# Implementation of the Local Competition Provisions in the Telecommunications Act of 1996

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URL: https://www.frixlaw.com/law-library/documents/fr%3A96-10300

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** April 25, 1996
- **Citation:** 61 FR 18311

## Text

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 96-98, FCC 96-182]

Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In enacting the Telecommunications Act of 1996 (1996 Act)
Congress sought to establish a pro-competitive, deregulatory national
policy framework for the telecommunications industry. In adding new
sections 251, 252, and 253 to the Communications Act of 1934, Congress
set forth a blueprint for ending monopolies in local telecommunications
markets. Section 251(d)(1) of the Act directs the Commission to
establish rules to implement the requirements of Section 251. In this
Notice of Proposed Rulemaking (``NPRM'') the Commission seeks to
implement the local competition provisions of the 1996 Act. The
Commission's rules that arise from this rulemaking proceeding will
serve to promote the procompetitive provisions of the statute. These
rules will assist incumbent LECs, telecommunications carriers, state
commissions, the Commission, and the courts in defining rights and
responsibilities regarding

[[Page 18312]]

interconnection, unbundling, resale, and many other issues under the
1996 Act. The rules will relate to such issues as: the negotiation
process between incumbent LECs and telecommunications carriers; state
commission approval of arbitrated agreements; the Commission's review
of arbitrated agreements when a state commission fails to act; judicial
review of state commission and this Commission's actions; statements of
generally available terms and conditions by Bell Operating Companies;
removal of barriers to entry; and BOC entry into interLATA services.

DATES: Comments on all sections other than Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way, must be submitted on or before May 16, 1996. Reply
comments must be filed on or before May 30, 1996. Comments on the
remaining sections must be submitted on or before May 20, 1996. Reply
comments for these sections must be submitted on or before June 3,
1996. Written comments on the Initial Regulatory Flexibility Analysis
must be filed in accordance with the same filing deadlines set for
comments on the issues other than Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way, in the NPRM, but they must have a separate and distinct
heading designating them as responses to the Regulatory Flexibility
Analysis. Written comments by the public on the proposed and/or
modified information collections are due on or before May 16, 1996.
Written comments must be submitted by the Office of Management and
Budget (OMB) on the proposed and/or modified information collections on
or before June 24, 1996.

ADDRESSES: Comments and reply comments should be sent to Office of the
Secretary, Federal Communications Commission, 1919 M Street, NW., Room
222, Washington, DC 20554, with a copy to Janice Myles of the Common
Carrier Bureau, 1919 M Street, NW., Room 544, Washington, DC 20554. A
copy of Comments and Reply Comments on Dialing Parity, Number
Administration, Public Notice of Technical Changes, and Access to
Rights of Way should be submitted to Gloria Shambley of the Network
Services Division, Common Carrier Bureau, 2000 M Street, NW.,
Washington, DC 20554. Parties should also file one copy of any
documents filed in this docket with the Commission's copy contractor,
International Transcription Services, Inc., 2100 M Street, NW., Suite
140, Washington, DC 20037. Comments and reply comments will be
available for public inspection during regular business hours in the
FCC Reference Center, 1919 M Street, NW., Room 239, Washington, DC
20554. Parties are also asked to submit comments and reply comments on
diskette. Such diskette submissions would be in addition to and not a
substitute for the formal filing requirements addressed above. Parties
submitting diskettes should submit them to Janice Myles of the Common
Carrier Bureau, 1919 M Street, NW., Room 544, Washington, DC 20554. In
addition to filing comments with the Secretary, a copy of any comments
on the information collections contained herein should be remitted to
Dorothy Conway, Federal Communications Commission, Room 234, 1919 M
Street, NW., Washington, DC 20554 or via the Internet to
[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB,
725--17th Street, NW., Washington, DC 20503 or via the Internet to
[email protected].

FOR FURTHER INFORMATION CONTACT: Donald Stockdale or Kalpak Gude at
(202) 418-1580, Common Carrier Bureau, Policy and Program Planning
Division. For information concerning Dialing Parity, Number
Administration, and Public Notice of Technical Changes, contact Lisa
Boehley at (202) 418-2320. For Access to Rights of Way contact Tom
Power at (202) 416-1188. For additional information concerning the
information collections contained in the NPRM, contact Dorothy Conway
at (202) 418-0217, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This NPRM contains proposed or modified
information collections subject to the Paperwork Reduction Act of 1995
(PRA). It has been submitted to the Office of Management and Budget
(OMB) for review under the PRA. OMB, the general public, and other
federal agencies are invited to comment on the proposed or modified
information collections contained in this proceeding. This is a
synopsis of the Commission's Notice of Proposed Rulemaking (FCC 96-182)
adopted on April 19, 1996 and released on April 19, 1996. The full text
of this Notice of Proposed Rulemaking is available for inspection and
copying during normal business hours in the FCC Reference Center (Room
239), 1919 M Street, NW., Washington, DC. The complete text also may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite
140, Washington, DC 20037.
Paperwork Reduction Act: This NPRM contains either a proposed or
modified information collection. The Commission, as part of its
continuing effort to reduce paperwork burdens, invites the general
public and the Office of Management and Budget (OMB) to comment on the
information collections contained in this NPRM, as required by the
Paperwork Reduction Act of 1995, Pub. L. No. 104-13. Public and agency
comments are due at the same time as comments on the other issues
(other than Dialing Parity, Number Administration, Public Notice of
Technical Changes, and Access to Rights of Way) in the NPRM; OMB
notification of action is due June 24, 1996. Comments should address:
(a) Whether the proposed collection of information is necessary for the
proper performance of the functions of the Commission, including
whether the information shall have practical utility; (b) the accuracy
of the Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
OMB Approval Number: None.
Title: Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, CC Docket No. 96-98.
Form No.: N/A.
Type of Review: New Collection.
Respondents: Business or other for-profit, including small
businesses.

------------------------------------------------------------------------
Annual
hour
Proposed requirement Number of burden
respondents per
response
------------------------------------------------------------------------
Public notice of technical changes............... 500 24
Network disclosure reference..................... 500 3
Consumer notification requirement................ 500 20
Burdens of proof regarding interconnection,
unbundling, and collocation..................... 75 36
Submission of agreements to state commission..... 75 5
Notification that state commission failed to act. 75 1
Proposed burden regarding access to rights-of-way
requirement..................................... 20 5

[[Page 18313]]

Notice of modification of rights-of-way
requirement..................................... 10,000 3
------------------------------------------------------------------------

Total Annual Burden: 56,750.
Estimated Costs per Respondent: 0.
Needs and Uses: The information collections proposed in the NPRM
would be to ensure that affected telecommunications carriers fulfill
their obligations under the Commnications Act, as amended.

Synopsis of Notice of Proposed Rulemaking

Adopted: April 19, 1996.
Released: April 19, 1996.
Comment Date: May 16, 1996.
Reply Date: May 30, 1996.

(Separate Dates for Dialing Parity/Number Administration/Notice of
Technical Changes/Access to Rights of Way)

Comment Date: May 20, 1996.
Reply Date: June 3, 1996.

By the Commission:

Table of Contents

Paragraph
No.

I. Introduction and Overview................................. 1
A. Background.............................................. 4
B. Overview of Sections 251, 252 and 253................... 14
II. Provisions of Section 251................................ 25
A. Scope of the Commission's Regulations................... 25
B. Obligations Imposed by Section 251(c) on ``Incumbent
LECs''.................................................... 42
1. Duty to Negotiate in Good Faith....................... 46
2. Interconnection, Collocation, and Unbundled Elements.. 49
3. Resale Obligations of Incumbent LECs [251(c)(4)]...... 172
4. Duty to Provide Public Notice of Technical Changes.... 189
C. Obligations Imposed on ``Local Exchange Carriers'' by
Section 251(b)............................................ 195
1. Resale................................................ 196
2. Number Portability.................................... 198
3. Dialing Parity........................................ 202
4. Access to Rights-of-Way............................... 220
5. Reciprocal Compensation for Transport and Termination
of Traffic.............................................. 226
D. Duties Imposed on ``Telecommunications Carriers'' by
Section 251(a)............................................ 245
E. Number Administration [251(e)].......................... 250
F. Exemptions, Suspensions, and Modifications [251(f)]..... 260
G. Continued Enforcement of Exchange Access and
Interconnection Regulations............................... 262
H. Advanced Telecommunications Capabilities................ 263
III. Provisions of Section 252............................... 264
A. Arbitration Process..................................... 264
B. Section 252(i).......................................... 269
IV. Procedural Issues........................................ 273
A. Ex Parte Presentations.................................. 273
B. Regulatory Flexibility Analysis......................... 274
C. Initial Paperwork Reduction Act of 1995 Analysis........ 288
D. Comment Filing Procedures............................... 289
E. Ordering Clauses........................................ 294

I. Introduction and Overview

1. In enacting the Telecommunications Act of 1996, Pub. L. No. 104-
104, 110 Stat. 56 (1996 Act), Congress sought to establish ``a pro-
competitive, de-regulatory national policy framework'' for the United
States telecommunications industry. S. Conf. Rep. No. 104-230, 104th
Cong., 2d Sess. 1 (1996) [hereinafter Joint Explanatory Statement]. The
statute imposes obligations and responsibilities on telecommunications
carriers, particularly incumbent local exchange carriers (LECs), that
are designed to open monopoly telecommunications markets to competitive
entry. The 1996 Act also includes provisions that are intended to
promote competition in markets that already are open to new
competitors. The 1996 Act seeks to develop robust competition, in lieu
of economic regulation, in telecommunications markets. The Act
envisions that removing legal and regulatory barriers to entry and
reducing economic impediments to entry will enable competitors to enter
markets freely, encourage technological developments, and ensure that a
firm's prowess in satisfying consumer demand will determine its success
or failure in the marketplace.
2. Congress entrusted to this Agency the responsibility for
establishing the rules that will implement most quickly and effectively
the national telecommunications policy embodied in the 1996 Act. Those
rules should promote the competitive markets envisioned by Congress. As
Senator Pressler has observed, ``Progress is being stymied by a morass
of regulatory barriers which balkanize the telecommunications industry
into protective enclaves. We need to devise a new national policy
framework--a new regulatory paradigm for telecommunications--which
accommodates and accelerates technological change and innovation.'' The
purpose of this proceeding is to adopt rules to implement the local
competition provisions of the Communications Act of 1934, as amended by
the 1996 Act, particularly Section 251. These rules will establish the
``new regulatory paradigm'' that is essential to achieving Congress'
policy goals.
3. This rulemaking is one of a number of interrelated proceedings
designed to advance competition, to reduce regulation in
telecommunications markets and at the same time to advance and preserve
universal service to all Americans. We are especially cognizant of the
interrelationship between this proceeding, our recently initiated
proceeding to implement the comprehensive universal service provisions
of the 1996 Act and our upcoming proceeding to reform our Part 69
access charge rules. Federal-State Joint Board on Universal Service, CC
Docket No. 96-45, Notice of Proposed Rulemaking and Order Establishing
Joint Board, FCC 96-93, 61 FR 10499 (Mar. 14, 1996) (Universal Service
NPRM) (proposing rules to implement Section 254 of the 1996 Act). This
proceeding also is relevant to our price cap regulations and our
regulation of the interstate, interexchange marketplace. Price Cap
Performance Review for Local Exchange Carriers, CC Docket No. 94-1,
Second Further Notice of Proposed Rulemaking, FCC 95-393, 60 FR 49539
(Sept. 26, 1996) (Price Caps Second Further Notice) (soliciting
comments on proposed and other possible changes to the price cap plan
to reflect emerging competition in telecommunications services); Price
Cap Performance Review for Local Exchange Carriers, CC Docket No. 94-1,
Fourth Further Notice of Proposed Rulemaking, FCC 95-406, 60 FR 52362
(Oct. 6, 1995) (Price Caps Fourth Further Notice) (seeking comment on
issues relating to revisions of the long-term price cap plan); Policy
and Rules Concerning the Interstate, Interexchange Marketplace, CC
Docket No. 96-91, Notice of Proposed Rulemaking, FCC 96-123, 61 FR
14717 (Apr. 3, 1996) (proposing to forbear from requiring tariffs for
nondominant interexchange carriers). We also plan to initiate a
proceeding that will review our existing jurisdictional separations
rules in the context of the new statute. Although these proceedings
will be conducted in separate dockets, and the 1996 Act prescribes
different completion dates for two of the proceedings, we intend to
conduct and

[[Page 18314]]

conclude all of these proceedings in a comprehensive, consistent, and
expedited fashion. We ask commenters in this proceeding to bear in mind
the relationship between these parallel proceedings and to frame their
proposals within the pro-competitive, deregulatory context of the 1996
Act as a whole.

A. Background

4. In contrast to the 1996 Act, the common carrier provisions of
the Communications Act of 1934 were grounded in the notion that
interstate telecommunications services would be offered and regulated
on a monopoly basis. For decades, state legislatures also followed this
traditional approach in regulating LECs' intrastate services. Local and
long distance telephone monopolies were created and maintained on the
grounds that the provision of telecommunications services was a natural
monopoly and, consequently, service could be provided at the lowest
cost to the maximum number of consumers through a single regulated
telecommunications network. The monopoly paradigm was thought to
further goals of universal service, service quality, and reliability.
The Modification of Final Judgment (MFJ) that required AT&T to divest
the Bell Operating Companies (BOCs) in 1984 was not so much a
repudiation as a reduction in the scope of this paradigm. United States
v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v.
United States, 460 U.S. 1001 (1983), vacated sub nom. United States v.
Western Elect. Co., slip op. CA 82-0192 (D.D.C. April 11, 1996). It
reflected the judgment that the markets for interexchange services,
telecommunications equipment and information services could become
competitive. At the same time, the local exchange continued to be
treated as a natural monopoly that required rigorous regulatory
oversight by state and federal authorities.
5. Even as the MFJ was implemented, academic criticism of the
natural monopoly model for the local network was developing. During the
past 12 years, many commenters and businesses have asserted that
technological innovation has eroded any arguable natural monopoly in
the local exchange, and that government should eliminate any legal
impediments to entry. This view is now embodied in the 1996 Act. The
extent to which it can be proved in the marketplace depends on the
capabilities of inventors, entrepreneurs, and financiers, as well as
this Commission and its state counterparts. At the time the 1996 Act
was signed, 19 states had in place some rules opening local exchange
markets to competition, including seven states in which competing firms
had already begun to offer switched local service. Even these 19
states, however, vary widely in their efforts to promote competitive
entry into local markets. Moreover, as of 1996, more than 30 states had
not adopted laws or regulations providing for local competition. Many
of those states that had not adopted laws or regulations permitting
local competition had provisions that specifically limited competitive
entry into local telecommunications markets. Section 253(a) of the 1996
Act prohibits these affirmative legal barriers to entry, and authorizes
the Commission to preempt enforcement of such entry barriers.
6. We believe that, in enacting the 1996 Act, Congress recognized
that although removing legal barriers to entry is necessary, it is
still not sufficient to enable competition to replace monopoly in the
local exchange. Congress acknowledged that incumbent LECs have
constructed and put in place high quality, reliable, redundant local
networks that can provide virtually ubiquitous service, and that they
possess an approximate 99.7 percent share of the local market as
measured by revenues. Because of this existing infrastructure, an
incumbent LEC typically can serve a new customer at a much lower
incremental cost than could a new entrant that is denied access to the
incumbent LEC's facilities, and thereby is denied access to as many
central office switches and as much trunking and subscriber loops as
the incumbent LEC operates. Moreover, because virtually all existing
customers subscribe to the incumbent LEC, a consumer of local switched
service would not subscribe to a new entrant's network if the customer
could not complete calls to the incumbent LEC's end users. As Congress
appeared to recognize in enacting section 251, if the incumbent LEC has
no obligation to interconnect and to arrange for mutual transport and
termination of calls, it could effectively block or greatly retard
entry into switched local service by using its economies of scale and
network externalities as impediments to entry.
7. Congress expressly recognized that ``it is unlikely that
competitors will have a fully redundant network in place when they
initially offer local service, because the investment necessary is so
significant.'' AT&T, for example, in filings before the Commission has
estimated that it would have to invest approximately $29 billion to
construct new facilities in local markets in order to be able to
provide full facilities to reach 20 percent of the 117 million access
lines served by the BOCs. Similarly, cable and wireless systems will
require substantial investment before either is capable of providing a
widespread substitute for wireline telephony services.
8. In the 1996 Act, Congress boldly moved to restructure the local
telecommunications market so as to remove economic impediments to
efficient entry that existed under the monopoly paradigm. In order to
offset the economies of scale and network externalities that would
inhibit efficient entry of competitors into markets currently
monopolized by incumbent LECs, the 1996 Act requires those LECs to
offer interconnection and network elements on an unbundled basis, and
imposes a duty to establish reciprocal compensation arrangements for
the transport and termination of calls. As the 1996 Act further
recognizes, these duties of incumbent LECs are only meaningful in
conjunction with the Act's limitations on the rates that can be
charged; otherwise, an incumbent LEC could offer interconnection,
unbundling, and transport and termination, but at prices that
perpetuate its market power. To constrain the incumbent LEC's ability
to perpetuate its market power through the pricing of interconnection
and unbundled elements, Congress specified that the prices for such
transactions should be cost-based and just and reasonable. By freeing
new entrants from having to build facilities that totally duplicate the
LECs' networks, the 1996 Act has dramatically increased the
opportunities for competitive entry and minimized the otherwise
overwhelming competitive advantages of large established carriers. We
also note that the new law provides for exemption, suspension, or
modification of certain requirements, under certain conditions, with
respect to small and rural LECs.
9. Different entrants may be expected to pursue different
strategies that reflect their competitive advantages in the markets
they seek to target. For example, interexchange carriers and
competitive access providers may combine their own facilities with
unbundled loops and other LEC elements and perhaps augment their own
loop facilities over time. Cable systems may choose to develop more
extensive networks within their service areas, and thus require fewer
unbundled elements from LECs; but, like all entrants, they will require
termination arrangements with incumbent LECs. Outside their franchise
areas, or in areas not passed by their existing systems,

[[Page 18315]]

cable companies will need to find some other technique for offering
telecommunications services, such as resale of incumbent LEC services
or purchase of unbundled LEC elements. Because of local franchising, a
given cable operator may not have cable facilities in all parts of the
geographic market in which it intends to offer telecommunications
service.
10. In addition to imposing interconnection, termination, and
unbundling requirements in the 1996 Act, Congress also provided for
entrants to be able to resell a LEC's retail services. Even if an
entrant planned to construct its own facilities, it may still face
marketing disadvantages, because of the time it takes to construct a
new network. Resale enables new entrants to offer at the outset a
conventional service to all customers currently served by an incumbent
LEC. Some entrants also may choose to rely on resale as part of a
longer term strategy as well.
11. At the same time, Congress plainly intended for LECs in the
future to be vigorous competitors, to continue to offer high quality
service, and to play a vital role in delivering universal service to
all Americans. Nothing in the 1996 Act suggests that Congress intended
to divest incumbent LECs of all or part of their local networks, even
if some portions continue to be natural monopolies. Indeed, the Act
expressly confirms that incumbent LECs may earn a reasonable profit for
the interconnection services and network elements they provide.
12. Consistent with this perspective on competition, we also note
that the purpose and, given proper implementation, the likely effect of
the unbundling and other provisions of the 1996 Act is not to ensure
that entry shall take place irrespective of costs, but to remove both
the statutory and regulatory barriers and economic impediments that
inefficiently retard entry, and to allow entry to take place where it
can occur efficiently. This entry policy is competitively neutral; it
is pro-competition, not pro-competitor. Our discussion of the 1996 Act
in this and other proceedings, therefore, is phrased in terms of
removing statutory and regulatory barriers and economic impediments, in
permitting efficient competition to occur wherever possible, and
replicating competitive outcomes where competition is infeasible or not
yet in place.
13. This foregoing discussion has focused on obligations created by
the 1996 Act for incumbent LECs in order to reduce economic impediments
to efficient market entry by new competitors. The statute, however,
also creates general duties for all telecommunications carriers, and
obligations for all local exchange carriers, whether classified as
``incumbent'' LECs or not. These provisions are also important to
facilitating competitive local telecommunications markets. We discuss
those provisions below.

B. Overview of Sections 251, 252 and 253

14. In adding new sections 251, 252 and 253 to the Communications
Act of 1934, Congress set forth a blueprint for ending monopolies in
local telecommunications markets. As discussed above, sections 251 (b)
and (c) impose specific obligations on incumbent LECs to open their
networks to competitors. Section 251(b)(5), in particular, requires all
LECs, including incumbent LECs, to ``establish reciprocal compensation
arrangements for the transport and termination of telecommunications.''
15. Section 251(c) imposes on incumbent LECs three key and separate
duties. They must make available to new entrants and existing
competitors in local telecommunications markets interconnection
services and unbundled network elements, and offer for resale at
wholesale rates any telecommunications service that the incumbent LEC
provides at retail to subscribers. Specifically, section 251(c)(2)
requires an incumbent LEC to interconnect with any requesting
telecommunications carrier at any technically feasible point in the
LEC's network for the transmission and routing of telephone exchange
service and exchange access.
Section 251(c)(3) requires incumbent LECs to unbundle their network
facilities and features so that an entrant can choose among them,
combine them with any of its own facilities, and offer services that
will compete with the incumbent's offerings. In addition, section
251(c)(4) directs an incumbent LEC to offer for resale, at a wholesale
rate, any telecommunications service the incumbent LEC offers to end
users at retail. Viewed as a whole, the statutory scheme of section 251
(b) and (c) enables entrants to use interconnection, unbundled
elements, and/or resale in the manner that the entrant determines will
advance its entry strategy most effectively.
16. Section 251(d)(1) directs the Commission to establish rules to
implement the requirements of section 251, including the core
interconnection, unbundling, and resale provisions of section 251(c).
These rules, however, have much broader implications than merely
implementing the requirements of section 251. In fact, these rules are
central to a number of functions contemplated by the 1996 Act. As
discussed below, these rules in varying ways relate to such issues as:
(1) the voluntary negotiation process between incumbent LECs and
telecommunications carriers; (2) the arbitration process; (3) state
commission approval of arbitrated agreements; (4) the FCC's review of
arbitrated agreements when a state commission fails to act; (5)
judicial review of state commissions' and this Commission's actions;
(6) statements of generally available terms and conditions by BOCs; (7)
removal of barriers to entry; and (8) BOC entry into interLATA
services.
17. Section 251(f)(1) provides that the obligations under section
251(c) shall not apply to a rural telephone company, as defined in the
1996 Act, ``until (i) such company has received a bona fide request for
interconnection, services, or network elements, and (ii) the State
commission determines * * * that such request is not unduly
economically burdensome, is technically feasible, and is consistent
with section 254 (other than sections (b)(7) and (c)(1)(D) thereof.''
Section 251(f)(2) provides that a LEC ``with fewer than 2 percent of
the Nation's subscriber lines'' may petition the state commission for a
suspension or modification of the requirements set forth in sections
251 (b) and (c).
18. Section 252 sets forth the procedures that incumbent LECs and
new entrants must follow to transform the requirements of section 251
into binding contractual obligations. Under section 252, incumbent LECs
and new entrants initially must seek to agree on the terms and
conditions under which LEC facilities and services are made available
to the new entrant. To the extent that the resulting agreements are
based on voluntary negotiations rather than state arbitration, those
agreements are not required to satisfy the provisions of sections 251
and our regulations issued thereunder, but such agreements must not
discriminate against a telecommunications carrier not a party to the
agreement, and all portions must be consistent with the public
interest, convenience, and necessity.
19. If an incumbent LEC and requesting carrier are unable to reach
a negotiated agreement, section 252(c) authorizes a state commission to
resolve disputed issues by arbitration, and requires the state
commission to ``ensure that such resolution and conditions meet the
requirements of section 251, including the regulations prescribed by
the Commission pursuant to section 251.'' The Commission's section 251
rules also guide states in

[[Page 18316]]

their subsequent review of arbitrated arrangements. A state commission
may reject an arbitrated agreement (or any portion thereof) pursuant to
section 252(e)(2)(B) ``if it finds that the agreement does not meet the
requirements of section 251, including the regulations prescribed by
the Commission pursuant to section 251.'' The rules adopted in this
proceeding also will guide the Commission in a similar context. In the
event that the Commission must assume the responsibility of a state
commission under section 252(e)(5), the section 251 rules will provide
the substantive standards the Commission will apply to arbitrate and
approve agreements pursuant to section 252.
20. Thus, the statutory scheme of sections 251 and 252 contemplates
that the obligations imposed by section 251 and our regulations will
establish the relevant provisions that will frame the negotiation
process and will govern the resolution of disputes in the arbitration
process. We recognize that the section 251 rules will tend to influence
negotiations, pursuant to section 252(a) (1) and (2), between incumbent
LECs and requesting carriers seeking interconnection, access to
unbundled network elements, and resale of LEC services. As a practical
matter, it seems reasonable to expect that requesting carriers will
seek to negotiate terms and conditions that are, overall, at least as
advantageous as those available pursuant to the Commission's rules. At
least in some cases, the implementing Section 251 rules may serve as a
de facto floor or set of minimum standards that guide the parties in
the voluntary negotiation process.
21. Sections 271 and 273 create incentives for the BOCs to
implement promptly the mandates of sections 251 and 252. Pursuant to
section 271, a BOC may not offer interLATA services within its service
area (``in region'') until it is approved to do so (on a state-by-state
basis) by the Commission, and section 273 allows a BOC to enter
manufacturing at the same time the BOC is approved to offer in-region
interLATA services. Under the terms of the MFJ, the BOCs were barred
from manufacturing telecommunications equipment. Section 273 of the
1996 Act repealed that judicial prohibition and allows BOCS to
manufacture such equipment subject to certain conditions. One of the
requirements for obtaining approval for in-region interLATA services
under section 271 is that the BOC must produce either an
interconnection agreement that, among other things, has been approved
under section 252 or, under certain circumstances, a statement of
generally available interconnection terms and conditions. Under section
252 interconnection agreements that are arbitrated have to comply with
section 251's mandates, as do all statements of generally available
terms. In addition, all agreements and statements must comply with a
``competitive checklist'' set out in section 271, several requirements
of which expressly reference the mandates of section 251. In these
respects, compliance with section 251 and our regulations thereunder is
a prerequisite to BOC entry into in-region interLATA services. But
compliance may also facilitate BOC entry under section 271 in less
obvious ways. For example, in reviewing a BOC application, the
Commission must also consult with the Department of Justice and the
relevant state commission, and it must decide whether granting the
application serves the public interest. Each of these consultations and
determinations could, in theory, be affected by considerations of the
extent to which the BOC is regarded as complying with section 251 and
our rules. Thus, the Commission's section 251 rules will play a central
role regarding BOC entry into in-region interLATA services under
section 271.
22. Section 253 bars state and local regulations that prohibit or
have the effect of prohibiting entities from offering
telecommunications services. It also authorizes the Commission to
preempt any law or regulation that is violative of this section. The
section 251 rules should help to give content and meaning to what state
or local requirements the Commission ``shall preempt'' as barriers to
entry pursuant to section 253.
23. Moreover, the section 251 rules will assist the judiciary in
reviewing actions of state commissions and the Commission in this area.
Subsection 252(e)(6) provides that any party aggrieved by a state
determination regarding a negotiated or arbitrated agreement or a
statement of generally available terms, may bring an action in federal
district court ``to determine whether the agreement or statement meets
the requirements of section 251,'' presumably including our rules
thereunder. The federal district court will thus have to refer to our
implementing regulations in determining whether a state commission
acted properly in approving or rejecting an arbitrated agreement.
Similarly, Commission action in this area will be subject to review by
federal circuit courts of appeal. This might include, for example,
review of Commission decisions regarding BOC petitions to provide
interLATA services pursuant to section 271 or review of Commission
action preempting state or local regulations pursuant to section 253.
In all of these cases, the court will look to the Commission's section
251 rules to guide its review of the Commission's action.
24. These statutory provisions and the Commission's rules
implementing the requirements of section 251 are designed to end the
era of monopoly regulation for American telecommunications markets. By
dismantling entry barriers and reducing the inherent advantages of
incumbent LECs, they establish a national process for enhancing
competition, increasing consumer choice, lowering rates, and reducing
regulation. The Commission's rules implementing section 251 will have a
pervasive and substantial impact in a variety of contexts under the
1996 Act and will serve as the cornerstone of the pro-competitive
provisions of the statute. These rules will assist incumbent LECs,
telecommunications carriers, state commissions, the FCC, and the courts
in defining rights and responsibilities regarding interconnection,
unbundling, resale, and many other issues under the 1996 Act.

II. Provisions of Section 251

A. Scope of the Commission's Regulations

25. Section 251(d)(1) instructs the Commission, within six months
after the enactment of the 1996 Act (that is, August 8, 1996), to
``establish regulations to implement the requirements of [section
251].'' The Commission's implementing rules should be designed ``to
accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunications markets to competition.''
In addition to directing the Commission to establish rules to implement
section 251, section 253 further requires the Commission to preempt the
enforcement of any state or local statute, regulation or legal
requirement that ``prohibit[s] or [has] the effect of prohibiting the
ability of any entity to provide any interstate or intrastate
telecommunications service.''
26. These specific statutory directives make clear that Congress
intended the Commission to implement a pro-competitive, de-regulatory,
national policy framework envisioned by the 1996 Act. Given the
forward-looking focus of the 1996 Act, the nationwide character of
development and

[[Page 18317]]

deployment of underlying telecommunications technology, and the
nationwide nature of competitive markets and entry strategies in the
dynamic telecommunications industry, we believe we should take a
proactive role in implementing Congress's objectives. Thus, we intend
in this proceeding to adopt national rules that are designed to secure
the full benefits of competition for consumers, with due regard to work
already done by the states that is compatible with the terms and the
pro-competitive intent of the 1996 Act.
27. In accomplishing this objective, we need to determine the
extent to which our rules should elaborate on the meaning of the
statutory requirements set forth in sections 251 and 252. For example,
we could adopt explicit rules to address those issues that are most
critical to the successful development of competition, and with respect
to which significant variations would undermine competition. This
approach would further a uniform, pro-competitive national policy
framework, as envisioned by the statute, and yet still preserve broad
discretion for states to resolve, consistent with the 1996 Act, the
panoply of other individual issues that may be raised in arbitration
proceedings. This approach also would facilitate rapid private sector
deployment of advanced telecommunications and information technologies
and services by swiftly opening all telecommunications markets to
competition. We seek comment on such an approach and whether it would
accomplish Congress' goal of promoting efficient competition in local
telecommunications markets throughout the country.
28. We see many benefits in adopting such rules to implement
section 251. Such rules should minimize variations among states in
implementing Congress' national telecommunications policy and guide
states that have not yet adopted the competitive paradigm of the 1996
Act. Such rules also could expedite the transition to competition,
particularly in those states that have not adopted rules allowing local
competition, and thereby promote economic growth in state, regional,
and national markets. More than 30 states do not have rules governing
local competition in place today; most of those states have not
commenced proceedings to adopt the necessary rules.
29. The adoption of explicit national rules to implement section
251 would not necessarily undermine the initiatives undertaken by
various states prior to the enactment of the 1996 Act, and in fact, we
anticipate that we will build upon actions some states have taken to
address interconnection and other issues related to opening local
markets to competition. Some states have been in the forefront of the
pro-competitive effort to open local markets to competition, and these
approaches may comport with the 1996 Act despite the fact that many of
them pre-date it. Building on the progress made by these states,
explicit national rules could be modelled on existing state statutes or
regulations to the extent that they comply with the terms of the 1996
Act. For example, the Commission could conclude that a particular
state's approach to unbundling of network elements is consistent with
the 1996 Act and that it therefore may serve as a useful model for a
national rule on unbundling. The Commission might also conclude that a
range of different approaches used by several states to interconnection
arrangements comply with the Act and therefore would be acceptable
under a national rule. Throughout this item, we seek comment on the
extent to which existing state initiatives are consistent with the new
federal statute and, to the extent they are, the wisdom of using
existing state approaches as guideposts or benchmarks for our national
rules.
30. Explicit national rules implementing section 251 can be
expected to reduce the capital costs of, and attract investment in, new
entrants by enhancing the ability of the investment community to assess
an entrant's business plan. Such rules would also permit firms to
configure their networks in the same manner in every market they seek
to enter. Uniform network configurations could achieve significant cost
efficiencies for new entrants; if new competitors were required to
modify their networks in different markets solely to be compatible with
a patchwork of different regulations, they would likely incur
additional expense, thereby increasing the cost of entry that is
inconsistent with the pro-competitive goals of the statute. A uniform
network design can be expected to reduce start-up costs, accelerate
innovation, enhance interoperability of networks and equipment, and
reduce the administrative burdens for both incumbent LECs and entrants.
31. Explicit national rules under section 251 also could expedite
the implementation of other provisions of the 1996 Act that require
incumbent LECs, new entrants, the states, federal courts, and the
Commission to apply the requirements of section 251 in other contexts.
Section 252 provides that incumbent LECs and entrants initially will
seek to arrive at interconnection and unbundling arrangements through
voluntary negotiations. By narrowing the range of permissible results,
concrete national standards would limit the effect of the incumbent's
bargaining position on the outcome of the negotiations. In addition,
the application of explicit national rules under section 251 could
provide important guidance to federal district courts that are charged
with reviewing state determinations of whether particular arbitration
agreements are consistent with section 251 (presumably including our
rules thereunder). Moreover, the absence of such rules could lead to
varying or inconsistent decisions by individual district and circuit
courts concerning the core requirements of the 1996 Act. We believe
that such a result would be inconsistent with the intent of Congress in
passing comprehensive telecommunications legislation.
32. Further, rules that elaborate on the statutory requirements of
section 251 would establish clear guidelines that we will need to carry
out our responsibilities under the 1996 Act. We will need explicit
rules to guide our arbitration of disputes between incumbent LECs and
new entrants if we are required, under section 252(e), to assume those
responsibilities. In addition, BOCs must satisfy the checklist set
forth in section 271(c)(2)(B) before they may offer in-region,
interLATA services. The checklist requires BOCs to comply with specific
provisions of section 251. Thus, the Commission needs to articulate
clear rules that clarify what constitutes compliance with section 251
for purposes of our review under section 271.
33. On the other hand, there may be countervailing concerns that
could weigh against rules that significantly explicate in some detail
the statutory requirements of sections 251 and 252. Adopting explicit
national rules, in certain circumstances, might unduly constrain the
ability of states to address unique policy concerns that might exist
within their jurisdictions. The case for permitting material
variability among the states could be strengthened if there are
substantial state-specific variations in technological, geographic, or
demographic conditions in particular local markets that call for
fundamentally different regulatory approaches. We seek comment on the
nature of such variations, and on whether there are such variations
that require fundamentally different regulatory approaches. States may
also seek, to the extent permitted by sections 251, 252,

[[Page 18318]]

253, and 254, to ensure the uninterrupted delivery of certain services
by the incumbent where competition might arguably threaten those
services. It might also be argued that there is value to permitting
states to experiment with different pro-competitive regimes to the
extent that there is not a sufficient body of evidence upon which to
choose the optimal pro-competitive policy. If we were to decline to
adopt explicit rules at all, in effect we would be permitting states to
set different priorities and timetables for requiring incumbent LECs to
offer interconnection and unbundled network elements. Such an approach
means that we would balance the need to swiftly introduce
telecommunications competition against other policy priorities. We seek
comment on these issues.
34. We also note that, under section 252, states must implement any
rules we establish under section 251. Section 252 assigns to the states
the responsibility for arbitrating disputes between the parties,
including resolving factual disputes. We seek comment on how our
national rules can best be crafted to assist the states in carrying out
this responsibility.
35. In the succeeding sections of this NPRM, we invite parties to
comment, with respect to each of the obligations imposed by section
251, on the extent to which adoption of explicit national rules would
be the most constructive approach to furthering Congress' pro-
competitive, deregulatory goals of making local telecommunications
markets effectively competitive. We seek comment on the relative costs
and benefits of constraining or encouraging variations among the states
in carrying out their responsibilities under section 252. We also
invite parties to comment on whether our rules implementing section 251
can be crafted to allow states to implement policies reflecting unique
concerns present in the respective states, without vitiating the
intended effects of a scheme of overarching national rules. We further
ask parties to comment on the consequences of fostering or constraining
variability among the states.
36. As a separate matter, we note that section 251 and our
implementing regulations govern the states' review of BOC statements of
generally available terms and conditions, as well as arrangements
arrived at through compulsory arbitration pursuant to section 252(b).
We tentatively conclude that we should adopt a single set of standards
with which both arbitrated agreements and BOC statements of generally
available terms must comply. We believe that this is consistent with
both the language and the purpose of the 1996 Act. We seek comment on
this tentative conclusion.
37. On a separate jurisdictional issue, we tentatively conclude
that Congress intended sections 251 and 252 to apply to both interstate
and intrastate aspects of interconnection, service, and network
elements, and thus that our regulations implementing these provisions
apply to both aspects as well. It would make little sense, in terms of
economics, technology, or jurisdiction, to distinguish between
interstate and intrastate components for purposes of sections 251 and
252. Indeed, if the requirements of sections 251 and 252 regarding
interconnection, and our regulations thereunder, applied only to
interstate interconnection, as might be argued in light of the lack of
a specific reference to intrastate service in those sections, states
would be free, for example, to establish disparate guidelines for
intrastate interconnection with no guidance from the 1996 Act. We
believe that such a result would be inconsistent with Congress' desire
to establish a national policy framework for interconnection and other
issues critical to achieving local competition. As Senator Lott
observed, ``In addressing local and long distance issues, creating an
open access and sound interconnection policy was the key objective * *
*.'' Representative Markey noted that, ``[W]e take down the barriers of
local and long distance and cable company, satellite, computer,
software entry into any business they want to get in.''
38. We also tentatively conclude that it would be inconsistent with
the 1996 Act to read into sections 251 and 252 an unexpressed
distinction by assuming that the FCC's role is to establish rules for
interstate aspects of interconnection and the states' role is to
arbitrate and approve intrastate aspects of interconnection agreements.
Because the statute explicitly contemplates that the states are to
follow the Commission's rules, and because the Commission is required
to assume the state commission's responsibilities if the state
commission fails to act to carry out its section 252 responsibilities,
we believe that the jurisdictional role of each must be parallel. We
seek comment on our tentative conclusion. The argument has also been
raised that sections 251 and 252 apply only with respect to intrastate
aspects of interconnection, service, and network elements. We seek
comment on this argument as well.
39. Section 2(b) of the 1934 Act does not require a contrary
tentative conclusion. Section 2(b) provides that, except as provided in
certain enumerated sections not including sections 251 and 252,
``nothing in [the 1934] Act shall be construed to apply or to give to
the Commission jurisdiction with respect to * * * charges,
classifications, practices, services, facilities, or regulations for or
in connection with intrastate communication service by wire or radio of
any carrier * * *.'' As stated above, however, we tentatively conclude
that section 251 applies to certain ``charges, classifications,
practices, services, facilities, or regulations for or in connection
with intrastate communication service.'' In enacting section 251 after
section 2(b) and squarely addressing therein the issues before us, we
believe Congress intended for section 251 to take precedence over any
contrary implications based on section 2(b). We seek comment on this
tentative conclusion.
40. We note that sections 251 and 252 do not alter the
jurisdictional division of authority with respect to matters falling
outside the scope of these provisions. For example, rates charged to
end users for local exchange service, which have traditionally been
subject to state authority, continue to be subject to state authority.
Indeed, that section 251 does not disturb state authority over local
end user rates may explain why Congress saw no need to amend section
2(b) expressly, whereas it did see such a need in its 1993 legislation
establishing commercial mobile radio service (CMRS). In the 1993
legislation, Congress eliminated the authority of states to regulate
the rates charged for CMRS and so may have felt that an express
amendment to section 2(b) would be especially helpful. We seek comment
on these issues as well.
41. We also seek comment on the relationship between sections 251
and 252 and the Commission's existing enforcement authority under
section 208. Section 208 of the Act gives the Commission general
authority over complaints regarding acts by ``any common carrier
subject to this Act, in contravention of the provisions thereof.'' Does
this mean that the Commission has authority over complaints alleging
violations of requirements set forth in sections 251 or 252? If not, in
what forum would such complaints be reviewed? In state commissions? In
courts? Is there a relevant distinction here between complaints
concerning the formation of interconnection agreements and complaints
regarding implementation of

[[Page 18319]]

such agreements? We also seek comment on the relationship between
sections 251 and 252 and any other source of Commission enforcement
authority that may be applicable. We further seek comment on how we
might increase the effectiveness of the enforcement mechanisms
available under the 1934 Act, as amended. We seek comment on how
private rights of action might be used under sections 206-208 of the
1934 Act, as amended, and the different roles the Commission might
play, for example, as an expert agency, to speed resolution of disputes
in other forms used by private parties.

B. Obligations Imposed by Section 251(c) on ``Incumbent LECs''

42. We now turn to the particular provisions of section 251 that
the Commission is obligated to implement under section 251(d)(1). We
begin with section 251(c) because we believe that provision is the
cornerstone of Congress's plan for opening local telecommunication
markets to competitive entry.
43. Section 251(c) establishes obligations for ``incumbent local
exchange carriers.'' An ``incumbent local exchange carrier'' for a
particular area is defined in section 251(h)(1) as a LEC that: (1) as
of the enactment date of the 1996 Act, both ``provided telephone
exchange service in such area'' and ``was deemed to be a member of the
exchange carrier association pursuant to Section 69.601 of the
Commission's regulations'', or (2) ``is a person or entity'' that, on
or after the enactment date of the 1996 Act, ``became a successor or
assign of such member'' of the exchange carrier association.
44. In addition, under Section 251(h)(2), the Commission may, by
rule, treat another LEC or class of LECs as an incumbent LEC if (1)
``such carrier occupies a position in the market for telephone exchange
service within an area that is comparable'' to that of an incumbent
LEC, (2) ``such carrier has substantially replaced'' an incumbent LEC,
and (3) ``such treatment is consistent with the public interest,
convenience, and necessity and the purposes'' of Section 251. We seek
comment on whether we should establish at this time standards and
procedures by which carriers or other interested parties could seek to
demonstrate that a particular LEC should be treated as an incumbent LEC
pursuant to Section 251(h)(2).
45. We further seek comment on whether state commissions are
permitted to impose on carriers that have not been designated as
incumbent LECs any of the obligations the statute imposes on incumbent
LECs. We understand that some states have found that the negotiation
process between incumbent LECs and their potential competitors may move
more smoothly if the arrangements offered by an incumbent LEC are made
reciprocal. Under this approach, for example, a potential competitor
would be required to make available to an incumbent LEC directory
assistance information on the same basis that the LEC agreed to furnish
the information. Some parties have alleged, however, that imposing on
new entrants the obligations imposed on incumbent LECs would undermine
the competitive goals of the 1996 Act. We seek comment on whether
imposing on new entrants requirements the 1996 Act imposes on incumbent
LECs would be consistent with the Act's distinction between the
obligations of all telecommunications carriers, all LECs and the
additional obligations of all incumbent LECs.
1. Duty To Negotiate in Good Faith
46. As noted in section I.B., above, if the parties fail to
negotiate an agreement voluntarily, they must submit to arbitration.
Section 251(c)(1) states that ``each incumbent local exchange carrier
has the * * * duty to negotiate in good faith in accordance with
section 252 the particular terms and conditions of agreements to
fulfill the duties'' described in section 251(b) for LECs and section
251(c) for incumbent LECs. In addition, section 252(b)(5) provides
that, pursuant to the arbitration process, the refusal of a party to
``participate further in the negotiations, to cooperate with the State
commission in carrying out its function as an arbitrator, or to
continue to negotiate in good faith in the presence of, or with the
assistance of, the State commission shall be considered a failure to
negotiate in good faith.'' The state commission is required to resolve,
within 9 months after the incumbent LEC receives a request under
section 252, any issues that were submitted for arbitration.
47. We seek comment on the extent to which the Commission should
establish national guidelines regarding good faith negotiation under
section 251(c)(1), and on what the content of those rules should be. We
note that carriers have submitted some information alleging that LECs
already have employed certain tactics that the Commission should
determine violate the duty to negotiate in good faith. For example,
carriers have alleged that incumbent LECs have refused to begin to
negotiate until the requesting telecommunications carrier satisfies
certain conditions, such as signing a nondisclosure agreement, or
agreeing to limit its legal remedies in the event that negotiations
fail. We believe that such tactics might impede the development of
local competition, and may be inconsistent with provisions of the 1996
Act. We seek comment on the extent to which these or other practices
should be deemed to violate the duty to negotiate in good faith. We
note that courts and the Commission previously have addressed issues
regarding good faith negotiation. We seek comment on specific legal
precedent regarding the duty to negotiate in good faith that we should
rely on in establishing national guidelines regarding section
251(c)(1).
48. A related issue is what effect section 252 has on agreements
regarding service, interconnection, or unbundled network elements that
predate the 1996 Act. Section 252(e)(1) states: ``Any interconnection
agreement adopted by negotiation or arbitration shall be submitted for
approval to the State commission.'' Section 252(a)(1) states that an
agreement for interconnection, service, or network element, ``including
any interconnection agreement negotiated before the date of the
enactment of the Telecommunications Act of 1996, shall be submitted to
the State commission under subsection (e) of this section.'' We seek
comment on whether these provisions require parties that have existing
agreements to submit those agreements to state commissions for
approval. We also seek comment on whether one party to an existing
agreement may compel renegotiation (and arbitration) in accordance with
the procedures set forth in section 252.
2. Interconnection, Collocation, and Unbundled Elements
a. Interconnection. 49. Section 251(c)(2) imposes upon incumbent
LECs ``the duty to provide, for the facilities and equipment of any
requesting telecommunications carrier, interconnection with the local
exchange carrier's network * * * for the transmission and routing of
telephone exchange service and exchange access.'' Such interconnection
must be: (1) provided by the incumbent LEC at ``any technically
feasible point within [its] network;'' (2) ``at least equal in quality
to that provided by the local exchange carrier to itself or * * * [to]
any other party to which the carrier provides interconnection;'' and
(3) provided on rates, terms, and conditions that are ``just,
reasonable, and nondiscriminatory, in accordance with the terms and
conditions of the agreement and the requirements of this section and
section 252.'' The interconnection obligation plays a vital

[[Page 18320]]

role in promoting competition by ensuring that a requesting carrier can
on reasonable rates, terms and conditions transmit telecommunications
traffic between its network and the incumbent's network in a reliable
and efficient manner.
50. We believe that uniform national rules for evaluating
interconnection arrangements would likely offer several advantages in
advancing Congress' desire to create a pro-competitive national policy
framework regarding local telephone service. For example, national
standards would likely speed the negotiation process by eliminating
potential areas of dispute. We note that, in the past, disputes before
the FCC between LECs and interconnectors have arisen most often where
our rules lacked specificity, or where no standards had been adopted.
Lingering disputes over the terms and conditions of interconnection due
to confusion or ambiguity create the potential for incumbent LECs to
delay entry. For these reasons we tentatively conclude that uniform
interconnection rules would facilitate entry by competitors in multiple
states by removing the need to comply with a multiplicity of state
variations in technical and procedural requirements.
51. We also, however, seek comment on the consequences of not
establishing such specific rules for interconnection. We seek comment
on whether there are instances wherein the aims of the 1996 Act would
be better achieved by permitting states to experiment with different
approaches. Would permitting substantial variation make it easier for
states to respond more appropriately to technical, demographic, or
geographic issues specific to that state or region without detracting
from the overall purposes of the 1996 Act? For example, might technical
differences, such as a lack of digital switching capability in a
particular network, affect the technically feasible interconnection
points on the network? Would variations in technical requirements among
states affect the ability of new entrants to plan and configure
regional or national networks? For example, how would variations in the
definition of ``technical feasibility,'' the number of required points
of interconnection, and methods of interconnection, affect the ability
of new entrants to plan and configure regional or national networks?
How would such variations affect the entrant's ability to deploy
alternative network architectures, such as synchronous optical network
(SONET) rings, which may deliver telephone service more efficiently?
Would a lack of explicit national standards reduce predictability and
certainty, and thereby slow down the development of competition? Would
a lack of explicit guidelines impair the state's ability to complete
arbitration within 9 months of the date that the interconnection
request was made, or our ability to evaluate BOC compliance under
section 271 within 90 days? Would a lack of clear national standards
impair our ability under section 252(e) to assume a state commission's
responsibilities if the state commission fails to act to carry out its
responsibilities under section 252?
52. We also encourage parties to submit information regarding the
approaches taken by those states that have allowed interconnection. A
number of states already have adopted a variety of approaches to
interconnection. For example, New York sets basic ``expectations'' that
constitute default provisions if the parties fail to agree. These
provisions include the availability of two-way trunking facilities and
combined trunking arrangements. California has adopted what it calls a
``preferred outcomes'' approach. Under this approach, parties are
encouraged to use 13 broad criteria regarding interconnection
arrangements (the ``preferred outcomes'') that were established by the
State commission to guide the negotiation and arbitration process.
Although parties may develop different outcomes, preferred outcomes
receive expedited review and approval. Arbitration judges may also use
the preferred outcomes as guidelines in cases where the negotiations
fail, and they have the discretion to mandate interconnection
provisions that go beyond the preferred outcomes. With respect to each
of the issues discussed below, we invite commenters to analyze the
advantages and the disadvantages of the approaches states have adopted
with respect to interconnection arrangements. We also seek comment on
whether any elements of these state approaches would be suitable for
incorporation into national standards implementing the 1996 Act.
Finally, we ask commenting parties to identify state approaches to
interconnection that they believe are inconsistent with or preempted by
the 1996 Act, or that are inadvisable from a policy perspective.
53. We further seek comment on the relationship between the
obligation of incumbent LECs to provide ``interconnection'' under
251(c)(2) and the obligation of the incumbent LEC, and all LECs, to
establish reciprocal compensation arrangements for the ``transport and
termination'' of telecommunications pursuant to 251(b)(5). The issue is
significant mainly because, in section 252(d)(2), there is one pricing
standard for ``interconnection'' under section 251(c)(2) and a separate
one for ``transport and termination'' under 251(b)(5).
54. On the one hand, the term ``interconnection,'' as used in
section 251(c)(2), might refer only to the facilities and equipment
physically linking two networks and not to transport and termination
services provided by such linking--in which case there is no overlap in
the coverage of the two sections. On the other hand, the term
``interconnection'' as used in section 251(c)(2) might refer to both
the physical linking of the two networks and to transport and
termination services--in which case there is considerable overlap. We
seek comment on how to ``interpret'' the term ``interconnection'' in
section 251(c)(2). Parties that advocate the broader meaning should
also comment on the overlap in the coverage of the sections and how the
overlap affects which section 252(d) pricing standards apply.
55. In the following paragraphs, we discuss the requirements of the
1996 Act concerning interconnection in more detail. More specifically,
we address issues of technically feasible points of interconnection,
just, reasonable, and nondiscriminatory terms and conditions, and
quality and methods of interconnection.
(1) Technically Feasible Points of Interconnection. 56. Subsection
(c)(2)(B) requires that incumbent LECs provide interconnection ``at any
technically feasible point within the [incumbent LEC's] network.'' We
seek comment on what constitutes a ``technically feasible point''
within the incumbent LEC's network for purposes of this section. In
this regard, we note that network technology continues to advance and
emphasize that we seek to avoid a static definition that may
artificially limit future interconnection. Is there a definition of
``technically feasible'' that will provide the necessary flexibility in
determining interconnection points as network technology evolves?
Further, to what extent, if any, should a risk to network reliability
or other potential harm to the network be considered in determining
whether interconnection at a particular point is technically feasible?
We tentatively conclude that, if risks to network reliability are
considered in determining whether interconnection at a certain point is
technically feasible, the party alleging harm to the network will be
required to present detailed information to support such a claim. We
seek comment on these issues and our

[[Page 18321]]

tentative conclusion concerning claims of network harm.
57. We also tentatively conclude that the minimum federal standard
should provide that interconnection at a particular point will be
considered technically feasible within the meaning of section 251(c)(2)
if an incumbent LEC currently provides, or has provided in the past,
interconnection to any other carrier at that point, and that all
incumbent LECs that employ similar network technology should be
required to make interconnection at such points available to requesting
carriers. For example, many LECs already provide interconnection at the
trunk- and loop-side of the local switch, transport facilities, tandem
facilities, and signal transfer points. We thus tentatively conclude
that interconnection at those points should be technically feasible for
all incumbent LECs that use technology similar to that used by LECs
currently offering interconnection at those points. We believe that as
technology advances, the number of points at which interconnection is
feasible may change and acknowledge that the federal standard for
minimum interconnection points should change accordingly.
58. Alternatively, we could allow states to determine whether
interconnection at a greater number of points would also be technically
feasible. We seek comment on whether allowing states to designate
additional technically feasible interconnection points would make it
more difficult for a carrier to develop a regional or national network.
In this regard, commenters should address additional points at which
LECs currently provide interconnection and on other possible points of
interconnection that may be technically feasible. Because the statute
imposes an affirmative obligation on incumbent LECs to provide
interconnection at any technically feasible points in their networks,
we further tentatively conclude that, where a dispute arises, the
incumbent LEC has the burden of demonstrating that interconnection at a
particular point is technically infeasible. We seek comment on this
tentative conclusion.
59. We also invite parties to submit information concerning
interconnection obligations and policies that state commissions have
adopted for incumbent LECs to help us determine what points of
interconnection states have found to be technically feasible. We note,
for example, that the New York Public Service Commission (NYPSC) has
established options for interconnection points that range from the
incumbent LEC's premises to the requesting carrier's premises, and
include any point in between. These options are deemed reasonable by
the NYPSC, although they are not requirements (in contrast to other
interconnection requirements, which New York sets up as default
provisions). The parties are to negotiate the actual interconnection
points, however. We also seek comment on approaches that other states
have adopted for determining the technical feasibility of
interconnection at particular points. We also seek comment on which
state policies are either inconsistent with the language of the 1996
Act or unwarranted from a policy perspective.
(2) Just, Reasonable, and Nondiscriminatory Interconnection. 60.
Section 251(c)(2)(D) requires that the interconnection provided by the
incumbent LEC be ``on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory.'' We address the pricing of
interconnection, collocation, and unbundled elements in section
II.B.2.d below.
61. We seek comment on how to determine whether the terms and
conditions for interconnection arrangements are just, reasonable, and
nondiscriminatory. For example, should we adopt explicit national
standards for the terms and conditions for interconnection? In
particular, we seek comment on whether we should adopt uniform national
guidelines governing installation, maintenance and repair of the
incumbent LEC's portion of interconnection facilities. We also seek
comment on whether we should adopt standards for the terms and
conditions concerning the payment of the non-recurring costs associated
with installation. We seek comment on whether the Commission should
establish incentives to encourage incumbent LECs to provide just,
reasonable, and nondiscriminatory interconnection and, if so, what
those incentives should be. For example, should LECs be required to
meet agreed upon performance standards for installing or repairing
interconnection facilities and pay liquidated damages for any failure
to satisfy the agreement? Are there means of accomplishing this result
that do not require the propagation of rules detailing specific
performance standards?
62. If we were to establish national guidelines on this issue, we
seek comment on state policies regarding the terms and conditions for
interconnection that might serve as models. For example, with respect
to meet point interconnection arrangements, the state of Washington
requires that each company pay for and be responsible for building and
maintaining its own facilities up to the meet point, as is typical in
this type of interconnection arrangement. We note that New York permits
earnest fees on interconnection arrangements to ensure the good faith
nature of interconnection requests before the incumbent LEC begins
construction or other necessary arrangements for interconnection. That
fee is then applied to the requesting party's costs for
interconnection. We recognize, however, that LECs potentially could use
such fees and other terms and conditions to delay and deter entry. We
invite parties to comment on this approach as well as on other states'
policies. We specifically seek comment on whether such policies are
consistent with the pro-competitive and deregulatory tenor of the Act.
We seek comment on whether any state substantive rules regarding the
terms and conditions for interconnection might be adopted as a national
standard, as well as comment on which state rules might be inconsistent
with the 1996 Act.
(3) Interconnection that is Equal in Quality. 63. Section
251(c)(2)(C) requires that the interconnection provided by the
incumbent LEC be ``at least equal in quality to that provided by the
[incumbent LEC] to itself or to any subsidiary, affiliate, or any other
party to which the carrier provides interconnection.'' We seek comment
on what criteria may be appropriate in determining whether
interconnection is ``equal in quality.'' We seek comment on whether
these criteria should be adopted as a national standard, or whether
competitive objectives would be achievable by allowing variations and
experimentation among states. We also seek comment on relevant state
requirements, such as those in Iowa, which prohibit a rate-regulated
incumbent from providing inferior interconnection to another provider.
We invite parties to comment on this and other provisions that might
guide our efforts in implementing the ``equal in quality'' requirement
of the 1996 Act.
(4) Relationship Between Interconnection and Other Obligations
Under the 1996 Act. 64. Section 251(c)(2) further requires incumbent
LECs to provide interconnection with the LEC's network ``for the
facilities and equipment of any requesting telecommunications
carrier.'' In comparison, section 251(c)(6) imposes upon incumbent LECs
``the duty to provide * * * for physical collocation of equipment
necessary for interconnection.'' We note that section 251(c)(6)
regarding physical collocation does not expressly limit the
Commission's authority under section 251(c)(2) to establish rules
requiring

[[Page 18322]]

incumbent LECs to make available a variety of technically feasible
methods for interconnection. These methods may, for example, include
meet point arrangement as well as physical and virtual collocation. We
tentatively conclude that the Commission has the authority to require,
in addition to physical collocation, virtual collocation and meet point
interconnection arrangements, as well as any other reasonable method of
interconnection. We seek comment on this tentative conclusion.
65. We seek comment on the various state requirements concerning
methods for interconnection. For example, in the state of Washington,
the commission has ordered that companies establish mutually agreed
upon meet points for purposes of exchanging local traffic. Incumbent
LECs may establish, through negotiations, separate meet points for each
company, or a common hub by which multiple companies can come together
efficiently. Oregon requires that requesting carriers be permitted to
interconnect with incumbent LECs by negotiating mutually acceptable
arrangements, including meet points. Maryland allows the incumbent LEC
the option of using virtual or physical collocation, subject to
commission review. We seek information on these and other similar state
requirements. We seek comment on whether any state requirements
concerning methods for interconnection might be appropriately adopted
as a national standard. We also seek comment concerning those state
requirements that may be inconsistent with the 1996 Act or
inappropriate from a policy standpoint.
b. Collocation. 66. Section 251(c)(6) of the Act requires incumbent
LECs to provide ``for the physical collocation of equipment necessary
for interconnection or access to unbundled network elements at the
premises of the local exchange carrier, except that the carrier may
provide for virtual collocation if the local exchange carrier
demonstrates to the State commission that physical collocation is not
practical for technical reasons or because of space limitations.''
Section 251(c)(6) fosters competition by ensuring that a competitor may
install equipment necessary for interconnection or access to unbundled
network elements on LEC premises and gives competitors access to the
LEC central office to install, maintain, and repair this equipment.
67. The establishment of national rules with respect to at least
some issues regarding collocation would appear to offer several
important benefits. For example, we believe that national standards
would speed the negotiation process by eliminating potential areas of
dispute. Lingering disputes or ambiguity regarding the parties'
obligations may delay competitive entry. In addition, uniform standards
would probably facilitate entry by competitors in multiple states by
removing the need to comply with a patchwork of state variations in
technical and procedural requirements. Finally, clear uniform rules
could add speed, fairness, and simplicity to the arbitration process,
and reduce uncertainty. We also note that beginning in 1992, the
Commission adopted both physical and virtual collocation rules and that
these rules were then used by several states to develop their own
approaches to collocation. We therefore tentatively conclude that we
should adopt national standards where appropriate to implement the
collocation requirements of the 1996 Act.
68. We also seek comment on the extent to which we should establish
national rules for collocation that allow for some variation among
states, and on the advantages and disadvantages of permitting such
variation. Would permitting material variation foster competition and
make it easier for states to respond more appropriately to issues
specific to that state or region? Would variations in technical
requirements among states affect the ability of new entrants to plan
and configure regional or national networks? Would a lack of specific
national standards reduce predictability and certainty, and thereby
slow down the development of competition? Would a lack of explicit
guidelines impair the state's ability to complete arbitration within 9
months of the date that the interconnection request was made, or our
ability to evaluate BOC compliance under section 271 within the
statutory time-frame? Would a lack of specific national standards
impair our ability under section 252(e) to assume a state commission's
responsibilities if the state commission fails to act to carry out its
responsibilities under section 252?
69. We also encourage parties to submit information concerning
specific state approaches regarding collocation that might provide
useful models for national guidelines. In several states, including
California and New York, incumbent LECs currently provide physical
collocation. Under California's ``preferred outcomes'' approach, the
``preferred outcome'' concerning physical collocation is similar to
rules the FCC previously established for physical collocation.
California presently allows LECs to offer virtual or physical
collocation. New York applies a comparably efficient interconnection
(CEI) standard to both new entrants and incumbent LECs, that requires
that interconnection be technically and economically comparable to
actual physical collocation. New York does not have detailed physical
collocation requirements under the CEI standard, but rather leaves such
matters to negotiation between the parties. Currently in New York,
Rochester Telephone and NYNEX both offer physical collocation to
satisfy the CEI standard. In other states, incumbent LECs currently
provide only virtual collocation. Illinois, which had originally
mandated physical collocation, recently adopted rules regarding virtual
collocation. The state of Washington also permits virtual collocation
and has stated that such charges for virtual collocation should be no
higher than charges for physical collocation. The Washington Commission
also concluded that, if meet point interconnection arrangements are
established by mutual agreement, decisions about where equipment is
placed will be resolved as part of that negotiation, and therefore a
virtual collocation tariff probably would not be necessary. Finally,
Florida permits LECs to offer both virtual and physical collocation,
but has left the details of such arrangements to negotiation between
the parties.
70. We seek comment on whether one or more of these state
collocation policies would be suitable for use as a national standard.
We also seek comment on state policies that commenters believe are
inconsistent with the goals of the 1996 Act, or that are inadvisable
from a policy perspective. In this regard, parties are specifically
asked to comment on the possible consequences of requiring new entrants
with regional or national business plans to comply with divergent state
requirements.
71. In light of our tentative conclusion that we should adopt
national guidelines concerning physical and virtual collocation, we
seek comment on what specific regulations would foster opportunities
for local competition. For example, section 251(c)(6) mandates physical
collocation at the ``premises'' of an incumbent LEC. Consistent with
the ordinary meaning of the term ``premises,'' we tentatively conclude
that ``premises'' includes, in addition to incumbent LEC central
offices or tandem offices, all buildings or similar structures owned or
leased by the incumbent LEC that house LEC network facilities. We seek
comment on this tentative conclusion. We also seek comment on whether
structures housing LEC network facilities on public rights

[[Page 18323]]

of way, such as vaults containing loop concentrators, or similar
structures should be deemed to be LEC premises. We note that
collocation of facilities inside such structures would still be subject
to the technical feasibility and space availability limitations of
section 251(c)(6).
72. Section 251(c)(6) requires the incumbent LEC to provide for the
physical collocation of equipment necessary for interconnection or
access to unbundled network elements. We seek comment on what types of
equipment competitors should be permitted to collocate on LEC premises.
Section 251(c)(6) also allows the incumbent LEC to provide virtual
collocation instead of physical collocation in specific locations if
``the local exchange carrier demonstrates to the state commission that
physical collocation is not practical for technical reasons or because
of space limitations.'' We seek comment on whether we should establish
guidelines for states to apply when determining whether physical
collocation is not practical for ``technical reasons or because of
space limitations,'' and, if so, what those guidelines might be. For
example, to what extent, if any, should the risk of reduced reliability
or other harm to the network be considered as a technical reason
justifying a refusal to offer physical collocation, and what type of
evidence must the LEC offer to prove its claim? We also seek comment on
whether national guidelines may be necessary to prevent anticompetitive
behavior by the manipulation or unreasonable allocation of space by
either the incumbent LEC or new entrants.
73. Finally, we seek comment on whether we should adopt
comprehensive national standards for collocation by readopting our
prior standards governing physical and virtual collocation that we
established in the Expanded Interconnection proceeding. Special Access
Expanded Interconnection Order, 57 FR 54323 (11/18/92); Virtual
Collocation Expanded Interconnection Order, 59 FR 38922 (8/1/94). In
that proceeding, we addressed standards governing, among other things,
the following: space exhaustion and allocation; types of equipment that
could be placed, or designated for placement, in incumbent LEC offices;
points of entry; insurance; and exemptions from physical collocation
requirements based on space limitations. We also seek comment regarding
whether we should modify those standards, in light of: (1) the new
statutory requirements; (2) disputes that have arisen in the subsequent
investigations regarding the LECs' physical and virtual collocation
tariffs; (Tariffs for both virtual and physical collocation offerings,
filed by the LECs pursuant to the Virtual Collocation Expanded
Interconnection Order, 59 FR 38922 (8/1/94), are currently under
investigation. In these designation orders, we addressed disputes that
arose over various standards issues, for example: space size, space
warehousing, termination notice and reasons, cage inspections, and
insurance.) or (3) additional policy considerations. We also
tentatively conclude, in light of the court decision in Pacific Bell v.
FCC, (Pacific Bell v. FCC, No. 94-1547 (D.C. Cir. Mar. 22, 1996). The
court remanded for reconsideration the Commission's virtual collocation
order, 59 FR 38922 (8/1/94), concluding that the Commission's
regulations implementing the 1996 Act would render moot the questions
about the future effect of the order. The petitioners had argued that
the Commission lacked statutory authority to order incumbent LECs to
provide virtual collocation.) that our existing policies on expanded
interconnection for interstate special access and switched transport
services should continue to apply pursuant to our authority under
sections 201 and 251(g). We seek comment on this tentative conclusion.
c. Unbundled Network Elements. 74. Section 251(c)(3) imposes a duty
upon incumbent LECs ``to provide, to any requesting telecommunications
carrier for the provision of a telecommunications service,
nondiscriminatory access to network elements on an unbundled basis at
any technically feasible point on rates, terms, and conditions that are
just, reasonable, and nondiscriminatory in accordance with the terms
and conditions of the agreement and the requirements of this section
and section 252.'' Incumbent LECs are required to provide these network
elements ``in a manner that allows requesting carriers to combine such
elements in order to provide such telecommunications service.'' In
addition, section 251(d)(2) provides that the Commission, in
determining which network elements incumbent LECs should unbundle,
``shall consider, at a minimum, whether (A) access to such network
elements as are proprietary in nature is necessary; and (B) the failure
to provide access to such network elements would impair the ability of
the telecommunications carrier seeking access to provide the services
that it seeks to offer.''
75. Together, sections 251(c)(3) and 251(d)(2) foster competition
by ensuring that new entrants wishing to compete with incumbent LECs
can purchase access to those network elements that they do not possess,
without paying for elements that they do not require. The ability to
purchase, at reasonable, cost-based prices, access only to those
network elements a carrier needs allows new entrants to enter the LEC's
market gradually, building their own networks over time, and purchasing
fewer unbundled elements as their own networks develop. Further, new
entrants can purchase access to those elements incumbent LECs can
provide most efficiently, and at the same time build their own
facilities only where it would be efficient.
76. In addition, the requirement that rates, terms, and conditions
be just, reasonable, and nondiscriminatory: (1) prevents the incumbent
LEC from offering unbundled elements on rates, terms, and conditions so
overpriced or burdensome as to discourage competition; (2) enables new
entrants to discipline the incumbent's pricing; and (3) allows entrants
to take market share from the incumbent if the new entrant is more
efficient or if the incumbent attempts to charge prices above
competitive levels.
77. Section 251(d)(2) provides that the Commission will
``determin[e] what network elements should be made available for
purposes of subsection (c)(3).'' As a result of this provision, and the
obligation created by section 251(d)(1), we tentatively conclude that
section 251 obligates the Commission to identify network elements that
incumbent LECs should unbundle and make available to requesting
carriers under subsection (c)(3). Rather than itemize an exhaustive
list of network elements, however, some of which competing carriers may
not desire, we further tentatively conclude that the Commission should
identify a minimum set of network elements that incumbent LECs must
unbundle for any requesting telecommunications carrier, and, to the
extent necessary, establish additional or different unbundling
requirements in the future as services, technology, and the needs of
competing carriers evolve. We seek comment on these tentative
conclusions.
78. Carriers may, of course, voluntarily negotiate agreements for
unbundling elements that differ from those addressed by the Commission
under section 251(c)(3). In addition, section 252(e)(3) preserves a
state's authority to impose other requirements of state law in its
review of arbitrated agreements. 1996 Act, sec. 101, Sec. 252(e)(3).
Such requirements could include intrastate telecommunications service
quality standards. Section

[[Page 18324]]

251(d)(3) also preserves the right of states to enforce consistent
access and interconnection regulations. 1996 Act, sec. 101,
Sec. 251(d)(3). Thus, to the extent such requirements are consistent
with the provisions of section 251(c)(3) and our rules, we tentatively
conclude that states may require additional unbundling of LEC networks.
79. In light of our obligations under sections 251(d)(1) and
251(d)(2), we also seek comment on whether and to what extent, beyond
merely identifying network elements that incumbent LECs must provide on
an unbundled basis pursuant to subsection (c)(3), the Commission should
establish minimum requirements governing such unbundling. These
requirements could include, for example, provisioning and service
intervals, nondiscrimination safeguards, and technical standards. We
believe that minimum national requirements governing the unbundling of
network elements would likely offer several advantages. Such
requirements would provide uniform technical requirements, and would
enhance the ability of new entrants to take advantage of economies of
scale and to plan and deploy networks stretching across state and LEC
boundaries. We note that telecommunications equipment has heretofore
been provided by national manufacturers selling to a nation-wide
market, without substantial regional or state-to-state variation in
equipment design. Minimum national requirements also may ensure some
level of network and equipment interoperability between both competing
and noncompeting carriers. Further, Commission minimums would reduce or
eliminate the need for certain duplicative decision-making by the
states, provide a ready framework for the many states that have not
acted to unbundle LEC networks, and speed the negotiation and
arbitration processes by reducing any ambiguity in the parties'
obligations. Thus, states could rely on a set of generally applicable
minimum requirements, while prescribing additional rules of unbundling
tailored to their particular circumstance.
80. We also seek comment on whether and to what extent we should
establish national rules for unbundled network elements that allow for
some variation among states. For example, we seek comment on the extent
to which such rules should permit states to impose different
obligations to address state-specific concerns and to experiment with
alternative approaches, and whether permitting such variation would
better achieve the goals of the 1996 Act. Would variations in technical
requirements among states affect the ability of new entrants to plan
and configure regional or national networks? Would a lack of explicit
requirements impair a state's ability to complete arbitrations within
the prescribed time-frame, or our ability to evaluate BOC compliance
under section 271 within 90 days? Would a lack of clear national rules
impair our ability under section 252(e) to assume a state commission's
responsibilities if the state commission fails to act to carry out its
responsibilities under section 252?
81. We also encourage parties to provide us with information
regarding the policies that states have adopted to address network
unbundling. While many states have not acted at all to unbundle LEC
networks, several states have ordered some amount of LEC network
unbundling. States such as Illinois, New York, California, and Maryland
require, or plan to require, LECs to unbundle at least local loops. New
York, for example, has implemented a request-based approach that
requires unbundling only for requested elements (to date local loops
and ports), and then only if essential facilities are involved. Other
states, such as Maryland and Florida, require LECs to unbundle all
network elements to the extent technically feasible and ``reasonable''
or ``economically feasible,'' and address unbundling requirements for a
specific element when that element is requested. In contrast to these
request-based approaches, some states, such as Colorado, Hawaii, and
California, determine an essential or ``key'' set of LEC network
elements that LECs must unbundle. We seek comment on the policies that
other states have adopted.
82. Finally, with respect to each of the issues discussed below, we
request comment on whether any existing state approaches, alone or in
combination, would be suitable for incorporation into national rules
implementing section 251(c)(3). We also ask commenting parties to
identify state approaches that they believe are either inconsistent
with the 1996 Act or that are inadvisable from a policy perspective.
(1) Network Elements. 83. Section 3(29) defines a ``network
element'' as both ``a facility or equipment used in the provision of a
telecommunications service'' as well as ``features, functions, and
capabilities that are provided by means of such facility or
equipment.'' According to the Joint Explanatory Statement, ``[t]he term
`network element' was included to describe the facilities, such as
local loops, equipment, such as switching, and the features, functions,
and capabilities that a [LEC] must provide for certain purposes under
other sections of the conference agreement.'' We believe that under
this broad definition, an entire local loop, for example, could
constitute a single network element, or comprise several network
elements. An alternative interpretation, albeit one that would provide
competitors less flexibility, is that a network element, once defined,
cannot be subdivided. We seek comment on our more flexible
interpretation of ``network element,'' and how to apply the definition
in accordance with the unbundling proposals discussed below.
84. We also seek comment on the apparent distinction, drawn in the
definition of ``network element'' in the 1996 Act, between the
``facility or equipment used in the provision of a telecommunications
service,'' and the service itself. We request comment on the meaning
and significance of such a distinction in general and with respect to
particular elements. For example, because the nature of a network
element, under the definition in the 1996 Act, is a facility or
function, and is not dependent upon the particular services offered by
means of such facility or function, does the purchase of access to such
an element entitle, or indeed obligate the requesting carrier to
provide the customer with all services, intrastate and interstate, that
use the element? Under this reading of the statute, a
telecommunications carrier that purchased local switching as a network
element would use that element to provide whatever intrastate and
interstate switching services the customer desired. As discussed more
fully below in section II.B.2.e., such an entitlement or obligation to
provide all of the services that a particular network element currently
is used to furnish may distinguish network elements from existing
access services.
85. In addition, we request comment on the relationship between
section 251(c)(3), concerning unbundling, and section 251(c)(4), which
addresses resale of incumbent LEC services. Specifically, may
requesting carriers order and combine network elements to offer the
same services an incumbent LEC offers for resale under subsection
(c)(4)? Does subsection (c)(3) in effect provide new entrants with an
alternative way to ``resell'' the services of incumbent LECs in
addition to the specific resale provision in subsection (c)(4)? In this
regard, we note that section 252(d) provides different pricing
standards for these two subsections, and we ask commenters to address
the implications of this difference. Some parties have asserted, for
example, that allowing interexchange carriers to offer

[[Page 18325]]

the same services over combined LEC network elements that the LEC
already offers would enable such carriers to circumvent the section
271(e)(1) joint marketing restriction. To the extent that section
251(c)(3) contemplates the purchase of unseparated facilities (i.e.
facilities used to provide both intra- and interstate services), as
discussed above, we note that a telecommunications carrier would not
necessarily be purchasing the same service(s) it would under section
251(c)(4). Does the difference, if any, between network elements and
the services provided by means of such elements play a meaningful role
in distinguishing these two subsections? For example, under the
Illinois Local Switching Platform concept, discussed in detail below,
requesting carriers may offer services by means of the unbundled
platform that the incumbent LEC does not offer. We invite parties to
comment on these and any other issues raised by the interplay of
subsections (c)(3) and (c)(4). Parties should base their comments on
specific statutory language.
(2) Access to Network Elements. 86. Section 251(c)(3) requires
incumbent LECs to provide ``access'' to network elements ``on an
unbundled basis.'' We interpret these terms as requiring incumbent LECs
for a fee to provide requesting carriers with the ability to obtain a
particular element's functionality, such as a local loop's function of
transmitting signals from a LEC central office to a customer premises,
separate from that of other functionalities or network elements, such
as the local switch. Further, the term ``unbundled'' suggests that
there must be a separate charge for each purchased network element. We
seek comment on this and any alternative interpretations of section
251(c)(3).
87. Section 251(c)(3) further mandates that incumbent LECs provide
access to network elements on an unbundled basis ``at any technically
feasible point.'' Parties are asked to identify and describe, in brief,
each network element for which they believe access on an unbundled
basis is technically feasible at this time. Further, we seek comment on
whether a dynamic definition of ``technically feasible'' is practical
for identifying elements beyond those discussed here, and, if so, what
such a definition should be. We also ask whether the states, rather
than the Commission, may apply the definition during the arbitration
process. We further request that parties comment on experiences with
providing or purchasing access to elements currently unbundled by the
states, and any state approaches to determining the technical
feasibility of unbundling elements that the Commission could use in a
national model. We also seek comment on whether the technical
feasibility of interconnection at a particular point affects, at least
in part, the technical feasibility of providing access to a network
element on an unbundled basis at that point. Finally, because
subsection (c)(3) imposes an affirmative obligation on incumbent LECs
to provide unbundled elements, we tentatively conclude that LECs have
the burden of proving that it is technically infeasible to provide
access to a particular network element. We also tentatively conclude
that the unbundling of a particular network element by one LEC (for any
carrier) evidences the technical feasibility of providing the same or a
similar element on an unbundled basis in another, similarly structured
LEC network. We seek comment on these tentative conclusions.
88. In addition to technical feasibility, section 251(d)(2)
requires that the Commission ``consider, at a minimum, whether * * *
access to such network elements as are proprietary is necessary, and
[whether] the failure to provide access to such network elements would
impair the ability of the telecommunications carrier seeking access to
provide the services that it seeks to offer.'' We seek comment on the
extent to which the Commission must ``consider'' these standards, how
these standards should be interpreted, and on any additional
considerations, such as possible risks to network reliability or other
harm. We note that the 1996 Act uses the terms ``technically feasible''
and ``economically reasonable'' together in other sections of the Act,
and we seek comment on what effect the absence of the term
``economically reasonable'' in section 251(c)(3) has on economic
considerations. See, e.g., 1996 Act, sec. 101, Sec. 254(h)(2). The
House Committee, in considering H.R. 1555, dropped the term
``economically reasonable'' from its unbundling provision, reporting
that ``this requirement could result in certain unbundled * * *
elements * * * not being made available.'' H. Rep. 104-204, 71 (1995).
Further, we request comment on whether this omission could be construed
to imply that Congress intended for carriers requesting unbundling to
pay its cost, and on whether that construction is consistent with the
intent of the 1996 Act. In any event, access to network elements must
be available at rates, terms, and conditions that are just, reasonable,
and nondiscriminatory. 1996 Act, sec. 101, Sec. 251(c)(3).
89. We also request comment on whether the Commission should
establish minimum requirements governing the ``terms'' and
``conditions'' that would apply to the provision of all network
elements. For example, should the Commission require incumbent LECs to
provide network elements using the appropriate installation, service,
and maintenance intervals that apply to LEC customers and services?
Alternatively, should the Commission require LECs to comply with
national or industry-based standards? Would minimum national
requirements for electronic ordering interfaces reduce the time and
resources required for new entrants to compete in regional markets?
What standard unbundling terms and conditions, if any, should the
Commission use in evaluating applications under section 271(b)? Would
national rules aid the states in arbitrating agreements within the
statutory period? If parties believe that the Commission should specify
minimum terms and conditions, we seek comment on what those terms and
conditions should be, and how those terms and conditions might be
enforced. Parties are encouraged to cite specific examples from the
states that could be incorporated into minimum national requirements.
90. In addition, we request comment on the meaning of the
requirement in section 251(c)(3) that LECs provide unbundled network
elements ``in a manner that allows requesting carriers to combine such
elements in order to provide * * * telecommunications service.'' For
example, should the required facilities or services associated with a
particular network element vary depending on the services the
requesting carrier wishes to provide or on the types of facilities the
requesting carrier will use in combination with the requested elements?
We also seek comment on the relationship between this provision and
section 251(d)(2)(B), discussed above, which requires the Commission to
consider whether the failure to provide access to an element would
impair the ability of a requesting carrier to provide a desired
service.
91. Section 251(c)(3) further requires incumbent LECs to provide
requesting carriers with ``nondiscriminatory'' access to unbundled
network elements. That section also requires LECs to provide access on
``terms, and conditions that are * * * nondiscriminatory.'' We seek
comment on what minimum requirements, if any, we should adopt to ensure
that LECs do not discriminate among requesting carriers. For example,
one criterion might be whether an end user could perceive any
differences in the quality

[[Page 18326]]

of service provided by one carrier as compared with another. Another
criterion might be to require LECs to make it as easy to switch local
service providers as it is for customers to switch interexchange
providers. Further, unlike subsection (c)(2), which requires that
interconnection offered requesting carriers be ``at least equal in
quality to that provided'' by the LEC itself, subsection (c)(3) does
not contain such a requirement. Nevertheless, we request comment on
whether we can and should prohibit an incumbent LEC from providing
requesting carriers with access inferior to that which it provides
itself.
(3) Specific Unbundling Proposals. 92. We now consider particular
network elements to which incumbent LECs must provide access on an
unbundled basis under section 251(c)(3). As discussed above, we propose
to identify a minimum number of elements that incumbent LECs must
unbundle, and we seek comment on what minimum requirements of
unbundling, if any, the Commission should adopt for each element. AT&T,
for example, has publicly advocated that the Commission should require
the unbundling of eleven network elements: loop distribution,
concentration, and feeder plant; local and access tandem switches;
dedicated and common transport; SS7 signalling links, signal transfer
points, and signal control points; and operator services. MCI
advocates, in addition, the unbundling of loop and trunk ports from
local switching. Some LECs favor the unbundling of significantly fewer
elements.
93. We address below four categories of elements: loops, switches,
transport facilities, and signaling and databases. For each of the
proposed network elements discussed in these categories, we request
that parties comment on the following issues:
(1) the technical feasibility of providing access to that or an
equivalent element on an unbundled basis, how such access should be
provided, and any demonstrable network reliability concerns;
(2) whether and to what extent LECs currently allow other carriers
to access such elements;
(3) whether the Commission should establish a standard for defining
the element, and if so, what level of technical detail is required in
the definition, and what facilities or functionalities should be
included or excluded from the definition;
(4) whether the Commission should establish minimum requirements
for the terms and conditions of provisioning the element, and if so,
what they should be;
(5) whether the failure to unbundle the element would impair a
requesting carrier's ability to provide the services that it seeks to
offer;
(6) whether proprietary interfaces or technology are involved in
providing the element, and if so, whether unbundled access to the
element is necessary; and
(7) any other issues presented by the unbundling of this element
that are important to effectuating the goals of section 251(c)(3) and
the 1996 Act.
(a) Local Loops. 94. We propose to require incumbent LECs to
provide local loops as unbundled network elements. The Joint
Explanatory Statement accompanying the 1996 Act expressly cites the
local loop as an example of a network element. In addition, the
competitive checklist of section 271(c)(2)(B) specifies the unbundling
of local loops from local switching or other services as a precondition
to BOC provision of in-region interLATA services. Further, several
states have ordered, and LECs currently offer, loops unbundled from
local switching, and thus we tentatively conclude that the unbundling
of local loops is technically feasible.
95. We first seek comment on whether and the extent to which the
Commission should prescribe a set of minimum requirements for
unbundling and provisioning loops. For example, we could require only
that incumbent LECs must, upon request, provide at central offices
individual transmission links to customer premises regardless of the
technology involved. It appears, however, that in states that already
have ordered loop unbundling, the general requirement to unbundle is
merely the first step in a process of providing new entrants with
meaningful facilities with which to compete.
96. The New York Commission, for example, having anticipated and
addressed many of the problems associated with unbundling loops and
ports, is still grappling with issues such as operational interfaces
between carriers, the timing of loop provisioning relative to number
porting, and underlying delivery systems supporting loop-provisioning.
In view of such complex and resource-intensive issues, we seek comment
on whether there are minimum requirements that would build upon the
progress of preexisting state initiatives and facilitate the
provisioning of unbundled loops. What requirements, for example, would
avoid the need for duplicative decision-making by states and variations
among states in the effectiveness of loop unbundling, while better
enabling new entrants to plan and fund regional networks? To what
extent is the avoidance of interstate duplication and variation
necessary to achieving the goals of the 1996 Act? How should the
Commission structure national requirements to provide sufficient
flexibility to carriers and the states for use of different or new
``loop'' technologies or services?
97. In addition, we tentatively conclude that we should require
further unbundling of the local loop. We seek comment on which subloop
elements are technically feasible to unbundle. For example, the
Commission could require incumbent LECs to provide access to loop
feeder and distribution plant on an unbundled basis at remote switching
or concentration sites, in addition to access to the switching or
concentration equipment itself. Hawaii, for example, divides local loop
functions into these three categories. Illinois also recently required
LECs to provide subloop elements in response to a bona fide request.
Such requests may come from carriers deploying cable or fiber feeder
facilities that lack distribution plant. We thus seek comment on
whether requiring access to loops prior to their concentration or
multiplexing would allow requesting carriers to provide services they
could not provide at LEC central offices, and whether such access would
involve proprietary equipment. Finally, we request comment on what
minimum requirements for subloop unbundling, at this early stage where
few if any states have addressed the issue, would pave the way for
rapid adoption and provision of subloop elements.
(b) Local Switching Capability. 98. In addition to the local loop,
we tentatively conclude that incumbent LECs should provide unbundled
local switching capability as a network element. The Joint Explanatory
Statement expressly cites switching equipment as an example of a
network element. In addition, the competitive checklist of section
271(c)(2)(B) specifies the unbundling of local switching from
transport, local loop transmission, or other services as a precondition
to BOC provision of in-region interLATA services. Finally, we believe
unbundling of local switching capability is critical to the
implementation of section 251(c)(3) and the provision of competing
telecommunications services.
99. Unlike a local loop, local switching equipment is often shared
by thousands of customers. As a result, it may be difficult to identify
or define the use of such equipment for a particular customer. One
possible way to identify

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a switching element is to define the element in terms of the capacity
of a local switch to switch traffic from line to line, line to trunk,
trunk to line, or trunk to trunk. This is both the most essential and
rudimentary capacity of a local switch. Today's modern switches,
however, are capable of significantly more advanced functions, such as
call waiting, conference calling, signaling, and centrex. Under the
1996 Act's definition of network element, these functions could
constitute individual network elements separate from the basic
switching functionality, or could be grouped in part or whole with the
basic functionality, which would allow requesting carriers, in turn, to
offer the functions they desire.
100. Illinois, for example, is investigating a ``local switching
platform'' approach to unbundling the local switch. The platform is
described in terms of ``virtual'' switch capacity, including all the
services and functions performed by the switch on a per line basis,
such as dialtone, telephone number provision, all CLASS and CCF
features, originating and terminating usage, and 911 services.
According to its advocates, unlike merely reselling a single switching
service, under the platform structure requesting carriers incur added
risk because the cost of the platform includes the cost of all
functionalities provided by the switch on a per line basis, regardless
of the functionalities ultimately purchased by an end user. This added
risk translates into added profits if the requesting carrier is able to
sell a combination of these switching functionalities at a higher
profit than would have been possible under a simple resale arrangement.
Moreover, because requesting carriers are not tied to the incumbent
LEC's retail price structure, concerns about possible price squeezes
are reduced.
101. Other states have defined a switching ``port,'' which usually
includes all the capabilities of the local network provided at the main
distribution frame of a LEC central office. For example, New York
treats a port essentially as an interconnection point into the rest of
the NYNEX network. Thus a port defined in this way is not in the nature
of an unbundled element that a competing carrier could combine with its
own transport and other loop facilities to provide a competing
telecommunications service. Rather, such a port is effectively
equivalent to the LEC's bundled retail local service offering minus the
loop. We seek comment on whether such a definition of ``port'' is
consistent with the requirements of section 251(c)(3), especially the
requirement that incumbent LECs provide elements in a manner that
allows carriers to combine them to provide telecommunications services.
Further, we seek comment on alternative definitions of ``port,'' and on
whether the port should be a separate unbundled element from the
switch. For example, MCI defines a port as the link from the LEC main
distribution frame to the switch.
102. We also request comment on these and alternative approaches to
unbundling the local switch, and on the technical feasibility of such
approaches. Under the switching platform approach, for example, what
control, if any, can and should requesting carriers have over the
operations of a LEC local switch, and is access to proprietary
functions or equipment necessary? Further, should the Commission
identify several permissible approaches to switch unbundling, and what
minimum requirements, if any, should apply? What requirements of switch
unbundling would help the Commission in evaluating applications under
section 271(b), and the states and the courts in arbitrating and
evaluating agreements between carriers?
103. Finally, in conjunction with the next section addressing
transport facilities, we request comment on whether requirements
governing a local switching element could be tailored to apply to a
tandem switching element. Parties should address the issues discussed
above in the context of tandem switches.
(c) Local Transport and Special Access. 104. We also propose to
require incumbent LECs to provide access to unbundled transport
facilities as network elements. We note that the competitive checklist
of section 271(c)(2)(B) requires the provision of local transport from
the trunk side of a LEC switch unbundled from switching or other
services as a precondition to BOC provision of in-region interLATA
services. We tentatively conclude that the unbundling of local
transport and special access facilities is technically feasible. We
note that the Commission's action in the Expanded Interconnection
proceeding effectively required substantial unbundling of these
facilities.
105. We propose to require unbundling of LEC facilities that
correspond to the current interstate transport and special access rate
elements. For direct-trunked transport networks, transport trunks would
be unbundled from local switches, and the link from the serving wire
center (SWC) to the IXC point of presence (POP) would be unbundled from
the link between the central office and the SWC. For tandem-switched
transport networks, the elements could include, among other options,
unbundled trunks from the end office to the tandem office, trunks from
the tandem office to the SWC, trunks from the SWC to the IXC POP, and
the tandem switch itself. Finally, for special access we propose to
require the unbundling of channel termination facilities from
interoffice facilities.
106. We seek comment on the technical feasibility of unbundling
direct-trunked and tandem-switched transport and special access
facilities in this or in any alternative manner, and on how LECs should
unbundle any other network facilities used to transport traffic from
LEC central offices to IXC POPs or to other LEC central offices. As
discussed above, we ask parties to address the unbundling of tandem
switches in accordance with the issues raised in the local switching
section, and comment on any issues pertaining exclusively to tandem
switching.
(d) Databases and Signaling Systems. 107. The 1996 Act contemplates
the unbundling of incumbent LECs' signaling systems and databases.
Congress specifically included ``databases'' and ``signaling systems''
in the definition of network elements. The 1996 Act also requires BOCs
to provide access to ``databases and associated signaling necessary for
call routing and completion'' as a precondition for entry into in-
region interLATA services. Therefore, we tentatively conclude that
requiring incumbent LECs to unbundle their signaling systems and
databases is consistent with the intent of the 1996 Act.
108. Many incumbent LECs have Signaling System 7 (SS7) networks
that are separate from, but interconnected with, the telecommunications
networks that carry voice and data communications between end users.
SS7 networks perform three primar

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A96-10300. Public record. Not legal advice.