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FCC 96-182
                                 Before the
                     FEDERAL COMMUNICATIONS COMMISSION
                           Washington, D.C. 20554
In the Matter of)
     )
Implementation of the Local Competition)
Provisions in the Telecommunications Act     )    CC Docket No.
96-98
of  1996                    )
)
                )
                       NOTICE OF PROPOSED RULEMAKING
Adopted:  April 19, 1996         Released:  April 19, 1996
Comment Date: May 16, 1996
Reply Date: May 30, 1996
Separate Dates for Dialing Parity/Number Administration/Notice of
Technical Changes/Access to
Rights of Way:
Comment Date: May 20, 1996
Reply Date: June 3, 1996
By the Commission:
                             Table of Contents
Paragraph
 Number
I.  INTRODUCTION AND OVERVIEW. . . . . . . . . . . . . . . . . .
. . . .   1
      A.      Background . . . . . . . . . . . . . . . . . . . .
. . . .   4
      B.   Overview of Sections 251, 252 and 253 . . . . . . . .
. . . .  14
II.  PROVISIONS OF SECTION 251 . . . . . . . . . . . . . . . . .
. . . .  25
      A.   Scope of the Commission's Regulations . . . . . . . .
. . . .  25
      B.   Obligations Imposed by Section 251(c) on "Incumbent
LECs" . .  42
           1.   Duty to Negotiate in Good Faith  . . . . . . . .
. . . .  46
           2.   Interconnection, Collocation, and Unbundled
Elements . .  49
           3.   Resale Obligations of Incumbent LECs . . . . . .
. . . . 172
           4.   Duty to Provide Public Notice of Technical
Changes . . . 189
      C.   Obligations Imposed on "Local Exchange Carriers" by
Section 251(b)  195
           1.   Resale . . . . . . . . . . . . . . . . . . . . .
. . . . 196
           2.   Number Portability . . . . . . . . . . . . . . .
. . . . 198
           3.   Dialing Parity . . . . . . . . . . . . . . . . .
. . . . 202
           4.   Access to Rights-of-Way. . . . . . . . . . . . .
. . . . 220
           5.   Reciprocal Compensation for Transport and
Termination of
                Traffic. . . . . . . . . . . . . . . . . . . . .
. . . . 226
      D.   Duties Imposed on "Telecommunications Carriers" by
Section 251(a)  245
      E.   Number Administration . . . . . . . . . . . . . . . .
. . . . 250
      F.   Exemptions, Suspensions, and Modifications  . . . . .
. . . . 260
      G.   Continued Enforcement of Exchange Access and
Interconnection
           Regulations . . . . . . . . . . . . . . . . . . . . .
. . . . 262
      H.   Advanced Telecommunications Capabilities. . . . . . .
. . . . 263
III.  PROVISIONS OF SECTION 252. . . . . . . . . . . . . . . . .
. . . . 264
      A.   Arbitration Process . . . . . . . . . . . . . . . . .
. . . . 264
      B.   Section 252(i). . . . . . . . . . . . . . . . . . . .
. . . . 269
IV.  PROCEDURAL ISSUES . . . . . . . . . . . . . . . . . . . . .
. . . . 273
      A.   Ex Parte Presentations. . . . . . . . . . . . . . . .
. . . . 273
      B.   Regulatory Flexibility Analysis . . . . . . . . . . .
. . . . 274
      C.   Initial Paperwork Reduction Act of 1995 Analysis. . .
. . . . 288
      D.   Comment Filing Procedures . . . . . . . . . . . . . .
. . . . 289
      E.   Ordering Clauses. . . . . . . . . . . . . . . . . . .
. . . . 294
                       I.  INTRODUCTION AND OVERVIEW
     1.  In enacting the Telecommunications Act of 1996 (1996
Act), Congress sought to
establish "a pro-competitive, de-regulatory national policy
framework" for the United States
telecommunications industry.  The statute imposes obligations and
responsibilities on
telecommunications carriers, particularly incumbent local
exchange carriers (LECs), that are
designed to open monopoly telecommunications markets to
competitive entry.  The 1996 Act
also includes provisions that are intended to promote competition
in markets that already are
open to new competitors.  The 1996 Act seeks to develop robust
competition, in lieu of
economic regulation, in telecommunications markets.  The Act
envisions that removing legal
and regulatory barriers to entry and reducing economic
impediments to entry will enable
competitors to enter markets freely, encourage technological
developments, and ensure that a
firm's prowess in satisfying consumer demand will determine its
success or failure in the
marketplace.
     2.  Congress entrusted to this Agency the responsibility for
establishing the rules that will
implement most quickly and effectively the national
telecommunications policy embodied in the
1996 Act.  Those rules should promote the competitive markets
envisioned by Congress.  As
Senator Pressler has observed, "Progress is being stymied by a
morass of regulatory barriers
which balkanize the telecommunications industry into protective
enclaves.  We need to devise a
new national policy framework -- a new regulatory paradigm for
telecommunications -- which
accommodates and accelerates technological change and
innovation."  The purpose of this
proceeding is to adopt rules to implement the local competition
provisions of the
Communications Act of 1934, as amended by the 1996 Act,
particularly Section 251.  These
rules will establish the "new regulatory paradigm" that is
essential to achieving Congress's
policy goals.
     3.  This rulemaking is one of a number of interrelated
proceedings designed to advance
competition, to reduce regulation in telecommunications markets
and at the same time to
advance and preserve universal service to all Americans.  We are
especially cognizant of the
interrelationship between this proceeding, our recently initiated
proceeding to implement the
comprehensive universal service provisions of the 1996 Act and
our upcoming proceeding to
reform our Part 69 access charge rules.  Although these
proceedings will be conducted in
separate dockets, and the 1996 Act prescribes different
completion dates for two of the
proceedings, we intend to conduct and conclude all of these
proceedings in a comprehensive,
consistent, and expedited fashion.  We ask commenters in this
proceeding to bear in mind the
relationship between these parallel proceedings and to frame
their proposals within the pro-
competitive, deregulatory context of the 1996 Act as a whole.
A.      Background
     4.  In contrast to the 1996 Act, the common carrier
provisions of the Communications
Act of 1934 were grounded in the notion that interstate
telecommunications services would be
offered and regulated on a monopoly basis.  For decades, state
legislatures also followed this
traditional approach in regulating LECs' intrastate services.
Local and long distance telephone
monopolies were created and maintained on the grounds that the
provision of
telecommunications services was a natural monopoly and,
consequently, service could be
provided at the lowest cost to the maximum number of consumers
through a single regulated
telecommunications network.  The monopoly paradigm was thought to
further goals of universal
service, service quality, and reliability.  The Modification of
Final Judgment (MFJ) that required
AT&T to divest the Bell Operating Companies (BOCs) in 1984 was
not so much a repudiation
as a reduction in the scope of this paradigm.   It reflected the
judgment that the markets for
interexchange services, telecommunications equipment, and
information services could become
competitive. At the same time, the local exchange continued to be
treated as a natural monopoly
that required rigorous regulatory oversight by state and federal
authorities.
     5.  Even as the MFJ was implemented, academic criticism of
the natural monopoly model
for the local network was developing.  During the past 12 years,
many commenters and
businesses have asserted that technological innovation has eroded
any arguable natural monopoly
in the local exchange, and that government should eliminate any
legal impediments to entry.
This view is now embodied in the 1996 Act.  The extent to which
it can be proved in the
marketplace depends on the capabilities of inventors,
entrepreneurs, and financiers, as well as
this Commission and its state counterparts.  At the time the 1996
Act was signed, 19 states had
in place some rules opening local exchange markets to
competition, including seven states in
which competing firms had already begun to offer switched local
service.  Even these 19 states,
however, vary widely in their efforts to promote competitive
entry into local markets.  Moreover,
as of 1996, more than 30 states had not adopted laws or
regulations providing for local
competition.  Many of those states that had not adopted laws or
regulations permitting local
competition had provisions that specifically limited competitive
entry into local
telecommunications markets.  Section 253(a) of the 1996 Act
prohibits these affirmative legal
barriers to entry, and authorizes the Commission to preempt
enforcement of such entry
barriers.
     6.  We believe that, in enacting the 1996 Act, Congress
recognized that although
removing legal barriers to entry is necessary, it is still not
sufficient to enable competition to
replace monopoly in the local exchange.  Congress acknowledged
that incumbent LECs have
constructed and put in place high quality, reliable, redundant
local networks that can provide
virtually ubiquitous service, and that they possess an
approximate 99.7 percent share of the local
market as measured by revenues.  Because of this existing
infrastructure, an incumbent LEC
typically can serve a new customer at a much lower incremental
cost than could a new entrant
that is denied access to the incumbent LEC's facilities, and
thereby is denied access to as many
central office switches and as much trunking and subscriber loops
as the incumbent LEC
operates.  Moreover, because virtually all existing customers
subscribe to the incumbent LEC, a
consumer of local switched service would not subscribe to a new
entrant's network if the
customer could not complete calls to the incumbent LEC's end
users.  As Congress appeared to
recognize in enacting section 251, if the incumbent LEC has no
obligation to interconnect and to
arrange for mutual transport and termination of calls, it could
effectively block or greatly retard
entry into switched local service by using its economies of scale
and network externalities as
impediments to entry.
     7.  Congress expressly recognized that "it is unlikely that
competitors will have a fully
redundant network in place when they initially offer local
service, because the investment
necessary is so significant."  AT&T, for example, in filings
before the Commission, has
estimated that it would have to invest approximately $29 billion
to construct new facilities in
local markets in order to be able to provide full facilities to
reach 20 percent of the 117 million
access lines served by the BOCs.  Similarly, cable and wireless
systems will require
substantial investment before either is capable of providing a
widespread substitute for wireline
telephony services.
     8.  In the 1996 Act, Congress boldly moved to restructure
the local telecommunications
market so as to remove economic impediments to efficient entry
that existed under the monopoly
paradigm.  In order to offset the economies of scale and network
externalities that would inhibit
efficient entry of competitors into markets currently monopolized
by incumbent LECs, the 1996
Act requires those LECs to offer interconnection and network
elements on an unbundled basis,
and imposes a duty to establish reciprocal compensation
arrangements for the transport and
termination of calls.  As the 1996 Act further recognizes, these
duties of incumbent LECs are
only meaningful in conjunction with the Act's limitations on the
rates that can be charged;
otherwise, an incumbent LEC could offer interconnection,
unbundling, and transport and
termination, but at prices that perpetuate its market power.  To
constrain the incumbent LEC's
ability to perpetuate its market power through the pricing of
interconnection and unbundled
elements, Congress specified that the prices for such
transactions should be cost-based and just
and reasonable.  By freeing new entrants from having to build
facilities that totally duplicate
the LECs' networks, the 1996 Act has dramatically increased the
opportunities for competitive
entry and minimized the otherwise overwhelming competitive
advantages of large established
carriers.  We also note that the new law provides for exemption,
suspension, or modification of
certain requirements, under certain conditions, with respect to
small and rural LECs.
     9.  Different entrants may be expected to pursue different
strategies that reflect their
competitive advantages in the markets they seek to target.  For
example, interexchange carriers
and competitive access providers may combine their own facilities
with unbundled loops and
other LEC elements and perhaps augment their own loop facilities
over time.  Cable systems
may choose to develop more extensive networks within their
service areas, and thus require
fewer unbundled elements from LECs; but, like all entrants, they
will require termination
arrangements with incumbent LECs.  Outside their franchise areas,
or in areas not passed by
their existing systems, cable companies will need to find some
other technique for offering
telecommunications services, such as resale of incumbent LEC
services or purchase of
unbundled LEC elements.
     10.  In addition to imposing interconnection, termination,
and unbundling requirements in
the 1996 Act, Congress also provided for entrants to be able to
resell a LEC's retail services.
Even if an entrant planned to construct its own facilities, it
may still face marketing
disadvantages, because of the time it takes to construct a new
network.  Resale enables new
entrants to offer at the outset a conventional service to all
customers currently served by an
incumbent LEC.  Some entrants also may choose to rely on resale
as part of a longer term
strategy as well.
     11.  At the same time, Congress plainly intended for LECs in
the future to be vigorous
competitors, to continue to offer high quality service, and to
play a vital role in delivering
universal service to all Americans.  Nothing in the 1996 Act
suggests that Congress intended to
divest incumbent LECs of all or part of their local networks,
even if some portions continue to
be natural monopolies.  Indeed, the Act expressly confirms that
incumbent LECs may earn a
reasonable profit for the interconnection services and network
elements they provide.
     12.  Consistent with this perspective on competition, we
also note that the purpose and,
given proper implementation, the likely effect of the unbundling
and other provisions of the
1996 Act is not to ensure that entry shall take place
irrespective of costs, but to remove both the
statutory and regulatory barriers and economic impediments that
inefficiently retard entry, and to
allow entry to take place where it can occur efficiently.  This
entry policy is competitively
neutral; it is pro-competition, not pro-competitor.  Our
discussion of the 1996 Act in this and
other proceedings, therefore, is phrased in terms of removing
statutory and regulatory barriers
and economic impediments, in permitting efficient competition to
occur wherever possible, and
replicating competitive outcomes where competition is infeasible
or not yet in place.
     13.  This foregoing discussion has focused on obligations
created by the 1996 Act for
incumbent LECs in order to reduce economic impediments to
efficient market entry by new
competitors.   The statute, however, also creates general duties
for all telecommunications
carriers, and obligations for all local exchange carriers,
whether classified as "incumbent" LECs
or not.  These provisions are also important to facilitating
competitive local telecommunications
markets.  We discuss those provisions below.
B.   Overview of Sections 251, 252 and 253
     14.  In adding new sections 251, 252, and 253 to the
Communications Act of 1934,
Congress set forth a blueprint for ending monopolies in local
telecommunications markets.
As discussed above, sections 251(b) and (c) impose specific
obligations on incumbent LECs to
open their networks to competitors.  Section 251(b)(5), in
particular, requires all LECs,
including incumbent LECs, to "establish reciprocal compensation
arrangements for the transport
and termination of telecommunications."
     15.  Section 251(c) imposes on incumbent LECs three key and
separate duties.  They
must make available to new entrants and existing competitors in
local telecommunications
markets interconnection, services, and unbundled network
elements, and offer for resale at
wholesale rates any telecommunications service that the incumbent
LEC provides at retail to
subscribers.   Specifically, section 251(c)(2) requires an
incumbent LEC to interconnect with any
requesting telecommunications carrier at any technically feasible
point in the LEC's network for
the transmission and routing of telephone exchange service and
exchange access.  Section
251(c)(3) requires incumbent LECs to unbundle their network
facilities and features so that an
entrant can choose among them, combine them with any of its own
facilities, and offer services
that will compete with the incumbent's offerings.  In addition,
section 251(c)(4) directs an
incumbent LEC to offer for resale, at a wholesale rate, any
telecommunications service the
incumbent LEC offers to end users at retail.  Viewed as a whole,
the statutory scheme of section
251(b) and (c) enables entrants to use interconnection, unbundled
elements, and/or resale in the
manner that the entrant determines will advance its entry
strategy most effectively.
     16.  Section 251(d)(1) directs the Commission to establish
rules to implement the
requirements of section 251, including the core interconnection,
unbundling, and resale
provisions of section 251(c).  These rules, however, have much
broader implications than merely
implementing the requirements of section 251.  In fact, these
rules are central to a number of
functions contemplated by the 1996 Act.  As discussed below,
these rules in varying ways relate
to such issues as:  (1) the voluntary negotiation process between
incumbent LECs and
telecommunications carriers; (2) the arbitration process; (3)
state commission approval of
arbitrated agreements; (4) the FCC's review of arbitrated
agreements when a state commission
fails to act; (5) judicial review of state commissions' and this
Commission's actions; (6)
statements of generally available terms and conditions by BOCs;
(7) removal of barriers to entry;
and (8) BOC entry into interLATA services.
     17.  Section 251(f)(1) provides that the obligations under
section 251(c) shall not apply to
a rural telephone company, as defined in the 1996 Act, "until (i)
such company has received a
bona fide request for interconnection, services, or 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 (other
than sections (b)(7) and (c)(1)(D)
thereof."  Section 251(f)(2) provides that a LEC "with fewer than
2 percent of the Nation's
subscriber lines" may petition the state commission for a
suspension or modification of the
requirements set forth in sections 251(b) and (c).
     18.  Section 252 sets forth the procedures that incumbent
LECs and new entrants must
follow to transform the requirements of section 251 into binding
contractual obligations.  Under
section 252, incumbent LECs and new entrants initially must seek
to agree on the terms and
conditions under which LEC facilities and services are made
available to the new entrant.  To
the extent that the resulting agreements are based on voluntary
negotiations rather than state
arbitration, those agreements are not required to satisfy the
provisions of sections 251 and our
regulations issued thereunder, but such agreements must not
discriminate against a
telecommunications carrier not a party to the agreement, and all
portions must be consistent with
the public interest, convenience, and necessity.
     19.  If an incumbent LEC and requesting carrier are unable
to reach a negotiated
agreement, section 252(c) authorizes a state commission to
resolve disputed issues by arbitration,
and requires the state commission to "ensure that such resolution
and conditions meet the
requirements of section 251, including the regulations prescribed
by the Commission pursuant to
section 251."  The Commission's section 251 rules also guide
states in their subsequent review
of arbitrated arrangements.  A state commission may reject an
arbitrated agreement (or any
portion thereof) pursuant to section 252(e)(2)(B) "if it finds
that the agreement does not meet the
requirements of section 251, including the regulations prescribed
by the Commission pursuant to
section 251."  The rules adopted in this proceeding also will
guide the Commission in a similar
context.  In the event that the Commission must assume the
responsibility of a state commission
under section 252(e)(5), the section 251 rules will provide the
substantive standards the
Commission will apply to arbitrate and approve agreements
pursuant to section 252.
     20.  Thus, the statutory scheme of sections 251 and 252
contemplates that the obligations
imposed by section 251 and our regulations will establish the
relevant provisions that will frame
the negotiation process and will govern the resolution of
disputes in the arbitration process.  We
recognize that the section 251 rules will tend to influence
negotiations, pursuant to section
252(a)(1) and (2), between incumbent LECs and requesting carriers
seeking interconnection,
access to unbundled network elements, and resale of LEC services.
At least in some cases, the
implementing Section 251 rules may serve as a de facto floor or
set of minimum standards that
guide the parties in the voluntary negotiation process.
     21.  Sections 271 and 273 create incentives for the BOCs to
implement promptly the
mandates of sections 251 and 252.  Pursuant to section 271, a BOC
may not offer interLATA
services within its service area ("in region") until it is
approved to do so (on a state-by-state
basis) by the Commission, and section 273 allows a BOC to enter
manufacturing at the same
time the BOC is approved to offer in-region interLATA services.
One of the requirements for
obtaining approval for in-region interLATA services under section
271 is that the BOC must
produce either an interconnection agreement that, among other
things, has been approved under
section 252 or, under certain circumstances, a statement of
generally available interconnection
terms and conditions.  Under section 252, interconnection
agreements that are arbitrated have to
comply with section 251's mandates, as do all BOC statements of
generally available terms.  In
addition, all agreements and statements must comply with a
"competitive checklist" set out in
section 271, several requirements of which expressly reference
the mandates of section 251.  In
these respects, compliance with section 251 and our regulations
thereunder is a prerequisite to
BOC entry into in-region interLATA services.  But compliance may
also facilitate BOC entry
under section 271 in less obvious ways.  For example, in
reviewing a BOC application, the
Commission must also consult with the Department of Justice and
the relevant state commission,
and it must decide whether granting the application serves the
public interest.  Each of these
consultations and determinations could, in theory, be affected by
considerations of the extent to
which the BOC is regarded as complying with section 251 and our
rules.  Thus, the
Commission's section 251 rules will play a central role regarding
BOC entry into in-region
interLATA services under section 271.
     22.  Section 253 bars state and local regulations that
prohibit or have the effect of
prohibiting entities from offering telecommunications services.
It also authorizes the
Commission to preempt any law or regulation that is violative of
this section.  The section 251
rules should help to give content and meaning to what state or
local requirements the
Commission "shall preempt" as barriers to entry pursuant to
section 253.
     23.  Moreover, the section 251 rules will assist the
judiciary in reviewing actions of state
commissions and the Commission in this area.  Subsection
252(e)(6) provides that any party
aggrieved by a state determination regarding a negotiated or
arbitrated agreement or a statement
of generally available terms may bring an action in federal
district court "to determine whether
the agreement or statement meets the requirements of section
251," presumably including our
rules thereunder.  The federal district court will thus have to
refer to our implementing
regulations in determining whether a state commission acted
properly in approving or rejecting
an arbitrated agreement.  Similarly, Commission action in this
area will be subject to review by
federal circuit courts of appeal.  This might include, for
example, review of Commission
decisions regarding BOC petitions to provide interLATA services
pursuant to section 271 or
review of Commission action preempting state or local regulations
pursuant to section 253.  In
all of these cases, the court will look to the Commission's
section 251 rules to guide its review
of the Commission's action.
     24.  These statutory provisions and the Commission's rules
implementing the
requirements of section 251 are designed to end the era of
monopoly regulation for American
telecommunications markets.  By dismantling entry barriers and
reducing the inherent advantages
of incumbent LECs, they establish a national process for
enhancing competition, increasing
consumer choice, lowering rates, and reducing regulation.  The
Commission's rules
implementing section 251 will have a pervasive and substantial
impact in a variety of contexts
under the 1996 Act and will serve as the cornerstone of the
pro-competitive provisions of the
statute.  These rules will assist incumbent LECs,
telecommunications carriers, state commissions,
the FCC, and the courts in defining rights and responsibilities
regarding interconnection,
unbundling, resale, and many other issues under the 1996 Act.
                       II.  PROVISIONS OF SECTION 251
A.   Scope of the Commission's Regulations
     25.  Section 251(d)(1) instructs the Commission, within six
months after the enactment of
the 1996 Act (that is, August 8, 1996), to "establish regulations
to implement the requirements of
[section 251]."  The Commission's implementing rules should be
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."  In
addition to directing the Commission to establish rules to
implement section 251, section 253
further requires the Commission to preempt the enforcement of any
state or local statute,
regulation, or legal requirement that "prohibit[s] or [has] the
effect of prohibiting the ability of
any entity to provide any interstate or intrastate
telecommunications service."
     26.  These specific statutory directives make clear that
Congress intended the
Commission to implement a pro-competitive, de-regulatory,
national policy framework
envisioned by the 1996 Act.  Given the forward-looking focus of
the 1996 Act, the nationwide
character of development and deployment of underlying
telecommunications technology, and the
nationwide nature of competitive markets and entry strategies in
the dynamic
telecommunications industry, we believe we should take a
proactive role in implementing
Congress's objectives.  Thus, we intend in this proceeding to
adopt national rules that are
designed to secure the full benefits of competition for
consumers, with due regard to work
already done by the states that is compatible with the terms and
the pro-competitive intent of the
1996 Act.
     27.  In accomplishing this objective, we need to determine
the extent to which our rules
should elaborate on the meaning of the statutory requirements set
forth in sections 251 and 252.
For example, we could adopt explicit rules to address those
issues that are most critical to the
successful development of competition, and with respect to which
significant variations would
undermine competition.  This approach would further a uniform,
pro-competitive national policy
framework, as envisioned by the statute, and yet still preserve
broad discretion for states to
resolve, consistent with the 1996 Act, the panoply of other
individual issues that may be raised
in arbitration proceedings.  This approach also would facilitate
rapid private sector deployment
of advanced telecommunications and information technologies and
services by swiftly opening
all telecommunications markets to competition.  We seek comment
on such an approach and
whether it would accomplish Congress's goal of promoting
efficient competition in local
telecommunications markets throughout the country.
     28.  We see many benefits in adopting such rules to
implement section 251.  Such rules
should minimize variations among states in implementing
Congress's national
telecommunications policy and guide states that have not yet
adopted the competitive paradigm
of the 1996 Act.  Such rules also could expedite the transition
to competition, particularly in
those states that have not adopted rules allowing local
competition, and thereby promote
economic growth in state, regional, and national markets.
     29.  The adoption of explicit national rules to implement
section 251 would not
necessarily undermine the initiatives undertaken by various
states prior to the enactment of the
1996 Act, and in fact, we anticipate that we will build upon
actions some states have taken to
address interconnection and other issues related to opening local
markets to competition.  Some
states have been in the forefront of the pro-competitive effort
to open local markets to
competition, and these approaches may comport with the 1996 Act
despite the fact that many of
them pre-date it.  Building on the progress made by these states,
explicit national rules could be
modelled on existing state statutes or regulations to the extent
that they comply with the terms of
the 1996 Act.  For example, the Commission could conclude that a
particular state's approach to
unbundling of network elements is consistent with the 1996 Act
and that it therefore may serve
as a useful model for a national rule on unbundling.  The
Commission might also conclude that
a range of different approaches used by several states to
interconnection arrangements comply
with the Act and therefore would be acceptable under a national
rule.  Throughout this item, we
seek comment on the extent to which existing state initiatives
are consistent with the new federal
statute and, to the extent they are, the wisdom of using existing
state approaches as guideposts
or benchmarks for our national rules.
     30.  Explicit national rules implementing section 251 can be
expected to reduce the
capital costs of, and attract investment in, new entrants by
enhancing the ability of the
investment community to assess an entrant's business plan.  Such
rules would also permit firms
to configure their networks in the same manner in every market
they seek to enter.  Uniform
network configurations could achieve significant cost
efficiencies for new entrants; if new
competitors were required to modify their networks in different
markets solely to be compatible
with a patchwork of different regulations, they would likely
incur additional expense, thereby
increasing the cost of entry, a result that would be inconsistent
with the pro-competitive goals of
the statute.
     31.  Explicit national rules under section 251 also could
expedite the implementation of
other provisions of the 1996 Act that require incumbent LECs, new
entrants, the states, federal
courts, and the Commission to apply the requirements of section
251 in other contexts.  Section
252 provides that incumbent LECs and entrants initially will seek
to arrive at interconnection
and unbundling arrangements through voluntary negotiations.  By
narrowing the range of
permissible results, concrete national standards would limit the
effect of the incumbent's
bargaining position on the outcome of the negotiations.  In
addition, the application of explicit
national rules under section 251 could provide important guidance
to federal district courts that
are charged with reviewing state determinations of whether
particular arbitration agreements are
consistent with section 251 (presumably including our rules
thereunder).  Moreover, the absence
of such rules could lead to varying or inconsistent decisions by
individual district and circuit
courts concerning the core requirements of the 1996 Act.  We
believe that such a result would
be inconsistent with the intent of Congress in passing
comprehensive telecommunications
legislation.
     32.  Further, rules that elaborate on the statutory
requirements of section 251 would
establish clear guidelines that we will need to carry out our
responsibilities under the 1996 Act.
We will need explicit rules to guide our arbitration of disputes
between incumbent LECs and
new entrants if we are required, under section 252(e), to assume
those responsibilities.  In
addition, BOCs must satisfy the checklist set forth in section
271(c)(2)(B) before they may offer
in-region, interLATA services.  The checklist requires BOCs to
comply with specific provisions
of section 251.  Thus, the Commission needs to articulate clear
rules that clarify what constitutes
compliance with section 251 for purposes of our review under
section 271.
     33.  On the other hand, there may be countervailing concerns
that could weigh against
rules that significantly explicate in some detail the statutory
requirements of sections 251 and
252.  Adopting explicit national rules, in certain circumstances,
might unduly constrain the
ability of states to address unique policy concerns that might
exist within their jurisdictions.  The
case for permitting material variability among the states could
be strengthened if there are
substantial state-specific variations in technological,
geographic, or demographic conditions in
particular local markets that call for fundamentally different
regulatory approaches.  We seek
comment on the nature of such variations, and on whether there
are such variations that require
fundamentally different regulatory approaches.  States may also
seek, to the extent permitted by
sections 251, 252, 253, and 254, to ensure the uninterrupted
delivery of certain services by the
incumbent where competition might arguably threaten those
services.  It might also be argued
that there is value to permitting states to experiment with
different pro-competitive regimes to
the extent that there is not a sufficient body of evidence upon
which to choose the optimal pro-
competitive policy.  If we were to decline to adopt explicit
rules at all, in effect we would be
permitting states to set different priorities and timetables for
requiring incumbent LECs to offer
interconnection and unbundled network elements.  Such an approach
means that we would
balance the need to swiftly introduce telecommunications
competition against other policy
priorities.  We seek comment on these issues.
     34.  We also note that, under section 252, states must
implement any rules we establish
under section 251.  Section 252 assigns to the states the
responsibility for arbitrating disputes
between the parties, including resolving factual disputes.  We
seek comment on how our national
rules can best be crafted to assist the states in carrying out
this responsibility.
     35.  In the succeeding sections of this Notice, we invite
parties to comment, with respect
to each of the obligations imposed by section 251, on the extent
to which adoption of explicit
national rules would be the most constructive approach to
furthering Congress' pro-competitive,
deregulatory goals of making local telecommunications markets
effectively competitive.  We
seek comment on the relative costs and benefits of constraining
or encouraging variations among
the states in carrying out their responsibilities under section
252.  We also invite parties to
comment on whether our rules implementing section 251 can be
crafted to allow states to
implement policies reflecting unique concerns present in the
respective states, without vitiating
the intended effects of a scheme of overarching national rules.
We further ask parties to
comment on the consequences of fostering or constraining
variability among the states.
     36.  As a separate matter, we note that section 251 and our
implementing regulations
govern the states' review of BOC statements of generally
available terms and conditions, as well
as arrangements arrived at through compulsory arbitration
pursuant to section 252(b).  We
tentatively conclude that we should adopt a single set of
standards with which both arbitrated
agreements and BOC statements of generally available terms must
comply.  We believe that this
is consistent with both the language and the purpose of the 1996
Act.  We seek comment on this
tentative conclusion.
     37.  On a separate jurisdictional issue, we tentatively
conclude that Congress intended
sections 251 and 252 to apply to both interstate and intrastate
aspects of interconnection, service,
and network elements, and thus that our regulations implementing
these provisions apply to both
aspects as well.  It would make little sense, in terms of
economics, technology, or jurisdiction, to
distinguish between interstate and intrastate components for
purposes of sections 251 and 252.
Indeed, if the requirements of sections 251 and 252 regarding
interconnection, and our
regulations thereunder, applied only to interstate
interconnection, as might be argued in light of
the lack of a specific reference to intrastate service in those
sections, states would be free, for
example, to establish disparate guidelines for intrastate
interconnection with no guidance from
the 1996 Act.  We believe that such a result would be
inconsistent with Congress' desire to
establish a national policy framework for interconnection and
other issues critical to achieving
local competition.  As Senator Lott observed, "In addressing
local and long distance issues,
creating an open access and sound interconnection policy was the
key objective . . . ."
Representative Markey noted that, "[W]e take down the barriers of
local and long distance and
cable company, satellite, computer, software entry into any
business they want to get in."
     38.  We also tentatively conclude that it would be
inconsistent with the 1996 Act to read
into sections 251 and 252 an unexpressed distinction by assuming
that the FCC's role is to
establish rules for interstate aspects of interconnection and the
states' role is to arbitrate and
approve intrastate aspects of interconnection agreements.
Because the statute explicitly
contemplates that the states are to follow the Commission's
rules, and because the Commission
is required to assume the state commission's responsibilities if
the state commission fails to act
to carry out its section 252 responsibilities, we believe that
the jurisdictional role of each must
be parallel.  We seek comment on our tentative conclusion.  The
argument has also been raised
that sections 251 and 252 apply only with respect to intrastate
aspects of interconnection,
service, and network elements.  We seek comment on this argument
as well.
     39.  Section 2(b) of the 1934 Act does not require a
contrary tentative conclusion.
Section 2(b) provides that, except as provided in certain
enumerated sections not including
sections 251 and 252, "nothing in [the 1934] Act shall be
construed to apply or to give to the
Commission jurisdiction with respect to . . .  charges,
classifications, practices, services,
facilities, or regulations for or in connection with intrastate
communication service by wire or
radio of any carrier . . . ."  As stated above, however, we
tentatively conclude that section 251
applies to certain "charges, classifications, practices,
services, facilities, or regulations for or in
connection with intrastate communication service."  In enacting
section 251 after section 2(b)
and squarely addressing therein the issues before us, we believe
Congress intended for section
251 to take precedence over any contrary implications based on
section 2(b).  We seek comment
on this tentative conclusion.
     40.  We note that sections 251 and 252 do not alter the
jurisdictional division of authority
with respect to matters falling outside the scope of these
provisions.  For example, rates charged
to end users for local exchange service, which have traditionally
been subject to state authority,
continue to be subject to state authority.  Indeed, that section
251 does not disturb state authority
over local end user rates may explain why Congress saw no need to
amend section 2(b)
expressly, whereas it did see such a need in its 1993 legislation
establishing commercial mobile
radio service (CMRS).  In the 1993 legislation, Congress
eliminated the authority of states to
regulate the rates charged for CMRS and so may have felt that an
express amendment to section
2(b) would be especially helpful.  We seek comment on these
issues as well.
     41.  We also seek comment on the relationship between
sections 251 and 252 and the
Commission's existing enforcement authority under section 208.
Section 208 of the Act gives
the Commission general authority over complaints regarding acts
by "any common carrier
subject to this Act, in contravention of the provisions thereof."
Does this mean that the
Commission has authority over complaints alleging violations of
requirements set forth in
sections 251 or 252?  If not, in what forum would such complaints
be reviewed?  In state
commissions?  In courts?  Is there a relevant distinction here
between complaints concerning the
formation of interconnection agreements and complaints regarding
implementation of such
agreements?  We also seek comment on the relationship between
sections 251 and 252 and any
other source of Commission enforcement authority that may be
applicable.  We further seek
comment on how we might increase the effectiveness of the
enforcement mechanisms available
under the 1934 Act, as amended.  We seek comment on how private
rights of action might be
used under sections 206-208 of the 1934 Act, as amended, and the
different roles the
Commission might play, for example, as an expert agency, to speed
resolution of disputes in
other forums used by private parties.
B.   Obligations Imposed by Section 251(c) on "Incumbent LECs"
     42.  We now turn to the particular provisions of section 251
that the Commission is
obligated to implement under section 251(d)(1).  We begin with
section 251(c) because we
believe that provision is the cornerstone of Congress's plan for
opening local telecommunication
markets to competitive entry.
     43.  Section 251(c) establishes obligations for "incumbent
local exchange carriers."  An
"incumbent local exchange carrier" for a particular area is
defined in section 251(h)(1) as a LEC
that: (1) as of the enactment date of the 1996 Act, both
"provided telephone exchange service in
such area" and "was deemed to be a member of the exchange carrier
association pursuant to
Section 69.601 of the Commission's regulations," or (2) "is a
person or entity" that, on or after
the enactment date of the 1996 Act, "became a successor or assign
of a member" of the
exchange carrier association.
     44.  In addition, under Section 251(h)(2), the Commission
may, by rule, treat another
LEC or class of LECs as an incumbent LEC if (1) "such carrier
occupies a position in the
market for telephone exchange service within an area that is
comparable" to that of an
incumbent LEC, (2) "such carrier has substantially replaced" an
incumbent LEC, and (3) "such
treatment is consistent with the public interest, convenience,
and necessity and the purposes" of
Section 251.  We seek comment on whether we should establish at
this time standards and
procedures by which carriers or other interested parties could
seek to demonstrate that a
particular LEC should be treated as an incumbent LEC pursuant to
Section 251(h)(2).
     45.  We further seek comment on whether state commissions
are permitted to impose on
carriers that have not been designated as incumbent LECs any of
the obligations the statute
imposes on incumbent LECs.  We understand that some states have
found that the negotiation
process between incumbent LECs and their potential competitors
may move more smoothly if
the arrangements offered by an incumbent LEC are made reciprocal.
Under this approach, for
example, a potential competitor would be required to make
available to an incumbent LEC
directory assistance information on the same basis that the LEC
agreed to furnish the
information.  Some parties have alleged, however, that imposing
on new entrants the obligations
imposed on incumbent LECs would undermine the competitive goals
of the 1996 Act.  We
seek comment on whether imposing on new entrants requirements
that the 1996 Act imposes on
incumbent LECs would be consistent with the Act's distinction
between the obligations of all
telecommunications carriers, all LECs and the additional
obligations of all incumbent LECs.
     1.    Duty to Negotiate in Good Faith
     46.  As noted in section I.B., above, if the parties fail to
negotiate an agreement
voluntarily, they must submit to arbitration.  Section 251(c)(1)
states that "each incumbent local
exchange carrier has the . . . duty to negotiate in good faith in
accordance with section 252 the
particular terms and conditions of agreements to fulfill the
duties" described in section 251(b) for
LECs and section 251(c) for incumbent LECs.  In addition, section
252(b)(5) provides that,
pursuant to the arbitration process, the refusal of a party to
"participate further in the
negotiations, to cooperate with the State commission in carrying
out its function as an arbitrator,
or to continue to negotiate in good faith in the presence of, or
with the assistance of, the State
commission shall be considered a failure to negotiate in good
faith."  The state commission is
required to resolve, within 9 months after the incumbent LEC
receives a request under section
252, any issues that were submitted for arbitration.
     47.  We seek comment on the extent to which the Commission
should establish national
guidelines regarding good faith negotiation under section
251(c)(1), and on what the content of
those rules should be.  We note that carriers have submitted some
information alleging that
LECs already have employed certain tactics that the Commission
should determine violate the
duty to negotiate in good faith.  For example, carriers have
alleged that incumbent LECs have
refused to begin to negotiate until the requesting
telecommunications carrier satisfies certain
conditions, such as signing a nondisclosure agreement, or
agreeing to limit its legal remedies in
the event that negotiations fail.  We believe that such tactics
might impede the development of
local competition, and may be inconsistent with provisions of the
1996 Act.  We seek comment
on the extent to which these or other practices should be deemed
to violate the duty to negotiate
in good faith.  We note that courts and the Commission previously
have addressed issues
regarding good faith negotiation.  We seek comment on specific
legal precedent regarding the
duty to negotiate in good faith that we should rely on in
establishing national guidelines
regarding section 251(c)(1).
     48.  A related issue is what effect section 252 has on
agreements regarding service,
interconnection, or unbundled network elements that predate the
1996 Act.  Section 252(e)(1)
states: "Any interconnection agreement adopted by negotiation or
arbitration shall be submitted
for approval to the State commission."  Section 252(a)(1) states
that an agreement for
interconnection, service, or network element, "including any
interconnection agreement
negotiated before the date of the enactment of the
Telecommunications Act of 1996, shall be
submitted to the State commission under subsection (e) of this
section."  We seek comment on
whether these provisions require parties that have existing
agreements to submit those
agreements to state commissions for approval.  We also seek
comment on whether one party to
an existing agreement may compel renegotiation (and arbitration)
in accordance with the
procedures set forth in section 252.
     2.    Interconnection, Collocation, and Unbundled Elements
     a.    Interconnection
     49.  Section 251(c)(2) imposes upon incumbent LECs "the duty
to provide, for the
facilities and equipment of any requesting telecommunications
carrier, interconnection with the
local exchange carrier's network . . . for the transmission and
routing of telephone exchange
service and exchange access."  Such interconnection must be:  (1)
provided by the incumbent
LEC at "any technically feasible point within [its] network;"
(2) "at least equal in quality to
that provided by the local exchange carrier to itself or . . .
[to] any other party to which the
carrier provides interconnection;"  and (3) provided 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."
The interconnection
obligation plays a vital role in promoting competition by
ensuring that a requesting carrier can
on reasonable rates, terms and conditions transmit
telecommunications traffic between its
network and the incumbent's network in a reliable and efficient
manner.
     50.  We believe that uniform national rules for evaluating
interconnection arrangements
would likely offer several advantages in advancing Congress's
desire to create a pro-competitive
national policy framework regarding local telephone service.  For
example, national standards
would likely speed the negotiation process by eliminating
potential areas of dispute.  We note
that, in the past, disputes before the FCC between LECs and
interconnectors have arisen most
often where our rules lacked specificity, or where no standards
had been adopted.  Lingering
disputes over the terms and conditions of interconnection due to
confusion or ambiguity create
the potential for incumbent LECs to delay entry.  For these
reasons we tentatively conclude that
uniform interconnection rules would facilitate entry by
competitors in multiple states by
removing the need to comply with a multiplicity of state
variations in technical and procedural
requirements.
     51.  We also, however, seek comment on the consequences of
not establishing such
specific rules for interconnection.  We seek comment on whether
there are instances wherein the
aims of the 1996 Act would be better achieved by permitting
states to experiment with different
approaches.  Would permitting substantial variation make it
easier for states to respond more
appropriately to technical, demographic, or geographic issues
specific to that state or region
without detracting from the overall purposes of the 1996 Act?
For example, might technical
differences, such as a lack of digital switching capability in a
particular network, affect the
technically feasible interconnection points on the network?
Would variations in technical
requirements among states affect the ability of new entrants to
plan and configure regional or
national networks?  For example, how would variations in the
definition of "technical
feasibility," the number of required points of interconnection,
and methods of interconnection,
affect the ability of new entrants to plan and configure regional
or national networks?  How
would such variations affect the entrant's ability to deploy
alternative network architectures, such
as synchronous optical network (SONET) rings, which may deliver
telephone service more
efficiently?  Would a lack of explicit national standards reduce
predictability and certainty, and
thereby slow down the development of competition?  Would a lack
of explicit guidelines impair
the state's ability to complete arbitration within 9 months of
the date that the interconnection
request was made, or our ability to evaluate BOC compliance under
section 271 within 90 days?
Would a lack of clear national standards impair our ability under
section 252(e) to assume a
state commission's responsibilities if the state commission fails
to act to carry out its
responsibilities under section 252?
     52.  We also encourage parties to submit information
regarding the approaches taken by
those states that have allowed interconnection.  A number of
states already have adopted a
variety of approaches to interconnection.  For example, New York
sets basic "expectations"
that constitute default provisions if the parties fail to agree.
These provisions include the
availability of two-way trunking facilities and combined trunking
arrangements.  California has
adopted what it calls a "preferred outcomes" approach.  Under
this approach, parties are
encouraged to use 13 broad criteria regarding interconnection
arrangements (the "preferred
outcomes") that were established by the State commission to guide
the negotiation and
arbitration process.  Although parties may develop different
outcomes, preferred outcomes
receive expedited review and approval.  Arbitration judges may
also use the preferred outcomes
as guidelines in cases where the negotiations fail, and they have
the discretion to mandate
interconnection provisions that go beyond the preferred outcomes.
With respect to each of the
issues discussed below, we invite commenters to analyze the
advantages and the disadvantages
of the approaches states have adopted with respect to
interconnection arrangements.  We also
seek comment on whether any elements of these state approaches
would be suitable for
incorporation into national standards implementing the 1996 Act.
Finally, we ask commenting
parties to identify state approaches to interconnection that they
believe are inconsistent with or
preempted by the 1996 Act, or that are inadvisable from a policy
perspective.
     53.  We further seek comment on the relationship between the
obligation of incumbent
LECs to provide "interconnection" under 251(c)(2) and the
obligation of the incumbent LEC, and
all LECs, to establish reciprocal compensation arrangements for
the "transport and termination"
of telecommunications pursuant to 251(b)(5).  The issue is
significant mainly because, in section
252(d)(2), there is one pricing standard for "interconnection"
under section 251(c)(2) and a
separate one for "transport and termination" under 251(b)(5).
     54.  On the one hand, the term "interconnection," as used in
section 251(c)(2), might
refer only to the facilities and equipment physically linking two
networks and not to transport
and termination services provided by such linking -- in which
case there is no overlap in the
coverage of the two sections.  On the other hand, the term
"interconnection" as used in section
251(c)(2) might refer to both the physical linking of the two
networks and to transport and
termination services -- in which case there is considerable
overlap.  We seek comment on how
to "interpret" the term "interconnection" in section 251(c)(2).
Parties that advocate the broader
meaning should also comment on the overlap in the coverage of the
sections and how the
overlap affects which section 252(d) pricing standards apply.
     55.  In the following paragraphs, we discuss the
requirements of the 1996 Act concerning
interconnection in more detail.  More specifically, we address
issues of technically feasible
points of interconnection, just, reasonable, and
nondiscriminatory terms and conditions, and
quality and methods of interconnection.
     (1)   Technically Feasible Points of Interconnection
     56.  Subsection (c)(2)(B) requires that incumbent LECs
provide interconnection "at any
technically feasible point within the [incumbent LEC's] network."
We seek comment on what
constitutes a "technically feasible point" within the incumbent
LEC's network for purposes of
this section.  In this regard, we note that network technology
continues to advance and
emphasize that we seek to avoid a static definition that may
artificially limit future
interconnection.  Is there a definition of "technically feasible"
that will provide the necessary
flexibility in determining interconnection points as network
technology evolves?  Further, to
what extent, if any, should a risk to network reliability or
other potential harm to the network be
considered in determining whether interconnection at a particular
point is technically feasible?
We tentatively conclude that, if risks to network reliability are
considered in determining
whether interconnection at a certain point is technically
feasible, the party alleging harm to the
network will be required to present detailed information to
support such a claim.  We seek
comment on these issues and our tentative conclusion concerning
claims of network harm.
     57.  We also tentatively conclude that the minimum federal
standard should provide that
interconnection at a particular point will be considered
technically feasible within the meaning of
section 251(c)(2) if an incumbent LEC currently provides, or has
provided in the past,
interconnection to any other carrier at that point, and that all
incumbent LECs that employ
similar network technology should be required to make
interconnection at such points available
to requesting carriers.  For example, many LECs already provide
interconnection at the trunk-
and loop-side of the local switch, transport facilities, tandem
facilities, and signal transfer
points.  We thus tentatively conclude that interconnection at
those points should be technically
feasible for all incumbent LECs that use technology similar to
that used by LECs currently
offering interconnection at those points.  We believe that as
technology advances, the number of
points at which interconnection is feasible may change and
acknowledge that the federal standard
for minimum interconnection points should change accordingly.
     58.  Alternatively, we could allow states to determine
whether interconnection at a greater
number of points would also be technically feasible.  We seek
comment on whether allowing
states to designate additional technically feasible
interconnection points would make it more
difficult for a carrier to develop a regional or national
network.  In this regard, commenters
should address additional points at which LECs currently provide
interconnection and on other
possible points of interconnection that may be technically
feasible.  Because the statute imposes
an affirmative obligation on incumbent LECs to provide
interconnection at any technically
feasible points in their networks, we further tentatively
conclude that, where a dispute arises, the
incumbent LEC has the burden of demonstrating that
interconnection at a particular point is
technically infeasible.  We seek comment on this tentative
conclusion.
     59.  We also invite parties to submit information concerning
interconnection obligations
and policies that state commissions have adopted for incumbent
LECs to help us determine what
points of interconnection states have found to be technically
feasible.  We note, for example, that
the New York Public Service Commission (NYPSC) has established
options for interconnection
points that range from the incumbent LEC's premises to the
requesting carrier's premises, and
include any point in between.  These options are deemed
reasonable by the NYPSC, although
they are not requirements (in contrast to other interconnection
requirements, which New York
sets up as default provisions).  The parties are to negotiate the
actual interconnection points,
however.  We also seek comment on approaches that other states
have adopted for determining
the technical feasibility of interconnection at particular
points.  We also seek comment on which
state policies are either inconsistent with the language of the
1996 Act or unwarranted from a
policy perspective.
     (2)   Just, Reasonable, and Nondiscriminatory
Interconnection
     60.  Section 251(c)(2)(D) requires that the interconnection
provided by the incumbent
LEC be "on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory."  We
address the pricing of interconnection, collocation, and
unbundled elements in section II.B.2.d
below.
     61.   We seek comment on how to determine whether the terms
and conditions for
interconnection arrangements are just, reasonable, and
nondiscriminatory.  For example, should
we adopt explicit national standards for the terms and conditions
for interconnection?  In
particular, we seek comment on whether we should adopt uniform
national guidelines governing
installation, maintenance, and repair of the incumbent LEC's
portion of interconnection facilities.
We also seek comment on whether we should adopt standards for the
terms and conditions
concerning the payment of the non-recurring costs associated with
installation.  We seek
comment on whether the Commission should establish incentives to
encourage incumbent LECs
to provide just, reasonable, and nondiscriminatory
interconnection and, if so, what those
incentives should be.  For example, should LECs be required to
meet agreed upon performance
standards for installing or repairing interconnection facilities
and pay liquidated damages for any
failure to satisfy the agreement?  Are there means of
accomplishing this result that do not
require the propagation of rules detailing specific performance
standards?
     62.  If we were to establish national guidelines on this
issue, we seek comment on state
policies regarding the terms and conditions for interconnection
that might serve as models.  For
example, with respect to meet point interconnection arrangements,
the state of Washington
requires that each company pay for and be responsible for
building and maintaining its own
facilities up to the meet point, as is typical in this type of
interconnection arrangement.  We
note that New York permits earnest fees on interconnection
arrangements to ensure the good
faith nature of interconnection requests before the incumbent LEC
begins construction or other
necessary arrangements for interconnection.  That fee is then
applied to the requesting party's
costs for interconnection.  We recognize, however, that LECs
potentially could use such fees
and other terms and conditions to delay and deter entry.  We
invite parties to comment on this
approach as well as on other states' policies.  We specifically
seek comment on whether such
policies are consistent with the pro-competitive and deregulatory
tenor of the Act.  We seek
comment on whether any state substantive rules regarding the
terms and conditions for
interconnection might be adopted as a national standard, as well
as comment on which state
rules might be inconsistent with the 1996 Act.
     (3)   Interconnection that is Equal in Quality
     63.  Section 251(c)(2)(C) requires that the interconnection
provided by the incumbent
LEC be "at least equal in quality to that provided by the
[incumbent LEC] to itself or to any
subsidiary, affiliate, or any other party to which the carrier
provides interconnection."  We seek
comment on what criteria may be appropriate in determining
whether interconnection is "equal
in quality."  We seek comment on whether these criteria should be
adopted as a national
standard, or whether competitive objectives would be achievable
by allowing variations and
experimentation among states.  We also seek comment on relevant
state requirements, such as
those in Iowa, which prohibit a rate-regulated incumbent from
providing inferior interconnection
to another provider.  We invite parties to comment on this and
other provisions that might
guide our efforts in implementing the "equal in quality"
requirement of the 1996 Act.
     (4)   Relationship Between Interconnection and Other
Obligations
           Under the 1996 Act
     64.  Section 251(c)(2) further requires incumbent LECs to
provide interconnection with
the LEC's network "for the facilities and equipment of any
requesting telecommunications
carrier."  In comparison, section 251(c)(6) imposes upon
incumbent LECs "the duty to
provide . . . for physical collocation of equipment necessary for
interconnection."  We note that
section 251(c)(6) regarding physical collocation does not
expressly limit the Commission's
authority under section 251(c)(2) to establish rules requiring
incumbent LECs to make available
a variety of technically feasible methods for interconnection.
These methods may, for example,
include meet point arrangement as well as physical and virtual
collocation.  We tentatively
conclude that the Commission has the authority to require, in
addition to physical collocation,
virtual collocation and meet point interconnection arrangements,
as well as any other reasonable
method of interconnection.  We seek comment on this tentative
conclusion.
     65.  We seek comment on the various state requirements
concerning methods for
interconnection.  For example, in the state of Washington, the
commission has ordered that
companies establish mutually agreed upon meet points for purposes
of exchanging local traffic.
Incumbent LECs may establish, through negotiations, separate meet
points for each company, or
a common hub by which multiple companies can come together
efficiently.  Oregon requires
that requesting carriers be permitted to interconnect with
incumbent LECs by negotiating
mutually acceptable arrangements, including meet points.
Maryland allows the incumbent LEC
the option of using virtual or physical collocation, subject to
commission review.  We seek
information on these and other similar state requirements.  We
seek comment on whether any
state requirements concerning methods for interconnection might
be appropriately adopted as a
national standard.  We also seek comment concerning those state
requirements that may be
inconsistent with the 1996 Act or inappropriate from a policy
standpoint.
     b.    Collocation
     66.  Section 251(c)(6) of the Act requires incumbent LECs to
provide "for the physical
collocation of equipment necessary for interconnection or access
to unbundled network elements
at the premises of the local exchange carrier, except that the
carrier may provide for virtual
collocation if the local exchange carrier demonstrates to the
State commission that physical
collocation is not practical for technical reasons or because of
space limitations."  Section
251(c)(6) fosters competition by ensuring that a competitor may
install equipment necessary for
interconnection or access to unbundled network elements on LEC
premises and gives
competitors access to the LEC central office to install,
maintain, and repair this equipment.
     67.  The establishment of national rules with respect to at
least some issues regarding
collocation would appear to offer several important benefits.
For example, we believe that
national standards would speed the negotiation process by
eliminating potential areas of dispute.
Lingering disputes or ambiguity regarding the parties'
obligations may delay competitive entry.
In addition, uniform standards would probably facilitate entry by
competitors in multiple states
by removing the need to comply with a patchwork of state
variations in technical and procedural
requirements.  Finally, clear uniform rules could add speed,
fairness, and simplicity to the
arbitration process, and reduce uncertainty.  We also note that
beginning in 1992, the
Commission adopted both physical and virtual collocation rules
and that these rules were then
used by several states to develop their own approaches to
collocation.  We therefore tentatively
conclude that we should adopt national standards where
appropriate to implement the collocation
requirements of the 1996 Act.
     68.  We also seek comment on the extent to which we should
establish national rules for
collocation that allow for some variation among states, and on
the advantages and disadvantages
of permitting such variation.  Would permitting material
variation foster competition and make it
easier for states to respond more appropriately to issues
specific to that state or region?  Would
variations in technical requirements among states affect the
ability of new entrants to plan and
configure regional or national networks?  Would a lack of
specific national standards reduce
predictability and certainty, and thereby slow down the
development of competition?  Would a
lack of explicit guidelines impair the state's ability to
complete arbitration within 9 months of
the date that the interconnection request was made, or our
ability to evaluate BOC compliance
under section 271 within the statutory time-frame?  Would a lack
of specific national standards
impair our ability under section 252(e) to assume a state
commission's responsibilities if the
state commission fails to act to carry out its responsibilities
under section 252?
     69.  We also encourage parties to submit information
concerning specific state
approaches regarding collocation that might provide useful models
for national guidelines.  In
several states, including California and New York, incumbent LECs
currently provide physical
collocation.  Under California's "preferred outcomes" approach,
the "preferred outcome"
concerning physical collocation is similar to rules the FCC
previously established for physical
collocation.  California presently allows LECs to offer virtual
or physical collocation.  New
York applies a comparably efficient interconnection (CEI)
standard to both new entrants and
incumbent LECs, that requires that interconnection be technically
and economically comparable
to actual physical collocation.  New York does not have detailed
physical collocation
requirements under the CEI standard, but rather leaves such
matters to negotiation between the
parties.  Currently in New York, Rochester Telephone and NYNEX
both offer physical
collocation to satisfy the CEI standard.  In other states,
incumbent LECs currently provide only
virtual collocation.  Illinois, which had originally mandated
physical collocation, recently
adopted rules regarding virtual collocation.  The state of
Washington also permits virtual
collocation and has stated that such charges for virtual
collocation should be no higher than
charges for physical collocation.  The Washington Commission also
concluded that, if meet point
interconnection arrangements are established by mutual agreement,
decisions about where
equipment is placed will be resolved as part of that negotiation,
and therefore a virtual
collocation tariff probably would not be necessary.  Finally,
Florida permits LECs to offer both
virtual and physical collocation, but has left the details of
such arrangements to negotiation
between the parties.
     70.  We seek comment on whether one or more of these state
collocation policies would
be suitable for use as a national standard.  We also seek comment
on state policies that
commenters believe are inconsistent with the goals of the 1996
Act, or that are inadvisable from
a policy perspective.  In this regard, parties are specifically
asked to comment on the possible
consequences of requiring new entrants with regional or national
business plans to comply with
divergent state requirements.
     71.   In light of our tentative conclusion that we should
adopt national guidelines
concerning physical and virtual collocation, we seek comment on
what specific regulations
would foster opportunities for local competition.  For example,
section 251(c)(6) mandates
physical collocation at the "premises" of an incumbent LEC.
Consistent with the ordinary
meaning of the term "premises," we tentatively conclude that
"premises" includes, in addition
to incumbent LEC central offices or tandem offices, all buildings
or similar structures owned or
leased by the incumbent LEC that house LEC network facilities.
We seek comment on this
tentative conclusion.  We also seek comment on whether structures
housing LEC network
facilities on public rights of way, such as vaults containing
loop concentrators, or similar
structures should be deemed to be LEC premises.  We note that
collocation of facilities inside
such structures would still be subject to the technical
feasibility and space availability limitations
of section 251(c)(6).
     72.  Section 251(c)(6) requires the incumbent LEC to provide
for the physical collocation
of equipment necessary for interconnection or access to unbundled
network elements.  We seek
comment on what types of equipment competitors should be
permitted to collocate on LEC
premises.  Section 251(c)(6) also allows the incumbent LEC to
provide virtual collocation
instead of physical collocation in specific locations if "the
local exchange carrier demonstrates to
the state commission that physical collocation is not practical
for technical reasons or because of
space limitations."  We seek comment on whether we should
establish guidelines for states to
apply when determining whether physical collocation is not
practical for "technical reasons or
because of space limitations," and, if so, what those guidelines
might be.  For example, to what
extent, if any, should the risk of reduced reliability or other
harm to the network be considered
as a technical reason justifying a refusal to offer physical
collocation, and what type of evidence
must the LEC offer to prove its claim?  We also seek comment on
whether national guidelines
may be necessary to prevent anticompetitive behavior by the
manipulation or unreasonable
allocation of space by either the incumbent LEC or new entrants.
     73.  Finally, we seek comment on whether we should adopt
comprehensive national
standards for collocation by readopting our prior standards
governing physical and virtual
collocation that we established in the Expanded Interconnection
proceeding.  In that
proceeding, we addressed standards governing, among other things,
the following:  space
exhaustion and allocation; types of equipment that could be
placed, or designated for placement,
in incumbent LEC offices; points of entry; insurance; and
exemptions from physical collocation
requirements based on space limitations.   We also seek comment
regarding whether we should
modify those standards, in light of:  (1) the new statutory
requirements; (2) disputes that have
arisen in the subsequent investigations regarding the LECs'
physical and virtual collocation
tariffs; or (3) additional policy considerations.  We also
tentatively conclude, in light of the
court decision in Pacific Bell v. FCC, that our existing policies
on expanded interconnection
for interstate special access and switched transport services
should continue to apply pursuant to
our authority under sections 201 and 251(g).  We seek comment on
this tentative conclusion.
     c.    Unbundled Network Elements
     74.  Section 251(c)(3) imposes a duty upon incumbent LECs
"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."  Incumbent LECs are required to provide these
network elements "in a manner
that allows requesting carriers to combine such elements in order
to provide such
telecommunications service."  In addition, section 251(d)(2)
provides that the Commission, in
determining which network elements incumbent LECs should
unbundle, "shall consider, at a
minimum, whether (A) access to such network elements as are
proprietary in nature is necessary;
and (B) the failure to provide access to such network elements
would impair the ability of the
telecommunications carrier seeking access to provide the services
that it seeks to offer."
     75.  Together, sections 251(c)(3) and 251(d)(2) foster
competition by ensuring that new
entrants wishing to compete with incumbent LECs can purchase
access to those network
elements that they do not possess, without paying for elements
that they do not require.  The
ability to purchase, at reasonable, cost-based prices, access
only to those network elements a
carrier needs allows new entrants to enter the LEC's market
gradually, building their own
networks over time, and purchasing fewer unbundled elements as
their own networks develop.
Further, new entrants can purchase access to those elements
incumbent LECs can provide most
efficiently, and at the same time build their own facilities only
where it would be efficient.
     76.  In addition, the requirement that rates, terms, and
conditions be just, reasonable, and
nondiscriminatory:  (1) prevents the incumbent LEC from offering
unbundled elements on rates,
terms, and conditions so overpriced or burdensome as to
discourage competition; (2) enables
new entrants to discipline the incumbent's pricing; and (3)
allows entrants to take market share
from the incumbent if the new entrant is more efficient or if the
incumbent attempts to charge
prices above competitive levels.
     77.  Section 251(d)(2) provides that the Commission will
"determin[e] what network
elements should be made available for purposes of subsection
(c)(3)."  As a result of this
provision, and the obligation created by section 251(d)(1), we
tentatively conclude that section
251 obligates the Commission to identify network elements that
incumbent LECs should
unbundle and make available to requesting carriers under
subsection (c)(3).  Rather than itemize
an exhaustive list of network elements, however, some of which
competing carriers may not
desire, we further tentatively conclude that the Commission
should identify a minimum set of
network elements that incumbent LECs must unbundle for any
requesting telecommunications
carrier, and, to the extent necessary, establish additional or
different unbundling requirements in
the future as services, technology, and the needs of competing
carriers evolve.  We seek
comment on these tentative conclusions.
     78.   Carriers may, of course, voluntarily negotiate
agreements for unbundling elements
that differ from those addressed by the Commission under section
251(c)(3).  In addition,
section 252(e)(3) preserves a state's authority to impose other
requirements of state law in its
review of arbitrated agreements.  Thus, to the extent such
requirements are consistent with the
provisions of section 251(c)(3) and our rules, we tentatively
conclude that states may require
additional unbundling of LEC networks.
     79.  In light of our obligations under sections 251(d)(1)
and 251(d)(2), we also seek
comment on whether and to what extent, beyond merely identifying
network elements that
incumbent LECs must provide on an unbundled basis pursuant to
subsection (c)(3), the
Commission should establish minimum requirements governing such
unbundling.  These
requirements could include, for example, provisioning and service
intervals, nondiscrimination
safeguards, and technical standards.  We believe that minimum
national requirements governing
the unbundling of network elements would likely offer several
advantages.  Such requirements
would provide uniform technical requirements, and would enhance
the ability of new entrants to
take advantage of economies of scale and to plan and deploy
networks stretching across state
and LEC boundaries.  We note that telecommunications equipment
has heretofore been provided
by national manufacturers selling to a nation-wide market,
without substantial regional or state-
to-state variation in equipment design.  Minimum national
requirements also may ensure some
level of network and equipment interoperability between both
competing and noncompeting
carriers.  Further, Commission minimums would reduce or eliminate
the need for certain
duplicative decision-making by the states, provide a ready
framework for the many states that
have not acted to unbundle LEC networks, and speed the
negotiation and arbitration processes
by reducing any ambiguity in the parties' obligations.  Thus,
states could rely on a set of
generally applicable minimum requirements, while prescribing
additional rules of unbundling
tailored to their particular circumstance.
     80.  We also seek comment on whether and to what extent we
should establish national
rules for unbundled network elements that allow for some
variation among states.  For example,
we seek comment on the extent to which such rules should permit
states to impose different
obligations to address state-specific concerns and to experiment
with alternative approaches, and
whether permitting such variation would better achieve the goals
of the 1996 Act.  Would
variations in technical requirements among states affect the
ability of new entrants to plan and
configure regional or national networks?   Would a lack of
explicit requirements impair a state's
ability to complete arbitrations within the prescribed
time-frame, or our ability to evaluate BOC
compliance under section 271 within 90 days?  Would a lack of
clear national rules impair our
ability under section 252(e) to assume a state commission's
responsibilities if the state
commission fails to act to carry out its responsibilities under
section 252?
     81.  We also encourage parties to provide us with
information regarding the policies that
states have adopted to address network unbundling.  While many
states have not acted at all to
unbundle LEC networks, several states have ordered some amount of
LEC network unbundling.
States such as Illinois, New York, California, and Maryland
require, or plan to require, LECs to
unbundle at least local loops.  New York, for example, has
implemented a request-based
approach that requires unbundling only for requested elements (to
date local loops and ports),
and then only if essential facilities are involved.  Other
states, such as Maryland and Florida,
require LECs to unbundle all network elements to the extent
technically feasible and
"reasonable" or "economically feasible," and address unbundling
requirements for a specific
element when that element is requested.  In contrast to these
request-based approaches, some
states, such as Colorado, Hawaii, and California, determine an
essential or "key" set of LEC
network elements that LECs must unbundle.  We seek comment on the
policies that other states
have adopted.
     82.  Finally, with respect to each of the issues discussed
below, we request comment on
whether any existing state approaches, alone or in combination,
would be suitable for
incorporation into national rules implementing section 251(c)(3).
We also ask commenting
parties to identify state approaches that they believe are either
inconsistent with the 1996 Act or
that are inadvisable from a policy perspective.
     (1)   Network Elements
     83.  Section 3(29) defines a "network element" as both "a
facility or equipment used in
the provision of a telecommunications service" as well as
"features, functions, and capabilities
that are provided by means of such facility or equipment."
According to the Joint Explanatory
Statement, "[t]he term `network element' was included to describe
the facilities, such as local
loops, equipment, such as switching, and the features, functions,
and capabilities that a [LEC]
must provide for certain purposes under other sections of the
conference agreement."  We
believe that under this broad definition, an entire local loop,
for example, could constitute a
single network element, or comprise several network elements.  An
alternative interpretation,
albeit one that would provide competitors less flexibility, is
that a network element, once
defined, cannot be subdivided.  We seek comment on our more
flexible interpretation of
"network element," and how to apply the definition in accordance
with the unbundling proposals
discussed below.
     84.  We also seek comment on the apparent distinction, drawn
in the definition of
"network element" in the 1996 Act, between the "facility or
equipment used in the provision of a
telecommunications service," and the service itself.  We request
comment on the meaning and
significance of such a distinction in general and with respect to
particular elements.  For
example, because the nature of a network element, under the
definition in the 1996 Act, is a
facility or function, and is not dependent upon the particular
services offered by means of such
facility or function, does the purchase of access to such an
element entitle, or indeed obligate the
requesting carrier to provide the customer with all services,
intrastate and interstate, that use the
element?  Under this reading of the statute, a telecommunications
carrier that purchased local
switching as a network element would use that element to provide
whatever intrastate and
interstate switching services the customer desired.  As discussed
more fully below in section
II.B.2.e., such an entitlement or obligation to provide all of
the services that a particular network
element currently is used to furnish may distinguish network
elements from existing access
services.
     85.  In addition, we request comment on the relationship
between section 251(c)(3),
concerning unbundling, and section 251(c)(4), which addresses
resale of incumbent LEC
services.  Specifically, may requesting carriers order and
combine network elements to offer the
same services an incumbent LEC offers for resale under subsection
(c)(4)?  Does subsection
(c)(3) in effect provide new entrants with an alternative way to
"resell" the services of incumbent
LECs in addition to the specific resale provision in subsection
(c)(4)?  In this regard, we note
that section 252(d) provides different pricing standards for
these two subsections, and we ask
commenters to address the implications of this difference.  To
the extent that section 251(c)(3)
contemplates the purchase of unseparated facilities (i.e.
facilities used to provide both intra- and
interstate services), as discussed above, we note that a
telecommunications carrier would not
necessarily be purchasing the same service(s) it would under
section 251(c)(4).  Does the
difference, if any, between network elements and the services
provided by means of such
elements play a meaningful role in distinguishing these two
subsections?  We invite parties to
comment on these and any other issues raised by the interplay of
subsections (c)(3) and (c)(4).
Parties should base their comments on specific statutory
language.
     (2)   Access to Network Elements
     86.  Section 251(c)(3) requires incumbent LECs to provide
"access" to network elements
"on an unbundled basis."  We interpret these terms as requiring
incumbent LECs for a fee to
provide requesting carriers with the ability to obtain a
particular element's functionality, such as
a local loop's function of transmitting signals from a LEC
central office to a customer premises,
separate from that of other functionalities or network elements,
such as the local switch.
Further, the term "unbundled" suggests that there must be a
separate charge for each purchased
network element.  We seek comment on this and any alternative
interpretations of section
251(c)(3).
     87.  Section 251(c)(3) further mandates that incumbent LECs
provide access to network
elements on an unbundled basis "at any technically feasible
point."  Parties are asked to
identify and describe, in brief, each network element for which
they believe access on an
unbundled basis is technically feasible at this time.  Further,
we seek comment on whether a
dynamic definition of "technically feasible" is practical for
identifying elements beyond those
discussed here, and, if so, what such a definition should be.  We
also ask whether the states,
rather than the Commission, may apply the definition during the
arbitration process.   We further
request that parties comment on experiences with providing or
purchasing access to elements
currently unbundled by the states, and any state approaches to
determining the technical
feasibility of unbundling elements that the Commission could use
in a national model.  We also
seek comment on whether the technical feasibility of
interconnection at a particular point affects,
at least in part, the technical feasibility of providing access
to a network element on an
unbundled basis at that point.  Finally, because subsection
(c)(3) imposes an affirmative
obligation on incumbent LECs to provide unbundled elements, we
tentatively conclude that
LECs have the burden of proving that it is technically infeasible
to provide access to a particular
network element.  We also tentatively conclude that the
unbundling of a particular network
element by one LEC (for any carrier) evidences the technical
feasibility of providing the same or
a similar element on an unbundled basis in another, similarly
structured LEC network.  We seek
comment on these tentative conclusions.
     88.  In addition to technical feasibility, section 251(d)(2)
requires that the Commission
"consider, at a minimum, whether . . . access to such network
elements as are proprietary is
necessary, and [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."  We seek comment on the extent to which the Commission
must "consider" these
standards, how these standards should be interpreted, and on any
additional considerations, such
as possible risks to network reliability or other harm.  We note
that the 1996 Act uses the terms
"technically feasible" and "economically reasonable" together in
other sections of the Act, and
we seek comment on what effect the absence of the term
"economically reasonable" in section
251(c)(3) has on economic considerations.  Further, we request
comment on whether this
omission could be construed to imply that Congress intended for
carriers requesting unbundling
to pay its cost, and on whether that construction is consistent
with the intent of the 1996 Act.
     89.  We also request comment on whether the Commission
should establish minimum
requirements governing the "terms" and "conditions" that would
apply to the provision of all
network elements.  For example, should the Commission require
incumbent LECs to provide
network elements using the appropriate installation, service, and
maintenance intervals that apply
to LEC customers and services?  Alternatively, should the
Commission require LECs to comply
with national or industry-based standards?  Would minimum
national requirements for electronic
ordering interfaces reduce the time and resources required for
new entrants to compete in
regional markets?  What standard unbundling terms and conditions,
if any, should the
Commission use in evaluating applications under section 271(b)?
Would national rules aid the
states in arbitrating agreements within the statutory period?  If
parties believe that the
Commission should specify minimum terms and conditions, we seek
comment on what those
terms and conditions should be, and how those terms and
conditions might be enforced.  Parties
are encouraged to cite specific examples from the states that
could be incorporated into
minimum national requirements.
     90.  In addition, we request comment on the meaning of the
requirement in section
251(c)(3) that LECs provide unbundled network elements "in a
manner that allows requesting
carriers to combine such elements in order to provide . . .
telecommunications service."  For
example, should the required facilities or services associated
with a particular network element
vary depending on the services the requesting carrier wishes to
provide or on the types of
facilities the requesting carrier will use in combination with
the requested elements?  We also
seek comment on the relationship between this provision and
section 251(d)(2)(B), discussed
above, which requires the Commission to consider whether the
failure to provide access to an
element would impair the ability of a requesting carrier to
provide a desired service.
     91.  Section 251(c)(3) further requires incumbent LECs to
provide requesting carriers
with "nondiscriminatory" access to unbundled network elements.
That section also requires
LECs to provide access on "terms, and conditions that are . . .
nondiscriminatory."  We seek
comment on what minimum requirements, if any, we should adopt to
ensure that LECs do not
discriminate among requesting carriers.  For example, one
criterion might be whether an end
user could perceive any differences in the quality of service
provided by one carrier as compared
with another.  Another criterion might be to require LECs to make
it as easy to switch local
service providers as it is for customers to switch interexchange
providers.  Further, unlike
subsection (c)(2), which requires that interconnection offered
requesting carriers be "at least
equal in quality to that provided" by the LEC itself, subsection
(c)(3) does not contain such a
requirement.  Nevertheless, we request comment on whether we can
and should prohibit an
incumbent LEC from providing requesting carriers with access
inferior to that which it provides
itself.
     (3)   Specific Unbundling Proposals
     92.  We now consider particular network elements to which
incumbent LECs must
provide access on an unbundled basis under section 251(c)(3).  As
discussed above, we propose
to identify a minimum number of elements that incumbent LECs must
unbundle, and we seek
comment on what minimum requirements of unbundling, if any, the
Commission should adopt
for each element.  AT&T, for example, has publicly advocated that
the Commission should
require the unbundling of eleven network elements:  loop
distribution, concentration, and feeder
plant; local and access tandem switches; dedicated and common
transport; SS7 signalling links,
signal transfer points, and signal control points; and operator
services.  MCI advocates, in
addition, the unbundling of loop and trunk ports from local
switching.  Some LECs favor the
unbundling of significantly fewer elements.
     93.  We address below four categories of elements:  loops,
switches, transport facilities,
and signaling and databases.  For each of the proposed network
elements discussed in these
categories, we request that parties comment on the following
issues:
     (1)   the technical feasibility of providing access to that
or an equivalent element on an
           unbundled basis, how such access should be provided,
and any demonstrable
           network reliability concerns;
     (2)   whether and to what extent LECs currently allow other
carriers to access such
           elements;
     (3)   whether the Commission should establish a standard for
defining the element, and
           if so, what level of technical detail is required in
the definition, and what facilities
           or functionalities should be included or excluded from
the definition;
     (4)   whether the Commission should establish minimum
requirements for the terms
           and conditions of provisioning the element, and if so,
what they should be;
     (5)   whether the failure to unbundle the element would
impair a requesting carrier's
           ability to provide the services that it seeks to
offer;
     (6)   whether proprietary interfaces or technology are
involved in providing the
           element, and if so, whether unbundled access to the
element is necessary; and
     (7)   any other issues presented by the unbundling of this
element that are important to
           effectuating the goals of section 251(c)(3) and the
1996 Act.
                (a)   Local Loops
     94.  We propose to require incumbent LECs to provide local
loops as unbundled network
elements.  The Joint Explanatory Statement accompanying the 1996
Act expressly cites the local
loop as an example of a network element.  In addition, the
competitive checklist of section
271(c)(2)(B) specifies the unbundling of local loops from local
switching or other services as a
precondition to BOC provision of in-region interLATA services.
Further, several states have
ordered, and LECs currently offer, loops unbundled from local
switching, and thus we
tentatively conclude that the unbundling of local loops is
technically feasible.
     95.  We first seek comment on whether and the extent to
which the Commission should
prescribe a set of minimum requirements for unbundling and
provisioning loops.  For example,
we could require only that incumbent LECs must, upon request,
provide at central offices
individual transmission links to customer premises regardless of
the technology involved.  It
appears, however, that in states that already have ordered loop
unbundling, the general
requirement to unbundle is merely the first step in a process of
providing new entrants with
meaningful facilities with which to compete.
     96.  The New York Commission, for example, having
anticipated and addressed many of
the problems associated with unbundling loops and ports, is still
grappling with issues such as
operational interfaces between carriers, the timing of loop
provisioning relative to number
porting, and underlying delivery systems supporting
loop-provisioning.  In view of such
complex and resource-intensive issues, we seek comment on whether
there are minimum
requirements that would build upon the progress of preexisting
state initiatives and facilitate the
provisioning of unbundled loops.  What requirements, for example,
would avoid the need for
duplicative decision-making by states and variations among states
in the effectiveness of loop
unbundling, while better enabling new entrants to plan and fund
regional networks?  To what
extent is the avoidance of interstate duplication and variation
necessary to achieving the goals of
the 1996 Act?  How should the Commission structure national
requirements to provide sufficient
flexibility to carriers and the states for use of different or
new "loop" technologies or services?
     97.  In addition, we tentatively conclude that we should
require further unbundling of the
local loop.  We seek comment on which subloop elements are
technically feasible to unbundle.
For example, the Commission could require incumbent LECs to
provide access to loop feeder
and distribution plant on an unbundled basis at remote switching
or concentration sites, in
addition to access to the switching or concentration equipment
itself.  Hawaii, for example,
divides local loop functions into these three categories.
Illinois also recently required LECs to
provide subloop elements in response to a bona fide request.
Such requests may come from
carriers deploying cable or fiber feeder facilities that lack
distribution plant.  We thus seek
comment on whether requiring access to loops prior to their
concentration or multiplexing would
allow requesting carriers to provide services they could not
provide at LEC central offices, and
whether such access would involve proprietary equipment.
Finally, we request comment on
what minimum requirements for subloop unbundling, at this early
stage where few if any states
have addressed the issue, would pave the way for rapid adoption
and provision of subloop
elements.
           (b)  Local Switching Capability
     98.  In addition to the local loop, we tentatively conclude
that incumbent LECs should
provide unbundled local switching capability as a network
element.  The Joint Explanatory
Statement expressly cites switching equipment as an example of a
network element.  In
addition, the competitive checklist of section 271(c)(2)(B)
specifies the unbundling of local
switching from transport, local loop transmission, or other
services as a precondition to BOC
provision of in-region interLATA services.  Finally, we believe
unbundling of local switching
capability is critical to the implementation of section 251(c)(3)
and the provision of competing
telecommunications services.
     99.  Unlike a local loop, local switching equipment is often
shared by thousands of
customers.  As a result, it may be difficult to identify or
define the use of such equipment for a
particular customer.  One possible way to identify a switching
element is to define the element
in terms of the capacity of a local switch to switch traffic from
line to line, line to trunk, trunk
to line, or trunk to trunk.  This is both the most essential and
rudimentary capacity of a local
switch.  Today's modern switches, however, are capable of
significantly more advanced
functions, such as call waiting, conference calling, signaling,
and centrex.  Under the 1996 Act's
definition of network element, these functions could constitute
individual network elements
separate from the basic switching functionality, or could be
grouped in part or whole with the
basic functionality, which would allow requesting carriers, in
turn, to offer the functions they
desire.
     100.  Illinois, for example, is investigating a "local
switching platform" approach to
unbundling the local switch.  The platform is described in terms
of "virtual" switch capacity,
including all the services and functions performed by the switch
on a per line basis, such as
dialtone, telephone number provision, all CLASS and CCF features,
originating and terminating
usage, and 911 services.  According to its advocates, unlike
merely reselling a single switching
service, under the platform structure requesting carriers incur
added risk because the cost of the
platform includes the cost of all functionalities provided by the
switch on a per line basis,
regardless of the functionalities ultimately purchased by an end
user.  This added risk translates
into added profits if the requesting carrier is able to sell a
combination of these switching
functionalities at a higher profit than would have been possible
under a simple resale
arrangement.  Moreover, because requesting carriers are not tied
to the incumbent LEC's retail
price structure, concerns about possible price squeezes are
reduced.
     101.  Other states have defined a switching "port," which
usually includes all the
capabilities of the local network provided at the main
distribution frame of a LEC central office.
For example, New York treats a port essentially as an
interconnection point into the rest of the
NYNEX network.  Thus a port defined in this way is not in the
nature of an unbundled element
that a competing carrier could combine with its own transport and
other loop facilities to provide
a competing telecommunications service.  Rather, such a port is
effectively equivalent to the
LEC's bundled retail local service offering minus the loop.  We
seek comment on whether such
a definition of "port" is consistent with the requirements of
section 251(c)(3), especially the
requirement that incumbent LECs provide elements in a manner that
allows carriers to combine
them to provide telecommunications services.  Further, we seek
comment on alternative
definitions of "port," and on whether the port should be a
separate unbundled element from the
switch.
     102.  We also request comment on these and alternative
approaches to unbundling the
local switch, and on the technical feasibility of such
approaches.  Under the switching platform
approach, for example, what control, if any, can and should
requesting carriers have over the
operations of a LEC local switch, and is access to proprietary
functions or equipment necessary?
Further, should the Commission identify several permissible
approaches to switch unbundling,
and what minimum requirements, if any, should apply?  What
requirements of switch unbundling
would help the Commission in evaluating applications under
section 271(b), and the states and
the courts in arbitrating and evaluating agreements between
carriers?
     103.   Finally, in conjunction with the next section
addressing transport facilities, we
request comment on whether requirements governing a local
switching element could be tailored
to apply to a tandem switching element.  Parties should address
the issues discussed above in the
context of tandem switches.
     (c)   Local Transport and Special Access
     104.  We also propose to require incumbent LECs to provide
access to unbundled
transport facilities as network elements.  We note that the
competitive checklist of section
271(c)(2)(B) requires the provision of local transport from the
trunk side of a LEC switch
unbundled from switching or other services as a precondition to
BOC provision of in-region
interLATA services.  We tentatively conclude that the unbundling
of local transport and special
access facilities is technically feasible.  We note that the
Commission's action in the Expanded
Interconnection proceeding effectively required substantial
unbundling of these facilities.
     105.  We propose to require unbundling of LEC facilities
that correspond to the current
interstate transport and special access rate elements.  For
direct-trunked transport networks,
transport trunks would be unbundled from local switches, and the
link from the serving wire
center (SWC) to the IXC point of presence (POP) would be
unbundled from the link between
the central office and the SWC.  For tandem-switched transport
networks, the elements could
include, among other options, unbundled trunks from the end
office to the tandem office, trunks
from the tandem office to the SWC, trunks from the SWC to the IXC
POP, and the tandem
switch itself.  Finally, for special access we propose to require
the unbundling of channel
termination facilities from interoffice facilities.
     106.  We seek comment on the technical feasibility of
unbundling direct-trunked and
tandem-switched transport and special access facilities in this
or in any alternative manner, and
on how LECs should unbundle any other network facilities used to
transport traffic from LEC
central offices to IXC POPs or to other LEC central offices.
     (d)   Databases and Signaling Systems
     107.  The 1996 Act contemplates the unbundling of incumbent
LECs' signaling systems
and databases.  Congress specifically included "databases" and
"signaling systems" in the
definition of network elements.  The 1996 Act also requires BOCs
to provide access to
"databases and associated signaling necessary for call routing
and completion" as a precondition
for entry into in-region interLATA services.  Therefore, we
tentatively conclude that requiring
incumbent LECs to unbundle their signaling systems and databases
is consistent with the intent
of the 1996 Act.
     108.   Many incumbent LECs have Signaling System 7 (SS7)
networks that are separate
from, but interconnected with, the telecommunications networks
that carry voice and data
communications between end users.  SS7 networks perform three
primary functions:  (1) call set
up, which establishes transmission paths for calls; (2) access to
remote databases, which provides
specialized call routing information to switches; and (3) custom
local area signaling service
(CLASS) features, such as caller ID, which require the
transmission of certain information
between the calling and called parties.  We request that
commenters identify the points at which
carriers interconnect with LEC SS7 networks today and the
signaling and database functions
currently provided by incumbent LECs on an unbundled basis.
Commenters should also discuss
the technical feasibility of establishing other points of
interconnection and other unbundled
signaling and database functions not currently offered by
incumbent LECs.
     109.  An example of unbundling particular signaling and
database elements is Colorado's
requirement that incumbent LECs provide unbundled access to
signaling links, signal transfer
points, and service control points as well as access to
non-proprietary signaling protocols used in
the routing of local and interexchange traffic, 800 service,
alternative billing service, and line
information database (LIDB) service.  Colorado has not specified
whether access to signaling
and databases is limited to those particular services.  Hawaii
has taken a similar approach by
requiring incumbent LECs to unbundle signaling links, signal
transfer points, and service control
points, and has not specified which services provided by these
network elements must be made
available to competitors.  By contrast, Louisiana has ordered
unbundled access to incumbent
LEC databases for all services that the incumbent LEC provides
itself, including 800 service,
LIDB, and advanced intelligent network (AIN) services.  Does the
variation among the
Colorado, Hawaii, and Louisiana regulations governing unbundled
signaling and databases reflect
differing circumstances that should be accommodated in our rules?
Would such variation among
states be consistent with the goals of the 1996 Act?  Would new
entrants be better served by
uniform federal rules concerning unbundled access to signaling
systems and databases?  If so,
would any of the regulations adopted by the states be useful to
incorporate into national rules?
     110.  We also seek comment on the relative importance to
potential entrants of the
various functions performed by incumbent LECs' signaling systems
and databases.  For example,
call set up plays an important role in the transmission of calls
that are routed through more than
one switch.  Thus, it would appear that such functionality will
be needed by entrants to provide
competing local exchange service.  However, we are aware that
there are alternative suppliers of
call set up services other than incumbent LECs.  What bearing, if
any, should this have on our
adoption of unbundling rules for call set up?  Are there existing
suppliers for other functions
performed by incumbent LECs' signaling systems and databases?
     111.  In addition, a competitor may seek to provide certain
call processing features to its
customers by reselling the incumbent LEC's call processing
services.  We seek comment on the
importance of unbundled access to the incumbent LEC's advanced
call processing features, such
as single number service, in the market entry decisions of
potential competitors.  We also seek
comment on whether the software "building blocks" used by
incumbent LECs to create call
processing services are network elements to be unbundled.  Given
the array of existing and
potential call processing services that could be provided by
incumbent LECs' signaling systems
and databases, we seek comment on whether the establishment of
uniform national guidelines
governing all call processing services provided via remote
databases would facilitate the state
arbitration process, judicial review, and/or Commission
activities under section 253.  We also
seek comment on whether it would be consistent with the 1996 Act
to permit variation among
states with regard to unbundling call processing services
provided via remote databases.
     112.  Under another scenario, a competitor that is providing
resold local exchange service
might seek to distinguish its offerings by connecting its own
call processing database to the
incumbent LEC's network, which would allow the competitor to
provide call processing features
not offered by the incumbent LEC.  Enabling new entrants to offer
their own call processing
services in this way would likely stimulate local exchange
competition.  We seek comment on
whether this type of interconnection is technically feasible
without jeopardizing network
reliability.
     113.  We also note that in our Intelligent Networks (IN)
proceeding, we are considering
unbundling advanced intelligent network (AIN) elements, which
include signaling systems and
databases.  In the IN NPRM, we tentatively proposed ordering Tier
1 LECs to provide access
to several specific AIN elements in order to promote competition
in the provision of AIN
services.  Subsequently, a group of Tier 1 LECs filed a joint
proposal calling for a two-year
testing plan to explore methods of third-party interconnection to
LEC AINs.  We seek
comment on what role, if any, the LEC proposal for a testing
program should play with regard
to access to signaling and database elements that we address in
this proceeding.
     114.  We further note that our IN proceeding has focused on
providing all interested third
parties with access to Tier 1 LECs' AIN elements, primarily for
the purpose of providing
competing AIN services.  Section 251 of the 1996 Act provides any
requesting
telecommunications carrier unbundled access to incumbent LECs'
network elements "for the
provision of a telecommunications service."  We seek comment on
whether mandating the
unbundling of signaling systems and databases pursuant to section
251 would be sufficient to
meet the objectives of the IN proceeding.  To the extent that
section 251 does not require
incumbent LECs to provide certain third parties with access to
unbundled AIN elements, we
seek comment on whether we should use our section 201 authority
to require such access.  We
also seek comment on how the unbundling of signaling systems and
databases in this proceeding
should affect our actions in the IN proceeding.
     115.  Requiring incumbent LECs to provide unbundled access
to their signaling and
database networks could also potentially permit competing
carriers to gain access to
competitively sensitive data.  Louisiana has addressed this
potential problem by specifically
prohibiting incumbent providers from accessing the customer
proprietary network information
(CPNI) of an interconnecting carrier in order to market services
to the interconnecting carrier's
customers.  We seek comment on whether such a restriction should
be implemented in federal
standards.  Are there other state regulations concerning access
to competitors' CPNI that
would prevent this type of anticompetitive conduct while allowing
us to establish interconnection
and unbundling rules for signaling and database facilities?
     116.  Finally, we request comment on other network elements
to which the Commission
should require access on an unbundled basis, and specific
standards that should govern their
unbundling.  For example, the statutory definition of network
element includes "subscriber
numbers" and "information sufficient for billing and collection
or used in the transmission,
routing, or other provision of a telecommunications service."  We
tentatively conclude that
these elements should be unbundled and we request comment on the
standards we should set for
such unbundling.  In addition, section 271 of the 1996 Act
requires incumbent LECs to unbundle
"operator call completion services" as a precondition for
providing in-region, interLATA
services.  In light of this, we tentatively conclude that
incumbent LECs should be required to
unbundle operator call completion services as a network element
pursuant to section 251(c) of
the Act.  We seek comment on this tentative conclusion.
     d.    Pricing of Interconnection, Collocation, and Unbundled
Network
           Elements
     (1)   Commission's Authority to Set Pricing Principles
     117.  Section 251, in some instances, explicitly sets forth
requirements regarding rates for
service, interconnection, and unbundled elements.  For example,
sections 251(c)(2), (c)(3), and
(c)(6) require that incumbent LECs' "rates, terms and conditions"
for interconnection, unbundled
network elements, and collocation be "just, reasonable, and
nondiscriminatory," and, with
respect to interconnection and unbundled elements, in accordance
with section 252.  Section
251(c)(4) requires that incumbent LECs offer "for resale at
wholesale rates any
telecommunications service that the carrier provides at retail to
subscribers who are not
telecommunications carriers," without unreasonable conditions or
limitations.  Section
251(b)(5) requires that all LECs "establish reciprocal
compensation arrangements for the
transport and termination of telecommunications."  We tentatively
conclude that this statutory
language establishes our authority under section 251(d) to adopt
pricing rules to ensure that rates
for interconnection, unbundled network elements, and collocation
are just, reasonable, and
nondiscriminatory.  We also tentatively conclude that we have
statutory authority to define what
are "wholesale rates" for purposes of resale, and what is meant
by "reciprocal compensation
arrangements" for transport and termination of
telecommunications.  We seek comment on this
tentative conclusion.
     118.  We note that, under the statutory framework
established by Congress, states have
the critical role under section 252 of establishing rates
pursuant to arbitration and of reviewing
rates under BOC statements of generally available terms.  Rates
for both arbitrated agreements
and BOC statements of generally available terms must be in
accordance with section 252(d),
which sets forth specific "pricing standards" for interconnection
and unbundled elements,
wholesale services, and transport and termination of traffic
under reciprocal compensation
arrangements.  The 1996 Act appears to give a role to both the
states and the Commission
regarding rates for interconnection, unbundled network elements,
wholesale services, and
reciprocal compensation arrangements.  We believe that the
statute, and in particular our
statutory duty to implement the pricing requirements of section
251, as elaborated in section 252,
is reasonably read to require that we establish pricing
principles interpreting and further
explaining the provisions of section 252(d) for the states to
apply in establishing rates in
arbitrations and in reviewing BOC statements of generally
available terms and conditions.  Such
an approach appears to be consistent with both the language and
the goals of the statute.
     119.  Establishing national pricing principles would be
likely to improve opportunities for
local competition by reducing or eliminating inconsistent state
regulatory requirements, thereby
easing recordkeeping and other administrative burdens.  In
addition, national pricing principles
would be likely to increase the predictability of rates, and
facilitate negotiation, arbitration, and
review of agreements between incumbent LECs and competitive
providers.  We seek comment
on these tentative conclusions.  We also seek comment on the
potential consequences if the
Commission does not set specific pricing principles.  For
example, would the lack of consistent
rates, even in contiguous geographic areas, create a barrier to
entry or to deployment of facilities
throughout a multistate market?  In addition, if the Commission
is required to assume the
responsibility of a state commission, pursuant to section
252(e)(5), would an absence of federal
pricing principles impede the Commission's ability to arbitrate
or review an agreement in a
timely fashion?
     120.  Finally, consistent with our earlier discussion that
sections 251 and 252 do not
make jurisdictional distinctions between interstate and
intrastate services and facilities, we
tentatively conclude that the pricing principles we establish
pursuant to section 251(d) would not
recognize any jurisdictional distinctions, but would be based on
some measure of unseparated
costs.  We do not believe section 2(b) requires a different
conclusion.  We seek comment on this
tentative conclusion.  We also seek comment on whether we need to
revise our cost allocation
rules in Part 64, or whether we need to adopt a similar set of
cost allocation rules to remove the
costs and revenues of services provided pursuant to sections 251
and 252 before the separations
process is applied.
     (2)   Statutory Language
     121.  Section 251(c)(2)(D) requires that incumbent LECs
provide interconnection "on
rates, terms, and conditions that are just, reasonable, and
nondiscriminatory, in accordance with .
. . the requirements of this section and section 252."  Section
251(c)(3) similarly requires
incumbent LECs to provide "nondiscriminatory access to network
elements on an unbundled
basis . . . on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory in
accordance with . . . the requirements of this section and
section 252."  Likewise, section
251(c)(6) requires incumbent LECs to provide "on rates, terms,
and conditions that are just,
reasonable, and nondiscriminatory, for physical collocation of
equipment."   Section 252(d)(1)
provides that state determinations of
     the just and reasonable rate for the interconnection of
facilities and equipment for
     purposes of subsection (c)(2) of section 251, and the just
and reasonable rate for
     network elements for purposes of subsection (c)(3) of such
section --
           (A) shall be (i) 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 (ii)
nondiscriminatory,
           and
           (B) may include a reasonable profit.
We seek comment on the proper interpretation of each of these
statutory provisions.  We also
seek comment on any specific principles that parties believe the
Commission should promulgate
to ensure that the rates established or approved by states are
just, reasonable, and
nondiscriminatory.  We seek comment below on the national pricing
principles that states might
apply in setting and reviewing rates for interconnection,
collocation, and access to unbundled
network elements.  We also seek comment on what enforcement or
monitoring mechanism, if
any, the Commission or the industry should adopt to ensure that
all carriers comply with any
pricing principles that the Commission establishes.
     122.  Further, we believe that any pricing principles we
adopt should be the same for
interconnection and unbundled network elements, because sections
251(c)(2) and (c)(3) and
252(d)(1) use the same standard for both types of services.  We
invite parties to comment on
whether there are any reasons to make a distinction.  In
addition, we believe that the same
pricing rules that apply to interconnection and unbundled network
elements should apply to
collocation as required under section 251(c)(6).  We seek comment
on this issue.  In particular,
we seek comment on whether the absence of any pricing rule for
collocation in section 252 has
any legal significance with regard to our authority to specify
rules for pricing of collocation
services.  Alternatively, should collocation be considered a
subset of interconnection services,
pursuant to sections 251(c)(2) and 252(d)(1) for purposes of the
statutory pricing principle?
     (3)   Rate Levels
     123.  As previously set forth, section 252(d)(1) provides
that state determinations of just
and reasonable rates for interconnection and providing network
elements shall be "based on the
cost (determined without reference to a rate-of-return or other
rate-based proceeding),"
"nondiscriminatory," and "may include a reasonable profit."  We
tentatively conclude that this
language precludes states from setting rates by use of
traditional cost-of-service regulation, with
its detailed examination of historical carrier costs and rate
bases.  Instead, the statute appears to
contemplate the use of other forms of cost-based price
regulation, such as price cap regulation
that is indirectly based on costs, or the setting of prices based
on a forward-looking cost
methodology that does not involve the use of an embedded rate
base, such as long-run
incremental cost (LRIC).   We seek comment on this view of the
meaning of section
252(d)(1).
     124.  Economists generally agree that rates based on LRIC
give appropriate signals to
producers and consumers and ensure efficient entry and
utilization of the telecommunications
infrastructure.  They further agree that competitive markets,
over the long run, tend to force
prices toward LRIC.  A broad range of parties appears to agree
that rates for interconnection
and unbundled elements should be based on some type of LRIC
methodology, such as, for
example, using what some parties refer to as a "total service
long-run incremental cost"
(TSLRIC) approach.  In the following section, we consider whether
we should adopt a LRIC-
based pricing methodology for states to use to set
interconnection and unbundled element rates
under the 1996 Act.  Under such an approach, if voluntary
negotiations between parties were
unsuccessful, the state commissions would conduct arbitration
proceedings under section 252 in
order to develop the specific factual information required to
specify the actual rates in
accordance with the national policy.  As discussed at greater
length below, however, there
appear to be considerable differences of opinion as to the
precise form of the LRIC methodology
that should be used.  Further, while pricing based on LRIC may be
the theoretical ideal,
significant practical and administrative problems are likely to
arise in determining the LRIC of
specific services and facilities for particular incumbent LECs,
especially in the short term, given
the contentious and often time-consuming proceedings that may be
necessary to resolve the
complex issues raised by incremental cost studies.  We explore
these and other issues concerning
the use of a LRIC-based pricing methodology in the following
section.
     125.  As an alternative to our specifying a methodology for
states to follow in setting
prices under section 252(d)(1), we could establish outer
boundaries for rates for interconnection
and unbundled network elements, within which states would have a
range of flexibility to select
a cost-based method of determining interconnection and unbundled
element rates.  In particular,
we could establish an administratively simple methodology that is
relatively easy to apply,
potentially using proxies for cost-based rates, to set rate
ceilings or upper bounds on the range of
state ratemaking flexibility.  The use of a proxy to set the
ceiling would reduce the
administrative burden that is inherent in the application of a
LRIC-based methodology, and thus
may be especially attractive in the near term.  We discuss this
proxy-based ceiling approach in
detail below.  We also discuss below the extent to which embedded
(or historical) costs are
relevant to the pricing rule for interconnection and unbundled
network elements in the 1996 Act,
the relationships between this pricing rule and policies on
universal service and access charge
reform, and whether certain methodologies are so fundamentally
inconsistent with the 1996 Act
that the statute precludes states from using such methodologies.
     (a)   LRIC-Based Pricing Methodology
     126.  As noted above, most economists -- and a broad range
of parties that have
submitted materials related to this proceeding -- appear to agree
that rates for interconnection
and unbundled elements ideally should be based on a LRIC-type
methodology.  The economists
and parties, however, do not appear to agree on the specifics of
a LRIC or TSLRIC
methodology.  Parties sometimes assign different meanings to the
same terms.  We therefore ask
commenters advocating this approach to define with specificity
the costing methodology that
they support.  In particular, we seek comment on precise
definitions for the following terms:
LRIC, TSLRIC, forward-looking costs, joint costs, common costs,
shared costs, and stand-alone
costs.  We also seek comment on the definition of the following
related terms:  embedded
costs, fully distributed costs (FDC), overheads, contribution,
and residual costs.  For example,
many years ago the Commission defined LRIC as including "the full
amount of incremental
investment and expenses which would be incurred by reason of
furnishing additional quantities
of service, whether in a new or an existing service category,"
and added that, in estimating
LRIC, one "determine[s] prospectively the effect on total costs,
including the effect on common
costs, . . . of adding units of service."  Does this continue to
be an appropriate definition of
LRIC?  In what respects, if at all, does a TSLRIC analysis differ
from a LRIC analysis?
Commenters should explain how any methodology they support should
be calculated, and how
such an approach differs from other possible costing
methodologies.
     127.  We note that some states already have adopted
LRIC-based pricing methodologies
to set rates for interconnection services and unbundled network
elements that new entrants
purchase from incumbent LECs.  For example, the Illinois Commerce
Commission has
promulgated detailed rules regarding the use of TSLRIC studies to
derive the rates for specified
services offered by incumbent LECs.  Michigan law provides that
incumbent LECs' rates for
interconnection will be set at TSLRIC levels until January 1,
1997.  The California Public
Utilities Commission has set prices for unbundled elements based
on a forward-looking
calculation of TSLRIC, which excludes shared and common costs.
The New York Public
Service Commission has allowed incumbent LECs to establish
tariffed rates for interconnection
offerings with rates based on incremental cost plus, where
appropriate, offsets to account for
contribution loss and the impacts of "stranded plant."  Finally,
the Local Competition Work
Group of the NARUC Staff Subcommittee on Communications has
recommended that network
component prices should recover at least TSLRIC and, subject to
state commission oversight and
review, may include "a markup over TSLRIC to reflect a reasonable
allocation of joint and
common costs."
     128.  We invite parties to comment on the costing
methodologies used by these and other
states, and on the extent to which these approaches are
consistent with the pricing principles and
goals of the 1996 Act.  We also seek comment on whether the
approach taken by any state
regarding pricing interconnection, collocation, and unbundled
network elements can be used as a
model for a federal policy for these services and facilities.
Are the existing state standards
substantially the same or materially different?  If there are
significant differences, what are the
costs and benefits of such variation to economic efficiency and a
national, pro-competitive
communications policy?  We note that, while several states have
identified specific costing
methodologies and have ordered incumbent LECs to offer unbundled
network elements at rates
based on LRIC, most states have not yet acted in this area.
     129.  We can consider a number of different approaches if we
were to require a LRIC-
based methodology for states to follow.  For example, we could
require that prices be set based
on a narrowly defined LRIC of interconnection service and
unbundled network elements, with no
allowance for joint or common costs, overheads, or any other
added increment.  There may,
however, be a problem with basing rates on LRIC alone if there
are significant joint and
common costs among network elements, even if such costs are
determined on a forward-looking
basis.  As a second option, we could require prices to be based
on the LRIC of the applicable
service or unbundled element plus a reasonable allocation of
forward-looking joint and common
costs.   Even then, however, under some LRIC methodologies, the
sum of all LRIC-based
service and element pricing may not cover all of the firm's
forward-looking costs.   Finally,
Ameritech has suggested a LRIC-based methodology that includes,
in addition to TSLRIC, an
allocation of joint (or shared) costs, common costs (or
overhead), and residual costs.  We seek
comment on these alternative approaches, or variations, in terms
of their compliance with the
statute, including the statutory provision that rates "may
include a reasonable profit," and their
respective advantages and disadvantages.
     130.  We also seek comment on how, if rates are to be set
above LRIC, to deal with the
problems inherent in allocating common costs and any other
overheads.  First, it may be possible
to minimize the costs to be allocated as joint and common by
identifying a substantial portion of
costs as incremental to a particular service or element.  The
feasibility of minimizing the costs
to be allocated as joint and common may depend, in part, on the
degree to which unbundled
elements are disaggregated.  Alternatively, joint and common
costs could be minimized by
establishing a pricing standard at a higher level of aggregation
than individually unbundled
subelements.  A second approach would be to allocate common costs
and overhead among
services in an inverse relationship to the sensitivity of demand
for each of the services.  This
"Ramsey" approach, in theory, minimizes reductions in consumer
welfare due to prices above
LRIC.  On the other hand, Ramsey pricing principles were
developed in the context of
regulated monopolies, and may not be desirable for markets in
which competition is
developing.  A third approach would be to allocate common costs
and overheads among all
services based on some specified allocator.  For example, shared
costs and overheads could be
allocated among services in proportion to each service's LRIC or
direct costs, or could be
apportioned based on some measure of usage.  We seek comment on
these approaches, and on
the expected magnitude of forward-looking costs under each
approach that cannot be attributed
to specific services or elements.  We also seek comment on
whether, regardless of the method of
allocating common costs, we should limit rates to levels that do
not exceed stand-alone costs.
     131.  Parties should specify their reasons for supporting or
objecting to a particular
costing model, and on what types of LRIC-based pricing
methodology would be consistent with
the 1996 Act.  Parties that favor a particular methodology should
explain how their proposals
satisfy the statutory requirement that cost-based rates be
determined "without reference to a rate-
of-return or other rate-based proceeding."  They should also
address how their methodologies
would comply with the statutory requirement that rates for
interconnection and unbundled
elements "may include a reasonable profit."  We also seek comment
on whether the
"reasonable profit" provision should be interpreted to mean that
rates should yield reasonable
levels of return on capital (including assessment of risk).
Parties are encouraged to provide
examples of states that have used the particular methodology that
they support, or other
illustrative evidence to indicate how such a standard would be
applied.  Should the LRIC-based
methodology that any particular state has used be adopted as a
national policy for
interconnection and unbundled elements, or should a number of
existing state approaches be
identified as acceptable options?  We invite parties to propose
other approaches, and to delineate
with particularity how their proposal differs from the approaches
described above.  Parties
should also address the practicality of such approaches in a
state arbitration setting, including the
extent to which they would be clear and relatively easy to derive
with a minimum of controversy
and delay, and the administrative burdens associated with such
approaches.
     132.  We also seek comment on a transitional pricing
mechanism during an interim time
period.  Should we adopt an easily implementable interim approach
that would address concerns
about unequal bargaining power in negotiations, followed by some
sort of transition mechanism
to a more permanent set of pricing principles?  One possible
approach would be to require that
during an interim period, rates be set at short-run marginal
cost.  Such an approach might give
incumbent LECs an incentive to reach a rapid agreement.
     133.  We seek comment on whether interconnection and
unbundled element rates should
be set on a geographically- and class-of-service-averaged basis
for each incumbent LEC, or
whether some form of disaggregation would be desirable.  On the
one hand, averaged rates
would be simpler to derive and administer, and would minimize the
possibility of unreasonable
or unlawfully discriminatory rate differences.  On the other
hand, averaged rates might be above
the cost of service in relatively dense areas, and below cost in
less dense areas.  This could
create uneconomic incentives for competitive entrants to use
incumbent LECs' unbundled
network elements rather than deploying their own facilities in
high cost areas, even if their costs
are lower than those of the incumbent LEC.  Conversely, it might
create incentives for
competitive entrants to deploy their own more costly facilities,
rather than using unbundled
network elements provided by incumbent LECs, in low cost areas.
This problem may be
exacerbated if the incumbent LECs' local exchange or exchange
access services are priced on a
geographically averaged basis.  If interconnection and unbundled
element rates should be
disaggregated, what level of disaggregation would be appropriate
-- by density pricing zone,
LATA, exchange, or some other unit?  What types of
class-of-service disaggregation are
appropriate?  For example, should incumbent LECs be permitted to
charge different rates for
unbundled business and residential loops, or for unbundled loops
using different technologies?
What rate differentials would be reasonable?  We further seek
comment on whether some cost
index or price cap system would be appropriate to ensure that
rates reflect expected changes in
unit costs over time.
     (b)   Proxy-Based Outer Bounds for Reasonable Rates
     134.  We also seek comment on the benefits, if any, of
adopting a national policy of
outer boundaries for reasonable rates instead of specifying a
particular pricing methodology.  For
example, rate ceilings could define the maximum end of the
reasonable range within which state
commissions could establish rates for interconnection and
unbundled elements in the arbitration
process pursuant to sections 252(b)-(e).  Properly set rate
ceilings would prevent incumbent
LECs from setting rates at levels so high as to prevent efficient
competitive entry or to allow
them to extract monopoly rents, and would ensure that rate levels
bear some relationship to
costs.  If rates are too high, use of unbundled elements will be
deterred and therefore
competitive entry will take place only if competitors either
resell incumbent LECs' existing
offerings (using few or none of their own facilities) or use
their own facilities to bypass the
incumbent LEC network completely.  Consequently, setting rates
too high would contravene
Congress's desire to allow new entrants to compete by purchasing,
at cost-based rates, unbundled
elements or services of the incumbent LEC network.  We therefore
seek comment on whether a
ceiling to protect against excessive rates for unbundled elements
and services would be the best
means of furthering the pro-competitive goals of the 1996 Act.
     135.  We believe that, to be consistent with the pricing
principles of the 1996 Act, any
mechanism used to set rate ceilings for interconnection services
and unbundled elements should:
(1) make it possible for competitors efficiently to enter the
local exchange market, even if all
elements are priced at the rate ceiling; (2) constrain incumbent
LECs' ability to preclude
efficient entry, for example, by manipulating overheads and the
allocation of common costs
between services; and (3) be as simple to administer as possible.
We seek comment on this
approach, and request parties that favor a particular approach to
explain how that approach is
consistent with these principles.
     136.  Rate ceilings could be derived using a proxy or
surrogate for cost-based rates that
does not require use of a cost study.  Such a proxy could
approximate a rate derived through a
detailed cost study, and could establish a level above which
rates set by states would be too high
to allow efficient entry by competitors.  Such an approach might
well be simpler and speedier to
implement than a LRIC-based methodology.  A proxy also might
reduce or eliminate the need
for recordkeeping and examinations of carrier rate bases,
consistent with the deregulatory thrust
of the 1996 Act.  A proxy also would address the concern that
incumbents, which have the best
information about their own costs, might withhold or otherwise
restrict access to those data.
Finally, carriers may have an incentive to manipulate their costs
and thus their rates.  Using a
methodology not directly related to costs could remove this
incentive.  We seek comment on the
use of a proxy for a cost-based rate ceiling.  Would setting a
ceiling based on a proxy fulfill the
statutory mandate of section 252(d)(1) and the obligation under
section 251 to ensure that rates
are just and reasonable?   We also seek comment on other possible
approaches that would satisfy
the requirements of the statute.
     137.  One method for establishing proxies as a ceiling would
be to use generic or
averaged cost data.  For example, some measure of
nationally-averaged costs could be used in
lieu of the actual costs of each incumbent LEC.  Alternatively, a
generic cost study could be
used.  For example, we could use the Benchmark Cost Model
submitted by MCI, Sprint,
NYNEX, and US WEST in the record of CC Docket No. 80-286, or the
Hatfield study submitted
by MCI.  We seek comment on whether this or other cost studies
would serve as an
appropriate proxy for constraining rates that states may set for
interconnection and unbundled
network elements.  We also seek comment on the extent to which
any study we rely on in
establishing proxies should reflect geographically divergent
factors such as population density.
     138.  A second method for establishing proxies would be to
use rates in existing inter-
connection and unbundling arrangements between incumbent LECs and
other providers of local
service, such as neighboring incumbent LECs, CMRS providers, or
other new entrants in the
same service area.  Possible disadvantages of using existing
interconnection arrangements,
however, are that they may reflect various historical public
policy influences that resulted in
prices that do not reflect underlying costs, and that they may
reflect arrangements between
parties with unequal bargaining power.  In addition, these
arrangements may not include rates for
interconnection services or network elements that are comparable
with the services and elements
to be used by competitive entrants.
     139.  A third possible method for establishing a ceiling for
the pricing of certain
unbundled network elements could be a subset of the incumbent
LECs' existing interstate access
rates, charged for interconnection with IXCs and other access
customers, or an intrastate
equivalent.  This method would have the advantage of setting
ceilings that could be relatively
easier to derive than ceilings based on cost studies.  We would,
however, want to be sure that
any such ceilings would not effectively become the price targets
for interconnection.  These
tariffs (and intrastate tariffs in many states), first, include
flat rates for special access and
dedicated transport that we have concluded, in general, are
reasonably cost based.  These rates
could serve as the upper limit for rates for unbundled network
elements consisting of
transmission facilities between networks or between central
offices in the incumbent LEC's
network.  Second, for the unbundled network elements
corresponding to local switching, a
ceiling could be the lower of interstate or intrastate local
switching access charges -- excluding
part or all of the transport interconnection charge (TIC) and the
carrier common line charge
(CCLC), or their intrastate equivalents.  Exclusion of the TIC
and CCLC would reduce the
effective per-minute local switching charges substantially, and
intrastate charges could be
lower.  The use of access charges as a proxy for cost-based rates
to derive price ceilings may
be reasonable, because interstate access charges were initially
derived based on the accounting
costs of incumbent LEC networks after various regulatory
allocations, and, for the larger
incumbent LECs, these charges have been subject to price cap
regulation for five years.  Thus,
although access charges were not derived based on forward-looking
costs, a subset of these
charges might provide an appropriate and easily-implemented
ceiling.  We seek comment on this
analysis.  We also seek comment on whether this subset of access
charges, or some other proxy,
could be used on an interim basis, with some transition mechanism
to move towards rate ceilings
based on economic costs.
     140.  We seek comment on whether all or part of the CCLC and
TIC should be excluded
from any ceilings applicable to unbundled local switching or
transport elements.  The TIC was
originally set at a residual level to recover costs not accounted
for in our interim restructuring of
local transport rates.  To the extent that the costs in the TIC
may be unrelated to the provision of
local switching, a ceiling that included the entire TIC would
exceed the incremental cost of those
network elements.  The CCLC arguably should be excluded from the
ceiling because it
recovers local loop costs, rather than switching and transport
costs.  In the ONA proceeding,
certain interstate prices were established for unbundled features
and functions of the local switch.
We seek comment on the possible use of these prices as ceilings
for the same unbundled
elements under section 251.
     141.  Deriving an appropriate ceiling for unbundled local
loops using a method not
requiring cost studies clearly raises its own set of
difficulties.  Using existing interstate access
charges is problematic because interstate access charges were
designed to recover only 25% of
incumbent LECs' unseparated local loop costs, because the
interstate access charge regime
currently includes two different types of rate elements to
recover loop costs -- the CCLC and the
subscriber line charge (SLC) -- that are assessed in different
ways to different categories of
customers, and because the CCLC is a per-minute charge recovering
costs that do not vary with
usage.  To address the first issue, we seek comment on whether a
ceiling for unbundled loop
rates could be based on the sum of the following:  (1) the
existing SLC, (2) an imputed flat-rate
charge based on the CCLC paid by a customer with average usage,
such as that we permitted
Rochester Telephone to implement last year, and (3) some subset
of intrastate local exchange
rates.  We solicit comment on how such a ceiling could be
implemented.  We recognize that,
while using some subset of existing prices as a ceiling may be
administratively simple, that
ceiling may not tightly correlate with a TSLRIC definition of
costs, and thus we seek comment
more broadly on other possible administratively simple methods
for setting a ceiling for the price
of an unbundled loop to be applied by the states in an
arbitration under sections 251 and 252.
We note that we have referred to a Federal-State Joint Board
established under section 254 the
question of whether and how the existing subsidy to reduce the
level of the SLC should be
changed, and we seek comment on how the current system for
separating and recovering
common line costs, as well as various pending proposals before
the Joint Board, should affect
our analysis.
     142.  Using any of the above proxy methodologies, the proxy
rate may be usage-
sensitive, while a service or element is sold on a flat-rated
basis, or vice versa.  In those
situations the applicable ceiling could be derived through a
conversion factor, such as average
usage.  We seek comment on whether such an average usage factor,
a geographically
disaggregated usage factor, or some alternative methodology,
would be appropriate for
converting per-minute rates to flat rates, or vice versa.  We
also seek comment on how such a
proxy-based ceiling could be applied on a service-by-service or
element-by-element basis if
services are unbundled in different configurations from the
methods set forth in the proxy.
     143.  As the counterpart to ceilings, we seek comment on
whether it is necessary or
appropriate for us to establish floors for interconnection and
unbundled element prices, i.e., the
lower end of a reasonable range within which state commissions
could establish rate levels.
What would be the potential competitive benefits or detriments of
setting a floor for
interconnection, collocation, and unbundled element rates?  Are
they needed to protect
incumbent LECs from confiscatory regulatory action?  If they are
needed, how should they be
calculated?   Below, we discuss a possible pricing rule under
which the sum of the prices of
unbundled services cannot exceed the retail price for those
services if sold on a bundled basis.
Under such a rule, if retail rates are below cost-based levels
due to universal service or other
implicit subsidies, it may be necessary to price some or all of
the unbundled services below
LRIC in order for their sum not to exceed the subsidized retail
rate.  How would this affect
the implementation of price floors, or the desirability of such
floors?
     (c)   Other Issues
     144.  We seek comment on the extent to which embedded or
historical costs should be
relevant, if at all, to the determination of cost-based rates
under section 252(d)(1).  Setting rates
based on a detailed rate base examination of the incumbent LEC's
book costs, with an allocation
of residual costs among elements and services, would violate the
requirement of section
252(d)(1)(A)(i) that rates for interconnection and network
elements be "based on cost
(determined without reference to a rate-of-return or other
rate-based proceeding.)."  In
economic terms, prices in competitive markets are based on firms'
forward-looking costs rather
than historic (sunk) costs.  We note however, since the statutory
language precludes only use
of costs determined on the basis of a "rate-based proceeding," it
may be permissible to take
some account of an incumbent LEC's embedded costs.  Given that
incumbent LECs provide
services over shared facilities and that technological
developments are consistently reducing the
costs of providing service, setting the price of discrete
services and elements equal to the
forward-looking LRIC of each service or element is not likely to
recover the historical costs of
incumbent LECs' networks.  We seek comment on the empirical
magnitude of the differences
between the historical costs incurred by incumbent LECs (or
historical revenue streams) and the
forward-looking LRIC of the services and facilities they will be
providing pursuant to section
251.  How much of this differential can be attributed to
universal service support flows?  To
what extent can incumbent LECs reasonably claim an entitlement to
recover a portion of such
cost differences?  According to the Local Competition Work Group
of the NARUC Staff
Subcommittee on Communications, a competitive local market would
make the issue of recovery
of "stranded" embedded costs moot, at least from a purely
economic perspective.  It notes that,
in limited circumstances, other considerations could result in a
regulatory decision that some
recovery of past investment decisions by incumbents is
appropriate.  Should we establish
LRIC as a long-run standard, but permit some interim recognition
of embedded costs in the short
run?  We seek specific comment on mechanisms for any such
transition, including how to
determine what costs should be recovered during the transition
and, most importantly, how and
when any such transition would end.
     145.  We also solicit comment on whether it would be
consistent with sections 251(d)(1)
and 254 for states to include any universal service costs or
subsidies in the rates they set for
interconnection, collocation, and unbundled network elements.
For instance, New York has
adopted a "play or pay" model in which interconnectors who agree
to serve all customers in their
self-defined service areas ("players") potentially pay a
substantially lower interconnection rate
than those who serve only selected customers ("payers"), who are
liable to pay additional
contribution charges.  In the long term, section 254 requires the
Commission and the Joint
Board established under section 254 to take actions to implement
the following statutory
principles:  "All providers of telecommunications service should
make an equitable and
nondiscriminatory contribution to the preservation and
advancement of universal service. . . .
There should be specific, predictable, and sufficient Federal and
State mechanisms to preserve
and advance universal service."  Arguably, these principles can
be interpreted as requiring
competitively-neutral mechanisms for recovering universal service
support, rather than recovering
such support through rates for interconnection or unbundled
network elements.  On the other
hand, the statutory schedule for completion of the universal
service reform proceeding (15
months from enactment of the 1996 Act) is different from that for
this proceeding (6 months
from the date of enactment of the 1996 Act).  Also, intrastate
universal service mechanisms will
not be affected directly by the section 254 Joint Board
proceeding.  We also seek comment on
whether the ability of states to take universal service support
into account differs pending
completion of the section 254 Joint Board proceeding or state
universal service proceedings
pursuant to section 254(f), during any transition period that may
be established in the Joint
Board proceeding, or thereafter.
     146.  We recognize that even though, as noted below, the
provision of interconnection
and unbundled elements pursuant to sections 251 and 252 may not
legally displace our interstate
access charge regime, the two types of services have clear
similarities.  Radically different
pricing rules for interconnection and unbundled elements, on the
one hand, and levels of
interstate access charges, on the other, may create economic
inefficiencies and other anomalies.
Indeed, under a long-term competitive paradigm, it is not clear
that there can be a sustainable
distinction between access for the provision of local service and
access for the provision of long
distance service.  Thus, we are cognizant of the need to consider
these issues in a coordinated
manner, and believe it is critically important to reform our
interstate access charge rules in the
near future.
     147.  Finally, we note that certain incumbent LECs have
advocated that interconnection
rates be set based on the "efficient component pricing rule"
(ECPR) proposed by economist
William Baumol and others.  Under this approach, an incumbent
carrier that sells an essential
input service, such as interconnection, to a competing network
would set the price of that input
service equal to "the input's direct per-unit incremental costs
plus the opportunity cost to the
input supplier of the sale of a unit of input."  Under the ECPR,
competitive entry will not
place at greater risk the incumbent's recovery of its overhead
costs or any profits that it
otherwise would forego due to the entry of the competitor.  In
other words, the incumbent's
profitability would not be diminished by providing
interconnection or unbundled elements or
both.  Proponents of ECPR argue that the ECPR creates an
incentive for services to be provided
by the lowest-cost provider and that it makes the incumbent
indifferent to whether it sells an
input service to a competitor or a final service to an end user.
Critics, however, have argued
that these properties only hold in special circumstances.  The
ECPR presupposes that the
incumbent is the sole provider of a bottleneck service, and seeks
to define efficient incentives for
incremental entry based on that assumption.  Under the ECPR,
competitive entry does not drive
prices toward competitive levels, because it permits the
incumbent carrier to recover its full
opportunity costs, including any monopoly profits.  In general,
the ECPR framework precludes
the opportunity to obtain the advantages of a dynamically
competitive marketplace.  These
arguments cast significant doubts on the claims that the rule
will yield efficient outcomes over
time.  Finally, as an administrative matter, it would be
difficult for a regulatory agency to
determine a carrier's actual opportunity cost.
     148.  We tentatively conclude that use of the ECPR or
equivalent methodologies to set
prices for interconnection and unbundled network elements would
be inconsistent with the
section 252(d)(1) requirement that be based on "cost."  We
propose that states be precluded from
using this methodology to set prices for interconnection and
access to unbundled elements.
Moreover, we seek comment on whether such a pricing methodology,
if used by a state, would
constitute a barrier to entry as under section 253 of the 1996
Act.
     (4)   Rate Structure
     149.  The structure of incumbent LEC rates for
interconnection and unbundled network
elements will influence the incentives for interconnectors to
purchase and use these services,
independent of the level at which rates are set.  For example, a
usage-sensitive rate will create
incentives for the purchaser to minimize usage, or to seek out
end users with low usage, while a
flat rate for an element will create incentives to utilize the
maximum capacity available.  Some
possible rate structures for interconnection and access to
unbundled network elements under the
1996 Act might produce rates that are not just, reasonable, and
nondiscriminatory (as required
under section 251), might conflict with the pricing standard in
section 252(d)(1), or might be at
odds with the pro-competitive goals of the 1996 Act.
Establishing clear federal rules and
principles concerning rate structures may assist states and the
parties in arbitrating rates for
interconnection and unbundled network elements.  We therefore
seek comment on some possible
principles for analyzing rate structure questions, and some
possible principles to guide state (and
ultimately judicial) decisions in structuring rates for
interconnection and unbundled network
elements.
     150.  In general, we believe that costs should be recovered
in a manner that reflects the
way they are incurred.  This approach is consistent with the 1996
Act's pricing standard for
interconnection and unbundled network elements, which indicates
that prices should be based on
cost.  Network providers incur costs in providing two broad
categories of facilities, dedicated
and shared.  Dedicated facilities are those that are used by a
single party -- either an end user or
an interconnecting network.  Shared facilities are those that are
used by multiple parties.  The
cost of a dedicated facility can be attributed directly to the
party ordering the service that uses
that facility, and it is therefore efficient for that party to
pay charges that recover the full cost of
the facility.  A non-traffic sensitive (NTS) or "flat-rated"
charge is most efficient for dedicated
facilities, because it ensures that a customer will pay the full
cost of the facility, and no more.
It ensures that the customer will, for example, add additional
lines only if the customer believes
that the benefits of the additional lines will exceed their cost.
It also ensures that the customer
will not face an additional (and non-cost-based) usage charge.
     151.  We believe the costs of shared facilities should be
recovered in a manner that
efficiently apportions costs among users that share the facility.
We seek comment on whether a
capacity-based NTS rate or a traffic-sensitive (TS) rate may be
efficient for recovering the cost
of shared facilities in any given circumstance.  For shared
facilities whose cost varies with
capacity, such as network switching, it may be efficient to set
prices using any of the following:
a usage-sensitive charge; a usage-sensitive charge for peak-time
usage and a lower charge for
off-peak usage; or a flat charge for the peak capacity that an
interconnector wishes to pay for
and use as though that portion of the facility were dedicated to
the interconnector.
     152.  We seek comment on whether, pursuant to section
251(c)(2), (c)(3), (c)(6), and
251(d)(1), we should adopt rate structure principles for states
to apply in meeting the pricing
responsibilities under section 252(d)(1).  We also seek comment
on how such requirements
might further our goal of having clear and administratively
simple rules.  More specifically,
we seek comment on whether we should require states to adopt rate
structures that are cost-
causative and, in particular, whether we should require states to
provide for recovery of
dedicated facility costs on a flat-rated basis or, at a minimum,
make LECs offer a flat-rate
option.  In the absence of such a standard, could usage sensitive
rates for dedicated facilities
cause serious inefficiencies, harm competition, or be contrary to
the requirements of the 1996
Act?  For example, a usage-based charge could cause parties with
high traffic volumes to
overpay (i.e., pay more than the fixed cost of the facility), and
parties with low traffic volumes
to underpay (i.e., pay less than the fixed cost of the facility).
In addition, a usage-based charge
could give all parties an uneconomic incentive to reduce their
traffic volumes or to avoid
connecting with networks that impose such charges.  It also could
give parties with low volumes
of traffic, who face below-cost prices, an incentive to add lines
that they valued less than their
cost.  The Washington Utilities Commission, for example, has
concluded that measured use
interconnection rates are not cost-based and could harm local
consumers, and therefore rejected a
measured use compensation structure as an exclusive compensation
mechanism.
     153.  We also seek comment on whether we should adopt any
rules for pricing of shared
facilities.  Parties should address the circumstances under which
TS rates or flat capacity-based
rates would produce efficient results for shared facilities.
Several parties have argued that, in the
context of interconnection and access to unbundled incumbent LEC
networks, interconnectors
should have the option of paying for and using a portion of the
capacity of incumbent LEC
switches.  As proposed by some, interconnectors would pay a flat
rate for the use of a certain
amount of incumbent LEC's switching capacity, and this rate would
be discounted based on
volume and term commitments.  The interconnector would be able to
use this platform to
provide both basic local switching service as well as vertical
switching features -- such as caller
ID and call forwarding -- to its end users without paying the
incumbent LEC a separate charge
for these services.  The interconnector would assume the risk of
generating sufficient traffic to
justify the capacity it purchased from the incumbent LEC.  We
seek comment on the "switch
platform" concept, on whether the 1996 Act requires that
switching capacity be made available
to new entrants on this basis, and on the competitive
implications of such a rate structure.  We
also seek comment on whether, in the context of these bottleneck
facilities offered by incumbent
LECs to their competitors, any measures are necessary to prevent
incumbent LECs from
recovering more than the total cost of a shared facility from
users of that facility.  Finally, we
seek comment on whether concerns about pricing of shared
facilities could be alleviated if, as
discussed below, sellers of facilities are not allowed to
preclude purchasers from further reselling
such facilities on a shared basis, which would create alternative
sources of shared capacity.
     154.  Additionally, we seek comment on whether under the
1996 Act we should require
or permit volume and term discounts for unbundled elements or
services.  Commenters are also
invited to suggest alternative rate structure principles.
Parties should explain how their proposals
are consistent with economic cost-causation principles, and with
the language and intent of the
1996 Act.
     (5)   Discrimination
     155.  Sections 251 and 252 require that interconnection and
unbundled element rates be
"nondiscriminatory."  In addition, section 251(c)(4) requires
that, in making resale available,
carriers not impose "discriminatory conditions or limitations on
resale".  Finally, section
252(e) provides that states may reject a negotiated agreement or
a portion of the agreement if it
"discriminates" against a carrier not a party to the agreement
and section 252(i) requires
incumbent LECs to "make available any interconnection, service,
or network element provided
under an agreement . . . to which it is a party to any requesting
telecommunications carrier upon
the same terms and conditions."  By comparison, section 202(a) of
the 1934 Act provides that
"(i)t shall be unlawful for any common carrier to make any unjust
or unreasonable
discrimination in charges . . . for . . . like communication
service."
     156.  We seek comment on the meaning of the term
"nondiscriminatory" in the 1996 Act
compared with the phrase "unreasonable discrimination" in the
1934 Act.  More specifically, in
choosing the word "nondiscriminatory," did Congress intend to
prohibit all price discrimination,
including measures (such as density zone pricing or volume and
term discounts) that are
considered lawful under section 202(a)?  We note that the
legislative history of the new
provisions prohibiting discrimination offers no explicit guidance
on this question.  We seek
comment on whether sections 251 and 252 can be interpreted to
prohibit only unjust or
unreasonable discrimination.  For example, may carriers charge
different rates to parties that are
not similarly situated, such as when a carrier incurs different
costs to provide service to such
parties?  We also seek comment as to whether we should allow such
pricing as a policy matter.
     (6)   Relationship to Existing State Regulation and
Agreements
     157.  Section 251(d)(3) of the 1996 Act expressly bars the
Commission, when prescribing
and enforcing regulations to implement section 251, from
precluding enforcement of certain
existing state regulations.  Specifically, section 251(d)(3)
prohibits us from
     "[precluding] 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 [the portion of the 1996 Act dealing with
development of competitive
     markets] ."
We ask parties to address the meaning of the specific terms of
section 251(d)(3).  What types of
state policies would, or would not, be consistent with the
requirements of section 251 and the
purposes of Part II or Title II of the Act?  We also seek comment
on how the particular
principles discussed above would affect existing state rules and
policies, as well as existing
negotiated agreements between carriers.
     e.    Interexchange Services, Commercial Mobile Radio
Services, and Non-
           Competing Neighboring LECs
     158.  In this section, we address whether the terms of
section 251(c) cover
interconnection arrangements between incumbent LECs and providers
of interexchange services,
CMRS providers, and non-competing neighboring LECs.
     (1)   Interexchange Services
     159.  Sections 251(c)(2) and 251(c)(3) impose duties upon
incumbent LECs to provide
interconnection and nondiscriminatory access to unbundled network
elements, respectively, to
"any requesting telecommunications carrier."  In relevant part,
"telecommunications carrier" is
defined in section 3(44) of the 1934 Act, as amended, as "any
provider of telecommunications
services."  Because interexchange services are a type of
"telecommunications services," which
are defined in section 3(46) as "the offering of
telecommunications for a fee directly to the
public . . . regardless of the facilities used," we conclude that
carriers providing interexchange
services are "telecommunications carriers."  Thus, we believe
that interexchange carriers may
seek interconnection and unbundled elements under subsections
(c)(2) and (c)(3), respectively.
     160.  With respect to section 251(c)(2), however, we believe
the statute imposes limits on
the purposes for which any telecommunications carrier, including
interexchange carriers, may
request interconnection pursuant to that section.  Section
251(c)(2) imposes an obligation upon
incumbent LECs to provide requesting carriers with
interconnection where the request is for the
"transmission and routing of telephone exchange service and
exchange access."  "Telephone
exchange service" is defined in section 3(47) of the 1934 Act, as
amended, as "service within a
telephone exchange, or within a connected system of telephone
exchanges within the same
exchange area operated to furnish to subscribers
intercommunicating service of the character
ordinarily furnished by a single exchange," or "comparable
service[s]."  According to this
definition, interexchange service does not appear to constitute a
"telephone exchange service."
We seek comment on this interpretation.
     161.  Interexchange service would not appear to qualify as
"exchange access" either.
"Exchange access" is defined in section 3(16) of the 1934 Act, as
amended, as "the offering of
access to telephone exchange services or facilities for the
purpose of the origination or
termination of telephone toll services."  This definition would
appear to require a
telecommunications carrier to request interconnection for
purposes of "offering" access to
exchange services.  An interexchange carrier that requests
interconnection to originate or
terminate an interexchange toll call would not appear to be
"offering" access services, but rather
to be "receiving" access services.  Thus, it would appear that
the obligation to provide
interconnection pursuant to section 251(c)(2) does not apply to
telecommunications carriers
requesting such interconnection for the purpose of originating or
terminating interexchange
traffic.  This tentative conclusion seems consistent with section
251(i), which provides that
"[n]othing in this section shall be construed to limit or
otherwise affect the Commission's
authority under section 201."  Section 201 is the statutory basis
on which interexchange carriers
have long been entitled to interconnect for the purposes of
originating and terminating
interexchange traffic.  Some have argued that our interpretation
is also consistent with other
provisions of section 251, such as section 251(g), and with
Congress's focus on the local
exchange market.  We seek comment on our tentative conclusion.
     162.  It follows from the above definition of "exchange
access" that a
telecommunications carrier may request cost-based interconnection
under section 251(c)(2) for
the purpose of offering access services in competition with the
incumbent LEC.  We seek
comment, however, on whether a carrier may request cost-based
interconnection under section
251(c)(2) solely for this purpose.  The language in section
251(c)(2) indicating that
interconnecting carriers must offer "telephone exchange service
and exchange access" may mean
that carriers must offer both "telephone exchange service and
exchange access," or it may mean
that telecommunications carriers may obtain interconnection from
an incumbent LEC to provide
one or the other service, or both.  We believe that if we were to
interpret this section to require
requesting parties to offer both telephone exchange and exchange
access services, such a
requirement would exclude competitive access providers that
currently interconnect with
incumbent LECs in order to offer competing exchange access
transport services, not telephone
exchange service.   On the other hand, if we interpret section
251(c)(2) to permit cost-based
interconnection for the purpose of offering either telephone
exchange or exchange access, that
interpretation might permit an interexchange carrier to form an
affiliate to obtain interconnection
from an incumbent LEC for the purpose of offering a competing
exchange access service.  The
affiliate then might offer its competing service exclusively to
its interexchange affiliate, thereby
enabling the latter to accomplish indirectly -- obtaining
interconnection for the purpose of
receiving exchange access service -- what the statute appears to
prohibit it from doing directly
under section 251(c)(2).  This concern is real, of course, only
if an exclusive relationship of this
sort is otherwise lawful under the 1934 Act, as amended, which it
may not be.  We seek
comment on this analysis.  We also seek comment on the impact
that any conclusion here would
have on the Commission's Expanded Interconnection rules, which
address the competitive
provision of interstate access.
     163.  Section 251(c)(3) appears to limit the purposes for
which telecommunications
carriers may request access to unbundled network elements only in
the sense that such carriers
must seek to provide a "telecommunications service" by means of
such elements.  As discussed
above, interexchange service is a "telecommunications service."
Thus, we tentatively conclude
that carriers may request unbundled elements for purposes of
originating and terminating
interexchange toll traffic, in addition to whatever other
services the carrier wishes to provide
over those facilities.
     164.   Some interested persons have suggested that this
interpretation of section 251(c)(3)
would allow interexchange carriers, in effect, to obtain network
elements in order to avoid the
Commission's Part 69 access charges, but would not require such
carriers to use such elements
to compete with the incumbent LEC to provide telephone exchange
service to subscribers.  In
opposition, others may argue that incumbent LECs are not obliged
under section 251(c)(3) to
provide access to unbundled elements, such as a local loop,
solely for the purpose of originating
and terminating interexchange toll traffic.  Rather, the argument
might go, the incumbent LEC's
statutory obligation to provide network elements extends only to
providing exclusive access to an
entire loop, in which case an interexchange carrier could not, as
a practical matter, purchase such
access without having won over the local customer associated with
the loop and providing that
telephone exchange service to that customer (or arranging for
others to provide it).  This latter
reading of the statute is consistent with our earlier discussion
concerning the meaning of the
term "network element."  There we noted that a network element
appears to refer to a facility
or function, rather than a jurisdictionally distinct service,
such as switching for intrastate
exchange access.  We also note that viewing a network element as
a jurisdictionally distinct
service might be inconsistent with the pricing standards set
forth in section 252(d)(1), which
suggest that prices for these elements should be set on the basis
of some measure of economic
costs, not jurisdictionally separated costs.  Moreover, as with
section 251(c)(2), allowing
interexchange carriers to circumvent Part 69 access charges by
subscribing under section
251(c)(3) to network elements solely for the purpose of obtaining
exchange access may be
viewed as inconsistent with other provisions in section 251, such
as sections 251(i) and 251(g),
and contrary to Congress' focus in these sections on promoting
local competition.  Lastly, such a
reading of the statute may effect a fundamental jurisdictional
shift by placing interstate access
charges under the administration of state commissions.  We seek
comment on these issues.
     165.  If a carrier that provides interexchange toll services
purchases access to unbundled
network elements in order to provide such toll services -- either
alone if the statute permits it, or
in conjunction with local exchange services -- we tentatively
conclude that the incumbent LEC
may not assess Part 69 access charges in addition to the charges
assessed for the network
elements determined under sections 251 and 252.  Section 252, we
note, requires that charges for
elements shall be based on cost.  Thus, the additional imposition
of Part 69 access charges
would result in total charges not based on cost and thus would
seem inconsistent with the
statutory scheme.  We seek comment on this conclusion.  In
commenting, parties may want to
discuss the relevance of section 272(e)(3).  That section
requires BOCs, after entering the in-
region interexchange business, to impose on their affiliates --
or impute to themselves -- access
charges no lower than what they charge to unaffiliated
interexchange carriers.  In light of the
above discussion and its possible implications for our Part 69
access charge regime, we repeat
here our intention of taking up access charge reform in the very
near future.
     (2)   Commercial Mobile Radio Services
     166.  We next seek comment on whether interconnection
arrangements between
incumbent LECs and commercial mobile radio service (CMRS)
providers fall within the scope of
section 251(c)(2).  As indicated below in the discussion of
section 251(b)(5), we also seek
comment on the separate but related question of whether LEC-CMRS
transport and termination
arrangements fall within the scope of section 251(b)(5).
     167.  With respect to section 251(c)(2), because the
obligations of that section, and of
section 251(c) generally, apply only to incumbent LECs, we
tentatively conclude that CMRS
providers are not obliged to provide interconnection to
requesting telecommunications carriers
under the provision of section 251(c)(2).  CMRS providers are not
encompassed by the 1996
Act's definition of "incumbent local exchange carrier" discussed
above.
     168.  LEC-CMRS interconnection arrangements may nonetheless
fall within the scope of
section 251(c)(2) if CMRS providers are "requesting
telecommunications carrier[s]" that seek
interconnection for the purpose of providing "telephone exchange
service and exchange access."
CMRS are within the definition of "telecommunications services"
in section 3(46) of the 1934
Act, as amended, because they are offered "for a fee directly to
the public."  Similarly, CMRS
providers are within the definition of  "telecommunications
carrier[s]" in section 3(44) because
they are "provider[s] of telecommunications services."  The
phrase "telephone exchange service"
is arguably broad enough to encompass at least some CMRS.
"[T]elephone exchange service" is
defined as either "(A) service within a telephone exchange, or
within a connected system of
telephone exchanges within the same exchange area operated to
furnish to subscribers
intercommunicating service of the character ordinarily furnished
by a single exchange, and which
is covered by the exchange service charge, or (B) comparable
service[s]."  We seek comment
on which if any CMRS, including voice-grade services, such as
cellular, PCS, and SMR, and
non-voice-grade services, such as paging, fit this definition.
In commenting, parties should
address any past Commission statements that bear on the matter.
     169.  If CMRS providers seeking interconnection from
incumbent LECs fall within the
purview of section 251(c)(2), or of section 251(b)(5), there
arises the question of the relationship
between section 251 and another recent addition to the 1934 Act
that also addresses
interconnection between CMRS providers and other common carriers,
section 332(c).  Although
we seek comment on the relationship of the two provisions in this
proceeding, we note that
LEC-CMRS interconnection pursuant to section 332(c) is the
subject of its own ongoing
proceeding in CC Docket No. 95-185, which the Commission
initiated prior to the enactment of
the 1996 Act.  We also note that we sought comment in that
proceeding generally on the issue
of the interplay of section 251 and section 332(c) and have
received extensive comments.  We
intend that CC Docket No. 95-185 remain open and we do not want
to ask interested parties to
repeat their arguments on issues they have already addressed in
that docket.  Therefore, in this
proceeding, we ask parties to address any specific issues
presented in this Notice that are not
already addressed in CC Docket No. 95-185.  In submitting
additional comments, parties may
want to address the possibility that, if both sections 251 and
332(c) apply, the requesting carrier
would have to choose the provision under which to proceed.
Parties may also want to address
whether it would be sound policy for the Commission to
distinguish between telecommunications
carriers on the basis of the technology they use.  The Commission
retains the prerogative of
incorporating by reference comments filed in the section 332(c)
proceeding into the record of
this proceeding, and of acting on these pending rulemakings in a
manner that best serves the
interests of reasoned decisionmaking.
     (3)   Non-Competing Neighboring LECs
     170.  We turn next to whether interconnection agreements
between incumbent LECs and
non-competing neighboring LECs are subject to section 251(c)(2).
If they are, section 252
would appear to require that such arrangements be made public and
the terms and conditions of
the agreements made available to other carriers.  Whether this is
true of existing arrangements
between incumbent LECs and non-competing neighboring LECs depends
on the resolution of the
issue, discussed above, of existing agreements generally.
     171.  The language of section 251(c)(2), which encompasses
interconnection requested
for the purposes of providing "telephone exchange service and
exchange access," appears to
encompass the services provided by non-competing neighboring
LECs.  By definition, such
LECs provide "telephone exchange service and exchange access."
Nevertheless, a reading of
section 251(c)(2) in context shows that it is part of a provision
designed to promote competition
against the incumbent LEC, and on this basis, the requirements
set forth therein could arguably
be understood to apply only to arrangements between competing
carriers.  We note, however,
that in deciding this issue, we do not seek to create any
disincentives that might hamper
competition between neighboring carriers.  We seek comment on
which of the above
interpretations is correct.  To the extent a party advocates the
latter interpretation, we also seek
comment on the implications, if any, for the CMRS discussion.
     3.    Resale Obligations of Incumbent LECs
     a.    Statutory Language
     172.  Section 251(c)(4) imposes a duty upon incumbent LECs
to offer certain services for
resale at wholesale rates.  Specifically, section 251(c)(4)
requires incumbent LECs:
     (A) to offer for resale at wholesale rates any
telecommunications service that the carrier
     provides at retail to subscribers who are not
telecommunications carriers; and (B) not to
     prohibit, and not to impose unreasonable or discriminatory
conditions or limitations on,
     the resale of such telecommunications service, except that a
State commission may,
     consistent with regulations prescribed by the Commission
under this section, prohibit a
     reseller that obtains at wholesale rates a
telecommunications service that is available at
     retail only to a category of subscribers from offering such
service to a different category
     of subscribers.
     173.  We seek comment generally on the application of this
section, as set forth in some
detail below.  We will first discuss the services subject to
resale and conditions on such resale
and then turn to the pricing issues concerning resale.  We also
seek comment generally on the
relationship of this section to section 251(b)(1), which imposes
certain resale duties on all LECs.
     b.  Resale Services and Conditions
     174.  Section 251(c)(4)(A) provides that incumbent LECs must
offer for resale at
wholesale rates "any telecommunications service that the carrier
provides at retail to subscribers
who are not telecommunications carriers."   Section 251(b)(1)
imposes on all LECs "the duty not
to prohibit, and not to impose unreasonable or discriminatory
conditions or limitations on, the
resale of its telecommunications services."  One view of the
relationship between section
251(b)(1) and section 251(c)(4) is that all LECs are prohibited
from imposing unreasonable
restrictions on resale, but that only incumbent LECs that provide
retail services to subscribers
that are not telecommunications carriers are required to make
such services available at
wholesale rates to requesting telecommunications carriers.  We
seek comment on this view.
     175.  We also seek comment on what limitations, if any,
incumbent LECs should be
allowed to impose with respect to services offered for resale
under section 251(c)(4).  Should the
incumbent LEC have the burden of proving that a restriction it
imposes is reasonable and
nondiscriminatory?  Given the pro-competitive thrust of the 1996
Act and the belief that
restrictions and conditions are likely to be evidence of an
exercise of market power, we believe
that the range of permissible restrictions should be quite
narrow.  We seek comment on this
view.  We also seek comment on whether, and if so how, the resale
obligation under section
251(c)(4) extends to an incumbent LEC's discounted and
promotional offerings.  Did Congress
intend for such offerings to be provided at wholesale rates,
based on the promotional rate minus
avoided costs, or does the obligation to provide for resale at
wholesale rates only apply to the
incumbent LEC's standard retail offerings?  If the obligation
extends only to the standard
offering, what effect would that have on the use of resale as a
means of entering the local
market?  If the obligation applies to promotional and discounted
offerings, must the entrant's
customer take service pursuant to the same restrictions that
apply to the incumbent LEC's retail
customers?  Moreover, how would such restrictions be enforced
without impeding competition
(e.g., through disclosure of competitively sensitive
information)?  We also seek comment on
whether a LEC can avoid making a service available at wholesale
rates by withdrawing the
service from its retail offerings, or whether it should be
required to make a showing that
withdrawing the offering is in the public interest or that
competitors will continue to have an
alternative way of providing service.  We also seek comment on
whether access to unbundled
elements addresses this concern.
     176.  We seek comment on the meaning of the language that "a
State commission may,
consistent with regulations prescribed by the Commission under
this section, prohibit a reseller
that obtains at wholesale rates a telecommunications service that
is available at retail only to a
category of subscribers from offering such service to a different
category of subscribers."  The
provision suggests that Congress did not intend to allow
competing telecommunications carriers
to purchase a service that, pursuant to state or federal policy,
is offered at subsidized prices to a
specified category of subscribers (e.g., residential
subscribers), and then resell such service to
customers that are not eligible for such subsidized service
(e.g., business subscribers).  For
example, it might be reasonable for a state to restrict the
resale of a residential exchange service
that is limited to low-income consumers, such as the existing
Lifeline program.  At the same
time, we have generally not allowed carriers to prevent other
carriers from purchasing high
volume, low price offerings to resell to a broad pool of lower
volume customers.  We seek
comment on this analysis.
     177.  We note that states have adopted various policies
regarding resale of
telecommunications services.  For example, some states prohibit
the resale of flat-rated services
and residential service.  Other states require or permit the
resale of residential services, but
place restrictions, or permit the LECs to place restrictions, on
the resale of such service.  For
example, Illinois prohibits the resale of residential services to
customers other than residential
users, while Washington and Ohio permit carriers to prohibit or
to place reasonable restrictions
on the resale of residential services to business customers.
Finally, some states have imposed
nondiscrimination requirements similar to those contained in
section 251(c)(4).  Colorado has
enacted rules governing the authorization of local exchange
service providers, and has prohibited
facilities-based telecommunications providers from imposing
unreasonable or discriminatory
limitations on the resale of the regulated telecommunications
service.  Pennsylvania also
prohibits a LEC from maintaining or imposing resale or sharing
restrictions on any service that
the state commission finds to be competitive.  We seek comment on
whether it would be
consistent with the 1996 Act to use any state policies concerning
restrictions on resale in our
federal policies.  We also seek comment on state policies that
are inconsistent with the goals of
the 1996 Act or that are inadvisable from a policy perspective.
Parties are also invited to
comment on whether requiring new entrants to cope with resale
policies that are inconsistent
from one state to another would disadvantage them competitively
in a manner inconsistent with
the 1996 Act.
     c.  Pricing of Wholesale Services
     (1)  Statutory Language
     178.  The requirement in section 251(c)(4) that incumbent
LECs offer services at
"wholesale rates" is elaborated in section 252(d)(3), which sets
forth the standards that states
must use in arbitrating agreements and reviewing rates under BOC
statements of generally
available terms and conditions.  Section 252(d)(3) provides that
wholesale rates shall be set "on
the basis of retail rates charged to subscribers for the
telecommunications service requested,
excluding the portion thereof attributable to any marketing,
billing, collection, and other costs
that will be avoided by the local exchange carrier."  As
previously discussed in Section
II.B.2.d.(1), we believe that the Commission is authorized to
promulgate rules for the states in
applying section 252(d).
     (2)  Discussion
     179.  We seek comment generally about the meaning of the
term "wholesale rates" in
section 251(c)(4).  To ensure that incumbent LECs fulfill their
duty under section 251(c)(4)
regarding resale services, can and should we establish principles
for the states to apply in order
to determine wholesale prices in an expeditious and consistent
manner?
     180.  We also seek comment on whether we should issue rules
for states to apply in
determining avoided costs.  We could, for example, determine that
states are permitted, under
the Act, to direct incumbent LECs to quantify their costs for any
marketing, billing, collection,
and similar activities that are associated with offering retail,
but not wholesale services.  We
seek comment on whether avoided costs should also include a share
of general overhead or
"mark-up" assigned to such costs.  LECs would then reduce retail
rates by this amount, offset
by any portion of those expenses that they incur in the provision
of wholesale services.  This
approach appears to be consistent with the statute, but would
create certain administrative
difficulties because all of the information regarding such costs
is under the control of the
incumbent LECs.  We seek comment on how this approach could be
adopted without creating
unnecessary burdens on the LECs.
     181.  Alternatively, we could establish a uniform set of
presumptions that states could
adopt and that would apply in the absence of quantifications of
such costs by incumbent LECs.
For example, the Commission could identify a significant number
of expenses that the states
would presume to be retail expenses, absent a contrary showing by
the incumbent LEC.  Such
presumptions recognize that it may be difficult to obtain cost
data from incumbent LECs.  They
also appear to be consistent with section 252(b)(4)(B), which
provides that, "[i]f any party
refuses or fails unreasonably to respond on a timely basis to any
reasonable request from the
state commission, then the State commission may proceed on the
basis of the best information
available to it from whatever source derived."  In addition, we
could identify specific accounts
or portions of accounts in the Commission's Uniform System of
Accounts (USOA) that the
states should include as "avoided costs."  Another issue on which
we seek comment is whether
states should be permitted or required to allocate some common
costs to "avoided cost"
activities.  We seek comment on these options, and invite parties
to propose other options.  We
also seek comment on how any approach would further our goals of
clarity and administrative
simplicity.
     182.  We also seek comment on whether we should establish
rules that allocate avoided
costs across services.  Should incumbent LECs be allowed, or
required, to vary the percentage
wholesale discounts across different services based on the degree
the avoided costs relate to
those services?  The benefit of any such approach is that it is
likely to result in wholesale
rates which are more cost-based than a uniform allocation across
services, and that should
facilitate efficient entry.  However, the administrative
complexity of this approach may outweigh
the benefits.  We seek comment on this approach and on other
options, such as requiring that
avoided costs be allocated proportionately across all services so
that there would be a uniform
discount percentage off of the retail rate of each service.
     183.  While most states have taken no action in this area, a
few states have considered
these issues.  California recently established interim wholesale
rates based on identified costs
attributable to retailing functions.  Based on the costs,
California required Pacific Bell to offer a
17 percent discount below retail business rates and a 10 percent
discount below its retail
residential rates.  It also required GTE to set wholesale rates
12 percent below its retail business
rates and 7 percent below its residential rates.  In Illinois,
Ameritech has filed wholesale tariffs
with rates that are approximately 6 percent below undiscounted
residential retail rates and 10
percent below undiscounted business retail rates.  These tariffs
are in effect, but are subject to
revision in a tariff proceeding pending before the Illinois
Commerce Commission.  Illinois
commission staff have recommended that wholesale prices be set on
the basis of retail rates less
a measure of net avoided costs.  The measure of avoided costs
would include the net total
assigned costs (TSLRIC plus an allocation of joint costs) of the
avoided functions and a pro rata
share of the contribution in existing retail rates.  We seek
comment on whether any of these
approaches by the states are consistent with the fundamental
objectives of the 1996 Act, and
which, if any, might be useful in setting a national policy.  We
also invite comments discussing
the effect of any regulations we adopt on agreements that have
already been negotiated or
decisions that have already been made by the states.
     (3)   Relationship to Other Pricing Standards
     184.  We seek comment on the relationship between rates for
unbundled network
elements and rates for wholesale or retail service offerings.
Some states have adopted rules
requiring that the sum of the rates for unbundled network
elements be no greater than the retail
service rate.  The Illinois Commerce Commission calls this the
"imputation rule."  Proponents
of an imputation rule argue that it prevents anticompetitive
price squeezes by incumbent LECs,
which may set unbundled element prices too high in order to
discourage new entrants from
purchasing unbundled elements instead of purchasing and reselling
the bundled service.
     185.    It may be difficult to comply with an imputation
rule, however, if rates for retail
services are below cost, due to implicit, non-competitively
neutral, intrastate subsidy flows.
For example, assume the cost of basic residential local exchange
service is $25, including a $20
cost for the loop element and a $5 cost for the "port" element,
and the retail rate for such service
(including the federal SLC) is $10.  In such a case, application
of the imputation rule would
require either that the incumbent LEC offer unbundled network
elements to its competitors at
prices less than cost, or that the retail rate be increased to at
least $25.
     186.  Certain states, including the New York Public Service
Commission, have not found
it necessary to adopt an imputation rule.  When the incumbent LEC
sells retail services at prices
that are less than cost, it may be that it recovers the
difference in other state retail service rates
and in interexchange access charges.  For example, in the example
cited above, the customer
may pay 12 cents per minute for intrastate toll traffic that
costs only 2 cents per minute to
provide, and may generate long-distance traffic for which the
incumbent LEC receives access
charges of 3 cents per minute even though it costs only 1 cent
per minute to provide such
access.  Under these circumstances, it could be argued that no
imputation rule is needed to
protect new entrants because, as a matter of market economics or
legal obligations, new entrants
purchasing unbundled elements priced at cost would be providing
all of these services, and thus
could collect the same relatively overpriced revenues for toll
service, interstate access, vertical
features, and other offerings to make up for the underpricing of
basic residential local exchange
service.  By contrast, an entrant that merely resells a bundled
retail service purchased at
wholesale rates, would not receive the access revenues.  There
are at least two possible
additional objections to an imputation rule when it requires that
unbundled elements be priced
below cost.  First, the unbundled elements could be used to
provide services that compete with
LEC retail services that are the source of the subsidy.  Second,
if unbundled elements were
priced at less than cost, then efficient facility-based entry
would be deterred, as new entrants
purchase unbundled network elements at below cost rather than
constructing their own facilities.
We seek comment on whether it would advance the pro-competitive
goals of the 1996 Act for
all states to follow an imputation rule, and on the potential
pitfalls of such a rule.
     187.  One action a state could take to address any problems
created by adopting an
imputation rule when retail rates are below cost would be to
restructure its retail rates to
eliminate non-competitively neutral, implicit subsidy flows.
This restructure could involve either
making subsidy flows explicit and competitively neutral, reducing
the level of such flows, or a
combination.  For example, the Illinois Commerce Commission,
before enacting an imputation
rule, divided the state into three access areas with separate
rates in each area.  It then
restructured rates, so that retail rates in each access area are,
on average, above TSLRIC.  Are
such changes required pursuant to section 254(f)?  We seek
comment on the relative
advantages and detriments of this and other alternatives as
either federal policies or policies that
individual states could adopt.
     188.  We note that, to the extent federal implicit universal
service subsidies contribute to
any problems created by adopting an imputation rule when retail
rates are below cost, they will
be addressed in the federal-state joint board review of universal
service requirements being
conducted pursuant to section 254.  We further note that at least
one incumbent LEC has
suggested in another proceeding that the Commission consider
commencing a proceeding to
determine whether it would be appropriate to enter a preemption
order requiring that rates for
local service exceed the cost of providing that service.  We seek
comment on these issues.
We also invite comment on whether some interim rules might be
appropriate to address this
problem before the federal-state joint board established pursuant
to section 254 acts, which could
be up to nine months after we issue an order in this proceeding.
We also solicit comment on
any other rules that should be adopted concerning the
relationship between services or elements
that are necessary to promote the goals of the Act.
     4.    Duty to Provide Public Notice of Technical Changes
     189.  Section 251(c)(5) of the 1996 Act requires incumbent
LECs to "provide reasonable
public notice of changes in the information necessary for the
transmission and routing of
services using that local exchange carrier's facilities or
networks, as well as of any other changes
that would affect the interoperability of those facilities and
networks."  We tentatively
conclude that (1) "information necessary for transmission and
routing" should be defined as any
information in the LEC's possession that affects interconnectors'
performance or ability to
provide services; (2) "services" should include both
telecommunications services and information
services as defined in sections 3(46) and 3(20), respectively, of
the 1934 Act, as amended; and
(3) "interoperability" should be defined as the ability of two or
more facilities, or networks, to be
connected, to exchange information, and to use the information
that has been exchanged.  We
request comment on what changes should trigger the public notice
requirement and on the above
tentative conclusions.
      190.  We note that public notice is critical to the uniform
implementation of network
disclosure, particularly for entities operating networks in
numerous locations across a variety of
states.  We tentatively conclude that incumbent LECs should be
required to disclose all
information relating to network design and technical standards,
and information concerning
changes to the network that affect interconnection.  We further
tentatively conclude that the
incumbent LEC, at a minimum, must provide the following specific
information: (1) date
changes are to occur;  (2) location at which changes are to
occur;  (3) type of changes;  and (4)
potential impact of changes.  We believe that these proposed
categories represent the minimum
information that a potential competitor would need in order to
achieve and maintain efficient
interconnection.
      191.  In addition, we request comment on how public notice
should be provided.  We
tentatively conclude that full disclosure of the required
technical information should be provided
through industry forums (e.g., the Network Operations Forum (NOF)
or Interconnection Carrier
Compatibility Forum (ICCF)) or in industry publications.  This
approach would build on a
voluntary practice that now exists in the industry and would
result in broad availability of the
information.  We seek comment on this tentative conclusion.  We
further seek comment as to
whether incumbent LECs should be required to file with the
Commission a reference to this
technical information and where it can be located (e.g., an
Internet address).
      192.  We also tentatively conclude that incumbent LECs
should be required to: (1)
publicly disclose the information within a "reasonable" time in
advance of implementation; and
(2) make the information available within a "reasonable" time if
responding to an individual
request.  We seek comment on what constitutes a reasonable time
in each of these situations,
and on whether the Commission should adopt a timetable for
disclosing technical information
comparable to the disclosure timetable that we adopted in the
Computer III proceeding.  In
Phase II of that proceeding, the Commission required AT&T and the
BOCs to disclose
information about network changes or new network services that
affect the interconnection of
enhanced services with the network at two points in time.  First,
carriers were required to
disclose such information at the "make/buy" point -- that is,
when the carrier decides to make
itself, or to procure from an unaffiliated entity, any product
the design of which affects or relies
on the network interface.  Second, carriers were required to
release publicly all technical
information at least twelve months prior to the introduction of a
new service or network change
that would affect enhanced service interconnection with the
network.  If a carrier is able to
introduce a new service between six and twelve months of the
make/buy point, public disclosure
was permitted at the make/buy point, but in no event could the
carrier introduce the service
earlier than six months after the public disclosure.  We seek
comment as to whether the
Commission should adopt a comparable timetable for the section
251(c)(5) network disclosure
requirements and how the timetable should be implemented in this
context.
     193.  We seek comment on the relationship between sections
273(c)(1) and (c)(4), which
detail BOCs' disclosure requirements "to interconnecting carriers
. . . on the planned deployment
of telecommunications equipment," and section 251(c)(5), which
addresses disclosure
requirements for all incumbent LECs.  In addition, we seek
comment on what enforcement
mechanism, if any, should be employed to ensure compliance with
the section 251(c)(5) public
notice requirement and how we might reconcile the related
obligations under sections 251(a),
251(c)(5) and 256 to make them simple to administer.
     194.  We seek comment on the extent to which safeguards may
be necessary to ensure
that information regarding network security, national security
and proprietary interests of LECs,
manufacturers and others are not compromised, and what those
safeguards should be.
C.   Obligations Imposed on "Local Exchange Carriers" by Section
251(b)
     195.  Section 251(b) imposes certain specified obligations
on all "local exchange
carriers."  "Local exchange carrier" is defined in section 3(26)
as "any person that is engaged in
the provision of telephone exchange service or exchange access."
Section 3(26) excludes from
the definition persons "engaged in the provision of a commercial
mobile service under section
332(c), except to the extent that the Commission finds that such
service should be included in
the definition of such term."  We seek comment on whether, and to
what extent, CMRS
providers should be classified as LECs and the criteria, such as
wireless local loop competition
in the LEC's service area by the CMRS provider, that we should
use to make such a
determination.  We seek comment on whether and how a Commission
determination that
CMRS providers be granted flexibility to provide fixed wireless
local loop service should affect
the determination of whether CMRS providers should be included in
the definition of local
exchange carrier.  We also seek comment on whether we may
classify a CMRS provider as a
LEC for certain purposes but not for others.  For example, could
we treat a CMRS provider as a
LEC for purposes of providing resale but not for providing number
portability?  We also request
that commenters discuss whether we may classify some classes of
CMRS providers as LECs, but
not others, such as those that are not competing with LECs.  For
example, in considering
whether to classify certain CMRS providers as LECs, should we
distinguish between CMRS
providers that offer cellular service from those that offer only
paging services?
     1.   Resale
     196.  Section 251(b)(1) imposes a duty on all LECs "not to
prohibit, and not to impose
unreasonable or discriminatory conditions or limitations on, the
resale of its telecommunications
services."  New carriers can use resale of other LECs' services
to provide service in a
geographic area and such resale opportunities facilitate
beneficial forms of competition.
     197.  We seek comment on what types of restrictions on
resale of telecommunications
services would be "unreasonable" under this provision.  We
believe that few, if any, conditions
or limitations should be permitted because such restrictions
generally are inconsistent with the
pro-competitive thrust of the Act and would likely be evidence of
the exercise of market power.
We seek comment on this position.  We also seek comment on what
standards we should adopt,
if any, to determine whether a resale restriction should be
permitted.  Further, we seek comment
on whether any restriction on resale should be presumed to be
unreasonable absent an
affirmative showing that the restriction is reasonable, and if
so, how could such a showing be
made.  Finally, commenters should address whether any of the
issues discussed above with
respect to resale by incumbent LECs as required under section
251(c)(4) should be applied to
other LECs pursuant to section 251(b)(1).
     2.   Number Portability
     198.  Section 251(b)(2) imposes a duty on all LECs "to
provide, to the extent technically
feasible, number portability in accordance with the requirements
prescribed by the
Commission."  This provision reflects Congress's recognition that
pro-competitive policies
must necessarily address the consumer's preferences and
circumstances in the new competitive
environment.  By requiring that customers be able to switch local
service providers without
changing their telephone number, Congress seeks to lower barriers
to entry and promote
competition in the local exchange market.  Section 3(30) of the
1996 Act defines number
portability as "the ability of users of telecommunications
services to retain, at the same location,
existing telecommunications numbers without impairment of
quality, reliability, or convenience
when switching from one telecommunications carrier to another."
Section 251(e)(2) of the
1996 Act mandates that the cost of number portability "be borne
by all telecommunications
carriers on a competitively neutral basis as determined by the
Commission."  This requirement
helps to ensure that no single category of telecommunications
carriers will be disadvantaged
competitively by bearing all or substantially all of the costs of
number portability, and will help
enhance fair and efficient local exchange competition.
     199.  On July 13, 1995, the Commission adopted a Notice of
Proposed Rulemaking in
CC Docket No. 95-116 seeking comment on a wide variety of
technical and policy issues
concerning number portability.  On March 14, 1996, the Common
Carrier Bureau issued a
Public Notice in that docket seeking comment on how passage of
the 1996 Act may affect the
issues raised in the Number Portability NPRM.  Accordingly, in an
effort to adopt number
portability rules expeditiously, we will address number
portability issues raised by the 1996 Act
in our ongoing proceeding on number portability.  That proceeding
will specifically address,
inter alia, the deployment schedule that incumbent LECs must
follow for providing number
portability, the manner in which it can be provided, and the
recovery of number portability costs.
     200.  Since our July NPRM, a number of states have taken
significant steps to implement
service provider number portability.  Washington state completed
a number portability trial using
the Local Area Number Portability (LANP) method in December,
1995, and New York is
currently conducting a number portability trial in Manhattan
using the Carrier Portability Code
(CPC) method.  Several states have established task forces with
industry participants to
investigate the development and implementation of long-term
number portability methods.
In addition, the State commissions of Illinois, Colorado, New
York, and Georgia have adopted
the recommendations of their staffs and task forces to implement
AT&T's Location Routing
Number (LRN).  Other states, such as Indiana, Michigan, Ohio, and
Wisconsin, have selected,
or are about to select, LRN without first establishing task
forces.  Switch vendors have indicated
that the software required to support LRN generally will be
available in the second quarter of
1997.  Consequently, Illinois plans to deploy LRN in the Chicago
LATA in the third quarter of
1997, and Georgia has ordered implementation of LRN as soon as it
becomes fully available.
Ohio plans to have implemented a database number portability
method by October, 1997.
     201.  We note that while several states have taken action
toward implementation of
service provider portability, no long-term number portability
solutions are in use today, and
approximately 27 states have yet to address issues related to
long-term number portability.  By
enacting section 251(b)(2) of the 1996 Act, Congress has stated
that consumers should be able to
change local telephone companies without changing their phone
numbers, and that this capability
is critical to the development of local exchange competition.
Although there are methods of
providing number portability today, these mechanisms generally
are considered less efficient and
less pro-competitive than the long-term solutions now being
developed.  For example, existing
methods rely on the incumbent LEC network, generally do not
support all current vertical
services, and are wasteful of numbering resources.  Accordingly,
we intend to take expeditious
action on number portability issues.
     3.   Dialing Parity
     202.   Section 251(b)(3) of the 1996 Act requires LECs "to
provide dialing parity to
competing providers of telephone exchange service and telephone
toll service."  Under section
3(15) of the 1934 Act, as amended, "dialing parity" means:
     that a person that is not an affiliate of a local exchange
carrier is able to provide
     telecommunications services in such a manner that customers
have the ability to
     route automatically, without the use of any access code,
their telecommunications
     to the telecommunications services provider of the
customer's designation from
     among 2 or more telecommunications services providers
(including such local
     exchange carrier).
This dialing parity requirement will foster local exchange, long
distance, and international
competition by ensuring that each customer has the freedom to
choose among different carriers
for different services without the burden of dialing additional
access codes or personal
identification numbers.
     203.  It is our understanding that some form of intraLATA
toll dialing parity is available
or has been ordered in eighteen states.  In the thirty-two states
where dialing parity has not
been required, competition in the intraLATA toll market generally
has been permitted only with
the use of access codes, which require customers to dial a five-
or seven-digit prefix before
dialing the called party's telephone number.  Under the 1996 Act,
LECs are precluded from
relying upon access codes as a means of providing dialing parity
to competitive
telecommunications providers.  Thus, when the 1996 Act became
law, "dialing parity" did not
exist in most states and, where some form of dialing parity had
been required, implementation
requirements and methodologies varied across the states.
     204.  On April 4, 1994, the Commission adopted a Notice of
Proposed Rulemaking that
sought comment on a variety of issues related to the
administration of the North American
Numbering Plan (NANP), including whether to impose dialing parity
requirements on LECs
for interstate, intraLATA toll traffic.  In a subsequent Order,
adopted July 13, 1995, the
Commission deferred consideration of the dialing parity issue.
     205.  Comments in response to the NANP NPRM as to whether
LECs should be required
to implement dialing parity have become moot in light of the
mandatory dialing parity
provisions in section 251(b)(3) of the 1996 Act.  In addition,
because the NANP NPRM proposed
requiring dialing parity solely for interstate, intraLATA toll
traffic, comments received in
response to that notice do not address all of the section
251(b)(3) dialing parity requirements that
apply to all interstate and intrastate telephone exchange local
calling, and telephone toll services.
We address the dialing parity issue anew in this Notice in light
of the broader dialing parity
directives contained in the 1996 Act.  We ask parties to file in
this docket those portions of any
comments filed in response to the NANP NPRM that address
particular methodologies for
implementing intraLATA toll dialing parity and that are relevant
to our consideration of the
dialing parity requirements in the 1996 Act.
     206.  Section 251(b)(3) makes no distinction among
international, interstate and intrastate
traffic for purposes of the dialing parity provisions.  Based on
the absence of any such
distinctions in defining the scope of the dialing parity
requirements, we tentatively conclude that
section 251(b)(3) creates a duty to provide dialing parity with
respect to all telecommunications
services that require dialing to route a call, and encompasses
international as well as interstate
and intrastate, local and toll services.  We believe that this
interpretation is consistent with the
statutory definition of dialing parity and would open the local
and long distance markets to the
greatest number of competitive telecommunications services
providers.  We seek comment on
this tentative conclusion.
     207.  The statutory definition of dialing parity provides
that the customer must have the
ability to choose "from among 2 or more telecommunications
services providers (including such
local exchange carrier)."  LECs are precluded from relying on
access codes as a means of
providing dialing parity to competitive service providers.  The
Act, however, does not specify
what methods should be used to implement dialing parity.  We
believe that presubscription
represents the most feasible method of achieving dialing parity
in long distance markets
consistent with the definition of dialing parity in section 3(15)
of the 1996 Act.  In this
context, "presubscription" refers to the process by which a
customer preselects a carrier, to
which all of a particular category or categories of calls on the
customer's line will be routed
automatically.
     208.  Presubscription to a carrier other than the customer's
local exchange carrier has not
been available for interstate, intraLATA toll calls nor has it
been available in most states for
intrastate, intraLATA toll calls.  Instead, BOCs automatically
carry these calls rather than
routing them to a presubscribed carrier of the customer's choice.
If the state from which the
customer is calling has authorized competition, but has not
ordered presubscription in the
intraLATA toll market, a customer wishing to route an intraLATA
call to an alternative carrier
typically must dial the carrier access code of the alternative
carrier.
     209.  We seek comment on specific alternative methods for
implementing local and toll
dialing parity, including various forms of presubscription, in
the interstate and intrastate long
distance and international markets, that are consistent with the
statutory requirements set forth in
the 1996 Act.  Specifically, we seek information and comment on
the standards, if any, that have
been developed to address or define local or toll dialing parity,
the consistency of those
standards with the statutory definition of dialing parity set
forth in the 1996 Act, and the extent
to which there is a need for the development of further
standards.
     210.  We note that there is substantial variation in the
intraLATA toll dialing parity
requirements and implementation methodologies that individual
states have adopted.  For
example, some states have adopted a presubscription methodology
that allows a customer to
choose between the incumbent LEC and any interexchange carrier
that is authorized in that state
to carry the customer's intrastate, intraLATA toll calls.  Other
states have adopted a
presubscription methodology that allows the customer a choice
only between the incumbent LEC
and the same interexchange carrier that the customer is currently
presubscribed to for interLATA
long-distance calling.  A "multi-PIC" or "smart-PIC"
presubscription methodology, which
would enable customers to presubscribe to multiple carriers for
various categories of long-
distance calling, also is being considered in some states.  We
seek comment on whether any of
the presubscription methods adopted by the states could be
implemented in national dialing
parity standards consistent with the requirements of the 1996
Act.  We also seek comment as to
the categories of long distance traffic (e.g., intrastate,
interstate, and international traffic) for
which a customer should be entitled to choose presubscribed
carriers, and whether a uniform,
nationwide methodology is necessary.  In the absence of uniform,
federal rules, we ask
commenters, and state commissions in particular, to address the
difficulties state commissions
might experience in implementing the dialing parity requirements
of the 1996 Act.  Finally, we
seek comment on what Commission action, if any, is necessary to
implement dialing parity for
international calls.
     211.  We tentatively conclude that, pursuant to section
251(b)(3), a LEC is required to
permit telephone exchange service customers within a defined
local calling area to dial the same
number of digits to make a local telephone call, notwithstanding
the identity of a customer's or
the called party's local telephone service provider.  We believe
that this interpretation of the
dialing parity requirement as applied to the provision of
telephone exchange service would best
facilitate the introduction of competition in local markets by
ensuring that customers of
competitive service providers are not required to dial additional
access codes or personal
identification numbers in order to make local telephone calls.
We seek comment on this
tentative conclusion and seek information as to how this local
dialing parity requirement should
be implemented.
     212.  For most LECs, the 1996 Act provides no timetable for
implementing dialing
parity.  Section 271(e)(2)(A) requires BOCs, however, to provide
intraLATA toll dialing parity
in a state "coincident with" its exercise of authority to provide
interLATA services in that state,
or three years from the date of enactment of the 1996 Act,
whichever is earlier.  Section
271(e)(2)(B) limits the ability of states to impose dialing
parity requirements on a BOC prior to
the earlier of those two dates.  We seek comment on what
implementation schedule should be
adopted for dialing parity obligations for all LECs.
     213.  The 1996 Act does not require that procedures be
established to permit consumers
to choose among competitive telecommunications providers (e.g.,
through balloting).  We seek
comment as to whether the Commission should require LECs to
notify consumers about carrier
selection procedures or impose any additional consumer education
requirements.  Finally, we
seek comment on an alternative proposal that would make
competitive telecommunications
providers responsible for notifying customers about carrier
choices and selection procedures
through their own marketing efforts.
     214.  In addition to the duty to provide dialing parity,
Section 251(b)(3) also imposes the
duty on all LECs to provide competing telecommunications services
providers with
"nondiscriminatory access to telephone numbers, operator
services, directory assistance, and
directory listing, with no unreasonable dialing delays."  As a
general matter, we tentatively
conclude that "nondiscriminatory access" means the same access
that the LEC receives with
respect to such services.  We seek comment on this tentative
conclusion.  We also seek
comment as to how the Commission should implement the
nondiscriminatory access provisions
that are contained in section 251(b)(3) as is discussed in more
detail below.
     215.  More specifically, we interpret "nondiscriminatory
access to telephone numbers" to
mean that competing telecommunications providers must be provided
access to telephone
numbers in the same manner that such numbers are provided to
incumbent LECs.  Currently, the
largest local exchange carrier in each area code serves as the
central office (CO) code
administrator, the entity that is responsible for the assignment
and administration of telephone
numbers.  In 1995, the Commission ordered that the functions
associated with the assignment
and administration of local telephone numbers be centralized and
transferred from the largest
LECs to a newly created NANP Administrator.  New section
251(e)(1) directs the Commission
to create or designate one or more impartial entities to
administer telecommunications numbering
and to make such numbers available on an equitable basis.  In
light of the directives contained
in the NANP Order and section 251(e)(1), we seek comment as to
what, if any, additional
Commission action is necessary or desirable to ensure
nondiscriminatory access to telephone
numbers consistent with the requirements of section 251(b)(3).
     216.  We interpret "nondiscriminatory access to . . .
operator services" by LECs to mean,
at least in part, that a telephone service customer, regardless
of the identity of his local telephone
service provider, must be able to connect to a local operator by
dialing "0" or "0" plus the
desired telephone number.  For purposes of this provision, we
tentatively define "operator
services" as any automatic or live assistance to a consumer to
arrange for billing or completion
or both of a telephone call through a method other than:  (1)
automatic completion with billing
to the telephone from which the call originated, or (2)
completion through an access code by the
consumer, with billing of an account previously established with
the telecommunications service
provider by the consumer.  We seek comment on this proposed
definition and on what, if any,
Commission action is necessary to implement the nondiscriminatory
access requirements for
operator services under section 251(b)(3). We ask commenters to
address whether the duty
imposed on LECs to provide nondiscriminatory access to operator
services includes the duty to
resell operator services to non-facilities-based competing
providers or facilities-based competing
providers.
     217.  We further interpret "nondiscriminatory access to . .
. directory assistance and
directory listing" by LECs to mean that all telecommunications
services providers' customers
must be able to access each LEC's directory assistance service
and obtain a directory listing in
the same manner, notwithstanding (1) the identity of a requesting
customer's local telephone
service provider, or (2) the identity of the telephone service
provider for a customer whose
directory listing is requested through directory assistance.  We
seek comment on this
interpretation and on what, if any, Commission action is
necessary or desirable to implement
nondiscriminatory access to directory assistance and directory
listing as required by section
251(b)(3).  We also seek comment on whether customers of
competing telecommunications
providers can access directory assistance by dialing 411 or
555-1212, or whether an alternative
dialing arrangement is needed in order to make directory
assistance databases accessible to all
providers.  We ask commenters to address whether the duty imposed
on LECs to provide
nondiscriminatory access to directory assistance includes the
duty to resell 411 or local 555-1212
directory assistance services to non-facilities-based competing
providers or to facilities-based
competing providers.
     218.  Section 251(b)(3) prohibits "unreasonable dialing
delays."  We seek comment on
the appropriate definition of the term "dialing delay" and on
appropriate methods for measuring
and recording that delay.  For example, the term "dialing delay"
might refer to the period that
begins when the caller completes dialing a call and ends when a
ringing tone or busy signal is
heard on the line.  Alternatively, "dialing delay" might refer to
the period beginning when the
caller completes dialing a call and ending when the call is
delivered by the incumbent LEC to a
competing service provider.  Another relevant measure might
include the period beginning when
a customer goes off hook and ending when a dialtone is heard on
the line.  We recognize the
confusion that has centered around the context-specific use of
the terms post-dial delay, access
time, call set-up time, and dialtone delay.  Accordingly, we ask
interested parties to define
clearly the time being measured rather than rely upon a
definition of a term that may have been
used in particular proceedings.  Finally, we ask commenters to
identify a specific period that
would constitute an "unreasonable" dialing delay.
     219.  The 1996 Act does not specify how LECs would recover
costs associated with
providing dialing parity to competing providers.  We seek comment
on what, if any, standard
should be used for arbitration to determine the dialing parity
implementation costs that LECs
should be permitted to recover, and how those costs should be
recovered.
     4.   Access to Rights-of-Way
     220.  Section 251(b)(4) imposes upon LECs the "duty to
afford access to the poles, ducts,
conduits, and rights-of-way of such carrier to competing
providers of telecommunications
services on rates, terms, and conditions that are consistent with
section 224."  Section 224,
which predates the enactment of the 1996 Act, states that the
Commission "shall regulate the
rates, terms, and conditions for pole attachments to provide that
such rates, terms, and conditions
are just and reasonable, and shall adopt procedures necessary and
appropriate to hear and resolve
complaints concerning such rates, terms, and conditions."  Thus,
under section 224, if an entity
provided access to poles, ducts, conduits, and rights-of-way, it
had to do so on rates, terms, and
conditions that were just and reasonable, but there was no
specific requirement to provide access
to poles, ducts, conduits and rights-of-way.  Section 251(b)(4)
establishes an additional
requirement for LECs to provide access to poles, ducts, conduits,
and rights-of-way, consistent
with the requirements in section 224.  Moreover, amendments to
section 224(a)(1) state
expressly that LECs are subject to the requirements of section
224.  Thus, section 251(a)(4), in
conjunction with section 224, requires LECs to provide access to
poles, ducts, conduits, and
rights-of-way on just and reasonable rates, terms, and
conditions.  This requirement is vital to
the development of local competition, because it ensures that
competitive providers can obtain
access to facilities necessary to offer service.
     221.  Section 703 of the 1996 Act, added and amended several
provisions of section 224
of the 1934 Act.  Specifically, section 703 amended sections
224(a)(1), (a)(4), (c)(1) and
(c)(2)(B), and added sections 224(a)(5), (d)(3), (e), (f), (g),
(h) and (i).  We will adopt rules
implementing several of these provisions in one or more separate
proceedings.  In this
proceeding, however, we believe that we should address issues
raised by new sections 224 (f)
and (h), to ensure that we have an opportunity to seek comment
and establish any rules
necessary to implement section 251(b)(4) within the six month
period established by the statute.
     222.  Section 224(f) provides:
          (1)  A utility shall provide a cable television system
or any
          telecommunications carrier with nondiscriminatory
access to any
          pole, duct, conduit, or right-of-way owned or
controlled by it.
          (2)  Notwithstanding paragraph (1), a utility providing
electric
          service may deny a cable television system or any
          telecommunications carrier access to its poles, ducts,
conduits, or
          rights-of-way, on a non-discriminatory basis where
there is
          insufficient capacity and for reasons of safety,
reliability and
          generally applicable engineering purposes.
We seek comment as to the meaning of "nondiscriminatory access"
with respect to this
provision.  For example, to what extent must a LEC provide access
to poles, ducts, conduits, and
rights-of-way on similar terms to all requesting
telecommunications carriers?  Must those terms
be the same as the carrier applies to itself or an affiliate for
similar uses?  Are there any
legitimate bases for distinguishing conditions of access?  We
seek comment on specific reasons
of safety, reliability, and engineering purposes, if any, upon
which access could be denied
consistent with sections 224(f)(1) and 251(b)(4).
     223.  We seek comment on specific standards under section
224(f)(2) for determining
when a utility has "insufficient capacity" to permit access.
Likewise, we seek comment as to the
conditions under which access may be denied for "reasons of
safety, reliability and generally
applicable engineering purposes."  For example, should we
establish regulations that require a
certain minimum or quantifiable threat to reliability before a
utility may deny access under
section 224(f)(2)?  Should we establish regulations that
expressly impose on utilities the burden
of proving that they are justified in denying access pursuant to
section 224(f)(2)?  May we, and
should we, establish regulations to ensure that a utility fairly
and reasonably allocates capacity?
     224.  Section 224(h) provides that whenever "the owner of a
pole, duct, conduit, or right-
of-way intends to modify or alter such pole, duct, conduit, or
right-of-way," the owner must
provide written notification of such action "to any entity that
has obtained an attachment to such
conduit or right-of-way so that such entity may have a reasonable
opportunity to add to or
modify its existing attachment.  An entity that adds to or
modifies its existing attachment after
receiving such notification shall bear a proportionate share of
the costs incurred by the owner in
making such pole, duct, conduit, or right-of-way accessible."
     225.  We seek comment on whether we should establish
requirements regarding the
manner and timing of the notice that must be given under this
provision to ensure that the
recipient has a "reasonable opportunity" to add to or modify its
attachment.  In addition, we seek
comment on whether to establish rules to determine the
"proportionate share" of the costs to be
borne by each entity, and if so, how such a determination should
be made.  We also seek
comment on whether any payment of costs should be offset by the
potential increase in revenues
to the owner.  For example, if the owner of a pole modifies the
pole so as to permit additional
attachments, for which it can collect additional revenues, should
such potential revenues offset
the costs borne by the entities that already have access to the
pole?  We also seek comment on
whether we should impose any limitations on an owner's right to
modify a facility and then
collect a proportionate share of the costs of such modification.
For example, should we establish
rules that limit owners from making unnecessary or unduly
burdensome modifications or
specifications?
     5.   Reciprocal Compensation for Transport and Termination
of Traffic
          a.   Statutory Language
     226.  Section 251(b)(5) provides that each LEC has the duty
to "establish reciprocal
compensation arrangements for the transport and termination of
telecommunications."  Section
252(d)(2) states that, for the purpose of an incumbent LEC's
compliance with section 251(b)(5),
a state commission shall not consider the terms and conditions
for reciprocal compensation to be
just and reasonable unless such terms and conditions both:  (1)
provide for the "mutual and
reciprocal recovery by each carrier of costs associated with the
transport and termination on each
carrier's network facilities of calls that originate on the
network facilities of the other carrier,"
and (2) "determine such costs on the basis of a reasonable
approximation of the additional costs
of terminating such calls."  That subsection further provides
that the foregoing language shall not
be construed "to preclude arrangements that afford the mutual
recovery of costs through the
offsetting of reciprocal obligations, including arrangements that
waive mutual recovery (such as
bill-and-keep arrangements)," or to authorize the Commission or
any state to "engage in any rate
regulation proceeding to establish with particularity the
additional costs of transporting or
terminating calls, or to require carriers to maintain records
with respect to the additional costs of
such calls."  The legislative history notes that "mutual and
reciprocal recovery of costs . . . may
include a range of compensation schemes, such as in-kind exchange
of traffic without cash
payment (known as bill-and-keep arrangements)."  The statutory
duty to establish reciprocal
compensation arrangements for transport and termination furthers
the pro-competitive goals of
the 1996 Act by ensuring that all LECs receive reasonable
compensation for transporting and
terminating the traffic of competing local networks with which
they are interconnected.  It also
furthers competition by ensuring that incumbent LECs, in
particular, do not charge excessive
rates for such transport and termination.  As previously
discussed in Section II.B.2.d.(1), we
believe that the Commission is authorized to promulgate rules to
guide the states in applying
section 252(d).
          b.   State Activity
     227.  While most states have not addressed pricing for
transport and termination of traffic
among local competitors, a number of states have taken such
actions to foster reciprocal
compensation arrangements between incumbent LECs and wireline and
wireless competitors.  In
the states that allow competition for local exchange services,
there are at least three different
systems in place to allow for reciprocal compensation between
competing local networks,
although many of these arrangements are interim pending the
establishment of permanent rules.
Some states have adopted mutual compensation policies with rates
for termination of traffic
subject to tariff regulation by the state commission.  Other
states have required bill and keep
arrangements, at least on an interim basis, such as, the
Washington Utilities and Transportation
Commission.  We discuss bill and keep arrangements in more detail
below, at section II.C.5.f.
Third, a number of states have directed incumbent LECs and
prospective competing carriers to
negotiate arrangements, but have not imposed detailed regulatory
requirements with respect to
those arrangements.
     228.  The Pennsylvania Public Utilities Commission has
created an interim escrow
arrangement to govern mutual compensation for termination of
local calls to allow for the start-
up of local exchange competition until a permanent rate can be
developed.  Each party makes an
initial payment and then continuing monthly payments into an
escrow account.   After the
Pennsylvania commission determines the appropriate rates for
termination of local traffic, the
parties will calculate the amounts owed to each party and the
escrow funds will be distributed
accordingly.  This mechanism allows local competition to commence
immediately, and gives all
parties incentives to conclude the development of a permanent
rate, either through negotiation or
by the Pennsylvania commission.
     229.  Illinois, Maryland and New York have established
different rates for termination of
a competitor's traffic, depending upon whether the traffic is
terminated at the incumbent LEC's
end office or at a tandem switch.  California and Michigan,
however, have established only
one rate that applies to termination of a competitor's traffic
without regard to whether the call is
terminated at an end office or at a tandem switch.
          c.   Definition of Transport and Termination of
Telecommunications
     230.  We seek comment on whether "transport and termination
of telecommunications"
under section 251(b)(5) is limited to certain types of traffic.
The statutory provision appears at
least to encompass telecommunications traffic that originates on
the network of one LEC and
terminates on the network of a competing LEC in the same local
service area as well as traffic
passing between LECs and CMRS providers.  We seek comment on
whether it also encompasses
telecommunications traffic passing between neighboring LECs that
do not compete with one
another.  While the issues here overlap with those in our
discussion, supra, of section 251(c)(2),
the text of the two sections are different and thus commenters
should note that the issues are not
necessarily identical.
     231.  Because section 252(d)(2) is entitled "Charges for
Transport and Termination of
Traffic," it could be interpreted to permit separate charges for
these two components of
reciprocal compensation.  As discussed in the section on pricing
of interconnection and
unbundled network elements, economic theory dictates that
dedicated facilities should be priced
on a flat-rated basis.  We seek comment on whether we should
require that states price
facilities dedicated to an interconnecting carrier, such as the
transport links from one carrier's
switch to the meet point with an interconnecting carrier, on a
flat-rated basis.  We invite
comment on other possible interpretations of the statutory
distinction between "transport" and
"termination" of traffic.
          d.   Rate Levels
     232.  In considering the pricing policies for transport and
termination of traffic, we seek
comment on whether the pricing provisions in Section 252(d)
should be viewed independently,
or whether they should be considered together.  This question
arises particularly with respect to
section 252(d)(1), relating to interconnection and unbundled
elements, and section 252(d)(2),
relating to the transport and termination of traffic.  Because
the statute uses different language
for interconnection and unbundled elements and transport and
termination of traffic, each
standard could be interpreted in a different way based on the
different language used in each
section.  This would require that each incumbent LEC offering be
identified as falling within one
particular category.  For example, if a carrier terminates a call
to one of its customers using
unbundled facilities purchased from an incumbent LEC, the
unbundled standard would apply.  If
a carrier delivers a call to the incumbent LEC for termination to
a customer on the incumbent
LEC's network, then the termination standard would apply.
     233.  In certain instances, however, transport and
termination under reciprocal
compensation may be difficult or impossible to distinguish from
unbundled elements.  For
example, transport between an incumbent LEC's central office and
an interconnector's network
could be considered either of the foregoing.  In such a case, the
use of different pricing rules for
the different categories may create inconsistencies in the
pricing of similar services.  This could
create economic inefficiencies.  We seek comment on whether the
statute permits states to use
identical pricing rules for each category and, if different rules
are used for each, whether it will
be possible to distinguish transport and termination from the
other categories of service.  We
also seek comment on whether, if two different pricing rules
could apply to a particular
situation, we should require that the new entrant be able to
choose between them.
     234.  We seek comment on whether we should establish a
generic pricing methodology
or impose a ceiling to guide the states in setting the charge for
the transport and termination of
traffic, and whether any such generic pricing methodology or
ceiling should be established using
the same principles that might be used to establish any ceiling
for interconnection and unbundled
elements.  We invite parties to suggest any other rules we might
establish to assist states.  We
also seek comment on whether we should mandate a floor for state
pricing of reciprocal
compensation.  The question of whether any floors should be
imposed on the charge for
transport and termination of traffic is complicated by the
additional questions, discussed below,
of whether competing LECs should be required to charge
symmetrical rates, and to what extent
bill and keep arrangements may or should be used.  We seek
comment on these issues.  We also
seek comment on the meaning of section 252(d)(2)(B)(ii), which
prohibits "any rate regulation
proceeding to establish with particularity the additional costs
of transporting or terminating calls"
and any requirement that carriers "maintain records with respect
to the additional costs of such
calls."  We seek comment on whether one or more of the state
policies for mutual
compensation for transport and termination of traffic could serve
as a model for national
policies.  We also seek comment on state policies that the
commenter believes are inconsistent
with the goals of the 1996 Act or that are inadvisable from a
policy perspective.  Parties are also
invited to comment on the possible consequences of requiring new
entrants to negotiate
reciprocal compensation arrangements with incumbents under ground
rules that may vary widely
from state to state.  We also seek comment on whether provisions
to maintain existing
arrangements are necessary under section 251(d)(3).
          e.   Symmetry
     235.  Symmetrical compensation arrangements are those in
which the rate paid by an
incumbent LEC to a competitor for transport and termination of
traffic is the same as the rate
the incumbent LEC charges the competitor for the same service.
We note that incumbent LECs
are not likely to need to purchase significant amounts of
interconnection or unbundled elements
from competitors, except for transport and termination of
traffic.  We therefore consider
symmetrical compensation arrangements as a possible additional
requirement only for transport
and termination of traffic.  We seek comment on whether a rate
symmetry requirement is
consistent with the statutory requirement that rates set by
states for transport and termination of
traffic be based on "costs associated with the transport and
termination on each carrier's network
facilities of calls that originate on the network facilities of
the other carrier," and "a reasonable
approximation of the additional costs of terminating such calls."
     236.  Symmetrical compensation rates based on the incumbent
LEC's rate are
administratively easier to derive and manage than asymmetrical
rates based on the costs of each
of the respective networks.  Setting asymmetric, cost-based rates
might require evaluating the
cost structure of nondominant carriers, which would be complex
and intrusive.  Symmetrical
rates also could satisfy the requirement of section 252(d)(2)
that costs be determined "on the
basis of a reasonable approximation of the additional costs of
terminating such calls," by using
the incumbent LEC's costs and rates for transport and termination
of traffic as a proxy for the
costs incurred by new entrants.  Moreover, symmetrical rates
could reduce an incumbent LEC's
ability to use its bargaining strength to negotiate an
excessively high termination charge that
competitors would pay the incumbent and an excessively low
termination rate that the incumbent
would pay competitors.   Further complicating this issue is that
a competitor may possess a
degree of market power over the incumbent LEC that needs to
terminate a call on the
competitor's network because the decision to place the call lies
with the incumbent's customer
(who may or may not be aware that the call's intended recipient
is on a different network).  The
competitor, therefore, may have an incentive and the ability to
charge high rates to the
incumbent for transport and termination of traffic on its
network.  Finally, symmetrical rates may
give carriers a greater incentive to reduce their costs, because
the rates they can charge for
transport and termination of traffic may not be based directly on
their own costs.
     237.  On the other hand, symmetrical interconnection rates
have certain disadvantages.
Different networks, even those that use similar technologies, may
have different cost
characteristics.  If interconnection rates were fully cost-based,
then instead of setting symmetric
rates, one LEC might pay a competitor different interconnection
rates for transport and
termination than it receives from its competitor.  Further, rate
symmetry in some circumstances
may not resolve existing bargaining power imbalances.  For
instance, a LEC might be able to
use its bargaining power to extract a symmetrical rate higher
than relevant costs, or to require
that new entrants incur a disproportionate share of the costs of
transporting traffic between the
two carriers' central offices.
     238.  In establishing principles to govern state arbitration
of rates for transport and
termination of traffic, as well as state review of BOC statements
of generally available terms and
conditions, there are a number of possible options we could
follow with regard to rate symmetry.
First, we could allow the states to decide whether to require
rate symmetry.  Second, we could
require the states to impose symmetrical rates.  Third, we could
permit states to allow new
entrants to charge termination rates higher than the incumbent
LEC in particular circumstances.
For example, it might be appropriate to permit a new entrant that
offers a premium service with
higher costs to charge a higher rate to the LEC of the customer
originating the call if the
originating LEC can pass on the additional cost to the caller,
who could be informed that the call
carries an additional charge.  We seek comment on these options.
          f.   Bill and Keep Arrangements
     239.  Under bill and keep arrangements, broadly construed,
neither of the interconnecting
networks charges the other network for terminating the traffic
that originated on the other
network, and hence the terminating marginal compensation rate on
a usage basis is zero.
Instead, each network recovers from its own end-users the cost of
both originating traffic
delivered to the other network and terminating traffic received
from the other network.  A bill
and keep approach does not, however, preclude a positive
flat-rated charge for transport of traffic
between carriers' networks.
     240.  As noted earlier, many states have established bill
and keep arrangements on an
interim basis until a tariffed rate can be established.  In other
states, such as Maryland,
Michigan and New York, bill and keep has not been employed and
tariffed rates for the
transport and termination of traffic are already in effect.
Michigan, however, allows carriers to
waive mutual recovery and use bill and keep if traffic from one
network to the other is not more
than five percent greater than traffic flowing in the opposite
direction.  In Florida, after
negotiations between the incumbent and two new entrants failed,
the Florida Public Service
Commission determined that, for the termination of local traffic,
competing LECs will
compensate each other by mutual traffic exchange.  Any party that
believes that traffic is
imbalanced to the point that it is not receiving benefits
equivalent to those it is providing
through this form of bill and keep arrangement may request that
the compensation mechanism be
changed.  Other states are considering approaches similar to that
of Florida.  The Texas
Public Utilities Commission has proposed a rule that would
require competitive LECs to
negotiate mutual compensation rates.  If negotiations fail, there
would be a nine-month bill and
keep period to allow the Texas commission time to establish
interconnection rates, terms, and
conditions.  The Public Utilities Commission of Ohio staff has
proposed using bill and keep
on an interim basis for one year.  While that proposal is under
consideration, Ameritech and
Time Warner are using bill and keep in their interim
interconnection arrangement until the end
of December 1997.
     241.  Proponents of bill and keep arrangements argue that
such arrangements are
advantageous in many circumstances.  Because no calculation of
costs, nor any metering of
usage, is necessary under a bill and keep regime, such
arrangements may be more quickly
established and easily administered.  Further, some networks may
lack the ability to measure the
volume of exchange traffic, and adding that ability would be very
costly if done outside of
normal network upgrades.  Bill and keep arrangements are
efficient if the incremental cost to
each network of terminating traffic originated on the other
network is zero.  When the
incremental costs of termination for each carrier are near zero
(as may be the case for off-peak
usage), bill and keep arrangements yield results similar to those
of arrangements in which mutual
compensation rates are set based on the incremental costs of
shared network facilities.  Finally,
even if incremental termination costs are not zero, bill and keep
may impose a small loss in
economic efficiency if the demand for calls is inelastic with
respect to termination charges.
Demand might be inelastic either because termination charges are
not passed through to
customers, or, as is the case with CMRS, the termination charges
are a small part of the cost of
service.  Bill and keep may be efficient when the efficiency loss
is small and the administrative
cost of termination charges is large.
     242.  If at least one carrier has a non-zero incremental
termination cost and the elasticity
of demand is significant, then bill and keep may create
significant efficiency losses by not giving
carriers (and their customers) the correct price signals to use
network resources efficiently.  If
there is a positive cost to terminating a call on a competitor's
network, but the originating carrier
is not charged for sending the call, the originating carrier will
have inefficient incentives to
compete for customers that initiate large volumes of traffic but
receive few calls.  Similarly, if
there is no charge to the consumer for placing a call that
imposes a positive cost on the network
of the party called, consumers are likely to initiate an
excessive number of calls.
     243.  As noted earlier, section 252(d)(2)(B)(i) provides
that the standards in section
252(d)(2)(A) restricting what may be considered "just and
reasonable" terms and conditions for
reciprocal compensation "shall not be construed to preclude
arrangements that afford the mutual
recovery of costs through the offsetting of reciprocal
obligations, including arrangements that
waive mutual recovery (such as bill and keep arrangements)."
Some parties contend that this
section merely authorizes bill and keep arrangements in voluntary
negotiated arrangements, but
that the Commission and the states are prohibited from imposing
bill and keep.  The grounds
on which a state may reject a negotiated arrangement, however,
are limited in Section 252(e)(2)
to those that discriminate against a non-party telecommunications
carrier or are inconsistent with
the public interest, convenience, and necessity.  Therefore, the
language in 252(d)(2)(B)(i)
arguably is not necessary to authorize the states to approve bill
and keep in negotiated
arrangements, and may be intended to authorize the states to
impose bill and keep arrangements
in arbitration.  We seek comment on whether section
252(d)(2)(B)(i) authorizes states or the
Commission to impose bill and keep arrangements.  If it does, we
also seek comment on
whether we must or should limit the circumstances in which states
may adopt bill and keep
arrangements.  For example, one approach would find that section
252(d)(2)(B)(i) allows states
to establish bill and keep arrangements only when either of two
conditions are met: (1) the
transport and termination costs of both carriers are roughly
symmetrical and traffic is roughly
balanced in each direction during peak periods; or (2) actual
transport and termination costs are
so low that there is little difference between a cost-based rate
and a zero rate (for example,
during off-peak periods).  When neither of these conditions are
met, bill and keep arrangements
arguably would not provide for "the mutual and reciprocal
recovery by each carrier of costs
associated with the transport and termination on each carrier's
network facilities of calls that
originate on the network facilities of the other carrier," which
would violate the requirement of
section 252(d)(2)(A)(i).  Another possible approach would be to
permit or require states to
adopt a variant of bill and keep, such as that used by Michigan.
In addition, we seek
comment on the meaning of the statutory description of bill and
keep arrangements as
"arrangements that waive mutual recovery."  We seek comment on
the policies that the states
have adopted with respect to bill and keep arrangements.  We also
seek comment on the
historical interconnection arrangements between neighboring
incumbent LECs, which, in many
cases, used a bill and keep approach with respect to compensation
for transport and termination
of telecommunications traffic.  We also seek comment on whether
one or more of these state
policies could be incorporated as models for federal policy.  We
also seek comment on state
policies that the commenter believes are inconsistent with the
goals of the 1996 Act or that are
inadvisable from a policy perspective.
          g.   Other Possible Standards
     244.  There are other ways to establish rate levels or
ceilings for reciprocal compensation
for transport and termination of traffic, including, inter alia,
basing them on existing
arrangements between neighboring incumbent LECs or measured local
service rates (which
provides a quick method for determining an appropriate ceiling),
or establishing a presumptive
uniform per-minute interconnection rate.  We solicit comment on
whether any of these or other
alternatives should be used as the principle for pricing
transport and termination of traffic
between LECs, and how they would be applied.  We also seek
comment on whether it might
be desirable to establish an interim rule (such as bill and keep)
to apply during a limited initial
period while negotiations or arbitration proceedings are ongoing,
and a different rule for states to
use if called upon to establish long-term arbitrated rates.  This
could permit new competitors to
enter the market more quickly, equalize bargaining power between
new entrants and incumbent
LECs, and reduce the incumbent's incentive to stall negotiations.
D.   Duties Imposed on "Telecommunications Carriers" by Section
251(a)
     245.  We first need to identify the entities that qualify as
"telecommunications carriers"
under section 251.  A "telecommunications carrier" is defined in
section 3(44) as "any provider
of telecommunications services, except that such term does not
include aggregators of
telecommunications services (as defined in section 226)."
Section 3(44) further provides 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."
     246.  We believe this definition, by itself, generally
includes local, interexchange, and
international services.  We therefore tentatively conclude that,
to the extent that a carrier is
engaged in providing for a fee local, interexchange, or
international basic services, directly to the
public or to such classes of users as to be effectively available
directly to the public, that carrier
falls within the definition of "telecommunications carrier." We
seek comment on which carriers
are included under this definition, and on whether a provider may
qualify as a
telecommunications carrier for some purposes but not others.  For
example, how does the
provision of an information service, as defined by section
3(a)(41), in addition to an unrelated
telecommunications service, affect the status of a carrier as a
"telecommunications carrier" for
purposes of section 251?
     247.  With respect to the regulatory classification of the
provision of fixed or mobile
satellite service, we already have determined that earth station
and space station licensees
providing domestic and international fixed-satellite
telecommunications services may offer
service on a non-common carrier basis, if they choose.  We have
determined that earth station
operators could elect whether to operate as common carriers or
private carriers.  More
recently, we extended this policy to domestic fixed-satellite
(domsat) space station licensees.
Previously, we required domsat licensees to operate as common
carriers unless the licensee
applied for, and was granted, authority to sell transponders on a
non-common carrier basis.  In
amending this policy, we noted that no transponder sales request
has been opposed in the last
decade.  We also noted that despite the routine approval of these
sales requests, several operators
have chosen to continue to offer space segment capacity on a
common carrier basis.  This
suggests that market forces are sufficient to provide enough
common carrier capacity for
domestic satellite telecommunications services.  We also stated
that separate satellite systems
providing international fixed-satellite services were established
to operate on a non-common
carrier basis, and, thus, were never regulated as common
carriers.  This policy gives
fixed-satellite service operators flexibility to meet their
customers' changing needs without
unnecessary regulatory delay and allows them to remain
competitive in the marketplace.  With
respect to fixed-satellite capacity offered to CMRS providers, we
stated that we will examine an
array of public interest factors in deciding whether such an
offering should be treated as
common carriage consistent with section 332(c)(5).  With respect
to the mobile-satellite
service, we already have determined that we would allow space
station licensees operating in
certain services to choose whether to offer space segment
capacity on a common carrier or non-
common carrier basis.  We tentatively conclude that we should
continue to determine whether
the provision of mobile satellite services is CMRS (and therefore
common carriage) or Private
Mobile Radio Service based on the factors set forth in the CMRS
Second Report and Order.
We also seek comment on whether, and in what respects, this
definition of "telecommunications
carrier" differs from the definition of "common carrier."
     248.  Section 251(a)(1) imposes a duty to "interconnect
directly or indirectly with the
facilities and equipment of other telecommunications carriers."
We seek comment on the
meaning of "directly or indirectly" in the context of section
251(a)(1), as well as any other issues
raised by this subsection.  In this context, we ask commenters to
address whether section 251(a)
is correctly interpreted to allow non-incumbent LECs receiving an
interconnection request from
another carrier to connect directly or indirectly at its
discretion. Section 251(a)(2) of the 1996
Act imposes a duty on each telecommunications carrier "not to
install network features, functions
or capabilities that do not comply with the guidelines or
standards established pursuant to section
255 or 256."  We ask commenters to address how this provision
should be applied to
incumbent and non-incumbent LECs.
     249.  Section 255 requires the development of guidelines to
ensure that
telecommunications equipment and customer premises equipment is
accessible by persons with
disabilities.  Section 256 requires the Commission to coordinate
"network planning among
telecommunications carriers and other providers of
telecommunications services for the efficient
interconnection of public telecommunications networks."  While
the specific guidelines or
standards to be adopted pursuant to section 255 and 256 will be
addressed in one or more
separate proceedings, we request comment here on what action, if
any, the Commission should
take to ensure compliance with the obligations established in
section 251(a)(2), which directs
telecommunications carriers "not to install network features,
functions, or capabilities that do not
comply with the guidelines or standards established pursuant to
section 255 or 256."  What
steps, if any, should the Commission take to make carriers aware
of the standards adopted
pursuant to sections 255 and 256, and of the periodic revisions
to these standards?  How
should the phrase "network features, functions or capabilities"
be defined, and what is meant by
"installing" such network features?
E.   Number Administration
     1.   Selection of a neutral number administrator
     250.  Section 251(e)(1) of the Act requires the Commission
to "create or designate one or
more impartial entities to administer telecommunications
numbering and to make such numbers
available on an equitable basis."  It further gives the
Commission "exclusive jurisdiction over
those portions of the North American Numbering Plan that pertain
to the United States," but
states that "[n]othing in this paragraph shall preclude the
Commission from delegating to state
commissions or other entities all or any portion of such
jurisdiction."
     251.  Additionally, pursuant to the competitive checklist
contained in section
271(c)(2)(B), BOCs desiring to provide in-region interLATA
telecommunications services
must afford, "[u]ntil the date by which telecommunications
numbering administration
guidelines, plans or rules are established, non-discriminatory
access to telephone numbers for
assignment to the other carrier's telephone exchange service
customers . . . [and] [a]fter that
date, [must] compl[y] with such guidelines, plan or rules."
These measures foster
competition by ensuring telecommunications numbering resources
are administered in a fair,
efficient, and orderly manner.
     252.  The Commission has already taken action to designate
an impartial number
administrator in its North American Numbering Plan (NANP)
decision.  In the NANP
Order, the Commission concluded that the functions associated
with NANP administration
would be transferred to a new administrator of the NANP,
unaligned with any particular
segment of the telecommunications industry.  We tentatively
conclude that the NANP Order
satisfies the requirement of section 251(e)(1) that the
Commission designate an impartial
number administrator.  We seek comment on this tentative
conclusion.
     253.  Toll free telephone numbers are not administered by
the North American
Numbering Plan administrator.  Database Service Management, Inc.
(DSMI), which is a
subsidiary of Bellcore, administers toll free numbers.  In its
proceeding addressing toll free
telephone numbers, the Commission sought comment on whether DSMI
should continue to
administer toll free numbers, or whether the NANP administrator
or another neutral entity
should administer toll free numbers.  We will address the issue
of toll free number
administration in the Commission's Toll Free proceeding.
     2.   State role in numbering administration
     254.  Section 251(e)(1) allows the Commission to delegate
any portion of its
jurisdiction over numbering administration to the states.  We
tentatively conclude that the
Commission should retain its authority to set policy with respect
to all facets of numbering
administration, including area code relief issues in order to
ensure the creation of a
nationwide, uniform system of numbering that is essential to the
efficient delivery of
interstate and international telecommunications services and to
the development of the
robustly competitive telecommunications services market.  Prior
to the enactment of the Act,
state commissions implemented new area codes by adopting area
code relief plans, subject to
the guidelines enumerated by the Commission in its Ameritech
Order.
     255.  Area code relief traditionally has come in the form of
an area code split, but
can also take the form of an area code overlay.  In
the Ameritech Order, the Commission concluded that Ameritech's
proposed wireless-only
overlay plan would be unreasonably discriminatory and
anticompetitive and that
administration of numbers:  (1) must seek to facilitate entry
into the communications
marketplace by making numbering resources available on an
efficient, timely basis to
communications services providers; (2) should not unduly favor or
disadvantage any particular
industry segment or group of consumers; and (3) should not unduly
favor one technology
over another.
     256.  In that decision, the Commission also sought to
clarify the authority of the
Commission and the states respectively with respect to numbering
administration.  While the
Commission held that it had broad authority over telephone
numbering issues, the
Commission overturned as dicta prior statements it had made
suggesting that we retained
plenary jurisdiction over numbering issues.  The Commission
acknowledged that state
commissions have legitimate interests in the administration of
numbering; it also noted that
the state commissions are uniquely positioned to understand,
judge and determine how new
area codes can best be implemented in view of local
circumstances.  We believe this
continues to be the case.  We thus tentatively conclude that the
Commission should delegate
matters involving the implementation of new area codes, such as
the determination of area
code boundaries, to the state commissions so long as they act
consistently with our numbering
administration guidelines.  We also tentatively conclude that the
Ameritech Order should
continue to provide guidance to the states regarding how new area
codes can be lawfully
implemented.  We seek comment on these tentative conclusions.
     257.  Nevertheless, we emphasize that any uncertainty about
the Commission's and the
states' jurisdiction over numbering administration that may have
existed prior to the
enactment of the 1996 Act has now been eliminated.  Section
251(e)(1) of the Act vests in
the Commission exclusive jurisdiction over numbering matters in
the United States and
authorizes the Commission to delegate some or all of that power
to state commissions.  As
indicated above, we propose leaving to the states decisions
related to the implementation of
new area codes subject to the guidelines enumerated in the
Ameritech Order.  We are
concerned, however, that situations may arise where a state
commission, in implementing area
code relief, appears to be acting in violation of those
guidelines.  We therefore seek
comment on whether the Commission should, in light of this
concern and the enactment of
section 251(e)(1), reassess the jurisdictional balance between
the Commission and the states
that was crafted in the Ameritech Order.  We also seek comment on
what action this
Commission should take when a state appears to be acting
inconsistently with our numbering
administration guidelines.  In this regard, we note that issues
related to area code relief plans
often require prompt resolution due to the imminent exhaustion of
central office codes in the
area code at issue.
     258.  Prior to enactment of the 1996 Act, Bellcore, as the
NANP Administrator, the
LECs, as central office code administrators, and the states
performed the majority of functions
related to the administration of numbers.  We tentatively
conclude that the Commission
should delegate to Bellcore, the LECs, and the states the
authority to continue performing
each of their functions related to the administration of numbers
as they existed prior to
enactment of the 1996 Act until such functions are transferred to
the new NANP
administrator pursuant to the NANP Order.  We seek comment on
this tentative conclusion.
We also seek comment on whether the Commission should delegate
any additional number
administration functions to the states or to other entities.
     3.   Cost related to number administration
     259.  In section 251(e)(2) of the 1996 Act, Congress
mandates that "[t]he cost of
establishing telecommunications numbering administration
arrangements and number
portability shall be borne by all telecommunications carriers on
a competitively neutral basis
as determined by the Commission."  In the NANP Order, the
Commission:  (1) directed that
the costs of the new impartial numbering administrator be
recovered through contributions by
all communications providers; (2) concluded that the gross
revenues of each communications
provider will be used to compute each provider's contribution to
the new numbering
administrator; and (3) concluded that the NANC will address the
details concerning recovery
of the NANP administrator costs.  We find that we need take no
further action in this
NPRM because the Commission has already determined that cost
recovery for numbering
administration arrangements must be borne by all
telecommunications carriers on a
competitively neutral basis.
F.   Exemptions, Suspensions, and Modifications
     260.  Section 251(f)(1)(A) provides that the obligations
imposed on incumbent LECs
pursuant to section 251(c) "shall not apply to a rural telephone
company until (i) such
company has received a bona fide request for interconnection,
services, or network elements,
and (ii) the State commission determines (under subparagraph (B))
that such request is not
unduly economically burdensome, is technically feasible, and is
consistent with section 254
(other than subsections (b)(7) and (c)(1)(D) thereof)."  Section
251(f)(1)(B) sets forth
procedures for the state commission to terminate the rural
telephone company exemption.
Section 251(f)(2) provides that a LEC "with fewer than 2 percent
of the Nation's subscriber
lines installed in the aggregate nationwide may petition a State
commission for a suspension
or modification of the application of a requirement or
requirements of subsection (b) or (c) to
telephone exchange service facilities specified in such
petition."  The state must grant the
petition to the extent that, and for such duration as, the state
commission determines that such
suspension or modification is necessary and is consistent with
the public interest, convenience
and necessity.  Section 251(f)(2) provides for relief from the
requirements of both Section
251(b) and (c), whereas section 251(f)(1)(A) provides for relief
only from the requirements of
section 251(c).
     261.  We seek comment on whether the Commission can and
should establish some
standards that would assist the states in satisfying their
obligations under this section.  For
example, should the Commission establish standards regarding what
would constitute a "bona
fide" request? We tentatively conclude that the states alone have
authority to make
determinations under section 271(f).
G.   Continued Enforcement of Exchange Access and Interconnection
Regulations
     262.  Section 251(g) provides that each LEC, "to the extent
that it provides wireline
services, shall provide exchange access, information access, and
exchange services for such
access . . . in accordance with the same equal access and
nondiscriminatory interconnection
restrictions and obligations (including receipt of compensation)"
that applied to such carrier
immediately preceding the date of enactment of the 1996 Act,
"until such restrictions and
obligations are explicitly superseded by regulations prescribed
by the Commission . . . ."
Those obligations and restrictions are enforceable until they are
superseded.  Section 251(i)
states that nothing in section 251 "shall be construed to limit
or otherwise affect the
Commission's authority under section 201."  We seek comment on
any issues that these
provisions may create.  In particular, we seek comment on any
aspect of this Notice that may
affect existing "equal access and nondiscriminatory
interconnection restrictions and
obligations (including receipt of compensation)."
H.   Advanced Telecommunications Capabilities
     263.  Finally, we note that pursuant to subsection 706(a) of
the 1996 Act the
Commission "shall encourage the deployment on a reasonable and
timely basis of advanced
telecommunications capability to all Americans (including, in
particular, elementary and
secondary schools and classrooms) by utilizing, in a manner
consistent with the public
interest, convenience, and necessity, price cap regulation,
regulatory forbearance, measures to
promote competition in the local telecommunications market, or
other regulating methods that
remove barriers to infrastructure investment."  We sought comment
on subsection 706(a) in
our section 254 Universal Service NPRM, in our Open Video Systems
NPRM, and in our
Cable Reform NPRM.  Because section 251 and this NPRM
comprehensively address
"measures to promote competition in the local telecommunications
market," we believe it
relevant to also seek comment herein on how we can advance
Congress's subsection 706(a)
goal within the context of our implementation of sections 251 and
252 of the 1996 Act.
                      III.  PROVISIONS OF SECTION 252
A.   Arbitration Process
     264.  Section 252(a) 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 without regard to the standards set forth in
subsections (b) and (c) of
section 251."  Any party negotiating an agreement under section
252(a) "may, at any point
in the negotiation, ask a State commission to participate in the
negotiation and to mediate any
differences arising in the course of the negotiation."  Section
252(b) states that, "[d]uring
the period from the 135th to the 160th day (inclusive) after the
date on which an incumbent
local exchange carrier receives a request for negotiation under
this section, the carrier or any
other party to the negotiation may petition the State commission
to arbitrate any open
issues."  In addition, under section 252(e), the parties must
submit for approval any
negotiated or arbitrated agreement to the state commission.
     265.  Section 252(e)(5) directs the Commission to assume
responsibility for any
proceeding or matter in which the state commission "fails to act
to carry out its
responsibility" under that section.  We note that, unlike section
251(d)(1), there is no
specified time within which the Commission must establish
regulations pursuant to section
252(e)(5).  Thus, we seek comment on whether in this proceeding
we should establish
regulations necessary and appropriate to carry out our
obligations under section 252(e)(5).
We also seek comment on what constitutes notice of failure to
act, and what procedures, if
any, we should establish for interested parties to notify the FCC
that a state commission has
failed to act.
     266.  We seek comment on the circumstances under which a
state commission should
be deemed to have "fail[ed] to act" under section 252(e)(5).  We
note that section 252(e)(4)
states that if the state commission does not approve or reject
(1) a negotiated agreement
within 90 days, or (2) an arbitrated agreement within 30 days,
from the time the agreement is
submitted by the parties, the agreement shall be "deemed
approved."  We seek comment on
the relationship between this provision and our obligation to
assume responsibility under
section 252(e)(5).  Other questions raised by section 252(e)(5)
include: (1) if the Commission
assumes the responsibility of the state commission, is the
Commission bound by all of the
laws and standards that would have applied to the state
commission; and (2) is the
Commission authorized to determine whether an agreement is
consistent with applicable state
law as the state commission would have been under section
252(e)(3)?  One possible
interpretation is that, if an agreement is deemed approved
pursuant to section 252(e)(4), it will
be deemed to comply with state law, and the Commission will have
no authority to review
that determination.
     267.  Once the Commission assumes such responsibility under
section 252(e)(5), there
is no specific provision by which authority reverts back to the
state commission.  For
example, if the Commission arbitrates an agreement pursuant to
section 252(e)(5), the 1996
Act does not provide that the arbitrated agreement is referred
back to the state commission for
any further purpose.  We seek comment on whether, once the
Commission assumes
responsibility under section 252(e)(5), it retains jurisdiction
over that matter or proceeding.
     268.  We also seek comment on whether we should adopt in
this proceeding some
standards or methods for arbitrating disputes in the event we
must conduct an arbitration
under section 252(e)(5).  One method we could adopt is "final
offer" arbitration, whereby
each party to the negotiation proposes its best and final offer,
and the arbitrator determines
which of the two proposals becomes binding.  Under final offer
arbitration, each party has
incentives to propose an arrangement that the arbitrator could
determine to be fair and
equitable.  In addition, parties are more likely to present terms
and conditions that
approximate the economically efficient outcome, because proposing
extreme terms and
conditions may result in an unfavorable finding by the
arbitrator.  While final offer arbitration
is a simple and speedy option, it is possible that the proposals
submitted by the parties may
not be consistent with the public interest and policies of
sections 251 and 252.  Alternatively,
we could adopt an open-ended arbitration method, which would
culminate in a final decision
that would be consistent with the public interest and policies of
sections 251 and 252.  Open-
ended arbitration, however, is more administratively difficult
and likely to be slower than
final offer arbitration.
B.   Section 252(i)
     269.  Section 251 requires that interconnection, unbundled
element, and collocation
rates be "nondiscriminatory" and prohibits the imposition of
"discriminatory conditions" on
the resale of telecommunications services.  Section 252(i)
appears to be a primary tool of
the 1996 Act for preventing discrimination under section 251.
Section 252(i) of the 1996 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 telecommunications carrier upon the
same terms and conditions
as those provided in the agreement."  We note that in its March
23, 1995 Report on S.652,
the Senate Committee on Commerce, Science and Transportation
discusses an earlier version
of section 252(i) and states that the Committee "intends this
requirement to help prevent
discrimination among carriers."
     270.    We seek comment on whether in this proceeding we
should adopt standards for
resolving disputes under section 252(i) in the event that we must
assume the state's
responsibilities pursuant to section 252(e)(5).  Because the
Commission may need to interpret
section 252(i) if it assumes the state commission's
responsibilities, we seek comment on the
meaning of that provision.  Must interconnection, services, or
network elements provided
under a state-approved section 252 agreement be made available to
any requesting
telecommunications carrier, or would it be consistent with the
language and intent of the law
to limit this requirement to similarly situated carriers?  If the
obligation were construed to
extend only to similarly situated carriers, how should similarly
situated carriers be defined?
For example, does the section require that the same rates for
interconnection must be offered
to all requesting carriers regardless of the cost of serving that
carrier, or would it be
consistent with the statute to permit different rates if the
costs of serving carriers are
different? In addition, can section 252(i) be interpreted to
allow LECs to make available
interconnection, services, or network elements only to requesting
carriers serving a
comparable class of subscribers or providing the same service
(i.e., local, access, or
interexchange) as the original party to the agreement?  We
tentatively conclude that the
language of the statute appears to preclude such differential
treatment among carriers.  We
seek comment on this tentative conclusion.
     271.  We note that negotiated agreements under section
252(a) are the product of
compromise between incumbent LECs and requesting carriers, and
may therefore contain
provisions to which a party agreed as specific consideration for
some other provision.  We
seek comment on whether section 252(i) requires requesting
carriers to take service subject to
all of the same terms and conditions contained in the entire
state-approved agreement.
Alternatively, does section 252(i) permit the separation of
section 251(b) and (c) agreements
down to the level of the individual provisions of subsections (b)
and (c) and the individual
paragraphs of section 251?  We recognize that allowing requesting
carriers to unbundle too
extensively the provisions of a voluntarily negotiated agreement
might affect the negotiation
process by intensifying the importance each individual term of
the agreement.  We note that
in its March 23, 1995 Report on S. 652, the Senate Committee on
Commerce, Science, and
Transportation stated that it intended the requirement codified
in section 252(i) to "make
interconnection more efficient by making available to other
carriers the individual elements of
agreements that have been previously negotiated," and seek
comment on its meaning.
     272.  Section 252(i) requires that incumbent LECs must make
available the
interconnection, service, or network element provided under the
agreement after state approval
of the agreement.  The statute is silent, however, as to how long
such an agreement must be
made available.  We seek comment on whether the agreement should
be made available for
an unlimited period, or whether the statute would permit the
terms of the agreement to be
available for a limited period of time.  In particular, we ask
commenters to cite any statutory
language that would require the resubmission of these
pre-existing interconnection agreements
to state agencies.
                          IV.  PROCEDURAL ISSUES
A.   Ex Parte Presentations
     273.  This is a non-restricted notice-and-comment rulemaking
proceeding.  Ex parte
presentations are permitted, except during the Sunshine Agenda
period, provided that they are
disclosed as provided in the Commission's rules.  See generally
47 C.F.R.  1.1202, 1.1203,
1.1206.  Written submissions, however, will be limited as
discussed below.
B.   Regulatory Flexibility Analysis
     274.  Section 251 of the Communications Act establishes a
variety of interconnection
obligations.  Some of these requirements apply to all
telecommunications carriers (which
include incumbent LECs, new LEC entrants, and interexchange
carriers).  Other
requirements apply to LECs -- both incumbents and new entrants.
Section 252 also places
certain obligations on state regulatory commissions.
     275.  We believe that the Regulatory Flexibility Act applies
differently to these
groups.  In particular, we believe that the Regulatory
Flexibility Act is inapplicable to this
proceeding insofar as it pertains to incumbent LECs.  The
proposal in this proceeding,
however, may have a significant economic impact on a substantial
number of small
businesses as defined by section 601(3) of the Regulatory
Flexibility Act insofar as they apply
to telecommunications carriers other than incumbent LECs.
     276.  Accordingly, we certify that the Regulatory
Flexibility Act of 1980 does not
apply to this rulemaking proceeding insofar as it pertains to
incumbent LECs and state utility
commissions because the relevant proposals, if promulgated, would
not have a significant
economic impact on a substantial number of small entities, as
defined by section 601(3) of
the Regulatory Flexibility Act.  Incumbent LECs directly subject
to the proposed rule
amendments do not qualify as small businesses since they are
dominant in their field of
operation.  The Commission will, however, take appropriate steps
to ensure that the special
circumstances of the smaller incumbent LECs are carefully
considered in resolving those
issues.  To the extent that this Notice may apply to state
utility commissions, they do not
qualify as small entities under section 601 of the Regulatory
Flexibility Act.
     277.  Insofar as the proposals in this Notice apply to
telecommunications carriers other
than incumbent LECs (generally interexchange carriers and new LEC
entrants), they may
have a significant economic effect on a substantial number of
small entities.  Accordingly, we
are preparing an Initial Regulatory Flexibility analysis with
respect to the provisions
applicable to telecommunications carriers other than incumbent
LECs.  Pursuant to the
Regulatory Flexibility Act of 1980, 5 U.S.C.  601-612, the
Commission's Initial Regulatory
Flexibility Analysis with respect to the Notice of Proposed
Rulemaking is as follows:
     278.  Reason for Action:  The Commission is issuing this
Notice of Proposed
Rulemaking to implement the local exchange competition provisions
of the 1996 Act
discussed above, most importantly section 251.
     279.  Objectives:  The objective of the Notice of Proposed
Rulemaking is to provide
an opportunity for public comment and to provide a record for a
Commission decision on the
issues addressed in the Notice.
     280.  Legal basis:  The Notice of Proposed Rulemaking is
adopted pursuant to
Sections
1, 4, 201-205, 222, 224, 225, 251, 252, 253, 254, 255, 256, 271,
and 273 of the
Communications Act of 1934, as amended, 47 U.S.C.  153, 154,
201-205, 222, 224, 251,
252, 253, 254, 255, 256, 271, and 273.
     281.  Description of small entities affected:  Certain of
the proposals in this Notice
would apply to telecommunications carriers, other than incumbent
LECs.  These carriers
would include small interexchange carriers and small, new LEC
entrants.  Some of these
carriers clearly qualify as small business entities.
     282.  Potential Impact:  Some of the proposals in this
Notice may impose
requirements that will have a significant economic effect on
certain small business entities.
After evaluating the comments in this proceeding, the Commission
will further examine the
impact of any rule changes on small entities and set forth
findings in the Final Regulatory
Flexibility Analysis.
     283.  Reporting, recordkeeping and other compliance
requirement:  The proposed
rules, adopted pursuant to the Telecommunications Act of 1996,
would require dominant
incumbent local exchange carriers, in certain cases, to submit
documentation requested by
state commissions for arbitration concerning the rates, terms,
and conditions for
interconnection and network element unbundling.
     284.  Federal rules that may overlap, duplicate or conflict
with the Commission's
proposal:  Our existing Expanded Interconnection rules may
overlap with the requirements of
section 251 addressed in this Notice.  We have also sought
comment on the relationship
between our Part 69 Access Charge rules and the requirements of
sections 251 and 252 of the
1996 Act.
     285.  Any significant alternatives minimizing impact on
small entities and consistent
with stated objectives:  The Notice of Proposed Rulemaking
solicits comments on alternatives.
     286.  Comments are solicited:  Written comments are
requested on this Initial
Regulatory Flexibility Analysis.  These comments must be filed in
accordance with the same
filing deadlines set for comments on the other issues in this
Notice of Proposed Rulemaking
but they must have a separate and distinct heading designating
them as responses to the
Regulatory Flexibility Analysis.
     287.  The Secretary shall send a copy of this Notice of
Proposed Rulemaking,
including the certification set out above, to the Chief Counsel
for Advocacy of the Small
Business Administration in accordance with Section 603(a) of the
Regulatory Flexibility Act,
Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.  601, et. seq.
(1981).
C.   Initial Paperwork Reduction Act of 1995 Analysis
     288.  This NPRM contains either a proposed or modified
information collection.  As
part of its continuing effort to reduce paperwork burdens, we
invite the general public and the
Office of Management and Budget (OMB) to take this opportunity to
comment on the
information collections contained in this NPRM, as required by
the Paperwork Reduction Act
of 1995, Pub. L. No. 104-13.  Public and agency comments are due
at the same time as other
comments on this NPRM;  OMB comments are due 60 days from the
date of publication of
this NPRM in the Federal Register.  Comments should address: (a)
whether the proposed
collection of information is necessary for the proper performance
of the functions of the
Commission, including whether the information shall have
practical utility; (b) the accuracy
of the Commission's burden estimates; (c) ways to enhance the
quality, utility, and clarity of
the information collected; and (d) ways to minimize the burden of
collection of information
on the respondents, including the use of automated collection
techniques or other forms of
information technology.
D.   Comment Filing Procedures
     289.  General.  Pursuant to applicable procedures set forth
in sections 1.415 and 1.419
of the Commission's rules, 47 C.F.R.  1.415, 1.419, interested
parties may file comments
on or before 25 days after public release of the item, and reply
comments on or before 14
days after the comment due date.  To file formally in this
proceeding, you must file an
original and twelve copies of all comments, reply comments, and
supporting comments.  If
you want each Commissioner to receive a personal copy of your
comments, you must file an
original and 16 copies.  Comments and reply comments should be
sent to Office of the
Secretary, Federal Communications Commission, 1919 M Street,
N.W., Room 222,
Washington, D.C.  20554, with a copy to Janice Myles of the
Common Carrier Bureau, 1919
M Street, N.W., Room 544, Washington, D.C.  20554.  Parties
should also file one copy of
any documents filed in this docket with the Commission's copy
contractor, International
Transcription Services, Inc., 2100 M Street, N.W., Suite 140,
Washington, D.C.  20037.
Comments and reply comments will be available for public
inspection during regular business
hours in the FCC Reference Center, 1919 M Street, N.W., Room 239,
Washington, D.C.
20554.
     290.  Separate Comment Filing Procedures for Dialing Parity,
Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way.  Interested
parties are instructed to file separate comments with respect to
(1) dialing parity, (2) access to
rights-of-way, (3) number administration, and (4) public notice
of technical changes
requirements and regulatory changes proposed or discussed above.
Comments on these issues
are to be filed on or before 27 days after public release of the
item; and reply comments on,
or before, 14 days after the comment due date for these four
sections.  These filings will not
be considered in applying the page limits for filings in this
proceeding.  To file formal
comments addressing these issues, parties are required to comply
with all of the remaining
comment filing procedures contained in part VI(D) of this Notice.
Comments and reply
comments should be sent to the Office of the Secretary, Federal
Communications
Commission, 1919 M Street, N.W., Room 222, Washington, D.C.
20554, with 3 copies to
Gloria Shambley of the Network Services Division, Common Carrier
Bureau, 2000 M Street,
N.W., Suite 210, Washington, D.C. 20554.
     291.  Other requirements.  In order to facilitate review of
comments and reply
comments, both by parties and by Commission staff, we require
that comments be no longer
than seventy-five (75) pages and reply comments be no longer than
thirty-five (35) pages,
including exhibits, appendices, and affidavits of expert
witnesses.  Empirical economic studies
and copies of relevant state orders will not be counted against
these page limits.  These page
limits will not be waived and will be strictly enforced.
Comments and reply comments must
include a short and concise summary of the substantive arguments
raised in the pleading.
Comments and reply comments must also comply with Section 1.49
and all other applicable
sections of the Commissions rules.  We also direct all interested
parties to include the name
of the filing party and the date of the filing on each page of
their comments and reply
comments.  Comments and reply comments also must clearly identify
the specific portion of
this Notice of Proposed Rulemaking to which a particular comment
or set of comments is
responsive.  If a portion of a party's comments does not fall
under a particular topic listed in
the outline of this Notice, such comments must be included in a
clearly labelled section at the
beginning or end of the filing.  Parties may not file more than a
total of ten (10) pages of ex
parte submissions, excluding cover letters.  This 10 page limit
does not include: (1) written ex
parte filings made solely to disclose an oral ex parte contact;
(2) written material submitted at
the time of an oral presentation to Commission staff that
provides a brief outline of the
presentation; or (3) written material filed in response to direct
requests from Commission
staff.  Ex parte filings in excess of this limit will not be
considered as part of the record in
this proceeding.
     292.  Parties are also asked to submit comments and reply
comments on diskette.
Such diskette submissions would be in addition to and not a
substitute for the formal filing
requirements addressed above.  Parties submitting diskettes
should submit them to Janice
Myles of the Common Carrier Bureau, 1919 M Street, N.W., Room
544, Washington, D.C.
20554.  Such a submission should be on a 3.5 inch diskette
formatted in an IBM compatible
form using MS DOS 5.0 and WordPerfect 5.1 software.  The diskette
should be submitted in
"read only" mode.  The diskette should be clearly labelled with
the party's name, proceeding,
type of pleading (comment or reply comments) and date of
submission.  The diskette should
be accompanied by a cover letter.
     293.  Written comments by the public on the proposed and/or
modified information
collections are due 25 days after public release of this NPRM,
and reply comments must be
submitted not later than 14 days after the comments.  Written
comments must be submitted
by the Office of Management and Budget (OMB) on the proposed
and/or modified
information collections on or before 60 days after date of
publication in the Federal Register.
In addition to filing comments with the Secretary, a copy of any
comments on the
information collections contained herein should be submitted to
Dorothy Conway, Federal
Communications Commission, Room 234, 1919 M Street, N.W.,
Washington, D.C.  20554, or
via the Internet to dconway@fcc.gov and to Timothy Fain, OMB Desk
Officer, 10236 NEOB,
725 - 17th Street, N.W., Washington, D.C.  20503 or via the
Internet to fain_t@al.eop.gov.
E.   Ordering Clauses
     294.  Accordingly, IT IS ORDERED that pursuant to Sections
1, 4, 201-205, 222, 224,
225, 251, 252, 254, 255, 256, 271 of the Communications Act of
1934, as amended, 47
U.S.C.  153, 154, 201-205, 222, 224, 251, 252, 254, 255, 256,
and 271, a NOTICE OF
PROPOSED RULEMAKING is hereby ADOPTED.
     295.  IT IS FURTHER ORDERED that, the Secretary shall send a
copy of this
NOTICE OF PROPOSED RULEMAKING, including the regulatory
flexibility certification, to
the Chief Counsel for Advocacy of the Small Business
Administration, in accordance with
paragraph 603(a) of the Regulatory Flexibility Act, 5 U.S.C. 
601 et seq. (1981).
     296.  The Administration of the North American Numbering
Plan, Notice of Proposed
Rulemaking, CC Docket No. 92-237, 9 FCC Rcd 2068 (1994), to the
extent that it addressed
the issue of dialing parity, is hereby dismissed as moot solely
with respect to that issue.
                    FEDERAL COMMUNICATIONS COMMISSION
                    William F. Caton
                    Acting Secretary