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PUBLIC POLICY ANALYSIS p>"(#I 7 XxPIII. INTERCONNECTION ARCHITECTURE p"(#F 13  Y#-XxX` ` xA.` ` Physical and Virtual Collocation ` p"(#F 13  Y -XxX` ` xB.` ` Locations Where Expanded Interconnection Must Be Made Available ` p"(#F 38 XxPIV. STANDARDS p"(#F 40 XxX` ` xA. Standards Governing Virtual Collocation ` p"(#F 41  Y!-XxX` ` X ` ` 1. In General p"(#F 41  Y"-XxX` ` X ` ` 2. Equipment Designation p"(#F 47  Y#-XxX` ` X ` ` 3. Installation, Maintenance, and Repair p"(#F 54  Yk$-XxX` ` X ` ` 4. Other Requirements for Virtual Collocation p"(#F 63 XxX` ` xB. Standards Governing Physical Collocation ` p"(#F 67  Y=&-XxX` ` X ` ` 1. Space Allocation and Exhaustion p"(#F 67  Y&'-XxX` ` X ` ` 2. Tariffing Requirements for Physical Collocation p"(#F 73  Y(-XxX` ` xC.` ` Standards that Apply to Both Virtual Collocation and Physical Collocation ` p"(#F 74"(=0*0*0*0*"Ԍ Y-XxX` ` X ` ` 1. State Expanded Interconnection Policies p"(#F 74  Y-XxX` ` X ` ` 2. Reporting Requirements p"(#F 76  Y4XX` ` X ` ` 3. Dispute Resolution p"(# 80  Y4XX` ` X ` ` 4. Interconnection to LEC Facilities p"(# 82  Y4XX` ` X X, a.,Microwave p"(# 82  Y4XX` ` X X, b.,Copper or Coaxial Cable p"(# 85  Yv4XX` ` X X, c.,DS0 and Other Special Access Services p"(# 89  Y_4XX` ` X ` ` 5. Other Standards Issues p"(# 94 XcV. AVAILABILITY OF EXPANDED INTERCONNECTION p!(# 102  Y 4XX` ` A.` ` Parties that Offer Expanded Interconnection: Reciprocity ` p!(# 102  Y 4XX` ` B.` ` Parties that May Use Expanded Interconnection ` p!(# 106  Y 4XX` ` X ` ` 1. Restrictions on AT&T p!(# 107  Y 4XX` ` X ` ` 2. Restrictions on End Users p!(# 111 XcVI. EXPANDED INTERCONNECTION RATE STRUCTURE AND PRICING p!(# 112  Y4XX` ` A.` ` Connection Charge Rate Structure ` p!(# 112  Yy4XX` ` B.` ` Connection Charge Pricing ` p!(# 118  Yb4XX` ` C.` ` Contribution Charge ` p!(# 130  YK4XX` ` D.` ` Separations ` p!(# 134 XcVII. LEC PRICING FLEXIBILITY p!(# 138  Y4XX` ` A.` ` In General ` p!(# 138  Y4XX` ` B.` ` Density Zone Pricing ` p!(# 149  Y4XX` ` X ` ` 1. Threshold Required for Implementation p!(# 149  Y4XX` ` X ` ` 2. Price Cap Structure p!(# 157  Y4XX` ` X ` ` 3. Definition of Zones p!(# 164  Y4XX` ` B.` ` Volume and Term Discounts ` p!(# 168  Y|4XX` ` X ` ` 1. Special Access p!(# 168  Ye4XX` ` X ` ` 2. Switched Transport p!(# 172  YN4XX` ` X X, a.,In General p!(# 172  Y74XX` ` X X, b.,Threshold Required for Implementation p!(# 177  Y 4XX` ` X X, c.,Application of New Service Test to Discounts p!(# 186  Y 4XX` ` D.` ` Other Forms of Pricing Flexibility ` p!(# 193  Y4XX` ` E.` ` Fresh Look ` p!(# 197  Y4XX` ` F.` ` NonRecurring Reconfiguration Charges ` p!(# 209 XcVIII. OTHER MATTERS p!(# 213 XcIX. CONCLUSION p!(# 215 XcX. ORDERING CLAUSES p!(# 216 ":&0*((("ԌAPPENDIX A: Petitions for Reconsideration, Oppositions, and Replies Filed APPENDIX B: Rule Changes  Y4X` "%'0*,.8135@8: u Y4ЍSee supra 1, 912.b While the new rules  !impose some increased regulatory burdens on the LECs, they also provide those carriers with  Y 4offsetting pricing flexibility with which to compete in the more competitive environment.N? &  Y4ԍSee supra 8.N  Y4 (  ` ` 29. O ur action, moreover, in no way interferes with the LECs' reasonable  !investmentbacked expectations concerning the use of their property. As a general matter,  !private property used for common carrier purposes has always been imbued with a public  YM4 !Ucharacter.m@M  Y4ЍMunn v. Illinois, 94 U.S. 113, 126 (1876). m Given their position as common carriers controlling bottleneck facilities, the LECs  !must expect that they will be subject to nonstreamlined regulation as dominant carriers. Indeed,  !|as already noted, this Commission frequently has ordered common carriers to provide access to  !bottleneck facilities in order to increase competition and facilitate the development of new  Y4 !services.A  Y*$4 x}ЍSee, e.g., Lincoln Tel.& Tel. Co.v. FCC, 659F.2d 1092; MCI Telecommunications  Y%4 !;Corp.v. FCC, 580F.2d 590 (D.C. Cir.), cert. denied, 439U.S. 980 (1978); Bell Tel. Co. of  Y%4 !Pennsylvaniav. FCC, 503F.2d 1250; Cellular Communications Systems, 86FCC 2d 469  Y&4(1981), recon., 89FCC 2d 58 (1982).  The Commission has also taken steps to require telephone companies to provide new"A0*(("  !service features and technologies that we have found would promote competition and improve  Y4 !!the functioning of the public telephone network.B Yb4ԍSee, e.g., Provision of Access for 800 Service, CC Docket No. 8610, 6 FCC Rcd  YK45421, 542527, 1929 (1991), petitions for review pending sub nom. GTE Service Corp.  Y44et al. v. FCC, D.C. Circuit No. 911507 (and consolidated cases) (requiring LECs to meet enhanced 800 database service performance standards). The LECs here are exchanging compliance  !!with lawful Commission regulation for the privilege, with attendant licenses and franchises, of  !providing telephone service to the public as interstate dominant common carriers. The Supreme  !Court has employed similar analysis in finding that no taking has occurred in other heavily Y4regulated industries.C4 Yr 4 x#Xw P7ډXP#эSee, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 100708 (1984) (regulation  !requiring disclosure by chemical companies of confidential research and development data in exchange for the right to register and market pesticides in this country held not a taking).   Y_4 ( _` ` 30. Finally, we find under the last prong of the "regulatory takings" analysis, that  YI4 !virtual collocation does not result in a total, or even a substantial, economic deprivation of the  Y24 !;LECs' economic property interests.D2 Y4#Xw P7ډXP#эSee Lucas, 112 S. Ct. at 289395, 28992902. The LECs will continue to be able to use their property,  !Mincluding the equipment dedicated to interconnectors, in the provision of common carrier  !services for which they are entitled to charge just and reasonable rates. The new, more  !.competitive environment that expanded interconnection will foster will undoubtedly present the  ! LECs with increased competitive challenges, but the LECs have no property right to continuation  !of a monopoly or quasimonopoly environment for the provision of interstate access service.  !Our decision specifically permits LECs to recover from interconnectors the cost of providing  !expanded interconnection. We are also granting the Tier 1 LECs continued pricing flexibility  !^in conjunction with expanded interconnection. We do not expect that our virtual collocation  !brequirements will impose undue burdens on the LECs, and have structured our requirements to  YL4 !avoid unnecessary difficulties.ELh  Ye4ЍSee, e.g., 44, 53, 58, 95, 98, & 208 infra. To the extent that virtual collocation requirements may be  !3shown, in specific central offices in which space is extremely limited, to be prohibitively  Y4burdensome, the waiver process is available as a safety valve.YF  Y 4ЍSee 65 infra.Y  Y4 ( m` ` 31. Physical Collocation Exemption. A LEC will be exempted from our  !|mandatory virtual collocation requirement at any specific central office or offices for which the  !LEC opts to offer under tariff expanded interconnection through physical collocation, subject to  !full regulation by the Commission as a communications common carrier service, including the  !!standards we adopt below for such offerings. We believe that both LECs and interconnectors  !can benefit from the flexibility provided by such an exemption. We conclude that physical"~ F0*((E"  !collocation provides an adequate substitute for virtual collocation only if it is offered on a  !tariffed basis, with generally available rates, terms and conditions, in order to protect inter !connectors from potential anticompetitive LEC behavior. Therefore, a LEC's physical  Y4 ! collocation offering will exempt it from the general requirement to offer virtual collocation under  Y4 !tariff only if the LEC explicitly consents to offer physical collocation as a communications common carrier offering under nonstreamlined TitleII regulation.  Y_4 ( ` ` 32. A LEC will qualify for an exemption from the mandatory virtual collocation  !requirement only if it voluntarily provides physical collocation subject to all the rules relating  !to physical collocation that are set forth in this order. As part of that regulation, a LEC that has  !chosen to provide physical collocation at particular central offices will not be permitted to  Y 4 !withdraw its physical collocation offering for customers' existing physical collocation nodes at  Y 4 !those offices, for either current or new circuits, without Commission certification pursuant to  !Section 214 of the Communications Act that such a discontinuation of service will not adversely  Y 4 !affect the present or future public convenience and necessity.QG  Y84Ѝ47U.S.C. 214(a).Q The exemption from the virtual  !collocation requirement will apply as long as the LEC offers physical collocation. If a LEC has  !offered physical collocation pursuant to this exemption, and subsequently withdraws its physical  !collocation offering for new customers at a given location, it will no longer qualify for the  !^exemption, and will be required to offer virtual collocation on a generally available, tariffed  !basis at that location. Similarly, if a LEC has offered virtual collocation on a generally  !!available, tariffed basis, and later wants to withdraw that offering in a particular central office  !because it qualifies for the physical collocation exemption in that office, it may withdraw the  !xoffering for new interconnectors. In such a case, however, the LEC must continue to make  !virtual collocation available for existing and new circuits of interconnectors that are already  !using virtual collocation in that office, unless it obtains Commission certification that such a  !discontinuation of service will not adversely affect the present or future public convenience and necessity.  Y}4 ( ` `  33. We find that we have authority to impose these common carriage standards  Yg4 !.on the LECs' voluntary physical collocation offerings. As previously explained in our Special  YP4 !Access Expanded Interconnection Order,aHPy Yz4Ѝ7 FCC Rcd at 744347, 16063.a all elements of physical collocation are  !"communications services," including the provision of central office space, which falls within  Y"4 !Dthe statutory definition because it is "incidental" to communications.cI"* Y"4ЍSee 47 U.S.C.  153(a). c Moreover, absent the  !Dcommon carriage standards we are imposing on the provision of physical collocation, LECs  !ocould undermine the procompetitive objectives of our expanded interconnection policies, either  !by charging unreasonably high rates to interconnectors, or by giving special discounts to favored  !customers. In these circumstances, where we are allowing physical collocation as a substitute  !for the mandatory virtual collocation requirements that we otherwise would lawfully impose, our"!I0*((#"  Y4 !Title I powersTJ Yy4ԍ47 U.S.C.  151, 152, & 154.T allow us to impose common carriage conditions on that choice.Ky Y*4 xpЍSee, e.g., Southwestern Bell Tel. Co. v. FCC, 19 F.3d 1475, 1483 (D.C. Cir. 1994);  Y4 !Lincoln Tel. & Tel. Co. v. FCC, 659 F.2d at 110709; Computer and Communications Industry  Y4Ass'n v. FCC, 693 F.2d 198, 21214 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983). Moreover,  !because the LECs are voluntarily choosing to employ physical collocation, we find that that  !choice constitutes a voluntary holding out so as to confer common carriage status under Title  Y4II of the Act.L Yh 4 xЍSee National Ass'n of Regulatory Utility Commissioners v. FCC, 525 F.2d 630, 641  YQ 4 !(D.C. Cir.), cert. denied, 425 U.S. 992 (1976) (NARUC I); National Ass'n of Regulatory  Y: 4 !^Utility Commissioners v. FCC, 533 F.2d 601, 608 (D.C. Cir. 1976) (NARUC II) (common carrier status can arise either from a voluntary holding out or from legal compulsion).  Y4 ( N` ` !34. In Southwestern Bell Telephone Co.v. FCC,YMh  Y4Ѝ19F.3d 1475 (D.C. Cir. 1994).Y the D.C. Circuit remanded  !7an order of the Commission requiring LECs to continue offering under general tariff "dark  !fiber" services that the carriers had voluntarily initiated under individual case basis (ICB) tariffs.  !^The Commission in that case, however, had never made an affirmative finding that the dark  !fiber services that the carriers had initiated on a limited, individually negotiated basis, needed  !to be offered on a common carriage basis in order to advance the public interest objectives of  !the Communications Act. Rather, the Commission had simply found that because the carriers  !had documented their limited offerings by filing ICB tariffs, those filings alone conferred  !bcommon carriage status upon the offerings under the voluntary "holding out" test established in  Y 4 !NARUCI and NARUCII.N   Y4ЍNARUC I, 525F.2d at 641; NARUCII, 533F.2d at 60809. đ The court in Southwestern Bell held that the mere fact of such  !filings, standing alone, was insufficient to impose general common carriage obligations on the  !LECs. By contrast, in this proceeding, we have explicitly determined, pursuant to Section  !201(a) and other provisions of the Communications Act, that the expanded interconnection  !services we are requiring are necessary or desirable in the public interest, and that any carrier  YL4 !choosing the physical collocation option must provide such service as a common carrier.`OL  Y 4ЍSee supra  3132.` This  !affirmative finding on the basis of an extensive record fully distinguishes this case from  Y4Southwestern Bell.  Y4 ( l` ` "35. Alternative Interconnection Offerings. Although we are moving forward now  !with the mandatory virtual collocation regime defined herein in response to the court's order,  !we remain open to alternative interconnection arrangements that telephone companies may  !.propose in waiver petitions, if those proposals satisfy the public interest objectives achieved by"{O0*((W"  !our virtual collocation requirements. Moreover, LECs are free to tariff alternative virtual  !collocation, physical collocation, or other arrangements that interconnectors may want to take  !in addition to the baseline arrangements satisfying the LECs' basic obligations under the rules  !adopted herein. Such alternatives may be negotiated between the parties, although such  !negotiated arrangements must be filed as tariffs to enable other interconnectors desiring the same  !arrangement in the same central office to obtain them. While LECs are not required to offer  !3such negotiated arrangements, we envision that LECs and interconnectors will be able to cooperate in developing particular arrangements that meet their mutual needs.  Y14 ( E` ` #36. Implementation. The LECs subject to expanded interconnection requirements  !shall file tariffs offering virtual collocation as defined herein on September1, 1994, to be  !effective on December15, 1994. Given our previous experience with expanded interconnection  !tariffs, and the likely complexity and need for detailed review of these new tariffs, December  !15 is the earliest date by which we can ensure that the tariffs will have undergone adequate  !review by the Commission's staff. LECs must amend their initial tariff filings by October3,  !k1994 if they are required to tariff rates for services using additional interconnectorspecified  Y4 !circuit terminating equipment.YP Y 4ЍSee infra 51.Y Petitions to reject or suspend and investigate any of these tariffs  !should be filed by October14, 1994; replies will be due on October31, 1994. LECs that wish  !to be exempted from the virtual collocation requirement must, on September1, 1994, file any  !necessary tariff revisions to implement physical collocation in accordance with the rules set forth  !!in this order, or notify the Chief, Tariff Division, Common Carrier Bureau, in writing that no  !such revisions are necessary and explain the basis for that conclusion. Unlike the procedure for  !obtaining exemptions from the current physical collocation requirement, we are not requiring  !!LECs to obtain our advance approval before making use of the physical collocation exemption  !^from the virtual collocation requirement. LECs will, however, be held to the rules set forth  ! herein concerning physical collocation offerings made in lieu of the mandatory virtual collocation requirement.  Y}4 ( 0` ` $37. We also emphasize that the mandatory physical collocation requirement  Yg4 !adopted in our earlier orders, which the Bell Atlanticv. FCC court has stated it would vacate  !!with respect to special access expanded interconnection, remains in effect until the court issues  !the mandate in that case, and the LECs may not propose to withdraw, suspend, or otherwise  !Dabrogate their current special access physical collocation offerings until then. Assuming the  !mandate does not issue before December15, 1994, our rules requiring that LECs offer both  !special access and switched transport expanded interconnection through physical collocation will remain in effect until December 15, 1994.  X!4 B.XLocations Where Expanded Interconnection Must Be Made Available (#  Y#4 ( E` ` %38. Orders/Background. In the Special Access Expanded Interconnection Order,  !we required LECs to make expanded interconnection for special access available in all end"k$yP0*((&"  Y4 !offices, serving wire centers, and remote nodes used as rating points for special access.Q Yy4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 741718, 103104. In the  Y4 !First Reconsideration Order, we modified this requirement, and decided that LECs must tariff  !expanded interconnection for special access initially only in a subset of offices that took account  !of interconnectors' needs, as reflected in lists they submitted to the LECs. LECs were required  Y4 !to provide interconnection in additional offices upon bona fide request.Ry Y4ЍFirst Reconsideration Order, 8FCC Rcd at 12829, 718. In the Switched  Y4 !Transport Expanded Interconnection Order, we adopted the same approach as the First  Yv4 !Reconsideration Order, and extended the requirements for switched transport expanded inter Y_4 !connection, on a bona fide request basis, to tandem offices and remote nodes or switches that  !Dserve as rating points for switched transport and that have the necessary space and technical  Y14capabilities.S1* Y 4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 740709, 5357.  Y 4 ( ` ` &39. Discussion. For purposes of implementing our mandatory virtual collocation  Y 4 !regime, we require, as we did in the First Reconsideration Order, that LECs provide expanded  !.interconnection in a subset of their central offices in their initial tariffs. In this instance, LECs  !Qshould initially tariff expanded interconnection in all offices in which it is currently tariffed.  !Under either virtual collocation or physical collocation, this approach reduces the burdens on  !the LECs, while making expanded interconnection available in all central offices in which inter !connectors have a realistic interest in the near future. Under the mandatory virtual collocation  Yc4 !rules, if a LEC receives a bona fide request to make expanded interconnection available in  !additional central offices, the LEC must file tariff revisions offering virtual collocation (or, if  !it qualifies for an exemption, physical collocation) in such offices within 45 days of receipt of  Y4 !such a request. Such tariff revisions shall be effective on 45 days notice or less. We also  !reaffirm that, under the policies adopted in this order, LECs must provide: (1)both special  !!access and switched transport expanded interconnection at central offices that are classified as  ! end offices and service wire centers, (2)special access expanded interconnection at remote nodes  Y4 !that are rating points for special access;T YN4 xЍA "rating point" is a point used in calculating the length of interoffice links. Special  Y74Access Expanded Interconnection Order, 7FCC Rcd at 7417, 103. and (3)switched transport expanded interconnection  Y4 !on a bona fide request at "standalone tandems";Uu Y!4 xЍA "standalone tandem" is defined as a LEC tandem office that is not collocated with a  Y"4 !;LEC end office or serving wire center. Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7409, 56.; and at remote nodes that serve as rating points" U0*((J"  !for switched transport and have the necessary space and technical capabilities to originate and  Y4terminate switched traffic.V Yb4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 741718, 10304;  YK4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 740709, 5357.  Y4_ IV. STANDARDS ׃  Yw4 ( ` ` '40. Overview. In this section, we address the detailed standards that will govern  !mandatory virtual collocation. We also address the standards that will apply to physical  !collocation when it is offered to obtain an exemption from the virtual collocation requirement.  !Except for the policy changes described below, we conclude on the basis of the record  !3previously compiled that the virtual collocation standards adopted in earlier orders in this  !proceeding should continue to apply under the new mandatory virtual collocation requirement.  !ZWe also find that the standards we adopted as part of our mandatory physical collocation  !requirement remain appropriate in the context of physical collocation provided voluntarily under  Y 4the new rules.W b Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 739194, 740918, 43 Y4 !@46, 84104; Second Reconsideration Order, 8FCC Rcd at 739196, 2935; Switched  Y4Transport Expanded Interconnection Order, 8FCC Rcd at 739296, 740716, 3035, 5369.  X4 wA. Standards Governing Virtual Collocation   Xd4 1.` ` In General (#`  Y64 ( ` ` (41. Orders. In the Special Access Expanded Interconnection Order, we rejected  !some LECs' contentions that the Commission should establish general interconnection goals orw  !principles in lieu of detailed rules. Instead, we concluded that the adoption of detailed standards  !@would speed the implementation of expanded interconnection by clarifying the rights and  !obligations of LECs and interconnectors, thereby reducing the disputes that could arise during  Y4the implementation process.X YZ4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 740506, 6972.  Y4 ( 4` ` )42. Positions of the Parties. In recent ex parte filings, CAPs have argued that  !kvirtual collocation should be defined to impose more stringent obligations on the LECs. For  !instance, some CAPs urge that the Commission require virtual collocation arrangements to be  YR4 !!"technically and economically comparable to actual collocation."FYR Y%4 xЍTeleport Ex Parte (July1, 1994) at 13; US Signal Corp. Ex Parte (July7, 1994) at 13;  Y&4ALTS Ex Parte (July6, 1994) at 23; Electric Lightwave, Inc. Ex Parte (July7, 1994) at 2.F Other CAPs argue that any  !Hexpanded interconnection arrangement should be "technically and economically comparable" to";0 Y0*(("  Y4 !the LEC's own internal interconnections.Z Yy4 x&ЍMFS Ex Parte (July5, 1994) at 3; Intermedia Communications of Florida, Inc. Ex Parte (July6, 1994) at 2. Bell Atlantic, by contrast, argues that the  Y4 !UCommission's existing virtual collocation standards are fully adequate.r[b Y4ЍBell Atlantic Ex Parte (July 7, 1994) at 2.r Ameritech asserts that  !the Commission should not mandate any specific interconnection arrangement, but should just  Y4 !set general standards with the choice among alternatives left strictly to the LECs.d\ Y 4ԍAmeritech Ex Parte (July7, 1994) at 1.d US West  !^argues that it should be required to offer only a standardized list of central office equipment  !Zunder virtual collocation, rather than permitting interconnectors freedom to designate any  Yv4equipment they choose.t]v Y 4ЍUS West Ex Parte (July6, 1994), Attachment.t  YH4 ( ` ` *43. Discussion. The specific details of virtual collocation could be defined in a  !;number of different ways. We here consider a range of different standards. At one extreme,  !we could adopt the CAPs' proposal to require virtual collocation offerings to be technically and  Y 4 !economically comparable to physical collocation, from the perspective of the interconnector.^ u Y*4ЍSee supra 42 and ex parte submissions cited therein.  !In our view, this standard would impose burdens on the LECs that are unnecessary to protect  Y 4 !Zinterconnectors' interests, and in some cases may be unenforceable.Y_ &  Y4ЍSee infra 62.Y Moreover, a court  Y 4 !applying the Bell Atlanticv. FCC decision could construe mandatory virtual collocation under  !this standard to be an unauthorized taking of property, because this standard would appear to impose requirements that, in practice, are equivalent to mandatory physical collocation.  Yc4 ( A` ` +44. Under the approach we choose here, we adopt rules governing mandatory  !virtual collocation that are similar to the rules we adopted in earlier orders in this proceeding  Y64 !to govern virtual collocation.c`6  Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 739294, 4446;  Y 4 !^Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7392, 30; 47 C.F.R. 64.1401(g) (redesignated in this order as 64.1401(e)).c Under these rules, LECs will be required to dedicate to inter !connectors' use in terminating the interconnectors' circuits any kind of central office basic  !transmission equipment reasonably specified by the interconnector. LECs will be required to  !xinstall, maintain, and repair this equipment, at a minimum, under the same time intervals and  !with the same failure rates that apply to comparable LEC equipment not dedicated to inter !Qconnectors. Interconnectors will be entitled to monitor and control this equipment remotely.  !VLECs will be exempt from the virtual collocation requirement if they provide physical"Z`0*((q"  !&collocation offerings that satisfy our requirements. Tariffing, rate structure, and pricing  !requirements will ensure that virtual collocation is generally available on a nondiscriminatory  !basis and fulfills our public interest objectives. As explained in detail elsewhere in this order,  !we conclude that these standards ensure that interconnectors have a realistic opportunity to  !compete with LEC special access and switched transport services, while also minimizing burdens  Y4on the LECs and satisfying the strictures on our authority announced in Bell Atlanticv. FCC.a Y4ЍSee supra 1637, infra 4953, 5762.  Y_4 ( ` ` ,45. Under a less detailed approach, rather than giving interconnectors the right  !to designate their choice of central office transmission equipment, we could require LECs and  !Uinterconnectors to negotiate a limited array of equipment that would satisfy both of their needs.  !Under an even less specific approach, we could allow the LECs to provide virtual collocation  !by offering a limited array of central office transmission equipment reasonably selected by the  !DLEC, not the interconnector. Interconnectors would have the right only to select one of the  !types of equipment offered by the LEC. Under either of these approaches, the requirements  !discussed in this order would apply in other respects: remote monitoring and control by inter !.connectors; LEC installation, maintenance, and repair standards; and rate structure and pricing  !|principles. We conclude that these approaches are less satisfactory than the standards we adopt  !in this order, because any restrictions in the choice of equipment limits interconnectors' ability to determine the configuration of circuits in their network.  Y54 (  ` ` -46. On the other hand, in the unlikely event a court were to hold that we lack  !Qauthority to require that interconnectors be able to specify the virtually collocated equipment  !dedicated to their use, we intend that this requirement be replaced by the first approach  !described in the preceding paragraph, under which LECs and interconnectors would negotiate  !tthe range of equipment available for virtual collocation. We find this to be an acceptable  !alternative that promotes most of our public interest objectives, and we would adopt it in place  !of the requirements set forth herein. If a court were to hold that we lack authority to impose  !even that approach, we intend that the second approach described in the preceding paragraph,  !.under which the LEC specifies the equipment that the interconnector could select, be used as a  !Dreplacement. Moreover, if a court were to hold that we lack authority to impose any of the  !;other specific requirements included in the standards described in paragraph 44, we intend that  !the offending provision be removed. We find that these approaches would be acceptable, although substantially less desirable, options.  X4 2.` ` Equipment Designation (#`  Y 4 ( ` ` .47. Orders/Background. Our existing rules define virtual collocation as "an  !offering that enables interconnectors to designate or specify equipment needed to terminate basic  Y"4transmission facilities."}b"y Y&4Ѝ47C.F.R. 64.1401(g)(1) (redesignated as 64.1401(e)(1)).}""*b0*(($"Ԍ Y4 ( ԙ` ` /48. Positions of the Parties. US West argues that it should be required to offer  !only a standardized list of central office equipment under virtual collocation, rather than  Y4 !permitting interconnectors freedom to designate any equipment they choose.jc YL4ԍUS West Ex Parte (July6, 1994), Attachment.j The CAPs  !generally argue for imposing more stringent requirements regarding interconnectors' rights to  Y4 !specify equipment under a mandatory virtual collocation regime.jdy Y4ԍSee supra 42 and comments cited therein.j MFS argues that it should  !not be required to use LECspecified equipment, arguing that this would require it to modify its  Yw4centralized network management system to accommodate the unfamiliar equipment._ew* YR 4ԍMFS Ex Parte (July5, 1994) at 14._  YI4 ( ` ` 049. Discussion. We reaffirm that under our virtual collocation policy, inter !connectors have the right to select the type of central office equipment dedicated to their use.  !The right to designate equipment is critical to enable interconnectors to determine the  !configuration of their circuits that terminate in such equipment. In many cases, CAPs and other  !parties may deploy equipment in their networks that differs from the types of equipment in  !LECs' networks. Under current technology, a circuit cannot function unless compatible  !oequipment, typically of the same type and made by the same manufacturer, is deployed on both  !Zends. Thus, a broad interconnector right to designate equipment helps ensure that virtual collocation provides a realistic opportunity for access competition.  Yd4 ( 8` ` 150. In addition to our requirement that LECs offer virtual collocation of any type  !!of transmission equipment reasonably requested by interconnectors, we also require that LECs  !offer virtual collocation through generally available tariffs. We are specifying tariffing  !procedures for the LECs' service offerings involving virtual collocation equipment to ensure that  !!both these requirements are satisfied. The procedures we adopt are comparable to the process  Y4 !we designed in the First Reconsideration Order to govern the tariffing of central offices, which  !accommodated both the LECs' need for certainty in devising their physical collocation tariffs  !oand the interconnectors' desires that expanded interconnection be offered in specified locations.  !In that order, we directed the LECs to publish lists of central offices in which physical  !collocation would be offered, authorized the interconnectors to request that the lists be expanded  !to include additional offices, and required the LECs to file tariffs that took into account the  !interconnectors' submissions. We also required the LECs, after the initial physical collocation  !tariffs took effect, to revise their tariffs to offer physical collocation in additional central offices  Y:4 !upon bona fide requests from interconnectors. We conclude that an analogous process would  !Ube useful in assuring that interconnectors' needs for particular types of equipment are satisfied,  !while also giving the LECs greater certainty about the range of equipment likely to be used initially, and facilitating a smooth process of filing and reviewing virtual collocation tariffs.  Y 4 ( ` ` 251. Prospective users of virtual collocation may request that LECs include  !.specific types of equipment that they are likely to use initially, and would like to have included"!e0*((#"  !in the tariffs. If they submit such requests to the LECs by August1, 1994, the LECs are  !required to include specific rates for the requested equipment in their virtual collocation tariffs  !filed on September 1, 1994. Prospective users of virtual collocation may continue to give the  !? LECs requests for tariffing specific equipment through September1, 1994. By October3, 1994,  !xLECs must amend their initial tariff filings to include specific prices for all of the equipment  !% identified by interconnectors by September 1. During the period from September 1 to December  !15, interconnectors may continue to submit equipment requests, although in order to facilitate  !an orderly tariffing process, we will permit LECs to treat those requests as if they were received  !ton the day after the tariffs become effective, subject to the procedure outlined in the next paragraph.  Y 4 ( l` ` 352. After the initial tariffs become effective, interconnectors will continue to have  !the right to specify additional types of virtual collocation equipment. An interconnector may  !orequest that a LEC modify its virtual collocation tariffs to offer additional types of transmission  !&equipment. The LEC will be required to modify its tariff accordingly within 30 days of  !receiving such a request. Such tariff changes should be scheduled to become effective on 30  !days notice. This procedure will ensure that interconnectors can make rapid modifications to  !their networks and obtain corresponding additions to the LEC's offerings of central office  !equipment that is dedicated to their use. The requirement ensures that interconnecting parties  !can upgrade their networks to take account of technological improvements, and will help achieve our objective that access competition through virtual collocation spurs technological progress.  Y4 ( ` ` 453. These equipment designation requirements are unlikely to impose substantial  !kburdens on the LECs. We anticipate that in most cases, LECs will not be called on to serve  !;more than a few interconnectors in any given central office, and the number of different types  !tof dedicated transmission equipment is likely to be reasonably limited given that there is a  !Drelatively small number of manufacturers of such equipment. In addition, we reaffirm that,  !under our new expanded interconnection policy, LECs may proscribe the use of interconnector !!designated equipment or practices that represent a significant and demonstrable technical threat  !to the LEC network. We will scrutinize any such allegations brought to our attention carefully,  YP4however, and expect them to be rare.fP Y4ԍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7392, 44 n.101.  X"4 3. ` ` Installation, Maintenance, and Repair (#`  Y4 ( ` ` 554. Orders/Background. Virtual collocation requires that the LEC install,  !maintain, and repair the central office electronic equipment dedicated to an interconnector's use.  !Existing rules require the LECs, at a minimum, to install, maintain, and repair this equipment  !under the same time intervals and with the same failure rates that apply to the performance of  !similar functions for comparable LEC equipment. We have required LECs to keep records and""yf0*(($"  !&file annual reports on the installation, maintenance, and repair times and failure rates for  Y4comparable LEC and interconnection equipment and circuits.g Yb4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 739394, 4546;  YK4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7392, 30.  Y4 ( ` ` 655. Positions of the Parties. In petitions for reconsideration, Teleport and ALTS  !3argue that the LECs should be required to install, maintain, and repair virtual collocation  !equipment to meet the interconnector's standards rather than the LEC's standards, so that CAPs  !Dcan control the quality of their services and so that virtual collocation can be technically and  Y`4 !economically equivalent to physical collocation.h`b Ys 4 xЍTeleport Special Petition at 1718; Teleport Special Reply at 67; ALTS Special Petition at 2021; ALTS Special Reply at 13. The LECs respond that the absolute  !3equivalence standard requested by the CAPs is unworkable and could disadvantage LEC  !Vcustomers other than interconnectors. The LECs further assert that such a standard is  !xunnecessary because either interconnectors accept LEC performance standards for the LEC !!provisioned transmission segment to which the interconnector is connecting or they can bypass  !the LEC entirely rather than interconnecting. The LECs add that the existing virtual collocation  Y 4standard prevents discrimination and ensures efficient service to interconnectors.i  Y4 xRЍAmeritech Special Opposition at 1011; Bell Atlantic Special Opposition at 7; GTE  !Special Opposition at 2022; United Special Opposition at 89; USTA Special Opposition at 19;  YU4 !Ameritech ex parte (styled "Further Opposition to Petitions for Reconsideration") at 26 (Feb.18, 1993).  Y 4 ( ` ` 756. In more recent filings, CAPs argue that LEC charges for installation,  !maintenance, and repair under their current virtual collocation tariffs are excessive. MFS asserts  !that LECs have charged interconnectors large sums for training multiple shifts of LEC personnel  !in each office to install, maintain, and repair interconnectordesignated equipment. MFS also  !states that LECs have required interconnectors to purchase "excessive amounts" of spare parts  !to ensure prompt repair, and have then charged for the storage of those parts. The solution the  !7CAPs propose is to require all LECs that certify third parties to install, maintain, and repair  ! equipment in their central offices to certify interconnectors as well on a nondiscriminatory basis,  Y4 !and to allow the interconnectors to perform these functions themselves.jh  Y !4ԍMFS Ex Parte (July5, 1994) at 12, 1720; see also Electric Lightwave, Inc. Ex Parte  Y!4(July 7, 1994) at 3; Intermedia Ex Parte (July 6, 1994) at 23. LECs have also  !3indicated concerns about being held responsible for installing, maintaining, and repairing  Y4unfamiliar equipment.k  Yv%4ЍSW Bell Ex Parte (July7, 1994) at 1; US West Ex Parte (July6, 1994), Attachment. "k0*((W"Ԍ Y4 ( ` ` 857. Discussion. In our virtual collocation regime, the LECs are responsible for  !binstalling, maintaining, and repairing the central office equipment that they own and dedicate to  !.the use of interconnectors. In general, we reaffirm our conclusion in earlier orders that LECs  !must provide these services, at a minimum, under the same time intervals, and with the same  !failure rates, that apply to the performance of similar functions for comparable LEC equipment.  !Failure to provide these functions on equipment dedicated to interconnectors in a manner that  !is at least as timely and efficient as the service the LECs provide themselves for services that  !2 compete with interconnectors' offerings constitutes an unreasonable practice under Section201(b)  !kof the Communications Act. We conclude, contrary to the arguments of the LECs, that this standard will not impose disproportionate burdens on the LECs.  Y 4 ( _` ` 958. Evidence in the record shows that many LECs have procedures for certifying  !or approving equipment manufacturers and independent contractor personnel to install electronic  Y 4 !equipment, and in some cases, to maintain and repair such equipment.l  YP4ЍMFS Ex Parte (July5, 1994) at 1718 and Appendices E & F. Use of outside  !contractors can reduce LEC costs, particularly in cases when LEC employees do not routinely  !install, maintain, or repair particular types of equipment, or are not qualified to do so. Using  !outside contractors could reduce or eliminate a LEC's need to train employees to provide service  !on types of interconnectordesignated equipment that are not typically deployed elsewhere in the  !bLEC's network. Similarly, use of outside contractors would allow interconnectors to avoid the  !substantial costs that might be incurred to train LEC personnel to install, maintain, and repair  !interconnectordesignated equipment with which LEC personnel are unfamiliar. Thus, LECs,  !as well as interconnectors, may benefit from the use of outside contractors. Of course, if an  !interconnector designates equipment that a LEC currently uses in a given central office, the LEC  !!will not need to provide training to its employees and therefore will not be permitted to charge the interconnector for training LEC personnel to service that equipment.  Y4 ( _` ` :59. Virtual collocation customers should not be required to pay for costly training  !;of LEC employees if the LEC uses qualified outside contractors to install, maintain, and repair  !Qother equipment in its offices. We therefore conclude that LECs that permit outside service  !representatives to enter their central offices to install, maintain, or repair LEC equipment must  !Dpermit outside representatives to provide these services for the equipment dedicated to inter !connectors' use under virtual collocation. If LECs can choose from a range of levels of service  Y#4 !quality offered by outside service representatives (e.g., repair times), the LECs must offer the  !same range of service options to virtual collocation customers in their tariffs. LECs may impose  !Dconditions, including certification and bonding requirements, on the contractors that provide  !;service for equipment dedicated to interconnectors, but these requirements must be the same as  !Dthe requirements that apply to contractors that provide service for other LEC equipment. If  !DLECs use outside contractors to install, maintain, or repair equipment, they must reasonably consider both price and service quality in selecting contractors to provide these services. "#yl0*((%"Ԍ Y4 ( ` ` ;60. If an interconnector meets the LEC's standards for outside service  !representatives, then the interconnector should be certified as a possible outside contractor.  !Indeed, we see mutual benefits to the LEC and interconnector deriving from use of a certified  !interconnector's representative for these functions, potentially simplifying the operation of virtual  !xcollocation. However, in light of the D.C. Circuit's decision striking down arguably similar  Y4 !requirements in Bell Atlanticv. FCC, we do not here require a LEC toselect the interconnector  !to provide these services for the LEC's equipment dedicated to the interconnector. Although  !MLECs are generally required to consider cost in selecting a contractor, a LEC will not be  !^required to choose an interconnector to perform installation, maintenance, and repair on this  !*basis alone. We therefore do not adopt MFS's proposal to give interconnectors the right to  !perform installation, maintenance, and repair of the LEC equipment dedicated to their use.  !*LECs that do not permit outside contractors to enter their central offices are not required to  !permit such contractors to provide service for equipment dedicated to interconnectors' use,  !although they are permitted to do so, and may find it the most advantageous way of  !.implementing virtual collocation. Thus, any decision to grant physical access to certified interconnector representatives will be voluntary on the part of the LEC.  Yz4 ( ` ` <61. To provide a basis for monitoring compliance with our prohibition of  !discrimination in the installation, maintenance, and repair of virtual collocation equipment, we  !trequire the LECs to report on the timing and failure rates for providing such services for  !comparable LEC and interconnectordedicated equipment and circuits. In light of the importance  !^of nondiscriminatory installation, maintenance, and repair under our new mandatory virtual  !Mcollocation policy, we increase the frequency of these required reports from annually, as  !bcurrently required, to quarterly. We delegate authority to the Chief, Common Carrier Bureau,  !Dto specify the format and timing of these reports. LECs are not subject to this reporting re !quirement if they are exempt from the virtual collocation requirement because they provide physical collocation in all central offices in which they provide expanded interconnection.  Y~4 ( ` ` =62. We find no reason to impose more stringent installation, maintenance, or  !!repair standards upon LECs. Specifically, we decline to require the LECs to install, maintain,  !and repair interconnectors' virtual collocation equipment to meet the interconnectors' time  Y:4 !intervals. We reaffirm our conclusion in the Special Access Expanded Interconnection Order  !^that such a requirement would be difficult or impossible to enforce, because it could require  !LECs to maintain and repair their competitors' equipment faster and more effectively than the  Y4 !LECs maintain and repair their own.m Yn!4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 739394, 45 n.103. Moreover, such a requirement would be of limited  !utility because the interconnectors already essentially acquiesce to LEC performance standards  !on the LEC circuits to which interconnector circuits are connected, and because interconnectors  !ocan achieve a high level of reliability through the use of electronics with redundant components and remote monitoring and control rather than through expedited repair procedures. "#ym0*((%"Ԍ X4 4. ` ` Other Requirements for Virtual Collocation (#`  Y4 ( '` ` >63. Orders/Background. In earlier orders in this proceeding, we held that the  !|crossconnect element, covering short cable connections from the LEC distribution frame to the  !central office electronic equipment dedicated to or owned by the interconnector, should be  !/tariffed at a studyareawide averaged rate under both virtual collocation and physical  !collocation. We concluded that certain other charges, such as labor and materials charges for  !binstallation, maintenance, and repair services, may differ in different central offices due to cost  !variations, but should be uniform for all interconnectors in each individual central office. We  !allowed LECs and interconnectors to negotiate the rates, terms, and conditions for the use of  !;different types of central office electronic equipment dedicated to interconnectors' use in order  !to address particular interconnectors' needs, but required such negotiated arrangements to be  Y 4made available to similarly situated interconnectors in the same central office under tariff.yn  Yf 4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 744143, 15659;  YO4 ! Second Reconsideration Order, 8FCC Rcd at 736567, 5659; Switched Transport Expanded  Y84Interconnection Order, 8FCC Rcd at 742122, 86.y  Y 4 ( ` ` ?64. Discussion. Except as stated elsewhere in this order, we reaffirm our  !existing rules on the tariffing of virtual collocation offerings, for the reasons stated in our  !% original orders. We reaffirm that the crossconnect element must be tariffed at a studyareawide  !averaged rate that is the same for both virtual collocation and physical collocation for LECs that  !kchoose to offer physical collocation. In addition, because we now recognize that the cost of  !Qtransmission equipment does not vary in different locations, we require that LECs' rates for  !particular types of equipment offered to interconnectors may not vary within a study area.  !While we are permitting certain costbased variations in the rates for specific types of equipment  Y4 !used by different interconnectors, as described below,boK Y4ЍSee infra 124127.b such rate differences are not dependent  !on the characteristics of particular central offices or locations within a study area. We also  !reaffirm, in the context of our mandatory virtual collocation policy, that rates for elements of  !virtual collocation other than the crossconnect element and elements recovering the cost of  !tcentral office equipment may reasonably vary in different locations corresponding to cost differences.  Yg4 ( _` ` @65. In unusual circumstances, space may be so limited in particular central offices  YQ4 !that even virtual collocation is infeasible in those locations. As noted in our earlier orders,pQ Y"4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7417, 103 n.240.  !we will entertain requests for waiver of the requirement that virtual collocation be made available in such offices.  Y4 ( ` ` A66. Finally, SW Bell argues that the requirement in our earlier orders that it take  !interconnector needs into account in planning its space needs for the future converts virtual" p0*((!"  Y4 !collocation into a taking of its property.q Yy4 x<ЍSouthwestern Bell Telephone Company's Petition for Stay, Expanded Interconnection  Yb4 !with Local Telephone Company Facilities, CCDocket No.91-141 (filed Nov.18, 1992) at 58,  YK4 !!citing Special Access Expanded Interconnection Order, 7FCC Rcd at 739293, 7403, 7408 & n.191, 7490 n.605, 44, 65, 77, 79& n.191, 259 n.605. SW Bell contends that virtual collocation requires  !.LECs to reserve central office space anticipated to be requested by interconnectors and refrain  !kfrom using that space for their own purposes, and asserts that these requirements effectively  Y4 !deprive the LECs of all interest in that reserved space.`r4 Y 4ЍSW Bell Petition for Stay at 7.` SW Bell seems to have misinterpreted  !bthe language of our earlier order as requiring LECs affirmatively to set aside space in new and  Y4 !*existing central offices to meet anticipated virtual collocation requests. We now clarify  that  ! LECs need not set aside segregated space, which they could not then use for their own purposes,  !in anticipation of virtual collocation requests. Virtual collocation arrangements do not involve  !the reservation of segregated central office space for the use of interconnectors. LECs must  !consider the needs of virtual collocation customers, just as they consider the demand for other  !services in planning space usage. We will not tolerate any discrimination against interconnectors  Y 4visavis other customers, however.  X 4w B. Standards Governing Physical Collocation   X 4 1.` ` Space Allocation and Exhaustion (#`  Yy4 ( ` ` B67. Orders/Background. Our existing rules require the LECs to offer space for  !physical collocation on a firstcome, firstserved basis, and to provide virtual collocationw in  YL4 !central offices in which space for physical collocation is unavailable or becomes exhausted.sL Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 740708, 7780;  Y4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7403, 47.  !HWe did not require LECs to expand their facilities or relinquish space reserved for their future  ! use in order to offer physical collocation, but we did state that we expected the LECs to consider  !interconnector demand for central office space when remodeling or constructing new central  Y4offices.t  Y 4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 740708, 7780;  Y !4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7403, 47.  Y4 ( S` ` C68. Positions of the Parties on Reconsideration. USTA suggests that the  !!Commission permit LECs to initiate lotteries, or combinations of "firstcome, firstserved" and  !xlottery mechanisms, in appropriate circumstances, rather than requiring use of a "firstcome,  Y~4 !xfirstserved" mechanism.uu~  YH'4ЍUSTA Special Petition at 10 n.27; USTA Special Reply at 9.u MCI opposes USTA's idea, citing the Commission's experience"~! u0*((8"  Y4 !with the abuse of lotteries in the mobile service context by speculators.Qv Yy4ԍMCI Special Opposition at 9 n.8.Q Rochester argues, and  !.MFS agrees, that waivers should be available for certain situations in which space is so limited  !othat neither physical nor virtual collocation is feasible, particularly if the LEC makes alternative  Y4arrangements available.rwy Y4ԍRochester Special Petition at 710; MFS Special Opposition at 22.r  Y4 ( `` ` D69. MFS and ALTS argue that to justify an exemption from the physical  !collocation requirement due to exhaustion of space in particular central offices, LECs should be  !^required to make a specific showing, including affidavits detailing the planned uses of space  YI4 !within the 24 months following the petition filing date.pxI* Y$ 4ԍALTS Special Petition at 1718; MFS Special Petition at 20, 21.p The LECs respond that such  !Hmicro-management of LEC central office usage would amount to an unnecessary intrusion into  !;LEC longrange planning, could interfere with other Commission and state regulatory policies,  !might require them to reveal confidential and proprietary information about LEC business plans  !Hsuch as growth projections and equipment upgrades, and essentially elevates the CAPs' interest  !in LEC central office space over the LECs' interest in their own property to serve their  Y 4customers' future needs. y  YK4 xRЍAmeritech Special Opposition at 1213; Bell Atlantic Special Opposition at 5; GTE  !Special Opposition at 1820; NYNEX Special Opposition at 1112; USTA Special Opposition at 18.   Y4 ( 4` ` E70. Discussion. The exemption from the physical collocation requirement due  !to space limitations will generally not be relevant under our new mandatory virtual collocation  !rules. LECs that are providing physical collocation on a voluntary basis and have been  !exempted from the virtual collocation requirements may exhaust the space available for inter !connection in a central office. In that case, just as under the original rules, upon Commission  !.approval of a showing that space is unavailable, the LEC will be required to provide generally  !available, tariffed virtual collocation to subsequent interconnectors. For the same reasons set  Y4 !!forth in our earlier orders,z^  Y 4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 740708, 7780. we conclude that under our new policy, if physical collocation is  !xthe only generally tariffed expanded interconnection offering, permitting LECs to turn away  !interconnectors when space for physical collocation is exhausted could prevent interested parties  !Zfrom interconnecting in offices where space is limited. In most cases, requiring LECs to  !provide a virtual collocation alternative when space has been exhausted in such offices will  !ensure that all potential interconnectors can be accommodated, without imposing unreasonable burdens on the LECs. "P" z0*((3"Ԍ Y4 ( =` ` F71. We conclude that the same standards and procedures will apply to such  Y4 !requests based on space limitations that apply to such requests under our existing rules.D{ Yc4ЍId.D We  !!decline to adopt the extensive requirements proposed by the CAPs regarding the processing of  !requests to govern space limitations. The CAPs filed these proposals before the Common  !^Carrier Bureau processed the LECs' petitions for exemptions due to space limitation. In the  !proceedings initiated by those petitions, the LECs provided detailed information regarding  !central office space availability, in many cases including floor plans and statements regarding  !future plans. We believe that in general, the existing procedures worked well and CAPs'  !tconcerns regarding possible manipulation were unfounded. If additional information in a  !bparticular case is needed to analyze fully a LEC request for exemption due to space limitations,  !the Common Carrier Bureau can require the LEC to submit such information when the need arises.  Y 4 ( ` ` G72. We conclude that, for LECs that choose to offer physical collocation pursuant  !Qto the terms of this order, a firstcome, firstserved process appears to be the most equitable  !omanner to allocate space. In general, we do not believe that a sufficient number of prospective  !!interconnectors are likely to request interconnection in central offices with limited space at any  !Hone time to make lotteries a reasonable way to allocate space, and we are concerned that LECs  !could use a lottery process to delay fulfilling an early request for interconnection until a  !xsufficient number of other requests were received to permit a lottery. LECs that qualify for  !exemptions to provide physical collocation in lieu of virtual collocation need not expand their  !facilities or relinquish space reasonably reserved for their future use, for the same reasons stated  Y4 !in the Special Access Expanded Interconnection Order.|y Y24ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7408, 79. We also reaffirm our conclusion that  !LEC tariffs may reasonably include provisions prohibiting interconnectors from warehousing  Y4central office space.N}* Y4ЍId., 80.N  X4 2.` ` Tariffing Requirements for Physical Collocation (#`  Y~4 ( N` ` H73. In earlier orders in this proceeding, we held that the crossconnect element  !should be tariffed at a studyareawide averaged rate under both virtual collocation and physical  !7collocation. We concluded that cost differences among central offices may justify different  !charges for central office space, power, environmental conditioning, and labor and materials  !charges for installing physical collocation arrangements, but charges should be uniform for all  Y 4 !|interconnectors in each individual central office.y~  Y%4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 744143, 15659;  Y&4 ! Second Reconsideration Order, 8FCC Rcd at 736567, 5659; Switched Transport Expanded  Yj'4Interconnection Order, 8FCC Rcd at 742122, 86.y We now conclude, for the reasons given in" #^ ~0*(("  !tour prior orders, that the same tariffing requirements should apply to physical collocation provided pursuant to exemption from the virtual collocation requirement.  X4` C.XStandards that Apply to Both Virtual Collocation and Physical Collocation (#  X4 1.` ` State Expanded Interconnection Policies (#`  Y_4 ( 8` ` I74. In our earlier orders, we allowed the LECs to apply for exemptions from the  !^mandatory physical collocation requirement, and to provide virtual collocation instead, if the  !states` in which they operated had adopted policies requiring LECs to offer intrastate expanded  Y 4 !interconnection.  Y 4 xcЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7391, 41; Switched  Y} 4Transport Expanded Interconnection Order, 8FCC Rcd at 739394, 31. The state policy exemption from the physical collocation requirement does  !|not apply under our mandatory virtual collocation policy. Of course, LECs operating in a state  !with an expanded interconnection policy that favors physical collocation may obtain an  !exemption from the interstate virtual collocation tariffing requirement by offering physical collocation subject to the terms set forth in this order.  Y4 ( ` ` J75. We reaffirm our conclusion in the Special Access Expanded Interconnection  Y{4 !.Order that if a LEC offers both interstate and intrastate expanded interconnection, it should do  !so in a manner that satisfies both federal and state requirements to the extent possible, and  !should provide mechanisms to avoid double payment for facilities used for both interstate and  Y64 !intrastate collocation.6b YI4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 748889, 25455. As we stated in the Special Access Expanded Interconnection Order,  !|we believe that this requirement should reduce the potential for federal/state conflict and should  !prevent manipulation of different approaches to expanded interconnection to disadvantage  Y4 !unfairly interconnectors (i.e., requiring interconnectors to pay for different facilities for federal  !and state interconnection due to slightly differing requirements, when the same facilities could serve both purposes and satisfy both sets of requirements).  X4 2.` ` Reporting Requirements (#`  Yg4 (  ` ` K76. Orders/Background. We have required the BOCs and GTE to report  !biennially on the customers using special access expanded interconnection and the locations at  Y:4 !which they are interconnected.: Y"4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7492, 263. We have also required the BOCs and GTE to report annually  !!on the customers using switched transport expanded interconnection and the locations at which  Y 4they are interconnected.  Y&4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 7444, 142. "$u0*((!"Ԍ Y4 ( W` ` L77. Positions of the Parties on Reconsideration. USTA takes issue with the  !breporting requirements applicable solely to the BOCs and GTE. USTA claims that these LECs  !have no unique ability to gather or provide the data and should not be treated differently from  !other competitors. Instead, USTA contends that the Commission should require all special  Y4 !Uaccess competitors to provide information regarding the growth of access competition. Y4 xЍUSTA Special Petition at 2930; USTA Special Reply at 10; see also NYNEX Special Opposition at 1213. GTE  ! argues that interconnectors, rather than LECs, should be required to report on collocation as well  !as quantities of circuits, number and location of network nodes, and numbers of customers, to  !_give the Commission data necessary to conduct a reasoned analysis of the extent of  YI4competition.Ib Y\ 4 xЍGTE Special Petition at 3031; GTE Special Reply at 67; GTE Switched Petition at 1718.  Y 4 ( l` ` M78. ALTS and MCI respond that the existing requirement will assist in identifying  !possible discrimination, involves a minimal burden, and is appropriately imposed only on the  Y 4 !LECs because it relates to the interconnection services they provide.  Y4 xIЍALTS Special Opposition at 1516; MCI Special Opposition at 1213 (also noting that it does not object to requiring submission of additional useful information by the CAPs). In addition, MCI argues  !that the BOCs should be required to file quarterly reports identifying the parties using expanded  !interconnection and the offices in which they are interconnected, in order to enforce the new  Y 4 !restrictions it recommends imposing on interconnection by AT&T.  Y4 xЍMCI Special Petition at 10. See supra 37 for a description of the restrictions MCI proposes. Sprint contends that the  !ginformation that the LECs propose requiring-- the location of interconnection customers'  !network nodes and the number of their users-- is irrelevant to monitoring the development of  Yd4 !local competition.[d0  YE4ЍSprint Special Opposition at 10.[ NARUC submits that the Commission should collect data on collocation  YM4expenses, revenues, and deployment activity to facilitate Joint Board decisionmaking.XM  Y4ЍNARUC Special Petition at 23.X  Y4 ( E` ` N79. Discussion. We now conclude that a broader information collection program  !is necessary to monitor the development of access competition. The extent to which access  !competition develops is a significant gauge of the success of our expanded interconnection  !policy. In addition, the extent to which competition actually develops is an important factor in  !bconsidering LEC requests for additional pricing flexibility in the future. The existing reporting  !grequirements were designed to monitor the limited question of which customers are using  !xexpanded interconnection and at what locations they are interconnected. We conclude that a"%0*((["  !broader monitoring program is needed to gather empirical data that will better enable us to  !monitor the development of competition in interstate access markets. We delegate authority to  !the Chief, Common Carrier Bureau, to formulate the detailed elements of this reporting  !program, decide which carriers must provide information, and specify the format and timing of these reports.   Xv4 3.` ` Dispute Resolution (#`  YH4 ( z` ` O80. Orders/Background/Positions of the Parties on Reconsideration. We  !concluded in our initial order in this proceeding that existing dispute resolution procedures-- our  !&standard tariff and complaint processes, as well as our new alternative dispute resolution  Y 4 !mechanisms  Y} 4 xЍUse of Alternative Dispute Resolution Procedures in Proceedings Before the Commission  Yf 4 !!in Which the Commission is Not a Party, GCDocket No.91-119, Initial Policy Statement and  !Order, 6FCC Rcd 5669 (1991); Notice of Proposed Rulemaking and Second Notice of Inquiry, 7FCC Rcd 2874 (1992); 47C.F.R. 1.18.֠-- are adequate to resolve disagreements regarding the implementation of  Y 4 !expanded interconnection. 4 Y4ЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7493, 266. MFS argues that the Commission should delegate authority to  !Especific staff members to facilitate expeditious, informal, and binding resolution of  Y 4 !implementation disputes.Y  YU4ЍMFS Special Petition at 1819.Y The LECs respond that MFS's request unjustifiedly presupposes bad  !faith on behalf of the LECs, would unnecessarily tax the Commission's scarce resources, and  !could discourage negotiated resolution and encourage parties to resort to the FCC to settle  Yz4disputes.z Y4ЍAmeritech Special Opposition at 1112; NYNEX Special Opposition at 79.  YL4 ( d` ` P81. Discussion. We recognize that the implementation of mandatory virtual  !ccollocation carries with it the potential for more disputes than arose under the physical  !<collocation regime. In particular, disagreements could arise regarding the installation,  !maintenance, and repair of the virtually collocated central office electronic equipment that  !oterminates interconnectors' circuits. We encourage LECs and interconnectors to work together  !*to resolve these disputes amicably. In cases that the parties are unable to resolve, however,  !special dispute resolution mechanisms could expedite the resolution of these disagreements and  !could help ensure that our new expanded interconnection regime works smoothly. We delegate  !"to the Chief, Common Carrier Bureau, authority to develop special dispute resolution  !mechanisms, possibly including the designation of a Commission representative to work  !Dpersonally with the parties to mediate disputes and ensure that they are settled expeditiously, fairly, and consistently. "9&G 0*(("Ԍ X4 4.` ` Interconnection to LEC Facilities (#`  X4` ` a. Microwave (#  Y4 ( h` ` Q82. Orders/Background. The Special Access Expanded Interconnection Order  ! required LECs to permit interconnection with microwave transmission facilities where reasonably  Yw4 !bfeasible.w Y4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7416, 98.  The Common Carrier Bureau granted LECs a waiver of this tariffing requirement  !to permit microwave expanded interconnection to be tariffed on an individual case basis (ICB)  YI4 !% in response to bona fide requests.Iy Ys 4ЍAmeritech Operating Companies, 8FCC Rcd at 4603, 7879 (Com. Car. Bur. 1993). The Commission adopted the same approach for microwave  Y24 !Hswitched transport interconnection in the Switched Transport Expanded Interconnection Order,  Y 4 !3pending resolution of the issue on reconsideration of the Special Access Expanded Inter Y 4connection Order. * Y4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 7415, 68.  Y 4 ( ` ` R83. Positions of the Parties on Reconsideration. USTA and GTE seek  !clarification that microwave collocation "where reasonably feasible" must be tariffed only  Y 4 !;through an officespecific bona fide request process, and only in central offices in which there  Y4 !are no safety or engineering risks and the costs are not unreasonable. Y4 x ЍUSTA Special Petition at 2325; GTE Special Petition at 3133; USTA Special Reply at 78. API responds that inter !connection by microwave transmission facilities will be the principal costeffective means for  !sophisticated end users to obtain expanded interconnection, particularly in lowdensity rural  !careas, and argues that the LECs should be directed to make every reasonable effort to  Y64accommodate requests for microwave interconnection arrangements.6u Y\4 x}ЍAPI Special Opposition at 79; see GTE Special Reply at 8 (stating that it stands ready to work cooperatively with parties desiring microwave interconnection).  Y4 ( 4` ` S84. Discussion. We agree with the Bureau's conclusion that microwave inter !connection must be so tailored to specific interconnectors and to particular central offices that  Y4 !it does not readily lend itself to uniform tariff arrangements.  Y"4ЍAmeritech Operating Companies, 8FCC Rcd at 4603, 7879 (Com. Car. Bur. 1993). We therefore modify our  !requirements to specify that the LECs must tariff microwave interconnection on a central office Y4 !specific, individual case basis, in response to bona fide requests. Such tariffed arrangements  !must be made available to other similarly situated parties at the same central office on non !discriminatory terms, and must be offered under general tariff at a given central office if the  !"LECs gain sufficient experience to do so and if such arrangements can reasonably be"h' 0*((I"  Y4 !standardized.O Yy4ԍSee supra 34.O Microwave interconnection should be offered through virtual collocation (using  !microwave transmission equipment that is owned by the LEC and dedicated to the inter !Hconnector's exclusive use) or, if the LEC wishes to qualify for an exemption, through physical  Y4 !collocation. We expect the LECs to make reasonable efforts to accommodate requests for  !% microwave interconnection arrangements. Of course, the LECs may charge rates that reasonably recover the costs of offering such arrangements.  X_4` ` b. Copper or Coaxial Cable (#  Y14 ( ` ` T85. Orders/Background. Because the interconnection of copper or coaxial cable  !Ucould rapidly exhaust available conduit and riser space, we held in our earlier orders that inter !connection of such cable facilities is permitted in specific cases only upon the approval of the  Y 4Common Carrier Bureau. y Y4 xcЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7416, 99; Switched  Y4Transport Expanded Interconnection Order, 8FCC Rcd at 741516, 69.   Y 4 ( ` ` U86. Positions of the Parties on Reconsideration. Penn Access argues that inter !connectors should be able to use coaxial cable facilities for interconnection. It asserts that  !contrary to the Commission's conclusion, interconnection with coaxial cable can use space more  !efficiently and require less maintenance than fiber because it eliminates the need for inter Yd4 ! connector optical terminals and electronic equipment on LEC premises.d Y(4 xtЍPenn Access Special Petition at 37, AttachmentB (stating that a 1 1/4 inch innerduct can house 19 coaxial cables). Penn Access adds that  !small to mediumsized CAPs in particular can avoid unnecessary costs by using coaxial cable  Y64 !when they have lower capacity needs.]6 Y4ЍPenn Access Special Reply at 210.] Penn Access suggests that rather than placing a burden  !on coaxial interconnectors to make a showing to the Bureau, the LECs, which have more  !information and monopoly power, should have the burden of showing that a specific coaxial  Y4interconnection would significantly limit conduit or riser space._^  Y 4ЍPenn Access Special Petition at 78._  Y4 ( ` ` V87. The LECs respond that coaxial cable is not widely favored by communi !cations providers, is becoming less prevalent throughout the industry, and would consume  !|entrance space and user ducts far more rapidly than fiber due to differences in capacity and the  !klarger physical diameter of coaxial cable. They contend that coaxial cable interconnection is  !costly and could crowd out fiber interconnection and force LECs to reconfigure central offices,"( 0*((<"  !potentially leaving LECs with an unusable investment when interconnectors change over to  Y4 !xfiber. Yy4 xЍUSTA Special Opposition at 2122; Ameritech Special Opposition at 89 (noting that a  !oneinch coaxial cable could accommodate up to 16 DS3s, while a oneinch fiber cable could  !accommodate over 1,000 DS3s); GTE Special Opposition at 1517 (noting that at least four fiber cables are typically put in the same duct and riser space occupied by one or two coaxial cables). WilTel, concerned about interconnection by AT&T, recommends prohibiting inter Y4connection with copper coaxial cable without Commission approval.\K Y4ЍWilTel Special Petition at 1415.\  Y4 ( ~` ` W88. Discussion. We reaffirm our decision that interconnection of copper or  !coaxial cable facilities will be permitted in specific cases only upon approval by the Common  !Carrier Bureau. Copper and coaxial cables use conduit space much less efficiently than fiber.  !kWe remain concerned that if, under virtual collocation or physical collocation arrangements,  !Dinterconnectors request that such cable be brought into LEC central offices, conduit or riser  !*space might quickly be exhausted, which could impair the LECs' ability to serve their other  !customers or subsequent interconnectors. Most cable television companies (and other parties  !.with substantial amounts of copper or coaxial cable in their networks) do not interconnect with  !Uthe LECs at present and will have to install new facilities to establish collocated interconnection  !at LEC central offices. We believe it is in the public interest to encourage them to deploy fiber  !Uin making such interconnections in order to promote efficient use of available conduit and riser  !space and thereby facilitate access to central office interconnection by the greatest number of  !potential interconnectors. We also clarify that the restriction on interconnecting copper or  !coaxial cable refers to the interconnector's facilities, and does not restrict the type of LEC services to which interconnectors are entitled to connect.  X54` ` c. DS0 and Other Special Access Services (#  Y4 ( E` ` X89. Orders/Background. In the Special Access Expanded Interconnection Order,  !we required the LECs initially to tariff interconnection to DS1 and DS3 services generally. We  Y4 ! required the LECs to file tariffs within 45 days of bona fide requests for interconnection to other  Y4special access services. Such tariff revisions are to be filed on 45 days notice. Yp4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 748990, 259 & n.603.  Y4 ( d` ` Y90. Positions of the Parties on Reconsideration. Teleport submits that inter !*connection at the DS0 level should be generally tariffed like DS1 and DS3 interconnection.  !Teleport argues that this would enable interconnectors to provide their own multiplexing from  !highcapacity levels down to the DS0 level, rather than handing off DS1 circuits to the LECs  !;and being dependent on (allegedly often overpriced) LEC multiplexing to obtain access to DS0  !level circuits. Teleport contends that this would give CAPs more control over the speed of  !provisioning and service quality to their DS0 customers, and would facilitate greater competition" )0*(("  Y4 ! for DS0 services.} Yy4ЍTeleport Special Petition at 1920; Teleport Special Reply at 79.} The LECs, on the other hand, contend that universal tariffing of DS0 inter !connection is unnecessary, would impose inefficiencies on LECs by requiring them to bypass  !their own multiplexers and route large quantities of cable through their buildings to terminate  !.at interconnectors' multiplexers, and might require LECs to equip central offices with facilities  Y4for which there is no present demand.}y Y4ЍUnited Special Opposition at 1314; USTA Special Opposition at 22.}  Yv4 ( +` ` Z91. GTE seeks clarification that crossconnect elements for DS1, DS3, and other  !services should be tariffed only if the LEC's corresponding special access service is available  YI4 !.in a specific office.I* Y$ 4 xЍGTE Special Petition at 3334; GTE Special Reply at 78. Accord, USTA Special Reply at 910. MFS agrees, but states that the LEC should be required to permit inter Y24 !connectors to crossconnect to any special access service offered out of a specific office.X2 Y4ЍMFS Special Opposition at 23.X  !ALTS, however, contends that this LEC argument amounts to an effort to limit artificially CAP  Y 4innovation.^ u Y*4ЍALTS Special Opposition at 17 n.36.^  Y 4 ( ` ` [92. GTE argues that the 45 day deadline for filing tariffs for the interconnection  !of services other than DS1 and DS3 is too short given the detailed engineering and costing  !7activities necessary, and contends that it is unlikely that any interconnector could design and  !build transmission facilities to a central office in 45 days or less so that a reasonable extension  Y{4 !;would not delay interconnection in practice.n{&  YR4ЍGTE Special Petition at 33; GTE Special Reply at 8.n MFS argues that these tariffs are unlikely to be  Yd4particularly complex and that 45 days should be more than sufficient.Xd  Y4ЍMFS Special Opposition at 24.X  Y64 ( ` ` \93. Discussion. We believe that interconnection to the broadest array of special  !access services is in the public interest because it facilitates competition for all these services.  !^The initial tariffing requirement was limited to DS1 and DS3 services only to promote rapid  !implementation, because these are the services that we believed interconnectors desired most and  !xfor which competition would be most likely to develop in the short term. We conclude that,  !under our new rules, the LECs must provide interconnection to DS0 and all other special access  Y4 !services within 45 days of receiving a bona fide request for such a service. We conclude that  !omore time is unnecessary and could impede competition, thereby unnecessarily delaying service  Y4 !kto customers. Our expanded interconnection policies do not require a LEC to connect inter"* 0*((_"Ԯ Y4 !connectors' facilities with any given LEC service (e.g., DS3 service) at a particular central office if the LEC does not offer that service at that central office.  X4 5.` ` Other Standards Issues   Y4 ( R` ` ]94. Equipment in LEC Central Offices. In our earlier orders, we required LECs  !to permit interconnectors to place, or designate for placement, in LEC central offices only  !Qequipment needed to terminate basic transmission facilities, including optical line terminating  !equipment and multiplexers. We concluded that the placement or dedication of other types of  !*equipment, such as enhanced service equipment, in LEC central offices was unnecessary to  !&foster competition in the provision of special access and switched transport services, and  !consequently we did not require the LECs to permit the collocation of such equipment in their  Y 4 !central offices.  Yf 4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 741314, 9394;  YO4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 741213, 63. We conclude that the same principles should apply under the mandatory  !xvirtual collocation and physical collocation exemption policies we adopt in this order, for the  !Hreasons stated in our previous orders. Only central office equipment needed to terminate basic transmission facilities must be collocated pursuant to this order.  Yz4 ( ` ` ^95. Points of Entry. In our earlier orders, we required the LECs to offer inter !connectors at least two separate points of entry to each central office if they have at least two  YM4 !|entry points for their own cable.Mb Y`4 xtЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 741112, 89; Switched  YI4 !bTransport Expanded Interconnection Order, 8FCC Rcd at 741011, 60. See also Ameritech  Y24 !|Operating Companies, CCDocket No.93-162, 8FCC Rcd 4589, 4605, 91 (Com. Car. Bur. 1993) (waiving application of this requirement when all entry points but one are at capacity). USTA and GTE contend that the requirement should apply  !only when there is space available for new facilities at each of two points entering the central  !office, and that LECs should not be required to construct new entry points or reroute their own  Y4 !facilities to accommodate interconnectors. Y4ЍUSTA Special Petition at 26; GTE Special Petition at 35; USTA Special Reply at 89. MFS responds that LECs should be required to  !Qrearrange facilities or take other reasonable steps (short of installing new cable entrances) to  Y4 !provide diverse cable entrances upon an interconnector's request.X  Y !4ЍMFS Special Opposition at 24.X Under our new regime, we  !reaffirm the general requirement, but make the modification requested by USTA and GTE. We  !Qconclude that this revision reasonably advances our policy objective of ensuring that in most  !cases interconnectors desiring reliability can obtain diverse entry points, while avoiding undue burdens on the LECs.  YP4 ( ` ` _96. Network Reliability Council. GTE submits that the Commission should not  !tlet expanded interconnection proceed until the Network Reliability Council has developed":+0 0*(("  Y4 !standards and operational safeguards to ensure that network reliability is not compromised.Y Yy4ЍGTE Special Petition at 2627.Y  !We decline to adopt GTE's suggestion under our new regime. The Network Reliability Council  !Uhas not been delegated responsibility for developing specific technical guidelines. We reaffirm  !our conclusion that LECs are permitted to proscribe use of interconnector equipment or  !;operating practices that would constitute a significant and demonstrable technical threat to LEC  Y4networks.y Y4ЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7392, n.101.  Y_4 ( ` ` `97. Insurance. MFS suggests that a LEC tariff requirement that an inter !kconnector obtain $1 million in comprehensive general liability insurance should be presumed  !reasonable, and any more burdensome insurance requirement should be allowed only if the LEC  Y 4 !Dprovides specific factual justification for it.Y * Y4ЍMFS Special Petition at 2021.Y The LECs respond that such a rule would be  Y 4 !bunprecedented, unnecessary, and overly intrusive into LEC property management.\  Y4ЍUSTA Special Opposition at 1819.\ NYNEX  !kpoints out that liability insurance requirements will reasonably differ in different parts of the  !.country and in different types of central office buildings, and contends that a $1 million policy  !bwould almost always prove inadequate because a central office fire or other casualty caused by  Y 4 !an interconnector's negligence could easily result in far more than $1 million in damage.Z  Y4ЍNYNEX Special Opposition at 10.Z We  !reaffirm our conclusion that resolution of insurance issues is best addressed when we examine  Yz4 !|the reasonableness of specific LEC physical collocation tariff provisions.z=  Yh4ЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7407, 77 n.189. We add, however,  !that unless a LEC makes a compelling case to the contrary, in general no liability insurance requirements should be imposed in connection with virtual collocation offerings.  Y4 ( '` ` a98. Customer Proprietary Network Information (CPNI). MFS argues that the  !Commission should impose CPNI protection rules on expanded interconnection arrangements to  !tprevent LECs from using their control of bottleneck facilities to obtain unfair competitive  Y4 !|advantages.V  Yy"4ЍMFS Special Petition at 17.V The LECs respond that CPNI rules are unnecessary because any competitor can  !Ueasily identify potential access service customers, and contends that such rules would split LEC  !bstaffs into subgroups that are likely to be less efficient and perform redundant work, and could", 0*((q"  Y4 !not be implemented at all due to the limited staff in many smaller business offices. Yy4 xЍAmeritech Special Opposition at 1415; Bell Atlantic Special Opposition at 9; USTA Special Opposition at 23. We are  !Hpersuaded by the LECs' arguments on this point, and conclude that no special CPNI protection  Y4rules are necessary in the context of our new expanded interconnection regime.b Y4ЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7418, 104 n.245.  Y4 ( ` ` b99. Billing. In the Switched Transport Expanded Interconnection Order, we  !decided that the LECs should bill the interconnection charge to the customer of record, whether  !L that party is a CAP or an IXC, even in cases where a CAP aggregates the traffic of several IXCs  Y`4 !and the CAP is the customer of record.` Y$ 4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 744142, 13334. Rochester seeks clarification that it may bill the  !transport interconnection charge and other switched access elements to the entity whose traffic  !it can measure, in circumstances where it cannot bill the customer of record. Rochester states  !that this may occur when a CAP aggregates the traffic of several IXCs, the CAP is the customer  Y 4 !of record, and the carrier identification codes are associated with the IXCs.~  Yy4ЍRochester Switched Petition at 810; Rochester Switched Reply at 6.~ MFS supports  !Rochester's petition, stating that the procedure Rochester proposes is technically unavoidable and  Y 4 !permits the charges to be billed to the actual underlying user of switched access services.X u Y4ЍMFS Switched Opposition at 6.X  !Sprint opposes Rochester's proposed clarification, arguing that the customer of record should  !_be billed, but states that it would not object to a waiver for Rochester limited to the  Y4 !Hcircumstances described in its petition.[&  Yh4ЍSprint Switched Opposition at 5.[ We will not issue Rochester's proposed clarification,  Yz4 !because Rochester has presented no evidence persuading us that our decision in the Switched  Yc4 !HTransport Expanded Interconnection Order was incorrect or unworkable, and we reaffirm that  !bdecision. We concluded that billing the customer of record would enable the LECs to measure  !interstate minutes of use accurately and bill the charge to the appropriate party. The LEC, of  !course, must be able to bill for the services it provides to its customers, and we will consider  Y4granting waivers in circumstances meeting the normal waiver standard.  Y!4 x_ЍIn general, to qualify for a waiver, a party must demonstrate that enforcement of a  !generally applicable rule would not be in the public interest in the special circumstances under  Ya#4 !consideration. Northeast Cellular Tel. Co.v. FCC, 897F.2d 1164, 1166 (D.C. Cir. 1990);  YJ$4WAIT Radiov. FCC, 418F.2d 1153, 1159 (D.C. Cir. 1969); 47C.F.R. 1.3.   Y4 ( [` ` c100. Percentage of Interstate Use (PIU) Reporting. In the Switched Transport  Y4 !Expanded Interconnection Order, we concluded that in cases in which IXCs are able to report"-C0*((z"  Y4 !end users' PIU data, LECs may, in their tariffs, require them to do so. Yy4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 7443, 137. Sprint submits that  !end users that are expanded interconnection customers of record-- not the IXCs serving those  !|users-- should report their own PIU data to LECs. Sprint argues that requiring IXCs to report  !PIU data to LECs when the customer of record is an end user places an unwarranted and  !impractical burden on IXCs, because end users often split their traffic among several IXCs, and  !IXCs may not be able to segregate any particular user's traffic for the purposes of PIU  Yv4 !measurement.Zvy Y 4ЍSprint Switched Petition at 13.Z No party opposes Sprint's request. We reaffirm our decision in our earlier  !orders. If IXCs cannot accurately report end users' PIU data, it would be reasonable for LECs  !^to require the end user customer of record to report its PIU to the LEC. LECs may use the  !same PIU verification procedures for end user access customers that they now use for IXC customers.  Y 4 ( A` ` d101. Collocation of DataOverVoice (DOV) Equipment. The Special Access  Y 4 !!Expanded Interconnection Order and the Switched Transport Expanded Interconnection Order  !required LECs to permit interconnectors laying their own circuit facilities to a LEC central  !office to collocate any type of basic transmission equipment, including dataovervoice (DOV)  Y4 !2 equipment, but not switches or enhanced service equipment.* Yl4 xIЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 741314, 9394&  YU4n.224; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 741213, 63. USTA and GTE argue that LECs  !should not be required to allow collocation of DOV equipment, because they assert that DOV  !equipment is not used to provide a basic transmission service in conjunction with interstate  YL4 !special access service (i.e., as a substitute for LEC channel terminations). Instead, USTA and  !tGTE contend that DOV equipment is generally used in conjunction with switched service  !between copperbased local loops and split voice and data ports in the LECs' local switches, and  !constitutes "equipment to be interconnected with LECprovided transmission facilities" and not  Y4 !|included in the scope of expanded interconnection. Ye4 x ЍGTE Special Petition at 2728; USTA Special Petition at 2627; USTA Special Reply at  YN46; GTE Special Reply at 56. Accord, NYNEX Special Opposition at 1415. IDCMA and ITAA respond that DOV is  !basic transmission equipment and note that several LECs offer tariffed services using such  !equipment. They assert that interconnectors could use DOV equipment in connection with  !special access services without connecting to the loop side of LEC switches and argue that  Y4 !GTE's and USTA's proposed restriction would be anticompetitive.{^  Y#4ЍIDCMA Special Opposition at 27; ITAA Special Opposition at 46.{ We reaffirm our  !tconclusion that because DOV equipment is basic transmission equipment, expanded inter !connection customers have a right to virtual collocation of DOV equipment in LEC central  !offices (or physical collocation for LECs that qualify for exemptions from the virtual collocation"O. 0*((3"  !requirement). We clarify, however, that we have not required the LECs to unbundle their loopside switched access common line services.  Y4 U  V. AVAILABILITY OF EXPANDED INTERCONNECTION ׃  Xw4 A.XParties that Offer Expanded Interconnection: Reciprocity (#  YI4 ( E` ` e102. Orders/Background. In our prior orders in this proceeding, we required all  !Tier1 LECs, except NECA pool members, to provide expanded interconnection, but did not  Y 4impose reciprocal obligations on interconnectors.9  Y 4 x}ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 739899, 7403 n.167,  Y~ 4 !5658, 65 n.167; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 73997400, 40.9  Y 4 ( ` ` f103. Positions of the Parties on Reconsideration. GTE and USTA contend that  !the Commission should require at least those common carriers that seek expanded inter !connection to offer expanded interconnection themselves on equivalent terms, as MFS had  ! originally proposed. GTE and USTA submit that reciprocity would help facilitate a level playing  !field between competing carriers, particularly given the policymakers' goal of a "network of  !networks" in which LECs may wish to obtain fiber from CAPs or others, and given the  Ye4evolution of special arrangements between CAPs, cable television operators, IXCs, and others.eK Ya4 xgЍGTE Special Petition at 2426; USTA Special Petition at 2729; USTA Switched Petition at 10; USTA Switched Reply at 56.  Y74 ( ` ` g104. MCI, Sprint, and AT&T oppose requiring reciprocal interconnection  ! obligations, because the LECs, which possess bottleneck facilities, do not need access to  Y 4 !Uinterconnector facilities to provide their services.  Y4 xЍMCI Special Opposition at 1112; Sprint Special Opposition at 910; Sprint Switched Opposition at 5; AT&T Switched Opposition at 2 n.2. MFS states that it is amenable to providing  !tcollocation or equivalent interconnection to LECs upon request, as long as other common  !carriers using expanded interconnection (but not endusers) are subject to similar obligations,  !but adds that because it controls no bottleneck facilities, there is no need for the Commission  Y4to require reciprocal interconnection rights.{  Y"4ЍMFS Special Opposition at 2122; MFS Switched Opposition at 67.{  Y4 ( ` ` h105. Discussion. Section 201(a) of the Act already requires CAPs and other  !xcommon carriers to provide interconnections with other common carriers upon request. We  !bconclude that this general requirement is sufficient with respect to parties other than LECs, and  !othat our detailed mandatory virtual collocation rules should apply only to the Tier1 LECs other"</0 0*(("  !kthan NECA pool members. First, mandated expanded interconnection for parties other than  ! LECs is beyond the scope of this proceeding, because we did not propose in either of the notices  !in this proceeding to impose interconnection obligations on parties other than the LECs. Second,  !|mandated expanded interconnection requirements are necessary because the LECs are dominant  !Ucarriers and control facilities to which other parties need access in order to provide service. In  !Uthe absence of any other identified public interest benefits in mandating reciprocity, we find no  !Hreason to impose expanded interconnection requirements on parties that lack market power and  !do not control bottleneck facilities. MFS has indicated that it is willing to provide inter !7connection to its facilities voluntarily, and we believe that market forces are likely to induce other nondominant interconnectors to do so to meet demand as well.  X 4 B.XParties that May Use Expanded Interconnection (#  Y 4 ( E` ` i106. Orders/Background. Currently, all parties, including CAPs, IXCs, and end  !users, can make use of expanded interconnection. We concluded in our earlier orders that  !oAT&T and any other parties already located in the same building as a LEC central office could  !use expanded interconnection to interconnect with LEC facilities in the same manner, and at the  Yz4same charges, as other parties.z Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 740304, 6568;  Y4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7402, 44.  XL4 1.` ` Restrictions on AT&T   Y4 ( ` ` j107. Positions of the Parties on Reconsideration. MCI contends that AT&T can  !derive unique, unfair advantages from expanded interconnection using its collocated points of  !gpresence (POPs) that result from its historical relationship with the BOCs. MCI provides  !examples of ways it alleges AT&T could use interconnection arrangements to cut its access costs  Y4 !by over 90% in many cases.b Y4ЍMCI Special Petition at 39; MCI Switched Petition at 45; MCI Switched Reply at 67. MCI recommends that AT&T be required to continue paying  !channel termination charges in central offices where it currently has POPs until another party  !is taking expanded interconnection service in that office, although MCI does not object to AT&T  !;obtaining expanded interconnection immediately in offices in which it did not have preexisting  Yg4 !.collocated POPs.g Y+!4 xЍMCI Special Petition at 911, 1314; MCI Special Reply at 27; accord, CompTel Special  !Opposition at 68; Sprint Special Opposition at 1011; WilTel Special Opposition at 1517  Y"4(arguing that AT&T should not receive price reductions until a CAP is interconnected). WilTel and CompTel argue that AT&T possesses monopsony power, and  !Ucould use that power to gain windfall benefits from interconnection. They contend that AT&T  !may be the only IXC that can benefit from interconnection. They thus assert that AT&T should  !|not become eligible for collocation pricing unless it installs an optical interface, and recommend""00*(("  Y4 !Hprohibiting interconnection with copper coaxial cable without Commission approval. Yy4 xЍWilTel Special Petition at 34, 1415; WilTel Special Reply at 89; WilTel Switched Reply at 710; CompTel Special Opposition at 68. WilTel  !submits a quantitative analysis purporting to show that, given the LECs' rates for physical  !ocollocation, an IXC or CAP located 1/2 mile from a central office could justify interconnecting  !Qonly if it has enough traffic to fill at least 24 DS3s, while only 12 DS3s of traffic would be  Y4needed to justify physical collocation for an IXC whose POP is at the central office.\b Y4ЍWilTel Switched Petition at 911.\  Yv4 ( ` ` k108. AT&T responds that these arguments amount to attempts by its competitors  !to obtain advantages through the regulatory process, and asserts that by requiring AT&T to pay  !Dthe same charges and use the same interconnection architecture as other interconnectors, the  Y24 !Uorders already eliminate any possible advantages it may have.{2 Y4ЍAT&T Special Opposition at 26; AT&T Switched Opposition at 26.{ GTE asserts that LEC pricing  !should not depend on the identity of an interconnecting party, and that such distinctions may not  Y 4be consistent with Section 202 of the Communications Act.R  Yy4ЍGTE Special Reply at 3.R  Y 4 ( ` ` l109. Discussion. In the context of our mandatory virtual collocation policy, we  !reaffirm our conclusion that AT&T may use expanded interconnection, and that if it does so,  Y 4 !it must deploy the same facilities and pay the same charges as any other interconnector. u Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 740304, 6568;  Y4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7402, 44.  !Restricting AT&T's ability to use expanded interconnection would impede the ability of the  !largest potential access competitor to the LECs to enter the market, which would not be in the  !public interest. Moreover, imposing such a restriction on AT&T would not promote costbased  !interexchange competition. To the extent AT&T has any advantage over other IXCs because  !Dit has a larger number of POPs in closer proximity to LEC central offices, this advantage is  !offset by the added capital costs that AT&T incurred to deploy these facilities and the additional  !operating expenses that they cause. Finally, such a restriction could remove an important market  !check on abovecost pricing by the Tier1 LECs in rural areas, where AT&T may be the only party that could compete with LEC access services in the foreseeable future.  Y4 ( ` ` m110. We are unconvinced by the nondominant IXCs' arguments. In particular,  !HWilTel has offered insufficient information to assess the validity of the assumptions underlying  !its quantitative analysis. Moreover, WilTel's analysis does not appear to take into account the  !@internal network costs of the party located at the LEC central office (such as the costs of  !*constructing and maintaining additional transmission facilities to reach the central office), as  !opposed to those of parties located 1/2 mile from the LEC central office, which should offset":1 0*((*"  !at least some of that party's benefits. Contrary to MCI's suggestions, AT&T cannot simply pay  !xcrossconnect charges instead of channel termination charges; if AT&T uses expanded inter !connection, it must pay for and use the same collocation arrangements that other interconnectors  !buse. In any case, for the policy reasons given above, we reaffirm our existing rules relating to AT&T's use of expanded interconnection.  Xv4 2.` ` Restrictions on End Users   YH4 ( A` ` n111. USTA submits that there is no need to make collocation available to non !common carriers to avoid unreasonable discrimination, because Section 201(a) explicitly  !distinguishes carriers from others for interconnection purposes, and the Commission need not  Y 4 !prejudge LECs' methods for responding to discrimination concerns.V  Y} 4ЍUSTA Special Petition at 6.V We are unconvinced by  !USTA's argument, and reaffirm our decision that all parties, including noncommon carriers,  !bmay use expanded interconnection offerings-- an approach that is consistent with our policy of  Y 4not distinguishing between carriers and users in the application of access charges.w y Y4ЍSee supra 19 and authorities cited therein.w  Yz4X} VI. EXPANDED INTERCONNECTION RATE STRUCTURE AND PRICING׃  Yd4  XM4 A.XConnection Charge Rate Structure (#  Y4 (  ` ` o112. Orders/Background. Connection charges are the rates that LECs assess  Y 4 !interconnectors for the provision of expanded interconnection services. In our earlier Expanded  Y4 !Interconnection decisions, we did not impose detailed rate structure requirements for connection  Y4 !charges, but did require that the connection charge rate structures that the LECs use reflect cost !!causation principles, and be unbundled to ensure that interconnectors are not forced to pay for  Y4services that they do not need.* Y4 xЍSecond Reconsideration Order, 8FCC Rcd at 7368, 61; Switched Transport Expanded  Yq4Interconnection Order, 8FCC Rcd at 741718, 7275.  Y4 ( ` ` p113. Positions of the Parties on Reconsideration. In comments filed before the  Yi4 !badoption of the Second Reconsideration Order, which mandated unbundling of expanded inter !connection rate structures, WilTel asserted that to prevent discrimination with respect to  !individually negotiated virtual collocation offerings, LECs should be required to unbundle all  !rate elements for such offerings to the maximum extent possible and should be permitted to offer  Y 4 !volume discounts only when justified by technology.[  Y&4ЍWilTel Special Petition at 710.[ WilTel also submits that maximum  !unbundling could enable the Commission to ensure that virtual collocation offerings are priced"2u0*((!"  !consistently with physical collocation, and argues for pricing virtual collocation using physical  !collocation rates as a starting point, and then deducting the cost savings resulting from using a  Y4 !virtual arrangement.\ YK4ЍWilTel Special Petition at 1113.\ Ameritech contends that virtual and physical collocation will be different  Y4services, and terms and conditions will justifiably differ.^y Y4ЍAmeritech Special Opposition at 15.^  Y4 ( S` ` q114. Discussion. In light of our decision to impose a mandatory virtual  !collocation requirement, and based on the record on reconsideration, we reaffirm and expand  !7our requirements regarding the rate structure of connection charges. We conclude that we  !should not at this time impose a detailed rate structure for connection charges under our  Y24 !mandatory virtual collocation regime. For the reasons set forth in our earlier orders,p2* Y 4 x@ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 742526, 121; Second  Y4 !2 Reconsideration Order, 8FCC Rcd at 7368, 61; Switched Transport Expanded Interconnection  Y4Order, 8FCC Rcd at 741718, 7275.p we  !.conclude that such a structure could be overly inflexible. We have found in our experience in  Y 4 !the ongoing investigation of the LECs' expanded interconnection tariffs,e  Yb4ЍSee supra note 14.e however, that the use  !Zof disparate rate structures can complicate the ability of interested parties and our staff to  !evaluate the reasonableness of LEC rate structures and levels. Thus, we conclude that additional  !!guidance could facilitate the tariff review process, and we set forth additional requirements to guide the LECs' choice of expanded interconnection rate structures.  Yz4 ( ` ` r115. First, we reaffirm for our new regime the rate structure principles adopted  Yd4 !Qin the Second Reconsideration Order and the Switched Transport Expanded Interconnection  YM4 ! Order, for the reasons stated in those orders.M^  Y\4 xЍSecond Reconsideration Order, 8FCC Rcd at 7368, 61; Switched Transport Expanded  YE4Interconnection Order, 8FCC Rcd at 741718, 7275. Thus, we require the LECs to establish  !reasonable, disaggregated subelements for connection charges pursuant to rate structures that (1)  !oreflect costcausation principles, (2) are unbundled to ensure that interconnectors are not forced  !to pay for services that they do not need, and (3)establish a crossconnect element that applies uniformly to both physical and virtual collocation.  Y4 ( R` ` s116. In addition, the LECs' rate structures must be clear and easy to understand.  !Regardless of a LEC's individual choice of rate structure, the facilities and services provided  !under each rate element should be clear on the face of the tariff, and the tariff support  !Zinformation should identify the specific costs that are recovered by each rate element. In  !addition, each rate element should logically relate to the service function provided under that rate  !;element. For example, one of the basic functions of virtual collocation service is the provision"Q3 0*((3"  !of a cable running from the point of interconnection of the LEC's and interconnector's networks  !to the termination equipment in the LEC's central office. An entrance cable rate element, therefore, would logically recover the costs of cable running between these two locations.  Y4 ( ` ` t117. Finally, we will require the LECs to provide cost support data for their  !September 1, 1994 virtual collocation tariff filings pursuant to a uniform Tariff Review Plan  !(TRP) format established by the Common Carrier Bureau. The TRP will disaggregate expanded  !interconnection service into broad categories, or "functions." For example, one TRP function  !might be the entrance cable function described above. Provision of basic cost data by TRP  !.function permits Commission staff and the interested public to compare the LECs' various rate  !structures and levels more effectively. We delegate authority to the Chief, Common Carrier Bureau, to promulgate detailed requirements regarding the TRP format in a separate order.  X 4 B.XConnection Charge Pricing (#  Y 4 ( A` ` u118. Orders/Background. In the earlier Expanded Interconnection orders, we  !concluded that LECs should recover the costs of providing expanded interconnection services  !through new connection charge elements. We required the LECs to set the initial rates for  !connection charges for expanded interconnection based on direct costs plus a reasonable share  !<of overhead loadings. We required the LECs to derive direct costs using a consistent  !methodology, and to justify any deviation from uniform overhead loadings that they propose for  !connection charges. The same cost justification standards apply to both initial rate levels and  Y4subsequent rate changes for connection charges.1 Y4 x}ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 742833, 127131,  Yj4 ! 13637; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 741921, 7981, 83. 1  Y4 ( ` ` v119. Positions of the Parties on Reconsideration. ALTS requests clarification of  !the pricing standard to be used to justify connection charge elements, arguing that there are  !disparities between the application of overhead loadings to connection charges and to rates for  !*services subject to competition, and that such differences are anticompetitive and should be  Y4 !Zeliminated.ZK Y{4ЍALTS Special Petition at 1920.Z ALTS argues that the current pricing standard enables the LECs to charge  !Dexorbitant rates for expanded interconnection and engage in a classic cost/price squeeze that  YQ4 !;stifles competition.[Q Y"4ЍALTS Switched Petition at 1315.[ The LECs respond that they must be able to recover real overhead costs  Y:4in their rates.|: Y%4ЍUSTA Special Opposition at 5; United Special Opposition at 1516.| "#4^ 0*(("Ԍ Y4 ( ` ` w120. Positions of the Parties in Recent Filings. The CAPs complain that the  !LECs have imposed excessive charges for equipment under their current virtual collocation  Y4 !xtariffs.a YL4ԍMFS Ex Parte (July 5, 1994) at 712.a The CAPs propose that the LECs should be required to purchase equipment from  !interconnectors at $1 or other nominal amount, giving interconnectors the right of first refusal  !to buy back the equipment at any time for the same price. Under this approach, the CAPs assert  !that the LECs would have no capital investment in equipment, and therefore would be prohibited  Yw4 !from marking up their costs to reflect depreciation, the cost of money, or ad valorem taxes.2wy Y 4 xЍMFS Ex Parte (July 5, 1994) at 2122; Electric Lightwave, Inc. Ex Parte (July 7, 1994)  Y 4at 3; Intermedia Communications of Florida, Inc. Ex Parte (July 6, 1994) at 23.2  Y24 ( ` ` x121. Discussion. We continue to believe that the LECs must costjustify the rate  !levels for connection charges, and that these rate levels must receive careful scrutiny by  !Commission staff. The same scrutiny will be required for both initial rate levels and subsequent  ! rate changes in connection charges assessed both by price cap LECs and by rateofreturn LECs.  !oWe also reaffirm that expanded interconnection services covered by connection charges will be  !excluded from the LECs' price cap baskets indefinitely and are subject to nonstreamlined tariff  Y 4 !review.@  Ym4 xgЍ47C.F.R. 61.42(f). See Special Access Expanded Interconnection Order, 7FCC Rcd  YV4 !xat 743233, 13637; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 742021, 83.@ We are making some changes to our pricing rules, however, in light of our adoption  !of a mandatory virtual collocation regime and our experience in reviewing the expanded inter !!connection tariffs filed under the existing rules. The LECs' costjustified rates will be derived  !from the direct costs of providing expanded interconnection service plus a reasonable amount of overhead costs. We address these two types of costs in turn.  Y4 ( +` ` y122. Direct Costs. We reaffirm that price cap LECs must derive the direct costs  !;of expanded interconnection offerings as provided under the price cap new services test. Rate  !of return LECs that provide expanded interconnection should provide the cost information  Y4 !required for new services under the applicable sections of our rules.] Y" 4Ѝ47C.F.R. 61.38 or 61.39.] Thus, under our new  !mandatory virtual collocation policy, the LECs must justify the direct costs related to all services  !covered by connection charges (including those related to physical collocation provided pursuant  !to an exemption), for both the initial level of these charges and subsequent changes.  !.Specifically, we require the price cap LECs to derive the direct cost of providing similar types  !of new offerings, including expanded interconnection services covered by the connection charge  !rate elements, based on consistent methodologies, unless they can justify different"Q5G 0*((&"  Y4 !Hmethodologies. Yy4 xЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 742829, 127;  Yb4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7419, 79. This requirement reflects our policy for the pricing of new services adopted  Y4 !;in the LEC Price Cap proceeding.b Y4 xЍAmendments of Part69 of the Commission's Rules Relating to the Creation of Access  Y4Charge Subelements for Open Network Architecture, 6FCC Rcd 4524, 4531 (1991). As noted in our earlier expanded interconnection orders,  !however, certain aspects of the new services test, such as risk premiums, are not applicable to  Y4expanded interconnection services. Yh 4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7429, n.290; see  YQ 4 !.Amendments of Part69 of the Commission's Rules Relating to the Creation of Access Charge  Y: 4Subelements for Open Network Architecture, 7FCC Rcd 5235, 523637 (1992).  Y4 ( ` ` z123. The LECs' rates for virtual collocation services involving the central office  !Zequipment dedicated to the use of interconnectors are likely to be the most expensive rate  !.elements in virtual collocation offerings. The purchase price of the equipment used to provide  !these services will, of course, be an important factor in computing the LECs' costbased rates  !for these services, and we recognize that there will be different purchase prices for different  !types of equipment designated by interconnectors. We therefore require the LECs to include  !in their September 1 tariff filings a description of the methodology they use to compute their  !*rates for services that require the use of optical line terminating multiplexers (OLTMs), and  !other equipment used to terminate, multiplex, and demultiplex circuits, based on the purchase  !prices of the equipment. This will ensure that the rates paid by all interconnectors are derived  !in the same manner, and will enable interconnectors that wish to offer to sell equipment to the  !LECs, or to designate equipment not previously tariffed, to predict their charges for the services  !xthat rely on the use of this equipment. The LECs' methodologies must be consistent with all  !the rate structure and pricing rules set forth in this order. In addition, the LECs must specify in their tariffs the actual charges for the equipment, calculated using the general methodology.  Y4 ( ` ` {124. We are concerned about the reasonableness of the purchase prices of central  !office virtual collocation equipment, as the rates for services involving use of this equipment will  !!be based on those purchase prices. For instance, LECs purchasing equipment that they do not  !ordinarily use in their networks may not be able to obtain the volume discounts available to  !interconnectors that regularly use such equipment in their networks. More importantly, in  !Upurchasing equipment, LECs do not have an incentive to obtain the lowest possible price, since  !|their costs will be passed on to their competitors, the interconnectors. To counter this problem,  !7we impose the following requirement on LEC pricing of OLTMs and other equipment with  !similar functions used in virtual collocation arrangements. LECs must base the direct costs of  !.providing this equipment on the lowest purchase price reasonably available to them to serve an  !Hinterconnector. In applying this standard, we would find probative the price at which an inter !connector may offer to sell the desired equipment to the LEC. Any costs incurred above the  !lowest reasonably available price are not prudently incurred, and thus should not be reflected" 6 0*(("  !in the LECs' rates. The LECs, however, are not required to purchase the equipment from interconnectors.  Y4 ( +` ` |125. This pricing approach will help ensure that LEC rates for use of this virtual  !!collocation equipment will be reasonable, and will limit the LECs' ability to pay inflated prices  !and pass them on in charges to interconnectors. In addition, this approach will have the  !Ddesirable collateral effect of easing the transition from a mandatory physical collocation to a  !mandatory virtual collocation environment. Specifically, if a LEC were to stop providing  !physical collocation, causing its expanded interconnection customers to shift to virtual collocation  !barrangements, an interconnector that currently uses terminating equipment in its collocated cage  !|may offer to sell that equipment to the LEC at a price lower than that otherwise available to the LEC.  Y 4 ( ` ` }126. LECs may reasonably charge different rates to different customers if they  !incur different costs to serve those customers. To be sure, even virtual collocation offerings  !odesigned to meet the needs of individual interconnectors must be made generally available to all  !similarly situated interconnectors, and the actual rate levels (as well as the general methodology)  !must be specified in the tariffs. In this context, however, an interconnector that relies on the  !DLEC to purchase equipment from a third party at a price the LEC negotiates is not similarly  !Msituated to, and may not pay the same charges as, an interconnector that offers to sell the  !equipment to the LEC itself at a lower price. Because the costs prudently incurred by the LECs  !to serve the different interconnectors are different in such cases, the difference in the rates  !charged to different customers does not constitute unreasonable discrimination under Section 202  Y4 !of the Communications Act.H Yj4 xЍ47 U.S.C. 202. See Competitive Telecommunications Ass'nv. FCC, 998F.2d 1058,  YS4 !1062 (D.C. Cir. 1993), citing 1Alfred E. Kahn, The Economics of Regulation: Principles and  Y<4 !Institutions 63 (1970) (defining price discrimination as "charging different purchasers prices that  Y%4 !differ by varying proportions from the respective marginal costs of serving them"); SeaLand  Y4 ![Service, Inc.v. ICC, 738F.2d 311 (D.C. Cir. 1984) ("The core concern in the  !nondiscrimination area has been to maintain equality of pricing for shipments subject to  !substantially similar costs and competitive conditions, while permitting carriers to introduce differential pricing where dissimilarities in those key variables exist."). The LEC, however, must use the same basic methodology specified in its tariff to compute all customers' rates.  Y4 W` ` ~127.  We do not intend to limit the LECs' ability to use financial arrangements  !other than purchasing equipment outright from third parties. For instance, in their current  !ovirtual collocation tariffs, some LECs allow the interconnector to purchase equipment and lease  !it to the LEC. LECs may, if they wish, offer to purchase virtual collocation equipment from  YQ4 !Qinterconnectors for a nominal amount (e.g., $1) and make it available for resale to the inter !connectors for the same amount. We decline, however, to adopt the CAPs' recommendation  ! that we require the LECs to offer such an arrangement. Under our definition of virtual  !Ucollocation, the LECs own and control the central office equipment. A $1 sale and repurchase" 70*(("  !right would effectively make the interconnector the owner of the equipment in all but formal  Y4title, and would perhaps run afoul of the D.C. Circuit's analysis in Bell Atlanticv. FCC.e Yb4ԍSee Bell Atlanticv. FCC, slip op. at 9.e  Y4 ( ` ` 128. Overhead Costs. LECs incur overhead costs in providing expanded inter !|connection services, and should be allowed to charge reasonable amounts to recover these costs  !in their rates for these services. We are concerned, however, that the LECs could attempt to  !|load excessive overhead costs on their connection charges. On the current record, we reaffirm  !xour decision in the earlier orders in this proceeding that the LECs may include no more than  !.uniform overhead loadings in their rates for expanded interconnection services, or must justify  Y24 !any deviations from uniform loadings.2y Y\ 4 xЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7429, 128 &  YE 4n.291; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 7419, 79. In other words, LECs may not recover a greater share  !of overheads in rates for expanded interconnection services than they recover in rates for  !comparable services, absent justification. The LECs have the burden of demonstrating that their  !connection charges meet this overhead loading standard, and are otherwise just, reasonable, and  !7not unreasonably discriminatory. The price cap LECs may be required to submit additional  !information to enable us to verify that the overhead loadings on the expanded interconnection  !connection charges do not unreasonably differ from the overhead loadings on other services, for  !!which price cap LECs generally do not provide cost justification. We will carefully scrutinize  !;the overhead costs that the LECs propose to recover through connection charges to ensure that they are reasonable.  Y54 ( ` ` 129. Other Pricing Issues. We decline to require the LECs to set connection  !charges to ensure that interconnectors using virtual and physical collocation arrangements pay  !the same total prices, or to require that virtual collocation be priced using physical collocation  !rates as a starting point and deducting the cost savings from using a virtual arrangement, as  !xrequested by WilTel. Virtual collocation and physical collocation are different services, and  !each should be priced based on the cost of providing it. We reaffirm our decision to require the  !LECs to provide cost justification for any connection charges that would vary on a per circuit  Y4 !basis because of the number or type of interconnected circuits ordered. YY4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7425, 121 n.269;  YB 4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 741920, 80. We also reaffirm our  !conclusion that the LECs may not charge different rates for special access and switched inter ! connection rate elements, or for interconnection rate elements in different types of central offices  YP4 !(i.e., end offices, serving wire centers, tandem offices, etc.), unless costs differ.P Y$4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 741920, 80. Inter !connectors' wage rates are irrelevant to a determination of the cost of the service provided by the LECs. " 8^ 0*(( "Ԍ X4f C.XContribution Charge (#  Y4 ( l` ` 130. Orders/Background. A "contribution charge" is a rate element that recovers  !subsidies or support flows embedded in LEC rates for services comparable to those provided by  !Hinterconnectors. Certain states permit a contribution charge in connection with expanded inter Y4 !xconnection, and we concluded in the Special Access Expanded Interconnection Order that in  !theory a contribution charge would be reasonable if targeted to recover specifically identified  !Hregulatory support mechanisms or noncostbased allocations embedded in LEC rates subject to  YI4 !7competition.I Y 4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7437, 146. We did not, however, permit the LECs to assess an interstate special access  Y24 !contribution charge in the Special Access Expanded Interconnection Order. Instead, we took  !@steps to eliminate the only support flow that appeared on the existing record to warrant a  !contribution charge. f We did, however, adopt a rule (47C.F.R. 69.122) permitting the LECs  !to seek the Commission's approval for a contribution charge applicable to special access  !expanded interconnection, as well as to their own special access services, if they could  Y 4 !demonstrate the existence of any such support flows.r y Y4ЍId., 7FCC Rcd at 743639, 14349.r In the Switched Transport Expanded  Y 4 !Interconnection Order, we concluded that the transport interconnection charge recovers revenues  !not recovered through other transport rate elements, and therefore that there is no need for a  Yz4separate switched transport contribution charge.z* YU4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 7421, 84.  YL4 ( ` ` 131. Positions of the Parties on Reconsideration. MFS argues that individual  !LECs should not be allowed to seek permission to impose a contribution charge. Rather, it  !contends that contribution charges should be allowed only following a rulemaking proceeding,  !!because any noncostbased support flows that exist must exist for all LECs under the uniform  !access rate structure. MFS asserts that any changes in the cost allocation and pricing rules  Y4 !should be consistent across the LEC industry.V Yf4ЍMFS Special Petition at 22.V USTA responds that a LEC's own costs, not  Y4an industrywide proceeding, should define a costbased contribution element.X Y 4ЍUSTA Special Opposition at 5.X  Y4 ( 0` ` 132. Discussion. We reaffirm the principle, adopted in the Special Access  Y4 !Expanded Interconnection Order, that interconnectors, as well as LECs, should provide  !contributions to support any specifically identified regulatory subsidy mechanisms that are  YQ4 !embedded in LEC rates for services subject to competition.Q=  Y?&4Ѝ Special Access Expanded Interconnection Order, 7FCC Rcd at 743639, 14349. This policy principle advances  ! our universal service goals in a manner that is consistent with the development of access":9 0*((7"  !2 competition, by ensuring the continued recovery of any regulatory subsidies or support flows that clearly advance universal network access on an equitable basis.  Y4 ( ` ` 133. Our rule on contribution charges for special access and expanded inter !connection, 47C.F.R. 69.122, will advance this policy principle, under the new expanded  !interconnection regime adopted in this order. No contribution charge was permitted in the  Yw4 !Special Access Expanded Interconnection Order because we proposed to eliminate the only  !7regulatory support flow identified in the record affecting the LECs' interstate special access  !rates-- the overallocation of General Support Facility costs. We eliminated that overallocation  Y24 ! shortly thereafter.2 Y 4 !kЍ Amendment of the Part 69 Allocation of General Support Facility Costs, Report and  Y 4Order, CCDocket No.92222, 8FCC Rcd 3697 (1993), pets. for recon. pending. Without evidence of other regulatory support flows within interstate special  !access rates, we decline to modify for our new regulatory regime the policy principle, the rule,  !or our procedures regarding contribution charges. We believe that MFS's challenge is  !premature. If any LEC proposes a contribution charge, we will consider such a proposal on its  !merits. As to switched transport, we find no reason to alter our conclusion that the transport interconnection charge obviates the need for any separate contribution charge.  X4 D.Separations  Yc4 ( d` ` 134. Orders/Background. In earlier stages of this proceeding, some parties  !argued that expanded interconnection should be accompanied by separations changes because  Y64 !interstate competition could lead to revenue shifts to the intrastate jurisdiction.6b YI4 x@ЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 748385, 24246 and comments cited therein. We adopted  Y4 !no separations changes in the Special Access Expanded Interconnection Order and the Switched  Y4 !Transport Expanded Interconnection Order, because we found that any indirect cost reallocation  !that might result from the implementation of expanded interconnection would not be of sufficient  Y4 !|magnitude to undermine universal service or threaten state regulatory programs. Y4 xЍSpecial Access Expanded Interconnection Order, 7 FCC Rcd at 748586, 247; Switched  Yp4Transport Expanded Interconnection Order, 8FCC Rcd at 744648, 14751 Both orders  !were, however, accompanied by notices of proposed rulemaking that referred to the Federal !State Joint Board in CC Docket No. 80286 the limited issue of whether separations changes are  !bneeded to allocate properly the costs of, and revenues from, expanded interconnection between  Y~4the state and federal jurisdictions.q~ Y#4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 748586, 24748;  Y$4 !Second Notice, 7FCC Rcd at 7749, 5455; Switched Transport Expanded Interconnection  Y%4Order, 8FCC Rcd at 744648, 14751. q "g: 0*((/"Ԍ Y4 ( +` ` 135. Positions of the Parties on Reconsideration. NARUC submits that, pending  !7Joint Board action, the LECs should be required to exclude from the separations process an  !Uamount of expense equivalent to the amount of revenues received for interstate expanded inter Y4 !connection, to avoid costrevenue mismatches.[ Y54ЍNARUC Special Petition at 2223.[ The D.C. PSC argues that the Commission  !oshould have directed the Joint Board to consider the full impact of expanded interconnection on  !separations, such as the reassignment of formerly interstate special access facilities to the state  !jurisdiction caused by diversion of LEC interstate traffic to competitors. According to the D.C.  !PSC, this trend could accelerate the reduction in telephone subscribership in the District of  YI4 !Columbia by increasing the costs that must be recovered from intrastate services.Iy Ys 4 xЍD.C. PSC Special Petition at 15 (arguing that as competition develops and the LECs lose  !market share more rapidly with respect to interstate than intrastate services, a greater proportion  !of the LECs' facilities will be used for intrastate purposes, causing a greater proportion of costs to be allocated to the state jurisdiction). GTE  !responds that existing separations procedures should continue to be used, rather than the interim  !Mprocedures proposed by the states, but argues that a comprehensive separations review is  Y 4necessary.[  Y4ЍGTE Special Opposition at 2223.[  Y 4 ( A` ` 136. Discussion. We reaffirm our earlier conclusions concerning the possible  !"need for separations changes in response to the adoption of expanded interconnection  Y 4 !requirements for special access and switched transport.p  Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 748586, 24749;  Y4 !Second Notice, 7FCC Rcd at 7749, 5455; Switched Transport Expanded Interconnection  Y4Order, 8FCC Rcd at 744748, 15051.p The policies we adopt here create no  !reason to alter those conclusions. Thus, while we find no reason to delay implementation of  !the requirements set forth in this order, we leave in place our current referrals to the Joint Board  !concerning whether separations changes are needed to ensure a reasonable jurisdictional allocation of expanded interconnection costs and revenues.  Y4 ( u` ` 137. Having reviewed the record on reconsideration, we decline to broaden the  !scope of our referral to the Joint Board. A comprehensive review of separations and cost  !;recovery is not necessary to resolve the limited issue of the jurisdictional allocation of the costs  !kof and revenues from expanded interconnection. We also decline to modify our separations  ! procedures, as proposed by NARUC. Because the initial magnitude of expanded interconnection  !costs and revenues is likely to be very small relative to LECs' total regulated costs and revenues,  !we conclude that any effect of the existing rules on the overall separations allocations should be  !7minimal and should permit ample time for the Joint Board to make a recommendation to the Commission. "Q; 0*((&"Ԍ Y4 ęx ! VII. LEC PRICING FLEXIBILITY ׃  X4 A.XIn General (#  Y4 ( ~` ` 138. Background/Orders. Before we adopted the expanded interconnection  !^orders, the LECs were permitted to offer special access but not switched transport-- withx  !;term and volume discounts, and were required to offer all special and switched access services  Ya4 !at geographically averaged rates in each study area. In the Special Access Expanded Inter YJ4 !|connection Order, we permitted LECs with operational special access expanded interconnection  !arrangements in a study area to introduce density zone pricing for special access in that study  !xarea. We defined special access expanded interconnection as "operational" after at least one  Y 4 !kinterconnector has taken a special access crossconnect element.  Y~ 4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7454, 179 n.411. Density zone pricing is a  !*system that permits the LECs gradually to deaverage their special access rates by zones in a  Y 4 !study area. In the Switched Transport Expanded Interconnection Order, we permitted LECs  !with operational switched transport expanded interconnection arrangements in a study area to  !implement density zone pricing for switched transport in that study area. We also allowed the  !LECs to offer volume and term 'discounts on switched transport services after interconnectors  Y{4have subscribed to a certain number of switched expanded interconnection crossconnects.{y Y4 xЍSee generally Special Access Expanded Interconnection Order, 7FCC Rcd at 745158,  Y4 ! 17286; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 742236, 87 !120. We describe how the density zone pricing system works, and the rules on volume and term discounts for switched transport, in more detail below. '  YM4 ( ` ` 139. The Teleport Petition. After the court issued its ruling in Bell Atlanticv.  Y74 !FCC, Teleport filed a petition for declaratory ruling requesting that the Commission eliminate  Y 4 !the additional pricing flexibility granted to the LECs in the Special Access Expanded Inter Y 4 !Qconnection Order unless those LECs voluntarily provide physical collocation for special and  Y4 !!switched access expanded interconnection.z Y4ЍTeleport Petition for Declaratory Ruling (filed June10, 1994).z Teleport argues that the Commission determined  !;that physical collocation is the best way to ensure that the LECs provide interconnection on the  !same terms as the interconnection they provide to themselves. Teleport further contends that  !the additional pricing flexibility granted to the LECs was premised on the mandate of physical  !gcollocation, and that without physical collocation, "the rationale behind the FCC's pricing  Y4 !Qflexibility standard falls away."J Y#4ЍId. at 4.J According to Teleport, limiting the availability of pricing  !flexibility will present a strong incentive for LECs to provide physical collocation, and an  YQ4 !"appropriate reward" to those who do.EQG  YI'4ЍId. E Finally, Teleport claims that if LECs continue to"Q< 0*((&"  !benefit from pricing flexibility without any incentive to provide physical collocation, the pace of developing competition will be slowed.  Y4 ( 0` ` 140. ALTS supports the Teleport petition, arguing that the policy and legal  Y4 !xunderpinnings of increased pricing flexibility were eliminated by the Court's decision in Bell  Y4 !HAtlantic v. FCC. ALTS argues that the "significantly increased potential for competition made  Yw4 !possible by expanded interconnection" will not be achieved without physical collocation.ew Y4ЍALTS Comments on Teleport Petition at 34.e  !Whereas Teleport's petition directly addresses only density zone pricing for special access,  !&ALTS urges that Teleport's request is equally applicable to the pricing flexibility that the  !Commission has granted for switched transport. ALTS notes, however, that it is not arguing  !that there are no circumstances under which virtual collocation could create a level playing field.  !Rather, ALTS argues that a level playing field is more difficult to achieve where the only  !interconnection available is virtual collocation, and where the Commission's rules have not been  !modified to adequately ensure that virtual collocation is comparable in all relevant respects to  Y 4 !physical.J y Y4ЍId. at 5.J Electric Lightwave, Inc. (ELI) also filed comments in support of the Teleport  !petition. ELI argues that virtual collocation is inferior to physical collocation, reduces the  !effectiveness of the Commission's expanded interconnection policies, and justifies a retraction  Yz4of the previously granted pricing flexibility.dz* YU4ЍELI Comments on Teleport Petition at 12.d  YL4 ( ` ` 141. Bell Atlantic, GTE, Pacific, SW Bell, and Ameritech oppose the Teleport  !petition. Some of these LECs argue that Teleport's request is premature and procedurally  Y4 !improper because the mandate in Bell Atlanticv. FCC has not yet issued. Y4 xcЍPacific Opposition to Teleport Petition at 23; SW Bell Opposition to Teleport Petition at 12. The LECs assert  !Dthat under the Commission's rules, density zone pricing is linked to any form of operational  Y4 !Hexpanded interconnection crossconnect, not necessarily a physical collocation crossconnect.u Y4 xЍGTE Opposition to Teleport Petition at 23; Pacific Opposition to Teleport Petition at 4;  !SW Bell Opposition to Teleport Petition at 23; Ameritech Reply in Support of Oppositions to  Y 4Teleport Petition at 2. See also Sprint/United Opposition to Teleport Petition at 2 n.4.  !They contend that Teleport's request would circumvent the effect of the Court's order by  !withholding the pricing flexibility that they assert they need to compete unless they allow third  Y4 !parties to occupy their property.  YU%4 xЍGTE Opposition to Teleport Petition at 12; Pacific Opposition to Teleport Petition at 34. Some LECs submit that more pricing flexibility is needed,  !onot less, given the growth of competition and the rigid limits on LEC pricing under the existing"=0*((["  Y4 !density zone pricing and switched transport discount rules. Yy4 xЍBell Atlantic Opposition to Teleport Petition at 15; Pacific Opposition to Teleport Petition at 47; Ameritech Reply in Support of Oppositions to Teleport Petition at 12. Ameritech notes that CAPs'  Y4 !trepresentatives have stated publicly that their ability to compete is not affected by the Bell  Y4 !Atlanticv. FCC decision.b Y4ЍAmeritech Reply in Support of Oppositions to Teleport Petition at 23. Finally, SW Bell asserts that at least some LECs will likely choose  !to offer some form of expanded interconnection that is satisfactory to the Commission even after  !othe Court's mandate issues, and that the Commission should look to what the LECs are actually  !boffering, as opposed to what they are legally required to offer, in making decisions concerning  Yv4 !pricing flexibility.pv Y: 4ЍSW Bell Opposition to Teleport Petition at 34.p Sprint/United also opposes the petition. It renews its argument on  !reconsideration that density zone pricing should be permitted even if expanded interconnection  !tis not operational, because it enables LECs to tailor prices more closely to costs, and thus  Y14creates correct economic signals that facilitate sound entry decisions by CAPs.1 Y4 xЍSprint/United Opposition to Teleport Petition at 23. This filing represents the company's position both as LEC and as IXC.  Y 4 ( ` ` 142. Positions of the Parties on Reconsideration. Even under a general mandate  !of physical collocation, the CAPs have generally advocated reversal of the grant of additional  !xpricing flexibility to the LECs. Teleport argues that special access expanded interconnection  !oincreased competition for only a limited market segment (for connections to IXC POPs, not for  !low density connections to end user premises), and that special access volume and term discounts  Y4 !already give the LECs the practical benefits of deaveraged rates.}^  Y4ЍTeleport Special Petition at 1517; Teleport Special Reply at 56.} MFS and ALTS maintain  !that the LECs have sufficient pricing flexibility for switched transport under the price cap rules,  !@continue to control bottleneck facilities and dominate markets, and do not need additional  !oflexibility (density zone pricing or volume and term discounts) to respond to competition before  Y54 !a more substantial amount of competitive entry has occurred.5  Y4 xVЍMFS Switched Petition at 410; MFS Switched Reply at 13; ALTS Switched Petition at 513; ALTS Switched Reply at 13. They assert that no additional  !flexibility should be allowed until the Bureau completes its inquiry into special access volume  Y4 !and term discounts.z  Ya#4ЍALTS Special Petition at 2223; MFS Switched Petition at 1314.z ALTS and Hyperion argue that the Commission should remove">Z0*(("  !Urestrictions on the LECs in the same manner as it did for AT&T in the interexchange market--  Y4gradually, and not until after competing providers had made substantial inroads in the market. Yb4 xЍALTS Switched Petition at 911; ALTS Switched Reply at 78; Hyperion Switched Petition at 8.  Y4 ( ` ` 143. The LECs contend that, in light of the competitive inroads of CAPs and  !gothers, and the likelihood of rapid competitive advances in the highly concentrated access  !Zmarket, additional pricing flexibility is needed to prevent price umbrellas or market share  Yw4 !allocation that could deprive customers of the benefits of more rigorous competition.Y wb Y 4 xЍUSTA Special Opposition at 24; Bell Atlantic Special Opposition at 23 (submitting  !independent market analysis purporting to show that CAPs have already obtained 2030% of  !market share in targeted areas); Rochester Special Opposition at 68; United Special Reply at  !o17 (stating that delaying LEC pricing flexibility will force AT&T, customer of 60% of access,  !to shift traffic from LECs to CAPs); USTA Special Reply at 12; Ameritech Switched  !Opposition at 34; BellSouth Switched Opposition at 26; NYNEX Switched Opposition at 46,  !b1112 (noting that a large market share does not necessarily indicate market power, particularly  Y4 !in undesirable, regulated markets); United Switched Opposition at 23; USTA Second Special  Y4 !Reply at 13; GTE Switched Reply at 14; Rochester Switched Reply at 12. See also API Special Opposition at 910.Y Several  !ULECs note that ALTS' and Hyperion's arguments that restrictions on LECs be maintained until  !they have lost a certain share of the market ignore the realities of the access market: a few large  !customers, high elasticity of supply and demand, and less potential overall market growth than  Y 4the interexchange market.j D  Y4 !.Ѝ See, e.g., Pacific Switched Opposition at 1216, citing Special Access Expanded Inter Y4 !Hconnection Order, 7FCC Rcd at 7422 n.253 (distinguishing the development of competition in the access and interexchange markets); USTA Switched Reply at 2.j  Y 4 ( ` ` 144. Discussion. We deny the Teleport petition and reject the claims for  !wholesale reversal of our density zone pricing policy, except that we slightly modify the  !lthreshold standard by changing the definition of when expanded interconnection is "operational," as set forth in 15456below.  Y{4 ( '` ` 145. We deny Teleport's request because the need for additional LEC pricing  !flexibility does not hinge upon the choice between virtual collocation and physical collocation.  !Access competition should accelerate with the implementation of expanded interconnection,  !whether in the form of virtual collocation or physical collocation. In adopting a mandatory  !virtual collocation policy, we intend to ensure the availability of a reasonable expanded inter !connection offering that gives interconnectors a realistic opportunity to provide special access  !band switched transport services in competition with the LECs. Thus, making additional pricing flexibility available only to LECs that opt to provide physical collocation appears unwarranted. "?0*((F"Ԍ Y4 ( l` ` 146. As we stated in our earlier orders in this proceeding,` Yy4 xЍSee generally Special Access Expanded Interconnection Order, 7FCC Rcd at 742122,  Yb4 !745155, 11015, 17279; Switched Transport Expanded Interconnection Order, 8FCC Rcd at 742627, 743334, 98100, 11517.` excessive constraints  !on LEC pricing and rate structure flexibility during a time of increasing competition will deprive  !customers of the benefits of competition and give the new entrants false economic signals. At  !the same time, we recognize that inadequate restrictions on LEC pricing and rate structure could  !bpermit competitive abuses that would stifle economic competitive entry and place excessive cost  !burdens on customers of less competitive services. We conclude that density zone pricing for  !!special access and switched transport, as well as our switched transport discount rules, strike a  !reasonable balance between these competing concerns under our mandatory virtual collocation regime.  Y 4 ( ` ` 147. We reaffirm under the new regime our conclusion that retention of study !% areawide rate averaging or a flat restriction on discounted offerings could maintain LECs' prices  !at artificially high levels in lowcost areas and thus create a pricing umbrella for the CAPs,  Y 4 !/depriving customers of the benefits of more vigorous competition. K Y4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7454, 178. Restraining full  !bcompetition by the LECs even when they are the low cost service providers could further deny  !consumers the benefits of reduced prices from competition, increase the LECs' competitive  !|losses under expanded interconnection, and might cause LEC rates for less competitive services  !to rise. In addition, some parties might enter the market who would not do so if LEC service  !&rates were permitted to reflect more economic pricing. Similarly, requiring the LECs to  !maintain belowcost prices for potentially competitive services in highcost areas could depress  !xLECs' incentives to invest in modernizing their networks, and could deter competitive entry. We will not, therefore, limit pricing flexibility in the manner that Teleport requests.  Y4 ( ` ` 148. With regard to the issues raised on reconsideration, and the question of  !whether any modifications to our previously adopted pricing flexibility rules is warranted under  !our new regime, we generally reaffirm our decisions in the expanded interconnection orders  !tregarding LEC pricing flexibility. We address the specific issues relating to density zone  !!pricing, volume and term discounts, and related issues raised in petitions for reconsideration at greater length below.  XQ4 wB.XDensity Zone Pricing (#  X#4 1.` ` Threshold Required for Implementation (#`  Y4 ( ` ` 149. Orders/Background. In the Special Access Expanded Interconnection Order,  !we permitted LECs to introduce density zone pricing of interstate highcapacity special accessw  !in a study area after their expanded interconnection offerings are operational in that study area--" @0*((""  Y4 !that is, once at least one interconnector has taken a special access crossconnect element. Yy4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7454, 179 & n.411. In  Y4 !the Switched Transport Expanded Interconnection Order, we permitted LECs to implement  !density zone pricing of interstate switched transport in a study area once their expanded inter !connection offerings are operational in that study area-- that is, after at least one interconnector  Y4has taken a switched crossconnect element.y Y4 xcЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 742627, 99 & n.230.  Yv4 ( ` ` 150. Positions of the Parties on Reconsideration. Several LECs argue that zone  !pricing should be available after expanded interconnection tariffs are effective, rather than after  !an interconnector takes the service, in order to enable LECs to set rates more in line with costs,  Y24 !kand to avoid giving uneconomic incentives for entry.2 Y4 xЍUSTA Special Petition at 2021; GTE Special Petition at 2223; Rochester Special  !Petition at 1517 (noting that two CAPs are providing service in competition with Rochester, but  !that neither has used Rochester's intrastate collocation offering); United Special Petition at 912;  !!Ameritech Special Opposition at 17; GTE Special Opposition at 6; USTA Switched Petition at 45. Sprint and other IXCs maintain that  !ozone pricing should be available regardless of whether expanded interconnection is operational,  !because zone pricing enables LECs to set rates closer to cost, facilitates sound network planning  !and decisionmaking by IXCs, and eliminates any justification for maintaining artificial DS3/DS1  Y 4rate ratios or uneconomic volume discounts. h  Y4 xЍSprint Special Petition at 23; Sprint Special Opposition at 34; CompTel Special Opposition at 1011; WilTel Special Opposition at 11; Sprint Switched Opposition at 13.  Y 4 ( ` ` 151. MFS and ALTS argue that instead of obtaining statewide pricing flexibility  !in response to a collocation arrangement, LECs should obtain pricing flexibility only in the  !7specific metropolitan area where a CAP is providing competitive service using a collocation  Yd4 !arrangement.7d  Y4 xAЍALTS Special Petition at 23; ALTS Switched Reply at 34 (terming geographic  ! deaveraging a form of discrimination against customers in less dense service areas); MFS Special Petition at 23; MFS Switched Petition at 1213.7 MFS proposes that density zone tariffs not be permitted to become effective  !until the earlier of: (1)12 months after a party other than AT&T has an operational inter !connection arrangement, or (2)when interconnection arrangements are operational in central  !offices that serve at least 25% of the total interstate special access circuits, weighted by capacity,  Y4 !Hin a geographic area.Y Y>&4ЍMFS Special Petition at 2324.Y MFS argues that since both density zone pricing and volume and term  !discounts give the LECs substantial pricing flexibility, LEC density zone pricing should not be"A60*(("  !@permitted unless LEC volume discounts, including implicit volume discounts contained in  !3DS3/DS1/voice grade relationships, are justified separately by cost conditions in specific  Y4 !zones.u  YK4ЍMFS Special Petition at 6; MFS Switched Petition at 1112.u The CAPs, MCI, and Ad Hoc oppose the LECs' request to engage in density zone  !pricing before an interconnector takes service, arguing that the existing requirement gives LECs  !Han incentive to cooperate in implementing interconnection, that no CAP would commit "market  !suicide" by avoiding interconnection to prevent deaveraging, and that averaged prices do not  !give CAPs incorrect pricing signals because the CAPs take into account the likelihood of later  Y_4deaveraging. _y Y 4 xЍALTS Special Opposition at 910; MFS Special Opposition at 1820; MCI Special Opposition at 56; Ad Hoc Special Opposition at 1921.  Y14 ( A` ` 152. The LECs and Sprint oppose the delays in density zone pricing proposed  !by the CAPs, contending that density zone pricing merely allow rates to reflect cost differences,  !@and that competition will begin even before, and certainly after, the first crossconnect is  Y 4 ! operational.*   Y4 xЍAmeritech Special Opposition at 17; GTE Special Opposition at 56; GTE Switched  !Reply at 45; United Special Opposition at 24, 6 (noting that it does not offer volume or term  !discounts on special access); Ameritech Switched Opposition at 34; Bell Atlantic Switched  !Opposition at 5; NYNEX Switched Opposition at 5; Pacific Switched Opposition at 1618; United Switched Opposition at 23; Sprint Switched Opposition at 13.* United asserts that the proposals of MFS and ALTS to allow LECs to lower rates  !in dense areas but not to bring prices in other zones closer to cost is unfair and essentially would  Y 4 !force LECs to lose revenue.Z  h  Y4ЍUnited Special Opposition at 2.Z United contends that MFS's solution to the perceived problem  !of AT&T's "headstart"- restraining LEC flexibility when AT&T uses expanded inter !Uconnection, and permitting flexibility only when a party other than AT&T interconnects-- only  !exacerbates the problem and penalizes the LECs without restraining AT&T, because AT&T can  Yc4and does compete with LECs in providing local transmission.\ c  Y-4ЍUnited Special Opposition at 45.\  Y54 ( ` ` 153. Discussion. We reaffirm for our new regime the conclusion that LECs  !Hwith "operational" expanded interconnection offerings for special access in a study area should  !obe allowed to implement density zone pricing of special access in that study area, and similarly,  !Hthat "operational" switched expanded interconnection should enable LECs to implement density  Y4 !2 zone pricing of switched transport.  YU%4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7454, 179; Switched  Y>&4Transport Expanded Interconnection Order, 8FCC Rcd at 742627, 99. Substantial changes in the LECs' expanded interconnection  Y4 !offerings are likely, however, in light of the Bell Atlanticv. FCC decision and the mandatory"Bd0*((m"  !virtual collocation policy we adopt in this order. We believe it is important to reflect these  !changes. Accordingly, we modify our definition of when expanded interconnection offerings are "operational."  Y4 ( ` ` 154. For the purpose of our mandatory virtual collocation regime, we define  !!expanded interconnection offerings as "operational" when and if an interconnector has taken a  Yw4 !crossconnect element in connection with a tariffed expanded interconnection offering after our  !new mandatory virtual collocation policy becomes effective. We believe that this change will  !Hgive the LECs an incentive to cooperate in providing expanded interconnection pursuant to our  !new policy, and will ensure that expanded interconnection provided under the new rules gives  !interconnectors a realistic opportunity to compete with the LECs before we permit LECs to  !engage in density zone pricing. The fact that an interconnector took a crossconnect prior to  !7implementation of the new rules will not qualify a LEC for density zone pricing if previous  !|interconnectors cease taking expanded interconnection, and no new interconnector takes service after the mandatory virtual collocation rules are implemented.  Y4 ( u` ` 155. Thus, an offering will be considered "operational" under our new regime  !in the following circumstances: (1)an interconnector has taken a crossconnect pursuant to a  !generally tariffed virtual collocation offering pursuant to our new rules; or (2) an interconnector  !bhas taken a crossconnect pursuant to a physical collocation offering subject to the terms of this  !korder. In this second case, the interconnector need not have started taking the crossconnect  !bafter our new regime becomes effective, so long as it continues to take the crossconnect under  !the new rules. In study areas where a LEC has implemented density zone pricing, we will  !require the LEC to file, sixty days after the effective date of the LEC's new expanded inter !connection offering, tariff revisions effective on 15 days notice that reestablish averaged rates  !Hthroughout the study area pursuant to 69.3(e)(7) of our rules if no interconnector has taken a  Y4crossconnect under our new regime.U Y%4Ѝ47C.F.R. 69.3(e)(7).U  Y~4 ( ` ` 156. We reject proposals to delay any competitive rate changes by the LECs for  !;an arbitrary time period (such as the 12 months proposed by MFS) or until after they have lost  !a specified proportion of market share. A threshold based on a simple percentage share of  !market penetration by LEC competitors comes too close to allocating market shares among  !competitors. We do not intend to try to determine competitive outcomes. Rather, we intend  !Uto expand opportunities for new entrants as well as incumbent providers to compete. As stated  !above, we will consider empirical evidence on the development of access competition in  Y4 !*evaluating whether to grant the LECs additional pricing flexibility in the future.Yy Y$4ЍSee supra 79.Y We also  !reject the CAPs' suggestion that LECs be permitted to reduce rates in highdensity areas but not  !to increase rates in lowdensity areas, where they may be below cost due to past geographic rate  !@averaging. Finally, making density zone pricing for price cap LECs conditional on cost""C*0*(($"ԫ !Ujustification of special access volume discounts would be inconsistent with price cap regulation.  !QUnder price cap regulation, the threshold justification for subsequent rate changes is tested primarily by reference to the indexes and bands of price cap regulation, not cost studies.  X4 2.` ` Price Cap Structure (#`  Yv4 ( ` ` 157. Orders/Background. In earlier orders, the Commission created new price  !cap service subcategories for LEC offerings in different zones, within the existing service  !2 categories and subcategories. The zone subcategories have upper pricing bands of 5% and lower  !bands of 10%. In the year during which a LEC introduces density zone pricing, the LEC must  !!apply the same upper and lower bands to all of the zone subcategories for a given service, but  !kthe rate levels may diverge to the extent permitted by the upper and lower bands without the  Y 4justifications that the price cap rules require for above or belowband rates.  Yf 4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7456, 18183;  YO4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 743032, 109112.   Y 4 ( ` ` 158. Positions of the Parties on Reconsideration. USTA submits that LECs will  !be unable to use the +5%/-10% pricing bands for the zones because of the interplay with the  !overall DS1 and DS3 subindexes. USTA also asserts that separate and overlapping DS1 and  !DS3 subindexes with duplicative zone subindexes are redundant and reduce price competition,  Yd4 !and asks that the zone subindexes be widened and that other subindexes be eliminated.sdb Yw4ЍUSTA Special Petition at 1820; USTA Special Reply at 3.s USTA  !contends that the upper bands in the highcost zone remove incentives to deliver service  Y64 !improvements because rates will be substantially below cost.W6 Y4ЍUSTA Switched Petition at 5.W USTA asserts that the 90 day  !filing period and tariff support requirements for above band filings will deter and delay the  !implementation of compensatory rates in high cost areas. It argues for reducing the filing period  Y4 !and streamlining the cost support.] Yf4ЍUSTA Special Petition at 20.] Specifically, USTA recommends modifying the tariff  !standard for aboveband rate zone filings to include a showing that the proposed zone revenues,  !when aggregated, are no greater than the study area revenues before zone pricing was  Y4 !% implemented.Wu Y!4ЍUSTA Switched Petition at 5.W Several other LECs also argue that the zone subindexes do not provide adequate  !kpricing flexibility and are inconsistent with full competition and with the rationale behind the  Y~4price cap system.~&  YU%4 xЍGTE Special Petition at 2021; Rochester Special Petition at 1722; United Special Opposition at 78. "gD 0*((I"Ԍ Y4 ( ` ` 159. United argues that broader annual pricing bands are needed, such as  Y4 ! +20%/-20%, to enable LECs to move prices rapidly toward costs.\ Yc4ЍUnited Special Petition at 1213.\ United also seeks  !clarification that the LECs may continue to average multiple study areas and to use a single tariff  Y4 !cfor multiple operating companies.Ny Y4ЍId. at 1315.N Sprint, CompTel, and WilTel argue that broader  Y4 !differences should be permitted for initial rates in different zones (i.e., set initial zone rates  !based on the costs of service in each zone), or broader bands such as -20% and +10% or  !+20% for subsequent rate changes, to enable LECs to set prices based on cost and to give  Y`4 !proper access planning incentives to IXCs.6`* Y; 4 xЍSprint Special Petition at 36; Sprint Special Opposition at 4; Sprint Switched Petition at  Y$ 4 !35; Sprint Switched Opposition at 34; CompTel Special Opposition at 12; WilTel Special Opposition at 1112.6 WilTel also agrees with some LECs' arguments  !|that the zonespecific pricing subindexes eliminate the need for overall floors for DS3 and DS1  !brates, and argues that the double layer of indexes could require a LEC to increase rates in low Y 4density zones to offset a decrease in the highdensity zone.^  Yy4ЍWilTel Special Opposition at 1213.^  Y 4 ( ` ` 160. The CAPs, MCI, WilTel, and Ad Hoc oppose LEC proposals to eliminate  !Qpricing bands or otherwise substantially broaden LEC pricing flexibility, contending that the  !price cap bands are necessary to protect against crosssubsidization of the LECs' competitive  Y 4 !% services by captive rural customers and to prevent abuse of the LECs' market power. ^  Y4 xЍALTS Special Opposition at 1011; MFS Special Opposition at 1718; MCI Special  !Opposition at 7; Ad Hoc Special Opposition at 1921; MFS Special Petition at 1013; WilTel  Y4 !;Switched Opposition at 56. But see United Special Reply at 45 (contending that density zone ends an urbantorural crosssubsidy, rather than creating one). Ad Hoc  !does not oppose a reasonable increase in the LECs' downward pricing flexibility in contested  !markets, short of predation, but states that this right should not justify predation in monopoly  Yd4 !markets.[d  Y4ЍAd Hoc Special Opposition at 21.[ MFS argues that if density zone pricing is allowed, LECs should have to  !.demonstrate that the ratio of revenues to average variable cost in the highestdensity zone is no  Y64less than that ratio in the lowestdensity zone.w6{ Yb#4ЍMFS Switched Petition at 12; MFS Switched Opposition at 34.w  Y4 ( ~` ` 161. The LECs respond that MFS's proposed rigid ratio requirement would  !restrict the LECs' ability to compete using costbased prices, and would result in economic  !inefficiencies and umbrella pricing. They also argue that MFS's proposal could unfairly require"E,0*(("  !!LECs to lower prices throughout a study area, including in lowdensity areas where prices are  !already below cost, to compete with CAPs, and would essentially constitute a return to  Y4 !regulation based on fully distributed costs. YK4 xЍUSTA Switched Opposition at 5; GTE Switched Opposition at 1112; NYNEX Switched Opposition at 711. NYNEX contends that price cap regulation was  Y4 !&developed to enable LECs to price services efficiently (i.e., services with elastic demand  ! relatively close to marginal cost and services with inelastic demand relatively high above  Y4 !marginal cost), and to avoid the inefficient incentives created by costofservice regulation.b Y 4 xЍNYNEX Switched Opposition at 37, citing National Rural Telecom Ass'n v. FCC,  !988F.2d 174, 182 (D.C. Cir. 1993) (upholding price cap regulation of LECs, and pointing out  Yr 4 !that it facilitates Ramsey pricing); see also infra 128 (LEC responses to similar arguments in context of volume and term discounts).  !@Rochester submits that subsidization only occurs when a company prices a service below  !incremental cost, for which average variable cost is a surrogate. Thus, Rochester asserts that  !MFS's concern would have merit only if the ratio of revenues to average variable cost were less  !than one in any particular zone, regardless of the relative ratios among zones. Rochester also  !argues that in a competitive market, profit margins can be expected to vary in different  Y 4geographic areas.e   Y4 xЍRochester Switched Opposition at 3, citing Matsushita Elec. Indus. Co.v. Zenith Radio  Yk4 !Corp., 475U.S. 574 (1986) (subsidization occurs only in case of predatory pricing); Jay Foods,  YT4 !Inc.v. FritoLay, Inc., 614F. Supp. 1073 (N.D. Ill. 1985) (rejecting geographic cross !subsidization argument and concluding that in a competitive market, profit margins can be expected to vary in different geographic areas); Rochester Switched Reply at 3.e  Y 4 ( +` ` 162. Discussion. We find no need to amend the price cap rules for density zone  !!pricing under our mandatory virtual collocation regime. Moreover, we reaffirm our decisions  !regarding the price cap structure for density zone pricing under the preexisting rules, including  !the +5%/-10% pricing bands that apply to the zone subindexes, the retention of the overall DS1  !and DS3 pricing bands, and the existing tariff procedures for aboveband rate changes. We  !Ucontinue to believe that we granted the LECs a reasonable degree of pricing flexibility with the  !Ddensity zone pricing system, and nothing in the record convinces us to the contrary. As we  Y54 !.stated in the Special Access Expanded Interconnection Order, we intend to monitor the density  Y4 !zone pricing system carefully and to review it in 1995.!#  Y!4ЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7457, 184. Measures to increase the LECs'  !Hpricing flexibility may be appropriate in the future, however, as the access market grows more competitive.  Y4 ( ` ` 163. We also decline to adopt MFS's reconsideration proposal to require the  !LECs to demonstrate that the ratio of revenues to average variable cost in the highestdensity  !zone is no less than that ratio in the lowestdensity zone. First, we believe that the problem"F!0*((A"  !about which MFS is concerned-- rates that are well in excess of costs in lowdensity zones--  !is unlikely to occur in the near future. Evidence in the record indicates that the differences  !Hbetween the costs of serving different geographic areas are substantial, although the rates were  Y4 !averaged before the implementation of density zone pricing." Y44 xЍSee Special Access Expanded Interconnection Order, 7FCC Rcd at 7452, 175 & n.405 and evidence cited therein. Thus, at present and for the next  !.few years, we believe that with the limited pricing flexibility permitted the LECs, rates in low !Hdensity zones are unlikely to be substantially above cost. Second, we conclude that the rateto !|cost ratios may reasonably differ for similar services in different zones, within the limits of our  !oprice cap rules. When we adopted price cap regulation for the LECs, we explicitly recognized  !7that deviations from fully distributed cost (embedded costs plus a proportional share of joint  !costs) may be desirable and in some cases can maximize the consumer welfare created by  Y 4 !regulated carriers.#_ b Y-4 xЍSee National Rural Telecom Ass'nv. FCC, 988F.2d 174, 18283 (D.C. Cir. 1993)  Y4 !g(affirming LEC price cap rules), citing Policy and Rules Concerning Rates for Dominant  Y4 !.Carriers, CCDocket No.87-313, Further Notice of Proposed Rulemaking, 3FCC Rcd 3195,  Y4 !325758 (1988); Policy and Rules Concerning Rates for Dominant Carriers, CCDocket  Y4 !No.87-313, Second Report and Order, 5FCC Rcd 6786, 681011 & n.299 (1990), aff'd,  Y4 !.National Rural Telecom Ass'nv. FCC, supra. See also Transport Rate Structure and Pricing, Second Report and Order, CCDocket No.91-213, 9FCC Rcd 615, 623, 15 (1994). To protect against the LECs' ability to disadvantage one class of customers  !.to the benefit of another, the Commission used the baskets and bands mechanisms of price cap regulation.  X 4 3.` ` Definition of Zones (#`  Y4 ( ` ` 164. Orders/Background. In the Special Access Expanded Interconnection Order,  !kthe Commission directed LECs to assign central offices to zones based on cost based factors  !such as the density of total interstate special and switched traffic. Channel terminations or  !xentrance facilities from a given central office are classified in the zone to which the office is  !kassigned. Interoffice facilities between central offices in different zones are classified in the  !higherpriced, less dense of the zones, because the Commission concluded that "this  Y4 !classification will be consistent with traffic density patterns and underlying costs."$  YA 4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7455, 179 n.414. In the  Y4 !Switched Transport Expanded Interconnection Order, the Commission directed the LECs to use  Y4the same zone definitions for switched transport and special access.%:  Y#4ЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 742829, 104.  Y4 ( '` ` 165. Positions of the Parties on Reconsideration. Several IXCs argue that the  !LECs should not use the same density pricing zones for special access and switched transport,  !or for entrance facilities and interoffice facilities. CompTel asserts that the zones created for"~G %0*((8"  !channel terminations are unsuited for interoffice transport. CompTel argues that the zones  !developed for channel terminations, based on collection and dispersion of traffic at wire centers,  !lead to little or no Zone1 interoffice transport in many states, while the costs of interoffice  !transport relate to the technologies of interoffice networks and should be grouped in zones with  Y4 !relatively large geographic areas.{& Y4ЍCompTel Switched Petition at 79; CompTel Switched Reply at 78.{ WilTel submits that zones for interoffice special access and  !switched transport should be broad in geographic scope and should reflect prevailing network  Yv4 !characteristics.y'vy Y 4ЍWilTel Switched Petition at 78; WilTel Switched Reply at 57.y Sprint contends that the requirement that traffic between offices in different  !Mzones must be charged the higherrated zone rates would result in virtually no interoffice  !switched transport carried at highdensity rates. Accordingly, Sprint argues that density zone  !Upricing of switched transport would be ineffective unless LECs are allowed to establish density  !Dzones for switched transport different from those for special access and are required to rate  Y 4 !interoffice traffic at the lowerpriced zone, rather than the higherpriced zone.( * Y4 xZЍSprint Switched Petition at 58; Sprint Switched Reply at 24. Accord, WilTel Switched Opposition at 56. ALTS asserts  !that in order to establish more than three zones, LECs should be required to satisfy the same  !standard that applies to aboveband filings under price caps: a compelling showing of substantial  Y 4cause, with a high likelihood of suspension.W)  Y34ЍALTS Special Petition at 23.W  Y4 ( ` ` 166. The LECs oppose establishing separate zone plans for switched and special  !access or for interoffice facilities and entrance facilities, and argue that their density zone pricing  !bplans defined their zones based on a calculation that included special and switched volumes and  !interoffice and entrance facility volumes, that interoffice channels have cost characteristics  !similar to those of entrance facilities, and that separate plans would be illogical in view of the  Y4integrated services the LECs provide.4*u YD4 xЍBell Atlantic Switched Opposition at 46; BellSouth Switched Opposition at 7; GTE  !Switched Opposition at 1011 (stating that the Commission should permit, but not require, individual LECs to establish separate zones).4  Y4 ( ` ` 167. Discussion. We reaffirm our decision to assign interoffice facilities between  !;different zones to the higherprice, lowerdensity zone, and find no reason to apply a different  Y4 !rule under our mandatory virtual collocation policy. In the Special Access Expanded Inter Y4 ! connection Order, we reached our decision based on a conclusion that interoffice traffic between  !bdifferent zones has cost characteristics more similar to the traffic in the less dense zone. There  !xis no basis in our policy on remand, and no new evidence in the reconsideration record, that  ! would justify reversing this decision. We also decline to create separate zone systems for special  ! access and switched transport services. This would be contrary to our conclusion in the"PH *0*((3"  Y4 !Transport proceeding that special access and switched transport have similar cost  Y4 !characteristics.+ Yb4 xIЍTransport Rate Structure and Pricing, CCDocket No.91-213, Report and Order and  !Further Notice of Proposed Rulemaking, 7FCC Rcd 7006, 7028, 7034, 42, 53 (1992);  Y44 !? Transport Rate Structure and Pricing, CCDocket No.91-213, Second Report and Order, 9FCC Rcd 615, 622, 12 (1994). Moreover, we directed the LECs to consider both special and switched access  Y4 !traffic in defining density zones.,4 Y4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7455, 179 n.415. Finally, we decline to create separate zone systems for  !interoffice facilities and entrance facilities, or to impose substantially higher burdens of proof  !othan those we already imposed if LECs propose zone plans with more than three zones. These  ! alternatives would be administratively burdensome and complex for the LECs, and do not appear to provide benefits that would justify the costs.  XH4 B.XVolume and Term Discounts (#  X 4 1.` ` Special Access (#`  Y 4 ( m` ` 168. Order. In the Special Access Expanded Interconnection Order, we  !concluded that hubbing and ratcheting arrangements are reasonable means to give customers and  ! LECs flexibility in structuring and engineering their special access arrangements. We also found  !othat volume and term discounts are generally legitimate means of pricing special access services  !to recognize the efficiencies associated with larger traffic volumes and the certainty of longer !term arrangements. We stated, however, that some of the largest of the LECs' volume and term  !|discounts raised concerns of anticompetitiveness, and we directed the Common Carrier Bureau  !Eto conduct an inquiry to help determine whether any additional guidelines might be  Y54appropriate.-5 Y4ЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 7463, 199200.  Y4 ( ` ` 169. Positions of the Parties on Reconsideration. MFS asserts that the LECs  !should be required to costjustify all volume and term discounts that exceed reasonable threshold  !blevels, such as the 20% maximum volume discount and 10% maximum term discount that MFS  Y4 !had proposed.q. Y !4ЍMFS Special Petition at 46; MFS Special Reply at 24.q MFS alleges that LEC volume and term discount practices will become even  !more pernicious if coupled with density zone pricing, and argues that LEC density zone pricing  !should not be permitted unless LECs justify their volume discounts, including implicit volume  !discounts contained in DS3/DS1/voice grade relationships, separately by cost conditions in  Yg4 !|specific zones.U/gG  Y_&4ЍMFS Special Petition at 6.U MFS contends that it is unreasonable for LECs to charge less for unbundled,  !.hubbed service offerings than they charge for bundled pointtopoint circuits that in most cases"PI /0*((3"  Y4 !use similar facilities, and asks that such hubbing discounts be addressed.s0 Yy4ЍMFS Special Petition at 1012; MFS Special Reply at 46.s ALTS argues that  !kthe Commission should broaden the scope of the Bureau's inquiry to address all Tier1 LEC  !Rvolume discounts in excess of 20%, term discounts in excess of 10%, and hubbing  Y4arrangements.t1y Y4ЍALTS Special Petition at 1517; ALTS Special Reply at 10.t  Y4 ( h` ` 170. The LECs respond that the CAPs' arguments were considered previously  !and rejected by the Commission, suggest that the Commission obtain information about CAP  !Uvolume and term discount practices, and assert that the volume and term discounts and hubbing  YI4 !arrangements are reasonable and have been costjustified.&2I* Y$ 4 xЍUSTA Special Opposition at 78; Bell Atlantic Special Opposition at 34; GTE Special  !Opposition at 712; Rochester Special Opposition at 810; United Special Opposition at 1415; USTA Special Reply at 4.& Sprint supports requiring the LECs  !to costjustify volume discounts, and contends that there would be no justification for volume  Y 4 !discounts in interoffice channel mileage rate elements.\3  Yy4ЍSprint Special Opposition at 45.\ Sprint contends that intermediate  !xhubbing is reasonable, and serves as a critical tool for medium and small IXCs to mitigate in  Y 4part the price advantages the current rate structure gives AT&T.Z4 ^  Y4ЍSprint Special Opposition at 6.Z  Y 4 ( ` ` 171. Discussion. Pursuant to the Commission's direction, t he Common Carrier  !Bureau conducted an inquiry into LEC special access volume and term arrangements. The  ! Bureau required the four LECs that had been identified by MFS as offering the steepest  !!discounts to submit cost data to demonstrate whether the rates for one of their most discounted  !offerings covered average variable cost and were otherwise just and reasonable. Certain CAPs  YM4 !and LECs submitted comments on these data.5M  Y 4 x<Ѝ See ALTS Ex Parte (Oct.29, 1993); MFSEx Parte (Dec.31, 1992); MFSEx Parte  Y4 !|(Mar. 3, 1993); MFSEx Parte (Mar.30, 1993); MFSEx Parte (July 19, 1993); MFSEx Parte  Y4 !% (Aug.31, 1993); Teleport Ex Parte (Dec.8, 1993); NYNEX Ex Parte (June14, 1993); SW Bell  Y 4 !Ex Parte (Apr.30, 1993); SW Bell Ex Parte (May11, 1993); SW Bell Ex Parte (Aug.11,  Y!41993); US West Ex Parte (Aug.12, 1993); US West Ex Parte (Aug.25, 1993). At this time, we are not persuaded that LEC  !gofferings are priced below their average variable cost. Nevertheless, we will continue to  !;examine LEC pricing behavior in the future, and will be vigilant in examining any evidence of unreasonable pricing practices on the part of the LECs.   X4 2.` ` Switched Transport  "Jd50*((m"Ԍ X4` ` a. In General   Y4 ( N` ` 172. Positions of the Parties on Reconsideration. The IXCs other than AT&T  !7generally seek reconsideration of the decision to permit volume discounts, arguing that such  !discounts will benefit AT&T, harm other IXCs, and interfere with the Commission's policies  !on the transport restructure and interexchange competition. CompTel, MCI, and WilTel contend  !that volume discounts on interoffice transport cannot be justified by underlying costs, because  !the cost of providing interoffice transport depends on the total traffic carried over the interoffice  YI4 !network, and all users should share the scale economies.6I Y 4 xЍCompTel Switched Petition at 34; CompTel Switched Reply at 37; MCI Switched  !Petition at 12; MCI Switched Reply at 34; WilTel Switched Petition at 34 (citing Ameritech's  !Bulk Capacity Transport and Bell Atlantic's Facilities Management Service as LEC offerings that  !oacknowledge interoffice network efficiencies), 56; WilTel Switched Opposition at 35; WilTel Switched Reply at 25. Sprint does not object to term  !discounts that are uniform regardless of the amount or type of capacity ordered, and concedes  !kthat costbased volume discounts on entrance facilities should be permitted, but contends that  !volume discounts should not be permitted on interoffice facilities because the cost of such  Y 4facilities is based on the total shared interoffice network.|7  Y4ЍSprint Switched Petition at 1011; Sprint Switched Reply at 410.|  Y 4 ( ` ` 173. The LECs and AT&T defend the Commission's decision to permit volume  !discounts, stating that the LECs' competitors and the small and medium IXCs offer volume  !discounts on interoffice facilities, and that although both DS1 and DS3 services use the same  !transport facilities, highercapacity services use less costly electronics and involve administrative  Yd4 !kcost savings from ordering, billing, and provisioning.F8d Y4 x<ЍBell Atlantic Switched Opposition at 14; BellSouth Switched Opposition at 89; GTE  !Switched Opposition at 1315; GTE Switched Reply at 78; Rochester Switched Reply at 56; USTA Switched Reply at 23; AT&T Switched Opposition at 810.F BellSouth asserts that the small and  !|medium IXCs' complaints are premature, because LECproposed discounts can be implemented  Y64only through a tariff filing with full cost support.^96Q  Y84ЍBellSouth Switched Opposition at 8.^  Y4 ( ` ` 174. Discussion. We reaffirm our decision to permit LECs to offer volume and  !term discounts on switched transport services after the specified threshold has been reached, and  !find no reason for a different rule under our mandatory virtual collocation policy. (We address  !below the specific threshold to be applied.) First, we are not persuaded that cost differences do  !not justify volume and term discounts on both interoffice facilities and entrance facilities. The  !cost of providing interoffice directtrunked transport depends, at least in part, on the specific"K 90*((A"  Y4 !facilities used by the customer.: Yy4 xЍSee Transport Rate Structure and Pricing, CCDocket No.91-213, Report and Order and Further Notice of Proposed Rulemaking, 7FCC Rcd 7006, 703032, 4749 (1992). Transmission facilities carrying higher volumes of traffic tend  !to be characterized by lower percircuit costs than lowercapacity facilities. In addition, term  !discounts recognize cost savings due to the certainty of longerterm commitments. When LECs  !!first introduce such discounts on switched transport offerings, they will be required to provide cost justification because such discounts are new services under the price cap rules.  Yv4 ( ` ` 175. Second, the record reflects that volume and term discounts are an  !established and accepted feature of the communications marketplace. The LECs' competitors,  !tas well as some of the IXCs that have argued against such discounts, offer these kinds of  !discounts themselves. If the LECs are not permitted to offer discounts on their services, large  !customers can simply obtain the services from other providers at such discounts, or provide such services for themselves.  Y 4 ( W` ` 176. Finally, we believe that permitting the LECs to offer volume and term  !discounts, subject to the safeguards we have adopted, will stimulate economic growth and  !oenhance access to communications markets. Lower LEC prices for highvolume and longterm  !bservices, if costjustified, should reduce access costs for IXCs, stimulate costbased competition  !in the interexchange market, and ultimately make possible lower longdistance prices. Lower  !longdistance prices, in turn, should stimulate greater use of communications services, as well  !as free resources for consumers to spend and businesses to invest elsewhere in the economy,  !creating opportunities for new jobs and economic expansion. Lower longdistance prices should  !Malso give more Americans access to a variety of services that are available over interstate telecommunications facilities.  X4` ` b. Threshold Required for Implementation (#  Y4 ( ` ` 177. Order. In the Switched Transport Expanded Interconnection Order, we  !|permitted the LECs to begin offering switched transport with volume and term discounts in any  !Uparticular study area only after one of the following conditions is met: (1)100 DS1equivalent  !switched crossconnects are operational in the Zone1 offices in the study area; or (2)an average  !of 25 DS1equivalent switched crossconnects per Zone1 office are operational. (Zone1 refers  !to the LEC's density pricing zone with the greatest traffic density.) In study areas with no Zone  !Z1 offices, the LECs may implement volume and term discounts once five DS1equivalent  !switched crossconnects have been taken in the study area. LECs that have not implemented  !;density zone pricing may implement volume and term discounts in a study area after customers  Y4have subscribed to 100 DS1equivalent switched crossconnects in the study area.;b Y$4 xЍSwitched Transport Expanded Interconnection Order, 8FCC Rcd at 743435, 118 & nn.26365. " L;0*((""Ԍ Y4 ( ` ` 178. Positions of the Parties on Reconsideration. The CAPs and the IXCs other  !othan AT&T argue that the threshold constraints for allowing term and volume discounts are not  !valid measures of viable competition because they bear no relationship to realities of competition  !in the marketplace, the numbers are too small and easy to satisfy for large LECs, and the LECs  !|already have excessive pricing flexibility. The CAPs recommend more stringent threshold tests  !for switched transport volume and term discounts: ALTS and Hyperion argue for thresholds  !based on a certain percentage of market share for competitors, while MFS proposes to permit  !LEC transport discounts in a study area only after an interconnector is present at central offices  !serving 50% of a LEC's switched access traffic in the study area, and two or more  !interconnectors are present in central offices serving 25% of the switched traffic in the study  Y 4 !oarea.F<H  Y 4 xЍALTS Switched Petition at 12 (suggesting an "effective competition" standard under  !which (1)a certain percentage of telephone subscribers have access to at least one competitor  !to the LEC, and (2)a certain percentage of subscribers are receiving service from one of the  !competitors); ALTS Switched Opposition at 37; ALTS Switched Reply at 37; Hyperion  !Switched Petition at 39 (recommending competitive penetration of 20% of market as threshold);  !MFS Switched Petition at 1516; CompTel Switched Petition at 45; MCI Switched Petition at  !23; Sprint Switched Petition at 1112; Sprint Switched Opposition at 4; WilTel Switched Petition at 45.F Sprint contends that there is no need to require a particular level of competition before  !allowing costbased discounts for entrance facilities, and it makes no economic sense to allow  Y 4 !tinteroffice volume discounts even if viable competition is present.]=  Yv4ЍSprint Switched Petition at 1213.] MCI asserts that the  !thresholds are meaningless if the density of interconnection criteria can be satisfied by AT&T  Y 4alone.X>  Y4ЍMCI Switched Petition at 23.X  Y4 ( A` ` 179. The LECs oppose delays in volume and term discounts. They argue that  !xtheir competitors provide such discounts and that because such delays would create a pricing  !umbrella and protections for LEC competitors that prevent real competition from developing,  !they are not in the public interest. They also assert that interconnection by AT&T is properly  !included in satisfying the threshold requirement, and argue that selfprovisioning by AT&T  !represents a competitive challenge to LEC switched transport offerings as significant as the  Y4introduction of CAP networks. ?_:  Y!4 x8ЍAmeritech Switched Opposition at 34; BellSouth Switched Opposition at 26; Bell  !Atlantic Switched Opposition at 14; Rochester Switched Petition at 46; USTA Switched  !UOpposition at 24; NYNEX Switched Opposition at 56; Pacific Switched Opposition at 1618;  !HGTE Switched Opposition at 26, 89 (opposing MFS's proposed standard because competitive  !access markets are generally smaller than a study area, and opposing ALTS's proposed standard  !because numbers of subscribers is an inapposite measure in the access market, in which some subscribers have much higher levels of usage); GTE Switched Reply at 45.  "Ma?0*((a"Ԍ Y4 ( ԙ` ` 180. USTA and GTE assert that the threshold required for volume and term  !discounts on transport is inconsistent with the Commission's policy of permitting the LECs to  Y4 ! offer special access discounts, which the Commission reaffirmed in the Special Access Expanded  Y4 !;Interconnection Order, and is unsupported by the Communications Act. They contend that the  !threshold will unfairly exacerbate LEC competitive losses and prevent genuine competition, and  !is an arbitrary and capricious exercise in regulatory handicapping. They argue that a more  !reasonable threshold for volume and term discounts would be when switched expanded inter Y`4 !connection is tariffed (or, in the alternative, when it is operational).x@` Y4ЍUSTA Switched Petition at 69; GTE Switched Petition at 211.x USTA and GTE propose  !that special access crossconnects be counted toward satisfaction of the threshold requirement,  !given that special and switched access services are substitutable and zone plans were constructed  Y 4based on total traffic density.A y YE 4 xЍUSTA Switched Petition at 9; GTE Switched Petition at 12; GTE Switched Opposition  Y.4at 78; GTE Switched Reply at 6; accord, NYNEX Switched Opposition at 6 n.16.  Y 4 ( ` ` 181. GTE, Rochester, and USTA note that the threshold essentially requires  !substantial market share losses before LECs with smaller study areas may engage in volume and  Y 4 !*term discounts.B  Y4 xpЍGTE Switched Petition at 911; GTE Switched Opposition at 67; Rochester Switched Petition at 48; USTA Switched Petition at 78. GTE asserts that in over half of its study areas, the 100 DS1 equivalents  !threshold would require market share losses of 25% or more, and that in the five GTE study  !areas where the 25 DS1 equivalents per Zone1 office threshold applies, that threshold amounts  Y{4 !to a 43% to 60% loss of market share.:C{ Y4 xЍGTE Switched Petition at 911; GTE Switched Opposition at 67; GTE Switched Reply  !at 56 (recommending amending the threshold to become the smaller of the existing threshold or 5% of the DS1 equivalents in the Zone1 area).: Rochester states that the 100 DS1 threshold, which  Yd4 !applies to it, would require loss of nearly half of its switched transport minutes to competitors.Dd0  YE4ЍRochester Switched Petition at 48; Rochester Switched Reply at 35.  !Sprint, MCI, MFS, and ALTS oppose the LECs' proposals, although these parties concede that  Y64 !the threshold may be unreasonably high in some smaller study areas.E6  Y 4 xMЍSprint Switched Opposition at 4; MCI Switched Reply at 46; MFS Switched Opposition at 5; ALTS Switched Opposition at 37. As already noted, Sprint  ! instead recommends permitting no volume discounts, MCI would permit only costbased  !discounts that apply equally to all interoffice network users, while MFS recommends using a market penetration test as the threshold.  Y4 ( `` ` 182. Discussion. For our new mandatory virtual collocation regime, we  !generally reaffirm the threshold that must be met before a LEC may introduce term and volume"N{E0*((d"  !!discounts on switched transport. The threshold chosen represents a considered policy decision  !balancing both the costs and benefits of higher and lower thresholds. The requirement that  !LECs not offer transport volume or term discounts until expanded interconnection is operational  Y4 !on a broader scale than a single operational crossconnect should provide an incentive for the  ! LECs to offer expanded interconnection for switched transport on reasonable terms. In addition,  !a LEC's flexibility to engage in volume and term discounts for switched transport services  !Ushould be linked to a demonstration that the LEC's switched expanded interconnection offering  !Dpresents a viable competitive opportunity. For this reason, in light of our mandatory virtual  !collocation policy, we adopt the definition of "operational" crossconnects that we adopted in  Y14the context of density zone pricing.aF1 Y 4ЍSee supra 15455.a  Y 4 ( N` ` 183. The lower thresholds for density zone pricing (and special access volume  !and term discounts) coupled with the higher threshold for switched transport discounts should  !gradually introduce LEC pricing flexibility and facilitate the initial development of competitive  ! entry. A different standard for special access and switched transport is also reasonable:  !interstate switched access services, unlike special access services, have always been subject to  !close rate structure regulation and, until December 1993, were priced at an equal charge per  !minute of use. Permitting volume and term discounts for switched transport is a substantial departure from our past practice, and must be done cautiously.  Y54 ( ` ` 184. As with density zone pricing,SG5y Y_4Ѝ See supra 156.S we decline to set a threshold based on the  !market penetration of LEC competitors, an action that may be perceived to endorse allocating  !Umarket shares among competitors. We do not intend to try to determine competitive outcomes.  !Rather, we intend to expand new entrants', as well as incumbent providers', opportunities to  !Ucompete. We are, however, concerned about GTE's and Rochester's assertions that in smaller  !Ustudy areas the 100 DS1equivalent switched crossconnects threshold requirement may require  !ULECs to lose 25% to 60% of their switched transport market share before they may implement  !volume and term discounts. Because this problem potentially may affect only a few Tier1  !carriers with small study areas, we delegate authority to the Chief, Common Carrier Bureau,  !|to modify the threshold point for zone density pricing in unusual circumstances where a change in the strict requirements would advance the Commission's objectives.  Y"4 ( ~ ` ` 185. Finally, we do not adopt GTE's and USTA's proposal to count special  !Haccess crossconnects toward any of the thresholds for switched transport discounts. Although  !there is a degree of crosselasticity demand between special access and switched transport, the  !.gradual introduction of LEC pricing flexibility warrants looking only to switched access crossconnects in deciding when to allow more switched access flexibility. "!O*G0*((#"Ԍ X4` ` c. Application of New Service Test to Discounts (#  Y4 ( h` ` 186. Order. When LECs subject to the price cap rules offer volume and term  !!discounts on switched transport, the LECs must satisfy the cost showing requirements for new  !xservices under those rules. A special 120day notice period, rather than the standard 45day  Y4notice period, applies to these tariff filings.H Y4ЍSpecial Access Expanded Interconnection Order, 8FCC Rcd at 7435, 119.  Y`4 ( ` ` 187. Positions of the Parties on Reconsideration. CompTel, Sprint, WilTel, and  !MFS object to the price cap new service test that will be used to evaluate the level of discounted  !tprices. CompTel asserts that LECs have excessive flexibility to define direct costs and to  Y 4 !employ nonuniform overhead loadings,ZI y YF 4ЍCompTel Switched Petition at 5.Z while Sprint contends that the Commission should  Y 4 !orequire justification for any rate differences between different levels of capacity.xJ * Y4ЍSprint Switched Petition at 910; Sprint Switched Reply at 7.x Sprint also  !argues that LECs should be required to implement density pricing before offering volume  !Ddiscounts, to prevent LECs from charging medium and small IXCs high, averaged rates for  Y 4 !transport in highdensity areas while giving AT&T volume discounts.ZK  YL4ЍSprint Switched Petition at 10.Z WilTel submits that the  !knew service test is inadequate to scrutinize discounts because it prevents overpricing but not  Y4 !discriminatory underpricing.YL Y4ЍWilTel Switched Petition at 4.Y WilTel opposes using the volume discounts in existing LEC  !special access tariffs as the basis for switched transport rates, noting that the Commission is in  Yd4 !the process of investigating current LEC special access volume discounts.[Md=  YR4ЍWilTel Switched Opposition at 4.[ MFS contends that  !the new service test does not place any meaningful limits on the magnitude of the discounts, and  !Uinstead proposes requiring the LECs to show that the ratio of revenues to average variable cost  !of discounted services is not less than the same ratio for less discounted services (except for term  Y4discounts less than 10% or volume discounts less than 20%).ZN  Y 4ЍMFS Switched Petition at 1618.Z  Y4 ( ` ` 188. NYNEX opposes proposals to compare the overhead loadings or revenueto !kcost ratios of different services. NYNEX argues that price cap regulation was developed to  Y4 !enable LECs to price services efficiently (i.e., services with elastic demand relatively close to  !xmarginal cost and services with inelastic demand relatively high above marginal cost), and to"P N0*((h"  Y4 !avoid the inefficient incentives created by costofservice regulation.O Yy4 xЍNYNEX Switched Opposition at 37, citing National Rural Telecom Ass'n v. FCC,  !U988F.2d 174, 18283 (D.C. Cir. 1993) (upholding price cap regulation of LECs, and pointing  YK4 !out that it facilitates Ramsey pricing); see also supra 161 (LEC responses to similar arguments in context of density zone pricing). Rochester submits that  !subsidization only occurs when a company prices a service below incremental cost, for which  !average variable cost is a surrogate. Thus, Rochester asserts that MFS's concern would have  !force only if the ratio of revenues to average variable cost were less than one for any particular  Y4offering, regardless of the relative ratios among services.P4 Y 4 xЍRochester Switched Opposition at 3, citing Matsushita Elec. Indus. Co.v. Zenith Radio  Yr 4Corp., 475U.S. 574 (1986) (subsidization occurs only in case of predatory pricing).  Yv4 ( E` ` 189. GTE argues that rates for discounted switched transport offerings should be  !*presumed reasonable if based on existing special access rates, like rates for nondiscounted,  ! restructured transport, without additional cost support or lengthy review periods. GTE notes that  !its volume and term special access arrangements have been costjustified either under rateof !return regulation or under the price cap rules' belowband pricing test. GTE contends that  !discounted transport offerings are "new services" only as an artifact of the sequence in which  !the Commission permitted them to be introduced, and essentially are no more "new services"  Y 4 !Uthan were the nondiscounted restructured transport rates.Q  YU4 xZЍGTE Switched Petition at 1316; GTE Switched Reply at 89. Accord, USTA Switched Reply at 34. GTE also argues that the 120day  Y 4 !tariff review period is unnecessarily long and contrary to the public interest.ZR h  Y4ЍGTE Switched Petition at 1617.Z ALTS responds  !that improper pricing could be more disruptive for switched transport because of the size of the  !market, and that it is essential to retain the 120day review period to give the Commission and  Yz4interested parties additional time to assess whether the tariff rates are costjustified.YSz  YD4ЍALTS Switched Opposition at 8.Y  YL4 ( _` ` 190. Discussion. We retain for our mandatory virtual collocation regime the rule  !regarding cost showings for discounted switched transport offerings, which qualify as new  !services under the price cap rules. New services are services that make additional options  !Zavailable to customers, which discounted transport offerings clearly do. Volume or term  !!discounts for the transport component of interstate switched access have never been offered in  !the past. Contrary to the IXCs' assertions, the new service test protects against underpricing  !as well as overpricing. The cost justification that the LECs are required to submit enables us to ascertain that rates for new services are not less than direct costs. "Q S0*((N"Ԍ Y4 ( ` ` 191. We reject the proposals of MFS and Sprint to require LECs to demonstrate  !that discounted services recover the same proportion of overheads as nondiscounted services,  ! or to require that the ratio of revenues to average variable cost of discounted offerings be no less  !Uthan that ratio for nondiscounted services. We conclude that the cost showing required by the  !existing new service test adequately protects against possible unreasonable discrimination with  Y4respect to newly introduced volume and term discounts for switched transport.sT Y4 xЍAmendments of Part 69 of the Commission's Rules Relating to the Creation of Access  Y4 !Charge Subelements for Open Network Architecture, 6FCC Rcd 4524, 4531 (1991), recon., 7FCC Rcd 5235, 523637 (1992) (adopting the current version of the new service test).s  Y`4 ( [` ` 192. We believe that the cost justification required pursuant to the new service  !;standard is an essential safeguard against the LECs' offering of unreasonable volume and term  !discounts on switched transport. Accordingly, we will not permit the discounted switched  !transport rates to be set based on preexisting discounted special access rates without such cost  !justification. In addition, we are not persuaded that any change is necessary to the 120day  !notice period for these tariff filings, which we conclude is reasonable in light of the extensive cost showings that must accompany these tariffs.  X 4 D.XOther Forms of Pricing Flexibility (#  Y{4 ( y` ` 193. Orders/Background. In the Special Access Expanded Interconnection Order  Ye4 !2 and the Switched Transport Expanded Interconnection Order, we did not grant the LECs broader  !pricing flexibility, such as individual case basis pricing of special access or switched transport  !in response to competitors' offerings or differential pricing of loopside and trunkside special  Y 4access services.U K Y4 xЍSpecial Access Expanded Interconnection Order, 7FCC Rcd at 745758, 18586;  Y4Switched Transport Expanded Interconnection Order, 8FCC Rcd at 742425, 94.  Y4 ( A` ` 194. Positions of the Parties on Reconsideration. GTE and USTA argue that,  !in order to compete fully with CAPs, LECs should be able to engage in individual case basis  Y4 !contract pricing, competitive response pricing, or other alternatives.V Y[4ЍGTE Special Petition at 2324; USTA Special Petition at 21; USTA Special Reply at 34. USTA also argues for  !comprehensive reform of the restrictive Part69 structure and tariffing rules applicable to the  Y4 !LECs in light of competition.ZW Y"4ЍUSTA Special Petition at 2123.Z Ad Hoc supports nonpredatory individual case basis pricing  Y4 !of DS1 and DS3 services in contested markets.[XG  Yx%4ЍAd Hoc Special Opposition at 21.[ The CAPs and IXCs respond that such broad  !pricingflexibilitycouldlead to widespread anticompetitive behavior by LECs, such as  !preferential arrangements benefiting AT&T, as demonstrated by the results of the Commission's"RR X0*((3"  !2 investigation of individual case basis pricing of DS3 offerings and the pending inquiry on volume  Y4 !and term discounts, and is unnecessary given the flexibility already granted to the LECs.Y Yb4 x ЍALTS Special Opposition at 1112; MFS Special Opposition at 2021; CompTel Special  !"Opposition at 1112; MCI Special Opposition at 7; WilTel Special Opposition at 710  !(contending that such individual case basis pricing would interfere with interexchange and access competition, and would violate the MFJ and 202(a) of the Communications Act).  !Sprint contends that with a properly implemented system of density zone pricing that enables  !HLECs to respond to competitive pressures in dense areas, there is no justification for individual  Y4 !case basis or contract pricing.UZ4 Y 4Ѝ Sprint Special Opposition at 56.U In an ex parte filing, Pacific argues that LECs should be  !permitted to institute differential rates for loopside and trunkside special access rates, which  Yv4Pacific contends would be costjustified.{[v Y 4ЍPacific Ex Parte (April 7, 1994), Attachment at 24.{  YH4 ( ` ` 195. Discussion. We do not grant the LECs authority for broader pricing  !flexibility at present. We have taken a number of significant steps to increase the LECs' ability  !bto compete with new entrants. We also recognize, however, that the LECs continue to possess  !substantial market power in the provision of special access and switched transport services. We  !believe that the ability to introduce density zone pricing and volume and term discounts under  !the criteria we have set is sufficient flexibility to facilitate the development of competition at this time.  Y4 ( ` ` 196. As competition develops, we may consider eliminating more of the pricing  !Hrestrictions imposed upon the LECs. As indicated in paragraph 79 above, however, we intend  !to carefully monitor the development of competition in the access marketplace, and have  !delegated to the Chief, Common Carrier Bureau, responsibility for instituting a monitoring program.  X4 wE.Fresh Look   Y4 ( '` ` 197. Orders/Background. In general, "fresh look" means a policy that makes  ! it easier for an incumbent provider's established customers to consider taking service from a new  Y4 !entrant. In the Second Reconsideration Order, we reconsidered de novo our "fresh look" policy  Y4 !for special access expanded interconnection. We concluded that certain longterm special accessw  !Harrangements may prevent customers from obtaining the benefits of the new, more competitive  !access environment. For that reason, we adopted a "fresh look" policy, limiting the charges a  !QLEC may impose on certain customers who want to terminate longterm LEC special access  !arrangements to an amount that would place both the LEC and the customer in the same position  !Hthey would have been had the customer chosen a shorter term arrangement from the beginning  !tof the term. We limited the fresh look opportunity to customers with LEC special access  !arrangements for terms of three years or longer, entered into on or before September 17, 1992,"S[0*(( "  Y4 !the date of adoption of the Special Access Expanded Interconnection Order. The right to limited  !? termination charges for services in a particular central office exists for a period of 180 days from  !the date of filing of the LEC's tariff transmittal giving public notice of the start of the fresh look  !period. The LEC must file that tariff transmittal within five business days of the date that the  !first special access expanded interconnection arrangement is operational in that central office.  Y_4 ( ` ` 198. If a customer chooses to terminate a longterm arrangement pursuant to the  !;fresh look policy, its termination liabilities will be limited to the difference between the amount  !the customer has already paid and any additional charges that the customer would have paid for  !service under a shorter term offering corresponding to the term actually used, plus interest at  !.the IRS rate for tax refunds, compounded daily from the date of each discounted payment that  !3the customer made while taking the service. In addition, we created a second fresh look  !opportunity that occurs when switched transport expanded interconnection becomes operational,  !and applies only to LEC special access facilities used to transmit both special and switched  Y 4 !oaccess traffic.\  Y!4 xЍSecond Reconsideration Order, 8FCC Rcd at 734259, 341. See also Special Access  Y 4 !Expanded Interconnection Order, 7FCC Rcd at 746364, 201; Switched Transport Expanded  Y4Interconnection Order, 8FCC Rcd at 743738, 12425. Like the original fresh look, this second opportunity applies only to long term arrangements entered into on or before September 17, 1992.  Yc4 ( ` ` 199. In Bell Atlanticv. FCC, the Court of Appeals did not directly address the  !LECs' challenges to our fresh look policy. The court held that "[a]lthough the temporary right  !Zto switch providers may have been intended as an independent regulatory remedy for the  !problems of rate structure and barriers to competition that the Commission identified, the remedy  !was tied to the details of colocation and would float unattached in their absence. We must  Y4therefore remand that portion as well."f]K Y4ЍBell Atlanticv. FCC, slip op. at 11.f  Y4 ( ` ` 200. Positions of the Parties on Reconsideration. MFS and Teleport argue that  !!to facilitate greater access competition, the fresh look requirement should eliminate termination  Y4 !liabilities, rather than merely limiting them.^ YC 4ЍMFS Second Special Petition at 36; Teleport Switched Petition at 56. WilTel and MFS argue that AT&T's preexisting  !collocation at many BOC central offices and its dominant market share enable it to benefit  !7uniquely from expanded interconnection, assert that the benefits of fresh look will be lost if  !access customers do not have competitive alternatives to LEC services during the period in  !|which they can terminate their access arrangements with LECs, and therefore ask that the fresh":T^0*(("  !look period not be triggered by interconnection by a party that already had collocated facilities  Y4before September 1992 (i.e., AT&T) alone._ Yb4 xtЍWilTel Second Special Petition at 23; WilTel Second Special Reply at 13; MFS Second Special Petition at 68; MFS Second Special Opposition at 13; MFS Switched Reply at 2 n.2.  Y4 ( ` ` 201. The LECs respond that the CAPs and WilTel raise no new arguments, that  !the Commission's fresh look rules properly permit the LECs to collect costbased nonrecurring  !charges and put both the LEC and the customer in the same position they would have been if  !the customer had originally chosen a shorter term arrangement, and that customers with term  Y`4 !!arrangements are large sophisticated businesses that do not need additional protection.B``b Ys 4 xЍAmeritech Switched Opposition at 12; Bell Atlantic Second Special Opposition at 13;  !GTE Second Special Opposition at 25; United Switched Opposition at 4; Rochester Switched Opposition at 6; USTA Second Special Opposition at 23.B They  !contend that LECs face real competition from selfprovisioning by AT&T, that the expanded  !Hinterconnection proceeding is not intended to equalize the competitive positions of new entrants  !Dand established providers, and that the fresh look period should run from the same date that  Y 4density zone pricing is implemented.a  Y4ЍGTE Second Special Opposition at 57; USTA Second Special Opposition at 35.  Y 4 ( ` ` 202. USTA suggests that, instead of requiring LECs to file tariff transmittals  !every time expanded interconnection becomes operational in a central office, the Commission  !*should require LECs to file monthly transmittals to include all new collocations that become  Y4 !.operational within that month.b Y4 xЍUSTA Second Special Petition at 12; USTA Switched Petition at 910; USTA Second Special Reply at 3; USTA Switched Reply at 5. MFS supports USTA's proposal, stating that it would reduce  !^administrative burdens on LECs, interconnectors, and users by making the fresh look notice  Yd4process simpler and more predictable.Xcd0  YE4ЍMFS Switched Opposition at 6.X  Y64 ( _` ` 203. GTE Petition. GTE filed a petition for waiver of the requirement that it file  Y 4 !a tariff each time expanded interconnection first becomes operational in a central office.d   Y!4ЍGTE Petition for Limited Waiver of the "Fresh Look" Policy (Nov.16, 1993).  !Instead, GTE proposes to reduce the termination charges in its tariff to enable all customers that  !kmay become eligible for the fresh look to exercise that option at any time during the term of  !Dtheir agreements. GTE also proposes not to charge customers any interest in computing the  !oapplicable termination charges. GTE contends that these measures would benefit its customers,  !and should relieve GTE of administrative burdens in calculating such charges. SW Bell does"Ud0*((d"  !not oppose GTE's petition, but suggests that no waiver may be required, and contends that other  Y4LECs should not be subject to similar requirements.e Yb4 xЍSW Bell Comments on GTE Petition for Limited Waiver of the "Fresh Look" Policy (DATE) at 3.  Y4 ( ` ` 204. Discussion. We conclude that fresh look continues to be necessary, in  !Qconnection with our mandatory virtual collocation policy, to give customers with LEC term  !odiscounts entered into on or before September 17, 1992, a reasonable chance to take advantage  !of new competitive opportunities made possible by expanded interconnection. We reaffirm our  !Dconclusion that the limited termination liabilities enable customers to benefit sooner from the  !competition generated by our expanded interconnection policies. We also reaffirm our  !bconclusion that fresh look does not place an unreasonable burden on the LECs, since the LECs  !&will obtain the compensation appropriate for the term actually taken by the customer. In  !addition, we find that the parties have presented no evidence or arguments in the reconsideration  !record that persuade us that our earlier conclusion regarding the maximum reasonable amount of termination liabilities was incorrect.  Y 4 ( 8` ` 205. Some of the LECs challenged our fresh look policy in court on the grounds  !Uthat we did not provide adequate notice of the policy to satisfy the requirements of Section 553  Y{4 !of the Administrative Procedure Act or Section205 of the Communications Act.af{b Y4Ѝ5U.S.C. 553; 47U.S.C. 205.a We disagree  !twith this contention. In the initial Notice of Proposed Rulemaking in this proceeding, we  YM4 !focused on the anticompetitive effect of the LECs' thenexisting special access tariff structure.ogM Y4ЍFirst Notice, 6FCC Rcd at 3260, 69.o  !ULongterm contracts had the effect of locking in that tariff structure and sealing off portions of  !the market from competition, notwithstanding our expanded interconnection policy. Thus, in  !the absence of fresh look, implementation of expanded interconnection would lead to only  !limited special access competition because of the effects of longterm contracts. While we  !recognize that we did not ask for specific comment on the fresh look remedy, we continue to  Y4 !believe that it is a "logical outgrowth" of the competitive concerns identified in the Notice._h_ Y84 xЍSee Action Alliance of Senior Citizens of Philadelphiav. Bowen, 846F.2d 1449, 1455  Y! 4 !k(D.C. Cir. 1988); Small Lead Refiner PhaseDown Task Forcev. EPA, 705F.2d 506, 547  Y !4 !(D.C. Cir. 1983); Central Lincoln Peoples' Utility Districtv. Johnson, 735F.2d 1101, 1118  Y!4 !2 (9th Cir. 1984); American Transfer& Storage co.v. ICC, 719F.2d 1283, 1303 (5th Cir. 1984);  Y"4 !!Second Reconsideration Order, 8FCC Rcd at 734344, 68. See also First Notice, 6FCC  !Rcd at 3266, 45 (requesting comment on "whether to establish new guidelines for review of rate structure responses to competition.")._  Y4 !Finally, we reconsidered the fresh look issue de novo, and made substantial changes to the  Y4 !policy, in the Second Reconsideration Order, based on an extensive record submitted by a broad  !range of parties. Thus, even if inadequate notice was given before adopting fresh look in the"~V h0*((8"  Y4 !Special Access Expanded Interconnection Order, any error was harmless because we have  Y4already reconsidered the decision de novo, with an open mind.i Yb4 xЍSee Reederv. FCC, 865F.2d 1298, 1304 (D.C. Cir. 1989); McLouth Steel Prods.  YK4 !tCorp.v. Thomas, 838F.2d 1317, 1323 (D.C. Cir. 1988); Air Transport Ass'nv. DOT,  Y44 !D900F.2d 369, 379 (D.C. Cir. 1990), vacated for consideration of mootness, 111S.Ct. 944 (1991).  Y4 ( ` ` 206. We also reaffirm that interconnection by any party, including AT&T, in a  !given central office triggers the beginning of the fresh look period for that office. If AT&T (or  !kany other party) interconnects in a central office, it should be eligible for limited termination  !Uliabilities for longterm LEC special access arrangements purchased by it or by its customers to  !Qwhom it sells access service. The fresh look period does not recommence each time a new  !interconnector enters a given central office. Interconnectors subsequent to the first must take  !the access market as they find it. The LEC tariff filing giving customers public notice of the  !beginning of the fresh look period for each central office gives potential subsequent inter !3connectors notice of the activities of the earliest interconnector, and enables them to start  !providing service in the central office during the fresh look period if they can and choose to do  !so. We are not placing any special restrictions on the ability of AT&T or other parties to  Y 4purchase and use expanded interconnection.bj 4 Y4ЍSee supra 109110.b  Y4 ( A` ` 207. USTA's proposal to allow LECs to file monthly transmittals including all  !|new collocations that become operational within that month appears to be reasonable. As noted  !by MFS in support, this should reduce the tariff filing burdens on LECs, as well as the  !information retrieval burdens on parties interested in these filings. Accordingly, we modify our  !fresh look policy, which currently requires LECs to file tariff transmittals giving public notice  !L of the fresh look opportunity for each central office no later than five business days after the first  !;special access expanded interconnection arrangement becomes operational in the central office.  !Instead, we will require the LECs to file tariff transmittals no later than five business days after  !the end of each calendar month giving public notice of the fresh look opportunity for each  ! central office in which the first expanded interconnection arrangement became operational during  !tthat month. The fresh look period runs from the actual date that the first expanded inter !connection arrangement becomes operational until 180 days following the filing date of the tariff  Y~4 !!providing notice of the beginning of the fresh look period.nk~ Y"4ЍSee 47C.F.R. 1.4 (computation of time).n The same procedures will apply  !to fresh look periods triggered by switched transport expanded interconnection. In addition, we  !!clarify that LECs need not file any tariff transmittals if their termination liabilities are less than  !or equal to the maximum liabilities specified by our fresh look policy. Accordingly, we dismiss GTE's petition for waiver as moot. " Wk0*(("Ԍ Y4 ( ` ` 208. Finally, we conclude that no additional fresh look periods are necessary  !bunder our mandatory virtual collocation rules. Once interconnectors entered a market by using  !tphysical collocation arrangements in a particular central office, LEC customers with term  !discounts had the opportunity to switch their service to the interconnectors with limited  !termination liabilities. Such interconnectors are likely to remain active in the same geographic  !Zareas even if the LEC substitutes a virtual collocation offering for its physical collocation  !offering. Thus, if the fresh look period has already run in a given central office, no new fresh look period will be triggered by operational expanded interconnection under our new policies.  X24 F.XNonRecurring Reconfiguration Charges (#  Y 4 ( ` ` 209. Order. In our earlier orders, we decided that all nonrecurring charges  !applicable to customers shifting to an interconnector's services are to be set no higher than cost !based levels, and exempted such charges from the application of the presumption of  !reasonableness in the price cap rules. In addition, we concluded that any difference between the  !charges applicable when a customer shifts to an interconnector's services and those applicable  Y4when a customer reconfigures its service with the LEC must be costbased.l Y 4 xЍSecond Reconsideration Order, 8FCC Rcd at 736163, 4751; Switched Transport  Y4Expanded Interconnection Order, 8FCC Rcd at 7439, 130.  Yd4 ( B` ` 210. Positions of the Parties on Reconsideration. Ameritech asks the  !oCommission to reconsider the decision to eliminate the price cap presumption of reasonableness  !for nonrecurring reconfiguration charges, expressing concern about the erosion of pricing  !flexibility in the price cap system, and arguing that the price cap constraints and the existence  Y 4 !Hof access competition and interconnection adequately protect consumers.Om b Y4 xtЍAmeritech Second Special Petition at 13; Ameritech Second Special Reply at 12 (noting  !Qthat it has modified its nonrecurring charges to establish a single rate structure applicable to special access, switched transport, and interconnection).O MFS responds that  !!it is necessary to abandon the presumption of lawfulness in order to review the reasonableness  !Hof the levels and differences in nonrecurring charges, protect consumers and competitors, and  Y4enforce the Communications Act's prohibition of unreasonable discrimination in this context.`n YZ4ЍMFS Second Special Opposition at 34.`  Y4 ( ` ` 211. Teleport opposes the provision permitting "costbased" differences between  !!nonrecurring charges applicable to customers shifting to use interconnector services and those  !applicable to customers reconfiguring LEC services. Teleport argues that this exception creates  !ga huge loophole that enables LECs to discriminate against access competitors, and instead  !Irecommends a requirement that LECs waive all NRCs when customers shift traffic to  !competitors within 180 days of the establishment of a collocation arrangement in a given central"$Xn0*(("  Y4 !&office.]o Yy4ЍTeleport Switched Petition at 46.] The LECs argue that termination liabilities are costbased, are commonly used  ! throughout commerce, including by the CAPs, and reflect the economics of protecting LECs and  !.their ratepayers from premature customer departure from LEC facilities. They also argue that  Y4Teleport's proposal would constitute a rate prescription without the necessary procedures.py Y4 x3ЍUSTA Switched Opposition at 6; Ameritech Switched Opposition at 12; GTE Switched Opposition at 1719; GTE Second Special Opposition at 25; United Switched Opposition at 4.  Y4 ( ` ` 212. Discussion. We reaffirm our policies on nonrecurring reconfiguration  !|charges. These charges raise special competitive concerns, and we conclude that elimination of  !the price cap presumption of reasonableness for these charges is necessary to enforce our  !% requirement that the levels of and differences between these charges be costbased, and to protect  !competitors and consumers. We also reaffirm that LECs may charge higher nonrecurring  !charges to customers reconfiguring to use interconnectors' services than they charge for other  !reconfigurations if such rate differences are costjustified. The LECs incur legitimate costs in  !making service changes, and in general should be able to recover these costs from inter !Uconnectors and their customers. The only exception would be when the LEC does not recover  !nonrecurring reconfiguration costs from its own special access or switched transport customers.  !|In that case, the LEC must not charge customers who reconfigure in order to take service from  !an interconnector more than an amount reflecting the difference between the costs of the two different types of reconfigurations.  Y54SE VIII. OTHER MATTERS ׃  Y4 ( ,` ` 213. The CAPs have argued that the Commission should impose certain  !requirements to govern the transition from a mandatory physical to a mandatory virtual  !collocation regime. Specifically, the CAPs argue that in the event LECs choose to terminate  !their existing physical collocation offerings, those LECs should bear the full cost of any LEC Y4 !required rearrangements to virtual collocation.q Yq4ЍMFS Ex Parte (July5, 1994) at 2324; US Signal Ex Parte (July7, 1994) at 3. The CAPs also argue that the LECs should  !reimburse interconnectors for certain charges previously paid for physical collocation, such as  Y4 !Hthe costs of cage construction,r Y!4ЍALTSEx Parte (July 6, 1994) at 5; MFSEx Parte (July5, 1994) at 2426. and that LECs that "grandfather" existing physical collocation  !Harrangements should be required to permit interconnectors reasonably to expand those facilities  YQ4 !to meet demand.lsQu Yw%4ЍMFS Ex Parte (July 5, 1994) at 2627.l We believe that the transition issues raised by the CAPs generally present  !|questions that should be addressed on a casebycase basis. We delegate authority to the Chief, Common Carrier Bureau, to address these matters."#Y& s0*((!"Ԍ Y4 ( ԙ` ` 214. With respect to any other issues addressed in our previous expanded inter !connection orders that are not specifically addressed in this order, we reaffirm our earlier  !kconclusions for our new virtual collocation regime, based on the reasons stated in the earlier orders.  Yw4t[ IX. CONCLUSION ׃  YJ4 ( _` ` 215.  Our expanded interconnection policy advances major Commission objectives  !2 of promoting economic growth and increasing access to communications networks. Accordingly,  Y 4 !we modify that policy to be consistent with the recent court decision in the Bell Atlanticv. FCC  !Qcase, and require the LECs to provide expanded interconnection through virtual collocation,  !Zunless they qualify for an exemption that would permit them to offer physical collocation  !oinstead. We have addressed in detail in this order the standards, terms, and conditions that will  !apply to virtual collocation under our new policy. Because we expect that some LECs will  !provide a TitleII physical collocation offering under this new regime, we have also addressed  !the standards, terms, and conditions that will apply to physical collocation. In most respects,  !Hthe rules governing the mandatory virtual collocation regime will be the same rules that applied under our original mandatory physical collocation policy.  Y 4-? X. ORDERING CLAUSES ׃  Y4 ( 9 ` ` 216. Accordingly, IT IS ORDERED, pursuant to authority contained in  ! Sections1, 4, 201205, 214, and 218 of the Communications Act of 1934, as amended,  !47U.S.C. 151, 154, 201205, 214, and 218, that Parts 64 and 69 of the Commission's Rules ARE AMENDED as set forth in AppendixB of this Order.  Y4 (  ` ` 217. IT IS FURTHER ORDERED that the policies, rules, and requirements  !adopted in this Order SHALL BE EFFECTIVE on December15, 1994, except the requirements  !&regarding the filing of tariffs and regarding notifications with respect to exempt physical  Y=4collocation offerings,Ot= Y4ԍSee supra 36.O which SHALL BE EFFECTIVE on September1, 1994.  Y4 ( ` ` 218. IT IS FURTHER ORDERED that Teleport's Petition for Declaratory Ruling IS DENIED except to the extent specified in this order.  Y 4 ( h` ` 219. IT IS FURTHER ORDERED that GTE's Petition for Limited Waiver of the "Fresh Look" Policy IS DISMISSED as moot. ""Zyt0*(($"Ԍ Y4 ( = ` ` 220. IT IS FURTHER ORDERED that authority is delegated to the Chief,  Y4Common Carrier Bureau, as set forth herein.vu Yc4ЍSee infra 61, 79, 81, 117, 184, & 213.v ` `  ,hh]FEDERAL COMMUNICATIONS COMMISSION ` `  ,hh]William F. Caton ` `  ,hh]Acting Secretary " [yu0*(( "  Y4r APPENDIX A   PETITIONS FOR RECONSIDERATION,  X4, OPPOSITIONS AND REPLIES FILED c 50Petitions for Reconsideration of the Special Access Expanded Interconnection Order ("Special Petitions")  Y`4`aDecember 18, 1992BvA` Y4ԍ #c P7P#GTE filed a document captioned "Second Petition for Reconsideration" on February1, 1993. This  xP 'filing does not challenge the First Reconsideration Order; in substance it merely records GTE's continued  xP 'objections to the Special Access Expanded Interconnection Order discussed in its initial petition for  xPR 'reconsideration. We consider this "petition" as an ex parte filing.#Xw P7ډXP#B   xP2'*(#҇ c#c P7P#XcAmerican Telephone and Telegraph Co. (AT&T) XcAssociation for Local Telecommunications Services (ALTS) XcCentral Telephone Co. (Centel) XcGTE Service Corporation and its affiliated domestic telephone operating companies (GTE) XcIndependent Data Communications Manufacturers Association, Inc. (IDCMA) XcMCI Telecommunications Corp. (MCI) XcMFS Communications Co. (MFS) XcNational Association of Regulatory Utility XCommissioners (NARUC)"\v0*((" XppNew York Telephone Co. and New England Telephone and Telegraph Co. (NYNEX)(#p XppPenn Access Corporation (Penn Access)(#p XppRochester Telephone Corp. (Rochester)(#p XppSprint Communications Co. (Sprint)(#p XppTeleport Communications Group (Teleport)(#p XppTennessee Public Service Commission (Tennessee)(#p XppUnited States Telephone Association (USTA)(#p XppUnited Telephone Companies (United)(#p XppWilTel, Inc. (WilTel)(#pH:\v0*(( $\2\P((Hԯ  Y"4#Xw P7ډXP# Oppositions to Petitions for Reconsideration of the ?Special Access Expanded Interconnection Order ("Special Oppositions") oFebruary 3, 1993c  xP'ԇ#c P7P#XcAd Hoc Telecommunications Users Committee (Ad Hoc) XcAmeritech Operating Companies (Ameritech) ALTS XcAmerican Petroleum Institute (API) AT&T XcBell Atlantic Telephone Companies (Bell Atlantic) XcCompetitive Telecommunications Association (CompTel) GTE IDCMA XcInformation Industry Association (IIA) "& \v0*((!" XppInformation Technology Association of America (ITAA)(#p XppInternational Communications Association (ICA)(#p MCI MFS NARUC NYNEX XppProdigy Services Co. (Prodigy)(#p Rochester Sprint United USTA WilTelH& \v0*((!$ \ \ ((H  Y4#Xw P7ډXP# Replies to Oppositions to Petitions for Reconsideration of the Special Access Expanded Interconnection Order ("Special Replies") kFebruary 18, 1993c  xP4'(# L(#҇#c P7P#ALTS AT&T GTE MCI"]v0*((" MFS IDCMA NYNEX"]v0*((" Penn Access Corp. (Penn Access) Sprint Teleport "T]v0*((" United USTA WilTel\]v0*((8T ]]]p@4]|((\ԯ  Y 4#Xw P7ډXP#05Petitions for Reconsideration of the W Second Reconsideration Order ("Second Special Petitions") nOctober 18, 1993  xPg '#c P7P# Ameritech"/]v0*((" MFS"/]v0*((" USTA"/]v0*((" WilTel\/]v0*((8]]]/]((\ԯ  Y4#Xw P7ډXP# Oppositions to Petitions for Reconsideration of the Second Reconsideration Order ("Second Special Oppositions") fNovember 23, 1993  xPB'#c P7P# Bell Atlantic" ]v0*((" GTE" ]v0*((" MFS" ]v0*((" USTA\ ]v0*((8]]] ]((\ԯ  Yb4#Xw P7ډXP# Replies to Oppositions to Petitions for Reconsideration of the Second Reconsideration Order ("Second Special Replies") kDecember 9, 1993  xP'#c P7P# Ameritech"]v0*((+" MFS"]v0*((+" USTA"]v0*((+" WilTel\]v0*((+8]]]]+((\ԯ  Y=4#Xw P7ډXP#05Petitions for Reconsideration of the Switched Transport Expanded Interconnection Order ("Switched Petitions") nOctober 18, 1993  xP'#c P7P#  L(#(#҇ALTS CompTel GTE XcHyperion Telecommunications, Inc. (Hyperion) MCI MFS NARUC "8%]v0*(('" Pennsylvania Public Utility Commission pp(Pennsylvania) Sprint WilTel Teleport USTAH#]v0*((`%$&]]P!((Hԯ Y&4#Xw P7ډXP#"&]v0*(('" Oppositions to Petitions for Reconsideration of the Switched Transport Expanded Interconnection Order ("Switched Opppositions") fNovember 23, 1993  xP'#c P7P# Ameritech AT&T Bell Atlantic BellSouth Telecommunications, Inc. (BellSouth) GTE MFS "3^v0*((" NYNEX Pacific Bell and Nevada Bell (Pacific) Rochester Sprint XppUnited and Central Telephone Companies (United)(#p USTA WilTelH3^v0*(($^^((Hԯ  Y 4#Xw P7ډXP# Replies to Oppositions to Petitions for Reconsideration of the Switched Transport Expanded Interconnection Order ("Switched Replies") kDecember 9, 1993  xPF '#c P7P# (# L(#҇CompTel GTE"^v0*((" MCI MFS"^v0*((" Rochester Sprint"^v0*((" USTA WilTel\^v0*((8^^^^((\ԯ "f^v0*((*"  X4#Xw P7ډXP##Xw P7ډXP#"  APPENDIX B RULE CHANGES ē c  X4 PART 64 MISCELLANEOUS RULES RELATING TO COMMON CARRIERS  Y4 I. A. 1. a.(1)(a) i) a) 1. A. 1. a.(1)(a) i) a) 1. The authority citation for Part 64 continues to read as follows:  x@AUTHORITY: Section 4, 48 Stat. 1066, as amended; 47 U.S.C. 154, unless otherwise  !% noted. Interpret or apply secs. 201, 218, 225, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 225, unless otherwise noted.  Y 4 x 2. Section 64.1401 of Subpart N of Part 64 is amended by revising paragraph (c), removing  !paragraphs (d) and (e), redesignating paragraphs (f) through (i) as paragraphs (d) through (g), respectively, and revising redesignated paragraph (f)(2), to read as follows:  X 4 64.1401` ` Expanded Interconnection * * * * *  YM4 ( A(c)` ` The local exchange carriers specified in paragraph (a) of this section shall offer  !expanded interconnection for interstate special access and switched transport services through  !virtual collocation, except that they may offer physical collocation, instead of virtual collocation,  !in specific central offices, as a service subject to nonstreamlined communications common carrier regulation under TitleII of the Communications Act (47U.S.C. 201228). * * * * *  Y4(f)` ` * * *  Yg4 W` ` (2) At least two such interconnection points at any local exchange carrier  !Mlocation at which there are at least two entry points for the local exchange carrier's cable facilities, and space is available for new facilities in at least two of those entry points. Part 69 of Title47 of the Code of Federal Regulations is amended as follows:  X4 PART 69 ACCESS CHARGES  Y!4 1. A. 1. a.(1)(a) i) a) 1. A. 1. a.(1)(a) i) a) 1. The authority citation for Part 69 continues to read as follows:  Y#4 xAUTHORITY: Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat. 1066, 1070, 1072, 1077, 1094, as amended; 47 USC 154, 201, 202, 203, 205, 218, 403.  XT%4  Y=&42. Section 69.121 is amended by revising paragraph (a)(2) to read as follows:  X''4 Ì X469.121 Connection charges for expanded interconnection.  Y4(a)* * *  Y4 ( E(2)` ` Charges for subelements associated with physical collocation or virtual collocation,  !other than the subelement described in paragraph (a)(1) of this section and subelements  !recovering the cost of the virtual collocation equipment described in 64.1401(e)(1) of this chapter, may reasonably differ in different central offices, notwithstanding 69.3(e)(7). * * * * *