# Modernizing Unbundling and Resale Requirements in an Era of Next-Generation Networks and Services

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-25254

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** January 8, 2021
- **Citation:** 86 FR 1636

## Text

FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 51
[WC Docket No. 19-308; FCC 20-152; FRS 17221]
Modernizing Unbundling and Resale Requirements in an Era of Next-Generation Networks and Services

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

In this document, the Commission eliminates unbundling requirements, subject to reasonable transition periods, for enterprise-grade DS1 and DS3 loops here there is evidence of actual and potential competition, for broadband-capable DS0 loops and subloops in the most densely populated areas, for operations support systems nationwide except for the purposes of managing remaining UNEs, number portability, and interconnection, and for voice-grade narrowband loops, multiunit premises subloops, and network interface devices nationwide. The Commission preserves unbundling requirements for DS0 loops in less densely populated areas and DS1 and DS3 loops in areas without sufficient evidence of competition. The Commission further eliminates unbundled dark fiber transport provisioned from wire centers within a half-mile of competitive fiber networks, but provides an eight-year transition period for existing circuits so as to avoid stranding investment and last-mile deployment by competitive LECs that may harm consumers. The
Report and Order
also forbears from remaining Avoided-Cost Resale obligations. In all, the Commission ends unbundling and resale requirements where they stifle technology transitions and broadband deployment, but preserves unbundling requirements where they are still necessary to realize the 1996 Act's goal of robust intermodal competition benefiting all Americans.

DATES:

Effective February 8, 2021.

FOR FURTHER INFORMATION CONTACT:

For further information, please contact Megan Danner, Competition Policy Division, Wireline Competition Bureau, at
Megan.Danner@fcc.gov,
202.418.1151.

SUPPLEMENTARY INFORMATION:

The full text of this document, WC Docket No. 19-308; FCC 20-1522, adopted on October 27, 2020, and released on October 28, 2020, is available for public inspection on the Commission's website at:
https://docs.fcc.gov/public/attachments/FCC-20-152A1.pdf.

I. Introduction

1. The Telecommunications Act of 1996 (the 1996 Act) changed the focus of telecommunications law and policy from the regulation of monopolies to the encouragement of robust intermodal competition. Few of its effects were as consequential as ending the local exchange monopolies held by incumbent local exchange carriers (LECs) and opening local markets to competition. To facilitate new entry into the local exchange market, the 1996 Act imposed special obligations on incumbent LECs, including requirements to offer these new competitive carriers unbundled network elements and retail telecommunications services for resale, both on a rate-regulated basis.

2. In the nearly quarter-century since the passage of the 1996 Act, the telecommunications marketplace has transformed from a marketplace dominated by monopolies to a marketplace characterized by competition and technological innovation. Former monopolist incumbent LECs are now one of many intermodal competitors, facing fierce competition from competitive LECs, cable providers, and wireless providers, among others. And that competition has itself shifted from siloed markets to the internet, as increasingly local and long distance voice, data, video, and nearly all communications technologies are delivered via broadband connections. The Commission has repeatedly adjusted the incumbent LEC-specific obligations in the 1996 Act to account for changed circumstances.

3. In this document, we continue on that path of modernizing our unbundling and resale regulations. We eliminate unbundling requirements, subject to a reasonable transition period, for enterprise-grade DS1 and DS3 loops where there is evidence of actual and potential competition, for broadband-capable DS0 loops in the most densely populated areas, and for voice-grade narrowband loops nationwide. But we preserve unbundling requirements for DS0 loops in less densely populated areas and DS1 and DS3 loops in areas without sufficient evidence of competition. We eliminate unbundled dark fiber transport provisioned from wire centers within a half-mile of competitive fiber networks, but provide an eight-year transition period for existing circuits so as to avoid stranding investment and last-mile deployment by competitive LECs that may harm consumers. In all, we end unbundling and resale requirements where they stifle technology transitions and broadband deployment, but preserve unbundling requirements where they are still necessary to realize the 1996 Act's goal of robust intermodal competition benefiting all Americans.

II. Background

4. The 1996 Act and implementing Commission regulations imposed a number of obligations on incumbent LECs to promote competitive entry into the telecommunications marketplace, including obligations to unbundle network elements to other carriers on a rate-regulated basis and to offer telecommunications services for resale on a rate-regulated basis. In the 24 years since the passage of the 1996 Act, the Commission has continually reviewed and, when warranted, reduced incumbent LEC unbundling and resale obligations to encourage competition and development of advanced telecommunications capability within the changing communications marketplace. The Commission has consistently aimed to promote sustainable facilities-based competition, recognizing that permanent unbundling obligations can reduce incentives for both incumbent and competitive LECs to deploy next-generation networks.

A. The 1996 Act's Market-Opening Provisions

5. Before the enactment of the 1996 Act, incumbent LECs controlled more than 99% of the local voice marketplace because of their “virtually ubiquitous” networks and subsequently low relative incremental costs. To open this monopolized market, Congress required, among other things, incumbent LECs to offer their competitors unbundled network elements and telecommunications services for resale on a discounted basis.

6.
Unbundled Network Elements.
Section 251(c)(3) of the Communications Act of 1934, as amended (the Act) sets forth incumbent LECs' unbundling obligations. Following Congress's directive that the Commission determine which network elements should be subject to the unbundling rules, the Commission created a list of unbundled network elements (UNEs) that competitive LECs can lease from incumbent LECs in order to provide competitive local service. When identifying network elements subject to unbundling obligations, section 251(d)(2) requires that the Commission consider, “at a minimum,” whether “the failure to provide access to such network elements would impair the ability of the telecommunications

carrier seeking access to provide the services that it seeks to offer.” The statute also requires that the Commission determine whether access to proprietary network elements is “necessary.” However, the Commission does not currently require incumbent LECs to make any proprietary network elements available on an unbundled basis. The identified UNEs were then to be made available at cost-based rates. Parties may negotiate agreed-upon rates for UNEs, which the state must then approve. If the parties cannot come to an agreement, the rates are set by state arbitration and will be “based on the cost (determined without reference to a rate-of-return or other rate-based proceeding) of providing the interconnection or network element” and “may include a reasonable profit.”

7. The impairment inquiry considers whether a hypothetical “reasonably efficient competitor” would be impaired when lack of access to a particular network element creates a barrier to entry that renders entry uneconomic. The Commission presumes that the reasonably efficient competitor would use “reasonably efficient technologies and take advantage of existing alternative facilities deployment where possible.” The impairment inquiry makes reasonable inferences about competition, including that if competitive providers have successfully entered using their own facilities in one market, other providers could enter similar markets on a similar basis. The Commission's impairment determinations account for the existence of intermodal competition, as “[t]he fact that an entrant has deployed its own facilities—regardless of the technology chosen—may provide evidence that any barriers to entry can be overcome.” Furthermore, the courts and the Commission have interpreted section 251(d)(2)'s “at a minimum” language to allow the Commission to consider other factors “rationally related to the goals of the Act,” even where impairment exists. The Commission has identified broadband deployment, as called for by section 706 of the 1996 Act, as one such goal.

8. When first implementing section 251(d)(2) and adopting the unbundling requirements, the Commission acknowledged that the availability of UNEs to competitive LECs “is a necessary precondition to the development of self-provisioned network facilities.” Consistent with its preference for facilities-based competition, the Commission expected UNEs to provide competitors a means to enter the local marketplace in order to obtain a sufficient subscriber base and revenue to support the development of their own competitive facilities. The Commission also recognized that rural areas face higher deployment costs and longer deployment timeframes.

9.
Avoided-Cost Resale.
In addition to unbundling obligations, section 251 includes an Avoided-Cost Resale provision that requires incumbent LECs to “offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers.” Congress defined the methodology to determine wholesale rates as “retail rates . . . excluding the portion thereof attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier.” As a practical matter, incumbent LECs implement this Avoided-Cost Resale obligation by incorporating in their interconnection agreements with competitive LECs discounted rates established by each state for the incumbent LECs' telecommunications services. The Avoided-Cost Resale obligations in section 251(c)(4) go beyond the more general resale requirement in section 251(b)(1) of the Act, which applies to incumbent and competitive LECs alike, and does not include a wholesale discount rate mandate. Avoided-Cost Resale services are predominately used by competitive LECs today to provision legacy TDM voice services to business and government customers.

10.
Forbearance.
Section 10 of the Act, as amended by the 1996 Act, requires the Commission to forbear from applying any requirement of the Act or one of its regulations to a telecommunications carrier or telecommunications service if and only if the Commission determines that: (1) Enforcement of the requirement “is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory,” (2) enforcement of that requirement “is not necessary for the protection of consumers,” and (3) “forbearance from applying that requirement is consistent with the public interest.” Forbearance is warranted only if all three criteria are satisfied. In making the public interest determination, the Commission must also consider, pursuant to section 10(b) of the Act, “whether forbearance from enforcing the provision or regulation will promote competitive market conditions.”

11. The Commission has broad discretion in analyzing whether the forbearance criteria have been satisfied, and “the agency [may] reasonably interpret[] the statute to allow the forbearance analysis to vary depending on the circumstances.” When the Commission undertakes a competitive analysis, “the statute imposes no particular mode of market analysis or level of geographic rigor.” In addition, the Commission can consider the section 706 goal of fostering the deployment of advanced telecommunications capabilities in making forbearance decisions. In considering forbearance from unbundling obligations, the Commission is entitled to rely on its expert predictive judgment and may balance “the positive short-term impact of unbundling” against the “longer-term positive impact that
not
unbundling would have . . . .” Furthermore, the Commission may forbear without conducting a competitive analysis when changed circumstances have rendered a regulatory requirement unnecessary for other reasons.

12.
Unbundling and Resale Obligations Since 1996.
Pursuant to the provisions of the 1996 Act, the Commission has over the years reassessed and, when warranted, reduced its unbundling and resale requirements to account for changes in communications service markets where competition among incumbent and competitive LECs has flourished. Congress expressly authorized the Commission to forbear from any regulatory obligations, including section 251(c) obligations, once the agency determined that they are no longer necessary, and encouraged the Commission to use forbearance and other means to encourage deployment of advanced telecommunications capability and remove barriers to infrastructure deployment. With respect to forbearing from section 251(c), Congress first required that section to be fully implemented. The Commission has specifically found that section 251(c) has been fully implemented—
i.e.,
that the Commission has adopted rules implementing the statute and that those rules have become effective.

13. In its initial orders implementing section 251(c)(3), the Commission adopted nationwide unbundling obligations for local loops used to serve mass market and enterprise customers on a technology-neutral basis, for dedicated and shared interoffice transport, and various other network elements. The courts rejected these initial attempts, in whole or in part, for a variety of reasons, including that overly-broad unbundling is inappropriate. For example, the

Supreme Court vacated the Commission's first order implementing broad unbundling regulations because it failed “to apply
some
limiting standard, rationally related to the goals of the Act,” as the Act requires. In a separate opinion, Justice Breyer observed that “given the Act's basic purpose, it requires a convincing explanation of why facilities should be shared or unbundled where a new entrant could compete effectively without the facility, or where practical alternatives to that facility are available.” Justice Breyer went on to explain that unbundling “by itself does not automatically mean increased competition. It is in the
un
shared, not in the shared, portions of the enterprise that meaningful competition would likely emerge.” The D.C. Circuit later vacated and remanded the Commission's next attempt to adopt unbundling rules, because, among other things, the agency failed to weigh potential negative effects of unbundling on incentives to invest in facilities-based competition, failed to analyze impairment on a sufficiently granular level, and did not adequately consider the role of intermodal competition. Citing Justice Breyer's separate opinion, the D.C. Circuit explained that “mandatory unbundling comes at a cost, including disincentives to research and development by both incumbent LECs, competitive LECs and the tangled management inherent in shared use of a common resource.”

14. Following the D.C. Circuit's remand, the Commission issued the
Triennial Review Order
in 2003 (68 FR 52276, Sept. 2, 2003), at the same time as the local markets were seeing the increased deployment of next-generation fiber-based loops. Considering section 251(c)(3)'s “at a minimum” language, the Commission declined to require unbundling for most fiber-based loops because it seemed likely to undermine important goals of the 1996 Act, specifically the exhortation in section 706 to encourage deployment of advanced telecommunications capability to all Americans by removing barriers to investment. The Commission recognized that unbundling fiber-based loops could reduce incentives for both incumbent and competitive LECs to deploy advanced facilities. The Commission reasoned that refraining from imposing such obligations would increase incentives for incumbent LECs to develop and deploy innovative new networks, while forcing competitive LECs to “seek innovative network access options to serve end users and to fully compete against incumbent LECs in the mass market,” with consumers benefitting from the race to build next-generation networks and increased competition in broadband service. The Court of Appeals for the D.C. Circuit affirmed the Commission's decision not to require the unbundling of fiber-based loops, but remanded many other aspects of the
Triennial Review Order,
including the Commission's nationwide impairment determinations with respect to dedicated transport elements and its decision that wireless carriers were impaired without access to unbundled dedicated transport.

15. In 2004, in response to the D.C. Circuit's remand, the Commission adopted the
Triennial Review Remand Order
(70 FR 8940, Feb. 24, 2005). Acknowledging that certain markets were already sufficiently competitive and that competition could be expected to develop in markets with similar characteristics, the Commission limited incumbent LECs' DS1 and DS3 loop unbundling obligations to buildings served by incumbent LEC wire centers without sufficient competitive presence and service demand. It also limited the DS1, DS3, and dark fiber interoffice transport unbundling obligations depending on the level of current and anticipated competition by classifying wire centers into tiers “based on indicia of the potential revenues and suitability for competitive transport deployment.” The Commission also declined to require unbundling of network elements for competitors to use exclusively for providing long distance and mobile voice services because of the presence of pervasive competition in those markets that occurred without reliance on UNEs. Although the Commission declined to eliminate unbundling requirements for competitors seeking to offer local telephone service, despite evidence of some intermodal competition, it acknowledged that ending those unbundling obligations “might someday be appropriate, upon findings of sufficient facilities-based competition in the local exchange market.” The Commission ultimately imposed unbundling obligations only in those situations where it found unbundling “does not frustrate sustainable, facilities-based competition.”

16. While the
Triennial Review Remand Order
was the last time the Commission applied its impairment inquiry to consider the extent to which unbundling obligations should apply, the Commission has refined and reduced its unbundling rules by forbearing from UNE loop and transport obligations where there is evidence of facilities-based deployment and competition, or that continued unbundling requirements slow the transition to next-generation services. For example, in 2005, the Commission granted the incumbent LEC Qwest relief from UNE loop and transport obligations in portions of its service territory in the Omaha Metropolitan Statistical Area (MSA) where a facilities-based cable competitor had substantially built out its local network in competition with Qwest. The Commission relied on the “substantial intermodal competition” presented by the cable competitor, Cox, over its “own extensive facilities” and, though noting that it had earlier determined that intermodal competition from cable providers “had not blossomed into a full substitute” for wireline voice service, determined that Cox had changed those circumstances within the Omaha MSA as a result of its investment in the network infrastructure in that area. In 2007, the Commission granted similar relief to ACS of Anchorage in wire centers located in the Anchorage study area “where the level of facilities-based competition by the local cable operator [GCI] ensures that market forces will protect the interests of consumers and that such regulation, therefore, is unnecessary.” In 2015, to further its goal of advancing the TDM to IP transition for next generation networks and services, the Commission eliminated one of the last unbundling requirements applicable to next-generation networks by granting forbearance on a forward-looking basis to incumbent LECs from the requirement to make available a 64 kbps voice-grade channel over overbuilt fiber loops.

17. More recently, in 2019, in response to USTelecom's petition for forbearance, we granted forbearance from certain loop and transport unbundling and resale obligations that had become increasingly outdated due to competitive fiber deployment, technological change, and intermodal competition. Throughout this Order, when referencing the
BDS Remand Order
/
UNE Transport Forbearance Order
(84 FR 38566, Aug. 7, 2019), we cite the portions containing the Commission's findings in response to the Eighth Circuit's partial remand of
Business Data Services in an internet Protocol Environment et al.,
WC Docket Nos. 16-143 et al., Report and Order, 32 FCC Rcd 3459 (2017) (82 FR 25660, June 2, 2017) (
BDS Order
), as the
BDS Remand Order,
and we cite the portions addressing aspects of the May 2018 forbearance petition filed by USTelecom—The Broadband Association (USTelecom) as the
UNE Transport Forbearance Order.
In two

orders (the
UNE Transport Forbearance Order
(84 FR 38566, Aug. 7, 2019) and
UNE Analog Loop and Avoided-Cost Resale Forbearance Order
(34 FCC Rcd 6503, Aug. 2, 2019), collectively,
2019 UNE Forbearance Orders
), we determined that forbearance from unbundling obligations was warranted for: (1) DS1/DS3 dedicated interoffice transport (UNE DS1/DS3 Transport) between price cap incumbent LEC wire centers within a half mile of competitive fiber network deployment; (2) two-wire and four-wire analog voice-grade copper loops, including the attached equipment (UNE Analog Loops) for price cap incumbent LECs throughout the entirety of their service areas; and (3) Avoided-Cost Resale obligations throughout the entirety of price cap incumbent LECs' service areas. We found that these obligations, which are overwhelmingly used to provide TDM-based local voice service, were no longer necessary based on “the sweeping changes in the communications marketplace” since 1996, including the increasing migration of consumers of all types to “newer, any-distance voice services over next-generation wireline and wireless networks,” as well as the wide range of intermodal competitors in the voice marketplace. We further found that “the public interest is no longer served by maintaining these legacy regulatory obligations and their associated costs.”

18.
Current Unbundling and Resale Requirements.
Currently, the Commission's unbundling rules, subject to forbearance as described above, require that incumbent LECs unbundle (1) mass market copper digital and xDSL-capable loops (collectively, UNE DS0 Loops) nationwide; (2) UNE Analog Loops in non-price cap incumbent LEC service areas; (3) the TDM capabilities, features, and functionalities of hybrid fiber-copper loops nationwide; (4) enterprise loops (
i.e.,
DS1 and DS3 loops) subject to the limitations adopted in the
Triennial Review Remand Order
reflecting current and potential competition (UNE DS1 and DS3 Loops); (5) subloops, including subloops for multiunit premises wiring, nationwide; (6) network interface devices nationwide; (7) dedicated interoffice transport (
i.e.,
DS1, DS3, and dark fiber transport) subject to limitations reflecting potential competition in the
Triennial Review Remand Order
and our forbearance for UNE DS1/DS3 Transport in wire centers within a half mile of competitive fiber in the
UNE Transport Forbearance Order;
(8) operations support systems nationwide; and (9) 911/E911 databases nationwide. As discussed above, the Commission has at times granted requested forbearance relief to petitioning carriers for particular UNEs in specific geographic markets. Incumbent LECs are also required to maintain access to a 64 kbps channel over fiber loops for existing customers. The Commission has not found impairment with respect to any new unbundled network elements since 2004. In addition, non-price cap incumbent LECs must offer Avoided-Cost Resale to requesting carriers in their local exchange service areas.

19. In November 2019, we adopted the
Modernizing Unbundling and Resale Requirements in an Era of Next-Generation Networks and Services Notice of Proposed Rulemaking
(
NPRM
) (85 FR 472, Jan. 6, 2020) to comprehensively reexamine the Commission's current unbundling rules in light of the substantial changes in voice and broadband service competition in the communications landscape. The
NPRM
sought comment on proposals to modernize and update incumbent LECs' remaining unbundling and resale obligations to better reflect the current marketplace realities of intermodal voice and broadband competition. The sole unbundling obligation that the
NPRM
did not propose to modify or eliminate is the requirement to unbundle 911/E911 databases. The Commission also sought comment on the costs and benefits of its proposals, as well as proposed transition time frames.

20. Various parties, particularly incumbent and competitive LECs, vigorously debated the issues raised by the
NPRM
in comments and reply comments filed in February and March 2020, and in
ex parte
letters filed thereafter. On August 5, 2020, INCOMPAS, USTelecom, and many of their respective members (Joint Parties), “in recognition of the current state of competition in the communications marketplace,” filed a compromise resolution (Compromise Proposal) in this docket for the Commission to consider regarding whether and to what extent incumbent LECs must continue to provide access to unbundled DS0 loops and associated copper subloops, DS1 loops, DS3 loops, and OSS. Specifically, aside from the trade associations, INCOMPAS and USTelecom, the parties to this agreement include: Many of USTelecom's incumbent LEC members—AT&T Services, Inc., CenturyLink, Inc. (now Lumen), Consolidated Communications, Inc., Frontier Communications Corp., and Verizon Communications Inc.—and many of INCOMPAS' competitive LEC members—Allstream Business US, LLC, Digital West, First Communications, LLC, Biddeford Internet Corporation d/b/a GWI, IdeaTek Telecom, Mammoth Networks and Visionary Broadband, SnowCrest ISP & SnowCrest Telephone, Socket Telecom, LLC, TelNet Worldwide, Inc., and TPx Communications. Windstream Services, LLC signed as a member of both trade associations, in its capacity as an incumbent LEC and competitive LEC. The Joint Parties discussed but did not reach a compromise regarding dark fiber transport at that time and avoided-cost resale. The Joint Parties did not discuss UNE Analog Loops in non-price cap areas, 64 kbps voice-grade channels over last-mile fiber loops, Multiunit Premises UNE Subloops, NIDs, and the TDM capabilities, features, and functionalities of hybrid loops. The Joint Parties emphasized that the Compromise Proposal was a “bargained-for, negotiated outcome that reflects trade-offs and concessions between” nearly every interested competitive LEC and incumbent LEC in this docket that have previously disputed the appropriate scope of the Commission's unbundling rules at the Commission, in this proceeding and in other proceedings, and in court. The Joint Parties further noted that the Compromise Proposal “necessarily departs in at least some ways from the specific positions each individual signatory has advanced in this proceeding,” but each proposal is a direct response to the record in this proceeding. The Joint Parties also assert that these resolutions are lawful and are logical outgrowths of the
NPRM
proposals, “within the reasonable range of conclusions supported by the record,” and in the public interest.

21. On September 14, 2020, INCOMPAS, USTelecom, and many of their respective members, representing a majority of buyers and sellers of UNE Dark Fiber Transport, additionally reached a compromise proposal with regard to UNE Dark Fiber Transport. The parties agreed that the Commission should forbear and find non-impairment vis-a-vis Tier 3 wire centers located within half a mile of alternative fiber, subject to an eight-year transition period for existing UNE Dark Fiber Transport.

B. Today's Communications Marketplace

22. The communications marketplace has dramatically transformed since Congress passed the 1996 Act. Incumbent LECs controlled 99.7% of the local telephone service market at that time. Incumbent LECs' wireline voice subscriptions now account for only approximately 39% of all wireline voice

subscriptions and only 9% of all voice subscriptions across all technologies. The fixed voice marketplace, once monopolized by incumbent LECs, now includes cable companies offering VoIP, fixed wireless providers, over-the-top VoIP providers, as well as competitive and incumbent LECs. As for fixed broadband, incumbent LECs are just one of many intermodal competitors, providing only about 22% of residential broadband subscriptions at or above 25/3 Mbps, which the Commission has defined as advanced telecommunications capability. Connections data are collected at the census tract level. Incumbent LEC affiliation is determined at the holding company level and the census block level. The incumbent LEC's connections are counted as within the incumbent's study area if any portion of its study area overlaps the census tract. Cable providers provide approximately 75% of 25/3 Mbps residential subscriptions. As of December 31, 2019, 99% of Americans had access to three providers of mobile voice and broadband. As of the date of this Order, December 2019 is the latest data available to the Commission, so we cannot report coverage after the T-Mobile/Sprint merger, and this data treats T-Mobile and Sprint as separate providers. Finally, as the Commission found in the
BDS Order,
the enterprise market is subject to “intense competition,” with 95% of census blocks with business data services demand in price cap MSAs, representing 99% of business establishments, featuring at least one competitive provider in addition to the incumbent LEC.

23. The communications marketplace has also seen rapid technological change. In the enterprise services marketplace, DS1 and DS3 loops, dominated by incumbent LECs, have been increasingly replaced by packet-based services, provided by a range of providers who benefit from a “considerably more level playing field” compared to TDM-based services. The copper-to-fiber and TDM-to-IP transitions have also increasingly reached residential consumers, as incumbent LECs have been retiring last-mile copper and replacing it with fiber or fixed wireless technologies. And of course, American consumers have themselves transitioned to newer technologies, increasingly moving from fixed legacy voice to fixed or nomadic voice over internet protocol (VoIP) and mobile voice services, and from DSL to broadband provided over fiber and fixed and mobile wireless. The widespread deployment of 5G wireless networks will only accelerate this process.

III. Discussion

24. In this document, we modernize our unbundling rules in light of the dramatic changes to the communications marketplace since 2004, when the Commission last examined unbundling obligations through the impairment lens. We eliminate, subject to a transition period, unbundling obligations for loops, transport, and other elements where record evidence shows that they are no longer necessary for reasonably efficient competitors to enter the market. Recognizing that some unbundling obligations have continued benefits in providing competitive telecommunications services and broadband access in rural areas, where competitive entry is harder because of entry barriers to fixed broadband services, including sunk costs, we maintain several unbundling requirements, including for mass market broadband-capable loops in less densely populated areas. Sunk costs are investments that have no scrap value or value in an alternative use,
e.g.,
a fiber cable connecting a customer's location to the provider's network. Most wireline network costs are sunk for at least twenty years. In addition, entrants may face other entry barriers including achieving scale economies and absolute cost disadvantages. Scale economies can be a barrier to entry if entrants are likely to attract fewer customers than competitors, making it more difficult for the entrant to compete against its competitors if it faces higher average cost and the market retail price is close to its competitor's average cost. Absolute cost advantages can occur if the incumbent providers have privileged access to resources. An incumbent firm may also have other first mover advantages,
e.g.,
because they have a relatively high penetration rate for their services and consumers face high costs in switching providers. We find that our impairment and forbearance findings, when taken together with the necessary transition periods and conditions we adopt for each element, best fulfill our statutory responsibilities and promote our policy objectives.

A. UNE Loops

25. Loops are the “last mile of a carrier's network,” connecting end-users to the network to access voice, broadband, and other technologies. Under existing law, incumbent LECs must provide at least some limited unbundled access nationwide to (1) DS1 and DS3 loops and associated subloops, (2) DS0 loops and associated subloops, and (3) the TDM-capabilities, features, and functionalities of hybrid copper-fiber loops. Subject to previous grants of forbearance, incumbent LECs must also provide unbundled access to UNE Analog Loops in non-price cap incumbent LEC service areas and to 64-kbps channels over fiber loops that were ordered before 2015.

1. UNE DS1 and DS3 Loops

26. We proposed in the
NPRM
to find that competitive LECs are no longer impaired in those counties and study areas deemed competitive in the
BDS Order
and
Rate-of-Return (RoR) BDS Order
(83 FR 67098, Dec. 28, 2018) (collectively, Competitive Counties), subject to a carve-out for UNE DS1 Loops used for residential purposes. Based on the record in this proceeding, as well as the Commission's findings in the
BDS Order,
we adopt a modified version of this proposal and find that unbundled access to DS1 and DS3 loops in the Competitive Counties, where demand for business data services is most highly concentrated, is unwarranted because competitive LECs are no longer impaired without access to these UNEs, and thus, incumbent LECs no longer need to provide unbundled access in these locations, subject to the transition periods and associated conditions we adopt. Moreover, we find that continued unbundling of those network elements is not warranted because it frustrates the congressionally mandated policy goal of ensuring the deployment of next-generation networks and services. Further, independent of our non-impairment finding, we find that, subject to the transition periods and conditions, forbearance from these obligations in the Competitive Counties is warranted. The record overwhelmingly supports this conclusion. INCOMPAS, USTelecom, and most of their members participating in this proceeding agree that both the non-impairment finding and forbearance conclusions are appropriate for the Competitive Counties, subject to the transition periods and associated conditions we also adopt. None of these findings, however, apply to non-competitive counties, where UNE DS1 and DS3 Loops will remain available, subject to the limits established in the
Triennial Review Remand Order.
Finally, we decline to adopt a residential carve-out for UNE DS1 Loops, finding that the costs and burdens associated with such an exemption outweigh the benefits.

27.
Background.
Our rules require that incumbent LECs make DS1 and DS3

loops, which are predominantly used to provision service to enterprise customers, available as UNEs on a limited basis. These loops operate at a total digital signal speed of 1.544 Mbps and 44.736 Mbps, respectively. The Commission adopted these unbundling requirements for DS1 and DS3 loops more than 16 years ago. The Commission based its impairment analysis at that time on two factors: The existence of actual competition and the inference to be drawn from the potential for competition in similar markets. The Commission found that “the presence of fiber-based collocations in a wire center service area is a good indicator of the potential for competitive deployment of fiber rings” and “a wire center service area's business line count is indicative of its location in or near a large central business district, which is likely to house multiple competitive fiber rings (and thus numerous splice points) with laterals to multiple buildings.” When viewed together, the Commission explained, these characteristics “are likely to correspond with actual self-deployment of competitive LEC loops or to indicate where deployment would be economic and potential deployment likely.” It thus found that competitive LECs were not impaired without unbundled access to DS1 loops only in wire centers where there are at least 60,000 business lines and four or more fiber-based collocators. It also found that competitive LECs were not impaired without unbundled access to DS3 loops in wire centers where there are at least 38,000 business lines and four or more fiber-based collocators.

28. In explaining these findings, the Commission noted that its “selection of specific criteria is not an exact science, and the Commission may exercise line-drawing discretion when rendering determinations based on agency expertise, our reading of the record before us, and a desire to provide an easily implemented and reasonable bright-line rule to guide the industry.” The Commission limited the availability of these UNEs to ten UNE DS1 Loops and one UNE DS3 Loop per building, respectively, finding that competitors are more likely to self-provision higher capacity loops at a certain level of bandwidth demand because of the greater economic feasibility resulting from the fact that “revenue opportunities increase with the capacity level.” It also indicated that even these revised unbundling obligations were designed to be removed “over time as carriers deploy their own networks and downstream local exchange markets exhibit the same robust competition that characterizes the long distance and wireless markets.”

29. In the more recent
BDS Order,
the Commission undertook a comprehensive analysis of the business data services market. Business data services refers to the dedicated point-to-point transmission of data at certain guaranteed speeds and service levels using high-capacity connections. This analysis focused extensively on the market for TDM-based DS1 and DS3 channel terminations, which are functionally identical products to UNE DS1 and DS3 Loops. The Commission found that “[t]o a large extent in the business data services market, the competition envisioned in the [1996 Act] has been realized,” and “any prior advantage an incumbent might have enjoyed at lower bandwidths is now less competitively relevant in light of customer demand that attracts a number of traditional and non-traditional competitors that are improving legacy cable networks and expanding with new facilities to meet demand.”

30. Relying upon the most comprehensive data collected from both purchasers and providers of BDS services to date, including circuit-based and packet-based BDS providers and significant providers of best-efforts services, and Form 477 data, the Commission created a Competitive Market Test to determine which counties are competitive for purposes of business data services. Best-efforts services are internet access services generally marketed to residential and small business consumers, rather than enterprise consumers. Unlike dedicated packet-based BDS, best-efforts services often provide asymmetrical speeds and lack service performance guarantees. While the Commission found in the
BDS Order
that best-efforts services generally did not directly compete with fiber-based BDS, the Commission found that the underlying facilities used to provision best-efforts services were being modernized to provide competitive BDS. Providers report their broadband deployment to the Commission semi-annually using FCC Form 477. The Eighth Circuit upheld the portion of the
BDS Order
adopting the Competitive Market Test, while remanding other portions of the
BDS Order
on notice grounds. The Commission determined that combining these two data sets would “approximate the full spectrum of competition in the business data services market, including competition from medium-term entrants.” The Commission determined that basing the Competitive Market Test on “the geographic unit of a county or county-equivalent” would “significantly reduce[] the over-and under-inclusivity issue posed by MSAs [metropolitan statistical areas] . . . and avoid[]the administrability issues posed by smaller geographic units of measure.” It went on to determine that “nearby [non-incumbent LEC wireline] competitors” with “nearby networks” are “effective competitor[s] in meeting BDS demand at a location if it either delivers BDS to a location or has a network within one half mile of the location with BDS demand, and/or is a cable company with a widespread HFC [hybrid fiber coax] network that surrounds the location with BDS demand.” The Commission determined that a county will be deemed competitive when either (1) at least 50% of the locations with BDS demand within the county are within a half mile of a competitive provider's network, or (2) a cable competitor's network serves at least 75% of the census blocks with BDS demand within the county.

31.
Impairment Analysis.
UNE DS1 and DS3 Loops are functionally equivalent to DS1 and DS3 BDS end-user channel terminations, with the only real difference being their respective prices. Indeed, UNE DS1 and DS3 Loops and DS1 and DS3 BDS end-user channel terminations use the very same incumbent LEC facilities. So where there is evidence that competition for BDS DS1 and DS3 end-user channel terminations exists, as demonstrated by the Competitive Market Test, such competition also exists for UNE DS1 and DS3 Loops. And that competition includes packet-based alternatives to DS1 and DS3 Loops, which are more versatile and capable of handling the increasingly higher bandwidth needs of business customers, thus demonstrating that DS1 and DS3 loops are no longer a reasonably efficient technology to enter the enterprise marketplace in the Competitive Counties. The existence of actual and potential competition, intermodal or otherwise, in the Competitive Counties leads us to conclude that unbundling DS1 and DS3 loops is unwarranted even in the face of some level of impairment. Finally, continuing the unbundling obligations for DS1 and DS3 loops is at odds with Congress's mandate in section 706 that we take action to encourage the deployment of advanced telecommunications capabilities. Thus, consistent with our proposal in the
NPRM,
we find that where the Commission in the
BDS
proceeding found actual or potential competition, and subject to the transition periods in this Order, competitive LECs seeking to

enter the business data services market are no longer impaired without unbundled access to DS1 and DS3 Loops, and those UNE requirements are no longer necessary.

32. Given the demands for ever-increasing broadband speeds, and packet-based services, we find that a reasonably efficient competitor would not use UNE DS1 and DS3 Loops as a reasonably efficient technology for entering the enterprise services market in the Competitive Counties. The communications marketplace today is dramatically different from the one that existed when the Commission last addressed impairment over a decade ago. Incumbent LECs were the dominant providers of TDM-based DS1s and DS3s in 2004, and cable was only beginning to make inroads into the enterprise services market at that time. Today, TDM-based DS1 and DS3 loops are becoming obsolete in the face of increasing bandwidth demands and the transition to IP-based networks and services. Their availability will become further constrained as incumbent LECs move forward with retiring their copper facilities, deploying packet-based services, and phasing out TDM services like DS1 and DS3 business data services. Indeed, the Commission found in the
BDS Order
that “[f]unctionally, TDM and packet-based services are broadly interchangeable in the business data services realm as both are used to provide connectivity for data network and point-to-point transmissions and both services can be delivered over the same network infrastructure.” It thus went on to find that “legacy TDM business data services suppliers would be constrained by the threat of potential customer loss to packet-based business data services suppliers.” And it noted the diminishing use and availability of UNE DS1 and DS3 Loops. One competitive LEC commenter in this proceeding made this clear when it noted that the bandwidth available through bonding multiple DS1 loops “might let a small business survive until another solution can be found.” But where competition, or the potential for competition, exists, such other solution has, by definition, been found because that competition comes from facilities-based providers using non-incumbent LEC facilities. And that competition includes packet-based services, which are scalable for the ever-increasing bandwidth needs of enterprise customers. In light of this next-generation competition, we find that a reasonably efficient competitor would not use UNE DS1 and DS3 Loops when seeking to enter the enterprise marketplace in the Competitive Counties. Thus, where the Competitive Market Test has shown that a particular county or study area is competitive, we no longer require incumbent LECs to make UNE DS1 and DS3 Loops available after an appropriate transition period.

33. This actual and potential competition comes in many forms, including from cable and fixed wireless providers who entered, or are entering, the market without reliance on UNEs. The record demonstrates that cable providers are even more significant competitors for enterprise services today than they were when the Commission explained their significance three years ago in the
BDS Order.
And while the Commission previously found that fixed wireless had a limited role in the BDS marketplace, it noted “the promise of 5G technology to provide quality high-bandwidth fixed wireless services to businesses in urban areas” and found that “fixed wireless services should be included in the product market discussion because they may have a competitive effect on the market.” This is the competition envisioned by the 1996 Act, and we would be remiss to not take into account competition from these providers. Indeed, in the context of affirming the Commission's decision not to require incumbent LECs to unbundle the broadband capabilities of hybrid loops, the D.C. Circuit stated “we agree with the Commission that robust intermodal competition from cable providers . . . means that even if all CLECs were driven from the broadband market, mass market consumers will still have the benefits of competition between cable providers and ILECs.” To ignore this competition and to allow continued reliance on UNEs in these areas would slow the transition to next-generation services, in contravention of the goals of section 706 and our preference for sustainable facilities-based competition, goals we are permitted to consider based on our “at a minimum” authority.

34. We realize that the
BDS Order
examined competition on a county level, whereas the Commission made its 2004 impairment findings based on an analysis of the smaller geographical level of wire centers. The Commission specifically found that “basing the competitive market test at the county level strikes the best balance between being sufficiently granular and administratively feasible,” a finding upheld by the Eighth Circuit. This concept of striking a balance between granularity and administrability is equally relevant and important in the UNE context. We infer from the level of competition in the Competitive Counties now and the growth in competitive providers deploying in areas previously outside their footprints that these locations will ultimately become competitive. Thus, while some customers within a Competitive County may not currently have available to them the competition relied on by the Commission in deeming that county to be competitive, that number will be relatively small and will likely shrink over time. Indeed, the Commission noted in the
BDS Order
that it expected as much. This approach is consistent with the Commission's use of the impairment inquiry in 2004, when the Commission “dr[e]w reasonable inferences regarding the prospects for competition in one geographic market based on the state of competition in other, similar markets.”

35. Some competitive LEC commenters assert that the Commission's reliance on the
BDS Order'
s competitive findings is at odds with “the level of competition required by the [
Triennial Review Remand Order'
s] findings.” We disagree. We note that INCOMPAS, along with the majority of its members that have filed comments in this proceeding, signed the Compromise Proposal that states that the competitive providers are no longer impaired in the Competitive Counties without access to UNE DS1 and DS3 Loops. As the Commission specifically found in the
BDS Order,
for the purposes of enterprise services, “the largest benefits from competition come from the presence of a second provider, with added benefits of additional providers falling thereafter, in part because, consistent with other industries with large sunk costs, the impact of a second provider is likely to be particularly profound in the case of wireline network providers.” This is consistent with the Commission's conclusion in the
Restoring internet Freedom Order
(83 FR 7852, Feb. 22, 2018) that the presence of two wireline internet service providers “can be expected to produce more efficient outcomes than any regulated alternative” relevant to our consideration in this context. Moreover, the competitive findings in the
BDS Order
support our findings of (1) no impairment, (2) the existence of intermodal competition supporting unbundling even in the face of some level of impairment, and (3) that eliminating this unbundling obligation furthers the goal of advancing deployment of next-generation facilities and services. The Commission found in the
BDS Order,
“[t]o a large extent in the business data services market, the

competition envisioned in the Telecommunications Act of 1996 . . . has been realized.” The existence of wireline competitors in the Competitive Counties demonstrates that market entry and thus competition without UNE DS1 and DS3 Loops is possible in these areas. Indeed, we found in last year's
BDS Remand Order
that the vast majority of business locations in Competitive Counties are served by wire centers within a half-mile of competitive fiber. And the Commission found in the
BDS Order
that the level of competition based on the Competitive Market Test was likely understated and that it will only continue to grow, and the competition that existed at the time of the 2015 Data Collection will not recede because those competitors have already incurred substantial sunk costs. Those competitors, including intermodal competitors providing advanced telecommunications capability over next-generation networks, did not need to rely on UNE DS1 and DS3 Loops to enter these markets. We thus disagree with commenters who assert that a reasonably efficient competitor would still need to rely on UNE DS1 and DS3 Loops to enter a new market.

36. We also disagree with competitive LEC objections to the Commission taking into consideration competition from cable providers in conducting its impairment analysis. Cable providers are much more significant competitors for enterprise services than they were 15 years ago when the Commission initially considered their role in the marketplace for determining unbundling obligations for DS1 and DS3 loops. Indeed, only three years later in the
Qwest Omaha Order
(20 FCC Rcd 19415, Dec. 2, 2005), the Commission viewed such providers as a source of competition for forbearance purposes. Fast forward almost a decade to the
BDS Order,
and the Commission noted the dramatic strides of cable providers in becoming “formidable competitors” over their own fiber and hybrid facilities in the business data services market. Cable providers now offer robust enterprise-grade business services that were not widely available in 2004, as found by the Commission in the
BDS Order,
including for multi-regional customers with low to medium bandwidth needs who still require enterprise-grade features. The Commission previously also found that 5G networks “have the potential to represent a significant additional source of competition for the provision of business data services.” And the BDS marketplace has only become more competitive in the seven years since the data collected in the 2015 Data Collection.

37. We also reject commenter arguments concerning the
Triennial Review Remand Order'
s finding that the availability of UNEs at that time served to constrain business data service pricing (such services were called special access services at the time). Today, the widespread intermodal competition and entry for enterprise services constrains pricing, making “synthetic” UNE-based competition unnecessary, particularly as the continued obligation to provide UNEs in Competitive Counties could reduce investment incentives for packet-based services. We reiterate that the 1996 Act's market-opening provisions were intended to foster competition, not support specific competitors or business models. We find the evidence of facilities-based competition for products and services here to be sufficient to demonstrate that reasonably efficient competitors have the ability to deploy their own services without the use of UNEs. While certain competitive LEC commenters may wish to continue relying on UNE DS1 and DS3 Loops for their business models, this does not mean that a reasonably efficient competitor is impaired without access to those UNEs. Indeed, the business data services on which these commenters rely are now subject to competition from other business data services, including through cable deployment that developed without the reliance on UNEs, an indication that there is no longer impairment.

38. We are further unpersuaded by commenter assertions that the findings in the
BDS Order
are flawed because they are based on Form 477 data, which have recently been the subject of challenges regarding their accuracy. As the Commission made clear in the
BDS Order,
its findings were not based solely on Form 477 data. Rather, its findings were based largely on the 2015 Data Collection (with respect to traditional competitive LECs). The Commission used the Form 477 data to supplement the 2015 Data Collection with respect to cable providers, which added only an additional 0.5% of all competitive counties and county equivalents.

39.
Forbearance Analysis.
Independent of our finding of non-impairment for UNE DS1 and DS3 Loops, we find that the forbearance criteria are met for UNE DS1 and DS3 Loop requirements in the same geographical areas—
i.e.,
the Competitive Counties. In doing so, we have the flexibility to conduct our forbearance analysis based on the specific circumstances at issue. Although we forbear from our UNE DS1 and DS3 Loop requirements in the Competitive Counties, we conclude that competitive LECs will be able to obtain DS1 and DS3 services as business data services or through section 251(b)(1) resale. And because the marketplace for DS1 and DS3 BDS channel terminations is competitive, the marketplace will discipline the prices of those services.

40.
Section 10(a)(1).
We conclude that enforcement of UNE DS1 and DS3 Loop obligations is not necessary to ensure just and reasonable rates. To the extent competitive LECs seek to continue purchasing DS1 and DS3 services, they are able to do so through commercial offerings. The Commission found in the
BDS Order
that market pressure from competitive alternatives, including packet-based services, will ensure reasonable prices. Thus, the existence of competitive alternatives already available or that could economically be made available will ensure reasonable prices and no harm to consumers. Indeed, we find that competition will more effectively ensure just and reasonable rates more effectively than maintenance of these UNE requirements. Accordingly, although these UNE obligations may have served to constrain DS1 and DS3 prices at reasonable levels 16 years ago, they no longer serve that purpose.

41.
Section 10(a)(2).
We find that the evolving marketplace and the statutory and regulatory safeguards that work to ensure just and reasonable rates also ensure that consumers will not be harmed by forbearance from enforcement of the UNE DS1 and DS3 Loops obligations. And as with ensuring just and reasonable rates, we find that competition will better protect consumers—in this instance, enterprise customers—from harm than continued enforcement of these outdated unbundling obligations. Moreover, absent the availability of UNE DS1 or DS3 Loops, competitors will still be able to purchase DS1 and DS3 end-user channel terminations as business data services via commercial agreements or pursuant to section 251(b)(1) resale, albeit at a higher price. Such higher prices, resulting from marketplace dynamics rather than regulatory mandates, will serve to encourage end-user customers to migrate to next-generation services, thus helping to advance Congress's goal as stated in section 706. The rules adopted in 2004 and still in force today placed limits on UNE DS1 and DS3 Loop availability, both by wire center characteristics and by the numerical cap. Competitors, including incumbent LECs outside of

their incumbent territories, already use DS1 and DS3 BDS end-user channel terminations to compete, including facilities purchased from other competitive LECs and from cable providers. And DS1 and DS3 end-user channel terminations are increasingly becoming obsolete in light of the pressure for applications requiring increasing bandwidth. Indeed, the Commission found in the
BDS Order
that “use and availability of UNEs is diminishing.”

42.
Section 10(a)(3).
Finally, we find that forbearing from the UNE DS1 and DS3 Loop obligations in Competitive Counties is in the public interest as it promotes the policy of ensuring the deployment of next-generation networks and services. The Commission has found that “[p]acket-based services represent the future of business data services” and “will lead to greater returns on investment and in turn, greater incentives for facilities-based entry into the business data services market.” Continuing to enable reliance on legacy lower-speed technologies unnecessarily reduces incentives and thus slows this deployment in the face of competitive alternatives as well as commercially available DS1 and DS3 products at market-based prices. We find that the benefit of encouraging the deployment of advanced telecommunications capabilities and next-generation networks outweighs any loss of competitors in the market as long as some level of competition remains.

43.
UNE DS1/DS3 Loops in Non-Competitive and Grandfathered Counties.
We decline to extend our DS1 and DS3 loop unbundling relief to non-competitive and grandfathered counties, consistent with our proposal in the
NPRM.
A number of incumbent LEC commenters take the position that we should eliminate unbundling obligations for DS1 and DS3 loops in non-competitive counties as well, arguing that the existence of continued price cap regulation in those counties obviates the need for UNE DS1 and DS3 Loops. However, the fact that price cap regulation continues in these counties does not demonstrate that either the non-impairment or forbearance standard has been met. The Commission's findings in the
BDS Order
about actual and potential competition in these areas indicate that there is insufficient evidence to conclude that competition in the enterprise market currently exists or is likely to exist in the near future without the use of UNEs, and the continued existence of price cap regulation does not undermine those findings. Nor is there sufficient evidence in this proceeding to conclude that reasonably efficient competitors could enter in these areas without the use of UNE DS1 and DS3 Loops. And UNE DS1 and DS3 requirements in these locations continue to be necessary for the protection of consumers and for the public interest, based on the limited degree of competition found in those areas in the
BDS Order.

44. We also decline to eliminate UNE DS1 and DS3 requirements in grandfathered counties, as one commenter requests. The
BDS Order
did not find these counties competitive based on the Competitive Market Test, but rather refrained from imposing new price cap regulation because they were previously granted Phase II pricing flexibility. In the
BDS Order,
the Commission determined not to reimpose price cap regulation in these counties because it favored a “conservative” approach to avoid regulatory disruption, rather than on other considerations, such as the underlying conditions when those areas were granted Phase II pricing flexibility. The interest in a conservative approach to regulatory disruption weighs in favor of retaining UNE DS1 and DS3 Loops in the grandfathered counties, as those UNEs are currently available in these locations and were not affected by Phase II pricing flexibility.

45.
No DS1 Residential Exemption.
In the
NPRM,
we proposed exempting from any non-impairment findings UNE DS1 Loops used for providing mass market broadband in rural census blocks of Competitive Counties. We decline to adopt such an exemption. The record in this proceeding does not support such an exemption, and we find that the burdens to incumbent LECs of administering any such exemption outweigh any benefits. The number of existing UNE DS1 Loops in rural census blocks of Competitive Counties is exceedingly small in the first place, and the subset of such loops used for residential purposes is orders of magnitudes smaller. According to AT&T, fewer than one percent of the UNE DS1 Loops it sells in rural census blocks within Competitive Counties serve residential addresses. We find that the small number of these UNEs used in rural areas does not warrant such treatment, particularly because the
BDS Order
found these specific areas to be competitive for DS1 and DS3 channel terminations. According to AT&T, fewer than one percent of the UNE DS1 Loops it sells in rural census blocks within Competitive Counties serve residential addresses. This is not surprising given that competitive LECs use UNE DS1 and DS3 Loops almost exclusively to provision service to enterprise customers. Moreover, to administer the proposed exemption on a going forward basis, incumbent LECs would be required to make costly modifications to their processes, which they would then need to update and monitor. Some incumbent LECs state they would also have to manually validate whether each new address, of which they receive hundreds daily, qualified for the exemption. One incumbent LEC commenter describes in detail the system changes necessary for a carrier to implement such an exemption and the substantial cost involved in implementing those changes. For example, Verizon describes the changes it would have to implement in order to accommodate a rural residential DS1 exemption, “at a minimum”: (1) “Create a new “yes/no” field in its provisioning and inventory systems to determine whether each individual end user address in Verizon's territory (millions of addresses) is located in census blocks subject to relief . . . [and] constantly update this data, including to incorporate the hundreds of new addresses added on a daily basis;” (2) “Build intelligence into the ordering system to limit the availability of the [DS1] UNE loops to only census blocks not subject to relief; (3) “Modify billing systems if required to bill the UNE loops subject to relief at a different rate from those loops not subject to relief (
e.g.,
a different rate during a transition period);” and (4) “validating the residential and broadband classification of the circuit.” Indeed, the cost per provider for implementing such changes could be “at least hundreds of thousands of dollars.” While INCOMPAS and NWTA point to one competitive LEC's use of UNE DS1 Loops to serve some residential customers based upon filings made in the 2018 USTelecom forbearance proceeding, neither this competitive LEC nor any other individual competitive LEC indicated any such use in in their filings in this proceeding or supported such an exemption. INCOMPAS and NWTA also pointed to Virginia Global, but that citation suffers from the same infirmities as the citation to Sonic. While INCOMPAS initially called for expanding the proposed exemption to enterprise customers, it was a party to the Compromise Proposal, which did not provide a DS1 exemption for residential or enterprise customers in the Competitive Counties. Because of the negligible benefits and significant costs, we decline to provide a residential DS1 exemption.

46.
Transition Period.
In the
NPRM,
we proposed a uniform transition period

for UNE DS1 and DS3 Loops that would provide a 36-month transition period for existing UNE DS1 and DS3 Loops without a period for new orders. Based on the record, we find that different transition plans for UNE DS1s and UNE DS3 Loops are warranted. Instead, for UNE DS1 Loop obligations, we adopt a two-part transition of 24 months for new orders and 42 months for existing UNE DS1 Loops. For existing UNE DS3 Loops, consistent with our proposal in the
NPRM,
we adopt a single transition period of 36 months with no additional period for placing new orders. Carriers may not convert existing special access circuits to UNEs after the effective date of this Order.

47. Our decision to adopt modified and different transition timeframes for these enterprise UNE loops is based on both record evidence and the Compromise Proposal between and among a majority of incumbent and competitive LEC stakeholders and participants in this proceeding, each of which individually would have preferred a shorter or longer transition period having different accompanying conditions than what their compromise proposal suggests. The Commission has long found compromise proposals negotiated by interested parties representing different interests to be reasonable and to serve the public interest. We acknowledge, however, the need to base our findings on an independent rationale. We find the transition periods contained in the Compromise Proposal to be reasonable and in the public interest, based both on the record in this proceeding and because the proposal has been advanced by most of the major buyers and sellers of these UNEs. We therefore adopt the following transition timeframes for eliminating the availability of UNE DS1 and DS3 Loops. We also reject Verizon's assertion that we should modify the “provision-then-dispute” process adopted in the
Triennial Review Remand Order
as we significantly reduce the availability of UNEs in this Order only to areas where they remain necessary, and there is no evidence in the record to support changing the process for obtaining UNEs in the limited areas where they remain.

48. First, we permit competitive LECs to order new UNE DS1 Loops for 24 months after the effective date of this order. This timeframe will enable competitive LECs to continue to execute short-term business plans and honor contractual obligations with new or existing customers, including small businesses, while they determine which alternative voice service option will best serve their customers' needs. Second, we adopt a 42-month grandfathering period for UNE DS1 Loops for all competitive LEC customers. We adopt a 36-month grandfathering period for UNE DS3 Loops for all competitive LEC customers, with no period included for new orders. The record demonstrates that demand for UNE DS3 Loops is
de minimis,
justifying a shorter grandfathering period and no transition period for new orders, as compared to UNE DS1 Loops.

49. We reject proposals for either a longer transition period or a shorter transition period and find the Compromise Proposal to be reasonable. Indeed, Puerto Rico Telephone Company, which was not a party to the INCOMPAS-USTelecom Compromise Proposal, supports the DS1 relief, transition period, and associated conditions because as a whole, it “strikes a reasonable balance that modernizes regulatory requirements and promotes competition,” providing additional evidence of its reasonableness. We find that these transition periods will provide competitive LECs with sufficient time to make alternative arrangements, particularly given the availability of DS1 and DS3 BDS channel terminations as discussed above, without continuing to impose these burdensome and costly requirements on incumbent LECs for longer than necessary.

50. The 42-month transition timeframe within which all UNE DS1 Loops (including any new UNE DS1 Loops ordered during the first 24 months) and the 36-month transition timeframe within which all UNE DS3 Loops must be transitioned to alternative arrangements will commence on the effective date of this order. These transition periods should provide more than enough time for competitive LECs and their customers to transition to alternative voice and broadband service arrangements as evidenced by the willingness of the major competitive LEC trade association and the majority of its members to support this timeframe. Competitive LECs that have provided record information about the length of their customer contracts have typically referenced contract lengths of a minimum of three years with business or government customers. To the extent competitive LECs have entered into longer-term contracts with their customers without securing long-term contracts with their suppliers, they have done so at their own risk like any other business does, and we see no reasonable basis for accommodating that risk. Moreover, the fact that the major incumbent LECs currently subject to these unbundling obligations have agreed to support this transition timeframe suggests the burdens they claim to incur as a result of continuing to provide such UNEs during the transition are outweighed by the benefit of a compromised transition proposal.

51. In addition, during the relevant transition periods for any competitive LEC customer, any UNE DS1 and DS3 Loops that a competitive LEC leases as of the effective date of this order shall be available for lease from the incumbent LEC at regulated UNE rates. Such rates are established either through negotiated interconnection agreements or through state-commission-arbitrated rates applying certain Commission-developed pricing formulas. Our forbearance action is not intended to upset pre-existing interconnection agreements or other contractual arrangements that may currently exist nor pre-existing state-commission-arbitrated rates during the transition period (including any already-adopted state commission scheduled changes in UNE rates), which should quell concerns of those fearing near-term price increases for UNE DS1 and DS3 Loops resulting from this Order. Of course, the transition mechanism we adopt is simply a default process, and competitive LECs and price cap LECs remain free to negotiate different arrangements superseding this transition period and replacing UNE DS1 and DS3 Loop arrangements with negotiated commercial arrangements at any earlier time. We find this approach will ensure an orderly transition for end-user customers of affected competitive LECs by mitigating any immediate rate changes that could otherwise be experienced by these end users if current rates for UNE DS1 and DS3 Loops were immediately eliminated. The transition timeframes we adopt will also work to ensure that consumers do not experience any undue service disruption as a result.

2. UNE DS0 Loops and Associated UNE Copper Subloops

52. We proposed in the
NPRM
to find that competitive LECs are no longer impaired in urban census blocks without unbundled access to DS0 loops. Based on the record in this proceeding, as well as Commission data, we adopt a modified version of this proposal and find that unbundled access to DS0 loops and their associated copper subloops in urbanized areas (areas of 50,000 or more people), the most densely populated areas of the country, is unwarranted because competitive LECs are no longer impaired without unbundled access to these UNEs. The Census Bureau divides the country into approximately eleven

million census blocks, the smallest unit of geography for which the Census Bureau provides demographic data. Census blocks are classified as being located in an urbanized area (where populations are over 50,000) or an urban cluster (where populations range from 2,500-50,000). Locations with fewer than 2,500 people are considered rural. As of the 2010 Census, 71.2% of Americans lived in urbanized areas, 9.5% lived in urban clusters, and 19.3% lived in rural areas. The record overwhelmingly supports this conclusion. We decline to extend unbundling relief in census blocks in rural areas and urban clusters.

53. Section 51.319(a)(1) of our rules requires incumbent LECs to make available on an unbundled basis digital copper loops and two-wire and four-wire copper loops conditioned to transmit digital signals (collectively, DS0s or UNE DS0 Loops). We exclude from the purview of this term UNE Analog Loops, which are addressed separately below. UNE DS0 Loops are used predominantly to serve residential and small and medium businesses. UNE Copper Subloops are the portions of the copper DS0 loops that are used to connect certain end-user premises with local loops.

54. USTelecom, INCOMPAS, and most of their members participating in this proceeding agree that, subject to the applicable transition period and associated conditions we adopt for UNE DS0 Loops in this Order, competitive LECs are no longer impaired without access to UNE DS0 Loops in urbanized areas. We agree with this assessment. We also find that continued unbundling of those network elements in urbanized areas frustrates the goal of ensuring deployment of advanced communications capability. Independently, we conclude that forbearance from the UNE DS0 Loop obligation is warranted in urbanized areas, subject to the transition period and associated conditions we adopt. Our findings of non-impairment and forbearance from UNE DS0 Loops and UNE Copper Subloops requirements do not apply to UNE DS0 Loops and associated UNE Copper Subloops in less densely populated urban clusters or rural areas where the record and Commission data do not provide sufficient evidence of entry by facilities-based competitors, intermodal or otherwise, without the use of UNE DS0 Loops.

55.
Background.
The current unbundling requirements for DS0 loops and copper subloops were adopted more than 17 years ago. At that time, the Commission found nationwide impairment without unbundled access to DS0 loops. In doing so, it noted that fiber deployment for the mass market was still in its infancy, wireless was not yet a suitable option for providing mass market broadband, and cable telephony had not developed sufficiently to be considered a substitute for traditional wireline telephony.

56. In the past 17 years, the communications marketplace has dramatically changed. The most recent data at the time that the DS0 unbundling requirements were adopted showed that wireline switched access was the leading form of telecommunications, and incumbent LECs were the dominant providers of wireline switched access. It followed that unbundling requirements were focused on providing competitive LECs with the network elements, such as local loops, to provide wireline switched access in competition with incumbent LECs. The data available in early 2003 reported 187.5 million wireline switched access lines, with incumbent LECs providing approximately 167.5 million of those lines, about 88% of the total. Cable providers reported serving only 2% of all switched access lines (via coaxial cable) in the reported data available when the Commission adopted the
Triennial Review Order.
Other forms of wireline voice lines, including interconnected VoIP, were so negligible that they were unreported. Over the last 17 years, wireline switched access lost its role as the leading technology for telecommunications. The most recent data reported 38.4 million total wireline switched access lines, with incumbent LECs providing 29.9 million of those lines, less than one-fifth of the wireline switched access lines they provided in 2003. In the interim, interconnected VoIP went from being irrelevant and thus unreported until 2008, to the most recent data showing 69.5 million interconnected VoIP lines reported, outnumbering wireline switched access lines from all providers. Wireline switched access lines now account for just 8% of all retail voice subscriptions across all technologies, and those provided by incumbent LECs are only about 39% of all wireline end-user subscriptions (both switched access and interconnected VoIP). Overall, incumbent LECs serve over fixed lines only 9% of all voice subscriptions across all technologies. At the same time wireline switched access line counts were decreasing, wireless voice subscribership was increasing. December 2002 data reported 136.2 million mobile wireless subscribers. As of December 31, 2019, that number had nearly tripled, reaching 355.7 million. And according to the Centers for Disease Control, most adults live wireless-only households, having increased from 45% to 61.3% between 2014 and 2019 and accounting for more than 80% of Americans between the ages of 25 and 34 and 73% of Americans between the ages of 35 and 44.

57. The change over 17 years has been even more dramatic for broadband. In 2003, the Commission defined advanced services as transmission speeds of more than 200 kbps both upstream and downstream, and found just over 20 million mass market advanced service lines in use. The Commission now defines fixed broadband as speeds of at least 25/3 Mbps, and it was available to approximately 96% of all Americans by the end of 2019. We exclude Barrier Communications Corporation's deployment data from our analysis because of inaccuracies and overstatements in that company's Form 477 filings. While the Commission does not yet consider satellite broadband to be a substitute for wireline broadband, the Commission found that “[i]f we include satellite service in our estimate, the December 2018 data shows that fixed 25/3 Mbps service is deployed to nearly every American.” Further, more than 87% of Americans had access to fixed speeds of 250/25 Mbps by the end of 2019. Deployment of last-mile fiber loops, which was not widespread in 2003, has expanded extensively. Between 2014 and 2019, residential subscription to a fiber based broadband service more than doubled, increasing from 8.3 million to 16.7 million. And mobile broadband, provided via LTE technology, which did not even exist in 2004, is now available in geographic areas covering virtually all Americans. Approximately 96% of Americans now have access to both 25/3 Mbps terrestrial broadband and
5/1
Mbps Mobile LTE broadband.

58.
Continuing Marketplace Changes.
Competition in the mass market communications space is likely to continue to grow, as barriers to entry have rapidly fallen for broadband providers using fixed wireless technology in densely populated areas. Industry analysts and incumbent wireline providers believe that 5G may allow wireless providers to capture a significant share of the residential broadband marketplace. T-Mobile committed, as a condition of its merger with Sprint, to roll out an in-home broadband service in millions of households, with a goal of serving the majority of zip codes by 2024. These 5G plans, and those of the other two

national wireless providers, are most advanced in dense urbanized areas where the deployment business case is most compelling. Other providers, including Starry, are also deploying fixed wireless technologies to serve urban areas in different frequency bands. And wireless as an intermodal alternative to wireline voice and broadband service is only going to increase further as 5G deployment progresses, further pushing DS0 loops into obsolescence. Cable providers have expanded their broadband networks beyond their current footprints to ready themselves for competition from forthcoming 5G services.

59.
Impairment Analysis.
We find sufficient evidence of facilities-based competition and competitive entry in urbanized area census blocks without reliance on UNE DS0 Loops and UNE Copper Subloops to determine that competitive LECs in those locations are no longer impaired without access to those UNEs, and that policy considerations weigh against maintaining these requirements. Because UNE Copper Subloops are used to connect DS0 loops to end-user premises, our conclusions about UNE DS0 Loops apply equally to UNE Copper Subloops. Because of the many competitive alternatives available to customers in urbanized areas, we find that elimination of these unbundling requirements will not impact the provision of 9-1-1 service. Our conclusion is based on three related findings. First, robust intermodal competition, particularly from cable providers, now exists in urbanized areas, meaning that in these areas, “the costs cognizable under the Act of unbundling that UNE outweigh the benefits of unbundling, even if some level of impairment might be present.” Second, reasonably efficient competitors seeking to provide broadband and voice services in urbanized areas would use fixed wireless or other technologies, and not copper-based DS0 loops. Third, in light of this actual intermodal competition and potential competition from entering providers, continuing to require incumbent LECs to offer UNE DS0 Loops reduces incentives to invest and slows the transition to next-generation networks, in contravention of statutory goals we consider under section 251(d)(2) of the Act.

60. Intermodal competition in the form of cable competition alone is enough to establish the existence of sufficient competition even in the absence of UNEs. Nearly all households in urbanized areas (98%) live in census blocks served by cable broadband with speeds of at least 25/3 Mbps, and incumbent LECs have deployed broadband meeting this speed threshold in 73% of these areas. Incumbent LEC affiliation is determined at the holding company level and for all census block which the incumbent LEC's study area overlaps the census block. We exclude a provider's deployment if the provider is not an incumbent LEC and whose last mile connection is based upon a copper technology (
i.e.,
FCC Form 477 Technology Codes 10, 11, 12, 20 and 30). In addition, 84% of households in urbanized areas live in census blocks served by at least two 25/3 Mbps providers without the use of UNEs, and 90% of households live in census blocks served by at least two 10/1 Mbps providers without the use of UNEs. For purposes of this analysis, we exclude deployment of non-incumbent LECs that report broadband based upon copper facilities on the assumption that these firms are likely using UNEs. Finally, because urbanized area census blocks are relatively small, to the extent that a facilities-based provider already serves one customer in a given census block, economies of scale are more likely to accrue to serve additional customers in that census block, as the Commission long ago noted. There are, on average, 0.057 square miles in a rural census block, 0.017 square miles in an urban cluster census block, and 0.028 square miles in an urbanized area census block.

61. Moreover, it is our predictive judgment, supported by the record, that reasonably efficient competitors seeking to enter the fixed voice and broadband marketplace in urbanized areas for residential and small business customers are likely to use a variety of technologies, including fixed wireless, rather than relying upon the existing copper-based local loop network or building a similar network. That is, the use of DS0 loops to enter the broadband and voice marketplace in urbanized areas is no longer a reasonably efficient technology. Indeed, the three national mobile wireless carriers continue to invest in 5G-based fixed wireless service, which will provide additional fixed-service choices for voice and broadband services, particularly in dense urbanized areas where 5G is being first deployed and where small cell technology is most efficiently used. And other fixed wireless providers are similarly deploying innovative solutions. The record also indicates that a range of providers are deploying fiber-to-the-home networks, including but not limited to incumbent and competitive LECs. To the extent competitive LECs claim they remain dependent upon UNE DS0 Loops in these urbanized areas to serve new customers in order to obtain the necessary scale and revenue to fund such fiber-to-the-home builds, we no longer find these claims compelling. These competitive LECs are not “new entrants” in these urbanized areas any longer, and network expansion like that for other types of technology providers should no longer be based on unnecessary unbundled DS0 loops. These and other technologies, rather than copper loops, are reasonably efficient methods of entry into urbanized areas today.

62. Our conclusions about actual and potential competition are supported by our “at a minimum” authority under section 251(d)(2). We are not only permitted to look to the impact of unbundling requirements on broadband deployment as “rationally related to the goals of the Act,” but are required to take this important policy goal into account. We reject the Electronic Frontier Foundation's argument that we should reconsider our decisions in the 2000s to end the unbundling of fiber-to-the-home loops. As the Commission has consistently found, unbundling fiber-based loops could reduce the incentives for both incumbent and competitive LECs to invest in next-generation networks, and there is no evidence to suggest that unbundling's effect on incentives to invest would be any different in low-income urban markets. In doing so, we find that continued unbundling of DS0 loops would inhibit, rather than promote, broadband deployment and the transition to next-generation networks and services in urbanized areas, because continued unbundling at regulated rates could artificially slow the transition away from legacy services and reduce incentives to invest in more advanced technologies, such as fixed wireless and fiber-based networks.

63. While we proposed in the
NPRM
a finding of no impairment in urban census blocks, which would include both urbanized areas (areas of 50,000 or more people) and urban clusters (areas with at least 2,500 but less than 50,000 people), based on the record and our own data, we conclude that we should limit that finding only to urbanized area census blocks. The data show that there are fewer competitor options in census blocks categorized as urban clusters and rural areas than in urbanized area census blocks. For example, as of December 31, 2019, approximately 84% of households in urbanized areas lived in census blocks with two or more providers of 25/3 Mbps broadband, compared to 59% of households in urban clusters and 42% in rural areas. Incumbent LEC affiliation is determined

at the holding company level and for all census block which the incumbent LEC's study area overlaps the census block. We exclude a provider's deployment if the provider is not an incumbent LEC and whose last mile connection is based upon a copper technology (
i.e.,
FCC Form 477 Technology Codes 10, 11, 12, 20 and 30). We therefore reject arguments that we should extend relief to urban clusters. By limiting DS0 loop unbundling relief to urbanized areas, we also obviate the concerns of commenters that consumers in less densely populated areas, particularly urban clusters, may lose their only source of competition or lose access to high-speed broadband altogether. Commission staff analysis of FCC Form 477 deployment data as of December 31, 2019 and of study area maps indicates that approximately 42,000 households have a single provider option for 25/3 Mbps that may rely on UNE DS0 Loops, based on the number of households who live in census blocks where a single provider reports 25/3 Mbps deployment for residential customers over a copper wire loop. The identification of the provider as a CLEC is based upon the provider's holding company name and incumbent LEC study area maps that indicate that the provider is not the incumbent LEC. About 35,000 of these households live in rural areas and urban clusters where UNE DS0 Loops will remain available. We believe that the approximately 7,000 households who live in urbanized areas (just 0.008% of the 88 million households in urbanized areas) with only one provider of 25/3 Mbps will not be negatively affected by our action today for two reasons. First, as discussed below, we provide a two-part transition period for UNE DS0 Loops in urbanized areas, including a 2-year period for new orders and a 4-year period for existing orders. Second, we believe that these areas may be among the ripest for entry by competitive providers, including fixed wireless providers, based on their relative density and now that UNE DS0 loops will no longer be available in these areas after the transition.

64.
Forbearance Analysis.
The facts supporting our finding of non-impairment equally support an independent finding that forbearance from our UNE DS0 Loop and UNE Copper Subloop requirements in urbanized area census blocks is appropriate. As with UNE DS1 and DS3 Loops, we find that forbearance is appropriate based on our analysis of the specific circumstances at issue. Competitive LECs wanting to continue offering the same services currently provisioned over UNE DS0 Loops in urbanized areas will have access to commercial alternatives, subject to the existence of “suitable facilities” after the transition. And because the marketplace for mass market last-mile loops is competitive, as discussed above, the marketplace will discipline the prices of those services.

65.
Section 10(a)(1).
We conclude that enforcement of UNE DS0 Loop obligations in urbanized area census blocks is not necessary to ensure just and reasonable rates. Intermodal competition in urbanized areas has increased dramatically since the Commission adopted the current DS0 loop unbundling obligations, and mass market customers in urbanized areas now have numerous voice and broadband options available to them. The competitive pressures posed by those intermodal competitors will serve to constrain incumbent LEC rates for commercial replacement offerings to UNE DS0 Loops. Both actual and potential competition force incumbent LECs to compete on price in order to retain, and grow, their existing customer bases. Competition overall constrains incumbent LEC rates to end users. And incumbent LECs have an incentive to make wholesale inputs available at reasonable rates so that they will continue to earn revenues from competitive LECs rather than losing those revenues to intermodal competitors. The record supports forbearing from this unbundling obligation, as enforcement of the obligation is not necessary to ensure just and reasonable rates in this competitive environment.

66.
Section 10(a)(2).
We find that the evolving marketplace and the statutory and regulatory safeguards that work to ensure just and reasonable rates also ensure that consumers will not be harmed by forbearance from enforcement of the UNE DS0 Loop obligation. Most importantly, consumers in urbanized areas now have a multitude of intermodal competitors, with others attempting to enter, vying for their voice and broadband business. The fact that these competitors use more modern technologies than copper-based local loops supports our decision in this document. As we found in the
UNE Analog Loops and Avoided-Cost Resale Forbearance Order,
“regulations that subsidize end-user customers to remain on legacy services and technologies run counter to the Commission's goal of facilitating technology transitions to the long-term benefit of all consumers.” We also note that there is evidence that wholesale alternatives to UNE DS0 Loops currently exist in certain areas or are starting to emerge. For example, according to CenturyLink, at least three large cable providers launched products intended to serve as alternatives to UNE Analog Loops shortly after the Commission adopted the
UNE Analog Loops and Avoided-Cost Resale Forbearance Order.
And CenturyLink itself offers a UNE DS0 Loop wholesale alternative in areas in which it was previously granted forbearance. Moreover, incumbent LECs have committed to making wholesale alternatives commercially available “where suitable facilities exist” “in any area in which unbundled DS0 loops are no longer available,” which competitive LECs can use to provide service.

67.
Section 10(a)(3).
Finally, we find that forbearing from the UNE DS0 Loop obligation in urbanized area census blocks is in the public interest as it promotes the policy of facilitating the deployment of next-generation networks and services and encouraging the transition away from legacy facilities. As we noted in the
UNE Analog Loops and Avoided-Cost Resale Forbearance Order,
end users transitioning from TDM to new technologies and services “will experience the benefits the Commission has recognized as flowing from that transition,” including “not only the benefits from the technologies themselves but also from the vibrant competition associated with next-generation [] services.” Indeed, extensive intermodal competition has already developed in these areas. Retaining UNE DS0 Loop obligations in this competitive environment in urbanized area census blocks could actually harm the facilities-based competitive options that are currently available and developing, because the use of UNEs at cost-based rates may allow providers using legacy technologies to undercut new entrants using fixed wireless and other advanced technologies, as well as reducing competitive LECs' incentives to invest in advanced technologies. And continued reliance on legacy services by end users reduces the incentive of incumbent and competitive LECs alike to deploy advanced networks and services. We therefore find retaining this requirement in urbanized areas would have an adverse effect on the public interest. The Commission has previously expressed its preference for facilities-based competition.

68.
Geographic Area.
Certain commenters urge us to find that competitive LECs are not impaired without access to all UNE DS0 Loops or that we should forbear from this obligation on a nationwide basis. We

disagree. Two of these commenters (USTelecom and AT&T) subsequently entered into a joint compromise proposal that appears to limit their request for relief to urbanized areas subject to certain conditions. While broadband deployment and competitive entry may be increasing in urban clusters and rural areas, competitive broadband availability in these areas continues to lag behind densely populated urbanized areas, and the costs of deployment are inherently higher as density falls.

69. Alternatively, other commenters urge us to make our findings of no impairment or forbearance on a county basis rather than on a census block basis, as proposed in the
NPRM,
for purposes of administrative efficiency. Still others request that we implement our findings on a wire center basis, to provide incumbent LECs with flexibility in implementation. We disagree that a geographic basis other than census blocks is the best geographic area to rely upon. The Commission's Form 477 data is reported on a census block level, thus making that geographic boundary the most appropriate for measuring the extent of competitive facilities-based deployment by technology and the availability of competitive broadband alternatives for households. While incumbent LECs provision UNEs at the wire center level, and some wire centers serve both urbanized areas and urban cluster and rural census blocks, to the extent an incumbent LEC does not wish to take measures to distinguish between the different types of census blocks, we find that it is better to err on the side of overinclusiveness for UNE DS0 Loops, to avoid eliminating such UNE access for customers located in rural areas and urban clusters. Indeed, the Commission erred on the side of overinclusiveness when defining Tier 3 Wire Centers for the purpose of where to unbundle transport.

70.
Cable Deployment.
Certain commenters assert that reliance on cable deployment as evidence of non-impairment is inappropriate due to cable provider first-mover advantages, because they already had extensive facilities deployed for providing video service and had an established customer base. We disagree. For one, our impairment and forbearance analyses require us to consider competition from all sources. When affirming the Commission's decision not to require the unbundling of the broadband capabilities of hybrid loops, the D.C. Circuit held that “robust intermodal competition from cable providers” was sufficient evidence of competition, in itself, to justify the Commission's decision. The same extensive investment in the legacy cable video network that enabled cable companies to provide competitive voice and broadband service in competition with incumbent LECs and served as the underpinning of the Commission's decision to refrain from unbundling hybrid loop broadband capabilities applies equally to our decision today for UNE DS0 Loops. If the Commission was permitted to rely on cable deployment to support a decision not to unbundle the broadband capabilities of hybrid loops, we may rely on it to support our decision to eliminate unbundling for DS0 loops here. Moreover, we can consider the effects of intermodal competition in our decision to weigh other factors when considering whether to order unbundling, particularly the incentives for broadband deployment, based on our section 251(d)(2) authority.

71.
Form 477 Data.
Some commenters assert that we should not rely on Form 477 data to support competition findings because of flaws in that data. We disagree. Our UNE DS0 Loop relief in this Order is limited to urbanized areas. The census blocks in those areas are generally extremely small, meaning even in the unlikely event a provider is serving only one or a few locations in these census blocks, we can infer that the other locations in the census block are extremely likely to be served in the near future. Indeed, based on the most recent Form 477 data, cable's footprint increased by over 645,000 households, or 1.8 million people, from December 2018 to December 2019. Our assumption of such a deployment strategy, considering the high fixed costs of broadband deployment, is a “reasonable inference[] regarding the prospects for competition in one geographic market from the state of competition in other, similar markets,” as we are required to make per the
United States Telecom Ass'n
v.
FCC,
359 F.3d 554 (D.C. Cir. 2004) decision (
USTA II
decision).

72.
5G and Other Nascent Technologies.
Certain commenters assert that we should not rely on potential 5G deployment to support findings of potential competition sufficient to find non-impairment. Again, as we explain above, DS0 loops are no longer a reasonably efficient technology to provide voice or broadband services in urbanized areas. We must look not only to existing competition in making an impairment finding, but to all sources of
potential
competition as well. And the impairment inquiry specifically “presume[s] that a requesting carrier will use reasonably efficient technology.” As we have indicated, we believe it is increasingly likely to be fixed wireless technology, whether provided by 5G or other means. We therefore “explicitly reject arguments that support unbundling based on the costs associated with a particular architecture or approach—even an architecture or approach employed by the incumbent LEC—where entry using a more efficient available technology would permit economic entry.”

73.
“Natural Forbearance.”
Certain commenters assert that the Commission's copper retirement rules provide incumbent LECs an avenue for “natural forbearance” and thus assert that we should not provide UNE DS0 Loop relief through deregulatory means. Because section 251(c)(3)'s requirements do not apply to fiber facilities (other than dark fiber transport),
see
47 CFR 51.319, an incumbent LEC may obtain unbundling relief by deploying fiber or other next-generation networks and then retiring its copper facilities pursuant to our network change disclosure rules. Incumbent LECs retire their copper facilities through a notice-only process, without the need to seek our authorization. The continued unbundling obligation, commenters assert, thus acts as an incentive for incumbent LECs to deploy fiber. We are unpersuaded. First, unbundling imposes significant economic costs not recognized by this argument. Second, unbundling requirements lack sufficient countervailing benefits in densely populated urbanized areas, given the degree of competition and potential entry that already exists in those areas separate from the incumbent LEC's decision whether or not to retire copper in that area. Given the existence of competition in urbanized areas that does not rely on access to UNE DS0 Loops, we find that this one-sided regulation giving certain competitive LECs an economic advantage where others have entered the market without such an advantage is unwarranted, and incumbent LECs should no longer have to bear this lopsided burden.

74.
Single Competitor Not Enough to Find Non-Impairment.
Certain commenters also oppose the proposed finding of non-impairment in the
NPRM
because, they assert, a single competitor is not sufficient to show that competitive providers are not impaired without unbundled access to the particular network element. However, we find evidence of existing and potential intermodal competition in urbanized areas. Nor is this argument consistent with the D.C. Circuit's holding in the
USTA II
decision that the presence of intermodal competition from cable providers alone was

sufficient to support eliminating unbundling obligations for hybrid loops. In any event, competitive providers will still have access to UNE DS0 Loops in census blocks in rural and urban cluster areas after the relief we grant in this order becomes effective, thus largely obviating the concerns of these commenters.

75.
Transition Period.
While the
NPRM
proposed a three-year transition period and sought comment on a six-month period for new orders, numerous stakeholders have negotiated and proposed an alternative transition timeframe that we find to be reasonable based on the record in this proceeding and which we adopt instead. We condition our relief from UNE DS0 Loop and associated UNE Copper Subloop obligations on a two-part transition, consistent with the Compromise Proposal. First, we permit competitive LECs to order new UNE DS0 Loops for an additional 24 months after the effective date of this order. This timeframe will enable competitive LECs to continue to execute short-term business plans, honor contractual obligations with new or existing customers, including small businesses, and replace UNE DS0 Loops lost through end-user customer moves or loop degradation, while they determine which alternative voice service option will best serve their customers' needs. Second, we adopt a 48-month grandfathering period for all competitive LEC customers. The 48-month transition timeframe within which all UNE DS0 Loops (including any new UNE DS0 Loops ordered during the first 24 months) must be transitioned to alternative arrangements will commence on the effective date of this order. Industry organizations and their members, accounting for the lion's share of buyers and sellers of these UNEs, agree that this 48-month period is reasonable and should provide more than enough time for competitive LECs and their customers to transition to alternative service arrangements. Competitive LECs typically have contract lengths of a minimum of three years with business or government customers. To the extent competitive LECs have entered into longer-term contracts with their customers without securing long-term contracts with their suppliers, they have done so at their own risk like any other business does, and we see no reasonable basis for accommodating that risk.

76. We reject proposals calling for either a longer transition period or a shorter transition period. We find this four-year period to be a reasonable time frame that is sufficient to enable competitive LECs in these urbanized areas to transition away from depending on UNE DS0 Loops without stranding any investments they may have made while not burdening incumbent LECs with the costs of unbundling longer than necessary. We note that Puerto Rico Telephone Company, which was not a party to the INCOMPAS-USTelecom Compromise Proposal, supports the UNE DS0 relief, transition period, and associated conditions as a “reasonable balance.”

77. During the relevant transition period for any competitive LEC customer, any UNE DS0 Loops that a competitive LEC leases as of the effective date of this Order shall be available for lease from the incumbent LEC at regulated UNE rates. Such rates are established either through negotiated interconnection agreements or through state-commission-arbitrated rates applying certain Commission-developed pricing formulas. Our forbearance action is not intended to upset pre-existing interconnection agreements or other contractual arrangements that may currently exist nor pre-existing state-commission-arbitrated rates during the transition period (including any already-adopted state commission scheduled changes in UNE rates), which should quell concerns of those fearing near-term price increases for UNE DS0 Loops resulting from this Order. However, beginning with month 37 of the grandfathering period, incumbent LECs may raise their prices by up to 25%. Delaying any price increase for the first three years of the transition period should obviate concerns about economic pressure accompanying any such increase. However, allowing a price increase during the final year of the transition will further incentivize competitive LECs to transition their customers off of legacy networks. And incumbent LECs will be entitled to charge market rates after month 48, when the grandfathering period will expire. And incumbent LECs have committed to providing commercial alternatives for DS0s at the end of the transition period where the facilities exist to do so. Of course, the transition mechanism we adopt is simply a default process, and competitive and incumbent LECs remain free to negotiate different arrangements superseding this transition period and replacing UNE DS0 Loop arrangements with negotiated commercial arrangements at any earlier time. We find this approach will ensure an orderly transition for end-user customers of affected competitive LECs by mitigating any immediate service disruption or rate changes that could otherwise be experienced by these end users if current rates for these UNE DS0 Loops were immediately eliminated.

3. UNE Narrowband Voice-Grade Loops

78. In the
NPRM,
we proposed to eliminate all remaining narrowband voice-grade loop unbundling obligations. We find that competitors are no longer impaired without access to these elements, nationwide. Moreover, we find that continued unbundling of these network elements is no longer justified because it contravenes the Congressionally-mandated policy goal of ensuring the deployment of next-generation networks and services. We also adopt our proposal and independently find that forbearance from the remaining UNE Narrowband Voice-Grade Loop obligations nationwide is warranted.

79.
Background.
Under our current rules, incumbent LECs must provide three specific types of unbundled narrowband voice-grade loops: UNE Analog Loops, 64 kbps voice-grade channels over last-mile fiber loops when an incumbent LEC retires copper (UNE 64 kbps Voice-Grade Channel Over Fiber Loops), and the TDM capabilities of hybrid loops (UNE Hybrid Loops) (collectively, UNE Narrowband Voice-Grade Loops).

80. UNE Analog Loops are one type of copper loop that incumbent LECs must make available to competitors under the Commission's rules implementing section 251(c)(3). Notably, UNE Analog Loops are capable of providing only legacy TDM voice service, often referred to as plain old telephone service, or “POTS.” UNE Analog Loops, by definition, are not capable of providing or supporting digital communications, including modern IP-based services or even digital subscriber line (DSL) service. In the recent USTelecom forbearance proceeding, we granted forbearance relief from unbundling requirements for UNE Analog Loops to price cap incumbent LECs in their service areas. We granted this relief due to extensive intermodal competition present in the voice marketplace, the harmful marketplace distortions generated by outdated regulations, and because the continued existence of UNE Analog Loops reduced incentives for both incumbent and competitive LECs to invest in their own facilities and to transition to next-generation networks.

81. UNE Hybrid Loops are another type of loop that incumbent LECs must make available to competitors under the Commission's rules implementing section 251(c)(3). Hybrid loops are local loops “composed of both fiber optic

cable, usually in the feeder plant, and copper wire or cable, usually in the distribution plant.” Our rules currently require that incumbent LECs unbundle either (1) a TDM voice-grade capable 64 kbps channel or (2) a spare copper loop if the requesting carrier seeks to provide narrowband services, and only the TDM features, functions, and capabilities of hybrid loops if the requesting carrier seeks to provision broadband services. UNE Hybrid Loops are used to provide the “exact same legacy TDM-based services that could be provided with UNE Analog Loops.” The only difference is that UNE Hybrid Loops “provide those services partially over fiber facilities, rather than over copper-only facilities.” In the
Triennial Review Order,
the Commission declined to order unbundling of the packet-based capabilities of hybrid loops, because unbundling “these next-generation network elements would blunt the deployment of advanced telecommunications infrastructure by incumbent LECs and the incentive for competitive LECs to invest in their own facilities, in direct opposition to the express statutory goals authorized in section 706.”

82. The UNE 64 kbps Voice-Grade Channel Over Fiber Loops obligation was created when the Commission eliminated unbundled access to fiber-based local loops because, among other reasons, requiring unbundling of fiber-based local loops would “undermine important goals of the 1996 Act,” particularly the section 706 goal to encourage the deployment of advanced telecommunications capability to all Americans. The Commission found, however, that where an incumbent LEC has retired its copper facilities, lack of access to an incumbent LEC fiber loop would impair a competitive carrier in its provision of narrowband voice services it had been providing over the unbundled copper loop. In essence, this “very limited” requirement was intended to prevent incumbents from exercising their “sole control” over the disposition of copper loops (by retiring the copper loop and replacing it with a fiber-based local loop) to disrupt competitors' provision of narrowband services. By 2015, the Commission recognized that this requirement itself could undermine incentives for broadband deployment and granted forbearance on a forward-looking basis to incumbent LECs from the requirement to make available a 64 kbps voice-grade channel over overbuilt fiber loops. This 64 kbps unbundling requirement remains in the Code of Federal Regulations. The Commission found that this unbundling requirement could impede copper loop retirements and the ongoing transition from copper to fiber and from legacy TDM-based services to next-generation networks and services. While the Commission found that this UNE had a “decreasingly relevant purpose” as a safeguard to protect narrowband voice competition during the copper-to-fiber transition, it nevertheless retained the 64 kbps voice-grade channel unbundling obligation for existing users.

83. UNE Narrowband Voice-Grade Loops, be they UNE Analog Loops, UNE Hybrid Loops, or UNE 64 kbps Voice-Grade Channel Over Fiber Loops, are used, if at all, almost exclusively for the provision of switched access voice-grade service, which we have found customers are migrating away from in favor of IP- and wireless-based voice services provided by multiple intermodal providers. Our conclusions in the
UNE Analog Loop and Avoided-Cost Resale Forbearance Order
were based on Form 477 data, which is collected on a nationwide basis. Indeed, in 2019, incumbent LEC legacy networks provided only about 8% of retail voice subscriptions across all technologies, serve a minority of both wired residential connections and wired business connections, and face growing competition from voice service alternatives including facilities-based fixed voice providers such as cable companies providing VoIP, mobile wireless facilities-based providers and resellers, and VoIP providers offering over-the-top services via broadband.

84.
Impairment Analysis.
Consistent with our
NPRM
proposal to eliminate these obligations, we find that competitors are not impaired without access to UNE Narrowband Voice-Grade Loops due to the widespread availability of intermodal competition, the declining number of incumbent LEC voice subscriptions, the lack of demand for these UNEs, and the migration away from legacy TDM services. Section 251(d)(2) mandates that the Commission consider “at a minimum” whether access to proprietary network elements is necessary and a competitor would be impaired without access to such network elements. We find that continued unbundling of these network elements contravenes the congressionally mandated policy goal of ensuring the deployment of next-generation networks and services.

85.
UNE Analog Loops.
We find that competitors are not impaired without access to UNE Analog Loops nationwide. Today, there are a multitude of competitive alternatives for voice services that do not rely on an incumbent LEC's legacy network. We find there is no longer any credible basis to claim competitors are impaired without access to these UNE Analog Loops. First, voice-grade copper loops are no longer a reasonably efficient technology to enter the voice marketplace, in light of facilities-based and over-the-top alternatives to provide voice service. A reasonable entrant would use any of a number of newer technologies and services capable of providing advanced voice and broadband services, including wireless technologies. And a number of over-the-top voice capabilities are available that could also be used to enter the voice market today without constructing network facilities, instead relying on the broadband capabilities of other providers' networks.

86. Second, intermodal competition for voice services is so advanced that competitive providers, including cable providers, wireless providers, and other VoIP providers, have come to dominate the voice service marketplace. The level of competition, much of which evolved without UNEs, is such that the cost of unbundling can no longer be justified. As the Commission noted in 2004, impairment can only be found for low-capacity loops “
if
no alternatives outside the incumbent's network are available.”

87. Finally, the declining share of incumbent LEC switched-access voice subscriptions in recent years and the prevalent deployment of facilities-based alternatives indicates that incumbent LECs no longer have a unique position in the voice service market. We further find that continued unbundling of these network elements that serve only to preserve outdated legacy voice services slows the transition to next-generation networks and services in contravention of our significant policy objectives in promoting the deployment of advanced telecommunications capabilities. Our decision to eliminate UNE Narrowband Voice-Grade Loop obligations furthers the Commission's ultimate goal of fostering the deployment of next-generation networks and services and consumers' migration to next-generation services.

88.
UNE Hybrid Loops.
Nationwide elimination of UNE Hybrid Loop obligations is also appropriate because reasonably efficient competitors are not impaired without access to these UNEs—
i.e.,
no reasonably efficient competitor would seek to enter today's voice-service market by using a loop solely capable of providing TDM service. The “widespread deployment of facilities-based alternatives” to the TDM-based services provided over UNE

Hybrid Loops and the fact that intermodal competition for voice services is so advanced indicates there is no basis for competitors to claim they are impaired without access to TDM-based services, particularly those provided over UNE Hybrid Loops. Further, competitive LECs no longer face significant barriers to entering the voice market without access to the TDM-based services provided over UNE Hybrid Loops owned by incumbent LECs. Competitors have come to dominate the voice service marketplace using technologies that do not include TDM-based voice. The declining amount of incumbent LEC voice subscriptions and the
de minimis
demand for the TDM-based services provided over UNE Hybrid Loops demonstrates that access to these UNEs are not necessary for a reasonably efficient competitor to enter today's voice-service marketplace. For these reasons, no reasonably efficient competitor would seek to enter today's voice service market by using a loop solely capable of providing TDM service, just as we find with respect to UNE Analog Loops. Rather, such an entrant using its own facilities would provide any of a number of newer technologies and services capable of providing both voice and broadband services, or provide over-the-top service relying on other providers' broadband networks. Moreover, eliminating access to the TDM capabilities of UNE Hybrid Loops will reduce potential delays to the TDM-to-IP transition and will promote broadband deployment that will benefit American consumers and businesses, supporting important goals of the Act.

89.
Grandfathered UNE 64 kbps Voice-Grade Channel

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-25254. Public record. Not legal advice.