NEWS Report No. DC 96-32 ACTION IN DOCKET CASE April 19, 1996 COMMISSION INITIATES PROCEEDING TO IMPLEMENT INTERCONNECTION PROVISIONS OF TELECOMMUNICATIONS ACT OF 1996 (CC DOCKET NO. 96-98) Pursuant to the Telecommunications Act of 1996, the Commission today commenced a proceeding to implement Congress' pro-competitive, de-regulatory national policy framework for opening local telephone markets to competition. In a Notice of Proposed Rulemaking (NPRM) released today, the Commission seeks comment on rules to implement Sections 251, 252, and 253 of the 1996 Act. The 1996 Act promotes entry into local telecommunications markets by banning any state or local statute or regulation that has the effect of prohibiting entry into any telecommunications market. In addition, Congress recognized that the removal of legal and regulatory barriers to entry is necessary, but not sufficient to enable competition to supplant the existing local exchange monopolies. Consequently, Section 251 of the 1996 Act requires incumbent local exchange carriers (LECs) to offer interconnection, unbundled network elements, transport and termination, and wholesale rates for retail services to new entrants. The 1996 Act further places limits on the incumbent LECs' pricing of these services with the requirement that rates be cost-based and just and reasonable. Section 251 also imposes upon all LECs a duty to provide number portability, dialing parity, and access to rights-of-way, as well as a duty to establish reciprocal compensation arrangements for the transport and termination of telecommunications traffic. The Commission noted in the NPRM that Congress intended that LECs should be able to compete, to continue to offer high quality service, and to play a vital role in advancing and preserving universal service for all Americans. The purpose 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 retard efficient entry. This entry policy is competitively neutral and it is pro-competition. By dismantling entry barriers and reducing the inherent advantages of incumbent LECs, the Commission proposes in this NPRM to implement a national framework for enhancing competition, increasing consumer choice, lowering rates, and reducing regulation. The following summarizes the requirements of the 1996 Act addressed in this proceeding and outlines several of the areas in which the Commission seeks comment. Section 251 - Interconnection; Unbundled Access; and Resale General Section 251 imposes specific obligations on incumbent LECs to open their networks to new entrants. Section 251(c) requires incumbent LECs to make available to new entrants interconnection and unbundled network elements, and to offer LEC retail services for resale to telecommunications carriers at wholesale rates. This provision of the 1996 Act enables entrants to use a combination of interconnection, unbundled elements, and/or resale in the manner that the entrant determines will advance its entry strategy most effectively. Section 251(b) requires all LECs to provide resale, number portability, dialing parity, access to rights-of-way, and to establish reciprocal compensation arrangements for transport and termination of traffic. Section 251(a) imposes general obligations on all telecommunications carriers. Interconnection The NPRM discusses the requirements of the 1996 Act concerning interconnection and seeks comment on: the determination of technically feasible points of interconnection; just, reasonable, and nondiscriminatory terms and conditions for interconnection; and methods of interconnection. The Commission tentatively concludes that interconnection at a particular point in an incumbent LEC's network will be considered technically feasible if the incumbent LEC currently provides, or has provided in the past, interconnection to any other carrier at that point, and that all incumbent LECs using similar technology should be required to make interconnection at such points available to requesting carriers. The Commission cites interconnection at the trunk-side and loop-side of the local switch, transport facilities, tandem facilities, and signal transfer points as examples of existing interconnection points that LECs currently provide. The Commission further states that, as technology advances, it anticipates that the points of feasible interconnection may also change and that the rules should change accordingly. The NPRM also seeks comment on how to determine whether the terms and conditions of interconnection are just, reasonable, and nondiscriminatory, and what criteria may be appropriate in determining whether interconnection is equal in quality to that provided by the LEC to itself. Unbundled Elements The NPRM seeks comment on access to unbundled network elements offered by incumbent LECs. The Commission believes that the ability to purchase, at reasonable, cost- based prices, access only to those network elements a carrier needs will permit a new entrant to enter the LEC's market gradually by deploying its own networks over time and purchasing LEC elements only where it would be efficient. Consequently, the Commission tentatively concludes that it 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 requirements as the needs of competing carriers evolve. The NPRM also seeks comment on whether and to what extent, the Commission should establish minimum requirements governing such unbundling. In addition, the Commission notes that parties may voluntarily negotiate agreements for unbundled elements that differ from those addressed by the Commission. The Commission tentatively concludes that states may require additional unbundling of LEC networks. The Commission also seeks comment on particular network elements to which incumbent LECs must provide access on an unbundled basis under the 1996 Act. The NPRM identifies four categories of elements: loops, switches, transport facilities, and signalling and databases. In addition, the Commission tentatively concludes that it should require further unbundling of the local loop. Pricing Principles The Commission notes that the 1996 Act appears to give a role to both the states and the Commission regarding rates for interconnection, unbundled network elements, wholesale services and reciprocal compensation arrangements. Consequently, the Commission tentatively concludes that it should establish principles to ensure that rates established by the states for interconnection, unbundled elements, and collocation are just, reasonable, and nondiscriminatory. In addition, the Commission recognizes that, pursuant to Section 252, states have the critical role of establishing rates in arbitrations and in reviewing Bell Operating Company (BOC) statements of generally available terns and conditions. Resale In the NPRM, the Commission seeks comment on a LEC's duty to offer certain services for resale at wholesale rates. In particular, the NPRM seeks comment on the specific services that LECs must make available at wholesale rates, the limitations that may be imposed on the resale of such services, the applicable pricing standards, and whether it would be consistent with the 1996 Act to incorporate any particular state policies concerning resale restrictions into federal policies. Duties of all LECs In addition to the obligations imposed upon incumbent LECs, the 1996 Act imposes a duty on all LECs to provide resale service, number portability, dialing parity, and access to rights-of-way, as well as to establish reciprocal compensation arrangements for the transport and termination of telecommunications. The Commission seeks comment generally on these obligations. Additional Issues The Commission seeks comment on whether Section 251 of the 1996 Act applies to interconnection arrangements between incumbent LECs and providers of interexchange services, commercial mobile radio service providers, and non-competing neighboring LECs. In addition, the Commission seeks comment on how it should carry out its responsibilities under Section 252 in the event that a state fails to assume responsibility for arbitrating disputes that arise in interconnection negotiations between incumbent LECs and new entrants. Finally, the Commission notes that the 1996 Act provides for exemption, suspension, or modification of certain requirements, under certain conditions, with respect to small and rural LECs. Action by the Commission April 19, 1996, by Notice of Proposed Rulemaking (FCC 96-182). Chairman Hundt, Commissioners Quello, Ness and Chong. -FCC- News Media contact: Mindy J. Ginsburg (202) 418-1500 Common Carrier Bureau contacts: Lisa Gelb (202) 418-1580 and David Sieradzki (202) 418- 1520