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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** FCC 96-182 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of) ) Implementation of the Local Competition) Provisions in the Telecommunications Act ) CC Docket No. 96-98 of 1996 ) ) ) 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 Number 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 . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . 250 F. Exemptions, Suspensions, and Modifications . . . . . . . . . 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 (1996 Act), Congress sought to establish "a pro-competitive, de-regulatory national policy framework" for the United States telecommunications industry. 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's 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. 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 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. 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, 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. 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 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. 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. 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 BOC 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 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's 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's 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. 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, a result that would be inconsistent with the pro-competitive goals of the statute. 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, 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 Notice, 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 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 forums 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 a 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 that 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 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's 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 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 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 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. 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; or (3) additional policy considerations. We also tentatively conclude, in light of the court decision in Pacific Bell v. FCC, 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. 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. 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? 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. 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. 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 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 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. 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. (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 primary functions: (1) call set up, which establishes transmission paths for calls; (2) access to remote databases, which provides specialized call routing information to switches; and (3) custom local area signaling service (CLASS) features, such as caller ID, which require the transmission of certain information between the calling and called parties. We request that commenters identify the points at which carriers interconnect with LEC SS7 networks today and the signaling and database functions currently provided by incumbent LECs on an unbundled basis. Commenters should also discuss the technical feasibility of establishing other points of interconnection and other unbundled signaling and database functions not currently offered by incumbent LECs. 109. An example of unbundling particular signaling and database elements is Colorado's requirement that incumbent LECs provide unbundled access to signaling links, signal transfer points, and service control points as well as access to non-proprietary signaling protocols used in the routing of local and interexchange traffic, 800 service, alternative billing service, and line information database (LIDB) service. Colorado has not specified whether access to signaling and databases is limited to those particular services. Hawaii has taken a similar approach by requiring incumbent LECs to unbundle signaling links, signal transfer points, and service control points, and has not specified which services provided by these network elements must be made available to competitors. By contrast, Louisiana has ordered unbundled access to incumbent LEC databases for all services that the incumbent LEC provides itself, including 800 service, LIDB, and advanced intelligent network (AIN) services. Does the variation among the Colorado, Hawaii, and Louisiana regulations governing unbundled signaling and databases reflect differing circumstances that should be accommodated in our rules? Would such variation among states be consistent with the goals of the 1996 Act? Would new entrants be better served by uniform federal rules concerning unbundled access to signaling systems and databases? If so, would any of the regulations adopted by the states be useful to incorporate into national rules? 110. We also seek comment on the relative importance to potential entrants of the various functions performed by incumbent LECs' signaling systems and databases. For example, call set up plays an important role in the transmission of calls that are routed through more than one switch. Thus, it would appear that such functionality will be needed by entrants to provide competing local exchange service. However, we are aware that there are alternative suppliers of call set up services other than incumbent LECs. What bearing, if any, should this have on our adoption of unbundling rules for call set up? Are there existing suppliers for other functions performed by incumbent LECs' signaling systems and databases? 111. In addition, a competitor may seek to provide certain call processing features to its customers by reselling the incumbent LEC's call processing services. We seek comment on the importance of unbundled access to the incumbent LEC's advanced call processing features, such as single number service, in the market entry decisions of potential competitors. We also seek comment on whether the software "building blocks" used by incumbent LECs to create call processing services are network elements to be unbundled. Given the array of existing and potential call processing services that could be provided by incumbent LECs' signaling systems and databases, we seek comment on whether the establishment of uniform national guidelines governing all call processing services provided via remote databases would facilitate the state arbitration process, judicial review, and/or Commission activities under section 253. We also seek comment on whether it would be consistent with the 1996 Act to permit variation among states with regard to unbundling call processing services provided via remote databases. 112. Under another scenario, a competitor that is providing resold local exchange service might seek to distinguish its offerings by connecting its own call processing database to the incumbent LEC's network, which would allow the competitor to provide call processing features not offered by the incumbent LEC. Enabling new entrants to offer their own call processing services in this way would likely stimulate local exchange competition. We seek comment on whether this type of interconnection is technically feasible without jeopardizing network reliability. 113. We also note that in our Intelligent Networks (IN) proceeding, we are considering unbundling advanced intelligent network (AIN) elements, which include signaling systems and databases. In the IN NPRM, we tentatively proposed ordering Tier 1 LECs to provide access to several specific AIN elements in order to promote competition in the provision of AIN services. Subsequently, a group of Tier 1 LECs filed a joint proposal calling for a two-year testing plan to explore methods of third-party interconnection to LEC AINs. We seek comment on what role, if any, the LEC proposal for a testing program should play with regard to access to signaling and database elements that we address in this proceeding. 114. We further note that our IN proceeding has focused on providing all interested third parties with access to Tier 1 LECs' AIN elements, primarily for the purpose of providing competing AIN services. Section 251 of the 1996 Act provides any requesting telecommunications carrier unbundled access to incumbent LECs' network elements "for the provision of a telecommunications service." We seek comment on whether mandating the unbundling of signaling systems and databases pursuant to section 251 would be sufficient to meet the objectives of the IN proceeding. To the extent that section 251 does not require incumbent LECs to provide certain third parties with access to unbundled AIN elements, we seek comment on whether we should use our section 201 authority to require such access. We also seek comment on how the unbundling of signaling systems and databases in this proceeding should affect our actions in the IN proceeding. 115. Requiring incumbent LECs to provide unbundled access to their signaling and database networks could also potentially permit competing carriers to gain access to competitively sensitive data. Louisiana has addressed this potential problem by specifically prohibiting incumbent providers from accessing the customer proprietary network information (CPNI) of an interconnecting carrier in order to market services to the interconnecting carrier's customers. We seek comment on whether such a restriction should be implemented in federal standards. Are there other state regulations concerning access to competitors' CPNI that would prevent this type of anticompetitive conduct while allowing us to establish interconnection and unbundling rules for signaling and database facilities? 116. Finally, we request comment on other network elements to which the Commission should require access on an unbundled basis, and specific standards that should govern their unbundling. For example, the statutory definition of network element includes "subscriber numbers" and "information sufficient for billing and collection or used in the transmission, routing, or other provision of a telecommunications service." We tentatively conclude that these elements should be unbundled and we request comment on the standards we should set for such unbundling. In addition, section 271 of the 1996 Act requires incumbent LECs to unbundle "operator call completion services" as a precondition for providing in-region, interLATA services. In light of this, we tentatively conclude that incumbent LECs should be required to unbundle operator call completion services as a network element pursuant to section 251(c) of the Act. We seek comment on this tentative conclusion. d. Pricing of Interconnection, Collocation, and Unbundled Network Elements (1) Commission's Authority to Set Pricing Principles 117. Section 251, in some instances, explicitly sets forth requirements regarding rates for service, interconnection, and unbundled elements. For example, sections 251(c)(2), (c)(3), and (c)(6) require that incumbent LECs' "rates, terms and conditions" for interconnection, unbundled network elements, and collocation be "just, reasonable, and nondiscriminatory," and, with respect to interconnection and unbundled elements, in accordance with section 252. Section 251(c)(4) requires that incumbent LECs offer "for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers," without unreasonable conditions or limitations. Section 251(b)(5) requires that all LECs "establish reciprocal compensation arrangements for the transport and termination of telecommunications." We tentatively conclude that this statutory language establishes our authority under section 251(d) to adopt pricing rules to ensure that rates for interconnection, unbundled network elements, and collocation are just, reasonable, and nondiscriminatory. We also tentatively conclude that we have statutory authority to define what are "wholesale rates" for purposes of resale, and what is meant by "reciprocal compensation arrangements" for transport and termination of telecommunications. We seek comment on this tentative conclusion. 118. We note that, under the statutory framework established by Congress, states have the critical role under section 252 of establishing rates pursuant to arbitration and of reviewing rates under BOC statements of generally available terms. Rates for both arbitrated agreements and BOC statements of generally available terms must be in accordance with section 252(d), which sets forth specific "pricing standards" for interconnection and unbundled elements, wholesale services, and transport and termination of traffic under reciprocal compensation arrangements. 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. We believe that the statute, and in particular our statutory duty to implement the pricing requirements of section 251, as elaborated in section 252, is reasonably read to require that we establish pricing principles interpreting and further explaining the provisions of section 252(d) for the states to apply in establishing rates in arbitrations and in reviewing BOC statements of generally available terms and conditions. Such an approach appears to be consistent with both the language and the goals of the statute. 119. Establishing national pricing principles would be likely to improve opportunities for local competition by reducing or eliminating inconsistent state regulatory requirements, thereby easing recordkeeping and other administrative burdens. In addition, national pricing principles would be likely to increase the predictability of rates, and facilitate negotiation, arbitration, and review of agreements between incumbent LECs and competitive providers. We seek comment on these tentative conclusions. We also seek comment on the potential consequences if the Commission does not set specific pricing principles. For example, would the lack of consistent rates, even in contiguous geographic areas, create a barrier to entry or to deployment of facilities throughout a multistate market? In addition, if the Commission is required to assume the responsibility of a state commission, pursuant to section 252(e)(5), would an absence of federal pricing principles impede the Commission's ability to arbitrate or review an agreement in a timely fashion? 120. Finally, consistent with our earlier discussion that sections 251 and 252 do not make jurisdictional distinctions between interstate and intrastate services and facilities, we tentatively conclude that the pricing principles we establish pursuant to section 251(d) would not recognize any jurisdictional distinctions, but would be based on some measure of unseparated costs. We do not believe section 2(b) requires a different conclusion. We seek comment on this tentative conclusion. We also seek comment on whether we need to revise our cost allocation rules in Part 64, or whether we need to adopt a similar set of cost allocation rules to remove the costs and revenues of services provided pursuant to sections 251 and 252 before the separations process is applied. (2) Statutory Language 121. Section 251(c)(2)(D) requires that incumbent LECs provide interconnection "on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with . . . the requirements of this section and section 252." Section 251(c)(3) similarly requires incumbent LECs to provide "nondiscriminatory access to network elements on an unbundled basis . . . on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with . . . the requirements of this section and section 252." Likewise, section 251(c)(6) requires incumbent LECs to provide "on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, for physical collocation of equipment." Section 252(d)(1) provides that state determinations of the just and reasonable rate for the interconnection of facilities and equipment for purposes of subsection (c)(2) of section 251, and the just and reasonable rate for network elements for purposes of subsection (c)(3) of such section -- (A) shall be (i) based on the cost (determined without reference to a rate-of-return or other rate-based proceeding) of providing the interconnection or network element . . . , and (ii) nondiscriminatory, and (B) may include a reasonable profit. We seek comment on the proper interpretation of each of these statutory provisions. We also seek comment on any specific principles that parties believe the Commission should promulgate to ensure that the rates established or approved by states are just, reasonable, and nondiscriminatory. We seek comment below on the national pricing principles that states might apply in setting and reviewing rates for interconnection, collocation, and access to unbundled network elements. We also seek comment on what enforcement or monitoring mechanism, if any, the Commission or the industry should adopt to ensure that all carriers comply with any pricing principles that the Commission establishes. 122. Further, we believe that any pricing principles we adopt should be the same for interconnection and unbundled network elements, because sections 251(c)(2) and (c)(3) and 252(d)(1) use the same standard for both types of services. We invite parties to comment on whether there are any reasons to make a distinction. In addition, we believe that the same pricing rules that apply to interconnection and unbundled network elements should apply to collocation as required under section 251(c)(6). We seek comment on this issue. In particular, we seek comment on whether the absence of any pricing rule for collocation in section 252 has any legal significance with regard to our authority to specify rules for pricing of collocation services. Alternatively, should collocation be considered a subset of interconnection services, pursuant to sections 251(c)(2) and 252(d)(1) for purposes of the statutory pricing principle? (3) Rate Levels 123. As previously set forth, section 252(d)(1) provides that state determinations of just and reasonable rates for interconnection and providing network elements shall be "based on the cost (determined without reference to a rate-of-return or other rate-based proceeding)," "nondiscriminatory," and "may include a reasonable profit." We tentatively conclude that this language precludes states from setting rates by use of traditional cost-of-service regulation, with its detailed examination of historical carrier costs and rate bases. Instead, the statute appears to contemplate the use of other forms of cost-based price regulation, such as price cap regulation that is indirectly based on costs, or the setting of prices based on a forward-looking cost methodology that does not involve the use of an embedded rate base, such as long-run incremental cost (LRIC). We seek comment on this view of the meaning of section 252(d)(1). 124. Economists generally agree that rates based on LRIC give appropriate signals to producers and consumers and ensure efficient entry and utilization of the telecommunications infrastructure. They further agree that competitive markets, over the long run, tend to force prices toward LRIC. A broad range of parties appears to agree that rates for interconnection and unbundled elements should be based on some type of LRIC methodology, such as, for example, using what some parties refer to as a "total service long-run incremental cost" (TSLRIC) approach. In the following section, we consider whether we should adopt a LRIC- based pricing methodology for states to use to set interconnection and unbundled element rates under the 1996 Act. Under such an approach, if voluntary negotiations between parties were unsuccessful, the state commissions would conduct arbitration proceedings under section 252 in order to develop the specific factual information required to specify the actual rates in accordance with the national policy. As discussed at greater length below, however, there appear to be considerable differences of opinion as to the precise form of the LRIC methodology that should be used. Further, while pricing based on LRIC may be the theoretical ideal, significant practical and administrative problems are likely to arise in determining the LRIC of specific services and facilities for particular incumbent LECs, especially in the short term, given the contentious and often time-consuming proceedings that may be necessary to resolve the complex issues raised by incremental cost studies. We explore these and other issues concerning the use of a LRIC-based pricing methodology in the following section. 125. As an alternative to our specifying a methodology for states to follow in setting prices under section 252(d)(1), we could establish outer boundaries for rates for interconnection and unbundled network elements, within which states would have a range of flexibility to select a cost-based method of determining interconnection and unbundled element rates. In particular, we could establish an administratively simple methodology that is relatively easy to apply, potentially using proxies for cost-based rates, to set rate ceilings or upper bounds on the range of state ratemaking flexibility. The use of a proxy to set the ceiling would reduce the administrative burden that is inherent in the application of a LRIC-based methodology, and thus may be especially attractive in the near term. We discuss this proxy-based ceiling approach in detail below. We also discuss below the extent to which embedded (or historical) costs are relevant to the pricing rule for interconnection and unbundled network elements in the 1996 Act, the relationships between this pricing rule and policies on universal service and access charge reform, and whether certain methodologies are so fundamentally inconsistent with the 1996 Act that the statute precludes states from using such methodologies. (a) LRIC-Based Pricing Methodology 126. As noted above, most economists -- and a broad range of parties that have submitted materials related to this proceeding -- appear to agree that rates for interconnection and unbundled elements ideally should be based on a LRIC-type methodology. The economists and parties, however, do not appear to agree on the specifics of a LRIC or TSLRIC methodology. Parties sometimes assign different meanings to the same terms. We therefore ask commenters advocating this approach to define with specificity the costing methodology that they support. In particular, we seek comment on precise definitions for the following terms: LRIC, TSLRIC, forward-looking costs, joint costs, common costs, shared costs, and stand-alone costs. We also seek comment on the definition of the following related terms: embedded costs, fully distributed costs (FDC), overheads, contribution, and residual costs. For example, many years ago the Commission defined LRIC as including "the full amount of incremental investment and expenses which would be incurred by reason of furnishing additional quantities of service, whether in a new or an existing service category," and added that, in estimating LRIC, one "determine[s] prospectively the effect on total costs, including the effect on common costs, . . . of adding units of service." Does this continue to be an appropriate definition of LRIC? In what respects, if at all, does a TSLRIC analysis differ from a LRIC analysis? Commenters should explain how any methodology they support should be calculated, and how such an approach differs from other possible costing methodologies. 127. We note that some states already have adopted LRIC-based pricing methodologies to set rates for interconnection services and unbundled network elements that new entrants purchase from incumbent LECs. For example, the Illinois Commerce Commission has promulgated detailed rules regarding the use of TSLRIC studies to derive the rates for spec