PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

AT&T COMMUNICATIONS OF VIRGINIA,

INCORPORATED,

Plaintiff-Appellant,

and

MCI TELECOMMUNICATIONS

CORPORATION, a Delaware

corporation; MCIMETRO ACCESS

TRANSMISSION SERVICES OF VIRGINIA,

INCORPORATED, a Virginia

Corporation,

Plaintiffs,

v.

BELL ATLANTIC-VIRGINIA,

INCORPORATED; HULLIHEN WILLIAMS

No. 98-2131

MOORE, in his official capacity as

Commissioner of the

Commonwealth of Virginia State

Corporation Commission; I. CLINTON

MILLER, in his official capacity as

Commissioner of the

Commonwealth of Virginia State

Corporation Commission; THEODORE

V. MORRISON, JR., in his official

capacity as Commissioner of the

Commonwealth of Virginia State

Corporation Commission; STATE

CORPORATION COMMISSION,

Commonwealth of Virginia,

Defendants-Appellees,

and
RICHARD CULLEN, Attorney General

of Virginia,

Intervenor-Defendant,

and

FEDERAL COMMUNICATIONS

COMMISSION,

Party in Interest.

MCI TELECOMMUNICATIONS

CORPORATION, a Delaware

corporation; MCIMETRO ACCESS

TRANSMISSION SERVICES OF VIRGINIA,

INCORPORATED, a Virginia

Corporation,

Plaintiffs-Appellants,

and

AT&T COMMUNICATIONS OF VIRGINIA,

INCORPORATED,

Intervenor-Plaintiff,

v.

No. 98-2147

BELL ATLANTIC-VIRGINIA,

INCORPORATED; HULLIHEN WILLIAMS

MOORE, in his official capacity as

Commissioner of the

Commonwealth of Virginia State

Corporation Commission; I. CLINTON

MILLER, in his official capacity as

Commissioner of the

Commonwealth of Virginia State

Corporation Commission; THEODORE

V. MORRISON, JR., in his official

capacity as Commissioner of the

 2
Commonwealth of Virginia State

Corporation Commission; STATE

CORPORATION COMMISSION,

Commonwealth of Virginia,

Defendants-Appellees,

and

RICHARD CULLEN, Attorney General

of Virginia,

Intervenor-Defendant,

and

FEDERAL COMMUNICATIONS

COMMISSION,

Party in Interest.

MCI TELECOMMUNICATIONS

CORPORATION, a Delaware

corporation; MCIMETRO ACCESS

TRANSMISSION SERVICES OF VIRGINIA,

INCORPORATED, a Virginia

Corporation; AT&T

COMMUNICATIONS OF VIRGINIA,

INCORPORATED,

Plaintiffs-Appellees,

No. 98-2196

v.

BELL ATLANTIC-VIRGINIA,

INCORPORATED,

Defendant-Appellant,

and

HULLIHEN WILLIAMS MOORE, in his

official capacity as Commissioner

of the Commonwealth of Virginia

 3
State Corporation Commission; I.

CLINTON MILLER, in his official

capacity as Commissioner of the

Commonwealth of Virginia State

Corporation Commission; THEODORE

V. MORRISON, JR., in his official

capacity as Commissioner of the

Commonwealth of Virginia State

Corporation Commission; STATE

CORPORATION COMMISSION,

Commonwealth of Virginia,

Defendants,

and

RICHARD CULLEN, Attorney General

of Virginia,

Intervenor-Defendant,

and

FEDERAL COMMUNICATIONS

COMMISSION,

Party in Interest.

Appeals from the United States District Court

for the Eastern District of Virginia, at Richmond.

James R. Spencer, District Judge.

(CA-97-629-R)

Argued: June 8, 1999

Decided: December 15, 1999

Before MICHAEL, Circuit Judge; Malcolm J. HOWARD,

United States District Judge for the Eastern District of

North Carolina, sitting by designation; and

Jerome B. FRIEDMAN, United States District Judge

for the Eastern District of Virginia, sitting by designation.

 4
Affirmed in part, reversed in part, and remanded by published opinion. Judge Michael wrote the opinion, in which Judge Howard and

Judge Friedman joined.

_________________________________________________________________

COUNSEL

ARGUED: David Lee Lawson, SIDLEY & AUSTIN, Washington,

D.C., for Appellants. Robert A. Dybing, SHUFORD, RUBIN & GIBNEY, Richmond, Virginia; Warner F. Brundage, Jr., BELL

ATLANTIC-VIRGINIA, INC., Richmond, Virginia, for Appellees.

ON BRIEF: David Carpenter, Stephen F. Smith, SIDLEY & AUSTIN, Washington, D.C.; James C. Roberts, George A. Somerville,

Dabney J. Carr, IV, MAYS & VALENTINE, L.L.P., Richmond, Virginia; John J. Langhauser, Wilma R. McCarey, AT&T COMMUNICATIONS OF VIRGINIA, INC., Oakton, Virginia; Donald B.

Verrilli, Jr., Maureen F. Del Duca, Jodie L. Kelley, JENNER &

BLOCK, Washington, D.C.; Thomas F. O'Neil, III, William Single,

IV, Matthew B. Pachman, MCI WORLDCOM, INC., Washington,

D.C., for Appellants. Michael D. Lowe, BELL ATLANTICVIRGINIA, INC., Richmond, Virginia; James C. Dimitri, William H.

Chambliss, Robert M. Gillespie, STATE CORPORATION COMMISSION OF VIRGINIA, Richmond, Virginia; Anthony Gambardella, WOODS, ROGERS & HAZLEGROVE, Richmond, Virginia,

for Appellees. Philip D. Bartz, Acting Assistant Attorney General,

Helen F. Fahey, United States Attorney, Mark B. Stern, Charles W.

Scarborough, Appellate Staff, Civil Division, UNITED STATES

DEPARTMENT OF JUSTICE, Washington, D.C.; Christopher J.

Wright, General Counsel, John E. Ingle, Deputy Associate General

Counsel, FEDERAL COMMUNICATIONS COMMISSION, Washington, D.C., for Amicus Curiae.

_________________________________________________________________

OPINION

MICHAEL, Circuit Judge:

After Congress enacted the Telecommunications Act of 1996, Pub.

L. 104-104, 110 Stat. 56, codified at 47 U.S.C.§ 251 et seq. (the Act),

 5
AT&T Communications of Virginia, Inc. (AT&T) and MCI Telecommunications Corp. and MCImetro Access Services of Virginia, Inc.

(collectively, MCI) tried to enter the local telephone market in Virginia served by Bell Atlantic-Virginia, Inc. (Bell Atlantic), an authorized monopoly prior to the Act. When AT&T and MCI were

unsuccessful in negotiating all of the terms and prices for access to

Bell Atlantic's network and services, the parties went to arbitration

before the Virginia State Corporation Commission (SCC), as the Act

allows. Next, AT&T and MCI sought review of the arbitration by

suing Bell Atlantic and the SCC commissioners in district court. Bell

Atlantic cross-claimed, also seeking review on certain issues. The

issues are (1) whether AT&T and MCI may use the switching function of their remote switching modules collocated on Bell Atlantic's

premises, (2) whether Bell Atlantic has a duty to renegotiate (for the

benefit and use of MCI) licenses on intellectual property contained

within Bell Atlantic's network, (3) whether MCI should be allowed

access to Bell Atlantic's dark fiber, (4) whether Bell Atlantic must

provide certain directory publishing services to AT&T at cost-based

rates, and (5) whether the SCC used the proper methodology in setting wholesale prices for retail services. The district court resolved the

issues on cross-motions for summary judgment. We now have the

case on appeal, and for the reasons that follow, we affirm in part,

reverse in part, and remand.

I.

In a related opinion filed today, GTE South, Inc. v. Morrison, ___

F.3d ___, No. 98-1887 (4th Cir. Dec. 15, 1999), we explain how the

Act sets a course for restructuring local telephone markets:

 The breakup of AT&T in the early 1980s brought competition to the long distance telephone market. The local market, however, has been a different story. Until the passage

of the 1996 Act, state utility commissions continued to regulate local telephone service as a natural monopoly. Commissions typically granted a single company, called a local

exchange carrier (LEC), an exclusive franchise to provide

telephone service in a designated area. Under this protection

the LEC built a local network -- made up of elements such

as loops (wires), switches, and transmission facilities -- that

 6
connects telephones in the local calling area to each other

and to long distance carriers.

 The 1996 Act brought sweeping changes. It ended the

monopolies that incumbent LECs held over local telephone

service by preempting state laws that had protected the

LECs from competition. See 47 U.S.C. § 253. Congress recognized, however, that removing the legal barriers to entry

would not be enough, given current technology, to make

local telephone markets competitive. In other words, it is

economically impractical to duplicate the incumbent LEC's

local network infrastructure. To get around this problem, the

Act allows potential competitors, called competing local

exchange carriers (CLECs), to enter the local telephone

market by using the incumbent LEC's network or services

in three ways. First, a CLEC may build its own network and

"interconnect" with the network of an incumbent. See id.

§ 251(c)(2). Second, a CLEC may lease elements (loops,

switches, etc.) of an incumbent LEC's network "on an

unbundled basis." See id. § 251(c)(3). Third, a CLEC may

buy an incumbent LEC's retail services "at wholesale rates"

and then resell those services to customers under its (the

CLEC's) brand. See id. § 251(c)(4).

 The Act details procedures for allowing a CLEC access

to the incumbent LEC's facilities and services. The CLEC

first makes a request to the incumbent for interconnection or

for access to its network or services. Thereafter, both parties

must negotiate in good faith in an effort to reach agreement

on terms and conditions (including price) of access. See id.

§§ 251(c)(1), 252(a)(1). If negotiations fail-- it is hard to

see how they would not -- either party may petition the

state utility commission to arbitrate open issues. See id.

§ 252(b). The terms imposed by the state commission in

arbitration must "meet the requirements of section 251 . . .

including the regulations prescribed by the [FCC] pursuant

to section 251." Id. § 252(c)(1). The Act includes general

standards for a state commission to use in arbitrating open

price (or rate) issues. See id. §§ 251(c), 252(d). Finally, the

Act authorizes any party aggrieved by the arbitration deci-

 7
sion of a state commission to bring an action in federal district court to determine whether the arbitration decision

"meets the requirements of" §§ 251 and 252. See id.

§ 252(e)(6).

Id. at ___ (footnote omitted).

On August 8, 1996, the FCC (pursuant to § 251(d)(1) of the Act)

issued an order and rules, including rules governing pricing, to implement the local competition provisions of the Act. See In the Matter

of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order, 11 F.C.C.R.

15499 (1996) (First Report and Order). After the rules were challenged in petitions for review filed in several circuits, the proceedings

were consolidated and assigned to the Eighth Circuit. See 28 U.S.C.

§ 2112(a). The Eighth Circuit first stayed the FCC's pricing rules

before their effective date, see Iowa Utils. Bd. v. FCC, 109 F.3d 418,

427 (8th Cir. 1996), and then vacated the rules in July 1997, holding

that state utility commissions, not the FCC, had exclusive authority

to make pricing decisions under the Act. See Iowa Utils. Bd. v. FCC,

120 F.3d 753, 800 (8th Cir. 1997), aff'd in part, rev'd in part sub

nom. AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 119 S. Ct. 721

(1999). On January 25, 1999, the Supreme Court reversed this part of

the Eighth Circuit's judgment, holding that the FCC had jurisdiction

to issue "rules to guide the state-commission judgments." AT&T

Corp. v. Iowa Utils. Bd., 525 U.S. at ___, 119 S. Ct. at 738. Although

the Supreme Court remanded for consideration of substantive challenges to the pricing rules, these rules became effective when the

Supreme Court issued its judgment. And although the Supreme Court

invalidated one of the FCC rules governing access to unbundled network elements, see Iowa Utils. Bd., 525 U.S. at ___, 119 S. Ct. at 736,

other (non-pricing) rules relating to local competition have been in

effect since October 15, 1996. See Iowa Utils. Bd., 109 F.3d at 427.

In this case, AT&T and MCI were unsuccessful in negotiating

interconnection agreements with Bell Atlantic (the incumbent LEC)

to cover their entry into Virginia's local telephone market. In July

1996 AT&T petitioned the SCC to arbitrate the unresolved issues.

Shortly thereafter, AT&T's petition was consolidated with a petition

filed by MCI, and the SCC proceeded to arbitrate the open issues.

 8
After the SCC's arbitration decisions were incorporated into interconnection agreements between Bell Atlantic and each of the CLECs, the

CLECs (AT&T and MCI) sued Bell Atlantic and the SCC commissioners in district court, alleging that certain of the SCC's determinations violated the Act. Bell Atlantic filed a cross-claim because it

objected to different SCC rulings.

The SCC (and the district court) resolved the issues now contested

as follows. First, the SCC denied AT&T and MCI the right to use the

switching functions of their collocated remote switching modules

(RSMs), although the RSMs may be used for interconnection and

access to unbundled network elements. Second, the SCC determined

that Bell Atlantic, in providing access to its network elements, is not

required to negotiate and obtain license modifications from its thirdparty vendors to allow MCI use of intellectual property embedded in

Bell Atlantic's network. Third, the SCC determined that Bell Atlantic

was not required to allow MCI access to its (Bell Atlantic's) dark

fiber, that is, fiber optic transmission cable that has been installed but

not activated. (The district court dismissed the claim underlying issue

two and granted summary judgment for Bell Atlantic and the SCC

commissioners on issues one and three. AT&T and MCI appeal.)

Fourth, the SCC required Bell Atlantic to provide certain directory

publishing services to AT&T at cost-based rates, instead of tariff

rates. (The district court granted summary judgment to AT&T and the

SCC commissioners on this issue, and Bell Atlantic cross-appeals.)

Fifth, the SCC decided that wholesale prices (for services the CLECs

will resell) should be determined by assuming that the incumbent

LEC, Bell Atlantic, will leave the retail market altogether. (The district court granted summary judgment to AT&T, MCI, and the SCC

commissioners on this issue, and Bell Atlantic cross-appeals.)1

We will address the issues after we summarize the standard of

_________________________________________________________________

1 MCI also appealed the SCC's refusal to compel Bell Atlantic to provide its directory assistance database for Bell Atlantic customers in

Washington, D.C., and Maryland. In addition, Bell Atlantic crossappealed the SCC's order requiring it to give MCI actual possession of

its directory assistance database for Virginia, instead of merely granting

read-and-use access. MCI and Bell Atlantic settled these issues prior to

oral argument.

 9
review. The district court's grant of summary judgment is reviewed

de novo. We also review de novo the SCC's interpretations of the

Act, and we accord no deference to the state commission's interpretations. Finally, we review the SCC's factfindings under the substantial

evidence standard. See GTE South, Inc. v. Morrison, ___ F.3d ___

(4th Cir. 1999).

II.

AT&T and MCI argue that the SCC and the district court erred in

deciding that AT&T and MCI cannot use the switching function of

RSMs (remote switching modules) that they place, or collocate, at

Bell Atlantic's premises. We agree with AT&T and MCI.

The SCC did correctly determine that Bell Atlantic must allow

AT&T and MCI to collocate RSMs because this equipment is necessary for interconnection and access to unbundled network elements.

The SCC went on to hold, however, that the switching capability of

collocated RSMs must be disabled. This holding was erroneous.

An RSM has an important, although limited, switching capability.

It can perform a local call routing function when one customer served

by a loop connected to the RSM calls another customer who is also

connected to that same RSM. This limited switching function avoids

the more costly and inefficient routing of the call to a distant main

switch and back. Bell Atlantic uses this local call routing function on

its own RSMs, taking advantage of the attendant operating and cost

efficiencies. Under the SCC's order AT&T and MCI cannot use this

switching function on their RSMs placed in Bell Atlantic's premises.

This puts AT&T and MCI at a competitive disadvantage. The question, of course, is whether the Act and the FCC's implementing rules

require the elimination of this disadvantage.

Section 251(c)(6) of the Act requires Bell Atlantic, as an incumbent LEC, to allow new entrants, such as AT&T and MCI, to collocate at Bell Atlantic's premises any equipment that is "necessary for

interconnection or access to unbundled network elements" on terms

and conditions that are "nondiscriminatory." 47 U.S.C. § 251(c)(6).

While the Act requires that the collocated equipment be "necessary"

for one of the two specified purposes (interconnection or access to

 10
network elements), the equipment is not rendered"unnecessary"

because it can perform other functions such as switching. See First

Report and Order at ¶ 579 ("necessary" simply means that the equipment is "used" or "useful" for interconnection or access to unbundled

network elements). Because the RSMs are used for interconnection

and access, they are necessary and must be collocated, as the SCC

determined.

AT&T and MCI argue, however, that a discriminatory term was

imposed on the collocation here because they cannot use their RSMs

for a different function, switching, and that deprives them of efficiencies available to Bell Atlantic, the incumbent LEC. The question

therefore is a narrow one: is it a discriminatory condition of collocation to require that the switching function of the CLECs' collocated

RSMs be disconnected.

The Act sets the general standard -- "nondiscriminatory" -- for

collocation terms, see 47 U.S.C. § 251(c)(6), and leaves the details to

FCC rulemaking. But the FCC rules are also fairly general. The First

Report and Order does make clear that the "nondiscrimination" standard is meant to be a strict one and that an incumbent LEC, such as

Bell Atlantic, cannot impose on CLECs less favorable terms of interconnection or access to unbundled network elements than it (the LEC)

enjoys. See First Report and Order at ¶¶ 217-18. The SCC did not

interpret the First Report and Order to permit AT&T and MCI to use

the switching function of their collocated RSMs, even though Bell

Atlantic could use their RSMs for that very purpose.

Fortunately, we do not have to decide whether the SCC interpreted

the First Report and Order properly. The FCC has issued a clarifying

rule, effective June 1, 1999, that resolves the collocation issue before

us: "an incumbent LEC may not place any limitations on the ability

of requesting carriers to use all the features, functions, and capabilities of equipment collocated [for interconnection or access to unbundled network elements], including, but not limited to, switching and

routing features." 47 C.F.R. § 51.323(c) (1999).2

_________________________________________________________________

2 The rule does provide that an incumbent LEC is not required "to permit collocation of equipment used solely for switching or solely to provide enhanced services." 47 C.F.R. § 51.323(c) (1999).

 11
The revised rule plainly requires Bell Atlantic to allow AT&T and

MCI to use their collocated RSMs for switching and routing. The district court's judgment to the contrary is reversed, and we instruct that

court to remand to the SCC for it to amend the necessary instruments

to conform to 47 C.F.R. § 51.323(c).

III.

According to MCI, the SCC erred by failing to require Bell Atlantic to negotiate and obtain license modifications from its third-party

vendors that would allow MCI to use intellectual property embedded

in Bell Atlantic's network. Because we hold that Bell Atlantic must

use its best efforts to renegotiate modifications, a remand is necessary

on this issue.

Much of the hardware and software that make up Bell Atlantic's

network is licensed from third-party patent and copyright holders. If

MCI uses unbundled elements in that network, as the Act gives it the

right to do, it will be exposed to potential intellectual property

infringement claims. Meanwhile, Bell Atlantic, which holds licenses

for that intellectual property, faces no such liability. MCI argues that

this disparity in conditions of access discriminates against it in violation of § 251(c)(3) of the Act. Therefore, MCI argues, Bell Atlantic

must renegotiate its licensing agreements to permit use by CLECs.

The SCC rejected this argument. Instead, it required Bell Atlantic

(1) to indemnify MCI against third-party intellectual property claims

arising from its use of any network equipment or software acquired

by Bell Atlantic in the future; (2) to allow MCI the protection of any

indemnities given by Bell Atlantic's vendors to cover intellectual

property, but only to the extent those indemnities flow through to

third parties; and (3) to notify MCI of any pending or threatened intellectual property claims. The district court dismissed MCI's challenge

to the SCC's order, concluding that MCI lacked standing.

We disagree with both the SCC and the district court. The standing

question presents little difficulty. Again, MCI seeks to invoke its statutory right to access to unbundled network elements on nondiscriminatory terms. See 47 U.S.C. § 251(c)(3). According to MCI, the SCC

imposed terms that do not allow MCI equal access to Bell Atlantic's

 12
network: Bell Atlantic's use of the intellectual property is protected

by third-party licensing agreements, but MCI's use is not. Unequal

access is a statutory injury that is sufficient to confer standing on

MCI. See Linda R.S. v. Richard D., 410 U.S. 614, 617 n.3 (1973)

("Congress may enact statutes creating legal rights, the violation of

which creates standing, even though no injury would exist without the

statute.").

The Act imposes the duty on Bell Atlantic, as an incumbent LEC,

to provide "access to network elements on an unbundled basis . . . on

rates, terms, and conditions that are just, reasonable and nondiscriminatory." 47 U.S.C. § 251(c)(3). "Nondiscriminatory," in turn, means

access on the same terms and conditions that Bell Atlantic itself

enjoys. See 47 C.F.R. 51.311(b) (1999); First Report and Order at

¶ 218. The interconnection agreement approved by the SCC fails to

satisfy this requirement in one respect: although it grants MCI access

to Bell Atlantic's network, it discriminates because it does not provide MCI equal license to use the intellectual property embedded in

that network. This part of the agreement leaves MCI with several

unsatisfactory options. First, it can use the network elements without

obtaining licenses, risking infringement suits. Second, it could

attempt to independently negotiate for licensing, also an untenable

option. Only Bell Atlantic knows which of its licensing agreements

might be implicated by the lease of network elements. In addition, the

lease rate set by the SCC already accounts for licensing fees paid by

Bell Atlantic, so any additional fees paid by MCI to third parties

would constitute double payment. Third, MCI might limit itself to

using only network elements that are not subject to licenses from third

parties. Even if this option provided some access, it would not be

access on equal footing with Bell Atlantic. The SCC's resolution of

the intellectual property issue therefore discriminates under the meaning of the Act. Moreover, the resolution is inconsistent with the Act's

purpose of fostering competition by removing barriers to entry in the

local telephone market.

As a result, we conclude that the Act requires Bell Atlantic to

attempt to renegotiate its existing intellectual property licenses to

cover use by MCI. Cf. In the Matter of Implementation of Infrastructure Sharing Provisions in the Telecommunications Act of 1996, 12

F.C.C.R. 5470 at ¶ 70 (1997) (requiring that incumbent LECs renego-

 13
tiate terms of intellectual property licenses when necessary to satisfy

the infrastructure sharing requirements of 47 U.S.C.§ 259). In those

negotiations, Bell Atlantic must exercise its best efforts to obtain

licensing for CLECs on the terms that it has obtained for itself.3 We

recognize that negotiations might not be successful in every instance.

If negotiations fail, we do not interpret § 251(c)(3) to impose an absolute duty to provide identical licensing terms in the case of existing

agreements. Cf. First Report and Order at¶ 313 (interpreting

§ 251(c)(3) to require equal access rather than absolute equality of

treatment to allow for "rare circumstances where it is technically

infeasible for an incumbent LEC to provision access or elements that

are equal-in-quality"). Still, there must be a duty to negotiate. Otherwise, the Act's goal -- competition in local telephone markets --

would be ignored.

The district court's dismissal of the intellectual property licensing

claim is reversed. On this issue, the district court is directed to enter

summary judgment for MCI, granting it relief to the extent we have

specified.4 This issue will then be remanded to the SCC.

IV.

MCI argues that the SCC and district court erred in denying it

access to Bell Atlantic's "dark fiber," that is, transmission cable that

has been laid but is not attached to the electronics required to "light"

it. MCI says the Act entitles it to use the dark fiber because, without

it, its ability to provide local telephone service is impaired. This issue

must be remanded to the SCC for further proceedings.

The Act requires that an incumbent LEC allow new entrants access

to unbundled elements of the incumbent's network. See 47 U.S.C.

_________________________________________________________________

3 Because the cost of renegotiating license agreements would be part of

the cost of providing the network element, Bell Atlantic would be entitled to compensation for its efforts. See 47 U.S.C. § 252(d)(1).

4 See Nat'l Coalition for Students with Disabilities Educ. & Legal

Defense Fund v. Virginia, 152 F.3d 283, 293 (4th Cir. 1998) (observing

that when facts are uncontroverted, court of appeals may direct entry of

an order awarding summary judgment to a party whose motion below

was denied).

 14
§ 251(c)(3). According to the FCC rules in effect when the SCC and

district court rendered their decisions, a nonproprietary network element had to be made available if "the failure to provide access to such

. . . element[ ] would impair the ability of the [CLEC] seeking access

to provide the services that it seeks to offer." Id. § 251(d)(2)(B). See

47 C.F.R. 51.317(b)(2) (1997). MCI wants to lease Bell Atlantic's

dark fiber, splice in its own electronics, and then deploy its own network technology and design. Before the SCC, MCI argued that without access to Bell Atlantic's dark fiber, it would be left with two noncompetitive options: (1) laying its own fiber in the ground, an expensive and time-consuming effort, or (2) leasing Bell Atlantic's "lit"

fiber, bundled with Bell Atlantic's electronics. The SCC rejected this

argument without comment, and the district court affirmed. The district court found that while MCI had "introduced evidence that dark

fiber is necessary in its provision of local services," denial of access

would "inconvenience," but not impair, the company's ability to provide local telephone service.

Before we reach the impairment issue, we consider a more fundamental objection that Bell Atlantic has made to MCI's demand for

dark fiber. Bell Atlantic claims that dark fiber is not a network element at all. And if it is not a network element, the company has no

obligation to grant the CLECs access to it. A "network element" is "a

facility or equipment used in the provision of a telecommunications

service." 47 U.S.C. § 153(29)(emphasis added). Seizing on "used,"

Bell Atlantic argues that this word requires that the equipment be in

actual use, not merely capable of being used. Since dark fiber is

equipment that (currently) is not being used, it is not a network element, according to Bell Atlantic.

Like every other court that has heard this argument, we reject it.

See, e.g., US West Communications, Inc. v. Jennings, 46 F. Supp.2d

1004, 1018-19 (D. Ariz. 1999); MCI Telecommunications Corp. v.

BellSouth Telecommunications, Inc., 40 F. Supp.2d 416, 425 (E.D.

Ky. 1999). First, it places undue weight on "used," a word commonly

appearing in definitions. For example, according to Webster, a hammer is a "hand tool consisting of a solid head set crosswise on a handle and used for pounding." Webster's Third New International

Dictionary 1025 (1981)(emphasis added). We doubt that a hand tool

becomes a hammer only when someone starts to pound with it. Sec-

 15
ond, Bell Atlantic's narrow interpretation conflicts with the Supreme

Court's acknowledgment that "network element" is broadly defined.

See Iowa Utils. Bd., 525 U.S. at ___, 119 S. Ct. at 734. Third, an

interpretation of network element that includes dark fiber is in harmony with Congress's express goal of fostering competition to promote more efficient, cheaper, and better phone service. See H.R. Rep.

No. 104-204 at 89 (1995). If CLECs can lease incumbents' dark fiber,

they can use their own electronics to deploy newer, more efficient

technologies instead of remaining captive to the existing network

architecture. Each of these factors counsels in favor of construing

"used" to include equipment and facilities, such as dark fiber, that are

part of the network, even though they may not be in actual use when

the access request is made.

It is a closer question whether MCI's ability to provide local service will be impaired without access to Bell Atlantic's dark fiber. As

the district court recognized, MCI presented the SCC with evidence

that dark fiber is "necessary" for it to provide the service. MCI's evidence tended to show that denial of access to dark fiber would force

it either to incur substantial costs by laying its own wire or to tie itself

to Bell Atlantic's electronics, thereby restricting its ability to deploy

its own network design. An SCC expert confirmed the value of dark

fiber to MCI, testifying that while "dark fiber is a pure cost savings

. . ., there are many other reasons for MCI to use dark fiber." Despite

this evidence, the district court concluded that other unbundled network elements (Bell Atlantic's lit fiber and electronics) were available to MCI and that use of these alternative elements would

inconvenience rather than impair MCI.

Section 251(d)(2)'s language concerning impairment of service

does not directly qualify the right to access granted by § 251(c)(3).

Rather, in light of the general duty under § 251(c)(3) to provide

access "at any technically feasible point,"§ 251(d)(2) directs the FCC

to consider whether particular proprietary network elements are necessary and whether denial of access to particular nonproprietary network elements would impair service. Thus, § 251(d)(2) "requires the

FCC to apply some limiting standard, rationally related to the goals

of the Act." Iowa Utils. Bd., 525 U.S. at ___, 119 S. Ct. at 734-35.

When the SCC and the district court made their decisions in this case,

the FCC had interpreted the impairment of service standard as fol-

 16
lows: service "would [be] impair[ed]" if "the failure of an incumbent

to provide access to a network element would decrease the quality, or

increase the financial or administrative cost of the service a requesting

carrier seeks to offer, compared with providing that service over other

unbundled elements in the incumbent LEC's network." First Report

and Order at ¶ 285. See also 47 C.F.R. 51.317(b)(2) (1997). If this

rule still provided the applicable standard, we would be inclined to

reverse outright and say that MCI must have access to the dark fiber.

However, in Iowa Utilities Board the Supreme Court vacated a

related FCC rule, 47 C.F.R. § 51.319 (1997), which had specified particular network elements that the FCC deemed "necessary" for providing local telephone service. Iowa Utils. Bd., 525 U.S. at ___, 119

S. Ct. at 734-36. In vacating this rule, the Court rejected the FCC's

interpretation of "impaired" in paragraph 285 of the First Report and

Order, holding that:

the Commission's assumption that any increase in cost (or

decrease in quality) imposed by denial of a network element

renders access to that element "necessary," and causes the

failure to provide that element to "impair" the entrant's ability to furnish its desired services is simply not in accord

with the ordinary and fair meaning of those terms.

Id. at ___, 119 S. Ct. at 735 (emphasis added). Although the Court did

not provide an alternative definition of "impaired," the exchange

between the majority and the dissent provides some guidance. Rejecting Justice Souter's suggestion that the absence of a ladder may

impair someone's ability to change a light bulb, even if he had access

to "a chair, a milk can, or eight volumes of Gibbon," id. at ___, 119

S. Ct. at 739 (Souter, J., dissenting), the majority said that impairment

was better illustrated by "the presence of a ladder tall enough to

enable one to do the job, but not without stretching one's arm to its

full extension. A ladder one-half inch taller is not, `within an ordinary

and fair meaning of the word,' `necessary,' nor does its absence

`impair' one's ability to do the job." Id. at ___, 119 S. Ct. at 735 n.11.

Similarly, the Court noted that a one-percent decrease in anticipated

profits resulting from denial of access to a network element would not

constitute an "impairment" under the terms of the statute. Id. at ___,

119 S. Ct. at 735.

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We understand the Court's illustrations to mean that de minimis

decreases in the quality of service or de minimis increases in the cost

of providing service do not require that an incumbent provide access

to a particular network element. When denying access to an unbundled network element has more than a de minimis effect, however, the

Act requires that access be provided. Accord, MCI v. Bell Atlantic, 36

F. Supp.2d 419, 425 (D.D.C. 1999)(interpreting Iowa Utilities Board

to mean that "a market entrant must demonstrate something more than

a minor decrease in quality or rise in costs"). Thus, we are confronted

with the following issue: if MCI is denied access to dark fiber, will

MCI experience more than a de minimis effect on the quality of its

service or the cost of providing it.

On the record before us, we are unable to make that determination.

We have no explicit findings of fact from the SCC. The district

court's conclusion that access to dark fiber was"necessary," but that

the denial of access was only an "inconvenience," rested on an erroneous application of a vacated standard. The record itself contains no

estimates of the added cost to MCI to provide service without Bell

Atlantic's dark fiber. Nor does the record contain any details about

the disadvantages resulting to MCI if it cannot use its own electronics.

We have only conclusory statements about the cost and service

advantages that use of the dark fiber would bring to MCI. This void

is understandable because the record was created under a standard

that required only some impairment, without regard to degree. On

remand, however, further evidence will be necessary.

For these reasons, we vacate the district court's judgment on the

dark fiber issue. The district court will remand this issue to the SCC.

The SCC should determine whether MCI, if denied access to Bell

Atlantic's dark fiber, will experience more than a de minimis increase

in costs or decrease in the quality of its service to customers.

V.

On cross-appeal Bell Atlantic claims that the SCC erred in requiring it to provide certain directory publishing services to AT&T at

cost-based rates. Bell Atlantic argues that these services are not network elements, which means that it can charge AT&T the tariff rate,

that is, the retail rate charged to Bell Atlantic customers. We reject

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Bell Atlantic's argument and affirm the district court's judgment

upholding the SCC on this issue.

Bell Atlantic, as part of its local service, provides customers a free

listing in the white pages of the company's telephone directory. Other

directory publishing services (additional white pages listings and the

non-listing and non-publication of numbers) are provided at additional tariff rates. It is undisputed that a CLEC, such as AT&T, would

need to offer these features to be competitive in the local telephone

market. The question here is the price (tariff or cost-based) at which

the incumbent has to make these services available. If these directory

publishing services qualify as "network elements," they must be made

available at cost-based rates. See 47 U.S.C.§ 252(d)(1).

The Act says that the term "network element""includes features

. . . that are provided by means of [a] facility or equipment, including

subscriber numbers [and] databases . . . used in the . . . provision of

a telecommunications service." 47 U.S.C. § 153(29). This is a broad

definition. The FCC's implementing rules provide that network elements encompass the "features, functions, and capabilities of the

switch," which provide customers with "a telephone number,

directory listing, dial tone, signaling, and access to 911, operator services and directory assistance." First Report and Order at ¶ 412

(emphasis added). The Supreme Court has recognized that the Act's

definition of "network element" is broad and that a network element

need not be "part of the physical facilities and equipment used to provide local phone service." Iowa Utils. Bd. , 525 U.S. at ___, 119 S. Ct.

at 734 (upholding FCC's determination that operator services and

directory assistance are network elements).

The one free listing in the white pages is indisputably a "directory

listing" and therefore a network element. It is a network element

because it is a feature used in providing (through the company's facilities) telephone service. If the basic directory listing is a network element, it stands to reason that the other directory services -- additional

listings and the non listing and non-publication of numbers -- must

also be network elements. As the SCC points out, additional white

pages listings are necessary to local telephone service because many

customers (spouses with different surnames, for example) require

additional listings. In addition, some customers prefer non-listed or

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non-published numbers for reasons of privacy or security. A CLEC

that had to acquire these features at tariff rates before providing them

to customers would be at a competitive disadvantage in the local market. The Act's definition and the FCC's interpretation of the term

"network element" are broad enough to include the additional directory services. The SCC and the district court were therefore correct

to count these services as network elements that Bell Atlantic must

provide to AT&T at cost-based prices. We affirm on this issue.

VI.

Bell Atlantic also argues on cross-appeal that the SCC erred in its

methodology for determining the wholesale prices Bell Atlantic may

charge AT&T and MCI for its retail telecommunications services.

The district court upheld the SCC's approach. We considered this

same issue in GTE South, Inc. v. Morrison, ___ F.3d at ___, and we

affirm on our reasoning there. Id. at ___.

VII.

To summarize, (1) we hold that AT&T and MCI may use the

switching functions of their RSMs collocated on Bell Atlantic's property; the district court will remand this issue for the SCC to see that

the necessary instruments are amended; (2) we hold that Bell Atlantic

must use its best efforts to renegotiate its intellectual property licenses

on network hardware and software to allow use by MCI; the district

court will remand to the SCC for appropriate proceedings on this

issue; (3) we hold that dark fiber is a network element, and the district

court will remand to the SCC for further proceedings on whether MCI

will be impaired at more than a de minimis level if it does not have

access to Bell Atlantic's dark fiber; (4) we affirm the portion of the

district court's judgment upholding the SCC's determination that Bell

Atlantic must provide the identified directory publishing services to

AT&T at cost-based prices; and (5) we affirm the portion of the district court's judgment that upholds the SCC's methodology for setting

wholesale prices for retail telecommunications services.

AFFIRMED in part, REVERSED in part,

and REMANDED

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