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 Federal  Communications  Commission  FCC  03-  36 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 

 In  the  Matter  of 
 Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange 
 Carriers 
 Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of 
 1996 
 Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability 

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 CC  Docket  No.  01-  338 
 CC  Docket  No.  96-  98 
 CC  Docket  No.  98-  147 

 REPORT  AND  ORDER  AND  ORDER  ON  REMAND  AND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 Adopted:  February  20,  2003  Released:  August  21,  2003 
 Comment  Date:  30  days  after  Federal  Register  publication  of  this  Notice  Comment  Reply  Date:  60  days  after  Federal  Register  publication  of  this  Notice 

 By  the  Commission:  Chairman  Powell  and  Commissioner  Abernathy  approving  in  part,  dissenting  in  part  and  issuing  separate  statements;  Commissioners  Copps  and  Adelstein 
 approving  in  part,  concurring  in  part,  dissenting  in  part  and  issuing  separate  statements;  Commissioner  Martin  issuing  a  separate  statement. 

 Para. 
 I.  INTRODUCTION.............................................................................................................  1 
 II.  EXECUTIVE  SUMMARY  ..............................................................................................  7 
 III.  BACKGROUND  AND  LEGAL  HISTORY...................................................................  8 
 IV.  EVOLUTION  OF  THE  MARKET  FOR  LOCAL  TELECOMMUNICATIONS  SERVICES....................................................................  35 

 A.  EFFECTS  OF  THE  ACT  ON  TELECOMMUNICATIONS  AND  INDUSTRY  TRENDS  ...........  36  B.  MARKETS  FOR  TELECOMMUNICATIONS  SERVICES  .................................................  43 
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 1.  The  Enterprise  Market  ..............................................................................  44  2.  The  Mass  Market  ......................................................................................  50 
 V.  PRINCIPLES  OF  UNBUNDLING  ...............................................................................  55 
 A.  DEFINITION  OF  NETWORK  ELEMENT  ..................................................................  58  B.  THE  IMPAIRMENT  ANALYSIS..................................................................................  61 
 1.  The  Impair  Standard..............................................................................  61  a.  Court  Decisions.............................................................................  62 
 b.  Guidance  from  the  Act  and  Its  History  .........................................  69  c.  Guidance  from  Analogous  Legal  Doctrines  and  Economic 
 Literature.......................................................................................  73  d.  Interpretation  of  the  Impair  Standard  ........................................  84 
 (i)  Types  of  Barriers  to  Entry  ................................................  85  (ii)  Evidence  of  Impairment....................................................  92 
 (iii)  Rejection  of  Other  Approaches  to  Impairment...............  105  2.  Granularity  of  the  Impairment  Analysis  .................................................  118 
 a.  Customer  Class  Distinctions  .......................................................  123  b.  Geographic  Granularity  ..............................................................  130 
 c.  Service  Considerations  ...............................................................  132  (i)  Legal  Background  and  Authority  ...................................  134 
 (ii)  Qualifying  Services.........................................................  135  3.  Implicit  Support  Flows  ...........................................................................  154 
 a.  Background.................................................................................  154  b.  Discussion...................................................................................  163 
 C.  THE  NECESSARY  STANDARD............................................................................  170  D.  AT  A  MINIMUM  ................................................................................................  172 
 E.  ROLE  OF  THE  STATES...........................................................................................  179  1.  Background.............................................................................................  179 
 2.  Discussion...............................................................................................  186  a.  Federal  Authority  and  the  Role  of  the  States..............................  187 
 b.  State  Authority............................................................................  191 
 VI.  UNBUNDLING  REQUIREMENTS  FOR  INDIVIDUAL  NETWORK  ELEMENTS  ..................................................................................................................  197 

 A.  LOOPS..................................................................................................................  197  1.  Summary  .................................................................................................  197 
 2.  Background.............................................................................................  203  3.  General  Economic  Characteristics  of  Loop  Deployment  .......................  205 
 4.  Loop  Impairment  by  Customer  Market  ..................................................  209  a.  Mass  Market  Loops  ....................................................................  211 
 (i)  Introduction.....................................................................  211  (ii)  Mass  Market  Loop  Types  ...............................................  214 
 (iii)  Evidence  of  Loop  Deployment  .......................................  222 
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 (a)  Self-  Deployment  .................................................  225  (b)  Intermodal  Loops................................................  228 
 (c)  Third-  Party  Offerings  .........................................  233  (iv)  Unbundling  Analysis  ......................................................  234 
 (a)  Impairment..........................................................  237  (b)  Other  Considerations  ..........................................  241 
 (v)  Specific  Unbundling  Requirements  for  Mass  Market  Loops..................................................................  247 
 (a)  Legacy  Networks  ................................................  248  (b)  Next  Generation  Networks  .................................  272 
 (i)  FTTH  Loops............................................  273  (ii)  Hybrid  Loops  ..........................................  285 
 b.  Enterprise  Market  Loops  ............................................................  298  (i)  Record  Evidence  .............................................................  298 
 (ii)  Impairment  Analysis.......................................................  302  (a)  Operational  and  Economic  Barriers  to 
 Serving  the  Enterprise  Market  ............................  302  (b)  General  Framework  ............................................  307 
 (c)  Capacity-  Based  Impairment  Findings  ................  311  (i)  Dark  Fiber  Loops  ....................................  311 
 (ii)  OCn  Loops..............................................  315  (iii)  DS3  Loops  ..............................................  320 
 (iv)  DS1  Loops  ..............................................  325  (d)  Location-  Specific  Review  Conducted  By 
 States  Applying  Federal  Triggers  .......................  328  (i)  Self-  Provisioning  Trigger  .......................  332 
 (ii)  Competitive  Wholesale  Facilities  Trigger  ....................................................  337 
 (iii)  State  Action  Under  Both  Triggers  ..........  339  (e)  Other  Loop  Unbundling  Proposals  .....................  341 
 B.  SUBLOOPS  FOR  MULTIUNIT  PREMISES  ACCESS  AND  NIDS  ..................................  343  1.  Background.............................................................................................  343 
 2.  Subloops  for  Multiunit  Premises  Access  ................................................  347  a.  Inside  Wire  Subloops  and  NIDs  .................................................  351 
 (i)  Inside  Wire  Subloop  Impairment....................................  354  (ii)  NID  Impairment..............................................................  356 
 C.  DEDICATED  TRANSPORT  ......................................................................................  359  1.  Summary  .................................................................................................  359 
 2.  Background.............................................................................................  361  3.  Definition  of  Dedicated  Transport..........................................................  365 
 4.  Impairment  Analysis...............................................................................  370  a.  General  Economic  and  Operational  Characteristics  of 
 Transport.....................................................................................  370  b.  Record  Evidence  .........................................................................  378 
 c.  Capacity-  Based  Impairment  Analysis  ........................................  380 
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 (i)  Dark  Fiber  Transport  ......................................................  381  (ii)  DS3  Capacity  Transport..................................................  386 
 (iii)  DS1  Capacity  Transport..................................................  390  d.  Route-  Specific  Review  Conducted  by  States  Applying 
 Federal  Triggers..........................................................................  394  (i)  Self-  Provisioning  Trigger  ...............................................  405 
 (ii)  Competitive  Wholesale  Facilities  Trigger  ......................  412  (iii)  State  Action  Under  Both  Triggers  ..................................  417 
 D.  LOCAL  CIRCUIT  SWITCHING  ................................................................................  419  1.  Summary  .................................................................................................  419 
 2.  Background.............................................................................................  429  3.  Definition  of  Unbundled  Local  Circuit  Switching  Element  ...................  433 
 4.  Impairment  Analysis...............................................................................  435  a.  Evidence  of  Switch  Deployment  ................................................  435 
 5.  DS1  Enterprise  Customers......................................................................  451  6.  Mass  Market  Customers  .........................................................................  459 
 a.  Impairment  Caused  by  Incumbent  LEC  Hot  Cut  Process  ..........  464  (i)  Other  Operational  and  Economic  Impairment................  476 
 (a)  Operational  Factors.............................................  477  (b)  Economic  Factors................................................  479 
 (ii)  State  Actions  and  Determinations...................................  486  (a)  Incumbent  LEC  Batch  Hot  Cut  Processes  ..........  487 
 (b)  State  Commission  Determinations......................  493  (i)  Defining  the  Market................................  495 
 (ii)  Triggers...................................................  498  (iii)  Analysis  of  Potential  Deployment  ..........  506 
 (c)  Baseline  Rolling  Use  of  Unbundled  Switching  for  Customer  Acquisition 
 Purposes  ..............................................................  521  (d)  Transition  Rules..................................................  525 
 (e)  Continuing  Review  .............................................  526  b.  State  Commission  Failure  to  Act  ................................................  527 
 c.  Transition  of  the  Embedded  Customer  Base  ..............................  528  E.  SHARED  TRANSPORT............................................................................................  533 
 1.  Background.............................................................................................  533  2.  Discussion...............................................................................................  534 
 F.  PACKET  SWITCHING.............................................................................................  535  1.  Background.............................................................................................  535 
 2.  Discussion...............................................................................................  537  G.  SIGNALING  NETWORKS........................................................................................  542 
 1.  Background.............................................................................................  542  2.  Discussion...............................................................................................  544 
 H.  CALL-  RELATED  DATABASES  ...............................................................................  549  1.  Background.............................................................................................  549 
 2.  Discussion...............................................................................................  551 
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 I.  OSS  FUNCTIONS  ..................................................................................................  561  1.  Background.............................................................................................  561 
 2.  Discussion...............................................................................................  562 
 VII.  SCOPE  OF  UNBUNDLING  OBLIGATIONS...........................................................  569 
 A.  COMBINATIONS  OF  NETWORK  ELEMENTS............................................................  569  1.  Background.............................................................................................  569 
 2.  Discussion...............................................................................................  572  a.  New  Combinations  of  Unbundled  Network  Elements................  573 
 b.  EELs............................................................................................  575  c.  General  Commingling  Issues  for  Transmission  Facilities  ..........  579 
 d.  Conversions  ................................................................................  585  B.  SERVICE  ELIGIBILITY  TO  ACCESS  UNES..............................................................  590 
 1.  Background.............................................................................................  590  2.  Discussion...............................................................................................  591 
 a.  Scope  of  Eligibility  Criteria  Limited  to  High-  Capacity  EELs............................................................................................  591 
 b.  Service  Eligibility  Criteria  for  High-  Capacity  EELs..................  595  (i)  Authorization  to  Provide  Voice  Service  .........................  601 
 (ii)  Actually  Providing  Local  Voice  Service  to  the  Customer  Over  Every  Circuit  .........................................  602 
 (iii)  Architectural  Safeguards  to  Prevent  Gaming  .................  603  (iv)  Other  Service  Eligibility  Proposals.................................  612 
 C.  CERTIFICATION  AND  AUDITING............................................................................  620  1.  Background.............................................................................................  620 
 2.  Discussion...............................................................................................  622  a.  Certification  ................................................................................  623 
 b.  Auditing  ......................................................................................  625  D.  MODIFICATION  OF  EXISTING  NETWORK...............................................................  630 
 1.  Background.............................................................................................  630  2.  Discussion...............................................................................................  632 
 a.  Routine  Network  Modifications  to  Existing  Facilities  ...............  632  b.  Line  Conditioning  .......................................................................  642 
 c.  Special  Construction  of  Transmission  Facilities  ........................  645 
 VIII.  REMAINING  ISSUES..................................................................................................  649 
 A.  SECTION  271  ISSUES  ............................................................................................  649  1.  Background.............................................................................................  649 
 2.  Discussion...............................................................................................  653  B.  CLARIFICATION  OF  TELRIC  RULES.....................................................................  668 
 1.  Background.............................................................................................  668  2.  Discussion...............................................................................................  675 
 a.  Cost  of  Capital  ............................................................................  677 
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 b.  Depreciation................................................................................  685  C.  FRESH  LOOK  ........................................................................................................  692 
 D.  TRANSITION  PERIOD  ............................................................................................  700  E.  PERIODIC  REVIEW  OF  NATIONAL  UNBUNDLING  RULES  .......................................  707 
 1.  Background.............................................................................................  707  2.  Discussion...............................................................................................  710 
 F.  DUTY  TO  NEGOTIATE  IN  GOOD  FAITH..................................................................  712 
 IX.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING  .........................................  713 
 A.  BACKGROUND......................................................................................................  715  B.  REQUEST  FOR  COMMENT  .....................................................................................  720 

 X.  PROCEDURAL  ISSUES..............................................................................................  730 
 A.  FINAL  REGULATORY  FLEXIBILITY  ANALYSIS  ......................................................  730  B.  INITIAL  REGULATORY  FLEXILIBILITY  ANALYSIS  .................................................  788 
 C.  OTHER  PROCEDURAL  MATTERS...........................................................................  827 
 XI.  ORDERING  CLAUSES...............................................................................................  830 

 APPENDIX  A:  LIST  OF  COMMENTERS  APPENDIX  B:  FINAL  RULES 

 I.  INTRODUCTION 
 1.  Seven  years  ago,  Congress  enacted  the  Telecommunications  Act  of  1996  (1996  Act)  for  the  benefit  of  the  American  consumer.  1  This  watershed  legislation  was  partially 

 designed  to  remove  the  decades-  old  system  of  legal  monopoly  in  the  local  exchange  and  open  that  market  to  competition.  The  1996  Act  did  so  by  establishing  broad  interconnection,  resale 
 and  network  access  requirements,  designed  to  facilitate  multiple  modes  of  entry  into  the  market  by  intermodal  and  intramodal  service  providers.  The  1996  Act  also  sought  to  reduce  the  need 
 for  regulation  in  the  presence  of  competition  and  provide  for  universal  service  mechanisms  in  order  to  foster  the  deployment  of  advanced  telecommunications  capabilities  to  all  Americans. 

 2.  This  Commission  and  our  colleagues  in  state  commissions  around  the  country  have  devoted  enormous  amounts  of  time  and  resources  to  implement  the  Acts  market-  opening 
 requirements,  and  the  industry  has  devoted  equally  large  amounts  of  time  and  resources  to  take  advantage  of  the  new  business  opportunities  made  available  by  the  1996  Act.  Few,  if  any,  other 

 1  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56.  The  1996  Act  amended  the 
 Communications  Act  of  1934,  47  U.  S.  C.    151  et  seq.  We  refer  to  these  Acts  collectively  as  the  Communications  Act  or  the  Act. 
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 requirements  of  the  1996  Act  have  attracted  so  much  regulatory  attention,  industry  effort,  or  litigation,  however,  as  the  requirement  under  section  251(  c)(  3)  that  incumbent  local  exchange 
 carriers  (incumbent  LECs)  make  elements  of  their  networks  available  on  an  unbundled  basis  to  new  entrants  at  cost-  based  rates.  Every  aspect  and  application  of  this  extraordinary  vehicle  for 
 opening  local  exchange  markets  has  been  the  focus  of  extensive  debate  and  litigation.  Indeed,  this  Commission  has  been  told  twice,  once  by  the  Supreme  Court  and  once  by  the  D.  C.  Circuit, 
 that  it  had  failed  to  implement  unbundling  in  a  reasonable  manner  because  it  did  not  adopt  appropriate  principles  for  limiting  its  application. 

 3.  Direction  from  the  courts,  our  own  experience,  and  the  experience  of  the  telecommunications  industry  over  the  last  seven  years  have  caused  us  to  reevaluate  the 
 Commissions  approach  to  these  obligations  in  light  of  the  Acts  goals  of  opening  local  exchange  markets  to  competition,  fostering  the  deployment  of  advanced  services,  and  reducing  regulation. 
 Although  we  recognize  that  Congress  intended  to  create  a  competitive  landscape  through  resale,  interconnection  and  facilities-  based  provision,  and  a  combination  of  these  modes  of  entry,  in 
 practice,  we  have  come  to  recognize  more  clearly  the  difficulties  and  limitations  inherent  in  competition  based  on  the  shared  use  of  infrastructure  through  network  unbundling.  While 
 unbundling  can  serve  to  bring  competition  to  markets  faster  than  it  might  otherwise  develop,  we  are  very  aware  that  excessive  network  unbundling  requirements  tend  to  undermine  the  incentives 
 of  both  incumbent  LECs  and  new  entrants  to  invest  in  new  facilities  and  deploy  new  technology.  The  effect  of  unbundling  on  investment  incentives  is  particularly  critical  in  the  area  of  broadband 
 deployment,  since  incumbent  LECs  are  unlikely  to  make  the  enormous  investment  required  if  their  competitors  can  share  in  the  benefits  of  these  facilities  without  participating  in  the  risk 
 inherent  in  such  large  scale  capital  investment.  At  the  same  time,  continued  unbundling  for  the  network  elements  provided  over  current  facilities  appears  to  be  necessary  in  many  areas  under 
 section  251  of  the  Act,  especially  with  respect  to  mass  market  customers. 
 4.  This  Order  takes  a  balanced  approach  to  these  issues.  We  eliminate  most  unbundling  requirements  for  broadband,  making  it  easier  for  companies  to  invest  in  new 

 equipment  and  deploy  the  high-  speed  services  that  consumers  desire.  We  have  also  made  new  decisions  concerning  the  unbundling  of  other  network  elements  that  result  in  substantial  changes 
 to  existing  requirements,  including  a  more  granular  analysis  of  unbundling  requirements  by  the  states  when  appropriate. 

 5.  This  Order  thus  achieves  three  primary  goals.  First,  this  Order  continues  the  Commissions  implementation  and  enforcement  of  the  Acts  market-  opening  requirements  by 
 applying  the  experience  we  have  gained  implementing  the  Act.  Second,  it  applies  unbundling  as  Congress  intended:  with  a  recognition  of  the  market  barriers  faced  by  new  entrants  as  well  as 
 the  societal  costs  of  unbundling.  In  doing  so,  this  Order  resolves  numerous  questions  about  unbundling  left  open  by  years  of  litigation  and  industry  conflicts,  and  opens  a  new  chapter  in  the 
 history  of  the  Acts  unbundling  requirements.  Third,  this  Order  establishes  a  regulatory  foundation  that  seeks  to  ensure  that  investment  in  telecommunications  infrastructure  will 
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 address  these  issues  as  well  as  the  relevant  court  guidance  is  critical  to  ensuring  a  successful  consideration  of  these  issues  in  this  Order. 
 9.  Statutory  Requirements.  The  Communications  Act  requires  that  incumbent  LECs  provide  UNEs  to  other  telecommunications  carriers.  4  In  particular,  section  251(  c)(  3)  of  the  Act 
 states  that  incumbent  LECs  have  a  duty  to 
 provide,  to  any  requesting  telecommunications  carrier  for  the  provision  of  a  telecommunications  service,  nondiscriminatory 

 access  to  network  elements  on  an  unbundled  basis  at  any  technically  feasible  point  on  rates,  terms,  and  conditions  that  are 
 just,  reasonable,  and  nondiscriminatory  in  accordance  with  the  terms  and  conditions  of  the  agreement  and  the  requirements  of  this 
 section  and  section  252.  5 
 This  section  requires  that  incumbent  LECs  provide  such  network  elements  in  a  manner  that  allows  requesting  carriers  to  combine  such  elements  in  order  to  provide  such 

 telecommunications  service.  6  The  Act  defines  the  term  network  element  as  a  facility  or  equipment  used  in  the  provision  of  a  telecommunications  service,  specifying  that  [  s]  uch  term 
 also  includes  features,  functions,  and  capabilities  that  are  provided  by  means  of  such  facility  or  equipment,  including  subscriber  numbers,  databases,  signaling  systems,  and  information 
 sufficient  for  billing  and  collection  or  used  in  the  transmission,  routing,  or  other  provisions  of  a  telecommunications  service.  7 

 10.  The  Act  also  establishes  a  general  federal  standard  for  use  in  determining  the  UNEs  that  must  be  made  available  by  the  incumbent  LECs  pursuant  to  section  251.  Section 
 251(  d)(  2)  provides  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    (A)  access  to  such  network  elements  as  are  proprietary  in  nature  is  necessary;  and  (B)  the  failure  to 

 4  Section  153(  44)  of  the  Act  defines  a  telecommunications  carrier  as  any  provider  of  telecommunications 
 services,  except  that  such  term  does  not  include  aggregators  of  telecommunications  services  (as  defined  in  section  226).  47  U.  S.  C.    153(  44).  Section  153(  44)  also  states  that  [  a]  telecommunications  carrier  shall  be  treated  as  a 

 common  carrier  under  this  Act  only  to  the  extent  that  it  is  engaged  in  providing  telecommunications  services,  except  that  the  Commission  shall  determine  whether  the  provision  of  fixed  and  mobile  satellite  service  shall  be  treated  as 
 common  carriage.  Id. 
 5  47  U.  S.  C.    251(  c)(  3). 

 6  Id.  Section  153(  46)  defines  telecommunications  service  as  the  offering  of  telecommunications  for  a  fee 
 directly  to  the  public,  or  to  such  classes  of  users  as  to  be  effectively  available  to  the  public,  regardless  of  the  facilities  used.  Id.    153(  46). 

 7  Id.    153(  29). 
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 provide  access  to  such  network  elements  would  impair  the  ability  of  the  telecommunications  carrier  seeking  access  to  provide  the 
 services  that  it  seeks  to  offer.  8 
 The  1996  Act  also  preserves  a  state  role  in  addressing  unbundling  issues.  First,  section  252  authorizes  states  to  review  and  to  arbitrate  interconnection  agreements 

 for  compliance  with  the  requirements  of  sections  251  and  252  and  this  Commissions  implementing  rules.  9  Second,  section  251(  d)(  3)  also  preserves 
 states  independent  state  law  authority  to  address  unbundling  issues  to  the  extent  that  the  exercise  of  that  authority  poses  no  conflict  with  federal  law.  That  section 
 provides  that 
 [i]  n  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.  10 

 11.  In  addition,  the  statute  establishes  standards  to  govern  the  pricing  of  UNEs  in  sections  251  and  252.  For  UNEs,  section  251(  c)(  3)  provides  that  elements  shall  be  made 
 available  on  rates,  terms,  and  conditions  that  are  just,  reasonable,  and  nondiscriminatory.  11  Section  252  provides  that: 

 [d]  eterminations  by  a  State  Commission  of  the  .  .  .  just  and  reasonable  rate  for  network  elements  for  purposes  of  subsection 
 [251](  c)(  3)  .  .  .    (A)  shall  be    (i)  based  on  the  cost  (determined  without  reference  to  a  rate-  of-  return  or  other  rate-  based 
 proceeding)  of  providing  the  .  .  .  network  element  .  .  .  ,  and  (ii)  nondiscriminatory,  and  (B)  may  include  a  reasonable  profit.  12 

 The  statute  also  establishes  a  resale  entry  vehicle  separate  from  the  availability  of  UNEs.  Section  251(  c)(  4)  provides  that  incumbent  LECs  have  [  t]  he  duty  .  .  .  to  offer  for  resale  at  wholesale  rates 
 any  telecommunications  service  that  the  carrier  provides  at  retail  to  subscribers  who  are  not 
 8  Id.    251(  d)(  2). 

 9  See  generally  id.    252. 
 10  Id.    251(  d)(  3).  The  states  may  exercise  this  state  law  authority  in  the  course  of  reviewing  interconnection 
 agreements  under  section  252.  See  id.    252(  e)(  3). 
 11  Id.    251(  c)(  3). 

 12  Id.    252(  d)(  1). 
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 telecommunications  carriers.  13  Because  section  251(  c)(  4)  applies  only  to  retail  telecommunications  services  that  the  incumbent  LEC  provides  to  subscribers,  some  incumbent 
 LEC  services,  such  as  wholesale-  only  services  and  information  services,  are  not  available  at  a  resale  discount  to  competing  carriers.  Indeed,  as  the  Commission  has  discussed  in  section  271 
 orders,  some  incumbent  LECs  retail  high-  speed  Internet  access  service[  s]  have  not  been  affirmatively  determined  to  fall  within  section  251(  c)(  4).  14 

 12.  Local  Competition  Order.  The  Commission  first  addressed  the  unbundling  obligations  of  incumbent  LECs  in  the  Local  Competition  Order,  which,  among  other  things, 
 adopted  rules  designed  to  implement  the  requirements  of  the  section  251.  15  The  Commission  interpreted  the  statutory  necessary  and  impair  standards  governing  the  incumbent  LECs 
 unbundling  obligations  very  broadly.  The  Commission  stated  that  for  purposes  of  determining  whether  access  to  a  proprietary  network  element  was  necessary  under  section  251(  d)(  2),  the 
 term  [  n]  ecessary  means  .  .  .  that  an  element  is  a  prerequisite  for  competition.  16  The  Commission  also  found  that  [  t]  he  term  impair  means  to  make  or  cause  to  become  worse; 
 diminish  in  value.    17  The  Commission  added  that  the  impairment  standard  requires  the  Commission  .  .  .  to  consider  whether  the  failure  of  an  incumbent  to  provide  access  to  a  network 
 element  would  decrease  the  quality,  or  increase  the  financial  or  administrative  cost  of  the  service 

 13  Id.    251(  c)(  4). 
 14  Joint  Application  by  SBC  Communications  Inc.,  Southwestern  Bell  Telephone  Company,  and  Southwestern  Bell 
 Communications  Services,  Inc.  d/  b/  a  Southwestern  Bell  Long  Distance  Pursuant  to  Section  271  of  the  Telecommunications  Act  of  1996  To  Provide  In-  Region,  InterLATA  Services  in  Arkansas  and  Missouri,  CC  Docket 

 No.  01-  194,  Memorandum  Opinion  and  Order,  16  FCC  Rcd  20719,  20758-  61,  paras.  79-  84  (2001);  see  also  Application  by  BellSouth  Corp.,  BellSouth  Telecommunications,  Inc.,  and  BellSouth  Long  Distance,  Inc.,  for 
 Authorization  To  Provide  In-  Region,  InterLATA  Services  in  Florida  and  Tennessee,  WC  Docket  No.  02-  307,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  25828,  25922,  para.  178  (2002)  (BellSouth  FL/  TN  271  Order); 
 Application  by  SBC  Communications  Inc.,  Pacific  Bell  Telephone  Company,  and  Southwestern  Bell  Communications  Services  Inc.,  for  Authorization  To  Provide  In-  Region,  InterLATA  Services  in  California,  WC 
 Docket  No.  02-  306,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  25650,  25714,  para.  113  (2002);  Joint  Application  by  BellSouth  Corp.,  BellSouth  Telecommunications,  Inc.  and  BellSouth  Long  Distance,  Inc.  for 
 Provision  of  In-  Region,  InterLATA  Services  in  Georgia  and  Louisiana,  CC  Docket  No.  02-  35,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  9018,  9174-  76,  paras.  274-  77  (2002)  (BellSouth  Georgia/  Louisiana  Order). 

 15  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996;  Interconnection 
 between  Local  Exchange  Carriers  and  Commercial  Mobile  Radio  Service  Providers,  CC  Docket  Nos.  96-  98,  95-  185,  First  Report  and  Order,  11  FCC  Rcd  15499,  15616-  775  (1996)  (Local  Competition  Order),  affd  in  part  and 

 vacated  in  part  sub  nom.  Competitive  Telecommunications  Assn  v.  FCC,  117  F.  3d  1068  (8th  Cir.  1997)  and  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  753  (8th  Cir.  1997),  affd  in  part  and  remanded,  AT&  T  v.  Iowa  Utils.  Bd.,  525  U.  S.  366 
 (1999)  (Iowa  Utils.  Bd.),  on  remand,  Iowa  Utils.  Bd.  v.  FCC,  219  F.  3d  744  (8th  Cir.  2000),  reversed  in  part  sub  nom.  Verizon  Communications  Inc.  v.  FCC,  535  U.  S.  467  (2002)  (Verizon),  Order  on  Reconsideration,  11  FCC  Rcd 
 13042  (1996),  Second  Order  on  Reconsideration,  11  FCC  Rcd  19738  (1996),  Third  Order  on  Reconsideration  and  Further  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  12460  (1997),  further  recons.  pending. 

 16  Local  Competition  Order,  11  FCC  Rcd  at  15641,  para.  282. 
 17  Id.  at  15643,  para.  285. 
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 a  requesting  carrier  seeks  to  offer,  compared  with  providing  that  service  over  other  unbundled  elements  in  the  incumbent  LECs  network.  18 
 13.  The  Commission  also  adopted  a  minimum  set  of  UNEs,  requiring  that  incumbent  LECs  provide  unbundled  access  to  local  loops,  19  network  interface  devices,  20  local  and  tandem 
 switching  capability,  21  interoffice  transmission  facilities,  22  signaling  and  call-  related  databases,  23  operations  support  systems  functions,  24  and  operator  services  and  directory  assistance  facilities.  25 
 The  Commission  noted  that  the  state  commissions  were  free  to  prescribe  additional  elements.  26  The  Commission  also  found  that  the  incumbent  LECs  were  obligated  to  combine  UNEs  upon 
 request.  27 
 14.  In  addition,  the  Commission  established  the  Total  Element  Long  Run  Incremental  Cost  (TELRIC)  methodology,  a  forward-  looking,  long-  run,  incremental  cost  methodology,  for 

 the  states  to  use  in  setting  actual  rates  for  UNEs.  28  The  Commission  found  that  the  price  of  a 
 18  Id. 
 19  In  the  Local  Competition  Order,  the  Commission  defined  the  local  loop  network  element  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.  Id.  at  15691,  para.  380. 

 20  The  Commission  defined  the  network  interface  device  network  element  as  a  cross-  connect  device  used  to 
 connect  loop  facilities  to  inside  wiring.  Id.  at  15697,  para.  392  n.  852. 
 21  The  Commission  defined  the  local  switching  network  element  to  include  line-  side  and  trunk-  side  facilities  plus 
 the  features,  functions  and  capabilities  of  the  switch.  Id.  at  15706,  para.  412. 
 22  The  Commission  stated  that  the  interoffice  transmission  facilities  network  element  included  unbundled  access 
 to  shared  transmission  facilities  between  end  offices  and  the  tandem  switch  as  well  as  unbundled  access  to  dedicated  transmission  facilities  between  LEC  central  offices  or  between  such  offices  and  those  of  competing 

 carriers.  Id.  at  15718,  para.  440. 
 23  The  Commission  stated  that  purchase  of  unbundled  elements  of  the  SS7  [signaling]  network  gives  the 
 competitive  provider  the  right  to  use  those  elements  for  signaling  between  its  switches  (including  unbundled  switching  elements),  between  its  switches  and  the  incumbent  LECs  switches,  and  between  its  switches  and  those 

 third  party  networks  with  which  the  incumbent  LECs  SS7  network  is  interconnected.  Id.  at  15740,  para.  483.  The  Commission  required  that  incumbent  LECs  make  access  to  their  call-  related  databases  available  on  an  unbundled 
 basis  for  the  purpose  of  switch  query  and  database  response  through  the  SS7  network.  The  Commission  stated  that  [  c]  all-  related  databases  are  those  SS7  databases  used  for  billing  and  collection  or  used  in  the  transmission,  routing 
 or  other  provision  of  a  telecommunications  service.  Id.  at  15741,  para.  484  n.  1126. 
 24  The  Commission  required  that  the  incumbent  LECs  make  unbundled  access  to  their  operations  support  systems 
 available  for  pre-  ordering,  ordering,  provisioning,  maintenance  and  repair,  and  billing.  Id.  at  15766-  67,  para.  523. 
 25  Id.  at  15771,  para.  534. 

 26  Id.  at  15625-  26,  para.  244. 
 27  Id. 
 28  Id.  at  15812-  72,  paras.  618-  740. 
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 network  element  should  include  the  forward-  looking  costs  that  can  be  attributed  directly  to  the  provision  of  services  using  that  element,  which  includes  a  reasonable  return  on  investment  (i.  e., 
 profit),  plus  a  reasonable  share  of  the  forward-  looking  joint  and  common  costs.  29  The  Commission  determined  that  TELRIC-  based  rates  for  UNEs  should  not  include  embedded  or 
 historical  costs,  opportunity  costs  or  universal  service  subsidies.  30 
 15.  Iowa  Utilities  Board  v.  FCC.  On  review  in  1997,  the  Eighth  Circuit  vacated  many  of  the  rules  adopted  in  the  Local  Competition  Order  as  beyond  the  Commissions 

 jurisdiction,  which  it  viewed  as  limited  to  interstate  matters.  31  The  court  also  vacated  section  51.315(  b)  of  the  Commissions  rules,  which  barred  incumbent  LECs  from  separating  UNEs 
 before  providing  them  to  competitors,  on  the  ground  that  unbundled  means  not  combined.  32  In  addition,  the  court  vacated  sections  51.315(  c)-(  f),  which  required  incumbent  LECs  to  combine 
 elements  on  behalf  of  competitive  LECs  on  request,  on  the  ground  that  section  251(  c)(  3)  does  not  require  incumbent  LECs  to  combine  elements  on  behalf  of  competitive  LECs,  but  only 
 requires  incumbent  LECs  to  provide  elements  in  a  manner  that  permits  the  competitive  LEC  to  do  the  actual  combining.  33  As  to  superior  network  issues,  the  court  held  that  section  251(  c)(  3) 
 requires  unbundled  access  only  to  an  incumbent  LECs  existing  network    not  to  a  yet  unbuilt  superior  one.  34  Specifically,  the  Eighth  Circuit  explained  that  incumbent  LECs  can  be  required 
 to  modify  their  facilities  to  the  extent  necessary  to  accommodate  interconnection  or  access  to  network  elements,  but  cannot  be  required  to  alter  substantially  their  networks  in  order  to 
 provide  superior  quality  interconnection  and  unbundled  access.  35  Finally,  the  court  upheld  the  Commissions  interpretation  of  the  necessary  and  impair  standards.  36 

 16.  AT&  T  v.  Iowa  Utilities  Board.  In  1998,  the  U.  S.  Supreme  Court  reversed  the  Eighth  Circuits  jurisdictional  holdings,  concluding  that  the  Commission  has  jurisdiction  to 
 implement  the  local  competition  provisions  of  the  1996  Act.  The  Court,  however,  vacated  the  Commissions  interpretation  of  the  necessary  and  impair  standards  in  section  251(  d)(  2).  37  In 
 particular,  the  Court  also  faulted  the  Commission  for  its  failure  to  consider  the  availability  of  alternative  sources  of  network  elements.  38  The  Court  also  concluded  that  the  Commissions 

 29  Id.  at  15844-  56,  paras.  673-  703. 
 30  Id.  at  15844,  para.  673;  15857-  69,  paras.  704-  32. 
 31  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  753. 
 32  Id.  at  813. 
 33  Id. 
 34  Id. 
 35  Id.  at  813  n.  33  (emphasis  added). 
 36  Id.  at  810-  12. 
 37  Iowa  Utils.  Bd.,  525  U.  S.  366. 
 38  Id. 
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 assumption  that  any  increase  in  cost  (or  decrease  in  quality)  imposed  by  denial  of  a  network  element  renders  access  to  that  element  necessary,    and  causes  the  failure  to  provide  that  element 
 to  impair  the  entrants  ability  to  furnish  its  desired  services  is  simply  not  in  accord  with  the  ordinary  and  fair  meaning  of  those  terms.  39  The  Court  stated  that  the  Act  requires  the  FCC  to 
 apply  some  limiting  standard,  rationally  related  to  the  goals  of  the  Act,  which  it  has  simply  failed  to  do.  40 

 17.  In  conclusion,  the  Court  stated  that  if  Congress  had  wanted  to  give  blanket  access  to  incumbents  networks  on  a  basis  as  unrestricted  as  the  scheme  the  Commission  has 
 come  up  with,  it  would  not  have  included    251(  d)(  2)  in  the  statute  at  all.  41  Instead,  [  i]  t  would  simply  have  said  .  .  .  that  whatever  requested  element  can  be  provided  must  be  provided.  42  At 
 the  same  time,  the  Court  declined  to  find  that  section  251(  d)(  2)  incorporates  something  akin  to  the  essential  facilities  doctrine  as  argued  by  the  incumbent  LECs.  43  The  Court  found  that  it 
 need  not  decide  whether  the  statute  requires  application  of  that  standard  as  a  matter  of  law,  adding  it  may  be  that  some  other  standard  would  provide  an  equivalent  or  better  criterion  for 
 the  limitation  upon  network-  element  availability  that  the  statute  has  in  mind.  44 
 18.  The  Court  upheld  section  51.315(  b)  of  the  Commissions  rules,  which  bars  an  incumbent  LEC  from  separating  network  elements  that  are  already  combined  in  the  incumbents 

 network  before  providing  them  to  a  competitor  if  the  competitor  asks  for  them  in  a  combined  form.  The  Commission  had  explained  that  the  rule  prevents  incumbent  LECs  from 
 disconnecting  previously  connected  elements  merely  to  impose  additional  reconnect  charges  on  requesting  carriers.  The  Court  stated  that  section  251(  c)(  3)  is  ambiguous  on  whether  leased 
 network  elements  may  or  must  be  separated,  and  the  rule  the  Commission  has  prescribed  is  entirely  rational,  finding  its  basis  in    251(  c)(  3)  s  nondiscrimination  requirement.  45 

 19.  The  Commissions  UNE  Remand  Order.  In  1999,  in  response  to  the  Supreme  Courts  decision,  the  Commission  re-  examined  its  treatment  of  the  necessary  and  impair 
 standards,  as  well  as  the  list  of  UNEs  that  incumbent  LECs  must  provide.  46  In  the  UNE  Remand  Order,  the  Commission  adopted  narrower  requirements  for  determining  the  UNEs  that 

 39  Id.  at  389-  90. 
 40  Id.  at  388. 
 41  Id.  at  390. 
 42  Id. 
 43  Id.  at  388. 
 44  Id. 
 45  Id.  at  395. 
 46  UNE  Remand  Order,  15  FCC  Rcd  3696. 
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 incumbent  LECs  must  provide  pursuant  to  the  necessary  and  impair  standards,  and  modified  its  list  of  required  UNEs,  expanding  it  in  certain  respects  and  narrowing  it  in  others. 
 20.  The  Commission  found  that  a  proprietary  network  element  is  necessary  under  section  251(  d)(  2)(  A)  if,  taking  into  consideration  the  availability  of  alternative  elements  outside 
 the  incumbents  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.  47 

 21.  The  Commission  also  adopted  a  new  definition  of  what  constitutes  impairment  for  purposes  of  section  251(  d)(  2)(  B).  The  Commission  stated  that 
 [t]  he  incumbent  LECs  failure  to  provide  access  to  a  non-proprietary  network  element  impairs  a  requesting  carrier  .  .  .  if, 
 taking  into  consideration  the  availability  of  alternative  elements  outside  the  incumbents  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  carriers  ability  to  provide  the  services  it  seeks  to  offer.  48 

 The  Commission  added  that  [  i]  n  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.  49  The  Commission  thus  held  that  the    impair  analysis  considers  the  cost,  timeliness,  quality,  ubiquity,  and  operational  issues 
 associated  with  the  use  of  an  alternative.  50 
 22.  The  Commission  also  stated  that  it  was  interpret[  ing]  the  obligations  imposed  in  section  251(  d)(  2)  within  the  larger  statutory  framework  of  the  1996  Act,  consistent  with  that 

 sections  directive  to  consider  at  a  minimum  the  necessary  and  impair  standards.  51  Accordingly,  the  Commission  stated  that  in  addition  to  the  factors  set  forth  above,  we  may 
 consider  the  following  factors:  52  (1)  the  rapid  introduction  of  competition  in  all  markets  --  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 
 47  Id.  at  3704  (emphasis  in  original);  see  also  id.  at  3720-  23,  paras.  41-  47. 
 48  Id.  at  3704-  05  (emphasis  in  original);  see  also  id.  at  3723-  50,  paras.  48-  116. 
 49  Id.  at  3705;  see  also  id.  at  3730,  para.  62. 
 50  Id.  at  3705;  see  also  id.  at  3730-  45,  paras.  62-  100. 
 51  Id.  at  3705;  see  also  id.  at  3745-  46,  paras.  101-  02. 
 52  Id.  at  3705;  see  also  id.  at  3746-  47,  paras.  103-  06. 
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 possible[;]  53  (2)  promotion  of  facilities-  based  competition,  investment  and  innovation    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[;]  54 
 (3)  reduced  regulation    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[;]  55  (4)  certainty  in  the  market    how  the  unbundling  obligations  .  .  .  can  provide  the  uniformity  and  predictability  that 
 new  entrants  and  fledgling  competitors  need  to  develop  national  and  regional  business  plans[,  as  well  as]  .  .  .  whether  the  rules  .  .  .  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[;]  56  and  (5)  administrative  practicality    whether  the  unbundling 
 obligations  .  .  .  are  administratively  practical  to  apply.  57 
 23.  Based  on  this  analysis,  the  Commission  concluded  that  the  following  network  elements  must  be  unbundled:  (1)  loops    including  high-  capacity  lines,  xDSL-  capable  loops, 

 dark  fiber,  and  inside  wire  owned  by  the  incumbent  LEC[;]  58  (2)  subloops    unbundled  access  to  subloops,  or  portions  of  the  loop,  at  any  accessible  point[;]  59  (3)  NID    includ[  ing]  all 
 features,  functions  and  capabilities  of  the  facilities  used  to  connect  the  loop  to  premises  wiring,  regardless  of  the  specific  mechanical  design[;]  60  (4)  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[;]  61  (5)  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[;]  62  (6)  interoffice  transmission  facilities   
 unbundled  access  to  dedicated  interoffice  transmission  facilities,  or  transport,  including  dark 
 53  Id.  at  3705;  see  also  id.  at  3747-  48,  paras.  107-  09. 
 54  Id.  at  3705;  see  also  id.  at  3748-  49,  paras.  110-  12. 
 55  Id.  at  3705;  see  also  id.  at  3749,  para.  113. 
 56  Id.  at  3705;  see  also  id.  at  3749-  50,  paras.  114-  15. 
 57  Id.  at  3705;  see  also  id.  at  3750,  para.  116. 
 58  Id.  at  3706;  see  also  id.  at  3778-  87,  paras.  181-  201. 
 59  Id.  at  3706;  see  also  id.  at  3788-  800,  paras.  202-  29. 
 60  Id.  at  3706;  see  also  id.  at  3800-  04,  paras.  230-  40. 
 61  Id.  at  3707;  see  also  id.  at  3804-  32,  paras.  241-  99.  An  enhanced  extended  link  is  a  combination  of  an 
 unbundled  loop,  multiplexing/  concentrating  equipment,  and  dedicated  transport.  Id.  at  3707. 
 62  Id.  at  3707;  see  also  id.  at  3832-  40,  paras.  300-  17. 
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 fiber[;]  63  (7)  shared  transport    unbundled  access  to  shared  transport  where  unbundled  local  circuit  switching  is  provided;  64  (8)  signaling  and  call-  related  databases    including,  but  not 
 limited  to  unbundled  access  to  signaling  links  and  signaling  transfer  points  (STPs)  in  conjunction  with  unbundled  switching,  and  on  a  stand-  alone  basis[,]  as  well  as  unbundled 
 access  to  call-  related  databases;  65  and  (9)  OSS    consist[  ing]  of  pre-  ordering,  ordering,  provisioning,  maintenance  and  repair,  billing  functions  supported  by  an  incumbent  LECs 
 databases  and  information[,]  including  access  to  all  loop  qualification  information  contained  in  any  of  the  incumbent  LECs  databases  or  other  records,  including  information  on  whether  a 
 particular  loop  is  capable  of  providing  advanced  services.  66  The  Commission  stated  that  in  light  of  the  rapid  changes  in  technology  and  competition,  it  would  reexamine  the  national  list  of  UNEs 
 in  three  years,  thereby  establishing  the  Triennial  Review  process  reflected  in  this  Order. 
 24.  Availability  of  Enhanced  Extended  Links.  The  Commission  subsequently  modified  its  UNE  Remand  Order  as  it  related  to  the  use  of  UNEs  to  provide  exchange  access 

 services  originating  and  terminating  long  distance  services.  67  Specifically,  the  Commission  ruled  that  on  an  interim  basis,  pending  further  Commission  action,  interexchange  carriers  (IXCs)  may 
 not  convert  special  access  services  to  combinations  of  unbundled  loops  and  transport  network  elements,  whether  or  not  the  IXCs  self-  provide  entrance  facilities  (or  obtain  them  from  third 
 parties).  68  The  Commission  provided  that  this  restriction  would  not  apply  if  an  IXC  uses  combinations  of  unbundled  network  elements  to  provide  a  significant  amount  of  local  exchange 
 service,  in  addition  to  exchange  access  service,  to  a  particular  customer.  69  The  Commission  stated  that  this  temporary  restriction  on  the  use  of  EELs  was  consistent  with  its  finding  in  the 

 63  Id.  at  3707;  see  also  id.  at  3840-  61,  paras.  318-  68.  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  the  incumbent  LECs  or  requesting  telecommunications  carriers, 

 or  between  switches  owned  by  incumbent  LECs  or  requesting  telecommunications  carriers.  Id.  at  3707. 
 64  Id.  at  3707.  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  LECs  network.  Id. 

 65  Id.  at  3707-  08.  The  Commission  stated  that  the  call-  related  databases  that  must  be  unbundled  include[  d],  but 
 [were]  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.  Id. 
 66  Id.  at  3708.  The  Commission  specifically  found  that  certain  other  network  elements  did  not  need  to  be 
 unbundled.  The  elements  that  need  not  be  unbundled  included:  (1)  operator  services  and  directory  assistance  (OS/  DA)    except  in  limited  circumstances;  (2)  shared  transport    where  the  incumbent  LEC  is  not  required  to  offer 

 unbundled  local  circuit  switching;  and  (3)  packet  switching    except  in  limited  circumstances.  Id. 
 67  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  No. 
 96-  98,  Supplemental  Order,  15  FCC  Rcd  1760  (1999)  (Supplemental  Order). 
 68  Id.  at  1760,  para.  2. 

 69  Id. 
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 Local  Competition  Order  that  the  Commission  may,  where  necessary,  establish  a  temporary  transitional  mechanism  to  help  complete  all  of  the  steps  toward  the  pro-  competitive  goals  of  the 
 1996  Act,  including  the  full  implementation  of  a  competitively-  neutral  system  to  fund  universal  service  and  a  completed  transition  to  cost-  based  access  charges.  70 

 25.  The  Commission  later  clarified  and  extended  this  temporary  restriction  on  the  use  of  EELs  to  provide  exchange  access  service.  71  In  particular,  the  Commission  define[  d]  more 
 precisely  the  significant  amount  of  local  exchange  service  that  a  requesting  carrier  must  provide  in  order  to  obtain  loop-  transport  combinations.  72  The  Commission  specified  three 
 different  sets  of  circumstances  that  would  serve  as  safe  harbors  for  demonstrating  that  a  requesting  carrier  was  providing  a  significant  amount  of  local  exchange  service  to  a  particular 
 customer.  The  Commission  stated  that  section  251(  d)(  2)  does  not  compel  [the  Commission],  once  [it]  determines[  s]  that  any  network  element  meets  the  impair  standard  for  one  market,  to 
 grant  competitors  automatic  access  to  that  same  network  element  solely  or  primarily  for  use  in  a  different  market.  73  The  Commission  also  clarified  that  incumbent  LECs  must  allow  requesting 
 carriers  to  self-  certify  that  they  are  providing  a  significant  amount  of  local  exchange  service  over  combinations  of  unbundled  network  elements.  74  In  addition,  the  Commission  noted  that  there 
 was  widespread  agreement  among  all  interested  parties  concerning  appropriate  auditing  procedures.  75 

 26.  Line  Sharing  Order.  In  the  Line  Sharing  Order,  the  Commission  directed  incumbent  LECs  to  provide  the  high-  frequency  portion  of  the  local  loop  (HFPL)  to  requesting 
 telecommunications  carriers  as  a  UNE.  76  In  reaching  this  conclusion,  the  Commission  found  that  [  a]  n  incumbent  LECs  failure  to  provide  such  access  impairs  the  ability  of  a  competitive  LEC  to 

 70  Id.  at  1763,  para.  7. 
 71  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  No. 
 96-  98,  Supplemental  Order  Clarification,  15  FCC  Rcd  9587  (2000),  affd  sub  nom.  CompTel  v.  FCC,  309  F.  3d  3  (D.  C.  Cir.  2002)  (CompTel)  (Supplemental  Order  Clarification). 

 72  Id.  at  9598,  para.  21. 
 73  Id.  at  9595,  para.  15. 
 74  Id.  at  9602,  para.  29. 
 75  Id.  at  9603-  04,  para.  31.  The  Commission  also  adopted  a  restriction  on  the  commingling  of  local  exchange  and 
 access  traffic  as  an  additional  means  of  preventing  widespread  conversion  of  special  access  circuits  to  UNEs.  Id.  at  9602,  para.  28. 

 76  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability  and  Implementation  of  the 
 Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  Nos.  98-  147,  96-  98,  Third  Report  and  Order  in  CC  Docket  No.  98-  147  and  Fourth  Report  and  Order  in  CC  Docket  No.  96-  98,  14  FCC  Rcd  20912 

 (1999)  (Line  Sharing  Order). 
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 offer  certain  forms  of  xDSL-  based  services.  77  The  Commission  stated  [  t]  he  record  shows  that  lack  of  access  would  materially  raise  the  cost  for  competitive  LECs  to  provide  advanced  services 
 to  residential  and  small  business  users,  delay  broad  facilities-  based  market  entry  and  materially  limit  the  scope  and  quality  of  competitor  service  offerings.  78  In  order  to  prevent  the  degradation 
 of  analog  voice  service,  the  Commission  required  that  incumbent  LECs  make  the  high  frequency  portion  of  the  loop  available  only  to  carriers  seeking  to  provide  xDSL-  based  service  that  meets 
 certain  criteria.  The  Commission  also  concluded  that  [  i]  ncumbents  are  not  required  to  provide  unbundled  access  to  the  high  frequency  portion  of  the  loop  if  they  are  not  currently  providing 
 analog  voice  service  to  the  customer.  The  Commission  also  required  that  incumbent  LECs  condition  loops  to  enable  requesting  carriers  to  provide  acceptable  forms  of  xDSL-  based 
 services  over  the  high  frequency  portion  of  the  loop  unless  such  conditioning  would  significantly  degrade  the  incumbents  analog  voice  service.  79 

 27.  Iowa  Utilities  Board  v.  FCC  (Remand  Decision).  In  2000,  on  remand  after  the  Supreme  Courts  opinion  in  AT&  T  v.  Iowa  Utilities  Board,  the  Eighth  Circuit  reviewed  several 
 more  aspects  of  the  Local  Competition  Order.  80  The  court  vacated  on  the  merits  the  Commissions  rule  setting  out  the  TELRIC  pricing  methodology  because  the  methodology  calls 
 for  incumbent  LECs  to  be  compensated  for  the  use  of  their  network  at  charges  that  reflect  what  an  incumbents  costs  would  be  if  it  were  providing  the  most  efficient  technology  in  the  most 
 efficient  configuration  available  using  its  existing  wire  center  locations.  The  court  reasoned  that  costs  based  on  this  hypothetical  network  did  not  reflect  the  cost  .  .  .  of  providing  the 
 interconnection  or  network  element  as  required  by  section  252(  d)(  1)(  A)(  i).  81  The  court  did,  however,  agree  with  the  Commission  that  it  was  reasonable  to  interpret  cost  to  mean  forward-looking 
 cost,  rather  than  historical  cost,  82  and  that  the  cost  of  the  element  should  not  include  any  costs  of  universal  service  subsidies.  83  The  court  also  reaffirmed  its  earlier  decision  to  vacate  the 
 Commissions  new  combinations  rules,  sections  51.315(  c)-(  f).  84 

 77  Id.  at  20916.  Digital  subscriber  line  technology,  commonly  referred  to  as  xDSL,  permits  high  speed 
 connections  between  subscribers  and  packet  switched  networks  over  ordinary  copper  telephone  loops.  Id.  at  20915,  para.  3. 

 78  Id.  at  20916,  para.  5. 
 79  Id.  at  20917. 
 80  Iowa  Utils.  Bd.  v.  FCC,  219  F.  3d  744. 
 81  Id.  at  750. 
 82  Id.  at  751. 
 83  Id.  at  753.  The  court  also  vacated  the  Commissions  resale  pricing  rule  on  the  ground  that  section  252(  d)(  3) 
 requires  wholesale  rates  to  reflect  those  retail  costs  that  the  incumbent  LEC  actually  avoids  by  providing  the  service  at  wholesale  rather  than  at  retail,  not  those  costs  that  merely  could  be  avoided.  Id.  at  755. 

 84  Id.  at  759. 
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 28.  Triennial  Review  NPRM.  In  December  2001,  about  two  years  after  releasing  the  UNE  Remand  Order,  the  Commission  adopted  and  released  the  Notice  that  began  the  instant 
 proceeding,  the  Triennial  Review  NPRM.  85  The  Notice  posed  questions  regarding  almost  all  aspects  of  the  unbundling  regime,  including  the  necessary  and  impair  standards,  the  at  a 
 minimum  language  of  section  251(  d)(  2),  whether  and  how  the  Commissions  previously  identified  UNEs  should  be  unbundled,  and  whether  the  Commission  should  conduct  a  more 
 granular  impairment  analysis.  86  The  Commission  asked  particular  questions  about  crafting  unbundling  rules  that  foster  facilities  investment  by  both  incumbent  LECs  and  new  entrants,  in 
 particular  investment  in  facilities  needed  to  provide  broadband  services.  87 
 29.  Verizon  v.  FCC.  In  2002,  after  the  Commission  released  the  Triennial  Review  NPRM,  the  Supreme  Court  upheld  the  TELRIC  standard  established  by  the  Commission  in  the 

 Local  Competition  Order  and  applied  by  state  commissions  to  set  the  actual  rates  for  UNEs.  88  In  so  doing,  the  Court  overturned  the  decision  by  the  Eighth  Circuit  concerning  the  lawfulness  of 
 the  TELRIC  pricing  standard.  The  Court  specifically  rejected  the  argument  that  rates  for  UNEs  must  be  based  on  the  historic  cost  incurred  by  the  incumbent  LEC  in  furnishing  the  specific  UNE 
 to  be  provided  as  opposed  to  its  value  or  price  in  a  competitive  open  market.  The  Court  also  affirmed  the  Commissions  decision  to  base  TELRIC  costs  on  the  use  of  the  most  efficient 
 telecommunications  technology  currently  available  and  the  lowest  cost  network  configuration  in  light  of  the  existing  location  of  the  incumbents  wire  centers.  In  addition,  the  Court  rejected  the 
 claim  that  TELRIC  is  an  unreasonable  rate  making  methodology  for  UNEs  because  it  does  not  produce  facilities-  based  competition.  The  Court  stated  that  it  had  no  idea  whether  a  different 
 forward-  looking  pricing  scheme  would  have  generated  even  greater  competitive  investment  than  the  $55  billion  that  the  entrants  claim.  89  The  Court,  however,  emphasized  that  it  suffices  to  say 
 that  a  regulatory  scheme  that  can  boast  such  substantial  competitive  capital  spending  over  a  4-  year  period  is  not  easily  described  as  an  unreasonable  way  to  promote  competitive  investment  in 
 facilities.  90 
 30.  Moreover,  the  Court  eliminated  remaining  uncertainty  regarding  the  Commissions  new  combinations  requirement  by  explicitly  upholding  the  Commissions  rules 

 requiring  that  incumbent  LECs  combine  UNEs  in  certain  circumstances  even  if  they  are  not  combined  in  the  incumbents  network.  The  Court  stated  these  rules  reflect  a  reasonable  reading 

 85  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers,  Implementation  of 
 the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Notice  of  Proposed 

 Rulemaking,  16  FCC  Rcd  22781  (2001)  (Triennial  Review  NPRM). 
 86  Id.  at  22790,  para.  18,  22791,  para.  21,  22803-  13,  paras.  47-  70,  22797-  802,  para.  34-  44. 

 87  Id.  at  22793-  96,  paras.  24-  30. 
 88  Verizon,  535  U.  S.  467. 
 89  Verizon,  535  U.  S.  at  517. 
 90  Id. 
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 of  the  statute,  meant  to  remove  practical  barriers  to  competitive  entry  into  local-  exchange  markets  while  avoiding  serious  interference  with  incumbent  network  operations.  91 
 31.  United  States  Telecom  Association  v.  FCC.  Eleven  days  after  the  Supreme  Courts  decision  in  Verizon,  the  D.  C.  Circuit  vacated  and  remanded  for  further  consideration  the 
 portions  of  the  Commissions  UNE  Remand  Order  that  adopted  an  interpretation  of  the  impair  standard  and  established  a  list  of  mandatory  UNEs,  and  vacated  and  remanded  as  well  the 
 Commissions  Order  requiring  that  the  high-  frequency  portion  of  the  loop  be  made  available  as  a  UNE.  92  Specifically,  it  appears  that  the  court  reversed  rule  51.317(  b)  (the  impair  standard)  and 
 rule  51.319  (specific  unbundling  requirements).  93  As  explained  below,  other  rules  related  to  these  topics,  such  as  the  rules  relating  to  spectrum  management  and  the  rule  defining  the 
 necessary  standard,  remain  in  effect.  94 
 32.  While  recognizing  the  extraordinary  complexity  of  the  Commissions  task[,]  95  the  court  found  the  Commissions  analysis  wanting  in  a  number  of  respects.  At  the  outset,  the 

 court  criticized  what  it  characterized  as  the  decision  in  the  UNE  Remand  Order  to  adopt  a  uniform  national  rule,  mandating  [an]  elements  unbundling  in  every  geographic  market  and 
 customer  class,  without  regard  to  the  state  of  competitive  impairment  in  any  particular  market.  96  The  court  concluded  that,  under  this  approach,  UNEs  will  be  available  to  CLECs  in  many 
 markets  where  there  is  no  reasonable  basis  for  thinking  that  competition  is  suffering  from  any  impairment  of  a  sort  that  might  have  [been]  the  object  of  Congresss  concern.  97  The  court  stated 
 that  [  o]  ne  reason  for  such  market-  specific  variations  in  competitive  impairment  is  the  cross-subsidization  often  ordered  by  state  regulatory  commissions,  .  .  [which]  usually  brings  about 
 undercharges  for  some  subscribers  (usually  rural  and/  or  residential)  and  overcharges  for  the  others  (usually  urban  and/  or  business).  98  In  particular,  the  court  stated  that  [  t]  he  Commission 
 never  explicitly  addresses  by  what  criteria  want  of  unbundling  can  be  said  to  impair  competition  in  such  markets  [where  customers  are  charged  below  cost]  where,  given  the  ILECs  regulatory 

 91  Id.  at  535. 
 92  USTA,  290  F.  3d  415. 
 93  On  September  4,  2002,  the  court  stayed  the  effectiveness  of  its  opinion  until  January  2,  2003.  See  USTA  v. 
 FCC,  No.  00-  1012,  Order  (D.  C.  Cir.  Sept.  4,  2002).  Then,  on  December  23,  2002,  the  court  granted  the  consent  motion  of  the  Commission  and  the  Bell  Operating  Companies  to  extend  the  stay  through  February  20,  2003.  See 

 USTA  v.  FCC,  Nos.  00-  1012,  00-  1015,  Order  (D.  C.  Cir.  Dec.  23,  2002). 
 94  See  infra  Parts  V.  C.,  the  Necessary  Standard,  and  VI.  A.  4.  a.(  v),  Specific  Unbundling  Requirements  for  Mass 
 Market  Loops. 
 95  USTA,  290  F.  3d  at  421. 

 96  Id.  at  422. 
 97  Id. 
 98  Id. 
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 hobbling,  any  competition  will  be  wholly  artificial.  99  The  court  added,  [  b]  ut  it  is  in  the  other  segments  of  the  markets,  where  presumably  ILECs  must  charge  above  cost  (at  least  above 
 average  costs  allocated  in  conventional  regulatory  fashion)  in  order  to  offset  their  losses  in  the  subsidized  markets,  that  the  gap  in  the  Commissions  reasoning  is  greatest.  100  In  particular,  the 
 court  stated  that  the  Commission  nowhere  appears  to  have  considered  the  advantage  CLECs  enjoy  in  being  free  of  any  duty  to  provide  underpriced  service  to  rural  and/  or  residential 
 customers  and  thus  of  any  need  to  make  up  the  difference  elsewhere.  101  The  court  also  concluded  that  the  Commission  had  failed  to  adequately  explain  how  a  uniform  national  rule 
 would  help  to  achieve  the  goals  of  the  Act,  including  the  rapid  introduction  of  competition,  promotion  of  facilities-  based  competition,  investment  and  innovation,  certainty  in  the  market 
 place,  administrative  practicality  and  reduced  regulation.  102 
 33.  The  court  further  found  that  the  UNE  Remand  Order  improperly  reflect[  s]  an  open-  ended  notion  of  what  kinds  of  cost  disparity  are  relevant  for  purposes  of  identifying 

 impairment.  103  In  particular,  the  court  stated  that  [  t]  o  rely  on  cost  disparities  that  are  universal  as  between  new  entrants  and  incumbents  in  any  industry  is  to  invoke  a  concept  too  broad,  even 
 in  support  of  an  initial  mandate,  to  be  reasonably  linked  to  the  purpose  of  the  Acts  unbundling  provisions.  104  Instead,  the  court  indicated  that  the  Commission  must  engage  in  a  balancing 
 process,  reflecting  both  the  benefits  and  drawbacks  of  unbundling,  noting  that,  in  his  separate  opinion  in  AT&  T  v.  Iowa  Utilities  Board,  Justice  Breyer  concluded  that  fulfillment  of  the  Acts 
 purposes  .  .  .  called  for  balance  between  .  .  .  competing  concerns.  105  The  court  of  appeals  stated  that  although  it  did  not  intend  to  suggest  that  the  Act  requires  use  of  [the  essential 
 facilities]  doctrines  criteria[,]  106  [  a]  cost  disparity  approach  that  links  impairment  to  universal  characteristics,  rather  than  ones  linked  in  (in  some  degree)  to  natural  monopoly,  can 
 hardly  be  said  to  strike  such  a  balance.  107  The  court  emphasized  that  cost  comparisons  of  the  sort  made  by  the  Commission,  largely  devoid  of  any  interest  in  whether  the  cost  characteristics 
 of  an  element  render  it  at  all  unsuitable  for  competitive  supply,  seem  unlikely  either  to  achieve 
 99  Id. 
 100  Id. 
 101  Id.  at  423. 
 102  Id. 
 103  Id.  at  426. 
 104  Id.  at  427  (emphasis  in  original). 
 105  Id.  In  this  regard,  the  court  stated  that  [  e]  ach  unbundling  of  an  element  imposes  costs  of  its  own,  spreading 
 the  disincentive  to  invest  in  innovation  and  creating  complex  issues  of  managing  shared  resources[,]  while  recognizing  that  a  broad  mandate  [for  unbundling]  can  facilitate  competition  by  eliminating  the  need  for  separate 

 construction  of  facilities  where  such  construction  would  be  wasteful.  Id. 
 106  Id. 

 107  Id. 
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 the  balance  called  for  explicitly  by  Justice  Breyer  or  implicitly  by  the  Court  as  a  whole.  108  The  court  also  vacated  the  Commissions  Line  Sharing  Order,  finding  that  the  Commission  had 
 failed  to  give  adequate  consideration  to  existing  facilities-  based  competition  in  the  provision  of  broadband  services,  especially  by  cable  systems.  109 

 34.  Competitive  Telecommunications  Association  v.  FCC.  In  2002,  a  few  months  after  the  D.  C.  Circuits  decision  in  USTA,  the  D.  C.  Circuit  upheld  the  Commissions  interim 
 restrictions  on  the  availability  of  enhanced  extended  links  for  use  in  the  provision  of  exchange  access  service.  110  The  court  held  that  the  Commission  has  authority  to  restrict  the  availability  of 
 UNEs  to  particular  services  for  which  there  has  been  a  showing  that  denial  of  the  requested  element  would  impair  the  competitors  ability  to  provide  the  service.  111  The  court  also  found  that 
 the  Commission  had  provided  a  reasonable  justification  for  its  restrictions  on  the  use  of  enhanced  extended  links  for  the  provision  of  exchange  access  service.  Moreover,  the  court  went 
 on  to  state  that  it  is  far  from  obvious  to  us  that  the  FCC  has  the  power,  without  an  impairment  finding  as  to  non-  local  services,  to  require  that  ILECs  provide  EELs  for  such  services  on  an 
 unbundled  basis[,]  although  it  did  not  rule  on  this  issue  since  it  was  not  raised  by  the  parties.  112  The  court  also  rejected  CompTels  argument  that  the  Commissions  safe  harbor  provisions  were 
 arbitrary  and  capricious.  113 
 IV.  EVOLUTION  OF  THE  MARKET  FOR  LOCAL  TELECOMMUNICATIONS  SERVICES 

 35.  To  provide  context  for  this  Orders  unbundling  decisions,  we  describe  some  of  the  major  developments  in  the  local  telecommunications  market,  with  special  emphasis  on  the 
 introduction  of  competition  through  the  1996  Act.  This  Part  provides  a  brief  factual  overview  of  telecommunications  markets  that  sets  the  stage  for  the  unbundling  decisions  set  forth  below. 

 A.  Effects  of  the  Act  on  Telecommunications  and  Industry  Trends 
 36.  The  1996  Act  marked  the  greatest  single  change  in  local  telephone  regulation  since  the  original  Communications  Act  of  1934.  Although  a  few  states  had  initiated  significant 

 market  opening  programs,  the  1996  Act  opened  the  monopoly  local  exchange  market  on  a  nationwide  basis  and  also  established  procedures  for  the  Bell  Operating  Companies  (BOCs)  to 

 108  Id. 
 109  Id.  at  428-  29. 
 110  CompTel,  309  F.  3d  at  8. 
 111  See  id.  at  12-  14. 
 112  Id.  at  14. 
 113  See  id.  at  17-  18. 
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 enter  the  interLATA  long  distance  market.  114  Specifically,  the  1996  Act  expanded  existing  collocation  and  interconnection  requirements  115  and  imposed  network  access  requirements  to 
 allow  full  local  service  competition  through  three  types  of  entry:  resale,  leasing  of  UNEs  and  investment  in  and  ownership  of  full  facilities.  116  Various  competitive  LECs  pursued  these 
 strategies  either  singly  or  in  combination.  Total  service  resale  requires  the  least  initial  capital  investment,  but  is  limited  to  reselling  the  incumbent  LEC  products  with  little  opportunity  to  vary 
 the  products  other  than  through  improved  customer  service  and  bundling  additional  products  with  resold  local  service.  Full  ownership  of  facilities,  on  the  other  hand,  allows  the  competitive 
 LEC  to  totally  engineer  its  own  network,  giving  maximum  control  and  flexibility  but  requiring  the  most  capital  investment.  Leasing  some  parts  of  the  network  as  UNEs,  such  as  unbundled 
 loops,  can  be  accomplished  at  a  lower  initial  capital  investment  than  full  facilities  ownership  and  provides  greater  flexibility  to  develop  services  than  does  resale,  but  it  may  result  in  less  network 
 flexibility  to  add  new  services  than  does  full  facilities  ownership. 
 37.  The  competitive  LEC  industry  grew  rapidly  beginning  in  1997.  This  initial  expansion  was  followed  by  consolidation  beginning  in  2001.  Direct  competitive  local  service 

 was  being  offered  to  mass  market  and  enterprise  customers.  To  a  smaller  degree,  some  competitive  LECs  began  to  provide  selected  transport  services  to  other  competitive  LECs  on  a 
 wholesale  basis.  One  telecommunications  trade  association  has  estimated  that  in  2000  there  were  about  300  facilities-  based  competitive  LECs,  but  that  by  early  2002  that  number  had 
 contracted  to  about  70.  117 
 38.  The  competitive  LEC  industry  experienced  major  difficulty  in  2001  and  2002  due  to  a  slowing  general  economy  and  major  reduction  in  access  to  capital.  Some  trade  associations 

 estimate  that  competitive  LEC  capital  spending  of  $21.7  billion  in  2000  was  down  to  an  estimated  $10.7  billion  for  2002.  118  Although  there  has  been  a  significant  reduction  in  the 
 number  of  competitive  LECs,  the  capital  assets  for  those  exiting  carriers  in  some  cases  returned 

 114  Local  Competition  Order,  11  FCC  Rcd  at  14174,  para.  4;  47  U.  S.  C.    271.  Nineteen  states  had  some  local 
 competition  rules  in  place  by  the  time  of  the  1996  Act.  Seven  of  these  states  had  firms  offering  competitive  switched  access  service:  California,  Illinois,  Maryland,  Massachusetts,  Michigan,  New  York,  and  Washington. 

 115  See,  e.  g.,  Expanded  Interconnection  with  Local  Telephone  Company  Facilities,  CC  Docket  No.  91-  141,  First 
 Report  and  Order,  7  FCC  Rcd  7369  (1992)  (Special  Access  Order),  vacated  in  part  and  remanded,  Bell  Atlantic,  24  F.  3d  1441  (D.  C.  Cir.  1994);  First  Reconsideration,  8  FCC  Rcd  127  (1993),  vacated  in  part  and  remanded,  Bell 

 Atlantic  Tel.  Cos.  v.  FCC,  24  F.  3d  1441  (D.  C.  Cir.  1994);  Second  Reconsideration,  8  FCC  Rcd  7341  (1993);  Second  Report  and  Order,  8  FCC  Rcd  7374  (1993)  (Switched  Transport  Order),  vacated  in  part  and  remanded,  Bell 
 Atlantic  Telephone  Cos.,  v.  FCC,  24  F.  3d  1441;  Remand  Order,  9  FCC  Rcd  5154  (1994)  (Virtual  Collocation  Order),  remanded  for  consideration  of  1996  Act,  Pacific  Bell  v.  FCC,  81  F.  3d  1147  (1996). 

 116  47  U.  S.  C.    251.  Congress  recognized  that  it  might  be  inefficient  or  impossible  for  competitive  LECs  to 
 duplicate  the  entire  incumbent  LEC  telecommunications  network  to  enter  a  market  and  established  several  modes  of  possible  market  entry,  including  resale  and  UNEs,  as  well  as  full  facilities  deployment. 

 117  ALTS,  THE  STATE  OF  LOCAL  COMPETITION  2002,  Annual  Report  5  (Apr.  2002)  (ALTS  2002  Report). 
 118  Id.  at  11. 
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 to  productive  use  by  other  entities.  Accordingly,  much  of  this  investment  has  not  been  lost,  but  rather  shifted  to  new  companies  and  put  back  into  service.  119 
 39.  Although  precise  figures  about  competitive  LEC  services  are  difficult  to  obtain,  parties  in  this  proceeding  have  provided  some  estimates.  120  At  the  end  of  2001,  competitive 
 LECs  had  almost  25,000  collocation  arrangements  with  the  BOCs,  up  from  less  than  5,000  in  1998.  121  Minutes  of  traffic  exchanged  had  grown  from  less  than  100  billion  to  almost  500  billion 
 minutes  from  1998  through  2001.  122  In  the  same  time  period,  competitive  LEC  access  lines  grew  from  an  estimated  8-  9  million  to  23-  32  million  lines.  123  Estimates  provided  by  analysts,  BOCs, 
 and  trade  groups  indicate  that  competitive  LEC  revenues  from  local  service  have  risen  from  $3.5  billion  in  1998  to  $9.5  billion  in  2001.  124  By  2001,  competitive  LECs  had  deployed  about  1,300 
 local  circuit  switches,  with  potential  coverage  of  over  86  percent  of  BOC  access  lines.  125 
 40.  Incumbent  LECs  have  also  entered  the  competitive  LEC  market.  Some  have  expanded  their  existing  network  into  adjacent,  usually  BOC,  territory.  Others  have  established 

 separate  competitive  entities  and  operate  further  afield.  126  In  addition  to  existing  telecommunications  companies  expanding  into  local  service,  new  companies  have  been  created 
 to  address  new  opportunities.  127  Cable  companies  have  also  deployed  networks  to  serve  business 

 119  See  ALTS,  PROGRESS  REPORT  ON  THE  CLEC  INDUSTRY  (Oct.  17,  2002), 
 <http://  www.  alts.  org/  Filings/  101702CLECProgressReport.  pdf>,  for  ALTS  detailed  analysis  of  current  and  projected  health  of  the  competitive  LEC  industry. 

 120  The  data  supplied  do  not  generally  distinguish  between  mass  market  and  enterprise  services,  but  they  provide 
 some  clues  about  the  state  of  competition  in  the  mass  market. 
 121  SBC  Comments,  Attach.  A  at  I-  4. 

 122  Id.  at  I-  4. 
 123  Id.  at  I-  5.  In  mid-  2002,  competitive  LECs  reported  they  provided  slightly  more  than  21  million  total  access 
 lines,  including  resale,  UNEs  and  full  facilities;  competitive  LEC-  owned  facilities  comprised  about  6.2  million  lines.  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  Local  Telephone  Competition: 

 Status  as  of  June  30,  2002  (Dec.  2002)  at  Table  3  (Local  Telephone  Competition  December  2002  Report). 
 124  SBC  Comments,  Attach.  A,  UNE  Fact  Report  2002  at  I-  13  (BOC  UNE  Fact  Report  2002);  ALTS  2002  Report 
 at  9. 
 125  BOC  UNE  Fact  Report  2002  at  II-  1.  The  record  indicates  that  in  2001,  competitive  LECs  owned  339,501  route 
 miles  of  fiber.  ALTS  2002  Report  at  17. 
 126  There  are  at  least  45  competitive  LECs  with  incumbent  LEC  affiliations.  Numbering  Resource 
 Utilization/  Forecast  (NRUF)  FCC  Form  502,  as  of  December  31,  2001,  staff  calculation. 
 127  For  example,  Sempra  in  San  Diego  and  Dominion  Telecom  in  Hartford-  New  Haven  were  laying  fiber.  Utility 
 companies  such  as  Avista,  Montana  Power,  Pacific  Enterprises  of  Southern  California,  UtiliCorp  of  Kansas/  Missouri  and  PEPCO  entered  the  telecommunications  business.  Citizens  Utilities,  for  one,  has  more  than 

 two  million  access  lines  in  the  United  States.  See  Telecommunications  Industry  Association,  2002  Telecommunications  Market  Review  and  Forecast,  at  37  (2002)  (TIA  2002  Market  Review). 
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 customers.  128  These  are  generally  not  the  historic  hybrid-  fiber-  coaxial  cable  networks  providing  service  to  residential  customers  but  newly  deployed  facilities  specifically  designed  to  serve 
 enterprise  customers. 
 41.  Competitive  LECs  purchase  of  total  service  resale  has  declined  from  a  peak  of  almost  5.4  million  lines  in  2000  to  below  3.5  million  lines  by  mid-  2002.  129  Over  the  same  time 

 period,  total  access  lines  served  by  UNE-  Loops  (UNE-  L)  and  UNE-  P  combinations  have  grown  from  about  1.5  million  to  about  11.5  million.  130  UNE-  L  grew  from  1  million  to  4  million  lines. 
 UNE-  P  lines  grew  from  less  than  half  a  million  to  almost  7.5  million.  131  These  UNE-  L  and  UNE-  P  represent  approximately  6.9  percent  of  BOC  access  lines.  132  Competitive  LECs  provide 
 service  to  about  16-  20  percent  of  all  access  lines  in  the  BOC  territories:  26-  33  percent  of  business  access  and  about  9  percent  of  residential  access  lines.  133  Considering  all  modes  of  entry, 
 competitive  LEC  lines  probably  exceed  10  percent  of  BOC  lines  in  most  states.  The  BOCs  at  present  serve  87  percent  of  all  incumbent  LEC  access  lines  while  the  independent  incumbent 
 LECs  serve  the  balance.  134 
 42.  Fiber  transport  facilities  have  also  increased  in  recent  years.  The  BOCs  estimate  that  since  1998,  competitive  LEC-  owned  fiber  has  increased  from  100,000  to  184,000  route 

 miles.  In  addition,  wholesale  suppliers  of  fiber  continue  to  invest  in  facilities  that  are  being  used  by  all  carriers.  135  Much  of  this  interoffice  transport  is  long-  haul  intercity,  rather  than  local.  For 

 128  In  June  2002  cable  carriers  responded  that  they  provide  fewer  than  16,000  coaxial  cable  connections  to  medium 
 and  large  businesses;  small  business  and  residential  services  are  not  separately  reported.  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  High  Speed  Services  for  Internet  Access:  Status  as  of  June  30, 

 2002  (Dec.  2002)  calculation  using  Table  3  and  Table  5  (High  Speed  Services  December  2002  Report). 
 129  Local  Telephone  Competition  December  2002  Report  at  Table  2,  Table  4. 

 130  The  UNE-  P  consists  of  a  leased  combination  of  the  loop,  local  switching  and  shared  transport  UNEs. 
 131  Local  Telephone  Competition  December  2002  Report  at  Table  4.  PACE  estimates  that  UNE-  P  grew  to  over  ten 
 million  lines  by  the  end  of  2002.  Letter  from  Genevieve  Morelli,  Counsel  for  PACE,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Jan.  14,  2003)  (PACE  Jan.  14,  2003 

 UNE-  P  Fact  Report). 
 132  Local  Telephone  Competition  December  2002  Report  at  Table  4.  In  mid-  2002,  about  65%  of  UNE  lines 
 included  switching.  While  competitive  LEC  end-  user  lines  increased  by  about  30%  from  December  2000  to  June  2002,  UNEs  and  especially  UNE-  P  have  become  a  higher  percentage  of  competitive  LEC  lines  from  2000  to  mid-2002. 

 Considering  the  PACE  estimate  of  ten  million  UNE-  P  lines  at  the  end  of  2002,  competitive  LECs  would  have  8.2%  of  BOC  lines  in  UNE-  L  and  UNE-  P.  PACE  Jan.  14,  2003  Ex  Parte  Letter,  UNE-  P  Fact  Report  Attach.  at  1. 

 133  BOC  UNE  Fact  Report  2002  at  I-  7.  This  figure  includes  competitive  LEC  services  provided  through  resale, 
 UNE-  P,  UNE-  L  and  fully-  owned  facilities. 
 134  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  Trends  in  Telephone  Service  (May 
 2002)  at  Table  8.3  (Trends  in  Telephone  Service  May  2002  Report). 
 135  BOC  UNE  Fact  Report  2002  at  III-  8  to  III-  14.  The  route  miles  deployed  and  planned  are  difficult  to  estimate. 
 ALTS  estimates  competitive  LEC  fiber  miles  at  almost  340,000  miles  in  2001.  ALTS  2002  Report  at  17. 
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 any  given  city,  a  competitive  LEC  may  or  may  not  have  non-  incumbent  LEC  interoffice  transport  sufficient  to  link  the  various  wire  centers  necessary  to  offer  local  service.  136 
 B.  Markets  for  Telecommunications  Services 
 43.  Some  competitive  LECs  have  pursued  the  medium  and  large  business  enterprise  markets  while  others  have  pursued  mass  market  strategies.  As  discussed  below  in  detail,  the 

 economic  characteristics  of  these  markets  vary  significantly.  137  In  this  Part,  we  summarize  general  observations  about  the  overall  development  of  competition  for  these  customer  classes. 

 1.  The  Enterprise  Market 
 44.  Within  the  enterprise  market  for  telecommunications  services,  new  entrants  began  competing  with  the  incumbent  LECs  in  the  mid-  1980s.  Beginning  in  New  York  in  the  mid-1980s, 

 competitive  fiber  suppliers  (competitive  access  providers  or  CAPs)  began  providing  competitive  exchange  access  service  to  larger  business  customers.  138  The  CAPs,  in  general, 
 provided  a  specialized  service  to  their  customers    connecting  incumbent  LECs  local  wire  centers  to  interexchange  carriers  points  of  presence  (POPs)  and  large  enterprise  customers 
 directly  to  interexchange  carrier  POPs.  139  The  CAPs  enjoyed  some  success  in  this  market  as  they  were  able  to  underprice  the  incumbent  LECs  comparable  (but  regulated)  special  access 
 services.  140  By  1993,  the  ten  largest  CAPs  had  revenues  of  $209.6  million  from  providing 
 136  Allegiance  Comments  at  28.  Allegiance  provisions  about  70%  of  its  DS3  interoffice  transport  through  the 
 incumbent  LEC.  Id.  ALTS  states  that  competitive  fiber  is  only  available  in  about  15%  of  all  BOC  wire  centers.  ALTS  et  al.  Comments  at  63.  Covad  and  Mpower  state  they  have  competitive  fiber  alternatives  in  about  one-  half  of 

 the  incumbent  LECs  central  offices  where  they  collocate.  Covad  Comments  at  67-  68;  Mpower  Reply  at  13-  16;  Letter  from  Ross  A.  Buntrock,  Counsel  for  Mpower,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01- 
 338,  96-  98,  98-  147  at  7  (filed  Oct.  11,  2002)  (Mpower  Oct.  11,  2002  Ex  Parte  Letter).  Broadview  has  experienced  competitive  transport  availability  in  only  about  20%  of  cases.  Letter  from  Rebecca  H.  Sommi,  Vice  President, 
 Operations  Support,  Broadview,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  14  (filed  Aug.  2,  2002)  (Broadview  Aug.  2,  2002  Ex  Parte  Letter);  see  also  Letter  from  Joan  Marsh,  Director, 
 Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  7-  10  (filed  Oct.  8,  2002)  (AT&  T  Oct.  8,  2002  Ex  Parte  Letter). 

 137  See  infra  Part  V.  B.  2. 
 138  By  the  late  1980s,  companies  like  Teleport  Communications  Group  in  New  York;  Institutional 
 Communications  Company  in  Washington,  D.  C.;  Chicago  Fiber  Optic/  MFS  in  Chicago,  Baltimore  and  Philadelphia;  Kansas  City  Fiber  Net  in  Kansas  City;  and  other  CAPs  had  begun  to  develop  networks  in  traditional 

 BOC  territories.  RICHARD  G.  TOMLINSON,  TELE-  REVOLUTION    TELEPHONE  COMPETITION  AT  THE  SPEED  OF  LIGHT  87-  88  (2000). 

 139  AT&  T,  MCI  and  Sprint  are  the  largest  interexchange  carriers.  Industry  Analysis  and  Technology  Division, 
 Wireline  Competition  Bureau,  Statistics  of  Communications  Common  Carriers  (Sept.  2002)  at  Table  1.4  (Statistics  of  Communications  Common  Carriers  December  2001  Report).  These  interexchange  carriers  accounted  for  83%  of 

 reported  1996  long  distance  carrier  revenues.  CAPs  connected  large  business  customers  directly  to  the  interexchange  carriers  POP,  bypassing  the  incumbent  LECs  switch  and  thereby  avoiding  access  charges. 

 140  In  1999,  the  Commission  established  a  framework  by  which  incumbent  LECs  could  obtain  pricing  flexibility  in 
 the  provisioning  of  special  access  services.  See  Access  Charge  Reform,  CC  Docket  Nos.  96-  262,  94-  1,  98-  157,  (continued.) 
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 competitive  access  either  through  fiber  or  microwave  technologies,  out  of  a  total  of  $91  billion  in  telecommunications  revenue  nationally.  141  CAPs  began  to  install  more  infrastructure  and  expand 
 services  where  approved  by  state  regulatory  authority.  By  1995,  the  CAPs  total  revenues  had  exceeded  $1  billion  with  about  one-  half  from  dedicated  access  and  private  line  service  and  the 
 balance  from  local  switched  service,  switched  access  and  data  service.  142  Approximately  57  CAPs  were  providing  competitive  access  services  in  1996  and  were  well  positioned  when 
 Congress  passed  the  1996  Act.  143  Interexchange  carriers  and  CAPs  quickly  entered  the  newly  opened  local  markets  as  competitive  LECs,  144  and  large  interexchange  carriers  began  to  acquire 
 CAPs  to  facilitate  local  market  entry.  145 
 45.  Since  1996,  new  entrants  have  captured  some  of  the  enterprise  market.  Competitive  LECs  report  about  51  percent  of  their  customer  access  lines  serve  medium  and  large 

 business  customers.  146  Unlike  the  incumbent  LEC  legacy  network  that  was  built  out  from  central  offices  in  a  radiating  pattern,  competitive  LECs  collocated  in  few  incumbent  LEC  central  offices 
 and  built  fiber  ring-  lateral-  spur  configurations  to  connect  large  business  customers.  147  Competitive  LECs  self-  provision  facilities,  lease  facilities  from  other  competitive  facilities 
 providers  or  purchase  high-  capacity  (DS1  and  above)  loops  either  as  UNEs  or  special  access  services  from  the  incumbent  LECs.  Competitive  LECs  high-  capacity  loops,  however 
 provisioned,  are  difficult  to  count.  BOCs  estimate  that  competitive  LECs  share  of  special 

 (Continued  from  previous  page) 
 CCB/  CPD  File  No.  98-  63,  Fifth  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  14  FCC  Rcd  14221,  14224-  25,  paras.  2-  3  (1999)  (Pricing  Flexibility  Order). 

 141  TOMLINSON,  supra  note  138,  at  241-  42. 
 142  Id.  at  241-  65. 
 143  TIA  2002  Market  Review  at  37. 
 144  Carriers  have  not  generally  used  satellite  technologies  to  serve  the  enterprise  market.  While  there  was  some 
 fixed  wireless  entry  in  the  enterprise  market,  it  has  been  limited.  See,  e.  g.,  AT&  T  Comments,  Attach.  F,  Declaration  of  Robert  D.  Willig  (AT&  T  Willig  Decl.)  at  paras.  200-  01. 

 145  MCI  had  acquired  extensive  rights-  of-  way  and  fiber  cable  in  over  100  cities  from  Western  Union  in  1990, 
 creating  the  competitive  LEC  MCIMetro  in  1994.  WorldCom  acquired  MFS,  the  largest  competitive  LEC,  in  1996,  Brooks  Fiber  in  1997  and  MCIMetro,  the  fourth  largest  competitive  LEC,  in  1998.  WorldCom  had  also  acquired 

 UUNET  Technologies  (which  was  providing  Internet  access  to  350  corporate  local  area  networks  (LANs))  in  August  1996.  AT&  T  acquired  the  second  largest  ex-  CAP,  Teleport  Communications  Group,  in  early  1998. 
 Accordingly,  for  a  period  of  time  after  the  enactment  of  the  1996  Act,  WorldCom  and  AT&  T  were  the  two  largest  competitive  LECs,  accounting  for  about  one-  half  of  all  competitive  LEC  revenues  for  1998.  TOMLINSON,  supra 
 note  138,  at  346-  54. 
 146  Local  Telephone  Competition  December  2002  Report  at  Table  2. 

 147  MARTIN  F.  MCDERMOTT  III,  CLEC    AN  INSIDERS  LOOK  AT  THE  RISE  AND  FALL  OF  LOCAL  EXCHANGE 
 COMPETITION  64  (2002). 
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 access  revenues  is  at  least  28  percent.  148  The  enterprise  market  has  been  expanding,  and  the  BOCs  also  expanded  their  services  in  this  market.  BOCs  report  about  22  percent  of  their 
 customer  access  lines  serve  medium  and  large  business  customers.  149  Further,  BOCs  state  that  they  provided  19.5  million  special  access  lines  in  1996,  growing  to  78.6  million  lines  in  2001.  150 
 BOC  provisioning  of  fiber  and  high-  capacity  loops  to  end-  user  customers  premises  significantly  increased  in  recent  years.  Total  BOC  reported  DS1s  terminating  at  customer  premises  increased 
 over  four  fold  from  fewer  than  300,000  in  1996,  to  over  600,000  by  1999  and  almost  1.3  million  in  2001.  151  BOC  reported  fiber  terminated  to  customers  premises  more  than  doubled  between 
 1996  and  2001,  from  just  under  1  million  to  over  2  million  lines.  152 
 46.  To  meet  the  business  demands  of  enterprise  customers,  competitive  carriers  must  meet  more  stringent  design  and  operational  standards  with  higher  capacity  and  more  reliability. 

 Specifically,  enterprise  customers  demand  several  different  kinds  of  packet  switching  services  provided  by  these  competitive  carriers  including  frame  relay,  and  its  predecessor  X.  25,  which 
 allow  local  area  networks  to  be  connected  across  a  public  network.  Frame  relay  is  especially  valuable  in  connecting  employees  in  several  different,  distant  locations  and  more  than  35,000 
 enterprises  customers  utilize  frame  relay  with  more  than  one  million  ports.  153  The  frame  relay  market  for  services  has  grown  from  about  $1.3  billion  in  1996  to  $7.6  billion  in  2001  and  use  of 
 frame  relay  is  growing  at  a  faster  rate  than  use  of  dedicated  leased  lines  because  it  is  more  economical  and  flexible.  154  Another  technology,  asynchronous  transfer  mode  (ATM),  however, 
 is  the  most  widely  used  carrier  backbone  technology  and  can  guarantee  different  quality  of  service  levels  to  meet  different  customer  needs.  155  Frame  relays  rapid  growth  slowed  somewhat 
 in  recent  years,  partially  as  ATM  became  more  widely  deployed.  In  2001,  ATM  technology  had 

 148  BOC  UNE  Fact  Report  2002,  App.  L,  at  L-  1,  L-  2.  It  is  difficult  to  obtain  data  on  the  competitive  LECs  market 
 share.  It  appears,  however,  that  the  special  access  market  is  growing  and  the  BOCs  themselves  are  providing  more  special  access  services.  Id. 

 149  Local  Telephone  Competition  December  2002  Report  at  Table  2. 
 150  Statistics  of  Communications  Common  Carriers  September  2002  Report  at  Table  2.6;  Industry  Analysis 
 Division,  Common  Carrier  Bureau,  Statistics  of  Communications  Common  Carriers  (Dec.  1997)  at  Table  2.10  (Statistics  of  Communications  Common  Carriers  December  1997  Report). 

 151  ARMIS  Report  43-  07  (Transmission  Facilities,  DS1s  Terminated  at  Customer  Premises,  1996  to  2001). 
 152  Id.  (Transmission  Facilities,  Fiber  Terminated  at  Customer  Premises,  1996  to  2001). 
 153  TIA  2002  Market  Review  at  136. 
 154  Id.  at  138-  39,  Table  III-  11.2. 
 155  Id.  at  140. 
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 a  total  bandwidth  of  over  12,000  DS0s  while  frame  relay  had  fewer  than  11,000  DS0  equivalents.  156 
 47.  A  relatively  new,  but  growing  voice  service  used  by  enterprise  customers  is  telephony  provided  over  Internet  protocol,  also  known  as  IP  telephony.  157  Some  analysts  have 
 estimated  that  close  to  half  of  U.  S.  businesses  have  implemented  private  business  exchanges  (PBXs)  capable  of  providing  IP  telephony  and  place  calls  among  corporate  locations  over  an  IP 
 network:  the  IP  PBX  market  is  projected  to  be  $3.9  billion  (20  percent  of  the  PBX  market)  by  2005,  and  25  percent  of  call  center  contacts  currently  use  IP  technology.  158 

 48.  Some  competitive  LECs  market  integrated  voice  and  data  services  to  enterprise  customers.  159  The  business  plan  of  these  competitive  LECs  involves  leasing  high-  capacity  loops 
 as  UNEs  and  then  using  them  efficiently  to  provide  a  bundled  offering  including  voice,  data  and  Internet  access.  160 

 49.  In  serving  enterprise  customers,  the  BOCs  must  operate  under  the  Acts  restrictions  on  BOCs  originating  long  distance  service  from  their  regions  until  they  have  gained 
 section  271  approval.  161  Many  approvals  have  been  granted,  allowing  the  BOCs  to  expand  their 

 156  Id.  at  143.  In  2001,  there  were  about  26,000  ATM  ports  compared  to  1.2  million  frame  relay  ports.  The  high 
 cost  and  technical  complexity  relative  to  other  technologies  make  ATM  potentially  vulnerable  to  new  technologies  that  might  be  provided  at  a  lower  cost.  Id.  at  140-  43. 

 157  We  do  not  intend  to  define  the  regulatory  classification  of  IP  telephony  here,  but  merely  to  discuss  its  use  and 
 growth  in  very  broad  terms. 
 158  See,  e.  g.,  CommWeb.  com,  VoIP/  IP  Telephony  Statistics  (Oct.  15,  2002), 
 <http://  www.  commweb.  com/  article/  COM20021015S0002>  (visited  Dec.  16,  2002). 
 159  Companies  such  as  ITC^  Deltacom,  NewSouth  and  Cbeyond  have  focused  on  providing  integrated  services  to 
 the  business  market.  ALTS  et  al.  Comments  at  16;  see  also  NewSouth  Comments  at  7-  38;  NuVox  Comments  at  5-  8;  ITC^  Deltacom  Petition  for  Waiver  of  Supplemental  Order  Clarification,  CC  Docket  No.  96-  98  at  1-  2  (filed  Aug. 

 16,  2001)  (ITC^  Deltacom  Aug.  16,  2001  Petition). 
 160  ALTS  et  al.  Comments  at  33.  ITC^  Deltacom,  for  example,  offers  a  bundled  package  consisting  of  facilities-based 
 long  distance,  local  service,  data  and  Internet  access  services  and  customer  premises  equipment.  ITC^  Deltacom  Aug.  16,  2001  Petition  at  1-  2.  NewSouth  markets  to  small  businesses,  typically  leasing  a  single  DS1 

 as  a  UNE  to  support  a  mix  of  voice  and  data  services.  NewSouth  Comments  at  5.  Over  90%  of  NewSouth  customers  are  being  served  by  DS1s  upgraded  from  previous  analog  services.  Id.  NewSouth  has  deployed  digital 
 circuit  and  packet  switches  and  leased  intercity  lit  fiber  from  third  parties  to  connect  its  switches  and  collocated  equipment  in  incumbent  LEC  central  offices.  Id.  at  9.  NewSouth  states  that  its  facilities  allow  it  to  offer  customers 
 better  prices  and  more  and  varied  services.  Id.  at  9-  10. 
 161  47  U.  S.  C.    271.  As  an  incentive  to  BOCs  opening  their  local  markets,  Congress  enacted  section  271,  which 
 allows  the  Commission  to  grant  BOCs  entry  into  the  interLATA  market  after  the  BOC  has  demonstrated  that  it  has  implemented  the  necessary  conditions  to  open  its  market.  The  first  section  271  authority  was  granted  to  Verizon  in 

 New  York  in  December  1999.  Application  by  Bell  Atlantic  New  York  for  Authorization  Under  Section  271  of  the  Communications  Act  To  Provide  In-  Region,  InterLATA  Service  in  the  State  of  New  York,  CC  Docket  No.  99-  295, 
 Memorandum  Opinion  and  Order,  15  FCC  Rcd  3953  (1999)  (Bell  Atlantic  New  York  271  Order). 
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 enterprise  offerings.  Currently,  the  BOCs  have  authority  to  provide  in-  region  long  distance  service  in  43  states,  representing  82.6  percent  of  the  BOC  access  lines  and  82.2  percent  of  the 
 United  States  population.  162  BellSouth  was  the  first  BOC  to  complete  all  section  271  authorizations  for  its  service  territory.  163 

 2.  The  Mass  Market 
 50.  The  mass  market  for  telecommunications  services  before  1996  was  served  more  by  monopoly  providers  than  was  the  enterprise  market.  164  Since  1996,  various  competitive  LECs 

 have  used  one  or  more  of  the  three  entry  strategies  set  forth  in  the  1996  Act  to  provide  competitive  local  service  to  many  residential  customers  in  the  United  States.  By  mid-  2002,  over 
 93  percent  of  the  United  States  population  lived  in  a  zip  code  served  by  at  least  one  competitive  LEC  providing  some  kind  of  service.  165  It  appears  that  competitive  LECs  are  more  often  found 
 in  urban  than  rural  areas.  166  Over  51  percent  of  competitive  LEC  lines  serve  the  residential/  small  business  market  while  over  78  percent  of  BOC  lines  serve  this  group.  167 

 51.  The  mass  market  has  also  seen  competition  increase  in  the  provision  of  broadband  services,  largely  fueled  by  the  popularity  of  the  Internet.  168  The  residential  market  for  Internet 
 access  has  supported  additional  line  growth  for  dial-  up  service.  In  1988,  only  2.7  percent  of  households  had  two  or  more  telephone  lines.  That  percentage  steadily  increased  to  9.1  percent  in 

 162  Population  numbers  include  Alaska,  Hawaii  and  all  of  Connecticut.  BOCs  do  not  operate  in  Alaska  and 
 Hawaii.  Some  states  have  a  low  percentage  of  BOC  access  lines  or,  as  is  the  case  in  SBCs  territory  in  Connecticut,  are  not  subject  to  section  271. 

 163  BellSouth  FL/  TN  271  Order,  17  FCC  Rcd  25828. 
 164  The  exception  to  this  statement  was  the  provision  of  commercial  mobile  radio  service  (CMRS),  a  service  which 
 had  44  million  residential  and  business  telephony  subscribers  in  1996.  Trends  in  Telephone  Service  May  2002  Report  at  Table  12.2.  However,  the  number  of  subscribers  has  risen  to  almost  129  million  by  mid-  2002.  Local 

 Telephone  Competition  December  2002  Report  at  Table  11.  Commercial  mobile  service  is  any  mobile  service,  as  defined  in  section  3  of  the  Act,  as  amended,  provided  for  profit  and  making  interconnection  services  available  to  the 
 public.  See  47  U.  S.  C.    332(  d)(  1).  Commercial  Mobile  Services  became  known  by  the  Commission  as  the  Commercial  Mobile  Radio  Service,  or  CMRS.  See  47  C.  F.  R.    20.9.  Mobile  Telephony  is  a  CMRS. 

 165  Local  Telephone  Competition  December  2002  Report  at  Table  13.  Competitive  LECs  access  lines  total  about 
 17  million,  or  9%  of  total  U.  S.  access  lines.  Id.  (calculation  using  Table  3  and  Table  4).  By  mid-  2002,  over  11  million  BOC  lines  had  been  leased  as  UNE-  L  or  UNE-  P  to  competitive  LECs.  Id.  at  Table  4. 

 166  Thirty-  three  percent  of  all  zip  codes,  serving  about  7%  of  the  population,  have  no  competitive  LEC  presence. 
 Id.  at  Table  12;  see  also  James  Zolnierek,  James  Eisner  &  Ellen  Burton,  An  Empirical  Examination  of  Entry  Patterns  in  Local  Telephone  Markets,  19  J.  REG.  ECON.  143-  59  (2001)  (quantifying  increased  competitive  LEC 

 presence  in  areas  with  a  high  percentage  of  urban  households). 
 167  Local  Telephone  Competition  December  2002  Report  at  Table  2. 

 168  See  FCC  Technical  Advisory  Council,  Optical  Working  Group,  Broadband  Access  Platforms  for  the  Mass 
 Market    An  Assessment  (Dec.  4,  2002),  <http://  www.  fcc.  gov/  oet/  tac/  Broadband_  Access_  Supporting_  Materials_  12_  4_  02.  ppt>. 
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 1992,  16.8  percent  in  1996,  19.7  percent  in  1998,  and  26.5  percent  in  2000.  169  Internet  access  has  spurred  growing  xDSL  subscription.  As  of  mid  2002,  there  were  about  5.1  million  xDSL  lines  in 
 service.  Incumbent  LECs  were  the  major  providers  of  xDSL  service  with  95.6  percent  of  xDSL  lines,  while  competitive  LECs  accounted  for  4.4  percent.  170  Eighty-  two  percent  of  the  incumbent 
 LECs  xDSL  lines  and  39  percent  of  the  competitive  LECs  xDSL  lines  are  residential.  The  BOCs  served  about  4.5  million  xDSL  customers  in  mid  2002.  Due  to  technical  network 
 limitations  and  other  reasons,  less  than  50  percent  of  BOC  customers  are  able  to  subscribe  to  xDSL.  One  state  commission  expects  this  percentage  to  rise  to  about  75  percent  by  2005.  171 

 52.  The  mass  market  has  also  experienced  increased  narrowband  and  broadband  competition  from  intermodal  competitors.  Cable  operators  have  expanded  into  both  voice 
 telephony  and  cable  modem  service,  which  have,  to  a  limited  extent,  competed  with  services  of  traditional  wireline  providers.  172  The  cable  companies  have  remained  focused  on  mass  market, 
 largely  residential  service  consistent  with  their  historic  residential  network  footprints,  and  bundling  telephone  service  with  cable  modem  services.  173  More  broadly,  cable  companies  are 
 offering  cable  modem  service  capability  to  71  percent  of  United  States  households  with  a  current  take  rate  of  about  11  percent.  174  In  2002,  cable  companies  provided  cable  modem  service  to 
 approximately  9.2  million  subscribers.  175  Some  cable  companies  have  begun  offering  local  voice  service.  176  In  mid-  2002,  cable  telephony  represented  over  2.5  million  access  lines  in  27  states,  a 

 169  Trends  in  Telephone  Service  May  2002  Report  at  Table  8.4.  It  appears  that  the  proportion  of  households  with 
 additional  lines  declined  to  24.6%  for  2001.  Preliminary  staff  estimate  for  2001. 
 170  High  Speed  Services  December  2002  Report  at  Table  5 

 171  Letter  from  Lila  A.  Jaber,  Chairman,  Florida  Public  Service  Commission,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  96-  98,  98-  146,  98-  147,  01-  337,  02-  33,  Attach.  at  12-  15  (filed  Nov.  6,  2002)  (Florida  Commission  Nov.  6,  2002  Ex  Parte  Letter). 

 172  The  largest  such  residential  service  cable  companies  are  Adelphia  Business  Solutions/  Hyperion,  Cablevision 
 Lightpath,  Comcast  Business  Communications,  Cox  Fibernet/  Cox  Business  Services  and  Time  Warner  Telecom.  National  Cable  &  Telecommunications  Association,  Cable  Telephony:  Offering  Consumers  Competitive  Choice,  at 

 8-  9  (July  2001)  (NCTA  2001  Report),  <http://  www.  ncta.  com/  pdf_  files/  Telephony_  ReportComplete.  pdf>. 
 173  However,  there  is  some  recent  cable  expansion  into  the  enterprise  market.  Letter  from  Edward  Shakin,  Vice 
 President  and  Associate  General  Counsel,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  02-  33,  01-  337  at  1-  4  (filed  Jan.  15,  2003)  (Verizon  Jan.  15,  2003  Ex  Parte  Letter). 

 174  Inquiry  Concerning  the  Deployment  of  Advanced  Telecommunications  Capability  to  All  Americans  in  a 
 Reasonable  And  Timely  Fashion,  and  Possible  Steps  to  Accelerate  Such  Deployment  Pursuant  to  Section  706  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.  98-  146,  Third  Report,  17  FCC  Rcd  2844,  2871-  72,  paras.  65-  66 

 (2002)  (Third  Section  706  Report  2002);  High  Speed  Services  December  2002  Report  at  Table  1.  Some  analysts  expect  cable  modem  subscriptions  to  increase  to  28-  30  million  by  2006  with  a  40%  penetration  rate.  Third  Section 
 706  Report  2002,  17  FCC  Rcd  at  2872,  para.  66. 
 175  High  Speed  Services  December  2002  Report  at  Table  5. 

 176  Cox  and  AT&  T  are  the  largest  voice-  over-  cable  providers.  NCTA  2001  Report  at  1-  4. 
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 39  percent  growth  over  the  previous  year.  177  Industry  sources  state  that  over  10  million  households  have  access  to  cable  telephony.  178  Cable  companies  voice  service  competes  with  the 
 primary  landline  voice  service  and  second  line  while  cable  modem  service  competes  with  second  line  dial-  up  service  and  xDSL  service. 

 53.  Wireless  telephone  subscriber  growth  for  the  mass  market  has  been  remarkable.  From  fewer  than  100,000  subscribers  in  1984,  there  were  over  5  million  subscribers  by  1990, 
 over  44  million  in  1996,  and  almost  129  million  by  mid-  2002.  179  Over  90  percent  of  the  United  States  population  lives  in  counties  served  by  three  or  more  wireless  operators;  about  two  in  five 
 Americans  now  have  a  mobile  phone.  180  Prices  for  wireless  service  have  steadily  declined  in  recent  years.  In  1990  average  wireless  bills  were  over  $80  a  month  while  the  average  monthly 
 bill  in  mid-  2001  was  about  $46.  181  Sixty-  one  percent  of  households  had  at  least  one  wireless  telephone  in  mid-  2001.  182  Notably,  3  to  5  percent  of  wireless  customers  use  their  wireless  phone 
 as  their  only  phone.  183  Some  carriers  attribute,  at  least  in  part,  the  recent  drop  in  wireline  switched  access  lines  184  to  this  replacement  of  wireline  phones  by  wireless  phones.  This 
 replacement  may  particularly  affect  second-  line  growth.  185 

 177  Local  Telephone  Competition  December  2002  Report  at  Table  5  and  staff  calculation. 
 178  BOC  UNE  Fact  Report  2002  at  II-  11. 
 179  Local  Telephone  Competition  December  2002  Report  at  Table  11.  The  wireless  survey  data  present  total 
 cellular,  broadband  personal  communications  service  (PCS),  and  specialized  mobile  radio  (SMR)  subscribers  and  does  not  distinguish  between  mass  market  and  enterprise  customers. 

 180  BOC  UNE  Fact  Report  2002  at  I-  4. 
 181  Trends  in  Telephone  Service  May  2002  Report  at  Table  12.3. 
 182  Implementation  of  Section  6002(  B)  of  the  Omnibus  Budget  Reconciliation  Act  of  1993,  Annual  Report  and 
 Analysis  of  Competitive  Market  Conditions  With  Respect  to  Commercial  Mobile  Services,  Seventh  Report,  17  FCC  Rcd  12985,  13016  (2002)  (Seventh  Wireless  Report  2002). 

 183  Id.  at  13017. 
 184  Since  2000,  we  have  seen  for  the  first  time  a  decrease  in  the  number  of  retail  access  lines  served  by  the 
 incumbent  LECs:  from  2000  to  2002,  their  share  of  access  lines  declined  by  about  nine  million,  or  about  4.7%.  Local  Telephone  Competition  December  2002  Report  at  Table  4.  Some  of  the  decline  can  be  attributed  to  a  decline 

 in  additional  lines  in  households.  Recent  growth  in  additional  residential  lines  in  a  household,  from  16.8%  in  1996  to  26.5%  in  2000,  appears  to  have  decreased  to  less  than  25%  in  2001.  Trends  in  Telephone  Service  May  2002 
 Report,  Table  8.4  and  preliminary  staff  estimate  for  2001.  Despite  the  recent  drop  in  the  number  of  BOC  retail  switched  access  lines,  the  retail  and  wholesale  lines  combined  provided  by  BOCs  have  increased  each  year  since 
 1996.  BOC  business  service  offerings  have  expanded  in  recent  years  with  more  special  access  (measured  as  DS0  equivalents).  Considering  all  switched  and  non-  switched  access  lines,  the  BOCs  total  access  line  count  has 
 increased  in  recent  years,  at  188.3  million  in  1999,  228.5  million  in  2000  and  235.3  million  in  2001.  See  Statistics  of  Communications  Common  Carriers  September  2002  Report  at  Table  2.6;  Industry  Analysis  Division,  Common 
 Carrier  Bureau,  Statistics  of  Communications  Common  Carriers  (Sept.  2001)  at  Table  2.6  (Statistics  of  Communications  Common  Carriers  September  2001  Report);  Industry  Analysis  Division,  Common  Carrier  Bureau, 
 (continued.) 
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 54.  High-  speed  satellite  data  service  is  also  available  in  most  areas  of  the  United  States.  Satellite  broadband  exists  and  is  most  attractive  where  xDSL  or  cable  modem  service  is 
 not  available.  186  But  satellite  services  generally  are  not  price  competitive  with  wireline  services  in  the  mass  market  except  in  specialized  situations.  187  As  two-  way  Internet  connectivity  is 
 deployed  and  if  prices  decline  over  time,  satellite  service  may  become  a  more  viable  alternative  to  terrestrial  high-  speed  services  like  xDSL.  In  2001,  there  were  only  212,610  reported  high 
 speed  service  subscribers  of  satellite  and  fixed  wireless  combined.  188 
 V.  PRINCIPLES  OF  UNBUNDLING 
 55.  In  this  Part,  we  set  forth  our  new  standards  and  guiding  principles  for  determining  when  a  network  element  should  be  unbundled.  We  adopt  below  an  approach  to  unbundling  that 

 is  faithful  to  the  statute,  responsive  to  the  Supreme  Court  and  the  D.  C.  Circuit,  economically  rational,  and  that  embraces  the  states  involvement  in  the  unbundling  process. 

 56.  In  subpart  A,  we  interpret  the  definition  of  network  element  contained  in  section  153(  29)  of  the  Act  as  it  relates  to  our  unbundling  inquiry.  Specifically,  we  conclude  that 
 a  network  element  refers  to  an  element  of  the  incumbent  LECs  network  that  is  capable  of  being  used  to  provide  a  telecommunications  service.  In  subpart  B,  we  set  forth  our  new 
 interpretation  of  impair.  We  analyze  principles  from  the  Supreme  Court  and  D.  C.  Circuit  opinions  on  impair;  what  guidance  we  derive  from  the  language,  structure,  purposes,  and 
 history  of  the  1996  Act;  and  what  lessons  we  can  take  from  economic  and  legal  literature  on  topics  that  bear  some  resemblance  to  the  ambiguous  impair  standard  in  an  effort  to  make  our 

 (Continued  from  previous  page) 
 Statistics  of  Communications  Common  Carriers  (Aug.  2000)  at  Table  2.6  (Statistics  of  Communications  Common  Carriers  August  2000  Report). 

 185  Seventh  Wireless  Report  2002,  17  FCC  Rcd  at  13016-  17.  The  penetration  rate  is  calculated  by  dividing  total 
 wireless  subscribers  by  total  population.  Such  replacement  may  also  be  occurring  for  long  distance.  Id.  at  13018.  Other  forms  of  wireless  availability  have  improved  in  recent  years,  becoming  a  possible  method  to  access  the 

 Internet  for  some  customers.  Mobile  data  services  had  between  2  and  2.5  million  subscribers  in  2000  and  between  eight  and  ten  million  subscribers  in  2001.  Id.  at  13038-  39. 

 Local  Multipoint  Distribution  System  (LMDS)  is  another  fixed  wireless  broadband  transmission  technology.  Most  effective  where  customers  are  closely  grouped,  this  line-  of-  sight  transmission  technology  has  not  been 
 significantly  deployed.  About  $220  million  LMDS  investment  occurred  in  2001,  as  compared  to  $61  million  the  year  before.  See  TIA  2002  Market  Review  at  195.  As  the  wireless  technology  continues  to  improve,  wireless  may 
 become  a  more  practical  and  attractive  alternative  to  wireline  for  data  services. 
 186  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2877,  para.  78.  Until  recently,  only  one-  way  Internet 
 connectivity  was  available,  with  a  dial-  up  upstream  connection  accompanied  by  a  high-  speed  satellite-  based  downstream  path.  Id.  at  2880,  para.  85. 

 187  Some  analysts  estimate  that  the  20-  30  million  United  States  homes  where  cable  modem  or  xDSL  is  not 
 available  are  the  most  likely  current  potential  customers  for  satellite  services.  Id.  at  2877,  para.  78. 
 188  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  High  Speed  Services  for  Internet 
 Access:  Status  as  of  December  31,  2001  (July  2002)  at  Table  1,  Table  2  (High  Speed  Services  July  2002  Report). 
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 interpretation  as  economically  rational  as  possible.  From  these  sources,  we  derive  an  interpretation  of  impair  that  asks  whether  lack  of  access  to  an  incumbent  LEC  network 
 element  poses  a  barrier  or  barriers  to  entry,  including  operational  and  economic  barriers,  that  are  likely  to  make  entry  into  a  market  uneconomic.  We  will  apply  this  interpretation  of  impair  to 
 individual  elements  in  a  more  granular  manner  than  the  Commission  has  in  the  past,  taking  into  account  different  customer  classes,  geographic  considerations,  and  service  considerations.  We 
 also  explain  the  relationship  between  unbundling  obligations  and  implicit  support  flows. 
 57.  In  subpart  C,  we  reaffirm  our  existing  interpretation  of  the  necessary  standard.  In  subpart  D,  we  reaffirm  our  interpretation  of  the  at  a  minimum  language  of  section 

 251(  d)(  2),  although  we  emphasize  that  we  apply  this  language  with  restraint  throughout  the  Order,  and  we  find  no  instances  on  this  record  where  unbundling  is  warranted  in  the  absence  of 
 impairment.  In  subpart  E,  we  explain  the  critical  role  of  the  states  in  the  unbundling  process;  specifically,  we  explain  how  we  will  delegate  to  the  states  the  authority  to  perform  a  more 
 granular  analysis  to  determine  where  unbundling  is  appropriate,  and  the  extent  to  which  states  may  establish  unbundling  requirements  pursuant  to  state  law  that  are  consistent  with  federal 
 requirements. 
 A.  Definition  of  Network  Element 
 58.  We  reaffirm  our  previous  interpretation  of  the  definition  of  network  element,  set  forth  in  section  153(  29)  of  the  Act,  as  requiring  incumbent  LECs  to  make  available  to 

 requesting  carriers  network  elements  that  are  capable  of  being  used  in  the  provision  of  a  telecommunications  service.  189  Section  153(  29)  defines  network  element  as  a  facility  or 
 equipment  used  in  the  provision  of  a  telecommunications  service.  Such  term  also  includes  features,  functions  and  capabilities  that  are  provided  by  means  of  such  facility  or 
 equipment  .  .  .  .  190  As  an  initial  matter,  we  disagree  with  those  commenters  that  continue  to  argue  that  network  elements  can  only  be  physical  facilities  or  pieces  of  equipment  and 
 therefore  cannot  include  mere  features,  functions,  and  capabilities  of  a  physical  facility  or  equipment,  such  as  a  portion  of  the  available  bandwidth  of  a  loop.  191  Several  courts,  including 
 the  Supreme  Court,  have  previously  considered  and  rejected  this  argument.  Indeed,  the  Supreme  Court  stated  that  [  g]  iven  the  breadth  of  [Congresss  network  element]  definition,  it  is 
 impossible  to  credit  the  incumbents  argument  that  a  network  element  must  be  part  of  the  physical  facilities  and  equipment  used  to  provide  local  telephone  service.  192 

 189  UNE  Remand  Order,  15  FCC  Rcd  at  3845,  para.  329. 
 190  47  U.  S.  C.    153(  29). 
 191  See,  e.  g.,  Verizon  Comments  at  82-  83. 
 192  Iowa  Utils.  Bd.,  525  U.  S.  at  387;  see  also  USTA,  290  F.  3d  at  430  (upholding  the  Commissions  decision  that 
 the  high  frequency  portion  of  the  loop  is  a  capability  of  the  loop,  and  stating  that  the  Commissions  view  is  convincing.). 
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 59.  In  addition,  the  definition  of  a  network  element  is  ambiguous  as  to  whether  the  facility  or  equipment  (and  the  accompanying  features,  functions  and  capabilities)  must  be 
 actually  used  by  the  incumbent  LEC  in  the  provision  of  a  telecommunications  service  or  must  be  capable  of  being  used  by  a  requesting  carrier  in  the  provision  of  a  telecommunications  service 
 regardless  of  whether  the  incumbent  LEC  is  actually  using  the  network  element  to  provide  a  telecommunications  service.  193  We  find  that,  taken  together,  the  relevant  statutory  provisions  and 
 the  purposes  of  the  1996  Act  support  requiring  incumbent  LECs  to  provide  access  to  network  elements  to  the  extent  that  those  elements  are  capable  of  being  used  by  the  requesting  carrier  in 
 the  provision  of  a  telecommunications  service.  We  note  that,  by  using  the  terms  features,  functions,  and  capabilities,  the  definition  itself  uses  broad  and  expansive  terminology  in 
 defining  its  scope.  For  example,  the  term  capability  is  defined  in  Websters  New  College  Dictionary  as  potential  ability.  194  Limiting  a  requesting  carriers  ability  to  obtain  access  only 
 to  facilities  or  equipment  (and  associated  features,  functions  and  capabilities)  actually  used  in  the  provision  of  a  telecommunications  service  would  require  a  reading  in  tension  with  this 
 definition. 
 60.  With  regard  to  the  purposes  of  the  Act,  as  mentioned  above,  section  251(  d)(  2)  requires  the  Commission  to  consider  whether  the  failure  to  provide  access  to  a  particular  network 

 element  would  impair  the  ability  of  a  requesting  telecommunications  carrier  to  provide  the  services  that  it  seeks  to  offer.  195  To  interpret  the  definition  of  network  element  so  narrowly  as 
 to  mean  only  facilities  and  equipment  actually  used  by  the  incumbent  LEC  in  the  provision  of  a  telecommunications  service  also  would  be  at  odds  with  the  statutory  language  in  section 
 251(  d)(  2)  and  the  pro-  competitive  goals  of  the  1996  Act.  196  Such  a  finding  would  deny  competitive  LECs  any  certainty  about  the  availability  of  a  network  element  in  a  given  market 
 unless  and  until  a  determination  was  made  about  whether  the  incumbent  LEC  is  actually  using  that  network  element  in  its  provision  of  a  telecommunications  service  in  that  market.  Providing 
 requesting  carriers  with  access  only  to  those  facilities  and  equipment  actually  used  by  the  incumbent  LEC  would  also  lead  to  such  unreasonable  results  as  preventing  a  spare  loop  that  is 
 capable  of  providing  second-  line  service  from  being  considered  a  network  element  if  the  customer  were  not  purchasing  service  over  that  line  from  the  incumbent  LEC.  197  Finally,  an 

 193  We  look  to  the  use  by  the  requesting  carrier  as  discussed  below.  See  infra  Part  V.  B.  2.  c  (discussing  our  adopted 
 service-  specific  approach). 
 194  See  WEBSTERS  II  NEW  RIVERSIDE  UNIVERSITY  DICTIONARY  226  (1994)  (defining  capability  as  the  quality 
 or  state  of  being  capable;  potential  ability;  the  capacity  to  be  used,  treated,  or  developed  for  a  particular  purpose.). 
 195  47  U.  S.  C.    251(  d)(  2)(  B)  (emphasis  added). 

 196  See,  e.  g.,  Letter  from  David  Lawson,  Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 No.  01-  338  at  12-  13  (filed  Dec.  23,  2002)  (arguing  that  the  manner  in  which  an  incumbent  LEC  chooses  to  use  its  facilities  is  irrelevant  to  competitive  LECs  rights  under  section  251(  c)(  3))  (AT&  T  Dec.  23,  2002  Broadband  Ex 

 Parte  Letter). 
 197  See  Letter  from  Praveen  Goyal,  Senior  Counsel  for  Government  &  Regulatory  Affairs,  Covad,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  02-  33  at  3  (filed  Jan.  10,  2003)  (Covad  Jan.  10,  2003  Ex  Parte  Letter). 
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 alternative  reading  of  the  statute  would  allow  incumbent  LECs  to  prevent  competitors  from  making  new  and  innovative  uses  of  network  elements  simply  because  the  incumbent  LEC  has 
 not  yet  offered  a  given  service  to  consumers.  Such  a  result  would  stifle  a  competitors  ability  to  innovate  and  could  hinder  deployment  of  advanced  telecommunications  services.  198 

 B.  The  Impairment  Analysis 
 1.  The  Impair  Standard 
 61.  In  this  Part,  we  first  describe  the  principles  that  the  courts  have  instructed  us  to  use  in  interpreting  the  impair  standard.  We  explain  what  guidance  we  can  derive  from  the 

 language,  structure,  purposes,  and  history  of  the  1996  Act  itself.  We  examine  several  legal  doctrines  and  economic  theories  in  related  or  analogous  areas  to  see  what  guidance  they  may 
 provide  as  we  interpret  the  ambiguous  impair  standard.  Finally,  we  explain  our  new  interpretation  of  the  impair  standard,  which  draws  on  all  these  sources. 

 a.  Court  Decisions 
 62.  Since  1996,  the  Commission  has  twice  interpreted  the  impair  standard,  and  twice  the  courts  have  remanded  its  interpretation  as  lacking  the  rigor  intended  by  Congress.  In 

 its  first  attempt  to  interpret  and  apply  the  unbundling  provisions  of  the  1996  Act,  the  Commission  found,  in  section  251(  c)(  3),  a  duty  to  provide  all  network  elements  for  which  it  is 
 technically  feasible  to  provide  access  on  an  unbundled  basis.  199  The  Commission  then  found  in  section  251(  d)(  2)  the  authority  to  refrain  from  requiring  incumbent  LECs  to  provide  all  network 
 elements  for  which  it  is  technically  feasible  to  provide  access  on  an  unbundled  basis.  200  In  applying  that  authority  to  refrain,  the  Commission  interpreted  impair  to  mean    to  make  or 
 cause  to  become  worse;  diminish  in  value,    201  meaning  there  is  impairment  if  the  quality  of  service  the  entrant  can  offer,  absent  access  to  the  required  element,  declines  and/  or  the  cost  of 
 providing  the  service  rises.  202  In  determining  whether  the  cost  would  rise  or  the  quality  would  decline,  the  Commission  determined  to  examine  whether  using  a  different  element  within  the 
 incumbent  LECs  network  would  alleviate  the  impairment.  203  The  resulting  list  of  UNEs  was 
 198  Section  706,  reproduced  in  the  notes  under  section  157  of  the  Act,  directs  the  Commission  to  encourage  the 
 deployment  of  advanced  telecommunications  capability  to  all  Americans  on  a  reasonable  and  timely  basis.  47  U.  S.  C.    157  nt.  Additionally,  as  noted  in  the  Joint  Managers  Statement,  the  goals  of  the  1996  Act  were  to  provide 

 for  a  pro-  competitive,  deregulatory  national  framework  designed  to  accelerate  rapidly  private  sector  deployment  of  advanced  telecommunications  and  information  technologies  and  services  to  all  Americans  by  opening  all 
 telecommunications  markets  to  competition  .  .  .  .  Joint  Managers  Statement,  S.  Conf.  Rep.  No.  104-  230,  104th  Cong.,  2d  Sess.  113  (1996)  (Joint  Conference  Report). 

 199  Local  Competition  Order,  11  FCC  Rcd  at  15640,  para.  278. 
 200  Id.  at  15641,  para.  279. 
 201  Id.  at  15643,  para.  285  (quoting  RANDOM  HOUSE  COLLEGE  DICTIONARY  665  (rev.  ed.  1984)). 
 202  Id. 
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 extremely  broad,  encompassing  everything  from  the  NID  to  operator  services  and  directory  assistance. 
 63.  The  Supreme  Court  reviewed  this  interpretation  in  Iowa  Utilities  Board  and  concluded  that  the  Commissions  interpretation  failed  to  comport  with  the  Act,  which  requires 
 the  FCC  to  apply  some  limiting  standard,  rationally  related  to  the  goals  of  the  Act.  204  In  particular,  the  Court  faulted  the  agency  for  assum[  ing]  that  any  increase  in  cost  (or  decrease  in 
 quality)  imposed  by  denial  of  a  network  element  .  .  .  causes  the  failure  to  provide  that  element  to  impair  the  entrants  ability  to  furnish  its  desired  services,  205  and  for  blind[  ing]  itself  to  the 
 availability  of  elements  outside  the  incumbents  network.  206  Specifically  with  regard  to  costs,  the  Court  noted  that  if  competition  were  perfect  and  all  market  participants  were  providing 
 service  at  marginal  cost,  the  Commissions  total  equating  of  increased  cost  (or  decreased  quality)  with  necessity  and  impairment  might  be  reasonable,  but  such  had  not  been  shown  to 
 be  the  case.  207  The  Court  also  rejected  the  notion  that  section  251(  c)(  3)  imposes  a  general  unbundling  obligation,  which  the  Commission  has  the  authority  to  temper  by  making  individual 
 determinations  of  a  lack  of  necessity  or  impairment  under  section  251(  d)(  2).  Rather,  the  Act  requires  the  Commission  to  justify  unbundling  elements,  by  applying  the  standards  of  section 
 251(  d)(  2).  208 
 64.  Justice  Breyer  concurred  with  the  majoritys  handling  of  the  impair  standard,  and  added  several  specific  concepts  to  elaborate  on  the  Courts  statement  that  the  Commission 

 must  find  some  limiting  standard  in  its  interpretation  of  impair.  209  Overall,  Justice  Breyer  stated  his  belief  that  the  Act  calls  for  balance  between  unbundlings  benefits  to  competition 
 and  its  social  and  administrative  costs.  210  On  the  one  hand,  Justice  Breyer  acknowledged  that  unbundling  benefits  competition  by  seek[  ing]  to  facilitate  the  introduction  of  competition  where 
 practical,  i.  e.,  without  inordinate  waste.  211  On  the  other  hand,  Justice  Breyer  expressed  his  view  that  unbundling  can  have  significant  administrative  and  social  costs  inconsistent  with  the  Acts 
 purposes.  212  Specifically,  unbundling  has  administrative  costs  because  two  competitors  are  (Continued  from  previous  page) 
 203  Id. 
 204  Iowa  Utils.  Bd.,  525  U.  S.  at  388  (emphasis  in  original). 
 205  Id.  at  389-  90  (emphasis  in  original). 
 206  Id.  at  389. 
 207  Id.  at  390. 
 208  See  id.  at  391-  92. 
 209  See  id.  at  427-  31  (Breyer,  J.,  concurring  with  regard  to  unbundling  rules). 
 210  Id.  at  429-  30  (Breyer,  J.,  concurring). 
 211  Id.  at  428. 
 212  Id. 
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 sharing  the  same  facility.  Someone  must  manage  that  sharing,  and  that  management  costs  something.  Also,  unbundling  has  social  costs,  Justice  Breyer  explained,  in  the  diminished 
 incentives  of  the  facility  owner  to  keep  up  or  improve  the  property,  as  it  must  share  the  benefits  of  those  investments  with  its  competitors.  213  Justice  Breyer  also  expressed  his  view  that 
 the  Act  imposes  limits  on  unbundling  that  are  related  to  antitrusts  essential  facilities  doctrine.  214 
 65.  In  response  to  the  Supreme  Courts  remand,  the  Commission  interpreted  the  impair  standard  anew  in  the  UNE  Remand  Order,  attempting  to  take  the  Courts  criticisms  into 

 account.  The  Commission  concluded  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  incumbents  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  carriers  ability  to  provide  the  services  it  seeks  to  offer.  215 

 In  determining  whether  alternatives  are  in  fact  available,  the  Commission  stated  it  would  consider  the  factors  of  cost,  timeliness,  quality,  ubiquity,  and  impact  on  network  operations.  216 
 The  resulting  list  of  UNEs  was  narrower  than  the  Commissions  first  list  to  the  extent  the  Commission  excluded  some  circuit  switches,  operator  services,  and  directory  assistance.  The 
 Commission  did,  however,  extend  unbundling  requirements  to  dark  fiber,  subloops,  and  packet  switches  in  some  circumstances. 

 66.  As  explained  above,  shortly  before  the  D.  C.  Circuit  addressed  the  Commissions  revised  unbundling  standards  in  USTA,  217  the  Supreme  Court  issued  its  decision  in  Verizon  218 
 upholding  the  TELRIC  pricing  standard  and  the  Commissions  combinations  rules.  The  Verizon  Court  placed  special  emphasis  on  the  deference  owed  to  the  Commissions  interpretation  of  the 
 Act,  noting  that  section  252(  d)(  1),  which  authorized  the  Commission  to  set  just  and  reasonable  UNE  rates  based  on  the  cost  .  .  .  of  providing  the  .  .  .  network  element,  left  the  Commission 
 ample  discretion  in  establishing  a  rate-  setting  methodology.  219  The  Courts  task  was  therefore 
 213  Id.  at  428-  29. 

 214  Id.  at  428. 
 215  UNE  Remand  Order,  15  FCC  Rcd  at  3725,  para.  51. 
 216  Id.  at  3731,  para.  65;  see  also  supra  Part  III. 
 217  USTA,  290  F.  3d  at  415. 
 218  Verizon,  535  U.  S.  at  467. 
 219  Id.  at  500;  see  also  id.  at  523  (  In  short,  the  incumbents  have  failed  to  carry  their  burden  of  showing 
 unreasonableness  to  defeat  the  deference  due  the  Commission.). 
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 not  to  determine  whether  TELRIC  was  the  ideal  pricing  mechanism,  but  rather  to  evaluate  whether  the  TELRIC  methodology  reflected  a  reasonable  interpretation  of  the  Act,  given  the 
 leeway  accorded  the  Commission.  220 
 67.  While  Verizon  addressed  the  section  252(  d)(  1)  pricing  standard  rather  than  the  section  251(  d)(  2)  impair  standard,  the  decision  touched  on  issues  related  to  our  analysis  here. 

 However,  consistent  with  the  deference  described  above,  the  Court  refrained  from  issuing  particular  policy  mandates,  confining  its  inquiry  to  the  reasonableness  of  the  Commissions 
 chosen  approach.  For  example,  while  the  majority  accepted  as  plausibl[  e]  221  the  Commissions  arguments  that  TELRIC  pricing  would  not  stifle  investment  in  new  facilities,  it  did  not  purport  to 
 resolve  the  parties  disagreement  on  this  score,  and  did  not  preclude  later  modification  of  the  TELRIC  rules  or  other  aspects  of  the  unbundling  regime.  Instead,  the  Court  recognized  that  it 
 was  in  no  position  to  assess  the  precise  economic  significance  of  the  parties  opposing  arguments  regarding  incentives,  222  and  that  it  ha[  d]  no  idea  whether  a  different  forward-  looking 
 pricing  scheme  would  have  generated  even  greater  competitive  investment  than  the  $55  billion  that  the  entrants  claim.  223  Thus,  it  merely  acknowledged  that  the  Commission  had  been  forced 
 to  decide  whether  it  was  better  to  risk  keeping  more  potential  entrants  out,  or  to  induce  them  to  compete  in  less  capital-  intensive  facilities  with  lessened  incentives  to  build  their  own  bottleneck 
 facilities,  224  and  found  that  in  such  circumstances,  [  i]  t  was  not  obviously  unreasonable  for  the  FCC  to  prefer  the  latter.  225 

 68.  Days  later  in  the  USTA  decision,  the  D.  C.  Circuit  squarely  addressed  the  UNE  Remand  Orders  interpretation  of  impair  and  found  substantial  faults  with  it.  226  First,  the  court 
 220  See,  e.  g.,  id.  at  523  (  TELRIC  appears  to  be  a  reasonable  policy  for  now,  and  that  is  all  that  counts.) 
 221  Id.  at  504. 
 222  Id.  at  507. 
 223  Id.  at  517. 
 224  Id.  at  510. 
 225  Id.  Thus,  we  disagree  with  commenters  that  suggest  that  Verizon  mandates  a  particular  result  in  this  Order. 
 While  we  acknowledge  the  Courts  statement  that  the  1996  Act  was  meant  to  reorganize  markets  by  rendering  regulated  utilities  monopolies  vulnerable  to  interlopers  and  that  its  ratesetting  mechanism  is  designed  to  give 

 aspiring  competitors  every  possible  incentive  to  enter  local  retail  telephone  markets,  id.  at  489,  we  adhere,  as  we  must,  to  the  Courts  specific  statement  with  regard  to  necessary  and  impair  that  the  Commission  must  find 
 some  limiting  standard,  rationally  related  to  the  goals  of  the  Act.  Iowa  Utils.  Bd.  525  U.  S.  at  388  (emphasis  in  original).  But  see,  e.  g.,  Talk  America  Reply  at  2-  4;  NuVox  Reply  at  3-  4. 

 226  See  generally  USTA,  290  F.  3d  at  415  (cert.  denied  after  adoption  of  this  Order  but  before  release).  Because  the 
 D.  C.  Circuit  found  substantial  fault  with  the  UNE  Remand  Order  and  because  the  Triennial  Review  NPRM  asked  sweeping  questions  about  retooling  the  Commissions  unbundling  policies,  we  dismiss  as  moot  the  portion  of  the 

 CompTel  Nov.  26,  2001  Joint  Conference  Petition  in  which  CompTel  seeks  a  narrow  review  of  the  UNE  Remand  Order  that  would  preclude  parties  from  using  this  Triennial  Review  as  a  reconsideration  proceeding.  See 
 Competitive  Telecommunications  Association  Petition,  CC  Docket  No.  96-  98  (filed  Nov.  26,  2001)  (CompTel  Nov.  26,  2001  Joint  Conference  Petition). 
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 echoed  the  call  Justice  Breyer  made  in  Iowa  Utilities  Board  for  balance,  stating  that  the  Act  contemplates  some  trade-  offs  between  the  pro-  competition  benefits  of  unbundling  and  the 
 detriments  of  unbundling  such  as  the  disincentives  to  investment  and  the  costs  of  managing  shared  facilities.  227  With  regard  to  the  Commissions  treatment  of  cost  disparities,  the  D.  C. 
 Circuit  found  that  the  Commission  erred  by  considering  as  relevant  cost  disparities  that  are  universal  as  between  new  entrants  and  incumbents  in  any  industry.  228  The  D.  C.  Circuit  also 
 cautioned  the  Commission  to  consider  the  competitive  landscape  when  making  an  unbundling  determination,  and  not  to  exclude  the  participation  of  relevant  intermodal  competitors  as  a 
 relevant  factor  in  the  analysis.  229  Finally,  the  D.  C.  Circuit  noted  that  the  essential  facilities  doctrine  might  offer  useful  concepts  for  agency  guidance  in  interpreting  the  unbundling 
 provisions  of  the  1996  Act,  even  if  the  Act  does  not  require  its  use.  230 
 b.  Guidance  from  the  Act  and  Its  History 
 69.  In  this  Part,  we  explain  what  we  derive  from  the  language,  structure,  purposes,  and  history  of  the  impair  standard  and  the  1996  Act  as  we  attempt  to  interpret  it  in  a  manner 

 that  is  faithful  to  its  language,  comports  with  Congresss  intent,  responds  fully  to  the  courts,  and  is  economically  rational.  The  impair  language  itself  is  ambiguous,  and  as  one  Justice  has 
 explained,  this  ambiguity  reflects  congressional  uncertainty  about  the  extent  to  which  compelled  use  of  an  incumbents  facilities  will  prove  necessary  to  avoid  waste.  231  Thus,  it  is  up 
 to  the  Commission  to  resolve  the  ambiguity  of  the  impair  standard. 
 70.  We  note  that  other  language  in  the  1996  Act  provides  some  clues  as  to  Congresss  intent.  First,  we  look  to  the  Preamble  of  the  1996  Act,  which  calls  it  [  a]  n  Act  [t]  o  promote 

 competition  and  reduce  regulation  in  order  to  secure  lower  prices  and  higher  quality  services  for  American  telecommunications  consumers  and  encourage  the  rapid  deployment  of  new 
 telecommunications  technologies.  232  We  believe  that  this  language  gives  the  best  snapshot  of  Congresss  overall  intent  in  enacting  the  1996  Act.  We  reaffirm  the  conclusion  in  the  UNE 
 Remand  Order  that  facilities-  based  competition  serves  the  Acts  overall  goals.  233 

 227  USTA,  290  F.  3d  at  425,  427. 
 228  Id.  at  427  (emphasis  in  USTA). 
 229  Id.  at  429-  30. 
 230  Id.  at  428  &  n.  4  (cert.  denied  after  adoption  of  this  Order,  but  before  release). 
 231  Iowa  Utils.  Bd.,  525  U.  S.  at  428  (Breyer,  J.,  concurring).  Justice  Breyer  asks  whether  wireless  or  cable 
 technologies  might  provide  the  local  telephone  competition  for  which  Congress  was  striving,  without  the  need  for  extensive  unbundling  of  incumbent  LECs  facilities.  Id. 

 232  See  Preamble  to  the  1996  Act. 
 233  UNE  Remand  Order,  15  FCC  Rcd  at  3704,  para.  14;  see  also,  e.  g.,  BellSouth  Comments  at  7;  Progress  & 
 Freedom  Foundation  Comments  at  5,  7-  8;  Progress  &  Freedom  Foundation  Reply  at  3-  4  (recognizing  that  markets  can  support  a  limited  number  of  facilities-  based  competitors).  Facilities-  based  competition  better  serves  the  goal  of 

 (continued.) 
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 71.  Specifically  as  to  impair,  we  note  an  important  distinction  that  the  Act  makes,  which  provides  us  guidance  on  how  to  interpret  this  term.  Section  251(  d)(  2)  of  the  Act  contains 
 two  different  standards,  necessary  and  impair.  234  The  necessary  standard,  which  applies  to  proprietary  elements,  instructs  the  Commission  to  consider  whether  access  to  such  network 
 elements  as  are  proprietary  in  nature  is  necessary.  235  By  contrast,  the  impair  standard,  which  applies  to  non-  proprietary  elements,  instructs  the  Commission  to  consider  whether  the  failure  to 
 provide  access  to  such  network  elements  would  impair  the  ability  of  the  telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer.  236  In  past  orders,  the 
 Commission  has  interpreted  the  necessary  standard  as  a  more  rigorous  standard  than  the  impair  standard,  and  this  construct  has  not  been  disturbed  by  the  courts.  We  believe  it  is 
 reasonable  to  continue  to  interpret  the  impair  standard  as  less  demanding  than  the  necessary  standard.  237  We  believe  this  approach  reflects  Congresss  intentions  in  creating  two  distinct 
 standards  for  two  classes  of  elements. 
 72.  As  we  formulate  our  interpretation  of  impair  that  is  less  demanding  than  necessary,  however,  we  remain  cognizant  that  Congress  did  not  create  a  general  duty  to 

 unbundle,  tempered  by  the  impair  standard  of  section  251(  d)(  2).  As  the  courts  have  explained,  if  Congress  had  wanted  to  create  a  general  unbundling  duty,  it  would  not  have  included  the 
 impair  standard  in  the  Act  at  all.  238  Thus,  we  must  interpret  the  impair  standard  as 
 (Continued  from  previous  page) 
 deregulation  because  it  permits  new  entrants  to  rely  less  on  incumbent  LECs  facilities  and  on  regulated  terms  for  access  and  price.  And  it  serves  the  goal  of  innovation  because  new  facilities  are  more  likely  to  have  additional 

 capabilities  to  provide  new  services  to  consumers  and  competitors  deployment  of  new  facilities  is  likely  to  encourage  incumbents  to  invest  in  their  own  networks.  See,  e.  g.,  Qwest  Comments  at  3;  SBC  Comments  at  25-  26; 
 BellSouth  Comments,  Declaration  of  Howard  A.  Shelanski  at  paras.  7-  9,  14-  16  (BOC  Shelanski  Decl.)  (also  attached  to  SBC  Comments  and  Verizon  Comments);  Qwest  Farrell  Reply  Decl.  at  paras.  5-  6.  But  see,  e.  g., 
 WorldCom  Reply  at  51.  Facilities-  based  competition  also  increases  the  likelihood  that  new  entrants  will  find  and  implement  more  efficient  technologies,  thus  benefiting  consumers.  See  BOC  Shelanski  Decl.  at  paras.  7-  9.  We  thus 
 disagree  that  duplication  of  facilities  is  necessarily  wasteful.  We  expect  consumer  benefits  to  follow  from  new  entrants  investment  in  facilities,  and  where  duplication  is  uneconomic,  those  facilities  often  will  be  unbundled 
 pursuant  to  our  analysis.  See,  e.  g.,  Verizon  Reply  at  24-  27.  Finally,  facilities-  based  competition  creates  network  redundancy,  which  increases  reliability  and  enhances  national  security.  See  CompTel  Comments  at  78-  79;  SBC 
 Comments  at  26;  USTA  Comments  at  5.  Thus,  we  disagree  with  commenters  that  argue  that  the  Act  contains  a  statutory  mandate  of  equal  treatment  for  all  three  options,  although  we  are  aware  that  Congress  created  an 
 unbundling  vehicle  because  complete  duplication  of  the  incumbent  LECs  networks  is  not  feasible.  CompTel  Comments  at  9-  12.  See  generally,  e.  g.,  ASCENT  Comments  at  20-  22;  Utah  Commission  Reply  at  2. 

 234  47  U.  S.  C.    251(  d)(  2)(  A),  (B). 
 235  Id.    251(  d)(  2)(  A)  (emphasis  added). 
 236  Id.    251(  d)(  2)(  B)  (emphasis  added). 
 237  See,  e.  g.,  AT&  T  Reply  at  35. 
 238  See  Iowa  Utils.  Bd.,  525  U.  S.  at  390  ([  I]  f  Congress  had  wanted  to  give  blanket  access  to  incumbents  networks 
 on  a  basis  as  unrestricted  as  the  scheme  the  Commission  has  come  up  with,  it  would  not  have  included    251(  d)(  2)  in  the  statute  at  all.). 
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 Congresss  direction  for  us  to  make  specific,  affirmative  findings  that  elements  should  or  should  not  be  unbundled. 
 c.  Guidance  from  Analogous  Legal  Doctrines  and  Economic  Literature 
 73.  In  this  Part,  we  cull  concepts  from  many  years  of  scholarly  work  and  debate  in  legal  and  economic  fields  that  resemble  our  impair  standard  in  some  way.  Some  of  these  legal 
 doctrines  and  economic  theories,  such  as  essential  facilities  and  natural  monopoly,  were  described  in  the  USTA  decision  and  Justice  Breyers  concurring  opinion  in  Iowa  Utilities  Board 
 as  providing  guidance  on  the  appropriate  standard  to  adopt.  Other  doctrines  and  theories,  such  as  the  Horizontal  Merger  Guidelines  (HMG)  used  in  antitrust  and  the  economic  theories 
 developed  in  the  barriers  to  entry  literature,  were  proffered  by  commenters  as  providing  models  for  such  a  standard.  While  we  discuss  later  why  we  do  not  adopt  any  single  one  of  these 
 doctrines  or  theories  in  toto  as  our  standard,  we  find  that  the  lessons  learned  from  these  legal  doctrines  and  economic  theories  help  us  develop  an  impairment  standard,  and  will  also  help  us  in 
 our  attempt  to  apply  this  standard  in  our  analysis  of  specific  network  elements. 
 74.  Several  Standards  Are  Possible  For  Defining  Impairment.  While  the  Act  provides  no  definition  of  impair,  there  are  a  number  of  possible  definitions  available  from  the 

 legal  and  economic  literatures  for  determining  when  impairment  exists.  One  approach  is  to  use  the  economic  concept  of  barriers  to  entry  to  examine  whether  competitors  are  prevented  from 
 entering  a  particular  market.  239  They  include  definitions  by  Joe  Bain  (any  factor  preventing  entry  when  incumbents  are  earning  above  average  profits)  240  and  George  Stigler  (any  factor  that  creates 
 a  cost  faced  by  new  entrants  but  not  by  the  incumbent).  241  The  essential  facilities  doctrine 

 239  The  Commission  previously  discussed  barriers  to  entry  in  its  section  257  report.  See  generally  Section  257 
 Proceeding  To  Identify  and  Eliminate  Market  Entry  Barriers  for  Small  Businesses,  GN  Docket  No.  96-  113,  Report,  12  FCC  Rcd  16802  (1997)  (Section  257  Report). 

 240  Bain  defined  a  barrier  to  entry  as  the  extent  to  which,  in  the  long  run,  established  firms  can  elevate  their 
 selling  prices  above  minimal  average  costs  of  production  and  distribution  .  .  .  without  inducing  potential  entrants  to  enter  the  industry.  JOE  S.  BAIN,  INDUSTRIAL  ORGANIZATION  252  (2d  ed.  1968);  see  also  W.  KIP  VISCUSI,  JOHN  M. 

 VERNON,  &  JOSEPH  E.  HARRINGTON,  JR.,  ECONOMICS  OF  REGULATION  AND  ANTITRUST  156  (3d  ed.  2000).  Bain  argued  that  barriers  to  entry  typically  fall  into  the  categories  of  absolute  cost  advantages,  scale  economies,  and 
 product  differentiation.  See  JOE  BAIN,  BARRIERS  TO  NEW  COMPETITION  12-  16  (reprint  1993). 
 241  George  Stigler  defined  a  barrier  to  entry  as  a  cost  of  producing  .  .  .  which  must  be  borne  by  a  firm  which  seeks 
 to  enter  an  industry  but  is  not  borne  by  firms  already  in  the  industry.  GEORGE  STIGLER,  THE  ORGANIZATION  OF  INDUSTRY  67  (1968).  His  definition  of  barriers  to  entry  is  narrower  than  Bains  definition,  excluding  any  factor  that 

 had  to  be  met  by  incumbent  and  entrant  alike.  One  interpretation  is  that  the  advantages  gained  by  an  incumbent  due  to  entering  the  market  first  could  be  viewed  as  an  appropriate  reward  to  those  who  took  the  risk  of  making  the  first 
 investment.  See  Jonathan  B.  Baker,  Responding  to  Developments  in  Economics  and  the  Courts:  Entry  in  the  Merger  Guidelines  at  4-  5  (2002),  <http://  www.  usdoj.  gov/  atr/  hmerger/  11252.  pdf>.  For  example,  the  presence  of 
 scale  economies  alone  would  not  be  a  barrier  to  entry  under  his  definition,  even  if  they  were  large  enough  to  permit  only  one  firm  to  occupy  the  market,  because  entrants  would  face  the  same  cost  structure  as  the  incumbents,  and 
 could  achieve  the  same  average  costs  as  the  incumbents  if  they  were  able  to  attract  the  same  number  of  customers.  Likewise,  he  argued  that  capital  requirements  and  advertising  costs  are  not  barriers  to  entry,  if  both  incumbents  and 
 (continued.) 
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 provides  another  construct  for  identifying  when  entry  is  hindered,  focusing  on  whether  a  particular  facility  is  needed  for  an  entrant  to  serve  the  market.  242  In  addition,  the  HMG  attempt  to 
 determine  whether  entry  will  be  timely,  likely,  and  sufficient  to  deter  incumbents  from  exercising  market  power.  243  As  explained  below,  no  one  of  these  standards  comports  with  the 
 impair  concept  entirely.  Indeed,  these  standards  were  developed  for  other  purposes,  and  have  been  written  about  and  discussed  since  long  before  the  1996  Act. 

 75.  Many  Factors  Can  Act  as  Barriers  to  Entry.  Depending  on  the  circumstances,  barriers  to  entry  can  come  from  a  variety  of  factors  such  as  sunk  costs,  244  scale  economies,  245 
 (Continued  from  previous  page) 
 entrants  have  the  same  obligation.  See  STIGLER,  supra,  at  67-  70.  More  recently,  Christian  von  Weizsacker  proposed  to  restrict  Stiglers  definition  to  limitations  to  entry  that  create  economic  inefficiency.  Thus,  he  would 

 define  a  barrier  to  entry  that  may  warrant  regulatory  intervention  as  costs  borne  by  entrants  and  not  by  incumbents  that  distort  the  operation  of  the  market  in  a  socially  undesirable  way.  See  C.  C.  von  Weizsacker,  A  Welfare  Analysis 
 of  Barriers  to  Entry,  11  BELL  J.  ECON.  400  (1980).  Stiglers  more  limited  definition  of  barriers  to  entry,  and  his  use  of  price  theory  to  analyze  whether  various  factors  are  likely  to  impede  entry,  fit  in  with  the  Chicago  Schools 
 emphasis  on  the  use  of  economic  theory  to  determine  whether  firm  behavior  causes  harm  to  consumers,  its  belief  that  there  should  be  a  more  permissive  merger  policy,  and  its  skepticism  of  the  need  for  vigorous  antitrust  action  to 
 prohibit  many  commonplace  practices  such  as  tie-  ins  and  resale  price  maintenance.  See  Baker,  supra,  at  5-  6;  Richard  A.  Posner,  The  Chicago  School  of  Antitrust  Analysis,  127  U.  PA.  L.  REV.  925-  34  (1979). 

 242  Under  the  essential  facilities  doctrine,  a  firm  controlling  a  facility  deemed  essential  is  required  to  share  that 
 facility  with  competitors  at  a  reasonable  price.  See  3A  PHILLIP  E.  AREEDA  &  HERBERT  HOVENKAMP,  ANTITRUST  LAW:  AN  ANALYSIS  OF  ANTITRUST  PRINCIPLES  AND  THEIR  APPLICATION,  para.  771  (2001);  Mats  A.  Bergman,  The 

 Role  of  the  Essential  Facilities  Doctrine,  46  ANTITRUST  BULL.,  Summer  2001,  at  403.  Although  the  Supreme  Court  has  never  explicitly  adopted  the  essential  facilities  doctrine,  it  has  determined  that  refusal  to  provide  access  to  an 
 essential  facility  to  competitors  can  be  an  antitrust  violation.  See  AREEDA  &  HOVENKAMP,  supra,  paras.  772-  73;  Phillip  Areeda,  Essential  Facilities:  An  Epithet  in  Need  of  Limiting  Principles,  58  ANTITRUST  L.  J.  841  (1989).  To 
 prove  antitrust  liability  under  the  essential  facilities  doctrine,  four  conditions  have  been  identified  by  circuit  courts:  (1)  The  facility  is  controlled  by  a  monopolist;  (2)  Competing  firms  lack  a  reasonable  ability  to  reproduce  the 
 facility;  (3)  Competing  firms  have  been  denied  access  to  the  facility;  and  (4)  It  is  feasible  to  provide  access  to  the  facility.  See  MCI  Communications  Co.  v.  American  Tel.  &  Tel.  Co.,  708  F.  2d  1081,  1132-  33  (7th  Cir.  1983);  see 
 also  Bergman,  supra,  at  407-  08;  Robert  Pitofsky,  The  Essential  Facilities  Doctrine  Under  United  States  Antitrust  Law,  708  PLI/  PAT  775,  781-  82  (2002). 

 243  The  HMG  were  developed  to  embody  economic  theory  in  a  set  of  guidelines  for  determining  whether  mergers 
 would  cause  harm.  As  one  of  the  steps  of  analysis,  the  Agency  assesses  whether  entry  would  be  timely,  likely,  and  sufficient  either  to  deter  or  to  counteract  the  competitive  effects  of  concern.  Horizontal  Merger  Guidelines,  issued 

 by  U.  S.  Department  of  Justice  and  Federal  Trade  Commission,  Apr.  2,  1992,  revised  Apr.  8,  1997  (HMG)    0.2.  Section  3  of  the  HMG,  which  examines  the  conditions  under  which  committed  entry  (entry  requiring  significant 
 sunk  costs)  will  occur,  is  the  most  relevant  to  our  analysis.  HMG    3. 
 Whether  the  Bainian  or  Stiglerian  definition  of  barriers  to  entry  should  be  used  in  the  antitrust  context  has  not  been  decided.  Some  authorities  have  adopted  Bains  definition.  See  Baker,  supra  note  241,  at  6  n.  25.  The  Federal 

 Trade  Commission  had  decided  that  only  Stiglerian  barriers  prevented  entry  that  would  eventually  drive  prices  down  to  competitive  levels.  However,  it  also  decided  that  a  second  type  of  barrier,  an  impediment  to  entry, 
 existed,  which  could  delay  entry  into  the  market  for  a  significant  period  of  time.  It  thus  effectively  adopted  a  Bainian  definition.  See  Baker,  supra  note  241,  at  6-  7. 

 244  Sunk  costs  are  those  costs  that  are  unrecoverable  upon  exit  from  the  market.  See  DENNIS  W.  CARLTON  & 
 JEFFREY  M.  PERLOFF,  MODERN  INDUSTRIAL  ORGANIZATION  28  (3d  ed.  2000).  Scholars  point  out  that  when  there  (continued.) 
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 scope  economies,  246  absolute  cost  advantages,  247  capital  requirements,  248  first-  mover  advantages,  249  strategic  behavior  by  the  incumbent,  250  product  differentiation,  251  long-  term 
 (Continued  from  previous  page) 
 are  large  fixed  and  sunk  costs,  fewer  firms  are  able  to  profitably  coexist  in  the  industry.  See  Babu  Nahata  &  Dennis  Olson,  On  the  Definition  of  Barriers  to  Entry,  S.  ECON.  J.  236-  39  (July  1989);  JOHN  SUTTON,  SUNK  COSTS  AND 

 MARKET  STRUCTURE:  PRICE  COMPETITION,  ADVERTISING,  AND  THE  EVOLUTION  OF  CONCENTRATION  (1991).  Significant  sunk  costs  by  the  incumbent  can  increase  an  entrants  concern  that  an  incumbent  will  lower  prices  in  the 
 face  of  vigorous  competition.  In  addition,  large  sunk  costs  can  give  a  significant  first-  mover  advantage  to  the  incumbent.  Other  firms  that  are  contemplating  entry  will  realize  that  large-  scale  facilities-  based  entry  on  their  part 
 will  create  excess  capacity  and  force  prices  down  to  marginal  cost,  leading  to  large  losses.  These  firms  are  therefore  unlikely  to  enter.  See  Section  257  Report,  12  FCC  Rcd  at  18614  n.  48;  Merger  of  MCI  Communications  Corp.  and 
 British  Telecommunications  PLC,  GN  Docket  No.  96-  245,  Memorandum  Opinion  and  Order,  12  FCC  Rcd  15351,  15413,  para.  162  (1997);  see  also  JEAN  TIROLE,  THE  THEORY  OF  INDUSTRIAL  ORGANIZATION  314-  21  (1988); 
 CARLTON  &  PERLOFF,  supra,  at  79-  80.  High  sunk  costs  also  increase  the  cost  of  failure  to  an  entrant.  Thus,  if  there  is  a  substantial  risk  that  entry  will  not  be  successful  for  various  reasons,  including  uncertainty  concerning  demand 
 for  the  firms  product  and  the  firms  operational  ability  to  enter  the  market  and  achieve  profitability,  then  the  presence  of  large  sunk  costs  could  raise  the  cost  of  failure  and  exit  sufficiently  to  deter  entry.  DOUGLAS  F.  GREER, 
 INDUSTRIAL  ORGANIZATION  AND  PUBLIC  POLICY  240  (3d  ed.  1992).  This  risk  could  also  be  reflected  in  a  higher  cost  of  capital  to  entrants,  thus  discouraging  entry  into  industries  which  are  inherently  risky.  See  VISCUSI,  VERNON, 
 &  HARRINGTON,  supra  note  240,  at  161;  HMG    3.3. 
 245  Scale  economies  refer  to  lower  average  costs  from  producing  a  larger  quantity  of  output.  A  more  technical 
 definition  is  that  economies  of  scale  exist  at  a  particular  range  of  output  when  the  long  run  average  total  cost  decreases  as  output  expands.  See  KENNETH  TRAIN,  OPTIMAL  REGULATION  5  (1991).  Scale  economies  can  be  a 

 barrier  to  entry  if  entrants  are  likely  to  acquire  fewer  customers  and  sell  less  output  than  the  incumbent,  and  the  resulting  higher  average  cost  for  the  entrants  makes  it  difficult  for  them  to  compete  with  the  incumbent,  particularly 
 if  retail  prices  are  close  to  the  incumbents  average  cost. 
 246  Economies  of  scope  exist  when  one  firm  can  produce  two  or  more  products  at  a  lower  total  cost  than  if  each 
 product  were  produced  separately  by  different  firms.  See  TRAIN,  supra  note  245,  at  8.  Scope  economies  can  be  a  barrier  to  entry  if  entrants  are  unable  to  produce  and  sell  all  of  the  products  the  incumbent  produces,  and  the 

 resulting  higher  cost  makes  it  unprofitable  to  enter  the  market.  See  SCHERER  &  ROSS,  INDUSTRIAL  MARKET  STRUCTURE  AND  ECONOMIC  PERFORMANCE  361  (3d  ed.  1990). 

 247  An  incumbent  has  an  absolute  cost  advantage  if,  for  any  given  level  of  output,  its  per  unit  costs  are  lower  than 
 for  an  entrant.  Possible  sources  of  absolute  cost  advantages  include  privileged  access  to  resources,  control  of  a  better  technology  or  more  efficient  means  of  production  which  cannot  be  duplicated  by  the  entrant,  limitations  in  the 

 availability  of  productive  factors,  the  learning  curve,  and  a  lower  cost  of  capital.  See  BAIN,  BARRIERS  TO  NEW  COMPETITION,  supra  note  240,  at  144-  45;  GREER,  supra  note  244,  at  241-  42;  VISCUSI,  VERNON,  &  HARRINGTON, 
 supra  note  240,  at  156;  DON  E.  WALDMAN  &  ELIZABETH  J.  JENSEN,  INDUSTRIAL  ORGANIZATION:  THEORY  AND  PRACTICE  139-  41  (2d  ed.  2001). 

 248  Some  argue  that  entrants,  especially  small  entrants,  are  at  a  disadvantage  to  incumbents  in  raising  large  amounts 
 of  capital.  Three  possible  reasons  given  are  that  entrants  are  a  riskier  investment,  small  entrants  face  higher  transaction  costs  to  raise  funds,  and  the  capital  market  is  imperfect  such  that  large  firms  have  more  market  power  to 

 obtain  loans  at  favorable  rates.  See  GREER,  supra  note  244,  at  256-  57;  WALDMAN  &  JENSEN,  supra  note  247,  at  141-  43. 

 249  When  a  firm  is  able  to  gain  an  advantage  in  the  marketplace  as  a  result  of  entering  the  market  first,  it  is  said  to 
 have  a  first-  mover  advantage.  There  are  a  number  of  sources  of  first-  mover  advantages,  such  as  advertising  and  gaining  brand  name  preference,  patents,  sunk  costs,  and  rights-  of-  way.  See  GREER,  supra  note  244,  at  264-  65; 

 CARLTON  &  PERLOFF,  supra  note  244,  at  80. 
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 contracts,  252  and  network  externalities.  253  Despite  the  different  definitions  that  have  been  proposed,  economists,  since  the  advent  of  economic  game  theory,  have  developed  a  better 
 understanding  of  the  factors  that  impede  entry.  254  There  is  general  agreement  in  the  economics  literature  on  the  critical  importance  of  sunk  costs,  absolute  cost  advantages,  first-  mover 
 advantages,  and,  in  the  right  circumstances,  scale  economies,  in  determining  the  likelihood  of  entry.  255  In  their  analysis  of  entry,  the  HMG  consider  economic  barriers  to  entry,  focusing  in 
 particular  on  sunk  costs  and  minimum  viable  scale  (in  addition  to  other  factors).  256 

 (Continued  from  previous  page)  250 
 Strategic  behavior  refers  to  actions  by  an  incumbent  that  prevent  entry  from  occurring.  Game  theory  is  now  often  used  to  model  the  behavior  of  incumbents  and  entrants,  and  determine  the  equilibrium  set  of  strategies.  Under 

 certain  circumstances,  an  incumbent  could  deter  entry  if  it  invested  in  additional  capacity  today,  such  that  it  would  be  likely  to  lower  prices  when  entry  occurs,  creating  losses  for  everyone.  Such  behavior  is  rational  only  if  the 
 incumbent  expects  that  an  entrant  is  likely  to  be  deterred  from  entry  as  a  result.  See  OZ  SHY,  INDUSTRIAL  ORGANIZATION  186-  206  (1995);  TIROLE,  supra  note  244,  at  314-  21;  Baker,  supra  note  241,  at  7-  9. 

 251  Product  differentiation  refers  to  firms  attempts  to  distinguish  their  products  from  other  firms  products  and 
 gain  the  ability  to  raise  the  price  through  advertising,  the  development  of  a  brand  name  and  product  image,  varying  the  product  characteristics  and  quality,  and  selling  in  different  locations.  See  WALDMAN  &  JENSEN,  supra  note  247, 

 at  357  (  The  objective  of  product  differentiation  is  to  increase  profits  by  increasing  demand  and  decreasing  the  price  elasticity  of  demand.  Sellers  attempt  to  differentiate  their  products  in  many  ways.  Common  forms  of  differentiation 
 include  location,  service,  physical  characteristics,  and  subjective  image  differences.);  see  also  BAIN,  INDUSTRIAL  ORGANIZATION,  supra  note  240,  at  29-  30. 

 252  An  incumbent  monopolist  can  induce  customers  to  sign  long-  term  contracts,  with  substantial  penalties  for 
 breaching  the  contract.  These  contracts  can  act  as  a  barrier  to  entry,  if  they  prevent  customers  from  switching  to  an  entrant.  See  Philippe  Aghion  &  Patrick  Bolton,  Contracts  As  a  Barrier  to  Entry,  77  AM.  ECON.  REV.  388-  401 

 (1987);  TIROLE,  supra  note  244,  at  196-  98;  HMG    3.3. 
 253  Network  externalities  (or  network  effects)  exist  if  the  benefit  that  a  consumer  derives  from  purchasing  a  good  is 
 affected  by  whether  others  take  the  same  service.  Consumers  then  derive  greater  benefit  from  purchasing  services  from  larger  networks.  Thus,  larger  networks  gain  a  competitive  advantage  over  small  networks,  which  allows  them 

 to  charge  higher  prices.  See  J.  Farrell  &  G.  Saloner,  Standardization,  Compatibility,  and  Innovation,  16  RAND.  J.  ECON.  70-  83  (1985);  M.  Katz  &  C.  Shapiro,  Network  Externalities,  Competition  and  Compatibility,  75  AM.  ECON. 
 REV.  424-  40  (1985);  OZ  SHY,  THE  ECONOMICS  OF  NETWORK  INDUSTRIES  17  (2001).  In  telecommunications  networks,  network  externalities  refer  to  the  greater  value  of  a  network  in  which  all  users  can  communicate  with  all 
 other  users. 
 254  See,  e.  g.,  Richard  J.  Gilbert,  Mobility  Barriers  and  the  Value  of  Incumbency,  in  1  HANDBOOK  OF  INDUSTRIAL 
 ORGANIZATION  475  (Richard  Schmalensee  &  Robert  Willig,  eds.  1989). 
 255  See  SHY,  INDUSTRIAL  ORGANIZATION,  supra  note  250,  at  182-  206;  Gilbert,  supra  note  254,  at  531;  Baker, 
 supra  note  241,  at  7-  16;  see  also  AT&  T  Reply,  Declaration  of  Robert  D.  Willig  (AT&  T  Willig  Reply  Decl.)  at  paras.  18-  36. 

 256  See  HMG    1.32,  3.3.  Minimum  viable  scale  is  defined  in  the  HMG  as  the  smallest  average  annual  level  of 
 sales  that  the  committed  entrant  must  persistently  achieve  for  profitability  at  premerger  prices.  Minimum  viable  scale  is  a  function  of  expected  revenues,  based  upon  premerger  prices,  and  all  categories  of  costs  associated  with  the 

 entry  alternative,  including  an  appropriate  rate  of  return  on  invested  capital  given  that  entry  could  fail  and  sunk  costs,  if  any,  will  be  lost.  HMG    3.3  (footnotes  omitted).  Scale  economies  are  factored  into  the  HMGs  analysis 
 through  their  impact  on  the  minimum  viable  scale  necessary  for  entry.  Large  scale  economies  are  likely  to  create  a  (continued.) 
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 76.  Some  Factors  Only  Cause  Barriers  to  Entry  in  Particular  Circumstances.  While  many  factors  can  cause  barriers  to  entry,  the  economics  literature  points  out  that  some  are  only 
 barriers  in  particular  circumstances,  or  in  combination  with  other  factors.  For  example,  some  scholars  only  consider  capital  requirements  a  barrier  in  the  presence  of  substantial  sunk  costs, 
 first-  mover  advantages,  or  risky  entry.  257  Likewise,  some  consider  scale  economies  a  barrier  only  if  they  are  large  enough  to  prevent  additional  firms  from  profitably  entering  the  industry, 
 and  they  are  combined  with  other  factors  such  as  significant  sunk  costs,  long-  term  contracts  or  brand  preference  by  consumers.  258  The  HMG  consider  scale  economies  to  be  a  barrier  to  entry 
 only  if  the  minimum  viable  scale  is  larger  than  the  sales  an  entrant  is  likely  to  achieve.  Many  scholars  consider  scale  economies  that  are  so  pervasive  as  to  make  it  less  expensive  for  one  firm 
 to  satisfy  all  demand  within  a  market  to  be  a  formidable  barrier  to  entry    a  natural  monopoly.  259 

 (Continued  from  previous  page) 
 large  minimum  viable  scale,  because  it  will  likely  require  a  large  volume  of  output  and  sales  to  achieve  an  average  cost  lower  than  the  expected  price.  See  HMG    3.  3,  n.  31  (  The  minimum  viable  scale  of  an  entry  alternative  will  be 

 relatively  large  when  the  fixed  costs  of  entry  are  large,  when  the  fixed  costs  of  entry  are  largely  sunk,  when  the  marginal  costs  of  production  are  high  at  low  levels  of  output,  and  when  a  plant  is  underutilized  for  a  long  time 
 because  of  delays  in  achieving  market  acceptance.);  see  also  Letter  from  C.  Frederick  Beckner,  III,  Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1-  8  (filed  Nov. 
 14,  2002)  (AT&  T  Nov.  14,  2002  Ex  Parte  Letter). 
 257  Whether  the  cost  of  capital  to  entrants,  particularly  when  large  amounts  of  capital  are  needed,  can  be  a  barrier 
 to  entry  has  been  controversial.  Some  argue  that  capital  markets  are  imperfect,  such  that  entrants    e.  g.,  small  competitive  LECs    would  have  poorer  access  to  financial  resources  than  incumbents.  See  BAIN,  BARRIERS  TO  NEW 

 COMPETITION,  supra  note  240,  at  55;  GREER,  supra  note  244,  at  256-  57;  WALDMAN  &  JENSEN,  supra  note  247,  at  141-  43.  Others  argue  that  both  incumbent  and  entrant  have  an  equal  need  to  spend  money  to  build  plant,  or  to 
 create  a  brand  name.  Only  in  the  presence  of  a  significant  risk  of  failure  by  the  entrant,  not  shared  by  the  incumbent,  will  the  entrants  higher  cost  of  capital,  due  to  the  need  for  a  risk  premium,  create  a  cost  disadvantage 
 for  the  entrant.  See  Richard  A.  Posner,  supra  note  241,  at  945-  46;  VISCUSI,  VERNON,  &  HARRINGTON,  supra  note  240,  at  161. 

 258  The  importance  of  scale  economies  has  been  controversial.  While  Bain  considered  them  a  barrier  to  entry, 
 Stigler  argued  that  the  existence  of  scale  economies  alone  could  not  be  a  barrier  to  entry,  since  incumbents  and  entrants  would  face  the  same  costs.  See  STIGLER,  supra  note  241,  at  67-  69.  Subsequent  writers  have  suggested  that 

 entry  is  still  possible  in  the  face  of  scale  economies  when  an  entrant  could,  through  contracts  with  the  majority  of  the  customers,  gain  the  advantage  from  scale  economies.  For  example,  studies  have  shown  that  there  are  scale 
 economies  for  garbage  collection  in  smaller  municipalities.  Many  municipalities  put  up  the  contract  for  bid,  thus  allowing  entry,  because  whoever  gains  the  contracts  wins  the  whole  market.  See  CARLTON  &  PERLOFF,  supra  note 
 244,  at  76,  658. 
 259  A  natural  monopoly  exists  when  the  costs  of  production  are  such  that  it  is  less  expensive  for  market  demand  to 
 be  met  with  one  firm  than  with  more  than  one.  TRAIN,  supra  note  245,  at  1.  For  the  single  product  firm,  this  situation  occurs  in  the  presence  of  economies  of  scale  over  the  entire  range  of  output  demanded.  TRAIN,  supra  note 

 245,  at  5;  2  ALFRED  E.  KAHN,  THE  ECONOMICS  OF  REGULATION:  PRINCIPLES  AND  INSTITUTIONS  119  (1989).  For  the  multiproduct  firm,  a  natural  monopoly  occurs  when  the  cost  of  production  for  the  entire  set  of  products  would 
 be  minimized  if  produced  by  one  firm,  i.  e.,  costs  are  subadditive  for  all  relevant  ranges  of  output  for  all  products.  Cost  subadditivity  is  said  to  exist  at  a  particular  level  of  output  for  a  particular  set  of  products  when  one  firm  can 
 produce  all  of  those  products  at  that  level  of  output  at  a  lower  cost  than  two  or  more  firms.  WILLIAM  SHARKEY,  THE  THEORY  OF  NATURAL  MONOPOLY  2  (1982).  This  occurs  if  there  are  both  economies  of  scale  and  economies  of 
 (continued.) 
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 77.  A  Firms  Ability  To  Enter  Is  Affected  by  the  Costs  Incurred,  Revenues  Obtained,  and  Risk  Involved  in  Entering  a  Market.  The  economics  literature  generally  states  that  a  firms 
 decision  to  enter  a  market  depends  on  whether  the  revenues  it  expects  to  obtain  exceed  the  costs  of  entering  and  serving  the  market,  factoring  in  the  cost  and  risk  of  failure.  260  Thus,  factors  that 
 raise  an  entrants  cost  of  service,  limit  its  potential  revenues,  261  or  increase  the  risk  or  cost  of  failure  reduce  the  likelihood  of  entry.  Conversely,  entry  is  made  easier  if  an  entrant  has  late-mover 
 advantages,  such  as  from  using  newer  technologies  or  a  better  network  architecture,  or  has  additional  revenue  opportunities  stemming  from  economies  of  scope.  Operational  barriers, 
 which  may  not  directly  affect  the  long-  term  potential  costs  and  revenues  of  the  firm  but  could  significantly  delay  or  reduce  the  quality  of  the  services  an  entrant  is  attempting  to  offer,  must 
 also  be  taken  into  consideration  in  determining  the  likelihood  and  extent  of  entry.  In  general,  it  is  important  to  consider  all  of  the  relevant  cost  and  demand  characteristics  of  a  market,  including 
 the  presence  and  size  of  sunk  costs,  scale  and  scope  economies,  and  absolute  cost  and  first-mover  advantages,  as  well  as  the  full  range  of  revenues  available  and  countervailing  late-  mover 
 advantages  an  entrant  might  possess,  in  determining  whether  entry  is  possible.  262 
 78.  Need  for  Requirements  To  Be  Economically  Rational.  Many  scholars  and  the  federal  courts  have  taken  the  view  that  the  application  of  antitrust  enforcement  (including  merger 

 review  and  the  essential  facilities  doctrine)  is  only  necessary  when  the  merger  or  behavior  causes  economic  harm  to  consumers  and  society.  That  is,  the  antitrust  law  has  been  interpreted  to 
 include  an  element  of  economic  rationality  despite  a  lack  of  explicit  language  requiring  such  analysis  in  the  statute.  263  Especially  in  light  of  guidance  from  courts  that  have  already  considered 
 the  Acts  unbundling  regime,  we  believe  that  any  reasonable  application  of  the  impairment  standard  and  unbundling  requirements  should  be  economically  rational.  264 

 (Continued  from  previous  page) 
 scope  for  all  products.  When  a  natural  monopoly  exists,  economic  theory  has  traditionally  held  that  it  would  be  inefficient  to  have  more  than  one  firm  in  the  market.  SHARKEY,  supra,  at  54;  2  KAHN,  supra,  at  ch.  4. 

 260  Stated  in  more  technical  terms,  the  condition  is  whether  the  net  present  value  of  the  expected  economic  profit  is 
 positive.  See  WALDMAN  &  JENSEN,  supra  note  247,  at  146  (  Microeconomic  theory  predicts  that  profit-  maximizing  firms  will  enter  an  industry  if  the  net  present  value  of  expected  profits,  appropriately  adjusted  for  risk,  is  positive.). 

 Economists  define  economic  profit  to  be  the  firms  revenues  minus  the  full  cost  (including  opportunity  costs  of  the  assets  employed)  of  the  firm.  The  opportunity  cost  of  an  asset  is  the  value  of  its  best  alternative  use.  See 
 CARLTON  &  PERLOFF,  supra  note  244,  at  239;  see  also  STEPHEN  MARTIN,  INDUSTRIAL  ECONOMICS:  ECONOMIC  ANALYSIS  AND  PUBLIC  POLICY  17  (2d  ed.  1994)  (  Economic  profit  is  any  accounting  profit  over  and  above  the 
 normal  rate  of  return  on  an  investment.). 
 261  HMG    3.3. 

 262  See  STIGLER,  supra  note  241,  at  67-  70;  BAIN,  INDUSTRIAL  ORGANIZATION,  supra  note  240,  at  268-  69;  see  also 
 HMG    3.1. 
 263  See  CARLTON  &  PERLOFF,  supra  note  244,  at  604;  VISCUSI,  VERNON  &  HARRINGTON,  supra  note  240,  at  66-  67; 
 ROBERT  H.  BORK,  THE  ANTITRUST  PARADOX  89  (1978). 
 264  See  Iowa  Utils.  Bd.,  525  U.  S.  at  427-  31  (Breyer,  J.,  concurring);  USTA,  290  F.  3d  at  425-  30. 
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 79.  Unbundling  of  Bottleneck  Facilities  Can  Cause  Harms.  Scholars  have  pointed  out  that  there  may  be  countervailing  reasons  why  the  owner  of  a  bottleneck  facility  should  not  be 
 required  to  make  the  facility  available  to  its  potential  competitors.  For  example,  some  scholars  argue  that  if  providing  access  to  the  facility  would  not  enhance  competition  or  provide  economic 
 benefits,  courts  should  consider  not  making  the  facility  available.  Similarly,  if  making  the  facility  available  would  deter  desirable  activity  on  the  part  of  the  owner  (such  as  investment  in 
 upgrades  or  new  facilities)  or  the  entrant  (such  as  investment  in  alternatives),  courts  should  consider  not  making  the  facility  available.  265 

 80.  The  Size  of  Sunk  Costs  Is  a  Significant  Factor  in  Determining  the  Likelihood  That  Competitors  Will  Enter.  Sunk  costs  are  important  for  several  reasons.  Larger  fixed  266  and  sunk 
 costs  imply  that  fewer  firms  are  able  to  survive  profitably  in  the  industry.  267  When  combined  with  scale  economies,  high  sunk  costs  increase  the  entrants  concern  that  the  incumbent  will 
 lower  its  prices  in  response  to  entry,  possibly  to  unprofitable  levels  for  both  incumbents  and  entrants.  Large  sunk  costs  also  increase  the  cost  of  failure,  so  if  there  is  a  substantial  risk  of 
 failure,  entrants  may  be  reluctant  to  take  the  risk,  and  investors  may  be  reluctant  to  finance 

 265  See,  e.  g.,  Areeda,  supra  note  242,  at  841;  David  J.  Gerber,  Rethinking  the  Monopolists  Duty  To  Deal:  A  Legal 
 and  Economic  Critique  of  the  Doctrine  of  Essential  Facilities,  74  VA.  L  REV.  1069  (1988);  see  also  Qwest  Comments,  Attach.,  John  Haring  &  Harry  M.  Shooshan,  Reorienting  Regulation:  Toward  a  More  Facilities-Friendly 

 Local  Competition  Policy  at  10-  11  (Apr.  3,  2002)  (Qwest  Haring  &  Shooshan  Paper);  SBC  Comments  at  26  (citing  PHILLIP  E.  AREEDA  &  HERBERT  HOVENKAMP,  ANTITRUST  LAW  para.  787c  (Supp.  2001));  Verizon 
 Comments  at  27-  32,  34-  36.  In  his  Epithet  article,  Areeda  argued  that  a  requirement  to  provide  access  should  not  be  imposed  if:  the  denial  of  access  was  for  a  legitimate  business  purpose  or  for  legitimate  business  reasons;  it  is 
 administratively  impractical  for  the  court  to  supervise;  it  does  not  enhance  competition  in  the  marketplace  and  provide  economic  benefits;  or  if  it  would  deter  desirable  activity  on  the  part  of  the  owner.  See  Areeda,  supra  note 
 242,  at  852-  53.  Areeda  provided  six  principles  for  limiting  application  of  the  essential  facilities  doctrine:  (1)  There  is  no  general  duty  to  share    compulsory  access  should  be  exceptional;  (2)  The  facility  should  be  considered 
 essential  only  if  it  is  critical  for  the  plaintiffs  ability  to  compete  and  for  the  development  of  competition  in  the  market;  (3)  Providing  access  must  be  likely  to  improve  competition  substantially  in  the  marketplace,  provide 
 economic  benefits,  and  not  chill  desirable  activity;  (4)  Denial  of  access  must  not  have  occurred  for  a  legitimate  business  purpose;  (5)  The  monopolist  intended  to  exclude  others  by  improper  means;  and  (6)  The  court  must  be  able 
 to  adequately  explain  and  supervise  the  access  requirement.  Areeda,  supra  note  242,  at  852-  53;  Bergman,  supra  note  242,  at  409-  10;  see  also  BOC  Shelanski  Decl.  at  para.  38. 

 Gerber  argued  that  the  essential  facilities  doctrine  should  be  applied  only  when  it  improves  consumer  welfare,  and  that  the  focus  should  be  on  the  vertical  relationship  between  the  monopolist  and  the  downstream  market.  He 
 believes  that  the  test  used  by  most  courts,  that  a  facility  is  essential  when  its  owners  refusal  to  provide  access  harms  the  ability  of  its  competitors  to  compete,  is  inappropriate  and  fails  to  maximize  consumer  welfare.  See  Gerber, 
 supra,  at  1069-  72.  Areeda  and  Hovenkamp  note  that  once  a  court  determines  to  mandate  access,  a  price  that  is  set  at  the  competitive  level  will  reduce  competitors  incentives  to  build  alternative  facilities,  if  and  when  this  becomes 
 feasible.  See  AREEDA  &  HOVENKAMP,  supra  note  242,  para.  771b. 
 266  Fixed  costs  are  costs  that  do  not  vary  with  the  level  of  output.  See  CARLTON  &  PERLOFF,  supra  note  244,  at  28. 

 267  See  Nahata  &  Olson,  supra  note  244,  at  236-  23;  SUTTON,  supra  note  244,  at  8-  11  and  ch.  2. 
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 entry.  268  The  size  of  the  sunk  costs  figures  prominently  in  the  HMG,  with  special  analysis  reserved  for  committed  entry,  which  is  entry  requiring  significant  sunk  costs.  269 
 81.  Costs  Incurred  To  Enter  a  Market  May  Not  Be  a  Barrier  to  Entry.  A  cost  incurred  by  an  entrant  upon  entry,  even  if  fairly  significant,  may  not  be  a  barrier  to  entry  if  it 
 creates  no  cost  disadvantage  relative  to  the  incumbent,  does  not  generate  a  minimum  viable  scale  that  is  too  large  for  the  entrant  to  achieve,  and  does  not  significantly  raise  the  cost  of  failure  and 
 exit.  Thus,  to  determine  whether  initial  entry  costs  are  a  likely  deterrent  to  entry,  the  economics  literature  considers,  among  other  things:  whether  the  incumbent  had  to  incur  the  same  costs; 
 how  large  the  costs  are;  whether  the  costs  are  sunk;  the  likelihood  of  success  in  entry;  and  the  size  of  the  scale  economies  and  the  likely  share  of  the  markets  entrants  can  expect  to  take. 
 Entrants  are  unlikely  to  be  deterred  by  smaller,  transient  entry  costs  that  are  recoverable  and  that  do  not  raise  the  minimum  viable  scale  above  the  typical  market  share  they  can  expect.  270 

 82.  Some  Barriers  to  Entry  Are  Not  Harmful.  Not  all  barriers  to  entry  are  harmful  to  competition  or  consumers.  Some  barriers  are  the  result  of  firms  attempts  to  develop  new 
 technologies  and  improve  their  efficiencies,  and  the  barriers  provide  the  appropriate  reward  for  their  innovative  activity.  271  For  example,  patent  protection  is  a  powerful  barrier  to  entry  that 
 denies  new  entrants  the  legal  right  to  take  advantage  of  the  patent  holders  research.  But  patent  protection  provides  an  incentive  to  invest  in  research  that  would  otherwise  be  diminished  if  the 
 innovator  did  not  expect  to  reap  monopoly  profits  from  the  innovation,  at  least  for  a  period  of  time.  272 

 83.  Incumbents  Behavior  Can  Influence  Whether  Entrants  Will  Want  To  Enter.  The  extensive  literature  on  strategic  behavior  and  deterrence  examines  how  incumbents,  through 
 present  and  future  actions,  could  prevent  entry.  273  For  example,  in  assessing  whether  incumbents  can  profit  from  a  price  rise,  the  HMG  do  not  assume  that  retail  prices  will  remain  elevated  after 

 268  See  HMG    3.3. 
 269  The  HMG  distinguish  between  uncommitted  and  committed  entrants.  Firms  that  are  able  to  respond  to  a  small 
 but  significant  and  nontransitory  price  increase  within  one  year  and  with  no  significant  sunk  costs  of  entry  and  exit  are  considered  uncommitted  entrants,  and  treated  as  participants  in  the  relevant  market.  HMG    1.  32.  Committed 

 entry  requires  significant  sunk  costs  of  entry  and  exit.  A  significant  sunk  cost  is  one  that  would  not  be  recouped  within  one  year  of  the  commencement  of  the  supply  response,  assuming  a  small  but  significant  and  nontransitory 
 price  increase  in  the  relevant  market.  Id. 
 270  GREER,  supra  note  244,  at  241-  46;  STIGLER,  supra  note  241,  at  67-  70. 

 271  The  idea  that  barriers  to  entry  and  high  market  concentration  are  not  always  a  concern  to  be  combated  with 
 antitrust  enforcement  is  an  important  point  stressed  by  Stigler,  Posner,  and  others  in  the  Chicago  School.  See  VISCUSI,  VERNON,  &  HARRINGTON,  supra  note  240,  at  156;  Weizsacker,  supra  note  241,  at  399-  400;  Baker,  supra 

 note  241,  at  5-  6.  See  generally  Posner,  supra  note  241. 
 272  See  CARLTON  &  PERLOFF,  supra  note  244,  at  505-  13;  Qwest  Haring  &  Shooshan  Paper  at  8-  9. 

 273  See  SHY,  INDUSTRIAL  ORGANIZATION,  supra  note  250,  at  186-  206;  TIROLE,  supra  note  244,  at  314-  21;  GREER, 
 supra  note  244,  at  305. 
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 entry  occurs,  but  rather  take  into  account  the  possibility  that  incumbents  will  lower  prices  in  response  to  entry,  thus  making  the  entry  less  rewarding  for  new  competitors.  274 
 d.  Interpretation  of  the  Impair  Standard 
 84.  We  find  a  requesting  carrier  to  be  impaired  when  lack  of  access  to  an  incumbent  LEC  network  element  poses  a  barrier  or  barriers  to  entry,  including  operational  and  economic 

 barriers,  that  are  likely  to  make  entry  into  a  market  uneconomic.  That  is,  we  ask  whether  all  potential  revenues  from  entering  a  market  exceed  the  costs  of  entry,  taking  into  consideration 
 any  countervailing  advantages  that  a  new  entrant  may  have.  As  explained  in  detail  below,  this  granular  analysis  is  informed  by  consideration  of  the  relevant  barriers  to  entry,  as  well  as  a 
 careful  examination  of  the  evidence,  especially  marketplace  evidence  showing  whether  entry  has  already  occurred  in  particular  geographic  and  customer  markets  without  reliance  on  the 
 incumbent  LECs  networks  but  instead  through  self-  provisioning  or  reliance  on  third-  party  sources.  275 

 (i)  Types  of  Barriers  to  Entry 
 85.  As  suggested  by  the  summary  of  economic  and  legal  literature  above,  276  there  are  different  kinds  of  barriers  to  entry.  We  describe  in  this  subpart  which  barriers  we  consider 

 relevant  to  the  impairment  analysis.  We  also  examine  whether  unbundling  can  address  the  impairment  caused  by  these  barriers.  We  focus  on  the  barriers  described  below  because  we  find 
 that  they  are  the  most  likely  to  create  impairment,  that  there  is  general  recognition  of  the  importance  of  these  barriers  in  the  economics  literature  described  above  and  the  HMG,  and  that 
 they  comport  with  our  understanding  of  the  characteristics  of  the  telecommunications  industry.  We  recognize,  as  did  the  USTA  court,  that  at  bottom  all  these  barriers  can  be  expressed  in  terms 
 of  costs,  and  thus  to  the  extent  described  throughout  this  section,  cost  differences  remain  relevant 

 274  See  HMG    3.3. 
 275  See  Qwest  Comments  at  11  (  But,  of  course,  there  is  no  universal,  magic  formula  by  which  the  Commission  or 
 anyone  else  can  assign  weights  to  various  factors  and  arrive  at  the  answer  as  to  whether  a  particular  element  meets  the  impair  standard  and  should  be  unbundled.  The  basic  question  is  whether  CLECs  can  feasibly  provide  service 

 and  meaningfully  compete  without  access  to  a  particular  type  of  facility.);  BellSouth  Reply  at  12-  13  (  Once  the  UNE  market  is  properly  defined,  impairment  should  be  tested  by  asking  whether  a  reasonably  efficient  CLEC 
 retains  the  ability  to  compete  even  without  access  to  the  UNE.);  BellSouth  Reply,  Attach.  2,  Declaration  of  Howard  A.  Shelanski,  at  para.  2  (BOC  Shelanski  Reply  Decl.)  (also  attached  to  SBC  Reply  and  Verizon  Reply) 
 (  As  an  economic  matter,  impairment  must  at  the  very  least  mean  that  CLECs  suffer  some  disadvantages  relative  to  the  ILEC  that  are  sufficiently  great  that  they  could  tip  to  the  negative  a  rational  CLECs  decision  about  whether  or 
 not  to  enter  a  local  exchange  market.);  Letter  from  William  P.  Barr,  Executive  Vice  President  and  General  Counsel,  Verizon,  to  Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  No.  01-  338  at  3  (filed  Oct.  16,  2002) 
 (Verizon  Oct.  16,  2002  Ex  Parte  Letter)  (  The  key  to  the  impairment  analysis  therefore  is  whether  an  entrant  can,  over  time  using  its  own  facilities,  profitably  serve  less  than  the  entire  market.);  Letter  from  James  C.  Smith,  Senior 
 Vice  President,  SBC,  to  Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  1  at  5  (SBC  Jan.  14,  2003  Ex  Parte  Letter). 

 276  See  supra  Part  V.  B.  1.  c. 
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 to  the  impairment  analysis.  277  Throughout  our  application  of  the  impairment  standard  to  individual  elements,  we  ask  whether  the  sum  of  these  barriers  is  likely  to  make  entry 
 uneconomic,  taking  into  account  available  revenues  and  any  countervailing  advantages  that  a  requesting  carrier  may  have.  278  Our  analysis  does  not  rest  solely  on  the  existence  of  cost 
 disparities,  but  instead  is  based  on  determining  whether  entry  would  be  profitable  without  the  UNE  in  question.  Therefore,  the  existence  of  cost  disparities  does  not  necessarily  require  a 
 finding  of  impairment,  but  it  can  significantly  affect  our  analysis  through  its  impact  on  an  entrants  ability  to  enter.  279 

 86.  Before  discussing  relevant  barriers  to  entry,  however,  we  note  that  the  telecommunications  industry  is  replete  with  the  kinds  of  barriers  described  in  the  economics 
 discussion  above.  For  example,  facilities-  based  entry  into  the  telecommunications  market  requires  a  great  deal  of  capital  for  equipment,  network  construction,  and  operating  costs  while 
 customers  are  gradually  added  to  an  entrants  network.  280  The  capital  requirements  are  exacerbated  by  the  length  of  time    months  or  years    that  it  can  take  before  investments  start  to 
 turn  a  profit  owing  to  the  pace  of  construction,  the  difficulties  of  luring  customers  away  from  incumbent  LECs,  and  the  need  to  invest  in  a  great  deal  of  equipment  before  serving  the  first 

 277  See  USTA,  290  F.  3d  at  426  (  Of  course  any  cognizable  competitive  impairment  would  necessarily  be 
 traceable  to  some  kind  of  disparity  in  cost.);  see  also,  e.  g.,  WorldCom  Reply  at  13;  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at 

 2  (filed  Oct.  23,  2002)  (WorldCom  Oct.  23,  2002  Ex  Parte  Letter). 
 278  See,  e.  g.,  Verizon  Oct.  16,  2002  Ex  Parte  Letter  at  5  (urging  the  Commission  to  take  into  account  any 
 countervailing  advantages,  such  as  being  able  to  sell  other  services,  avoid  costs,  achieve  qualitative  advantages  unavailable  to  the  incumbent  LEC,  cherry-  pick  profitable  customers  or  markets,  and  use  more  efficient  equipment 

 and  network  architectures);  see  also  BellSouth  Comments  at  25;  Verizon  Comments  at  58;  BellSouth  Reply  at  10;  Verizon  Reply  at  42-  43;  WorldCom  Reply  at  18-  19  (noting  that  any  competitive  LEC  advantages  are  outweighed  by 
 disadvantages);  BellSouth  Reply,  Reply  Declaration  of  National  Economic  Research  Associates,  Inc.  (NERA  Reply  Decl.)  at  paras.  70-  74;  BOC  Shelanski  Reply  Decl.  at  para.  3  (noting  that  new  entrants  may  have  advantages  of 
 more  advanced  equipment,  lower  labor  costs,  and  the  ability  to  serve  larger  areas  or  to  market  selectively  to  more  attractive  markets).  We  recognize  that  a  precise  calculation  of  a  competitive  LECs  advantage  is  difficult  or 
 impossible,  but  we  attempt  to  make  reasonable  deductions  through  our  examination  of  marketplace  and  other  evidence.  See  AT&  T  Willig  Reply  Decl.  at  para.  57. 

 279  See  also  infra  para.  112. 
 280  While  we  acknowledge  that  the  telecommunications  industry  is  capital-  intensive,  we  will  not  base  our 
 impairment  analysis  on  competitors  current  ability  to  access  capital  markets,  as  suggested  by  some  commenters.  See  CompTel  Comments  at  65-  71;  Covad  Comments  at  15-  16;  CompTel  Reply  at  6;  see  also  Allegiance  Reply  at  3, 

 14-  18.  But  see  Verizon  Reply  at  135-  36;  BellSouth  NERA  Reply  Decl.  at  para.  74.  We  recognize  that  todays  market  conditions  make  access  to  capital  more  difficult    and  thus  self-  provisioning  more  difficult    than  it  may 
 have  been  several  years  ago.  But  because  the  markets  can  change  quickly,  an  impairment  analysis  that  hung  on  the  current  state  of  the  capital  markets,  and  in  particular  on  short-  term  fluctuations  in  access  to  capital,  would  either 
 result  in  our  rules  quickly  becoming  out-  of-  date,  or  require  frequent  review  that  would  contribute  to  market  uncertainty.  However,  as  part  of  the  analysis  to  determine  whether  entry  is  economic,  we  recognize  that  a  relevant 
 factor  is  the  cost  of  capital  to  competitors.  Our  impairment  analysis  will  therefore  consider  the  current  and  likely  prospective  cost  of  capital,  based  on  our  expectations  of  the  availability  and  price  of  capital  in  the  long-  run. 
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 customer.  281  The  kinds  of  equipment  needed  to  provide  that  service  also  pose  barriers  in  the  form  of  very  high  fixed  costs,  many  of  which  are  sunk.  While  switches  and  other  intelligence 
 equipment  can  be  moved  from  place  to  place,  construction  of  wireline  transmission  facilities  is  literally  sunk    once  invested  in,  it  cannot  be  moved,  even  if  customer  demand  patterns 
 change.  In  addition,  producing  telecommunications  services  requires  very  substantial  economies  of  scale  and  scope.  With  these  facts  in  mind,  we  explain  how  we  will  analyze  barriers  to  entry  in 
 the  telecommunications  market    including  scale  economies,  sunk  costs,  first-  mover  advantages,  and  absolute  cost  advantages    and  we  explain  our  approach  to  unbundling  as  a  means  of 
 overcoming  certain  barriers  to  entry. 
 87.  Scale  Economies.  Scale  economies,  particularly  when  combined  with  sunk  costs  and  first-  mover  advantages  (described  just  below),  can  pose  a  powerful  barrier  to  entry.  282  If 

 entrants  are  likely  to  achieve  substantially  smaller  levels  of  sales  than  the  incumbent,  then  with  scale  economies  their  average  costs  will  be  higher  than  those  of  the  incumbent,  putting  them  at  a 
 potentially  significant  cost  disadvantage  to  the  incumbent.  Profitable  entry  may  not  be  possible  if  retail  prices  are  close  to  the  incumbents  average  costs.  The  greater  the  extent  and  size  of  the 
 scale  economies  throughout  the  range  of  likely  demand,  the  higher  the  barrier  they  pose.  283  By 
 281  See,  e.  g.,  BTI  Comments  at  9  (noting  that  competitive  LECs  must  amass  a  customer  base  before  attracting 
 private  equity);  Illuminet  Comments  at  8  (pointing  out  that  [  t]  he  construction  and  operation  of  a  stand-  alone  SS7  signaling  system  and  the  data  bases  necessary  for  provision  of  many  services  is  a  complex  and  very  capital  intensive 

 undertaking  which  may  serve  as  a  barrier  to  entry  for  smaller  firms.). 
 282  See  AT&  T  Reply  at  38;  AT&  T  Willig  Reply  Decl.  at  para.  19;  BellSouth  NERA  Reply  Decl.  at  para.  75 
 (urging  the  Commission  not  to  unbundle  all  elements  because  of  the  possibility  of  scale  economies  posing  a  barrier);  Qwest  Reply  at  9-  10;  Qwest  Farrell  Reply  Decl.  at  para.  12  (  If  an  element  displays  only  ordinary 

 economies  of  scale,  the  Commission  should  not  require  its  unbundling  unless  that  element  also  exhibits  certain  additional  features  that  (perhaps  in  conjunction  with  the  scale  economies)  create  true  entry  barriers  .  .  .  .  Such 
 features  might  include  large  sunk  costs  relative  to  recurring  costs,  low  rates  of  innovation,  and  high  costs  relative  to  complements  (other  network  elements).);  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T, 
 to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Attach.  at  2,  4  (filed  Jan.  10,  2003)  (AT&  T  Jan.  10,  2003  Ex  Parte  Letter);  see  also  WorldCom  Reply  at  14-  15  (noting  that  incumbent  LECs  derive  significant  and 
 relevant  cost  advantages  from  their  economies  of  scale). 
 283  See  supra  note  259.  Scale  economies  are  necessarily  more  of  a  hurdle  for  small  competitive  LECs,  which  tend 
 to  serve  fewer  customers. 

 We  recognize,  as  did  the  USTA  court,  that  if  scale  economies  are  present  over  the  entire  relevant  market,  the  element  may  be  one  for  which  multiple,  competitive  supply  is  unsuitable,  such  that  unbundling  could  be 

 appropriate  to  avoid  wasteful  duplication  of  the  facility.  See  USTA,  290  F.  3d  at  427  (citing  2  KAHN,  supra  note  259,  at  119);  see  also,  e.  g.,  Mpower  Reply  at  11  (arguing  that  competitive  LECs  should  not  have  to  replicate  the 
 incumbent  LECs  networks  unnecessarily).  We  do  not  agree  that  USTA  requires  us  to  limit  unbundling  to  those  situations  only  where  an  element  is  wholly  unsuitable  for  competitive  supply.  See,  e.  g.,  Qwest  Reply  at  9 
 (quoting  USTA,  290  F.  3d  at  427).  Rather,  USTA  urges  us  to  consider  the  cost  characteristics  of  elements  and  ensure  that  we  do  not  mistakenly  equate  just  any  cost  disparity  with  impairment.  See  USTA,  290  F.  3d  at  427  ([  C]  ost 
 comparisons  of  the  sort  made  by  the  Commission  [in  the  UNE  Remand  Order],  largely  devoid  of  any  interest  in  whether  the  cost  characteristics  of  an  element  render  it  at  all  unsuitable  for  competitive  supply,  seem  unlikely 
 either  to  achieve  the  balance  called  for  explicitly  by  Justice  Breyer  or  implicitly  by  the  [Supreme]  Court  as  a  whole  [in  Iowa  Utils.  Bd.]  in  its  disparagement  of  the  Commissions  readiness  to  find  any  cost  disparity  reason  enough  to 
 order  unbundling.)  (emphasis  in  USTA). 
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 contrast,  scale  economies  are  less  of  a  barrier  to  entry  if  average  costs  reach  a  low  point  or  begin  to  increase  at  some  level  of  production  less  than  total  market  demand,  particularly  if  that  level  of 
 production  is  one  that  a  new  firm  can  reasonably  expect  to  achieve.  284  Thus,  we  will  not  find  scale  economies  that  typically  exist  for  any  entrant  into  any  industry  to  pose  a  barrier,  when  they 
 have  not  typically  blocked  such  entry.  285  Indeed,  the  HMG  ask  whether  a  new  entrant  can  achieve  the  minimum  viable  scale  (i.  e.,  the  lowest  output  at  which  entry  is  profitable),  and  thus 
 recognize  that  scale  economies  that  typically  exist  for  any  entrant  into  any  industry  do  not  pose  a  barrier,  when  they  have  not  typically  blocked  entry.  286  In  sum,  we  will  consider  whether  the  cost 
 differences  caused  by  scale  economies  are  sufficiently  large  and  persistent,  alone  or  in  combination  with  other  factors,  to  be  likely  to  make  entry  uneconomic.  For  similar  reasons,  we 
 also  examine  scope  economies  to  determine  whether  they,  too,  could  contribute  to  a  barrier  to  entry. 

 88.  Sunk  Costs.  Sunk  costs,  particularly  when  combined  with  scale  economies,  can  pose  a  formidable  barrier  to  entry.  287  Sunk  costs  increase  risk  as  well  as  an  entrants  cost  of 
 failure,  which  in  turn  can  increase  the  cost  of  capital  and  discourage  entry.  288  In  addition,  an  entrant  that  knows  that  an  incumbent  LEC  has  incurred  substantial  sunk  costs  may  be  disinclined 
 to  enter  a  market  because  the  incumbent  LEC  is  likely  to  drop  its  prices,  possibly  to  levels  below 
 284  The  lowest  output  at  which  average  costs  reach  their  minimum  (if  it  exists)  is  called  the  Minimum  Efficient 
 Scale.  See  CARLTON  &  PERLOFF,  supra  note  244,  at  41. 
 285  Similar  to  our  analysis,  the  USTA  court  noted  that  average  unit  costs  are  necessarily  higher  at  the  outset  for 
 any  new  entrant  into  virtually  any  business,  USTA,  290  F.  3d  at  427,  so  scale  economies  (and  cost  differences  in  general)  that  pertain  just  to  the  beginning  stages  of  entry  might  not  be  an  appropriate  factor  in  an  unbundling 

 analysis.  See  also  Verizon  Oct.  16,  2002  Ex  Parte  Letter  at  3  (  A  transient  cost  disparity  resulting  from  differences  in  scale  does  not  meet  the  standard  for  unbundling  established  by  the  Act.);  see  also  Verizon  Comments  at  57-  58 
 (arguing  that  new  entrants  in  any  industry  routinely  lose  money  for  an  initial  period);  AT&  T  Reply  at  32-  34,  37  (urging  the  Commission  to  find  that  cost  differences  and  scale  economies  are  relevant  so  long  as  they  are  not 
 universal  cost  disparities,  and  to  find  that  unbundling  does  not  depend  on  an  element  being  a  natural  monopoly);  Qwest  Reply  at  9;  SBC  Reply  at  46;  Verizon  Reply  at  39-  40;  WorldCom  Reply  at  14;  BOC  Shelanski  Reply  Decl. 
 at  para.  2  (  Impairment  must  consist  of  more  than  the  usual  challenge  of  playing  catch-  up  that  any  new  entrant  into  a  mature  industry  faces.),  para.  3;  Qwest  Farrell  Reply  Decl.  at  paras.  9-  12. 

 286  See  supra  note  256;  see  also  HMG    3.3;  AT&  T  Nov.  14,  2002  Ex  Parte  Letter,  Attach.  at  4-  7. 
 287  See,  e.  g.,  AT&  T  Reply  at  38-  39;  WorldCom  Reply  at  14-  17;  AT&  T  Willig  Reply  Decl.  at  para.  20  (  It  is  basic 
 economics  that  the  need  to  incur  significant  sunk  costs  to  deploy  facilities  that  have  substantial  scale  economies  establishes  a  significant  entry  barrier.),  paras.  21-  22;  AT&  T  Jan.  10,  2003  Ex  Parte  Letter,  Attach.  at  4.  Cf.  BOC 

 Shelanski  Reply  Decl.  at  para.  4  (urging  Commission  not  to  unbundle  merely  because  new  entrants  face  risks);  Qwest  Farrell  Reply  Decl.  at  para.  13. 

 288  See  AREEDA  &  HOVENKAMP,  supra  note  242,  para.  421c;  GREER,  supra  note  244,  at  240;  CARLTON  &  PERLOFF, 
 supra  note  244,  at  78;  VISCUSI,  VERNON,  &  HARRINGTON,  supra  note  240,  at  161;  HMG    3.3.  Factors  that  can  add  to  the  risk  of  entry  can  include  whether  the  entrant  will  attract  enough  customers  to  take  advantage  of  scale 

 economies,  whether  it  can  install  its  equipment  at  the  estimated  cost,  whether  the  incumbent  will  perform  its  required  tasks  with  the  necessary  timeliness  and  quality,  and  whether  the  incumbent  will  respond  to  entry  by 
 dropping  its  price,  as  well  as  legal  and  regulatory  uncertainties  about  future  rules.  Cf.,  e.  g.,  AT&  T  Jan.  10,  2003  Ex  Parte  Letter,  Attach.  at  4. 
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 average  cost,  in  response  to  entry.  289  In  these  ways,  sunk  costs  can  act  to  give  significant  first-mover  advantages  to  incumbent  LECs.  290 
 89.  First-  Mover  Advantages.  First-  mover  advantages  can  contribute  to  the  factors  described  above.  291  First-  mover  advantages  can  include  preferential  access  to  buildings,  292  access 
 to  rights-  of-  way,  293  the  higher  risk  of  new  entrants  failure  (often  exacerbated  by  high  sunk  costs),  the  fact  that  the  incumbent  LEC  has  substantial  sunk  capacity,  operational  difficulties 
 faced  by  an  entrant  that  have  already  been  worked  out  by  the  incumbent  LEC  when  it  built  out  its  network  as  a  monopolist,  294  consumers  reluctance  to  switch  carriers,  295  and  advertising  and 
 brand  name  preference.  296  First-  mover  advantages  often  create  an  absolute  cost  disadvantage  for  entrants,  which,  if  large  enough,  can  be  a  barrier  to  entry.  297  Some  of  these  factors  interact  with 

 289  See  SHY,  INDUSTRIAL  ORGANIZATION,  supra  note  250,  at  186-  206. 
 290  See  UNE  Remand  Order,  15  FCC  Rcd  at  3736-  37,  paras.  77-  80.  Cf.  Allegiance  Reply  at  13  (noting  that 
 requesting  carriers  incur  sunk  costs  in  negotiating  arbitration  agreements  and  deploying  OSS  for  the  purposes  of  ordering  UNEs). 

 291  See,  e.  g.,  WorldCom  Reply  at  17-  18;  AT&  T  Willig  Reply  Decl.  at  paras.  29-  31;  AT&  T  Jan.  10,  2003  Ex  Parte 
 Letter,  Attach.  at  6-  8. 
 292  See,  e.  g.,  AT&  T  Reply  at  50  (noting  that  delays  associated  with  obtaining  building  access  can  prevent  carriers 
 from  providing  service);  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  (filed  Oct.  25,  2002)  (WorldCom  Oct.  25,  2002  Ex  Parte 

 Letter).  The  Commission  has  an  open  proceeding  on  building  access  issues.  See  Promotion  of  Competitive  Networks  in  Local  Telecommunications  Markets,  WT  Docket  No.  99-  217,  CC  Docket  Nos.  96-  98,  88-  57,  First 
 Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  in  WT  Docket  No.  99-  217,  Fifth  Report  and  Order  and  Memorandum  Opinion  and  Order  in  CC  Docket  No.  96-  98,  and  Fourth  Report  and  Order  and  Memorandum 
 Opinion  and  Order  in  CC  Docket  No.  88-  57,  15  FCC  Rcd  22983  (2000)  (Competitive  Networks  Order). 
 293  See,  e.  g.,  WorldCom  Reply  at  17-  18.  Section  224  of  the  Act  provides  a  detailed  scheme  for  the  regulation  of 
 access  to  rights-  of-  way.  47  U.  S.  C.    224.  While  section  224  provides  certain  rights  to  requesting  telecommunications  carriers,  the  requesting  carriers  must  still  face  costs  inherent  in  exercising  those  rights    costs 

 that  the  incumbent  LEC  does  not  face  because  it  already  has  access  to  rights-  of-  way  (for  its  existing  network). 
 294  See,  e.  g.,  AT&  T  Reply  at  49-  51  (noting  that  hot  cut  issues  can  cause  delays  and  degrade  quality  of  new 
 entrants  service);  Letter  from  Laurence  J.  Kotlikoff,  Professor  of  Economics,  Boston  University,  to  Michael  K.  Powell,  Chairman,  FCC,  et  al.,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.,  in  Letter  from  Penelope  K.  Alberg, 

 AT&  T,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  22,  2003)  (AT&  T  Jan.  22,  2003  Ex  Parte  Letter).  Cf.  BOC  Shelanski  Decl.  at  paras.  30-  31  (arguing  that  costs  of  combining  network 
 elements  with  non-  incumbent  facilities  should  not  result  in  a  finding  of  impairment  unless  they  are  so  high  as  to  make  alternatives  economically  infeasible). 

 295  Consumers  reluctance  to  switch  carriers  may  be  caused  by  inertia  or  the  high  costs  of  changing. 
 296  We  note,  as  well,  that  requesting  carriers  may  also  have  very  recognizable  brand  names.  See  BellSouth  NERA 
 Reply  Decl.  at  para.  73. 
 297  See,  e.  g.,  Z-  Tel  Comments  at  26  (noting  that  incumbent  LECs  have  cost  advantages  resulting  from  their  historic 
 monopoly  position);  Allegiance  Reply  at  14  (noting  that  requesting  carriers  incur  higher  marketing  and  promotional  costs  than  incumbent  LECs). 
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 other  factors,  such  as  scale  economies,  to  create  barriers  to  entry.  298  As  we  consider  these  factors,  we  will  keep  in  mind  that  new  entrants  may  have  countervailing  advantages  (second 
 mover  advantages)  that  mitigate  some  of  these  factors.  For  example,  competitors  are  able  to  design  new  networks,  and  may  be  able  to  offer  higher  quality  services  than  incumbent  LECs 
 because  they  are  relying  on  newer  equipment.  299  While  these  countervailing  advantages  are  relevant,  they  are  not  necessarily  dispositive  and  do  not,  without  further  analysis  of  the  other 
 relevant  factors  we  describe,  demonstrate  a  lack  of  impairment.  300 
 90.  Absolute  Cost  Advantages.  When  the  incumbent  LEC  has  absolute  cost  advantages,  other  firms  may  be  deterred  from  entering  the  market.  301  Particularly  if  the 

 incumbent  LEC  is  providing  service  at  rates  close  to  its  average  cost,  competitive  LECs  may  find  it  difficult  or  impossible  to  provide  service  in  an  economic  fashion,  because  they  likely  will  have 
 higher  average  costs  than  the  incumbent  LEC.  Small  disadvantages,  however,  will  not  pose  a  barrier  unless  they  raise  an  entrants  costs  above  revenues.  302 

 91.  Barriers  Within  the  Control  of  the  Incumbent  LEC.  We  also  examine  those  barriers  to  entry  that  are  solely  or  primarily  within  the  control  of  the  incumbent  LEC.  We  look 
 to  these  barriers  because  it  is  within  the  control  of  the  incumbent  LEC  to  eliminate  them  or  mitigate  their  effects,  which  could  eliminate  the  need  to  unbundle  network  elements  to  overcome 
 them.  This  approach  flows  from  the  Acts  call  for  a  deregulatory  approach  where  possible.  303 
 298  For  example,  the  incumbent  LECs  advantage  in  advertising  or  brand  name  preference  can  affect  an  entrants 
 ability  to  reach  a  large  enough  size  to  achieve  the  scale  economies  necessary  to  compete  with  the  incumbent.  Advertising  and  brand  name  preference  play  a  critical  role  in  the  HMG  in  helping  to  determine  whether  an  entrant 

 can  achieve  the  minimum  viable  scale.  See  HMG    3.3  n.  33  (  Entrants  anticipated  share  of  growth  in  demand  depends  on  incumbents  capacity  constraints  and  irreversible  investments  in  capacity  expansion,  as  well  as  on  the 
 relative  appeal,  acceptability,  and  reputation  of  incumbents  and  entrants  products  to  the  new  demand.). 
 299  See  SBC  Comments  at  36;  Verizon  Comments  at  42;  Verizon  Reply  at  42;  BellSouth  NERA  Reply  Decl.  at 
 para.  72.  Competitive  LECs  may  also  have  countervailing  advantages  in  being  free  to  avoid  unattractive  markets.  See  Verizon  Reply  at  43. 

 300  See  Verizon  Reply  at  41  (arguing  that  the  incumbent  LECs  scale  and  scope  economies  are  irrelevant  because 
 competitors  design  new  networks). 
 301  See,  e.  g.,  AT&  T  Jan.  10,  2003  Ex  Parte  Letter,  Attach.  at  6. 

 302  We  find  support  for  considering  absolute  cost  advantages,  as  does  Professor  Willig,  in  the  HMG.  The  HMG 
 ask  whether  potential  committed  entrants  with  significantly  higher  costs  than  the  incumbents  can  act  to  hold  prices  down  to  pre-  merger  levels.  Similarly,  the  HMG  ask  whether  potential  committed  entrants  can  achieve  the  minimum 

 viable  scale    absolute  cost  advantages  could  prevent  them  from  doing  so.  This  is  analogous  to  our  question    whether  new  firms  can  enter  the  market  to  challenge  the  incumbent  LECs.  See  AT&  T  Nov.  14,  2002  Ex  Parte 
 Letter,  Attach.  at  3-  4,  7-  8;  Letter  from  C.  Frederick  Beckner,  III,  Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  3  (filed  Feb.  12,  2003)  (AT&  T  Feb.  12,  2003  Ex 
 Parte  Letter);  see  also  AT&  T  Jan.  22,  2003  Ex  Parte  Letter,  Attach.  But  see  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98- 
 147,  Attach.  (filed  Feb.  6,  2003)  (Qwest  Feb.  6,  2003  Ex  Parte  Letter)  (citing  A.  Douglas  Melamed  that  argues  that  the  HMG  do  not  contain  any  explicit  reference  to  any  absolute  cost  disadvantages.). 

 303  See  Preamble  to  the  1996  Act. 
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 Thus,  if  there  are  technical  or  operational  barriers  solely  or  primarily  within  the  incumbent  LECs  control,  304  unbundling  a  network  element  may  give  the  requesting  carrier  an  opportunity 
 to  compete  while  the  incumbent  LEC  determines  whether  or  how  it  might  cure  the  provisioning  or  operational  problems.  By  contrast,  factors  that  are  within  the  control  of  the  new  entrant,  such 
 as  those  that  might  be  caused  by  choosing  a  particular  network  architecture,  are  less  likely  to  result  in  an  unbundling  determination  to  the  extent  they  are  truly  within  the  new  entrants 
 control.  305  Accordingly,  we  disagree  with  commenters  that  argue  that  we  should  give  operational  barriers  less  weight  in  our  impairment  analysis  and  deal  with  them  more  directly  instead.  306 
 Rather,  we  find  that  some  operational  difficulties  are  inherent  in  the  unbundling  process,  and  find  it  necessary  to  take  them  into  account  in  our  analysis. 

 (ii)  Evidence  of  Impairment 
 92.  Parties  have  submitted  an  enormous  amount  of  evidence  for  our  consideration  in  this  proceeding.  We  will  address  the  merits  of  this  evidence  in  the  Parts  below  regarding  the 

 application  of  the  unbundling  analysis  to  specific  UNEs.  As  guidance  for  our  analysis,  however,  we  explain  here  what  kinds  of  evidence  we  will  find  most  persuasive  in  those  discussions.  We 
 do  not  adopt  a  burden  of  proof  approach  that  places  the  onus  on  either  incumbent  LECs  or  competitors  to  prove  or  disprove  the  need  for  unbundling.  307  Rather,  in  the  application  of  our 
 standard,  we  examine  the  record  evidence  in  light  of  the  Acts  goals  to  make  the  best  determination  regarding  the  need  for  unbundling. 

 93.  As  we  anticipated  in  the  Triennial  Review  NPRM,  we  agree  with  commenters  that  argue  that  actual  marketplace  evidence  is  the  most  persuasive  and  useful  kind  of  evidence 

 304  See,  e.  g.,  AT&  T  Reply  at  49  (  Delays  that  would  result  from  denials  of  access  to  a  UNE  materially  diminish 
 CLECs  ability  to  provide  service  in  multiple  ways.  For  example,  hot  cuts  cause  delays  that  have  prevented  CLECs  from  serving  the  overwhelming  majority  of  customer  locations  .  .  .  .). 

 305  See,  e.  g.,  Letter  from  Michael  E.  Glover,  Senior  Vice  President  and  Deputy  General  Counsel,  Verizon,  and 
 Susanne  Guyer,  Senior  Vice  President    Federal  Regulatory  Affairs,  Verizon,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  at  6-  7,  in  Letter  from  Ann  D.  Berkowitz,  Project  Manager    Federal  Affairs,  Verizon,  to 

 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  10,  2003)  (Verizon  Jan.  10,  2003  UNE-  P  Ex  Parte  Letter). 

 306  See,  e.  g.,  SBC  Comments  at  36-  37. 
 307  See,  e.  g.,  ALTS  et  al.  Comments  at  123-  24;  BellSouth  Comments  at  18-  21;  NuVox  Reply  at  24-  25;  Letter  from 
 Michael  E.  Glover,  Senior  Vice  President  and  Deputy  General  Counsel,  Verizon,  and  Susanne  Guyer,  Senior  Vice  President    Federal  Regulatory  Affairs,  Verizon,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  at 

 3,  in  Letter  from  William  P.  Barr,  Executive  Vice  President  and  General  Counsel,  Verizon,  to  Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Dec.  17,  2002)  (Verizon  Dec.  17,  2002  Ex  Parte 
 Letter).  Because  we  decline  to  adopt  a  burden  of  proof  approach,  we  dismiss  as  moot  that  portion  of  the  CompTel  Nov.  26,  2001  Joint  Conference  Petition  in  which  CompTel  asks  the  Commission  to  impose  a  burden  of 
 proof  on  parties  requesting  that  a  UNE  no  longer  be  unbundled.  See  CompTel  Nov.  26,  2001  Joint  Conference  Petition  at  13. 
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 submitted.  308  In  particular,  we  are  most  interested  in  granular  evidence  that  new  entrants  are  providing  retail  services  in  the  relevant  market  using  non-  incumbent  LEC  facilities,  for  two  main 
 reasons.  First,  it  is  faithful  to  the  Supreme  Courts  admonition  that  we  consider  the  availability  of  elements  outside  the  incumbents  network  as  we  apply  the  impair  standard.  309  Second,  this 
 kind  of  evidence  demonstrates  better  than  any  other  kind  what  business  decisions  actual  market  participants  have  made  regarding  whether  it  is  feasible  to  provide  service  without  relying  on  the 
 incumbent  LEC.  Specifically,  this  evidence  shows  us  whether  new  entrants,  as  a  practical  matter,  have  surmounted  barriers  to  entry  in  the  relevant  market.  310 

 94.  As  we  examine  the  evidence  of  facilities  deployment  by  competitive  LECs  in  the  specific  UNE  discussions,  we  will  give  it  substantial  weight,  311  but  we  do  not  agree  that  we  must 
 find  it  conclusive  or  presumptive  of  a  particular  outcome  without  additional  information  or  analysis.  312  For  example,  if  the  marketplace  evidence  shows  that  new  entrants  have  deployed  a 
 certain  type  of  facility,  we  will  consider  the  facts  as  evidence  that  the  barriers  to  entry  in  that  market  for  that  element  are  surmountable.  313  In  deciding  what  weight  to  give  this  evidence,  we 
 will  consider  how  extensively  carriers  have  been  able  to  deploy  such  alternatives,  to  serve  what 

 308  See  Triennial  Review  NPRM,  16  FCC  Rcd  at  22789,  para.  17;  see  also  Qwest  Comments  at  5,  11-  12;  SBC 
 Comments  at  27;  Qwest  Farrell  Reply  Decl.  at  para.  17.  But  see  Competitive  Enterprise  Institute  Comments  at  2  (urging  the  Commission  not  to  rely  on  marketplace  evidence  in  a  way  that  freezes  its  rules  to  todays  conditions). 

 309  Iowa  Utils.  Bd.,  525  U.  S.  at  389;  see  also  Letter  from  Karen  Brinkmann,  Counsel  for  ITTA,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Jan.  29,  2003)  (ITTA  Jan.  29,  2003  Ex  Parte  Letter)  (noting  that  question  is  whether  elements  are  available  from  sources  other  than  incumbent 

 LEC). 
 310  Cf.,  e.  g.,  BOC  Shelanski  Reply  Decl.  at  paras.  8-  12  (arguing  that,  as  facilities-  based  entry  increases,  unbundling 
 makes  less  sense  because  it  punishes  earlier  facilities-  based  entrants,  fails  to  recognize  that  the  market  can  only  absorb  a  limited  number  of  firms,  and  confuses  impairment  with  lack  of  an  attractive  business  case).  We  recognize 

 the  credibility  of  econometric  analytical  techniques,  such  as  regression  analysis,  when  properly  specified  and  conducted. 

 311  See,  e.  g.,  BOC  Shelanski  Decl.  at  para.  17;  Qwest  Reply  at  7-  8;  BOC  Shelanski  Reply  Decl.  at  para.  17; 
 Verizon  Jan.  10,  2003  Ex  Parte  Letter,  Attach.  at  2  (arguing  that  the  Commission  should  presume  that  alternative  facilities  can  be  deployed  anywhere);  Verizon  Dec.  17,  2002  Ex  Parte  Letter,  Attach.  at  2  (arguing  that  no  carriers 

 are  impaired  in  markets  where  competitive  entry  has  occurred),  3  (arguing  for  presumption  of  no  impairment  when  facilities  at  issue  have  been  significantly  deployed  on  a  competitive  basis).  Similarly,  we  do  not  presume  that  if  one 
 carrier  can  enter  the  market  without  UNEs,  there  is  no  impairment. 
 312  See,  e.  g.,  CompTel  Comments  at  62  (urging  the  Commission  not  to  rely  on  a  simple  count  of  alternative 
 facilities);  GCI  Comments  at  19;  Z-  Tel  Comments  at  23;  AT&  T  Reply  at  41-  43;  NuVox  Reply  at  23;  SBC  Reply  at  10  (  If  competitive  facilities  already  have  been  deployed,  then  ipso  facto  they  can  be  deployed.  That  does  not  mean 

 that  the  mere  presence  of  a  single  competitive  facilities  in  a  particular  market  necessarily  precludes  a  finding  of  impairment  in  that  market.);  Talk  America  Reply  at  18;  WorldCom  Reply  at  29. 

 313  Cf.  Qwest  Comments  at  11-  12. 
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 extent  of  the  market,  and  how  mature  and  stable  that  market  is.  314  Thus,  while  we  agree  that  such  evidence  may  indicate  a  lack  of  impairment,  we  disagree  with  commenters  that  argue  that  such 
 evidence  is  dispositive  or  creates  a  rebuttable  presumption  of  no  impairment.  315  We  likewise  disagree  that  evidence  of  deployment  of  alternative  facilities  or  availability  of  non-  UNE 
 alternatives  from  the  incumbent  LEC  means  that  a  market  is  contestable  (as  some  parties  use  that  term)  and  therefore  necessarily  shows  a  lack  of  impairment.  316  Rather,  as  just  stated, 
 evidence  of  alternative  deployment  is  probative  but  not  necessarily  dispositive  of  a  lack  of  impairment.  And  as  we  explain  in  detail  below,  the  availability  of  non-  UNE  alternatives  from 
 incumbent  LECs  (such  as  tariffed  services  or  resold  retail  services)  has  little  bearing  on  our  impairment  analysis.  317 

 95.  Likewise,  we  disagree  that  evidence  of  alternative  deployment  is  irrelevant  unless  access  to  those  facilities  is  available  to  requesting  carriers  on  a  wholesale  basis.  318  We  examine 
 whether  wholesale  suppliers  exist,  but  our  standard  is  not  based  solely  on  whether  there  is  a  wholesale  market.  Instead,  we  also  consider  the  possibility  of  self-  provisioning.  We  also 
 disagree  that  deployment  of  alternative  facilities  is  necessarily  irrelevant  unless  carriers  have  been  able  to  serve  customers  profitably  over  those  facilities.  319  We  may  consider  the  extent  to 

 314  See  CompTel  Comments  at  72-  73  (noting  that  many  carriers  that  have  self-  deployed  are  now  bankrupt  or  have 
 left  the  market);  Covad  Comments  at  16-  18;  see  also  Talk  America  Comments  at  22  (noting  that  industry  must  mature  before  facilities-  based  competition  will  emerge). 

 315  See  BellSouth  Comments  at  17,  23;  Qwest  Comments  at  11  (  The  fact  of  widespread  CLEC  entry  without 
 reliance  on  a  particular  UNE  from  the  incumbent  should  be  deemed  to    and  clearly  does    establish  that  lack  of  access  to  that  UNE  under  section  251  does  not  impair  the  ability  of  a  CLEC  to  provide  service.);  SBC  Comments 

 at  27  (  That  some  CLECs  are  in  fact  providing  service  over  their  own  facilities  is  dispositive  evidence  that  carriers  are  not  impaired  without  access  to  ILEC  facilities.)  (emphasis  in  original);  Verizon  Comments  at  43-  46  (  Thus,  if 
 some  CLECs  use  non-  ILEC  facilities  to  serve  particular  types  of  customers  or  geographic  locations,  then  no  CLEC  should  be  considered  impaired  without  access  to  the  relevant  UNEs    not  just  with  respect  to  the  specific  customers 
 or  locations  served  by  the  original  CLECs,  but  with  respect  to  all  similar  customers  or  locations  [as  well  as  where]  circumstances  are  not  strictly  similar.);  Verizon  Reply  at  38. 

 316  See,  e.  g.,  Verizon  Dec.  17,  2002  Ex  Parte  Letter,  Attach.  at  2;  Letter  from  Brian  J.  Benison,  Associate  Director 
   Federal  Regulatory,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  2  (filed  Jan.  29,  2003)  (SBC  Jan.  29,  2003  Ex  Parte  Letter).  But  see  Letter  from  C.  Frederick  Beckner  III, 

 Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  31,  2003)  (AT&  T  Jan.  31,  2003  Ex  Parte  Letter)  (arguing  that  a  so-  called  contestability  analysis  that  focuses  on  the 
 presence  of  a  single  alternative  on  a  specific  route  is  insufficient  to  judge  impairment). 
 317  See  infra  para.  102. 

 318  See,  e.  g.,  Covad  Reply  at  13;  see  also  NuVox  Reply  at  23,  28;  Sprint  Reply  at  19;  Talk  America  Reply  at  18- 
 20;  Letter  from  Frederick  W.  Hitz,  III,  Director,  Rates  and  Tariffs,  General  Communication,  Inc.,  to  William  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  01-  318,  98-  56,  98-  141  at  4,  in 

 Letter  from  John  T.  Nakahata,  Counsel  for  GCI,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  01-  318,  96-  56,  98-  141  (filed  Jan.  27,  2003)  (GCI  Jan.  27,  2003  Ex  Parte  Letter)  (arguing  that  the 
 wholesale  market  for  inputs  is  the  relevant  market  to  consider  in  the  impairment  analysis). 
 319  See,  e.  g.,  AT&  T  Reply  at  42-  43. 
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 which  carriers  have  been  able  to  serve  customers  profitably,  but  we  recognize  that  profitability  can  be  affected  by  many  factors  other  than  those  we  examine  for  the  impair  analysis,  such  as 
 whether  there  is  overcapacity  in  the  market,  320  whether  facilities-  based  carriers  are  still  in  the  process  of  deploying  capacity,  321  and  the  scope  economies  involved  in  providing  multiple 
 services.  322 
 96.  On  the  other  hand,  if  the  marketplace  evidence  shows  that  new  entrants  have  not  widely  deployed  a  particular  kind  of  facility,  we  will  consider  the  facts  as  some  evidence  that 

 barriers  to  entry  in  that  market  for  that  element  are  preventing  the  deployment.  We  will  not  generally  presume  from  lack  of  entry  or  lack  of  deployment,  however,  that  there  are  barriers  to 
 entry  in  the  relevant  market,  323  or  that  any  barriers  cannot  be  overcome  through  means  other  than  unbundling  without  further  analysis.  For  example,  the  market  may  be  nascent  and  therefore  not 
 mature  enough  to  determine  whether  the  lack  of  entry  demonstrates  impairment.  We  also  consider  the  possibility  that  past  unbundling  policies  may  have  discouraged  the  build-  out  of 
 facilities.  We  further  recognize  that  many  factors  contribute  to  a  new  entrants  decision  where  to  place  its  facilities,  and  that  new  entrants  may  in  some  cases  simply  choose  not  to  enter  a 
 particular  market.  We  will  not  necessarily  presume  from  that  lack  of  entry  that  unbundling  is  warranted.  324 

 97.  We  also  examine  evidence  that  intermodal  alternatives  325  can  be  used  to  provide  telecommunications  service.  In  appropriate  instances,  evidence  of  the  deployment  of  intermodal 
 alternatives  informs  our  judgment  on  the  impair  factors  described  above,  and  in  those  circumstances  we  will  give  weight  to  deployment  of  intermodal  alternatives  in  our  analysis. 
 Specifically,  we  consider  whether  these  intermodal  alternatives  permit  a  requesting  carrier  to 
 320  If  more  facilities-  based  carriers  have  entered  the  market  than  can  be  supported  by  market  demand,  creating 
 overcapacity  and  generating  low  prices,  none  of  the  carriers  may  be  profitable.  However,  self-  provisioning  has  been  demonstrated  to  be  achievable,  and  with  exit  of  one  or  more  carriers,  the  remaining  carriers  may  achieve 

 profitability. 
 321  There  may  be  clear  evidence  that  carriers  are  profitably  serving  customers  in  a  particular  area,  but  have  not 
 achieved  overall  profitability  because  they  are  still  in  the  process  of  expanding  their  business. 
 322  It  can  be  difficult  to  determine  the  profitability  of  an  individual  product  for  a  multiproduct  firm.  While  the 
 revenues  obtained  from  a  particular  product  may  not  completely  cover  the  stand-  alone  costs  of  providing  just  that  product,  they  may  be  sufficient  to  cover  the  incremental  costs,  such  that  selling  the  product  adds  to  the  firms 

 profitability.  See  WILLIAM  J.  BAUMOL,  JOHN  C.  PANZAR  &  ROBERT  D.  WILLIG,  CONTESTABLE  MARKETS  AND  THE  THEORY  OF  INDUSTRY  STRUCTURE  351-  56  (1988). 

 323  See  Verizon  Comments  at  45,  60-  61;  SBC  Reply  at  47  (  To  the  extent  competitive  facilities  have  not  been 
 deployed  in  a  particular  market,  therefore,  the  Commission  must  attempt  to  determine  why,  and  it  must  differentiate  between  true  impairment  and  factors  that  have  nothing  to  do  with  impairment.). 

 324  See  Qwest  Comments  at  13;  BOC  Shelanski  Decl.  at  paras.  4,  42;  BOC  Shelanski  Reply  Decl.  at  para.  25. 
 325  By  intermodal,  we  refer  generally  to  facilities  or  technologies  other  than  those  found  in  traditional  telephone 
 networks.  These  include,  for  example,  traditional  or  new  cable  plant,  wireless  technologies  (satellite,  mobile,  and  fixed),  power  line  (electric  grid)  technologies,  or  other  technologies  not  rooted  in  traditional  telephone  networks. 
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 serve  the  market,  either  through  self-  provisioning  or  by  obtaining  capacity  on  a  wholesale  basis.  326  We  take  these  alternatives  into  account  for  several  reasons.  First,  the  Act  expresses  no 
 preference  for  the  technology  that  carriers  should  use  to  compete  with  the  incumbent  LECs.  Second,  we  do  not  want  to  prejudice  market  participants  business  decisions  about  whether  to 
 deploy  alternative  facilities  by  basing  our  unbundling  rules  on  the  presence  or  absence  of  any  certain  technology.  Third,  in  some  instances,  the  presence  of  intermodal  alternatives  can  be  just 
 as  probative  of  a  lack  of  impairment  as  the  presence  of  traditional  wireline  telephone  deployment.  The  fact  that  an  entrant  has  deployed  its  own  facilities    regardless  of  the 
 technology  chosen    may  provide  evidence  that  any  barriers  to  entry  can  be  overcome.  This  approach  is  consistent  with  USTAs  admonition  that  we  should  consider  intermodal  competitors 
 as  relevant  to  our  analysis.  327  Just  as  with  regard  to  the  deployment  of  new  traditional  facilities,  however,  we  do  not  find  the  presence  of  intermodal  alternatives  dispositive  in  our  impairment 
 analysis,  328  as  some  commenters  suggest.  329  We  also  disagree  with  commenters  that  suggest  that  deployment  of  intermodal  alternatives  is  irrelevant  if  the  facilities  are  not  available  to  requesting 
 carriers  on  a  wholesale  basis,  330  for  reasons  discussed  in  the  preceding  paragraphs.  As  we  evaluate  evidence  of  intermodal  deployment,  we  will  consider  to  what  extent  services  provided 
 over  these  intermodal  alternatives  are  comparable  in  cost,  quality,  and  maturity  to  incumbent  LEC  services.  331 

 326  Many  commenters  have  urged  us  to  take  services  provided  over  intermodal  alternatives  into  account.  See 
 Verizon  Oct.  16,  2002  Ex  Parte  Letter  at  4  (  In  determining  whether  an  element  meets  the  standard  for  unbundling,  the  Commission  must  consider  the  full  range  of  technologies  by  which  that  elements  function  could  be 

 performed.)  (emphasis  in  original);  see  also  Alcatel  Comments  at  17-  18;  Qwest  Comments  at  6-  8,  15;  USTA  Comments  at  4-  5;  Verizon  Comments  at  46-  51;  BOC  Shelanski  Decl.  at  para.  43;  AT&  T  Reply  at  57  ([  T]  he 
 Commission  must  consider  whether  substitute  services  that  are  offered  outside  the  ILECs  networks  have  led  to  the  profitable  provision  of  service  by  multiple  providers  .  .  .  .);  Qwest  Reply  at  16-  17;  BOC  Shelanski  Reply  Decl.  at 
 para.  23;  Qwest  Farrell  Reply  Decl.  at  para.  18.  But  see  Moline  and  CCG  Comments  at  8-  11  (urging  Commission  not  to  give  too  much  weight  to  intermodal  competition);  Sprint  Comments  at  12-  13  (arguing  that  even  where 
 intermodal  alternatives  are  available,  unbundling  may  be  necessary  to  promote  robust  competition);  NuVox  Reply  at  21-  22. 

 327  See  USTA,  290  F.  3d  at  429. 
 328  See  supra  para.  64. 
 329  See,  e.  g.,  Qwest  Comments  at  6-  9;  Verizon  Comments  at  46-  48. 
 330  See  ALTS  et  al.  Comments  at  39-  40;  ASCENT  Comments  at  26;  UNE-  P  Coalition  Comments  at  19;  see  also 
 Allegiance  Reply  at  21;  ASCENT  Reply  at  13;  Covad  Reply  at  13.  But  see  Qwest  Reply  at  16-  17.  We  also  address  this  argument  in  more  detail  infra  para.  112.  We  also  disagree  that  intermodal  alternatives  should  not  be  considered 

 because  CLECs  desire  to  offer  wireline  service,  not  wireless  service  or  cable  telephony.  See,  e.  g.,  ASCENT  Reply  at  13.  As  explained  above  and  as  the  USTA  decision  explained,  we  look  at  alternatives  for  whether  they 
 provide  comparable  service,  not  the  same  technology.  See  USTA,  290  F.  3d  at  429. 
 331  See  Allegiance  Reply  at  24-  25.  Our  analysis  is  necessarily  based  on  the  current  technical  capabilities, 
 economic  characteristics,  and  patterns  of  use  of  intermodal  alternatives.  These  facts  are  likely  to  change  going  forward  as  these  and  other  technologies  develop.  The  changes  may  affect  future  impairment  determinations. 
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 98.  In  some  cases,  the  differences  between  intermodal  alternatives  and  traditional  wireline  deployments  may  reduce  the  weight  we  give  to  the  deployment  of  alternatives.  For 
 example,  some  carriers  relying  on  intermodal  alternatives  have  not  needed  to  overcome  the  same  kinds  of  barriers  as  new  entrants  that  start  without  any  facilities  at  all.  Cable  telephony  and 
 cable  modem  service,  for  example,  have  developed  because  cable  operators  have  been  able  to  overlay  additional  capabilities  onto  networks  that  they  built  for  other  purposes,  often  under 
 government  franchise,  and  therefore  have  first-  mover  advantages  and  scope  economies  not  available  to  other  new  entrants,  which  lower  their  incremental  costs  of  providing  the  additional 
 services.  332  Similarly,  we  recognize  that  some  intermodal  technologies  will  only  be  available  to  one  or  a  few  firms  due  to  legal  restrictions,  such  as  spectrum  licensing  requirements,  that  may 
 limit  the  number  of  firms  that  can  use  a  given  technology  in  one  geographic  area.  When  an  intermodal  technology  is  limited  in  availability  to  only  one  or  a  few  telecommunications  carriers 
   either  because  of  the  historical  economic  characteristics  of  their  providers  or  legal  restrictions    we  will  consider  whether  that  technology  contributes  to  a  wholesale  market  in  accessing  the 
 customer.  We  may  give  less  weight  to  intermodal  alternatives  that  do  not  contribute  to  the  creation  of  a  wholesale  market  in  accessing  the  customer  or  do  not  provide  evidence  that  self-deployment 
 of  such  access  is  possible  to  other  entrants.  In  addition,  if  the  record  evidence  shows  that  there  are  limitations  on  the  number  or  types  of  customers  that  can  be  served  by  a  particular 
 technology,  we  will  consider  whether  an  entrant  could  use  this  technology  profitably  to  target  only  those  customers  that  can  be  served  by  the  alternative  technology. 

 99.  We  will  also  give  consideration  to  cost  studies,  business  case  analyses,  and  modeling  if  they  provide  evidence  at  a  granular  level  concerning  the  ability  of  competitors 
 economically  to  serve  the  market  without  the  UNE  in  question.  While  these  are  useful  tools  for  analysis,  we  may  give  this  evidence  less  weight  than  actual  marketplace  evidence  for  several 
 reasons.  First,  as  stated  above,  actual  marketplace  evidence  shows  whether  new  entrants,  as  a  practical  matter,  have  surmounted  barriers  to  entry  in  the  relevant  market.  Second,  these  studies 
 are  generally  based  on  estimates  of  costs  and  revenues  that  can  be  difficult  to  verify,  and  thus  are  more  easily  manipulated  by  the  advocates  in  this  proceeding.  Third,  there  may  be  issues  and 
 factors  that  affect  a  competitors  ability  to  enter  that  are  difficult  to  foresee  (such  as  unexpected  costs,  delays,  revenue  streams,  or  new  niche  products).  Thus,  there  will  be  uncertainty 
 concerning  the  existence  of  such  factors  when  examining  these  studies,  while  examination  of  actual  marketplace  evidence  will  reveal  whether  such  factors  exist  and  are  significant. 

 100.  In  conducting  our  impairment  analysis,  we  recognize  that  decisions  on  whether  to  enter  are  based  not  just  on  the  cost  of  entry  but  also  on  the  revenues  to  be  gained.  333  Thus,  we 
 will  consider,  where  provided,  evidence  of  the  revenue  opportunities  available  to  those  carriers  that  provide  services  over  the  relevant  facilities,  keeping  in  mind  that  competitors  are  able  to 

 332  Cf.  AT&  T  Reply  at  34  (arguing  that  the  presence  of  a  cable  competitor  has  no  relevance  to  the  impairment 
 analysis). 
 333  See,  e.  g.,  AT&  T  Comments  at  36;  CompTel  Comments  at  71  (urging  the  Commission  to  take  profitability  into 
 account  in  the  analysis  of  self-  provisioning);  Talk  America  Comments  at  15  (noting  that  financial  viability  depends  on  the  difference  between  retail  rates  and  the  cost  of  providing  service). 
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 choose  which  markets  to  enter  and  to  avoid  unattractive  markets.  334  We  consider  all  the  revenue  opportunities  that  a  competitor  can  reasonably  expect  to  gain  over  the  facilities,  from  providing 
 all  possible  services  that  an  entrant  could  reasonably  expect  to  sell,  335  taking  into  account  limitations  on  entrants  ability  to  provide  multiple  services,  such  as  diseconomies  of  scope  in 
 production,  management,  and  advertising.  336 
 101.  In  our  impairment  analysis,  we  examine  both  whether  new  entrants  can  provide  retail  services  over  non-  incumbent  facilities  and  whether  new  entrants  can  provide  wholesale 

 services  over  non-  incumbent  facilities.  337  Rather  than  providing  the  retail  services  itself,  338  a  wholesaling  carrier  will  be  providing  service  to  other  carriers  that  will  provide,  individually  or  as 
 a  group,  the  range  of  services  that  customers  want,  at  market-  based  prices.  Thus,  the  wholesale  carriers  sales  and  revenues  are  dependent  on  the  services  the  retail  carriers  will  demand  and  the 
 prices  they  are  willing  to  pay,  which  in  turn  depend  on  the  revenues  they  gain  from  the  retail  services  provided.  339  Wholesale  carriers  may  not  be  limited  by  the  same  factors  that  limit  the 
 likely  market  share  of  carriers  providing  retail  service,  since  they  will  be  able  to  serve  multiple  carriers  needs.  Thus,  if  advertising  or  diseconomies  of  scale  or  scope  limit  individual  carriers 
 market  shares  and  product  lines,  which  could  make  self-  deployment  of  facilities  uneconomic,  a  wholesale  carrier  may  be  able  to  serve  multiple  carriers  and  overcome  these  limits  in  the 
 aggregate. 
 102.  We  reaffirm  our  prior  conclusion  in  the  UNE  Remand  Order  to  afford  little  weight  to  evidence  that  requesting  carriers  are  using  incumbent  LEC  tariffed  services  as  relevant 

 to  our  unbundling  determination.  340  Specifically,  many  commenters  have  urged  us  to  find  that  requesting  carriers  are  not  necessarily  impaired  if  they  can  use  incumbent  LEC  resold  or  retail 

 334  See  USTA,  290  F.  3d  at  423  (urging  the  Commission  to  consider  high  retail  rates  as  they  relate  to  revenue 
 opportunities);  Verizon  Comments  at  42. 
 335  See  Verizon  Comments  at  57. 

 336  Diseconomies  of  scope  are  the  opposite  of  economies  of  scope.  Diseconomies  of  scope  occur  when  the  cost  of 
 producing  a  good  rises  when  a  firm  attempts  to  produce  a  second  good.  See  John  C.  Panzar,  Technological  Determinations  of  Firm  and  Industry  Structure,  in  1  HANDBOOK  OF  INDUSTRIAL  ORGANIZATION  16  (Richard 

 Schmalensee  and  Robert  Willig,  eds.,  1989). 
 337  The  wholesale  provision  of  services  would  not  be  limited  to  exchange  access  services,  but  would  include  all 
 access  services.  See  infra  Part  V.  B.  2.  c. 
 338  This  implies  the  carrier  is  vertically  integrated,  providing  both  wholesale  and  retail  service  itself.  The  product 
 it  provides  from  its  upstream  wholesale  service  is  then  combined  with  other  inputs  to  provide  downstream  retail  service. 

 339  The  demand  for  the  wholesale  carrier  services  is  therefore  a  derived  demand  from  retail  sales. 
 340  See  UNE  Remand  Order,  15  FCC  Rcd  at  3732-  34,  paras.  67-  70;  see  also  AT&  T  Comments  at  38-  39;  ATTWS 
 Comments  at  14-  16;  CompTel  Comments  at  64-  65;  Allegiance  Reply  at  30-  31;  AT&  T  Reply  at  56. 
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 tariffed  services,  such  as  special  access,  to  provide  their  retail  service.  341  We  decline  to  adopt  this  position.  We  conclude  that  it  would  be  inconsistent  with  the  Act  if  we  permitted  the 
 incumbent  LEC  to  avoid  all  unbundling  merely  by  providing  resold  or  tariffed  services  as  an  alternative.  342  Such  an  approach  would  give  the  incumbent  LECs  unilateral  power  to  avoid 
 unbundling  at  TELRIC  rates  simply  by  voluntarily  making  elements  available  at  some  higher  price.  Because  the  Act  contains  three  modes  of  entry,  we  cannot  find  an  approach  that  would  so 
 easily  remove  one  mode  from  the  Act  to  be  a  reasonable  reading  of  Congresss  intent.  343  Indeed,  such  an  approach  would  also  be  contrary  to  the  Acts  requirement  that  unbundled  facilities   
 facilities  without  which  serving  the  market  becomes  uneconomic    should  be  priced  at  cost-based  rates  344  and  our  determination  that  TELRIC  is  the  appropriate  methodology  for 
 determining  those  rates    an  approach  to  rates  that  the  Supreme  Court  has  affirmed.  345  In  addition,  resold  and  retail  tariffed  offerings  present  different  opportunities  and  risks  for  the 
 requesting  carrier  than  the  use  of  UNEs  or  non-  incumbent  LEC  alternatives.  346  Also,  forcing  requesting  carriers  to  rely  on  tariffed  offerings  would  place  too  much  control  in  the  hands  of  the 
 incumbent  LECs,  which  could  subsequently  alter  their  tariffs  and  thereby  engage  in  a  vertical  price  squeeze.  347 

 103.  Likewise,  we  disagree  with  commenters  that  argue  that  the  presence  of  a  tariffed  offering  that  is  subject  to  substantial  competition  in  the  retail  market  should  preclude  an 
 impairment  finding  with  respect  to  the  UNEs  used  to  provide  the  relevant  service.  348  As  explained  in  greater  detail  in  Parts  V.  B.  1.  d(  iii)  and  V.  B.  2.  c  below,  our  unbundling  analysis 
 considers  service,  but  does  not  examine  whether  the  relevant  market  is  competitive  as  part  of  the  unbundling  analysis. 

 104.  Similarly,  as  we  found  in  the  UNE  Remand  Order,  349  we  do  not  find  that  wherever  incumbent  LECs  have  received  pricing  flexibility,  we  should  not  unbundle  the  relevant  network 
 341  See  SBC  Comments  at  27-  29;  Verizon  Comments  at  51-  55;  BOC  Shelanski  Reply  Decl.  at  para.  21;  Verizon 
 Dec.  17,  2002  Ex  Parte  Letter,  Attach.  at  8-  10. 
 342  UNE  Remand  Order,  15  FCC  Rcd  at  3732-  33,  para.  67. 

 343  See  also  Iowa  Utils.  Bd.,  120  F.  3d  at  809-  10  (rejecting  a  similar  interpretation  urged  by  incumbent  LECs  that 
 would  have  given  them  the  freedom  to  circumvent  the  unbundling  obligations  of  section  251(  c)(  3)  by  choosing  to  offer  network  elements  as  services). 

 344  See  47  U.  S.  C.    252(  d)(  1)(  A)(  i). 
 345  See  Verizon,  535  U.  S.  at  497-  528. 
 346  UNE  Remand  Order,  15  FCC  Rcd  at  3733,  para.  68. 
 347  UNE  Remand  Order,  15  FCC  Rcd  at  3733,  para.  69.  SBC,  for  one,  points  out  that  the  Commission  could 
 evaluate  tariffed  services  and  refuse  to  consider  as  alternatives  those  that  it  finds  to  be  in  place  merely  to  avoid  the  unbundling  rules,  but  this  misses  the  points  described  in  the  text.  See  SBC  Comments  at  28-  29. 

 348  See,  e.  g.,  Verizon  Comments  at  53. 
 349  See  UNE  Remand  Order,  15  FCC  Rcd  at  3756-  57,  paras.  131-  32,  3849,  para.  341  n.  673. 
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 elements.  350  Our  pricing  flexibility  rules  go  to  protecting  consumers  from  anticompetitive  pricing,  which  is  not  the  same  as  our  unbundling  rules,  which  go  to  asking  whether  entry  into  a 
 market  is  economic  and  to  serving  a  host  of  statutory  goals  beyond  protecting  consumers  from  anticompetitive  pricing.  Thus,  the  impair  test  and  the  test  for  pricing  flexibility  are  different, 
 reflecting  these  different  aims.  Moreover,  our  unbundling  analysis  is  far  more  granular,  in  many  cases,  than  our  pricing  flexibility  analysis.  This  is  because  competition  in  some  parts  of  a  market 
 may  be  sufficient  to  constrain  prices,  but  insufficient  to  demonstrate  a  lack  of  impairment.  In  the  discussions  of  particular  elements  below,  we  consider  evidence  that  competitors  have  collocated 
 or  deployed  alternative  facilities  as  highly  relevant  to  our  impairment  analysis,  but  we  will  not  presume  that  a  grant  of  pricing  flexibility  necessitates  a  finding  of  lack  of  impairment. 

 (iii)  Rejection  of  Other  Approaches  to  Impairment 
 105.  In  this  Part,  we  explain  why  we  reject  other  approaches  to  impairment  that  commenters  have  put  forward. 

 106.  UNE  Remand  Impairment  Approach.  We  disagree  with  commenters  that  press  us  to  maintain  the  approach  to  unbundling  that  the  Commission  adopted  in  the  UNE  Remand 
 Order.  351  We  recognize  that  there  are  benefits  to  keeping  a  single  regulatory  standard  in  place  if  doing  so  can  provide  market  certainty  and  predictability.  The  UNE  Remand  approach,  however, 
 has  proven  overbroad  in  some  instances,  and  was  rejected  by  the  D.  C.  Circuit  as  insufficiently  rigorous.  352  We  could  thus  not  maintain  it,  even  if  we  found  a  good  policy  reason  to  do  so.  353 
 While  we  no  longer  rely  on,  or  formally  examine,  the  five  UNE  Remand  factors  as  a  basis  for  our  analysis  of  impairment,  these  factors  still  play  a  role  in  our  analysis  as  they  relate  to  the  barriers 
 to  entry  we  have  identified  above.  354 
 107.  Essential  Facilities  Doctrine.  As  explained  above  in  Part  V.  B.  1.  c,  we  use  the  essential  facilities  doctrine  as  a  guide  in  formulating  our  impair  standard,  but  we  do  not  adopt 

 350  See  Verizon  Comments  at  53-  54;  Verizon  Dec.  17,  2002  Ex  Parte  Letter,  Attach.  at  6-  8. 
 351  See,  e.  g.,  ALTS  et  al.  Comments  at  27-  28;  ASCENT  Comments  at  15-  18;  AT&  T  Comments  at  34-  40;  Eschelon 
 Comments  at  7;  McLeodUSA  Comments  at  4;  NewSouth  Comments  at  48-  50;  NuVox  Comments  at  20,  22-  33;  Ohio  Commission  Comments  at  5;  Progress  Telecom  Comments  at  16;  Sprint  Comments  at  7-  8;  UNE-  P  Coalition 

 Comments  at  16-  17,  20-  21;  WorldCom  Comments  at  50-  52;  UNE-  P  Coalition  Reply  at  15-  17;  Mpower  Oct.  11,  2002  Ex  Parte  Letter,  Attach.  at  4.  But  see  Verizon  Comments  at  55-  61. 

 352  See  USTA,  290  F.  3d  at  415. 
 353  We  do  not  address  the  comments  of  parties  that  focused  on  the  UNE  Remand  factors  in  their  opening 
 comments,  before  the  D.  C.  Circuit  issued  its  USTA  decision,  except  to  the  extent  those  comments  are  still  relevant  after  USTA. 

 354  See,  e.  g.,  WorldCom  Reply  at  11-  12  (urging  Commission  to  keep  UNE  Remand  standard  with  modifications  to 
 comport  to  USTA). 
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 the  essential  facilities  doctrine  as  our  standard.  355  First,  as  in  prior  orders,  we  point  out  that  Congress  could  have  codified  the  essential  facilities  doctrine  in  section  251(  d)(  2),  but  chose  not 
 to.  Indeed,  legislative  history  shows  that  Congress  was  aware  of  the  essential  facilities  doctrine  when  it  enacted  section  251(  d)(  2),  yet  chose  to  use  the  ambiguous  word  impair  rather  than 
 suggesting  that  the  existing  law  of  essential  facilities  should  determine  which  network  elements  should  be  unbundled.  356  Second,  the  structure  of  the  Act  itself  suggests  that  we  cannot  equate 
 impairment  with  the  essential  facilities  doctrine.  The  essential  facilities  doctrine  is  more  analogous  to  the  necessary  standard  of  section  251(  d)(  2)(  A)  than  to  the  impair  standard  of 
 section  251(  d)(  2)(  B).  That  is,  before  a  court  would  require  an  owner  to  share  its  facility  with  competitors,  it  would  determine  that  the  facility  was  essential  for  competition.  Essential 
 appears  comparable  to  necessary.  357  To  equate  essential  with  impair  would  collapse  the  Acts  two  unbundling  standards,  rather  than  respect  the  dichotomy  that  Congress  established. 
 Finally,  to  adopt  the  essential  facilities  doctrine  would  disregard  the  fact  that  Congress  chose  to  use  a  different  standard.  That  is,  where  Congress  wanted  to  address  points  that  are  analogous  to 
 parts  of  the  essential  facilities  doctrine,  it  did  so.  For  example,  once  a  court  determines  that  a  facility  is  essential,  it  must  decide  how  it  should  be  shared  and  at  what  price.  Congress 
 already  put  these  mechanisms  in  place  through  the  sharing  requirement  of  section  251(  c)(  3)  and  the  pricing  requirements  of  section  252(  d)(  1).  Indeed,  Congresss  requirements  that  facilities  be 
 shared  at  cost-  based  rates,  and  on  a  nondiscriminatory  basis,  are  potentially  more  rigorous  than  the  requirements  that  most  courts  would  impose  on  the  owner  of  an  essential  facility.  358  This 
 additional  departure  from  the  essential  facilities  doctrine  lends  support  to  our  conclusion  that  Congress  did  not  intend  for  us  to  read  it  into  the  impair  standard. 

 108.  However,  we  incorporate  important  lessons  from  scholars  who  have  examined  the  essential  facilities  doctrine  into  our  interpretation  of  impair.  As  the  D.  C.  Circuit  has  noted,  the 
 essential  facilities  doctrine  can  offer  useful  concepts  for  agency  guidance  when  Congress  has  directed  an  agency  to  provide  competitor  access  in  a  specific  industry.  359  Indeed,  scholars  have 
 noted  the  drawbacks  of  mandatory  sharing  of  facilities  in  their  criticisms  of  the  essential  facilities  doctrine,  and  we  have  found  these  criticisms  useful  in  our  standard  as  explained 
 above.  360 

 355  Cf.  BellSouth  NERA  Reply  Decl.  at  para.  58  ([  I]  mpairment  cannot  occur  when  a  network  element  does  not 
 meet  the  definition  of  an  essential  facility.).  But  see  AT&  T  Reply  at  35;  NewSouth  Reply  at  9-  10;  WorldCom  Reply  at  19-  20;  Z-  Tel  Reply  at  57-  60. 

 356  See  137  Cong.  Rec.  S7054,  S7058  (daily  ed.  June  5,  1991  (reading  S.  1200,  102d  Cong.    202  (1991));  see  also 
 UNE  Remand  Order,  15  FCC  Rcd  at  3728-  30,  paras.  57-  61  (discussing  essential  facilities  doctrine). 
 357  Thus,  a  significant  cost  disadvantage  that  hinders  the  ability  of  competitors  to  enter  may  be  sufficient  to  trigger 
 a  finding  of  impairment,  but  may  not  qualify  the  facility  as  essential. 
 358  INGO  VOGELSANG  &  BRIDGER  M.  MITCHELL,  TELECOMMUNICATIONS  COMPETITION:  THE  LAST  TEN  MILES  57 
 (1997). 
 359  USTA,  290  F.  3d  at  427  n.  4  (emphasis  in  original). 

 360  See  supra  Part  V.  B.  1.  c. 
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 109.  Market  Power  Analysis  and  the  Use  of  Antitrust  or  HMG  Analysis.  We  reject  the  arguments  that  we  should  require  the  unbundling  of  network  elements  to  remove  an  incumbent 
 LECs  market  power  in  the  retail  market  and  that  we  should  use  the  HMG  to  identify  market  power.  361  The  purposes  of  a  market  power  analysis  are  not  the  purposes  of  section  251(  d)(  2). 
 While  this  antitrust  analysis  attempts  to  determine  whether  market  participants  would  be  able  to  exercise  market  power  and  raise  prices  above  competitive  levels  if  a  merger  were  consummated, 
 the  Act  requires  only  that  network  elements  be  unbundled  if  competing  carriers  are  impaired  without  them,  regardless  of  whether  the  incumbent  LEC  is  exercising  market  power  or  the 
 unbundling  would  eliminate  this  market  power.  A  market  power  analysis  would  go  to  the  question  of  whether  an  incumbent  LEC  could  raise  its  retail  prices  unchecked;  the  impair 
 analysis  asks  whether  a  new  entrant  can  provide  its  services  without  the  UNE.  A  market  power  analysis  might  be  appropriate  if  the  only  goal  of  the  Act  were  to  drive  prices  to  cost,  362  but  that 
 approach  disregards  the  Acts  other  goals  of  encouraging  the  deployment  of  alternative  facilities  and  new  technologies  and  reducing  regulation. 

 110.  We  also  decline  to  adopt  a  standard  that  equates  or  hinges  a  requesting  carriers  impairment  with  an  incumbent  LECs  market  power  in  the  wholesale  market  for  the  input  in 
 question.  Some  commenters  argue  that  an  incumbent  LECs  market  power  in  the  wholesale  market  will  permit  it  to  charge  prices  above  cost  for  that  input,  thus  creating  or  worsening  a  cost 
 disadvantage  for  new  entrants.  363  Similar  to  our  reasoning  just  above,  we  point  out  that  the  Act  is  not  directly  aimed  at  eliminating  an  incumbent  LECs  market  power  in  any  particular  market,  but 
 in  identifying  new  entrants  impairment.  While  incumbent  LECs  control  wholesale  facilities  in  a  manner  that  often  creates  market  power,  we  look  instead  for  whether  new  entrants  are  impaired 
 without  those  facilities.  Indeed,  there  may  be  circumstances  where  an  incumbent  LEC  has  market  power  with  regard  to  a  particular  input,  but  competitors  are  not  impaired  without  access 
 to  the  element,  so  unbundling  would  not  be  appropriate  and  might  discourage  new  entrants  from  building  their  own  facilities.  In  addition,  an  analysis  that  focused  exclusively  on  the  wholesale 
 market  would  fail  to  give  weight  to  the  possibility  or  actuality  of  self-  provisioning. 

 361  See,  e.  g.,  AT&  T  Nov.  14,  2002  Ex  Parte  Letter,  Attach.  at  2;  AT&  T  Jan.  22,  2003  Ex  Parte  Letter,  Attach.; 
 AT&  T  Feb.  12,  2003  Ex  Parte  Letter,  Attach.  at  2  ([  A]  n  economically  rigorous  impairment  analysis  must  assess  whether  facilities-  based  entry  by  competitive  carriers  (or  more  generally,  entry  by  competitive  carriers  without 

 access  to  unbundled  network  elements  at  cost-  based  prices)  will  be  able  to  stop  the  incumbent  LECs  from  exercising  market  power.).  Covad  argues  that  we  should  always  order  unbundling  in  highly  concentrated  markets 
 (calculated  using  the  Herfindahl-  Hirschman  Index),  presumptively  order  unbundling  in  moderately  concentrated  markets,  and  not  order  unbundling  in  unconcentrated  markets.  See  Covad  Reply  at  8-  14;  Covad  Reply,  Reply 
 Declaration  of  Terry  L.  Murray  (Covad  Murray  Reply  Decl.)  at  paras.  12-  42. 
 362  See  AT&  T  Nov.  14,  2002  Ex  Parte  Letter,  Attach.  at  2  ([  T]  he  Commission  should  continue  to  mandate 
 unbundled  access  to  network  elements  to  the  extent  that  such  access  is  necessary  to  drive  retail  rates  towards  costs.). 

 363  See,  e.  g.,  Allegiance  Comments  at  6-  11;  Allegiance  Reply  at  3,  18-  20.  Allegiance  has  specifically  suggested 
 that  we  should  find  impairment  unless  there  are  four  non-  incumbent  LEC  sources  of  supply,  either  self-  provisioned  or  wholesale  offerings.  See  Allegiance  Comments  at  9-  10;  Allegiance  Reply  at  3-  4. 
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 111.  HMG  Analysis  of  Committed  Entry.  We  disagree  with  commenters  that  suggest  that  we  should  adopt  the  HMGs  analysis  of  committed  entry  as  our  impair  standard.  364  The 
 HMG  apply  a  three-  pronged  test  to  determine  whether  committed  entry  is  likely  to  deter  anticompetitive  behavior  post-  merger.  365  Specifically,  the  HMG  consider  whether  committed 
 entry  would  be  timely,  366  likely,  367  and  sufficient  368  in  response  to  a  small  but  significant  and  nontransitory  post-  merger  price  increase.  Although  we  recognize  a  substantial  amount  of 
 commonality  between  the  HMGs  framework  for  assessing  ease  of  entry  and  our  analysis  of  entry  barriers  above,  369  we  do  not  adopt  the  standards  and  framework  of  the  HMG  for  evaluating 
 committed  entry.  370  First,  in  contrast  to  the  HMG,  we  are  not  considering  whether  new  competitors  will  enter  the  market  in  response  to  a  small  but  significant  and  nontransitory  price 
 rise,  371  nor  do  we  assume  that  incumbent  LECs  will  be  ceding  a  portion  of  the  market  to  competitors  due  to  this  price  rise.  Second,  contrary  to  commenters  urgings  as  discussed  above, 
 our  impairment  analysis  does  not  share  the  HMGs  goal  of  determining  whether  committed  entry  will  check  incumbents  market  power.  372  Third,  the  HMG  do  not  take  into  consideration  the 
 other  goals  we  do  here    particularly  encouraging  investment  in  new  facilities  by  both  incumbent  LECs  and  others    or  the  costs  of  unbundling  that  the  courts  have  pointed  out  to  us.  373  Finally, 
 the  time  horizon  of  two  years  in  the  HMG  is  a  fairly  short  period  compared  to  the  time  it  is  likely 

 364  See  AT&  T  Nov.  14,  2002  Ex  Parte  Letter. 
 365  HMG    3.0. 
 366  The  HMG  consider  entry  to  be  timely  if  it  can  have  a  significant  market  impact  within  two  years  of  initial 
 planning.  See  HMG    3.2. 
 367  The  HMG  consider  entry  to  be  likely  if  it  would  profitable  in  the  long  run  at  pre-  merger  prices,  if  those  prices 
 are  attainable.  See  HMG    3.3. 
 368  The  HMG  consider  entry  to  be  sufficient  if  it  will  force  market  prices  to  their  pre-  merger  levels.  See  HMG 
   3.0,  3.4. 
 369  For  example,  as  explained  by  Professor  Willig  on  behalf  of  AT&  T,  the  HMG  ask  whether  entry  would  require 
 significant  sunk  costs,  HMG    1.32,  whether  a  new  entrant  could  likely  achieve  a  level  of  sales  sufficient  to  be  profitable,  HMG    3.3,  and  whether  a  new  entrant  suffers  from  absolute  cost  disadvantages  as  compared  with  the 

 incumbent,  HMG    1.11,  1.32.  And  [  i]  n  short,  consistent  with  established  antitrust  economics,  the  Guidelines  conclude  that  the  greater  the  magnitude  of  the  fixed  and  sunk  investment  and  the  greater  the  scope  of  entry  a  new 
 entrant  needs  to  achieve  unit  costs  that  are  comparable  to  the  incumbents,  the  less  likely  that  such  entry  will  occur.  AT&  T  Nov.  14,  2002  Ex  Parte  Letter,  Attach.  at  3-  8. 

 370  See  AT&  T  Nov.  14,  2002  Ex  Parte  Letter,  Attach.;  see  also  Covad  Murray  Reply  Decl.  at  paras.  43-  51. 
 371  But  see  Covad  Murray  Reply  Decl.  at  para.  25  (noting  that  small  but  significant  price  construct  not  directly 
 relevant  to  impairment  analysis). 
 372  But  see  AT&  T  Feb.  12,  2003  Ex  Parte  Letter,  Attach.  at  1  ([  A]  ny  economically  rigorous  impairment  analysis 
 must  determine  whether  the  denial  of  access  to  a  particular  network  element  at  cost-  based  rates  would  enable  incumbent  LECs  to  exercise  market  power  by  charging  supra-  competitive  prices,  and  .  .  .  the  Guidelines  contain  a 

 logical  and  accepted  framework  for  accomplishing  such  analysis.). 
 373  See  Iowa  Utils.  Bd.,  525  U.  S.  at  428-  29  (Breyer,  J.,  concurring);  USTA,  290  F.  3d  at  425,  427. 
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 to  take  for  full  competition  to  develop  in  local  telecommunications,  particularly  on  a  facilities  basis.  374  The  Act  effectively  attempts  a  restructuring  of  the  local  telecommunications  market, 
 and  it  often  takes  decades  for  a  new  technology  or  organizational  structure  to  completely  replace  the  old  structure.  Building  new  facilities  and  networks  and  developing  and  delivering  new 
 services  will  take  a  substantial  period  of  time.  We  recognize  that  adopting  a  standard  that  has  been  revised  and  improved  over  decades,  and  subject  to  much  scrutiny  in  judicial  and  regulatory 
 proceedings,  would  have  the  benefit  of  providing  predictability  to  our  analysis.  375  We  cannot,  however,  adopt  a  standard  that  does  not  fit  the  purposes  of  the  Act. 

 112.  Cost  Disadvantages.  We  reject  the  proposal  to  find  impairment  whenever  entrants  would  suffer  from  a  substantial  cost  disadvantage  (such  as  five  percent),  regardless  of 
 whether  entry  is  still  possible.  376  In  a  related  argument,  Z-  Tel  urges  us  to  find  impairment  when  entrants  are  likely  to  sell  less  of  their  product  without  the  UNE  than  they  would  with  the  UNE   
 which  Z-  Tel  explains  would  be  a  consequence  of  cost  disparities.  377  A  cost  disadvantage  standard  would  focus  on  maximizing  entry  to  the  detriment  of  the  other  goals  of  the  Act,  such  as 
 innovation,  deployment  of  new  technologies,  and  reduced  regulation,  which  goals  are  most  likely  to  be  met  through  facilities-  based  competition.  Second,  entry  may  be  possible  despite  cost 
 disadvantages,  and  our  impair  standard  takes  into  account  costs  as  compared  with  potential 

 374  But  see  Covad  Murray  Reply  Decl.  at  paras.  7,  45. 
 375  See,  e.  g.,  Covad  Reply  at  10. 
 376  See,  e.  g.,  Z-  Tel  Reply,  Declaration  of  George  S.  Ford  (Z-  Tel  Ford  Reply  Decl.)  at  paras.  26-  30,  43-  49,  82-  83; 
 Letter  from  Donna  Sorgi,  Vice  President    Federal  Advocacy,  WorldCom,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  at  2-  3,  in  Letter  from  Gil  M.  Strobel,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch, 

 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  8,  2003)  (WorldCom  Jan.  8,  2003  Ex  Parte  Letter);  AT&  T  Jan.  22,  2003  Ex  Parte  Letter,  Attach.  at  8-  9;  Letter  from  Kemal  Hawa,  Counsel  for  MetTel  and 
 Bridgecom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  8  (filed  Jan.  27,  2003)  (MetTel  Jan.  27,  2003  Ex  Parte  Letter)  (noting  importance  of  costs  in  impairment  analysis);  Letter  from 
 Gil  M.  Strobel,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1-  10  (filed  Jan.  27,  2003)  (WorldCom  Jan.  27,  2003  Ex  Parte  Letter).  Some  commenters  argue  that 
 new  entrants  cost  disadvantages  could  make  entry  unprofitable  because  incumbent  LECs  will  likely  lower  prices  to  a  level  below  entrants  costs  (but  above  incumbent  LECs  costs).  See,  e.  g.,  AT&  T  Nov.  14,  2002  Ex  Parte  Letter, 
 Attach.  at  3-  4;  WorldCom  Jan.  8,  2003  Ex  Parte  Letter,  Attach.  at  1-  5;  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4-  5  (filed  Feb. 
 4,  2003)  (AT&  T  Feb.  4,  2003  Ex  Parte  Letter).  But  see,  e.  g.,  BOC  Shelanski  Reply  Decl.  at  para.  3  (  Importantly,  the  case  for  impairment  is  not  made  by  a  showing  that  CLECs  merely  face  some  costs  that  are  higher  than  the 
 ILECs  corresponding  costs.);  SBC  Jan.  14,  2003  Ex  Parte  Letter,  Attach.  2  at  1-  5  (arguing  that  an  incumbent  LEC  cannot  lower  retail  residential  rates  to  keep  out  competitors  because  it  serves  many  residential  customers  at  a  loss 
 and  relies  on  higher-  end  customers  to  make  up  the  difference),  Attach.  2  at  1-  3. 
 377  See,  e.  g.,  Z-  Tel  Comments,  Attach.  4,  Z-  Tel  Public  Policy  Paper  No.  5,  Some  Thoughts  on  Impairment:  An 
 Economic  Analysis  of  the  Impairment  Standard  of  the  1996  Telecommunications  Act;  Z-  Tel  Reply  at  21-  25;  Z-  Tel  Ford  Reply  Decl.  at  paras.  26-  30  ([  I]  t  seems  reasonable  that  to  constitute  a  statutorily  cognizable  impairment,  there 

 must  be  a  small,  but  significant  and  non-  transitory  decrease  in  the  requesting  carriers  output.);  Letter  from  Timothy  J.  Simeone,  Counsel  for  Z-  Tel,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98- 
 147,  Attach.  1  at  5-  7  (filed  July  24,  2002)  (Z-  Tel  July  24,  2002  Ex  Parte  Letter). 
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 revenues.  378  Indeed,  unbundling  when  there  are  only  small  cost  disadvantages  is  likely  to  make  it  more  difficult  for  facilities-  based  competitors  to  compete  against  entrants  relying  on  TELRIC-priced 
 UNEs,  379  and  would  skew  our  analysis  of  marketplace  evidence  away  from  examining  the  presence  of  facilities-  based  entrants.  Thus,  we  consider  cost  disadvantages  as  they  reflect  the 
 factors  described  in  our  impairment  standard,  but  we  will  consider  them  to  create  an  impairment  only  when  they  are  substantial  enough  to  be  likely  to  make  entry  into  a  market  uneconomic, 
 taking  into  consideration  available  revenues  and  any  countervailing  advantages  that  new  entrants  may  have.  380  Similarly,  we  cannot  agree  that  any  cost  a  new  entrant  faces  that  is  greater  than  the 
 relevant  TELRIC  price  necessarily  demonstrates  impairment.  381  The  Supreme  Court  explicitly  rejected  this  as  an  approach  to  impairment,  criticizing  a  standard  that  equates  any  increase  in 
 cost  to  impairment.  382  Likewise,  the  D.  C.  Circuit  criticized  the  Commission  for  rely[  ing]  on  cost  disparities  that  are  universal  as  between  new  entrants  and  incumbents  in  any  industry.  383 

 113.  Wholesale  Market  for  Alternatives  to  the  Incumbent  LECs  Networks.  We  disagree  that  we  should  continue  to  require  unbundling  of  a  network  element  until  a  vibrant 
 wholesale  market  for  that  element  exists,  or  that  a  wholesale  market  is  the  best  evidence  of  the  feasibility  of  self-  provisioning.  384  First,  while  this  approach  might  ensure  that  competitors  have 

 378  See,  e.  g.,  Verizon  Oct.  16,  2002  Ex  Parte  Letter  at  5  (  If  an  entrants  cost  of  providing  an  alternative  element  is 
 higher  than  the  incumbents,  but  the  entrant  nevertheless  can  profitably  do  so  because  it  can  sell  other  services,  avoid  other  costs,  or  achieve  qualitative  advantages  in  a  way  that  is  not  available  to  the  incumbent,  the  element  can 

 be  supplied  competitively  and  unbundling  cannot  be  required.  The  question  is  whether  the  entrant  can  provide  an  overall  service  that  is  competitive,  not  whether  the  cost  of  each  input  matches  that  of  the  incumbent.). 

 379  UNEs  are  priced  using  the  TELRIC  methodology.  See  Local  Competition  Order,  11  FCC  Rcd  at  15812-  929, 
 paras.  618-  862.  TELRIC  prices  reflect  the  forward-  looking  economic  cost  of  the  incumbent  LECs  facilities,  which  take  into  account  the  scale  and  scope  economies  of  the  incumbent.  Id.  at  15846-  47,  para.  679.  Thus,  if  scale 

 economies  are  present,  it  would  be  difficult  for  an  entrant  with  a  small  market  share  to  achieve  costs  as  low  as  the  TELRIC  price.  See  also  BellSouth  Comments  at  12  (  The  Commissions  TELRIC  pricing  requirements  effectively 
 imposed  an  upper  limit  on  what  facilities-  based  carriers  could  charge,  without  losing  customers  to  non-  facilities-based  UNE-  P  carriers.);  SBC  Reply  at  23. 

 380  WorldCom  Jan.  27,  2003  Ex  Parte  Letter,  Attach.  at  7  (  Under  existing  precedent,  therefore,  the  key  objective 
 is  to  determine  when  cost  differences  translate  into  impairment,  not  to  adopt  an  approach  unrelated  to  cost  differences.)  (emphasis  in  original). 

 381  But  see,  e.  g.,  BellSouth  Comments  at  25;  Qwest  Comments  at  12-  14;  Verizon  Comments  at  58  (urging  the 
 Commission  not  to  find  impairment  based  on  the  cost  difference  between  using  alternatives  to  UNEs  and  using  TELRIC-  priced  UNEs);  Allegiance  Reply  at  11-  12  (arguing  that  TELRIC  does  not  equate  to  the  incumbent  LECs 

 cost);  Qwest  Reply  at  10-  11;  Verizon  Reply  at  40. 
 382  Iowa  Utils.  Bd.,  525  U.  S.  at  389  (emphasis  in  original);  see  also  SBC  Comments  at  34  (arguing  that  under 
 Supreme  Court  precedent,  cost  differentials  standing  alone  cannot  constitute  impairment). 
 383  USTA,  290  F.  3d  at  427  (emphasis  in  original). 

 384  See,  e.  g.,  CompTel  Comments  at  63-  64  (arguing  that  the  existence  of  a  wholesale  market  is  key  evidence  in 
 deciding  whether  to  unbundle  an  element,  and  that  the  absence  of  such  a  market  is  prima  facie  evidence  that  self-deployment  is  not  feasible);  UNE-  P  Coalition  Comments  at  21;  SWCTA  Reply  at  8;  see  also  Covad  Reply  at  12 

 (arguing  that  the  Commission  should  assess  the  state  of  the  wholesale  market  in  applying  an  HMG  analysis  as  (continued.) 
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 access    either  through  wholesale  alternatives  or  access  to  UNEs    we  are  concerned  that  this  approach  might  discourage  investment  in  facilities  by  competitors.  As  we  have  emphasized 
 above  in  our  impair  standard,  one  of  the  goals  of  the  Act,  impressed  on  us  by  the  courts,  is  investment  in  facilities  by  both  incumbent  LECs  and  new  entrants.  385  Second,  as  we  noted  in  the 
 UNE  Remand  Order,  this  approach  disregards  the  possibility  of  self-  provisioning  as  an  alternative  to  using  the  incumbent  LECs  network,  contrary  to  the  Supreme  Courts  direction.  386 
 Indeed,  with  regard  to  certain  elements  like  switching,  self-  provisioning  is  far  more  common  than  leasing  access  from  another  non-  incumbent  LEC  provider.  While  the  record  contains 
 substantial  evidence  of  self-  deployment,  we  have  little  to  no  evidence  of  a  wholesale  market  for  switching  services  from  alternate  vendors. 

 114.  Evaluating  Impairment  Based  on  the  Level  of  Retail  Competition.  We  do  not  adopt  a  standard  that  asks  whether  competition  (as  opposed  to  competitive  carriers)  is 
 impaired  387  or  base  our  impairment  determination  on  whether  the  level  of  retail  competition  is  sufficient  such  that  unbundling  is  no  longer  required  to  enable  further  entry.  388  As  explained 
 above,  evidence  of  retail  competition  over  non-  incumbent  LEC  facilities  informs  our  analysis  of  whether  competitive  LECs  are  impaired  without  access  to  UNEs.  But  some  carriers,  for 
 example,  suggest  that  we  not  require  any  unbundling  in  markets  where  competitors  have  achieved  a  particular  market  share,  where  competitors  have  a  certain  number  of  collocations,  or 
 where  consumers  have  a  choice  of  facilities-  based  providers.  389  We  decline  to  determine  impairment  based  on  a  certain  level  of  retail  competition  because  section  251(  d)(  2)  requires  us  to 
 ask  whether  requesting  carriers  are  impaired,  not  whether  certain  thresholds  of  retail  competition  have  been  met.  390  While  it  is  true  that  retail  competition  is  a  goal  of  the  1996  Act,  it 
 is  not  the  only  goal,  and  a  standard  that  focused  exclusively  on  retail  competition  would  do  so  at  the  expense  of  Congresss  other  goals,  such  as  investment  in  new  facilities.  Moreover,  the 

 (Continued  from  previous  page) 
 described  supra  para.  109).  But  see  Verizon  Jan.  10,  2003  Ex  Parte  Letter,  Attach.  at  8  (arguing  that  the  Act  does  not  require  a  wholesale  market  to  exist  before  finding  no  impairment  for  switching). 

 385  See  supra  Part  V.  B.  1.  a;  see  also  USTA,  290  F.  3d  at  427. 
 386  See  UNE  Remand  Order,  15  FCC  Rcd  at  3727,  para.  56;  see  also  Iowa  Utils.  Bd.,  525  U.  S.  at  389. 
 387  See  BOC  Shelanski  Reply  Decl.  at  para.  11. 
 388  Cf.  ITTA  Jan.  29,  2003  Ex  Parte  Letter,  Attach.  at  3-  4  (urging  Commission  not  to  adopt  a  multiple-  competitor 
 standard);  Letter  from  Ann  D.  Berkowitz,  Project  Manager    Federal  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  2  (filed  Jan.  14,  2003)  (Verizon  Jan.  14,  2003 

 Ex  Parte  Letter). 
 389  See,  e.  g.,  Letter  from  Karen  Brinkmann,  Counsel  for  ACS,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147  at  13-  14  (filed  Jan.  6,  2003)  (ACS  Jan.  6,  2003  Ex  Parte  Letter);  Letter  from  Karen  Brinkmann,  Counsel  for  ACS,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3 

 (filed  Jan.  16,  2003)  (ACS  Jan.  16,  2003  Ex  Parte  Letter).  But  see  GCI  Jan.  27,  2003  Ex  Parte  Letter,  Attach.  at  4,  7-  8. 

 390  See  47  U.  S.  C.    251(  d)(  2). 
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 relationship  between  retail  competition  and  unbundling  is  complex.  In  many  instances,  retail  competition  depends  on  the  use  of  UNEs  and  would  decrease  or  disappear  without  those  UNEs; 
 thus,  a  standard  that  takes  away  UNEs  when  a  retail  competition  threshold  has  been  met  could  be  circular.  391  While  evidence  of  retail  competition  over  non-  incumbent  LEC  facilities  is  highly 
 relevant  to  our  impairment  analysis  as  explained  above,  392  retail  competition  that  relies  on  incumbent  LEC  facilities    whether  UNEs,  resale,  or  tariffed  services    does  less  to  inform  our 
 impairment  analysis.  393  We  explain  in  greater  detail  below  why  we  do  not  conduct  an  analysis  of  individual  services,  and  the  levels  of  competition  for  those  services,  below.  394 

 115.  Impairment  of  Individual  Requesting  Carriers  or  Carriers  Pursuing  a  Particular  Business  Strategy.  We  will  not,  as  some  commenters  urge,  evaluate  whether  individual 
 requesting  carriers  or  carriers  that  pursue  a  particular  business  strategy  are  impaired  without  access  to  UNEs.  395  We  recognize  that  section  251(  d)(  2)  refers  to  the  telecommunications  carrier 
 seeking  access,  but  such  a  subjective,  individualized  approach  could  give  some  carriers  access  to  elements  but  not  others,  and  could  reward  those  carriers  that  are  less  efficient  or  whose 
 business  plans  simply  call  for  greater  reliance  on  UNEs.  Providing  UNEs  to  carriers  with  more  limited  business  strategies  would  also  disregard  the  availability  of  scale  and  scope  economies 
 gained  by  providing  multiple  services  to  large  groups  of  customers.  396  Thus,  an  entrant  is  not 
 391  See,  e.  g.,  GCI  Jan.  27,  2003  Ex  Parte  Letter,  Attach.  at  1. 
 392  See  supra  Part  V.  B.  1.  d.(  ii);  Verizon  Jan.  14,  2003  Ex  Parte  Letter,  Attach.  at  2.  Indeed,  retail  competition  from 
 multiple  market  participants  that  do  not  rely  on  incumbent  LEC  facilities  at  all  may  well  demonstrate,  as  explained  above,  that  barriers  to  entry  in  the  relevant  market  at  not  so  high  as  to  make  entry  uneconomic. 

 393  See  supra  para.  102. 
 394  See  infra  Part  V.  B.  2.  c. 
 395  See,  e.  g.,  ALTS  et  al.  Comments  at  37-  38;  ACS  Comments  at  2-  8  (arguing  that  that  Commission  must 
 determine  whether  each  competitor    including  small  competitive  LECs    needs  access  to  UNEs);  GCI  Comments  at  19-  20;  Z-  Tel  Comments  at  22-  24;  BellSouth  Reply  at  13  (arguing  that  the  Commission  should  require  individual 

 competitive  LECs  to  demonstrate  both  that  they  are  reasonably  efficient  and  that  alternative  elements  are  not  available  to  them);  NewSouth  Reply  at  11;  Z-  Tel  Reply  at  22;  BellSouth  NERA  Reply  Decl.  at  para.  135;  Z-  Tel 
 Ford  Reply  Decl.  at  paras.  24-  25;  ACS  Jan.  6,  2003  Ex  Parte  Letter  at  9-  11  (urging  Commission  to  find  Alaskan  competitor  not  impaired);  ACS  Jan.  16,  2003  Ex  Parte  Letter  (urging  Commission  to  find  Alaskan  competitor  not 
 impaired);  Letter  from  Karen  Brinkmann,  Counsel  for  ITTA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Jan.  27,  2003)  (ITTA  Jan.  27,  2003  Ex  Parte  Letter).  But  see,  e.  g., 
 Qwest  Reply  at  24-  25.  The  Commission  also  disagreed  with  this  approach  in  the  UNE  Remand  Order.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3725-  27,  paras.  53-  54. 

 396  For  example,  a  carrier  could  claim  that  it  would  be  unable  to  pursue  a  strategy  of  providing  local  exchange 
 service  to  all  people  with  the  first  name  Sam.  Because  of  the  relatively  small  number  of  people  with  that  name,  the  cost  of  providing  such  service  would  likely  be  very  high,  and  thus  entry  would  be  impossible  without  UNEs. 

 However,  an  entrant  could  achieve  a  much  lower  average  cost  of  service  while  serving  these  people,  by  pursuing  a  business  strategy  of  providing  service  to  all  potential  customers  in  the  market.  It  might  be  able  to  further  lower  its 
 costs  by  offering  other  services,  such  as  vertical  features  and  data  services.  Our  determination  is  thus  based  on  an  entrant  providing  the  full  range  of  services  and  to  all  customers  supported  by  the  marketplace.  Our  analysis  must, 
 however,  take  into  account  diseconomies  of  scale  and  scope  that  might  exist,  such  as  limitations  on  what  services  customers  are  willing  to  purchase  as  a  bundle  from  a  single  provider.  But  see  BTI  Comments  at  6  (noting  that 
 (continued.) 
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 impaired  if  it  could  serve  the  market  in  an  economic  fashion  using  its  own  facilities,  considering  the  range  of  customers  that  could  reasonably  be  served  and  the  services  that  could  reasonably  be 
 provided  with  those  facilities.  Furthermore,  a  carrier-  or  business  plan-  specific  approach  would  be  administratively  unworkable  for  regulators,  incumbent  LECs,  and  new  entrants  alike  because 
 it  would  require  case-  by-  case  determinations  of  impairment  and  continuous  monitoring  of  the  competitive  situation.  Finally,  we  do  not  read  Verizon  to  state  the  contrary.  397  While  Verizon 
 noted  that  smaller  entrants  may  be  in  greater  need  of  UNEs  than  larger  carriers,  398  the  Supreme  Court  made  those  factual  observations  in  the  context  of  defending  unbundling  in  general,  not  in 
 the  context  of  requiring  any  particular  kind  of  impairment  analysis.  Thus,  we  agree  with  commenters  that  argue  we  cannot  order  unbundling  merely  because  certain  competitors  or 
 entrants  with  certain  business  plans  are  impaired.  399  Rather,  we  will  achieve  needed  granularity  through  consideration  of  other  factors  discussed  below  in  Part  V.  B.  2. 

 116.  For  similar  reasons,  we  decline  to  make  impairment  determinations  on  an  incumbent  LEC-  by-  incumbent  LEC  basis.  400  The  impair  inquiry  of  section  251(  d)(  2)  focuses 
 on  requesting  carriers,  not  incumbent  LECs.  401  We  recognize,  however,  that  many  aspects  of  our  impairment  analysis  may  coincidentally  turn  on  the  incumbent  LEC,  such  as  potential  revenue 
 opportunities,  geographic  areas  (as  explained  below  in  Part  V.  B.  2.  b  regarding  Geographic  Granularity),  and  costs.  Likewise,  we  do  not  resolve  here  disputes  between  particular  incumbent 
 LECs  and  requesting  carriers  over  compliance  with  the  Act  and  our  rules.  402  Such  disputes  are  better  handled  in  an  enforcement  context,  not  in  a  rulemaking. 

 (Continued  from  previous  page) 
 competitive  LECs  cannot  compete  with  incumbent  LEC  scale  economies);  Eschelon  Comments  at  11-  14  (noting  that  a  competitive  LEC  that  serves  geographically  dispersed  customers  may  not  be  able  to  construct  a  duplicative 

 network). 
 397  See  NewSouth  Reply  at  11;  Z-  Tel  Ford  Reply  Decl.  at  para.  24. 

 398  See  Verizon,  535  U.  S.  at  503  n.  20,  510  n.  27. 
 399  See  Competitive  Enterprise  Institute  Comments  at  3  (cautioning  Commission  against  setting  different  standards 
 for  different  carriers);  Verizon  Comments  at  42-  43;  BOC  Shelanski  Decl.  at  para.  39  (pointing  out  that  antitrust  law  focuses  on  harms  to  competition,  not  harms  to  individual  competitors).  But  see,  e.  g.,  Eschelon  Comments  at  8 

 (noting  that  smaller,  newer  competitive  LECs  may  face  higher  hurdles  than  larger,  established  competitive  LECs). 
 400  See,  e.  g.,  ACS  Jan.  6,  2003  Ex  Parte  Letter  at  9-  11  (arguing  that  unbundling  is  no  longer  warranted  for  Alaskan 
 incumbent  subject  to  substantial  retail  competition). 
 401  47  U.  S.  C.    251(  d)(  2)(  B)  (The  unbundling  inquiry  asks  whether  denial  of  a  UNE  would  impair  the  ability  of 
 the  telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer.). 
 402  See,  e.  g.,  Letter  from  Frederick  W.  Hitz,  III,  Director,  Rates  and  Tariffs,  General  Communication,  Inc.,  to 
 William  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  11,  in  Letter  from  John  T.  Nakahata,  Counsel  for  GCI,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98- 

 147  (filed  Nov.  21,  2002)  (GCI  Nov.  21,  2002  Ex  Parte  Letter);  ACS  Jan.  6,  2003  Ex  Parte  Letter  at  6-  9;  Letter  from  Frederick  W.  Hitz,  III,  Director,  Rates  and  Tariffs,  General  Communication,  Inc.,  to  William  Maher,  Chief, 
 Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  10,  in  Letter  from  John  T.  Nakahata,  Counsel  for  GCI,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan. 
 (continued.) 
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 117.  UNEs  As  Purely  Transitional  Measures  for  Competitive  Development.  We  recognize,  as  the  Commission  did  in  the  UNE  Remand  Order,  that  in  some  instances  (discussed 
 in  greater  detail  in  the  Parts  on  specific  UNEs)  UNEs  can  serve  as  transitions  to  facilities-  based  competition.  403  We  do  not,  however,  agree  with  commenters  that  urge  that  all  UNEs  must 
 necessarily  be  limited  to  temporary  availability.  404  The  Act  requires  incumbent  LECs  to  make  an  element  available  so  long  as  requesting  carriers  would  be  impaired  without  it.  While  we  could 
 find  impairment  to  be  limited  in  time  based  on  specific  evidence  in  the  record,  we  could  not  generally  limit  UNEs  based  on  speculation  that,  at  some  time  in  the  future,  competitors  might  no 
 longer  be  impaired.  Rather,  we  will  let  the  facts  and  evidence  guide  our  determination  as  to  when  unbundling  obligations  can  be  lifted. 

 2.  Granularity  of  the  Impairment  Analysis 
 118.  In  this  Part,  we  explain  how  and  why  our  approach  to  unbundling  will  be  granular.  In  the  Triennial  Review  NPRM,  the  Commission  asked  many  questions  about  whether 

 and  how  to  make  the  unbundling  analysis  more  granular  by  considering  such  factors  as  specific  services,  specific  geographic  locations,  the  different  types  and  capacities  of  facilities,  and 
 customer  and  business  considerations.  405  Subsequently,  the  USTA  decision  directed  us  to  approach  the  section  251(  d)(  2)  impairment  analysis  by  considering  market-  specific  variations  in 
 competitive  impairment.  406  As  explained  in  detail  below,  we  will  apply  several  types  of  granularity  in  our  unbundling  analysis,  including  considerations  of  customer  class,  geography, 
 and  service.  407  In  addition,  within  our  discussions  of  specific  network  elements,  we  will  also  (Continued  from  previous  page) 

 23,  2003)  (GCI  Jan.  23,  2003  Ex  Parte  Letter).  We  therefore  dismiss  as  moot  the  portion  of  the  CompTel  Nov.  26,  2001  Joint  Conference  Petition  in  which  CompTel  requests  that  the  Commission  not  consider  lifting  unbundling 
 obligations  for  a  UNE  unless  the  incumbent  LEC  making  the  request  has  fully  complied  with  its  obligation  to  provide  the  UNE  for  a  commercially  reasonable  period  of  time.  CompTel  Nov.  26,  2001  Joint  Conference  Petition 
 at  14. 
 403  See  UNE  Remand  Order,  15  FCC  Rcd  at  3700-  01,  paras.  6-  7;  see  also,  e.  g.,  New  York  State  Attorney  General 
 Reply  at  14;  Letter  from  James  W.  Cicconi,  General  Counsel  and  Executive  Vice  President    Law  &  Government  Affairs,  AT&  T,  to  Michael  K.  Powell,  Chairman,  FCC,  et  al.,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  14-  15 

 (filed  Nov.  13,  2002)  (AT&  T  Nov.  13,  2002  Ex  Parte  Letter). 
 404  See  Verizon  Comments  at  26-  27,  70;  Verizon  Reply  at  45,  60;  see  also  Alcatel  Comments  at  21.  But  see,  e.  g., 
 California  Commission  Comments  at  15;  Eschelon  Comments  at  17;  Maine  CLEC  Coalition  Comments  at  7;  Colorado  Commission  Reply  at  3-  4;  Sprint  Reply  at  14-  15;  WorldCom  Oct.  23,  2002  Ex  Parte  Letter,  Attach.  at  16. 

 405  Triennial  Review  NPRM,  16  FCC  Rcd  at  22797-  98,  paras.  34-  35. 
 406  USTA,  290  F.  3d  at  422. 
 407  See,  e.  g.,  GCI  Comments  at  20;  BOC  Shelanski  Decl.  at  para.  40  (arguing  that  the  Commission  should  define 
 markets  in  terms  of  product  and  geography);  BellSouth  Reply  at  10  (stating  that  USTA  supports  the  views  that  [  d]  ifferentiated  (or  partial)  national  unbundling  rules  are  sustainable;  [  t]  he  Commission  is  capable  of  making 

 market  differentiations;  and  [  a]  nuanced  concept  of  impairment  requires  a  consideration  of  specific  markets  or  market  categories);  Ohio  Commission  Reply  at  6;  Qwest  Reply  at  26;  SBC  Reply  at  67-  68;  BOC  Shelanski  Reply 
 Decl.  at  para.  18  (arguing  for  careful  market  definition);  GCI  Nov.  21,  2002  Ex  Parte  Letter,  Attach.  at  2;  ITTA  Jan.  27,  2003  Ex  Parte  Letter,  Attach.  at  1. 
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 inject  granularity  into  our  analysis  by  considering  types  and  capacities  of  facilities.  408  While  some  have  argued  that  granularity  can  only  harm  competition  by  making  it  more  difficult  for 
 competitors  to  use  UNEs,  409  we  find  that  additional  granularity  takes  into  account  the  state  of  competitive  impairment  in  [a]  particular  market,  410  and  adds  the  needed  balance  to  our 
 unbundling  rules  that  the  courts  have  required.  411  Indeed,  doing  a  granular  analysis  permits  us  to  distinguish  situations  for  which  there  is  impairment  from  those  for  which  there  is  none.  412 

 119.  We  disagree  that  we  should  conduct  a  different  impairment  analysis  for  independent  incumbent  LECs  than  for  BOCs,  or  that  we  should  formulate  different  triggers  for 
 relief  from  unbundling  obligations  for  these  carriers.  413  Sections  251(  c)(  3)  and  251(  d)(  2)  apply  equally  to  all  incumbent  LECs,  both  independents  and  BOCs,  414  and  Congress  applied  a  different 
 standard  to  BOCs  than  to  independent  incumbent  LECs  in  other  areas  of  the  1996  Act,  such  as  section  271.  415  That  being  said  it  is  possible  that  our  more  granular  analysis  will  produce 
 different  results  in  some  independent  incumbent  LEC  territories  to  the  extent  they  are  more  rural  or  less  densely  populated  than  other  territories.  However,  many  rural  LECs  still  retain  the 
 exemption  from  section  251(  c)(  3)  of  the  Act  as  required  by  section  251(  f),  and  as  such,  will  not  be  subject  to  those  particular  unbundling  requirements  until  such  time  as  the  exemption  is 
 lifted.  416 

 408  Several  commenters  urged  us  to  do  so.  See,  e.  g.,  SBC  Comments  at  32-  33. 
 409  See  AT&  T  Comments  at  61-  64.  See  generally  Illinois  Commission  Comments  at  5. 
 410  USTA,  290  F.  3d  at  422. 
 411  Iowa  Utils.  Bd.,  525  U.  S.  at  430  (Breyer,  J.,  concurring);  USTA,  290  F.  3d  at  427  (quoting  Iowa  Utils.  Bd.,  525 
 U.  S.  at  429-  30  (Breyer,  J.,  concurring)). 
 412  See,  e.  g.,  ACS  Reply  at  4.  This  granularity  may  well  result  in  different  findings  for  urban  versus  rural  markets. 
 See  ACS  Jan.  16,  2003  Ex  Parte  Letter  (urging  Commission  to  take  local  Alaskan  market  conditions  into  account);  ITTA  Jan.  27,  2003  Ex  Parte  Letter,  Attach.  at  2-  3  (arguing  that  the  Commission  should  take  the  characteristics  of 

 independent  incumbent  LECs  into  account  through  a  more  granular  analysis),  5-  6  (finding  support  in  section  251(  f)  for  the  proposition  that  Congress  intended  a  market-  specific  impairment  analysis,  particularly  for  rural  carriers). 
 We  do  not  in  this  Order  address  appropriate  rules  for  state  proceedings  regarding  the  rural  exemption  of  section  251(  f).  Id.  at  5-  6. 

 413  See  generally,  e.  g.,  ACS  Jan.  6,  2003  Ex  Parte  Letter;  ITTA  Jan.  27,  2003  Ex  Parte  Letter,  Attach.  at  3;  ITTA 
 Jan.  29,  2003  Ex  Parte  Letter,  Attach. 
 414  47  U.  S.  C.    251(  c)  ([  E]  ach  incumbent  local  exchange  carrier  has  the  following  duties  .  .  .  .);  id.    251(  d)(  2) 
 (  In  determining  what  network  elements  should  be  made  available  for  purposes  of  subsection  (c)(  3)  .  .  .  .). 
 415  Id.    271(  a)  (  Neither  a  Bell  operating  company,  nor  any  affiliate  of  a  Bell  operating  company,  may  provide 
 interLATA  services  except  as  provided  in  this  section.). 
 416  Id.    251(  f)(  1),  (2).  Section  251(  f)(  1)  involves  a  conditional  exemption  from  section  251(  c)  for  rural  telephone 
 companies,  while  section  251(  f)(  2)  involves  a  right  of  rural  carriers  with  fewer  than  2%  of  the  nations  subscriber  lines  to  petition  state  commissions  for  suspension  and  modification  of  section  251(  c)  obligations.  Id.    251(  f)(  2). 
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 120.  We  disagree  with  commenters  that  section  251(  c)(  3)  s  reference  to  a  telecommunications  service  means  that  a  granular  analysis  is  unlawful  because  UNEs  must  be 
 available  for  any  telecommunications  service.  417  As  we  discuss  in  more  detail  in  Part  V.  B.  2.  c.,  this  argument  is  no  longer  consistent  with  the  D.  C.  Circuits  call  for  granularity  or  its  affirmation 
 of  the  Commissions  previous  service-  by-  service  inquiry. 
 121.  We  also  disagree  with  commenters  that  the  only  type  of  granular  analysis  that  would  enhance  the  unbundling  rules  must  be  so  granular  as  to  be  administratively  unworkable, 

 and  therefore  that  the  Commission  should  not  pursue  any  granularity  at  all.  418  Furthermore,  commenters  argue,  any  granularity  will  involve  line-  drawing  that  will  yield  imperfect  results   
 underinclusiveness  and  overinclusiveness    and  will  lead  to  litigation  and  opportunities  for  incumbent  LECs  to  interpret  rules  aggressively  in  their  own  favor.  419  We  conclude,  as  explained 
 below,  that  we  can  incorporate  granularity  in  an  administratively  workable  fashion  that  results  in  meaningful  distinctions  in  our  unbundling  rules.  We  cannot  analyze  each  of  the  countless  pieces 
 of  equipment  in  the  incumbent  LECs  networks  individually.  As  we  have  stated,  the  courts  have  not  required  such  an  extreme  level  of  granularity  and  we  find  that  approach,  in  any  event, 
 administratively  infeasible.  We  recognize,  too,  that  Congress  expressed  its  preference  for  deregulation,  but  we  do  not  agree  that  a  general  call  for  deregulation  throughout 
 implementation  of  the  many  provisions  of  the  1996  Act  must  trump  our  duty  to  make  the  unbundling  analysis  of  section  251  adhere  as  closely  as  possible  to  the  many  goals  of  the  Act  by 
 declining  to  engage  in  a  careful,  granular  analysis.  420 
 122.  We  also  disagree  with  commenters  that  argue  that  the  definition  of  network  element  contained  in  section  153(  29)  precludes  any  unbundling  distinctions  based  on  the 

 granularity  factors  we  have  determined  to  examine.  421  The  D.  C.  Circuit  has  instructed  us  to  perform  a  more  granular  analysis.  422  Moreover,  it  is  up  to  the  Commission  to  determine  which 
 network  elements,  as  defined  by  the  Commission,  must  be  unbundled.  Section  251(  d)(  2)  does  not  direct  us  to  unbundle  all  elements  in  all  circumstances.  Likewise,  section  251(  c)(  3)  does  not 
 prevent  us  from  making  more  granular  assessments  of  unbundling.  Section  251(  c)(  3)  indicates  where  network  elements  must  be  unbundled  (after  a  section  251(  d)(  2)  analysis  results  in  an 

 417  See,  e.  g.,  ASCENT  Comments  at  28-  30. 
 418  See  AT&  T  Comments  at  98-  99;  CompTel  Comments  at  75-  76;  Sprint  Reply  at  23.  Cf.  ATTWS  Comments  at  7 
 (cautioning  that  too  much  granularity  could  make  the  Commissions  rules  too  complicated  and  could  increase  market  uncertainty);  Dynegy  Comments  at  5;  NewSouth  Comments  at  51;  Qwest  Comments  at  16-  17  (urging  the 

 Commission  to  adopt  rules  that  are  easy  to  administer  and  predictable);  Allegiance  Reply  at  18,  26  (noting  that  a  fully  granular  analysis  is  not  possible). 

 419  See  AT&  T  Comments  at  99-  106;  WorldCom  Reply  at  21;  AT&  T  Willig  Reply  Decl.  at  para.  69.  See  generally 
 NewSouth  Comments  at  55;  SWCTA  Comments  at  16. 
 420  Cf.  Qwest  Comments  at  16. 

 421  See  CompTel  Comments  at  23. 
 422  USTA,  290  F.  3d  at  415. 
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 unbundling  determination)  and  says  nothing  about  the  impairment  finding  that  creates  the  unbundling  obligations  in  the  first  instance.  423 
 a.  Customer  Class  Distinctions 
 123.  In  this  Part,  we  distinguish  broad  classes  of  customers  as  the  first  step  in  introducing  granularity  into  our  analysis.  We  asked  in  the  Triennial  Review  NPRM  whether  our 

 analysis  should  consider  the  type  of  customer  that  a  requesting  carrier  seeks  to  serve.  424  Subsequent  to  the  NPRM,  customer  classes  were  specifically  discussed  as  a  relevant  example  of 
 granularity  in  USTA  v.  FCC.  425  We  find  here  that  the  economic  characteristics  of  the  mass  market,  small  and  medium  enterprise,  and  large  enterprise  customer  classes  can  be  sufficiently 
 different  that  they  constitute  major  market  segments.  Much  of  our  analysis  in  discussing  the  individual  network  elements  will  be  organized  around  these  classes,  which  may  vary  slightly 
 from  element  to  element  because  of  the  different  economic  considerations  that  surround  the  different  elements.  426  These  customer  classes  generally  differ  in  the  kinds  of  services  they 
 purchase,  427  the  service  quality  they  expect,  the  prices  they  are  willing  to  pay,  the  levels  of  revenues  they  generate,  and  the  costs  of  delivering  them  services  of  the  desired  quality.  While 
 our  analysis  will  be  performed  on  a  granular  level,  we  will  only  discuss  those  distinctions  that  could  yield  a  difference  in  our  finding  of  impairment.  If  different  classes  of  customers  have 
 sufficiently  similar  economic  characteristics  such  that  we  expect  them  to  yield  identical  findings  of  impairment  with  regard  to  the  network  element  in  question,  then  we  will  analyze  those  classes 
 together. 
 124.  Based  on  the  record  before  us,  it  is  reasonable  to  distinguish  these  three  classes  of  customers    mass  market,  small  and  medium  enterprise,  and  large  enterprise    for  several 

 reasons.  These  classes  can  differ  significantly  based  on  the  services  purchased,  the  costs  of  providing  service,  and  the  revenues  generated.  Because  of  these  differences,  for  certain  network 
 elements  the  determination  whether  impairment  exists  may  differ  depending  upon  the  customer  class  a  competing  carrier  seeks  to  serve. 

 125.  We  reject  the  argument  made  by  some  commenters  that  distinguishing  customers  by  customer  class  is  either  not  required  by  the  Act,  nor  administratively  practicable.  428  As 

 423  See  Iowa  Utils.  Bd.,  525  U.  S.  at  391. 
 424  Triennial  Review  NPRM,  16  FCC  Rcd  at  22801-  02,  paras.  42-  44. 
 425  USTA,  290  F.  3d  at  422-  26. 
 426  Where  it  is  appropriate,  in  our  discussion  of  the  individual  network  elements  we  will  provide  an  even  more 
 granular  analysis,  examining  whether  impairment  exists  in  the  provision  of  different  services,  for  different  types  of  customers,  located  in  different  geographic  areas. 

 427  See  supra  Parts  VI.  A.  4.  b.(  ii)(  c)  and  VI.  C.  4.  c. 
 428  AT&  T  Comments  at  97-  100;  CompTel  Comments  at  75;  Covad  Comments  at  42;  Georgia  Commission 
 Comments  at  3-  4;  Illinois  Commission  Comments  at  5;  Sprint  Comments  at  14-  17. 
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 discussed  earlier,  a  more  granular  analysis  is  required  to  determine  whether  competing  carriers  are  impaired  in  providing  the  services  they  seek  to  provide.  429  Because  carriers  impairment 
 could  vary  by  customer  class,  we  are  obligated  to  determine  which  customers  could  not  be  served  by  carriers  without  the  UNEs  in  question,  and,  where  practical,  require  unbundling  only 
 for  those  customers.  We  also  find  that  distinguishing  customers  by  class  is  administratively  practical  in  our  analysis  for  many  of  the  network  facilities.  While  we  acknowledge  that  our 
 analysis  is  limited  by  the  administrative  feasibility  of  performing  a  particular  level  of  granular  analysis,  we  find  that  distinguishing  customers  by  class  is  both  convenient  and  feasible,  and 
 increases  the  granularity  of  our  analysis.  It  also  allows  us  to  examine  more  carefully  whether  competing  carriers  are  able  to  serve  small  businesses,  and  determine  the  unbundling 
 requirements  needed  to  overcome  competing  carriers  impairment  (if  any)  in  serving  these  customers.  We  can  thus  ensure  that  our  rules  will  bring  the  benefits  of  competition  to  small 
 businesses. 
 126.  We  note  that  in  previous  orders,  such  as  the  UNE  Remand  Order,  we  found  it  appropriate  to  consider  the  customer  classes  a  requesting  carrier  seeks  to  serve  when  considering 

 whether  to  unbundle  a  network  element.  430  Distinguishing  customers  by  type  is  also  consistent  with  our  approach  in  merger  orders,  such  as  the  Bell  Atlantic/  NYNEX  Merger  Order,  the 
 SBC/  Ameritech  Merger  Order,  and  the  WorldCom/  MCI  Merger  Order.  431 

 429  See  supra  Part  V.  B.  2. 
 430  UNE  Remand  Order,  15  FCC  Rcd  at  3737,  para.  81  ([  T]  he  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.).  This  approach  was 

 subsequently  applied  in  the  Line  Sharing  Order.  Line  Sharing  Order,  14  FCC  Rcd  at  20929,  paras.  31-  32. 
 431  Application  of  NYNEX  Corp.,  Transferor,  and  Bell  Atlantic  Corp.,  Transferee,  For  Consent  to  Transfer  Control 
 of  NYNEX  Corp.  and  its  Subsidiaries,  File  No.  NSD-  L-  96-  10,  Memorandum  Opinion  and  Order,  12  FCC  Rcd  19985,  20016,  para.  53  (1997)  (Bell  Atlantic/  NYNEX  Merger  Order);  Applications  of  Ameritech  Corp.,  Transferor, 

 and  SBC  Communications,  Inc.,  Transferee,  For  Consent  to  Transfer  Control  of  Corporations  Holding  Commission  Licenses  and  Lines  Pursuant  to  Sections  214  and  310(  d)  of  the  Communications  Act  and  Parts  5,  22,  24,  25,  63,  90, 
 95,  and  101  of  the  Commission's  Rules,  CC  Docket  No.  98-  141,  Memorandum  Opinion  and  Order,  14  FCC  Rcd  14712,  14746,  para.  68  (1999)  (SBC/  Ameritech  Merger  Order);  Application  of  WorldCom,  Inc.  and  MCI 
 Communications  Corp.  for  Transfer  of  Control  of  MCI  Communications  Corp.  to  WorldCom,  Inc.,  CC  Docket  No.  97-  211,  Memorandum  Opinion  and  Order,  13  FCC  Rcd  18025,  18040-  41,  paras.  25-  26  (1998)  (WorldCom/  MCI 
 Merger  Order).  The  approach  in  these  merger  orders  follows  that  developed  in  the  LEC  Classification  Order,  which  followed  the  1992  Merger  Guidelines.  See  Regulatory  Treatment  of  LEC  Provision  of  Interexchange 
 Services  Originating  in  the  LEC's  Local  Exchange  Area  and  Policy  and  Rules  Concerning  the  Interstate,  Interexchange  Marketplace,  CC  Docket  Nos.  96-  149,  96-  61,  Second  Report  in  CC  Docket  No.  96-  149  and  Third 
 Report  and  Order  in  CC  Docket  No.  96-  61,  12  FCC  Rcd  15756,  15773-  74,  paras.  25-  26  (LEC  Classification  Order);  WorldCom/  MCI  Merger  Order,  13  FCC  Rcd  at  18040,  para.  25.  The  Bell  Atlantic/  NYNEX  Merger  Order 
 found  three  separate  customer  groups,  consisting  of  residential  and  small  business,  medium  sized  businesses,  and  large  business  and  government.  Bell  Atlantic/  NYNEX  Merger  Order,  12  FCC  Rcd  at  20016,  para.  53.  In  the 
 WorldCom/  MCI  Merger  Order,  SBC/  Ameritech  Merger  Order,  and  Bell  Atlantic/  GTE  Merger  Order,  the  Commission  distinguished  mass  market  consumers  from  larger  business  customers  in  its  analysis  of  the 
 provisioning  of  local  exchange  and  exchange  access  services.  WorldCom/  MCI  Merger  Order,  13  FCC  Rcd  at  18119,  para.  164;  SBC/  Ameritech  Merger  Order,  14  FCC  Rcd  at  14746,  para.  68;  Application  of  GTE  Corp., 
 (continued.) 
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 127.  Mass  market  customers  consist  of  residential  customers  and  very  small  business  customers.  432  Mass  market  customers  typically  purchase  ordinary  switched  voice  service  (Plain 
 Old  Telephone  Service  or  POTS)  and  a  few  vertical  features.  Some  customers  also  purchase  additional  lines  and/  or  high  speed  data  services.  Although  the  cost  of  serving  each  customer  is 
 low  relative  to  the  other  customer  classes,  the  low  levels  of  revenue  that  customers  tend  to  generate  create  tight  profit  margins  in  serving  them.  The  tight  profit  margins,  and  the  price 
 sensitivity  of  these  customers,  force  service  providers  to  keep  per  customer  costs  at  a  minimum.  Profits  in  serving  these  customers  are  very  sensitive  to  administrative,  marketing,  advertising, 
 and  customer  care  costs.  These  customers  usually  resist  signing  term  contracts. 
 128.  Small  and  medium  enterprises  are  willing  to  pay  higher  prices  for  telecommunications  services  than  the  mass  market.  Indeed,  they  are  often  required  to  do  so 

 under  business  tariffs.  Because  their  ability  to  do  business  may  depend  on  their  telecommunications  networks,  they  are  typically  very  sensitive  to  reliability  and  quality  of 
 service  issues.  These  customers  buy  larger  packages  of  services  than  do  mass  market  customers,  and  are  willing  to  sign  term  contracts.  These  packages  may  include  POTS,  data,  call  routing, 
 and  customized  billing,  among  other  services.  Although  serving  these  customers  is  more  costly  than  mass  market  customers,  the  facts  that  enterprise  customers  generate  higher  revenues,  and 
 are  more  sensitive  to  the  quality  of  service,  generally  allow  for  higher  profit  margins.  The  higher  profit  margins  and  greater  emphasis  on  quality  of  service  can  provide  a  greater  incentive  to 
 competing  carriers  to  provision  their  own  facilities,  and  the  higher  revenues  make  it  easier  to  cover  the  fixed  costs  of  installing  such  facilities. 

 129.  Large  enterprises  demand  extensive,  sophisticated  packages  of  services.  Reliability  of  service  is  essential  to  these  customers,  and  they  often  expect  guarantees  of  service 
 quality.  The  services  they  might  purchase  include  an  internal  voice  and  data  network,  local,  long  distance,  and  international  POTS  service  to  one  or  multiple  locations,  provisioning  and 
 maintenance  of  a  data  network  such  as  ATM,  frame  relay  or  X.  25,  and  customized  billing.  The  large  revenues  these  customers  generate,  and  their  need  for  reliable  service  and  specialized 
 equipment  to  serve  them,  provide  a  large  incentive  to  suppliers  to  build  their  own  facilities  where  possible,  and  carry  these  customers  traffic  over  their  own  networks. 

 (Continued  from  previous  page) 
 Transferor,  and  Bell  Atlantic  Corp.,  Transferee,  For  Consent  to  Transfer  Control,  CC  Docket  No.  98-  184,  Memorandum  Opinion  and  Order,  15  FCC  Rcd  14032,  14088-  89,  para.  102  (Bell  Atlantic/  GTE  Merger  Order). 

 432  Very  small  businesses  typically  purchase  the  same  kinds  of  services  as  do  residential  customers,  and  are 
 marketed  to,  and  provided  service  and  customer  care,  in  a  similar  manner.  Therefore,  we  will  usually  include  very  small  businesses  in  the  mass  market  for  our  analysis.  We  note,  however,  that  there  are  some  differences  between 

 very  small  businesses  and  residential  customers.  For  example,  very  small  businesses  usually  pay  higher  retail  rates,  and  may  be  more  likely  to  purchase  additional  services  such  as  multiple  lines,  vertical  features,  data  services,  and 
 yellow  page  listings.  Therefore,  we  may  include  them  with  other  enterprise  customers,  where  it  is  appropriate  in  our  analysis. 
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 b.  Geographic  Granularity 
 130.  In  the  Triennial  Review  NPRM,  we  sought  comment  on  whether  and  how  to  reflect  geographic  differences  in  the  application  of  our  unbundling  standard.  433  The  USTA 

 decision  also  found  a  need  for  a  more  granular  analysis  in  general  that  takes  market-  specific  variations  into  account.  434  As  many  commenters  urge  us  to  do,  throughout  our  application  of 
 the  analysis  to  specific  elements  we  will  consider  whether  impairment  varies  geographically  throughout  the  country.  435  Indeed,  several  incumbent  LECs  urge  this  Commission  to  adopt  an 
 unbundling  analysis  that  is  far  more  granular  than  that  of  the  UNE  Remand  Order.  436  Such  an  approach  permits  us  to  take  the  circumstances  of  rural  carriers  and  the  areas  they  serve  into 
 account.  437  In  those  instances  where  the  record  permits  us  to  create  unbundling  rules  that  apply  nationally    because  the  result  would  be  the  same  as  if  we  conducted  a  separate  analysis  of  each 
 geographic  market    we  agree  with  commenters  that  we  should  do  so.  438  In  other  instances,  we  will  create  rules  that  will  vary  in  their  implementation  in  different  areas  of  the  country. 
 Accordingly,  in  these  circumstances,  we  may  delegate  authority  to  state  commissions  to  ensure 

 433  See  Triennial  Review  NPRM,  16  FCC  Rcd  at  22799-  800,  para.  39. 
 434  See  USTA,  290  F.  3d  at  422. 
 435  See,  e.  g.,  Alcatel  Comments  at  19-  20;  GCI  Comments  at  21;  SBC  Comments  at  30-  32;  BOC  Shelanski  Decl.  at 
 para.  41;  Verizon  Reply  at  35;  Verizon  Dec.  17,  2002  Ex  Parte  Letter,  Attach.  at  2-  3. 

 We  do  not,  however,  evaluate  in  this  proceeding  whether  states  have  set  TELRIC  prices  at  appropriate  levels.  See,  e.  g.,  ACS  Jan.  6,  2003  Ex  Parte  Letter  (arguing  that  Alaska  Commission  has  set  UNE  rates  below  cost).  This 

 proceeding  is  not  the  proper  forum  for  such  arguments,  for  which  the  Act  has  set  up  a  separate  review  procedure  in  section  252(  e)(  6). 

 436  See  Qwest  Reply  at  26-  27  ([  A]  market  specific  analysis  may  be  necessary  to  eliminate  unbundling  obligations 
 in  certain  markets  where  it  would  be  feasible  for  CLECs  to  obtain  network  elements  from  a  non-  ILEC  source  .  .  .  .  For  example,  .  .  .  the  increased  deployment  of  CLEC  transport  facilities  in  certain  markets  justifies  geographic 

 specificity  in  the  unbundling  analysis  for  the  dedicated  transport  network  element.);  SBC  Reply  at  67  ([  T]  he  Commission  may  not  make  UNEs  available  where  competitors  are  already  using  or  should  be  able  to  use 
 alternatives  to  UNEs  .  .  .  .  With  respect  to  .  .  .  elements  [other  than  switching,  transport,  and  high-  capacity  loops],  it  may  be  true  in  some  areas  but  not  yet  in  others.  For  those  elements,  the  Commission  must  adopt  a  more  granular 
 analysis  of  when  to  order  unbundling.)  (emphasis  in  original);  Verizon  Reply  at  35  ([  A]  geographic-  specific  analysis  is  necessary,  not  to  determine  where  CLECs  are  not  impaired,  but  to  identify  those  few  remaining  locations 
 where  they  are  impaired.);  BellSouth  NERA  Reply  Decl.  at  para.  136  (  To  summarize,  the  geographic  granularity  sought  by  the  Commission  can  be  helpful  for  defining  the  market  within  which  impairment  analysis  should  be 
 conducted.). 
 437  See,  e.  g.,  Eschelon  Comments  at  9  (noting  that  it  services  small  business  customers,  which  are  often  not  located 
 in  downtown  areas);  Rural  Independent  Competitive  Alliance  Comments  at  2-  3;  PACE  Coalition  Comments  on  Verizon  Forbearance  Petition  at  6  (filed  Sept.  3,  2002);  NTCA  Reply  at  2-  3  (arguing  that  rural  areas  cannot 

 economically  be  served  by  several  carriers). 
 438  See  SBC  Comments  at  32;  Allegiance  Reply  at  4  (noting  that  the  Commission  can  adopt  a  national  market  for 
 some  UNEs  and  disaggregated  markets  for  others);  Qwest  Reply  at  26;  WorldCom  Reply  at  22-  23. 
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 that  the  unbundling  rules  are  implemented  on  the  most  accurate  level  possible  while  still  preserving  administrative  practicality.  439 
 131.  We  disagree  with  commenters  that  urge  us  not  to  conduct  any  geographically-specific  analysis  or  delegate  any  geographic  analysis  to  the  states  because,  for  example, 
 geographically-  granular  rules  will  raise  the  cost  of  advertising,  eliminate  the  possibility  of  ubiquitous  competitive  service,  or  prove  administratively  unworkable.  440  In  some  cases,  it  is  not 
 possible  for  us  to  adopt  nationally-  applicable  rules  that  adhere  to  the  USTA  courts  call  for  additional  granularity.  441  Indeed,  where  we  do  defer  analysis  to  the  states,  we  expect  they  will 

 439  Cf.,  e.  g.,  ASCENT  Comments  at  32-  33  (urging  the  Commission  to  permit  the  states  to  handle  any  location-specific 
 analysis);  BellSouth  Comments  at  23  (arguing  that  the  Commission  should  use  MSAs  in  all  instances);  California  Commission  Comments  at  12-  13  (noting  geographic  differences  in  competition);  Covad  Comments  at  84 

 (noting  that  the  Commission  cannot  likely  do  a  geographically-  specific  analysis);  Florida  Commission  Comments  at  2-  3;  GCI  Comments  at  22-  23  (urging  caution  in  aggregating  geographic  areas);  New  York  Department  Comments 
 at  5;  NuVox  Comments  at  52  (urging  the  Commission  to  involve  the  states  in  any  geographically-  specific  analysis);  Qwest  Comments  at  16-  17  (arguing  that  geographic  markets  smaller  than  MSAs  are  probably  unworkable);  Texas 
 Commission  Comments  (urging  strong  role  for  states);  UNE  Platform  Coalition  Comments  at  27-  32  (urging  Commission  to  permit  states  to  have  substantial  role);  Allegiance  Reply  at  4  (urging  Commission  to  delegate  loop 
 and  transport  analysis  to  states),  25  (noting  difficulties  of  generalizing  markets);  BellSouth  Reply  at  12  (urging  use  of  MSA);  Talk  America  Reply  at  14-  17  (arguing  that  only  the  states  can  make  sufficiently  granular  rules); 
 WorldCom  Reply  at  23-  24;  BellSouth  NERA  Reply  Decl.  at  para.  125  (urging  use  of  MSA);  Covad  Murray  Reply  Decl.  at  paras.  14-  16  (noting  that  the  Commission  needs  state  help  to  do  a  geographically  granular  analysis);  Letter 
 from  Russell  M.  Blau,  Counsel  for  Lightship  Telecom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  June  28,  2002)  (Lightship  June  28,  2002  Ex  Parte  Letter)  (arguing  that 
 MSAs  are  too  large  for  meaningful  granularity);  GCI  Nov.  21,  2002  Ex  Parte  Letter,  Attach.  at  11-  12. 
 Thus,  even  in  those  circumstances  where  the  record  contains  substantial  evidence  regarding  market  conditions  in  some  localities,  the  Commission  may  determine  that  state  commissions  are  better  poised  to  assess  local 

 impairment  through  hearings  or  other  fact-  finding  procedures.  But  see  ACS  Jan.  16,  2003  Ex  Parte  Letter  (urging  Commission  to  make  a  finding  of  no  impairment  for  Alaskan  markets).  We  also  do  not  address  ACSs  request  for 
 forbearance  contained  within  a  written  ex  parte  presentation,  as  this  is  a  rulemaking  proceeding.  Parties  remain  free  to  file  petitions  for  forbearance  that  comply  with  our  rules.  47  C.  F.  R.    1.  53. 

 Covad  has  pointed  out  that  if  we  adopted  the  HMG  as  our  impair  standard,  it  would  require  us  to  define  a  geographic  market  for  our  analysis.  See  Covad  Reply  at  10;  see  also  BellSouth  NERA  Reply  Decl.  at  paras.  123-  24 
 (noting  that  HMG  could  form  basis  of  granular  analysis).  We  take  this  lesson  of  geographic  granularity  from  the  HMG  without  adopting  the  HMG  wholesale,  as  explained  above.  See  supra  Part  V.  B.  1.  d.(  iii). 

 440  See,  e.  g.,  Sprint  Comments  at  5,  14-  15;  WorldCom  Comments  at  63;  Mpower  Reply  at  17-  18;  AT&  T  Willig 
 Reply  Decl.  at  paras.  67-  68  (arguing  that  a  national  unbundling  list  is  deregulatory  in  the  sense  that  it  is  simpler  and  leads  to  less  regulatory  involvement).  But  see  BellSouth  NERA  Reply  Decl.  at  para.  127  (noting  that  ubiquity 

 and  a  granular  analysis  are  not  compatible). 
 441  But  see,  e.  g.,  Arch  Wireless  Reply  at  6,  11,  18  (arguing  that  paging  and  CMRS  carriers  need  national 
 unbundling  rules). 
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 achieve  a  much  finer  delineation  of  impairment  from  non-  impairment  than  what  we  could  do  nationally.  442 
 c.  Service  Considerations 
 132.  In  this  Part,  we  describe  how  we  will  use  a  service-  specific  framework  to  analyze  the  circumstances  under  which  competitors  qualify  for  access  to  UNEs.  We  adopt  an  approach 

 that  is  consistent  with  the  goals  of  the  1996  Act  because  it  obligates  incumbent  LECs  to  provide  access  to  UNEs  only  when  requesting  carriers  seek  to  use  those  elements  to  compete  against 
 those  services  that  traditionally  have  been  the  exclusive  domain  of  incumbent  LECs.  As  we  explain  below,  Congress  created  the  section  251  unbundling  regime  to  foster  competition  in  the 
 incumbent  LECs  core  markets.  Moreover,  we  set  forth  an  approach  that  is  consistent  with  the  guidance  we  have  received  from  the  D.  C.  Circuit  in  the  USTA  and  CompTel  decisions.  443 

 133.  Under  the  approach  we  adopt  today,  a  requesting  carrier  may  access  UNEs  for  the  purpose  of  providing  qualifying  services,  as  we  define  them  below.  Once  a  requesting  carrier 
 satisfies  this  condition,  we  reaffirm  the  Commissions  existing  rules  that  permit  the  carrier  to  use  a  UNE  to  provide  additional  services  including  non-  qualifying  telecommunications  services  and 
 information  services.  444  We  reiterate  that  requesting  carriers  must  be  telecommunications  carriers  that  seek  to  use  the  UNE  to  provide  common  carrier  services,  rather  than  private  carrier 
 services. 
 (i)  Legal  Background  and  Authority 
 134.  Section  251(  d)(  2)  sets  forth  the  standard  by  which  the  Commission  is  to  determine  what  network  elements  should  be  unbundled.  Congress  directed  the  Commission  to 

 consider  whether  the  failure  to  provide  access  to  such  network  elements  would  impair  the  ability  of  the  telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to 
 offer.  445  In  earlier  orders,  the  Commission  generally  approached  the  unbundling  analysis  with 

 442  Likewise,  we  do  not  agree  that  we  must  unbundle  everywhere  so  that  requesting  carriers  can  enter 
 ubiquitously,  and  that  requiring  unbundling  in  locations  where  there  is  no  impairment  will  do  no  harm.  See,  e.  g.,  Sprint  Comments  at  15-  16;  SWCTA  Comments  at  16-  17.  But  see  BellSouth  Comments  at  26;  Qwest  Comments  at 

 13;  Verizon  Reply  at  37-  39,  47;  BOC  Shelanski  Decl.  at  para.  4.  Because  unbundling  has  costs  as  well  as  benefits,  we  determine  to  unbundle  elements  only  where  they  meet  our  impair  standard.  See  USTA,  290  F.  3d  at  422;  see 
 also,  e.  g.,  SBC  Reply  at  22-  23,  33.  But  see,  e.  g.,  WorldCom  Comments  at  49  (noting  that  competitive  LECs  cannot  build  a  totally  ubiquitous  network);  AT&  T  Reply  at  55  (noting  that  inability  to  provide  service  ubiquitously 
 contributes  to  impairment  by  limiting  the  number  of  customers  over  which  overhead  costs  can  be  spread);  Talk  America  Reply  at  6,  36  (arguing  that  competitive  LECs  will  prefer  to  use  their  own  facilities  when  possible). 

 443  See  USTA,  290  F.  3d  at  422-  30;  CompTel,  309  F.  3d  at  12-  16. 
 444  In  Part  VII.  B.  below,  we  describe  that,  with  respect  to  high-  capacity  facilities  over  which  several  types  of 
 services  may  be  provided  (i.  e.,  local,  long  distance,  or  Internet  access),  we  determine  that  certain  eligibility  requirements  must  be  satisfied  to  ensure  that  these  facilities  are  being  used  for  a  qualifying  service. 

 445  47  U.  S.  C.    251(  d)(  2)(  B)  (emphasis  added).  The  statute  also  requires  the  Commission  to  consider  whether 
 access  to  such  network  elements  as  are  proprietary  in  nature  is  necessary.  47  U.  S.  C.    251(  d)(  2)(  A).  That  prong  (continued.) 
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 regard  to  all  telecommunications  services,  rather  than  the  specific  types  of  services  a  requesting  carrier  sought  to  provide  over  an  element.  446  More  recently,  the  Commission  began  to  take  the 
 service  provided  by  a  requesting  carrier  into  account,  but  did  not  do  so  in  a  comprehensive  and  consistent  fashion.  447  Instead  of  adopting  an  overall  framework  applicable  to  all  UNEs,  the 
 Commission  focused  only  on  how  the  UNE  was  being  used  in  the  context  of  specific  elements.  In  this  Order,  although  we  decline  to  adopt  a  service-  by-  service  impairment  framework,  we 
 conclude  that  only  requesting  carriers  providing  certain  qualifying  services  are  entitled  to  UNEs. 
 (ii)  Qualifying  Services 
 135.  We  find  that,  in  order  to  gain  access  to  UNEs,  carriers  must  provide  qualifying  services  using  the  UNE  to  which  they  seek  access.  By  qualifying,  we  mean  those 

 telecommunications  services  offered  by  requesting  carriers  in  competition  with  those  telecommunications  services  that  have  been  traditionally  the  exclusive  or  primary  domain  of 
 incumbent  LECs.  They  include,  for  example,  local  exchange  service,  such  as  POTS,  and  access  services,  such  as  xDSL  and  high-  capacity  circuits.  448 

 136.  In  determining  which  types  of  service  qualify  for  UNEs,  we  first  look  to  the  text  of  the  1996  Act.  Because  the  text  of  the  Act  does  not  provide  unambiguous  direction,  we 
 consider  the  structure  and  history  of  the  relevant  portions  of  the  Act,  including  its  stated  purposes,  and  interpret  the  statute  to  reach  a  reasonable  conclusion  regarding  Congresss  intent. 
 Ultimately,  we  rely  upon  the  purposes  of  the  Act  to  support  the  interpretation  that  a  permissible  use  of  a  network  element  must  include  a  qualifying  component. 

 (Continued  from  previous  page) 
 of  section  251(  d)(  2)  does  not  include  a  reference  to  the  services  that  [the  requesting  carrier]  seeks  to  offer.  However,  the  same  rationale  applies  to  proprietary  network  elements  as  to  non-  proprietary  network  elements  with 

 respect  to  Congresss  intent  regarding  when  network  elements  would  be  available  for  requesting  carriers.  In  fact,  Congress  intended  a  higher  standard    when  access  to  the  element  is  necessary,  not  just  when  a  carrier  is  impaired 
 without  access  to  the  element    to  govern  the  availability  of  proprietary  network  elements.  Therefore,  there  is  no  reason  to  differentiate  between  proprietary  and  non-  proprietary  network  elements  with  respect  to  the  services  for 
 which  they  can  be  used.  In  any  event,  we  do  not  analyze  any  proprietary  elements  in  this  Order,  so  consideration  of  which  services  will  be  provided  using  those  UNEs  is  not  necessary. 

 446  UNE  Remand,  15  FCC  Rcd  at  3911-  12,  para.  484;  Local  Competition  Order,  11  FCC  Rcd  at  15671-  72,  para. 
 356. 
 447  See,  e.  g.,  Supplemental  Order  Clarification  15  FCC  Rcd  at  9598,  para.  21  (usage  restrictions  applied  to  only 
 EELs,  not  all  UNEs).  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether  the  unbundling  analysis  should  be  applied  to  specific  services.  Triennial  Review  NPRM,  16  FCC  Rcd  at  22798-  99,  para.  36.  In  a 

 Public  Notice  issued  following  the  Supplemental  Order  Clarification,  the  Commission  also  requested  comment  on  whether  it  should  undertake  to  conduct  its  impairment  analysis  on  a  service-  by-  service  or  market-  by-  market  basis, 
 and  if  so,  how.  Comments  Sought  on  the  Use  of  Unbundled  Network  Elements  to  Provide  Exchange  Access  Service,  CC  Docket  No.  96-  98,  Public  Notice,  DA  01-  169  (rel.  Jan.  24,  2001)  (Exchange  Access  Public  Notice).  The 
 Commission  also  asked  whether  the  service-  specific  approach  should  be  applied  to  all  aspects  of  the  section  251(  d)(  2)  analysis  or  just  the  impairment  prong.  Triennial  Review  NPRM,  16  FCC  Rcd  at  22798-  99,  para.  36. 

 448  These  services  must  be  offered  on  a  common  carrier  basis,  as  explained  below. 
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 137.  First,  we  note  that  section  251(  d)(  2)  s  reference  to  the  services  that  [the  carrier]  seeks  to  offer  is  ambiguous  as  to  the  question  of  which  services  we  should  analyze  in  the 
 context  of  our  impairment  analysis.  449  Despite  prior  interpretations  to  the  contrary,  in  the  Supplemental  Order  Clarification  the  Commission  concluded  that  this  language  was  indeed 
 ambiguous,  and  determined  to  examine  section  251(  d)(  2)  s  reference  to  services  as  part  of  the  impairment  analysis.  450  In  the  context  of  considering  whether  requesting  carriers  could  lease 
 UNEs  solely  to  provide  exchange  access  or  long  distance  services,  451  the  Commission  noted  that  section  251(  d)(  2)  s  services  language  likely  would  limit  the  conversion  of  special  access  to 
 combinations  of  loop  and  transport  UNEs: 
 [Section  251(  d)(  2)]  asks  whether  denial  of  access  to  network  elements  would  impair  the  ability  of  the  telecommunications 

 carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer.  Although  ambiguous,  that  language  is  reasonably  construed  to 
 mean  that  we  may  consider  the  markets  in  which  a  competitor  seeks  to  offer  services  and,  at  an  appropriate  level  of  generality, 
 ground  the  unbundling  obligation  on  the  competitors  entry  into  those  markets  in  which  denial  of  the  requested  elements  would  in 
 fact  impair  the  competitors  ability  to  offer  services.  452 
 138.  We  agree  with  the  conclusion  that  the  term  services  in  section  251(  d)(  2)  is  ambiguous.  Although  Congress  may  have  intended  services  in  section  251(  d)(  2)  to  mean 

 telecommunications  services  as  used  in  section  251(  c)(  3),  even  this  interpretation  does  not  necessarily  resolve  the  ambiguity  concerning  the  scope  of  the  section  251(  d)(  2)  inquiry.  While 
 telecommunications  services  is  more  specific  than  services,  and  thus  limits  the  inquiry  somewhat,  we  are  still  left  to  question  which  telecommunications  services  should  be  subject  to 
 the  unbundling  analysis.  453  Some  parties  have  argued  that  section  251(  d)(  2)  requires  the  Commission  to  analyze  every  telecommunications  service  using  the  impairment  standard,  and, 
 that  such  a  review  would  result  in  the  unavailability  of  UNEs  for  most  services  except  possibly 
 449  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9595,  para.  15;  USTA,  290  F.  3d  at  422. 
 450  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9596,  para.  15. 
 451  CompTel,  309  F.  3d  at  11,  14. 
 452  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9595,  para.  15  (footnotes  omitted)  (emphasis  in  original). 
 Although  the  Commission  in  the  Supplemental  Order  Clarification  generally  referred  to  use  of  a  UNE  in  the  provision  of  exchange  access  services,  special  access  services,  or  long  distance  services,  it  is  clear  that  the 

 Commission  was  concerned  about  use  of  a  UNE  without  appropriate  consideration  under  the  impair  standard  for  how  the  UNE  was  to  be  used.  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9595-  96,  9602,  paras.  15-  16,  28. 
 Later  in  this  Part,  we  specifically  distinguish  between  the  provision  of  exchange  access  services  as  part  of  a  retail  long  distance  service  and  the  wholesale  provision  of  exchange  access  services  in  competition  with  the  incumbent 
 LECs  special  access  services.  As  a  result,  issues  raised  in  the  Exchange  Access  Public  Notice  are  either  no  longer  relevant  or  resolved  in  this  Order. 

 453  47  U.  S.  C.    251(  c)(  3)  (emphasis  added). 
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 local  voice  services.  454  Yet  other  parties  argue  that  the  Commission  should  not  consider  the  particular  services  that  a  carrier  seeks  to  offer  at  all,  provided  it  seeks  to  offer  a 
 telecommunications  service.  455  On  this  point,  the  D.  C.  Circuit  observed  that  [  b]  y  referring  to  the  services  that  [the  requesting  carrier]  seeks  to  offer,    [Congress]  seems  to  invite  an  inquiry 
 that  is  specific  to  particular  carriers  and  services.  456  Thus,  we  conclude  that  the  language  of  section  251(  d)(  2)  is  ambiguous  concerning  the  scope  of  the  impairment  inquiry. 

 139.  An  examination  of  the  purposes  behind  the  Act  provides  us  with  guidance  as  to  the  scope  of  section  251(  d)(  2).  In  passing  the  1996  Act,  Congress  substantially  changed  many 
 aspects  of  federal  regulation  of  telecommunications  services  by  establishing  a  pro-  competitive,  de-  regulatory  national  policy  framework  designed  to  benefit  all  Americans  by  opening  all 
 telecommunications  markets  to  competition.  457  As  its  preamble  notes,  the  Act  was  designed  to  promote  competition  and  reduce  regulation  in  order  to  secure  lower  prices  and  higher  quality 
 services  for  American  telecommunications  consumers  and  encourage  the  rapid  development  of  new  telecommunications  technologies.  458  In  particular,  section  251s  role  in  this  regulatory 
 scheme  involves  opening  local  markets  to  competition.  459  Indeed,  Congress  recognized  that  it  is 

 454  Under  these  commenters  proposed  analysis,  requesting  carriers  would  not  be  impaired  without  UNEs  for  those 
 services  for  which  sufficient  retail  competition  exists.  BellSouth  Comments  at  30-  31,  34;  SBC  Comments  at  21  ([  P]  rior  to  ordering  unbundling,  the  Commission  must  carefully  scrutinize  the  service  market  in  which  the  carrier 

 that  seeks  to  purchase  the  UNE  intends  to  provide  service.  And,  if  the  very  concept  of  impairment  is  to  be  intelligible,    it  cannot  permit  unbundling  where  the  service  at  issue  is  competitive.);  Verizon  Comments  at  39-  40. 

 455  See,  e.  g.,  ASCENT  Comments  at  28-  29  (  Section  251(  c)(  3),  accordingly,  requires  application  of  the 
 unbundling  analysis  on  a  functionality-  by-  functionality  basis,  not  on  a  service-  by-  service,  or  customer-  by-  customer,  or  carrier-  by-  carrier  basis.);  ATTWS  Comments  at  17  (arguing  that  a  service-  specific  analysis  would  violate  the 

 plain  language  of  the  Act);  California  Commission  Comments  at  14;  CompTel  Comments  at  52-  54  (arguing  that  when  a  competitor  buys  a  UNE,  it  pays  for  the  entire  functionality;  a  usage  limitation  would  diminish  the  UNEs 
 value);  Illinois  Commission  Comments  at  5;  Maine  CLEC  Coalition  at  6-  7;  Missouri  Commission  Comments  at  8;  NewSouth  Comments  at  52;  Norlight  Comments  at  10;  NuVox  Comments  at  45.  We  deny,  in  part,  the  petition  for 
 reconsideration  filed  by  CompTel  requesting  that  the  Commission  reconsider  its  decision  to  allow  use  restrictions  for  the  reasons  we  explain  in  this  section.  Competitive  Telecommunications  Association  Petition  for 
 Reconsideration,  CC  Docket  No.  96-  98  (filed  Feb.  17,  2000)  (CompTel  Feb.  17,  2000  Petition  for  Reconsideration). 
 456  CompTel,  309  F.  3d  at  12-  13  (emphasis  added). 

 457  Joint  Conference  Report  at  1. 
 458  Preamble  to  the  1996  Act. 
 459  Id.;  see  also  Local  Competition  Order,  11  FCC  Rcd  at  15506,  para.  4  (  Competition  in  local  exchange  and 
 exchange  access  markets  is  desirable,  not  only  because  of  the  social  and  economic  benefits  competition  will  bring  to  consumers  of  local  services,  but  also  because  competition  eventually  will  eliminate  the  ability  of  an  incumbent  local 

 exchange  carrier  to  use  its  control  of  bottleneck  local  facilities  to  impede  free  market  competition.).  See,  e.  g.,  Letter  from  Herschel  L.  Abbott  Jr.,  Vice  President    Government  Affairs,  BellSouth,  to  Michael  K.  Powell, 
 Chairman,  FCC,  CC  Docket  No.  01-  338  at  2,  in  Letter  from  Jonathan  Banks,  General  Attorney,  BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  2  (filed  Dec.  19,  2002)  (BellSouth  Dec.  19,  2002  Ex 
 Parte  Letter)  (stating  that  Congress  intended  the  Act  to  provide  competitive  alternatives  for  basic  wireline  local  (continued.) 
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 unlikely  that  competitors  will  have  a  fully  redundant  network  in  place  when  they  initially  offer  local  service  .  .  .  [and]  some  facilities  capabilities  (e.  g.,  central  office  switching)  will  likely  need 
 to  be  obtained  from  the  incumbent  local  exchange  carrier  as  network  elements  pursuant  to  new  section  251.  460  As  the  Commission  noted  in  the  Local  Competition  Order,  under  the  1996  Act, 
 the  opening  of  one  of  the  last  monopoly  bottleneck  strongholds  in  telecommunications    the  local  exchange  and  exchange  access  markets    to  competition  is  intended  to  pave  the  way  for 
 enhanced  competition  in  all  telecommunications  markets,  by  allowing  all  providers  to  enter  all  markets.  461  We  find  that  a  reasonable  interpretation  of  the  statute  is  that  our  impairment  inquiry 
 should  center  on  those  telecommunications  services  that  competitors  provide  in  direct  competition  with  the  incumbent  LECs  core  services,  which  we  call  qualifying  services.  462 

 140.  As  stated  above,  by  qualifying  services,  we  mean  those  telecommunications  services  offered  by  requesting  carriers  in  competition  with  those  telecommunications  services 
 that  have  been  traditionally  within  the  exclusive  or  primary  domain  of  incumbent  LECs.  463  These  services,  whether  they  are  sold  to  residential  or  business  customers,  include,  for  example, 
 local  exchange  services,  such  as  POTS  and  local  data  service  464  ,  and  access  services,  such  as  xDSL  465  and  high-  capacity  circuits.  466  Parties  have  asked  us  to  clarify  whether  CMRS  would 

 (Continued  from  previous  page) 
 exchange  service.);  HTBC  Comments  at  41  (  Section  251  was  intended  to  promote  competition  in  a  voice  telephony  market  when  [incumbent  LECs]  have  market  power  and  where  no  competitive  alternatives  to  [incumbent 

 LECs]  networks  existed  .  .  .). 
 460  Joint  Conference  Report  at  148  (emphasis  added). 

 461  Local  Competition  Order,  11  FCC  Rcd  at  15506,  para.  4. 
 462  See  Letter  from  John  J.  Heitmann,  Counsel  for  NuVox,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No. 
 01-  338  at  3  (filed  Jan.  15,  2003)  (NuVox  Jan.  15,  2003  Ex  Parte  Letter)  (referencing  the  type  of  services  it  provides  indicates  NuVox  intends  to  and  does  compete  with  the  Bells  and  other  ILECs  head  on  in  the  provision  of  LEC 

 services.). 
 463  Our  determination  in  this  Part  moots  the  issues  the  Commission  raised  in  the  Shared  Transport  Order.  See 
 Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.  96-  98,  Third  Order  on  Reconsideration  and  Further  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  12460,  12494-  96,  paras. 

 60-  61  (1997)  (Shared  Transport  Order)  affd,  Southwestern  Bell  Tel.  Co.  v.  FCC,  153  F.  3d  597  (8th  Cir.  1998)  (affirming  the  Commissions  decision  that  shared  transport  is  a  network  element  regardless  of  the  fact  that  shared 
 transport  can  be  used  only  when  combined  with  switching),  vacated,  Ameritech  Corp.  v.  FCC,  526  U.  S.  1142  (1999),  affd  in  part  on  rehg,  Southwestern  Bell  Telephone  Co.,  199  F.  3d  996  (8th  Cir.  1999)  (reissuing  its 
 affirmation  of  the  Commissions  determination  that  shared  transport  is  a  network  element  but  vacating  and  remanding  for  further  consideration  the  issue  of  whether  shared  transport  must  be  made  available  on  an  unbundled 
 basis). 
 464  Letter  from  John  J.  Heitmann,  Counsel  for  NuVox,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01- 
 338  at  2  (filed  Jan.  23,  2003)  (NuVox  Jan.  23,  2003  Ex  Parte  Letter)  (noting  that  a  point-  to-  point  local  service  comprises  data  transmission  between  two  points  within  a  designated  local  calling  area.). 

 465  Although  the  D.  C.  Circuit  vacated  the  Commissions  conclusion  that  xDSL  service  is  a  telephone  exchange 
 service  or  exchange  access  service,  as  defined  in  the  Act,  these  services  are  currently  regulated  as  access  services  as  defined  by  the  Commissions  rules.  WorldCom  v.  FCC,  246  F.  3d  690  (D.  C.  Cir.  2001);  see  also  GTE 

 Telephone  Operating  Cos.,  GTOC  Tariff  No.  1,  GTE  Transmittal  No.  1148,  CC  Docket  No.  98-  79,  Memorandum  (continued.) 
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 qualify  for  the  use  of  a  UNE.  467  We  find  that  because  CMRS  are  used  to  compete  against  telecommunications  services  that  have  been  traditionally  within  the  exclusive  or  primary  domain 
 of  incumbent  LECs  services,  CMRS  providers  also  qualify  for  access  to  UNEs,  subject  to  the  limitations  described  herein.  468 

 141.  We  find  that  our  interpretation  of  sections  251(  c)(  3)  and  251(  d)(  2)  is  the  most  reasonable  because  it  ensures  that  the  powerful  regulatory  tools  made  available  through  those 
 provisions  are  focused  on  opening  the  bottleneck  markets  largely  controlled  by  incumbent  LECs.  Given  that  unbundling  is  one  of  the  most  intrusive  forms  of  economic  regulation    and  one  of  the 
 most  difficult  to  administer    it  is  unlikely  that  Congress  intended  to  apply  unbundling  more  generally  absent  an  unambiguous  mandate.  Although  we  recognize  that  the  Acts  general 
 purpose  is  to  open  all  telecommunications  markets  to  competition,  section  251  of  the  Act  is  designed  to  achieve  that  goal  in  markets  for  local  exchange  services.  Therefore,  we  believe  it  is 
 more  appropriate  to  interpret  section  251(  c)  and  (d)  as  applying  to  only  those  services  that  compete  directly  against  traditional  incumbent  LEC  services. 

 (Continued  from  previous  page) 
 Opinion  and  Order,  13  FCC  Rcd  22466  (1998).  For  example,  some  carriers  file  access  tariffs  containing  certain  types  of  xDSL  services,  such  as  ADSL  and  SDSL.  See,  e.  g.,  National  Exchange  Carrier  Association  Tariff  FCC 

 No.  5,    8;  Sprint  Local  Telephone  Co.  Tariff  FCC  No.  3,    8.5;  Roseville  Tariff  FCC  No.  1,    9.1.  We  note  that  commenters,  including  incumbent  LECs,  do  not  dispute  that  xDSL  service  is  appropriately  considered  in  our  section 
 251  impairment  analysis.  BellSouth  Comments  36-  44;  HTBC  Comments  at  40-  42;  SBC  Comments  at  22-  23  (arguing  that,  under  the  impairment  analysis,  carriers  should  not  receive  access  to  UNEs  for  xDSL-  based  broadband 
 services).  But  see  Qwest  Comments  at  42  (noting  that  some  new  network  facilities  that  can  be  used  to  provide  xDSL  fall  outside  the  scope  of  the  market-  opening  objectives  of  section  251.);  Verizon  Comments  at  71;  Letter 
 from  William  P.  Barr,  Executive  Vice  President  and  General  Counsel,  Verizon,  to  Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  No.  01-  338  at  5,  in  Letter  from  Ann  D.  Berkowitz,  Project  Manager    Federal  Affairs,  Verizon,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Nov.  22,  2002)  (Verizon  Nov.  22,  2002  Ex  Parte  Letter). 

 466  These  services  must  be  offered  on  a  common  carrier  basis,  as  explained  below.  Our  list  is  intended  to  identify 
 general  categories  of  services  that  would  qualify  as  eligible  services.  It  is  not  intended  to  be  an  exhaustive  list  or  to  identify  services  in  a  more  particular  manner.  Rather,  we  believe  this  list  should  provide  adequate  guidance  for 

 parties  to  determine  whether  a  service  qualifies  or  not.  See  NuVox  Comments  at  55-  56.  In  contrast,  non-qualifying  are  those  services  not  traditionally  provided  exclusively  by  incumbent  LECs.  Among  others,  they 
 would  include  long  distance  voice  services  and  data  services  provided  on  an  interexchange  basis. 
 467  ATTWS  Comments  at  23-  24;  CTIA  Comments  at  3-  7;  Nextel  Comments  at  2;  see  also  ATTWS  and 
 VoiceStream  Petition  for  Declaratory  Ruling,  CC  Docket  No.  96-  98  at  5-  6  (filed  Nov.  19,  2001)  (ATTWS/  VoiceStream  Nov.  19,  2001  Petition);  Triennial  Review  NPRM,  16  FCC  Rcd  at  22809-  10,  para.  63.  On 

 the  other  hand,  some  commenters  argue  that  wireless  providers  should  not  be  able  to  obtain  access  to  UNEs.  See  BellSouth  Comments  at  46-  53;  SBC  Comments  at  24. 

 468  We  grant  the  portion  of  the  ATTWS/  VoiceStream  Nov.  19,  2001  Petition  requesting  that  the  Commission 
 declare  that  CMRS  providers  are  entitled  to  access  to  UNEs,  as  long  as  the  CMRS  provider  meets  the  requirements  outlined  throughout  this  Order.  ATTWS/  VoiceStream  Nov.  19,  2001  Petition  at  6;  see  also  Progress  Telecom 

 Comments  at  6  (  Nothing  in  the  Communications  Act  .  .  .  even  remotely  suggests  that  a  requesting  carrier  must  use  the  standalone  UNEs  for  the  provision  of  wireline  services  in  order  to  obtain  them  from  the  incumbent  LECs.). 
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 142.  We  disagree  with  those  commenters  that  argue  that  section  251(  d)(  2)  compels  us  to  conduct  an  analysis  of  every  possible  service  that  a  requesting  carrier  might  want  to  offer.  469 
 Because  section  251(  d)(  2)  s  edict  is  far  from  clear,  the  Commission  can  use  its  discretion  to  reasonably  interpret  the  statute.  470  Only  if  the  statute  were  unambiguous  would  the  Commission 
 be  compelled  to  undertake  such  an  analysis  as  suggested  by  commenters. 
 143.  Use  of  UNEs  for  Non-  Qualifying  Services.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether,  if  a  network  element  is  unbundled  for  one  service,  its 

 availability  should  be  limited  to  that  service  or  whether  requesting  carriers  should  be  able  to  use  it  for  any  service.  471  We  conclude  that,  once  a  requesting  carrier  has  obtained  access  to  a  UNE  to 
 provide  a  qualifying  service,  as  defined  above,  the  carrier  may  use  that  UNE  to  provide  any  additional  services,  including  non-  qualifying  telecommunications  and  information  services.  This 
 approach  to  the  use  of  the  network  element,  which  maximizes  the  use  of  a  network  element  once  an  unbundling  decision  has  been  made,  is  most  consistent  with  the  concerns  raised  by  the  USTA 
 court  regarding  the  costs  associated  with  unbundling  in  the  first  instance.  472  In  other  words,  once  the  Commission  has  determined  to  impose  the  costs  associated  with  mandatory 
 unbundling  upon  an  incumbent  LEC,  it  would  be  wasteful  for  the  network  element  not  to  be  put  to  its  maximum  use. 

 144.  As  discussed  above,  a  requesting  carrier  must  use  a  network  element  to  provide  a  qualifying  service  in  order  to  obtain  unbundled  access  to  that  network  element.  473  Section 
 251(  c)(  3)  requires  that  incumbent  LECs  must  provide  UNEs  to  requesting  carriers  for  the  provision  of  a  telecommunications  service.  474  Even  if  we  presume  that  Congress  may  have 
 intended  services  in  section  251(  d)(  2)  to  mean  telecommunications  services  as  used  in  section  251(  c)(  3),  as  we  noted  above,  this  interpretation  does  not  necessarily  resolve  the 
 ambiguity  regarding  whether  mixed  use  of  UNEs  is  permissible.  However,  a  reasonable  interpretation  of  the  Act,  and  an  examination  of  its  purposes,  leads  us  to  the  conclusion  that, 
 when  a  UNE  can  be  used  to  provide  multiple  services,  Congress  did  not  intend  to  require  that  UNEs  be  used  exclusively  to  provide  qualifying  telecommunications  services. 

 145.  We  note  that  section  51.100(  b)  of  the  Commissions  current  rules  allows  mixed  use  of  UNEs.  475  We  reaffirm  this  rule  here.  Moreover,  the  Commissions  EELs  rules  were 
 469  SBC  Reply  at  61-  67. 
 470  Chevron  U.  S.  A.,  Inc.  v.  Natural  Resources  Defense  Council,  467  U.  S.  837,  843  (1984). 
 471  Triennial  Review  NPRM,  16  FCC  Rcd  at  22799,  para.  38. 
 472  USTA,  290  F.  3d  at  429. 
 473  These  services  also  must  be  offered  on  a  common  carrier  basis,  as  explained  below. 
 474  47  U.  S.  C.    251(  c)(  3). 
 475  47  C.  F.  R.    51.100(  b)  (  A  telecommunications  carrier  that  has  interconnection  or  gained  access  under  sections 
 251(  a),  251(  c)(  2),  or  251(  c)(  3)  of  the  Act,  may  offer  information  services  through  the  same  arrangement,  so  long  as  it  is  offering  telecommunications  services  through  the  same  arrangement  as  well.). 
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 affirmed  by  the  D.  C.  Circuit,  and  those  rules  permit  a  variety  of  services  to  be  provided  over  this  combination  of  network  elements  so  long  as  a  significant  amount  of  local  exchange  service  is 
 also  provided.  476  Generally,  commenters  do  not  contest  these  rules;  instead,  they  debate  how  much  local  service  should  be  required  and  what  conditions  should  be  placed  upon  that  usage 
 (e.  g.,  a  collocation  requirement).  477  We  ensure  below,  through  our  impairment  analysis  and  related  eligibility  requirements,  that  our  decision  permitting  the  use  of  UNEs  for  services  other 
 than  qualifying  services  does  not  lead  to  the  gaming  of  our  rules.  Those  issues  will  be  addressed  later  in  this  Order  within  the  impairment  analysis  for  each  particular  UNE. 

 146.  Allowing  requesting  carriers  to  use  UNEs  to  provide  multiple  services  on  the  condition  that  they  are  also  used  to  provide  qualifying  services  will  permit  carriers  to  create  a 
 package  of  local,  long  distance,  international,  information,  and  other  services  tailored  to  the  customer.  Offering  packages  of  services  in  one  integrated  offering  is  a  marketing  method 
 increasingly  utilized  by  incumbent  LECs  to  sell  end  users  their  array  of  available  services.  478  The  record  shows  that  carriers  must  have  sufficient  flexibility  in  how  they  package  service 
 offerings  to  customers  in  order  to  be  able  to  fully  participate  in  the  telecommunications  market.  479  Limiting  competitive  LECs  use  of  UNEs  to  qualifying  services  only  would  likely 
 affect  their  ability  to  meaningfully  compete  against  incumbent  LECs.  480  Moreover,  such  an  interpretation  would  hamper  a  competitive  LECs  ability  to  provide  innovative  service  packages 
 to  customers,  a  result  that  would  directly  undermine  the  Acts  explicit  goal  of  encouraging 

 476  CompTel,  309  F.  3d  at  12-  18. 
 477  See,  e.  g.,  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  No.  01-  338  at  1  (filed  Dec.  19,  2002)  (Qwest  Dec.  19,  2002  EELs  Ex  Parte  Letter)  (proposing  mixed  use  as  long  as  51%  of  traffic  is  local  voice). 

 478  Illinois  Commission  Comments  at  3;  Verizon  Reply,  Attach.  B,  Reply  Declaration  of  Alfred  E.  Kahn  and 
 Timothy  J.  Tardiff  (Verizon  Kahn/  Tardiff  Decl.)  at  para.  39  (stating  that  Verizon  has  long  agreed  with  [AT&  Ts]  position  that  carriers  need  to  offer  packages  of  services  if  they  are  to  compete  successfully.). 

 479  CompTel  Comments  at  55-  56;  Illinois  Commission  Comments  at  3;  LDMI  Comments  at  17;  NewSouth 
 Communications  Comments  at  54-  55;  NuVox  Comments  at  56. 
 480  We  note  that  SBC  has  argued  specifically  that  requesting  carriers  should  not  be  allowed  to  use  shared  transport 
 for  intraLATA  toll  traffic.  SBC  Comments  at  81-  84;  SBC  Reply  at  141-  42;  But  see  ALTS  et  al.  Reply  at  94-  96  (responding  in  opposition  to  SBC  on  this  point).  SBC  notes  that  some  competing  carriers  that  have  purchased  the 

 shared  transport  UNE  to  provide  local  exchange  service  have  asserted  that  they  should  be  permitted  to  use  it  for  intraLATA  toll  service  as  well.  SBC  Comments  at  81  (citing  a  formal  complaint,  CoreComm  Communications,  Inc. 
 and  Z-  Tel  Communications,  Inc.  v.  SBC  Communications,  Inc.  et  al.,  EB-  01-  MD-  017  (Aug.  28,  2001)).  As  we  have  previously  indicated,  the  ability  to  compete  in  offering  intraLATA  toll  services  affects  a  competing  LECs  ability  to 
 compete  in  the  local  market.  See  SBC  Communications  Inc.  Apparent  Liability  for  Forfeiture,  File  No.  EB-  01-  IH-0030,  Forfeiture  Order,  17  FCC  Rcd  19923,  19931-  32,  para.  15  (2002)  (citing  Application  of  Ameritech  Michigan 
 Pursuant  to  Section  271  of  the  Communications  Act  of  1934,  as  amended,  to  Provide  In-  Region,  InterLATA  Services  in  Michigan,  CC  Docket  No.  97-  137,  Memorandum  Opinion  and  Order,  12  FCC  Rcd  20543,  20738-  40,  paras.  377- 
 78  (1997)).  Under  our  decision  here,  once  a  requesting  carrier  gains  access  to  the  shared  transport  UNE  to  provide  local  service,  the  requesting  carrier  may  also  use  it  to  provide  any  additional  services,  regardless  whether  those 
 services  are  qualifying  or  non-  qualifying.  Accordingly,  in  light  of  the  discussion  above,  we  reject  SBCs  argument. 
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 innovation.  481  As  the  Commission  stated  in  the  Local  Competition  Order,  Congress  intended  the  opening  of  local  markets  to  pave  the  way  for  enhanced  competition  in  all  telecommunications 
 markets,  by  allowing  all  providers  to  enter  all  markets.  482  To  limit  competitors  use  of  UNEs  to  only  qualifying  services  would  force  requesting  carriers  to  either  continue  to  provide  services  on 
 a  stand-  alone  basis,  contrary  to  the  market  trend,  or  even  more  perversely,  to  provide  a  package  of  services  over  duplicative  networks  or  through  duplicative  network  configurations.  483  Either 
 result  would  effectively  preclude  a  competitors  ability  to  compete  in  the  market,  especially  in  a  market  in  which  the  market  leader    the  incumbent  LEC    is  not  similarly  constrained. 

 147.  Allowing  the  use  of  UNEs  in  this  manner  is  similar  to  the  approach  the  Commission  adopted  in  its  Collocation  Remand  Order  for  multi-  functional  equipment.  484  In  that 
 Order,  the  Commission  required  incumbent  LECs  to  allow  the  collocation  of  competitive  LEC  equipment  that  contained  functions  that  would  not  meet  the  standard  as  stand-  alone  functions, 
 recognizing  that  allowing  the  collocation  of  multi-  functional  equipment  is  critical  to  the  realization  of  Congresss  goal  of  promoting  competition  and  technical  innovation.  485  The 
 Commission  acknowledged  that  competitive  LECs  must  be  able  to  realize  the  same  productivity  increases  that  developments  in  new  technologies  offer.  486  For  these  reasons,  the  Commission 
 found  that  as  long  as  the  primary  function  satisfies  the  requisite  collocation  test,  the  other  functions  are  also  permitted.  487  Here,  we  follow  a  similar  rationale.  Our  approach  ensures  that  a 
 UNE  is  used  for  appropriate  purposes  but  also  recognizes  that  the  market  and  end  users  may  benefit  from  the  use  of  the  UNE  to  provide  additional  services.  Furthermore,  as  a  practical 
 matter,  if  we  did  not  allow  carriers  to  use  UNEs  to  provide  services  in  addition  to  qualifying  services,  we  would  effectively  limit  a  requesting  carriers  ability  to  use  innovative  multi-functional 
 collocation  equipment.  Carriers  would  be  able  to  collocate  multi-  functional 

 481  Preamble  to  the  1996  Act;  see  also  47  U.  S.  C.    157  nt  (  The  Commission  .  .  .  shall  encourage  the  deployment 
 on  a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans.). 
 482  Local  Competition  Order,  11  FCC  Rcd  at  15506,  para.  4. 

 483  The  same  analysis  applies  in  this  context  as  in  the  commingling  context.  AT&  T  claims  that  the  commingling 
 ban  creates  a  competitive  barrier  because  it  effectively  requires  competitive  LECs  to  establish  two  parallel  networks    one  for  local  traffic  and  one  for  access  traffic.  AT&  T  Reply  at  293.  Furthermore,  while  it  is  theoretically  possible 

 to  require  a  regime  of  differentiated  pricing  under  which  qualifying  traffic  would  be  priced  at  TELRIC  and  other  traffic  would  be  priced  at  market  rates,  such  a  regime  would  require  undue  policing  of  customer  usage  and  would  be 
 administratively  impractical  and  burdensome. 
 484  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  Fourth  Report  and  Order, 
 CC  Docket  No.  98-  147,  16  FCC  Rcd  15435,  15454,  para.  36  (2001)  (Collocation  Remand  Order),  affd  sub.  nom.  Verizon  Telephone  Cos.  v.  FCC,  292  F.  3d  903  (D.  C.  Cir.  2002). 

 485  Collocation  Remand  Order,  16  FCC  Rcd  at  15453,  para.  33. 
 486  Id. 
 487  Id.  at  15454,  para.  36.  The  Commission  placed  certain  physical  restrictions  of  the  equipment  allowed  for  other 
 functions.  Id. 
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 equipment,  as  allowed  by  the  Collocation  Remand  Order,  but,  under  a  rule  restricting  the  use  of  UNEs,  would  be  unable  to  use  of  all  of  the  equipments  permitted  functions.  488 
 148.  We  disagree  with  commenters  that  state  that  the  Act  prohibits  the  use  of  UNEs  for  information  services.  489  Section  251(  c)(  3)  states  that  incumbent  LECs  have  a  duty  to  provide,  to 
 any  requesting  telecommunications  carrier  for  the  provision  of  a  telecommunications  service,  nondiscriminatory  access  to  network  elements  on  an  unbundled  basis.  490  The  statute  does  not 
 require  that  access  be  provided  exclusively  for  telecommunications  services.  We  note,  in  fact,  that  this  statutory  interpretation  is  consistent  with  Congresss  intent  to  open  existing  markets 
 served  by  incumbent  LECs  to  competitive  entry.  As  the  foregoing  discussion  explains,  491  competitive  LECs  are  providing  integrated  telecommunications  and  information  service 
 offerings  in  direct  competition  with  the  incumbent  LEC  provision  of  these  services.  492  Moreover,  such  a  rule  may  prohibit  the  packaging  of  services  that  would  be  considered  advanced 
 telecommunications  capabilities,  but  are  not  telecommunications  services  themselves,  thus  conflicting  with  the  goals  of  the  Act.  493  We  reasonably  infer  that  a  competitor  may  use  a  UNE  to 
 provide  a  broader  category  of  services,  provided  that  the  competitor  is,  in  fact,  also  providing  qualifying  service  over  the  UNE.  494 

 149.  Requesting  carriers  must  offer  a  service  on  a  common  carrier  basis.  Finally,  we  affirm  that,  in  order  to  gain  access  to  a  UNE  under  section  251(  c)(  3),  a  requesting  carrier  must 
 provide  a  telecommunications  service,  and  specifically  a  qualifying  telecommunications  service,  over  that  UNE.  495  It  cannot,  for  example,  qualify  for  UNEs  to  the  extent  it  provides 
 exclusively  private  carrier  services  or  information  services.  496  Section  251(  c)(  3)  uses  the  term  telecommunications  service  and  both  sections  251(  c)(  3)  and  (d)(  2)  use  the  term 
 telecommunications  carrier  to  define  the  scope  of  the  unbundling  obligation.  497 

 488  CompTel  Comments  at  55-  56. 
 489  Next  Level  Comments  at  13  n.  26;  SBC  Comments  at  22;  Verizon  Comments  at  71-  81;  SBC  Reply  at  88-  112. 
 490  47  U.  S.  C.    251(  c)(  3). 
 491  See  Part  IV.  B.  1. 
 492  See  NuVox  Jan.  15,  2003  Ex  Parte  Letter  at  3. 
 493  See  47  U.  S.  C.    157  nt  (  The  Commission  .  .  .  shall  encourage  the  deployment  on  a  reasonable  and  timely  basis 
 of  advanced  telecommunications  capability  to  all  Americans.). 
 494  This  issue  is  discussed  further  in  Part  VII.  B. 

 495  47  U.  S.  C.    251(  c)(  3). 
 496  This  issue  is  discussed  further  in  Part  VII.  B. 
 497  47  U.  S.  C.    251(  c)(  3)  and  (d)(  2). 
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 150.  The  Act  defines  telecommunications  service  as  the  offering  of  telecommunications  for  a  fee  directly  to  the  public,  or  to  such  classes  of  users  as  to  be  effectively 
 available  directly  to  the  public,  regardless  of  the  facilities  used,  498  and  defines  telecommunications  carrier  as  any  provider  of  telecommunications  services.  499  The 
 Commission  has  interpreted  telecommunications  services  to  mean  services  offered  on  a  common  carrier  basis,  and  the  D.  C.  Circuit  has  affirmed  that  interpretation.  500  Thus,  to  obtain 
 access  to  a  UNE,  a  requesting  carrier  must  use  the  UNE  to  provide  at  least  some  services  on  a  common,  rather  than  private,  carriage  basis.  We  note  that  this  provision  of  the  Act  is  not 
 ambiguous.  Thus,  Congresss  use  of  telecommunications  service  in  section  251(  c)(  3)  has  a  clear  meaning  defined  by  the  Act. 

 151.  We  find  that  the  Act  evokes  an  implicit  tradeoff.  In  exchange  for  obtaining  UNEs,  a  requesting  carrier  must  not  only  provide  services  that  compete  head-  to-  head  against  the 
 incumbent  LEC,  but  must  do  so  on  a  basis  that  ensures  that  the  benefits  of  competition  accrue  to  the  general  public.  We  find  that  it  is  reasonable  to  interpret  the  Act  in  a  manner  that  ensures  the 
 availability  of  UNEs  is  not  boundless  and  is  appropriately  limited  to  the  furtherance  of  clear  statutory  purposes.  501 

 152.  Generally  stated,  a  common  carrier  holds  itself  out  to  provide  service  on  a  non-discriminatory  basis.  502  A  private  carrier,  on  the  other  hand,  decides  for  itself  with  whom  and  on 
 what  terms  to  deal.  503  Common  carrier  status  has  been  assessed  by  the  Commission  and  the  courts  by  the  application  of  the  two-  part  NARUC  test:  (1)  whether  the  carrier  holds  himself  out 

 498  Id.    153(  46). 
 499  Id.    153(  44). 
 500  See  AT&  T  Submarine  Systems,  Inc.,  File  No.  S-  C-  L-  94-  006,  11  FCC  Rcd  14885  (1996)  (AT&  T  Submarine 
 Systems),  appl.  for  rev.  denied,  AT&  T  Submarine  Systems,  Inc.,  13  FCC  Rcd  21585  (1998),  affd  sub  nom.  Virgin  Islands  Tel.  Corp.  v.  FCC,  198  F.  3d  921  (D.  C.  Cir.  1999). 

 501  It  is  also  fundamentally  fair  that  carriers  that  choose  to  escape  some  of  the  regulation  necessary  to  become  a 
 common  carrier  do  not  have  the  same  benefits  available  to  those  carriers  that  do  bear  those  burdens. 
 502  See  AT&  T  Submarine  Systems,  11  FCC  Rcd  at  14885;  see  also  47  U.  S.  C.    153(  10)  (  The  term  common 
 carrier  or  carrier  means  any  person  engaged  as  a  common  carrier  for  hire,  in  interstate  or  foreign  communication  by  wire  or  radio  .  .  .  .). 

 503  See  Southwestern  Bell  Telephone  v.  FCC,  19  F.  3d  1475,  1481  (D.  C.  Cir.  1994)  (  If  the  carrier  chooses  its 
 clients  on  an  individual  basis  and  determines  in  each  particular  case  whether  and  on  what  terms  to  serve  and  there  is  no  specific  regulatory  compulsion  to  serve  all  indifferently,  the  entity  is  a  private  carrier  for  that  particular  service 

 and  the  Commission  is  not  at  liberty  to  subject  the  entity  to  regulation  as  a  common  carrier  citing  National  Assn.  of  Regulatory  Utility  Commissioners  v.  FCC,  533  F.  2d  601,  608-  09  (1976)  (NARUC  II);  National  Assn  of 
 Regulatory  Utility  Commissioners  v.  FCC,  525  F.  2d  630,  643  (1976)  (NARUC  I)). 
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 to  serve  indifferently  all  potential  users;  and  (2)  whether  the  carrier  allows  customers  to  transmit  intelligence  of  their  own  design  and  choosing.  504 
 153.  Common  carrier  services  may  be  offered  on  a  retail  or  wholesale  basis  because  common  carrier  status  turns  not  on  who  the  carrier  serves,  but  on  how  the  carrier  serves  its 
 customers,  i.  e.,  indifferently  and  to  all  potential  users.  For  example,  residential  local  voice  services  typically  are  both  retail  services  and  common  carrier  services  because  they  are  sold  to 
 end  users  through  generally  available  offerings.  Carriers  that  offer  residential  local  voice  services  do  not  generally  make  individualized  decisions  whether  and  on  what  terms  to  deal  with 
 their  customers.  Likewise,  although  access  services  are  wholesale  offerings  when  sold  to  other  carriers,  they  also  are  common  carrier  services  when  offered  indifferently  to  all  members  of  a 
 particular  class  of  customers.  For  example,  if  a  carrier  tariffed  an  access  offering  and  made  it  available  to  other  carriers  as  an  input  for  their  retail  interexchange  service,  such  access  service 
 would  be  a  common  carrier  service.  In  contrast,  the  self-  provision  of  access  services  used  solely  as  an  input  to  provide  a  retail  interexchange  service  does  not  qualify  as  the  provision  of 
 exchange  access  on  a  common  carriage  basis.  Instead,  in  that  instance,  the  carrier  is  providing  exchange  access  to  itself  on  a  private  carriage  basis.  Therefore  an  interexchange  carrier  would 
 not  be  eligible  to  obtain  a  UNE  exclusively  to  provide  exchange  access  to  itself  in  order  to  provide  a  retail  interexchange  service. 

 3.  Implicit  Support  Flows 
 a.  Background 
 154.  In  the  USTA  decision,  the  D.  C.  Circuit  addressed  the  question  of  implicit  support  flows  and  their  relationship  to  the  Commissions  decision  making  under  section  251.  The  court 

 concluded,  among  other  things,  that  the  Commission  had  not  adequately  explained  its  decision  to  adopt  nationwide  unbundling  requirements  in  light  of  the  implicit  support  flows  found  in 
 telecommunications  rates.  505  In  this  Part,  we  explain  how  our  new  impairment  standard  will  address  the  concerns  voiced  by  the  D.  C.  Circuit  and  describe  the  nature  and  extent  of  existing 
 implicit  support  flows. 
 155.  In  reaching  the  conclusion  that  the  Commissions  explanation  was  inadequate,  the  court  expressed  concerns  about  the  Commissions  approach  to  unbundling  both  in  areas  where 

 the  incumbent  LECs  retail  rates  may  exceed  its  costs  (presumably  referring  to  historic  costs)  and  in  areas  where  incumbent  LEC  retail  rates  may  be  below  cost,  although  the  court  raised 
 different  concerns  in  each  case.  The  court  noted  that  [  c]  ompetitors  will  presumably  not  be  drawn  to  markets  where  customers  are  already  charged  below  cost,  although  it  recognized  that 

 504  NARUC  II,  533  F.  2d  at  608-  09.  Commission  and  court  precedent  provides  guidance  as  to  the  characteristics  of 
 common  carrier  services.  Id.;  NARUC  I,  525  F.  2d  at  644. 
 505  USTA,  290  F.  3d  at  422-  23.  In  the  Iowa  Utilities  Board  decision,  the  Supreme  Court  had  previously  rejected 
 BOC  arguments  concerning  implicit  support  flows,  noting  that  [  section]  254  requires  that  universal-  service  subsidies  be  phased  out,  so  whatever  possibility  of  arbitrage  remains  will  be  only  temporary.  Iowa  Utils.  Bd.,  525 

 U.  S.  at  393-  94. 
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 competitors  might  be  drawn  to  such  areas  if  the  new  entrant  could  sell  complementary  services  at  prices  high  enough  to  offset  the  low  local  exchange  rates.  506  While  questioning  entry  into  the 
 higher  cost  markets,  the  court  found  the  gap  in  the  Commissions  reasoning  .  .  .  greatest  in  requiring  unbundling  in  the  other  segments  of  the  markets,  where  presumably  ILECs  must 
 charge  above  cost  .  .  .  in  order  to  offset  their  losses  in  the  subsidized  markets  .  .  .  .  507  As  explained  below,  however,  the  granular  impairment  analysis  we  adopt  today,  by  focusing  on  the 
 economic  and  operational  viability  of  entry  in  different  market  segments,  provides  for  a  modification  of  the  impairment  standard  that  addresses  these  concerns,  while  supplying  the 
 detailed  explanation  the  USTA  court  sought. 
 156.  As  the  D.  C.  Circuit  noted,  the  rates  for  telecommunications  services  historically  have  included  implicit  support  flows  between  different  classes  of  customers  and  geographic 

 areas.  In  general,  as  the  court  recognized,  these  implicit  support  flows  have  tended  to  result  in  rates  that  are  lower  than  they  otherwise  would  be  for  residential  and  rural  customers  and  rates 
 that  are  higher  than  they  otherwise  would  be  for  business  and  urban/  suburban  customers.  508  These  implicit  support  flows  still  exist  in  many  of  the  rates  regulated  by  the  state  commissions, 
 including  those  for  local  exchange  service,  intrastate  exchange  access,  and  intrastate  toll  rates.  Such  implicit  support  flows  have  also  traditionally  been  found  in  the  rates  for  interstate  exchange 
 access,  and  interstate  toll  service  509  subject  to  the  Commissions  regulatory  jurisdiction.  510  Implicit  support  flows  have  traditionally  been  justified  as  supporting  the  universal  availability  of 

 506  USTA,  290  F.  3d  at  422.  Thus,  as  the  court  suggested,  even  where  the  rate  for  an  individual  customer  service 
 offering  may  not  cover  the  incumbent  LECs  fully  distributed  historical  book  cost,  that  does  not  mean  that  such  customers  as  a  group  are  unprofitable  or  undesirable  to  serve. 

 507  Id.  (emphasis  in  original). 
 508  Id. 
 509  These  implicit  support  flows  result,  in  large  part  from  rate  averaging  between  rural  and  suburban/  urban  areas 
 and  the  recovery  of  certain  non-  traffic  sensitive  costs  through  traffic  sensitive  per  minute  rates,  which  over-  recovers  costs  from  higher  volume  users,  often  business  customers.  See  generally,  Access  Charge  Reform,  Price  Cap 

 Performance  Review  for  Local  Exchange  Carriers,  Low-  Volume  Long  Distance  Users,  Federal-  State  Joint  Board  On  Universal  Service,  CC  Docket  Nos.  96-  262,  94-  1,  99-  249,  96-  45,  Sixth  Report  and  Order  in  CC  Docket  Nos. 
 96-  262  and  94-  1,  Report  and  Order  in  CC  Docket  No.  99-  249  and  Eleventh  Report  and  Order  in  CC  Docket  No.  96-  45,  15  FCC  Rcd  12962,  12971-  72,  para.  23  (2002)  (CALLS  Order)  aff'd  in  part,  rev'd  in  part,  and  remanded  in 
 part  sub  nom.  Texas  Office  of  Public  Utility  Counsel  v.  FCC,  265  F.  3d  313  (5th  Cir.  2001).  The  court  affirmed  the  CALLS  Order  in  most  respects,  but  remanded  for  further  analysis  and  explanation  the  decisions  to  size  the  Interstate 
 Access  Support  (IAS)  mechanism  at  $650  million  and  to  adopt  the  6.5  %  X-  factor. 
 510  The  original  Communications  Act  of  1934  established  a  bifurcated  system  for  the  regulation  of 
 telecommunications,  generally  leaving  the  regulation  of  communications  that  originated  and  terminated  within  the  same  state  to  the  state  commissions,  while  this  Commission  regulated  communications  that  originated  and 

 terminated  in  different  states,  except  in  the  case  of  multi-  state  local  exchange  areas.  See  47  U.  S.  C.    152(  b)(  2),  221(  b).  The  1996  Act  also  gives  various  responsibilities  concerning  the  implementation  of  the  local  competition 
 provisions  to  this  Commission.  Iowa  Utils.  Bd.,  525  U.  S.  at  378.  In  addition,  section  253  requires  the  Commission  to  preempt  state  and  local  requirements  that  prohibit  or  have  the  effect  of  prohibiting  the  ability  of  any  entity  to 
 provide  any  interstate  or  intrastate  telecommunications  service.  47  U.  S.  C.    253(  a),  (d). 
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 local  exchange  telephone  service  at  affordable  rates,  and  ensuring  reasonable  interexchange  toll  rates  for  customers  in  all  parts  of  the  country. 
 157.  Despite  relatively  widespread  agreement  on  such  broad  general  statements  concerning  implicit  support  flows,  511  this  area  is  more  complex  than  it  might  initially  appear. 
 The  existence  of  below  cost  residential  local  exchange  service  rates  does  not  mean  that  such  customers  are  unprofitable  to  serve.  Determining  whether  a  customer  class  is  desirable  to 
 serve  512  requires  a  comparison  of  costs  and  all  potential  revenues  for  the  class,  which  will  substantially  exceed  the  local  exchange  service  rate.  513  In  addition,  describing  certain  rates  as 
 being  above  or  below  cost  itself  involves  complex  questions  concerning  how  costs  should  be  defined.  In  the  context  of  implicit  support  flows,  describing  a  rate  as  below  cost  typically 
 means  that  the  rate  is  lower  than  the  incumbent  LECs  fully  distributed  historical  cost  of  providing  service.  514  This  definition  of  cost  does  not  necessarily  provide  a  valid  basis  for 
 comparison  since  in  a  fully  competitive  market,  firms  would  typically  price  a  service  offering  at  long  run  incremental  cost,  which  in  the  telecommunications  industry  may  be  considerably  lower 
 than  fully  distributed  historical  cost.  515  Moreover,  telecommunications  prices  are  not  static,  and  will  change  over  time  in  response  to  increased  competition.  516 

 158.  Recognizing  the  potential  effect  of  implicit  support  flows  on  the  development  of  competition,  the  1996  Act  addresses  this  issue  in  section  254.  This  provision  directs  the 
 Commission,  after  consultation  with  the  Joint  Board,  to  establish  specific,  predictable,  and 

 511  But  see  AT&  T  Willig  Reply  Decl.  at  paras.  50-  56;  WorldCom  Reply  at  26-  27;  WorldCom  Reply,  Declaration 
 of  Daniel  Kelley  (WorldCom  Kelley  Reply  Decl.)  at  paras.  60-  64. 
 512  Even  if  the  class  as  a  whole  is  not  desirable  to  serve,  certain  categories  of  customers  within  the  larger  class  will 
 typically  be  desirable  based  on  their  usage  patterns  or  cost  characteristics. 
 513  Residential  customers  typically  take  a  number  of  different  services  from  their  LEC  in  addition  to  local 
 exchange  service.  These  include  vertical  features,  as  well  as  federal  and  state  access  charges  typically  paid  to  the  local  exchange  service  provider  unless  the  service  is  provided  through  resale,  in  which  case  the  incumbent  LEC 

 would  receive  the  access  charge  revenues.  See  Local  Competition  Order,  11  FCC  Rcd  at  15646-  47,  para.  292.  The  LEC  may  also  receive  explicit  support  payments,  and  provide  the  customer  with  long  distance  service  and  Internet 
 access  service. 
 514  It  is  worth  noting  that,  except  for  smaller  incumbent  LECs  and  some  mid-  sized  incumbent  LECs,  both  the 
 Commission  and  state  regulators  have  generally  moved  from  traditional  rate-  base/  rate-  of-  return  regulation  to  the  use  of  price  cap  or  incentive  type  regulation  for  telecommunications  rates,  which  does  not  involve  a  direct  link 

 between  cost  showings  and  rate  levels.  Under  price  cap  or  incentive  type  regulation,  for  example,  a  regulated  carriers  rates  may  be  frozen  for  a  period  of  time  or  subject  to  periodic  adjustments  that  reflect  factors  such  as  the 
 rate  of  inflation,  historic  productivity  gains  and  certain  cost  changes  deemed  to  be  beyond  the  carriers  control. 
 515  In  addition,  economic  theory  does  not  provide  a  clear  answer  to  the  question  of  how  joint  and  common  and 
 fixed  costs  should  be  allocated  for  costing  purposes.  This  is  particularly  problematic  in  the  telecommunications  industry  due  to  the  very  high  proportion  of  joint  and  common  costs  and  fixed  costs. 

 516  See,  e.  g.,  AT&  T  Willig  Reply  Decl.  at  para.  60. 
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 sufficient  federal  support  mechanisms  to  preserve  and  advance  universal  service.  517  In  particular,  section  254(  e)  states  that  federal  support  mechanisms  should  be  explicit  and  sufficient  to 
 achieve  the  purposes  of  this  section.  518  At  the  same  time,  section  254(  b)  establishes  a  list  of  principles  that  the  Commission  must  use  in  establishing  its  policies  for  the  preservation  and 
 advancement  of  universal  service,  including  the  principle  that  consumers  in  rural,  insular,  and  high-  cost  areas  should  have  access  to  telecommunications  services  at  rates  that  are  reasonably 
 comparable  to  rates  charged  for  similar  services  in  urban  areas.  519  In  fact,  section  254(  g)  of  the  Act  requires  nationwide  averaging  of  interstate  toll  rates.  520  In  addition,  section  254(  f)  provides 
 that  the  [  s]  tate[  s]  may  adopt  regulations  not  inconsistent  with  the  Commissions  rules  to  preserve  and  advance  universal  service.  521 

 159.  The  extent  of  interstate  implicit  support  flows  has  decreased  substantially  since  passage  of  the  1996  Act.  In  response  to  section  254,  the  Commission  has  taken  a  number  of 
 major  steps  to  remove  implicit  support  flows  from  interstate  access  charges  and  develop  federal  universal  service  support  mechanisms  that  are  portable,  i.  e.,  available  not  only  to  the  incumbent 
 local  exchange  carrier,  but  also  to  other  qualifying  local  exchange  carriers.  These  measures  are  intended  to  make  universal  service  support  compatible  with  the  increasingly  competitive 
 marketplace  for  telecommunications. 
 160.  In  the  CALLS  Order,  the  Commission  adopted  a  five-  year  transitional  interstate  access  and  universal  service  reform  plan  for  price  cap  carriers.  522  The  Commissions  decision 

 was  intended  to  [  reform]  our  interstate  access  charge  regime  to  identify  implicit  universal  service  support  and  to  remove  such  implicit  support  from  our  interstate  access  charges,  and  .  .  . 
 [establish]  new  universal  service  mechanisms.  523  At  the  same  time,  the  CALLS  Order  keeps  rates  affordable  in  high  cost  areas,  by  replacing  the  subsidies  with  explicit  interstate  access 
 universal  service  support.  524  In  particular,  the  Order  creates  an  explicit  interstate  access  universal  service  support  mechanism  .  .  .  to  replace  the  implicit  support,  and  makes  interstate 

 517  47  U.  S.  C.    254. 
 518  Id.    254(  e). 
 519  Id.    254(  b)(  3). 
 520  Id.    254(  g);  47  C.  F.  R.    64.1801. 
 521  47  U.  S.  C.    254(  f).  The  Commission  has  not  interpreted  section  254  as  requiring  the  elimination  of  implicit 
 support  flows  contained  in  state  rates. 
 522  The  CALLS  Order  reforms  apply  only  to  price  cap  carriers.  The  Commission  previously  reformed  interstate 
 access  charges  in  the  1997  Access  Charge  Reform  Order.  Access  Charge  Reform,  Price  Cap  Performance  Review  for  Local  Exchange  Carriers,  Transport  Rate  Structure  and  Pricing,  End  User  Common  Line  Charges,  CC  Docket 

 Nos.  96-  262,  94-  1,  91-  213,  95-  72,  First  Report  and  Order,  12  FCC  Rcd  15982  (1997). 
 523  CALLS  Order,  15  FCC  Rcd  at  12973,  para.  25. 

 524  Id.  at  12975,  para.  32. 
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 access  universal  service  support  fully  portable  among  eligible  telecommunications  carriers.  525  The  Commission  also  reformed  the  interstate  access  charge  regime  and  universal  service  support 
 for  rate-  of-  return  carriers  in  the  2001  MAG  Order.  526  The  Commission  has  also  taken  steps  to  reform  pre-  existing  universal  service  support  mechanisms  in  light  of  section  254.  527 

 161.  While  it  would  be  difficult,  if  not  impossible,  to  accurately  quantify  the  implicit  support  flows  that  remain  in  state  rates,  it  appears  that  substantial  intrastate  support  flows 
 remain.  This  is  true  even  though  some  states  have  engaged  in  rate  rebalancing  in  light  of  the  developing  competitive  environment.  528  At  the  same  time,  under  the  current  system  of 
 federal/  state  jurisdiction  for  telecommunications  regulation,  the  primary  responsibility  for  regulating  rates  for  intrastate  telecommunications  services  529  rests  with  the  state  commissions  and 
 is  largely  beyond  our  jurisdiction.  Thus,  under  the  system  of  dual  federal/  state  jurisdiction,  the  states  are  generally  responsible  for  adjusting  the  rates  for  intrastate  services  to  promote 
 consumer  welfare  and  competition. 
 162.  We  also  note  that  the  vast  majority  of  incumbent  telephone  companies  may  qualify  for  an  exemption  from,  or  modification  or  suspension  of  the  Commissions  unbundling 

 requirements  under  section  251(  c)  with  the  result  that  the  scope  of  the  issues  posed  by  implicit  support  is  further  limited.  In  particular,  section  251(  f)(  1)  contains  an  exemption  from  the 
 Commissions  unbundling  requirements  for  rural  telephone  companies,  which  provides  that 
 [s]  ubsection  (c)  of  this  section  [the  unbundling  requirements]  shall  not  apply  to  a  rural  telephone  company  until  (i)  such  company  has 

 received  a  bona  fide  request  for  interconnection,  services,  or 
 525  Id. 
 526  Multi-  Association  Group  (MAG)  Plan  for  Regulation  of  Interstate  Services  of  Non-  Price  Cap  Incumbent  Local 
 Exchange  Carriers  and  Interexchange  Carriers,  CC  Docket  No.  00-  256,  Second  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Fifteenth 

 Report  and  Order,  Access  Charge  Reform  for  Incumbent  Local  Exchange  Carriers  Subject  to  Rate-  of-  Return  Regulation,  CC  Docket  No.  98-  77,  Report  and  Order,  Prescribing  the  Authorized  Rate  of  Return  From  Interstate 
 Services  of  Local  Exchange  Carriers,  CC  Docket  No.  98-  166,  Report  and  Order,  16  FCC  Rcd  19613  (2001),  recon.  pending  (MAG  Plan  Order). 

 527  See,  e.  g.,  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Ninth  Report  and  Order  and 
 Eighteenth  Order  on  Reconsideration,  14  FCC  Rcd  20432  (1999)  (Ninth  Report  and  Order),  remanded  sub  nom.  Qwest  Corp.  v.  FCC,  258  F.  3d  1191  (10th  Cir.  2001).  The  Ninth  Report  and  Order  established  a  federal  high-  cost 

 universal  service  support  mechanism  for  non-  rural  carriers  based  on  forward-  looking  economic  costs.  Id.  at  20434-  35,  para.  2.  The  Commission  is  considering  the  Joint  Board's  recommendations  regarding  the  remand  of  the  Ninth 
 Report  and  Order.  Federal-  State  Joint  Board  on  Universal  Service,  CC  Docket  No.  96-  45,  Recommended  Decision,  17  FCC  Rcd  20716  (2002). 

 528  See,  e.  g.,  Covad  Reply  at  52-  53  (creation  of  intrastate  universal  service  fund  in  California). 
 529  As  previously  discussed,  the  1996  Act  gives  the  Commission  a  role  in  establishing  the  principles  to  be  used  in 
 setting  rates  for  UNEs  and  the  discounts  that  apply  to  services  when  they  are  ordered  for  the  purpose  of  resale.  See  generally  supra  note  510. 
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 network  elements,  and  (ii)  the  State  commission  determines  .  .  .  that  such  request  is  not  unduly  economically  burdensome,  is 
 technically  feasible,  and  is  consistent  with  section  254  .  .  .  .  530 
 Section  251(  f)(  2)  also  provides  for  suspensions  and  modifications  of  the  requirements  of  section  251(  b)  and  (c),  which  includes  unbundling  obligations,  for  local  exchange  carrier[  s]  with  fewer 

 than  2  percent  of  the  Nations  subscriber  lines  installed  in  the  aggregate  nation-  wide  in  certain  circumstances.  531  Only  the  BOCs  and  Sprint  exceed  the  2  percent  standard  and  thus  would  not  be 
 eligible  to  seek  relief  under  the  provisions  of  this  section.  532 
 b.  Discussion 
 163.  As  explained  below,  by  focusing  on  the  economic  and  operational  viability  of  entry  in  different  market  segments,  our  revised  impairment  standard  addresses  the  issue  of 

 implicit  support  flows  in  a  manner  that  is  responsive  to  the  concerns  raised  in  the  D.  C.  Circuits  USTA  decision.  At  the  same  time,  we  conclude  that  the  statute  is  best  interpreted  as  giving  the 
 Commission  considerable  discretion  to  address  the  relationship  between  implicit  support  flows  and  our  impairment  analysis.  In  particular,  the  statute  does  not  specify  how  the  Commission  is 
 to  address  this  issue,  although  it  does  contain  a  number  of  provisions  that  relate  to  the  existence  of  implicit  support  flows.  For  example,  Congress  addressed  issues  related  to  implicit  support 
 flows  in  section  254  of  the  Act,  but  chose  not  to  include  language  addressing  how  the  existence  of  implicit  support  flows  should  factor  into  our  impairment  analysis.  In  addition,  the  statute 
 allows  the  state  commissions  to  limit  the  extent  of  unbundling,  and  thereby  address  possible  issues  arising  from  unbundling  and  implicit  support  flows,  for  all  but  the  largest  incumbent 
 LECs.  In  particular,  section  251(  f)(  1)  and  (2)  provide  for  an  exemption  from  section  251(  c)  requirements  for  rural  carriers,  and  permit  suspension  or  modification  of  the  section  251(  c) 
 requirements  for  carriers  serving,  in  the  aggregate,  less  than  two  percent  of  the  nations  access  lines.  533  Moreover,  section  271,  which  governs  BOC  in-  region,  interLATA  entry,  requires  that 
 they  provide  local  loops,  local  switching  and  local  transport  on  an  unbundled  basis  throughout  their  service  areas  without  regard  to  the  existence  of  implicit  support  flows.  534  Thus,  we 

 530  47  U.  S.  C.    251(  f)(  1).  Section  153(  37)  defines  a  rural  telephone  company.  47  U.  S.  C.    153(  37). 
 531  Id.    251(  f)(  2). 
 532  Trends  in  Telephone  Service  May  2002  Report  at  8-  5. 
 533  Thus,  while  the  Commission  has  not  interpreted  the  statute  to  require  the  development  of  comparable  explicit 
 support  mechanisms  at  the  state  level,  sections  251(  f)(  1)  and  (2)  effectively  permit  the  states  to  address  the  relationship  between  unbundling  and  implicit  support  flows  in  state  rates  by  allowing  the  state  commissions  to  limit 

 unbundling  for  all  but  the  largest  incumbent  LECs.  This  provision  as  well  shows  that  Congress  provided  for  mechanisms  other  than  the  impairment  standard  for  the  handling  of  implicit  support  flows. 

 534  47  U.  S.  C.    271(  c)(  2)(  B)(  iv),  (v),  (vi).  As  discussed  below,  we  interpret  the  unbundling  requirement  in 
 section  271  to  require  that  the  network  elements  enumerated  in  the  competitive  checklist  be  priced  based  on  the  pricing  standards  in  sections  201  and  202  of  the  Communications  Act  when  they  are  not  required  to  be  unbundled 

 pursuant  to  section  251(  c)(  3).  See  infra  Part  VIII.  A. 
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 conclude  that  the  Act  leaves  the  Commission  with  substantial  discretion  to  address  the  appropriate  relationship  between  implicit  support  flows  and  network  unbundling  within  the 
 confines  of  reasoned  decision-  making. 
 164.  As  explained  below,  the  impairment  standard  adopted  by  the  Commission  and  reflected  in  the  more  granular  state  commission  proceedings  mandated  by  this  Order  addresses 

 the  existence  of  implicit  support  flows  in  several  ways.  In  general  terms,  the  new  impairment  standard  provides  that  a  requesting  carrier  is  deemed  to  be  impaired  when  lack  of  access  to  an 
 incumbent  LEC  network  element  poses  a  barrier  or  barriers  to  entry,  including  operational  and  economic  barriers  that  are  likely  to  make  entry  into  a  market  uneconomic.  535  In  reaching  this 
 determination,  our  new  impairment  standard  generally  provides  for  consideration  of  any  advantages  as  well  as  disadvantages  that  will  be  experienced  by  competitive  LECs.  Our 
 impairment  standard  also  provides  for  consideration  of  whether  entry  is  economic  by  taking  into  account  the  potential  revenue  opportunities  available. 

 165.  In  determining  whether  impairment  exists,  the  Commission  finds  that  actual  marketplace  evidence  is  the  most  persuasive  and  useful  evidence,  especially  information 
 concerning  whether  new  entrants  have  deployed  their  own  facilities  or  obtained  wholesale  facilities  from  entities  other  than  the  incumbent  LEC  for  use  in  providing  competitive  retail 
 services.  While  such  market  evidence  will  be  given  substantial  weight,  it  is  not  necessarily  conclusive  or  presumptive  of  a  particular  outcome  without  additional  information.  The 
 Commission  will  also  consider  evidence  of  intermodal  competition,  when  it  is  presented  in  the  record. 

 166.  Our  impairment  standard  is  unlikely  to  result  in  unwarranted  unbundling  in  the  case  of  areas  and  services  for  which  local  exchange  rates  generally  exceed  the  incumbent  LECs 
 costs.  In  fact,  the  services  in  urban  areas  and  the  enterprise  services,  which  have  tended  to  be  priced  above  the  incumbent  LECs  costs  have  generally  been  the  first  areas  to  attract 
 competitive  entry,  536  probably  due  to  the  relatively  high  revenue  opportunities  available.  Thus,  these  areas  and  services  are  the  ones  for  which  marketplace  evidence  of  facilities-  based 
 competitive  entry  is  most  likely  to  warrant  a  finding  of  no  impairment.  Our  impairment  standard  also  generally  provides  for  consideration  of  advantages  experienced  by  new  entrants  as  well  as 
 the  barriers  to  entry  that  they  encounter.  Thus,  our  impairment  standard  will  take  into  account  circumstances  in  which  the  incumbent  sets  certain  retail  rates  above  its  cost,  in  order  to 
 provide  support  for  other  areas  or  services  with  retail  rates  that  are  below  cost,  although  we  recognize  that  such  rates  are  likely  to  change  in  response  to  competitive  entry.  537  As  a  result,  our 
 impairment  standard,  which  will  be  reflected  in  the  granular  analysis  that  the  state  commissions  apply,  will  generally  tend  to  reduce  the  likelihood  of  a  finding  of  impairment  in  the  case  of  areas 

 535  See  Part  V.  B.  1.  d.  supra. 
 536  See  supra  Part  IV;  see  also  Allegiance  Reply  at  23. 
 537  See  supra  note  516. 
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 and  services  for  which  prices  are  above  the  incumbent  LECs  cost,  and  thus  tend  to  reduce  the  extent  of  unbundling  required  in  those  areas. 
 167.  Significantly,  to  the  extent  that  incumbent  LECs  are  required  to  make  UNEs  available  pursuant  to  our  impairment  standard  in  the  case  of  areas  or  services  for  which  rates  are 
 above  cost,  it  will  be  based  on  an  affirmative  finding  of  impairment.  538  At  the  same  time,  such  unbundling  in  above  cost  areas  will  tend  to  create  pressure  for  the  incumbent  LECs  539  and  state 
 regulators  to  reduce  or  eliminate  implicit  support  flows,  540  and  establish  rates  that  more  closely  reflect  costs  in  conjunction  with  explicit  support  mechanisms.  Insofar  as  unbundling  in  such 
 areas  brings  about  pressure  for  reductions  in  above  cost  rates,  it  should  not  be  a  matter  for  regulatory  concern  unless  an  incumbent  LECs  overall  earnings  for  telecommunications  services 
 fall  below  confiscatory  levels.  541  This  result  is  consistent  with  the  Commissions  long-  standing  support  for  movement  toward  cost-  based  rates  and  explicit  support  mechanisms.  542  It  would  also 
 be  in  harmony  with  the  general  goals  of  section  254(  b)  for  reform  of  interstate  universal  service  support  flows. 

 168.  Furthermore,  our  impairment  standard,  which  will  be  reflected  in  the  granular  analysis  that  the  state  commissions  apply,  should  not  produce  unreasonable  effects  in  areas  and 
 538  Retail  rates  that  exceed  the  incumbents  cost  of  providing  service  will  not  necessarily  result  in  facilities-  based 
 competitive  entry.  Rather,  competitors  are  likely  to  base  entry  decisions  on  whether  all  potential  revenues  exceed  the  cost  of  entry,  taking  into  consideration  any  countervailing  advantages  a  new  entrant  may  have.  See,  e.  g., 

 WorldCom  Reply  at  27;  AT&  T  Willig  Reply  Decl.  at  para.  61;  WorldCom  Kelley  Reply  Decl.  at  para.  64.  In  addition,  even  in  such  areas,  new  entrants  may  initially  choose  not  to  enter  on  a  facilities-  basis  due  to  the  very  high 
 fixed  costs  involved. 
 539  Incumbent  LECs  will  generally  have  flexibility  to  reduce  rates  appropriately  in  response  to  competition. 

 540  See  generally  Qwest  Reply  at  13  (state  rate  rebalancing);  Sprint  Reply  at  9  n.  11  (state  rate  rebalancing). 
 541  Permian  Basin  Area  Rate  Cases,  390  U.  S.  747,  767  (1968). 
 542  The  Commission  has  long  supported  federal  rule  changes  designed  to  reduce  implicit  support  flows  and  reflect 
 cost  causation  principles  in  conjunction  with  explicit  support  mechanisms  to  protect  universal  service.  The  Commission  began  implementing  such  changes  in  the  early  and  mid-  1980s  when  it  adopted  measures  to  reform  the 

 jurisdictional  separations  process,  which  divides  incumbent  LEC  costs  between  state  and  interstate  operations,  and  adopted  a  system  of  interstate  access  charges  which  included  a  flat-  rate  end-  user  charge.  For  information 
 concerning  the  initial  steps  in  jurisdictional  separations  reform,  see  Amendment  of  Part  67  of  the  Commissions  Rules,  CC  Docket  No.  80-  286,  Decision  and  Order,  96  FCC  2d  781  (1984)  adopting  Second  Recommended 
 Decision  and  Order,  48  Fed.  Reg.  46556  (Joint  Board  1983),  affd  sub  nom.  Rural  Telephone  Coalition  v.  FCC,  838  F.  2d  1307  (D.  C.  Cir.  1988).  For  information  concerning  the  Commissions  access  charge  plan  see,  e.  g.,  MTS  and 
 WATS  Market  Structure,  CC  Docket  No.  78-  72,  Third  Report  and  Order,  93  FCC  3d  241  (1983);  modified  on  recon.,  97  FCC  2d  682,  (1984),  modified  on  recon.  97  FCC  2d  834  (1984),  affd  in  principal  part  and  remanded  in 
 part  sub  nom,  NARUC  v.  FCC,  737  F.  2d  1095  (D.  C.  Cir.  1984),  cert  denied,  469  U.  S.  1227  (1985);  MTS  and  WATS  Market  Structure  and  Amendment  of  Part  67  of  the  Commissions  Rules,  CC  Docket  Nos.  78-  72,  80-  286,  Decision 
 and  Order,  50  Fed.  Reg.  939  (1985),  adopting  Recommended  Decision  and  Order,  49  Fed.  Reg.  48325  (Joint  Board  1984);  MTS  and  WATS  Market  Structure  and  Amendment  of  Part  67  of  the  Commissions  Rules,  CC  Docket  Nos. 
 78-  72,  80-  286,  Report  and  Order,  2  FCC  Rcd  2953  (1987),  adopting  Recommended  Decision  and  Order,  2  FCC  Rcd  2324  (1987). 
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 for  services  where  local  exchange  rates  are  below  the  incumbents  cost  of  providing  service.  We  recognize  that  below  cost  local  exchange  rates  will  tend  to  discourage  competitive 
 facilities-  based  entry,  and  that  the  absence  of  such  entry  will  be  considered  as  evidence  of  impairment.  Our  impairment  standard,  however,  also  provides  for  consideration  of  evidence 
 concerning  the  full  range  of  revenue  opportunities  available  to  carriers  providing  service  over  the  relevant  facilities.  Thus,  retail  local  exchange  rates  that  are  below  cost  do  not  mean  that 
 competitive  entry  will  necessarily  be  uneconomic  since  a  competitor  will  base  entry  decisions  on  a  comparison  of  its  costs  and  the  full  range  of  available  revenue  opportunities,  not  solely  the 
 local  exchange  rate.  543  Moreover,  new  entrants  using  alternative  technologies  may  have  lower  costs  than  the  incumbent  LEC  even  when  UNE  rates  are  set  at  reasonable  levels.  Competitive 
 entry  under  these  circumstances  would  benefit  consumers  by  increasing  choice.  544 
 169.  Were  our  impairment  standard  to  require  unbundling  for  services  and  areas  with  below  cost  rates  where  actual  competitive  entry  does  not  take  place,  little  harm  would  result. 

 As  previously  mentioned,  the  statute  contains  an  exemption  from  the  unbundling  requirements  for  rural  carriers  and  provides  for  state  modification  or  suspension  of  the  unbundling 
 requirements  for  incumbent  carriers  serving,  in  the  aggregate,  less  than  two  percent  of  the  nations  access  lines.  545  Thus,  the  state  commissions  are  fully  able  to  prevent  any  problems  that 
 they  believe  might  result  from  unbundling  requirements  in  these  circumstances.  Even  without  this  statutory  provision,  little  harm  is  likely  to  result  in  the  event  of  unbundling  requirements  in 
 situations  where  competitors  do  not  actually  enter  the  market.  546 
 C.  The  Necessary  Standard 
 170.  Section  251(  d)(  2)  requires  the  Commission,  in  making  its  unbundling  determination,  to  consider  whether  access  to  such  network  elements  as  are  proprietary  in  nature 

 is  necessary.  547  In  the  UNE  Remand  Order,  the  Commission  gave  this  interpretation  of  the  necessary  standard: 

 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  incumbents  network,  including  self-  provisioning  by  a  requesting 
 carrier  or  acquiring  an  alternative  from  a  third-  party  supplier,  lack 
 543  For  example,  a  new  entrant  may  offer  a  premium  product  or  service  package  designed  to  be  attractive  to 
 customers  even  when  priced  well  above  the  incumbent  LECs  rate  for  local  exchange  service. 
 544  See,  e.  g.,  Allegiance  Reply  at  22. 

 545  47  U.  S.  C.    251(  f)(  1),  (2). 
 546  Until  a  competitor  requests  UNEs,  most  of  the  smaller  incumbent  LECs  need  to  do  little  other  than  stand  ready 
 to  negotiate  in  good  faith.  The  BOCs  and  the  larger  independent  incumbent  LECs  will  already  have  incurred  the  full  cost  of  developing  and  providing  UNEs  where  entry  has  taken  place. 

 547  47  U.  S.  C.    251(  d)(  2)(  A). 
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 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.  548 
 171.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether  to  change  the  interpretation  of  necessary  that  was  set  forth  in  the  UNE  Remand  Order.  549  We 

 decline  to  change  that  interpretation.  550  The  D.  C.  Circuit  did  not  remand  to  us  or  vacate  the  necessary  standard  or  instruct  us  to  consider  it  further.  551  Particularly  given  how  rarely  the 
 necessary  standard  is  invoked  as  compared  with  the  impair  standard  (indeed,  in  this  Order  we  do  not  analyze  any  elements  under  the  necessary  standard),  we  find  no  reason  to  alter 
 course. 
 D.  At  a  Minimum 
 172.  Section  251(  d)(  2)  provides  that  the  Commission  shall  consider,  at  a  minimum,  whether  .  .  .  the  failure  to  provide  access  to  such  network  elements  would  impair  the  ability  of 

 the  telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer.  552  In  reviewing  our  interpretation  of  that  phrase  under  the  UNE  Remand  Order,  the  D.  C.  Circuit  found 
 no  fault  with  the  Commissions  determination  that  this  language  allows  the  Commission  to  consider  factors  other  than  those  specified  in  subparagraphs  (A)  and  (B)  of  section  251(  d)(  2) 
 when  determining  whether  or  not  to  require  unbundling.  With  regard  to  the  Commissions  authority  to  consider  other  elements,  the  court  stated,  [  w]  e  assume  in  favor  of  the 
 Commission  that  that  is  so.  553  But  the  court  cautioned  restraint,  recognizing  that  any  use  of 
 548  UNE  Remand  Order,  15  FCC  Rcd  at  3721,  para.  44  (emphasis  in  original).  The  Commission  also  set  forth  a 
 definition  of  proprietary,  which  was  not  challenged  in  USTA  v.  FCC  and  is  not  at  issue  in  this  proceeding.  See  id.  at  3716-  20,  paras.  32-  40. 

 In  the  UNE  Remand  Order,  the  Commission  only  found  two  instances  where  an  element  could  be  considered  proprietary  and  thus  susceptible  to  unbundling  under  the  necessary  standard.  The  Commission  found  that 
 Ameritechs  routing  tables  in  switches  may  be  proprietary,  Id.  at  3806,  para.  247,  but  the  Commission  applied  the  impair  standard  rather  than  the  necessary  standard  because  those  routing  tables  were  unlikely  to  distinguish 
 Ameritechs  service  from  its  competitors,  and  because  withholding  access  to  the  routing  tables  would  jeopardize  competition.  Id.  at  3807,  paras.  250-  51.  The  Commission  also  found  that  services  created  in  the  AIN  platform  and 
 architecture  were  proprietary,  but  found  that  they  were  not  necessary,  and  therefore  did  not  unbundle  them.  See  id.  at  3875,  para.  402,  3881-  82,  paras.  418-  20. 

 549  See  generally  Triennial  Review  NPRM,  16  FCC  Rcd  at  22790-  91,  paras.  18,  21. 
 550  See  ALTS  et  al.  Comments  at  26-  27;  Eschelon  Comments  at  6-  7;  NuVox  Comments  at  21. 
 551  See  generally  USTA,  290  F.  3d  at  415. 
 552  47  U.  S.  C.    251(  d)(  2)  (emphasis  added). 
 553  USTA,  290  F.  3d  at  425.  The  courts  discussion  was  premised  on  the  Commissions  determination  in  the  UNE 
 Remand  Order  that  additional  factors  could  be  used  to  assess  unbundling,  whether  as  a  further  limitation  on  unbundling  despite  the  presence  of  impairment,  or  as  a  justification  of  unbundling  in  the  absence  of  evident 

 impairment.  UNE  Remand  Order,  15  FCC  Rcd  at  3745,  para.  101. 
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 factors  in  addition  to  impairment  must  be  reasonably  and  responsibly  tied  to  the  statute.  The  court  stated,  to  the  extent  that  the  Commission  orders  access  to  UNEs  in  circumstances  where 
 there  is  little  or  no  reason  to  think  that  its  absence  will  genuinely  impair  competition  .  .  .  we  believe  it  must  point  to  something  a  bit  more  concrete  than  its  belief  in  the  beneficence  of  the 
 widest  unbundling  possible.  554 
 173.  Consistent  with  the  admonition  of  the  courts  that  we  not  extend  the  unbundling  obligations  more  widely  than  required  to  fulfill  the  purposes  of  the  Act,  we  apply  the  phrase  at  a 

 minimum  in  section  251(  d)(  2)  with  appropriate  restraint.  In  this  Order,  we  have  not  required  the  unbundling  of  any  network  element  in  the  absence  of  impairment.  Although  we  continue  to 
 find  that  section  251(  d)(  2),  by  its  express  terms,  permits  us  to  consider,  where  appropriate,  other  factors  closely  tied  to  the  purposes  of  the  statute  in  reaching  an  unbundling 
 determination,  555  we  have  not  found  on  this  record  any  other  factors  that  would  require  unbundling  in  the  absence  of  impairment.  We  have,  however,  used  this  authority  to  inform  our 
 consideration  of  unbundling  in  contexts  where  some  level  of  impairment  may  exist,  but  unbundling  appeared  likely  to  undermine  important  goals  of  the  1996  Act.  556  Specifically,  in  our 
 analyses  of  fiber-  to-  the-  home  (FTTH)  and  hybrid  loops,  we  have  considered  the  goal  set  forth  in  section  706  of  the  Act,  that  the  Commission  shall  encourage  the  deployment  on  a  reasonable 
 and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans,  557  as  well  as  the 
 554  Id. 

 555  Many  commenters  urge  us  to  affirm  this  approach.  See  BellSouth  Comments  at  26-  28;  CompTel  Comments  at 
 29;  GCI  Comments  at  29;  HTBC  Comments  at  42;  NuVox  Comments  at  33-  35;  SBC  Comments  at  11-  12,  18,  21-  22  (arguing  that  the  Commission  should  take  into  account  the  goals  of  encouraging  facilities-  based  competition,  the 

 deployment  of  advanced  technologies,  and  protecting  competition  where  it  already  exists);  Verizon  Comments  at  26;  HTBC  Reply  at  20;  Qwest  Reply  at  18;  see  also  UNE  Platform  Coalition  Comments  at  24  (urging  Commission 
 to  take  public  interest  into  account  in  unbundling  analysis);  SBC  Reply  at  50  (urging  Commission  to  examine  whether  unbundling  will  benefit  or  harm  competition  in  particular  circumstances).  But  see  AT&  T  Comments  at 
 41-  43  (arguing  that  the  Commission  cannot  consider  whether  unbundling  would  be  harmful  to  competition,  and  that  unbundling  necessarily  promotes  competition  and  facilities-  investment);  CompTel  Comments  at  25  (arguing  that  the 
 Commission  can  fully  satisfy  section  251(  d)(  2)  by  considering  only  impair),  26-  27  (arguing  that  consideration  of  section  706  could  only  lead  the  Commission  to  order  unbundling  in  the  absence  of  impairment),  28-  30  (arguing  that 
 at  a  minimum  can  only  be  used  to  order  unbundling  in  the  absence  of  impairment). 
 556  Thus,  we  disagree  with  commenters  that  suggest  that  we  cannot,  consistent  with  the  Act,  consider  whether 
 unbundling  will  deter  investment  or  whether  unbundling  is  consistent  with  the  goals  of  section  706.  See  Allegiance  Comments  at  11-  12;  ALTS  et  al.  Comments  at  29-  35;  CompTel  Comments  at  18,  27-  28.  We  do  not  read  section 

 251  in  isolation,  but  in  the  larger  context  of  the  1996  Act,  including  all  its  expressed  purposes  such  as  those  contained  in  section  706.  Indeed,  the  courts  require  as  much.  See  Iowa  Utils.  Bd.,  525  U.  S.  at  388  (requiring  the 
 Commission  to  apply  some  limiting  standard,  rationally  related  to  the  goals  of  the  Act,  as  it  considers  necessary  and  impair)  (emphasis  in  original);  USTA,  290  F.  3d  at  425  (urging  the  Commission  to  engage  in  some  analysis  of 
 the  trade-  offs  between  unbundling  and  investment  incentives). 
 557  The  Act  defines  advanced  telecommunications  capability  without  regard  to  any  transmission  media  or 
 technology,  as  high-  speed,  switched,  broadband  telecommunications  capability  that  enables  users  to  originate  and  receive  high-  quality  voice,  data,  graphics,  and  video  telecommunications  using  any  technology.  Id.    157  nt  (c)(  1). 

 The  Commission  considers  services  with  upstream  and  downstream  speeds  in  excess  of  200  kbps  to  display  advanced  telecommunications  capability.  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2850,  para.  9. 

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 presence  of  intermodal  competition.  In  sum,  we  will  continue  to  weigh  other  factors  that  may  be  relevant  to  a  particular  unbundling  determination,  but  we  will  do  so  with  an  eye  to  the  specific 
 goals  of  the  Act,  as  the  D.  C.  Circuit  has  indicated  we  may  do. 
 174.  We  reject  arguments  that  the  Commission  can  only  use  the  at  a  minimum  language  to  decline  to  unbundle  despite  impairment  in  order  to  remain  faithful  to  the  courts 

 admonitions  to  find  a  limiting  standard  for  unbundling  or  that  the  Commission  must  decline  to  unbundle  if  unbundling  would  frustrate  other  Congressional  goals.  558  First,  we  note  that 
 Congress  did  not  specify  what  it  meant  by  at  a  minimum;  thus  we  disagree  that  the  meaning  of  the  phrase  is  not  subject  to  interpretation.  In  addition,  as  explained  above,  we  find  that  it  is 
 reasonable  to  interpret  the  phrase  to  permit  the  Commission  to  make  unbundling  determinations  in  light  of  the  Acts  many  and  conflicting  goals,  not  just  goals  that  would  limit  incumbent  LECs 
 unbundling  obligations.  Finally,  section  251(  d)(  2)  does  not  direct  us  to  unbundle  only  if  all  goals  of  the  Act  are  satisfied  by  doing  so.  Rather,  we  must  balance  all  these  goals  as  we  make 
 our  unbundling  determinations.  For  similar  reasons,  we  disagree  that  at  a  minimum  can  only  be  used  to  order  unbundling  in  the  absence  of  impairment.  559 

 175.  We  disagree  that  the  Commission  must  find,  under  section  706,  that  advanced  telecommunications  capability  is  not  being  deployed  in  a  reasonable  and  timely  fashion  before  it 

 (Continued  from  previous  page) 
 Our  approach  is  entirely  consistent  with  section  706  and  the  language  of  the  Preamble  to  the  1996  Act,  which  states  that  the  statute  is  [  a]  n  Act  [t]  o  promote  competition  and  reduce  regulation  in  order  to  secure  lower  prices  and 

 higher  quality  services  for  American  telecommunications  consumers  and  encourage  the  rapid  deployment  of  new  telecommunications  technologies.  Preamble  to  the  1996  Act.  It  is  also  consistent  with  section  7(  a),  which  states 
 that  [  i]  t  shall  be  the  policy  of  the  United  States  to  encourage  the  provision  of  new  technologies  and  services  to  the  public.  47  U.  S.  C.    157(  a);  see  also  infra  Part  VI.  A.  4.  a.(  iv)(  b);  Covad  Comments  at  78;  FTTH  Council  Comments 
 at  2-  3,  6;  HTBC  Comments  at  43;  TIA  Comments  at  23;  USTA  Comments  at  5;  SBC  Reply  at  51-  52. 
 We  disagree  that  the  goals  of  sections  251  and  706  cannot  be  balanced  because,  as  several  commenters  argue,  these  statutory  provisions  are  aimed  at  separate  and  distinct  product  markets.  Likewise,  we  also  disagree  that  the 

 goals  of  section  706  can  only  be  encouraged  by  unbundling.  See  ALTS  et  al.  Comments  at  31-  32;  BellSouth  Comments  at  32;  CompTel  Comments  at  26;  McLeodUSA  Comments  at  5;  NuVox  Comments  at  12-  13,  34.  See 
 generally  Allegiance  Comments  at  14-  15;  ASCENT  Comments  at  22-  25;  Illinois  Commerce  Commission  Comments  at  4;  Moline  Dispatch  Publishing  Comments  at  7;  Sprint  Comments  at  10.  Rather,  we  find  that  markets 
 covered  by  section  251  may  well  overlap  with  the  markets  addressed  by  section  706.  And,  as  explained  above,  unbundling  may  not  always  promote  the  goals  of  section  706. 

 558  See  SBC  Comments  at  11  n.  16;  Verizon  Comments  at  26;  Qwest  Reply  at  18-  20;  Verizon  Reply  at  45,  47-  50. 
 But  see  Minnesota  Department  of  Commerce  Reply  at  6  (questioning  why  Commission  would  impose  a  higher  standard  for  unbundling  than  necessary  and  impair  now  when  capital  markets  are  restricted). 

 559  See,  e.  g.,  ALTS  et  al.  Comments  at  35-  36;  CompTel  Comments  at  29-  30;  UNE  Platform  Coalition  Comments 
 at  21-  23;  WorldCom  Comments  at  52.  Contrary  to  the  views  of  AT&  T,  we  find  that  unbundling  where  there  is  no  impairment  does  not  promote  competition  without  any  costs,  even  if  new  entrants  prefer  to  use  their  own  facilities 

 where  possible.  See  AT&  T  Comments  at  46-  47.  Rather,  as  explained  above,  unbundling  has  administrative  and  social  costs  that  the  courts  have  cautioned  us  to  consider  carefully,  and  we  cannot  simply  hope  that  competitors  will 
 choose  to  use  their  own  facilities  rather  than  UNEs.  See  supra  Part  V.  B. 
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 can  take  section  706  into  account  in  its  unbundling  analysis.  560  Rather,  as  explained  above,  we  find  that  the  at  a  minimum  language  permits  us  to  take  many  goals  into  account,  including 
 those  expressed  in  section  706.  While  the  Commission  may  have  found  that  the  goals  of  section  706  are  being  met  on  a  reasonable  and  timely  basis,  that  does  not  preclude  us  from  taking 
 measures  to  ensure  that  that  continues  to  be  the  case  or  to  accelerate  the  achievement  of  those  goals. 

 176.  We  also  reject  parties  arguments  that  taking  other  goals  into  account,  such  as  the  Acts  goals  in  section  706,  amounts  to  forbearance  under  section  10(  d),  which  is  prohibited 
 unless  section  251(  c)  has  been  fully  implemented.  561  We  are  not  forbearing;  rather  we  are  applying  section  251(  d)(  2)  to  determine  where  unbundling  serves  the  goals  of  the  Act.  562 
 Contrary  to  arguments  otherwise,  563  our  approach  is  fully  consistent  with  the  Advanced  Services  Order,  where  we  concluded  that  section  706(  a)  directs  the  Commission  to  use  the  authority 
 granted  in  other  provisions  .  .  .  to  encourage  the  deployment  of  advanced  services,  564  and  with  ASCENT  v.  FCC,  where  the  D.  C.  Circuit  admonished  the  Commission  for  the  equivalent  of 
 forbearing  from  section  251(  c).  565  The  Commission  has  not  proposed  to  relax  in  any  way  the  requirements  of  section  251(  c)(  3),  which  establishes    where  unbundled  access  must  occur,  not 
 which  [network]  elements  must  be  unbundled.    566  Rather,  we  take  section  706  into  account  in  interpreting  and  applying  section  251(  d)(  2),  a  separate  provision.  Indeed,  section  251(  d)(  2), 
 particularly  the  at  a  minimum  clause,  grants  us  all  the  authority  we  need  to  take  Congresss  goals  into  account  as  we  decide  which  [network]  elements  must  be  unbundled.    567  We  do  not 
 need  any  authority  from  section  706(  a)  to  take  this  approach. 

 560  See  Consumer  Federation  et  al.  Comments  at  20-  21. 
 561  See  CompTel  Comments  at  19.  See  generally  Allegiance  Comments  at  13;  AT&  T  Comments  at  87. 
 562  Likewise,  because  we  use  section  706  as  an  at  a  minimum  consideration  as  described  above,  we  need  not  visit 
 the  question  of  whether  we  can  or  should  forbear  from  section  251.  See  HTBC  Comments  at  45-  47  (arguing  that  the  Commission  should  forbear  from  unbundling  broadband  facilities,  and  that  section  251  is  fully  implemented 

 because  incumbent  LECs  are  subject  to  intermodal  competition  for  broadband  services);  Progress  &  Freedom  Foundation  Comments  at  34  (arguing  that  a  grant  of  section  271  authority  means  that  section  251  is  fully 
 implemented  in  that  state);  TIA  Comments  at  23-  24.  But  see  WorldCom  Reply  at  37-  38. 
 563  See  AT&  T  Comments  at  86. 

 564  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  CC  Docket  Nos.  98-  147, 
 98-  11,  98-  26,  98-  32,  98-  15,  98-  78,  98-  91,  Memorandum  Opinion  and  Order  and  Notice  of  Proposed  Rulemaking,  13  FCC  Rcd  24012,  24045,  para.  69  (1998)  (Advanced  Services  Order);  see  also  id.  at  24046,  para.  74  ([  S]  ection 

 706(  a)  gives  this  Commission  an  affirmative  obligation  to  encourage  the  deployment  of  advanced  services,  relying  on  our  authority  established  elsewhere  in  the  Act.). 

 565  ASCENT  v.  FCC,  235  F.  3d  662,  666  (D.  C.  Cir.  2001). 
 566  Iowa  Utils.  Bd.,  525  U.  S.  at  391  (quoting  Iowa  Utils.  Bd  v.  FCC.,  120  F.  3d  at  810)  (emphasis  in  8th  Circuit 
 opinion,  bracketed  language  inserted  in  Supreme  Court  opinion). 
 567  Id. 
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 177.  We  also  disagree  that  section  706s  direction  to  use  measures  that  promote  competition  in  the  local  telecommunications  market  means  that  the  Commission  cannot  read 
 section  706  to  limit  any  unbundling  obligations.  568  To  the  contrary,  as  explained  above,  the  at  a  minimum  language  of  section  251(  d)(  2)  expressly  contemplates  that  the  Commission  will  take 
 other  factors  into  account,  and  we  find  that  the  explicit  goals  of  the  Act  such  as  those  contained  in  section  706  most  likely  reflect  Congresss  intent  for  what  we  should  take  into  account.  And  in 
 any  event,  we  find  in  neither  section  706  nor  section  251  a  direction  that  one  provision  always  trumps  the  other;  through  our  approach  we  seek  balance  between  them  both. 

 178.  Also  regarding  section  706,  we  note  that  the  discussions  below  of  individual  UNEs  address  the  role  that  investment  incentives  play  in  our  unbundling  determination.  Parties 
 have  taken  widely  divergent  views  throughout  this  proceeding  on  the  question  of  whether  mandatory  unbundling  obligations  promote  or  deter  investment  in  new  infrastructure.  569  In 
 general,  the  incumbent  LECs  and  equipment  manufacturers  take  the  position  that  unbundling  deters  both  incumbent  LEC  and  competitive  LEC  capital  investment.  570  The  competitive 
 industry  criticizes  the  incumbent  LEC  studies  as  incomplete,  skewed  and  inaccurate.  571  In  contrast,  the  competitive  industry  advances  its  own  studies  that  ascertain  that  certain  unbundling 

 568  See  AT&  T  Comments  at  85. 
 569  We  address  arguments  concerning  specific  UNEs  in  the  relevant  sections.  See  infra  Parts  VI.  A.  and  VI.  D. 
 570  See,  e.  g.,  ACS  Comments  at  6-  7;  Alcatel  Comments  at  6-  11;  BellSouth  Comments  at  71-  72;  California 
 Commission  Comments  at  8-  10;  GSA  Comments  at  11-  12;  Maine  CLEC  Coalition  Comments  at  4-  6;  Progress  &  Freedom  Foundation  Comments  at  9-  31,  Attach.,  Investment  Incentives  and  Local  Competition  at  the  FCC,  Media 

 Law  &  Policy,  IX,  1,  1-  18,  Larry  F.  Darby  and  Joseph  Fuhr;  Ohio  Commission  Comments  at  16;  Qwest  Comments  at  14-  16;  Verizon  Comments  at  27-  29,  34-  36;  ACS  Reply  at  6-  8;  AT&  T  Reply  at  paras.  126-  36,  339-  43;  El  Paso 
 and  CTC  Reply  at  11-  16;  Progress  &  Freedom  Foundation  Reply  at  3;  Qwest  Reply  at  13-  15  and  Attach.  A,  Declaration  of  Joseph  Farrell  at  para.  5;  SBC  Reply  at  22-  45;  see  Stimulating  Investment  and  the 
 Telecommunications  Act  of  1996,  Robert  D.  Willig,  et.  al.  (AT&  T  Oct.  11,  2002  Willig  Stimulating  Investment)  at  5,  in  Letter  from  Joan  Marsh,  Director,  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Oct.  11,  2002)  (AT&  T  Oct.  11,  2002  Ex  Parte  Letter);  Letter  from  Debbie  Goldman,  Research  Economist,  CWA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96- 
 98,  98-  147  at  1-  4  (filed  Jan.  14,  2003)  (CWA  Jan.  14,  2003  Ex  Parte  Letter). 
 571  AT&  T  Reply  at  paras.  346-  59;  El  Paso  and  CTC  Reply  at  16-  23;  Letter  from  Joan  Marsh,  Director    Federal 
 Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.,  C.  Michael  Pfau,  Correcting  the  RBOCs  Empirical  Analysis  of  the  Linkage  Between  UNE-  P  and 

 Investment  (AT&  T  Correcting)  at  12,  14  (filed  Oct.  16,  2002)  (AT&  T  Oct.  16,  2002  Ex  Parte  Letter);  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98, 
 98-  147  (filed  Nov.  7,  2002)  (Z-  Tel  Nov.  7,  2002  Ex  Parte  Letter);  Letter  from  Marc  Goldman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  13  (filed  Nov.  13, 
 2002)  (WorldCom  Nov.  13,  2002  Ex  Parte  Letter);  Letter  from  Kimberly  Scardino,  Senior  Counsel,  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Nov.  27,  2002)  (WorldCom 
 Nov.  27,  2002  Ex  Parte  Letter);  Letter  from  David  R.  Conn,  Deputy  General  Counsel,  McLeodUSA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  6  (filed  Jan.  8,  2003)  (McLeodUSA  Jan.  8, 
 2003  Ex  Parte  Letter);  Letter  from  David  R.  Conn,  Deputy  General  Counsel,  McLeodUSA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  4  (filed  Jan.  17,  2003)  (McLeodUSA  Jan.  17,  2003  Ex 
 Parte  Letter). 
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 obligations  do  not  hinder,  but  rather  encourage  incumbent  LECs  to  make  capital  investments  to  modernize  their  networks  and  deploy  new  services  to  meet  increasing  competition.  572  In 
 addition,  competitors  assert  that  they  make  capital  investments  where  such  investments  are  economically  rational  and  use  UNEs  elsewhere;  that  is,  they  contend  that  the  availability  of 
 UNEs  does  not  detract  from  competitive  LECs  deploying  their  own  networks.  573  The  incumbent  LECs,  in  turn,  challenge  the  competitive  LEC  studies  as  flawed  and  unreliable.  574  The  evidence 
 submitted  by  both  sides  is  inconclusive.  The  economic  studies  presented  by  each  side  suffer  from  flaws  that  undermine  their  probative  value.  Studies  submitted  by  the  incumbent  LECs  are 
 generally  simple  correlation  models  or  state-  to-  state  comparisons  lacking  adequate  efforts  to  control  for  or  explain  other  relevant  variables.  575  Studies  submitted  by  the  competitive  LECs 

 572  AT&  T  Willig  Decl.;  Letter  from  Michael  J.  Hunseder,  Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  June  28,  2002)  (AT&  T  June  28,  2002  Ex  Parte  Letter);  Innovation,  Investment,  and  Unbundling:  An  Empirical  Update,  Robert  B.  Ekelund,  and  George  S.  Ford,  (Z-  Tel 

 Innovation)  at  5,  in  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  (filed  Oct.  7,  2002)  (Z-  Tel  Oct.  7,  2002  Ex  Parte  Letter);  AT&  T  Willig 
 Stimulating  Investment  at  1-  7,  28-  39. 
 573  AT&  T  Comments  at  44-  65;  CompTel  Comments  at  78-  82,  Declaration  of  James  N.  Perry  at  paras.  9-  24; 
 CompTel  Comments,  Declaration  of  John  Hunt  at  paras.  1-  11;  Dynegy  Comments  at  4-  7;  Eschelon  Comments  at  10-  15;  GCI  Comments  at  33-  41;  Indiana  Commission  Comments  at  8-  9;  Moline  and  CCG  Comments  at  6-  8; 

 WorldCom  Comments,  Attach.  A,  The  Technology  and  Economics  of  Cross-  Platform  Competition  In  Local  Telecommunications  Markets,  Richard  A.  Chandler,  A.  Daniel  Kelley,  and  David  M.  Nugent,  HAI  Consulting,  Inc. 
 (WorldCom  Technology  and  Economics)  at  88;  Sprint  Reply  at  14-  16;  WorldCom  Kelley  Reply  Decl.  at  13;  Z-  Tel  Reply  at  74-  90;  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.,  Unbundling  and  Facilities-  Based  Entry  by  CLECs:  Two  Empirical  Tests,  George  S.  Ford  and  Michael  D.  Pelcovits  (Z-  Tel  Unbundling),  at  2,  and  Attach.  Preliminary  Evidence  on  the 
 Demand  for  Unbundled  Elements,  Robert  B.  Ekelund,  and  George  S.  Ford,  at  2  (filed  Oct.  7,  2002)  (Z-  Tel  Oct.  7,  2002  Unbundling  Ex  Parte  Letter);  Letter  from  Genevieve  Morelli,  Counsel  for  CompTel,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1,  96-  97  (filed  Oct.  31,  2002)  (CompTel  and  PACE  Oct.  31,  2002  Ex  Parte  Letter);  WorldCom  Nov.  13,  2002  Ex  Parte  Letter  at  11;  Letter  from  Phil  Marchesiello,  Co-Chairman, 
 The  Official  Committee  of  Unsecured  Creditors  of  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  30,  2003)  (WorldCom  Unsecured  Creditors  Jan.  30,  2003  Ex 
 Parte  Letter).  Eschelon  states  that  small  competitive  LECs  like  itself  serving  small  enterprise  customers  are  also  encouraged  investment  in  their  own  networks  where  UNEs  are  available  to  fill  in  service  territories.  Eschelon 
 Comments  at  11. 
 574  BellSouth  Reply  at  60-  61;  BOC  Shelanski  Decl.  at  paras.  4-  12;  SBC  Reply  at  3-  16;  Verizon  Nov.  18,  2002  Ex 
 Parte  Letter  at  1-  7. 
 575  BOC  Shelanski  Decl.  at  22.  Verizon  Reply,  Appendix  2,  UNE-  P  and  Investment,  Prepared  for  BellSouth,  SBC, 
 and  Verizon,  July  2002,  (Verizon  Unbundled  Switching  Study).  The  study  consisted  of  a  univariate  regression,  which  AT&  T  characterizes  as  a  correlation  study.  AT&  T  Oct.  15,  2002  Ex  Parte  Letter  at  12,  14.  AT&  T  notes  that 

 only  two  cable  companies  are  significantly  implementing  cable  telephony  and  they  do  not  have  franchises  in  New  York,  so  any  comparison  between  California  and  New  York  cable  telephony  is  unsound.  Also,  the  E-  911  database 
 used  to  estimate  competitive  LEC  access  lines  can  only  provide  an  upper  bound  to  competitive  access  lines  and  closer  to  9.7  to  9.9  million  lines  as  opposed  to  the  16.4  million  lines  used  by  the  BOCs  in  their  analysis.  The  study 
 supposedly  showing  how  high  level  of  UNE-  P  equates  to  low  facilities-  based  competitive  LEC  access  lines  simply  plots  competitive  LEC  facilities-  based  access  lines  against  competitive  LEC  UNE-  P  lines  but  does  not  include  all 
 states.  Pfau  duplicates  the  calculation  but  includes  all  states  demonstrating  that  there  is  no  depression  of  investment.  (continued.) 
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 include  multiple  regression  models,  but  their  conclusions  relate  more  to  particular  market  strategies  of  some  competitive  LECs  rather  than  the  effect  on  competitive  services  that  would  be 
 provided  under  an  alternate  unbundling  obligation.  Neither  the  overall  levels  of  competitive  LEC  activity  nor  the  not  insubstantial  costs  associated  with  unbundling  were  generally  addressed 
 by  either  the  competitive  LECs  or  the  incumbent  LECs.  576  That  said,  we  return  to  these  issues  in  more  detail  in  the  specific  unbundling  sections  below. 

 E.  Role  of  the  States 
 1.  Background 
 179.  Sections  201(  b)  and  251(  d)(  1)  of  the  Act  authorize  and  direct  the  Commission  to  establish  rules  to  implement  the  network  unbundling  requirements  of  section  251(  c)(  3)  and 

 251(  d)(  2)  of  the  1996  Act.  Section  201(  b)  provides  that  [  t]  he  Commission  may  prescribe  such 

 (Continued  from  previous  page) 
 Pfau  also  claims  the  BOCs  significantly  overstated  the  number  of  AT&  T  competitive  LEC  switches  in  California  and  New  York  by  confusing  local  from  long  distance  tandem  switches.  AT&  T  Pfau  Correcting  at  3-  9. 

 576  AT&  T  Willig  Decl.  The  study  was  a  multivariate  regression  between  UNE  pricing  and  incumbent  LEC 
 investment.  It  is  methodologically  suspect  to  use  investment  divided  by  state  population  as  opposed  to  the  more  direct  BOC  measure  of  dividing  by  access  lines:  BOC  access  lines  as  a  percentage  of  state  population  vary 

 significantly.  The  authors  independent  variables  of  UNE  rates,  average  revenue  per  access  line  and  the  incumbent  LEC  cost  of  investment  are  not  well  explained,  subject  to  significant  errors,  and  appear  suspect  lacking  significant 
 additional  explanation.  It  is  unclear  if  the  error  terms  are  robust,  i.  e.,  heteroskedasticity-  corrected,  standard  errors;  if  not,  then  conclusions  about  statistical  significance  could  be  inaccurate.  The  authors  attributing  the  lack  of 
 significance  in  many  of  the  variables  to  simply  noise  cannot  be  accepted  without  stronger  justification.  The  competitive  LEC  access  line  data  may  significantly  understate  actual  levels  of  competition  as  the  data  excludes 
 competitive  LECs  with  less  than  10,000  access  lines  in  a  state.  Willig  expanded  his  analysis  in  AT&  T  Willig  Stimulating  Investment,  but  the  essential  analysis  is  unchanged.  AT&  T  Willig  Stimulating  Investment.  In 
 WorldCom  Technology  and  Economics,  the  authors  do  not  provide  an  econometric  model,  but  simply  view  the  gross  incumbent  LEC  investment  since  the  1996  Act  and  assert  that  this  proves  unbundling  does  not  deter 
 incumbent  LEC  investment.  See  WorldCom  Technology  and  Economics  at  88.  Such  a  simple  and  gross  comparison  fails  to  take  into  account  any  other  possible  variables  that  might  explain  the  investment  pattern.  Such  a 
 gross  comparison  cannot  be  given  significant  weight.  Id.  at  96-  97.  In  Z-  Tel  Unbundling  and  in  Z-  Tel  Preliminary  Evidence,  the  two  studies  use  multivariate  econometric  analysis  and  demonstrate  that  there  is  a  downward  sloping 
 demand  curve  for  UNE-  P:  as  prices  increase  quantity  demanded  of  UNEs  by  competitive  LECs  decrease.  It  is  difficult  to  criticize  the  almost  universal  economic  truism  illuminated  in  the  results,  but  whatever  the  validity  of  the 
 results,  they  do  not  demonstrate  what  effect  reducing  availability  of  network  elements  would  have  on  investment.  The  studies  might  be  more  persuasive  if  the  authors  attempted  to  extend  their  analysis  to  the  direct  matter  of 
 investment.  In  Z-  Tel  Innovation,  the  study  attempts  to  estimate  the  market  risks  of  incumbent  LECs  to  determine  if  the  cost  of  raising  capital  investigates  changed  with  the  introduction  of  unbundling  obligations.  The  authors 
 concluded  that,  despite  the  economic  downturn  in  recent  years,  the  risk  of  borrowing  money  for  capital  spending  had  not  increased.  They  conclude  that  unbundling  has  therefore  not  decreased  incumbent  LECs  investment.  The 
 effect  of  the  decrease  in  value  of  incumbent  LECs  stock  value  was  not  addressed.  Even  given  the  results,  this  study  does  not  address  whether  or  to  what  extent  investment  is  changed  by  unbundling  obligations,  simply 
 concluding  that  the  risk  associated  with  incumbent  LECs  borrowing  funds  had  not  increased  in  recent  years. 
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 rules  and  regulations  as  may  be  necessary  in  the  public  interest  to  carry  out  the  provisions  of  this  Act.  577  Section  251(  d)(  1)  provides: 
 Within  six  months  of  the  date  of  enactment  of  the  Telecommunications  Act  of  1996,  the  Commission  shall  complete 
 all  action  necessary  to  establish  regulations  to  implement  the  requirements  of  this  section.  578 

 Section  251(  d)(  2)  directs  the  Commission  to  perform  the  necessary  and  impair  analysis  required  to  determine  what  network  elements  should  be  made  available.  579 

 180.  The  1996  Act  also  preserves  the  states  580  authority  to  establish  unbundling  regulations  pursuant  to  state  law  as  long  as  the  exercise  of  state  authority  does  not  conflict  with 
 the  Act  and  its  purposes  or  substantially  prevent  the  Commissions  implementation.  Section  251(  d)(  3)  requires  that,  in  prescribing  and  enforcing  its  regulations  to  implement  the 
 requirements  of  section  251   
 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.  581 

 Section  252(  e)(  3)  preserves  the  states  authority  in  its  review  of  interconnection  agreements: 
 Notwithstanding  paragraph  (2),  but  subject  to  section  253,  nothing  in  this  section  shall  prohibit  a  State  commission  from  establishing 
 or  enforcing  other  requirements  of  State  law  in  its  review  of  an  agreement,  including  requiring  compliance  with  intrastate 
 telecommunications  service  quality  standards  or  requirements.  582 

 577  47  U.  S.  C.    201(  b). 
 578  Id.    251(  d)(  1). 
 579  Id.    251(  d)(  2). 
 580  For  purposes  of  this  Order,  the  term  state  includes  the  District  of  Columbia  and  the  Territories  and 
 possessions,  as  defined  in  section  3(  40)  of  the  Act.  Id.    153(  40). 
 581  Id.    251(  d)(  3). 

 582  Id.    252(  e)(  3). 
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 Sections  261(  b)  and  (c)  generally  preserve  state  authority  to  take  action  pursuant  to  state  law,  provided  that  such  action  is  consistent  with  the  Act  and  our  federal  framework.  583 
 181.  In  the  Local  Competition  Order,  the  Commission  identified  a  national  minimum  list  of  UNEs  that  incumbent  LECs  must  make  available  to  new  entrants  upon  request,  as  required 
 by  section  251(  d)(  2).  584  The  Commission  delegated  to  the  states  the  authority  to  apply  section  251(  d)(  2)    and  the  Commissions  interpretation  of  that  provisions  necessary  and  impair 
 standards    to  require  incumbent  LECs  to  make  available  to  new  entrants  additional  network  elements  beyond  those  that  the  Commission  identified  in  its  minimum  national  list.  585 

 182.  The  Supreme  Court  upheld  the  Commissions  authority  to  implement  the  local  competition  provisions  of  the  1996  Act,  including  the  unbundling  requirements  of  section  251,  in 
 AT&  T  Corp.  v.  Iowa  Utilities  Board.  586  The  Court  found  that  Congress  granted  the  Commission  full  authority  to  regulate  with  respect  to  matters  addressed  by  the  1996  Act,  even  though,  in 
 doing  so,  Congress  had  taken  the  regulation  of  local  telecommunications  competition  away  from  the  States.  587 

 183.  In  the  UNE  Remand  Order,  588  the  Commission  revisited  its  unbundling  requirements  in  light  of  the  Supreme  Courts  remand.  In  doing  so,  the  Commission,  among  other 
 things,  stated  that  the  source  of  authority  relied  upon  for  Rule  317  in  the  Local  Competition  Order  was  section  252(  e)(  3),  which  preserves  a  states  authority  under  state  law  when  reviewing 
 interconnection  agreements.  589  The  Commission  amended  Rule  317  in  order  to  incorporate  a  revised  necessary  and  impair  standard  into  that  rule.  590  The  Commission  also  modified  the 

 583  Id.    261(  b),  (c). 
 584  Local  Competition  Order,  11  FCC  Rcd  15499. 
 585  Local  Competition  Order,  11  FCC  Rcd  at  15641-  42,  paras.  281-  82;  see  also  47  C.  F.  R.    51.317(  a)  and  (b) 
 (1996).  Original  rule  317  provided  that,  when  faced  with  a  request  for  additional  federal  unbundling  beyond  that  required  by  the  Commissions  minimum  list,  the  state  could  decline  to  require  unbundling  of  the  network  element 

 only  if    that  network  element  did  not  satisfy  the  applicable  necessary  or  impair  test.  47  C.  F.  R.    51.317(  b)(  emphasis  added). 

 586  525  U.  S.  366.  No  party  challenged  the  Commissions  conclusion  that  it  could  authorize  the  states  to  apply 
 those  standards  to  require  unbundling  of  additional  network  elements  under  federal  law.  However,  the  Supreme  Court  held  that  the  Commission  had  not  properly  construed  the  necessary  and  impair  standards  of  section 

 251(  d)(  2)  and  remanded  to  the  Commission  for  further  proceedings  consistent  with  its  opinion.  Id.  at  397.  Following  the  Supreme  Courts  decision,  the  Eighth  Circuit  vacated  Rule  317  because  the  rule  incorporated  the 
 Commissions  faulty  construction  of  necessary  and  impair  in  its  instructions  to  the  states.  Iowa  Utils.  Bd.  v.  FCC,  219  F.  3d  at  757. 

 587  Iowa  Utils.  Bd.,  525  U.  S.  at  378  n.  6. 
 588  UNE  Remand  Order,  15  FCC  Rcd  3696. 
 589  Id.  at  3762,  para.  145  and  nn.  249-  50. 
 590  Id.  at  3767-  68,  para.  155. 
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 language  addressing  state  action  with  respect  to  additional  unbundling  requirements  in  two  respects.  First,  the  Commissions  new  language  provided  that  [  a]  state  must  comply  with  the 
 standards  set  forth  in  this  51.317  when  considering  whether  to  require  the  unbundling  of  additional  elements.  591  Second,  the  Commission  rules  provided  that  a  state  could  not  remove  a 
 network  element  from  the  national  UNE  list,  but  that  the  state  could  remove  a  network  element  that  the  state  itself  had  added  in  accordance  with  the  requirements  of  this  rule.  592  The 
 Commission  described  the  authority  to  be  exercised  by  states  under  new  Rule  317  as  state  law  authority  preserved  by  section  251(  d)(  3)  of  the  Act,  which  preserves  such  authority  regarding 
 network  elements  to  the  extent  that  it  is  consistent  with  section  251  requirements  and  does  not  substantially  prevent  implementation  of  federal  law.  593 

 184.  In  United  States  Telecom  Assn  v.  FCC,  594  the  D.  C.  Circuit  reversed  the  revised  construction  and  application  of  section  251(  d)(  2)  that  the  Commission  had  adopted  in  the  UNE 
 Remand  Order.  Among  other  things,  the  Court  found  fault  with  the  Commissions  adoption  of  a  uniform  national  rule  that  mandated  provision  of  unbundled  access  to  most  network  elements 
 throughout  the  country.  595  The  court  held  that  section  251(  d)(  2)  required  a  more  nuanced  concept  of  impairment  that  took  into  account  possible  variations  in  impairment  in  different 
 geographic  and  customer  markets. 
 185.  In  the  Notice,  we  sought  comment  on  the  proper  role  of  state  commissions  in  the  implementation  of  unbundling  requirements  for  incumbent  LECs  in  light  of  the  changes  that 

 have  occurred  since  the  initial  implementation  of  the  1996  Act.  Specifically,  we  sought  comment  on  the  extent  to  which  state  commissions  can  create,  remove,  and  implement 
 unbundling  requirements  and  the  statutory  provisions  that  would  provide  authority  to  states  to  act,  consistent  with  applicable  limitations  on  delegations  of  authority  to  the  states.  596 

 2.  Discussion 
 186.  The  Communications  Act  assigns  the  Commission  the  responsibility  for  establishing  a  framework  to  implement  the  unbundling  requirements  of  section  251(  d)(  2).  In  this 

 Order,  we  create  rules  for  UNEs  based  on  our  new  impairment  standard  and  marketplace  developments  over  the  past  three  years.  We  are  cognizant  of  the  concern  expressed  by  the  court 
 in  USTA  that  our  prior  rules  were  not  narrowly-  tailored  enough.  We  recognize  that  competition  has  evolved  at  a  different  pace  in  different  geographic  markets  and  for  different  market 
 segments.  Thus,  to  ensure  that  the  proper  degree  of  unbundling  occurs,  we  rely,  in  certain 
 591  47  C.  F.  R.    51.317(  b)(  4). 
 592  Id. 
 593  UNE  Remand  Order,  15  FCC  Rcd  at  3768,  paras.  156-  57. 
 594  290  F.  3d  at  415. 
 595  USTA,  290  F.  3d  at  422. 
 596  Triennial  Review  NPRM,  16  FCC  Rcd  at  22815-  16,  paras.  75-  76. 
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 instances  when  such  analysis  is  necessary,  on  market-  by-  market  fact-  finding  determinations  made  by  the  states.  While  we  delegate  to  the  states  a  role  in  the  implementation  of  our  federal 
 unbundling  requirements  for  certain  network  elements  that  require  this  more  granular  approach,  we  make  clear  that  any  action  taken  by  the  states  pursuant  to  this  delegated  authority  must  be  in 
 conformance  with  the  Act  and  the  regulations  we  set  forth  herein.  We  find  further  that  the  1996  Act  preserved  the  states  authority  to  prescribe  access  obligations  pursuant  to  state  law  in  section 
 251(  d)(  3),  but  only  to  the  extent  that  state  laws  or  regulations  do  not  conflict  with  or  frustrate  the  Act  and  its  purposes  or  substantially  prevent  the  federal  implementation  regime.  In  short,  the 
 statute  allows  states  to  continue  to  exercise  federal  authority  delegated  by  this  Commission  or  state  authority  that  is  consistent  with  and  does  not  substantially  prevent  implementation  of  the 
 federal  regime. 
 a.  Federal  Authority  and  the  Role  of  the  States 
 187.  As  we  explain  in  this  Order,  we  conclude  that  a  more  targeted,  granular  unbundling  analysis  is  needed  in  light  of  the  lessons  learned  over  the  last  three  years.  To 

 achieve  the  successful  implementation  of  our  new  framework,  we  have  examined  what  role  the  states  should  play.  597  The  policy  framework  we  adopt  in  this  Order  is  based  on  carefully  targeted 
 impairment  determinations.  Where  appropriate,  based  on  the  record  before  us,  we  adopt  uniform  rules  that  specify  the  network  elements  that  must  be  unbundled  by  incumbent  LECs  in  all 
 markets  and  the  network  elements  that  must  not  be  unbundled,  in  any  market,  pursuant  to  federal  law.  In  doing  so,  we  exercise  our  authority  pursuant  to  sections  201(  b)  and  251(  d)  of  the  Act. 
 As  we  explain  in  this  Order,  we  find  that  setting  a  national  policy  for  unbundling  some  network  elements  is  necessary  to  send  proper  investment  signals  to  market  participants  and  to  provide 
 certainty  to  requesting  carriers,  including  small  entities.  We  find  that  states  do  not  have  plenary  authority  under  federal  law  to  create,  modify  or  eliminate  unbundling  obligations. 

 188.  The  record  before  us  and  the  D.  C.  Circuits  emphasis  in  USTA  on  granularity  in  making  unbundling  determinations  both  lead  us  to  conclude  that  asking  states  to  take  on  some 
 fact  finding  responsibilities  would  be  the  most  reasonable  way  to  implement  the  statutory  goals  for  certain  network  elements.  598  We  find  that  giving  the  state  this  role  is  most  appropriate  where, 

 597  As  the  Commission  stated  in  1996,  if,  upon  review,  decision-  making  responsibilities  have  been  inefficiently  or 
 inappropriately  allocated  between  the  Commission  and  the  states,  the  Commission  will  reallocate  them.  Local  Competition  Order,  11  FCC  Rcd  at  15520,  para.  41.  Many  state  commissions  urge  the  Commission  to  convene  a 

 Federal/  State  Joint  Conference  on  unbundling  requirements  pursuant  to  section  410(  b)  of  the  1996  Act  before  promulgating  new  rules.  NARUC  Comments  at  4-  5;  Michigan  Commission  Comments  at  5-  6;  Illinois  Commission 
 Comments  at  3;  see  also  CompTel  Nov.  26,  2001  Joint  Conference  Petition.  Others  oppose  the  Federal/  State  Joint  Conference  proposal  as  superfluous  and  creating  delay  in  resolution  of  the  issues.  ALTS  et  al.  Comments  at  132- 
 33;  Pennsylvania  Commission  Comments  at  3-  4  n.  7;  BellSouth  Comments  at  112.  In  light  of  our  responsibilities  under  the  Act  to  implement  the  unbundling  obligations  as  well  as  the  D.  C.  Circuit  Courts  decision  in  USTA,  we 
 find  it  imperative  to  move  forward  to  adopt  new  rules  without  reference  to  a  Joint  Conference  and  we  therefore  deny  that  portion  of  the  CompTel  Petition. 

 598  See  infra  Part  VI.  A  number  of  state  commissions  have  urged  the  Commission  to  take  advantage  of  their 
 knowledge  of  local  market  conditions.  See  Michigan  Commission  Comments  at  4-  6;  Florida  Commission  Reply  at  2-  3;  Georgia  Commission  Comments  at  3-  4;  Massachusetts  Department  Comments  at  5-  8.  Competitive  LECs  have 

 (continued.) 
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 in  our  judgment,  the  record  before  us  does  not  contain  sufficiently  granular  information  and  the  states  are  better  positioned  than  we  are  to  gather  and  assess  the  necessary  information.  A  more 
 granular  analysis  will  also  benefit  small  businesses  by  considering  the  differing  levels  of  competition  in  rural  and  urban  markets  and  the  differing  needs  and  resources  of  carriers  serving 
 mass  market  and  small  to  medium  business  customers.  599  We  conclude  that  we  have  the  authority  to  delegate  to  the  states  some  of  our  authority  pursuant  to  section  251(  d)(  2).  Express 
 statutory  authority  is  not  required  for  an  agency  validly  to  delegate  functions  to  another  entity  or  sovereign.  600  Moreover,  neither  section  251(  d)(  2)  nor  any  other  provision  of  the  1996  Act 
 prohibits  delegation  of  the  Commissions  authority  to  determine  what  network  elements  must  be  made  available.  601  Incumbent  LECs  argue  that  the  Commission  may  not  punt  unbundling 
 decisions  to  the  states.  602  They  argue  that,  in  those  instances  where  impairment  analysis  requires  a  more  granular  approach,  the  Commission  should  establish  objective,  carefully  defined  criteria 
 for  determining  where  unbundling  is  (and  is  not)  appropriate.  603  We  find  that,  provided  our  delegation  to  the  states  is  consistent  with  applicable  federal  law  and  is  undertaken  in  a  way  that 
 is  reasonably  designed  to  ensure  that  the  substantive  function  at  issue  will  be  performed  consistently  with  the  statutes  substantive  standards,  we  are  in  no  way  punting  decisions  to  the 
 states.  604  Rather,  we  are  reasonably  implementing  the  statute,  particularly  given  that  states  may  be  in  the  best  position  to  judge  whether  the  Acts  extraordinary  unbundling  remedies  should  be 
 applied. 
 (Continued  from  previous  page) 
 made  similar  proposals.  See  AT&  T  Comments  at  246-  50;  Letter  from  Heather  B.  Gold,  Principle,  KDW  Group  (for  Broadview,  Talk  America,  and  Eschelon),  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338,  Attach.  1 

 (filed  Dec.  31,  2002)  (KDW  Dec.  31,  2002  Ex  Parte  Letter).  Some  competitive  carriers  petitioned  the  Commission  to  adopt  procedures  that  provide  state  public  utility  commissions  with  authority  to  determine  which  network 
 elements  should  be  unbundled  in  their  states.  See  Promoting  Active  Competition  Everywhere  (PACE)  Coalition  Petition,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Feb.  6,  2002)  (PACE  Feb.  6,  2002  Petition).  In  light  of  our 
 decision  in  this  Order  to  delegate  some  of  our  unbundling  authority  to  the  states  in  appropriate  circumstances,  we  dismiss  the  PACE  petition  as  moot. 

 599  See  Eschelon  Comments  at  6,  8. 
 600  See,  e.  g.,  Fleming  v.  Mohawk  Wrecking  &  Lumber  Co.,  331  U.  S.  111,  121-  22  (1947);  Tabor  v.  Joint  Board  For 
 Enrollment  of  Actuaries,  566  F.  2d  705,  708  n.  5  (D.  C.  Cir.  1977);  Assiniboine  and  Sioux  Tribes  v.  Board  of  Oil  and  Gas  Conservation,  792  F.  2d  782,  795-  96  (9th  Cir.  1986). 

 601  See  47  U.  S.  C.    251(  d)(  2). 
 602  Letter  from  Herschel  L.  Abbott,  Jr.,  Vice  President    Government  Affairs,  BellSouth  et  al.,  to  Michael  K. 
 Powell,  Chairman,  FCC  at  2,  in  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Nov.  19,  2002)  (RBOC  Joint  Nov.  19,  2002  Ex 

 Parte  Letter). 
 603  RBOC  Joint  Nov.  19,  2002  Ex  Parte  Letter  at  4. 

 604  See  Vierra  v.  Rubin,  915  F.  2d  1372,  1378  (9th  Cir.  1990)  (a  states  authority  to  define  a  federal  statutory  term 
 may  not  exceed  the  statutory  authority  given  the  federal  agency  by  Congress  in  the  first  place);  see  also  Assiniboine  and  Sioux  Tribe  v.  Board  of  Oil  and  Gas  Conservation,  792  F.  2d  at  795-  96;  Natl.  Park  and  Conservation  Assn  v. 

 Stanton,  54  F.  Supp.  2d  7,  19  (D.  D.  C.  1999). 
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 189.  We  find  that  a  delegation  to  the  states  with  standards  from  the  Commission  will  best  ensure  that  our  unbundling  decisions  are  implemented  consistently  with  the  Acts  purposes. 
 We  find  this  approach  is  consistent  with  the  Supreme  Courts  view  that  the  state  commissions  participation  in  the  new  federal  regime  should  be  guided  by  federal-  agency  regulations.  605 
 We  limit  the  states  delegated  authority  to  the  specific  areas  and  network  elements  identified  in  this  Order.  To  ensure  that  the  states  implement  their  delegated  authority  in  the  same  carefully 
 targeted  manner  as  our  federal  determinations,  we  set  forth  in  this  Order  federal  guidelines  to  be  applied  by  the  states  in  the  execution  of  their  authority  pursuant  to  federal  law. 

 190.  We  delegate  to  the  states  our  authority  under  section  251(  d)(  2)  to  undertake  analyses  set  forth  in  this  Order  which  will  affect  incumbent  LECs  unbundling  obligations  for 
 certain  elements  in  particular  areas  in  this  Order.  There  can  be  no  doubt  that  state  commissions  possess  the  ability  and  the  competence  to  undertake  such  analyses  for  specific  network  elements 
 successfully.  Moreover,  for  the  elements  we  have  specified,  state  commissions  are  well  situated  to  conduct  the  granular  analysis  required.  If  a  state  commission  fails  to  perform  the  granular 
 inquiry  we  delegate  to  them,  any  aggrieved  party  may  petition  this  Commission  to  step  into  the  states  role.  Any  party  seeking  Commission  review  of  a  state  commissions  failure  to  act  shall 
 file  a  petition  with  this  Commission  that  explains  with  specificity  the  bases  for  the  petition  and  information  that  supports  the  claim  that  the  state  has  failed  to  act.  The  Commission  will  issue  a 
 public  notice  seeking  comment  on  the  petition  and  rule  on  the  petition  within  ninety  days  from  this  public  notice.  If  the  Commission  agrees  that  the  state  has  failed  to  act,  it  will  assume 
 responsibility  for  the  proceeding  and  make  any  findings  in  accordance  with  the  rules  set  forth  herein.  These  findings  will  be  made  nine  months  from  the  time  the  Commission  has  assumed 
 responsibility  for  the  proceeding.  606 
 b.  State  Authority 
 191.  Section  252(  e)(  3)  preserves  the  states  authority  to  establish  or  enforce  requirements  of  state  law  in  their  review  of  interconnection  agreements.  Section  251(  d)(  3)  of  the 

 1996  Act  preserves  the  states  authority  to  establish  unbundling  requirements  pursuant  to  state  law  to  the  extent  that  the  exercise  of  state  authority  does  not  conflict  with  the  Act  and  its 
 purposes  or  our  implementing  regulations.  607  Many  states  have  exercised  their  authority  under  state  law  to  add  network  elements  to  the  national  list.  608 

 605  Iowa  Utils.  Bd.,  525  U.  S.  at  378  n.  6.  We  do  not  agree  that  the  Court  meant  to  suggest  that  states  had  no  role  to 
 play,  as  some  have  argued.  See  SBC  Comments  at  42. 
 606  In  the  case  of  switches  used  to  serve  customers  in  the  enterprise  market  at  the  DS1  capacity  and  above, 
 however,  the  Commission  will  issue  its  findings  within  90  days  from  the  time  it  has  assumed  responsibility  for  the  proceeding.  See  infra  Part  VI.  D.  5. 

 607  See  47  U.  S.  C.    251(  d)(  3). 
 608  See,  e.  g.,  NARUC  Comments  at  8-  9. 
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 192.  We  do  not  agree  with  incumbent  LECs  that  argue  that  the  states  are  preempted  from  regulating  in  this  area  as  a  matter  of  law.  609  If  Congress  intended  to  preempt  the  field, 
 Congress  would  not  have  included  section  251(  d)(  3)  in  the  1996  Act.  We  likewise  do  not  agree  with  those  that  argue  that  the  states  may  impose  any  unbundling  framework  they  deem  proper 
 under  state  law,  without  regard  to  the  federal  regime.  610  These  commenters  overlook  the  specific  restraints  on  state  action  taken  pursuant  to  state  law  embodied  in  section  251(  d)(  3),  and  the 
 general  restraints  on  state  actions  found  in  sections  261(  b)  and  (c)  of  the  Act.  611  Their  arguments  similarly  ignore  long-  standing  federal  preemption  principles  that  establish  a  federal  agencys 
 authority  to  preclude  state  action  if  the  agency,  in  adopting  its  federal  policy,  determines  that  state  actions  would  thwart  that  policy.  612  Under  these  principles,  states  would  be  precluded  from 

 609  See,  e.  g.,  SBC  Comments  at  40-  42;  Verizon  Comments  at  65-  66;  RBOC  Joint  Nov.  19,  2002  Ex  Parte  Letter. 
 Cf.  Iowa  Utils.  Bd.,  525  U.  S.  366  (rejecting  incumbent  LECs  assertions  that  the  states,  not  the  Commission,  have  authority  to  adopt  rules  to  implement  the  local  competition  provisions  of  the  1996  Act). 

 610  See  NARUC  Comments  at  10  (urging  the  Commission  to  defer  to  State  determinations  of  whether  unbundling 
 requirements  in  any  State  should  collapse  to  the  existing  or  new  federal  minimums.);  see  also  Z-  Tel  Comments  at  89-  90;  AT&  T  Reply  at  374-  75;  see  also  Letter  from  Edward  A.  Yorkgitis,  Jr.,  Counsel  for  Talk  America,  to 

 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Nov.  15,  2002)  (Talk  America  Nov.  15,  2002  Role  of  States  Ex  Parte  Letter);  AT&  T  Nov.  13,  2002  Ex  Parte  Letter  at  4  (asserting  that  section  251(  d)(  3) 
 expressly  bars  the  Commission  from  adopting  regulations  that  preclude  enforcement  of  State  unbundling  requirements  that  are  in  addition  to  those  that  the  Commission  adopts.). 

 611  Z-  Tel  and  Talk  America  argue  that  the  Eighth  Circuit  has  already  found  that  section  251(  d)(  3)  constrains  the 
 FCCs  authority  to  preempt  state  access  and  interconnection  obligations.  Talk  America  Nov.  15,  2002  Role  of  States  Ex  Parte  Letter  at  2;  Z-  Tel  Comments  at  87-  88,  citing  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d.  at  806-  07.  Z-  Tel 

 maintains  that,  in  light  of  the  Eighth  Circuits  holding,  the  Commission  should  not  attempt,  in  advance,  to  limit  the  state  commissions  authority  to  create  unbundling  requirements  but  should  conduct  a  separate  adjudicative 
 proceeding  if  an  incumbent  LEC  seeks  to  preempt  state  unbundling  requirements.  Z-  Tel  Comments  at  89.  The  Eighth  Circuit  found  that  the  scope  of  federal  rulemaking  authority  under  section  251  of  the  1996  Act  was  limited  to 
 six  specific  areas  and  interpreted  section  251(  d)(  3)  as  a  further  constraint  on  Commission  authority.  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  806.  The  Supreme  Court  reversed  with  respect  to  the  scope  of  federal  rulemaking  authority  in 
 Iowa  Utilities  Board.  The  Commission  did  not  appeal  the  Eighth  Circuits  holding  with  respect  to  section  251(  d)(  3).  That  portion  of  the  Eighth  Circuits  opinion  reinforces  the  language  of  the  section,  i.  e.,  that  state 
 interconnection  and  access  regulations  must  substantially  prevent  the  implementation  of  the  federal  regime  to  be  precluded  and  that  merely  an  inconsistency  between  a  state  regulation  and  a  Commission  regulation  was  not 
 sufficient  for  Commission  preemption  under  section  251(  d)(  3).  Id.  We  believe  our  decision  properly  balances  the  broad  authority  granted  to  the  Commission  by  the  1996  Act  with  the  role  preserved  for  the  states  in  section 
 251(  d)(  3)  and  is  fully  consistent  with  the  Eighth  Circuits  interpretation  of  that  provision. 
 612  See,  e.  g.,  Geier  v.  American  Honda  Motor  Co.,  529  U.  S.  861,  873  (2000)  (where  state  law  frustrates  the 
 purposes  and  objectives  of  Congress,  conflicting  state  law  is  nullified  by  the  Supremacy  Clause);  City  of  New  York  v.  FCC,  486  U.  S.  57,  64  (1988);  see  also  Iowa  Utils.  Bd.,  525  U.  S.  at  381  n.  7  (the  Court  opined  that,  after  the 

 1996  Act,  the  limitation  on  the  Commission  taking  intrastate  action  embodied  in  section  152(  b)  of  the  Communications  Act  may  have  less  practical  effect  .  .  .  because  Congress,  by  extending  the  Communications  Act 
 into  local  competition,  has  removed  a  significant  area  from  States  exclusive  control.). 
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 enacting  or  maintaining  a  regulation  or  law  pursuant  to  state  authority  that  thwarts  or  frustrates  the  federal  regime  adopted  in  this  Order.  613 
 193.  Based  on  the  plain  language  of  the  statute,  we  conclude  that  the  state  authority  preserved  by  section  251(  d)(  3)  is  limited  to  state  unbundling  actions  that  are  consistent  with  the 
 requirements  of  section  251  and  do  not  substantially  prevent  the  implementation  of  the  federal  regulatory  regime.  614  We  disagree  with  those  commenters  that  maintain  that,  because  we  have 
 permitted  states  to  add  UNEs  to  our  national  list  in  the  past,  we  cannot  limit  their  ability  to  continue  to  do  so.  615  Their  argument  ignores  the  clear  directives  Congress  provided  in  the  1996 
 Act.  Section  251(  d)(  3)  preserves  states  authority  to  impose  unbundling  obligations  but  only  if  their  action  is  consistent  with  the  Act  and  does  not  substantially  prevent  the  implementation  of 
 our  federal  regime.  Their  argument  also  ignores  the  fact  that  prior  Commission  actions  clearly  had  preemptive  effect;  as  noted  above,  in  the  UNE  Remand  Order,  the  Commission  prohibited 
 the  states  from  removing  UNEs  from  the  federally  mandated  list. 
 194.  We  also  find  that  state  action,  whether  taken  in  the  course  of  a  rulemaking  or  during  the  review  of  an  interconnection  agreement,  is  limited  by  the  restraints  imposed  by 

 subsections  251(  d)(  3)(  B)  and  (C).  We  are  not  persuaded  by  AT&  Ts  argument  that  a  state  commission  may  impose  additional  unbundling  obligations  in  the  context  of  its  review  of  an 
 interconnection  agreement  without  regard  to  the  federal  scheme.  616  Section  252(  e)(  3)  provides  that  nothing  in  section  252  prohibits  a  state  commission  from  imposing  additional  requirements 
 of  state  law  in  its  review  of  an  interconnection  agreement.  617  We  find  nothing  in  the  language  of 
 613  Fidelity  Federal  Savings  &  Loan  Assoc.  v.  de  la  Cuesta,  458  U.  S.  141,  154  (1982)  (  A  pre-  emptive  regulations 
 force  does  not  depend  on  express  congressional  authorization  to  displace  state  law);  City  of  New  York  v.  FCC,  486  U.  S.  57,  64  (1988)  (  The  statutorily  authorized  regulations  of  an  agency  will  pre-  empt  any  state  or  local  law  that 

 conflicts  with  such  regulations  or  frustrates  the  purposes  thereof.).  Even  where  Congress  has  preserved  some  role  for  the  states  the  Supreme  Court  has  found  that  state  law  is  nullified  to  the  extent  that  it  actually  conflicts  with 
 federal  law.  Fidelity  Federal  Savings  &  Loan  Assoc.  v.  de  la  Cuesta,  458  U.  S.  at  154.  The  Court  stated  that  such  a  conflict  arises  .  .  .  when  state  law  stands  as  an  obstacle  to  the  accomplishment  and  execution  of  the  full  purposes 
 and  objectives  of  Congress,    Hines  v.  Davidowitz,  312  U.  S.  52,  67,  61  S.  Ct.  399,  404,  85  L.  Ed.  581  (1941).  Id. 
 614  We  find  that  Congress  reference  to  the  implementation  of  the  requirements  of  this  section  in  section 
 251(  d)(  3)(  C)  means  the  Commissions  section  251  implementing  regulations.  AT&  Ts  argument  that  the  validity  of  state  unbundling  regulations  must  be  measured  solely  against  the  Acts  purposes  fails  to  recognize  that  the 

 Commission  is  charged  with  implementing  the  Act  and  its  purposes  are  fully  consistent  with  the  Acts  purposes.  See  AT&  T  Nov.  13,  2002  Ex  Parte  Letter  at  6;  Letter  from  Mark  Rosenblum,  Vice  President    Law,  AT&  T,  to 
 Michael  K.  Powell,  Chairman,  FCC,  et  al.,  CC  Docket  No.  01-  338  at  7,  in  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98- 
 147  (filed  Dec.  18,  2002)  (AT&  T  Dec.  18,  2002  Rosenblum  Ex  Parte  Letter). 
 615  See  California  Commission  Comments  at  23;  New  York  Department  Comments  at  8-  9;  NARUC  Comments  at 
 6;  Florida  Commission  Comments  at  5-  6;  AT&  T  Reply  at  373-  75;  Letter  from  Access  Integrated  Networks  et  al.,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  3  (filed  Oct.  24,  2002)  (Access 

 Integrated  Networks  Oct.  24,  2002  Ex  Parte  Letter). 
 616  See  AT&  T  Dec.  18,  2002  Rosenblum  Ex  Parte  Letter  at  9. 

 617  See  47  U.  S.  C.    252(  e)(  3). 
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 section  251(  d)(  3)  to  limit  its  application  to  state  rulemaking  actions.  Therefore,  we  find  that  the  most  reasonable  interpretation  of  Congress  intent  in  enacting  sections  251  and  252  to  be  that 
 state  action,  whether  taken  in  the  course  of  a  rulemaking  or  during  the  review  of  an  interconnection  agreement,  must  be  consistent  with  section  251  and  must  not  substantially 
 prevent  its  implementation. 
 195.  Parties  that  believe  that  a  particular  state  unbundling  obligation  is  inconsistent  with  the  limits  of  section  251(  d)(  3)(  B)  and  (C)  may  seek  a  declaratory  ruling  from  this 

 Commission.  If  a  decision  pursuant  to  state  law  were  to  require  the  unbundling  of  a  network  element  for  which  the  Commission  has  either  found  no  impairment    and  thus  has  found  that 
 unbundling  that  element  would  conflict  with  the  limits  in  section  251(  d)(  2)    or  otherwise  declined  to  require  unbundling  on  a  national  basis,  we  believe  it  unlikely  that  such  decision 
 would  fail  to  conflict  with  and  substantially  prevent  implementation  of  the  federal  regime,  in  violation  of  section  251(  d)(  3)(  C).  Similarly,  we  recognize  that  in  at  least  some  instances  existing 
 state  requirements  will  not  be  consistent  with  our  new  framework  and  may  frustrate  its  implementation.  It  will  be  necessary  in  those  instances  for  the  subject  states  to  amend  their  rules 
 and  to  alter  their  decisions  to  conform  to  our  rules. 
 196.  We  find  that  our  federal  framework,  which  provides  for  uniform  national  rules  for  some  network  elements  and  a  more  granular  approach  for  others,  offers  the  certainty  and  stability 

 necessary  to  enable  parties  to  make  investment  decisions.  This  approach  is  required  under  USTA.  618  Commenters  have  argued  that  nothing  could  create  more  instability,  and  be  more 
 destructive  of  investment  incentives  for  both  incumbent  LECs  and  competitive  LECs,  than  the  establishment  of  multiple,  separate  state  decisions  as  to  which  UNEs  have  to  be  offered  and 
 under  what  conditions.  619  In  this  Order  we  have  balanced  the  need  for  a  more  granular  analysis  with  the  need  for  certainty  through  a  federal  unbundling  regime.  In  light  of  policy  reasons  and 
 the  fact  that  the  D.  C.  Circuit  has  found  fault  with  our  uniform  national  rules,  we  find  that  the  availability  of  certain  network  elements  may  vary  between  geographic  regions.  However,  the 
 basis  on  which  those  more  granular  determinations  will  be  made  is  straightforward  and  predictable.  Additionally,  we  find  that  the  limitations  embodied  in  section  251(  d)(  3)(  B)  and  (C) 
 will  prevent  states  from  taking  actions  under  state  law  that  conflict  with  our  framework  and  create  disincentives  for  investment. 

 618  See  USTA,  290  F.  3d  at  427  (finding  that  Commissions  concept  of  impairment  failed  to  take  account  of  relevant 
 cost  disparities). 
 619  Verizon  Reply  at  51.  Verizon  also  urges  the  Commission  to  expeditiously  halt  existing  state  efforts  to  craft 
 expanded  unbundling  requirements.  Id.  at  53;  see  also  SBC  Reply  at  71-  83. 
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 VI.  UNBUNDLING  REQUIREMENTS  FOR  INDIVIDUAL  NETWORK  ELEMENTS 
 A.  Loops 
 1.  Summary 
 197.  Consistent  with  our  statutory  mandate  and  relevant  judicial  precedent,  we  focus  on  specific  market  and  customer  characteristics  as  informed  by  the  various  loop  types  and 

 capacities  that  typically  serve  these  markets  and  customers  to  undertake  the  granular  inquiry  necessary  to  determine  where  loop  impairment  exists.  620  In  distinguishing  among  the  various 
 types  of  loop  facilities,  i.  e.,  DS0  (voice-  grade/  POTS),  DS1,  DS3,  OCn  and  dark  fiber,  we  recognize  that  these  facilities,  as  a  practical  matter,  typically  serve  distinct  classes  of 
 customers,  621  resulting  in  different  economic  considerations  for  competitive  carriers  seeking  to  self-  deploy.  622  Through  this  approach  we  are  able  to  more  precisely  calibrate  our  rules  to  ensure 
 that  competitive  LECs  only  gain  access  to  unbundled  loops  where  they  are  impaired  under  the  standard  we  adopt  above,  i.  e.,  where  they  cannot  economically  self-  provision  loops  and 
 competitive  alternatives  do  not  exist.  623  To  that  end,  we  conduct  separate  loop  impairment  analyses  based  on  loop  types  and  capacity  levels,  which  also  consider  two  relevant  customer 
 classes    the  mass  market  and  the  enterprise  market.  624 

 620  Specifically,  the  local  loop  network  element  is  a  transmission  facility  between  a  distribution  frame  (or  its 
 equivalent)  in  an  incumbent  LEC  central  office  and  the  loop  demarcation  point  at  an  end-  user  customer  premises.  This  network  element  also  includes  all  features,  functions  and  capabilities  of  such  transmission  facility,  including 

 the  NID.  It  also  includes  all  electronics,  optronics,  and  intermediate  devices  (including  repeaters  and  load  coils)  used  to  establish  the  transmission  path  to  the  end-  user  customer  premises  as  well  as  any  inside  wire  owned  or 
 controlled  by  the  incumbent  LEC  that  is  part  of  that  transmission  path.  See  infra  note  638. 
 621  See,  e.  g.,  SBC  Comments  at  96-  98;  NewSouth  Reply  at  16. 

 622  As  explained  in  Part  VI.  A.  4.  a.  below,  we  make  a  further  distinction  in  our  unbundling  analysis  for  mass  market 
 loops  based  upon  the  type  of  loop  facility  (e.  g.,  copper  or  fiber). 
 623  Our  loop  unbundling  analyses  takes  into  account  the  relevant  customer  market  typically  served  by  the  loop 
 capacity  involved.  However,  we  recognize  that  although  each  loop  type  and  capacity  level  may  be  used  predominantly  to  provide  service  to  a  particular  customer  group,  that  same  loop  also  may  be  used  to  provide  service 

 across  a  range  of  customer  categories.  For  that  reason,  though  our  loop  unbundling  analysis  focuses  upon  the  customer  classes  most  likely  to  be  served  by  a  specific  type  of  loop,  the  unbundling  rules  we  adopt  apply  with  equal 
 force  to  every  customer  served  by  that  loop  type.  See  infra  paras.  209-  10. 
 624  As  described  in  Part  V.  B.  2.  a.  above,  the  mass  market  consists  primarily  of  residential  and  similar,  very  small, 
 business  users  of  analog  POTS.  The  enterprise  market  is  a  business  customer  market  of  typically  medium  to  large  businesses  with  a  high  demand  for  a  variety  of  sophisticated  telecommunications  services.  See  supra  Part  V.  B.  2.  a. 

 The  record  reflects  that  high-  capacity  loops,  DS1  to  OCn,  are  generally  provisioned  to  enterprise  customers,  while  voice-  grade  analog  loops,  DS0  loops,  and  loops  that  deploy  xDSL  services,  are  used  to  serve  customers  typically 
 associated  with  the  mass  market.  We  note,  however,  that  while  the  enterprise  market  is  comprised  of  business  customers  of  varying  size  and  capacity  requirements,  these  customers  reside,  most  often,  in  multiunit  premises 
 which  are  owned  or  controlled  by  another  entity.  Competitive  carriers  serving  multiunit  premises  face  deployment  barriers  that  are  not  present  when  a  competitive  carrier  seeks  to  deploy  service  to  a  customer  located  in  a  premises 
 that  such  customer  owns  or  controls.  See  infra  Part  VI.  B.  2.  (addressing  in  detail  barriers  associated  with  accessing  (continued.) 
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 198.  With  respect  to  our  mass  market  analysis,  we  make  national  impairment  determinations  for  loops  based  on  general  economic  and  operational  factors  that  do  not  vary 
 significantly  by  geographic  region.  625  As  we  explain  more  fully  below,  we  find  that  the  technical  characteristics  of  the  loop  facilities  generally  deployed  for  use  by  mass  market  customers 
 counsel  for  adopting  rules  that  take  into  account  the  various  technologies  now  used  in  loops.  In  crafting  our  unbundling  requirements,  we  consider  other  factors,  most  notably  our  mandate 
 under  section  706  of  the  Act  to  promote  the  rapid  deployment  of  advanced  services  throughout  the  nation.  Additionally,  we  reach  our  findings  after  full  recognition  and  consideration  of 
 intermodal  platforms,  notably  cable  and  CMRS. 
 199.  Given  the  steep  economic  barriers  associated  with  alternative  loop  deployment  that  are  compounded  by  various  identified  operational  issues,  we  require  that  loops  consisting  of 

 either  all  copper  or  hybrid  copper/  fiber  facilities  must  be  provided  on  an  unbundled  basis  so  that  requesting  carriers  may  provide  narrowband  services  over  them.  626  For  these  reasons,  we  also 
 direct  incumbent  LECs  to  unbundle  stand-  alone  copper  loops  and  subloops  for  the  provision  of  broadband  service.  However,  subject  to  a  transition  plan  discussed  below,  we  do  not  reinstate 
 the  Commissions  vacated  line  sharing  rules  because  we  determine  that  continued  unbundled  access  to  stand-  alone  copper  loops  and  subloops  enables  a  requesting  carrier  to  offer  and  recover 
 its  costs  from  all  of  the  services  that  the  loop  supports,  including  broadband  service. 
 200.  In  addition,  we  find  that  different  policy  considerations,  as  well  as  different  technical  considerations,  are  associated  with  copper  loops,  hybrid  copper/  fiber  loops,  and  FTTH 

 loops.  For  example,  we  decline  to  require  incumbent  LECs  to  provide  unbundled  access  to  their  hybrid  loops  for  the  provision  of  broadband  services.  627  Similarly,  we  decline  to  unbundle  loops 
 that  consist  of  FTTH  facilities  for  broadband  services.  As  explained  more  fully  below,  this  unbundling  approach    i.  e.,  greater  unbundling  for  legacy  copper  facilities  and  more  limited 
 unbundling  for  next-  generation  network  facilities    appropriately  balances  our  goals  of 

 (Continued  from  previous  page) 
 customers  in  multiunit  premises).  When  customers  typically  associated  with  the  mass  market  reside  in  multiunit  premises,  carriers  seeking  to  self-  deploy  their  own  facilities  to  serve  these  customers  face  the  same  barriers  as  when 

 serving  multiunit  premise-  based  enterprise  customers.  Because  we  find  that  the  barriers  faced  by  requesting  carriers  in  accessing  customers  in  multiunit  premises  are  not  unique  to  enterprise  market  customers  residing  in  such 
 premises  but  extend  to  all  classes  of  customers  residing  therein,  including  residential  or  other  mass  market  tenants,  the  conclusions  we  reach  for  high-  capacity  loops  in  the  enterprise  market  apply  equally  to  mass  market  customers  in 
 multiunit  premises.  This  in  no  way  affects  or  changes  the  conclusions  we  reach  with  respect  to  DS0  and  xDSL  capable  loops  in  our  mass  market  analysis. 

 625  See,  e.  g.,  AT&  T  Reply  at  146,  165. 
 626  As  explained  below,  in  overbuild  situations  where  the  incumbent  LEC  elects  to  retire  existing  copper  loops  for 
 FTTH  loops,  we  also  require  incumbent  LECs  to  make  available  unbundled  access  to  a  64  kbps  transmission  path  over  that  FTTH  loop  so  that  a  competitor  may  provide  narrowband  service  to  that  end-  user  customer. 

 627  Incumbent  LECs  must  continue  to  provide  unbundled  access  to  the  TDM  features,  functions,  and  capabilities  of 
 their  hybrid  loops.  This  will  allow  competitive  LECs  to  continue  providing  both  traditional  narrowband  services  (e.  g.,  voice,  fax,  dial-  up  Internet  access)  and  high-  capacity  services  like  DS1  and  DS3  circuits. 
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 promoting  facilities-  based  investment  and  innovation  against  our  goal  of  stimulating  competition  in  the  market  for  local  telecommunications  services. 
 201.  With  respect  to  our  enterprise  market  analysis,  we  make  national  impairment  determinations  based  on  loop  characteristics  that  do  not  vary  significantly  from  area  to  area.  Our 
 conclusions  with  respect  to  loop  deployment  do  vary,  however,  according  to  the  loop  type,  i.  e.,  dark  fiber  628  or  lit  fiber,  629  and  the  capacity  level  of  the  particular  loop.  We  find  that  different 
 economic  characteristics  impact  a  competitive  LECs  ability  to  self-  deploy  or  utilize  wholesale  alternatives  based  on  the  capacity  level  of  the  loop  facility  demanded  by  its  customer.  630 

 202.  With  regard  to  the  highest  capacity  loop  facilities,  i.  e.,  OCn  loops,  631  we  conclude  that  no  impairment  exists  on  a  nationwide  basis.  At  the  OCn  level,  requesting  carriers  have  the 
 ability  to  economically  self-  provision  their  own  loops  or  are  able  to  obtain  unbundled  dark  fiber  and  light  it  at  the  OCn  level.  With  respect  to  dark  fiber  loops,  632  DS3  loops,  633  and  DS1  loops,  634 

 628  Dark  fiber  is  optical  fiber  through  which  no  light  is  transmitted  and  no  signal  is  carried.  It  is  unactivated 
 deployed  fiber  that  is  left  dark,  i.  e.,  with  no  necessary  equipment,  i.  e.,  opto-  electronics  or  optronics  attached  to  light  the  fiber  to  carry  a  signal  to  serve  customers.  See  NEWTONS  TELECOM  DICTIONARY  201  (18th  ed.  2002) 

 (definition  of  Dark  Fiber);  see  also  UNE  Remand  Order,  15  FCC  Rcd  at  3771,  para.  162  n.  292.  Once  the  optronics  are  attached  to  the  fiber  to  make  signal  transmission  possible  the  dark  fiber  becomes  lit.  See  NEWTONS  TELECOM 
 DICTIONARY  538-  39  (18th  ed.  2002)  (definition  of  Opto-  Electronics  and  Optronics). 
 629  Id.;  see  also  NEWTONS  TELECOM  DICTIONARY  433  (18th  ed.  2002)  (definition  of  Lit  Fiber). 

 630  We  also  know  that  alternative  transmission  technologies  such  as  fixed  wireless,  satellite  and  unlicensed 
 wireless  may  exist  as  potential  enterprise  market  loop  alternatives  in  limited  circumstances  and,  therefore,  consider  these  alternative  transmission  capabilities  in  our  impairment  analysis  where  appropriate.  See,  e.  g.,  BellSouth 

 Comments  at  42-  44;  SBC  Reply  at  91;  Verizon  Comments  at  118-  19. 
 631  OCn  is  an  optical  interface  designed  to  work  with  a  Synchronous  Optical  Network  (SONET).  See  NEWTONS 
 TELECOM  DICTIONARY  528  (18th  ed.  2002)  (definition  of  OCn).  SONET  is  an  optical  interface  standard  for  translating  electronic  communications  signals  into  photonic  signals  for  transmission  across  fiber  optic  facilities. 

 Ideally,  SONET  transmission  systems  are  laid  out  in  a  ring  formation  to  provide  redundancy.  See  NEWTONS  TELECOM  DICTIONARY  684-  85  (18th  ed.  2002)  (definition  of  SONET).  OCn  transmission  facilities  are  deployed  as 
 SONET  channels  having  a  bandwidth  of  typically  155.52  Mbps  (OC3  or  the  equivalent  capacity  of  3  DS3s)  and  higher,  e.  g.,  OC12  (622.08  Mbps);  OC48  (2.488  Gbps)  etc.  See  NEWTONS  TELECOM  DICTIONARY  527  (18th  ed. 
 2002)  (definitions  of  OC3,  OC12,  and  OC48). 
 632  In  the  UNE  Remand  Order,  the  Commission  determined  that  the  loop  facility  includes  dark  fiber,  stating  that 
 both  copper  and  fiber  alike  represent  unused  loop  capacity  therefore  dark  fiber  and  extra  copper  both  fall  within  the  loop  network  elements  facilities,  functions,  and  capabilities.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3776, 

 para.  174.  The  Commission  went  on  to  state  that  there  is  no  reason  to  distinguish  dark  fiber  from  our  general  unbundling  analysis  for  loops.  UNE  Remand  Order,  15  FCC  Rcd  at  3785,  para.  196.  The  record  contains  no  basis 
 for  departing  from  this  determination. 
 633  A  DS3  loop  is  a  digital  local  loop  having  a  total  digital  signal  speed  of  44.736  Mbps  provided  over  various 
 transmission  media  including  but  not  limited  to  fiber  optics,  coaxial  cable,  or  radio.  DS3  loops  can  be  channelized  into  28  DS1  channels.  See  infra  note  634.  They  can  also  be  unchannelized.  See  NEWTONS  TELECOM  DICTIONARY 

 242  (18th  ed.  2002)  (defining  DS3). 
 634  A  DS1  is  a  1.544  Mbps  first-  level  signal  in  the  digital  transmission  hierarchy.  In  the  time  division  multiplexing 
 (continued.) 
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 we  conclude  that  requesting  carriers  are  impaired  on  a  location-  by-  location  basis  without  unbundled  access  to  incumbent  LEC  loops  nationwide.  We  find,  however,  that  some 
 competitive  carriers  have  been  able  to  deploy  certain  high-  capacity  loops  to  particular  customer  locations  and  that  some  wholesale  alternatives  also  exist  at  particular  customer  locations. 
 Because  the  record  does  not  provide  the  specific  information  necessary  to  identify  the  precise  customer  locations  where  this  deployment  has  occurred,  635  we  delegate  to  state  commissions  the 
 authority  to  make  findings  of  fact  within  the  scope  of  the  deployment  triggers  we  define,  to  identify  on  a  more  granular  scale  where  carriers  are  not  impaired  without  access  to  incumbent 
 LEC  unbundled  high-  capacity  loops. 
 2.  Background 
 203.  Loops  in  their  simplest  form  are  the  transmission  facilities  between  a  central  office  and  the  customers  premises,  i.  e.,  the  last  mile  of  a  carriers  network  that  enables  the 

 end-  user  customer  to  receive,  for  example,  a  telephone  call  or  a  facsimile,  as  well  as  to  originate  similar  communications.  636  Loops  were  included  on  the  initial  list  of  UNEs  in  the  Local 
 Competition  Order,  and  even  the  incumbent  LECs  agreed  that  the  loop  network  element  must  be 
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 hierarchy  of  the  telephone  network,  DS1  is  the  initial  level  of  multiplexing.  Traditionally,  24  64  kbps  DS0  channels  have  been  multiplexed  up  to  the  1.544  Mbps  DS1  rate,  with  each  DS0  channel  carrying  the  digital  representation  of 

 an  analog  voice  channel.  See  TELCORDIA,  INC.,  NOTES  ON  THE  NETWORK,  TELCORDIA  TECHNOLOGIES  SPECIAL  REPORT,  SR-  2275,  Issue  4,  Oct.  2000,  Glossary  at  46  (TELCORDIA  NOTES  ON  THE  NETWORK).  DS1  loops  are 
 provided  over  various  transmission  media  and  combinations  of  transmission  media,  including  but  not  limited  to  two-  wire  and  four-  wire  copper,  fiber  optics,  or  radio.  DS1  loops  may  be  channelized  typically  into  up  to  24  DS0 
 channels  of  56/  64  kbps  each,  or  unchannelized,  i.  e.,  providing  a  continuous  bit  stream  for  data  (such  as  frame  relay,  ATM,  or  Internet  access)  or  other  customer  applications.  We  note  that  throughout  the  record  in  this  proceeding 
 parties  use  the  terms  DS1  and  T1  interchangeably  when  describing  a  symmetric  digital  transmission  link  having  a  total  1.544  Mbps  digital  signal  speed.  Carriers  frequently  use  a  form  of  DSL  service,  i.  e.,  High-  bit  rate  DSL 
 (HDSL),  both  two-  wire  and  four-  wire  HDSL,  as  the  means  for  delivering  T1  services  to  customers.  We  will  use  DS1  for  consistency  but  note  that  a  DS1  loop  and  a  T1  are  equivalent  in  speed  and  capacity,  both  representing  the 
 North  American  standard  for  a  symmetric  digital  transmission  link  of  1.544  Mbps.  See  NEWTONS  TELECOM  DICTIONARY  242  (18th  ed.  2002)  (definition  of  DS1);  id.  at  718  (definition  of  T1);  see  also  ENGINEERING  AND 
 OPERATIONS  IN  THE  BELL  SYSTEM  198-  201  (R.  F.  Ray  Technical  ed.,  2d  ed.  1983)  (channelization  process  for  transmission  of  telecommunications),  369-  73  (technical  characteristics  of  DS1  loops),  386-  93  (describing  T-  carrier 
 hierarchy  and  necessary  equipment);  TELCORDIA,  INC.,  NOTES  ON  THE  NETWORK,  SR-  2275,  section  7.7  (Dec.  2000)  (describing  digital  data  services  provided  over  local  loops)  at  7-  23  (overview  of  DS  hierarchy). 

 635  We  do,  however,  determine  that  the  record  contains  sufficient  information  to  enable  us  to  identify  appropriate 
 triggers  and  related  criteria  that  will,  after  a  more  particularized  analysis,  identify  the  specific  customer  locations  where  certain  types  of  high-  capacity  loop  impairment  does  not  exist.  To  that  end,  we  develop  a  mechanism  for  a 

 further  level  of  granular  inquiry  by  state  commissions  on  a  customer  location-  specific  basis  where  our  defined  triggers  exist.  We  both  delegate  authority  to  and  direct  state  commissions  to  undertake  more  granular  analyses  for 
 dark  fiber  loops,  DS3  loops,  and  DS1  loops  at  specific  customer  locations  based  upon  our  defined  triggers  and  related  criteria  for  each  of  these  three  types  of  loops,  as  described  below.  These  more  granular  impairment  analyses 
 may  result  in  non-  impairment  determinations  for  one  or  more  of  these  three  types  of  high-  capacity  loop  facilities  at  specified  customer  locations. 

 636  Local  Competition  Order,  11  FCC  Rcd  at  15691,  para.  380. 
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 unbundled  pursuant  to  sections  251(  c)(  3)  and  251(  d)(  2)  of  the  Act.  637  In  the  UNE  Remand  Order,  the  Commission  broadened  the  definition  of  the  loop  to  include  all  features,  functions, 
 and  capabilities  of  these  transmission  facilities,  including  high-  capacity  loops,  dark  fiber  and  all  attached  electronics  (except  those  used  for  providing  advanced  services).  638  The  Commission 
 also  concluded  that  obtaining  all  types  of  loops  from  alternative,  non-  incumbent  LEC  sources,  i.  e.,  third  party  or  self-  provisioning,  would  impede  competitive  entry  by  materially  raising  entry 
 costs;  delaying  entry;  and  limiting  the  scope  and  timeliness  of  competitors  offerings.  639  Accordingly,  the  Commission  applied  a  one-  size-  fits-  all  approach  to  loops,  and  ordered 
 unbundling  of  all  incumbent  LEC  loops,  from  DS0  to  OCn  and  dark  fiber,  throughout  the  nation.  640 

 204.  In  the  Triennial  Review  NPRM,  as  part  of  its  overall  inquiry  about  the  viability  of  adopting  more  granular  unbundling  rules,  the  Commission  asked  whether  its  impairment  analysis 
 should  make  service,  geographic,  capacity  or  other  distinctions  to  the  unbundled  loop.  641  In  addition,  the  Commission  asked  whether  there  were  meaningful  distinctions  between  those  loops 
 capable  of  providing  basic  services  versus  those  capable  of  advanced  or  broadband  services.  642  Finally,  for  high-  capacity  loops  (DS1  and  above),  the  Commission  sought  comment  on  whether 
 there  was  a  particular  capacity  level  at  which  new  entrants  could  economically  self-  deploy.  643 

 637  Id.  at  15689-  90,  para.  377;  see  also  UNE  Remand  Order,  15  FCC  Rcd  at  3771,  para.  162  n.  292. 
 638  UNE  Remand  Order,  15  FCC  Rcd  at  3772,  paras.  166-  67  nn.  300  &  301;  see  also  47  C.  F.  R.    51.319(  a)(  1), 
 which  defined  loops  as: 

 Local  loop.  The  local  loop  network  element  is  defined  as  a  transmission  facility  between  a  distribution  frame  (or  its  equivalent)  in  an  incumbent  LEC  central  office  and  the  loop  demarcation 

 point  at  an  end-  user  customer  premises,  including  inside  wire  owned  by  the  incumbent  LEC.  The  local  loop  network  element  includes  all  features,  functions,  and  capabilities  of  such  transmission 
 facility.  Those  features,  functions,  and  capabilities  include,  but  are  not  limited  to,  dark  fiber,  attached  electronics  (except  those  electronics  used  for  the  provision  of  advanced  services,  such  as 
 Digital  Subscriber  Line  Access  Multiplexers),  and  line  conditioning.  The  local  loop  includes,  but  is  not  limited  to,  DS1,  DS3,  fiber,  and  other  high-  capacity  loops. 

 639  UNE  Remand  Order,  15  FCC  Rcd  at  3772,  para.  165. 
 640  In  the  UNE  Remand  Order,  the  Commission  did  not  engage  in  a  capacity-  based  analysis  beyond  confirming 
 that  high-  capacity  loops  were  included  in  the  definition  of  the  loop.  The  Commission  found  that  because  the  wire  facility  used  for  transmission  of  the  traffic  is  indistinguishable  from  any  other  copper  wire  there  was  no  reason  to 

 modify  the  definition  of  loops  to  describe  various  categories  of  capacity.  UNE  Remand  Order,  15  FCC  Rcd  at  3777,  para.  176.  The  Commission,  however,  did  separately  consider  dark  fiber  local  loops,  finding  the 
 characteristics  to  be  similar  to  dark  fiber  transport  (  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.).  UNE  Remand  Order,  15  FCC  Rcd  at  3785-  86,  para.  198. 
 641  Triennial  Review  NPRM,  16  FCC  Rcd  at  22804,  para.  51. 

 642  Id.  at  22804-  05,  para.  51. 
 643  Id. 
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 3.  General  Economic  Characteristics  of  Loop  Deployment 
 205.  Constructing  loop  plant  is  both  costly  and  time  consuming,  regardless  of  the  type  of  loop  being  deployed.  644  Notably,  both  the  Supreme  Court  and  the  D.  C.  Circuit  recognized  that 

 incumbent  LECs  may  be  required  to  unbundle  loop  facilities  because  they  are  very  expensive  to  duplicate.  645  Because  the  distribution  portion  of  the  loop  serves  a  specific  location,  646  and 
 installing  and  rewiring  that  loop  is  very  expensive,  most  of  the  costs  of  constructing  loops  are  sunk  costs.  Unless  that  loop  is  subsequently  purchased  by  another  provider  wishing  to  serve  that 
 same  location,  a  carriers  ability  to  recover  the  cost  of  that  loop  is  generally  constrained  except  in  limited  circumstances  at  certain  capacity  levels.  While  fixed  costs  for  constructing  loops  are 
 quite  high,  economies  of  scale  in  deployment  can  accrue  in  constructing  loops  to  locations  that  are  geographically  close  to  a  carriers  transport  network,  assuming  other  barriers  do  not  preclude 
 construction.  647  This  is  especially  true  in  urban  areas  where  the  concentration  of  potential  customer  locations  is  very  dense.  648  Conversely,  because  of  long  loop  lengths  required  to  reach 
 more  distant,  geographically  dispersed  customers,  loops  are  more  expensive  to  build  in  rural  areas,  raising  the  average  cost  per  loop  for  equipment,  installation,  and  maintenance.  649  In 
 addition  to  the  cost-  related  barriers  discussed  above,  competitive  carriers  deploying  loops  also  face  difficulties  in  acquiring  municipal  and  private  rights-  of-  ways  as  well  as  gaining  building 
 access  from  owners  of  multiunit  premises.  650  These  additional  factors  can  further  affect 

 644  See,  e.  g.,  ALTS  et  al.  Comments  at  56-  57  (stating  that  fiber  deployment  costs  $100,000-$  300,000  per  mile 
 underground,  $50,000  per  mile  on  poles,  and  $10,000  to  $60,000  through  pipelines  and  adding  a  building  averages  $250,000    and  that  if  the  building  is  more  than  a  mile  from  the  competitive  LECs  existing  networks  ,  it  can  cost 

 more  that  $1,000,000  per  mile  to  construct  fiber  loops  in  urban  areas);  WorldCom  Comments  at  74-  75  (stating  that  it  costs  approximately  $250,000  for  a  building  add  and  can  take  six  to  nine  months  for  a  competitive  LEC  to 
 deploy  a  new  DS1  loop). 
 645  USTA,  290  F.  3d  at  426  (citing  Verizon,  535  U.  S.  467  at  n.  27). 

 646  This  contrasts  with  the  feeder  portion  of  the  loop  which  may  serve  multiple  locations. 
 647  See,  e.  g.,  AT&  T  Comments  at  134. 
 648  See,  e.  g.,  Letter  from  Douglas  A.  Dawson,  CCG  Consulting,  (on  behalf  of  20  network-  based  competitive 
 LECs)  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  6-  7  (filed  July  17,  2002)  (submitting  survey-  based  State  Of  CLEC  Competition)  (CCG  July  17,  2002  CLEC  Survey  Ex  Parte  Letter) 

 (demonstrating  that  for  the  six  major  metropolitan  areas  surveyed  the  concentration  of  competitive  LEC  loop  deployment  is  in  the  downtown  area);  Allegiance  Comments  at  23. 

 649  In  addition,  we  note  that  scale  economies  may  particularly  affect  small  businesses. 
 650  See,  e.  g.,  AT&  T  Reply  at  174-  79  (discussing  other  barriers  linked  to  the  incumbent  LECs  historical  monopoly 
 that  preclude  competitive  loop  deployment  independent  of  cost  factors);  see  also  NuVox  Comments  at  74;  KMC  Duke  Aff.  at  paras.  7-  8  (citing  proprietary  information),  Affidavit  of  Joseph  Polito,  SNiP  LiNK,  Inc.  (SNiP  LiNK 

 Polito  Aff.)  at  paras.  4-  7;  Sprint  Comments  at  22;  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  3  (filed  Oct.  25,  2002)  (discussing  building 
 access  barriers)  (WorldCom  Oct.  25,  2002  Building  Access  Ex  Parte  Letter);  ALTS  et  al.  Comments  at  56. 
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 competitive  carriers  ability  to  sign  up  customers  that  need  predictability  in  their  business  decisions.  651 
 206.  For  fiber-  based  loops,  the  cost  of  construction  does  not  vary  significantly  by  loop  capacity,  i.  e.,  the  per-  mile  cost  of  building  a  DS1  loop  does  not  differ  significantly  from  the  cost 
 to  construct  an  OCn  loop.  The  most  significant  portion  of  the  costs  incurred  result  from  deploying  the  physical  fiber  infrastructure  in  the  ground,  rather  than  from  lighting  the  fiber 
 optical  cable.  652  The  ability  to  recover  these  construction  costs  for  different  loop  capacities  does,  however,  vary  based  on  the  relevant  capacity  level  of  the  loop  to  be  provided.  Accordingly,  a 
 key  consideration  in  our  impairment  analysis  is  the  loop  capacity  level  at  which  a  competitive  entrant  can  recover  its  construction  costs.  Similarly,  the  ability  to  overcome  other  operational 
 barriers  to  deployment  varies  based  on  the  capacity  of  the  loop.  The  record  confirms  that  loop  capacity  level  directly  affects  the  potential  revenue  stream  that  can  reasonably  be  obtained  to 
 offset  construction  costs  in  an  economically  feasible  timeframe.  653  Thus,  in  addition  to  the  barriers  a  new  entrant  faces  in  deploying  loops,  we  consider  the  revenue  potential  associated 
 with  particular  loop  capacity,  654  as  well  as  the  ability  to  mitigate  construction  delays  that  affect  provisioning  intervals  as  keys  to  determining  the  degree  to  which  an  entrant  is  impaired  in 
 deploying  a  particular  loop  capacity. 
 207.  Unlike  transport  facilities,  loops  generally  do  not  aggregate  multiple  customers  traffic.  As  a  result,  loop  impairment  is  more  closely  related  to  the  demands  of  the  individual 

 customer  served  by  such  loop.  In  that  regard,  customer  class  distinctions  are  useful  in 

 651  See,  e.  g.,  AT&  T  Reply  at  175  (describing  how  it  keeps  statistics  on  breakage,  i.  e.,  instances  where  it  initially 
 won  a  customer  but  subsequently  lost  it  due  to  delay  in  gaining  building  access  to  provision  the  customer);  see  also  Sprint  Comments  at  23  (  Customers  will  not  wait  the  months  required  by  CLECs  to  acquire  permits,  cut  streets, 

 install  additional  equipment,  engineer,  construct,  and  test  new  facilities.). 
 652  See,  e.  g.,  AT&  T  Comments  at  130;  AT&  T  Reply  at  148  (arguing  that  the  cost  of  loop  deployment  primarily  lies 
 in  the  structures  and  rights-  of-  way,  not  in  the  copper  or  fiber  conductor). 
 653  See,  e.  g.,  WorldCom  Comments  at  76;  Letter  from  Timothy  J.  Regan,  Senior  Vice  President    Government 
 Affairs,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  32  (filed  Nov.  26,  2002)  (Corning  Nov.  26,  2002  Ex  Parte  Letter);  Corning  Comments,  App.  A  at  10  (Cambridge 

 Strategic  Management  Group,  Assessing  the  Impact  of  Regulation  on  Deployment  of  Fiber  to  the  Home  (2002)  (CSMG  Study)). 

 654  In  considering  potential  revenue  streams  from  the  various  types  of  loops,  it  is  necessary  to  factor  in  the  ability 
 to  enter  into  and  enforce  long-  term  contracts  with  customers.  We  have  some  evidence  that  certain  states  have  adopted  or  are  considering  regulations  that  limit  the  ability  of  carriers  to  bind  a  customer  to  a  long-  term  local  service 

 contract  (i.  e.,  longer  than  one  year)  and  associated  termination  charges.  See,  e.  g.,  Missouri  Public  Service  Commission,  Southwestern  Bell  Telephone  Companys  Proposed  Revisions  to  PSC  Mo.  No.  26,  Long  Distance 
 Message  Telecommunications  Service  Tariff,  Report  and  Order,  Case  Nos.  TT-  2002-  227  et  al.  (June  27,  2002)  (local  service  terms  in  excess  of  one  year  will  not  be  permitted);  California  Public  Utilities  Commission,  Rules 
 Governing  Telecommunications  Consumer  Protection,  Interim  Decision,  Rulemaking  00-  02-  004,  Rule  3  (June  6,  2002).  To  the  extent  such  limitations  exist,  a  carriers  ability  to  rely  on  a  guaranteed  long-  term  revenue  stream  from 
 a  loop  to  recover  sunk  construction  costs  is  adversely  affected. 
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 understanding  competitive  carriers  decisions  and  economic  abilities  regarding  deployment  of  loops  typically  used  to  serve  customers  generally  associated  with  that  particular  class. 
 208.  Consistent  with  our  impairment  framework  set  out  above,  655  our  loop  analysis  considers  alternative  transmission  technologies  that  are  capable  of  providing  transmission  to 
 individual  customers  as  alternatives  to  the  incumbent  LECs  loop  facility.  These  alternative  technologies  may  use  non-  wireline  platforms  to  offer  other  kinds  of  services  to  customers,  i.  e., 
 intermodal  competition,  such  as  cable  operators  providing  cable  telephony  and  cable  modem  service  in  addition  to  cable  television,  or  may  be  used  solely  to  provide  telephone  and  data 
 communications  service,  such  as  fixed  wireless  technologies.  As  explained  above,  we  will  consider  whether  these  alternative  technologies  permit  a  requesting  carrier  to  serve  the  market, 
 either  through  self-  provisioning  the  necessary  transmission  capacity  to  the  customer,  or  by  obtaining  the  transmission  capacity  on  a  wholesale  basis  from  other  firms  deploying  that 
 technology. 
 4.  Loop  Impairment  by  Customer  Market 
 209.  The  record  reflects  that  customers  generally  associated  with  the  mass  market  typically  use  different  types  of  loop  facilities  than  customers  generally  associated  with  the 

 enterprise  market.  We  note  that  very  small  business  customers,  like  residential  customers,  typically  purchase  analog  loops,  DS0  loops,  or  loops  using  xDSL-  based  technologies.  We 
 address  the  loops  provisioned  to  these  customers  as  part  of  our  mass  market  analysis.  All  other  business  customers    whom  we  characterize  as  the  enterprise  market    typically  purchase 
 high-  capacity  loops,  such  as  DS1,  DS3,  and  OCn  capacity  loops.  We  address  high-  capacity  loops  provisioned  to  these  customers  as  part  of  our  enterprise  market  analysis.  656  We  first 
 analyze  those  loops  generally  provisioned  to  mass  market  customers  and  then  analyze  the  high-  capacity  loops  generally  provisioned  to  enterprise  customers. 

 210.  In  considering  the  different  customer  markets  to  inform  our  understanding  of  competitive  carrier  loop  deployment,  we  note  that  our  market  classifications  allow  us  to  conduct 
 our  impairment  analyses  for  the  various  loop  types  at  a  more  granular  level  but  are  not  intended  to  prohibit  the  use  of  UNE  loops  by  customers  not  typically  associated  with  the  respective 
 customer  market  class.  For  example,  business  customers  typically  associated  with  the  enterprise  market  may  require  DS0  lines,  particularly  if  they  have  remote  business  locations  staffed  by  only 
 a  few  employees  where  high-  capacity  loop  facilities  are  not  required.  657  Because  a  competitive 
 655  See  supra  Part  V.  B. 

 656  We  note  that  through  the  application  of  our  new  impairment  standard  to  high-  capacity  loops,  including 
 impairment  analyses  based  on  each  particular  loop  capacity  level,  we  have  considered  evidence  raised  by  joint  petitioners  in  the  High-  Capacity  Loop  and  Transport  Petition.  See,  e.  g.,  BellSouth,  SBC,  and  Verizon,  Joint  Petition 

 for  Elimination  of  Mandatory  Unbundling  of  High-  Capacity  Loops  and  Dedicated  Transport,  CC  Docket  No.  96-  98  (filed  Apr.  5,  2001)  (High-  Capacity  Loop  and  Transport  Petition).  Because  we  base  our  unbundling  obligations 
 with  respect  to  high-  capacity  loops  on  our  findings  of  impairment  and  non-  impairment  according  to  our  new  impairment  standard,  we  dismiss  the  High-  Capacity  Loop  and  Transport  Petition  as  moot. 

 657  See,  e.  g.,  WorldCom  Comments  at  14. 
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 carrier  faces  the  same  economic  characteristics  to  serve  these  customers  at  their  remote  locations  with  a  DS0  loop  that  it  faces  to  serve  residential  customers  served  by  the  same  loop  type,  our 
 customer  class  distinctions  are  not  intended  to  preclude  a  competitive  LEC  from  obtaining  an  unbundled  DS0  loop  to  serve  these  business  customers.  Similarly,  a  competitive  LEC  faces  the 
 same  economic  considerations  in  provisioning  a  DS1  loop  to  a  large  business  customer  typically  associated  with  the  enterprise  market  that  it  faces  in  provisioning  that  same  loop  type  to  a  very 
 small  business  or  residential  customer  typically  associated  with  the  mass  market.  Thus,  while  we  adopt  loop  unbundling  rules  specific  to  each  loop  type,  our  unbundling  obligations  and 
 limitations  for  such  loops  do  not  vary  based  on  the  customer  to  be  served. 
 a.  Mass  Market  Loops 
 (i)  Introduction 
 211.  We  conclude  that  requesting  carriers  seeking  to  serve  the  mass  market  face  varying  levels  of  impairment  without  unbundled  access  to  the  transmission  path  between  the 

 central  office  and  the  customer  premises  depending  upon  whether  the  loop  used  to  complete  this  path  consists  entirely  of  copper,  or  consists  of  a  hybrid  of  fiber  and  copper  cables,  and  whether  a 
 requesting  carrier  seeks  to  offer  narrowband  or  broadband  services  or  both.  In  fact,  for  those  loops  consisting  of  fiber  from  the  central  office  to  the  customer  premises,  i.  e.,  FTTH  loops,  we 
 find  no  impairment  on  a  national  basis.  658  Based  on  our  review  of  the  record,  which  covers  the  current  deployment  of  local  loops,  technological  advancements  in  incumbent  LEC  outside  plant, 
 and  the  economic  barriers  and  revenue  opportunities  facing  competitive  providers  today  with  regard  to  loops,  we  conclude  that  incumbent  LECs  must  provide,  as  UNEs  pursuant  to  section 
 251(  c)(  3),  copper  loops,  including  copper  loops  conditioned  to  provide  xDSL  service.  As  discussed  below,  we  also  require  incumbent  LECs  to  provide  competitive  LECs  the  ability  to 
 line  split,  which  allows  two  competitive  LECs  to  split  the  loop  so  that  one  carrier  can  provide  narrowband  service  and  the  other  can  provide  broadband  service. 

 212.  As  for  our  unbundling  rules  related  to  broadband,  we  recognize  there  are  special  considerations  in  crafting  unbundling  rules  for  loops  used  to  provide  broadband  service. 
 Broadband  deployment  is  a  critical  domestic  policy  objective  that  transcends  the  realm  of  communications.  While  the  development  of  broadband  infrastructure  is  a  fundamental  and 
 integral  step  in  ensuring  that  consumers  are  able  to  fully  reap  the  benefits  of  the  information  age,  even  more  broadly,  it  is  vital  to  the  long-  term  growth  of  our  economy  as  well  as  our  countrys 
 continued  preeminence  as  the  global  leader  in  information  and  telecommunications  technologies.  The  Commissions  primary  regulatory  challenge  for  broadband  is  to  determine  how  we  can  help 
 drive  the  enormous  infrastructure  investment  required  to  turn  the  broadband  promise  into  a  reality.  This  challenge  is  squarely  raised  in  our  consideration  of  unbundling  rules  for  last-  mile 
 facilities. 

 658  As  discussed  more  fully  below,  there  is  an  unbundling  obligation  for  narrowband  voice  services  in  one  FTTH 
 loop  deployment  scenario,  i.  e.,  overbuild  deployment  in  which  an  incumbent  LEC  constructs  fiber  transmission  facilities  parallel  to  or  in  replacement  of  its  existing  copper  loop  plant.  See  infra  Part  VI.  A.  4.  a.(  v)(  b). 
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 213.  With  respect  to  unbundling  obligations  for  facilities  used  to  provide  broadband  service,  we  are  charged  with  determining  the  potential  impact  of  our  rules  on  advanced  services, 
 including  those  supported  by  broadband  deployment  and  infrastructure  investment,  as  directed  by  section  706  of  the  1996  Act.  659  For  this  reason,  we  craft  unbundling  rules  that  provide  the 
 right  incentives  for  all  carriers,  including  incumbent  LECs,  to  invest  in  broadband  facilities.  Thus,  we  decline  to  require  unbundling  on  a  national  basis  of  the  features,  functions,  and 
 capabilities  of  the  packetized  fiber  facilities  of  incumbent  LEC  hybrid  loops.  We  require,  however,  incumbent  LECs  to  provide  unbundled  access  to  the  time  division  multiplexing  (TDM) 
 features,  functions,  and  capabilities  of  their  hybrid  loops  on  a  national  basis.  Subject  to  a  three-year  transition  period  explained  below,  we  also  decline  to  require  incumbent  LECs  to  continue  to 
 unbundle  the  high  frequency  portion  of  the  loop.  Our  rules  strike  the  appropriate  statutorily  required  balance  between  ensuring  competitive  access  and  maintaining  incentives  to  invest  in 
 next-  generation  networks. 
 (ii)  Mass  Market  Loop  Types 
 214.  At  its  most  basic  level,  a  local  loop  that  serves  the  mass  market  consists  of  a  transmission  medium,  which  almost  always  includes  copper  wires  of  various  gauges.  The  loop 

 may  include  additional  components  (e.  g.,  load  coils,  bridge  taps,  repeaters,  multiplexing  equipment)  that  are  usually  intended  to  facilitate  the  provision  of  narrowband  voice  service. 

 215.  As  a  general  matter,  incumbent  LECs  use  two  local  exchange  network  configurations  to  connect  customers  to  their  switching  systems.  First,  carriers  connect  customers 
 directly  to  a  central  office  via  a  loop  dedicated  solely  to  a  particular  customer.  In  this  configuration,  the  local  loop  consists  of  a  single  cable  pair    for  copper  loops,  this  is  often 
 referred  to  as  home-  run  copper.  660  For  the  mass  market,  carriers  can  use  copper  loops  to  provide  both  narrowband  voice  service  and  broadband  xDSL  services.  661  Providing  broadband 
 service  requires  the  use  of  special  equipment,  such  as  DSLAMs  662  located  in  the  central  office  (or 

 659  47  U.  S.  C.    157  nt. 
 660  See,  e.  g.,  Letter  from  Stephen  C.  Gray,  President,  McLeodUSA,  to  William  Maher,  Chief,  Wireline 
 Competition  Bureau,  FCC,  CC  Docket  Nos.  96-  98,  98-  147,  01-  338,  02-  33  at  8  (filed  Dec.  18,  2002)  (McLeodUSA  Dec.  18,  2002  Ex  Parte  Letter).  McLeod  states  that  customers  are  served  by  a  connected-  through  copper  loop, 

 with  a  direct  analog  electrical  connection  between  the  customers  network  interface  and  the  central  office  main  distribution  frame  or  one  of  two  types  of  DLC  systems. 

 661  Subject  to  certain  distance  limitations,  a  carrier  can  provide  various  types  of  xDSL  service  over  a  copper  loop 
 with  appropriate  conditioning.  We  use  the  term  xDSL  to  refer  to  DSL  as  a  generic  transmission  technology,  as  opposed  to  a  specific  type  of  DSL  such  as  ADSL  (asymmetric  digital  subscriber  line),  HDSL  (high-  speed  digital 

 subscriber  line),  UDSL  (universal  digital  subscriber  line),  VDSL  (very-  high  speed  digital  subscriber  line),  and  RADSL  (rate-  adaptive  digital  subscriber  line). 

 662  DSLAMs  send  the  customers  voice  traffic  to  the  public,  circuit-  switched  telephone  network  and  the  customers 
 data  traffic  (combined  with  that  of  other  xDSL  users)  to  a  packet-  switched  data  network.  See  Line  Sharing  Order,  14  FCC  Rcd  at  20920,  para.  9;  see  also  Walter  Goralski,  ADSL  AND  DSL  TECHNOLOGIES  at  252-  60  (describing 

 DSLAMs). 
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 remote  terminals  in  the  incumbent  LECs  outside  plant)  and  xDSL  modems  or  other  equipment  at  the  customers  premises. 
 216.  Second,  incumbent  LECs  deploy  feeder  plant  to  a  centralized  location  (referred  to  as  a  remote  terminal)  where  the  carrier  aggregates  distribution  plant,  i.  e.,  copper  cable 
 pairs  that  are  used  to  serve  individual  customers.  In  this  second  configuration,  then,  the  local  loop  portion  of  the  network  consists  of  two  parts,  i.  e.,  feeder  plant  and  distribution  plant.  663  The 
 feeder  plant  consists  of  a  large  number  of  high-  capacity  cable  pairs  to  accommodate  a  large  volume  of  telecommunications  traffic.  In  recent  years,  carriers  have  started  deploying  fiber  optic 
 cable  in  the  feeder  plant  to  handle  more  efficiently  the  increasing  volume  of  traffic  (although  some  legacy  technologies  continue  to  require  use  of  copper  feeder  plant).  664  By  contrast,  the 
 distribution  plant  consists  generally  of  many  copper  cable  pairs,  i.  e.,  one  direct  connection  or  transmission  path  to  each  customer  premises. 

 217.  Carriers  use  digital  line  carrier  (DLC)  systems  to  aggregate  the  many  copper  loops  that  terminate  at  a  remote  terminal  location,  665  multiplex  such  signals  onto  a  fiber  or  copper 
 feeder  loop  facility,  and  transport  them  to  the  carriers  central  office.  666  These  DLC  systems  may  be  integrated  directly  to  the  carriers  switch  (i.  e.,  Integrated  DLC  systems)  or  not  (i.  e.,  Universal 

 663  TELCORDIA  NOTES  ON  THE  NETWORK  at    12  (describing  LEC  distribution  networks);  AT&  T  Comments  at  184- 
 86;  AT&  T  Reply  at  149.  We  recognize  that  carriers  may  categorize  their  outside  plant  facilities  into  three  sections,  i.  e.,  feeder,  distribution,  and  customer  drops.  See  AT&  T  Reply  at  149.  For  the  purposes  of  our  unbundling 

 analysis,  we  consider  customer  drops  to  be  part  of  an  incumbent  LECs  distribution  plant. 
 664  WorldCom  Comments,  Joint  Declaration  of  Tom  Stumbaugh  and  David  Reilly  (WorldCom  Stumbaugh/  Reilly 
 Joint  Decl.)  at  paras.  8-  10;  Letter  from  Leonard  G.  Ray,  Government  Relations  Committee  Chairman,  FTTH  Council,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  10  (filed  Jan.  8,  2003)  (FTTH  Council 

 Jan.  8,  2003  FTTH  Deployment  Ex  Parte  Letter)  (noting  that  fiber  feeder  optimized  the  network  for  voice  transmission);  Letter  from  Kimberly  Scardino,  Senior  Counsel,  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  Nos.  96-  98,  98-  147,  01-  338  at  2  (filed  Dec.  12,  2002)  (WorldCom  Dec.  12,  2002  Next-  Generation  Networks  Ex  Parte  Letter). 

 665  Although  there  are  different  varieties  of  DLC  systems,  they  typically  consist  of  cross-  connect  and  multiplexing 
 equipment  that  are  housed  in  remote  terminals,  which  are  intended  to  house  a  limited  amount  of  equipment.  There  are  three  basic  types  of  remote  terminals:  (1)  huts,  which  are  above-  ground  structures  with  environmental  control 

 capabilities;  (2)  controlled  environmental  vaults  (CEVs),  which  are  below-  ground  structures  that  are  accessed  through  manholes  and  contain  environmental  control  capabilities;  and  (3)  cabinets,  which  are  above-  ground 
 structures  that  are  typically  designed  as  an  integrated  system.  See  Ameritech  Corp.,  Transferor,  and  SBC  Communications,  Inc.,  Transferee,  For  Consent  to  Transfer  Control  of  Corporations  Holding  Commission  Licenses 
 and  Lines  Pursuant  to  Sections  214  and  310(  d)  of  the  Communications  Act  and  Parts  5,  22,  24,  25,  63,  90,  95,  and  101  of  the  Commissions  Rules,  CC  Docket  No.  98-  141,  Second  Memorandum  Opinion  and  Order,  15  FCC  Rcd 
 17521,  17539,  para.  34  n.  94  (2000)  (Pronto  Modification  Order)  (describing  remote  terminals). 
 666  Carriers  historically  deployed  local  loops  on  a  one-  for-  one  basis,  i.  e.,  one  direct  copper  cable  pair  connecting  a 
 customer  to  the  central  office.  WorldCom  Stumbaugh/  Reilly  Decl.  at  para.  7.  Carriers  started  using  DLC  for  feeder  pair  relief  in  urban  areas.  Id.  at  para.  9. 
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 DLC  systems).  667  Through  the  use  of  feeder  loop  plant  and  DLC  systems,  carriers  can  reduce  the  costs  of  constructing,  deploying,  and  maintaining  their  outside  plant.  668 
 218.  Although  originally  deployed  to  manage  voice  networks,  carriers  now  use  DLC  systems  to  provide  both  voice  and  data  services.  Technological  improvements  have  enabled 
 carriers  to  use  DLC  systems  to  deliver  broadband  services  (e.  g.,  ADSL)  in  addition  to  narrowband  services.  669  In  particular,  manufacturers  have  developed  line  cards  that  can  be 
 installed  (along  with  other  components)  into  a  DLC  system  to  provide  broadband  services,  or  a  combination  of  broadband  and  narrowband  service,  to  customers  served  by  DLC  systems.  670  By 
 deploying  this  DSLAM  functionality  in  a  DLC  system,  carriers  can  serve  customers  whose  copper  loop  facility  would  otherwise  be  too  long  to  support  the  provision  of  xDSL  service.  671  To 
 do  so  has  generally  required  incumbent  LECs  deploying  this  technology  to  segregate  and  minimize  the  traffic  in  a  different  way    that  is,  carriers  dedicate  a  segment  of  their  feeder  plant 
 to  serving  narrowband  voice  traffic  and  another  segment  to  serving  broadband  traffic.  672  The 

 667  Universal  DLC  systems  consist  of  a  central  office  terminal  and  a  remote  terminal,  i.  e.,  a  DLC  system  in  the 
 carriers  central  office  terminal  mirrors  the  deployment  at  the  remote  terminal.  Notes  on  the  Network  at    12.6.  By  contrast,  an  Integrated  DLC  system  does  not  require  the  use  of  a  central  office  terminal  because  the  DLC  system  is 

 integrated  into  the  carriers  switch  (thus,  the  naming  convention).  Id.    12.7;  see  also  Letter  from  David  R.  Conn,  Deputy  General  Counsel,  McLeodUSA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  96-  98,  98-  147,  01- 
 338,  02-  33  at  8  (filed  Nov.  15,  2002)  (McLeodUSA  Nov.  15,  2002  DLC  systems  Ex  Parte  Letter);  McLeodUSA  Dec.  18,  2002  Ex  Parte  Letter  at  8;  see  also  TELCORDIA  NOTES  ON  THE  NETWORK  at  2-  2  to  2-  5  (describing  DLC 
 systems). 
 668  TELCORDIA  NOTES  ON  THE  NETWORK  at    12.6-  12.7. 

 669  WorldCom  Stumbaugh/  Reilly  Decl.  at  paras.  9-  11  (describing  technological  developments  in  DLC  systems); 
 AT&  T  Reply  at  152-  53  (noting  that  incumbent  LECs  can  upgrade  existing  DLC  systems  by  replacing  the  line  cards  installed  in  such  systems).  In  their  original  form,  carriers  connected  DLC  systems  to  copper  transmission  facilities 

 that  comprised  the  feeder  loop  plant.  The  DLC  system  would  convert  analog  signals  transmitted  from  the  customers  premises  to  digital  signals  suitable  for  transmission  over  the  carriers  network.  By  the  late  1990s, 
 carriers  were  purchasing  Next  Generation  Digital  Loop  Carrier  (NGDLC)  systems,  which  were  designed  for  use  with  fiber  optic  cable.  In  addition  to  the  fiber  capability,  NGDLC  systems  have  more  flexible  and  remote 
 configuration  capabilities  than  their  predecessors  and,  depending  on  the  manufacturer,  they  may  contain  additional  features  like  the  ability  to  provide  broadband  services.  See  Walter  Goralski,  ADSL  AND  DSL  TECHNOLOGIES,  273 
 (1998);  NEWTONS  TELECOM  DICTIONARY  510  (18th  ed.  2002)  (defining  NGDLC  systems  as  DLC  [that]  can  receive  and  aggregate  large  amounts  of  bandwidth  (higher  than  T-  1));  see  also  Letter  from  Jim  Lamourex,  Senior 
 Counsel,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  1-  2  (filed  Dec.  12,  2002)  (SBC  Dec.  12,  2002  Ex  Parte  Letter)  (stating  that  SBC  considers  DLC  that  provides  both  time  slot  interchanger  and 
 xDSL  functionality  as  NGDLC.). 
 670  Alcatel  Comments  at  26;  Catena  Comments  in  CC  Dkt.  Nos.  02-  33,  95-  20,  and  98-  10,  at  5  n.  7  (describing 
 Catenas  DLC  system  upgrade);  WorldCom  Stumbaugh/  Reilly  Decl.  at  para.  13;  Alcatel  Reply  at  6;  see  Pronto  Modification  Order,  15  FCC  Rcd  at  17523-  31,  paras.  4-  19  (describing  SBCs  DLC  network  architecture  used  to 

 provide  broadband  service). 
 671  WorldCom  Stumbaugh/  Reilly  Decl.  at  para.  13. 

 672  Id.  at  para.  15;  Letter  from  W.  Scott  Randolph,  Director    Federal  Regulatory  Affairs,  Verizon,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  337,  01-  338,  96-  98,  98-  147,  02-  33  at  10  (filed  Sept.  30,  2002)  (continued.) 
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 feeder  loop  plant  transporting  voice  traffic  connects  to  the  carriers  switch  in  its  central  office  (often  through  intermediate  electronics  in  the  central  office).  673  By  contrast,  the  feeder  loop  plant 
 transporting  the  broadband  signal  terminates  at  a  packet  switch  (usually  referred  to  as  an  optical  concentration  device  or  OCD)  also  located  in  the  carriers  central  office.  674 

 219.  In  recent  years,  carriers  have  started  deploying  FTTH    that  is,  using  fiber  optic  cable  to  replace  traditional  copper  loops.  Whereas  the  use  of  fiber  feeder  plant  and  DLC  systems 
 is  an  augmentation  of  the  existing  network  and  relies  on  the  continued  use  of  copper  (albeit  to  a  lesser  degree)  in  the  loop  plant,  FTTH  is  essentially  a  broad  replacement  of  the  existing  loop 
 plant.  The  use  of  fiber  optic  cable  requires  the  deployment  of  network  equipment  with  different  features  and  capabilities  from  comparable  equipment  used  for  copper  cable.  As  noted  above, 
 deployment  of  FTTH  loops    that  is,  a  transmission  path  consisting  entirely  of  fiber  optic  cable  and  associated  equipment  between  the  customers  premises  and  the  central  office    remains  in  its 
 infancy. 
 220.  Carriers  use  different  technologies  to  transport  telecommunications  over  their  networks.  As  digital  transmission  technologies  replaced  analog  systems,  carriers  started  using 

 TDM  to  combine  multiple  transmission  paths  onto  a  single  cable.  675  TDM  provides  a  transmission  path  by  dividing  a  circuit  into  time  slots  and  providing  a  dedicated  time  slot  to  an 
 end  user  for  the  duration  of  the  call.  More  recently,  carriers  have  started  using  packet-  switched  technologies  (e.  g.,  ATM  or  frame  relay)  to  combine  different  types  of  traffic  over  shared 
 facilities.  676  By  using  packet-  switched  technology,  carriers  can  transmit  voice,  fax,  data,  video,  and  other  over  a  single  transmission  path  at  the  same  time. 

 221.  In  light  of  the  foregoing,  we  find  that  our  unbundling  rules  for  local  loops  serving  the  mass  market  must  account  for  these  different  loop  architectures.  Therefore,  we  craft 
 unbundling  rules  specific  to  each  different  loop  type.  First,  we  address  our  unbundling  rules  for  loops  consisting  of  copper  pairs  of  various  gauges  and  associated  electronics  (e.  g.,  load  coils, 

 (Continued  from  previous  page) 
 (Verizon  Sept.  30,  2002  Ex  Parte  Letter)  (submitting  diagram  showing  the  use  of  two  parallel  feeder  loops  to  provide  broadband  service  through  DLC  systems). 

 673  Alcatel  Reply  at  6  (explaining  that  voice  and  data  traffic  are  segregated  in  the  incumbent  LECs  central  office). 
 674  AT&  T  Comments  at  187-  89;  Covad  Comments  at  65;  WorldCom  Comments  at  108;  WorldCom 
 Stumbaugh/  Reilly  Decl.  at  para.  13;  Letter  from  Jonathan  J.  Boynton,  Associate  Director    Federal  Regulatory,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  5  (filed  Jan.  15,  2003)  (SBC  Jan.  15,  2003 

 Ex  Parte  Letter);  Verizon  Sept.  30,  2002  Ex  Parte  Letter  at  10.  Several  parties  explain  that  an  OCD  is  equivalent  to  a  main  distribution  frame.  See,  e.  g.,  Covad  Comments  at  65  (noting  that  the  OCD  demultiplexes  data  transmissions 
 from  the  fiber  feeder  and  distributes  the  signal  to  its  next  destination). 
 675  See,  e.  g.,  Walter  Goralski,  ADSL  AND  DSL  TECHNOLOGIES  77-  98  (1998)  (describing  differences  between 
 packet-  switched  and  circuit-  switched  networks);  Walter  Goralski,  SONET  99-  108  (2d.  ed.  2000)  (describing  T-  carrier  and  different  multiplexing  techniques). 

 676  For  example,  some  carriers  use  packet-  switching  technology  as  the  building  blocks  of  their  networks.  See,  e.  g., 
 NewSouth  Comments  at  11-  13  (describing  use  of  packet-  switching  technology  in  its  network). 
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 repeaters,  multiplexers),  which  we  refer  to  as  copper  loops.  Second,  we  address  our  unbundling  rules  for  loops  consisting  of  DLC  systems  that  are  fed  by  fiber  optic  cable,  which  we  refer  to  as 
 hybrid  loops.  Finally,  we  address  our  unbundling  rules  for  loops  consisting  entirely  of  fiber  optic  cable,  which  we  refer  to  as  FTTH  loops. 

 (iii)  Evidence  of  Loop  Deployment 
 222.  The  record  indicates  that  deployment  of  alternative  local  loop  facilities  for  the  purposes  of  providing  telecommunications  services  to  the  mass  market  has  been  minimal.  The 

 record  also  indicates,  however,  that  there  is  evidence  that  other  types  of  network  facilities  deployed  primarily  for  other  purposes  (e.  g.,  cable  television  systems,  satellite  technologies)  can 
 and  are  increasingly  being  modified  to  support  the  delivery  of  narrowband  and  broadband  services,  particularly  telephony  and  high-  speed  Internet  access  services,  to  the  mass  market.  As 
 a  general  matter,  while  these  systems  are  increasingly  being  used  for  the  delivery  of  retail  narrowband  and  broadband  services  (e.  g.,  telephony  and  high-  speed  Internet  access  services),  the 
 record  indicates  that  such  systems  are  not  being  used  currently  to  provide  wholesale  local  loop  offerings  that  might  substitute  for  access  to  incumbent  LECs  loop  facilities. 

 223.  The  factual  record  consists  of  three  parts.  First,  several  parties  submitted  detailed  studies  describing  local  loop  deployment  and  conditions  surrounding  competitive  access  to  local 
 loops.  677  Second,  many  parties  described  their  network  operations,  experiences,  and  future  deployment  plans  in  comments  and  ex  parte  letters.  678  Finally,  the  Commission  staff  has 

 677  See,  e.  g.,  BOC  UNE  Fact  Report  2002;  Letter  from  Dee  May,  Assistant  Vice  President,  Verizon,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Oct.  23,  2002)  (submitting  UNE  Rebuttal  Report  2002  commissioned  by  the  BOCs);  CCG  July  17,  2002  CLEC  Survey  Ex  Parte  Letter.  These  studies  in  turn  rely  on 

 additional  evidence  to  support  their  conclusions,  such  as  briefings  to  the  investment  community,  analyst  reports,  newspaper  articles,  and  trade  industry  reports.  Some  commenters  argue  that  unbundling  requirements  decrease 
 incumbent  LECs  financial  rewards  from  selling  future  broadband  services  by  increasing  the  risk  of  investment,  thereby  decreasing  the  amount  of  investment  incumbent  LECs  will  make  in  broadband  infrastructure.  See,  e.  g., 
 Corning  Comments  at  5-  9;  HTBC  Comments  at  28-  33,  App.  A  (submitting  John  Haring  and  Jeffrey  H.  Rohlfs,  The  Disincentives  for  ILEC  Broadband  Deployment  Afforded  by  the  FCCs  Unbundling  Policies  (July  16,  2002)); 
 Verizon  Comments  at  27-  32  (submitting  Declaration  of  Alfred  E.  Kahn  and  Timothy  J.  Tardiff);  Letter  from  Matthew  J.  Tanielian,  Vice  President    Governmental  Relations,  ITI    Information  Technology  Industry  Council,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Apr.  22,  2002)  (HTBC  Apr.  22,  2002  Ex  Parte  Letter);  Letter  from  W.  W.  Jordan,  Vice  President    Federal  Regulatory,  BellSouth,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Oct.  15,  2002)  (BellSouth  Oct.  15,  2002  Ex  Parte  Letter).  By  contrast,  other  commenters  argue  that  unbundling  requirements  do  not  decrease  the  incentives  for  BOCs  to  provide 
 broadband  services  over  fiber-  fed  loops.  See,  e.  g.,  AT&  T  Willig  Decl.  at  paras.  15,  175;  Letter  From  Jason  D.  Oxman,  Vice  President  and  Assistant  General  Counsel,  Covad,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147  (filed  Nov.  22,  2002)  (Covad  Nov.  22,  2002  Ex  Parte  Letter);  Covad  Murray  Reply  Decl.  at  paras.  99-  113;  Letter  from  C.  Frederick  Beckner  III,  Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4  (filed  Dec.  6,  2002)  (AT&  T  Dec.  6,  2002  Ex  Parte  Letter). 
 678  See,  e.  g.,  ACS  Reply  at  5-  6  (describing  market  conditions  in  Alaska);  BellSouth  Rely,  Reply  Declaration  of 
 Prof.  Robert  G.  Harris  (BellSouth  Harris  Reply  Decl.)  at  paras.  11-  21  (submitting  projections  and  market  data  related  to  broadband  services);  New  York  State  Attorney  General  Reply  at  4,  9-  11  (describing  competitive  entry  in 

 New  York);  Letter  from  Rebecca  H.  Sommi,  Vice  President  Operations  Support,  Broadview  Networks,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Oct.  16,  2002)  (Broadview  Oct.  16,  2002 
 (continued.) 
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 published  reports  arising  from  its  monitoring  of  the  deployment  of  advanced  telecommunications  capability  and  the  development  of  local  competition  throughout  the  country.  679 
 224.  Relying  on  these  sources,  the  record  shows  that  incumbent  LECs  continue  to  control  the  vast  majority  of  voice-  grade  local  loops  throughout  the  nation.  The  Commission 
 staffs  recent  Local  Telephone  Competition  December  2002  Report  noted  that  incumbent  LECs  served  approximately  167.5  million  switched  access  lines,  or  approximately  88.6  percent  of  the 
 national  market.  680  The  record  reflects  a  significant  growth  in  the  amount  of  fiber  incumbent  LECs  are  deploying  in  the  local  loop,  with  most  of  this  deployment  occurring  in  the  feeder  plant 
 rather  than  the  distribution  plant.  According  to  some  estimates,  upwards  of  30  percent  of  incumbent  LEC  access  lines  are  now  supported  by  the  use  of  mixed  fiber-  copper  loop 
 facilities.  681 
 (a)  Self-  Deployment 
 225.  The  record  reflects  that  competitive  LECs  have  not  self-  deployed  alternate  copper  local  loops  to  provide  telecommunications  services  (or  packages  of  telecommunications  and 

 other  services)  to  the  mass  market.  Moreover,  the  record  indicates  that,  in  those  limited  cases  where  competitors  are  deploying  alternative  loop  facilities,  competitive  LECs  are  using  fiber, 
 although  such  deployment  continues  to  be  targeted  primarily  to  serving  the  enterprise  market  rather  than  the  mass  market.  We  recognize,  however,  that  potential  self-  deployment  could  use 
 existing  wireline  telephony  technologies  and  facilities  or  could  employ  other  approaches  that  bear  little  or  no  resemblance  to  the  current  network  architecture  of  the  incumbent  LECs. 

 226.  No  party  seriously  asserts  that  competitive  LECs  are  self-  deploying  copper  loops  to  provide  telecommunications  services  to  the  mass  market.  Indeed,  in  the  BOC  UNE  Fact 
 Report  2002,  the  BOCs  provide  no  evidence  that  competitive  LECs  have  made  any  progress  towards  replicating  the  incumbent  LECs  embedded  base  of  voice-  grade  copper  local  loops.  682 
 Likewise,  no  competitive  LEC  claims  to  have  made,  let  alone  attempted  to  make,  such  progress.  Competitive  LECs  generally  argue  that  building  new  local  loops  to  serve  the  mass  market  would 

 (Continued  from  previous  page) 
 Ex  Parte  Letter);  Letter  from  Jason  Oxman,  Vice  President  and  Assistant  General  Counsel,  Covad,  to  William  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  No.  01-  338  (filed  Oct.  15,  2002)  (Covad  Oct.  15, 

 2002  Broadband  Deployment  Ex  Parte  Letter);  Letter  from  Thomas  Jones,  Counsel  for  Allegiance,  to  William  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3-  4  (filed  Dec.  12, 
 2002)  (Allegiance  Dec.  12,  2002  Ex  Parte  Letter). 
 679  See  Seventh  Wireless  Report  2002;  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2844. 

 680  Local  Telephone  Competition  December  2002  Report  at  Table  1. 
 681  Covad  Comments  at  55  n.  105  (citing  Trends  in  Telephone  Service  May  2002  Report  at  Table  18.3  (21.7%  of 
 working  telecommunications  channels  are  fiber));  AT&  T  Reply  at  80  (citing  Trends  in  Telephone  Service  May  2002  Report  at  Table  18.3  (32.5%  of  working  telecommunications  channels  are  fiber)). 

 682  In  their  UNE  Fact  Report,  the  BOCs  rely  primarily  on  intermodal  sources  to  argue  that  viable  alternatives  exist 
 to  incumbent  LEC  local  loop  facilities.  We  address  these  arguments  below. 
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 be  prohibitively  expensive.  683  Considered  as  a  whole,  the  record  indicates  that  competitive  LECs  rely  primarily  on  unbundled  local  loops  to  serve  the  mass  market  on  a  nationwide  basis.  684 
 227.  The  record  demonstrates  that  current  deployment  of  FTTH  for  providing  telecommunications  services  to  the  mass  market  is  still  in  its  infancy.  685  Corning,  for  example, 
 presents  evidence  of  FTTH  deployment  to  approximately  26,000  homes  and  asserts  that  competitive  LECs  account  for  77  percent  of  this  FTTH  deployment  to  date.  686  The  record  shows 
 further  that  some  competitive  LECs  are  self-  deploying  fiber  transmission  facilities  primarily  to  serve  business  customers  in  downtown  locations.  687  The  record  also  shows  that  competitive 
 LECs  are  self-  deploying  fiber  transmission  facilities  to  the  mass  market  in  certain  circumstances.  In  particular,  competitive  LECs  are  competing  in  so-  called  greenfield  markets,  which  require 
 entirely  new  construction  of  local  loops  (in  addition  to  the  deployment  of  the  necessary  switching  and  other  network  equipment)  to  serve  new  residential  communities.  688  According  to 
 at  least  one  study,  non-  incumbent  LEC  providers  (i.  e.,  competitive  LECs  and  municipalities)  have  deployed  90  percent  of  current  FTTH.  689  We  also  note  that  the  Commission  staffs  High 
 Speed  Services  December  2002  Report  found  that  parties  other  than  incumbent  LECs  deployed  92  percent  of  FTTH  and  fixed  wireless  service  lines.  690 

 (b)  Intermodal  Loops 
 228.  The  record  presents  some  evidence  that  intermodal  platforms  increasingly  support  the  provision  of  narrowband  and  broadband  services  to  the  mass  market.  In  particular,  the 

 record  indicates  that  cable  and  wireless  technologies  are  currently  being  used,  and  will  likely 
 683  See  Covad  Comments  at  16-  18;  AT&  T  Comments  at  132. 
 684  CompTel  Reply  at  24  (citing  statistics  compiled  by  Commission  staff  showing  that  competitive  LECs  serve 
 23%  of  the  access  lines  in  New  York,  14%  of  the  access  lines  in  Texas,  and  13%  of  the  access  lines  in  Illinois).  Incumbent  LECs  assert  that  competitive  LECs  have  deployed  on  a  national  basis  somewhere  between  16  and  23 

 million  loops  based  on  their  interpretation  of  data  in  E911  databases.  See  BOC  UNE  Fact  Report  2002  at  I-  5,  II-  4,  and  A-  2.  We  note  that  CompTels  data,  among  other  competitive  LECs,  are  generally  closer  to  those  published  by 
 the  Commission  in  the  Local  Telephone  Competition  December  2002  Report. 
 685  AT&  T  Reply  at  74. 

 686  Corning  Reply  at  12  (citing  CSMG  Study  at  51).  In  other  studies  submitted  on  the  record,  Corning  estimates 
 that  competitive  LECs  account  for  68%  of  the  FTTH  deployment  nationwide.  See  Corning  Nov.  20,  2002  Ex  Parte  Letter  at  7. 

 687  CCG  July  17,  2002  CLEC  Survey  Ex  Parte  Letter  at  6  (noting  that  five  competitive  LECs  are  deploying  fiber  in 
 Chicago  and  four  competitive  LECs  are  deploying  fiber  in  Boston  and  Portland). 
 688  BOC  UNE  Fact  Report  2002  at  IV-  16. 

 689  FTTH  Council  Second  Reply  at  2. 
 690  High  Speed  Services  December  2002  Report  at  Table  5.  In  that  report,  staff  found  that,  as  of  June  2002, 
 carriers  provided  6,120  fiber  lines  capable  of  supporting  data  transmissions  over  200  kbps  in  at  least  one  direction.  See  id.  at  Table  3. 
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 increasingly  be  used,  to  provide  loop  substitutes  to  support  services  that  compete  with  incumbent  local  services.  691 
 229.  Cable  companies  have  widely  deployed  local  broadband  service  in  the  form  of  high-  speed  Internet  access  offered  via  cable  modem  service.  As  of  June  2002,  cable  companies 
 provided  more  than  9.1  million  high  speed  lines  for  Internet  access  to  consumers  nationwide  and  the  service  is  available  to  more  than  70  million  homes  in  the  nation.  692  Some  cable  companies 
 also  have  augmented  their  networks  to  enable  the  provision  of  two-  way  voice  telephony  services.  693  For  such  services,  the  cable  infrastructure  serves  as  a  replacement  for  loops.  At  this 
 time,  however,  deployment  of  voice  telephony  by  cable  companies  has  been  substantially  exceeded  by  the  deployment  of  cable  modem  service.  694  In  their  UNE  Fact  Report,  the  BOCs 
 note  that  1.5  million  homes  695  subscribe  to  cable  telephony  on  a  nationwide  basis.  The  record  indicates  that  circuit-  switched  cable  telephony  has  been  deployed  in  portions  of  20  states  and  is 
 now  available  to  about  10  million  households  in  the  United  States,  or  about  9.6  percent  of  the  total  households  in  the  nation.  696  Because  companies  originally  deployed  cable  television 
 systems  for  the  provision  of  a  one-  way  mass  media  service,  retrofitting  cable  infrastructure  to  support  cable  telephony  and  broadband  services  requires  substantial  investment  and 
 modification.  697  For  those  cable  operators  that  have  not  already  augmented  their  networks  to 
 691  BOC  UNE  Fact  Report  2002  at  IV-  8  to  IV-  14.  Current  estimates  are  that  only  1.7%  of  U.  S.  households  rely  on 
 other  technologies  to  replace  their  traditional  wireline  voice  service.  Allegiance  Reply  at  35  n.  38. 
 692  Cable  companies  provided  9,172,895  high  speed  lines  for  Internet  access  as  of  June  30,  2002.  High  Speed 
 Services  December  2002  Report  at  Table  1.  See  Letter  from  Jason  D.  Oxman,  Vice  President  and  Assistant  General  Counsel,  Covad,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Declaration  of  Stephen  Siwek  and 

 Su  Sun  (Covad  Siwek/  Sun  Decl.)  at  paras.  58-  59  (filed  Nov.  20,  2002)  (Covad  Nov.  20,  2002  Ex  Parte  Letter).  Some  parties  estimate  that  cable  modem  service  is  available  to  two-  thirds  or  more  of  the  homes  in  the  nation.  BOC 
 UNE  Fact  Report  2002  at  IV-  12  n.  59  (estimating  that  cable  modem  service  is  available  to  70-  75  million  homes). 
 693  BellSouth  Comments  at  64  (noting  cable  companies  upgraded  to  provide  voice  in  Atlanta,  Jacksonville,  Miami 
 and  Louisville);  Letter  from  Florence  M.  Grasso,  Covad,  to  Marlene  M.  Dortch,  Secretary,  FCC,  Docket  Nos.  01-338,  96-  98,  98-  147  at  6  (filed  Apr.  19,  2002)  (Covad  Apr.  19,  2002  Ex  Parte  Letter)  (noting  cable  companies  spent 

 $55  billion  to  upgrade  their  facilities). 
 694  As  of  June  2001,  only  1%  of  all  local  access  lines  terminated  over  coaxial  cable  facilities.  For  example,  AT&  T 
 notes  that  UNE-  P  providers  in  New  York  alone  have  as  many  customers  as  cable-  provided  telephony  does  on  a  nationwide  basis.  AT&  T  Reply  at  26. 

 695  BOC  UNE  Fact  Report  2002  at  IV-  10.  There  are  approximately  108.3  million  households  in  the  nation.  See 
 Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  Telephone  Subscribership  in  the  United  States  (Nov.  8,  2002)  at  Table  1  (Telephone  Subscribership  November  2002  Report). 

 696  BOC  UNE  Fact  Report  2002  at  II-  11,  IV-  10  (noting  that  Cox  has  the  capability  to  offer  cable  telephony  to  75 
 to  95  percent  of  the  consumers  in  Rhode  Island). 
 697  WorldCom  Comments  at  35-  36,  Attach.  A  at  23,  25-  27  (Richard  A.  Chandler,  A.  Daniel  Kelley,  David  M. 
 Nugent,  The  Technology  and  Economics  of  Cross-  Platform  Competition  in  Local  Telecommunications  Markets  (Apr.  4,  2002)  (HAI  Report)).  Although  precise  numbers  are  difficult  to  assemble  because  much  of  the  necessary 

 information  is  not  publicly  available,  there  is  substantial  evidence  in  our  record  concerning  actual  and  projected  completion  of  cable  plant  upgrades  necessary  to  provide  voice  and  data  services.  For  example,  according  to  a 
 (continued.) 
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 offer  cable  telephony,  which  encompasses  the  majority  of  the  cable  networks  currently  in  operation,  significant  technical  and  operational  issues  must  still  be  resolved.  698  Thus,  it  is 
 difficult  to  predict  at  what  point  cable  telephony  will  be  deployed  on  a  more  widespread  and  ubiquitous  basis.  In  addition,  the  record  reflects  that  a  number  of  cable  operators  are  delaying 
 their  deployment  of  voice  telephony  until  they  are  able  to  deploy  such  services  over  a  packet-switched  platform. 

 230.  The  record  also  shows  that  narrowband  local  services  are  widely  available  through  CMRS  providers.  As  discussed  in  Part  IV  above,  one  study  estimates  that  64.3  million 
 households  (i.  e.,  61  percent  of  all  U.  S.  households)  use  wireless  phones.  699  The  record  shows  that  CMRS,  while  continuing  to  be  primarily  a  complementary  technology  to  wireline 
 narrowband  service,  is  growing  as  a  substitute  to  wireline  narrowband  service  with  about  three  to  five  percent  of  CMRS  subscribers  using  their  service  as  a  replacement  for  primary  fixed  voice 
 wireline  service.  700  While  this  percentage  is  small,  it  continues  to  show  increasing  growth.  Indeed,  the  Commission  recently  relied  on  wireless  substitution  to  support  the  Track  A  findings 
 in  two  section  271  proceedings  where  residential  customers  in  New  Mexico  and  Nevada  had  replaced  their  landline  phones  with  wireless  ones.  701  In  addition,  the  record  demonstrates  that, 

 (Continued  from  previous  page) 
 Yankee  Group  Report,  at  the  end  of  2000,  50%  of  United  States  households  had  cable  modem  service  available  and  this  percentage  was  predicted  to  exceed  80%  by  the  end  of  2005.  BellSouth  Comments  at  39  (citing  Broadband 

 Access  Technology:  Whose  Number  is  Up?,  Yankee  Group  Report  (Sept.  19,  2001)).  BellSouth  offered  more  recent  numbers:  at  the  end  of  2001,  70%  of  United  States  households  had  cable  modem  service  available. 
 BellSouth  Reply  at  48  (citing  BellSouth  Harris  Reply  Decl.  at  para.  9). 
 698  For  example,  potential  cable  telephony  providers  must  determine  how  to  provide  power  to  the  consumer 
 premises  equipment  (wireline  systems  utilizing  copper  facilities  already  provide  power  through  the  same  network  telephony  service  is  provided,  thus  ensuring  continuous  access  to  telecommunications  in  the  event  of  power 

 outages)  and  ensure  accurate  911  service.  Allegiance  Reply  at  33.  Allegiance  notes  that  incumbent  LEC  comments  rely  not  on  current  deployment  but  on  predictions  such  as  whether  Comcast  will  deploy  telephony  after  merger  with 
 AT&  T  and  future  deployment  of  IP  telephony  over  cable  networks. 
 699  See  BOC  UNE  Fact  Report  2002  at  IV-  12  (citing  Implementation  of  Section  6002(  B)  of  the  Omnibus  Budget 
 Reconciliation  Act  of  1993,  Annual  Report  and  Analysis  of  Competitive  Market  Conditions  With  Respect  to  Commercial  Mobile  Services,  Sixth  Report,  16  FCC  Rcd  13350,  13381  n.  211  (2001)  (Sixth  Wireless  Report  2001). 

 Wireless  phones  are  now  a  mass  market  consumer  device  used  by  some  45%  of  the  United  States.  Seventh  CMRS  Report  at  31.  One  study  estimates  that  64.3  million  households  (i.  e.,  61%  of  all  U.  S.  households)  use  wireless 
 phones.  Id.  By  contrast,  103.4  million  households  (i.  e.,  95.5%  of  all  U.  S.  households)  own  and  use  wireline  telephones.  Telephone  Subscribership  November  2002  Report  at  Table  1.  BellSouth  Comments  at  64  (arguing 
 wireless  is  a  substitute  for  wireline). 
 700  See  Seventh  CMRS  Report  at  32  n.  208;  see  also  BOC  UNE  Fact  Report  2002  at  IV-  12  (citing  Sixth  Wireless 
 Report  2001,  16  FCC  Rcd  at  13381  n.  211). 
 701  See  Application  by  SBC  Communications  Inc.,  Nevada  Bell  Telephone  Company,  and  Southwestern  Bell 
 Communications  Services,  Inc.,  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  Nevada,  WC  Docket  No.  03-  10,  Memorandum  Opinion  and  Order,  18  FCC  Rcd  7196,  7206,  para.  18  (2003)  (SBC  Nevada  271  Order); 

 Application  by  Qwest  Communications  International,  Inc.  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  New  Mexico,  Oregon  and  South  Dakota,  WC  Docket  No.  03-  11,  Memorandum  Opinion  and  Order,  18 
 FCC  Rcd  7325,  7336  n.  53  (2003)  (Qwest  New  Mexico  271  Order);  see  also  In  the  Matter  of  Application  of  (continued.) 
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 although  promising,  wireless  CMRS  connections  in  general  do  not  yet  equal  traditional  landline  local  loops  in  their  quality,  their  ability  to  handle  data  traffic,  and  their  ubiquity.  702  Finally,  the 
 record  indicates  that  CMRS  is  not  yet  capable  of  providing  broadband  services  to  the  mass  market    although  a  growing  number  of  wireless  carriers  make  available  Internet  access,  such 
 access  is  generally  limited  to  transmissions  of  25  to  66  kbps.  703 
 231.  The  record  indicates  that,  at  present,  fixed  wireless  and  satellite  services  remain  nascent  technologies,  with  limited  availability,  when  used  to  provide  broadband  services  to  the 

 mass  market.  Although  current  satellite  services  may  be  available  in  all  50  states,  their  transmission  capabilities  remain  limited  and  their  mass  market  services  have  few  subscribers.  704 
 For  example,  combined,  satellite  and  fixed  wireless  provide  broadband  services  to  approximately  200,000  customers  nationwide.  705  In  addition,  recent  financial  difficulties  of  fixed  wireless 
 carriers  suggest  the  potential  to  use  such  services  as  substitutes  for  local  loops  used  to  serve  the  mass  market  is  limited,  at  least  for  the  short  term.  706 

 232.  Finally,  we  note  that  other  technologies  that  can  substitute  for  loops  in  providing  narrowband  and  broadband  service  are  currently  under  development.  For  example,  some 
 companies  are  experimenting  with  delivering  narrowband  voice  service  via  power  lines.  707  Such  technologies  have  not  been  deployed  beyond  an  experimental  basis  (e.  g.,  technical  trials)  at  this 
 time. 

 (Continued  from  previous  page) 
 BellSouth  Corporation,  BellSouth  Telecommunications,  Inc.,  and  BellSouth  Long  Distance,  Inc.,  for  Provision  of  In-  Region,  Interlata  Services  in  Louisiana,  CC  Docket  No.  98-  121,  Memorandum  Opinion  and  Order,  13  FCC 

 Rcd  20599,  20606,  20622-  23,  paras.  11,  29-  33  (1998)  (BellSouth  Louisiana  II  271  Order)  (finding  that  PCS  can  be  a  substitute  for  wireline  service). 

 702  BellSouth  Comments  at  41  (stating  that  wireless  is  [  not]  very  effective  in  transmitting  large  amount  of  data  at 
 high  speed.).  AT&  T  points  out,  for  example,  that  wireless  service  is  engineered  to  provide  only  roughly  70%  call  completion  rate  while  wireline  call  completion  rates  exceed  99%.  AT&  T  Reply  at  25;  see  also  id.  at  162-  63. 

 703  Seventh  CMRS  Report  at  53-  54.  By  the  end  of  2001,  approximately  eight  to  ten  million  people  accessed  the 
 Internet  through  their  wireless  telephones,  up  from  2  to  2.5  million  the  year  before.  Id.  at  53. 
 704  See,  e.  g.,  WorldCom  Comments  at  4,  47,  Attach.  A  at  76-  78. 

 705  See  High  Speed  Services  December  2002  Report  at  Table  3. 
 706  See  Sprint  Comments  at  24-  25;  see  also  Covad  Siwek/  Sun  Decl.  at  paras.  49-  57  &  Schedule  5  (arguing  that 
 consumers  are  not  buying  satellite  broadband  because  it  does  not  work  well  in  inclement  weather,  requires  unobstructed  view  of  southern  sky,  and  is  too  expensive);  Letter  from  Florence  Grasso,  Covad,  to  Marlene  H. 

 Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  6  (filed  Oct.  21,  2002)  (Covad  Oct.  21,  2002  Ex  Parte  Letter). 
 707  See  Committee  on  Broadband  Last  Mile  Technology,  Computer  Science  and  Telecommunications  Board, 
 National  Research  Council,  BROADBAND:  BRINGING  HOME  THE  BITS  135-  36  (2002). 
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 (c)  Third-  Party  Offerings 
 233.  The  record  indicates  that  no  third  parties  are  effectively  offering,  on  a  wholesale  basis,  alternative  local  loops  capable  of  providing  narrowband  or  broadband  transmission 

 capabilities  to  the  mass  market.  708  This  includes  intermodal  platforms  such  as  cable  and  satellite  that  have  no  statutory  or  regulatory  obligation  comparable  to  the  unbundling  requirements  of 
 section  251(  c).  709  We  note  that,  in  their  various  reports  and  other  submissions,  the  incumbent  LECs  have  not  demonstrated  that  third  parties  are  offering  alternate  local  loop  transmission  on  a 
 wholesale  basis. 
 (iv)  Unbundling  Analysis 
 234.  We  engage  in  a  balancing  test  in  determining  our  unbundling  requirements  for  mass  market  local  loops.  We  recognize,  of  course,  that  impairment  remains  our  statutory 

 touchstone.  We  do  not  rely  exclusively,  however,  on  an  impairment  analysis  to  make  our  unbundling  determination.  We  retain  the  flexibility  under  our  section  251(  d)(  2)  at  a  minimum 
 authority  to  consider  other  factors.  We  use  this  flexibility  sparingly.  However,  we  believe  that  the  goal  of  swift  and  ubiquitous  broadband  deployment  is  so  important  to  the  United  States  that 
 we  consider  the  statutory  goals  outlined  in  section  706  and  how  they  relate  to  broadband  as  additional  factors  when  considering  loops.  In  addition,  we  also  consider  the  comparative  weight 
 of  the  costs  versus  benefits  of  unbundling  and  the  effect  of  intermodal  competition.  710  As  explained  below,  based  on  our  analysis  of  impairment  and  evaluation  of  other  factors,  we  adopt 
 loop  unbundling  rules  for  the  mass  market  that  ensure  competitive  access  through  extensive  unbundling  of  the  legacy  copper  loop  facilities  while  promoting  incentives  to  invest  in  next-generation 
 network  facilities  and  equipment  through  more  limited  unbundling  of  fiber-  based  loop  facilities. 

 235.  We  conclude  that  requesting  carriers  seeking  to  serve  the  mass  market  face  varying  levels  of  impairment  on  a  national  basis  without  unbundled  access  to  the  transmission 
 path  between  the  central  office  and  the  customer  premises  depending  upon  whether  the  loop  used  to  complete  this  path  consists  entirely  of  copper,  or  consists  of  a  hybrid  of  fiber  and  copper 
 cables,  and  whether  a  requesting  carrier  seeks  to  offer  narrowband  or  broadband  services  or  both.  Pursuant  to  our  section  251(  d)(  2)  unbundling  standard,  we  consider  generally  whether  the 
 potential  revenue  opportunity  exceeds  the  costs,  taking  into  consideration  the  relevant  entry  barriers    i.  e.,  scale  economies,  sunk  costs,  first-  mover  advantages,  and  barriers  within  the 
 control  of  the  incumbent  LEC    and  evidence  of  actual  marketplace  conditions. 

 708  Covad  Comments  at  35  (no  copper  alternative);  see  also  Access  Integrated  Networks  Reply  at  13;  Allegiance 
 Reply  at  32-  33  (contending  that  incumbent  LEC  arguments  are  based  on  predictions  and  speculation  rather  than  actual  marketplace  conditions). 

 709  Covad  Comments  at  36-  37  (arguing  cable,  wireless  satellite  and  competitive  fiber  are  not  capable  of  providing 
 xDSL  quality  or  ubiquity);  see  AT&  T  Reply  at  95-  98,  161-  63;  WorldCom  Reply  at  87. 
 710  See  supra  Part  V.  D. 
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 236.  Because  of  the  importance  of  broadband  to  the  American  public  and  telecommunications  users  generally,  we  also  consider  other  factors,  foremost  among  these  our 
 obligation  to  ensure  adequate  incentives  for  infrastructure  investment  under  section  706  of  the  Telecommunications  Act  of  1996,  under  our  at  a  minimum  authority  in  section  251(  d)(  2).  For 
 copper  loops,  we  find  on  a  national  basis  that  requesting  carriers  are  impaired  without  access  to  these  loops,  including  copper  subloops,  because  their  absence  is  likely  to  make  entry 
 uneconomic.  711  For  other  types  of  loops  (i.  e.,  FTTH  loops  and  hybrid  fiber/  copper  loops  used  in  packet-  based  transmissions),  however,  we  recognize  that  additional  revenue  opportunities 
 associated  with  increased  bandwidth  capabilities  may  alleviate,  in  direct  proportion  to  the  level  of  fiber  deployment,  at  least  some  of  these  entry  barriers.  Moreover,  our  obligation  to  ensure 
 adequate  infrastructure  investment  incentives  pursuant  to  section  706  supports  limitations  on  the  unbundling  of  fiber-  based  loops.  Finally,  the  existence  of  intermodal  competition  for  mass 
 market  broadband  services  reduces  the  need  for  more  extensive  unbundling  rules. 
 (a)  Impairment 
 237.  The  costs  of  local  loops  serving  the  mass  market  are  largely  fixed  and  sunk.  By  fixed  we  mean  that  these  costs  are  largely  insensitive  to  the  number  of  customers  being  served.  712 

 Much  of  the  cost  applies  whether  a  carrier  serves  a  single  residential  customer  or  ten  thousand  residential  customers:  that  carrier  must  secure  rights-  of-  way,  dig  trenches  or  place  poles,  and 
 run  wire  underground  or  along  poles.  713  Such  deployment  costs  are  also  sunk.  That  is,  local  loop  facilities  are  not  fungible  because  they  cannot  be  used  for  any  other  purpose  if  the  investment 
 fails.  714  If  a  new  entrant  overbuilds  to  serve  a  mass  market  customer  and  loses  that  customer  to  another  carrier,  the  new  entrant  cannot  economically  redeploy  that  loop  to  another  location.  Its 
 investment  might  be  lost  unless  it  could  find  a  purchaser  for  its  redundant  loops.  This  is  true  regardless  of  whether  the  new  entrant  was  providing  narrowband  or  broadband  service,  or  both. 
 A  carrier  will  not  deploy  mass  market  loops  unless  it  knows  in  advance  that  it  will  have 

 711  In  its  Verizon  decision,  the  Supreme  Court  stated  that  the  most  costly  and  difficult  part  of  [replicating  the 
 incumbent  LECs  network]  would  be  laying  down  the  last  mile  of  feeder  wire,  the  local  loop,  to  the  thousands  (or  millions)  of  terminal  points  in  individual  houses  and  businesses.  Verizon,  535  U.  S.  at  490-  91.  Indeed,  in  its  USTA 

 decision,  the  D.  C.  Circuit  quotes  the  following  passage  from  this  Supreme  Court  decision  in  its  discussion  of  cost  disparities:  entrants  may  need  to  share  some  facilities  that  are  very  expensive  to  duplicate  (say,  loop  elements)  in 
 order  to  be  able  to  compete  in  other,  more  sensibly  duplicable  elements  (say,  digital  switches  or  signal-  multiplexing  technology).  USTA,  290  F.  3d  at  426  (citing  Verizon,  535  U.  S.  at  510  n.  27)  (emphasis  added  by  D.  C.  Circuit). 

 712  Covad  Comments  at  28;  AT&  T  Reply  at  150,  154-  55  (citing  AT&  T  Comments,  Attach.  B,  Declaration  of 
 Richard  N.  Clarke  (AT&  T  Clarke  Decl.)  at  para.  23);  WorldCom  Reply  at  14-  18  (citing  WorldCom  Reply,  Attach.  A,  Declaration  of  Mark  T.  Bryant  (WorldCom  Bryant  Reply  Decl.)  at  paras.  3,  5-  14). 

 713  See  Covad  Comments  at  28  (arguing  that  incumbents  could  afford  such  massive  fixed  costs  because  they  had 
 100%  of  the  market  share  when  they  constructed  their  loop  plant);  WorldCom  Reply  at  63  (citing  WorldCom  Bryant  Reply  Decl.  at  para.  11).  We  note  that  fixed  costs  may  strongly  affect  small  businesses  because,  among 

 other  things,  they  likely  serve  fewer  customers.  See  supra  Part  V.  B.  for  a  discussion  of  the  relationship  between  fixed  costs  and  scale  economies. 

 714  AT&  T  Reply  at  144;  WorldCom  Reply  at  16. 
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 customers  that  will  generate  sufficient  revenues  to  allow  it  to  recover  its  sunk  loop  investment.  715  This  certainty  could  most  easily  be  achieved  through  long-  term  service  contracts  and  a  large, 
 guaranteed  customer  base.  In  contrast  to  the  enterprise  market,  however,  long-  term  contracts  are  not  commonplace  in  the  mass  market  for  either  the  narrowband  or  the  broadband  services  and  we 
 have  no  information  in  our  record  to  indicate  that  consumers  ordinarily  would  accept  such  terms.  716  As  new  entrants,  competitive  LECs  do  not  enjoy  a  large  guaranteed  subscriber  base  that 
 would  provide  a  predictable  source  of  funding  to  offset  their  local  loop  deployment  costs.  717  For  these  reasons,  we  find  that  the  costs  of  self-  provisioning  mass  market  loop  facilities  are 
 demonstrably  greater  than  those  faced  universally  by  new  entrants  in  other  industries.  718 
 238.  Incumbent  LECs  also  enjoy  first-  mover  advantages  that  work  with  the  steep  costs  noted  above  to  compound  the  entry  barriers  associated  with  local  loop  deployment.  When  the 

 incumbent  LECs  installed  most  of  their  loop  plant,  they  had  exclusive  franchises  and,  as  such,  the  record  shows  that  they  secured  rights-  of-  way  at  preferential  terms  and  at  minimal  costs.  719 
 By  contrast,  our  record  shows  that  new  entrants  have  no  such  advantage.  720  Even  if  a  competitive  LEC  obtains  speedy  resolution  of  rights-  of-  way  issues,  it  may  still  experience  delays 
 involved  with  constructing  new  loop  plant.  Incumbent  LECs,  of  course,  experience  no  such  delays  when  providing  narrowband  or  broadband  services  over  their  legacy  copper  loops. 

 715  NuVox  Comments  at  74-  75;  AT&  T  Reply  at  154  (citing  AT&  T  Willig  Reply  Decl.  at  paras.  21-  22,  26,  39);  see 
 also  Covad  Reply  at  16  (arguing  that  there  are  no  uncommitted  entrants  because  of  the  extremely  high  sunk  costs  in  constructing  loop  plant). 

 716  The  record  reflects  that  mass  market  customers  typically  purchase  services  offered  over  voice-  grade  loops  on  a 
 month-  to-  month  basis  at  relatively  low  prices.  Compared  to  higher-  capacity  loops  demanded  by  other  customer  classes,  loops  serving  the  mass  market  require  less  complex  technology.  Nevertheless,  replicating  a  single  loop  for 

 a  mass  market  customer  is  prohibitively  expensive  due  to  the  relatively  low  revenue  per  loop  as  compared  to  the  cost  of  construction.  This  factor,  coupled  with  the  markets  predominant  use  of  short-  term  customer  commitments, 
 equates  to  a  very  low  profit  margin  per  loop,  especially  for  new  entrants.  Moreover,  loops  for  mass  market  customers  exhibit  substantial  economies  of  scale,  in  that  the  larger  the  number  of  loops  provisioned  in  a  given  area, 
 the  lower  the  average  cost  of  provisioning  each  loop. 
 717  As  noted  earlier  in  this  Order,  large  sunk  costs  make  it  more  difficult  to  ramp  up  to  scale  and,  therefore, 
 overcome  a  scale  economies  problem.  See  supra  Part  V.  B. 
 718  AT&  T  Comments  at  127;  Covad  Reply  at  15-  18;  WorldCom  Reply  at  14-  18  (citing  WorldCom  Bryant  Reply 
 Decl.  at  paras.  3,  5-  14). 
 719  See,  e.  g.,  Covad  Comments  at  28  (stating  that  incumbents  often  obtained  rights-  of-  way  through  the  use  of  the 
 states  eminent  domain  power);  AT&  T  Willig  Decl.  at  paras.  62-  63  (arguing  that  as  the  first  mover,  incumbents  received  rights-  of-  way  from  local  governments  with  only  minimal  transaction  costs  because  the  residents  in  that 

 neighborhood  or  municipality  otherwise  would  not  receive  any  telecommunications  services). 
 720  See  WorldCom  Comments  at  33  (contending  that  competitive  LECs  have  been  hindered  in  their  ability  to  install 
 their  own  loops  by  municipal  ordinances  that  have  imposed  excessive,  non-  cost  based  fees  on  access  to  rights-  of-way  and  have  also  delayed  such  access  through  unnecessary  and  cumbersome  application  procedures  and  bonding 

 requirements.).  Although  section  224  of  the  Act  imposes  nondiscriminatory  access  obligations  on  incumbent  LECs  with  respect  to  their  poles,  ducts,  conduits,  and  rights-  of-  ways,  we  note  that  such  access  does  not  eliminate 
 the  transaction  costs  or  first-  mover  advantages  described  above.  47  U.  S.  C.    224. 
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 Because  these  loops  are  already  deployed,  they  are  available  immediately  for  providing  narrowband  services  (i.  e.,  voice,  fax,  dial-  up  Internet  access)  and  available  after  performing  any 
 necessary  line  conditioning  for  providing  broadband  service.  Furthermore,  competitive  LECs  are  also  faced  with  the  problem  of  overcoming  the  incumbent  LECs  established  brand  name 
 recognition  for  providing  reliable  service  in  order  to  convince  (potentially  reluctant)  mass  market  customers  to  change  carriers. 

 239.  According  to  several  commenters,  due  to  the  high  fixed  costs  described  above,  the  incumbents  LECs  designed  their  networks  to  minimize  the  extent  to  which  they  must  modify 
 their  loop  plant  when  adding  new  customers  or  services.  721  Accordingly,  when  incumbent  LECs  construct  loops,  they  typically  add  several  spare  wire  pairs  to  the  customers  location  because  the 
 cost  of  these  spare  wires  is  small  in  comparison  to  the  cost  of  adding  these  pairs  at  a  later  date.  722  This  design  lowers  the  incumbent  LECs  cost  of  adding  customers.  Incumbent  LECs  achieved 
 low  average  costs  because  historically  they  have  served  100  percent  of  demand  in  any  given  area.  Their  investments  were  recovered,  in  most  cases,  through  regulated  rates  and  an  authorized 
 rate  of  return.  723  For  a  new  entrant  to  match  or  even  come  close  to  the  incumbent  LECs  economies  of  scale,  at  a  minimum,  it  would  have  to  capture  quickly  a  significant  percentage  of 
 the  market.  724 
 240.  We  recognize,  however,  that  the  deployment  of  next-  generation  network  facilities  and  equipment    that  is,  fiber  optic  cables  and  equipment  used  to  provide  packet-  based  services 

   affects  our  analysis.  Although  some  of  the  entry  barriers  exist  for  both  all-  copper  and  all-  fiber  loops  (e.  g.,  the  costs  are  both  fixed  and  sunk,  and  such  deployment  is  characterized  by  scale 
 economies),  725  the  revenue  opportunities  are  significantly  greater  for  fiber-  based  construction.  The  record  indicates  that  carriers  can  earn  significant  returns  on  their  fiber-  based  investment  by 
 providing  a  suite  of  services  ranging  from  traditional  voice  to  full-  motion  video.  726  In  fact,  the 
 721  See  AT&  T  Reply  at  149. 
 722  See  id.  (stating  that  a  customer  drop  may  contain  six  pairs  of  wires  rather  than  two  because  the  carrying  costs 
 of  the  extra  capacity  are  small  compared  to  the  cost  of  deploying  additional  capacity  later  (e.  g.,  to  add  a  second  or  third  line));  see  also  AT&  T  Reply  at  150  n.  101  (explaining  the  incumbent  LECs  use  of  bridged  tap  and  additional 

 transmission  electronics  to  maximize  the  use  of  the  existing  plant);  WorldCom  Reply  at  15  (citing  WorldCom  Bryant  Reply  Decl.  at  paras.  11-  14;  AT&  T  Clarke  Decl.  at  para.  23)  (arguing  that  once  a  cable  route  is  established, 
 there  are  only  small  incremental  structure  costs  to  serving  additional  customer  lines  located  along  the  route.). 
 723  AT&  T  Reply  at  150  (citing  AT&  T  Reply,  Tab  C,  Declaration  of  Anthony  Fea  and  Anthony  Giovannucci 
 (AT&  T  Fea/  Giovannucci  Reply  Decl.)  at  paras.  6-  7). 
 724  See,  e.  g.,  AT&  T  Reply  at  157  (arguing  that  even  with  an  aggressive  market  share  of  30%,  the  new  entrants 
 loop  investments  per  line  costs  would  exceed  the  incumbents  by  45  to  87%  and  its  monthly  loop  costs  would  exceed  the  incumbents  by  39  to  65%). 

 725  Covad  Comments  at  27  (arguing  that  xDSL  signals  are  no  easier  or  cheaper  to  replicate  than  loops  carrying 
 POTS);  WorldCom  Reply  at  15  (citing  AT&  T  Clarke  Decl.  at  para.  23). 
 726  Corning  Comments  at  19-  20  (asserting  that  incumbent  and  competitive  LECs  are  on  equal  footing  for  FTTH 
 deployment).  Corning  and  the  FTTH  Council  estimate  that  FTTH  loops  allow  revenue  opportunities  of  approximately  $33  per  subscriber  compared  to  $18  per  subscriber  for  xDSL-  based  services.  Letter  from  Timothy  J. 

 (continued.) 
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 potential  rewards  of  fiber  deployment  may  offset  the  likelihood  that  competitive  LECs  will  view  entry  as  uneconomic.  In  addition,  the  barriers  faced  in  deploying  fiber  loops,  as  opposed  to 
 existing  copper  loops,  may  be  similar  for  both  incumbent  LECs  and  competitive  LECs.  727  Both  incumbent  and  competitive  LECs  must  purchase  fiber  and  the  associated  equipment,  negotiate 
 access  to  the  necessary  rights-  of-  way,  obtain  any  necessary  government  permits,  hire  skilled  labor,  and  manage  their  construction  projects  in  order  to  deploy  fiber  loops.  Moreover,  by  some 
 estimates,  competitive  LECs  enjoy  advantages  that  incumbent  LECs  do  not  have,  such  as  lower  labor  costs  and  superior  back  office  systems.  728 

 (b)  Other  Considerations 
 241.  As  we  have  stated  elsewhere,  broadband  deployment  is  a  critical  policy  objective  that  is  necessary  to  ensure  that  consumers  are  able  to  fully  reap  the  benefits  of  the  information 

 age.  729  In  this  regard,  we  weigh  how  our  rules  related  to  broadband  deployment  address  other  policy  considerations.  In  particular,  we  seek  to  encourage  investment  in  next-  generation 
 network  architecture  suitable  for  delivering  advanced  telecommunications  capability  throughout  the  nation.  We  also  look  to  promote  the  potential  of  broadband  in  a  minimally  regulated 
 environment  in  accordance  with  the  deregulatory  intent  of  the  1996  Act.  Finally,  we  seek  to  unleash  the  innovation  that  has  been  characteristic  of  the  computer  and  software  industries.  We 
 expect  to  develop  unbundling  rules  that  serve  these  broad  goals  so  that  consumers  ultimately  benefit  from  a  ubiquitous,  efficient,  nationwide  broadband  deployment. 

 242.  Section  706.  In  determining  what  our  unbundling  rules  for  loops  used  for  broadband  services  should  be,  we  also  are  guided  by  the  goals  of,  and  our  obligations  under, 
 section  706  of  the  1996  Act.  730  Section  706  directs  the  Commission  to  encourage  the  (Continued  from  previous  page) 

 Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338,  Attach.  at  33  (filed  Nov.  26,  2002)  (Corning  Nov.  26,  2002  FTTH  Deployment  Ex  Parte  Letter). 
 727  See,  e.  g.,  Verizon  Reply  at  40  n.  117  (arguing  that  both  incumbents  and  competitive  LECs  must  incur  and 
 recover  the  costs  of  obtaining  franchises  and  construction  permits,  and  building  out  fiber  loops).  Similarly,  as  discussed  earlier  in  this  Order,  incumbent  LECs  first-  mover  advantages  would  be  greatly  reduced  in  greenfield 

 situations.  See  supra  Part  V.  B. 
 728  Corning  estimates  construction  accounts  for  more  than  50%  of  FTTH  deployment  costs.  Letter  from  Timothy 
 J.  Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Attach.  2  at  9  (filed  Nov.  20,  2002)  (Corning  Nov.  20,  2002  FTTH  Deployment  Ex  Parte  Letter).  Corning  further  explains 

 that  labor  is  the  largest  component  of  construction  costs,  and  that  competitive  LECs  enjoy  an  advantage.  Id.,  Attach.  2  at  10-  11.  See  CSMG  Study  at  14  (noting  that  competitive  LEC  FTTH  construction  costs  for  labor  are 
 lower  than  those  of  incumbent  LECs);  BOC  Shelanski  Reply  Decl.  at  para.  3;  see  also  Verizon  Reply  at  42. 
 729  See,  e.  g.,  Appropriate  Framework  for  Broadband  Access  to  the  Internet  over  Wireline  Facilities,  Universal 
 Service  Obligations  of  Broadband  Providers,  CC  Docket  Nos.  02-  33,  95-  20,  98-  10,  Notice  of  Proposed  Rulemaking,  17  FCC  Rcd  3019  (2002)  (Wireline  Broadband  NPRM);  Review  of  Regulatory  Requirements  for 

 Incumbent  LEC  Broadband  Telecommunications  Services,  CC  Docket  No.  01-  337,  Notice  of  Proposed  Rulemaking,  16  FCC  Rcd  22745,  22747,  para.  4  (2001)  (Dom/  Non-  Dom  NPRM). 

 730  47  U.  S.  C.    157  nt. 
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 deployment  on  a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans  by  using  regulatory  measures  that  promote  competition  in  the  local 
 telecommunications  market  and  remove  barriers  to  infrastructure  investment.  731  Through  its  at  a  minimum  language,  section  251(  d)(  2)  provides  the  Commission  with  the  discretion  to 
 consider  factors  in  addition  to  impairment  before  requiring  unbundling.  732  We  find  that  this  discretion  is  appropriately  exercised  by  evaluating  whether  unbundling  of  local  loops  used  to 
 provide  broadband  services  to  the  mass  market  is  consistent  with  our  section  706  mandate.  In  particular,  we  consider  whether  our  unbundling  requirements  encourage  the  deployment  of 
 advanced  telecommunications  capability  to  all  Americans  by,  among  other  things,  promoting  competition  in  the  local  market,  promoting  facilities-  based  deployment,  promoting  the  delivery 
 of  innovative  advanced  services  offerings,  and  removing  barriers  to  infrastructure  investment.  In  addition,  we  note  that  section  706  promotes  the  deployment  of  high-  speed,  switched,  broadband 
 telecommunications  capability,  which  counsels  in  favor  of  measures  aimed  at  spurring  the  deployment  of  packet-  switching  technologies.  733 

 243.  Upgrading  telecommunications  loop  plant  is  a  central  and  critical  component  of  ensuring  that  deployment  of  advanced  telecommunications  capability  to  all  Americans  is  done 
 on  a  reasonable  and  timely  basis  and,  therefore,  where  directly  implicated,  our  policies  must  encourage  such  modifications.  Although  a  copper  loop  can  support  high  transmission  speeds 
 and  bandwidth,  it  can  only  do  so  subject  to  distance  limitations  and  its  broadband  capabilities  are  ultimately  limited  by  its  technical  characteristics.  734  The  replacement  of  copper  loops  with  fiber 
 will  permit  far  greater  and  more  flexible  broadband  capabilities.  735  Although  both  the  material  used  in  the  transmission  path  and  the  attached  equipment  work  together  to  enable  broadband 
 capabilities,  the  record  shows  that,  of  the  two,  it  is  the  upgrade  to  the  transmission  path  (the  loop)  that  is,  by  far,  the  more  costly,  complex,  and  risky  endeavor. 

 244.  In  establishing  our  unbundling  requirements,  we  consider  our  section  706  mandate  in  light  of  the  technical  characteristics  of  local  loops.  As  we  discuss  in  more  detail 
 below,  we  determine  that  our  obligation  to  ensure  the  deployment  of  advanced  telecommunications  capability  under  section  706  warrants  different  approaches  with  regard  to 
 existing  loop  plant  and  new  loop  plant.  With  existing  copper  loops,  all  investment  in  advanced 
 731  Id. 
 732  With  regard  to  the  Commissions  authority  to  consider  other  elements  under  the  at  a  minimum  language, 
 the  Court  of  Appeals  for  the  D.  C.  Circuit  has  stated,  [  w]  e  assume  in  favor  of  the  Commission  that  is  so.  USTA,  290  F.  3d  at  425. 

 733  47  U.  S.  C.    157  nt.  Section  706  defines  advanced  telecommunications  capability  as  high-  speed,  switched, 
 broadband  telecommunications  capability  that  enables  users  to  originate  and  receive  high-  quality  voice,  data,  graphics,  and  video  telecommunications  using  any  technology. 

 734  Line  Sharing  Order,  14  FCC  Rcd  at  20919,  para.  8  n.  9. 
 735  BROADBAND:  BRINGING  HOME  THE  BITS,  supra  note  707,  at  129-  30;  Corning  Comments  at  2;  Letter  from 
 Timothy  Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  FTTH  Council  Attach.  at  28  (filed  Jan.  29,  2003)  (Corning  Jan.  29,  2003  Ex  Parte  Letter). 
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 telecommunications  capability  is  necessarily  limited  to  the  equipment,  not  the  transmission  facility.  Therefore,  our  obligation  to  encourage  infrastructure  investment  tied  to  legacy  loops  is 
 more  squarely  driven  by  facilitating  competition  and  promoting  innovation.  Because  the  incumbent  LEC  has  already  made  the  most  significant  infrastructure  investment,  i.  e.,  deployed 
 the  loop  to  the  customers  premises,  we  seek,  through  our  unbundling  rules,  to  encourage  both  intramodal  and  intermodal  carriers  (in  addition  to  incumbent  LECs)  to  enter  the  broadband  mass 
 market  and  make  infrastructure  investments  in  equipment.  In  addition,  we  seek  to  promote  the  deployment  of  equipment  that  can  unleash  the  full  potential  of  the  embedded  copper  loop  plant 
 so  that  consumers  can  experience  enhanced  broadband  capabilities  before  the  mass  deployment  of  fiber  loops.  We  expect  that  more  innovative  products  and  services  will  follow  the  deployment 
 of  new  loop  plant  and  associated  equipment.  With  new  loop  plant,  however,  encouraging  infrastructure  investment  must  be  balanced  between  ensuring  that  incumbent  LECs  retain 
 adequate  incentives  to  upgrade  their  loop  plant  and  ensuring  that  competition  continues  to  drive  the  deployment  of  innovative  broadband  services.  These  considerations  come  into  play  most 
 acutely  in  determining  the  appropriate  unbundling  requirements  for  loops  used  to  provide  broadband  service  to  the  mass  market.  736 

 245.  Intermodal  Competition.  Upon  review  of  the  extensive  record  on  intermodal  competition  compiled  in  this  proceeding,  we  determine  that,  although  the  existence  of  intermodal 
 loops  does  not  warrant  a  finding  of  no  impairment,  such  competition  is  a  factor  to  consider  in  establishing  our  unbundling  requirements.  We  have  discussed  the  competitive  characteristics  of 
 intermodal  loops  in  preceding  paragraphs.  Indeed,  the  broadband  competition  posed  by  cable  operators  in  the  mass  market  supports  our  decision  to  refrain  from  unbundling  requirements  on 
 the  features,  functions,  and  capabilities  of  certain  types  of  loops.  Similarly,  the  state  of  intermodal  competition,  including  competition  from  wireless  telephony,  in  the  mass  market  for 
 narrowband  services  supports  our  approach  to  unbundling  the  legacy  loops  of  incumbent  LECs.  Neither  wireless  nor  cable  has  blossomed  into  a  full  substitute  for  wireline  telephony.  In 
 addition,  because  wireless  does  not  yet  demonstrate  the  technical  characteristics  necessary  to  provide  broadband  services,  unbundling  incumbent  LEC  legacy  loops  is  necessary  for  mass 
 market  consumers  to  realize  the  benefits  of  competition  both  for  narrowband  and  broadband  services,  as  well  as  both  combined  as  a  bundle. 

 246.  There  appear  to  be  a  number  of  promising  access  technologies  on  the  horizon  737  and  we  expect  intermodal  platforms  to  become  increasingly  a  substitute  for  wireline  voice 
 telephony  services  and  for  wireline  broadband  services.  As  we  continue  to  assess  impairment  in  the  future,  we  recognize  that  the  increased  presence  of  viable  alternative  platforms  may  help 
 increase  competitive  alternatives,  both  retail  and  wholesale,  in  the  narrowband  and  broadband  mass  markets.  The  presence  of  such  alternatives  in  the  future  may  enable  us  to  find  that 

 736  We  note  that  one  party,  Corning,  requested  that  the  Commission  forbear  from  imposing  on  incumbent  LECs  the 
 resale  requirements  set  forth  in  section  251(  c)(  4)  for  FTTH  loops.  Corning  Comments  at  31-  33.  Obviously,  Cornings  request  is  outside  the  scope  of  this  proceeding  and,  thus,  we  will  not  address  it  in  this  Order. 

 737  See,  e.  g.,  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2877-  80,  paras.  79-  88  (describing  other  potential 
 intermodal  platforms  capable  of  providing  broadband  service). 
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 requesting  carriers  are  no  longer  impaired  in  their  ability  to  compete  without  access  to  incumbent  LEC  loops.  738 
 (v)  Specific  Unbundling  Requirements  for  Mass  Market  Loops 
 247.  In  this  section,  we  address  the  specific  unbundling  requirements  for  mass  market  loops.  We  address  the  requirements  based  on  the  three  primary  types  of  local  loops  noted  above, 
 i.  e.,  copper  loops,  FTTH  loops,  and  hybrid  fiber/  copper  loops. 
 (a)  Legacy  Networks 
 248.  Stand-  Alone  Copper  Loops.  As  discussed  above,  we  find  that  requesting  carriers  are  generally  impaired  on  a  national  basis  without  unbundled  access  to  an  incumbent  LECs 

 local  loops,  whether  they  seek  to  provide  narrowband  or  broadband  services,  or  both.  739  However,  we  determine  that  unbundled  access  to  conditioned,  stand-  alone  copper  loops  (which, 
 of  course,  may  be  shared  between  two  competitive  LECs  as  discussed  below)  is  sufficient  to  overcome  such  impairment  for  the  provision  of  broadband  services.  Consequently,  we  find  that, 
 subject  to  the  grandfather  provision  and  transition  period  explained  below,  incumbent  LECs  do  not  have  to  unbundle  the  HFPL  for  requesting  telecommunications  carriers. 

 249.  With  more  than  6  million  kilometers  of  copper  cable  deployed,  it  is  clear  that  copper  remains  the  predominant  loop  type  serving  the  mass  market  740  and  no  party  seriously 
 asserts  that  stand-  alone  copper  loops  should  not  be  unbundled  in  order  to  provide  services  to  the  mass  market.  741  To  address  the  impairment  discussed  above,  we  conclude  that  incumbent  LECs 
 must  provide  unbundled  access  to  local  loops  comprised  of  copper  wire.  742  That  is,  incumbent  LECs  shall  provide,  as  a  UNE,  access  to  the  complete  transmission  path  comprised  of  a  copper 
 local  loop  between  the  central  office  and  the  customers  premises.  The  copper  loop  network  element  is  a  single  local  loop,  including  all  intermediate  devices  (e.  g.,  repeaters,  load  coils)  used 

 738  We  note  that  the  impairment  standard  set  forth  in  section  251  is  different  from,  and  does  not  prejudge,  the 
 standard  we  use  to  assess  a  carriers  dominant  or  non-  dominant  status.  See  Dom/  Non-  Dom  NPRM. 
 739  See  our  discussion  of  the  high  fixed  and  sunk  costs,  large  economies  of  scale,  and  operational  barriers  such  as 
 rights-  of-  way,  supra  Part  VI.  A.  4.  a(  iv)(  a). 
 740  See  Statistics  of  Communications  Common  Carriers  September  2002  Report  at  Table  2.2. 

 741  See,  e.  g.,  SBC  Reply  at  109  (stating  that  competitive  LECs  have  ample  opportunity  to  offer  voice  and  data 
 over  the  legacy  network  and  can  access  the  copper  distribution  subloop  at  the  first  accessible  point  in  the  ILECs  network  .  .  .  and  use  it  to  provision  DSL  service.).  In  addition,  we  note  that  some  commenters  assumed  continued 

 unbundling  of  loops  to  support  their  argument  that  UNE-  P  is  unnecessary.  See,  e.  g.,  Verizon  Reply  at  113  (arguing  that  UNE-  P  is  unnecessary  because  a  competitive  LEC  could  simply  use  hot  cuts  and  a  UNE-  L  strategy  to  serve 
 mass  market  customers.). 
 742  To  be  clear,  we  require  incumbent  LECs  to  unbundle  both  existing  copper  loops  and  copper  loops  as  they  are 
 newly  deployed. 
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 to  establish  the  transmission  path.  Consistent  with  the  definition  the  Commission  adopted  in  the  UNE  Remand  Order,  this  complete  transmission  path  between  the  incumbent  LECs  main 
 distribution  frame  (or  its  equivalent)  in  its  central  office  and  the  demarcation  point  at  the  customers  premises  743  also  includes  the  features,  functions,  and  capabilities  of  the  copper  loop.  744 
 We  include  within  this  network  element  all  local  loops  comprised  of  copper  cable,  including  two-  and  four-  wire  analog  voice-  grade  loops,  digital  loops  (e.  g.,  DS0s  and  ISDN  lines)  and  two- 
 and  four-  wire  loops  conditioned  to  transmit  the  digital  signals  needed  to  provide  xDSL  service.  Consistent  with  their  obligation  to  provide  unbundled  local  loops  on  just,  reasonable,  and 
 nondiscriminatory  terms  and  conditions,  incumbent  LECs  must  provide  the  requesting  carriers  with  nondiscriminatory  access  to  the  same  detailed  information  about  the  loop  that  is  available  to 
 the  incumbent  LEC  in  the  same  time  intervals  it  is  provided  to  the  incumbent  LECs  retail  operations.  745  We  note  that  our  requirements  for  stand-  alone  copper  loops  apply  to  both  copper 
 loops  that  are  in  active  service  and  those  that  are  deployed  in  the  network  as  spares.  746 
 250.  The  practical  effect  of  this  unbundling  requirement  is  to  ensure  that  requesting  carriers  have  access  to  the  copper  transmission  facilities  they  need  in  order  to  provide 

 narrowband  or  broadband  services  (or  both)  to  customers  served  by  copper  local  loops.  We  understand  that  this  unbundling  obligation  may  require  an  incumbent  LEC  to  provide  the 
 functionality  available  in  certain  equipment,  as  well  as  to  remove  the  functionality  from  other  equipment  (i.  e.,  to  condition  the  loop),  in  order  to  provide  a  complete  transmission  path  between 
 its  main  distribution  frame  (or  equivalent)  and  the  demarcation  point  at  the  customers  premises.  747  As  noted  elsewhere  in  this  Order,  we  find  that  line  conditioning  constitutes  a  form 

 743  As  discussed  below,  this  also  includes  any  inside  wire  owned  by  the  incumbent  LEC.  See  infra  Part  VI.  B.  2 
 (discussing  inside  wire). 
 744  As  noted  above,  the  Act  defines  the  term  network  element  as  a  facility  or  equipment  used  in  the  provision  of 
 a  telecommunications  service.  Such  term  also  includes  features,  functions,  and  capabilities  that  are  provided  by  means  of  such  facility  or  equipment.  47  U.  S.  C.    153(  29). 

 745  See  supra  Part  VI.  I  (discussing  incumbent  LECs  OSS  obligations);  see  also  UNE  Remand  Order,  14  FCC  Rcd 
 at  3884-  87,  paras.  426-  31  (requiring  incumbent  LECs  to  provide,  among  other  things,  the  composition  of  the  loop  material;  the  existence,  location  and  type  of  any  electronic  or  other  equipment  on  the  loop;  the  loop  length;  the  wire 

 gauge(  s)  of  the  loop;  and  the  electrical  parameters  of  the  loops);  Line  Sharing  Order,  14  FCC  Rcd  at  20958-  73,  paras.  96-  130;  47  C.  F.  R.    51.319(  g). 

 746  These  requirements  also  include  the  obligation  to  condition  the  spare  pair  so  that  the  requesting  carrier  may 
 provide  xDSL  service.  As  Qwest  points  out,  when  incumbent  LECs  construct  new  loop  plant,  they  frequently  overlay  fiber  facilities  that  supplement  existing  loops.  Qwest  Comments  at  45;  see  Alcatel  Comments  at  16  (noting 

 that,  when  incumbent  LECs  deploy  fiber  loops,  competitive  LECs  would  continue  to  maintain  access  to  legacy  copper  transmission  facilities).  Thus,  the  construction  of  new  facilities  does  not  in  itself  alter  a  competitive  LECs 
 ability  to  use  the  incumbent  LECs  network.  Qwest  explains  that  it  does  not  proactively  remove  copper  facilities  in  the  case  of  an  overlay  so  that  requesting  carriers  should  be  able  to  continue  providing  service  in  these 
 circumstances.  Qwest  Comments  at  45-  46. 
 747  As  discussed  in  Part  VI.  A.  infra,  we  readopt  incumbent  LECs  line  conditioning  obligations.  The  Commission 
 noted  in  its  Line  Sharing  Order  that  devices  such  as  load  coils  and  bridged  taps  interfere  with  the  provision  of  xDSL  service  and,  absent  a  certain  showing  by  the  incumbent  LEC  to  the  relevant  state  commission,  must  be  removed  at 

 the  request  of  the  competitive  LEC.  See  Line  Sharing  Order,  14  FCC  Rcd  at  20952-  54,  paras.  83-  86.  We  (continued.) 
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 of  routine  network  modification  that  must  be  performed  at  the  competitive  carriers  request  to  ensure  that  a  copper  local  loop  is  suitable  for  providing  xDSL  service.  748 
 251.  Line  Splitting.  We  find  that  when  competitive  carriers  opt  to  take  an  unbundled  stand-  alone  loop,  the  incumbent  LEC  must  provide  the  requesting  carrier  with  the  ability  to 
 engage  in  line  splitting  arrangements.  We  use  the  term  line  splitting  to  describe  the  scenario  where  one  competitive  LEC  provides  narrowband  voice  service  over  the  low  frequency  of  a  loop 
 and  a  second  competitive  LEC  provides  xDSL  service  over  the  high  frequency  portion  of  that  same  loop.  The  Commission  previously  found  that  existing  rules  require  incumbent  LECs  to 
 permit  competing  carriers  to  engage  in  line  splitting  where  a  competing  carrier  purchases  the  whole  loop  and  provides  its  own  splitter  to  be  collocated  in  the  central  office.  749  We  reaffirm 
 those  requirements  but,  for  purposes  of  clarity  and  ensuring  regulatory  certainty,  we  find  that  it  is  appropriate  to  adopt  line  splitting-  specific  rules. 

 252.  Included  among  these  rules  is  the  requirement  that  incumbent  LECs  modify  their  OSS  in  such  a  manner  as  to  facilitate  line  splitting.  We  also  readopt  the  Commission  rules 
 requiring  incumbent  LECs  to  provide  access  to  physical  loop  test  access  points  on  a  nondiscriminatory  basis  for  the  purpose  of  loop  testing,  maintenance,  and  repair  activities,  and 
 allowing  incumbent  LECs  to  maintain  control  over  the  loop  and  splitter  equipment  and  functions  in  certain  circumstances.  We  do  not  anticipate  that  the  incumbent  LECs  will  have  any  difficulty 
 implementing  such  an  obligation  because  the  Commission  required  as  much  from  them  in  its  Line  Sharing  Reconsideration  Order.  750  Furthermore,  so  long  as  the  unbundled  loop-  switch 

 (Continued  from  previous  page) 
 determine  that,  upon  the  competitive  LECs  request,  incumbent  LECs  must  similarly  condition  unbundled  stand-alone  loops  to  make  them  xDSL-  compatible. 

 748  We  also  require  such  conditioning  for  the  HFPL  consistent  with  the  grandfather  provision  and  transition  period 
 described  below.  See  Line  Sharing  Order,  14  FCC  Rcd  at  20952-  54,  paras.  83-  87. 
 749  See  Application  by  SBC  Communications  Inc.,  Southwestern  Bell  Telephone  Company,  and  Southwestern  Bell 
 Communications  Services,  Inc.  d/  b/  a  Southwestern  Bell  Long  Distance  Pursuant  to  Section  271  of  the  Telecommunications  Act  of  1996  to  Provide  In-  Region,  InterLATA  Services  in  Texas,  CC  Docket  No.  00-  65, 

 Memorandum  Opinion  and  Order,  15  FCC  Rcd  18354,  18515-  16,  paras.  324-  25  (2000)  (SWBT  Texas  271  Order);  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  Third  Report  and  Order  on 
 Reconsideration  in  CC  Docket  No.  98-  147,  Fourth  Report  and  Order  on  Reconsideration  in  CC  Docket  No.  96-  98,  Third  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  98-  147,  Sixth  Further  Notice  of  Proposed 
 Rulemaking  in  CC  Docket  No.  96-  98,  16  FCC  Rcd  2101,  2109-  14,  paras.  16-  26  (2001)  (Line  Sharing  Reconsideration  Order).  These  Orders  expressly  determined  that  rules  51.307(  c)  (requiring  incumbent  LECs  to 
 provide  unbundled  access  to  a  UNE  in  a  manner  that  allows  the  requesting  telecommunications  carrier  to  provide  any  telecommunications  service  that  can  be  offered  by  means  of  that  network  element)  and  51.309(  a)  (prohibiting 
 an  incumbent  LEC  from  imposing  limitations,  restrictions,  or  requirements  on  .  .  .  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  carrier  intends)  require  incumbent  LECs  to  permit  line  splitting. 
 750  See  Line  Sharing  Reconsideration  Order,  16  FCC  Rcd  at  2111,  para.  20  (requiring  incumbent  LECs  to  make  all 
 necessary  network  modifications,  including  providing  nondiscriminatory  access  to  OSS  necessary  for  pre-  ordering,  ordering,  provisioning,  maintenance  and  repair,  and  billing  for  loops  used  in  line  splitting  arrangements).  For  the 

 reasons  explained  herein,  we  grant  WorldComs  request  for  clarification  that  requesting  carriers  may  engage  in  line  (continued.) 
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 combination  is  permitted  in  a  particular  state,  the  rules  make  clear  that  incumbent  LECs  must  permit  competitive  LECs  providing  voice  service  through  that  arrangement  to  line  split  with 
 another  competitive  LEC.  751  As  the  Commission  did  before,  we  encourage  incumbent  LECs  and  competitors  to  use  existing  state  commission  collaboratives  and  change  management  processes 
 to  address  OSS  modifications  that  are  necessary  to  support  line  splitting.  752 
 253.  Unbundled  Access  to  Copper  Subloops.  We  require  incumbent  LECs  to  provide  unbundled  access  to  their  copper  subloops,  i.  e.,  the  distribution  plant  consisting  of  the  copper 

 transmission  facility  between  a  remote  terminal  and  the  customers  premises.  753  We  conclude  that  our  impairment  finding  extends  to  copper  subloops  because  they  are  part  and  parcel  of  the 
 local  loop  plant  of  incumbent  LECs    requesting  carriers  face  precisely  the  same  barriers  to  entry  for  a  subloop  as  with  a  copper  loop  that  extends  from  the  incumbent  LECs  central  office  to  the 
 customers  premises.  Indeed,  we  note  that  several  incumbent  LECs  argue  that  accessing  copper  subloops  provides  competitive  LECs  with  sufficient  access  to  the  loop  for  the  provision  of  the 
 services  that  they  seek  to  provide.  754  Consistent  with  our  section  706  goal  to  spur  deployment  of  advanced  telecommunications  capability,  we  do  not  require  incumbent  LECs  to  provide  access  to 
 their  fiber  feeder  loop  plant  on  an  unbundled  basis  as  a  subloop  UNE.  As  explained  below,  in  light  of  our  decision  to  refrain  from  unbundling  the  packetized  capabilities  of  incumbent  LECs, 
 incumbent  LECs  will  provide  access  to  their  fiber  feeder  plant  only  to  the  extent  their  fiber  feeder  plant  is  necessary  to  provide  a  complete  transmission  path  between  the  central  office  and 
 the  customer  premises  when  incumbent  LECs  provide  unbundled  access  to  the  TDM-  based  capabilities  of  their  hybrid  loops.  We  encourage  parties  to  negotiate  access  arrangements  that 
 would  facilitate  competitive  LEC  access  to  copper  subloops.  Specifically,  we  expect  that  incumbent  LECs  will  develop  wholesale  service  offerings  for  access  to  their  fiber  feeder  to 

 (Continued  from  previous  page) 
 splitting.  MCI  WorldCom  Petition  for  Clarification,  CC  Docket  No.  96-  98  at  10  (filed  Feb.  17,  2000)  (MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification). 

 751  Again,  the  Commission  required  this  in  an  earlier  Order.  See  Line  Sharing  Reconsideration  Order,  16  FCC 
 Rcd  at  2110-  11,  para.  19. 
 752  See  id.  at  2111-  12,  para.  21.  We  note  with  support  the  work  already  performed  by  state  commissions  in  this 
 area  and  we  encourage  states  to  continue  overseeing  and  participating  in  such  collaboratives.  See,  e.  g.,  New  York  Department  Comments  at  6-  7.  Some  commenters  claimed  that  BOCs  reject  competitive  LEC  xDSL  orders  because 

 the  BOCs  are  not  the  local  voice  provider  and  they  refuse  to  coordinate  the  HFPL  order  with  the  voice  competitive  LEC.  See,  e.  g.,  WorldCom  Comments,  Declaration  of  Ian  Graham  (WorldCom  Graham  Decl.)  at  para.  33.  We  do 
 expect  incumbent  LECs  to  implement,  in  a  timely  fashion,  practical  and  reasonable  measures  to  enable  competitive  LECs  to  line  split.  Id. 

 753  Letter  from  Derek  R.  Khlopin,  High  Tech  Broadband  Coalition,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  No.  01-  338,  Attach.  at  2  (filed  Feb.  14,  2003)  (HTBC  Feb.  14,  2003  Ex  Parte  Letter)  (submitting  proposed  rule  language). 

 754  Qwest  Comments  at  46;  SBC  Comments  at  53-  54;  Verizon  Comments  at  89  n.  296. 
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 ensure  that  competitive  LECs  have  access  to  copper  subloops.  Of  course,  the  terms  and  conditions  of  such  access  would  be  subject  to  sections  201  and  202  of  the  Act.  755 
 254.  We  define  the  copper  subloop  UNE  as  the  distribution  portion  of  the  copper  loop  that  is  technically  feasible  to  access  at  terminals  in  the  incumbent  LECs  outside  plant  (i.  e., 
 outside  its  central  offices),  including  inside  wire.  756  We  find  that  any  point  on  the  loop  where  technicians  can  access  the  cable  without  removing  a  splice  case  constitutes  an  accessible 
 terminal.  As  HTBC  points  out,  a  non-  exhaustive  list  of  these  points  includes  the  pole  or  pedestal,  the  serving  area  interface  (SAI),  the  NID  itself,  the  MPOE,  the  remote  terminal,  and  the 
 feeder/  distribution  interface.  To  facilitate  competitive  LEC  access  to  the  copper  subloop  UNE,  we  require  incumbent  LECs  to  provide,  upon  a  site-  specific  request,  access  to  the  copper  subloop 
 at  a  splice  near  their  remote  terminals.  757  With  respect  to  the  copper  subloop,  in  addition  to  providing  greater  specificity  of  access  points  consistent  with  the  HTBC  proposal,  we  readopt  our 
 previous  requirements  for  providing  unbundled  access  to  subloop  UNEs.  Unlike  our  previous  subloop  unbundling  rules,  however,  the  rules  we  adopt  herein  do  not  require  incumbent  LECs  to 
 provide  unbundled  access  to  their  feeder  loop  plant  as  stand-  alone  UNEs,  thereby  limiting  incumbent  LEC  subloop  unbundling  obligations  to  their  distribution  loop  plant. 

 255.  High  Frequency  Portion  of  the  Loop.  Although  we  make  the  whole  copper  loop  and  the  copper  subloop  available  to  requesting  carriers  as  UNEs,  along  with  the  ability  to  engage 
 in  line  splitting,  some  parties  have  requested  that  we  also  make  available  the  high  frequency  portion  of  the  copper  loop.  For  reasons  we  discuss  below,  we  decline  to  do  so  except  as 
 specified  on  a  grandfathered  basis.  As  an  initial  matter,  we  use  the  term  line  sharing  to  describe  when  a  competing  carrier  provides  xDSL  service  over  the  same  line  that  the  incumbent 
 LEC  uses  to  provide  voice  service  to  a  particular  end  user,  with  the  incumbent  LEC  using  the  low  frequency  portion  of  the  loop  and  the  competing  carrier  using  the  HFPL.  Continued  access 
 to  the  incumbent  LECs  conditioned,  stand-  alone  copper  loops  and  subloops  enables  a  requesting  carrier  to  offer  and  recover  its  costs  from  all  of  the  services  that  the  loop  supports,  including 
 xDSL  service.  758  Commenters  have  not  argued  that  it  is  technically  infeasible  to  provide  xDSL 
 755  For  example,  incumbent  LECs  could  develop,  and  provide  pursuant  to  sections  201/  202  of  the  Act, 
 telecommunications  services  that  are  similar  to  the  special  access  services  they  already  provide.  Such  services  would,  in  effect,  offer  competitive  LECs  access  to  the  shared  fiber  feeder  plant  (and  any  necessary  cross-connections 

 or  similar  functions)  in  order  to  obtain  access  to  equipment  in  a  remote  terminal  or  to  the  copper  subloop  itself.  We  note  that  at  least  one  incumbent  LEC  has  supported  making  available  wholesale  broadband 
 service  offerings  because  such  arrangements  would  make  commercial  sense.  See,  e.  g.,  Verizon  Comments  at  82  (arguing  that  incumbent  LECs  should  be  permitted  to  offer  wholesale  broadband  services  in  lieu  of  unbundling  its 
 broadband  network  equipment  and  facilities).  But  see  WorldCom  Reply  at  120-  21  (criticizing  Verizons  proposal). 
 756  HTBC  Feb.  14,  2003  Ex  Parte  Letter  at  2  (submitting  proposed  rule  language). 

 757  Id. 
 758  Moreover,  as  explained  above,  the  Commission  reaffirms  the  incumbent  LECs  obligation  to  permit  line 
 splitting  so  that  a  competitive  LEC  seeking  only  to  offer  xDSL  service  (i.  e.,  a  data  LEC)  may  partner  with  a  voice-only  competitive  LEC  to  provide  the  service    xDSL    that  the  data  LEC  offered  under  the  Commissions  now-vacated 

 rules. 
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 service  over  a  stand-  alone  copper  loop  nor  have  they  argued  that  it  is  technically  infeasible  to  provide  xDSL  service  over  a  line  split  loop  (i.  e.,  a  loop  that  is  shared  by  two  competitive  LECs   
 one  offering  voice  service  and  the  second  offering  xDSL  service).  Advocates  for  reinstating  unbundled  access  to  the  HFPL  instead  offer  various  economic  and  operational  reasons  for  why 
 they  would  be  impaired  without  such  access,  generally  reiterating  the  same  reasons  that  were  offered  in  the  Commissions  original  line  sharing  proceeding  in  1999.  759 

 256.  As  we  noted  above,  the  D.  C.  Circuit  vacated  these  rules  and  directed  the  Commission  to  apply  some  limiting  standard  rationally  related  to  the  goals  of  the  Act.  760  The 
 D.  C.  Circuit  stated  that  the  Commission  must  weigh  the  costs  associated  with  unbundling  in  making  its  section  251(  d)(  2)  determinations.  761  More  generally,  the  D.  C.  Circuit  explained  that 
 the  Commission  must  make  an  effort  to  balance  these  costs  against  the  benefits  of  unbundling.  762  It  is  against  this  backdrop  that  the  Commission  makes  its  decision  on  line  sharing. 

 257.  In  its  Line  Sharing  Order,  the  Commission  found  that  competitive  LECs  were  impaired  without  unbundled  access  to  the  HFPL  because,  among  other  things,  purchasing  a 
 stand-  alone  loop  would  be  too  costly  for  carriers  seeking  to  offer  only  broadband  service.  763  It  also  determined  that  requiring  these  carriers  to  offer  voice  service  in  order  to  provide  xDSL 
 service  would  impose  on  them  the  cost  of  providing  circuit-  switched  voice  services,  which  includes  the  development  of  marketing,  billing,  and  customer  care  infrastructure  to  serve  the 
 needs  of  voice  customers.  764  In  addition,  the  Commission  found  no  evidence  that  requesting  carriers  could  obtain  the  HFPL  from  another  competitive  LEC  (i.  e.,  what  the  Commission 
 subsequently  termed  line  splitting).  765 
 258.  As  an  initial  matter,  we  disagree  with  the  Commission's  prior  finding  that  competitive  LECs  are  impaired  without  unbundled  access  to  the  HPFL  because  purchasing  a 

 stand-  alone  loop  would  be  too  costly  for  carriers  seeking  to  offer  a  broadband  service.  Whereas  in  the  Line  Sharing  Order,  the  focus  was  only  on  the  revenues  derived  from  an  individual 
 service,  our  focus  is  on  the  all  potential  revenues  derived  from  using  the  full  functionality  of  the  loop.  As  stated  above,  the  impairment  standard  we  adopt  today  considers  whether  all  potential 
 revenues  from  entering  a  market  exceed  the  costs  of  entry,  taking  into  account  consideration  of 

 759  Line  Sharing  Order,  14  FCC  Rcd  at  20931-  38,  paras.  38-  53. 
 760  USTA,  290  F.  3d  at  429  (citing  Iowa  Utils.  Bd.,  525  U.  S.  at  386-  88).  The  D.  C.  Circuit  also  cautioned  the 
 Commission  against  imposing  the  costs  of  unbundling  if  doing  so  would  not  bring  on  a  significant  enhancement  of  competition.  Id. 

 761  Id.  at  429. 
 762  Id.  at  427,  429. 
 763  Line  Sharing  Order,  14  FCC  Rcd  at  20932-  35,  paras.  39-  43. 
 764  Id.  at  20936,  para.  48. 
 765  Id.  at  20938,  para.  53. 
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 any  advantages  a  new  entrant  may  have.  766  Thus,  in  the  instant  case,  we  take  into  the  account  the  fact  that  there  are  a  number  of  services  that  can  be  provided  over  the  stand-  alone  loop,  including 
 voice,  voice  over  xDSL  (i.  e.,  VoDSL),  data,  and  video  services.  In  so  doing,  we  conclude  that  the  increased  operational  and  economic  costs  of  a  stand-  alone  loop  (including  costs  associated 
 with  the  development  of  marketing,  billing,  and  customer  care  infrastructure)  are  offset  by  the  increased  revenue  opportunities  afforded  by  the  whole  loop. 

 259.  Moreover,  we  can  no  longer  find  that  competitive  LECs  are  unable  to  obtain  the  HFPL  from  other  competitive  LECs  through  line  splitting.  For  example,  the  largest  non-incumbent 
 LEC  provider  of  xDSL  service,  Covad,  recently  announced  plans  to  offer  ADSL  service  to  more  of  AT&  Ts  50  million  consumer  customers  through  line  splitting.  767  In 
 addition,  in  the  1999  Line  Sharing  Order,  the  Commission  relied  on  the  marketplace  conditions  present  at  the  time  to  justify,  at  least  partially,  its  decision  to  unbundle  the  HFPL.  Specifically, 
 the  Commission  noted  the  nascency  of  local  competition  and  the  lack  of  viable  alternatives  for  a  provider  of  broadband  services.  768  Although  we  recognize  that  these  circumstances  have  not 
 been  completely  reversed,  significant  strides  have  been  made  by  competitors  in  the  local  market.  Competitors  now  serve  more  than  three  times  the  number  of  voice  customers  that  were  served  in 
 1999.  769  Moreover,  the  conditions  for  further  competitive  entry  are  much  better  established  as  evidenced  by  the  Commissions  approval  of  43  section  271  applications,  which  requires  the 
 Commission  to  find  that  the  local  telephone  market  is  open  to  competition  in  a  particular  state,  since  1999.  770  Since  some  incumbent  LECs  have  thus  far  refused  to  provide  xDSL  service  to 
 customers  that  obtain  voice  service  from  a  competitive  LEC,  by  necessity,  any  of  the  over  11  million  voice  customers  served  by  competitive  LECs  who  seek  xDSL  service  would  have  to 
 obtain  that  service  from  a  competing  carrier.  771 

 766  See  supra  para.  84. 
 767  See  Covad  Communications,  AT&  T  and  Covad  Extend  Residential  DSL  Relationship,  Press  Release  (dated  Jan. 
 6,  2003)  <http://  www.  covad.  com/  companyinfo/  pressroom/  pr_  2003/  010603_  press.  shtml>  (stating  that  this  agreement  will  enable  more  of  AT&  Ts  50  million  consumer  customers  to  obtain  xDSL  service  through  Covads 

 network,  which  itself  covers  more  than  40  million  households  and  businesses  nationwide).  We  thus  do  not  find  credible  Covads  argument  that  the  Commissions  previous  finding,  that  there  are  no  third-  party  alternatives  to  the 
 incumbent  LECs  HFPL,  remains  valid.  See  Covad  Comments  at  42. 
 768  See,  e.  g.,  Line  Sharing  Order,  14  FCC  Rcd  at  20938,  20939-  40,  paras.  53,  56. 

 769  See  Local  Telephone  Competition  December  2002  Report  at  Table  2  (comparing  3.  4  million  mass  market 
 customers  in  December  1999  with  over  11  million  mass  market  customers  in  June  2002).  We  also  note  that  several  voice  providers,  AT&  T  and  WorldCom,  subsequently  purchased  the  assets  of  two  former  data  LECs:  NorthPoint 

 and  Rhythms  NetConnections,  respectively.  See,  e.  g.,  WorldCom  Reply,  Reply  Declaration  of  Ian  Graham  (WorldCom  Graham  Reply  Decl.)  at  para.  1. 

 770  We  note  that  in  1999,  only  one  state,  New  York,  had  been  granted  section  271  authority.  Since  then,  the 
 Commission  has  approved  section  271  applications  in  42  other  states  (including  the  District  of  Columbia). 
 771  See  Local  Telephone  Competition  December  2002  Report  at  Table  2.  As  noted  by  WorldCom,  the  need  for  line 
 splitting  is  likely  to  grow  as  penetration  by  competitive  voice  providers  increases.  WorldCom  Comments  at  104. 
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 260.  We  find  that  allowing  competitive  LECs  unbundled  access  to  the  whole  loop  and  to  line  splitting  but  not  requiring  the  HFPL  to  be  separately  unbundled  creates  better  competitive 
 incentives  than  the  alternatives.  This  is  largely  due  to  the  difficulties  in  pricing  the  HFPL  as  a  separate  element.  As  we  explained  in  the  Line  Sharing  Order,  the  same  physical  loop  is  used  for 
 multiple  services,  and  there  is  no  single  correct  method  for  allocating  loop  costs  among  these  services  and  the  HFPL.  772  Pricing  the  HFPL  thus  creates  a  dilemma:  either  incumbent  LECs  are 
 allowed  to  over-  recover  their  loop  costs  by  fully  charging  for  both  the  HFPL  and  the  low  frequency  portion  of  the  loop,  or  competitive  LECs  are  allowed  to  purchase  the  HFPL  at  a  price 
 of  roughly  zero.  773  Following  our  pricing  rules,  most  states  did  the  latter.  774  The  result  is  that  competitive  LECs  purchasing  only  the  HFPL  have  an  irrational  cost  advantage  over  competitive 
 LECs  purchasing  the  whole  loop  and  over  the  incumbent  LECs.  In  contrast,  allowing  competitive  LECs  unbundled  access  to  the  whole  loop  and  to  line  splitting  but  not  requiring  the 
 HFPL  to  be  separately  unbundled  puts  competitive  LECs  using  only  the  HFPL  in  a  more  fair  competitive  position  with  respect  to  other  competitive  LECs  and  to  the  incumbent  LECs.  Each 
 carrier  faces  the  same  loop  costs  and,  it  if  wishes,  each  can  partner  with  another  carrier  to  provide  service  over  the  HFPL  alone  or  the  low  frequency  portion  of  the  loop  alone  as  it  wishes. 

 261.  We  expressly  reject  the  Commissions  earlier  finding  that  line  sharing  will  level  the  competitive  playing  field  .  .  .  .  775  In  fact,  rules  requiring  line  sharing  may  skew  competitive 
 LECs  incentives  toward  providing  a  broadband-  only  service  to  mass  market  consumers,  rather  than  a  voice-  only  service  or,  perhaps  more  importantly,  a  bundled  voice  and  xDSL  service 
 offering.  In  addition,  readopting  our  line  sharing  rules  on  a  permanent  basis  would  likely  discourage  innovative  arrangements  between  voice  and  data  competitive  LECs  and  greater 
 product  differentiation  between  the  incumbent  LECs  and  the  competitive  LECs  offerings.  We  find  that  such  results  would  run  counter  to  the  statutes  express  goal  of  encouraging  competition 
 and  innovation  in  all  telecommunications  markets. 
 262.  Furthermore,  in  vacating  the  Commissions  line  sharing  rules,  the  D.  C.  Circuit  found  that  the  Commission  failed  to  consider  the  relevance  of  broadband  competition  coming 

 from  cable  and,  to  a  lesser  extent,  satellite  providers.  776  The  Commission  staffs  High  Speed  Services  December  2002  Report  shows  that,  nationally,  cable  modem  service  is  the  most  widely 

 772  Line  Sharing  Order,  14  FCC  Rcd  at  20975,  para.  138;  see  also  Intercarrier  Compensation  NPRM,  16  FCC  Rcd 
 at  9625,  para.  39  (describing  generally  the  difficulties  associated  with  allocating  common  costs  among  services). 
 773  Line  Sharing  Order,  14  FCC  Rcd  at  20975,  para.  137. 

 774  See,  e.  g.,  Covad  Dec.  27,  2002  Ex  Parte  Letter  at  6  (noting  that  73%  of  the  states  in  which  Covad  does  business 
 have  approved  a  zero  rate  for  the  HFPL).  See  also  CALLS  Order,  15  FCC  Rcd  at  13001,  para.  98  (stating  that,  as  of  2000,  the  Commission  was  unaware  of  any  incumbent  LEC  allocating  any  loop  costs  to  ADSL  service). 

 775  Line  Sharing  Order,  14  FCC  Rcd  at  20930-  31,  para.  35. 
 776  USTA,  290  F.  3d  at  428. 
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 used  means  by  which  the  mass  market  obtains  broadband  service.  777  Indeed,  two  reports  show  that  the  gap  between  cable  modem  and  ADSL  subscribership  continues  to  widen.  778 
 263.  As  discussed  earlier,  the  Commission  also  has  acknowledged  the  important  broadband  potential  of  other  platforms  and  technologies,  such  as  third  generation  wireless, 
 satellite,  and  power  lines.  779  Although  cable  modems  lead  in  broadband  deployment  is  not  dispositive  in  our  impairment  analysis,  780  the  fact  that  broadband  service  is  actually  available 
 through  another  network  platform  and  may  potentially  be  available  through  additional  platforms  helps  alleviate  any  concern  that  competition  in  the  broadband  market  may  be  heavily  dependent 
 upon  unbundled  access  to  the  HFPL.  Indeed,  as  noted  by  Allegiance,  the  existence  of  some  measure  of  intermodal  alternatives  in  the  residential  market  lessens  the  benefits  of  unbundling.  781 
 Given  that  the  whole  loop  is  available,  on  an  unbundled  basis,  we  find  that  the  costs  of  unbundling  the  HFPL  outweigh  the  benefits  when  taking  into  account  the  skewed  entry 
 incentives  discussed  above.  Moreover,  we  anticipate  that  the  Commissions  decisions  in  this  Order  and  other  proceedings  will  encourage  the  deployment  of  new  technologies  providing  the 
 mass  market  with  even  more  broadband  options.  782 

 777  See  High  Speed  Services  December  2002  Report  at  Table  5  (noting  that  cable  modem  service  is  provided  over 
 nine  million  lines,  which  is  approximately  57%  of  all  high-  speed  lines). 
 778  Compare  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  High  Speed  Services  July 
 2002  Report  at  Table  5  (noting  that  the  difference  in  number  of  high-  speed  lines  served  by  cable  modem  service  and  ADSL  service  was  3.11  million  as  of  December  2001)  with  High  Speed  Services  December  2002  Report  at  Table  5 

 (noting  that  the  difference  in  number  of  high-  speed  lines  served  by  cable  modem  service  and  ADSL  service  was  4.07  million  as  of  June  2002). 

 779  See,  e.  g.,  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2877-  81,  paras.  79-  88. 
 780  See  supra  Part  V.  B.  (discussing  intermodal  alternatives  in  the  general  impairment  Part  of  this  Order). 
 781  See  Letter  from  Thomas  Jones,  Counsel  for  Allegiance,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos. 
 01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  13,  2003)  (Allegiance  Feb.  13,  2003  Ex  Parte  Letter). 
 782  Chairman  Powell  claims  that  our  decision  on  line  sharing  contains  some  compromises,  which,  he  contends,  are 
 improper.  Chairman  Powell  Statement  at  15-  16.  There  is  nothing  improper  about  our  decision.  The  Commission  is  composed  of  five  people,  each  of  whom  sometimes  has  a  different  view  of  the  right  answer.  When  that  occurs,  it  is 

 essential  to  work  together  to  find  common  ground,  or  else  the  agency  cannot  function.  Compromise  is  inherently  part  of  that  process,  and  good  public  policy  often  must  be[]  a  balanced  compromise  of  conflicting  values  and 
 judgments.  Separate  Statement  of  Commissioner  Michael  K.  Powell,  Review  of  the  Commissions  Regulations  Governing  Attribution  of  Broadcast  and  Cable/  MDS  Interests,  Report  and  Order,  14  FCC  Rcd  12559,  12669 
 (1999);  see  also  Separate  Statement  of  Commissioner  Michael  K.  Powell,  1998  Biennial  Regulatory  Review  Spectrum  Aggregation  Limits  for  Wireless  Telecommunications  Carriers,  Report  and  Order,  15  FCC  Rcd.  9219, 
 9296-  97  (1999)  (  Well,  this  time  we  are  not  doing  much  to  modify  or  eliminate  the  rule  and  I  do  not  agree  with  all  of  the  findings  and  competitive  analysis  in  the  item.  .  .  .  Most  importantly,  in  the  spirit  of  compromise,  the  item 
 recognizes  three  things  that  I  find  somewhat  comforting  in  my  decision  today  to  support  the  item.).  In  fact,  compromise  .  .  .  is  within  the  Commissions  purview,  Interstate  Natural  Gas  Assn  v.  FERC,  285  F.  3d  18,  36 
 (D.  C.  Cir.  2002),  so  long  as  an  agency  articulate[  s]  a  satisfactory  explanation  for  its  action  including  a  rational  connection  between  the  facts  found  and  the  choice  made.  Assn  of  American  Railroads  v.  Surface  Transp.  Bd.,  161 
 F.  3d  58,  66  (D.  C.  Cir.  1998)  (quoting  Michigan  Consol.  Gas  Co.  v.  FERC,  883  F.  2d  117,  120-  21  (D.  C.  Cir.  1989))  (continued.) 
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 264.  Line  Sharing  Transition.  We  recognize  that  a  number  of  competitive  LECs  have  relied  on  the  existence  of  line  sharing  to  provide  broadband  service  to  end  users  since  the 
 adoption  of  the  Line  Sharing  Order.  These  carriers  have  built  internal  systems  to  order  the  HFPL  from  incumbent  LECs  and  have  designed  products  that  depend  on  line  sharing  as  an  input. 
 In  order  to  ensure  that  these  carriers  have  adequate  time  to  implement  new  internal  processes  and  procedures,  design  new  product  offerings,  and  negotiate  new  arrangements  with  incumbent 
 LECs  to  replace  line  sharing,  we  adopt  a  three-  year  transition  period  for  new  line  sharing  arrangements  of  requesting  carriers.  783  In  addition,  until  the  next  biennial  review,  a  proceeding 
 that  will  commence  in  2004,  we  grandfather  all  existing  line  sharing  arrangements  unless  the  respective  competitive  LEC,  or  its  successor  or  assign,  discontinues  providing  xDSL  service  to 

 (Continued  from  previous  page) 
 (quotation  marks  omitted).  Here,  we  have  offered  a  detailed  justification  of  our  actions.  Specifically,  as  discussed,  the  Commissions  previous  decision  to  require  line  sharing  was  unequivocally  vacated  by  the  D.  C.  Circuit;  the 

 Commissions  earlier  assessment  of  costs  and  revenues  from  the  local  loop  failed  to  consider  all  potential  revenues;  competitive  LECs  are  now  able  to  obtain  the  HFPL  from  other  competitive  LECs  through  line  splitting;  the 
 Commissions  previous  line  sharing  rule  created  warped  incentives,  because  there  is  no  single  correct  method  for  allocating  the  costs  attributable  to  the  HFPL;  and  cable  television  providers,  who  are  not  subject  to  line  sharing 
 obligations,  serve  a  majority  of  the  current  residential  broadband  customers,  while  incumbent  LECs  have  only  a  fraction  of  this  market  share. 

 783  In  response  to  the  transition  mechanism  for  line  sharing  voted  on  February  20th,  the  dissent  raised  some 
 concerns  regarding  aspects  of  the  transition  for  existing  customers  that  had  not  been  previously  discussed.  Separate  Statement  of  Commissioner  Kathleen  Q.  Abernathy,  Review  of  the  Section  251  Unbundling  Obligations  of 

 Incumbent  Local  Exchange  Carriers,  Report  and  Order  and  Order  on  Remand  and  Further  Notice  of  Proposed  Rulemaking,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  FCC  03-  36  (rel.  Feb.  20,  2003)  (  I  am  also  troubled  by  the 
 majoritys  decision  to  establish  a  three-  year  transition  period  for  the  elimination  of  line  sharing.  I  believe  that  the  majority  should  own  up  to  the  fact  that,  by  cutting  off  data  LECs  access  to  line  sharing,  it  has  shut  down  residential 
 broadband  competition  over  the  copper  loop.  Any  talk  of  a  glide  path  is  fanciful,  because,  in  all  likelihood,  there  will  regrettably  be  no  providers  left  to  participate  in  a  transition  three  years  from  now.);  Separate  Statement  of 
 Chairman  Michael  K.  Powell,  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers,  Report  and  Order  and  Order  on  Remand  and  Further  Notice  of  Proposed  Rulemaking,  CC  Docket  Nos. 
 01-  338,  96-  98,  98-  147,  FCC  03-  36  (rel.  Feb.  20,  2003)  (  By  some  estimates,  40%  of  DSL  providers  use  line  shared  inputs.  The  decision  to  kill  off  this  element  and  replace  it  with  a  transition  of  higher  wholesale  prices  will  lead  quite 
 quickly  to  higher  retail  prices  for  broadband  consumers  .  .  .).  As  the  Commission  has  concluded  in  other  contexts,  some  of  those  concerns  were  well  thought  out  and  prompted  the  majority  to  rethink  its  position  and  further  explain 
 its  rationale.  Those  steps  improved  this  Order  --  and  in  turn  resulted  in  a  higher  quality  product  for  the  American  people.  At  the  end  of  the  day  that  should  be  the  goal  of  all  the  Commissioners.  Joint  Statement  of  Chairman 
 Michael  Powell  and  Commissioner  Kathleen  Q.  Abernathy,  Amendment  of  Parts  2  and  25  of  the  Commissions  Rules  to  Permit  Operation  of  NGSO  FSS  Systems  Co-  Frequency  with  GSO  and  Terrestrial  Systems  in  the  Ku-  Band 
 Frequency  Range,  ET  Docket  No.  98-  206,  RM-  9147,  RM-  9245,  Memorandum  Opinion  and  Order  and  Second  Report  and  Order,  17  FCC  Rcd  9614,  9807  (2002)  (Joint  Statement  of  Chairman  Powell  and  Commissioner 
 Abernathy  on  Northpoint).  Those  concerns  prompted  the  majority  to  address  the  status  of  existing  customers  and  further  explain  its  rationale.  The  interim  grandfathering  rule  we  adopted  improved  this  Order,  responds  to  the 
 dissenters  call  for  the  need  to  strengthen  the  glide  path  we  set  forth  on  February  20th,  and  further  ameliorates  the  immediate  impact  of  our  decision  on  retail  prices  for  broadband  consumers.  In  addition,  immediate  change  of 
 existing  service  may  be  unnecessary  in  light  of  frequent  broadband  customer  churn  and  our  effort  to  reevaluate  the  extent  that  grandfathered  customers  remain  prior  to  the  end  of  the  three-  year  transition  in  the  context  of  our  next 
 biennial  review.  While  ideally  we  would  engage  in  the  dialogue  at  an  earlier  stage,  continuous  improvement  of  our  items  is  the  right  thing  to  do.  See  id;  see  also  infra  note  1396. 
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 that  particular  end-  user  customer.  During  this  interim  period,  we  direct  incumbent  LECs  to  charge  competitive  LECs  the  same  price  for  access  to  the  HFPL  for  those  grandfathered 
 customers  that  they  charged  prior  to  the  effective  date  of  this  Order.  Consistent  with  our  stated  policy  goal  of  preventing  harm  to  consumers  caused  by  a  discontinuance  of  service,  we  conclude 
 that  establishing  a  grandfathering  rule  is  necessary  to  prevent  consumers  who  currently  rely  on  line  sharing  from  losing  their  broadband  service.  784  This  interim  grandfathering  rule  will  help 
 alleviate  the  impact  of  such  a  significant  rule  change  on  end-  user  customers.  785  Consistent  with  our  findings  set  forth  above  in  Part  V.  E,  if  a  decision  taken  pursuant  to  state  law  after  this  Order 
 becomes  effective  were  to  require  line  sharing  obligations,  any  party  that  believes  such  decision  is  inconsistent  with  the  limits  of  section  251(  d)(  3)(  B)  and  (C)  may  seek  a  declaratory  ruling  from 
 this  Commission.  786 
 265.  The  three-  year  transition  period  for  new  line  sharing  arrangements  will  work  as  follows.  During  the  first  year,  which  begins  on  the  effective  date  of  this  Order,  competitive 

 LECs  may  continue  to  obtain  new  line  sharing  customers  through  the  use  of  the  HFPL  at  25  percent  of  the  state-  approved  recurring  rates  or  the  agreed-  upon  recurring  rates  in  existing 
 interconnection  agreements  for  stand-  alone  copper  loops  for  that  particular  location.  787  During  the  second  year,  the  recurring  charge  for  such  access  for  those  customers  will  increase  to  50 

 784  See  e.  spire  Application  to  Discontinue  Domestic  and  International  Telecommunications  Services,  Order,  Comp. 
 File  No.  592,  17  FCC  Rcd  14785,  para.  1  (WCB  2002)  (denying  application  to  discontinue  telecommunications  service  because  such  action  would  disrupt  service  to  consumers);  Rhythms  Link  Inc.  Section  63.71  Application  to 

 Discontinue  Domestic  Telecommunications  Services,  Order,  NSD  File  No.  W-  P-  D-  517,  16  FCC  Rcd  17024,  17025,  paras.  4,  13  (CCB  2001)  (granting  application  to  discontinue  telecommunications  service  after  determining  that 
 Rhythms  gave  proper  notice  to  its  customers,  which  resulted  in  most  affected  customers  being  migrated  to  other  carriers  without  a  service  interruption). 

 785  We  note  that  both  Qwest  and  Verizon  suggested  some  form  of  grandfathering  line  sharing  customers.  For 
 example,  Qwest  proposed  grandfathering  existing  locations  for  line  sharing.  Qwest  Comments  at  44-  45.  Although  Qwests  proposal  was  premised  on  the  D.  C.  Circuit  upholding  the  Commissions  line  sharing  rules,  we  find  that  a 

 modification  of  this  proposal  to  address  current  marketplace  conditions  is  appropriate.  Id.  at  45  n.  115.  Namely,  instead  of  permitting  competitive  LECs  to  continue  obtaining  unbundled  access  to  the  HFPL  at  all  current  locations, 
 which  presumably  would  allow  requesting  carriers  to  add  new  subscribers  served  out  of  those  locations,  we  limit  this  proposal  to  existing  customers  only.  Even  after  issuance  of  the  USTA  decision,  Verizon  suggested 
 grandfathering  existing  competitive  LEC  xDSL  customers  served  over  line  shared  loops.  See  Letter  from  William  P.  Barr,  Verizon,  to  Michael  Powell,  Chairman,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  5  (filed  Jan.  17, 
 2003)  (Verizon  Jan.  17,  2003  Ex  Parte  Letter)  (noting  that  [  a]  s  a  purely  transitional  measure  .  .  .  existing  [line  sharing]  customers  could  be  grandfathered  for  some  period  of  time.).  As  a  practical  matter,  because  of  the  churn 
 rates  associated  with  this  industry,  we  find  that  our  grandfathering  requirement  described  above  is  not  without  end. 
 786  See  supra  Part  V.  E  for  our  discussion  of  the  role  of  the  states. 

 787  We  determine  that  it  is  appropriate  to  permit  requesting  carriers  to  continue  obtaining  new  customers  during  the 
 first  year  of  the  transition.  This  augmented  customer  base  will  enable  requesting  carriers,  especially  data  LECs,  to  continue  their  day-  to-  day  operations  while  modifying  their  business  plans  and  working  to  preserve  access 

 arrangements  with  incumbent  LECs.  See  Letter  From  Jason  D.  Oxman,  Vice  President  and  Assistant  General  Counsel,  Covad,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (Covad  Feb. 
 24,  2003  Ex  Parte  Letter). 
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 percent  of  the  state-  approved  recurring  rate  or  the  agreed-  upon  recurring  rate  in  existing  interconnection  agreements  for  a  stand-  alone  copper  loop  for  that  particular  location.  Finally,  in 
 the  last  year  of  the  transition  period,  the  competitive  LECs  recurring  charge  for  access  to  the  HFPL  for  those  customers  obtained  during  the  first  year  after  release  of  this  Order  will  increase 
 to  75  percent  of  the  state-  approved  recurring  rate  or  the  agreed-  upon  recurring  rate  for  a  stand-alone  loop  for  that  location.  788  After  the  transition  period,  any  new  customer  must  be  served 
 through  a  line  splitting  arrangement,  through  use  of  the  stand-  alone  copper  loop,  or  through  an  arrangement  that  a  competitive  LEC  has  negotiated  with  the  incumbent  LEC  to  replace  line 
 sharing.  789  We  strongly  encourage  the  parties  to  commence  negotiations  as  soon  as  possible  so  that  a  long-  term  arrangement  is  reached  and  reliance  on  the  shorter-  term  default  mechanism  that 
 we  describe  above  is  unnecessary. 
 266.  The  purpose  of  this  transition  is  to  minimize  disruption  to  the  customers  that  obtain  xDSL  service  through  line  shared  loops  and  to  provide  a  reasonable  glide  path  to 

 competitive  LECs  currently  availing  themselves  of  this  UNE.  The  Commission  has  established  transition  periods  of  this  length  in  the  past.  For  example,  in  establishing  a  three-  year  interim 
 intercarrier  compensation  regime  for  ISP-  bound  traffic,  the  Commission  stated  that  it  would  be  prudent  to  avoid  a  flash  cut  to  a  new  compensation  regime  that  would  upset  the  legitimate 
 business  expectations  of  carriers  and  their  customers.  790  We  find  that  a  similar  approach  is  required  here.  It  is  entirely  appropriate  to  fashion  a  transition  period  of  sufficient  length  to 
 enable  competitive  LECs  to  move  their  customers  to  alternative  arrangements  and  modify  their  business  practices  and  operations  going  forward.  791 

 267.  As  one  commenter  noted  in  describing  the  Commissions  authority  to  establish  interim  rates  for  unbundled  local  circuit  switching,  in  combination  with  other  elements,  inherent 
 in  the  Commissions  authority  to  establish  transitional  rules  is  its  authority  to  establish  transitional  rates.  792  Section  201(  b)  gives  the  Commission  broad  authority  to  adopt  the  transition 
 mechanism  set  forth  in  this  Part  and  nothing  in  that  provision  limits  our  authority  with  respect  to 

 788  After  this  third  year,  competitive  LECs  will  not  have  unbundled  access  to  the  HFPL,  pursuant  to  section 
 251(  c)(  3),  to  provide  those  customers  obtained  after  the  Order  became  effective  xDSL  service  over  line  shared  loops.  That  is,  after  this  third  year,  the  recurring  charge  for  the  HFPL  increases  to  100%  of  the  recurring  charge  for 

 a  stand-  alone  loop. 
 789  By  new  customers,  we  mean  any  customer  obtained  during  the  three-  year  transition  period  or  after  the  three-year 
 transition  period.  New  customers  do  not  include,  however,  those  line  sharing  customers  who  have  been  grandfathered,  as  described  above  in  para.  264. 

 790  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996;  Intercarrier 
 Compensation  for  ISP-  Bound  Traffic,  CC  Docket  Nos.  96-  98,  99-  68,  Order  on  Remand  and  Report  and  Order,  16  FCC  Rcd  9151,  9186-  87,  paras.  77-  78  (2001)  (ISP  Remand  Order). 

 791  See,  e.  g.,  Letter  from  Susan  Guyer  and  Michael  Glover,  Verizon,  to  William  F.  Maher,  Chief,  Wireline 
 Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4  (filed  Jan.  10,  2003). 
 792  See  Letter  from  Gary  L.  Phillips,  Counsel  for  SBC,  to  Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  No.  01- 
 338  at  2  (filed  Dec.  19,  2002)  (SBC  Dec.  19,  2002  Ex  Parte  Letter)  (citing  the  Commissions  ISP  Remand  Order). 
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 rates.  Indeed,  we  agree  with  those  commenters  that  contend  that  a  transitional  rate  is  often  the  most  effective  means  by  which  to  implement  a  glide  path  from  one  regulatory/  pricing  regime  to 
 another.  793  The  incremental  approach  we  adopt  here  will  encourage  requesting  carriers  either  to  migrate  their  customers  to  the  whole  loop  in  an  orderly  manner  or  to  reach  agreement,  if  it  is 
 desired,  with  the  incumbent  LEC  to  continue  access  to  the  HFPL  on  different  terms  and  conditions. 

 268.  In  order  to  implement  the  line  sharing  transition  plan  described  above,  we  find  that  it  is  necessary  to  reinstate  certain  rules  concerning  the  HFPL.  794  Specifically,  we  define  the 
 HFPL  as  the  frequency  range  above  the  voiceband  on  a  copper  loop  facility  that  is  being  used  to  carry  analog  circuit-  switched  voiceband  transmissions.  795  The  features,  functions,  and 
 capabilities  of  the  HFPL  network  element  are  those  that  establish  a  complete  transmission  path  on  the  frequency  range  above  the  one  used  to  carry  analog  circuit-  switched  voice  transmissions 
 between  the  incumbent  LECs  distribution  frame  (or  its  equivalent)  in  its  central  office  and  the  demarcation  point  at  the  customers  premises,  and  includes  any  inside  wire  owned  by  the 
 incumbent  LEC.  Incumbent  LECs  must  condition  loops  to  enable  requesting  carriers  to  access  the  HFPL.  796  Finally,  incumbent  LECs  must  provide  physical  loop  test  access  points  on  a 
 nondiscriminatory  basis  for  the  purposes  of  loop  testing,  maintenance,  and  repair  activities.  797 
 269.  In  addition,  incumbent  LECs  are  only  required  to  provide  access  to  the  HFPL  if  the  incumbent  LEC  is  providing,  and  continues  to  provide,  analog  circuit-  switched  voiceband 

 services  on  the  particular  loop  over  which  the  requesting  carriers  seeks  access  to  provide  ADSL  service.  798  In  the  event  that  the  customer  ceases  purchasing  voice  service  from  the  incumbent 

 793  Id. 
 794  To  be  clear,  although  the  D.  C.  Circuit  referred  broadly  to  vacating  the  Line  Sharing  Order,  it  did  not  address 
 the  Commissions  spectrum  management  rules  or  that  portion  of  the  Order  in  its  decision.  Consequently,  the  Commission  finds  that  these  rules  were  unaffected  by  the  USTA  decision  and  therefore  do  not  need  to  be  readopted 

 because  they  remain  in  effect.  See,  e.  g.,  47  C.  F.  R.    51.230-.  233.  Finally,  we  find  no  reason  to  modify  these  rules  in  this  Order. 

 795  47  C.  F.  R.    51.319(  h)(  1);  Line  Sharing  Order,  14  FCC  Rcd  at  20926-  27,  para.  26. 
 796  Line  Sharing  Order,  14  FCC  Rcd  at  20952-  54,  paras.  83-  87;  47  C.  F.  R.    51.319(  h)(  5).  Included  among  the 
 incumbent  LECs  conditioning  requirements  that  we  reinstate  is  the  requirement  that,  after  determining  that  conditioning  a  loop  will  significantly  degrade  the  voiceband  service  offered  by  the  incumbent  LEC  on  that  loop,  the 

 incumbent  LEC  must  either  locate  another  loop  and  migrate  its  voice  service  to  that  loop  while  providing  the  requesting  carrier  with  access  to  the  HFPL,  or  demonstrate  to  the  relevant  state  commission  that  the  loop  cannot  be 
 conditioned  without  significantly  degrading  the  voiceband  service  and  no  alternative  loop  exists  to  which  the  customers  voiceband  service  can  be  moved  to  enable  line  sharing.  See  47  C.  F.  R.    51.319(  h)(  5)(  ii);  see  also  infra 
 Part  VII.  D  (discussing  modifications  to  the  existing  network). 
 797  See  Line  Sharing  Order,  14  FCC  Rcd  at  20964-  67,  paras.  111-  18;  47  C.  F.  R.    51.319(  h)(  7). 

 798  Line  Sharing  Order,  14  FCC  Rcd  at  20947,  para.  72;  47  C.  F.  R.    51.319(  h)(  3).  Finally,  we  also  readopt  our 
 finding  contained  in  the  Line  Sharing  Order  that  if  an  incumbent  LEC  disconnects  a  customers  voice  service  in  accordance  with  applicable  law,  then  the  competitive  LEC  must  purchase  the  entire  loop  to  continue  providing  that 

 customer  with  xDSL  service.  Line  Sharing  Order,  14  FCC  Rcd  at  20947-  48,  para.  73. 
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 LEC,  either  the  new  voice  provider  or  the  xDSL  provider,  or  both,  must  purchase  the  full  stand-alone  loop  to  continue  providing  xDSL  service.  Finally,  as  the  Commission  found  before, 
 incumbent  LECs  may  also  maintain  control  over  the  loop  and  splitter  equipment  and  functions.  799 
 270.  Low  Frequency  Portion  of  the  Loop.  We  disagree  with  CompTel  that  we  should  separately  unbundle  the  low  frequency  portion  of  the  loop,  which  is  the  portion  of  the  copper 

 local  loop  used  to  transmit  voice  signals.  800  We  conclude  that  unbundling  the  low  frequency  portion  of  the  loop  is  not  necessary  to  address  the  impairment  faced  by  requesting  carriers 
 because  we  continue  (through  our  line  splitting  rules)  to  permit  a  narrowband  service-  only  competitive  LEC  to  take  full  advantage  of  an  unbundled  loops  capabilities  by  partnering  with  a 
 second  competitive  LEC  that  will  offer  xDSL  service. 
 271.  Retirement  of  Copper  Loops  and  Copper  Subloops.  As  we  note  below  in  our  discussion  of  FTTH  loops,  we  decline  to  prohibit  incumbent  LECs  from  retiring  copper  loops  or 

 copper  subloops  that  they  have  replaced  with  fiber.  Instead,  we  reiterate  that  our  section  251(  c)(  5)  network  modification  disclosure  requirements  (with  the  minor  modifications  also 
 noted  below  in  that  same  discussion)  apply  to  the  retirement  of  copper  loops  and  copper  subloops.  801  In  addition,  any  state  requirements  that  currently  apply  to  an  incumbent  LECs 
 copper  loop  or  copper  subloop  retirement  practices  will  continue  to  apply. 
 (b)  Next-  Generation  Networks 
 272.  Although  we  require  the  unbundling  of  legacy  technology  used  over  hybrid  loops,  we  decline  to  attach  unbundling  requirements  to  the  next-  generation  network  capabilities  of 

 fiber-  based  local  loops,  i.  e.,  those  loops  that  make  use  of  fiber  optic  cables  and  electronic  or  optical  equipment  capable  of  supporting  truly  broadband  transmission  capabilities  based  on  the 
 analysis  described  earlier  in  this  subsection.  We  expect  that  this  decision  to  refrain  from  unbundling  incumbent  LEC  next-  generation  networks    which  is  based  on  our  evaluation  of  an 
 extensive  record  developed  over  more  than  two  years    will  stimulate  facilities-  based  deployment  in  two  ways.  First,  with  the  certainty  that  their  fiber  optic  and  packet-  based 
 networks  will  remain  free  of  unbundling  requirements,  incumbent  LECs  will  have  the  opportunity  to  expand  their  deployment  of  these  networks,  enter  new  lines  of  business,  and  reap 
 the  rewards  of  delivering  broadband  services  to  the  mass  market.  Thus,  we  conclude  that  relieving  incumbent  LECs  from  unbundling  requirements  for  these  networks  will  promote 
 investment  in,  and  deployment  of,  next-  generation  networks.  Second,  with  the  knowledge  that  incumbent  LEC  next-  generation  networks  will  not  be  available  on  an  unbundled  basis, 
 competitive  LECs  will  need  to  continue  to  seek  innovative  network  access  options  to  serve  end  users  and  to  fully  compete  against  incumbent  LECs  in  the  mass  market.  The  end  result  is  that 

 799  Id.  at  20949-  50,  paras.  76-  79. 
 800  CompTel  Comments  at  43-  45. 
 801  See  47  U.  S.  C.    251(  c)(  5)  (specifying  network  disclosure  requirements);  47  C.  F.  R.    51.324-.  335. 
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 consumers  will  benefit  from  this  race  to  build  next  generation  networks  and  the  increased  competition  in  the  delivery  of  broadband  services. 
 (i)  FTTH  Loops 
 273.  We  conclude  that  requesting  carriers  are  not  impaired  without  access  to  FTTH  loops,  802  although  we  find  that  the  level  of  impairment  varies  to  some  degree  depending  on 

 whether  such  loop  is  a  new  loop  or  a  replacement  of  a  pre-  existing  copper  loop.  803  With  a  limited  exception  for  narrowband  services,  our  conclusion  applies  to  FTTH  loops  deployed  by 
 incumbent  LECs  in  both  new  construction  and  overbuild  situations.  Only  in  fiber  loop  overbuild  situations  where  the  incumbent  LEC  elects  to  retire  existing  copper  loops  must  the  incumbent 
 LEC  offer  unbundled  access  to  those  fiber  loops,  and  in  such  cases  the  fiber  loops  must  be  unbundled  for  narrowband  services  only.  Incumbent  LECs  do  not  have  to  offer  unbundled 
 access  to  newly  deployed  or  greenfield  fiber  loops. 
 274.  FTTH  loop  deployment  is  still  in  its  infancy.  Corning  notes,  for  example,  that  only  47  communities  throughout  the  nation  currently  enjoy  widespread  FTTH  deployment.  804 

 The  record  demonstrates  that  mass  market  FTTH  loops  are  used  almost  entirely  for  providing  broadband  services  (or  broadband  in  conjunction  with  narrowband  services)  at  this  time,  and  that 
 carriers  are  not  deploying  such  loops  to  provide  narrowband  services  alone.  805  The  record  further  indicates  that  FTTH  loops  display  several  economic  and  operational  entry  barriers  in  common 
 with  copper  loops    that  is,  the  costs  of  FTTH  loops  are  both  fixed  and  sunk,  and  deployment  is  expensive.  806  The  record  also  shows,  however,  that  the  potential  rewards  from  FTTH 
 deployment  are  significant.  Corning  notes,  for  example,  that  carriers  will  be  able  to  earn  a  substantially  greater  return  on  their  FTTH  investment  by  offering  voice,  data,  video,  and  other 

 802  By  FTTH  loop,  we  mean  a  local  loop  consisting  entirely  of  fiber  optic  cable  (and  the  attached  electronics), 
 whether  lit  or  dark  fiber,  that  connects  a  customers  premises  with  a  wire  center  (i.  e.,  from  the  demarcation  point  at  the  customers  premises  to  the  central  office).  See  Corning  Nov.  20,  2002  Ex  Parte  Letter  at  2  (submitting  proposed 

 definition  of  FTTH  loop). 
 803  Alcatel  Comments  at  15-  16;  Corning  Comments  at  22-  26  (arguing  that  no  impairment  exists  for  FTTH  loops); 
 Corning  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  1  at  17-  21,  78-  89,  Attach.  2  at  7-  10;  HTBC  Comments  at  40-  41.  We  therefore  disagree  with  those  parties  who  argue  we  should  require  unbundling  of  FTTH  loops.  See  ALTS  et  al. 

 Comments  at  82  (contending  that  the  Commission  should  require  incumbent  LECs  to  provide  unbundled  access  to  broadband  fiber);  CompTel  Comments  at  40-  42;  Covad  Comments  at  54-  58  (arguing  that  the  Commission  should 
 unbundle  fiber  loops). 
 804  Letter  from  Timothy  Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 01-  338  at  5  (filed  Dec.  20,  2002)  (Corning  Dec.  20,  2002  FTTH  Ex  Parte  Letter). 
 805  Deployment  of  FTTH  loop  plant  enables  a  carrier  to  provide  both  narrowband  voice  and  broadband  services   
 in  essence,  voice  telephony  becomes  an  application  provided  over  an  integrated  network.  See  Corning  Comments  at  2  (asserting  that  FTTH  allows  carriers  to  provide  narrowband  voice  service,  full  motion  video,  and  high  speed  data 

 transfers  simultaneously),  16-  18;  FTTH  Council  Comments  at  1;  HTBC  Comments  at  6-  8,  14-  17. 
 806  See  Corning  Nov.  20,  2002  Ex  Parte  Letter,  Attach.  at  7-  10  (estimating  costs  involved  with  deploying  FTTH 
 loops). 
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 services.  807  Thus,  we  find  that  the  substantial  revenue  opportunities  posed  by  FTTH  deployment  help  ameliorate  many  of  the  entry  barriers  presented  by  the  costs  and  scale  economies. 
 275.  With  respect  to  new  FTTH  deployments  (i.  e.,  so-  called  greenfield  construction  projects),  we  note  that  the  entry  barriers  appear  to  be  largely  the  same  for  both  incumbent  and 
 competitive  LECs    that  is,  both  incumbent  and  competitive  carriers  must  negotiate  rights-  of-way,  respond  to  bid  requests  for  new  housing  developments,  obtain  fiber  optic  cabling  and  other 
 materials,  develop  deployment  plans,  and  implement  construction  programs.  808  Indeed,  the  record  indicates  that  competitive  LECs  are  currently  leading  the  overall  deployment  of  FTTH 
 loops  after  having  constructed  some  two-  thirds  or  more  of  the  FTTH  loops  throughout  the  nation.  809  Competitive  LECs  active  participation  in  deploying  FTTH  loops  demonstrates  that 
 carriers  are  not  impaired  if  we  refrain  from  unbundling  these  loops.  810  Thus,  we  conclude  that  incumbent  LECs  do  not  have  a  first-  mover  advantage  that  would  compound  any  barriers  to  entry 
 in  this  situation.  In  addition,  we  conclude  that  incumbent  LECs  have  no  advantages  concerning  the  sunk  costs  of  greenfield  FTTH  loops    both  incumbent  LECs  and  competitive  LECs  are 
 faced  with  the  same  issue  in  their  deployment  of  such  loops.  As  a  result  of  our  analysis,  we  do  not  require  incumbent  LECs  to  provide  unbundled  access  to  new  FTTH  loops  for  either 
 narrowband  or  broadband  services.  811 

 807  Corning  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  33.  Corning  indicates  that,  through  FTTH  deployment, 
 carriers  could  reasonably  earn  a  return  of  $33  per  subscriber,  compared  to  $18  for  ADSL  deployment  and  $21  for  cable  modem  service.  Id. 

 808  Some  parties  contend  that  competitive  LECs  actually  have  a  competitive  advantage  in  deploying  FTTH  loops 
 because  their  labor  costs  are  generally  lower.  See  Corning  Comments  at  4;  Corning  Jan.  29,  2003  Ex  Parte  Letter  at  19;  Corning  Nov.  20,  2002  Ex  Parte  Letter,  Attach.  2  at  10.  In  addition,  some  parties  argue  that  FTTH  loop  costs 

 are  declining  because  of  the  cost  of  the  necessary  attached  electronics  is  dropping.  Corning  Comments  at  13,  n.  33.  BellSouth  notes  that  competitive  LECs  have  a  mandatory  right  to  access  the  rights-  of-  way  of  [incumbent  LECs] 
 and  presumptive  rights  to  access  other  utility  rights-  of-  way.  BellSouth  Comments  at  68-  69. 
 809  Corning  Comments  at  5;  HTBC  Comments  at  42  (asserting  that  competitive  LECs  and  incumbent  LECs  are  on 
 equal  footing  for  deploying  FTTH  loops);  Corning  Reply  at  12;  Letter  from  Jeffrey  S.  Linder,  Counsel  for  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Attach  1  at  2  (filed  Feb.  6,  2003)  (Corning  Feb.  6, 

 2003  Ex  Parte  Letter);  Letter  from  Larry  Aiello,  President  and  Chief  Executive  Officer,  Corning  Cable  Systems,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  3  (filed  Feb.  3,  2003)  (noting  that  competitive  LECs 
 have  deployed  68%  of  the  existing  FTTH  deployment  to  date)  (Corning  Feb.  3,  2003  Ex  Parte  Letter);  Letter  from  Derek  R.  Khlopin,  HTBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  4  (filed  Jan.  14,  2003) 
 (arguing  that  competitive  LECs  are  not  impaired  without  access  to  FTTH  loops)  (HTBC  Jan.  14,  2003  Ex  Parte  Letter);  Letter  from  Timothy  J.  Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  No.  01-  338  ,  Attach.  2  at  7  (filed  Jan.  29,  2003)  (Corning  Jan.  29,  2003  FTTH  Ex  Parte  Letter).  Corning  estimates  that  competitive  LECs  have  deployed  FTTH  loops  to  44,890  homes,  that  small  incumbent  LECs  have 
 deployed  FTTH  loops  to  3,600  homes,  that  the  BOCs  have  deployed  FTTH  loops  to  some  400  homes,  and  that  municipalities  have  deployed  FTTH  loops  to  about  18,100  homes.  Corning  Jan.  29,  2003  FTTH  Ex  Parte  Letter, 
 Attach.  at  7. 
 810  Corning  Jan.  29,  2003  FTTH  Ex  Parte  Letter  at  6-  7. 

 811  By  FTTH  loop,  we  mean  a  loop  consisting  entirely  of  fiber  optic  cable  between  the  main  distribution  frame  (or 
 its  equivalent)  and  the  demarcation  point  at  the  customers  premises.  We  recognize  that  other  fiber-  in-  the-  loop  (continued.) 
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 276.  We  recognize  that  one  FTTH  deployment  scenario,  i.  e.,  overbuild  deployment  in  which  an  incumbent  LEC  constructs  fiber  transmission  facilities  parallel  to  or  in  replacement  of 
 its  existing  copper  plant,  merits  slightly  different  treatment  than  greenfield  FTTH  deployments.  Although  the  record  indicates  that  this  scenario  is  largely  theoretical,  at  least  today,  the  evidence 
 suggests  that  impairment  would  not  exist  for  two  reasons.  First,  as  with  greenfield  deployments,  competitive  and  incumbent  LECs  largely  face  the  same  obstacles  in  deploying  overbuild  FTTH 
 loops,  although  incumbent  LECs  still  enjoy  an  established  customer  base.  Both  competitive  LECs  and  incumbent  LECs  must  obtain  materials,  hire  the  necessary  labor  force,  and  construct 
 the  fiber  transmission  facilities.  Second,  we  note  that  the  revenue  opportunities  associated  with  deploying  any  type  of  FTTH  loop  are  far  greater  than  for  services  provided  over  copper  loops. 
 Besides  providing  narrowband  services  like  voice,  fax,  and  dial-  up  Internet  access,  competitive  LECs  could  also  deploy  a  wide-  array  of  video  and  other  broadband  applications  over  such  FTTH 
 loops.  812  In  fact,  broadband  platforms  enabled  by  the  deployment  of  FTTH  loops  will  likely  enable  a  variety  of  new  services  and  applications,  competing  directly  with  the  market-  leading 
 cable  broadband  offerings  and  the  broadband  offerings  potentially  provided  by  other  technological  platforms,  such  as  satellite  and  wireless,  thereby  weakening  the  case  for 
 unbundling.  Thus,  the  potential  rewards  for  deploying  overbuild  FTTH  loops  are  distinctly  greater  than  those  associated  with  deploying  copper  loops  and  thus  present  a  different  balance 
 when  weighed  against  the  barriers  to  entry. 
 277.  We  agree  with  Corning  and  Verizon,  however,  that  in  a  FTTH  overbuild  situation  we  must  ensure  continued  access  to  an  unbundled  transmission  path  suitable  for  providing 

 narrowband  services  to  customers  served  by  FTTH  loops.  813  The  record  indicates  that  deployment  of  overbuild  FTTH  loops  could  act  as  an  additional  obstacle  to  competitive  LECs 
 seeking  to  provide  certain  services  to  the  mass  market.  By  its  nature,  an  overbuild  FTTH  deployment  enables  an  incumbent  LEC  to  replace  and  ultimately  deny  access  to  the  already-existing 
 copper  loops  that  competitive  LECs  were  using  to  serve  mass  market  customers.  In  this  regard,  incumbent  LECs  potentially  have  an  entry  barrier  within  their  sole  control  (i.  e.,  the 
 decision  to  replace  pre-  existing  copper  loops  with  FTTH).  In  order  to  ensure  continued  narrowband  access  in  this  situation,  incumbent  LECs  have  the  option  to  either  (1)  keep  the 

 (Continued  from  previous  page) 
 network  architectures  exist,  such  as  fiber  to  the  curb  (FTTC),  fiber  to  the  node  (FTTN),  and  fiber  to  the  building  (FTTB).  See  Telcordia,  Inc.,  NOTES  ON  FIBER-  IN-  THE-  LOOP  (FITL),  SR-  Notes-  Series-  10,  Issue  1  at  5-  1 

 to  6-  17  (Jul.  2001).  Our  definition  of  FTTH  loops  excludes  such  intermediate  fiber  deployment  architectures.  For  purposes  of  our  unbundling  rules,  we  consider  any  loop  consisting  of  fiber  optic  and  copper  cable  to  be  a  hybrid 
 loop. 
 812  See  Corning  Comments  at  2;  HTBC  Comments  at  15-  16  (describing  services  that  can  be  offered  over  FTTH 
 loops);  CSMG  Study  at  10  (describing  key  revenue  drivers  for  FTTH  loops),  18-  24  (comparing  revenue  opportunities  for  xDSL-  based  networks  and  FTTH  networks);  Corning  Nov.  26,  2002  Ex  Parte  Letter  at  28. 

 813  Letter  from  Timothy  J.  Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  No.  01-  338  at  2  (filed  Feb.  5,  2003)  (Corning  Feb.  5,  2003  FTTH  Overbuild  Ex  Parte  Letter);  Verizon  Jan.  17,  2003  Ex  Parte  Letter  at  7  (asserting  that  incumbent  LECs  should  only  have  to  provide  unbundled  access  to  a  64 

 kbps  transmission  path  over  their  fiber  transmission  facilities). 
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 existing  copper  loop  connected  to  a  particular  customer  after  deploying  FTTH;  814  or  (2)  in  situations  where  the  incumbent  LEC  elects  to  retire  the  copper  loop,  it  must  provide  unbundled 
 access  to  a  64  kbps  transmission  path  over  its  FTTH  loop.  815  Under  the  first  option,  we  do  not  require  incumbent  LECs  to  incur  relief  and  rehabilitation  costs  for  that  loop  unless  a  competitive 
 LEC  requests  unbundled  access  to  it  and  such  loop  is  placed  back  into  service.  We  conclude  that  these  measures  counteract  any  obstacles  competitive  LECs  face  in  overbuild  FTTH  situations 
 much  like  other  provisions  of  the  Act  offset  certain  entry  barriers.  We  note  that  this  is  a  very  limited  requirement  intended  only  to  ensure  continued  access  to  a  local  loop  suitable  for 
 providing  narrowband  services  to  the  mass  market  in  situations  where  an  incumbent  LEC  has  deployed  overbuild  FTTH  and  elected  to  retire  the  pre-  existing  copper  loops. 

 278.  As  noted  above,  section  706  informs  our  policymaking  as  we  determine  what  unbundling  rules,  if  any,  should  apply  to  FTTH  loops.  816  All  parties  agree  that  FTTH  loops  meet 
 the  definition  of  advanced  telecommunications  capability,  817  and  so  we  determine  that  promoting  the  deployment  of  FTTH  loops  is  particularly  important  in  light  of  our  section  706  mandate. 
 Simply  put,  delivering  broadband  service  is  impossible  without  a  transmission  path  to  the  customers  premises  that  supports  broadband  capabilities.  While  copper  loops  enable  carriers  to 
 deliver  xDSL-  based  broadband  services,  FTTH  loops  significantly  enhance  the  broadband  capabilities  a  carrier  can  deliver  to  consumers.  Thus,  we  determine  that,  particularly  in  light  of  a 
 competitive  landscape  in  which  competitive  LECs  are  leading  the  deployment  of  FTTH,  removing  incumbent  LEC  unbundling  obligations  on  FTTH  loops  will  promote  their  deployment 
 of  the  network  infrastructure  necessary  to  provide  broadband  services  to  the  mass  market.  818 

 814  Corning  Feb.  5,  2003  FTTH  Overbuild  Ex  Parte  Letter  at  2  (proposing  policy  recommendations  related  to 
 overbuild  FTTH);  Corning  Feb.  6,  2003  Ex  Parte  Letter  at  5;  Letter  from  Timothy  J.  Regan,  Senior  Vice  President,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  2  (filed  Feb.  13,  2003)  (proposing 

 overbuild  FTTH  policies)  (Corning  Feb.  13,  2003  Ex  Parte  Letter);  Letter  from  Leonard  G.  Ray,  Government  Relations  Committee  Chairman,  FTTH  Council,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  2- 
 3  (filed  Feb.  13,  2003). 
 815  See  Letter  from  Timothy  J.  Regan,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338, 
 Attach.  3  at  1  (providing  key  definitions);  Verizon  Jan.  17,  2003  Ex  Parte  Letter  at  7  (asserting  that  incumbent  LECs  should  only  have  to  provide  unbundled  access  to  a  64  kbps  transmission  path  over  their  fiber  transmission 

 facilities).  A  key  part  of  the  HTBC  proposal  is  ensuring  that  competitive  LECs  maintain  access  to  all  existing  non-packet  loop  capabilities  over  hybrid  fiber/  copper  facilities.  Letter  from  Derek.  R.  Khlopin,  HTBC,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Attach.  1  at  1  (filed  Jan.  24,  2003)  (HTBC  Jan.  24,  2003  Khlopin  Ex  Parte  Letter).  As  an  example,  HTBC  states  that  DS-  1s  provided  over  TDM  facilities  would  remain  subject  to  a 
 Section  251  impairment  analysis.  Id. 
 816  Section  706(  a)  of  the  Telecommunications  Act  of  1996.  See  Corning  Comments  at  10-  11  (arguing  that  the 
 Commission  should  consider  section  706  in  crafting  its  unbundling  framework);  HTBC  Comments  at  43-  44. 
 817  See,  e.  g.,  Corning  Comments  at  2,  11-  13;  HTBC  Comments  at  5. 

 818  Corning  Comments  at  3,  10-  14;  SBC  Reply  at  55-  60;  Letter  from  Jeffrey  S.  Linder,  Counsel  for  Corning,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Attach.  at  6  (filed  Jan.  31,  2003)  (estimating  that  unbundling  relief  will  increase  FTTH  deployment  by  a  factor  of  6.2). 
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 279.  We  further  agree  with  Corning  that  our  FTTH  policy  adopted  herein  should  not  adversely  affect  competitive  LECs  for  several  reasons.  819  First,  competitive  LECs  have 
 demonstrated  that  they  can  self-  deploy  FTTH  loops  and  are  doing  so  at  this  time.  Second,  competitive  LECs  can  continue  to  use  resale  as  a  means  for  serving  mass  market  customers  after 
 incumbent  LECs  deploy  FTTH  loops.  Finally,  competitive  LECs  can  continue  to  have  unbundled  access  to  existing  copper  facilities,  to  the  extent  such  facilities  are  available. 

 280.  For  these  reasons,  we  disagree  with  AT&  T  that  we  should  further  study  issues  surrounding  the  deployment  of  FTTH  loops  used  to  serve  the  mass  market.  820  The  record 
 contains  sufficient  information  concerning  the  current  deployment  of  FTTH  loops  and  the  economic  barriers  surrounding  such  deployment,  as  well  as  a  number  of  studies  and  projections 
 of  future  FTTH  deployment.  821 
 281.  Retirement  of  Copper  Loops.  We  decline  to  impose  a  blanket  prohibition  on  the  ability  of  incumbent  LECs  to  retire  any  copper  loops  or  subloops  they  have  replaced  with  FTTH 

 loops.  Several  parties  also  propose  extensive  rules  that  would  require  affirmative  regulatory  approval  prior  to  the  retirement  of  any  copper  loop  facilities.  822  We  find  that  such  a  requirement 
 is  not  necessary  at  this  time  because  our  existing  rules,  with  minor  modifications,  serve  as  adequate  safeguards.  823  Pursuant  to  the  Act  and  the  Commissions  rules,  incumbent  LECs  must 
 provide  public  notice  of  any  network  change  that  will  affect  a  competing  carriers  performance  or  ability  to  provide  service.  824  Because  the  retirement  of  copper  loop  plant  is  a  network 
 modification  that  affects  the  ability  of  competitive  LECs  to  provide  service,  825  we  clarify  that 

 819  See  Corning  Feb.  6,  2003  Ex  Parte  Letter  at  5. 
 820  AT&  T  Reply  at  74  (advocating  that  the  Commission  study  FTTH  deployment  issues  further  before  determining 
 what  unbundling  requirements,  if  any,  apply  to  FTTH  loops  used  to  serve  the  mass  market). 
 821  See  Corning  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  29-  33  (describing  revenue  opportunities),  42-  45 
 (describing  competitive  LEC  ability  to  self-  deploy  FTTH  loops);  CSMG  Study  at  10-  14  (providing  overview  of  study  conclusions). 

 822  Allegiance  Comments  at  25;  California  Commission  Comments  at  18  (proposing  rule  requiring  incumbent  LEC 
 to  maintain  copper  plant);  Letter  from  Timothy  J.  Regan,  Corning,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  9  (filed  Nov.  27,  2002)  (Corning  Nov.  27,  2002  Ex  Parte  Letter)  (arguing  that  incumbent 

 LECs  should  have  the  option  of  retiring  or  selling  copper  plant  where  FTTH  is  deployed);  HTBC  Comments  at  36-  37  (proposing  measures  regarding  incumbent  LEC  retirement  of  legacy  copper  plant);  TIA  Comments  at  17-  18 
 (proposing  rule  to  prohibit  incumbent  LECs  from  retiring  copper  loops  unless  they  allow  access  to  broadband  facilities);  AT&  T  Reply  at  216-  19  (asserting  that  a  home-  run  copper  loop  may  be  of  inferior  quality). 

 823  See  Verizon  Jan.  17,  2003  Ex  Parte  Letter  at  7  (arguing  that  a  duty  to  maintain  two  networks  would  impose 
 additional  costs). 
 824  47  U.  S.  C.    251(  c)(  5);  47  C.  F.  R.    51.325-.  335.  This  disclosure  requirement  applies  to  the  retirement  of  both 
 feeder  plant  and  distribution  plant. 
 825  See,  e.  g.,  Sprint  Comments  at  45  (arguing  that  a  competitive  LEC  could  be  stranded  after  an  incumbent  LEC 
 upgrades  its  loop  plant);  Supra  Comments  at  10-  13. 
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 incumbent  LECs  must  provide  notice  of  such  retirement  in  accordance  with  our  rules.  Thus,  incumbent  LECs  must  disclose  among  other  things  the  planned  date  for  retiring  a  copper  loop 
 and  a  description  of  the  reasonably  foreseeable  impact  of  the  planned  changes.  826  Such  notifications  will  ensure  that  incumbent  and  competitive  carriers  can  work  together  to  ensure  the 
 competitive  LECs  maintain  access  to  loop  facilities. 
 282.  Consistent  with  the  proposals  of  Corning  and  HTBC,  we  modify  our  network  modification  rules  with  respect  to  the  retirement  of  copper  loops.  827  Specifically,  when  a  copper 

 loop  is  retired  and  replaced  with  a  FTTH  loop,  we  allow  parties  to  file  objections  to  the  incumbent  LECs  notice  of  such  retirement.  Consistent  with  our  existing  network  disclosure 
 rules,  such  oppositions  must  be  filed  with  the  Commission  and  served  on  the  incumbent  LEC  within  nine  business  days  from  the  release  of  the  Commissions  public  notice.  828  Unless  the 
 copper  retirement  scenario  suggests  that  competitors  will  be  denied  access  to  the  loop  facilities  required  under  our  rules,  we  will  deem  all  such  oppositions  denied  unless  the  Commission  rules 
 otherwise  upon  the  specific  facts  and  circumstances  of  the  case  at  issue  within  90  days  of  the  Commissions  public  notice  of  the  intended  retirement. 

 283.  We  note  that,  with  respect  to  network  modifications  that  involve  copper  loop  retirements,  the  rules  we  adopt  herein  differ  in  two  respects  from  the  notification  rules  that  apply 
 to  other  types  of  network  modifications.  829  First,  we  establish  a  right  for  parties  to  object  to  the  incumbent  LEC's  proposed  retirement  of  its  copper  loops  for  both  short-  term  and  long-  term 
 notifications  as  outlined  in  Part  51  of  the  Commissions  rules.  By  contrast,  our  disclosure  rules  for  other  network  modifications  permit  oppositions  only  for  instances  involving  short-  term 
 notifications.  830  Second,  we  establish  a  mechanism  to  deny  such  objections  automatically  unless  the  Commission  rules  otherwise  within  90  days  of  the  Commissions  public  notice  of  the 
 intended  retirement.  As  a  practical  matter,  this  mechanism  redefines  the  short-  term  notice  rules  for  a  subset  of  network  modifications,  i.  e.,  retirement  of  copper  loops  that  are  replaced  by  FTTH 
 loops,  and  means  that  incumbent  LECs  must  file  their  disclosures  for  copper  loop  retirements  at  least  91  days  prior  to  their  planned  retirement  date. 

 826  See  47  C.  F.  R.    51.327. 
 827  Corning  Feb.  6,  2003  Ex  Parte  Letter  at  7  (proposing  a  90-  day  application  process  before  the  Commission  with 
 respect  to  the  retirement  of  any  copper  loops);  Letter  from  Derek  R.  Khlopin,  HTBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Jan.  23,  2003)  (HTBC  Jan.  23,  2003  Ex  Parte 

 Letter)  (stating  that  HTBCs  proposal  would  prohibit  incumbent  LECs  from  retiring  the  existing  copper  loop  absent  permission  from  the  Commission.). 

 828  Objections  to  both  short  and  long-  term  notices  should  be  made  in  accordance  with  section  51.333(  c)  of  the 
 Commissions  rules.  Moreover,  incumbent  LECs  may  respond  to  such  objections  in  accordance  with  section  51.333(  d)  of  the  Commissions  rules.  See  47  C.  F.  R.    51.333(  c)-(  d). 

 829  These  modified  network  notification  requirements  apply  only  to  the  retirement  of  copper  loops  and  copper 
 subloops,  but  not  to  the  retirement  of  copper  feeder  plant. 
 830  See  47  C.  F.  R.    51.333(  c)-(  d). 
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 284.  As  a  final  matter,  we  stress  that  we  are  not  preempting  the  ability  of  any  state  commission  to  evaluate  an  incumbent  LECs  retirement  of  its  copper  loops  to  ensure  such 
 retirement  complies  with  any  applicable  state  legal  or  regulatory  requirements.  We  also  stress  that  we  are  not  establishing  independent  authority  based  on  federal  law  for  states  to  review 
 incumbent  LEC  copper  loop  retirement  policies.  We  understand  that  many  states  have  their  own  requirements  related  to  discontinuance  of  service,  and  our  rules  do  not  override  these 
 requirements.  We  expect  that  the  state  review  process,  working  in  combination  with  the  Commissions  network  disclosure  rules  noted  above,  will  address  the  concerns  noted  by  Corning 
 and  others  regarding  the  potential  impact  of  an  incumbent  LEC  retiring  its  copper  loops. 
 (ii)  Hybrid  Loops 
 285.  Hybrid  loops  represent  an  important  step  towards  the  deployment  of  a  fiber-  based  network  capable  of  supporting  a  wide  array  of  advanced  telecommunications  and  other  services. 

 Several  incumbent  LECs  note  that  they  pursue  their  construction  and  network  modification  projects  in  incremental  ways    first,  deployment  of  fiber  in  the  feeder  plant  and  associated 
 equipment  like  DLC  systems  (often  with  line  cards  capable  of  providing  xDSL  services),  followed  by  fiber-  to-  the-  curb,  followed  by  FTTH.  831  In  light  of  this  practice,  we  view  our  task 
 with  respect  to  hybrid  loops  as  determining  an  unbundling  approach  that  addresses  impairment,  but  also  aligns  business  incentives  with  the  explicit  congressional  goal  of  promoting  the  rapid 
 deployment  of  advanced  services. 
 286.  In  making  our  unbundling  determination  for  hybrid  loops,  we  consider  both  impairment  and,  through  our  section  251(  d)(  2)  at  a  minimum  authority,  additional  factors.  As 

 noted  above,  we  find  that  competitive  LECs  are  impaired  on  a  national  basis  without  unbundled  access  to  a  transmission  path  when  seeking  to  provide  service  to  the  mass  market.  We  further 
 find  that  this  impairment  at  least  partially  diminishes  with  the  increasing  deployment  of  fiber.  In  addition,  we  retain  the  flexibility  to  determine  the  unbundling  approach  that  best  addresses  the 
 impairment  in  a  manner  that  advances  other  goals  of  the  Act.  In  this  regard,  balanced  against  impairment,  we  evaluate  three  primary  factors  to  determine  the  most  appropriate  unbundling 
 requirements  for  hybrid  loops.  First,  we  consider  the  costs  of  unbundling,  i.  e.,  whether  refraining  from  unbundling  requirements  will  stimulate  facilities-  based  investment  and  promote 
 the  deployment  of  advanced  telecommunications  infrastructure.  Second,  we  consider  the  effect  of  alternatives  to  mandating  unbundled  access  to  the  hybrid  loops  of  incumbent  LECs.  In 
 particular,  we  consider  whether  unbundled  access  to  subloops,  spare  copper  loops,  and  the  non-packetized  portion  of  incumbent  LEC  hybrid  loops,  as  well  as  remote  terminal  collocation,  offer 
 suitable  alternatives  to  an  intrusive  unbundling  approach.  Finally,  we  consider  the  state  of  intermodal  competition  in  crafting  our  unbundling  approach.  As  explained  further  below,  after 
 balancing  these  three  primary  factors  against  our  impairment  findings,  we  adopt  a  national  approach  that  relieves  incumbent  LECs  of  unbundling  requirements  for  the  next-  generation 
 network  capabilities  of  their  hybrid  loops,  while  at  the  same  time  ensures  requesting  carriers  have  access  to  the  transmission  facilities  they  need  to  serve  the  mass  market. 

 831  See  Verizon  Nov.  22,  2002  Ex  Parte  Letter  at  1. 
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 287.  We  discuss  our  unbundling  rules  for  hybrid  loops  below.  These  rules  vary  depending  upon  whether  a  competitive  LEC  seeks  access  for  the  provision  of  broadband  or 
 narrowband  services.  Therefore,  our  discussion  is  separated  into  two  parts  in  order  to  clearly  reflect  this  important  distinction. 

 288.  Broadband  Services.  We  decline  to  require  incumbent  LECs  to  unbundle  the  next-  generation  network,  packetized  capabilities  of  their  hybrid  loops  to  enable  requesting 
 carriers  to  provide  broadband  services  to  the  mass  market.  832  AT&  T,  WorldCom,  Covad,  and  others  urge  the  Commission  to  extend  our  unbundling  requirements  to  the  packet-  based  and  fiber 
 optic  portions  of  incumbent  LEC  hybrid  loops.  We  conclude,  however,  that  applying  section  251(  c)  unbundling  obligations  to  these  next-  generation  network  elements  would  blunt  the 
 deployment  of  advanced  telecommunications  infrastructure  by  incumbent  LECs  and  the  incentive  for  competitive  LECs  to  invest  in  their  own  facilities,  in  direct  opposition  to  the 
 express  statutory  goals  authorized  in  section  706.  The  rules  we  adopt  herein  do  not  require  incumbent  LECs  to  unbundle  any  transmission  path  over  a  fiber  transmission  facility  between 
 the  central  office  and  the  customers  premises  (including  fiber  feeder  plant)  that  is  used  to  transmit  packetized  information.  833  Moreover,  the  rules  we  adopt  herein  do  not  require 
 incumbent  LECs  to  provide  unbundled  access  to  any  electronics  or  other  equipment  used  to  transmit  packetized  information  over  hybrid  loops,  such  as  the  xDSL-  capable  line  cards  installed 
 in  DLC  systems  or  equipment  used  to  provide  passive  optical  networking  (PON)  capabilities  to  the  mass  market.  834 

 289.  Although  packetized  fiber  capabilities  will  not  be  available  as  UNEs,  incumbent  LECs  remain  obligated,  however,  to  provide  unbundled  access  to  the  features,  functions,  and 
 capabilities  of  hybrid  loops  that  are  not  used  to  transmit  packetized  information.  Thus,  as  discussed  more  specifically  in  the  Enterprise  Loops  section,  consistent  with  the  proposals  of 
 HTBC,  SBC,  and  others,  incumbent  LECs  must  provide  unbundled  access  to  a  complete  transmission  path  over  their  TDM  networks  to  address  the  impairment  we  find  that  requesting 

 832  As  noted  above  in  our  description  of  the  record  evidence,  incumbent  LECs  have  deployed,  and  are  continuing 
 to  deploy,  a  substantial  amount  of  hybrid  loops,  i.  e.,  local  loops  consisting  of  both  copper  and  fiber  optic  cable  (and  associated  electronics,  such  as  DLC  systems).  Incumbent  LECs  appear  to  be  at  various  stages  of  fiber 

 deployment  and  have  chosen  a  number  of  FITL  architectures  (e.  g.,  FTTC,  FTTN)  and  hybrid  loops.  Thus,  we  treat  such  intermediate  deployments  of  fiber  as  hybrid  loops  because  they  consist  of  both  copper  and  fiber  optic  cable. 

 833  See  Letter  from  Robert  Holleyman,  HTBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338 
 (filed  Jan.  24,  2003)  (HTBC  Jan.  24,  2003  Ex  Parte  Letter);  Letter  from  Veronica  OConnell,  Director,  HTBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Feb.  7,  2003)  (HTBC  Feb.  7,  2003  Ex  Parte 

 Letter);  HTBC  Feb.  14,  2003  Ex  Parte  Letter.  Because  we  decline  to  require  unbundling  of  packet-  switching  equipment,  we  deny  WorldComs  petitions  for  reconsideration  and  clarification  requesting  that  we  unbundle  packet-switching 
 equipment,  DSLAMs,  and  other  equipment  used  to  deliver  DSL  service.  MCI  WorldCom  Petition  for  Reconsideration,  CC  Docket  No.  96-  98  at  2-  18  (filed  Feb.  17,  2000)  (MCI  WorldCom  Feb.  17,  2000  Petition  for 
 Reconsideration);  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  2,  13. 
 834  See  HTBC  Feb.  14,  2003  Ex  Parte  Letter  at  1-  4. 
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 carriers  currently  face.  835  This  requirement  ensures  that  competitive  LECs  have  additional  means  with  which  to  provide  broadband  capabilities  to  end  users  because  competitive  LECs  can  obtain 
 DS1  and  DS3  loops,  including  channelized  DS1  or  DS3  loops  and  multiple  DS1  or  DS3  loops  for  each  customer. 

 290.  Section  706  requires  the  Commission  to  encourage  deployment  of  advanced  telecommunications  capability  by  using,  among  other  things,  methods  that  remove  barriers  to 
 infrastructure  investment.  836  Unbundling  access  to  hybrid  loops  in  the  manner  adopted  herein    that  is,  limiting  the  requesting  carriers  access  to  the  TDM  portion  of  the  hybrid  loop  and 
 precluding  unbundled  access  to  the  packet-  based  networks  (and  associated  fiber  transmission  facilities)  of  incumbent  LECs    promotes  our  section  706  goals  in  two  ways.  First,  it  limits 
 access  to  the  (in  many  cases)  newly  deployed  fiber  transmission  facility,  and  thereby  gives  incumbent  LECs  an  incentive  to  deploy  fiber  (and  associated  next-  generation  network 
 equipment,  such  as  packet  switches  and  DLC  systems)  and  develop  new  broadband  offerings  for  mass  market  consumers  free  of  any  unbundling  requirements.  837  Although  incumbent  LECs  have 
 been  deploying  fiber  feeder  plant  for  some  time,  such  deployment  was  generally  limited  to  the  purpose  of  increasing  network  efficiency  for  the  provision  of  narrowband  services  rather  than 
 enhancing  network  capabilities  to  deliver  broadband  services.  In  addition,  fiber  feeder  deployment  (and  the  broadband  capabilities  attendant  to  such  deployment)  is  far  from 
 ubiquitous.  Moreover,  incumbent  LECs  have  not  widely  deployed  the  next-  generation  networking  equipment  (e.  g.,  DLC  systems  with  xDSL-  capable  line  cards)  needed  to  deliver 
 broadband  services  to  mass  market  customers  served  by  hybrid  loops.  838  Second,  by  prohibiting  access  to  the  packet-  based  networks  of  incumbent  LECs,  we  expect  that  our  rules  will  stimulate 
 competitive  LEC  deployment  of  next-  generation  networks.  Because  competitive  LECs  will  not  have  unbundled  access  to  the  packet-  based  networks  of  incumbent  LECs,  they  will  need  to 
 continue  to  seek  innovative  access  options,  including  the  deployment  of  their  own  facilities  necessary  for  providing  broadband  services  to  the  mass  market. 

 835  HTBC  Feb.  7,  2003  Ex  Parte  Letter  at  2  (advocating  a  requirement  to  unbundle  non-  packet  loop  capabilities 
 only);  SBC  Jan.  24,  2003  Ex  Parte  Letter  at  12-  13  (describing  proposal  to  ensure  competitive  LECs  have  unbundled  access  to  TDM  and  non-  packet  capabilities  of  SBCs  networks);  Letter  from  Jonathan  J.  Boynton,  Associate 

 Director,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  5  (filed  Jan.  15,  2003)  (SBC  Jan.  15,  2003  Broadband  Ex  Parte  Letter)  (explaining  that  competitive  LECs  will  have  continued  unbundled  access  to 
 non  packet  fiber  feeder  plant  combined  with  copper  distribution  plant). 
 836  Section  706(  a)  of  the  Telecommunications  Act  of  1996.  See  Corning  Comments  at  10-  11  (arguing  that  the 
 Commission  should  consider  section  706  in  crafting  its  unbundling  framework);  CompTel  Comments  at  26  (arguing  that  the  Commission  should  use  section  706  to  expand  unbundling  obligations);  HTBC  Comments  at  42-  45;  SBC 

 Reply  at  95-  96. 
 837  See  Corning  Jan.  29,  2003  Ex  Parte  Letter  at  12  (estimating  that  FTTH  deployment  will  reach  31%  of  U.  S. 
 households  if  no  unbundling  requirements  apply  to  incumbent  LECs,  but  only  5%  of  U.  S.  households  if  unbundling  requirements  apply);  CSMG  Study  at  26-  28,  30  (concluding  that  incumbent  LECs  will  deploy  more  FTTH  loops  if 

 relieved  from  unbundling  obligations). 
 838  Indeed,  some  incumbent  LECs  contend  that  the  regulatory  environment  has  deterred  their  deployment  of  such 
 equipment.  See,  e.  g.,  SBC  Reply  at  96-  104. 
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 291.  In  making  our  unbundling  determination,  we  are  also  guided  by  the  availability  of  other  loop  alternatives  within  the  networks  of  incumbent  LECs.  In  particular,  we  determine  that 
 unbundled  access  to  incumbent  LEC  copper  subloops  adequately  addresses  the  impairment  competitive  LECs  face  so  that  intrusive  unbundling  requirements  on  incumbent  LEC  packetized 
 fiber  loops  facilities  is  not  necessary.  Unbundled  access  to  subloops  also  better  promotes  our  section  706  goals  than  unbundling  incumbent  LEC  packetized  fiber  loops.  In  particular,  subloop 
 access  promotes  competitive  LEC  investment  in  next-  generation  network  equipment  (e.  g.,  packet  switches,  remote  DSLAMs,  etc.)  and  transmission  facilities  (e.  g.,  fiber  loop  facilities  built  to 
 points  in  incumbent  LEC  networks  closer  to  the  home).  Furthermore,  unbundled  subloop  access  furthers  our  goal  of  promoting  innovation  because  it  enables  competitive  LECs  to  differentiate 
 their  product  and  service  offerings  from  those  of  the  incumbent  LEC.  In  addition  to  subloop  unbundling,  as  discussed  more  fully  below,  we  require  incumbent  LECs  to  continue  providing 
 unbundled  access  to  the  TDM-  based  features,  functions,  and  capabilities  of  their  hybrid  loops  where  impairment  exists.  As  discussed  above,  in  addition  to  subloop  unbundling,  the  availability 
 of  TDM-  based  loops,  such  as  DS1s  and  DS3s,  provide  competitive  LECs  with  a  range  of  options  for  providing  broadband  capabilities.  We  therefore  find  that  competitive  LECs  retain  alternative 
 methods  of  accessing  loop  facilities  in  hybrid  loop  situations  and  disagree  with  WorldCom  and  others  concerning  the  appropriate  unbundling  requirements  for  the  next-  generation  broadband 
 features,  functions,  and  capabilities  of  hybrid  loops.  839 
 292.  We  are  also  informed  in  our  analysis  by  the  state  of  intermodal  competition  for  broadband  service.  840  As  noted  above,  cable  companies  have  made  significant  inroads  in 

 providing  broadband  service  to  the  mass  market,  but  these  same  companies  have  made  less  progress  in  the  market  for  traditional  narrowband  services.  For  example,  cable  companies  have 
 widely  deployed  broadband  service  in  the  form  of  high-  speed  Internet  access  offered  via  cable  modem  service,  but  cable  telephony  deployment  is  still  in  its  infancy.  According  to  a 
 Commission  staff  report,  more  consumers  continue  to  obtain  their  high  speed  Internet  access  by  cable  modem  service  than  by  xDSL,  and  the  rate  of  growth  for  cable  modem  subscribership 
 continues  to  outpace  the  rate  of  growth  for  xDSL  subscribership  (i.  e.,  since  the  period  June  to  December  2001,  cable  modem  subscribership  for  high  speed  Internet  access  increased  55  percent 
 versus  an  increase  of  only  35  percent  for  xDSL-  based  subscribership).  841  A  primary  benefit  of 
 839  WorldCom  Dec.  12,  2002  Next-  Generation  Networks  Ex  Parte  Letter  at  3  (arguing  that,  without  unbundled 
 access  to  hybrid  loops,  competitive  LECs  will  not  be  able  to  serve  certain  customers). 
 840  See  SBC  Reply  at  95;  Allegiance  Feb.  13,  2003  Ex  Parte  Letter  at  2  (asserting  that  the  Commission  should 
 consider  the  existence  of  an  intermodal  competitor  with  a  leading  position  in  the  market). 
 841  High  Speed  Services  December  2002  Report  at  Table  2  (noting  that  cable  companies  provide  6.  8  million  lines 
 capable  of  providing  at  least  200  kbps  in  both  direction,  compared  to  only  1.8  million  xDSL  lines).  The  High  Speed  Services  December  2002  Report  notes  the  percentage  change  of  growth.  For  coaxial  cable  services  providing  at 

 least  200  kbps  in  both  directions,  cable  companies  provided  4.394  million  lines  as  of  December  2001.  This  number  increased  to  6.819  million  lines  by  June  2002.  By  comparison,  wireline  carriers  provided  1.369  million  such  lines 
 as  of  December  2001  and  a  total  of  1.852  million  such  lines  by  June  2002.  Thus,  not  only  do  cable  companies  provide  more  high  speed  lines  capable  of  providing  at  least  200  kbps  in  both  directions  than  xDSL-  based  carriers, 
 but  cable  companies  continue  to  outpace  xDSL-  based  carriers  in  terms  of  the  rate  of  growth  of  such  subscribership.  See  id.  at  Table  2;  see  also  id.  at  Table  1  (noting  that  cable  companies  provide  9.  1  million  cable  modem-  based  lines 
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 unbundling  hybrid  loops    that  is,  to  spur  competitive  deployment  of  broadband  services  to  the  mass  market    appears  to  be  obviated  to  some  degree  by  the  existence  of  a  broadband  service 
 competitor  with  a  leading  position  in  the  marketplace.  842  We  therefore  tailor  our  unbundling  requirements  to  most  effectively  address  those  services  that  are  not  yet  fully  subject  to 
 competition  (i.  e.,  narrowband  services  in  the  mass  market)  rather  than  the  broadband  services  that  are  currently  provided  in  a  competitive  environment. 

 293.  Several  parties  have  advocated  drawing  a  bright  line  between  old  and  new  investment  in  network  architectures  and  using  such  a  division  to  articulate  our  unbundling 
 requirements.  843  Others  contend  that  we  should  make  no  such  distinction.  844  Based  on  our  evaluation  of  impairment,  as  informed  by  the  two  factors  noted  above,  we  determine  that 
 drawing  such  a  bright  line  is  practical,  if  the  line  is  drawn  between  legacy  technology  and  newer  technology.  In  fact,  we  conclude  that  such  a  line  is  best  drawn  based  on  technological 
 boundaries  rather  than  transmission  speeds,  bandwidth,  or  some  other  factor    the  technical  characteristics  of  packet-  switched  equipment  versus  TDM-  based  equipment,  for  example,  are 
 well-  known  and  understood  by  all  members  of  the  industry. 
 294.  We  stress  that  the  line  drawing  in  which  we  engage  does  not  eliminate  the  existing  rights  competitive  LECs  have  to  obtain  unbundled  access  to  hybrid  loops  capable  of 

 providing  DS1  and  DS3  service  to  customers.  845  These  TDM-  based  services    which  are  generally  provided  to  enterprise  customers  rather  than  mass  market  customers    are  non-packetized, 
 high-  capacity  capabilities  provided  over  the  circuit  switched  networks  of  incumbent  LECs.  To  provide  these  services,  incumbent  LECs  typically  use  the  features,  functions,  and 
 capabilities  of  their  networks  as  deployed  to  date    i.  e.,  a  transmission  path  provided  by  means  of  the  TDM  form  of  multiplexing  over  their  digital  networks    or  certain  capabilities  of  multi-( 

 Continued  from  previous  page) 
 compared  to  5.  1  million  ADSL-  based  lines  provided  by  LECs);  see  also  Covad  Siwek/  Sun  Decl.  at  paras  58-  59.  As  a  result,  cable  companies  leading  position  in  providing  broadband  services  to  the  mass  market  appears  to  be 

 increasing  rather  than  leveling  off. 
 842  Allegiance  Feb.  13,  2003  Ex  Parte  Letter  at  2  (asserting  that  the  Commission  should  consider  the  existence  of 
 an  intermodal  competitor  with  a  leading  position  in  the  market). 
 843  See,  e.  g.,  Alcatel  Comments  at  15-  17;  SBC  Reply  at  109;  Verizon  Jan.  10,  2003  Ex  Parte  Letter  at  6-  7 
 (proposing  a  line  drawn  on  voice-  grade  versus  broadband  capability);  Verizon  Nov.  22,  2002  Ex  Parte  Letter  at  4. 
 844  AT&  T  Reply  at  216-  19  (advocating  unified  loops  theory  and  arguing  that  home-  run  copper  is  not  sufficient 
 to  address  impairment);  Covad  Reply  at  46-  54;  WorldCom  Reply  at  111-  13  (advocating  in  support  of  unbundling  all  the  features,  functions,  and  capabilities  of  loops,  including  those  provided  by  means  of  DLC  systems  and  packet-switching 

 equipment);  Letter  from  Jonathan  Askin,  General  Counsel,  ALTS,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  5  (filed  Feb.  13,  2003)  (ALTS  Feb.  13,  2003  Ex  Parte  Letter)  (arguing  that  the 
 Commission  should  not  limit  access  to  capacity  on  any  fiber-  fed  loop  plant);  Letter  from  Jonathan  Askin,  General  Counsel,  ALTS,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  3  (filed  Jan.  31,  2003)  (ALTS 
 Jan.  31,  2003  Ex  Parte  Letter)  (advocating  in  support  of  unbundling  requirements  on  fiber-  fed  loop  plant). 
 845  HTBC  Feb.  7,  2003  Ex  Parte  Letter  at  2;  SBC  Jan.  24,  2003  Ex  Parte  Letter. 
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 use  integrated  equipment  (e.  g.,  integrated  line  cards  deployed  in  DLC  systems).  846  Incumbent  LECs  remain  obligated  to  comply  with  the  nondiscrimination  requirements  of  section  251(  c)(  3) 
 in  their  provision  of  loops  to  requesting  carriers,  including  stand-  alone  spare  copper  loops,  copper  subloops,  and  the  features,  functions,  and  capabilities  for  TDM-  based  services  over  their 
 hybrid  loops.  In  this  regard,  we  prohibit  incumbent  LECs  from  engineering  the  transmission  capabilities  of  their  loops  in  a  way  that  would  disrupt  or  degrade  the  local  loop  UNEs  (either 
 hybrid  loops  or  stand-  alone  copper  loops)  provided  to  competitive  LECs.  To  ensure  competitive  LECs  receive  the  transmission  path  within  the  parameters  we  establish,  we  determine  that  any 
 incumbent  LEC  practice,  policy,  or  procedure  that  has  the  effect  of  disrupting  or  degrading  access  to  the  TDM-  based  features,  functions,  and  capabilities  of  hybrid  loops  for  serving  the 
 customer  is  prohibited  under  the  section  251(  c)(  3)  duty  to  provide  unbundled  access  to  loops  on  just,  reasonable,  and  nondiscriminatory  terms  and  conditions.  847 

 295.  Finally,  in  balancing  potential  impairment  against  our  obligations  under  section  706,  we  conclude  that  the  costs  associated  with  unbundling  these  packet-  based  facilities 
 outweigh  the  potential  benefits.  A  number  of  parties  have  argued  that  unbundling  requirements  deter  the  incentive  of  incumbent  LECs  to  take  risks  and  deploy  fiber-  based  networks  because 
 they  would  face  reduced  returns  on  their  investment.  848  We  recognize  that,  particularly  in  the  realm  of  next-  generation  network  capabilities,  unbundling  requirements  could  have  the 
 unintended  effect  of  blunting  innovation  because  such  an  approach  would  largely  lock  competitive  LECs  to  the  technological  choices  of  the  incumbent  LECs.  We  therefore  consider 
 the  effect  of  other  approaches,  such  as  the  subloop  access  and  remote  terminal  collocation  requirements,  discussed  above,  on  stimulating  the  deployment  of  advanced  telecommunications 
 infrastructure.  For  these  reasons,  we  conclude  that  it  is  consistent  with  our  section  706  mandate  to  promote  investment  in  infrastructure  by  refraining  from  unbundling  incumbent  LECs  next-generation 
 network  facilities  and  equipment. 
 296.  Narrowband  Services.  With  respect  to  providing  unbundled  access  to  hybrid  loops  for  a  requesting  carrier  to  provide  narrowband  service,  849  we  require  incumbent  LECs  to 

 provide  an  entire  non-  packetized  transmission  path  capable  of  voice-  grade  service  (i.  e.,  a  circuit  equivalent  to  a  DS0  circuit)  between  the  central  office  and  customers  premises.  Pursuant  to  this 
 requirement,  competitive  LECs  will  be  able  to  obtain  access  to  UNE  loops  comprised  of  the  feeder  portion  of  the  incumbent  LECs  loop  plant,  the  distribution  portion  of  the  loop  plant,  the 

 846  In  their  submissions  in  this  proceeding,  incumbent  LECs  demonstrate  that  they  typically  segregate 
 transmissions  over  hybrid  loops  onto  two  paths,  i.  e.,  a  circuit-  switched  path  using  TDM  technology  and  a  packet-switched  path  (usually  over  an  ATM  network).  See,  e.  g.,  SBC  Jan.  15,  2003  Ex  Parte  Letter  at  4  (providing 

 diagram  to  illustrate  that  its  network  architecture  consists  of  a  TDM-  based  portion  and  a  packet-  switched  portion). 
 847  Notwithstanding  our  prohibition  against  disrupting  or  degrading  unbundled  access  to  the  TDM  capabilities  of 
 hybrid  loops,  incumbent  LECs  may  remove  copper  loops  from  their  plant  so  long  as  they  comply  with  our  Part  51  network  notification  requirements,  as  amended  by  this  Order,  and  any  applicable  state  law. 

 848  See  Corning  Comments  at  7-  9. 
 849  Narrowband  services  include  traditional  voice,  fax,  and  dial-  up  modem  applications  over  voice-  grade  loops. 
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 attached  DLC  system,  and  any  other  attached  electronics  used  to  provide  a  voice-  grade  transmission  path  between  the  customers  premises  and  the  central  office.  850  Consistent  with  the 
 access  requirements  for  broadband  services  noted  above,  we  limit  the  unbundling  obligations  for  narrowband  services  to  the  TDM-  based  features,  functions,  and  capabilities  of  these  hybrid 
 loops.  Incumbent  LECs  may  elect,  instead,  to  provide  a  homerun  copper  loop  rather  than  a  TDM-  based  narrowband  pathway  over  their  hybrid  loop  facilities  if  the  incumbent  LEC  has  not 
 removed  such  loop  facilities.  851 
 297.  We  recognize  that  providing  unbundled  access  to  hybrid  loops  served  by  a  particular  type  of  DLC  system,  e.  g.,  Integrated  DLC  systems,  may  require  incumbent  LECs  to 

 implement  policies,  practices,  and  procedures  different  from  those  used  to  provide  access  to  loops  served  by  Universal  DLC  systems.  852  These  differences  stem  from  the  nature  and  design  of 
 Integrated  DLC  architecture.  Specifically,  because  the  Integrated  DLC  system  is  integrated  directly  into  the  switches  of  incumbent  LECs  (either  directly  or  through  another  type  of  network 
 equipment  known  as  a  cross-  connect)  and  because  incumbent  LECs  typically  use  concentration  as  a  practice  for  engineering  traffic  on  their  networks,  a  one-  for-  one  transmission 
 path  between  an  incumbents  central  office  and  the  customer  premises  may  not  exist  at  all  times.  Even  still,  we  require  incumbent  LECs  to  provide  requesting  carriers  access  to  a  transmission 
 path  over  hybrid  loops  served  by  Integrated  DLC  systems.  853  We  recognize  that  in  most  cases  this  will  be  either  through  a  spare  copper  facility  or  through  the  availability  of  Universal  DLC 
 systems.  854  Nonetheless  even  if  neither  of  these  options  is  available,  incumbent  LECs  must  present  requesting  carriers  a  technically  feasible  method  of  unbundled  access.  855 

 850  As  discussed  below,  we  do  not  require  incumbent  LECs  to  maintain  or  retain  copper  loops  if  they  have 
 deployed  fiber  replacements.  Incumbent  LECs  have  the  option  of  either  providing  competitive  LECs  with  unbundled  access  to  a  voice-  grade  channel  over  a  hybrid  loop  or,  to  the  extent  a  copper  loop  exists,  the  existing 

 copper  loop. 
 851  As  Qwest  points  out,  when  incumbent  LECs  construct  new  loop  plant,  they  frequently  overlay  fiber  facilities 
 that  supplement  existing  loops.  Qwest  Comments  at  45;  Alcatel  Comments  at  16  (noting  that,  when  incumbent  LECs  deploy  fiber  loops,  competitive  LECs  would  continue  to  maintain  access  to  legacy  copper  transmission 

 facilities).  Thus,  the  construction  of  new  facilities  does  not  in  itself  alter  a  competitive  LECs  ability  to  use  the  incumbents  network.  Qwest  Comments  at  45.  Qwest  explains  that  it  does  not  proactively  remove  copper 
 facilities  in  the  case  of  an  overlay  so  that  requesting  carriers  should  be  able  to  continue  providing  service  in  these  circumstances.  Qwest  Comments  at  45-  46. 

 852  McLeodUSA  Dec.  18,  2002  Ex  Parte  Letter  at  10-  11;  Letter  from  Joan  Marsh,  Director,  Federal  Government 
 Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  3  (filed  Dec.  4,  2002)  (AT&  T  Dec.  4,  2002  Ex  Parte  Letter)  (describing  operational  issues  related  to  providing  unbundled  access  to 

 loops  served  by  DLC  systems  using  a  GR-  303  interface,  i.  e.,  integrated  DLC  systems,  and  proposing  some  solutions);  McLeodUSA  Nov.  15,  2002  Ex  Parte  Letter  at  1. 

 853  See  SBC  Jan.  15,  2003  Ex  Parte  Letter  at  3;  SBC  Jan.  24,  2003  Ex  Parte  Letter,  Attach.  2  at  3-  4. 
 854  See  Letter  from  Jim  Lamoureux,  Senior  Counsel,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No. 
 01-  338  at  1  (filed  Dec.  10,  2002)  (SBC  Dec.  10,  2002  Ex  Parte  Letter)  (describing  DLC  deployment  in  SBCs  region).  SBC  explains  that,  for  99.88%  of  SBCs  lines  served  over  Integrated  DLC,  competitive  LECs  have  access 

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 b.  Enterprise  Market  Loops 
 (i)  Record  Evidence 
 298.  The  record  contains  a  wealth  of  evidence  to  inform  our  enterprise  market  loop  analyses.  First,  it  reflects  that  competitive  LECs  have  deployed  fiber  that  enables  them  to  reach 

 customers  entirely  over  their  own  loop  facilities.  856  When  competitive  LECs  self-  deploy  fiber 

 (Continued  from  previous  page) 
 to  Universal  DLC  or  spare  copper  facilities  as  alternatives  to  the  transmission  path  over  SBCs  Integrated  DLC  system.  Id. 

 855  We  recognize  that  it  is  technically  feasible  (though  not  always  desirable  for  either  carrier)  to  provide  unbundled 
 access  to  hybrid  loops  served  by  Integrated  DLC  systems.  Incumbent  LECs  can  provide  unbundled  access  to  hybrid  loops  served  by  integrated  DLC  systems  by  configuring  existing  equipment,  adding  new  equipment,  or  both.  See 

 McLeodUSA  Dec.  18,  2002  Ex  Parte  Letter  10-  11.  Qwest  explains,  for  example,  that  it  can  provide  a  UNE  loop  over  Integrated  DLC  systems  by  using  a  hairpin  option,  i.  e.,  configuring  a  semi-  permanent  path  and  disabling 
 certain  switching  functions.  See  Qwest  Nov.  13,  2002  Ex  Parte  Letter  at  23  (describing  hairpin  solution  to  providing  UNE  loop  over  Integrated  DLC  system);  see  also  Telcordia,  Inc.,  NOTES  ON  THE  NETWORKS,  SR-  2275, 
 Issue  4,  12.13.2.1  (Oct.  2000)  (describing  means  for  incumbent  LECs  to  provide  unbundled  loops  to  competitive  LECs  over  integrated  DLC  systems).  In  addition,  we  understand  that  some  Integrated  DLC  systems  can  simulate 
 Universal  DLC  systems.  See  Telcordia,  Inc.,  NOTES  ON  FIBER-  IN-  THE-  LOOP  (FITL),  SR-  Notes-  Series-  10,  Issue  1,  2.3  (Jul.  2001)  (noting  that  many  modern  Integrated  DLC  systems  can  operate  in  UDLC  mode.).  Frequently, 
 unbundled  access  to  Integrated  DLC-  fed  hybrid  loops  can  be  provided  through  the  use  of  cross-  connect  equipment,  which  is  equipment  incumbent  LECs  typically  use  to  assist  in  managing  their  DLC  systems.  McLeodUSA  Nov.  15, 
 2002  DLC  systems  Ex  Parte  Letter  at  10-  11  (describing  use  of  cross-  connect  equipment  to  provide  unbundled  loops  over  Integrated  DLC  systems);  Pronto  Modification  Order,  15  FCC  Rcd  at  17565-  66,  App.  B,  C  (showing  that  SBC 
 typically  uses  a  cross-  connect  in  its  network  to  establish  the  connection  between  the  feeder  loop  plant  and  its  circuit  and  packet  switches);  Verizon  July  19,  2002  Ex  Parte  Letter  at  3  (showing  that  Verizon  typically  uses  central  office 
 terminations  and  cross-  connects).  McLeodUSA  explains  that  an  incumbent  LEC  can  configure  most  Integrated  DLC  systems  to  assign  requesting  carriers  individual  interface  groups  that  assist  in  establishing  a  complete 
 transmission  path  between  the  central  office  and  the  customers  premises.  In  this  way,  incumbent  LECs  can  provide  Integrated  DLC-  fed  hybrid  loops  on  an  unbundled  basis.  McLeodUSA  Dec.  18,  2002  Ex  Parte  Letter  at  10.  In 
 addition,  McLeodUSA  further  explains  that  manufacturers  either  already  account  for  an  incumbent  LECs  regulatory  obligations  in  designing  equipment  (and  software  used  to  upgrade  that  equipment)  or  are  planning  to  do 
 so.  Id.  at  11  n.  15. 
 856  Both  competitive  LECs  and  incumbent  LECs  report  that  approximately  30,000,  i.  e.,  between  3%  to  5%,  of  the 
 nations  commercial  office  buildings  are  served  by  competitor-  owned  fiber  loops.  See,  e.  g.,  ALTS  et  al.  Comments  at  52  (citing  to  WorldCom  Comments,  CC  Docket  Nos.  96-  98  at  7  (filed  June  11,  2001)  (WorldCom  June  11,  2001 

 High-  capacity  Comments));  Sprint  Comments  at  23-  24;  WorldCom  Comments  at  74-  76;  see  also  BOC  UNE  Rebuttal  Report  at  iv,  44;  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Oct.  30,  2002)  (discussing  high-  capacity  transmission  facility  deployment)  (WorldCom  Oct.  30,  2002  Ex  Parte  Letter);  AT&  T  Comments  at  152  (citing  proprietary 
 information);  Cbeyond  et  al.  Comments,  CC  Docket  96-  98  at  23  (filed  June  11,  2001)  (Cbeyond  et  al.  June  11,  2001  High-  capacity  Comments)  (citing  confidential  information  in  attached  Affidavit  of  Michael  P.  Duke,  KMC 
 Telecom,  Inc.  (KMC  Duke  June  11,  2001  High-  capacity  Aff.)  at  para.  5);  NuVox  et  al.  Comments,  Affidavit  of  Nicholas  D.  Jackson,  TDS  Metrocom,  Inc.  (TDS  Jackson  Aff.)  at  para.  6;  El  Paso  et  al.  Comments  at  16. 
 Competitive  carriers  indicate  that  most  of  these  commercial  office  buildings  are  carrier  hotels  or  large  office  buildings.  See,  e.  g.,  ALTS  et  al.  Comments  at  52;  WorldCom  June  11,  2001  High-  capacity  Comments  at  9;  El  Paso 
 et  al.  Comments  at  16.  Some  commenters  indicate  that  other  facilities-  based  competitive  LECs  may  have  self-(  continued.) 
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 they  predominantly  do  so  at  the  OCn-  level.  857  In  addition,  the  record  shows  that  competitors  have  built  fiber  loops  to  buildings  that  carry  a  significant  portion  of  the  competitive  traffic  in 
 certain  MSAs.  858  In  contrast,  the  record  contains  little  evidence  of  self-  deployment,  or  availability  from  alternative  providers,  for  DS1  loops.  859  As  for  DS3  loops,  evidence  of  self-deployment 
 and  wholesale  availability  is  somewhat  greater  than  for  DS1s  and  is  directly  related  to  location-  specific  criteria.  860  Indeed,  competitive  LECs  agree  that  at  a  three  DS3  loop  capacity 

 (Continued  from  previous  page) 
 deployed  high-  capacity  loops,  but  have  not  submitted  comments  in  this  proceeding.  See,  e.  g.,  SBC  Comments  at  102;  Verizon  Comments  at  117. 

 857  See,  e.  g.,  ALTS  et  al.  Comments  at  52;  CCG  July  17,  2002  CLEC  Survey  Ex  Parte  Letter  at  6-  7;  WorldCom 
 Comments  at  76;  WorldCom  Fleming  Decl.  at  para.  10;  NewSouth  Reply  at  17. 
 858  See,  e.  g.,  BOC  UNE  Rebuttal  Report  at  45  (relating  this  figure  to  a  typical  Tier-  I  MSA  but  stating  that  New 
 York,  San  Francisco,  Washington,  D.  C.,  and  Los  Angeles  account  for  40%  of  all  data  revenue  nationwide). 
 859  Based  on  the  record  as  a  whole,  for  DS1  loops  and  some  DS3  loops,  overbuilding  to  enterprise  customers  that 
 require  services  over  these  facilities  generally  does  not  present  sufficient  opportunity  for  competitors  to  recover  their  costs  and,  therefore,  may  not  be  economically  feasible.  See,  e.  g.,  Covad  Reply  at  56;  AT&  T  Jan.  14,  2003  Ex 

 Parte  Letter  at  para.  3  n.  5;  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  B  (filed  Nov.  25,  2002)  (AT&  T  Nov.  25, 
 2002  Ex  Parte  Letter)  (providing  loop  build/  no-  build  cost  analysis);  WorldCom  Comments  at  7;  WorldCom  Fleming  Decl.  at  para.  10;  Allegiance  Reply  at  38;  NewSouth  Reply  at  17.  In  limited  cases  where  evidence  exists 
 that  a  competitive  LEC  is  serving  customers  via  their  own  DS1  loops,  the  record  suggests  this  is  largely  because  these  competitive  LECs  have  already  self-  provisioned  OCn  level  capacity  to  that  specific  location  and  other 
 deployment  barriers  have  not  precluded  them  from  using  that  capacity  to  serve  other  customers  at  lower  loop  capacity  levels  at  that  same  location.  See  Letter  from  Joan  Marsh,  Director,  Governmental  Affairs,  AT&  T,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  at  para.  2  (AT&  T  Jan.  14,  2003  Ex  Parte  Letter);  WorldCom  June  11,  2001  High-  capacity  Comments  at  8  (citing  confidential  information)  and  Attach.  B,  Proprietary 
 and  Confidential  Declaration  of  Jay  Slocum  (WorldCom  Slocum  Decl.)  at  paras.  3-  6. 
 860  See,  e.  g.,  WorldCom  Fleming  Decl.  at  para.  10  (when  customer  demand  is  projected  at  several  DS3s  or  optical 
 level  capacity  a  self-  build  decision  is  made);  WorldCom  Comments  at  7  (customers  in  a  building  must  commit  to  at  least  three  DS3  circuits  before  it  is  economically  viable  to  extend  fiber  to  that  building);  AT&  T  Comments  at  134  (a 

 competitive  LEC  can  only  self-  deploy  to  a  location  with  enormous  demand,  the  smallest  of  which  would  be  at  the  OC3  level);  AT&  T  Nov.  25,  2002  Ex  Parte  Letter  at  3  (the  amount  of  committed  traffic  to  support  construction  of 
 loops  for  large  business  customers  is  about  three  DS3s,  i.  e.,  an  OC3),  and  Attach.  B  at  9  (at  least  three  DS3s  worth  of  demand  is  required  before  a  facility  build  can  generally  be  proven  as  financially  prudent).  The  record  also 
 contains  some  evidence  that  DS3  loop  services  may  be  available  from  alternative  providers  other  than  the  incumbent  LECs  in  some  buildings  where  competitive  capacity  to  the  building  has  already  been  provisioned  at  the 
 OCn  level.  See  Sprint  Comments  at  23-  24;  Letter  from  John  E.  Benedict,  Senior  Attorney,  Sprint,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Oct.  16,  2002)  (Sprint  Oct.  16,  2002 
 Ex  Parte  Letter);  WorldCom  Comments  at  16;  KMC  Duke  June  11,  2001  High-  capacity  Aff.  at  para.  5  (citing  confidential  information);  SBC  Reply  at  143  (citing  AT&  T  Comments  at  150  n.  10  (citing  confidential 
 information));  WorldCom  Slocum  Decl.  at  paras.  3-  6;  AT&  T  Reply  at  185  (citing  CCG  July  17,  2002  CLEC  Survey  Ex  Parte  Letter  at  6  &  Table  3);  NuVox  et  al.  Comments  at  7. 
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 level  of  demand,  it  is  economically  feasible  to  self-  deploy,  861  and  record  evidence  reveals  that  both  AT&  T  and  WorldCom  have  self-  provisioned  DS3  circuits  to  many  customer  locations.  862 
 299.  The  record  also  contains  extensive,  albeit  contradictory,  evidence  regarding  the  degree  to  which  competitors  rely  on  the  incumbent  LECs  facilities  versus  their  own  to  provision 
 loops  to  their  customers.  According  to  the  BOC  UNE  Fact  Report  2002,  market  statistics  show  that  competitive  LECs  are  now  serving  between  13  and  20  million  business  lines  off  their  own 
 switches    yet  they  have  obtained  only  about  1.5  million  unbundled  loops  to  serve  business  customers.  863  The  BOCs  conclude  that  competitive  LECs  are,  therefore,  serving  the  remaining 
 85-  95  percent  of  those  13-  20  million  self-  switched  business  lines  using  alternative  facilities  instead  of  unbundled  loops.  864  In  addition,  the  BOCs  state  that  virtually  all  of  the  high-  capacity 
 unbundled  loops  that  competitive  LECs  have  purchased  in  the  BOC  territories  are  DS1  loops  and  that  competitive  LECs  have  purchased  only  140  unbundled  DS3  loops,  and  not  a  single 
 unbundled  loop  above  a  DS3  level.  865  The  BOCs  reason  that  these  figures  reflect  that  competitive  LEC  fiber  networks  are  now  so  extensive  in  urban  markets  that  they  readily  can  be   
 and  routinely  are    extended  as  needed  to  pick  up  additional  traffic  from  new  customers  in  adjacent  buildings,  or  down  the  block,  and  on  outward  from  there.  866  According  to  the  BOCs, 
 once  a  competitive  LEC  deploys  its  initial  fiber  ring,  extending  that  fiber  incrementally  to  new  customers  is  comparatively  inexpensive.  867 

 300.  Competitive  LECs  strongly  disagree  with  the  BOCs  figures  on  line  deployment,  claiming  these  numbers  are  far  less  reliable  than  the  data  the  Commission  itself  collects  to 
 measure  competitive  LEC  deployment  and  the  level  of  local  competition.  868  Competitive  carriers  point  to  our  own  statistics  which  reveal  that  competitive  LECs  serve  fewer  than  9  million 
 business  lines  nationwide,  i.  e.,  not  the  13  to  20  million  lines  that  the  incumbent  LECs  claim.  869 

 861  See  supra  note  860. 
 862  See  SBC  Reply  at  143  (citing  AT&  T  Comments  at  150  n.  10  (confidential  information));  WorldCom  Slocum 
 Decl.  at  paras.  3-  6;  see  also  CCG  Jul.  17,  2002  CLEC  Survey  Ex  Parte  Letter  (indicating  that  competitive  loop  capacity  has  been  deployed  into  buildings  but  not  indicating  at  what  capacity  level  customers  are  served  in  those 

 buildings). 
 863  BOC  UNE  Fact  Report  2002  at  IV-  1  through  IV-  4. 

 864  The  BOCs  also  claim  that  competitive  LECs  have  deployed  approximately  1,800  fiber  networks  in  the  150 
 largest  MSAs.  BOC  UNE  Fact  Report  2002  at  I-  3. 
 865  BOC  UNE  Fact  Report  2002  at  IV-  6.  Specifically,  the  BOC  UNE  Fact  Report  2002  states  that  competitive 
 LECs  have  purchased  a  total  of  72,000  high-  capacity  loops  UNEs    all  but  140  of  which  are  DS1s.  Id. 
 866  See  BOC  UNE  Fact  Report  2002  at  IV-  4. 

 867  Id. 
 868  See,  e.  g.,  El  Paso  et  al.  Comments  at  16-  18  &  n.  68  (citing  numerous  other  competitive  LEC  comments). 
 869  AT&  T  Reply,  Declaration  of  C.  Michael  Pfau  (AT&  T  Pfau  Reply  Decl.)  at  paras.  2,  12-  14  (describing  how  the 
 incumbent  LECs  methods  for  determining  the  number  of  competitive  loops  deployed  substantially  overstates  the  (continued.) 
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 They  further  claim  that  this  discrepancy  is  due  in  large  part  to  the  BOCs  inclusion  of  special  access  lines  as  alternative  facilities  in  the  BOC  UNE  Fact  Report  2002.  870  Further,  these 
 commenters  correctly  note  that  the  Commission  staffs  Local  Competition  Report,  which  calculates  approximately  8.9  million  voice-  grade  equivalent  (VGE)  lines  for  competitive  LECs, 
 explicitly  indicates  that  it  does  not  count  special  access  lines  as  competitive  LEC  self-provisioned  or  alternative  provided  lines.  871  The  BOCs  acknowledge  the  inclusion  of  special 
 access  lines  in  their  data,  thus  accounting  for  the  approximate  15.8  million  VGE  differential  from  the  Commissions  Local  Competition  Report.  872 

 301.  Finally,  the  record  indicates  that  various  types  of  alternative  transmission  technologies  to  high-  capacity  local  loops,  i.  e.,  fixed-  wireless,  unlicensed-  wireless,  and  satellite 
 facilities,  have  been  deployed  in  limited  circumstances  at  certain  locations.  873  The  record,  however,  does  not  indicate  the  extent  to  which  these  alternative  transmission  technologies  have 
 been  deployed  or  where  they  are  available  on  a  wholesale  basis.  874  Nevertheless,  it  appears  that,  in  certain  circumstances,  such  technologies  have  been  used  by  competitive  LECs  as  alternatives 
 to  incumbent  LEC  unbundled  high-  capacity  loops.  875  Incumbent  LECs  report  that  competitive  carriers  can  often  deploy  fixed  wireless  connections  more  quickly  and  cheaply  than  fiber,  and 
 that  free  space  optics,  i.  e.,  laser-  guided  high-  bandwidth  connections  to  a  fiber  backbone,  is  now 

 (Continued  from  previous  page) 
 actual  number  by  including,  inter  alia,  leased  special  access  circuits  and  other  flawed  assumptions).  See  Covad  Reply  55;  AT&  T  Reply  at  182-  85;  NuVox  et  al.  Reply  at  42;  WorldCom  Comments  at  76  (arguing  that  even  in  the 

 most  competitive  market  in  the  country,  incumbent  LECs  have  seven  times  more  fiber  than  competitive  LECs  do). 
 870  See,  e.  g.,  AT&  T  Pfau  Reply  Decl.  at  paras.  14  (indicating  that  his  experience  recognizes  that  a  much  greater 
 proportion  of  circuits  are  bought  as  special  access). 
 871  See  Local  Competition  June  2002  at  1  n.  2,  <http://  www.  fcc.  gov/  wcb/  iatd/  stats.  html>. 

 872  See  BOC  UNE  Rebuttal  Report  at  45  (acknowledging  that  special  access  lines  are,  indeed,  included  in  their 
 numbers).  In  evaluating  the  extent  to  which  competitive  LECs  have  self-  provisioned,  the  Commission  has  instructed  competitive  carriers  to  exclude  local  services  provisioned  over  special  access  facilities  in  their  reported 

 data.  See  supra  note  871.  Because  the  Commission  places  little  weight  on  the  availability  of  special  access  in  its  impairment  analysis,  we  do  not  rely  on  evidence  that  includes  such  lines. 

 873  See,  e.  g.,  BellSouth  Comments  at  42-  43;  SBC  Comments  at  91;  Verizon  Comments  at  118. 
 874  See,  e.  g.,  ALTS  et  al.  Comments  at  45;  Allegiance  Comments  at  19-  22;  Allegiance  Reply  at  36;  AT&  T 
 Fea/  Giovannucci  Reply  Decl.  at  21  n.  19;  WorldCom  June  11,  2001  High-  capacity  Comments  at  13-  14;  Covad  Comments  at  49-  50;  Sprint  Comments  at  24-  25;  TDS  Jackson  Aff.  at  para.  9. 

 875  See  Local  Telephone  Competition  December  2002  Report;  see  also  Allegiance  Comments  at  20-  21;  Sprint 
 Comments  at  25;  Verizon  Comments  at  118. 
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 a  viable  technology.  876  Competitive  LECs,  however,  question  the  extent  to  which  this  deployment  is  widespread  and  point  to  certain  technical  limitations  of  such  technologies.  877 
 (ii)  Impairment  Analysis 
 (a)  Operational  and  Economic  Barriers  to  Serving  the  Enterprise  Market 

 302.  Enterprise  market  customers  demand  reliable  services  that  include  customized  products,  significant  customer  care,  and  enhanced  security  features.  878  Moreover,  they  prefer  a 
 single  provider  capable  of  meeting  all  their  needs  at  each  of  their  business  locations  which  may  be  in  multiple  locations  in  different  parts  of  the  city,  state  or  country.  879  The  economics  of 
 serving  a  particular  enterprise  customer  at  each  of  its  business  facilities  may  be  very  different  depending  on  the  location  of  the  facility.  880  Small  to  medium-  sized  business  customers  generally 
 demand  services  at  the  DS1,  and  to  a  lesser  extent,  DS3  capacities.  881  Competitive  LECs  meet  these  demands  by  providing  packages  of  services,  carrying  both  voice  and  data  traffic,  sold 
 under  month-  to-  month  or  short-  term  contracts.  882  In  contrast,  larger  enterprise  customers 
 876  See,  e.  g.,  Verizon  Comments  at  118  (stating  that  fixed  wireless  and  free  space  optics  is  available  for  high-capacity 
 links);  SBC  Reply  at  91  (fixed  wireless  and  satellite  are  broadband  options  for  small  business  users). 
 877  See,  e.  g.,  Sprint  Comments  at  24-  25  (indicating  its  significant  experience  with  fixed  wireless  and  noting  its 
 limitations  and  delayed  development);  TDS  Jackson  Aff.  at  para.  9  (indicating  wireless  loop  alternatives  are  too  costly,  not  available  in  TDS  markets,  and  are  not  sufficiently  robust  platforms  for  TDS  services);  WorldCom  June 

 11,  2001  High-  capacity  Comments,  Attach.  D,  Affidavit  of  A.  Daniel  Kelley  &  Richard  A.  Chandler  (WorldCom  Kelley  &  Chandler  June  11,  2001  High-  capacity  Aff.)  at  paras.  38-  45  (arguing  that  there  have  been  abortive 
 attempts  by  competitors  to  provide  high-  capacity  access  to  business  customers  using  several  fixed  wireless  technologies).  We  note  that  fixed  wireless  alternatives  require  Commission  issued  licenses  and  are  subject  to  the 
 availability  of  limited  spectrum  resources. 
 878  See,  e.  g.,  GCI  Reply  at  20. 

 879  See,  e.  g.,  WorldCom  Comments  at  13-  18;  Covad  Reply  at  57. 
 880  Id.  The  loop  capacity  impairment  approach  we  adopt  today  accommodates  the  need  to  serve  a  single  enterprise 
 customer  at  multiple  locations  because  it  recognizes  that  it  may  only  be  economical  to  build  at  the  primary  location  where  the  loop  capacity  demanded  is  very  high,  enabling  the  competitive  LEC  to  obtain  unbundled  lower  capacity 

 loops  to  serve  the  customers  other  business  locations. 
 881  See,  e.  g.,  NewSouth  Reply  at  16  (DS1  loops  serve  smaller  businesses  and  DS3  and  OCn  serve  larger 
 businesses);  NuVox  et  al.  Reply  at  39-  41  (T1  facilities  serve  innovative  bundled  service  offerings  efficiently  to  small  and  medium  business  customers);  Allegiance  Reply  at  35-  36  (a  significant  segment  of  business  customers  are 

 small  and  medium-  sized  enterprises  that  use  DS1  capacity  services). 
 882  See,  e.  g.,  ITC^  Deltacom  Aug.  16,  2001  Petition  at  1-  2;  NewSouth  Comments  at  5;  Affidavit  of  Edward  J. 
 Cadieux,  NuVox  (NuVox  Cadieux  Jan.  24,  2003  Aff.)  at  paras.  4-  5,  in  Letter  from  Steven  A.  Augustino,  Counsel  for  NuVox  et  al.,  to  William  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  No.  01-  338,  96-  98,  98- 

 147  (filed  Jan.  24,  2003);  see  also  Letter  from  Kimberly  Scardino,  Senior  Counsel,  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Jan.  31,  2003)  (WorldCom  Jan.  31,  2003 
 Ex  Parte  Letter). 
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 demand  extensive  services  using  multiple  DS3s  or  OCn  loops  typically  offered  under  long-  term  arrangements  which  guarantee  a  substantial  revenue  stream  over  the  life  of  the  contract.  883 
 303.  Because  the  cost  to  self-  deploy  local  loops  at  any  capacity  is  great,  884  and  the  cost  to  deploy  fiber  does  not  vary  based  on  capacity,  885  a  competitive  LEC  that  plans  to  self-  deploy  its 
 own  facilities  must  target  customer  locations  where  there  is  sufficient  demand  from  a  potential  customer  base,  usually  a  multiunit  premises  location,  to  generate  a  revenue  stream  that  could 
 recover  the  sunk  construction  costs  of  the  underlying  loop  transmission  facility,  including  laying  the  fiber  and  attaching  the  requisite  optronics  to  light  the  fiber.  886  For  competitive  LECs 
 deploying  a  very  high-  capacity  loop  facility  to  a  particular  customer  location,  the  revenue  commitment  relative  to  the  cost  of  constructing  that  loop  facility  may  result  in  a  positive  profit 
 margin  for  that  single  customer  location,  making  it  economically  feasible  from  a  profitability  perspective,  to  self-  provision  in  that  particular  case.  887  Even  when  the  customer  demand  at  a 
 certain  location  may  support  self-  deployment  from  a  pure  cost  recovery  perspective,  however,  there  are  other  obstacles  that  must  be  overcome  before  such  self-  deployment  can  effectively 
 occur.  888  These  other  barriers  include  the  inability  to  obtain  reasonable  and  timely  access  to  the  customers  premises  both  in  laying  the  fiber  to  the  location  and  getting  it  into  the  building 
 thereafter,  889  as  well  as  convincing  customers  to  accept  the  delays  and  uncertainty  associated  with  deployment  of  alternative  loop  facilities.  890 

 883  Id. 
 884  In  discussing  the  general  economic  characteristics  of  loop  deployment  above,  we  noted  that  loop  construction 
 costs  do  not  vary  by  the  capacity  of  the  loop  and  that  the  ability  to  recover  the  high  fixed  and  sunk  costs  is  the  key  factor  to  considering  impairment.  We  also  observed  that  loop  impairment  is  closely  related  to  the  demands  of  the 

 individual  customer  served  by  such  loop  and  the  capacity  level  of  the  loop  provided.  See  supra  Part  VI.  A.  3. 
 885  See  supra  Part  VI.  A.  3.;  see  also  Letter  from  Stephen  W.  Crawford,  General  Counsel,  El  Paso  Global  Networks, 
 to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  5,  2003)  (El  Paso  Feb.  5,  2003  Ex  Parte  Letter). 

 886  See,  e.  g.,  Allegiance  Comments  at  23;  WorldCom  Comments  at  76;  AT&  T  Reply  at  145;  see  also  TDS  Jackson 
 Aff.  at  para.  8. 
 887  Id.;  see  also  TDS  Jackson  Aff.  at  paras.  8-  10. 

 888  See,  e.  g.,  El  Paso  et  al.  Comments  at  20-  21. 
 889  See,  e.  g.,  ALTS  et  al.  Comments  at  56  (discussing  other  barriers  competitive  LECs  face  in  self-  deployment); 
 AT&  T  Reply  at  174-  79. 
 890  See,  e.  g.,  Sprint  Comments  at  23;  AT&  T  Reply  at  175.  Competitive  LECs  argue  that  they  can  not  feasibly 
 construct  loop  facilities  and  justify  the  fixed  and  sunk  costs  that  self-  provisioning  will  entail  in  advance  of  securing  firm  customer  commitments  guaranteeing  the  likelihood  of  cost  recovery.  See,  e.  g.,  NuVox  et  al.  Comments  at  74; 

 AT&  T  Reply  at  176-  77;  Supra  Comments  at  7.  This  barrier  to  entry  can  be  exacerbated  when  states  adopt  service  quality  rules  that  require  local  service  providers  to  be  in  a  position  to  provision  service  within  a  specified  number  of 
 days  after  a  customer  signs  up  for  service.  See,  e.  g.,  Ohio  Admin  Code  Ch.  4901    1-  5-  20  (C);  220  ILCS  5    13-  712;  83  ILAC    730.540. 
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 304.  The  record  reflects  that  constructing  local  loops  generally  takes  between  6-  9  months  without  unforeseen  delay.  891  Competitive  LECs  describe  numerous  ways  in  which 
 further  delay  affecting  construction  decisions  and  deployment  occurs.  These  delays  can  be  attributable  to  securing  rights-  of-  way  from  local  authorities  which  is  necessary  before 
 competitive  LECs  can  dig  up  streets  to  lay  fiber.  Often,  carriers  must  engage  in  lengthy  negotiations  with  local  authorities  over  the  ability  to  use  the  public  rights-  of-  way.  892  Similarly, 
 obtaining  building  and  zoning  permits  adds  further  delay  as  local  authorities  often  conduct  extensive  inquiries  into  the  planned  construction  activity  of  the  competitive  carrier.  893  Moreover, 
 commenters  note  that  many  local  jurisdictions  impose  construction  moratoriums  which  prevent  the  grant  of  a  franchise  agreement  to  construct  new  fiber  facilities  in  the  public  rights-  of  way.  894 

 305.  In  addition  to  delays  associated  with  gaining  access  to  rights-  of-  ways  and  permits  from  local  or  municipal  authorities,  competitive  LECs  face  additional  barriers  with  regard  to 
 serving  multiunit  premises  due  to  difficulties  and  sometimes  outright  prohibitions  in  gaining  building  access.  895  Although  multiunit  premises  could  present  substantial  economic 
 opportunities  for  competitors,  if  the  entity  or  individual  controlling  access  to  the  premises  does  not  allow  a  competitor  to  reach  its  customer  residing  therein  (or  places  unreasonable  burdens  on 
 the  competitive  LEC  as  a  condition  of  entry),  the  competitive  LEC  may  be  unable  to  serve  its  customer  via  its  own  facilities,  896  even  where  a  competitive  carrier  may  be  ready,  willing,  and 
 otherwise  able  to  self-  deploy  the  loop.  897 

 891  See,  e.  g.,  ALTS  et  al.  Comments  at  58;  WorldCom  Comments  at  75  (citing  WorldCom  Fleming  Decl.). 
 892  Because  of  the  expense  and  delay  associated  with  filing  a  preemption  petition,  carriers  rarely  avail  themselves 
 of  section  253(  c)  of  the  Act.  See  47  U.  S.  C.    253(  c). 
 893  See,  e.  g.,  ALTS  et  al.  Comments  at  23-  24.  Incumbent  LECs  argue,  however,  that  actual  competitive  LEC 
 deployment  undermines  these  arguments.  See,  e.  g.,  SBC  Reply  at  156. 
 894  See,  e.  g.,  ALTS  et  al.  Comments  at  42,  50,  56,  58;  see  also  New  York  Department  Comments  at  4.  Incumbent 
 carriers,  however,  generally  argue  that  competitive  LECs  are  not  impaired  by  rights-  of-  way  costs  and  delays.  BellSouth  argues  that  mandatory  access  to  rights-  of-  way  means  that  there  are  not  generally  extreme  delays  caused 

 by  disputes,  and  competitive  LECs  can  turn  to  the  accelerated  docket  if  need  be.  BellSouth  Comments  at  68-  69. 
 895  See,  e.  g.,  AT&  T  Reply  at  175  (stating  that  the  time  to  negotiate  building  access  arrangements  can  be  up  to  18 
 months);  see  also  WorldCom  Oct.  25,  2002  Building  Access  Ex  Parte  Letter. 
 896  See,  e.  g.,  AT&  T  Reply  at  178-  79.  Verizon  argues  that,  in  the  interim,  competitive  LECs  can  purchase  special 
 access  services  or  use  wireless  or  free-  space  optics  loop  in  the  interim  during  construction  of  the  loop.  Verizon  Comments  at  120-  23.  Competitive  LECs,  however,  question  the  extent  to  which  these  wireless  modes  are  available 

 for  use  on  an  interim  basis.  See  supra  Part  VI.  A.  4.  a.(  iii)(  b).  As  for  Verizons  suggestion  that  the  use  of  special  access  services  is  sufficient,  the  Commission  has  stated  it  does  not  factor  the  availability  of  incumbent  LECs 
 special  access  services  into  its  loop  impairment  analysis.  See  supra  Part  V.  B.  1.  d.(  ii). 
 897  See,  e.  g.,  ALTS  et  al.  Comments  at  56-  58;  WorldCom  Oct.  25,  2002  Building  Access  Ex  Parte  Letter;  AT&  T 
 Reply  at  175.  We  address  building  access-  related  barriers  to  loop  deployment  in  greater  detail  below  in  our  subloop  and  NID  unbundling  analyses,  particularly,  with  respect  to  the  Inside  Wire  Subloop.  We  expect  that  the  subloop 

 and  NID  unbundling  rules  that  we  adopt  today  will  substantially  mitigate  the  adverse  impact  of  many  of  the  building  access-  related  barriers  requesting  carriers  face  with  respect  to  serving  customers  in  multiunit  premises,  particularly 
 (continued.) 
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 306.  In  conducting  our  impairment  analysis,  we  give  substantial  weight  to  the  cost  of  constructing  a  loop  facility  in  relation  to  the  ability  of  the  competitive  carrier  to  recover  those 
 costs  over  time,  i.  e.,  where  the  traffic  volume  and  associated  revenue  potential  from  the  loop  facility  allow  a  carrier  to  earn  a  return  necessary  to  sustain  its  operations  at  that  location.  We  do, 
 however,  consider  other  factors  affecting  competitive  LEC  loop  deployment,  including  access  to  public  and  private  rights-  of-  way  and  multiunit  premises  access,  that  incumbent  LECs  have  not  or 
 do  not  similarly  face  as  a  result  of  their  first-  mover  advantage.  Altogether,  these  factors  directly  influence  the  ability  of  competitive  carriers  to  raise  capital  to  deploy  service  to  customers  using 
 their  own  loop  facilities  in  a  timely  manner.  The  record  reflects  that  these  barriers  can  be  overcome  at  certain  loop  capacity  levels  and  certain  service  locations  as  we  explain  below.  898 

 (b)  General  Framework 
 307.  We  organize  our  analysis  of  high-  capacity  loops  based  on  capacity  level  because  it  is  a  more  reliable  indicator  of  the  economic  abilities  of  a  requesting  carrier  to  utilize  third-party 

 alternatives,  or  to  self-  deploy.  At  the  same  time,  we  recognize  that  operational  and  economic  concerns  will  vary  depending  on  the  geographic  market  served.  We  find  that  the 
 extent  of  competitive  deployment  of  high-  capacity  loop  facilities  can  vary  tremendously  by  geographic  area.  More  specifically,  the  barriers  to  entry  requesting  carriers  face  are  most 
 precisely  identified  on  each  geographic  route  serving  a  particular  customer  location.  Where  our  record  permits,  however,  we  distill  general  characteristics  of  high-  capacity  loop  deployment  on  a 
 national  level  sufficient  to  make  nationwide  determinations  of  impairment  and  non-  impairment.  Where  the  record  indicates  impairment  and  that  only  with  more  granular  evidence  could  a 
 finding  of  non-  impairment  be  made,  we  establish  triggers  to  identify  non-  impairment  based  on  customer  location-  specific  evidence. 

 308.  In  conducting  our  impairment  analyses  for  the  various  types  of  high-  capacity  loops,  we  first  consider  evidence  of  whether  competitive  LECs  have  self-  deployed  such  loop 
 facilities,  on  either  an  intermodal  or  intramodal  basis,  to  provide  retail  services  to  enterprise  market  customers.  899  In  our  analysis,  we  recognize  that  a  variety  of  alternative  high-  capacity 
 loop  transmission  technologies,  in  various  stages  of  development  and  use,  are  offered  to  enterprise  customers  in  certain  locations  as  potential  alternatives  to  their  traditional  high-capacity 
 loops,  i.  e.,  different  types  of  fixed-  wireless,  e.  g.,  38  GHz,  LMDS,  MMDS,  and  24  GHz; 

 (Continued  from  previous  page) 
 where  the  incumbent  LECs  network  extends  beyond  the  minimum  point  of  entry  at  the  premises  and  the  wiring  in  the  building  is  owned  and  controlled  by  the  incumbent  LEC.  Moreover,  the  Commission  still  has  an  open 

 proceeding,  WT  Docket  No.  99-  217,  related  to  building  access.  See  Competitive  Networks  Order,  15  FCC  Rcd  22983. 

 898  See  supra  para.  298;  see  also  Allegiance  Comments  at  23;  ALTS  et  al.  Comments  at  58. 
 899  Iowa  Utils.  Bd.,  525  U.  S.  at  389  (noting  that  the  Commission  must  consider  the  availability  of  elements 
 outside  the  incumbents  network  when  applying  the  impair  standard).  See  also  ITTA  Jan.  29,  2003  Ex  Parte  Letter,  Attach.  at  1  (noting  that  the  question  is  whether  elements  are  available  from  sources  other  than  incumbent 

 LEC). 
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 satellite  facilities;  and  unlicensed  wireless.  900  As  we  have  indicated  above,  901  evidence  of  self-deployment  demonstrates  better  than  any  other  kind  of  evidence  what  business  decisions 
 competitive  carriers  have  actually  made  regarding  the  feasibility  to  deploy  facilities  without  relying  on  the  incumbent  LEC.  This  evidence  shows  us,  as  a  practical  matter,  that  competitive 
 LECs  have  been  able  to  surmount  barriers  to  entry  with  respect  to  that  particular  loop  deployment.  We  then  consider  the  extent  of  this  deployment,  whether  it  occurs  or  could  occur 
 on  a  nationwide  basis,  or  is  more  limited  in  scope.  Next  we  look  at  the  extent  to  which  wholesale  alternatives  to  the  incumbent  LECs  unbundled  loops  are  available  to  competitive 
 LECs  to  provision  high-  capacity  loops  to  their  customers.  We  consider  whether  these  alternatives,  including  alternative  transmission  technologies,  are  available  ubiquitously  or  only 
 in  certain  places. 
 309.  We  note  that  our  consideration  of  alternative  loop  technologies  in  the  enterprise  market  analysis  differs  from  our  consideration  of  intermodal  alternatives  in  our  mass  market 

 analysis.  Different  approaches  are  warranted  because  of  the  differences  in  how  these  technologies  are  deployed  in  these  markets  based  on  their  suitability  to  individual  customers,  as 
 well  as  the  likelihood  these  technologies  could  be  self-  provisioned  or  made  available  to  competitive  carriers  on  a  wholesale  basis.  902  In  the  enterprise  market,  companies  are  able  to 
 target  individual  buildings  and  customers  and  determine  which  technology  is  the  optimal  means  of  reaching  each  customer.  On  the  other  hand,  in  the  mass  market  where  revenues  are  small, 
 customers  are  typically  served  in  large  groups,  using  uniform  technologies  and  mass  marketing  and  provisioning  techniques  to  minimize  the  cost  of  serving  each  customer.  903  As  such,  creating 
 mechanisms  to  identify  intermodal  alternatives  on  an  individual  customer  basis  in  the  mass  market  is  impractical,  whereas  it  is  feasible,  in  certain  cases,  in  the  enterprise  market. 

 310.  We  find  that  certain  types  of  alternative  loop  technologies  could  be  made  available  on  a  wholesale  basis  to  competitive  carriers  for  providing  high-  capacity  loop  services 
 to  particular  building  locations  in  the  enterprise  market.  Providers  of  viable  intermodal  alternatives  to  mass  market  customers  have  shown  no  inclination  to  provide  access  to  competing 
 carriers  to  serve  their  customers,  nor  would  we  expect  them  to.  904  With  respect  to  the  ability  of  a  competitive  LEC  to  self-  provision  high-  capacity  loops  using  alternative  loop  technologies,  there 
 are  substantial  differences  between  the  mass  market  and  the  enterprise  market.  For  example,  one 
 900  See,  e.  g.,  BellSouth  Comments  at  42-  43;  SBC  Comments  at  91;  Verizon  Comments  at  118;  see  also  ALTS  et 
 al.  Comments  at  45;  Allegiance  Comments  at  19-  22;  Allegiance  Reply  at  36;  AT&  T  Fea/  Giovannucci  Reply  Decl.  at  21. 

 901  See  supra  Part  V.  B. 
 902  See  supra  Part  V.  B.  1.  d.(  ii);  see  also  supra  Part  VI.  A.  4.  a.(  iv). 
 903  Thus,  those  technologies  that  can  only  be  used  for  accessing  certain  customers  and  require  equipment 
 installation  at  the  customer  location,  such  as  fixed  wireless,  have  only  proven  to  be  economically  viable  for  customers  found  in  the  enterprise  market. 

 904  A  provider  that  has  privileged  access  to  a  single  mass  market  customer  potentially  will  lose  the  customer  if  it 
 provides  wholesale  access  to  a  potential  competitor. 
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 of  the  mass  markets  major  alternative  loop  technologies,  cable  telephony,  is  only  available  to  cable  TV  companies  that,  because  of  their  unique  economic  circumstances  of  first-  mover 
 advantages  905  and  scope  economies,  906  have  access  to  the  customer  that  other  competitive  carriers  lack.  Other  technologies,  such  as  fixed  wireless,  have  not  proven  to  be  viable  or  deployable  on  a 
 mass  market  scale.  This  contrasts  with  the  enterprise  market,  where  the  record  reflects  that  alternative  technologies  are  available  to  some  degree  at  certain  locations  that  might  be  used  by 
 competitive  carriers  to  provide  high-  capacity  loops  to  enterprise  customers. 
 (c)  Capacity-  based  Impairment  Findings 
 (i)  Dark  Fiber  Loops 
 311.  We  find  on  a  national  basis  that  requesting  carriers  are  impaired  at  most  customer  locations  without  access  to  dark  fiber  loops.  Dark  fiber,  unlike  lit  fiber,  is  unused  fiber  within 

 an  existing  fiber  optic  cable  that  has  not  yet  been  activated  through  optronics  to  render  it  capable  of  carrying  communications  services.  907  Users  of  unbundled  dark  fiber  loops,  similar  to  users  of 
 dark  fiber  transport,  908  provide  the  electronic  equipment  necessary  to  activate  the  dark  fiber  strands  to  provide  services.  909  While  the  underlying  capacity  level  of  a  strand  of  dark  fiber  is 
 comparable  in  total  capacity  to  an  OCn  loop,  we  address  dark  fiber  loops  separately  from  OCn  loops  due  to  economic  and  operational  characteristics  that  distinguish  dark  fiber  from  lit 
 fiber.  910  We  make  our  determination  of  impairment  based  on  the  high  sunk  costs  associated  with 
 905  These  companies  had  the  advantage  of  beginning  with  exclusive  franchises  and  a  captive  market.  These 
 advantages  are  not  available  to  other  entrants. 
 906  Scope  economies  exist  when  the  cost  of  providing  a  service  is  lower  when  combined  with  other  services.  The 
 cost  of  providing  cable  telephony  to  customers  is  lower  for  cable  TV  companies  because  they  also  provide  video  services  to  those  customers. 

 907  See  supra  note  628  (definition  of  dark  fiber). 
 908  See  infra  Part  VI.  C.  4.  c.(  i). 
 909  By  itself,  dark  fiber  has  virtually  unlimited  capacity.  It  is  the  electronics  that  define  the  capacity.  See  El  Paso 
 Feb.  5,  2003  Ex  Parte  Letter  at  2;  see  also  AT&  T  Comments  at  130;  Letter  from  Thomas  Jones,  Counsel  for  Conversent  Communications,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2 

 (filed  Dec.  24,  2002)  (Conversent  Dec.  24,  2002  Ex  Parte  Letter). 
 910  For  example,  competitive  providers  that  use  unbundled  dark  fiber  claim  that  it  can  offer  a  higher  level  of 
 service  than  lit  transmission  because  unbundled  dark  fiber  integrates  more  efficiently  into  their  networks  by  reducing  the  number  of  failure  points  and  by  providing  the  competing  carrier  with  greater  ability  to  test  for  quality 

 and  maintenance.  See  Conversent  Comments  at  7;  Letter  from  Scott  Sawyer,  Vice  President  -  Regulatory  Affairs,  Conversent  Communications,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3 
 (filed  Oct.  10,  2002)  (Conversent  Oct.  10,  2002  Ex  Parte  Letter).  Other  competitive  carriers  indicate  that  dark  fiber  gives  them  greater  control  over  their  own  network  components  which  is  an  important  aspect  of  their  competitive 
 service  offerings.  See  Letter  from  Lawrence  R.  Freedman,  Counsel  for  Norlight,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Dec.  30,  2002)  (Norlight  Dec.  30,  2002  Ex  Parte  Letter). 
 In  the  UNE  Remand  Order,  we  recognized  that  the  characteristics  of  dark  fiber  do  not  vary  between  loop  and  transport  deployment.  Because  dark  fiber  is  more  extensively  used  in  transport,  we  discuss  its  characteristics  in 
 more  detail  below  in  our  discussion  of  dark  fiber  transport  and  do  not  repeat  such  discussion  here  other  than  to  (continued.) 
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 deploying  high-  capacity  loop  facilities  and  lack  of  evidence  showing  alternatives  at  specific  customer  locations. 
 312.  Dark  fiber  exists  in  a  carriers  network  as  unused  fiber  available  because  that  carrier  has  deployed  fiber  in  the  first  instance  for  the  express  purpose  of  lighting  certain  strands 
 of  it  to  serve  a  particular  customer  location.  911  The  dark  fiber  strands,  however,  remain  unlit.  Dark  fiber  loop  construction,  like  loops  generally,  involves  substantial  fixed  and  sunk  costs.  The 
 primary  costs  associated  with  fiber  deployment  lie  in  the  substantial  sunk  costs  associated  with  physically  laying  the  fiber  cable.  912  In  addition,  there  are  other  barriers  that  must  be  overcome 
 before  deployment  can  effectively  occur.  913  These  other  barriers  include  the  inability  to  obtain  reasonable  and  timely  access  to  the  customers  premises  both  in  laying  the  fiber  to  the  location 
 and  getting  it  into  the  building  thereafter,  914  as  well  as  convincing  customers  to  accept  the  delays  and  uncertainty  associated  with  deployment  of  alternative  loop  facilities.  915  It  is  only  when  a 
 competitive  LEC  has  sufficient  demand  for  lit  fiber  to  a  particular  customer  location  to  enable  it  to  recover  the  fixed  and  sunk  costs  of  the  fiber  deployment  that  it  is  economically  feasible  for 
 that  competitor  to  deploy  fiber  to  that  location.  916  When  a  fiber  build  decision  is  made,  carriers  take  advantage  of  the  fact  that  they  are  already  incurring  substantial  fixed  costs  to  obtain  the 
 rights-  of  way,  dig  up  the  streets,  and  trench  the  cable,  to  lay  more  fiber  than  they  immediately  need.  Once  the  significant  fiber  construction  cost  is  incurred,  917  the  record  reflects  that  it  is 
 relatively  easy  and  inexpensive  to  install  fiber  strands  in  excess  of  current  demand  at  that  time  to  maximize  the  use  of  the  conduit  and  avoid  the  need  to  incur  duplicate  costs  to  retrench  the  same 

 (Continued  from  previous  page) 
 indicate  that  the  characteristics  of  dark  fiber  described  therein  pertain  to  dark  fiber  loops  as  well.  See  infra  Part  VI.  C.  4.  c.(  i).  Any  operational  or  provisioning  requirements  associated  with  incumbent  LEC  provisioning  of 

 unbundled  dark  fiber  transport  apply  equally  to  provisioning  unbundled  dark  fiber  loops.  See  id.,  para.  385  (discussing  issues  associated  with  dark  fiber  access  and  granting  states  the  flexibility  to  establish  reasonable 
 limitations  and  technical  parameters). 
 911  Competitive  carriers  indicate  that  they,  unlike  the  incumbent  LEC,  can  not  build  fiber  loop  plant  until  they  have 
 secured  a  substantial  customer  base  and  revenue  stream.  See  Letter  from  Robert  J.  Aamoth,  Counsel  for  Dominion  Telecom,  to  Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  No.  01-  338  at  4  (filed  Jan.  28,  2003)  (Dominion  Jan. 

 28,  2003  Aamoth  Ex  Parte  Letter);  see  also  El  Paso  et  al.  Comments  at  9. 
 912  See  supra  Part  VI.  A.  3  (discussing  loop  construction  costs);  see  also  El  Paso  Feb.  5,  2003  Ex  Parte  Letter  at  1. 

 913  See,  e.  g.,  El  Paso  et  al.  Comments  at  20-  21. 
 914  See,  e.  g.,  ALTS  et  al.  Comments  at  56  (discussing  other  barriers  competitive  LECs  face  in  self-  deployment); 
 AT&  T  Reply  at  174-  79. 
 915  See  supra  note  890. 

 916  See  infra  Part  VI.  A.  4.  b.(  i)  (stating  that  evidence  that  the  specific  level  of  demand  must  be  OCn  or  3  DS3s  of 
 capacity  into  a  particular  customer  location  to  justify  competitive  loop  deployment);  see  also  supra  note  911. 
 917  See  supra  Part  VI.  A.  3  (discussing  loop  construction  costs);  see  also  El  Paso  et  al.  Comments  at  20-  21. 
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 location  in  the  future  if  demand  for  additional  fiber  facilities  occurs.  918  As  such,  incumbent  LECs  are  the  largest  source  of  intracity  dark  fiber  nationwide  as  a  result  of  their  first-  mover 
 fiber  deployment  to  the  majority  of  customer  locations.  919  This  sharply  contrasts  with  the  availability  of  competitive  dark  fiber  loops,  which  is  necessarily  limited  by  the  economic  barriers 
 inherent  in  deploying  alternative  fiber  loops,  generally,  except  to  certain  customer  locations.  920 
 313.  Because  it  is  generally  not  economically  feasible  to  deploy  duplicate  fiber  loop  facilities,  the  record  reflects  that  a  number  of  facilities-  based  competitive  LECs  rely  on 

 incumbent  LEC  unbundled  dark  fiber  to  provision  last-  mile  services  to  small  and  medium-sized  customers,  particularly  in  rural,  unserved,  or  underserved  areas  of  the  country.  921  These 
 users  of  unbundled  dark  fiber  provide  the  necessary  optronics  922  and  collocations  that  are  preconditions  to  activating  the  fiber  to  serve  customers.  These  carriers  extensively  deploy  their 
 own  network  facilities,  e.  g.,  switches,  transport,  and  the  necessary  optronics  to  light  dark  fiber  to  enable  the  provision  of  competitive  high-  capacity  local  service  to  end  users  in  direct  competition 
 with  the  incumbent  LEC.  923  These  competitive  LECs  argue  that  they  seek  to  construct  their  own  fiber  loops  all  the  way  to  the  customer  if  economically  feasible  to  self-  deploy,  but  that  in  many 
 areas  the  level  of  demand  is  not  sufficient  to  warrant  overbuilding  the  dark  fiber  already  available  from  incumbent  LECs.  924  Because  it  is  not  economically  feasible  to  self-  deploy  to 
 many  enterprise  market  customer  locations,  particularly  less  densely  populated  areas,  unbundled  dark  fiber  loops  enable  competitive  carriers  to  build  facilities-  based  networks  to  serve  customers 

 918  See,  e.  g.,  El  Paso  et  al.  Comments  at  attached  TPUC  testimony  at  8  (indicating  an  industry  average  of  a  mere 
 $1.00  per  foot  to  increase  fiber  placement  from  a  72  fiber  strand  cable  to  the  next  standard  144  size  fiber  strand  cable);  see  also  Norlight  Dec.  30,  2002  Ex  Parte  Letter  at  5. 

 919  See  Norlight  Dec.  30,  2002  Ex  Parte  Letter  at  5  (the  first  carrier  to  lay  fiber  to  a  particular  location  will  lay 
 significantly  more  than  it  will  need  because  the  incremental  cost  of  burying  additional  fibers  is  negligible;  requiring  competitors  to  construct  duplicate  facilities  where  there  is  already  excess  capacity  in  place  is  precisely  the 

 inefficiency  the  USTA  court  instructed  the  Commission  to  avoid). 
 920  See  supra  note  905. 

 921  See,  e.  g.,  Dominion  Jan.  28,  2003  Aamoth  Ex  Parte  Letter  at  4  (dark  fiber  loops  are  especially  critical  because 
 they  are  often  located  in  areas  where  few  or  no  competitors  presently  serve  customers;  eliminating  unbundled  dark  fiber  loops  would  deprive  hundreds  of  businesses  in  Tier  II  and  III  cities  from  receiving  competitive  service); 

 Norlight  Dec.  30,  2002  Ex  Parte  Letter  at  5  (in  smaller  rural  markets  where  dark  fiber  exists  there  typically  is  no  demand  or  expected  growth  in  demand  to  warrant  additional  facilities);  Norlight  Comments  at  2-  4  (Norlight  serves 
 Tier  II  and  III  cities  where  the  incumbent  LEC  is  the  only  option  other  than  cost  prohibitive  self-  deployment  to  extend  competitive  service  to  customers). 

 922  We  note  that  the  cost  of  electronics,  such  as  those  used  to  activate  dark  fiber,  are  not  sunk  costs  like  fiber 
 construction  costs  because  they  can  be  moved  from  one  location  to  another  location  upon  exit  from  a  particular  location. 

 923  See,  e.  g.,  Norlight  Dec.  30,  2002  Ex  Parte  Letter  at  2. 
 924  Id  at  5.  Carriers  also  note  that  in  these  more  rural  areas  it  actually  may  be  less  costly  to  both  in  time  and  dollars 
 to  self-  deploy  fiber  than  in  more  urban  areas,  but  the  level  of  demand  to  a  customer  location  may  simply  be  too  low  to  justify  the  cost  of  installing  duplicative  facilities.  Id  at  3. 
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 at  those  locations  925  with  the  least  reliance  on  the  incumbent  LECs  facilities.  926  We  find  that  dark  fiber  loops  allow  competing  carriers  to  provide  services  without  incurring  many  of  the  high 
 sunk  costs  of  self-  deploying  the  loop  facility,  but  still  require  significant  investment  in  collocation  and  optronics.  We  expect  that  unbundling  of  dark  fiber  loops  will  encourage 
 construction  of  alternative  facilities  because  it  will  provide  facilities-  based  carriers  the  means  of  obtaining  the  last-  mile  facility  necessary  to  serve  customers  over  competitive  networks 
 comprised  largely  of  facilities  other  than  the  incumbent  LECs.  The  availability  of  dark  fiber  loops  increases  the  ability  of  facilities-  based  competitive  LECs  to  reduce  their  reliance  on 
 unbundled  lit  high-  capacity  loops  at  locations  where  dark  fiber  loops  are  available  to  them,  encouraging  investment  in  the  optronics  necessary  to  light  the  fiber.  927  Moreover,  unbundling 
 dark  fiber  enables  the  Commission  to  limit  unbundling  obligations  with  respect  to  certain  high-capacity  lit  loops  as  we  discuss  below. 

 314.  In  most  areas,  competing  carriers  are  unable  to  self-  deploy  and  have  no  alternative  to  the  incumbent  LECs  facility.  928  However,  the  record  indicates  that  competitive 
 LECs  have  been  able  to  self-  deploy  fiber  to  some  customer  locations,  although  the  record  does  not  reveal  the  specific  locations  of  such  deployment.  929  For  this  reason,  we  delegate  to  the  states 
 the  authority  to  collect  and  analyze  more  specific  evidence  of  loop  deployment  on  a  customer  location  basis,  applying  a  uniform  national  trigger  that  measures  self-  provisioning  to  determine 
 customer  locations  where  competitive  carriers  are  not  impaired  without  access  to  incumbent  LEC  unbundled  dark  fiber  loops.  930 

 925  See,  e.  g.,  Dominion  Jan.  28,  2003  Aamoth  Ex  Parte  Letter  at  2;  Norlight  Dec.  30,  2002  Ex  Parte  Letter  at  5. 
 926  See,  e.  g.,  Letter  from  Joshua  M.  Bobeck,  Counsel  for  El  Paso  Global  Networks,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  No.  01-  338,  96-  98,  98-  147  at  2  (filed  Oct.  4,  2002)  (El  Paso  Oct.  4,  2002  Ex  Parte  Letter)  (dark  fiber  is  the  UNE  that  is  closest  to  100%  facilities-  based  competition). 

 927  See  Letter  from  Stephen  W.  Crawford,  General  Counsel,  El  Paso  Networks,  and  Scott  Sawyer,  Vice  President 
 and  Counsel,  Conversent  Communications,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Nov.  26,  2002)  (El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter). 

 928  See  supra  note  856;  see  also  Letter  from  Brad  E.  Mutschelknaus,  Counsel  for  OnFiber  Communications,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  6,  2003)  (OnFiber  Feb.  6,  2003  Ex  Parte  Letter)  (asserting  that  the  vast  expense  associated  with  deploying  dark  fiber  precludes  self-provisioning 

 and  prevents  any  kind  of  alternative  market  from  developing). 
 929  See  supra  note  856;  see  also  Letter  from  Patrick  J.  Donovan,  Counsel  for  El  Paso  Networks  LLC,  to  Marlene 
 H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Jan.  22,  2003)  (El  Paso  Jan.  22,  2003  Ex  Parte  Letter);  Letter  from  Ann  D.  Berkowitz,  Project  Manager    Federal  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC, 

 CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  19  (filed  Jan.  31,  2003)  (discussing  competition  for  special  access)  (Verizon  Jan.  31,  2003  Special  Access  Ex  Parte  Letter);  Norlight  Dec.  30,  2002  Ex  Parte  Letter  at  2. 

 930  See  infra  Part  VI.  A.  4.  b.(  ii)(  d)  (discussing  in  detail  the  state  reviews  on  a  customer-  location  specific  basis 
 applying  the  defined  Self-  Provisioning  Trigger  and  Competitive  Wholesale  Facilities  Trigger). 
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 (ii)  OCn  Loops 
 315.  We  find  that  requesting  carriers  are  not  impaired  on  a  nationwide  basis  without  access  to  unbundled  lit  OCn  loops  because  the  barriers  relating  to  the  deployment  of  OCn  lit 

 loops  can  be  overcome  through  self-  deployment  at  the  OC3  and  above  level,  the  use  of  unbundled  dark  fiber,  or  the  use  of  lit  DS3s.  931  Record  evidence  reflects  competitive 
 deployment  of  loops  at  the  OCn  level  and  competitive  carriers  confirm  they  are  often  able  to  economically  deploy  these  facilities  to  the  large  enterprise  customers  which  use  them.  932  Further, 
 there  does  not  appear  to  be  any  evidence  of  demand  for  incumbent  LEC  OCn  level  unbundled  loops.  933  Competitive  LECs  have  deployed  OCn  capacity  to  some  commercial  buildings 
 nationwide,  including  Tier  II  and  Tier  III  markets.  934  We  find  this  evidence  of  deployment  persuasive  in  demonstrating  that  competitive  LECs  can  often  overcome  the  barriers  associated 
 with  loop  deployment  at  the  OCn  level. 

 931  OCn  circuits  range  from  OC3  to  OC192.  The  smallest  common  OCn  capacity  circuit,  an  OC3,  is  comparable  in 
 capacity  to  3  DS3s,  84  DS1s,  or  2016  voice-  grade  loops.  Our  impairment  finding  for  OCn  level  loops  differs  from  our  finding  for  dark  fiber  loops  as  the  economics  of  deploying  lit  fiber  at  the  OCn  level  differs  from  deploying 

 dark  fiber  at  a  comparable  capacity  level.  While  the  construction-  related  costs  in  laying  the  fiber  are  the  same,  the  ability  to  recover  these  sunk  costs  differs  if  considered  as  distinct  types  of  loop  facilities.  As  we  noted  in  our 
 discussion  of  dark  fiber  loops  above,  dark  fiber  is  unused  deployed  fiber  along  a  particular  route  that  is  not  associated  with  a  specific  potential  revenue  stream  from  a  known  customer  at  the  time  of  construction.  See  supra 
 para.  312.  A  competitive  LEC  does  not  deploy  dark  fiber  to  use  in  self-  provisioning  high-  capacity  local  service  to  customers  unless  that  competitive  LEC  already  has  sufficient  customer  demand  at  a  lit  fiber  level,  i.  e.,  at  the  OCn 
 or  3  DS3  level,  to  recover  the  sunk  costs  of  the  fiber  construction.  See  supra  note  911;  see  also  Dominion  Jan.  28,  2003  Aamoth  Ex  Parte  Letter  at  4.  In  other  words,  competitive  carriers  can  not  economically  deploy  dark  fiber  on  a 
 stand-  alone  basis  for  self-  deployment  purposes  without  an  associated  lit  fiber  demand.  While  carriers  deploying  OCn  fiber  loops  must  necessarily  first  deploy  dark  fiber  and  then  attach  the  requisite  optronics  to  activate  the  fiber 
 for  service  capability  at  the  OCn  level,  carriers  deploying  fiber  to  meet  a  particular  customer  demand  for  OCn  capacity  are  viewed  as  deploying  an  OCn  loop  to  serve  that  customer  rather  than  deploying  dark  fiber  to  serve  that 
 customer. 
 932  See,  e  g.,  WorldCom  Fleming  Decl.  at  para.  10  (when  customer  demand  is  projected  at  several  DS3s  or  optical 
 level  capacity  a  self-  build  decision  is  made);  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  96-  98,  98-  147,  Attach.  at  5  (filed  Oct.  7,  2002)  (WorldCom  Oct.  7, 

 2002  Ex  Parte  Letter)  (for  self-  deployment  to  be  feasible,  the  demand  must  be  for  at  least  multiple  DS3s);  AT&  T  Comments  at  134  (a  competitive  LEC  can  only  self-  deploy  to  a  location  with  enormous  demand,  i.  e.,  the  smallest  of 
 which  would  be  at  the  OC3  level);  AT&  T  Nov.  25,  2002  Ex  Parte  Letter  at  2  (the  amount  of  committed  traffic  to  support  construction  of  loops  for  large  business  customers  is  about  3  DS3s,  i.  e.,  an  OC3),  and  Attach.  B  at  9  (at 
 least  3  DS3s  worth  of  demand  is  required  before  a  facility  build  can  generally  be  proven  as  financially  prudent). 
 933  See  supra  para.  299  (BOCs  state  that  not  a  single  unbundled  loop  above  a  DS3  level  has  been  purchased). 

 934  See  KMC  Duke  June  11,  2001  High-  capacity  Aff.  at  para.  3  (naming  the  Tier  III  markets  they  serve  with  their 
 own  facilities);  CCG  July  17,  2002  CLEC  Survey  Ex  Parte  Letter  (explaining  that  the  six  metropolitan  areas  chosen  to  represent  competitive  LEC  loop  buildout    Albany,  Augusta,  Boston,  Chicago,  Corpus  Christi,  and  Portland   

 represent  a  broad  cross  section  of  populations  and  business  concentrations);  see  also  WorldCom  Oct.  30,  2002  Ex  Parte  Letter. 
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 316.  Commenters  indicate  that  services  offered  over  OCn  loops  produce  revenue  levels  which  can  justify  the  high  cost  of  loop  construction,  providing  the  opportunity  for  competitive 
 LECs  to  offset  the  fixed  and  sunk  costs  associated  with  the  loop  construction.  Large  enterprise  customers  purchasing  services  over  OCn  loops  935  enter  into  long-  term  contracts  committing  to 
 revenue  streams  and  associated  early  termination  charges  that  provide  the  ability  for  carriers  to  recover  their  substantial  non-  recurring  set-  up  or  construction  costs.  936  Customers  obtaining 
 services  at  the  OCn  level  also  understand  that  transitioning  such  services  to  a  new  provider  is  not  an  overnight  process.  Because  of  their  level  of  business  planning  sophistication,  as  a  practical 
 matter,  they  begin  the  process  of  seeking  a  new  or  alternative  service  provider  well  in  advance  of  their  actual  need  for  the  service.  937  Accordingly,  they  are  more  receptive  to  the  inherent 
 provisioning  delays  associated  with  constructing  these  high-  capacity  loops  to  meet  their  particular  needs  than  smaller  business  customers  served  by  lower  capacity  loops.  938  Competitive 
 carriers  deploying  fiber  at  the  OCn  capacity  level  are  therefore  able  to  accommodate  provisioning  delays  and  additional  expense  at  the  start  of  the  construction  process,  mitigating 
 obstacles  to  self-  deploying  they  may  face  in  gaining  access  to  public  and  private  rights-  of-  way.  939 
 317.  Furthermore,  enterprise  customers  requiring  OCn  level  capacity  are  often  located  in  multiunit  premises  where  they  may  have  the  ability  to  exert  greater  influence  over  building 

 access  because:  (1)  their  operations  are  so  substantial  that  they  own  the  premises  outright;  (2)  they  control  the  access  to  the  premise;  or  (3)  they  have  sufficient  influence  over  the 

 935  We  recognize  that  large  enterprise  customers  may  also  have  remote  business  locations  that  do  not  require  the 
 capacity  of  an  OCn  loop.  We  reiterate  that  we  do  not  tailor  our  rules  to  restrict  or  limit  unbundling  based  on  the  size  or  class  of  the  customer  served.  A  large  enterprise  customers  particular  loop  capacity  demand  at  a  given 

 service  location  is  determined  by  multiple  factors  unique  to  that  customers  needs  at  that  specific  location,  rather  than  the  size  of  that  customer.  Merely  because  large  enterprise  customers  are  typically  the  only  type  of  customer 
 that  purchase  OCn  capacity  loops  does  not  equate  to  the  fact  that  OCn  loops  are  the  only  type  of  loop  such  customers  demand. 

 936  See  supra  note  932;  see  also  Declaration  of  Alfred  E.  Kahn  and  William  E.  Taylor,  RM  No.  10593  at  32-  33 
 (discussing  generally  how  long-  term  contracts  and  associated  termination  penalties  are  used  to  ensure  cost  recovery)  in  Verizon  Jan.  31,  2003  Special  Access  Ex  Parte  Letter.  Long-  term  contracts  are  used  to  minimize  risk  exposure 

 and  stabilize  construction  costs  over  time  when  the  seller  incurs  heavy  sunk  costs  as  part  of  a  transaction.  Id. 
 937  If  this  customers  competitive  OCn  loop  is  to  be  provisioned  at  their  current  business  location,  we  understand 
 they  will  generally  begin  the  process  of  looking  at  alternative  service  providers  months  in  advance  of  the  expiration  date  of  their  current  contract  for  service,  which  will  usually  include  a  provision  for  month-  to-  month  service 

 thereafter  for  as  long  as  needed.  If  service  is  to  be  provided  at  a  brand  new  location  that  the  customer  is  moving  to,  or  having  built,  at  an  OCn  level  of  capacity,  decisions  regarding  which  service  provider  will  provision  that  service 
 will  similarly  be  made  months  before  occupancy.  Each  of  these  scenarios  mitigates  the  impact  of  the  lead  time  to  build  new  loops  with  respect  to  serving  these  customers. 

 938  See,  e.  g.,  Sprint  Comments  at  23;  WorldCom  Fleming  Decl.  at  paras.  9-  10. 
 939  To  the  extent  these  initial  obstacles  are  in  the  form  of  unreasonably  high  costs  for  rights-  of-  way  access, 
 competitive  LECs  deploying  fiber  to  serve  customers  at  the  OCn  level  are  better  able  to  overcome  these  barriers  as  the  revenues  associated  with  OCn  capacity  service  contracts  are  quite  high.  See  generally  AT&  T  Comments  at  134; 

 WorldCom  Comments  at  76;  see  also  TDS  Jackson  Aff.  at  para.  8. 
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 landlord/  building  owner  to  overcome  building  access  impairments  the  competitive  provider  may  encounter  due  to  the  amount  of  leased  occupancy  space  for  which  this  enterprise  customer  has 
 committed.  940 
 318.  Competitive  carriers  requiring  OCn  capacity  lit  loops  to  serve  customers  will  also  have  the  ability  to  purchase  dark  fiber,  including  unbundled  dark  fiber  loops,  and  attach 

 their  own  optronics  to  activate  such  loops  to  serve  their  customers  at  those  locations  where  unbundled  dark  fiber  is  available.  In  circumstances  where  competitive  LECs  may  be  unable  to 
 self-  deploy  the  underlying  OCn  fiber  loop,  the  record  demonstrates  that  there  is  no  impairment  with  respect  to  obtaining  and  attaching  the  requisite  optronics  necessary  to  light  dark  fiber  at  the 
 OCn  level  to  provide  service.  Based  on  record  evidence  that  self-  deployment  of  the  loop  transmission  facility  at  the  OCn  level  is  generally  feasible,  it  necessarily  follows  that  the  lesser 
 cost  of  self-  providing  just  the  optronics  to  light  the  fiber  at  the  OCn  level  is  economically  feasible.  While  we  recognize  that  dark  fiber  may  not  be  available  at  every  customer  location 
 nationwide,  a  competitive  carrier  may  also  access  lit  loops.  Because  the  record  demonstrates,  however,  that  competitive  carriers  routinely  self-  deploy  when  customer  demand  is  three  DS3s 
 (or  optical  capacity)  as  discussed  further  below,  we  limit  the  availability  of  lit  DS3  loops  to  a  maximum  of  two  unbundled  DS3  loops  per  carrier  at  each  customer  location.  941 

 319.  Finally,  as  we  have  noted,  at  least  in  the  BOC  regions,  the  record  reflects  that  competitive  LECs  have  not  obtained  unbundled  loops  at  the  OCn  level.  942  Thus,  there  are  few,  if 
 any,  transition  issues  with  regard  to  OCn  loops.  In  the  event  a  competitive  LEC  of  which  we  are  not  aware  is  currently  providing  service  over  an  unbundled  OCn  loop,  the  transition  scheme  that 
 we  have  adopted  herein  governs  such  situation.  943 
 (iii)  DS3  Loops 
 320.  We  make  a  national  finding  that  requesting  carriers  are  impaired  on  a  customer-location-  specific  basis  without  access  to  unbundled  DS3  loops.  The  inability  to  recover  the 

 significant  fixed  and  sunk  construction  costs  of  DS3  loops,  coupled  with  the  additional  barriers  to  loop  deployment  associated  with  accessing  rights-  of-  way;  obtaining  and  paying  for  building 
 access;  and  other  service  provisioning  delays  impair  the  ability  of  requesting  carriers  to  self-  provision  single  DS3  loops.  944  Unlike  deployment  at  even  the  lowest  OCn  level,  the  record 
 indicates  that  a  single  DS3  loop,  generally,  can  not  provide  a  sufficient  revenue  opportunity  to 
 940  See,  e.  g.,  AT&  T  Reply  at  174-  77. 
 941  See  infra  para.  321. 
 942  See  supra  para.  299. 
 943  See  supra  Part  VIII.  D  (addressing  the  transition  process  adopted  herein). 
 944  See  supra  Part  VI.  A.  3  for  a  discussion  of  the  general  economic  characteristics  of  loop  deployment.  Because  the 
 cost  of  constructing  a  fiber  loop  facility  does  not  vary  to  any  significant  degree  with  loop  capacity,  to  economically  justify  a  particular  loop  construction  expenditure,  a  competitive  carrier  must  have  some  reasonable  expectation  of 

 being  able  to  recover  its  cost  over  time. 
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 overcome  these  barriers.  945  Because  our  impairment  analysis  rests  most  heavily  on  the  ability  of  a  self-  deploying  carrier  to  recover  its  sunk  and  fixed  costs,  the  inability  to  recover  such  costs  at  a 
 single  DS3  level  results  in  impairment.  In  finding  impairment  based  on  the  inability  to  recover  sunk  costs,  we  find  that  the  other  economic  and  operational  barriers  faced  by  competitive  LECs 
 in  self-  deploying  loops  generally,  i.  e.,  difficulties  in  acquiring  municipal  and  private  rights-  of-ways  as  well  as  gaining  building  access  from  owners  of  multiunit  premises,  946  exist  for 
 competitive  LECs  with  respect  to  single  DS3  loop  deployment.  947 
 321.  Despite  the  economic  barriers  that  a  competitive  LEC  faces  in  deploying  single  DS3  loops,  the  record  indicates  that  some  carriers  have  been  able  to  overcome  these  barriers 

 when  providing  multiple  DS3s  to  a  specific  customer  location.  948  Because  the  record  does  not,  however,  provide  sufficient  evidence  to  determine  the  specific  factors  that  make  such 
 deployment  feasible  at  these  locations,  we  are  unable  to  conclude  with  any  precision  exactly  where  requesting  carriers  would  not  be  similarly  impaired  without  access  to  unbundled  DS3 
 loops.  949  Similarly,  the  record  reflects  a  small  but  potentially  growing  wholesale  alternative  DS3  loop  market.  950  Once  again,  however,  the  record  in  this  proceeding  does  not  specify  exactly 
 where  this  deployment  has  occurred.  Therefore,  as  discussed  below,  we  delegate  to  the  states  the 
 945  See  supra  note  860.  The  potential  revenue  stream  associated  with  a  customer  commitment  for  a  single  DS3 
 loop  is  far  less  than  the  revenue  stream  associated  with  an  OCn  loop,  yet  the  cost  to  construct  the  loop  facility  is  the  same.  At  the  smallest  OCn  level,  i.  e.,  OC3,  there  are  2,016  voice-  grade  equivalent  lines.  A  single  DS3  is 

 equivalent  to  672  voice-  grade  equivalent  lines.  A  simple  comparison  of  the  relative  voice-  grade  equivalent  lines  demonstrates  that  a  customer  commitment  in  terms  of  potential  revenue  stream  for  a  DS3  is  many  times  smaller  than 
 that  of  an  OC3  loop.  Accordingly,  it  takes  a  longer  period  of  time  for  a  competitive  LEC  to  recover  its  costs  of  deploying  a  single  DS3  loop  facility. 

 946  See,  e.  g.,  AT&  T  Reply  at  174-  79  (discussing  other  barriers  linked  to  the  incumbent  LECs  historical  monopoly 
 that  preclude  competitive  loop  deployment  independent  of  cost  factors);  see  also  NuVox  et  al.  Comments  at  74;  KMC  Duke  Aff.  at  paras.  7-  9  (citing  proprietary  information);  SNiP  LiNK  Polito  Aff.  at  paras.  3-  7;  Sprint 

 Comments  at  22;  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Oct.  25,  2002)  (discussing  building  access  barriers)  (WorldCom  Oct. 
 25,  2002  Building  Access  Ex  Parte  Letter);  ALTS  et  al.  Comments  at  56. 
 947  See  supra  Part  VI.  A.  3.  for  evidence  of  the  existence  of  the  other  operational  barriers  to  DS3  loop  capacity 
 deployment. 
 948  The  record  indicates  that  some  competitive  carriers  have  economically  self-  deployed  DS3  capacity  loops  to 
 certain  customer  locations  where  the  aggregate  demand  for  DS3  capacity  at  those  locations  is  three  or  more.  See  supra  note  860;  see  also  Letter  from  David  L.  Lawson,  Counsel  for  AT&  T  to  Marlene  H.  Dortch,  Secretary,  FCC, 

 CC  Docket  Nos.  01-  338,  96-  98,  02-  33  at  1  n.  2  (filed  Feb.  3,  2003)  (AT&  T  Feb.  3,  2003  Lawson  Ex  Parte  Letter)  (citing  AT&  T  Nov.  25,  2002  Ex  Parte  Letter  indicating  competitors  can  economically  self-  deploy  at  3  DS3s  worth 
 of  traffic). 
 949  Indeed,  we  note  that  competitive  carriers  do  not  have  an  incentive  to  volunteer  such  information  in  our  record. 
 The  record  does  provide  sufficient  information  to  enable  us  to  impose  a  limitation  on  the  number  of  DS3  unbundled  loops  that  a  requesting  carrier  can  obtain  to  any  single  customer  location.  See  infra  para.  324. 

 950  See  AT&  T  Comments  at  150  n.  110  (citing  confidential  information  that  indicates  that  some  of  its  DS3  level 
 loop  capacity  is  obtained  from  non-  incumbent  LEC  sources). 
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 authority  to  collect  and  analyze  more  specific  evidence  of  DS3  loop  deployment  on  a  customer  location-  specific  basis,  applying  uniform  national  triggers  that  measure  self-  provisioning  or 
 wholesale  alternative  availability  to  determine  customer  locations  where  competitive  carriers  are  not  impaired  without  access  to  incumbent  LEC  unbundled  DS3s.  951 

 322.  If,  as  the  incumbent  LECs  argue,  a  small  number  of  buildings  in  each  metropolitan  area  typically  account  for  a  large  fraction  of  the  traffic,  952  we  expect  that  the 
 triggers  that  we  adopt  today  will  provide  incumbent  LECs  substantial  relief  from  their  unbundling  obligations  while  simultaneously  ensuring  that  competitive  carriers  get  unbundled 
 high-  capacity  loop  access  only  where  they  are  unable  to  economically  self-  deploy  or  use  alternative  facilities.  953 

 323.  In  finding  that  competitive  carriers  are  impaired  without  unbundled  access  to  DS3  loops,  we  disagree  with  incumbent  LECs  claims  that  market  evidence  of  DS3  deployment  in 
 certain  situations  demonstrates  that,  in  all  situations,  traffic  and  revenue  potential  justify  a  nationwide  finding  of  DS3  non-  impairment.  The  limited  record  evidence  we  have  of  self-deployment 
 does  not  permit  such  broad  extrapolation. 
 324.  Limitation  on  Multiple  Unbundled  DS3  Loops.  Finally,  consistent  with  our  finding  of  no  impairment  at  the  OCn  loop  capacity  level,  and  because  the  record  confirms  that  it 

 is  economically  possible  to  self-  deploy  at  a  three  DS3  loop  level  to  a  particular  customer  location,  we  limit  an  incumbent  LECs  unbundling  obligation  to  a  total  of  two  DS3s  per 
 requesting  carrier  to  any  single  customer  location.  954  We  find  that  as  a  carrier  approaches  customer  demand  for  three  DS3s  of  capacity  at  a  particular  customer  location,  it  is  feasible  for 
 that  carrier  to  self-  deploy  its  own  high-  capacity  facilities.  Our  unbundled  DS3  loop  quantity 

 951  See  infra  Part  VI.  A.  4.  b.(  ii)(  d)  (discussing  in  detail  the  state  reviews  on  a  customer-  location  specific  basis 
 applying  the  defined  Self-  Provisioning  Trigger  and  Competitive  Wholesale  Facilities  Trigger). 
 952  BOC  UNE  Rebuttal  Report  at  45. 

 953  One  commenter  indicates  that  200  to  300  out  of  15,000  multiunit  premises  in  a  typical  Tier-  I  MSA  generate 
 80%  of  the  data  revenues.  Id.  Verizon  indicates  a  Tier  I  MSA  is  typically  defined  as  an  MSA  with  a  population  of  one  million  or  more.  See  Verizon  Jan.  31,  2003  Special  Access  Ex  Parte  Letter  at  13  n.  62. 

 954  We  note  that  our  unbundled  DS3  loop  cap  is  smaller  than  the  unbundled  DS3  transport  cap.  See  infra  Part 
 VI.  C.  4.  c.(  ii).  The  unbundled  DS3  loop  cap  is  based  on  record  evidence  indicating  the  feasibility  of  DS3  loop  self-deployment  at  a  3  DS3  level.  Indeed,  AT&  Ts  record  evidence  indicates  economic  feasibility  at  about  2.75  DS3s  or 

 77  DS1s  worth  of  traffic.  See  AT&  T  Jan.  14,  2003  Ex  Parte  Letter  at  4  (citing  AT&  T  Nov.  25,  2002  Ex  Parte  Letter,  Attach.  B).  Once  a  competitive  carriers  customer  demand  at  a  location  exceeds  2  DS3  loops,  the 
 competitive  carrier  should  plan  to  self-  deploy  DS3  capacity  to  that  customer  location.  The  record  evidence  for  the  self-  provisioning  feasibility  level  for  DS3  transport  varies,  but  because  it  generally  is  within  a  higher  range  than  for 
 DS3  loops,  establishing  the  DS3  transport  limit  at  a  higher  number  is  appropriate. 
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 limit  is  location  specific,  maintaining  consistency  with  our  impairment  conclusions  about  OCn  capacity  loop  deployment,  955  as  well  as  DS3  loop  deployment. 
 (iv)  DS1  Loops 
 325.  We  find  that  requesting  carriers  generally  are  impaired  without  access  to  unbundled  DS1  loops.  956  The  record  contains  little  evidence  of  competitive  LECs  ability  to  self-deploy 

 single  DS1  capacity  loops  957  and  scant  evidence  of  wholesale  alternatives  for  serving  customers  at  the  DS1  level.  958  Commenters  expressly  state  that  a  competitive  carrier  would  not 
 construct  its  own  DS1  or  lower  capacity  loops.  959  Indeed,  incumbent  LECs  recognize  a  distinction  between  provisioning  DS1  level  loops  and  other  higher  capacity  loops.  960  The  record 
 shows  that  requesting  carriers  seeking  to  serve  DS1  enterprise  customers  face  extremely  high  economic  and  operational  barriers  in  deploying  DS1  loops  to  serve  these  customers.  961 

 955  We  have  noted  that  the  lowest  common  OCn  capacity  standard,  OC3,  is  equivalent  to  three  DS3  circuits  in 
 terms  of  capacity.  See  supra  note  931. 
 956  DS1  loops  will  be  available  to  requesting  carriers,  without  limitation,  regardless  of  the  technology  used  to 
 provide  such  loops,  e.  g.,  two-  wire  and  four-  wire  HDSL  or  SHDSL,  fiber  optics,  or  radio,  used  by  the  incumbent  LEC  to  provision  such  loops  and  regardless  of  the  customer  for  which  the  requesting  carrier  will  serve  unless 

 otherwise  specifically  indicated.  See  supra  Part  VI.  A.  4.  a.(  v)  (discussing  FTTH).  The  unbundling  obligation  associated  with  DS1  loops  is  in  no  way  limited  by  the  rules  we  adopt  today  with  respect  to  hybrid  loops  typically 
 used  to  serve  mass  market  customers.  See  supra  Part  VI.  A.  4.  a.(  v)(  b)(  i). 
 957  We  note  that  at  least  two  competitive  LECs  have  provided  evidence  that  indicates  that  they  self-  provide  some 
 DS1  capacity  loops  to  certain  customer  locations.  See  supra  note  859.  It  is  important  to  note,  however,  that  this  evidence  of  self-  provisioning  has  been  possible  where  that  same  carrier  is  already  self-  provisioning  OCn  or  a  3  DS3 

 level  of  loop  capacity  to  that  same  customer  location.  Thus,  this  evidence  does  not  support  the  ability  to  self-  deploy  stand-  alone  DS1  capacity  loops  nor  does  it  impact  our  DS1  impairment  finding.  See  AT&  T  Comments  at  150  n.  10 
 (citing  confidential  information);  WorldCom  Slocum  Decl.  at  paras.  3-  6. 
 958  See  Covad  Reply  at  56  (discussing  no  alternative  DS1  capacity  providers);  NewSouth  Comments  at  13-  17; 
 NewSouth  Reply  at  17;  WorldCom  Comments  at  74;  AT&  T  Jan.  14,  2003  Ex  Parte  Letter  at  2;  WorldCom  Oct.  30,  2002  Ex  Parte  Letter;  AT&  T  Feb.  3,  2003  Lawson  Ex  Parte  Letter  at  13.  The  record  indicates  that  even 

 competitive  carriers  that  have  deployed  their  own  loop  facilities  do  not  have  the  back  office  support  systems  in  place  that  are  necessary  to  offer  any  excess  capacity  on  a  wholesale  basis  to  other  competitive  LECs.  See,  e.  g., 
 KMC  Duke  Aff  at  para.  13  (discussing  what  systems  are  necessary  to  wholesale  service  to  other  carriers). 
 959  See  AT&  T  Jan.  14,  2003  Ex  Parte  Letter  at  3  n.  5;  Covad  Comments  at  47;  Allegiance  Reply  at  38. 

 960  SBC  Comments  at  100-  01;  SBC  Reply  at  156  (recognizing  that  impairment  may  exist  for  certain  DS1  loops  and 
 proposing  a  carve-  out). 
 961  See  supra  Part  VI.  A.  4.  b.(  ii)(  a)  for  a  discussion  of  the  economic  and  operational  barriers  to  DS1  loop  capacity 
 deployment.  The  record  indicates  that  many  competitive  carriers  providing  DS1  capacity  loops  to  enterprise  market  customers  serve  the  small  to  medium-  sized  segment  of  this  market  which  is  characterized  as  typically  underserved 

 by  incumbent  LECs.  Indeed,  many  of  these  competitive  LECs,  which  are  themselves  small  to  medium  size  businesses,  have  entered  the  competitive  telecommunications  market  specifically  to  serve  these  smaller  business 
 customers  requiring  primarily  DS1  level  capacity.  The  DS1  loop  unbundling  rule  we  adopt  today  recognizes  the  dependency  that  smaller  business  customers  and  carriers  have  on  DS1  capacity  loops  and  accommodates  those 
 (continued.) 
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 Customers  demanding  services  over  DS1  loops  possess  significantly  different  economic  characteristics  for  competitive  carriers  than  large  enterprise  market  customers.  In  particular, 
 small  and  medium  enterprise  customers  served  by  DS1  loops  provide  much  lower  revenue  opportunities  than  large  enterprise  market  customers  and,  generally,  resist  long-  term  contract 
 obligations.  962  These  factors  lead  to  a  greater  potential  to  change  providers  on  a  more  frequent  basis,  i.  e.,  churn,  resulting  in  the  inability  of  competitive  LECs  to  rely  on  a  long-  term  DS1 
 revenue  stream,  as  they  can  with  much  higher  loop  capacity  demands.  Taken  together,  these  factors  make  it  economically  infeasible  for  competitive  LECs  to  deploy  DS1  loops,  which 
 require  the  same  significant  sunk  and  fixed  construction  costs  as  higher  capacity  loops. 
 326.  While  DS1  loops  are  typically  used  to  serve  small  to  medium-  sized  business  customers  associated  with  the  enterprise  market,  they  are  also  used  to  serve  customers  associated 

 with  the  mass  market.  Although  we  recognize  different  characteristics  between  these  two  markets,  e.  g.,  enterprise  customers  are  more  concentrated  in  urban  locations,  in  multiunit 
 premises,  and  demand  greater  variety  and  higher  quality  services  than  mass  market  customers,  the  economics  of  constructing  DS1  loop  facilities  to  serve  these  different  customer  classes  are 
 not  significantly  different.  The  average  revenue  available  per  customer  in  either  of  these  markets  is  very  low  relative  to  larger  enterprise  market  customers  using  higher  capacity  loops.  963 
 While  we  recognize  that  retail  business  customer  rates  are  typically  higher  than  residential  rates,  the  record  reflects  that  the  revenues  generated  from  small  and  medium  enterprise  customers  are 
 not  sufficient  to  make  self-  deploying  DS1  loops  economically  feasible  from  a  cost  recovery  perspective.  964  As  we  have  stated,  our  impairment  findings  rely  most  heavily  on  the  economic 
 feasibility  of  competitive  LECs  to  self-  deploy  and  recover  sunk  costs.  965  Competitive  LECs  do  not  have  the  ability  to  recover  sunk  costs  in  self-  deploying  DS1  loops.  Furthermore,  the  other 
 economic  and  operational  barriers  faced  by  competitive  LECs  in  self-  deploying  loops  generally,  e.  g.,  the  inability  to  obtain  reasonable  and  timely  access  to  the  customers  premises  both  in 
 laying  the  fiber  to  the  location  and  bringing  it  into  a  building  thereafter,  966  as  well  as  convincing  customers  to  accept  the  delays  and  uncertainty  associated  with  deployment  of  alternative  loop 

 (Continued  from  previous  page) 
 needs  consistent  with  our  impairment  framework.  See  also  NuVox  Cadieux  Jan.  24,  2003  Ex  Parte  Aff.  (for  general  discussion  of  serving  small  to  medium  business  customers  with  DS1  capacity);  NuVox  et  al.  Comments, 

 attached  Profiles  &  Affidavits;  Covad  Reply  at  54;  NewSouth  Reply  at  16-  17;  Allegiance  Reply  at  36-  38. 
 962  See,  e.  g.,  NewSouth  Reply  at  18  (discussing  the  lower  traffic  volumes  and  revenue  potential  that  can  be 
 generated  from  a  DS1);  see  also  TDS  Jackson  Aff.  at  para.  10. 
 963  This  fact  can  be  most  easily  demonstrated  by  simply  comparing  voice-  grade  line  equivalents,  i.  e.,  a  single  DS1 
 is  equivalent  to  24  voice-  grade  lines  whereas  3  DS3s  (the  number  of  DS3  capacity  loops  where  self-  provisioning  begins  to  be  economically  feasible)  is  equivalent  to  2016  voice-  grade  equivalents. 

 964  See  supra  note  962. 
 965  See  supra  para.  206. 
 966  See,  e.  g.,  AT&  T  Reply  at  174-  79;  ALTS  et  al.  Comments  at  56  (discussing,  generally,  some  of  the  other 
 barriers  competitive  LECs  face  to  self-  deployment). 
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 facilities  exist  with  DS1  loop  self-  deployment.  967  Indeed,  because  the  ability  to  absorb  the  additional  costs  associated  with  these  other  economic  and  operational  barriers  over  time 
 becomes  increasingly  more  difficult  at  lower  loop  capacity  levels,  these  barriers  impact  the  ability  to  self-  deploy  at  a  DS1  level  to  an  even  greater  extent  than  at  higher  loop  capacity 
 levels.  968 
 327.  Because  the  record  does  not  demonstrate  that  carriers  can  economically  self-provision  at  the  DS1  level,  we  do  not  delegate  to  the  states  the  authority  to  consider  DS1  loop 

 impairment  on  a  location-  specific  basis  based  on  a  self-  provisioning  trigger.  969  On  the  other  hand,  although  the  record  indicates  little  evidence  of  wholesale  alternative  DS1  loop  capacity, 
 evidence  of  alternative  providers  at  the  DS3  and  higher  capacity  levels  suggests  that  there  may  be  specific  locations  where  competitive  carriers  have  deployed  fiber  and  could  offer  excess 
 capacity  at  the  DS1  loop  level.  Thus,  we  recognize  the  possibility  that  non-  incumbent  LEC  DS1  loop  alternatives  may  be  available  now  or  in  the  near  future  at  particular  customer  locations.  As 
 explained  below,  we  delegate  to  the  states  the  authority  to  collect  and  analyze  more  specific  evidence  of  wholesale  alternatives  to  DS1  loops  on  a  customer  location-  specific  basis,  applying  a 
 uniform  national  trigger  that  measures  the  availability  of  wholesale  competitive  alternatives  to  determine  customer  locations  where  competitive  carriers  are  not  impaired  without  access  to 
 incumbent  LEC  unbundled  DS1s.  970 
 (d)  Location-  Specific  Review  Conducted  By  States  Applying  Federal  Triggers 

 328.  In  making  affirmative  impairment  findings  on  a  nationwide  basis  for  dark  fiber  loops,  DS3  loops,  and  DS1  loops,  we  recognize  that  limited  alternative  deployment  has  occurred 
 at  particular  customer  locations  not  specified  in  our  record  for  certain  of  these  high-  capacity  loop  types  which  could  lead  to  a  finding  of  no  impairment  for  that  loop  type  at  that  location.  Thus, 
 for  these  loop  types,  a  more  granular  impairment  analysis  should  be  applied  on  a  customer-  by-customer  location  basis.  To  that  end,  we  delegate  to  states  a  fact-  finding  role  to  identify  where 
 competing  carriers  are  not  impaired  without  unbundled  high-  capacity  loops  pursuant  to  two  triggers.  If  a  state  commission  finds  that  the  federal  triggers  for  a  finding  of  non-  impairment 
 have  been  satisfied  for  a  specific  type  of  high-  capacity  loop  at  a  particular  customer  location,  the  incumbent  LEC  will  no  longer  be  required  to  unbundle  that  loop  type  at  that  location  according 
 to  the  transition  schedule  adopted  by  the  state  commission.  971  Incumbent  LECs  must  make  the 

 967  See  supra  Part  VI.  A.  3.,  Part  VI.  A.  4.  b(  ii)(  a)  for  evidence  of  the  existence  of  the  other  operational  barriers  to 
 DS1  loop  capacity  deployment. 
 968  See  supra  para.  315  (discussing  the  ability  to  absorb  these  costs  at  the  OCn  loop  level). 

 969  See  infra  Part  VI.  A.  4.  b(  ii)(  d)  (discussing  in  detail  the  state  reviews  on  a  customer-  location  specific  basis)  and 
 para.  334  (describing  why  states  will  not  apply  the  Self-  Provisioning  Trigger  to  DS1). 
 970  See  infra  Part  VI.  A.  4.  b(  ii)(  d)  (discussing  in  detail  the  Competitive  Wholesale  Facilities  Trigger). 

 971  See  infra  Part  VIII.  D  (discussing  the  transition  process). 
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 unbundled  high-  capacity  loops  for  which  we  find  impairment  on  a  nationwide  basis  available  to  qualifying  requesting  carriers  except  at  those  customer  locations  where  a  state  commissions 
 granular  review  has  confirmed  that  no  impairment  exists  and  unbundling  is  no  longer  required.  In  the  event  a  state  commission  declines  to  exercise  the  authority  we  delegate  to  it,  a  party  may 
 petition  this  Commission  to  conduct  such  analysis.  972 
 329.  We  establish  two  different  types  of  triggers  to  identify  the  specific  customer  locations  where  there  may  be  no  impairment  for  the  high-  capacity  loops  we  identify  below  and 

 the  incumbent  LEC  unbundling  obligation  can  be  eliminated  at  that  customer  location:  1)  where  a  specific  customer  location  is  identified  as  being  currently  served  by  two  or  more  unaffiliated 
 competitive  LECs  with  their  own  loop  transmission  facilities  at  the  relevant  loop  capacity  level  (Self-  Provisioning  Trigger);  or  2)  where  two  or  more  unaffiliated  competitive  providers  have 
 deployed  transmission  facilities  to  the  location  and  are  offering  alternative  loop  facilities  to  competitive  LECs  on  a  wholesale  basis  at  the  same  capacity  level  (Competitive  Wholesale 
 Facilities  Trigger).  Although  both  triggers  focus  on  whether  there  are  two  alternative  loop  providers  at  a  particular  customer  location,  they  are  different  because  the  Competitive  Wholesale 
 Facilities  Trigger  can  be  satisfied  by  alternative  loop  providers  that  have  deployed  their  own  facilities  or  by  alternative  providers  that  are  using  unbundled  network  elements  but  otherwise 
 satisfy  the  wholesaling  requirement  of  the  Competitive  Wholesale  Facilities  Trigger.  For  example,  unbundled  dark  fiber  loops  obtained  from  the  incumbent  LEC  and  activated  by  the 
 alternative  provider  through  attaching  its  own  optronics  to  offer  wholesale  lit  loop  capacity  may  be  used  to  satisfy  the  Competitive  Wholesale  Facilities  Trigger  to  remove  the  unbundling 
 obligation  for  DS3  and  DS1  loops  at  a  particular  customer  location.  Unbundled  dark  fiber  loops,  however,  may  not  be  used  to  satisfy  the  Self-  Provisioning  Trigger.  It  is  possible,  however,  that 
 the  Self-  Provisioning  Trigger  could,  in  some  circumstances,  overlap  with  the  Competitive  Wholesale  Facilities  Trigger.  On  the  other  hand,  the  Competitive  Wholesale  Facilities  Trigger 
 will  capture  loop  alternatives  even  where  barriers  have  prevented  competitive  LECs  from  entirely  deploying  their  own  facilities  973  These  triggers,  tailored  to  respond  to  specific  record 
 evidence  demonstrating  that  self-  deployment  is  economically  feasible  or  competitive  alternatives  are  available  at  particular  customer  locations,  will  identify  those  locations  where  a  more  granular 
 analysis  is  required  to  overcome  the  finding  of  impairment.  974 

 972  See  supra  Part  V.  E.  2  (discussing  the  role  of  the  states). 
 973  See  infra  paras.  333,  340.  Thus,  while  a  particular  customer  location  may  not  satisfy  the  Self-  Provisioning 
 trigger  because  one  or  both  of  the  alternative  providers  lights  unbundled  dark  fiber  to  self-  provide  loops  to  customers  at  that  location,  these  providers  could  satisfy  the  Competitive  Wholesale  Facilities  Trigger  at  that  location 

 to  eliminate  loop  unbundling  requirements. 
 974  We  establish  the  number  of  competitors  to  the  incumbent  LEC  necessary  to  satisfy  each  trigger  for  high-capacity 
 loops  subject  to  a  finding  of  impairment  at  two  in  order  to  ensure  that  multiple  competitive  entry  at  each  location  is  feasible.  See  USTA,  290  F.  3d  at  427.  Limiting  our  high-  capacity  loop  triggers  to  only  one  competitor 

 runs  the  risk  of  failing  to  accommodate  unusual  circumstances  unique  to  that  single  provider  that  may  not  reflect  the  ability  of  other  competitors  to  similarly  deploy.  Establishing  a  higher  number,  for  example  three,  would  likely 
 render  our  high-  capacity  loop  triggers  meaningless  for  the  many  customer  locations  where  the  potential  aggregate  customer  demand  would  never  support  more  than  two  competitive  alternatives  to  the  incumbent  LEC.  Moreover, 
 (continued.) 
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 330.  We  establish  the  number  of  competitors  to  the  incumbent  LEC  necessary  to  satisfy  each  trigger  for  high-  capacity  loops  subject  to  a  finding  of  impairment  at  two  in  order  to 
 ensure  that  multiple  competitive  entry  at  each  location  is  feasible.  975  We  choose  a  lower  threshold  for  our  high-  capacity  loops  self-  provisioning  trigger  than  we  did  for  the  self-provisioning 
 triggers  for  transport  and  switching  (i.  e.,  two  versus  three)  for  two  reasons.  First,  we  are  taking  into  consideration  the  more  limited  ability  of  the  market  to  support  multiple 
 carriers  providing  their  own  loops  to  a  particular  location,  compared  to  the  demand  available  to  support  multiple  carriers  using  their  own  self-  provisioned  transport  and  switching.  Unlike  both 
 transport  and  switching,  few  customers  can  be  served  over  a  single  loop  facility,  and  the  traffic  of  multiple  customers  is  generally  not  aggregated  over  loops.  Thus,  establishing  a  higher 
 number,  for  example  three,  would  likely  render  our  high-  capacity  loop  triggers  meaningless  for  the  many  customer  locations  where  the  potential  aggregate  customer  demand  would  never 
 support  more  than  two  facilities-  based  competitive  alternatives  to  the  incumbent  LEC.  976  Second,  we  are  concerned  that  this  limited  demand  could  provide  a  greater  disincentive  to  build 
 out  any  alternative  loops  if  the  trigger  were  set  at  three.  The  more  limited  demand  for  loops  means  that  there  is  a  lesser  likelihood  that  a  third  competitive  provider  would  build  out  to  a 
 particular  location.  This,  in  turn,  creates  a  greater  disincentive  for  the  first  and  second  providers  to  build  out  to  the  location,  because  if  the  trigger  were  set  at  three,  they  will  likely  have  to 
 compete  against  unbundled  incumbent  LEC  loop  facilities  at  TELRIC-  based  prices  for  a  significant  period  of  time. 

 331.  We  choose  these  specific  triggers  because  we  find  that:  (1)  evidence  of  actual  deployment  indicates  barriers  to  entry  can  be  overcome;  and  (2)  the  availability  of  competitive 
 wholesale  alternatives  eliminates  impairment  for  competitive  LECs.  Eliminating  unbundling  obligations  where  no  impairment  exists  furthers  the  goals  of  the  Act  by  ensuring  that  the 
 availability  of  unbundled  network  elements  at  cost-  based  rates  does  not  discourage  the  deployment  of  facilities  by  competitive  LECs  where  such  deployment  is  economically  feasible. 

 (i)  Self-  Provisioning  Trigger 
 332.  Trigger  Defined.  Where  two  or  more  competitive  LECs  have  self-  provisioned  loop  transmission  facilities,  either  intermodal  977  or  intramodal  facilities,  to  a  particular  customer 
 (Continued  from  previous  page) 
 establishing  the  trigger  at  too  high  a  number  could  discourage  competitive  buildout  because  would-  be  competitive  facilities-  based  providers  would  know  that  two  additional  competitors  would  have  to  first  deploy  their  own  facilities 

 before  unbundled  loop  facilities  at  TELRIC-  based  prices  would  no  longer  be  available  at  that  location. 
 975  See  USTA,  290  F.  3d  at  427. 

 976  Moreover,  limiting  our  high-  capacity  loop  triggers  to  only  one  competitor  runs  the  risk  of  failing  to 
 accommodate  unusual  circumstances  unique  to  that  single  provider  that  may  not  reflect  the  ability  of  other  competitors  to  similarly  deploy. 

 977  See  supra  Part  V.  B.  1.  d.(  ii)  (describing  intermodal  alternatives  generally,  and  factors  affecting  differences  in  the 
 extent  to  which  various  intermodal  alternatives  are  considered);  Part  VI.  A.  3.  supra  (describing  how  intermodal  alternatives  are  considered  for  loops  generally);  paras.  308-  309  supra  (describing  how  intermodal  alternatives  are 

 considered  for  enterprise  market  loops). 
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 location  at  the  loop  capacity  level  for  which  the  state  impairment  analysis  is  being  conducted,  competitive  LECs  are  not  impaired  without  access  to  unbundled  incumbent  LEC  loops  at  that 
 capacity  level  at  those  particular  customer  locations.  978  This  determination  involves  a  finding  that  there  are  two  competitive  LECs  that  have  existing  facilities  in  place  serving  customers  at 
 that  location  over  the  relevant  loop  capacity  level.  979  If  the  state  commission  makes  a  finding  of  no  impairment  based  on  the  application  of  the  Self-  Provisioning  Trigger,  it  is  not  necessary  to 
 separately  apply  the  Competitive  Wholesale  Facilities  Trigger. 
 333.  Trigger  Applied.  In  conducting  its  proceeding  with  respect  to  the  Self-Provisioning  Trigger,  the  state  commission  must  verify  that  the  two  competitive  providers 

 identified  to  satisfy  this  trigger  are  unaffiliated  with  the  incumbent  LEC  and  each  other.  980  In  addition,  the  facilities  these  competitors  use  must  be  their  own  facilities  and  not  facilities  owned 
 or  controlled  by  one  of  the  other  two  providers  to  the  premises,  i.  e.,  the  incumbent  LEC  and  the  other  competitive  provider.  To  be  clear,  a  competitive  LEC  using  the  special  access  facilities  of 
 the  incumbent  LEC  or  the  transmission  facilities  of  the  other  competitive  provider  in  the  building  would  not  satisfy  the  definition  of  a  self-  provisioning  competitor  for  purposes  of  satisfying  the 
 trigger.  We  find,  however,  that  when  a  competitive  carrier  has  obtained  dark  fiber  on  a  long-term  indefeasible-  right-  of-  use  (IRU)  basis,  that  dark  fiber  facility  can  be  counted  as  a  separate, 
 unaffiliated  facility  for  self-  provisioning  determination  purposes.  981 
 334.  Special  Considerations  For  Dark  Fiber  and  DS1  Loops.  When  applying  the  Self-Provisioning  Trigger  to  eliminate  an  incumbent  LECs  requirement  to  unbundle  dark  fiber  loops 

 at  a  particular  customer  location,  the  mere  existence  of  two  unaffiliated  competitive  providers  (in  addition  to  the  incumbent  LEC)  that  have  deployed  fiber  to  that  location,  whether  or  not  they  are 
 offering  dark  fiber  to  other  carriers  to  serve  end-  user  customers  at  that  location,  will  satisfy  the 
 978  If  two  or  more  competitive  LECs  have  been  able  to  economically  self-  deploy  at  a  particular  location  at  the  loop 
 capacity  level  being  considered  by  the  state,  based  on  information  contained  in  the  record,  we  determine  that  the  barriers  to  self-  deployment  at  that  customer  location  for  that  loop  capacity  level  are  likely  able  to  be  similarly 

 overcome  by  other  competitive  entrants. 
 979  For  example  in  applying  the  Self-  Provisioning  Trigger  to  DS3  loops,  the  state  commission  must  determine  that 
 two  or  more  competitive  LECs  provide  DS3  loops  over  their  own  facilities  to  customers  at  that  particular  customer  location. 

 980  We  use  the  term  affiliated  and  affiliate  as  the  Act  defines  affiliate.  Section  3  of  the  Act  defines  the  term 
 affiliate  as  a  person  that  (directly  or  indirectly)  owns  or  controls,  is  owned  or  controlled  by,  or  is  under  common  ownership  or  control  with,  another  person.  For  purposes  of  this  paragraph,  the  term  own  means  to  own  an  equity 

 interest  (or  the  equivalent  thereof)  of  more  than  10  percent.  47  U.  S.  C.    153(  1). 
 981  For  purposes  of  the  own  facilities  prong  of  the  Self-  Provisioning  Trigger,  a  competitive  carrier  that  has 
 obtained  dark  fiber  transmission  facilities  from  the  incumbent  LEC  on  a  long-  term  IRU  basis  will  be  considered  to  operate  its  own  unaffiliated  facilities.  We  believe  that  dark  fiber  IRU  type  contracts  protect  against  short-  term 

 gaming  by  the  incumbent  LEC.  Moreover,  we  do  not  want  to  foreclose  incumbent  LECs  from  negotiating  long  term  dark  fiber  leases  with  competitive  LECs.  To  be  clear,  however,  because  we  want  to  be  certain  of  the  independent 
 ownership  of  the  loop  transmission  facilities,  we  find  that  loop  transmission  facilities  transferred  on  an  IRU  basis  is  limited  only  to  dark  fiber  and  does  not  include  lit  fiber  IRUs  obtained  from  the  incumbent  LEC  or  the  other 
 provider. 
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 Self-  Provisioning  Trigger  for  dark  fiber  loops  and  require  a  finding  of  no  impairment  at  that  location.  Therefore,  we  do  not  apply  a  wholesale  trigger  to  unbundled  dark  fiber  loops  because 
 such  trigger  would  necessarily  overlap  with  the  Self-  Provisioning  Trigger.  982  Because  there  is  little  record  evidence  demonstrating  that  carriers  construct  facilities  to  serve  customers 
 exclusively  at  the  DS1  level,  as  well  as  the  lack  of  economic  evidence  showing  such  self-deployment  is  possible,  the  Self-  Provisioning  Trigger  will  not  be  applied  to  DS1  loops. 

 335.  State  Analytical  Flexibility.  In  applying  the  Self-  Provisioning  Trigger  to  high-capacity  loops,  we  find  that  actual  competitive  deployment  is  the  best  indicator  that  requesting 
 carriers  are  not  impaired,  and  therefore  emphasize  that  this  quantitative  trigger  is  the  primary  vehicle  through  which  non-  impairment  findings  will  be  made.  We  recognize,  however,  that  this 
 high-  capacity  loop  trigger  measures  only  the  existence  of  actual  deployed  competitive  alternatives  at  a  customer  location  rather  than  whether  that  particular  customer  location  could  be 
 economically  served  by  competitive  carriers  through  deployment  of  alternative  loop  transmission  facilities.  Thus,  when  conducting  its  customer  location  specific  analyses,  a  state  must  consider 
 and  may  also  find  no  impairment  at  a  particular  customer  location  even  when  this  trigger  has  not  been  facially  met  if  the  state  commission  finds  that  no  material  economic  or  operational  barriers 
 at  a  customer  location  preclude  competitive  LECs  from  economically  deploying  loop  transmission  facilities  to  that  particular  customer  location  at  the  relevant  loop  capacity  level.  In 
 making  a  determination  that  competitive  LECs  could  economically  deploy  loop  transmission  facilities  at  that  location  at  the  relevant  capacity  level,  the  state  commission  must  consider 
 various  factors  affecting  the  ability  to  economically  deploy  at  that  particular  customer  location.  These  factors  include:  evidence  of  alternative  loop  deployment  at  that  location;  local 
 engineering  costs  of  building  and  utilizing  transmission  facilities;  the  cost  of  underground  or  aerial  laying  of  fiber  or  copper;  the  cost  of  equipment  needed  for  transmission;  installation  and 
 other  necessary  costs  involved  in  setting  up  service;  local  topography  such  as  hills  and  rivers;  availability  of  reasonable  access  to  rights-  of-  way;  building  access  restrictions/  costs; 
 availability/  feasibility  of  similar  quality/  reliability  alternative  transmission  technologies  at  that  particular  location. 

 336.  In  other  circumstances,  by  contrast,  state  commissions  may  believe  notwithstanding  satisfaction  of  this  trigger  for  a  particular  customer  location,  that  continued 
 access  to  unbundled  loops  at  the  capacity  level  under  analysis  should  be  maintained  at  the  customer  location  because  impairment,  in  fact,  remains  due  to  the  existence  of  a  barrier  to  further 
 competitive  facilities  deployment  at  that  location.  An  example  of  such  a  situation  might  be  where  a  municipality  has  imposed  a  long-  term  moratorium  on  granting  additional  rights-  of  way 
 permits  along  the  routes  necessary  to  serve  the  particular  customer  location.  983  In  these  circumstances,  a  state  commission  may  file  a  petition  for  waiver  with  the  Commission  to 

 982  Because  dark  fiber  loops  are  not  typically  retail  offerings  like  lit  loops,  it  is  necessary  to  modify  somewhat 
 the  application  of  the  Self-  Provisioning  Trigger  for  dark  fiber  loops  to  ensure  that  the  granular  state  analyses  include  all  those  locations  where  at  least  two  alternative  carriers  to  the  incumbent  LEC  have  deployed  fiber. 

 983  This  example  is  provided  for  illustrative  purposes  only  and  is  not  meant  to  be  exclusive  or  dispositive. 
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 maintain  the  incumbent  LECs  unbundling  obligation  at  that  location  until  the  barrier  identified  in  the  waiver  petition  no  longer  exists. 
 (ii)  Competitive  Wholesale  Facilities  Trigger 
 337.  Trigger  Defined.  Where  competitive  LECs  have  two  alternative  choices  (apart  from  the  incumbent  LECs  network)  to  purchase  wholesale  high-  capacity  loops,  including 

 intermodal  alternatives,  at  a  particular  premises,  we  conclude  that  impairment  does  not  exist  at  that  location  for  that  type  of  high-  capacity  loop.  984  Specifically,  where  the  relevant  state 
 commission  determines  that  two  or  more  unaffiliated  alternative  providers,  including  alternative  transmission  technology  providers  that  offer  an  equivalent  wholesale  loop  product  at  a 
 comparable  level  of  capacity,  quality,  and  reliability,  have  access  to  the  entire  multiunit  customer  premises,  and  offer  the  specific  type  of  high-  capacity  loop  over  their  own  facilities  on  a  widely 
 available  wholesale  basis  to  other  carriers  desiring  to  serve  customers  at  that  location,  then  incumbent  LEC  loops  at  the  same  loop  capacity  level  serving  that  particular  building  will  no 
 longer  be  unbundled.  985  Similar  to  including  dark  fiber  IRUs  as  facilities  that  satisfy  the  own  facilities  prong  of  the  Self-  Provisioning  Trigger,  986  dark  fiber  IRUs  also  satisfy  the  own 
 facilities  prong  of  the  Competitive  Wholesale  Facilities  Trigger.  Furthermore,  in  addition  to  dark  fiber  IRUs,  we  also  include  the  use  of  dark  fiber  obtained  on  any  other  lease/  purchase  basis, 
 including  obtaining  it  from  the  incumbent  LEC  on  an  unbundled  basis,  987  as  long  as  the  alternative  provider  has  attached  its  own  optronics  to  light  the  dark  fiber  in  order  to  make  lit 
 fiber  loops  available  to  competitive  LECs  on  a  wholesale  basis.  988 
 338.  Trigger  Applied.  In  evaluating  the  two  competitive  wholesale  loop  providers,  states  should  not  undertake  a  financial  viability  analysis  with  respect  to  each  provider.  However, 

 984  For  example,  in  applying  the  Competitive  Wholesale  Facilities  Trigger  to  DS3  loops,  the  state  must  find  that 
 two  alternative  providers  to  the  incumbent  LEC  offer  wholesale  DS3  loops  to  competitive  LECs  at  that  particular  customer  location. 

 985  While  the  record  indicates  little  evidence  of  wholesale  DS1  loop  capacity  presently,  evidence  of  some 
 alternative  providers  at  the  DS3  and  higher  capacity  levels  suggests  that  there  may  be  specific  locations  where  competitive  carriers  have  deployed  fiber  and  might  offer  unused  capacity  at  the  DS1  loop  level.  Because  we  expect 

 our  loop  unbundling  rules  to  encourage  greater  facilities-  based  deployment  where  it  is  economically  feasible,  it  is  not  unreasonable  to  accommodate  the  possibility  that  non-  incumbent  LEC  DS1  loop  alternatives  may  be  available 
 now  or  in  the  near  future  at  particular  customer  locations.  By  accommodating  this  possibility  in  the  trigger  mechanism  we  craft  today,  we  seek  to  ensure  that  our  DS1  loop  unbundling  rules  are  not  in  conflict  with  USTA. 

 986  See  supra  note  981. 
 987  By  counting  wholesale  loop  offerings  over  dark  fiber  UNEs,  an  incumbent  LEC  could  be  relieved  of  its 
 unbundling  obligation  at  a  specific  loop  capacity  level  at  certain  customer  locations  even  where  no  other  alternative  fiber  has  been  deployed,  but  where  alternatives  to  incumbent  LEC  unbundled  lit  loops  are 

 nevertheless  available. 
 988  Similarly,  as  we  determine  in  our  dark  fiber  transport  requirements,  when  applying  this  trigger  to  dark  fiber 
 loop  impairment,  the  state  may  ensure  that  dark  fiber  wholesalers  have  sufficient  quantity  of  dark  fiber  available.  See  infra  para.  416. 
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 there  should  be  some  reasonable  expectation  that  these  providers  are  operationally  capable  of  continuing  to  provide  wholesale  loop  capacity  to  that  customer  location.  989  We  recognize  that, 
 while  the  record  indicates  that  there  are  presently  a  limited  number  of  alternative  wholesale  loop  providers  serving  multiunit  premises,  we  anticipate  that  a  competitive  wholesale  market  will 
 continue  to  develop,  particularly  where  competitive  LECs  have  already  deployed  fiber  and  seek  to  derive  revenue  from  excess  capacity.  We  expect  this  granular  trigger  to  encourage  alternative 
 high-  capacity  transmission  providers  to  deploy  more  facilities  and  offer  them  on  a  wholesale  basis,  creating  a  more  robust  competitive  market  for  high-  capacity  loop  facilities  to  many  areas 
 nationwide. 
 (iii)  State  Action  Under  Both  Triggers 
 339.  We  expect  states  to  complete  their  initial  reviews  applying  the  triggers  and  other  analysis  discussed  above  within  nine  months  from  the  effective  date  of  this  Order.  Unbundled 

 DS1,  DS3,  and  dark  fiber  loops  will  remain  available  to  all  customer  locations  until  the  state  commission  determines  that  unbundled  loops  at  particular  capacities  serving  specific  customer 
 locations  are  no  longer  required.  States  that  conduct  this  review  need  only  address  specific  customer  locations  for  which  there  is  relevant  evidence  in  the  proceeding  that  the  customer 
 location  satisfies  one  of  the  triggers  or  the  potential  deployment  analysis  specified  in  this  Part.  990  To  the  extent  that  a  state  commission  does  not  complete  its  proceedings  in  this  nine  month 
 period,  991  aggrieved  parties  may  file  a  petition  with  this  Commission  demonstrating  a  states  failure  to  act  pursuant  to  the  procedures  we  outline  today.  992  We  expect  that  states  will  require  an 
 appropriate  period  for  competitive  LECs  to  transition  from  any  unbundled  loops  that  the  state  finds  should  no  longer  be  unbundled. 

 340.  After  completion  of  their  initial  reviews,  we  expect  state  commissions  to  conduct  further  granular  reviews,  pursuant  to  the  procedures  the  state  commissions  adopt,  to  identify 
 additional  customer  locations  that  satisfy  the  triggers.  Such  proceedings  shall  be  completed 

 989  We  note  that  carriers  operating  under  chapter  11  bankruptcy  are  still  capable  of  providing  service  while  they 
 reorganize  their  operations.  Relatedly,  in  the  case  of  a  chapter  7  liquidation,  the  physical  transmission  facility  assets  of  a  competitive  provider  will  continue  to  exist  at  that  location  as  the  purchaser  of  those  assets  will  likely  provide 

 similar  wholesale  service  or  use  such  facilities  to  self-  provide  retail  service.  Under  either  scenario,  the  triggers  which  resulted  in  a  finding  of  no  impairment  at  that  location  will  continue  to  be  met.  See  infra  Part  VI.  C.  4. 
 (discussing  similar  financial  viability  issues  with  respect  to  wholesale  transport  providers). 
 990  See  supra  para.  335. 

 991  By  complete,  we  mean  that  a  state  commission,  upon  receiving  sufficient  evidence,  has  an  affirmative 
 obligation  to  review  the  relevant  evidence  associated  with  any  customer  location  submitted  by  an  interested  party,  and  to  apply  the  trigger  and  any  other  analysis  specified  in  this  Part  to  such  evidence. 

 992  As  discussed  above,  if  a  state  fails  to  act,  we  set  forth  procedures  for  the  Commission  to  step  into  the  role  of  the 
 state.  See  supra  Part  V.  E.  (discussing  the  role  of  the  states). 
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 within  six  months  of  the  filing  of  a  petition  or  other  pleading  submitted  in  accordance  with  the  prescribed  state  commission  procedures.  993 
 (e)  Other  Loop  Unbundling  Proposals. 
 341.  Commenters  have  proposed  various  alternatives  to  the  method  we  have  adopted  herein  for  conducting  our  loop  impairment  analysis  and  reaching  our  resulting  conclusions.  To 

 the  extent  the  methods  we  use  and  the  conclusions  we  reach  differ  from  those  proposed,  we  expressly  decline  to  incorporate  them  herein.  We  note,  however,  that  we  agree  with  the 
 proposals  of  SBC  and  other  commenters  that  the  Commission  distinguish  among  loop  types  and  make  capacity-  based  distinctions.  The  analysis  we  have  undertaken  has,  indeed,  distinguished 
 not  only  among  the  various  loop  capacities,  e.  g.,  DS0,  DS3,  OCn,  but  also  the  type  of  loop  technology  where  appropriate,  e.  g.,  lit  fiber,  dark  fiber,  copper,  as  well  as  the  customer  market 
 class  typically  served  by  such  loops.  Through  our  approach,  we  recognize  the  different  economic  characteristics  of  serving  customers  demanding  services  provided  over  different  loop 
 capacity  levels,  eliminating  or  limiting  unbundling  obligations  accordingly.  994  We  disagree  with  SBC,  995  Verizon,  996  and  BellSouth  997  to  the  extent  each  proposes  that  we  base  our  loop  unbundling 
 analyses  and  conclusions  consistent  with  our  special  access  pricing  flexibility  rules.  998  Evidence  of  competitive  LECs  ability  to  self-  deploy  local  loop  facilities  or  have  wholesale  non-  incumbent 
 LEC  alternative  loop  facilities  available  to  them  is  the  proper  inquiry  in  our  loop  impairment  analysis.  This  analysis  serves  a  host  of  statutory  goals  beyond  the  goal  of  the  Pricing  Flexibility 

 993  Subsequent  to  the  initial  review,  states  have  the  flexibility  to  adopt  reasonable  and  timely  procedures  for  the 
 periodic  collection  and  evaluation  of  evidence  indicating  the  satisfaction  of  the  loop  triggers  at  additional  customer  locations  to  remove  unbundling  obligations.  For  example,  a  state  may  decide  to  include  self-  reporting  information 

 regarding  alternative  loop  deployment  in  an  annual  or  semi-  annual  report,  either  as  an  independent  obligation  or  as  part  of  the  competitive  carriers  periodic  filing  obligations.  Alternatively,  a  state  may  decide  to  accept  evidence  of 
 alternative  deployment  through  petitions  filed  during  prescribed  filing  windows  or  through  rulemaking  proceedings.  Regardless  of  the  procedures  adopted,  however,  states  that  conduct  further  reviews  must  complete  their  evaluation 
 of  the  evidence  and  reach  a  determination  within  six  months  of  the  filing  of  a  petition  or  other  pleading  filed  pursuant  to  the  state  procedures. 

 994  As  we  have  noted  above,  we  expect  that  the  triggers  that  we  adopt  today  for  use  by  the  states  will  provide 
 incumbent  LECs  substantial  relief  from  their  unbundling  obligations  while  simultaneously  ensuring  that  competitive  carriers  get  unbundled  high-  capacity  loop  access  only  where  they  are  unable  to  economically  self-  deploy  or  use 

 alternative  facilities.  See  supra  para.  322. 
 995  See,  e.  g.,  SBC  Comments  at  101  (proposing  a  DS1  trigger  at  two  or  more  fiber-  based  collocators,  serving 
 15,000+  business  lines,  and  $150,000  or  more  per  month  in  special  access  revenues  and  no  unbundling  at  all  above  the  DS1  level). 

 996  See,  e.  g.,  Verizon  Comments  at  119-  20  (proposing,  generally,  the  elimination  of  high-  capacity  loop  unbundling 
 where  the  incumbent  LEC  has  obtained  pricing  flexibility  for  special  access  circuits). 
 997  See,  e.  g.,  BellSouth  Comments  at  67  n.  240  (stating  it  makes  no  sense  to  find  impairment  where  BellSouth  has 
 obtained  pricing  flexibility  for  special  access  circuits). 
 998  See  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14221. 
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 Order,  which  is  limited  to  protecting  consumers  from  anticompetitive  pricing.  While  each  of  these  pricing  flexibility  proposals  vary  somewhat,  they  are  consistent  in  arguing  that  wherever 
 and  whenever  incumbent  LECs  have  received  pricing  flexibility  for  special  access  services,  unbundled  high-  capacity  loops,  to  some  degree,  should  not  be  required.  999  Incumbent  LECs  have 
 received  special  access  pricing  flexibility  in  numerous  MSAs  throughout  their  regions,  based  almost  exclusively  on  meeting  the  Pricing  Flexibility  Orders  triggers  based  on  special  access 
 revenues.  1000  As  we  note  below  in  our  transport  unbundling  analysis,  because  the  special  access  revenue  triggers  require  only  a  single  collocated  competitor  to  purchase  substantial  amounts  of 
 special  access  in  a  concentrated  area,  this  test  provides  little,  if  any,  indication  that  even  that  competitor  has  been  able  to  widely,  if  at  all,  self-  deploy  alternative  loop  facilities  in  that  area.  1001 
 Evidence  of  self-  deployment  of  transport  facilities  is  not  necessarily  evidence  of  the  economic  ability  of  a  competitive  LEC  to  self-  deploy  loops.  Moreover,  the  presence  of  a  single 
 competitive  LECs  collocated  transport  facility  as  a  trigger  for  purposes  of  protecting  consumers  from  anticompetitive  pricing,  i.  e.,  the  purpose  of  our  pricing  flexibility  rules,  is  not  sufficient 
 evidence  that  facilities-  based  competitive  entry  into  a  market  at  the  local  loop  level  is  economically  feasible.  Under  a  special  access  pricing  flexibility  trigger,  such  as  suggested  by 
 incumbent  LECs,  DS1  loops  would  no  longer  be  unbundled  in  many  large  geographic  areas  nationwide.  This  conclusion  would  clearly  contravene  our  unbundling  mandate  due  to  the 
 pervasive  competitive  LEC  impairment  at  the  DS1  loop  level  resulting  from  an  economic  inability  to  self-  deploy  and  limited  available  wholesale  alternatives.  Similarly,  we  reject 
 geographic  zone  distinctions  for  analyzing  impairment  for  high-  capacity  local  loops.  1002  Like  we  find  in  rejecting  a  pricing  flexibility  approach,  the  record  simply  does  not  contain  evidence  that 

 999  Phase  I  pricing  flexibility  related  to  special  access  revenue  is  triggered  on  an  MSA  basis  when  wire  centers 
 accounting  for  at  least  30%  of  (non-  channel  termination)  special  access  revenues  have  at  least  one  competitor  that  has  collocated  using  non-  incumbent  transport.  Phase  II  pricing  flexibility  related  to  special  access  revenues  is 

 triggered  on  an  MSA  basis  when  wire  centers  accounting  for  at  least  65%  of  (non-  channel  termination)  special  access  revenues  have  at  least  one  competitor  that  has  collocated  using  non-  incumbent  transport. 

 1000  See  Letter  from  Jake  E.  Jennings,  NewSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338, 
 96-  98  at  2  (filed  Dec.  12,  2002)  (NewSouth  Dec.  12,  2002  Ex  Parte  Letter)  (describing  details  of  where  and  how  BellSouth  has  received  special  access  pricing  flexibility);  see  also  BellSouth  Oct.  15,  2002  Transport  and  Loop  Ex 

 Parte  Letter,  Attach.  at  5  (stating  that  BellSouth  has  received  Phase  I  and  Phase  II  special  access  pricing  flexibility  in  100%  of  its  national  top  150  MSAs);  Verizon  Dec.  17,  2002  Ex  Parte  Letter  at  7  (stating  that  Verizon  has  pricing 
 flexibility  in  37%  of  its  wire  centers);  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  5  (filed  Oct.  11,  2002) 
 (Qwest  Oct.  11,  2002  Transport  Ex  Parte  Letter)  (stating  that  Qwest  has  been  granted  pricing  flexibility  in  33  of  its  45  MSAs,  many  of  which  are  not  national  top  100  MSAs). 

 1001  Covad  Reply  at  57-  58  (arguing  SBCs  proposal  of  two  or  more  fiber-  based  collocators  is  no  indication  that 
 competitive  networks  serve  any  more  than  a  limited  number  of  buildings  in  the  area,  much  less  the  wire  centers  entire  service  area). 

 1002  Incumbent  LECs  argue  that  the  Commission  should  consider  geographic  distinctions,  such  as  MSAs  or  even 
 individual  wire  centers,  for  some  or  all  UNEs,  where  there  are  differing  levels  of  alternatives.  See,  e.  g.,  BellSouth  Reply  at  11-  12  (arguing  that  the  appropriate  geographic  market  for  the  impairment  analysis  is  the  MSA). 

 Competitive  carriers,  however,  argue  that  there  is  no  geographic  area  or  market  anywhere  in  the  United  States  today  where  a  geographic  consideration  would  find  no-  impairment  for  any  UNE.  See,  e.  g.,  NuVox  et  al.  Comments  at  53. 
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 loop  impairment/  non-  impairment  determinations  can  be  appropriately  made  on  a  zone  basis  due  to  the  location-  specific  factors  which  impact  impairment  determinations  at  most  high-  capacity 
 loop  levels. 
 342.  Finally,  several  commenters  argue  that  the  Commission  should  remove  or  modify  its  unbundling  obligations  for  incumbent  LECs  based  on  evidence  of  adequate  incumbent  LEC 

 performance  in  provisioning  network  elements.  1003  These  parties  argue  that  incumbent  LECs  should  be  required  to  demonstrate  certain  levels  of  compliance  with  existing  unbundling 
 performance  measurements,  such  as  section  271  performance  metrics,  for  a  commercially  reasonable  period  of  time  prior  to  any  removal  of  an  unbundling  obligation.  1004  Commenters 
 suggest  such  a  rule  would  provide  incentives  to  incumbent  LECs  to  comply  with  their  performance  obligations.  1005  The  record,  however,  does  not  reveal  that  incumbent  LEC 
 performance  has  a  significant,  if  any,  direct  relationship  to  the  ability  of  competitive  LECs  to  economically  self-  deploy  local  loops.  Rather,  the  record  demonstrates  that  competitive  LEC 
 deployment  is  primarily  driven  by  general  economic  considerations.  While  these  economic  considerations  are  influenced  by  factors  which  the  incumbent  LEC  did  not,  or  does  not,  similarly 
 face,  i.  e.,  its  historical  ability  to  maximize  scale  economies  and  benefit  from  first  mover  advantages,  these  factors  are  not  so  related  to  performance  measurement  compliance  that 
 consideration  of  such  compliance  would  inform  our  impairment  analysis. 
 B.  Subloops  For  Multiunit  Premises  Access  and  NIDs 
 1.  Background 
 343.  In  the  Triennial  Review  NPRM,  1006  the  Commission  sought  comment  on  whether  it  should  maintain  unbundling  requirements  for  subloops  1007  and  NIDs.  1008  A  subloop  is  a  smaller 

 1003  See,  e.  g.,  CompTel  Comments  at  86-  87;  NARUC  Comments  at  10. 
 1004  See,  e.  g.,  CompTel  Comments  at  86-  87;  Maine  CLEC  Coalition  Comments  at  5-  7;  see  also  Pennsylvania 
 Commissioner  Wilson  Comments  at  8  (arguing  that  although  the  Commission  should  not  remove  unbundling  obligations  based  on  UNE  or  special  access  performance  data,  the  states  should  have  the  authority  to  do  so). 

 1005  Id. 
 1006  Triennial  Review  NPRM,  16  FCC  Rcd  at  22803,  para.  48. 
 1007  Subloops  were  first  included  in  the  list  of  specific  UNEs  in  the  UNE  Remand  Order  as  a  means  of  providing 
 competitive  carriers  maximum  flexibility  to  interconnect  their  own  facilities  to  various  accessible  points  within  the  incumbent  LECs  outside  loop  plant  closer  to  a  customers  premises.  Subloops  were  defined  as  any  portion  of 

 the  loop  that  is  technically  feasible  to  access  at  terminals  in  the  incumbent  LECs  outside  plant,  including  inside  wire.  UNE  Remand  Order,  15  FCC  Rcd  at  3801,  para.  234;  see  also  47  C.  F.  R.    51.319(  a)(  2). 

 1008  NIDs  were  included  in  the  initial  set  of  UNEs  and  defined  as  a  cross-  connect  device  used  to  connect  loop 
 facilities  to  inside  wiring.  Local  Competition  Order,  11  FCC  Rcd  at  15697,  para.  392.  The  Commission  later  modified  the  definition  of  a  NID  to  be  more  flexible  and  technology  neutral,  recognizing  that  its  rules  enabled 

 methods  other  than  just  a  cross-  connect  device  for  interconnecting  customer  premises  wiring  with  the  incumbent  LECs  loop  distribution  plant.  UNE  Remand  Order,  15  FCC  Rcd  at  3790,  para.  207;  see  also  47  C.  F.  R.   
 51.319(  b). 
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 included  segment  of  an  incumbent  LECs  local  loop  plant,  i.  e.,  a  portion  of  the  loop  from  some  technically  accessible  terminal  beyond  the  incumbent  LECs  central  office  1009  and  the  network 
 demarcation  point,  1010  including  that  portion  of  the  loop,  if  any,  which  the  incumbent  LEC  owns  and  controls  inside  the  customer  premises.  1011  The  Commissions  rules  permit  the  demarcation 
 point  of  the  incumbent  LECs  network  at  a  customers  premises  to  vary  depending  on  the  type  of  premises,  i.  e.,  single  unit  or  multiunit,  and  the  date  the  premises  was  built.  1012  A  competitor 
 purchasing  a  subloop  from  an  incumbent  LEC  to  serve  a  particular  customer  location  will  access  the  incumbent  LECs  loop  along  its  distribution  path  at  a  technically  feasible  accessible 
 terminal,  1013  generally,  outside  of  the  incumbent  LECs  central  office.  These  access  points  include,  but  are  not  limited  to,  a  feeder  distribution  interface  (FDI);  1014  a  pole  or  pedestal;  1015  the 
 MPOE;  1016  or  the  NID.  1017  The  technically  feasible  points  where  subloops  can  be  accessed  can  be  further  categorized  as  local  loop  plant  consisting  of  customer  premises  wiring  owned  by  the 
 incumbent  LEC  as  far  as  the  point  of  demarcation  (the  inside  wire  subloop),  1018  and  other  portions  of  the  loop  from  the  central  office  to  the  point  where  the  inside  wire  subloop  begins. 

 1009  UNE  Remand  Order,  15  FCC  Rcd  at  3789,  para.  206;  see  also  47  C.  F.  R.    51.319(  a)(  2). 
 1010  47  C.  F.  R.    68.3;  see  also  Competitive  Networks  Order,  15  FCC  Rcd  at  23007,  para.  54. 
 1011  UNE  Remand  Order,  15  FCC  Rcd  at  3791,  para.  210;  see  also  47  C.  F.  R.    51.319(  a)(  2)(  i). 
 1012  Section  68.105  of  the  rules  govern  the  location  of  the  incumbent  LECs  point  of  demarcation.  Specifically,  in 
 single  unit  premises  the  demarcation  point  is  within  12  inches  of  the  protector  or,  if  no  protector,  within  12  inches  of  where  the  telephone  wire  enters  the  customers  premises.  47  C.  F.  R.    68.105(  c).  For  multiunit  premises, 

 depending  on  whether  the  premises  existed  prior  to  1990  or  was  constructed  thereafter,  the  incumbent  LECs  demarcation  point  may  be  located  at  the  MPOE  or  at  some  other  point  or  points  within  the  premises.  Id.   
 68.105(  d).  The  MPOE  is  defined  to  be  either  the  closest  practicable  point  to  where  the  wiring  crosses  a  property  line  or  the  closest  practicable  point  to  where  the  wiring  enters  a  multiunit  building.  Id.    68.105(  b).  In  multiunit 
 premises  where  the  demarcation  point  is  not  located  at  the  MPOE,  the  incumbent  LECs  network  extends  into  the  premises  resulting  in  an  inside  wire  subloop. 

 1013  Accessible  terminals  contain  cables  and  their  respective  wire  pairs  that  terminate  on  screw  posts  which  enables 
 a  competitors  technician  to  cross  connect  its  terminal  to  the  incumbent  LECs  to  access  the  incumbent  LECs  loop  from  that  point  all  the  way  to  the  end-  user  customer.  UNE  Remand  Order,  15  FCC  Rcd  at  3789,  para.  206  n.  395. 

 1014  The  FDI  is  the  point  in  the  loop  where  the  trunk  line  or  feeder  leading  back  to  the  incumbent  LECs  central 
 office,  and  the  distribution  plant  branching  out  to  the  subscribers,  meet,  and  interface.  UNE  Remand  Order,  15  FCC  Rcd  at  3790,  para.  206. 

 1015  The  pole  or  pedestal  is  near  the  customer  premises  and  is  the  point  where  the  distribution  connects  to  the 
 dedicated  wire  connecting  the  subscriber  to  the  network.  UNE  Remand  Order,  15  FCC  Rcd  at  3790,  para.  206. 
 1016  The  MPOE  is  the  closest  practicable  point  to  where  the  wiring  crosses  a  property  line  or  the  closest  practicable 
 point  to  where  the  wiring  enters  a  multiunit  building.  See  supra  note  1012. 
 1017  At  whatever  point  a  subloop  is  accessed,  requesting  carriers  gain  access  to  the  loop  from  that  point  up  to,  and 
 including,  the  demarcation  point  of  that  loop.  An  incumbent  LEC  charge  for  that  subloop  should  reflect  a  single  rate  up  to  the  point  of  termination,  including  the  NID  if  it  is  before  or  at  the  point  of  termination. 

 1018  See  47  C.  F.  R.    51.319(  a)(  2)(  i). 
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 In  this  section,  we  address  only  subloops  for  access  to  multiunit  premises,  including  the  inside  wire  subloops.  1019  Furthermore,  because  the  incumbent  LECs  network  demarcation  point  may 
 be  located  at  the  NID,  before  the  NID  or  beyond  the  NID,  1020  which  is  always  located  at  the  customers  premises,  it  is  appropriate  to  discuss  the  NID  together  with  the  inside  wire 
 subloop.  1021 

 1019  We  consider  other  types  of  subloops  in  the  context  of  our  loop  unbundling  rules.  See  supra  Part  VI.  A.  4.  a.(  v). 
 1020  UNE  Remand  Order,  15  FCC  Rcd  at  3774,  para.  169. 
 1021  In  using  the  phrase  inside  wire  to  define  a  discrete  subloop  within  the  incumbent  LECs  local  loop,  we  are 
 cognizant  of  the  fact  that  prior  to  the  addition  of  the  subloop  to  the  list  of  UNEs  in  1999,  the  term  inside  wire  generally  was  thought  to  refer  only  to  that  deregulated  portion  of  wiring  within  an  end-  user  customers  premises 

 that  connected  the  customer  premises  equipment  (CPE)  to  the  incumbent  LECs  telephone  network  or  other  CPE  and  was  not  part  of  the  incumbent  LECs  regulated  network,  because  it  was  located  on  the  customers  side  of  the 
 demarcation  point.  In  the  UNE  Remand  Order,  the  Commission  recognized  that  its  rules  regarding  the  location  of  the  demarcation  point,  particularly  in  multiunit  buildings,  resulted  in  situations  where  the  incumbent  LEC  owned 
 and  controlled  wire  within  a  customer  premises  that  did,  indeed,  remain  part  of  the  incumbent  LECs  regulated  network.  The  Commission  referred  to  this  wire  as  inside  wire  also.  See  47  C.  F.  R.    51.319(  a)(  2)(  i).  The  UNE 
 Remand  Order  made  clear  that  this  inside  wire  was  not  limited  only  to  wire  that  was  physically  inside  the  premises  but  may  be  located  out-  of-  doors  for  many  multiunit  premises,  for  example,  as  may  be  the  case  in  a  garden 
 apartment  or  campus  environment.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3774,  para.  170.  Similarly,  in  the  UNE  Remand  Order,  we  noted  that  our  use  of  the  phrase  customer  premises  encompassed  not  just  the  actual 
 premises  of  end-  user  subscribers,  but  also  the  premises  of  the  property  owner  such  as  a  landlord,  a  condominium,  a  university  and  so  on,  i.  e.,  customer  premises  encompassed  any  premises  where  the  owner  of  that  premises  has 
 the  right  to  designate  the  MPOE.  See  47  C.  F.  R.    68.105(  b). 
 We  acknowledge  that  our  previous  use  of  the  phrase  inside  wire  to  describe  three  different  scenarios  involving  premises  wiring,  i.  e.,  (1)  the  unregulated  wire  on  the  end-  user  side  of  the  demarcation  point;  (2)  the  wiring  from  the 

 MPOE  up  to  the  end-  user  customer  suite  that  may  be  under  the  control  of  the  premises  owner  when  the  incumbent  LECs  demarcation  point  is  located  at  the  MPOE;  and  (3)  the  customer  premises  wire  that  extends  beyond  the 
 MPOE  to  the  demarcation  point  of  the  incumbent  LECs  network  that  remains  under  the  incumbent  LECs  control  if  the  premises  owner  has  not  exercised  its  right  to  have  the  demarcation  point  and  the  MPOE  coincide,  may  cause 
 some  confusion  as  noted  by  BellSouth.  See  BellSouth  Petition  for  Reconsideration  and  Clarification,  CC  Docket  No.  96-  98  at  1-  4  (filed  Feb.  17,  2000)  (BellSouth  Feb.  17,  2000  Petition  for  Reconsideration);  BellSouth  Comments 
 at  76.  For  this  reason,  we  will  refer  to  the  inside  wire  on  the  incumbent  LEC  network  side  of  the  demarcation  point,  i.  e.,  between  the  MPOE  and  the  demarcation  point  as  the  Inside  Wire  Subloop.  We  decline  to  define  this 
 wiring  as  intra-  building  network  cabling  as  requested  by  BellSouth,  see  BellSouth  Feb.  17,  2000  Petition  for  Reconsideration  at  3,  as  that  definition,  which  is  found  in  Part  32  of  the  rules  and  used  for  accounting  purposes, 
 potentially  limits  the  definition  of  the  Inside  Wire  Subloop.  Part  32  defines  intra-  building  network  cable  as  follows:  This  account  shall  include  the  original  cost  of  cables  and  wires  located  on  the  company's  side  of  the 
 demarcation  point  or  standard  network  interface  inside  subscribers'  buildings  or  between  buildings  on  one  customer's  same  premises.  Intra-  building  network  cables  are  used  to  distribute  network  access  facilities  to 
 equipment  rooms,  cross-  connection  or  other  distribution  points  at  which  connection  is  made  with  customer  premises  wiring.  47  C.  F.  R.    32.2426(  a).  While  we  deny  BellSouths  request,  we  have  addressed  herein  the  potential 
 confusion  that  may  have  previously  arisen  in  using  the  phrase  inside  wire  to  describe  different  portions  of  the  premises  wiring  by  defining  the  wiring  that  remains  part  of  the  incumbent  LECs  network  at  a  multiunit  premises  as 
 the  Inside  Wire  Subloop.  The  rules  we  adopt  today  with  respect  to  the  Inside  Wire  Subloop  are  not  intended  to  impact  or  otherwise  modify  any  aspect  of  our  existing  rules  regarding  the  inside  wire  on  the  non-  network  side  of  the 
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 344.  In  the  Local  Competition  Order,  the  Commission  declined  to  identify  particular  subloop  elements  as  separate  UNEs,  because  the  record  at  that  time  did  not  sufficiently  address 
 the  technical  issues  raised  by  the  incumbent  LECs  as  impediments  to  subloop  unbundling.  1022  The  Commission  acknowledged  that  subloop  unbundling  could  provide  competitors  flexibility  in 
 deploying  portions  of  their  own  loop  facilities  and  promised  to  revisit  subloop  unbundling  at  a  later  time.  1023  In  the  UNE  Remand  Order,  however,  the  Commission  determined  that  competitive 
 LECs  would  be  impaired  without  access  to  the  incumbent  LECs  subloops.  1024  The  Commission  found  that  access  to  subloops  was  likely  to  be  the  catalyst  to  the  eventual  deployment  of 
 competitive  loops  and  without  such  access  competitive  LECs  would  be  discouraged  from  attempting  to  construct  their  own  feeder  facilities  which,  when  combined  with  the  incumbent 
 LECs  distribution  plant,  would  enable  the  competitor  to  serve  customers  with  minimal  reliance  on  the  incumbent  LEC.  1025  Specifically,  subloop  unbundling  was  adopted  to  redress  three 
 particular  requesting  carrier  deployment  impairments  identified  in  the  record  at  that  time:  1)  the  need  to  interconnect  with  the  incumbent  LECs  network  at  or  near  customer  premises  to  serve 
 customers  in  multiunit  premises;  2)  the  need  to  provide  service  to  customers  served  by  IDLC  loops;  and,  3)  the  need  to  access  the  copper  portion  of  a  loop  to  offer  competitive  xDSL 
 service.  1026 
 345.  In  ordering  the  unbundling  of  subloops,  the  Commission  gave  particular  attention  to  unbundled  inside  wire  subloops,  specifically  recognizing  the  impairments  associated  with 

 facilities-  based  entry  in  multiunit  buildings  or  campus  environments.  1027  Indeed,  the  inside  wire  subloop  was  the  only  subloop  for  which  the  Commission  devoted  a  separate  subsection  of  its 
 subloop  rules.  1028  The  Commission  concluded  that  requiring  competitive  LECs  to  convince  landlords  and  customers  to  permit  construction  of  redundant  inside  wiring  would  substantially 
 impede  market  entry  and  competition.  1029  In  addition,  it  found  that  lack  of  access  to  the  inside  (Continued  from  previous  page) 

 demarcation  point,  either  inside  the  subscribers  suite  or  under  the  control  of  the  premises  owner  as  set  forth  in  sections  68.100  et  seq.  Id.    68.100  et  seq. 
 1022  Local  Competition  Order,  11  FCC  Rcd  at  15695-  96,  paras.  390-  91. 
 1023  Id.  at  15696,  para.  391. 
 1024  UNE  Remand  Order,  15  FCC  Rcd  at  3789,  para.  205. 
 1025  Id. 
 1026  See  id.  at  3792-  95,  paras.  215-  18. 
 1027  See  id.  at  3793,  para.  216. 
 1028  See  47  C.  F.  R.    51.319(  a)(  2)(  i).  When  the  first  Inside  Wire  Subloop  rules  were  adopted  in  1999,  the 
 Commission  had  commenced  a  related  rulemaking  proceeding,  the  Competitive  Networks  proceeding,  to  address,  generally,  barriers,  including  access  to  all  types  of  customer  premises  wiring,  which  competitive  LECs  faced  in 

 gaining  access  to  end-  user  customers  in  multiunit  buildings  or  other  environments  where  the  premises  occupied  by  the  end-  user  customer  was  in  a  building  owned  or  controlled  by  another.  See  Competitive  Networks,  15  FCC  Rcd  at 
 22983. 
 1029  See  UNE  Remand  Order,  15  FCC  Rcd  at  3793,  para.  216. 
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 wire  subloop  would  impede  facilities-  based  carriers  ability  to  develop  their  own  networks  which,  once  developed,  could  eventually  lead  to  the  elimination  of  the  loop  element  from 
 unbundling  obligations.  1030 
 346.  Similarly,  in  the  Local  Competition  Order,  the  Commission  ordered  the  unbundling  of  the  NID,  finding  that  competitors  deploying  their  own  loops  must  be  able  to 

 interconnect  those  loops  to  customer  premises  wiring  in  order  to  provide  service  using  their  own  facilities,  especially  to  customers  in  multiunit  buildings.  1031  In  the  UNE  Remand  Order,  the 
 Commission  broadened  the  definition  of  the  NID  to  encompass  any  means  of  interconnection  of  the  incumbent  LECs  distribution  plant  to  customer  premises  wiring  and  to  require  that 
 incumbent  LECs  permit  a  competitor  to  connect  its  own  loop  facilities  to  customer  premises  wiring  through  the  incumbent  LECs  NID  if  desired.  1032  The  Commission  declined  to  include  the 
 NID  in  the  definition  of  the  loop,  or  any  other  subloop  element,  emphasizing  its  intent  to  provide  competitors  flexibility  in  where  they  can  access  the  subloop.  1033  Together,  the  subloop  and  NID 
 unbundling  rules  recognize  the  necessity  of  these  UNEs  to  overcoming  existing  impairments  with  respect  to  accessing  customer  premises  wiring  to  provide  competitive  local  services  to 
 customers  desiring  to  take  such  services,  particularly  for  facilities-  based  loop  providers,  in  multiunit  premises.  1034 

 2.  Subloops  For  Multiunit  Premises  Access 
 347.  We  limit  our  analysis  herein  to  only  those  subloops  associated  with  access  to  premises  wiring  at  or  near  a  multiunit  customer  premises.  1035  Parties  submitting  comments  on 

 subloops,  other  than  subloop  access  at  remote  terminal  locations,  do  so  almost  exclusively  in  the 

 1030  Id.  at  3792,  para.  215. 
 1031  Local  Competition  Order,  11  FCC  Rcd  at  15697,  para.  392. 
 1032  UNE  Remand  Order,  15  FCC  Rcd  at  3802,  para.  237;  see  also  47  C.  F.  R.    51.319(  a)(  2). 
 1033  Id. 
 1034  See  UNE  Remand  Order,  15  FCC  Rcd  3793,  para.  216  (  a  facilities-  based  providers  ability  to  offer  service  in  a 
 multi-  unit  building  or  campus  may  be  severely  impaired  if  it  must  install  duplicative  inside  wiring  .  .  .  requiring  landlords  and  customers  to  permit  the  construction  of  redundant  inside  wiring  could  substantially  impede  market 

 entry  and  competition);  see  also  id.  at  3801,  para.  232  (  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  competitors  service  offerings.) 
 1035  We  include  within  the  definition  of  the  subloops  for  which  we  require  unbundled  access,  not  only  the  Inside 
 Wire  Subloop,  but  also  any  other  loop-  accessible  terminal  at,  or  near,  a  multiunit  customer  premises  where,  as  a  result  of  the  incumbent  LECs  network  architecture,  a  requesting  carrier  may  need  subloop  access  to  utilize  the 

 Inside  Wire  Subloop  or  NID  to  reach  the  end  user.  These  subloop  unbundling  rules  seek  to  encompass  the  various  other  network  configurations  that  may  occur  at  a  multiunit  premises  when  the  demarcation  point,  the  MPOE,  and 
 the  NID  are  not  all  located  at  the  same  point,  e.  g.,  in  the  basement  utility  room  of  the  particular  building  to  be  served.  The  Commission  has  defined  multiunit  premises  in  section  68.105  of  the  rules.  See  47  C.  F.  R.    68.105 
 (multiunit  premises  include  but  are  not  limited  to,  residential,  commercial,  shopping  center  and  campus  situations). 
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 context  of  multiunit  premises.  1036  We,  therefore,  limit  our  focus  accordingly.  To  the  extent  parties  address  unbundled  subloop  access  unrelated  to  multiunit  premises,  e.  g.,  access  at  remote 
 terminals  for  the  purpose  of  accessing  IDLC  loops  or  to  provide  xDSL  services,  we  consider  those  subloop  issues  in  the  context  of  our  loop  unbundling  rules.  1037  We  conclude  that  requesting 
 carriers  are  impaired  without  access  to  unbundled  subloops  associated  with  accessing  customer  premises  wiring  at  multiunit  premises.  1038  Based  on  evidence  in  the  record,  we  find  that  the 
 barriers  faced  by  requesting  carriers  in  accessing  customers  in  multiunit  premises  are  not  unique  to  customers  typically  associated  with  the  enterprise  market  residing  in  such  premises  but  extend 
 to  all  customers  residing  therein,  including  residential  or  other  tenants  typically  associated  with  the  mass  market.  1039  Thus,  we,  expressly  require  subloop  unbundling  to  reach  all  customers 
 residing  in  multiunit  premises.  1040  The  use  of  unbundled  subloops  to  access  customers  in  multiunit  premises  is  also  not  limited  by  the  type  or  capacity  of  the  loop  the  requesting  carrier 
 will  provide.  1041 

 1036  See,  e.  g.,  WorldCom  Comments  at  119-  120;  ALTS  et  al.  Comments  at  48;  Sprint  Comments  at  30;  AT&  T 
 Reply  at  176. 
 1037  See  supra  Part  VI.  A.  4.  a.(  v).  Specifically,  because  these  other  types  of  subloop  access  arise  in  the  context  of 
 serving  customers  typically  associated  with  the  mass  market  over  DS0  level  mixed  copper/  fiber  loops,  we  address  them  in  the  Mass  Market  loop  impairment  analysis.  We  note  that  the  subloop  unbundling  rules  adopted  in  this 

 section  are  not  intended  to  modify  or  otherwise  change  any  aspect  of  the  loop  or  subloop  unbundling  rules  we  also  adopt  today  except  to  the  extent  expressly  indicated. 

 1038  We  noted  in  the  UNE  Remand  Order,  for  example,  that  the  FDI  which  is  the  meet  point  between  the  feeder 
 trunk  line  leading  back  to  the  central  office  and  the  distribution  plant  to  the  subscriber  may  be  located  in  a  utility  room  in  a  multiunit  premises  and  the  loop  may  go  directly  from  the  feeder  to  the  inside  wire.  In  this  scenario,  under 

 the  rules  we  adopt  today,  unbundled  access  to  the  FDI  would  be  required  as  a  subloop  necessary  to  access  the  inside  wire  in  the  building.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3790,  para.  206  &  n.  398.  Similarly,  any  other 
 network  configuration  whereby  access  to  the  incumbent  LECs  network  in  or  near  the  multiunit  premises  facilitates  access  to  the  Inside  Wire  Subloop  or  other  inside  wire  at  the  premises  must  be  unbundled.  In  other  words,  any  other 
 technically  feasible  access  point  to  these  subloops,  including  but  not  limited  to,  the  pole  or  pedestal,  the  NID,  the  MPOE,  and  the  SPOI  must  be  provided  on  an  unbundled  basis. 

 1039  See,  e.  g.,  AT&  T  Reply  at  174-  77  (incorporating  by  reference  its  March  8,  2002  Comments  in  WT  Docket  No. 
 99-  217,  Competitive  Networks);  WorldCom  Oct.  25,  2002  Building  Access  Ex  Parte  Letter  at  n.  21  (incorporating  by  reference  multiple  documents  discussing  these  and  related  issues);  ALTS  et  al.  Comments  at  48  n.  118 

 (incorporating  into  record  SBPP  Mar.  8,  2002  Comments  in  Competitive  Networks). 
 1040  Competitive  LECs  serving  customers  residing  in  multiunit  premises  typically  associated  with  the  mass  market 
 face  the  same  economic  and  operational  barriers  as  serving  customers  residing  in  multiunit  premises  typically  associated  with  the  enterprise  market. 

 1041  While  we  recognize  impairments  related  to  multiunit  premises  access  as  one  of  a  number  of  factors  considered 
 in  crafting  our  unbundling  rules  for  high-  capacity  loops,  we  accord  substantially  greater  weight  to  these  impairments  with  respect  to  subloop  unbundling  for  multiunit  premises  access.  We  recognize  that  carriers  seeking 

 to  provide  all  types  of  loop  capacities  to  end  users  in  these  premises  may  encounter  these  impairments  on  an  equal  basis.  For  example,  in  a  building  where  unbundled  DS3  loops  from  the  incumbent  LEC  are  no  longer  required 
 because  such  capacity  has  met  the  self-  provisioning  or  available  wholesale  alternatives  trigger,  the  availability  of  such  capacity  to  the  building  does  not  correlate  to  the  ability  to  take  that  capacity  up  through  the  building  to  the 
 (continued.) 
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 348.  We  find  that  competitive  carriers  are  impaired  on  a  nationwide  basis  1042  without  access  to  unbundled  subloops  used  to  access  customers  in  multiunit  premises.  1043  Because  of 
 their  prior  exclusive  access,  incumbent  LECs  have  first-  mover  advantages  with  respect  to  access  to  customers  in  multiunit  premises.  Requesting  carriers  face  many  barriers  in  accessing 
 customers  in  multiunit  premises,  including  a  general  prohibition  against  facilities-  based  access;  prohibitive  sunk  costs  associated  with  rewiring  a  building  to  serve  potentially  only  a  single 
 customer;  the  refusal  for  reasonable  access  to  the  existing  premises  wiring;  or  the  refusal  to  allow  installation  of  the  carriers  own  new  wiring.  Subloops  associated  with  access  to  multiunit 
 premises  have  economic  characteristics  similar  to  loops  generally,  i.  e.,  they  are  extremely  time-consuming  and  expensive  to  duplicate  on  a  pervasive  scale  and  self-  provisioning  can  be 
 prohibitively  costly.  1044  As  explained  above,  the  loop  itself  can  be  overwhelmingly  difficult  for  competitors  to  self-  deploy  due  to  the  sunk  and  fixed  costs  associated  with  entry.  Many  types  of 
 loops  continue  to  represent  an  enduring  last-  mile  bottleneck.  1045  Finally,  the  record  reflects  that  no  third-  party  wholesale  alternatives  to  these  subloops  are  available.  1046  Our  findings 
 regarding  impairment  with  respect  to  subloops  to  serve  multiunit  premises,  is  consistent  with  our  findings  regarding  loops,  generally.  1047  Failure  to  recognize  these  barriers  and  their  substantial 
 preclusive  effect  on  the  ability  of  facilities-  based  entry  to  multiunit  premises  undermines  the  objectives  of  our  unbundling  mandates.  For  all  requesting  carriers,  especially  carriers 
 constructing  facilities-  based  networks,  the  ability  to  access  subloops  at,  or  near,  the  customers  premises  in  order  to  reach  the  infrastructure  in  those  premises  where  they  otherwise  would  not 
 be  able  to  take  their  loop  the  full  way  to  the  customer,  is  critical.  1048 

 (Continued  from  previous  page) 
 floor  or  suite  of  a  customer  to  be  served.  See,  e.  g.,  AT&  T  Reply  at  176  (describing  fiber  to  the  floor  limitations).  Thus,  to  be  clear,  unbundled  subloops  for  multiunit  premises  access  are  available  to  requesting  carriers  irrespective 

 of  the  capacity  level  or  type  of  loop  such  carrier  will  provide  to  its  customer  at  that  premises.  We  note  that  existing  premises  wiring  may  often  be  suboptimal  for  provisioning  higher  capacity  loops  depending  on  the  age  of  the  wiring. 
 Ideally,  in  these  circumstances,  competitive  carriers  prefer  to  install  new  wiring  if,  and  when,  they  are  permitted. 
 1042  We  note  that  some  states  have  adopted  rules  that  address  various  aspects  of  multiunit  tenant  access  by 
 competitive  LECs.  See,  e.  g.,  Order  Establishing  Statewide  Policy  for  MDU  Access,  Application  No.  C-  1878/  PI-  23,  (Neb.  P.  S.  C.  Mar.  2,  1999);  Conn.  Gen.  Stat.    16-  2471  (1997);  16  Tex.  Admin.  Code    26-  129  (Sept.  7,  2000); 

 Mass.  DTE  98-  36-  A.  These  rules  vary  widely  in  scope  and  application  and  we  have  little  evidence  that  that  these  provisions  sufficiently  mitigate  the  barriers  to  multiunit  premises  access  associated  with  our  subloop  impairment 
 finding. 
 1043  See  NuVox  et  al.  Comments  at  70  ([  n]  o  changed  circumstances  have  developed  over  the  past  two  years  that 
 would  support  or  justify  removal  of  .  .  .  subloops  or  NIDs  from  the  national  UNE  list.). 
 1044  See  id.  at  81-  82;  ALTS  et  al.  Comments  at  46. 

 1045  See  supra  Part  VI.  A.  4. 
 1046  See  NuVox  et  al.  Comments  at  81-  82. 
 1047  See  supra  Part  VI.  A.  4. 
 1048  See  GCI  Comments  at  44;  Sprint  Comments  at  30;  ALTS  et  al.  Comments  at  46. 
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 349.  In  reaching  our  conclusion,  we  note  that  no  commenter,  including  incumbent  LECs,  argue  that  subloops  associated  with  accessing  wiring  at  multiunit  premises,  generally, 
 should  be  removed  from  the  list  of  UNEs.  1049  Indeed,  one  incumbent  LEC  states  that  it  has  not  incurred  large  burdens  or  increased  costs  in  having  subloops  defined  as  UNEs  and  doubts  if  it 
 has  been  a  burden  for  other  LECs  either.  1050  We  acknowledge  that  the  record  contains  some  evidence  that  competitors  use  of  subloop  UNEs,  to  date,  has  been  limited.  1051  We  agree  that  this 
 is  largely  the  result  of  the  fact  that  competitive  carriers  have  relied  more  heavily  on  entry  methods  such  as  loops  in  combination  with  switching  or  stand-  alone  loops  which  take  them  all 
 the  way  to  the  end-  user  customer,  even  in  multiunit  premises,  rather  than  self-  provisioning  facilities-  based  networks,  including  loop  plant,  to  the  customers  premises.  We  expect  that, 
 collectively,  the  unbundling  rules  we  adopt  today  will  both  facilitate  and  encourage  facilities-based  provisioning  and,  thus,  lead  to  a  greater  demand  for  these  unbundled  subloops  in  the 
 future.  Accordingly,  we  seek  to  ensure  that  those  carriers  that  self-  deploy  loops  are  able  to  access  the  last  few  feet  necessary  to  serve  the  end-  user  customer  residing  in  a  multiunit  premises. 

 350.  Finally,  our  previous  subloop  unbundling  rules  contained  a  provision  stating  that  access  to  the  subloops  is  subject  to  the  Commissions  collocation  rules.  1052  This  provision  was 
 included  to  facilitate  remote  terminal  access  particularly  for  accessing  IDLC  loops  and  copper  loop  portion  for  xDSL  service.  1053  The  record  indicates  that  this  provision  may  have  been 
 interpreted  to  require  either  that  a  requesting  carrier  establish  collocation  as  its  chosen  method  of  interconnection  pursuant  to  section  51.321  of  our  rules  1054  in  order  to  obtain  a  subloop,  or  that  the 

 1049  See  GCI  Comments  at  43-  44  (discussing  the  fact  that  a  competitive  LEC  is  impaired  without  access  to  the  loop 
 or  subloop  because  constructing  loop  facilities  is  not  a  viable  alternative  to  unbundling;  there  are  no  economically  feasible  alternative  sources  available;  and  even  GCI,  who  is  constructing  its  own  loop  facilities,  is  years  away  from 

 being  able  to  do  it  on  a  widespread  basis);  ALTS  et  al.  Comments  at  46-  47  (asserting  that  the  Commission  should  continue  to  require  unbundled  access  to  subloops  for  the  same  reasons  it  must  continue  to  provide  unbundled  access 
 to  loops;  access  to  the  subloop  remains  crucial  to  competitive  LECs  who  self-  provision  parts  of  their  networks  and  need  access  to  discrete  portions  of  the  loop);  Sprint  Comments  at  30;  BellSouth  Comments  at  74-  76;  see  also  Supra 
 Comments  at  9;  Texas  Commission  Reply  at  12;  California  Commission  Comments  at  17.  We  note,  however,  that  BellSouth  and  Verizon  take  issue  with  the  way  multiunit  premises  subloop  access  at  a  SPOI  has  been  required.  See 
 BellSouth  Feb.  17,  2000  Petition  for  Reconsideration  at  4-  5;  Bell  Atlantic  Petition  for  Reconsideration  and  Clarification,  CC  Docket  No.  96-  98  at  13-  15  (filed  Feb.  17,  2000)  (Verizon  Feb.  17,  2000  Petition  for 
 Reconsideration).  We  address  subloop  access  through  a  SPOI  below.  See  infra  note  1058.  Other  parties  argue,  generally,  that  the  Commission  should  retain  its  entire  currently-  specified  list  of  unbundled  elements  including 
 subloops.  See,  e.  g.,  Rural  Independent  Competitive  Alliance  Comments  at  2;  Illinois  Commission  Comments  at  5;  GSA  Comments  at  5;  Pennsylvania  Office  of  the  Consumer  Advocate  et  al.  Comments  at  19-  22. 

 1050  See  Sprint  Comments  at  30;  see  also  Qwest  Comments  at  45-  46  (suggesting  the  continued  availability  of 
 subloops  in  arguing  against  unbundling  for  advanced  services). 
 1051  See  Sprint  Comments  at  30. 

 1052  47  C.  F.  R.    51.319(  a)(  2)(  iv). 
 1053  See  UNE  Remand  Order,  15  FCC  Rcd  at  3794-  3800,  paras.  218-  29. 
 1054  47  C.  F.  R.    51.321(  b). 
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 requesting  carrier  must  establish  a  collocation  arrangement  at  the  specific  point  it  accesses  the  subloop,  including  those  subloops  associated  with  multiunit  premises  access.  1055  The  rules  we 
 adopt  today  make  clear  that  no  collocation  requirement  exists  with  respect  to  subloops  used  to  access  the  infrastructure  in  multiunit  premises.  Incumbent  LECs  are  required  to  provide 
 subloops  to  access  multiunit  premises  without  collocation.  1056  Competitive  carriers  are  able  to  access  these  subloops  at  any  technically  feasible  terminal  point  at  or  near  the  building  in  any 
 technically  feasible  manner.  1057  This  will  provide  facilities-  based  competitors  the  greatest  flexibility  in  designing  their  networks  and  most  efficiently  accessing  these  subloops  only  at  the 
 point  necessary.  1058 

 1055  The  record  contains  evidence  that  at  least  one  incumbent  LEC  imposes  a  collocation  requirement  on  requesting 
 carriers  ordering  subloops  at  multiunit  premises.  See  Letter  from  J.  G.  Harrington,  Counsel  for  Cox  Communications,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Dec.  19, 

 2002)  (discussing  issues  associated  with  accessing  multiunit  premises  wiring)  (Cox  Dec.  19,  2002  Ex  Parte  Letter). 
 1056  This  is  not  to  suggest  that  a  requesting  competitive  LEC  and  an  incumbent  LEC  may  not  agree  that  some 
 method  of  collocating  a  competitors  terminal  to  cross-  connect  with  the  incumbent  LECs  terminal  at  a  subloop  access  point  at  a  multiunit  premises  is  desirable,  taking  into  account  space  availability. 

 1057  To  the  extent  there  is  disagreement  with  respect  to  what  is  technically  feasible  with  respect  to  subloop  access 
 at  a  multiunit  premises,  this  issue  is  left  to  the  state  in  the  context  of  particular  interconnection  arrangements  pursuant  to  section  252  of  the  Act,  which  can  take  into  account  the  particular  incumbent  LECs  network  architecture 

 as  well  as  the  requesting  carriers  network.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3797,  para.  224.  Once  a  state  determines  that  it  is  technically  feasible  to  unbundle  a  subloop  at  a  particular  point,  an  incumbent  LEC  shall  have 
 the  burden  of  demonstrating  that  it  is  not  technically  feasible  to  unbundle  its  own  loop  at  that  point.  WorldCom  requests  clarification  that  state  determinations  of  technically  feasible  subloop  unbundling  may  occur  in  state 
 proceedings  that  are  not  limited  solely  to  section  252  arbitration  proceedings,  but  may  include  other  state  proceedings  conducted  pursuant  to  and  consistent  with  section  252  of  the  Act.  We  agree  that  this  is  an  important 
 clarification  and  therefore  reflect  it  in  our  rules.  See  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  20-  21. 

 1058  In  requiring  unbundled  subloops  at,  or  near,  a  multiunit  premises  for  access  to  the  wiring  at  the  premises, 
 including  Inside  Wire  Subloops,  we  note  that  our  current  requirement  relating  to  the  incumbent  LECs  obligation  to  construct  a  single  point  of  interconnection  (SPOI)  at  multiunit  premises  locations  for  access  to  these  subloops 

 requires  the  incumbent  LEC  to  construct  a  SPOI  even  where  it  has  no  facilities  into  the  premises.  We  agree  with  BellSouth  that  if  an  incumbent  LEC  has  no  facilities  which  it  owns,  controls  or  leases  at  a  multiunit  premises 
 through  which  it  serves,  or  can  serve,  customers  at  such  premises,  it  should  not  be  obligated  to  construct  an  SPOI.  See  BellSouth  Feb.  17,  2000  Petition  for  Reconsideration  at  4-  5.  Thus,  we  grant  that  portion  of  BellSouths  petition 
 requesting  that  we  limit  the  incumbent  LECs  obligation  to  construct  a  SPOI  to  only  those  multiunit  premises  where  the  incumbent  LEC  has  distribution  facilities  to  that  premises  and  either  owns,  controls,  or  leases  the  inside  wire  at 
 the  multiunit  premises,  including  the  Inside  Wire  Subloop,  if  any,  at  such  premises.  We  further  clarify  as  requested  by  BellSouth  that  the  incumbent  LECs  obligation  to  build  a  SPOI  for  multiunit  premises  only  arises  when  a 
 requesting  carrier  indicates  that  it  intends  to  place  an  order  for  access  to  an  unbundled  subloop  network  element  via  a  SPOI.  See  BellSouth  Feb.  17,  2000  Petition  for  Reconsideration  at  4-  5;  see  also  BellSouth  Comments  at  75. 

 In  clarifying  the  rules  we  adopt  today  regarding  the  extent  of  an  incumbent  LECs  obligation  to  construct  a  SPOI,  we  deny  Verizons  request  to  eliminate  the  SPOI  requirement.  See  Verizon  Feb.  17,  2000  Petition  for 
 Reconsideration  at  13-  15.  Verizon  claims  a  SPOI  rule  requires  it  to  construct  a  new  network  element.  A  SPOI  is  a  means  of  interconnection  with  a  network  element,  rather  than  part  of  the  network  element.  We  locate  our  authority 
 to  require  the  SPOI  in  the  section  251(  c)(  2)  requirement  that  incumbent  LECs  provide  interconnection  at  any  (continued.) 
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 a.  Inside  Wire  Subloops  and  NIDs. 
 351.  We  find  that  requesting  carriers  continue  to  be  impaired  on  a  nationwide  basis  without  unbundled  access  to  the  incumbent  LEC  inside  wire  subloops  and  NIDs.  The  record 

 conclusively  supports  our  determination  that  inside  wire  subloops  and  NIDs  should  be  unbundled.  The  economic  impairment  competitive  LECs  face,  generally,  with  respect  to  most 
 loops  is  exacerbated  through  the  outright  barriers  they  face  in  gaining  access  to  customers  from  owners  of  multiunit  premises.  This  impairment  is  especially  problematic  in  situations  where 
 competitors  are  able  to  construct  and  provision  a  local  loop  using  their  own  facilities  all  the  way  to  a  customer  premises,  yet  still  remain  unable  to  reach  the  end  user  in  that  premises.  1059  If 
 competitors  can  only  get  as  far  as  the  building  or  property  line  MPOE  with  their  own  facilities  because  they  are  prohibited  from  installing  their  own  customer  premises  wiring  to  reach  a 
 customer  at  that  premises,  the  incumbent  LECs  inside  wire  subloop  or  NID  may  be  the  exclusive  means  of  reaching  an  end  user.  Often,  there  is  no  alternative  inside  wiring  other  than 
 the  incumbent  LECs  available  at  the  premises.  1060  In  cases  where  customer  premises  wire  is  not  part  of  the  incumbent  LECs  network,  hence  not  an  inside  wire  subloop,  the  NID  may  be  the  sole 
 means  of  accessing  this  customer  premises  wire. 
 352.  We  note  that  the  Triennial  Review  NPRM  raised  the  issue  of  whether  the  NID  is  appropriately  considered  part  of  the  loop  when  a  competitor  requests  access  to  the  loop  or  a 

 subloop.  1061  We  have  previously  declined  to  include  the  NID  as  part  of  the  loop  1062  in  adopting  subloop  unbundling  rules,  yet  we  have  recognized  that  the  loop  network  element  does,  indeed, 
 include  the  NID  functionality  when  an  end-  to-  end  loop  is  provided.  1063  Under  the  rules  we  adopt  (Continued  from  previous  page) 

 technically  feasible  point  within  the  carriers  network.  See  47  U.  S.  C.    251(  c)(  2).  We  reject  the  argument  advanced  by  Verizon  that  the  SPOI  requirement  is  inconsistent  with  either  section  251(  c)(  2)  of  the  Act  or  the  Eighth 
 Circuits  decision  in  Iowa  Utils.  Bd.  The  Eighth  Circuit  endorsed  the  Commissions  statement  that  the  obligations  imposed  by  sections  251(  c)(  2)  and  section  251(  c)(  3)  include  modifications  to  incumbent  LEC  facilities  to  the  extent 
 necessary  to  accommodate  interconnection  or  access  to  network  elements.  Iowa  Utils.  Bd.,  120  F.  3d  at  813  n.  33.  Section  251(  c)(  2)  expressly  requires  incumbent  LECs  to  provide  interconnection  at  any  technically  feasible  point 
 and  the  Eighth  Circuit  held  that,  pursuant  to  section  251(  c)(  2),  incumbent  LECs  must  modify  their  networks  to  accommodate  interconnection  and  access  to  UNEs.  Thus,  incumbent  LECs  are  under  a  continuing  obligation  to 
 accommodate  technically  feasible  methods  of  interconnection,  including  modifying  their  networks  to  do  so,  and  the  Eighth  Circuits  decision  does  not  relieve  incumbent  LECs  of  the  requirement  to  construct  a  SPOI  necessary  to 
 accommodate  subloop  access  at  multiunit  premises. 
 1059  Owners  of  multiunit  premises  have  no  nationwide  obligation  to  provide  competitive  LECs  reasonable  and 
 nondiscriminatory  access  to  their  premises  on  the  same  terms  that  the  incumbent  LEC  has  access.  This  often  includes  the  ability  to  timely  and  economically  install  customer  premises  wiring  and  other  necessary  facilities 

 (including  the  NID  functionality)  to  reach  end-  user  customers.  See  infra  para.  353. 
 1060  See,  e.  g.,  Letter  from  John  T.  Nakahata,  Counsel  for  GCI,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147,  01-  318,  98-  56,  98-  141,  Attach.  at  7  (filed  Jan.  15,  2003). 
 1061  Triennial  Review  NPRM,  16  FCC  Rcd  at  22803,  para.  48  n.  110. 

 1062  UNE  Remand  Order,  15  FCC  Rcd  at  3802,  para.  235. 
 1063  Line  Sharing  Order,  14  FCC  Rcd  at  20923,  para.  17  n.  29. 
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 today,  we  identify  at  least  three  scenarios  where  competitive  LECs  are  impaired  without  access  to  the  NID  functionality:  (1)  access  to  a  stand  alone  unbundled  NID;  (2)  access  to  the  NID 
 functionality  as  a  component  of  an  unbundled  end-  to-  end  loop  or  a  subloop  and  (3)  access  to  the  NID  to  utilize  the  inside  wire  subloop.  We  note  that  different  incumbent  LEC  network 
 configurations  determine  where  the  NID  occurs  in  each  of  the  three  scenarios  1064  and  we  specify  the  incumbent  LECs  unbundling  obligations  with  respect  to  each  of  these  scenarios. 

 353.  First,  we  require  the  NID  to  be  offered  as  a  separate  UNE  for  requesting  carriers  requiring  only  stand  alone  NID  access.  Incumbent  LECs  are  required  to  provide  unbundled 
 access  to  the  NID  on  the  incumbent  LECs  network  side  on  a  stand-  alone  basis  to  permit  a  requesting  carrier  to  connect  its  own  loop  facilities  to  the  premises  wiring  at  any  customer 
 location.  1065  The  incumbent  LECs  NID  in  this  case  provides  a  critical  and  necessary  element  to  enable  the  competitor  to  reach  its  customer  and  a  UNE-  based  rate  for  this  access  is  appropriate. 
 Second,  when  a  requesting  carrier  requests  access  to  an  unbundled  local  loop  or  subloop  to  reach  a  customer,  the  NID  functionality  is  an  included  component  of  that  loop  or  subloop,  and  must  be 

 1064  For  example,  the  NID  can  mark  the  end  of  the  loop,  hence,  the  end  of  the  incumbent  LECs  network.  The  NID 
 can  also  be  within  the  loop  at  a  multiunit  premises  if  the  incumbent  LECs  network  extends  into  the  building  beyond  the  MPOE;  in  this  case  the  NID  can  be  characterized  as  part  of  a  subloop.  Similarly,  competitive  LECs 

 may  need  unbundled  access  to  the  NID  on  the  incumbent  LECs  network  side  to  utilize  wiring  in  the  building  that  is  not  part  of  the  incumbent  LECs  network,  or  they  may  need  only  one  time  contact  with  the  incumbent  LECs  NID 
 on  the  customers  side  of  the  NID  to  disconnect  the  customers  dedicated  wiring  and  reconnect  it  to  the  competitive  LECs  own  NID  if  the  competitive  LEC  has  installed  its  own  NID.  In  this  latter  case,  the  competitive  LECs 
 contact  with  the  NID  on  the  customer  side  does  not  constitute  access  to  an  incumbent  LECs  UNE  and  the  competitive  LEC  should  neither  incur  a  charge  from  the  incumbent  LEC  associated  therewith  nor  can  the  incumbent 
 LEC  require  the  presence  of  one  of  its  technicians. 
 1065  For  example,  a  competitor  will  generally  need  access  to  the  NID  on  a  stand-  alone  basis  on  the  incumbent 
 LECs  network  side  of  the  NID  when  the  competitive  LEC  is  provisioning  its  own  loops  to  the  premises;  the  NID  and  the  demarcation  point  are  located  at  the  MPOE;  and  the  wiring  in  the  premises  is  not  part  of  the  incumbent 

 LECs  network.  In  this  scenario,  accessing  the  incumbent  LECs  NID  on  the  network  side  enables  the  competitor  to  directly  access  the  premises  wiring  to  serve  its  customer  either  because  the  competitor  has  been  prevented  from 
 installing  its  own  NID  and  duplicative  premises  wiring,  or  the  cost  of  doing  so  to  serve  a  single  customer  is  prohibitively  expensive.  Verizon  opposes  a  requirement  that  permits  competitive  LECs  to  connect  their  loops 
 directly  to  the  incumbent  LECs  NID  because  of  the  risk  of  overvoltage.  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  11-  13.  We  reject  Verizons  argument  that  requesting  carriers  be  denied  direct  access  to  the  NID 
 because  of  the  risk  of  overvoltage.  The  record  does  not  support  a  finding  that  overvoltage  is  a  likely  occurrence  at  NIDs  because  competitive  LECs  generally  deploy  fiber  loops,  which  will  ground  in  the  terminating  box  rather  than 
 the  NID.  See  WorldCom  Comments  in  Response  to  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  10-  11  (Prevalence  of  fiber  loops  deployed  by  requesting  carriers  and  the  spare  grounding  terminals  at  incumbent  LEC 
 NIDs  guard  against  overvoltage);  see  also  AT&  T  Comments  In  Response  to  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  12;  MediaOne  Comments  in  Response  to  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at 
 2;  Sprint  Comments  in  response  to  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  9  (it  is  technically  feasible  for  requesting  carriers  to  connect  their  loops  directly  to  incumbent  LEC  NIDs).  Where  a  requesting  carrier  may 
 deploy  copper,  incumbent  LECs  can  require  requesting  carriers  interconnecting  at  the  NID  to  take  appropriate  steps  to  properly  secure  displaced  or  turned-  back  wiring,  such  as  taping  the  ends  of  the  wire,  or  attaching  the  displaced 
 wire  to  spare  terminals  within  the  NID,  through  interconnection  arrangements.  We  therefore  deny  Verizons  petition  with  respect  to  enabling  competitive  LECs  to  directly  connect  their  loops  to  the  incumbent  LECs  NID.  Id. 
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 provided  to  the  requesting  carrier  as  such.  1066  In  this  case  the  incumbent  LEC  should  not  impose  a  separate  charge  for  the  NID  functionality  as  it  should  be  included  in  the  unbundled  loop  or 
 subloop  charge.  Similarly,  in  network  configurations  where  the  NID  does  not  coincide  with  the  termination  point  of  the  incumbent  LECs  network  at  a  multiunit  premises,  i.  e.,  the  demarcation 
 point,  and  a  portion  of  the  loop  extends  beyond  the  NID,  a  competitor  accessing  the  NID  for  the  purpose  of  connecting  to  the  incumbent  LECs  inside  wire  subloop  is  entitled  to  the  NID 
 functionality  as  part  of  the  inside  wire  subloop.  1067  Finally,  we  note  that  in  scenarios  where  a  competitive  LEC  has  constructed  its  own  NID  at  a  premises  and  needs  only  to  make  contact  with 
 the  incumbent  LECs  NID  to  disconnect  the  customers  wiring  from  the  incumbent  LECs  NID  and  reconnect  it  to  the  competitive  LECs  NID,  the  competitive  LEC  is  not  accessing  or  using 
 the  incumbent  LECs  NID  on  an  unbundled  basis  and  no  associated  incumbent  LEC  charge  may  be  imposed  on  the  competitive  LEC.  1068 

 (i)  Inside  Wire  Subloop  Impairment 
 354.  We  require  incumbent  LECs  to  unbundle  the  inside  wire  subloop.  We  conclude  that  a  finding  of  impairment  for  the  inside  wire  subloop  removes  a  disincentive  for  competitors 

 to  deploy  their  own  loop  infrastructure.  Without  unbundled  access  to  the  inside  wire  subloop,  a  facilities-  based  competitor  could  conceivably  construct  an  entire  facilities-  based  network  with 
 no  reliance  whatsoever  on  the  incumbent  LECs  network  elements,  and  still  be  unable  to  reach  an  end  user  in  a  multiunit  premises  or  campus-  type  environment.  1069  Unless  a  competitor  has 
 access  to  the  unbundled  incumbent  LEC  inside  wire  subloop,  competitors  may  simply  have  no  alternative,  especially  in  multiunit  premises,  if  the  premises  owner  simply  refuses  to  enable  the 

 1066  For  example,  a  competitive  LEC  ordering  a  full  loop  or  a  subloop  at  some  accessible  point  before  the  loop 
 reaches  the  customer  premises  wiring  will  be  doing  so  because  it  is  unable  to  otherwise  reach  its  customer.  In  this  scenario,  ordering  the  loop  or  subloop  is  intended  to  take  the  competitor  all  the  way  to  the  customer.  Because  the 

 NID  is  the  functionality  that  connects  the  distribution  plant  to  the  customer  premises  wiring  it  is  part  of  that  loop  and  must  be  provisioned  as  such.  Depending  again  on  where  the  incumbent  LECs  network  demarcation  point  is 
 located  at  the  premises,  the  NID  may  either  mark  the  end  of  the  loop  or  be  at  some  point  within  the  loop  before  the  demarcation  point.  One  commenter  suggests  that  competitive  LECs  ordering  an  end-  to-  end  loop  (or  subloop)  to 
 reach  a  customer  should  have  the  NID  functionality  included  in  the  loop  without  a  separate  charge.  See  AT&  T  Comments  at  162.  We  agree  and  expect  that  the  NID  rules  we  adopt  today  make  that  clear  going  forward.  In  the 
 unlikely  event  that  a  competitive  LEC  does  not  need  the  NID  at  a  location  where  it  orders  an  unbundled  loop  or  subloop  that  includes  the  NID  functionality,  this  scenario  should  be  accommodated  through  a  separate  negotiation. 

 1067  In  buildings  where  the  incumbent  LEC  has  not  located  the  demarcation  point  at  the  MPOE  and  its  network 
 extends  into  the  building,  the  NID  may  nevertheless  be  located  at  the  MPOE.  In  this  scenario,  a  competitor  may  need  access  to  that  NID  to  gain  access  to  the  Inside  Wire  Subloop.  Since  the  NID  would  not  mark  the  end  of  the 

 incumbent  LECs  network  in  this  scenario,  accessing  the  Inside  Wire  Subloop  at  the  NID  would  provide  the  NID  functionality  for  that  subloop. 

 1068  See  AT&  T  Comments  at  162. 
 1069  It  would  be  an  unintended  perverse  result  which  would  run  afoul  of  one  of  our  principal  objectives  in 
 implementing  the  Act--  the  encouragement  of  facilities-  based  competition--  if  our  rules  did  not  accommodate  this  impairment  while  enabling  competitors  that  continue  to  rely  on  the  incumbent  LEC  for  a  full  unbundled  local  loop 

 (which  by  definition  includes  the  Inside  Wire  Subloop)  to  gain  unimpaired  access  to  the  same  end  users. 
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 competitive  LEC  to  construct  its  own  wiring.  1070  In  situations  where  the  competitor  may  be  able  to  negotiate  the  right  to  install  its  own  wiring,  consistent  with  our  finding  of  financial/  economic 
 barriers  for  self-  provisioning  most  loops  and  subloops,  generally,  duplication  of  the  inside  wire  subloop,  particularly  for  a  limited  number  of  tenants  is  both  cost  and  time  prohibitive  and  could 
 require  competitors  to  incur  sunk  costs  which  may  never  be  recoverable.  1071 
 355.  Commenters  confirm  that  in  those  premises  where  the  demarcation  point  of  the  incumbent  LECs  network  is  not  located  at  the  MPOE  and  the  incumbent  LECs  network 

 extends  into  the  premises,  a  competitors  access  to  the  incumbent  LECs  inside  wire  is  often  the  only  means  by  which  a  competitive  LEC  can  practically  offer  service  to  customers.  1072  There  is 
 no  evidence  that  any  third-  party  alternative  providers  exist  and  self-  provisioning  is  extremely  difficult,  if  not  impossible.  The  record  further  reflects  that  competitive  carriers  continue  to 
 experience  barriers  with  respect  to  their  ability  to  gain  access  to  multiunit  premises  to  install  their  own  facilities  as  building  owners  regularly  impose  unreasonably  high  entry  rates  on 
 competitive  LECs;  fail  to  negotiate  on  a  timely  basis;  1073  or  impose  uneconomic  limitations  on  the  installation  of  inside  wiring.  1074 

 (ii)  NID  Impairment 
 356.  We  conclude  that  the  NID  should  remain  available  as  an  UNE  as  the  means  to  enable  a  competitive  LEC  to  connect  its  loop  to  customer  premises  inside  wiring.  1075  As  noted  by 

 1070  If  there  is  a  portion  of  the  incumbent  LECs  loop  at  the  premises  on  the  incumbent  LECs  side  of  the  NID,  the 
 subloop  unbundling  rules  we  adopt  today  will  ensure  useful  access  to  the  NID.  See  WorldCom  Comments  at  119-  20.  We  recognize  that  at  those  premises  where  the  building  owner  has  exercised  its  right  to  require  the  incumbent 

 LEC  to  place  its  demarcation  point  at  the  MPOE  pursuant  to  47  C.  F.  R.    68.105,  the  wiring  at  that  premises  will  not  be  part  of  the  incumbent  LECs  local  loop  and  our  Inside  Wire  Subloop  rules  may  not  aid  the  competitor  in  reaching 
 the  customer  if  the  building  owner  will  not  enable  the  competitor  to  construct  its  own  wiring  (assuming  such  construction  would  even  be  economically  feasible).  In  this  situation,  however,  enabling  competitive  LECs  to 
 connect  their  loop  to  the  incumbent  LECs  unbundled  NID  gives  competitive  LECs  access  to  the  existing  inside  wire  used  by  the  incumbent  LEC  to  reach  its  customers  even  though  this  inside  wire  may  not  be  an  UNE.  We 
 reiterate  our  requirement  that  access  to  such  wiring  be  provided  to  a  competitive  LEC  on  non-  discriminatory  terms  where  another  carrier  providing  service  at  the  premises  over  such  wire,  e.  g.,  the  incumbent  LEC,  has  responsibility 
 for  the  installation  and  maintenance  of  the  wire.  Similarly,  we  expect  building  owners  to  exercise  the  control  of  this  wiring  in  a  non-  discriminatory  way.  See  Competitive  Networks  Order,  15  FCC  Rcd  at  23009,  para.  57. 

 1071  See  ALTS  et  al.  Comments  at  42. 
 1072  WorldCom  Reply  at  170;  NuVox  et  al.  Comments  at  81  (citing  TDS  Jackson  Aff.  at  para.  10  n.  251)  (  For 
 residential  and  small  business  customers  who  are  served  off  basic  loops  or  subloops,  there  is  absolutely  no  way  to  justify  overbuilding  LEC  facilities  using  current  technology.). 

 1073  See,  e.  g.,  WorldCom  Comments  at  120  (noting  that  it  takes  6-  9  months  to  negotiate);  AT&  T  Reply  at  174-  79. 
 1074  See,  e.  g.,  AT&  T  Reply  at  176. 
 1075  See,  e.  g.,  NuVox  et  al.  Comments  at  83-  84;  NuVox  et  al.  Reply  at  39;  GCI  Comments  at  43-  44;  WorldCom 
 Comments  at  119-  20;  WorldCom  Reply  at  170-  71;  Supra  Comments  at  9;  Sprint  Comments  at  31;  ALTS  et  al.  Comments  at  60. 
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 commenters,  the  NID  is  the  gateway  to  the  consumer  and  thus  the  key  to  local  competition.  1076  Indeed,  the  record  shows  that  the  NID  may  often  be  the  only  means  through  which  a  competitive 
 LEC  can  provide  facilities-  based  service  to  customers,  particularly  those  located  in  multiunit  premises.  1077  As  we  noted  above  in  our  discussion  of  the  inside  wire  subloop,  unbundled  access 
 to  the  NID  ensures  that  competitors  are  able  to  access  customer  premises  inside  wiring  owned,  controlled  or  used  by  the  LEC,  even  if  competitors  are  precluded  by  the  premises  owner  from 
 installing  duplicative,  yet  necessary,  wiring  to  reach  their  customer.  1078  The  Commission  first  recognized  this  in  the  Local  Competition  Order  1079  and  we  find  it  to  remain  the  case  today.  If 
 anything,  the  record  suggests  that  as  more  and  more  competitors  begin  deploying  their  own  local  loop  facilities  in  lieu  of  relying  on  the  incumbent  LEC  loop,  access  to  the  unbundled  NID  will  be 
 more  critical  than  ever.  1080  We  agree  that  unbundled  access  to  the  NID  remains  a  crucial  catalyst  to  facilities-  based  competition.  1081  The  record  demonstrates  that  competitive  carriers  face 
 numerous  situations  where  access  to  the  unbundled  NID  is  critical  to  the  ability  to  access  the  LECs  inside  wire  subloop  or  other  customer  premises  inside  wiring  beyond  the  demarcation 
 point  in  order  to  reach  the  end-  user  customer.  1082  Only  one  commenter,  Verizon,  opposed  continued  unbundling  of  the  NID.  We  disagree  with  Verizon  that  because  no  requests  for 
 unbundled  access  to  the  NID  have  been  made  in  Verizon  territory,  no  requesting  carrier  can  reasonably  claim  that  it  is  impaired  without  access  to  the  LECs  unbundled  NID.  1083  The  record 
 reflects  otherwise  on  a  nationwide  basis. 

 1076  NuVox  et  al.  Comments  at  83. 
 1077  See,  e.  g.,  WorldCom  Comments  at  120;  Sprint  Comments  at  31-  32. 
 1078  See  supra  para.  352. 
 1079  Local  Competition  Order,  11  FCC  Rcd  at  15697,  para.  392. 
 1080  See,  e.  g.,  GCI  Comments  at  43;  WorldCom  Reply  at  170-  71;  Sprint  Comments  at  32;  ALTS  et  al.  Comments  at 
 60. 
 1081  See,  e.  g.,  ALTS  et  al.  Comments  at  60  (noting  that  unbundling  the  NID  promotes  facilities-  based  competition 
 by  allowing  carriers  to  reduce  their  reliance  on  the  incumbent  by  interconnecting  their  facilities  closer  to  the  customer.). 

 1082  See,  e.  g.,  WorldCom  Comments  at  120;  WorldCom  Reply  at  170-  71;  Sprint  Comments  at  31-  32;  see  also  Cox 
 Dec.  19,  2002  Ex  Parte  Letter. 
 1083  See  Verizon  Comments  at  122  n.  433.  While  it  may  initially  appear  that  AT&  T,  like  Verizon,  suggests  that  the 
 NID  need  not  be  separately  unbundled  from  the  loop  so  as  to  prevent  competitors  from  accessing  it  on  a  stand-  alone  basis,  AT&  Ts  comments  appear  to  be  directed  both  at  how  a  competitive  LEC  is  charged  for  access  to  the  NID 

 functionality  and  whether  the  NID  functionality  is  to  be  provided  as  part  of  a  loop  or  subloop  when  ordered  by  a  competitive  LEC  rather  than  whether  it  should  be  available  as  a  separate  unbundled  element  to  the  extent 
 competitive  LECs  require  access  to  the  NID  on  a  stand-  alone  basis.  See  AT&  T  Comments  at  162;  AT&  T  Corp.  Petition  For  Reconsideration  and  Clarification  of  the  Third  Report  and  Order,  CC  Docket  No.  96-  98  at  19-  20  (filed 
 Feb.  17,  2000)  (AT&  T  Feb.  17,  2000  Petition  for  Reconsideration).  We  have  distinguished  above  those  scenarios  where  the  NID  must  be  provisioned  as  part  of  the  loop  or  subloop  when  a  competitive  LEC  orders  a  loop  or  subloop 
 and  those  scenarios  when  charges  for  stand-  alone  NID  access  are  appropriate.  The  NID  and  subloop  unbundling  rules  we  adopt  herein  ensure  that  competitive  LECs  obtain  a  full  loop  or  subloop,  including  the  network  termination 
 (continued.) 
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 357.  The  record  also  reveals  that  the  equipment,  labor  and  construction  cost  of  duplicating  the  NID  functionality  at  every  customer  location  continues  to  be  prohibitive,  1084  and, 
 thus,  presents  a  barrier  to  entry.  1085  Moreover,  the  record  indicates  that  no  competitive  NID  providers  exist.  1086  Finally,  commenters  offer  compelling  evidence  that  from  an  operational 
 perspective,  denying  competitors  the  ability  to  access  the  incumbent  LECs  unbundled  NID  could  result  in  complicated  inside  wire  rearrangements  that  would  result  in  lengthy  service 
 delays  and  costs  and  result  in  a  waste  of  resources  for  all  carriers  involved.  1087 
 358.  We  decline  to  adopt  in  this  Order  more  specific  rules  defining,  on  a  nationwide  basis,  the  manner  and  scope  of  access  to  the  unbundled  NID  functionality.  1088  Individual 

 incumbent  LEC  and  competitive  LEC  arrangements  governing  the  process  and  procedures  for  obtaining  access  to  an  UNE  to  which  a  competitive  LEC  is  entitled,  are  more  appropriately 
 addressed  in  the  context  of  individual  interconnection  agreements  pursuant  to  section  252  of  the  Act.  Should  a  competitive  LEC  believe  that  the  incumbent  LEC  is  imposing  unreasonable  or 
 discriminatory  requirements,  either  in  the  negotiation  or  implementation  stage  of  an  interconnection  arrangement,  forums  to  address  such  issues  are  set  forth  in  the  Act.  1089  These 
 (Continued  from  previous  page) 
 portion  of  that  loop  or  subloop,  if  required,  yet  preserves  the  ability  of  facilities-  based  LECs  to  obtain  access  to  only  the  NID  on  a  stand-  alone  basis  when  required.  AT&  Ts  February  17,  2000  petition  for  reconsideration  with  respect 

 to  loop  and  subloop  unbundling  requirements  is  therefore  moot. 
 1084  See,  e.  g.,  Sprint  Comments  at  31  ([  I]  t  is  the  total  cost  of  installing  a  NID  at  every  customer  location  that 
 substantially  impairs  requesting  carriers);  ALTS  et  al.  Comments  at  59  (  The  cost/  benefit  equation  of  self-provisioning  NIDs  has  not  changed  since  the  UNE  Remand  Order.  Self-  provisioning  NIDs  at  numerous  locations 

 would  cause  competitive  LECs  to  incur  duplicative  expense  and  delay  the  timeframe  in  which  they  are  able  to  provide  service.);  see  also  GCI  Comments  at  42-  43;  WorldCom  Comments  at  120;  NuVox  et  al.  Comments  at  84; 
 NuVox  et  al.  Reply  at  39  n.  169. 
 1085  We  reached  a  similar  conclusion  in  the  UNE  Remand  Order.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3801, 
 para.  232. 
 1086  NuVox  et  al.  Comments  at  84  ([  T]  he  CLEC  Coalition  knows  of  no  vendor  that  can  provide  it  with  or  install 
 NIDS  at  the  locations  they  serve.  Thus,  they  must  continue  to  rely  on  LECs  for  NID  access  in  order  to  have  entry  to  customer  premises.);  see  also  Sprint  Comments  at  32  (  Sprint  is  unaware  of  any  alternative  providers  of  standalone 

 NIDs.). 
 1087  See  Sprint  Comments  at  32;  see  also  WorldCom  Comments  at  120  (  It  would  be  prohibitively  expensive  for  a 
 CLEC  leasing  unbundled  loops  to  single  unit  premises  to  dispatch  technicians  to  each  unit  to  install  a  new  NID,  and  it  would  be  wasteful  to  impose  on  new  entrants  the  costs  both  of  disconnecting  loops  and  NIDs  that  are  normally 

 combined  in  ILECs  networks  and  of  installing  new  and  unnecessary  NIDs.). 
 1088  See  BellSouth  Comments  at  75-  76  (discussing  hypothetical  hazards  that  competitive  LECs  may  cause  to  an 
 end  users  premises  through  accessing  the  incumbent  LECs  NID  and  arguing  that  competitive  LECs  need  to  agree  to  follow  practices  and  procedures  that  ensure  safety  and  continuity  of  service);  see  also  Cox  Dec.  19,  2002  Ex 

 Parte  Letter  (discussing  its  experience  with  requirements  imposed  by  certain  incumbent  LECs  associated  with  a  competitive  LECs  need  to  access  the  NID  functionality  and  requesting  that  the  Commission  adopt  a  uniform 
 nationwide  rule  which  would  prohibit  unreasonable  requirements). 
 1089  See  generally  section  252  of  the  Act  governing  the  process  for  interconnection  negotiations  and  related 
 disputes.  47  U.  S.  C.    252. 
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 same  forums  are  available  to  the  incumbent  LEC.  We  note,  however,  that  the  record  contains  evidence  that  at  least  one  incumbent  LEC  requires  competitive  LECs  seeking  access  to  the  NID 
 or  inside  wire  subloop  to  undertake  a  lengthy  and  burdensome  process  at  the  customer  premises  to  collocate  a  separate  terminal  facility  in  order  to  gain  access  to  the  inside  wire  subloop,  or 
 other  inside  wire  used  by  the  LEC  to  access  customers  in  multiunit  premises.  1090  We  find  such  a  requirement  to  be  contrary  to  the  NID  and  inside  wire  subloop  unbundling  rules  we  adopt  today 
 and  therefore  prohibit  such  requirements.  1091  Similarly,  a  competitive  LEC  seeking  to  make  contact  with  the  incumbent  LECs  NID  for  the  purpose  of  disconnecting  wiring  on  the 
 customers  side  of  the  NID  so  that  the  competitive  LEC  can  reconnect  such  customer  wiring  to  its  own  NID  is  not  accessing  the  incumbent  LECs  NID  as  a  UNE.  As  such,  an  incumbent  LEC 
 requirement  to  have  its  technician  present  and  to  impose  an  associated  charge  on  the  competitive  LEC  for  such  contact  on  the  non-  network  side  of  the  NID  would  also  be  contrary  to  the  rules  we 
 adopt  today.  Accordingly,  we  therefore  prohibit  these  types  of  requirements  as  well. 
 C.  Dedicated  Transport 
 1.  Summary 
 359.  Pursuant  to  the  approach  of  the  Triennial  Review  NPRM,  the  Commission  adopts  in  this  Order  a  more  granular  unbundling  analysis  for  transport  facilities.  1092  As  discussed  above, 

 this  analysis  comports  with  the  guidance  of  the  Supreme  Court  and  the  D.  C.  Circuit  which  call  for  the  Commission  to  apply  some  limiting  standard  and  to  demonstrate  a  reasonable  basis  for 
 thinking  that  competition  is  suffering  .  .  .  impairment.  1093  Our  findings  reflect  these  admonitions  as  we  carefully  assess  the  availability  of  network  elements  from  alternative  sources  outside  the 
 incumbent  LECs  facilities.  1094  As  an  initial  matter,  we  limit  our  definition  of  the  dedicated  transport  network  element  to  only  those  transmission  facilities  connecting  incumbent  LEC 
 switches  or  wire  centers.  The  Commission  makes  findings  regarding  impairment  as  to  different  capacities  of  transport.  We  believe  that  our  analysis  of  transport  will  create  market  certainty  and 
 provide  incentives  for  competitive  LECs  to  deploy  and  utilize  alternate  facilities.  1095  Specifically,  based  on  the  evidence  in  the  record,  we  make  the  following  determinations: 

 1090  See  Cox  Dec.  19,  2002  Ex  Parte  Letter. 
 1091  As  we  have  noted  in  para.  350,  supra,  we  recognize  that  facilities-  based  carriers,  in  particular,  may  use  an 
 alternative  method  of  interconnection  as  provided  for  in  section  51.321  of  the  rules,  47  C.  F.  R.    51.321.  Moreover,  with  respect  to  subloops  to  access  multiunit  premises  including  Inside  Wire  Subloops,  a  collocation  requirement 

 would  be  unduly  burdensome  and  unnecessary. 
 1092  Triennial  Review  NPRM,  16  FCC  Rcd  at  22809-  11,  paras.  63-  64. 

 1093  Iowa  Utils.  Bd.,  525  U.  S.  at  388  (emphasis  in  original);  USTA,  299  F.  3d  at  422. 
 1094  See  UNE  Remand  Order,  15  FCC  Rcd  at  3861-  62,  paras.  366-  68. 
 1095  Providing  a  limitation  on  the  availability  of  higher  capacity  unbundled  transport  may  also  encourage 
 technological  innovation  that  allows  more  efficient  use  of  lower  capacity  bandwidth  levels. 
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 impairment,  our  analysis  provides  a  roadmap  for  deregulation  where  regulation  does  not  serve  the  goals  of  the  Act.  1099 
 2.  Background 
 361.  Dedicated  interoffice  transmission  facilities  (transport)  are  facilities  dedicated  to  a  particular  customer  or  competitive  carrier  that  it  uses  for  transmission  among  incumbent  LEC 

 central  offices  and  tandem  offices.  1100  Competing  carriers  generally  use  interoffice  transport  as  a  means  to  aggregate  end-  user  traffic  to  achieve  economies  of  scale.  They  do  so  by  using 
 dedicated  transport  to  carry  traffic  from  their  end  users  loops,  often  terminating  at  incumbent  LEC  central  offices,  through  other  central  offices  to  a  point  of  aggregation.  Ultimately,  the 
 traffic  is  carried  to  the  competitors  switch  or  other  equipment,  often  from  an  incumbent  LEC  central  office  along  a  circuit  generally  known  as  an  entrance  facility. 

 362.  The  definition  of  dedicated  transport  adopted  by  the  Commission  in  the  UNE  Remand  Order  broadly  applied  to  all  technically  feasible  capacity  levels  between  incumbent 
 LEC  wire  centers,  or  between  switches  owned  by  incumbent  LECs  or  requesting  telecommunications  carriers.  1101  Although  the  UNE  Remand  Order  defined  transport  broadly,  the 
 record  reveals  that  the  availability  of  these  facilities  has  been  limited  in  a  number  of  ways.  First,  although  the  Commission  determined  that  requesting  carriers  are  impaired  without  access  to 
 entrance  facilities,  1102  availability  has  been  very  limited  as  a  practical  matter  because  new  facilities  often  must  be  constructed  to  deploy  this  circuit.  1103  Second,  CMRS  providers  have 
 demanded,  and  incumbent  LECs  have  denied,  access  to  unbundled  transmission  circuits.  1104  Third,  some  incumbent  LECs  have  interpreted  commingling  and  use  restrictions  to  further  limit 

 1099  In  contrast,  in  the  Local  Competition  Order  and  UNE  Remand  Order,  despite  observing  that  competitive 
 transport  facilities  were  available  in  many  locations,  the  Commission  concluded  that  incumbent  LECs  must  provide  interoffice  transmission  facilities,  including  dedicated  and  shared  transport,  on  an  unbundled  basis  to  requesting 

 carriers,  practically  without  limit.  Local  Competition  Order,  11  FCC  Rcd  at  15717,  para.  439;  UNE  Remand  Order,  15  FCC  Rcd  at  3842,  para.  321;  see  also  Shared  Transport  Order,  12  FCC  Rcd  at  12475,  para.  25. 

 1100  We  refer  generically  to  transport  in  this  Part  as  meaning  dedicated  transport.  We  address  shared  transport  in 
 Part  VI.  E.  of  this  Order. 
 1101  The  Commission  defined  dedicated  transport  as  incumbent  LEC  transmission  facilities  including  all 
 technically  feasible  capacity-  related  services  including,  but  not  limited  to,  DS1,  DS3  and  OCn  levels,  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.  47  C.  F.  R.    51.319(  d)(  1)(  i). 

 1102  See  UNE  Remand  Order,  15  FCC  Rcd  at  3851-  52,  paras.  347-  48. 
 1103  For  a  detailed  discussion  of  limitations  on  new  facilities  construction,  see  our  discussion  of  this  aspect  of 
 network  modifications  at  Part  VII.  D  below.  See  also  Supplemental  Order,  15  FCC  Rcd  at  1760,  para.  4  &  n.  5  (discussing  a  limitation  on  converting  entrance  facilities  from  incumbent  LEC  special  access  to  unbundled 

 transport). 
 1104  We  address  CMRS  carrier  access  to  unbundled  transport  more  fully  below. 
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 the  ability  of  carriers  to  obtain  unbundled  transport  facilities.  1105  Finally,  incumbent  LECs  have  denied  requesting  carriers  access  to  transport  using  SONET  technology.  1106 
 363.  Reviewing  courts  have  considered  the  Commissions  broad  network  element  definitions  and  unbundling  requirements.  The  Supreme  Court  stated  that  the  Commissions 
 impairment  analysis  cannot,  consistent  with  the  statute,  blind  itself  to  the  availability  of  elements  outside  the  incumbent  LECs  network.  1107  More  recently,  the  D.  C.  Circuit  questioned 
 how  the  Commission  could  find  that  an  element  like  transport  is  significantly  deployed  on  a  competitive  basis,  but  remains  available  as  an  unbundled  element  from  the  incumbent  LEC.  1108 
 In  both  Iowa  Utilities  Board  and  USTA,  the  courts  were  reviewing  broad  unbundling  requirements  for  transport  that  made  little  to  no  distinction  in  capacity,  geography,  or  customer 
 class. 
 364.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  how  to  analyze  impairment  for  transport,  especially  in  light  of  the  manner  in  which  the  Commissions 

 rules  have  been  interpreted  by  courts  and  carriers  in  the  industry.  Importantly,  the  Commission  sought  comment  on  whether  it  should  refine  its  unbundling  analysis  for  transport  by  applying  a 
 more  granular  analysis  based  on  service,  geographic,  or  capacity  distinctions.  1109  The  Commission  also  invited  comments  and  proposals  for  guidelines  or  bright-  line  rules  that  would 
 provide  sufficient  guidance  [to]  all  parties  involved  to  minimize  disputes  arising  from  implementation  of  unbundling  requirements  adopted  in  this  proceeding.  1110 

 3.  Definition  of  Dedicated  Transport 
 365.  We  limit  our  definition  of  dedicated  transport  under  section  251(  c)(  3)  to  those  transmission  facilities  connecting  incumbent  LEC  switches  and  wire  centers  within  a  LATA.  1111 

 The  Commission  previously  defined  dedicated  transport  as: 

 1105  For  further  discussion  of  the  Commissions  previous  use  and  commingling  restrictions,  see  Part  VII.  A.  infra. 
 1106  BellSouth  Comments  at  56;  see  also  UNE  Remand  Order,  15  FCC  Rcd  at  3843,  para.  324.  SONET  is  an 
 optical  interface  standard  for  translating  electronic  communications  signals  into  photonic  signals  for  transmission  across  fiber  optic  facilities.  Ideally,  SONET  transmission  systems  are  laid  out  in  a  ring  formation  to  provide 

 redundancy.  See  NEWTONS  TELECOM  DICTIONARY  684-  86  (18th  ed.  2002). 
 1107  Iowa  Utils.  Bd.,  525  U.  S.  at  389.  The  Court  intimated  that  the  Commission  should  consider  when  elements  can 
 be  self-  provision[  ed]  or  purchas[  ed]  from  another  provider.  Id. 
 1108  USTA,  290  F.  3d  at  422. 

 1109  Triennial  Review  NPRM,  16  FCC  Rcd  at  22810,  para.  64. 
 1110  Id.  at  22811,  para.  65. 
 1111  Section  271  of  the  Act  prohibits  BOCs  from  providing  in-  region  interLATA  services  unless  the  BOC  meets 
 very  specific  requirements,  but  transport  and  other  services  are  permitted  within  a  LATA  without  meeting  such  requirements.  See  47  U.  S.  C.    271.  Therefore,  we  find  that  LATA  boundaries  serve  as  a  reasonable  limitation  on 

 the  scope  of  BOC  obligations  to  unbundle  transport. 
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 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.  1112 
 We  conclude  that  our  previous  definition  was  overly  broad.  As  we  explain  in  this  Part,  competitive  LECs  often  use  transmission  links  including  unbundled  transport  connecting 

 incumbent  LEC  switches  or  wire  centers  in  order  to  carry  traffic  to  and  from  its  end  users.  These  links  constitute  the  incumbent  LECs  own  transport  network.  However,  in  order  to  access 
 UNEs,  including  transmission  between  incumbent  LEC  switches  or  wire  centers,  while  providing  their  own  switching  and  other  equipment,  competitive  LECs  require  a  transmission  link  from  the 
 UNEs  on  the  incumbent  LEC  network  to  their  own  equipment  located  elsewhere.  Competitive  LECs  use  these  transmission  connections  between  incumbent  LEC  networks  and  their  own 
 networks  both  for  interconnection  and  to  backhaul  traffic.  Unlike  the  facilities  that  incumbent  LECs  explicitly  must  make  available  for  section  251(  c)(  2)  interconnection,  1113  we  find  that  the 
 Act  does  not  require  incumbent  LECs  to  unbundle  transmission  facilities  connecting  incumbent  LEC  networks  to  competitive  LEC  networks  for  the  purpose  of  backhauling  traffic. 

 366.  We  find  that  a  more  reasonable  and  narrowly-  tailored  definition  of  the  dedicated  transport  network  element  includes  only  those  transmission  facilities  within  an  incumbent  LECs 
 transport  network,  that  is,  the  transmission  facilities  between  incumbent  LEC  switches.  1114  Because  the  Act  does  not  provide  guidance  on  which  transmission  facilities  should  be  included 
 in  the  definition  of  the  transport  network  element,  we  believe  we  have  discretion  to  adopt  a  definition  that  is  in  keeping  with  the  section  251s  goal  of  opening  the  incumbent  LECs  local 
 network  to  competition.  We  find  that  transmission  facilities  connecting  incumbent  LEC  switches  and  wire  centers  are  an  inherent  part  of  the  incumbent  LECs  local  network  Congress 
 intended  to  make  available  to  competitors  under  section  251(  c)(  3).  On  the  other  hand,  we  find  that  transmission  links  that  simply  connect  a  competing  carriers  network  to  the  incumbent 
 LECs  network  are  not  inherently  a  part  of  the  incumbent  LECs  local  network.  Rather,  they  are  transmission  facilities  that  exist  outside  the  incumbent  LECs  local  network.  Accordingly,  such 
 transmission  facilities  are  not  appropriately  included  in  the  definition  of  dedicated  transport.  We 

 1112  Local  Competition  Order,  11  FCC  Rcd  at  15718,  para.  440,  reaffirmed  in  UNE  Remand  Order,  15  FCC  Rcd  at 
 3842,  paras.  322-  23  (emphasis  added);  see  47  C.  F.  R.    51.319(  d)(  1)(  i);  see  NuVox  et  al.  Reply  at  34-  36  (noting  that  the  Commissions  rules  explicitly  unbundle  transmission  facilities  connecting  incumbent  LEC  switches  or  wire 

 centers  with  competitive  LEC  switches). 
 1113  Specifically,  section  251(  c)(  2)  requires  access  to  the  facilities  and  equipment  used  by  competing  carriers  for 
 interconnection  with  the  local  exchange  carriers  network  .  .  .  for  the  transmission  and  routing  of  telephone  exchange  service  and  exchange  access  .  .  .  .  The  Local  Competition  Order  discussed  the  relationship  between 

 sections  251(  c)(  2)  and  251(  c)(  3)  only  to  the  extent  that  the  obligation  under  section  251(  c)(  3)  allows  unbundled  elements  to  be  used  for  a  broader  range  of  services  than  subsection  (c)(  2)  allows  for  interconnection.  Local 
 Competition  Order,  11  FCC  Rcd  at  15636-  37,  para.  270. 
 1114  For  further  discussion  of  the  Commissions  definition  of  network  elements,  see  supra  Part  V.  A. 
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 note  that  a  previous  Commission  reached  a  different  result  finding  that,  because  unbundling  this  type  of  transmission  facility  is  technically  feasible  and  will  reduce  entry  barriers  into  the 
 local  exchange  market,  it  was  appropriate  to  include  such  facilities  within  the  definition  of  dedicated  transport.  1115  We  find  that  this  approach  was  misguided.  The  standard  for  unbundling 
 is  not  technical  feasibility  and,  moreover,  just  because  a  facility  is  capable  of  being  unbundled  does  not  mean  that  it  is  appropriately  considered  to  be  a  network  element  for  purposes  of  section 
 251(  c)(  3).  We  find  that  the  more  reasonable  approach,  and  the  one  that  is  most  consistent  with  the  goals  of  section  251,  is  to  not  consider  those  facilities  outside  of  the  incumbent  LECs  local 
 network  as  part  of  the  dedicated  transport  network  element  that  is  subject  to  unbundling.  1116  In  reaching  this  determination  we  note  that,  to  the  extent  that  requesting  carriers  need  facilities  in 
 order  to  interconnect[]  with  the  [incumbent  LECs]  network,  section  251(  c)(  2)  of  the  Act  expressly  provides  for  this  and  we  do  not  alter  the  Commissions  interpretation  of  this 
 obligation.  1117  Therefore,  we  find  that  the  dedicated  transport  network  element  includes  only  those  features,  functions,  and  capabilities  of  equipment  and  facilities  that  coincide  with  the 
 incumbent  LECs  transport  network    the  transmission  links  connecting  incumbent  LEC  switches  or  wire  centers.  1118 

 367.  Our  conclusion  in  this  respect  is  buttressed  by  the  fact  that  the  economics  of  dedicated  facilities  used  for  backhaul  between  networks  are  sufficiently  different  from  transport 
 within  an  incumbent  LECs  network  that  our  analysis  must  adequately  reflect  this  distinction.  Competing  carriers  have  control  over  where  to  locate  their  network  facilities  to  minimize  self-deployment 
 costs,  or  the  costs  of  using  third-  party  alternatives  for  transport  from  the  incumbent  LECs  network.  1119  These  backhaul  facilities  from  incumbent  LEC  networks  to  competitors 
 networks  are  distinguished  from  other  transport  facilities  because  competing  carriers  have  some  control  over  the  location  of  their  network  facilities  that  is  lacking  with  regard  to  transport  as  we 
 define  it  here.  Competing  carriers  control,  in  part,  how  they  design  and  locate  their  networks,  as 

 1115  Local  Competition  Order,  11  FCC  Rcd  at  15718-  19,  paras.  440-  43. 
 1116  Our  determination  here  effectively  eliminates  entrance  facilities  as  UNEs  and,  therefore,  moots  the 
 Commissions  Fourth  Further  NPRM  insofar  as  it  proposes  limitations  on  obtaining  entrance  facilities  as  UNEs.  UNE  Remand  Order,  15  FCC  Rcd  at  3914-  15,  paras.  492-  96  (setting  forth  the  Fourth  Further  NPRM).  We  note 

 that  the  terms  of  the  Fourth  Further  NPRM  were  expanded  to  include  unbundled  loop/  transport  combinations  in  addition  to  entrance  facilities.  See  generally  Supplemental  Order,  15  FCC  Rcd  1760;  Supplemental  Clarification 
 Order,  15  FCC  Rcd  9587.  We  address  issues  related  to  unbundled  loop/  transport  combinations  infra  Part  VII.  A. 
 1117  Section  251(  c)(  2)  requires  access  to  the  facilities  and  equipment  used  by  competing  carriers  for 
 interconnection  with  the  local  exchange  carriers  network  .  .  .  for  the  transmission  and  routing  of  telephone  exchange  service  and  exchange  access.  47  U.  S.  C.    251(  c)(  2)  (emphasis  added). 

 1118  Id.    153(  29). 
 1119  Although  we  are  not  in  this  subsection  conducting  an  impairment  analysis,  we  find  that  this  economic 
 difference  significantly  distinguishes  our  analysis  of  intra-  incumbent  LEC  transmission  facilities    which  we  define  to  be  transport    from  inter-  network  transmission  facilities  used  for  backhaul.  See  supra  Part  V.  B.  (discussing  the 

 impairment  standard). 
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 opposed  to  obtaining  a  connection  between  two  incumbent  LEC  wire  centers.  1120  For  instance,  a  competing  carrier  can  choose  to  locate  its  switch  very  close  to  an  incumbent  LEC  wire  center  to 
 minimize  costs  associated  with  deploying  fiber  over  longer  distances.  Similarly,  a  competing  carrier  can  choose  to  locate  its  network  equipment,  such  as  its  switch,  near  other  competing 
 carriers  to  share  costs,  or  near  existing  competitive  fiber  providers  that  have  already  deployed  competitive  transport  facilities.  1121  Competing  carriers  have  no  such  choice  in  seeking  to  obtain 
 transport  within  the  network  of  incumbent  LECs.  We  also  note  that  transmission  facilities  used  for  backhaul  from  an  incumbent  LEC  office  to  a  competitive  LEC  network  often  represents  the 
 point  of  greatest  aggregation  of  traffic  in  a  competing  carriers  network,  and  such  carriers  are  more  likely  to  self-  deploy  these  facilities  because  of  the  cost  savings  such  aggregation 
 permits.  1122  Moreover,  we  find  that  our  more  limited  definition  of  transport  is  consistent  with  the  Act  because  it  encourages  competing  carriers  to  incorporate  those  costs  within  their  control  into 
 their  network  deployment  strategies  rather  than  to  rely  exclusively  on  the  incumbent  LECs  network.  1123 

 1120  The  Commission  recognized  this  principle  in  the  Local  Competition  Order  in  its  discussion  of  the  choices 
 competing  carriers  make  in  choosing  an  efficient  point  of  interconnection.  See  Local  Competition  Order,  11  FCC  Rcd  at  15608,  para.  209. 

 1121  Additionally,  the  BOCs  describe  collocation  hotels  as  points  of  telecommunications  traffic  aggregation  used 
 by  multiple  carriers  and  ISPs  to  interconnect  with  each  other.  These  collocation  hotels  are  often  located  very  close  to  an  incumbent  LEC  central  office  for  carriers  to  connect  to  the  incumbent  LECs  network.  BOC  UNE  Fact  Report 

 2002  at  III-  4  through  III-  5;  see  also  Verizon  Jan.  10,  2003  UNE-  P  Ex  Parte  Letter  at  6  (describing  the  choice  competitors  have  in  the  location  of  their  network  facilities  when  entering  a  market);  WorldCom  Reply  at  130 
 (  Collocation  hotels  are  useful  places  for  carriers  and  very  large  customers  to  meet.).  We  find  that  collocation  hotels,  however,  do  not  provide  a  substitute  for  the  need  to  access  within  an  incumbent  LECs  network.  See 
 WorldCom  Reply  at  130. 
 1122  Competing  carriers  agree  that  the  most  competitive  type  of  transport  is  the  link  between  an  incumbent  LEC 
 wire  center  and  a  competitors  network.  See  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  7  (filed  Nov.  18,  2002)  (WorldCom 

 Nov.  18,  2002  EELs  Ex  Parte  Letter)  (asserting  that  because  entrance  facility  deployment  is  so  pervasive,  incumbent  LEC  special  access  pricing  closely  mirrors  UNE  rates);  Letter  from  Patrick  J.  Donovan,  Counsel  for 
 Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Declaration  of  Richard  Batelaan  at  para.  10  (filed  Nov.  22,  2002)  (Cbeyond  Nov.  22,  2002  Transport  Ex  Parte  Letter)  (stating  that 
 alternative  provider  [transport]  facilities  are  typically  used  between  Cbeyonds  non-  ILEC  collocation  point  of  presence  (  POP)  and  the  ILEC  tandem  office  or  offices  where  Cbeyond  aggregates  traffic.). 

 1123  Finally,  we  do  not  want  to  delay  the  further  development  of  intermodal  solutions,  such  as  point-  to-  point 
 microwave,  that  competing  carriers  may  use  to  hub  traffic  back  to  a  common  location.  Some  CMRS  carriers  state  that  they  are  able  to  use  point-  to-  point  microwave  as  an  alternative  to  incumbent  LEC  transmission  facilities  on 

 some  routes.  Nextel  Comments  at  6-  7;  Letter  from  Michael  H.  Pryor,  Counsel  for  AT&  T  Wireless,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  11  (filed  Jan.  7,  2003)  (ATTWS  Jan.  7, 
 2003  Ex  Parte  Letter)  (approximately  4%  of  ATTWS  transport  links  are  microwave).  We  note  that  these  carriers  cite  limitations  on  microwave  including  the  need  for  zoning  approval  for  towers,  licensing,  limited  space  on  cell 
 towers,  and  reliability  concerns.  Id.  As  a  result,  this  type  of  self-  provisioning  is  not  common.  Nextel  Comments  at  6-  7;  see  ATTWS  Jan.  7,  2003  Ex  Parte  Letter,  Attach.  at  11. 
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 368.  We  note  that  this  change  in  definition  applies  to  all  competitors  alike,  including  intermodal  competitors.  We  find  that  no  requesting  carrier  shall  have  access  to  unbundled  inter-network 
 transmission  facilities  under  section  251(  c)(  3).  Thus,  assuming  arguendo,  that  a  CMRS  carriers  base  station  is  a  type  of  requesting  carrier  switch,  CMRS  carriers  are  ineligible  for 
 dedicated  transport  from  their  base  station  to  the  incumbent  LEC  network.  1124  However,  all  telecommunications  carriers,  including  CMRS  carriers,  will  have  the  ability  to  access  transport 
 facilities  within  the  incumbent  LECs  network,  pursuant  to  section  251(  c)(  3),  and  to  interconnect  for  the  transmission  and  routing  of  telephone  exchange  service  and  exchange  access,  pursuant  to 
 section  251(  c)(  2).  1125 
 369.  We  find  that  this  technology-  neutral  approach  best  comports  with  the  statute,  suits  the  development  of  intermodal  competition,  and  recognizes  the  role  of  the  requesting  carrier  in 

 controlling  the  costs  associated  with  where  to  locate  its  network.  Accordingly,  we  limit  the  dedicated  transport  network  element  to  those  incumbent  LEC  transmission  facilities  dedicated  to 
 a  particular  customer  or  carrier  that  provide  telecommunications  between  switches  or  wire  centers  owned  by  incumbent  LECs.  1126  We  conduct  our  impairment  analysis  based  on  this 
 definition  of  the  transport  network  element. 
 4.  Impairment  Analysis 
 a.  General  Economic  and  Operational  Characteristics  of  Transport 

 370.  Competing  carriers  generally  use  dedicated  transport  as  a  means  to  aggregate  end-user  traffic  to  achieve  economies  of  scale.  Such  transport  carries  their  traffic  within  the 
 incumbent  LECs  network  through  the  incumbent  LECs  central  offices  to  a  point  of  aggregation.  As  noted  above,  ultimately,  the  traffic  is  carried  to  the  competitors  switch,  or  other 
 equipment,  from  an  incumbent  LEC  central  office  along  an  inter-  network  facility  often  known  as  an  entrance  facility.  When  carriers  self-  deploy  transport  facilities,  they  typically  deploy  fiber 

 1124  Our  decision  moots  the  ATTWS/  VoiceStream  Petition  to  the  extent  that  it  requests  that  CMRS  carriers  have 
 access  to  unbundled  transport  facilities  from  an  incumbent  LEC  wire  center  to  a  CMRS  base  station  or  mobile  switching  center  (MSC).  ATTWS/  VoiceStream  Petition  at  19-  26. 

 1125  Accordingly,  to  the  extent  that  the  Petition  for  Declaratory  Rulemaking  filed  by  AT&  T  Wireless  and 
 VoiceStream  requests  that  unbundled  transport  be  available  to  CMRS  carriers,  that  portion  of  the  Petition  is  moot.  ATTWS/  VoiceStream  Petition  at  5-  19;  see  also  Triennial  Review  NPRM,  16  FCC  Rcd  at  22809-  10,  para.  63. 

 1126  We  recognize  that  incumbent  LECs  may  reverse  collocate  in  some  instances  by  collocating  equipment  at  a 
 competing  carriers  premises,  or  may  place  equipment  in  a  common  location,  for  purposes  of  interconnection.  See,  e.  g.,  Letter  from  Steven  A.  Augustino,  Counsel  for  SNiP  LiNK,  to  William  Maher,  Chief,  Wireline  Competition 

 Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  3  (filed  Feb.  5,  2003)  (SNiP  LiNK  Feb.  5,  2003  Reverse  Collocation  Ex  Parte  Letter).  Moreover,  to  the  extent  that  an  incumbent  LEC  has  local  switching  equipment,  as 
 defined  by  the  Commissions  rules,  reverse  collocated  in  a  non-  incumbent  LEC  premises,  the  transmission  path  from  this  point  back  to  the  incumbent  LEC  wire  center  shall  be  unbundled  as  transport  between  incumbent  LEC 
 switches  or  wire  centers  to  the  extent  specified  in  this  Part. 
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 rings  that  may  connect  several  incumbent  LEC  central  offices  in  a  market.  1127  On  these  rings,  carriers  aggregate  end-  user  traffic  for  backhaul  to  their  switch,  or  other  equipment,  in  a  similar 
 manner  to  the  way  in  which  carriers  do  in  using  incumbent  LEC  facilities.  However,  these  fiber  rings  are  often  deployed  to  maximize  the  ability  of  competitors  eventually  to  deploy  loop 
 facilities  to  connect  directly  buildings  and  customers  to  the  transport  fiber  ring,  without  accessing  unbundled  loops  at  an  incumbent  LEC  central  office.  1128 

 371.  Deploying  transport  facilities  is  an  expensive  and  time-  consuming  process  for  competitors,  requiring  substantial  fixed  and  sunk  costs.  1129  Most  competing  carriers  comments 
 have  focused  on  the  costs  of  self-  deploying  transport  facilities.  Among  the  costs  associated  with  self-  deployment  of  transport  facilities  are  collocation  costs,  1130  the  cost  of  fiber,  the  cost  of 
 physically  deploying  the  fiber,  1131  and  the  cost  of  the  optronics  necessary  to  light  the  fiber.  1132  Moreover,  parties  have  explained  that  carriers  deploying  fiber  facilities  must  obtain  rights-  of-way, 
 which  can  delay  deployment.  While  we  find  that  substantial  sunk  costs  are  required  to  deploy  transport,  the  economic  characteristics  of  transport  vary  from  those  of  loops.  1133 

 1127  See  KMC  Duke  Aff.  at  para.  3  (stating  that  KMC  typically  invests  in  a  local  SONET  network  and  collocates  at 
 three  incumbent  LEC  offices,  including  the  tandem);  Letter  from  Joan  Marsh,  Director  -  Federal  Government  Affairs,  AT&  T  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  5-  8  (filed 

 Oct.  4,  2002)  (AT&  T  Oct.  4,  2002  Ex  Parte  Letter)  (describing  how  AT&  T  deploys  metro  rings). 
 1128  For  example,  KMC  designs  its  networks  to  reach  80%  of  the  commercial  buildings  in  each  local  market  that  it 
 serves  by  either  direct  on-  net  service,  or  by  using  unbundled  loops  aggregated  at  incumbent  LEC  offices.  KMC  Duke  Aff.  at  para.  3.  Of  the  80%  of  total  buildings  KMC  is  able  to  reach,  over  36%  can  be  reached  on-  net, 

 indicating  that  KMCs  fiber  ring  deployment  is  significantly  designed  to  bypass  the  incumbent  LEC  loop  network  where  possible,  rather  than  simply  mirroring  the  incumbent  LECs  transport  network  connecting  incumbent  LEC 
 wire  centers.  Id.;  AT&  T  Nov.  25,  2002  Ex  Parte  Letter,  Attach.  B  at  1-  2  (describing  local  building  rings  that  are  approximately  30  miles  each  and  connect  10-  15  buildings). 

 1129  See  WorldCom  Comments  at  77  (extending  WorldComs  transport  network  to  an  additional  incumbent  central 
 office  generally  costs  at  least  $1  million);  AT&  T  Nov.  25,  2002  Ex  Parte  Letter,  Attach.  A. 
 1130  See  AT&  T  Comments  at  145.  We  note  that  the  Commissions  collocation  rules  define  the  statutory  duties  of 
 incumbent  LECs  to  allow  competitive  LECs  to  collocate  in  incumbent  LEC  premises.  See  Collocation  Remand  Order,  16  FCC  Rcd  at  15435. 

 1131  See,  e.  g.,  Conversent  Comments,  Exh.  1,  Declaration  of  David  A.  Graham  (Conversent  Graham  Decl.)  at  para. 
 30  (estimating  the  costs  of  deploying  fiber  to  replicate  its  unbundled  dark  fiber  network). 
 1132  See  ALTS  et  al.  Comments  at  73;  AT&  T  Nov.  25,  2002  Ex  Parte  Letter,  Attach.  A  at  6  (stating  that  relatively 
 little  equipment  is  required  to  be  placed  in  a  collocation  arrangement  for  interoffice  transport  including  optical  path  panels  (to  terminate  and  cross-  connect  the  fiber  facility),  optical  multiplexers,  and  power  distribution  (e.  g., 

 power  filtering  and  fuses)  equipment.). 
 1133  Like  loops,  transport  costs  (aside  from  attached  electronics)  are  substantially  sunk  insofar  as  the  facility  cannot 
 be  moved  to  another  location  upon  exit  from  the  market.  However,  because  transport  facilities  typically  connect  points  of  network  traffic  aggregation,  the  sunk  costs  of  transport  are  different  from  the  sunk  cost  of  deploying  loops 

 (especially  lower  capacity  loops)  because  the  carrier  is  less  dependent  upon  maintaining  any  particular  customer  relationship,  but  rather  must  maintain  an  aggregate  level  of  traffic  sufficient  to  justify  the  costs.  Moreover,  the 
 facility  may  be  useful  to  other  carriers  aggregating  traffic  at  the  same  location. 
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 Incumbent  LECs  assert  that  they  face  similar  fixed  costs  for  deploying  fiber  as  competitive  LECs  1134  and  that  new  technologies  may  reduce  the  costs  of  deploying  fiber.  1135  The  record 
 indicates  that  deploying  fiber  is  significantly  less  expensive  in  rural  areas  than  it  is  in  urban  areas  1136  and  that  how  the  fiber  is  deployed  affects  the  cost  of  deployment.  1137  Competing  carriers 
 also  explain  that  deploying  transport  facilities  can  take  a  long  period  of  time.  1138  The  record  indicates  that  obtaining  rights-  of-  way  delays  entry  and  imposes  sunk  costs  on  competitive  LEC 
 efforts  to  deploy  transport.  1139 
 372.  Carriers  have  developed  and  continue  to  operate  copper  technologies  as  well  as  fiber  optic  transmission  technologies,  such  as  SONET,  to  transport  telecommunications 

 signals.  1140  When  carriers  deploy  new  transport  facilities,  they  deploy  fiber  optic  facilities.  1141 
 1134  Verizon  Comments  at  110  n.  380. 

 1135  BOC  UNE  Fact  Report  2002  at  III-  8  (describing  CityNets  process  for  deploying  fiber  through  utility  pipes 
 rather  than  trenching  to  bury  fiber  cables). 
 1136  See,  e.  g.,  Letter  from  Lawrence  R.  Freedman,  Counsel  for  Norlight,  to  Marlene  Dortch,  Secretary,  FCC, 
 CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  3  (filed  Dec.  30,  2002)  (Norlight  Dec.  30,  2002  Ex  Parte  Letter)  (noting  that  deployment  in  rural  areas  is  faster  and  less  costly  because  cabling  can  be  run  on  poles  and  does  not  need 

 to  be  buried);  WorldCom  Fleming  Decl.  at  para.  18  (stating  that  deploying  fiber  in  urban  and  suburban  areas  is  costlier  than  in  rural  areas  because  trenching  requires  digging  up  and  then  repairing  streets  and  sidewalks). 

 1137  El  Paso  et  al.  Comments  at  21  (indicating  that  placing  fiber  underground  can  cost  $100,000  to  $300,000  per 
 mile  while  placing  fiber  on  poles  can  cost  $50,000  per  mile  and  placing  fiber  in  pipelines  costs  $10,000  to  $60,000  per  mile);  Conversent  Graham  Decl.  at  para.  30  (estimating  the  costs  in  Massachusetts  of  underground  fiber 

 deployment  where  conduit  is  not  available  at  $485,812.80  per  mile  and  aerial  fiber  deployment  at  $44,915.40  per  mile). 

 1138  For  instance,  obtaining  permits  may  take  2  weeks  to  90  days.  TDS  Comments,  CC  Docket  No.  96-  98,  at  6 
 (filed  June  11,  2001)  (TDS  June  11,  2001  High-  Capacity  Comments);  Verizon  Comments  at  111  n.  385.  Obtaining  necessary  rights-  of-  way  likely  takes  4-  6  months.  AT&  T  Comments  at  144.  Building  the  actual  fiber  facilities  takes 

 approximately  6-  9  months.  Sprint  Comments  at  46.  Fiber  can  be  deployed  in  a  buried  manner  in  rural  areas  at  a  rate  of  several  miles  per  day,  in  suburban  areas,  at  a  rate  of  up  to  a  half  a  mile  per  day,  while  in  urban  areas,  daily 
 construction  averages  only  a  few  hundred  feet.  In  total,  WorldCom  estimates  that  constructing  fiber  transport  facilities  takes  nine  months  to  obtain  the  rights-  of-  way,  collocation  application,  and  equipment,  while  it  takes  five 
 months  to  build  fiber,  construct  the  collocation,  install,  and  test  equipment.  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  12  (filed 
 Nov.  18,  2002)  (WorldCom  Nov.  18,  2002  Transition  to  UNE-  L  Ex  Parte  Letter). 
 1139  See,  e.  g.,  AT&  T  Comments  at  142-  44.  See  supra  Part  V.  B.  1.  d.(  i).  (discussing  the  first-  mover  advantages 
 possessed  by  incumbent  LECs);  but  see  Verizon  Comments  at  110  &  n.  380  (asserting  that  incumbent  LECs  can  face  similar  fixed  costs  for  deploying  fiber  as  competitive  LECs);  BOC  UNE  Fact  Report  2002  at  III-  8  (describing 

 stating  that  new  technologies  are  emerging  that  may  reduce  the  costs  and  delays  associated  with  deploying  fiber). 
 1140  See  infra  note  1106  (describing  SONET). 

 1141  For  instance,  AT&  T  discusses  the  low  capacity  limitations  of  copper  facilities  and  states  that  virtually  all 
 incumbent  LEC  transport  facilities  are  fiber.  AT&  T  Comments  at  132-  34  (citing  AT&  T  Comments,  CC  Docket  No.  98-  147,  Declaration  of  Joseph  P.  Riolo  at  paras.  18-  19  (filed  Oct.  11,  2001))  (describing  the  technological 

 progression  from  copper  to  optical  transport  facilities). 
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 The  optical  circuits  operate  and  interface  at  a  range  of  capacities,  up  to  OC192.  1142  This  variation  in  capacity  is  almost  exclusively  based  on  the  attached  optronic  equipment  used  to  activate  or 
 light  the  fiber  optic  cable.  1143  Each  increasing  capacity  level  technology,  while  nominally  a  multiple  of  a  lower  capacity  system,  requires  a  slightly  different  interface.  Effectively,  an  OC3 
 capacity  circuit  carries  the  same  capacity  as  three  DS3  circuits,  but  an  OC3  circuit  terminates  on  a  different  technological  interface.  Incumbent  LECs  generally  operate  their  interoffice  transport 
 networks  at  OCn  capacity  levels.  1144  When  transport  is  leased  as  an  unbundled  element  to  competing  carriers,  for  example,  a  DS3  capacity  circuit,  the  leased  dedicated  circuit  is 
 channelized  within  the  larger  OCn  circuit  operated  by  the  incumbent  LEC.  1145  Therefore,  competing  carriers  are  not  necessarily  leasing  physically  separate  facilities,  but  rather,  dedicated 
 bandwidth  capacities  along  a  given  route.  1146  However,  through  electronic  equipment  such  as  multiplexers  and  de-  multiplexers,  the  circuit  is  provided  to  the  requesting  carrier  at  the  requested 
 capacity  on  the  relevant  interface,  such  as  a  DS3  interface. 
 373.  As  we  have  discussed,  transport  facilities  generally  are  used  to  carry  traffic  aggregated  from  multiple  customers,  or  even  multiple  carriers,  within  an  incumbent  LECs 

 network  and,  thus,  the  economics  of  transport  facilities  can  be  well-  suited  to  a  wholesale  business.  There  are  costs  to  carriers  associated  with  using  transport  provided  on  a  wholesale 
 basis  by  third  party  competitive  transport  providers.  Because  a  competitive  transport  provider  may  not  always  offer  facilities  that  mirror  the  market  a  competing  carrier  serves,  a  competing 
 carrier  may  have  to  make  arrangements  with  multiple  providers,  thus  raising  its  costs.  Also,  if  a  point-  to-  point  route  along  which  a  carrier  seeks  transport  can  only  be  served  by  a  combination  of 
 different  competitive  transport  providers,  commenting  parties  assert  that  service  quality,  especially  testing  for  maintenance  and  repair,  becomes  much  more  difficult  to  maintain.  1147 
 Finally,  for  a  collocated  competing  carrier  to  access  the  transport  facilities  terminated  in  the  collocation  arrangement  of  another  carrier,  a  cross-  connect  must  be  provisioned  between 
 collocation  arrangements.  1148 

 1142  See  supra  Part  VI.  A.  4.  b.(  ii)  (discussing  capacity  distinctions  with  respect  to  enterprise  loops). 
 1143  AT&  T  Comments  at  130. 
 1144  AT&  T  asserts  that  most  carriers,  including  incumbent  LECs,  typically  operate  their  transport  networks  at  the 
 OC48  capacity.  AT&  T  Comments  at  134. 
 1145  See  WorldCom  Comments  at  79;  Covad  Joshi  et  al.  Decl.  at  paras.  46-  48. 

 1146  To  the  extent  CompTel  petitioned  the  Commission  for  access  to  packetized  transport,  we  find  CompTels 
 petition  to  be  mooted  by  our  decision  today.  CompTel  Feb.  17,  2000  Petition  for  Reconsideration  at  5-  10. 
 1147  Letter  from  Jonathan  Askin,  General  Counsel,  ALTS,  and  Jonathan  Lee,  Vice  President    Regulatory  Affairs, 
 CompTel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  3  &  Attach.  A  (filed  Oct.  28,  2002)  (ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte  Letter)  (describing  the  problems  associated  with  piecing 

 together  transport  from  different  vendors  along  a  single  route).  For  further  discussion  of  this  issue  with  respect  to  our  route-  specific  triggers,  see  infra  paras.  401-  402. 

 1148  See  Collocation  Remand  Order,  16  FCC  Rcd  at  15465,  para.  58. 
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 374.  Collocation  costs  need  not  be  a  factor  for  every  competing  carrier.  Firms  that  deploy  competitive  transport  facilities  have  the  ability  to  obtain  UNEs,  such  as  loops,  for  the 
 purpose  of  providing  a  wholesale  product  on  a  common  carrier  basis.  1149  Therefore,  competing  carriers  may  be  able  to  avoid  the  costs  of  collocating  in  central  offices  in  which  their  competitive 
 transport  provider  is  able  to  access  end-  user  loops.  We  also  note,  to  the  extent  incumbent  LECs  want  to  remove  their  unbundling  obligation  for  DS1,  DS3,  and  dark  fiber  transport,  they  have  an 
 incentive  to  allow  alternate  transport  providers  to  collocate  in  their  central  offices  for  the  purposes  of  providing  alternative  transport.  1150 

 375.  Unlike  our  analysis  of  certain  other  elements,  we  do  not  make  distinctions  in  analyzing  transport  based  on  different  customer  classes.  While  the  characteristics  of  serving 
 different  market  classes  (i.  e.,  mass  market  and  enterprise  markets)  may  provide  a  rough  understanding  of  the  how  carriers  use  transport,  the  characteristics  do  not  necessarily  inform 
 when  a  carrier  is  impaired  without  access  to  unbundled  transport.  1151  Because  mass  market  customers  provide  low  revenue  per  customer  relative  to  enterprise  customers,  competitors 
 serving  the  mass  market  customer  class  achieve  economies  of  scale  by  aggregating  traffic  from  multiple  incumbent  LEC  loops,  often  from  several  incumbent  LEC  central  offices,  to  their 
 switches.  1152  Carriers  serving  enterprise  customers,  on  the  other  hand,  can  typically  serve  a  more  geographically  concentrated  area.  They  are  more  certain  of  recovering  costs  associated  with 
 self-  providing  transport  facilities,  and  are  able  to  achieve  economies  of  scale  by  aggregating  traffic  from  loops  serving  many  fewer  end  users.  These  factors,  principally  the  ability  to 
 aggregate  greater  quantities  of  traffic,  make  the  self-  provisioning  of  facilities  more  economically  feasible  for  competing  carriers  serving  enterprise  customers  than  carriers  serving  the  mass 
 market  customer  class.  Because  customer  class  distinctions  do  not  help  refine  our  unbundling  analysis  of  transport  facilities,  however,  we  do  not  develop  an  unbundling  framework  for 
 transport  based  on  such  distinctions. 
 376.  Instead,  we  organize  our  analysis  of  transport  based  on  capacity  level  because  it  is  a  more  reliable  indicator  of  the  economic  abilities  of  a  requesting  carrier  to  utilize  third-  party 

 alternatives,  or  to  self-  deploy.  At  the  same  time,  we  recognize  that  operational  and  economic  concerns,  though  of  lesser  significance,  will  vary  depending  on  the  geographic  market  served. 
 We  find  that  the  extent  of  competitive  deployment  of  transport  facilities  can  vary  tremendously 

 1149  See  supra  Part  V.  B.  2.  c. 
 1150  See  our  discussion  infra  Part  VI.  C.  4.  d  for  a  more  detailed  discussion  of  this  incentive. 
 1151  For  instance,  a  carrier  serving  the  mass  market  customer  class  may  achieve  very  high  levels  of  loop 
 concentration  in  an  area  enabling  it  to  justify  transport  facilities  deployment  while  a  carrier  serving  a  single  enterprise  customer  in  an  area  with  a  DS1  loop  faces  different  economic  costs  per  customer  to  backhaul  its  loop 

 traffic  to  its  switch.  Moreover,  because  transport  facilities  are  used  to  carry  aggregated  traffic,  competing  carriers  may  utilize  the  same  transport  facility  to  carry  loop  traffic  serving  both  the  mass  market  and  enterprise  customer 
 classes. 
 1152  To  date,  competing  carriers  serving  the  mass  market  have  relied  most  extensively  on  shared  transport,  used  in 
 combination  with  unbundled  switching. 
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 by  geographic  area.  More  specifically,  the  barriers  to  entry  that  requesting  carriers  face  are  most  precisely  identified  on  each  geographic  route  connecting  two  points.  1153  Where  our  record 
 permits,  however,  we  distill  general  characteristics  of  transport  routes  on  a  national  level  sufficient  to  make  nationwide  determinations  of  impairment  and  non-  impairment.  Where  the 
 record  indicates  impairment  and  that  only  with  more  granular  evidence  could  a  finding  of  non-impairment  be  made,  we  establish  triggers  to  identify  non-  impairment  based  on  route-  specific 
 evidence. 
 377.  For  these  reasons,  a  reliable  measure  of  the  ability  of  competing  carriers  to  incur  additional  costs  related  to  obtaining  transport  from  an  alternative  provider,  or  self-  providing,  is 

 based  on  the  capacity  competing  carriers  require  along  a  transport  route.  1154  Because  a  carrier  using  higher  capacity  levels  of  transport  has  a  greater  incentive  and  broader  revenue  base  to 
 support  the  self-  provisioning  of  transport  facilities,  we  adopt  an  approach  to  analyzing  transport  that  considers  different  capacity  levels.  1155  We  expressly  consider  the  ability  of  competing 
 carriers  to  self-  provision  transport  facilities,  as  well  as  the  ability  to  manage  the  fixed  costs  associated  with  using  competitive  alternatives,  based  on  different  transport  capacity  levels.  1156 

 b.  Record  Evidence 
 378.  The  record  indicates  that  competing  carriers  have  deployed  significant  amounts  of  fiber  transport  facilities  to  serve  local  markets.  The  BOCs  claim  that  competitors  have  deployed 

 over  184,000  route  miles  of  fiber.  1157  An  ALTS  report  claims  that  competitors  have  deployed 

 1153  See  infra  paras.  401-  402  (further  discussing  our  route-  specific  analysis). 
 1154  The  Triennial  Review  NPRM  asks  whether  the  Commission  should  pursue  distinctions  based  on  facilities  in 
 order  to  refine  its  unbundling  analysis.  Triennial  Review  NPRM,  16  FCC  Rcd  at  22800-  01,  22804-  05,  22809,  paras.  41,  51,  62.  A  single  voice-  grade  circuit  can  be  digitized  to  its  equivalent  digital  capacity  of  DS0.  A  DS1  capacity 

 circuit  carries  the  traffic  equivalent  to  24  voice-  grade  or  DS0  channels.  A  DS3  capacity  circuit  contains  the  equivalent  of  28  DS1  channels  or  672  DS0  channels.  An  OC3  circuit  equals  the  capacity  of  three  DS3  circuits,  or 
 84  DS1  circuits,  or  2016  DS0s.  Effectively,  each  OCn  capacity  interval  indicates  the  capacity  of  the  equivalent  number  of  DS3  circuits    for  example,  an  OC48  circuit  has  the  capacity  equivalent  to  48  DS3  circuits. 

 1155  As  WorldCom  states,  for  any  given  amount  of  traffic,  the  cost  per  unit  of  traffic  will  be  lower  where  larger 
 amounts  of  traffic  can  be  aggregated  and  carried  a  short  distance.  WorldCom  Reply  at  122;  WorldCom  Bryant  Reply  Decl.  at  para.  16.  Thus,  competitive  carriers  with  lower  amounts  of  traffic  aggregation,  such  as  new  market 

 entrants,  face  economies  of  scale  that  can  act  as  a  barrier  to  entry. 
 1156  In  the  UNE  Remand  Order,  the  Commission  found  that  access  to  all  technically  feasible  transport  capacities, 
 such  as  DS1,  DS3,  and  OCn  capacities,  and  would  promote  competition  in  the  local  exchange  market.  UNE  Remand  Order,  15  FCC  Rcd  at  3842-  43,  paras.  321-  23;  see  also  Local  Competition  Order,  11  FCC  Rcd  at  15717- 

 18,  para.  439. 
 1157  See  BOC  UNE  Fact  Report  2002  at  III-  6  &  nn.  26-  27  (asserting  the  number  to  be  highly  conservative  as  it  does 
 not  include  fiber  miles  deployed  by  competitive  Independent  Operating  Companies,  utility  CLECs,  data  providers,  or  Gig-  E  providers  and  maintaining  that  the  figure  has  been  adjusted  downward  to  address  competitive  LEC 

 comments  made  during  a  prior  proceeding);  UNE  Fact  Rebuttal  Report  at  41-  42  (addressing  comments  claiming  that  some  of  the  reported  route  miles  were  long-  haul  fiber  miles). 
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 over  339,500  route-  miles.  1158  The  record  also  indicates  that  much  of  this  deployment  has  occurred  in  more  densely  populated  areas.  1159  According  to  the  BOC  Fact  Report,  competitive 
 LECs  have  built  fiber  to  approximately  13  percent  of  BOC  wire  centers.  1160  However,  in  the  25  largest  metropolitan  areas  served  by  each  BOC,  competitive  LECs  have  built  fiber  to  35  percent 
 of  wire  centers,  which  provide  access  to  61  percent  of  the  incumbent  LECs  lines.  1161  Moreover,  at  least  one  competitor  has  deployed  fiber  to  BOC  wire  centers  with  more  than  5,000  business 
 lines  48  percent  of  the  time,  providing  access  to  84  percent  of  all  business  lines.  1162  Even  competing  carriers  recognize  that  they  have  available  to  them  along  many  routes  alternatives  to 
 the  incumbent  LECs  transport.  In  fact,  a  variety  of  carriers  state  that  they  have  at  least  one  alternative  transport  provider  available  to  them  on  a  range  from  20  percent  to  over  50  percent  of 
 their  routes.  1163 
 379.  The  record  also  indicates  that  fiber  transport  facilities  have  been  deployed  by  firms  other  than  incumbent  LECs  with  the  intention  of  solely  or  partially  providing  wholesale 

 transport  capacity  as  well  as  dark  fiber  transport  to  other  carriers.  1164  These  carriers  continue  to 

 1158  See  SBC  Reply  at  143  (citing  ALTS,  THE  STATE  OF  LOCAL  COMPETITION  2002,  Annual  Report  (Apr  2002)  at 
 17). 
 1159  The  Commission  has  previously  noted  that  competing  carriers  have  deployed  interoffice  transport  along 
 selected  point-  to-  point  routes,  primarily  in  dense  market  areas.  UNE  Remand  Order,  15  FCC  Rcd  at  3846-  47,  para.  333.  Indicia  of  widespread  fiber  deployment  is  most  prominent  in  the  largest  metropolitan  areas  and 

 connections  to  the  largest  incumbent  LEC  wire  centers.  BOC  UNE  Fact  Report  2002  at  III-  2  to  III-  3  &  Tables  1-  3. 
 1160  BOC  UNE  Fact  Report  2002  at  III-  2,  Table  1;  see  BellSouth  Jan.  17,  2003  Ex  Parte  Letter,  Attach.  at  5,  7 
 (identifying  1018  fiber-  based  collocation  arrangements  in  the  BellSouth  region).  The  BOCs  also  present  evidence,  supported  by  the  record,  that  competitive  LEC  local  fiber  facilities  often  bypass  the  incumbent  LEC  network  at  least 

 partially.  Id.  at  III-  4.  For  example,  AT&  T  describes  how  it  deploys  fiber  building  rings  in  order  to  directly  connect  enterprise  customers  to  its  network,  bypassing  the  incumbent  LECs  loop  facilities.  AT&  T  Nov.  25,  2002 
 Loop  and  Transport  Costs  Ex  Parte  Letter,  Attach.  B. 
 1161  BOC  UNE  Fact  Report  2002  at  III-  3,  Table  2. 

 1162  Id.  at  Table  3. 
 1163  See  Broadview  Aug.  2,  2002  Ex  Parte  Letter,  Attach.  at  14  (Broadview  able  to  order  alternative  interoffice 
 transport  20%  of  the  time);  Covad  Comments  at  67-  68;  Covad  Comments,  CC  Docket  No.  96-  98  at  8  (filed  June  11,  2001)  (Covad  June  11,  2001  High-  Capacity  Comments)  (competitors  have  terminated  non-  incumbent  fiber  in  their 

 collocation  arrangements  in  over  51%  of  the  incumbent  central  offices  in  which  Covad  also  collocates);  Mpower  Reply  at  13-  16  (competitors  have  terminated  non-  incumbent  fiber  in  their  collocation  arrangements  in  over  51%  of 
 the  incumbent  central  offices  in  which  Mpower  also  collocates);  Allegiance  Comments  at  28  (Allegiance  self-provides  or  leases  alternative  transport  facilities  for  30%  of  its  routes).  These  carriers  do  not  propose  that  where 
 only  one  alternative  exists,  they  do  not  face  impairment  for  unbundled  transport.  These  numbers  have  not  been  provided  in  a  consistent  format. 

 1164  BOC  UNE  Fact  Report  2002  at  III-  6  through  III-  11  (describing  carrier-  agnostic  wholesale  suppliers  and 
 CAPs);  Coalition  of  Competitive  Fiber  Providers  Reply,  at  1-  2  (  Coalition  members  provide  competitive  fiber-based  transport  services  and  dark  fiber  to  competitive  local  exchange  carriers  .  .  .  collocated  in  ILEC  central 

 offices.). 
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 deploy  local  fiber  facilities  today.  1165  The  record  also  indicates  that  multiple  carriers  often  coordinate  a  single  transport  construction  project  to  share  the  one-  time  costs  of  deployment.  1166 
 Moreover,  we  note  that  competitive  carriers  seek  to  use  existing  alternatives  to  incumbent  LEC  transport  facilities,  including  dark  fiber  purchases  of  competitive  transport  facilities.  1167 
 Therefore,  it  is  likely  that  the  costs  of  transport  deployment  need  not  be  borne  by  a  single  carrier,  but  rather  can  be  shared  by  multiple  carriers. 

 c.  Capacity-  Based  Impairment  Analysis 
 380.  As  described  above,  we  conduct  our  impairment  analysis  of  transport  on  a  capacity  basis  as  we  find  this  to  be  the  most  informative  manner  to  review  the  economic  barriers 

 to  entry  that  affect  how  a  competing  carrier  is  impaired  without  access  to  unbundled  transport.  Thus,  we  analyze  transport  according  to  different  capacities  and  make  findings  of  impairment  or 
 non-  impairment  based  on  the  record. 
 (i)  Dark  Fiber  Transport 
 381.  We  find  on  a  national  basis  that  competing  carriers  are  impaired  without  access  to  unbundled  dark  fiber  transport.  Dark  fiber  is  unactivated  fiber  optic  cable,  deployed  by  a  carrier, 

 that  has  not  been  activated  through  connections  to  optronics  that  light  it,  and  thereby  render  it  capable  of  carrying  communications.  1168  Once  supplied  with  the  proper  optronics  and  activated, 
 dark  fiber  transport  is  used  by  carriers  for  the  same  purposes  as  lit  dedicated  transport.  We  make  our  determination  of  impairment  based  on  the  high  sunk  costs  associated  with  deploying  fiber 
 facilities  and  the  lack  of  evidence  showing  on  a  route-  specific  basis  alternative  fiber  facilities.  The  same  economic  factors  and  barriers,  especially  the  sunk  cost  of  deploying  fiber,  that  affect 
 the  ability  of  carriers  to  self-  deploy  lit  transport  apply  equally  to  dark  fiber  transport.  We  address  dark  fiber  separately  from  OCn  transport  because  commenting  parties  identify  some 
 operational  characteristics  that  distinguish  dark  fiber  transport  from  lit  transport.  1169  Dark  fiber 

 1165  See  UNE  Fact  Rebuttal  Report  at  41-  43. 
 1166  AT&  T  Fea/  Giovannucci  Reply  Decl.  at  para.  28  (  AT&  T  often  engages  in  joint  builds  with  other  CLECs  in 
 order  to  share  the  high  fixed  costs  of  construction.).  While  AT&  T  reports  that  financial  problems  with  building  partners  have  proved  troublesome,  AT&  T  states  that  partners  are  often  willing  to  make  significant  payments 

 toward  construction  costs  which  can  mitigate  the  up  front  fixed  costs  incurred  by  the  lead  partner  actually  constructing  the  facility.  Id. 

 1167  See  Allegiance  Comments  at  28;  Conversent  Comments  at  8-  9. 
 1168  UNE  Remand  Order,  15  FCC  Rcd  at  3776,  3843,  paras.  174,  325.  The  dark  fiber  transport  element  has  been 
 defined  by  the  Commission  as  incumbent  LEC  optical  transmission  facilities  without  attached  multiplexing,  aggregation,  or  other  electronics.  47  C.  F.  R.    51.319(  d)(  1)(  ii).  In  the  UNE  Remand  Order,  the  Commission  found 

 that  dark  fiber  fits  within  the  definition  of  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.  UNE  Remand  Order,  15  FCC  Rcd  at  3844,  para.  326. 
 1169  See  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  1,  12-  14. 
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 transport  is  activated  by  competing  carriers  using  self-  provided  optronic  equipment.  We  find  that  where  carriers  are  impaired  in  their  ability  to  self-  provision  the  transmission  conduit  itself, 
 but  are  not  impaired  by  the  costs  of  collocation  and  electronics  necessary  to  activate  dark  fiber,  that  unbundled  dark  fiber  most  closely  addresses  the  impairment  faced  by  competing  carriers. 

 382.  The  record  indicates  that  when  competing  carriers  self-  deploy  transport  facilities,  they  often  deploy  fiber  optic  facilities  that  are  activated  at  OCn  levels.  1170  However,  this  does  not 
 mean  that  a  carrier  that  requires  OCn  capacity  can  necessarily  self-  deploy  transport  facilities.  As  we  have  described  above,  large  fixed  and  sunk  costs  are  required  to  self-  provision  fiber  transport 
 facilities.  1171  These  fixed  and  sunk  costs  include  obtaining  rights-  of-  way,  the  costs  of  fiber,  the  cost  of  deploying  the  fiber,  and  the  optronic  equipment  necessary  to  activate  the  fiber.  1172  Unlike 
 lit  unbundled  transport,  however,  users  of  unbundled  dark  fiber  provide  the  optronic  equipment  necessary  to  activate  the  dark  fiber  strands.  1173  While  users  of  unbundled  dark  fiber 
 provide  optronics,  the  record  indicates  that  a  substantial  part  of  the  costs  of  deploying  transport  facilities  is  in  the  sunk  cost  of  burying,  or  otherwise  deploying  the  fiber.  1174  Moreover,  the  costs 
 associated  with  actually  deploying  the  fiber  transmission  facilities  are  all  sunk  costs,  such  as  obtaining  rights-  of-  way,  digging  up  streets  or  attaching  cabling  to  poles.  1175  Therefore,  the 
 barriers  to  deployment  faced  by  carriers  that  use  unbundled  dark  fiber  are  very  similar  to  those  of  other  competing  carriers.  However,  carriers  that  request  dark  fiber  transport,  used  to  provide 
 relatively  high-  capacity  transport,  must  purchase  and  deploy  necessary  electronics  and  collocations,  thus  requiring  them  to  deploy  those  facilities  for  which  there  is  no  impairment.  Our 
 finding  of  impairment  recognizes  that  the  costs  of  deploying  fiber,  especially  the  sunk  costs,  make  self-  deployment  of  transport  facilities  uneconomic  in  some  situations. 

 1170  See,  e.  g.,  AT&  T  Oct.  4,  2002  Ex  Parte  Letter. 
 1171  See  supra  para.  371  (describing  the  costs  and  barriers  to  entry  associated  with  deploying  transport  facilities); 
 see  also  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  15-  17  (describing  the  sunk  costs  associated  with  fiber  deployment). 

 1172  See  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  1,  15-  17  (describing  the  electronic  equipment 
 a  competitive  LEC  must  deploy  to  activate  dark  fiber). 
 1173  We  note  that  the  cost  of  electronics,  such  as  those  used  to  activate  dark  fiber,  are  not  sunk  costs  because  they 
 can  be  moved  to  another  location  upon  exit  from  the  market. 
 1174  AT&  T,  for  example,  states  that  the  monthly  costs  of  operating  interoffice  transport  between  two  collocations  is 
 allocated  roughly  as  follows:  50%  to  the  cost  of  the  transport  ring,  30%  to  equipment  and  other  costs,  and  20%  to  collocation.  AT&  T  Oct.  4,  2002  Ex  Parte  Letter,  Attach.  at  13.  Conversent  states  that  it  has  spent  over  $30  million 

 in  capital  costs  for  purchasing  electronics  while  it  estimates  that  replicating  its  fiber  network  in  eastern  Massachusetts  would  cost  $81  million.  Letter  from  Christi  Shewman,  Counsel  for  Conversent,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  2,  5  (filed  Sept.  24,  2002)  (Conversent  Sept.  24,  2002  Ex  Parte  Letter).  Similarly,  El  Paso  states  that  the  electronics  necessary  to  light  an  OC12  loop 
 require  $80,000  in  capital  investment.  El  Paso  Oct.  4,  2002  Ex  Parte  Letter,  Attach.  Regulatory  Briefing  at  8. 
 1175  See  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  1;  see  also  supra  para.  371. 
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 383.  The  record  also  indicates  that  competing  carriers  using  unbundled  dark  fiber  transport  can  operate  more  efficiently  than  when  using  lit  transport.  Conversent  and  El  Paso 
 argue  that  they  can  offer  a  higher  level  of  service  because  unbundled  dark  fiber  integrates  more  efficiently  into  their  networks  by  reducing  the  number  of  failure  points  and  by  providing  them 
 greater  control  including  the  ability  to  test  for  quality  and  maintenance.  1176  Commenters  also  argue  that  dark  fiber  more  precisely  addresses  impairment  they  face  in  deploying  fiber.  1177  We 
 agree  that  dark  fiber  allows  competing  carriers  to  provide  service  without  incurring  the  high  sunk  costs  of  self-  deploying  transport,  especially  when  the  fiber  is  not  being  used  by  the  incumbent 
 LEC.  Competing  carriers  assert  that  this  also  avoids  unnecessary  digging  of  streets.  1178  Commenters  also  argue  that  unbundled  dark  fiber  users  must  deploy  significant  facilities 
 including  optronic  equipment  and  collocation  in  order  to  light  the  dark  fiber.  1179  We  find  that  this  investment  advances  the  facilities  deployment  goals  of  the  Act.  1180 

 384.  Although  the  record  indicates  that  dark  fiber  can  be  self-  provisioned  in  some  circumstances  or  obtained  on  a  wholesale  basis  from  carriers  other  than  the  incumbent  LEC,  the 
 record  does  not  reveal  the  specific  routes  where  such  transport  is  available.  1181  In  addition,  dark  fiber  transport  is  generally  not  available  in  most  areas  of  the  country.  In  fact,  in  many  areas, 
 competing  carriers  are  unable  to  self-  deploy  and  have  no  alternative  to  the  incumbent  LECs  facilities.  1182  On  the  current  record,  we  are  unable  to  identify  those  specific  routes  where 

 1176  See  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  1,  12-  13.  Specifically,  dark  fiber  reduces  the 
 number  of  points  of  failure  within  a  local  transport  network  and  is  integrated  more  easily  into  the  competitors  network.  See  id.;  Conversent  Comments  at  7;  Conversent  Oct.  10,  2002  Ex  Parte  Letter  at  3. 

 1177  See  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  1.  For  example,  Conversent  asserts  that  it  is 
 not  impaired  without  the  electronics  needed  to  activate  transport  facilities,  but  is  impaired  without  the  actual  facilities.  See  Conversent  Dec.  24,  2002  Ex  Parte  Letter  at  2. 

 1178  See,  e.  g.,  Stephanie  A.  Joyce,  Counsel  for  Dominion  Telecom,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  No.  01-  338  at  4  (filed  Jan.  28,  2003)  (Dominion  Jan.  28,  2003  Dark  Fiber  Ex  Parte  Letter). 
 1179  See,  e.  g.,  Letter  from  Scott  Sawyer,  Vice  President    Regulatory  Affairs,  Conversent,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1-  3  (filed  Dec.  6,  2002)  (Conversent  Dec.  6,  2002  Ex  Parte  Letter);  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  1. 

 1180  While  it  could  be  argued  that  permitting  use  of  unbundled  dark  fiber  acts  as  a  disincentive  to  alternative 
 transport  deployment  by  allowing  competing  carrier  to  obtain  the  fiber  transport  without  incurring  sunk  costs  that  a  self-  deploying  carrier  would  incur,  we  find  that,  through  the  application  of  our  triggers,  described  below,  any 

 disincentive  effect  is  minimized. 
 1181  See  supra  paras.  378-  379  (describing  record  evidence  of  competitive  LEC  transport  deployment);  NuVox  et  al. 
 Comments,  Affidavit  of  Robert  Riordan,  (MFN  Riordan  Aff.)  at  paras.  2-  4;  BOC  UNE  Fact  Report  2002  at  III-  1  to  III-  14.  As  discussed,  above  at  para.  376,  we  find  that  transport  is  appropriately  reviewed  on  a  route-  specific  basis. 

 1182  Conversent  asserts  that  of  its  166  dark  fiber  transport  routes  throughout  six  New  England  states,  alternative 
 dark  fiber  is  available  on  only  25  routes  (approximately  15%).  Conversent  Sept.  24,  2002  Ex  Parte  Letter,  Attach.  at  4-  5;  see  also  Conversent  Comments  at  8-  9. 
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 competing  carriers  are  not  impaired  without  access  to  unbundled  dark  fiber.  1183  As  we  describe  below,  however,  we  delegate  to  the  states  the  authority  to  collect  and  analyze  more  specific 
 evidence  of  transport  deployment  on  a  route-  specific  basis,  applying  uniform  national  triggers  that  measure  self-  provisioning  or  wholesale  alternative  transport  availability  to  determine  routes 
 where  competitive  carriers  are  not  impaired  without  access  to  incumbent  LEC  unbundled  dark  fiber  transport.  1184 

 385.  Access  to  Dark  Fiber.  Because  dark  fiber  requires  an  incumbent  LEC  to  unbundle  whole  fibers,  the  Commission  previously  granted  states  the  flexibility  to  establish 
 reasonable  limitations  and  technical  parameters  for  dark  fiber  unbundling.  1185  We  affirm  that  conclusion.  1186  Additionally,  requesting  carriers  state  that  they  have  been  denied 
 nondiscriminatory  access  to  unbundled  dark  fiber  in  a  number  of  ways.  1187  We  note  that  many  state  commissions  have  directly  addressed  these  issues  through  arbitrations  and  other 
 proceedings.  1188  For  example,  states  have  addressed  the  pre-  ordering  and  ordering  processes  including  determinations  about  what  information  incumbent  LECs  must  make  available  about 

 1183  As  described  below,  we  develop  specific  triggers  for  states  to  identify  where  competing  carriers  are  not 
 impaired  without  access  to  dark  fiber  due  to  the  ability  to  self-  deploy  or  the  availability  of  third-  party  wholesale  alternatives.  We  find  that  our  national  determination  that  requesting  carriers  are  impaired  without  access  to  dark 

 fiber  transport,  subject  to  a  more  granular  analysis,  benefits  competitors  that  operate  where  no  competitive  alternatives  exist  and  where  self-  provisioning  is  not  possible.  See,  e.  g.,  Conversent  Comments  at  4;  BrahmaCom 
 Reply  at  1-  2;  Maine  CLEC  Coalition  Comments  at  4-  5. 
 1184  As  discussed  in  detail  below,  we  find  on  a  national  basis  that  requesting  carriers  are  not  impaired  without  dark 
 fiber  transport  along  point-  to-  point  routes  when  a  state  commission  finds  that  either  three  competing  carriers  have  self-  provided  transport  facilities  on  that  route  (irrespective  of  whether  they  make  available  wholesale  capacity),  or 

 two  competing  carriers  make  available  wholesale  dark  fiber  transport  on  that  route.  See  infra  Part  VI.  C.  4.  d. 
 1185  UNE  Remand  Order,  15  FCC  Rcd  at  3854-  55,  para.  352.  Again,  we  note  the  difficult  balance  between  putting 
 spare  incumbent  LEC  fiber  to  use  and  the  carrier-  of-  last-  resort-  obligations  and  planning  interests  of  the  incumbent  LEC.  As  noted  in  the  UNE  Remand  Order,  some  states  such  as  Texas  have  developed  processes  to  allow  for  the 

 equitable  use  of  dark  fiber  while  addressing  the  legitimate  concerns  of  incumbent  LECs.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3854,  para.  352  n.  694  (affirming  as  reasonable  some  of  the  parameters  the  Texas  Commission 
 developed  regarding  the  use  of  unbundled  dark  fiber). 
 1186  Accordingly,  our  determination  moots  Mpowers  petition  asking  the  Commission  to  establish  a  first-  come, 
 first-  served  policy  for  access  to  dark  fiber  as  we  grant  states  the  flexibility  to  develop  rules  that  incorporate  policy  objectives  such  as  reservation  policies  and  meeting  carrier  of  last  resort  obligations.  MGC  Communications 

 Petition  for  Clarification  on  Reconsideration  and  Request  for  Expedited  Treatment,  CC  Docket  Nos.  96-  98,  95-  185  at  4-  6  (filed  Feb.  17,  2000)  (Mpower  Feb.  17,  2000  Petition  for  Clarification).  Additionally,  the  Mpower  Petition 
 for  Clarification  is  moot  to  the  extent  that  it  requests  the  Commission  to  take  action  before  May  17,  2000.  Mpower  Feb.  17,  2000  Petition  for  Clarification  at  2-  4,  6. 

 1187  Conversent  Oct.  10,  2002  Ex  Parte  Letter  at  1-  4;  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at 
 2-  11. 
 1188  See,  e.  g.,  El  Paso  et  al.  Comments  at  36-  75;  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter  at  3-  10. 
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 the  location  of  dark  fiber,  1189  the  extent  to  which  incumbent  LECs  must  allow  or  perform  splicing  and  other  preparatory  work,  1190  and  access  to  dark  fiber  transport  that  traverses  through 
 intermediate  central  offices  where  the  competitive  LEC  is  not  collocated.  1191  We  recognize  the  hard  work  of  the  state  commissions  to  make  dark  fiber  meaningfully  available  and  endorse  such 
 efforts  here.  We  retain  rule  51.307(  e)  which  establishes  an  incumbent  LECs  obligation  to  provide  technical  information  about  the  incumbent  LECs  network  facilities.  1192 

 (ii)  DS3  Capacity  Transport 
 386.  We  conclude  on  a  nationwide  basis  that  requesting  carriers  are  impaired  on  a  route-  specific  basis  without  access  to  unbundled  DS3  transport.  We  make  this  determination 

 based  on  the  high  fixed  and  sunk  costs  associated  with  self-  providing  transport  and  the  lack  of  route-  specific  evidence  showing  alternative  facilities  as  well  as  the  difficulty  of  overcoming 
 these  obstacles  at  this  transmission  level.  The  need  for  DS3  capacity  transport  indicates  that  a  carrier  is  aggregating  a  substantial  amount  of  traffic  from  end  users.  1193  However,  as  we  discuss 
 above,  the  cost  of  deploying  a  transmission  facility  does  not  vary  significantly  with  capacity  because  much  of  the  cost  of  the  facility  is  related  to  the  deployment  itself,  such  as  trenching  or 
 attaching  to  poles,  rather  than  the  cost  of  the  cabling  and  other  equipment.  1194  Moreover,  the  ability  to  economically  justify  transport  deployment  is  based  on  the  reasonable  expectation  of 
 recovering  the  costs  of  deployment  over  time.  1195  Therefore,  due  to  scale  economies,  we  find, 

 1189  See,  e.  g.,  El  Paso  et  al.  Comments  at  58-  80  (describing  decisions  made  by  the  states  of  Texas,  New  Hampshire, 
 Rhode  Island,  New  Jersey  and  Maine);  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter  at  7-  10  (describing  decisions  made  by  the  states  of  Texas,  New  Hampshire,  Rhode  Island,  New  Jersey,  and  Maine). 

 1190  See,  e.  g.,  El  Paso  et  al.  Comments  at  39-  44,  50,  53-  57  (describing  decisions  made  by  the  states  of  Texas, 
 Indiana,  Massachusetts,  New  Hampshire,  Rhode  Island,  and  the  District  of  Columbia);  Conversent  Oct.  10,  2002  Ex  Parte  Letter  at  1-  4;  El  Paso/  Conversent  Nov.  26,  2002  Ex  Parte  Letter,  Attach.  at  3-  7  (describing  decisions  made  by 

 the  states  of  California,  Texas,  Indiana,  Massachusetts,  New  Hampshire,  Rhode  Island,  and  the  District  of  Columbia).  To  the  extent  that  access  to  unbundled  dark  fiber  requires  some  routine  modification  of  an  existing 
 facility,  our  discussion,  infra  Part  VII.  D,  may  provide  additional  clarity.  See,  e.  g.,  El  Paso  et  al.  Comments  at  53-  57  (describing  existing  fiber  facilities  not  attached  to  termination  equipment). 

 1191  See,  e.  g.,  El  Paso  et  al.  Comments  at  36-  39  (describing  decisions  made  by  the  states  of  Massachusetts,  Rhode 
 Island,  New  Jersey  and  Maine). 
 1192  Section  51.307(  e)  states,  [  a]  n  incumbent  LEC  shall  provide  to  a  requesting  telecommunications  carrier 
 technical  information  about  the  incumbent  LECs  network  facilities  sufficient  to  allow  the  requesting  carrier  to  achieve  access  to  unbundled  network  elements  consistent  with  the  requirements  of  this  section. 

 1193  A  DS3  circuit  has  the  equivalent  capacity  to  672  voice-  grade  loops  or  28  DS1  loops. 
 1194  See  AT&  T  Oct.  4,  2002  Ex  Parte  Letter,  Attach.  at  12  (stating  that  transmission  electronics  generally  do  not 
 scale  with  demand);  see  also  supra  para.  371  (describing  costs  and  other  barriers  to  entry  associated  with  deploying  transport  facilities). 

 1195  The  potential  revenue  stream  associated  with  a  single  DS3  is  far  less  than  the  revenue  stream  associated  with 
 aggregating  traffic  that  requires  an  OCn  circuit,  yet  the  cost  to  deploy  the  facilities  can  be  practically  the  same.  See  (continued.) 
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 generally,  that  the  inability  to  recover  the  fixed  and  sunk  costs  of  deploying  transport  facilities,  coupled  with  the  barriers  to  obtaining  rights-  of-  way,  impairs  the  ability  of  requesting  carriers  to 
 self-  provision  DS3  transport. 
 387.  There  is  substantial  evidence  that  carriers  lease  non-  incumbent  LEC  transport  at  the  DS3  capacity  where  competitive  alternatives  are  available  or  self-  deploy  transport  when 

 multiple  DS3  transport  circuits  are  required  to  carry  aggregated  traffic  along  a  route.  1196  The  record  indicates  that  competitive  transport  facilities  exist  in  a  number  of  areas  and  are  often 
 being  made  available  on  a  wholesale  basis  at  the  DS3  level.  1197  However,  while  some  local  markets  have  competitive  alternatives,  the  record  does  not  establish  with  route-  specificity  where 
 such  deployment  has  occurred.  1198  While  a  few  competing  carriers  have  stated  in  the  aggregate  that  there  is  an  alternative  transport  facility  on  up  to  approximately  50  percent  of  routes  they  use, 
 these  carriers  do  not  serve  all  geographic  areas,  especially  rural  areas,  and  have  not  shown  that  the  alternative  is  available  to  them.  1199  Although  we  find  that  alternative  facilities  are  not 
 available  to  competing  carriers  in  a  majority  of  areas,  the  record  indicates  that,  particularly  in  dense  urban  areas,  alternative  transport  facilities  are  readily  available.  As  we  describe  below, 
 however,  we  delegate  to  the  states  the  authority  to  collect  and  analyze  more  specific  evidence  of 
 (Continued  from  previous  page) 
 AT&  T  Oct.  4,  2002  Ex  Parte  Letter,  Attach.  at  12  (stating  that  transmission  electronics  generally  do  not  scale  with  demand).  Accordingly,  it  takes  a  longer  period  of  time  for  a  competitive  LEC  to  recover  its  costs  of  deploying  a 

 single  DS3  transmission  facility. 
 1196  See  supra  para.  379  (discussing  competitive  wholesale  supply).  Importantly,  where  alternative  transport  is 
 available,  DS3  circuits  are  very  commonly  a  standard  unit  of  wholesale  provisioning. 
 1197  AT&  T  uses  non-  incumbent  LEC  facilities,  including  its  own  facilities,  for  a  substantial  portion  of  its  DS3 
 transport  while  Allegiance  uses  non-  incumbent  LEC  facilities  for  30%  of  its  DS3  transport.  AT&  T  Comments  at  150  (citing  confidential  data);  Allegiance  Comments  at  28.  Thus,  the  record  indicates  that  when  a  carrier  aggregates 

 sufficient  traffic  to  require  DS3  transport,  the  carrier  is  not  impaired  by  the  fixed  costs  associated  with  negotiating  for  alternative  facilities  and  obtaining  a  cross-  connect. 

 1198  BOC  UNE  Fact  Report  2002  at  III-  2,  Table  1  (stating  that,  on  average,  only  13%  of  BOC  wire  centers  have  a 
 single  competing  carrier  collocated  using  non-  incumbent  transport  facilities).  However,  in  the  largest  25  MSAs  served  by  each  BOC,  35%  of  BOC  wire  centers  have  a  single  competing  carrier  collocated  using  non-  incumbent 

 transport  facilities.  BOC  UNE  Fact  Report  2002  at  III-  3,  Table  2.  Additionally,  the  BOCs  argue  that  larger  central  offices  are  more  likely  to  have  competitors  collocate  alternative  transport  facilities.  BOC  UNE  Fact  Report  2002  at 
 III-  3,  Table  3  (showing  that  at  least  one  competitive  fiber-  based  collocation  exists  in  48%  of  central  offices  with  over  5,000  business  lines).  Finally,  the  BOCs  argue  that  the  largest  metropolitan  areas  have  a  significant  number  of 
 competitive  LEC  networks.  BOC  UNE  Fact  Report  2002  at  III-  7,  Table  4  (showing  an  average  of  15  competitive  networks  operate  in  the  top  50  MSAs).  As  discussed  above,  we  find  that  transport  is  appropriately  reviewed  on  a 
 route-  specific  basis.  See  supra  para.  376. 
 1199  For  example,  Mpower  states  that,  in  50%  of  the  central  offices  in  which  Mpower  is  collocated,  at  least  one 
 alternative  transport  provider  also  is  collocated.  Mpower  Reply  at  13-  16;  Mpower  Oct.  11,  2002  Ex  Parte  Letter,  Attach.  at  5.  In  the  offices  in  which  Covad  is  collocated  in  four  of  Covads  major  markets  (San  Francisco,  Chicago, 

 New  York  Tri-  State,  and  Washington,  D.  C.),  Covad  observes  that  one  or  more  competitors  have  terminated  non-incumbent  fiber  in  over  51%  of  these  central  offices.  Covad  Comments,  CC  Docket  No.  96-  98,  Declaration  of 
 Mark  Shipley  and  Marie  Chang  at  para.  18,  Table  1  (filed  June  11,  2001). 
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 transport  deployment  on  a  route-  specific  basis,  applying  uniform  national  triggers  that  measure  self-  provisioning  or  wholesale  alternative  transport  availability  to  determine  routes  where 
 competitive  carriers  are  not  impaired  without  access  to  incumbent  LEC  unbundled  DS3  transport.  1200 

 388.  Limitation  on  Multiple  DS3  Circuits  and  OCn.  Consistent  with  our  analysis  of  dark  fiber  transport,  we  find  that  as  a  carrier  develops  traffic  along  a  route  consisting  of  multiple 
 DS3s  worth  of  capacity,  it  can  overcome  barriers  to  entry  including  sunk  costs  and  economies  of  scale  such  that  it  can  prepare  to  self-  deploy  transmission  facilities  or  optronic  equipment  to 
 activate  dark  fiber.  1201  Indeed,  our  record  shows  that  carriers  add  capacity  in  increments  of  DS3  capacity  as  demand  for  additional  transport  increases.  Based  on  the  predominance  of  record 
 evidence,  we  establish  a  maximum  number  of  twelve  unbundled  DS3  transport  circuits  that  a  competing  carrier  or  its  affiliates  1202  may  obtain  along  a  single  route.  1203  In  making  this  decision, 
 we  considered  a  wide  range  of  evidence  in  the  record.  For  instance,  BellSouth  states  that  one-third  of  its  end  offices  require  only  three  DS3  transport  circuits  or  less.  1204  Meanwhile, 
 competitive  LECs  assert  that  it  is  not  economic  for  them  to  deploy  transport  facilities  with  less  than  ten  to  eighteen  DS3  circuits  on  a  route.  1205  Moreover,  the  record  shows  that  carriers  have 

 1200  As  discussed  in  detail  below,  we  find  on  a  national  basis  that  requesting  carriers  are  not  impaired  without  DS3 
 transport  along  point-  to-  point  routes  when  a  state  commission  finds  that  either  three  competing  carriers  have  self-provided  transport  facilities  on  that  route  (irrespective  of  whether  they  make  available  wholesale  capacity),  or  two 

 competing  carriers  make  available  wholesale  DS3  transport  on  that  route.  See  infra  Part  VI.  C.  4.  d.  We  find  that  our  national  determination  that  requesting  carriers  are  impaired  without  access  to  DS3  transport,  subject  to  a  more 
 granular  analysis,  benefits  small  business  competitors  that  operate  where  no  competitive  alternatives  exist  and  where  self-  provisioning  is  not  possible.  See,  e.  g.,  BrahmaCom  Reply  at  1-  2;  Maine  CLEC  Coalition  Comments  at 
 4-  5. 
 1201  See  supra  para.  371  (describing  costs  and  barriers  to  entry  associated  with  deploying  transport  facilities). 

 1202  We  incorporate  the  Acts  definition  of  affiliate  to  define  the  extent  to  which  a  carrier  or  its  affiliates  may 
 obtain  multiple  DS3  circuits  on  a  route.  See  47  U.  S.  C.    153(  1). 
 1203  Because  our  record  indicates  that  the  cost  of  deploying  transport  can  be  greater  than  the  cost  of  deploying  some 
 fiber  loops,  we  set  the  limit  on  unbundled  DS3  circuits  at  12  per  route,  per  carrier,  higher  than  the  permissible  number  of  DS3  loops  per  location.  See  supra  Part  VI.  A.  4.  b.(  ii)(  c)(  iii)  (imposing  a  limitation  of  two  DS3  capacity 

 loops  per  location). 
 1204  Letter  from  Jonathan  Banks,  General  Attorney,  BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  5,  2003)  (BellSouth  Feb.  5,  2003  Transport  Ex  Parte  Letter)  (explaining  that  two-  thirds  of  its  end  offices  are  served  by  fewer  than  18  DS3  equivalent  circuits  while  one-  third  of  its  end 

 offices  require  only  three  DS3  circuits  or  less,  and  suggesting  that  scale  economies  can  be  achieved  at  these  capacities);  see  also  High-  Capacity  Loop  and  Transport  Petition  (petitioning  to  eliminate  unbundling  for  all  loop 
 and  transport  circuits  greater  than  DS1  capacity  on  the  basis  that  competing  carriers  are  not  impaired  in  further  deployment  because  these  facilities  have  been  extensively  deployed  and  are  available  on  a  wholesale  basis). 

 1205  See  Letter  from  Steven  A.  Augustino,  Counsel  for  SNiP  LiNK,  to  William  Maher,  Chief,  Wireline  Competition 
 Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2  (filed  Feb.  7,  2003)  (SNiP  LiNK  Feb.  7,  2003  Transport  Ex  Parte  Letter)  (stating  that  SNiP  LiNK  built  its  own  transport  facilities  when  it  required  the  equivalent 

 of  12  DS3  circuits);  AT&  T  Oct.  4,  2002  Ex  Parte  Letter,  Attach.  at  14  (stating  that  it  makes  economic  sense  for  AT&  T  to  deploy  transport  only  when  it  requires  12  or  more  DS3s  on  a  route);  AT&  T  Nov.  25,  2002  Ex  Parte  Letter 
 (continued.) 
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 deployed  transmission  facilities  at  the  twelve  DS3  level  and  above  to  serve  enterprise  customers,  1206  in  areas  across  the  country,  1207  and  to  provide  wholesale  transmission  services  and 
 facilities  to  carriers.  1208  In  limiting  the  unbundling  obligation  on  a  route  to  twelve  DS3  circuits  per  carrier,  we  recognize  that  we  are  engaging  in  an  act  of  line-  drawing.  1209  Nevertheless,  we 
 draw  this  line  as  informed  by  an  extensive  record  and  based  on  our  predictive  judgment  that  this  point  will  serve  as  an  incentive  for  further  facilities  deployment  while  still  allowing  competitive 
 entrants  the  opportunity  to  use  unbundled  transport  at  lower  capacity  levels,  and  to  use  dark  fiber  for  higher  capacities,  to  attain  sufficient  scale  to  self-  deploy.  1210 

 (Continued  from  previous  page) 
 at  1  &  Attach.  A  (stating  that,  compared  to  incumbent  LEC  special  access  prices,  it  is  economic  for  AT&  T  to  self-deploy  transport  only  when  it  has  18  DS3s  worth  of  traffic);  Letter  from  Thomas  Jones,  Counsel  for  Allegiance 

 Telecom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Feb.  3,  2003)  (Allegiance  Feb.  3,  2003  Transport  Ex  Parte  Letter)  (stating  that  it  is  generally  economic  for  Allegiance  to  deploy 
 facilities  when  it  requires  10  DS3s  on  a  route);  Letter  from  Cathleen  A.  Massey,  Vice  President    External  Affairs,  XO  Communications,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2  (filed 
 Feb.  5,  2003)  (XO  Feb.  5,  2003  Transport  Ex  Parte  Letter)  (contending  that  it  is  generally  economic  for  XO  to  deploy  facilities  when  it  requires  10  to  12  DS3s  on  a  route);  Letter  from  Patrick  J.  Donovan,  Counsel  for  Cbeyond, 
 to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  13,  2003)  (Cbeyond  Feb.  13,  2003  Ex  Parte  Letter)  (stating  that  any  limitation  should  be  close  to  or  at  the  OC-  12  level);  but  see 
 AT&  T  Fea/  Giovannucci  Reply  Decl.  at  para.  28  (  AT&  T  often  engages  in  joint  builds  with  other  CLECs  in  order  to  share  the  high  fixed  costs  of  construction.). 

 1206  See  KMC  Duke  Aff.  at  paras.  3,  6,  10  (describing  how  KMC  has  deployed  over  2100  route  miles  of  local 
 SONET  transport  networks  in  several  geographic  markets,  an  average  of  60  miles  each,  serving  customers  using  self-  deployed  and  unbundled  loops  at  the  DS1  capacity  and  higher);  AT&  T  Comments,  Attach.  E,  Declaration  of 

 Michael  E.  Lesher  and  Robert  J.  Frontera  at  para.  9  (citing  AT&  Ts  17,000  fiber  route  miles);  see  also  supra  Part  IV  (describing  the  evolution  of  the  market  for  local  telecommunications  services);  SNiP  LiNK  Feb.  7,  2003 
 Transport  Ex  Parte  Letter  at  1-  2  (stating  that  SNiP  LiNK  built  its  own  transport  facilities  when  it  maximized  the  use  of  an  OC12  circuit). 

 1207  For  example,  KMC  serves  markets  ranging  between  100,000  and  750,000  in  population  using  its  extensive 
 fiber  transport  network.  KMC  Duke  Aff.  at  para.  3;  see  also  BOC  UNE  Fact  Report  2002  at  III-  7,  Table  4  (showing  that  several  competitive  LECs  operate  networks,  even  in  much  smaller  MSAs  with  an  average  of  4.  8  networks  in 

 MSAs  ranked  101  to  125  and  3.4  competitive  LEC  networks  in  MSAs  126-  150).  We  also  note  that  the  costs  of  deploying  fiber  in  rural  areas  can  be  substantially  lower,  thus  requiring  a  lower  aggregation  of  traffic  sufficient  to 
 take  on  the  costs  of  fiber  deployment.  See  supra  para.  371. 
 1208  BOC  UNE  Fact  Report  2002  at  III-  6  through  III-  11  (describing  carrier-  agnostic  wholesale  suppliers  and 
 CAPs);  Coalition  of  Competitive  Fiber  Providers  Reply  at  1-  2  (  Coalition  members  provide  competitive  fiber-  based  transport  services  and  dark  fiber  to  competitive  local  exchange  carriers  .  .  .  collocated  in  ILEC  central  offices.). 

 1209  See  ALTS  Feb.  13,  2003  Ex  Parte  Letter  at  4  (stating  that  an  acceptable  trade-  off  would  logically  occur  at  12 
 DS-  3s.). 
 1210  See  infra  para.  403  (indicating  the  need  to  draw  bright-  line  rules  for  the  sake  of  market  certainty  and 
 administrative  practicality). 
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 389.  The  Commission  previously  unbundled  all  transport  capacities  up  through  OC192  and  such  higher  capacities  as  evolve  over  time.  1211  We  do  not  perpetuate  such  broad 
 unbundling  today.  As  described  above,  we  find  that  requesting  carriers  are  not  impaired  without  lit  transport  beyond  twelve  DS3s  on  a  route  due  to  the  ability  to  self-  provision  transport 
 facilities,  or  to  self-  provision  optronic  equipment  necessary  to  activate  unbundled  dark  fiber.  Because  we  find  no  impairment  above  a  twelve  DS3  level  and  transport  below  this  level  is 
 unbundled,  we  need  not  unbundle  OCn  interface  transmission  facilities.  Rather,  we  find  that  dark  fiber  and  multiple  DS3  circuits  provide  reasonable  substitutes  for  OCn  interface  circuits  at 
 these  capacities  and  find  that  requesting  carriers  are  not  impaired  without  OCn  or  SONET  interface  transport.  1212 

 (iii)  DS1  Capacity  Transport 
 390.  We  find  that  requesting  carriers  generally  are  impaired  without  access  to  DS1  capacity  transport.  1213  We  make  this  determination  based  on  the  high  entry  barriers  associated 

 with  deploying  or  obtaining  transport  used  to  serve  relatively  few  end-  user  customers  and  the  lack  of  route-  specific  evidence  showing  sufficient  alternative  deployment. 

 1211  UNE  Remand  Order,  15  FCC  Rcd  at  3842-  43,  para.  323.  Typically,  carriers  employ  OCn  circuits  in  OC3, 
 OC12,  OC48,  and  OC192  capacity  intervals.  See  supra  note  1154  (describing  capacity  equivalencies).  We  also  note  that  most  carriers  operate  their  transport  networks  at  OC48  levels  as  the  associated  electronics  are  only 

 incrementally  more  expensive  in  relation  to  the  large  jump  in  available  scale.  AT&  T  Comments  at  134;  AT&  T  Oct.  4,  2002  Ex  Parte  Letter,  Attach.  at  12  (stating,  transmission  electronics  .  .  .  generally  do  not  scale  with  demand 
 (e.  g.,  an  OC48  is  not  generally  4  times  as  costly  as  an  OC12)). 
 1212  Commenting  parties  provide  differing  interpretations  of  the  availability  of  unbundled  transport  using  SONET 
 technology,  as  set  forth  in  the  UNE  Remand  Order.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3843,  para.  324;  NuVox  et  al.  Comments  at  93-  94;  BellSouth  Comments  at  56  (  The  Commission  has  not  required  ILECs  to  provide 

 unbundled  access  to  SONET  rings.).  Because  we  find  that  competing  carriers  are  not  impaired  without  access  to  optical  capacity  transport  circuits,  there  is  no  need  to  clarify  whether  competing  carriers  can  access  a  circuit  directly 
 provided  on  a  SONET  interface.  However,  because  an  incumbent  LECs  interoffice  transport  facilities  often  operate  using  SONET  technology,  we  clarify  that  incumbent  LECs  must  unbundle  DS1  and  DS3  capacity  circuits 
 and  dark  fiber  (on  which  a  competing  carrier  may  use  SONET  technology  provided  by  its  own  electronics)  on  a  point-  to-  point  basis  where  subject  to  an  unbundling  obligation.  Specifically,  we  note  that  this  obligation  exists 
 regardless  of  the  underlying  technology  the  incumbent  employs,  and  includes  point-  to-  point  transport  provided  on  SONET  rings  operated  by  incumbent  LECs.  See  also  infra  Part  VII.  D  (discussing  incumbent  LEC  unbundling 
 obligations  for  specially  constructed  network  facilities). 
 1213  Unlike  the  DS3  cap  we  establish  today,  we  do  not  find  it  prudent  to  establish  a  limit  on  the  number  of 
 unbundled  DS1  transport  circuits  a  carrier  may  lease  on  a  route.  Instead,  we  are  convinced  that  both  operational  and  pricing  efficiencies  exist  that  serve  to  limit  a  competing  carriers  incentive  to  over-  subscribe  DS1  transport  on  a 

 route,  even  where  unbundled  DS3  transport  is  not  available.  Specifically,  our  record  shows  that  the  coordination  of  large  multiples  of  DS1  circuits  quickly  becomes  burdensome  and  much  more  costly  than  using  larger  capacity  DS3 
 transport.  See,  e.  g.,  Letter  from  Henry  Hultquist,  Senior  Attorney,  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  (filed  Oct.  29,  2002)  (WorldCom  Oct.  29,  2002  Loops  and 
 Transport  Ex  Parte  Letter). 
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 391.  The  record  indicates  that  competing  carriers  generally  cannot  self-  provide  DS1  transport.  A  carrier  requiring  only  DS1  capacity  transport  between  two  points  typically  does  not 
 have  a  large  enough  presence  along  a  route  (generally  loop  traffic  at  a  central  office)  to  justify  incurring  the  high  fixed  and  sunk  costs  of  self-  providing  just  that  DS1  circuit.  1214  This  is  because 
 a  requesting  carrier  in  need  of  DS1  capacity  transport  faces  the  same  fixed  and  sunk  costs  as  other  carriers  deploying  transport  or  using  alternatives,  but  faces  substantially  higher  incremental 
 costs  across  its  customer  base  than  a  carrier  requesting  higher  capacity  transport.  1215 
 392.  The  record  also  indicates  that,  although  competitive  fiber  has  been  deployed  in  many  areas,  DS1  transport  is  not  generally  made  available  on  a  wholesale  basis  1216  and  the  record 

 lacks  the  specificity  for  us  to  analyze  appropriately  transport  on  a  route-  specific  basis.  1217  At  this  time,  while  we  find  that  the  market  for  competitive  wholesale  DS1  transport  is  nascent,  even 
 where  higher  capacity  competitive  transport  is  already  made  available  on  a  wholesale  basis,  we  find  that  applying  a  wholesale  availability  trigger  is  appropriate.  While  carriers  suggest  that  a 
 wholesale  market  for  DS1  transport  has  not  developed  due  to  operational  and  cost  considerations,  we  find  that  technological  advances  may  allow  this  market  to  become 
 practical.  1218  It  is  our  predictive  judgment  that  wholesale  provision  of  DS1  transport  will  develop 
 1214  DS1  transport  is  the  lowest  standard  capacity  level  of  dedicated  transport,  although  dedicated  transport  can  be 
 ordered  at  the  DS0  capacity.  Unbundled  DS0  dedicated  transport  is  not  used  by  competing  carriers  as  a  practical  matter. 

 1215  See  supra  para.  371  (discussing  transport  costs  and  entry  barriers).  Even  some  incumbent  LECs  concede  that 
 some  impairment  exists  at  the  DS1  level  according  to  the  impairment  tests  they  propose.  For  example,  while  BellSouth  asserts  that  transport  at  the  DS3  level  and  above  should  not  be  unbundled,  BellSouth  proposes  to  use  a 

 trigger  proxy  at  the  DS1  level.  Letter  from  Robert  T.  Blau,  Vice  President    Executive  and  Federal  Regulatory  Affairs,  BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338  and  02-  33,  Attach.  at  8  (filed 
 Jan.  16,  2003)  (BellSouth  Jan.  16,  2003  Ex  Parte  Letter);  see  also  Letter  from  W.  W.  Jordan,  Vice  President    Federal  Regulatory,  BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  321,  01-  338,  Attach.  at  3 
 (filed  Aug.  26,  2002)  (BellSouth/  Time  Warner  Aug.  26,  2002  Transport  and  Performance  Measures  Ex  Parte  Letter)  (advocating  a  trigger  be  applied  to  determine  impairment  for  all  dedicated  transport).  Similarly,  SBC 
 proposes  (in  the  alternative  to  removing  unbundling  for  all  DS1  and  above  transport)  that  unbundling  for  DS1  transport  should  be  determined  according  to  triggers  similar  to  those  adopted  in  the  Pricing  Flexibility  Order.  SBC 
 Reply  at  153. 
 1216  While  it  is  relatively  common  for  carriers  to  obtain  wholesale  transport  at  higher  capacities,  we  have  very 
 limited  evidence  of  carriers  using  alternative  DS1  transport.  AT&  T  almost  never  uses  non-  incumbent  LEC  facilities  for  its  DS1  transport  while  it  uses  non-  incumbent  LEC  facilities  a  substantially  higher  percentage  of  its 

 DS3  transport.  AT&  T  Comments  at  149-  50  (citing  confidential  data);  see  also  Cbeyond  Nov.  22,  2002  Transport  Ex  Parte  Letter,  Declaration  of  Richard  Batelaan  at  para.  11  (concluding  that  alternative  providers  for  DS1  level 
 transport  are  at  best  nascent);  NuVox  et  al.  Comments,  Affidavit  of  Edward  J.  Cadieux  (NuVox  Cadieux  Aff.)  at  para.  9  (where  third-  party  providers  exist  they  either  do  not  offer  dedicated  transport  at  the  DS1  level  (only  at  the 
 DS3  level  or  higher)  or  that  operational  interfaces  at  the  DS1  level  are  too  problematic  for  third-  party  providers  to  be  a  viable  facility  source.);  ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte  Letter  at  3  (stating  that  competition 
 at  the  DS3  capacity  level  does  not  equate  to  competition  for  DS1  transport). 
 1217  As  discussed  in  para.  376  above,  we  find  that  transport  is  appropriately  reviewed  on  a  route-  specific  basis. 

 1218  Competing  transport  providers  would  have  to  install  additional  multiplexing  equipment  and  refine  back  office 
 systems  to  handle  DS1  interface  wholesale  transport.  KMC  Duke  Aff.  at  para.  13;  NuVox  Cadieux  Aff.  at  para.  9  (continued.) 
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 as  technology  improvements  make  wholesale  provision  of  DS1  circuits  economic  such  that  carriers  have  an  incentive  to  invest  in  the  equipment  necessary  to  provide  this  capacity 
 service.  1219  As  we  state  below,  however,  we  delegate  to  the  states  the  ability  to  collect  and  analyze  more  specific  evidence  of  transport  deployment  on  a  route-  specific  basis,  applying  a 
 uniform  national  trigger  that  measures  wholesale  alternative  transport  availability  to  determine  routes  where  competitive  carriers  are  not  impaired  without  access  to  incumbent  LEC  unbundled 
 DS1  transport.  1220 
 393.  We  also  note  that  unbundled  DS1  transport  is  often  used  by  competing  carriers  in  a  loop/  transport  combination  when  collocation  at  the  customers  end-  office  is  uneconomic.  1221  In 

 this  manner,  DS1  transport  is  used  by  competing  carriers  to  expand  into  new  service  areas  and  may  be  used  as  a  transition  mechanism  for  carriers  just  entering  an  area,  or  for  carriers  serving  a 
 customer  in  an  area  only  as  a  supplement  to  its  primary  operations  in  another  area.  In  these  situations,  carriers  are  able  to  enter  new  markets  to  begin  accumulating  traffic,  but  do  not  have 
 sufficient  traffic  to  self-  deploy.  1222  Under  our  analysis,  new  market  entrants  will  have  the  ability  to  access  unbundled  DS1  transport,  or  access  DS1  transport  from  multiple  competing  carriers. 

 d.  Route-  Specific  Review  Conducted  by  States  Applying  Federal  Triggers 
 394.  The  Supreme  Court  required  that  the  Commission  apply  some  limiting  standard  to  its  impairment  analysis.  1223  In  this  regard,  the  Court  advised  that  [  t]  he  Commission  cannot, 
 consistent  with  the  statute,  blind  itself  to  the  availability  of  elements  outside  the  incumbents  network,  including  whether  requesting  carriers  are  able  to  self-  provision,  or  .  .  .  purchas[  e] 
 from  another  provider.  1224  We  also  recognize  that  the  D.  C.  Circuit  questioned  how  the 
 (Continued  from  previous  page) 
 (where  operational  interfaces  at  the  DS1  level  are  too  problematic  for  third-  party  providers  to  be  a  viable  facility  source);  see  also  Eschelon  Kunde  Aff.  at  para.  11  (describing  the  costs  associated  with  using  multiple  transport 

 vendors  including  the  added  complexity  of  managing  multiple  contracts,  ordering  processes,  maintenance  processes,  and  bills). 

 1219  Therefore,  our  wholesale  availability  test,  explained  in  detail  below,  while  not  likely  to  have  an  immediate 
 impact  at  the  DS1  capacity  level,  ensures  that  our  analysis  is  flexible  enough  to  accommodate  innovation  in  the  marketplace. 

 1220  As  discussed  in  detail  below,  we  find  on  a  national  basis  that  requesting  carriers  are  not  impaired  without  DS1 
 transport  along  point-  to-  point  routes  when  a  state  commission  finds  that  two  competing  carriers  make  available  wholesale  DS1  transport  on  that  route.  See  infra  Part  VI.  C.  4.  d. 

 1221  See  infra  Part  VII.  A  (describing  combinations  of  UNEs). 
 1222  For  the  reasons  outlined  above,  nationwide  availability  of  DS1  transport  will  benefit  small  business 
 competitors,  especially  those  just  entering  a  new  market,  as  well  as  small  business  telecommunications  consumers  that  use  DS1  capacity  services. 

 1223  Iowa  Utils.  Bd.,  525  U.  S.  at  388. 
 1224  Id.  at  389. 
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 Commission  could  find  that  an  element  like  transport  is  significantly  deployed  on  a  competitive  basis,  but  remains  available  as  an  unbundled  element  from  the  incumbent  LEC.  1225  As  discussed 
 above,  we  make  affirmative  national  findings  of  impairment  and  non-  impairment  for  transport  at  the  national  level,  as  supported  by  the  record.  However,  evidence  suggests  that  requesting 
 carriers  likely  are  not  impaired  without  access  to  unbundled  transport  in  some  particular  instances,  but  evidence  in  the  record  is  not  sufficiently  detailed  to  identify  these  specific  routes. 
 Therefore,  as  described  in  detail  below,  we  delegate  to  states  a  fact-  finding  role  to  identify  where  competing  carriers  are  not  impaired  without  unbundled  transport,  pursuant  to  two  triggers. 

 395.  Commenting  parties  suggested  various  proposals  for  how  the  Commission  should  apply  a  more  granular  impairment  analysis  for  dedicated  transport  as  suggested  in  the  Triennial 
 Review  NPRM.  We  review  these  proposals  here  as  they  inform  our  conclusions  about  an  appropriate  level  of  granularity. 

 396.  While  the  competitive  LEC  community  generally  supports  unlimited  unbundling  of  all  transport,  1226  in  the  alternative,  competitive  LECs  generally  support  removing  the 
 unbundling  obligation  for  transport  on  a  route-  specific  basis  only  when  a  transport  market  on  that  route  is  fully  competitive.  1227  ALTS  and  CompTel  proposed  that  the  Commission  adopt  the 
 Department  of  Justice  merger  guidelines  to  determine  when  each  transport  route  is  sufficiently  competitive  because  such  a  test  will  ensure  that  no  alternative  transport  provider,  or  the 
 incumbent  LEC,  maintains  market  power  along  every  route  for  which  no  impairment  is  found.  We  reject  this  proposal  because,  as  we  describe  above,  this  introduces  a  standard  other  than  the 
 impairment  standard  we  have  adopted  more  generally  for  determining  unbundling  obligations.  1228  Additionally,  market  power  analyses  are  neither  easily  verifiable  nor  administratively  simple  for 
 purposes  of  our  instant  inquiry;  they  rely  on  market  share  analysis  that  is  complicated  and  requires  considerable  time  and  expense  to  prepare.  1229  Moreover,  such  an  analysis  is  likely  to  be 

 1225  USTA,  290  F.  3d  at  422. 
 1226  See,  e.  g.,  ALTS  et  al.  Comments  at  60-  61;  NuVox  et  al.  Comments  at  84-  91. 
 1227  See,  e.  g.,  Letter  from  H.  Russell  Frisby,  President,  CompTel,  and  John  Windhausen,  President,  ALTS,  to 
 William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  No.  01-  338,  Attach.  at  1-  4  (filed  Oct.  8,  2002)  (ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter);  ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte 

 Letter  at  5-  6;  Letter  from  Douglas  I.  Brandon,  Vice  President    External  Affairs  and  Law,  AT&  T  Wireless,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  3  (filed  Dec.  20,  2002)  (ATTWS 
 Dec.  20,  2002  Ex  Parte  Letter).  Indeed,  competitive  LECs  opposed  geographic  granular  analysis  that  did  not  consider  route-  specific  factors,  or  applied  only  to  broader  geographic  areas.  See,  e.  g.,  ALTS  Feb.  13,  2003  Ex 
 Parte  Letter  at  3-  4;  Letter  from  Praveen  Goyal,  Senior  Counsel,  Covad,  to  Michelle  Carey,  Chief,  Competition  Policy  Division,  Wireline  Competition  Bureau,  FCC,  CC  Docket  No.  01-  338  at  4-  5  (filed  Jan.  21,  2003)  (Covad 
 Jan.  21,  2003  Ex  Parte  Letter). 
 1228  See  supra  Part  V.  B.  1.  d.(  iii)  (describing  why  the  Commission  does  not  adopt  an  antitrust-  style  market  power 
 analysis  as  a  part  of  its  impairment  analysis). 
 1229  See  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14271-  72,  para.  90. 
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 controversial  and  difficult  to  resolve.  1230  We  conclude  that  a  route-  specific  bright-  line  standard  is  more  manageable  for  the  parties  and  administratively  more  practical.  1231 
 397.  SBC,  Verizon,  and  BellSouth  all  propose  that  the  Commission  find  no  impairment  for  all  DS3  and  greater  transport,  including  dark  fiber.  1232  In  the  alternative,  they  and  Qwest 
 argue  that  if  the  Commission  should  adopt  a  trigger  to  identify  impairment,  the  Commission  should  adopt  a  competitive  trigger  based  on  those  in  the  Commissions  Pricing  Flexibility  Order 
 for  special  access.  1233  In  general,  these  incumbent  LECs  argue  that  wherever  and  whenever  they  have  received  pricing  flexibility  for  special  access,  they  should  not  be  required  to  unbundle 
 transport.  1234  The  record  indicates  that  incumbent  LECs  have  qualified  for  special  access  pricing  flexibility  in  numerous  MSAs  throughout  their  regions,  almost  exclusively  by  meeting  the 
 triggers  based  on  special  access  revenues.  1235  Because  the  revenue  trigger  requires  only  a  single 

 1230  Id. 
 1231  See,  e.  g.,  WorldCom  Reply  at  127  (suggesting  a  bright-  line  standard  of  four  wholesale  competitors  on  a  route); 
 Allegiance  Reply  at  47  (suggesting  a  bright-  line  standard  of  four  wholesale  competitors  on  a  route);  Letter  from  Thomas  Jones,  Counsel  for  Allegiance,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98- 

 147  at  1-  5  (filed  Jan.  30,  2003)  (Allegiance  Jan.  30,  2003  Transport  Ex  Parte  Letter)  (proposing  a  bright-  line  standard  of  2  competitive  wholesale  providers  or  3  competitive  providers  on  a  route  as  sufficient  to  satisfy  the 
 impairment  standard);  XO  Jan.  28,  2003  Transport  Ex  Parte  Letter  at  1-  2  (advocating  a  bright-  line  route-  based  standard  of  at  least  four  competitors  collocated  at  both  end  points  of  a  transport  route,  three  of  which  must  offer 
 wholesale  transport). 
 1232  See,  e.  g.,  Verizon  Comments  at  105-  13;  BellSouth  Comments  at  90-  102;  SBC  Comments  at  96.  To  the  extent 
 that  these  arguments  are  based  on  the  availability  of  incumbent  LEC  tariffed  special  access  services  serving  as  an  alternative  to  UNEs,  we  address  these  arguments  in  our  impairment  analysis,  supra  Part  V.  B.  1.  d.(  iii).  See  Verizon 

 Dec.  17,  2002  Ex  Parte  Letter  at  1,  8-  11  (arguing  that  competitive  LECs  are  not  impaired  without  unbundled  transport  because  they  use  incumbent  LEC  special  access  transport  services). 

 1233  See,  e.  g.,  Qwest  Comments  at  32-  39.  We  note  that  while  their  various  proposals  may  differ  slightly,  they  are  all 
 based  expressly  on  the  triggers  set  forth  in  the  Commissions  Pricing  Flexibility  Order.  Pricing  Flexibility  Order,  14  FCC  Rcd  14221. 

 1234  See,  e.  g.,  Qwest  Comments  at  32.  Although  they  argue  non-  impairment  should  be  identified  based  on  Phase  I 
 pricing  flexibility,  in  the  alternative,  the  BOCs  argue  that  Phase  II  pricing  flexibility  should  apply  as  a  non-impairment  trigger.  Phase  I  pricing  flexibility  for  certain  special  access  services  is  triggered  on  an  MSA  basis  when 

 (1)  15%  of  wire  centers  have  one  collocated  competitor  using  non-  incumbent  transport,  or  (2)  in  wire  centers  accounting  for  at  least  30%  of  revenues  for  these  services,  at  least  one  competitor  has  collocated  using  non-incumbent 
 transport.  Phase  II  pricing  flexibility  is  triggered  on  an  MSA  basis  when  (1)  50%  of  wire  centers  have  one  collocated  competitor  using  non-  incumbent  transport,  or  (2)  in  wire  centers  accounting  for  at  least  65%  of 
 revenues  for  these  services,  at  least  one  competitor  has  collocated  using  non-  incumbent  transport.  See  47  C.  F.  R.    69.709. 

 1235  See  supra  note  1234  (describing  the  Pricing  Flexibility  Order  triggers  based,  alternatively,  on  competitive 
 transport-  based  collocation  or  special  access  revenues);  see  also  NewSouth  Dec.  12,  2002  Ex  Parte  Letter  at  2  (describing  details  of  where  and  how  BellSouth  has  received  special  access  pricing  flexibility);  BellSouth  Oct.  15, 

 2002  Transport  and  Loop  Ex  Parte  Letter,  Attach.  at  5  (stating  that  BellSouth  has  received  Phase  I  and  Phase  II  special  access  pricing  flexibility  in  100%  of  nations  top  150  MSAs  in  its  region);  Verizon  Dec.  17,  2002  Ex  Parte 
 Letter  at  7  (stating  that  Verizon  has  pricing  flexibility  in  37%  of  its  wire  centers);  Qwest  Oct.  11,  2002  Transport  Ex  (continued.) 
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 collocated  competitor  and  the  purchase  of  substantial  amounts  of  special  access  in  a  concentrated  area,  this  test  provides  little  indication  that  competitors  have  self-  deployed  alternative  facilities, 
 or  are  not  impaired  outside  of  a  few  highly  concentrated  wire  centers.  Additionally,  the  pricing  flexibility  trigger  based  on  alternative  transport-  based  collocation  requires  no  consideration  of 
 the  ubiquity  of  the  competitive  transport  facilities  throughout  an  MSA.  The  measure  does  not  indicate  that  the  competitive  fiber  facilities  connect  to  collocations  in  any  other  incumbent  LEC 
 central  offices.  The  measure  may  only  indicate  that  numerous  carriers  have  provisioned  fiber  from  their  switch  to  a  single  collocation  rather  than  indicating  that  transport  has  been 
 provisioned  to  transport  traffic  between  incumbent  LEC  central  offices.  Therefore,  we  find  that  Commission  approval  for  special  access  pricing  flexibility,  finding  that  competing  carriers  have 
 made  irreversible  sunk  investments,  is  not  sufficiently  tailored  to  identify  where  requesting  carriers  are  not  impaired  without  unbundled  transport.  1236 

 398.  There  is  no  disagreement  among  the  parties  that  alternative  transport  facilities  have  been  deployed  and  are  available  as  alternatives  to  unbundled  transport  in  some  locations. 
 However,  the  record  does  not  identify  the  location  of  alternative  transport  facilities,  and  parties  dispute  the  degree  to  which  competitive  facilities  must  be  deployed  before  competing  carriers 
 are  no  longer  impaired  without  unbundled  transport.  We  need  not  resolve  in  this  Order  the  factual  identification  of  where  alternative  facilities  exist.  Rather,  we  are  able  to  discern 
 impairment  at  the  national  level  based  on  aggregated  data.  However,  because  we  recognize  that  the  record  is  insufficiently  detailed  to  make  more  precise  findings  regarding  impairment,  we 
 delegate  to  the  states,  subject  to  appeal  back  to  this  Commission  if  a  state  fails  to  act,  a  fact-finding  role  to  determine  on  a  route-  specific  basis  where  alternatives  to  the  incumbent  LECs 
 networks  exist  such  that  competing  carriers  are  no  longer  impaired.  1237 
 399.  As  discussed  above,  the  record  indicates  that  competing  carriers  have  self-deployed  significant  quantities  of  local  fiber  transport  facilities.  Moreover,  the  record  indicates 

 that  competing  carriers  often  use  transport  provided  by  competitive  transport  providers  where  available,  rather  than  facilities  provided  by  the  incumbent  LEC.  However,  substantial  barriers  to 
 self-  deploying  transport  including  high  fixed  and  sunk  costs  indicate  that  carriers  are  impaired  in  many  instances  without  access  to  incumbent  LEC  facilities.  Therefore,  we  adopt  two  triggers 
 designed  to  identify  where  carriers  are  not  impaired  without  access  to  incumbent  LEC  transport  based  on  the  two  primary  ways  carriers  can  overcome  impairment:  (1)  the  ability  to  self-  deploy 

 (Continued  from  previous  page) 
 Parte  Letter,  Attach.  at  5  (stating  that  Qwest  has  been  granted  pricing  flexibility  in  33  of  its  45  MSAs,  many  of  which  are  not  national  top  100  MSAs). 

 1236  See  supra  Part  V.  B.  1.  d.(  iii)  (distinguishing  the  purposes  of  the  impair  standard  and  the  pricing  flexibility 
 standard). 
 1237  Appeals  of  state  inaction  shall  be  filed  as  pursuant  to  the  procedures  we  adopt  today.  See  supra  Part  V.  E. 
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 facilities,  and;  (2)  access  to  third  party  alternatives.  1238  We  adopt  both  triggers  to  best  address  the  guiding  principles  provided  by  reviewing  courts.  1239 
 400.  The  first  trigger  is  designed  to  identify  routes  along  which  the  ability  to  self-provide  transport  facilities  is  evident  based  on  the  existence  of  several  competitive  transport 
 facilities.  Specifically,  where  three  or  more  competing  carriers,  not  affiliated  with  each  other  or  the  incumbent  LEC,  each  have  deployed  non-  incumbent  LEC  transport  facilities  along  a  specific 
 route,  regardless  of  whether  these  carriers  make  transport  available  to  other  carriers,  we  find  that  to  be  sufficient  evidence  that  competing  carriers  are  capable  of  self-  deploying.  1240  The  second 
 trigger  is  designed  to  identify  where  competitive  wholesale  alternatives  are  available.  Specifically,  we  find  that  competing  carriers  are  not  impaired  where  competing  carriers  have 
 available  two  or  more  alternative  transport  providers,  not  affiliated  with  each  other  or  the  incumbent  LEC,  immediately  capable  and  willing  to  provide  transport  at  a  specific  capacity 
 along  a  given  route  between  incumbent  LEC  switches  or  wire  centers.  1241  If  a  state  commission  finds  no  impairment  for  a  specific  capacity  of  transport  on  a  route,  the  incumbent  LEC  will  no 
 longer  be  required  to  unbundle  that  transport  along  that  route,  according  to  the  transition  schedule  adopted  by  the  state  commission. 

 401.  Both  triggers  we  adopt  today  evaluate  transport  on  a  route-  specific  basis.  We  define  a  route,  for  purposes  of  these  tests,  as  a  connection  between  wire  center  or  switch  A  and 
 wire  center  or  switch  Z.  1242  Even  if,  on  the  incumbent  LECs  network,  a  transport  circuit  from  A  to  Z  passes  through  an  intermediate  wire  center  X,  the  competitive  providers  must  offer 
 service  connecting  wire  centers  A  and  Z,  but  do  not  have  to  mirror  the  network  path  of  the  incumbent  LEC  through  wire  center  X.  We  find  that  analyzing  transport  at  this  very  granular 
 level  will  provide  the  most  accurate  determination  of  impairment.  BellSouths  and  other  BOCs 
 1238  See  Iowa  Utils.  Bd.,  525  U.  S.  at  389;  see  also  supra  Part  V.  B  (discussing  the  impair  standard). 
 1239  We  expect  states  to  implement  both  triggers  as  each  addresses  only  part  of  the  analysis.  Were  we  to  adopt  (or 
 states  to  implement)  only  a  test  for  the  ability  to  self-  provision  transport,  two  carriers  could  conceivably  deploy  transport  facilities  and  make  them  available  to  other  carriers  such  that  competing  carriers  are  not  impaired  without 

 access  to  the  incumbent  LECs  facilities,  but  the  incumbent  would  remain  subject  to  an  unbundling  obligation.  Likewise,  were  we  to  adopt  (or  states  to  implement)  only  a  test  for  wholesale  availability,  it  is  possible  that 
 wholesale  opportunities  may  not  exist  despite  the  ability  of  several  carriers  to  overcome  the  barriers  to  deploy  along  a  route.  We  note  that  where  a  state  makes  a  finding  of  non-  impairment  under  either  trigger,  there  is  no  reason  to 
 apply  the  other  trigger  on  that  route. 
 1240  See  infra  para.  405. 

 1241  See  infra  para.  413. 
 1242  See,  e.  g.,  Letter  from  Steven  A.  Augustino,  Counsel  for  SNiP  LiNK  et  al.,  to  William  Maher,  Chief,  Wireline 
 Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3-  6  (filed  Jan.  24,  2003)  (SNiP  LiNK  et  al.  Jan.  24,  2003  Transport  Ex  Parte  Letter);  Letter  from  Michael  H.  Pryor,  Counsel  for  NewSouth,  to  Marlene  H. 

 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  Attach.  at  2  (filed  Feb.  3,  2003)  (NewSouth  Feb.  3,  2003  Transport  Ex  Parte  Letter);  Letter  from  Jonathan  Askin,  General  Counsel,  ALTS,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  No.  01-  338  at  1  (filed  Jan.  29,  2003)  (ALTS  Jan.  29,  2003  Transport  Ex  Parte  Letter);  Covad  Jan.  21,  2003  Ex  Parte  Letter  at  1,  4-  5. 
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 fiber-  based  collocation  proposals  are  based  solely  on  the  presence  of  alternative  transport  at  one  end  of  a  route  such  that  when  one  end  of  a  route  is  competitive  (a  central  office  with  fiber-  based 
 collocation),  no  unbundled  transport  will  be  available  in  or  out  of  that  competitive  central  office.  1243  These  proposals  would  effectively  leverage  the  existence  of  competition  in  one 
 location  to  remove  the  unbundling  obligation  to  perhaps  several  other  locations  without  any  proof  that  a  requesting  carrier  could  self-  provide  or  utilize  alternative  transport  to  reach  those 
 other  locations.  1244  A  route-  specific  test  is  sufficiently  granular  to  avoid  falsely  identifying  as  competitive  a  route  between  two  offices.  1245  Also,  the  route-  based  triggers  we  adopt  allow 
 carriers  to  avoid  the  costs  and  operational  problems  associated  with  cobbling  together  multiple  vendor  links  to  complete  a  route  between  two  incumbent  LEC  central  offices. 

 402.  We  consider,  but  decline  to  adopt,  a  test  based  on  each  link  between  two  incumbent  LEC  central  offices.  1246  While  this  may  have  benefits  of  being  easier  to  implement,  a 
 link-  specific  test  raises  practical  operational  problems  of  linking  together  facilities  of  multiple  providers  to  complete  a  single  circuit,  sometimes  called  daisy-  chaining.  That  is,  a  competing 
 carrier  may  have  to  coordinate  multiple  vendors  for  a  single  route  if  the  complete  route  a  competing  carrier  requests  goes  through  an  intermediate  central  office  and  one  of  the  two  links 
 comprising  the  complete  route  is  not  unbundled.  1247  This  almost  inevitably  would  raise  costs,  increase  provisioning  time  intervals,  and  make  maintenance  and  repair  more  difficult.  1248  We 
 also  consider,  but  decline  to  adopt,  an  analysis  of  transport  markets  on  a  broader  scale,  such  as  a  city,  MSA,  or  other  zone  and  reject  these  approaches  as  too  over-  and  under-  inclusive.  1249  That 
 is,  there  may  be  actual  impairment  on  some  routes,  but  not  others  within  a  wider  geographic  area.  Thus,  a  finding  of  impairment  or  non-  impairment  throughout  an  area  could  permit 

 1243  See,  e.  g.,  BellSouth  and  Time  Warner  Telecom  propose  finding  no  impairment  for  unbundled  transport  where 
 3  or  more  competitive  transport  providers  exist  in  either  A  or  Z  wire  center.  BellSouth/  Time  Warner  Aug.  26,  2002  Transport  and  Performance  Measures  Ex  Parte  Letter,  Attach.  at  3. 

 1244  See,  e.  g.,  ALTS  et  al.  Comments  at  67. 
 1245  See  ALTS  Jan.  29,  2003  Ex  Parte  Letter  at  1;  SNiP  LiNK  et  al.  Jan.  24,  2003  Transport  Ex  Parte  Letter  at  3-  6; 
 Covad  Jan.  21,  2003  Ex  Parte  Letter  at  4-  5.  As  ALTS  and  CompTel  state  in  a  metaphor,  [  A]  passenger  at  Dulles  Airport  seeking  to  fly  to  San  Francisco  would  not  ask  an  airline:  Do  any  of  your  flights  have  seats  available?   

 Instead,  the  question  would  be:  Do  any  of  your  flights  to  San  Francisco  have  seats  available?    ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter  at  1. 

 1246  By  a  link,  we  mean  a  direct  connection  between  two  incumbent  LEC  switches  or  wire  centers,  without 
 passing  through  any  intermediate  wire  centers  or  switches.  On  the  other  hand,  a  route  may  connect  wire  centers  or  switches  that  are  not  directly  connected  to  each  other. 

 1247  ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte  Letter  at  3,  6  &  Attach.  A  (describing  the  costs  associated 
 with  not  using  a  whole  route  approach  and  multi-  span  routes). 
 1248  Id. 

 1249  See  supra  para.  397  (discussing  incumbent  LEC  suggestions  to  incorporate  the  MSA-  based  Pricing  Flexibility 
 Order  triggers  into  the  Commissions  impairment  analysis  of  transport). 
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 unbundling  on  routes  where  no  impairment  exists,  or  foreclose  access  to  unbundled  transport  on  routes  where  impairment  does  exist. 
 403.  As  the  Commission  has  done  in  other  circumstances,  we  adopt  these  triggers  as  a  mechanism  for  determining  impairment.  Adopting  triggers  with  objective  criteria  can  avoid  the 
 delays  caused  by  protracted  proceedings  and  can  minimize  administrative  burdens.  1250  Our  selection  of  various  thresholds,  as  in  rate  setting,  is  not  an  exact  science.  1251  Rather,  the 
 thresholds  are  based  on  our  agency  expertise,  our  interpretation  of  the  record,  and  our  desire  to  provide  bright-  line  rules  to  guide  the  industry  in  implementing  section  251.  1252  Our  effort  to 
 select  triggers  that  precisely  measure  impairment  for  transport  is  hampered  by  the  lack  of  verifiable  data  concerning  competitors  facilities.  Given  these  constraints,  we  adopt  triggers 
 that,  in  our  reasoned  judgment,  minimize  administrative  burdens  while  still  reasonably  applying  our  impairment  standard. 

 404.  We  also  expect  that  the  triggers  we  adopt  will  produce  desirable  incentives  for  competing  carriers  to  build  out  their  transport  networks.  As  a  policy  matter,  we  find  that 
 unbundling  can  create  a  disincentive  for  competitive  LECs  to  deploy  transport.  After  incurring  substantial  fixed  and  sunk  costs,  a  carrier  that  has  deployed  transport  facilities  must  continue  to 
 compete  against  carriers  able  to  obtain  unbundled  transport  without  incurring  any  large  costs.  Moreover,  the  triggers  will  benefit  competing  carriers  that  invest  or  have  invested  in  their  own 
 transport  facilities  by  attracting  additional  wholesale  customers  to  mitigate  the  costs  of  deployment  if  their  facilities  trigger  a  finding  of  no  impairment  that  eliminates  unbundling. 

 (i)  Self-  Provisioning  Trigger 
 405.  We  delegate  to  state  commissions  the  authority  to  declare  requesting  carriers  not  to  be  impaired  without  unbundled  transport  when  there  is  sufficient  evidence  that  facilities 

 deployment  is  possible  on  a  particular  route,  regardless  of  the  availability  of  wholesale  transport.  Reviewing  courts  have  instructed  the  Commission  to  identify  those  areas  in  which  lack  of  access 
 to  an  incumbent  LECs  facilities  does  not  present  an  insurmountable  barrier  to  entry  as  evidenced  by  the  suitability  of  multiple,  competitive  supply.  1253  As  noted  above,  we  give 
 substantial  weight  to  actual  commercial  deployment  of  an  element  by  competing  carriers.  1254 
 1250  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14267-  68,  para.  84. 
 1251  United  States  v.  FCC,  707  F.  2d  610,  618  (D.  C.  Cir.  1983);  see  also  Pricing  Flexibility  Order,  14  FCC  Rcd  at 
 14276,  14297-  98,  paras.  96,  144. 
 1252  Although  ALTS  and  CompTel  do  not  support  a  test  based  on  a  strict  count  of  the  number  of  alternative 
 transport  providers,  they  urge  the  Commission  to  set  numbers  at  a  level  sufficient  to  insure  meaningful  competition,  and  that  the  viability  of  the  providers  is  clear  and  unquestioned.  ALTS/  CompTel  Oct.  8,  2002 

 Transport  Ex  Parte  Letter,  Attach.  at  2. 
 1253  USTA,  290  F.  3d  at  427;  see  supra  Part  V.  B.  (discussing  the  framework  for  the  Commissions  impairment 
 analysis). 
 1254  See  supra  Part  V.  B.  (discussing  the  impair  standard). 
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 Therefore,  our  trigger  identifies  existing  examples  of  deployment  by  multiple  competitive  LECs  on  a  route-  specific  basis.  Specifically,  we  delegate  to  states  authority  to  determine  where  three 
 or  more  unaffiliated  competing  carriers  each  have  deployed  transport  facilities  on  a  route.  1255  We  find  that,  when  three  carriers,  in  addition  to  the  incumbent  LEC,  have  each  made  sunk 
 investment  in  transport  facilities  on  a  route,  that  is  a  sufficient  indication  that  sunk  costs,  economies  of  scale,  and  other  barriers  to  deploying  transport  facilities  do  not  present  an 
 insurmountable  barrier  on  a  particular  route  such  that  requesting  carriers  are  not  impaired  without  access  to  unbundled  transport. 

 406.  Each  counted  self-  provisioned  facility  along  a  route  must  be  operationally  ready  to  provide  transport  into  or  out  of  an  incumbent  LEC  central  office.  1256  We  find  that  the 
 competitive  transport  facilities  counted  to  satisfy  this  trigger  must  terminate  in  a  collocation  arrangement  which  may  be  arranged  either  pursuant  to  contract,  tariff  or,  where  appropriate, 
 section  251(  c)(  6)  of  the  Act.  1257  We  find  it  beneficial  to  count  for  purposes  of  this  test  all  types  of  collocation  arrangements,  including  those  that  may  not  qualify  for  collocation  under  section 
 251(  c)(  6).  1258  This  provides  an  incentive  to  incumbent  LECs  to  enable  competitive  LEC,  including  the  carrier-  agnostic  wholesale  transport  providers,  identified  by  incumbent  LECs,  to 
 develop  their  transport  networks  by  developing  viable  alternatives  to  unbundled  transport.  1259 
 407.  We  set  the  number  of  competitive  facilities  at  three  for  several  reasons.  First,  we  want  to  be  assured  that  the  route  can  support  multiple,  competitive  transport  networks. 

 1255  Allegiance  proposes  a  granular  impairment  analysis  to  identify  where  carriers  can  self-  provision  very  similar  to 
 this  test.  See  Allegiance  Jan.  30,  2003  Transport  Ex  Parte  Letter  at  2-  4;  Letter  from  Thomas  Jones,  Counsel  for  Conversent,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  5,  2003) 

 (Conversent  Feb.  5,  2003  Ex  Parte  Letter)  (supporting  the  transport  impairment  test  Allegiance  proposes  in  its  January  30,  2003  ex  parte  letter). 

 1256  This  requirement  is  intended  to  preclude  counting  competitive  facilities  before  the  facility  is  capable  of 
 operation  on  that  route.  For  example,  the  incumbent  LEC  must  have  fully  provisioned  the  collocation  arrangement  (e.  g.,  provided  space  and  power)  before  the  route  could  be  considered  complete.  In  this  same  regard,  states  should 

 not  review  the  financial  stability  of  alternative  transport  provisioners,  except  to  the  extent  the  carrier  remains  in  operation.  See  infra  para.  415.  States  also  shall  consider  carriers  that  have  self-  deployed  intermodal  transport 
 facilities  that  meet  the  requirements  of  this  trigger. 
 1257  Collocation  may  be  in  a  more  traditional  collocation  space  or  fiber  can  be  terminated  on  a  fiber  distribution 
 frame,  or  the  like,  to  which  any  other  competing  carrier  collocated  in  that  central  office  can  obtain  a  cross-  connect  under  nondiscriminatory  terms.  See  MFN  Riordan  Aff.  at  paras.  6-  13  (describing  Verizons  CATT  arrangement  for 

 terminating  transport  fibers).  Our  impairment  analysis  recognizes  alternatives  outside  the  incumbent  LECs  network  regardless  of  the  authority  under  which  they  came  to  exist. 

 1258  See  Coalition  of  Competitive  Fiber  Providers  Petition  for  Declaratory  Ruling,  CC  Docket  No.  01-  77  (filed  Mar. 
 15,  2001)  (stating  that  competitive  fiber  providers  must  reach  a  central  office  in  order  to  be  able  to  provide  alternative  transport  to  competing  carriers  collocated  there,  but  are  often  denied  access  to  section  251(  c)(  6) 

 collocation  rights);  Coalition  of  Competitive  Fiber  Providers  Reply  at  3-  9;  ALTS  et  al.  Comments  at  69;  Cbeyond  Nov.  22,  2002  Ex  Parte  Letter  at  2. 

 1259  MFN  Riordan  Aff.  at  paras.  6-  13;  see  BOC  UNE  Fact  Report  2002  at  III-  6. 
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 Second,  setting  the  trigger  at  three  competitive  facilities  allows  for  the  possibility  that  some  network  owners  may  not  be  interested  in  providing  wholesale  services,  in  contrast  with  the 
 wholesale  availability  trigger  which  counts  only  actual  wholesalers.  1260  Third,  due  to  the  sunk  nature  of  transmission  facilities,  facilities  will  remain  on  a  route  even  if  a  competitive  transport 
 provider  exits  the  market.  1261  Furthermore,  we  note  that  where,  through  the  application  of  this  trigger,  impairment  for  unbundled  transport  at  a  particular  capacity  is  no  longer  found, 
 substantial  competitive  transport  facilities,  and  perhaps  other  capacities  of  UNE  transport  will  be  available.  1262  Therefore,  if  this  trigger  removes  unbundled  transport  at  a  particular  capacity  level, 
 carriers  will  remain  capable  of  serving  end-  user  customers  in  all  areas.  This  will  provide  certainty  for  new  market  entrants. 

 408.  The  competitive  transport  providers  identified  to  satisfy  this  trigger  on  a  route  must  be  unaffiliated  with  the  incumbent  LEC  and  each  other.  1263  This  requires  that  separate 
 facilities  are  counted  and  avoids  counting  as  a  true  alternative  a  provider  that  uses  the  transport  facilities  of  the  incumbent  LEC  or  another  alternative  provider  to  provide  service  on  that 
 route.  1264  We  find,  however,  that  when  a  company  has  obtained  dark  fiber  from  another  carrier  on  a  long-  term  IRU  basis  and  activated  that  fiber  with  its  own  optronics,  that  facility  should  be 
 counted  as  a  separate,  unaffiliated  facility.  1265  As  described  above,  the  record  suggests  that 
 1260  See,  e.  g.,  KMC  Duke  Aff.  at  paras.  12-  14  (indicating  KMCs  lack  of  interest  in  providing  wholesale  transport 
 services  on  its  network). 
 1261  UNE  Fact  Rebuttal  Report  at  20-  24,  41-  43. 

 1262  Transport  facilities  may  also  be  available  from  the  incumbent  LEC  as  a  special  access  service.  As  noted  in  our 
 earlier  general  discussion,  the  presence  or  absence  of  these  facilities  is  not  a  factor  in  our  impairment  analysis. 
 1263  Affiliated  companies  will  be  counted  together  in  order  to  prevent  gaming.  We  use  the  term  affiliated  and 
 affiliate  as  the  Act  defines  affiliate.  Section  3  of  the  Act  defines  the  term  affiliate  as  a  person  that  (directly  or  indirectly)  owns  or  controls,  is  owned  or  controlled  by,  or  is  under  common  ownership  or  control  with,  another 

 person.  For  purposes  of  this  paragraph,  the  term  own  means  to  own  an  equity  interest  (or  the  equivalent  thereof)  of  more  than  10  percent.  47  U.  S.  C.    153(  1).  As  discussed  above,  we  find,  for  the  limited  purposes  described 
 herein,  that  when  a  company  acquires  dark  fiber,  but  not  lit  fiber,  from  another  carrier  on  a  long-  term  IRU  or  comparable  basis,  that  facility  should  be  counted  as  a  separate,  unaffiliated  facility.  See  ALTS/  CompTel  Oct.  28, 
 2002  Transport  Ex  Parte  Letter  at  3  (stating  that,  for  a  route-  specific  test,  a  facilities-  based  transport  provider  must  offer  transport  capacity  via  fiber  it  either  owns,  or  else  leases  from  a  third  party  via  long  term  lease.). 

 1264  Thus,  the  self-  provisioning  trigger  may  be  satisfied  on  a  route  by  a  combination  of  carriers  facilities  that  were 
 self-  deployed  to  provide  wholesale  transport  to  other  carriers  and  facilities  self-  deployed  by  carriers  to  serve  their  own  needs. 

 1265  ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte  Letter  at  3  (stating  that,  for  a  route-  specific  test,  a  facilities-based 
 transport  provider  must  offer  transport  capacity  via  fiber  it  either  owns,  or  else  leases  from  a  third  party  via  long  term  lease.).  For  purposes  of  this  test,  a  competing  carrier  that  has  obtained  dark  fiber  transport  facilities  from 

 the  incumbent  LEC  on  an  IRU  basis  should  be  considered  to  operate  its  own  unaffiliated  facilities.  We  believe  that  dark  fiber  IRU-  type  contracts  protect  against  short-  term  gaming  of  this  trigger.  Moreover,  we  do  not  want  to 
 foreclose  incumbent  LECs  from  negotiating  dark  fiber  IRU  agreements  with  competitive  LECs.  Because  we  want  to  be  certain  of  the  independent  ownership  of  the  transport  facilities,  we  find  that  consideration  of  transport  facilities 
 transferred  on  an  IRU  basis  is  limited  to  dark  fiber  and  does  not  include  lit  fiber  IRUs. 
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 competing  carriers  are  able  to  engage  and  have  engaged  in  joint  efforts  to  deploy  transport,  so  that  imposing  a  trigger  that  requires  each  facility  on  a  route  to  have  been  separately  deployed 
 would  fail  to  consider  and  may  inhibit  such  cooperative  deployment  efforts.  1266  However,  each  competitive  transport  facility  on  a  route  counted  to  satisfy  the  trigger  must  terminate  in  a 
 collocation  arrangement  in  the  incumbent  LEC  central  office.  This  demonstrates  that  true  alternatives  to  the  incumbent  LECs  network  have  been  deployed  1267  and  is  consistent  with  the 
 Supreme  Courts  interpretation  of  impairment.  1268  There  is  no  requirement  that  the  competing  carriers  identified  to  meet  this  trigger  offer  wholesale  access  to  their  transport  networks. 

 409.  Specific  Application.  As  described  above,  the  record  indicates  that  competing  carriers  generally  cannot  self-  provide  DS1  transport.  Therefore,  we  find  that  the  self-provisioning 
 trigger  described  above  should  not  apply  at  the  DS1  level. 
 410.  State  Analytical  Flexibility.  In  applying  the  self-  provisioning  trigger,  we  find  that  actual  competitive  deployment  is  the  best  indicator  that  requesting  carriers  are  not  impaired  and, 

 therefore,  emphasize  that  this  quantitative  trigger  is  the  primary  vehicle  through  which  non-impairment  findings  will  be  made.  However,  we  recognize  that  this  trigger  identifies  only  the 
 existence  of  actual  competitive  facilities  and  does  not  address  the  potential  ability  of  competitive  LECs  to  deploy  transport  facilities  along  a  particular  route.  1269  Therefore,  when  conducting  its 
 analysis,  a  state  must  consider  and  may  also  find  no  impairment  on  a  particular  route  that  it  finds  is  suitable  for  multiple,  competitive  supply,  but  along  which  this  trigger  is  not  facially 
 satisfied.  States  must  expressly  base  any  such  decision  on  the  following  economic  characteristics:  local  engineering  costs  of  building  and  utilizing  transmission  facilities;  the  cost 
 of  underground  or  aerial  laying  of  fiber;  the  cost  of  equipment  needed  for  transmission;  installation  and  other  necessary  costs  involved  in  setting  up  service;  local  topography  such  as 
 hills  and  rivers;  availability  of  reasonable  access  to  rights-  of-  way;  the  availability  or  feasibility  of  alternative  transmission  technologies  with  similar  quality  and  reliability;  customer  density  or 

 1266  AT&  T  Fea/  Giovannucci  Reply  Decl.  at  para.  28  (describing  coordinated  deployment  projects);  see  Letter  from 
 Stephen  W.  Crawford,  General  Counsel,  El  Paso  Global  Networks,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  6  (filed  Feb.  5,  2003)  (El  Paso  Feb.  5,  2003  Transport  Ex  Parte  Letter) 

 (asserting  that  only  separately  deployed  facilities  should  be  considered);  Letter  from  Jonathan  D.  Lee,  Vice  President    Regulatory  Affairs,  CompTel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98, 
 98-  147  at  12-  13  (filed  Feb.  6,  2003)  (CompTel  Feb.  6,  2003  Dark  Fiber  Ex  Parte  Letter)  (asserting  that  only  separately  deployed  facilities  should  be  considered). 

 1267  As  the  Commission  explained  in  the  Pricing  Flexibility  Order,  the  lease  of  facilities  from  the  incumbent  does 
 not  indicate  the  type  of  lasting  competitive  infrastructure  that  can  provide  competition.  See  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14270-  71,  para.  88. 

 1268  Iowa  Utils.  Bd.,  525  U.  S.  at  389  (discussing  self-  provision  and  looking  for  the  availability  of  elements 
 outside  the  incumbents  network)  (emphasis  added). 
 1269  For  example,  incumbent  LECs  claim  that  competing  carriers  have  deployed  transport  networks  that  entirely 
 bypass  parts  of  the  incumbent  LECs  networks.  See  BOC  UNE  Fact  Report  2002  at  III-  4;  WorldCom  v.  FCC,  238  F.  3d.  440,  462  (D.  C.  Cir.  2001)  (quoting  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14275-  76,  para.  95). 
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 addressable  market;  1270  and  existing  facilities-  based  competition.  We  believe  that  it  is  important  to  delegate  this  limited  additional  analysis  because  states  are  best  positioned  to  analyze  the 
 characteristics  of  local  markets  where  national  aggregation  does  not  appear  possible.  1271 
 411.  In  other  instances,  by  contrast,  states  may  identify  impairment  on  specific  routes  that  facially  satisfy  the  self-  provisioning  trigger,  but  where  some  significant  barrier  to  entry 

 exists  such  that  deploying  additional  facilities  is  entirely  foreclosed.  For  example,  a  state  might  find  impairment,  despite  the  facial  satisfaction  of  this  trigger,  if  a  municipality  has  imposed  a 
 long-  term  moratorium  on  obtaining  the  necessary  rights-  of-  way  such  that  a  competing  carrier  can  not  deploy  new  facilities.  In  these  circumstances,  a  state  commission  may  petition  the 
 Commission  for  a  waiver  of  application  of  the  trigger  until  the  impairment  to  deployment  identified  by  the  state  no  longer  exists.  Nevertheless,  as  explained  in  the  following  Subpart,  a 
 state  must  make  a  finding  of  non-  impairment  under  the  wholesale  availability  trigger  if  two  or  more  carriers  make  transport  available  at  wholesale,  pursuant  to  the  trigger. 

 (ii)  Competitive  Wholesale  Facilities  Trigger 
 412.  Because  the  record  demonstrates  that  competing  carriers  can  obtain  transport  facilities  from  alternative  providers  offering  wholesale  dark  fiber,  DS3,  and  DS1  capacity 

 transport  along  certain  routes,  carriers  are  not  impaired  without  access  to  unbundled  transport  along  those  routes  at  the  capacities  made  available.  However,  the  record  before  the  Commission 
 is  not  granular  enough  to  determine  along  which  routes  multiple  alternative  providers  are  able  and  willing  to  offer  service  to  other  competing  carriers  on  a  point-  to-  point  basis.  Therefore,  we 
 delegate  to  state  commissions  the  fact-  finding  role  of  identifying  on  which  routes  requesting  carriers  are  not  impaired  without  unbundled  transport  at  a  specific  capacity  when  there  is 
 evidence  that  two  or  more  competing  carriers,  not  affiliated  with  each  other  or  the  incumbent  LEC,  offer  wholesale  transport  service  completing  that  route.  1272  This  test  ensures  that  transport 
 can  readily  be  obtained  from  a  firm  using  facilities  that  are  not  provided  by  the  incumbent  LEC. 
 413.  We  choose  two  competitive  wholesale  providers  as  the  appropriate  trigger  because  it  ensures  the  suitability  of  multiple,  competitive  supply  and  will  provide  an  incentive 

 for  new  transport  facilities  deployment  while  allowing  competitive  pressures  from  the  wholesalers  to  control  pricing  and  terms.  1273  A  competing  carrier  that  is  considering  whether  to 

 1270  The  record  indicates  that  competitive  transport  facilities  are  most  likely  to  connect  central  offices  with  large 
 addressable  markets.  See  BOC  UNE  Fact  Report  2002  at  III-  3,  Table  3. 
 1271  See,  e.  g.,  Michigan  Commission  Comments  at  4-  5;  Massachusetts  Department  Comments  at  3;  Kansas 
 Commission  Comments  at  4;  Ohio  Commission  Comments  at  10;  Oklahoma  Commission  Comments  at  4. 
 1272  Although  wholesale  providers  may  lease  entire  transport  ring  offerings,  for  purposes  of  this  trigger,  a  wholesale 
 offering  must  be  made  available  on  a  route-  specific  basis.  See  El  Paso  Feb.  5,  2003  Dark  Fiber  Ex  Parte  Letter  at  5-6. 

 1273  USTA,  290  F.  3d  at  427.  Although  Allegiance  initially  advocated  the  use  of  the  Department  of  Justice  market 
 concentration  guidelines,  Allegiance  asserts  that  two  is  an  appropriate  number  of  competitive  wholesale  providers  on  a  route  to  identify  non-  impairment.  Allegiance  Jan.  30,  2003  Transport  Ex  Parte  Letter  at  1-  4.  We  also  find, 

 given  the  way  we  have  developed  our  triggers  for  transport,  that  setting  the  number  of  wholesale  providers  at  three  (continued.) 
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 deploy  transport  facilities  for  the  purpose  of  providing  a  wholesale  offering  is  likely  to  be  encouraged  to  deploy  if  its  deployment  will  eliminate  transport  priced  at  TELRIC,  which  is  often 
 lower  than  incumbent  LEC  tariffed  special  access  rates.  Because  we  want  to  provide  an  incentive  for  competing  carriers  to  deploy  facilities,  we  avoid  setting  the  required  number  of 
 wholesalers  as  high  as  competing  carriers  suggest.  1274  Finally,  we  find  that  two  wholesale  providers,  in  addition  to  the  incumbent  LEC,  should  provide  competitive  pressures  on  pricing 
 and  terms  and  avoid  umbrella  pricing  while  providing  incentives  to  deploy.  1275 
 414.  The  competitive  transport  providers  identified  to  satisfy  this  trigger  must  be  unaffiliated  with  the  incumbent  LEC  and  each  other.  1276  This  requires  that  separate  facilities  are 

 counted  and  avoids  counting  as  a  true  alternative  a  provider  that  uses  the  lit  transport  facilities  of  the  incumbent  LEC  or  another  alternative  provider  to  provide  service  on  that  route.  We  find, 
 however,  that  when  a  wholesale  transport  provider  has  obtained  dark  fiber  from  another  carrier,  including  unbundled  dark  fiber  from  the  incumbent  LEC,  and  activates  and  operates  that  fiber 
 with  its  own  optronic  equipment,  that  facility  should  be  counted  as  a  separate,  unaffiliated  facility.  1277  Additionally,  the  competitive  transport  providers  must  be  operationally  ready  and 
 (Continued  from  previous  page) 
 or  more  would  conflict  with  our  determination  that  three  self-  provisioned  facilities  on  a  route  indicates  a  lack  of  impairment  on  that  route.  See  supra  para.  407. 

 1274  See,  e.  g.,  WorldCom  Reply  at  127;  ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter  at  2;  El  Paso  Feb.  5, 
 2003  Transport  Ex  Parte  Letter  at  2-  4.  If  we  established  a  higher  number  than  two  as  the  threshold,  such  as  four,  to  ensure  the  market  is  fully  competitive,  the  first  potential  entrant  might  be  deterred  from  deploying  facilities  by  the 

 prospect  of  facing  competition  from  providers  using  unbundled  transport  for  a  long  time    until  three  other  competitors  deployed  facilities.  With  a  threshold  of  two,  the  first  entrant  to  deploy  and  wholesale  facilities  need 
 only  wait  until  one  other  entrant  deploys  and  wholesales  facilities  before  a  finding  of  no  impairment  is  warranted  and  they  no  longer  face  competition  with  transport  priced  at  TELRIC. 

 1275  Umbrella  pricing  occurs  when  a  smaller  market  entrant  is  able  to  price  its  product  or  service  immediately  below 
 the  price  of  the  larger  market  leader,  but  does  not  have  sufficient  market  presence  to  affect  the  market  leaders  price.  See  CARLTON  &  PERLOFF,  MODERN  INDUSTRIAL  ORGANIZATION  111  (3d  ed.)  (stating,  [  i]  t  is  often  asserted  that  a 

 dominant  firm  provides  a  pricing  umbrella  for  smaller  firms.  As  long  as  competing  firms  price  at  or  below  the  level  of  the  dominant  firm,  they  will  be  able  to  find  buyers.).  We  find  that  the  risk  of  umbrella  pricing  is  high  when  only 
 one  wholesale  competitor  enters  the  market  in  competition  with  the  incumbent  LEC,  but  is  substantially  reduced  when  two  or  more  competitors  provide  wholesale  transport  in  competition  with  the  market  leader,  the  incumbent 
 LEC.  See  also  Allegiance  Jan.  30,  2003  Transport  Ex  Parte  Letter  at  4  (stating,  the  choice  of  two  non-  ILEC  wholesalers  .  .  .  avoids  the  extreme  inefficiencies  created  by  a  duopoly  market  structure.).  We  therefore  recognize 
 the  balance  between  encouraging  facilities  deployment  and  ensuring  that  competitors  have  access  to  facilities  on  a  competitive  basis. 

 1276  We  use  the  term  affiliated  and  affiliate  as  the  Act  defines  affiliate.  Section  3  of  the  Act  defines  the  term 
 affiliate  as  a  person  that  (directly  or  indirectly)  owns  or  controls,  is  owned  or  controlled  by,  or  is  under  common  ownership  or  control  with,  another  person.  For  purposes  of  this  paragraph,  the  term  own  means  to  own  an  equity 

 interest  (or  the  equivalent  thereof)  of  more  than  10  percent.  47  U.  S.  C.    153(  1). 
 1277  Competing  carriers  that  offer  wholesale  DS1  and  DS3  transport  using  unbundled  dark  fiber  will  be  counted  for 
 purposes  of  this  test  if  they  activate  and  operate  the  unbundled  dark  fiber  with  their  own  electronic  equipment.  However,  the  availability  of  unbundled  dark  fiber  will  not  affect  the  application  of  this  wholesale  availability  trigger 

 as  applied  to  dark  fiber.  Thus,  a  provider  of  wholesale  dark  fiber  must  own  the  fiber  it  wholesales.  See  Allegiance  Jan.  30,  2003  Transport  Ex  Parte  Letter  at  3  (stating  that  the  Commission  should  consider  as  viable  wholesale 
 (continued.) 
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 willing  to  provide  the  particular  capacity  transport  on  a  wholesale  basis  along  the  specific  route.  1278  This  safeguards  against  counting  alternative  fiber  providers  that  may  offer  service,  but 
 do  not  yet  have  their  facilities  terminated  or  collocated  in  the  incumbent  LEC  central  office,  or  are  otherwise  unable  immediately  to  provision  service  along  the  route.  1279  Moreover,  the  quality 
 and  terms  of  the  competing  carriers  wholesale  offerings  need  not  include  the  full  panoply  of  services  offered  by  incumbent  LECs.  1280  Finally,  for  purposes  of  this  test,  the  competitive 
 transport  provider  must  make  the  specific  capacity  transport  services  widely  available.  These  provisions  avoid  counting  alternative  transport  facilities  owned  by  competing  carriers  not  willing 
 to  offer  capacity  on  their  network  on  a  wholesale  basis.  1281 
 415.  We  find  that  states  should  not  evaluate  any  other  factors,  such  as  the  financial  stability  or  well-  being  of  the  competitive  transport  providers.  1282  Bankrupt  competing  carriers  in 

 Chapter  11  are  often  still  providing  service  and,  regardless  of  their  financial  status,  the  physical  assets  remain  and  may  be  bought  by  someone  else  and  remain  in  service.  1283  Requiring  states  to 
 determine  the  financial  ability  of  competitive  wholesale  providers  to  provide  service  in  the  future  could  hamper  economic  recovery  efforts  of  companies  in  financial  distress.  The  key  principle  is 

 (Continued  from  previous  page) 
 alternatives  competing  carriers  that  obtain  dark  fiber  on  a  long-  term  basis  and  activate  that  fiber  with  their  own  electronics);  ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte  Letter  at  3  (stating  that,  for  a  route-  specific  test,  a 

 facilities-  based  transport  provider  must  offer  transport  capacity  via  fiber  it  either  owns,  or  else  leases  from  a  third  party  via  long  term  lease.). 

 1278  See  ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter,  Attach.  at  3;  Cbeyond  Nov.  22,  2002  Ex  Parte 
 Letter  at  2  (asserting  that  the  Commission  should  ensure  that  competitive  fiber  providers  are  able  to  extend  facilities  into  incumbent  central  offices  and  establish  a  presence  in  that  central  office  that  will  permit  ready  and  economical 

 access  to  competing  carriers).  States  also  shall  consider  carriers  that  utilize  intermodal  transport  facilities  to  provide  wholesale  transport  capacity  to  the  extent  that  they  satisfy  the  requirements  of  this  trigger. 

 1279  We  believe  that  a  connection  such  as  a  cross-  connect  between  collocations,  or  the  ability  to  connect  to  a 
 competitive  fiber  termination  panel,  similar  to  the  CATT  tariffed  offering  by  Verizon,  qualifies  as  ready  to  provision,  so  long  as  other  carriers  can  obtain  such  a  connection  in  a  reasonable  and  nondiscriminatory  manner.  See 

 ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter,  Attach.  at  3  (advocating  that  economical  and  reliable  access  to  competitive  transport  facilities  should  be  a  prerequisite  of  a  route-  by-  route  analysis);  MFN  Riordan  Aff.  at 
 paras.  6-  11  (describing  Verizons  CATT  fiber  termination  offering).  This  ensures  that  the  wholesale  trigger  counts  only  wholesale  offerings  that  are  readily  available.  The  Commissions  collocation  rules  provide  clarity  on 
 nondiscriminatory  principles  including  the  right  to  interconnect  with  other  collocated  competing  carriers  by  cross-connection.  See  generally  Collocation  Remand  Order,  16  FCC  Rcd  15435. 

 1280  We  expect  that  providers  of  alternative  transport  will  have  an  incentive  to  offer  competitive  terms  with  those  of 
 the  incumbent  LEC. 
 1281  We  note  that  carriers  with  transport  facilities  on  a  route  not  willing  to  provide  wholesale  services  will  be 
 counted  in  the  self-  provisioning  trigger  described  above. 
 1282  See  ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter,  Attach.  at  3. 

 1283  UNE  Fact  Rebuttal  Report  at  20-  24,  41-  43. 
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 that  they  are  currently  offering  and  able  to  provide  service.  1284  Another  factor  that  states  should  not  consider  is  whether  the  incumbent  LEC  allows  multi-  vendor  end-  to-  end  testing  of  circuits.  1285 
 Our  trigger  looks  at  the  entire  requested  route  and  so  avoids  the  pitfalls  of  multi-  span  patchwork  problems.  Finally,  we  do  not  expect  states  to  consider  the  economic  feasibility  of  competitive 
 offerings.  1286  Again,  this  type  of  review  would  engender  great  uncertainty  and  variability  from  state  to  state.  We  find  that  economic  forces  will  act  to  constrain  uneconomic  wholesale 
 offerings.  Moreover,  an  offering  that  may  not  be  feasible  for  one  competing  carrier  may  be  feasible  for  another. 

 416.  Specific  Application  to  Different  Capacities.  Unlike  the  wholesale  availability  tests  for  lit  DS1  and  DS3  transport,  unbundled  dark  fiber  from  the  incumbent  LEC  is  not  to  be 
 considered  a  wholesale  alternative  for  dark  fiber.  States  may  ensure  that  wholesalers  of  dark  fiber  have  sufficient  quantities  of  dark  fiber  available  to  satisfy  current  demand.  1287 

 (iii)  State  Action  Under  Both  Triggers 
 417.  We  expect  states  to  complete  their  initial  reviews  applying  the  triggers  and  other  analysis  discussed  above  within  nine  months  from  the  effective  date  of  this  Order.  Unbundled 

 DS1,  DS3,  and  dark  fiber  transport  will  remain  available  in  all  locations  until  the  state  commission  determines  that  unbundled  transport  at  particular  capacities  in  specific  locations  is 
 no  longer  required.  States  that  conduct  this  review  need  only  address  routes  for  which  there  is  relevant  evidence  in  the  proceeding  that  the  route  satisfies  one  of  the  triggers  or  the  potential 
 deployment  analysis  specified  in  this  Part.  1288  To  the  extent  that  a  state  commission  does  not  complete  its  proceedings  in  this  nine  month  period,  1289  aggrieved  parties  may  file  a  petition  with 
 this  Commission  demonstrating  a  states  failure  to  act  pursuant  to  the  procedures  we  outline  today.  1290  We  expect  that  states  will  require  an  appropriate  period  for  competitive  LECs  to 
 transition  from  any  unbundled  transport  that  the  state  finds  should  no  longer  be  unbundled. 

 1284  For  instance,  states  should  review  whether  the  competitive  transport  provider  has  filed  a  notice  to  terminate 
 service  along  the  route  in  question. 
 1285  See  ALTS/  CompTel  Oct.  8,  2002  Transport  Ex  Parte  Letter,  Attach.  at  3. 

 1286  ALTS/  CompTel  Oct.  28,  2002  Transport  Ex  Parte  Letter  at  1-  2  (asserting  that  alternative  transport  must  be 
 economically  feasible). 
 1287  See  Allegiance  Jan.  30,  2003  Transport  Ex  Parte  Letter  at  3;  Conversent  Feb.  5,  2003  Ex  Parte  Letter  at  1. 

 1288  See  supra  para.  410. 
 1289  By  complete,  we  mean  that  a  state  commission,  upon  receiving  sufficient  evidence,  has  an  affirmative 
 obligation  to  review  the  relevant  evidence  associated  with  any  route  submitted  by  an  interested  party,  and  to  apply  the  trigger  and  any  other  analysis  specified  in  this  Part  to  such  evidence. 

 1290  As  discussed  above,  if  a  state  fails  to  act,  we  set  forth  procedures  for  the  Commission  to  step  into  the  role  of  the 
 state.  See  supra  Part  V.  E  (discussing  the  role  of  the  states). 
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 420.  We  organize  our  analysis  of  local  circuit  switching  based  on  the  customer  market  served  and  the  corresponding  loop  capacity  levels  used  to  serve  each  customer  market.  These 
 categories  are  reliable  indicators  of  the  ability  of  a  requesting  carrier  to  utilize  self-  deployed  switches.  Our  analysis  focuses  on,  among  other  things,  the  different  processes  for  transferring 
 loops  from  incumbent  LEC  switches  to  competing  carriers  switches  to  serve  enterprise  customers  and  mass  market  customers.  1294 

 421.  In  conducting  our  impairment  analyses,  we  consider  marketplace  evidence  of  competitive  LEC  deployment  of  switches  to  provide  competing  local  services  to  enterprise  or 
 mass  market  customers.  Our  impairment  analysis  with  respect  to  DS1  enterprise  customers  (i.  e.,  customers  that  are  or  could  be  served  by  competitors  using  DS1  capacity  and  above  facilities) 
 recognizes  the  significant  existing  deployment  of  competitive  LEC  switches  to  serve  such  customers.  1295  The  evidence  in  our  record  establishes  that,  in  most  areas,  competitive  LECs  can 
 overcome  barriers  to  serving  enterprise  customers  economically  using  their  own  switching  facilities  in  combination  with  unbundled  loops  (or  loop  facilities).  The  facilities  used  to  provide 
 DS1  capacity  or  above  services  to  enterprise  customers  typically  are  not  pre-  wired  to  incumbent  LEC  switches,  allowing  competing  carriers  to  avoid  the  costs  and  service  disruptions  associated 
 with  hot  cuts    the  manual  process  by  which  customer  lines  are  migrated  to  competitor  switches.  Enterprise  customers  also  generally  offer  increased  revenue  opportunities  and  are 
 more  willing  to  enter  long-  term  contracts,  allowing  competitive  LECs  a  greater  ability  to  recover  the  nonrecurring  costs  associated  with  providing  service  using  their  own  switches.  Accordingly, 
 we  make  a  national  finding  that  competitors  are  not  impaired  without  unbundled  access  to  incumbent  LEC  local  circuit  switching  when  serving  DS1  enterprise  customers.  1296  We 
 recognize,  however,  that  special  circumstances  may  create  impairment  without  access  to 

 1294  See  infra  Parts  VI.  D.  5-  6.  As  discussed  below,  we  refer  to  this  process  of  transferring,  or  cutting  over,  the  loop 
 as  a  hot  cut.  Specifically,  a  hot  cut  refers  to  a  process  requiring  incumbent  LEC  technicians  to  disconnect  manually  the  customers  loop,  which  was  hardwired  to  the  incumbent  LEC  switch,  and  physically  re-  wire  it  to  the 

 competitive  LEC  switch,  while  simultaneously  reassigning  (i.  e.,  porting)  the  customers  original  telephone  number  from  the  incumbent  LEC  switch  to  the  competitive  LEC  switch.  See  generally  Letter  from  Ron  Gavillet, 
 BiznessOnline.  Com,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  7  (filed  Feb.  14,  2003)  (BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter). 

 1295  Specifically,  the  record  reflects  that  competing  carriers  have  deployed  as  much  as  1,300  local  circuit  switches 
 and  are  primarily  utilizing  these  switches  to  serve  enterprise  customers.  AT&  T  Comments  at  208-  09;  BOC  UNE  Fact  Report  2002  at  II-  1;  see  also  Letter  from  Michael  A.  Peterson,  Executive  Vice  President    Chief  Operating 

 Officer  and  Chief  Financial  Officer,  ATX,  to  Hon.  Kevin  Martin,  Commissioner,  FCC,  CC  Docket  No.  01-  338  at  1-  2,  4  (filed  Jan.  22,  2003)  (ATX  Jan.  22,  2003  Ex  Parte  Letter)  (stating  that  ATX  has  learned  (as  have  most  other 
 CLECs  that  ATX  is  familiar  with)  that  local  switching  facilities  can  be  used  to  compete  for  larger  customers).  ATX  states  that,  to  its  knowledge,  virtually  all  CLEC  switches  are  today  focused  on  serving  DS1  customers.  Id. 
 at  3. 
 1296  We  define  DS1  enterprise  customers  for  our  impairment  analysis  as  customers  for  which  it  is  economically 
 feasible  for  a  competing  carrier  to  provide  voice  service  with  its  own  switch  using  a  DS1  or  above  loop.  We  find  that  this  includes  all  customers  that  are  served  by  the  competing  carrier  using  a  DS1  or  above  loop.  After  the  state 

 commission  conducts  a  multiline  DS0  cut-  off  inquiry,  it  includes  customers  who  could  be  served  by  the  competing  carrier  using  a  DS1  or  above  loop.  See  infra  para.  497. 
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 unbundled  local  circuit  switching  to  serve  enterprise  customers  in  particular  markets.  We  thus  allow  states  90  days  to  petition  the  Commission  to  rebut  the  national  finding  in  individual 
 markets  based  on  specific  operational  evidence  regarding  loop,  collocation,  and  transport  provisioning  and  specific  economic  evidence  including  the  actual  deployment  of  competitive 
 switches  and  competitors  costs  in  serving  enterprise  customers.  1297 
 422.  In  contrast,  the  record  indicates  that  there  has  been  only  minimal  deployment  of  competitive  LEC-  owned  switches  to  serve  mass  market  customers.  The  characteristics  of  the 

 mass  market  give  rise  to  significant  barriers  to  competitive  LECs  use  of  self-  provisioned  switching  to  serve  mass  market  customers.  Inherent  difficulties  arise  from  the  incumbent  LEC 
 hot  cut  process  for  transferring  DS0  loops,  typically  used  to  serve  mass  market  customers,  to  competing  carriers  switches.  These  hurdles  include  increased  costs  due  to  non-  recurring 
 charges  and  high  customer  churn  rates,  service  disruptions,  and  incumbent  LECs  inability  to  handle  a  sufficient  volume  of  hot  cuts.  Accordingly,  based  on  those  barriers,  we  make  a  national 
 finding  that  competitive  carriers  providing  service  to  mass  market  customers  are  impaired  without  unbundled  access  to  local  circuit  switching. 

 423.  While  our  analysis  could  end  with  this  conclusion,  we  nevertheless  put  in  place  concrete  steps  to  mitigate  these  causes  of  impairment.  Specifically,  we  ask  the  state 
 commissions,  within  nine  months  of  the  effective  date  of  this  Order,  to  approve  and  implement  a  batch  cut  migration  process    a  seamless,  low-  cost  process  for  transferring  large  volumes  of 
 mass  market  customers    or  to  issue  detailed  findings  that  a  batch  cut  process  is  unnecessary  in  a  particular  market  because  incumbent  LEC  hot  cut  processes  do  not  give  rise  to  impairment  in 
 that  market.  We  believe  that  the  institution  of  such  processes  could  significantly  reduce  or  eliminate  the  causes  of  impairment  we  identify,  thereby  enabling  significantly  greater  facilities-based 
 competition  in  mass  market  switching. 
 424.  While  the  record  establishes  that,  on  a  national  level,  requesting  carriers  are  impaired  without  access  to  unbundled  local  circuit  switching  when  serving  mass  market 

 customers,  we  institute  a  more  granular  market-  by-  market  analysis  of  impairment  on  a  going  forward  basis.  Specifically,  we  provide  enumerated  impairment  triggers  and  criteria  for  the 
 states  to  apply  in  individual  markets.  In  conducting  such  an  analysis,  the  states  shall  apply  specific  triggers  to  evaluate  impairment  in  the  specific  market  and,  if  the  triggers  are  not 
 satisfied,  examine  evidence  of  the  potential  for  switch  self-  provisioning  that  takes  into  account  current  switch  deployment,  revenues,  costs,  processes,  network  architecture,  and  other  factors  in 
 the  market  under  consideration.  1298  If,  after  applying  the  triggers  and  examining  evidence  of  switch  deployment  and  other  factors,  a  state  commission  has  made  a  finding  of  impairment  in 

 1297  Most  state  commenters  in  this  proceeding  requested  such  a  role.  See,  e.  g.,  NARUC  Reply  at  1-  6. 
 1298  As  discussed  below,  a  state  must  also  examine  factors  including  incumbent  LEC  performance  in  fulfilling 
 unbundling,  collocation,  and  other  statutory  obligations,  difficulties  in  performing  customer  migrations  between  competitive  LECs,  difficulties  in  performing  collocation  cross-  connects  between  competing  carriers,  and  the 

 significant  cost  disadvantages  competitive  carriers  face  in  obtaining  access  to  the  loop  and  backhauling  the  circuit  to  their  own  switches.  See  infra  paras.  456,  477-  478. 
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 any  particular  market,  it  must  consider  whether  this  impairment  could  be  addressed  by  a  narrower  rule  making  unbundled  switching  temporarily  available  for  a  minimum  of  90  days  for 
 customer  acquisition  purposes,  rather  than  making  unbundled  switching  available  for  an  indefinite  period  of  time.  1299  Finally,  we  ask  the  state  commissions  to  conduct  periodic  reviews 
 of  impairment  for  unbundled  local  circuit  switching. 
 425.  We  have  asked  the  state  commissions  to  take  on  these  roles,  because,  as  explained  below,  they  require  analysis  of  geographic  and  market  specific  factors.  1300  For  example,  hot  cut 

 processes,  as  well  as  recurring  and  non-  recurring  charges  for  critical  UNE  inputs  such  as  collocation,  loops,  and  transport,  often  vary  substantially  between  states.  1301  Within  a  state  UNE 
 loop  rates  can  vary  tremendously  among  zones.  1302  Revenue  potential  also  varies  dramatically,  as  retail  rates  can  vary  between  states,  by  the  type  of  customer,  and  within  the  state.  1303  State 

 1299  We  refer  to  this  as  rolling  use  because  a  competitive  LEC  gets  access  to  unbundled  local  circuit  switching  for 
 each  customer  acquisition  for  some  defined  period  of  time,  and,  at  the  end  of  this  period,  it  must  upgrade  that  customer  to  its  own  facilities. 

 1300  Chairman  Powell  maintains  that  our  switching  analysis  is  flawed  because,  he  claims,  the  economic  criteria  we 
 set  forth  might  be  applied  by  the  states  in  divergent  and  subjective  ways.  Chairman  Powell  Statement  at  8;  see  also  id.  at  8  n.  20  (citing  the  subjective,  multi-  factor  impairment  [switching]  analysis).  This  criticism  is  flatly 

 inconsistent  with  the  high-  capacity  loop  and  transport  sections,  which  Chairman  Powell  proposed  and  the  Commission  unanimously  approved.  Just  as  in  those  sections,  states  must  first  employ  triggers  that  examine  actual 
 deployment;  only  if  the  triggers  are  not  met  must  the  states  apply  criteria  to  assess  whether  entry  is  uneconomic.  The  criteria  we  provide  for  switching  are  no  more  subjective  or  susceptible  to  divergent  application  than  are  the 
 criteria  we  provide  for  high-  cap  loops  and  transport.  With  respect  to  loop  facilities,  for  example,  the  state  must  examine  a  range  of  factors  to  determine  whether  competitive  LECs  could  economically  deploy  loop  transmission 
 facilities  at  that  location  at  the  relevant  capacity  level.  See  supra  para.  335.  These  factors  include  evidence  of  alternative  loop  deployment  at  that  location;  local  engineering  costs  of  building  and  utilizing  transmission  facilities; 
 the  cost  of  underground  or  aerial  laying  of  fiber  or  copper;  the  cost  of  equipment  needed  for  transmission;  installation  and  other  necessary  costs  involved  in  setting  service;  local  topography  such  as  hills  and  rivers; 
 availability  of  reasonable  access  to  rights-  of-  way;  building  access  restrictions/  costs;  [and]  availability  of  similar  quality/  reliability  alternative  transmission  technologies  at  that  particular  location.  Id.;  see  also  id.  at  para  410 
 (listing  similar  criteria  for  transport).  The  Commission  provides  no  guidance  on  how  these  various  factors  are  to  be  assessed  and  weighed.  In  contrast,  we  provide  considerable  guidance  on  how  to  assess  and  weigh  the  factors  for 
 switching.  For  example,  we  make  clear  that  evidence  of  enterprise  switch  deployment  must  be  given  substantial  weight  and  the  existence  of  a  single  competitively  deployed  mass  market  switch  must  be  given  particularly 
 substantial  weight.  Id.  at  para.  517. 
 1301  According  to  one  source,  recurring  loop  rates  can  vary  from  $2.59  (Illinois)  to  $66.31  (Nevada),  with  a  national 
 average  of  $12.98.  Billy  Jack  Gregg,  A  Survey  of  Unbundled  Network  Element  Prices  in  the  United  States  (Updated  Jan.  1,  2003),  <http://  www.  nrri.  ohio-  state.  edu/  documents/  uneprices103.  pdf>  and  <http://  www.  nrri.  ohio-state. 

 edu/  documents/  unepricesmatrix103_  001.  pdf>. 
 1302  Many  states  have  defined  at  least  three  geographic  zones  for  the  pricing  of  unbundled  loops  pursuant  to  section 
 252(  d)(  1)  of  the  Act.  47  C.  F.  R.    51.507(  f)  (  State  commissions  shall  establish  different  rates  for  elements  in  at  least  three  defined  geographic  areas  within  the  state  to  reflect  geographic  cost  differences.). 

 1303  For  a  sample  of  95  urban  areas,  residential  rates  for  flat-  rate  service  ranged  from  $14.68  (Phillipsburg,  New 
 Jersey)  to  $30.87  (West  Memphis,  Arkansas),  including  surcharges  and  taxes.  Rates  also  sometimes  vary  substantially  within  a  state,  such  as  in  California,  where  the  residential  rate  is  $16.39  in  Salinas  and  $25.18  in  Long 

 Beach.  FCC  Reference  Book  of  Rates,  Price  Indices,  and  Household  Expenditures  for  Telephone  Service,  July  2002  (continued.) 
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 commissions,  which  have  traditionally  exercised  jurisdiction  over  intrastate  telecommunications,  have  significantly  closer  proximity  and  more  intimate  knowledge  of  this  information  than  does 
 this  Commission.  They  have  greater  knowledge,  for  instance,  of  how  their  intrastate  retail  rates  are  set,  including  where  the  implicit  subsidies  lie.  1304  They  also  have  experience  in  making  the 
 kind  of  market-  specific  determinations  we  seek,  from  conducting  interconnection  arbitrations,  making  intrastate  universal  service  decisions,  and  retail  ratemaking.  1305  Accordingly,  we  believe 
 that  by  setting  specifically  enumerated  national  triggers  and  criteria  for  impairment,  which  we  explain  below,  to  be  applied  by  the  state  commissions,  we  can  best  provide  the  kind  of  granular 
 impairment  analysis  called  for  by  the  statute.  1306 

 (Continued  from  previous  page) 
 (FCC  Reference  Book),  at  Table  1.3.  According  to  data  in  a  separate  report,  rural  rates  can  be  higher  (Georgia),  lower  (Connecticut),  or  the  same  (Massachusetts)  as  urban  rates.  TELECOMMUNICATIONS:  FEDERAL  AND  STATE 

 UNIVERSAL  SERVICE  PROGRAMS  AND  CHALLENGES  TO  FUNDING,  U.  S.  General  Accounting  Office  Report,  GAO-  02-  187,  Feb.  2002  (GAO  Report  on  Universal  Service),  at  Appendix  IV.  The  report  notes  that  states  used  different 
 methods  of  setting  rates,  including  cost-  based  prices  (such  that  rural  rates  are  higher),  value-  of-  service  pricing  (such  that  rural  rates  tend  to  be  lower),  and  geographic  rate  averaging  (such  that  rates  are  constant).  A  nationwide 
 examination  of  rates  showed  that  there  is  no  consistent  relationship  between  residential  rates  and  the  cost  of  providing  service.  Id.  at  14-  15.  Business  customers  generally  pay  higher  rates  than  residential  customers.  Based 
 on  the  survey  of  95  urban  areas,  on  average  business  rates  are  double  residential  rates,  at  $44.80  for  a  business  purchasing  a  single  line  versus  $21.84  for  a  residential  line.  FCC  Reference  Book,  at  Tables  1.1  and  1.8;  GAO 
 Report  on  Universal  Service  at  16  (  For  every  type  of  place,  average  single-  line  business  rates  are  approximately  twice  as  high  as  residential  rates.). 

 1304  The  existence  of  such  subsidies  and  their  impact  on  revenue  opportunities  is  taken  into  account  in  our 
 impairment  analysis.  See  supra  Part  V.  B.  3. 
 1305  See  infra  para.  496. 

 1306  See  USTA,  290  F.  3d  at  422  (directing  the  Commission  to  approach  the  section  251(  d)(  2)  impairment  analysis 
 by  considering  market-  specific  variations  in  competitive  impairment.).  The  BOCs  and  Chairman  Powell  have  previously  advocated  giving  the  states  precisely  the  kind  of  role  we  give  the  states  in  this  item.  Chairman  Powell 

 previously  argued  that  this  Commission  should  consider  whether  regulators  with  closer  proximity  and  more  intimate  knowledge  of  the  availability  of  non-  incumbent  elements  (e.  g.,  state  commissioners)  should  take  a  leading 
 role  in  that  [impairment]  analysis.  Statement  of  Commissioner  Michael  K.  Powell,  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.  96-  98,  14  FCC  Rcd  8694,  8721 
 (1999);  see  also,  e.  g.,  id.  (  I  am  somewhat  skeptical  that  the  Commission  can  give  meaningful  effect  to  the  requirement  that  we  assess  the  availability  of  non-  incumbent  elements  and  related  geographic  variation  for  all  areas 
 and  markets  in  the  nation.  Although  I  think  the  Commission  could  potentially  conduct  such  a  sweeping  assessment,  at  least  in  theory,  that  project  would  likely  necessitate  an  exhaustive,  fact-  intensive  inquiry  to  which  I  fear  the 
 Commission  would  devote  inadequate  time  and  resources.);  Statement  of  Commissioner  Michael  K.  Powell,  Dissenting  in  Part,  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996, 
 Third  Report  and  Order  and  Fourth  Further  Notice  of  Proposed  Rulemaking,  16  FCC  Rcd  1732,  1733  n.  6  (1999)  (  A  preferable  option  would  have  been  to  provide  some  time-  limited  ability  for  state  commissions  that  perceive 
 their  markets  are  different  to  remove  elements  from  the  national  list  .  .  .).  For  their  part,  the  BOCs  have  consistently  advocated  for  a  significant  state  role  in  analyzing  impairment.  In  the  UNE  Remand  proceeding,  for 
 example,  U  S  WEST  argued  that  [  a]  s  Commissioner  Powell  has  observed,  state  commissions  have  closer  proximity  and  more  intimate  knowledge  of  these  facts.  They  would  thus  be  ideally  positioned  to  track  such 
 localized  data  on  a  current  basis  and  to  determine  where  the  Commissions  unbundling  presumptions  would  or  would  not  apply.  U  S  WEST  Comments  at  30,  CC  Docket  No.  96-  98  (May  26,  1999)  (citation  omitted). 
 (continued.) 
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 426.  This  Commission  will  provide  guidance  to  and  exercise  oversight  of  state  commissions  as  they  make  these  determinations.  A  party  aggrieved  by  a  state  commission 
 determination  may  seek  a  declaratory  ruling  from  this  Commission,  and  state  commissions  or  other  parties  may  at  any  time  seek  a  declaratory  ruling  where  necessary  to  remove  uncertainty  or 
 eliminate  a  controversy.  1307  In  addition,  as  the  Commission  articulated  in  the  Local  Competition  Report  and  Order,  an  aggrieved  party  can  always  file  a  section  208  complaint  with  this 
 Commission,  alleging  that  the  incumbent  LEC  or  requesting  carrier  has  failed  to  comply  with  the  requirements  of  sections  251  and  252.  1308 

 427.  At  the  same  time,  we  anticipate,  and  several  parties  have  explicitly  advocated,  that  state  commission  unbundling  decisions  will  be  incorporated  into  the  arbitration  agreement 
 process;  indeed,  at  least  one  party  has  argued  that  a  failure  to  incorporate  the  unbundling  analysis  into  the  arbitration  process  would  be  legally  suspect.  1309  Specifically,  the  Act  provides 
 that  state  commissions  will  resolve  issues  related  to  unbundling  in  conducting  arbitrations  between  carriers  and  approving  interconnection  agreements  and  statements  of  generally  available 
 terms  pursuant  to  the  Act  and  regulations  promulgated  by  this  Commission.  Under  section  252, 

 (Continued  from  previous  page) 
 BellSouth  asserted  that  [  i]  t  is  imperative  that  the  state  commissions  play  an  important  part  in  defining  network  elements  due  to  their  knowledge  of  local  market  conditions  and  their  extensive  experience  in  making  factual 

 determinations  about  local  competition  issues.  Letter  from  Robert  T.  Blau,  Vice  President    Executive  and  Federal  Regulatory  Affairs,  BellSouth  to  Magalie  Roman  Salas,  Secretary,  FCC,  CC  Docket  No.  96-  98  (filed  Feb.  11, 
 1999).  GTEs  general  counsel,  who  is  now  general  counsel  for  Verizon,  stated  that  because  actual  facilities  deployment  by  CLECs  varies  by  geographic  area,  type  of  customer  and  type  of  service,  the  Commission  cannot 
 adopt  a  single,  one  size  fits  all  national  list  of  UNEs  merely  for  the  sake  of  simplicity  and  uniformity.  Letter  from  William  P.  Barr,  General  Counsel,  GTE  Service  Corporation,  to  Lawrence  E.  Strickling,  Chief,  Common 
 Carrier  Bureau,  FCC,  CC  Docket  No.  96-  98  at  4  (filed  March  1,  1999)  (GTE  Mar.  1,  1999  Ex  Parte  Letter).  According  to  Verizons  general  counsel,  [  t]  he  rule  must  be  tailored  to  accommodate  variations  in  the  facilities-based 
 competition  that  already  exists  and  that  is  currently  possible  through  the  use  of  available  substitutes.  Id.  He  also  stated  that  the  Act  clearly  establishes  a  mechanism    individualized  arbitrations  conducted  by  state 
 commissions    to  take  such  variations  into  account.  Any  departure  by  the  Commission  from  the  localized  determination  of  what  elements  are  essential  for  unbundling,  which  the  Acts  arbitration  process  enables,  must  be 
 strictly  justified  and  narrowly  tailored.  Id.  SBC  agreed  and  argued  that  [  s]  tates  may  administer  the  national  standards  set  by  the  Commission  (e.  g.,  by  applying  the  standards  to  specific  geographic  areas  or  making  specific 
 factual  determinations)  .  .  .  .  SBC  Comments  at  18,  CC  Docket  No.  96-  98  (filed  May  26,  1999). 
 1307  Local  Competition  Order,  11  FCC  Rcd  at  15563-  64,  para.  125. 

 1308  Id.  at  15564,  paras.  127-  28.  Indeed,  we  do  not  believe  we  could  prohibit  such  petitions  and  complaints,  which 
 are  statutory,  from  being  filed  at  the  Commission. 
 1309  See  GTE  Mar.  1,  1999  Ex  Parte  Letter  at  4  (  It  is  simply  not  rational  to  attempt  to  determine  what  is  needed,   
 or  what  will  impair  a  CLECs  ability  to  compete,  on  a  single,  nationwide  basis  and  without  taking  into  account  the  particular  variations  associated  with  different  geographic  areas  and  types  of  service.  And  the  Act  clearly  establishes 

 a  mechanism    individualized  arbitrations  conducted  by  state  commissions    to  take  such  variations  into  account.  Any  departure  by  the  Commission  from  the  localized  determination  of  what  elements  are  essential  for  unbundling, 
 which  the  Acts  arbitration  process  enables,  must  be  strictly  justified  and  narrowly  tailored.). 
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 parties  wishing  to  appeal  such  determinations  may  do  so  in  federal  district  court.  1310  Accordingly,  there  is  no  exclusive  right  of  appeal  to  this  Commission.  1311 
 428.  Incumbent  LECs  argue  that  the  Commission  may  not  punt  unbundling  decisions  to  the  states.  1312  They  argue  that,  in  those  instances  where  impairment  analysis  requires 
 a  more  granular  approach,  the  Commission  should  establish  objective,  carefully  defined  criteria  for  determining  where  unbundling  is  (and  is  not)  appropriate.  1313  We  agree.  As  explained  in 
 detail  below,  we  do  establish  objective,  carefully  defined  criteria  for  determining  where  unbundling  is  (and  is  not)  appropriate.    1314  These  criteria    including  our  triggers    ensure  that 
 states  undertake  the  tasks  we  give  them  consistently  with  the  statutes  substantive  standards  and  stay  within  the  parameters  of  federally  established  guidelines.  1315  Accordingly,  we  are  not 
 punting  unbundling  decisions  to  the  states. 

 1310  See  47  U.  S.  C.    252(  e)(  6). 
 1311  Chairman  Powell  finds  fault  with  the  fact  that  we  do  not  provide  for  exclusive  appeals  of  state  commission 
 switching  decisions  to  this  Commission.  Chairman  Powell  Statement  at  8.  However,  the  suggestion  that  we  should  bar  court  review  of  state  commission  switching  decisions  seems  unnecessary  and  potentially  conflicts  with  the 

 statute.  See  Local  Competition  Order,  11  FCC  Rcd  at  15563,  para.  124  (  Pursuant  to  section  252(  e)(  6),  a  party  aggrieved  by  a  state  commission  arbitration  determination  under  section  252  has  the  right  to  bring  an  action  in 
 federal  district  court.);  47  U.  S.  C.    252(  e)(  6)  (  In  any  case  in  which  a  State  commission  makes  a  determination  under  this  section,  any  party  aggrieved  by  such  determination  may  bring  an  action  in  an  appropriate  Federal  district 
 court  to  determine  whether  the  agreement  or  statement  meets  the  requirements  of  section  251  of  this  title  and  this  section.). 

 1312  Letter  from  Herschel  L.  Abbott,  Jr.,  Vice  President    Government  Affairs,  BellSouth  et  al.,  to  Michael  K. 
 Powell,  Chairman,  FCC  at  2,  in  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Nov.  19,  2002)  (RBOC  Joint  Nov.  19,  2002  Ex 

 Parte  Letter). 
 1313  RBOC  Joint  Nov.  19,  2002  Ex  Parte  Letter  at  4. 

 1314  See,  e.  g.,  infra  paras.  493-  524. 
 1315  Similarly,  contrary  to  the  dissents  assertions,  we  did  not  unlawfully  delegate  authority  to  the  states.  The 
 dissents  assertions  that  we  have  failed  to  provide  state  commissions  sufficient  guidance  in  their  decisionmaking  is  inconsistent  and  difficult  to  understand,  see  Chairman  Powell  Statement  at  5-  9;  Commissioner  Abernathy  Statement 

 at  7-  8,  as  our  approach  is  essentially  identical  to  our  treatment  of  dedicated  transport  and  loops,  which  Chairman  Powell  proposed  and  both  he  and  Commissioner  Abernathy  fully  support.  See  Parts  VI.  C.  4.  d  (transport), 
 VI.  A.  4.  b.(  ii)(  d)  (loops).  More  importantly,  the  assertion  is  wrong. 
 For  enterprise  switches,  we  have  made  a  nationwide  finding  of  no  impairment,  which  states  can  displace  only  by  filing  a  petition  for  waiver  with  this  Commission  based  on  explicitly  enumerated  factors.  For  mass  market 

 switches,  we  make  a  nationwide  finding  of  impairment  and  require  the  states  to  conduct  a  more  granular  analysis  by  applying  mandatory  and  exhaustive  federal  triggers.  Specifically,  where  a  state  commission  determines  that  there 
 are  three  or  more  carriers,  unaffiliated  with  either  the  incumbent  LEC  or  each  other,  that  are  serving  mass  market  customers  in  a  particular  market  using  self-  provisioned  switches,  the  state  must  find  no  impairment  in  that  market 
 unless  it  petitions  this  Commission  for  a  waiver  of  the  trigger.  A  state  must  also  find  no  impairment  when  it  determines  that  there  are  two  or  more  competitive  wholesale  suppliers  of  unbundled  local  circuit  switching, 
 unaffiliated  with  the  incumbent  or  each  other.  Indeed  it  is  exactly  these  kind  of  factors  that  Chairman  Powell  has  (continued.) 
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 2.  Background 
 429.  We  note  that  an  important  function  of  the  local  circuit  switch  is  as  a  means  of  accessing  the  local  loop.  1316  Competitive  LECs  can  use  their  own  switches  to  provide  services 

 only  by  gaining  access  to  customers  loop  facilities,  which  predominately,  if  not  exclusively,  are  provided  by  the  incumbent  LEC.  Although  the  record  indicates  that  competitors  can  deploy 
 duplicate  switches  capable  of  serving  all  customer  classes,  without  the  ability  to  combine  those  switches  with  customers  loops  in  an  economic  manner,  competitors  remain  impaired  in  their 
 ability  to  provide  service.  Accordingly,  it  is  critical  to  consider  competing  carriers  ability  to  have  customers  loops  connected  to  their  switches  in  a  reasonable  and  timely  manner. 

 430.  In  addition,  incumbent  LEC  local  circuit  switching  performs  several  specific  functions,  including  connecting  loop  facilities  to  the  network,  switching  loops  to  other  lines  and 
 trunks,  and  providing  service  capabilities  to  customers,  such  as  dial  tone  and  vertical  features.  In  prior  orders  addressing  the  unbundling  of  network  elements,  the  Commission  concluded  that 
 incumbent  LECs  must  provide  access  to  unbundled  local  switching  and  defined  the  switching  element  to  include  line-  side  facilities,  trunk-  side  facilities,  and  all  the  features,  functions, 
 and  capabilities  of  the  switch.  1317  In  the  UNE  Remand  Order,  the  Commission  generally  found  that  for  the  largest  50  MSAs  in  the  country,  competitors  were  impaired  without  access  to 
 switching  only  for  serving  mass  market  customers.  1318  Noting  that  commenters  had  not  identified  the  characteristics  that  distinguish  the  mass  market  from  medium  and  large  business  customers, 
 the  Commission  found  that  a  significant  portion  of  the  mass  market  could  be  identified  as  customers  with  no  more  than  four  access  lines.  This  four-  line  limit  would  include  nearly  all 

 (Continued  from  previous  page) 
 advocated  be  used  in  the  past.  See  Commissioner  Powell  Second  NPRM  Statement  at  3  (  Further,  to  the  extent  other  facilities-  based  competitors  do  not  use  elements  of  the  incumbents  network,  the  presence  of  those  competitors  in  a 

 particular  market  should  be  probative  in  evaluating  whether  other  firms  would  be  impaired  in  their  ability  to  provide  service  in  that  market  absent  mandated  access  to  the  incumbents  elements.  It  follows  directly,  then,  that 
 assessments  of  whether  an  element  is  necessary  to  provide  service  or  whether  failing  to  mandate  access  to  that  element  would  impair  a  new  entrants  ability  to  provides  service  will  vary  significantly  among  different  markets, 
 states,  and  regions.).  Where  neither  of  these  two  triggers  is  satisfied,  we  establish  specific  and  mandatory  criteria  that  state  commissions  must  apply  to  determine  whether  a  market  allows  self-  provisioning  of  switching.  It  is 
 difficult  to  see  how  we  could  provide  more  guidance  in  this  analysis.  Indeed,  we  provide  considerably  more  guidance  than  we  do  for  the  states  analysis  of  dedicated  transport,  which  again  both  the  dissenters  voted  to 
 approve. 
 1316  As  discussed  more  fully  in  our  discussion  above  regarding  local  loop  unbundling,  no  party  disputes  that 
 competitors  need  access  to  incumbent  LECs  loops  to  compete  in  the  mass  market.  See  infra  Part  VI.  A.  4.  a. 
 1317  See  Local  Competition  Order,  11  FCC  Rcd  at  15706,  para.  412.  The  line-  side  facilities  include  the  connection 
 between  a  loop  termination  at,  for  example,  a  main  distribution  frame,  and  a  switch  line  card.  Trunk-  side  facilities  include  the  connection  between,  for  example,  trunk  termination  at  a  trunk-  side  cross-  connect  panel  and  a  trunk  card. 

 1318  UNE  Remand  Order,  15  FCC  Rcd  at  3821-  22,  para.  274. 
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 residential  users  and  those  business  users  that,  because  they  had  fewer  than  four  access  lines,  were  more  similar  to  residential  users  than  they  were  to  large  businesses.  1319 
 431.  Although  in  the  past  the  Commissions  rules  required  incumbent  LECs  to  provide  switching  unbundled  from  other  network  elements,  competitors  widely  use  unbundled  local 
 circuit  switching  in  combination  with  incumbent  LEC  loops  and  shared  transport.  1320  This  combination  has  been  primarily  used  to  serve  mass  market  customers,  and  within  that  market, 
 depending  on  the  state,  a  varying  mix  of  residential  and  business  customers.  1321  In  contrast,  new  entrants  that  do  not  rely  on  incumbent  LECs  for  switching  generally  obtain  UNE-  L  from 
 incumbent  LECs  and  connect  these  loops  to  their  switches.  1322 
 432.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether,  in  light  of  changed  circumstances,  it  should  retain  these  unbundling  requirements  and  if  so,  whether 

 it  should  modify  these  requirements  or  the  existing  definition  for  unbundled  local  circuit  switching.  1323  The  Commission  also  sought  comment  on  the  benefits  and  burdens  resulting  from 
 continuing  unbundled  switching  and  whether  there  are  any  alternative,  less  burdensome  options  to  achieve  the  goals  of  the  Act.  1324 

 3.  Definition  of  Unbundled  Local  Circuit  Switching  Element 
 433.  We  define  local  circuit  switching  to  encompass  line-  side  and  trunk-  side  facilities,  plus  the  features,  functions,  and  capabilities  of  the  switch.  1325  The  features,  functions,  and 

 1319  UNE  Remand  Order,  15  FCC  Rcd  at  3829,  paras.  292-  93.  Specifically,  in  density  zone  one  of  the  top  50 
 MSAs,  incumbent  LECs  that  make  the  EEL  combination  available  were  not  obligated  to  provide  unbundled  local  circuit  switching  to  requesting  carriers  for  serving  customers  with  four  or  more  lines.  Id.  at  3822-  31,  paras.  276-  78. 

 1320  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  13,  2003)  (AT&  T  Feb.  13,  2003  Ex  Parte  Letter). 
 1321  The  evidence  in  the  record  demonstrates  that,  by  the  end  of  2002,  more  than  ten  million  residential  and  small 
 business  lines  were  being  served  by  competitive  LECs  using  unbundled  loops  combined  with  unbundled  local  circuit  switching.  PACE  Jan.  14,  2003  Ex  Parte  Letter  at  2;  see  also  George  S.  Ford,  Ph.  D,  UNE-  Platform, 

 Impairment  and  Natural  Monopoly:  Bell  Company  Estimates  of  Cost  Disparities  and  Their  Consequences  at  1,  in  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01- 
 338,  96-  98,  98-  147  (filed  Jan.  29,  2003)  (Z-  Tel  Jan.  29,  2003  Ex  Parte  Letter).  Unbundled  local  circuit  switching  usage  is  heavily  concentrated  in  residential  markets:  approximately  70%  of  such  lines  serve  residential  customers. 
 Verizon  Unbundled  Switching  Study  at  3.  In  contrast  to  the  other  three  BOCs,  Qwest  claims  that  the  majority  of  customers  in  its  region  that  are  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  are 
 business  customers.  Id.  This  appears,  however,  to  be  due  to  Qwests  offering  of  Centrex  lines  (typically  used  for  business  customers)  on  a  unbundled  basis.  See  id. 

 1322  As  discussed  above,  UNE-  L  describes  an  entry  mode  where  a  competitive  LEC  combines  unbundled  loops 
 procured  from  the  incumbent  LEC  with  the  competitive  LECs  own  switching  and  transport  network. 
 1323  Triennial  Review  NPRM,  16  FCC  Rcd  at  22806,  para.  55. 

 1324  Id. 
 1325  47  C.  F.  R.    51.319(  c)(  1). 
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 capabilities  of  the  switch  include  the  basic  switching  function  of  connecting  lines  to  lines,  lines  to  trunks,  trunks  to  lines,  and  trunks  to  trunks.  In  addition,  we  conclude  that  the  features, 
 functions,  and  capabilities  of  the  local  circuit  switching  UNE  also  include  the  same  basic  capabilities  that  are  available  to  the  incumbent  LECs  customers,  such  as  telephone  number, 
 directory  listing,  dial  tone,  signaling,  and  access  to  911,  and,  in  the  cases  described  below,  operator  services  and  directory  assistance.  1326  The  end  office  switching  element  includes  all 
 vertical  features  that  the  switch  is  capable  of  providing,  including  custom  calling,  CLASS  features,  and  Centrex,  as  well  as  any  technically  feasible  customized  routing  functions.  Thus, 
 when  a  requesting  carrier  purchases  the  unbundled  local  switching  element,  it  obtains  all  switching  features  in  a  single  element  on  a  per-  line  basis.  A  requesting  carrier  will  deploy 
 individual  vertical  features  on  its  customers  lines  by  designating,  via  an  electronic  ordering  interface,  features  which  the  incumbent  LEC  must  activate  for  particular  customer  lines.  1327 

 434.  We  disagree  with  SBC  that,  to  the  extent  that  the  switch  is  unbundled,  the  Commission  should  not  unbundle  access  to  switch  routing  tables.  1328  We  include  access  to 
 switch  routing  tables  as  a  function  of  the  switch  because  one  of  the  most  essential  functions  a  switch  performs  is  to  provide  routing  information  that  sends  a  call  to  the  appropriate 
 destination.  1329  Requiring  requesting  carriers  to  engage  in  the  potentially  lengthy  process  of  compiling  traffic  studies  and  populating  routing  tables  with  data  in  the  incumbent  LECs  switch 
 would  deny  a  requesting  carrier  meaningful  access  to  unbundled  local  circuit  switching  to  serve  customers.  Accordingly,  consistent  with  the  Commissions  finding  in  the  Local  Competition 
 Third  Order  on  Reconsideration,  we  find  no  support  for  SBCs  assertion  that  the  switch  as  a 

 1326  See  infra  Part  VI.  H.  2.  We  readopt  here  the  definitions  of  operator  services  and  directory  assistance  set 
 forth  in  the  UNE  Remand  Order.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3892,  para.  443. 
 1327  Because  signaling  networks  are  accessed  via  the  switch,  when  carriers  purchase  switching  as  a  UNE  under  the 
 terms  established  in  this  Order,  they  shall  continue  to  obtain  access  to  the  incumbent  LECs  signaling  networks.  Moreover,  because  competitive  carriers  access  call-  related  databases  through  signaling  networks,  in  such  instances 

 where  switching  remains  a  UNE,  competitive  carriers  purchasing  the  switching  UNE  shall  have  access  to  the  call-related  databases  that  the  signaling  networks  permit  carriers  to  access.  See  infra  Parts  VI.  G,  VI.  H.  Indeed,  in  light 
 of  the  technical  complexity  associated  with  making  the  necessary  network  modifications  to  use  an  incumbents  switch  in  combination  with  competitively  provided  signaling  networks  and  call-  related  databases,  it  seems  unlikely 
 that  incumbents  would  prefer  a  different  rule.  We  also  note  that,  as  described  above,  when  a  requesting  carrier  purchases  unbundled  access  to  the  incumbent  LECs  switching,  the  incumbent  LEC  must  also  offer  unbundled 
 access  to  operator  service  and  directory  assistance  (OS/  DA)  services  if  the  incumbent  LEC  does  not  provide  customized  routing. 

 1328  SBC  Comments  at  79-  81  (arguing  that  routing  tables  should  not  be  unbundled  because  they  contain 
 confidential  information). 
 1329  See  In  the  Matter  Of  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of 
 1996,  Interconnection  between  Local  Exchange  Carriers  and  Commercial  Mobile  Radio  Service  Providers,  CC  Docket  Nos.  96-  98,  95-  185,  Third  Order  on  Reconsideration  and  Further  Notice  of  Proposed  Rulemaking,  12  FCC 

 Rcd  12460,  12486-  87,  para.  45  (1997)  (Local  Competition  Third  Reconsideration  Order)  (rejecting  Ameritechs  arguments  that  the  Commission  should  not  unbundle  switch  routing  tables). 
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 network  element  does  not  include  access  to  the  functionality  provided  by  the  incumbent  LECs  routing  tables.  1330 
 4.  Impairment  Analysis 
 a.  Evidence  of  Switch  Deployment 
 435.  In  conducting  our  impairment  analysis,  we  first  consider  evidence  of  competitive  LEC  circuit  switch  deployment  in  the  relevant  customer  market.  As  indicated  above,  evidence 

 of  self-  deployment  is  the  best  indicator  of  whether  competitive  LECs  have  been  able  to  overcome  barriers  to  entry  with  respect  to  facilities  deployment.  1331  We  find  that  the  extent  of 
 competitive  LEC  circuit  switch  deployment  varies  tremendously  in  the  enterprise  and  mass  markets.  In  particular,  we  find  that  the  record  demonstrates  significant  nationwide  deployment 
 of  switches  by  competitive  providers  to  serve  the  enterprise  market,  but  extremely  limited  deployment  of  competitive  LEC  circuit  switches  to  serve  the  mass  market.  1332 

 436.  There  is  no  dispute  in  the  record  that  competitive  carriers  have  significantly  increased  their  switch  deployment  and  the  number  of  lines  they  have  served  since  1999. 
 Specifically,  the  record  shows  that  competitive  LEC  switch  deployment  has  almost  doubled  in  two  years,  growing  from  700  in  1999  to  as  much  as  1,300  in  2001.  1333  In  addition,  more  than  200 

 1330  Local  Competition  Third  Reconsideration  Order,  12  FCC  Rcd  at  12487,  para.  45.  Because  we  continue  to 
 require  access  to  routing  tables  to  the  extent  we  unbundle  switching,  we  reject  CompTels  argument  that  proprietary  treatment  prevents  unbundling  of  such  tables,  and  deny  CompTels  petition  for  reconsideration  of  this  conclusion. 

 CompTel  Feb.  17,  2000  Petition  for  Reconsideration  at  17-  18. 
 1331  See  supra  Part  V.  B.  1.  d. 

 1332  Chairman  Powell  offers  contradictory  arguments  to  support  his  opposition  to  unbundled  switching.  He  first 
 argues  that  there  are  sufficient  switching  alternatives  already  used  to  serve  the  mass  market  and  then  argues  that  such  alternatives  will  not  be  deployed  so  long  as  unbundled  switching  is  available.  Compare  Chairman  Powell 

 Statement  at  11-  12  with  13.  Chairman  Powell  also  suggests  that  any  impairment  determination  for  switching  should  be  overridden  by  the  social  and  economic  costs  of  unbundling  switching  and  thus  there  is  no  need  even  to  conduct 
 an  impairment  analysis.  We  disagree  that  this  Commission  should  reach  such  a  conclusion  for  the  entire  nation  on  the  basis  of  the  current  record  and  believe  an  impairment  analysis  should  be  conducted.  Moreover,  Chairman 
 Powell  seems  to  focus  only  on  the  costs  or  benefits  depending  on  whether  or  not  he  wants  to  retain  access  to  an  element.  For  example,  with  respect  to  line  sharing  he  ignores  the  impairment  standard  and  argues  that  line  sharing 
 should  be  retained  because  it  has  generated  clear  and  measurable  benefits  for  consumers.  Chairman  Powell  Statement  at  1.  With  regard  to  switching  he  appears  to  disregard  the  clear  and  measurable  benefit  to  consumers 
 standard  and  instead  focuses  only  on  the  costs  of  unbundling. 
 1333  See,  e.  g.,  BOC  UNE  Fact  Report  2002  at  II-  1-  II-  2,  II-  4  (citing  numbers  based  on  Jan.  2002  LERG  data  and  a 
 New  Paradigm  Resources  Group  (NPRG)  Report  based  on  year-  end  2001  data);  Local  Competition  Rules  Must  Encourage  Investment  and  Job  Growth  in  the  Telecommunications  Industry,  in  Letter  from  Debbie  Goldman, 

 Research  Economist,  Research  and  Development  Department,  Communications  Workers  of  America,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Feb.  6,  2003)  (CWA  Feb.  6,  2003  Ex 
 Parte  Letter).  For  example,  BellSouth  estimates  that  there  are  284  competitive  voice  switches  deployed  in  its  region.  See  Letter  from  Robert  T.  Blau,  Vice  President    Executive  and  Federal  Regulatory  Affairs,  BellSouth,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  02-  33,  Attach.  at  10  (filed  Jan.  24,  2003)  (BellSouth  Jan.  24,  2003  Ex  Parte  Letter).  BellSouth  estimates  that,  since  the  release  of  the  UNE  Remand  Order,  the  number 
 (continued.) 
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 competitive  LECs  of  all  sizes  have  deployed  local  voice  switches.  1334  The  record  also  shows  that  vendors  have  produced  switches  (at  declining  prices)  that  are  readily  available  for  purchase.  1335 
 These  switches  are  capable  of  serving  significantly  broader  service  areas  than  traditional  incumbent  LEC  rate  centers.  1336 

 437.  Incumbent  LECs  claim  that  the  Commission  should  remove  virtually  all  unbundling  obligations  regarding  local  switching  on  a  national  basis  simply  because  competitive 
 carriers  have  deployed  1,300  switches  and  are  serving,  according  to  the  BOC  UNE  Fact  Report  2002,  over  16  million  lines  with  those  switches.  1337  This  argument,  however,  ignores  significant 
 differences  in  the  evidence  concerning  the  enterprise  market  and  mass  market.  The  record  is  replete  with  evidence  showing  that  competitive  LECs  are  successfully  using  their  own  switches 
 to  serve  large  business  customers  that  require  high-  capacity  loops  (which  can  be  connected  to 

 (Continued  from  previous  page) 
 of  competitive  LEC  switches  in  the  Atlanta,  Miami,  and  New  Orleans  MSAs  have  doubled.  BellSouth  Comments  at  79.  But  see  Letter  from  Kimberly  Scardino,  Senior  Counsel,  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 

 Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Jan.  31,  2003)  (WorldCom  Jan.  31,  2003  Switching  Ex  Parte  Letter).  WorldCom  argues  that  the  record  demonstrates  that  the  1,300  switches  cited  in  the  BOC  UNE  Fact  Report  are 
 overstated  by  at  least  33%  once  various  inaccuracies  are  corrected.  First,  WorldCom  states  that  the  BOCs  estimate  of  competitive  LEC  switches  includes  hundreds  of  switches  that  can  only  be  used  to  serve  customers  with  high-capacity 
 connections  or  PBXs.  Id.  at  2.  Second,  WorldCom  states  that  the  record  demonstrates  that  the  BOC  UNE  Fact  Report  overstates  the  number  of  switches  deployed  by  four  competitive  LECs  by  105  switches,  or  8%.  Id.  at  2; 
 Letter  from  Dana  Frix,  Counsel  for  Bridgecom  and  Metropolitan  Telecommunications,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Feb.  5,  2003)  (Bridgecom  Feb.  5,  2003  Ex  Parte 
 Letter).  WorldComs  criticisms  of  the  BOCs  computations,  however,  would  also  apply  to  the  700  competitive  switches  the  BOCs  claim  existed  in  1999,  resulting  in  a  lower  figure.  WorldComs  filing  does  not  set  forth  the 
 effects  its  analysis  would  have  on  a  year-  to-  year  basis.  Thus,  even  taken  at  face  value,  that  filing  fails  to  refute  the  central  point  that  competitive  switching  deployment  has  risen  dramatically. 

 1334  BOC  UNE  Fact  Report  2002  at  II-  1.  The  BOC  calculation  of  1,300  competitive  LEC  local  circuit  switches 
 does  not  include  packet  switches.  BOC  UNE  Fact  Report  2002  at  I-  1  (stating  that  competitive  LECs  have  deployed  approximately  1,700  packet  switches).  We  note  that  the  record  reflects  that  competitive  LEC  deployed  packet 

 switches  are  not  used  to  serve  analog  mass  market  customers.  See,  e.  g.,  WorldCom  Jan.  31,  2003  Switching  Ex  Parte  Letter  at  3  (  As  WorldCom  and  other  CLECs  have  demonstrated,  the  types  of  circuits  provisioned  and  the 
 equipment  used  to  serve  business  customers  are  quite  different  than  those  used  to  serve  analog  residential  and  small  business  customers.). 

 1335  Z-  Tel  Reply  at  45. 
 1336  BOC  UNE  Fact  Report  2002  at  II-  1. 
 1337  BellSouth  Comments  at  77-  90;  Qwest  Comments  at  20-  31;  Verizon  Comments  at  94-  105.  Qwest  would 
 eliminate  the  unbundled  switching  requirements  in  areas  where  multiple  competitive  LECs  have  deployed  their  own  switches.  See  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch, 

 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Feb.  13,  2003)  (Qwest  Feb.  13,  2003  Ex  Parte  Letter).  For  those  LATAs  where  competitive  LECs  have  deployed  three  or  more  local  exchange  voice  switches, 
 Qwest  would  have  this  Commission  eliminate  local  circuit  switching  as  a  UNE.  The  Qwest  proposal  assumes  that  if  three  competitive  LEC  switches  physically  exist  in  a  LATA,  a  wholesale  market  for  local  switching  will  develop, 
 thereby  enabling  competitive  LECs  to  refrain  from  deploying  their  own  switches  to  serve  customers. 
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 competitive  carrier  switches  with  few  of  the  obstacles  that  affect  voice-  grade  loops).  1338  For  example,  BiznessOnline.  Com  cites  data  compiled  by  a  coalition  of  competitive  carriers  which 
 examined  six  representative  markets  and  found  that  approximately  90  percent  of  the  loops  used  by  competitive  carriers  in  these  markets  are  DS1  capacity  or  higher  loops.  1339  Specifically, 
 according  to  the  BOCs,  competitive  LECs  are,  as  of  year-  end  2001,  serving  at  least  13  million  business  lines  over  their  own  switches.  1340 

 438.  On  the  other  hand,  the  record  indicates  that  competitive  LECs  have  self-  deployed  few  local  circuit  switches  to  serve  the  mass  market.  1341  The  BOCs  claim  that,  as  of  year-  end 
 2001,  approximately  three  million  residential  lines  were  served  via  competitive  LEC  switches.  1342  Others  argue  that  this  figure  is  significantly  inflated.  1343  Even  accepting  that  figure,  however,  it 
 represents  only  a  small  percentage  of  the  residential  voice  market.  It  amounts  to  less  than  three  percent  of  the  112  million  residential  voice  lines  served  by  reporting  incumbent  LECs.  1344 

 439.  We  find,  moreover,  that  the  BOCs  competitive  LEC  residential  line  count  does  not  accurately  depict  the  ability  of  an  entering  competitive  LEC  to  overcome  the  barriers  to  entry 
 generated  by  the  hot  cut  process,  and  to  serve  the  mass  market  using  incumbent  LEC  loops.  Specifically,  many  of  the  lines  cited  by  the  incumbents  are  served  by  carriers  that,  for  one  reason 
 or  another,  are  able  to  use  their  own  loops.  We  have  made  detailed  findings  that  competitors  are 

 1338  See,  e.  g.,  ATX  Jan.  22,  2003  Ex  Parte  Letter  at  1-  2,  4  (stating  that  competitive  carriers  are  deploying  switches 
 to  serve  high  volume  customer  locations  that  require  DS1  or  higher  loop  connectivity);  WorldCom  Jan.  31,  2003  Switching  Ex  Parte  Letter  at  1;  AT&  T  et  al.  Feb.  3,  2003  Ex  Parte  Letter  at  2.  Since  1999,  AT&  T  has  continued  to 

 deploy  circuit  switches,  but  uses  those  switches  almost  exclusively  to  provide  service  to  large  businesses.  AT&  T  Comments  at  207-  09,  219;  AT&  T  Comments,  Attach.  A,  Declaration  of  Ellyce  Brenner  (AT&  T  Brenner  Decl.)  at 
 paras.  24-  29;  see  also  Z-  Tel  Comments  at  48-  50  (  The  fact  that  some  CLECs  have  deployed  switches  to  serve  the  large  business  market  or  broadband  market  does  not  support  the  conclusion  that  CLECs  are  not  impaired  without 
 access  to  unbundled  switching  to  serve  the  mass  market.);  CompTel  Comments  at  62-  63. 
 1339  See  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  23  (citing  CCG  July  17,  2002  CLEC  Survey  Ex  Parte 
 Letter  at  Table  4). 
 1340  BOC  UNE  Fact  Report  2002  at  II-  1;  Verizon  Unbundled  Switching  Study  at  3. 

 1341  Letter  from  Marc  A.  Goldman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Nov.  13,  2002)  (WorldCom  Nov.  13,  2002  Unbundled  Switching  Ex  Parte  Letter). 

 1342  BOC  UNE  Fact  Report  2002  at  II-  1.  This  number  may  count  only  competitor  lines  in  BOC-  served  territories, 
 excluding  the  former  GTE  and  SNET  territories.  BOC  UNE  Fact  Report  2002  at  II-  4,  Table  2. 
 1343  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  24;  Z-  Tel  Reply  at  41;  AT&  T  Pfau  Reply  Decl.  at  paras. 
 28-  31. 
 1344  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  Statistics  of  Communications 
 Common  Carriers  September  2002  Report  at  Table  2.6.  The  112  million  line  figure  represents  the  number  of  residential  access  lines  for  incumbent  LECs  that  are  required  to  report  residential  line  figures  to  the  Commission. 

 Id. 
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 impaired  without  access  to  incumbents  voice-  grade  local  loops.  1345  Indeed,  no  party  seriously  contends  that  competitors  should  be  required  to  self-  deploy  voice-  grade  loops.  1346  Thus,  for  the 
 typical  entrant,  entry  into  the  mass  market  will  likely  require  access  to  the  incumbents  loops,  using  the  UNE-  L  strategy.  As  described  below,  this  strategy  raises  operational  and  economic 
 difficulties  associated  with  accessing  the  loop.  1347  Indeed,  as  discussed  above,  a  crucial  function  of  the  incumbents  local  circuit  switch  is  to  provide  a  means  of  accessing  the  local  loop.  1348 

 440.  Of  the  three  million  residential  lines  purportedly  served  by  competitive  switches  at  year-  end  2001,  approximately  2.2  million  lines  were  served  by  cable  telephony  providers  that 
 bypass  the  incumbent  LECs  networks  entirely.  1349  Of  the  remaining  access  lines,  Z-  Tel  offers  evidence  that  most  are  served  by  large,  independent  incumbent  LECs  expanding  into  adjacent 
 areas  and  by  cable  overbuilders.  1350  Z-  Tel  then  estimates  that  only  200,000  mass  market  lines  are  served  through  UNE-  L.  1351  Accordingly,  much  of  the  deployment  relied  upon  by  the  BOCs  in 
 fact  provides  no  evidence  that  competitors  have  successfully  self-  deployed  switches  as  a  means  to  access  the  incumbents  local  loops,  and  have  overcome  the  difficulties  inherent  in  the  hot  cut 
 process.  1352 

 1345  See  supra  Part  VI.  A.  4.  a.(  v).(  a). 
 1346  Nor  is  there  any  wholesale  market  for  such  loops.  See  Access  Integrated  Networks  Reply  at  13;  Allegiance 
 Reply  at  32-  33;  Covad  Comments  at  35-  37;  WorldCom  Reply  at  87. 
 1347  See  supra  Part  VI.  D.  6.  a.(  i). 

 1348  See  supra  Part  VI.  D.  2. 
 1349  Industry  Analysis  and  Technology  Division,  Wireline  Competition  Bureau,  Local  Telephone  Competition: 
 Status  as  of  December  31,  2001  (July  2002)  at  Table  5  (Local  Telephone  Competition  July  2002  Report).  As  noted  above,  in  mid-  2002,  cable  telephony  represented  2.6  million  access  lines,  a  39%  growth  over  the  previous  year.  Id. 

 at  Table  5.  Virtually  all  cable  subscribers  are  mass  market  customers.  See  AT&  T  Comments  at  224  (noting  that  virtually  no  businesses  subscribe  to  cable);  see  also  WorldCom  Comments,  Attach.  A  at  21  (  The  cable  industry 
 provides  service  to  almost  no  large  business  customers.),  37  (  Cable  systems  were  for  the  most  part  built  to  serve  residential  and  suburban  areas.),  35  (  Cable  television  systems  do  not  have  the  capacity  to  serve  large  numbers  of 
 business  customers  requiring  DS-  1  and  higher-  speed  services.).  The  BOCs  arguments  confirm  that  cable  is  primarily  suited  for  service  to  residential  customers,  rather  than  to  business  customers.  See,  e.  g.,  BellSouth 
 Comments  at  38-  41;  SBC  Comments  at  53,  56;  Verizon  Comments  at  12-  14. 
 1350  Z-  Tel  Reply  at  43-  46;  see  also  WorldCom  Reply  at  143-  44  (  Others  such  as  TDS  Telecom  and  ALLTEL  are 
 using  their  monopoly  incumbent  LEC  base  to  expand  into  neighboring  incumbent  territories.).  Z-  Tel  argues  that  the  1996  Act  was  not  intended  to  foster  local  competition  only  by  companies  with  the  resources  of  cable  or 

 incumbent  assets.  Z-  Tel  Reply  at  41-  43.  In  addition,  WorldCom  argues  that  the  small  group  of  competitive  LECs  that  have  deployed  switches  serving  the  mass  market,  including  the  cable  overbuilders,  focus  only  on  high-  density 
 areas  and  that  their  future  expansion  is  in  doubt.  WorldCom  Reply  at  143-  44. 
 1351  Z-  Tel  Reply  at  48-  49. 

 1352  We  note,  however,  that  some  of  this  competitive  deployment  could  be  considered  by  states  in  determining 
 whether  the  triggers  discussed  below  have  been  satisfied  in  specific  markets. 
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 441.  Additionally,  the  BOCs  suggestion  that  our  analysis  should  treat  switches  deployed  to  serve  large  enterprise  customers  exactly  the  same  as  those  deployed  to  serve  mass 
 market  customers  ignores  the  substantial  modifications,  and  attendant  costs,  necessary  to  serve  mass  market  customers  with  an  enterprise  switch.  For  example,  in  order  to  enable  a  switch 
 serving  large  enterprise  customers  to  serve  mass  market  customers,  competitive  LECs  may  need  to  purchase  additional  analog  equipment,  acquire  additional  collocation  space,  and  purchase 
 additional  cabling  and  power.  1353  Thus,  while  we  agree  that  deployment  of  an  enterprise  switch  is  one  piece  of  evidence  relevant  to  the  possibility  of  serving  mass  market  customers    and, 
 indeed,  our  impairment  analysis  takes  such  deployment  into  account,  as  discussed  below    the  fact  remains  that  competitors  using  their  own  switches  are  currently  serving  extremely  few  mass 
 market  customers,  through  enterprise  switches  or  otherwise.  1354 
 442.  Moreover,  because  no  party  offers  evidence  to  show  that  third  parties  are  currently  offering  switching  on  a  wholesale  basis    that  is,  selling  switching  capacity  to  third-party 

 carriers  to  use  in  their  offerings    we  find  that  no  significant  third-  party  alternatives  to  unbundling  local  switching  exist.  Thus,  we  are  unable  to  find  that  this  evidence  demonstrates 
 that  competitive  LECs  are  able  to  economically  enter  the  mass  market  without  unbundled  access  to  incumbent  LEC  circuit  switching. 

 443.  Intermodal  Switching  Alternatives.  We  determine  that,  although  the  existence  of  intermodal  switching  is  a  factor  to  consider  in  establishing  our  unbundling  requirements,  current 
 evidence  of  deployment  does  not  presently  warrant  a  finding  of  no  impairment  with  regard  to  local  circuit  switching.  1355  In  particular,  we  determine  that  the  limited  use  of  intermodal  circuit 

 1353  See,  e.  g.,  WorldCom  Nov.  18,  2002  Transition  to  UNE-  L  Ex  Parte  Letter  at  7.  WorldCom  states  that  in  order 
 to  modify  one  of  its  switches  in  Manhattan  serving  enterprise  customers  to  serve  the  mass  market,  WorldCom  would  be  required  to:  purchase  and  install  analog-  capable  equipment;  increase  the  existing  collocation  cage  space 

 by  200  square  feet;  and  pay  Verizon  for  additional  cabling  and  power.  Id. 
 1354  The  dissents  assertion  that  enterprise  switches  should  be  considered  in  our  mass  market  triggers  ignores  these 
 substantial  differences  between  the  switches  serving  the  different  markets.  Chairman  Powell  Statement  at  6;  Commissioner  Abernathy  Statement  at  4-  5.  Most  importantly,  as  explained  above,  unlike  mass  market  loops, 

 facilities  used  to  serve  enterprise  customers  are  typically  not  pre-  wired  to  incumbent  LEC  switches,  allowing  competing  carriers  to  avoid  the  costs  and  service  disruptions  associated  with  hot  cuts.  The  dissents  also  ignore  the 
 substantial  differences  in  the  mass  market  and  the  enterprise  market    such  as  the  fact  that  enterprise  customers  generally  offer  increased  revenue  opportunities  and  are  more  willing  to  enter  long-  term  contracts  than  are  mass 
 market  customers.  These  differences  elsewhere  led  them  to  agree  to  conduct  separate  .  .  .  impairment  analyses  based  on  [among  other  things]  two  relevant  customer  classes    the  mass  market  and  the  enterprise  market.  See 
 supra  para.  197.  Our  loops  discussion,  for  example,  conducts  an  entirely  separate  analysis  and  arrives  at  different  conclusions  for  loops  used  to  serve  mass  market  customers  than  it  does  for  loops  used  to  serve  enterprise  customers. 
 See  supra  Part  VI.  A.  While  we  do  not  make  the  same  distinction  for  transport,  that  is  only  because  transport  is  used  to  aggregate  significant  volumes  of  traffic,  and  neither  the  economics  nor  the  operations  significantly  differ  for  mass 
 market  and  enterprise  customers.  As  we  indicate,  however,  that  is  an  exception  to  the  practice  adopted  by  the  Commission  and  explicitly  approved  by  both  the  dissenters.  See  supra  para.  197. 

 1355  We  note  that  our  analysis  of  intermodal  switching  alternatives  is  informed  by  the  evidence  of  intermodal 
 alternatives  relating  to  local  loops.  Because  commenters  devoted  a  significant  amount  of  discussion  to  cable  and  wireless  facilities  as  substitutes  for  local  loops,  evidence  of  intermodal  alternatives  is  also  discussed  under  our 

 analysis  of  local  loop  unbundling. 
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 switching  alternatives  for  the  mass  market  is  insufficient  for  us  to  make  a  finding  of  no  impairment  in  this  market,  especially  since  these  intermodal  alternatives  are  not  generally 
 available  to  new  competitors.  1356 
 444.  The  Commissions  Local  Competition  Report  shows  that  only  about  2.6  million  homes  subscribe  to  cable  telephony  on  a  nationwide  basis,  1357  even  though  there  are 

 approximately  103.4  million  households  in  the  United  States.  1358  Moreover,  the  record  indicates  that  circuit-  switched  cable  telephony  is  only  available  to  about  9.6  percent  of  the  total 
 households  in  the  nation.  1359  Ultimately,  because  retrofitting  cable  infrastructure  to  support  cable  telephony  requires  substantial  investment  and  modification,  and  because  significant  technical 
 and  operational  issues  must  still  be  resolved  for  those  cable  operators  that  have  not  already  augmented  their  networks  to  offer  cable  telephony  (which  are  the  majority  of  the  cable  networks 
 currently  in  operation),  it  is  difficult  to  predict  at  what  point  cable  telephony  will  be  deployed  on  a  more  widespread  and  ubiquitous  basis.  1360 

 445.  We  also  find  that,  despite  evidence  demonstrating  that  narrowband  local  services  are  widely  available  through  CMRS  providers,  wireless  is  not  yet  a  suitable  substitute  for  local 
 circuit  switching.  1361  In  particular,  only  about  three  to  five  percent  of  CMRS  subscribers  use  their  service  as  a  replacement  for  primary  fixed  voice  wireline  service,  which  indicates  that 

 1356  BOC  UNE  Fact  Report  2002  at  IV-  8  to  IV-  14.  Current  estimates  are  that  only  1.7%  of  U.  S.  households  rely  on 
 other  technologies  to  replace  their  traditional  wireline  voice  service.  Allegiance  Reply  at  35. 
 1357  Local  Telephone  Competition  December  2002  Report  at  2.  In  their  joint  BOC  UNE  Fact  Report  2002,  the 
 BOCs  claim  that  1.5  million  homes  subscribe  to  cable  telephony.  BOC  UNE  Fact  Report  2002  at  IV-  10. 
 1358  See  Telephone  Subscribership  November  2002  Report  at  Table  1.  According  to  Verizon,  cable  telephony 
 providers  already  offer  circuit  switched  telephone  services  to  some  ten  million  households  nationwide,  already  serve  more  than  two  million  lines,  and  are  adding  roughly  100,000  lines  each  month.  See  Letter  from  Michael  E.  Glover, 

 Senior  Vice  President  and  Deputy  General  Counsel,  Verizon,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (dated  Jan.  10,  2003)  (Verizon  Jan.  10,  2003  Switching 
 Ex  Parte  Letter)  in  Letter  from  Ann  D.  Berkowitz,  Project  Manager    Federal  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  10,  2003)  ;  see  also  Unbundling 
 Switching,  UNE-  P,  and  Hot  Cuts,  SBC  Presentation  to  FCC,  in  Letter  from  Brian  J.  Benison,  Associate  Director    Federal  Regulatory,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  10  (filed  Jan.  7,  2003) 
 (SBC  Jan.  7,  2003  Ex  Parte  Letter). 
 1359  BOC  UNE  Fact  Report  2002  at  II-  11,  IV-  10  (noting  that  Cox  has  the  capability  to  offer  cable  telephony  to  75 
 to  95  percent  of  the  consumers  in  Rhode  Island). 
 1360  BellSouth  Comments  at  38,  40  (citing  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the 
 Delivery  of  Video  Programming,  CS  Docket  No.  01-  129,  8th  Annual  Report,  FCC  01-  389,  at  para.  34  (2001)). 
 1361  The  Commission,  however,  recently  relied  on  wireless  broadband  PCS  substitution  to  support  Track  A  findings 
 in  two  section  271  proceedings  where  residential  customers  in  New  Mexico  and  Nevada  had  replaced  their  landline  service  with  wireless  service.  SBC  Nevada  271  Order,  18  FCC  Rcd  at  7206,  para.  18;  Qwest  New  Mexico  271 

 Order,  18  FCC  Rcd  at  7336  n.  53;  see  also  BellSouth  Louisiana  II  271  Order,  13  FCC  Rcd  at  20606,  20622-  23,  paras.  11,  29-  30.  This,  however,  was  based  on  a  different  analysis  than  that  required  under  the  necessary  and  impair 
 standards. 
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 wireless  switches  do  not  yet  act  broadly  as  an  intermodal  replacement  for  traditional  wireline  circuit  switches.  1362  Lastly,  the  record  demonstrates  that  wireless  CMRS  connections  in  general 
 do  not  yet  equal  traditional  landline  facilities  in  their  quality  and  their  ability  to  handle  data  traffic.  1363 

 446.  Moreover,  both  cable  and  CMRS  are  potential  alternatives  not  simply  for  switching,  but  for  the  entire  incumbent  LEC  telephony  platform,  including  the  local  loop.  We 
 are  unaware  of  any  evidence  that  either  technology  can  be  used  as  a  means  of  accessing  the  incumbents  wireline  voice-  grade  local  loops.  1364  Accordingly,  neither  technology  provides 
 probative  evidence  of  an  entrants  ability  to  access  the  incumbent  LECs  wireline  voice-  grade  local  loop  and  thereby  self-  deploy  local  circuit  switches.  Rather,  competition  from  cable 
 telephony  and  CMRS  providers  only  serves  as  evidence  of  entry  using  both  a  self-  provisioned  loop  and  a  self-  provisioned  switch. 

 447.  Impact  of  Unbundling  on  Switching  Deployment.  Commenters  have  raised  questions  regarding  the  impact  of  unbundling  on  carriers  incentives  to  construct  and  deploy 
 switching  facilities.  1365  We  find  that  the  record  evidence  on  this  matter  is  inconclusive.  As  we 
 1362  See  Seventh  Wireless  Report  2002  at  32  n.  208;  see  also  BOC  UNE  Fact  Report  2002  at  IV-  12  (citing  Sixth 
 Wireless  Report  2001,  16  FCC  Rcd  at  13381  n.  211). 
 1363  BellSouth  Comments  at  41  (stating  that  wireless  is  ineffective  in  transmitting  large  amounts  of  data  at  high 
 speeds);  see  also  AT&  T  Reply  at  25,  162-  63  (stating  that  wireless  service  is  engineered  to  provide  only  roughly  70%  call  completion  rate  while  wireline  call  completion  rates  exceed  99%). 

 1364  See  infra  Part  V.  B. 
 1365  The  dissents  also  argue  that  triggers  based  on  deployment  will  never  be  met  for  switching  because  the 
 unbundling  of  switching  itself  creates  such  a  disincentive  for  deployment  that  neither  competitors  nor  incumbents  will  build  new  switching  facilities.  Chairman  Powell  Statement  at  5-  6;  Commissioner  Abernathy  Statement  at  4-  5. 

 The  dissents  offer  no  evidence  whatsoever  to  support  this  conclusion.  To  the  contrary,  the  Chairman  himself  acknowledges  that,  despite  the  current  nationwide  availability  of  unbundled  switching,  a  number  of  competitors 
 have  overcome  whatever  economic  impediments  exist  and  are  using  that  switching  capability  to  serve  mass  market  customers.  Chairmant  Powell  Statement  at  7.  Moreover,  neither  Chairman  Powell  nor  Commissioner  Abernathy 
 explain  how  their  disincentives  argument  is  consistent  with  the  conclusions  they  support  throughout  the  rest  of  the  Order  that  the  best  evidence  of  lack  of  impairment  is  evidence  that  new  entrants  are  providing  retail  services  in  the 
 relevant  market  using  non-  incumbent  LEC  facilities.  See  supra  paras.  93-  94.  Indeed,  in  both  the  transport  and  high-  capacity  loop  sections  of  the  Order,  they  have  agreed  to  eliminate  unbundling  obligations  only  after  a  finding 
 that  there  is  sufficient  deployment  of  alternative  facilities.  As  both  dissenters  have  agreed  in  the  transport  section,  the  probability  of  a  disincentive  effect  from  unbundling  is  addressed  by  establishing  relatively  low  thresholds  for 
 the  triggers.  See  supra  para.  413  &  note  1274.  Thus,  for  example,  the  triggers  for  the  transport  network  element  eliminate  unbundling  requirements  on  a  particular  route  where  there  are  three  competitive  self-  providers  of  transport 
 or  two  competitive  wholesale  providers.  These  are  the  same  thresholds  that  we  use  for  eliminating  unbundled  switching.  In  addition,  similar  to  transport  and  loops,  even  where  there  is  no  deployment  and  these  triggers  are  not 
 met,  states  must  consider  whether  potential  deployment  is  possible  based  on  specific  criteria  consistent  with  our  impairment  standard. 

 Looking  at  the  record  on  this  point,  we  found  the  evidence  of  disincentives  inconclusive  at  best.  The  incumbents  evidence  purports  to  show  disincentives  consisted  of  studies  alleging  that  as  lines  served  by  unbundled 
 loops  combined  with  unbundled  local  circuit  switching  increases  in  a  given  state,  the  number  of  facilities  based  (continued.) 
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 competitive  LEC-  owned  lines  decreases.  However,  as  explained  in  the  Order,  these  studies  suffer  from  fundamental  flaws  that  undermine  their  probative  value.  See  infra  note  1374.  At  the  same  time,  there  were  studies  purporting  to 

 show  that  unbundling  obligations  in  fact  encourage  carriers  to  make  capital  investments  in  facilities.  See  infra  note  1373.  In  the  end,  we  found  neither  compelling.  We  found  significantly  more  probative  the  evidence  that  in  areas 
 where  competitors  have  their  own  switches  for  other  purposes  (e.  g.,  enterprise  switches),  they  are  not  converting  them  to  serve  mass  market  customers  and  are  instead  relying  on  unbundled  loops  combined  with  unbundled  local 
 circuit  switching.  Given  the  fixed  costs  already  invested  in  these  switches,  competitors  have  every  incentive  to  spread  the  costs  over  a  broader  base.  Their  failure  to  do  so  bolsters  our  findings  that  significant  barriers  caused  by 
 hot  cuts  and  other  factors  make  entry  uneconomic. 
 Chairman  Powells  suggestion  that  the  number  of  lines  that  competing  carriers  serve  with  their  own  switches  has  decreased  while  the  number  of  lines  served  with  unbundled  switching  has  increased  is  simply  wrong.  See 

 Chairman  Powell  Statement  at  6.  In  fact,  Commission  data  show  that  the  number  of  customers  served  with  self-deployed  switches  has  consistently  increased.  For  example,  incumbent  LECs  provided  about  3.2  million  unbundled 
 loops  without  switching  in  June  2001,  about  3.7  million  unbundled  loops  without  switching  in  December  2001,  about  4.1  million  unbundled  loops  without  switching  in  June  2001,  and  about  4.3  million  unbundled  loops  without 
 switching  in  December  2002.  See  Local  Telephone  Competition,  Status  as  of  December  31,  2002  (June  2003);  Local  Telephone  Competition,  Status  as  of  June  30,  2002  (December  2002);  Local  Telephone  Competition,  Status  as 
 of  December  31,  2001  (July  2002);  Local  Telephone  Competition,  Status  as  of  June  30,  2001  (February  2002);  Local  Telephone  Competition,  Status  as  of  December  31,  2000  (May  2001);  Local  Telephone  Competition,  Status  as 
 of  June  30,  2000  (December  2000);  Local  Telephone  Competition,  Status  as  of  December  31,  1999  (August  2000).  Thus,  the  availability  of  unbundled  switching  does  not  appear  to  have  stopped  the  development  of  facilities-  based 
 competition.  While  Chairman  Powell  is  correct  that,  in  certain  states,  the  rate  of  growth  in  lines  using  unbundled  switching  has  increased  at  a  higher  rate  than  has  the  rate  of  growth  for  lines  served  with  competitively  deployed 
 switches,  that  fact  falls  far  short  of  showing  any  significant  disincentive  effect  from  the  availability  of  unbundled  switching.  More  importantly,  this  data  is  fully  consistent  with  the  evidence  in  the  record  that  significant  barriers 
 caused  by  hot  cuts  and  other  factors  make  self  deployment  uneconomic.  See  supra  paras.  466-  470.  For  example,  the  record  shows  that  AT&  T  spent  over  $11  billion  in  an  effort  to  use  its  own  switches  with  unbundled  loops  to 
 serve  low-  volume  business  customers,  but  that  this  effort  failed  as  a  result  of  hot  cut  problems.  See  AT&  T  Comments  at  218.  Customer  conversions  took  an  average  of  45  days  from  the  time  of  sale  to  the  establishment  of 
 dial  tone.  See  id.  at  219.  Service  outages  during  cutovers  occurred  6  to  9%  of  the  time.  See  id.  As  a  result,  over  half  of  AT&  Ts  orders  were  cancelled  prior  to  actual  conversion.  See  id.  Chairman  Powell  offers  no  response 
 whatsoever  to  this  evidence  or  the  other  evidence  in  the  record  on  the  barriers  caused  by  hot  cuts. 
 Moreover,  the  dissents  fail  to  consider  the  incentives  created  by  our  decisions  on  packet  switching  and  advanced  services.  Specifically,  we  no  longer  unbundle  packet  switching  and  the  advanced  networks  used  with 

 such  switching.  This  means  that  to  the  extent  there  are  significant  disincentives  caused  by  unbundling  of  circuit  switching,  incumbents  can  avoid  them  by  deploying  more  advanced  packet  switching.  This  would  suggest  that 
 incumbents  have  every  incentive  to  deploy  these  more  advanced  networks,  which  is  precisely  the  kind  of  facilities  deployment  we  wish  to  encourage.  At  the  same  time,  competitors  have  incentives  to  build  comparable  facilities  to 
 compete.  And  because  we  count  competitive  deployment  of  packet  switches    and  other  intermodal  facilities    in  our  circuit  switching  triggers,  such  deployment  can  lead  to  the  elimination  of  unbundling  requirements  on  circuit 
 switches. 
 In  the  end,  the  dissents  would  simply  eliminate  unbundled  switching  and  wait  for  competition  to  arise  from  other  platforms.  We  have  chosen  to  eliminate  unbundling  more  gradually,  as  we  do  for  other  elements,  by  both 

 attacking  the  causes  of  impairment  for  circuit  switching  and  encouraging  intermodal  competition  through  the  switching  triggers.  Unlike  the  approach  advocated  by  the  dissents,  our  approach  maintains  appropriate  incentives 
 without  throwing  away  the  competition  that  exists  today. 
 (continued.) 
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 have  explained  above,  section  251(  d)(  2)  s  at  a  minimum  clause  permits  us  to  consider,  when  appropriate,  factors  that  are  closely  tied  to  the  purposes  of  the  statute  but  distinct  from  the 
 necessary  and  impair  standards  in  reaching  an  unbundling  determination.  1366  Above,  we  have  exercised  this  authority  in  our  analysis  of  FTTH  and  hybrid  loops,  where  we  have  given 
 weight  to  section  706s  directive  that  the  Commission  encourage  the  deployment  on  a  reasonable  and  timely  basis  of  advanced  telecommunications  capability  to  all  Americans.  1367 
 While  section  251(  d)(  2)  permits  us  to  consider  factors  other  than  the  statutory  necessary  and  impair  standards,  we  are  mindful  of  the  courts  admonitions  that  we  not  extend  incumbents 
 unbundling  obligations  more  widely  than  required  to  fulfill  the  purposes  of  the  Act.  As  explained  above,  we  thus  apply  the  at  a  minimum  language  with  due  restraint.  Here,  we 
 consider  investment  incentives  in  the  context  of  unbundled  local  circuit  switching,  but  conclude  that  given  the  insufficient  record  evidence  on  this  issue  and  the  fact  that  the  goals  of  section  706 
 are  not  directly  implicated  in  the  context  of  switching,  our  findings  of  impairment  are  not  overcome  in  this  context. 

 448.  Although  our  consideration  of  investment  incentives  in  our  FTTH  and  hybrid  loops  decisions  is  largely  driven  by  the  Acts  direction  to  do  so  contained  in  section  706,  we 
 believe  that  consideration  of  economic  incentives,  pursuant  to  section  251(  d)(  2)  s  at  a  minimum  language,  is  appropriate  in  the  context  of  unbundled  circuit  switching  because  such 
 consideration  accords  weight  to  the  Acts  aim  of  encouraging  facilities-  based  competition.  As  explained  above,  the  Supreme  Court  in  Verizon  emphasized  that  the  Commission  has  discretion 
 to  evaluate  the  role  of  investment  incentives  when  implementing  the  Acts  local  competition  provisions.  1368  We  note,  however,  that  the  particular  incentives  primarily  at  issue  here  differ  in  a 
 key  respect  from  those  at  issue  in  the  FTTH  and  hybrid  loops  discussion  above.  There,  the  primary  inquiry  involved  the  incumbents  incentives  to  develop  and  deploy  new  broadband-capable 
 loop  facilities  if  those  facilities  were  subject  to  unbundling.  Here    where  the 
 (Continued  from  previous  page) 
 Finally,  we  note  that  to  the  extent  Chairman  Powell  and  Commissioner  Abernathy  are  concerned  that  the  price  of  using  unbundled  switching  is  too  attractive  when  compared  with  using  self-  deployed  switches,  this  issue  is  more 

 appropriately  addressed  in  the  forthcoming  proceeding  on  TELRIC  pricing. 
 1366  See  supra  Part  V.  D.  Section  251(  d)(  2)  provides  that  the  Commission  shall  consider,  at  a  minimum,  whether 
 .  .  .  the  failure  to  provide  access  to  such  network  elements  would  impair  the  ability  of  the  telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer.  47  U.  S.  C.    251(  d)(  2)  (emphasis  added). 

 1367  The  Commission  considers  services  with  upstream  and  downstream  speeds  in  excess  of  200  kbps  to  display 
 advanced  telecommunications  capability.  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2850,  para.  9. 
 1368  Verizon,  535  U.  S.  at  500;  see  also  id.  at  523  (  In  short,  the  incumbents  have  failed  to  carry  their  burden  of 
 showing  unreasonableness  to  defeat  the  deference  due  the  Commission.).  In  Verizon,  the  Court  recognized  that  it  was  in  no  position  to  assess  the  precise  economic  significance  of  the  parties  opposing  arguments  regarding 

 incentives  created  by  TELRIC,  and  that  it  ha[  d]  no  idea  whether  a  different  forward-  looking  pricing  scheme  would  have  generated  even  greater  competitive  investment  than  the  $55  billion  that  the  entrants  claim.  Id.  at  517.  Thus, 
 it  merely  acknowledged  that  the  Commission  had  been  forced  to  decide  whether  it  was  better  to  risk  keeping  more  potential  entrants  out,  or  to  induce  them  to  compete  in  less  capital-  intensive  facilities  with  lessened  incentives  to 
 build  their  own  bottleneck  facilities,  and  found  that  in  such  circumstances,  [  i]  t  was  not  obviously  unreasonable  for  the  FCC  to  prefer  the  latter.  Id.  at  510. 
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 incumbents  already  operate  ubiquitous  legacy  circuit  switching  networks    our  inquiry  into  unbundlings  impact  on  investment  incentives  focuses  primarily  on  the  competitive  LECs 
 incentives  to  deploy  alternative  switching  facilities.  In  fact,  given  that  we  do  not  require  packet  switches  to  be  unbundled,  there  is  little,  if  any,  basis  for  an  argument  that  our  treatment  of  circuit 
 switches  gives  LECs  a  disincentive  to  upgrade  their  switches. 
 449.  The  parties  submit  conflicting  evidence  regarding  the  relationship  between  unbundled  local  circuit  switching  and  investment  incentives.  The  incumbent  LECs  claim  that 

 unbundling  obligations  undermine  competitive  LECs  incentives  to  invest  in  local  circuit  switching  facilities  because  the  competitive  carriers  will  always  prefer  to  use  the  incumbents 
 switching  facilities,  which  are  available  to  them  at  TELRIC  rates  that  assume  the  use  of  the  most  efficient  technologies  available.  1369  For  example,  the  incumbents  UNE-  P  and  Investment  study 
 asserts  that  as  unbundled  local  circuit  switching  usage  increases  in  a  given  state,  the  number  of  competitive  LEC-  owned  lines  decreases.  1370  Competitive  LECs  deny  that  elimination  of 
 unbundled  local  switching  will  result  in  additional  competitive  LEC  switch  deployment.  1371  In  support  of  their  contentions,  however,  the  competitive  carriers  advance  their  own  studies 
 purporting  to  show  that  unbundling  obligations  in  fact  encourage  carriers  to  make  capital 

 1369  Incumbents  also  argue  that  local  circuit  switch  unbundling  obligations  undermine  their  own  incentives  to  make 
 capital  investment  in  their  own  facilities  because  competitive  LECs  are  free  to  use  those  same  facilities,  at  TELRIC  rates,  to  compete  for  the  incumbent  LECs  customers.  See,  e.  g.,  SBC  Comments  at  6. 

 1370  Verizon  Unbundled  Switching  Study.  The  study  consisted  of  a  univariant  regression,  which  AT&  T 
 characterizes  as  a  correlation  study.  See  also  Verizon  Reply,  App.  1,  Harold  Ware,  UNE-  P  Use  and  Facilities-Based  Competition,  in  New  York  and  Other  States,  in  Z-  Tel  Nov.  7,  2002  Ex  Parte  Letter.  The  study  regresses 

 competitive  LEC  facilities  based  access  lines  per  1,000  BOC  access  lines  against  competitive  LEC  access  lines  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  per  1,000  BOC  access  lines  for  all 
 states  where  competitive  LEC  access  lines  (unbundled  loops  combined  with  unbundled  local  circuit  switching  and  full  facilities)  combined  exceed  10%  of  BOC  lines.  Verizon  Unbundled  Switching  Study  at  3-  4. 

 1371  AT&  T  Comments  at  222-  23;  WorldCom  Reply  at  153-  57.  WorldCom,  for  example,  claims  that  it  has  built 
 more  switches  in  states  where  unbundled  switching  has  been  available  without  restriction.  See  also  Letter  from  Lawrence  R.  Freedman,  Counsel  for  WorldNet,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  3 

 (filed  Jan.  6,  2003)  (WorldNet  Jan.  6,  2003  Ex  Parte  Letter)  (stating  that  its  business  plan  is  largely  dependent  upon  its  ability  to  purchase  unbundled  loops  combined  with  unbundled  local  circuit  switching  from  the  incumbent  as  a 
 transition  step).  SBC  challenges  this  claim.  See  SBC  Jan.  7,  2003  Ex  Parte  Letter  at  6  (stating  that,  in  New  York,  AT&  T  and  WorldCom  operate  28  switches  and  serve  over  one  million  residential  customers  using  unbundled 
 incumbent  LEC  local  circuit  switching,  but  have  not  converted  a  single  residential  customer  to  their  switches);  CWA  Jan.  14,  2003  Ex  Parte  Letter.  We  find,  however,  that  the  fact  that  competitors  have  not  converted  unbundled 
 loops  combined  with  unbundled  local  circuit  switching  or  served  residential  customers  with  existing  switches  only  serves  to  demonstrate  the  barriers  to  such  service.  AT&  T  Comments  at  207-  08,  224-  31;  BiznessOnline.  Com  Feb. 
 14,  2003  Ex  Parte  Letter  at  23-  24;  Z-  Tel  Comments  at  34-  36;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  3-  4.  Given  the  sunk  costs  already  invested  in  deployed  switches,  competitors  have  every  incentive  to  spread  those 
 costs  over  a  larger  base.  AT&  T  Comments  at  211-  12;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  2-  3;  NewSouth  Reply  at  29-  30;  Z-  Tel  Comments  at  52-  54  &  n.  113.  Barriers  caused  by  hot  cuts  and  other  factors  simply 
 make  this  uneconomic.  AT&  T  Comments  at  207-  08,  212,  214-  17;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  8-  11;  NewSouth  Reply  at  26-  28;  Z-  Tel  Comments  at  35-  36. 
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 investments  to  meet  increasing  competition.  1372  We  find,  however,  that  the  economic  studies  presented  by  both  sides  of  the  industry  suffer  from  several  fundamental  flaws  that  undermine 
 their  probative  value.  1373  Thus,  we  are  unable  to  conclude  from  the  parties  studies  that  the  availability  of  unbundled  local  circuit  switching  either  depresses  or  stimulates  infrastructure 
 investment. 
 450.  Section  706s  directive  to  promote  advanced  telecommunications  is  not  undermined  by  the  unbundling  of  local  circuit  switching  because  such  unbundling  imposes 

 requirements  with  respect  to  the  legacy  telephone  network,  and  thus  does  not  deter  carriers  investment  in  advanced  telecommunications  capabilities.  Accordingly,  we  do  not  believe  that 
 section  251(  d)(  2)  s  at  a  minimum  language  justifies  any  departure  from  our  impairment  findings  in  the  switching  context.  1374 

 5.  DS1  Enterprise  Customers 
 451.  We  find  that  the  record  evidence  establishes  that  there  are  few  barriers  to  deploying  competitive  switches  to  serve  customers  in  the  enterprise  market  at  the  DS1  capacity 

 and  above,  and  thus  no  operational  or  economic  impairment  on  a  national  basis.  1375 
 1372  See,  e.  g.,  AT&  T  Comments  at  65-  97;  AT&  T  Willig  Decl.;  Z-  Tel  Oct.  7,  2002  Innovation  Ex  Parte  Letter  at  5; 
 AT&  T  Willig  Stimulating  Investment  at  1-  7,  28-  39. 
 1373  The  studies  submitted  by  the  incumbent  LECs,  such  as  Verizon  Unbundled  Switching  Study,  are  overly 
 simplified  correlation  models  or  state-  to-  state  comparisons  lacking  adequate  explanation  of  relevant  variables.  BOC  Shelanski  Decl.  at  22;  AT&  T  Oct.  15,  2002  Ex  Parte  Letter,  Attach.  C  at  12,  14  (AT&  T  Pfau  Correcting)  (asserting 

 that  the  study  supposedly  showing  how  the  high  level  of  unbundled  loops  combined  with  unbundled  local  circuit  switching  equates  to  low  facilities-  based  competitive  LEC  access  lines  simply  plots  competitive  LEC  facilities 
 based  access  lines  against  competitive  LEC  unbundled  loops  combined  with  unbundled  local  circuit  switching  lines  but  does  not  include  all  states). 

 1374  Several  incumbent  LECs  express  particular  opposition  to  any  outcome  that  would  maintain  the  availability  of 
 unbundled  loops  combined  with  unbundled  local  circuit  switching.  See,  e.  g.,  Verizon  Comments  at  6;  SBC  Comments  at  76.  This  opposition  appears  to  stem  from  the  incumbent  LECs  claim  that  the  TELRIC  rates  they 

 obtain  for  UNEs  do  not,  in  fact,  compensate  them  for  the  costs  associated  with  provisioning  these  UNEs  to  requesting  carriers.  See,  e.  g.,  Verizon  Comments  at  32-  33;  SBC  Comments  at  34-  35;  BellSouth  Reply  at  43,  51 
 n.  118.  As  explained  below,  however,  we  intend  to  review  our  TELRIC  framework  in  a  future  proceeding.  See  infra  Part  VIII.  B.  2.  To  the  extent  the  incumbent  LECs  concerns  relate  not  to  the  proper  interpretation  of  the 
 section  251(  d)(  2)  standards  governing  access  to  UNEs,  but  rather  to  the  section  252(  d)(  1)  UNE  pricing  standards,  those  concerns  should  properly  be  addressed  in  that  future  proceeding  rather  than  in  this  Order. 

 1375  The  dissents  claim  that,  when  we  voted  February  20th,  we  intended  to  make  only  presumptions  on 
 impairment  and  that  we  have  now  significantly  changed  the  item  in  making  an  affirmative  finding.  Chairman  Powell  Statement  at  n.  42;  Commissioner  Abernathy  Statement  at  4.  This  argument  completely  misses  the  mark.  In 

 both  the  language  we  adopted  February  20th  and  in  this  item,  we  had  exactly  the  same  intent:  to  make  a  national  finding  based  on  the  record  evidence  but  to  allow  the  states  to  rebut  that  finding  based  on  a  more  granular  inquiry. 
 In  this  manner,  we  intended  to  treat  switching  exactly  as  Chairman  Powell  proposed  and  the  Commission  unanimously  voted  to  treat  transport  and  loops.  We  previously  characterized  this  approach  as  a  presumption 
 because  Chairman  Powells  proposed  draft  of  the  item  used  the  presumption  terminology  in  the  transport  and  loops  sections  to  convey  that  a  finding  of  impairment  (or  non-  impairment)  is  subject  to  a  more  a  granular  review  by 
 the  states.  The  presumption  language  in  the  loops  and  transport  sections  was  subsequently  changed,  and,  (continued.) 
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 Consequently,  we  establish  a  national  finding  that  competitors  are  not  impaired  with  respect  to  DS1  enterprise  customers  that  are  served  using  loops  at  the  DS1  capacity  and  above.  1376  DS1 
 enterprise  customers  are  characterized  by  relatively  intense,  often  data-  centric,  demand  for  telecommunications  services  sufficient  to  justify  service  via  high-  capacity  loops  at  the  DS1 
 capacity  and  above.  The  evidence  in  the  record  demonstrates  that  it  becomes  viable  to  aggregate  loops  at  a  customer  location  and  provide  service  at  a  DS1  capacity  interface  or  higher.  1377 
 Specifically,  if  a  customer  has  purchased  services  from  the  competitive  carrier  that  require  a  DS1  or  above  loop,  it  is  economically  feasible  to  digitize  the  traffic  and  aggregate  the  customers 
 voice  loops  at  the  customers  premises  and  put  them  onto  a  high-  capacity  circuit.  1378  This  obviates  the  need  for  hot  cuts  at  the  incumbent  LECs  central  office,  1379  which,  as  discussed 
 above,  is  a  significant  source  of  impairment.  Specifically,  the  conversion  process  for  enterprise  customers  generally  involves  the  initiation  of  service  to  the  competitors  new  digital  loop  while 
 the  incumbents  service  remains  in  place.  1380  During  migration  of  an  enterprise  customer  from  analog  services  to  a  new  digital  loop,  the  enterprise  customers  remain  on  the  incumbents  analog 
 facilities  while  the  new  digital  loop  is  installed  and  service  initiated.  1381  Similarly,  where  enterprise  customers  are  being  converted  from  the  digital  facilities,  the  competing  carrier  installs 

 (Continued  from  previous  page) 
 accordingly,  we  changed  the  switching  language  to  be  consistent.  In  no  sense  did  we  intend  to  change  our  approach.  The  claim  that  we  made  no  findings  at  all  is  simply  false.  Although  we  used  the  presumption 

 terminology  in  accord  with  Chairman  Powells  proposed  language  for  transport  and  loops,  we  were  explicit  that  our  switching  determination  was  based  on  findings  of  fact    i.  e.,  the  impairments  associated  with  cutting  over  large 
 volumes  of  loops,  the  NRCs  associated  with  cutting  over  those  loops,  and  the  churn  rates.  Despite  any  confusion,  throughout  this  process  we  have  consistently  endeavored  to  create  a  document  that  reflects  the  majoritys  views. 
 Todays  item  is  fully  consistent  with  the  positions  taken  in  the  negotiations  leading  to  the  vote,  the  vote  on  February  20th,  and  the  majoritys  views  today. 

 1376  For  purposes  of  determining  whether  impairment  exists  according  to  our  standard,  we  define  DS1  enterprise 
 customers  as  those  customers  for  which  it  is  economically  feasible  for  a  competing  carrier  to  provide  voice  service  with  its  own  switch  using  a  DS1  or  above  loop.  We  determine  that  this  includes  all  customers  that  are  served  by  the 

 competing  carrier  using  a  DS1  or  above  loop,  and  all  customers  meeting  the  DS0  cutoff  described  below  in  paragraph  497.  As  discussed  below,  however,  we  determine  that  the  state  commissions  are  best  situated  to  identify 
 potential  enterprise  customers,  i.  e.,  those  customers  for  whom  it  could  be  economically  feasible  to  serve  using  a  DS1  or  above  loop.  See  infra  para.  497.  Because  of  the  expected  difficulties  and  detailed  information  needed  in 
 conducting  this  inquiry,  we  allow  the  states  nine  months  to  make  this  identification,  which  would  include  determining  the  maximum  number  of  lines  that  a  carrier  may  obtain  from  a  particular  customer  before  that  customer 
 is  classified  as  a  enterprise  customer.  We  expect  such  analysis  to  be  conducted  at  the  same  time  as  the  analysis  of  the  mass  market.  State  commissions  have  discretion  to  define  the  relevant  markets  for  purposes  of  this  inquiry, 
 provided  they  follow  the  guidelines  described  here  and  below.  See  infra  Part  VI.  D.  6.  a.(  ii)(  b)(  i)  (discussing  the  market  definition  to  be  used  by  states). 

 1377  Z-  Tel  Comments  at  52. 
 1378  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  14. 
 1379  See  NewSouth  Reply  at  27-  28;  NewSouth  Fury  Reply  Aff.  at  para.  6. 
 1380  NewSouth  Fury  Reply  Aff.  at  paras.  6,  14. 
 1381  Id.  at  para.  14. 
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 and  initiates  service  on  a  new  digital  loop  in  parallel  with  the  customers  existing  service.  1382  In  each  case,  the  incumbents  service  is  disconnected  only  after  the  competitors  service  over  a  new 
 loop  has  been  initiated.  1383  Thus,  enterprise  customers  avoid  potentially  lengthy  disruption  of  service  due  to  physical  hot  cuts,  occasionally  experiencing  an  outage  of  only  10  to  30  seconds 
 for  incoming  calls  as  their  numbers  are  updated  in  the  industry  databases  used  to  route  calls.  1384  As  a  result,  competitive  carriers  neither  incur  the  costs  of  hot  cuts  nor  experience  the  quality 
 degradation  associated  with  the  cut  over  process  to  serve  customers  with  loops  with  DS1  capacity  and  above.  1385  Accordingly,  competitive  LECs  generally  face  the  same  opportunities 
 and  challenges  as  incumbents  on  connecting  such  facilities  to  their  switches. 
 452.  In  addition,  the  revenue  opportunities  associated  with  serving  DS1  enterprise  customers  generally  are  sufficient  to  justify  the  sunk  and  fixed  costs  associated  with  using  and 

 installing  the  switch.  1386  DS1  enterprise  customers  are  typically  medium  or  large  business  customers  with  high  demand  for  a  variety  of  sophisticated  telecommunications  services  that  use 
 loops  with  DS1  capacity  and  above.  DS1  enterprise  customers  purchase  extensive  local  services,  resulting  in  significant  revenues  to  the  service  provider,  allowing  a  greater  opportunity  for  the 
 competitive  LEC  to  recover  any  non-  recurring  costs  associated  with  the  set-  up  of  the  loop  and  switch  facilities  necessary  to  provide  services.  1387  DS1  enterprise  customers  are  more  receptive 
 to  entering  into  long-  term  contracts,  which  likewise  gives  competing  carriers  a  greater  ability  to  recover  non-  recurring  costs.  Moreover,  because  large  business  customers  generate  comparably 
 greater  revenues  than  residential  customers,  requesting  carriers  are  more  willing  to  tolerate  any  provisioning  difficulties  that  may  be  present  in  the  installation  process. 

 453.  The  record  demonstrates  that  competitive  LECs  are  competing  successfully  in  the  provision  of  switched  services,  using  a  collocation  network  with  associated  backhaul  transport, 
 to  medium  and  large  enterprise  customers  without  unbundled  local  circuit  switching.  1388  The  characteristics  of  the  enterprise  market  support  use  of  self-  provisioned  switching  in  combination 
 with  unbundled  loops  (or  loop  facilities)  without  the  imposition  of  substantial  barriers  upon  the 
 1382  Id.  at  paras.  18-  19. 
 1383  Id.  at  para.  19. 
 1384  Id.  at  paras.  15-  17. 
 1385  NewSouth  Fury  Reply  Aff.  at  para.  6;  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T, 
 to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Jan.  17,  2003)  (AT&  T  Jan.  17,  2003  Ex  Parte  Letter);  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  14. 

 1386  NewSouth  Reply  at  29-  30;  NewSouth  Fury  Reply  Aff.  at  paras.  5-  6. 
 1387  NewSouth  Reply  at  30;  NewSouth  Fury  Reply  Aff.  at  para.  6. 
 1388  Allegiance,  for  example,  serves  several  enterprise  customers  using  its  own  switches.  Verizon  Reply  at  103 
 (citing  Allegiance  SEC  Form  10-  K  for  the  period  ending  December  31,  2001).  In  addition,  Conversent  Communications  also  provides  local  and  long  distance  voice  and  data  service  to  small  and  medium  sized  business 

 customers  in  second  and  third  tier  urban  and  suburban  markets  using  its  own  switch.  Conversent  Comments  at  1-  2. 
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 competitive  LEC.  The  record  indicates  that  competitive  LECs  are  serving  at  least  13  million  business  lines  through  self-  deployed  switches,  approximately  89  percent  of  all  UNE-  L  lines 
 served  by  competitive  switches.  1389  Accordingly,  while  the  enterprise  market  characteristics  do  not  eliminate  all  of  the  cost  and  operational  disadvantages  that  competitive  carriers  may  face 
 when  using  their  own  switches  to  serve  enterprise  customers,  we  find  that  evidence  in  the  record  shows  that,  unlike  for  the  mass  market,  the  elimination  of  cut  over  cost  differentials  and  other 
 operational  issues  supports  a  national  finding  of  no  impairment.  1390  That  is,  the  record  indicates  that  denial  of  access  to  unbundled  switching  would  not  impair  a  competitors  ability  to  serve  the 
 enterprise  markets,  including  all  customers  which  are  served  by  the  competitor  over  loops  of  DS1  capacity  and  above.  1391 

 454.  Although  the  record  shows  no  impairment  on  a  national  basis,  we  recognize  that  a  geographically  specific  analysis  could  possibly  demonstrate  that  competitive  carriers  are 
 impaired  without  access  to  unbundled  incumbent  LEC  local  circuit  switching  for  DS1  enterprise  customers  in  a  particular  market.  1392  As  discussed  above,  while  the  record  shows  that  cut  over 
 cost  differentials  are  eliminated  and  other  operational  challenges  may  be  mitigated  when  competitive  carriers  use  their  own  switches  to  serve  enterprise  customers,  the  characteristics  of 
 enterprise  markets  do  not  eliminate  all  of  the  cost  and  operational  disadvantages.  For  example,  in  a  local  market  with  low  retail  rates,  it  is  possible  that  difficulties  in  obtaining  collocation 
 space,  costs  accompanying  collocation,  high  UNE  rates  for  local  loops,  and  backhaul  costs  could  make  it  uneconomic  for  competitive  LECs  to  self-  deploy  switches  specifically  to  serve  the 
 enterprise  market.  In  particular,  the  record  suggests  that  such  factors  make  impairment  more  likely  in  rural  areas.  1393 

 455.  While  the  record  in  this  proceeding  does  not  contain  evidence  identifying  any  particular  markets  where  competitive  carriers  would  be  impaired  without  unbundled  access  to 
 local  circuit  switching  to  serve  enterprise  customers,  state  commissions  are  uniquely  positioned  to  evaluate  local  market  conditions  and  determine  whether  DS1  enterprise  customers  should  be 
 granted  access  to  unbundled  incumbent  LEC  circuit  switching.  1394  To  that  end,  we  permit  state 

 1389  BOC  UNE  Fact  Report  2002  at  II-  1;  Verizon  Unbundled  Switching  Study  at  3. 
 1390  See,  e.  g.,  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  3  (filed  Oct.  10,  2002)  (Z-  Tel  Oct.  10,  2002  Ex  Parte  Letter)  (stating  that  large  businesses  with  intensive  bandwidth  needs  are  a  different  market  than  the  mass  market    they  will  agree  to 

 enter  into  long-  term  contracts  and  can  tolerate  some  degree  of  manual  installation). 
 1391  See  Verizon  Reply  at  103  (citing  Allegiance  Telecom,  Inc.  SEC  Form  10-  K  for  year  ending  December  31, 
 2001,  at  30,  34). 
 1392  We  also  note  that  these  costs  may  only  be  considered  a  barrier  to  entry  if  they  are  sufficient  to  prevent 
 economic  entry,  and  thus  they  would  not  be  considered  the  kinds  of  costs  any  new  entrant  would  bear. 
 1393  See,  e.  g.,  UNE-  P  Coalition  Comments  at  51;  PACE  Dec.  12,  2002  Ex  Parte  Letter. 

 1394  Moreover,  where  we  have  found  no  impairment,  states  may  alter  that  determination  only  by  petitioning  this 
 Commission.  It  is  solely  where  we  have  found  impairment  that  states  may  alter  the  finding  without  petitioning  us  (continued.) 
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 commissions  to  rebut  the  national  finding  of  no  impairment  by  undertaking  a  more  granular  analysis  utilizing  the  economic  and  operational  criteria  contained  herein.  State  commissions  will 
 have  90  days  from  the  effective  date  of  this  Order  to  petition  the  Commission  to  waive  the  finding  of  no  impairment.  1395  State  commissions  wishing  to  do  so  must  make  an  affirmative 
 finding  of  impairment  showing  that  carriers  providing  service  at  the  DS1  capacity  and  above  should  be  entitled  to  unbundled  access  to  local  circuit  switching  in  a  particular  market.  1396  State 

 (Continued  from  previous  page) 
 first.  This  further  undercuts  the  dissents  claims  that  the  role  we  provide  for  the  states  is  biased  in  favor  of  finding  impairment. 

 1395  Chairman  Powell  complains  that  the  majority  fails  to  reach  a  conclusive  finding  of  no-  impairment  in 
 competitive  business  markets.  Chairman  Powell  Statement  at  14.  In  fact,  we  have  made  a  nationwide  finding  that  switching  for  enterprise  customers  should  not  be  unbundled,  which  states  can  displace  only  by  filing  a  petition  for 

 waiver  with  this  Commission  based  on  explicitly  enumerated  factors.  Chairman  Powells  assertion  that  we  should  not  allow  waivers  of  our  determination  is  difficult  to  fathom.  The  Commissions  governing  rules  state  that  Any 
 provision  of  the  rules  may  be  waived  by  the  Commission  on  its  own  motion  or  on  petition  if  good  cause  therefore  is  shown.  47  C.  F.  R.    1.3.  Moreover,  in  sections  of  the  Order  proposed  by  Chairman  Powell  and  adopted 
 unanimously,  we  explicitly  note  that  our  unbundling  determinations  for  transport  and  high-  cap  loops  can  be  displaced  by  states  through  filing  of  a  waiver  with  this  Commission. 

 1396  In  voting  on  February  20th,  we  noted  that  the  manner  in  which  state  commissions  could  rebut  our  national 
 finding  of  impairment  for  enterprise  switches  was  subject  to  further  analysis  regarding  the  viability  of  that  approach.  After  completing  this  further  analysis  and  reviewing  concerns  raised  by  the  dissents  that  had  not  been  previously 

 discussed,  we  decided  that  allowing  state  commissions  to  rebut  the  national  findings  through  a  waiver  petition  to  this  Commission  was  the  best  way  to  effectuate  its  overall  intent  in  the  item  and  provide  effective  oversight.  As  the 
 Commission  has  concluded  in  other  contexts,  [  s]  ome  of  those  concerns  were  well  thought-  out  and  prompted  the  majority  to  rethink  its  position  and  further  explain  its  rationale.  Those  steps  improved  this  Order    and  in  turn 
 resulted  in  a  higher  quality  product  for  the  American  people.  At  the  end  of  the  day  that  should  be  the  goal  of  all  the  Commissioners.  Joint  Statement  of  Chairman  Powell  and  Commissioner  Abernathy  on  Northpoint,  17  FCC  Rcd  at 
 9807.  The  waiver  process  we  adopted  improved  this  Order  and  also  responds  to  some  of  the  dissenters  concerns  about  oversight.  While  ideally  we  would  engage  in  the  dialogue  at  an  earlier  stage,  continuous  improvement  of 
 our  items  is  the  right  thing  to  do.  See  Joint  Statement  of  Chairman  Powell  and  Commissioner  Abernathy  on  Northpoint,  17  FCC  Rcd  at  9807.  The  Commission  routinely  clarifies  its  intent  and  strengthens  its  orders  through 
 post-  adoption  edits  before  an  items  release.  See  Joint  Statement  of  Chairman  Powell  and  Commissioner  Abernathy  on  Northpoint,  17  FCC  Rcd  at  9807  n.  705  (  There  is  nothing  procedurally  inappropriate  in  making 
 changes,  substantive  or  non-  substantive,  after  adoption  to  further  elucidate  the  rationale  for  the  Commissions  decision.  Such  revisions  are  permissible  when  all  non-  dissenting  Commissioners  concur  in  the  changes.  Here,  all 
 of  the  Commissioners  who  supported  the  relevant  sections  agreed  to  the  post-  adoption  edits.);  Statement  of  Chairman  William  E.  Kennard,  1998  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast 
 Ownership  Rules  and  Other  Rules  Adopted  Pursuant  to  Section  202  of  the  Telecommunications  Act  of  1996,  MM  Docket  No.  98-  35,  Biennial  Review  Report,  15  FCC  Rcd  11058,  11126  n.  6  (2000)  (  Contrary  to  the  suggestion  of 
 dissenting  Commissioners,  there  is  nothing  procedurally  inappropriate  in  making  revisions,  substantive  or  non-substantive,  to  the  biennial  review  report  after  adoption  in  order  to  further  elucidate  the  rationale  for  the  decision  to 
 retain  the  national  ownership  rule.  Such  revisions  are  permissible  when  all  non-  dissenting  Commissioners  concur  in  the  revisions.  Here,  all  the  Commissioners  who  supported  the  relevant  sections  agreed  to  the  post-  adoption  edits. 
 Post-  adoption  edits  are  not  uncommon.);  Separate  Statement  of  Commissioner  Kevin  J.  Martin,  2002  Biennial  Regulatory  Review    Review  of  the  Commissions  Broadcast  Ownership  Rules  and  Other  Rules  Adopted  Pursuant 
 to  Section  202  of  the  Telecommunications  Act  of  1996,  Report  and  Order  and  Notice  of  Proposed  Rulemaking,  MB  Docket  Nos.  02-  277,  03-  130,  MM  Docket  Nos.  01-  235,  01-  317,  00-  244,  at  2-  3  n.  1  (rel.  July  2,  2003)  (enumerating 
 some  of  the  substantive  post-  adoption  edits  to  that  item).  Indeed,  elsewhere  in  this  item,  after  initially  requiring  that  incumbent  LECs  seek  state  approval  before  retiring  copper  loops,  the  Chairman  proposed,  and  the  majority  agreed, 
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 commissions  have  discretion  to  define  the  relevant  markets  for  purposes  of  this  inquiry,  provided  they  follow  the  guidelines  described  here  and  below.  1397  After  the  90-  day  period,  states  may 
 wish,  pursuant  to  state-  determined  procedures,  to  revisit  whether  competitive  LECs  are  impaired  without  access  to  unbundled  local  circuit  switching  to  serve  enterprise  customers  due  to  changes 
 in  the  specified  operational  and  economic  criteria.  1398 
 456.  Operational  Criteria.  In  order  to  rebut  the  Commissions  finding  of  no  impairment  as  it  relates  to  operational  barriers,  the  states  must  examine  whether  operational 

 factors  are  impairing  competitors,  according  to  our  impairment  standard  discussed  above.  1399  In  particular,  state  commissions  must  consider  whether  incumbent  LEC  performance  in 
 provisioning  loops,  difficulties  in  obtaining  collocation  space  due  to  lack  of  space  or  delays  in  provisioning  by  the  incumbent  LEC,  or  difficulties  in  obtaining  cross-  connects  1400  in  an 
 incumbents  wire  center,  are  making  entry  uneconomic  for  competitive  LECs.  We  believe,  based  on  the  large  record  in  this  proceeding,  that  these  factors  can  raise  barriers  to  entry.  1401  We 
 lack,  however,  sufficient  specific  evidence  concerning  whether  and  where  they  will  be  significant  enough  to  constitute  impairment.  We  therefore  ask  state  commissions  to  consider 
 evidence,  which  could  include  performance  metrics  and  standards  for  BOCs  or  other  types  of  evidence  for  non-  BOC  incumbent  LECs,  of  whether  these  factors  are  impairing  entrants  in  the 
 enterprise  market,  and  whether  unbundling  will  overcome  this  impairment. 
 457.  Economic  Criteria.  To  rebut  the  Commissions  finding  that  competitive  LECs  are  not  impaired  by  the  lack  of  access  to  unbundled  local  circuit  switching,  the  states  must  find 

 that  entry  into  a  particular  market  is  uneconomic  in  the  absence  of  unbundled  local  circuit  switching.  To  make  this  determination,  states  must  weigh  competitive  LECs  potential  revenues 
 from  serving  enterprise  customers  in  a  particular  geographic  market  against  the  cost  of  entry  into  that  market.  In  evaluating  competitive  LECs  potential  revenues,  the  states  should  consider  all 
 likely  revenues  to  be  gained  from  entering  the  enterprise  market  (not  necessarily  any  carriers  individual  business  plan),  including  revenues  derived  from  local  exchange  and  data  services. 
 The  states  should  also  consider  the  prices  entrants  are  likely  to  be  able  to  charge,  after  considering  the  prevailing  retail  rates  the  incumbents  charge  to  the  different  classes  of  customers 

 (Continued  from  previous  page) 
 to  remove  this  approval  requirement.  Here  in  this  item,  all  of  the  Commissioners  who  support  the  relevant  section  agree  to  the  post-  adoption  edits,  as  each  has  signed  the  Commission  form  designated  for  precisely  that  purpose. 

 1397  See  infra  Part  VI.  D.  6.  a.(  ii)(  b)(  i)  (discussing  the  market  definition  to  be  used  by  the  states). 
 1398  Any  subsequent  review  to  rebut  the  Commissions  finding  remains  subject  to  the  petition  process  discussed  in 
 this  paragraph  above.  The  proceedings  described  in  this  paragraph  shall  be  completed  within  six  months  of  the  filing  of  a  petition  or  other  pleading  submitted  in  accordance  with  the  prescribed  state  procedures. 

 1399  See  supra  Part  V.  B.  1  (discussing  our  impairment  standard). 
 1400  A  cross-  connect  is  defined  as  [  a]  connection  scheme  between  cabling  runs,  subsystems,  and  equipment  using 
 patch  cords  or  jumpers  that  attach  to  connecting  hardware  on  each  end.  NEWTONS  TELECOM  DICTIONARY  at  191  (18th  ed.  2002). 

 1401  See  infra  Part  VI.  D.  5. 
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 in  the  different  parts  of  the  state.  In  determining  the  cost  of  entry  into  a  particular  geographic  market,  the  states  should  consider  the  costs  imposed  by  both  operational  and  economic  barriers 
 to  entry. 
 458.  The  states  must  consider  all  relevant  factors  in  determining  whether  entry  is  uneconomic  in  the  absence  of  unbundled  access  to  local  circuit  switching.  For  example,  even  in 

 a  market  where  retail  rates  would  give  competitive  carriers  the  opportunity  to  earn  considerable  revenues,  entry  may  nonetheless  be  uneconomic.  For  example,  the  potential  revenues  could  be 
 outweighed  by  a  combination  of  even  higher  economic  and  operational  costs,  such  as  untimely  and  unreliable  provisioning  of  loops,  transport,  or  collocation  by  the  incumbent  LEC  at  high 
 non-  recurring  charges,  and  significant  costs  to  purchase  equipment  and  backhaul  the  local  traffic  to  the  competitors  switch.  However,  where  competitive  LECs  have  the  opportunity  to  earn 
 revenues  that  outweigh  the  costs  associated  with  entry,  carriers  are  not  impaired  without  unbundled  access  to  local  circuit  switching  for  DS1  enterprise  customers. 

 6.  Mass  Market  Customers 
 459.  The  record  demonstrates  that  customers  for  mass  market  services  are  different  from  customers  in  the  enterprise  market.  1402  The  mass  market  for  local  services  consists 

 primarily  of  consumers  of  analog  plain  old  telephone  service  or  POTS  that  purchase  only  a  limited  number  of  POTS  lines  and  can  only  economically  be  served  via  analog  DS0  loops.  1403 
 We  find  on  a  national  basis,  that  competing  carriers  are  impaired  without  access  to  unbundled  local  circuit  switching  for  mass  market  customers.  1404  This  finding  is  based  on  evidence  in  our 
 record  regarding  the  economic  and  operational  barriers  caused  by  the  cut  over  process.  1405  These 
 1402  Mass  market  customers  are  residential  and  very  small  business  customers    customers  that  do  not,  unlike  larger 
 businesses,  require  high-  bandwidth  connectivity  at  DS1  capacity  and  above.  Z-  Tel  Comments  at  30-  31.  Mass  market  customers  accounts  tend  to  be  smaller,  lower  revenue  accounts  and  are  often  serviced  on  a  month-  to-  month 

 basis  and  not  pursuant  to  annual  contracts.  The  record  shows  that  consumers  of  DS1  capacity  and  above  telecommunications  are  more  willing  to  sign  annual  or  term  commitments.  Id.  at  32. 

 1403  Z-  Tel  Comments  at  30. 
 1404  As  mentioned,  the  dissenters  are  simply  wrong  in  claiming  that,  when  we  voted  on  February  20th,  we  intended 
 to  make  only  presumptions  on  impairment  and  that  we  have  now  significantly  changed  the  item.  See  supra  note  1375.  In  both  the  language  we  adopted  February  20th  and  in  this  item,  we  had  exactly  the  same  intent:  to  make  a 

 national  finding  based  on  a  more  granular  inquiry.  In  this  manner,  we  intended  to  treat  switching  the  exactly  as  Chairman  Powell  proposed  and  the  Commission  unanimously  voted  to  treat  transport  and  loops.  We  previously 
 characterized  this  approach  as  a  presumption  because  Chairman  Powells  proposed  draft  of  the  item  used  the  presumption  terminology  in  the  transport  and  loops  sections  to  convey  that  a  finding  impairment  (or 
 nonimpairment)  is  subject  to  a  more  granular  review  by  the  states.  The  presumption  language  in  the  loops  and  transport  sections  was  subsequently  changed,  and,  accordingly,  we  changed  the  switching  language  to  be  consistent. 
 As  we  explained,  see  supra  note  1375,  in  no  sense  did  we  intend  to  change  our  approach. 
 1405  Chairman  Powell  claims  that  [  t]  he  Majority  finds  impairment  based  solely  on  the  basis  of  operational 
 impairment  but,  he  asserts,  it  empowers  the  states  to  find  economic  impairment  (even  after  curing  the  operational  concern)  based  on  a  laundry  list  of  possible  economic  disadvantages.  Chairman  Powell  Statement  at  7.  The 

 Chairman  misrepresents  our  analysis.  To  begin  with,  we  base  our  impairment  finding  on  economic  and  operational  barriers.  See  supra  paras.  459-  475.  Among  other  things,  for  example,  we  find  that  high  non-  recurring  per-  line 
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 barriers  include  the  associated  non-  recurring  costs,  the  potential  for  disruption  of  service  to  the  customer,  and  our  conclusion,  as  demonstrated  by  our  record,  that  incumbent  LECs  appear 
 unable  to  handle  the  necessary  volume  of  migrations  to  support  competitive  switching  in  the  absence  of  unbundled  switching.  These  hot  cut  barriers  not  only  make  it  uneconomic  for 
 competitive  LECs  to  self-  deploy  switches  specifically  to  serve  the  mass  market,  but  also  hinder  competitive  carriers  ability  to  serve  mass  market  customers  using  switches  self-  deployed  to 
 serve  enterprise  customers. 
 460.  In  this  section,  we  ask  state  commissions  to  take  specific  actions  designed  to  alleviate  impairment  in  markets  over  which  they  exercise  jurisdiction.  Because  we  find  that 

 operational  and  economic  factors  associated  with  the  current  hot  cut  process  used  to  transfer  a  loop  from  one  carriers  switch  to  anothers  serve  as  barriers  to  competitive  entry  in  the  absence 
 of  unbundled  switching,  state  commissions  must,  within  nine  months  from  the  effective  date  of  this  Order,  approve  and  implement  a  batch  cut  process  that  will  render  the  hot  cut  process  more 
 efficient  and  reduce  per-  line  hot  cut  costs.  In  the  alternative,  if  appropriate  for  any  particular  geographic  market,  state  commissions  must  issue  detailed  findings  supporting  a  conclusion  that 
 current  hot  cut  processes  do  not  give  rise  to  impairment  in  a  market  and  that  a  batch  cut  process  is  therefore  unnecessary. 

 461.  We  also  recognize  that  a  more  granular  analysis  may  reveal  that  a  particular  market  is  not  subject  to  impairment  in  the  absence  of  unbundled  local  circuit  switching.  We 
 therefore  set  forth  two  triggers  that  state  commissions  must  apply  in  determining  whether  requesting  carriers  are  impaired  in  a  given  market.  Our  triggers  are  based  on  our  conclusion  that 
 actual  deployment  is  the  best  indicator  of  whether  there  is  impairment,  and  accordingly  evidence  of  actual  deployment  is  given  substantial  weight  in  our  impairment  analysis.  Thus,  we  determine 
 that  states  should  examine  these  triggers  first  in  their  analyses. 

 (Continued  from  previous  page) 
 charges  for  connecting  a  carriers  own  switch  to  an  unbundled  loop  in  combination  with  customer  churn  may  make  entry  uneconomic.  Id.  Moreover,  Chairman  Powells  suggestion  that  we  allow  states  to  find  impairment  on  the 

 basis  of  factors  that  we  did  not  consider  is  simply  wrong,  as  we  did  consider  and  address  all  of  these  factors.  We  found  that  the  record  evidence  indicates  that  these  factors  may  give  rise  to  impairment  in  a  given  market,  even 
 setting  aside  the  problems  associated  with  hot  cuts.  See  supra  para.  476.  We  did  not  base  our  national  impairment  finding  on  these  factors  because  [  t]  he  evidence  in  the  record  is  not  sufficiently  detailed  to  conclude  that 
 impairment  exists  on  a  national  basis  due  to  these  factors,  as  they  vary  on  a  geographic  basis.  See  supra  para.  476  note  1472.  It  is  for  that  reason  that  we  have  asked  the  states  to  investigate  them.  Finally,  Chairman  Powells 
 intimation  that  we  have  tilted  the  scales  in  favor  of  finding  impairment  by  listing  what  he  considers  to  be  a  laundry  list  of  factors  fundamentally  misunderstands  the  impairment  inquiry.  Chairman  Powell  Statement  at  7.  Chairman 
 Powell  and  the  rest  of  the  Commission  have  all  agreed  that  actual  deployment  is  the  best  evidence  of  impairment.  The  factors  that  Chairman  Powell  criticizes  here  come  into  play  only  if  our  deployment  triggers  are  not  met.  As 
 such,  the  factors  purpose  is  to  determine  whether  the  lack  of  deployment  is  due  to  actual  impairment  or  some  other  reason  by  inquiring  whether  entry  is  in  fact  uneconomic.  In  making  this  determination,  Chairman  Powell  has 
 acknowledged  that  one  must  consider  all  costs  of  entry  as  well  as  all  potential  revenues.  See  supra  para.  84.  Just  as  in  our  analysis  of  high-  capacity  loops  and  transport,  which  Chairman  Powell  proposed  and  the  Commission 
 adopted  unanimously,  this  inquiry  requires  consideration  of  a  number  of  different  factors. 
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 462.  Framework  of  Analysis.  The  analysis  we  prescribe  with  regard  to  mass  market  switching  is  as  follows.  First,  where  a  state  determines  that  there  are  three  or  more  carriers, 
 unaffiliated  with  either  the  incumbent  LEC  or  each  other,  that  are  serving  mass  market  customers  in  a  particular  market  using  self-  provisioned  switches,  the  state  must  find  no  impairment  in 
 that  market.  As  described  below,  we  recognize  that  there  may  be  some  markets  where  three  or  more  carriers  are  serving  mass  market  customers  with  self-  provisioned  switches,  but  where  some 
 significant  barrier  to  entry  exists  such  that  additional  carriers  with  self-  provisioned  switches  are  foreclosed  from  serving  mass  market  customers.  For  example,  if  there  is  no  collocation  space 
 available  for  additional  competitive  LEC  equipment,  further  competitive  entry  may  be  impossible,  irrespective  of  other  economic  or  operational  circumstances.  Where  the  self-provisioning 
 trigger  has  been  satisfied  and  the  state  commission  identifies  an  exceptional  barrier  to  entry  that  prevents  further  entry,  the  state  commission  may  petition  the  Commission  for  a 
 waiver  of  the  application  of  the  trigger,  to  last  until  the  impairment  to  deployment  identified  by  the  state  no  longer  exists. 

 463.  Second,  a  state  must  find  no  impairment  when  it  determines  that  there  are  two  or  more  competitive  wholesale  suppliers  of  unbundled  local  circuit  switching,  unaffiliated  with  the 
 incumbent  or  each  other.  Where  neither  of  these  two  triggers  is  satisfied,  we  establish  a  framework  that  state  commissions  must  apply  to  determine  whether  a  market  allows  self-provisioning 
 of  switching,  notwithstanding  the  absence  of  three  actual  independent  self-provisioning  carriers.  In  conducting  this  inquiry,  states  must  consider  evidence  of  actual 
 competitive  deployment  of  local  circuit  switches,  operational  barriers  to  competitive  entry,  and  economic  barriers  to  competitive  entry.  Where  these  factors  suggest  the  feasibility  of  self-provisioning 
 of  switching,  states  may  render  a  no  impairment  finding  for  the  market  at  issue.  In  the  event  a  state  does  not  reach  such  a  finding  and  the  triggers  are  not  met  for  a  particular 
 market,  we  direct  states  to  consider  whether,  in  a  given  market,  requesting  carriers  impairment  without  access  to  local  circuit  switching  would  be  cured  by  a  more  limited  unbundling  rule   
 specifically,  rolling  access  to  unbundled  local  circuit  switching  for  a  period  of  90  days  or  more.  Where  such  rolling  access  would  cure  all  relevant  sources  of  impairment    for  example, 
 by  allowing  competitive  LECs  to  aggregate  customers  in  preparation  for  a  batch  cut  over  and  to  avoid  certain  non-  recurring  costs  associated  with  end  users  who  might  discontinue  service  during 
 the  first  few  months  after  becoming  customers  of  the  competitive  LEC    we  direct  states  to  implement  such  rolling  access  to  unbundled  local  circuit  switching  instead  of  a  broader 
 unbundling  rule.  Finally,  we  ask  the  state  commissions  to  conduct  continuing  reviews  of  impairment  for  unbundled  switching. 

 a.  Impairment  Caused  by  Incumbent  LEC  Hot  Cut  Process 
 464.  Unlike  the  incumbent  LECs,  competitive  LECs  do  not  own  entire  exchanges  in  which  the  customers  loops  are  already  connected  to  their  switches  through  a  pre-  wired 

 connection.  Instead,  switch-  based  competitive  LECs  must  gain  access  to  those  customers  loop  facilities,  which  predominately,  if  not  exclusively,  are  provided  by  the  incumbent  LEC.  1406 

 1406  Competitors  use  unbundled  dedicated  transport  to  provide  the  loop  extensions  that  they  need  to  connect  their 
 customers  with  their  switches.  In  contrast,  an  incumbent  LEC  can  connect  its  copper  loop  directly  to  its  switch  by  (continued.) 
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 Specifically,  in  order  to  use  its  own  switch  to  provide  end-  user  services,  the  competitor  must  connect  its  switch  to  the  incumbent  loop  (i.  e.,  last-  mile  connectivity).  To  interconnect  with  an 
 incumbent  LEC  or  to  access  an  incumbent  LECs  UNEs,  competitors  must  be  able  to  directly  access  the  incumbents  facilities  with  their  own  equipment.  The  most  practical  and  efficient 
 places  in  an  incumbents  network  where  this  direct  access  can  occur  are  those  centralized  points  where  individual,  subscriber-  generated  telecommunications  traffic  is  aggregated  onto  common 
 links  for  transmitting  the  traffic  through  the  network  or  onto  other  networks.  Collocation  allows  competitors  to  place  their  own  equipment  directly  into  these  centralized  points  in  the 
 incumbents  network.  1407  Competitive  LECs  must  collocate  facilities  at  the  incumbent  LECs  central  offices,  and  then  build  additional  transport  facilities  to  extend  those  loops  to  competitive 
 LEC  switches,  and  route  all  of  their  customers  traffic  to  their  own  switches.  1408 
 465.  The  physical  transfer  of  a  customers  line  from  the  incumbent  LEC  switch  to  the  competitive  LEC  switch  currently  requires  a  coordinated  loop  cut  over  or  hot  cut  for  each 

 customers  line.  1409  The  record  shows  that  hot  cut  capacity  is  limited  by  several  factors,  such  as  the  labor  intensiveness  of  the  process,  including  substantial  incumbent  LEC  and  competitive 
 resources  devoted  to  coordination  of  the  process,  the  need  for  highly  trained  workers  to  perform  the  hot  cuts,  and  the  practical  limitations  on  how  many  hot  cuts  the  incumbent  LECs  can  perform 
 without  interference  or  disruption.  1410  Regardless  of  whether  a  customer  was  previously  being  served  by  the  competitive  LEC  using  unbundled  local  circuit  switching,  or  by  the  incumbent 

 (Continued  from  previous  page) 
 merely  running  a  jumper  wire  across  its  main  distribution  frame  in  the  central  office.  See  generally  AT&  T  Oct.  4,  2002  Ex  Parte  Letter. 

 1407  AT&  T  Comments  at  211-  12;  NewSouth  Comments  at  40-  45;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte 
 Letter  at  3-  4. 
 1408  AT&  T  Reply  at  310. 

 1409  As  discussed  above,  a  hot  cut  is  a  largely  manual  process  requiring  incumbent  LEC  technicians  to  manually 
 disconnect  the  customers  loop,  which  was  hardwired  to  the  incumbent  LEC  switch,  and  physically  re-  wire  it  to  the  competitive  LEC  switch,  while  simultaneously  reassigning  (i.  e.,  porting)  the  customers  original  telephone  number 

 from  the  incumbent  LEC  switch  to  the  competitive  LEC  switch.  See  generally  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  7.  From  the  time  the  technician  disconnects  the  subscribers  loop  until  the  competitor  re-establishes 
 service,  the  subscriber  is  without  service.  Simultaneously,  incumbent  LEC  and  competitor  technicians  must  coordinate  to  ensure  that  the  subscribers  telephone  number  is  ported  to  the  competitors  switch  so  that 
 inbound  calls  are  properly  routed  to  the  requesting  carriers  switch.  This  process  necessarily  disconnects  service  to  the  customer  for  a  brief  period  of  time,  as  the  physical  connection  between  the  loop  and  the  incumbent  LEC  switch 
 is  broken  and  then  a  new  connection  with  the  competitive  LEC  switch  is  made.  The  process  of  number  porting  also  potentially  subjects  the  customer  to  some  period  of  time  where  incoming  calls  will  not  be  received  (i.  e.,  until  the 
 number  porting  process  is  correctly  completed,  the  customers  number  will  not  correctly  route  incoming  calls  to  the  competitive  LEC  switch  now  serving  that  customer).  Some  parties  contend  that  hot  cuts  are  practically  infeasible  in 
 an  increasing  number  of  cases  that  leave  requesting  carriers  with  no  workable  means  of  obtaining  access  to  unbundled  loops.  GCI  Comments  at  8-  9,  16.  GCI  states  that  where  the  incumbent  LEC  has  deployed  IDLC 
 architecture,  it  simply  cannot  obtain  access  to  the  unbundled  UNE  loop  in  order  to  interconnect  and  direct  that  traffic  to  its  collocation  space.  Id.  at  9. 

 1410  Z-  Tel  Comments  at  38. 
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 itself,  a  hot  cut  must  be  performed.  The  record  contains  evidence  that  hot  cuts  frequently  lead  to  provisioning  delays  and  service  outages,  and  are  often  priced  at  rates  that  prohibit  facilities-based 
 competition  for  the  mass  market.  1411  The  barriers  associated  with  the  manual  hot  cut  process  are  directly  associated  with  incumbent  LECs  historical  local  monopoly,  and  thus  go 
 beyond  the  burdens  universally  associated  with  competitive  entry.  1412  Specifically,  the  incumbent  LECs  networks  were  designed  for  use  in  a  single  carrier,  non-  competitive 
 environment  and,  as  a  result,  the  incumbent  LEC  connection  between  most  voice-  grade  loops  and  the  incumbent  LEC  switch  consists  of  a  pair  of  wires  that  is  generally  only  a  few  feet  long 
 and  hardwired  to  the  incumbent  LEC  switch.  1413  Accordingly,  for  the  incumbent,  connecting  or  disconnecting  a  customer  is  generally  merely  a  matter  of  a  software  change.  1414  In  contrast,  a 
 competitive  carrier  must  overcome  the  economic  and  operational  barriers  associated  with  manual  hot  cuts.  1415  Our  finding  concerning  operational  and  economic  barriers  associated  with  loop 
 access  reflects  these  significant  differences  between  how  the  incumbent  LEC  provides  service  and  how  competitive  LECs  provide  service  using  their  own  or  third-  party  switches. 

 466.  Competitive  carriers  contend  that  the  current  hot  cut  process  prevents  an  orderly  and  seamless  migration,  at  least  with  respect  to  mass  market  customers.  1416  Requesting  carriers 
 must  wait  for  coordinated  cut  overs  before  providing  service  with  their  own  switch,  delay  that  prevents  the  competitive  LEC  from  providing  service  in  a  way  that  mass  market  customers  have 
 come  to  expect.  Service  disruptions  also  will  influence  customer  perceptions  of  competitive  LECs  ability  to  provide  quality  service,  and  thus  affect  competitive  LECs  ability  to  attract 
 customers.  Competitive  LECs,  like  ATX,  provide  ample  testimony  in  the  record  reporting  on  their  efforts  to  serve  mass  market  locations  using  the  hot  cut  process,  claiming  that  they  were 
 forced  to  cease  marketing  and  discontinue  plans  to  provide  switch-  based  services  to  mass  market  customers  because  they  experienced  difficulties  with  service  implementation  associated  with  the 
 hot  cut  process  to  connect  voice-  grade  loops  to  their  switches.  1417  Similarly,  AT&  T  contends  that  it  lost  over  one-  half  of  its  UNE-  L  customers  before  the  customers  were  even  cut  over  due  to  the 
 impact  the  hot  cut  process  had  on  customers.  1418  AT&  T  also  states  that  it  experienced  so  many  problems  with  coordinated  hot  cuts  used  to  connect  loops  to  its  switches  that  it  was  forced  to 

 1411  AT&  T  Comments  at  212,  214-  17;  New  York  Department  Comments  at  2-  4;  BTI  Comments  at  11;  UNE-  P 
 Coalition  Comments  at  49-  50;  WorldCom  Comments  at  86-  87;  Z-  Tel  Comments  at  38-  47. 
 1412  AT&  T  Reply  at  311;  see  also  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  4,  7-  8,  10-  11. 

 1413  See  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  7. 
 1414  See  id. 
 1415  See  id. 
 1416  Bridgecom  Feb.  5,  2003  Ex  Parte  Letter  at  9. 
 1417  See  ATX  Jan.  22,  2003  Ex  Parte  Letter  at  3-  5  (stating  that  the  problems  with  hot  cuts  were  so  bad  that  it  had  to 
 create  special  processes  to  handle  hot  cuts  on  a  special  project  basis  with  Ameritech). 
 1418  AT&  T  Comments  at  214-  17,  219;  AT&  T  Brenner  Decl.  at  paras.  34-  42. 
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 stop  marketing  its  switch-  based  service  to  all  customer  locations  that  did  not  have  enough  traffic  to  warrant  the  use  of  a  DS-  1  or  higher  capacity  loop.  1419 
 467.  Most  importantly,  mass  market  customers  generally  demand  reliable,  easy-  to-operate  service  and  trouble-  free  installation.  1420  WorldCom  asserts  that,  before  the  competitive 
 LEC  has  established  an  ongoing  business  relationship  with  its  new  customer,  the  customer  is  unlikely  to  tolerate  any  disruption  of  service  caused  by  a  manual  hot  cut    no  matter  how  minor 
   during  customer  acquisition.  1421  Moreover,  competition  is  meant  to  benefit  consumers,  and  not  create  obstacles  for  them.  The  record  shows  that  customers  experiencing  service  disruptions 
 generally  blame  their  provider,  even  if  the  problem  is  caused  by  the  incumbent.  1422  Indeed,  Z-  Tel  states  that  one  glitch  or  delay  in  the  cut  over  process  for  a  mass  market  customer  may  be  enough 
 to  convince  the  customer  to  go  back  to  the  incumbent.  1423  In  contrast,  when  a  competitive  LEC  provisions  a  higher  capacity  service,  such  as  DS1  capacity  and  above,  to  an  enterprise  customer, 
 there  generally  is  no  hot  cut  of  the  customer.  1424  In  addition,  enterprise  customers  are  often  more  willing  to  pay  for  redundancy  to  protect  against  disruption  in  the  cut  over  process. 
 Accordingly,  we  find  the  evidence  in  the  record  persuasive  that  the  hot  cut  problem  would  be  particularly  great  for  transferring  existing  mass  market  customers  in  a  cost-  effective  and 
 operationally  seamless  manner. 
 468.  Competitive  carriers  also  argue  that  the  manual  hot  cut  process  is  not  suitable  for  mass  market  customers  because  the  incumbents  cannot  handle  the  necessary  volume  of 

 transactions  to  support  competitive  switching  in  the  absence  of  unbundled  local  circuit  switching  and  that  the  non-  recurring  costs  associated  with  hot  cuts  are  prohibitively  expensive.  1425  In 

 1419  AT&  T  Comments  at  207;  see  also  UNE-  P  Coalition  Comments  at  47-  48;  Letter  from  Christopher  J.  Wright, 
 Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Dec.  16,  2002)  (Z-  Tel  Dec.  16,  2002  Ex  Parte  Letter);  Letter  from  Robert  A.  Curtis,  President,  and  Thomas  M.  Koutsky, 

 Vice  President    Law  and  Public  Policy,  Z-  Tel,  to  Michael  K.  Powell  et  al.,  FCC,  in  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2 
 (filed  Feb.  6,  2003)  (Z-  Tel  Feb.  6,  2003  Powell  Ex  Parte  Letter)  (noting  generally  that  manual  hot  cuts  are  inadequate  to  handle  the  scale,  quality,  and  efficiency  needed  if  switching  were  eliminated). 

 1420  WorldCom  Reply  at  141;  Z-  Tel  Comments  at  32-  33. 
 1421  WorldCom  Reply  at  141. 
 1422  AT&  T  Comments  at  19-  20;  Z-  Tel  Comments  at  47;  Navigator  Comments  at  4. 
 1423  Z-  Tel  Comments  at  32,  36,  47. 
 1424  See  NewSouth  Reply  at  27-  28;  NewSouth  Fury  Reply  Aff.  at  para.  6. 
 1425  See  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  3  (filed  Dec.  5,  2002)  (WorldCom  Dec.  5,  2002  Ex  Parte  Letter);  Letter  from  Donna  Sorgi,  Vice  President,  Federal  Advocacy,  WorldCom,  to  William  F.  Maher,  Chief,  Wireline 

 Competition  Bureau,  FCC,  at  5,  in  Letter  from  Gil  M.  Strobel,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  8,  2003)  (WorldCom  Jan.  8,  2003  Switching  Ex 
 Parte  Letter)  (stating  that  the  hot  cut  process  permits  a  few  thousand  transactions  per  month,  not  the  million  needed  to  bring  competition  to  the  mass  market);  Letter  from  Ruth  E.  Holder,  Legal  Specialist  for  WorldCom,  to  Marlene 
 (continued.) 
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 deciding  whether  competitors  are  impaired  by  incumbent  LEC  provisioning  processes,  we  must  necessarily  make  a  predictive  judgment  concerning  this  systemic  capability  to  handle  anticipated 
 future  hot  cut  volumes,  which  (absent  access  to  unbundled  local  circuit  switching)  would  be  greater  than  volumes  that  have  been  experienced  in  the  past.  1426  Competitive  carriers  have  shown 
 that,  although  they  have  used  hot  cuts  to  serve  certain  small  segments  of  the  market,  no  competitive  carrier  relies  on  hot  cuts  to  offer  service  to  significant  numbers  of  customers  served 
 by  voice-  grade  loops.  Having  reviewed  the  record  evidence,  we  find  that  it  is  unlikely  that  incumbent  LECs  will  be  able  to  provision  hot  cuts  in  sufficient  volumes  absent  unbundled  local 
 circuit  switching  in  all  markets.  For  instance,  AT&  T  has  presented  evidence  in  the  record  that,  despite  years  of  effort  to  serve  low-  volume  business  locations  with  a  UNE-  L  strategy  that  relied 
 on  hot  cuts,  hot  cuts  could  not  be  provided  in  the  volumes  required  to  support  AT&  Ts  customer  demand,  leading  to  cancellation  of  orders  for  AT&  Ts  competitive  service  offering.  1427  GCI,  a 
 carrier  operating  in  Alaska,  attempted  to  rely  in  part  on  hot  cuts  to  provide  service  to  the  mass  market,  but  it  claimed  that  it  had  continual  problems  with  provisioning  unbundled  loops, 
 especially  for  small  business  loops  which  require  a  hot  cut.  1428  GCI  states  that  its  business  plan  required  the  incumbent  LEC  to  perform  approximately  500  hot  cuts  per  day,  but  that  the 
 incumbent  LEC  at  its  peak  has  averaged  only  approximately  100  per  day.  1429  McLeod  states  that  in  the  former  Ameritech  region,  SBC  has  performed  at  most  35  hot  cuts  per  central  office  per 
 day.  1430  Moreover,  the  evidence  in  the  record  shows  that  some  incumbent  LECs  expressly  limit  the  number  of  lines  that  can  be  cut  over  in  a  given  day.  1431  Specifically,  Broadview  states  that 
 Verizon  limits  the  number  of  lines  that  can  be  cut  over  in  a  given  day  to  125  for  the  entire  region.  1432 

 (Continued  from  previous  page) 
 H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Feb.  12,  2003)  (WorldCom  Feb.  12,  2003  Ex  Parte  Letter)  (showing  hot  cut  NRCs  and  how  they  vary  across  the  country). 

 1426  Market  data  confirm  that,  by  the  end  of  2002,  competing  carriers  served  an  estimated  ten  million  residential  and 
 small  business  lines  via  unbundled  loops  combined  with  unbundled  local  circuit  switching.  PACE  Jan.  14,  2003  Ex  Parte  Letter  at  2. 

 1427  AT&  T  Comments  at  219-  20;  AT&  T  Brenner  Decl.  paras.  39-  42. 
 1428  GCI  Comments  at  8. 
 1429  Id.  These  problems  so  adversely  affected  its  business  plans  that  GCI  determined  that  it  would  pa[  y]  the  cost 
 for  the  incumbent  LEC  to  hire  25  additional  workers  to  increase  hot  cut  volume,  which  cost  GCI  over  $3  million  per  year.  Id.  at  34;  id.,  Declaration  of  Frederick  W.  Hitz,  III  at  para.  14. 

 1430  Letter  from  Stephen  C.  Gray,  President,  McLeodUSA,  to  William  F.  Maher,  Chief,  Wireline  Competition 
 Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  02-  33  at  12  (filed  Dec.  17,  2002)  (McLeodUSA  Dec.  17,  2002  Ex  Parte  Letter). 

 1431  See  id.  (noting  in  general  that  RBOCs  typically  impose  limitations  on  the  number  of  conversions  from  UNE-  P 
 to  stand-  alone  unbundled  loops  that  [can]  be  performed  in  a  given  CO  in  a  given  day,  and  notes  that  SBC  is  most  restrictive  with  a  limit  of  25-  35  orders  per  central  office  per  day  in  the  SBC  Midwest  region). 

 1432  Letter  from  Rebecca  M.  Sommi,  Vice  President,  Operations  Support,  Broadview,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Oct.  16,  2002)  (Broadview  Oct.  16,  2002  Ex  Parte  (continued.) 
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 469.  While  incumbent  LECs  reference  the  Commissions  determination  in  multiple  section  271  orders  that  BOCs  provision  hot  cuts  at  a  level  of  quality  that  offers  efficient 
 competitors  a  meaningful  opportunity  to  compete,  1433  and  argue  that  performance  data  show  that  current  hot  cut  performance  is  satisfactory,  even  as  the  number  of  hot  cuts  has  increased,  1434  we 
 find  that  the  number  of  hot  cuts  performed  by  BOCs  in  connection  with  the  section  271  process  is  not  comparable  to  the  number  that  incumbent  LECs  would  need  to  perform  if  unbundled 
 switching  were  not  available  for  all  customer  locations  served  with  voice-  grade  loops.  1435  In  the 
 (Continued  from  previous  page) 
 Letter).  But  see  Letter  from  W.  Scott  Randolph,  Director    Federal  Regulatory  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  6  (dated  Dec.  23,  2002)  (Verizon  Dec.  23,  2002  Hot  Cut  Ex 

 Parte  Letter)  (claiming  that  Verizons  current  internal  guidelines  contemplate  as  many  as  150  hot  cuts  per  central  office).  Verizons  filing,  however,  provides  no  evidence  that  the  company  has  actually  been  able  to  perform  hot 
 cuts  at  such  volumes  consistently  over  a  long-  term  period,  as  would  be  required  upon  any  transition  away  from  unbundled  switching.  Moreover,  while  Verizon  claims  that  its  guidelines  could  be  adjusted  to  permit  more  than  150 
 hot  cuts  per  day  if  necessary,  Verizon  provides  no  evidence  that  its  current  processes  are  sufficient  to  meet  that  increased  demand. 

 1433  See,  e.  g.,  SWBT  Texas  271  Order,  15  FCC  Rcd  at  18490-  93,  paras.  268-  73. 
 1434  See  Verizon  Dec.  23,  2002  Hot  Cut  Ex  Parte  Letter  at  3.  Verizon  states  that  between  2000  and  2001,  its  hot  cut 
 volume  increased  by  50%  in  Massachusetts  (14,114  to  21,089),  40%  in  Pennsylvania  (22,184  to  31,592),  and  more  than  200%  in  New  Jersey  (3,918  to  11,845).  Id.  at  3.  Verizon  claims  that  its  on-  time  performance  in  those  states 

 was  98.41%,  97.56%,  and  95.91%,  respectively.  Id.  Qwest  also  contends  that  its  hot  cut  performance  is  excellent.  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  No.  01-  338  at  5  (filed  Jan.  7,  2003)  (Qwest  Jan.  7,  2003  Ex  Parte  Letter);  see  also  Letter  from  Lawrence  E.  Sarjeant,  Vice  President  Law  and  General  Counsel,  USTA,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 No.  01-  338  at  3  (filed  Dec.  11,  2002)  (USTA  Dec.  11,  2002  Ex  Parte  Letter)  (stating  that  USTA  incumbent  LEC  members  are  able  to  perform  hot  cuts  in  volumes  and  timeframes  that,  in  the  context  of  their  particular 
 circumstances,  support  the  finding  that  the  removal  of  switching  from  the  UNE  list  will  not  impair  the  ability  of  competitive  LECs  to  provide  local  exchange  and  exchange  access  services).  Verizon  states  that  its  performance 
 data  show  that  it  routinely  meets  95  percent  or  more  of  its  installation  appointments  on  time.  Verizon  Comments  at  102. 

 1435  Based  entirely  on  the  Commissions  prior  findings  in  section  271  orders,  Chairman  Powell  and  Commissioner 
 Abernathy  claim  that  incumbent  LEC  hot  cut  processes  cannot  be  a  source  of  impairment.  See  Chairman  Powell  Statement  at  4-  5;  Commissioner  Abernathy  Statement  at  5-  6.  To  begin  with,  the  dissenters  completely  ignore  the 

 volume  of  evidence  in  the  record  of  this  proceeding  that  hot  cuts  create  significant  barriers  to  providing  service,  offering  no  response  or  explanation  whatsoever.  Moreover,  contrary  to  their  contentions,  the  Commissions  prior 
 findings  in  section  271  orders  do  not  support  a  finding  here  that  competitive  carriers  would  not  be  impaired  if  they  were  required  to  rely  on  the  hot  cut  process  to  serve  all  mass  market  customers.  At  most,  these  orders  found  that  the 
 specific  companies  at  issue  will  be  able  to  handle  reasonably  foreseeable  demand  volumes.  Commissioner  Abernathy  Statement  at  6  (quoting  Bell  Atlantic  New  York  271  Order,  15  FCC  Rcd  at  3993,  para.  89).  Leaving 
 aside  the  fact  that  these  orders  applied  only  to  specific  BOCs  in  specific  states  and  by  no  means  make  any  findings  with  respect  to  BOCs  or  incumbent  LECs  generally,  these  orders  examined  the  adequacy  of  hot  cuts  at  a  time  when 
 competitive  LECs  were  principally  using  unbundled  local  circuit  switching  to  compete  for  mass  market  customers.  Indeed,  the  BOCs  frequently  relied  on  evidence  of  customers  being  served  by  unbundled  loops  combined  with 
 unbundled  local  circuit  switching  to  support  their  Track  A  findings  of  sufficient  facilities-  based  competition.  See,  e.  g.,  BellSouth  Georgia/  Louisiana  271  Order,  17  FCC  Rcd  at  9026-  27,  para.  15;  SBC  California  271  Order,  17 
 FCC  Rcd  at  25656,  para  12;  Application  of  Verizon  New  England  Inc.,  Bell  Atlantic  Communications,  Inc.  (d/  b/  a  Verizon  Long  Distance),  NYNEX  Long  Distance  Company  (d/  b/  a  Verizon  Enterprise  Solutions)  and  Verizon  Global 
 (continued.) 
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 states  where  section  271  authorization  has  been  granted,  unbundled  local  circuit  switching  has  been  available  and,  accordingly,  the  BOCs  hot  cut  performance  has  generally  been  limited.  1436 
 Moreover,  we  find  that  the  issue  is  not  how  well  the  process  works  currently  with  limited  hot  cut  volumes,  rather  the  issue  identified  by  the  record  is  an  inherent  limitation  in  the  number  of 
 manual  cut  overs  that  can  be  performed,  which  poses  a  barrier  to  entry  that  is  likely  to  make  entry  into  a  market  uneconomic.  1437  Our  finding  is  also  corroborated  by  the  comments  of  state 

 (Continued  from  previous  page) 
 Networks  Inc.  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  Massachusetts,  CC  Docket  No.  01-  9,  Memorandum  Opinion  and  Order,  16  FCC  Rcd  8988,  8990,  para.  224  (2001)  (Verizon  Massachusetts  271  Order); 

 Verizon  Global  Networks  Inc.,  and  Verizon  Select  Services  Inc.  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  Vermont,  CC  Docket  No.  02-  7,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  7625,  7630-  31,  para.  11 
 (2002)  (Verizon  Vermont  271  Order);  Application  by  Qwest  Communications  International,  Inc.  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  the  States  of  Colorado,  Idaho,  Iowa,  Montana,  Nebraska,  North 
 Dakota  ,Utah,  Washington  and  Wyoming,  WC  Docket  No.  02-  314,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  26303,  26317,  para.  29  (2002)  (Qwest  9-  State  271  Order);  see  also  Letter  from  Brad  E.  Mutschelknaus,  Counsel  for 
 Broadview  et  al.,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Jan.  21,  2003)  (  Notably,  all  four  of  the  RBOCs  have  relied,  in  one  or  more  States,  upon  the  presence  of  UNE-  P,  to  advance 
 their  bids  for  Section  271  authority.).  And  Chairman  Powell  and  Commissioner  Abernathy  repeatedly  voted  to  approve  orders  characterizing  such  deployment  as  facilities-  based  competition  for  purposes  of  meeting  section 
 271s  requirement  of  the  presence  of  a  facilities-  based  competitor.  See,  e.  g.,  Qwest  9-  State  271  Order,  17  FCC  Rcd  at  26303,  para.  29  (stating  that  Qwest  satisfies  Track  A,  section  271(  c)(  1)(  a));  SBC  California  271  Order,  17 
 FCC  Rcd  at  25657,  para.  15  (stating  that  SBC  satisfies  Track  A,  section  271(  c)(  1)(  a));  Verizon  Vermont  271  Order,  17  FCC  Rcd  at  7630-  31,  para.  11  (stating  that  Verizon  satisfies  Track  A,  section  271(  c)(  1)(  a)).  Furthermore,  even 
 in  those  states  where  there  was  not  significant  unbundled  switching-  based  competition  (see  Commissioner  Abernathy  Statement  at  6-  7  n.  12)  when  the  Commission  granted  the  section  271  applications  for  those  states,  the 
 availability  of  unbundled  loops  combined  with  unbundled  switching  as  a  mode  of  entry  informed  the  Commissions  determination  of  reasonably  foreseeable  demand  volumes.  Here,  we  must  consider  the  adequacy  of  current  hot  cut 
 practices  for  handling  the  volumes  that  would  be  expected  if  competitive  LECs  were  denied  unbundled  access  to  unbundled  local  circuit  switching    something  that  was  by  no  means  reasonably  foreseeable  in  the  context  of  the 
 section  271  orders.  The  section  271  orders  thus  tell  us  very  little  about  a  BOCs  ability  to  provision  large  batches  of  cut  overs  in  a  timely  and  reliable  manner  under  these  circumstances.  In  Broadviews  experience,  for  example, 
 Verizons  performance  measures  do  not  apply  to  bulk  migrations  on  a  project-  managed  basis.  Broadview  Jan.  15,  2003  Ex  Parte  Letter  at  4;  see  also  Application  by  Verizon  New  Jersey  Inc.,  Bell  Atlantic  Communications, 
 Inc.(  d/  b/  a  Verizon  Long  Distance),  NYNEX  Long  Distance  Company  (d/  b/  a/  Verizon  Enterprise  Solutions),  Verizon  Global  Networks  Inc.,  and  Verizon  Select  Services  Inc.,  for  Authorization  to  Provide  In-  Region,  InterLATA  Services 
 in  New  Jersey,  CC  Docket  No.  02-  67,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  12275,  12326,  para.  109  n.  309  (2002).  Accordingly,  the  Commissions  section  271  holdings  by  no  means  find  that  incumbent  LEC 
 performance  is  now  adequate  to  meet  the  demands  of  UNE-  L-  based  competition.  Finally,  our  decision  does  not  overlook  the  possibility  that  if  in  some  markets  the  incumbents  ability  to  perform  batch  hot  cuts  does  not  pose 
 impairment,  the  states  may  simply  make  findings  to  this  effect. 
 1436  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  9-  10. 

 1437  The  dissents  assert  that  the  majority  makes  unwarranted  assumptions  about  incumbent  LECs  ability  to  handle 
 increased  volumes  in  the  absence  of  unbundled  loops  combined  with  unbundled  local  circuit  switching.  Chairman  Powell  Statement  at  5;  Commissioner  Abernathy  Statement  at  5.  It  appears  that  they  would  support  a  finding  of  no 

 impairment  based  on  affidavits  and  declarations  submitted  by  incumbent  LECs  attesting  to  their  willingness  and  ability  to  handle  any  requested  volume  of  hot  cuts.  Commissioner  Abernathy  Statement  at  5.  We  find,  however, 
 incumbent  LECs  promises  of  future  hot  cut  performance  insufficient  to  support  a  Commission  finding  that  the  hot  cut  process  does  not  impair  the  ability  of  a  requesting  carrier  to  provide  the  service  it  seeks  to  offer  without  at  least 
 some  sort  of  unbundled  circuit  switching.  While  incumbent  LECs  state  that  they  have  the  capacity  to  meet  any  (continued.) 
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 commissions,  most  notably  the  New  York  Department,  which  concluded  that  Verizon  would  need  to  dramatically  increase  the  number  of  hot  cut  orders  per  month  if  UNE-  P  was  terminated 
 and  CLEC  customers  were  switched.  1438  The  New  York  Department  concluded  that  it  would  take  Verizon  over  11  years  to  switch  all  the  existing  UNE-  P  customers  to  UNE-  L.  1439  Indeed, 
 the  New  York  Department  is  currently  examining  ways  to  migrat[  e]  large  volumes  of  customers  from  Verizons  switches  to  CLECs  switches  more  efficiently.  1440  For  those  reasons,  the 
 Commissions  prior  findings  in  section  271  orders  do  not  support  a  finding  here  that  competitive  carriers  would  not  be  impaired  if  they  were  required  to  rely  on  the  hot  cut  process  to  serve  all 
 mass  market  customers. 
 470.  Competitive  carriers  also  argue  that  the  cost  of  hot  cuts,  exacerbated  by  churn,  creates  a  cost  disparity  that  makes  it  uneconomic  to  serve  mass  market  customers.  1441 

 Competitors  seeking  to  use  their  own  switches  must  incur  the  costs  associated  with  a  hot  cut,  including  both  the  charges  assessed  by  the  incumbent  LEC  and  their  own  costs  of  managing  and 
 participating  in  the  hot  cut  process.  1442  The  hot  cut  cost  assessed  by  the  incumbent  LEC  is  a  non-recurring  per-  line  charge  on  competitive  carriers  that  connect  their  own  switches  to  unbundled 
 loops.  1443  The  record  shows  that  the  cost  of  connecting  each  customer  to  the  competitive  LECs  switch  makes  it  difficult  to  compete.  1444  Although  hot  cut  costs  vary  among  incumbent  LECs,  we 

 (Continued  from  previous  page) 
 reasonable  foreseeable  increase  in  demand  for  stand-  alone  loops  that  might  result  from  increased  competitive  LEC  reliance  on  self-  provisioned  switching,  there  is  little  other  evidence  in  the  record  to  show  that  the  incumbent  LECs 

 could  efficiently  and  seamlessly  perform  hot  cuts  on  a  going-  forward  basis  for  competitors  who  submit  large  volumes  of  orders  to  switch  residential  subscribers.  As  described  above,  moreover,  we  ascribe  more  weight  to 
 actual  evidence  of  competitive  entry  serving  the  relevant  market  than  to  predictive  claims  of  incumbents  ability  to  handle  hypothetical  volumes    and  the  incumbents  have  been  unable  to  offer  compelling  evidence  that  they  have 
 actually  provisioned  hot  cuts  in  the  requisite  quantity.  Moreover,  where  incumbent  LECs  have  undergone  comprehensive  testing  of  their  loop  provisioning  processes,  state  commissions  have  found  difficulties  regarding  hot 
 cut  performance.  Indeed,  in  its  initial  comments  in  this  proceeding,  the  New  York  Department  recognized  the  hot  cut  process  as  one  of  the  major  issues  that  hamper  the  development  of  facilities  based  competition,  and  concluded 
 that  [  u]  ntil  hot  cuts  can  be  performed  in  much  greater  volumes,  competitive  LECs  lack  of  access  to  the  UNE-  P  will  materially  diminish  their  ability  to  provide  local  service.  New  York  Department  Comments  at  3. 

 1438  New  York  Department  Comments  at  4  n.  18. 
 1439  Id. 
 1440  Id.  at  3. 
 1441  See,  e.  g.,  WorldCom  Comments  at  33  ([  A]  fter  a  comprehensive  evaluation,  WorldCom  concluded  that  it  did 
 not  make  economic  sense  to  spend  additional  capital  necessary  to  attempt  .  .  .  to  enter  the  mass  market  through  end-to-  end  facilities-  based  service.). 

 1442  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  4-  5. 
 1443  See,  e.  g.,  ASCENT  Comments  at  36;  Letter  from  Kimberly  Scardino,  Senior  Counsel,  WorldCom,  to  Michelle 
 Carey,  Chief,  Competition  Policy  Division,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2  (filed  Nov.  15,  2002)  (WorldCom  Nov.  15,  2002  Customer  Churn  Ex  Parte  Letter). 

 1444  See,  e.  g.,  AT&  T  Comments  at  216;  ASCENT  Comments  at  36;  GCI  Comments  at  36;  WorldCom  Comments  at 
 86;  ASCENT  Reply  at  7.  If  the  competitive  LEC  uses  unbundled  incumbent  LEC  loops,  this  loop  access  cost  (continued.) 
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 find  on  a  national  level  that  that  these  costs  contribute  to  a  significant  barrier  to  entry.  1445  WorldCom  submitted  hot  cut  non-  recurring  costs  (NRCs)  for  several  states,  with  an  average  non-recurring 
 charge  of  approximately  $51,  with  several  states  having  NRCs  in  excess  of  $100.  1446  According  to  WorldCom,  in  New  York,  the  hot  cut  NRC  will  soon  rise  to  $185  (from  $35)  for 
 each  line  served.  1447  Z-  Tels  analysis  of  the  New  York  market  indicates  that  even  if  the  switch  itself,  collocation,  and  maintenance  were  free,  with  a  non-  recurring  hot  cut  charge  of  $185  per 
 line,  it  would  not  be  economic  to  deploy  a  switch  to  serve  mass  market  customers  in  New  York.  1448  In  addition  to  the  high  non-  recurring  charges  imposed  by  the  incumbent  LECs,  the 
 evidence  in  the  record  shows  that  hot  cuts  also  require  significant  internal  resources  and  expenditures  which  must  be  borne  by  the  competitive  LEC.  Thus,  the  record  evidence  indicates 
 that  the  non-  recurring  costs  associated  with  cutting  over  large  volumes  of  loops  would  likely  be  prohibitively  expensive  for  a  competitive  carrier  seeking  to  provide  service  without  the  use  of 
 unbundled  local  circuit  switching. 
 471.  Moreover,  the  evidence  in  the  record  demonstrates  that  there  is  a  significant  amount  of  churn,  or  movement,  among  mass  market  customers.  Mass  market  customers  move 

 freely  from  carrier  to  carrier  when  they  desire,  and  have  come  to  expect  the  ability  to  change  local  service  providers  in  a  seamless  and  rapid  manner.  1449  We  find  that  this  movement,  or  churn, 
 happens  most  frequently  in  the  first  few  months  after  the  customer  switches  to  a  new  carrier  and  is  often  driven  by  winback  activities.  1450  WorldCom,  for  example,  states  that  it  loses  50 

 (Continued  from  previous  page) 
 includes  the  nonrecurring  costs  of  moving  the  customers  line  to  the  competitive  LEC  switch  and  establishing  a  collocation  arrangement,  and  the  recurring  costs  of  maintaining  collocation  and  transport  to  connect  the  customers 

 POTS  line  to  the  competitive  LECs  switch.  Because  competitive  LECs  generally  do  not  collocate  a  switch  in  every  incumbent  LEC  end  office  but  rather  serve  a  number  of  collocation  arrangements  from  a  single  switch,  competitive 
 LECs  generally  connect  their  switches  to  unbundled  loops  via  transport  facilities. 
 1445  See,  e.  g.,  ASCENT  Comments  at  36  (noting  repeated  attempts  by  incumbent  LECs  to  dramatically  increase 
 hot  cut  charges  .  .  .  confirm  that  hot  cut  costs  will  continue  to  be  a  highly  adverse  factor);  ASCENT  Reply  at  7;  AT&  T  Reply  at  321  (stating  that  the  current  charges  for  hot  cuts  in  many  states  forecloses  the  use  of  UNE-  L,  even 

 in  narrow  situations);  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  5  n.  12. 
 1446  WorldCom  Feb.  12,  2003  Ex  Parte  Letter  at  2-  3;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  5  n.  12. 

 1447  WorldCom  Feb.  12,  2003  Ex  Parte  Letter  at  2-  3. 
 1448  Z-  Tel  Oct.  10,  2002  Ex  Parte  Letter  at  2.  Considering  only  the  non-  recurring  cost  of  hot  cuts,  Talk  America 
 estimates  that  it  would  incur  costs  of  $840,000  just  to  convert  its  existing  customer  base  in  New  York  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  stand-  alone  loops  based  on  the  promotional 

 rate  of  $35  per  hot  cut  adopted  by  the  New  York  Department.  Talk  America  Reply  at  25. 
 1449  See,  e.  g.,  UNE-  P  Coalition  Comments  at  46  (noting  that  mass  market  customers  are  not  used  to  and  will  not 
 tolerate  service  degradation  as  a  cost  of  moving  from  one  carrier  to  another);  Z-  Tel  Comments  at  46-  47  (stating  that  mass  market  customers  expect  to  be  able  to  switch  their  local  carriers  seamlessly  as  they  can  switch  long  distance 

 carriers). 
 1450  WorldCom  Nov.  15,  2002  Customer  Churn  Ex  Parte  Letter  at  1-  2. 
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 percent  of  its  new  local  customers  within  the  first  three  months  of  signing  up  for  service.  1451  Z-  Tel  estimates  that  at  least  four  percent  of  its  lines  turn  over  each  month.  1452  Because  of  this 
 churn,  Z-  Tel  asserts  that  carriers  in  a  competitive  market  cannot  expect  to  keep  any  particular  customer  for  more  than  18-  24  months.  1453  The  evidence  in  the  record  demonstrates  that  customer 
 churn  exacerbates  the  operational  and  economic  barriers  to  serving  mass  market  customers.  For  example,  competitive  LECs  incur  non-  recurring  costs  upon  establishing  an  end  users  service, 
 but  generally  recover  those  costs  over  time,  spreading  them  out  over  monthly  customer  bills;  high  churn  rates  thus  often  deprive  competitive  carriers  the  opportunity  fully  to  recover  those 
 outlays.  The  record  demonstrates  that  the  current  level  of  churn  for  carriers  providing  service  to  the  mass  market  has  significant  negative  revenue  effects  on  the  ability  of  competitive  carriers  to 
 recover  the  high  costs  associated  with  manual  hot  cuts.  1454  Finally,  higher  volumes  of  customer  turnover  necessitate  higher  volumes  of  hot  cuts  than  the  record  demonstrates  incumbent  carriers 
 are  currently  able  to  provide. 
 472.  In  making  our  national  finding  of  impairment  due  to  the  incumbent  LEC  hot  cut  process,  we  do  not  rely  on  the  results  of  the  cost  studies  and  business  case  analyses  some 

 commenters  submitted  concerning  the  economic  feasibility  of  competitive  entry  into  the  mass  market  without  access  to  unbundled  switching.  Specifically,  BellSouth  and  SBC  presented 
 studies  in  support  of  their  claim  that  economic  entry  by  competitive  LECs  was  possible  using  UNE-  L  without  unbundled  switching,  at  least  in  wire  centers  with  5,000  lines  or  more.  1455  AT&  T 
 and  WorldCom  claimed  that  competitive  LECs  were  impaired  without  unbundled  switching  based  on  studies  estimating  the  cost  disadvantage  relative  to  the  incumbent  LEC  experienced  by 
 competitive  LECs  serving  customers  using  UNE-  L,  although  WorldComs  study  suggested  that 
 1451  Id.  WorldCom  estimates  that,  for  customers  that  choose  its  Neighborhood  bundled  local  and  long  distance 
 products,  on  average,  it  loses  25%  of  its  customers  within  three  months,  50%  within  six  months,  and  4%  to  6%  per  month  after  the  six-  month  threshold.  Id.  Although  we  do  not  rely  on  any  individual  competitors  churn  data,  we 

 agree  that  the  evidence  in  the  record  establishes  that  churn  in  the  mass  market  affects  the  economics  of  serving  this  market. 

 1452  Z-  Tel  Comments  at  31. 
 1453  Id.  at  33. 
 1454  Competitive  LECs  contend  that,  given  the  high  degree  of  churn  and  relatively  low  monthly  revenues  for  mass 
 market  customers,  it  is  difficult  to  recoup  this  non-  recurring  charge  over  the  entire  customer  base.  WorldCom  Nov.  15,  2002  Customer  Churn  Ex  Parte  Letter  at  2  (stating  that  the  high  non-  recurring  costs  associated  with  the  hot  cut 

 process  are  almost  impossible  to  recover  for  customers  that  switch  to  another  carrier  within  the  first  six  months).  Z-  Tel  states  that  even  if  a  competitive  LEC  received  revenues  of  $30  per  month,  it  would  take  the  competitor  more 
 than  six  months  to  recover  the  hot  cut  costs,  a  long  period  of  time  for  a  market  with  significant  churn.  Z-  Tel  Comments  at  35-  36.  To  ameliorate  these  cost  disadvantages,  WorldCom  states  that  UNE-  L  would  be  more  feasible 
 in  many  areas  if  competitive  carriers  could  obtain  volume  discounts  for  hot  cuts,  lower  transport  rates,  and  lower  collocation  charges,  or  alternatives  (other  than  collocation)  for  accessing  the  loop,  such  as  EELs.  See  WorldCom 
 Jan.  8,  2003  Switching  Ex  Parte  Letter  at  6. 
 1455  See  generally  Letter  from  Glenn  T.  Reynolds,  Vice  President    Federal  Regulatory,  BellSouth,  to  Marlene  H. 
 Dortch,  Secretary,  FCC  (filed  Jan.  30,  2003)  (BellSouth  Jan.  30,  2003  Ex  Parte  Letter);  SBC  Jan.  14,  2003  Ex  Parte  Letter. 
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 it  may  be  possible  to  alleviate  the  impairment  in  the  largest  wire  centers.  1456  These  studies  are  discussed  in  detail  below.  1457  We  find  that  technical  shortcomings  in  each  of  these  studies 
 preclude  us  from  relying  on  their  results  to  evaluate  impairment  at  the  national  level.  1458  These  shortcomings  include:  (1)  failure  to  use  the  proper  framework  when  determining  impairment;  1459 
 (2)  insufficient  granularity  in  their  analyses;  1460  (3)  failure  to  consider  the  typical  revenues  gained  from  serving  the  average  customer  in  the  market;  and  (4)  inadequate  support  for  the  parameters 
 they  employed.  Each  studys  particular  inputs  and  assumptions  heavily  influenced  its  results,  and  there  was  significant  disagreement  in  the  record  about  the  proper  inputs  and  assumptions.  1461 
 Although  we  are  not  able  to  rely  on  the  results  of  these  studies  with  respect  to  our  national  finding  of  impairment,  the  studies  do  highlight  various  factors  which  should  be  evaluated  by  the 
 states  on  a  market-  specific  basis  as  part  of  their  impairment  analyses,  as  discussed  in  greater  detail  below.  1462 

 473.  Our  national  finding  of  impairment  is  based  on  the  combined  effect  of  all  aspects  of  the  hot  cut  process  on  competitors  ability  to  serve  mass  market  voice  customers.  Thus,  while 
 many  of  the  factors  discussed  above  may  vary  from  location  to  location,  such  as  hot  cut  NRCs,  1463  we  find  the  overall  impact  of  the  current  hot  cut  process  raises  competitors  costs, 
 lowers  their  quality  of  service,  and  delays  the  provisioning  of  service,  thereby  preventing  them  from  serving  the  mass  market  in  the  large  majority  of  locations.  However,  observed  variations  in 
 these  factors  suggest  that  requesting  carriers  may  not  be  impaired  without  access  to  unbundled  switching  in  some  particular  instances,  but  evidence  in  the  record  is  not  sufficiently  detailed  to 
 identify  these  specific  markets.  Therefore,  as  described  in  detail  below,  we  ask  the  states  to  identify  where  competing  carriers  are  not  impaired  without  unbundled  switching,  pursuant  to  the 
 triggers  and  analysis  of  competitors  potential  to  deploy. 

 1456  See  generally  AT&  T  Jan.  17,  2003  Ex  Parte  Letter;  WorldCom  Jan.  8,  2003  Ex  Parte  Letter. 
 1457  See  infra  Part  VI.  D.  6.  a.(  i). 
 1458  See  supra  para.  178  (discussing  the  shortcomings  of  the  studies). 
 1459  The  AT&  T  and  WorldCom  studies  do  not  consider  the  potential  revenues  available  to  an  entrant. 
 1460  All  of  the  studies  rely  on  averages,  and  fail  to  provide  geographically  disaggregated  results. 
 1461  For  example,  the  commenters  disagree  about  what  revenues  to  use  when  calculating  net  profits,  and  use 
 different  estimates  regarding  the  size  of  the  wire  center  and  where  it  is  located,  the  competing  carriers  predicted  market  share,  the  cost  of  inputs  such  as  transport  and  collocation,  the  estimated  revenue,  and  whether  the  competing 

 carrier  had  existing  facilities.  See  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  3;  WorldCom  Jan.  8,  2003  Ex  Parte  Letter  at  Attach.  A,  3-  6;  SBC  Jan.  14,  2003  Ex  Parte  Letter  at  3;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter  at  2-  8, 
 Attach.  at  4,  7-  9. 
 1462  See  infra  Part  VI.  D.  6.  a.(  i)  (discussing  other  factors  which  potentially  could  cause  impairment,  but  for  which  the 
 present  record  does  not  warrant  a  national  finding  of  impairment). 
 1463  According  to  one  commenter,  non-  recurring  charges  for  hot  cuts  can  vary  from  $2  (in  Minnesota)  to  $117  (in 
 Oregon).  WorldCom  Feb.  12,  2003  Ex  Parte  Letter  at  2. 
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 474.  The  record  evidence  strongly  suggests  that  the  hot  cut  process  could  be  improved  if  cut  overs  were  done  on  a  bulk  basis,  such  that  the  timing  and  volume  of  the  cut  over  is  better 
 managed.  1464  We  expect  that  such  improvements  would  result  in  some  reduction  of  the  non-recurring  costs  that,  according  to  competitive  carriers,  prevent  entry.  Indeed,  at  this  time,  we 
 find  such  improvements  are  likely  to  be  essential  to  overcome  the  operational  impairment  that  competitors  face  in  serving  mass  market  customers.  1465  Without  such  improvement,  the  record 
 shows  that  carriers  are  likely  to  be  unable  to  economically  serve  a  market  characterized  by  low  margins.  Incumbent  LECs  argue  that  Frame  Due  Time  (FDT)  and  project  managed  approaches 
 offer  sufficient  efficiency.  With  FDT  cut  overs,  both  the  incumbent  and  the  competing  carrier  perform  necessary  work  at  pre-  arranged  times,  with  no  communication  required  at  the  time  of 
 the  hot  cut.  Project  managed  cut  overs  involve  the  conversion  of  a  number  of  lines  at  one  time,  pursuant  to  provisioning  requirements  and  intervals  negotiated  by  the  incumbent  and  the 
 competitive  LEC.  We  find  that  these  approaches  are  not  sufficiently  developed  or  widespread  enough  to  adequately  address  the  impairment  created  by  the  loop  cut  over  process.  The  evidence 
 in  the  record  demonstrates  that  the  carriers  that  have  used  project-  managed  cut  overs  have  used  them  only  for  business  customers,  1466  and  only  after  acquiring  the  customer  through  a  means  that 
 offered  the  use  of  incumbent  LEC  loops  and  switches  in  combination.  1467  Further,  competitive  carriers  rarely  know  in  advance  the  precise  locations  of  new  mass  market  customers,  and  the 
 facilities  used  to  serve  them,  hindering  the  use  of  project  managed  processes,  which  must  be  negotiated  well  in  advance  of  customer  conversion.  1468  In  addition,  the  FDT  and  project  managed 
 approaches  do  not  offer  rates  (i.  e.,  volume  discounts)  that  reflect  efficiencies  to  these 

 1464  Verizon  states  that  it  can  efficiently  manage  the  conversion  of  the  anticipated  hot  cut  volumes  associated  with 
 the  embedded  base  on  a  negotiated  project  managed  basis,  as  it  has  done  with  carriers  like  AT&  T  and  Broadview.  See  Verizon  Dec.  23,  2002  Hot  Cut  Ex  Parte  Letter  at  2,  5-  6.  We  note,  however,  that  there  is  no  completion 

 interval  associated  with  such  conversions,  and  that  Verizon  therefore  is  not  subject  to  penalties  for  inadequate  performance. 

 1465  We  recognize  that  any  such  operational  impairment  would  result  in  a  disparity  between  an  incumbents  cost 
 to  serve  a  customer  and  a  new  entrants  cost  to  serve  a  customer.  We  will  treat  any  such  cost  disparity  separately  from  other  economic  issues  because  it  is  tied  closely  to  the  hot  cut  process,  which  is  uniquely  within  the  control  of 

 the  incumbent  LEC. 
 1466  See  Letter  from  Rebecca  Sommi,  Vice  President    Operations,  Broadview  Networks  et  al.,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  6  (filed  Jan.  15,  2003)  (Broadview  et  al.  Jan.  15,  2003  Ex  Parte  Letter)  (asserting  that  the  project  managed  hot  cuts  had  been  primarily  used  with  small  business  customers  as 

 opposed  to  mass  market  customers);  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  11  (asserting  that  the  project  managed  hot  cuts  were  mostly  used  for  business  customers).  Broadview  states  that  the  Commission  should 
 accord  no  credibility  to  Verizons  claim  that  it  can  handle  hot  cuts  on  a  project-  managed  basis  as  well  as  it  handles  hot  cuts  on  an  order-  by-  order  basis,  given  the  fact  that  Verizon  has  failed  to  provide  the  data  that  indicate  that  the 
 quality  of  the  hot  cut  is  not  impacted  when  managed  as  a  project.  Broadview  et  al.  Jan.  15,  2003  Ex  Parte  Letter  at  6. 

 1467  AT&  T  Brenner  Decl.  at  44-  55;  Broadview  et  al.  Jan.  15,  2003  Ex  Parte  Letter  at  6;  BiznessOnline.  Com  Feb. 
 14,  2003  Ex  Parte  Letter  at  11. 
 1468  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  11. 
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 approaches.  Finally,  because  there  generally  are  no  performance  intervals  associated  with  these  approaches,  incumbent  LECs  are  not  subject  to  financial  penalties  for  inadequate  performance. 
 475.  Accordingly,  we  conclude  that  the  operational  and  economic  barriers  arising  from  the  hot  cut  process  create  an  insurmountable  disadvantage  to  carriers  seeking  to  serve  the  mass 
 market,  demonstrating  that  competitive  carriers  are  impaired  without  local  circuit  switching  as  a  UNE.  Although  we  find  that  current  conditions  at  the  national  level  demonstrate  that 
 competitive  LECs  are  impaired  without  unbundled  switching  for  mass  market  customers  based  on  the  costs  and  delays  associated  with  hot  cuts,  we  take  affirmative  steps  to  reduce  this 
 impairment  and  promote  an  environment  suitable  for  increased  facilities-  based  competition.  As  described  below,  we  find  that  the  present  impairment  can  be  mitigated  by  an  improved  loop 
 provisioning  process. 
 (i)  Other  Operational  and  Economic  Impairment 
 476.  Above  we  have  concluded  that  economic  and  operational  barriers  associated  with  the  hot  cut  process  justify  a  national  finding  that  requesting  carriers  are  impaired  without  access 

 to  unbundled  local  circuit  switching.  We  have,  however,  asked  states  to  identify  markets  in  which  requesting  carriers  are  not  impaired  without  access  to  unbundled  local  circuit  switching, 
 pursuant  to  the  guidance  set  forth  below.  1469  In  doing  so,  we  ask  the  states  to  examine  evidence  of  sources  of  impairment  other  than  hot  cuts,  in  the  manner  we  describe  below,  as  the  record 
 shows  that  requesting  carriers  may  be  impaired  without  access  to  unbundled  incumbent  LEC  local  circuit  switching  because  of  operational  and  economic  factors  other  than  those  associated 
 with  hot  cuts.  Commenters  have  alleged  that  these  barriers    which  include  poor  incumbent  LEC  performance  in  fulfilling  unbundling,  collocation,  and  other  statutory  obligations, 
 difficulties  in  performing  customer  migrations  between  competitive  LECs,  difficulties  in  performing  collocation  cross-  connects  between  competing  carriers,  1470  and  the  significant  cost 
 disadvantages  competitive  carriers  face  in  obtaining  access  to  the  loop  and  backhauling  the  circuit  to  their  own  switches  1471    can  be  sufficient  to  hinder  or  prevent  entry  even  if  impairment 
 caused  by  hot  cuts  were  fully  resolved.  Although  these  factors  do  not  form  the  basis  of  our  national  impairment  finding,  1472  we  recognize  that  the  record  evidence  indicates  that  these  factors 
 may  give  rise  to  impairment  in  a  given  market,  even  setting  aside  the  problems  associated  with  hot  cuts,  and  that  they  therefore  will  be  relevant  to  state  commissions  determinations  with 
 respect  to  unbundled  local  circuit  switching.  We  describe  these  potential  barriers  here. 

 1469  State  commissions  can  alternatively  make  a  finding  that  there  is  impairment  based  on  other  economic  and 
 operational  factors  in  the  manner  explained  below. 
 1470  See,  e.  g.,  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter. 

 1471  See  UNE-  P  Coalition  Comments  at  44-  46;  WorldCom  Jan.  8,  2003  Ex  Parte  Letter  at  3  (noting  that  switching 
 has  high  fixed  costs  that  must  be  spread  over  a  large  number  of  customers  if  a  competitive  carrier  is  to  achieve  cost  efficiencies  similar  to  those  enjoyed  by  the  incumbent  LEC). 

 1472  The  evidence  in  the  record  is  not  sufficiently  detailed  to  conclude  that  impairment  exists  on  a  national  basis  due 
 to  these  factors,  as  they  vary  on  a  geographic  basis. 
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 (a)  Operational  Factors 
 477.  Collocation.  We  find  that  the  absence  of  sufficient  collocation  space  in  the  incumbent  LEC  central  office  or  offices  might  in  some  markets  render  competitive  entry 

 impossible  and  thus  result  in  impairment.  The  record  evidence  indicates  that  in  some  markets,  competitive  LECs  may  face  a  lack  of  sufficient  collocation  space  in  the  incumbent  LECs  central 
 office  or  offices.  For  competitive  LECs  that  rely  on  the  incumbent  LECs  transmission  facilities  but  not  on  unbundled  local  circuit  switching,  collocation  of  facilities  in  the  incumbents  central 
 office  is  essential  to  the  provision  of  local  service.  The  incumbents  failure  to  provide  adequate  collocation  space  may  render  competitive  entry  uneconomic.  Thus,  as  set  forth  below,  when 
 states  evaluate  the  prospects  for  self-  provisioned  switching  in  a  given  market,  we  direct  them  to  consider  whether  a  lack  of  sufficient  collocation  space  gives  rise  to  impairment  in  that  market. 

 478.  Incumbent  LEC  Provisioning  of  Competitive  LEC-  to-  Competitive  LEC  Cross    Connects.  We  further  find  that  an  incumbent  LECs  failure  to  provide  cross-  connections  1473 
 between  the  facilities  of  two  competitive  LECs  on  a  timely  basis  can  also  result  in  impairment.  Competition  in  the  absence  of  unbundled  local  circuit  switching  requires  seamless  and  timely 
 migration  not  only  to  and  from  the  incumbents  facilities,  but  also  to  and  from  the  facilities  of  other  competitive  carriers.  1474  Such  interconnection  requires  that  the  incumbent  LEC  place  cross 
 connections  between  the  competitive  carriers  facilities  in  its  central  office  on  a  timely  basis.  The  incumbents  failure  to  do  so  will  tend  to  delay  competitors  entry,  and  thus  to  increase 
 competitors  costs.  We  conclude  that  in  some  cases,  such  failure  can  give  rise  to  impairment  in  the  absence  of  unbundled  local  circuit  switching. 

 (b)  Economic  Factors 
 479.  Competing  carriers  contend  that  many  economic  factors  also  prevent  them  from  using  UNE-  L  and  thus  impair  their  ability  to  serve  the  mass  market  without  access  to  unbundled 

 switching.  Competing  carriers  maintain  that  even  using  the  most  efficient  network  architecture  available  for  entry  using  the  UNE-  L  strategy,  they  are  at  a  significant  cost  disadvantage  vis-  -  vis 
 the  incumbent  in  all  areas.  In  addition  to  the  hot  cut-  related  costs  discussed  above,  competitive  LECs  cite  the  cost  of  backhauling  the  voice  circuit  to  their  switch  from  the  customers  end 
 office.  1475  They  allege  that  these  hot  cut  and  backhaul  costs  are  not  faced  by  the  incumbent,  and 

 1473  Cross-  connection  is  the  attachment  of  one  wire  to  another  usually  by  anchoring  each  wire  to  a  connecting 
 block  and  then  placing  a  third  wire  between  them  so  that  an  electrical  connection  is  made.  Id.;  see  also  AT&  T  Brenner  Decl.  at  para.  21;  Z-  Tel  Comments,  Declaration  of  Peggy  Rubino  at  para.  12. 

 1474  See  Collocation  Remand  Order,  16  FCC  Rcd  at  15436,  15464-  78,  paras.  2,  55-  84  (concluding  that  while  an 
 incumbent  LEC  need  not  allow  collocators  to  install  and  maintain  cross-  connects  between  different  carriers  collocated  equipment,  an  incumbent  LEC  itself  must  provide  these  cross-  connects  upon  reasonable  request);  Local 

 Competition  Order,  11  FCC  Rcd  at  15801,  para.  594  (  We  believe  that  it  serves  the  public  interest  and  is  consistent  with  the  policy  goals  of  section  251  to  require  that  incumbents  permit  two  or  more  collocators  to  interconnect  their 
 networks  at  the  incumbents  premises.);  UNE  Remand  Order,  15  FCC  Rcd  at  3777-  78,  paras.  178-  79. 
 1475  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  3-  4;  Letter  from  Joan  Marsh,  Director,  Federal  Regulatory 
 Affairs,  AT&  T,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  5  (filed  Nov.  26,  (continued.) 
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 thus  put  competing  carriers  at  a  significant  relative  disadvantage.  1476  The  costs  faced  only  by  competitive  LECs  are,  they  claim,  especially  burdensome  given  the  high  churn  rates  associated 
 with  serving  mass  market  customers  that  they  face  in  the  first  few  months  of  service.  Incumbent  LECs  respond  that  the  marketplace  evidence  showing  deployment  of  switches  for  both  business 
 and  residential  customers,  and  an  analysis  of  the  costs  and  revenues  of  entry  using  the  UNE-  L  strategy,  demonstrate  that  competitors  are  able  to  enter  the  voice  mass  market  economically,  and 
 that  economic  factors  do  not  justify  a  national  impairment  finding.  As  described  above,  we  believe  that  economic  and  operational  barriers  associated  with  the  hot  cut  process  do  justify  such 
 a  national  finding,  but  authorize  the  state  commissions  to  find  otherwise  where  there  is  no  impairment.  In  this  section,  we  discuss  economic  factors  that,  based  on  our  record,  may  be 
 relevant  to  the  states  determinations. 
 480.  The  need  to  backhaul  the  circuit  derives  from  the  use  of  a  switch  located  in  a  location  relatively  far  from  the  end  users  premises,  which  effectively  requires  competitors  to 

 deploy  much  longer  loops  than  the  incumbent.  1477  Competing  carriers  assert  that  the  costs  of  backhaul,  which  include  the  costs  of  collocating  in  the  customers  serving  wire  center,  1478 
 installing  equipment  in  the  wire  center  in  order  to  digitize,  aggregate,  and  transmit  the  voice  traffic,  and  paying  the  incumbent  to  transport  the  traffic  to  the  competitors  switch,  put  them  at  a 
 significant  cost  disadvantage  to  the  incumbent.  1479  Since  many  of  these  costs  are  fixed,  competitors  argue  that  these  costs  must  be  spread  over  a  large  number  of  customers  if  a 
 competitive  carrier  is  to  achieve  cost  efficiencies  similar  to  those  enjoyed  by  the  incumbent  LEC.  1480  Thus  in  smaller  wire  centers,  where  the  competitors  customer  base  is  likely  to  be 

 (Continued  from  previous  page) 
 2002)  (AT&  T  Nov.  26,  2002  Ex  Parte  Letter);  AT&  T  Oct.  4,  2002  Ex  Parte  Letter  at  8-  9,  21;  Letter  from  Joan  Marsh,  Director,  Federal  Regulatory  Affairs,  AT&  T,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338, 

 96-  98,  98-  147,  Attach.  at  6-  11  (filed  Nov.  12,  2002)  (AT&  T  Nov.  12,  2002  Ex  Parte  Letter);  WorldCom  Oct.  12,  2002  Ex  Parte  Letter,  Attach.  at  34-  38;  WorldCom  Bryant  Reply  Decl.  at  paras.  22-  24. 

 1476  See,  e.  g.,  ASCENT  Comments  at  36;  ASCENT  Reply  at  7;  WorldCom  Nov.  15,  2002  Customer  Churn  Ex 
 Parte  Letter;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  4;  CompTel/  PACE  Oct.  31,  2002  Ex  Parte  Letter  at  2-  4.  The  current  system  of  hot  cuts  involves  a  constant  charge  per  line,  such  that  there  are  no  benefits  from 

 handling  larger  volumes.  This  may  change  with  the  use  of  a  batch  cut  over  system,  however,  if  volume  discounts  are  provided  to  competitors. 

 1477  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  3;  AT&  T  Oct.  4,  2002  Ex  Parte  Letter  at  8. 
 1478  On  average,  for  example,  NewSouth  estimates  that  it  incurs  costs  totaling  approximately  $500,000  over  the  first 
 3  years  at  each  collocation  site.  NewSouth  Reply  at  25-  26;  NewSouth  Fury  Reply  Aff.  at  para.  4.  According  to  NewSouth,  these  costs  include  expenses  associated  with  building  the  collocation  space,  recurring  charges  for  rent 

 and  power,  and  the  costs  of  purchasing  and  installing  the  equipment  in  the  collocation  space.  NewSouth  Reply  at  26;  Fury  Reply  Aff.  at  para.  4. 

 1479  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  3-  4;  AT&  T  Nov.  26,  2002  Ex  Parte  Letter  at  2-  5;  AT&  T 
 Oct.  4,  2002  Comparing  ILEC  and  CLEC  Local  Network  Architectures  Ex  Parte  at  8-  9,  21;  AT&  T  Nov.  12,  2002  Ex  Parte  Letter,  Attach.  at  6-  11;  WorldCom  Oct.  12,  2002  Ex  Parte  Letter,  Attach.  at  34-  38;  WorldCom  Bryant 

 Reply  Decl.  at  paras.  22-  24. 
 1480  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  3-  4. 
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 smaller  and  they  are  unable  to  take  advantage  of  scale  economies,  the  cost  disadvantage  due  to  backhaul  is  much  larger.  1481 
 481.  In  support  of  their  arguments,  several  parties  have  submitted  detailed  cost  studies  and  business  case  analyses  concerning  whether  entry  into  the  mass  market  is  economically 
 feasible  without  access  to  the  incumbents  switch.  1482  The  studies  submitted  by  AT&  T  1483  and  WorldCom  1484  examine  only  the  costs  a  competing  carrier  would  incur  that  would  not  be  incurred 
 by  the  incumbent  to  determine  whether  a  competitive  LEC  utilizing  UNE-  L  would  suffer  a  cost  disadvantage  relative  to  the  incumbent.  1485  AT&  T  submitted  two  studies,  one  of  which  found 
 that  competitors  suffer  from  a  cost  disadvantage  of  at  least  $8  per  line  in  larger  wire  centers,  and 

 1481  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  4-  6;  Letter  from  Access  Integrated  Networks  et  al.,  to 
 Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3-  6  (filed  Dec.  11,  2002)  (Access  Integrated  Networks  et  al.  Dec.  11,  2002  Ex  Parte  Letter).  For  example,  WorldCom  finds  that  the  average  monthly 

 cost  of  collocation,  transport,  hot  cut,  and  collocated  equipment  assuming  that  it  serves  7%  of  the  local  service  market  and  has  no  physical  network  to  begin  with,  is  $11.40  per  line  served  in  incumbent  end  offices  with  switches 
 larger  than  25,000  lines,  and  $49.92  in  incumbent  end  offices  with  switches  under  5,000  lines.  WorldCom  Comments  at  Appendix,  Table  1.  AT&  T  examined  the  costs  attributable  to  hot  cuts  and  backhaul  that  are  not  faced 
 by  the  incumbent.  In  the  first  study  it  found  that  for  a  model  competitor,  the  cost  disadvantage  for  a  20%  market  share  is  $9.53  per  line  served  in  a  typical  incumbent  end  office  of  15,000  lines  and  $8.12  per  line  in  a  wire  center  of 
 100,000  lines.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  2-  3.  The  second  study  examined  the  cost  of  serving  customers  in  every  existing  incumbent  wire  center  for  a  model  competitor,  assuming  that  collocation  space  and 
 backhaul  are  being  used  for  other  purposes  as  well  as  for  serving  analog  loops.  The  study  showed  that  to  serve  all  incumbent  wire  centers  with  at  least  5,000  lines,  a  competitor  with  5%  market  share  will  suffer  a  cost  impairment 
 per  line  of  $4.72  for  collocation  and  digitization/  concentration  equipment  costs,  $0.84  for  backhaul  transport,  and  $2.44  for  hot  cuts,  with  a  cost  offset  of  $0.60  because  the  competitor  is  able  to  use  all  digital  lines,  for  a  net  cost 
 disadvantage  of  $7.41.  If  the  competitor  has  a  20%  market  share  in  each  end  office,  the  net  cost  disadvantage  falls  to  $6.24,  taking  into  account  the  $0.60  cost  offset.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  3-  4  &  n.  9. 

 1482  See  generally  AT&  T  Jan.  17,  2003  Ex  Parte  Letter;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter;  BellSouth  Jan.  30, 
 2003  Ex  Parte  Letter;  Letter  from  James  C.  Smith,  Senior  Vice  President,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  14,  2003)  (SBC  Jan.  14,  2003  Unbundled  Switching  Ex 

 Parte  Letter);  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter. 
 1483  AT&  T  Jan.  17,  2003  Ex  Parte  Letter. 

 1484  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter. 
 1485  In  addition,  Birch  and  PACE  submitted  a  joint  analysis  of  the  costs  of  market  entry.  See  Letter  from  Genevieve 
 Morelli,  Counsel  for  PACE,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4,  6  (filed  Dec.  9,  2002)  (PACE  et  al.  Dec.  9,  2002  Ex  Parte  Letter).  Although  not  a  full  cost  study,  this  analysis 

 purported  to  show  that  it  was  uneconomic  for  competing  carriers  to  serve  DS0  customers  via  either  existing  enterprise  switches  or  alternative  approaches  such  as  the  use  of  EELs  or  incumbent  LEC  multiplexers.  Id.  Granite 
 also  submitted  an  analysis  of  its  projected  costs  to  enter  a  market  using  its  own  switch.  See  Letter  from  William  B.  Wilhelm,  Jr.  and  Patrick  J.  Donovan,  Counsel  for  Granite,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos. 
 01-  338,  96-  98,  98-  147  at  1-  2  &  Attach.  (filed  Dec.  16,  2002)  (Granite  Dec.  16,  2002  Ex  Parte  Letter).  This  analysis  suggests  that,  to  enter  the  Boston  local  market,  a  competing  carrier  using  its  own  switch  would  incur  costs  of  $12 
 million  during  the  first  year.  Id.,  Attach.  at  3.  Based  on  this  analysis,  Granite  argues  that  migration  from  service  using  unbundled  incumbent  LEC  local  circuit  switching  to  UNE-  L  is  not  economically  feasible.  Id.  at  1-  2. 
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 from  a  greater  cost  disadvantage  in  smaller  incumbent  end  offices.  1486  AT&  T  argues  that  this  cost  disparity  means  that  competitors  are  impaired  without  access  to  the  incumbents  switching. 
 WorldComs  study  purports  to  show  that,  assuming  a  market  share  of  seven  percent,  WorldCom  suffers  from  a  cost  disadvantage  of  at  least  $10  per  line,  in  wire  centers  where  it  has  its  own 
 collocation,  transport  and  nearby  switch,  and  that  this  disadvantage  rises  to  $21.59  per  line  in  wire  centers  where  it  lacks  facilities  and  collocation.  WorldCom  further  argues  that  in  central 
 offices  with  fewer  than  25,000  residential  lines,  the  cost  of  UNE-  L  service  will  constitute  an  insurmountable  barrier  to  entry  and  competition,  even  if  there  are  significant  reductions  in 
 incumbent  LEC  charges.  1487  WorldCom  also  claims  that  in  central  offices  serving  25,000  or  more  residential  lines,  competitive  LECs  that  achieve  a  reasonable  (e.  g.,  seven  percent)  market 
 share  can  economically  migrate  customers  served  by  unbundled  local  circuit  switching  to  their  own  switches,  provided  that  operational  and  economic  barriers  have  already  been  substantially 
 reduced  or  removed  by  state  commissions.  1488 
 482.  The  studies  presented  by  SBC  and  BellSouth  examine  whether  economic  entry  is  possible,  taking  into  consideration  the  revenue  opportunities  available  and  the  typical  costs  of 

 utilizing  a  UNE-  L  strategy.  The  incumbents  claim  that  competitive  LECs  have  successfully 
 1486  In  the  first  study,  AT&  T  found  that  for  a  model  competitor,  the  minimum  cost  disadvantage  to  a  competing 
 carrier  is  $8.12  per  line,  assuming  a  20%  market  share  in  a  wire  center  of  100,000  lines.  The  cost  disadvantage  was  larger  for  smaller  wire  centers  and  lower  market  shares.  For  a  typical  incumbent  end  office  of  15,000  lines,  the  total 

 net  impairment  was  found  to  equal  $9.53.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  2-  3.  The  second  study  examined  the  costs  of  serving  customers  in  every  existing  incumbent  wire  center  for  a  model  competitor,  assuming  that 
 collocation  space  and  backhaul  were  being  used  for  other  purposes  as  well  as  serving  analog  loops.  The  study  showed  that  to  serve  all  incumbent  wire  centers  with  at  least  5,000  lines,  a  competitor  with  5%  market  share  will 
 suffer  a  cost  impairment  per  line  of  $4.72  for  collocation  and  digitization/  concentration  equipment  costs,  $0.84  for  backhaul,  and  $2.44  for  hot  cuts,  with  a  cost  offset  of  $0.60  because  the  competitor  would  be  able  to  use  all  digital 
 lines,  for  a  net  cost  disadvantage  of  $7.41.  If  the  competitor  had  a  20%  market  share  in  each  end  office,  the  cost  disadvantage  would  fall  to  $6.24,  taking  into  account  the  $0.60  cost  offset.  Id.  at  3-  4  and  n.  9. 

 1487  WorldCom  examined  the  additional  costs  (in  the  major  categories  of  collocation,  digitization  and  concentration, 
 transport,  switching,  OSS,  and  hot  cuts)  incurred  in  serving  residential  customers  in  BOC  territories  using  WorldCom  switches,  based  on  WorldComs  existing  network.  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter. 

 BOC  central  offices  were  classified  into  three  groups:  offices  where  WorldCom  already  has  collocation,  on-  net  transport,  and  nearby  switching  (case  1);  offices  where  WorldCom  has  a  switch  in  the  LATA  but  no  collocation  or 
 transport  (case  2);  and  offices  with  no  WorldCom  collocation,  switching  or  transport  (case  3).  Estimates  of  the  cost  disadvantage  were  broken  down  by  case,  size  of  wire  center,  WorldComs  assumed  market  share,  and  whether 
 WorldCom  uses  UNEs  or  special  access  for  transport.  WorldCom  claimed  that,  assuming  a  7%  market  share,  on  average  WorldCom  would  be  at  a  56%  ($  10.03),  178%  ($  17.92),  and  301%  ($  25.84)  cost  disadvantage  using  UNE-L 
 relative  to  the  BOCs  unbundled  loop  and  circuit  switching  combination  cost  (excluding  the  cost  of  the  loop  for  both)  for  cases  1,  2,  and  3,  respectively.  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  2-  3,  Attach.  A  at  6-  7 
 and  Appendix  Table  1.  We  note  that  most  of  the  additional  costs  were  due  to  the  costs  of  collocation  and  of  the  equipment  needed  for  backhaul.  For  example,  for  case  3  with  7%  market  share,  the  digitization,  concentration,  and 
 switching  equipment  and  OSS  cost  $6.70  and  collocation  $11.08,  while  transport  was  $1.31  and  hot  cut  charge  was  $2.50,  for  a  total  cost  of  $21.59.  MICRA  Jan.  8  Study  at  3-  6  and  App.  Table  1. 

 1488  See  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  7;  Letter  from  A.  Richard  Metzger,  Counsel  for 
 WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  23,  2003)  (WorldCom  Jan.  23,  2003  Unbundled  Switching  Ex  Parte  Letter). 
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 served  the  business  market  using  self-  provisioned  switches,  and  that  they  could  use  these  switches  to  serve  the  mass  market  as  well,  thus  taking  advantage  of  economies  of  scope.  1489  They 
 note,  too,  that  competitive  LECs  are  free  to  serve  only  high-  margin  customers,  rather  than  being  required,  as  are  the  incumbents,  to  provide  underpriced  service  to  rural  and/  or  residential 
 consumers.  1490  Moreover,  incumbent  LECs  contend  that  switches  deployed  by  competitive  LECs  may  be  able  to  serve  larger  geographic  areas  than  switches  deployed  by  the  incumbent  LEC, 
 thereby  reducing  the  per-  line  fixed  cost  of  purchasing  circuit  switching  capability  and  allowing  requesting  carriers  to  create  their  own  switching  efficiencies.  1491  Based  on  the  prices  competitors 
 have  charged  to  high-  revenue  mass  market  customers,  and  the  likely  scale  economies  entrants  could  achieve  using  a  UNE-  L  strategy  with  collocated  transmission  equipment,  incumbent  LECs 
 argue  that  competitors  could  economically  enter  and  serve  the  mass  market  using  their  own  centrally  located  switches.  1492  Specifically,  SBC  and  BellSouth  claim  that  competitive  LECs  can 
 earn  a  positive  margin  providing  facilities-  based  residential  service  in  wire  centers  with  5,000  or  more  lines.  1493  SBC  further  asserts  that  any  losses  in  the  wire  centers  of  under  5,000  lines  would 
 be  more  than  offset  by  the  profits  a  competitive  LEC  will  accrue  from  serving  wire  centers  of  5,000  lines  or  more.  Thus,  SBC  argues,  a  competitor  could  economically  serve  all  wire 
 centers.  1494 

 1489  BOC  UNE  Fact  Report  2002  at  II-  10-  11. 
 1490  See  Verizon  Reply  at  42-  43;  SBC  Reply  at  2,  26;  BellSouth  NERA  Reply  Decl.  at  viii. 
 1491  See  BellSouth  Comments  at  79-  80  (citing  BOC  UNE  Fact  Report  2002  at  II). 
 1492  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter. 
 1493  See  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter  at  2;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter.  In 
 its  study,  SBC  assumes  that  MCI  had  deployed  switches  to  serve  residential  customers  in  wire  centers  with  5,000  or  more  lines  (which,  according  to  SBC,  accounts  for  57.7%  of  SBC  wire  centers  in  suburban  and  rural  areas).  In 

 California,  Michigan,  and  Texas,  the  SBC  study  determines  that  MCI  would  be  able  to  cover  its  UNE-  L  provisioning  costs  if  MCI  set  its  retail  prices  (for  residential  customers)  at  $40-$  60  per  line  and  had  a  market  share 
 of  at  least  5%  in  each  wire  center  with  more  than  5,000  lines.  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter  at  3.  SBCs  model  compares  the  costs  of  a  UNE-  L  arrangement  to  the  residential  revenue  opportunities 
 available  to  competitors.  See  Letter  from  Jay  Bennett,  Executive  Director    Federal  Regulatory,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4  (filed  Jan.  24,  2003)  (SBC  Jan.  24,  2003  Ex 
 Parte  Letter).  Specifically,  SBC  concludes  that  competitive  LECs  winning  5%  to  10%  of  access  lines  in  wire  centers  of  5,000  access  lines  or  more  can  profitably  serve  residential  customers  using  their  own  switches.  Id. 

 BellSouth  examines  whether  a  competitor  with  a  5%  market  share  could  profitably  serve  customers  in  wire  centers  of  various  sizes,  grouped  into  the  following  categories:  greater  than  25,000  lines,  15,000  to  25,000  lines, 
 5,000-  15,000  lines,  and  under  5,000  lines.  The  study  relies  on  the  cost  estimates  supplied  by  WorldCom,  to  which  BellSouth  adds  the  cost  of  an  average  UNE  loop.  See  generally  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter. 
 Under  each  of  the  three  scenarios  presented,  which  varies  according  to  the  estimates  of  collocation  costs  and  retail  revenues  available,  BellSouths  study  determines  that  competitors  could  profitably  serve  the  groups  of  wire  centers 
 with  greater  than  5,000  lines,  and  would  lose  money  only  for  wire  centers  of  less  than  5,000  lines.  BellSouth  Jan.  30,  2003  Ex  Parte  Letter  at  7-  9. 

 1494  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter  at  3-  4  (  The  critical  issue  is  not  whether  CLECs  can 
 serve  every  wire  center  profitably,  but  whether  they  can  viably  serve  a  particular  market.  Because  wire  centers  with  (continued.) 
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 483.  We  find  that  these  studies  fail  to  provide  sufficient  evidence  to  form  a  basis  for  making  a  national  finding  of  no  impairment,  or  a  finding  of  impairment  on  the  basis  of  non-  hot 
 cut  factors  alone.  These  studies  either  failed  to  adopt  the  proper  framework  for  determining  impairment,  were  insufficiently  granular,  or  failed  to  provide  sufficient  support  for  the 
 parameters  they  employed.  We  observe  that  the  results  of  these  studies  were  very  sensitive  to  the  inputs  used  and  the  assumptions  employed.  The  studies  cost  estimates  depend  on  the 
 competitors  predicted  market  share  in  each  incumbent  end  office  and  the  size  of  the  end  office,  as  well  as  on  the  cost  of  various  UNEs  and  equipment,  some  of  which  were  disputed.  1495  The 
 cost  estimates  were  also  sensitive  to  whether  or  not  the  competing  carrier  was  assumed  already  to  have  installed  facilities,  such  as  collocation,  transmission  equipment  and  backhaul,  a  switch, 
 and/  or  their  own  transport  network,  for  the  purpose  of  providing  other  services    for  example,  to  serve  the  medium  and  large  enterprise  market.  1496  The  studies  failed  to  provide  sufficient  support 
 for  many  of  these  parameters,  and  often  failed  to  take  into  account  geographic  variations  in  these  parameters.  While  providing  significant  evidence  that  competitors  operate  at  a  cost  disadvantage 
 compared  to  the  incumbent,  the  studies  presented  by  WorldCom  and  AT&  T  also  did  not  adopt  the  proper  framework,  because  they  failed  to  consider  all  revenue  opportunities  associated  with 
 entry.  These  studies  were  therefore  unable  to  determine  when  entry  would  be  uneconomic.  The  incumbent  LEC  studies  also  used  incorrect  revenues,  failing  to  use  the  likely  revenues  to  be 
 obtained  from  the  typical  customer.  Moreover,  all  of  the  studies  relied  on  averages,  either  national  or  regional,  for  some  of  their  revenue  and  cost  parameters,  despite  the  fact  that  a 
 granular  analysis  must  wherever  possible  account  for  market-  specific  factors.  Accordingly,  based  on  the  foregoing,  the  studies  provide  insufficient  evidence  either  for  or  against  a  finding  of 
 impairment. 
 484.  However,  we  are  persuaded  that  other  economic  factors,  in  addition  to  the  economic  and  operational  barriers  associated  with  the  current  hot  cut  process  that  we  have 

 already  identified,  may  make  entry  uneconomic  without  access  to  the  incumbents  switch.  If 
 (Continued  from  previous  page) 
 fewer  than  5,000  lines  account  for  a  minority  of  all  subscriber  lines,  notwithstanding  that  they  represent  almost  half  (42.  3%)  of  SBCs  wire  centers,  its  is  reasonable  to  assume  that  any  losses  a  CLEC  incurs  in  those  wire  centers  will 

 be  more  than  offset  by  profits  earned  in  larger  wire  centers  in  those  same  markets.) 
 1495  Besides  the  total  number  of  lines  in  each  incumbent  end  office  and  the  competitors  market  share,  other  input 
 parameters  that  affect  the  calculation  included  competitor  capital  costs;  depreciation  rates;  maintenance  costs;  customer  churn  rates;  collocation  space  preparation  costs  and  monthly  rental  fees;  digital  loop  carrier  equipment 

 costs,  capacities  and  degree  of  concentration;  UNE  transport  and  special  access  charges;  competitor  switch  termination  costs;  and  hot  cut  costs.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  2. 

 1496  Thus,  a  competitor  may  have  already  set  up  collocation  and  transport  (using  the  incumbents  transport  network) 
 for  a  particular  end  office,  and  installed  its  own  switch,  in  order  to  serve  business  customers  in  that  end  office.  Some  competing  carriers  also  have  established  extensive  fiber  transport  networks  in  metropolitan  areas.  Use  of 

 these  facilities  would  potentially  reduce  or  eliminate  the  costs  of  collocation,  transmission  equipment,  backhaul,  and  switching.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  3;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter,  Attach.  A 
 at  3-  6;  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter  at  3.  In  these  cases,  the  cost  of  these  facilities  would  have  already  been  recovered  by  the  revenues  recovered  in  connection  with  these  other  services,  and  thus  the 
 carriers  would  be  taking  advantage  of  the  scope  economies  available  from  the  facilities  other  uses. 
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 nothing  else,  the  evidence  provided  to  us  demonstrates  that  whether  entry  will  be  economic  depends  critically  on  the  values  of  certain  factors  affecting  a  competing  carriers  likely  costs  and 
 revenues,  1497  and  that  these  factors  vary  significantly  among  locations  and  types  of  customers.  1498  It  is  quite  possible  that  carriers  can  economically  enter  with  their  own  facilities  in  low  cost,  high 
 revenue  locations,  but  not  in  high  cost,  low  revenue  locations.  1499  Although  we  lack  sufficient  evidence  in  the  record  to  determine  the  accuracy  of  the  inputs  used  to  generate  their  results,  we 
 observe  that  all  of  the  studies  mentioned    including  the  BOC  studies    suggest  that  it  would  be  uneconomic  for  a  competing  carrier  to  serve  customers  in  smaller  wire  centers.  All  the  studies 
 found  that  in  such  wire  centers,  entry  would  be  much  more  expensive  for  the  competitive  LEC  than  for  the  incumbent,  or  simply  would  be  uneconomic.  WorldCom  found  that,  for  customers 
 for  which  it  lacks  facilities,  its  cost  disadvantage  rises  from  an  average  of  $11.40  per  line  for  wire  centers  of  over  25,000  lines,  to  $49.92  for  wire  centers  of  under  5,000  lines.  1500  AT&  Ts 
 study  shows  that,  assuming  a  market  share  of  seven  percent,  a  competitors  cost  disadvantage  rises  from  $8.78  for  a  wire  center  of  100,000  lines  to  $71.73  for  a  wire  center  of  2,000  lines.  1501 
 Even  the  studies  by  the  incumbent  LECs,  SBC  and  BellSouth,  found  that  entry  would  be  uneconomic  for  wire  centers  of  under  5,000  lines.  1502  BellSouth  found  that  for  wire  centers  of 
 under  5,000  lines,  1503  a  competitor  would  likely  experience  a  net  loss  of  $1.93  per  line  assuming 
 1497  According  to  the  standard  set  forth  above,  our  analysis  must  take  into  consideration  the  full  range  of  revenues 
 that  are  likely  to  be  obtained  by  an  entrant  providing  voice  and  related  services,  and  the  costs  likely  to  be  incurred.  All  factors  affecting  a  competing  carriers  likely  revenues  and  costs  must  be  examined  to  determine  if  they  affect  its 

 ability  to  enter  a  market  economically.  Because  economic  entry  depends  on  whether  the  sum  total  of  all  likely  revenue  sources  exceeds  the  sum  total  of  all  likely  costs  of  serving  the  market,  any  factor  that  limits  or  lowers  the 
 potential  revenues  available  to  a  competing  carrier,  or  raises  the  cost  of  serving  a  set  of  customers,  is  a  potential  barrier  to  entry.  It  is  only  by  evaluating  all  the  factors  together  that  we  may  determine  whether  the  likely  revenues 
 from  entry  will  exceed  the  likely  costs.  Therefore,  no  factor  should  be  examined  in  isolation. 
 1498  To  utilize  a  UNE-  L  strategy,  which  is  the  most  likely  network  architecture  a  new  competing  carrier  would  use 
 to  serve  a  mass  market  voice  customer  in  the  absence  of  unbundled  switching,  a  competing  carrier  would  have  to  incur  costs  for  the  loop,  backhaul,  collocation  space,  digitizing  and  aggregating  equipment  in  the  customers  wire 

 center,  a  switch,  interconnection,  transport,  and  the  transfer  of  the  customer  to  its  switch  using  a  hot  cut,  as  well  as  internal  administrative  costs,  the  cost  of  capital,  and  other  costs.  Likely  revenues  depend  on  the  prevailing  retail 
 rate  and  other  revenues  to  be  gained  from  selling  local  service,  including  those  associated  with  access  charges  and  vertical  features.  Also  important  is  whether  a  competing  carrier  can  sell  other  products  in  the  region  or  wire  center, 
 which  might  generate  sufficient  revenues  to  help  justify  expenditures  on  collocation,  backhaul,  and  a  switch. 
 1499  Entry  is  more  likely  to  be  economic  in  locations  served  by  larger  wire  centers  with  greater  line  density,  and  in 
 areas  with  low  UNE  loop  rates,  high  retail  rates  relative  to  cost,  high  subscription  rates  for  vertical  features,  large  numbers  of  business  customers,  low  UNE  rates,  and  high  retail  rates.  This  list  does  not  necessarily  include  all 

 possible  factors  that  may  vary. 
 1500  WorldCom  Jan.  8,  2003  Ex  Parte  Letter  at  2-  3,  Attach.  A  at  6-  7  and  App.  Table  1,  Case  3. 

 1501  AT&  T  Jan.  17,  2003  Ex  Parte  Letter,  Attach.  1  (using  7%  market  share  and  switch  sizes  of  100,000  and  2,000 
 lines  used  as  inputs). 
 1502  SBC  admits  that  competitive  LECs  cannot  earn  a  profit  serving  customers  in  wire  centers  of  under  5,000  lines, 
 but  provides  no  analysis  of  the  likely  per-  line  losses.  SBC  Jan.  14,  2003  Ex  Parte  Letter. 
 1503  The  average  size  of  these  wire  centers  is  1,968  lines.  BellSouth  Jan.  30,  2003  Ex  Parte  Letter  at  8. 
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 BellSouths  average  retail  local  revenues.  1504  However,  as  discussed  above,  there  was  significant  disagreement  concerning  whether  entry  would  be  economic  for  larger  wire  centers.  1505 
 485.  All  of  these  studies,  including  those  provided  by  the  BOCs,  strongly  support  the  need  for  a  more  granular  analysis  of  impairment.  We  have  insufficient  evidence  in  the  record, 
 however,  to  conduct  this  granular  analysis.  Such  an  analysis  would  require  complete  information  about  UNE  rates,  retail  rates,  other  revenue  opportunities,  wire  center  sizes, 
 equipment  costs,  and  other  overhead  and  marketing  costs.  While  some  of  this  information  was  submitted  to  us,  or  is  available  to  us  from  other  sources,  the  available  data  do  not  sufficiently 
 facilitate  a  granular  inquiry  into  precisely  where  entry  is  economic.  That  market-  specific  data  is  needed  is  indicated  by  the  significant  variation  in  the  costs  and  revenues  an  efficient  entrant  is 
 likely  to  face.  For  example,  costs  appear  to  vary  significantly  among  locations  and  types  of  customers.  1506  The  recurring  and  non-  recurring  charges  for  critical  UNE  inputs  such  as 
 collocation,  loops,  and  transport  often  vary  substantially  between  states.  1507  Within  a  state  UNE  loop  rates  can  vary  tremendously  among  rate  zones.  1508  Parties  also  agree  that  the  average  cost 
 per  customer  for  collocation  and  equipment  varies  according  to  the  number  of  customers  served  in  a  wire  center,  which  is  likely  to  depend  on  the  size  of  the  wire  center  and  the  likely  market 
 share  of  an  efficient  competitor.  1509  Some  costs  also  vary  according  to  the  total  size  of  the  market  served.  1510  The  revenue  estimates,  which  depend  on  customers  predicted  expenditures  on  local 
 voice  service,  were  particularly  controversial,  and  appear  to  have  had  a  significant  impact  on  the  results.  1511  Retail  rates  can  vary  between  states,  by  the  type  of  customer,  and  within  the  state.  1512 

 1504  BellSouth  Jan.  30,  2003  Ex  Parte  Letter  at  8. 
 1505  See  supra  Part  VI.  D.  4.  a. 
 1506  See  supra  note  1498. 
 1507  See  supra  note  1301. 
 1508  Most  states  have  adopted  three  rate  zones,  which  is  the  minimum  required  by  the  Commission.  See  Local 
 Competition  Order,  11  FCC  Rcd  at  15882-  83,  para.  765.  Some  states  have  adopted  four  zones. 
 1509  See  supra  Part  VI.  D.  6.  a.(  i). 

 1510  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  2-  3,  7-  8  (discussing  collocation  space  costs,  which  relate  to  the  number 
 of  customers  served,  and  backhaul  costs,  which  relate  to  the  distance  between  the  customers  premises  and  the  competitive  LECs  switch);  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter,  Attach.  at  7  (  Economies  of  scale 

 are  critical  to  the  level  and  structure  of  costs  incurred  by  the  CLECs.). 
 1511  There  is  significant  disagreement  concerning  what  revenues  to  use  in  calculating  net  profits.  AT&  T, 
 WorldCom,  and  Z-  Tel  argue  that  retail  rates  should  not  be  relied  upon,  and  that  instead  we  should  examine  the  cost  disparity  the  competitor  suffers  using  UNE-  L  relative  to  the  incumbent.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter  at  3; 

 WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  Attach.  A,  3-  6.  SBC  and  BellSouth  argue  that  we  should  examine  whether  entry  is  economic  using  typical  retail  revenues.  SBC  Jan.  14,  2003  Unbundled  Switching  Ex 
 Parte  Letter  at  3.  In  its  study  SBC  used  the  typical  retail  revenue  charged  by  WorldCom  for  its  nationwide  offering  of  combined  local  and  long  distance  service,  called  The  Neighborhood.  Id.  BellSouth  suggests  using  the 
 incumbents  average  retail  per-  line  local  revenues,  or  the  price  of  the  incumbents  retail  local  offerings  as  the  basis  for  determining  competitors  revenues.  BellSouth  Jan.  30,  2003  Ex  Parte  Letter  at  2-  8. 
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 Other  revenues  from  mass  market  customers,  1513  and  additional  revenue  opportunities  from  other  types  of  customers,  1514  may  also  vary  between  and  within  states.  Therefore,  we  expect  that  the 
 states  will  consider  the  economic  factors  discussed  here  on  a  market-  by-  market  basis  and  will  determine  whether  it  is  appropriate  to  find  no  impairment  in  any  particular  market.  This 
 approach  is  consistent  with  our  standard,  which  requires  a  determination  of  impairment  on  a  granular  basis,  and  with  the  dictates  of  USTA.  1515 

 (ii)  State  Actions  and  Determinations 
 486.  In  this  section,  we  ask  state  commissions  to  take  certain  actions  designed  to  alleviate  impairment  in  the  markets  over  which  they  exercise  jurisdiction.  We  also  set  forth  a 

 detailed  process  by  which  states  may  perform  analysis  on  a  more  granular  basis,  and  may  identify  where  competing  carriers  are  not  impaired  without  access  to  unbundled  switching. 

 (a)  Incumbent  LEC  Batch  Cut  Processes 
 487.  We  have  found  that  a  seamless,  low-  cost  batch  cut  process  for  switching  mass  market  customers  from  one  carrier  to  another  is  necessary,  at  a  minimum,  for  carriers  to  compete 

 effectively  in  the  mass  market.  1516  We  conclude  that  the  loop  access  barriers  contained  in  the  (Continued  from  previous  page) 
 1512  See  supra  note  1303. 
 1513  Revenues  associated  with  related  services  purchased  by  mass  market  customers,  such  as  vertical  features,  are 
 not  included  in  residential  rates,  and  may  vary  among  the  states  and  within  a  state.  Revenues  can  also  vary  according  to  the  state  Subscriber  Line  Charge  (SLC)  and  the  state  and  federal  access  charges  that  can  be  applied. 

 FCC  Reference  Book  at  1;  MAG  Plan  Order,  16  FCC  Rcd  at  19636-  37,  19669,  paras.  47,  131.  Many  state  commissions  report  setting  intrastate  access  charges  above  cost.  GAO  Report  on  Universal  Service  at  18. 

 1514  Additional  revenue  opportunities  are  likely  to  be  greatest  in  areas  with  large  numbers  of  enterprises,  especially 
 if  some  of  those  enterprises  are  heavy  users  of  telecommunications  services. 
 1515  USTA,  290  F.  3d  at  422-  26. 

 1516  Commissioner  Abernathy  emphasizes  that  despite  the  availability  of  a  managed  hot  cut  process  in  some  states, 
 carriers  with  their  own  switches  have  been  increasing  their  reliance  on  unbundled  switching.  See  Commissioner  Abernathy  Statement  at  5  n.  9.  However,  the  record  evidence  demonstrates  that  competitive  LECs  have  been  forced 

 to  abandon  plans  to  provide  switch-  based  services  to  mass  market  customers  because  of  the  difficulties  associated  with  the  current  hot  cut  process.  See  supra  para.  466.  Moreover,  Commissioner  Abernathy  overlooks  the  fact  that 
 current  market  conditions  warrant  the  availability  of  unbundling  at  a  minimum,  to  transition  to  competitive  switch  deployment.  See  WorldCom  Reply  at  155.  More  importantly,  Commissioner  Abernathy  fails  to  recognize  that  the 
 record  evidence  indicates  that  incumbent  LECs  are  not  well-  equipped  to  handle  hot  cut  volumes  even  with  the  existence  of  a  procedure  to  manage  bulk  migrations  on  a  project-  managed  basis.  Indeed,  in  New  York,  where 
 Verizon  has  worked  with  carriers  such  as  Broadview  and  AT&  T  to  handle  bulk  migrations  on  a  project-  managed  basis,  there  continue  to  be  quality  issues  associated  with  hot  cuts.  Broadview  Jan.  15,  2003  Ex  Parte  Letter  at  6. 
 This  fact  is  illustrated  by  an  order  issued  by  the  New  York  Department  confirming  that  although  the  New  York  hot  cut  process  is  working  and  is  well  refined  .  .  .  at  least  at  current  volumes,  an  efficient  bulk-  hot-  cut  process  and 
 rate  is  critical  to  the  development  of  facilities-  based  competition,  and  thus  instituted  a  proceeding  to  address  that  problem.  See  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  9  n.  26  (citing  Order  Instituting  Proceeding, 
 Proceeding  on  Motion  of  the  Commission  to  Examine  the  Process,  and  Related  Costs  of  Performing  Loop  Migrations  on  a  More  Streamlined  (e.  g.,  Bulk)  Basis,  Case  02-  C-  1425  (Nov.  22,  2002)). 
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 record  may  be  mitigated  through  the  creation  of  a  batch  cut  process  by  spreading  loop  migration  costs  among  a  large  number  of  lines,  decreasing  per-  line  cut  over  costs.  1517 
 488.  State  commissions  must  approve,  within  nine  months  of  the  effective  date  of  this  Order,  a  batch  cut  migration  process  to  be  implemented  by  incumbent  LECs  that  will  address  the 
 costs  and  timeliness  of  the  hot  cut  process.  Alternatively,  state  commissions  must  make  detailed  findings  explaining  why  such  a  process  is  not  necessary  in  a  particular  market,  as  described 
 below.  We  find  that  state  regulators  are  closest  to  the  facts  particular  to  the  provisioning  issues  applicable  to  their  respective  markets,  and  are  in  the  best  position  to  judge  whether  the 
 incumbent  LEC  has  indeed  developed  an  efficient  loop  migration  process.  There  can  be  no  doubt  that  state  commissions  possess  the  competence  to  implement  a  cost-  effective  and  fast 
 process  for  provisioning  unbundled  local  loops.  State  commissions  possess  the  requisite  expertise  to  apply  Commission-  prescribed  standards,  and  they  routinely  utilize  the  processes  and 
 procedures    including  discovery,  sworn  testimony,  and  cross  examination  on  the  record    that  are  essential  to  reasoned  fact-  finding.  Should  a  state  commission  fail  to  approve  a  batch  cut 
 migration  process  or  provide  a  detailed  explanation  why  such  a  process  is  not  necessary  within  nine  months  of  this  Orders  effective  date,  an  aggrieved  party  will  be  permitted  to  initiate  a 
 proceeding  with  this  Commission.  1518 
 489.  As  an  initial  matter,  state  commissions  should  adopt  a  batch  cut  over  increment  for  migrating  customers  served  by  unbundled  loops  combined  with  unbundled  local  circuit 

 switching  to  unbundled  stand-  alone  loops.  In  other  words,  states  should  decide  the  appropriate  volume  of  loops  that  should  be  included  in  the  batch.  In  conjunction  with  incumbent  LECs 
 and  competitive  LECs,  states  should  also  approve  specific  processes  to  be  employed  when  performing  a  batch  cut.  The  processes  adopted  will  necessarily  vary  based  on  the  relevant 
 incumbents  particular  network  design  and  cut  over  practices.  Generally,  however,  we  expect  these  processes  to  result  in  efficiencies  associated  with  performing  tasks  once  for  multiple  lines 
 that  would  otherwise  have  been  performed  on  a  line-  by-  line  basis.  For  example,  pursuant  to  the  processes  in  place  in  at  least  some  states,  the  incumbent  LEC  currently  will  pre-  wire  circuits  on 
 the  central  office  frame,  verify  the  presence  of  dial  tone,  and  communicate  with  competitive  LECs  regarding  problems  encountered  on  a  line-  by-  line  basis.  1519  Under  a  batch  cut  process, 
 these  activities  might  be  undertaken  simultaneously  for  all  lines  affected  by  a  given  batch  order.  In  addition  to  developing  a  cost-  effective  hot  cut  process,  state  commissions  should  evaluate 

 1517  In  theory,  electronic  loop  provisioning  might  one  day  obviate  the  need  for  a  hot  cut  when  migrating  a  loop  from 
 one  carriers  switch  to  anothers.  See,  e.  g.,  AT&  T  Comments,  Attach.  C,  Declaration  of  Irwin  Gerzberg,  at  paras.  6,  18-  19,  25-  28;  Z-  Tel  Reply  at  53.  As  discussed  below,  however,  the  record  in  this  proceeding  does  not  support  a 

 determination  that  electronic  provisioning  is  currently  feasible. 
 1518  See  supra  Part  V.  E.  2.  a  (discussing  the  role  of  the  states). 

 1519  See,  e.  g.,  Application  by  Verizon  New  Jersey,  Inc.,  Bell  Atlantic  Communications,  Inc.  (d/  b/  a  Verizon  Long 
 Distance),  NYNEX  Long  Distance  Company  (d/  b/  a  Verizon  Enterprise  Solutions),  Verizon  Global  Networks  Inc.,  and  Verizon  Select  Services  Inc.,  for  Authorization  To  Provide  In-  Region,  InterLATA  Service  in  New  Jersey, 

 Supplemental  Declaration  of  Patrick  A.  Garzillo  and  Marsha  S.  Prosini  at  Attach.  2,  WC  Docket  No.  02-  67  (filed  Mar.  26,  2002)  (describing  Verizons  hot  cut  process  in  New  York  and  New  Jersey). 
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 whether  the  incumbent  LEC  is  capable  of  migrating  batch  cutovers  of  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  unbundled  stand-  alone  loops  for  any  requesting  carrier 
 in  a  timely  manner.  Specifically,  state  commissions  may  require  that  incumbent  LECs  comply  with  an  average  completion  interval  metric,  including  any  further  disaggregation  of  existing  loop 
 performance  metrics  (i.  e.,  quality  or  maintenance  and  repair  metrics),  for  provisioning  high  volumes  of  loops.  Finally,  if  they  have  not  done  so  already,  state  commissions  should  adopt 
 TELRIC  rates  for  the  batch  cut  activities  they  approve.  These  rates  should  reflect  the  efficiencies  associated  with  batched  migration  of  loops  to  a  competitive  LECs  switch,  either 
 through  a  reduced  per-  line  rate  or  through  volume  discounts. 
 490.  If  a  state  should  conclude  that  the  absence  of  a  batch  cut  migration  process  is  not  causing  impairment  for  a  particular  market,  however,  that  conclusion  will  render  the  creation  of 

 such  a  process  unnecessary.  For  example,  in  a  small,  rural  wire  center,  where  there  is  not  a  significant  volume  of  customer  migrations,  the  absence  of  a  batch  cut  process  may  not  cause 
 impairment.  1520  In  such  cases,  the  state  commission  may  decline  to  institute  a  batch  cut  process,  so  long  as  it  instead  issues  detailed  findings  regarding  the  volume  of  UNE-  L  migrations  that 
 could  be  expected  if  competitive  LECs  were  no  longer  entitled  to  unbundled  local  circuit  switching,  the  ability  of  the  incumbent  to  meet  that  demand  in  a  timely  and  efficient  manner 
 using  the  existing  hot  cut  process,  and  the  non-  recurring  costs  associated  with  the  hot  cut  process.  If  a  state  commission  determines  that  these  findings  demonstrate  that  existing  hot  cut 
 practices  would  be  adequate  even  in  the  absence  of  unbundled  local  circuit  switching,  and  that  the  costs  of  such  processes  will  not  deter  entry  by  competitive  LECs,  it  may  conclude  that  a 
 batch  cut  process  is  not  necessary.  Only  such  detailed  findings,  however,  will  serve  as  an  adequate  substitute  for  the  development  of  a  batch  cut  migration  process.  We  emphasize, 
 moreover,  that  a  states  decision  not  to  develop  a  batch  cut  process  will  not  relieve  the  state  commission  of  its  obligation  to  conduct  the  analysis  set  forth  below  in  assessing  whether 
 requesting  carriers  are  actually  not  impaired  without  access  to  unbundled  switching  in  any  given  market. 

 491.  Other  Issues.  We  note  that  AT&  T  and  WorldCom  propose  other  mechanisms  intended  to  mitigate  the  disruptions  and  other  practical  difficulties  inherent  in  the  current  loop 
 infrastructure.  1521  First,  AT&  T  argues  that  unbundled  switching  for  voice-  grade  loops  is  essential  until  incumbent  LECs  offer  an  electronic  loop  provisioning  (ELP)  method  of  transferring  large 
 volumes  of  local  customers  in  the  mass  market  from  one  carrier  to  another  that  it  describes  as  being  analogous  to  the  existing  process  used  to  change  a  customers  long  distance  provider  and 
 as  eliminating  the  need  for  physical  hot  cuts.  1522  We  agree  with  AT&  T  that  it  is  easier  for  a 
 1520  See  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  7  (noting  that  Commission  has  found  current  hot  cut 
 processes  adequate  for  the  relatively  small  volumes  under  consideration  in  section  271  proceedings). 
 1521  See  AT&  T  Comments  at  63;  see  also  Letter  from  Kimberly  Scardino,  Senior  Counsel,  WorldCom,  to  Michelle 
 Carey,  Chief,  Competition  Policy  Division,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Nov.  13,  2002)  (WorldCom  Nov.  13,  2002  DS0  EELs  Ex  Parte  Letter). 

 1522  AT&  T  Comments  at  235-  39.  The  UNE-  P  Coalition  states  that  electronic  provisioning  will  allow  thousands 
 more  migrations  per  day,  thereby  affording  more  consumers  a  competitive  choice  of  provider.  UNE-  P  Coalition  Comments  at  7. 
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 competitive  LEC  to  manage  the  hot  cut  process  when  migrating  large  numbers  of  lines  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  stand-  alone  loops  than  in 
 individual  hot  cut  situations,  because  the  conversions  can  be  project-  managed  by  both  the  incumbent  LEC  and  the  requesting  carrier.  1523  However,  the  evidence  in  the  record  suggests  that 
 an  ELP  process,  to  be  effective,  would  require  significant  and  costly  upgrades  to  the  existing  local  network  at  both  the  remote  terminal  and  central  office.  AT&  Ts  ELP  proposal  proposes  to 
 packetize  the  entire  public  switched  telephone  network  for  both  voice  and  data  traffic,  at  a  cost  one  party  estimates  to  be  more  than  $100  billion.  1524  Incumbent  LECs  state  that  AT&  Ts 
 proposal  would  entail  a  fundamental  change  in  the  manner  in  which  local  switches  are  provided  and  would  require  dramatic  and  extensive  alterations  to  the  overall  architecture  of  every 
 incumbent  LEC  local  telephone  network.  1525  Given  our  conclusions  above,  we  decline  to  require  ELP  at  this  time,  although  we  may  reexamine  AT&  Ts  proposal  if  hot  cut  processes  are  not,  in 
 fact,  sufficient  to  handle  necessary  volumes. 
 492.  In  order  to  mitigate  perceived  difficulties  with  a  transition  from  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  stand-  alone  loops,  WorldCom  proposes  to 

 establish  rules  ensuring  that  competitive  LECs  may  obtain  concentrated  EELs  at  the  DS0  level.  1526  WorldCom  asserts  that  TELRIC-  priced  EELs  with  concentration  could  facilitate  the 
 competitive  growth  based  on  a  UNE-  L  strategy.  1527  We  agree  with  WorldCom  that  DS0  EELs  can  minimize  collocation  costs  and  increase  the  geographic  reach  of  competitive  LECs,  thereby 
 facilitating  the  expansion  of  competition  based  on  UNE-  L  strategies  in  some  markets.  1528  We  decline,  however,  to  establish  at  this  time  rules  requiring  concentration.  The  record 
 demonstrates  that  DS0  EELs  could  increase  loop  costs  1529  and  may  raise  several  additional 
 1523  AT&  T  Comments  at  237. 
 1524  See  SBC  Reply  at  131  (estimating  that,  including  the  entire  cost  of  all  equipment  necessary  to  implement 
 AT&  Ts  proposal,  and  assuming  that  a  rough  benchmark  based  on  SBCs  Project  Pronto  would  be  applicable  to  other  incumbent  LECs,  it  could  cost  more  than  $100  billion  to  implement  ELP  nationwide). 

 1525  See,  e.  g.,  SBC  Reply  at  129  (stating  that  AT&  Ts  proposal  would  require  substantial  modifications  to  outside 
 plant  equipment,  central  office  equipment,  and  OSS). 
 1526  WorldCom  Nov.  13,  2002  DS0  EELs  Ex  Parte  Letter.  The  term  concentrated  EELs  refers  to  an  arrangement 
 in  which  the  competitive  LEC  utilizes  concentration  equipment  allowing  it  to  transport  four  to  six  DS0s  or  more  on  a  single  DS0-  equivalent  circuit.  Thus,  for  example,  using  concentration  a  competitive  LEC  might  use  one  DS1 

 circuit  to  carry  144  (rather  than  only  24)  DS0s.  WorldCom  claims  that  such  aggregation  allows  it  to  reach  more  customers  more  efficiently.  See  id.  at  2;  see  also  Letter  from  Jay  Bennett,  Executive  Director    Federal  Regulatory, 
 SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  4  (filed  Nov.  14,  2002)  (SBC  UNE-  Loop/  Special  Access  Ex  Parte  Letter);  Letter  from  Rebecca  M.  Sommi,  Vice  President   
 Broadview  Networks  et  al.,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Nov.  26,  2002)  (Broadview  et  al.  Nov.  26,  2002  Ex  Parte  Letter). 

 1527  WorldCom  Nov.  13,  2002  DS0  EELs  Ex  Parte  Letter. 
 1528  Id. 
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 operational  issues.  1530  Accordingly,  we  are  not  convinced,  based  on  the  limited  record  before  us,  that  we  should  require  incumbent  LECs  to  include  concentration  when  they  provide  UNEs  to 
 requesting  carriers.  1531 
 (b)  State  Commission  Determinations 
 493.  Although  we  find  competitors  to  be  impaired  without  access  to  the  incumbent  LECs  switch  on  a  national  level  when  serving  the  mass  market,  we  authorize  state  commissions 

 to  play  a  fact-  finding  role    as  set  forth  below    to  identify  where  competing  carriers  are  not  impaired  without  access  to  unbundled  local  circuit  switching.  1532  As  discussed  above,  the  record 
 does  not  contain  sufficient  detail  concerning  which  geographic  and  customer  markets  may  in  fact  allow  economic  entry.  In  addition,  impairments  that  exist  today  in  certain  markets  may  be 
 remedied  in  the  future  due  to  the  implementation  of  a  batch  cut  process,  as  discussed  above.  Because  our  standard  and  the  guidance  from  the  USTA  decision  require  that  the  determination  of 
 impairment  be  made  on  a  granular  basis,  and  because  the  record  provides  insufficient  evidence  concerning  the  characteristics  of  particular  markets,  we  find  it  appropriate  to  ask  the  states  to 
 assess  impairment  in  the  mass  market  on  a  market-  by-  market  basis.  1533 
 (Continued  from  previous  page)  1529 
 Letter  from  Access  Integrated  et  al.,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Dec.  11,  2002)  (Access  Integrated  et  al.  Dec.  11,  2002  Ex  Parte  Letter);  Letter  from  AT&  T  et  al.  to 

 Michael  K.  Powell  et  al.,  Chairman,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  4,  2003)  (AT&  T  et  al.  Feb.  4,  2003  Ex  Parte  Letter). 

 1530  Letter  from  David  A.  Kunde,  Executive  Vice  President  of  Network  Operations,  Eschelon,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Oct.  21,  2002)  (Eschelon  Oct.  21,  2002  Ex  Parte  Letter). 

 1531  According  to  WorldCom,  some  variant  of  the  DS0  EEL  is  available  and  has  been  priced  in  at  least  the 
 following  states:  Arizona,  Arkansas,  Colorado,  Idaho,  Illinois,  Iowa,  Kansas,  Kentucky,  Louisiana,  Maine,  Massachusetts,  Michigan,  Minnesota,  Mississippi,  Missouri,  Montana,  Nebraska,  New  Hampshire,  New  Mexico, 

 New  York,  North  Dakota,  Oklahoma,  Oregon,  Rhode  Island,  South  Carolina,  South  Dakota,  Tennessee,  Texas,  Utah,  Vermont,  Washington,  and  Wyoming.  WorldCom  Nov.  13,  2002  DS0  EELs  Ex  Parte  Letter  at  3  n.  8. 

 1532  Chairman  Powell  asserts  that  this  proceeding  has  transformed  into  a  battle  not  over  what  should  be  unbundled, 
 but  who  should  decide    this  Commission  or  the  states.  See  Chairman  Powell  Statement  at  3  (emphasis  in  original).  Chairman  Powell  essentially  characterizes  the  Commissions  decision  regarding  unbundled  switching  as  a 

 battle  over  forum  shopping.  To  the  contrary,  throughout  the  decision  the  Commission  sets  forth  the  same  analytical  framework    not  only  for  the  unbundled  switching  element  but  for  other  elements,  including  transport    that 
 provides  specific  federal  guidance  under  which  the  states  perform  a  granular  analysis  to  identify  where  competitive  carriers  are  not  impaired  without  access  to  a  particular  element.  Surprisingly,  Chairman  Powell  seems  troubled  by 
 the  framework  as  applied  to  unbundled  switching  yet  appear  unfazed  by  its  existence  and  support  its  similar  application  to  other  elements. 

 1533  Chairman  Powell  contends  that  with  respect  to  unbundled  switching  there  is  a  default  assumption  of 
 impairment  and  that  [  o]  nly  when  all  barriers  to  profitability  have  been  eliminated  does  this  Commission  empower  states  to  eliminate  unbundled  switching.  Chairman  Powell  Statement  at  10  (emphasis  in  original);  see  also 

 Commissioner  Abernathy  Statement  at  6  (stating  that  [  t]  he  majoritys  multifactor  test  starts  with  a  default  presumption  of  impairment  and  cannot  be  overcome  unless  every  conceivable  obstacle  to  profitability  has  been 
 eliminated.).  That  is  incorrect.  First,  the  Commissions  decision  makes  a  national  finding  that  competitors  are  (continued.) 
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 494.  We  expect  state  commissions  to  follow  a  two-  step  process  in  determining  whether  to  find  no  impairment  in  a  particular  market.  In  the  first  step,  states  will  apply  self-provisioning 
 and  wholesale  triggers  to  a  particular  market  to  determine  if  the  marketplace  evidence  of  deployment  of  circuit  switches  serving  the  mass  market  requires  a  finding  of  no 
 impairment.  If  the  triggers  are  satisfied,  the  states  need  not  undertake  any  further  inquiry,  because  no  impairment  should  exist  in  that  market.  1534  If  the  triggers  are  not  satisfied,  the  state 
 commission  shall  proceed  to  the  second  step  of  the  analysis,  in  which  it  must  evaluate  certain  operational  and  economic  criteria  to  determine  whether  conditions  in  the  market  are  actually 
 conducive  to  competitive  entry,  and  whether  carriers  in  that  market  actually  are  not  impaired  without  access  to  unbundled  local  circuit  switching.  The  states  should  evaluate  evidence  of 
 switch  deployment  that  does  not  automatically  satisfy  the  triggers,  but  nonetheless  may  demonstrate  the  absence  of  impairment  in  the  market.  1535 

 (i)  Defining  the  Market 
 495.  The  triggers  and  analysis  described  below  must  be  applied  on  a  granular  basis  to  each  identifiable  market.  State  commissions  must  first  define  the  markets  in  which  they  will 

 evaluate  impairment  by  determining  the  relevant  geographic  area  to  include  in  each  market.  1536 
 (Continued  from  previous  page) 
 not  impaired  without  unbundled  access  to  incumbent  LEC  local  circuit  switching  when  serving  DS1  enterprise  customers.  Second,  as  to  determinations  of  impairment  regarding  unbundled  switching  for  mass  market  customers, 

 the  framework  of  analysis  is  essentially  the  same  as  the  assumptions  used  to  make  findings  of  impairment  for  other  elements,  such  as  transport  facilities.  For  example,  for  both  unbundled  local  circuit  switching  and  transport, 
 the  Commission  requires  states  to  examine  triggers  based  on  actual  competitive  deployment  first,  and  when  neither  of  these  triggers  is  satisfied,  the  Commission  sets  forth  factors  that  state  commissions  must  apply  to  determine 
 whether  a  market  allows  self-  provisioning  of  the  element.  Where  these  factors  suggest  feasibility  of  self-provisioning  of  the  element,  states  may  render  a  no  impairment  finding.  The  dissent  not  only  mischaracterizes  the 
 Commissions  impairment  test  on  unbundled  switching,  it  also  chooses  to  ignore  the  fact  it  supported  application  of  the  same  test  to  other  elements. 

 1534  As  explained  below,  we  recognize  that  exceptional  circumstances  may  preclude  a  state  determination  that  there 
 is  no  impairment  in  a  given  market  even  when  one  of  the  triggers  has  been  satisfied. 
 1535  Commissioner  Abernathy  states  that,  throughout  this  proceeding,  she  was  willing  to  peg[]  non-  impairment 
 findings  to  deployment  of  a  threshold  number  of  switches.  Commissioner  Abernathy  Statement  at  3.  However,  throughout  this  process  and  prior  to  February  20th,  she  has  been  unwilling  to  distinguish  the  enterprise  and  mass 

 markets  in  this  analysis    the  approach  we  adopt  here.  We  believed    and  continue  to  believe    that  our  approach  is  more  consistent  with  the  general  impairment  section  approved  unanimously  by  the  full  Commission.  In  that  section, 
 we  agree  to  conduct  separate  .  .  .  impairment  analyses  based  on  [among  others]  two  relevant  customer  classes    the  mass  market  and  the  enterprise  market.  See  supra  para.  197. 

 1536  Chairman  Powells  criticism  of  the  discretion  we  give  states  to  define  the  relevant  geographic  market  for 
 purposes  of  the  switching  analysis  is  misplaced.  See  Chairman  Powell  Statement  at  6-  7.  It  is  fundamental  to  our  general  impairment  analysis  to  consider  whether  alternative  facilities  deployment  shows  a  lack  of  impairment  in 

 serving  a  particular  market.  Indeed,  we  adopt  triggers  for  the  states  to  apply  to  measure  impairment  by  considering  this  alternative  facilities  deployment  in  our  analysis  of  loops,  transport,  and  switching.  Although  the  incumbent 
 LECs  argue  that  we  should  apply  a  zone  approach  to  transport  and  loops,  we  define  the  relevant  geographic  market  for  transport  as  route-  by-  route,  and  the  relevant  geographic  market  for  enterprise  loops  as  customer-  by-  customer, 
 because  of  the  economic  and  operational  issues  associated  with  alternative  transport  and  loops  deployment.  As  (continued.) 
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 State  commissions  have  discretion  to  determine  the  contours  of  each  market,  but  they  may  not  define  the  market  as  encompassing  the  entire  state.  Rather,  state  commissions  must  define  each 
 market  on  a  granular  level,  and  in  doing  so  they  must  take  into  consideration  the  locations  of  customers  actually  being  served  (if  any)  by  competitors,  1537  the  variation  in  factors  affecting 
 competitors  ability  to  serve  each  group  of  customers,  1538  and  competitors  ability  to  target  1539  and  serve  specific  markets  economically  and  efficiently  using  currently  available  technologies. 
 While  a  more  granular  analysis  is  generally  preferable,  states  should  not  define  the  market  so  narrowly  that  a  competitor  serving  that  market  alone  would  not  be  able  to  take  advantage  of 
 available  scale  and  scope  economies  from  serving  a  wider  market.  State  commissions  should  consider  how  competitors  ability  to  use  self-  provisioned  switches  or  switches  provided  by  a 
 third-  party  wholesaler  to  serve  various  groups  of  customers  varies  geographically  and  should 

 (Continued  from  previous  page) 
 Chairman  Powell  recognizes,  a  switch  can  theoretically  serve  wide  areas  (provided  that  the  costs  of  transporting  traffic  back  to  the  switch  are  not  cost  prohibitive),  so  one  would  expect  a  broader  market  definition  for  switching 

 than  for  loops  or  transport.  Chairman  Powell  Statement  at  7.  Indeed,  because  we  measure  alternative  switching  in  a  given  market,  not  switches  located  in  that  market,  the  physical  location  of  the  switch  is  not  necessarily  relevant 
 to  defining  the  geographic  market.  For  example,  a  switch  located  in  Rhode  Island  could  satisfy  the  switching  trigger  in  Massachusetts  if  it  is  serving  customers  in  the  relevant  market  in  Massachusetts.  Chairman  Powell 
 Statement  at  7.  To  the  extent  the  states  define  a  geographic  market  broadly,  it  is  more  likely  that  such  geographic  market  will  capture  sufficient  switching  alternatives  to  satisfy  the  trigger,  thus  resulting  in  removal  of  the  particular 
 UNE  in  that  geographic  market  (a  result  the  dissents  would  seem  to  endorse).  The  exact  parameters  of  these  geographic  markets,  however,  cannot  be  defined  nationally  for  switching  because,  as  both  incumbent  LECs  and 
 competitive  LECs  agree,  there  are  extreme  variations  in  population  density,  and  thus  wire  center  line  densities,  across  the  country.  See  generally  AT&  T  Jan.  17,  2003  Ex  Parte  Letter;  SBC  Jan.  14,  2003  UNE  P  Ex  Parte  Letter; 
 WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter.  States  are,  therefore,  better  positioned  to  draw  these  lines.  Because  states  are  more  familiar  with  how  these  variations  have  affected  competitive  entry,  and  because  there  was 
 no  credible  record  evidence  to  show  how  we  could  establish  these  boundaries  based  on  a  national  rule,  we  ask  the  states  to  create  these  boundaries.  We  do,  however,  provide  the  states  significant  guidance.  We  require  state 
 commissions  to  define  each  geographic  market  on  a  granular  level  and  direct  them  to  take  into  consideration  the  locations  of  customers  actually  being  served  by  competitors,  the  variation  in  factors  affecting  competitors  ability  to 
 serve  each  group  of  customers,  and  competitors  ability  to  target  and  serve  specific  markets  economically  and  efficiently  using  currently  available  technologies.  We  make  clear  that  state  commissions  cannot  define  a  market  as 
 encompassing  an  entire  state  and  that  they  should  not  define  the  market  so  narrowly  that  a  competitor  serving  that  market  alone  would  not  be  able  to  take  advantage  of  available  scale  and  scope  economies  from  serving  a  wider 
 market. 
 1537  For  example,  if  competitors  with  their  own  switches  are  only  serving  certain  geographic  areas,  the  state 
 commission  should  consider  establishing  those  areas  to  constitute  separate  markets. 
 1538  For  example,  if  UNE  loop  rates  vary  substantially  across  a  state,  and  this  variation  is  likely  to  lead  to  a  different 
 finding  concerning  the  existence  of  impairment  in  different  parts  of  the  state,  the  state  commission  should  consider  separating  zones  with  high  and  low  UNE  loop  rates  for  purposes  of  assessing  impairment. 

 1539  For  example,  competitors  often  are  able  to  target  particular  sets  of  customers,  or  customers  in  particular  wire 
 centers  or  rate  zones. 
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 attempt  to  distinguish  among  markets  where  different  findings  of  impairment  are  likely.  The  state  commission  must  use  the  same  market  definitions  for  all  of  its  analysis.  1540 
 496.  Thus,  for  example,  a  state  commission  may  choose  to  consider  how  UNE  loop  rates  vary  across  the  state,  how  retail  rates  vary  geographically,  how  the  number  of  high-  revenue 
 customers  1541  varies  geographically,  how  the  cost  of  serving  customers  varies  according  to  the  size  of  the  wire  center  and  the  location  of  the  wire  center,  and  variations  in  the  capabilities  of 
 wire  centers  to  provide  adequate  collocation  space  and  handle  large  numbers  of  hot  cuts.  We  recognize  that  many  states  have  implemented  varied  administrative  tools  to  distinguish  among 
 certain  markets  within  a  state  on  a  geographic  basis  for  other  purposes  including  retail  ratemaking,  the  establishment  of  UNE  loop  rate  zones,  and  the  development  of  intrastate 
 universal  service  mechanisms.  If  a  state  determines,  after  considering  the  factors  just  described,  that  these  already-  defined  markets  would  be  appropriate  to  use  in  this  context  as  well,  it  may 
 choose  to  use  these  market  definitions. 
 497.  For  purposes  of  the  examination  described  here,  mass  market  customers  are  analog  voice  customers  that  purchase  only  a  limited  number  of  POTS  lines,  and  can  only  be 

 economically  served  via  DS0  loops.  Some  mass  market  customers  (i.  e.,  very  small  businesses)  purchase  multiple  DS0s  at  a  single  location.  The  previous  Commission  determined  that 
 incumbent  LECs  that  make  the  EEL  combination  available  are  not  obligated  to  provide  unbundled  local  circuit  switching  to  requesting  carriers  for  serving  customers  with  four  or  more 
 DS0  loops  in  density  zone  one  of  the  top  fifty  MSAs.  1542  The  previous  Commission  found  that  under  such  circumstances,  lack  of  access  to  unbundled  local  circuit  switching  would  not  impair 
 requesting  carriers  in  these  specific  areas.  1543  At  some  point,  customers  taking  a  sufficient  number  of  multiple  DS0  loops  could  be  served  in  a  manner  similar  to  that  described  above  for 
 enterprise  customers    that  is,  voice  services  provided  over  one  or  several  DS1s,  1544  including  the  same  variety  and  quality  of  services  and  customer  care  that  enterprise  customers  receive. 
 Therefore,  as  part  of  the  economic  and  operational  analysis  discussed  below,  a  state  must  determine  the  appropriate  cut-  off  for  multi-  line  DS0  customers  as  part  of  its  more  granular 
 review.  This  cross  over  point  may  be  the  point  where  it  makes  economic  sense  for  a  multi-  line  customer  to  be  served  via  a  DS1  loop.  We  expect  that  in  those  areas  where  the  switching  carve-out 
 was  applicable  (i.  e.,  density  zone  1  of  the  top  50  MSAs),  the  appropriate  cutoff  will  be  four 

 1540  Therefore  the  market  definitions  used  for  the  analysis  of  the  triggers  must  also  be  used  for  the  second  step  of 
 the  analysis,  if  the  triggers  are  not  satisfied. 
 1541  These  include,  for  example,  business  customers,  as  well  as  those  residential  customers  likely  to  take  vertical 
 features  and  ancillary  services  such  as  data  and  voice  mail  service. 
 1542  UNE  Remand  Order,  15  FCC  Rcd  at  3822-  31,  paras.  276-  98. 

 1543  Id. 
 1544  The  evidence  in  the  record  indicates  that  it  may  be  viable  to  aggregate  loops  at  a  customer  location  and  provide 
 service  at  a  DS1  capacity  or  higher.  Specifically,  if  a  customer  has  enough  lines  to  justify  the  expense  of  purchasing  multiplexing  equipment  and  a  high-  capacity  line,  it  makes  sense  to  aggregate  the  customers  loops  at  the 

 customers  premises,  which  avoids  the  need  for  hot  cuts  at  the  incumbent  LECs  central  office. 
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 lines  absent  significant  evidence  to  the  contrary.  We  are  not  persuaded,  based  on  this  record,  that  we  should  alter  the  Commissions  previous  determination  on  this  point.  1545  Accordingly,  we 
 authorize  the  states,  within  nine  months  of  the  effective  date  of  this  Order,  to  determine  the  appropriate  cross  over  point.  1546 

 (ii)  Triggers 
 498.  We  adopt  triggers  as  a  principal  mechanism  for  use  by  states  in  evaluating  whether  requesting  carriers  are  in  fact  not  impaired  in  a  particular  market.  As  noted  above,  we 

 give  substantial  weight  to  actual  commercial  deployment  of  particular  network  elements  by  competing  carriers.  1547  We  find  that  the  presence  of  facilities-  based  competitors  is  the  best 
 indicator  that  requesting  carriers  are  not  impaired.  Therefore,  our  triggers  identify  existing  examples  of  multiple  competitive  LECs  using  their  own  switches  to  serve  mass  market 
 customers,  or  to  provide  a  switching  wholesale  service.  We  require  state  commissions  to  find  no  impairment  in  a  particular  market  when  either  trigger  is  satisfied,  subject  to  the  limitations 
 described  below.  The  use  of  triggers  keyed  to  objective  criteria  can  avoid  the  delays  caused  by  protracted  proceedings  and  can  minimize  administrative  burdens.  1548  Our  selection  of  various 
 thresholds  is  based  on  our  agency  expertise,  our  interpretation  of  the  record,  and  our  desire  to  provide  bright-  line  rules  to  guide  the  state  commission  in  implementing  section  251. 

 499.  The  triggers  we  set  forth  rely  on  the  number  of  carriers  that  self-  provision  switches  or  the  number  of  competitive  wholesalers  offering  independent  switching  capacity  in  a 

 1545  Because  the  previous  carve  out  only  applied  where  new  EELs  were  made  available  and  because  this 
 Commission  allowed  state  commissions  to  require  switching  to  be  unbundled  even  in  areas  where  the  carve-  out  test  was  met,  it  appears  that  the  four-  line  carve-  out  was  adhered  to  in  very  few  areas  in  the  country.  SBC  Reply  at  30; 

 BellSouth  NERA  Reply  Decl.  at  51-  52.  As  part  of  their  analysis,  we  expect  states  to  make  a  finding  of  whether  or  not  the  carve  out  was  in  effect. 

 1546  Commissioner  Abernathy  claims  that  our  decision  not  to  preserve  the  previous  Commissions  four-  line  carve-out 
 represents  a  potentially  massive  expansion  of  unbundled  switching.  Commissioner  Abernathy  Statement  at  8  n.  27.  This  claim  makes  no  sense.  If  a  state  finds  that  the  appropriate  cut-  off  for  distinguishing  enterprise  from  mass 

 market  customers  in  density  zone  1  of  the  top  50  MSAs  is  four  lines,  there  will  be  no  more  unbundled  switching  available  than  there  was  under  the  previous  carve-  out.  Indeed,  since  the  previous  carve-  out  was  conditioned  on  the 
 availability  of  EELs  and  appears  to  have  actually  been  in  effect  in  very  few  areas  of  the  country,  see  supra  note  1545,  setting  the  cut-  off  at  an  unconditional  four  lines  would  result  in  more  customers  being  treated  as  enterprise 
 customers  subject  to  our  finding  of  no  impairment.  If,  on  the  other  hand,  a  state  finds  based  on  record  evidence  that  a  cut-  off  of  more  than  four  lines  is  appropriate,  more  multi-  line  customers  will  be  treated  as  mass  market  customers. 
 But  in  no  way  will  this  result  in  an  expansion  of  unbundled  switching.  To  the  contrary,  as  Commissioner  Abernathy  points  out,  dozens  of  CLECs  serve  business  customers  of  such  size  using  their  own  switches. 
 Commissioner  Abernathy  Statement  at  8  n.  27.  Such  widespread  deployment  of  competitive  switches  would  be  considered  under  our  mass  market  triggers.  In  such  markets,  then,  it  is  more  likely  that  there  will  be  a  finding  of  no 
 impairment  for  the  entire  market,  leading  to  significantly  less  unbundled  switching  than  was  available  under  the  previous  four-  line  carve-  out. 

 1547  See  supra  Part  V.  B.  1  (discussing  the  impair  standard). 
 1548  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14267-  68,  para.  84. 
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 given  market.  1549  In  both  cases,  the  competitive  switch  providers  that  the  state  commission  relies  upon  in  finding  either  trigger  to  be  satisfied  must  be  unaffiliated  with  the  incumbent  LEC  and 
 with  each  other.  1550  In  addition,  they  should  be  using  or  offering  their  own  separate  switches.  1551  This  requirement  avoids  counting  as  a  true  alternative  a  provider  that  uses  the  switching  facilities 
 of  the  incumbent  LEC  or  another  alternative  provider  that  has  already  been  counted.  Moreover,  the  identified  competitive  switch  providers  should  be  actively  providing  voice  service  to  mass 
 market  customers  in  the  market.  Identified  carriers  providing  wholesale  service  should  be  actively  providing  voice  service  used  to  serve  the  mass  market  and  be  operationally  ready  and 
 willing  to  provide  wholesale  service  to  all  competitive  providers  in  the  designated  market.  1552  However,  the  competing  carriers  wholesale  offerings  need  not  include  the  full  panoply  of 
 services  offered  by  incumbent  LECs.  1553 

 1549  As  in  the  impairment  triggers  for  high-  capacity  loops  and  dedicated  transport,  states  also  shall  consider  carriers 
 that  provide  intermodal  voice  service  using  their  own  switch  facilities  (including  packet  and  soft  switches)  that  meet  the  requirements  of  these  triggers  and  Part  V  above.  See  supra  Part  V.  B.  1.  d.(  ii)  (describing  intermodal  alternatives 

 generally,  and  factors  affecting  differences  in  the  extent  to  which  various  intermodal  alternatives  are  considered);  see  also  supra  paras.  332,  337  and  notes  1256,  1278.  In  deciding  whether  to  include  intermodal  alternatives  for 
 purposes  of  these  triggers,  states  should  consider  to  what  extent  services  provided  over  these  intermodal  alternatives  are  comparable  in  cost,  quality,  and  maturity  to  incumbent  LEC  services.  See  supra  para.  97.  For  example,  we  note 
 that  CMRS  does  not  yet  equal  traditional  incumbent  LEC  services  in  its  quality,  its  ability  to  handle  data  traffic,  its  ubiquity,  and  its  ability  to  provide  broadband  services  to  the  mass  market.  See  supra  para.  230.  Thus,  just  as 
 CMRS  deployment  does  not  persuade  us  to  reject  our  nationwide  finding  of  impairment,  see  supra  para.  445,  at  this  time,  we  do  not  expect  state  commissions  to  consider  CMRS  providers  in  their  application  of  the  triggers.  In 
 applying  the  triggers,  states  must  consider  packet  switches  to  the  extent  they  are  used  to  provide  local  voice  service  to  the  mass  market. 

 1550  Affiliated  companies  will  be  counted  together,  in  order  to  prevent  gaming.  We  use  the  term  affiliated  and 
 affiliate  as  the  Act  defines  affiliate.  Section  3  of  the  Act  defines  the  term  affiliate  as  a  person  that  (directly  or  indirectly)  owns  or  controls,  is  owned  or  controlled  by,  or  is  under  common  ownership  or  control  with,  another 

 person.  For  purposes  of  this  paragraph,  the  term  own  means  to  own  an  equity  interest  (or  the  equivalent  thereof)  of  more  than  10  percent.  47  U.  S.  C.    153(  1). 

 1551  While  the  record  indicates  that  competitors  do  not  currently  purchase  wholesale  switching  from  non-incumbent- 
 LEC  providers,  we  find,  for  the  limited  purposes  described  herein,  that  if  a  carrier  were  to  acquire  the  long  term  right  to  the  use  of  a  non-  incumbent-  LEC  switch  sufficient  to  serve  a  substantial  portion  of  the  mass 

 market,  that  carrier  should  be  counted  as  a  separate,  unaffiliated  self-  provider  of  switching. 
 1552  In  circumstances  where  switch  providers  (or  the  resellers  that  rely  on  them)  are  identified  as  currently  serving, 
 or  capable  of  serving,  only  part  of  the  market,  the  state  commission  may  choose  to  consider  defining  that  portion  of  the  market  as  a  separate  market  for  purposes  of  its  analysis. 

 As  we  stated  above,  a  party  aggrieved  by  a  state  commission  determination,  including  a  decision  on  the  appropriate  market  definition,  may  seek  a  declaratory  ruling  from  this  Commission.  See  supra  para.  426  (discussing 
 declaratory  ruling  determinations).  Accordingly,  this  Commission  will  exercise  its  authority  as  necessary  to  ensure  that  state  market  determinations  are  reasonable  and  comport  with  the  guidance  set  forth  herein. 

 1553  We  expect,  however,  that  providers  of  switching  will  have  an  incentive  to  offer  competitive  terms  with  those  of 
 the  incumbent  LEC. 
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 500.  For  the  purposes  of  these  triggers,  we  find  that  states  shall  not  evaluate  any  other  factors,  such  as  the  financial  stability  or  well-  being  of  the  competitive  switching  providers.  1554 
 Competing  carriers  in  Chapter  11  bankruptcy  protection  are  often  still  providing  service.  Regardless  of  their  financial  status,  the  physical  assets  remain  viable  and  may  be  bought  by 
 someone  else  and  remain  in  service.  1555  We  note  that  requiring  states  to  determine  the  financial  ability  of  competitive  wholesale  providers  to  provide  service  in  the  future  could  hamper 
 economic  recovery  efforts  of  companies  in  financial  distress.  The  key  consideration  to  be  examined  by  state  commissions  is  whether  the  providers  are  currently  offering  and  able  to 
 provide  service,  and  are  likely  to  continue  to  do  so.  1556 
 (a)  Self-  Provisioning  Trigger 
 501.  We  determine  that    subject  only  to  the  limited  exception  set  forth  below    a  state  must  find  no  impairment  when  three  or  more  unaffiliated  competing  carriers  each  is  serving 

 mass  market  customers  in  a  particular  market  with  the  use  of  their  own  switches.  1557  We  set  the  number  of  competitive  facilities  at  three  for  several  reasons.  First,  we  choose  three  self-provisioners 
 as  the  appropriate  threshold  in  order  to  be  assured  that  the  market  can  support  multiple,  competitive  local  exchange  service  providers  using  their  own  switches.  1558  Second, 
 setting  the  trigger  at  three  competitive  facilities  takes  into  consideration  the  likelihood  that  self-providers  will  not  offer  their  service  for  wholesale,  based  on  the  evidence  that  local  exchange 
 service  providers  have  generally  not  shown  an  interest  in  providing  wholesale  services,  in  contrast  to  the  wholesale  trigger,  described  below,  which  is  met  if  there  are  two  actual 
 wholesalers.  1559  Finally,  we  believe  that  the  existence  of  three  self-  provisioners  of  switching  demonstrates  adequately  the  technical  and  economic  feasibility  of  an  entrant  serving  the  mass 

 1554  For  the  potential  deployment  analysis,  however,  the  state  commission  may  consider  financial  evidence  relating 
 to  the  difficulty  in  serving  the  mass  market  by  existing  competitive  switch  providers. 
 1555  BOC  UNE  Fact  Rebuttal  Report  at  20-  24,  41-  43. 

 1556  For  instance,  states  should  review  whether  the  competitive  switching  provider  has  filed  a  notice  to  terminate 
 service  in  that  market. 
 1557  Competitors  with  their  own  switch  that  are  providing  service  only  on  a  wholesale  basis  should  be  counted  for 
 this  test.  Thus,  for  example,  this  test  will  be  satisfied  if  there  are  three  carriers  providing  service  to  mass  market  voice  customers  using  their  own  switch,  with  two  of  the  carriers  providing  only  retail  service,  and  one  providing 

 only  wholesale  service. 
 1558  We  therefore  deny  Bell  Atlantics  petition  seeking  the  elimination  of  unbundled  switching  in  all  geographic 
 markets  for  all  customer  classes  where  a  single  competitive  switch  has  been  deployed.  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  9-  11. 

 1559  See  Talk  America  Reply  at  19;  SWCTA  Comments  at  8-  9;  SWCTA  Reply  at  7;  Supra  Comments  at  36; 
 Navigator  Comments  at  6;  Eschelon  Comments  at  28-  29. 
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 market  with  its  own  switch,  and  indicates  that  existing  barriers  to  entry  are  not  insurmountable.  1560 
 502.  We  find,  based  on  our  review  of  the  record,  that  competitive  carriers  providing  service  to  mass  market  customers  are  impaired  without  access  to  local  circuit  switching.  1561  We 
 determine  that  this  is  caused,  in  part,  by  the  problems  with  the  hot  cut  process  identified  above.  We  believe  that  this  is  unlikely  to  change  until  incumbent  LECs  implement  batch  cut  processes. 
 Nevertheless,  particularly  in  light  of  the  batch  cut  processes  we  are  requiring  states  to  approve  and  implement,  we  believe  that  competitive  carriers  will  likely  begin  to  utilize  self-  provisioned 
 switches  in  greater  numbers  going  forward.  As  discussed  below,  we  require  state  commissions  to  monitor  circumstances  in  their  respective  states  for  any  significant  changes  in  factors  that  may 
 cause  impairment.  1562  After  a  batch  cut  process  has  been  put  into  place,  we  expect  state  commissions  in  subsequent  reviews  to  reevaluate  the  circumstances  surrounding  self-provisioning, 
 and  expect  that  states  will  begin  to  find  that  requesting  carriers  are  not  impaired  without  access  to  unbundled  switching  as  competing  carriers  self-  provision  switches  in  greater 
 numbers.  1563 
 503.  Exceptional  Sources  of  Impairment.  In  exceptional  circumstances,  states  may  identify  specific  markets  that  facially  satisfy  the  self-  provisioning  trigger,  but  in  which  some 

 significant  barrier  to  entry  exists  such  that  service  to  mass  market  customers  is  foreclosed  even  to  carriers  that  self-  provision  switches.  For  example,  if  there  is  no  collocation  space  available 
 for  additional  competitive  LEC  equipment,  further  competitive  entry  may  be  impossible,  irrespective  of  other  economic  or  operational  circumstances.  Where  the  self-  provisioning  trigger 
 has  been  satisfied  and  the  state  commission  identifies  an  exceptional  barrier  to  entry  that  prevents  further  entry,  the  state  commission  may  petition  the  Commission  for  a  waiver  of  the 

 1560  We  recognize  that  when  one  or  more  of  the  three  competitive  providers  is  also  self-  deploying  its  own  local 
 loops,  this  evidence  may  bear  less  heavily  on  the  ability  to  use  a  self-  deployed  switch  as  a  means  of  accessing  the  incumbents  loops.  Nevertheless,  the  presence  of  three  competitors  in  a  market  using  self-  provisioned  switching 

 and  loops,  shows  the  feasibility  of  an  entrant  serving  the  mass  market  with  its  own  facilities. 
 1561  The  Chairman  claims  that  the  Majority  blinds  itself  to  the  significant  self-  provisioned  switching  capacity  that 
 exists  in  the  market  and  the  fact  that  a  number  of  competitors  have  overcome  whatever  economic  impediments  exist  and  are  using  that  switching  capability  to  serve  mass  market  customers.  Chairman  Powell  Statement  at  7-  8.  This 

 claim  is  simply  wrong.  We  require  the  states  to  apply  triggers  that  look  only  at  actual  deployment  as  the  principal  mechanism  for  evaluating  impairment  in  a  particular  market.  If  the  deployment  triggers  are  met,  the  states  must  find 
 no  impairment.  Even  if  these  triggers  are  not  met,  we  require  the  states  to  give  evidence  of  a  single  competitively  deployed  mass  market  switch  particularly  substantial  weight  and  evidence  of  enterprise  switch  deployment 
 substantial  weight  in  determining  whether  entry  is  economic.  See  supra  paras.  508,  510.  Moreover,  the  Chairmans  contention  that  significant  competitive  mass  market  switching  deployment  exists  currently,  while 
 unbundled  switching  is  universally  available,  is  in  direct  tension  with  his  claim  that  it  is  unreasonable  to  expect  that  competitors  will  utilize  self-  provisioned  switching  capacity  while  a  steeply-  discounted  and  long-  term  UNE-  P 
 alternative  exists.  Chairman  Powell  Statement  at  6. 
 1562  See  Part  VI.  D.  6.  a.(  ii)(  e)  (discussing  continuing  review). 

 1563  We  note,  as  described  below,  that  state  commissions  will  undertake  subsequent  granular  reviews.  See  infra  Part 
 VI.  D.  6.  a.(  ii)(  e)  (discussing  continuing  review). 
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 application  of  the  trigger,  to  last  until  the  impairment  to  deployment  identified  by  the  state  no  longer  exists.  1564 
 (b)  Competitive  Wholesale  Facilities  Trigger 
 504.  Separate  from  the  inquiry  into  self-  provisioning,  we  direct  states  to  consider  whether  switching  facilities  are  available  from  competitive  wholesale  providers  in  a  given 
 market  to  serve  mass  market  customers.  Consistent  with  our  approach  with  regard  to  transport  and  loops,  we  determine  that  carriers  are  not  impaired  if  they  are  able  to  obtain  switching  from 
 third  parties  offering  access  to  their  own  switches  on  a  wholesale  basis.  While  the  record  shows  that  such  wholesale  alternatives  are  not  generally  available  at  this  time,  we  establish  this  trigger 
 as  a  mechanism  for  identifying  markets  with  adequate  wholesale  alternatives,  in  the  expectation  such  alternatives  may  well  develop  in  the  future.  Therefore,  state  commissions  should  identify 
 those  markets  in  which  requesting  carriers  are  not  impaired  without  unbundled  local  circuit  switching  because  two  or  more  competing  carriers,  not  affiliated  with  each  other  or  the 
 incumbent  LEC,  offer  wholesale  switching  service  for  that  market  using  their  own  switch.  1565  In  those  markets,  states  should  determine  that  requesting  carriers  are  not  impaired  without  access  to 
 unbundled  local  circuit  switching.  This  test  will  ensure  that  local  circuit  switching  can  readily  be  obtained  from  a  firm  using  facilities  that  are  not  provided  by  the  incumbent. 

 505.  We  choose  two  competitive  wholesale  providers  as  the  appropriate  threshold  because  this  standard  ensures  that  states  will  only  find  no  impairment  where  the  market  can 
 support  multiple,  competitive  supply  and  establishes  an  incentive  for  new  local  circuit  switching  facilities  deployment  while  allowing  competitive  pressures  from  the  wholesalers  to 
 control  pricing  and  terms.  A  competitive  carrier  that  is  considering  deploying  switching  facilities  for  the  purpose  of  providing  a  wholesale  offering  is  likely  to  be  encouraged  to  deploy  if 
 its  deployment  will  eliminate  switching  priced  at  TELRIC  rates.  Because  we  want  to  provide  an  incentive  for  competing  carriers  to  deploy  facilities,  we  do  not  demand  the  presence  of  more  than 
 two  competitive  wholesalers.  1566  Finally,  we  find  that  two  wholesale  providers,  in  addition  to  the 

 1564  We  do  not  find  these  types  of  barriers  to  be  applicable  to  the  wholesale  trigger  described  below,  because  if  the 
 wholesale  trigger  is  satisfied,  even  if  further  facilities-  based  entry  is  inhibited,  the  existence  of  two  wholesale  providers  already  provides  a  certain  assurance  that  necessary  facilities  can  be  obtained  by  new  entrants  at 

 competitive  rates.  Therefore  we  limit  the  states  ability  to  petition  us,  when  an  exceptional  barrier  to  entry  has  been  identified,  to  the  application  of  the  self-  provisioning  trigger. 

 1565  We  note  that  carriers  providing  switching  services  to  the  mass  market  not  willing  to  provide  wholesale  services 
 will  be  counted  in  the  self-  provisioning  trigger  described  above. 
 1566  Thus,  if  we  were  to  establish  a  higher  number  than  two  as  the  threshold,  such  as  four,  to  ensure  the  market  is 
 fully  competitive,  the  first  facilities-  based  potential  entrant  might  be  deterred  from  entry  by  the  prospect  of  facing  competition  from  providers  using  unbundled  local  circuit  switching  for  a  long  time    until  three  other  facilities-based 

 competitors  enter.  With  a  threshold  of  two,  the  first  facilities-  based  entrant  need  only  wait  until  one  other  facilities-  based  entrant  appears,  before  a  finding  of  no  impairment  is  warranted  and  they  no  longer  face  competition 
 with  switching  priced  at  TELRIC. 
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 incumbent  LEC,  should  provide  competitive  pressures  on  pricing  and  terms  and  minimize  the  risk  of  umbrella  pricing  while  encouraging  deployment.  1567 
 (iii)  Analysis  of  Potential  Deployment 
 506.  Above,  we  have  found  that  actual  competitive  deployment  is  the  best  indicator  that  requesting  carriers  are  not  impaired  and,  therefore,  emphasize  that  the  states  should  apply 

 the  self-  provisioning  and  wholesale  triggers  described  above,  in  their  determination  of  whether  impairment  exists.  We  recognize,  however,  that  the  self-  provisioning  trigger  discussed  above 
 identifies  only  the  existence  of  actual  competitive  facilities  serving  the  mass  market  and  does  not  address  the  potential  ability  of  competitive  LECs  to  deploy  their  own  switches  to  serve  this 
 market.  For  example,  there  may  well  be  markets  where  self-  provisioning  of  switching  is  economic  notwithstanding  the  fact  that  no  three  carriers  have  in  fact  provisioned  their  own 
 switches.  In  such  cases,  we  expect  states  to  find  no  impairment.  Therefore,  we  find  that  where  neither  of  the  triggers  described  above  have  been  satisfied,  the  state  must  conduct  further 
 analysis  to  determine  whether  the  market  in  question  is  suitable  for  multiple,  competitive  supply. 

 507.  In  evaluating  whether  to  find  that  requesting  carriers  are  not  impaired  without  access  to  local  circuit  switching,  notwithstanding  a  markets  failure  to  satisfy  the  triggers 
 described  above,  the  states  shall  evaluate  three  types  of  evidence,  set  forth  more  fully  below.  First,  states  must  examine  whether  competitors  are  using  their  own  switches  to  serve  enterprise 
 or  mass  market  customers  in  the  market  at  issue.  Second,  states  must  consider  the  role  of  potential  operational  barriers,  specifically  examining  whether  incumbent  LEC  performance  in 
 provisioning  loops,  difficulties  in  obtaining  collocation  space  due  to  lack  of  space  or  delays  in  provisioning  by  the  incumbent  LEC,  and  difficulties  in  obtaining  cross-  connects  in  an 
 incumbents  wire  center,  are  making  entry  uneconomic  for  competitive  LECs.  Third,  states  must  consider  the  role  of  potential  economic  barriers  associated  with  the  use  of  competitive  switching 
 facilities.  Analyzing  these  factors  in  concert,  state  commissions  must  determine  whether,  in  any  particular  market  or  markets,  it  is  appropriate  to  find  no  impairment. 

 (a)  Evidence  of  Actual  Competitive  Deployment  of  Local  Circuit  Switches 
 508.  States  should  first  examine  whether  competitors  are  already  using  their  own  switches  to  serve  voice  customers  in  the  relevant  market.  We  determine  that  to  the  extent  that 
 there  are  two  wholesale  providers  or  three  self-  provisioners  of  switching  serving  the  voice  enterprise  market,  and  the  state  commission  determines  that  these  providers  are  operationally 
 and  economically  capable  of  serving  the  mass  market,  this  evidence  must  be  given  substantial  weight  by  the  state  commissions  in  evaluating  impairment  in  the  mass  market.  We  find  the 
 existence  of  switching  serving  customers  in  the  enterprise  market  to  be  a  significant  indicator  of  the  possibility  of  serving  the  mass  market  because  of  the  demonstrated  scale  and  scope 
 economies  of  serving  numerous  customers  in  a  wire  center  using  a  single  switch.  Although 
 1567  See  supra  para.  413  (describing  umbrella  pricing). 
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 switches  serving  the  enterprise  market  do  not  qualify  for  the  triggers  described  above,  we  believe  that,  after  implementation  of  a  batch  cut  process,  switches  being  used  to  serve  the  enterprise 
 market  are  likely  to  be  employed  to  serve  the  mass  market  as  well,  and  that  the  state  commission  should  investigate  the  feasibility  of  this.  The  evidence  in  the  record  shows  that  the  cost  of 
 providing  mass  market  service  is  significantly  reduced  if  the  necessary  facilities  are  already  in  place  and  used  to  provide  other  higher  revenue  services,  and  a  more  efficient  cut  over  process  is 
 in  place.  1568  We  choose  three  self-  provisioners  and  two  competitive  wholesale  providers  as  the  appropriate  threshold  in  order  to  be  assured  that  the  market  can  support  multiple,  competitive 
 local  exchange  service  providers  using  their  own  switch,  and  for  the  reasons  described  in  the  Trigger  section  above.  1569 

 509.  As  with  regard  to  the  triggers  described  above,  any  competitive  switch  provider  relied  upon  in  the  states  analysis  here  must  be  unaffiliated  with  the  incumbent  LEC  and  with 
 any  other  carrier  relied  upon,  and  must  be  relying  on  its  own  switch.  1570  This  requirement  ensures  that  no  provider  that  uses  the  switching  facilities  of  the  incumbent  LEC  or  another 
 alternative  provider  to  provide  service  is  counted  as  a  separate  alternative  provider. 
 510.  We  also  find  that  to  the  extent  there  is  a  switch  in  an  area  serving  the  local  exchange  mass  market,  this  fact  must  be  given  particularly  substantial  weight.  The  existence  of 

 a  competitor  that  is  serving  the  local  exchange  mass  market  with  its  own  switch  provides  evidence  that  the  mass  market  can  be  served  effectively.  The  state  commission  should  consider 
 whether  the  entire  market  could  be  served  by  this  switch.  1571  Although  a  single  self-  provisioned  switch  is  not  sufficient  to  invoke  the  mandatory  triggers  described  above,  we  conclude  that  the 
 existence  of  even  one  such  switch  might  in  some  cases  justify  a  state  finding  of  no  impairment,  if  it  determines  that  the  market  can  support  multiple,  competitive  supply.  1572 

 1568  For  example,  a  study  by  WorldCom  purports  to  show  that  the  average  cost  disadvantage  a  competitor  labors 
 under  relative  to  the  incumbent  is  significantly  lower  if  the  competitor  already  has  its  own  switching,  collocation,  and  transport  facilities  in  place  ($  10.03  per  customer,  assuming  the  competitor  has  a  7%  market  share),  than  if  it 

 must  build  and  install  them  ($  21.59  per  customer).  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  3,  Attach.  A  at  2,  Appendix:  Table  1. 

 1569  See  supra  paras.  501,  505. 
 1570  Affiliated  companies  will  be  counted  together,  in  order  to  prevent  gaming.  As  described  above,  we  use  the 
 term  affiliated  and  affiliate  as  the  Act  defines  affiliate.  See  supra  note  1550. 
 1571  For  example,  a  mass  market  switch  with  relatively  high  variable  costs  per  customer  (i.  e.,  in  cases  where  the  cost 
 of  acquiring  and  serving  each  additional  customer  is  high,  excluding  the  fixed  costs  of  entry  and  collocation)  may  be  able  to  serve  only  high  revenue  customers  in  the  market  economically.  These  variable  costs  would  be 

 determined  by  hot  cut  costs,  churn,  loop  costs,  and  other  customer-  acquisition  outlays. 
 1572  Whether  this  competitor  is  using  the  incumbents  loops  or  its  own  loops  should  bear  on  how  much  weight  to 
 assign  this  factor,  at  least  until  such  time  as  incumbent  loops  are  no  longer  required  to  be  unbundled. 
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 (b)  Operational  Barriers  to  be  Examined 
 511.  As  discussed  above,  state  commissions  should  examine  the  role  of  potential  operational  barriers  in  determining  whether  to  find  no  impairment.  In  particular,  state 

 commissions  should  examine  whether  incumbent  LEC  performance  in  provisioning  loops,  difficulties  in  obtaining  collocation  space  due  to  lack  of  space  or  delays  in  provisioning  by  the 
 incumbent  LEC,  and  difficulties  in  obtaining  cross-  connects  in  an  incumbents  wire  center,  are  making  entry  uneconomic  for  competitive  LECs.  As  described  above,  we  find  that  these  factors 
 can  raise  barriers  to  entry,  but  they  are  not  the  bases  for  our  national  finding  of  impairment.  1573 
 512.  Loop  Provisioning.  We  have  found  on  a  national  basis  that  the  delays  and  costs  associated  with  loop  provisioning    those  specifically  arising  from  the  hot  cut  process    impair  a 

 requesting  carriers  entry  into  the  mass  market.  Above,  we  have  directed  the  state  commissions  to  implement  batch  cut  processes  to  reduce  the  economic  and  operational  barriers  posed  by  the 
 present  hot  cut  process.  We  recognize,  though,  that  even  after  such  processes  are  implemented,  competitive  carriers  may  face  barriers  associated  with  loop  provisioning    even  problems  arising 
 from  the  newly  improved  hot  cut  processes    which  may  continue  to  impair  a  requesting  carriers  entry  into  the  mass  market.  We  therefore  ask  the  state  commissions  to  consider  more  granular 
 evidence  concerning  the  incumbent  LECs  ability  to  transfer  loops  in  a  timely  and  reliable  manner.  Specifically,  we  ask  the  states  to  determine  whether  incumbent  LECs  are  providing 
 nondiscriminatory  access  to  unbundled  loops.  1574  Evidence  relevant  to  this  inquiry  might  include,  for  example,  commercial  performance  data  demonstrating  the  timeliness  and  accuracy 
 with  which  the  incumbent  LEC  performs  loop  provisioning  tasks  and  the  existence  of  a  penalty  plan  with  respect  to  the  applicable  metrics.  For  incumbent  LECs  that  are  BOCs  subject  to  the 
 requirements  of  section  271  of  the  Act,  states  may  choose  to  rely  on  any  performance  data  reports  and  penalty  plans  that  might  have  been  developed  in  the  context  of  a  past,  pending,  or 
 planned  application  for  long-  distance  authority.  For  other  incumbent  LECs,  the  states  may  choose  to  minimize  the  regulatory  burden  posed  by  extensive  metric  reporting  and  penalty  plan 
 requirements  by  reviewing  other  forms  of  evidence.  State  commissions  should  also  consider 

 1573  As  noted  above,  we  lack  sufficient  specific  evidence  concerning  whether  and  where  these  factors  will  be 
 significant  enough  to  constitute  impairment,  particularly  after  a  batch  cut  process  has  been  implemented.  Therefore,  as  part  of  its  analysis,  a  state  must  consider  evidence  of  whether  operational  considerations  permit  or  prevent 

 competitive  entry  in  each  market,  and,  if  the  latter,  whether  unbundling  would  overcome  the  impairment  found.  Here,  we  detail  three  particular  types  of  operational  barriers  that  may  or  may  not  give  rise  to  impairment,  even  in  the 
 presence  of  a  batch  cut  process. 
 1574  In  determining  whether  granular  evidence  contradicts  our  finding  that  the  hot  cut  process  imposes  an 
 operational  barrier,  the  state  commission  should  review  evidence  of  consistently  reliable  performance  in  three  areas:  (1)  Timeliness:  percentage  of  missed  installation  appointments  and  order  completion  interval;  (2)  Quality:  outages 

 and  percent  of  provisioning  troubles;  and  (3)  Maintenance  and  Repair:  customer  trouble  report  rate,  percentage  of  missed  repair  appointments,  and  percentage  of  repeat  troubles.  This  review  is  necessary  to  ensure  that  customer 
 loops  can  be  transferred  from  the  incumbent  LEC  main  distribution  frame  to  a  competitive  LEC  collocation  as  promptly  and  efficiently  as  incumbent  LECs  can  transfer  customers  using  unbundled  local  circuit  switching.  This 
 evidence  will  permit  states  to  evaluate  whether  competitive  carriers  are  impaired  because  the  quality  of  their  services  is  below  that  offered  by  the  incumbent. 
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 whether  the  incumbents  facilities,  human  resources,  and  processes  are  sufficient  to  handle  adequately  the  demand  for  loops,  collocation,  cross  connects,  and  other  services  required  by 
 competitors  for  facilities-  based  entry  into  the  voice  market. 
 513.  Collocation.  As  described  above,  we  find  that  the  absence  of  sufficient  collocation  space  in  the  incumbent  central  office  or  offices  might  in  some  markets  render 

 competitive  entry  impossible  and  thus  result  in  impairment.  We  therefore  direct  the  state  commissions  to  consider  evidence  concerning  the  costs  and  physical  constraints  associated  with 
 collocation  in  a  particular  market.  We  direct  state  commissions  to  consider  whether  competitive  entry  is  inhibited,  or  is  likely  to  be  inhibited  going  forward,  by  the  exhaustion  of  available 
 collocation  space  in  the  incumbent  LECs  central  offices.  Evidence  relevant  to  this  inquiry  would  include,  for  example,  the  amount  of  space  currently  available  in  those  central  offices;  the 
 expected  growth  or  decline,  if  any,  in  the  amount  of  space  available;  and  the  expected  growth  or  decline,  if  any,  of  requesting  carriers  collocation  space  needs,  assuming  that  access  to 
 unbundled  switching  were  curtailed.  The  state  commissions  shall  consider  this  factor  in  determining  whether  to  find  that  requesting  carriers  are  not  impaired  without  access  to 
 unbundled  local  circuit  switching. 
 514.  Competitive  LEC    to    Competitive  LEC  Cross  Connects.  We  have  also  determined  that  an  incumbent  LECs  failure  to  provide  cross-  connections  between  the  facilities 

 of  two  competitive  LECs  on  a  timely  basis  can  result  in  impairment.  Therefore,  a  state  commission  considering  whether  to  find  no  impairment  with  regard  to  mass  market  switching 
 must  evaluate  whether  such  delays  increase  requesting  carriers  costs  to  such  a  degree  that  entry  into  the  market  is  rendered  uneconomic  in  the  absence  of  unbundled  switching.  Evidence 
 relevant  to  this  inquiry  would  include,  for  example,  information  regarding  the  incumbents  practices  and  procedures  with  regard  to  provision  of  cross-  connects  linking  competitive  carriers 
 facilities,  competitive  LECs  complaints  regarding  the  incumbents  past  performance  in  this  area,  the  incumbent  LECs  response  to  these  complaints,  the  costs  incurred  in  connection  with 
 deficient  performance  in  this  regard,  and  the  degree  to  which  those  costs  render  entry  into  a  given  market  uneconomic. 

 (c)  Economic  Barriers  to  be  Examined 
 515.  State  commissions  conducting  a  review  of  unbundled  switching  must  next  examine  whether  economic  factors  associated  with  the  use  of  competitive  switching  facilities  are 

 preventing  competitive  entry  into  the  mass  market,  and,  if  not,  whether  it  is  appropriate  to  find  that  requesting  carriers  are  not  impaired  without  access  to  unbundled  circuit  switching  in  any 
 particular  market.  Competing  carriers  argue  that  even  using  the  most  efficient  network  architecture  available  for  entry,  the  UNE-  L  strategy,  they  are  at  a  significant  cost  disadvantage 
 vis-  -  vis  the  incumbent.  1575  As  discussed  above,  these  carriers  focus  on  two  primary  types  of  costs  that  only  they  face:  (1)  the  costs  of  migrating  incumbent  LEC  loops  to  their  switches;  and 

 1575  See  UNE-  P  Coalition  Comments  at  44-  46;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  3  (noting  that 
 switching  has  high  fixed  costs  that  must  be  spread  over  a  large  number  of  customers  if  a  competing  carrier  is  to  achieve  cost  efficiencies  similar  to  those  enjoyed  by  the  incumbent  LEC). 
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 (2)  the  costs  of  backhauling  voice  circuits  to  their  switches  from  the  end  offices  serving  their  customers,  which  as  noted  above,  include  the  costs  associated  with  collocation  in  the  incumbent 
 LECs  central  offices.  1576 
 516.  As  discussed  above,  we  find  that  the  record  does  not  contain  sufficient  detail  concerning  the  scope  and  scale  of  the  barrier  posed  by  the  costs  associated  with  migration  and 

 backhaul  in  particular  markets  to  permit  us  to  determine  whether  and  where  there  may  be  exceptions  to  our  national  finding  that  competing  carriers  cannot  economically  serve  the  mass 
 market  without  access  to  unbundled  local  switching.  1577  Accordingly,  we  ask  state  commissions  to  examine,  on  a  granular  basis,  evidence  that  may  demonstrate  that  requesting  carriers  are  not 
 impaired  without  access  to  unbundled  local  circuit  switching. 
 517.  Evidence  of  Whether  Entry  is  Economic.  In  considering  whether  a  competing  carrier  could  economically  serve  the  market  without  access  to  the  incumbents  switch,  the  state 

 commission  must  also  consider  the  likely  revenues  and  costs  associated  with  local  exchange  mass  market  service,  as  detailed  below.  1578  Specifically,  state  commissions  must  determine 
 whether  entry  is  likely  to  be  economic  utilizing  the  most  efficient  network  architecture  available  to  an  entrant.  1579  While  most  comments  have  focused  on  the  UNE-  L  strategy,  1580  in  which  a 
 requesting  carrier  combines  the  incumbents  loops  and  transport  with  its  own  switch,  collocation  and  backhaul,  state  commissions  must  also  consider  whether  new  technologies  provide  a 
 superior  means  of  serving  customers.  The  analysis  must  be  based  on  the  most  efficient  business  model  for  entry  rather  than  to  any  particular  carriers  business  model.  Because  this  analysis 
 involves  comparing  the  potential  revenues  to  the  potential  costs  of  entry,  a  state  will  necessarily  be  weighing  advantages  and  disadvantages  an  entrant  has  in  attempting  to  serve  mass  market 
 customers.  In  judging  whether  entry  is  economic,  states  must  also  consider  how  sunk  costs  and  competitive  risks  affect  the  likelihood  of  entry.  1581 

 1576  See  infra  Part  VI.  D.  6.  a.(  i)  (discussing  possible  economic  impairment). 
 1577  See  id. 
 1578  See  infra  para.  519. 
 1579  Consistent  with  the  impairment  standard  we  adopt  today,  state  commissions  must  determine  whether 
 competitors  are  unable  economically  to  serve  the  market.  State  commissions  should  not  focus  on  whether  competitors  operate  under  a  cost  disadvantage.  State  commissions  should  determine  if  entry  is  economic  by 

 conducting  a  business  case  analysis  for  an  efficient  entrant.  This  involves  estimating  the  likely  potential  revenues  from  entry,  and  subtracting  out  the  likely  costs  (accounting  for  scale  economies  likely  to  be  achieved).  We  note  that 
 for  switching,  at  least,  parties  have  submitted  business  case  analyses  to  demonstrate  the  likely  profitability  of  entry.  See  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter;  see  also 
 AT&  T  Jan.  17,  2003  Ex  Parte  Letter;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter. 
 1580  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter;  AT&  T  Jan. 
 17,  2003  Ex  Parte  Letter;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter;  AT&  T  Oct.  4,  2002  Ex  Parte  Letter;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter;  PACE  Dec.  11,  2002  Ex  Parte  Letter. 

 1581  We  reject  the  dissenters  bootstrapping  argument  that  other  UNEs  should  not  be  considered  in  our 
 impairment  analysis.  Chairman  Powell  Statement  at  11-  12;  Commissioner  Abernathy  Statement  at  7-  8.  First,  we  (continued.) 
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 (Continued  from  previous  page) 
 note  that  consideration  of  these  factors  only  arises  where  the  competitive  triggers  have  not  been  met.  Second,  we  note  that  even  though  nondiscrimination  and  pricing  obligations  under  section  251(  c)(  3)  and  252  for  each  individual 

 UNE  certainly  lower  the  cost  of  entry,  these  provisions  do  not  necessarily  establish  that  they  will  lower  costs  sufficiently  to  make  entry  economic  without  access  to  any  one  particular  element.  Even  if  interconnection  and 
 unbundling  are  performed  as  efficiently  as  is  technically  feasible,  these  costs  must  still  be  considered  in  our  business  case  analysis  to  determine  whether  entry  is  uneconomic  without  access  to  a  particular  network  element. 

 To  illustrate,  even  if  the  unbundling  of  transport  significantly  lowers  the  cost  of  entry,  the  cost  of  using  unbundled  transport  (priced  at  TELRIC)  is  still  a  cost  that  competitors  will  likely  have  to  incur  to  provide  local 
 exchange  service,  and  should  be  included  in  a  business  case  analysis  for  determining  whether  entry  is  economic.  Furthermore,  to  the  extent  that  transport  is  needed  to  extend  the  loops  from  the  subscribers  wire  center  to  the 
 competitors  collocation,  that  is  an  additional  cost  that  should  be  included  in  a  business  case  analysis.  And  even  if  a  market  would  otherwise  be  capable  of  sustaining  switch  deployment,  if  an  incumbent  lacked  sufficient  collocation 
 space,  then,  the  additional  cost  (including  securing  building,  additional  space,  power,  etc.)  should  be  considered  in  the  business  case  analysis.  Similarly,  if  competing  carriers  were  unable  to  cross  connect  their  cages,  a  competitive 
 voice  LEC  would  not  be  able  to  engage  in  line  splitting  with  a  competitive  data  LEC,  reducing  its  potential  revenues.  The  dissent  is  incorrect  to  conclude  that  this  analysis  equates  calculating  a  cost  for  purposes  of  a  business 
 case  analysis  with  a  source  of  competitive  disadvantage.  Chairman  Powell  Statement  at  12;  see  also  Commissioner  Abernathy  Statement  at  8. 

 The  dissents  mischaracterize  our  intention.  Unlike  in  the  UNE  Remand  Order,  we  do  not  intend  that  the  availability  of  any  UNE  at  state  established  wholesale  (TELRIC)  rates  could  by  itself  constitute  impairment  without 
 considering  all  costs  and  revenues  in  a  business  case  analysis.  Rather,  we  are  requiring  the  states  to  conduct  an  analysis  of  whether  entry  is  economic  by  comparing  the  potential  revenues  to  the  potential  costs  of  providing  a 
 particular  service.  Mass  market  switching,  in  isolation,  is  not  a  service  and  thus  cannot  be  easily  evaluated.  Instead,  to  evaluate  the  feasibility  of  self-  deploying  a  switch,  states  should  perform  a  business  case  analysis  of  providing 
 local  exchange  service.  As  described,  the  potential  revenues  include  basic  service,  vertical  features,  access  charges,  see  infra  para.  519,  revenues  beyond  just  switching  revenues.  Likewise,  costs  include  the  forward-  looking, 
 TELRIC  costs  of  the  other  elements  necessary  to  provide  local  service.  See  infra  para.  520.  The  cost  factors  listed  should  not  be  considered  in  isolation,  but  only  in  the  context  of  a  broad  business  case  analysis  that  examines  all 
 likely  potential  costs  and  revenues. 
 Contrary  to  the  dissents  assertions,  our  determination  of  whether  competitors  are  impaired  without  unbundled  switching  does  not  depend  on,  and  is  not  directly  related  to,  whether  loops  or  transport  are  unbundled.  Rather  than 

 compelling  the  unbundling  of  switching,  the  fact  that  such  complementary  inputs  may  be  available  on  an  unbundled  basis  serves  to  lower  the  cost  of  providing  service  and  thereby  makes  facilities-  based  entry  more  likely  to  be 
 economic.  Indeed,  the  alternative  to  assuming  that  competitors  will  use  UNEs  priced  at  TELRIC  as  complementary  inputs  would  be  to  conduct  the  business  case  analysis  using  the  cost  of  self-  provisioning  all  of  the  elements 
 necessary  to  provide  local  exchange  service.  Such  an  analysis,  however,  would  lead  to  significantly  greater  unbundling,  as  the  costs  of  self-  providing  these  elements  is  likely  much  higher  than  obtaining  them  from  the 
 incumbent  priced  at  TELRIC.  For  example,  the  cost  of  self-  providing  a  loop  could  be  extremely  high  and  using  that  cost  in  the  business  case  analysis  for  switching  would  always  lead  to  a  finding  of  impairment.  Thus,  we  reject  such 
 an  approach  and  in  our  business  case  analysis  consider  the  minimum  cost  of  entering  the  market,  which  includes  the  wholesale  (forward-  looking,  TELRIC)  prices  of  UNEs  purchased  from  the  incumbent  LEC  that  are  necessary  to 
 provide  the  relevant  service.  Moreover,  we  note  that  to  the  extent  that  incumbent  LECs  believe  that  TELRIC  prices  are  too  low,  as  they  claim,  (see,  e.  g.,  BellSouth  Comments  at  25;  Verizon  Comments  at  32),  it  should  make  it  easier 
 to  satisfy  this  business  case  analysis  for  determining  whether  switching  can  be  self  provisioned  in  a  market. 
 Chairman  Powell  also  asserts  that  we  improperly  considered  factors  that  have  characteristics  that  are  not  linked  to  natural  monopoly.  Chairman  Powell  Statement  at  12.  As  an  initial  matter,  we  note  that  our  switching 

 analysis  avoids  finding  impairment  on  the  basis  of  natural  monopoly  characteristics  associated  with  elements  that  (continued.) 
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 518.  State  commissions  should  also  consider  how  the  existence  of  universal  service  payments  and  implicit  support  flows  will  impact  competitors  ability  to  serve  the  specific 
 market.  As  discussed  in  Part  V.  B.  3  above,  universal  service  payments  and  implicit  support  flows  have  been  used  to  ensure  the  universal  availability  of  local  exchange  service  at  affordable 
 rates.  1582  These  payments  and  support  flows  are  likely  to  affect  whether  entry  is  economic,  and  therefore  our  impairment  standard  requires  that  they  be  taken  into  consideration.  Particularly 
 significant  is  the  fact  that  implicit  support  flows  have  been  incorporated  into  retail  rates,  such  that  retail  rates  for  particular  services  may  vary  significantly  from  the  cost  of  providing  those 
 services.  State  commissions  should  consider  how  competitors  ability  to  serve  the  market  is  facilitated  in  those  areas  where  rates  are  above  cost,  and  is  impeded  where  rates  are  below 
 cost,  while  recognizing  that  rates  are  likely  to  change  over  time  in  response  to  competition.  1583 
 519.  Potential  Revenues.  In  determining  the  likely  revenues  available  to  a  competing  carrier  in  a  given  market,  the  state  commission  must  consider  all  revenues  that  will  derive  from 

 service  to  the  mass  market,  based  on  the  most  efficient  business  model  for  entry.  These  potential  revenues  include  those  associated  with  providing  voice  services,  including  (but  not  restricted  to) 
 the  basic  retail  price  charged  to  the  customer,  the  sale  of  vertical  features,  universal  service  payments,  access  charges,  subscriber  line  charges,  and,  if  any,  toll  revenues.  1584  The  state  must 

 (Continued  from  previous  page) 
 are  complementary  inputs  (such  as  loops),  because  it  assumes  competitors  will  use  UNEs  purchased  at  TELRIC  rates,  where  they  are  available.  When  we  list  various  cost  factors  for  state  commissions  to  consider  in  their 

 impairment  analysis,  we  do  so  only  because  we  determined  that  they  were  likely  costs  of  entry,  and  were  therefore  relevant  to  a  business  case  analysis. 

 1582  See  infra  Part  V.  B.  3.  Section  254  of  the  1996  Act  requires  that  federal  support  mechanisms  be  explicit  and 
 sufficient  to  achieve  the  purposes  of  this  section,  and  should  be  based  on  a  set  of  principles  enumerated  in  section  254(  b),  including  the  principle  that  consumers  in  rural  and  high-  cost  areas  should  have  access  to 

 telecommunications  services  at  rates  that  are  reasonably  comparable  to  those  charged  in  urban  areas.  47  U.  S.  C.    254(  b).  Section  254(  f)  permits  states  to  adopt  regulations  to  preserve  and  advance  universal  service  within  that 
 [s]  tate,  provided  that  these  regulations  are  not  inconsistent  with  the  Commissions  rules  to  preserve  and  advance  universal  service.  47  U.  S.  C.    254(  f).  States  may  also  adopt  regulations  providing  additional  definitions  and 
 standards  to  promote  universal  service,  but  only  to  the  extent  that  such  regulations  adopt  additional  specific,  predictable,  and  sufficient  mechanisms  to  support  such  definitions  or  standards  that  do  not  rely  on  or  burden  Federal 
 universal  service  support  mechanisms.  Id. 
 1583  As  discussed  above  in  Part  V.  B.  3.,  to  the  extent  that  unbundling  tends  to  create  pressures  to  reduce  or  eliminate 
 these  implicit  support  flows,  we  note  that  the  states  may  choose  to  rebalance  rates,  adopt  an  explicit  and  portable  support  mechanism,  and/  or  exempt  rural  and  small  incumbent  LECs  from  unbundling  obligations  as  provided  in 

 section  251(  f)(  1)  of  the  Act. 
 1584  See,  e.  g.,  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3,  11  (filed  Sept.  25,  2002)  (AT&  T  Sept.  25,  2002  Ex  Parte  Letter);  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter.  The  dissents  claim  that  considering,  in  the 

 impairment  analysis,  retail  rates  that  are  low  as  a  result  of  implicit  universal  service  subsidies  will  perpetuate  reliance  on  UNE-  P  is  wrong.  To  begin  with,  our  analysis  considers  such  rates  only  if  the  triggers  are  not  met. 
 Moreover,  the  dissenters  voted  to  approve  an  impairment  analysis  that  specifically  takes  such  rates  into  account.  As  mentioned,  our  general  impairment  standard    which  Chairman  Powell  proposed  and  the  Commission  voted 
 unanimously  to  approve    asks  whether  all  potential  revenues  from  entering  a  market  exceed  the  costs  of  entry,  taking  into  account  consideration  of  any  counterveiling  advantages  that  a  new  entrant  may  have.  See  supra  para. 
 (continued.) 
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 also  consider  the  revenues  a  competitor  is  likely  to  obtain  from  using  its  facilities  for  providing  data  and  long  distance  services  and  from  serving  business  customers.  1585  Moreover,  state 
 commissions  must  consider  the  impact  of  implicit  support  flows  and  universal  service  subsidies  on  the  revenue  opportunities  available  to  competitors.  Consideration  of  potential  revenues  is 
 consistent  with  our  standard,  as  described  in  Part  V  above,  and  with  the  guidance  of  the  USTA  decision.  1586 

 520.  Potential  Costs.  Similarly,  the  state  must  consider  all  factors  affecting  the  costs  faced  by  a  competitor  providing  local  exchange  service  to  the  mass  market.  1587  If  the  state 
 (Continued  from  previous  page) 
 84.  This  analysis  requires  examination  of  prices,  see  supra  para.  85,  which,  as  the  Order  states  in  a  section  proposed  by  Chairman  Powell  and  approved  unanimously  by  the  full  Commission,  may  be  low  as  a  result  of 

 implicit  universal  service  subsidies.  See  supra  para.  164  ([  T]  he  impairment  standard  adopted  by  the  Commission  and  reflected  in  the  more  granular  state  commission  proceedings  mandated  by  this  Order  addresses  the  existence  of 
 implicit  support  flows  in  several  ways.  .  .  .  Our  impairment  standard  .  .  .  provides  for  consideration  of  whether  entry  is  economic  by  taking  into  account  the  potential  revenue  opportunities  available.).  In  the  same  section,  again 
 proposed  by  Chairman  Powell  and  approved  unanimously  by  the  full  Commission,  we  explicitly  recognize  that  below-  cost  local  exchange  rates  will  tend  to  discourage  competitive  facilities-  based  entry,  and  the  absence  of  such 
 entry  will  be  considered  as  evidence  of  impairment.  See  supra  para.  168.  As  Chairman  Powell  and  Commissioner  Abernathy  agreed,  however,  consideration  of  such  evidence  will  not  perpetuate  reliance  on  UNEs.  Specifically, 
 facilities-  based  competitive  entry  may  still  occur  because  new  entrants  using  alternative  technologies  may  have  lower  costs  than  the  incumbent  LEC  even  when  UNE  rates  are  set  at  reasonable  levels  and  because  [  o]  ur 
 impairment  standard  also  provides  for  consideration  of  evidence  concerning  the  full  range  of  revenue  opportunities  available  such  as  premium  services  attractive  to  customers  even  when  priced  well  above  the  incumbent  LEC's 
 rate  for  local  exchange  service.  See  supra  para.  168  &  n.  543.  Competing  carriers  can  also  gain  access  to  the  same  universal  service  subsidies  available  to  incumbent  carriers  by  applying  for  eligible  telecommunications  carrier 
 status.  47  U.  S.  C.    214(  e)(  6);  see  also  47  U.  S.  C.    254(  e).  These  subsidies  should  encourage  entry  and,  even  where  our  deployment  triggers  are  not  met,  the  availability  of  the  subsidies  must  be  taken  into  account  in 
 determining  whether  entry  is  uneconomic.  In  addition,  the  statute  contains  an  exemption  from  the  unbundling  requirements  for  rural  carriers  and  provides  for  state  modification  or  suspension  of  the  unbundling  requirements  for 
 incumbent  carriers  serving,  in  the  aggregate,  less  than  two  percent  of  the  nation's  access  lines.  Id. 
 1585  This  analysis  will  therefore  take  into  account  the  scale  and  scope  economies  available  to  carriers  using  existing 
 facilities  to  provide  a  variety  of  services  to  all  customers  that  are  likely  to  be  served  by  an  efficient  entrant. 
 1586  The  USTA  decision  expressed  concern  that  in  some  markets  incumbent  LECs  prices  were  above  cost,  and  that 
 the  Commission  failed  to  take  this  gap,  and  the  advantage  it  conferred  on  competitors,  into  consideration  in  its  impairment  analysis  in  the  Local  Competition  Order.  USTA,  290  F.  3d  at  422-  23.  As  discussed  in  Part  V.  B.  3. 

 (discussion  of  implicit  support  flows)  supra,  our  standard,  involving  a  granular  analysis  examining  both  the  cost  and  revenues  associated  with  entry,  automatically  incorporates  competitive  LECs  advantages  such  as  these,  and 
 therefore  addresses  the  USTA  decisions  concern  about  these  situations. 
 1587  The  dissents  argue  that  any  consideration  of  the  same  factors  that  were  considered  in  the  UNE  Remand  Order  is 
 impermissible  according  to  the  USTA  decision.  Chairman  Powell  Statement  at  11  n.  30;  Commissioner  Abernathy  Statement  at  6  n.  16.  The  use  of  factors  common  to  the  UNE  Remand  Order  is  beside  the  point.  In  this  Order,  we 

 have  fundamentally  changed  the  formula  (i.  e.,  the  unbundling  framework  and  standard)  by  which  we  consider  these  factors.  Thus,  as  stated  above  and  unlike  in  the  UNE  Remand  Order,  they  may  play  a  role  in  our  analysis,  but  are 
 not  individually  dispositive  of  an  impairment  determination.  See  supra  para.  106  (  While  we  no  longer  rely  on,  or  formally  examine,  the  five  UNE  Remand  factors  as  a  basis  for  our  analysis  of  impairment,  these  factors  still  play  a 
 role  in  our  analysis  as  they  relate  to  the  barriers  to  entry  we  have  identified  above.).  Moreover,  the  dissents  claims  that  the  factors  we  require  states  to  examine  as  part  of  their  granular  inquiries  are  inconsistent  with  the  USTA 
 (continued.) 
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 (Continued  from  previous  page) 
 decision  are  wrong.  Chairman  Powell  Statement  at  9-  11;  Commissioner  Abernathy  Statement  at  6  n.  16.  Their  arguments  are  predicated  upon  a  mischaracterization  of  USTA  and  are  inconsistent  with  the  Commissions  decision 

 in  other  sections  of  this  Order  that  they  have  affirmatively  supported. 
 For  example,  the  dissents  argue  that  the  switching  analysis  relies  on  costs  that  are  merely  ordinary  start-  up  costs  and  that  these  costs  may  not  be  taken  into  account  under  USTA.  Chairman  Powell  Statement  at  9;  Commissioner 

 Abernathy  Statement  at  7-  8.  As  an  initial  matter,  we  note  that  these  costs  are  only  considered  if  the  automatic  triggers  are  not  met.  Moreover,  although  the  Commissions  switching  analysis  requires  the  states  to  examine  certain 
 factors  that  may  contribute  to  the  start-  up  costs  of  a  new  entrant,  this  is  not  the  end  of  the  inquiry.  Consistent  with  the  unbundling  analysis  applied  in  the  rest  of  the  Order  and  the  guidance  from  USTA,  we  have  examined  these  costs 
 to  determine  whether,  as  balanced  against  the  potential  revenues  that  may  be  achieved,  they  are  sufficiently  large  to  prevent  entry.  That  is,  the  inquiry  we  adopt  today  considers  whether,  after  weighing  all  the  costs  associated  with 
 entry  against  the  potential  revenues  and  offsetting  advantages,  entry  into  the  market  is  economic.  A  cost  disparity  that  is  typical  of,  and  has  not  prevented,  entry  into  the  industry  is  insufficient  to  justify  impairment  under  our 
 standard.  With  respect  to  the  factors  themselves,  there  is  general  agreement  in  the  record  that  the  relevant  start-  up  costs  associated  with  entry  into  the  local  market  include  purchasing  collocation,  transmission  equipment,  transport, 
 and  loops.  Indeed,  in  the  cost  studies  submitted  by  the  BOCs  themselves  they  largely  utilize  the  very  same  factors  that  we  require  the  states  to  consider.  USTA  did  not  require  us  to  ignore  the  costs  associated  with  these  factors; 
 rather,  the  court  directed  us  to  set  a  higher  threshold  for  determining  when  these  costs,  considered  cumulatively,  are  sufficiently  large  as  to  create  impairment.  While  any  single  cost  factor  may  appear  to  be  a  small  hindrance,  it  is 
 only  by  considering  the  cumulative  effect  of  all  cost  factors  that  the  total  potential  hindrance  to  entry  can  be  fully  evaluated. 

 Notably,  in  criticizing  our  switching  analysis,  the  dissents  appear  to  attack  the  very  impairment  standard  that  they  proposed,  voted  for,  and  applied  to  the  Commissions  analysis  of  transport  and  loops    other  sections  of  the 
 Order  that  they  affirmatively  supported.  For  example,  Chairman  Powell  complains  that  the  Majoritys  switching  decision  conflates  an  impairment  standard  that  properly  asks  whether  entry  is  uneconomic  with  the  question  of 
 whether  entry  is  profitable.  Chairman  Powell  Statement  at  14.  We  are  at  a  loss  to  understand  his  complaint.  The  switching  section  in  no  way  states  a  requirement  to  consider  profitability    that  is  discussed  in  the  general 
 impairment  section  which  was  proposed  by  Chairman  Powell  and  adopted  unanimously  by  the  Commission.  The  general  impairment  standard  that  Chairman  Powell  proposed  and  the  Commission  adopts  unanimously  asks 
 whether  all  potential  revenues  from  entering  a  market  exceed  the  costs  of  entry,  taking  into  account  consideration  of  any  countervailing  advantages  that  a  new  entrant  may  have.  See  supra  para.  84.  Furthermore,  the  general 
 impairment  section  makes  clear,  in  a  passage  proposed  by  Chairman  Powell  and  adopted  unanimously,  that  this  analysis  is  based  on  determining  whether  entry  would  be  profitable  without  the  UNE  in  question.  See  supra  para. 
 85  (emphasis  added).  We  merely  ask  whether  entry  is  economic,  and  it  is  Chairman  Powell  that  engages  in  bootstrapping,  criticizing  the  very  standard  that  he  has  proposed  we  consider. 

 Similarly,  Chairman  Powell  claims  that  applying  in  the  switching  section  the  impairment  standard  he  proposed  and  the  Commission  unanimously  adopted  has  converted  the  impairment  standard  into  a  protector  of  individual 
 business  plans.  Chairman  Powell  Statement  at  11.  The  Orders  general  impairment  section,  which  again  was  proposed  by  Chairman  Powell  and  adopted  unanimously,  devotes  an  entire  paragraph  to  explaining  why  our 
 impairment  analysis  does  not  entail  assessing  individual  business  plans.  That  paragraph    entitled  Impairment  of  Individual  Requesting  Carriers  or  Carriers  Pursuing  a  Particular  Business  Strategy  states  that  [  w]  e  will  not,  as 
 some  commenters  urge,  evaluate  whether  individual  requesting  carriers  or  carriers  that  pursue  a  particular  business  strategy  are  impaired  without  access  to  UNEs.  See  supra  para.  115.  Rather,  we  explain,  an  entrant  is  not 
 impaired  if  it  could  serve  the  market  in  an  economic  fashion  using  its  own  facilities,  concerning  the  range  of  customers  that  could  reasonably  be  served  and  the  services  that  could  reasonably  be  provided  with  those  facilities. 
 Id.  This  same  analysis  applies  in  the  switching  section  no  less  than  it  does  in  the  other  sections  of  this  Order.  See  supra  note  1579  (stating  that  [  t]  he  business  case  analysis  pertains  to  an  efficient  entrant  and  an  estimation  of  the 
 likely  potential  revenues  and  the  likely  costs). 
 (continued.) 
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 commission  determines  that  a  UNE-  L  strategy  is  the  most  efficient  means  of  serving  the  customer,  these  costs  would  likely  include  (among  others):  1588  the  cost  of  purchasing  and 
 installing  a  switch;  1589  the  recurring  and  non-  recurring  charges  paid  to  the  incumbent  LEC  for  loops,  collocations,  transport,  hot  cuts,  OSS,  signaling,  and  other  services  and  equipment 
 necessary  to  access  the  loop;  1590  the  cost  of  collocation  and  equipment  necessary  to  serve  local  (Continued  from  previous  page) 

 Chairman  Powell  claims  that  the  Majority  directs  states  to  consider  whether  price  and  revenue  reductions  that  result  from  additional  competitive  entrants  can  form  the  basis  of  impairment.  Chairman  Powell  Statement  at  13. 
 This  is  simply  false,  as  we  do  not  direct  states  to  consider  any  such  thing.  While  we  recognize  that  an  academically  pure  interpretation  of  the  impairment  standard  proposed  by  Chairman  Powell  and  adopted  unanimously  in  this  item 
 might  take  such  reductions  into  account,  we  agree  with  Chairman  Powell  that  a  more  administratively  practicable  approach  would  be  to  consider  prevailing  prices  and  revenues.  Accordingly,  we  expect  states  to  consider  prices  and 
 revenues  prevailing  at  the  time  of  their  analyses.  We  believe  that  these  are  reasonable  proxies  for  likely  prices  and  revenues  after  competitive  entry  and  will  result  in  a  more  administrable  standard. 

 Finally,  Chairman  Powell  maintains  that  our  switching  analysis  ignores  the  fact  that  the  rates  for  collocation  and  hot  cuts  as  well  as  other  UNEs,  are  not  within  the  control  of  the  incumbent  LEC  and  therefore  are  not 
 cognizable  under  section  251(  d)(  2).  Chairman  Powell  Statement  at  12.  This  claim  is  doubly  wrong.  First,  each  of  these  factors  is  within  the  incumbent  LECs  control.  The  statute  is  clear  that  incumbent  LECs  are  free  to  negotiate 
 rates  for  UNEs,  hot  cuts,  and  collocation  irrespective  of  statutory  standards.  See  47  U.  S.  C.    252(  a)  ([  A]  n  incumbent  local  exchange  carrier  may  negotiate  and  enter  into  a  binding  agreement  with  the  requesting 
 telecommunications  carrier  or  carriers  without  regard  to  the  standards  set  forth  in  subsections  (b)  and  (c)  of  section  251.).  Second,  to  the  extent  that  these  factors  are  impacted  by  forces  beyond  the  incumbent  LECs  control    for 
 example,  to  negotiate  UNE  rates,  an  incumbent  LEC  must  come  to  an  agreement  with  a  requesting  carrier    there  is  no  basis  whatsoever  for  Chairman  Powells  claim  that  they  are  not  cognizable  under  section  251(  d)(  2).  The  text 
 of  the  section  251(  d)(  2)  does  not  mention  or  in  any  way  suggest  such  a  limitation.  See  47  U.  S.  C.    251(  d)(  2)  (  In  determining  what  network  elements  should  be  made  available  .  .  .,  the  Commission  shall  consider,  at  a  minimum, 
 whether  .  .  .  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.).  And  the  impairment 
 standard  proposed  by  Chairman  Powell  and  adopted  unanimously  by  the  Commission  requires  consideration  of  the  costs  of  entry,  which  necessarily  includes  some  factors  entirely  beyond  the  incumbent  LECs  control.  See  supra 
 para.  84.  Indeed,  with  respect  to  high-  capacity  loop  facilities,  the  Chairman  proposed  and  the  Commission  unanimously  approved  consideration  of  multiple  criteria  outside  the  control  of  incumbent  LECs,  including.  among 
 other  things,  local  topography  such  as  hills  and  rivers,  availability  of  reasonable  access  to  rights-  of-  way,  and  building  access  restrictions/  costs.  See  supra  para.  335;  see  also  id.  at  para.  410  (listing  similar  criteria  for 
 transport). 
 1588  Note  that  these  costs  are  likely  to  be  affected  by  whether  the  entrant  is  using  the  same  facilities  to  serve 
 customers  in  other  markets,  thus  taking  advantage  of  available  scale  and  scope  economies.  Thus,  a  portion  of  the  costs  may  be  paid  for  by  revenues  generated  in  other  markets,  and  the  full  cost  should  not  be  attributed  to  serving 

 just  one  market.  For  example,  it  would  be  unreasonable  to  assume  that  the  cost  of  developing  a  complete  OSS  system  would  have  to  be  recovered  within  a  single  granular  market.  Also,  if  it  is  determined  that  an  efficient  entrant 
 could  efficiently  serve  both  enterprise  and  mass  market  customers  with  the  same  switch,  collocation  and  transport  facilities,  then  the  states  analysis  of  mass  market  customers  in  a  particular  market  should  not  assume  that  the  entire 
 cost  of  these  facilities  is  borne  by  these  customers. 
 1589  Granite  Dec.  16,  2002  Ex  Parte  Letter. 

 1590  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter;  AT&  T  Jan. 
 17,  2003  Ex  Parte  Letter;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter;  ASCENT  Comments  at  36;  ASCENT  Reply  at  7;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  4. 
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 exchange  customers  in  a  wire  center,  taking  into  consideration  an  entrants  likely  market  share,  the  scale  economies  inherent  to  serving  a  wire  center,  and  the  line  density  of  the  wire  center;  1591 
 the  cost  of  backhauling  the  local  traffic  to  the  competitors  switch;  1592  other  costs  associated  with  transferring  the  customers  service  over  to  the  competitor;  the  impact  of  churn  on  the  cost  of 
 customer  acquisitions;  1593  the  cost  of  maintenance,  operations,  and  other  administrative  activities;  1594  and  the  competitors  capital  costs.  1595  State  commissions  should  pay  particular 
 attention  to  the  impact  of  migration  and  backhaul  costs  on  competitors  ability  to  serve  the  market.  We  also  note  that  parties  to  this  proceeding  have  placed  evidence  in  the  record  that 
 economic  impairment  may  be  especially  likely  in  wire  centers  below  a  specific  line  density.  1596  Before  finding  no  impairment  in  a  particular  market,  therefore,  state  commissions  must 
 consider  whether  entrants  are  likely  to  achieve  sufficient  volume  of  sales  within  each  wire  center,  and  in  the  entire  area  served  by  the  entrants  switch,  to  obtain  the  scale  economies  needed 
 to  compete  with  the  incumbent.  1597 

 1591  New  South  Reply  at  25-  26;  NewSouth  Fury  Reply  Aff.  at  para.  4;  AT&  T  Jan.  17,  2003  Ex  Parte  Letter; 
 WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter  at  4. 
 1592  The  state  commission  should  consider  whether  EELs  or  digital  loop  carrier  remote  terminals  are  the  most 
 effective  means  for  a  competitor  to  backhaul  the  traffic  to  its  switch. 
 1593  WorldCom  Nov.  15,  2002  Customer  Churn  Ex  Parte  Letter;  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter 
 at  4. 
 1594  See,  e.  g.,  BellSouth  Jan.  30,  2003  Ex  Parte  Letter  at  7;  see  also  AT&  T  Feb.  4,  2003  UNE-  L  Cost  Impairment 
 Ex  Parte  Letter  at  10. 
 1595  These  include  the  capital  carrying  costs  for  the  period  it  takes  a  competitor  to  set  up  operations  and  achieve 
 profitability.  AT&  T  Feb.  4,  2003  UNE-  L  Cost  Impairment  Ex  Parte  Letter  at  2,  10.  Some  of  the  costs  listed  here  are  unlikely  to  constitute  by  themselves  a  barrier  to  entry,  particularly  if  the  incumbent  incurs  the  same  costs  for  the 

 provisioning  of  its  retail  service.  A  state  commission  should  take  them  into  consideration  in  performing  a  business  case  analysis,  which  requires  consideration  of  all  likely  revenues  and  costs. 

 1596  SBC  and  BellSouth  have  presented  studies  to  show  that  competitors  using  their  own  switches  should  be  able  to 
 earn  a  positive  profit  in  wire  centers  serving  at  least  5,000  lines.  SBC  Jan.  14,  2003  Unbundled  Switching  Ex  Parte  Letter;  BellSouth  Jan.  30,  2003  Ex  Parte  Letter.  WorldCom  and  AT&  T  provided  studies  to  show  that  a  competitor 

 would  operate  under  a  significant  cost  disadvantage,  and  that  this  disadvantage  is  larger  in  small  wire  centers.  AT&  T  Jan.  17,  2003  Ex  Parte  Letter;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter.  WorldCom  claims  that  its 
 cost  study  shows  that  in  central  offices  with  fewer  than  25,000  residential  lines,  the  cost  of  UNE-  L  will  constitute  an  insurmountable  barrier  to  entry  and  competition,  even  if  there  are  significant  reductions  in  incumbent  LEC  charges. 
 In  central  offices  serving  25,000  or  more  residential  lines,  competitive  LECs  that  achieve  a  reasonable  market  share  (e.  g.,  7%)  can  profitably  migrate  customers  served  by  unbundled  loops  combined  with  unbundled  local  circuit 
 switching  to  their  own  switches,  provided  that  state  commissions  ensure  that  operational  and  economic  barriers  are  substantially  reduced  or  removed.  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  7. 

 1597  BiznessOnline.  Com  Feb.  14,  2003  Ex  Parte  Letter;  PACE  Dec.  11,  2002  Ex  Parte  Letter  at  5-  10;  AT&  T  Jan. 
 17,  2003  Ex  Parte  Letter;  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter;  AT&  T  Oct.  4,  2002  Comparing  ILEC  and  CLEC  Local  Network  Architectures  Ex  Parte  Letter. 
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 (c)  Baseline  Rolling  Use  of  Unbundled  Switching  for  Customer  Acquisition  Purposes 
 521.  If,  after  applying  the  triggers  and  the  flexible  analysis  of  potential  deployment  described  above,  a  state  commission  concurs  that  requesting  carriers  are  impaired  in  the  mass 
 market  in  any  particular  market,  we  conclude  that  it  must  next  consider  the  use  of  rolling  access  to  unbundled  local  circuit  switching  to  address  impairment  in  that  market.  Specifically,  we 
 conclude  that,  in  some  cases,  impairment  in  a  given  market  could  be  mitigated  by  granting  requesting  carriers  access  to  unbundled  local  circuit  switching  for  a  temporary  period,  permitting 
 carriers  first  to  acquire  customers  using  unbundled  incumbent  LEC  local  circuit  switching  and  later  to  migrate  these  customers  to  the  competitive  LECs  own  switching  facilities.  1598  As  set 
 forth  below,  we  conclude  that  where  transitional  access  to  unbundled  switching  would  cure  any  impairment  that  would  otherwise  undermine  competition  if  requesting  carriers  were  denied 
 access  to  unbundled  local  circuit  switching,  the  state  must  implement  such  rolling  access  rather  than  perpetuating  permanent  access  to  the  switching  element.  1599 

 522.  We  note  at  the  outset  that  in  at  least  some  cases,  rolling  access  to  unbundled  local  circuit  switching  could  adequately  address  certain  barriers  to  entry  associated  with  the 
 switching  element.  First,  competitive  LECs  may  face  difficulties  in  accumulating  enough  customers  to  justify  batch  line  migration  processing  in  both  new  central  offices  and  existing 
 collocations.  Because  the  evidence  in  the  record  demonstrates  that  the  provisioning  delays  caused  by  the  manual  hot  cut  process  may  place  new  entrants  at  a  significant  competitive 
 disadvantage  relative  to  the  incumbent  LECs,  which  are  able  to  offer  service  to  customers 

 1598  We  refer  to  this  as  rolling  use  because  under  such  a  framework,  each  competitive  LEC  would  obtain  limited 
 access  to  unbundled  local  circuit  switching  on  a  customer-  by-  customer  basis. 
 1599  Chairman  Powell  claims  that  our  impairment  test  for  switching  is  unworkable.  Chairman  Powell  Statement 
 at  13.  To  the  extent  the  impairment  test  for  switching  is  not  simple,  however,  it  is  because  the  facts  surrounding  impairment  are  not  simple.  For  example,  hot  cut  processes  and  the  charges  for  them  often  vary  substantially 

 between  states.  Revenue  potential  also  varies  dramatically,  as  retail  rates  can  vary  between  states,  by  the  type  of  customer,  and  within  the  state.  In  order  to  conduct  a  granular  analysis  of  the  type  called  for  by  the  D.  C.  Circuit,  it  is 
 necessary  to  take  these  variations  into  account.  Indeed,  in  the  past,  Chairman  Powell  has  argued  that  such  geographic  variations  and  complicated  factors  must  be  taken  into  account.  See  Commissioner  Powell  Second 
 NPRM  Statement,  14  FCC  Rcd  at  8720-  21  (  The  availability  of  elements  outside  the  incumbents  network  could  potentially  turn  on  many  factors,  such  as  the  existence  of  vendors  and  distribution  channels,  the  presence  of 
 competing  facilities-  based  LECs  and  the  price  of  non-  incumbent  elements  relative  to  the  requesting  competitors  ability  to  pay.  These  factors  are  likely  to  vary  significantly  from  one  market  to  the  next  .  .  .  .  It  follows  directly, 
 then,  that  assessments  of  whether  an  element  is  necessary  to  provide  service  or  whether  failing  to  mandate  access  to  that  element  would  impair  a  new  entrants  ability  to  provides  service  will  vary  significantly  among  different 
 markets,  states,  and  regions.).  While  a  more  simple  solution  would  have  been  to  find  impairment  or    as  Chairman  Powell  would  have  found    no  impairment  nationwide,  this  approach  would  not  have  been  responsive  to  the  statute, 
 the  court,  or  the  record  in  this  case.  Moreover,  the  enterprise  loop  analysis  delegated  to  the  states  is  arguably  even  more  complicated  as  it  requires  the  states  to  conduct  a  location-  specific  review  on  an  individual  customer-  by-customer 
 basis.  See  supra  para.  328.  Similarly,  the  transport  analysis  requires  a  route-  by-  route  review.  Again,  both  Chairman  Powell  and  Commissioner  Abernathy  support  these  more  complicated  analyses. 
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 immediately  after  they  receive  a  customers  order,  1600  we  find  that  the  availability  of  unbundled  local  circuit  switching    even  on  a  temporary  basis    may  enable  competitors  to  acquire 
 customers,  aggregate  them,  and  migrate  them  to  the  carriers  own  switch  in  a  manner  that  would  not  be  feasible  if  the  customers  each  had  to  be  migrated  individually  upon  signing  up  with  the 
 competitive  LEC. 
 523.  Second,  rolling  access  to  unbundled  local  circuit  switching  might  satisfactorily  address  barriers  associated  with  high  customer  turnover.  1601  Competitive  LECs  contend  that  high 

 churn  rates  render  them  unable  fully  to  recover  the  high  non-  recurring  costs  associated  with  the  provision  of  UNE-  L  service  to  end  users,  because  such  costs  are  generally  recovered  on  an 
 amortized  basis.  1602  We  find  that  transitional  access  to  unbundled  local  circuit  switching  could  mitigate  some  of  the  costs  related  to  customer  churn.  Such  rolling  access  would  allow  the 
 competitive  LEC  to  incur  the  non-  recurring  costs  associated  with  UNE-  L  service  only  after  it  had  served  the  end  user  in  question  for  some  time.  Given  the  record  evidence  that  churn  is  most 
 frequent  in  the  first  few  months  after  the  customer  switches  to  a  new  carrier,  1603  rolling  access  to  unbundled  switching  could  eliminate  a  substantial  portion  of  the  non-  recurring  costs  for  which 
 competitive  LECs  would  otherwise  have  gone  uncompensated. 
 524.  In  light  of  the  prospect  that  rolling  access  to  unbundled  local  circuit  switching  could  permit  requesting  carriers  to  compete  when  they  otherwise  would  have  been  impaired 

 without  access  to  the  switching  element,  we  require  states  to  consider  and  to  mandate  such  rolling  access  when  appropriate,  as  described  here.  When  a  state  commission  finds  that 
 requesting  carriers  would  be  impaired  in  a  particular  market  without  access  to  unbundled  local  circuit  switching,  it  must  next  determine  whether  granting  such  carriers  rolling  access  to  the 
 switching  element  for  a  transitional  period  of  90  days  or  more  would  address  the  impairment  found.  1604  We  conclude  that  in  such  cases,  the  narrow  rolling  access  approach  is  more 

 1600  As  discussed  above,  the  manual  nature  of  the  hot  cut  process,  which  requires  coordination  between  competitive 
 LEC  and  incumbent  LEC  technicians  in  a  central  office,  takes  a  significant  period  of  time.  See  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  5.  CompTel  contends  that  the  provisioning  interval  for  lines  served  by 

 unbundled  loops  combined  with  unbundled  local  circuit  switching  is,  on  average,  1-  3  days  where  the  corresponding  average  interval  for  an  unbundled  loop  is  five  to  six  days.  CompTel/  PACE  Oct.  31,  2002  Ex  Parte  Letter  at  3. 

 1601  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  6. 
 1602  See,  e.  g.,  WorldCom  Comments  at  34  (  Customers  may  migrate  away  from  the  CLEC  before  the  CLEC 
 recovers  installation  and  non-  recurring  costs.);  Z-  Tel  Reply  at  28-  29. 
 1603  WorldCom  Nov.  15,  2002  Customer  Churn  Ex  Parte  Letter.  As  noted  above,  WorldCom  estimates  that  it  loses 
 about  50%  of  all  new  customers  within  the  first  three  months  of  service.  For  customers  that  choose  its  Neighborhood  bundled  local  and  long  distance  products,  WorldCom  loses,  on  average,  25%  of  its  customers 

 within  3  months.  Id. 
 1604  We  recognize  that  the  record  includes  support  for  a  wide  range  of  potential  customer  acquisition  periods. 
 WorldCom  argues  that,  because  of  the  high  customer  turnover,  unbundled  local  circuit  switching  must  not  only  be  available  for  acquisition  of  new  customers,  but  also  remain  available  for  each  new  customer  for  six  months  after 

 acquisition.  WorldCom  Jan.  8,  2003  Switching  Ex  Parte  Letter  at  6.  According  to  Talk  America,  competitive  LECs  must  still  be  able  to  acquire  customers  using  unbundled  local  circuit  switching  for  18  months  to  achieve 
 (continued.) 
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 appropriate  than  an  approach  requiring  continued  open-  ended  unbundled  access  to  the  switching  element.  Thus,  where  the  impairment  is  due  primarily  or  exclusively  to  the  problems  associated 
 with  the  economies  of  scale,  the  churn  problem,  or  other  issues  that  would  be  addressed  by  rolling  access  to  unbundled  local  circuit  switching,  we  ask  the  state  commission  to  implement 
 such  a  transitional  access  period  for  requesting  carriers.  That  transitional  period  shall  be  no  shorter  than  90  days,  though  the  state  commissions  may  determine  that  a  longer  period  is 
 appropriate,  and  permit  rolling  access  to  unbundled  local  circuit  switching  for  a  period  of  more  than  90  days.  1605 

 (d)  Transition  Rules 
 525.  To  minimize  potential  service  disruptions  that  could  occur  from  the  changes  that  we  adopt  today  regarding  local  circuit  switching,  we  retain  the  four-  line  carve-  out  from  the 

 unbundled  local  circuit  switching  obligation  on  an  interim  basis,  1606  pending  state  commission  determinations  pursuant  to  the  framework  set  forth  above.  In  the  UNE  Remand  Order,  the 
 Commission  determined  that  incumbent  LECs  are  not  obligated  to  provide  unbundled  local  circuit  switching  to  requesting  carriers  for  serving  customers  with  four  or  more  DS0  loops  in 
 density  zone  one  of  the  top  fifty  MSAs.  1607  If  we  were  not  to  retain  the  carve-  out,  carriers  could  potentially  accumulate  more  multi-  line  DS0  customers  while  states  pursued  their  inquiries,  only 
 to  risk  losing  those  customers  after  states  make  their  determinations  pursuant  to  the  framework  described  above.  This  inquiry  will  likely  limit  any  multi-  line  DS0  unbundling  obligation    either 

 (Continued  from  previous  page) 
 sufficient  numbers  for  lines  for  batch  migration;  to  acquire  customers  in  non-  collocated  locations  to  build  toward  density  triggers;  and  to  acquire  and  serve  customers  who  have  both  on-  net  and  off-  net  locations.  Letter  from 

 Heather  Gold,  Counsel  for  Talk  America  et  al.,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  4  (filed  Dec.  17,  2002)  (Talk  America  et  al.  Dec.  17,  2002  Ex  Parte  Letter).  We  choose  a  90- 
 day  period  here  because  the  evidence  in  this  proceeding  suggests  that  a  substantial  portion  of  churn  occurs  within  the  first  three  months  of  service,  and  because  the  90  day  period  allows  competitive  LECs  significant  opportunities  to 
 accumulate  enough  end  users  to  justify  a  batch  hot  cut.  See,  e.  g.,  WorldCom  Nov.  15,  2002  Customer  Churn  Ex  Parte  Letter. 

 1605  As  described  in  the  following  section,  a  state  determination  to  require  rolling  access  to  unbundled  switching   
 like  a  state  determination  to  require  open-  ended  access  to  the  switching  element    is  subject  to  modification  during  a  state  commissions  subsequent  review. 

 1606  We  find  that  we  have  the  authority  to  retain  the  four-  line  carve  out,  especially  in  light  of  case  law  suggesting 
 that  agencies  are  given  additional  deference  for  interim  or  transitional  mechanisms.  See,  e.  g.,  CompTel,  117  F.  3d  at  1068  (stating  that  although  temporary  agency  rules  are  subject  to  judicial  review  notwithstanding  their 

 transitory  nature,  substantial  deference  by  courts  is  accorded  to  an  agency  when  the  issue  concerns  interim  relief);  CompTel,  87  F.  3d  at  531;  MCI,  750  F.  2d  at  140. 

 1607  47  C.  F.  R.    51.319(  c)(  2);  UNE  Remand  Order,  15  FCC  Rcd  at  3822-  31,  paras.  276-  98.  We  note  that  the 
 Commission,  in  the  UNE  Remand  Order,  had  also  required  incumbent  LECs  subject  to  the  switching  carve-  out  rule  to  provide  new  EEL  combinations.  This  aspect  of  the  rule  has  become  moot  in  light  of  the  Supreme  Courts  ruling 

 in  Verizon.  See  Verizon,  535  U.  S.  at  531-  38.  Thus,  we  dismiss  as  moot  Intermedias  petition  for  clarification  of  the  carve-  outs  EELs  requirements.  See  Intermedia  Communications,  Inc.  Petition  for  Reconsideration  and 
 Clarification,  in  Implementation  of  the  Local  Competition  Provisions  of  the  of  the  Telecommunications  Act  of  1996,  CC  Docket  No.  96-  98  at  15-  17  (filed  Feb.  17,  2000)  (Intermedia  Feb.  17,  2000  Petition  for  Reconsideration). 
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 through  the  detailed  review  described  in  the  preceding  sections,  or  through  a  state  determination  of  the  appropriate  cut-  off  for  multi-  line  DS0  customers  (i.  e.,  the  point  at  which  it  makes 
 economic  sense  for  a  multi-  line  customer  to  be  served  via  a  DS1  loop).  1608  By  extending  the  four-  line  carve-  out  on  an  interim  basis,  pending  such  state  commission  action,  we  seek  to  avoid 
 service  disruptions  that  may  result  from  expanding  and  then  possibly  reducing  the  eligibility  for  local  circuit  switching  in  this  manner.  1609 

 (e)  Continuing  Review 
 526.  We  emphasize  that  the  framework  set  forth  here  contemplates  ongoing  state  review  of  the  status  of  unbundled  switching.  The  operational  and  economic  factors  governing 

 the  analysis  we  have  described  are  unlikely  to  remain  constant  as  technology  advances,  customer  needs  change,  and  the  competitive  market  for  local  service  continues  to  mature.  Therefore,  after 
 completion  of  the  initial  review  described  here,  we  expect  states  to  conduct  further  granular  reviews,  pursuant  to  the  procedures  the  state  adopts,  to  reevaluate  whether  competitive  LECs  are 
 impaired  without  access  to  unbundled  local  circuit  switching,  and  whether  such  impairment,  if  found,  could  be  cured  by  rolling  access  to  such  facilities.  Like  the  initial  proceeding,  these 
 further  reviews  might  result  in  a  state  conclusion  that  requesting  carriers  are  impaired  in  a  particular  market  without  access  to  unbundled  local  circuit  switching,  that  carriers  are  not 
 impaired,  or  that  carriers  would  be  impaired  but  for  the  availability  of  rolling  access  to  such  facilities.  Where  a  state  finds,  applying  the  standards  set  forth  above,  that  requesting  carriers  are 
 no  longer  impaired  without  unbundled  access  to  circuit  switching,  it  shall  reverse  its  previous  decision  that  such  access  is  required  under  section  251(  c)(  3).  The  proceedings  described  in  this 
 paragraph  shall  be  completed  within  six  months  of  the  filing  of  a  petition  or  other  pleading  submitted  in  accordance  with  the  prescribed  state  procedures.  1610 

 1608  See  supra  para.  497.  We  expect  that  in  those  areas  where  the  switching  carve-  out  was  applicable  (i.  e.,  density 
 zone  1  of  the  top  50  MSAs),  the  appropriate  cutoff  will  be  four  lines  absent  significant  evidence  to  the  contrary.  See  id. 

 1609  We  therefore  reject  arguments  that  we  establish  a  national  carve-  out.  See,  e.  g.,  NewSouth  Reply  at  30;  Z-  Tel 
 Comments  at  52-  54  &  n.  113;  WorldCom  Reply  at  159-  61;  BellSouth  Reply  at  23.  Because  we  retain  the  carve-  out  only  on  a  transitional  basis,  and  ask  the  states  to  establish  an  appropriate  multiline  DS0  cut-  off  point  as  part  of  their 

 more  granular  review,  we  dismiss  as  moot  the  various  requests  before  the  Commission  to  reconsider  and  clarify  the  carve-  outs  terms.  See  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  7-  11;  CompTel  Feb.  17,  2000  Petition 
 for  Reconsideration  at  2-  5;  Telecommunications  Resellers  Association  Petition  for  Reconsideration,  CC  Docket  No.  96-  98  at  1-  11  (filed  Feb.  17,  2000);  MCI  WorldCom  Feb.  17,  2000  Petition  for  Reconsideration  at  20-  23;  AT&  T 
 Feb.  17,  2000  Petition  for  Reconsideration  at  12-  19;  Birch  Petition  for  Partial  Reconsideration,  CC  Docket  No.  96-  98  at  1-  9  (filed  Feb.  17,  2000);  Sprint  Petition  for  Reconsideration  and  Clarification,  CC  Docket  No.  96-  98  at  7-  9 
 (filed  Feb.  17,  2000). 
 1610  See  supra  note  1291. 
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 (f)  State  Commission  Failure  to  Act 
 527.  For  the  mass  market,  state  commissions  will  conduct  their  initial  reviews,  applying  the  triggers  and  factors  discussed  above,  1611  within  nine  months  of  the  effective  date  of 

 this  Order.  The  incumbent  LEC  must  continue  providing  unbundled  circuit  switching  in  all  locations  until  a  state  commission  completes  its  proceedings.  To  the  extent  that  a  state 
 commission  fails  to  complete  the  granular  inquiry,  1612  any  aggrieved  party  may  file  a  petition  with  this  Commission  demonstrating  a  states  failure  to  act  pursuant  to  the  procedures  we  outline 
 today.  1613  Moreover,  should  a  state  commission  fail  to  approve  a  batch  cut  migration  process  or  provide  a  detailed  explanation  why  such  a  process  is  not  necessary  within  nine  months  of  this 
 Orders  effective  date,  any  aggrieved  party  will  be  permitted  to  initiate  a  proceeding  with  this  Commission.  1614  The  incumbent  LEC  must  continue  providing  unbundled  local  circuit  switching, 
 subject  to  the  four-  line  carve-  out  described  above,  1615  while  such  a  petition  is  pending  with  this  Commission. 

 7.  Transition  of  the  Embedded  Customer  Base 
 528.  We  recognize  the  need  to  establish  a  transition  plan  to  migrate  the  embedded  unbundled  local  circuit  switching  customer  base  to  an  alternative  service  arrangement  when 

 unbundled  local  circuit  switching  is  no  longer  made  available.  We  find  that  we  have  the  authority  to  establish  such  a  plan  because  whether  competing  carriers  can  deploy  facilities  in  a 
 timely  fashion  is  a  key  consideration  in  determining  whether  there  is  impairment.  In  instances  when  existing  network  elements  may  potentially  be  eliminated  pending  a  fact-  intensive 
 investigation,  we  find  that  section  251(  d)(  2)  gives  us  authority  to  promulgate  reasonable  transition  rules  to  protect  the  public  interest  by  preserving  the  status  quo  pending  the  outcome  of 
 the  investigation  and  by  giving  competitive  carriers  a  realistic  opportunity  to  deploy  their  own  facilities.  1616  Because  the  record  contains  a  wide  range  of  proposals  that,  in  many  respects,  do 
 not  on  their  own  account  fully  for  the  interests  of  all  stakeholders  involved,  we  further  recognize  a  need  to  exercise  discretion  in  establishing  the  specific  parameters  for  the  transition  plan.  Our 

 1611  This  includes  the  state  commissions  approval  of  a  batch  cut  migration  process  or,  in  the  alternative,  the 
 provision  of  a  detailed  explanation  why  such  a  process  is  not  necessary  within  nine  months  of  this  Orders  effective  date. 

 1612  By  complete,  we  mean  that  a  state  commission,  upon  receiving  sufficient  evidence,  has  an  affirmative 
 obligation  to  review  the  relevant  evidence  associated  with  any  market  submitted  by  an  interested  party,  and  to  apply  the  trigger  and  any  other  analysis  specified  in  this  Part  to  such  evidence. 

 1613  As  discussed  above,  if  a  state  fails  to  act,  we  set  forth  procedures  for  the  Commission  to  step  into  the  role  of  the 
 state.  See  supra  Part  V.  E.  2.  (discussing  the  role  of  the  states). 
 1614  See  id. 

 1615  See  supra  para.  525. 
 1616  See  Letter  from  Jay  Bennett,  Executive  Director    Federal  Regulatory,  SBC,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  5-  7  (filed  Nov.  19,  2002)  (SBC  Nov.  19,  2002  Ex  Parte  Letter). 
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 exercise  of  discretion  is  one  that  inherently  resists  mathematical  precision,  calling  on  us  instead  to  make  reasonable  judgments  based  on  a  totality  of  competing  factors. 
 529.  The  most  critical  aspect  of  any  industry-  wide  transition  plan  is  to  avoid  significant  disruption  to  the  existing  customer  base  served  via  unbundled  local  circuit  switching 
 so  that  consumers  will  continue  to  have  access  to  their  telecommunications  service.  The  record  reflects  that,  by  the  end  of  2002,  more  than  ten  million  residential  and  small  business  lines  were 
 being  served  by  competitive  LECs  via  unbundled  local  circuit  switching  arrangements.  1617  We  agree  with  carriers  on  the  need  to  establish  quantifiable  milestones  to  ensure  the  transition  takes 
 place  in  an  orderly  manner.  1618  We  recognize  that  eliminating  unbundled  access  to  incumbent  LEC  switching  on  a  flash  cut  basis  could  substantially  disrupt  the  business  plans  of  some 
 competitors.  This  is  especially  unacceptable,  given  that  the  record  contains  substantial  evidence    including  cost  studies  submitted  by  the  incumbent  LECs  themselves    that  competitive  carriers 
 suffer  cost  disadvantages  and  other  barriers  when  they  self-  deploy  switching  in  some  locations.  1619  There  is  also  a  need  for  an  orderly  transition  to  afford  sufficient  time  for  carriers  to 
 implement  any  necessary  business  and  operational  plans  and  practices  to  account  for  the  changed  regulatory  environment,  including  the  need  to  modify  or  revise  their  interconnection  agreements. 
 For  example,  competitive  LECs  may  need  to  develop  new  UNE-  L  provisioning  systems,  including  hiring,  training,  and  equipping  loop  provisioning  and  switch  technicians;  purchase  and 
 collocate  new  equipment;  create  additional  customer  service  and  trouble  maintenance  groups;  revise  wholesale  billing  systems;  and  develop  capabilities  for  E911  and  local  number 
 portability.  1620  Moreover,  our  transition  plan  must  require  the  incumbent  LEC  to  unbundle  its  local  circuit  switching  facilities  for  some  limited  period  after  a  state  commission  has  found  no 
 impairment,  because  otherwise  a  competitive  LEC  would  be  forced  to  halt  its  advertising  and  customer  acquisition  activities  between  the  time  the  state  commission  issued  its  findings  and  the 
 time  the  competitive  LEC  was  able  to  serve  its  customers  using  alternative  facilities.  Finally,  our  plan  must  ensure  that,  as  a  practical  matter,  the  transition  occurs  in  a  timely  manner.  We 
 balance  these  important  considerations  against  the  reality  that  it  would  frustrate  the  statutory  scheme  and  the  courts  conclusion  that  impairment  is  the  touchstone  of  our  unbundling 
 decision  if  customers  are  not  transitioned  from  required  unbundled  switching  as  expeditiously  as  possible. 

 530.  The  parties  take  diverging  positions  regarding  a  transition  from  unbundled  switching  to  facilities-  based  service  (i.  e.,  UNE-  L  or  resale).  1621  Incumbent  LECs  generally 

 1617  PACE  Jan.  14,  2002  Ex  Parte  Letter  at  2. 
 1618  SBC  Reply  at  112. 
 1619  Letter  from  Jay  Bennett,  Executive  Director    Federal  Regulatory,  SBC,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  No.  01-  338,  Attach.  Residential  Customers  Can  Be  Profitably  Served  Using  UNE-  L  at  2  (filed  Jan.  24,  2003)  (SBC  Jan.  24,  2003  Ex  Parte  Letter);  see  also  BellSouth  Jan.  24,  2003  Ex  Parte  Letter  at  12. 

 1620  See,  e.  g.,  WorldCom  Nov.  18,  2002  Transition  to  UNE-  L  Ex  Parte  Letter  at  4. 
 1621  SBC,  for  example,  offers  a  proposal  with  respect  to  customers  served  by  unbundled  loops  combined  with 
 unbundled  local  circuit  switching,  which  relies  on  the  establishment  of  a  national  two-  year  transitional  wholesale  (continued.) 
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 support  elimination  of  their  obligation  to  unbundle  local  circuit  switching  and  propose  transition  plans  away  from  unbundled  incumbent  LEC  local  circuit  switching.  1622  Competitive  LECs 
 generally  oppose  the  incumbent  LEC  transition  proposals  and  argue  that  the  Commission  should  not  establish  triggers  to  transition  away  from  incumbent  LEC  unbundled  local  circuit  switching. 
 In  several  ex  parte  presentations,  a  number  of  parties  softened  their  initial  positions  and  proposed  narrowly  tailored  transition  proposals  towards  promoting  facilities-  based  competition. 
 For  example,  incumbent  LECs  propose  transition  plans  based  on  a  finding  of  no  impairment  for  all  customer  classes.  Several  competitive  LECs  propose  migration  from  unbundled  switching  to 
 competitive  LEC-  owned  switching  over  time  based  on  ensuring  that  competitive  LECs  migrate  to  their  own  switching  platform  as  self-  provisioned  switching  becomes  technically  and 
 economically  feasible,  with  all  proposals  envisioning  substantial  state  involvement  to  administer  the  phase-  out.  1623  For  example,  Broadview,  Eschelon,  and  Talk  America  propose  a  four-  step 
 migration  plan,  which  requires  incumbent  LECs  to  create  efficient  loop  provisioning  processes  for  hot  cutting  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  unbundled 

 (Continued  from  previous  page) 
 offering  for  serving  residential  customers  that  is  functionally  equivalent  to  such  an  arrangement  at  a  rate  of  $26  per  month.  See  SBC  Nov.  19,  2002  Ex  Parte  Letter  at  5.  Under  SBCs  proposal,  resale  and  UNE-  L  options  would 

 remain  available  for  competitive  LECs  to  serve  the  mass  market.  Several  competitive  LECs  propose  migration  from  unbundled  switching  to  competitive  LEC-  owned  switching  over  time  based  on  ensuring  that  competitive  LECs 
 migrate  to  their  own  switching  platform  as  self-  provisioned  switching  becomes  technically  and  economically  feasible.  See  Letter  from  Heather  B.  Gold,  Representative  for  Broadview,  Talk  America,  and  Eschelon,  to  Marlene 
 H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Jan.  2,  2003)  (Broadview  et  al.  Jan.  2,  2003  Unbundled  Switching  to  Unbundled  Loop  Proposed  Migration  Ex  Parte  Letter). 

 1622  See  Verizon  Oct.  16,  2002  Ex  Parte  Letter  at  18;  Verizon  Jan.  10,  2003  Ex  Parte  Letter  at  2  (stating  that  if  the 
 Commission  chooses  to  adopt  a  transition  plan  for  residential  customers,  an  appropriate  transition  would  be  one  that  moves  quickly  to  the  resale  price  prescribed  by  Congress).  According  to  Verizon,  the  Commission  should  transition 

 the  residential  rates  for  access  to  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  the  state-established  resale  rate  over  a  12-  month  period.  See  Verizon  Jan.  10,  2003  Ex  Parte  Letter  at  2.  One-  third  of  the 
 differential  would  be  eliminated  immediately,  as  of  the  date  of  the  Commissions  Order.  Id.  Another  third  would  be  eliminated  after  six  months.  Id.  At  the  end  of  the  12-  month  period,  the  residential  rates  for  access  to  unbundled 
 loops  combined  with  unbundled  local  circuit  switching  would  be  the  resale  rate.  Id.  at  2-  3.  Verizon  further  recommends  that  these  transitional  rates  apply  to  the  embedded  base  of  residential  customers  served  by  unbundled 
 loops  combined  with  unbundled  local  circuit  switching  as  well  as  any  new  customers  added  for  the  first  six  months  after  the  Commissions  Order.  Id.  Qwests  plan,  for  example,  would  require  the  following:  (1)  Day  60   
 Competitive  LECs  would  declare  its  preferred  transition  option;  (2)  As  soon  as  possible    Transition  existing  customers  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  Resale  or  Unbundled 
 Switching;  (3)  August  2003    Transition  existing  customers  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  new  market-  based  product  offering  from  Qwest;  and  (4)  December  2003    Transition 
 existing  customers  served  by  unbundled  loops  combined  with  unbundled  local  circuit  switching  to  stand-  alone  loops  on  a  negotiated  project  basis.  See  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  Attach.  at  2  (filed  Oct.  30,  2002)  (Qwest  Oct.  30,  2002  Switching  Ex  Parte  Letter). 

 1623  Broadview  et  al.  Jan.  2,  2003  Unbundled  Switching  to  Unbundled  Loop  Proposed  Migration  Ex  Parte  Letter; 
 Letter  from  Heather  B.  Gold,  Counsel  for  Broadview,  Talk  America,  and  Eschelon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  2  (filed  Dec.  31,  2002)  (Broadview  et  al.  Dec. 

 31,  2002  Ex  Parte  Letter). 
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 stand-  alone  loops  migration  once  competitive  LECs  exceed  prescribed  line  densities.  1624  Z-  Tel  details  a  five-  step  plan  for  building  wholesale  switching  and  transport  alternatives,  which,  it 
 contends,  will  support  the  entry  of  several  telecommunications  firms.  1625  While  we  decline  to  adopt  these  proposed  transition  plans,  1626  and  any  other  transition  proposal  in  full,  we  base  our 
 decision  on  evaluation  of  those  proposals  in  the  record  and  our  transition  plan  goals  noted  above. 
 531.  We  find  that  state  commissions  are  well  suited  to  monitoring  the  operational  aspects  of  this  migration,  and  we  therefore  incorporate  a  state  role  into  our  transition  plan.  State 

 commissions  have  strong  incentives  both  to  encourage  competition  (as  a  means  of  providing  citizens  of  their  states  with  a  choice  of  service  providers)  as  well  as  to  foster  new  investment  (as 
 a  means  of  promoting  economic  growth  in  their  states).  The  evidence  in  the  record  demonstrates  that  state  commissions  have  a  strong  interest  in  creating  the  conditions  for  transition  from  service 
 using  unbundled  local  circuit  switching  to  unbundled  stand-  alone  loops  wherever  possible,  and  managing  the  transition  in  a  way  that  promotes  investment  as  well  as  continued  choice  for 
 consumers.  We  therefore  require  competitive  and  incumbent  LECs  to  jointly  submit  the  details  of  their  implementation  plan  to  the  appropriate  state  commission.  In  addition,  we  require 
 competitive  LECs  to  notify  the  relevant  state  commissions  when  they  have  submitted  their  orders  for  migration.  Finally,  we  require  incumbent  LECs  to  notify  the  relevant  state  commission  when 
 they  have  completed  the  migrations. 
 532.  Competing  carriers  must  transfer  their  embedded  base  of  DS1  enterprise  customers  to  an  alternative  service  arrangement  within  90  days  from  the  end  of  the  90-  day  state 

 commission  consideration  period,  unless  a  longer  period  is  necessary  to  comply  with  a  change 
 1624  Broadview  et  al.  Jan.  2,  2003  Unbundled  Switching  to  Unbundled  Loop  Proposed  Migration  Ex  Parte  Letter  at 
 2.  According  to  the  plan,  step  1  requires  incumbent  LECs  to  develop,  implement,  and  then  have  certified  a  loop  migration  process  in  each  state.  Id.  Then,  according  to  step  2,  once  an  incumbent  LEC  has  implemented  a 

 satisfactory  migration  process,  it  can  petition  the  state  to  determine  sufficient  customer  density  to  justify  facilities  investment.  Id.  at  4.  Step  3  provides  competitive  LECs  with  at  least  18  months  to  migrate  lines  above  the  requisite 
 numbers  to  their  own  facilities;  for  subsequent  migrations,  competitive  LECs  will  have  six  months  to  establish  collocation  and  migrate  lines  above  the  requisite  number  to  their  own  facilities.  Lastly,  step  4  of  their  proposal 
 requires  that  competitive  LECs  be  able  to  acquire  customers  using  unbundled  local  circuit  switching,  pending  implementation  of  an  incumbent  LEC  efficient  loop  migration  process. 

 1625  See  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 Nos.  01-  338,  96-  98,  98-  147  (filed  Nov.  22,  2002)  (Z-  Tel  Nov.  22,  2002  Ex  Parte  Letter).  Z-  Tels  plan  envisions  the  availability  of  unbundled  access  to  switching  until  vibrant,  effective,  and  efficient  wholesale  alternative 

 providers  of  mass  market  switching  and  transport  services  are  in  place.  Id.  at  1.  The  five-  step  plan  consists  of  equal  access  requirements  for  loop  provisioning;  competitive  wholesale  interoffice  transport;  switch-  based  competitive 
 LEC  transfer  from  unbundled  local  circuit  switching;  competitive  analysis  of  wholesale  providers  by  state  commissions;  and  a  transition  to  wholesale  providers.  Id.  at  2.  A  key  aspect  of  the  plan  is  to  make  sure  the  steps 
 are  completed  in  sequence  before  proceeding  to  the  next  step.  Id.  According  to  Z-  Tel,  the  principal  adjudicator  as  to  whether  a  step  has  been  completed  is  the  state  commission.  Id.  at  6. 

 1626  While  the  Supreme  Court  has  advised  that  [  t]  he  Commission  cannot,  consistent  with  the  statute,  blind  itself  to 
 the  availability  of  elements  outside  the  incumbents  network,  including  review  of  requesting  carriers  ability  to  self-  provision,  or  purchas[  e]  from  another  provider,  the  Commission  is  not  obligated  to  establish  a  wholesale 

 market  for  switching  and  transport.  See  Iowa  Utils.  Bd.,  525  U.  S.  at  389. 
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 of  law  provision  in  an  applicable  interconnection  agreement.  1627  To  the  extent  a  state  commission  finds  no  impairment  for  mass  market  customers  in  a  particular  market,  we  require 
 mass  market  carriers  to  commit  to  an  implementation  plan  with  the  appropriate  incumbent  LEC  within  two  months  from  the  finding  of  no  impairment.  Thus,  if  a  state  commission  determines 
 that  there  is  no  impairment  for  a  particular  market  in  its  initial  9  month  review,  the  carriers  must  have  a  plan  in  place  within  11  months  of  the  effective  date  of  this  Order.  By  five  months  after  a 
 finding  of  no  impairment,  competitive  LECs  may  no  longer  request  access  to  unbundled  local  circuit  switching.  Moreover,  we  require  competitive  LECs  to  submit  the  necessary  orders  1628  for 
 one-  third  of  their  customers  in  accordance  with  the  following  schedule:  (1)  13  months  after  a  finding  of  no  impairment:  Each  competitive  LEC  must  submit  orders  for  one-  third  of  all  its 
 unbundled  local  circuit  switching  end  users;  (2)  20  months  after  a  finding  of  no  impairment:  Each  competitive  LEC  must  submit  orders  for  half  of  its  remaining  unbundled  local  circuit 
 switching  end  users;  and  (3)  27  months  after  a  finding  of  no  impairment:  Each  competitive  LEC  must  submit  orders  for  its  remaining  unbundled  local  circuit  switching  end  users.  1629 

 1627  See  infra  Part  VIII.  D  (transition  period). 
 1628  For  purposes  of  calculating  the  number  of  customers  who  must  be  migrated,  the  embedded  base  of  customers 
 shall  include  all  customers  served  using  unbundled  switching  that  are  not  being  served  with  transitional  unbundled  switching. 

 1629  We  disagree  with  Chairman  Powells  claim  that  permitting  competitive  LECs  to  transition  their  mass  market 
 customers  off  of  unbundled  switching  over  the  course  of  a  three-  year  period  is  either  unreasonable  or  unlawful.  Chairman  Powell  Statement  at  13.  As  an  initial  matter,  we  note  that,  at  the  time  of  this  Orders  adoption,  there  were 

 over  ten  million  customers  receiving  local  service  over  unbundled  local  switches.  Chairman  Powell  concedes  that  the  Commission  has  the  discretion  to  set  forth  reasonable  transition  periods  and,  given  the  enormous  number  of 
 customers  that  may  potentially  be  affected,  we  believe  that  three  years  is  a  reasonable  amount  of  time.  Chairman  Powell  Statement  at  13.  Further,  we  note  that  this  Commission  voted  unanimously  to  give  the  states  unlimited 
 discretion  to  determine  the  appropriate  transition  period  for  migrating  customers  off  of  enterprise  loops  and  transport  UNEs  where  they  find  no  impairment  for  these  facilities.  See,  e.  g.,  supra  para.  338  (stating  expectation 
 that  states  will  give  competitors  an  appropriate  period  to  transition  from  unbundled  loops).  Significantly,  Chairman  Powell  does  not  appear  to  be  concerned  about  legality  of  continued  access  to  these  facilities  after  an 
 express  finding  of  no  impairment.  Chairman  Powell  Statement  at  13.  Moreover,  under  our  switching  transition  period,  competitive  LECs  must  begin  transitioning  one-  third  of  their  customers  to  their  own  facilities  13  months 
 after  a  finding  of  no  impairment.  Once  competitive  carriers  have  incurred  the  fixed  costs  associated  with  deploying  their  own  switching  facilities  to  support  one-  third  of  their  customers,  we  find  it  likely  that  such  carriers  will  have  an 
 incentive  to  fill  the  capacity  of  their  switch  such  that  they  will  not  necessarily  need  the  full  three  years  to  complete  the  migration    assuming,  of  course,  that  the  incumbents  can  successfully  manage  the  cutover  process.  Finally, 
 providing  a  sufficiently  long  transition  for  the  embedded  base  of  customers  should  have  the  effect  of  encouraging  competitive  entry  and  investment  in  the  future.  Without  such  a  transition,  potential  entrants  might  fear  that 
 investments  they  make  in  facilities,  office  systems,  and  marketing  would  be  stranded  if  future  unbundling  decisions  suddenly  made  their  business  plans  no  longer  viable. 
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 E.  Shared  Transport 
 1.  Background 
 533.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether  it  should  retain  or  modify  the  existing  unbundling  obligations  for  shared  transport.  1630  The 

 Commission  previously  has  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  LECs  network.  1631  In  the  Shared  Transport  Order,  the  Commission  clarified  the  extent  to  which 
 incumbent  LECs  are  obligated  to  provide  requesting  carriers  with  access  to  shared  transport.  1632  The  Commission  later  found  in  the  UNE  Remand  Order  that,  without  access  to  shared  transport, 
 requesting  carriers  are  impaired  in  their  ability  to  use  unbundled  local  circuit  switching.  1633 
 2.  Discussion 
 534.  Incumbent  LECs  and  competitive  LECs  demonstrate  that  the  use  of  unbundled  shared  transport  is  tied  exclusively  to  unbundled  local  switching.  1634  Verizon  and  SBC  assert  that 

 because  switching  and  shared  transport  are  inextricably  linked,  if  incumbent  LECs  are  no  longer  obligated  to  unbundle  switching,  they  should  no  longer  be  obligated  to  unbundle  shared 
 transport.  1635  We  agree.  Therefore,  we  find  that  requesting  carriers  are  impaired  without  access  to  unbundled  shared  transport  only  to  the  extent  that  we  find  they  are  impaired  without  access  to 
 unbundled  switching.  1636  Because  unbundled  shared  transport  is  linked  to  the  use  of  unbundled  switching,  and  because  the  Commission  delegates  a  role  to  state  commissions  in  identifying 

 1630  Triennial  Review  NPRM,  16  FCC  Rcd  at  22809-  10,  para.  63. 
 1631  UNE  Remand  Order,  15  FCC  Rcd  at  3862,  para.  370;  47  C.  F.  R.    51.319(  d)(  1)(  iii);  see  generally  Shared 
 Transport  Order,  12  FCC  Rcd  12460. 
 1632  Shared  Transport  Order,  12  FCC  Rcd  at  12462,  para.  2. 

 1633  UNE  Remand  Order,  15  FCC  Rcd  at  3862-  66,  paras.  369-  79. 
 1634  See,  e.  g.,  SBC  Comments  at  81;  Verizon  Comments  at  95  n.  319;  SBC  Reply  at  141;  Letter  from  Peter 
 Karoczkai,  InfoHighway  Communications  Corp.,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Feb.  14,  2003)  (InfoHighway  Feb.  14,  2003  Ex  Parte  Letter);  Z-  Tel  Reply  at  68- 

 69;  UNE  Remand  Order,  15  FCC  Rcd  at  3862,  para.  369  n.  731  (stating,  the  only  carrier  that  would  need  shared  transport  facilities  would  be  one  that  was  using  an  unbundled  local  switch);  Id.  at  3863,  para.  371  (stating,  shared 
 transport  is  technically  inseparable  from  unbundled  switching.). 
 1635  See  SBC  Comments  at  81;  Verizon  Comments  at  95  n.  319;  SBC  Reply  at  141. 

 1636  This  conclusion  is  similar  to  the  Commissions  conclusion  in  the  UNE  Remand  Order.  See  15  FCC  Rcd  at 
 3862,  para.  369  (  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). 
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 impairment  for  unbundled  circuit  switching,  1637  states  should  incorporate  into  their  analyses  of  switching  the  economic  characteristics  of  shared  transport  and  other  backhaul.  1638  Thus,  we  find 
 that  requesting  carriers  are  impaired  without  access  to  unbundled  shared  transport    transmission  facilities  shared  by  more  than  one  carrier  between  end  office  switches,  between  end  office 
 switches  and  tandem  switches,  and  between  tandem  switches  1639  in  the  incumbent  LECs  network    to  the  extent  that  local  circuit  switching  is  unbundled. 

 F.  Packet  Switching 
 1.  Background 
 535.  In  the  UNE  Remand  Order,  the  Commission  defined  packet  switching  capability  as  routing  or  forwarding  packets,  frames,  cells  or  other  data  units  based  on  address 

 or  other  routing  information  contained  in  the  packets,  frames,  cells  or  other  data  units  as  well  as  the  functions  performed  by  DSLAMs.  1640  The  Commission  also  excluded  packet  switching 
 functionalities  from  the  section  251(  c)(  3)  unbundling  obligations,  except  in  limited  circumstances.  1641 

 1637  See  supra  Part  VI.  D  (describing  the  role  states  may  take  in  identifying  impairment  for  unbundled  local  circuit 
 switching). 
 1638  The  record  indicates  that  without  access  to  unbundled  shared  transport,  a  requesting  carrier  with  access  to 
 unbundled  switching  would  have  to  obtain  dedicated  transport  from  the  incumbent  LEC,  from  a  third  party,  or  by  self-  provisioning.  See,  e.  g.,  AT&  T  Comments  at  159,  161;  see  also  UNE  Remand  Order,  15  FCC  Rcd  at  3864, 

 para.  374.  Our  discussion  of  dedicated  transport,  above,  analyzes  the  barriers  to  entry  related  to  self-  deploying  or  otherwise  obtaining  dedicated  transport  facilities.  See  Part  VI.  B.  3.  d,  supra.  The  record  also  indicates  that  shared 
 transport  is  rarely  available  from  third  party  sources  and  no  incumbent  LEC  presents  evidence  of  third-  party  alternatives  to  unbundled  shared  transport.  See  UNE-  P  Coalition  Comments  at  54;  CTC  Reply  at  18. 

 1639  Shared  transport  between  local  tandem  switches  sometimes  is  used  by  competing  carriers  for  transiting    a 
 means  of  indirectly  interconnecting  with  other  competing  carriers  for  the  purpose  of  terminating  local  and  intraLATA  traffic.  See,  e.  g.,  InfoHighway  Feb.  14,  2003  Ex  Parte  Letter  at  2.  To  date,  the  Commissions  rules 

 have  not  required  incumbent  LECs  to  provide  transiting.  See  Application  by  Verizon  Maryland  Inc.,  Verizon  Washington,  D.  C.  Inc.,  Verizon  West  Virginia  Inc.,  Bell  Atlantic  Communications  Inc.,  (d/  b/  a  Verizon  Long 
 Distance),  NYNEX  Long  Distance  Company  (d/  b/  a  Verizon  Enterprise  Solutions),  Verizon  Global  Networks  Inc.,  and  Verizon  Select  Services  Inc.,  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  Maryland, 
 Washington,  D.  C.,  and  West  Virginia,  WC  Docket  No.  02-  384,  Memorandum  Opinion  and  Order,  18  FCC  Rcd  5212,  5271,  para.  101  (2003)  (Verizon  Maryland/  DC/  West  Virginia  271  Order).  The  Commission  plans  to  address 
 transiting  in  its  pending  Intercarrier  Compensation  rulemaking  proceeding.  See  Developing  a  Unified  Intercarrier  Compensation  Regime,  CC  Docket  No.  01-  92,  Notice  of  Proposed  Rulemaking,  16  FCC  Rcd  9610  (2001) 
 (Intercarrier  Compensation  NPRM). 
 1640  UNE  Remand  Order,  15  FCC  Rcd  at  3833-  34,  paras.  302-  04;  see  47  C.  F.  R.    51.319(  c)(  4). 

 1641  UNE  Remand  Order,  15  FCC  Rcd  at  3838-  39,  para.  313;  see  47  C.  F.  R.    51.319(  c)(  5).  An  incumbent  LEC 
 must  provide  access  to  unbundled  packet  switching  only  where  the  incumbent  LEC  has  deployed  digital  loop  carrier  systems  or  otherwise  deployed  fiber  optic  facilities  in  the  distribution  part  of  the  loop;  has  no  spare  copper  loops 

 capable  of  providing  the  xDSL  service  the  requesting  carrier  seeks  to  offer;  has  not  permitted  the  requesting  carrier  to  collocate  its  own  DSLAM  at  an  appropriate  subloop  point;  and  has  deployed  packet  switching  for  its  own  use. 
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 536.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether,  in  light  of  changed  circumstances,  it  should  retain  this  limited  unbundling  requirement  and  if  so, 
 whether  it  should  modify  this  requirement  or  the  existing  definition  of  packet  switching,  including  the  DSLAM  functionality.  1642  The  Commission  also  sought  comment  on  the  benefits 
 and  burdens  resulting  from  the  packet  switching  unbundling  requirement  and  whether  there  are  any  alternative,  less  burdensome  options  available  to  achieve  the  goals  of  the  Act.  1643 

 2.  Discussion 
 537.  We  find,  on  a  national  basis,  that  competitors  are  not  impaired  without  access  to  packet  switching,  including  routers  and  DSLAMs.  1644  Accordingly,  we  decline  to  unbundle 

 packet  switching  as  a  stand-  alone  network  element.  1645  We  further  find  that  the  Commissions  limited  exception  to  its  packet-  switching  unbundling  exemption  is  no  longer  necessary.  1646 
 Lastly,  our  decision  not  to  unbundle  stand-  alone  packet  switching  is  consistent  with  the  goals  of  section  706  of  the  1996  Act.  1647 

 538.  Evidence  in  our  record  demonstrates  that  the  considerations  applied  in  the  UNE  Remand  Order  apply  with  equal  force  at  this  time  to  support  our  earlier  decision  not  to  unbundle 
 packet  switching  as  a  stand-  alone  network  element.  1648  Specifically,  the  record  shows  that  a  wide  range  of  competitors  are  actively  deploying  their  own  packet  switches,  including  routers  and 
 DSLAMs  to  serve  both  the  enterprise  and  mass  markets,  1649  and  that  these  facilities  are  much 
 1642  Triennial  Review  NPRM,  16  FCC  Rcd  at  22809,  paras.  61-  62. 
 1643  Id.  at  22809,  para.  62. 
 1644  As  discussed  below,  this  conclusion  applies  to  both  the  mass  market  and  the  enterprise  market. 
 1645  See  UNE  Remand  Order,  15  FCC  Rcd  at  3835,  para.  306.  The  incumbent  LECs  contend  that  packet  switching 
 should  not  be  required  as  a  UNE.  See,  e.  g.,  SBC  Comments  at  52;  Qwest  Comments  at  41.  Sprint  also  states  that  it  does  not  quarrel  with  this  position,  at  least  in  the  central  office  environment.  See  Sprint  Reply  at  32. 

 1646  See  UNE  Remand  Order,  15  FCC  Rcd  at  3838-  39,  para.  313.  Access  to  packet  switching  functionalities  as 
 used  in  DLC  loop  architecture  is  discussed  in  Part  VI.  A.  4.,  infra,  which  addresses  unbundled  loops. 
 1647  47  U.  S.  C.    157  nt. 

 1648  Based  on  the  record  in  this  proceeding,  we  deny  the  portion  of  WorldComs  Petition  for  Reconsideration 
 arguing  that  the  Commission  should  reconsider  its  prior  decision  to  not  unbundle  packet  switching  beyond  the  limited  exception  provided  for  in  our  vacated  rules.  See  MCI  WorldCom  Feb.  17,  2000  Petition  for  Reconsideration 

 at  2-  15.  For  the  same  reasons,  we  deny  the  portion  of  the  Petition  for  Reconsideration  and  Clarification  of  Intermedia  Communications,  Inc.  arguing  that  the  Commission  should  reconsider  its  prior  decision  to  not  unbundle 
 packet  switching.  See  Intermedia  Feb.  17,  2000  Petition  for  Reconsideration  at  3-  13.  Because  we  decline  to  unbundle  packet  switching  as  a  stand-  alone  UNE  under  our  new  unbundling  framework,  we  dismiss  as  moot  the 
 arguments  raised  in  the  Intermedia  Petition  for  Reconsideration  and  the  Petition  for  Reconsideration  filed  by  CompTel  dealing  with  forms  of  packet  switching  and  combinations  that  include  packet  switching.  See  Intermedia 
 Feb.  17,  2000  Petition  for  Reconsideration  at  3-  13;  CompTel  Feb.  17,  2000  Petition  for  Reconsideration. 
 1649  According  to  the  BOC  UNE  Fact  Report  2002,  the  largest  providers  of  both  Frame  Relay  and  ATM  services  are 
 AT&  T,  WorldCom,  and  Sprint.  See  BOC  UNE  Fact  Report  2002  at  II-  24.  In  addition,  Covad  has  deployed  (continued.) 
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 cheaper  to  deploy  than  circuit  switches.  1650  In  fact,  according  to  the  BOC  UNE  Fact  Report  2002,  unrebutted  in  the  record,  competitive  LEC  deployment  of  packet  switching  has  doubled 
 since  the  UNE  Remand  Order,  from  860  in  1998  to  at  least  1,700  in  2001.  1651  In  addition,  more  than  55  competitive  LECs  have  deployed  packet  switches  in  more  than  200  different  cities.  1652  In 
 the  top  100  MSAs,  the  average  number  of  packet  switches  per  MSA  has  grown  by  an  average  of  nearly  150  percent  since  our  last  UNE  review.  1653  The  record  also  shows  that  several  carriers 
 maintain  their  own  frame  relay  and  ATM  networks  with  AT&  T,  WorldCom,  and  Sprint  each  operating  extensive,  nationwide  networks.  1654  In  addition,  competitive  carriers  lead  incumbent 
 LECs  in  the  deployment  of  Gigabit  Ethernet  switches.  1655 
 539.  Consistent  with  the  UNE  Remand  Order,  we  conclude  that  any  collocation  costs  and  delays  incurred  by  requesting  carriers  to  provide  packet  switched  services  do  not  rise  to  a 

 level  so  as  to  require  us  to  modify  the  Commissions  previous  finding  not  to  unbundle  packet  switching.  1656  In  fact,  the  record  shows  that  any  disadvantages  that  competitive  LECs  may  face 
 in  obtaining  collocation  space  are  likely  outweighed  by  their  advantage  in  relying  solely  on  newer,  more  efficient  technology.  1657  In  addition,  most  of  the  arguments  regarding  the 
 difficulties  associated  with  collocation  for  packet  switches  deal  with  collocation  at  the  remote  terminal,  rather  than  the  central  office.  We  discuss  this  particular  issue  in  our  discussion  of 
 unbundled  loops.  1658  Accordingly,  there  do  not  appear  to  be  any  barriers  to  deployment  of  packet  switches  that  would  cause  us  to  conclude  that  requesting  carriers  are  impaired  with  respect  to 

 (Continued  from  previous  page) 
 DSLAMs,  routers,  ATM  equipment  in  nearly  2000  central  offices    reaching  45%  of  the  country  in  35  states.  See  Letter  from  Florence  Grasso,  Covad,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338,  Attach.  at  2  (filed 

 Nov.  7,  2002)  (Covad  Nov.  7,  2002  Ex  Parte  Letter);  Covad  Comments  at  5;  see  also  Third  Section  706  Report  2002,  17  FCC  Rcd  at  2873-  74,  para.  70. 

 1650  According  to  the  BOC  UNE  Fact  Report  2002,  packet  switches  are  much  cheaper  to  deploy  than  circuit 
 switches.  See  BOC  UNE  Fact  Report  2002  at  II-  33.  Because  of  extensive  self-  deployment  by  competitive  LECs,  we  need  not  rely  on  the  existence  of  a  wholesale  market  for  packet  switching. 

 1651  Id.  at  II-  23. 
 1652  Id. 
 1653  Id.  at  II-  23  and  Table  11. 
 1654  Id.  at  II-  24  and  Figure  5. 
 1655  Id.  at  II-  25. 
 1656  See  UNE  Remand  Order,  15  FCC  Rcd  at  3835-  40,  paras.  306-  17;  see  also  Covad  Comments  at  56  (discussing 
 the  costs  associated  with  remote  terminal  collocation);  see  also  ASCENT  Comments  at  40;  but  see  Verizon  Comments  at  n.  289  (stating  that  subsequent  developments    principally,  the  nearly  pervasive  collocation  of 

 companies  such  as  Covad,  the  availability  of  cageless  and  shared  collocation,  and  the  adoption  of  strict  intervals  for  establishing  collocation  arrangements    demonstrate  than  any  impairment  no  longer  exists.). 

 1657  See  BOC  UNE  Fact  Report  2002  at  II-  33  &  n.  127. 
 1658  See  infra  Part  VI.  A.  4.  (addressing  unbundled  loops). 
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 packet  switching.  We  therefore  find  that  the  evidence  in  the  record  confirms  the  Commissions  findings  in  the  UNE  Remand  Order  that  competitors  continue  to  actively  deploy  their  own 
 packet  switches,  including  routers  and  DSLAMs,  and  are  not  impaired  without  unbundled  access  to  these  facilities  from  incumbents. 

 540.  Most  parties  that  favor  the  unbundling  of  packet  switching  focus  their  arguments  on  unbundling  the  packet  switching  functionality  as  it  exists  in  DLC  systems  that  are  deployed  in 
 the  loop  plant  to  provide  multiplexing,  switching,  and  routing  functionalities  between  the  customer  premises  and  the  central  office.  1659  Our  rules  covering  these  situations  are  discussed  in 
 Part  VI.  A.  4.  a.(  v),  which  addresses  unbundled  loops.  In  view  of  our  analysis  in  that  section,  we  decline  to  permit  any  limited  exceptions  to  our  decision  not  to  unbundle  packet  switching.  1660 

 541.  Finally,  because  packet  switching  is  used  in  the  provision  of  broadband  services,  our  decision  not  to  unbundle  stand-  alone  packet  switching  is  also  guided  by  the  goals  of,  and  our 
 obligations  under,  section  706  of  the  1996  Act.  1661  In  order  to  ensure  that  both  incumbent  LECs  and  competitive  LECs  retain  sufficient  incentives  to  invest  in  and  deploy  broadband 
 infrastructure,  such  as  packet  switches,  we  find  that  requiring  no  unbundling  best  serves  our  statutorily-  required  goal.  Thus,  we  decline  to  require  unbundling  on  a  national  basis  for  stand-alone 
 packet  switching  because  it  is  the  type  of  equipment  used  in  the  delivery  of  broadband. 
 G.  Signaling  Networks 
 1.  Background 
 542.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether  it  should  modify  its  requirement  that  signaling  be  unbundled  for  competitive  LECs.  1662  Signaling 

 systems  facilitate  the  routing  of  telephone  calls  between  switches  and  are  necessary  components  of  providing  circuit-  based  telecommunications  services.  1663  The  telecommunications  network  in 
 the  United  States  employs  out-  of-  band  signaling,  meaning  that  the  signaling  network  is 

 1659  See,  e.  g.,  Sprint  Comments  at  40-  45;  WorldCom  Comments  at  113-  19;  Covad  Comments  at  54-  65. 
 1660  In  addition,  the  rules  we  adopt  for  unbundled  loops  do  not  require  incumbent  LECs  to  provide  unbundled 
 access  to  any  electronics  or  other  equipment  used  to  transmit  packetized  information  over  hybrid  loops,  such  as  xDSL-  capable  line  cards  installed  in  DLC  systems  or  equipment  used  to  provide  passive  optical  networking 

 capabilities  to  the  mass  market.  See  infra  Part  VI.  A.  4.  a.(  v). 
 1661  47  U.  S.  C.    157  nt. 

 1662  Triennial  Review  NPRM,  16  FCC  Rcd  at  22811,  para.  65. 
 1663  Local  Competition  Order,  11  FCC  Rcd  at  15723-  24,  para.  455. 
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 physically  separate  from  the  carriers  voice  network.  1664  Out-  of-  band  signaling  is  performed  using  the  SS7  protocol  and  requires  access  to  an  SS7  network.  1665 
 543.  In  the  Local  Competition  Order,  the  Commission  determined  that  competitive  LECs  would  be  impaired  without  access  to  the  incumbent  LECs  unbundled  signaling  links  and 
 STPs.  1666  The  Commission  concluded  that  the  alternative  signaling  methods  available  would  provide  a  lower  quality  of  service  to  the  competitive  carriers.  1667  In  the  UNE  Remand  Order, 
 however,  the  Commission  recognized  that  a  competitive  signaling  market  was  emerging.  Nevertheless,  the  Commission  determined  that  these  alternative  networks  could  not  match  the 
 incumbent  LECs  signaling  systems  in  terms  of  quality  and  ubiquity,  and  accordingly,  ruled  that  signaling  networks  must  continue  to  be  unbundled.  1668 

 2.  Discussion 
 544.  As  explained  above  in  our  discussion  of  unbundled  switching,  in  the  instances  in  which  incumbent  LECs  will  be  required  to  provide  access  to  switching  as  a  UNE,  carriers 

 purchasing  the  switching  UNE  must  also  gain  access  to  incumbent  LEC  signaling.  1669  In  all  other  cases,  however,  we  determine  that  there  are  sufficient  alternatives  in  the  market  available  to 
 incumbent  LEC  signaling  networks  and  competitive  LECs  are  no  longer  impaired  without  access  to  such  networks  as  UNEs  for  all  markets.  1670 

 545.  We  conclude  that,  in  the  last  several  years,  the  market  for  signaling  networks  has  matured.  The  record  reflects  that  multiple  alternative  providers  are  available  to  provide  rival 
 signaling  services  to  competitive  LECs.  1671  Accordingly,  we  conclude  that,  as  a  general  matter,  competitive  LECs  are  no  longer  impaired  without  access  to  the  incumbent  LECs  signaling 
 networks  as  a  UNE.  In  performing  our  impairment  analysis,  we  consider  whether  barriers  exist  for  a  competitive  LEC  to  serve  customers  through  either  deploying  its  own  signaling  network  or 

 1664  Id. 
 1665  SS7  networks  use  signaling  links  to  transmit  routing  messages  between  switches  and  call-  related  databases 
 (such  as  the  Line  Information  Database,  Toll  Free  Calling  Database,  and  Advanced  Intelligent  Network  Databases).  These  links  enable  a  switch  to  send  queries  via  the  SS7  network  to  call-  related  databases,  which  return  customer 

 information  or  instructions  for  call  routing  to  the  switch.  A  typical  SS7  network  includes  a  signaling  link  that  transmits  signaling  information  in  packets,  from  a  local  switch  to  a  STP,  which  is  a  high-  capacity  packet  switch. 
 UNE  Remand  Order,  15  FCC  Rcd  at  3866,  para.  380  n.  746. 
 1666  Local  Competition  Order,  11  FCC  Rcd  at  15740,  para.  482. 

 1667  Id. 
 1668  UNE  Remand  Order,  15  FCC  Rcd  at  3873,  para.  397. 
 1669  See  supra  Part  VI.  D. 
 1670  As  stated  below,  this  conclusion  applies  to  both  the  mass  market  and  the  enterprise  market. 
 1671  See,  e.  g.,  Sprint  Comments  at  49-  50;  Illuminet  Comments  at  3-  5;  Verizon  Comments  at  129-  32. 
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 by  purchasing  signaling  from  alternative  providers  to  the  incumbent  LEC.  We  determine  that  no  such  barriers  exist.  A  review  of  our  record  reveals  that  there  are  numerous  competitive  suppliers 
 of  signaling  services,  such  as  Illuminet,  TSI,  Southern  New  England  Telephone,  AT&  T,  WorldCom  and  Sprint,  1672  all  of  which  are  actively  providing  signaling  services  to  competitive 
 LECs  on  a  commercial  basis.  For  instance,  Illuminet,  which  owns  the  largest  signaling  network  in  the  United  States  that  is  unaffiliated  with  an  incumbent  LEC,  has  access  to  all  of  the  LATAs 
 of  the  BOCs  and  major  independent  LECs,  operates  14  STP  pairs,  and  provides  signaling  to  competitive  carriers  on  a  national  scope.  1673  Similarly,  TSI  provides  a  nationwide  signaling 
 service  that  offers  SS7  access  to  and  from  nearly  all  LATAs  within  the  United  States.  1674  There  are  also  regional  SS7  options  for  competitive  carriers.  Sprint,  for  example,  operates  a  regional 
 SS7  network,  which  contains  ten  pairs  of  regional  STPs  and  one  national  STP  pair  that  serves  Sprint  customers  in  18  states.  1675  ICG  also  offers  a  regional  SS7  service,  which  is  available  from 
 over  thirty  cities  via  ICGs  regional  STP  access  hub  nodes.  1676  Indeed,  there  is  evidence  in  the  record  that  many  competitive  LECs  are  using  alternative  providers  for  most  or  all  of  their 
 signaling  needs.  1677  There  is  also  evidence  of  self-  deployment  of  SS7  network  capabilities  by  competitive  carriers,  such  as  TimeWarner  Telecom  and  NewSouth.  1678  We  find,  therefore,  that 
 for  competitive  carriers  deploying  their  own  switches,  there  are  no  barriers  to  obtaining  signaling  or  self-  provisioning  signaling  capabilities  and  we  do  not  require  incumbent  LECs  to  continue 
 offering  access  to  signaling  as  a  UNE  under  section  251(  c)(  3)  of  the  Act. 
 546.  Consistent  with  this  analysis,  we  reject  the  claims  of  competitive  carriers  that  signaling  networks  should  remain  available  as  UNEs.  1679  Even  those  carriers  arguing  for  the 

 1672  See  Illuminet  Comments  at  4  n.  3;  Verizon  Comments  at  129-  33. 
 1673  Illuminet  Comments  at  5. 
 1674  See  SBC  Reply  at  164;  see  generally  TSI  Connections:  Home  (visited  Jan.  3,  2003) 
 <http://  www.  tsiconnections.  com>. 
 1675  Sprint  Reply,  Attach.  A,  Joint  Declaration  of  John  D.  Chapman  and  Jeffrey  L.  Leister  (Sprint  Chapman/  Leister 
 Reply  Decl.)  at  para.  6. 
 1676  See  Verizon  Comments  at  131;  see  generally  Welcome  to  ICG  Communications  (visited  Jan.  3,  2003) 
 <http://  www.  icgcom.  com>. 
 1677  For  instance  Illuminet  states  that  it  has  more  than  900  customers,  including  incumbent  LECs,  competitive 
 LECs,  interexchange  carriers,  CMRS  providers  and  Internet  service  providers  that  are  connected  to  its  network  by  approximately  2700  access  links  and  950  signaling  points.  Illuminet  Comments  at  5.  In  addition,  Sprint  provides 

 evidence  that  the  vast  majority  of  competitive  LECs  providing  service  in  Sprints  local  territories  do  not  purchase  UNE  signaling  from  Sprint.  Sprint  Comments  at  50. 

 1678  Sprint  Reply  at  40;  Verizon  Comments  at  132  (citing  evidence  that  Time  Warner  and  NewSouth  have  deployed 
 their  own  signaling  networks);  see  also  NewSouth  Communications  Completes  SS7  Network  Buildout  (Mar.  29,  2001)  <www.  newsouth.  com/  news/  press_  releases/  a349.  asp>. 

 1679  See,  e.  g.,  Allegiance  Comments  at  31-  37;  ALTS  et  al.  Comments  at  87-  89;  NuVox  Comments  at  106-  07;  see 
 also  Letter  from  Joseph  O.  Kahl,  Director    Regulatory  Affairs,  RCN  Telecom  Services,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Jan.  23,  2003)  (RCN  Jan.  23,  2003  Ex  Parte  Letter). 
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 retention  of  signaling  as  a  UNE  recognize  that  multiple  alternative  providers  exist.  1680  These  carriers  argue,  however,  that  because  alternative  providers  utilize  fewer  STPs,  1681  instead  of  one 
 STP  in  each  LATA,  such  providers  do  not  offer  the  same  level  of  ubiquity  and  thus,  are  not  a  genuine  substitute  to  the  incumbent  LECs  signaling.  1682  We  find  these  arguments  unpersuasive. 
 Our  impairment  analysis  does  not  require  exact  replication  of  the  incumbent  LECs  networks.  Rather,  when  it  is  evident  that  there  are  alternative  providers  for  a  particular  network  element, 
 the  Commission  must  determine  whether  the  alternative  product  or  self-  provisioning  can  be  used  in  an  economic  manner  to  enter  and  stay  in  the  market.  This  is  clearly  the  case  with  signaling 
 networks.  The  record  reflects  that  many  competitive  LECs  use  either  their  own  signaling  networks  or  the  networks  of  alternative  providers  to  provide  signaling  for  their  customers.  1683 
 Although  competitive  SS7  providers  state  that  their  networks  tend  to  have  STPs  in  various  strategically  located  points,  while  the  BOCs  have  STPs  in  every  LATA,  such  providers  claim 
 that  it  is  unnecessary  to  have  an  STP  in  every  LATA  to  ensure  network  redundancy  and  reliability.  1684  Moreover,  there  is  evidence  in  the  record  that  the  incumbent  LEC  signaling 
 facilities  are  being  modified  more  closely  to  resemble  the  networks  of  the  alternative  providers.  For  instance,  BellSouth  has  reduced  the  number  of  STPs  it  has  deployed  by  50  percent  and  no 
 longer  has  an  STP  in  every  LATA.  1685 
 547.  We  find  the  appropriate  level  of  granularity  for  our  analysis  to  be  at  the  national  level.  Two  of  the  alternative  signaling  networks  discussed  above  are  national  networks  that 

 competitive  LECs  can  utilize  throughout  the  country.  Both  the  Illuminet  and  TSI  networks  are  designed  with  pairs  of  STPs  strategically  located  throughout  the  country,  in  order  to  offer 
 competitive  carriers  access  to  their  SS7  networks  nationwide.  1686  Other  SS7  providers,  such  as  ICG  and  Sprint,  have  fewer  STP  pairs  and  offer  a  more  regional  SS7  service  but  still  a  service 

 1680  For  instance,  Allegiance  admits  that  Illuminet,  TSI,  Southern  New  England  Telephone,  AT&  T,  WorldCom  and 
 Sprint  all  provide  signaling  services  that  bear  a  resemblance  to  unbundled  incumbent  LEC  SS7.  Allegiance  Comments  at  31. 

 1681  STPs  are  packet  switches  that  provide  access  to  the  SS7  network  and  route  SS7  messages  among  service 
 switching  points  and  service  control  points.  These  are  the  traffic  controllers  of  the  SS7  network  and  typically  consist  of  highly  reliable  computers  running  special  software.  Allegiance  Comments  at  32  n.  49.  We  readopt  here 

 the  UNE  Remand  Orders  conclusion  that  when  a  requesting  telecommunications  carrier  purchases  unbundled  local  circuit  switching  from  an  incumbent  LEC,  the  incumbent  LEC  must  allow  the  competitive  LEC  to  use  its  service 
 control  point  element  in  the  same  manner,  and  via  the  same  signaling  links,  as  the  incumbent  LEC  itself.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3878,  para.  410. 

 1682  See,  e.  g.,  Allegiance  Comments  at  32;  ALTS  et  al.  Comments  at  88. 
 1683  See  Illuminet  Comments  at  5;  Verizon  Comments  at  129-  33. 
 1684  For  instance,  Sprint  operates  eleven  STPs  that  serve  Sprints  customers  in  eighteen  states.  See,  e.  g.,  Sprint 
 Reply;  see  also  Sprint  Chapman/  Leister  Reply  Decl.  at  paras.  3,  6-  7. 
 1685  BellSouth  Comments  at  103. 

 1686  See,  e.  g.,  Illuminet  Comments  at  4;  SBC  Reply  at  164. 
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 that  spans  numerous  states  and  markets.  1687  Thus,  the  availability  of  alternatives  does  not  vary  significantly  from  region  to  region.  Indeed,  the  main  distinction  between  signaling  offered  in 
 different  geographic  areas  is  the  identity  of  the  incumbent  LEC  providing  signaling,  rather  than  the  availability  of  alternative  providers.  Moreover,  our  conclusion  applies  equally  to  the  mass 
 market  and  the  enterprise  market.  Signaling  networks  are  multistate  in  scope  and  the  feasibility  of  using  alternative  providers  is  linked  to  whether  a  carrier  has  deployed  its  own  switches,  rather 
 than  the  types  of  customers  the  carrier  serves.  1688  Accordingly,  as  we  stated  above,  in  the  instances  that  carriers  purchase  switching  as  a  UNE  under  the  terms  established  in  this  Order 
 they  will  continue  to  obtain  access  to  the  incumbent  LECs  signaling  networks.  For  carriers  deploying  their  own  switches,  the  signaling  networks  are  accessed  via  the  switch,  therefore,  the 
 feasibility  of  using  alternative  signaling  providers  would  not  be  different  whether  the  carrier  serves  enterprise  or  mass  market  customers. 

 548.  Finally,  we  note  that  although  we  are  no  longer  requiring  incumbent  LECs,  pursuant  to  section  251(  c)(  3),  to  provide  unbundled  access  to  their  signaling  networks,  there  is  a 
 clear  obligation  on  the  incumbent  LECs,  pursuant  to  sections  251(  a),  251(  c)(  2)  and  our  rules  implementing  these  requirements,  to  provide  for  interconnection  between  their  signaling 
 networks  and  the  signaling  networks  of  alternative  providers.  1689  Based  on  the  evidence  in  the  record  that  third  party  providers  of  signaling  are  currently  interconnected  with  the  incumbent 
 LEC  signaling  networks,  we  conclude  that  such  interconnection  is  clearly  technically  feasible  and  that  nothing  in  this  Order  should  be  interpreted  as  altering  those  interconnection 
 obligations.  1690 
 H.  Call-  Related  Databases 
 1.  Background 
 549.  Call-  related  databases  are  databases  that  are  used  in  signaling  networks  for  billing  and  collection  or  for  the  transmission,  routing  or  other  provision  of  telecommunications 

 services.  1691  We  have  identified  several  specific  databases  as  covered  by  our  call-  related 

 1687  See  Sprint  Reply  at  40;  SBC  Reply  at  164. 
 1688  Switch  technology  requires  each  local  switch  to  connect  to  a  single  STP.  Therefore,  a  carrier  that  has  deployed 
 its  own  switch  may  link  its  switch  to  a  signaling  network  of  its  choosing.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3868-  69,  paras.  367-  87. 

 1689  47  U.  S.  C.    251(  a),  251(  c)(  2). 
 1690  For  example,  Sprints  SS7  network  is  interconnected  with  a  variety  of  signaling  providers  including:  AT&  T, 
 WorldCom,  Transaction  Network  Services,  SNET,  Illuminet,  Qwest,  Bell  South,  Verizon,  SBC,  and  AT&  T  Wireless.  Sprint  Chapman/  Leister  Reply  Decl.  at  para.  5. 

 1691  These  are  not  those  databases  and  systems  covered  by  the  Commissions  operations  support  systems  (OSS) 
 requirements,  discussed  in  Part  VI.  I.  infra.  See  UNE  Remand  Order,  15  FCC  Rcd  at  3875,  para.  403. 
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 database  requirements:  (i)  LIDB;  1692  (ii)  CNAM;  1693  (iii)  Toll  Free  Calling;  1694  (iv)  LNP;  1695  (v)  AIN;  1696  and  (vi)  E911.  1697  Parties  have  identified  in  the  record  no  additional  databases  covered 
 by  the  UNE  Remand  Orders  definition  for  call-  related  databases. 
 550.  In  the  UNE  Remand  Order,  the  Commission  found  that  competitors--  even  those  that  deployed  their  own  switching  equipment--  would  be  impaired  without  access  to  the 

 incumbent  LECs  call-  related  databases.  1698  Moreover,  the  Commission  noted  that  its  analysis  of  call-  related  databases  is  intertwined  with  its  analysis  of  signaling,  because  signaling  is  necessary 
 to  obtain  access  to  certain  call-  related  databases.  1699 
 2.  Discussion 
 551.  We  find  that  competitive  carriers  that  deploy  their  own  switches  are  not  impaired  in  any  market  without  access  to  incumbent  LEC  call-  related  databases,  with  the  exception  of  the 

 911  and  E911  databases  as  discussed  below.  1700  For  carriers  that  deploy  their  own  switches,  there  is  evidence  in  the  record  that,  along  with  signaling,  there  are  a  substantial  number  of  competitive 
 suppliers  of  call-  related  databases  that  competitive  LECs  can  reliably  utilize  as  an  alternative  to  the  incumbent  LECs  services.  Moreover,  because  competitive  carriers  access  call-  related 
 databases  through  signaling  networks,  it  follows  that  since  we  found  that  competitive  carriers 
 1692  The  Line  Information  Database  or  LIDB  contains  all  valid  telephone  numbers  and  calling  card  information  in 
 a  specific  region  (i.  e.,  incumbent  LEC  in-  region  territory).  NEWTONS  TELECOM  DICTIONARY  429  (18th  ed.  2002).  Access  to  the  LIDB  supports  carrier  provision  of  such  services  as  Originating  Line  Number  Screening,  Calling  Card 

 Validation,  Billing  Number  Screening,  Calling  Card  Fraud  and  Public  Telephone  Check.  These  services  are  provided  in  conjunction  with  local  exchange,  toll  and  other  telecommunications  services. 

 1693  The  Caller  ID  with  Name  database  or  CNAM  allows  carriers  to  provide  Caller  ID  and  other  CLASS  services. 
 See  UNE  Remand  Order,  15  FCC  Rcd  at  3876,  para.  406. 
 1694  Databases  at  the  core  of  all  toll  free  number  services  (i.  e.,  800,  888)  are  administered  by  an  independent 
 number  administrator.  See  Toll  Free  Service  Access  Codes,  CC  Docket  No.  95-  155,  Fifth  Report  and  Order,  15  FCC  Rcd  11939,  11948-  49,  para.  25  (2000)  (Toll  Free  Order). 

 1695  Local  Number  Portability  databases  are  used  to  facilitate  the  porting  of  numbers  between  local  exchange 
 carriers  and  are  deployed  through  a  system  of  multiple  regional  databases.  Each  regional  database  is  managed  by  the  local  number  portability  administrator  (LNPA).  See  Telephone  Number  Portability,  CC  Docket  No.  95-  116, 

 Second  Report  and  Order,  12  FCC  Rcd  12281,  12296,  para.  21  (1997)  (Number  Portability  Order). 
 1696  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.  UNE  Remand  Order,  15  FCC  Rcd  at  3875,  para.  404. 

 1697  911  and  E911  databases  are  used  to  support  the  provision  of  emergency  911  services.  UNE  Remand  Order,  15 
 FCC  Rcd  at  3876,  para.  406. 
 1698  Id.  at  3879,  para.  411. 

 1699  Id. 
 1700  As  stated  below,  this  conclusion  applies  to  both  the  mass  market  and  the  enterprise  market. 
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 have  alternative  providers  available  and  are  not  impaired  without  access  to  unbundled  signaling,  competitive  carriers  are  also  not  impaired  without  access  to  call-  related  databases.  In  such 
 instances  where  switching  remains  a  UNE,  however,  competitive  carriers  purchasing  the  switching  UNE  will  have  access  to  signaling  and  the  call-  related  databases  that  the  signaling 
 networks  permit  carriers  to  access.  1701 
 552.  As  with  signaling,  we  find  the  appropriate  level  of  granularity  for  our  analysis  to  be  at  the  national  level.  The  alternative  call-  related  database  networks  discussed  below  are 

 national  and  regional  networks  that  competitive  LECs  would  be  able  to  use  throughout  the  country.  1702  Because  these  networks  are  multistate  in  scope  the  availability  of  alternatives  does 
 not  vary  significantly  from  market  to  market.  Indeed,  the  main  distinction  between  call-  related  databases  offered  in  different  geographic  areas  is  the  identity  of  the  incumbent  LEC  providing 
 access  to  the  databases,  rather  than  the  availability  of  alternative  providers.  In  addition,  our  conclusion  applies  equally  to  the  mass  market  and  the  enterprise  market.  Call-  related  databases 
 are  accessed  through  signaling  networks,  which  are  national  in  scope  and  the  feasibility  of  using  alternative  providers  is  linked  to  whether  a  carrier  has  deployed  its  own  switches,  rather  than  the 
 types  of  customers  the  carrier  serves.  1703  Accordingly,  as  we  stated  above,  carriers  that  purchase  switching  as  a  UNE  will  also  obtain  unbundled  access  to  the  incumbent  LECs  call-  related 
 databases.  For  carriers  deploying  their  own  switches,  the  call-  related  databases  are  accessed  through  signaling  networks,  which  are  accessed  via  the  switch,  therefore,  the  feasibility  of  using 
 alternative  providers  would  not  be  different  whether  the  carrier  serves  mass  market  or  enterprise  customers. 

 553.  In  performing  our  impairment  analysis,  we  consider  whether  competitive  LECs  can  serve  customers  through  either  deploying  their  own  call-  related  databases  or  by  purchasing 
 call-  related  databases  from  providers  other  than  the  incumbent  LEC.  The  record  in  this  proceeding  reveals  that  there  are  a  number  of  competitive  suppliers  providing  call-  related 
 database  services  that  are  comparable  to  the  functionality  of  unbundled  access,  and  these  suppliers  are  actively  providing  such  services  to  competitive  LECs  on  a  commercial  basis.  1704 
 For  example,  Sprint  maintains  national  database  platforms,  including  Toll  Free  Calling,  CNAM,  LIDB  and  LNP.  1705  Illuminet  provides  its  signaling  customers  with  access  to  call-  related 
 databases,  including  Toll  Free  Calling,  LNP,  CNAM,  and  LIDB.  1706  Alternative  providers  such  as  Tekelec  also  provide  access  to  AIN  databases  that  competitive  LECs  can  utilize  to  control  call 

 1701  See  supra  Part  V.  D. 
 1702  With  regard  to  the  911  and  E911  databases,  there  is  no  evidence  of  alternative  providers  in  any  part  of  the 
 country.  Accordingly,  the  granularity  of  our  impairment  analysis  is  at  the  national  level  as  well. 
 1703  UNE  Remand  Order,  15  FCC  Rcd  at  3878,  para.  410. 

 1704  See  Sprint  Comments  at  50-  51;  Verizon  Comments  at  133-  36. 
 1705  Sprint  Chapman/  Leister  Reply  Decl.  at  para.  9. 
 1706  Illuminet  Comments  at  5-  7. 
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 processing  and  manage  network  information.  1707  All  of  these  providers  offer  competitive  LECs  call-  related  database  products  as  an  alternative  to  the  incumbent  LECs  services.  1708  Moreover, 
 certain  competitive  LECs  have  self-  deployed  their  own  call-  related  databases.  1709 
 554.  We  therefore  reject  the  general  claims  of  commenters  that  they  are  impaired  without  access  to  the  incumbent  LECs  call-  related  databases.  1710  Specifically,  a  number  of 

 carriers  argue  that  they  are  impaired  without  access  to  the  incumbent  LECs  CNAM  and  LIDB  databases.  Although  such  carriers  recognize  that  alternative  providers  are  available  for  these 
 databases,  they  contend  that  third-  party  CNAM  and  LIDB  databases  are  inferior  to  those  of  the  incumbent  LECs.  1711  We  find  these  arguments  for  impairment  to  be  unpersuasive.  When  it  is 
 evident  that  there  are  alternative  providers  for  a  particular  network  element,  the  question  is  not  whether  the  alternatives  are  an  exact  replica  of  the  element  offered  by  the  incumbent  LEC,  but 
 whether  the  alternative  products  or  self-  provisioning  are  reliable  products  that  can  be  used  in  an  economically  sound  manner  to  enter  and  stay  in  the  market.  In  this  instance,  it  is  clear  that 
 carriers  can  either  self-  provision  or  use  alternative  providers  to  obtain  CNAM  and  LIDB  database  services.  Indeed,  WorldCom  has  constructed  its  own  CNAM  database  that  it  accesses 
 using  its  own  signaling  network.  1712  Furthermore,  there  is  evidence  in  the  record  that  many  competitive  carriers  are  using  alternative  providers  to  obtain  CNAM  and  LIDB  database 
 services,  and  commenters  provide  no  persuasive  evidence  as  to  why  CNAM  and  LIDB  databases  offered  by  such  vendors  are  insufficient  alternatives  to  the  incumbent  LEC.  1713  For  instance, 
 Illuminet  claims  that  it  offers  access,  through  its  SS7  network,  to  all  of  the  LIDB  databases  in  the  United  States  for  various  purposes,  and  also  manages  and  operates  its  own  LIDB  database.  1714 
 Illuminet  also  offers  a  CNAM  database  and  a  CNAM  delivery  access  and  transport  service  that  provides  SS7  connectivity  to  all  available  CNAM  databases  for  nationwide  name  delivery  for 
 wireline  and  wireless  carriers.  1715  In  addition,  Targus  Information  Services  offers  a  Caller  Name  Express  services  that  provides  nationwide  calling  name  delivery  with  over  140  million  names, 

 1707  Verizon  Comments  at  134-  35. 
 1708  See,  e.  g.,  Illuminet  Comments  at  5-  7;  Sprint  Comments  at  39-  40. 
 1709  For  instance,  WorldCom  has  constructed  its  own  CNAM  database.  WorldCom  Reply  at  164.  In  addition, 
 according  to  Verizon,  Time  Warner  Telecom  has,  or  is  in  the  process  of  constructing,  a  LNP  database  in  addition  to  its  own  SS7  network.  Verizon  Comments  at  132  n.  475. 

 1710  See,  e.  g.,  AT&  T  Comments  at  239-  40;  CompTel  Comments  at  86;  ALTS  et  al.  Comments  at  90;  WorldCom 
 Comments  at  122-  27;  see  also  AT&  T  Jan.  10,  2003  Ex  Parte  Letter. 
 1711  See,  e.  g.,  ALTS  et  al.  Comments  at  90. 

 1712  WorldCom  Reply  at  165. 
 1713  For  instance,  WorldCom  claims  that  it  would  be  unable  to  duplicate  the  LIDB  database,  however,  it  fails  to 
 address  the  alternative  providers  of  LIDB  that  are  available.  WorldCom  Reply  at  165. 
 1714  Illuminet  Comments  at  6-  7. 

 1715  Id.,  App.  B  at  2. 
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 from  a  database  accessible  through  SS7.  1716  We  find,  therefore,  that  competing  carriers  are  not  impaired  without  access  to  incumbent  LEC  CNAM  and  LIDB  databases. 
 555.  We  similarly  find  that  carriers  are  not  impaired  without  access  to  the  Toll  Free  Calling  and  LNP  databases.  Like  CNAM  and  LIDB  databases,  there  are  third-  party  vendors 
 available  to  provide  competitive  carriers  access  to  Toll  Free  Calling  and  LNP  databases.  For  instance,  Illuminets  SS7  network  provides  access  to  all  toll  free  numbers  in  the  country  for  call-routing. 
 1717  Illuminet  also  provides  competitive  carriers  extensive  local  number  portability 
 services,  including  service  order  administration  and  network  transport  routing  of  all  queries  to  nationwide  LNP  databases.  1718  Sprint  also  provides  access  to  Toll  Free  Calling  and  LNP 

 databases  to  customers  of  its  SS7  services.  1719  Moreover,  we  note  that  competitive  carriers  have  not  claimed  that  these  third-  party  alternatives  to  the  incumbent  LECs  Toll  Free  Calling  and  LNP 
 databases  are  inferior  to  those  offered  by  the  incumbent  LECs. 
 556.  With  regard  to  AIN  databases,  in  the  UNE  Remand  Order,  the  Commission  determined  that  incumbent  LECs  were  required  to  provide  unbundled  access  to  AIN  platform 

 and  architecture,  but  concluded  that  the  AIN  service  software  was  proprietary  and  not  necessary  for  competitive  LECs  to  gain  unbundled  access  under  section  251(  d)(  2)(  A).  1720  Like 
 the  call-  related  databases  discussed  above,  we  conclude  that  the  market  for  AIN  platform  and  architecture  has  matured  since  the  Commission  adopted  the  UNE  Remand  Order  and  we  no 
 longer  find  that  competitive  LECs  are  impaired  without  unbundled  access  to  those  databases.  For  instance,  Illuminet  provides  carriers  access  to  AIN  services  that  permit  subscribers  to 
 manage  incoming  and  outgoing  calls  through  a  web  interface.  1721  In  addition,  the  record  indicates  that  Tekelec  provides  an  AIN  service  center,  which  includes  a  service  creation 
 environment  that  provides  complete  local  visibility  and  control  over  network  services,  allowing  telecommunications  providers  to  rapidly  bring  new  services  to  market.  1722  We  also  note  that 
 parties  that  supported  unbundling  did  not  provide  specific  information  rebutting  the  evidence  that  these  alternative  offerings  can  be  used  by  carriers  in  an  economically  sound  manner  to  enter 
 and  stay  in  the  market.  1723 

 1716  Sprint  Comments  at  51. 
 1717  Illuminet  Comments  at  7. 
 1718  Id.  at  6. 
 1719  Sprint  Chapman/  Leister  Reply  Decl.  at  para.  8. 
 1720  UNE  Remand  Order,  15  FCC  Rcd  at  3875,  3882,  paras.  402,  419. 
 1721  Illuminet  Comments,  App.  B  at  2. 
 1722  See  Verizon  Comments  at  134-  35  n.  490. 
 1723  Consistent  with  our  findings  regarding  the  AIN  databases,  we  dismiss  as  moot  Low  Tech  Designs  Petition  for 
 Reconsideration  of  several  aspects  of  the  UNE  Remand  Order.  Because  we  no  longer  require  incumbent  LECs  to  unbundle  access  to  the  AIN  databases  for  carriers  not  using  the  incumbent  LECs  switching  capabilities,  it  is 

 (continued.) 
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 557.  We  conclude  that  competitive  carriers  continue  to  be  impaired  on  a  national  basis  without  access  to  the  911  and  E911  databases.  Therefore,  access  to  such  databases  must 
 continue  to  be  unbundled.  Significantly,  we  note  that  no  commenter  has  argued  otherwise.  Contrary  to  the  call-  related  databases  discussed  above,  no  commenter  in  this  proceeding  has 
 provided  evidence  of  alternative  providers  of  911  or  E911  databases  that  competitive  carriers  could  utilize  or  of  carriers  self-  provisioning  their  own  services.  Moreover,  because  of  the  unique 
 nature  of  911  and  E911  services  and  the  public  safety  issues  inherent  in  ensuring  nondiscriminatory  access  to  such  databases,  we  conclude  that  without  evidence  of  alternative 
 providers  or  the  ability  to  self-  deploy,  competitive  carriers  must  continue  to  obtain  unbundled  access  to  those  databases  to  ensure  that  their  customers  have  access  to  emergency  services. 

 558.  We  reject  competitive  LECs  assertions  that,  we  should  require  in  this  proceeding  unbundled  access  to  the  incumbent  LEC  databases  for  bulk  transfer  of  information  for 
 competitive  carriers  to  maintain  their  own  call-  related  databases.  1724  Specifically,  competitive  LECs  claim  that  they  should  be  able  to  access  the  CNAM  database  via  batch  download,  which 
 would  allow  them  to  obtain  a  copy  and  thus,  maintain  their  own  CNAM  databases.  1725  We  conclude  that  this  issue  is  more  properly  addressed  pursuant  to  the  dialing  parity  requirements 
 under  section  251(  b)(  3),  1726  rather  than  our  impairment  analysis  under  section  251(  d)(  2).  Our  impairment  analysis  is  necessarily  focused  on  the  appropriate  access  to  incumbent  LEC  facilities 
 that  competitive  LECs  are  unable  to  self-  provide  or  obtain  from  other  sources,  and  as  explained  above,  there  is  persuasive  evidence  that  competitive  LECs  have  alternative  sources  available  to 
 obtain  access  to  call-  related  databases  generally,  and  the  CNAM  database  specifically.  To  the  extent  that  competition  may  lead  to  inability  to  obtain  complete  CNAM  databases  that  could 
 impede  the  continued  availability  of  nondiscriminatory  dialing  parity  for  all  providers  of  local  exchange  services,  that  is  an  issue  that  ultimately  will  impact  incumbent  LECs  as  significantly  as 
 competitive  LECs  and  therefore  is  more  appropriate  for  treatment  under  the  requirements  of  section  251(  b)(  3)  than  in  this  docket.  1727 

 (Continued  from  previous  page) 
 unnecessary  to  consider  modifying  the  definition  or  the  manner  in  which  those  carriers  would  be  able  to  obtain  access  to  those  databases.  See  Low  Tech  Designs  Petition  for  Reconsideration,  CC  Docket  No.  96-  98  (filed  Feb. 

 15,  2000). 
 1724  See,  e.  g.,  WorldCom  Comments  at  122-  27. 

 1725  WorldCom  Comments  at  125. 
 1726  47  U.  S.  C.    251(  b)(  3).  All  local  exchange  carriers  have  the  duty  to  provide  nondiscriminatory  access  to 
 telephone  numbers,  operator  services,  directory  assistance,  and  directory  listing,  with  no  unreasonable  dialing  delays. 

 1727  See  In  the  Matters  of  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of 
 1996,  Interconnection  Between  Local  Exchange  Carriers  and  Commercial  Mobile  Radio  Service  Providers,  Area  Code  Relief  Plan  For  Dallas  And  Houston,  Ordered  By  The  Public  Utility  Commission  Of  Texas,  Administration  of 

 the  North  American  Numbering  Plan,  CC  Docket  Nos.  96-  98,  95-  185,  92-  237,  NSD  File  No.  96-  8,  Second  Report  and  Order  and  Memorandum  Opinion  and  Order,  11  FCC  Rcd  19392,  19446,  para.  106  (1996)  (Local  Competition 
 Second  Report  and  Order). 
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 559.  We  also  dismiss  as  moot  WorldComs  Petition  for  Declaratory  Ruling  requesting  Commission  confirmation  that  requesting  carriers  are  entitled  to  access  LIDB  data  at  cost-  based 
 rates  when  they  use  such  data  to  provide  interexchange  and  exchange  access  service.  1728  Because,  as  explained  above,  we  conclude  that  competitive  carriers  are  not  impaired  without 
 access  to  the  LIDB  database  as  a  UNE,  it  is  unnecessary  for  us  to  determine  whether  use  restrictions  should  be  applied.  1729 

 560.  We  also  reject  the  arguments  of  some  parties  that  we  should  require  incumbent  LECs  to  provide  unbundled  access  to  Operator  Services  and  Directory  Assistance  (OS/  DA), 
 contrary  to  the  Commissions  finding  that  there  was  no  impairment  in  the  UNE  Remand  Order.  1730  Moreover,  we  deny  the  Petition  for  Reconsideration  of  RCN  Telecom  Services 
 arguing  that  the  Commission  should  reconsider  its  prior  decision  to  remove  OS/  DA  from  the  UNE  list.  1731  As  the  Commission  concluded  in  the  UNE  Remand  Order,  there  are  multiple 
 alternative  providers  of  OS/  DA  that  are  available  to  competitive  carriers  and  offer  a  level  of  quality  similar  to  that  of  the  incumbent  LECs  services.  1732  The  parties  requesting  the 
 Commission  to  unbundle  the  databases  underlying  these  services  fail  to  provide  evidence  that  the  alternative  providers  cited  in  the  UNE  Remand  Order  no  longer  make  these  elements  available. 
 Instead,  these  parties  claim  that  the  alternative  sources  of  OS/  DA  fail  to  provide  the  same  level  of  quality  as  the  incumbent  LEC  services.  1733  As  we  stated  above  in  the  signaling  section,  the 
 Commission  need  not  conclude  that  alternative  providers  are  an  exact  substitute  for  the  incumbent  LEC  in  order  to  find  no  impairment.  We  have  no  evidence  to  suggest  that  anything 
 has  changed  since  the  Commissions  findings  in  the  UNE  Remand  Order  that  would  impair  the  ability  of  competitive  LECs  to  obtain  alternative  sources  for  OS/  DA.  Furthermore,  for  the  same 
 reasons  in  the  UNE  Remand  Order,  we  find  that  in  order  to  ensure  that  competitive  carriers  have  access  to  OS/  DA,  in  those  circumstances  where  switching  is  unbundled,  we  require  incumbent 

 1728  Petition  of  WorldCom  for  a  Declaratory  Ruling  that  ILECs  are  Prohibited  from  Imposing  Use  Restrictions  on 
 UNEs  such  as  LIDB,  CC  Docket  No.  01-  338  (filed  Aug.  8,  2002). 
 1729  However,  for  general  discussion  of  the  types  of  services  competitive  carriers  may  use  UNEs  to  provide  see 
 supra  Part  V.  B.  2.  c. 
 1730  See,  e.  g.,  ALTS  et  al.  Comments  at  90-  95;  WorldCom  Comments  at  127-  29. 

 1731  See  RCN  Telecom  Services  Petition  for  Reconsideration,  CC  Docket  No.  96-  98  (filed  Feb.  17,  2000)  (RCN 
 Feb.  17,  2000  Petition  for  Reconsideration).  We  also  deny  MCI  WorldComs  Petition  for  Reconsideration  to  the  extent  the  Petition  requests  that  OS/  DA  continue  to  be  available  as  a  UNE.  See  MCI  WorldCom  Feb.  17,  2000 

 Petition  for  Reconsideration  at  18-  19. 
 1732  UNE  Remand  Order,  15  FCC  Rcd  at  3894,  paras.  447-  48. 

 1733  See  ALTS  et  al.  Comments  at  92.  Moreover,  RCN  argues  that  operator  services  should  remain  a  UNE  because 
 consumers  sometimes  rely  on  operators  to  route  calls  to  PSAPs  in  emergency  situations.  RCN  Petition  for  Reconsideration  at  3.  As  we  concluded  in  the  UNE  Remand  Order,  there  are  only  limited  instances  where  an 

 operator  would  connect  a  consumer  with  a  PSAP  and  there  is  no  persuasive  evidence  that  incumbent  LEC  call  centers  would  be  better  able  to  determine  the  correct  PSAP  than  alternative  providers,  especially  if  the  incumbent 
 LEC  utilizes  remote  call  centers.  UNE  Remand  Order,  15  FCC  Rcd  at  3901,  para.  460. 
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 LECs  to  provide  unbundled  access  to  competitive  carriers  purchasing  the  switching  UNE,  if  the  incumbent  LEC  does  not  provide  customized  routing  necessary  to  use  alternative  providers.  1734 
 Lastly,  we  note,  as  the  Commission  did  in  the  UNE  Remand  Order,  that  incumbent  LECs  continue  to  remain  obligated  pursuant  to  section  251(  b)(  3)  to  provide  nondiscriminatory  access 
 to  OS/  DA.  1735 
 I.  OSS  Functions 
 1.  Background 
 561.  In  our  previous  orders,  we  defined  OSS  as  consisting  of  five  functions:  pre-ordering,  ordering,  provisioning,  maintenance  and  repair,  and  billing  functions  supported  by  an 

 incumbent  LECs  databases  and  information.  1736  These  functions  are  essential  for  carriers  to  serve  mass  market  and  enterprise  customers.  OSS  includes  manual,  computerized,  and 
 automated  systems,  together  with  associated  business  processes  and  the  data  maintained  and  kept  current  in  those  systems.  1737  In  the  UNE  Remand  Order,  we  clarified  that  the  pre-  ordering  OSS 
 functions  include  access  to  loop  qualification  information.  1738  Based  on  this  definition,  in  both  the  Local  Competition  Order  and  the  UNE  Remand  Order,  the  Commission  concluded  that 
 requesting  carriers  are  impaired  without  access  to  the  incumbent  LECs  OSS  as  a  UNE,  and  required  incumbent  LECs  to  provide  nondiscriminatory  access  to  all  OSS  functions.  1739  The 
 Commission  noted  that  the  incumbent  LECs  OSS  provides  access  to  vital  information  that  is  not  available  from  third  parties  and  is  critical  to  the  ability  of  competitive  LECs  to  offer  local 
 exchange  and  exchange  access  service.  1740  In  the  Triennial  Review  NPRM,  the  Commission 

 1734  Moreover,  we  grant  in  part  the  Petitions  for  Clarification  of  MCI  WorldCom  and  AT&  T  to  the  extent  they 
 request  the  Commission  to  clarify  that  such  customized  routing  must  be  provided  in  a  manner  that  allows  competitive  LECs  to  efficiently  access  either  a  third  partys  OS/  DA  platform  or  their  own  OS/  DA  Platform.  See 

 AT&  T  Feb.  17,  2000  Petition  for  Reconsideration  at  20-  24;  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  16-  20;  see  also  LSSI  Reply  at  5  (arguing  that  incumbent  LECs  have  not  yet  made  sufficient  customized  routing 
 available). 
 1735  See  UNE  Remand  Order,  15  FCC  Rcd  at  3903,  para.  464. 

 1736  See  Local  Competition  Order,  11  FCC  Rcd  at  15764,  para.  518;  UNE  Remand  Order,  15  FCC  Rcd  at  3884, 
 para.  425.  The  Commission  determined  that  incumbent  LECs  must  make  these  five  functions  of  OSS  available  to  competitors  on  an  unbundled  basis. 

 1737  UNE  Remand  Order,  15  FCC  Rcd  at  3884,  para.  425. 
 1738  Loop  qualification  information  identifies  the  physical  attributes  of  the  loop  plant  (such  as  loop  length,  the 
 presence  of  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.  Id.  at  3885,  para.  426. 

 1739  Local  Competition  Order,  11  FCC  Rcd  at  15763,  para.  516;  UNE  Remand  Order,  15  FCC  Rcd  at  3887,  para. 
 433. 
 1740  See  UNE  Remand  Order,  15  FCC  Rcd  at  3887,  para.  433. 
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 sought  comment  on  whether  we  should  retain  these  unbundling  requirements  in  light  of  any  changed  circumstances  that  exist  in  the  market.  1741 
 2.  Discussion 
 562.  We  adopt  again  the  same  definition  of  OSS  as  in  our  prior  orders,  including  statements  about  loop  qualification.  1742  No  commenters  have  put  forth  alternative  definitions  or 

 modifications  to  our  existing  definition.  We  further  find  that  competitive  LECs  providing  qualifying  services  continue  to  be  impaired  on  a  national  basis  without  access  to  OSS. 
 Accordingly,  we  require  incumbent  LECs  to  continue  to  provide  unbundled  access  to  OSS.  This  requirement  includes  an  ongoing  obligation  on  the  incumbent  LECs  to  make  modifications  to 
 existing  OSS  as  necessary  to  offer  competitive  carriers  nondiscriminatory  access  and  to  ensure  that  the  incumbent  LEC  complies  with  all  of  its  network  element,  resale  and  interconnection 
 obligations  in  a  nondiscriminatory  manner  including  any  new  obligations  established  in  this  Order.  1743  We  note  that  even  the  incumbent  LECs  have  not  argued  against  OSS  continuing  to  be 
 available  as  a  UNE.  1744 
 563.  Commenters  in  this  proceeding  generally  agree  that  OSS  functions  must  remain  available  to  competitive  carriers  as  UNEs.  1745  Competitive  LECs  contend  that  no  substitutable 

 alternative  market  for  OSS  has  developed  because  the  incumbent  LECs  retain  access  to  exclusive  information  and  functionalities  required  to  provide  OSS  services.  1746  Indeed, 
 competitive  LECs  assert  that  access  to  all  five  OSS  functions  the  Commission  has  identified  in  addition  to  the  business  processes  associated  with  the  change  management  procedures  are 
 essential  to  ensure  that  competitive  LECs  are  not  impaired  without  access  to  these  functions.  1747  We  agree  with  these  commenters  and  conclude  that,  to  the  extent  a  competitive  LEC  is  providing 
 a  qualifying  service  it  is  entitled  to  access  the  incumbent  LECs  OSS  to  offer  that  service. 
 564.  In  reaching  this  conclusion,  we  find  that  the  systems,  databases,  and  personnel  that  the  incumbent  LEC  uses  to  provide  OSS  functions  represent  an  extensive  infrastructure  that 

 would  be  difficult,  if  not  impossible,  for  competitors  to  duplicate.  Indeed,  there  is  no  evidence  in  the  record  that  any  competitive  LEC  has  been  able  to  successfully  self-  provision  OSS  functions, 

 1741  Triennial  Review  NPRM,  16  FCC  Rcd  at  22811,  para.  64. 
 1742  See  UNE  Remand  Order,  15  FCC  Rcd  at  3884-  87,  paras  425-  31. 
 1743  See  infra  Parts  VI.  B.  1.  d.(  i)  and  VI.  B.  5.  In  these  sections,  we  note  modifications  that  incumbent  LECs  must 
 make  to  their  OSS  in  order  to  comply  with  unbundling  obligations  specified  in  this  Order. 
 1744  See,  e.  g.,  SBC  Reply  at  167. 

 1745  See,  e.  g.,  ALTS  et  al.  Comments  at  77-  80;  Sprint  Comments  at  51-  52;  WorldCom  Comments  at  129-  33;  AT&  T 
 Comments  at  240-  41;  Allegiance  Comments  at  37-  38;  Covad  Comments  at  74-  77. 
 1746  See  Allegiance  Comments  at  37-  38;  Covad  Comment  at  75;  ALTS  et  al.  Comments  at  78-  79. 

 1747  WorldCom  Comments  at  131. 
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 and  there  is  no  evidence  of  any  alternative  providers  available.  Accordingly,  because  these  systems,  databases  and  personnel  are  under  the  exclusive  control  of  the  incumbent  LEC  and  are 
 necessary  for  competitors  effectively  to  access  network  elements,  resell  incumbent  LEC  services  and  interconnect  with  the  incumbent  LEC,  we  find  that  competitive  LECs  are  impaired  without 
 access  to  incumbent  LECs  OSS. 
 565.  Although  the  specific  systems,  databases  and  personnel  used  to  provide  OSS  functions  may  vary  by  incumbent  LEC  and  by  state,  the  OSS  functions  as  defined  apply 

 universally  for  all  incumbent  LECs  and  there  is  no  evidence  in  the  record  that  would  suggest  a  more  geographically  disaggregated  approach  to  our  OSS  unbundling  requirement.  We  therefore 
 adopt  an  unbundling  requirement  for  OSS  functions  on  a  national  basis. 
 566.  However,  we  recognize  the  wide  variety  of  systems  and  databases  that  comprise  the  OSS  of  incumbent  LECs,  and  the  important  role  that  state  commissions  have  played  in 

 facilitating  access  to  incumbent  LEC  OSS  through  the  section  271  process  and  other  state  proceedings.  Although  our  determination  that  OSS  for  qualifying  services  must  continue  to  be 
 unbundled  is  a  national  rule,  we  expect  that  states  will  continue  their  important  role  in  working  with  the  incumbent  LECs  and  competitive  LECs  to  ensure  that  competitors  obtain  necessary 
 access  to  the  particular  incumbent  LEC  OSS  systems  in  each  state  for  the  qualifying  services.  1748  In  addition,  our  conclusions  apply  equally  to  the  mass  market  and  the  enterprise  market. 
 Because  there  are  no  alternative  OSS  providers  and  competitive  LECs  are  impaired  without  access  to  OSS,  whether  the  customers  are  mass  market  or  enterprise,  we  find  that  there  is  no 
 reason  to  distinguish  between  such  markets  in  establishing  the  availability  of  OSS  as  a  UNE. 
 567.  SBC,  however,  urges  the  Commission  to  clarify  that  incumbent  LECs  do  not  need  to  provide  direct  access  to  back  office  systems.  1749  SBC  suggests  that,  under  the  approach  taken 

 in  the  UNE  Remand  Order,  an  incumbent  LEC  may  satisfy  its  obligations  with  respect  to  loop  qualification  information  by  providing  carriers  with  the  same  underlying  information  that  it  has 
 in  any  of  its  own  databases  or  internal  records  without  offering  direct  access  to  those  records.  1750  We  agree,  and  note  that  this  conclusion  was  recently  reflected  in  our  Qwest  9-  State  Order,  in 

 1748  Along  those  lines,  we  reject  Illuminets  request  that  we  require  all  incumbent  LECs  to  standardize  their  OSS 
 functionalities  and  specifically  their  pre-  ordering  processes.  Illuminet  Comments  at  9.  The  Act  does  not  require  nationwide  uniformity  among  all  incumbent  LECs.  We  also  note  that  in  most  states,  BOCs  OSS  processes  have 

 already  been  subject  to  third-  party  testing  and  state  commission  review,  and  we  decline  to  require  the  substantial  modifications  to  such  systems  necessary  to  achieve  uniformity. 

 1749  SBC  claims  that  back  office  systems  may  contain  proprietary  information  about  other  competitive  LEC 
 facilities,  and  other  highly  sensitive  information.  SBC  suggests  that  such  information  is  not  necessary  for  competitive  carriers  to  compete,  and  thus  suggests  that  competitive  LECs  should  not  be  allowed  direct  access  to 

 systems  and  databases  containing  such  information.  See  SBC  Reply  at  168. 
 1750  Id.  at  168-  69. 
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 which  we  held  that  Qwest  was  not  required  to  permit  competitive  LECs  direct  access  to  its  back  office  loop  qualification  database.  1751 
 568.  Covad  also  argues  that  incumbent  LECs  should  modify  their  OSS  to  provide  certain  additional  information  related  to  certain  facilities  and  network  elements,  consistent  with 
 its  view  of  the  facilities  and  network  elements  it  is  entitled  to  access  under  section  251.  1752  For  example,  Covad  asks  that  we  expressly  mandate  access  to  a  wide  range  of  information  related  to 
 remote  terminal  feature  availability.  1753  Because  we  do  not  adopt  Covads  approach  to  unbundling,  we  recognize  that  Covad  may  not  require  all  of  the  information  it  describes  in  its 
 Comments.  We  thus  decline  to  reach  the  level  of  detail  requested  by  Covad  or  change  our  approach  to  OSS  and  loop  qualification  information,  but  note  that  Covad  remains  entitled  on  a 
 going-  forward  basis  to  nondiscriminatory  access  to  OSS  as  defined  herein. 
 VII.  SCOPE  OF  UNBUNDLING  OBLIGATIONS 
 A.  Combinations  of  Network  Elements 
 1.  Background 
 569.  In  the  Local  Competition  Order,  the  Commission  adopted  rules  that  prohibited  incumbent  LECs  from  separating  network  elements  that  ordinarily  are  combined.  1754  In  addition, 

 the  Commission  adopted  rules  requiring  incumbent  LECs  to  provide  combinations  of  UNEs  when  requested  by  competitive  LECs  and  to  perform  the  necessary  functions  to  make  such 
 combinations  available.  1755  After  various  appeals  before  the  Eighth  Circuit,  the  Supreme  Court  addressed  both  requirements.  First,  in  Iowa  Utilities  Board,  the  Court  reinstated  the 
 Commissions  rules  prohibiting  incumbent  LECs  from  separating  network  elements  ordinarily  combined.  1756  Second,  in  Verizon,  the  Court  reversed  the  vacatur  of  sections  51.315(  c)  through 
 51.315(  f),  which  required  incumbent  LECs  to  provide  UNE  combinations  and  perform  the  necessary  functions  involved  with  that  process.  1757  Specifically,  Verizon  concluded  that  the 

 1751  Qwest  9-  State  271  Order,  17  FCC  Rcd  at  26317,  para.  29.  In  addition,  to  the  extent  that  Bell  Atlantic  requested 
 the  same  clarification,  we  grant  their  request.  See  Verizon  Feb.  17,  2000  Petition  for  Reconsideration  at  15-  17. 
 1752  Covad  Comments  at  76-  77.  We  therefore  deny  WorldComs  request  to  adopt  additional  rules  stating  specific 
 characteristics  of  the  local  loop  plant  that  incumbent  LECs  must  disclose  to  requesting  carriers.  MCI  WorldCom  Feb.  17,  2000  Petition  for  Reconsideration  at  23-  24. 

 1753  Covad  Comments  at  76-  77.  (arguing  that  it  is  entitled  to  information  about  the  software  versions  and  channel 
 units  used  in  each  remote  terminal). 
 1754  Local  Competition  Order,  11  FCC  Rcd  at  15646-  47,  paras.  292-  93;  47  C.  F.  R.    51.315(  b). 

 1755  Local  Competition  Order,  11  FCC  Rcd  at  15647-  48,  paras.  294-  97. 
 1756  Iowa  Utils.  Bd.,  525  U.  S.  at  391-  96. 
 1757  The  Eighth  Circuit  subsequently  reinstated  the  rules.  Iowa  Utils.  Bd.  v.  FCC,  301  F.  3d  957. 
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 Commissions  rules  reflected  a  reasonable  reading  of  section  251(  c)(  3)  intended  to  remove  practical  barriers  to  competitive  entry  into  the  local  exchange  market.  1758 
 570.  In  the  UNE  Remand  Order,  the  Commission  required  incumbent  LECs  to  provide  EELs  (i.  e.,  a  particular  combination  of  network  elements)  pursuant  to  section  51.315(  b)  of  the 
 Commissions  rules,  which  prohibits  incumbent  LECs  from  separating  currently  combined  network  elements  before  providing  them  to  requesting  carriers.  1759  At  the  same  time,  the 
 Commission  recognized  and  explored  significant  legal  and  policy  issues  surrounding  the  use  of  EELs  and  the  Commissions  universal  service  and  access  charge  rules.  Shortly  after  the  release 
 of  the  UNE  Remand  Order,  the  Commission  issued  the  Supplemental  Order  in  which  it  established  an  interim  usage  requirement  related  to  EELs  while  considering  the  legal  and  policy 
 issues  implicated  by  making  EELs  available.  In  particular,  the  Commission  determined  that  competitive  LECs  must  provide  a  significant  amount  of  local  exchange  service  to  a  particular 
 customer  in  order  to  use  an  EEL.  1760  In  the  Supplemental  Order  Clarification,  the  Commission  clarified  the  significant  amount  of  local  usage  requirement  and  established  three  safe  harbors 
 to  define  the  term.  1761  The  Commission  also  adopted  the  commingling  restriction,  which  prevented  a  requesting  carrier  from  connecting  a  loop  or  EEL  to  tariffed  access  services  used  as 
 interoffice  transmission  facilities.  1762  In  October  2002,  the  D.  C.  Circuit  resolved  CompTels  appeal  of  the  Supplemental  Order  Clarification.  In  CompTel,  the  court  found  that  CompTel  had 
 not  demonstrated  that  the  Supplemental  Order  Clarifications  commingling  restriction  was  arbitrary  and  capricious.  1763 

 571.  In  the  Notice,  the  Commission  sought  comment  on  issues  related  to  the  EEL,  which  is  a  UNE  combination  consisting  of  an  unbundled  loop  and  dedicated  transport  and  may 
 sometimes  include  additional  electronics  (e.  g.,  multiplexing  equipment).  In  particular,  the  Commission  sought  comment  on  whether  offering  EELs  is  an  appropriate  precondition  to  the 
 switching  carve-  out  adopted  in  the  UNE  Remand  Order,  whether  the  availability  of  EELs  serves  to  address  impairment  in  the  absence  of  unbundled  switching,  and  whether  certain  EELs-  related 
 issues  (e.  g.,  use  restrictions,  commingling)  warrant  revision  in  light  of  industry  developments 

 1758  Verizon,  535  U.  S.  at  531-  38. 
 1759  The  Commission  explained  that  because  incumbent  LECs  may  not  separate  loop  and  transport  elements  that  are 
 currently  combined  and  purchased  through  their  special  access  tariffs,  competitive  LECs  are  entitled  to  obtain  these  existing  loop-  transport  combinations  at  UNE  prices.  UNE  Remand  Order,  15  RCC  Rcd  at  3909,  para.  480. 

 1760  Supplemental  Order,  15  FCC  Rcd  at  1761,  para.  4. 
 1761  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9598-  9600,  para.  22. 
 1762  Id.  at  9598-  9600,  9602,  paras.  22,  28;  see,  e.  g.,  Net2000  Communications,  Inc.  v.  Verizon  -  Washington,  D.  C., 
 Inc.,  File  No.  EB-  00-  018,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  1150,  1159,  paras.  29-  30  (2001). 
 1763  CompTel,  309  F.  3d  at  17-  18. 
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 since  the  release  of  the  UNE  Remand  Order.  1764  In  addition,  the  Commission  incorporated  the  record  related  to  these  issues  from  earlier  proceedings.  1765 
 2.  Discussion 
 572.  In  this  section,  we  address  our  rules  for  UNE  combinations,  specific  issues  pertaining  to  EELs,  the  ability  of  requesting  carriers  to  commingle  UNEs  and  UNE  combinations 

 with  other  wholesale  services,  issues  surrounding  conversions  of  access  services  to  UNEs. 
 a.  New  Combinations  of  Unbundled  Network  Elements 
 573.  We  reaffirm  our  existing  rules  regarding  UNE  combinations.  1766  Our  rules  require  incumbent  LECs  to  provide  UNE  combinations  upon  request  and  prohibit  incumbent  LECs  from 

 separating  UNE  combinations  that  are  ordinarily  combined  except  upon  request.  Section  251(  c)(  3)  requires  incumbent  LECs  to  provide  unbundled  network  elements  in  a  manner  that 
 allows  requesting  carriers  to  combine  such  elements  in  order  to  provide  a  telecommunications  service.  1767  As  noted  in  the  Supreme  Courts  Verizon  decision,  the  statute  does  not  specify  which 
 party  must  perform  the  functions  necessary  to  effectuate  UNE  combinations.  1768  Based  on  the  nondiscrimination  requirements  of  section  251(  c)(  3),  1769  and  because  incumbent  LECs  are  in  the 
 best  position  to  perform  the  functions  necessary  to  provide  UNE  combinations  (and  to  separate  UNE  combinations  upon  request)  through  their  control  of  the  elements  of  their  networks  that  are 
 unbundled,  our  rules  require  incumbent  LECs  to  provide  UNE  combinations  upon  request.  The  record  does  not  indicate  that  these  recently-  reinstated  rules  are  problematic. 

 574.  We  reiterate  the  conditions  that  apply  to  the  duty  of  incumbent  LECs  to  provide  UNE  combinations  upon  request,  i.  e.,  that  such  a  combination  must  be  technically  feasible  and 
 must  not  undermine  the  ability  of  other  carriers  to  access  UNEs  or  interconnect  with  the  incumbent  LECs  network.  1770  As  noted  in  the  Verizon  decision,  the  limitation  on  technical 

 1764  Triennial  Review  NPRM,  16  FCC  Rcd  at  22807-  08,  22814-  15,  paras.  57,  60,  73. 
 1765  Id.  at  22814,  para.  72. 
 1766  47  C.  F.  R.    51.315. 
 1767  47  U.  S.  C.    251(  c)(  3);  Local  Competition  Order,  11  FCC  Rcd  at  15646-  48,  paras.  292-  97;  see  LDMI 
 Comments  at  11;  NewSouth  Comments  at  42-  46;  Norlight  Comments  at  5-  7;  OpenBand  Comments  at  10-  12;  Sprint  Comments  at  26-  27;  UNE-  P  Coalition  Comments  at  35-  38;  Letter  from  Joan  Marsh,  Director,  AT&  T  Corp.  to 

 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2,  6-  7  (filed  Dec.  23,  2002)  (AT&  T  Dec.  23,  2002  EELs  and  New  Combinations  Ex  Parte  Letter). 

 1768  Verizon,  535  U.  S.  at  534  (reading  section  251(  c)(  3)  as  leaving  open  who  should  do  the  work  of 
 combination.). 
 1769  Id.  at  537-  38  (noting  the  statutory  requirement  of  nondiscriminatory  access);  Iowa  Utils.  Bd.,  525  U.  S.  at  394- 
 95  (discussing  section  251(  c)(  3)  nondiscrimination  requirements). 
 1770  47  C.  F.  R.    51.315(  c). 
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 feasibility  is  meant  to  preserve  the  reliability  and  security  of  the  incumbent  LECs  network,  and  a  UNE  combination  is  not  technically  feasible  if  it  impedes  an  incumbent  carriers  ability  to 
 retain  responsibility  for  the  management,  control,  and  performance  of  its  own  network.  1771  Incumbent  LECs  must  prove  to  state  commissions  that  a  request  to  combine  UNEs  in  a  particular 
 manner  is  not  technically  feasible  or  would  undermine  the  ability  of  other  carriers  to  obtain  access  to  UNEs  or  to  interconnect  with  the  incumbent  LECs  network.  1772 

 b.  EELs 
 575.  As  noted  above,  our  rules  currently  require  incumbent  LECs  to  make  UNE  combinations,  including  loop-  transport  combinations,  available  in  all  areas  where  the  underlying 

 UNEs  are  available  and  in  all  instances  where  the  requesting  carrier  meets  the  eligibility  requirements.  1773  We  decline  to  designate  EELs  as  additional  UNEs  for  which  an  impairment 
 analysis  is  necessary.  Instead,  we  continue  to  view  EELs  as  UNE  combinations  consisting  of  unbundled  loops  and  unbundled  transport  (with  or  without  multiplexing  capabilities).  Pursuant 
 to  the  statute,  requesting  carriers  are  entitled  to  nondiscriminatory  access  to  UNE  combinations  on  just,  reasonable,  and  nondiscriminatory  rates,  terms  and  conditions.  Apart  from  the  service 
 eligibility  criteria  for  high-  capacity  (DS1  or  DS3)  EELs  set  forth  in  Part  VII  below,  our  rules  do  not  permit  incumbent  LECs  to  impose  additional  conditions  or  limitations  upon  obtaining  access 
 to  EELs  and  other  UNE  combinations,  such  as  requiring  a  competitive  LEC  to  purchase  special  access  and  then  convert  such  facilities  to  UNEs.  1774  Thus,  to  the  extent  DS1  transport  facilities 
 are  available  along  a  specific  route,  for  example,  the  incumbent  LEC  must  provide  (upon  request)  a  DS1  EEL  consisting  of  unbundled  loop  and  unbundled  transport  facilities  to  any 
 requesting  carrier  that  qualifies  for  access  to  that  combination.  1775  Similarly,  if  desired,  a 
 1771  Verizon,  535  U.  S.  at  536  (citing  Local  Competition  Order,  11  FCC  Rcd  at  15605-  06,  para.  203). 
 1772  47  C.  F.  R.    51.315(  e),  (f).  We  note  that  our  prior  rules  used  the  word  impair  in  defining  an  incumbent 
 LECs  obligations  to  provide  UNE  combinations  upon  request.  See  47  C.  F.  R.    51.315(  c),  (f).  To  avoid  confusion  between  the  standard  under  these  rules  and  the  impairment  standard  in  section  251(  d)(  2)(  B)  of  the  Act, 

 we  amend  these  rules  to  eliminate  this  use  of  impair.  See  infra  App.  B. 
 1773  Local  Competition  Order,  11  FCC  Rcd  at  1646-  48,  paras.  292-  97;  Verizon,  535  U.  S.  at  531-  38  (upholding  the 
 Commissions  rules  on  UNE  combinations).  See  USTA,  290  F.  3d  at  428  (concluding  that  the  Commission  has  the  authority  to  require  [loop-  transport]  combinations,  affirmatively);  see  also  AT&  T  Reply  at  299;  XO  Reply  at  5-  7. 

 1774  See  ALTS  et  al.  Comments  at  102;  AT&  T  Comments  at  105-  06  (asserting  that  incumbent  LECs  require  pre-auditing); 
 BrahmaCom  Reply  at  2  (arguing  that  incumbent  LECs  impose  a  conversion  requirement  on  EELs);  Focal  Apr.  5,  2001  Comments  at  5-  6;  Letter  from  Thomas  Jones,  Counsel  for  Conversent,  to  Marlene  H.  Dortch, 

 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4  (filed  Nov.  5,  2002)  (Conversent  Nov.  5,  2002  Transport  and  Loops  Ex  Parte  Letter).  We  therefore  grant  CompTels  request  to  clarify  that  requesting  carriers 
 need  not  purchase  special  access  circuits  in  order  to  qualify  for  EELs.  CompTel  Feb.  17,  2000  Petition  for  Reconsideration.  We  deny,  however,  CompTels  request  to  specify  the  EEL  as  an  additional  network  element.  Id. 
 at  13-  14.  In  addition,  in  light  of  our  determination  herein  regarding  EELs,  we  dismiss  as  moot  WorldComs  petition  for  clarification  regarding  the  proper  interpretation  of  section  51.315(  b)  of  the  Commissions  rules.  MCI 
 WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  2,  13. 
 1775  See  infra  Part  V.  B.;  see  also  BellSouth  Reply  at  22. 
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 competitive  LEC  could  obtain  access  to  a  DS0  EEL  so  long  as  the  underlying  UNEs  are  available  pursuant  to  our  impairment  analysis.  1776 
 576.  Based  on  the  record  before  us,  we  conclude  that  EELs  facilitate  the  growth  of  facilities-  based  competition  in  the  local  market.  1777  The  availability  of  EELs  extends  the 
 geographic  reach  for  competitive  LECs  because  EELs  enable  requesting  carriers  to  serve  customers  by  extending  a  customers  loop  from  the  end  office  serving  that  customer  to  a 
 different  end  office  in  which  the  competitive  LEC  is  already  located.  In  this  way,  EELs  also  allow  competitive  LECs  to  reduce  their  collocation  costs  by  aggregating  loops  at  fewer 
 collocation  locations  and  then  transporting  the  customers  traffic  to  their  own  switches.  Moreover,  we  find  that  access  to  EELs  also  promotes  self-  deployment  of  interoffice  transport 
 facilities  by  competitive  LECs  because  such  carriers  will  eventually  self-  provision  transport  facilities  to  accommodate  growing  demand.  1778  We  further  agree  that  the  availability  of  EELs 
 and  other  UNE  combinations  promotes  innovation  because  competitive  LECs  can  provide  advanced  switching  capabilities  in  conjunction  with  loop-  transport  combinations.  1779 

 577.  As  discussed  below,  a  competitive  LEC  must  meet  the  eligibility  criteria  in  order  to  obtain  a  high-  capacity  EEL  on  an  unbundled  basis.  1780  On  a  going-  forward  basis,  a  requesting 
 carrier  may  obtain  a  high-  capacity  EEL  any  time  the  underlying  network  elements  are  available  pursuant  to  our  impairment  analysis  and  the  carrier  meets  the  eligibility  criteria.  1781  We  conclude 
 that  pre-  audits  and  requirements  to  purchase  special  access  and  then  convert  to  UNE 

 1776  WorldCom  Nov.  13,  2002  Ex  Parte  Letter  at  1-  3  (describing  DS0  EEL  arrangements);  Letter  from  William 
 Jordan,  Vice  President,  BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Nov.  25,  2002)  (BellSouth  Nov.  25,  2002  EELs  Ex  Parte  Letter)  (describing  BellSouths  EEL  offerings). 

 1777  ALTS  et  al.  Comments  at  76-  77;  AT&  T  Comments  at  99,  203;  Letter  from  Julia  O.  Strow,  Vice  President, 
 Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  01-  318,  01-  321  at  1-  2  (filed  Dec.  16,  2002)  (Cbeyond  Dec.  16,  2002  EELs  Ex  Parte  Letter). 

 1778  AT&  T  Reply  at  252;  NewSouth  Comments  at  14-  15  (explaining  practices  implemented  to  make  network  more 
 efficient). 
 1779  Letter  from  Patrick  J.  Donovan,  Counsel  for  Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos. 
 01-  338,  96-  98,  98-  147  at  1-  2  (filed  Dec.  16,  2002)  (Cbeyond  Dec.  16,  2002  Ex  Parte  Letter);  BroadRiver  Apr.  5,  2001  Comments  at  5  (arguing  that  EEL  availability  will  accelerate  the  rollout  of  next  generation  networks); 

 WorldCom  Apr.  5,  2001  Comments  at  28-  29  (arguing  that  EEL  availability  promotes  innovation). 
 1780  See  infra  Part  VII.  B.;  see  also  AT&  T  Comments  at  104-  05;  AT&  T  Reply,  Tab  F,  Declaration  of  Michael  E. 
 Lesher  (AT&  T  Lesher  Reply  Decl.)  at  para.  33;  CompTel  Comments  at  90-  95;  CompTel  Apr.  30,  2001  Reply  at  2-  4.  AT&  T  Apr.  5,  2001  Comment  at  20.  But  see  SBC  Reply  at  67-  69.  See,  e.  g.,  Letter  from  Ann  D.  Berkowitz, 

 Project  Manager,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  13  (filed  Oct.  16,  2002)  (Verizon  Oct.  16,  2002  Section  251  Obligations  Ex  Parte  Letter)  (arguing  that  the  Commission  should  limit  the  use 
 of  UNEs  to  providing  local  service). 
 1781  Thus,  a  requesting  carrier  may  obtain  access  to  a  new  EEL  or  other  UNE  combination.  See  BroadRiver  Apr. 
 5,  2001  Comments  at  16-  19  (arguing  that  the  Commission  should  allow  competitive  LECs  to  obtain  access  to  new  EELs). 
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 combinations  constitute  unjust,  unreasonable,  and  discriminatory  terms  and  conditions  for  obtaining  access  to  UNE  combinations  and  are  prohibited  by  the  Act  and  our  rules.  1782 
 578.  We  decline  to  link  the  availability  of  EELs  and  other  UNE  combinations  to  our  analysis  in  the  Pricing  Flexibility  Order.  1783  Because  the  comprehensive  impairment  analysis  we 
 adopt  herein  addresses  the  arguments  of  Qwest  and  other  incumbent  LECs  concerning  the  availability  of  alternative  transmission  facilities,  additional  conditions  are  not  necessary  to 
 determine  the  availability  of  EELs  and  other  UNE  combinations. 
 c.  General  Commingling  Issues  for  Transmission  Facilities 
 579.  We  eliminate  the  commingling  restriction  that  the  Commission  adopted  as  part  of  the  temporary  constraints  in  the  Supplemental  Order  Clarification  and  applied  to  stand-  alone 

 loops  and  EELs.  We  therefore  modify  our  rules  to  affirmatively  permit  requesting  carriers  to  commingle  UNEs  and  combinations  of  UNEs  with  services  (e.  g.,  switched  and  special  access 
 services  offered  pursuant  to  tariff),  and  to  require  incumbent  LECs  to  perform  the  necessary  functions  to  effectuate  such  commingling  upon  request.  By  commingling,  we  mean  the 
 connecting,  attaching,  or  otherwise  linking  of  a  UNE,  or  a  UNE  combination,  to  one  or  more  facilities  or  services  that  a  requesting  carrier  has  obtained  at  wholesale  from  an  incumbent  LEC 
 pursuant  to  any  method  other  than  unbundling  under  section  251(  c)(  3)  of  the  Act,  or  the  combining  of  a  UNE  or  UNE  combination  with  one  or  more  such  wholesale  services.  Thus,  an 
 incumbent  LEC  shall  permit  a  requesting  telecommunications  carrier  to  commingle  a  UNE  or  a  UNE  combination  with  one  or  more  facilities  or  services  that  a  requesting  carrier  has  obtained  at 
 wholesale  from  an  incumbent  LEC  pursuant  to  a  method  other  than  unbundling  under  section  251(  c)(  3)  of  the  Act.  In  addition,  upon  request,  an  incumbent  LEC  shall  perform  the  functions 
 necessary  to  commingle  a  UNE  or  a  UNE  combination  with  one  or  more  facilities  or  services  that  a  requesting  carrier  has  obtained  at  wholesale  from  an  incumbent  LEC  pursuant  to  a  method 
 other  than  unbundling  under  section  251(  c)(  3)  of  the  Act.  As  a  result,  competitive  LECs  may  connect,  combine,  or  otherwise  attach  UNEs  and  combinations  of  UNEs  to  wholesale  services 
 (e.  g.,  switched  and  special  access  services  offered  pursuant  to  tariff),  and  incumbent  LECs  shall 

 1782  47  U.  S.  C.    201-  202,  251(  c)(  3);  47  C.  F.  R.    51.311-.  315.  See  XO  Reply  at  7  (arguing  that  competitive 
 LECs  may  obtain  EELs  without  conversion  requirements);  Cbeyond  Apr.  5,  2001  Comments  at  6-  9  (arguing  that  incumbent  LECs  have  required  compliance  audits  before  providing  access  to  a  UNE  combination);  Focal  Apr.  30, 

 2001  Reply  at  6. 
 We  note  that,  because  the  Eighth  Circuit  had  vacated  our  rules  concerning  new  combinations,  competitive  LECs  could  obtain  access  to  EELs  through  a  conversion  process  under  section  51.315(  b)  of  our  rules,  which 

 prohibited  incumbent  LECs  from  separating  network  elements  ordinarily  combined.  In  light  of  Verizon,  our  new  combinations  rules  were  reinstated,  and  thus,  competitive  LECs  may  order  new  UNE  combinations  and  need  not 
 convert  special  access  (or  other  previously  combined  network  elements)  to  UNE  combinations.  See  Verizon,  535  U.  S.  at  531-  38  (upholding  the  Commissions  rules  on  UNE  combinations). 

 1783  Qwest  Reply  at  56-  57.  We  note  that  Qwest  later  modified  its  position  to  support  the  availability  of  EELs.  See 
 Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  15-  17  (filed  Dec.  17,  2002)  (Qwest  Dec.  17,  2002  Ex  Parte  Letter). 
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 not  deny  access  to  UNEs  and  combinations  of  UNEs  on  the  grounds  that  such  facilities  or  services  are  somehow  connected,  combined,  or  otherwise  attached  to  wholesale  services. 
 580.  As  explained  below,  however,  we  do  not  require  incumbent  LECs  to  ratchet  1784  individual  facilities.  Thus,  we  do  not  require  incumbent  LECs  to  implement  any  changes  to  their 
 billing  or  other  systems  necessary  to  bill  a  single  circuit  at  multiple  rates  (e.  g.,  a  DS3  circuit  at  rates  based  on  special  access  services  and  UNEs)  in  order  to  charge  competitive  LECs  a  single, 
 blended  rate.  Although  we  do  not  require  ratcheting,  we  do  note  that  incumbent  LECs  shall  not  deny  access  to  a  UNE  on  the  ground  that  the  UNE  or  UNE  combination  shares  part  of  the 
 incumbent  LECs  network  with  access  services  or  other  non-  qualifying  services.  1785 
 581.  We  conclude  that  the  Act  does  not  prohibit  the  commingling  of  UNEs  and  wholesale  services  and  that  section  251(  c)(  3)  of  the  Act  grants  authority  for  the  Commission  to 

 adopt  rules  to  permit  the  commingling  of  UNEs  and  combinations  of  UNEs  with  wholesale  services,  including  interstate  access  services.  An  incumbent  LECs  wholesale  services  constitute 
 one  technically  feasible  method  to  provide  nondiscriminatory  access  to  UNEs  and  UNE  combinations.  1786  We  agree  with  the  Illinois  Commission,  the  New  York  Department,  and  others 
 that  the  commingling  restriction  puts  competitive  LECs  at  an  unreasonable  competitive  disadvantage  by  forcing  them  either  to  operate  two  functionally  equivalent  networks    one 
 network  dedicated  to  local  services  and  one  dedicated  to  long  distance  and  other  services    or  to  choose  between  using  UNEs  and  using  more  expensive  special  access  services  to  serve  their 
 customers.  1787  Thus,  we  find  that  a  restriction  on  commingling  would  constitute  an  unjust  and 
 1784  Ratcheting  is  a  pricing  mechanism  that  involves  billing  a  single  circuit  at  multiple  rates  to  develop  a  single, 
 blended  rate. 
 1785  More  specifically,  our  approach  to  ratcheting  does  not  mean  that  an  incumbent  LEC  can  refuse  to  commingle  a 
 UNE  with  a  special  access  service  because  the  incumbent  LEC  multiplexes  traffic  for  multiple  customers  onto  one  facility  within  its  own  network.  For  example,  an  incumbent  LEC  shall  not  refuse  to  provide  a  UNE  DS1  transport 

 (where  such  UNEs  are  available)  on  the  grounds  that  the  UNE  shares  a  transmission  facility  with  tariffed  access  services  or  other  wholesale  services. 

 1786  See  NewSouth  Comments  at  42-  43  (describing  connections  and  work  processes);  Qwest  Dec.  17,  2002  Ex 
 Parte  Letter  at  15-  16  (proposing  and  describing  EEL  arrangements);  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4-  6 

 (filed  Dec.  18,  2002)  (Qwest  Dec.  18,  2002  EELs  Ex  Parte  Letter)  (describing  Qwests  commingling  proposal);  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Feb.  6,  2003)  (Qwest  Feb.  6,  2003  EELs  Ex  Parte  Letter)  (describing  Qwests  commingling  proposal);  AT&  T  Apr.  5,  2001  Comments  at  22.  In  addition,  we  find  that 
 commingling  is  a  technically  feasible  practice.  See,  e.  g.,  AT&  T  Apr.  30,  2001  Reply,  CC  Docket  No.  96-  98,  Decl.  of  Anthony  Fea  and  William  J.  Taggart  III  (AT&  T  Apr.  30,  2001  Fea/  Taggart  Reply  Decl.)  at  para.  40  (asserting 
 that  linking  loops  or  loop-  transport  combinations  with  high-  capacity  special  access  services  is  technically  feasible).  In  light  of  the  determinations  we  make  herein,  we  grant  WorldComs  request  to  clarify  that  requesting  carriers  may 
 commingle  UNEs  with  other  types  of  services.  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  21-  23. 
 1787  In  the  Local  Competition  Order,  the  Commission  concluded  that  those  terms  require  incumbent  LECs  to 
 provide  unbundled  elements  under  terms  and  conditions  that  would  provide  an  efficient  competitor  with  a  meaningful  opportunity  to  compete.  11  FCC  Rcd  at  15660,  para.  315;  see  UNE  Remand,  15  FCC  Rcd  at  3913-  14, 

 paras.  490-  91.  A  number  of  parties  persuade  us  that  a  commingling  restriction,  combined  with  the  reduced  (continued.) 
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 unreasonable  practice  under  201  of  the  Act,  as  well  as  an  undue  and  unreasonable  prejudice  or  advantage  under  section  202  of  the  Act.  1788  Furthermore,  we  agree  that  restricting  commingling 
 would  be  inconsistent  with  the  nondiscrimination  requirement  in  section  251(  c)(  3).  1789  Incumbent  LECs  place  no  such  restrictions  on  themselves  for  providing  service  to  any  customers 
 by  requiring,  for  example,  two  circuits  to  accommodate  telecommunications  traffic  from  a  single  customer  or  intermediate  connections  to  network  equipment  in  a  collocation  space.  1790  For  these 
 (Continued  from  previous  page) 
 unbundling  obligations,  would  raise  the  costs  of  competitive  LECs.  AT&  T  Comments  at  106-  107;  ALTS  et  al.  Comments  at  106;  CompTel  Comments  at  97;  Illinois  Commission  Comments  at  5;  Sprint  Comments  at  55-  57; 

 WorldCom  Comments  at  55;  AT&  T  Reply  at  293  (citing  AT&  T  Lesher  Reply  Decl.  at  paras.  34-  36);  NewSouth  Reply  at  37;  Sprint  Reply  at  46;  NuVox  et  al.  Reply  at  52;  XO  Reply  at  17;  Letter  from  Ruth  Milkman,  Counsel  for 
 WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  13  (filed  Oct.  7,  2002)  (WorldCom  Oct.  7,  2002  EELs  Ex  Parte  Letter)  (asserting  that  commingling  forces  needless  inefficiencies 
 on  competitors);  Letter  from  Michael  H.  Pryor,  Counsel  for  NewSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98  (filed  Oct.  18,  2002)  (NewSouth  Oct.  18,  2002  Loops  and  Commingling  Ex  Parte 
 Letter);  ALTS/  CompTel  Oct.  28,  2002  Ex  Parte  Letter  at  5;  Cbeyond  Nov.  22,  2002  Ex  Parte  Letter;  Letter  from  Jonathan  Askin,  General  Counsel,  ALTS,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC 
 Docket  Nos.  01-  338,  96-  98,  98-  147  at  5  (filed  Nov.  14,  2002)  (ALTS  Nov.  14,  2002  Use  and  Commingling  Restrictions  Ex  Parte  Letter);  WorldCom  Nov.  22,  2002  Ex  Parte  Letter  at  13-  14;  AT&  T  Dec.  23,  2002  Ex  Parte 
 Letter  at  8  (arguing  that  commingling  restrictions  force  competitive  LECs  into  inefficient  network  architectures);  Letter  from  Ruth  Milkman,  Counsel  for  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01- 
 338,  96-  98,  98-  147  at  3  (filed  Feb.  13,  2003)  (WorldCom  Feb.  13,  2003  EELs  Ex  Parte  Letter);  Letter  from  Patrick  Donovan,  Counsel  for  Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338  at  4  (filed  Feb.  13, 
 2003)  (Cbeyond  Feb.  13,  2003  EELs  and  Commingling  Ex  Parte  Letter).  See  Cbeyond  et  al.  Apr.  5,  2001  Comments  at  14  (requesting  clarification  that  competitive  LECs  can  purchase  access  to  a  DS1  EEL  that  is  riding 
 on  a  DS3  circuit  with  other  types  of  ancillary  traffic);  CompTel  Apr.  5,  2001  Comments  at  33;  AT&  T  Apr.  30,  2001  Fea/  Taggart  Reply  Decl.  at  paras.  41-  42.  We  therefore  disagree  with  Qwest  and  the  other  incumbent  LECs 
 who  argue  that  the  commingling  restriction  does  not  impede  competitive  LECs  from  deploying  efficient  network  configurations.  See  SBC  Comments  at  108  (noting  that  commingling  restriction  precludes  competitive  LECs  from 
 obtaining  UNEs  and  access  services  that  share  the  same  facility);  BellSouth  Reply  at  40  (stating  that  competitive  LECs  can  connect  UNEs  and  access  services  at  collocation  arrangements);  Letter  from  Cronan  OConnell,  Vice 
 President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98  at  3  (filed  Oct.  28,  2002)  (Qwest  Oct.  28,  2002  Transport  and  Commingling  Ex  Parte  Letter). 

 1788  ALTS  et  al.  Comments  at  105;  ALTS/  CompTel  Oct.  28,  2002  Ex  Parte  Letter  at  5;  WorldCom  Nov.  18,  2002 
 Ex  Parte  Letter  at  15;  Cbeyond  Nov.  22,  2002  Ex  Parte  Letter  at  13-  14. 
 1789  AT&  T  Comments  at  107;  Illinois  Commission  Comments  at  5;  WorldCom  Reply  at  32;  ALTS/  CompTel  Oct. 
 28,  2002  Ex  Parte  Letter  at  5;  AT&  T  Nov.  23,  2002  Ex  Parte  Letter  at  8  (arguing  that  commingling  restriction  is  discriminatory). 

 1790  AT&  T  Comments  at  107  (arguing  that  the  co-  mingling  ban  deprives  CLECs  of  obtaining  the  same  network 
 efficiencies  as  the  ILEC  enjoys  because  the  ILEC  can  place  any  traffic  on  any  facility  to  maximize  efficiency);  NewSouth  Comments  at  42-  46;  Sprint  Reply  at  46-  48;  WorldCom  Apr.  30,  2001  Reply  at  14;  CompTel  Apr.  5, 

 2001  Comments  at  33;  AT&  T  Apr.  30,  2001  Fea/  Taggart  Reply  Decl.  at  paras.  41-  42);  see  47  C.  F.  R.    51.315(  b)  (requiring  incumbent  LECs  to  provide  access  to  UNEs  on  terms  and  conditions  no  less  favorable  to  those  under 
 which  the  incumbent  LEC  provides  such  UNEs  to  itself).  But  see  SBC  Comments  at  108  (noting  requirement  for  competitive  LECs  to  collocate  in  certain  circumstances);  Verizon  Comments  at  141  (acknowledging  that  it 
 combines  all  telecommunications  traffic  on  the  same  facilities);  BellSouth  Reply  at  40  (acknowledging  collocation  requirement);  see  47  C.  F.  R.    51.315(  b)  (requiring  incumbent  LECs  to  provide  access  to  UNEs  on  terms  and 
 conditions  no  less  favorable  to  those  under  which  the  incumbent  LECs  provides  such  UNEs  to  itself). 
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 reasons,  we  require  incumbent  LECs  to  effectuate  commingling  by  modifying  their  interstate  access  service  tariffs  to  expressly  permit  connections  with  UNEs  and  UNE  combinations.  1791 
 582.  We  decline,  however,  to  require  ratcheting,  which  is  a  pricing  mechanism  that  involves  billing  a  single  circuit  at  multiple  rates  to  develop  a  single,  blended  rate.  1792  The 
 Commissions  pricing  rules  for  UNEs  already  ensure  that  competitive  LECs  are  paying  appropriate  rates  for  UNEs  and  UNE  combinations,  and  that  incumbent  LECs  are  adequately 
 compensated  for  the  use  of  their  networks.  To  permit  ratcheting  would  be  to  create  an  additional  series  of  discounts  for  situations  in  which  all  parties  interests  are  already  protected.  1793  Thus, 
 our  rules  permit  incumbent  LECs  to  assess  the  rates  for  UNEs  (or  UNE  combinations)  commingled  with  tariffed  access  services  on  an  element-  by-  element  and  a  service-  by-  service 
 basis.  1794  This  ensures  that  competitive  LECs  do  not  obtain  an  unfair  discount  off  the  prices  for 

 1791  We  note  that  sections  202  and  203  of  the  Act  provide  specific  penalties  for  noncompliance.  See  47  U.  S.  C.   
 202(  c),  203(  e).  These  amounts  have  been  adjusted  to  $7,600  for  each  offense  and  $330  for  each  day  of  the  continuance  of  the  offense.  47  C.  F.  R.    1.80(  b)(  4).  Thus,  any  incumbent  LEC  policy  or  practice  that  has  the  effect 

 of  prohibiting  commingling  could  subject  the  incumbent  LEC  to  enforcement  action  for  imposing  an  undue  or  unreasonable  prejudice  or  disadvantage  upon  competitive  LECs.  In  addition,  the  Commissions  rules  establish  a 
 five-  year  statute  of  limitations  for  violations  of  sections  202  and  203.  Id.  at    1.80(  c)(  2). 
 1792  CompTel  Comments  at  97-  98  (citing  BellSouth  Telecommunications,  Inc.  Part  69(  g)(  1)  Public  Interest  Petition 
 to  Establish  New  Rate  Elements  for  Switched  Access  Versions  of  BellSouths  SMARTGate  Service  and  BellSouth  SPA  Managed  Shared  Network,  Memorandum  Opinion  and  Order,  14  FCC  Rcd  1838,  1839,  para.  2,  n.  2  (CCB 

 1998)  (BellSouth  Ratcheting  Order);  Sprint  Comments  at  56,  n.  48;  Sprint  Reply  at  47.  As  explained  in  the  BellSouth  Ratcheting  Order,  ratcheting  allows  special  access  charges  to  be  reduced  by  1/  24th  for  each  switched 
 access  voice-  grade  circuit  on  a  special  access  DS1  or  1/  672nd  for  each  switched  access  voice-  grade  circuit  on  a  special  access  DS3.  BellSouth  Ratcheting  Order,  14  FCC  Rcd  at  1839  n.  2.  We  note  that  some  parties  contend  that 
 any  Commission  rule  requiring  ratcheting  would  necessitate  substantial  modifications  to  incumbent  LEC  billing  systems  and  operational  procedures.  See  Letter  from  Glenn  T.  Reynolds,  Vice  President    Federal  Regulatory, 
 BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Feb.  6,  2003)  (BellSouth  Feb.  6,  2003  Ratcheting  Ex  Parte  Letter).  Because  we  do  not  require  ratcheting,  however,  we  find  no  need  to  address  these 
 arguments. 
 1793  Our  decision  not  to  require  ratcheting  does  not  affect  a  competitive  LECs  ability  to  obtain  UNEs,  UNE 
 combinations,  and  wholesale  services.  Thus,  an  incumbent  LEC  may  not  deny  access  to  a  UNE  or  UNE  combination  on  the  grounds  that  such  UNE  or  UNE  combination  shares  part  of  the  incumbent  LECs  network  with 

 access  or  other  non-  UNE  services.  Some  competitive  LECs  have  contended,  for  example,  that  incumbent  LECs  deny  access  to  UNE  combinations  on  the  grounds  that  a  UNE  and  access  service  share  certain  multiplexing 
 equipment.  See  Letter  from  Brad  E.  Mutschelknaus  et  al.,  Counsel  for  ALTS  et  al.,  to  Dorothy  Attwood,  Chief,  Common  Carrier  Bureau,  FCC,  CC  Docket  No.  96-  98  (filed  Aug.  1,  2001)  (ALTS  Aug.  1,  2001  EELs  Ex  Parte 
 Letter),  in  Letter  from  Steven  A.  Augustino,  Counsel  for  ALTS  et  al.,  to  Magalie  Roman  Salas,  Secretary,  FCC,  CC  Docket  No.  96-  98  (filed  Aug.  1,  2001).  By  eliminating  the  commingling  restriction,  we  will  ensure  that  competitive 
 LECs  will  be  able  to  obtain  all  available  UNEs,  UNE  combinations,  and  wholesale  services,  albeit  at  the  rates  established  pursuant  to  tariffs,  interconnection  agreements  or  other  contracts. 

 1794  See  infra  Part  VII.  B. 
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 wholesale  services,  while  at  the  same  time  ensuring  that  competitive  LECs  do  not  pay  twice  for  a  single  facility.  1795 
 583.  We  therefore  disagree  with  SBC,  Verizon,  and  others  who  argue  in  favor  of  adopting  a  permanent  commingling  restriction.  First,  we  determine  that  the  eligibility 
 qualifications  adopted  herein  (and  applied  to  all  conversions  of  a  special  access  circuit  to  a  high-  capacity  EEL;  to  obtaining  a  new  high-  capacity  EEL;  and  to  obtaining  at  UNE  pricing  part 
 of  a  high-  capacity  loop-  transport  combination)  address  the  universal  service  and  access  charge  arguments  by  ensuring  competitive  LECs  purchase  UNEs  for  legitimate  competitive  purposes.  1796 
 Second,  we  conclude  that  the  commingling  restriction  is  no  longer  necessary  to  preserve  the  status  quo  while  the  Commission  grapples  with  potential  modifications  to  its  universal  service 
 and  access  charge  policies.  1797  We  recognize  that  some  issues  remain  outstanding,  but  we  conclude  that  the  remaining  issues  do  not,  by  themselves,  warrant  a  permanent  restriction  on 
 commingling  UNEs  and  UNE  combinations  with  wholesale  services.  Third,  we  find  that  commingling  does  not  constitute  the  creation  of  a  new  UNE  for  which  an  impairment  analysis  is 
 required.  1798  Instead,  commingling  allows  a  competitive  LEC  to  connect  or  attach  a  UNE  or  UNE  combination  with  an  interstate  access  service,  such  as  high-  capacity  multiplexing  or 
 transport  services.  Because  commingling  will  not  enable  a  competitive  LEC  to  obtain  reduced  or  discounted  prices  on  tariffed  special  access  services  because  we  are  not  requiring 
 ratcheting,  1799  our  general  impairment  analysis  for  individual  UNEs  is  adequate.  Fourth,  we  conclude  that  permitting  commingling  is  consistent  with  the  D.  C.  Circuits  CompTel  decision. 
 Verizon  incorrectly  characterizes  that  decision  as  finding  that  a  commingling  restriction  is 

 1795  For  example,  a  competitive  LEC  connecting  a  UNE  loop  to  special  access  interoffice  transport  facilities  would 
 pay  UNE  rates  for  the  unbundled  loops  and  tariffed  rates  for  the  special  access  service.  We  recognize  that,  at  some  point,  competitive  LECs  may  make  a  business  decision  to  either  use  UNEs  or  wholesale  services  to  serve  a 

 customer.  For  example,  a  competitive  LEC  buying  UNE  DS1  transport  continues  to  add  UNE  DS1  transport  facilities  to  its  network.  At  some  point,  the  competitive  LEC  will  make  a  business  decision  to  either  buy  DS3 
 special  access  (and  convert  its  traffic  onto  the  larger  facility)  or  to  buy  UNE  DS3  transport,  where  available  and  if  the  competitive  LEC  meets  the  service  eligibility  requirements. 

 1796  AT&  T  Reply  at  284;  WorldCom  Reply  at  36.  But  see  SBC  Comments  at  107;  NECA  Reply  at  4-  5. 
 1797  ALTS  et  al.  Comments  at  105-  06;  CompTel  Comments  at  76-  77;  NuVox  et  al.  Comments  at  49-  51  (citing 
 CALLS  and  MAG  Orders);  Norlight  Comments  at  9-  10;  AT&  T  Reply  at  284,  290;  WorldCom  Reply  at  36;  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 

 Nos.  01-  338,  96-  98,  98-  147  at  13  (filed  Oct.  7,  2002)  (AT&  T  Oct.  7,  2002  Transport  and  Commingling  Ex  Parte  Letter);  13;  Nov.  14,  2002  ALTS  Ex  Parte  Letter  at  3,  5.  But  see  NECA  Reply  at  3;  NECA  Apr.  5,  2001  Comments 
 at  3-  5;  TDS  Apr.  5,  2001  Comments  at  1-  7;  USTA  Apr.  5,  2001  Comments  at  9-  11. 
 1798  Letter  from  Brad  E.  Mutschelknaus,  Counsel  for  ALTS,  to  Magalie  Roman  Salas,  Secretary,  FCC,  CC  Docket 
 No.  96-  98  at  3-  5  (filed  Aug.  20,  2001)  (ALTS  Aug.  20,  2001  EELs  Ex  Parte  Letter);  SBC/  Verizon  Apr.  5,  2001  Comments  at  30. 

 1799  As  discussed  below,  we  are  not  requiring  incumbent  LECs  to  blend  the  rates  of  a  transmission  facility 
 according  to  the  amount  of  UNE  usage  and  access  service  usage.  Thus,  competitive  LECs  that  commingle  UNEs  or  UNE  combinations  with,  for  example,  interstate  access  services  would  pay  the  appropriate  rates  for  each  service. 
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 necessary  because  its  absence  would  allow  mass  conversions.  1800  Instead,  the  court  concluded  that,  based  on  the  information  submitted  by  the  parties,  it  could  not  conclude  that  the 
 Commissions  prior  commingling  restriction  was  arbitrary  and  capricious.  1801  Further,  as  we  explain  in  detail  below,  we  obviate  the  risk  identified  by  the  court  by  applying  service  eligibility 
 criteria  to  commingled  loop-  transport  combinations.  Finally,  we  conclude  that  the  billing  and  operational  issues  raised  by  Verizon  do  not  warrant  a  permanent  commingling  restriction,  but 
 instead  can  be  addressed  through  the  same  process  that  applies  for  other  changes  in  our  unbundling  requirements  adopted  herein,  i.  e.,  through  change  of  law  provisions  in 
 interconnection  agreements.  1802  We  expect  that  change  of  law  provisions  will  afford  incumbent  LECs  sufficient  time  to  complete  all  actions  necessary  to  permit  commingling.  1803 

 584.  As  a  final  matter,  we  require  that  incumbent  LECs  permit  commingling  of  UNEs  and  UNE  combinations  with  other  wholesale  facilities  and  services,  including  any  services 
 offered  for  resale  pursuant  to  section  251(  c)(  4)  of  the  Act.  Section  251(  c)(  4)  places  the  duty  on  incumbent  LECs  not  to  prohibit,  and  not  to  impose  unreasonable  or  discriminatory  conditions 
 or  limitations  on  the  resale  of  telecommunications  services  provided  at  retail  to  customers  who  are  not  telecommunications  carriers.  1804  Any  restriction  that  prevents  commingling  of  UNEs  (or 
 UNE  combinations)  with  resold  services  constitutes  a  limitation  on  both  reselling  the  eligible  service  and  on  obtaining  access  to  the  UNE  or  UNE  combination.  We  conclude  that  a  restriction 
 on  commingling  UNEs  and  UNE  combinations  with  services  eligible  for  resale  is  inconsistent  with  the  section  251(  c)(  4)  prohibition  on  unreasonable  .  .  .  conditions  or  limitations  because  it 
 would  impose  additional  costs  on  competitive  LECs  choosing  to  compete  through  multiple  entry  strategies,  and  because  such  a  restriction  could  even  require  a  competitive  LEC  to  forego  using 
 efficient  strategies  for  serving  different  customers  and  markets.  We  agree  with  ALTS  that  an  incumbent  LECs  obligations  under  sections  251(  c)(  3)  and  251(  c)(  4)  are  not  mutually 
 exclusive.  1805  In  addition,  a  restriction  on  obtaining  UNEs  and  UNE  combinations  in  conjunction  with  services  available  for  resale  would  constitute  a  discriminatory  condition  on  the  resale  of 
 eligible  telecommunications  services  because  incumbent  LECs  impose  no  such  limitations  or 

 1800  Verizon  Dec.  17,  2002  Ex  Parte  Letter  at  5;  Letter  from  Ann  D.  Berkowitz,  Project  Manager,  Verizon,  to 
 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Jan.  30,  2003);  Letter  from  Ann  D.  Berkowitz,  Project  Manager,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96- 

 98,  98-  147,  Attach.  at  2-  3  (filed  Feb  6,  2003). 
 1801  CompTel,  309  F.  3d  at  17-  18. 

 1802  CompTel  Comments  at  97-  98;  NewSouth  Comments  at  41;  Sprint  Comments  at  56;  WorldCom  Reply  at  33-  34; 
 Sprint  Reply  at  47.  But  see  Verizon  Comments  at  140.  We  note  that,  taken  to  its  extreme,  the  incumbent  LEC  argument  would  prevent  any  modification  of  our  UNE  rules  because  billing  and  operational  changes  would 

 certainly  follow  any  such  change. 
 1803  For  example,  incumbent  LECs  will  have  to  modify  their  interstate  tariffed  offerings  to  permit  commingling  of 
 interstate  access  services  with  UNEs  and  UNE  combinations. 
 1804  47  U.  S.  C.    251(  c)(  4). 

 1805  ALTS  et  al.  Comments  at  98. 
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 restrictions  on  their  ability  to  combine  facilities  and  services  within  their  network  in  order  to  meet  customer  needs.  1806 
 d.  Conversions 
 585.  We  decline  the  suggestions  of  several  parties  to  adopt  rules  establishing  specific  procedures  and  processes  that  incumbent  LECs  and  competitive  LECs  must  follow  to  convert 

 wholesale  services  (e.  g.,  special  access  services  offered  pursuant  to  interstate  tariff)  to  UNEs  or  UNE  combinations,  and  the  reverse,  i.  e.,  converting  UNEs  or  UNE  combinations  to  wholesale 
 services.  1807  Because  both  the  incumbent  LEC  and  requesting  carriers  have  an  incentive  to  ensure  correct  payment  for  services  rendered,  and  because  both  parties  are  bound  by  duties  to 
 negotiate  in  good  faith,  we  conclude  that  these  carriers  can  establish  any  necessary  procedures  to  perform  conversions  with  minimal  guidance  on  our  part. 

 586.  We  conclude  that  carriers  may  both  convert  UNEs  and  UNE  combinations  to  wholesale  services  and  convert  wholesale  services  to  UNEs  and  UNE  combinations,  so  long  as 
 the  competitive  LEC  meets  the  eligibility  criteria  that  may  be  applicable.  To  the  extent  a  competitive  LEC  fails  to  meet  the  eligibility  criteria  for  serving  a  particular  customer,  the 
 serving  incumbent  LEC  may  convert  the  UNE  or  UNE  combination  to  the  equivalent  wholesale  service  in  accordance  with  the  procedures  established  between  the  parties.  Likewise,  to  the 
 extent  a  competitive  LEC  meets  the  eligibility  requirements  and  a  particular  network  element  is  available  as  a  UNE  pursuant  to  our  impairment  analysis,  it  may  convert  the  wholesale  service 
 used  to  serve  a  customer  to  UNEs  or  UNE  combinations  in  accordance  with  the  relevant  procedures.  Converting  between  wholesale  services  and  UNEs  or  UNE  combinations  should  be 
 a  seamless  process  that  does  not  affect  the  customers  perception  of  service  quality.  1808  We  recognize  that  conversions  may  increase  the  risk  of  service  disruptions  to  competitive  LEC 
 customers  because  they  often  require  a  competitive  LEC  to  groom  interexchange  traffic  off  circuits  and  equipment  that  are  already  in  use  in  order  to  comply  with  the  eligibility  criteria.  1809 

 1806  See,  e.  g.,  AT&  T  Comments  at  107;  NewSouth  Comments  at  42-  46;  Sprint  Reply  at  46-  48. 
 1807  See  ALTS  et  al.  Comments  at  101  (arguing  that  the  Commission  should  establish  explicit  time  period  for 
 effectuating  conversions);  Focal  Apr.  30,  2001  Reply  at  6-  7.  We  therefore  grant  in  part  WorldComs  request  to  clarify  that  competitive  LECs  may  convert  existing  special  access  services  to  combinations  of  loop  and  transport 

 network  elements,  but  only  to  the  extent  such  conversions  meet  the  service  eligibility  criteria  for  EELs  adopted  herein.  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  24.  Furthermore,  we  dismiss  as  moot 
 Intermedias  request  to  issue  another  supplementary  order  clarifying  that  incumbent  LECs  must  make  available  loop  and  transport  network  elements  that  are  currently  combined  as  tariffed  special  access  services.  Intermedia  Feb.  17, 
 2000  Petition  for  Reconsideration  at  14-  15. 
 1808  We  note  that  no  party  seriously  contends  that  it  is  technically  infeasible  to  convert  UNEs  and  UNE 
 combinations  to  wholesale  services  and  vice  versa. 
 1809  WorldCom  explains  that  the  grooming  process  requires  submission  of  circuit-  level  disconnect  orders,  and 
 circuit-  level  reconnect  orders  during  limited  periods  of  time  in  order  to  segregate  telecommunications  traffic  onto  the  redundant  facilities  required  by  the  commingling  restriction.  WorldCom  Apr.  5,  2001  Comments  at  37-  38.  See 

 ALTS  et  al.  Comments  at  105  (arguing  that  force  moves  are  inefficient  and  risky);  AT&  T  Comments  at  108  (citing  AT&  T  Apr.  5,  2001  Comments  at  22);  Sprint  Reply  at  46-  48. 
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 Thus,  requesting  carriers  should  establish  and  abide  by  any  necessary  operational  procedures  to  ensure  customer  service  quality  is  not  affected  by  conversions. 
 587.  We  decline  to  require  incumbent  LECs  provide  requesting  carriers  an  opportunity  to  supersede  or  dissolve  existing  contractual  arrangements  through  a  conversion  request.  Thus, 
 to  the  extent  a  competitive  LEC  enters  into  a  long-  term  contract  to  receive  discounted  special  access  services,  such  competitive  LEC  cannot  dissolve  the  long-  term  contract  based  on  a  future 
 decision  to  convert  the  relevant  circuits  to  UNE  combinations  based  on  changes  in  customer  usage.  1810  We  recognize,  however,  that  once  a  competitive  LEC  starts  serving  a  customer,  there 
 exists  a  risk  of  wasteful  and  unnecessary  charges,  such  as  termination  charges,  re-  connect  and  disconnect  fees,  or  non-  recurring  charges  associated  with  establishing  a  service  for  the  first  time. 
 We  agree  that  such  charges  could  deter  legitimate  conversions  from  wholesale  services  to  UNEs  or  UNE  combinations,  or  could  unjustly  enrich  an  incumbent  LEC  as  a  result  of  converting  a 
 UNE  or  UNE  combination  to  a  wholesale  service.  1811  Because  incumbent  LECs  are  never  required  to  perform  a  conversion  in  order  to  continue  serving  their  own  customers,  we  conclude 
 that  such  charges  are  inconsistent  with  an  incumbent  LECs  duty  to  provide  nondiscriminatory  access  to  UNEs  and  UNE  combinations  on  just,  reasonable,  and  nondiscriminatory  rates,  terms, 
 and  conditions.  1812  Moreover,  we  conclude  that  such  charges  are  inconsistent  with  section  202  of  the  Act,  which  prohibits  carriers  from  subjecting  any  person  or  class  of  persons  (e.  g., 
 competitive  LECs  purchasing  UNEs  or  UNE  combinations)  to  any  undue  or  unreasonable  prejudice  or  disadvantage.  1813 

 588.  We  conclude  that  conversions  should  be  performed  in  an  expeditious  manner  in  order  to  minimize  the  risk  of  incorrect  payments.  We  expect  carriers  to  establish  any  necessary 
 timeframes  to  perform  conversions  in  their  interconnection  agreements  or  other  contracts.  We  decline  to  adopt  ALTSs  suggestion  to  require  the  completion  of  all  necessary  billing  changes 
 within  ten  days  of  a  request  to  perform  a  conversion  because  such  time  frames  are  better  established  through  negotiations  between  incumbent  LECs  and  requesting  carriers.  1814  We 
 recognize,  however,  that  converting  between  wholesale  services  and  UNEs  (or  UNE  combinations)  is  largely  a  billing  function.  We  therefore  expect  carriers  to  establish  appropriate 
 mechanisms  to  remit  the  correct  payment  after  the  conversion  request,  such  as  providing  that  any  pricing  changes  start  the  next  billing  cycle  following  the  conversion  request. 

 589.  As  a  final  matter,  we  decline  to  require  retroactive  billing  to  any  time  before  the  effective  date  of  this  Order.  The  eligibility  criteria  we  adopt  in  this  Order  supersede  the  safe 

 1810  We  would  expect  competitive  LECs  to  take  into  account  the  possibility  of  future  conversions  to  UNE 
 combinations  before  entering  into  a  long-  term  contract  (with  associated  discounts)  for  wholesale  services. 
 1811  AT&  T  Reply  at  296-  300;  AT&  T  Nov.  23,  2002  Ex  Parte  Letter  at  12-  13. 

 1812  47  U.  S.  C.    251(  c)(  3). 
 1813  Id.    202(  a). 
 1814  ALTS  et  al.  Comments  at  101. 
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 harbors  that  applied  to  EEL  conversions  in  the  past.  To  the  extent  pending  requests  have  not  been  converted,  however,  competitive  LECs  are  entitled  to  the  appropriate  pricing  up  to  the 
 effective  date  of  this  Order. 
 B.  Service  Eligibility  to  Access  UNEs 
 1.  Background 
 590.  A  requesting  carrier  may  obtain  a  UNE  where  it  provides  qualifying  services  over  that  UNE.  1815  In  the  Local  Competition  Order  and  UNE  Remand  Order,  the  Commission 

 determined  not  to  impose  eligibility  thresholds  for  UNE  access.  1816  In  the  Supplemental  Order,  it  restricted  the  ability  of  competitive  carriers  to  convert  special  access  arrangements  to  EELs, 
 unless  such  a  carrier  provides  a  significant  amount  of  local  exchange  services.  1817  In  the  Supplemental  Order  Clarification,  the  Commission  clarified  what  constitutes  a  significant 
 amount  of  local  exchange  service  by  defining  three  safe  harbors  for  requesting  carriers  to  demonstrate  local  usage  to  convert  special  access  arrangements  to  EELs,  two  of  which  specified 
 in  detail  a  variety  of  local  voice  traffic  requirements  by  circuit.  1818  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  several  issues  relating  to  the  safe  harbors,  including 
 whether  they  effectively  tailor  access  to  EEL  combinations  to  those  requesting  carriers  seeking 

 1815  See  supra  Part  V.  B.  2.  c. 
 1816  Local  Competition  Order,  11  FCC  Rcd  at  15679,  para.  356;  UNE  Remand  Order,  15  FCC  Rcd  at  3911-  12, 
 para.  484. 
 1817  Supplemental  Order,  15  FCC  Rcd  at  1760,  para.  2. 

 1818  The  safe  harbor  exceptions  require,  in  relevant  part,  that: 

 (1)  the  requesting  carrier  certifies  it  is  the  exclusive  provider  of  an  end  users  local  exchange  service; 
 (2)  the  requesting  carrier  certifies  that  it  provides  local  exchange  and  exchange  access  service  to  the  end-  user  customers  premises  and  handles  at  least  one  third  of  the  end-  user  customers  local  traffic  as  measured  as  a 

 percent  of  total  end-  user  dialtone  lines;  for  DS1  circuits  and  above,  at  least  50  percent  of  the  activated  channels  on  the  loop  portion  of  the  loop-  transport  combination  have  at  least  5  percent  local  voice  traffic 
 individually,  and  the  entire  loop  facility  has  at  least  10  percent  local  voice  traffic;  or 
 (3)  the  requesting  carrier  certifies  that  at  least  50  percent  of  the  activated  channels  on  a  circuit  are  used  to  provide  originating  and  terminating  local  dialtone  service  and  at  least  50  percent  of  the  traffic  on  each  of 

 these  channels  is  local  voice  traffic  and  the  entire  loop  facility  has  at  least  33  percent  local  voice  traffic. 
 Options  (1)  and  (2)  also  require  that  the  loop-  transport  combinations  in  question  terminate  at  the  requesting  carriers  collocation  arrangement  in  at  least  one  incumbent  LEC  central  office.  For  DS1  to  DS3  multiplexing,  each  of  the 

 individual  DS1  circuits  must  meet  these  criteria.  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9598-  600,  para.  22.  All  three  options  prohibited  commingling  EELs  with  tariffed  access  services,  a  restriction  which  we  conclude  is 
 no  longer  necessary.  See  supra  Part  VII.  A.  2. 
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 to  provide  significant  local  usage  to  their  end  users.  1819  Since  the  issuance  of  the  Triennial  Review  NPRM,  the  D.  C.  Circuit  has  denied  a  petition  for  review  of  these  safe  harbors.  1820 
 2.  Discussion 
 a.  Scope  of  Eligibility  Criteria  Limited  to  High-  Capacity  EELs 
 591.  As  we  explain  in  detail  under  our  service-  specific  approach,  a  carrier  seeking  access  to  an  unbundled  element  of  the  incumbent  LECs  network  must  provide  qualifying 

 service  to  a  customer  in  order  to  obtain  access  to  that  facility  pursuant  to  our  section  251  unbundling  rules.  1821  With  respect  to  combinations  of  high-  capacity  (DS1  and  DS3)  loops  and 
 interoffice  transport,  we  adopt  additional  eligibility  criteria  that  do  not  apply  to  other  UNEs.  Based  on  the  record  before  us,  we  find  that  it  is  reasonable  to  adopt  such  eligibility  criteria  for 
 these  high-  capacity  circuits  due  to  the  potential  for  gaming  by  non-  qualifying  providers  that  is  uniquely  possible  because  of  the  technical  characteristics  of  these  facilities.  By  gaming  of  our 
 eligibility  criteria,  we  mean  the  case  of  a  provider  of  exclusively  non-  qualifying  service  obtaining  UNE  access  in  order  to  obtain  favorable  rates  or  to  otherwise  engage  in  regulatory 
 arbitrage.  This  includes  the  intentional  circumvention  of  the  intent  of  our  rules  to  restrict  unbundled  network  access  to  bona  fide  providers  of  qualifying  service,  such  as  a  national  data 
 network  provider  carrying  minimal  qualifying  service  solely  to  obtain  UNE  pricing. 
 592.  We  do  not,  however,  impose  these  additional  requirements  on  access  to  UNEs  other  than  high-  capacity  EELs.  The  record  does  not  indicate  concern  over  misuse  of  voice-  grade 

 UNE  loops,  high-  capacity  loops,  or  other  UNEs.  1822  By  contrast,  it  discloses  significant  disagreements  between  incumbent  LECs  and  competitive  LECs  over  application  and 
 administration  of  use  restrictions  on  high-  capacity  EELs.  Accordingly,  although  a  requesting  carrier  must  provide  qualifying  services  to  obtain  access  to  loops,  lower-  capacity  EELs  and  other 
 UNEs  and  UNE  combinations,  we  need  not  provide  more  detailed  rules  for  application  of  these  requirements  to  other  elements  at  this  time,  given  the  lack  of  controversy  and  the  greater 
 administrative  burdens  that  enforcing  such  protections  places  on  requesting  carriers,  incumbent  LECs,  and  the  Commission.  1823  Should  there  become  an  apparent  need  in  the  future,  however,  to 

 1819  Triennial  Review  NPRM,  16  FCC  Rcd  at  22814,  para.  74. 
 1820  The  court  denied  petitions  for  review  that  argued  that  the  safe  harbors  were  arbitrary  and  capricious.  CompTel, 
 309  F.  3d  at  16-  18. 
 1821  We  also  conclude  in  Part  V.  B.  2.  c.  that  a  requesting  carrier  providing  qualifying  service  can  also  use  that  UNE 
 to  provide  multiple  services  to  a  customer. 
 1822  At  least  one  incumbent  LEC  indicates  that  the  Commission  does  not  need  to  apply  the  same  use  restrictions  to 
 DS0  and  other  lower-  capacity  circuits  as  the  Commission  should  apply  to  high-  capacity  circuits.  See  BellSouth  Jan.  16,  2003  Ex  Parte  Letter,  Attach.  at  4  (stating  that  a  simplified  use  restriction  could  be  implemented  so  long  as  the 

 protections  for  DS1  and  higher-  capacity  circuits  are  continued  and  not  subject  to  gaming). 
 1823  We  conclude  that  a  requesting  carrier  qualifies  for  access  to  loops,  transport,  subloops,  and  other  stand-  alone 
 UNEs,  as  well  as  EELs  combining  lower-  capacity  loops,  so  long  as  that  carrier  provides  a  qualifying  service  to  the  end-  user  customer.  In  contrast  to  the  potential  for  interexchange  carriers  to  use  high-  capacity  EELs  without 

 (continued.) 
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 guard  against  access  to  other  parts  of  the  network  for  the  provision  of  non-  qualifying  services,  we  would  revisit  this  decision. 
 593.  To  ensure  that  our  rules  on  service  eligibility  are  not  gamed  in  whole  or  in  part,  we  make  clear  that  the  service  eligibility  criteria  must  be  satisfied  (1)  to  convert  a  special  access 
 circuit  to  a  high-  capacity  EEL;  (2)  to  obtain  a  new  high-  capacity  EEL;  or  (3)  to  obtain  at  UNE  pricing  part  of  a  high-  capacity  loop-  transport  combination  (commingled  EEL).  The 
 Supplemental  Order  Clarification  targeted  the  scope  of  its  restrictions  to  protect  a  specific  definition  of  special  access  service  from  conversion,  namely,  a  service  that  employs  dedicated, 
 high-  capacity  facilities  that  run  directly  between  an  end  user,  usually  a  large  business  customer,  and  the  IXCs  point  of  presence.  1824  Although  that  Order  did  not  rely  expressly  on  the 
 commingling  restriction  to  prevent  partial  UNE  conversions,  the  D.  C.  Circuit  deduced  that  a  commingling  ban  would  appear  to  prevent  gaming  because  commingling  will  allow  the  entire 
 base  of  the  loop  or  channel  termination  portion  of  special  access  circuits  to  be  converted  into  unbundled  loops.  1825  Pointing  to  this  pronouncement  from  the  court,  incumbent  LECs  argue  that 
 permitting  commingling,  as  we  do  in  this  Order,  would  risk  conversion  of  the  entire  channel  termination  base.  1826 

 594.  In  response  to  this  concern,  we  apply  service  eligibility  criteria  to  commingled  loop-  transport  combinations  and  therefore  avoid  the  possibility  of  across-  the-  board  loop 
 arbitrage,  yet  protect  access  to  the  UNE  portion  of  a  circuit  that  would  otherwise  qualify  for  conversion  under  the  EELs  rules  we  adopt  today.  1827  For  example,  where  a  state  commission 

 (Continued  from  previous  page) 
 providing  any  qualifying  services,  the  record  before  us  does  not  show  such  issues  exist  for  transport,  loops  or  other  last-  mile  UNEs.  See,  e.  g.,  Covad  Jan.  21,  2003  Ex  Parte  Letter  at  3  (arguing  that  a  regime  of  use  restrictions  on 

 standalone  UNE  loops,  which  affects  all  facilities-  based  carriers,  to  avoid  speculative  concerns  about  access  charge  bypass  by  a  few  carriers  would  be  a  vastly  over-  inclusive  solution  in  search  of  a  very  narrow,  speculative 
 problem.).  Although  BellSouth  states  that  local  use  restrictions  are  necessary  for  stand-  alone  UNEs,  it  focuses  on  the  importance  of  conducting  a  local  service  impairment  inquiry  for  all  UNEs,  and  does  not  identify  UNE  access  by 
 non-  local  wireline  providers  as  a  problem.  Letter  from  Glenn  Reynolds,  Vice  President    Federal  Regulatory,  BellSouth,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147 
 at  3  (filed  Jan.  21,  2003)  (BellSouth  Jan.  21,  2003  Ex  Parte  Letter).  Accordingly,  we  find  that  certification  is  unnecessary  to  verify  that  carriers  provide  qualifying  services  over  these  UNEs. 

 1824  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9593,  para.  10  n.  36  (citations  omitted).  Our  revised 
 definition  of  dedicated  transport,  which  is  limited  to  transmission  facilities  within  an  incumbent  LECs  network,  squarely  removes  a  key  segment  of  those  facilities  from  the  incumbent  LECs  unbundling  obligation.  See  supra 

 Part  VI.  C.  3. 
 1825  CompTel,  309  F.  3d  at  17-  18.  Incumbent  LECs  typically  sell  transmission  service  over  a  loop  facility  out  of 
 their  special  access  tariffs  as  channel  termination.  The  court  went  on  to  explain  that  [  t]  he  reason  is  that  there  are  no  use  restrictions  on  unbundled  loops,  and  therefore  allowing  loops  to  be  freely  connected  to  special  access 

 services  would  allow  loops  that  provide  no  local  services  to  be  unbundled  and  then  merely  attached  to  special  access  transports.  Id.  at  18. 

 1826  See,  e.  g.,  Verizon  Dec.  17,  2002  Ex  Parte  Letter  at  5. 
 1827  At  least  one  incumbent  LEC  endorses  the  availability  of  a  commingled  EEL  subject  to  service  eligibility 
 restrictions.  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  (continued.) 
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 finds  that  transport  on  a  specific  route  is  not  available  as  a  UNE  pursuant  to  a  Commission-  defined  trigger,  a  UNE  loop  would  still  be  available  in  combination  with  a  special 
 access  transport  service  on  that  route  so  long  as  the  eligibility  criteria  are  satisfied.  Accordingly,  a  competitive  LEC  that  provides  local  voice  service  would  be  able  to  obtain  the 
 UNE  loop  portion  of  a  commingled  circuit,  but  interexchange  carriers  would  be  unable  to  obtain  the  remaining  loop  base  of  special  access  circuits  because  of  the  service  eligibility  criteria  we 
 establish  below. 
 b.  Service  Eligibility  Criteria  for  High-  Capacity  EELs 
 595.  A  central  goal  of  the  service  eligibility  criteria  we  establish  in  this  Order  is  to  safeguard  the  ability  of  bona  fide  providers  of  qualifying  service  to  obtain  access  to  high-capacity 

 EELs  while  simultaneously  addressing  the  potential  for  gaming.  To  that  end,  we  therefore  focus  on  local  voice  service  due  to  its  verifiability  and  its  role  as  the  core  competitive 
 offering,  either  on  a  stand-  alone  or  bundled  basis,  in  direct  competition  to  traditional  incumbent  LEC  service.  1828  Importantly,  in  devising  a  gating  mechanism  to  obtain  high-  capacity  EELs,  we 
 recognize  that  we  must  go  beyond  superficial  indicia  and  require  satisfaction  of  multiple  network-  specific  and  circuit-  specific  criteria  to  ensure  that  the  requesting  carrier  demonstrates  a 
 commitment  to  the  local  voice  market. 
 596.  In  crafting  eligibility  requirements  for  competitive  access  to  high-  capacity  EELs,  we  find  our  experience  with  the  safe  harbors  set  forth  in  the  Supplemental  Order  Clarification  to 

 be  instructive.  On  the  one  hand,  several  incumbent  LECs  argue  that  the  safe  harbors  have  provided  certainty  and  accountability,  have  survived  judicial  review,  and  urge  the  Commission 
 to  retain  them.  1829  On  the  other  hand,  many  competitive  LECs  submit  evidence  that  that  the  safe  harbors  and  auditing  procedures  have  proved  to  be  unworkable  and  susceptible  to  abuse  by  the 
 incumbent  LECs.  1830  While  the  assignment  of  a  local  telephone  number  and  other  characteristics  of  local  voice  service  provide  a  significant  degree  of  bright-  line  measurability,  we  are  mindful 
 that  overly  intrusive  and  onerous  compliance  requirements,  such  as  monitoring  traffic  over  individual  circuits,  serve  as  a  drag  on  competitive  entry.  To  avoid  the  difficulties  and  unwanted 
 effects  of  measuring  usage  or  certifying  to  exclusivity  in  providing  qualifying  services,  we  adopt 

 (Continued  from  previous  page) 
 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  13,  2003)  (Qwest  Feb.  13,  2003  Commingled  EEL  Ex  Parte  Letter). 

 1828  Our  identification  of  local  voice  service  as  the  touchstone  for  high-  capacity  EEL  eligibility  does  not  limit  our 
 definition  of  qualifying  services  or  otherwise  affect  our  impairment  findings. 
 1829  See,  e.  g.,  BellSouth  Reply  at  39-  41;  SBC  Reply  at  157-  63;  Verizon  Dec.  17,  2002  Ex  Parte  Letter  at  1. 

 1830  See,  e.  g.,  CompTel  Comments  at  99  n.  206;  NuVox  et  al.  Reply  at  51  (claiming  that  the  safe  harbors  are  too 
 cumbersome  and  amount  to  a  mad  science  that  challenges  network  engineers,  marketing  personnel  and  provisioners    and  leaves  far  too  much  opportunity  for  creative  interpretation  by  the  ILECs.). 
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 rules  based  largely  on  elements  of  the  proposed  architectural  solutions  advanced  by  SBC,  Qwest,  and  BellSouth.  1831 
 597.  We  conclude  that  where  a  requesting  carrier  satisfies  the  following  three  categories  of  criteria,  it  is  a  bona  fide  provider  of  qualifying  services  and  thus  is  entitled  to  order 
 high-  capacity  EELs.  First,  we  find  that  each  requesting  carrier  must  have  a  state  certification  of  authority  to  provide  local  voice  service.  Second,  to  demonstrate  that  it  actually  provides  a  local 
 voice  service  to  the  customer  over  every  DS1  circuit,  we  find  that  the  requesting  carrier  must  have  at  least  one  local  number  assigned  to  each  circuit  and  must  provide  911  or  E911  capability 
 to  each  circuit.  Third,  we  find  the  following  additional  circuit-  specific  architectural  safeguards  to  prevent  gaming  are  necessary:  each  circuit  must  terminate  into  a  collocation  governed  by 
 section  251(  c)(  6)  at  an  incumbent  LEC  central  office  within  the  same  LATA  as  the  customer  premises;  1832  each  circuit  must  be  served  by  an  interconnection  trunk  in  the  same  LATA  as  the 
 customer  premises  served  by  the  EEL  for  the  meaningful  exchange  of  local  traffic,  and  for  every  24  DS1  EELs  or  the  equivalent,  the  requesting  carrier  must  maintain  at  least  one  active  DS1 
 local  service  interconnection  trunk;  and  each  circuit  must  be  served  by  a  Class  5  switch  or  other  switch  capable  of  providing  local  voice  traffic.  Requesting  carriers  must  certify  to  meeting  all 
 three  criteria  (authorization,  local  number  and  E911  assignment,  and  architectural  safeguards)  to  qualify  for  the  high-  capacity  circuit,  subject  to  the  certification  and  auditing  requirements  set 
 forth  in  Part  VII.  C,  below. 
 598.  When  applied  in  their  totality,  the  criteria  we  adopt  here  to  demonstrate  that  a  requesting  carrier  has  undertaken  substantial  regulatory  and  commercial  measures  to  provide 

 local  voice  service  will  ensure  that  the  requesting  carrier  is  indeed  a  provider  of  qualifying  services.  In  this  manner,  the  criteria  afford  high-  capacity  EEL  access  to  an  integrated 
 communications  provider  that  sells  a  bundle  of  local  voice,  long-  distance  voice,  and  Internet  access  to  small  businesses,  because  such  a  provider  is  competing  against  the  incumbent  LECs 
 local  voice  offerings.  1833  In  contrast,  a  provider  of  exclusively  long-  distance  voice  or  data 
 1831  See  Letter  from  Julia  O.  Strow,  Vice-  President    Regulatory  &  Industry  Relations,  Cbeyond  et  al.,  to  Marlene 
 H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338,  Attach.  at  3  (filed  Feb.  7,  2003)  (SBC/  NuVox/  Cbeyond/  SNiP  LiNK  Feb.  7,  2003  Ex  Parte  Letter);  Qwest  Feb.  13,  2003  Ex  Parte  Letter;  Letter  from  Herschel  L.  Abbott,  Jr.,  Vice 

 President    Government  Affairs,  BellSouth,  to  Chairman  Michael  Powell,  FCC,  CC  Docket  No.  01-  338,  Attach.  (filed  Feb.  13,  2003)  (BellSouth  Feb.  13,  2003  Ex  Parte  Letter),  in  Letter  from  Jonathan  Banks,  General  Attorney, 
 BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Feb.  13.  2003).  As  we  discuss  later  in  this  Part,  several  parties,  these  carriers  as  well  as  competitive  LECs  such  as  Cbeyond  have  supplemented  their 
 original  comments  and  filed  alternative  proposals  that  incorporate  network-  design  solutions  intended  to  allow  UNE  access  for  local  voice  traffic,  while  seeking  to  minimize  gaming  by  providers  of  non-  qualifying  services.  We  do  not 
 adopt  in  whole  the  proposals  submitted  by  any  of  these  carriers. 
 1832  47  U.  S.  C.    251(  c)(  6).  We  therefore  deny  WorldComs  request  to  clarify  that  a  collocation  requirement  is  not 
 necessary  for  competitive  LECs  to  obtain  EELs.  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  25. 
 1833  For  example,  Cbeyond  reports  that  well  over  95%  of  its  nearly  5000  customers  had  narrowband  access  and  no 
 T1  service  prior  to  signing  up  for  Cbeyonds  integrated  package.  Letter  from  Julia  Strow,  Vice  President    Regulatory  &  Legislative  Affairs,  Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98, 

 98-  147  at  2  (filed  Dec.  16,  2002)  (Cbeyond  Dec.  16,  2002  EELs  Ex  Parte  Letter);  see  also  Letter  from  Michael  H.  Pryor,  Counsel  for  NewSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2 
 (continued.) 
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 services  that  seeks  to  use  high-  capacity  UNE  facilities  without  providing  any  local  services  would  fall  short  of  one  of  the  tests,  if  not  all.  As  a  further  check  on  potential  for  abuse,  we  make 
 clear  that  these  requirements  apply  to  all  wholesale  as  well  as  retail  service  offerings  over  high-  capacity  EELs. 

 599.  We  apply  the  service  eligibility  requirements  on  a  circuit-  by-  circuit  basis,  so  each  DS1  EEL  (or  combination  of  DS1  loop  with  DS3  transport)  must  satisfy  the  service  eligibility 
 criteria.  Importantly,  our  adoption  of  this  circuit-  specific  approach  rather  than  a  customer-  specific  one  prevents  gaming,  so  the  qualification  of  one  DS1  EEL  to  a  customer  does 
 not  qualify  other  DS1  EELs  to  that  customer.  Similarly,  for  arrangements  where  DS1  loops  are  multiplexed  onto  DS3  transport  facilities,  each  DS1  loop  that  subtends  the  DS3  transport  must 
 qualify  in  order  to  obtain  the  transport  at  a  UNE  price.  1834  We  also  recognize  that  the  harms  associated  with  gaming  by  long-  distance  providers  increase  in  direct  proportion  to  the  capacity 
 level  that  a  competitor  seeks  to  utilize.  Therefore,  for  a  requesting  carrier  to  obtain  a  DS3  EEL  as  a  UNE,  the  requesting  carrier  must  satisfy  the  criteria  for  service  eligibility  for  the 
 DS1-  equivalent  circuit  capacity  of  that  DS3  EEL. 
 600.  As  the  Commission  explained  in  adopting  thresholds  for  pricing  flexibility,  our  selection  of  tests  here  is  not  an  exact  science,  but  a  determination  based  on  agency  expertise,  our 

 reading  of  the  record  before  us,  and  a  desire  to  provide  an  easily  implemented  and  reasonable  bright-  line  rule  to  guide  the  industry.  1835  Specifically,  we  find  that  each  of  these  criteria  is  highly 
 probative  of  legitimate  provision  of  a  qualifying  service,  and  not  overly  burdensome  for  a  requesting  carrier  to  satisfy.  We  are  persuaded  on  the  record  before  us  that  while  no  single 
 requirement  can  prevent  gaming,  the  criteria  we  adopt  are  collectively  sufficient  to  restrict  the  availability  of  these  UNE  combinations  to  legitimate  providers  of  local  voice  service.  The  cost 
 of  taking  the  steps  necessary  to  meet  these  criteria    especially  collocation  and  network  re-  configuration    outweighs  the  benefits  of  lowering  that  carriers  special  access  rate  to  a  UNE 
 rate.  Accordingly,  the  burdens  and  inefficiencies  for  a  provider  to  meet  these  criteria  for  non-  qualifying  service  would  deter  a  carrier  of  non-  qualifying  services  from  re-  designing  its 
 operations  to  subvert  our  rules.  If  these  criteria  prove  insufficient  to  prevent  the  gaming  of  high-  capacity  EEL  use,  we  stand  ready  to  take  corrective  action  to  remedy  any  abuse. 

 (Continued  from  previous  page) 
 (filed  Sept.  26,  2002)  (NewSouth  Sept.  26,  2002  Ex  Parte  Letter)  (stating  that  over  90%  of  new  customers  are  upgraded  from  analog  to  digital  broadband  services). 

 1834  As  explained  above  in  Part  VI.  B.  5.,  we  do  not  require  incumbent  LECs  to  ratchet  transmission  facilities  in  a 
 blended  rate  of  UNE  and  special  access  pricing.  Where  a  requesting  carrier  serves  customers  through  DS1  facilities  that  are  multiplexed  onto  a  DS3  special  access  transport  service,  that  carrier  may  obtain  DS1  loops  where  it  satisfies 

 the  service  eligibility  criteria  for  each  loop. 
 1835  See  Pricing  Flexibility  Order,  14  FCC  Rcd  at  14276,  para.  96  (citing  United  States  v.  FCC,  707  F.  2d,  610,  618 
 (D.  C.  Cir.  1983));  see  also  NuVox  et  al.  Jan.  10,  2003  Ex  Parte  Letter  at  6  (  We  can  think  of  no  test  that  will  eliminate  all  possibilities  of  gaming  and  any  need  for  enforcement  activity.). 
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 (i)  Authorization  to  Provide  Voice  Service 
 601.  The  first  prong,  certification  to  provide  local  voice  service,  typically  involves  the  review  of  technical  and  financial  fitness  by  a  state  commission.  Because  some  states  only 

 require  providers  of  local  voice  service  to  be  registered  as  telecommunications  providers,  certification  is  not  mandatory  in  those  states.  As  we  explain  in  the  discussion  of  certification  and 
 audit  procedures  below,  evidence  of  registration,  tariffing,  filing  of  fees,  or  other  regulatory  compliance  can  demonstrate  satisfaction  of  this  criterion.  1836  We  emphasize  that  the  entity 
 seeking  to  obtain  the  EEL  must  have  direct  authorization  to  do  so,  and  cannot  rely  on  certification  granted  to  an  affiliate. 

 (ii)  Actually  Providing  Local  Voice  Service  to  the  Customer  Over  Every  Circuit 
 602.  We  find  that  local  number  assignment  to  a  DS1  circuit,  as  well  as  911/  E911  capabilities,  indicate  that  a  requesting  provider  does,  in  fact,  provide  local  voice  service  over  that 
 circuit  to  a  customer.  To  ensure  the  legitimacy  of  these  assignments,  we  adopt  Qwests  proposal  that  the  origination  and  termination  of  local  voice  traffic  should  not  include  a  toll  charge,  and 
 should  not  require  dialing  special  digits  beyond  those  normally  required  for  a  local  voice  call.  1837  Because  some  competitive  LECs  do  not  assign  telephone  numbers  at  the  time  of  ordering,  1838  we 
 find  that  a  requesting  carrier  may  satisfy  the  numbering  and  911/  E911  criteria  to  initiate  the  ordering  process  for  a  new  EEL  circuit  by  certifying  that  it  will  not  begin  to  provide  service  until 
 a  local  number  is  assigned  and  911  or  E911  capability  is  provided.  1839  Further,  we  also  clarify  that  each  DS1-  equivalent  circuit  of  a  DS3  EEL  must  have  its  own  local  number  assignment,  so 
 that  each  DS3  must  have  at  least  28  local  voice  numbers  assigned  to  it. 
 (iii)  Architectural  Safeguards  to  Prevent  Gaming 
 603.  Numerous  parties  to  this  proceeding  proposed  different  limitations  on  access  to  EELs,  many  of  which  featured  a  variety  of  architectural  solutions.  The  three  elements  of  the 

 criteria  we  adopt    collocation,  interconnection,  and  termination  at  a  local  switch    build  off  of  these  proposals. 

 604.  Collocation.  We  find  that  termination  of  a  circuit  into  a  section  251(  c)(  6)  collocation  arrangement  in  an  incumbent  LEC  central  office  is  an  effective  tool  to  prevent 
 arbitrage,  because  collocation  is  a  necessary  building  block  for  providing  local  voice  services 

 1836  See  infra  Part  VI.  B.  8. 
 1837  Qwest  Feb.  13,  2003  Ex  Parte  Letter,  Attach.  at  1. 
 1838  Letter  from  John  J.  Heitman,  Counsel  for  ALTS  et  al,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos. 
 01-  338,  96-  98,  98-  147,  Attach.  at  9  (filed  Dec.  16,  2002)  (ALTS  et  al.  Dec.  16,  2002  Ex  Parte  Letter). 
 1839  However,  in  any  event,  a  requesting  carrier  must  assign  the  number  and  implement  911/  E911  capability  within 
 30  days  after  provisioning  of  the  circuit.  See  id.  (noting  that  proof  can  be  supplied  in  such  a  timeframe). 
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 and  is  traditionally  not  used  by  interexchange  carriers.  More  specifically,  because  traditional  interexchange  configurations  route  long-  distance  traffic  from  a  customer  premises  over  tariffed 
 channel  termination  and  transport  facilities  directly  to  an  interexchange  POP,  a  section  251(  c)(  6)  collocation  requirement  ensures  that  a  carrier  has  set  up  an  architecture  that  ensures  that  traffic 
 can  leave  the  incumbent  LEC  network  prior  to  hitting  the  POP.  1840  Accordingly,  the  collocation  criterion  serves  as  an  easily  verifiable  test  that  the  circuit  terminating  at  the  collocation 
 arrangement  carries  local  voice  traffic.  As  further  evidence  that  a  carrier  provides  qualifying  voice  service,  the  collocation  arrangement  must  be  within  the  same  LATA  as  the  customer 
 premises.  1841 
 605.  We  emphasize  that  the  collocation  must  be  within  the  incumbent  LEC  network,  and  cannot  be  at  an  interexchange  carrier  POP  or  ISP  POP.  However,  a  requesting  carrier  can 

 satisfy  this  prong  through  reverse  collocation.  For  the  purposes  of  this  test,  we  adopt  SNiP  LiNKs  definition  of  all  mutually-  agreeable  interconnection  methodologies.  1842  We  also  clarify 
 that  any  non-  incumbent  LEC  collocation  arrangement  pursuant  to  section  251(  c)(  6)  meets  this  test.  1843  Permitting  indirect  collocation  to  satisfy  this  test  is  especially  critical  in  light  of  the  fact 
 that  fewer  transmission  facilities  will  be  unbundled  than  previously  following  the  issuance  of  this  Order,  1844  and  our  conclusion  that  incumbent  LEC  prohibitions  on  the  commingling  of  UNEs 
 with  tariffed  services  are  unjust  and  unreasonable.  1845 

 1840  A  carrier  that  routes  traffic  directly  from  a  customer  premises  to  a  POP  on  an  inter-  city  network  without 
 providing  local  service  would  not  have  a  reason  to  arrange  and  pay  for  collocation  and  local  interconnection  trunks.  For  instance,  AT&  T  reports  that  75%  of  its  special  access  circuits  terminate  at  its  interexchange  carrier  POP. 

 AT&  T  proposes  that,  to  the  extent  that  the  Commission  determines  to  limit  the  use  of  UNE  combinations  (but  not  individual  UNEs),  special  access  combinations  terminating  at  an  interexchange  carrier  POP  would  not  be  eligible 
 for  UNE  conversion.  AT&  T  Jan.  16,  2003  Ex  Parte  Letter  at  1,  3-  4.  We  therefore  dismiss  the  assertions  by  some  parties  that  a  collocation  requirement  is  unnecessary  to  ensure  the  provision  of  local  service.  See,  e.  g.,  CompTel 
 Comments  at  98-  99.  We  also  reject  the  argument  that  collocation  is  too  insignificant  because  direct  connections  [to  a  POP]  are  not  the  norm  for  special  access  customers.  Letter  from  Dee  May,  Assistant  Vice  President,  Verizon, 
 to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  2  (filed  Jan.  27,  2003). 
 1841  See  AT&  T  Jan.  16,  2003  Ex  Parte  Letter  at  7  (  It  is  a  virtual  certainty,  however,  that  facilities  used  to  provide 
 non-  switched  services  between  two  points  in  a  LATA  are  used  to  provide  significant  amounts  of  local  voice  or  data  traffic.).  Where  there  is  no  single  customer  premises,  such  as  where  the  traffic  from  multiple  DS1  wireline 

 end-  user  loops  are  aggregated  onto  a  DS3  transport  facility,  the  point  of  aggregation  will  serve  as  the  customer  premises  for  the  purpose  of  this  requirement. 

 1842  Letter  from  Steven  A.  Augustino,  Counsel  for  SNiP  LiNK,  to  William  Maher,  Bureau  Chief,  Wireline 
 Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  5,  2003).  This  definition  would  include  the  installation  of  incumbent  LEC  equipment  at  the  premises  of  a  competitive  LEC  or  any  other  entity  not 

 affiliated  with  that  incumbent  LEC,  regardless  of  whether  the  incumbent  LEC  has  a  cage. 
 1843  For  example,  an  EEL  connected  to  a  third-  party  entrance  facility  originating  in  that  third-  partys  section 
 251(  c)(  6)  collocation  would  satisfy  the  collocation  requirement. 
 1844  See  supra  Part  VI.  C.  (finding  that  carriers  are  not  impaired  without  access  to  inter-  network  transmission 
 facilities  (entrance  facilities)  and  implementing  triggers  for  states  to  make  further  findings  of  non-  impairment). 
 1845  See  supra  Part  VII.  B. 
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 606.  Although  at  least  one  carrier  contends  that  a  collocation  requirement  would  fail  to  recognize  an  alternative  network  arrangement  that  carries  local  voice  and  other  services,  1846  we 
 find  that  collocation  is  a  necessary  threshold  to  prevent  providers  of  non-  qualifying  services  from  improperly  gaining  access,  and  that  the  exclusion  of  qualifying  voice  service  would  be 
 minimal.  1847  We  acknowledge  the  difficulties  in  anticipating  every  possible  configuration  or  arrangement  of  a  provider  of  qualifying  services,  but  our  approach  has  the  advantage  of 
 relatively  easy  verification  by  leveraging  the  current  legal  commitments  necessary  to  provide  qualifying  service. 

 607.  Interconnection.  As  an  additional  indicator  of  providing  local  voice  service,  we  find  that  each  EEL  circuit  must  be  served  by  an  interconnection  trunk  in  the  same  LATA  as  the 
 customer  premises  served  by  the  EEL,  and  that  for  every  24  DS1  EELs  or  the  equivalent,  the  requesting  carrier  must  maintain  at  least  one  active  DS1  interconnection  trunk  for  the  exchange 
 of  local  voice  traffic.  As  a  further  safeguard  against  gaming,  where  a  requesting  carrier  strips  off  the  calling  party  number  (CPN)  on  calls  exchanged  over  the  interconnection  trunk,  that  trunk 
 shall  not  be  counted  towards  meeting  the  trunk/  EEL  ratio.  1848  The  costs  and  difficulties  of  network  configuration  necessary  to  satisfy  the  interconnection  and  collocation  requirements 
 minimize  the  potential  for  these  safeguards  to  be  gamed;  only  a  bona  fide  provider  of  qualifying  local  services  would  undertake  these  measures,  all  of  which  are  a  necessary  precondition  to 
 compete  directly  against  the  incumbent  LECs  voice  service.  1849 
 608.  The  24-  to-  1  EEL  to  interconnection  trunk  ratio  provides  a  reliable  gauge  that  the  competitive  LEC  exchanges  local  traffic  with  the  incumbent  LEC  in  a  manner  that  indicates  that 

 it  is  a  bona  fide  provider  of  local  voice  service.  1850  One  incumbent  LEC  claims  that  even  at  full 
 1846  NewSouth  states  that  in  certain  instances,  it  procures  a  DS1  loop  from  the  incumbent  LEC  which  terminates  on 
 the  incumbent  LECs  main  distribution  frame  at  the  central  office.  Under  this  arrangement,  NewSouth  purchases  a  cross-  connect  to  the  incumbent  LECs  multiplexing  equipment,  which  is  connected  to  a  channel  facility  assignment 

 (CFA)  block  and  then  connected  to  incumbent  LEC  or  third  party  backhaul  to  NewSouths  switch.  NewSouth  Comments  at  43.  NewSouth  characterizes  the  CFA  block  it  purchases  from  the  incumbent  LEC  tariff  as  a  POP. 

 1847  Indeed,  even  NewSouth  notes  that  most  of  the  local  loops  that  it  purchases  from  incumbent  LECs  terminate  at  a 
 NewSouth  collocation.  NewSouth  Comments  at  42.  Other  competitive  LECs  inform  us  that  a  collocation  requirement  would  not  present  a  barrier  to  many  competitive  LECs  using  EELs  today.  See,  e.  g.,  ALTS  et  al.  Dec. 

 13,  2002  Ex  Parte  Letter,  Attach.  at  7.  Accordingly,  we  dismiss  the  MCI  WorldCom  Petition  for  Clarification  to  the  extent  that  it  seeks  a  rule  explicitly  stating  that  incumbent  LECs  cannot  require  competitive  LECs  to  collocate  in 
 order  to  obtain  EELs.  See  MCI  WorldCom  Feb.  17,  2000  Petition  for  Clarification  at  24-  25. 
 1848  See  SBC/  NuVox/  Cbeyond/  SNiP  LiNK  EELs  Ex  Parte  Letter,  Attach.  at  3. 

 1849  We  establish  these  requirements  for  purposes  of  unbundling  high-  capacity  EELs  only,  and  not  for  the  purposes 
 of  the  ongoing  reciprocal  compensation  proceeding  or  any  other  docket. 
 1850  The  proponents  of  a  proposal  that  incorporates  the  24-  to-  1  ratio  as  a  safeguard  for  smaller  competitive  LECs 
 explain  that  the  Commission  could  reasonably  conclude  that,  in  its  expert  judgment,  the  purchase  and  use  of  proportional  and  bona  fide  local  interconnection  capacity  for  every  DS1  EEL  (1)  demonstrates  a  carriers 

 commitment  to  facilities-  based  entry  into  the  local  exchange  market  in  the  relevant  LATA  and  (2)  indicates  a  reasonable  likelihood  that  a  significant  amount  of  local  traffic  is  carried  on  given  EEL  facilities.  Cbeyond  et  al. 
 Feb.  4,  2003  Ex  Parte  Letter  at  4. 
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 local  utilization  this  ratio  allows  only  for  a  maximum  of  four  percent  local  usage  and  therefore  cannot  be  considered  significant,  on  the  apparent  theory  that  one  channel  on  an 
 interconnection  trunk  is  necessary  to  serve  one  voice  channel  of  the  24  channels  in  a  DS1  EEL.  1851  However,  proponents  of  the  ratio  explain  that  it  has  its  roots  in  the  general  engineering 
 principle  that  one  DS0  interconnection  trunk  can  serve  every  five  local  access  lines,  1852  so  that  one  active  DS1  local  service  interconnection  trunk  can  serve  24  DS1  EELs  that  have  5  local 
 voice  channels  on  each  EEL.  We  find  that  this  ratio  therefore  provides  a  reasonable  proxy  for  the  capacity  of  interconnection  that  a  bona  fide  provider  of  local  voice  service  competing  against 
 the  incumbent  LEC  would  require.  1853  Moreover,  as  we  explain  above  in  this  Part,  we  base  our  EEL  eligibility  criteria  on  whether  a  requesting  carrier  is  a  bona  fide  provider  of  local  voice 
 service,  and  do  not  retain  the  temporary  threshold  of  significant  amount  of  local  exchange  service  established  in  the  Supplemental  Order. 

 609.  Verizon  asserts  that  trunks  inbound  to  a  competitive  LEC  frequently  carry  Internet-  bound  traffic  and  are  not  obtained  by  the  competitive  LEC,  and  that  only  competitive 
 LEC-  outbound  trunks  should  count  toward  the  ratio.  1854  Due  to  the  variety  of  interconnection  arrangements  that  a  bona  fide  local  voice  service  provider  may  choose  to  implement,  we  do  not 
 exclude  all  one-  way  inbound  trunks  as  they  can  be  part  of  a  legitimate  interconnection  arrangement.  1855  However,  where  a  competitive  LEC  does  not  arrange  for  a  meaningful 
 exchange  of  traffic    which  must  include  hand-  offs  of  local  voice  calls  that  flow  in  both  directions    those  arrangements  cannot  be  attributed  towards  satisfaction  of  this  criterion.  For 
 similar  reasons,  we  also  reject  Qwests  proposal  that  a  competitive  LEC  must  associate  the  individual  EEL  collocation  termination  point  with  a  local  interconnection  trunk  in  the  same  wire 
 center.  1856  Because  a  legitimate  provider  of  local  voice  service  may  configure  its  network  in 
 1851  Letter  from  Susanne  Guyer,  Senior  Vice  President,  Federal  Regulatory  Affairs  and  Ed  Shakin,  Vice  President 
 and  Associate  General  Counsel,  Verizon,  to  the  Honorable  Michael  Powell,  Chairman,  FCC,  at  4  (dated  Feb.  12,  2003)  (Verizon  Feb.  12,  2003  Ex  Parte  Letter),  in  Letter  from  Dee  May,  Assistant  Vice  President,  Verizon  to 

 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Feb.  12,  2003). 
 1852  Letter  from  John  J.  Heitmann,  Counsel  for  SNiP  LiNK  and  NuVox,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4  (filed  Feb.  14,  2003). 
 1853  Verizon  concedes  that  establishing  a  reasonable  ratio  of  trunks  to  EELs,  such  as  4-  to-  1,  would  help  shore  up 
 this  test.  Letter  from  W.  Scott  Randolph,  Director    Regulatory  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  14,  2003)  (Verizon  Feb.  14,  2003  Ex  Parte  Letter). 

 The  nature  of  interconnection  trunk  concentration,  in  which  five  EELs  can  be  served  by  one  interconnection  trunk,  supports  the  test  we  adopt.  Furthermore,  as  the  competitive  LEC  proponents  of  the  SBC/  CLEC  EELs  proposal 
 point  out,  competitive  LEC  customers  do  place  calls  to  each  other  that  never  reach  the  incumbent  LEC  network,  so  that  the  interconnection  trunks  between  a  competitive  LEC  and  incumbent  LEC  do  not  capture  all  the  local  voice 
 traffic  that  a  competitive  LEC  originates  and  terminates.  Cbeyond  et  al.  Feb.  13,  2003  Ex  Parte  Letter  at  4. 
 1854  Verizon  Feb.  12,  2003  Ex  Parte  Letter  at  4. 

 1855  For  example,  a  competitive  LEC  may  choose  to  purchase  a  two-  way  trunk,  or  may  purchase  a  one-  way  trunk 
 and  arrange  for  the  incumbent  LEC  to  purchase  a  one-  way  trunk  in  the  opposite  direction. 
 1856  Letter  from  Cronan  OConnell,  Vice  President    Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC 
 Docket  No.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  13,  2003)  (Qwest  Feb.  13,  2003  Ex  Parte  Letter). 
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 various  ways  such  that  each  EEL  is  not  terminated  in  the  same  wire  center  as  the  interconnection  trunk,  1857  adopting  such  a  proposal  could  impose  inefficient  traffic  engineering  requirements. 
 Moreover,  our  requirement  that  each  EEL  must  be  in  the  same  LATA  as  the  interconnection  trunk  associated  with  that  EEL  adequately  ensures  that  interexchange  carriers  will  not  game  the 
 criteria  by  purchasing  sham  trunks  that  are  remote  and  unrelated  to  the  EEL  circuits  that  carry  local  voice  traffic. 

 610.  Local  Switching.  We  find  that  each  EEL  circuit  must  be  served  by  a  Class  5  switch  or  other  switch  capable  of  providing  local  voice  traffic.  To  ensure  that  the  traffic  carried 
 over  each  EEL  is  not  exclusively  non-  local,  a  requesting  carrier  must  certify  that  the  switching  equipment  is  either  registered  in  the  LERG  as  a  Class  5  or  that  it  can  switch  local  voice  traffic. 
 In  adopting  this  safeguard,  we  also  reject  the  proposal  of  certain  competitive  LECs  that  we  should  adopt  an  eligibility  restriction  whereby  a  requesting  carrier  cannot  obtain  UNEs  on 
 circuits  that  are  served  by  switching  equipment  used  exclusively  to  provide  interexchange  voice  services  (registered  in  the  LERG  as  a  Class  4-  only  switch).  1858  We  are  not  persuaded  that  a 
 switch  class  approach  based  solely  on  LERG  registration  is  sufficiently  linked  to  our  service  qualification  goals.  As  the  Supplemental  Order  Clarification  explained  in  rejecting  a  proposal  to 
 presume  that  circuits  terminating  in  a  Class  5  switch  are  exclusively  local,  switch  type  does  not  provide  a  basis  for  assuming  the  traffic  type  of  every  terminating  circuit.  1859  Our  record  in  this 
 proceeding  demonstrates  that  the  proposal  to  ban  termination  at  a  Class  4  switch  would  be  over-  exclusive,  as  at  least  one  party  informs  us  that,  in  the  same  manner  as  other  carriers,  it  can 
 and  does  provide  local  service  over  Class  4  switches  and  soft  (or  packet)  switches.  1860  Moreover,  grounding  our  requirements  in  the  technology  of  the  traditional  Class  5  circuit-switched 
 network  would  create  a  disincentive  to  the  deployment  of  micro-  switching  and  the  integration  of  data  and  voice  traffic.  1861  In  light  of  the  evolving  uses  of  equipment  and 
 innovations,  we  are  not  inclined  to  categorically  rule  out  any  carrier  on  the  basis  of  the  class  of  switches  it  deploys.  1862 

 1857  For  example,  a  competitive  LEC  could  build  a  fiber  ring  that  connects  two  or  more  incumbent  LEC  wire 
 centers  where  EELs  terminate,  and  hub  the  traffic  from  those  wire  centers  to  an  interconnection  trunk  that  connects  to  only  one  wire  center. 

 1858  ALTS  et  al.  Dec.  13,  2002  Ex  Parte  Letter,  Attach.  at  6;  ALTS  Nov.  14,  2002  Ex  Parte  Letter  at  4-  5. 
 1859  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9601,  para.  25. 
 1860  See  AT&  T  Apr.  30,  2001  Fea/  Taggart  Reply  Decl.  at  para.  3  n.  1;  AT&  T  Feb.  12,  2003  Ex  Parte  Letter  at  12. 
 1861  Collocation  Remand  Order,  16  FCC  Rcd  at  15453,  para.  33  (concluding  that  multi-  functional  equipment  is 
 designed  to  enable  telecommunications  carriers,  both  incumbent  LECs  and  their  competitors,  to  offer  their  customers  an  ever-  increasing  array  of  telecommunications  services,  including  advanced  services,  with  ever-increasing 

 efficiency);  see  also,  e.  g.,  Taqua  Comments  at  2-  3  (discussing  its  development  of  alternatives  to  legacy  telecommunications  networks  and  equipment  in  systems  that  combine  traditional  end  office  switching  with 
 integrated  softswitch  functionality  and  the  ability  to  provide  next-  generation  subscriber  services  in  a  single  chassis). 
 1862  The  local  switching  safeguard  we  adopt  renders  irrelevant  WorldComs  pending  request  for  a  presumption  that 
 circuits  that  terminate  on  a  Class  5  switch  are  local  circuits.  See  WorldCom,  Inc.  Petition  for  Waiver,  CC  Docket  (continued.) 
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 611.  The  record  also  indicates  that,  for  many  carriers  the  costs  of  gaming  a  local  switching  requirement  outweigh  the  benefit  of  a  reduction  in  special  access  payments.  For 
 example,  WorldCom  explains  that  none  of  its  Class  5  switches  provide  dedicated  access  services  and  that  its  long  distance  switches  do  not  provide  local  service,  and  that  it  cannot  reconfigure  its 
 Class  5  switches  to  provide  dedicated  access-  based  services.  1863 
 (iv)  Other  Service  Eligibility  Proposals 
 612.  We  conclude  that  none  of  the  other  eligibility  tests  proposed  on  the  record  before  us  is  preferable  to  the  indicia  of  qualifying  services  that  we  adopt  here.  For  example,  SBC, 

 BellSouth,  and  Verizon  support  a  continuation  of  or  limited  modification  to  the  current  safe  harbors,  1864  and  Qwest  proposes  a  local  use  restriction  requiring  a  certification  that  the  facility 
 carries  at  least  51  percent  local  voice  traffic.  1865  As  an  initial  matter,  we  note  that  the  Commission  established  the  usage  restrictions  in  the  safe  harbors  as  a  temporary  restriction  on 
 conversions  while  the  Commission  compiled  an  adequate  record  to  address  the  legal  and  policy  issues  raised  in  the  Fourth  FNPRM.  1866  They  were  meant  to  be  a  temporary  proxy  rather  than  a 
 permanent  restriction,  and  now  that  we  have  had  practical  experience  with  traffic  tests  and  adequate  time  to  evaluate  them  and  the  underlying  record  in  this  proceeding,  for  several  reasons 
 we  decline  to  perpetuate  current  local  voice  thresholds  mandated  by  safe  harbors  (2)  and  (3),  or  to  adopt  any  proposal  based  on  enumerated  percentages  of  traffic. 

 613.  We  agree  with  Cbeyond  that  measuring  minutes  of  use  is  antithetical  to  the  Acts  goals  of  encouraging  the  provision  new  technologies  and  advanced  services,  because  those  usage 
 tests  could  conceivably  work  only  for  channelized  DS1  providers  and  would  improperly  exclude  those  carriers  deploying  packetized  networks.  1867  Classifying  and  measuring  voice  traffic 
 separately  from  data  traffic  is  incompatible  with  the  integration  of  voice  and  data  in  new  (Continued  from  previous  page) 

 No.  96-  98  at  1,  2,  15  (filed  Sept.  12,  2000)  (WorldCom  Waiver  Petition).  In  addition,  we  note  that  favoring  a  switch-  neutral  approach  could  benefit  smaller  businesses  by  giving  them  flexibility  to  purchase  innovative  and  more 
 efficient  switches. 
 1863  WorldCom  Waiver  Petition  at  9  (  WorldCom  cannot  reconfigure  its  Class  5  switches  to  carry  long-  distance 
 traffic  without  restructuring  large  portions  of  its  network  and  related  systems  and  process  infrastructure,  including  its  diverse  customer  and  carrier  billing,  ordering,  and  provisioning  systems.). 

 1864  See,  e.  g.,  BellSouth  Jan.  16,  2003  Ex  Parte  Letter  at  4;  Verizon  Feb.  14,  2003  Ex  Parte  Letter  at  2  (stating  that 
 [  a]  ny  enhancement  to  the  existing  safe  harbors  must  contain  a  local  traffic  requirement.). 
 1865  Along  with  a  threshold  test  that  a  requesting  carrier  satisfies  the  51%  local  traffic  threshold  or  is  the  exclusive 
 local  provider,  Qwest  proposes  several  other  architectural  safeguards  and  a  marketing  requirement.  Qwest  Feb.  13,  2003  Ex  Parte  Letter,  Attach.  at  1.  BellSouths  proposed  requirements  include  a  50%  threshold  for  local  voice 

 traffic.  BellSouth  Jan.  21,  2003  Ex  Parte  Letter  at  6. 
 1866  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9592,  para.  8. 

 1867  47  U.  S.  C.    157;  Cbeyond  Dec.  16,  2002  Ex  Parte  Letter  at  2-  3.  Cbeyond  delivers  a  bundle  of  local, 
 long-  distance,  and  Internet  access  services  by  utilizing  dynamic  bandwidth  allocation  of  a  DS1  through  packetized  IP  technology. 
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 packetized  networks,  and  we  find  that  basing  our  new  rules  on  the  distinction  between  voice  and  data  would  inhibit  this  new  technology.  Moreover,  mandating  thresholds  based  upon 
 percentages  of  qualifying  traffic  would  penalize  technological  advancements  in  voice  compression,  and  have  the  perverse  effect  of  disqualifying  the  most  efficient  and  innovative 
 deployment  of  voice  technology.  1868 
 614.  In  addition,  the  record  demonstrates  that  requiring  competitors  to  ascertain  and  certify  to  traffic  percentages  is  burdensome  and  difficult  to  administer.  This  has  been  the  case 

 even  in  the  context  of  converting  an  existing  customer  facility  from  special  access  to  UNEs,  and  therefore  would  be  even  more  difficult  in  the  context  of  initiating  service  over  newly-provisioned 
 circuits.  1869  More  specifically,  because  the  carrier  providing  service  does  not  control  customer  calling  patterns,  and  local  usage  can  fluctuate  day  to  day  or  month  to  month,  requiring 
 competitors  to  certify  to  future  customer  use  as  a  precondition  to  obtaining  a  UNE  puts  them  in  an  untenable  position.  1870  Although  some  carriers  have  been  able  to  measure  and  categorize  their 
 traffic  sufficiently  to  certify  to  these  safe  harbors,  1871  many  other  competitive  LECs  report  that  the  safe  harbor  regime  is  burdensome  and  unworkable  because  they  lack  sufficient  information 
 to  make  the  necessary  certification  at  the  time  the  EEL  is  requested,  and  have  no  feasible  way  to  obtain  the  necessary  information  going  forward  to  ensure  continued  compliance.  1872  Further, 
 many  competitive  LECs  allege  that  incumbent  LECs  have  misconstrued  the  auditing  process  and  improperly  denied  competitors  self-  certifications.  1873  Although  the  D.  C.  Circuit  upheld  the  safe 
 harbors  as  interim  measures,  due  to  the  measuring  difficulties  and  potential  for  burdensome 

 1868  See,  e.  g.,  Cbeyond  Dec.  16,  2002  Ex  Parte  Letter  at  3. 
 1869  For  example,  AT&  T  explains  that  because  requesting  carriers  typically  order  backhaul  infrastructure  facilities 
 that  are  not  immediately  placed  in  service,  such  facilities  are  not  identified  with  any  specific  customers  and  carry  no  traffic  and  thus  it  is  not  even  possible  to  tell  which  of  them  would  be  used  to  provide  any  particular  type  of 

 traffic.  Letter  from  Joan  Marsh,  Director,  Federal  Government  Affairs,  AT&  T,  to  Marlene  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  and  98-  147  at  2  (filed  Jan.  16,  2003). 

 1870  See,  e.  g.,  Letter  from  Ross  A.  Buntrock,  Counsel  for  e.  spire,  to  Magalie  R.  Salas,  Secretary,  FCC,  CC  Docket 
 No.  96-  98,  Attach.  at  9  (filed  Apr.  19,  2000)  (  e.  spire  can  commit  to  channels  carrying  local  traffic,  but  e.  spire  cannot  predict  the  extent  to  which  a  given  customers  T-  1s  will  carry  local  traffic);  WorldCom  Waiver  Petition  at 

 14  (  it  is  impossible  to  predict  how  many  switched  access  long-  distance  calls  a  particular  customer  might  make  or  receive  in  the  aggregate  on  all  of  the  local  channels  provided  by  WorldCom.). 

 1871  CompTel,  309  F.  3d  at  17. 
 1872  See,  e.  g.,  CompTel  Comments  at  99  n.  206;  AT&  T  Comments  at  164  (contending  that  the  circuit-  by-  circuit 
 certification  process  is  inherently  unworkable  because  CLECs  systems    including  AT&  Ts    are  not  built  to  provide  the  kind  of  data  necessary  to  support  such  record  keeping  requirements);  AT&  T  Jan.  16,  2003  Ex  Parte 

 Letter  at  2  (  Thus,  it  is  not  even  possible  to  tell  which  [facilities]  would  be  used  to  provide  any  particular  type  of  traffic.  Accordingly,  any  attempt  to  isolate  UNEs  to  local  traffic  and  services  (or  elements  that  are  not  UNEs)   
 to  non-  local  traffic  would  be  impossible.);  Cbeyond  et  al.  Feb.  13,  2003  Ex  Parte  Letter  at  3  (noting  that  the  measurement  requirements  contained  in  the  usage-  based  qualification  criteria  of  safe  harbors  (2)  and  (3)  require 
 additional  circuit-  specific  engineering  and  monitoring). 
 1873  See,  e.  g.,  ALTS  et  al.  Comments  at  100;  NuVox  Petition  at  1. 
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 audits  inherent  to  traffic  thresholds,  we  conclude  that  these  usage  restrictions  are  inferior  to  those  we  adopt  here.  1874 
 615.  To  recognize  the  increasing  market  demand  for  diverse  network  infrastructure  and  for  other  reasons,  we  also  do  not  perpetuate  safe  harbor  (1),  which  allowed  a  carrier  to  convert 
 special  access  circuits  to  EELs  upon  certification  that  it  is  the  exclusive  provider  of  local  exchange  service.  As  competitive  carriers  inform  us,  many  customers  seek  multiple  local 
 carriers  to  ensure  connectivity  in  the  event  of  temporary  constraints  or  problems  1875  as  well  as  to  apply  competitive  pressure,  1876  and  we  are  reluctant  to  adopt  rules  that  encourage  carriers  to 
 obtain  commitments  contrary  to  the  market  trend  towards  diversity,  or  that  add  additional  layers  of  regulation  to  the  customer-  provider  relationship.  1877  In  addition,  because  a  carrier  may  certify 
 to  exclusivity  in  good-  faith  reliance  upon  a  customers  misrepresentation  that  it  has  only  one  local  service  provider,  or  that  subscribes  to  a  second  local  service  provider  at  a  later  time,  this 
 safe  harbor  presents  significant  difficulties  in  administration.  1878 
 616.  We  also  reject  the  joint  proposal  from  SBC,  NuVox,  Cbeyond,  and  SNiP  LiNK  to  subject  a  carrier  with  total  telecommunications  revenues  above  two  percent  of  total  industry 

 local  and  toll  revenues  to  the  Supplemental  Order  Clarification  safe  harbors,  but  apply  a  more  limited  set  of  non-  usage  safeguards  to  a  smaller  CLEC  with  revenues  below  that  threshold.  1879 
 We  find  that  establishing  two  tiers  of  eligibility  restrictions  based  on  revenue  is  not  tailored  to  our  goals  in  imposing  restrictions  of  encouraging  local  competition  but  minimizing  the  arbitrage 

 1874  Because  we  are  not  extending  the  safe  harbors  going  forward,  we  hereby  dismiss  as  moot  the  petitions  for 
 waiver  of  particular  safe  harbors  filed  by  ITC^  DeltaCom  and  WorldCom.  See  ITC^  DeltaCom  Waiver  Petition;  WorldCom  Waiver  Petition. 

 1875  See,  e.  g.,  AT&  T  Feb.  12,  2003  Ex  Parte  Letter  at  6  (noting  that  mid-  sized  and  large  business  end  users  are 
 sophisticated  customers  that  demand  flexibility  to  adjust  the  number  of  providers  they  use  and  the  amount  of  service). 

 1876  Cbeyond  Dec.  16,  2002  Ex  Parte  Letter  at  3. 
 1877  See  AT&  T  Jan.  16,  2003  Ex  Parte  Letter  at  6  &  n.  11  (stating  that  it  is  nearly  impossible  to  get  customers  to 
 certify  what  their  usage  will  be  on  particular  facilities,  and  that  many  customers  may  simply  consider  it  not  to  be  any  of  the  CLECs  business  whether  they  are  using  other  providers.). 

 1878  [  E]  ven  if  a  CLEC  could  obtain  a  representation  from  a  customer  that  it  is  the  customers  only  supplier  of  local 
 services,  there  is  no  reasonable  way  for  a  CLEC  to  determine  whether  it  continues  to  be  the  customers  sole  supplier  over  time,  other  than  by  continually  asking  the  customer,  which  is  at  best  difficult  and  awkward  from  a  marketing 

 perspective,  and  at  worst  anticompetitive.  AT&  T  Comments  on  WorldCom  Petition  for  Waiver,  CC  Docket  No.  96-  98  (filed  Oct.  2,  2000)  at  6-  7. 

 1879  More  specifically,  a  carrier  qualifies  as  a  smaller  CLEC  if  its  total  telecommunications  revenues  do  not 
 exceed  two  percent  of  total  telecommunications  industry  local  and  toll  service  revenues,  and  its  gross  annual  toll  service  revenues  do  not  exceed  two  percent  of  all  toll  service  revenues,  based  upon  the  industry  revenue  figures 

 published  most  recently  by  the  Wireline  Competition  Bureau.  SBC/  NuVox/  Cbeyond/  SNiP  Link  Feb.  7,  2003  EELs  Ex  Parte  Letter  at  3.  The  total  industry  local  and  toll  service  telecommunications  revenues  for  2000  were  $292.8 
 billion.  Trends  in  Telephone  Service  May  2002  Report  at  Table  16.1. 
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 opportunities  for  providers  of  non-  qualifying  services.  The  proponents  of  the  tiered  approach  argue  that  the  fixed  costs  of  deploying  systems  to  track  and  report  the  mix  of  traffic  over  given 
 facilities  have  a  more  significant  economic  impact  on  a  smaller  carrier  with  smaller  overall  telecommunications  revenues  than  on  larger  carriers,  and  therefore  are  more  likely  to  affect  the 
 entry  decisions  of  smaller  carriers.  1880  However,  the  SBC/  NuVox/  Cbeyond  proposal  fails  to  capture  the  decision-  making  process  of  a  competitive  LEC  entering  a  market  and  the  potential 
 for  gaming.  Any  cost/  benefit  analysis  should  not  involve  the  ability  to  spread  the  costs  over  other  revenues,  but  should  be  limited  to  identifying  the  costs  of  being  able  to  obtain  a  specific  set 
 of  EEL  circuits  against  the  benefits  of  obtaining  those  circuits.  1881  Similarly,  the  proponents  of  this  test  fail  to  demonstrate  that  the  costs  are  fixed,  as  they  would  appear  to  vary  with  the 
 number  of  circuits  and  customers.  1882  Moreover,  the  record  before  us  does  not  support  the  implementation  of  any  tiered  system  based  upon  administrative  costs  and  revenue  size  because 
 there  is  no  evidence  of  their  sizes,  much  less  of  their  relationship  to  each  other.  As  Verizon  notes,  the  proponents  of  this  proposal  do  not  quantify  or  substantiate  the  costs  and  burdens  of 
 compliance,  and  would  screen  out  only  the  very  largest  carriers    a  carrier  with  over  four  billion  dollars  in  revenues  would  qualify  as  a  smaller  CLEC.  1883 

 617.  We  decline  to  adopt  the  requirement  proposed  by  Qwest  and  BellSouth  that  the  service  offered  to  an  end  user  over  a  high-  capacity  EEL  must  be  marketed  and  sold  as  a  local 
 exchange  service,  or  a  bundle  of  services.  1884  State  commissions  currently  regulate  the  tariffing  and  other  terms  of  service  of  common  carrier  local  voice  services,  and  the  practical  difficulties  of 
 policing  carriers  marketing  and  advertising  efforts  do  not  support  the  initiation  of  additional  regulation.  Furthermore,  we  also  find  Qwests  proposal  to  require  a  requesting  carrier  to  have 

 1880  SBC/  NuVox/  Cbeyond/  SNiP  LiNK  EELs  Ex  Parte  Letter  at  3. 
 1881  For  example,  there  is  no  reason  that  a  large  interexchange  carrier  or  out-  of-  region  incumbent  LEC  seeking  to 
 obtain  a  small  amount  of  EEL  circuits  over  the  course  of  a  year  should  be  held  to  a  more  burdensome  standard  than  a  mid-  sized  competitive  LEC  seeking  to  obtain  a  large  amount  of  EEL  circuits.  In  this  instance,  the  mid-  sized 

 carrier  has  a  greater  incentive  for  non-  qualifying  service  arbitrage  and  a  greater  benefit  from  lower  UNE  rates,  yet  is  held  to  a  lesser  compliance  standard. 

 1882  The  only  way  to  determine  whether  any  particular  circuit  qualifies  for  conversion  to  an  EEL  is  to  undertake 
 very  expensive  measurement  processes  with  respect  to  that  circuit.  .  .  .  [M]  easuring  the  traffic  mix  on  1,000  circuits  is  not  materially  less  expensive  per  circuit  than  measuring  the  traffic  mix  on  100  circuits.  AT&  T  Feb.  12,  2003  Ex 

 Parte  Letter  at  9  (emphasis  in  original). 
 1883  Verizon  Feb.  12,  2003  Ex  Parte  Letter  at  3;  see  also  BellSouth  Feb.  13,  2003  Ex  Parte  Letter  at  3  (seeking 
 further  study  of  the  feasibility  and  costs  of  traffic  measurement  as  well  as  the  revenue  thresholds).  The  explanation  by  the  competitive  LEC  proponents  of  the  proposal  that  the  two  percent  revenue  figure  is  based  on  the  section 

 251(  f)(  2)  suspension  of  certain  unbundling  obligations  is  unavailing,  as  the  two  percent  figure  in  that  section  of  the  Act  is  based  on  lines,  not  revenues;  is  designed  for  incumbent  LECs,  not  competitive  LECs;  and  addresses  a  wholly 
 different  set  of  administrative  burdens.  Cbeyond  et  al.  Feb.  12,  2003  Ex  Parte  Letter  at  5. 
 1884  See,  e.  g.,  Qwest  Feb.  13,  2003  Ex  Parte  Letter,  Attach.  at  1;  BellSouth  Jan.  31,  2003  Ex  Parte  Letter,  Attach.  2 
 at  1. 
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 percent  of  local  use  arrangements  (PLUs)  on  file  1885  to  be  overexclusive,  because  not  all  competitive  LECs  report  PLUs  on  local  interconnection  trunks,  and  because  it  has  the  same 
 usage  measurement  problems  as  those  described  above.  1886 
 618.  We  conclude  that  the  three  criteria  we  adopt  here  together  comprise  the  most  probative  and  administratively  reasonable  indicia  of  providing  qualifying  traffic.  We  reject 

 proposals  to  permit  access  to  UNEs  based  upon  partial  satisfaction  of  a  broader  number  of  indicators.  1887  For  example,  several  carriers  propose  allowing  requesting  carriers  to  obtain  UNEs 
 by  meeting  a  subset  of  a  broader  menu  of  compliance  indicia,  including  local  telephone  number  assignment;  offer[  ing]  local  voice,  local  data  and/  or  Internet  access  in  the  LATA;  and  the 
 presence  of  a  switch  that  is  not  exclusively  used  to  provide  long  distance  service  that  serves  the  circuit.  1888  Some  of  these  additional  indicia,  such  as  LERG  registration  of  switch  class  type,  are 
 problematic  for  the  reasons  we  describe  above,  or  are  inconsistent  with  the  qualifying  service  approach  that  we  adopt.  Moreover,  because  some  criteria  are  more  essential  to  providing 
 qualifying  service  than  others,  we  are  not  persuaded  that  an  approach  permitting  the  partial  satisfaction  of  a  list  of  factors  is  superior  to  our  approach  of  a  focused  list  of  mandatory 
 requirements.  If  a  carrier  had  a  local  number  assignment  and  collocations  but,  for  some  reason, 
 1885  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  Attach.  at  19  (filed  Nov.  14,  2002)  (Qwest  Nov.  14,  2002  Ex  Parte  Letter). 

 1886  ALTS  et  al.  Dec.  16,  2002  Ex  Parte  Letter,  Attach.  at  10  (explaining  that  some  competitive  LECs  use  meet-point 
 rather  than  trunking  arrangements). 
 1887  We  also  reject  the  other  proposed  iterations  of  service  eligibility  restrictions  on  the  record,  because  they  are 
 more  attenuated  from  implementing  the  goals  of  our  service  considerations.  For  example,  NuVox  submits  a  business  plan  test,  permitting  access  to  high-  capacity  UNEs  based  upon  a  general  determination  of  whether  a 

 competitive  LEC  offers  service  in  direct  competition  with  incumbent  LECs,  without  regard  as  to  whether  specific  facilities  are  used  as  part  of  that  offering.  Letter  from  John  J.  Heitmann,  NuVox,  to  Christopher  Libertelli,  Legal 
 Advisor  to  Chairman  Powell,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2-  3  (filed  Jan.  15,  2003)  (NuVox  Jan.  15,  2003  Ex  Parte  Letter).  We  expressly  reject  above  such  a  business  strategy-  specific  notion  of  impairment.  See 
 supra  Part  V.  B.  1. 
 1888  For  instance,  a  group  of  carriers  propose  that  circuits  be  made  available  as  UNEs  upon  certification  by  a 
 requesting  carrier  that  at  least  two  of  the  following  five  compliance  criteria  are  met: 

 the  circuit  is  connected  to  a  collocation  in  an  ILEC  end  office;  or  the  CLEC  has  active  local  interconnection  trunks  with  the  ILEC  in  the  LATA;  or 

 the  CLEC  offers  local  voice,  local  data  and/  or  Internet  access  in  the  LATA;  or  the  CLEC  assigns  a  local  telephone  number  associated  with  the  circuit;  or 
 the  circuit  is  not  served  by  a  switch  that  is  used  exclusively  to  provide  long  distance  service. 
 Letter  from  John  J.  Heitmann,  Counsel  for  Nuvox,  SNiP  LiNK,  Xspedius  and  KMC  Telecom,  to  Michelle  Carey,  Chief,  Competition  Policy  Division,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at 

 5-  6  (filed  Jan.  17,  2003).  Other  carriers  have  suggested  modified  versions  of  this  approach.  See,  e.  g.,  NuVox  Jan.  15,  2003  Ex  Parte  Letter  at  3-  4  (proposing  a  3  of  5  standard  or  a  2  plus  1  of  3  standard,  based  on  additional 
 compliance  with  one  of  two  or  more  alternative  criteria);  XO  Feb.  5,  2003  Ex  Parte  Letter,  Attach.  at  4  (proposing  that  four  out  of  five  criteria  must  be  met). 
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 no  longer  had  a  valid  certification  to  provide  service  or  local  interconnection,  that  carrier  should  not  be  eligible  for  a  high-  capacity  EEL  facility.  We  find  that  requiring  all  requesting  carriers 
 seeking  high-  capacity  EELs  to  satisfy  the  same  three  categories  of  criteria  provides  predictability  and  certainty,  and  will  ensure  that  the  audit  process  is  more  easily  administered  and,  therefore, 
 less  costly  to  both  incumbent  LECs  and  competitors. 
 619.  Finally,  we  do  not  endorse  the  requests  advanced  by  some  incumbent  LECs  for  additional  dialogue  on  architectural  solutions  with  the  goal  of  a  collaborative  resolution.  1889  In 

 the  many  months  since  the  issuance  of  the  temporary  restrictions  of  the  Supplemental  Order  Clarification,  as  well  as  the  issuance  of  the  January  24,  2001  Public  Notice,  and  the  Triennial 
 Review  NPRM,  the  Commission  has  amassed  through  numerous  pleadings,  ex  parte  meetings  and  an  industry  roundtable  a  considerable  record  of  the  pragmatic  difficulties  of  the  current  safe 
 harbors  and  the  risk  of  conversions.  1890  Now  that  we  have  answered  the  questions  regarding  service-  by-  service  analysis  that  led  to  the  interim  safe  harbors,  we  conclude  that  we  have  a 
 sufficient  record  to  resolve  eligibility  issues  by  issuing  findings  of  the  appropriate  criteria,  and  that  further  delay  would  retard  the  development  of  local  competition. 

 C.  Certification  and  Auditing 
 1.  Background 
 620.  In  order  to  allow  carriers  meeting  the  safe  harbors  set  forth  in  the  Supplemental  Order  Clarification  to  convert  tariffed  loop-  transport  combinations  to  UNE  rates,  the 

 Commission  established  a  framework  of  self-  certification  and  auditing.  1891  The  Commission  declined  to  identify  precise  terms  of  certification,  but  recognized  that  a  letter  sent  to  the 
 incumbent  LEC  is  a  practical  method.  1892  Further,  upon  receiving  a  request  from  a  requesting 

 1889  BellSouth  Feb.  13,  2003  Ex  Parte  Letter  at  1-  3  (contending  also  that  further  industry  dialogue  in  a  less  rushed 
 atmosphere  is  likely  to  result  in  an  improved  and  more  focused  proposal);  Verizon  Feb.  12,  2003  Ex  Parte  Letter  at  4  (asking  for  more  time  for  various  parties  to  analyze  proposals  and  provide  input  to  the  Commission  to  avoid 

 unintended  and  unanticipated  consequences);  Letter  from  William  P.  Barr,  Verizon,  to  Michael  K.  Powell,  Chairman,  FCC,  in  Letter  from  Ann  D.  Berkowitz,  Project  Manager    Federal  Affairs,  Verizon,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  6,  2003)  (Verizon  Feb.  6,  2003  Barr  Ex  Parte  Letter)  (asking  for  the  Commission  to  obtain  comment  on  the  various  proposals). 

 1890  Several  parties  note  that  the  issues  associated  with  access  to  EELs  are  not  new  and  do  not  warrant  further  delay. 
 See,  e.  g.,  Letter  from  John  J.  Heitmann,  Counsel  for  NuVox  and  SNiP  LiNK,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Feb.  12,  2003)  (noting  that  EEL  access  issues  have  been 

 extensively  vetted  in  the  Triennial  Review  proceeding  and  associated  proceedings);  AT&  T  Feb.  12,  2003  Ex  Parte  Letter  at  4  (arguing  that  the  Bells  have  now  had  years  to  submit  evidence  supporting  use  restrictions  generally  and 
 the  interim  rules  in  particular)  (emphasis  in  original). 
 1891  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9602-  04,  paras.  28-  33. 

 1892  Id.  at  9602-  03,  para.  29. 
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 carrier  certifying  to  meeting  one  of  the  safe  harbors,  the  incumbent  LEC  should  immediately  process  the  conversion.  1893 
 621.  The  Commission  also  found  that,  to  confirm  reasonable  compliance  with  the  local  usage  requirements  in  that  Order,  incumbent  LECs  may  conduct  limited  audits  only  to  the  extent 
 reasonably  necessary  to  determine  a  requesting  carriers  compliance  with  the  local  usage  options  identified  by  the  carrier.  1894  The  Commission  emphasized  that  incumbent  LECs  may  not  require 
 a  requesting  carrier  to  submit  to  an  audit  prior  to  provisioning  combinations  of  unbundled  loop  and  transport  network  elements.  1895  Moreover,  the  Commission  concluded  that  audits  will  not 
 be  routine  practice,  but  will  only  be  undertaken  when  the  incumbent  LEC  has  a  concern  that  a  requesting  carrier  has  not  met  the  criteria  for  providing  a  significant  amount  of  local  exchange 
 service.  1896  Relying  upon  broad  agreement  between  incumbent  and  competitive  LECs  in  that  proceeding  on  audit  procedures,  and  to  reduce  the  burden  on  requesting  carriers,  the  Commission 
 set  forth  additional  principles  providing  competitors  with  notice,  limiting  the  frequency  of  audits,  and  establishing  practical  recordkeeping  requirements.  1897 

 1893  Id.  at  9603-  04,  para.  31. 
 1894  Id.  at  9602-  03,  para.  29 
 1895  Id.  at  9603-  04,  para.  31. 
 1896  Id.  at  9603-  04  n.  86. 
 1897  The  Commission  found  that  incumbent  LECs  must  provide  at  least  30  days  written  notice  to  a  carrier  that  has 
 purchased  [an  EEL]  that  it  will  conduct  an  audit;  may  not  conduct  more  than  one  audit  of  the  carrier  in  any  calendar  year  unless  an  audit  finds  non-  compliance;  and  that  when  an  incumbent  LEC  provides  notice  of  an  audit 

 to  the  affected  carrier,  it  should  send  a  copy  of  the  notice  to  the  Commission  so  the  Commission  can  monitor  the  implementation.  These  carriers  also  agreed  that  incumbent  LECs  requesting  an  audit  should  hire  and  pay  for  an 
 independent  auditor  to  perform  the  audit,  and  that  the  competitive  LEC  should  reimburse  the  incumbent  LEC  if  the  audit  uncovers  non-  compliance  with  the  local  usage  options.  The  Commission  also  stated  its  expectation  that 
 requesting  carriers  will  maintain  appropriate  records  .  .  .  to  support  their  local  usage  certification,  but  emphasized  that  an  audit  should  not  impose  an  undue  financial  burden  on  smaller  requesting  carriers  that  may  not  keep 
 extensive  records,  and  found  that,  in  the  event  of  an  audit,  the  incumbent  LEC  should  verify  compliance  for  these  carriers  using  the  records  that  the  carriers  keep  in  the  normal  course  of  business.  Supplemental  Order 
 Clarification  at  9603-  04,  paras.  31-  32. 
 On  May  17,  2002,  NuVox  filed  a  Petition  for  Declaratory  Ruling  in  Docket  No.  96-  98  identifying  certain  auditing  issues,  and  seeking  further  declaration  from  the  Commission  regarding  auditing  procedures.  Pleading  Cycle 

 Established  for  Comments  on  NuVox,  Inc.  Petition  for  Declaratory  Ruling,  Public  Notice,  CC  Docket  No.  96-  98,  DA  02-  1302,  Public  Notice  (rel.  June  3,  2002).  Among  other  relief,  NuVox  requests  that  the  Commission  declare 
 that  an  independent  LEC  must  provide  requesting  carrier  proof  of  the  independence  of  the  third  party  auditor,  and  that  competitive  LECs  must  reimburse  the  incumbent  LEC  for  only  the  pro  rata  share  of  the  circuits  found  to  be 
 non-  compliant.  NuVox  and  other  carriers  make  reference  to  those  pleadings  in  their  comments  to  the  instant  proceeding,  and  we  address  the  relevant  portions  of  the  responsive  pleadings  in  this  Order. 
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 2.  Discussion 
 622.  We  adopt  certification  and  auditing  procedures  comparable  to  those  established  in  the  Supplemental  Order  Clarification  for  our  service  eligibility  criteria,  and  tailor  the  substantive 

 requirements  to  our  eligibility  restrictions,  as  set  forth  below.  Although  the  bases  and  criteria  for  the  service  tests  we  impose  in  this  Order  differ  from  those  of  the  Supplemental  Order 
 Clarification,  we  conclude  that  they  share  the  basic  principles  of  entitling  requesting  carriers  unimpeded  UNE  access  based  upon  self-  certification,  subject  to  later  verification  based  upon 
 cause,  are  equally  applicable.  Significantly,  because  the  eligibility  criteria  we  adopt  in  this  Order  are  based  upon  indicators  such  as  collocation  more  easily  verified  than  traffic 
 measurement  or  categorization  of  the  safe  harbors,  we  anticipate  that  these  procedures  can  effectively  limit  UNE  access  to  bona  fide  providers  of  qualifying  service  without  imposing 
 undue  burdens  upon  them. 
 a.  Certification 
 623.  We  conclude  that  requesting  carrier  self-  certification  to  satisfying  the  qualifying  service  eligibility  criteria  for  high-  capacity  EELs  is  the  appropriate  mechanism  to  obtain 

 promptly  the  requested  circuit,  and  consistent  with  our  findings  of  impairment.  1898  A  critical  component  of  nondiscriminatory  access  is  preventing  the  imposition  of  any  undue  gating 
 mechanisms  that  could  delay  the  initiation  of  the  ordering  or  conversion  process.  Unlike  the  situation  before  the  Commission  when  it  issued  the  Supplemental  Order  Clarification,  which 
 only  addressed  EEL  conversions,  new  orders  for  circuits  are  subject  to  the  eligibility  criteria.  Due  to  the  logistical  issues  inherent  to  provisioning  new  circuits,  the  ability  of  requesting 
 carriers  to  begin  ordering  without  delay  is  essential.  1899 
 624.  Before  accessing  (1)  a  converted  high-  capacity  EEL,  (2)  a  new  high-  capacity  EEL,  or  (3)  part  of  a  high-  capacity  commingled  EEL  as  a  UNE,  a  requesting  carrier  must  certify 

 to  the  service  criteria  set  forth  in  Part  VII.  B.  2.  b  in  order  to  demonstrate  that  it  is  a  bona  fide  provider  of  qualifying  service.  We  do  not  specify  the  form  for  such  a  self-  certification,  but  we 
 readopt  the  Commissions  finding  in  the  Supplemental  Order  Clarification  that  a  letter  sent  to  the  incumbent  LEC  by  a  requesting  carrier  is  a  practical  method.  1900 

 1898  No  certification  is  necessary  for  requesting  carriers  to  obtain  access  to  loops,  transport,  subloops,  and  other 
 stand-  alone  UNEs,  as  well  as  EELs  combining  lower-  capacity  loops,  although  carriers  must  provide  a  qualifying  service  over  those  UNEs  to  obtain  them.  See  supra  Part  VII.  B. 

 1899  If  a  requesting  carrier  certifies  that  it  will  provide  qualifying  services  over  high-  capacity  EELs  in  accordance 
 with  the  Commissions  rules,  an  incumbent  LEC  that  wishes  to  challenge  the  certification  may  not  engage  in  self-  help  by  withholding  the  facility  in  question.  The  success  of  facilities-  based  competition  depends  on  the  ability 

 of  competitors  to  obtain  the  unbundled  facilities  for  which  they  are  eligible  in  a  timely  fashion.  Thus,  an  incumbent  LEC  that  questions  the  competitors  certification  may  do  so  by  initiating  the  audit  procedures  set  forth  below. 

 1900  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9602-  03,  para.  29. 
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 b.  Auditing 
 625.  As  a  threshold  matter,  we  set  forth  basic  principles  regarding  carriers  rights  to  undertake  and  defend  against  audits.  However,  we  recognize  that  the  details  surrounding  the 

 implementation  of  these  audits  may  be  specific  to  related  provisions  of  interconnection  agreements  or  to  the  facts  of  a  particular  audit,  and  that  the  states  are  in  a  better  position  to 
 address  that  implementation.  1901  For  example,  to  the  extent  that  the  parties  dispute  the  definition  of  an  independent  auditor  and  whether  a  given  party  satisfies  the  test  for  independence,  the 
 more  appropriate  forum  for  this  determination  is  a  state  commission.  1902 
 626.  We  conclude  that  incumbent  LECs  should  have  a  limited  right  to  audit  compliance  with  the  qualifying  service  eligibility  criteria.  In  particular,  we  conclude  that 

 incumbent  LECs  may  obtain  and  pay  for  an  independent  auditor  to  audit,  on  an  annual  basis,  compliance  with  the  qualifying  service  eligibility  criteria.  1903  We  conclude  that  an  annual  audit 
 right  strikes  the  appropriate  balance  between  the  incumbent  LECs  need  for  usage  information  and  risk  of  illegitimate  audits  that  impose  costs  on  qualifying  carriers.  The  independent  auditor 
 must  perform  its  evaluation  in  accordance  with  the  standards  established  by  the  American  Institute  for  Certified  Public  Accountants  (AICPA),  which  will  require  the  auditor  to  perform  an 
 examination  engagement  and  issue  an  opinion  regarding  the  requesting  carriers  compliance  with  the  qualifying  service  eligibility  criteria.  1904  We  note  that,  because  the  concept  of 
 materiality  governs  this  type  of  audit,  the  independent  auditors  report  will  conclude  whether  the  competitive  LEC  complied  in  all  material  respects  with  the  applicable  service  eligibility 
 criteria.  1905  Consistent  with  standard  auditing  practices,  such  audits  require  compliance  testing  designed  by  the  independent  auditor,  which  typically  include  an  examination  of  a  sample 
 selected  in  accordance  with  the  independent  auditors  judgment. 

 1901  See,  e.  g.,  BellSouth  Opposition,  CC  Docket  No.  96-  98  at  2  (filed  June  3,  2002)  (reporting  that  BellSouth  filed  a 
 complaint  with  the  Georgia  Commission  on  May  13,  2002  requesting  the  Georgia  Commission  to  direct  NuVox  to  allow  the  audit  to  commence  immediately). 

 1902  See  NuVox  Petition  at  6-  7. 
 1903  See  NuVox  Petition  at  2  (proposing  that  incumbent  LECs  obtain  and  pay  for  the  services  of  an  independent 
 third  party  auditor). 
 1904  Letter  from  John  J.  Heitmann,  Counsel  for  NuVox,  to  Michelle  Carey,  Chief,  Competition  Policy  Division, 
 Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  6  (filed  Jan.  10,  2003)  (NuVox  Jan.  10,  2003  EELs  and  Auditing  Ex  Parte  Letter)  (proposing  that  Commission  should  require  AICPA-  compliance 

 auditor  to  perform  such  audits).  See  American  Inst.  of  Certified  Pub.  Accountants,  STATEMENTS  ON  STANDARDS  FOR  ATTESTATION  ENGAGEMENTS  NO.  10,  at    6.30  (Jan.  2001)  (AICPA  ATTESTATION  STANDARDS).  The  AICPA 
 also  has  standards  and  other  requirements  related  to  standards  for  determining  the  independence  of  an  auditor  shall  govern  the  audit  of  requesting  carrier  compliance. 

 1905  AICPA  ATTESTATION  STANDARDS  at    6.  36  (explaining  concept  of  materiality),  6.  64  (explaining  reporting 
 issues  related  to  material  noncompliance). 
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 627.  To  the  extent  the  independent  auditors  report  concludes  that  the  competitive  LEC  failed  to  comply  with  the  service  eligibility  criteria,  that  carrier  must  true-  up  any  difference  in 
 payments,  convert  all  noncompliant  circuits  to  the  appropriate  service,  and  make  the  correct  payments  on  a  going-  forward  basis.  In  addition,  we  retain  the  requirement  adopted  in  the 
 Supplemental  Order  Clarification  concerning  payment  of  the  audit  costs  in  the  event  the  independent  auditor  concludes  the  competitive  LEC  failed  to  comply  with  the  service  eligibility 
 criteria.  1906  Thus,  to  the  extent  the  independent  auditors  report  concludes  that  the  competitive  LEC  failed  to  comply  in  all  material  respects  with  the  service  eligibility  criteria,  the  competitive 
 LEC  must  reimburse  the  incumbent  LEC  for  the  cost  of  the  independent  auditor.  We  expect  that  this  requirement  should  provide  an  incentive  for  competitive  LECs  to  request  EELs  only  to  the 
 extent  permitted  by  the  rules  we  adopt  herein. 
 628.  Similarly,  to  the  extent  the  independent  auditors  report  concludes  that  the  requesting  carrier  complied  in  all  material  respects  with  the  eligibility  criteria,  the  incumbent 

 LEC  must  reimburse  the  audited  carrier  for  its  costs  associated  with  the  audit.  1907  We  expect  that  this  reimbursement  requirement  will  eliminate  the  potential  for  abusive  or  unfounded  audits,  so 
 that  incumbent  LEC  will  only  rely  on  the  audit  mechanism  in  appropriate  circumstances.  We  further  expect  that  these  reimbursement  requirements  will  ensure  the  audit  process  (and 
 importantly,  the  resolution  of  any  issues  arising  out  of  any  audits)  occurs  in  a  self-  executing  manner  with  minimal  regulatory  involvement. 

 629.  Although  we  do  not  establish  detailed  recordkeeping  requirements  in  this  Order,  we  do  expect  that  requesting  carriers  will  maintain  the  appropriate  documentation  to  support 
 their  certifications.  For  instance,  to  demonstrate  satisfaction  of  the  first  category  for  high-capacity  EELs  (authorization  to  provide  voice  service),  we  anticipate  that  state  certification 
 would  be  the  most  prevalent  form  of  documentation,  but  that  evidence  of  registration,  tariffing,  filing  of  fees,  or  other  regulatory  compliance  would  be  adequate  where  there  is  no  state 
 certification  requirement.  To  verify  that  the  EEL  circuit  terminates  into  a  section  251(  c)(  6)  collocation,  circuit  facility  assignment  on  the  order  would  be  sufficient  supporting  evidence.  1908 
 The  local  interconnection  component  of  the  third  criterion  can  be  established  after  examination  of  the  governing  interconnection  agreement  and  the  physical  circuit  connections.  We  emphasize 
 that  these  records  are  only  examples  of  the  documentation  that  carriers  should  keep,  and  not  intended  to  be  an  exhaustive  list.  Due  to  the  variation  in  telecommunications  systems  and 
 technology,  and  to  provide  flexibility  to  competitive  LECs  in  establishing  the  most  efficient 

 1906  Supplemental  Order  Clarification,  15  FCC  Rcd  at  9603-  04,  para.  31  (requiring  competitive  LECs  to  reimburse 
 the  incumbent  if  the  audit  uncovers  non-  compliance  with  the  local  usage  options.). 
 1907  We  note  that  audited  carriers  should  account  for  the  staff  time  and  other  appropriate  costs  for  responding  to  the 
 audit  (e.  g.,  collecting  data  in  response  to  the  auditors  inquiries,  meeting  for  interviews,  etc). 
 1908  See  Letter  from  Julia  O.  Strow,  Vice  President    Regulatory  &  Legislative  Affairs,  Cbeyond,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Jan.  6,  2003). 
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 architectural  arrangements  to  provide  local  voice  service,  we  do  not  adopt  any  of  the  specific  documentation  requirements  proposed  by  some  carriers  in  this  proceeding.  1909 
 D.  Modification  of  Existing  Network 
 1.  Background 
 630.  In  Iowa  Utilities  Board,  the  Eighth  Circuit  held  that  section  251(  c)(  3)  requires  unbundled  access  only  to  an  incumbent  LECs  existing  network    not  to  a  yet  unbuilt  superior 

 one.  1910  Specifically,  the  Eighth  Circuit  explained  that  incumbent  LECs  can  be  required  to  modify  their  facilities  to  the  extent  necessary  to  accommodate  interconnection  or  access  to 
 network  elements,  but  cannot  be  required  to  alter  substantially  their  networks  in  order  to  provide  superior  quality  interconnection  and  unbundled  access.  1911 

 631.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  its  authority  to  require  incumbent  LECs  to  engage  in  activities  necessary  to  activate  loops  that  are  not 
 currently  activated  in  the  network.  1912  The  Commission  also  asked  about  the  extent  to  which  incumbent  LECs  have  an  obligation  to  modify  their  existing  networks  in  order  to  provide  access 
 to  network  elements.  1913  Commenters  identified  several  specific  issues  regarding  the  interpretation  of  the  Eighth  Circuits  holding,  most  notably  in  which  situations  incumbent  LECs 
 have  responded  to  an  order  for  high-  capacity  loop  by  attaching  equipment  and  facilities  to  its  network,  or  could  issue  a  no  facilities  available  response;  whether  carriers  must  remove 
 equipment  from  a  line  in  order  to  condition  it;  and  the  extent  to  which  specially  constructed  transmission  facilities  are  subject  to  unbundling  obligations.  To  resolve  these  related  questions 
 about  the  scope  of  the  incumbent  LEC  network  that  must  be  unbundled  and  which  modifications  constitute  construction,  and  because  they  share  a  fundamental  relationship  to  the  definition  of 
 the  network,  we  address  them  together  in  this  section. 
 2.  Discussion 
 a.  Routine  Network  Modifications  to  Existing  Facilities 
 632.  We  require  incumbent  LECs  to  make  routine  network  modifications  to  unbundled  transmission  facilities  used  by  requesting  carriers  where  the  requested  transmission  facility  has 

 1909  See,  e.  g.,  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  Attach.  at  1  (filed  Feb.  13,  2003)  (Qwest  Feb.  13,  2003  Proposed  EELs  Safe  Harbors  Ex  Parte  Letter)  (listing  proposed  documentation  requirements,  including  the  Qwest-designated 

 26  code  for  each  local  interconnection  trunk  group). 
 1910  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  813. 

 1911  Id.  at  813  n.  33  (emphasis  added). 
 1912  Triennial  Review  NPRM,  16  FCC  Rcd  at  22805,  para.  52. 
 1913  Id.  at  22811-  12,  paras.  65-  66. 
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 already  been  constructed.  By  routine  network  modifications  we  mean  that  incumbent  LECs  must  perform  those  activities  that  incumbent  LECs  regularly  undertake  for  their  own  customers. 
 Routine  modifications,  however,  do  not  include  the  construction  of  new  wires  (i.  e.,  installation  of  new  aerial  or  buried  cable)  for  a  requesting  carrier.  The  routine  modification  requirement  that 
 we  adopt  today  resolves  a  controversial  competitive  issue  that  has  arisen  repeatedly,  in  both  this  proceeding  and  in  the  context  of  several  section  271  applications,  and  is  designed  to  provide 
 competitive  carriers  with  greater  certainty  as  to  the  availability  of  unbundled  high-  capacity  loops  and  other  facilities  throughout  the  country. 

 633.  Parties  in  the  record  disagree  where  the  boundary  exists  between,  on  one  hand,  modifying  the  loop  element  to  provide  competitive  LECs  with  access  to  all  the  functions  of  that 
 element,  1914  and,  on  the  other,  requiring  substantial  alteration  of  the  loop  facility  to  provide  superior  quality  access.  In  particular,  competitive  LECs  assert  that  certain  incumbent  LECs  have 
 taken  an  exceedingly  narrow  interpretation  of  their  obligations  to  furnish  high-  capacity  loops  and  request  that  the  Commission  clarify  the  scope  of  the  loop  unbundling  obligation.  1915  We 
 conclude  that  incumbent  LECs,  in  provisioning  high-  capacity  loop  facilities  to  competitors,  must  make  the  same  routine  modifications  to  their  existing  loop  facilities  that  they  make  for  their  own 
 customers.  This  conclusion  is  consistent  with  the  Eighth  Circuits  ruling.  Specifically,  requiring  incumbent  LECs  to  engage  in  activities  necessary  to  activate  loops  that  are  not  currently 
 activated  in  the  network  complies  with  the  Eighth  Circuits  holding  that  the  obligations  imposed  by  sections  251(  c)(  2)  and  251(  c)(  3)  include  modifications  to  the  incumbent  LECs  facilities  to 
 the  extent  necessary  to  accommodate  access  to  existing  network  elements  --  in  this  case,  high-  capacity  loops.  1916  Were  we  not  to  adopt  such  a  requirement,  the  incumbent  LECs  would 
 have  the  ability  to  dictate  the  parameters  of  their  unbundling  requirements  and  thereby  readily  thwart  competitors  ability  to  obtain  access  to  high-  capacity  loops. 

 634.  Due  to  the  continually  evolving  and  dynamic  nature  of  telecommunications  networks,  however,  we  reject  the  argument  that  our  rule  should  list  the  precise  electronics  that 
 the  incumbent  LEC  must  add  to  the  loop  in  order  to  transform  a  DS0  voice-  grade  loop  to  an  unbundled  DS1  loop.  Rather,  our  operating  principle  is  that  incumbent  LECs  must  perform  all 
 loop  modification  activities  that  it  performs  for  its  own  customers.  By  way  of  illustration,  we  find  that  loop  modification  functions  that  the  incumbent  LECs  routinely  perform  for  their  own 
 customers,  and  therefore  must  perform  for  competitors,  include,  but  are  not  limited  to, 
 1914  See  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  808-  09  (holding  that  providing  access  to  a  network  element  includes 
 the  full  functionality  of  that  element). 
 1915  See,  e.  g.,  NewSouth  Reply  at  38. 

 1916  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  813  n.  33.  Because  the  Eighth  Circuit  struck  down  the  Commissions 
 superior  quality  rules  and  that  decision  is  final,  we  conform  our  regulations  accordingly.  See  also  NewSouth  Reply  at  40.  NewSouth  also  proposes  that  the  Commission  clarify  that  existing  facilities  includes  incumbent  LEC 

 facilities  available  in  the  existing  service  area  where  the  request  is  made,  not  just  facilities  available  for  the  specific  origination  and  termination  points  for  the  element  requested.  NewSouth  Comments  at  40.  Rather  than  adopting 
 such  a  geographic  test,  however,  we  conclude  that  the  routine  modification  requirement  described  herein  more  accurately  defines  an  incumbent  LECs  responsibilities,  and,  further,  is  more  administratively  practical. 
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 rearrangement  or  splicing  of  cable;  1917  adding  a  doubler  or  repeater;  1918  adding  an  equipment  case;  1919  adding  a  smart  jack;  1920  installing  a  repeater  shelf;  adding  a  line  card;  and  deploying  a 
 new  multiplexer  or  reconfiguring  an  existing  multiplexer.  1921 
 635.  The  record  reveals  that  attaching  routine  electronics,  such  as  multiplexers,  apparatus  cases,  and  doublers,  to  high-  capacity  loops  is  already  standard  practice  in  most  areas 

 of  the  country.  1922  Moreover,  performing  such  functions  is  easily  accomplished.  The  record  shows  that  requiring  incumbent  LECs  to  make  the  routine  adjustments  to  unbundled  loops 
 discussed  above  that  modify  a  loops  capacity  to  deliver  services  in  the  same  manner  as  incumbent  LECs  provision  such  facilities  for  themselves  is  technically  feasible  1923  and  presents 

 1917  Letter  from  Stephen  W.  Crawford,  General  Counsel,  El  Paso  Global  Networks  to  Marlene  H.  Dortch,  Secretary, 
 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  2  (filed  Dec.  17,  2002)  (El  Paso  Dec.  17,  2002  Ex  Parte  Letter). 
 1918  Although  a  digital  signal  loses  its  shape  as  it  transverses  a  circuit  due  to  noise  and  attenuation,  a  repeater  can 
 read  the  weakened  and  distorted  signal  and  retransmit  it  at  the  proper  level  of  signal  strength.  NEWTONS  TELECOM  DICTIONARY  623  (defining  repeater).  A  DS1  loop  generally  requires  line  repeaters  to  be  placed  approximately 

 every  mile  along  its  cable  route  in  order  to  maintain  signal  integrity.  Virginia  State  Corporation  Commission  Staff  Reply  at  4. 

 1919  Line  repeaters  are  housed  in  apparatus  cases,  and  cable  pairs  are  either  spliced  into  a  case  to  serve  a  specific 
 end  user  via  an  assigned  service  terminal,  or  are  pre-  assigned  along  a  route  with  splicing  occurring  at  or  near  the  end  users  service  terminal  in  order  to  access  the  needed  cable  pairs.  Id.  at  4-  5. 

 1920  Mpower  Reply  at  30.  A  smart  jack  is  a  device  installed  on  the  customer  premises  that  tests  the  integrity  of  DS1 
 circuits,  and  is  activated  remotely  from  the  central  office  without  having  to  dispatch  a  technician  to  the  site.  NEWTONS  TELECOM  DICTIONARY  677  (18th  ed.  2002)  (defining  smart  jack). 

 1921  Letter  from  Mary  C.  Albert,  Vice  President    Regulatory  and  Interconnection,  Allegiance,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (dated  Sept.  30,  2002)  (Allegiance  Sept.  30,  2002  Ex  Parte  Letter),  in  Letter  from  Mary  C.  Albert,  Vice  President    Regulatory  Interconnection,  Allegiance,  to 

 Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (filed  Oct.  1,  2002);  El  Paso  Dec.  17,  2002  Ex  Parte  Letter,  Declaration  of  Javier  Galindo  (El  Paso  Galindo  Decl.)  at  paras.  10,  15;  see  also  Petitions  of 
 WorldCom,  Inc.,  Cox  Virginia  Telcom,  Inc.,  and  AT&  T  Communications  of  Virginia,  Inc.  Pursuant  to  Section  252(  e)(  5)  of  the  Communications  Act  for  Preemption  of  the  Jurisdiction  of  the  Virginia  State  Corporation 
 Commission  Regarding  Interconnection  Disputes  With  Verizon  Virginia,  Inc.  and  For  Expedited  Arbitration,  CC  Docket  Nos.  00-  218,  00-  249,  00-  251,  17  FCC  Rcd  27039,  27283  n.  1658  (WCB  2002)  (  Verizon  cannot  refuse 
 to  provision  a  particular  loop  by  claiming  that  multiplexing  equipment  is  absent  from  the  facility.  In  that  case,  Verizon  must  provide  the  multiplexing  equipment,  because  the  requesting  carrier  is  entitled  to  a  fully  functioning 
 loop.);  see  also  Letter  from  Patrick  J.  Donovan,  Counsel  for  Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (filed  Nov.  23,  2002)  (Cbeyond  Nov.  23,  2002  Ex  Parte  Letter). 

 1922  The  record  reflects  that  different  incumbent  LECs  perform  varying  degrees  of  network  modifications  when 
 provisioning  unbundled  high-  capacity  loops.  See,  e.  g.,  Letter  from  Patrick  J.  Donovan,  Counsel  for  Cbeyond,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  (Cbeyond  Dec.  16,  2002  No  Facilities 

 Ex  Parte  Letter),  Declaration  of  Richard  Batelaan  at  paras.  8-  9  (filed  Dec.  16,  2002)  (discussing  the  different  no  facilities  policies  of  Qwest,  SBC,  and  Verizon). 

 1923  See  Allegiance  Sept.  30,  2002  Ex  Parte  Letter  at  5,  Attach.  4  (citing  Verizon  Maryland,  Inc.  s  response  to  a 
 data  request  stating  [  g]  enerally  speaking,  Verizon  MD  does  not  reject  DS1  requests  for  end  users  due  to  no  facilities.). 
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 no  significant  operational  issues.  1924  In  fact,  the  routine  modifications  that  we  require  today  are  substantially  similar  activities  to  those  that  the  incumbent  LECs  currently  undertake  under  our 
 line  conditioning  rules.  1925  Specifically,  based  on  the  record,  high-  capacity  loop  modifications  and  line  conditioning  require  comparable  personnel;  can  be  provisioned  within  similar  intervals; 
 and  do  not  require  a  geographic  extension  of  the  network.  1926 
 636.  We  do  not  find,  however,  that  incumbent  LECs  are  required  to  trench  or  place  new  cables  for  a  requesting  carrier.  Requests  for  altogether  new  transmission  facilities,  whether 

 serving  an  existing  customer  or  along  a  new  route,  demand  far  more  planning,  engineering,  and  technical  resources  than  the  routine  modifications  discussed  above,  and  include  rights-  of-  way 
 issues,  greater  demands  for  on-  site  construction  personnel,  and  substantial  periods  of  actual  construction.  1927  We  believe,  however,  the  physical  work  and  technical  requirements  required  to 
 perform  routine  modifications  described  above  do  not  implicate  these  concerns  and  are  therefore  encompassed  in  the  incumbent  LECs  unbundling  requirements.  1928 

 637.  Further,  activities  such  as  accessing  manholes,  splicing  into  existing  cable,  deploying  bucket  trucks  to  reach  aerial  cable,  and  installing  equipment  casings  do  not  render  a 
 modification  a  substantial  alteration  or  constitute  the  provision  of  a  superior  unbuilt  network.  1929  Rather,  these  activities  can  be  described  as  comprising  the  routine,  day-  to-  day  work  of 
 managing  an  [incumbent  LECs]  network.  1930  That  is,  rather  than  encompassing  extensive 
 1924  See  Allegiance  Sept.  30,  2002  Ex  Parte  Letter  at  2. 
 1925  See  infra  Part  VII.  D.  2.  b.  Specifically,  in  the  UNE  Remand  Order,  the  Commission  held  that  incumbent  LECs 
 must  remove  certain  devices,  such  as  bridge  taps,  low-  pass  filters,  and  range  extenders,  from  basic  copper  loops  in  order  to  enable  the  requesting  carrier  to  offer  advanced  services.  UNE  Remand  Order,  15  FCC  Rcd  at  3775,  para. 

 172.  Although  Verizon  rejects  unbundled  DS1  loop  orders  where  there  is  no  apparatus  or  doubler  case  on  the  loop  claiming  that  installation  of  these  cases  is  complex    requiring  a  truck  roll  to  either  dig  up  existing  cable  or  a 
 bucket  to  reach  aerial  cables  in  order  to  splice  open  the  cable  sheath    it  must  perform  similar  activities  to  accommodate  line  conditioning  requests.  See  Letter  from  W.  Scott  Randolph,  Director    Regulatory  Affairs, 
 Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4-  5  (filed  Oct.  18,  2002)  (Verizon  Oct.  18,  2002  No  Facilities  Ex  Parte  Letter);  see  also  El  Paso  Galindo  Decl.  at  para.  14  (  When  an  ILEC 
 outside  plant  technician  conditions  a  copper  loop  for  xDSL  by  removing  bridged  tap  and  Load  Coils  in  the  loop,  the  work  is  generally  performed  by  the  same  staff  that  performs  rearrangement  for  DS1  services.). 

 1926  See  Cbeyond  Nov.  23,  2002  Ex  Parte  Letter  at  3.  Furthermore,  these  routine  modifications  are  generally 
 provided  by  incumbent  LECs  within  relatively  short  intervals.  Mpower  Reply  at  29  (stating  that  Verizons  customers  [  i]  n  almost  every  instance  .  .  .  can  order  service  and  have  it  installed  within  one  week.). 

 1927  Verizon  Oct.  18,  2002  No  Facilities  Ex  Parte  Letter  at  1-  6. 
 1928  See  Cbeyond  Dec.  16,  2002  Ex  Parte  Letter  at  2-  3  (describing  the  routine  tasks  that  Verizon  performs  to 
 operate,  maintain,  and  repair  its  network). 
 1929  See  Verizon  Oct.  18,  2002  No  Facilities  Ex  Parte  Letter  at  1-  6. 

 1930  Letter  from  Jake  E.  Jennings,  NewSouth,  to  Christopher  Libertelli,  Legal  Advisor,  Office  of  Chairman  Michael 
 K.  Powell,  FCC,  CC  Docket  Nos.  01-  338,  96-  98  at  3  (filed  Nov.  6,  2002)  (NewSouth  Nov.  6,  2002  Ex  Parte  Letter).  While  we  largely  agree  with  NewSouths  proposed  definition  of  UNE  availability,  we  believe  that  adopting 

 a  definition  that  attempts  to  list  various  pieces  of  electronics  provides  an  opportunity  for  gaming  by  incumbent  (continued.) 
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 delays  caused  by,  for  example,  securing  permits  or  rights-  of-  way,  constructing  new  manholes  or  conduits,  or  installing  altogether  new  terminals,  the  routine  modifications  described  above 
 generally  require  incumbent  LEC  personnel  to  visit  sites  within  the  existing  and  readily  accessible  incumbent  LEC  architecture.  We  therefore  conclude  that  the  local  loop  definition 
 includes  routine  modifications  and  we  require  incumbent  LECs  to  add  types  of  electronics  that  incumbent  LECs  ordinarily  attach  to  a  loop  for  a  customer  requiring  a  DS1  loop,  even  if  such 
 electronics  are  not  attached  to  a  particular  loop.  1931 
 638.  Several  carriers  comment  that  the  difficulties  in  accessing  facilities  includes  access  to  dark  fiber  loops  and  transport,  as  well  as  to  lit  DS1  loops.  1932  The  requirement  we 

 establish  for  incumbent  LECs  to  modify  their  networks  on  a  nondiscriminatory  basis  is  not  limited  to  copper  loops,  but  applies  to  all  transmission  facilities,  including  dark  fiber  facilities. 
 For  example,  several  state  commissions  have  rejected  incumbent  LEC  attempts  to  deny  competitive  access  to  dark  fiber  where  a  competitive  LEC  seeks  access  to  the  network  in  the 
 same  manner  as  the  incumbent  LEC.  1933  Incumbent  LECs  must  make  the  same  routine  modifications  to  their  existing  dark  fiber  facilities  for  competitors  that  they  make  for  their  own 
 customers    including  the  work  done  on  dark  fiber  to  provision  lit  capacity  to  end  users.  Although  the  record  before  us  does  not  support  the  enumeration  of  these  activities  in  the  same 
 detail  as  we  do  for  lit  DS1  loops,  we  encourage  state  commissions  to  identify  and  require  such  modifications  to  ensure  nondiscriminatory  access. 

 639.  We  reject  Verizons  argument  that  the  Commission  lacks  authority  to  compel  incumbent  LECs  to  deploy  new  equipment  to  meet  the  demands  of  a  competitive  carrier.  1934 
 (Continued  from  previous  page) 
 LECs,  i.  e.,  if  each  and  every  piece  of  equipment  that  modifies  a  DS0  loop  to  a  DS1  loop  is  not  listed,  the  incumbent  LEC  may  reject  an  order  for  no  facilities  available.  Id.  at  6-  7.  Instead,  in  addition  to  providing  several  examples  of 

 routine  modifications  incumbent  LECs  are  required  to  provide  we  describe  various  factors,  such  as  personnel  requirements  and  timeliness,  that  determine  whether  the  modification  is  routine  or  provides  access  to  a  superior 
 quality  network. 
 1931  We  agree  with  Mpower  that  requiring  incumbent  LECs  to  attach  electronics  that  they  routinely  provide  to  their 
 customers  does  not  constitute  the  provision  of  a  new  network  element.  Mpower  Reply  at  29-  30;  see  also  Covad  Comments  at  45;  NewSouth  Comments  at  19-  20;  ALTS  et  al.  Comments  at  116-  17;  Sprint  Comments  at  20,  26. 

 1932  See,  e.  g.,  Dominion  Jan.  28,  2003  Aamoth  Ex  Parte  Letter  at  5  (claiming  that  incumbent  LECs  change  their 
 standard  loop  provisioning  practice  by  laying  new  loop  fiber  without  terminating  it  in  order  to  avoid  compliance  with  unbundling  obligations). 

 1933  See,  e.  g.,  New  England  Telephone  and  Telegraph  Company  d/  b/  a  NYNEX,  Decision  D.  P.  U./  D.  T.  E.  96-  73/  74, 
 96-  75,  96-  80/  81,  96-  83,  96-  94    Phase  3,  at  48  (Mass.  DTE  Dec.  4,  1996)  (  We  therefore  see  little  distinction  between  a  splice  performed  on  behalf  of  NYNEX  and  that  performed  for  another  carrier.). 

 1934  Verizon  Comments  at  62;  see  also  Verizon  Reply  at  99  n.  310;  Letter  from  Susanne  Guyer,  Senior  Vice 
 President,  Federal  Regulatory  Affairs,  Verizon,  to  William  F.  Maher,  Chief,  Wireline  Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2  (filed  Jan.  17,  2003),  in  Letter  from  Susanne  Guyer,  Senior  Vice 

 President,  Federal  Regulatory  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC  (dated  Jan.  17,  2003)  (Verizon  Jan.  17,  2003  Guyer  Ex  Parte  Letter).  Verizons  policies  concerning  high-  capacity  loops  have  also  arisen 
 in  context  with  its  section  271  obligations,  i.  e.,  checklist  item  4    unbundled  local  loops.  In  the  Verizon  Pennsylvania  271  proceeding,  several  competing  carriers  alleged  that  Verizon  violates  the  Commissions  rules  by 
 (continued.) 
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 Verizon  contends  that  the  Commission  cannot  require  incumbent  LECs  to  add  capacity  or  circuits,  including  constructing  and  modifying  loops  by  adding  electronics,  where  these  facilities 
 do  not  already  exist.  1935  That  is,  Verizon  argues  that  these  modifications  are  not  necessary  to  provide  access  to  existing  UNEs,  they  are  the  creation  of  new  or  improved  UNEs  that  would 
 unlawfully  force  an  incumbent  LEC  to  provide  superior  quality  access.  1936  In  particular,  Verizon  claims  that  the  Commission  is  barred  from  requiring  incumbent  LECs  to  build  a  new  loop,  place 
 new  line  cards  or  electronics  on  a  circuit,  and  provide  line  conditioning,  because  these  are  all  substantial  alterations  to  an  ILECs  existing  network.  1937  We  disagree  and,  with  the  exception 
 (Continued  from  previous  page) 
 refusing  to  provide  high-  capacity  loops  as  UNEs  unless  all  necessary  equipment  and  electronics  are  present  on  the  line  and  at  the  customers  premises.  Application  of  Verizon  Pennsylvania  Inc.,  Verizon  Long  Distance,  Verizon 

 Enterprise  Solutions,  Verizon  Global  Networks  Inc.,  and  Verizon  Select  Services  Inc.  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  Pennsylvania,  CC  Docket  No.  01-  138,  Memorandum  Opinion  and  Order,  16  FCC 
 Rcd  17419,  17469-  70,  para.  91  (2001).  Ultimately,  the  Commission  was  unable  to  find  in  the  Verizon  Pennsylvania  271  proceeding  that  Verizons  high-  capacity  loop  policy  expressly  violates  the  Commissions  unbundling  rules.  Id. 
 at  17470,  para.  92  (  We  disagree  with  commenters  that  Verizons  policies  and  practices  concerning  the  provisioning  of  high-  capacity  loops,  as  explained  to  us  in  the  instant  proceeding,  expressly  violate  the  Commissions  unbundling 
 rules.).  Instead  the  Commission  relied  on  its  policy  that  new  interpretative  disputes  concerning  the  precise  content  of  an  incumbent  LECs  obligations  to  its  competitors,  or  disputes  that  the  Commissions  rules  have  not  yet 
 addressed  and  that  do  not  involve  per  se  violations  of  the  Act  or  the  Commissions  rules,  are  not  appropriately  dealt  with  in  the  context  of  a  section  271  proceeding.  To  the  extent  parties  have  specific  disputes  with  Verizons  actual 
 practice  in  implementing  its  high-  capacity  loop  policies,  the  Commission  explained  that  such  disputes  are  best  addressed  in  an  alternative  forum.  Id.  (citing  Verizon  Massachusetts  Order,  16  FCC  Rcd  at  8993,  para.  10). 

 1935  Verizon  states  that  it  will  fill  a  competitive  LECs  unbundled  high-  capacity  loop  order  where  the  facilities 
 necessary  to  provision  the  service  requested  exist  and  are  currently  available.  Verizon  Oct.  18,  2002  No  Facilities  Ex  Parte  Letter  at  2.  That  is,  Verizon  states  that  it  will  provision  unbundled  high-  capacity  loops  where  equipment 

 need  only  be  removed,  but  not  when  certain  equipment  must  be  added.  The  six  situations  where  Verizon  argues  it  is  not  required  to  undertake  construction,  i.  e.,  where  orders  are  rejected  for  no  facilities  available  are:  (1)  no 
 available  copper  spares,  (2)  no  apparatus/  doubler  case,  (3)  no  central  office  or  remote  terminal  repeater  equipment,  (4)  no  riser  cable  or  buried  drop,  (5)  no  fiber  or  multiplexer  (DS1s  and  DS3s  over  fiber),  or  (6)  no  capacity  for  the 
 service  requested  on  existing  multiplexer  (DS1s  and  DS3s  over  fiber).  Id.  at  3-  7.  The  percentages  of  competitive  LEC  high-  capacity  loop  orders  rejected  by  Verizon  between  January  and  June  2002  in  the  former  Bell  Atlantic 
 South  states  for  these  six  no  facilities  situations,  respectively,  are:  12%,  45.  2%,  4.  6%,  0.  4%,  30.  5%,  and  3.  5%.  Id. 

 1936  Verizon  Comments  at  63-  64  (emphasis  in  original).  Nonetheless,  Verizon  states  that  it  will  make  certain 
 changes  to  available  wires  in  order  to  provision  high-  capacity  loops.  Specifically,  in  its  comments,  Verizon  states  that: 

 Verizons  current  policy  is  to  add  certain  electronics  to  available  wire  or  fiber  facilities  to  fill  a  [competitive]  LECs  order  for  an  unbundled  DS1  loop.  When  Verizon  receives  an  order  for  an  unbundled 
 DS1  loop,  it  checks  whether  the  required  common  equipment  is  installed  in  the  central  office  and  has  available  ports  or  slots.  If  there  is  capacity,  Verizon  will  install  the  necessary  line  cards.  Verizon  also  will 
 cross-  connect  the  common  equipment  to  the  wire  or  fiber  facility  running  to  the  end  user.  At  the  end  users  premises,  Verizon  terminates  the  DS1  loop  in  the  appropriate  NID.  This  practice  goes  well  beyond 
 Verizons  legal  obligations  under  the  Act. 
 Id.  at  64  n.  218. 
 1937  Verizon  Comments  at  63. 
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 of  constructing  an  altogether  new  local  loop,  we  find  that  requiring  an  incumbent  LEC  to  modify  an  existing  transmission  facility  in  the  same  manner  it  does  so  for  its  own  customers  provides 
 competitors  access  only  to  a  functionally  equivalent  network,  rather  than  one  of  superior  quality.  Indeed,  incumbent  LECs  routinely  add  a  drop  for  a  second  line  without  objection.  1938  We 
 conclude  that  with  the  exception  of  building  a  loop  from  scratch  by  trenching  or  pulling  cable,  because  incumbent  LECs  are  able  to  provide  routine  modifications  to  their  customers  with 
 relatively  low  expense  and  minimal  delays,  requesting  carriers  are  entitled  to  the  same  attachment  of  electronics.  1939  Lastly,  to  the  extent  that  certain  routine  network  modifications  to 
 existing  loop  facilities  affect  loop  provisioning  intervals,  contained  in,  for  example,  section  271  performance  metrics,  we  expect  that  states  will  address  the  impact  of  these  modifications  as  part 
 of  their  recurring  reviews  of  incumbent  LEC  performance. 
 640.  The  Commissions  pricing  rules  provide  incumbent  LECs  with  the  opportunity  to  recover  the  cost  of  the  routine  network  modifications  we  require  here.  1940  State  commissions 

 have  discretion  as  to  whether  these  costs  should  be  recovered  through  non-  recurring  charges  or  recurring  charges.  We  note  that  the  costs  associated  with  these  modifications  often  are  reflected 
 in  the  recurring  rates  that  competitive  LECs  pay  for  loops.  Specifically,  equipment  costs  associated  with  modifications  may  be  reflected  in  the  carriers  investment  in  the  network 
 element,  and  labor  costs  associated  with  modifications  may  be  recovered  as  part  of  the  expense  associated  with  that  investment  (e.  g.,  through  application  of  annual  charge  factors  (ACFs)).  The 
 Commissions  rules  make  clear  that  there  may  not  be  any  double  recovery  of  these  costs  (i.  e.,  if  costs  are  recovered  through  recurring  charges,  the  incumbent  LEC  may  not  also  recover  these 
 costs  through  a  NRC).  1941 

 1938  We  note  that  it  is  only  with  respect  to  DS1  loops  that  certain  incumbent  LECs  seem  to  argue  that  they  are  under 
 no  obligation  to  modify  loops  from  their  existing  condition. 
 1939  The  record  reflects  that  Verizon  provides  the  routine  modifications  listed  above  with  minimal  delay,  in  most 
 cases,  to  their  own  retail  customers.  Covad  Comments  at  51.  We  also  dismiss  Verizons  claim  that  the  availability  of  special  access  services  on  a  par  with  Verizons  own  retail  customers  is  fully  compliant  with  the  Act,  and  in 

 particular  Verizons  recently  instituted  procedure  under  which  it  voluntarily  allows  carriers  whose  UNE  orders  are  rejected  for  lack  of  facilities  to  purchase  Verizons  special  access  service  and  later  convert  it  to  a  UNE  after  a 
 minimum  in-  service  period  (provided  it  meets  the  conversion  criteria  established  by  the  Commission).  Verizon  Jan.  17,  2003  Guyer  Ex  Parte  Letter  at  1,  3.  We  find  this  policy  to  be  discriminatory  on  its  face. 

 1940  See  Local  Competition  Order,  11  FCC  Rcd  at  15847,  para.  682  (  Directly  attributable  forward-  looking  costs 
 include  the  incremental  costs  of  facilities  and  operations  that  are  dedicated  to  the  element.  Such  costs  typically  include  the  investment  costs  and  expenses  related  to  primary  plant  used  to  provide  that  element.);  see  also  id.  at 

 15851,  para.  691  (  Costs  must  be  attributed  on  a  cost-  causative  basis.  Costs  are  causally-  related  to  the  network  element  being  provided  if  the  costs  are  incurred  as  a  direct  result  of  providing  the  network  elements,  or  can  be 
 avoided,  in  the  long  run,  when  the  company  ceases  to  provide  them.). 
 1941  47  C.  F.  R.    51.507(  e)  (  Nonrecurring  charges  shall  be  allocated  efficiently  among  requesting 
 telecommunications  carriers,  and  shall  not  permit  an  incumbent  LEC  to  recover  more  than  the  total  forward-  looking  economic  cost  of  providing  the  applicable  element.). 
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 641.  A  number  of  parties  filed  petitions  for  reconsideration  of  the  UNE  Remand  Order  asking  the  Commission  to  find  that  charges  for  certain  types  of  network  modification  (loop 
 conditioning,  unbundling  of  IDLC  loops)  were  inconsistent  with  the  Commissions  TELRIC  pricing  rules.  1942  We  deny  these  petitions.  The  petitions  raise  complicated  economic  and 
 technical  issues  that  the  Commission  would  prefer  to  address  on  a  more  complete  and  up-  to-  date  record.  Accordingly,  we  will  include  these  issues  in  the  Commissions  upcoming  proceeding  on 
 TELRIC-  related  issues.  In  the  interim,  we  leave  it  to  state  commissions  to  decide  in  the  first  instance  whether  a  particular  cost  should  be  recovered  from  a  competitive  LEC  through  a 
 recurring  charge,  a  non-  recurring  charge,  or  not  at  all,  in  accordance  with  the  principles  identified  above.  1943  A  state  commission  could  decide,  for  example,  that  loop  conditioning  costs 
 should  be  recovered  through  a  NRC  only  in  extraordinary  situations,  such  as  removing  load  coils  on  loops  that  exceed  18,000  feet  in  length,  1944  and  that  any  other  conditioning  costs  should  be 
 recovered  in  recurring  charges  just  like  other  loop  maintenance  costs. 
 b.  Line  Conditioning 
 642.  As  noted  above,  we  conclude  that  incumbent  LECs  must  provide  access,  on  an  unbundled  basis,  to  xDSL-  capable  stand-  alone  copper  loops  because  competitive  LECs  are 

 impaired  without  such  loops.  1945  Such  access  may  require  incumbent  LECs  to  condition  the  local  loop  for  the  provision  of  xDSL-  capable  services.  1946  Accordingly,  we  readopt  the  Commissions 

 1942  See  Petition  of  MCI  WorldCom  Feb.  17,  2000  Petition  for  Reconsideration  at  15-  18  (loop  conditioning); 
 Rhythms  Netconnections,  Inc.  and  Covad  Communications  Company  Joint  Petition  for  Reconsideration,  CC  Docket  Nos.  95-  185,  96-  98  (filed  Jan.  21,  2000)  (loop  conditioning);  @Link  Networks,  Inc.  et  al.  Joint  Petition  for 

 Reconsideration,  CC  Docket  No.  96-  98  (filed  Feb.  17,  2000)  (loop  conditioning);  McLeodUSA  Telecommunications  Services,  Inc.  Petition  for  Reconsideration,  CC  Docket  No.  96-  98  (filed  Feb.  17,  2000) 
 (unbundling  of  IDLC  loops). 
 1943  Accordingly,  we  grant  WorldComs  Petition  for  Clarification  to  the  extent  it  seeks  clarification  that  states  have 
 discretion  to  conclude  that  loop  conditioning  costs  are  not  forward-  looking  costs  or  that  they  are  more  appropriately  recovered  through  recurring  charges  for  the  loop.  See  Petition  of  MCI  WorldCom  Feb.  17,  2000  Petition  for 

 Clarification  at  13-  15. 
 1944  The  Commission  recognized  in  the  UNE  Remand  Order  that  networks  built  today  should  not  require  voice-transmission 
 enhancing  devices  on  loops  of  18,000  feet  or  shorter.  UNE  Remand  Order,  15  FCC  Rcd  at  3784,  para.  193. 

 1945  See  supra  Part  VI.  A.  4.  a.(  v)(  a). 
 1946  In  the  UNE  Remand  Order,  the  Commission  made  clear  that  incumbent  LECs  must  condition  loops  to  allow 
 requesting  carriers  to  offer  advanced  services,  and  identified  the  removal  of  bridge  taps,  load  coils,  and  similar  devices  as  part  of  this  obligation.  UNE  Remand  Order,  15  FCC  Rcd  at  3775,  para.  172.  The  Commission 

 specifically  rejected  the  contention  that  the  Eighth  Circuits  holding  on  superior  quality  overturned  the  rules  requiring  incumbents  to  provide  conditioned  loops  even  where  the  incumbent  itself  is  not  providing  advanced 
 services  to  those  customers.  Id.  at  3775,  para.  173  (  We  find  that  loop  conditioning,  rather  than  providing  a  superior  quality  loop,  in  fact  enables  a  requesting  carrier  to  use  the  basic  loop.).  The  Commission  subsequently 
 refined  the  conditioning  obligation  to  cover  loops  of  any  length,  to  recognize  the  potential  degradation  of  analog  voice  service,  and  to  enable  incumbent  LECs  to  charge  for  conditioning  loops.  Line  Sharing  Order,  14  FCC  Rcd 
 20912,  20951-  53,  paras.  81-  87. 
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 previous  line  and  loop  conditioning  rules  for  the  reasons  set  forth  in  the  UNE  Remand  Order.  1947  Line  conditioning  is  necessary  because  of  the  characteristics  of  xDSL  service    that  is,  certain 
 devices  added  to  the  local  loop  in  order  to  facilitate  the  provision  of  voice  service  disrupt  the  capability  of  the  loop  in  the  provision  of  xDSL  services.  In  particular,  bridge  taps,  load  coils, 
 and  other  equipment  disrupt  xDSL  transmissions.  1948  Because  providing  a  local  loop  without  conditioning  the  loop  for  xDSL  services  would  fail  to  address  the  impairment  competitive  LECs 
 face,  we  require  incumbent  LECs  to  provide  line  conditioning  to  requesting  carriers. 
 643.  Line  conditioning  does  not  constitute  the  creation  of  a  superior  network,  as  some  incumbent  LECs  argue.  1949  Instead,  line  conditioning  is  properly  seen  as  a  routine  network 

 modification  that  incumbent  LECs  regularly  perform  in  order  to  provide  xDSL  services  to  their  own  customers.  As  noted  above,  incumbent  LECs  must  make  the  routine  adjustments  to 
 unbundled  loops  to  deliver  services  at  parity  with  how  incumbent  LECs  provision  such  facilities  for  themselves.  Similarly,  in  order  to  provide  xDSL  services  to  their  own  customers,  incumbent 
 LECs  condition  the  customers  local  loop.  1950  Thus,  line  conditioning  is  a  term  or  condition  that  incumbent  LECs  apply  to  their  provision  of  loops  for  their  own  customers  and  must  offer  to 
 requesting  carriers  pursuant  to  their  section  251(  c)(  3)  nondiscrimination  obligations.  We  therefore  agree  with  the  commenters  that  argue  that  requiring  the  conditioning  of  xDSL-  capable 
 loops  is  not  mandating  superior  access,  1951  and  reject  Verizons  renewed  challenge  that  the  Commission  lacks  authority  to  require  line  conditioning.  1952  Competitors  cannot  access  the 
 loops  inherent  features,  functions,  and  capabilities  unless  it  has  been  stripped  of  accretive  devices.  We  therefore  view  loop  conditioning  as  intrinsically  linked  to  the  local  loop  and 
 include  it  within  the  definition  of  the  loop  network  element.  1953 

 1947  We  note  that  the  USTA  court  did  not  expressly  opine  on  the  Commissions  line  and  loop  conditioning  rules. 
 1948  See  Telcordia  Technologies,  Inc.  NOTES  ON  DSL  at  2-  10  to  2-  16  (describing  limitations  of  xDSL  service); 
 Padmanand  Warrier  and  Balaji  Kumar,  XDSL  ARCHITECTURE  95-  97  (2000)  (describing  the  effect  of  bridge  taps,  load  coils,  various  gauges  of  copper  cable,  and  analog/  digital  conversions  on  xDSL  transmissions);  see  also  Line 

 Sharing  Order,  14  FCC  Rcd  at  20951-  52,  para.  83. 
 1949  See  Verizon  Jan.  17,  2003  Guyer  Ex  Parte  Letter  at  3-  4  (arguing  that  line  conditioning  constitutes  the  creation 
 of  a  superior  network). 
 1950  We  note  that  all  BOCs  offer  xDSL  service  throughout  their  service  areas.  See,  e.  g.,  Verizon,  Verizon  Online 
 DSL  for  Your  Home  Including  Personal  or  Office  Use  and  Price  Packages  for  DSL,  <http://  www22.  verizon.  com/  ForHomeDSL/  channels/  dsl/  forhomedsl.  asp>  (describing  Verizons  xDSL  offerings  for 

 residential  customers). 
 1951  See,  e.  g.,  NuVox  et  al.  Reply  at  43;  WorldCom  Reply  at  42-  43. 

 1952  Verizon  Comments  at  63  (arguing  that  loop  conditioning  plainly  is  an  unlawful  requirement  to  provide  a 
 superior  quality  network.).  More  specifically,  we  do  not  accept  Verizons  contention  that  line  conditioning  is  a  significant  construction  activity  that  provides  a  superior  quality  network  facility.  Jan.  17,  2003  Verizon  Guyer 

 Ex  Parte  Letter  at  4. 
 1953  As  the  Commission  noted  in  the  UNE  Remand  Order,  the  Eighth  Circuit  expressly  affirmed  the  Commissions 
 determination  that  section  251(  c)(  3)  requires  incumbent  LECs  to  provide  modifications  to  their  facilities  in  order  to  (continued.) 
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 644.  As  a  final  matter,  we  determine  that  requiring  incumbent  LECs  to  perform  line  conditioning  advances  our  section  706  goals.  1954  Specifically,  line  conditioning  speeds  the 
 deployment  of  advanced  services  by  ensuring  that  competitive  LECs  are  able  to  obtain,  as  a  practical  matter,  a  local  loop  UNE  with  the  features,  functions,  and  capabilities  necessary  to 
 provide  broadband  services  to  the  mass  market.  Consistent  with  our  analysis  for  mass  market  loops,  then,  we  conclude  that  the  unbundling  obligations  of  incumbent  LECs  include 
 conditioning  loops  for  the  provision  of  xDSL  services. 
 c.  Special  Construction  of  Transmission  Facilities 
 645.  We  do  not  require  incumbent  LECs  to  construct  transmission  facilities  so  that  requesting  carriers  can  access  them  as  UNEs  at  cost-  based  rates.  As  the  Commission  concluded 

 in  the  UNE  Remand  Order,  although  an  incumbent  LECs  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.  1955  Although  we  recognize  that  our  conclusion  in  this  Order  not  to  unbundle  inter-  network  transport  facilities,  including  circuits  from  the  incumbent  LEC  network  to  CMRS 
 to  base  stations  and  mobile  switching  centers,  will  diminish  the  significance  of  this  issue  for  many  commenters,  the  issues  surrounding  special  construction  play  an  important  role  in 
 infrastructure  growth  for  new  channel  termination  and  transport  facilities. 
 646.  At  present,  incumbent  LECs  generally  offer  to  build  out  transmission  facilities  to  a  customers  specific  needs  through  the  special  construction  provisions  of  their  special  access 

 tariffs  or  a  stand-  alone  special  construction  tariff.  1956  These  provisions  typically  contain  NRCs  and  termination  liabilities  over  a  fixed  term  to  ensure  compensation  in  the  event  that  the 
 customer  defaults  or  otherwise  cancels  its  contract  prior  to  the  expiration  of  its  term  commitment.  1957  Because  our  unbundling  rules  do  not  require  incumbent  LECs  to  be 
 construction  agents  for  requesting  carriers,  this  limitation  on  the  incumbent  LEC  unbundling 
 (Continued  from  previous  page) 
 accommodate  access  to  network  elements.  UNE  Remand  Order,  15  FCC  Rcd  at  3775,  para.  173  (citing  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  813,  n.  33).  With  respect  to  making  routine  network  modifications,  the  Eighth  Circuit 

 stated:  Although  we  strike  down  the  Commission's  rules  requiring  incumbent  LECs  to  alter  substantially  their  networks  in  order  to  provide  superior  quality  interconnection  and  unbundled  access,  we  endorse  the  Commission's 
 statement  that  the  obligations  imposed  by  sections  251(  c)(  2)  and  251(  c)(  3)  include  modifications  to  incumbent  LEC  facilities  to  the  extent  necessary  to  accommodate  interconnection  or  access  to  network  elements.    Iowa  Utils. 
 Bd.  v.  FCC,  120  F.  3d  at  813,  n.  33  (citing  Local  Competition  Order,  11  FCC  Rcd  at  15602-  03,  para.  198). 
 1954  As  we  noted  in  our  unbundling  analysis  for  mass  market  loops,  section  706  informs  the  manner  in  which  we 
 craft  our  unbundling  obligations.  See  supra  Part  VI.  A.  4.  a.(  iv). 
 1955  UNE  Remand  Order,  15  FCC  Rcd  at  3843,  para.  324. 

 1956  These  facilities  include  entrance  facilities,  connections  from  the  incumbent  LEC  tandem  office  to  a  CMRS 
 mobile  base  station,  and  other  inter-  network  facilities  for  which  no  unbundling  is  required.  See  supra  Part  VI.  C. 
 1957  See,  e.  g.,  National  Exchange  Carriers  Association,  Tariff  FCC  No.  3  (Special  Construction),    2.6.4. 
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 obligation  provides  a  critical  safeguard  against  excessive  unbundling  at  UNE  prices.  1958  To  the  extent  that  commenters  require  such  special  construction  and  new  facilities,  they  may  purchase 
 this  as  a  service  from  the  incumbent  LEC  special  access  tariff. 
 647.  We  reject  the  argument  advanced  by  certain  incumbent  LECs,  however,  that  specially  constructed  facilities,  once  constructed,  are  to  be  permanently  exempted  from 

 unbundling  obligations.  These  carriers  contend  that  all  of  their  SONET  rings  are  built  to  the  customers  definitive  request,  and  that  such  customized  facilities  are  not  required  to  be 
 unbundled  by  future  requesting  carriers.  1959  In  support  of  this  position,  the  incumbent  LECs  rely  heavily  on  the  UNE  Remand  Orders  statement  that  [  n]  otwithstanding  the  fact  that  we  require 
 incumbents  to  unbundle  high-  capacity  transmission  facilities,  we  reject  Sprints  proposal  to  require  incumbent  LECs  to  provide  unbundled  access  to  SONET  rings.  1960  Regardless  of  the 
 Commissions  decision  not  to  adopt  a  specific  proposal  in  a  prior  proceeding,  we  clarify  that  an  incumbent  LECs  unbundling  obligation  includes  all  deployed  transmission  facilities  in  its 
 network,  unless  specifically  exempted  in  this  Order.  1961  So  long  as  a  requesting  carrier  seeks  access  to  an  already  existing  transmission  facility  for  which  it  is  impaired,  we  do  not  deny  access 
 simply  because  the  facility  was  constructed  to  the  specifications  of  that  carrier  or  another  carrier. 
 648.  To  ensure  that  no  incumbent  LEC  is  obligated  to  build  out  facilities  at  TELRIC  pricing,  we  clarify  that  the  tariffed  termination  liabilities  for  special  construction  apply  to  the 

 conversion  of  special  access  circuits  built  to  customer  specification.  In  this  manner,  no  incumbent  LEC  will  be  uncompensated  for  constructing  facilities    the  tariffed  non-  recurring 
 charges  and  termination  liabilities  that  protect  incumbent  LECs  from  uncompensated  build-  outs  where  a  competitor  seeks  to  terminate  a  contract  provide  the  same  protection  against  UNE 
 conversion.  1962  Competitors  have  commented  broadly  that  no  termination  liabilities  should  apply 
 1958  See,  e.  g.,  Sprint  Comments  at  54  (recommending  conditions  where  an  incumbent  LEC  is  obligated  to  undertake 
 construction  that  include  where  the  requesting  carrier  is  willing  to  pay  TELRIC-  based  non-  recurring  charges). 
 1959  BellSouth  Comments  at  56-  57;  BellSouth  Reply  at  41-  42;  see  also  Qwest  Comments  at  40  (explaining  that  it 
 undertook  construction  for  CMRS  providers  pursuant  to  the  specification  of  those  carriers);  Letter  from  John  W.  Kure,  Executive  Director    Federal  Policy  and  Law,  Qwest,  to  Magalie  Roman  Salas,  Secretary,  FCC,  CC  Docket 

 No.  96-  98,  Attach.  at  3  (filed  Sep.  26,  2001)  (arguing  that  optic  fiber  rings  built  for  wireless  carriers  are  not  part  of  the  Qwest  ubiquitous  transport  network.).  As  we  explain  in  Part  VI.  C.,  supra,  our  interoffice  transport  rules  are 
 technology  neutral,  and  SONET  rings  are  subject  to  unbundling  obligations  in  the  same  manner  as  any  other  transport  facility.  Although  many  commenters  raise  issues  of  special  construction  and  SONET  ring  unbundling  in 
 the  context  of  CMRS  provider  access  to  UNEs,  our  discussion  here  addresses  all  facilities. 
 1960  BellSouth  Reply  at  42  (citing  UNE  Remand  Order,  15  FCC  Rcd  at  3843,  para.  324);  Qwest  Comments  at  40. 

 1961  We  affirm  that  for  those  facilities  that  incumbent  LECs  do  not  have  to  provide  on  an  unbundled  basis  to 
 competitors,  incumbent  LECs  may  deploy  them  in  their  networks  without  making  them  available  as  UNEs  on  a  nondiscriminatory  basis. 

 1962  Accordingly,  the  incumbent  LEC  concerns  about  lack  of  compensation  are  misplaced.  See,  e.  g.,  Qwest 
 Comments  at  40  (  Qwest  agrees  to  undertake  this  construction  only  because  the  CMRS  providers  promised  to  compensate  Qwest  the  tariffed  price  for  these  circuits.  Qwest  would  not  have  constructed,  nor  would  it  have  been 

 obligated  under  the  Commissions  rules  to  construct,  the  circuits  at  the  non-  compensatory  rates  demanded  by  the  CMRS  providers.)  (citations  omitted). 
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 to  any  conversions  from  special  access  to  UNEs.  1963  While  much  of  their  focus  appears  directed  toward  those  penalties  triggered  by  long-  term  contracts,  including  stand-  alone  loop  facilities,  we 
 are  not  persuaded  to  grant  them  relief  from  termination  liabilities  for  special  construction.  1964 
 VIII.  REMAINING  ISSUES 
 A.  Section  271  Issues 
 1.  Background 
 649.  As  detailed  above,  section  251  of  the  Act  is  the  source  of  incumbent  LECs  unbundling  obligations.  Section  251(  c)(  3)  requires  all  incumbent  LECs  (including  BOCs)  to 

 provide  nondiscriminatory  access  to  network  elements  on  an  unbundled  basis  at  any  technically  feasible  point  on  rates,  terms,  and  conditions  that  are  just,  reasonable,  and  nondiscriminatory.  1965 
 Section  251(  d)(  2)  directs  the  Commission  to  determine  whether  access  to  particular  proprietary  elements  is  necessary  and  whether  the  unavailability  of  non-  proprietary  elements  would  impair  a 
 competitor's  ability  to  provision  service.  1966  These  section  251  obligations  are  referenced  and  incorporated  as  obligations  of  BOCs  under  section  271(  c)(  2)(  B)(  ii)  of  the  Act.  1967 

 650.  Section  271  establishes  both  the  procedures  by  which  a  BOC  may  apply  to  provide  interLATA  services  in  one  of  its  in-  region  states  and  the  substantive  standards  by  which 
 that  application  must  be  judged.  In  particular,  section  271(  c)(  2)(  B)  of  the  Act  specifies  the  competitive  checklist  of  access  and  interconnection  requirements  that  BOCs  must  meet  before 
 they  are  allowed  to  offer  in-  region  long-  distance  services.  1968  Four  of  these  checklist  items  relate  to  network  elements  in  earlier  orders  the  Commission  has  deemed  to  be  UNEs  under  the 
 standards  of  section  251(  c)(  3).  In  particular,  checklist  items  4  through  6  and  10  require:  [  l]  ocal  loop  transmission  from  the  central  office  to  the  customers  premises,  unbundled  from  local 

 1963  See,  e.  g.,  NuVox  et  al.  Reply  at  52  (  As  part  of  this  [fresh  look]  proposal,  all  special  access  circuits  (whether 
 equivalent  to  standalone  UNEs,  EELs  or  some  other  UNE  combination)  should  be  subject  to  conversion  without  termination  penalties  or  imposition  of  nonrecurring  charges  other  than  a  cost-  based  conversion  charge  designed 

 exclusively  to  recover  administrative  expenses  associated  with  converting  associated  billing  from  special  access  to  UNE  billing.);  ALTS  et  al.  Comments  at  103  (  Furthermore,  the  FCC  should  mandate  that  no  termination  liability 
 charges  are  to  be  assessed  to  CLECs  converting  circuits  to  UNE  pricing.) 
 1964  We  address  the  specific  issue  of  granting  fresh  look  relief  for  conversions  of  EELs  ordered  during  the  vacatur 
 of  the  Commissions  combination  rules  in  Part  VIII.  C.  below. 
 1965  47  U.  S.  C.    251(  c)(  3). 

 1966  Id.    252(  d)(  2).  We  note  that  to  the  extent  an  incumbent  LEC  is  providing  network  elements  pursuant  to 
 section  251(  c)(  3),  section  252(  d)(  1)  further  requires  that  it  provide  such  elements  at  rates  that  are  nondiscriminatory  and  cost-  based.  Id.    252(  d)(  1). 

 1967  Id.    271(  c)(  2)(  B)(  ii). 
 1968  Id.    271(  c)(  2)(  B). 
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 switching  or  other  services;  1969  [  l]  ocal  transport  from  the  trunk  side  of  a  wireline  local  exchange  carrier  switch  unbundled  from  switching  or  other  services;  1970  [  l]  ocal  switching 
 unbundled  from  transport,  local  loop  transmission,  or  other  services,  1971  and  [  n]  ondiscriminatory  access  to  databases  and  associated  signaling  necessary  for  call  routing  and 
 completion.  1972 
 651.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  how  the  access  requirements  specified  in  the  section  271  competitive  checklist  relate  to  the  unbundling 

 requirements  derived  from  sections  251(  c)(  3)  and  251(  d)(  2).  The  Commission  first  noted  its  conclusion  in  the  UNE  Remand  Order  that  BOCs  must  continue  to  provide  access  to  those 
 network  elements  described  in  checklist  items  4-  6  and  10,  even  if  such  access  is  not  mandated  under  section  251  (and  checklist  item  2).  1973  The  Commission  also  concluded,  in  that  Order,  that 
 market  prices  should  be  permitted  to  prevail  for  such  network  elements,  rather  than  requiring  forward-  looking  prices.  1974  The  Triennial  Review  NPRM  sought  additional  comment  on  these 
 conclusions,  on  how  to  evaluate  a  checklist  item  where  there  is  no  unbundling  requirement  for  the  network  element  that  corresponds  to  that  checklist  item,  and  on  the  appropriateness  of 
 evaluating  a  tariffed  service  that  corresponds  to  that  network  element.  1975 
 652.  Some  commenters  seek  to  alter  the  Commissions  determination  in  the  UNE  Remand  Order  that  section  271  establishes  a  separate  BOC  access  obligation  for  network 

 elements  no  longer  listed  under  section  251(  c)(  3)  and  its  conclusion  that  the  marketplace,  rather  than  our  TELRIC  methodology,  should  determine  the  price  for  delisted  network  elements  under 
 section  271.  For  example,  Verizon  argues  that  once  the  Commission  has  determined  that  a  network  element  is  not  necessary  under  section  251(  d)(  2),  the  corresponding  checklist  item 
 should  be  construed  as  being  satisfied.  1976  Several  competitive  carriers  counter  that  section  271 
 1969  Id.    271(  c)(  2)(  B)(  iv). 

 1970  Id.    271(  c)(  2)(  B)(  v). 
 1971  Id.    271(  c)(  2)(  B)(  vi). 
 1972  Id.    271(  c)(  2)(  B)(  x). 
 1973  We  note  that  section  271(  c)(  2)(  B)(  ii)  s  requirement  that  BOCs  provide  nondiscriminatory  access  to  network 
 elements  is  referred  to  herein  as  checklist  item  2. 
 1974  UNE  Remand  Order,  15  FCC  Rcd  at  3906,  para.  473,  see  also  Triennial  Review  NPRM,  16  FCC  Rcd  at  22814, 
 para.  72. 
 1975  Triennial  Review  NPRM,  16  FCC  Rcd  at  22814,  para.  72;  see  also  Bell  Atlantic  New  York  271  Order,  15  FCC 
 Rcd  at  4126-  27,  para.  340. 
 1976  Verizon  Comments  at  66-  67.  Verizon  argues,  in  the  alternative,  that  the  Commission  should  forbear  from 
 applying  checklist  items  (4)  through  (6)  and  (10)  once  the  corresponding  elements  no  longer  need  to  be  unbundled  under  section  251(  d)(  2).  Verizon  Petition  for  Forbearance  of  the  Verizon  Telephone  Companies  Pursuant  to 

 Section  160(  c),  CC  Docket  01-  338  at  3  (filed  July  29,  2002).  We  do  not  address  Verizons  forbearance  petition  in  this  Triennial  Review  proceeding.  Rather,  we  will  address  the  petition  separately  consistent  with  the  procedures 
 outlined  in  section  10  of  the  Act. 
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 requires  BOCs  to  provide  access  to  loops,  switching,  transport,  and  signaling  regardless  of  impairment  under  section  251.  1977  Z-  Tel  further  argues  that  competitors  are  entitled  to  access  to 
 loops,  switching,  transport,  and  signaling  at  TELRIC  rates,  even  if  the  Commission  were  to  remove  these  items  from  the  list  of  UNEs  under  section  251.  1978  For  the  reasons  outlined  below, 
 we  reaffirm  that  BOCs  have  an  independent  obligation,  under  section  271(  c)(  2)(  B),  to  provide  access  to  certain  network  elements  that  are  no  longer  subject  to  unbundling  under  section  251, 
 and  to  do  so  at  just  and  reasonable  rates. 
 2.  Discussion 
 653.  Independent  Access  Obligation.  For  reasons  set  forth  below,  we  continue  to  believe  that  the  requirements  of  section  271(  c)(  2)(  B)  establish  an  independent  obligation  for 

 BOCs  to  provide  access  to  loops,  switching,  transport,  and  signaling  regardless  of  any  unbundling  analysis  under  section  251. 

 654.  First,  the  plain  language  and  the  structure  of  section  271(  c)(  2)(  B)  establish  that  BOCs  have  an  independent  and  ongoing  access  obligation  under  section  271.  Checklist  item  2 
 requires  compliance  with  the  general  unbundling  obligations  of  section  251(  c)(  3)  and  of  section  251(  d)(  2)  which  cross-  references  section  251(  c)(  3).  1979  Checklist  items  4,  5,  6,  and  10  separately 
 impose  access  requirements  regarding  loop,  transport,  switching,  and  signaling,  1980  without  mentioning  section  251.  Had  Congress  intended  to  have  these  later  checklist  items  subject  to 
 section  251,  it  would  have  explicitly  done  so  as  it  did  in  checklist  item  2.  1981  Moreover,  were  we  to  conclude  otherwise,  we  would  necessarily  render  checklist  items  4,  5,  6,  and  10  entirely 
 redundant  and  duplicative  of  checklist  item  2  and  thus  violate  one  of  the  enduring  tenets  of  statutory  construction:  to  give  effect,  if  possible,  to  every  clause  and  word  of  a  statute.  1982 
 Verizon  asserts  that  an  interpretation  of  the  Act  that  recognizes  the  independence  of  sections  271  and  251(  d)(  2)  places  these  sections  in  conflict  with  each  other.  1983  We  disagree.  Verizons 

 1977  ALTS  et  al.  Comments  at  117-  18;  NuVox  et  al.  Comments  at  115-  16;  CompTel  Comments  at  20;  UNE-  P 
 Coalition  Comments  at  17;  Z-  Tel  Comments  at  4-  15. 
 1978  Z-  Tel  Comments  at  7;  see  also  UNE-  P  Coalition  Reply  at  37  (noting  that  the  Coalition  agrees  with 
 Z-  Tel  .  .  .). 
 1979  See  47  U.  S.  C.    271(  c)(  2)(  B)(  ii). 

 1980  See  47  U.  S.  C.    271(  c)(  2)(  B)(  iv),  (v),  (vi),  (x). 
 1981  Bates  v.  U.  S.,  522  U.  S.  23,  29-  30  (1997)  (stating  that  [  w]  here  Congress  includes  particular  language  in  one 
 section  of  a  statute  but  omits  it  in  another  section  of  the  same  Act,  it  is  generally  presumed  that  Congress  acts  intentionally  and  purposely  in  the  disparate  inclusion  or  exclusion.)  (internal  quotation  marks  omitted).  As  such, 

 our  decision  is  entitled  to  deference  because  the  interpretation  involves  matters  about  which  the  Act  is  silent.  Chevron,  467  U.  S.  at  843. 

 1982  See  United  States  v.  Menasche,  348  U.  S.  528,  538-  39  (1955). 
 1983  Verizon  Comments  at  67;  Verizon  Reply  at  54-  55. 
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 reading  of  section  271  would  provide  no  reason  for  Congress  to  have  enacted  items  4,  5,  6,  and  10  of  the  checklist  because  checklist  item  2  would  have  sufficed. 
 655.  Second,  it  is  reasonable  to  interpret  section  251  and  271  as  operating  independently.  Section  251,  by  its  own  terms,  applies  to  all  incumbent  LECs,  and  section  271 
 applies  only  to  BOCs,  a  subset  of  incumbent  LECs.  1984  In  fact,  section  271  places  specific  requirements  on  BOCs  that  were  not  listed  in  section  251.  These  additional  requirements  reflect 
 Congress  concern,  repeatedly  recognized  by  the  Commission  and  courts,  with  balancing  the  BOCs  entry  into  the  long  distance  market  with  increased  presence  of  competitors  in  the  local 
 market.  1985  Before  the  1996  Act's  passage,  the  BOCs,  the  local  progeny  of  the  once-  integrated  Bell  system,  were  barred  by  the  terms  of  the  MFJ  from  entering  certain  lines  of  business, 
 including  providing  interLATA  services.  1986  The  ban  on  BOC  provision  of  long  distance  services  was  based  on  the  MFJ  court's  determination  that  such  a  restriction  was  clearly  necessary  to 
 preserve  free  competition  in  the  interexchange  market.  1987  The  protection  of  the  interexchange  market  is  reflected  in  the  fact  that  section  271  primarily  places  in  each  BOC's  hands  the  ability  to 
 determine  if  and  when  it  will  enter  the  long  distance  market.  If  the  BOC  is  unwilling  to  open  its  local  telecommunications  markets  to  competition  or  apply  for  relief,  the  interexchange  market 
 remains  protected  because  the  BOC  will  not  receive  section  271  authorization.  The  same  historical  underpinning,  however,  is  not  relevant  to  section  251,  which  is  a  mandatory  provision 
 designed  to  ensure  a  minimum  level  of  openness  in  the  local  market.  Therefore,  we  reject  Verizons  claim  that  any  interpretation  of  section  271  that  recognizes  its  independence  from 
 section  251  would  improperly  single  out  BOCs  for  treatment  different  from  other  incumbent  LECs.  1988  As  explained  above,  recognizing  an  independent  obligation  on  BOCs  under  section 
 271  would  by  no  means  be  inconsistent  with  the  structure  of  the  statute.  Section  271  was  written  for  the  very  purpose  of  establishing  specific  conditions  of  entry  into  the  long  distance  that  are 

 1984  This  fact  alone  demonstrates  that  section  271  is  not  dependent  on  section  251  because  a  more  limited  set  of 
 carriers  was  made  subject  to  the  demands  of  section  271.  It  is  consistent  with  norms  of  statutory  construction  that  section  251  as  a  general  statutory  provision  does  not  control  the  more  specific  section  271.  See  Gozlon-  Peretz  v. 

 United  States,  498  U.  S.  395  (1991)  (a  specific  provision  controls  over  one  of  a  more  general  application). 
 1985  Section  271  is  the  direct  progeny  of  the  Modification  of  Final  Judgment  (MFJ)  that  contained  the  terms  of  the 
 settlement  of  the  Department  of  Justice's  antitrust  suit  against  AT&  T.  See  United  States  v.  Western  Elec.  Co.,  552  F.  Supp.  131  (D.  D.  C.  1982),  affd  sub  nom.,  Maryland  v.  United  States,  460  U.  S.  1001  (1983).  The  MFJ  sought  to 

 avoid  the  emergence  of  an  unregulated  telecommunications  monopoly  by  imposing  specific  line-  of-  business  restrictions  that  explicitly  barred  the  BOCs  from  providing  service  for  calls  that  occurred  between  LATAs. 
 Although  the  Telecommunications  Act  of  1996  generally  superseded  the  MFJ,  section  271  conditionally  continued  the  interLATA  line-  of-  business  restriction  in  the  form  of  the  competitive  checklist. 

 1986  The  MFJ  contained  the  terms  of  the  settlement  of  the  Department  of  Justice's  antitrust  suit  against  AT&  T.  See 
 id. 
 1987  Id.  at  188. 

 1988  Verizon  Comments  at  67;  Verizon  Reply  at  54-  55. 
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 unique  to  the  BOCs.  As  such,  BOC  obligations  under  section  271  are  not  necessarily  relieved  based  on  any  determination  we  make  under  the  section  251  unbundling  analysis.  1989 
 656.  Prices,  Terms  and  Conditions.  It  is  a  different  question,  however,  as  to  what  pricing  standard  applies  to  network  elements  that  are  unbundled  by  BOCs  solely  because  of  the 
 requirements  set  forth  in  section  271.  Where  there  is  no  impairment  under  section  251  and  a  network  element  is  no  longer  subject  to  unbundling,  we  look  to  section  271  and  elsewhere  in  the 
 Act  to  determine  the  proper  standard  for  evaluating  the  terms,  conditions,  and  pricing  under  which  a  BOC  must  provide  the  checklist  network  elements.  Contrary  to  the  claims  of  some 
 commenters,  TELRIC  pricing  for  checklist  network  elements  that  have  been  removed  from  the  list  of  section  251  UNEs  is  neither  mandated  by  statute  nor  necessary  to  protect  the  public 
 interest.  Rather,  Congress  established  a  pricing  standard  under  section  252  for  network  elements  unbundled  pursuant  to  section  251  where  impairment  is  found  to  exist.  Here,  however,  we  are 
 discussing  the  appropriate  pricing  standard  for  these  network  elements  where  there  is  no  impairment.  Under  the  no  impairment  scenario,  section  271  requires  these  elements  to  be 
 unbundled,  but  not  using  the  statutorily  mandated  rate  under  section  252.  As  set  forth  below,  we  find  that  the  appropriate  inquiry  for  network  elements  required  only  under  section  271  is  to 
 assess  whether  they  are  priced  on  a  just,  reasonable  and  not  unreasonably  discriminatory  basis    the  standards  set  forth  in  sections  201  and  202.  1990 

 657.  By  their  own  terms,  neither  section  252(  d)(  1)  nor  section  271(  c)(  2)(  B)  requires  that  the  section  252(  d)(  1)  pricing  standard  be  applied  to  checklist  network  elements.  Section 
 252(  d)(  1)  provides  the  pricing  standard  for  network  elements  for  purposes  of  [section  251(  c)(  3)],  1991  and  does  not,  by  its  terms,  apply  to  network  elements  that  are  required  only  under 
 section  271.  Indeed,  section  252(  d)(  1)  is  quite  specific  that  it  only  applies  for  the  purposes  of  implementation  of  section  251(  c)(  3)    meaning  only  where  there  has  been  a  finding  of 
 impairment  with  regard  to  a  given  network  element.  Moreover,  as  noted  above,  while  checklist  item  2  provides  that  a  BOC  must  provide  access  to  UNEs  in  accordance  with  the  requirements 
 of  sections  251(  c)(  3)  and  252(  d)(  1),  the  checklist  items  establishing  the  specific,  separate  network  element  obligations  do  not  contain  this  language.  We  disagree  with  Z-  Tels  argument 
 that  the  cross-  reference  in  checklist  item  2  should  be  read  into  the  later  checklist  items,  and  is  implicit  in  them.  1992  Reading  this  language  into  these  provisions  would  change  their  plain 
 meaning,  and  Z-  Tel  offers  no  indication  that  this  is  what  Congress  intended.  Moreover,  we  reject  Z-  Tels  argument  that  the  cross-  references  were  omitted  simply  to  conserve  space  or  to 

 1989  We  decline  to  require  BOCs,  pursuant  to  section  271,  to  combine  network  elements  that  no  longer  are  required 
 to  be  unbundled  under  section  251.  Unlike  section  251(  c)(  3),  items  4-  6  and  10  of  section  271s  competitive  checklist  contain  no  mention  of  combining  and,  as  noted  above,  do  not  refer  back  to  the  combination  requirement 

 set  forth  in  section  251(  c)(  3). 
 1990  47  U.  S.  C.    201,  202. 

 1991  Id.    252(  d)(  1). 
 1992  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01- 
 338  at  11  (filed  Dec.  20,  2002)  (Z-  Tel  Dec.  20,  2002  Ex  Parte  Letter). 
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 avoid  repetition.  1993  To  the  contrary,  we  find  Congress  decision  to  omit  cross-  references  particularly  meaningful  in  this  instance:  half  of  the  checklist  items  contain  explicit  cross-references 
 to  other  statutory  provisions,  and  it  is  reasonable  to  conclude  that  Congress  would  have  inserted  a  cross-  reference  into  items  4-  6  and  10  had  that  been  its  intention. 

 658.  We  also  decline  to  use  section  271,  as  suggested  by  Z-  Tel,  to  broaden  the  unbundling  obligations  of  section  251.  Z-  Tel  notes  that  section  251(  d)(  2)  directs  the 
 Commission  to  consider  impair[  ment]  at  a  minimum  in  determining  which  network  elements  must  be  unbundled,  and  thus  argues  that  the  Commission  may  require  unbundling  pursuant  to 
 section  251  and  252  even  in  the  absence  of  an  impairment  finding.  1994  In  analyzing  section  252(  d)(  2)  the  D.  C.  Circuit  in  USTA  determined  that  the  at  a  minimum  language  potentially 
 could  justify  the  imposition  of  unbundling  obligations  under  that  provision  even  in  the  absence  of  impairment.  1995  However,  the  USTA  decision  contained  key  limitations  to  the  exercise  of  such 
 authority.  In  order  to  apply  the  at  a  minimum  language  in  the  absence  of  impairment,  the  USTA  court  required  that  the  Commission  point  to  something  a  bit  more  concrete  than  its  belief 
 in  the  beneficence  of  the  widest  unbundling  possible.  1996  Were  we  to  accept  Z-  Tels  argument,  we  would  again  impose  a  virtually  unlimited  standard  to  unbundling,  based  on  little  more  than 
 faith  that  more  unbundling  is  better,  regardless  of  context.  Checklist  items  4  through  6  and  10  do  not  require  us  to  impose  unbundling  pursuant  to  section  251(  d)(  2).  Rather,  the  checklist 
 independently  imposes  unbundling  obligations,  but  simply  does  so  with  less  rigid  accompanying  conditions. 

 659.  In  interpreting  section  271(  c)(  2)(  B),  we  are  guided  by  the  familiar  rule  of  statutory  construction  that,  where  possible,  provisions  of  a  statute  should  be  read  so  as  not  to 
 create  a  conflict.  1997  So  if,  for  example,  pursuant  to  section  251,  competitive  entrants  are  found  not  to  be  impaired  without  access  to  unbundled  switching  at  TELRIC  rates,  the  question 
 becomes  whether  BOCs  are  required  to  provide  unbundled  switching  at  TELRIC  rates  pursuant  to  section  271(  c)(  2)(  B)(  vi).  In  order  to  read  the  provisions  so  as  not  to  create  a  conflict,  we 
 conclude  that  section  271  requires  BOCs  to  provide  unbundled  access  to  elements  not  required  to  be  unbundled  under  section  251,  but  does  not  require  TELRIC  pricing.  This  interpretation 
 allows  us  to  reconcile  the  interrelated  terms  of  the  Act  so  that  one  provision  (section  271)  does  not  gratuitously  reimpose  the  very  same  requirements  that  another  provision  (section  251)  has 
 eliminated. 
 660.  We  reject  arguments  by  Z-  Tel  and  certain  other  competitive  LECs  that  the  proper  way  to  reconcile  any  such  conflict  is  to  find  that  our  section  251  impairment  determinations  with 

 1993  Z-  Tel  Dec.  20,  2002  Ex  Parte  Letter  at  11. 
 1994  Z-  Tel  Comments  at  17. 
 1995  USTA,  290  F.  3d  at  425. 
 1996  Id. 
 1997  See  Washington  Market  Co.  v.  Hoffman,  101  U.  S.  112  (1879). 
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 respect  to  unbundled  local  loops,  switching  and  transport  would  apply  only  to  non-  BOC  incumbent  LECs.  1998  Z-  Tels  argument  posits  that  particular  network  elements  enumerated  in  the 
 section  271  checklist  are  the  core  elements,  and  thus  concludes  that  while  the  standards  in  section  251  would  still  apply  to  all  carriers  as  to  any  network  elements  not  mentioned  in  the 
 checklist,  section  271  requirements  (as  construed  by  Z-  Tel)  would  supercede  section  251  standards  as  to  the  most  critical  network  elements  delineated  by  Congress.  We  think  that  this 
 reading  of  the  two  provisions  is  illogical.  BOCs  control  85.9  percent  of  incumbent  LEC  local  switched  access  lines.  1999  Of  the  remaining  lines,  11.6  percent  of  the  lines  are  served  by  certain 
 rural  telephone  companies  that  section  251(  f)  expressly  exempts  from  the  unbundling  obligations  set  forth  in  251(  c).  So,  under  the  Z-  Tel  interpretation  of  sections  251  and  271,  Z-  Tel  would  have 
 section  251(  c),  which  is  arguably  the  most  important  market-  opening  provision  of  the  Act,  apply  to  a  mere  2.5  percent  of  incumbent  LEC  lines  on  the  issues  and  facilities  that  matter  most  to  local 
 competition.  2000  The  section  271  checklist  cannot  be  read  to  have  such  a  broad  effect    while  it  does  set  forth  particular  conditions  Congress  wished  to  impose  on  entry  into  the  in-  region 
 interLATA  market,  Congress  could  not  have  intended  the  checklist  to  render  section  251  itself  superfluous. 

 661.  Our  recognition  that  pricing  pursuant  to  section  252  does  not  apply  to  network  elements  that  are  not  required  to  be  unbundled  is  consistent  with  the  Commissions  general 
 approach  in  the  UNE  Remand  Order,  and  has  been  applied    apparently  with  no  adverse  effect    with  respect  to  access  to  directory  assistance  and  operator  services.  The  Commission  removed 
 directory  assistance  and  operator  services  from  the  list  of  UNEs  in  the  UNE  Remand  Order.  2001  These  network  elements,  like  loops,  transport,  switching  and  signaling  databases,  are  separately 
 listed  in  the  competitive  checklist.  2002  Accordingly,  as  explained  in  subsequent  section  271  orders,  access  to  directory  assistance  and  operator  services  remains  a  condition  of  long  distance 
 entry    but  the  standard  applicable  to  rates  and  conditions  is  not  derived  from  sections  251  and  252.  2003  We  note  that  no  party  has  sought  to  overturn  this  aspect  of  the  seventeen  section  271 
 orders  that  have  applied  this  analysis  since  directory  assistance  and  operator  services  were  removed  from  the  list  of  section  251  UNEs,  and  no  party  has  suggested  in  this  proceeding  that 
 the  Commissions  interpretation  of  the  statute  has  produced  a  perverse  policy  impact  with  respect  to  a  BOCs  provision  of  these  network  elements. 

 1998  Z-  Tel  Comments  at  7-  8. 
 1999  Federal  Universal  Service  Support  Mechanisms  Fund  Size  Projections  for  the  First  Quarter  2003,  Submitted 
 by  the  Universal  Service  Administrative  Company  (filed  Nov.  1,  2002). 
 2000  Id. 

 2001  UNE  Remand  Order,  15  FCC  Rcd  at  3891-  92,  paras.  441-  42. 
 2002  See  47  U.  S.  C.    271(  c)(  2)(  B)(  vii)(  II)-(  III). 
 2003  See,  e.  g.,  SWBT  Texas  271  Order,  15  FCC  Rcd  at  18527,  para.  348. 
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 662.  We  note,  however,  that  in  the  UNE  Remand  Order  the  Commission  stated  that  [  i]  f  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).  2004  We  reach  essentially  the  same  result  here,  but  we  clarify  our  reasoning  below. 

 663.  The  Supreme  Court  has  held  that  the  last  sentence  of  section  201(  b),  which  authorizes  the  Commission  to  prescribe  such  rules  and  regulations  as  may  be  necessary  in  the 
 public  interest  to  carry  out  the  provisions  of  this  Act,  empowers  the  Commission  to  adopt  rules  that  implement  the  new  provisions  of  the  Communications  Act  that  were  added  by  the 
 Telecommunications  Act  of  1996.  2005  Section  271  is  such  a  provision.  2006  Thus,  the  pricing  of  checklist  network  elements  that  do  not  satisfy  the  unbundling  standards  in  section  251(  d)(  2)  are 
 reviewed  utilizing  the  basic  just,  reasonable,  and  nondiscriminatory  rate  standard  of  sections  201  and  202  that  is  fundamental  to  common  carrier  regulation  that  has  historically  been  applied 
 under  most  federal  and  state  statutes,  including  (for  interstate  services)  the  Communications  Act.  2007  Application  of  the  just  and  reasonable  and  nondiscriminatory  pricing  standard  of 
 sections  201  and  202  advances  Congress's  intent  that  Bell  companies  provide  meaningful  access  to  network  elements. 

 664.  Whether  a  particular  checklist  elements  rate  satisfies  the  just  and  reasonable  pricing  standard  of  section  201  and  202  is  a  fact-  specific  inquiry  that  the  Commission  will 
 undertake  in  the  context  of  a  BOC's  application  for  section  271  authority  or  in  an  enforcement  proceeding  brought  pursuant  to  section  271(  d)(  6).  We  note,  however,  that  for  a  given 
 purchasing  carrier,  a  BOC  might  satisfy  this  standard  by  demonstrating  that  the  rate  for  a  section  271  network  element  is  at  or  below  the  rate  at  which  the  BOC  offers  comparable  functions  to 
 similarly  situated  purchasing  carriers  under  its  interstate  access  tariff,  to  the  extent  such  analogues  exist.  Alternatively,  a  BOC  might  demonstrate  that  the  rate  at  which  it  offers  a  section 
 271  network  element  is  reasonable  by  showing  that  it  has  entered  into  arms-  length  agreements  with  other,  similarly  situated  purchasing  carriers  to  provide  the  element  at  that  rate. 

 665.  Post  Entry  Requirements.  In  the  event  a  BOC  has  already  received  section  271  authorization,  section  271(  d)(  6)  grants  the  Commission  enforcement  authority  to  ensure  that  the 
 BOC  continues  to  comply  with  the  market  opening  requirements  of  section  271.  In  particular, 

 2004  UNE  Remand  Order,  15  FCC  Rcd  at  3905,  para.  470. 
 2005  Iowa  Utils.  Bd.,  525  U.  S.  at  377-  81. 
 2006  The  Court  found  that  this  grant  of  authority  was  unaffected  by  the  jurisdictional  limitation  regarding 
 intrastate  matters  that  was  contained  in  section  2(  b)  of  the  1934  Act.  Id.  at  379.  The  Court  found  that  since  new  sections  251  and  252  applied  to  interstate  as  well  as  intrastate  matters,  section  201(  b)  authorized  the  Commission  to 

 adopt  rules  implementing  the  full  scope  of  those  provisions.  Id.  at  379-  81. 
 2007  See  47  U.  S.  C.    201(  b),  202(  a).  Therefore,  we  reject  the  argument  of  Z-  Tel  that  section  252(  d)(  1)  is  the  only 
 basis  for  the  Commission  to  evaluate  checklist  elements  not  required  to  be  unbundled  under  section  251. 
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 this  section  provides  the  Commission  with  enforcement  authority  where  a  BOC  has  ceased  to  meet  any  of  the  conditions  required  for  such  approval.  2008  We  conclude  that  for  purposes  of 
 section  271(  d)(  6),  BOCs  must  continue  to  comply  with  any  conditions  required  for  approval,  consistent  with  changes  in  the  law.  While  we  believe  that  section  271(  d)(  6)  established  an 
 ongoing  duty  for  BOCs  to  remain  in  compliance,  we  do  not  believe  that  Congress  intended  that  the  conditions  required  for  such  approval  would  not  change  with  time.  Absent  such  a  reading, 
 the  Commission  would  be  in  a  position  where  it  was  imposing  different  backsliding  requirements  on  BOCs  solely  based  on  date  of  section  271  entry,  rather  than  based  on  the  law  as  it  currently 
 exists.  We  reject  this  approach  as  antithetical  to  public  policy  because  it  would  require  the  enforcement  of  out-  of-  date  or  even  vacated  rules. 

 666.  Two  commenters  in  this  proceeding  ask  the  Commission  to  adopt  special  procedural  vehicles  for  re-  examining  section  271  authorizations,  in  light  of  potential  rule 
 changes  that  would  change  a  BOCs  obligations  under  section  251.  First,  Z-  Tel  asserts  that  the  Commission  must  revisit  every  section  271  authorization  to  consider  [  a]  ny  significant  change  to 
 the  availability  of  the  UNE  platform.  2009  Second,  Talk  America  asks  the  Commission  to  adopt  a  procedure  that  would  freeze  in  place  a  BOCs  unbundling  obligations  under  section  251,  at  least 
 pending  a  review  of  potential  backsliding  under  section  271(  d)(  6).  2010  Specifically,  Talk  America  contends  that,  for  a  BOC  that  has  previously  received  section  271  authorization,  the  anti-backsliding 
 requirements  of  section  271(  d)(  6)  would  require  it  to  continue  providing  unbundled  local  switching  (and  UNE-  P)  at  TELRIC  prices  in  the  event  it  is  no  longer  required  to  do  so 
 under  section  251.  Talk  America  suggests  that  any  rule  change  that  lessens  a  BOCs  obligation  to  provide  access  to  unbundled  switching  could  decrease  the  level  of  facilities-  based  competition 
 in  either  residential  or  business  markets,  thereby  potentially  causing  a  backsliding  violation  under  section  271(  d)(  6)  to  the  extent  the  BOC  relied  on  UNE-  P  based  competition  to  support  its 
 showing  under  section  271(  c)(  1)(  A)  (Track  A).  Accordingly,  to  address  this  risk  of  this  type  of  backsliding,  Talk  America  would  require  BOCs  to  file  a  petition  with  the  Commission   
 before  they  may  be  permitted  to  cease  providing  switching  and  UNE-  P  at  TELRIC-  based  rates    demonstrating  the  existence  of  facilities-  based  competition  from  carriers  that  do  not  rely  in  any 
 material  part  on  the  availability  of  unbundled  local  switching  or  UNE-  P  at  TELRIC-  based  rates.  2011 

 667.  We  decline  to  adopt  the  extraordinary  procedural  steps  requested  by  Z-  Tel  and  Talk  America.  With  respect  to  Talk  Americas  proposal,  by  reexamining  whether  a  BOC 

 2008  47  U.  S.  C.    271(  d)(  6). 
 2009  Z-  Tel  Comments  at  83-  84. 
 2010  Letter  from  Brad  A.  Mutschelknaus,  Counsel  for  Talk  America  and  Broadview  Networks,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  15  (filed  Dec.  6,  2002)  (Talk  America/  Broadview  Networks  Dec.  6,  2002  Ex  Parte  Letter);  see  also  Letter  from  Brad  A.  Mutschelknaus,  Counsel 

 for  Talk  America,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338  at  3  (filed  Dec.  30,  2002)  (Talk  America  Dec.  30,  2002  Ex  Parte  Letter). 

 2011  Talk  America  Dec.  30,  2002  Ex  Parte  Letter  at  3. 
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 continues  to  qualify  for  Track  A  before  conditions  change  in  the  market  ignores  the  reality  that  competitors  may  take  steps  to  retain  customers  served  by  UNE-  P.  For  example,  it  is  entirely 
 possible  that  a  competitive  LEC  may  transition  customers  from  UNE-  P  to  an  arrangement  using  unbundled  loops  combined  with  its  own  switching    thereby  retaining  the  same  level  of 
 facilities-  based  competition.  Accordingly,  the  before-  the-  fact  review  proposed  by  Talk  America  would  necessarily  require  speculation  and  would  hold  a  BOC  to  a  higher  standard  than  under  its 
 initial  section  271  application.  Finally,  there  is  no  suggestion  that  the  procedure  proposed  by  Talk  America  is  necessary  to  detect  discrimination  or  bad  conduct    indeed,  the  harm  alleged  by 
 Talk  America  would  result  from  a  BOCs  compliance  with  federal  unbundling  rules.  Accordingly,  we  do  not  believe  the  public  interest  warrants  adoption  of  this  special  procedural 
 step.  For  similar  reasons,  we  decline  Z-  Tels  request  to  revisit  every  section  271  authorization  to  consider  changes  regarding  UNE-  P. 

 B.  Clarification  of  TELRIC  Rules 
 1.  Background 
 668.  Section  252(  d)(  1)  of  the  Act  provides  that  rates  for  interconnection  and  unbundled  elements  shall  be  based  on  the  cost  (determined  without  reference  to  a  rate-  of-  return 

 or  other  rate-  based  proceeding)  of  providing  the  interconnection  or  network  element  and  may  include  a  reasonable  profit.  2012  In  the  Local  Competition  Order,  the  Commission  adopted 
 guidelines  to  be  applied  by  state  commissions  when  they  are  called  on  to  arbitrate  disputes  regarding  the  prices  for  interconnection  and  UNEs  pursuant  to  section  252(  d).  2013  Specifically, 
 the  Commission  adopted  a  forward-  looking  economic  cost  methodology,  which  it  called  Total  Element  Long  Run  Incremental  Cost  or  TELRIC.  The  Supreme  Court  affirmed  the 
 Commissions  TELRIC  rules  in  Verizon  v.  FCC.  2014 
 669.  Based  on  the  Commissions  finding  that  prices  in  a  competitive  market  will  tend  towards  long-  run  incremental  cost,  2015  the  TELRIC  methodology  is  designed  to  derive  prices  for 

 particular  elements  in  the  incumbent  LECs  network  that  replicate[],  to  the  extent  possible,  what  the  incumbent  LEC  would  be  able  to  charge  in  a  competitive  market.  2016  Specifically, 
 TELRIC  equates  the  current  market  value  of  the  existing  network  of  an  incumbent  telecommunications  provider  with  the  cost  the  incumbent  LEC  would  incur  today  if  it  built  a 

 2012  47  U.  S.  C.    252(  d)(  1). 
 2013  Local  Competition  Order,  11  FCC  Rcd  at  15515,  para.  29.  The  Commission  also  concluded  that  rates  for 
 reciprocal  compensation  under  section  252(  d)(  2)  should  be  based  on  the  same  principles.  Id.  at  16023,  para.  1054. 
 2014  Verizon,  535  U.  S.  at  467. 

 2015  Local  Competition  Order,  11  FCC  Rcd  at  15845,  para.  675. 
 2016  Id.  at  15846,  para.  679. 
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 local  network  that  could  provide  all  the  services  its  current  network  provides,  to  meet  reasonably  foreseeable  demand,  using  the  least-  cost,  most-  efficient  technology  currently  available.  2017 
 670.  The  Commissions  decision  to  equate  the  current  value  of  existing  equipment  with  the  forward-  looking  cost  of  currently  available  equipment  rests  on  the  rational  economic 
 assumption  that,  as  new,  more  efficient  equipment  becomes  available,  the  value  of  older,  less  efficient  equipment  will  be  affected.  2018  TELRIC  assumes  that  the  value  of  an  incumbent  LECs 
 network  is  constrained  by  the  most  efficient  technology  available,  even  if  the  incumbent  LEC  itself  does  not  deploy,  or  plan  to  deploy,  that  technology.  In  the  competitive  market  assumed 
 under  TELRIC,  we  assume  that  the  most  efficient  technology  currently  available  will  be  deployed  by  at  least  one  carrier,  and  that  the  value  of  all  competing  networks,  and  the  prices  for 
 elements  of  those  networks,  will  be  constrained  by  the  value  of  the  more  efficient  network.  2019 
 671.  The  TELRIC  of  a  network  element  is  the  sum  of  three  components    operating  expenses,  depreciation  expense,  and  cost  of  capital.  2020  Operating  expenses  are  the  annual  costs 

 associated  with  operating  a  particular  asset.  Specifically,  rates  established  under  TELRIC  should  reflect  the  operating  expenses  associated  with  a  network  that  uses  the  most  efficient 
 technology  currently  available.  2021  Depreciation  is  the  mechanism  by  which  the  investment  in  an  asset  is  recovered  over  the  life  of  the  asset.  In  describing  the  TELRIC  methodology,  the 
 Commission  stated  that  depreciation  expense  should  be  based  on  economic  depreciation  that  reflects  the  true  changes  in  economic  value  of  an  asset.  2022  Cost  of  capital  reflects  the  rate  of 
 rate  of  return  required  to  attract  capital,  i.  e.,  the  rate  of  return  that  investors  expect  to  receive  from  alternative  investments  that  have  the  same  risk.  In  the  Local  Competition  Order,  the 
 Commission  stated  that  regulators  should  adjust  the  cost  of  capital  to  reflect  the  risks  faced  by  the  incumbent  LEC  as  competition  is  introduced  into  its  local  market.  2023 

 672.  In  paragraph  24  of  the  Triennial  Review  NPRM,  we  sought  comment  on  whether,  "to  encourage  investment  in  new  facilities,  we  might  clarify  or  modify  our  pricing  rules  to  allow 
 2017  Local  Competition  Order,  11  FCC  Rcd  at  15848-  49,  para.  685;  47  C.  F.  R.    51.501  51.511.  The  Commission 
 added  one  additional  constraint  on  the  design  of  the  network:  the  new  network  must  take  as  given  the  existing  wire  center  locations.  Local  Competition  Order,  11  FCC  Rcd  at  15848-  49,  para.  685. 

 2018  Verizon  v.  FCC,  Reply  Brief  for  Petitioners  United  States  and  FCC  at  8  (FCC  Reply  Brief).  As  the  Supreme 
 Court  noted,  what  the  incumbents  call  the  hypothetical  element  is  simply  the  element  valued  in  terms  of  a  piece  of  equipment  an  incumbent  may  not  own.  Verizon,  535  U.  S.  at  501. 

 2019  Although  it  is  appropriate  for  a  TELRIC  analysis  to  consider  existing  technology  that  is  not  currently  deployed 
 by  an  incumbent  LEC,  it  is  not  appropriate  to  consider  technologies  that  may  be  available  in  the  future  but  are  not  currently  available. 

 2020  Local  Competition  Order,  11  FCC  Rcd  at  15856,  para.  703. 
 2021  Id.  at  15848-  49,  para.  685. 
 2022  Id.  at  15856,  para.  703. 
 2023  Id. 
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 incumbent  LECs  to  recover  for  any  unique  costs  and  risks  associated  with  such  investment."  In  their  comments  and  reply  comments,  both  incumbent  LECs  and  equipment  manufacturers  argue 
 that  a  reexamination  of  TELRIC  is  necessary  because  our  rules  discourage  carriers  from  investing  in  new  facilities.  2024  Competitive  LECs  generally  oppose  any  modification  of  our 
 pricing  rules  on  the  ground  that  TELRIC-  based  rates  are  fully  compensatory  and  higher  rates  would  create  inefficient  investment  incentives.  2025  Some  parties,  such  as  Covad,  argue  that,  if  the 
 Commission  decides  that  changes  are  needed  to  encourage  investment,  it  is  better  to  modify  our  pricing  rules  than  to  eliminate  unbundling  requirements.  2026 

 673.  Subsequently,  in  a  series  of  ex  parte  letters,  a  number  of  incumbent  LECs  provided  a  more  detailed  analysis  of  their  concerns  about  the  effect  of  TELRIC  pricing  on  their 
 investment  incentives.  2027  The  incumbent  LECs  identify  five  specific  aspects  of  TELRIC  that  they  contend  require  clarification  or  modification  to  ensure  that  UNE  pricing  sends  correct 
 economic  signals:  network  assumptions,  cost  of  capital,  depreciation,  fill  factors,  and  NRCs.  2028  Verizon  argues  that  resolution  of  these  issues  is  necessary  so  that  UNE  prices  send  the  best 
 possible  market  signals  to  incumbent  LECs,  competitive  LECs  and  intermodal  competitors,  a  result  that  is  critical  to  the  continued  investment  by  all  competing  providers.  2029  Similarly,  SBC 
 urges  the  Commission  to  strive  to  ensure  that  the  regulatory  methodology  for  setting  wholesale  prices  is  economically  rational  and  creates  the  right  incentives  for  incumbent  and  new  entrants 
 alike.  2030  Qwest  requests  restoration  of  TELRIC  to  its  original  purpose:  the  creation  of  economically  appropriate  price  signals  for  competitive  LECs  as  they  choose  between  leasing 
 facilities  from  incumbent  LECs  and  procuring  their  own.  2031 

 2024  See,  e.  g.,  Verizon  Comments  at  32-  33;  ACS  Comments  at  7-  8;  Alcatel  Comments  at  24-  25. 
 2025  See,  e.  g.,  WorldCom  Comments  at  65-  70. 
 2026  Covad  Comments  at  63;  see  also  Massachusetts  Department  Comments  at  6-  7. 
 2027  See  Letter  from  William  P.  Barr,  Executive  Vice  President  and  General  Counsel,  Verizon,  to  Michael  K. 
 Powell,  Chairman,  FCC  (dated  July  16,  2002),  in  Letter  from  W.  Scott  Randolph,  Director-  Regulatory  Affairs,  Verizon,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  July  18,  2002)  (Verizon  July  18, 

 2002  TELRIC  Ex  Parte  Letter);  Letter  from  William  M.  Daley,  President,  SBC  Communications,  to  Michael  K.  Powell,  Chairman,  FCC  (dated  Sept.  4,  2002),  in  Letter  from  Jim  Lamoureux,  Senior  Counsel,  SBC,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Sept.  9,  2002)  (SBC  Sept.  9,  2002  TELRIC  Ex  Parte  Letter);  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch,  Secretary,  FCC, 
 CC  Docket  No.  01-  338  (filed  Oct.  28,  2002)  (Qwest  Oct.  28,  2002  TELRIC  Ex  Parte  Letter). 
 2028  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  2-  5;  Letter  from  William  M.  Daly,  President,  SBC,  to 
 Michael  K.  Powell,  Chairman,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  3  (dated  Sept.  4,  2002)  (SBC  Sept.  9,  2002  TELRIC  Ex  Parte  Letter),  in  Letter  from  Jim  Lamoureux,  Senior  Counsel,  SBC,  to  Marlene  H.  Dortch, 

 Secretary,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147,  00-  218,  00-  249,  00-  251  (filed  Sept.  9,  2002). 
 2029  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  5. 

 2030  SBC  Sept.  9,  2002  TELRIC  Ex  Parte  Letter  at  2. 
 2031  Qwest  Oct.  28,  2002  TELRIC  Ex  Parte  Letter,  Attach.  at  3. 
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 674.  In  response,  competitive  LECs  contend  that  the  TELRIC  methodology,  properly  applied,  does  send  appropriate  pricing  signals.  2032  AT&  T  challenges  the  notion  that  TELRIC 
 pricing  diminishes  the  investment  incentives  of  the  incumbent  LECs.  According  to  AT&  T,  there  is  no  reason  why  unbundling  under  the  TELRIC  standard,  properly  applied,  should  lead  to 
 underinvestment.  2033  Rather,  existing  TELRIC  rules  provide  incumbent  LECs  the  opportunity  to  establish  the  UNE  rates  that  are  necessary  to  reflect  the  particular  costs  and  risks  they  face.  2034 
 Similarly,  McLeodUSA  states  that  current  TELRIC  rules  can  and  do  promote  investment  in  the  integrated  network.  2035 

 2.  Discussion 
 675.  We  conclude  that  it  is  necessary  to  clarify  the  application  of  two  components  of  TELRIC  that  have  a  major  impact  on  UNE  prices    cost  of  capital  and  depreciation.  These  two 

 components  of  TELRIC  are  the  primary  vehicles  by  which  any  risks  associated  with  new  facilities  and  new  services  may  be  reflected  in  UNE  prices,  and  therefore  it  is  appropriate  to 
 consider  these  issues  in  response  to  the  question  presented  in  the  Triennial  Review  NPRM.  We  believe  the  guidance  we  provide  below  is  responsive  to  the  concerns  raised  by  the  parties  and 
 will  assist  states  in  their  efforts  to  establish  UNE  prices  that  appropriately  reflect  these  risks. 
 676.  In  addition  to  clarification  of  our  rules,  some  of  the  incumbent  LECs  have  proposed  fundamental  changes  to  the  theory  underlying  the  TELRIC  rules.  2036  These  proposals 

 go  well  beyond  the  single  pricing  issue  identified  in  the  Triennial  Review  NPRM    whether  to  modify  or  clarify  our  rules  to  encourage  investment  in  new  facilities.  We  find  that  the  record  in 
 this  proceeding  does  not  support  the  type  of  dramatic  changes  proposed  by  the  incumbent  LECs.  2037  Rather,  we  find  that  issues  related  to  modification  of  our  TELRIC  pricing  framework 

 2032  See  Letter  from  James  W.  Cicconi,  General  Counsel  and  Executive  Vice  President,  AT&  T,  to  Michael  K. 
 Powell,  Chairman,  FCC,  (dated  July  26,  2002),  in  Letter  from  Joan  Marsh,  Director-  Federal  Government  Affairs,  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  July  26,  2002)  (AT&  T  July  26,  2002 

 TELRIC  Ex  Parte  Letter);  Letter  from  Chris  Frentrup,  Senior  Economist,  WorldCom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  (filed  Oct.  23,  2002)  (WorldCom  Oct.  23,  2002  TELRIC  Ex  Parte  Letter); 
 McLeodUSA  Jan.  8,  2003  TELRIC  Ex  Parte  Letter. 
 2033  AT&  T  July  26,  2002  TELRIC  Ex  Parte  Letter  at  2. 

 2034  Id. 
 2035  McLeodUSA  Jan.  8,  2003  TELRIC  Ex  Parte  Letter  at  4. 
 2036  Verizon,  for  example,  suggests  we  establish  prices  based  on  the  costs  of  its  actual  network,  rather  than  a 
 hypothetical  network.  See  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  4  ([  T]  he  Commission  should  alter  its  methodology  to  eliminate  the  assumption  that  the  existing  network  is  completely  reconstructed  to  reflect  a 

 technology  mix  that  goes  beyond  what  likely  will  ever  be  in  place  in  any  real-  world  network.). 
 2037  Both  incumbent  LECs  and  competitive  LECs  have  presented  some  evidence  attempting  to  establish  the 
 relationship  between  UNE  prices  and  investment.  See,  e.  g.,  Qwest  Reply,  Attach.  UNE  Prices  and  Telecommunications  Investment;  AT&  T  Oct.  11,  2002  Willig  Stimulating  Investment;  The  Role  of  Competition  in 

 Stimulating  Telecommunications  Investment,  Hassett  and  Kotlikoff  (dated  Oct.  2002),  in  Letter  from  Kevin  A.  Hassett,  Resident  Scholar,  The  American  Enterprise  Institute,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket 
 (continued.) 
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 are  best  addressed  in  a  future  proceeding  dedicated  to  that  topic.  Accordingly,  we  will  leave  the  general  TELRIC  framework  intact  at  this  time  and  consider  the  need  for  changes  on  a  more 
 complete  record  in  a  future  review  proceeding. 
 a.  Cost  of  Capital 
 677.  The  cost  of  capital  component  of  TELRIC  is  one  mechanism  by  which  risk  is  reflected  in  UNE  prices.  In  the  Local  Competition  Order,  the  Commission  stated  that  the 

 currently  authorized  rate  of  return  at  the  federal  or  state  level  is  a  reasonable  starting  point,  and  that  incumbent  LECs  bear  the  burden  of  demonstrating  with  specificity  that  the  business  risks 
 that  they  face  providing  unbundled  network  elements  and  interconnection  services  would  justify  a  different  risk-  adjusted  cost  of  capital  or  depreciation  rate.  2038  The  Commission  noted  that 
 11.25  percent  was  the  currently  authorized  rate  of  return  at  the  federal  level,  but  held  that  states  may  adjust  the  cost  of  capital  if  a  party  demonstrates  to  a  state  commission  that  either  a  higher 
 or  lower  level  of  cost  of  capital  is  warranted.  2039 
 678.  Verizon  urges  the  Commission  to  clarify  that,  because  TELRIC  requires  that  prices  be  set  based  on  various  competitive  assumptions,  the  cost  of  capital  calculated  under 

 TELRIC  must  reflect  the  risks  associated  with  those  assumptions.  2040  Both  Verizon  and  SBC  claim  that  the  risks  faced  by  incumbent  LECs  today  are  much  greater  than  they  were  in  1996 
 when  the  Commission  stated  that  11.25  percent  should  be  used  as  the  starting  point  in  calculating  cost  of  capital.  2041 

 679.  In  response,  AT&  T  states  that  paragraph  702  of  the  Local  Competition  Order  requires  consideration  of  the  actual  competitive  risks  an  incumbent  LEC  faces,  not  the  risks  it 
 would  face  in  the  competitive  market  that  TELRIC  assumes.  2042  Specifically,  AT&  T  emphasizes  that  incumbent  LECs  have  to  burden  to  demonstrate  with  specificity  the  business  risks  that 
 they  face  in  providing  UNEs,  not  the  risks  they  might  face  if  the  market  were  fully 
 (Continued  from  previous  page) 
 No.  01-  338  (filed  Nov.  15,  2002).  The  only  conclusion  that  we  can  draw  from  these  studies  is  that  wholesale  pricing  may  be  one  of  the  many  factors  that  influence  carriers  investment  decisions,  but  that  the  relative  importance 

 of  the  wholesale  pricing  regime  on  investment  incentives  is  uncertain. 
 2038  Local  Competition  Order,  11  FCC  Rcd  at  15856,  para.  702. 

 2039  Id. 
 2040  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  2. 
 2041  SBC  Sept.  9,  2002  TELRIC  Ex  Parte  Letter  at  3-  4;  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  2. 
 2042  AT&  T  July  26,  2002  TELRIC  Ex  Parte  Letter,  Attach.  at  1.  AT&  Ts  position  on  this  issue  appears  to  have 
 evolved  over  the  course  of  this  proceeding.  In  a  subsequent  ex  parte  letter,  AT&  T  states  that  TELRIC  compensates  incumbent  LECs  for  investing  in  upgraded  facilities,  such  as  fiber  loops,  because  a  TELRIC-  based  price  fully 

 compensates  the  incumbent  for  its  prospective  risk.  Letter  from  David  Lawson,  Counsel  for  AT&  T,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  No.  01-  338  at  16  (filed  Dec.  23,  2002)  (emphasis  added)  (AT&  T  Dec.  23,  2002 
 Lawson  Ex  Parte  Letter). 
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 competitive.  2043  AT&  T  also  challenges  the  assertion  that  an  incumbent  LECs  UNE  business  faces  risks  that  are  greater  than  they  were  in  1996,  arguing  that  even  Verizons  own  witnesses 
 have  conceded  in  state  proceedings  that  facilities-  based  competitive  LECs  are  unlikely  to  make  significant  inroads  in  the  foreseeable  future.  2044 

 680.  To  ensure  that  UNE  prices  set  by  the  states  appropriately  reflect  the  risks  associated  with  new  facilities  and  new  services,  we  think  it  would  be  helpful  to  clarify  two  types 
 of  risks  that  should  be  reflected  in  the  cost  of  capital.  First,  we  clarify  that  a  TELRIC-  based  cost  of  capital  should  reflect  the  risks  of  a  competitive  market.  The  objective  of  TELRIC  is  to 
 establish  a  price  that  replicates  the  price  that  would  exist  in  a  market  in  which  there  is  facilities-based  competition.  In  this  type  of  competitive  market,  all  facilities-  based  carriers  would  face  the 
 risk  of  losing  customers  to  other  facilities-  based  carriers,  and  that  risk  should  be  reflected  in  TELRIC  prices. 

 681.  We  do  not  agree  with  AT&  T  that  paragraph  702  of  the  Local  Competition  Order  limits  a  state  to  considering  only  the  actual  competitive  risk  the  incumbent  LEC  currently  faces 
 in  providing  UNEs.  Because  the  objective  of  TELRIC  pricing  is  to  replicate  pricing  in  a  competitive  market,  2045  and  prices  in  a  competitive  market  would  reflect  the  competitive  risks 
 associated  with  participating  in  such  a  market,  we  now  clarify  that  states  should  establish  a  cost  of  capital  that  reflects  the  competitive  risks  associated  with  participating  in  the  type  of  market 
 that  TELRIC  assumes.  The  Commission  specifically  recognized  that  increased  competition  would  lead  to  increased  risk,  which  would  warrant  an  increased  cost  of  capital.  2046  Although 
 paragraph  702  states  that  there  was  limited  competition  for  network  elements  at  the  time,  it  is  clear  from  our  discussion  of  the  TELRIC  methodology  that  future  competition  must  be 
 considered  in  assessing  risk.  2047 
 682.  The  approach  advocated  by  AT&  T  and  WorldCom  does  not  provide  optimal  incentives  for  investment.  To  calculate  rates  based  on  an  assumption  of  a  forward-  looking 

 network  that  uses  the  most  efficient  technology  (i.  e.,  the  network  that  would  be  deployed  in  a 

 2043  AT&  T  July  26,  2002  TELRIC  Ex  Parte  Letter,  Attach.  at  1  (citing  Local  Competition  Order,  11  FCC  Rcd  at 
 15856,  para.  702). 
 2044  Id. 

 2045  Local  Competition  Order,  11  FCC  Rcd  at  15846,  para.  679. 
 2046  Id.  at  15856,  para.  702. 
 2047  Id.  at  15848,  para.  683  (  Forward-  looking  cost  methodologies,  like  TELRIC,  are  intended  to  consider  the  costs 
 that  a  carrier  would  incur  in  the  future.);  see  also  id.  at  15854,  para.  700  (  The  concept  of  normal  profit  is  embedded  in  forward-  looking  costs  because  the  forward-  looking  cost  of  capital,  i.  e.,  the  cost  of  obtaining  debt  and 

 equity  financing,  is  one  of  the  forward-  looking  costs  of  providing  the  network  elements.  This  forward-  looking  cost  of  capital  is  equal  to  a  normal  profit.).  Even  if  the  Local  Competition  Order  could  be  read  to  suggest  that  a 
 TELRIC  analysis  should  consider  only  the  current  competitive  risk  faced  by  an  incumbent  LEC,  we  now  modify  that  requirement  as  described  in  the  text.  We  think  this  modification  is  necessary  to  send  appropriate  economic 
 signals  as  addressed  in  the  next  paragraph. 
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 competitive  market),  without  also  compensating  for  the  risks  associated  with  investment  in  such  a  network,  would  reduce  artificially  the  value  of  the  incumbent  LEC  network  and  send  improper 
 pricing  signals  to  competitors.  Establishing  UNE  prices  based  on  an  unreasonably  low  cost  of  capital  would  discourage  competitive  LECs  from  investing  in  their  own  facilities  and  thus  slow 
 the  development  of  facilities-  based  competition. 
 683.  Second,  we  clarify  that  a  TELRIC-  based  cost  of  capital  should  reflect  any  unique  risks  (above  and  beyond  the  competitive  risks  discussed  above)  associated  with  new  services  that 

 might  be  provided  over  certain  types  of  facilities.  2048  In  the  Local  Competition  Order,  the  Commission  stated  that  different  UNEs  may  have  different  costs  of  capital.  2049  We  now  clarify 
 that  the  use  of  UNE-  specific  costs  of  capital  is  an  acceptable  method  of  reflecting  in  UNE  prices  any  risk  associated  with  new  facilities  that  employ  new  technology  and  offer  new  services.  A 
 carrier  in  a  TELRIC  proceeding  could,  for  example,  attempt  to  demonstrate  that  the  cost  of  capital  associated  with  new  services  that  might  be  provided  over  mixed  copper/  fiber  loops  is 
 higher  than  the  cost  of  capital  used  for  voice  services  provided  over  other  UNEs.  We  think  this  approach  responds  to  the  incumbent  LECs  concern  that  our  rules  provide  no  opportunity  for 
 them  to  recover  the  cost  of  investing  in  facilities  to  provide  services  that  are  more  advanced  than  those  modeled  under  TELRIC.  2050 

 684.  We  are  not  aware  of  any  state  proceedings  that  have  considered  the  use  of  different  costs  of  capital  for  different  elements.  Moreover,  the  record  in  this  proceeding  does  not 
 specifically  identify  or  quantify  the  additional  risk  that  may  be  associated  with  investing  in  facilities  to  support  advanced  services.  We  cannot  tell,  therefore,  whether  the  benefits  of  using 
 multiple  costs  of  capital  will  in  all  cases  outweigh  the  possible  increased  administrative  burden  associated  with  establishing  multiple  costs  of  capital.  Accordingly,  we  believe  parties  should 
 continue  to  have  the  option  to  propose  (and  states  should  have  the  option  to  adopt)  a  single  cost  of  capital  for  all  UNEs  that  appropriately  reflects  the  risks  associated  with  competitive  markets 
 for  the  services  provided  over  incumbent  LEC  networks.  We  think  this  approach  provides  incumbent  LECs  the  opportunity  to  seek  compensation  for  any  additional  risks  associated  with 
 new  services  and  facilities,  while  preserving  flexibility  for  all  parties  and  for  state  commissions  with  respect  to  implementation  of  our  TELRIC  rules. 

 2048  There  seems  to  be  some  agreement  among  the  parties  on  this  point.  In  an  ex  parte  filing,  AT&  T  states  that 
 TELRIC-  based  rates  in  this  context  would  be  calculated  by  including  the  potential  risk  that  consumers  would  not  purchase  services  provided  over  upgraded  facilities.  AT&  T  Dec.  23,  2002  Lawson  Ex  Parte  Letter  at  16. 

 Similarly,  McLeodUSA  states  that  state  commissions  should  consider  whether  the  risks  associated  with  the  equipment  providing  integrated  (including  broadband)  services  warrants  an  increase  in  the  rate  of  return  used  to 
 calculate  the  TELRIC  price.  McLeodUSA  Jan.  8,  2003  TELRIC  Ex  Parte  Letter  at  4. 
 2049  Local  Competition  Order,  11  FCC  Rcd  at  15856,  para.  702  (  We  note  that  the  risk-  adjusted  cost  of  capital  need 
 not  be  uniform  for  all  elements.). 
 2050  See,  e.  g.,  Verizon  Oct.  16,  2002  Ex  Parte  Letter  at  2  (stating  that  the  current  regime  permits  telephone 
 companies  to  earn  back  their  costs  (or  less  under  TELRIC)  and  requires  them  to  bear  the  full  downside  risk  of  investments  that  fail,  while  leaving  others  to  capture  any  upside  of  investments  that  succeed.). 
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 b.  Depreciation 
 685.  Like  cost  of  capital,  the  depreciation  component  of  TELRIC  provides  a  mechanism  by  which  UNE  prices  will  reflect  certain  risks  associated  with  new  facilities  and  new 

 services.  The  Local  Competition  Order  contains  a  very  limited  discussion  of  depreciation.  Specifically,  the  Commission  stated  that  properly  designed  depreciation  schedules  should  take 
 into  account  expected  declines  in  the  value  of  goods.  2051  Similarly,  our  rules  require  the  use  of  economic  depreciation  but  provide  no  additional  detail.  2052  There  appears  to  be  general 
 agreement  among  the  parties  that  depreciation  should  reflect  any  factors  that  would  cause  a  decline  in  asset  values,  such  as  competition  or  advances  in  technology.  2053 

 686.  There  are  two  components  of  depreciation    the  useful  life  of  the  asset,  and  the  rate  at  which  the  asset  is  depreciated  over  the  useful  life.  In  their  comments,  the  incumbent 
 LECs  address  only  the  issue  of  asset  lives.  Verizon  requests  that,  at  an  absolute  minimum,  the  Commission  should  make  clear  that  the  starting  point  should  be  the  same  lives  that  are  used  for 
 financial  reporting  purposes  in  accordance  with  well-  recognized  accounting  principles.  2054  These  lives  are  intrinsically  forward-  looking  and  are  updated  frequently  to  reflect  technological 
 and  other  changes  that  affect  the  length  of  an  assets  economic  life.  2055  SBC  takes  a  similar  approach,  noting  that  Commission  action  is  necessary  because  virtually  all  states  applying 
 TELRIC  have  applied  historical,  backward-  looking  legacy  regulation  depreciation  rates  devised  years  ago.  2056  SBC  states  that  these  legacy  depreciation  rates  are  inconsistent  with  real 
 depreciation  lives  of  real  telephony  assets  in  the  ground,  and  they  are  even  more  inconsistent  with  the  forward-  looking  TELRIC  methodology  itself,  which  assumes,  after  all,  a  hypothetical 
 competitor  that  maintains  state-  of-  the-  art  equipment.  2057 
 687.  AT&  T  and  WorldCom  respond  by  arguing  that  no  clarification  of  TELRIC  is  necessary.  AT&  T  states  that  the  incumbent  LEC  position  misrepresents  the  Commission-prescribed 

 depreciation  lives  because  those  lives  reflect  a  rigorous  application  of  forward- 

 2051  Local  Competition  Order,  11  FCC  Rcd  at  15849,  para.  686. 
 2052  47  C.  F.  R.    51.505(  b)(  3). 
 2053  AT&  T,  for  example,  states  that  if  a  competitive  environment  makes  it  more  likely  that  an  incumbents  capital 
 will  be  devalued  (say  by  entry  or  by  more  rapid  technical  progress),  TELRIC  depreciation  will  reflect  this.  AT&  T  Dec.  23,  2002  Lawson  Ex  Parte  Letter  at  17.  This  statement  appears  to  be  consistent  with  the  basic  approach 

 advocated  by  the  incumbent  LECs.  See,  e.  g.,  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  3  (advocating  asset  lives  based  on  financial  reporting  because  they  are  updated  frequently  to  reflect  technological  and  other  changes 
 that  affect  the  length  of  an  assets  economic  life.). 
 2054  Verizon  July  18,  2002  TELRIC  Ex  Parte  Letter  at  2-  3. 

 2055  Id.  at  3. 
 2056  SBC  Sept.  9,  2002  TELRIC  Ex  Parte  Letter  at  3. 
 2057  Id. 
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 looking  principles.  2058  Depreciation  lives  based  on  financial  accounting,  on  the  other  hand,  are  biased  towards  the  low  (shorter)  side  because  they  are  driven  by  corporate  objectives,  including 
 the  objective  of  protecting  shareholders.  2059  WorldCom  echoes  these  arguments,  and  notes  that  the  Commission  rejected  the  use  of  financial  lives,  and  endorsed  the  use  of  Commission-prescribed 
 regulatory  lives,  for  use  in  the  TELRIC  model  used  to  calculate  universal  service  support.  2060 

 688.  We  decline  to  adopt  the  incumbent  LECs  suggestion  that  we  mandate  the  use  of  financial  lives  in  establishing  depreciation  expense  under  TELRIC.  The  incumbent  LECs  have 
 not  provided  any  empirical  basis  on  which  we  could  conclude  that  financial  lives  always  will  be  more  consistent  with  TELRIC  than  regulatory  lives.  Both  financial  lives  and  regulatory  lives 
 were  developed  for  purposes  other  than,  or  in  addition  to,  reflecting  the  actual  useful  life  of  an  asset.  2061  We  cannot  conclude  on  this  record  that  one  set  of  lives  or  the  other  more  closely 
 reflects  the  actual  useful  life  of  an  asset  that  would  be  anticipated  in  a  competitive  market.  Accordingly,  state  commissions  continue  to  have  discretion  with  respect  to  the  asset  lives  they 
 use  in  calculating  depreciation  expense. 
 689.  Although  we  decline  to  mandate  a  particular  method  of  deciding  the  useful  life  of  an  asset,  we  believe  that  clarification  of  our  rules  is  necessary  with  respect  to  the  rate  at  which  an 

 asset  is  depreciated  over  its  useful  life.  As  noted  above,  the  various  components  of  TELRIC  rates  should  be  developed  using  a  consistent  set  of  assumptions  about  competition.  In 
 calculating  depreciation  expense,  therefore,  the  rate  of  depreciation  over  the  useful  life  should  reflect  the  actual  decline  in  value  that  would  be  anticipated  in  the  competitive  market  TELRIC 
 assumes.  In  this  way  our  economic  depreciation  requirement  is  designed  to  replicate  the  results  that  would  be  anticipated  in  a  competitive  market. 

 690.  We  clarify  that  under  our  economic  depreciation  requirement,  a  carrier  may  accelerate  recovery  of  the  initial  capital  outlay  for  an  asset  over  its  life  to  reflect  any  anticipated 
 decline  in  its  value.  For  example,  an  approach  that  accelerates  cost  recovery  based  on  an  index  showing  that  equipment  prices  are  declining  over  time  may  be  consistent  with  our  requirement  to 
 use  economic  depreciation.  Recovering  more  of  the  initial  capital  outlay  for  the  asset  in  the  early  years  would  enable  a  carrier  to  recover  less  in  later  years,  thereby  allowing  it  to  compete 
 with  carriers  that  have  purchased  new,  lower-  priced  equipment  in  those  later  years. 
 2058  AT&  T  July  26,  2002  TELRIC  Ex  Parte  Letter,  Attach.  at  2. 

 2059  Id. 
 2060  WorldCom  Oct.  23,  2002  TELRIC  Ex  Parte  Letter  at  3  (citing  Federal-  State  Joint  Board  on  Universal  Service, 
 Forward-  Looking  Mechanism  For  High  Cost  Support  For  Non-  Rural  LECs,  CC  Docket  Nos.  96-  45,  97-  160,  Tenth  Report  and  Order,  14  FCC  Rcd  20156,  20344-  46,  paras.  426-  29  (1999)). 

 2061  See  1998  Biennial  Regulatory  Review    Review  of  Depreciation  Requirements  for  Incumbent  Local  Exchange 
 Carriers,  Report  and  Order  in  CC  Docket  No.  98-  137  and  Memorandum  Opinion  and  Order  in  ASD  98-  91,  15  FCC  Rcd  242,  262-  63,  paras.  48-  49  (1999)  (noting  that  Generally  Accepted  Accounting  Principles  (GAAP)  and  other 

 non-  FCC  regulatory  safeguards  are  intended  to  protect  investor  interests,  while  the  Commissions  depreciation  requirements  are  intended  to  protect  ratepayer  interests). 
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 691.  To  date,  state  commissions  generally  have  used  straight-  line  depreciation,  rather  than  accelerated  depreciation  that  reflects  the  anticipated  decline  in  value  of  assets. 
 Accordingly,  the  use  of  accelerated  depreciation  may  raise  issues  that  have  not  been  addressed  previously  in  state  proceedings.  Among  the  questions  that  would  have  to  be  addressed  by 
 regulators  -  either  the  Commission  or  the  states  -  are  how  to  measure  the  anticipated  decline  in  value  of  assets,  whether  shorter  asset  lives  represent  an  alternative  method  of  capturing  this 
 decline,  how  UNE  prices  should  be  structured  to  reflect  decreases  in  depreciation  expense  from  one  period  to  the  next,  and  whether  levelizing  rates  across  periods,  as  most  cost  models  do, 
 diminishes,  or  even  eliminates  the  intended  effect  of  the  acceleration.  The  record  in  this  proceeding  does  not  provide  sufficient  information  for  the  Commission  to  resolve  these 
 questions  at  this  time,  but  we  encourage  state  commissions  to  consider  these  issues  in  future  UNE  pricing  proceedings.  2062 

 C.  Fresh  Look 
 692.  In  the  UNE  Remand  Order,  the  Commission  declined  to  grant  relief  for  competitors  from  liability  under  contractual  early  termination  clauses  in  the  event  that  an 

 incumbent  LECs  carrier-  customer  converts  a  special  access  circuit  to  a  UNE.  2063  Early  termination  clauses  are  provisions  that  are  typically  found  in  fixed  term  contracts  that  require 
 payment  of  a  fee  if  a  customer  terminates  the  contract  prior  to  the  end  of  the  mutually  agreed  upon  contract  term.  As  a  general  matter,  early  termination  provisions  can  be  mutually 
 beneficial.  Providers  are  given  a  measure  of  certainty  because  such  penalty  provisions  ensure  that  costs  will  be  recouped  in  the  event  a  customer  fails  to  utilize  the  service  for  the  stipulated 
 period  of  time.  On  the  other  hand,  customers  enjoy  discounted  and  stable  priced  services  over  the  life  of  the  contract  term. 

 693.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  what  bases  competitors  should  be  able  to  obtain  a  fresh  look  for  long-  term  commitments.  2064  In  response, 
 some  competitive  LECs  have  indicated  that  the  Commission  should  not  permit  incumbent  LECs  to  impose  early  termination  liabilities  on  competitive  LECs  converting  from  special  access  to 
 UNEs  because  the  law  requires  such  a  result.  Notably,  they  contend  that:  (1)  no  termination  occurs  because  circuits  are  converted  to  EELs;  2065  (2)  the  Commission  is  obligated  to  correct 
 the  results  of  an  erroneous  decision  by  the  Eighth  Circuit;  2066  and  (3)  termination  penalties 
 2062  As  noted  above,  the  Commission  plans  to  commence  a  proceeding  to  consider  these  and  other  issues  related  to 
 TELRIC  pricing  in  the  near  future. 
 2063  UNE  Remand  Order,  15  FCC  Rcd  at  3912,  para.  486  n.  985. 

 2064  Triennial  Review  NPRM,  16  FCC  Rcd  22819,  para.  83. 
 2065  See,  e.  g.,  Letter  from  M.  Gavin  McCarty,  Chief  Legal  Officer,  Globalcom,  to  William  Maher,  Chief,  Wireline 
 Competition  Bureau,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1-  2  (dated  Nov.  11,  2002),  in  Letter  from  M.  Gavin  McCarty,  Chief  Legal  Officer,  Globalcom,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  Nos.  01-  338, 

 96-  98,  98-  147  (filed  Nov.  14,  2002)  (Globalcom  Nov.  14,  2002  Ex  Parte  Letter). 
 2066  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  2. 
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 constitute  restrictions  on  access  to  UNEs,  which  is  prohibited  by  section  251.  2067  Competitive  LECs  also  contend  that  the  Commission  should  exercise  its  discretion  to  adopt  fresh  look 
 because:  (1)  incumbent  LECs  exercise  market  power  to  force  competitive  LECs  to  buy  special  access  facilities  which  were  only  affordable  with  long-  term  discounts;  2068  and  (2)  in  light  of  high 
 special  access  charges  and  NRCs,  termination  penalties  would  be  a  windfall  to  incumbent  LECs.  2069 

 694.  Despite  these  arguments,  we  will  not  disturb  the  Commissions  earlier  determination  related  to  fresh  look  for  special  access  to  EEL  conversions.  As  indicated  below, 
 there  is  no  legal  basis  that  requires  the  Commission  to  institute  a  fresh  look  policy  for  EEL  conversions.  Moreover,  we  conclude  that  restructuring  these  contracts  may  be  unfair  to  both 
 incumbent  LECs  and  other  competitors,  disruptive  to  the  market  place,  and  ultimately  inconsistent  with  the  public  interest.  While  we  recognize  that  fresh  look  may  have  been  granted 
 in  other  circumstances,  we  nevertheless  note  that  the  grant  of  fresh  look  is  a  very  rare  occurrence. 

 695.  As  an  initial  matter,  we  remain  unconvinced  by  the  general  argument  advanced  by  several  commenters  that  converting  a  special  access  circuit  to  a  UNE  does  not  constitute  a 
 termination  within  the  meaning  of  the  termination  provisions  of  incumbent  LEC  tariffs.  Globalcom  suggests  that  such  conversions  do  not  constitute  a  termination  if  the  competitive 
 carrier  would  agree  to  maintain  the  UNE  loop/  transport  combination  for  the  remainder  of  the  special  access  term.  2070  In  support  of  this  position,  Globalcom  noted  that  the  Illinois  Commerce 
 Commission  determined  that  termination  charges  should  not  apply  under  Ameritechs  intrastate  special  access  tariffs  because  the  termination  charges  were  not  designed  for  the  situation  .  .  . 
 where  the  provider-  customer  relationship  continues.  2071  Globalcom,  however,  has  not  demonstrated  that  a  similar  interpretation  is  required  under  incumbent  LECs  interstate  special 
 access  tariffs.  2072  In  essence,  Globalcom  claims  that  no  termination  has  occurred  during  conversions  because  the  continuation  of  some  other  service  cancels  out  the  fact  that  the  original 

 2067  NuVox  et  al.  Comments  at  116. 
 2068  See  AT&  T  Reply  at  297;  see  also  ALTS  et  al.  Comments  at  128  (arguing  that  long-  term  special  access 
 arrangements  prevent  consumers  from  obtaining  the  benefits  of  competition);  NuVox  et  al.  Comments  at  116-  17  (arguing  that  conversion  to  UNEs  was  previously  denied  by  incumbent  LECs). 

 2069  See  ALTS  et  al.  Comments  at  129;  see  also  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  2  (arguing  that  after 
 the  termination  penalty  is  assessed  the  competitive  LEC  will  continue  to  pay  TELRIC  compensation). 
 2070  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  3. 

 2071  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  3  (citing  Globalcom  v.  Illinois  Bell  Telephone  d/  b/  a  Ameritech 
 Illinois,  ICC  Docket  02-  0365  (Ill.  C.  C.  Oct.  23,  2002)). 
 2072  We  note  that  Globalcom  has  not  provided  any  specific  information  (including  citations  to  specific  provisions) 
 from  its  interstate  special  access  contracts. 
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 service  under  the  tariff  will  be  discontinued.  2073  While  we  do  not  foreclose  this  as  a  proper  reading  of  a  particular  tariff  provision,  we  also  do  not  find  support  on  this  record  for  the 
 conclusion  that  this  reading  necessarily  is  proper  for  all  tariff  provisions. 
 696.  Globalcom  also  argues  that  but  for  the  protracted  litigation  regarding  UNE  rules,  competitive  LECs  would  not  have  been  forced  to  order  special  access  circuits  and 

 incumbent  LECs  would  not  have  been  able  to  charge  higher  special  access  rates  or  cost  prohibitive  termination  fees.  2074  Globalcom  seeks  to  have  the  Commission  go  back  in  time  to 
 resolve  the  inequities  that  it  claims  resulted  from  the  decision  of  the  Eighth  Circuit  to  vacate  sections  51.315(  c)-(  f)  of  our  rules,  which  required  incumbent  LECs  to  combine  elements  on 
 behalf  of  competitive  LECs  on  request.  2075  We  decline  to  engage  in  such  an  exercise.  We  find  that  doing  so  would  neither  be  in  the  public  interest  nor  represent  a  competitively  neutral 
 approach  to  the  rule  changes  that  have  affected  both  incumbent  LECs  and  competitive  LECs  alike.  Indeed,  in  overturning  the  Commissions  unbundling  rules  the  D.  C.  Circuit  wrote  that 
 UNEs  had  been  available  to  CLECs  in  many  markets  where  there  is  no  reasonable  basis  for  thinking  that  competition  is  suffering  from  any  impairment  .  .  .  .  2076  In  response  to  this  judicial 
 concern,  we  have  revisited  our  unbundling  requirements  in  this  Order.  However,  we  have  not  sought  to  establish  rules  that  would  retroactively  resolve  issues  related  to  the  issuance  of  the 
 UNE  Remand  Order.  Doing  so  would  require  a  level  of  speculation  and  conjecture  that  does  not  forward  the  public  interest.  Moreover,  to  the  extent  that  Globalcom  seeks  protection  from 
 regulatory  and  judicial  uncertainty,  it  was  free  to  negotiate  to  include  a  change  of  law  provision  that  would  have  protected  it  against  the  Eighth  Circuits  ruling. 

 697.  NuVox  et  al.  contends  that  the  Commission  is  legally  required  to  institute  a  fresh  look  policy,  arguing  that  a  denial  of  fresh  look  would  be  inconsistent  with  section  251,  which 
 does  not  permit  the  imposition  of  impediments  to  or  restrictions  on  access  to  UNEs.  2077  We  disagree  with  the  logic  of  NuVox.  Nothing  in  section  251  mandates  that  the  Commission  deny 
 incumbent  LECs  termination  liability  payments  to  which  they  are  entitled  under  contracts  in  the  event  of  an  EEL  conversion.  As  noted  above,  contracts  that  provide  for  term  pricing  and  early 
 termination  penalties  may  benefit  both  parties  and  thus  do  not  represent  the  type  of  impediment  or  restriction  to  access  that  section  251  prohibits.  While  we  agree  that  incumbent  LECs  are  not 
 permitted  to  establish  unilateral  barriers  that  work  to  restrict  access  to  UNEs,  that  is  not  the  case  here.  The  termination  penalties  were  established  by  a  process  of  bilateral  negotiation  or 
 arbitration,  not  fiat. 

 2073  See  also  NuVox  et  al.  Comments  at  116  (arguing  that  fresh  look  does  not  require  a  carrier  to  switch  to  another 
 provider,  but  to  convert  from  one  type  of  [incumbent]  LEC  service  to  another.). 
 2074  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  3. 

 2075  See  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  813. 
 2076  Id. 
 2077  NuVox  et  al.  Comments  at  116. 
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 698.  Although  we  not  persuaded  that  there  are  any  legal  requirements  mandating  that  we  adopt  a  fresh  look  for  all  special  access  contracts,  2078  the  Commission  may,  in  its  discretion, 
 take  such  action  pursuant  to  its  authority  under  sections  201  through  205  of  the  Act.  2079  We  decline  to  pursue  such  a  market-  disrupting  remedy  in  this  instance  because  there  is  not  sufficient 
 evidence,  in  this  record,  of  abuse  of  market  power  by  the  incumbent  LECs  or  some  other  wrong  that  must  be  retroactively  addressed  here.  2080  We  note  that  linking  a  price  discount  to  a 
 contractual  term  is  a  reasonable,  accepted  commercial  practice,  both  inside  and  outside  of  the  telecommunications  industry.  It  is  the  specific  application  of  such  provisions,  rather  than  the 
 very  existence,  that  could  offend  the  Communications  Act.  Determining  whether  such  provisions  were  applied  unlawfully  is  a  fact-  intensive  inquiry.  In  light  of  the  likely  marketplace 
 disruption  of  adopting  a  fresh  look  policy  along  with  the  lack  of  specific  evidence  on  the  record,  we  are  not  convinced  that  the  abrogation  of  negotiated  terms  will  be  in  the  public  interest  in  this 
 instance.  We,  nevertheless,  caution  incumbent  LECs  that  their  ability  to  apply  termination  penalties  is  not  unfettered.  We  concur  with  the  conclusion  in  the  UNE  Remand  Order  that  any 
 substitution  of  unbundled  network  elements  for  special  access  would  require  the  requesting  carrier  to  pay  any  appropriate  termination  penalties  required  under  volume  or  term  contracts.  2081 
 Thus,  to  the  extent  a  carrier  can  provide  more  specific  evidence  that  incumbent  LEC  termination  penalties  are  inappropriate,  we  will  resolve  such  a  matter  through  an  enforcement  proceeding. 

 699.  Finally,  although  competitive  carriers  contend  that  incumbent  LECs  will  receive  a  windfall  in  the  absence  of  fresh  look,  2082  we  conclude  that  the  inverse  may  be  true  as  well. 
 Competitive  LECs  that  entered  into  long-  term  special  access  contracts  benefited  from  term  discount  arrangements  which  allowed  for  lower  costs.  It  may  be  unfair  for  these  carriers  to 
 completely  avoid  costs  they  knowingly  agreed  to  shoulder.  Indeed,  it  would  put  them  in  a  far  better  position  than  those  competitive  LECs  that  chose  to  avoid  early  termination  provisions,  and 
 to  select  shorter  contract  periods  with  higher  prices. 
 D.  Transition  Period 
 700.  We  recognize  that  many  of  our  decisions  in  this  Order  will  not  be  self-  executing.  Indeed,  under  the  statutory  construct  of  the  Act,  the  unbundling  provisions  of  section  251  are 

 implemented  to  a  large  extent  through  interconnection  agreements  between  individual  carriers.  2083  The  negotiation  and  arbitration  of  new  agreements,  and  modification  of  existing 

 2078  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  3. 
 2079  See,  e.  g.,  Special  Access  Order,  7  FCC  Rcd  at  7463,  para.  40. 
 2080  AT&  T  and  Globalcom  contend  that  long-  term  special  access  contracts  were  signed  under  the  pressure  of 
 economic  duress  in  order  to  provide  economically  feasible  products  to  their  customers.  See  AT&  T  Reply  at  298;  Globalcom  Nov.  14,  2002  Ex  Parte  Letter  at  2.  On  the  record  before  us,  we  find  insufficient  evidence  to 

 demonstrate  that  carriers  seeking  long-  term  special  access  commitments  were  suffering  under  economic  duress. 
 2081  UNE  Remand  Order,  15  FCC  Rcd  at  3912,  para.  486  n.  985  (emphasis  added). 

 2082  See,  e.  g.,  ALTS  et  al.  Comments  at  129. 
 2083  See  47  U.  S.  C.    252. 
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 agreements  to  reflect  these  new  rules,  cannot  be  accomplished  overnight.  We  recognize  that  many  interconnection  agreements  contain  change  of  law  provisions  that  allow  for  negotiation 
 and  some  mechanism  to  resolve  disputes  about  new  agreement  language  implementing  new  rules.  Although  some  parties  believe  that  the  contract  modification  process  requires 
 Commission  intervention  in  this  instance,  we  believe  that  individual  carriers  should  be  allowed  the  opportunity  to  negotiate  specific  terms  and  conditions  necessary  to  translate  our  rules  into  the 
 commercial  environment,  and  to  resolve  disputes  over  any  new  agreement  language  arising  from  differing  interpretations  of  our  rules. 

 701.  Thus,  to  the  extent  our  decision  in  this  Order  changes  carriers  obligations  under  section  251,  we  decline  the  request  of  several  BOCs  that  we  override  the  section  252  process  and 
 unilaterally  change  all  interconnection  agreements  to  avoid  any  delay  associated  with  renegotiation  of  contract  provisions.  2084  Permitting  voluntary  negotiations  for  binding 
 interconnection  agreements  is  the  very  essence  of  section  251  and  section  252.  We  do  not  believe  that  the  lag  involved  in  negotiating  and  implementing  new  contract  language  warrants 
 the  extraordinary  step  of  the  Commission  interfering  with  the  contract  process.  We  also  recognize  that  commenters  have  argued  that  a  Commission-  mandated  transition  period  is  needed 
 so  carriers  have  time  to  adjust  their  business  practices,  and  to  make  arrangements  to  accommodate  their  customers.  Except  as  expressly  provided  above  in  Parts  VI.  A.  4.  a.(  v).(  a)  and 
 VI.  D.  4.  c.(  iii).(  d),  we  decline  to  establish  such  a  transition  period  and  find,  instead,  that  contract  arrangements  should  govern.  We  note,  however,  that  the  practical  effect  of  this  negotiation  of 
 new  terms  may  be  that  parties  are  provided  a  transition  period. 
 702.  While  we  decline  to  depart  from  the  section  252  process,  we  believe  that  additional  guidance  is  needed  here  to  ensure  that  parties  make  the  necessary  changes  to  their 

 interconnection  agreements  in  response  to  this  Order  in  a  timely  manner.  We,  therefore,  provide  some  guidance  below  to  give  individual  carrier  negotiations  a  framework  that  will  avoid  undue 
 delay  or  confusion. 
 703.  First,  we  require  incumbent  and  competitive  LECs  to  use  section  252(  b)  as  a  default  timetable  for  modification  of  interconnection  agreements  that  are  silent  concerning 

 change  of  law  and/  or  transition  timing.  2085  We  find  that  delay  in  the  implementation  of  the  new 
 2084  See  Letter  from  Cronan  OConnell,  Vice  President    Federal  Regulatory,  Qwest,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  01-  338  at  10  (filed  Nov.  21,  2002)  (Qwest  Nov.  21,  2002  Ex  Parte  Letter)  (arguing  that  competitive  LECs  typically  claim  that  change  of  law  provisions  are  not  self-  executing);  see  also  Letter  from 

 Michael  K.  Kellogg,  Counsel  for  SBC,  Qwest  and  BellSouth,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338  at  3-  5  (filed  Jan.  21,  2003)  (SBC/  Qwest/  BellSouth  Jan.  21,  2003  Ex  Parte  Letter)  (arguing  that  the  Commission 
 may  negate  certain  contract  terms  under  the  Mobile-  Sierra  doctrine).  Competitive  LECs,  however,  have  forcefully  argued  that  the  Mobile-  Sierra  doctrine  does  not  apply  to  interconnection  agreements  that  are  filed  with 
 the  states.  See  Letter  from  Christopher  J.  Wright,  Counsel  for  Z-  Tel,  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338  at  5-  9  (filed  Jan.  30,  2003);  see  also  AT&  T  Feb.  3,  2003  Ex  Parte  Letter;  Letter  from  Broadview 
 Networks  et  al.  to  Marlene  H.  Dortch,  Secretary,  FCC,  CC  Docket  01-  338  (filed  Feb.  3,  2003). 
 2085  Section  252(  a)(  1)  states  that  [  u]  pon  receiving  a  request  for  interconnection,  services,  or  network  elements 
 pursuant  to  section  251,  an  incumbent  local  exchange  carrier  may  negotiate  and  enter  into  a  binding  agreement  with  the  requesting  telecommunications  carrier  or  carriers.  If  the  parties  cannot  reach  agreement,  the  party  requesting 

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 rules  we  adopt  in  this  Order  will  have  an  adverse  impact  on  investment  and  sustainable  competition  in  the  telecommunications  industry.  Therefore,  to  ensure  that  there  is  no  undue 
 delay  in  commencing  the  renegotiation  of  interconnection  provisions,  the  effective  date  of  the  rules  we  adopt  in  this  Order  shall  be  deemed  the  notification  or  request  date  for  contract 
 amendment  negotiations  under  this  default  approach.  We  believe  that  this  requirement  will  ensure  that  carriers  will  begin  immediately  to  negotiate  in  good  faith  pursuant  to  section 
 251(  c)(  1)  of  the  Act  to  modify  their  interconnection  agreements  to  the  extent  necessary  in  view  of  the  rules  we  adopt  today.  2086  Further,  under  the  section  252(  b)  timetable,  where  a  negotiated 
 agreement  cannot  be  reached,  parties  would  submit  their  requests  for  state  arbitration  as  soon  as  135  days  after  the  effective  date  of  this  Order  but  no  longer  than  160  days  after  this  Order 
 becomes  effective.  2087  In  turn,  the  state  commissions  would  conclude  their  consideration  of  such  disputes  within  nine  months  of  the  effective  date  of  this  Order.  2088  We  will  rely  on  state 
 commissions  to  be  vigilant  in  monitoring  compliance  with  the  provisions  of  sections  251  and  252.  Although  parties  have  sought  to  have  the  Commission  intervene  in  this  process,  we  believe 
 that  the  statutory  maximum  transition  period  of  nine  months  will  ensure  an  orderly  transition  to  the  new  rules.  We  further  note  that  the  nine-  month  period  outlined  by  Congress  is  reasonably 
 consistent  with  the  transition  periods  sought  by  the  parties.  2089 
 704.  Second,  we  believe  that  the  section  252  process  described  above  provides  good  guidance  even  in  instances  where  a  change  of  law  provision  exists.  As  under  the  default  process 

 described  above,  we  expect  that  parties  would  begin  their  change  of  law  process  promptly.  Once  a  contract  change  is  requested  by  either  party,  we  expect  that  negotiations  and  any  timeframe  for 
 resolving  the  dispute  would  commence  immediately.  We  also  find  that  the  section  251(  c)(  1)  duty  to  negotiate  in  good  faith  applies  to  these  contract  modification  discussions,  as  they  do 
 under  the  section  252  process.  Accordingly,  any  refusal  to  negotiate  or  cooperate  with  the  contractual  dispute  resolution  process,  including  taking  actions  that  unreasonably  delay  these 

 (Continued  from  previous  page) 
 interconnection,  services,  or  network  elements  may  petition  the  relevant  state  commission  to  arbitrate  the  dispute.  See  47  U.  S.  C.    252(  b)(  1).  Such  petitions  must  be  submitted  between  the  135th  to  the  160th  day  (inclusive)  after 

 the  date  on  which  an  incumbent  LEC  received  the  request  for  interconnection,  services,  or  network  elements.  Id.  The  state  Commission  must  resolve  the  dispute  no  later  than  nine  months  after  the  date  on  which  the  incumbent 
 LEC  received  the  request  for  interconnection,  services,  or  network  elements.  See  47  U.  S.  C.    252(  b)(  4)(  C).  Although  section  252(  a)(  1)  and  section  252(  b)(  1)  refer  to  requests  that  are  made  to  incumbent  LECs,  we  find  that  in 
 the  interconnection  amendment  context,  either  the  incumbent  or  the  competitive  LEC  may  make  such  a  request,  consistent  with  the  parties  duty  to  negotiate  in  good  faith  pursuant  to  section  251(  c)(  1). 

 2086  For  example,  negotiation  or  modification  requests  received  before  the  rules  become  effective  would  not  start 
 the  negotiation  clock.  In  addition,  a  party  cannot  contend  that  the  negotiation  time  period  did  not  begin  because  another  party  failed  to  send  a  request  for  negotiation  because  such  actions  do  not  constitute  the  trigger  for 

 negotiations.  Instead,  as  indicated  above,  negotiations  will  be  deemed  to  commence  upon  the  effective  date  of  this  Order. 

 2087  See  47  U.  S.  C.    252(  b)(  1). 
 2088  See  id.    252(  b)(  4). 
 2089  See,  e.  g.,  Eschelon  Comments  at  18-  19. 
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 processes,  could  be  considered  a  failure  to  negotiate  in  good  faith  and  a  violation  of  section  251(  c)(  1).  2090  Finally,  to  the  extent  a  contractual  change  of  law  provision  envisions  a  state  role, 
 we  believe  a  state  commission  should  be  able  to  resolve  a  dispute  over  contract  language  at  least  within  the  nine-  month  timeframe  envisioned  for  new  contract  arbitrations  under  section  252. 

 705.  Third,  we  recognize  that  some  BOCs  are  concerned  that  the  negotiation  process  may  be  unnecessarily  delayed  where  a  change  of  law  provision  provides  for  interconnection 
 agreement  modification  pursuant  to  legally  binding  intervening  law  or  final  and  unappealable  [judicial]  orders.  2091  In  essence,  these  companies  contend  that  it  would  be  inappropriate  to  read 
 these  provisions  as  being  triggered  only  after  all  appeals  of  this  Order  become  final  and  unappealable.  Instead,  the  BOCs  contend  that  the  only  logical  reading  of  such  provisions  is  that 
 such  provisions  are  triggered  when  the  decision  of  the  D.  C.  Circuit  reversing  the  Commissions  prior  UNE  rules  becomes  final  and  nonappealable.  2092  We  believe  that  the  BOCs  interpretation 
 of  such  provisions  is  reasonable  and  that  either  a  court  or  a  state  commission  would  agree  with  such  a  reading.  Indeed,  once  the  USTA  decision  is  final  and  no  longer  subject  to  further  review, 
 or  the  new  rules  adopted  in  this  Order  become  effective,  the  legal  obligation  upon  which  the  existing  interconnection  agreements  are  based  will  no  longer  exist.  2093  Given  that  the  prior  UNE 
 rules  have  been  vacated  and  replaced  today  by  new  rules,  we  believe  that  it  would  be  unreasonable  and  contrary  to  public  policy  to  preserve  our  prior  rules  for  months  or  even  years 
 pending  any  reconsideration  or  appeal  of  this  Order. 
 706.  Finally,  we  reiterate  that  section  251(  c)  imposes  a  good  faith  negotiation  requirement  that  applies  to  both  incumbent  LECs  and  competitive  LECs.  Based  on  past  history, 

 we  understand  that  parties  may  disagree  significantly  on  what  constitutes  a  breach  of  the  good  faith  negotiation  requirement.  While  we  realize  that  whether  a  carrier  violates  its  section 
 251(  c)(  1)  is  a  fact-  specific  inquiry,  we  nevertheless  admonish  all  parties  to  avoid  gamesmanship  and  behavior  that  may  reasonably  lead  to  a  finding  of  bad  faith.  For  example,  parties  may  not 
 refuse  to  negotiate  any  subset  of  the  rules  we  adopt  herein.  Once  the  rules  established  herein  are  effective,  and  any  applicable  change  of  law  process  has  been  triggered,  a  partys  refusal  to 
 negotiate  (or  actions  that  would  otherwise  delay  unnecessarily  the  resolution  of)  any  single  issue  may  be  deemed  a  violation  of  section  251(  c)(  1). 

 2090  47  U.  S.  C.    251(  c)(  1).  As  we  have  recognized  in  the  past,  a  failure  to  engage  in  change  of  law  negotiations 
 may  constitute  a  failure  to  negotiate  in  good  faith  under  section  251(  c)(  1).  See  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  CC  Docket  No.  98-  147,  Order  on  Reconsideration  and  Second 

 Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  17806,  17825-  26,  paras.  34-  36  (2000). 
 2091  SBC/  Qwest/  BellSouth  Jan.  21,  2003  Ex  Parte  Letter  at  2. 

 2092  See  USTA,  290  F.  3d  at  415. 
 2093  SBC/  Qwest/  BellSouth  Jan.  21,  2003  Ex  Parte  Letter  at  2. 
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 E.  Periodic  Review  of  National  Unbundling  Rules 
 1.  Background 
 707.  Our  decisions  in  this  Order  regarding  the  network  elements  that  should  be  unbundled  are  consistent  with  the  determination  in  the  UNE  Remand  Order  that  rapid  changes  in 

 technology,  competition,  and  the  economic  conditions  of  the  telecommunications  market  would  require  amendments  to  the  list  of  UNEs  that  meet  the  standards  of  section  251(  d)(  2).  2094  To 
 ensure  that  the  list  of  UNEs  is  current  and  responsive  to  market  and  economic  realities,  the  Commission  further  determined  in  the  UNE  Remand  Order  that  it  would  periodically  review  its 
 rules  in  this  area.  2095 
 708.  At  the  time  of  the  UNE  Remand  Order,  three  years  had  passed  since  the  Commission  first  adopted  unbundling  requirements  and  considerable  market  changes  had  taken 

 place  that  required  the  Commission  to  reassess  the  availability  of  elements  outside  the  incumbent  LECs  networks.  2096  While  a  constantly  evolving  marketplace  makes  such  review  necessary,  the 
 Commission  wisely  concluded  that  modifications  to  the  list  must  be  done  systematically:  [  e]  ntertaining,  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.  2097  In  order  to  provide  market 
 certainty,  the  Commission  declined  to  adopt  an  automatic  sunset  mechanism  for  removing  unbundling  obligations  and  instead  chose  a  three-  year  review  period.  2098 

 709.  In  the  Triennial  Review  NPRM,  the  Commission  sought  comment  on  whether  the  Commission  should  continue  with  a  fixed-  period  review  process  that  bars  the  filing  of  petitions 
 to  remove  unbundling  obligations  between  cycles,  and  whether  the  Commission  should  adopt  a  sunset  approach  to  removing  unbundling  obligations.  2099  In  particular,  the  Commission  sought 
 comment  on  whether  a  sunset  period  for  remaining  unbundling  obligations  could  create  incentives  for  facilities  deployment  and  investment.  2100  The  Commission  also  invited  parties  to 
 provide  guiding  principles  that  should  be  employed  to  determine  whether  and  how  existing  unbundling  rules  should  be  modified  on  an  ongoing  basis.  2101  To  the  extent  a  periodic  review 

 2094  UNE  Remand  Order,  15  FCC  Rcd  at  3765,  paras.  148-  49. 
 2095  Id.  at  3765,  para.  148. 
 2096  Id.  at  3765,  para.  149.  The  Commission  explained  that  even  as  early  as  1999,  there  was  evidence  that 
 competition  was  developing  in  some  geographic  markets  for  certain  customer  groups. 
 2097  Id.  at  3765-  66,  para.  150. 

 2098  Id.  at  3766,  para.  151. 
 2099  Triennial  Review  NPRM,  16  FCC  Rcd  at  22817-  18,  para.  80. 
 2100  Id. 
 2101  Id. 
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 period  is  retained  the  Commission  also  sought  comment  on  whether  three  years  is  the  appropriate  length  for  the  review  cycle  in  light  of  competitors  experiences  with  network  design, 
 ability  to  attract  investment,  and  execution  of  their  business  strategies.  2102  The  Triennial  Review  NPRM  also  sought  comment  on  whether  triennial  UNE  review  was  consistent  with  the 
 requirement  of  section  11  of  the  Act  to  review  in  even-  numbered  years  whether  regulations  in  effect  continue  to  serve  the  public  interest.  2103 

 2.  Discussion 
 710.  We  conclude  that  a  commitment  to  a  further  de  novo  triennial  review  is  not  necessary  at  this  time.  Rather,  as  the  Commission  does  with  all  of  its  other  rules,  we  will  rely  on 

 the  biennial  review  mechanism  established  in  section  11  of  the  Act.  2104  This  is  not  de  novo  review.  Instead,  consistent  with  its  biennial  review  procedures,  the  Commission's  review  will  be 
 limited  to  assessing  whether  documented  market  changes  merit  modifications  in  our  rules.  We  conclude  that  reopening  every  issue  on  a  biennial  basis  is  not  in  the  public  interest  because  it 
 would  increase  regulatory  uncertainty  unnecessarily  in  this  area.  We  also  note  that  in  the  period  between  biennial  reviews,  it  will  be  the  policy  of  this  Commission  not  to  entertain  ad  hoc 
 motions  or  petitions  to  remove  or  add  UNEs,  and  we  will  summarily  dismiss  such  petitions  to  ensure  certainty  in  the  marketplace. 

 711.  We  specifically  decline  the  suggestion  of  BellSouth  and  Verizon  to  adopt  a  sunset  period  for  our  UNE  rules.  2105  Verizon  argues  that  the  Commission  must  set  a  firm  sunset  date  no 
 longer  than  three  years  for  the  elimination  of  all  remaining  UNEs  to  ensure  that  competitive  LECs  make  prudent  investments  and  to  minimize  obstacles  to  investment  by  the  incumbent 
 LECs.  2106  Several  commenters  oppose  a  sunset  period  for  UNEs  as  unnecessary  and  inconsistent  with  key  goals  of  the  Act.  2107  We  agree.  We  find  that,  considering  the  complexity  of  the  analysis 
 required  to  apply  the  impairment  standard,  a  sunset  provision  would  be  arbitrary,  would  risk  premature  withdrawal  of  UNEs,  and  would  be  likely  to  undercut  incumbent  LEC  incentives  to 
 comply  as  the  sunset  date  approaches.  2108  Moreover,  the  adoption  of  a  sunset  provision  is 

 2102  Id.  at  22818,  para.  81. 
 2103  Id.  (  Although  our  completion  of  the  instant  review  in  2002  satisfies  both  review  cycles,  we  seek  comment  on 
 whether  the  Commission  could  wait  until  2005  for  a  subsequent  UNE  review,  or  whether  section  11  requires  a  UNE  review  in  2004.). 

 2104  47  U.  S.  C.    161. 
 2105  BellSouth  Comments  at  66,  72;  Verizon  Reply  at  62-  63. 
 2106  Verizon  Reply  at  60-  61. 
 2107  ASCENT  Comments  at  50;  CompTel  Comments  at  87;  ALTS  et  al.  Comments  at  124;  WorldCom  Comments  at 
 64-  65;  Eschelon  Comments  at  17-  18;  LDMI  Comments  at  13. 
 2108  ALTS  et  al.  Comments  at  124;  ASCENT  Comments  at  50;  CompTel  Comments  at  87;  Eschelon  Comments  at 
 17-  18;  WorldCom  Comments  at  64-  65. 
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 inconsistent  with  the  requirements  of  the  Act.  Sections  251(  c)  and  (d)  require  the  Commission  to  use  objective  criteria  to  determine  impairment.  2109  Notably,  section  251(  d)  sets  out  the 
 necessary  and  impair  standard  as  the  statutory  floor  for  the  Commissions  UNE  review.  2110  Thus,  under  the  Act,  UNEs  remain  so  long  as  impairment  remains.  The  mere  passage  of  time  cannot 
 replace  this  statutory  mandate.  2111 
 F.  Duty  to  Negotiate  in  Good  Faith 
 712.  We  amend  our  duty-  to-  negotiate  rule  51.301(  c)(  8)(  ii)  to  make  the  rule  conform  to  the  text  of  the  Local  Competition  Order.  In  that  order  the  Commission  stated  a  new  entrant 

 could  reasonably  withhold  information  about  its  own  costs  because  the  negotiations  concern  unbundling  or  leasing  of  the  incumbent  LECs  networks,  not  the  new  entrants  networks.  Rule 
 51.301(  c)(  8)(  ii)  states  that  refusal  by  a  requesting  telecommunications  carrier  to  furnish  cost  data  that  would  be  relevant  to  setting  rates  if  the  parties  were  in  arbitration  is  among  the  actions  or 
 practices  that  violate  the  duty  to  negotiate  in  good  faith.  2112  The  text  of  the  Local  Competition  Order,  by  contrast,  states  that  it  would  not  be  unreasonable  for  a  new  entrant  to  withhold 
 information  about  its  own  costs  because  the  negotiations  do  not  concern  unbundling  or  leasing  the  new  entrants  networks.  2113  We  therefore  amend  rule  51.301(  c)(  8)(  ii)  to  correct  this 
 typographical  error  and  replace  the  word  requesting  telecommunications  carrier  with  incumbent  LEC. 

 IX.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 713.  In  this  proceeding  and  in  comments  filed  in  response  to  a  related  Petition  for  Forbearance  and  Rulemaking  filed  by  Mpower  Communications  (Mpower  May  25,  2001 

 Petition),  2114  several  parties  have  argued  that  the  Commission  should  reconsider  its  current  rules  implementing  section  252(  i)  (i.  e.,  pick-  and-  choose  rule),  under  which  requesting  carriers  are 

 2109  47  U.  S.  C.    251(  c),  251(  d). 
 2110  In  determining  what  network  elements  should  be  made  available  for  purposes  of  subsection  (c)(  3),  the 
 Commission  should  consider  at  a  minimum,  whether    (A)  access  to  such  network  elements  as  are  proprietary  in  nature  is  necessary;  and  (B)  the  failure  to  provide  access  to  such  network  elements  would  impair  the  ability  of  the 

 telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer.  47  U.  S.  C.    251(  d)(  2)  (emphasis  added). 

 2111  Eschelon  Comments  at  17-  18. 
 2112  47  C.  F.  R.    51.301(  c)(  8)(  ii).  The  rule  51.301  states  in  relevant  part  that:  (  c)  If  proven  to  the  Commission,  an 
 appropriate  state  commission,  or  a  court  of  competent  jurisdiction,  the  following  actions  or  practices,  among  others,  violate  the  duty  to  negotiate  in  good  faith:  .  .  .  (8)  Refusing  to  provide  information  necessary  to  reach  agreement. 

 Such  refusal  includes,  but  is  not  limited  to:  .  .  .  (ii)  Refusal  by  a  requesting  telecommunications  carrier  to  furnish  cost  data  that  would  be  relevant  to  setting  rates  if  the  parties  were  in  arbitration. 

 2113  Local  Competition  Order,  11  FCC  Rcd  at  15577-  78,  para.  155  (emphasis  added). 
 2114  Mpower  Communications  Corp.  Petition  for  Forbearance  and  Rulemaking,  CC  Docket  No.  01-  117  (filed  May 
 25,  2001)  (Mpower  May  25,  2001  Petition). 
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 permitted  to  opt  into  individual  portions  of  interconnection  agreements  without  accepting  all  the  terms  and  conditions  of  such  agreements.  2115  In  the  view  of  Mpower,  a  competitive  LEC,  and 
 several  incumbent  LECs,  this  regime  has  impeded  the  type  of  marketplace  negotiations  that  Congress  intended  to  make  a  centerpiece  of  the  transition  from  regulated  monopolies  to 
 competition.  In  this  section,  we  seek  comment  on  whether  the  Commission  should  alter  its  interpretation  of  section  252(  i)  to  promote  more  meaningful  commercial  negotiations.  We 
 tentatively  conclude  that  a  modified  approach  would  better  serve  the  goals  embodied  in  section  252(  i)  and  sections  251-  252  generally.  As  discussed  more  fully  below,  once  an  incumbent  LEC 
 obtains  state  approval  of  a  statement  of  generally  available  terms  and  conditions  (SGAT)  pursuant  to  section  252(  f)    which  essentially  functions  as  a  standardized  interconnection 
 agreement    the  incumbent  LEC  and  competitive  carriers  then  would  be  permitted  to  negotiate  alternative  agreements  that  third  parties  could  opt  into  only  in  their  entirety  or  not  at  all. 

 714.  We  hereby  incorporate  the  Mpower  May  25,  2001  Petition  and  the  comments  and  ex  parte  presentations  in  CC  Docket  No.  01-  117  into  this  docket.  Commenters  need  not 
 resubmit  material  previously  filed  in  these  proceedings. 
 A.  Background 
 715.  Section  252(  i)  of  the  Act  provides  that  a  local  exchange  carrier  shall  make  available  any  interconnection,  service  or  network  element  provided  under  an  agreement 

 approved  under  [Section  252]  to  which  it  is  a  party  to  any  other  requesting  carrier  upon  the  same  terms  and  conditions  as  those  provided  in  the  agreement.  2116  When  the  Commission  initially 
 sought  comment  on  the  appropriate  interpretation  of  section  252(  i),  competitive  LECs  generally  argued  that  they  should  be  entitled  to  opt  into  each  distinct  term  and  condition  in  an 
 interconnection  agreement  approved  pursuant  to  section  252.  2117  Incumbent  LECs,  by  contrast,  argued  that  such  an  approach  would  deter  meaningful  negotiations,  because  an  incumbent  LEC 
 would  be  reluctant  to  make  any  significant  concession  (in  exchange  for  some  benefit)  for  fear  that  the  concession  would,  without  all  of  the  bargained-  for  considerations,  become  available  to 
 every  potential  entrant  in  the  market.  2118  In  the  Local  Competition  Order,  the  Commission  adopted  the  interpretation  advanced  by  competitive  carriers,  finding  that  incumbent  LECs  must 
 permit  third  parties  to  obtain  access  under  section  252(  i)  to  any  individual  interconnection,  service  or  network  element  arrangement  on  the  same  terms  and  conditions  as  those  contained  in 
 any  agreement  approved  under  section  252.  2119  This  decision  has  allowed  competitive  carriers  to  pick  and  choose  any  provision  in  an  approved  interconnection  agreement  between  another 
 competitor  and  the  incumbent  LEC. 

 2115  47  C.  F.  R.    51.809(  a)-(  c). 
 2116  47  U.  S.  C.    252(  i). 
 2117  Local  Competition  Order,  11  FCC  Rcd  at  16135-  36,  paras.  1304-  05. 
 2118  Id.  at  16134,  para.  1303. 
 2119  Id.  at  16139,  para.  1314  (emphasis  added);  see  also  47  C.  F.  R.    51.809. 
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 716.  On  review,  the  U.  S.  Court  of  Appeals  for  the  Eighth  Circuit  vacated  the  pick-  and-choose  rule,  holding  that  it  would  unreasonably  deter  voluntarily  negotiated  agreements  by 
 making  incumbent  LECs  reluctant  to  grant  quids  for  quos,  so  to  speak,  for  fear  that  they  would  have  to  grant  others  the  same  quids  without  receiving  quos.  2120  The  Supreme  Court  reversed  the 
 Eighth  Circuit  and  reinstated  the  rule.  The  Court  agreed  with  the  incumbent  LECs  that  it  would  be  eminently  fair  if  [  a]  carrier  who  wants  one  term  from  an  existing  agreement  .  .  .  [were] 
 required  to  accept  all  the  terms  in  the  agreement.  2121  The  Court  held,  however,  that  the  Commissions  interpretation  of  section  252(  i)  was  reasonable  (and  indeed  the  most  readily 
 apparent  reading  of  section  252(  i)),  because  it  closely  tracked  the  statutory  text.  2122  Ultimately,  the  Court  concluded  that  the  question  of  whether  the  Commissions  approach  will  significantly 
 impede  negotiations  (by  making  it  impossible  for  favorable  interconnection-  service  or  network-element  terms  to  be  traded  off  against  unrelated  provisions)  is  a  matter  eminently  within  the 
 expertise  of  the  Commission  and  eminently  beyond  our  ken.  2123 
 717.  In  its  petition,  Mpower  Communications,  a  competitive  LEC,  seeks  relief  from  the  pick-  and-  choose  requirement,  arguing  that  the  rule  inhibit[  s]  innovative  deal-  making.  2124 

 Mpower  observes  that  the  existing  rule  has  produced  a  great  sameness  and  very  little  meaningful  choice.  2125  In  an  effort  to    add  an  arrow  to  the  quiver  of  ILECs  and  CLECs  who 
 want  to  make  competition  work,  2126  Mpower  proposes  authorizing  FLEX  contracts  as  an  alternative  to  the  pick-  and-  choose  regime.  A  FLEX  contract  would  be  a  voluntarily  negotiated 
 wholesale  agreement  between  an  incumbent  LEC  and  a  competitive  LEC  that  other  carriers  could  opt  into  only  as  a  package  deal    that  is,  they  would  be  required  to  accept  the  entire 
 agreement  rather  than  be  able  to  pick  just  the  best  parts  of  the  deal.  2127  To  accomplish  this  goal,  Mpower  argues  that  the  Commission  should  forbear  from  section  252(  i),  as  well  as  from 
 the  requirement  in  section  252(  e)  to  submit  interconnection  agreements  for  state  commission  approval.  2128  Only  the  Commission  would  be  permitted  to  enforce  the  terms  of  FLEX  contracts, 
 and  such  terms  would  not  be  admissible  in  any  unrelated  proceeding.  2129  Creating  this  safe 

 2120  Iowa  Utils.  Bd.,  525  U.  S.  at  377  (citing  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  at  801). 
 2121  Id.  at  395-  96. 
 2122  Id.  at  396. 
 2123  Id. 
 2124  Mpower  May  25,  2001  Petition  at  9. 
 2125  Id. 
 2126  Id.  at  4. 
 2127  Id.  at  8. 
 2128  Id.  at  14-  15. 
 2129  Id.  at  16. 
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 harbor  from  the  pick-  and-  choose  rule,  Mpower  argues,  would  pave  the  way  toward  improved  wholesale  relationships  between  incumbent  LECs  and  competitive  carriers.  2130 
 718.  Several  parties  filed  comments  in  response  to  the  Mpower  May  25,  2001  Petition.  Incumbent  LECs  support  the  Petition,  arguing  that  the  pick-  and-  choose  rule  undermines  the 
 regime  of  commercial  negotiations  envisioned  by  Congress.  2131  Commenters  opposing  the  Mpower  May  25,  2001  Petition  object  to  circumventing  the  requirement  of  state  commission 
 approval  of  interconnection  agreements,  arguing  that  the  forbearance  standard  is  not  satisfied.  2132  These  commenters  also  express  the  concern  that  requiring  competitors  to  opt  into  an  entire 
 FLEX  contract  would  enable  incumbent  LECs  to  create  poison  pills    provisions  that  do  not  negatively  affect  the  contracting  parties  but  that  would  make  the  contract  unpalatable  to  other 
 carriers.  2133 
 719.  In  a  January  17,  2003  ex  parte  letter,  Verizon,  joined  by  BellSouth,  SBC  and  Qwest,  press  for  the  abandonment  of  the  pick-  and-  choose  rule,  arguing  that  it  permits  a 

 competitive  LEC  to  cherry-  pick  individual  provisions  of  any  approved  interconnection  agreement  previously  negotiated  under    252  between  an  [ILEC]  and  another  CLEC,  without 
 any  obligation  to  accept  the  remaining  provisions  of  the  agreement.  2134  These  carriers  contend  that  [  e]  liminating  the  pick-  and-  choose  rule  entirely,  not  merely  for  Mpowers  proposed  flexible 
 contract  mechanism,  would  encourage  mutually  beneficial  business  relationships  between  ILECs  and  CLECs,  as  opposed  to  the  adversarial,  regulation-  based  relationships  that  are  more  typical 
 today.  2135 
 B.  Request  for  Comment 
 720.  We  seek  comment  on  whether  the  Commission  should  eliminate  the  pick-  and-choose  rule  and  substitute  an  alternative  interpretation  of  section  252(  i).  We  agree  with 

 commenters  that,  as  the  Commission  implements  a  granular  analysis  under  which  some  network  elements  will  no  longer  be  available  on  an  unbundled  basis  in  all  markets,  it  will  be  especially 
 important  for  the  Commission  to  provide  market-  based  incentives  for  incumbents  and  CLECs 

 2130  Id.  at  17. 
 2131  See,  e.  g.,  Verizon  Comments  on  Mpower  May  25,  2001  Petition  at  2;  BellSouth  Comments  on  Mpower  May 
 25,  2001  Petition  at  2;  Qwest  Comments  on  Mpower  May  25,  2001  Petition  at  1. 
 2132  See,  e.  g.,  AT&  T  Comments  on  Mpower  May  25,  2001  Petition  at  3-  4;  Focal  Comments  on  Mpower  May  25, 
 2001  Petition  at  5-  6;  Sprint  Comments  on  Mpower  May  25,  2001  Petition  at  3;  ASCENT  Comments  on  Mpower  May  25,  2001  Petition  at  8. 

 2133  AT&  T  Comments  on  Mpower  May  25,  2001  Petition  at  3. 
 2134  See  Verizon  Jan.  17,  2003  Ex  Parte  Letter  at  1. 
 2135  Verizon  Jan.  17,  2003  Ex  Parte  Letter  at  3. 
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 concerns  that  would  apply  equally  to  any  proposal  to  replace  the  existing  rule  with  a  requirement  to  opt  into  entire  agreements  as  package  deals.  First,  commenters  argue  that  if  competitive 
 carriers  were  required  to  opt  into  an  entire  agreement  rather  than  individual  provisions,  incumbent  LECs  would  insert  poison  pills  into  agreements  to  make  them  unsuitable  for 
 adoption  by  third  parties.  2143  The  Commission  credited  this  argument  in  the  Local  Competition  Order,  where  it  observed  that  failure  to  make  provisions  available  on  an  unbundled  basis  could 
 encourage  an  incumbent  LEC  to  insert  into  its  agreement  onerous  terms  for  a  service  or  element  that  the  original  carrier  does  not  need,  in  order  to  discourage  subsequent  carriers  from  making  a 
 request  under  that  agreement.  2144  The  Commission  accordingly  opined  that  requiring  requesting  carriers  to  elect  an  entire  agreement  would  appear  to  eviscerate  the  obligation 
 Congress  imposed  in  section  252(  i).  2145  Second,  in  response  to  Mpowers  suggestion  that  FLEX  contracts  exist  alongside  the  pick-  and-  choose  rule,  commenters  argue  that  there  is  no  valid  basis 
 for  exempting  carriers  from  the  requirement  to  submit  interconnection  agreements  for  state  commission  approval  or  from  other  requirements  in  section  252.  2146 

 724.  We  believe  that  the  concerns  expressed  in  the  Local  Competition  Order  remain  valid,  but,  in  light  of  the  shortcomings  of  the  pick-  and-  choose  regime,  we  seek  comment  on 
 whether  an  alternative  interpretation  of  section  252(  i)  could  restore  incentives  to  engage  in  give-and-  take  negotiations  while  maintaining  effective  safeguards  against  discrimination.  We  ask 
 commenters  to  address  whether  concerns  expressed  previously  by  the  Commission  about  poison  pills  and  other  types  of  discrimination  could  be  addressed  through  narrower  means  than  the 
 current  pick-  and-  choose  rule.  We  also  seek  comment  on  whether  any  new  rule  adopted  pursuant  to  an  alternative  interpretation  of  section  252(  i)  should  be  applied  to  all  existing  approved 
 interconnection  agreements  or  only  those  interconnection  agreements  approved  prior  to  the  adoption  of  such  new  rule. 

 725.  We  seek  comment  on  the  following  proposal  and  whether  it  would  address  the  criticisms  of  the  current  pick-  and-  choose  rule  without  undermining  competitors  rights  under  the 
 Act.  If  incumbent  LECs  do  not  file  and  obtain  state  approval  for  a  SGAT,  the  current  pick-  and-choose  rule  would  continue  to  apply  to  all  approved  interconnection  agreements  between  the 
 incumbent  LEC  and  other  carriers.  If  incumbent  LECs  do  file  and  obtain  state  approval  for  a  SGAT,  however,  the  current  pick-  and-  choose  rule  would  apply  solely  to  the  SGAT,  and  all  other 
 approved  interconnection  agreements  would  be  subject  to  an  all-  or-  nothing  rule  requiring  carriers  to  adopt  the  interconnection  agreement  in  its  entirety.  2147  The  SGAT  condition  would 

 2143  See,  e.  g.,  AT&  T  Reply  on  Mpower  May  25,  2001  Petition  at  3. 
 2144  Local  Competition  Order,  11  FCC  Rcd  at  16138,  para.  1312. 
 2145  Id. 
 2146  See,  e.  g.,  WorldCom  Comments  on  Mpower  May  25,  2001  Petition  at  5-  6. 
 2147  As  discussed  below  in  paragraph  727,  we  acknowledge  that  only  BOCs  are  subject  to    252(  f)  and  seek 
 comment  on  whether  we  can  provide  alternate  means  for  non-  BOC  incumbent  LECs  to  meet  our  proposed  SGAT  condition. 
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 guarantee  competitors  access  to  a  minimum  set  of  terms  and  conditions  for  interconnection  and  access  to  UNEs  or  resale  (or  services  provided  pursuant  to  section  251).  Once  the  incumbent 
 LEC  met  the  SGAT  condition,  the  incumbent  LEC  would  be  free  to  negotiate  more  customized  agreements  with  the  knowledge  that  third  parties  would  be  limited  to  opting  into  the  entirety  of 
 such  agreements,  rather  than  taking  individual  terms  without  making  any  trade-  offs.  2148 
 726.  We  note  that  such  an  approach,  unlike  Mpowers  FLEX  contract  proposal,  would  leave  in  place  all  of  the  safeguards  in  sections  251  and  252.  The  Commission  would  not  exercise 

 any  forbearance  authority.  Rather,  the  Commission  would  reinterpret  section  252(  i)  to  limit  carriers  opt-  in  rights  to  the  entire  agreement,  subject  to  the  SGAT  condition.  Importantly,  states 
 would  be  able  to  draw  on  their  considerable  expertise  in  deciding  whether  to  approve  an  SGAT.  Moreover,  any  customized  agreement  entered  into,  subsequent  to  the  satisfaction  of  the  SGAT 
 requirement,  would  continue  to  be  subject  to  the  duty  of  good  faith  negotiation  in  section  251(  c)(  1),  as  well  as  the  state  approval  requirement  in  section  252(  e).  Incumbent  LECs  also 
 would  remain  subject  to  the  nondiscrimination  provisions  and  other  safeguards  in  sections  201  and  202  of  the  Act. 

 727.  We  seek  comment  on  the  reasonableness  of  interpreting  section  252(  i)  to  allow  carriers  to  opt  into  entire  agreements,  but  not  individual  provisions,  subject  to  satisfaction  of  the 
 above  described  SGAT  condition.  We  recognize  that  section  252(  f)  refers  only  to  BOCs,  rather  than  to  incumbent  LECs  generally.  We  seek  comment  on  whether  conditioning  a  departure  from 
 the  pick-  and-  choose  rule  on  approval  of  an  SGAT    but  not  otherwise  making  non-  BOC  incumbent  LECs  subject  to  section  252(  f)    would  be  consistent  with  the  statute.  2149  We  also 
 seek  comment  on  whether  this  conditional  approach  would  adequately  address  the  shortcomings  in  the  existing  pick-  and-  choose  rule.  Moreover,  would  such  an  approach  adequately  protect 
 competitors  from  discrimination  and  other  anti-  competitive  effects?  Would  the  SGAT  condition,  together  with  the  preservation  of  the  good-  faith  obligation  and  nondiscrimination  safeguards,  be 
 sufficient  to  prevent  the  more  limited  approach  to  opt-  in  rights  from  eviscerat[  ing]  the  obligation  Congress  imposed  in  section  252(  i)?  2150  We  seek  comment  on  whether  the  proposal 
 described  above  would  be  workable  for  all  classes  of  carriers,  including  smaller  competitive 
 2148  If  the  Commission  were  to  adopt  such  a  rule  change,  state  commissions  could  not  prevent  its  implementation  by 
 rejecting  a  proposed  interconnection  agreement  on  the  ground  that  it  is  available  to  competitors  only  on  a  package-deal  basis.  Rather,  the  state  commission  could  reject  a  customized  agreement  as  discriminatory  only  if  the 

 commission  found  that  the  parties  intended  to  discriminate  against  other  carriers.  The  fact  that  a  third  party  might  be  unable  to  opt  into  the  agreement  as  a  practical  matter  would  not  constitute  unreasonable  discrimination  in  light  of 
 the  availability  of  interconnection,  UNEs,  and  services  under  the  state-  approved  SGAT. 
 2149  Although    252(  f)  applies  specifically  only  to  BOCs,  in  order  to  provide  the  same  opportunity  to  non-  BOC 
 incumbent  LECs  to  enter  into  customized  agreements,  we  would  allow  non-  BOC  incumbent  LECs  to  file  a  single  interconnection  agreement  for  state  approval  and  designate  it  as  an  SGAT-  equivalent  that  is  subject  to  the  current 

 pick-  and-  choose  rule.  Because  non-  BOC  incumbent  LECs  already  file  multiple  interconnection  agreements  for  state  approval  under  the  current  pick-  and-  choose  rule,  this  requirement  would  not  impose  any  new  requirements  on 
 non-  BOC  incumbent  LECs,  but  rather  provide  them  with  the  same  opportunity  we  propose  to  provide  BOCs  to  adopt  more  customized  interconnection  agreements  with  third  parties. 

 2150  Local  Competition  Order,  11  FCC  Rcd  at  16138,  para.  1312. 
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 LECs  that  lack  the  resources  of  larger  competitors.  We  ask  commenters  to  describe  any  relevant  experience  requesting  or  provisioning  network  elements  and  services  out  of  SGATs. 
 728.  We  tentatively  conclude  that  limiting  carriers  opt-  in  rights  to  entire  agreements  (subject  to  satisfaction  of  the  SGAT  condition)  would  be  consistent  with  the  text  of  section 
 252(  i),  which  requires  only  that  an  incumbent  LEC  make  available  any  interconnection,  service,  or  network  element  provided  under  an  agreement  approved  under  [section  252]  to  which  it  is  a 
 party  to  any  other  requesting  telecommunications  carrier  upon  the  same  terms  and  conditions  as  those  provided  in  the  agreement.  2151  We  note  that  the  ambiguous  nature  of  this  italicized  phrase 
 prompted  the  Supreme  Court  to  conclude  that  the  appropriate  interpretation  of  section  252(  i)  is  eminently  within  the  Commissions  expertise.  2152  Our  view  on  the  reasonableness  of  the 
 interpretation  proposed  above  is  strongly  influenced  by  our  tentative  judgment  that  conditioning  relief  from  the  pick-  and-  choose  rule  on  an  SGAT  requirement  would  strike  an  appropriate 
 balance  among  the  competing  policy  interests  at  stake.  We  seek  comment  on  these  tentative  conclusions. 

 729.  Finally,  we  seek  comment  on  other  means  of  restoring  the  congressional  goal  of  meaningful  marketplace  negotiations.  Are  there  modifications  to  the  approach  described  above 
 that  would  better  serve  the  statutory  goals?  Would  a  different  approach  be  preferable?  We  ask  commenters  to  describe  in  detail  any  proposal  and  explain  how  the  proposal  (a)  would  restore 
 market-  based  incentives  to  negotiate,  and  (b)  protect  competitors  from  discrimination. 
 X.  PROCEDURAL  ISSUES 
 A.  Final  Regulatory  Flexibility  Analysis 
 730.  As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  (RFA),  2153  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  was  incorporated  in  the  Federal  Register  summary 

 of  the  Triennial  Review  NPRM.  2154  The  Commission  sought  written  public  comments  on  the  proposals  in  the  Triennial  Review  NPRM,  including  comments  on  the  IRFA.  Comments 
 addressed  the  proposals  contained  in  the  Triennial  Review  NPRM,  as  well  as  the  IRFA.  This  present  Final  Regulatory  Flexibility  Analysis  (FRFA)  addresses  comments  on  the  IRFA  and 
 conforms  to  the  RFA.  2155 

 2151  47  U.  S.  C.    252(  i)  (emphasis  added). 
 2152  Iowa  Utils.  Bd.,  525  U.  S.  at  396. 
 2153  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601-  612,  has  been  amended  by  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996  (SBREFA),  Pub.  L.  No.  104-  121,  Title  II,  110  Stat.  857  (1996). 
 2154  67  Fed.  Reg.  1947  (Jan.  15,  2002). 

 2155  See  5  U.  S.  C.    604. 
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 1.  Need  for,  and  Objectives  of,  the  Rules 
 731.  This  Order  fulfills  the  commitment  the  Commission  undertook  in  its  1999  UNE  Remand  Order  to  reexamine,  in  three  years,  the  list  of  network  elements  that  incumbent  LECs 

 must  offer  to  competitors  on  an  unbundled  basis,  and  responds  to  several  significant  judicial  rulings  that  have  been  issued  since  the  Commission  last  conducted  a  comprehensive  review  of  its 
 unbundling  rules.  2156  More  specifically,  this  Order  refines  the  impair  standard  set  forth  in  section  251(  d)(  2)  of  the  Act,  and  applies  the  revised  standard  to  an  array  of  transmission  and 
 intelligence  network  elements.  The  revised  impair  standard  is  designed  to  reflect  both  the  experience  of  the  local  service  market  during  the  seven  years  since  the  Acts  market-  opening 
 provisions  took  effect  and  the  legal  guidance  mentioned  above.  Applying  this  standard,  which  pays  special  attention  to  the  requesting  carriers  ability  to  self-  provision  the  element  or  to  obtain 
 it  from  a  source  other  than  the  incumbent  LEC,  this  Order  adopts  a  list  of  network  elements  that  must  be  unbundled  and  sets  forth  the  particular  circumstances  in  which  unbundling  will  be 
 required.  The  approach  adopted  is  substantially  more  granular  than  our  earlier  formulations  of  the  impair  standard,  accounting  for  considerations  of  customer  class,  geography,  and  service. 
 This  Order  also  reaffirms  a  state  commissions  authority  to  establish  unbundling  requirements,  as  long  as  the  unbundling  obligations  are  consistent  with  the  requirements  of  section  251(  d)(  3) 
 and  do  not  substantially  prevent  implementation  of  the  requirements  of  that  section  and  the  purposes  of  the  Act,  and  authorizes  state  commissions  to  make  certain  factual  determinations 
 necessary  to  implementation  of  the  granular  analysis  we  adopt  here. 
 2.  Summary  of  Significant  Issues  Raised  by  the  Public  Comments  in  Response  to  the  IRFA 

 732.  In  this  section,  we  respond  to  various  arguments  raised  by  TeleTruth,  the  National  Federation  of  Independent  Businesses  (NFIB),  and  the  Office  of  Advocacy  of  the  Small  Business 
 Administration  (SBA  Advocacy)  relating  to  the  IRFA  presented  in  the  Triennial  Review  NPRM.  2157  We  also  address  concerns  raised  by  Senator  (then-  Representative)  James  Talent  in  a 
 letter  submitted  in  response  to  the  UNE  Remand  Order,  which  was  later  incorporated  into  this  proceeding.  2158  To  the  extent  we  received  comments  raising  general  small  business  concerns 
 during  this  proceeding,  those  comments  are  discussed  throughout  the  Order  and  are  summarized  in  Part  X.  A.  5,  below. 

 733.  As  an  initial  matter,  we  reject  the  contention  that  the  Commission  failed  to  consider  the  needs  of  small  business  customers  of  competitive  LECs  in  fashioning  the  analysis 
 set  forth  in  this  Order.  We  have  grappled,  throughout  this  proceeding  and  throughout  this  Order,  with  the  consequences  our  determinations  will  have  on  all  market  participants,  including  small 

 2156  See,  e.  g.,  Verizon,  535  U.  S.  467;  CompTel,  309  F.  3d  8;  USTA,  290  F.  3d  415. 
 2157  TeleTruths  reply  comments  were  filed  in  several  separate  dockets,  and  are  not  specific  to  the  IRFA  prepared 
 for  this  proceeding.  See  generally  TeleTruth  Reply.  Here,  we  address  only  those  concerns  pertinent  to  this  proceeding.  We  will  address  TeleTruths  remaining  arguments  in  subsequent  Orders,  as  appropriate. 

 2158  Triennial  Review  NPRM,  16  FCC  Rcd  at  22788,  para.  13. 
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 business  providers  and  the  small  business  end  users  about  which  TeleTruth,  NFIB,  SBA  Advocacy,  and  Senator  Talent  express  concern.  2159  We  have  also  considered  various  alternatives 
 to  the  rules  we  adopt,  and  have  stated  the  reasons  for  rejecting  these  alternative  rules,  as  commenters  have  urged.  2160  A  summary  of  our  analysis  regarding  small  business  concerns,  and 
 of  alternative  rules  that  we  considered  in  light  of  those  concerns,  is  presented  in  subsection  5  of  the  FRFA,  infra. 

 734.  Many  of  the  complaints  raised  regarding  the  Commissions  IRFA  hinge  on  the  argument  that  in  performing  the  analysis  mandated  by  the  RFA,  an  agency  must  analyze  the 
 effects  its  proposed  rules  will  have  on  customers  of  the  entities  it  regulates.  2161  But  as  the  courts  have  made  clear  time  and  again,  this  is  not  the  case.  Indeed,  the  D.  C.  Circuit  has 
 consistently  held  that  the  RFA  imposes  no  obligation  to  conduct  a  small  entity  impact  analysis  of  effects  on  entities  which  [the  agency  conducting  the  analysis]  does  not  regulate.  2162  Thus,  we 
 emphasize  that  the  RFA  imposes  no  independent  obligation  to  examine  the  effects  an  agencys  action  will  have  on  the  customers  of  the  companies  it  regulates  unless  those  customers  are, 
 themselves,  subject  to  regulation  by  the  agency.  In  any  event,  as  noted  above,  we  have  considered  the  needs  of  small  business  customers  of  competitive  (and  incumbent)  LECs 

 2159  For  example,  we  have  considered  the  argument  that  new  unbundling  rules  will  affect  competitive  LECs 
 broadband  capabilities,  and  in  turn  end  users  access  to  broadband  service.  See  supra  Part  VI.  A.  4.  a;  see  also  TeleTruth  Reply  at  37. 

 2160  See  TeleTruth  Reply  at  26;  Letter  from  Dan  Danner,  Senior  Vice  President    Public  Policy,  NFIB,  to  Michael 
 K.  Powell,  Chairman,  FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  1  (filed  Feb.  5,  2003)  (NFIB  Feb.  5,  2003  Ex  Parte  Letter);  Letter  from  Thomas  M.  Sullivan,  Chief  Counsel  for  SBA  Advocacy,  to  Michael  K.  Powell,  Chairman, 

 FCC,  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  at  4  (filed  Feb.  5,  2003)  (SBA  Advocacy  Feb.  5,  2003  Ex  Parte  Letter);  Letter  from  James  M.  Talent,  Chairman,  Committee  on  Small  Business,  House  of  Representatives,  to 
 William  Kennard,  Chairman,  FCC,  CC  Docket  No.  96-  98  at  2,  3  (filed  July  20,  2000)  (Talent  July  20,  2000  Ex  Parte  Letter);  5  U.  S.  C.    604(  a)(  5). 

 2161  See,  e.  g.,  TeleTruth  Reply  at  15  (asserting  that  [  t]  he  [c]  ustomer  had  been  [  t]  otally  [l]  eft  [o]  ut  of  the 
 proceeding  and  contending  that  [  f]  or  the  average  customer,  the  [NPRM  and  other  FCC  documents]  might  as  well  be  in  Aramaic,  or  Urdic),  16  (arguing  that  the  RFA  imposes  a  notice  requirement  vis-  -  vis  small  businesses  that 

 happen  to  consume  telecommunications  services),  18  (alleging  that  the  IRFA  failed  to  address  small  business  .  .  .  customers  of  telecommunications  providers),  20  (  The  FCC  has  failed  to  accurately  assess  the  number  of  small 
 business  entities  that  depend  on  [small  telecommunications  competitors],  from  the  small  business  users  to  the  small  business  suppliers.),  34-  35  (presenting  analysis  of  the  number  of  online  customers  of  ISPs  potentially  affected  by 
 Commissions  rulemakings),  43  (  A  class  of  small  businesses  that  is  totally  missing  from  [the  IRFA]  are  the  small  businesses  that  depends  [sic]  on  .  .  .  ISPs  and  CLECs  [that  will  be  affected  by  the  Commissions  ruling].);  see  also 
 NFIB  Feb.  5,  2003  Ex  Parte  Letter  at  1  ([  T]  he  FCC  should  make  certain  that  it  fully  considers  the  direct  and  indirect  impacts  of  its  rulemaking  on  small-  business  consumers.  We  urge  the  FCC  to  review  all  data  to  ensure  that 
 any  action  taken  does  not  hinder  the  availability  of  competition  for  small  businesses  needing  local  telephone  services.). 

 2162  Michigan  v.  EPA,  213  F.  3d  663,  689  (D.  C.  Cir.  2000)  (internal  quotation  marks  omitted);  see  also  Motor  & 
 Equip.  Mfrs.  Assn.  v.  Nichols,  142  F.  3d  449,  467  (D.  C.  Cir.  1998);  United  Distribution  Cos.  v.  FERC,  88  F.  3d  1105,  1170  (D.  C.  Cir.  1996);  American  Trucking  Assns,  Inc.  v.  EPA,  175  F.  3d  1027,  1044,  rehg  granted  in  part, 

 denied  in  part  195  F.  3d  4  (D.  C.  Cir.  1999),  revd  in  part  on  other  grounds,  531  U.  S.  457  (2001). 
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 throughout  this  Order.  Our  analysis  of  small  business  concerns  is  summarized  in  Part  X.  A.  5,  below. 
 735.  TeleTruth  argues  that  the  Commission  has  taken  inadequate  steps  to  notify  small  businesses  of  this  and  other  proceedings,  in  violation  of  the  RFA.  2163  We  disagree.  The  RFA 
 requires  the  Commission  to  assure  that  small  entities  have  been  given  an  opportunity  to  participate  in  the  rulemaking,  and  proposes  as  example  five  reasonable  techniques  that  an 
 agency  might  employ  to  do  so.  2164  In  this  proceeding,  the  Commission  has  employed  several  of  these  techniques:  it  has  published  a  notice  of  proposed  rulemaking  in  publications  likely  to  be 
 obtained  by  small  entities;  2165  has  inclu[  ded]  .  .  .  a  statement  that  the  proposed  rule  may  have  a  significant  economic  effect  on  a  substantial  number  of  small  entities  in  the  Triennial  Review 
 NPRM;  2166  has  solicited  comments  over  its  computer  network;  2167  and  has  acted  to  reduce  the  cost  or  complexity  of  participation  in  the  rulemaking  by  small  entities  by,  among  other  things, 
 facilitating  electronic  submission  of  comments.  2168  We  thus  conclude  that  the  Commission  has  satisfied  its  RFA  obligation  to  assure  that  small  companies  were  able  to  participate  in  this 
 proceeding. 
 736.  TeleTruth  further  contends  that  the  Commissions  IRFA  was  flawed  by  its  use  of  boilerplate  language  that  differed  little  from  the  language  used  in  the  IRFAs  prepared  for  other 

 proceedings.  2169  However,  the  only  language  it  cites  does  not  even  appear  in  the  IRFA  prepared  for  this  proceeding.  Moreover,  TeleTruth  has  suggested  no  reason  why  the  use  of  similar 
 language  in  several  proceedings  is  at  all  problematic.  Indeed,  the  particular  language  about  which  it  complains  merely  describes  the  number  of  telephone  companies  affected  by  a  given 
 proceeding    a  class  that  is  likely  to  differ  little,  if  at  all,  among  industry-  wide  rulemakings  such  as  this. 

 737.  TeleTruth  next  complains  that  the  IRFA  used  outdated  census  data  from  1992  in  estimating  the  number  of  small  businesses  that  might  be  affected  by  the  Commissions  decisions 

 2163  See  TeleTruth  Reply  at  16-  18;  Letter  from  Bruce  Kushnick,  Chairman,  TeleTruth,  to  Marlene  H.  Dortch, 
 Secretary,  FCC,  CC  Docket  No.  01-  338  at  5  (filed  Feb.  5,  2003)  (TeleTruth  Feb.  5,  2003  Ex  Parte  Letter). 
 2164  See  5  U.  S.  C.    609. 

 2165  5  U.  S.  C.    609(  a)(  2).  We  disagree  with  TeleTruths  argument  that  small  companies  pertinent  to  our  analysis 
 cannot  be  expected  to  learn  of  actions  reported  in  the  Federal  Register.  See  TeleTruth  Reply  at  16.  As  explained  above,  the  obligations  imposed  by  the  RFA  relate  only  to  companies  regulated  by  the  agency;  TeleTruth  has 

 provided  no  reason  to  believe  that  small  telecommunications  companies  would  be  unfamiliar  with  the  Federal  Register,  in  which  all  federal  regulations  pertinent  to  those  companies  operations  are  published. 

 2166  5  U.  S.  C.    609(  a)(  1). 
 2167  Id.    609(  a)(  2). 
 2168  Id.    609(  a)(  5). 
 2169  See  TeleTruth  Reply  at  19-  20. 
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 here.  2170  While  certain  1997  census  data  became  available  in  late  2000  and  were  not  incorporated  into  the  previous  NPRM,  this  updating  would  not,  we  believe,  have  affected  a  small  entitys 
 decisions  concerning  IRFA.  This  more  recent  data  are  reflected  in  subsection  3  of  the  FRFA,  infra. 

 738.  TeleTruth  also  contends  that  [  a]  true  IRFA  analysis  about  small  business  telecom  competitors  would  conclude  that  the  current  FCC  is  in  violation  of  the  Telecom  Act  and  all  of  its 
 provisions  because  the  Commission  purportedly  has  failed  to  enforce  its  local  competition  rules.  2171  Such  an  assertion  falls  outside  the  scope  of  this  rulemaking  proceeding  and  our  analysis 
 herein.  Complaints  regarding  carriers  compliance  with  the  Commissions  Rules  are  properly  addressed  in  other  venues.  For  example,  section  208  of  the  Communications  Act  specifically 
 permits  small  businesses  and  other  entities  to  lodge  complaints  regarding  other  carriers  activities,  and  to  seek  enforcement  of  Commission  regulations.  2172  Also,  to  the  extent  an 
 incumbent  LECs  obligations  under  section  251  are  implemented  through  interconnection  agreements,  those  obligations  are  enforceable  as  a  matter  of  contract  law  through  the  courts. 

 739.  TeleTruth  next  argues  the  RFA  requires  an  impact  study  on  how  [an  agencys  regulations]  will  harm  small  businesses,  and  that  the  FCC  has  not  done  anything  of  the  sort  for 
 this  proceeding.  2173  We  disagree:  the  RFA  requires  us  to  provide  precisely  the  information  contained  in  this  FRFA,  but  does  not  mandate  a  separate  impact  study.  2174  The  Commission 
 has  therefore  satisfied  its  RFA  obligations. 
 740.  In  a  letter  challenging  the  UNE  Remand  Order,  Senator  Talent  argued  that  that  Order  violated  section  3(  a)(  2)(  C)  of  the  Small  Business  Act.  2175  Specifically,  Senator  Talent 

 noted  that  the  UNE  Remand  Order  differentiated  between  businesses  that  used  fewer  than  four  access  lines  and  those  that  used  four  or  more  lines,  in  contravention  of  the  Small  Business  Acts 
 directive  that  unless  specifically  authorized  by  statute,  no  Federal  department  or  agency  may  prescribe  a  size  standard  for  categorizing  a  business  concern  as  a  small  business  concern,  unless 
 certain  procedural  requirements  are  satisfied.  2176  In  the  present  Order,  our  action  does  not  establish  any  special  small  business  size  standard. 

 741.  TeleTruth  and  Senator  Talent  suggest  that  section  257  of  the  Act  dictates  a  particular  substantive  result  in  this  matter.  Specifically,  TeleTruth  claims  that  this  Triennial 

 2170  See  id.  at  22. 
 2171  See  id.  at  37-  39,  41. 
 2172  47  U.  S.  C.    208. 
 2173  TeleTruth  Feb.  5,  2003  Ex  Parte  Letter  at  4. 
 2174  See  5  U.  S.  C.    604. 
 2175  See  15  U.  S.  C.    632(  a)(  2)(  C). 
 2176  Id. 
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 Review  is  mandated  in  Section  [257(  c)],  and  requires  an  outcome  favorable  to  entrepreneurs  and  small  businesses.  2177  Senator  Talent  argued  that  in  limiting  the  class  of  elements  subject  to 
 section  251(  c),  the  UNE  Remand  Order  erected  a  new  barrier  to  entry  by  small  business  carriers,  and  consequently  violated  section  257  of  the  Communications  Act.  Section  257, 
 however,  did  not  mandate  this  proceeding  and  in  no  way  cabins  this  Commissions  exercise  of  its  authority  to  adopt  rules  implementing  the  Act.  Section  257  required  the  Commission  to 
 conduct  a  proceeding  designed  to  identify  and  eliminate  market  entry  barriers  for  entrepreneurs  and  other  small  businesses  in  the  provision  and  ownership  of  telecommunications  services  and 
 information  services  within  15  months  of  the  enactment  of  the  1996  Act,  2178  and  periodically  to  review  its  regulations  and  report  to  Congress  on  any  such  barriers.  2179  The  Commission 
 concluded  the  requisite  proceeding  in  1997  2180  and  issued  its  first  subsequent  section  257  Report  to  Congress  in  2000.  2181  Thus,  this  proceeding  is  not  mandated  (or  in  any  way  governed)  by 
 section  257.  Rather,  as  described  above,  this  Order  fulfills  the  Commissions  commitment    set  forth  in  the  UNE  Remand  Order    to  reevaluate  unbundling  requirements,  and  responds  to 
 various  judicial  rulings  regarding  those  requirements.  2182 
 742.  TeleTruth,  the  NFIB,  and  SBA  Advocacy  caution  that  this  Order  may  stand  in  violation  of  Executive  Order  13272.  2183  Setting  aside  the  question  of  whether  a  multi-  member 

 independent  agency  such  as  the  FCC  must  comply  with  that  Executive  Order,  we  note  that  affected  agencies  must:  (1)  comply  with  the  RFA,  (2)  give  SBA  Advocacy  advanced  notice  of 
 any  proposed  rules  that  might  substantially  impact  small  businesses,  and  (3)  give  appropriate  consideration  to  and  provide  a  written  response  to  any  comments  provided  by  SBA 
 Advocacy.  Here,  the  Commission  did  send  SBA  Advocacy  a  copy  of  the  published  Triennial  Review  NPRM  (which  pre-  dated  the  Executive  Order).  2184  Moreover,  in  this  FRFA,  we  fully 
 satisfy  our  obligations  under  the  RFA.  Finally,  we  address  SBA  Advocacys  other  comments  below.  Therefore,  this  proceeding  stands  in  compliance  with  Executive  Order  13272. 

 2177  TeleTruth  Feb.  5,  2003  Ex  Parte  Letter  at  3. 
 2178  See  47  U.  S.  C.    257(  a). 
 2179  See  id.    257(  c). 
 2180  See  Section  257  Proceeding  To  Identify  and  Eliminate  Market  Entry  Barriers  For  Small  Businesses,  GN 
 Docket  No.  96-  113,  Report,  12  FCC  Rcd  16802  (1997). 
 2181  See  Section  257  Report  to  Congress,  Identifying  and  Eliminating  Market  Entry  Barriers  For  Entrepreneurs  and 
 Other  Small  Businesses,  Report,  15  FCC  Rcd  15376  (2000). 
 2182  See  supra  Parts  I,  III. 

 2183  Executive  Order  No.  13272,  67  Fed.  Reg.  53461  (Aug.  16,  2002);  see  TeleTruth  Feb.  5,  2003  Ex  Parte  Letter  at 
 6-  7;  NFIB  Feb.  5,  2003  Ex  Parte  Letter  at  1;  SBA  Advocacy  Feb.  5,  2003  Ex  Parte  Letter  at  2-  3. 
 2184  Triennial  Review  NPRM,  16  FCC  Rcd  at  22836,  para.  135. 
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 743.  SBA  Advocacy  argues  that  the  Commissions  IRFA  did  not  consider  the  impact  of  delisting  unbundled  network  elements  .  .  .  on  small  competitive  local  exchange  carriers.  2185 
 While  SBA  Advocacy  recommends  that  we  issue  a  revised  IRFA  to  account  more  fully  for  the  impact  our  rules  might  have  on  competitive  LECs,  it  recognizes  that  we  might  appropriately 
 address  any  such  impact  in  this  FRFA  instead.  2186  We  have  adopted  the  latter  course.  We  note  that  we  have  considered  the  concerns  of  competitive  LECs  throughout  this  Order,  and  those 
 considerations  are  summarized  in  Part  X.  A.  5,  below.  Moreover,  in  Part  X.  A.  3,  we  attempt  to  estimate  the  number  of  competitive  LECs  that  will  be  affected  by  the  rules  we  adopt  herein. 

 744.  SBA  Advocacy  also  claims  that  the  proposals  contained  in  the  Triennial  Review  NPRM  were  not  sufficiently  specific  to  allow  small  businesses  the  opportunity  to  comment 
 meaningfully.  2187  We  disagree.  This  proceeding  has  elicited  well  over  one  thousand  filings,  submitted  by  scores  of  parties.  These  parties    which  include  numerous  small  businesses   
 found  in  the  Notice  sufficient  specificity  to  permit  meaningful  comment.  SBA  Advocacy  notes  its  particular  concern  that  the  Commission  is  considering  removing  elements  from  the  list  of 
 incumbent  LECs  unbundling  obligations,  whereas  the  Triennial  Review  NPRM  purportedly  gave  no  indication  of  this  eventuality.  2188  But  in  fact,  the  Triennial  Review  NPRM  clearly 
 explained  that  the  Commission  was  considering  an  unbundling  analysis  that  is  more  targeted,  including  approaches  that  take  into  consideration  specific  services,  facilities,  and  customer  and 
 business  considerations.  2189  The  Commission  expressly  sought  comment  on  applying  the  unbundling  analysis  to  define  the  network  elements  subject  to  unbundling,  2190  and  indicated  its 
 intention  to  probe  whether  and  to  what  extent  we  should  adopt  a  more  sophisticated,  refined  unbundling  analysis.  2191  The  Commission  also  specifically  stated  its  intention  to  reexamine 
 unbundling  obligations  with  respect  to  loops,  2192  switching,  2193  interoffice  transport,  2194  OSS,  2195  call-  related  signaling,  2196  and  call-  related  databases.  2197  We  are  thus  not  persuaded  that  the  Notice 

 2185  SBA  Advocacy  Feb.  5,  2003  Ex  Parte  Letter  at  1. 
 2186  Id.  at  1-  2. 
 2187  See  id.  at  3-  4. 
 2188  Id.  at  3. 
 2189  Triennial  Review  NPRM,  16  FCC  Rcd  at  22789,  para.  16. 
 2190  Id. 
 2191  Id.  at  22797-  98,  para.  34. 
 2192  See  id.  at  22803-  05,  paras.  49,  51-  52. 
 2193  See  id.  at  22806-  09,  paras.  56-  62. 
 2194  See  id.  at  22810-  12,  paras.  64-  66. 
 2195  See  id.  at  22813,  para.  70. 
 2196  See  id.  at  22812,  para.  68. 
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 somehow  failed  to  signal  the  Commissions  intent  to  examine  rules  that  might  result  in  modification  of  the  list  of  elements  (including  possible  removal  of  elements)  subject  to  section 
 251(  c)(  3)  s  unbundling  requirements. 
 3.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  the  Actions  Taken  Will  Apply 

 745.  The  RFA  directs  agencies  to  provide  a  description  of  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  will  be  affected  by  the  rules.  2198  The  RFA  generally 
 defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and  small  governmental  jurisdiction.  2199  In  addition,  the  term  small  business 
 has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act.  2200  A  small  business  concern  is  one  which:  (1)  is  independently  owned  and  operated;  (2)  is  not 
 dominant  in  its  field  of  operation;  and  (3)  satisfies  any  additional  criteria  established  by  the  Small  Business  Administration  (SBA).  2201 

 746.  In  this  section,  we  further  describe  and  estimate  the  number  of  small  entity  licensees  and  regulatees  that  may  be  affected  by  rules  adopted  in  this  Order.  The  most  reliable 
 source  of  information  regarding  the  total  numbers  of  certain  common  carrier  and  related  providers  nationwide,  as  well  as  the  number  of  commercial  wireless  entities,  appears  to  be  the 
 data  that  the  Commission  published  in  its  Trends  in  Telephone  Service  May  2002  report.  2202  The  SBA  has  developed  small  business  size  standards  for  wireline  and  wireless  small  businesses 
 within  the  three  commercial  census  categories  of  Wired  Telecommunications  Carriers,  2203  Paging,  2204  and  Cellular  and  Other  Wireless  Telecommunications.  2205  Under  these  categories,  a 
 business  is  small  if  it  has  1,500  or  fewer  employees.  Below,  using  the  above  size  standards  and 

 (Continued  from  previous  page)  2197 
 See  id.  at  22812-  13,  para.  69. 
 2198  5  U.  S.  C.    603(  b)(  3),  604(  a)(  3). 

 2199  Id.    601(  6). 
 2200  Id.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  set  forth  in  the  Small 
 Business  Act,  15  U.  S.  C.    632).  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  agency,  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after 

 opportunity  for  public  comment,  establishes  one  or  more  definitions  of  such  terms  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definitions(  s)  in  the  Federal  Register. 

 2201  15  U.  S.  C.    632. 
 2202  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2203  13  C.  F.  R.    121.201,  North  American  Industry  Classification  System  (NAICS)  code  513310  (changed  to 
 517110  in  Oct.  2002). 
 2204  Id.    121.201,  NAICS  code  513321  (changed  to  517211  in  Oct.  2002). 

 2205  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
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 others,  we  discuss  the  total  estimated  numbers  of  small  businesses  that  might  be  affected  by  our  actions. 
 747.  We  have  included  small  incumbent  LECs  in  this  present  RFA  analysis.  As  noted  above,  a  small  business  under  the  RFA  is  one  that,  inter  alia,  meets  the  pertinent  small 
 business  size  standard  (e.  g.,  a  wired  telecommunications  carrier  having  1,500  or  fewer  employees),  and  is  not  dominant  in  its  field  of  operation.  2206  SBA  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.  2207  We  have  therefore  included  small  incumbent 
 LECs  in  this  RFA  analysis,  although  we  emphasize  that  this  RFA  action  has  no  effect  on  Commission  analyses  and  determinations  in  other,  non-  RFA  contexts. 

 748.  Wired  Telecommunications  Carriers.  The  SBA  has  developed  a  small  business  size  standard  for  Wired  Telecommunications  Carriers,  which  consists  of  all  such  companies 
 having  1,500  or  fewer  employees.  2208  According  to  Census  Bureau  data  for  1997,  there  were  2,225  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2209  Of  this  total,  2,201  firms 
 had  employment  of  999  or  fewer  employees,  and  an  additional  24  firms  had  employment  of  1,000  employees  or  more.  2210  Thus,  under  this  size  standard,  the  great  majority  of  firms  can  be 
 considered  small. 
 749.  Incumbent  LECs.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  incumbent  local  exchange  services.  The 

 closest  applicable  size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2211 
 According  to  Commission  data,  1,329  carriers  reported  that  they  were  engaged  in  the  provision  of  local  exchange  services.  2212  Of  these  1,329  carriers,  an  estimated  1,024  have  1,500  or  fewer 

 2206  5  U.  S.  C.    601(  3). 
 2207  Letter  from  Jere  W.  Glover,  Chief  Counsel  for  SBA  Advocacy,  and  Eric  E.  Menge,  Assistant  Chief  Counsel  for 
 Telecommunications,  SBA  Advocacy,  to  William  E.  Kennard,  Chairman,  FCC,  CC  Docket  Nos.  98-  147,  99-  68,  97-  181  (filed  May  27,  1999).  The  Small  Business  Act  contains  a  definition  of  small  business  concern,  which  the 

 RFA  incorporates  into  its  own  definition  of  small  business.  See  15  U.  S.  C.    632(  a);  5  U.  S.  C.    601(  3).  SBA  regulations  interpret  small  business  concern  to  include  the  concept  of  dominance  on  a  national  basis.  13  C.  F.  R. 
   121.102(  b). 
 2208  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 

 2209  U.  S.  Census  Bureau,  1997  Economic  Census,  Subject  Series:  Information,  Establishment  and  Firm  Size 
 (Including  Legal  Form  of  Organization)  (1997  Economic  Census,  Establishment  and  Firm  Size),  Table  5,  NAICS  code  513310  (issued  Oct.  2000). 

 2210  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2211  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 

 2212  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
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 employees  and  305  have  more  than  1,500  employees.  Consequently,  the  Commission  estimates  that  most  providers  of  incumbent  local  exchange  service  are  small  businesses  that  may  be 
 affected  by  the  rules  and  policies  adopted  herein. 
 750.  Competitive  LECs.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  providers  of  competitive  exchange 

 services  or  to  competitive  access  providers  or  to  Other  Local  Exchange  Carriers,  all  of  which  are  discrete  categories  under  which  TRS  data  are  collected.  The  closest  applicable  size  standard 
 under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2213  According  to  Commission  data,  532 
 companies  reported  that  they  were  engaged  in  the  provision  of  either  competitive  access  provider  services  or  competitive  LEC  services.  2214  Of  these  532  companies,  an  estimated  411  have  1,500 
 or  fewer  employees  and  121  have  more  than  1,500  employees.  2215  In  addition,  55  carriers  reported  that  they  were  Other  Local  Exchange  Carriers.  Of  the  55  Other  Local  Exchange 
 Carriers,  an  estimated  53  have  1,500  or  fewer  employees  and  two  have  more  than  1,500  employees.  2216  Consequently,  the  Commission  estimates  that  most  providers  of  competitive  local 
 exchange  service,  competitive  access  providers,  and  Other  Local  Exchange  Carriers  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 

 751.  Interexchange  Carriers.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  interexchange  services.  The  closest 
 applicable  size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2217  According  to 
 Commission  data,  229  companies  reported  that  their  primary  telecommunications  service  activity  was  the  provision  of  interexchange  services.  2218  Of  these  229  companies,  an  estimated  181  have 
 1,500  or  fewer  employees  and  48  have  more  than  1,500  employees.  2219  Consequently,  the  Commission  estimates  that  the  majority  of  interexchange  service  providers  are  small  entities  that 
 may  be  affected  by  the  rules  and  policies  adopted  herein. 
 752.  Operator  Service  Providers  (OSPs).  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  OSPs.  The  closest 

 applicable  size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that 

 2213  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2214  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2215  Id. 
 2216  Id. 
 2217  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2218  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2219  Id. 
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 size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2220  According  to  Commission  data,  22  companies  reported  that  they  were  engaged  in  the  provision  of  operator 
 services.  2221  Of  these  22  companies,  an  estimated  20  have  1,500  or  fewer  employees  and  two  have  more  than  1,500  employees.  2222  Consequently,  the  Commission  estimates  that  the  great 
 majority  of  OSPs  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 
 753.  Prepaid  Calling  Card  Providers.  The  SBA  has  developed  a  size  standard  for  a  small  business  within  the  category  of  Telecommunications  Resellers.  Under  that  SBA  size 

 standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2223  According  to  Commission  data,  32  companies  reported  that  they  were  engaged  in  the  provision  of  prepaid 
 calling  cards.  2224  Of  these  32  companies,  an  estimated  31  have  1,500  or  fewer  employees  and  one  has  more  than  1,500  employees.  2225  Consequently,  the  Commission  estimates  that  the  great 
 majority  of  prepaid  calling  card  providers  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 

 754.  Other  Toll  Carriers.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  Other  Toll  Carriers.  This  category 
 includes  toll  carriers  that  do  not  fall  within  the  categories  of  interexchange  carriers,  OSPs,  prepaid  calling  card  providers,  satellite  service  carriers,  or  toll  resellers.  The  closest  applicable 
 size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2226  According  to 
 Commissions  data,  42  companies  reported  that  their  primary  telecommunications  service  activity  was  the  provision  of  payphone  services.  2227  Of  these  42  companies,  an  estimated  37  have 
 1,500  or  fewer  employees  and  five  have  more  than  1,500  employees.  2228  Consequently,  the  Commission  estimates  that  most  Other  Toll  Carriers  are  small  entities  that  may  be  affected  by 
 the  rules  and  policies  adopted  herein. 
 755.  Wireless  Service  Providers.  The  SBA  has  developed  a  small  business  size  standard  for  wireless  firms  within  the  two  broad  economic  census  categories  of  Paging  2229  and 

 2220  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2221  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2222  Id. 
 2223  13  C.  F.  R.    121.201,  NAICS  code  513330  (changed  to  517310  in  Oct.  2002). 
 2224  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2225  Id. 
 2226  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2227  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2228  Id. 
 2229  13  C.  F.  R.    121.201,  NAICS  code  513321  (changed  to  517211  in  Oct.  2002). 
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 Cellular  and  Other  Wireless  Telecommunications.  2230  Under  both  SBA  categories,  a  wireless  business  is  small  if  it  has  1,500  or  fewer  employees.  For  the  census  category  of  Paging,  Census 
 Bureau  data  for  1997  show  that  there  were  1320  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2231  Of  this  total,  1303  firms  had  employment  of  999  or  fewer  employees,  and  an 
 additional  17  firms  had  employment  of  1,000  employees  or  more.  2232  Thus,  under  this  category  and  associated  small  business  size  standard,  the  great  majority  of  firms  can  be  considered  small. 
 For  the  census  category  Cellular  and  Other  Wireless  Telecommunications  firms,  Census  Bureau  data  for  1997  show  that  there  were  977  firms  in  this  category,  total,  that  operated  for  the  entire 
 year.  2233  Of  this  total,  965  firms  had  employment  of  999  or  fewer  employees,  and  an  additional  12  firms  had  employment  of  1,000  employees  or  more.  2234  Thus,  under  this  second  category  and 
 size  standard,  the  great  majority  of  firms  can,  again,  be  considered  small. 
 756.  Broadband  Personal  Communications  Service.  The  broadband  Personal  Communications  Service  (PCS)  spectrum  is  divided  into  six  frequency  blocks  designated  A 

 through  F,  and  the  Commission  has  held  auctions  for  each  block.  The  Commission  defined  small  entity  for  Blocks  C  and  F  as  an  entity  that  has  average  gross  revenues  of  $40  million  or 
 less  in  the  three  previous  calendar  years.  2235  For  Block  F,  an  additional  classification  for  very  small  business  was  added  and  is  defined  as  an  entity  that,  together  with  its  affiliates,  has 
 average  gross  revenues  of  not  more  than  $15  million  for  the  preceding  three  calendar  years.  2236  These  standards  defining  small  entity  in  the  context  of  broadband  PCS  auctions  have  been 
 approved  by  the  SBA.  2237  No  small  businesses,  within  the  SBA-  approved  small  business  size  standards  bid  successfully  for  licenses  in  Blocks  A  and  B.  There  were  90  winning  bidders  that 
 qualified  as  small  entities  in  the  Block  C  auctions.  A  total  of  93  small  and  very  small  business 

 2230  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2231  U.  S.  Census  Bureau,  1997  Economic  Census,  Subject  Series:  Information,  Employment  Size  of  Firms  Subject 
 to  Federal  Income  Tax:  1997  (1997  Economic  Census,  Employment  Size  of  Firms),  Table  5,  NAICS  code  513321  (issued  Oct.  2000). 

 2232  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2233  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513322  (issued  Oct.  2000). 

 2234  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2235  See  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules    Broadband  PCS  Competitive  Bidding  and  the 
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  WT  Docket  No.  96-  59,  Report  and  Order,  11  FCC  Rcd  7824  (1996)  (Parts  20  and  24  Amendment  Order);  see  also  47  C.  F.  R.    24.720(  b). 

 2236  See  Parts  20  and  24  Amendment  Order,  11  FCC  Rcd  7824. 
 2237  See,  e.  g.,  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No. 
 93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  5332  (1994). 
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 bidders  won  approximately  40  percent  of  the  1,479  licenses  for  Blocks  D,  E,  and  F.  2238  On  March  23,  1999,  the  Commission  re-  auctioned  347  C,  D,  E,  and  F  Block  licenses.  There  were  48 
 small  business  winning  bidders.  On  January  26,  2001,  the  Commission  completed  the  auction  of  422  C  and  F  Broadband  PCS  licenses  in  Auction  No.  35.  Of  the  35  winning  bidders  in  this 
 auction,  29  qualified  as  small  or  very  small  businesses.  Subsequent  events,  concerning  Auction  35,  including  judicial  and  agency  determinations,  resulted  in  a  total  of  163  C  and  F 
 Block  licenses  being  available  for  grant.  In  addition,  we  note  that,  as  a  general  matter,  the  number  of  winning  bidders  that  qualify  as  small  businesses  at  the  close  of  an  auction  does  not 
 necessarily  represent  the  number  of  small  businesses  currently  in  service.  Also,  the  Commission  does  not  generally  track  subsequent  business  size  unless,  in  the  context  of  assignments  or 
 transfers,  unjust  enrichment  issues  are  implicated. 
 757.  Narrowband  PCS.  To  date,  two  auctions  of  narrowband  PCS  licenses  have  been  conducted.  For  purposes  of  the  two  auctions  that  have  already  been  held,  small  businesses 

 were  entities  with  average  gross  revenues  for  the  prior  three  calendar  years  of  $40  million  or  less.  Through  these  auctions,  the  Commission  has  awarded  a  total  of  41  licenses,  out  of  which 
 11  were  obtained  by  small  businesses.  To  ensure  meaningful  participation  of  small  business  entities  in  future  auctions,  the  Commission  has  adopted  a  two-  tiered  small  business  size  standard 
 in  the  Narrowband  PCS  Second  Report  and  Order.  2239  A  small  business  is  an  entity  that,  together  with  affiliates  and  controlling  interests,  has  average  gross  revenues  for  the  three 
 preceding  years  of  not  more  than  $40  million.  A  very  small  business  is  an  entity  that,  together  with  affiliates  and  controlling  interests,  has  average  gross  revenues  for  the  three  preceding  years 
 of  not  more  than  $15  million.  The  SBA  has  approved  these  small  business  size  standards.  2240  In  the  future,  the  Commission  will  auction  459  licenses  to  serve  Metropolitan  Trading  Areas 
 (MTAs)  and  408  response  channel  licenses.  There  is  also  one  megahertz  of  narrowband  PCS  spectrum  that  has  been  held  in  reserve  and  that  the  Commission  has  not  yet  decided  to  release  for 
 licensing.  The  Commission  cannot  predict  accurately  the  number  of  licenses  that  will  be  awarded  to  small  entities  in  future  actions.  However,  four  of  the  16  winning  bidders  in  the  two 
 previous  narrowband  PCS  auctions  were  small  businesses,  as  that  term  was  defined  under  the  Commissions  Rules.  The  Commission  assumes,  for  purposes  of  this  analysis  that  a  large 
 portion  of  the  remaining  narrowband  PCS  licenses  will  be  awarded  to  small  entities.  The  Commission  also  assumes  that  at  least  some  small  businesses  will  acquire  narrowband  PCS 
 licenses  by  means  of  the  Commissions  partitioning  and  disaggregation  rules. 

 2238  FCC  News,  Broadband  PCS,  D,  E  and  F  Block  Auction  Closes,  No.  71744  (rel.  Jan.  14,  1997);  see  also 
 Amendment  of  the  Commissions  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications  Services  (PCS)  Licenses,  WT  Docket  No.  97-  82,  Second  Report  and  Order,  12  FCC  Rcd  16436  (1997). 

 2239  Amendment  of  the  Commissions  Rules  to  Establish  New  Personal  Communications  Services,  Narrowband 
 PCS,  Docket  Nos.  ET  92-  100,  PP  93-  253,  Second  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  10456  (2000). 

 2240  See  Letter  from  Aida  Alvarez,  Administrator,  SBA,  to  Amy  Zoslov,  Chief,  Auctions  and  Industry  Analysis 
 Division,  Wireless  Telecommunications  Bureau,  FCC  (filed  Dec.  2,  1998)  (SBA  Dec.  2,  1998  Ex  Parte  Letter). 
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 758.  220  MHz  Radio  Service    Phase  I  Licensees.  The  220  MHz  service  has  both  Phase  I  and  Phase  II  licenses.  Phase  I  licensing  was  conducted  by  lotteries  in  1992  and  1993. 
 There  are  approximately  1,515  such  non-  nationwide  licensees  and  four  nationwide  licensees  currently  authorized  to  operate  in  the  220  MHz  band.  The  Commission  has  not  developed  a 
 small  business  size  standard  for  small  entities  specifically  applicable  to  such  incumbent  220  MHz  Phase  I  licensees.  To  estimate  the  number  of  such  licensees  that  are  small  businesses,  we 
 apply  the  small  business  size  standard  under  the  SBA  rules  applicable  to  Cellular  and  Other  Wireless  Telecommunications  companies.  This  standard  provides  that  such  a  company  is  small 
 if  it  employs  no  more  than  1,500  persons.  2241  According  to  Census  Bureau  data  for  1997,  there  were  977  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2242  Of  this  total,  965  firms 
 had  employment  of  999  or  fewer  employees,  and  an  additional  12  firms  had  employment  of  1,000  employees  or  more.  2243  If  this  general  ratio  continues  in  the  context  of  Phase  I  220  MHz 
 licensees,  the  Commission  estimates  that  nearly  all  such  licensees  are  small  businesses  under  the  SBAs  small  business  size  standard. 

 759.  220  MHz  Radio  Service    Phase  II  Licensees.  The  220  MHz  service  has  both  Phase  I  and  Phase  II  licenses.  The  Phase  II  220  MHz  service  is  a  new  service,  and  is  subject  to 
 spectrum  auctions.  In  the  220  MHz  Third  Report  and  Order,  we  adopted  a  small  business  size  standard  for  small  and  very  small  businesses  for  purposes  of  determining  their  eligibility  for 
 special  provisions  such  as  bidding  credits  and  installment  payments.  2244  This  small  business  size  standard  indicates  that  a  small  business  is  an  entity  that,  together  with  its  affiliates  and 
 controlling  principals,  has  average  gross  revenues  not  exceeding  $15  million  for  the  preceding  three  years.  2245  A  very  small  business  is  an  entity  that,  together  with  its  affiliates  and 
 controlling  principals,  has  average  gross  revenues  that  do  not  exceed  $3  million  for  the  preceding  three  years.  The  SBA  has  approved  these  small  business  size  standards.  2246  Auctions 
 of  Phase  II  licenses  commenced  on  September  15,  1998,  and  closed  on  October  22,  1998.  2247  In  the  first  auction,  908  licenses  were  auctioned  in  three  different-  sized  geographic  areas:  three 

 2241  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2242  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513322  (issued  Oct.  2000). 
 2243  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2244  Amendment  of  Part  90  of  the  Commissions  Rules  to  Provide  for  the  Use  of  the  220-  222  MHz  Band  by  the 
 Private  Land  Mobile  Radio  Service,  PR  Docket  No.  89-  552,  Third  Report  and  Order  and  Fifth  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  10943,  11068-  70,  at  paras.  291-  95  (1997)  (220  MHz  Third  Report  and  Order). 

 2245  Id.  at  11068-  69,  para.  291. 
 2246  See  Letter  from  Aida  Alvarez,  Administrator,  SBA,  to  D.  Phythyon,  Chief,  Wireless  Telecommunications 
 Bureau,  FCC  (filed  Jan.  6,  1998)  (SBA  Jan.  6,  1998  Ex  Parte  Letter). 
 2247  See  generally  Phase  II  220  MHz  Service  Auction  Closes,  Winning  Bidders  in  the  Auction  of  908  Phase  II  220 
 MHz  Service  Licenses  Down  Payments  Due  November  6,  1998,  FCC  Form  601s  Due  November  6,  1998,  Ten-  Day  Petition  to  Deny  Period,  Report  No.  AUC-  18-  F,  14  FCC  Rcd  605  (1998). 
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 nationwide  licenses,  30  Regional  Economic  Area  Group  (EAG)  Licenses,  and  875  Economic  Area  (EA)  Licenses.  Of  the  908  licenses  auctioned,  693  were  sold.  Thirty-  nine  small  businesses 
 won  licenses  in  the  first  220  MHz  auction.  The  second  auction  included  225  licenses:  216  EA  licenses  and  9  EAG  licenses.  Fourteen  companies  claiming  small  business  status  won  158 
 licenses.  2248 
 760.  800  MHz  and  900  MHz  Specialized  Mobile  Radio  Licenses.  The  Commission  awards  small  entity  and  very  small  entity  bidding  credits  in  auctions  for  Specialized  Mobile 

 Radio  (SMR)  geographic  area  licenses  in  the  800  MHz  and  900  MHz  bands  to  firms  that  had  revenues  of  no  more  than  $15  million  in  each  of  the  three  previous  calendar  years,  or  that  had 
 revenues  of  no  more  than  $3  million  in  each  of  the  previous  calendar  years,  respectively.  2249  These  bidding  credits  apply  to  SMR  providers  in  the  800  MHz  and  900  MHz  bands  that  either 
 hold  geographic  area  licenses  or  have  obtained  extended  implementation  authorizations.  The  Commission  does  not  know  how  many  firms  provide  800  MHz  or  900  MHz  geographic  area 
 SMR  service  pursuant  to  extended  implementation  authorizations,  nor  how  many  of  these  providers  have  annual  revenues  of  no  more  than  $15  million.  One  firm  has  over  $15  million  in 
 revenues.  The  Commission  assumes,  for  purposes  here,  that  all  of  the  remaining  existing  extended  implementation  authorizations  are  held  by  small  entities,  as  that  term  is  defined  by  the 
 Small  Business  Act.  The  Commission  has  held  auctions  for  geographic  area  licenses  in  the  800  MHz  and  900  MHz  SMR  bands.  There  were  60  winning  bidders  that  qualified  as  small  or  very 
 small  entities  in  the  900  MHz  SMR  auctions.  Of  the  1,020  licenses  won  in  the  900  MHz  auction,  bidders  qualifying  as  small  or  very  small  entities  won  263  licenses.  In  the  800  MHz 
 auction,  38  of  the  524  licenses  won  were  won  by  small  and  very  small  entities.  Consequently,  the  Commission  estimates  that  there  are  301  or  fewer  small  entity  SMR  licensees  in  the  800 
 MHz  and  900  MHz  bands  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 
 761.  Common  Carrier  Paging.  In  the  Paging  Third  Report  and  Order,  we  developed  a  small  business  size  standard  for  small  businesses  and  very  small  businesses  for  purposes  of 

 determining  their  eligibility  for  special  provisions  such  as  bidding  credits  and  installment  payments.  2250  A  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  not  exceeding  $15  million  for  the  preceding  three  years.  Additionally,  a  very  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  that  are  not  more  than  $3  million  for  the  preceding  three  years.  An  auction  of  Metropolitan  Economic  Area  licenses  commenced  on  February  24,  2000, 
 and  closed  on  March  2,  2000.  2251  Of  the  985  licenses  auctioned,  440  were  sold.  Fifty-  seven  companies  claiming  small  business  status  won.  At  present,  there  are  approximately  24,000 

 2248  Phase  II  220  MHz  Service  Spectrum  Auction  Closes,  Report  No.  AUC-  24-  E,  14  FCC  Rcd  11218  (1999). 
 2249  47  C.  F.  R.    90.814(  b)(  1). 
 2250  220  MHz  Third  Report  and  Order,  12  FCC  Rcd  at  11068-  70,  paras.  291-  95. 
 2251  Revision  of  Part  22  and  Part  90  of  the  Commissions  Rules  to  Facilitate  Future  Development  of  Paging 
 Systems,  WT  Docket  No.  96-  18,  Memorandum  Opinion  and  Order  on  Reconsideration  and  Third  Report  and  Order,  14  FCC  Rcd  10030,  10085,  para.  98  (1999). 
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 Private-  Paging  site-  specific  licenses  and  74,000  Common  Carrier  Paging  licenses.  According  to  the  Trends  in  Telephone  Service  May  2002  Report,  471  carriers  reported  that  they  were  engaged 
 in  the  provision  of  either  paging  and  messaging  services  or  other  mobile  services.  2252  Of  those,  the  Commission  estimates  that  450  are  small,  under  the  SBA  business  size  standard  specifying 
 that  firms  are  small  if  they  have  1,500  or  fewer  employees.  2253 
 762.  700  MHz  Guard  Band  Licensees.  In  the  700  MHz  Guard  Band  Order,  we  adopted  a  small  business  size  standard  for  small  businesses  and  very  small  businesses  for  purposes  of 

 determining  their  eligibility  for  special  provisions  such  as  bidding  credits  and  installment  payments.  2254  A  small  business  as  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  not  exceeding  $15  million  for  the  preceding  three  years.  Additionally,  a  very  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  that  are  not  more  than  $3  million  for  the  preceding  three  years.  An  auction  of  52  Major  Economic  Area  (MEA)  licenses  commenced  on  September  6, 
 2000,  and  closed  on  September  21,  2000.  2255  Of  the  104  licenses  auctioned,  96  licenses  were  sold  to  nine  bidders.  Five  of  these  bidders  were  small  businesses  that  won  a  total  of  26  licenses.  A 
 second  auction  of  700  MHz  Guard  Band  licenses  commenced  on  February  13,  2001  and  closed  on  February  21,  2001.  All  eight  of  the  licenses  auctioned  were  sold  to  three  bidders.  One  of 
 these  bidders  was  a  small  business  that  won  a  total  of  two  licenses.  2256 
 763.  Rural  Radiotelephone  Service.  The  Commission  has  not  adopted  a  size  standard  for  small  businesses  specific  to  the  Rural  Radiotelephone  Service.  2257  A  significant  subset  of  the 

 Rural  Radiotelephone  Service  is  the  Basic  Exchange  Telephone  Radio  System  (BETRS).  2258  The  Commission  uses  the  SBAs  small  business  size  standard  applicable  to  Cellular  and  Other 
 Wireless  Telecommunications,  i.  e.,  an  entity  employing  no  more  than  1,500  persons.  2259  There  are  approximately  1,000  licensees  in  the  Rural  Radiotelephone  Service,  and  the  Commission 
 estimates  that  there  are  1,000  or  fewer  small  entity  licensees  in  the  Rural  Radiotelephone  Service  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 

 2252  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2253  Id.  The  SBA  size  standard  is  that  of  Paging,  13  C.  F.  R.    121.201,  NAICS  code  517211. 
 2254  See  Service  Rules  for  the  746-  764  and  776-  794  MHz  Bands,  and  Revisions  to  Part  27  of  the  Commissions 
 Rules,  WT  Docket  No.  99-  168,  Second  Report  and  Order,  15  FCC  Rcd  5299  (2000). 
 2255  See  generally  220  MHz  Service  Auction  Closes,  Report  No.  WT  98-  36  (rel  Oct.  23,  1998). 

 2256  700  MHz  Guard  Band  Auction  Closes,  Report  No.  AUC-  38-  F,  16  FCC  Rcd  4590  (2001). 
 2257  The  service  is  defined  in  section  22.99  of  the  Commissions  Rules,  47  C.  F.  R.    22.99. 
 2258  BETRS  is  defined  in  sections  22.757  and  22.759  of  the  Commissions  Rules,  47  C.  F.  R.    22.757  and  22.759. 
 2259  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
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 764.  Air-  Ground  Radiotelephone  Service.  The  Commission  has  not  adopted  a  small  business  size  standard  specific  to  the  Air-  Ground  Radiotelephone  Service.  2260  We  will  use 
 SBAs  small  business  size  standard  applicable  to  Cellular  and  Other  Wireless  Telecommunications,  i.  e.,  an  entity  employing  no  more  than  1,500  persons.  2261  There  are 
 approximately  100  licensees  in  the  Air-  Ground  Radiotelephone  Service,  and  we  estimate  that  almost  all  of  them  qualify  as  small  under  the  SBA  small  business  size  standard. 

 765.  Aviation  and  Marine  Radio  Services.  Small  businesses  in  the  aviation  and  marine  radio  services  use  a  very  high  frequency  (VHF)  marine  or  aircraft  radio  and,  as  appropriate,  an 
 emergency  position-  indicating  radio  beacon  (and/  or  radar)  or  an  emergency  locator  transmitter.  The  Commission  has  not  developed  a  small  business  size  standard  specifically  applicable  to 
 these  small  businesses.  For  purposes  of  this  analysis,  the  Commission  uses  the  SBA  small  business  size  standard  for  the  category  Cellular  and  Other  Telecommunications,  which  is 
 1,500  or  fewer  employees.  2262  Most  applicants  for  recreational  licenses  are  individuals.  Approximately  581,000  ship  station  licensees  and  131,000  aircraft  station  licensees  operate 
 domestically  and  are  not  subject  to  the  radio  carriage  requirements  of  any  statute  or  treaty.  For  purposes  of  our  evaluations  in  this  analysis,  we  estimate  that  there  are  up  to  approximately 
 712,000  licensees  that  are  small  businesses  (or  individuals)  under  the  SBA  standard.  In  addition,  between  December  3,  1998  and  December  14,  1998,  the  Commission  held  an  auction  of  42  VHF 
 Public  Coast  licenses  in  the  157.1875-  157.4500  MHz  (ship  transmit)  and  161.775-  162.0125  MHz  (coast  transmit)  bands.  For  purposes  of  the  auction,  the  Commission  defined  a  "small" 
 business  as  an  entity  that,  together  with  controlling  interests  and  affiliates,  has  average  gross  revenues  for  the  preceding  three  years  not  to  exceed  $15  million  dollars.  In  addition,  a  "very 
 small"  business  is  one  that,  together  with  controlling  interests  and  affiliates,  has  average  gross  revenues  for  the  preceding  three  years  not  to  exceed  $3  million  dollars.  2263  There  are 
 approximately  10,672  licensees  in  the  Marine  Coast  Service,  and  the  Commission  estimates  that  almost  all  of  them  qualify  as  "small"  businesses  under  the  above  special  small  business  size 
 standards. 
 766.  Fixed  Microwave  Services.  Fixed  microwave  services  include  common  carrier,  2264  private  operational-  fixed,  2265  and  broadcast  auxiliary  radio  services.  2266  At  present,  there  are 

 2260  The  service  is  defined  in  section  22.99  of  the  Commissions  Rules,  47  C.  F.  R.    22.99. 
 2261  13  C.  F.  R.    121.201,  NAICS  codes  513322  (changed  to  517212  in  Oct.  2002). 
 2262  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2263  Amendment  of  the  Commissions  Rules  Concerning  Maritime  Communications,  PR  Docket  No.  92-  257,  Third 
 Report  and  Order  and  Memorandum  Opinion  and  Order,  13  FCC  Rcd  19853  (1998). 
 2264  See  47  C.  F.  R.    101  et  seq.  (formerly  Part  21  of  the  Commissions  Rules)  for  common  carrier  fixed  microwave 
 services  (except  MDS). 
 2265  Persons  eligible  under  Parts  80  and  90  of  the  Commissions  Rules  can  use  Private  Operational-  Fixed 
 Microwave  services.  See  47  C.  F.  R.  Parts  80  and  90.  Stations  in  this  service  are  called  operational-  fixed  to  distinguish  them  from  common  carrier  and  public  fixed  stations.  Only  the  licensee  may  use  the  operational-  fixed 

 station,  and  only  for  communications  related  to  the  licensees  commercial,  industrial,  or  safety  operations. 
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 approximately  22,015  common  carrier  fixed  licensees  and  61,670  private  operational-  fixed  licensees  and  broadcast  auxiliary  radio  licensees  in  the  microwave  services.  The  Commission 
 has  not  created  a  size  standard  for  a  small  business  specifically  with  respect  to  fixed  microwave  services.  For  purposes  of  this  analysis,  the  Commission  uses  the  SBA  small  business  size 
 standard  for  the  category  Cellular  and  Other  Telecommunications,  which  is  1,500  or  fewer  employees.  2267  The  Commission  does  not  have  data  specifying  the  number  of  these  licensees  that 
 have  more  than  1,500  employees,  and  thus  are  unable  at  this  time  to  estimate  with  greater  precision  the  number  of  fixed  microwave  service  licensees  that  would  qualify  as  small  business 
 concerns  under  the  SBAs  small  business  size  standard.  Consequently,  the  Commission  estimates  that  there  are  up  to  22,015  common  carrier  fixed  licensees  and  up  to  61,670  private 
 operational-  fixed  licensees  and  broadcast  auxiliary  radio  licensees  in  the  microwave  services  that  may  be  small  and  may  be  affected  by  the  rules  and  policies  adopted  herein.  We  noted,  however, 
 that  the  common  carrier  microwave  fixed  licensee  category  includes  some  large  entities. 
 767.  Offshore  Radiotelephone  Service.  This  service  operates  on  several  UHF  television  broadcast  channels  that  are  not  used  for  television  broadcasting  in  the  coastal  areas  of 

 states  bordering  the  Gulf  of  Mexico.  2268  There  are  presently  approximately  55  licensees  in  this  service.  We  are  unable  to  estimate  at  this  time  the  number  of  licensees  that  would  qualify  as 
 small  under  the  SBAs  small  business  size  standard  for  Cellular  and  Other  Wireless  Telecommunications  services.  2269  Under  that  SBA  small  business  size  standard,  a  business  is 
 small  if  it  has  1,500  or  fewer  employees.  2270 
 768.  Wireless  Communications  Services  (WCS).  This  service  can  be  used  for  fixed,  mobile,  radiolocation,  and  digital  audio  broadcasting  satellite  uses.  The  Commission  established 

 small  business  size  standards  for  the  WCS  auction.  A  small  business  is  an  entity  with  average  gross  revenues  of  $40  million  for  each  of  the  three  preceding  years,  and  a  very  small  business 
 is  an  entity  with  average  gross  revenues  of  $15  million  for  each  of  the  three  preceding  years.  The  SBA  has  approved  these  small  business  size  standards.  2271  The  Commission  auctioned 
 geographic  area  licenses  in  the  WCS  service.  In  the  auction,  there  were  seven  winning  bidders  that  qualified  as  very  small  business  entities,  and  one  that  qualified  as  a  small  business 

 (Continued  from  previous  page)  2266 
 Auxiliary  Microwave  Service  is  governed  by  Part  74  of  the  Commissions  Rules.  See  47  C.  F.  R.  Part  74.  This  service  is  available  to  licensees  of  broadcast  stations  and  to  broadcast  and  cable  network  entities.  Broadcast 

 auxiliary  microwave  stations  are  used  for  relaying  broadcast  television  signals  from  the  studio  to  the  transmitter,  or  between  two  points  such  as  a  main  studio  and  an  auxiliary  studio.  The  service  also  includes  mobile  television 
 pickups,  which  relay  signals  from  a  remote  location  back  to  the  studio. 
 2267  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 

 2268  This  service  is  governed  by  Subpart  I  of  Part  22  of  the  Commissions  Rules.  See  47  C.  F.  R.    22.1001- 
 22.1037. 
 2269  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 

 2270  Id. 
 2271  See  SBA  Dec.  2,  1998  Ex  Parte  Letter. 
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 entity.  We  conclude  that  the  number  of  geographic  area  WCS  licensees  affected  by  this  analysis  includes  these  eight  entities. 
 769.  39  GHz  Service.  The  Commission  created  a  special  small  business  size  standard  for  39  GHz  licenses    an  entity  that  has  average  gross  revenues  of  $40  million  or  less  in  the  three 
 previous  calendar  years.  2272  An  additional  size  standard  for  very  small  business  is:  an  entity  that,  together  with  affiliates,  has  average  gross  revenues  of  not  more  than  $15  million  for  the 
 preceding  three  calendar  years.  2273  The  SBA  has  approved  these  small  business  size  standards.  2274  The  auction  of  the  2,173  39  GHz  licenses  began  on  April  12,  2000  and  closed  on  May  8,  2000. 
 The  18  bidders  who  claimed  small  business  status  won  849  licenses.  Consequently,  the  Commission  estimates  that  18  or  fewer  39  GHz  licensees  are  small  entities  that  may  be  affected 
 by  the  rules  and  polices  adopted  herein. 
 770.  Multipoint  Distribution  Service  (MDS),  Multichannel  Multipoint  Distribution  Service  (MMDS),  and  Instructional  Television  Fixed  Service  (ITFS).  MMDS  systems,  often 

 referred  to  as  wireless  cable,  transmit  video  programming  to  subscribers  using  the  microwave  frequencies  of  the  MDS  and  ITFS.  2275  In  connection  with  the  1996  MDS  auction,  the 
 Commission  established  a  small  business  size  standard  as  an  entity  that  had  annual  average  gross  revenues  of  less  than  $40  million  in  the  previous  three  calendar  years.  2276  The  MDS  auctions 
 resulted  in  67  successful  bidders  obtaining  licensing  opportunities  for  493  Basic  Trading  Areas  (BTAs).  Of  the  67  auction  winners,  61  met  the  definition  of  a  small  business.  MDS  also 
 includes  licensees  of  stations  authorized  prior  to  the  auction.  In  addition,  the  SBA  has  developed  a  small  business  size  standard  for  Cable  and  Other  Program  Distribution,  which  includes  all  such 
 companies  generating  $12.5  million  or  less  in  annual  receipts.  2277  According  to  Census  Bureau  data  for  1997,  there  were  a  total  of  1,311  firms  in  this  category,  total,  that  had  operated  for  the 
 entire  year.  2278  Of  this  total,  1,180  firms  had  annual  receipts  of  under  $10  million  and  an  additional  52  firms  had  receipts  of  $10  million  or  more  but  less  than  $25  million.  Consequently, 
 we  estimate  that  the  majority  of  providers  in  this  service  category  are  small  businesses  that  may  be  affected  by  the  rules  and  policies  adopted  herein.  This  SBA  small  business  size  standard  also 

 2272  See  Amendment  of  the  Commissions  Rules  Regarding  the  37.0-  38.6  GHz  and  38.6-  40.0  GHz  Bands,  ET 
 Docket  No.  95-  183,  Report  and  Order  and  Second  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  18600  (1997). 
 2273  Id. 

 2274  SBA  Feb.  4,  1998  Ex  Parte  Letter. 
 2275  Amendment  of  Parts  21  and  74  of  the  Commissions  Rules  with  Regard  to  Filing  Procedures  in  the  Multipoint 
 Distribution  Service  and  in  the  Instructional  Television  Fixed  Service  and  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  Docket  Nos.  MM  94-  131,  PP  93-  253,  Report  and  Order,  10  FCC  Rcd 

 9589,  9593,  para.  7  (1995). 
 2276  47  C.  F.  R.    21.961(  b)(  1). 

 2277  13  C.  F.  R.    121.201,  NAICS  code  513220  (changed  to  517510  in  Oct.  2002). 
 2278  1997  Economic  Census,  Establishment  and  Firm  Size,  Table  4,  NAICS  code  513220  (issued  Oct.  2000). 
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 appears  applicable  to  ITFS.  There  are  presently  2,032  ITFS  licensees.  All  but  100  of  these  licenses  are  held  by  educational  institutions.  Educational  institutions  are  included  in  this 
 analysis  as  small  entities.  2279  Thus,  we  tentatively  conclude  that  at  least  1,932  licensees  are  small  businesses. 

 771.  Local  Multipoint  Distribution  Service.  Local  Multipoint  Distribution  Service  (LMDS)  is  a  fixed  broadband  point-  to-  multipoint  microwave  service  that  provides  for  two-  way 
 video  telecommunications.  2280  The  auction  of  the  1,030  LMDS  licenses  began  on  February  18,  1998  and  closed  on  March  25,  1998.  The  Commission  established  a  small  business  size  standard 
 for  LMDS  licenses  as  an  entity  that  has  average  gross  revenues  of  less  than  $40  million  in  the  three  previous  calendar  years.  2281  An  additional  small  business  size  standard  for  very  small 
 business  was  added  as  an  entity  that,  together  with  its  affiliates,  has  average  gross  revenues  of  not  more  than  $15  million  for  the  preceding  three  calendar  years.  2282  The  SBA  has  approved 
 these  small  business  size  standards  in  the  context  of  LMDS  auctions.  2283  There  were  93  winning  bidders  that  qualified  as  small  entities  in  the  LMDS  auctions.  A  total  of  93  small  and  very  small 
 business  bidders  won  approximately  277  A  Block  licenses  and  387  B  Block  licenses.  On  March  27,  1999,  the  Commission  re-  auctioned  161  licenses;  there  were  40  winning  bidders.  Based  on 
 this  information,  we  conclude  that  the  number  of  small  LMDS  licenses  consists  of  the  93  winning  bidders  in  the  first  auction  and  the  40  winning  bidders  in  the  re-  auction,  for  a  total  of 
 133  small  entity  LMDS  providers. 
 772.  218-  219  MHz  Service.  The  first  auction  of  218-  219  MHz  spectrum  resulted  in  170  entities  winning  licenses  for  594  Metropolitan  Statistical  Area  (MSA)  licenses.  Of  the  594 

 licenses,  557  were  won  by  entities  qualifying  as  a  small  business.  For  that  auction,  the  small  business  size  standard  was  an  entity  that,  together  with  its  affiliates,  has  no  more  than  a  $6 
 million  net  worth  and,  after  federal  income  taxes  (excluding  any  carry-  over  losses),  has  no  more  than  $2  million  in  annual  profits  each  year  for  the  previous  two  years.  2284  In  the  218-  219  MHz 
 Report  and  Order  and  Memorandum  Opinion  and  Order,  we  established  a  small  business  size  standard  for  a  small  business  as  an  entity  that,  together  with  its  affiliates  and  persons  or 
 entities  that  hold  interests  in  such  an  entity  and  their  affiliates,  has  average  annual  gross  revenues 

 2279  In  addition,  the  term  small  entity  within  SBREFA  applies  to  small  organizations  (nonprofits)  and  to  small 
 governmental  jurisdictions  (cities,  counties,  towns,  townships,  villages,  school  districts,  and  special  districts  with  populations  of  less  than  50,000).  5  U.  S.  C.    601(  4)-(  6).  We  do  not  collect  annual  revenue  data  on  ITFS  licensees. 

 2280  See  Local  Multipoint  Distribution  Service,  Second  Report  and  Order,  CC  Docket  No.  92-  297,  12  FCC  Rcd 
 12545  (1997). 
 2281  Id. 

 2282  Id. 
 2283  See  SBA  Jan.  6,  1998  Ex  Parte  Letter. 
 2284  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No.  93-  253, 
 Fourth  Report  and  Order,  9  FCC  Rcd  2330  (1994). 
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 not  to  exceed  $15  million  for  the  preceding  three  years.  2285  A  very  small  business  is  defined  as  an  entity  that,  together  with  its  affiliates  and  persons  or  entities  that  hold  interests  in  such  an 
 entity  and  its  affiliates,  has  average  annual  gross  revenues  not  to  exceed  $3  million  for  the  preceding  three  years.  2286  We  cannot  estimate,  however,  the  number  of  licenses  that  will  be  won 
 by  entities  qualifying  as  small  or  very  small  businesses  under  our  rules  in  future  auctions  of  218-  219  MHz  spectrum. 

 773.  24  GHz    Incumbent  Licensees.  This  analysis  may  affect  incumbent  licensees  who  were  relocated  to  the  24  GHz  band  from  the  18  GHz  band,  and  applicants  who  wish  to 
 provide  services  in  the  24  GHz  band.  The  applicable  SBA  small  business  size  standard  is  that  of  Cellular  and  Other  Wireless  Telecommunications  companies.  This  category  provides  that 
 such  a  company  is  small  if  it  employs  no  more  than  1,500  persons.  2287  According  to  Census  Bureau  data  for  1997,  there  were  977  firms  in  this  category,  total,  that  operated  for  the  entire 
 year.  2288  Of  this  total,  965  firms  had  employment  of  999  or  fewer  employees,  and  an  additional  12  firms  had  employment  of  1,000  employees  or  more.  2289  Thus,  under  this  size  standard,  the 
 great  majority  of  firms  can  be  considered  small.  These  broader  census  data  notwithstanding,  we  believe  that  there  are  only  two  licensees  in  the  24  GHz  band  that  were  relocated  from  the  18 
 GHz  band,  Teligent  and  TRW,  Inc.  2290  It  is  our  understanding  that  Teligent  and  its  related  companies  have  less  than  1,500  employees,  though  this  may  change  in  the  future.  TRW  is  not  a 
 small  entity.  Thus,  only  one  incumbent  licensee  in  the  24  GHz  band  is  a  small  business  entity. 
 774.  24  GHz    Future  Licensees.  With  respect  to  new  applicants  in  the  24  GHz  band,  the  small  business  size  standard  for  small  business  is  an  entity  that,  together  with  controlling 

 interests  and  affiliates,  has  average  annual  gross  revenues  for  the  three  preceding  years  not  in  excess  of  $15  million.  2291  Very  small  business  in  the  24  GHz  band  is  an  entity  that,  together 
 with  controlling  interests  and  affiliates,  has  average  gross  revenues  not  exceeding  $3  million  for 

 2285  Amendment  of  Part  95  of  the  Commissions  Rules  to  Provide  Regulatory  Flexibility  in  the  218-  219  MHz 
 Service,  WT  Docket  No.  98-  169,  Report  and  Order  and  Memorandum  Opinion  and  Order,  15  FCC  Rcd  1497  (1999). 

 2286  Id. 
 2287  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2288  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513322  (issued  Oct.  2000). 
 2289  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2290  Teligent  acquired  the  DEMS  licenses  of  FirstMark,  the  only  licensee  other  than  TRW  in  the  24  GHz  band 
 whose  license  has  been  modified  to  require  relocation  to  the  24  GHz  band. 
 2291  Amendments  to  Parts  1,2,  87  and  101  of  the  Commissions  Rules  to  License  Fixed  Services  at  24  GHz,  WT 
 Docket  No.  99-  327,  Report  and  Order,  15  FCC  Rcd  16934,  16967  para.  77  (2000)  (Parts  1,  2;  87  and  101  Amendment  Order);  see  also  47  C.  F.  R.    101.538(  a)(  2). 
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 the  preceding  three  years.  2292  The  SBA  has  approved  these  small  business  size  standards.  2293  These  size  standards  will  apply  to  the  future  auction,  if  held. 
 775.  Internet  Service  Providers.  While  internet  service  providers  (ISPs)  are  only  indirectly  affected  by  our  present  actions,  and  ISPs  are  therefore  not  formally  included  within 
 this  present  FRFA,  we  have  addressed  them  informally  to  create  a  fuller  record  and  to  recognize  their  participation  in  this  proceeding.  The  SBA  has  developed  a  small  business  size  standard  for 
 Online  Information  Services,  which  consists  of  all  such  companies  having  $21  million  or  less  in  annual  receipts.  2294  According  to  Census  Bureau  data  for  1997,  there  were  2,751  firms  in  this 
 category,  total,  that  operated  for  the  entire  year.  2295  Of  this  total,  2,659  firms  had  annual  receipts  of  $9,999,999  or  less,  and  an  additional  67  had  receipts  of  $10  million  to  $24,999,999.  2296  Thus, 
 under  this  size  standard,  the  great  majority  of  firms  can  be  considered  small. 
 4.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 

 776.  Pursuant  to  sections  251(  c)  and  (d)  of  the  Act,  incumbent  LECs,  including  those  that  qualify  as  small  entities,  are  required  to  provide  nondiscriminatory  access  to  UNEs.  2297  The 
 only  exception  to  this  rule  applies  to  qualifying  rural  carriers  that  have  gone  through  the  process  of  obtaining  an  exemption,  suspension,  or  modification  pursuant  to  section  251(  f)  of  the  Act. 
 This  Order  represents,  in  large  part,  a  fresh  examination  of  the  issues  presented  in  implementing  the  unbundling  requirements  of  section  251,  based  on  comments  from  interested  parties 
 responding  to  the  Triennial  Review  NPRM.  This  Order  also  interprets  the  necessary  and  impair  standards  of  section  251(  d)(  2)  in  a  manner  that  satisfies  the  D.  C.  Circuits  directives  that  (1)  the 
 Commission  eschew  broad  national  standards  in  favor  of  more  granular  analysis,  2298  and  that,  (2)  in  determining  whether  a  carrier  is  impaired  by  diminished  access  to  a  given  element,  the 
 Commission  distinguish  between  cost  disparities  that  are  universal  as  between  new  entrants  and 

 2292  Parts  1,  2;  87  and  101  Amendment  Order,  15  FCC  Rcd  at  16967,  para.  77;  see  also  47  C.  F.  R.    101.538(  a)(  1). 
 2293  See  Letter  from  Gary  M.  Jackson,  Assistant  Administrator,  SBA,  to  Margaret  W.  Wiener,  Deputy  Chief, 
 Auctions  and  Industry  Analysis  Division,  Wireless  Telecommunications  Bureau,  FCC  (filed  July  28,  2000)  (SBA  July  28,  2000  Ex  Parte  Letter). 

 2294  13  C.  F.  R.    121.201,  NAICS  code  514191  (changed  to  518111  in  Oct.  2002). 
 2295  U.  S.  Census  Bureau,  1997  Economic  Census,  Subject  Series:  Information,  Receipts  Size  of  Firms  Subject  to 
 Federal  Income  Tax:  1997  (1997  Economic  Census,  Receipts  Size  of  Firms),  Table  4,  NAICS  code  514191  (issued  Oct.  2000). 

 2296  Id. 
 2297  47  U.  S.  C.    251(  c),  (d). 
 2298  USTA,  290  F.  3d  at  422. 
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 incumbents  in  any  industry  and  disparities  resulting  specifically  from  the  conditions  of  natural  monopoly  that  the  Act  is  designed  to  redress.  2299 
 777.  In  this  Order,  we  determine  that  requesting  carriers  (1)  are  impaired  without  access  to  local  circuit  switching  in  providing  service  to  mass  market  customers  using  DS0 
 capacity  loops;  2300  (2)  are  presumed  not  impaired  without  access  to  unbundled  local  circuit  switching  for  the  enterprise  market;  2301  (3)  are  not  impaired  without  access  to  packet  switching, 
 including  routers  and  DSLAMs;  2302  (4)  are  not  impaired  without  access  to  incumbent  LECs  signaling  systems  except  where  they  are  also  impaired  without  access  to  the  incumbent  LECs 
 unbundled  circuit  switching;  2303  (5)  are  impaired  without  unbundled  access  to  the  incumbent  LECs  911  and  e911  databases;  2304  (6)  are  not  impaired  without  access  to  the  incumbent  LECs 
 other  call-  related  databases  if  they  deploy  their  own  switches,  but  otherwise  are  impaired;  2305  (7)  are  impaired  without  access  to  incumbent  LECs  OSS;  2306  (8)  are  impaired  without  access  to 
 copper  loop  or  subloop  facilities  (and  must  condition  copper  loops  for  provision  of  advanced  services),  but  are  not  impaired  without  access  to  line-  sharing  (subject  to  a  three-  year  transition) 
 or  hybrid  loops;  2307  (9)  are  not  impaired  without  access  to  new  build/  greenfield  fiber-  to-  the-  home  (FTTH)  loops  for  broadband  or  narrowband  services  or  overbuild/  brownfield  FTTH  loops  for 
 broadband  services;  2308  (10)  are  not  impaired  without  unbundled  access  to  OCn  capacity  loop  facilities,  but  are  impaired,  subject  to  certain  triggers,  without  access  to  dark  fiber  loops,  DS1 
 loops,  and  DS3  loops;  2309  (11)  are  impaired  without  access  to  unbundled  subloops  associated  with  accessing  customer  premises  wiring  at  multiunit  premises  and  are  also  impaired  without 
 unbundled  access  to  the  incumbent  LEC  Inside  Wire  Subloops  and  NIDs,  regardless  of  loop  type;  2310  (12)  are  not  impaired  without  unbundled  access  to  OCn  transport  facilities,  but  are 
 impaired,  subject  to  certain  triggers,  without  access  to  dark  fiber  transport  facilities,  DS1 
 2299  Id.  at  426. 
 2300  See  supra  Part  VI.  D.  6. 
 2301  State  commissions  may  rebut  this  finding  as  specified  above.  See  supra  Part  VI.  D.  1. 
 2302  See  supra  Part  VI.  A.  2. 
 2303  See  supra  Part  VI.  A.  3. 
 2304  See  supra  Part  VI.  A.  4. 
 2305  See  id. 
 2306  See  supra  Part  VI.  A.  5. 
 2307  Incumbent  LECs  also  may  not  retire  copper  loops  without  state  approval.  See  supra  Part  VI.  B.  1.  The 
 Commission  reaffirms  incumbent  LEC  line-  splitting  obligations.  See  supra  Part  VI.  B.  1. 
 2308  See  supra  Part  VI.  B.  2. 

 2309  See  supra  Part  VI.  B.  3. 
 2310  See  supra  Parts  VI.  B.  2,  VI.  B.  3. 
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 transport  facilities,  and  DS3  transport  facilities;  2311  and  (13)  are  impaired  without  access  to  unbundled  shared  transport  only  to  the  extent  they  are  impaired  without  access  to  local  circuit 
 switching.  2312  The  Order  also  affirms  that  incumbent  LECs  are  obligated  to  provide  access  to  UNE  combinations.  2313 

 778.  In  this  Order,  we  adopt  rules  to  implement  a  congressionally-  mandated  scheme,  embodied  in  Section  251  of  the  Act,  that  imposes  upon  incumbent  LECs  an  obligation  to  provide 
 unbundled  access  to  certain  network  elements.  This  Order  articulates  a  new  impairment  standard  to  govern  which  network  elements  incumbent  LECs  must  unbundle  for  competitors  in 
 accordance  with  the  Act.  While  this  Order  imposes  no  general  obligations  on  competitive  LECs,  the  Order  does  require  competitive  LECs  to  satisfy  certain  reporting  requirements  in  order  to 
 obtain  as  UNEs  certain  high-  capacity  network  elements  from  incumbent  LECs.  We  have  attempted  to  keep  the  obligations  imposed  by  this  Order  to  the  minimum  necessary  to  implement 
 the  requirements  of  the  Act. 
 779.  In  addition,  this  Order  outlines  procedures  whereby  states  may  conduct  proceedings  to  determine  whether  certain  network  elements  satisfy  our  impairment  standard 

 according  to  specific  guidelines  and  triggers,  as  outlined  in  the  Order.  While  this  Order  does  not  specifically  impose  any  obligations  on  carriers  in  this  regard,  records  regarding  facility  use  may 
 be  necessary  for  these  state  proceedings. 
 780.  The  various  compliance  requirements  contained  in  this  Order  will  require  the  use  of  engineering,  technical,  operational,  accounting,  billing,  and  legal  skills.  The  carriers  that  are 

 affected  by  these  requirements  already  possess  these  skills.  This  Order  contains  new  or  modified  information  collections,  which  are  subject  to  Office  of  Management  and  Budget  review  pursuant 
 to  the  Paperwork  Reduction  Act  of  1995.  2314 
 5.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 

 781.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives 
 (among  others):  (1)  the  establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification, 
 consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small 

 2311  See  supra  Part  VI.  B.  3. 
 2312  See  supra  Part  VI.  B.  4. 
 2313  See  supra  Part  VI.  B.  6. 
 2314  Pub.  L.  No.  104-  13,  109  Stat.  163  (codified  at  44  U.  S.  C.    3507). 
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 entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from  coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  2315 
 782.  In  this  Order,  we  adopt  rules  regarding  the  unbundling  of  network  elements.  We  have  modified  our  impairment  analysis  to  find  that  a  requesting  carrier  is  impaired  when  lack  of 
 access  to  a  facility  in  the  incumbent  LECs  network  poses  barriers  that  are  likely  to  make  entry  into  the  market  uneconomic.  2316  These  can  include  both  operational  and  economic  barriers,  such 
 as  scale  economies,  sunk  costs,  first  mover  advantages,  absolute  cost  advantages,  and  barriers  within  the  control  of  the  incumbent  LEC.  In  adopting  this  interpretation,  we  considered  a  variety 
 of  factors  relating  to  the  size  of  regulated  entities  and  the  customers  they  serve.  2317  We  considered  a  number  of  barriers  to  competitive  entry,  including  those  faced  by  small  competitors, 
 as  well  as  the  importance  of  scale  economies  as  they  relate  to  small  entities.  2318  Finally,  we  considered  and  rejected  a  number  of  suggested  approaches  to  impairment.  2319 

 783.  In  applying  our  impairment  analysis  to  specific  network  elements,  we  adopt  a  more  granular  approach,  including  the  considerations  of  customer  class,  geography,  and  service. 
 We  found  that  conducting  a  more  granular  analysis  permits  us  to  distinguish,  with  more  particularity,  those  situations  for  which  there  is  impairment  from  those  for  which  there  is  none. 
 We  also  found  that  an  even  more  granular  analysis    loop  by  loop,  for  example    is  neither  administratively  feasible  nor  required  by  the  courts.  2320  We  considered  the  differing  needs  of 
 three  classes  of  telecommunications  customers:  mass  market  customers  (i.  e.,  residential  customers  and  sometimes  very  small  business  customers),  small  and  medium  enterprise 
 customers,  and  large  enterprise  customers.  2321  Mass  market  customers  typically  generate  lower  revenue  and  tighter  profit  margins  than  the  other  classes  and  therefore  require  service  providers 
 to  minimize  costs.  Small  and  medium  business  customers  typically  are  willing  to  pay  higher  prices  but  are  more  sensitive  to  reliability  and  quality  of  service.  Large  enterprise  customers 
 tend  to  demand  extensive  and  sophisticated  service  packages,  and  reliability  and  quality  of  service  are  essential  to  these  customers. 

 784.  In  addition,  because  requiring  unbundling  in  the  absence  of  impairment  imposes  unnecessary  costs    including  for  small  or  rural  incumbent  LECs    we  considered  whether 
 impairment  varies  geographically  throughout  the  country.  We  make  unbundling  decisions  on  a 
 2315  5  U.  S.  C.    603(  c). 
 2316  See  supra  Part  V.  B. 
 2317  See  id. 
 2318  See  id. 
 2319  These  include,  for  example,  the  essential  facilities  doctrine,  an  antitrust  analysis,  a  market  power  analysis,  and 
 the  approach  to  impairment  the  Commission  took  in  the  UNE  Remand  Order.  See  supra  Part  V.  B. 
 2320  See  supra  Part  V.  B. 

 2321  Id. 
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 national  scale  where  the  record  permits  us  to,  but  delegate  some  determining  role  to  the  states  where  it  appears  that  impairment  might  exist  in  some  regions  of  the  country  but  not  others.  2322  In 
 this  regard,  we  note  that  Congress  provided  a  mechanism    in  section  251(  f)  of  the  Act    to  exempt  small  and  rural  incumbent  LECs  from  several  of  the  Acts  obligations.  2323  For  example, 
 unbundling  rules  shall  not  apply  to  a  rural  telephone  company  until  it  receives  a  bona  fide  request  for  interconnection  and  until  the  state  commission  determines  that  the  request  is 
 technically  feasible,  not  unduly  economically  burdensome,  and  consistent  with  section  254.  2324  Or,  a  LEC  with  fewer  than  two  percent  of  the  nations  subscriber  lines  may  obtain  relief  from 
 unbundling  if  the  state  commission  decides,  among  other  things,  that  relief  is  necessary  to  avoid  imposing  a  economically  burdensome  requirement  or  other  significant  adverse  economic 
 impact.  2325 
 785.  Through  our  granular  impairment  analysis,  we  have  considered  the  resources  and  needs  of  various  carriers,  including  small  businesses,  and  have  examined  the  state  of  the 

 marketplace  to  determine  whether  it  was  economically  feasible  for  competitors  to  self-  provision  network  elements  or  obtain  them  from  competitive  sources  other  than  incumbent  LECs.  2326  We 
 believe  this  approach  strikes  the  appropriate  balance  between  the  needs  of  competitors    including  small  competitors    to  access  certain  network  elements,  against  the  burdens 
 unbundling  imposes  upon  incumbent  LECs    including  small  incumbents    and  yields  a  more  accurate  picture  of  the  state  of  competition  for  each  of  the  varied  network  elements  composing 
 the  local  telephone  network.  For  those  network  elements  for  which  carriers  may  be  impaired  only  in  certain  geographic  markets,  such  as  certain  high-  capacity  loops  and  transport,  we  adopt 
 an  approach  that  permits  localized  determination    with  a  role  for  the  states    as  to  where  and  whether  impairment  exists.  2327  In  this  way,  we  have  sought  to  take  a  more  specific  view  of  the 
 needs  of  differently  situated  competitors. 
 786.  We  also  have  established  service  eligibility  requirements  for  UNEs  which  are  designed  to  ensure  that  carriers  use  UNEs  primarily  to  provide  local  services  in  competition  with 

 incumbent  LECs,  while  avoiding  burdensome  administrative  rules  that  serve  as  a  drag  on  competitive  entry.  2328  While  we  recognize  that  regulatory  requirements  may  disproportionately 
 impact  smaller  entities,  we  have  adopted  the  least  burdensome  of  several  available  alternatives  in 

 2322  Id. 
 2323  See  47  U.  S.  C.    251(  f). 
 2324  See  id.    251(  f)(  1). 
 2325  See  id.    251(  f)(  2). 
 2326  See,  e.  g.,  supra  Part  VI.  B.  3.  (Dedicated  Interoffice  Transmission  Facilities). 
 2327  See,  e.  g.,  supra  Parts  V.  E.  (Role  of  the  States),  VI.  B.  3.  (Dedicated  Interoffice  Transmission  Facilities). 
 2328  See,  e.  g.,  supra  Parts  V.  B.  2.  (Granularity  of  the  Impairment  Analysis),  VI.  B.  6  (Service  Eligibility  to  Access 
 UNEs). 
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 requiring  competitors  to  satisfy  certain  service  eligibility  criteria.  2329  For  example,  rather  than  requiring  carriers  to  certify  to  be  the  sole  provider  of  local  service  in  order  to  access  certain 
 elements  (e.  g.,  high-  capacity  loops  and  transport)    an  approach  that  might  require  frequent  and  costly  assurance  from  a  carriers  customers    we  permit  carriers  to  certify  that  they  are  the 
 primary  providers  of  local  service.  2330  In  this  regard,  we  find  that  being  certified  as  a  competitive  LEC  is  probative  of  providing  qualifying  service.  2331  We  also  adopt  collocation  and  local 
 interconnection  requirements  as  less  burdensome  ways  of  assuring  service  eligibility.  2332  By  contrast,  we  have  rejected  a  number  of  suggested  approaches  as  unnecessarily  burdensome,  such 
 as  measuring  minutes  or  traffic  percentages,  separately  measuring  voice  and  data  use,  or  permitting  UNEs  only  where  a  competitive  carrier  uses  certain  types  of  switches.  2333  We  find 
 that  our  adopted  indicia  of  service  eligibility  serve  as  adequate  and  less  burdensome  assurance  that  a  carrier  is  using  UNEs  in  a  manner  consistent  with  the  local  competition  goals  of  the 
 Act.  2334 
 6.  Report  to  Congress 
 787.  The  Commission  will  send  a  copy  of  the  Order,  including  this  FRFA,  in  a  report  to  be  sent  to  Congress  pursuant  to  the  Congressional  Review  Act.  2335  In  addition,  the 

 Commission  will  send  a  copy  of  the  Order,  including  the  FRFA,  to  the  Chief  Counsel  for  SBA  Advocacy.  The  Order  and  FRFA,  or  summaries  thereof,  will  also  be  published  in  the  Federal 
 Register.  2336 
 B.  Initial  Regulatory  Flexibility  Analysis 
 788.  As  required  by  the  RFA,  2337  the  Commission  has  prepared  this  IRFA  of  possible  significant  economic  impact  on  a  substantial  number  of  small  entities  by  the  policies  and  rules 

 proposed  in  this  FNPRM.  Written  public  comments  are  sought  on  this  IRFA.  Comments  must  be  identified  as  responses  to  the  IRFA  and  must  be  filed  by  the  deadlines  for  comments  on  the 
 FNPRM,  provided  below  in  Part  X.  C.  The  Commission  will  send  a  copy  of  the  FNPRM, 
 2329  Id. 
 2330  See,  e.  g.,  supra  Part  VI.  B.  6.  (Service  Eligibility  to  Access  UNEs). 
 2331  Id. 
 2332  Id. 
 2333  Id. 
 2334  Id. 
 2335  See  5  U.  S.  C.    801(  a)(  1). 
 2336  See  5  U.  S.  C.    604(  b). 
 2337  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601-  612,  has  been  amended  by  the  SBREFA,  Pub.  L.  No.  104- 
 121,  Title  II,  110  Stat.  857  (1996). 
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 including  this  IRFA,  to  the  Chief  Counsel  for  SBA  Advocacy.  2338  In  addition,  the  FNPRM  and  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  2339 
 1.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 789.  We  initiate  the  FNPRM  portion  of  this  proceeding  to  ensure  that  market-  based  incentives  exist  for  incumbent  and  competitive  LECs  to  negotiate  innovative  commercial 

 interconnection  arrangements.  The  current  pick-  and-  choose  rules  implementing  section  252(  i)  may  discourage  give-  and-  take  negotiation  because  incumbent  LECs  may  be  reluctant  to  make 
 significant  concessions  (in  exchange  for  negotiated  benefit)  if  those  concessions  become  automatically  available    without  any  tradeoff    to  every  potential  market  entrant.  We  therefore 
 seek  comment  on  whether  alternate  approaches  to  implementing  section  252(  i),  such  as  requiring  third  parties  to  opt  into  entire  agreements,  would  promote  more  innovative  and  flexible 
 arrangements  between  parties.  Any  changes  to  the  current  pick-  and-  choose  rule,  however,  may  raise  concerns  as  to  whether  there  is  the  potential  for  parties  to  interconnection  agreements  to 
 include  poison  pill  language  that  would  deter  third  parties  from  opting  into  those  agreements  under  section  252(  i).  This  FNPRM  proposes  an  approach  that  would  eliminate  the  current  pick-and- 
 choose  regime  for  incumbent  LECs  wherever  the  incumbent  LEC  has  filed  and  received  state  approval  of  a  statement  of  generally  available  terms  and  conditions  (SGAT),  and  this 
 FNPRM  seeks  to  build  a  record  from  which  to  judge  the  wisdom  of  this  approach. 
 2.  Legal  Basis 
 790.  The  legal  basis  for  any  action  that  may  be  taken  pursuant  to  the  FNPRM  is  contained  in  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). 
 3.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  the  Proposed  Rules  Would  Apply 

 791.  The  RFA  directs  agencies  to  provide  a  description  of  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  will  be  affected  by  the  rules.  2340  The  RFA  generally 
 defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and  small  governmental  jurisdiction.  2341  In  addition,  the  term  small  business 
 has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act.  2342  A 

 2338  See  5  U.  S.  C.    603(  a). 
 2339  Id. 
 2340  5  U.  S.  C.    603(  b)(  3),  604(  a)(  3). 
 2341  Id.    601(  6). 
 2342  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  the  Small  Business 
 Act,  15  U.  S.  C.    632).  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  (continued.) 
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 small  business  concern  is  one  which:  (1)  is  independently  owned  and  operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  satisfies  any  additional  criteria  established  by  the 
 SBA.  2343 
 792.  In  this  section,  we  further  describe  and  estimate  the  number  of  small  entity  licensees  and  regulatees  that  may  be  affected  by  rules  proposed  in  this  FNPRM.  The  most 

 reliable  source  of  information  regarding  the  total  numbers  of  certain  common  carrier  and  related  providers  nationwide,  as  well  as  the  number  of  commercial  wireless  entities,  appears  to  be  the 
 data  that  the  Commission  publishes  in  its  Trends  in  Telephone  Service  report.  2344  The  SBA  has  developed  small  business  size  standards  for  wireline  and  wireless  small  businesses  within  the 
 three  commercial  census  categories  of  Wired  Telecommunications  Carriers,  2345  Paging,  2346  and  Cellular  and  Other  Wireless  Telecommunications.  2347  Under  these  categories,  a  business  is  small 
 if  it  has  1,500  or  fewer  employees.  Below,  using  the  above  size  standards  and  others,  we  discuss  the  total  estimated  numbers  of  small  businesses  that  might  be  affected  by  our  actions. 

 793.  We  have  included  small  incumbent  LECs  in  this  present  RFA  analysis.  As  noted  above,  a  small  business  under  the  RFA  is  one  that,  inter  alia,  meets  the  pertinent  small 
 business  size  standard  (e.  g.,  a  wired  telecommunications  carrier  having  1,500  or  fewer  employees),  and  is  not  dominant  in  its  field  of  operation.  2348  SBA  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.  2349  We  have  therefore  included  small  incumbent 
 LECs  in  this  RFA  analysis,  although  we  emphasize  that  this  RFA  action  has  no  effect  on  Commission  analyses  and  determinations  in  other,  non-  RFA  contexts. 

 (Continued  from  previous  page) 
 agency,  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity  for  public  comment,  establishes  one  or  more  definitions  of  such  terms  which  are  appropriate  to  the  activities  of  the 

 agency  and  publishes  such  definitions(  s)  in  the  Federal  Register. 
 2343  15  U.  S.  C.    632. 

 2344  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2345  13  C.  F.  R.    121.201,  North  American  Industry  Classification  System  (NAICS)  code  513310  (changed  to 
 517110  in  Oct.  2002). 
 2346  13  C.  F.  R.    121.201,  NAICS  code  513321  (changed  to  517211  in  Oct.  2002). 

 2347  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2348  5  U.  S.  C.    601(  3). 
 2349  Letter  from  Jere  W.  Glover,  Chief  Counsel  for  SBA  Advocacy,  and  Eric  E.  Menge,  Assistant  Chief  Counsel  for 
 Telecommunications,  SBA  Advocacy,  to  William  E.  Kennard,  Chairman,  FCC,  CC  Docket  Nos.  98-  147,  99-  68,  97-  181  (filed  May  27,  1999).  The  Small  Business  Act  contains  a  definition  of  small  business  concern,  which  the 

 RFA  incorporates  into  its  own  definition  of  small  business.  See  15  U.  S.  C.    632(  a);  5  U.  S.  C.    601(  3).  SBA  regulations  interpret  small  business  concern  to  include  the  concept  of  dominance  on  a  national  basis.  13  C.  F.  R. 
   121.102(  b). 
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 794.  Wired  Telecommunications  Carriers.  The  SBA  has  developed  a  small  business  size  standard  for  Wired  Telecommunications  Carriers,  which  consists  of  all  such  companies 
 having  1,500  or  fewer  employees.  2350  According  to  Census  Bureau  data  for  1997,  there  were  2,225  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2351  Of  this  total,  2,201  firms 
 had  employment  of  999  or  fewer  employees,  and  an  additional  24  firms  had  employment  of  1,000  employees  or  more.  2352  Thus,  under  this  size  standard,  the  great  majority  of  firms  can  be 
 considered  small. 
 795.  Incumbent  LECs.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  incumbent  local  exchange  services.  The 

 closest  applicable  size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2353 
 According  to  Commission  data,  1,329  carriers  reported  that  they  were  engaged  in  the  provision  of  local  exchange  services.  2354  Of  these  1,329  carriers,  an  estimated  1,024  have  1,500  or  fewer 
 employees  and  305  have  more  than  1,500  employees.  Consequently,  the  Commission  estimates  that  most  providers  of  incumbent  local  exchange  service  are  small  businesses  that  may  be 
 affected  by  the  rules  and  policies  adopted  herein. 
 796.  Competitive  LECs.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  providers  of  competitive  exchange 

 services  or  to  competitive  access  providers  or  to  Other  Local  Exchange  Carriers,  all  of  which  are  discrete  categories  under  which  TRS  data  are  collected.  The  closest  applicable  size  standard 
 under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2355  According  to  Commission  data,  532 
 companies  reported  that  they  were  engaged  in  the  provision  of  either  competitive  access  provider  services  or  competitive  LEC  services.  2356  Of  these  532  companies,  an  estimated  411  have  1,500 
 or  fewer  employees  and  121  have  more  than  1,500  employees.  2357  In  addition,  55  carriers  reported  that  they  were  Other  Local  Exchange  Carriers.  Of  the  55  Other  Local  Exchange 
 Carriers,  an  estimated  53  have  1,500  or  fewer  employees  and  two  have  more  than  1,500  employees.  2358  Consequently,  the  Commission  estimates  that  most  providers  of  competitive  local 

 2350  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2351  1997  Economic  Census,  Establishment  and  Firm  Size,  Table  5,  NAICS  code  513310  (issued  Oct.  2000). 
 2352  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2353  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 

 2354  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2355  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2356  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2357  Id. 
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 exchange  service,  competitive  access  providers,  and  Other  Local  Exchange  Carriers  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 
 797.  Interexchange  Carriers.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  interexchange  services.  The  closest 
 applicable  size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2359  According  to 
 Commission  data,  229  companies  reported  that  their  primary  telecommunications  service  activity  was  the  provision  of  interexchange  services.  2360  Of  these  229  companies,  an  estimated  181  have 
 1,500  or  fewer  employees  and  48  have  more  than  1,500  employees.  2361  Consequently,  the  Commission  estimates  that  the  majority  of  interexchange  service  providers  are  small  entities  that 
 may  be  affected  by  the  rules  and  policies  adopted  herein. 
 798.  OSPs.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  OSPs.  The  closest  applicable  size  standard  under 

 SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2362  According  to  Commission  data,  22  companies 
 reported  that  they  were  engaged  in  the  provision  of  operator  services.  2363  Of  these  22  companies,  an  estimated  20  have  1,500  or  fewer  employees  and  two  have  more  than  1,500  employees.  2364 
 Consequently,  the  Commission  estimates  that  the  great  majority  of  OSPs  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 

 799.  Prepaid  Calling  Card  Providers.  The  SBA  has  developed  a  size  standard  for  a  small  business  within  the  category  of  Telecommunications  Resellers.  Under  that  SBA  size 
 standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2365  According  to  Commission  data,  32  companies  reported  that  they  were  engaged  in  the  provision  of  prepaid 
 calling  cards.  2366  Of  these  32  companies,  an  estimated  31  have  1,500  or  fewer  employees  and  one  has  more  than  1,500  employees.  2367  Consequently,  the  Commission  estimates  that  the  great 

 (Continued  from  previous  page)  2358 
 Id. 
 2359  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 

 2360  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2361  Id. 
 2362  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2363  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2364  Id. 
 2365  13  C.  F.  R.    121.201,  NAICS  code  513330  (changed  to  517310  in  Oct.  2002). 
 2366  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2367  Id. 
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 majority  of  prepaid  calling  card  providers  are  small  entities  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 
 800.  Other  Toll  Carriers.  Neither  the  Commission  nor  the  SBA  has  developed  a  size  standard  for  small  businesses  specifically  applicable  to  Other  Toll  Carriers.  This  category 
 includes  toll  carriers  that  do  not  fall  within  the  categories  of  interexchange  carriers,  OSPs,  prepaid  calling  card  providers,  satellite  service  carriers,  or  toll  resellers.  The  closest  applicable 
 size  standard  under  SBA  rules  is  for  Wired  Telecommunications  Carriers.  Under  that  size  standard,  such  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2368  According  to 
 Commissions  data,  42  companies  reported  that  their  primary  telecommunications  service  activity  was  the  provision  of  payphone  services.  2369  Of  these  42  companies,  an  estimated  37  have 
 1,500  or  fewer  employees  and  five  have  more  than  1,500  employees.  2370  Consequently,  the  Commission  estimates  that  most  Other  Toll  Carriers  are  small  entities  that  may  be  affected  by 
 the  rules  and  policies  adopted  herein. 
 801.  Wireless  Service  Providers.  The  SBA  has  developed  a  small  business  size  standard  for  wireless  firms  within  the  two  broad  economic  census  categories  of  Paging  2371  and 

 Cellular  and  Other  Wireless  Telecommunications.  2372  Under  both  SBA  categories,  a  wireless  business  is  small  if  it  has  1,500  or  fewer  employees.  For  the  census  category  of  Paging,  Census 
 Bureau  data  for  1997  show  that  there  were  1320  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2373  Of  this  total,  1303  firms  had  employment  of  999  or  fewer  employees,  and  an 
 additional  17  firms  had  employment  of  1,000  employees  or  more.  2374  Thus,  under  this  category  and  associated  small  business  size  standard,  the  great  majority  of  firms  can  be  considered  small. 
 For  the  census  category  Cellular  and  Other  Wireless  Telecommunications  firms,  Census  Bureau  data  for  1997  show  that  there  were  977  firms  in  this  category,  total,  that  operated  for  the  entire 
 year.  2375  Of  this  total,  965  firms  had  employment  of  999  or  fewer  employees,  and  an  additional  12  firms  had  employment  of  1,000  employees  or  more.  2376  Thus,  under  this  second  category  and 
 size  standard,  the  great  majority  of  firms  can,  again,  be  considered  small. 

 2368  13  C.  F.  R.    121.201,  NAICS  code  513310  (changed  to  517110  in  Oct.  2002). 
 2369  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2370  Id. 
 2371  13  C.  F.  R.    121.201,  NAICS  code  513321  (changed  to  517211  in  Oct.  2002). 
 2372  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2373  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513321  (issued  Oct.  2000). 
 2374  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2375  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513322  (issued  Oct.  2000). 

 2376  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
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 802.  Broadband  PCS.  The  broadband  PCS  spectrum  is  divided  into  six  frequency  blocks  designated  A  through  F,  and  the  Commission  has  held  auctions  for  each  block.  The 
 Commission  defined  small  entity  for  Blocks  C  and  F  as  an  entity  that  has  average  gross  revenues  of  $40  million  or  less  in  the  three  previous  calendar  years.  2377  For  Block  F,  an 
 additional  classification  for  very  small  business  was  added  and  is  defined  as  an  entity  that,  together  with  its  affiliates,  has  average  gross  revenues  of  not  more  than  $15  million  for  the 
 preceding  three  calendar  years.  2378  These  standards  defining  small  entity  in  the  context  of  broadband  PCS  auctions  have  been  approved  by  the  SBA.  2379  No  small  businesses,  within  the 
 SBA-  approved  small  business  size  standards  bid  successfully  for  licenses  in  Blocks  A  and  B.  There  were  90  winning  bidders  that  qualified  as  small  entities  in  the  Block  C  auctions.  A  total  of 
 93  small  and  very  small  business  bidders  won  approximately  40  percent  of  the  1,479  licenses  for  Blocks  D,  E,  and  F.  2380  On  March  23,  1999,  the  Commission  re-  auctioned  347  C,  D,  E,  and  F 
 Block  licenses.  There  were  48  small  business  winning  bidders.  On  January  26,  2001,  the  Commission  completed  the  auction  of  422  C  and  F  Broadband  PCS  licenses  in  Auction  No.  35. 
 Of  the  35  winning  bidders  in  this  auction,  29  qualified  as  small  or  very  small  businesses.  Subsequent  events,  concerning  Auction  305,  including  judicial  and  agency  determinations, 
 resulted  in  a  total  of  163  C  and  F  Block  licenses  being  available  for  grant.  In  addition,  we  note  that,  as  a  general  matter,  the  number  of  winning  bidders  that  qualify  as  small  businesses  at  the 
 close  of  an  auction  does  not  necessarily  represent  the  number  of  small  businesses  currently  in  service.  Also,  the  Commission  does  not  generally  track  subsequent  business  size  unless,  in  the 
 context  of  assignments  or  transfers,  unjust  enrichment  issues  are  implicated. 
 803.  Narrowband  PCS.  To  date,  two  auctions  of  narrowband  PCS  licenses  have  been  conducted.  For  purposes  of  the  two  auctions  that  have  already  been  held,  small  businesses 

 were  entities  with  average  gross  revenues  for  the  prior  three  calendar  years  of  $40  million  or  less.  Through  these  auctions,  the  Commission  has  awarded  a  total  of  41  licenses,  out  of  which 
 11  were  obtained  by  small  businesses.  To  ensure  meaningful  participation  of  small  business  entities  in  future  auctions,  the  Commission  has  adopted  a  two-  tiered  small  business  size  standard 
 in  the  Narrowband  PCS  Second  Report  and  Order.  2381  A  small  business  is  an  entity  that, 
 2377  See  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules    Broadband  PCS  Competitive  Bidding  and  the 
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  WT  Docket  No.  96-  59,  Report  and  Order,  11  FCC  Rcd  7824  (1996);  see  also  47  C.  F.  R.    24.720(  b). 

 2378  See  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules    Broadband  PCS  Competitive  Bidding  and  the 
 Commercial  Mobile  Radio  Service  Spectrum  Cap,  WT  Docket  No.  96-  59,  Report  and  Order,  11  FCC  Rcd  7824  (1996). 

 2379  See,  e.  g.,  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No. 
 93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  5332  (1994). 
 2380  Broadband  PCS,  D,  E  and  F  Block  Auction  Closes,  (rel.  Jan.  14,  1997);  see  also  Amendment  of  the 
 Commissions  Rules  Regarding  Installment  Payment  Financing  for  Personal  Communications  Services  (PCS)  Licenses,  WT  Docket  No.  97-  82,  Second  Report  and  Order,  12  FCC  Rcd  16436  (1997). 

 2381  In  the  Matter  of  Amendment  of  the  Commissions  Rules  to  Establish  New  Personal  Communications  Services, 
 Narrowband  PCS,  Docket  Nos.  ET  92-  100,  PP  93-  253,  Second  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  10456  (2000). 
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 together  with  affiliates  and  controlling  interests,  has  average  gross  revenues  for  the  three  preceding  years  of  not  more  than  $40  million.  A  very  small  business  is  an  entity  that,  together 
 with  affiliates  and  controlling  interests,  has  average  gross  revenues  for  the  three  preceding  years  of  not  more  than  $15  million.  The  SBA  has  approved  these  small  business  size  standards.  2382  In 
 the  future,  the  Commission  will  auction  459  licenses  to  serve  MTAs  and  408  response  channel  licenses.  There  is  also  one  megahertz  of  narrowband  PCS  spectrum  that  has  been  held  in  reserve 
 and  that  the  Commission  has  not  yet  decided  to  release  for  licensing.  The  Commission  cannot  predict  accurately  the  number  of  licenses  that  will  be  awarded  to  small  entities  in  future  actions. 
 However,  four  of  the  16  winning  bidders  in  the  two  previous  narrowband  PCS  auctions  were  small  businesses,  as  that  term  was  defined  under  the  Commissions  Rules.  The  Commission 
 assumes,  for  purposes  of  this  analysis  that  a  large  portion  of  the  remaining  narrowband  PCS  licenses  will  be  awarded  to  small  entities.  The  Commission  also  assumes  that  at  least  some 
 small  businesses  will  acquire  narrowband  PCS  licenses  by  means  of  the  Commissions  partitioning  and  disaggregation  rules. 

 804.  220  MHz  Radio  Service    Phase  I  Licensees.  The  220  MHz  service  has  both  Phase  I  and  Phase  II  licenses.  Phase  I  licensing  was  conducted  by  lotteries  in  1992  and  1993. 
 There  are  approximately  1,515  such  non-  nationwide  licensees  and  four  nationwide  licensees  currently  authorized  to  operate  in  the  220  MHz  band.  The  Commission  has  not  developed  a 
 small  business  size  standard  for  small  entities  specifically  applicable  to  such  incumbent  220  MHz  Phase  I  licensees.  To  estimate  the  number  of  such  licensees  that  are  small  businesses,  we 
 apply  the  small  business  size  standard  under  the  SBA  rules  applicable  to  Cellular  and  Other  Wireless  Telecommunications  companies.  This  standard  provides  that  such  a  company  is  small 
 if  it  employs  no  more  than  1,500  persons.  2383  According  to  Census  Bureau  data  for  1997,  there  were  977  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2384  Of  this  total,  965  firms 
 had  employment  of  999  or  fewer  employees,  and  an  additional  12  firms  had  employment  of  1,000  employees  or  more.  2385  If  this  general  ratio  continues  in  the  context  of  Phase  I  220  MHz 
 licensees,  the  Commission  estimates  that  nearly  all  such  licensees  are  small  businesses  under  the  SBAs  small  business  size  standard. 

 805.  220  MHz  Radio  Service    Phase  II  Licensees.  The  220  MHz  service  has  both  Phase  I  and  Phase  II  licenses.  The  Phase  II  220  MHz  service  is  a  new  service,  and  is  subject  to 
 spectrum  auctions.  In  the  220  MHz  Third  Report  and  Order,  we  adopted  a  small  business  size  standard  for  small  and  very  small  businesses  for  purposes  of  determining  their  eligibility  for 
 special  provisions  such  as  bidding  credits  and  installment  payments.  2386  This  small  business  size 
 2382  See  SBA  Dec.  2,  1998  Ex  Parte  Letter. 
 2383  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2384  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513322  (issued  Oct.  2000). 
 2385  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2386  220  MHz  Third  Report  and  Order,  12  FCC  Rcd  at  11068-  70,  paras.  291-  295. 
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 standard  indicates  that  a  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling  principals,  has  average  gross  revenues  not  exceeding  $15  million  for  the  preceding 
 three  years.  2387  A  very  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling  principals,  has  average  gross  revenues  that  do  not  exceed  $3  million  for  the 
 preceding  three  years.  The  SBA  has  approved  these  small  business  size  standards.  2388  Auctions  of  Phase  II  licenses  commenced  on  September  15,  1998,  and  closed  on  October  22,  1998.  2389  In 
 the  first  auction,  908  licenses  were  auctioned  in  three  different-  sized  geographic  areas:  three  nationwide  licenses,  30  Regional  EAG  Licenses,  and  875  EA  Licenses.  Of  the  908  licenses 
 auctioned,  693  were  sold.  Thirty-  nine  small  businesses  won  licenses  in  the  first  220  MHz  auction.  The  second  auction  included  225  licenses:  216  EA  licenses  and  9  EAG  licenses. 
 Fourteen  companies  claiming  small  business  status  won  158  licenses.  2390 
 806.  800  MHz  and  900  MHz  SMR  Licenses.  The  Commission  awards  small  entity  and  very  small  entity  bidding  credits  in  auctions  for  SMR  geographic  area  licenses  in  the  800 

 MHz  and  900  MHz  bands  to  firms  that  had  revenues  of  no  more  than  $15  million  in  each  of  the  three  previous  calendar  years,  or  that  had  revenues  of  no  more  than  $3  million  in  each  of  the 
 previous  calendar  years,  respectively.  2391  These  bidding  credits  apply  to  SMR  providers  in  the  800  MHz  and  900  MHz  bands  that  either  hold  geographic  area  licenses  or  have  obtained 
 extended  implementation  authorizations.  The  Commission  does  not  know  how  many  firms  provide  800  MHz  or  900  MHz  geographic  area  SMR  service  pursuant  to  extended 
 implementation  authorizations,  nor  how  many  of  these  providers  have  annual  revenues  of  no  more  than  $15  million.  One  firm  has  over  $15  million  in  revenues.  The  Commission  assumes, 
 for  purposes  here,  that  all  of  the  remaining  existing  extended  implementation  authorizations  are  held  by  small  entities,  as  that  term  is  defined  by  the  Small  Business  Act.  The  Commission  has 
 held  auctions  for  geographic  area  licenses  in  the  800  MHz  and  900  MHz  SMR  bands.  There  were  60  winning  bidders  that  qualified  as  small  or  very  small  entities  in  the  900  MHz  SMR 
 auctions.  Of  the  1,020  licenses  won  in  the  900  MHz  auction,  bidders  qualifying  as  small  or  very  small  entities  won  263  licenses.  In  the  800  MHz  auction,  38  of  the  524  licenses  won  were  won 
 by  small  and  very  small  entities.  Consequently,  the  Commission  estimates  that  there  are  301  or  fewer  small  entity  SMR  licensees  in  the  800  MHz  and  900  MHz  bands  that  may  be  affected  by 
 the  rules  and  policies  adopted  herein. 

 2387  Id.  at  para.  291. 
 2388  See  SBA  Jan.  6,  1998  Ex  Parte  Letter. 
 2389  See  generally,  Phase  II  220  MHz  Service  Auction  Closes,  Winning  Bidders  in  the  Auction  of  908  Phase  II  220 
 MHz  Service  Licenses,  Down  Payments  Due  November  6,  1998,  FCC  Form  601s  Due  November  6,  1998,  Ten-  Day  Petition  to  Deny  Period,  Report  No.  AUC-  18-  F,  DA  No.  98-  2143,  14  FCC  Rcd  605  (rel.  Oct.  23,  1998). 

 2390  Phase  II  220  MHz  Service  Spectrum  Auction  Closes,  Report  No.  AUC-  24-  E,  DA  99-  1287,  14  FCC  Rcd  11218 
 (rel.  July  1,  1999). 
 2391  47  C.  F.  R.    90.814(  b)(  1). 
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 807.  Common  Carrier  Paging.  In  the  Paging  Third  Report  and  Order,  we  developed  a  small  business  size  standard  for  small  businesses  and  very  small  businesses  for  purposes  of 
 determining  their  eligibility  for  special  provisions  such  as  bidding  credits  and  installment  payments.  2392  A  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  not  exceeding  $15  million  for  the  preceding  three  years.  Additionally,  a  very  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  that  are  not  more  than  $3  million  for  the  preceding  three  years.  An  auction  of  MEA  licenses  commenced  on  February  24,  2000,  and  closed  on  March  2, 
 2000.  2393  Of  the  985  licenses  auctioned,  440  were  sold.  Fifty-  seven  companies  claiming  small  business  status  won.  At  present,  there  are  approximately  24,000  Private-  Paging  site-  specific 
 licenses  and  74,000  Common  Carrier  Paging  licenses.  According  to  the  Trends  in  Telephone  Service  May  2002  Report,  471  carriers  reported  that  they  were  engaged  in  the  provision  of  either 
 paging  and  messaging  services  or  other  mobile  services.  2394  Of  those,  the  Commission  estimates  that  450  are  small,  under  the  SBA  business  size  standard  specifying  that  firms  are  small  if  they 
 have  1,500  or  fewer  employees.  2395 
 808.  700  MHz  Guard  Band  Licensees.  In  the  700  MHz  Guard  Band  Order,  we  adopted  a  small  business  size  standard  for  small  businesses  and  very  small  businesses  for  purposes  of 

 determining  their  eligibility  for  special  provisions  such  as  bidding  credits  and  installment  payments.  2396  A  small  business  as  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  not  exceeding  $15  million  for  the  preceding  three  years.  Additionally,  a  very  small  business  is  an  entity  that,  together  with  its  affiliates  and  controlling 
 principals,  has  average  gross  revenues  that  are  not  more  than  $3  million  for  the  preceding  three  years.  An  auction  of  52  MEA  licenses  commenced  on  September  6,  2000,  and  closed  on 
 September  21,  2000.  2397  Of  the  104  licenses  auctioned,  96  licenses  were  sold  to  nine  bidders.  Five  of  these  bidders  were  small  businesses  that  won  a  total  of  26  licenses.  A  second  auction  of 
 700  MHz  Guard  Band  licenses  commenced  on  February  13,  2001  and  closed  on  February  21,  2001.  All  eight  of  the  licenses  auctioned  were  sold  to  three  bidders.  One  of  these  bidders  was  a 
 small  business  that  won  a  total  of  two  licenses.  2398 

 2392  220  MHz  Third  Report  and  Order,  12  FCC  Rcd  at  11068-  70,  paras.  291-  95. 
 2393  Revision  of  Part  22  and  Part  90  of  the  Commissions  Rules  to  Facilitate  Future  Development  of  Paging 
 Systems,  WT  Docket  No.  96-  18,  Memorandum  Opinion  and  Order  on  Reconsideration  and  Third  Report  and  Order,  14  FCC  Rcd  10030,  para.  98  (1999). 

 2394  Trends  in  Telephone  Service  May  2002  Report  at  Table  5.3. 
 2395  Id.  The  SBA  size  standard  is  that  of  Paging,  13  C.  F.  R.    121.201,  NAICS  code  517211. 
 2396  See  Service  Rules  for  the  746-  764  MHz  Bands,  and  Revisions  to  Part  27  of  the  Commissions  Rules,  WT 
 Docket  No.  99-  168,  Second  Report  and  Order,  15  FCC  Rcd  5299  (2000). 
 2397  See  generally,  220  MHz  Service  Auction  Closes,  Report  No.  WT  98-  36  (rel  Oct.  23,  1998). 

 2398  700  MHz  Guard  Band  Auction  Closes,  Report  No.  AUC-  38-  F,  DA  01-  478,  16  FCC  Rcd  4590  (rel.  Feb.  22, 
 2001). 
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 809.  Rural  Radiotelephone  Service.  The  Commission  has  not  adopted  a  size  standard  for  small  businesses  specific  to  the  Rural  Radiotelephone  Service.  2399  A  significant  subset  of  the 
 Rural  Radiotelephone  Service  is  the  BETRS.  2400  The  Commission  uses  the  SBAs  small  business  size  standard  applicable  to  Cellular  and  Other  Wireless  Telecommunications,  i.  e.,  an  entity 
 employing  no  more  than  1,500  persons.  2401  There  are  approximately  1,000  licensees  in  the  Rural  Radiotelephone  Service,  and  the  Commission  estimates  that  there  are  1,000  or  fewer  small  entity 
 licensees  in  the  Rural  Radiotelephone  Service  that  may  be  affected  by  the  rules  and  policies  adopted  herein. 

 810.  Air-  Ground  Radiotelephone  Service.  The  Commission  has  not  adopted  a  small  business  size  standard  specific  to  the  Air-  Ground  Radiotelephone  Service.  2402  We  will  use 
 SBAs  small  business  size  standard  applicable  to  Cellular  and  Other  Wireless  Telecommunications,  i.  e.,  an  entity  employing  no  more  than  1,500  persons.  2403  There  are 
 approximately  100  licensees  in  the  Air-  Ground  Radiotelephone  Service,  and  we  estimate  that  almost  all  of  them  qualify  as  small  under  the  SBA  small  business  size  standard. 

 811.  Aviation  and  Marine  Radio  Services.  Small  businesses  in  the  aviation  and  marine  radio  services  use  a  VHF  marine  or  aircraft  radio  and,  as  appropriate,  an  emergency  position-indicating 
 radio  beacon  (and/  or  radar)  or  an  emergency  locator  transmitter.  The  Commission  has  not  developed  a  small  business  size  standard  specifically  applicable  to  these  small  businesses. 
 For  purposes  of  this  analysis,  the  Commission  uses  the  SBA  small  business  size  standard  for  the  category  Cellular  and  Other  Telecommunications,  which  is  1,500  or  fewer  employees.  2404 
 Most  applicants  for  recreational  licenses  are  individuals.  Approximately  581,000  ship  station  licensees  and  131,000  aircraft  station  licensees  operate  domestically  and  are  not  subject  to  the 
 radio  carriage  requirements  of  any  statute  or  treaty.  For  purposes  of  our  evaluations  in  this  analysis,  we  estimate  that  there  are  up  to  approximately  712,000  licensees  that  are  small 
 businesses  (or  individuals)  under  the  SBA  standard.  In  addition,  between  December  3,  1998  and  December  14,  1998,  the  Commission  held  an  auction  of  42  VHF  Public  Coast  licenses  in  the 
 157.1875-  157.4500  MHz  (ship  transmit)  and  161.775-  162.0125  MHz  (coast  transmit)  bands.  For  purposes  of  the  auction,  the  Commission  defined  a  "small"  business  as  an  entity  that, 
 together  with  controlling  interests  and  affiliates,  has  average  gross  revenues  for  the  preceding  three  years  not  to  exceed  $15  million  dollars.  In  addition,  a  "very  small"  business  is  one  that, 
 together  with  controlling  interests  and  affiliates,  has  average  gross  revenues  for  the  preceding 

 2399  The  service  is  defined  in  section  22.99  of  the  Commissions  Rules,  47  C.  F.  R.    22.99. 
 2400  BETRS  is  defined  in  sections  22.757  and  22.759  of  the  Commissions  Rules,  47  C.  F.  R.    22.757  and  22.759. 
 2401  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2402  The  service  is  defined  in  section  22.99  of  the  Commissions  Rules,  47  C.  F.  R.    22.99. 
 2403  13  C.  F.  R.    121.201,  NAICS  codes  513322  (changed  to  517212  in  Oct.  2002). 
 2404  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
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 three  years  not  to  exceed  $3  million  dollars.  2405  There  are  approximately  10,672  licensees  in  the  Marine  Coast  Service,  and  the  Commission  estimates  that  almost  all  of  them  qualify  as  "small" 
 businesses  under  the  above  special  small  business  size  standards. 
 812.  Fixed  Microwave  Services.  Fixed  microwave  services  include  common  carrier,  2406  private  operational-  fixed,  2407  and  broadcast  auxiliary  radio  services.  2408  At  present,  there  are 

 approximately  22,015  common  carrier  fixed  licensees  and  61,670  private  operational-  fixed  licensees  and  broadcast  auxiliary  radio  licensees  in  the  microwave  services.  The  Commission 
 has  not  created  a  size  standard  for  a  small  business  specifically  with  respect  to  fixed  microwave  services.  For  purposes  of  this  analysis,  the  Commission  uses  the  SBA  small  business  size 
 standard  for  the  category  Cellular  and  Other  Telecommunications,  which  is  1,500  or  fewer  employees.  2409  The  Commission  does  not  have  data  specifying  the  number  of  these  licensees  that 
 have  more  than  1,500  employees,  and  thus  are  unable  at  this  time  to  estimate  with  greater  precision  the  number  of  fixed  microwave  service  licensees  that  would  qualify  as  small  business 
 concerns  under  the  SBAs  small  business  size  standard.  Consequently,  the  Commission  estimates  that  there  are  up  to  22,015  common  carrier  fixed  licensees  and  up  to  61,670  private 
 operational-  fixed  licensees  and  broadcast  auxiliary  radio  licensees  in  the  microwave  services  that  may  be  small  and  may  be  affected  by  the  rules  and  policies  adopted  herein.  We  noted,  however, 
 that  the  common  carrier  microwave  fixed  licensee  category  includes  some  large  entities. 
 813.  Offshore  Radiotelephone  Service.  This  service  operates  on  several  UHF  television  broadcast  channels  that  are  not  used  for  television  broadcasting  in  the  coastal  areas  of 

 states  bordering  the  Gulf  of  Mexico.  2410  There  are  presently  approximately  55  licensees  in  this  service.  We  are  unable  to  estimate  at  this  time  the  number  of  licensees  that  would  qualify  as 
 small  under  the  SBAs  small  business  size  standard  for  Cellular  and  Other  Wireless 

 2405  Amendment  of  the  Commission's  Rules  Concerning  Maritime  Communications,  PR  Docket  No.  92-  257,  Third 
 Report  and  Order  and  Memorandum  Opinion  and  Order,  13  FCC  Rcd  19853  (1998). 
 2406  See  47  C.  F.  R.    101  et  seq.  (formerly,  Part  21  of  the  Commissions  Rules)  for  common  carrier  fixed 
 microwave  services  (except  MDS). 
 2407  Persons  eligible  under  Parts  80  and  90  of  the  Commissions  Rules  can  use  Private  Operational-  Fixed 
 Microwave  services.  See  47  C.  F.  R.  Parts  80  and  90.  Stations  in  this  service  are  called  operational-  fixed  to  distinguish  them  from  common  carrier  and  public  fixed  stations.  Only  the  licensee  may  use  the  operational-  fixed 

 station,  and  only  for  communications  related  to  the  licensees  commercial,  industrial,  or  safety  operations. 
 2408  Auxiliary  Microwave  Service  is  governed  by  Part  74  of  Title  47  of  the  Commissions  Rules.  See  47  C.  F.  R.  Part 
 74.  This  service  is  available  to  licensees  of  broadcast  stations  and  to  broadcast  and  cable  network  entities.  Broadcast  auxiliary  microwave  stations  are  used  for  relaying  broadcast  television  signals  from  the  studio  to  the 

 transmitter,  or  between  two  points  such  as  a  main  studio  and  an  auxiliary  studio.  The  service  also  includes  mobile  television  pickups,  which  relay  signals  from  a  remote  location  back  to  the  studio. 

 2409  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2410  This  service  is  governed  by  Subpart  I  of  Part  22  of  the  Commissions  Rules.  See  47  C.  F.  R.    22.1001- 
 22.1037. 
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 Telecommunications  services.  2411  Under  that  SBA  small  business  size  standard,  a  business  is  small  if  it  has  1,500  or  fewer  employees.  2412 
 814.  WCS.  This  service  can  be  used  for  fixed,  mobile,  radiolocation,  and  digital  audio  broadcasting  satellite  uses.  The  Commission  established  small  business  size  standards  for  the 
 WCS  auction.  A  small  business  is  an  entity  with  average  gross  revenues  of  $40  million  for  each  of  the  three  preceding  years,  and  a  very  small  business  is  an  entity  with  average  gross 
 revenues  of  $15  million  for  each  of  the  three  preceding  years.  The  SBA  has  approved  these  small  business  size  standards.  2413  The  Commission  auctioned  geographic  area  licenses  in  the 
 WCS  service.  In  the  auction,  there  were  seven  winning  bidders  that  qualified  as  very  small  business  entities,  and  one  that  qualified  as  a  small  business  entity.  We  conclude  that  the 
 number  of  geographic  area  WCS  licensees  affected  by  this  analysis  includes  these  eight  entities. 
 815.  39  GHz  Service.  The  Commission  created  a  special  small  business  size  standard  for  39  GHz  licenses    an  entity  that  has  average  gross  revenues  of  $40  million  or  less  in  the  three 

 previous  calendar  years.  2414  An  additional  size  standard  for  very  small  business  is:  an  entity  that,  together  with  affiliates,  has  average  gross  revenues  of  not  more  than  $15  million  for  the 
 preceding  three  calendar  years.  2415  The  SBA  has  approved  these  small  business  size  standards.  2416  The  auction  of  the  2,173  39  GHz  licenses  began  on  April  12,  2000  and  closed  on  May  8,  2000. 
 The  18  bidders  who  claimed  small  business  status  won  849  licenses.  Consequently,  the  Commission  estimates  that  18  or  fewer  39  GHz  licensees  are  small  entities  that  may  be  affected 
 by  the  rules  and  polices  adopted  herein. 
 816.  MDS,  MMDS,  and  ITFS.  MMDS  systems,  often  referred  to  as  wireless  cable,  transmit  video  programming  to  subscribers  using  the  microwave  frequencies  of  the  MDS  and 

 ITFS.  2417  In  connection  with  the  1996  MDS  auction,  the  Commission  established  a  small  business  size  standard  as  an  entity  that  had  annual  average  gross  revenues  of  less  than  $40 
 million  in  the  previous  three  calendar  years.  2418  The  MDS  auctions  resulted  in  67  successful 
 2411  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2412  Id. 
 2413  See  SBA  Dec.  2,  1998  Ex  Parte  Letter. 
 2414  See  Amendment  of  the  Commissions  Rules  Regarding  the  37.0-  38.6  GHz  and  38.6-  40.0  GHz  Bands,  ET 
 Docket  No.  95-  183,  Report  and  Order  and  Second  Notice  of  Proposed  Rulemaking,  12  FCC  Rcd  18600  (1997). 
 2415  Id. 

 2416  See  SBA  Feb.  4,  1998  Ex  Parte  Letter. 
 2417  Amendment  of  Parts  21  and  74  of  the  Commissions  Rules  with  Regard  to  Filing  Procedures  in  the  Multipoint 
 Distribution  Service  and  in  the  Instructional  Television  Fixed  Service  and  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  Docket  Nos.  MM  94-  131,  PP  93-  253,  Report  and  Order,  10  FCC  Rcd 

 9589,  9593,  para.  7  (1995). 
 2418  47  C.  F.  R.    21.961(  b)(  1). 
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 bidders  obtaining  licensing  opportunities  for  493  BTAs.  Of  the  67  auction  winners,  61  met  the  definition  of  a  small  business.  MDS  also  includes  licensees  of  stations  authorized  prior  to  the 
 auction.  In  addition,  the  SBA  has  developed  a  small  business  size  standard  for  Cable  and  Other  Program  Distribution,  which  includes  all  such  companies  generating  $12.5  million  or  less  in 
 annual  receipts.  2419  According  to  Census  Bureau  data  for  1997,  there  were  a  total  of  1,311  firms  in  this  category,  total,  that  had  operated  for  the  entire  year.  2420  Of  this  total,  1,180  firms  had 
 annual  receipts  of  under  $10  million  and  an  additional  52  firms  had  receipts  of  $10  million  or  more  but  less  than  $25  million.  Consequently,  we  estimate  that  the  majority  of  providers  in  this 
 service  category  are  small  businesses  that  may  be  affected  by  the  rules  and  policies  adopted  herein.  This  SBA  small  business  size  standard  also  appears  applicable  to  ITFS.  There  are 
 presently  2,032  ITFS  licensees.  All  but  100  of  these  licenses  are  held  by  educational  institutions.  Educational  institutions  are  included  in  this  analysis  as  small  entities.  2421  Thus,  we 
 tentatively  conclude  that  at  least  1,932  licensees  are  small  businesses. 
 817.  LMDS.  LMDS  is  a  fixed  broadband  point-  to-  multipoint  microwave  service  that  provides  for  two-  way  video  telecommunications.  2422  The  auction  of  the  1,030  LMDS  licenses 

 began  on  February  18,  1998  and  closed  on  March  25,  1998.  The  Commission  established  a  small  business  size  standard  for  LMDS  licenses  as  an  entity  that  has  average  gross  revenues  of 
 less  than  $40  million  in  the  three  previous  calendar  years.  2423  An  additional  small  business  size  standard  for  very  small  business  was  added  as  an  entity  that,  together  with  its  affiliates,  has 
 average  gross  revenues  of  not  more  than  $15  million  for  the  preceding  three  calendar  years.  2424  The  SBA  has  approved  these  small  business  size  standards  in  the  context  of  LMDS  auctions.  2425 
 There  were  93  winning  bidders  that  qualified  as  small  entities  in  the  LMDS  auctions.  A  total  of  93  small  and  very  small  business  bidders  won  approximately  277  A  Block  licenses  and  387  B 
 Block  licenses.  On  March  27,  1999,  the  Commission  re-  auctioned  161  licenses;  there  were  40  winning  bidders.  Based  on  this  information,  we  conclude  that  the  number  of  small  LMDS 
 licenses  consists  of  the  93  winning  bidders  in  the  first  auction  and  the  40  winning  bidders  in  the  re-  auction,  for  a  total  of  133  small  entity  LMDS  providers. 

 2419  13  C.  F.  R.    121.201,  NAICS  code  513220  (changed  to  517510  in  Oct.  2002). 
 2420  1997  Economic  Census,  Establishment  and  Firm  Size,  Table  4,  NAICS  code  513220  (issued  Oct.  2000). 
 2421  In  addition,  the  term  small  entity  within  SBREFA  applies  to  small  organizations  (nonprofits)  and  to  small 
 governmental  jurisdictions  (cities,  counties,  towns,  townships,  villages,  school  districts,  and  special  districts  with  populations  of  less  than  50,000).  5  U.  S.  C.    601(  4)-(  6).  We  do  not  collect  annual  revenue  data  on  ITFS  licensees. 

 2422  See  Local  Multipoint  Distribution  Service,  CC  Docket  No.  92-  297,  Second  Report  and  Order,  12  FCC  Rcd 
 12545  (1997). 
 2423  Id. 

 2424  Id. 
 2425  See  SBA  Jan.  6,  1998  Ex  Parte  Letter. 
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 818.  218-  219  MHz  Service.  The  first  auction  of  218-  219  MHz  spectrum  resulted  in  170  entities  winning  licenses  for  594  MSA  licenses.  Of  the  594  licenses,  557  were  won  by 
 entities  qualifying  as  a  small  business.  For  that  auction,  the  small  business  size  standard  was  an  entity  that,  together  with  its  affiliates,  has  no  more  than  a  $6  million  net  worth  and,  after  federal 
 income  taxes  (excluding  any  carry-  over  losses),  has  no  more  than  $2  million  in  annual  profits  each  year  for  the  previous  two  years.  2426  In  the  218-  219  MHz  Report  and  Order  and 
 Memorandum  Opinion  and  Order,  we  established  a  small  business  size  standard  for  a  small  business  as  an  entity  that,  together  with  its  affiliates  and  persons  or  entities  that  hold  interests  in 
 such  an  entity  and  their  affiliates,  has  average  annual  gross  revenues  not  to  exceed  $15  million  for  the  preceding  three  years.  2427  A  very  small  business  is  defined  as  an  entity  that,  together 
 with  its  affiliates  and  persons  or  entities  that  hold  interests  in  such  an  entity  and  its  affiliates,  has  average  annual  gross  revenues  not  to  exceed  $3  million  for  the  preceding  three  years.  2428  We 
 cannot  estimate,  however,  the  number  of  licenses  that  will  be  won  by  entities  qualifying  as  small  or  very  small  businesses  under  our  rules  in  future  auctions  of  218-  219  MHz  spectrum. 

 819.  24  GHz    Incumbent  Licensees.  This  analysis  may  affect  incumbent  licensees  who  were  relocated  to  the  24  GHz  band  from  the  18  GHz  band,  and  applicants  who  wish  to 
 provide  services  in  the  24  GHz  band.  The  applicable  SBA  small  business  size  standard  is  that  of  Cellular  and  Other  Wireless  Telecommunications  companies.  This  category  provides  that 
 such  a  company  is  small  if  it  employs  no  more  than  1,500  persons.  2429  According  to  Census  Bureau  data  for  1997,  there  were  977  firms  in  this  category,  total,  that  operated  for  the  entire 
 year.  2430  Of  this  total,  965  firms  had  employment  of  999  or  fewer  employees,  and  an  additional  12  firms  had  employment  of  1,000  employees  or  more.  2431  Thus,  under  this  size  standard,  the 
 great  majority  of  firms  can  be  considered  small.  These  broader  census  data  notwithstanding,  we  believe  that  there  are  only  two  licensees  in  the  24  GHz  band  that  were  relocated  from  the  18 
 GHz  band,  Teligent  and  TRW,  Inc.  2432  It  is  our  understanding  that  Teligent  and  its  related  companies  have  less  than  1,500  employees,  though  this  may  change  in  the  future.  TRW  is  not  a 
 small  entity.  Thus,  only  one  incumbent  licensee  in  the  24  GHz  band  is  a  small  business  entity. 

 2426  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  PP  Docket  No.  93-  253, 
 Fourth  Report  and  Order,  9  FCC  Rcd  2330  (1994). 
 2427  Amendment  of  Part  95  of  the  Commissions  Rules  to  Provide  Regulatory  Flexibility  in  the  218-  219  MHz 
 Service,  WT  Docket  No.  98-  169,  Report  and  Order  and  Memorandum  Opinion  and  Order,  15  FCC  Rcd  1497  (1999). 

 2428  Id. 
 2429  13  C.  F.  R.    121.201,  NAICS  code  513322  (changed  to  517212  in  Oct.  2002). 
 2430  1997  Economic  Census,  Employment  Size  of  Firms,  Table  5,  NAICS  code  513322  (issued  Oct.  2000). 
 2431  Id.  The  census  data  do  not  provide  a  more  precise  estimate  of  the  number  of  firms  that  have  employment  of 
 1,500  or  fewer  employees;  the  largest  category  provided  is  Firms  with  1,000  employees  or  more. 
 2432  Teligent  acquired  the  DEMS  licenses  of  FirstMark,  the  only  licensee  other  than  TRW  in  the  24  GHz  band 
 whose  license  has  been  modified  to  require  relocation  to  the  24  GHz  band. 
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 820.  24  GHz    Future  Licensees.  With  respect  to  new  applicants  in  the  24  GHz  band,  the  small  business  size  standard  for  small  business  is  an  entity  that,  together  with  controlling 
 interests  and  affiliates,  has  average  annual  gross  revenues  for  the  three  preceding  years  not  in  excess  of  $15  million.  2433  Very  small  business  in  the  24  GHz  band  is  an  entity  that,  together 
 with  controlling  interests  and  affiliates,  has  average  gross  revenues  not  exceeding  $3  million  for  the  preceding  three  years.  2434  The  SBA  has  approved  these  small  business  size  standards.  2435 
 These  size  standards  will  apply  to  the  future  auction,  if  held. 
 821.  ISPs.  While  ISPs  are  only  indirectly  affected  by  our  present  actions,  and  ISPs  are  therefore  not  formally  included  within  this  present  IRFA,  we  address  them  informally  to  create  a 

 fuller  record.  The  SBA  has  developed  a  small  business  size  standard  for  Online  Information  Services,  which  consists  of  all  such  companies  having  $21  million  or  less  in  annual  receipts.  2436 
 According  to  Census  Bureau  data  for  1997,  there  were  2,751  firms  in  this  category,  total,  that  operated  for  the  entire  year.  2437  Of  this  total,  2,659  firms  had  annual  receipts  of  $9,999,999  or 
 less,  and  an  additional  67  had  receipts  of  $10  million  to  $24,999,999.  2438  Thus,  under  this  size  standard,  the  great  majority  of  firms  can  be  considered  small. 

 4.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements 
 822.  In  this  FNPRM,  we  seek  comment  on  proposed  rules  that  would  eliminate  the  current  pick-  and-  choose  rules  under  some  circumstances.  2439  The  proposed  changes  may  restrict 
 competitive  LECs  choices  to  opt  into  specific  terms  and  conditions  of  existing  interconnection  agreements,  perhaps  requiring  competitors  to  opt  into  entire  agreements  or  negotiate  their  own 
 agreements  with  incumbents.  The  proposed  rules  may  encourage  incumbent  LECs  to  seek  approval  from  state  public  utility  commissions  for  statements  of  generally  available  terms  and 
 conditions. 

 2433  Amendments  to  Parts  1,2,  87  and  101  of  the  Commissions  Rules  to  License  Fixed  Services  at  24  GHz,  WT 
 Docket  No.  99-  327,  Report  and  Order,  15  FCC  Rcd  16934,  16967  (2000);  see  also  47  C.  F.  R.    101.538(  a)(  2). 
 2434  Amendments  to  Parts  1,2,  87  and  101  of  the  Commissions  Rules  to  License  Fixed  Services  at  24  GHz,  WT 
 Docket  No.  99-  327,  Report  and  Order,  15  FCC  Rcd  16934,  16967  (2000);  see  also  47  C.  F.  R.    101.538(  a)(  1). 
 2435  See  SBA  July  28,  2000  Ex  Parte  Letter. 

 2436  13  C.  F.  R.    121.201,  NAICS  code  514191  (changed  to  518111  in  Oct.  2002). 
 2437  1997  Economic  Census,  Receipts  Size  of  Firms,  Table  4,  NAICS  code  514191  (issued  Oct.  2000). 
 2438  Id. 
 2439  See  supra  Part  IX. 
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 5.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered 
 823.  The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives 
 (among  others):  (1)  the  establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification, 
 consolidation,  or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from 
 coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  2440 
 824.  In  this  FNPRM,  we  seek  comment  on  amending  the  pick-  and-  choose  rules  in  a  manner  that  encourages  more  customized  contracts  between  competitive  and  incumbent  LECs, 

 as  envisioned  by  the  Act.  The  FNPRM  proposes  to  remove  disincentives  to  the  ability  of  incumbent  LECs  and  competitive  LECs  to  negotiate  more  customized  agreements,  including 
 agreements  that  may  include  significant  concessions  in  exchange  for  negotiated  benefits.  In  doing  so,  the  FNPRM  also  seeks  to  minimize  the  potential  for  discrimination  against  third  parties 
 that  may  seek  to  opt  into  the  entire  agreement  by  proposing  that  incumbent  LECs  first  file  and  receive  state  approval  for  a  statement  of  generally  available  terms  and  conditions  (SGAT)  before 
 the  incumbent  LEC  may  file  other  interconnection  agreements  not  subject  to  the  pick-  and-  choose  rules. 

 825.  Changing  the  current  rules,  in  favor  of  an  approach  where  competitive  LECs    including  small  entities    must  opt  into  entire  agreements,  rather  than  individual  terms  and 
 conditions,  may  impose  additional  burdens  on  these  parties  than  they  currently  bear.  We  will  consider,  therefore,  maintaining  the  current  pick-  and-  choose  rules.  The  current  rules,  however, 
 may  expose  incumbent  LECs  to  the  risk  that  subsequent  entrants  may  reap  a  one-  sided  benefit  from  negotiated  concessions  made  between  the  incumbent  LEC  and  the  actual  contracting 
 competitive  LEC,  and  this  may  form  a  disincentive  to  negotiation  to  both  negotiating  parties.  This  may,  in  turn,  impose  additional  burdens  on  competitors  and  incumbents  as  the  parties 
 attempt  to  reach  agreements  and  resolve  disputes,  often  through  arbitration  and  litigation,  in  a  regulatory  environment  that  creates  disincentives  for  either  party  to  compromise.  For  this 
 reason,  we  do  not  propose  to  establish  a  separate  pick-  and-  choose  regime  to  govern  small  business  incumbents  or  competitors.  We  believe  the  alternative  advanced  in  the  FNPRM    by 
 proposing  to  modify  the  application  of  the  pick-  and-  choose  rule  for  any  incumbent  LEC  that  files  and  receives  state  approval  of  a  statement  of  generally  available  terms  and  conditions 
 (SGAT)    would  serve  the  Commissions  goal  of  encouraging  negotiation  while  protecting  the  rights  and  interests  of  competitors,  including  small  businesses.  We  invite  comment  on  this 
 approach,  and  we  plan  to  review  the  record  assembled  in  response  to  the  FNPRM  with  a  view  to  considering  the  least  burdensome  way  to  achieve  market-  driven  contract  negotiations. 

 2440  5  U.  S.  C.    603(  c). 
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 6.  Federal  Rules  that  May  Duplicate,  Overlap,  or  Conflict  with  the  Proposed  Rules 
 826.  None. 
 C.  Other  Procedural  Matters 
 1.  Ex  Parte  Presentations 
 827.  This  matter  shall  be  treated  as  a  permit-  but-  disclose  proceeding  in  accordance  with  the  Commissions  ex  parte  rules.  2441  Persons  making  oral  ex  parte  presentations  are 

 reminded  that  memoranda  summarizing  the  presentations  must  contain  summaries  of  the  substance  of  the  presentations  and  not  merely  a  listing  of  the  subjects  discussed.  More  than  a 
 one  or  two  sentence  description  of  the  views  and  arguments  presented  in  generally  required.  2442  Other  requirements  pertaining  to  oral  and  written  presentations  are  set  forth  in  section  1.1206(  b) 
 of  the  Commissions  rules. 
 2.  Comment  Filing  Procedures 
 828.  Pursuant  to  sections  1.415  and  1.419  of  the  Commission's  rules,  2443  interested  parties  may  file  comments  not  later  than  30  days  after  publication  of  this  Notice  in  the  Federal 

 Register  and  may  file  reply  comments  not  later  than  30  days  after  the  date  for  filing  comments.  Comments  may  be  filed  using  the  Commission's  Electronic  Comment  Filing  System  (ECFS)  or 
 by  filing  paper  copies.  2444  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,  U.  S.  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.  Parties  who 
 choose  to  file  by  paper  must  file  an  original  and  five  copies  of  each  filing.  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.  Filings  can  be  sent  by  hand  or  messenger  delivery,  by  commercial  overnight  courier,  or  by  first-  class  or  overnight  U.  S. 
 Postal  Service  mail  (although  we  continue  to  experience  delays  in  receiving  U.  S.  Postal  Service 
 2441  47  C.  F.  R.    1.1200  et  seq. 
 2442  See  47  C.  F.  R.    1.1206(  b)(  2). 
 2443  47  C.  F.  R.    1.415,  1.419, 
 2444  See  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  63  Fed.  Reg.  24121  (1998). 
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 mail).  The  Commission's  contractor,  Vistronix,  Inc.,  will  receive  hand-  delivered  or  messenger-delivered  paper  filings  for  the  Commission's  Secretary  at  236  Massachusetts  Avenue,  N.  E.,  Suite 
 110,  Washington,  D.  C.  20002.  The  filing  hours  at  this  location  are  8:  00  a.  m.  to  7:  00  p.  m.  All  hand  deliveries  must  be  held  together  with  rubber  bands  or  fasteners.  Any  envelopes  must  be 
 disposed  of  before  entering  the  building.  Commercial  overnight  mail  (other  than  U.  S.  Postal  Service  Express  Mail  and  Priority  Mail)  must  be  sent  to  9300  East  Hampton  Drive,  Capitol 
 Heights,  MD  20743.  U.  S.  Postal  Service  first-  class  mail,  Express  Mail,  and  Priority  Mail  should  be  addressed  to  445  12th  Street,  S.  W.,  Washington,  D.  C.  20554.  All  filings  must  be  addressed  to 
 the  Commission's  Secretary,  Office  of  the  Secretary,  Federal  Communications  Commission. 
 3.  Scope  of  Written  Ex  Parte  Presentations  Included  in  This  Proceeding 
 829.  The  Commission  adopted  the  substance  of  this  Order  at  an  open  meeting  on  February  20,  2003.  Originally,  this  meeting  was  scheduled  for  February  13,  2003  by  a  notice 

 issued  February  6,  2003,  which  initiated  the  Sunshine  period  prohibition  on  ex  parte  presentations  to  the  Commission  and  staff.  The  Commission  lifted  this  Sunshine  restriction  late 
 on  February  10,  2003,  but  reimposed  it  on  February  13,  2003  by  releasing  a  public  notice  announcing  inclusion  of  this  proceeding  on  the  Sunshine  agenda  for  a  Commission  meeting  on 
 February  20,  2003.  In  light  of  these  facts  and  the  widespread  interest  in  this  proceeding,  we  find  it  in  the  public  interest  to  include  in  the  record  ex  parte  presentations  that  were  made  on 
 February  10,  but  prior  to  the  lifting  of  the  Sunshine  restriction.  We  also  include  in  the  record  ex  parte  presentations  made  during  the  imposition  of  the  Sunshine  restriction  in  direct  response  to 
 an  express  request  by  a  Commissioner  or  Commission  staff. 
 XI.  ORDERING  CLAUSES 
 830.  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),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt,  the  Report  and  Order  on  Remand  and  Further  Notice  of  Proposed 
 Rulemaking  in  CC  Docket  No.  01-  338  IS  ADOPTED,  and  that  Part  51  of  the  Commissions  Rules,  47  C.  F.  R.  Part  51,  is  amended  as  set  forth  in  Appendix  B.  The  requirements  of  this  Order 
 shall  become  effective  30  days  after  publication  in  the  Federal  Register,  pending  Office  of  Management  and  Budget  (OMB)  approval.  2445  The  Commission  will  publish  a  document  in  the 
 Federal  Register  announcing  the  effective  date  of  these  rules. 
 831.  IT  IS  FURTHER  ORDERED  that  the  collection  of  information  contained  herein  is  contingent  upon  approval  by  the  OMB. 

 832.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  3,  4,  201-  205,  251,  256,  271,  and  303(  r)  of  the  Communications  Act,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 
 251,  252,  256,  271,  and  303(  r),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt.  that  the  petitions  for  reconsideration  of  the  UNE  Remand  Order  filed  in  CC 

 2445  In  light  of  the  importance  of  these  rules,  the  Commission  is  seeking  emergency  approval  from  OMB. 
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 Docket  No.  96-  98  by  Low  Tech  Designs,  Inc.  on  February  15,  2000  and  by  the  Telecommunications  Resellers  Association  on  February  18,  2000;  the  petition  for  partial 
 reconsideration  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98  by  Birch  Telecom,  Inc.  on  February  17,  2000;  the  petition  for  reconsideration  and  clarification  of  the  UNE  Remand 
 Order  filed  in  CC  Docket  No.  96-  98  by  Sprint  Corporation  on  February  17,  2000;  the  petition  for  clarification  on  reconsideration  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98,  95- 
 185  by  MGC  Communications,  Inc.,  d/  b/  a  Mpower  Communications,  Corp.  on  February  17,  2000;  the  joint  petition  filed  in  CC  Docket  No.  96-  98  by  BellSouth  Corporation  and  BellSouth 
 Telecommunications,  Inc.,  SBC  Communications,  Inc.,  and  Verizon  Telephone  Companies  on  April  5,  2001;  the  petitions  for  waiver  of  the  supplemental  order  clarification  filed  in  CC  Docket 
 No.  96-  98  by  WorldCom,  Inc.  on  September  12,  2000  and  ITC^  DeltaCom  Communications,  Inc.  on  August  16,  2001;  the  petition  filed  in  CC  Docket  Nos.  01-  338,  96-  98,  98-  147  by  Promoting 
 Active  Competition  Everywhere  (PACE)  Coalition  on  February  6,  2002;  and  the  petition  for  declaratory  ruling  filed  in  CC  Docket  No.  01-  338  by  WorldCom,  Inc.  on  August  8,  2002  ARE 
 DISMISSED  AS  MOOT. 
 833.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  3,  4,  201-  205,  251,  256,  271,  and  303(  r)  of  the  Communications  Act,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 

 251,  252,  256,  271,  and  303(  r),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt.  that  the  joint  petition  for  declaratory  ruling  filed  in  CC  Docket  No.  96-  98  by 
 AT&  T  Wireless  Services,  Inc.  and  VoiceStream  Wireless,  Corp.  on  November  19,  2001  IS  GRANTED  to  the  extent  indicated  herein  and  otherwise  IS  MOOT. 

 834.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  3,  4,  201-  205,  251,  256,  271,  and  303(  r)  of  the  Communications  Act,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 
 251,  252,  256,  271,  and  303(  r),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt.  that  the  petition  for  reconsideration/  clarification  of  the  UNE  Remand  Order 
 filed  in  CC  Docket  No.  96-  98  by  BellSouth  Corporation  and  BellSouth  Telecommunications,  Inc.  on  February  17,  2000  IS  GRANTED  to  the  extent  indicated  herein  and  otherwise  ARE 
 DENIED. 
 835.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  3,  4,  201-  205,  251,  256,  271,  and  303(  r)  of  the  Communications  Act,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 

 251,  252,  256,  271,  and  303(  r),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt.  that  the  petitions  for  reconsideration  of  the  UNE  Remand  Order  filed  in  CC 
 Docket  Nos.  96-  98,  95-  185  by  Rhythms  Netconnections  Inc.  and  Covad  Communications  Co.  on  January  21,  2000,  @Link  Networks,  Inc.,  DSL.  net,  Inc.  and  MGC  Communications,  Inc.,  d/  b/  a 
 Mpower  Communications  Corp.  on  February  17,  2000,  McLeodUSA  Telecommunications  Services,  Inc.  and  the  petition  for  reconsideration  of  the  UNE  Remand  Order  filed  in  CC  Docket 
 No.  96-  98  by  RCN  Telecom  Services,  Inc.  on  February  17,  2000  ARE  DENIED. 
 836.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  3,  4,  201-  205,  251,  256,  271,  and  303(  r)  of  the  Communications  Act,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 

 251,  252,  256,  271,  and  303(  r),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt.  that  the  petition  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98  by 
 Competitive  Telecommunications  Association  on  November  26,  2001;  and  the  petitions  for 
484
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 reconsideration  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98  by  Intermedia  Communications,  Inc.  and  by  MCI  WorldCom,  Inc.  on  February  17,  2000  ARE  DENIED  to  the 
 extent  indicated  herein  and  otherwise  ARE  DISMISSED  AS  MOOT. 
 837.  IT  IS  FURTHER  ORDERED,  pursuant  to  sections  1,  3,  4,  201-  205,  251,  256,  271,  and  303(  r)  of  the  Communications  Act,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 

 251,  252,  256,  271,  and  303(  r),  and  Section  706  of  the  Telecommunications  Act  of  1996,  47  U.  S.  C.    157  nt.  that  the  petition  for  clarification  of  the  UNE  Remand  Order  filed  in  CC  Docket 
 No.  96-  98  by  MCI  WorldCom,  Inc.  on  February  17,  2000;  the  petition  for  reconsideration  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98  by  the  Competitive  Telecommunications 
 Association  on  February  17,  2000;  the  petition  for  reconsideration  and  clarification  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98  by  Bell  Atlantic  on  February  17,  2000;  and  the 
 petition  for  reconsideration  and  clarification  of  the  UNE  Remand  Order  filed  in  CC  Docket  No.  96-  98  by  AT&  T  Corp.  on  February  17,  2000  ARE  GRANTED  to  the  extent  indicated  herein  and 
 otherwise  ARE  DENIED  or  DISMISSED  AS  MOOT. 
 838.  IT  IS  FURTHER  ORDERED  that  the  Public  Notice,  Comments  Sought  on  the  Use  of  Unbundled  Network  Elements  to  Provide  Exchange  Access  Service,  CC  Docket  No.  96- 

 98,  DA  01-  169  (rel.  Jan.  24,  2001);  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability  and  Implementation  of  the  Local  Competition  Provisions  of  the 
 Telecommunications  Act  of  1996,  Third  Report  and  Order  on  Reconsideration  in  CC  Docket  No.  98-  147,  Fourth  Report  and  Order  on  Reconsideration  in  CC  Docket  No.  96-  98,  Third  Further 
 Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  98-  147,  and  Sixth  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket  No.  96-  98,  16  FCC  Rcd  2101  (2001);  Implementation  of  Local 
 Competition  Provisions  of  the  Telecommunications  Act  of  1996,  Third  Order  on  Reconsideration  and  Further  Notice  of  Proposed  Rulemaking,  CC  Docket  Nos.  96-  98  and  95-  185,  12  FCC  Rcd 
 12460  (1997);  and  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  Third  Report  and  Order  and  Fourth  Further  Notice  of  Proposed 
 Rulemaking,  CC  Docket  No.  96-  98,  15  FCC  Rcd  3696  (1999)  ARE  TERMINATED. 
 839.  IT  IS  FURTHER  ORDERED,  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this 

 Report  and  Order  and  Order  on  Remand,  including  the  Final  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 

 840.  IT  IS  FURTHER  ORDERED,  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this 
 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 

 Marlene  H.  Dortch  Secretary 
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 Federal  Communications  Commission  FCC  03-  36 
 APPENDIX  A    LIST  OF  COMMENTERS 
 Comments  Abbreviation 

 Aaron  Wilson,  Jr.,  Pennsylvania  Public  Utilities  Commission  Pennsylvania  Commissioner  Wilson 
 Advanced  Tel,  Inc.  Advanced  Tel  Alaska  Communications  Systems  ACS 
 Alcatel  USA,  Inc.  Alcatel  Allegiance  Telecom,  Inc.  Allegiance 
 Association  for  Local  Telecommunications  Services  Cbeyond  Communications,  LLC 
 DSLNET  Communications,  LLC  El  Paso  Networks,  LLC 
 Focal  Communications  Corporation  New  Edge  Network,  Inc. 
 Pac-  West  Telecomm,  Inc.  Paetec  Communications,  Inc. 
 RCN  Telecom  Services,  Inc.  US  LEC  Corp. 

 ALTS  et  al. 

 Association  of  Communications  Enterprises  ASCENT  AT&  T  Corp.  AT&  T 
 AT&  T  Wireless  Services,  Inc.  ATTWS  BellSouth  Corporation  BellSouth 
 Business  Telecom,  Inc.  BTI  California  Public  Utilities  Commission  California  Commission 
 Catena  Networks  Catena  Cellular  Telecommunications  &  Internet  Association  CTIA 
 Competitive  Enterprise  Institute  Competitive  Enterprise  Institute  Competitive  Telecommunications  Association  CompTel 
 Consumer  Federation  of  America  Texas  Office  of  Public  Utility  Counsel 
 Consumers  Union  Center  for  Digital  Democracy 
 Consumer  Federation  et  al. 

 Conversent  Communications  Conversent  Corning,  Inc.  Corning 
 Covad  Communications  Company  Covad  Dynegy  Global  Communications,  Inc.  Dynegy 
 El  Paso  Networks,  LLC  CTC  Communications  Corp. 
 ConEdison  Communications,  LLC 
 El  Paso  et  al. 

 Eschelon  Telecom,  Inc.  Eschelon  Fiber-  to-  the-  Home  Council  FTTH  Council 
 Florida  Public  Service  Commission  Florida  Commission  General  Communication  Inc.  GCI 
486
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 2 
 Comments  Abbreviation 
 General  Services  Administration  GSA  Georgia  Public  Service  Commission  Georgia  Commission 
 High  Tech  Broadband  Coalition  HTBC  Illinois  Commerce  Commission  Illinois  Commission 
 Illuminet  Illuminet  Indiana  Utility  Regulatory  Commission  Indiana  Commission 
 Kansas  Corporation  Commission  Kansas  Commission  Long  Distance  of  Michigan,  Inc.  LDMI 
 Louisiana  Public  Service  Commission  Louisiana  Commission  Maine  CLEC  Coalition  Maine  CLEC  Coalition 
 Massachusetts  Department  of  Telecommunications  and  Energy  Massachusetts  Department 
 McLeodUSA  Telecommunications  Services  McLeodUSA  Michigan  Public  Service  Commission  Michigan  Commission 
 Missouri  Public  Service  Commission  Missouri  Commission  Moline  Dispatch  Publishing  Company 
 Competitive  Communications  Group  Moline  and  CCG  Mpower  Communications  Corp.  Mpower 
 National  Association  of  Regulatory  Utilities  NARUC  National  Telecommunications  Cooperative 
 Association  NTCA  Navigator  Telecommunications,  LLC  Navigator 
 NewSouth  Communications  NewSouth  New  York  State  Department  of  Public  Service  New  York  Department 
 Next  Level  Communications  Next  Level  Nextel  Communications,  Inc.  Nextel 
 Norlight  Telecommunications,  Inc.  Norlight  NuVox  Inc. 
 KMC  Telecom,  Inc.  e.  spire  Communications,  Inc. 
 TDS  Metrocom,  Inc.  Metromedia  Fiber  Network  Services,  Inc. 
 SNiP  LiNK,  LLC 

 NuVox  et  al. 

 Oklahoma  Corporation  Commission  Oklahoma  Commission  Openband  of  Virginia,  LLC  Openband 
 Pennsylvania  Office  of  the  Consumer  Advocate,  Ohio  Consumers  Counsel 
 New  Hampshire  Office  of  Consumer  Advocate  West  Virginia  Consumer  Advocate  Division 
 Maryland  Office  of  Peoples  Counsel 

 Pennsylvania  Office  of  the  Consumer  Advocate  et  al. 

 Pennsylvania  Public  Utilities  Commission  Pennsylvania  Commission  Progress  &  Freedom  Foundation  Progress  &  Freedom  Foundation 
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 3 
 Comments  Abbreviation 
 Progress  Telecom  Corporation  Progress  Telecom  Public  Utilities  Commission  of  Ohio  Ohio  Commission 
 Public  Utilities  Commission  of  Texas  Texas  Commission  Qwest  Communications  International  Inc.  Qwest 
 Rural  Independent  Competitive  Alliance  Rural  Independent  Competitive  Alliance 
 SBC  Telecommunications  SBC  Southwest  Competitive  Telecommunications 
 Association  SWCTA  Sprint  Corporation  Sprint 
 Supra  Telecom  Supra  Talk  America,  Inc.  Talk  America 
 Taqua,  Inc.  Taqua  Telecommunications  Industry  Association  TIA 
 UNE  Platform  Coalition  UNE-  P  Coalition  United  States  Telecom  Association  USTA 
 Verizon  Telephone  Companies  Verizon  VoiceStream  Wireless  Corporation  VoiceStream 
 WorldCom,  Inc.  WorldCom  Z-  Tel  Communications  Z-  Tel 
488
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 4 
 Replies  Abbreviation 
 Access  Integrated  Networks,  Inc.  Access  Integrated  Networks  Advanced  Tel,  Inc.  Advanced  Tel 
 Alabama  Public  Service  Commission  Alabama  Commission  Alaska  Communications  Systems  ACS 
 Alcatel  USA,  Inc.  Alcatel  Allegiance  Telecom,  Inc.  Allegiance 
 Arch  Wireless,  Inc.  Arch  Wireless  Association  for  Local  Telecommunications  Services 
 Cbeyond  Communications,  LLC  DSLNET  Communications,  LLC 
 El  Paso  Networks,  LLC  Focal  Communications  Corporation 
 New  Edge  Network,  Inc.  Pac-  West  Telecomm,  Inc. 
 Paetec  Communications,  Inc.  RCN  Telecom  Services,  Inc. 
 US  LEC  Corp. 

 ALTS  et  al. 

 Association  of  Communications  Enterprises  ASCENT  AT&  T  Corp.  AT&  T 
 BellSouth  Corporation  BellSouth  BrahmaCom  BrahmaCom 
 Catena  Networks,  Inc.  Catena  CCG  Consulting,  Inc.  CCG 
 Choice  One  Communications  Inc.  Choice  One  Coalition  of  Competitive  Fiber  Providers  Coalition  of  Competitive  Fiber 
 Providers  Colorado  Public  Utilities  Commission  Colorado  Commission 
 Communications  Workers  of  America  CWA  Competitive  Telecommunications  Association  CompTel 
 Consumer  Federation  of  America,  Texas  Office  of  Public  Utility  Counsel 
 Consumers  Union  Center  for  Digital  Democracy 
 Media  Access  Project 

 Consumer  Federation  et  al. 

 Conversent  Communications  LLC  Conversent  Corning,  Inc.  Corning 
 Covad  Communications  Company  Covad  CTC  Communications  Corp.  CTC 
 Dobson  Communications  Corp.  Dobson  Earthlink,  Inc.  Earthlink 
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 5 
 Replies  Abbreviation 
 El  Paso  Networks,  LLC  CTC  Communications  Corp.  El  Paso  and  CTC 
 Fiber-  to-  the-  Home  Council  FTTH  Council  Florida  Public  Service  Commission  Florida  Commission 
 General  Communication  Inc.  GCI  High  Tech  Broadband  Coalition  HTBC 
 Hugh  Carter  Donahue,  Ph.  D.  Donahue  Illinois  Commerce  Commission  Illinois  Commission 
 Information  Technology  Industry  Council  ITIC  ITC^  DeltaCom  Communications,  Inc.  ITC^  DeltaCom 
 Kansas  Corporation  Commission  Kansas  Commission  LSSi  Corp.  LSSi 
 Michigan  Public  Service  Commission  Michigan  Commission  Minnesota  Department  of  Commerce  Minnesota  Department 
 Missouri  Public  Service  Commission  Missouri  Commission  Mpower  Communications  Corp.  Mpower 
 National  ALEC  Association,  Prepaid  Communications  Association  Natl  ALEC  and  Prepaid  Communications  Assns 
 National  Association  of  Regulatory  Utilities  NARUC  National  Exchange  Carrier  Association  NECA 
 National  Telecommunications  Cooperative  Association  NTCA 
 Nebraska  Public  Service  Commission  Nebraska  Commission  NewSouth  Communications  NewSouth 
 New  York  State  Office  of  the  Attorney  General  New  York  State  Attorney  General  Next  Level  Communications  Next  Level 
 Nextel  Communications  Nextel  NuVox  Inc. 
 KMC  Telecom,  Inc.  TDS  Metrocom,  Inc. 
 Core  Communications,  Inc.  SNiP  LiNK,  LLC 

 NuVox  et  al. 

 Oregon  Public  Utilities  Commission  Oregon  Commission  Pennsylvania  Public  Utilities  Commission  Pennsylvania  Commission 
 Pilgrim  Telephone,  Inc.  Pilgrim  Progress  &  Freedom  Foundation  Progress  &  Freedom  Foundation 
 Public  Utilities  Commission  of  Ohio  Ohio  Commission  Qwest  Communications  International  Qwest 
 Regulatory  Commission  of  Alaska  Alaska  Commission  SBC  Telecommunications  SBC 
 Southwest  Competitive  Telecommunications  Association  SWCTA 
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 Federal  Communications  Commission  FCC  03-  36 
 6 
 Replies  Abbreviation 
 Sprint  Corporation  Sprint  Talk  America,  Inc.  Talk  America 
 Telecommunications  Industry  Association  TIA  TeleTruth  TeleTruth 
 Texas  Office  of  the  Attorney  General  Texas  Attorney  General  Texas  Public  Utilities  Commission  Texas  Commission 
 UNE  Platform  Coalition  UNE-  P  Coalition  United  States  Telecom  Association  USTA 
 Verizon  Telephone  Companies  Verizon  Virginia  State  Corporation  Commission  Virginia  Commission 
 Washington  Utilities  and  Transportation  Commission  Washington  Commission 
 WorldCom,  Inc.  WorldCom  XO  Communications,  Inc.  XO 
 Z-  Tel  Communications,  Inc.  Z-  Tel 
491
 Federal  Communications  Commission  FCC  03-  36 
 APPENDIX  B    FINAL  RULES 
 Part  51  of  Title  47  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 PART  51    INTERCONNECTION 
 1.  The  authority  citation  for  part  51  is  revised  to  read  as  follows: 
 Authority:  Sections  1-  5,  7,  201-  05,  207-  09,  218,  225-  27,  251-  54,  256,  271,  303(  r),  332,  48  Stat.  1070,  as  amended,  1077;  47  U.  S.  C.    151-  55,  157,  201-  05,  207-  09,  218,  225-  27,  251-  54,  256, 

 271,  303(  r),  332,  and  section  706  of  the  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  February  8,  1996,  110  Stat.  153,  as  amended,  Pub.  L.  No.  107-  110,  January  8,  2002,  115  Stat. 
 2093,  47  U.  S.  C.    157  note,  unless  otherwise  noted. 
 2.  Section  51.5  is  amended  by  adding  six  new  definitions  in  alphabetical  order  and  by  revising  the  definition  of  state  commission  to  read  as  follows: 

   51.5  Terms  and  Definitions. 
 ***** 
 Commingling.  Commingling  means  the  connecting,  attaching,  or  otherwise  linking  of  an  unbundled  network  element,  or  a  combination  of  unbundled  network  elements,  to  one  or  more 

 facilities  or  services  that  a  requesting  telecommunications  carrier  has  obtained  at  wholesale  from  an  incumbent  LEC,  or  the  combining  of  an  unbundled  network  element,  or  a  combination  of 
 unbundled  network  elements,  with  one  or  more  such  facilities  or  services.  Commingle  means  the  act  of  commingling. 

 ***** 
 Enhanced  extended  link.  An  enhanced  extended  link  or  EEL  consists  of  a  combination  of  an  unbundled  loop  and  unbundled  dedicated  transport,  together  with  any  facilities,  equipment,  or 

 functions  necessary  to  combine  those  network  elements. 
 ***** 
 Intermodal.  The  term  intermodal  refers  to  facilities  or  technologies  other  than  those  found  in  traditional  telephone  networks,  but  that  are  utilized  to  provide  competing  services.  Intermodal 

 facilities  or  technologies  include,  but  are  not  limited  to,  traditional  or  new  cable  plant,  wireless  technologies,  and  power  line  technologies. 

 ***** 
 Non-  qualifying  service.  A  non-  qualifying  service  is  a  service  that  is  not  a  qualifying  service. 

 ***** 
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 Qualifying  service.  A  qualifying  service  is  a  telecommunications  service  that  competes  with  a  telecommunications  service  that  has  been  traditionally  the  exclusive  or  primary  domain  of 
 incumbent  LECs,  including,  but  not  limited  to,  local  exchange  service,  such  as  plain  old  telephone  service,  and  access  services,  such  as  digital  subscriber  line  services  and  high-  capacity 
 circuits. 
 ***** 
 State  commission.  A  state  commission  means  the  commission,  board,  or  official  (by  whatever  name  designated)  which  under  the  laws  of  any  state  has  regulatory  jurisdiction  with  respect  to 

 intrastate  operations  of  carriers.  As  referenced  in  this  part,  this  term  may  include  the  Commission  if  it  assumes  responsibility  for  a  proceeding  or  matter,  pursuant  to  section  252(  e)(  5) 
 of  the  Act  or    51.320.  This  term  shall  also  include  any  person  or  persons  to  whom  the  state  commission  has  delegated  its  authority  under  sections  251  and  252  of  the  Act  and  this  part. 

 ***** 
 Triennial  Review  Order.  The  Triennial  Review  Order  means  the  Commissions  Report  and  Order  and  Order  on  Remand  and  Further  Notice  of  Proposed  Rulemaking  in  CC  Docket 
 Nos.  01-  338,  96-  98,  and  98-  147. 
 ***** 
 3.  Section  51.301  is  amended  by  revising  paragraph  (c)(  8)(  ii)  to  read  as  follows: 
   51.301  Duty  to  negotiate. 
 ***** 

 (c)  *** 
 (8)  *** 
 (ii)  Refusal  by  an  incumbent  LEC  to  furnish  cost  data  that  would  be  relevant  to  setting  rates  if  the  parties  were  in  arbitration. 

 4.  Section  51.305  is  amended  by  removing  paragraph  (a)(  4),  redesignating  paragraph  (a)(  5)  as  paragraph  (a)(  4),  and  revising  paragraph  (a)(  3)  to  read  as  follows: 
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   51.305  Interconnection. 
 (a)  *** 
 (3)  That  is  at  a  level  of  quality  that  is  equal  to  that  which  the  incumbent  LEC  provides  itself,  a  subsidiary,  an  affiliate,  or  any  other  party.  At  a  minimum,  this  requires  an 
 incumbent  LEC  to  design  interconnection  facilities  to  meet  the  same  technical  criteria  and  service  standards  that  are  used  within  the  incumbent  LECs  network.  This  obligation 
 is  not  limited  to  a  consideration  of  service  quality  as  perceived  by  end  users,  and  includes,  but  is  not  limited  to,  service  quality  as  perceived  by  the  requesting 
 telecommunications  carrier;  and 
 ***** 

 5.  Section  51.309  is  amended  by  revising  paragraphs  (a)  and  (b),  and  by  adding  paragraphs  (d)  through  (g)  to  read  as  follows: 
   51.309  Use  of  unbundled  network  elements. 
 (a)  Except  as  provided  in    51.318,  an  incumbent  LEC  shall  not  impose  limitations,  restrictions,  or  requirements  on  requests  for,  or  the  use  of,  unbundled  network  elements  for  the  service  a 

 requesting  telecommunications  carrier  seeks  to  offer. 
 (b)  A  requesting  telecommunications  carrier  may  not  access  an  unbundled  network  element  for  the  sole  purpose  of  providing  non-  qualifying  services. 

 ***** 
 (d)  A  requesting  telecommunications  carrier  that  accesses  and  uses  an  unbundled  network  element  pursuant  to  section  251(  c)(  3)  of  the  Act  and  this  part  to  provide  a  qualifying  service  may 

 use  the  same  unbundled  network  element  to  provide  non-  qualifying  services. 
 (e)  Except  as  provided  in    51.318,  an  incumbent  LEC  shall  permit  a  requesting  telecommunications  carrier  to  commingle  an  unbundled  network  element  or  a  combination  of 

 unbundled  network  elements  with  wholesale  services  obtained  from  an  incumbent  LEC. 
 (f)  Upon  request,  an  incumbent  LEC  shall  perform  the  functions  necessary  to  commingle  an  unbundled  network  element  or  a  combination  of  unbundled  network  elements  with  one  or  more 

 facilities  or  services  that  a  requesting  telecommunications  carrier  has  obtained  at  wholesale  from  an  incumbent  LEC. 

 (g)  An  incumbent  LEC  shall  not  deny  access  to  an  unbundled  network  element  or  a  combination  of  unbundled  network  elements  on  the  grounds  that  one  or  more  of  the  elements: 
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 (1)  Is  connected  to,  attached  to,  linked  to,  or  combined  with,  a  facility  or  service  obtained  from  an  incumbent  LEC;  or 
 (2)  Shares  part  of  the  incumbent  LECs  network  with  access  services  or  inputs  for  non-qualifying  services. 

 6.  Section  51.311  is  amended  by  revising  paragraphs  (a)  and  (b),  removing  paragraph  (c),  redesignating  paragraphs  (d)  and  (e)  as  paragraphs  (c)  and  (d)  to  read  as  follows: 
   51.311  Nondiscriminatory  access  to  unbundled  network  elements. 
 (a)  The  quality  of  an  unbundled  network  element,  as  well  as  the  quality  of  the  access  to  the  unbundled  network  element,  that  an  incumbent  LEC  provides  to  a  requesting 
 telecommunications  carrier  shall  be  the  same  for  all  telecommunications  carriers  requesting  access  to  that  network  element. 

 (b)  To  the  extent  technically  feasible,  the  quality  of  an  unbundled  network  element,  as  well  as  the  quality  of  the  access  to  such  unbundled  network  element,  that  an  incumbent  LEC  provides  to 
 a  requesting  telecommunications  carrier  shall  be  at  least  equal  in  quality  to  that  which  the  incumbent  LEC  provides  to  itself.  If  an  incumbent  LEC  fails  to  meet  this  requirement,  the 
 incumbent  LEC  must  prove  to  the  state  commission  that  it  is  not  technically  feasible  to  provide  the  requested  unbundled  network  element,  or  to  provide  access  to  the  requested  unbundled 
 network  element,  at  a  level  of  quality  that  is  equal  to  that  which  the  incumbent  LEC  provides  to  itself. 

 ***** 

 7.  Section  51.315  is  amended  by  revising  paragraphs  (c)  and  (f)  to  read  as  follows: 
   51.315  Combination  of  unbundled  network  elements. 

 ***** 
 (c)  Upon  request,  an  incumbent  LEC  shall  perform  the  functions  necessary  to  combine  unbundled  network  elements  in  any  manner,  even  if  those  elements  are  not  ordinarily  combined 
 in  the  incumbent  LECs  network,  provided  that  such  combination: 
 (1)  Is  technically  feasible;  and 
 (2)  Would  not  undermine  the  ability  of  other  carriers  to  obtain  access  to  unbundled  network  elements  or  to  interconnect  with  the  incumbent  LECs  network. 
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 ***** 
 (f)  An  incumbent  LEC  that  denies  a  request  to  combine  unbundled  network  elements  pursuant  to  paragraph  (c)(  2)  of  this  section  must  demonstrate  to  the  state  commission  that  the  requested 
 combination  would  undermine  the  ability  of  other  carriers  to  obtain  access  to  unbundled  network  elements  or  to  interconnect  with  the  incumbent  LECs  network. 

 8.  Section  51.316  is  added  to  read  as  follows: 
   51.316  Conversion  of  unbundled  network  elements  and  services. 
 (a)  Upon  request,  an  incumbent  LEC  shall  convert  a  wholesale  service,  or  group  of  wholesale  services,  to  the  equivalent  unbundled  network  element,  or  combination  of  unbundled  network 

 elements,  that  is  available  to  the  requesting  telecommunications  carrier  under  section  251(  c)(  3)  of  the  Act  and  this  part. 

 (b)  An  incumbent  LEC  shall  perform  any  conversion  from  a  wholesale  service  or  group  of  wholesale  services  to  an  unbundled  network  element  or  combination  of  unbundled  network 
 elements  without  adversely  affecting  the  service  quality  perceived  by  the  requesting  telecommunications  carriers  end-  user  customer. 

 (c)  Except  as  agreed  to  by  the  parties,  an  incumbent  LEC  shall  not  impose  any  untariffed  termination  charges,  or  any  disconnect  fees,  re-  connect  fees,  or  charges  associated  with 
 establishing  a  service  for  the  first  time,  in  connection  with  any  conversion  between  a  wholesale  service  or  group  of  wholesale  services  and  an  unbundled  network  element  or  combination  of 
 unbundled  network  elements. 

 9.  Section  51.317  is  revised  to  read  as  follows: 
   51.317  Standards  for  requiring  the  unbundling  of  network  elements. 

 Proprietary  network  elements.  A  network  element  shall  be  considered  to  be  proprietary  if  an  incumbent  LEC  can  demonstrate  that  it  has  invested  resources  to  develop  proprietary 
 information  or  functionalities  that  are  protected  by  patent,  copyright  or  trade  secret  law.  The  Commission  shall  undertake  the  following  analysis  to  determine  whether  a  proprietary 
 network  element  should  be  made  available  for  purposes  of  section  251(  c)(  3)  of  the  Act: 
 (a)  Determine  whether  access  to  the  proprietary  network  element  is  necessary.  A  network  element  is  necessary  if,  taking  into  consideration  the  availability  of  alternative 
 elements  outside  the  incumbent  LEC's  network,  including  self-  provisioning  by  a  requesting  telecommunications  carrier  or  acquiring  an  alternative  from  a  third-  party 
 supplier,  lack  of  access  to  the  network  element  precludes  a  requesting 
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 telecommunications  carrier  from  providing  the  services  that  it  seeks  to  offer.  If  access  is  necessary,  the  Commission  may  require  the  unbundling  of  such  proprietary  network 
 element. 
 (b)  In  the  event  that  such  access  is  not  necessary,  the  Commission  may  require  unbundling  if  it  is  determined  that: 

 (1)  The  incumbent  LEC  has  implemented  only  a  minor  modification  to  the  network  element  in  order  to  qualify  for  proprietary  treatment; 
 (2)  The  information  or  functionality  that  is  proprietary  in  nature  does  not  differentiate  the  incumbent  LEC's  services  from  the  requesting 
 telecommunications  carrier's  services;  or 
 (3)  Lack  of  access  to  such  element  would  jeopardize  the  goals  of  the  Act. 

 10.  Section  51.318  is  added  to  read  as  follows: 
   51.318  Eligibility  criteria  for  access  to  certain  unbundled  network  elements. 
 (a)  Except  as  provided  in  paragraph  (b)  of  this  section,  an  incumbent  LEC  shall  provide  access  to  unbundled  network  elements  and  combinations  of  unbundled  network  elements  without  regard 

 to  whether  the  requesting  telecommunications  carrier  seeks  access  to  the  elements  to  establish  a  new  circuit  or  to  convert  an  existing  circuit  from  a  service  to  unbundled  network  elements. 

 (b)  An  incumbent  LEC  need  not  provide  access  to  (1)  an  unbundled  DS1  loop  in  combination,  or  commingled,  with  a  dedicated  DS1  transport  or  dedicated  DS3  transport  facility  or  service,  or 
 to  an  unbundled  DS3  loop  in  combination,  or  commingled,  with  a  dedicated  DS3  transport  facility  or  service,  or  (2)  an  unbundled  dedicated  DS1  transport  facility  in  combination,  or 
 commingled,  with  an  unbundled  DS1  loop  or  a  DS1  channel  termination  service,  or  to  an  unbundled  dedicated  DS3  transport  facility  in  combination,  or  commingled,  with  an  unbundled 
 DS1  loop  or  a  DS1  channel  termination  service,  or  to  an  unbundled  DS3  loop  or  a  DS3  channel  termination  service,  unless  the  requesting  telecommunications  carrier  certifies  that  all  of  the 
 following  conditions  are  met: 
 (1)  The  requesting  telecommunications  carrier  has  received  state  certification  to  provide  local  voice  service  in  the  area  being  served  or,  in  the  absence  of  a  state  certification 
 requirement,  has  complied  with  registration,  tariffing,  filing  fee,  or  other  regulatory  requirements  applicable  to  the  provision  of  local  voice  service  in  that  area. 

 (2)  The  following  criteria  are  satisfied  for  each  combined  circuit,  including  each  DS1  circuit,  each  DS1  enhanced  extended  link,  and  each  DS1-  equivalent  circuit  on  a  DS3 
 enhanced  extended  link: 
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 (i)  Each  circuit  to  be  provided  to  each  customer  will  be  assigned  a  local  number  prior  to  the  provision  of  service  over  that  circuit; 
 (ii)  Each  DS1-  equivalent  circuit  on  a  DS3  enhanced  extended  link  must  have  its  own  local  number  assignment,  so  that  each  DS3  must  have  at  least  28  local  voice 
 numbers  assigned  to  it; 
 (iii)  Each  circuit  to  be  provided  to  each  customer  will  have  911  or  E911  capability  prior  to  the  provision  of  service  over  that  circuit; 

 (iv)  Each  circuit  to  be  provided  to  each  customer  will  terminate  in  a  collocation  arrangement  that  meets  the  requirements  of  paragraph  (c)  of  this  section; 
 (v)  Each  circuit  to  be  provided  to  each  customer  will  be  served  by  an  interconnection  trunk  that  meets  the  requirements  of  paragraph  (d)  of  this  section; 
 (vi)  For  each  24  DS1  enhanced  extended  links  or  other  facilities  having  equivalent  capacity,  the  requesting  telecommunications  carrier  will  have  at  least 
 one  active  DS1  local  service  interconnection  trunk  that  meets  the  requirements  of  paragraph  (d)  of  this  section;  and 

 (vii)  Each  circuit  to  be  provided  to  each  customer  will  be  served  by  a  switch  capable  of  switching  local  voice  traffic. 
 (c)  A  collocation  arrangement  meets  the  requirements  of  this  paragraph  if  it  is: 
 (1)  Established  pursuant  to  section  251(  c)(  6)  of  the  Act  and  located  at  an  incumbent  LEC  premises  within  the  same  LATA  as  the  customers  premises,  when  the  incumbent 
 LEC  is  not  the  collocator;  and 
 (2)  Located  at  a  third  partys  premises  within  the  same  LATA  as  the  customers  premises,  when  the  incumbent  LEC  is  the  collocator. 

 (d)  An  interconnection  trunk  meets  the  requirements  of  this  paragraph  if  the  requesting  telecommunications  carrier  will  transmit  the  calling  partys  number  in  connection  with  calls 
 exchanged  over  the  trunk. 

 11.  Section  51.319  is  revised  to  read  as  follows: 
   51.319  Specific  unbundling  requirements. 

 (a)  Local  loops.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  the  local  loop  on  an  unbundled  basis,  in  accordance  with  section 
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 251(  c)(  3)  of  the  Act  and  this  part  and  as  set  forth  in  paragraphs  (a)(  1)  through  (a)(  9)  of  this  section.  The  local  loop  network  element  is  defined  as  a  transmission  facility  between  a 
 distribution  frame  (or  its  equivalent)  in  an  incumbent  LEC  central  office  and  the  loop  demarcation  point  at  an  end-  user  customer  premises.  This  element  includes  all  features, 
 functions,  and  capabilities  of  such  transmission  facility,  including  the  network  interface  device.  It  also  includes  all  electronics,  optronics,  and  intermediate  devices  (including  repeaters  and  load 
 coils)  used  to  establish  the  transmission  path  to  the  end-  user  customer  premises  as  well  as  any  inside  wire  owned  or  controlled  by  the  incumbent  LEC  that  is  part  of  that  transmission  path. 

 (1)  Copper  loops.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  the  copper  loop  on  an  unbundled  basis.  A  copper  loop  is  a 
 stand-  alone  local  loop  comprised  entirely  of  copper  wire  or  cable.  Copper  loops  include  two-  wire  and  four-  wire  analog  voice-  grade  copper  loops,  digital  copper  loops  (e.  g.,  DS0s  and 
 integrated  services  digital  network  lines),  as  well  as  two-  wire  and  four-  wire  copper  loops  conditioned  to  transmit  the  digital  signals  needed  to  provide  digital  subscriber  line  services, 
 regardless  of  whether  the  copper  loops  are  in  service  or  held  as  spares.  The  copper  loop  includes  attached  electronics  using  time  division  multiplexing  technology,  but  does  not 
 include  packet  switching  capabilities  as  defined  in  paragraph  (a)(  2)(  i)  of  this  section.  The  availability  of  DS1  and  DS3  copper  loops  is  subject  to  the  requirements  of  paragraphs  (a)(  4) 
 and  (a)(  5)  of  this  section. 
 (i)  Line  sharing.  Beginning  on  the  effective  date  of  the  Commissions  Triennial  Review  Order,  the  high  frequency  portion  of  a  copper  loop  shall  no  longer  be  required  to  be 
 provided  as  an  unbundled  network  element,  subject  to  the  transitional  line  sharing  conditions  in  paragraphs  (a)(  1)(  i)(  A)  and  (a)(  1)(  i)(  B)  of  this  section.  Line  sharing  is  the 
 process  by  which  a  requesting  telecommunications  carrier  provides  digital  subscriber  line  service  over  the  same  copper  loop  that  the  incumbent  LEC  uses  to  provide  voice  service, 
 with  the  incumbent  LEC  using  the  low  frequency  portion  of  the  loop  and  the  requesting  telecommunications  carrier  using  the  high  frequency  portion  of  the  loop.  The  high 
 frequency  portion  of  the  loop  consists  of  the  frequency  range  on  the  copper  loop  above  the  range  that  carries  analog  circuit-  switched  voice  transmissions.  This  portion  of  the 
 loop  includes  the  features,  functions,  and  capabilities  of  the  loop  that  are  used  to  establish  a  complete  transmission  path  on  the  high  frequency  range  between  the  incumbent  LECs 
 distribution  frame  (or  its  equivalent)  in  its  central  office  and  the  demarcation  point  at  the  end-  user  customer  premises,  and  includes  the  high  frequency  portion  of  any  inside  wire 
 owned  or  controlled  by  the  incumbent  LEC. 
 (A)  Line  sharing  customers  before  the  effective  date  of  the  Commissions  Triennial  Review  Order.  An  incumbent  LEC  shall  provide  a  requesting 
 telecommunications  carrier  with  the  ability  to  engage  in  line  sharing  over  a  copper  loop  where,  prior  to  the  effective  date  of  the  Commissions  Triennial 
 Review  Order,  the  requesting  telecommunications  carrier  began  providing  digital  subscriber  line  service  to  a  particular  end-  user  customer  and  has  not  ceased 
 providing  digital  subscriber  line  service  to  that  customer.  Until  such  end-  user  customer  cancels  or  otherwise  discontinues  its  subscription  to  the  digital 
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 subscriber  line  service  of  the  requesting  telecommunications  carrier,  or  its  successor  or  assign,  an  incumbent  LEC  shall  continue  to  provide  access  to  the 
 high  frequency  portion  of  the  loop  at  the  same  rate  that  the  incumbent  LEC  charged  for  such  access  prior  to  the  effective  date  of  the  Commissions  Triennial 
 Review  Order. 
 (B)  Line  sharing  customers  on  or  after  the  effective  date  of  the  Commissions  Triennial  Review  Order.  An  incumbent  LEC  shall  provide  a  requesting 
 telecommunications  carrier  with  the  ability  to  engage  in  line  sharing  over  a  copper  loop,  between  the  effective  date  of  the  Commissions  Triennial  Review 
 Order  and  three  years  after  that  effective  date,  where  the  requesting  telecommunications  carrier  began  providing  digital  subscriber  line  service  to  a 
 particular  end-  user  customer  on  or  before  the  date  one  year  after  that  effective  date.  Beginning  three  years  after  the  effective  date  of  the  Commissions  Triennial 
 Review  Order,  the  incumbent  LEC  is  no  longer  required  to  provide  a  requesting  telecommunications  carrier  with  the  ability  to  engage  in  line  sharing  for  this  end-user 
 customer  or  any  new  end-  user  customer.  Between  the  effective  date  of  the  Commissions  Triennial  Review  Order  and  three  years  after  that  effective  date,  an 
 incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  access  to  the  high  frequency  portion  of  a  copper  loop  in  order  to  serve  line  sharing 
 customers  obtained  between  the  effective  date  of  the  Commissions  Triennial  Review  Order  and  one  year  after  that  effective  date  in  the  following  manner: 

 (1)  During  the  first  year  following  the  effective  date  of  the  Commissions  Triennial  Review  Order,  the  incumbent  LEC  shall  provide  access  to  the 
 high  frequency  portion  of  a  copper  loop  at  25  percent  of  the  state-approved  monthly  recurring  rate,  or  25  percent  of  the  monthly  recurring 
 rate  set  forth  in  the  incumbent  LECs  and  requesting  telecommunications  carriers  interconnection  agreement,  for  access  to  a  copper  loop  in  effect 
 on  that  date. 
 (2)  Beginning  one  year  plus  one  day  after  the  effective  date  of  the  Commissions  Triennial  Review  Order  until  two  years  after  that  effective 
 date,  the  incumbent  LEC  shall  provide  access  to  the  high  frequency  portion  of  a  copper  loop  at  50  percent  of  the  state-  approved  monthly 
 recurring  rate,  or  50  percent  of  the  monthly  recurring  rate  set  forth  in  the  incumbent  LECs  and  requesting  telecommunications  carriers 
 interconnection  agreement,  for  access  to  a  copper  loop  in  effect  on  the  effective  date  of  the  Commissions  Triennial  Review  Order. 

 (3)  Beginning  two  years  plus  one  day  after  effective  date  of  the  Commissions  Triennial  Review  Order  until  three  years  after  that  effective 
 date,  the  incumbent  LEC  shall  provide  access  to  the  high  frequency  portion  of  a  copper  loop  at  75  percent  of  the  state-  approved  monthly 
 recurring  rate,  or  75  percent  of  the  monthly  recurring  rate  set  forth  in  the 
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 incumbent  LECs  and  requesting  telecommunications  carriers  interconnection  agreement,  for  access  to  a  copper  loop  in  effect  on  the 
 effective  date  of  the  Commissions  Triennial  Review  Order. 
 (ii)  Line  splitting.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  that  obtains  an  unbundled  copper  loop  from  the  incumbent  LEC  with  the  ability  to 
 engage  in  line  splitting  arrangements  with  another  competitive  LEC  using  a  splitter  collocated  at  the  central  office  where  the  loop  terminates  into  a  distribution  frame  or  its 
 equivalent.  Line  splitting  is  the  process  in  which  one  competitive  LEC  provides  narrowband  voice  service  over  the  low  frequency  portion  of  a  copper  loop  and  a  second 
 competitive  LEC  provides  digital  subscriber  line  service  over  the  high  frequency  portion  of  that  same  loop. 

 (A)  An  incumbent  LECs  obligation,  under  paragraph  (a)(  1)(  ii)  of  this  section,  to  provide  a  requesting  telecommunications  carrier  with  the  ability  to  engage  in  line 
 splitting  applies  regardless  of  whether  the  carrier  providing  voice  service  provides  its  own  switching  or  obtains  local  circuit  switching  as  an  unbundled  network 
 element  pursuant  to  paragraph  (d)  of  this  section. 
 (B)  An  incumbent  LEC  must  make  all  necessary  network  modifications,  including  providing  nondiscriminatory  access  to  operations  support  systems 
 necessary  for  pre-  ordering,  ordering,  provisioning,  maintenance  and  repair,  and  billing  for  loops  used  in  line  splitting  arrangements. 

 (iii)  Line  conditioning.  The  incumbent  LEC  shall  condition  a  copper  loop  at  the  request  of  the  carrier  seeking  access  to  a  copper  loop  under  paragraph  (a)(  1)  of  this  section,  the 
 high  frequency  portion  of  a  copper  loop  under  paragraph  (a)(  1)(  i)  of  this  section,  or  a  copper  subloop  under  paragraph  (b)  of  this  section  to  ensure  that  the  copper  loop  or 
 copper  subloop  is  suitable  for  providing  digital  subscriber  line  services,  including  those  provided  over  the  high  frequency  portion  of  the  copper  loop  or  copper  subloop,  whether 
 or  not  the  incumbent  LEC  offers  advanced  services  to  the  end-  user  customer  on  that  copper  loop  or  copper  subloop.  If  the  incumbent  LEC  seeks  compensation  from  the 
 requesting  telecommunications  carrier  for  line  conditioning,  the  requesting  telecommunications  carrier  has  the  option  of  refusing,  in  whole  or  in  part,  to  have  the  line 
 conditioned;  and  a  requesting  telecommunications  carriers  refusal  of  some  or  all  aspects  of  line  conditioning  will  not  diminish  any  right  it  may  have,  under  paragraphs  (a)  and  (b) 
 of  this  section,  to  access  the  copper  loop,  the  high  frequency  portion  of  the  copper  loop,  or  the  copper  subloop. 

 (A)  Line  conditioning  is  defined  as  the  removal  from  a  copper  loop  or  copper  subloop  of  any  device  that  could  diminish  the  capability  of  the  loop  or  subloop  to 
 deliver  high-  speed  switched  wireline  telecommunications  capability,  including  digital  subscriber  line  service.  Such  devices  include,  but  are  not  limited  to,  bridge 
 taps,  load  coils,  low  pass  filters,  and  range  extenders. 
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 (B)  Incumbent  LECs  shall  recover  the  costs  of  line  conditioning  from  the  requesting  telecommunications  carrier  in  accordance  with  the  Commissions 
 forward-  looking  pricing  principles  promulgated  pursuant  to  section  252(  d)(  1)  of  the  Act  and  in  compliance  with  rules  governing  nonrecurring  costs  in    51.507(  e). 

 (C)  Insofar  as  it  is  technically  feasible,  the  incumbent  LEC  shall  test  and  report  troubles  for  all  the  features,  functions,  and  capabilities  of  conditioned  copper 
 lines,  and  may  not  restrict  its  testing  to  voice  transmission  only. 
 (D)  Where  the  requesting  telecommunications  carrier  is  seeking  access  to  the  high  frequency  portion  of  a  copper  loop  or  copper  subloop  pursuant  to  paragraphs 
 (a)  or  (b)  of  this  section  and  the  incumbent  LEC  claims  that  conditioning  that  loop  or  subloop  will  significantly  degrade,  as  defined  in    51.233,  the  voiceband 
 services  that  the  incumbent  LEC  is  currently  providing  over  that  loop  or  subloop,  the  incumbent  LEC  must  either: 

 (1)  Locate  another  copper  loop  or  copper  subloop  that  has  been  or  can  be  conditioned,  migrate  the  incumbent  LECs  voiceband  service  to  that  loop  or 
 subloop,  and  provide  the  requesting  telecommunications  carrier  with  access  to  the  high  frequency  portion  of  that  alternative  loop  or  subloop;  or 

 (2)  Make  a  showing  to  the  state  commission  that  the  original  copper  loop  or  copper  subloop  cannot  be  conditioned  without  significantly  degrading 
 voiceband  services  on  that  loop  or  subloop,  as  defined  in    51.233,  and  that  there  is  no  adjacent  or  alternative  copper  loop  or  copper  subloop  available  that 
 can  be  conditioned  or  to  which  the  end-  user  customers  voiceband  service  can  be  moved  to  enable  line  sharing. 

 (E)  If,  after  evaluating  the  incumbent  LECs  showing  under  paragraph  (a)(  1)(  iii)(  D)(  2)  of  this  section,  the  state  commission  concludes  that  a  copper  loop 
 or  copper  subloop  cannot  be  conditioned  without  significantly  degrading  the  voiceband  service,  the  incumbent  LEC  cannot  then  or  subsequently  condition  that 
 loop  or  subloop  to  provide  advanced  services  to  its  own  customers  without  first  making  available  to  any  requesting  telecommunications  carrier  the  high  frequency 
 portion  of  the  newly  conditioned  loop  or  subloop. 
 (iv)  Maintenance,  repair,  and  testing.  (A)  An  incumbent  LEC  shall  provide,  on  a  nondiscriminatory  basis,  physical  loop  test  access  points  to  a  requesting 
 telecommunications  carrier  at  the  splitter,  through  a  cross-  connection  to  the  requesting  telecommunications  carriers  collocation  space,  or  through  a  standardized  interface,  such 
 as  an  intermediate  distribution  frame  or  a  test  access  server,  for  the  purpose  of  testing,  maintaining,  and  repairing  copper  loops  and  copper  subloops. 

 (B)  An  incumbent  LEC  seeking  to  utilize  an  alternative  physical  access  methodology  may  request  approval  to  do  so  from  the  state  commission,  but  must 
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 show  that  the  proposed  alternative  method  is  reasonable  and  nondiscriminatory,  and  will  not  disadvantage  a  requesting  telecommunications  carriers  ability  to 
 perform  loop  or  service  testing,  maintenance,  or  repair. 
 (v)  Control  of  the  loop  and  splitter  functionality.  In  situations  where  a  requesting  telecommunications  carrier  is  obtaining  access  to  the  high  frequency  portion  of  a 
 copper  loop  either  through  a  line  sharing  or  line  splitting  arrangement,  the  incumbent  LEC  may  maintain  control  over  the  loop  and  splitter  equipment  and 
 functions,  and  shall  provide  to  the  requesting  telecommunications  carrier  loop  and  splitter  functionality  that  is  compatible  with  any  transmission  technology  that  the 
 requesting  telecommunications  carrier  seeks  to  deploy  using  the  high  frequency  portion  of  the  loop,  as  defined  in  paragraph  (a)(  1)(  i)  of  this  section,  provided  that 
 such  transmission  technology  is  presumed  to  be  deployable  pursuant  to    51.230. 
 (2)  Hybrid  loops.  A  hybrid  loop  is  a  local  loop  composed  of  both  fiber  optic  cable,  usually  in  the  feeder  plant,  and  copper  wire  or  cable,  usually  in  the  distribution  plant. 

 (i)  Packet  switching  facilities,  features,  functions,  and  capabilities.  An  incumbent  LEC  is  not  required  to  provide  unbundled  access  to  the  packet 
 switched  features,  functions  and  capabilities  of  its  hybrid  loops.  Packet  switching  capability  is  the  routing  or  forwarding  of  packets,  frames,  cells,  or  other  data  units 
 based  on  address  or  other  routing  information  contained  in  the  packets,  frames,  cells  or  other  data  units,  and  the  functions  that  are  performed  by  the  digital 
 subscriber  line  access  multiplexers,  including  but  not  limited  to  the  ability  to  terminate  an  end-  user  customers  copper  loop  (which  includes  both  a  low-  band 
 voice  channel  and  a  high-  band  data  channel,  or  solely  a  data  channel);  the  ability  to  forward  the  voice  channels,  if  present,  to  a  circuit  switch  or  multiple  circuit 
 switches;  the  ability  to  extract  data  units  from  the  data  channels  on  the  loops;  and  the  ability  to  combine  data  units  from  multiple  loops  onto  one  or  more  trunks 
 connecting  to  a  packet  switch  or  packet  switches. 
 (ii)  Broadband  services.  When  a  requesting  telecommunications  carrier  seeks  access  to  a  hybrid  loop  for  the  provision  of  broadband  services,  an  incumbent 
 LEC  shall  provide  the  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  the  time  division  multiplexing  features,  functions, 
 and  capabilities  of  that  hybrid  loop,  including  DS1  or  DS3  capacity  (where  impairment  has  been  found  to  exist),  on  an  unbundled  basis  to  establish  a 
 complete  transmission  path  between  the  incumbent  LECs  central  office  and  an  end  users  customer  premises.  This  access  shall  include  access  to  all  features, 
 functions,  and  capabilities  of  the  hybrid  loop  that  are  not  used  to  transmit  packetized  information. 

 (iii)  Narrowband  services.  When  a  requesting  telecommunications  carrier  seeks  access  to  a  hybrid  loop  for  the  provision  of  narrowband  services,  the  incumbent 
 LEC  may  either: 
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 (A)  Provide  nondiscriminatory  access,  on  an  unbundled  basis,  to  an  entire  hybrid  loop  capable  of  voice-  grade  service  (i.  e.,  equivalent  to  DS0 
 capacity),  using  time  division  multiplexing  technology;  or 
 (B)  Provide  nondiscriminatory  access  to  a  spare  home-  run  copper  loop  serving  that  customer  on  an  unbundled  basis. 

 (3)  Fiber-  to-  the-  home  loops.  A  fiber-  to-  the-  home  loop  is  a  local  loop  consisting  entirely  of  fiber  optic  cable,  whether  dark  or  lit,  and  serving  an  end  users  customer  premises. 
 (i)  New  builds.  An  incumbent  LEC  is  not  required  to  provide  nondiscriminatory  access  to  a  fiber-  to-  the-  home  loop  on  an  unbundled  basis  when  the  incumbent  LEC  deploys  such 
 a  loop  to  an  end  users  customer  premises  that  previously  has  not  been  served  by  any  loop  facility. 

 (ii)  Overbuilds.  An  incumbent  LEC  is  not  required  to  provide  nondiscriminatory  access  to  a  fiber-  to-  the-  home  loop  on  an  unbundled  basis  when  the  incumbent  LEC  has 
 deployed  such  a  loop  parallel  to,  or  in  replacement  of,  an  existing  copper  loop  facility,  except  that: 

 (A)  The  incumbent  LEC  must  maintain  the  existing  copper  loop  connected  to  the  particular  customer  premises  after  deploying  the  fiber-  to-  the-  home  loop  and 
 provide  nondiscriminatory  access  to  that  copper  loop  on  an  unbundled  basis  unless  the  incumbent  LEC  retires  the  copper  loop  pursuant  to  paragraph  (a)(  3)(  iii) 
 of  this  section. 
 (B)  An  incumbent  LEC  that  maintains  the  existing  copper  loop  pursuant  to  paragraph  (a)(  3)(  ii)(  A)  of  this  section  need  not  incur  any  expenses  to  ensure  that 
 the  existing  copper  loop  remains  capable  of  transmitting  signals  prior  to  receiving  a  request  for  access  pursuant  to  that  paragraph,  in  which  case  the  incumbent  LEC 
 shall  restore  the  copper  loop  to  serviceable  condition  upon  request. 
 (C)  An  incumbent  LEC  that  retires  the  copper  loop  pursuant  to  paragraph  (a)(  3)(  iii)  of  this  section  shall  provide  nondiscriminatory  access  to  a  64  kilobits 
 per  second  transmission  path  capable  of  voice  grade  service  over  the  fiber-  to-  the-home  loop  on  an  unbundled  basis. 

 (iii)  Retirement  of  copper  loops  or  copper  subloops.  Prior  to  retiring  any  copper  loop  or  copper  subloop  that  has  been  replaced  with  a  fiber-  to-  the-  home  loop,  an  incumbent  LEC 
 must  comply  with: 
 (A)  The  network  disclosure  requirements  set  forth  in  section  251(  c)(  5)  of  the  Act  and  in    51.325  through    51.335;  and 
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 (B)  Any  applicable  state  requirements. 
 (4)  DS1  loops.  (i)  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  a  DS1  loop  on  an  unbundled  basis  except  where  the  state 
 commission  has  found,  through  application  of  the  competitive  wholesale  facilities  trigger  in  paragraph  (a)(  4)(  ii)  of  this  section,  that  requesting  telecommunications  carriers  are  not 
 impaired  without  access  to  a  DS1  loop  at  a  specific  customer  location.  A  DS1  loop  is  a  digital  local  loop  having  a  total  digital  signal  speed  of  1.544  megabytes  per  second.  DS1 
 loops  include,  but  are  not  limited  to,  two-  wire  and  four-  wire  copper  loops  capable  of  providing  high-  bit  rate  digital  subscriber  line  services,  including  T1  services. 

 (ii)  Competitive  wholesale  facilities  trigger  for  DS1  loops.  A  state  commission  shall  find  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  a  DS1  loop  at 
 a  specific  customer  location  where  two  or  more  competing  providers  not  affiliated  with  each  other  or  with  the  incumbent  LEC,  including  intermodal  providers  of  service  comparable  in 
 quality  to  that  of  the  incumbent  LEC,  each  satisfy  the  conditions  in  paragraphs  (a)(  4)(  ii)(  A)  and  (a)(  4)(  ii)(  B)  of  this  section: 

 (A)  The  competing  provider  has  deployed  its  own  DS1  facilities,  and  offers  a  DS1  loop  over  its  own  facilities  on  a  widely  available  wholesale  basis  to  other  carriers 
 desiring  to  serve  customers  at  that  location.  For  purposes  of  this  paragraph,  the  competing  providers  DS1  facilities  may  use  dark  fiber  facilities  that  the  competing 
 provider  has  obtained  on  an  unbundled,  leased,  or  purchased  basis  if  it  has  attached  its  own  optronics  to  activate  the  fiber. 

 (B)  The  competing  provider  has  access  to  the  entire  customer  location,  including  each  individual  unit  within  that  location. 
 (5)  DS3  loops.  Subject  to  the  cap  in  paragraph  (a)(  5)(  iii),  an  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  a  DS3  loop  on  an 
 unbundled  basis  except  where  the  state  commission  has  found,  through  application  of  either  paragraph  (a)(  5)(  i)  of  this  section  or  the  potential  deployment  analysis  in  paragraph  (a)(  5)(  ii)  of 
 this  section,  that  requesting  telecommunications  carriers  are  not  impaired  without  access  to  a  DS3  loop  at  a  specific  customer  location.  A  DS3  loop  is  a  digital  local  loop  having  a  total  digital 
 signal  speed  of  44.736  megabytes  per  second. 
 (i)  Triggers  for  DS3  loops.  A  state  commission  shall  find  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  unbundled  DS3  loops  at  a 
 specific  customer  location  where  two  or  more  competing  providers  not  affiliated  with  each  other  or  with  the  incumbent  LEC,  including  intermodal  providers  of  service 
 comparable  in  quality  to  that  of  the  incumbent  LEC,  satisfy  either  paragraph  (a)(  5)(  i)(  A)  or  paragraph  (a)(  5)(  i)(  B)  of  this  section: 

 (A)  Self-  provisioning  trigger  for  DS3  loops.  To  satisfy  this  trigger,  a  state  commission  must  find  that  each  competing  provider  has  either  deployed  its  own 
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 DS3  facilities  at  that  specific  customer  location  and  is  serving  customers  via  those  facilities  at  that  location,  or  has  deployed  DS3  facilities  by  attaching  its  own 
 optronics  to  activate  dark  fiber  transmission  facilities  obtained  under  a  long-  term  indefeasible  right  of  use  and  is  serving  customers  via  those  facilities  at  that 
 location. 
 (B)  Competitive  wholesale  facilities  trigger  for  DS3  loops.  To  satisfy  this  trigger,  a  state  commission  must  find  that  each  competing  provider  satisfies  the 
 conditions  in  paragraphs  (a)(  5)(  i)(  B)(  1)  and  (a)(  5)(  i)(  B)(  2)  of  this  section. 
 (1)  The  competing  provider  has  deployed  its  own  DS3  facilities,  and  offers  a  DS3  loop  over  its  own  facilities  on  a  widely  available  wholesale 
 basis  to  other  competing  providers  seeking  to  serve  customers  at  the  specific  customer  location.  For  purposes  of  this  paragraph,  the  competing 
 providers  DS3  facilities  may  use  dark  fiber  facilities  that  the  competing  provider  has  obtained  on  an  unbundled,  leased,  or  purchased  basis  if  it  has 
 attached  its  own  optronics  to  activate  the  fiber. 
 (2)  The  competing  provider  has  access  to  the  entire  customer  location,  including  each  individual  unit  within  that  location. 

 (ii)  Potential  deployment  of  DS3  loops.  Where  neither  trigger  in  paragraph  (a)(  5)(  i)  of  this  section  is  satisfied,  a  state  commission  shall  consider  whether  other  evidence  shows 
 that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  an  unbundled  DS3  loop  at  a  specific  customer  location.  To  make  this  determination,  a  state 
 must  consider  the  following  factors:  evidence  of  alternative  loop  deployment  at  that  location;  local  engineering  costs  of  building  and  utilizing  transmission  facilities;  the  cost 
 of  underground  or  aerial  laying  of  fiber  or  copper;  the  cost  of  equipment  needed  for  transmission;  installation  and  other  necessary  costs  involved  in  setting  up  service;  local 
 topography  such  as  hills  and  rivers;  availability  of  reasonable  access  to  rights-  of-  way;  building  access  restrictions/  costs;  and  availability/  feasibility  of  similar  quality/  reliability 
 alternative  transmission  technologies  at  that  particular  location. 
 (iii)  Cap  on  unbundled  DS3  circuits.  A  requesting  telecommunications  carrier  may  obtain  a  maximum  of  two  unbundled  DS3  loops  for  any  single  customer  location  where 
 DS3  loops  are  available  as  unbundled  loops. 
 (6)  Dark  fiber  loops.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  a  dark  fiber  loop  on  an  unbundled  basis  except 
 where  a  state  commission  has  found,  through  application  of  the  self-  provisioning  trigger  in  paragraph  (a)(  6)(  i)  of  this  section  or  the  potential  deployment  analysis  in  paragraph  (a)(  6)(  ii) 
 of  this  section,  that  requesting  telecommunications  carriers  are  not  impaired  without  access  to  a  dark  fiber  loop  at  a  specific  customer  location.  Dark  fiber  is  fiber  within  an  existing 
 fiber  optic  cable  that  has  not  yet  been  activated  through  optronics  to  render  it  capable  of  carrying  communications  services. 
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 (i)  Self-  provisioning  trigger  for  dark  fiber  loops.  A  state  commission  shall  find  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  a  dark  fiber 
 loop  at  a  specific  customer  location  where  two  or  more  competing  providers  not  affiliated  with  each  other  or  with  the  incumbent  LEC,  have  deployed  their  own  dark 
 fiber  facilities  at  that  specific  customer  location.  For  purposes  of  making  this  determination,  a  competing  provider  that  has  obtained  those  dark  fiber  facilities  under 
 a  long-  term  indefeasible  right  of  use  shall  be  considered  a  competing  provider  with  its  own  dark  fiber  facilities.  Dark  fiber  purchased  on  an  unbundled  basis  from  the 
 incumbent  LEC  shall  not  be  considered  under  this  paragraph. 
 (ii)  Potential  deployment  of  dark  fiber  loops.  Where  the  trigger  in  paragraph  (a)(  6)(  i)  of  this  section  is  not  satisfied,  a  state  commission  shall  consider  whether  other  evidence 
 shows  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  an  unbundled  dark  fiber  loop  at  a  specific  customer  location.  To  make  this  determination,  a 
 state  must  consider  the  following  factors:  evidence  of  alternative  loop  deployment  at  that  location;  local  engineering  costs  of  building  and  utilizing  transmission  facilities;  the  cost 
 of  underground  or  aerial  laying  of  fiber;  the  cost  of  equipment  needed  for  transmission;  installation  and  other  necessary  costs  involved  in  setting  up  service;  local  topography 
 such  as  hills  and  rivers;  availability  of  reasonable  access  to  rights-  of-  way;  building  access  restrictions/  costs;  and  availability/  feasibility  of  similar  quality/  reliability 
 alternative  transmission  technologies  at  that  particular  location. 
 (7)  State  commission  proceedings.  A  state  commission  shall  complete  the  proceedings  necessary  to  satisfy  the  requirements  in  paragraphs  (a)(  4),  (a)(  5),  and  (a)(  6)  of  this  section  in 
 accordance  with  paragraphs  (a)(  7)(  i)  and  (a)(  7)(  ii)  of  this  section. 
 (i)  Initial  review.  A  state  commission  shall  complete  any  initial  review  applying  the  triggers  and  criteria  in  paragraphs  (a)(  4),  (a)(  5),  and  (a)(  6)  of  this  section  within  nine 
 months  from  the  effective  date  of  the  Commissions  Triennial  Review  Order. 
 (ii)  Continuing  review.  A  state  commission  shall  complete  any  subsequent  review  applying  these  triggers  and  criteria  within  six  months  of  the  filing  of  a  petition  or  other 
 pleading  to  conduct  such  a  review. 
 (8)  Routine  network  modifications.  (i)  An  incumbent  LEC  shall  make  all  routine  network  modifications  to  unbundled  loop  facilities  used  by  requesting  telecommunications  carriers  where 
 the  requested  loop  facility  has  already  been  constructed.  An  incumbent  LEC  shall  perform  these  routine  network  modifications  to  unbundled  loop  facilities  in  a  nondiscriminatory  fashion, 
 without  regard  to  whether  the  loop  facility  being  accessed  was  constructed  on  behalf,  or  in  accordance  with  the  specifications,  of  any  carrier. 

 (ii)  A  routine  network  modification  is  an  activity  that  the  incumbent  LEC  regularly  undertakes  for  its  own  customers.  Routine  network  modifications  include,  but  are  not 
 limited  to,  rearranging  or  splicing  of  cable;  adding  an  equipment  case;  adding  a  doubler 
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 or  repeater;  adding  a  smart  jack;  installing  a  repeater  shelf;  adding  a  line  card;  deploying  a  new  multiplexer  or  reconfiguring  an  existing  multiplexer;  and  attaching  electronic  and 
 other  equipment  that  the  incumbent  LEC  ordinarily  attaches  to  a  DS1  loop  to  activate  such  loop  for  its  own  customer.  They  also  include  activities  needed  to  enable  a 
 requesting  telecommunications  carrier  to  obtain  access  to  a  dark  fiber  loop.  Routine  network  modifications  may  entail  activities  such  as  accessing  manholes,  deploying 
 bucket  trucks  to  reach  aerial  cable,  and  installing  equipment  casings.  Routine  network  modifications  do  not  include  the  construction  of  a  new  loop,  or  the  installation  of  new 
 aerial  or  buried  cable  for  a  requesting  telecommunications  carrier. 
 (9)  Engineering  policies,  practices,  and  procedures.  An  incumbent  LEC  shall  not  engineer  the  transmission  capabilities  of  its  network  in  a  manner,  or  engage  in  any  policy,  practice,  or 

 procedure,  that  disrupts  or  degrades  access  to  a  local  loop  or  subloop,  including  the  time  division  multiplexing-  based  features,  functions,  and  capabilities  of  a  hybrid  loop,  for  which  a 
 requesting  telecommunications  carrier  may  obtain  or  has  obtained  access  pursuant  to  paragraph  (a)  of  this  section. 

 (b)  Subloops.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  subloops  on  an  unbundled  basis  in  accordance  with  section 
 251(  c)(  3)  of  the  Act  and  this  part  and  as  set  forth  in  paragraph  (b)  of  this  section. 
 (1)  Copper  subloops.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  a  copper  subloop  on  an  unbundled  basis.  A  copper 
 subloop  is  a  portion  of  a  copper  loop,  or  hybrid  loop,  comprised  entirely  of  copper  wire  or  copper  cable  that  acts  as  a  transmission  facility  between  any  point  of  technically  feasible 
 access  in  an  incumbent  LECs  outside  plant,  including  inside  wire  owned  or  controlled  by  the  incumbent  LEC,  and  the  end-  user  customer  premises.  A  copper  subloop  includes  all 
 intermediate  devices  (including  repeaters  and  load  coils)  used  to  establish  a  transmission  path  between  a  point  of  technically  feasible  access  and  the  demarcation  point  at  the  end-  user 
 customer  premises,  and  includes  the  features,  functions,  and  capabilities  of  the  copper  loop.  Copper  subloops  include  two-  wire  and  four-  wire  analog  voice-  grade  subloops  as  well  as  two-wire 
 and  four-  wire  subloops  conditioned  to  transmit  the  digital  signals  needed  to  provide  digital  subscriber  line  services,  regardless  of  whether  the  subloops  are  in  service  or  held  as 
 spares. 
 (i)  Point  of  technically  feasible  access.  A  point  of  technically  feasible  access  is  any  point  in  the  incumbent  LECs  outside  plant  where  a  technician  can  access  the  copper  wire 
 within  a  cable  without  removing  a  splice  case.  Such  points  include,  but  are  not  limited  to,  a  pole  or  pedestal,  the  serving  area  interface,  the  network  interface  device,  the 
 minimum  point  of  entry,  any  remote  terminal,  and  the  feeder/  distribution  interface.  An  incumbent  LEC  shall,  upon  a  site-  specific  request,  provide  access  to  a  copper  subloop  at 
 a  splice  near  a  remote  terminal.  The  incumbent  LEC  shall  be  compensated  for  providing  this  access  in  accordance  with    51.501  through  51.515. 

 (ii)  Rules  for  collocation.  Access  to  the  copper  subloop  is  subject  to  the  Commissions 
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 collocation  rules  at    51.321  and  51.323. 
 (2)  Subloops  for  access  to  multiunit  premises  wiring.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  the  subloop  for 
 access  to  multiunit  premises  wiring  on  an  unbundled  basis  regardless  of  the  capacity  level  or  type  of  loop  that  the  requesting  telecommunications  carrier  seeks  to  provision  for  its 
 customer.  The  subloop  for  access  to  multiunit  premises  wiring  is  defined  as  any  portion  of  the  loop  that  it  is  technically  feasible  to  access  at  a  terminal  in  the  incumbent  LECs  outside 
 plant  at  or  near  a  multiunit  premises.  One  category  of  this  subloop  is  inside  wire,  which  is  defined  for  purposes  of  this  section  as  all  loop  plant  owned  or  controlled  by  the  incumbent 
 LEC  at  a  multiunit  customer  premises  between  the  minimum  point  of  entry  as  defined  in    68.105  of  this  chapter  and  the  point  of  demarcation  of  the  incumbent  LECs  network  as 
 defined  in    68.3  of  this  chapter. 
 (i)  Point  of  technically  feasible  access.  A  point  of  technically  feasible  access  is  any  point  in  the  incumbent  LECs  outside  plant  at  or  near  a  multiunit  premises  where  a 
 technician  can  access  the  wire  or  fiber  within  the  cable  without  removing  a  splice  case  to  reach  the  wire  or  fiber  within  to  access  the  wiring  in  the  multiunit  premises.  Such  points 
 include,  but  are  not  limited  to,  a  pole  or  pedestal,  the  network  interface  device,  the  minimum  point  of  entry,  the  single  point  of  interconnection,  and  the  feeder/  distribution 
 interface. 
 (ii)  Single  point  of  interconnection.  Upon  notification  by  a  requesting  telecommunications  carrier  that  it  requests  interconnection  at  a  multiunit  premises  where 
 the  incumbent  LEC  owns,  controls,  or  leases  wiring,  the  incumbent  LEC  shall  provide  a  single  point  of  interconnection  that  is  suitable  for  use  by  multiple  carriers.  This 
 obligation  is  in  addition  to  the  incumbent  LECs  obligations,  under  paragraph  (b)(  2)  of  this  section,  to  provide  nondiscriminatory  access  to  a  subloop  for  access  to  multiunit 
 premises  wiring,  including  any  inside  wire,  at  any  technically  feasible  point.  If  the  parties  are  unable  to  negotiate  rates,  terms,  and  conditions  under  which  the  incumbent 
 LEC  will  provide  this  single  point  of  interconnection,  then  any  issues  in  dispute  regarding  this  obligation  shall  be  resolved  in  state  proceedings  under  section  252  of  the 
 Act. 
 (3)  Other  subloop  provisions.  (i)  Technical  feasibility.  If  parties  are  unable  to  reach  agreement  through  voluntary  negotiations  as  to  whether  it  is  technically  feasible,  or  whether 
 sufficient  space  is  available,  to  unbundle  a  copper  subloop  or  subloop  for  access  to  multiunit  premises  wiring  at  the  point  where  a  telecommunications  carrier  requests,  the  incumbent 
 LEC  shall  have  the  burden  of  demonstrating  to  the  state  commission,  in  state  proceedings  under  section  252  of  the  Act,  that  there  is  not  sufficient  space  available,  or  that  it  is  not 
 technically  feasible  to  unbundle  the  subloop  at  the  point  requested. 
 (ii)  Best  practices.  Once  one  state  commission  has  determined  that  it  is  technically  feasible  to  unbundle  subloops  at  a  designated  point,  an  incumbent  LEC  in  any  state  shall 
 have  the  burden  of  demonstrating  to  the  state  commission,  in  state  proceedings  under 
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 section  252  of  the  Act,  that  it  is  not  technically  feasible,  or  that  sufficient  space  is  not  available,  to  unbundle  its  own  loops  at  such  a  point. 
 (c)  Network  interface  device.  Apart  from  its  obligation  to  provide  the  network  interface  device  functionality  as  part  of  an  unbundled  loop  or  subloop,  an  incumbent  LEC  also  shall  provide 
 nondiscriminatory  access  to  the  network  interface  device  on  an  unbundled  basis,  in  accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part.  The  network  interface  device  element  is  a  stand-alone 
 network  element  and  is  defined  as  any  means  of  interconnection  of  customer  premises  wiring  to  the  incumbent  LECs  distribution  plant,  such  as  a  cross-  connect  device  used  for  that 
 purpose.  An  incumbent  LEC  shall  permit  a  requesting  telecommunications  carrier  to  connect  its  own  loop  facilities  to  on-  premises  wiring  through  the  incumbent  LECs  network  interface 
 device,  or  at  any  other  technically  feasible  point. 
 (d)  Local  circuit  switching.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  local  circuit  switching,  including  tandem  switching,  on 
 an  unbundled  basis,  in  accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part  and  as  set  forth  in  paragraph  (d)  of  this  section. 

 (1)  Definition.  Local  circuit  switching  is  defined  as  follows: 
 (i)  Local  circuit  switching  encompasses  all  line-  side  and  trunk-  side  facilities,  plus  the  features,  functions,  and  capabilities  of  the  switch.  The  features, 
 functions,  and  capabilities  of  the  switch  shall  include  the  basic  switching  function  of  connecting  lines  to  lines,  lines  to  trunks,  trunks  to  lines,  and  trunks  to  trunks. 

 (ii)  Local  circuit  switching  includes  all  vertical  features  that  the  switch  is  capable  of  providing,  including  custom  calling,  custom  local  area  signaling  services 
 features,  and  Centrex,  as  well  as  any  technically  feasible  customized  routing  functions. 

 (2)  DS0  capacity  (i.  e.,  mass  market)  determinations.  An  incumbent  LEC  shall  provide  access  to  local  circuit  switching  on  an  unbundled  basis  to  a  requesting 
 telecommunications  carrier  serving  end  users  using  DS0  capacity  loops  except  where  the  state  commission  has  found,  in  accordance  with  the  conditions  set  forth  in  paragraph 
 (d)(  2)  of  this  section,  that  requesting  telecommunications  carriers  are  not  impaired  in  a  particular  market,  or  where  the  state  commission  has  found  that  all  such  impairment 
 would  be  cured  by  implementation  of  transitional  unbundled  local  circuit  switching  in  a  given  market  and  has  implemented  such  transitional  access  as  set  forth  in  paragraph 
 (d)(  2)(  iii)(  C)  of  this  section. 
 (i)  Market  definition.  A  state  commission  shall  define  the  markets  in  which  it  will  evaluate  impairment  by  determining  the  relevant  geographic  area  to  include 
 in  each  market.  In  defining  markets,  a  state  commission  shall  take  into  consideration  the  locations  of  mass  market  customers  actually  being  served  (if 
 any)  by  competitors,  the  variation  in  factors  affecting  competitors  ability  to  serve 
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 each  group  of  customers,  and  competitors  ability  to  target  and  serve  specific  markets  profitably  and  efficiently  using  currently  available  technologies.  A  state 
 commission  shall  not  define  the  relevant  geographic  area  as  the  entire  state. 
 (ii)  Batch  cut  process.  In  each  of  the  markets  that  the  state  commission  defines  pursuant  to  paragraph  (d)(  2)(  i)  of  this  section,  the  state  commission  shall  either 
 establish  an  incumbent  LEC  batch  cut  process  as  set  forth  in  paragraph  (d)(  2)(  ii)(  A)  of  this  section  or  issue  detailed  findings  explaining  why  such  a  batch 
 process  is  unnecessary,  as  set  forth  in  paragraph  (d)(  2)(  ii)(  B)  of  this  section.  A  batch  cut  process  is  defined  as  a  process  by  which  the  incumbent  LEC 
 simultaneously  migrates  two  or  more  loops  from  one  carriers  local  circuit  switch  to  another  carriers  local  circuit  switch,  giving  rise  to  operational  and  economic 
 efficiencies  not  available  when  migrating  loops  from  one  carriers  local  circuit  switch  to  another  carriers  local  circuit  switch  on  a  line-  by-  line  basis. 

 (A)  A  state  commission  shall  establish  an  incumbent  LEC  batch  cut  process  for  use  in  migrating  lines  served  by  one  carriers  local  circuit 
 switch  to  lines  served  by  another  carriers  local  circuit  switch  in  each  of  the  markets  the  state  commission  has  defined  pursuant  to  paragraph 
 (d)(  2)(  i)  of  this  section.  In  establishing  the  incumbent  LEC  batch  cut  process: 

 (1)  A  state  commission  shall  first  determine  the  appropriate  volume  of  loops  that  should  be  included  in  the  batch. 
 (2)  A  state  commission  shall  adopt  specific  processes  to  be  employed  when  performing  a  batch  cut,  taking  into  account  the 
 incumbent  LECs  particular  network  design  and  cut  over  practices. 
 (3)  A  state  commission  shall  evaluate  whether  the  incumbent  LEC  is  capable  of  migrating  multiple  lines  served  using  unbundled  local 
 circuit  switching  to  switches  operated  by  a  carrier  other  than  the  incumbent  LEC  for  any  requesting  telecommunications  carrier  in  a 
 timely  manner,  and  may  require  that  incumbent  LECs  comply  with  an  average  completion  interval  metric  for  provision  of  high 
 volumes  of  loops. 
 (4)  A  state  commission  shall  adopt  rates  for  the  batch  cut  activities  it  approves  in  accordance  with  the  Commissions  pricing  rules  for 
 unbundled  network  elements.  These  rates  shall  reflect  the  efficiencies  associated  with  batched  migration  of  loops  to  a 
 requesting  telecommunications  carriers  switch,  either  through  a  reduced  per-  line  rate  or  through  volume  discounts  as  appropriate. 

 (B)  If  a  state  commission  concludes  that  the  absence  of  a  batch  cut 
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 migration  process  is  not  impairing  requesting  telecommunications  carriers  ability  to  serve  end  users  using  DS0  loops  in  the  mass  market 
 without  access  to  local  circuit  switching  on  an  unbundled  basis,  that  conclusion  will  render  the  creation  of  such  a  process  unnecessary.  In  such 
 cases,  the  state  commission  shall  issue  detailed  findings  regarding  the  volume  of  unbundled  loop  migrations  that  could  be  expected  if  requesting 
 telecommunications  carriers  were  no  longer  entitled  to  local  circuit  switching  on  an  unbundled  basis,  the  ability  of  the  incumbent  LEC  to  meet 
 that  demand  in  a  timely  and  efficient  manner  using  its  existing  hot  cut  process,  and  the  non-  recurring  costs  associated  with  that  hot  cut  process. 
 The  state  commission  further  shall  explain  why  these  findings  indicate  that  the  absence  of  a  batch  cut  process  does  not  give  rise  to  impairment  in 
 the  market  at  issue. 
 (iii)  State  commission  analysis.  To  determine  whether  requesting  telecommunications  carriers  are  impaired  without  access  to  local  circuit  switching 
 on  an  unbundled  basis,  a  state  commission  shall  perform  the  inquiry  set  forth  in  paragraphs  (d)(  2)(  iii)(  A)  through  (d)(  2)(  iii)(  C)  of  this  section: 

 (A)  Local  switching  triggers.  A  state  commission  shall  find  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to 
 local  circuit  switching  on  an  unbundled  basis  in  a  particular  market  where  either  the  self-  provisioning  trigger  set  forth  in  paragraph  (d)(  2)(  iii)(  A)(  1) 
 of  this  section  or  the  competitive  wholesale  facilities  trigger  set  forth  in  paragraph  (d)(  2)(  iii)(  A)(  2)  of  this  section  is  satisfied. 

 (1)  Local  switching  self-  provisioning  trigger.  To  satisfy  this  trigger,  a  state  commission  must  find  that  three  or  more  competing 
 providers  not  affiliated  with  each  other  or  the  incumbent  LEC,  including  intermodal  providers  of  service  comparable  in  quality  to 
 that  of  the  incumbent  LEC,  each  are  serving  mass  market  customers  in  the  particular  market  with  the  use  of  their  own  local 
 switches.  ` 
 (2)  Local  switching  competitive  wholesale  facilities  trigger.  To  satisfy  this  trigger,  a  state  commission  must  find  that  two  or  more 
 competing  providers  not  affiliated  with  each  other  or  the  incumbent  LEC,  including  intermodal  providers  of  service 
 comparable  in  quality  to  that  of  the  incumbent  LEC,  each  offer  wholesale  local  switching  service  to  customers  serving  DS0 
 capacity  loops  in  that  market  using  their  own  switches. 
 (B)  Additional  state  authority.  If  neither  of  the  triggers  described  in  paragraph  (d)(  2)(  iii)(  A)  of  this  section  has  been  satisfied,  the  state 
 commission  shall  find  that  requesting  telecommunications  carriers  are  not 
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 impaired  without  access  to  unbundled  local  circuit  switching  in  a  particular  market  where  the  state  commission  determines  that  self-provisioning 
 of  local  switching  is  economic  based  on  the  following  criteria: 

 (1)  Evidence  of  actual  deployment.  The  state  commission  shall  consider  whether  switches  actually  deployed  in  the  market  at  issue 
 permit  competitive  entry  in  the  absence  of  unbundled  local  circuit  switching.  Specifically,  the  state  commission  shall  examine 
 whether,  in  the  market  at  issue,  there  are  either  two  wholesale  providers  or  three  self-  provisioners  of  local  switching  not  affiliated 
 with  each  other  or  the  incumbent  LEC,  serving  end  users  using  DS1  or  higher  capacity  loops  in  the  market  at  issue;  or  there  is  any 
 carrier,  including  any  intermodal  provider  of  service  comparable  in  quality  to  that  of  the  incumbent  LEC,  using  a  self-  provisioned 
 switch  to  serve  end  users  using  DS0  capacity  loops.  If  so,  and  if  the  state  commission  determines  that  the  switch  or  switches 
 identified  can  be  used  to  serve  end  users  using  DS0  capacity  loops  in  that  market  in  an  economic  fashion,  this  evidence  must  be  given 
 substantial  weight. 
 (2)  Operational  barriers.  The  state  commission  also  shall  examine  the  role  of  potential  operational  barriers  in  determining  whether  to 
 find  no  impairment  in  a  given  market.  Specifically,  the  state  commission  shall  examine  whether  the  incumbent  LECs 
 performance  in  provisioning  loops,  difficulties  in  obtaining  collocation  space  due  to  lack  of  space  or  delays  in  provisioning  by 
 the  incumbent  LEC,  or  difficulties  in  obtaining  cross-  connects  in  an  incumbent  LECs  wire  center  render  entry  uneconomic  for 
 requesting  telecommunications  carriers  in  the  absence  of  unbundled  access  to  local  circuit  switching. 

 (3)  Economic  barriers.  The  state  commission  shall  also  examine  the  role  of  potential  economic  barriers  in  determining  whether  to 
 find  no  impairment  in  a  given  market.  Specifically,  the  state  commission  shall  examine  whether  the  costs  of  migrating 
 incumbent  LEC  loops  to  requesting  telecommunications  carriers  switches  or  the  costs  of  backhauling  voice  circuits  to  requesting 
 telecommunications  carriers  switches  from  the  end  offices  serving  their  end  users  render  entry  uneconomic  for  requesting 
 telecommunications  carriers. 
 (4)  Multi-  line  DS0  end  users.  As  part  of  the  economic  analysis  set  forth  in  paragraph  (d)(  2)(  iii)(  B)(  3)  of  this  section,  the  state 
 commission  shall  establish  a  maximum  number  of  DS0  loops  for 
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 each  geographic  market  that  requesting  telecommunications  carriers  can  serve  through  unbundled  switching  when  serving 
 multiline  end  users  at  a  single  location.  Specifically,  in  establishing  this  cutoff,  the  state  commission  shall  take  into 
 account  the  point  at  which  the  increased  revenue  opportunity  at  a  single  location  is  sufficient  to  overcome  impairment  and  the  point 
 at  which  multiline  end  users  could  be  served  in  an  economic  fashion  by  higher  capacity  loops  and  a  carriers  own  switching  and 
 thus  be  considered  part  of  the  DS1  enterprise  market. 
 (C)  Transitional  use  of  unbundled  switching.  If  the  triggers  described  in  paragraph  (d)(  2)(  iii)(  A)  of  this  section  have  not  been  satisfied  with  regard 
 to  a  particular  market  and  the  analysis  described  in  paragraph  (d)(  2)(  iii)(  B)  of  this  section  has  resulted  in  a  finding  that  requesting 
 telecommunications  carriers  are  impaired  without  access  to  local  circuit  switching  on  an  unbundled  basis  in  that  market,  the  state  commission  shall 
 consider  whether  any  impairment  would  be  cured  by  transitional  (  rolling)  access  to  local  circuit  switching  on  an  unbundled  basis  for  a 
 period  of  90  days  or  more.  Rolling  access  means  the  use  of  unbundled  local  circuit  switching  for  a  limited  period  of  time  for  each  end-  user 
 customer  to  whom  a  requesting  telecommunications  carrier  seeks  to  provide  service.  If  the  state  commission  determines  that  transitional 
 access  to  unbundled  local  circuit  switching  would  cure  any  impairment,  it  shall  require  incumbent  LECs  to  make  unbundled  local  circuit  switching 
 available  to  requesting  telecommunications  carriers  for  90  days  or  more,  as  specified  by  the  state  commission.  The  time  limit  set  by  the 
 commission  shall  apply  to  each  request  for  access  to  unbundled  local  circuit  switching  by  a  requesting  telecommunications  carrier  on  a  per 
 customer  basis. 
 (iv)  DS0  capacity  end-  user  transition.  If  a  state  commission  finds  that  no  impairment  exists  in  a  market  or  that  any  impairment  could  be  cured  by 
 transitional  access  to  unbundled  local  circuit  switching,  all  requesting  telecommunications  carriers  in  that  market  shall  commit  to  an  implementation 
 plan  with  the  incumbent  LEC  for  the  migration  of  the  embedded  unbundled  switching  mass  market  customer  base  within  2  months  of  the  state  commission 
 determination.  A  requesting  telecommunications  carrier  may  no  longer  obtain  access  to  unbundled  local  circuit  switching  5  months  after  the  state  commission 
 determination,  except,  where  applicable,  on  a  transitional  basis  as  described  in  paragraph  (d)(  2)(  iii)(  C)  of  this  section. 

 (A)  Transition  timeline.  Each  requesting  telecommunications  carrier  shall  submit  the  orders  necessary  to  migrate  its  embedded  base  of  end-  user 
 customers  off  of  the  unbundled  local  circuit  switching  element  in  accordance  with  the  following  timetable,  measured  from  the  day  of  the 
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 state  commission  determination.  For  purposes  of  calculating  the  number  of  customers  who  must  be  migrated,  the  embedded  base  of  customers  shall 
 include  all  customers  served  using  unbundled  switching  that  are  not  customers  being  served  with  transitional  unbundled  switching  pursuant  to 
 paragraph  (d)(  3)(  iii)(  C)  of  this  section. 
 (1)  Month  13:  Each  requesting  telecommunications  carrier  must  submit  orders  for  one-  third  of  all  its  unbundled  local  circuit 
 switching  end-  user  customers; 
 (2)  Month  20:  Each  requesting  telecommunications  carrier  must  submit  orders  for  half  of  its  remaining  unbundled  local  circuit 
 switching  end-  user  customers,  as  calculated  pursuant  to  paragraph  (d)(  2)(  iv)(  A)(  1)  of  this  section;  and 

 (3)  Month  27:  Each  requesting  telecommunications  carrier  must  submit  orders  for  its  remaining  unbundled  local  circuit  switching 
 end-  user  customers. 
 (B)  Operational  aspects  of  the  migration.  Requesting  telecommunications  carriers  and  the  incumbent  LEC  shall  jointly  submit  the  details  of  their 
 implementation  plans  for  each  market  to  the  state  commission  within  two  months  of  the  state  commissions  determination  that  requesting 
 telecommunications  carriers  are  not  impaired  without  access  to  local  circuit  switching  on  an  unbundled  basis.  Each  requesting 
 telecommunications  carrier  shall  also  notify  the  state  commission  when  it  has  submitted  its  orders  for  migration.  Each  incumbent  LEC  shall  notify 
 the  state  commission  when  it  has  completed  the  migration. 
 (3)  DS1  capacity  and  above  (i.  e.,  enterprise  market)  determinations.  An  incumbent  LEC  is  not  required  to  provide  access  to  local  circuit  switching  on  an  unbundled  basis  to 
 requesting  telecommunications  carriers  for  the  purpose  of  serving  end-  user  customers  using  DS1  capacity  and  above  loops  except  where  the  state  commission  petitions  this 
 Commission  for  waiver  of  this  finding  in  accordance  with  the  conditions  set  forth  in  paragraph  (d)(  3)(  i)  of  this  section  and  the  Commission  grants  such  waiver. 

 (i)  State  commission  inquiry.  In  its  petition,  a  state  commission  wishing  to  rebut  the  Commissions  finding  should  petition  the  Commission  to  show  that  requesting 
 telecommunications  carriers  are  impaired  without  access  to  local  circuit  switching  to  serve  end  users  using  DS1  capacity  and  above  loops  in  a  particular  geographic 
 market  as  defined  in  accordance  with  paragraph  (d)(  2)(  i)  of  this  section  if  it  finds  that  operational  or  economic  barriers  exist  in  that  market. 

 (A)  In  making  this  showing,  the  state  commission  shall  consider  the  following  operational  characteristics:  incumbent  LEC  performance  in 
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 provisioning  loops;  difficulties  associated  with  obtaining  collocation  space  due  to  lack  of  space  or  delays  in  provisioning  by  the  incumbent  LEC;  and 
 the  difficulties  associated  with  obtaining  cross-  connects  in  the  incumbent  LECs  wire  center. 

 (B)  In  making  this  showing,  the  state  commission  shall  consider  the  following  economic  characteristics:  the  cost  of  entry  into  a  particular 
 market,  including  those  caused  by  both  operational  and  economic  barriers  to  entry;  requesting  telecommunications  carriers  potential  revenues  from 
 serving  enterprise  customers  in  that  market,  including  all  likely  revenues  to  be  gained  from  entering  that  market;  the  prices  requesting 
 telecommunications  carriers  are  likely  to  be  able  to  charge  in  that  market,  based  on  a  consideration  of  the  prevailing  retail  rates  the  incumbent  LEC 
 charges  to  the  different  classes  of  customers  in  the  different  parts  of  the  state. 

 (ii)  Transitional  four-  line  carve-  out.  Until  the  state  commission  completes  the  review  described  in  paragraph  (b)(  2)(  iii)(  B)(  4)  of  this  section,  an  incumbent  LEC 
 shall  comply  with  the  four-  line  carve-  out  for  unbundled  switching  established  in  Implementation  of  the  Local  Competition  Provisions  of  the 
 Telecommunications  Act  of  1996,  CC  Docket  No.  96-  98,  Third  Report  and  Order  and  Fourth  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  3822-  31,  paras. 
 276-  98  (1999),  reversed  and  remanded  in  part  sub.  nom.  United  States  Telecom  Assn  v.  FCC,  290  F.  3d  415  (D.  C.  Cir.  2002). 

 (A)  DS1  capacity  and  above  end-  user  transition.  Each  requesting  telecommunications  carrier  shall  transfer  its  end-  user  customers  served 
 using  DS1  and  above  capacity  loops  and  unbundled  local  circuit  switching  to  an  alternative  arrangement  within  90  days  from  the  end  of  the  90-  day 
 state  commission  consideration  period  set  forth  in  paragraph  (d)(  5)(  i),  unless  a  longer  period  is  necessary  to  comply  with  a  change  of  law 
 provision  in  an  applicable  interconnection  agreement. 
 (4)  Other  elements  to  be  unbundled.  Elements  relating  to  the  local  circuit  switching  element  shall  be  made  available  on  an  unbundled  basis  as  set  forth  in  paragraphs  (d)(  4)(  i) 

 and  (d)(  4)(  ii)  of  this  section. 
 (i)  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  signaling,  call-  related  databases,  and  shared 
 transport  facilities  on  an  unbundled  basis,  in  accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part,  to  the  extent  that  local  circuit  switching  is  required  to  be 
 unbundled  by  a  state  commission.  These  elements  are  defined  as  follows: 
 (A)  Signaling  networks.  Signaling  networks  include,  but  are  not  limited  to,  signaling  links  and  signaling  transfer  points. 
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 (B)  Call-  related  databases.  Call-  related  databases  are  defined  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  a  telecommunications  service.  Where  a  requesting 
 telecommunications  carrier  purchases  unbundled  local  circuit  switching  from  an  incumbent  LEC,  an  incumbent  LEC  shall  allow  a  requesting 
 telecommunications  carrier  to  use  the  incumbent  LECs  service  control  point  element  in  the  same  manner,  and  via  the  same  signaling  links,  as  the 
 incumbent  LEC  itself. 
 (1)  Call-  related  databases  include,  but  are  not  limited  to,  the  calling  name  database,  911  database,  E911  database,  line 
 information  database,  toll  free  calling  database,  advanced  intelligent  network  databases,  and  downstream  number  portability 
 databases  by  means  of  physical  access  at  the  signaling  transfer  point  linked  to  the  unbundled  databases. 

 (2)  Service  management  systems  are  defined  as  computer  databases  or  systems  not  part  of  the  public  switched  network  that 
 interconnect  to  the  service  control  point  and  send  to  the  service  control  point  information  and  call  processing  instructions  needed 
 for  a  network  switch  to  process  and  complete  a  telephone  call,  and  provide  a  telecommunications  carrier  with  the  capability  of 
 entering  and  storing  data  regarding  the  processing  and  completing  of  a  telephone  call.  Where  a  requesting  telecommunications 
 carrier  purchases  unbundled  local  circuit  switching  from  an  incumbent  LEC,  the  incumbent  LEC  shall  allow  a  requesting 
 telecommunications  carrier  to  use  the  incumbent  LECs  service  management  systems  by  providing  a  requesting 
 telecommunications  carrier  with  the  information  necessary  to  enter  correctly,  or  format  for  entry,  the  information  relevant  for  input 
 into  the  incumbent  LECs  service  management  system,  including  access  to  design,  create,  test,  and  deploy  advanced  intelligent 
 network-  based  services  at  the  service  management  system,  through  a  service  creation  environment,  that  the  incumbent  LEC  provides 
 to  itself. 
 (3)  An  incumbent  LEC  shall  not  be  required  to  unbundle  the  services  created  in  the  advanced  intelligent  network  platform  and 
 architecture  that  qualify  for  proprietary  treatment. 
 (C)  Shared  transport.  Shared  transport  is  defined  as  the  transmission  facilities  shared  by  more  than  one  carrier,  including  the  incumbent  LEC, 
 between  end  office  switches,  between  end  office  switches  and  tandem 
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 switches,  and  between  tandem  switches,  in  the  incumbent  LEC  network. 
 (ii)  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  nondiscriminatory  access  to  operator  services  and  directory  assistance  on  an 
 unbundled  basis,  in  accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part,  to  the  extent  that  local  circuit  switching  is  required  to  be  unbundled  by  a  state 
 commission,  if  the  incumbent  LEC  does  not  provide  that  requesting  telecommunications  carrier  with  customized  routing,  or  a  compatible  signaling 
 protocol,  necessary  to  use  either  a  competing  providers  operator  services  and  directory  assistance  platform  or  the  requesting  telecommunications  carriers  own 
 platform.  Operator  services  are  any  automatic  or  live  assistance  to  a  customer  to  arrange  for  billing  or  completion,  or  both,  of  a  telephone  call.  Directory 
 assistance  is  a  service  that  allows  subscribers  to  retrieve  telephone  numbers  of  other  subscribers. 

 (5)  State  commission  proceedings.  A  state  commission  shall  complete  the  proceedings  necessary  to  satisfy  the  requirements  in  paragraphs  (d)(  2)  and  (d)(  3)  of  this  section  in 
 accordance  with  paragraphs  (d)(  5)(  i)  and  (d)(  5)(  ii)  of  this  section. 
 (i)  Timing.  A  state  commission  shall  complete  any  initial  review  applying  the  triggers  and  criteria  in  paragraph  (d)(  2)  of  this  section  within  nine  months  from 

 the  effective  date  of  the  Commissions  Triennial  Review  Order.  A  state  commission  wishing  to  rebut  the  Commissions  finding  of  non-  impairment  for 
 DS1  and  above  enterprise  switches  must  file  a  petition  with  the  Commission  in  accordance  with  paragraph  (d)(  3)  within  90  days  from  that  effective  date. 

 (ii)  Continuing  review.  A  state  commission  shall  complete  any  subsequent  review  applying  these  triggers  and  criteria  within  six  months  of  the  filing  of  a 
 petition  or  other  pleading  to  conduct  such  a  review. 
 (e)  Dedicated  transport.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  dedicated  transport  on  an  unbundled  basis,  in 

 accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part  and  as  set  forth  in  paragraph  (e)(  1)  through  (e)(  5)  of  this  section.  As  used  in  those  paragraphs,  a  route  is  a  transmission  path 
 between  one  of  an  incumbent  LECs  wire  centers  or  switches  and  another  of  the  incumbent  LECs  wire  centers  or  switches.  A  route  between  two  points  (e.  g.,  wire  center  or  switch  A  and 
 wire  center  or  switch  Z)  may  pass  through  one  or  more  intermediate  wire  centers  or  switches  (e.  g.,  wire  center  or  switch  X).  Transmission  paths  between  identical  end  points  (e.  g.,  wire 
 center  or  switch  A  and  wire  center  or  switch  Z)  are  the  same  route,  irrespective  of  whether  they  pass  through  the  same  intermediate  wire  centers  or  switches,  if  any. 

 (1)  Dedicated  DS1  transport.  (i)  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  dedicated  DS1  transport  on 
 an  unbundled  basis  except  where  the  state  commission  has  found,  through  application  of  the  competitive  wholesale  facilities  trigger  in  paragraphs  (e)(  1)(  ii)  of  this  section,  that 
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 requesting  telecommunications  carriers  are  not  impaired  without  access  to  dedicated  DS1  transport  along  a  particular  route.  Dedicated  DS1  transport  consists  of  incumbent  LEC 
 interoffice  transmission  facilities  that  have  a  total  digital  signal  speed  of  1.544  megabytes  per  second  and  are  dedicated  to  a  particular  customer  or  carrier. 

 (ii)  Competitive  wholesale  facilities  trigger  for  dedicated  DS1  transport.  A  state  commission  shall  find  that  a  requesting  telecommunications  carrier  is  not  impaired 
 without  access  to  dedicated  DS1  transport  along  a  particular  route  where  two  or  more  competing  providers  not  affiliated  with  each  other  or  with  the  incumbent  LEC,  including 
 intermodal  providers  of  service  comparable  in  quality  to  that  of  the  incumbent  LEC,  each  satisfy  the  conditions  in  paragraphs  (e)(  1)(  ii)(  A)  through  (e)(  1)(  ii)(  D)  of  this  section. 

 (A)  The  competing  provider  has  deployed  its  own  transport  facilities  and  is  operationally  ready  to  use  those  facilities  to  provide  dedicated  DS1  transport  along 
 the  particular  route.  For  purposes  of  this  paragraph,  the  competing  providers  DS1  facilities  may  use  dark  fiber  facilities  that  the  competing  provider  has  obtained  on  an 
 unbundled,  leased,  or  purchased  basis  if  it  has  attached  its  own  optronics  to  activate  the  fiber. 

 (B)  The  competing  provider  is  willing  immediately  to  provide,  on  a  widely  available  basis,  dedicated  DS1  transport  along  the  particular  route. 
 (C)  The  competing  providers  facilities  terminate  in  a  collocation  arrangement  at  each  end  of  the  transport  route  that  is  located  at  an  incumbent  LEC  premises  and 
 in  a  similar  arrangement  at  each  end  of  the  transport  route  that  is  not  located  at  an  incumbent  LEC  premises. 

 (D)  Requesting  telecommunications  carriers  are  able  to  obtain  reasonable  and  nondiscriminatory  access  to  the  competing  providers  facilities  through  a  cross-connect 
 to  the  competing  providers  collocation  arrangement  at  each  end  of  the  transport  route  that  is  located  at  an  incumbent  LEC  premises  and  though  a  similar 
 arrangement  at  each  end  of  the  transport  route  that  is  not  located  at  an  incumbent  LEC  premises. 

 (2)  Dedicated  DS3  transport.  Subject  to  the  cap  in  paragraph  (e)(  2)(  iii)  of  this  section,  an  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with 
 nondiscriminatory  access  to  dedicated  DS3  transport  on  an  unbundled  basis  except  where  the  state  commission  has  found,  through  application  of  either  paragraph  (e)(  2)(  i)  of  this 
 section  or  the  potential  deployment  analysis  in  paragraph  (e)(  2)(  ii)  of  this  section,  that  requesting  telecommunications  carriers  are  not  impaired  without  access  to  dedicated  DS3 
 transport  along  a  particular  route.  Dedicated  DS3  transport  consists  of  incumbent  LEC  interoffice  transmission  facilities  that  have  a  total  digital  signal  speed  of  44.736 
 megabytes  per  second  and  are  dedicated  to  a  particular  customer  or  carrier. 
 (i)  Triggers  for  dedicated  DS3  transport.  A  state  commission  shall  find  that  a 
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 requesting  telecommunications  carrier  is  not  impaired  without  access  to  unbundled  dedicated  DS3  transport  along  a  particular  route  where  either  of  the 
 triggers  in  paragraphs  (e)(  2)(  i)(  A)  or  (e)(  2)(  i)(  B)  of  this  section  is  satisfied. 
 (A)  Self-  provisioning  trigger  for  dedicated  DS3  transport.  To  satisfy  this  trigger,  a  state  must  find  that  three  or  more  competing  providers  not 
 affiliated  with  each  other  or  with  the  incumbent  LEC,  including  intermodal  providers  of  service  comparable  in  quality  to  that  of  the 
 incumbent  LEC,  each  satisfy  the  conditions  in  paragraphs  (e)(  2)(  i)(  A)(  1)  and  (e)(  2)(  i)(  A)(  2)  of  this  section. 

 (1)  The  competing  provider  has  deployed  its  own  transport  facilities  and  is  operationally  ready  to  use  those  transport  facilities 
 to  provide  dedicated  DS3  transport  along  the  particular  route.  For  purposes  of  this  paragraph,  the  competing  providers  DS3  transport 
 facilities  may  use  dark  fiber  facilities  that  the  competing  provider  has  obtained  on  a  long-  term,  indefeasible-  right  of  use  basis  and 
 that  it  has  deployed  by  attaching  its  own  optronics  to  activate  the  fiber. 

 (2)  The  competing  providers  facilities  terminate  at  a  collocation  arrangement  at  each  end  of  the  transport  route  that  is  located  at  an 
 incumbent  LEC  premises  and  in  a  similar  arrangement  at  each  end  of  the  transport  route  that  is  not  located  at  an  incumbent  LEC 
 premises. 
 (B)  Competitive  wholesale  facilities  trigger  for  dedicated  DS3  transport.  To  satisfy  this  trigger,  a  state  must  find  that  two  or  more  competing 
 providers  not  affiliated  with  each  other  or  with  the  incumbent  LEC,  including  intermodal  providers  of  service  comparable  in  quality  to  that  of 
 the  incumbent  LEC,  each  satisfy  the  conditions  in  paragraphs  (e)(  2)(  i)(  B)(  1)  through  (e)(  2)(  i)(  B)(  4)  of  this  section. 

 (1)  The  competing  provider  has  deployed  its  own  transport  facilities,  including  transport  facilities  that  use  dark  fiber  facilities 
 that  the  competing  provider  has  obtained  on  an  unbundled,  leased,  or  purchased  basis  if  it  has  attached  its  own  optronics  to  activate 
 the  fiber,  and  is  operationally  ready  to  use  those  facilities  to  provide  dedicated  DS3  transport  along  the  particular  route. 

 (2)  The  competing  provider  is  willing  immediately  to  provide,  on  a  widely  available  basis,  dedicated  DS3  transport  along  the 
 particular  route. 
 (3)  The  competing  providers  facilities  terminate  in  a  collocation 
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 arrangement  at  each  end  of  the  transport  route  that  is  located  at  an  incumbent  LEC  premises  and  in  a  similar  arrangement  at  each  end 
 of  the  transport  route  that  is  not  located  at  an  incumbent  LEC  premises. 

 (4)  Requesting  telecommunications  carriers  are  able  to  obtain  reasonable  and  nondiscriminatory  access  to  the  competing 
 providers  facilities  through  a  cross-  connect  to  the  competing  providers  collocation  arrangement  at  each  end  of  the  transport 
 route  that  is  located  at  an  incumbent  LEC  premises  and  though  a  similar  arrangement  at  each  end  of  the  transport  route  that  is  not 
 located  at  an  incumbent  LEC  premises. 
 (ii)  Potential  deployment  of  dedicated  DS3  transport.  Where  neither  trigger  in  paragraph  (e)(  2)(  i)  of  this  section  is  satisfied,  a  state  commission  shall  consider 
 whether  other  evidence  shows  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  unbundled  dedicated  DS3  transport  along  a  particular 
 route.  To  make  this  determination,  a  state  must  consider  the  following  factors:  local  engineering  costs  of  building  and  utilizing  transmission  facilities;  the  cost  of 
 underground  or  aerial  laying  of  fiber  or  copper;  the  cost  of  equipment  needed  for  transmission;  installation  and  other  necessary  costs  involved  in  setting  up  service; 
 local  topography  such  as  hills  and  rivers;  availability  of  reasonable  access  to  rights-  of-  way;  availability/  feasibility  of  similar  quality/  reliability  alternative 
 transmission  technologies  along  the  particular  route;  customer  density  or  addressable  market;  and  existing  facilities-  based  competition. 

 (iii)  Cap  on  unbundled  DS3  circuits.  A  requesting  telecommunications  carrier  may  obtain  a  maximum  of  12  unbundled  dedicated  DS3  circuits  for  any  single 
 route  for  which  dedicated  DS3  transport  is  available  as  unbundled  transport. 
 (3)  Dark  fiber  transport.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  dark  fiber  transport  on  an 
 unbundled  basis  except  where  the  state  commission  has  found,  through  application  of  either  paragraph  (e)(  3)(  i)  of  this  section  or  the  potential  deployment  analysis  in  paragraph 
 (e)(  3)(  ii)  of  this  section,  that  requesting  telecommunications  carriers  are  not  impaired  without  access  to  unbundled  dark  fiber  transport  along  the  particular  route.  Dark  fiber 
 transport  consists  of  unactivated  optical  interoffice  transmission  facilities. 
 (i)  Triggers  for  dark  fiber  transport.  A  state  commission  shall  find  that  a  requesting  telecommunications  carrier  is  not  impaired  without  access  to  dark  fiber 
 transport  along  a  particular  route  where  either  of  the  triggers  in  paragraph  (e)(  3)(  i)(  A)  or  paragraph  (e)(  3)(  i)(  B)  of  this  section  is  satisfied. 

 (A)  Self-  provisioning  trigger  for  dark  fiber  transport.  To  satisfy  this  trigger,  a  state  commission  must  find  three  or  more  competing  providers 
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 not  affiliated  with  each  other  or  with  the  incumbent  LEC,  each  satisfy  paragraphs  (e)(  3)(  i)(  A)(  1)  and  (e)(  3)(  i)(  A)(  2)  of  this  section. 
 (1)  The  competing  provider  has  deployed  its  own  dark  fiber  facilities,  which  may  include  dark  fiber  facilities  that  it  has 
 obtained  on  a  long-  term,  indefeasible-  right  of  use  basis. 
 (2)  The  competing  providers  facilities  terminate  in  a  collocation  arrangement  at  each  end  of  the  transport  route  that  is  located  at  an 
 incumbent  LEC  premises  and  in  a  similar  arrangement  at  each  end  of  the  transport  route  that  is  not  located  at  an  incumbent  LEC 
 premises. 
 (B)  Competitive  wholesale  facilities  trigger  for  dark  fiber  transport.  To  satisfy  this  trigger,  a  state  commission  must  find  that  two  or  more 
 competing  providers  not  affiliated  with  each  other  or  with  the  incumbent  LEC,  each  satisfy  paragraphs  (e)(  3)(  i)(  B)(  1)  through  (e)(  3)(  i)(  B)(  4)  of  this 
 section.  In  applying  this  trigger,  the  state  commission  may  consider  whether  competing  providers  have  sufficient  quantities  of  dark  fiber 
 available  to  satisfy  current  demand  along  that  route. 
 (1)  The  competing  provider  has  deployed  its  own  dark  fiber,  including  dark  fiber  that  it  has  obtained  from  an  entity  other  than 
 the  incumbent  LEC,  and  is  operationally  ready  to  lease  or  sell  those  facilities  for  the  provision  of  fiber-  based  transport  along  the 
 particular  route. 
 (2)  The  competing  provider  is  willing  immediately  to  provide,  on  a  widely  available  basis,  dark  fiber  along  the  particular  route. 

 (3)  The  competing  providers  dark  fiber  terminates  in  a  collocation  arrangement  at  each  end  of  the  transport  route  that  is 
 located  at  an  incumbent  LEC  premises  and  in  a  similar  arrangement  at  each  end  of  the  transport  route  that  is  not  located  at 
 an  incumbent  LEC  premises. 
 (4)  Requesting  telecommunications  carriers  are  able  to  obtain  reasonable  and  nondiscriminatory  access  to  the  competing 
 providers  dark  fiber  through  a  cross-  connect  to  the  competing  providers  collocation  arrangement  at  each  end  of  the  transport 
 route  that  is  located  at  an  incumbent  LEC  premises  and  though  a  similar  arrangement  at  each  end  of  the  transport  route  that  is  not 
 located  at  an  incumbent  LEC  premises. 
 (ii)  Potential  deployment  of  dark  fiber  transport.  Where  neither  trigger  in 
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 paragraph  (e)(  3)(  i)  of  this  section  is  satisfied,  a  state  commission  shall  consider  whether  other  evidence  shows  that  a  requesting  telecommunications  carrier  is  not 
 impaired  without  access  to  unbundled  dark  fiber  transport  along  a  particular  route.  To  make  this  determination,  a  state  must  consider  the  following  factors:  local 
 engineering  costs  of  building  and  utilizing  transmission  facilities;  the  cost  of  underground  or  aerial  laying  of  fiber;  the  cost  of  equipment  needed  for 
 transmission;  installation  and  other  necessary  costs  involved  in  setting  up  service;  local  topography  such  as  hills  and  rivers;  availability  of  reasonable  access  to 
 rights-  of-  way;  availability/  feasibility  of  similar  quality/  reliability  alternative  transmission  technologies  along  the  particular  route;  customer  density  or 
 addressable  market;  and  existing  facilities-  based  competition. 
 (4)  State  commission  proceedings.  A  state  commission  shall  complete  the  proceedings  necessary  to  satisfy  the  requirements  in  paragraphs  (e)(  1),  (e)(  2),  and  (e)(  3)  of  this 
 section  in  accordance  with  paragraphs  (e)(  4)(  i)  and  (e)(  4)(  ii)  of  this  section. 
 (i)  Initial  review.  A  state  commission  shall  complete  any  initial  review  applying  the  triggers  and  criteria  in  paragraphs  (e)(  1),  (e)(  2),  and  (e)(  3)  of  this  section 
 within  nine  months  from  the  effective  date  of  the  Commissions  Triennial  Review  Order. 

 (ii)  Continuing  review.  A  state  commission  shall  complete  any  subsequent  review  applying  these  triggers  and  criteria  within  six  months  of  the  filing  of  a 
 petition  or  other  pleading  to  conduct  such  a  review. 
 (5)  Routine  network  modifications.  (i)  An  incumbent  LEC  shall  make  all  routine  network  modifications  to  unbundled  dedicated  transport  facilities  used  by  requesting 
 telecommunications  carriers  where  the  requested  dedicated  transport  facilities  have  already  been  constructed.  An  incumbent  LEC  shall  perform  all  routine  network 
 modifications  to  unbundled  dedicated  transport  facilities  in  a  nondiscriminatory  fashion,  without  regard  to  whether  the  facility  being  accessed  was  constructed  on  behalf,  or  in 
 accordance  with  the  specifications,  of  any  carrier. 
 (ii)  A  routine  network  modification  is  an  activity  that  the  incumbent  LEC  regularly  undertakes  for  its  own  customers.  Routine  network  modifications 

 include,  but  are  not  limited  to,  rearranging  or  splicing  of  cable;  adding  an  equipment  case;  adding  a  doubler  or  repeater;  installing  a  repeater  shelf;  and 
 deploying  a  new  multiplexer  or  reconfiguring  an  existing  multiplexer.  They  also  include  activities  needed  to  enable  a  requesting  telecommunications  carrier  to 
 light  a  dark  fiber  transport  facility.  Routine  network  modifications  may  entail  activities  such  as  accessing  manholes,  deploying  bucket  trucks  to  reach  aerial 
 cable,  and  installing  equipment  casings.  Routine  network  modifications  do  not  include  the  installation  of  new  aerial  or  buried  cable  for  a  requesting 
 telecommunications  carrier. 
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 Federal  Communications  Commission  FCC  03-  36 
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 (f)  911  and  E911  databases.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  911  and  E911  databases  on  an  unbundled  basis,  in 
 accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part. 
 (g)  Operations  support  systems.  An  incumbent  LEC  shall  provide  a  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  operations  support  systems  on  an 
 unbundled  basis,  in  accordance  with  section  251(  c)(  3)  of  the  Act  and  this  part.  Operations  support  system  functions  consist  of  pre-  ordering,  ordering,  provisioning,  maintenance  and  repair, 
 and  billing  functions  supported  by  an  incumbent  LECs  databases  and  information.  An  incumbent  LEC,  as  part  of  its  duty  to  provide  access  to  the  pre-  ordering  function,  shall  provide 
 the  requesting  telecommunications  carrier  with  nondiscriminatory  access  to  the  same  detailed  information  about  the  loop  that  is  available  to  the  incumbent  LEC. 

 12.  Section  51.320  is  added  to  read  as  follows: 
   51.320  Assumption  of  responsibility  by  the  Commission. 
 If  a  state  commission  fails  to  exercise  its  authority  under    51.319,  any  party  seeking  that  the  Commission  step  into  the  role  of  the  state  commission  shall  file  with  the  Commission  and  serve 

 on  the  state  commission  a  petition  that  explains  with  specificity  the  bases  for  the  petition  and  information  that  supports  the  claim  that  the  state  commission  has  failed  to  act.  Subsequent  to  the 
 Commissions  issuing  a  public  notice  and  soliciting  comments  on  the  petition  from  interested  parties,  the  Commission  will  rule  on  the  petition  within  90  days  of  the  date  of  the  public  notice. 
 If  it  agrees  that  the  state  commission  has  failed  to  act,  the  Commission  will  assume  responsibility  for  the  proceeding,  and  within  nine  months  from  the  date  it  assumed  responsibility  for  the 
 proceeding,  make  any  findings  in  accordance  with  the  Commissions  rules. 

 13.  Section  51.325  is  amended  by  adding  paragraph  (a)(  4)  to  read  as  follows: 
   51.325  Notice  of  network  changes:  Public  notice  requirement. 

 (a)  *** 
 (4)  Will  result  in  the  retirement  of  copper  loops  or  copper  subloops,  and  the  replacement  of  such  loops  with  fiber-  to-  the-  home  loops,  as  that  term  is  defined  in    51.319(  a)(  3). 

 ***** 

 14.  Section  51.331  is  amended  by  adding  paragraph  (c)  to  read  as  follows: 
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   51.331  Notice  of  network  changes:  Timing  of  notice. 
 ***** 

 (c)  Competing  service  providers  may  object  to  incumbent  LEC  notice  of  retirement  of  copper  loops  or  copper  subloops  and  replacement  with  fiber-  to-  the-  home  loops  in  the  manner  set  forth 
 in    51.333(  c). 

 15.  Section  51.333  is  amended  by  revising  the  section  heading,  paragraphs  (b)  and  (c)  introductory  test,  and  by  adding  paragraph  (f)  to  read  as  follows: 
   51.333  Notice  of  Network  Changes:  Short  term  notice,  objections  thereto  and  objections  to  retirement  of  copper  loops  or  copper  subloops. 

 ***** 
 (b)  Implementation  date.  The  Commission  will  release  a  public  notice  of  filings  of  such  short  term  notices  or  notices  of  replacement  of  copper  loops  or  copper  subloops  with  fiber-  to-  the-home 
 loops.  The  effective  date  of  the  network  changes  referenced  in  those  filings  shall  be  subject  to  the  following  requirements: 

 (i)  Short  term  notice.  Short  term  notices  shall  be  deemed  final  on  the  tenth  business  day  after  the  release  of  the  Commissions  public  notice,  unless  an  objection  is  filed  pursuant 
 to  paragraph  (c)  of  this  section. 
 (ii)  Replacement  of  copper  loops  or  copper  subloops  with  fiber-  to-  the-  home  loops.  Notices  of  replacement  of  copper  loops  or  copper  subloops  with  fiber-  to-  the-  home  loops 
 shall  be  deemed  approved  on  the  90th  day  after  the  release  of  the  Commissions  public  notice  of  the  filing,  unless  an  objection  is  filed  pursuant  to  paragraph  (c)  of  this  section. 
 Incumbent  LEC  notice  of  intent  to  retire  any  copper  loops  or  copper  subloops  and  replace  such  loops  or  subloops  with  fiber-  to-  the-  home  loops  shall  be  subject  to  the  short  term 
 notice  provisions  of  this  section,  but  under  no  circumstances  may  an  incumbent  LEC  provide  less  than  90  days  notice  of  such  a  change. 

 (c)  Objection  procedures  for  short  term  notice  and  notices  of  replacement  of  copper  loops  or  copper  subloops  with  fiber-  to-  the-  home  loops.  An  objection  to  an  incumbent  LECs  short  term 
 notice  or  to  its  notice  that  it  intends  to  retire  copper  loops  or  copper  subloops  and  replace  such  loops  or  subloops  with  fiber-  to-  the-  home  loops  may  be  filed  by  an  information  service  provider 
 or  telecommunications  service  provider  that  directly  interconnects  with  the  incumbent  LECs  network.  Such  objections  must  be  filed  with  the  Commission,  and  served  on  the  incumbent 
 LEC,  no  later  than  the  ninth  business  day  following  the  release  of  the  Commissions  public  notice.  All  objections  filed  under  this  section  must: 

 ***** 
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 (f)  Resolution  of  objections  to  replacement  of  copper  loops  or  copper  subloops  with  fiber-  to-  the-home  loops.  An  objection  to  a  notice  that  an  incumbent  LEC  intends  to  retire  any  copper  loops 
 or  copper  subloops  and  replace  such  loops  or  subloops  with  fiber-  to-  the-  home  loops  shall  be  deemed  denied  90  days  after  the  date  on  which  the  Commission  releases  public  notice  of  the 
 incumbent  LEC  filing,  unless  the  Commission  rules  otherwise  within  that  time.  Until  the  Commission  has  either  ruled  on  an  objection  or  the  90-  day  period  for  the  Commissions 
 consideration  has  expired,  an  incumbent  LEC  may  not  retire  those  copper  loops  or  copper  subloops  at  issue  for  replacement  with  fiber-  to-  the-  home  loops. 

 16.  Section  51.509  is  amended  by  revising  paragraph  (a)  and  adding  paragraph  (h)  to  read  as  follows: 
   51.509  Rate  structure  standards  for  specific  elements. 
 (a)  Local  loop  and  subloop.  Loop  and  subloop  costs  shall  be  recovered  through  flat-  rated  charges. 

 ***** 
 (h)  Network  interface  device.  An  incumbent  LEC  must  establish  a  price  for  the  network  interface  device  when  that  unbundled  network  element  is  purchased  on  a  stand-  alone  basis 
 pursuant  to    51.319(  c). 
526
 Federal  Communications  Commission  FCC  03-  36 
 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 
 APPROVING  IN  PART  AND  DISSENTING  IN  PART 

 Re:  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers  (CC  Docket  No.  01-  338),  Implementation  of  the  Local  Competition  Provisions 
 of  the  Telecommunications  Act  of  1996  (CC  Docket  No.  96-  98),  and  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability  (CC  Docket  No. 
 98-  147). 
 Today,  the  Commission  concludes  one  of  its  most  significant  proceedings  ever.  The  Triennial  Review  has  been  a  complicated  and  difficult  undertaking,  but  one  that  will  set  critical 
 parameters  for  competition  and  broadband  deployment  for  years  to  come.  There  are  some  important  achievements  in  this  Order  that  have  long  been  objectives  of  mine  namely, 
 substantial  broadband  relief.  Yet,  regrettably,  there  are  some  fateful  decisions  as  well  that  I  believe  represent  poor  policy  and  which  flout  the  law.  While  I  am  pleased  that  the  Majority  has 
 made  a  number  of  changes  to  their  UNE-  P  decision  that  respond  to  my  concerns,  significant  legal  failings  remain.  Accordingly,  I  must  respectfully  dissent. 

 I.  The  Order  Takes  Bold  Steps  to  Promote  Broadband  Investment 
 I  begin  with  the  substantial  step  we  take  today  to  create  a  broadband  regulatory  regime  that  will  stimulate  and  promote  deployment  of  next-  generation  infrastructure,  bringing  a  bevy  of 
 new  services  and  applications  to  consumers.  I  have  long  stated  that  broadband  deployment  is  the  most  central  communications  policy  objective  of  our  day.  Today,  we  at  last  put  some  substance 
 into  that  stated  goal.  I  am  proud  to  say  that  we  take  some  vital  steps  across  the  desert  from  the  analog  world  to  the  digital  one.  Todays  decision  makes  significant  strides  to  promote 
 investment  in  advanced  architecture  and  fiber  by  removing  unbundling  obligations  consistent  with  a  faithful  application  of  Congress  impair  standard.  Consistent  with  the  statute,  the  Order 
 removes  unbundling  obligations  that  have  applied  to  last  mile  Fiber  to  the  Home  deployments.  In  hybrid  copper-  fiber  networks,  the  Commission  has  determined  that  incumbent  LECs  are  not 
 required  to  unbundle  packet-  switching  functionality  provided  over  these  facilities;  but  competitors  will  continue  to  receive  access  to  high-  capacity  loops  provided  over  incumbent  LEC 
 Time  Division  Multiplexing  (  TDM)  networks.  1  These  decisions  mean  that  the  digital  migration  is  one  step  further  along,  as  more  investment  flows  into  the  deployment  of  these 
 advanced  networks. 
 To  date,  line  sharing  is  the  Commissions  most  successful  broadband  policy  and  it  has 

 1  In  so  doing,  we  require  incumbent  LECs  to  unbundle  legacy  technologies  such  as  HDSL  while  removing 
 barriers  to  the  deployment  of  innovative  advanced  electronics  such  as  Passive  Optical  Networking  (  PON)  components. 
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 generated  clear  and  measurable  benefits  for  consumers.  It  has  unquestionably  given  birth  to  important  broadband  suppliers.  This  additional  facilities-  based  competition  has  directly 
 contributed  to  lower  prices  for  new  broadband  services. 
 I  also  believe  the  argument  that  removing  line  sharing  is  a  form  of  positive  regulatory  relief  to  stimulate  broadband  is  ill-  conceived.  Line  sharing  rides  on  the  old  copper 
 infrastructure,  not  on  the  new  advanced  fiber  networks  that  we  are  attempting  to  push  to  deployment.  Indeed,  the  continued  availability  of  line  sharing  and  the  competition  that  flowed 
 from  it  likely  would  have  pressured  incumbents  to  deploy  more  advanced  networks  in  order  to  move  from  the  negative  regulatory  pole  to  the  positive  regulatory  pole,  by  deploying  more  fiber 
 infrastructure.  This  decision  actually  diminishes  the  competitive  pressure  to  do  so. 
 II.  The  Majoritys  Switching  Decision  Is  Bad  Law,  Bad  Policy  and  Ultimately  Bad  for  Consumers 

 In  opening  this  proceeding,  this  Commission  committed  itself  to  conduct  a  thorough  review  of  its  unbundling  policies.  This  review  took  on  greater  importance  in  light  of  a  slumping 
 telecommunications  sector  and  the  D.  C.  Circuits  USTA  decision  vacating  the  rules  that  unbundled  every  element  of  an  incumbents  network.  Thus,  the  Commission  was  ordered  to 
 reconstruct  its  list  of  unbundled  elements  from  the  ground  up    making  an  element  available  only  if  the  Commission  could  show  a  competitor  was  significantly  impaired  without  it.  As  we  have 
 endeavored  to  do  so,  the  most  controversial  judgment  rested  with  the  switching  element.  The  importance  of  this  element  is  not  in  its  particular  functionality,  but  that  it  represents  the  capstone 
 of  what  has  become  known  as  the  unbundled  platform  or  UNE-  P.  UNE-  P  is  nothing  more  than  a  complete  use  of  the  incumbents  network,  priced  by  element.  This  results  in  a  substantially 
 lower  price  than  the  statute  allows  for  resale.  If  switching  is  available,  it  is  very  likely  a  carrier  can  resell  the  entire  incumbents  network,  at  heavily  discounted  rates  set  by  regulators,  without 
 having  to  provide  anything  in  the  way  of  its  own  infrastructure.  After  one  sorts  through  the  legal  contortions  of  the  Majoritys  switching  decision  he  will  find  an  Order  remarkably  similar  to 
 the  prior  two  fatal  decisions    one  that  preserves  UNE-  P  as  the  favored  mode  of  competition,  without  any  meaningful  consideration  of  the  social  and  economic  costs  of  unbundling.  This  is 
 bad  policy  and  bad  law. 
 Consistently  underlying  my  position  is  a  commitment  to  promote  and  advance  competition  that  is  meaningful  and  sustainable,  and  that  will  eventually  achieve  Congress  goal 
 of  reducing  regulation  and  promoting  facilities-  based  competition.  2  The  benefits  of  such  a  policy  are  straightforward: 

 2  The  Commission  recognized  in  the  last  unbundling  order  that  the  goal  of  our  regime  is  to  promote  the 
 development  of  facilities-  based  competition.  Third  Report  and  Order  and  Fourth  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  3696,  para.  7  (1999)  (  UNE  Remand  Order).  Todays  UNE-  P  decision,  however,  does 

 not  support  the  established  proposition  that  facilities-  based  competition  is  the  preferred  method  to  achieve  the  twin  Congressional  goals  of  deregulation  and  competition. 
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 III.  The  Majoritys  Decision  Does  Not  Establish  A  Meaningful  Limit  on  Unbundled  Switching  As  the  Courts  Require 
 A.  The  Majoritys  Decision  to  Unbundle  Switching  for  the  Mass  Market  is  Flawed 
 I  also  dissent  from  the  switching  section  of  this  Order  because  I  find  a  Commission  majority  for  the  third  time  in  seven  years  substituting  its  preference  for  a  heavily  permissive 
 unbundling  regime  for  Congresss  judgment  that  no  element  should  be  provided  unless  the  Commission  can  affirmatively  conclude  that  a  competitor  is  impaired  without  it.  The  Supreme 
 Court  admonished  that  section  251(  d)(  2)  placed  clear  limits  on  the  Commissions  authority  to  order  unbundling.  AT&  T  v.  Iowa  Utils.  Bd.,  525  U.  S.  388,  397  (1999).  The  Commissions 
 second  unbundling  attempt  also  failed,  when  the  D.  C.  Circuit  vacated  our  rules  last  summer.  The  D.  C.  Circuit  emphasized  that  the  Commission  could  not  treat  unbundling  as  an  unqualified 
 good  and  had  to  consider  the  social  costs  as  well.  See  United  States  Telcom  Assn  v.  FCC,  290  F.  3d  415,  427  (D.  C.  Cir.  2002).  It  also  admonished  that  the  standard  employed  and  applied  by 
 the  FCC  had  to  demonstrate  that  a  typical  entrant  was  effectively  prohibited  from  entering  the  market  due  to  barriers  associated  with  the  monopoly  power  of  the  incumbent  and  not  just  typical 
 start-  up  costs  or  costs  naturally  associated  with  entry.  Id.  at  422.  In  reaching  its  switching  decision,  the  Majority  flouts  the  D.  C.  Circuits  mandate. 

 I  begin  with  a  discussion  of  the  Majoritys  mass  market  switching  decision.  First  I  question  whether  the  Majority  has  adequately  explained  its  conclusion  that  competitors  are 
 operationally  impaired  without  unbundled  switching  as  a  national  matter.  Second,  I  discuss  whether  the  Majoritys  economic  impairment  analysis  provides  a  meaningful  limitation  on  the 
 availability  of  UNE-  P.  Finally,  I  examine  the  Majoritys  approach  to  UNE-  P  in  the  business  market. 

 i.  The  Majority  Decision  Ignores  Record  Evidence  of  Hot  Cut  Performance  as  a  Limitation  on  Unbundled  Switching 
 In  the  mass  market,  the  Majority  rests  its  switch  unbundling  requirement  solely  on  the  blanket  judgment  that  the  incumbent  hot  cut  process    a  process  that  relates  solely  to  loop 
 provisioning    justifies  unbridled  switch  unbundling.  This  speculative,  nationalized  finding  ignores  substantial  record  evidence  and  cannot  be  squared  with  this  Commissions  own  findings 
 that  incumbent  LECs  perform  hot  cuts  at  sufficient  levels  to  demonstrate  that  competitors  are  presented  with  a  meaningful  opportunity  to  compete.  Indeed,  in  each  and  every  one  of  the  orders 
 approving  Bell  Company  applications  to  provide  long  distance  service,  the  Commission  has  found,  after  painstaking  state  review,  that  this  standard  is  met.  4  The  Majority  on  the  other  hand 

 4  Indeed  we  have  now  examined  the  hot  cut  processes  in  42  states  and  the  District  of  Columbia  and  found  that 
 each  and  every  BOC  has  in  place  a  hot  cut  process  that  provides  competitors  a  meaningful  opportunity  to  compete.  See  e.  g.,  Application  by  SBC  Communications  Inc.,  Southwestern  Bell  Telephone  Company,  And  Southwestern  Bell 

 Communications  Services,  Inc.  d/  b/  a  Southwestern  Bell  Long  Distance;  Pursuant  to  Section  271  of  the  Telecommunications  Act  of  1996  To  Provide  In-  Region,  InterLATA  Services  In  Texas,  CC  Docket  No.  00-  65,  FCC 
 00-  238,  Memorandum  Opinion  and  Order,  15  FCC  Rcd  18354,  18490-  93,  paras.  268-  73  (2000);  Joint  Application  (continued.) 
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 has  loftily  abstracted  away  from  the  granular  findings  of  this  Commissions  271  Orders  in  favor  of  vague  pronouncements  that  lead  back  to  variation  on  that  same  state-  sponsored  process.  Such 
 a  tautology  cannot  withstand  scrutiny. 
 The  Majority  disregards  this  objective  evidence  in  the  record  on  the  ground  that  hot  cut  volumes  could  substantially  increase  if  UNE-  P  were  phased  out.  Based  entirely  on  speculation 
 that  such  an  increase  could  result  in  a  degradation  of  hot  cut  performance,  the  Majority  presumes  impairment.  But  even  here  the  Majority  is  not  entirely  certain  of  its  own  conclusion,  stating  that 
 it  is  unlikely  that  incumbent  LECs  will  be  able  to  provision  hot  cuts  in  sufficient  volumes  absent  unbundled  local  switching  in  all  markets.  5  I  cannot  agree  with  a  Commission  finding  that  the 
 hot  cut  process  is  so  presumptively  broken  that  incumbents  must  offer  UNE-  P  indefinitely  without  a  more  nuanced  concept  of  where  and  when  that  process  might  cause  impairment. 
 United  States  Telecom  Assn  v.  FCC,  290  F.  3d  at  426.  The  Majoritys  finding  likewise  flies  in  the  face  of  substantial  record  evidence  that  incumbents  can  perform  at  levels  to  meet  reasonably 
 foreseeable  demand  volumes  for  hot  cuts.  E.  g.,  New  York  271  Order,  15  FCC  Rcd  at  3993.  6  Additionally,  there  are  other,  more  direct  methods  of  ensuring  that  the  hot  cut  process  is  working 
 that  fall  short  of  the  extraordinary  remedy  of  unbundling  the  switch.  7  I  would  have  preferred  to  continue  the  existing  partnership  with  state  regulators  to  further  define  an  incumbents 
 obligations  in  this  area  and,  where  it  is  demonstrated  that  the  hot  cut  processes  has  broken  down,  order  a  narrowly  tailored  remedy. 

 ii.  The  Majoritys  Mass  Market  Switch  Triggers  Are  Illusory 
 (Continued  from  previous  page) 
 by  SBC  Communications  Inc.,  Southwestern  Bell  Telephone  Company,  and  Southwestern  Bell  Communications  Services,  Inc.  d/  b/  a  Southwestern  Bell  Long  Distance  for  Provision  of  In-  Region,  InterLATA  Services  in  Kansas  and 

 Oklahoma,  CC  Docket  No.  00-  217,  FCC  01-  29,  Memorandum  Opinion  and  Order,  16  FCC  Rcd  6237,  6340,  para.  207  (2001);  Joint  Application  by  BellSouth  Corporation,  BellSouth  Telecommunications,  Inc.,  And  BellSouth  Long 
 Distance,  Inc  for  Provision  of  In-  Region,  InterLATA  Services  In  Georgia  and  Louisiana,  CC  Docket  No.  02-  35,  FCC  02-  147,  Memorandum  Opinion  and  Order,  16  FCC  Rcd  9018,  9145,  para.  220  (2002);  Application  by  Bell 
 Atlantic  New  York  for  Authorization  Under  Section  271  of  the  Communications  Act  To  Provide  In-  Region,  InterLATA  Service  in  the  State  of  New  York,  CC  Docket  No.  99-  295,  FCC  99-  404,  Memorandum  Opinion  and 
 Order,  15  FCC  Rcd  3953,  4104-  05,  para.  291  (1999);  Application  by  Qwest  Communications  Internationl,  Inc.  for  Authorization  to  Provide  In-  Region,  InterLATA  Services  in  the  States  of  Colorado,  Idaho,  Iowa,  Montana, 
 Nebraska,  North  Dakota,  Utah,  Washington  and  Wyoming,  WC  Docket  No.  02-  314,  FCC  02-  332,  Memorandum  Opinion  and  Order,  17  FCC  Rcd  26,303,  26,370,  para.  107  (2002). 

 5  Order  para.  468  (emphasis  added). 
 6  The  Majority  erroneously  cites  the  New  York  Commissions  conclusion  that  it  would  take  Verizon  over  11 
 years  to  switch  all  the  existing  UNE-  P  customers  to  UNE-  L  without  disclosing  that  the  New  York  Commission  did  not  assume  any  increase  in  the  incumbents  hot  cut  capacity  scaled  to  meet  reasonable  forecasts  of  demand.  See 

 Order  para.  469. 
 7  For  example,  state  regulators  could  continue  their  existing,  active  approach  to  enforcing  hot  cut  performance 
 measures;  unbundled  switching  might  serve  as  a  remedy  where  poor  hot  cut  performance  is  demonstrated. 
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 After  wading  through  the  complexity  of  the  Majoritys  regulatory  framework  for  mass  market  switching,  two  conclusions  emerge  from  the  tangle  of  conflicting  pronouncements:  First, 
 the  objective  switch  triggers  relied  upon  by  the  Majority  are  an  illusory  limitation.  Second,  because  the  switching  triggers  are  not  a  meaningful  limitation,  states  are  essentially  free  to  do  as 
 they  wish. 
 The  Majority  purports  to  constrain  state  discretion  by  removing  unbundled  switching  where  3  self-  provisioned  switches  or  2  wholesalers  are  present  in  a  given  market.  8  This  is  no 
 limitation  at  all.  Indeed  there  may  be  few  markets,  if  any,  that  include  three  competitors  using  self-  provisioned  switching  to  serve  the  mass  market.  Directing  states  to  apply  this  trigger  is 
 therefore  largely  a  meaningless  exercise.  Why?  Because  an  honest  inquiry  into  this  area  must  recognize  what  the  record  amply  demonstrates:  there  is  a  correlation  between  the  availability  of 
 UNE-  P  and  the  failure  of  competitors  to  utilize  their  own  switching  capacity.  I  fully  appreciate  the  challenges  that  carriers  face  in  utilizing  self-  provisioned  switching  to  serve  the  mass  market. 
 I  cannot  square  the  Majoritys  approach,  which  sets  a  trigger  at  a  level  that  is  presently  satisfied  almost  nowhere,  with  a  record  that  shows  competitors  are  now  widely  serving  mass  market 
 customers  using  their  own  switches  and  unbundled  loops. 
 Furthermore,  the  Commissions  own  data  is  replete  with  findings  that  the  average  number  of  lines  that  competing  carriers  serve  with  their  own  switches  and  unbundled  loops  dropped 
 sharply  between  the  beginning  of  2000  and  June  of  2002.  In  just  eight  of  the  states  where  carriers  now  make  extensive  use  of  UNE-  P,  competitors  are  connecting  more  than  45,000  fewer 
 lines  per  month    or  more  than  half  a  million  fewer  lines  per  year    to  their  own  switches  using  unbundled  loops  compared  to  2000.  9  Far  from  fostering  a  transition  to  facilities-  based  networks, 
 the  Commissions  data  suggest  that  some  carriers  are  moving  existing  lines  from  their  switches  to  UNE-  P,  leaving  competitor  switches  underutilized.  10  These  facts  suggest  that  it  is 
 unreasonable  to  expect  that  competitors  will  utilize  self-  provisioned  switching  capacity  while  a 

 8  Order  para.  463. 
 9  The  eight  states  are  New  York,  New  Jersey,  Massachusetts,  Georgia,  Florida,  Illinois,  California,  and  Texas. 
 Selected  RBOC  Local  Telephone  Data,  available  at:  http://  www.  fcc.  gov/  wcb/  iatd/  comp.  html  (RBOC  Local  Telephone  Dec  1999.  xls;  RBOC  Local  Telephone  June  2000.  xls;  RBOC  Local  Telephone  Dec.  2000.  xls;  RBOC 

 Local  Telephone  June  2001.  xls;  RBOC  Local  Telephone  Dec  2001.  xls;  RBOC  Local  Telephone  June  2002.  xls). 
 10  The  Commissions  data  show  that  the  number  of  CLEC-  owned  lines  other  than  those  provided  by  cable 
 decreased  by  half  a  million  lines  between  December  2002  and  June  2002,  while  the  number  of  UNE-  P  lines  increased  from  5.  8  to  7.  5  million.  See  Local  Telephone  Competition:  Status  as  of  June  30,  2002  (December  2002) 

 at  Tables  2,  3  &  5;  Local  Telephone  Competition:  Status  as  of  June  30,  2000  (December  2000)  at  Table  5.  See,  e.  g.,  UNE  Rebuttal  Report  2002,  Prepared  for  BellSouth,  SBC,  Qwest,  and  Verizon,  filed  with  the  Federal 
 Communications  Commission,  In  the  Matter  of  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers,  CC  Docket  No.  01-  338,  at  30  (October  2002)  (  UNE  Rebuttal  Report).  The  failure  of 
 facilities-  based  CLECs  to  accelerate  their  deployment  plans  may  likewise  explain  why  the  rollout  of  cable  telephony  has  proceeded  at  a  slower  pace  than  many  expected. 
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 steeply  discounted  and  long-  term  UNE-  P  alternative  exists.  11 
 The  purportedly  objective  and  mandatory  switch  trigger  is  also  undermined  by  unheeled  discretion  states  are  permitted  in  defining  the  market  to  which  the  trigger  applies. 
 Every  antitrust  lawyer  knows  that  the  outcome  of  any  case  is  generally  won  or  lost  over  how  the  market  is  defined.  The  same  is  true  of  the  Majoritys  impairment  analysis.  12  While  conceding 
 that  the  triggers  and  analysis  .  .  .  must  be  applied  on  a  granular  basis  to  each  identifiable  market  the  Majority  bounds  the  market  definition  exercise  only  by  acknowledging  that  states 
 may  not  define  the  market  as  encompassing  the  entire  state.  13  Under  this  guidance,  it  could  be  argued,  that  the  state  of  Rhode  Island  cannot  define  the  geographic  scope  of  its  market  any  larger 
 than  its  1545  square  miles  will  permit;  but  next  door,  Massachusetts  regulators  are  free  to  define  the  market  nearly  seven  times  larger  than  their  Rhode  Island  counterparts.  Never  mind  that  it  is 
 possible  for  switches  located  in  Providence  to  serve  a  customer  in  Boston.  This  is  not  granularity,  it  is  gerrymandering.  Put  simply,  states  are  likely  to  reach  wildly  different  results  in 
 applying  the  trigger  because  the  trigger  is  tied  to  state  market  definitions  that  can  be  as  large  as  a  LATA  and  as  small  as  a  wire  center.  14  The  Majority  responds  that  the  physical  location  of  the 
 switch  may  have  little  if  anything  to  do  with  the  location  of  the  customer  served  by  a  switch;  but  that  rationale  calls  into  question  the  very  premise  that  states  are  uniquely  qualified  to  make  these 
 judgments,  which  is  the  cornerstone  of  the  Majoritys  holding,  and  suggests  a  national  finding  is  more  appropriate.  The  Majoritys  market-  definition  approach  is  therefore  not  sufficiently 
 grounded  in  objective,  limiting  criteria. 
 iii.  The  Majority  Delegates  to  the  States  the  Power  to  Unbundle  Switching  Based  on  Economic  Impairment,  Without  Meaningful  Limits 

 The  Majority  finds  impairment  based  solely  on  the  basis  of  operational  impairment  and  the  hot  cut  process.  Yet,  it  empowers  states  to  find  economic  impairment  (even  after  curing 
 the  operational  concern)  based  on  a  laundry  list  of  possible  economic  disadvantages.  15  The  first 

 11  I  cannot  agree  that  the  presence  of  a  batch  migration  process  will  sufficiently  counter  the  powerful  incentive  of 
 carriers  to  send  merely  an  order  to  obtain  a  UNE-  P  arrangement  rather  than  utilize  their  own  switching  capacity. 
 12  States  are  granted  discretion  to  determine  the  contours  of  each  market  in  conducting  their  impairment 
 inquiries.  Order  para.  495. 
 13  Order  para.  495. 

 14  See  Order  para.  495. 
 15  The  Majoritys  list  of  possible  sources  of  economic  impairment  could  hardly  be  longer.  Potential  costs  that  a 
 state  commission  must  consider  include:  the  cost  of  purchasing  and  installing  a  switch,  the  recurring  and  non-recurring  charges  paid  to  the  incumbent  LEC  for  loops,  collocations,  transport,  hot  cuts,  OSS,  signaling,  and  other 

 services  and  equipment  necessary  to  access  the  loop;  the  cost  of  collocation  and  equipment  necessary  to  serve  local  exchange  customers  in  a  wire  center,  taking  into  consideration  an  entrants  likely  market  share,  the  scale  economies 
 inherent  to  serving  a  wire  center  and  the  line  density  of  the  wire  center;  the  cost  of  backhauling  the  local  traffic  to  the  competitors  switch;  other  costs  associated  with  transferring  the  customers  service  over  to  the  competitor;  the 
 (continued.) 
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 error  it  makes  in  taking  this  path  is  that  the  Majority  blinds  itself  to  the  significant  self-provisioned  switching  capacity  that  exists  in  the  market  and  the  fact  that  a  number  of 
 competitors  have  overcome  whatever  economic  impediments  exist  and  are  using  that  switching  capability  to  serve  mass  market  customers.  16  I  believe  the  record  supports  an  approach  that 
 would  have  enlisted  states  in  a  joint  enforcement  regime  designed  to  address  operational  issues  that  might  frustrate  a  transition  to  facilities-  based  competition.  Instead,  the  Majority  has 
 unleashed  a  chaotic  process  that  directs  the  states  to  find  economic  impairment  that  is  simply  not  cognizable  under  section  251(  d)(  2). 

 As  described  below,  states  are  free  to  do  what  they  choose  in  weighting  the  Majoritys  economic  criteria  in  divergent  and  subjective  ways.  Indeed,  given  these  economic  criteria,  it 
 would  be  difficult  to  judge  whether  an  individual  state  has  complied  with  the  delegation  granted  to  it.  17  Perhaps  this  is  why  the  Majority  has  resisted  an  exclusive  appeal  right  to  this 
 Commission  and  suggested  that  federal  district  courts    in  lieu  of  this  Commission    are  an  appropriate  venue  to  review  state  decisions  that  apply  these  factors.  18  The  significance  of 
 Commission  oversight  over  this  delegation  should  not  be  underestimated.  19  In  my  view,  the  statute  commits  to  this  Commission  the  ultimate  responsibility  for  ensuring  its  unbundling 
 decisions  are  adhered  to.  To  remain  faithful  to  the  statutory  scheme  and  principles  of  federal  supremacy,  however,  the  Commission  must  retain  the  primary  decision  making  authority,  and 
 we  must  establish  clear  standards  for  the  states  to  apply.  20 
 (Continued  from  previous  page) 
 impact  of  churn  on  the  cost  of  customer  acquisitions;  the  cost  of  maintenance,  operations  and  other  administrative  activities  and  the  competitors  capital  costs.  Order  para.  520. 

 16  See  BOC  UNE  Fact  Report  2002  at  I-  9,  Figure  6  Use  of  UNE  Platforms  by  CLECs  Providing  Service  to  25,000 
 or  More  Residential  Lines  Using  Their  Own  Switches  (  CLECs  providing  service  to  25,000  or  more  facilities-  based  residential  lines  include:  ALLTEL,  Broadview,  Cavalier  Telephone,  Intermedia,  Knology,  McLeodUSA,  RCA, 

 TOTALink). 
 17  Federal  district  courts  reviewing  state  decisions  are  likely  to  fare  no  better  for  the  same  reasons  this 
 Commission  would  have  difficulty  comparing  state  action  against  non-  existent  federal  standards. 
 18  The  Majority  admits  that  interested  parties  could  file  a  section  208  complaint  or  petition  for  declaratory  ruling 
 with  this  Commission  to  ensure  oversight  with  the  Commissions  switching  framework.  See  Order  para.  426.  I  cannot  agree,  however,  that  a  section  208  adjudicatory  proceeding  is  an  appropriate  procedural  vehicle  for  oversight 

 of  state  unbundling  determinations  of  general  applicability  made  pursuant  to  section  251(  d)(  2). 
 19  For  this  reason,  Commissioner  Abernathy  and  I  supported  a  specific,  exclusive  appeal  right  to  this  Commission 
 to  implement  the  transport  decision;  but  such  a  right  was  not  supported  by  the  Majority.  Transferring  oversight  responsibility  to  federal  district  courts  under  the  guise  of  their  arbitration  review  authority  is,  in  my  view, 

 inconsistent  with  the  statutory  command  that  the  Commission  shall  consider  which  network  elements  will  be  unbundled.  47  U.  S.  C.    251(  d)(  2). 

 20  For  this  reason,  I  fully  support  the  Commissions  delegation  of  federal  authority  to  states  to  implement  the 
 Commissions  unanimous  transport  and  high-  cap  loop  decision.  In  reaching  the  Commissions  binding  transport  and  high-  capacity  loop  decisions  we  grant  states  a  fact-  finding  role  to  implement  our  decision  and  therefore  avoid 

 abdicating  our  responsibilities  under  the  Act.  The  Majority  struggles  to  square  the  circle  and  harmonize  its  switching  approach  with  our  unanimous  transport  decision;  but  significant  differences  remain.  First,  because  the 
 (continued.) 
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 There  is  no  doubt  that  the  statute  does  contemplate  a  state/  federal  partnership  in  certain  areas.  States  are  given  control  over  the  rates  set  for  unbundled  elements,  but  it  is  principally  the 
 obligation  of  this  Commission  to  determine  what  those  elements  will  be,  faithfully  implementing  the  impairment  clause.  States  can  assist  in  that  effort,  but  our  responsibilities  should  not  be 
 released  to  them.  Justice  Antonin  Scalia,  whose  credentials  are  unchallenged  as  a  leading  voice  for  states  rights,  eloquently  addressed  the  division  of  federal  and  state  authority  when  he  wrote: 

 [t]  he  question  in  these  cases  is  not  whether  the  Federal  Government  has  taken  the  regulation  of  local  telecommunications  competition  away  from  the  States.  With  regard  to 
 the  matters  addressed  by  the  1996  Act,  it  unquestionably  has.  The  question  is  whether  the  state  commissions  in  the  administration  of  the  new  federal  regime  is  to  be  guided  by 
 federal-  agency  regulations.  If  there  is  any  presumption  applicable  to  this  question  it  should  arise  from  the  fact  that  a  federal  program  administered  by  50  independent  state 
 agencies  is  surpassing  strange  .  .  .  . 
 AT&  T  v.  Iowa  Utils.  Bd.  525  U.  S.  388,  391.  I  could  not  agree  more.  21 
 1.  The  Majoritys  Subjective  Economic  Criteria  Treats  UNE-  P  as  an  Unqualified  Good  and  Engages  in  Impermissible  Bootstrapping 

 The  USTA  court  cautioned  this  Commission  not  to  rely  on  start  up  costs  ordinarily  associated  with  entry  or  conditions  set  by  regulatory  bodies  in  reaching  our  unbundling 

 (Continued  from  previous  page) 
 triggers  are  set  at  an  appropriate  level  for  the  transport  market,  our  transport  decision  establishes  a  meaningful  limitation  on  unnecessary  unbundling.  Second,  because  the  transport  triggers  establish  a  meaningful  limitation, 

 there  is  less  of  a  need  for  the  Commission  to  direct  the  states  to  engage  in  a  subjective,  multi-  factor  impairment  analysis  as  in  the  Majoritys  switching  decision. 

 21  Compromise  within  the  limits  of  the  law  is  undoubtedly  necessary  for  the  administrative  process  to  function 
 smoothly;  but  on  the  question  of  federal    state  relations,  our  efforts  to  compromise  must  not  run  afoul  of  the  statutory  scheme.  The  Majority  charges  me  with  hypocrisy  by  citing  a  single  sentence  in  a  past  statement  taken  out 

 of  context,  as  evidence  that  I  should  support  the  switching  result  in  the  item  released  today.  Order  para.  425  n.  1306.  The  Majority  stresses  their  opinion  that  the  dissenters  did  not  make  sufficient  efforts  at  compromise;  but 
 their  citations  to  my  past  statements  and  parts  of  the  item  to  which  I  consented,  leaves  me  wondering  whether  the  Majority  may  be  more  interested  in  one-  upsmanship  than  compromise.  As  I  describe  below,  I  continue  to  believe 
 that  state  regulators  can  assist  in  our  efforts  to  achieve  a  rational  unbundling  regime,  but  our  responsibilities  should  not  be  released  to  them.  There  is  no  inconsistency  between  my  past  statements  and  my  current  position  that  the 
 Majority  simply  goes  too  far  in  that  direction.  If  questions  remain  about  my  views,  there  is  no  doubt  that  I  have  grown  in  my  concern  about  the  long-  term  viability  of  UNE-  P.  This  concern  was  amplified  after  the  D.  C.  Circuits 
 USTA  decision.  To  the  extent  a  judicial  decision  intervened  to  change  the  legal  landscape  and  caused  me  to  rethink  and  expand  upon  my  initial  position,  I  do  so  humbly  and  openly,  mindful  that  "wisdom  too  often  never  comes,  and 
 so  one  ought  not  to  reject  it  merely  because  it  comes  late."  Henslee  v.  Union  Planters,  335  U.  S.  595  (1949)  (Frankfurter,  J.,  dissenting). 
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 decision.  22  Yet  the  Majority  repeatedly  relies  upon  ordinary  start-  up  costs  or  other  impediments  within  the  control  of  federal  and  state  regulators  to  justify  its  conclusion  competitors  are,  or 
 could  be,  impaired  without  switching.  The  result  is  a  framework  that  treats  UNE-  P  as  an  unqualified  good  without  sufficient  regard  for  the  costs  associated  with  the  Majoritys  forced 
 sharing  requirements. 
 Many  factors  cited  by  the  Majority  are  cost  disparities  universally  faced  by  any  new  market  entrant.  For  example,  the  Majority  explicitly  finds  that  customer  churn  rates    a  prime 
 example  of  ordinary  start-  up  costs    contributes  to  impairment.  23  Thus  the  Commission,  once  again,  has  relied  upon  factors  specifically  rejected  by  the  USTA  court.  The  Majority  goes  on  to 
 note  that  competitor  switching  architecture  effectively  requires  competitors  to  deploy  much  longer  loops  than  the  incumbent.  24  I  do  not  contest  the  fact  that  competitors  must  reach  their 
 loops  farther  away  from  self-  provisioned  switches  compared  to  incumbents  who  have  deployed  ubiquitous  switching  capability.  What  I  do  contest  is  the  Majoritys  failure  to  adequately 
 recognize  that  this  network  configuration  demonstrates  that  competitors  generate  their  own  countervailing  competitive  advantage  by  self-  provisioning  switching.  25  While  the  cost  of 
 backhauling  traffic  to  a  central  switching  point  may  or  may  not  be  marginally  greater  than  the  incumbents  cost  of  backhaul,  competitors  experience  more  advantageous  cost  conditions   
 including  UNE  transport  rates    by  avoiding  the  cost  of  deploying  ubiquitous  switching  to  every  incumbent  LEC  wire  center,  thereby  mitigating  impairment.  26 

 Reasonable  minds  could  differ  regarding  the  extent  of  this  cost/  benefit  tradeoff  but  the  law  requires  the  Commission  to  confront  this  question  in  a  serious  manner  that  addresses  both 
 the  benefits  and  social  costs  of  unbundling    something  the  Majority  has  not  done.  Regrettably,  given  the  porous  nature  of  the  switching  triggers,  there  is  simply  no  barrier  that  would  preclude  a 

 22  The  Court  noted  that  average  unit  costs  are  necessarily  higher  at  the  outset  for  any  new  entrant  into  virtually 
 any  business.  Third  Report  and  Order  and  Fourth  Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  3696,  para.  7  (1999). 

 23  Order  para.  471  (  The  record  demonstrates  that  the  current  level  of  churn  for  carriers  providing  service  to  the 
 mass  market  has  significant  negative  revenue  effects  on  the  ability  of  competitive  carriers  to  recover  the  high  costs  associated  with  manual  hot  cuts.). 

 24  Order  para  480.  The  majority  describes  the  costs  of  backhaul,  which  include  the  costs  of  collocating  in  the 
 customers  serving  wire  center,  installing  equipment  in  the  wire  center  in  order  to  digitize,  aggregate,  and  transmit  the  voice  traffic,  and  paying  the  incumbent  to  transport  the  traffic  to  the  competitors  switch,  put  [competitors]  at  a 

 significant  cost  disadvantage  to  the  incumbent.  Id.  480. 
 25  See  Separate  Statement  of  Commissioner  Michael  K.  Powell,  Dissenting  in  part,  CC  Docket  No.  96-  98 
 (November  5,  1999). 
 26  See  USTA  at  290  F.  3d  at  427  (faulting  the  Commission  for  failing  to  identify  countervailing  competitor 
 economy  of  scale  advantages  in  switching  over  the  entire  extent  of  the  market.).  See  also  id.  at  423  (faulting  the  Commission  for  failing  to  consider  the  advantage  CLECs  enjoy  in  being  free  of  any  duty  to  provide  underpriced 

 service  to  rural  and/  or  residential  customers.). 
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 state  from  using  low  retail  rates  or  high  startup  costs  as  a  way  to  ensure  UNE-  P  will  continue  to  be  available.  The  Majority  approach,  in  effect,  begins  with  a  default  assumption  of  impairment. 
 Only  when  all  barriers  to  profitability  have  been  eliminated  does  this  Commission  empower  states  to  eliminate  UNE-  P.  27  This  exercise  is  unlikely  to  achieve  the  balance  called  for  explicitly 
 by  Justice  Breyer  in  Verizon  or  implicitly  by  the  Court  as  a  whole  in  its  disparagement  of  the  Commissions  readiness  to  find  any  cost  disparity  reason  enough  to  order  unbundling.  United 
 States  Telecom  Assn,  v.  FCC,  290  F.  3d  415,  428. 
 The  Commissions  task  is  to  determine  whether  competitors  are  impaired  without  a  given  element.  By  directing  states  to  examine  factors  that  are  chosen  to  focus  on  and  overstate 
 competitor  cost  disadvantages  without  meaningful  consideration  of  countervailing  advantages,  the  Commission  has  focused  not  on  whether  competitors  are  impaired  without  the  switching 
 element  but,  rather,  the  Majority  has  endorsed  a  regime  that  focuses  on  whether  self-  provided  switching  is  as  profitable  as  UNE-  P.  It  is  the  Commissions  job  to  ensure  that  local  markets  are 
 open  to  competition  and  that  competitors  are  given  a  fighting  chance  to  participate  in  that  market.  By  explicitly  engaging  in  a  profitability  analysis,  the  Commission  has  converted  the 
 impairment  standard  into  a  protector  of  individual  business  plans.  28  In  so  doing,  the  Majority  asks  the  wrong  question  and  provides  the  wrong  answer. 

 The  Majority  attempts  to  guide  states  evaluation  of  switching  impairment  with  a  shot-gun  blast  of  every  imaginable  economic  criterion.  In  so  doing,  however,  it  revives  the  very  type 
 of  factors  explicitly  rejected  by  the  USTA  court.  It  is  said  that  the  average  cost  of  collocation,  the  cost  of  backhauling  local  traffic  to  a  competitors  switch,  the  cost  of  capital  and  a 
 competitors  back  office  expenses  bear  on  a  states  decision  to  find  impairment.  29  These  factors  are  problematic  because  they  are  almost  identical  to  the  factors  rejected  in  the  UNE  Remand 
 decision.  30  I  am  particularly  troubled  that  we  are    once  again    importing  into  the  impairment 
 27  The  Majoritys  comparison  of  costs  and  revenues  amounts  to  a  consideration  of  whether  entry  by  a  competitor 
 is  profitable.  See  Order  paras.  517,  519-  520. 
 28  Order  para.  517  n.  1579  (states  may  conduct  a  business  case  analysis  for  an  efficient  entrant.). 

 29  Order  para.  520. 
 30  The  items  approach  is  virtually  identical  to  the  discredited  totality  of  the  circumstances  test  of  the  UNE 
 Remand  Order.  See  Order  para.  458.  Under  the  guise  of  granularity,  it  appears  that  the  majority  merely  renamed  the  cost,  quality,  and  ubiquity  factors  vacated  by  the  D.  C.  Circuit  by  focusing  the  state  analysis  on  precisely  the 

 alleged  impairments  analyzed  by  the  Commission  in  the  UNE  Remand  decision.  Compare  UNE  Remand  Order  para.  263  (finding  non-  recurring  costs  of  collocation  constitutes  impairment)  with  Order  para.  520  (finding  that 
 states  should  consider  whether  non-  recurring  costs  of  collocation  constitute  impairment);  Compare  UNE  Remand  Order  para.  266  (finding  that  loop  cutovers  costs  constitute  impairment)  with  Order  para.  512  (finding  that  states 
 should  consider  whether  loop  cutovers  costs  constitute  impairment);  Compare  UNE  Remand  Order  para.  256  (finding  that  geographic  specific  factors  may  determine  impairment)  with  Order  para.  520  (finding  that  states  should 
 consider  whether  geographic  specific  factors  determine  impairment);  Compare  UNE  Remand  Order  para.  262  (finding  that  self-  provisioning  switching  costs  constitutes  impairment)  with  Order  para.  520  (finding  that  states 
 should  consider  whether  self-  provisioning  switching  costs  constitutes  impairment). 
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 analysis  problems  that  do  not  result  directly  from  denying  competitors  access  to  unbundled  switching.  To  the  extent  collocation  is  a  problem  for  competitors  attempting  to  deploy  their  own 
 switches,  it  is  difficult  to  argue  that  this  problem  directly  results  from  denying  competitors  access  to  unbundled  switching.  31 

 The  Majority  approach  is  more  indefensible  because  through  regulation  we  have  addressed  competitor  collocation  rights,  and  for  the  first  time,  solidified  this  area  of  competition 
 policy  with  a  judicial  endorsement  of  their  consistency  with  the  Act.  32  Yet  despite  this  success,  the  Majority  would  pervert  these  stable  rules  into  sources  of  regulatory  instability  and 
 impairment.  Never  mind  that  after  this  order,  competitors  will  enjoy  forward-  looking  prices  for  hot  cuts,  collocation  and  unbundled  transport.  33  Never  mind  that  Congress  provided  a  direct 
 remedy  for  competitor  collocation  in  section  251.  Instead,  somehow  the  super-  efficient  pricing  of  collocation,  hot  cuts  and  transport  (which  is  set  by  regulators)  has  been  twisted  into  a  source 
 of  competitive  disadvantage  and  possible  reason  to  order  forced  sharing  of  the  incumbents  switch.  This  bootstrapping  flies  in  the  face  of  the  Courts  admonition  that  factors  set  by 
 regulators  can  hardly  justify  economic  impairment.  34 
 The  Majoritys  bootstrapping  of  UNE  rights  further  ignores  the  fact  that  the  rates  for  collocation  and  hot  cuts  as  well  as  other  UNEs,  are  not  within  the  control  of  the  incumbent  LEC 
 and  therefore  are  not  cognizable  under  section  251(  d)(  2).  35  The  Majority  has  threaded  its  impairment  analysis  with  characteristics  that  are  not  linked  to  natural  monopoly  in  direct 
 contravention  of  the  USTA  decision.  The  state  commissions  are  ultimately  responsible  for  setting  the  rates  for  collocation  and  unbundled  transport.  State  commissions  are  likewise 
 responsible  for  setting  retail  local  phone  rates.  We  stray  too  far  from  a  reasonable  interpretation  of  section  251(  d)(  2)  when  we  cite  these  government-  controlled  prices  as  the  reason  that  private 

 31  See  Separate  Statement  of  Commissioner  Michael  K.  Powell,  Dissenting  in  part,  CC  Docket  No.  96-  98 
 (November  5,  1999). 
 32  Indeed  the  costs,  delays,  and  physical  constraints  associated  with  collocation  have  already  been  addressed 
 through  the  Commissions  default  provisioning  interval.  See  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability,  Fourth  Report  and  Order,  CC  Docket  No.  98-  147,  16  FCC  Rcd  15435,  15454, 

 para.  36  (2001)  (Collocation  Remand  Order),  affd  sub.  nom.  Verizon  Telephone  Cos.  v.  FCC,  292  F.  3d  903  (D.  C.  Cir.  2002). 

 33  When  geographic  differences  point  to  the  elimination  of  an  unbundling  requirement,  the  Majority  is  all  too 
 happy  to  assume  away  these  differences  in  favor  of  a  national  finding.  See  Order  para.  470  (  Although  hot  cut  costs  vary  among  incumbent  LECs,  we  find  on  a  national  level  that  these  costs  contribute  to  a  significant  barrier  to 

 entry.). 
 34  Order  para.  91  (  We  examine  those  barriers  to  entry  that  are  solely  or  primarily  within  the  control  of  the 
 incumbent  LEC.)  See  also  USTA  at  427  (linking  impairment  to  natural  monopoly  characteristics  not  conditions  outside  of  control  of  incumbent  LEC). 

 35  Rather  they  are  generally  set  according  to  state  ratemaking  authority  found  in  section  252(  d)(  1)(  A)(  i).  The 
 statute  does  provide  for  interconnection  agreements  outside  of  the  section  252  framework;  but  those  arrangements  are  bilateral  negotiations  the  terms  of  which  are  not  entirely  within  the  control  of  incumbent  LECs. 
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 companies  should  be  required  to  unbundled  their  networks.  The  Majoritys  approach  risks  the  possibility  that  government  will  sponsor  competition  through  indirect  decisions  and  endorsement 
 of  continued  implicit  subsidies  designed  to  prop  up  synthetic  competition. 
 When  Congress  adopted  section  251(  d)(  2),  it  granted  this  Commission  a  toolbox  to  open  local  telephone  markets  to  competition.  One  of  those  specific  tools  was  unbundling. 
 Unbundling  is  specifically  designed  to  address  impairments  within  the  incumbents  control.  The  Majoritys  reliance  on  such  things  as  collocation,  CLEC-  CLEC  cross-  connects,  transport 
 availability  and  retail  rate  structures  is  simply  too  far  afield  from  the  question  of  whether  competitors  are  impaired  without  access  to  unbundled  switching.  I  cannot  support  a  decision  to 
 use  the  impairment  standard  as  a  hammer,  a  wrench,  a  screwdriver,  etc.,  to  fix  every  perceived  problem  that  may  ail  rational  competition  in  telecommunications  markets. 

 I  also  have  serious  concerns  that  the  Majoritys  switching  approach  is,  in  practice,  unworkable.  36  The  Majoritys  impairment  model  is  dependent  upon  hundreds  of  assumptions 
 about  local  exchange  markets  and  costs.  Simply  by  making  different  assumptions  about  local  exchange  networks,  or  by  picking  different  input  values  for  the  costs,  the  Commission  and 
 implementing  state  commissions  can  reach  widely  varying  conclusions,  undermining  a  coherent  federal  regime  and  distorting  entry  decisions.  37  This  uncertain  environment  disadvantages 
 competitors  and  incumbents  alike  as  neither  is  in  a  position  to  make  rational  investment  decisions  based  on  stable  rules. 

 Finally,  even  in  circumstances  where  a  state  has  found  no  mass  market  impairment,  the  Commission  has  seen  fit  to  allow  unbundling  for  three  full  years.  Given  the  USTA  courts 
 emphasis  on  the  significant  social  costs  that  unbundling  imposes,  it  is  legally  problematic  to  require  unbundled  switching  for  three  years  when  there  has  been  an  express  finding  of  no 
 impairment.  I  concede  that  the  Commission  is  permitted  to  afford  a  reasonable  transition  to  avoid  undue  customer  disruption,  but  this  period  is  nothing  of  the  sort.  Its  true  intent  is  made 
 obvious  by  allowing  unbundling  clear  through  the  Commissions  next  comprehensive 

 36  Factor  based  unbundling  requirements  have  been  tried  by  this  Commission  before,  to  little  consistent  effect. 
 In  the  UNE  Remand  Order,  the  Commission  created  a  straightforward  4-  part  test  for  unbundled  packet  switching.  Despite  this  objective  test,  state  commissions  took  diametrically  opposed  views  of  whether  packet  switching  should 

 be  required.  Compare  Arbitration  Award,  Case  No.  01-  1319-  TP-  ARB,  at  52  (Pub.  Utils.  Commn  of  Ohio,  Nov.  7,  2002)  (  the  criteria  of  the  FCCs  packet  switching  rule  should  be  evaluated  on  an  RT-  by-  RT  basis  or  location-  by-location 
 basis)  and  Final  Order  on  Arbitration,  Docket  No.  010098-  TP,  order  No.  PSC-  02-  0765-  FOF-  TP,  at  16  (Fla.  Publ.  Serv.  Commn,  June  5,  2002)  (FCCs  packet  switching  rule  contemplates  a  case-  by-  case  analysis  of 
 whether  [the  four]  conditions  are  met  at  specific  remote  terminals)  with  Order  on  Rehearing,  Docket  No.  00-  0393,  at  36  (Ill.  Comm.  Commn,  Sept.  26,  2001  (  We  reject  Ameritechs  notion  that  these  situations  must  be  viewed  on 
 an  RT  by  RT  basis.). 
 37  The  majority  makes  much  of  the  fact  that  its  approach  responds  to  the  USTA  courts  demand  for  granularity. 
 Yet,  in  response  to  this  decision,  the  states  have  already  organized  themselves  into  regional  and  national  cooperatives  that  appear  to  be  a  far  cry  from  the  localized,  market-  specific  findings  the  majority  expected  them  to 

 arrive  at.  See  www.  naruc.  org/  programs/  trip/  index.  shtml. 
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 unbundling  review.  This  is  not  a  decision  that  supports  the  transition  to  facilities-  based  networks;  it  is  a  decision  that  cleverly  pushes  UNE-  P  along  until  the  next  UNE  review. 
 2.  The  Majoritys  Approach  to  Revenue  Impairment  is  Inconsistent  with  the  USTA  Decision 
 Since  we  voted  this  item  on  February  20  th  ,  the  Majority  has  attempted  to  harmonize  the  switching  framework  with  other  sections  of  the  item.  Turning  heads  to  tails,  the  Majority  now 
 argues  that  dissenting  criticisms  of  the  switching  approach  rest  on  a  mischaracterization  of  the  USTA  decision  and  are  otherwise  inconsistent  with  sections  of  the  Order  to  which  I  have 
 approved.  This  criticism  boils  down  to  a  disagreement  over  the  manner  in  which  the  impairment  standard  is  applied.  For  example,  the  Majoritys  switching  decision  conflates  an  impairment 
 standard  that  properly  asks  whether  entry  is  uneconomic  with  the  question  of  whether  entry  is  profitable.  38  Under  its  profitability  analysis  the  Majority  directs  states  to  consider  whether  price 
 and  revenue  reductions  that  result  from  additional  competitive  entrants  can  form  the  basis  of  impairment.  39 

 First,  I  cannot  agree  that  the  very  entry  this  Commission  should  rightly  encourage  can  form  the  basis  for  a  continuing  impairment.  This  is  a  staggering  endorsement  of  a  centrally 
 managed  artificial  competition  standard  that  pays  little  attention  to  the  positive  consumer  benefits  that  result  from  facilities-  based  competition.  Second,  I  am  at  a  loss  to  understand  how  a 
 well-  intentioned  state  commissioner  can  implement  this  decision.  Is  a  10  percent  price  reduction  cause  for  impairment?  20  percent?  It  is  quite  simply  an  ad  hoc  calculation,  permitting  any  result 
 whatsoever.  Third,  this  approach  endorses  a  least  common  denominator  circularity  that  is  not  faithful  to  the  statute.  If  a  first  mover  enters  a  market  and  is  followed  by  a  second  entrant,  can 
 this  be  grounds  to  say  that  the  third  is  impaired?  The  third  entrant  is  not  impaired,  rather  three  is  merely  one  too  many  for  the  market  to  sustain.  Such  regulatory  calculus  impedes  the  proper 
 functioning  of  a  market,  which  signals  the  right  levels  of  scale  and  scope.  The  Majoritys  switching  construct  ignores  the  fundamentals  of  economics. 

 Furthermore,  it  is  widely  accepted  that  because  of  universal  service  cross  subsidies,  many  residential  rates  are  priced  below  cost  and,  thus,  the  retail  revenues  associated  with  those 
 services  may,  in  some  cases,  not  cover  the  costs  incurred  to  provide  the  service.  The  D.  C.  Circuit,  however,  rejected  the  notion  that  competitors  decision  not  to  enter  subsidized  markets 

 38  Order  at  para.  84. 
 39  The  Majority  notes  that  potential  revenues  could  be  outweighed  by  a  combination  of  even  higher  economic 
 and  operational  costs,  such  as  untimely  and  unreliable  provisioning  of  loops,  transport,  or  collocation  by  the  incumbent  LEC  at  high  non-  recurring  charges  and  significant  costs  to  purchase  equipment  and  backhaul  the  local 

 traffic  to  the  competitors  switch.  Order  para.  458. 
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 with  their  own  facilities  demonstrates  impairment.  40  In  this  situation,  it  is  the  retail  rate  structure  that  causes  impairment,  not  the  incumbents  monopoly  position  in  the  market.  Thus,  to  the 
 extent  that  the  Majoritys  approach  to  revenue-  impairment  includes  an  analysis  of  artificially  low  retail  voice  rates,  it  is  specifically  barred  by  USTA. 

 B.  The  Majority  Fails  to  Reach  a  Conclusive  Finding  of  No-  Impairment  in  Competitive  Business  Markets 
 In  the  business  market,  the  Majority  permits  states  to  unbundle  switching  for  business  customers  without  a  thorough  analysis  of  sufficiently  granular  facts.  As  discussed  above,  my 
 primary  objection  to  the  Commissions  initial  vote  was  the  complete  transfer  of  decision  making  authority  to  state  commissions  through  a  series  of  unreviewable  presumptions  of  impairment.  41  I 
 am  pleased  that  in  the  released  decision  the  Majority  has  jettisoned  its  initial  presumptive  approach  to  business  switching.  42  In  its  place  however,  it  has  provided  a  procedural  mechanism 
 that  provides  for  UNE-  P  in  a  segment  of  the  market  where  facilities-  based  competitors  have  been  the  most  successful.  The  record  shows  that  more  than  200  competitors  have  deployed  more  than 
 1,300  switches  nationwide  addressing  86  percent  of  Bell  Operating  company  wire  centers.  43  I 
 40  The  D.  C.  Circuit  stated  that  [  I]  f  competition  performed  with  ubiquitously  provided  ILEC  facilities  counts,  the 
 more  unbundling  there  is,  the  more  competition,  but  then  explained  that  if  fact  this  competition  does  not  support  the  goals  of  the  Act  because  it  is  completely  synthetic.  USTA,  290  F.  3d  at  422,  424. 

 41  I  appreciate  the  willingness  of  my  colleagues  to  reform  parts  of  their  unbundling  approach  in  response  to  my 
 concerns  at  that  time;  but  ultimately  the  Majoritys  approach  has  fallen  short  of  the  mark.  On  February  20,  I  dissented  to  the  Majoritys  switching  approach  because  unlike  our  impairment  frameworks  for  transport  and  high-capacity 

 loops,  the  Majoritys  switching  decision  made  no  findings  at  all  and  ensured  that  the  transfer  of  ultimate  decision  making  to  the  states  was  complete  by  withdrawing  an  appeal  right  to  this  Commission.  Today  the  released 
 version  of  the  item  does  not  use  a  pure  presumptive  approach  but  finds  that  the  hot  cut  process  currently  inflicts  a  nationwide  impairment  on  competitive  LECs  for  mass  market  customers  that  only  unbundled  switching  cures.  The 
 Majority  declares  that  [  o]  ur  national  finding  of  impairment  is  based  on  the  combined  effect  of  all  aspects  of  the  hot  cut  process  on  competitors  ability  to  serve  mass  market  voice  customers.  Order  para.  473.  In  the  business  market, 
 todays  order  adopts  a  national  non-  impairment  finding,  but  provides  a  vehicle  for  state  commissions  to  place  switching  on  the  list.  I  remain  concerned  that  this  approach  renders  the  finding  inconclusive  and  permits  states  to 
 overturn  the  Commissions  judgment. 
 42  The  Orders  initial  approach  completely  released  its  unbundling  decision  to  the  states  without  a  right  of  appeal 
 to  this  Commission,  thereby  totally  abdicat[  ing]  its  ultimate  responsibility  for  enforcing  the  [statutory]  provision.  American  Civil  Liberties  Union  v.  FCC,  823  F.  2d  1554,  1574-  75  (D.  C.  Cir.  1987).  Now  the  Majority  relies  on  a 

 state  waiver  process  to  protect  against  charges  that  it  has  avoided  its  responsibilities  to  determine  which  network  elements  should  be  unbundled. 

 43  See  BOC  UNE  Fact  Report  at  I-  9.  The  Majoritys  national  business  switching  findings  are  presumptions  by 
 another  name.  Indeed  the  Majority  notes  that  states  may  rebut  that  finding  based  on  a  more  granular  inquiry.  Order  para.  451  n.  1375.  In  adopting  this  approach  the  Majority  tests  the  limits  of  its  authority  and  may  well  have, 

 in  effect,  avoided  the  statutorily  prescribed  impairment  test  by  means  of  a  rebuttable  presumption.  The  D.  C.  Circuit  has  explained  that  an  agency  is  not  free  to  ignore  statutory  language  by  creating  a  presumption  on  grounds  of 
 policy  to  avoid  the  necessity  for  finding  that  which  the  legislature  requires  to  be  found.  United  Scenic  Artists,  Local  829  v.  NLRB,  762  F.  2d  1027  (D.  C.  Cir.  1987). 
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 am  concerned  that  state  decisions  endorsing  UNE-  P,  particularly  to  serve  small  enterprise  customers,  may  devalue  the  assets  of  providers  serving  these  markets  and  exert  pressure  on 
 legitimate  facilities-  based  providers  to  begin  using  UNE-  P.  Instead  of  providing  for  a  waiver  process  that  allows  states  to  unbundle  UNE-  P  for  business  customers,  I  believe  the  record  fully 
 supports  conclusively  removing  unbundled  switching  to  serve  business  customers,  subject  to  an  appropriate  transition  to  protect  against  customer  disruption. 

 IV.  The  Majority  Made  Incongruous  Compromises 
 I  am  concerned  that  there  are  incongruous  compromises  apparently  designed  only  to  preserve  UNE-  P.  Take  the  Majoritys  decision  on  line  sharing.  Companies  such  as  Covad 
 presented  specific,  credible  arguments  that  competitors  are  impaired  without  line  sharing.  The  public  statements  of  some  of  my  colleagues  make  very  clear  that  a  majority  of  the  Commission 
 actually  supported  line  sharing,  yet  it  was  sacrificed  to  secure  votes  to  achieve  the  higher  priority  of  indefinitely  preserving  UNE-  P.  44  Courts  have  been  quick  to  reverse  agencies  when  they 
 engage  in  unprincipled  compromises  of  Rube  Goldberg  complexity.  Schurz  Communications  Inc.  v.  Federal  Communications  Commission,  982  F.  2d  1043,  1050  (1992).  With  this  in  mind, 
 we  need  to  more  fully  explain  the  claim  that  competitors  are  not  impaired  without  line  sharing.  One  could  have  responsibly  accepted  or  rejected  Covads  arguments,  but  the  claims  should  rise 
 or  fall  on  the  merits.  Here,  members  of  the  Commission  seem  to  credit  the  merits,  but  nonetheless  sacrificed  parties  who  rely  on  line  sharing  in  order  to  achieve  something  wholly 
 unrelated  and  of  little  interest  to  companies  like  Covad.  45 
 V.  Conclusion 
 I  believe  this  decision  will  prove  too  chaotic  for  an  already  fragile  telecom  market.  In  choosing  to  abdicate  its  responsibility  to  craft  clear  and  sustainable  rules  on  unbundling  to  the 
 state  commissions  the  Majority  has  brought  forth  a  molten  morass  of  regulatory  activity  that  may  very  well  wilt  any  lingering  investment  interest  in  the  sector.  And,  I  fear  as  much  or  more  for 
 competitors  as  I  do  incumbents,  for  the  prolonged  uncertainty  of  rights  and  responsibilities  may  prove  stifling. 

 The  nation  will  now  embark  on  51  major  state  proceedings  to  evaluate  what  elements 
 44  I  would  have  preferred  to  maintain  this  access,  known  as  line  sharing.  Separate  Statement  of  Commissioner 
 Michael  Copps,  February  20,  2003.  There  has  been  a  great  deal  of  comprise  [sic]  in  this  process.  I  am  very  comfortable  with  some  of  the  decisions,  while  others  quite  frankly  give  me  pause.  Separate  Statement  of 

 Commissioner  Jonathan  S.  Adelstein,  February  20,  2003. 
 45  I  expect  that  even  this  decision  is  cold  comfort  for  providers  who  depend  on  line  shared  inputs  to  provide 
 service.  When  the  Commission  voted  on  this  item  on  February  20  th  ,  it  was  clear  that  it  did  not  grandfather  existing  customers.  Today,  the  Commission  decides  that  carriers  are  impaired  for  grandfathered  customers  and  orders 

 continued  access  to  line  sharing.  At  the  same  time,  however,  the  Majority  concludes  that  this  impairment  mysteriously  vanishes  for  new  customers  because  of  the  presence  of  whole  loop  alternatives.  The  item  does  not 
 explain  why  whole  loop  alternatives  are  not  good  enough  for  grandfathered  customers. 
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 will  be  unbundled  and  made  available  to  competitors.  These  decisions  will  be  litigated  through  51  different  federal  district  courts.  These  51  cases  will  likely  be  decided  in  multiple  ways 
 some  upholding  the  state,  some  overturning  the  state  and  little  chance  of  regulatory  and  legal  harmony  among  them  at  the  end  of  the  day.  These  51  district  court  cases  are  likely  to  be  heard 
 by  12  Federal  Courts  of  Appeals  do  we  expect  they  will  all  rule  similarly?  If  not,  we  will  eventually  be  back  in  the  Supreme  Court  of  the  United  States  to  resolve  any  conflicts  the  same 
 Court  that  vacated  our  excessively  permissive  unbundling  regime  in  1999.  This  process  will  take  many  years  and  will  hardly  be  the  quieting  and  stabilizing  regime  that  was  so  craved  by  a 
 rocky  market.  It  is,  in  short,  a  litigation  bonanza. 
 This  Majoritys  UNE-  P  decision  could  prove  harmful  to  consumers  in  the  long-  run,  and  I  cringe  to  see  their  welfare  raised  on  the  staff  of  the  Majoritys  decision.  Make  no  mistake,  UNE-P 
 may  have  very  limited  merits  as  a  transitional  strategy,  but  it  is  fatally  flawed  as  sustainable  local  competition.  This  is  not  the  low  lying  plateau  on  which  the  high  aspirations  of  the  1996 
 Act  should  be  planted.  It  is  a  model  that  only  works  if  hundreds  of  stars  align  perfectly  and  stay  that  way:  every  state  needs  to  continue  to  make  every  last  element  available;  every  decision  to 
 do  so  must  be  sustained  by  every  court  that  examines  it;  the  Commission  must  never  tamper  with  it  and  Congress  better  not  ever  alter  the  rights.  The  regulatory  arbitrage  bubble  expands  ever 
 more  perilously  with  each  regulatory  variable  and  is  sure  to  eventually  pop,  like  dot  coms  of  old,  if  government  policy  does  not  diligently  steer  the  balloon  to  stable  ground. 

 There  are  great  strides  being  made  today  in  the  march  of  Digital  Migration,  which  realize  some  of  my  most  important  objectives.  I  am  disappointed,  however,  by  todays  decision  on 
 UNE-  P.  Nonetheless,  it  is  the  fair  result  of  a  democratic  institution  in  which  Majority  rules.  I  also  recognized  that  state  commissions  will  now  have  an  enormous  task  before  them  and  I 
 sincerely  wish  them  the  very  best  as  they  struggle  through  what  the  Commission  could  not.  I  pledge  to  work  with  them  in  partnership  to  yield  the  best  result  for  the  nation.  And,  I  sincerely 
 hope  that  those  carriers  who  fought  so  fiercely  for  this  result  will  now  prove  their  value  in  the  marketplace  and  actually  deliver  the  local  competition,  lower  prices  and  more  innovative 
 services  that  they  insisted  they  would  if  they  prevailed.  I,  for  one,  will  be  watching.  This  has  been  a  tough  proceeding,  but  I  look  forward  to  getting  it  behind  us  and  moving  to  other  matters 
 pressing  for  the  Commissions  attention. 
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 In  conclusion,  the  Order  is  a  decidedly  mixed  result  in  my  view.  It  scores  a  big  win  for  consumers  by  promoting  broadband  investment,  but  it  potentially  undermines  that  victory  by 
 turning  unbundled  switching  into  a  regulatory  morass  that  carriers  will  be  stuck  in  for  years  to  come.  I  therefore  approve  in  part  and  dissent  in  part. 
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 Federal  Communications  Commission  FCC  03-  36 
 SEPARATE  STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 
 APPROVING  IN  PART,  CONCURRING  IN  PART,  DISSENTING  IN  PART 
 Re:  Review  of  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers  (CC  Docket  No.  01-  338) 

 Seven  years  ago,  Congress  enacted  a  sweeping  reform  of  our  nations  telecommunications  laws.  In  doing  so,  it  sought  to  promote  competition  in  all 
 telecommunications  markets  and  replace  the  heritage  of  monopoly  with  the  vitality  of  competition.  Provisions  to  open  the  local  markets  to  competition  are  at  the  very  heart  of  this 
 Congressional  framework.  The  Act  contemplates  three  modes  of  competitive  entry  into  the  local  market  construction  of  new  networks,  use  of  unbundled  elements  and  resale  of  services.  The 
 competition  envisioned  in  the  legislation  only  now  is  becoming  a  reality.  Today,  because  of  the  vision  of  Congress  and  the  hard  work  of  American  entrepreneurs  across  the  country,  there  are 
 nearly  25  million  competitive  lines  serving  consumers.  As  the  Commissions  own  data  on  local  competition  reflect,  this  number  has  continued  to  grow  even  during  the  economic  downturn  that 
 the  telecommunications  industries  and  the  nation  as  a  whole  have  suffered.  This  proceeding  offered  us  the  opportunity  to  encourage  this  competition  and  fulfill  the  mandate  of  the  law, 
 which  is  to  secure  lower  prices  and  higher  quality  for  American  consumers. 
 In  some  ways,  our  action  advances  that  mandate.  We  chart  a  course  that  preserves  burgeoning  voice  competition  in  the  local  markets  and  steers  it  in  the  direction  of  further  growth. 
 We  accord  the  states  an  enhanced  role  in  making  the  granular  determinations  about  where  the  rules  of  the  game  may  need  to  be  changed  and  where  they  should  be  maintained  in  order  to  foster 
 competition.  In  other  equally  important  ways,  however,  we  fail  our  charge.  The  majority  decision  plays  fast  and  loose  with  the  countrys  broadband  future,  denying  it  the  competitive  air 
 it  needs  to  breathe  in  order  to  flourish.  Consumers,  innovation  and  the  Internet  may  well  suffer. 
 This  decision  is  not  just  a  big-  ticket  item  for  telecommunications  companies  on  one  side  or  another  of  a  set  of  complex  and  arcane  issues.  It  affects  us  all.  It  is  next  months  telephone 
 bill.  It  is  also  the  next  generations  broadband  deployment.  It  is  the  future  of  the  Internet.  It  will  deeply  affect  our  countrys  future. 

 As  a  result,  this  proceeding  has  been  the  subject  of  heated  debate.  Although  our  decision  is  plagued  by  shifting  pluralities,  I  appreciate  the  willingness  of  my  colleagues  to  engage  in 
 discussion  to  find  common  ground.  In  my  own  review  I  have  tried  always  to  keep  in  mind  that  setting  competition  policy  is  the  exclusive  jurisdiction  of  Congress.  I  have  done  my  utmost  to 
 remain  faithful  to  the  public  interest  and  to  the  competitive  framework  that  Congress  adopted  in  the  1996  Act.  I  believe  those  aspects  of  the  decision  I  support  and  those  I  concur  in  are 
 consistent  with  Congressional  intent.  Where  I  am  unable  to  square  a  decision  with  statutory  directives  no  matter  how  hot  the  rhetoric  I  am  compelled  to  dissent. 

 I  am  pleased  to  support  the  rules  we  adopt  to  address  the  availability  of  local  switching.  In  the  face  of  intense  pressure  for  the  Commission  to  make  broad  nationwide  findings  on 
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 impairment  findings  that  would  have  doomed  the  future  of  unbundled  elements  such  as  switching  we  have  instead  managed  to  fashion  a  majority  for  a  more  reasonable  process  to 
 conduct  a  granular  analysis  that  takes  into  account  geographic  and  customer  variation  in  different  markets.  In  doing  so,  we  are  able  to  consider  the  very  real  differences  in  economies  of 
 scale  involved  in  providing  service  to  residential  and  small  business  customers  on  the  one  hand  and  larger  business  customers  on  the  other.  We  also  have  recognized  that  the  states  have  a 
 critical  role  to  play  in  our  unbundling  determinations.  The  path  to  success  is  not  through  preemption  of  the  role  of  the  states,  but  through  cooperation  with  the  states.  State  commissions 
 more  proximate  to  and  familiar  with  local  markets  are  often  best  positioned  to  make  the  fact  intensive  determinations  about  impairments  faced  by  competitors.  I  am  therefore  pleased  with 
 our  decision  that  states  should  have  an  active  role  in  conducting  the  granular  analysis  necessary  to  determine  whether  and  where  network  elements  such  as  switching  should  be  available  as 
 unbundled  network  elements. 
 The  decision  regarding  line  sharing  was  a  difficult  one.  I  believe  that  line  sharing  has  made  a  contribution  to  the  competitive  landscape.  Had  I  the  luxury  of  developing  our  list  of 
 unbundled  network  elements  on  a  blank  slate,  I  would  have  supported  its  inclusion.  Our  analysis  in  this  decision,  however,  was  etched  against  the  very  real  background  of  the  D.  C.  Circuits 
 decision  vacating  the  Commissions  line  sharing  rules.  That  decision  and  the  record  in  this  proceeding  lead  me  to  concur  in  this  aspect  of  the  Order.  Circumscribed  as  we  were  here,  my 
 focus  has  been  on  providing  a  realistic  transition  and  on  developing  carrier  and  consumer  options.  I  am  pleased  that  the  decision  provides  an  extended  transition  period  to  allow 
 competitors  to  purchase  the  full  loop  facility  as  a  network  element.  Carriers  also  may  pair  with  competitive  voice  providers  and  collectively  offer  a  full  range  of  services  to  customers. 

 Critically,  there  are  also  parts  of  this  Order  with  which  I  strongly  disagree.  Most  importantly,  I  am  troubled  that  we  are  undermining  competition  in  the  broadband  market  by 
 limiting  on  a  nationwide  basis  in  all  markets  for  all  customers  competitors  access  to  broadband  loop  facilities  whenever  an  incumbent  deploys  a  mixed  fiber/  copper  loop.  In  essence, 
 as  incumbents  deploy  fiber  anywhere  in  their  loop  plant,  they  are  relieved  of  the  unbundling  obligations  that  Congress  imposed  to  ensure  adequate  competition  in  the  local  market.  The 
 majority  assures  us  that  by  somehow  ignoring  the  intent  of  Congress  and  tearing  away  the  infrastructure  that  undergirds  competition,  this  will  promote  investment  in  advanced 
 architectures.  Rather  than  new  wires,  new  rules,  I  fear  the  majority  adopts  a  system  of  no  rules,  old  monopolies.  This  is  not  a  brave  new  world  of  broadband,  but  simply  the  old  system 
 of  local  monopoly  dressed  up  in  a  digital  cloak. 
 The  Commission  has  recognized  time  and  again  that  loops  are  the  ultimate  bottleneck  facility.  Yet,  here  the  Commission  chooses  to  perpetuate  the  bottleneck,  and  it  does  so  on  a 
 nationwide  basis  without  adequate  analysis  of  the  impact  on  consumers,  without  analyzing  different  geographic  or  customer  markets  and  without  conducting  the  granular,  fact-  intensive 
 inquiry  demanded  by  the  courts.  I  fail  to  see  how  the  majority  finds  that  competitors  are  impaired  without  access  to  the  loop,  but  abandons  this  finding  the  minute  that  fiber  is  found  in 
 the  loop  architecture.  To  make  matters  even  worse,  in  some  markets  such  as  the  small  business  market,  there  may  not  be  any  competitive  alternatives  if  competitors  cannot  get  access  to  loop 
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 facilities.  In  other  words,  our  nations  small  businesses  the  engines  of  so  much  entrepreneurial  activity  and  economic  growth  may  be  stuck  without  competitive  choices  and  prices  when  it 
 comes  to  critical  broadband  services.  I  fear  this  decision  will  result  in  higher  prices  for  consumers  and  put  us  on  the  road  to  re-  monopolization  of  the  local  broadband  market. 

 As  harmful  as  this  decision  is,  it  may  not  be  the  last  battle  this  year  in  the  headlong  rush  to  deregulate  broadband.  Shortly,  we  may  be  considering  whether  to  deregulate  broadband 
 entirely  by  removing  core  communications  services  from  the  statutory  framework  established  by  Congress.  This  strikes  many,  including  me,  as  substituting  our  own  judgment  for  that  of  the  law. 
 It  is  playing  a  game  of  regulatory  musical  chairs  by  moving  technologies  from  one  statutory  definition  to  another.  We  will  also  consider  whether  large  incumbent  carriers  providing 
 broadband  services  should  henceforth  be  regulated  as  non-  dominant  or  lacking  market  power,  rather  than  dominant  and  exercising  market  power.  And  we  commit  in  this  Order  to  reviewing 
 the  Commissions  forward-  looking  economic  cost  methodology  for  network  elements  in  a  soon-to-  be-  initiated  proceeding  that  improperly  crafted  could  create  more  problems  than  it  resolves. 
 In  light  of  our  goals  of  establishing  certainty  and  stability,  I  hope  we  can  agree  to  not  use  these  other  proceedings  to  overturn  our  new  unbundling  obligations  over  the  next  few  short  months. 
 But  I  caution  that  it  could  indeed  happen. 
 Finally,  I  am  troubled  by  the  less  than  satisfactory  process  that  generated  this  decision.  When  Congress  passed  its  landmark  legislation  seven  years  ago,  the  Commission  generally 
 implemented  its  regulatory  directives  in  a  bipartisan  fashion  by  unanimous  vote,  reaching  consensus  under  extremely  short  statutory  deadlines.  By  contrast,  this  decision  was  adopted  in  a 
 split  fashion  and  based  on  a  roughly  conceived  outline  produced  under  the  threat  of  a  judicial  deadline.  I  am  disappointed  that  we  were  not  able  to  reach  compromise  on  all  of  the  questions 
 and  issue  a  unanimous  decision  as  previous  Commissions  were  often  able  to  accomplish.  Perhaps,  given  the  different  philosophical  and  regulatory  approaches  which  exist  among  us,  that 
 just  was  not  in  the  cards  here.  Nevertheless,  this  proceeding  and  our  recent  decision  on  media  concentration  provide  serious  lessons  about  smoothing  the  process  within,  exchanging  ideas  and 
 paper  earlier  on,  and  making  sure  we  have  enough  time  to  reach  and  hammer  out  final  agreements.  I  also  believe  that  the  constraints  placed  upon  independent  regulatory 
 Commissioners  by  laws  that  forbid  more  than  two  of  us  from  meeting  together,  talking  together  and  reaching  agreement  together  hobble  the  regulatory  process  and  retard  our  ability  to  tackle 
 complex  proceedings  like  this  one.  I  do  not  know  of  any  other  institution  that  is  forced  to  operate  in  this  fashion.  Perhaps  the  ability  to  manage  our  discussions  differently  would  not  have 
 rescued  this  item  or  others  where  the  disagreement  among  my  colleagues  has  been  substantial  but  I  do  think  it  could  make  a  difference  going  forward.  And  we  certainly  have  a 
 lot  of  work  to  do  going  forward. 
 In  light  of  the  positive  and  negative  parts  of  todays  decision,  I  vote  to  approve  in  part,  concur  in  part,  and  dissent  in  part.  This  has  been  a  complex  decision  and  a  complex  process. 
 Nonetheless,  I  appreciate  all  the  work  that  so  many  dedicated  individuals  at  the  Commission  put  in  to  ensure  that  this  Order  finally  sees  the  light  of  day. 
556
 Federal  Communications  Commission  FCC  03-  36 
 SEPARATE  STATEMENT  OF  COMMISSIONER  KEVIN  J  .  MARTIN 

 Re:  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers,  Report  and  Order  on  Remand  and  Further  Notice  of  Proposed  Rulemaking,  CC 
 Docket  Nos.  01-  338,  96-  98,  98-  147,  02-  33 
 Today,  the  Commission  finally  releases  the  Triennial  Review  Order,  which  fully  explains  the  decisions  we  made  on  February  20th.  As  I  stated  in  my  February  20th  statement,  this  Order 
 achieves  a  balanced  approach  that  provides  substantial  regulatory  relief  for  broadband  investment,  where  there  is  vigorous  competition,  while  preserving  and  facilitating  competition 
 for  local  residential  service    the  competition  that  has  enabled  millions  of  consumers  to  benefit  from  lower  telephone  rates.  While  I  would  have  liked  to  release  the  Order  sooner,  I  appreciate 
 everyone  on  the  Commissions  desire  to  explain  fully  their  views  on  these  very  important  issues.  My  views  are  explained  in  my  February  20th  statement,  which  is  attached. 
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 NEWS  Federal  Communications  Commission  445  12  th  Street,  S.  W.  Washington,  D.  C.  20554  This  is  an  unofficial  announcement  of  Commission  action.  Release  of  the  full  text  of  a  Commission  order  constitutes  official  action.  See  MCI  v.  FCC.  515  F  2d  385  (D.  C.  Circ  1974). 
 FOR  IMMEDIATE  RELEASE  Contact:  Emily  Willeford  February  20,  2002  202-  418-  2100 
 COMMISSIONER  KEVIN  J.  MARTINS  PRESS  STATEMENT  ON  THE  TRIENNIAL  REVIEW 
 I  support  this  item  because  it  achieves  a  principled,  balanced  approach.  It  ensures  that  we  have  competition  and  deregulation.  We  deregulate  broadband,  making  it  easier  for 
 companies  to  invest  in  new  equipment  and  deploy  the  high-  speed  services  that  consumers  desire.  We  preserve  existing  competition  for  local  service    the  competition  that  has  enabled  millions  of 
 consumers  to  benefit  from  lower  telephone  rates.  And  we  continue  the  strong  role  of  the  states  in  promoting  local  competition  and  protecting  consumers.  Finally,  we  accomplish  these  goals  in 
 a  manner  that  is  consistent  with  the  statute  and  the  rulings  of  the  courts. 
 Deregulating  Broadband  and  Attracting  New  Investment 
 This  Order  takes  important  steps  toward  deregulating  broadband  and  encouraging  new  investment.  I  have  long  believed  that  the  Commission  should  make  broadband  its  top  priority 
 and  create  proper  incentives  for  new  investment  in  advanced  services.  The  action  we  take  today  provides  sweeping  regulatory  relief  for  broadband  and  new  investments.  It  removes  unbundling 
 requirements  on  all  newly  deployed  fiber  to  the  home.  It  provides  regulatory  relief  for  new  hybrid  fiber-  copper  facilities,  while  ensuring  continued  access  to  existing  copper.  And,  it  adjusts 
 the  wholesale  prices  for  all  new  investment.  In  fact,  we  endorse  and  adopt  in  total  the  High  Tech  Broadband  Coalitions  proposals  for  the  deregulation  of  fiber  to  the  home  and  any  fiber 
 used  with  new  packet  technology. 
 Companies  desiring  to  push  fiber  further  to  the  home  will  now  be  able  to  make  a  fair  return  on  their  investment.  And  more  consumers  will  be  able  to  enjoy  the  fast  speeds  and 
 exciting  applications  that  a  true  broadband  connection  offers. 
 I  hope  this  relief  will  jump  start  investment  in  next-  generation  networks  and  facilitate  the  deployment  of  advanced  services  to  all  consumers,  including  rural  America.  Our  actions  could 
 then  revitalize  the  advanced  services  market,  leading  to  a  new  period  of  growth  in  telecommunications  and  most  importantly  manufacturing. 

 News  media  information  202  /  418-  0500  Internet:  http://  www.  fcc.  gov 
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 Preserving  Local  Competition 
 This  Order  also  works  to  preserve  local  competition.  The  Telecommunications  Act  requires  that  competitors  have  access  to  pieces  of  the  incumbents  networks  when  they  are 
 impaired  in  their  ability  to  provide  service.  The  Court  of  Appeals  has  made  clear  that  in  analyzing  impairment,  uniform  national  rules  may  be  inappropriate.  Rather,  the  Commission 
 should  take  into  account  specific  market  conditions  and  look  at  specific  geographic  areas.  Todays  item  follows  these  admonitions,  putting  in  place  a  granular  analysis  that  recognizes  that 
 competitors  face  different  operational  and  economic  barriers  in  different  markets.  For  example,  the  barriers  competitors  face  in  deploying  equipment  and  trying  to  compete  are  different  in 
 Manhattan,  Kansas  than  in  Manhattan,  New  York. 
 Although  some  of  my  colleagues  disagreed  with  certain  aspects  of  this  analysis,  this  disagreement  primarily  concerns  the  switching  network  element  for  residential  customers,  a 
 small  piece  of  the  puzzle.  We  all  agree  that  states  should  play  a  significant  role  in  determining  whether  impairment  exists  for  transport.  We  all  agree  that  states  should  play  a  significant  role  in 
 determining  whether  impairment  exists  for  loop  facilities.  And,  we  all  agree  that  incumbents  should  no  longer  be  required  to  unbundle  switching  for  business  customers. 

 Some  of  my  colleagues  also  wish  to  end  the  unbundling  of  all  residential  switching  immediately.  I  believe  such  action  would  be  inconsistent  with  recent  court  decisions  and  the 
 state  of  competition  in  the  market.  It  is  true  that  there  are  now  a  significant  number  of  residential  telephone  customers  that  receive  service  from  a  CLEC,  but  the  overwhelming 
 majority  of  these  customers  is  currently  served  through  an  incumbents  switch.  To  declare  an  immediate  end  to  the  unbundling  of  all  switching  in  every  market  in  the  country  would  ignore 
 the  Courts  mandate  for  a  more  granular  analysis  and  effectively  end  residential  competition.  Accordingly,  I  support  the  items  approach  to  treat  residential  switching  as  we  do  other  network 
 elements,  removing  unbundling  obligations  only  after  a  fact  specific  market  analysis. 
 Maintaining  a  Role  for  State  Authorities 
 In  establishing  a  market-  specific  impairment  analysis  for  unbundling  network  elements,  this  item  provides  an  important  role  for  the  states.  During  my  time  at  the  Commission,  I  have 
 witnessed  first  hand  the  helpful  role  that  the  states  have  played  in  our  mutual  goal  of  implementing  the  Telecommunications  Act.  I  believe  that  the  states  are  best  positioned  to  make 
 the  highly  fact  intensive  and  local  impairment  determinations  required  by  the  Court  of  Appeals. 

 All  of  my  colleagues  agree  with  this  principle  when  applied  to  the  unbundling  of  transport  and  other  network  elements.  Some  felt,  however,  that  we  should  not  allow  the  states  a 
 role  in  determining  the  unbundling  of  switching.  In  my  view,  the  item  correctly  treats  switching  as  it  does  other  network  elements,  recognizing  that  the  states  are  better  able  to  make  individual, 
 factual  determinations  about  particular  geographic  markets  than  are  federal  regulators  in  Washington.  And,  just  as  we  do  for  other  network  elements,  the  Commission  provides  the  states 
 detailed  guidelines  of  what  constitutes  impairment.  For  example,  we  specifically  require  states 
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 to  consider  and  resolve  problems  with  provisioning    the  so-  called  hot  cut  problem.  We  also  require  states  to  consider  whether  competitors  have  been  successfully  able  to  deploy  their  own 
 switching  facilities.  We  provide  a  roadmap  for  states  to  use  in  making  their  analysis,  putting  us  on  the  road  to  facilities-  based  competition. 

 Conclusion 
 I  believe  we  have  crafted  a  balanced  package  of  regulations  to  revitalize  the  industry  by  spurring  investment  in  next  generation  broadband  infrastructure  while  also  maintaining  access  to 
 the  network  elements  necessary  for  new  entrants  to  provide  competitive  services.  This  Order  adopts  clear  rules  and  immediate  regulatory  relief  for  broadband  deployment  and  new 
 investment;  it  removes  the  obligation  to  unbundle  switches  for  business  customers  immediately;  and  it  provides  a  detailed  roadmap  for  eliminating  the  remaining  unbundling  obligations  for 
 network  elements. 
 I  believe  in  limited  government.  I  believe  that  competition    not  regulation    is  the  best  method  of  delivering  the  benefits  of  choice,  innovation,  and  affordability  to  consumers.  The 
 1996  Act  puts  in  place  a  policy  that  requires  local  markets  be  opened  to  competition  first,  and  then  provides  for  deregulation.  I  believe  we  have  faithfully  implemented  this  policy  today. 
 Where  there  is  facilities-  based  competition,  for  example  from  cable  modems  n  the  broadband  market  or  CLECs  in  the  business  market,  we  have  provided  deregulation.  That  is  what  the  law 
 and  the  courts  require. 
 In  sum,  this  Order  achieves  a  balanced  approach  that  provides  regulatory  relief  for  incumbents  new  investment  in  advanced  services  while  ensuring  that  local  competitors  will 
 continue  to  have  the  access  they  need  to  provide  service  to  consumers.  I  believe  these  steps  will  benefit  consumers  and  the  industry,  and  I  support  this  Order. 

 -  FCC  - 
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 Remarks  by  Commissioner  Kevin  J.  Martin  20  th  Annual  PLI/  FCBA  Telecom  Conference 
 December  12,  2002  Washington,  D.  C. 

 At  the  Crossroads 
 Thank  you,  Dick,  for  that  kind  introduction.  And  thank  you  for  inviting  me  to  speak  at  this  annual  conference.  The  PLI  and  FCBA  serve  the  communications  bar  so  well  with  these 
 informative  sessions.  I  recall  going  to  this  one  in  particular  as  a  junior  associate,  and  I  still  remember  how  much  I  relied  on  the  discussions  and  primers  throughout  much  of  the  next  year. 
 Im  not  sure  that  what  Ill  have  to  say  today  will  be  quite  as  educational  as  some  of  the  speakers  I  heard  then,  but  I  hope  at  least  to  keep  your  attention.  And  perhaps  Ill  even  spark  a  healthy 
 debate. 

 I.  Deliberation  to  Decision-  Making 
 As  most  of  you  know,  the  Commission  has  spent  almost  a  year  collecting,  reviewing,  and  discussing  various  policy  proposals  for  local  competition  and  broadband  service.  These  issues 

 are  of  critical  importance,  and  certainly,  a  significant  amount  of  time  is  needed  to  clearly  think  through  the  complicated  legal  and  policy  issues  at  stake. 

 At  some  point,  however,  the  Commission  must  move  to  wrap  up  the  debate  and  must  start  making  the  tough  decisions.  We  must  move  from  deliberation  to  decision-  making. 
 I  believe  we  now  are  at  the  crossroads  where  choices  must  be  made.  We  have  four  critical  rulemakings  that  have  been  pending  since  the  beginning  of  the  year:  the  Triennial 
 Review  of  unbundled  network  elements,  the  dominant/  nondominant  proceeding,  the  wireline  broadband  NPRM,  and  the  cable  modem  service  NPRM.  The  records  are  complete,  we  have 
 considered  and  debated  the  issues  at  length,  and  the  proceedings  are  now  ripe  for  action. 
 Moreover,  industry  conditions  cry  out  for  answers.  Companies  are  struggling  under  too  much  debt,  unable  to  recoup  the  past  investments  they  have  made.  Markets  are  valuing 

 companies  at  depressed  levels,  leaving  companies  with  little  capital.  Carriers  are  postponing  the  purchase  of  the  equipment  necessary  to  deploy  competitive  local  and  advanced  services,  leaving 
 the  manufacturers  to  suffer  the  consequences. 
 As  more  manufacturers  founder,  we  risk  being  left  with  too  few  domestic  providers  of  critical  infrastructure  for  advanced  services,  a  significant  threat  to  our  national  security.  Finally, 

 investors  are  questioning  whether  communications  continues  to  be  a  profitable  industry  in  which  to  risk  capital. 

 I  believe  the  prolonged  uncertainty  regarding  such  critical  issues  as  local  competition  and  broadband  may  have  aggravated  existing  market  troubles.  Prolonged  uncertainty  can  serve  as  a 
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 disincentive  to  invest  in  new  and  upgraded  facilities,  as  a  barrier  to  entry  for  potential  competitors,  and  as  a  deterrent  against  modifying  outdated  business  plans.  Companies  need  to 
 know  the  rules  of  the  road,  and  they  need  to  be  able  to  rely  on  them. 
 It  is  time  to  eliminate  uncertainty  and  instability.  We  must  make  the  difficult  policy  choices  and  conclude  these  four  proceedings.  Our  decisions  are  vital  to  industry,  to  national 

 security,  and  to  the  consumers  who  ultimately  will  benefit  from  more  competitive  and  advanced  services. 

 Last  May,  I  expressed  my  desire  that  the  Commission  take  action  on  these  pending  proceedings  by  the  end  of  year.  Given  the  potential  significance  of  our  decisions  on  the 
 economic  conditions,  I  did  not  think  that  was  an  unreasonable  goal.  Indeed,  last  November  the  Commission  committed  to  completing  the  Broadband  proceedings  by  the  end  of  this  year,  1  and 
 the  D.  C.  Circuit  has  expressed  their  expectation  that  we  complete  our  Triennial  Review  this  year,  as  well.  2  I  am  disappointed  that  we  will  not  make  it,  but  I  am  hopeful  that  we  will  act  soon. 

 The  Commission  recently  sought  another  extension  of  the  D.  C.  Circuits  USTA  decision  mandate  until  February  20  th  ,  and  I  am  beginning  to  become  concerned  with  whether  we  will  be 
 able  to  make  that  deadline.  If  we  are  to  meet  that  deadline,  I  believe  we  need  to  begin  a  more  specific  dialogue  with  the  public,  and  with  affected  industries  in  particular,  regarding  the  policy 
 direction  the  FCC  intends  to  take. 
 If  Im  going  to  call  for  FCC  action  by  the  end  of  this  year,  however,  I  too  must  be  prepared  to  share  what  I  am  thinking  on  these  critical  issues.  Therefore,  I  offer  the  following 

 thoughts  in  order  to  spur  debate,  respond  to  my  own  deadline,  and  to  help  the  Commission  finish  its  deliberative  process  and  reach  finality  on  these  issues. 

 II.  Principles  for  Decision-  Making 
 I  believe  it  is  important  for  the  Commission  to  begin  with  certain  core  values  and  goals.  Once  we  have  articulated  and  prioritized  these  principles,  we  can  begin  to  evaluate  concrete 

 actions.  Following  are  three  principles  that  I  believe  should  govern  our  decision  making. 
 First,  the  Commission  should  make  its  top  priority  new  investment  and  deployment  of  advanced  network  infrastructure.  We  have  a  number  of  issues  before  us  that  are  vital  to  the 

 marketplace  and  need  timely  resolution.  Nevertheless,  we  must  begin  somewhere.  I  believe  the 
 1  See  Joint  Application  by  SBC  Communications  Inc.,  Southwestern  Bell  Telephone  Company,  and  Southwestern 
 Bell  Communications  Services,  Inc.  d/  b/  a  Southwestern  Bell  Long  Distance  Pursuant  to  Section  271  of  the  Telecommunications  Act  of  1996  to  Provide  In-  Region,  InterLATA  Services  in  Arkansas  and  Missouri,  CC  Docket 

 No.  01-  194,  Memorandum  Opinion  and  Order,  16  FCC  Rcd  20719  at  20754  (2001). 
 2  See  United  States  Telecom  Ass'n  v.  Federal  Communications  Commission,  290  F.  3d  415  (D.  C.  Cir.  2002). 
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 Commission  should  focus  first  on  creating  the  right  incentives  for  companies  to  invest  in  and  deploy  advanced  services. 
 Until  we  create  a  stable  regulatory  framework  for  deploying  and  providing  such  services,  our  countrys  communications  network  and  services  will  remain  stagnant,  not  improving,  not 
 developing.  The  many  people  without  access  to  advanced  services  now,  particularly  consumers  in  rural  America,  will  remain  without.  And  competition    the  driver  of  innovation,  growth,  and 
 effective  pricing    will  remain  minimal. 
 Even  if  we  correct  the  incentives  with  respect  to  the  provision  of  basic  telephony,  and  even  if  the  market  corrects  its  valuations  of  telecom  carriers,  companies  will  not  invest  in 

 advanced  services  until  we  ensure  that  the  governing  regulations  will  not  deprive  companies  of  the  ability  to  make  a  return  on  their  investment. 

 Second,  the  Commission  must  minimize  further  questions  and  avoid  creating  greater  uncertainty  or  prolonging  ambiguity  in  this  area.  After  having  already  taken  a  year 
 to  review  a  set  of  issues  and  debate  various  policy  outcomes,  we  should  resolve  all  of  the  issues,  not  just  definitions,  but  also  the  implications  on  wholesale  obligations.  To  put  off  the  decisions 
 that  have  the  greatest  impact  on  the  marketplace  to  another  day  will  only  aggravate  current  market  conditions  and  prolong  the  angst  and  uncertainty  that  surround  the  deployment  of 
 advanced  services. 
 Third,  the  Commission  must  be  responsive  to  the  courts  by  outlining  a  clear  standard  on  the  necessary  and  impair  test  while  remembering  Congresss  goal  of  ensuring 

 that  the  local  markets  are  truly  open  to  competition.  In  so  doing,  we  must  address  the  courts  criticism  regarding  our  existing  unbundling  framework,  while  also  ensuring  access  to  essential 
 facilities. 

 Priority  I:  A  Regulatory  Environment  that  Encourages  New  Investment 
 As  you  know,  telecommunications  has  been  responsible  for  much  of  this  nations  economic  growth  during  the  past  decade.  The  availability  of  advanced  telecommunications  is 
 essential  to  the  economy  in  the  21  st  century,  dramatically  reducing  the  costs  of  exchanging  information,  improving  efficiency  and  productivity,  and  allowing  previously  local  businesses  to 
 serve  the  world. 
 I  am  confident  that  spurring  investment  in  the  deployment  of  new  facilities  and  advanced  network  infrastructure  will  lead  to  a  new  period  of  growth. 

 I  believe  that  at  the  outset,  there  are  three  immediate  steps  the  Commission  can  take  to  speed  that  growth  and  ensure  that  all  Americans  have  greater  access  to  advanced  services. 
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 1.  Adjust  TELRIC  Pricing 
 First,  we  need  to  adjust  the  TELRIC  pricing  formula  for  all  new  investment  on  a  going  forward  basis. 

 In  my  view,  the  TELRIC  pricing  formula  provides  incumbent  service  providers  with  an  insufficient  return  on  investment  capital  for  new  infrastructure. 
 In  a  nutshell,  the  existing  TELRIC  formula  fails  to  accurately  measure  the  true  risk  of  capital  investment  under  current  economic  conditions,  and  creates  an  unnecessary  barrier  for  the 
 deployment  of  broadband  facilities. 
 We  also  need  to  adjust  the  depreciation  schedules  within  the  TELRIC  formula  to  more  adequately  account  for  new  investment.  I  believe  that  greater  flexibility  in  depreciation  time 
 frames  will  provide  a  greater  economic  incentive  for  service  providers  to  invest  in  and  deploy  new  network  infrastructure. 

 We  therefore  should  conclude  in  the  Triennial  Review  proceeding  that  we  must  adjust  the  TELRIC  formula  on  a  going  forward  basis  to  spur  deployment  in  new  facilities  and  services. 

 2.  Deregulate  New  Fiber  to  the  Home 
 Secondly,  I  believe  we  also  need  to  adopt  the  principles  set  forth  in  recent  proposals  regarding  the  regulatory  framework  for  new  fiber  investment  deployed  to  a  customer  premises. 

 Under  these  proposals,  fiber  to  the  home  facilities  would  be  relieved  from  unbundling  requirements  and  incumbents  would  be  relieved  of  any  obligation  to  deploy  copper  facilities  in 
 new  build  situations  where  fiber  to  the  home  is  deployed.  Incumbents  also  would  have  several  options  and  obligations  with  respect  to  the  existing  copper  plant  in  new  build  situations. 

 In  the  recent  DC  Circuit  decision  overturning  our  unbundled  network  element  regime,  the  Court  criticized  the  Commission  for  not  fully  taking  into  account  the  ability  of  new  entrants  to 
 invest  in  and  deploy  new  network  infrastructure.  I  believe  that  it  is  not  necessary  for  a  competitor  to  have  access  to  a  new  fiber  loop. 

 I  believe  that  if  incumbent  service  providers  decide  to  build  new  fiber  local  loops  to  a  customer  premise,  they  should  be  free  of  old-  style  legacy  rules.  Legacy  rules  are  ill-  suited  for 
 new  facilities  and  new  services  in  the  supercharged  IP  and  fiber  broadband  worlds  of  tomorrow. 

 3.  Provide  Regulatory  Relief  for  Hybrid  Facilities  but  Ensure  Continued  Access 
 In  my  view,  new  entrants  should  only  use  incumbent  facilities  that  are  truly  necessary  for 
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 new  entrants  to  provide  service.  That  does  not  mean  that  we  should  allow  incumbents  to  stop  providing  any  elements  overnight,  and  we  need  to  acknowledge  the  distinctions  among  what 
 different  competitors  may  need  to  compete  for  small  and  medium-  sized  business  or  residential  customers. 

 We  also  ought  to  reexamine  how  our  unbundling  and/  or  pricing  rules  apply  to  incumbent  deployment  of  new  facilities.  For  example,  once  we  have  determined  that  a  particular  states 
 market  is  fully  and  irreversibly  open  to  competition,  how  is  access  to  yet-  unbuilt  new  facilities  at  super  efficient  prices  necessary  to  enable  a  new  entrant  to  compete,  especially  if  existing 
 facilities  or  their  equivalent  capacity  are  maintained  at  current  prices? 
 I  must  give  Tom  Tauke  of  Verizon  credit  for  this  policy  construct.  About  a  year  and  a  half  ago,  shortly  after  I  joined  the  Commission,  I  heard  Tom  give  a  speech  where  he  laid  out  the 
 concept  of  new  rules  for  new  wires. 
 I  believe  that  the  Commission  should  freeze  the  service  capacity  level  that  must  be  made  available  on  new  or  upgraded  facilities  to  the  service  capacity  level  provided  by  the  ILEC  prior 
 to  the  new  investment  in  a  hybrid  facility.  For  example,  under  this  approach  competitors  receiving  access  capacity  at  1.54  mbs  per  second  using  pre-  existing  ILEC  facilities  would  be 
 able  to  continue  to  receive  such  access  capacity  at  the  same  bit  rate  under  newly  deployed  hybrid  facilities. 

 I  believe  that  incumbents  should  be  given  the  proper  incentives  to  push  fiber  deeper  into  their  networks  and  closer  to  the  American  consumer.  And  such  an  approach  actually  facilitates 
 the  deployment  of  electronic  loop  provisioning  which  would  solve  many  provisioning  problems. 
 At  the  end  of  the  day,  ILECs  should  receive  the  benefits  of  making  investments  in  new  infrastructure  deployment,  but  competitors  should  maintain  the  ability  to  receive  access  to  end 
 user  customers  at  the  service  capacity  levels  that  they  currently  receive. 

 Priority  II:  Minimize  Further  Questions  and  Uncertainty 
 These  are  turbulent  economic  times  for  the  telecom  industry  and  the  economy  as  a  whole.  In  such  times,  the  Commission  should  be  particularly  cognizant  of  the  impact  of  its  decisions  and 
 that  it  can  contribute  to  market  stability  by  establishing  a  more  stable  and  reliable  regulatory  environment.  Broad  proceedings  that  remain  pending  for  extended  periods  can  contribute  to 
 uncertainty.  Protracted  uncertainty  can  prolong  financial  difficulties.  Regulatory  uncertainty  and  delay  can  function  as  entry  barriers  in  and  of  themselves,  limiting  investment  and  impeding 
 deployment  of  new  services. 
 Particularly  given  the  current  financial  conditions,  we  should  act  quickly  on  our  major  pending  rulemakings,  particularly  as  they  relate  to  new  investment.  Prompt  decision  making 
 will  provide  greater  certainty  and  stability  to  the  marketplace. 
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 We  should  work  to  be  faster  and  be  more  reliable  in  our  decision  making.  Prolonged  proceedings  with  shifting  rules  ultimately  serve  no  ones  interest,  regardless  of  the  substantive 
 outcome.  It  is  time  for  the  Commission  to  take  action  not  only  on  the  UNE  Triennial,  but  also  on  performance  measures  and  the  broadband  proceedings. 

 Much  of  the  buzz  that  I  hear  from  others  on  the  potential  outcome  for  the  Broadband  proceeding  is  centered  on  deregulation  of  the  retail  offering  of  broadband  service.  My  sense, 
 however,  is  that  the  question  that  most  parties  want  answered  is  how  we  will  ultimately  decide  the  wholesale  or  input  question.  In  other  words,  I  think  most  people  already  assume  that  we  are 
 going  to  treat  Internet  access  as  an  information  service.  The  question  that  matters  is  the  regulatory  treatment  of  DSL  and  cable  modem  transmission. 

 I  recognize  that  the  Commission  itself  may  have  contributed  to  the  continuing  confusion  on  this  issue  as  a  result  of  our  ambiguous  and  somewhat  contradictory  statements  in  the  Wireline 
 Broadband  Proceeding  and  the  Cable  Modem  Proceeding.  In  both  of  these  items  we  attempted  to  address  the  appropriate  regulatory  framework  for  broadband  services. 

 In  the  Cable  Modem  Proceeding, 
 (1)  we  determined  that  cable  modem  high  speed  Internet  access  is  an  information  service; 

 (2)  we  decided  that  the  Commissions  Computer  II  unbundling  obligations  did  not  automatically  apply  to  cable  modem  service;  and 
 (3)  we  sought  comment  on  whether  some  form  of  access  obligations  should  ultimately  be  imposed  on  Cable  Modem  service. 
 In  other  words,  in  the  Cable  Modem  Proceeding  we  addressed  the  definitional  issue  and  left  open  the  issue  of  whether  we  would  impose  discretionary  unbundling  obligations. 
 In  the  Wireline  Broadband  Proceeding,  the  Commission  tentatively  concluded  that  DSL  high  speed  Internet  access  is  an  information  service,  and  we  asked  about  the  implications  of  the 
 Computer  Inquiry  II  obligations  and  other  unbundling  obligations. 
 Some  in  and  around  the  Commission  have  suggested  that  the  Commission  should  use  the  same  process  we  set  forth  in  the  Cable  Modem  proceeding  in  the  Wireline  Broadband 
 proceeding. 
 In  other  words,  they  advocate  that  the  Commission  should  address  only  the  definitional  issues  and  leave  undecided    until  some  time  later  next  year    whether  and  to  what  extent  the 
 unbundling  obligations  apply  in  the  Wireline  context. 
 Im  very  concerned  about    and  at  this  stage  I  would  not  support    such  an  approach.  We  should  be  cognizant  and  clear  on  what  the  implications  of  that  suggested  approach  would  be. 
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 In  the  Cable  Modem  proceeding,  inaction  resulted  in  no  regulation  being  applied. 
 In  the  case  of  DSL,  however,  the  impact  of  the  current  presumption  under  the  Commissions  decision  is  that  unbundling  obligations  do  apply. 

 Inaction  by  the  Commission  therefore  leaves  all  of  the  unbundling  regulations  firmly  in  place    and  only  applies  them  to  one  of  the  two  competitors. 
 Therefore,  I  see  three  potential  courses  of  action: 
 We  could  treat  DSL  services  similar  to  cable  modem  service. 
 In  doing  so,  we  would  need  to  change  our  Computer  II  rules  so  that  incumbent  providers  would  no  longer  be  required  to  provide  underlying  transmission  services  as  retail  service 
 offerings.  Providers  nevertheless  would  have  the  incentive  to  provide  broadband  transport  to  unaffiliated  ISPs  on  reasonable  terms,  because  only  by  doing  so  could  they  maximize  the  value 
 of  their  investments.  Such  offerings  would  be  made  available  on  a  private  carriage  basis  and  not  as  unbundled  tariffed  offerings. 

 The  Commission  could,  on  an  interim  basis,  guarantee  ISPs  access  to  broadband  transmission  services  in  a  nondiscriminatory  manner.  Specifically,  ILECs  would  be  required  to 
 offer  unaffiliated  ISPs  the  same  transmission  services  that  the  ILEC  offers  to  its  own  affiliates  through  private  carriage  agreements.  This  nondiscrimination  requirement  could  be  put  in  place 
 for  two  or  three  years,  but  then  sunset  unless  the  FCC  extends  it  to  all  broadband  providers. 
 Second,  we  could  treat  cable  modem  services  similar  to  DSL  services.  Under  this  alternative,  the  Commission  could  leave  the  Computer  Inquiry  rules  in  place  and  apply  them  to 
 all  broadband  providers  with  common  carrier  status.  In  effect,  the  FCC  would  impose  the  same  regulatory  framework  on  cable  modem  service  that  currently  applies  to  wireline  DSL  service. 

 As  for  the  third  option,  I  believe  the  only  other  logical  alternative  is  to  classify  wireline  broadband  as  a  telecommunications  service,  with  the  accompanying  nondiscrimination 
 requirements,  and  to  acknowledge  that  the  Commission  was  wrong  when  it  declared  cable  modem  service  to  be  an  information  service.  Instead,  the  Commission  could  determine  that 
 cable  modem  service  is  a  cable  service  subject  to  the  panoply  of  Title  VI  regulations  currently  applicable  to  cable  service  providers,  such  as  local  franchise  obligations  and  service  regulations. 

 At  this  stage,  of  the  three  options  I  have  just  outlined,  I  believe  the  first  option    treating  DSL  service  similar  to  cable  modem  service    is  the  better  choice.  I  recognize,  however,  that 
 there  are  merits  to  all  three    I  fail  to  see  any  merits,  however,  in  refusing  to  answer  the  underlying  question. 

 Priority  III:  Responding  to  the  Courts 
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 As  you  know,  the  U.  S.  Court  of  Appeals  for  the  DC  Circuit  has  remanded  the  Commissions  UNE  Remand  Order    the  Commissions  most  recent  effort  to  set  out  a  list  of 
 network  elements  that  incumbent  local  exchange  carriers  must  make  available  on  an  unbundled  basis  to  competing  carriers. 

 The  Court  criticized  the  FCCs  unbundling  requirement  as  being  overly  broad.  The  Court  found  the  FCC  had  failed  to  take  into  account  the  competitive  nature  of  particular 
 geographic  and  customer  markets.  At  the  end  of  the  day,  we  need  to  develop  an  unbundling  framework  that  can  be  implemented  at  a  more  granular  level  and  takes  into  account  the  unique 
 issues  found  in  rural  and  underserved  areas. 

 Provisioning  Issues 
 First,  as  I  have  stated  previously,  in  responding  to  the  court,  the  Commission  cannot  ignore  and  must  address  provisioning  and  Hot  Cut  problems  that  new  entrants  have 
 highlighted  in  the  record  in  order  to  ensure  that  impairment  does  not  exist  and  to  allow  for  access  to  the  residential  market. 

 Switching 
 I  believe  the  Commission  can  adopt  a  relatively  simple  and  straightforward  test  with  regard  to  whether  unbundled  local  switching  is  necessary  for  the  provision  of  competitive 
 services  to  consumers. 
 If  other  alternative  facilities  based  providers  exist  in  a  market  and  the  impairment  associated  with  provisioning  problems  is  addressed  then  switching  would  not  need  to  be 
 provided. 
 In  other  words,  (1)  alternative  facilities  providers  would  be  required  to  use  their  own  facilities,  and  (2)  if  a  sufficient  number  of  alternative  providers  are  present,  the  Commission 
 would  assume  that  a  wholesale  market  for  switching  is  viable. 
 The  unbundling  obligations  that  reside  in  the  Act,  however,  still  remain  viable  and  serve  a  pro-  competitive  purpose.  In  my  view,  the  unbundling  obligations  are  necessary  and  need  to 
 stay  in  place  in  those  rural  and  underserved  areas  that  lack  alternative  facilities  based  service  providers. 

 At  the  end  of  the  day,  however,  we  need  to  recognize  that  if  we  fix  existing  provisioning  problems  that  will  allow  competitors  to  easily  migrate  customers  from  the  ILEC  to  their  own 
 facilities,  then  we  cannot  continue  to  require  unbundling  in  markets  where  such  competitive  facilities  exists. 

 Any  shifts  in  regulatory  direction,  however,  should  be  cushioned  by  transitional  measures 
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 and  safeguards. 
 Several  states  have  requested  that  they  become  more  involved  in  our  impairment  analysis. 

 In  my  view,  much  of  the  current  talk  about  state  preemption  is  premature.  I  believe  that  the  States  are  best  positioned  to  make  those  highly  fact  intensive  and  local  determinations. 
 During  my  stay  at  the  Commission,  I  have  witnessed  first  hand  the  role  that  the  States  have  played  in  being  helpful  partners  in  our  mutual  goal  to  implement  the  Act. 
 I  believe  that  the  States  should  be  implementing  our  standard  by  making  the  factual  determination  regarding  the  existence  of  alternative  facilities  based  providers  and  whether,  and 
 to  what  extent,  impairment  exists  with  respect  to  the  ability  of  new  entrants  to  access  the  market. 
 Line  Sharing 
 Besides  addressing  our  unbundling  framework,  the  DC  Circuits  USTA  decision  also  vacated  the  Commissions  Line  Sharing  Rules. 

 The  Court  stated  that  we  failed  to  adequately  take  into  account  alternative  facility  providers,  specifically  cable  and  satellite.  No  one  denies`  that  Cable  is  the  dominant  provider  of 
 residential  high  speed  Internet  access  services. 
 In  my  view,  the  Commission  has  no  choice  but  to  recognize  this  fact  as  it  decides  whether  incumbent  DSL  providers  should  be  treated  as  dominant  carriers  when  they  provide 
 high  speed  Internet  access  services. 
 Therefore,  Im  in  favor  of  declaring  the  incumbents  non-  dominant  in  the  residential  high-speed  Internet  Access  market  and  not  re-  imposing  our  Line  Sharing  obligations  where  a  cable 
 competitor  exists  for  residential  high  speed  services. 

 III.  Conclusion 
 In  sharing  with  you  this  afternoon  my  vision  of  how  the  Commission  should  proceed  and  what  the  future  landscape  should  look  like,  I  have  covered  a  lot  of  ground.  Id  like  to  leave  you 
 with  some  parting  thoughts. 
 In  todays  marketplace,  many  residential  consumers  do  have  competitive,  facilities-  based  choices  for  broadband  services.  Where  a  competing  provider,  such  as  cable,  offers  broadband 

 service,  our  regulations  need  to  recognize  this  reality. 
 In  the  residential  narrowband,  or  voice-  centric  world,  however,  less  facilities-  based 
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 competition  exists.  And  our  regulations  also  need  to  reflect  that  reality.  That  is  why  it  is  critical  that  we  establish  a  framework,  working  with  the  States,  that  evaluates  the  true  extent  of 
 facilities-  based  competition  in  markets  throughout  the  country.  We  must  not  leave  behind  American  consumers  that  live  in  rural  and  underserved  areas. 

 I  am  optimistic  that  if  the  Commission  follows  the  steps  I  have  just  outlined,  we  could  develop  a  framework  to  encourage  investment  in  new  infrastructure  and  that  would  ensure  the 
 availability  of  next  generation  network  technology  for  all  consumers  through  out  the  nation. 
 By  taking  these  steps,  the  Commission  can  establish  a  framework  that  would  result  in  an  effective  tiered  capacity  approach  agnostic  to  the  nature  of  the  service  provider  or  the  technology 

 it  is  using,  while  still  ensuring  access  to  competitive  providers  for  consumers.  This  framework  puts  cable  operators  and  telephony  providers  on  similar  footing. 

 Both  types  of  providers  would  have  basic  service  obligations  that  remain  regulated.  Cable  operators  would  be  required  to  continue  to  offer  basic  cable;  they  would  be  subject  to  must 
 carry  obligations  and  basic  tier  pricing.  Incumbent  local  exchange  carriers  would  continue  to  be  subject  to  unbundling  and  state  supervision. 

 Access  to  capacity  above  that  level,  however,  would  be  constrained  primarily  by  market  forces.  Both  types  of  service  providers  would  be  similarly  situated  with  regard  to  how  they 
 provide  broadband  service.  Both  would  be  free  to  innovate,  deploy  additional  capacity,  and  offer  service  in  a  completely  unregulated  tier. 

 As  I  have  said,  the  Commission  at  some  point  must  move  from  deliberation  to  decision-making.  I  believe  we  are  now  at  the  crossroads  where  the  tough  choices  must  be  made.  I 
 recognize  that  I  envision  a  very  different  world  that  exists  today.  The  proposal  I  have  set  forth  is  provocative,  and  one  with  which  everyone  will  not  agree.  Indeed,  I  will  not  be  surprised  if  there 
 are  aspects  with  which  you  agree,  but  you  do  so  silently,  and  points  with  which  you  disagree,  and  you  do  so  loudly.  But  in  the  end,  if  the  Commission  is  to  move  forward,  we  must  engage 
 more  directly  and  specifically.  I  therefore  welcome  your  reaction,  criticism,  and  suggestions.  Your  move. 

 Thank  you  for  your  time. 
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 Federal  Communications  Commission  FCC  03-  36 
 SEPARATE  STATEMENT  OF  COMMISSIONER  JONATHAN  S.  ADELSTEIN 
 APPROVING  IN  PART,  CONCURRING  IN  PART,  DISSENTING  IN  PART 
 Re:  Review  of  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers  (CC  Docket  01-  338). 

 As  reflected  by  my  vote  on  this  Order    approving  in  part,  concurring  in  part,  and  dissenting  in  part    this  proceeding  presented  complex  and  difficult  choices.  Ultimately,  I 
 support  much  of  this  item  because  it  is  faithful  to  the  Act,  employs  an  instrumental  partnership  with  our  state  commission  colleagues,  and  preserves  the  burgeoning  competition  that  so  many 
 inside  and  outside  of  this  Commission  have  worked  so  hard  to  promote.  Indeed,  as  we  release  this  Order,  most  residential  consumers  are  only  now  experiencing  their  first  taste  of  competition 
 for  voice  services,  so  I  am  pleased  that  the  Order  will  allow  consumers  to  continue  enjoying  these  benefits.  I  write  separately  to  explain  further  my  support  for  much  of  this  item  and  my 
 significant  concerns  about  other  aspects. 
 As  I  said  at  the  time  we  adopted  this  Order,  our  first  and  foremost  role  is  to  implement  the  law  as  written  by  Congress.  We  accomplish  this  goal  by  underpinning  this  Order  with  a 
 vigorous  impairment  standard    the  limiting  principle  which  Congress  set  out  to  restrict  the  availability  of  unbundled  elements.  By  applying  this  vigorous  standard  to  the  evidence  before 
 us,  we  respond  to  the  concerns  of  our  reviewing  courts  and  ensure  that  our  local  competitions  rules  will  be  implemented  as  Congress  intended.  1  On  balance,  I  believe  that  most  of  the  item 
 applies  this  standard  correctly,  in  accordance  with  the  law  and  to  the  benefit  of  incumbents,  competitors,  and  ultimately  consumers. 

 Much  of  this  item  also  appropriately  balances  the  goals  of  promoting  competition  and  creating  the  proper  incentives  for  both  incumbents  and  competitors  to  deploy  their  own  facilities. 
 Most  notably,  the  switching  and  transport  sections  establish  a  framework  that  will  allow  nascent  competition  to  continue  to  grow.  At  the  same  time,  these  sections  provide  a  pathway  for  the 
 elimination  of  unbundling  obligations  where  carriers  can  either  self-  deploy  facilities  or  obtain  them  from  alternative  sources,  including  other  technology  platforms. 

 With  respect  to  the  broadband  portions  of  this  Order,  I  have  supported  the  item  where  possible  but  have  significant  concerns  that  the  Order  may  raise  significant  barriers  to  both 
 competition  and  the  deployment  of  advanced  services  to  residential  and  small  business  consumers.  The  deployment  of  broadband  is  crucial;  it  has  the  ability  to  bring  unique  benefits  to 
 the  public  and,  indeed,  to  transform  communities.  So  I  support  the  Orders  attempts  to  limit  unbundling  obligations  in  those  cases  where  competitors  and  incumbents  stand  on  equal  footing. 
 I  must,  however,  dissent  from  other  portions  of  the  broadband  section,  in  particular  the  so-  called  hybrid  loops  section.  The  Orders  conclusions  here  are  inconsistent  with  our  stated  goal  of 

 1  See  AT&  T  Corp.  v.  Iowa  Utils.  Bd.,  525  U.  S.  366,  388  (1998). 
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 promoting  facilities-  based  competition  and  may  pose  a  real  danger  of  denying  consumers  the  benefits  of  competition  for  advanced  services. 
 Switching  Decision  Preserves  Voice  Competition,  Benefits  Consumers,  and  is  Faithful  to  the  Act 
 In  this  Order,  we  have  adopted  rules  to  address  the  availability  of  local  switching  in  a  manner  that  is  consistent  with  the  Act  and  that  preserves  the  benefits  of  competition  for  millions 
 of  American  consumers.  Despite  considerable  pressure  from  the  voices  of  dissent,  we  cannot  ignore  the  reality  of  how  difficult  it  is  for  competitors  to  build  out  and  connect  their  networks  to 
 residential  and  small  business  consumers. 
 Our  framework  will  allow  competition  to  continue  to  blossom  in  the  voice  market  for  residential  and  small  business  customers,  in  those  circumstances  where  competitors  have 
 conclusively  demonstrated  that  they  are  impaired  without  access  to  unbundled  local  switching.  2  The  reality  is  that  competition  for  residential  customers  has  relied  almost  completely  on  the 
 availability  of  unbundled  local  switching.  3  Our  state  commission  colleagues  have  labored  mightily  to  open  markets  to  competition  by  ironing  out  performance  issues,  establishing 
 incentive  plans  to  ensure  performance  going-  forward,  and  setting  prices  for  network  elements  in  accordance  with  this  Commissions  pricing  rules.  I  am  pleased  that  they  will  continue  to  play  a 
 role  in  developing  local  competition  under  our  Order.  Many  of  our  own  Section  271  approvals  granting  Bell  Companies  authorization  to  provide  long  distance  service  rely  on  the  existence  of 
 UNE-  Platform  competition  to  meet  the  Track  A  requirements  for  facilities-  based  competition.  4  The  service  provided  using  incumbents  switching  has  brought  the  clearest  and  most  direct 
 benefits  of  competition  to  American  consumers  in  the  form  of  lower  prices  and  innovative  services.  As  many  consumer  advocates  told  us,  quite  simply,  it  has  brought  the  benefit  of 
 choice.  5 
 Bringing  the  benefit  of  choice  has  been  good  for  the  American  people  and  for  American 
 2  Opponents  of  our  decision  invariably  point  to  the  current  deployment  switches  by  competitors.  This  argument, 
 however,  ignores  critical  differences  in  the  mechanics  and  economics  of  providing  service  to  residential  and  small  business  customers,  as  opposed  to  larger  business  customers. 

 3  Triennial  Review  Order,  para.  440  (noting  that  much  of  the  deployment  relied  upon  by  the  BOCs  in  fact 
 provides  no  evidence  that  competitors  have  successfully  deployed  switches  as  a  means  to  access  the  incumbents  loops). 

 4  See  Letter  from  Brad  E.  Mutschelknaus,  Counsel  for  Broadview  Networks,  to  Marlene  H.  Dortch,  Secretary, 
 FCC  (Jan.  21,  2003)  (describing  how  all  four  RBOCs  have  relied  upon  the  presence  of  UNE-  P  to  advance  their  bids  for  section  271  authority). 

 5  See,  e.  g.  Letter  from  Robert  S.  Tongren,  President,  National  Association  of  State  Utility  Consumer  Advocates  to 
 Michael  Powell,  Chairman,  FCC  (Dec.  16,  2002);  Letter  from  James  Bradford  Ramsey,  General  Counsel,  NARUC,  to  Office  of  the  Secretary,  FCC  (Feb.  14,  2003);  Letter  from  Consumers  Federation  of  America  and  Consumers 

 Union  to  Michael  Powell,  Chairman,  FCC  (Feb.  13,  2003). 
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 businesses.  Companies  are  forging  partnerships  to  offer  bundled  services  that  are  attractive  to  consumers  and  can  spur  demand.  Recently,  AT&  T  Corporation  announced  that  it  had  worked 
 out  a  resale  deal  with  its  former  subsidiary,  AT&  T  Wireless  Service,  Inc.,  in  which  the  two  companies  created  an  alliance  to  bring  a  wireline/  wireless  service  offering.  The  availability  of 
 unbundled  switching  has  allowed  the  nations  long  distance  carriers  to  provide  bundled  long  distance  and  local  services.  The  Bell  Companies  are  following  suit.  They  have  begun  rolling 
 out  programs  that  allow  customers  in  some  states  to  make  unlimited  local  and  national  calls  for  one  flat  monthly  rate.  There  is  growth  in  these  businesses,  and  it  is  made  possible  by  technology 
 and  changing  consumer  habits.  The  companies  providing  these  bundled  packages  are  seeing  them  as  a  way  to  secure  market  share.  I  do  not  believe  that  these  plans  would  have  become  so 
 readily  available  if  we  had  not  preserved  access  to  the  UNE-  Platform  where  competitors  are  unable  to  deploy  their  own  facilities. 

 The  switching  rules  adopted  in  this  Order  are  solidly  grounded  in  the  Act  and  address  the  concerns  of  the  reviewing  courts,  most  notably  the  U.  S.  Court  of  Appeals  for  the  District  of 
 Columbia  in  USTA  v.  FCC.  6  In  response  to  that  decision,  our  Order  employs  a  more  granular  analysis  that  examines  particular  customer  classes  and  geographic  areas.  Using  this  analytical 
 framework,  unbundling  will  only  be  required  in  those  areas  where  competitors  are  impaired.  In  addition,  the  Order  applies  an  impairment  standard  that  takes  into  account  not  only  actual 
 competitive  deployment  but  the  ability  of  competitors  to  self-  deploy  or  obtain  elements  from  alternative  sources.  The  Order  also  takes  into  account  the  incentives  created  by  unbundling 
 rules.  Indeed,  we  apply  the  same  impairment  standard  that  is  endorsed  by  all  five  members  of  the  Commission.  Moreover,  where  we  ask  state  commissions  to  analyze  geographic  and  market-specific 
 factors,  we  enumerate  specific  national  triggers  and  criteria  that  are  functionally  identical  to  those  endorsed  by  the  full  Commission  in  the  transport  section. 

 Finally,  we  have  taken  additional  proactive  steps  to  limit  unbundling  of  the  switching  element.  Where  we  determine  there  to  be  impairment  without  access  to  switching,  we  adopt 
 mechanisms  designed  to  mitigate  impairment  and  thereby  reduce  the  overall  amount  of  unbundling.  7  For  example,  we  include  a  baseline  rolling  use  of  unbundled  switching  for 
 customer  acquisition  purposes.  We  have  concluded  that  impairment  in  a  given  market  can  be  mitigated  by  granting  competitive  carriers  access  to  unbundled  circuit  switching  for  a  temporary 
 period  during  which  it  could  accumulate  customers  and  later  migrate  them  through  a  batch  hot-cut  process  to  their  own  switching  facilities.  This  temporary,  rolling  access  can  help  address 
 certain  barriers  to  entry  associated  with  the  switching  element.  It  can  also  help  address  high 

 6  USTA  v.  FCC,  290  F.  3d  415  (D.  C.  Cir.  2002). 
 7  First,  we  ask  our  state  commission  colleagues  to  evaluate  whether  competitors  could  rely  on  their  own  switches  if 
 they  had  access  to  a  batch  hot  cut  process  that  would  enable  them  to  transfer  larger  numbers  of  their  customers  over  to  their  own  switches.  Such  a  process  would  minimize  the  costs  and  operational  difficulties  for  competitors. 

 Second,  we  ask  our  state  commission  colleagues  to  consider  whether  the  use  of  unbundled  switching  on  a  rolling  basis  would  cure  whatever  additional  economic  and  operation  barriers  they  determine  to  exist  in  discrete  geographic 
 markets. 
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 customer  churn,  which  some  carriers  say  is  as  high  as  50%  for  new  customers  during  the  first  three  months  of  service.  This  rolling  availability  of  switching  can  aid  competitors  in  their 
 efforts  to  build  up  an  adequate  customer  base  and  then  cut  over  to  the  use  of  their  own  switches,  facilitating  the  transition  to  facilities-  based  competitive  service.  This  is  about  enhancing 
 competitive  entry  and  subsequent  opportunity,  and  not  hamstringing  it  before  it  is  ripe.  Indeed,  the  switching  majoritys  decision  takes  critical  steps  to  ensure  that  competitors  do  not  rely  on  the 
 UNE-  Platform  in  perpetuity. 
 Overall,  I  am  confident  that  this  decision  sets  up  a  framework  that  responds  to  the  D.  C.  Circuit  and  that  will  allow  consumers  to  see  lasting  benefits  of  competition. 

 Broadband  Decision  Provides  Inconsistent  Incentives  for  Providers 
 As  I  have  said  before,  speeding  the  deployment  of  broadband  to  all  Americans  is  one  of  the  most  critical  tasks  before  us.  That  is  our  clear  mandate  from  Congress.  So  I  support  portions 
 of  the  Unbundled  Local  Loops  section  of  this  Order  that  create  appropriate  incentives  for  competitors  and  incumbents  to  build  out  next  generation  facilities.  I  find,  however,  that  the 
 Order  takes  an  uneven  approach  to  creating  incentives  for  broadband  deployment  and,  accordingly,  I  must  dissent  from  significant  portions  of  the  section. 

 I  approve  this  Orders  finding  that  incumbents  and  competitors  stand  on  roughly  equal  footing  when  making  new  fiber-  to-  the-  home  deployments  (i.  e.,  greenfield"  construction 
 projects).  Where  barriers  to  deployment  are  equivalent,  we  should  give  providers  every  incentive  to  invest  in  and  roll-  out  next  generation  facilities  that  will  bring  the  benefit  of 
 advanced  services  to  American  consumers.  Indeed,  requiring  unbundling  in  such  circumstances  would  be  the  sort  of  overbroad  approach  for  which  this  Commission  has  been  rebuked  in  the 
 past.  By  eliminating  unbundling  for  greenfield  fiber-  to-  the-  home  projects,  we  will  speed  the  deployment  of  these  large  information  pipes,  which  have  the  greatest  potential  to  deliver  a 
 wealth  of  innovative  and  beneficial  services  to  consumers. 
 A  more  difficult  choice  was  presented  in  the  decision  to  eliminate  the  high  frequency  portion  of  the  loop.  Were  I  to  look  at  this  question  without  the  overlay  of  existing  judicial 
 precedent,  I  would  likely  have  reached  a  different  outcome.  Availability  of  this  element  has  made  a  positive  contribution  to  the  competitive  landscape  by  enabling  competitors  to  provide 
 advanced  services  through  line  sharing  arrangements.  Nevertheless,  I  concur  in  this  section  out  of  recognition  that  the  USTA  court  has  directly  spoken  to  this  issue  8  and  with  my  expectation, 
 which  is  being  borne  out  in  the  current  marketplace,  that  the  ability  of  competitors  to  access  whole  loops  will  enable  them  to  continue  to  roll-  out  broadband  services  to  residential  and  small 
 business  consumers.  Given  the  necessity  of  this  action,  I  am  pleased  that  we  are  able  to  provide  a  sufficient  transition  that  will  not  disrupt  service  to  the  many  consumers  who  currently  receive 

 8  USTA  v.  FCC,  290  F.  3d  at  428-  430. 
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 broadband  services  via  line  sharing  arrangements  and  that  will  allow  competitors  an  opportunity  to  adjust  their  business  plans  to  our  new  unbundling  rules. 
 Regrettably,  I  cannot  join  the  Order  in  other  broadband  findings.  Portions  of  the  Order  disregard  Congress  touchstone,  the  impairment  standard.  This  is  particularly  so  in  those  cases 
 where  incumbents  are  deploying  fiber  as  part  of  their  existing  networks  in  the  form  of  hybrid  loops,  which  combine  copper  and  fiber  plant.  In  these  cases,  I  find  the  Orders  conclusion  that 
 Section  706  of  the  Act  outweighs  the  impairment  standard  of  Section  251  to  be  unfounded.  The  decision  to  limit  competitors  access  to  unbundled  local  loops,  long  recognized  by  this 
 Commission  and  reviewing  courts  as  the  ultimate  bottleneck  facility,  9  strikes  me  as  wholly  inconsistent  with  the  Commissions  roundly-  supported  efforts  to  promote  loop-  based 
 competition.  More  broadly,  I  fear  that  this  decision  may  not  only  undermine  competition  but  also  drastically  limit  consumer  choices  for  broadband,  in  many  cases  to  one  provider. 
 Functionally,  the  Order  forces  many  residential  and  small  business  consumers  to  choose  narrowband,  dial-  up  service  in  order  to  reap  the  benefits  of  competition. 

 Conclusion 
 While  many,  including  me,  would  have  preferred  this  Order  to  have  been  released  on  the  day  of  adoption,  the  complex  issues,  the  divergent  viewpoints  expressed,  and  the  fact  that 
 significant  portions  of  the  drafting  were  not  begun  in  earnest  until  after  the  vote  prevented  a  simultaneous  release.  We  have  strived  to  finalize  this  Order  as  quickly  as  possible.  In  so  doing, 
 we  faced  the  daunting  task  of  addressing  two  court  remands  and  the  more  than  three  thousand  comments  filed  in  this  proceeding    many  of  which  included  sophisticated,  and  often 
 contradictory,  economic  studies  and  analyses.  The  result  is  a  five  hundred  page  order  that  incorporates  the  views  of  different  majorities  to  reach  conclusions  about  particular  elements. 
 The  complexity  of  the  issues  and  the  diversity  of  views  may  have  slowed  the  process  of  finalizing  the  Order,  but  we  have  worked  hard  in  fleshing  out  the  final  details  of  the  Order  to 
 address  many  of  the  concerns  raised  by  those  in  dissent.  Of  course,  I  would  have  preferred  that  this  be  a  unanimous  decision  and  I  worked  with  both  sides  to  try  to  find  common  ground. 
 However,  in  the  final  tally,  all  five  Commissioners  agreed  on  an  impairment  standard  that  satisfies  the  statute  and  the  courts;  we  simply  disagreed  on  how  it  is  applied  to  the  evidence  for 
 particular  elements. 
 Throughout  this  process,  we  have  been  fortunate  to  have  been  aided  by  the  exceptionally-talented  and  enormously-  dedicated  staff  here  at  the  Federal  Communications  Commission  and  to 
 have  had  the  benefit  of  a  well-  developed  record  reflecting  the  views  of  all  types  of  service  providers,  equipment  manufacturers,  state  utility  commissioners,  and,  most  importantly, 
 consumer  interests.  While  there  are  few  who  support  every  outcome  in  this  item,  I  express  my 

 9  See  Triennial  Review  Order,  para.  205  (noting  that  [  c]  onstructing  loop  plant  is  both  costly  and  time  consuming, 
 regardless  of  the  type  of  loop  being  deployed);  Verizon  v.  FCC,  535  U.  S.  467  at  n.  27  (acknowledging  that  loop  facilities  are  very  expensive  to  duplicate). 
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 thanks  to  all  of  my  colleagues,  the  dedicated  staff,  and  the  members  of  the  communications  industry  and  the  public  who  contributed  to  this  item. 
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