27892 Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations

TABLE 6 TO SUBPART CCCC.—APPLICABILITY OF GENERAL PROVISIONS TO SUBPART CCCC—Continued

Citation Subject Applicable to subpart CCCC?

§ 63.7 ................................... Performance Testing Requirements ............................... 1. § 63.7(a)(1)–(2) and (e)(3) do not apply, instead

specified in this subpart.

2. Otherwise, all apply.

§ 63.8 ................................... Monitoring Requirements ................................................ 1. § 63.8(a)(2) is modified by § 63.2163.

2. § 63.8(a)(4) does not apply.

3. For § 63.8(c)(1), requirements for startup, shutdown,

and malfunctions apply only to malfunctions, and no

report pursuant to § 63.10(d)(5)(i) is required.

4. For § 63.8(d), requirements for startup, shutdown,

and malfunctions apply only to malfunctions.

5. § 63.8(c)(4)(i), (c)(5), (e)(5)(ii), and (g)(5), do not

apply.

6. § 63.8(c)(4)(ii), (c)(6)–(8), (e)(4), and (g)(1)–(4) do

not apply, instead specified in this subpart.

7. Otherwise, all apply.

§ 63.9 ................................... Notification Requirements ............................................... 1. § 63.9(b)(2) does not apply because rule omits requirements for initial notification for sources that start

up prior to May 21, 2001

2. § 63.9(f) does not apply.

3. Otherwise, all apply.

§ 63.10 ................................. Recordkeeping and Reporting Requirements ................. 1. For § 63.10(b)(2)(i)–(v), (c)(9)–(15), and (d)(5), requirements for startup, shutdown, and malfunctions

apply only to malfunctions.

2. § 63.10(b)(2)(vii) and (c)(1)–(6) do not apply, instead

specified in this subpart.

3. § 63.10(c)(7)–(8), (d)(3), (e)(2)(ii)–(4), (e)(3)–(4) do

not apply.

4. Otherwise, all apply.

§ 63.11 ................................. Flares .............................................................................. No.

§ 63.12 ................................. Delegation ....................................................................... Yes.

§ 63.13 ................................. Addresses ....................................................................... Yes.

§ 63.14 ................................. Incorporation by Reference ............................................. Yes.

§ 63.15 ................................. Availability of Information ................................................ Yes.

[FR Doc. 01–12041 Filed 5–18–01; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 61

[CC Docket No. 96–262; FCC 01–146]

Access Charge Reform; Reform of

Access Charges Imposed by

Competitive Local Exchange Carriers

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: In this document, we limit the

application of our tariff rules to CLEC

access services in order to prevent use

of the regulatory process to impose

excessive access charges on IXCs and

their customers. Under the detariffing

regime we adopt, CLEC access rates that

are at or below the benchmark that we

set will be presumed to be just and

reasonable and CLECs may impose them

by tariff. Above the benchmark, CLEC

access services will be mandatorily

detariffed, so CLECs must negotiate

higher rates with the IXCs. We also

adopt a rural exemption to our

benchmark scheme, recognizing that a

higher level of access charges is justified

for certain CLECs serving truly rural

areas. To avoid too great a disruption for

competitive carriers, we implement the

benchmark in a way that will cause

CLEC rates to decrease over time until

they reach the rate charged by the

incumbent LEC. We also make clear that

an IXC’s refusal to serve the customers

of a CLEC that tariffs access rates within

our safe harbor, when the IXC serves

ILEC end users in the same area,

generally constitutes a violation of the

duty of all common carriers to provide

service upon reasonable request.

DATES: Effective June 20, 2001.

FOR FURTHER INFORMATION CONTACT:

Jeffrey H. Dygert, Common Carrier

Bureau, (202) 418–1500.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Seventh

Report and Order in CC Docket No. 96–

262, released on April 27, 2001. The full

text of this document is available for

public inspection during regular

business hours in the FCC Reference

Center, Room CY–A257, 445 Twelfth

Street, SW., Washington, D.C., 20554.

I. Introduction

1. By this order, we seek to ensure, by

the least intrusive means possible, that

CLEC access charges are just and

reasonable. Specifically, we limit the

application of our tariff rules to CLEC

access services in order to prevent use

of the regulatory process to impose

excessive access charges on IXCs and

their customers. Previously, certain

CLECs have used the tariff system to set

access rates that were subject neither to

negotiation nor to regulation designed to

ensure their reasonableness. These

CLECs have then relied on their tariff to

demand payment from IXCs for access

services that the long distance carriers

likely would have declined to purchase

at the tariffed rate.

2. Under the detariffing regime we

adopt, CLEC access rates that are at or

below the benchmark that we set will be

presumed to be just and reasonable and

CLECs may impose them by tariff.

Above the benchmark, CLEC access

services will be mandatorily detariffed,

so CLECs must negotiate higher rates

with the IXCs. During the pendency of

negotiations, or if the parties cannot

agree, the CLEC must charge the IXC the

appropriate benchmark rate. We also

adopt a rural exemption to our

Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations 27893

benchmark scheme, recognizing that a

higher level of access charges is justified

for certain CLECs serving truly rural

areas. To avoid too great a disruption for

competitive carriers, we implement the

benchmark in a way that will cause

CLEC rates to decrease over time until

they reach the rate charged by the

incumbent LEC.

3. We also make clear that an IXC’s

refusal to serve the customers of a CLEC

that tariffs access rates within our safe

harbor, when the IXC serves ILEC end

users in the same area, generally

constitutes a violation of the duty of all

common carriers to provide service

upon reasonable request.

4. We intend to allow CLECs a period

of flexibility during which they can

conform their business models to the

market paradigm that we adopt herein.

In addition, these rules should continue

to ensure the ubiquity of a fully

interconnected telecommunications

network that consumers have come to

expect. Finally, by ensuring that CLECs

do not shift an unjust portion of their

costs to interexchange carriers, our

actions should help continue the

downward trend in long-distance rates

for end users.

5. We view the mechanism we adopt

today as a means of moving the

marketplace for access services closer to

a competitive model. Because our tariff

benchmark is tied to the incumbent LEC

rate, we will re-examine these rates at

the close of the period specified in the

CALLS Order, 65 FR 38684, June 21,

2000. Through a separate further notice

of proposed rulemaking, published

elsewhere in this issue, we also evaluate

the access charge scheme as part of a

broader review of inter-carrier

compensation.

II. CLEC Switched Access Services

A. The Structure of the Access Service

Market

6. It appears that certain CLECs have

availed themselves of the tariff system

and have refused to enter meaningful

negotiations on access rates, choosing

instead simply to file a tariff and bind

IXCs receiving their access service to the

rates therein. Providers of terminating

access may be particularly insulated

from the effects of competition in the

market for access services. The party

that actually chooses the terminating

access provider does not also pay the

provider’s access charges and therefore

has no incentive to select a provider

with low rates. Indeed, end users may

have the incentive to choose a CLEC

with the highest access rates because

greater access revenues likely permit

CLECs to offer lower rates to their end

users. The record also indicates that

CLEC originating access service may

also be subject to little competitive

pressure, notwithstanding the fact that

the IXCs typically have a relationship

with the local exchange provider in

order to be included on the LEC’s list of

presubscribed IXCs.

7. CLECs’ ability to impose excessive

access charges seems attributable to two

separate factors. First, although the end

user chooses her access provider, she

does not pay that provider’s access

charges. Rather, the access charges are

paid by the caller’s IXC, which has little

practical means of affecting the caller’s

choice of access provider. Second, the

Commission has interpreted section

254(g) to require IXCs geographically to

average their rates and thereby to spread

the cost of both originating and

terminating access over all their end

users. Consequently, IXCs have little or

no ability to create incentives for their

customers to choose CLECs with low

access charges. Since the IXCs are

effectively unable either to pass through

access charges to their end users or to

create other incentives for end users to

choose LECs with low access rates, the

party causing the costs—the end user

that chooses the high-priced LEC—has

no incentive to minimize costs.

8. We are concerned that, in this

environment, permitting CLECs to tariff

any rate that they choose may allow

some CLECs inappropriately to shift

onto the long distance market in general

a substantial portion of the CLECs’ startup and network build-out costs. Such

cost shifting may promote economically

inefficient entry into the local markets

and may distort the long distance

market.

9. We decline to conclude, in this

order, that CLEC access rates, across the

board, are unreasonable. Nevertheless,

there is ample evidence that the

combination of the market’s failure to

constrain CLEC access rates, our

geographic rate averaging rules for IXCs,

the absence of effective limits on CLEC

rates and the tariff system create an

arbitrage opportunity for CLECs to

charge unreasonable access rates.

B. Tariff Benchmark Mechanism

10. A substantial majority of

commenters strongly oppose the

mandatory detariffing of CLEC access

services. Apart from their opposition to

mandatory detariffing, however, the two

sides of the debate have been largely

unable to agree about how CLECs

should set rates for their switched

access services.

11. In their provision of access

services, competitive carriers actually

serve two distinct customer groups. The

first is the IXCs, which purchase access

service as an input for the long distance

service that they provide to their enduser customers. An equally important

group of customers for access services is

the end users who benefit from the

ability, provided by access service, to

place and receive long distance calls.

The noteworthy aspect of this second

group of access consumers, or

beneficiaries, is that, unlike IXCs, they

have competitive alternatives in the

market in which they purchase CLEC

access service.

12. Under the regime we adopt in this

order, CLECs will be restricted only in

the manner that they recover their costs

from those access-service consumers

that have no competitive alternative. We

implement this restriction on the

CLECs’ exercise of their monopoly

power by establishing a benchmark

level at which CLEC access rates will be

conclusively presumed to be just and

reasonable and at (or below) which they

may therefore be tariffed. Above the

benchmark, CLECs will be mandatorily

detariffed. The benchmark approach has

several virtues that recommend it.

13. First, a benchmark provides a

bright line rule that permits a simple

determination of whether a CLEC’s

access rates are just and reasonable.

Such a bright line approach is

particularly desirable given the current

legal and practical difficulties involved

with comparing CLEC rates to any

objective standard of ‘‘reasonableness.’’

Second, by permitting CLECs to file

access tariffs at or below a benchmark

rate, our interim approach continues to

allow the carriers on both sides of the

access transaction to enjoy the

convenience of a tariffed service. Third,

adopting a benchmark for tariffed rates

allows CLECs the flexibility to obtain

additional revenues from alternative

sources. They may obtain higher rates

through negotiation.

C. Level and Structure of the Tariff

Benchmark

14. In setting the level of our

benchmark, we seek, to the extent

possible, to mimic the actions of a

competitive marketplace, in which new

entrants typically price their product at

or below the level of the incumbent

provider. We conclude that the

benchmark rate, above which a CLEC

may not tariff, should eventually be

equivalent to the switched access rate of

the incumbent provider operating in the

CLEC’s service area. We do not,

however, immediately set the

benchmark rate at the competing ILEC

rate because such a flash cut likely

would be unduly detrimental to the

competitive carriers that have not

27894 Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations

previously been held to the regulatory

standards imposed on ILECs. Our

benchmark mechanism, with certain

exceptions, will permit CLECs initially

to tariff rates for their switched access

service of up to 2.5 cents per minute, or

the rate charged by the competing

incumbent LEC, whichever is higher.

For those carriers competing with ILECs

that have tariffed rates below the

benchmark (generally, the Bell operating

companies), the benchmark rate will

decline over the course of three years

until it reaches the competing ILEC’s

rate. For at least one additional year,

CLECs will be permitted to continue to

tariff this rate, even if we decide to

move other access traffic to a bill-andkeep regime. We also adopt rules to

ensure that no CLEC avails itself of our

benchmark scheme to increase its access

rates, and we adopt a separate

benchmark for certain firms operating in

rural areas.

15. In determining the initial level for

the safe harbor rates which may be

imposed by tariff, we use current CLEC

rates as a starting point for analysis

because, as noted, we lack an

established framework for translating

CLEC costs into access rates. By

analyzing the IXC data on actual

amounts billed and actual minutes of

use, we can calculate composite access

rates and largely avoid the problems

that arise from the fact that CLEC rate

structures vary widely and that many

rely, in part, on flat-rated, or distancesensitive, charges. Taken together, the

IXC submissions show a range of 0.4

cents to 9.5 cents per minute for CLECprovided switched access service. From

the underlying, individual CLEC data,

we have determined the average,

weighted by minutes of use, for tariffed

access rates.

16. It is important that the benchmark,

though within this range, also move

CLEC access charges appreciably closer

to the competing ILEC rate.

Accordingly, setting the initial

benchmark toward the lower end of the

range appears to be justified. Based on

our review of the universe and

concentration of tariffed access rates

being charged to these three IXCs, we

conclude that—again, subject to certain

exceptions that we discuss—our safe

harbor for CLEC tariffed access rates

will begin at 2.5 cents. This rate is

within the current range of rates, but

represents an appreciable reduction in

the tariffed rate for many CLECs.

17. We draw additional support for

this initial benchmark level from a

consensus solution submitted by parties

on both sides of the present dispute. In

comments to the Safe Harbor Public

Notice, 65 FR 77545, December 12,

2000, the Association for Local

Telecommunications Services (ALTS)

filed a proposed resolution, negotiated

with WorldCom, suggesting, in relevant

part, that a benchmark of 2.5 cents per

minute for CLEC tariffed access rates

would be a reasonable one in at least

some markets. It appears that this rate

is acceptable to a substantial number of

CLECs, although it represents a

significant reduction in access rates.

18. On the effective date of the rules

we promulgate today, CLECs will be

permitted (subject to a rural exemption

discussed) to tariff their access rates, for

those areas where they have previously

offered service, at either the benchmark

of 2.5 cents per minute, or the rate of the

corresponding incumbent carrier in the

study area of the relevant end-user

customer, whichever is higher. One year

after the effective date of these rules, the

benchmark rate will drop from 2.5 to 1.8

cents per minute, or the ILEC rate,

whichever is higher. On the second

anniversary of the rules’ effective date,

the rate will drop to 1.2 cents per

minute, or the ILEC rate, whichever is

higher. Finally, three years after the

rules become effective, the benchmark

figure will drop to the switched access

rate of the competing ILEC. It will

remain at that level through the rule’s

fourth year. We conclude that such a

transition period is appropriate because,

as discussed, we are concerned about

the effects of a flash-cut to the ILEC rate.

19. By moving CLEC tariffs to the

‘‘rate of the competing ILEC’’ we do not

intend to restrict CLECs to tariffing

solely the per-minute rate that a

particular ILEC charges for its switched,

interstate access service. We intend to

permit CLECs to receive revenues

equivalent to those the ILECs receive

from IXCs, whether they are expressed

as per-minute or flat-rate charges. For

example, CLECs shall be permitted to

set their tariffed rates so that they

receive revenues equivalent to those

that the ILECs receive through the

presubscribed interexchange carrier

charge (PICC), to the extent that it

survives in the wake of our CALLS

Order. This does not entitle CLECs to

build into their tariffed per-minute

access rates a component representing

the subscriber line charge (SLC) that

ILECs impose on their end users, or any

other charges that ILECs recover from

parties other than the IXCs to which

they provide access service.

20. A number of CLEC commenters

urge the Commission not to set the

benchmark at ‘‘the ILEC rate’’ because

they claim that CLECs structure their

service offerings differently than ILECs.

We seek to preserve the flexibility

which CLECs currently enjoy in setting

their access rates. Thus, in contrast to

our regulation of incumbent LECs, our

benchmark rate for CLEC switched

access does not require any particular

rate elements or rate structure; for

example, it does not dictate whether a

CLEC must use flat-rate charges or perminute charges, so long as the

composite rate does not exceed the

benchmark. Rather it is based on a perminute cap for all interstate switched

access service charges. In this regard,

there are certain basic services that

make up interstate switched access

service offered by most carriers.

Switched access service typically entails

a connection between the caller and the

local switch, a connection between the

LEC switch and the serving wire center

(often referred to as ‘‘interoffice

transport’’), and an entrance facility

which connects the serving wire center

and the long distance company’s point

of presence. Using traditional ILEC

nomenclature, it appears that most

CLECs seek compensation for the same

basic elements, however precisely

named common line charges; local

switching; and transport. The only

requirement is that the aggregate charge

for these services, however described in

their tariffs, cannot exceed our

benchmark. In addition, by permitting

CLECs to decide whether to tariff within

the safe harbor or to negotiate terms for

their services, we allow CLECs

additional flexibility in setting their

rates and the amount that they receive

for their access services.

21. We will apply the benchmark for

both originating and terminating access

charges. That is, it will apply to tariffs

for both categories of service, including

to toll-free, 8YY traffic, and will decline

toward the rate of the competing ILEC

for each category of service. We note,

however, that shortly before the

issuance of this order, AT&T raised

questions regarding the application of

our benchmark to originating 8YY traffic

generated by CLEC customers. Because

these issues arose so late in the

proceeding, and because of the sparse

record on them, we decline to do as

AT&T suggests and immediately detariff

this category of CLEC services above the

rate of the competing ILEC. Instead, in

this order, we solicit comment on the

issues AT&T has raised so that we may

decide them on an adequately

developed record.

22. Our benchmark mechanism may

create the possibility for carriers with

lower rates to raise their rates to the

benchmark. We seek to avoid this result,

which could have the consequence of

increasing the amount that IXCs pay for

some CLECs’ access service. This, in

turn, would again allow these CLECs to

Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations 27895

shift a portion of their costs onto the

long distance market generally.

Accordingly, we further restrict the

tariff benchmark that may be charged to

a particular IXC by tariff to the lower of:

(1) The 2.5 figure, declining as

discussed, or (2) the lowest rate that a

CLEC has tariffed for access, during the

6 months immediately preceding the

effective date of these rules. Any rate

above this level (unless it is still below

the competing ILEC’s rate) will be

conclusively deemed to be unreasonable

in any proceeding challenging the rate.

Additionally, we expect that our

benchmark rule will have no effect on

negotiated contracts, under which

CLECs have chosen to charge even more

favorable access rates to particular IXCs.

Rather, these contracts will remain in

place and the participating IXCs will

continue to be entitled to any lower

access rates for which they provide.

23. We also find that it is prudent to

permit CLECs to tariff the benchmark

rate for their access services only in the

markets where they have operations that

are actually serving end-user customers

on the effective date of these rules. We

intend the declining benchmark scheme

to wean competitive carriers off of their

dependence on tariffed, supra-ILEC

access rates without the disruption of a

flash-cut to the prevailing market rate.

We therefore think it important to

ensure that this transitional mechanism

serves that purpose, rather than

presenting CLECs with the opportunity

to enter additional markets in a

potentially inefficient manner through

reliance on tariffed access rates above

those of the competing ILEC.

Accordingly, we restrict the availability

of the transitional benchmark rate to

those metropolitan statistical areas

(MSAs) in which CLECs are actually

serving end users on the effective date

of these rules. In MSAs where they

begin serving end users after the

effective date of these rules, we permit

CLECs to tariff rates only equivalent to

those of the competing ILEC; they will

have to achieve rates above this level by

negotiation.

D. Safe Harbor Rates for Rural CLECs

24. Limiting CLECs to the higher of

the benchmark rate or the access rate of

its ILEC competitor could prove rather

harsh for some of the small number of

CLECs that operate in rural areas. The

difficulty would likely arise for those

CLECs that operate in a rural area served

by a price-cap incumbent with statewide operations. Our rules require such

ILECs to geographically average their

access rates. During the course of this

proceeding, we became concerned that

tying the access rates of rural CLECs to

those of such non-rural ILECs could

unfairly disadvantage CLECs that lacked

urban operations with which they could

similarly subsidize their service to rural

areas.

1. Whether To Create a Rural Exemption

25. We conclude that the record

supports the creation of a rural

exemption to permit rural CLECs

competing with non-rural ILECs to

charge access rates above those charged

by the competing ILEC. First, we note

that such a device is consistent with the

Commission’s obligations, under section

254(d)(3) of the Act and section 706 of

the 1996 Act, to encourage the

deployment to rural areas of the

infrastructure necessary to support

advanced telecommunications services

and of the services themselves. The

record indicates that CLECs often are

more likely to deploy in rural areas the

new facilities capable of supporting

advanced calling features and advanced

telecommunications services than are

non-rural ILECs, which are more likely

first to deploy such facilities in their

more concentrated, urban markets.

Given the role that CLECs appear likely

to play in bringing the benefits of new

technologies to rural areas, we are

reluctant to limit unnecessarily their

spread by restricting them to the access

rates of non-rural ILECs.

26. We are persuaded by the CLEC

comments indicating that they

experience much higher costs,

particularly loop costs, when serving a

rural area with a diffuse customer base

than they do when serving a more

concentrated urban or suburban area.

The CLECs argue that, lacking the

lower-cost urban operations that nonrural ILECs can use to subsidize their

rural operations, the CLECs should be

permitted to charge more for access

service, as do the small rural

incumbents that charge the National

Exchange Carrier Association (NECA)

schedule rates. We note in this regard

that a rural exemption will also create

parity between the rural CLECs

competing with NECA carriers and

those competing with non-rural ILECs.

27. In adopting the rural exemption,

we reject the characterization of the

exemption as an implicit subsidy of

rural CLEC operations. It is true that an

exemption scheme will permit rural

CLECs to charge IXCs more for access to

their end-user customers than was

charged by the non-rural ILECs from

whom the CLECs captured their

customers. The exemption we adopt

today merely deprives IXCs of the

implicit subsidy for access to certain

rural customers that has arisen from the

fact that non-rural ILECs average their

access rates across their state-wide

study areas.

28. Our level of comfort in creating a

rural exemption is markedly increased

by the fact that the record indicates it

likely will apply to a small number of

carriers serving a tiny portion of the

nation’s access lines. The Rural

Independent Competitive Alliance

(RICA) asserts that, fewer than 100,000

access lines are served by carriers falling

in the definition that it proffers for a

rural CLEC.

29. We reject AT&T’s argument that

CLECs must rely solely on the CALLS

Order’s interstate access support when

entering the territories of non-rural

ILECs. This interstate access support

mechanism is portable, but that does not

necessarily indicate that it fully reflects

the costs (above those recovered through

ILEC access rates) that a rural CLEC

would encounter in serving customers

in the high-cost areas for which the

subsidy is available.

30. We are also skeptical of AT&T’s

assertions about the incentives that

would flow from a rural exemption.

First, AT&T argues that the exemption

would ‘‘create perverse incentives for

uneconomic competitive entry by

CLECs in any ‘‘rural’’ areas in which it

might be applicable.’’ It appears from

the record that both AT&T and Sprint

have routinely been paying for CLEC

access billed at the rate charged by the

competing incumbent. If AT&T were

accurate in its projection about higher

access rates spurring a rash of

uneconomic market entry in rural areas,

such uneconomic entry should already

have occurred in the territories of the

rural incumbent carriers that charge the

higher NECA rates. However, the record

fails to indicate such a trend.

31. We thus conclude that the record

supports the creation of a rural

exemption to the benchmark scheme

that we adopt for CLEC access charges.

Under this exemption, a CLEC that is

operating in a rural area, as defined, and

that is competing against a non-rural

ILEC may tariff access rates equivalent

to those of NECA carriers.

2. Carriers Eligible for Rural Exemption

32. Administrative simplicity is an

important consideration in our choice of

a way to define rural CLECs. Thus, we

conclude that the availability of the

exemption (and the higher access rates

that come with it) should be determined

based on the CLEC’s entire service area,

not on a subscriber-by-subscriber basis.

Similarly, we are concerned that the

definition rely on objectively available

information that will not require

extensive calculation or analysis by

either carriers or this Commission.

27896 Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations

33. We conclude that the rural

exemption to our benchmark limitation

on access charges will be available for

a CLEC competing with a non-rural

ILEC, where no portion of the CLEC’s

service area falls within any

incorporated place of 50,000 inhabitants

or more, based on the most recently

available population statistics of the

Census Bureau or an urbanized area, as

defined by the Census Bureau. Thus, if

any portion of a CLEC’s access traffic

originates from or terminates to end

users located within either of these two

types of areas, the carrier will be

ineligible for the rural exemption to our

benchmark rule. Relying on information

that is readily and publicly available,

this definition excludes from the

exemption those CLECs operating

within reasonably dense areas that are

not typically considered to be rural. It

does not, however, exclude from

eligibility entire counties that border

high population areas, as would a

definition based on MSAs.

34. Sprint has raised the issue of how

best to ensure that the rural exemption

does not create the potential for abuse

and that it is restricted to CLECs that are

serving rural end users. Thus, Sprint is

concerned about the potential for

competitive carriers, with some

qualifying end users, creating two

separate operating entities so that the

one serving rural end users could tariff

the higher access rate permitted under

the exemption. While we want to

forestall that strategy for exploiting our

rule, we also realize that certain

incumbents with urban (or non-rural)

operations may choose to enter adjacent

rural markets as a competitive carrier.

To the extent that such carriers provide

the benefit of competition in rural

markets, their non-qualifying incumbent

operations should not operate entirely

to deny them the benefit of the rural

exemption. Accordingly, we decline

Sprint’s invitation to examine all of the

subsidiary operations of a holding

company in order to determine the

applicability of the rural exemption. We

expect that we will be able to address,

on a case-by-case basis, the improper

exploitation of our rule—such as a

competitive carrier’s splitting itself into

two subsidiaries to qualify, in part, for

the exemption rates where it would not

otherwise do so.

35. Our definition for rural CLECs

closely resembles the first major

division of the Act’s definition for rural

telephone companies. It departs from

the remaining three major divisions of

the definition either because they would

be administratively burdensome, or

because they would be overly inclusive

or irrational when applied solely to

CLECs. Our definition adopts 50,000,

rather than 10,000, as the population

cut-off for incorporated places because

we are concerned that, without the

statute’s remaining three portions of the

definition as a way for a company to

attain rural status, the 10,000-person

threshold would be unduly restrictive

and deny the exemption to companies

operating in areas that would generally

be viewed as rural.

36. This exemption will permit a

CLEC to tariff access rates above the

competing ILEC’s only when the

competing ILEC has broad-based

operations that include concentrated,

urban areas that allow it to subsidize its

rural operations and therefore charge an

artificially low rate for access to its rural

customers. We conclude that the most

effective and objective means of

accomplishing this is to allow the rural

exemption only to those CLECs that are

competing with price-cap ILECs that do

not qualify as ‘‘rural telephone

companies’’ under the Act’s definition.

Those CLECs competing with carriers

that qualify as rural under the Act’s

definition are excluded from the rural

exemption and are therefore limited,

under the rule we announced, to

tariffing access rates equal only to those

of the competing ILEC.

3. Rate for Exemption Carriers

37. The final question with respect to

the rural exemption is what the access

service benchmark is for those carriers

that qualify. We adopt the NECA tariff

for switched access service as the

standard that is the most appropriately

reflective of the considerations that

should go into pricing the access service

of rural CLECs. Accordingly, qualifying

rural CLECs may tariff rates at the level

of those in the NECA access tariff,

assuming the highest rate band for local

switching and the transport

interconnection charge, minus the

tariff’s carrier common line (CCL)

charge if the competing ILEC is subject

to our CALLS Order. Above this

benchmark, rural CLECs will be

mandatorily detariffed in their provision

of access services.

38. We adopt the NECA access rate

because it is tariffed on a regular basis

and is routinely updated to reflect

factors relevant to pricing rural carriers’

access service. We choose the highest

rate bands for the two variable rate

elements because the opportunity to

tariff those rates will most effectively

spur the development of local-service

competition in the nation’s rural

markets and because the burden created

by choosing the highest rate will be

relatively minor, owing to the small

number of carriers involved. We deny

rural CLECs the NECA tariff’s CCL

charge when they compete with a

CALLS ILEC because the price-cap

LECs’ CCL charge has been largely

eliminated through implementation of

higher subscriber line charge (SLC) caps

and the multi-line business PICC. CLECs

competing with CALLS ILECs are free to

build into their end-user rates a

component approximately equivalent to

(or slightly below) the ILEC’s SLC, as

well as assessing IXCs a multi-line

business PICC. These potential revenue

sources obviate the need for a CCL

charge, which NECA carriers use to

recover loop costs that cannot be

recovered because of their lower SLC

caps and the absence of PICCs.

E. Forbearance Analysis for Rates Above

the Benchmark

39. Section 10 of the Act requires,

inter alia, that the Commission forbear

from applying any regulation or

provision of the Act to

telecommunications carriers or

telecommunications services, or classes

thereof, if the Commission determines

that certain statutory conditions are

satisfied. Because section 10 permits us

to exercise our forbearance authority

with respect to classes of services, we

conduct a forbearance analysis only for

those CLEC interstate access services for

which the aggregate charges exceed our

benchmark. For this class of services,

we conclude that the section 10

forbearance criteria are satisfied;

accordingly, we must take action

pursuant to the terms of this statute.

40. Under the first criterion for

forbearance, we examine whether our

tariff filing requirements for CLEC

interstate access services priced above

the benchmark are necessary to ensure

that rates for these services are just and

reasonable and not unreasonably

discriminatory. We conclude they are

not. As noted, CLECs are positioned to

wield market power with respect to

access service. Requiring CLECs to

negotiate with their IXC customers in

order to obtain access rates above the

benchmark will limit the CLECs’ ability

to exercise this market power and

unilaterally impose rates above the level

that we have found to be presumptively

reasonable.

41. We are not persuaded by CLEC

commenters that contend they will be

unable to negotiate agreements with

IXCs because IXCs wield significant

market power in the purchase of access

services. We find these claims of IXC

monopsony power unsupported in the

record. We note that three major IXCs

are purchasers in the market for access

services, and numerous smaller players

also purchase LEC access services.

Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations 27897

Moreover, we note that our tariff rules

were historically intended to protect

purchasers of services from monopoly

providers, not to protect sellers from

monopsony purchasing power. We

conclude that other remedies, like those

under the antitrust laws, are available to

protect CLECs from the exploitation of

any monopsony power that IXCs may

possess.

42. Under the second forbearance

criterion, we must determine whether

tariffing of CLEC access charges above

the benchmark is necessary to protect

consumers. Requiring negotiation of

access rates above the benchmark will

provide greater assurance that the rates

are just and reasonable and will likely

prevent CLECs from using long distance

ratepayers to subsidize their operational

and build-out expenses. It is possible

that the reduction of CLEC access

revenue caused by the benchmark

scheme will increase the rates CLECs

charge their end users. However, all

CLEC end users have competitive

alternative service providers, in the

form of regulated incumbents. We are

therefore not concerned that any

increase in CLEC end-user rates will

unduly harm consumers. To the extent

that this provision requires us to

examine the effect on the IXC

consumers of CLEC access services,

mandatory detariffing likely will protect

that group by removing the CLEC’s

ability unilaterally to impose excessive

rates through the tariff process.

43. The third forbearance criterion

requires that we determine whether

mandatory detariffing of CLEC access

services priced above the benchmark is

consistent with the public interest and,

in particular, whether it will promote

competitive market conditions. We

conclude, as discussed, that adopting

mandatory detariffing for access rates in

excess of the safe harbor limit will

subject to negotiation between two

willing parties any access services

offered at a rate above the benchmark.

The negotiation-driven approach that

we adopt will provide a better

mechanism for IXCs to control costs,

since they will not be subject to tariffs

with unilaterally established rates at

excessive levels. In addition, our

benchmark system, with its

presumption that qualifying rates are

reasonable, will provide greater

certainty for CLECs that they will

receive full compensation for the access

services that they provide. By limiting a

CLEC’s ability to shift its start-up costs

onto the long-distance market, our

benchmark approach will restrict

market entry to the efficient providers.

Accordingly, mandatory detariffing of

CLEC access services above the

benchmark fulfills all three of the

criteria for forbearance.

III. Interconnection Obligations

44. Although we have created a safe

harbor for CLEC access rates, within

which they will be presumed to be just

and reasonable, the question remains of

whether and under what circumstances

an IXC can decline to provide service to

the end users of a CLEC.

A. Interconnection and Sections 201

and 251

45. Sections 201(a) and 251(a)(1) do

not expressly require IXCs to accept

traffic from, and terminate traffic to, all

CLECs, regardless of their access rates.

The Commission has previously found

that a section 251(a)(1) duty to

interconnect, directly or indirectly, is

central to the Communications Act and

achieves important policy objectives.

However, the Commission construed the

statute to require only the physical

linking of networks, not to impose

obligations relating to the transport and

termination of traffic. Section 201

empowers the Commission, after a

hearing and a determination of the

public interest, to order the physical

connection of networks and to establish

routes and charges for certain

communications. This also falls short of

creating the blanket duty that the CLECs

seek to impose on the IXCs to accept all

access service, regardless of the rate at

which it is offered. Certainly, we have

made no finding that the public interest

dictates such broad acceptance of access

service, whatever its price.

Nevertheless, we conclude that section

201(a) places certain limitations on an

IXC’s ability to refuse CLEC access

service.

46. We agree that universal

connectivity is an important policy goal

that our rules should continue to

promote. The public has come to value

and expect the ubiquity of the nation’s

telecommunications network.

Accordingly, any solution to the current

problem that allows IXCs unilaterally

and without restriction to refuse to

terminate calls or indiscriminately to

pick and choose which traffic they will

deliver would result in substantial

confusion for consumers, would

fundamentally disrupt the workings of

the public switched telephone network,

and would harm universal service.

47. We therefore conclude that an IXC

that refuses to provide service to an end

user of a CLEC charging rates within the

safe harbor, while serving the customers

of other LECs within the same

geographic area, would violate section

201(a). That section imposes on

common carriers the obligation to

furnish communication service ‘‘upon

reasonable request therefor.’’ As set out

above, we will conclusively presume

that a CLEC’s access rates are reasonable

if they fall at or below the benchmark

that we establish herein. When an IXC’s

end-user customer attempts to place a

call either from or to a local access line,

that customer makes a request for

communication service—from the

originating LEC, the IXC and the

terminating LEC. When that customer

attempts to call from and/or to an access

line served by a CLEC with

presumptively reasonable rates, that

request for communications service is a

reasonable one that the IXC may not

refuse without running afoul of section

201(a). This obligation may be enforced

through a section 208 complaint before

the Commission.

B. Section 214 and Discontinuance of

Service

48. Section 214 of the

Communications Act and 63.71 of the

Commission’s rules govern an IXC’s

withdrawal of service. Section 214 of

the Communications Act provides, in

relevant part, that ‘‘[n]o carrier shall

discontinue, reduce, or impair service to

a community, or part of a community,

unless and until there shall first have

been obtained from the Commission a

certificate that neither the present nor

future public convenience and necessity

will be adversely affected thereby.’’ In

light of the solution we adopt herein, we

need not address the application of

either section 214 or our rule 63.17.

49. We conclude that it would be a

violation of section 201(a) for an IXC to

refuse CLEC access service, either

terminating or originating, where the

CLEC has tariffed access rates within

our safe harbor and, in the case of

originating access, where the IXC is

already providing service to other

members in the same geographical area.

Since section 201(a) already prohibits

such a withdrawal of service, we need

not address the question of whether

section 214 applies to an IXC that finds

itself in that position.

50. The remaining possible scenario

to which section 214 might apply is that

in which a CLEC wishes to charge

access rates above our benchmark and

an IXC will not agree to pay them.

Under the rules we adopt today, a CLEC

must charge the benchmark rate during

the pendency of negotiations or if the

parties cannot agree to a rate in excess

of the benchmark. In either case, since

the benchmark rate is conclusively

presumed reasonable, an IXC cannot

refuse to provide service to an end user

served by the CLEC without violating

27898 Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations

section 201. Here again, we need not

address the applicability of section 214.

IV. Procedural Matters

A. Paperwork Reduction Act

51. The action contained herein has

been analyzed with respect to the

Paperwork Reduction Act of 1995 (PRA)

and found to impose new or modified

reporting and/or recordkeeping

requirements or burdens on the public.

Implementation of these new or

modified reporting and/or

recordkeeping requirements will be

subject to approval by the Office of

Management and Budget (OMB) as

prescribed by the PRA, and will go into

effect upon announcement in the

Federal Register of OMB approval.

B. Final Regulatory Flexibility Analysis

52. As required by the Regulatory

Flexibility Act (RFA), an Initial

Regulatory Flexibility Analysis (IRFA)

was incorporated in the Pricing

Flexibility Order and Further Notice, 64

FR 51280, September 22, 1999. The

Commission sought written comments

on the proposals in the Pricing

Flexibility Order and Further Notice,

including the IRFA. The Commission’s

Final Regulatory Flexibility Analysis

(FRFA) in this order conforms to the

RFA, as amended.

1. Need for, and Objectives of, the

Proposed Action

53. With this order, we address a

number of interrelated issues

concerning charges for interstate

switched access services provided by

competitive local exchange carriers

(CLECs) and the obligations of

interexchange carriers (IXCs) to

exchange access traffic with CLECs. In

so doing, we seek to ensure, by the least

intrusive means possible, that CLEC

access charges are just and reasonable.

We also seek to reduce regulatory

arbitrage opportunities that previously

have existed with respect to tariffed

CLEC access services. This order is

designed to spur more efficient local

competition and to avoid disrupting the

development of competition in the local

telecommunications market.

54. We accomplish these goals by

revising our tariff rules more closely to

align tariffed CLEC access rates with

those of the incumbent LECs. Under the

detariffing regime we adopt, CLEC

access rates that are at or below the

benchmark that we set will be presumed

to be just and reasonable and CLECs

may impose them by tariff. Above the

benchmark, CLEC access services will

be mandatorily detariffed, so CLECs

must negotiate higher rates with the

IXCs. However, to avoid too great a

disruption for competitive carriers

(many of which may fall within the

SBA’s definition of a small entity), we

implement this approach in a way that

will cause CLEC tariffs to ramp down

over time until they reach the level

tariffed by the incumbent LEC. This

mechanism will mimic the operation of

the marketplace, as competitive LECs

ultimately will have tariffed rates at or

below the prevailing market price. At

the same time, this approach maintains

the ability of CLECs to negotiate access

service arrangements with IXCs at any

mutually agreed upon rate. In this order,

we also make clear that an IXC’s refusal

to serve the customers of a CLEC that

tariffs access rates within our safe

harbor constitutes a violation of the

duty of all common carriers to provide

service upon reasonable request.

2. Summary of Significant Issues Raised

by Public Comment in Response to the

IRFA

55. In the Pricing Flexibility Order

and Further Notice, we sought comment

on various, alternative proposals to

prevent CLECs from charging

unreasonable rates for their switched

access services. In the IRFA, we

tentatively concluded that the proposed

rule changes would have no effect on

the administrative burdens of

competitive LECs because they would

have no additional filing requirement.

In response to the Further Notice, we

received comments from more than 40

parties and held a series of ex parte

meetings addressing these issues.

Among those parties, only ALLTEL and

the Rural Independent Competitive

Alliance (RICA) commented specifically

on the IRFA.

56. We disagree with ALLTEL’s

contention that the Commission’s IRFA

was incomplete. ALLTEL argues that the

Commission, in the IRFA, did not

adequately address proposals in the

Further Notice that might affect

originating access and ‘‘open-end’’

access services; the potential burden on

CLECs to modify their tariffs or to

eliminate those tariffs and negotiate

individual contracts; and potential

burdens on other carriers, such as ILECs

(which, ALLTEL asserts, might have to

modify their tariffs and perform cost

studies). To the contrary, for several

different reasons, we conclude that the

IRFA gave adequate notice of our

proposals to address CLEC access

service. First, we chose to discuss, in

the IRFA, the primary proposals set out

in the Notice, though we sought

comment in the Notice on a number of

variations to those primary proposals.

Thus, while the IRFA only expressly

mentions proposals to address

terminating access, it includes crossreferences to the text of the Further

Notice, which discusses all variations of

the Commission’s proposals. Moreover,

we observe that the Further Notice and

the IRFA were sufficient to generate a

very sizable record, including comments

from many competitive LECs that likely

would be considered small businesses

under the closest applicable SBA

definition. The IRFA provided sufficient

information so that the public could

react to the Commission’s proposals in

an informed manner.

57. Second, with respect to the

administrative burdens associated with

our proposals in the Further Notice, we

have reconsidered our tentative

conclusion to adopt mandatory

detariffing. We note that many

commenters, large and small, oppose

the Commission’s proposal to adopt

mandatory detariffing for all CLEC

access services. These commenters, like

ALLTEL, argue that while mandatory

detariffing would reduce burdens

associated with filing tariffs, it would

increase administrative burdens overall

by imposing greater transaction costs on

CLECs and IXCs. Having received these

almost unanimous comments, we

conclude that we should not adopt our

proposal to implement mandatory

detariffing, at this time. Rather, we only

adopt mandatory detariffing to the

extent that a CLEC chooses to charge a

rate that exceeds our defined

benchmark. Under this approach, CLECs

and IXCs—both large and small— will

be able to continue to enjoy the benefits

of a tariffed service.

58. Similarly, we take into account

RICA’s assertion that mandatory

detariffing, as proposed, might cause

particular hardship for CLECs operating

in rural areas. Again, we have factored

these comments into our decision to

adopt a benchmark system, pursuant to

which CLECs will continue to be

permitted to file tariffs for their

switched access services. Thus, we

believe that our approach adequately

addresses the concerns of these CLEC

commenters. Moreover, we restate that

our decision to detariff rates above the

benchmark was motivated by our

conclusion that rates above that level

would be excessive (absent an

agreement between the parties) and

would place an inappropriate burden on

IXCs and long distance customers. In

this regard, we note that even the small

CLECs covered by our RFA analysis are

clearly prohibited by the Act and our

rules from charging unjust or

unreasonable rates. This order is

designed to prevent such unjust or

unreasonable rates.

Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations 27899

59. Finally, we reject ALLTEL’s

assertion that the proposals in the

Notice would place additional

regulatory burden on ILECs. The

proposals applied solely to CLECs and

IXCs and we find ALLTEL’s arguments

to be unsupported in the record.

60. Although not responding

specifically to the IRFA, many parties

commented generally on the potential

regulatory burdens associated with the

Commission’s various proposals. In

brief, IXC commenters typically sought

a mechanism to constrain CLEC access

charges. In contrast, CLEC commenters

typically sought to preserve their

freedom to set access rates as they

choose. We note that there are small

entities on both sides of this debate. We

encourage readers of this FRFA also to

consult the complete text of this order,

which describes in detail our analysis of

the issues.

3. Description and Estimate of the

Number of Small Entities To Which the

Rules Apply

61. The RFA directs agencies to

provide a description of and, where

feasible, an estimate of the number of

small entities that may be affected by

the proposed rules, if adopted. To

estimate the number of small entities

that may be affected by the proposed

rules, we first consider the statutory

definition of ‘‘small entity’’ under the

RFA. The RFA generally defines ‘‘small

entity’’ as having the same meaning as

the term ‘‘small business,’’ ‘‘small

organization,’’ and ‘‘small governmental

jurisdiction.’’ In addition, the term

‘‘small business’’ has the same meaning

as the term ‘‘small business concern’’

under the Small Business Act, unless

the Commission has developed one or

more definitions that are appropriate to

its activities. Under the Small Business

Act, a ‘‘small business concern’’ is one

that is independently owned and

operated; is not dominant in its field of

operation; and meets any additional

criteria established by the SBA. The

SBA has defined a small business for

Standard Industrial Classification (SIC)

categories 4812 (Radiotelephone

Communications) and 4813 (Telephone

Communications, Except

Radiotelephone) to be small entities

when they have no more than 1,500

employees.

62. The rules adopted in this order

apply to CLECs and IXCs. Neither the

Commission nor the SBA has developed

a definition of small CLECs or small

IXCs. The closest applicable definition

for these carrier-types under SBA rules

is for telephone communications

companies other than radiotelephone

(wireless) companies. The most reliable

source of information regarding the

number of these carriers nationwide of

which we are aware appears to be the

data that telecommunications carriers

file annually in connection with the

Commission’s universal services

requirements. According to our most

recent data, 349 companies reported

that they were engaged in the provision

of either competitive access services or

competitive local exchange services

(referred to collectively as CLECs) and

204 companies reported that they were

engaged in the provision of

interexchange services. Among these

companies, we estimate that

approximately 297 of the CLECs have

1500 or fewer employees and that

approximately 163 of the IXCs have

1500 or fewer employees. Although it

seems certain that some of these carriers

are not independently owned and

operated, we are unable at this time to

estimate with greater precision the

number of these carriers that would

qualify as small business concerns

under SBA’s definition. Consequently,

we estimate that there are 297 or fewer

small CLECs, and 163 or fewer small

IXCs that may be affected by the

decisions and rules adopted in this

order.

4. Description of Reporting,

Recordkeeping, and Other Compliance

Requirements

63. ALLTEL asserts that the

Commission’s proposals in the Further

Notice ‘‘could require CLECs to modify

their tariffs or to eliminate those tariffs

and negotiate individual contracts.’’

This argument was echoed by other

commenters who assert that the

Commission’s proposal to adopt

mandatory detariffing would increase

carriers’ transaction costs, even though

tariff filing requirements would be

eliminated. We acknowledge these

concerns and have decided not to adopt

mandatory detariffing for all CLEC

switched access services, at this time.

64. Thus, pursuant to this order, we

allow competitive LECs to continue to

file tariffs, as long as the rates for those

services are within the defined safe

harbor. We recognize that many

CLECs—we estimate between 100–150

CLECs—may be required to re-file their

tariffs in order to comply with this

order. Given that ALTS, an organization

which represents many CLECs, has

supported this proposal, we believe that

any increased burden will be

outweighed by the benefits associated

with resolving these issues. Further, we

conclude that it is a burden that is

justified by the Act’s requirement that

all rates be just and reasonable. We are

optimistic that this approach will

provide a bright line rule that permits a

simple determination as to whether

CLEC access charges are just and

reasonable and, at the same time, will

enable both sellers and purchasers of

CLEC access services to avail

themselves of the convenience of a

tariffed service offering. Thus, we

believe that this approach should

minimize reporting and recordkeeping

requirements on IXCs and CLECs,

including any small entities, while also

providing carriers with considerable

flexibility.

5. Steps Taken to Minimize Significant

Economic Impact on Small Entities, and

Significant Alternatives Considered

65. Through this order, we seek to

resolve contentious issues that have

arisen with respect to CLEC switched

access services. Because there are both

small entity IXCs and small entity

CLECs ‘‘ often with conflicting interests

in this proceeding—we expect that

small entities will be affected by any

approach that we adopt. As discussed,

we conclude that our approach best

balances these goals by removing

opportunities for regulatory arbitrage

and minimizing the burdens placed on

carriers.

66. In this order, we adopt a

benchmark approach to CLEC access

charges. We find that this approach will

minimize the impact of the rules on

small entities in several ways. First, it

allows small business CLECs to

continue to enjoy the convenience of

offering a tariffed service, an advantage

sought by CLECs, many of which may

be relatively new and small businesses.

Second, it will enable small IXCs to

purchase most access services via tariff,

rather than having to negotiate

agreements with every CLEC. Finally,

our approach ensures that IXCs will

continue to accept and pay for CLEC

switched access services, as long as the

CLEC tariffs rates within the

Commission’s benchmarks. Many

CLECs argued that such an outcome was

essential for new, relatively small

CLECs to continue to offer services.

67. In this order, we consider and

reject several alternatives to the

benchmark approach. In particular, we

also considered continuing to rely on

market forces to constrain CLEC

switched access charges; adopting a

mandatory detariffing policy, which

would prohibit CLECs from filing any

tariffs for their switched access services;

and, subjecting CLECs to the panoply of

regulation with which incumbents must

comply.

68. Although many CLECs contend

that the Commission need not take any

particular action with respect to CLEC

27900 Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations

switched access charges, we disagree.

We conclude that our action is

compelled by several factors, including

our desire to reduce regulatory arbitrage

opportunities and to revise our rules to

allow competitive market forces to

constrain CLEC access charges; growing

evidence that CLEC switched access

charges do not appear to be constrained

by market forces; significant concerns

that allowing IXCs to refuse to exchange

traffic without restriction may lead to a

decline in the universal connectivity

upon which telephone users have come

to rely.

69. On the other hand, we do not

impose mandatory detariffing for all

CLEC switched access services because

we believe that our benchmark

approach will provide a less drastic

alternative for carriers, including small

entity CLECs and small entity IXCs. For

example, by enabling CLECs to continue

to file tariffs within a safe harbor range,

we respond to concerns expressed by

many CLECs that complete detariffing of

CLEC services would cause significantly

increased transaction costs. We note, as

well, that many IXC commenters

supported this solution.

70. We also conclude that our

benchmark approach is more desirable

than subjecting CLECs to the panoply of

ILEC regulation. The Commission has

long stated its desire to allow

competitive forces to constrain access

charges. By adopting a benchmark

approach, we continue to allow CLECs

to tariff their services, while ensuring

IXCs and long distance customers,

generally, that CLEC rates will be just

and reasonable. We note that no

commenter favors subjecting CLECs to

dominant carrier regulation.

71. We also adopted a transition

mechanism that should minimize the

impact of the decision on all carriers,

including small entities. While we

considered adopting a benchmark that

would immediately drop CLEC access

rates to that level charged by the

competing incumbent LEC, we instead

implement the benchmark through a

three-year transition. This will allow

CLECs, including any small businesses,

a period of flexibility during which they

can conform their business models to

the new market paradigm that we adopt,

herein. At the same time, by effecting

significant reductions in switched

access charges immediately, we will

minimize the impact that excessive

access rates might have on IXCs,

including any small businesses. We

believe that this transition should

significantly reduce the impact of this

order on small businesses.

72. In addition, by clarifying rules for

the transport and origination of traffic

between CLECs and IXCs, this order

should continue to ensure the ubiquity

of a fully interconnected

telecommunications network that

consumers have come to expect. We

considered counter-proposals from

some carriers that there should be no

obligation to exchange traffic; however,

we believe that our approach will best

satisfy the expectations of end users

who have come to rely on a seamless,

fully-interconnected telephone network.

Further, these rules should provide

considerable assurance to CLECs, many

of which may be small businesses, that

seek to offer their customers access to

the broadest range of IXCs possible.

Many of these CLECs asserted that,

without such a rule, larger, more

established IXCs likely would refuse to

exchange traffic with them, essentially

driving them out of business. Our rules

should address this concern by

requiring IXCs to exchange traffic with

CLECs that tariff rates within the

benchmark, where IXCs already

exchange traffic with other carriers in

the same geographic area.

73. Overall, we believe that this order

best balances the competing goals that

we have for our rules governing CLEC

switched access charges. We have not

identified any additional alternatives

that would have further limited the

impact on small entities across-theboard while remaining consistent with

Congress’ pro-competitive objectives set

out in the 1996 Act.

74. Report to Congress: The

Commission will send a copy of this

CLEC Access Charge Reform Order,

including this FRFA, in a report to be

sent to Congress pursuant to the

Congressional Review Act. See 5 U.S.C.

801(a)(1)(A). In addition, the

Commission will send a copy of this

CLEC Access Charge Reform Order,

including FRFA, to the Chief Counsel

for Advocacy of the Small Business

Administration. A copy of the CLEC

Access Charge Reform Order and FRFA

(or summaries thereof) will also be

published in the Federal Register. See

5 U.S.C. 604(b).

V. Ordering Clauses

75. Pursuant to sections 1–5, 201–205,

303(r), 403, 502, and 503 of the

Communications Act of 1934, as

amended, this Report and Order, with

all attachments, including revisions to

part 61 of the Commission’s rules, is

hereby adopted.

76. The rule revisions adopted in this

Order shall become effective thirty days

after publication in the Federal

Register.

77. The Commission’s Consumer

Information Bureau, Reference

Information Center, shall send a copy of

this CLEC Access Charge Order,

including the Final and Initial

Regulatory Flexibility Analyses, to the

Chief Counsel for Advocacy of the Small

Business Administration.

List of Subjects in 47 CFR Part 61

Communications common carriers,

Reporting and recordkeeping

requirements, Telephone.

Federal Communications Commission.

William F. Caton,

Deputy Secretary.

Final Rules

For the reasons discussed in the

preamble, the Federal Communications

Commission amends 47 CFR part 61 as

follows:

PART 61—TARIFFS

Subpart C—General Rules for

Nondominant Carriers

1. The authority citation for part 61

continues to read as follows:

Authority: 47 U.S.C. 1, 4(i), 4(j), 201–205

and 403 unless otherwise noted.

2. Add § 61.26 to subpart C to read as

follows:

§ 61.26 Tariffing of competitive interstate

switched exchange access services.

(a) Definitions. For purposes of this

section 61.26, the following definitions

shall apply:

(1) CLEC shall mean a provider of

interstate exchange access services that

does not fall within the definition of

‘‘incumbent local exchange carrier’’ in

47 U.S.C. 251(h).

(2) Competing ILEC shall mean the

incumbent local exchange carrier, as

defined in 47 U.S.C. 251(h), that would

provide interstate exchange access

service to a particular end user if that

end user were not served by the CLEC.

(3) Interstate switched exchange

access services shall include the

functional equivalent of the ILEC

interstate exchange access services

typically associated with following rate

elements: carrier common line

(originating); carrier common line

(terminating); local end office switching;

interconnection charge; information

surcharge; tandem switched transport

termination (fixed); tandem switched

transport facility (per mile); tandem

switching.

(4) Non-rural ILEC shall mean an

incumbent local exchange carrier that is

not a rural telephone company under 47

U.S.C. 153(37).

(5) The rate for interstate switched

exchange access services shall mean the

composite, per-minute rate for these

Federal Register / Vol. 66, No. 98 / Monday, May 21, 2001 / Rules and Regulations 27901

services, including all applicable fixed

and traffic-sensitive charges.

(6) Rural CLEC shall mean a CLEC

that does not serve (i.e., terminate traffic

to or originate traffic from) any end

users located within either:

(i) Any incorporated place of 50,000

inhabitants or more, based on the most

recently available population statistics

of the Census Bureau or

(ii) An urbanized area, as defined by

the Census Bureau.

(b) Except as provided in paragraphs

(c) and (e) of this section, a CLEC shall

not file a tariff for its interstate switched

exchange access services that prices

those services above the higher of:

(1) The rate charged for such services

by the competing ILEC or

(2) The lower of:

(i) The benchmark rate described in

paragraph (c) of this section or

(ii) The lowest rate that the CLEC has

tariffed for its interstate exchange access

services, within the six months

preceding June 20, 2001.

(c) From June 20, 2001 until June 20,

2002, the benchmark rate for a CLEC’s

interstate switched exchange access

services will be $0.025 per minute.

From June 20, 2002 until June 20, 2003,

the benchmark rate for a CLEC’s

interstate switched exchange access

services will be $0.018 per minute.

From June 20, 2003 until June 21, 2004,

the benchmark rate for a CLEC’s

interstate switched exchange access

services will be $0.012 per minute. After

June 20, 2005, the benchmark rate for a

CLEC’s interstate switched exchange

access services will be the rate charged

for similar services by the competing

ILEC, provided, however, that the

benchmark rate for a CLEC’s interstate

switched exchange access services will

not move to bill-and-keep, if at all, until

June 20, 2005.

(d) Notwithstanding paragraphs (b)

and (c) of this section, in the event that,

after June 20, 2001, a CLEC begins

serving end users in a metropolitan

statistical area (MSA) where it has not

previously served end users, the CLEC

shall not file a tariff for its interstate

exchange access services in that MSA

that prices those services above the rate

charged for such services by the

competing ILEC.

(e) Rural exemption. Notwithstanding

paragraphs (b) through (3) of this

section, a rural CLEC competing with a

non-rural ILEC shall not file a tariff for

its interstate exchange access services

that prices those services above the rate

prescribed in the NECA access tariff,

assuming the highest rate band for local

switching and the transport

interconnection charge. If the competing

ILEC is subject to the Commission’s

CALLS Order, 65 FR 38684, June 21,

2000, this rate shall be reduced by the

NECA tariff’s carrier common line

charge.

[FR Doc. 01–12758 Filed 5–18–01; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF THE INTERIOR

Fish and Wildlife Service

50 CFR Part 17

RIN 1018–AF61

Endangered and Threatened Wildlife

and Plants; Final Rule for Endangered

Status for Astragalus pycnostachyus

var. lanosissimus (Ventura marsh milkvetch)

AGENCY: Fish and Wildlife Service,

Interior.

ACTION: Final rule.

SUMMARY: We, the U.S. Fish and

Wildlife Service (Service), determine

endangered status for Astragalus

pycnostachyus var. lanosissimus

(Ventura marsh milk-vetch) pursuant to

the Endangered Species Act (Act) of

1973, as amended. Historically known

from a three-county region in coastal

southern California, A. pycnostachyus

var. lanosissimus was believed extinct

until its rediscovery in 1997. The only

known extant population of this

recently rediscovered plant occurs in

Ventura County, California, on less than

1 acre of degraded dune habitat that was

previously used for disposal of

petroleum wastes. The most significant

current threats to A. pycnostachyus var.

lanosissimus are direct destruction of

this population from proposed soil

remediation, residential development,

and associated activities. This taxon is

also threatened by unanticipated

human-caused and natural events that

could eliminate the single remaining

population. Competition from nonnative

invasive plant species is an additional

threat. This action will extend the Act’s

protection to this plant.

EFFECTIVE DATE: This rule is effective

June 20, 2001.

ADDRESSES: The complete file for this

rule is available for inspection, by

appointment, during normal business

hours at the Ventura Fish and Wildlife

Office, U.S. Fish and Wildlife Service,

2493 Portola Road, Suite B, Ventura,

California 93003.

FOR FURTHER INFORMATION CONTACT: Rick

Farris or Lois Grunwald, Ventura Fish

and Wildlife Office, at the address above

(telephone 805/644–1766; facsimile

805/644–3958).

SUPPLEMENTARY INFORMATION:

Background

Astragalus pycnostachyus var.

lanosissimus (Ventura marsh milkvetch) was first described by Per Axel

Rydberg (1929) as Phaca lanosissima

from an 1882 collection by S.B. and

W.F. Parish made from ‘‘La Bolsa,’’

probably in what is now Orange County,

California. The combination A.

pycnostachyus var. lanosissimus was

assigned to this taxon by Philip Munz

and Jean McBurney in 1932 (Munz

1932).

Astragalus pycnostachyus var.

lanosissimus is a herbaceous perennial

in the pea family (Fabaceae). It has a

thick taproot and multiple erect, reddish

stems, 40 to 90 centimeters (cm) (16 to

36 inches (in)) tall, that emerge from the

root crown. The pinnately compound

leaves are densely covered with silvery

white hairs. The 27–39 leaflets are 5 to

20 millimeters (mm) (0.2 to 0.8 in) long.

The numerous greenish-white to cream

colored flowers are in dense clusters

and are 7 to 10 mm (0.3 to 0.4 in) long.

The calyx teeth are 1.2 to 1.5 mm (0.04

in) long. The nearly sessile, singlecelled pod is 8 to 11 mm (0.31 to 0.43

in) long (Barneby 1964). The blooming

time has been recorded as July to

October (Barneby 1964); however, the

one extant population was observed in

flower in June 1997. This variety is

distinguished from A. pycnostachyus

var. pycnostachyus by the length of

calyx tube, calyx teeth, and peduncles.

It is distinguished from other local

Astragalus species by its size, perennial

habit, size and shape of fruit, and

flowering time.

The type locality is ‘‘La Bolsa,’’ where

the plant was collected in 1882 by S.B.

and W.F. Parish (Barneby 1964). Based

on the labeling of other specimens

collected by the Parishes in 1881 and

1882, Barneby (1964) suggested that this

collection may have come from the

Ballona marshes in Los Angeles County.

However, Critchfield (1978) believed

that ‘‘La Bolsa’’ could easily have

referred to Bolsa Chica, a coastal marsh

system located to the south in what is

now Orange County. He noted that

Orange County was not made a separate

county from Los Angeles until 1889, 7

years after the Parish’s collection was

made. In the five decades following its

discovery, Astragalus pycnostachyus

var. lanosissimus was collected from

about four locations in Los Angeles and

Ventura counties, three of which are

near one another. In Los Angeles County

it was collected from near Santa Monica

in 1882, the Ballona marshes just to the

south in 1902, and ‘‘Cienega’’ in 1904,

also likely near the Ballona wetlands. In