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SCOPE OF COMMISSION AUTHORITY p"(# 20  X-XX` ` A.` ` Rulemaking Authority ` p"(# 20  X-XX` ` B.` ` Scope of Commission's Authority Regarding InterLATA Services ` p"(# 25 X\III. ACTIVITIES SUBJECT TO SECTION 272 REQUIREMENTS p"(# 50  X-XX` ` A.` ` General Issues ` p"(# 51  X -XX` ` X ` ` 1. Definition of "interLATA services" p"(# 51  Xk!-XX` ` X ` ` 2. Application of Section 272 Safeguards to International InterLATA Services p"(# 58  X=#-XX` ` X ` ` 3. Provision of Services through a Single Affiliate p"(# 59  X&$-XX` ` X ` ` 4. Manufacturing Activities p"(# 64  X%-XX` ` B.` ` Mergers/Joint Ventures of Two or More BOCs ` p"(# 65  X%-XX` ` C.` ` Previously Authorized Activities ` p"(# 71  X&-XX` ` D.` ` Outofregion interLATA information services ` p"(# 82"&,-(-(ZZ%"Ԍ X-XX` ` E.` ` Incidental InterLATA Services ` p"(# 88  X-XX` ` F.` ` InterLATA Information Services ` p"(# 99  X-XX` ` X ` ` 1. Relationship Between Enhanced Services and Information Services p"(# 99  X-XX` ` X ` ` 2. Distinguishing InterLATA Information Services subject to Section 272 from IntraLATA Information Services p!(# 108  Xv-XX` ` X ` ` 3. BOCprovided Internet Access Services p!(# 125  X_-XX` ` X ` ` 4. Impact of the 1996 Act on the Computer II, Computer III, and  XH-ONA requirements p!(# 128  X1-XX` ` G.` ` Information Services Subject to Other Statutory Requirements ` p!(# 138  X -XX` ` X ` ` 1. Electronic Publishing (section 274) p!(# 138  X -XX` ` X ` ` 2. Telemessaging (section 260) p!(# 143 X\IV. STRUCTURAL SEPARATION REQUIREMENTS OF SECTION 272 p!(# 146  X -XX` ` A.` ` Application of the Section 272(b) Requirements ` p!(# 146  X -XX` ` B.` ` The "Operate Independently" Requirement ` p!(# 147  X-XX` ` C. ` ` Section 272(b)(3) and Shared Services ` p!(# 171  Xy-XX` ` E.` ` Section 272(b)(4) ` p!(# 187  Xb-XX` ` F.` ` Section 272(b)(5) ` p!(# 191 X\V. NONDISCRIMINATION SAFEGUARDS p!(# 194  X-XX` ` A.` ` Relationship of Section 272(c)(1) and Preexisting Nondiscrimination Requirements ` p!(#195  X-XX` ` B.` ` Meaning of Discrimination in Section 272(c)(1) ` p!(# 198  X-XX` ` C.` ` Definition of "Goods, Services, Facilities and Information" in Section 272(c)(1) ` p!(#213  X-XX` ` D.` ` Establishment of Standards ` p!(#223  X-XX` ` E.` ` Procurement Procedures ` p!(#231  X|-XX` ` F.` ` Enforcement of Section 272(c)(1) ` p!(#236 X\VI. FULFILLMENT OF CERTAIN REQUESTS PURSUANT TO SECTION 272(e) p!(#237  X7-XX` ` A.` ` Section 272(e)(1) ` p!(#237  X -XX` ` B.` ` Section 272(e)(2) ` p!(#246  X -XX` ` C.` ` Section 272(e)(3) ` p!(#254  X-XX` ` D.` ` Section 272(e)(4) ` p!(#259  X-XX` ` E.` ` Sunset of Subsections 272(e)(2) and (4) ` p!(#268 X\VII. JOINT MARKETING p!(#272  X"-XX` ` A.` ` Joint Marketing Under Section 271(e) ` p!(#272  X#-XX` ` B.` ` Section 272(g) ` p!(#283  Xh$-XX` ` X ` ` 1. Marketing Restrictions on BOC Section 272 Affiliates p!(#283  XQ%-XX` ` X ` ` 2. Marketing Restrictions on BOCs p!(#288  X:&-XX` ` X ` ` 3. Section 272(g)(3)q p!(#294":&,-(-(ZZ$"Ԍ X-XX` ` C.` ` Interplay Between Sections 271(e), 272(g) and Other Provisions of the Statute ` p!(#297 X\VIII. PROVISION OF LOCAL EXCHANGE AND EXCHANGE ACCESS  BY BOC AFFILIATES p!(#301 X\IX. ENFORCEMENT p!(#318  X_-XX` ` A.` ` Reporting Requirements under Section 272 ` p!(#318  XH-XX` ` B.` ` Section 271(d)(6) Enforcement Provisions ` p!(#329  X1-XX` ` X ` ` 1. Commission's Enforcement Authority under Section 271(d)(6) p!(#330  X -XX` ` X ` ` 2. Legal and Evidentiary Standards p!(#335  X -XX` ` X ` ` 3. Prima Facie Standard p!(#338  X -XX` ` X ` ` 4. BurdenShifting and Presumption of Reasonableness p!(#342  X -XX` ` X ` ` 5. Enforcement Measures under Section 271(d)(6)(A)(# p!(#352 X\X. FINAL REGULATORY FLEXIBILITY CERTIFICATION p!(#357 XI. FURTHER NOTICE OF PROPOSED RULEMAKINGp!(#362  Xb-XX` ` A.` ` Information Disclosure Requirements under Section 272(e)(1) ` p!(#362  XK-XX` ` B.` ` Procedural Matters ` p!(#383 X\XII. ORDERING CLAUSES p!(#390  X-ԛ  X-APPENDIX A List of Commenters  X-APPENDIX B Final Rules  X-APPENDIX C Format for Information Disclosures Pursuant to Section 272(e)(1)<!}K ,!J:\POLICY\SAFE\ORDER\MASTER\272INTRO, <    Xe-MI kI. INTRODUCTION ă  X7- 1.` ` In February 1996, the Telecommunications Act of 1996 became law. 7 yO- v ԍTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996 Act), to be codified at 47 U.S.C.  yOx- d(# 151 et seq. Hereinafter, all citations to the 1996 Act will be to the 1996 Act as it will be codified in the United  d(#States Code. The 1996 Act amended the Communications Act of 1934. We will refer to the Communications Act of 1934, as amended, as "the Communications Act" or "the Act." Thek intent  d(#of the 1996 Act is "to provide for a procompetitive, deregulatory national policy framework  d(#jdesigned to accelerate rapidly private sector deployment of advanced telecommunications and  d(# information technologies and services to all Americans by opening all telecommunications  X-markets to competition." yO<&- v ԍSee Joint Statement of Managers, S. Conf. Rep. No. 104230, 104th Cong., 2d Sess. 1 (1996) (Joint Explanatory Statement). ",-(-(ZZ"Ԍ X- _ԙ2.` ` In this proceeding, we adopt nonaccounting safeguards, pursuant to section 272  d(#of the Communications Act, to govern entry by the Bell Operating Companies (BOCs) into  X- d(#Ncertain new markets.{ yOK-ԍWe define the term "BOC" as that term is defined in 47 U.S.C.  153(4).{ This proceeding is one of a series of interrelated rulemakings that  d(#jcollectively will implement the telephony provisions of the 1996 Act. Other proceedings under  X- d(#the 1996 Act have focused on opening markets to entry by new competitors,tX yO- v ԍSee Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC  yOu- d(#Docket No. 9698, First Report and Order, FCC 96325 (rel. Aug. 8, 1996) (First Interconnection Order), Motion  yO= - d(#for stay of the FCC's Rules Pending Judicial Review denied, FCC 96378 (rel. Sep. 17, 1996), partial stay granted,  yO - d(#Iowa Util. Bd. v. Federal Communications Commission, No. 963321, WL 589204 (8th Cir. Oct. 15, 1996) (Iowa  yO - d(#Utilities Board v. FCC), Order Lifting Stay in Part, (8th Cir. Nov. 1, 1996); Implementation of the Local  yO - d(#;Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 9698, Second Report and Order,  yO] - d(#and Memorandum Opinion and Order, FCC 96333 (rel. Aug. 8, 1996) (Second Interconnection Order); appeal  yO% - d(#docketed Bell Atlantic Telephone Companies v. FCC, No. 90567 (D.C. Cir. Sept. 16, 1996), People of the State  yO - d(#of California v FCC, No. 963519 (8th Cir. Sept.23, 1996), SBC Communications Inc, v. FCC, No. 961414 (D.C. Cir. Nov. 1, 1996). t establishing rules  X- d(#to preserve and advance universal service,X  yO.-ԍSee FederalState Joint Board on Universal Service, CC Docket No. 9645, Recommended Decision,  yO- d(#FCC 96J3 (rel. Nov. 8, 1996) (Universal Joint Board Recommended Decision); Order Establishing Joint Board on  yO-Universal Service, CC Docket No. 9645, Notice of Proposed Rulemaking, FCC 9693 (rel. Mar. 8, 1996). establishing rules for competition in those markets that  Xv-are opened to competitive entry,Xv yO7- v ԍSee Amendment of the Commission's Rules to Establish Competitive Service Safeguards for Local Exchange  yO- d(#Carrier Provision of Commercial Mobile Radio Services, WT Docket No. 96162, Notice of Proposed Rulemaking, Order on Remand, and Waiver Order, FCC 96319 (rel. Aug. 13, 1996). and on lifting legal and regulatory barriers to competition.  v0 yOW- v ԍSee Common Carrier Bureau Seeks Suggestions on Forbearance, DA 96798, Public Notice (rel. May 17,  yO- d(#1996); Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 254(g)  yO- d(#of the Communications Act of 1934, CC Docket No. 9661, Second Report and Order, FCC 96424 (rel. Oct. 31,  yO-1996) (Second Interexchange Order).   XH- 3.` ` Upon enactment, the 1996 Act permitted the BOCs immediately to provide  X1- d(#interLATA1 yO- v lԍ LATA Under the 1996 Act, a "local access and transport area" (LATA) is "a contiguous geographic area (A)  d(#established before the date of enactment of the [1996 Act] by a [BOC] such that no exchange area includes points  d(#within more than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State, except as  d(#expressly permitted under the AT&T Consent Decree; or (B) established or modified by a [BOC] after such date of  d(#>enactment and approved by the Commission." 47 U.S.C.  153(25). LATAs were created as part of the  d(#,Modification of Final Judgment's (MFJ) "plan of reorganization" under which the BOCs were divested from AT&T.  yO#- d(#,United States v. Western Elec. Co., 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460  yOr$- d(#U.S. 1001 (1983); United States v. Western Elec. Co., 569 F. Supp. 1057 (D.D.C. 1983) (Plan of Reorganization),  yO:%- d(#aff'd sub nom. California v. United States, 464 U.S. 1013 (1983); see also United States v. Western Elec. Co., No.  d(#820192 (D.D.C. Apr. 11, 1996) (vacating the MFJ). Pursuant to the MFJ, "all BOC territory in the continental  d(#United States [was] divided into LATAs, generally centering upon a city or other identifiable community of interest." "&,-(-(='"  yO-United States v. Western Elec. Co., 569 F. Supp. 990, 993 (D.D.C. 1983).  services  1X yO - v ԍ SERVICE The 1996 Act defines "interLATA services" as "telecommunications between a point located in a local access and transport area and a point located outside such area." 47 U.S.C.  153(21).  that originate outside of their inregion states. x1 yOx- v ԍFor purposes of this proceeding, we have defined the term "inregion state" as that term is defined in 47  d(#U.S.C.  271(i)(1). We note that section 271(j) provides that a BOC's inregion services include 800 service, private  d(#line service, or their equivalents that terminate in an inregion state of that BOC and that allow the called party to  yO- d(#Jdetermine the interLATA carrier, even if such services originate outofregion. Id.  271(j); see also Bell Operating  yO- d(#;Company Provision of OutofRegion Interstate, Interexchange Services, CC Docket No. 9621, Report and Order,  yO` - d(#iFCC 96288 (rel. July 1, 1996) (Interim BOC OutofRegion Order) (addressing BOC provision of outofregion, domestic, interstate, interexchange services). The 1996 Act conditions"1  ,-(-(ZZa"  d(#Lthe BOCs' entry into inregion interLATA services on their compliance with certain provisions  d(#of section 271. Under section 271, we must determine, among other things, whether the BOC  X- d(#<has complied with the safeguards imposed by section 272 and the rules adopted herein.? @  yOs- v Nԍ47 U.S.C.  271(d)(3)(B). The Commission also must find, within 90 days, that the interconnection  d(#agreements or statements approved by the appropriate state commission under section 252 satisfy the competitive  yO- d(#checklist contained in section 271(c)(2)(B), and that the BOC's entry into the inregion interLATA market is  yO- d(#"consistent with the public interest, convenience and necessity." Id.  271(d)(3)(A), (d)(3)(C). In acting on a  d(#xBOC's application for authority to provide inregion interLATA services, the Commission must consult with the  d(#Attorney General and give substantial weight to the Attorney General's evaluation of the BOC's application. In  d(#addition, the Commission must consult with the applicable state commission to verify that the BOC complies with  yO-the requirements of section 271(c). Id.  271(d)(2)(B).? Section  d(#272 addresses the BOCs' provision of interLATA telecommunications services originating in  d(#states in which they provide local exchange and exchange access services, interLATA information  X-services,9 X yO6- v =ԍThe 1996 Act excludes electronic publishing (as defined in section 274(h)) and alarm monitoring (as defined  d(#in section 275(e)) from the separate affiliate requirement for interLATA information services. 47 U.S.C.  272(a)(2)(C).9 and BOC manufacturing activities. `  yOV- v ԍThe MFJ prohibited the BOCs from providing information services, providing interLATA services,  d(#manufacturing and selling telecommunications equipment, and manufacturing customer premises equipment (CPE).  d(#The information services restriction was modified in 1987 to allow BOCs to provide voice messaging services and  yO- d(#hto transmit information services generated by others. United States v. Western Elec. Co., 673 F. Supp. 525 (D.D.C.  yOv- d(#1987); United States v. Western Elec. Co., 714 F. Supp. 1 (D.D.C. 1988).  In 1991, the restriction on BOC  yO>- d(#ownership of contentbased information services was lifted. United States v. Western Elec. Co., 767 F. Supp. 308  yO - d(#i(D.D.C. 1991), stay vacated, United States v. Western Elec. Co., 19911 Trade Cases (CCH)  69,610 (D.C. Cir.  d(#1991). The 1996 Act defines the term "AT&T Consent Decree" to refer to the MFJ and all subsequent judgments  d(#hor orders related to the MFJ. 47 U.S.C. 153(3). In the text of this order, we use the term "MFJ" and "MFJ Court"  yO^"- d(#-only to refer to the AT&T Consent Decree as defined in the 1996 Act and by the decisions of the D.C. District  yO&#- d(#Court. We will cite with particularity to the terms of the original Modification of Final Judgment cited at United  yO#-States v. Western Elec. Co. 552 F. Supp. at 226232. "v@ ,-(-(ZZ"Ԍ X- 4.` ` On July 18, 1996, we initiated this proceeding by releasing a Notice of Proposed  X- d(#Rulemaking (Notice)X yOb- v ԍImplementation of the NonAccounting Safeguards of Sections 271 and 272 of the Communications Act of  d(#h1934, as amended; and Regulatory Treatment of LEC Provisions of Interexchange Services Originating in the LEC's  yO-Local Exchange Area, CC Docket No. 96149, Notice of Proposed Rulemaking, FCC 96308 (rel. July 18, 1996). that sought comment on the nonaccounting separate affiliate and  d(#nondiscrimination safeguards of the 1996 Act. These provisions govern the BOCs' entry into  d(#ycertain new markets. We initiated a separate proceeding to address the accounting safeguards  X- d(#required to implement sections 260 and 272 through 276 of the Communications Act.& yO= - v ԍ See Accounting Safeguards for Common Carriers Under the Telecommunications Act of 1996, CC Docket  yO -No. 96150, Notice of Proposed Rulemaking, 11 FCC Rcd 9054 (1996) (Accounting Safeguards NPRM).&  d(#Comments on the nonaccounting separate affiliate and nondiscrimination safeguards were filed  Xv-on August 15, 1996, and reply comments were filed on August 30, 1996.nv@ yOg -ԍAppendix A lists the parties that filed comments and replies.n  XH- _5.` ` The Notice also sought comment on whether we should relax the dominant carrier  d(#Nclassification that under our current rules would apply to inregion, interstate, domestic,  X - d(#interLATA services provided by the BOCs' interLATA affiliates. Further, the Notice sought  d(#Mcomment on whether we should modify our existing rules for regulating the provision of in d(#region, interstate, interexchange services by independent local exchange carriers (LECs) (namely,  X - d(#carriers not affiliated with a BOC). Finally, the Notice considered whether to apply the same  d(#lregulatory treatment to the BOC affiliates' and independent LECs' provision of inregion,  d(#]international services, as would apply to the provision of inregion, interstate, domestic,  d(#ZinterLATA services and inregion, interstate, domestic interexchange services, respectively. This  d(#order addresses only the nonaccounting separate affiliate and nondiscrimination safeguards in  d(#sections 271 and 272. The classification of BOC affiliates or independent LECs (and their  d(#affiliates) as dominant or nondominant will be addressed in a separate Report and Order in this docket.  X- q6.` ` In this order, we promulgate rules and policies implementing, and, where  d(#necessary, clarifying the nonaccounting separate affiliate and nondiscrimination safeguards  d(#prescribed by Congress in sections 271 and 272. These safeguards are intended both to protect  d(#subscribers to BOC monopoly services, such as local telephony, against the potential risk of  d(#zhaving to pay costs incurred by the BOCs to enter competitive markets, such as interLATA  d(#services and equipment manufacturing, and to protect competition in those markets from the  d(#BOCs' ability to use their existing market power in local exchange services to obtain an  d(# anticompetitive advantage in those new markets the BOCs seek to enter. Our action today  d(#-continues the process of enhancing competition in all telecommunications markets as envisioned by the 1996 Act. " ,-(-(ZZz"Ԍ X- A.Background  X- 7.` ` The fundamental objective of the 1996 Act is to bring to consumers of  d(#ktelecommunications services in all markets the full benefits of vigorous competition. As we  X- d(#recognized in the First Interconnection Order, "[t]he opening of all telecommunications markets  d(#to all providers will blur traditional industry distinctions and bring new packages of services,  Xv- d(#lower prices, and increased innovation to American consumers."]v yO-ԍFirst Interconnection Order at  4.] With the removal of legal,  d(#xeconomic, and regulatory impediments to entry, providers of various telecommunications services  d(#=will be able to enter each other's markets and provide various services in competition with one  d(#another. Both the BOCs and other firms, most notably existing interexchange carriers, will be  d(#Zable to offer a widely recognized brand name that is associated with telecommunications services.  d(#KAs firms expand the scope of their existing operations to new product lines, they will increasingly  d(#.offer consumers the ability to purchase local, intraLATA, and interLATA telecommunications  X - d(#services, as well as wireless, information, and other services, from a single provider (i.e., "one  X -stop shopping"), and other advantages of vertical integration. X yO- v !ԍThere are economies of scope where it is less costly for a single firm to produce a bundle of goods or  d(#services together, than it is for two or more firms, each specializing in distinct product lines, to produce them  yOW- d(#separately. See, e.g., John C. Panzar and Robert D. Willig, Economies of Scope, 71 Am. Econ. Rev. of Papers and  yO- d(#Proc. 268 (1981); William J. Baumol, John C. Panzar, and Robert D. Willig, Contestable Markets and the Theory  yO-of Industry Structure 7179 (1982); Daniel F. Spulber, Regulation and Markets 11415 (1989).   X- p8.` ` The 1996 Act opens local markets to competing providers by imposing new  d(#interconnection and unbundling obligations on existing providers of local exchange service,  d(#Lincluding the BOCs. The 1996 Act also allows the BOCs to provide interLATA services in the  d(#states where they currently provide local exchange and exchange access services once they satisfy  d(#the requirements of section 271. Moreover, by requiring compliance with the competitive  d(#checklist set out in section 271(c)(2)(B) as a prerequisite to BOC provision of inregion  d(#interLATA service, the statute links the effective opening of competition in the local market with  d(#the timing of BOC entry into the long distance market, so as to ensure that neither the BOCs nor  d(#the existing interexchange carriers could enjoy an advantage from being the first to enter the other's market.  X- 9.` ` In enacting section 272, Congress recognized that the local exchange market will  d(#not be fully competitive immediately upon its opening. Congress, therefore, imposed in section  d(#272 a series of separate affiliate requirements applicable to the BOCs' provision of certain new  d(#services and their engagement in certain new activities. These requirements are designed, in the  d(#absence of full competition in the local exchange marketplace, to prohibit anticompetitive discrimination and costshifting, while still giving consumers the benefit of competition.  X-  10.` ` As we observed in the Notice, BOC entry into inregion interLATA services raises  d(#<issues for competition and consumers, even after a BOC has satisfied the requirements of section",-(-(ZZ"  d(#271(d)(3). BOCs currently are the dominant providers of local exchange and exchange access  d(#[services in their inregion states, accounting for approximately 99.1 percent of the local service  X- d(#Lrevenues in those markets.I yOK- v ԍ Industry Analysis Division, Telecommunications Industry Revenue: TRS Worksheet Data (Com. Car. Bur.  d(#\Feb. 1996). Tables 18 and 15 show that BOC local and access revenues in 1994 were $61.4 billion, while  d(#Competitive Access Provider (CAP) local and access revenues both in and out of BOC regions were only $281  d(#Ymillion. We acknowledge that the CAP rate of growth is high, but their share of the overall end market is small and is the key factor.I If a BOC is regulated under rateofreturn regulation, a price caps  d(#structure with sharing (either for interstate or intrastate services), a price caps scheme that adjusts  d(#Mthe Xfactor periodically based on changes in industry productivity, or if any revenues it is  d(#allowed to recover are based on costs recorded in regulated books of account, it may have an  d(#Mincentive to allocate improperly to its regulated core business costs that would be properly attributable to its competitive ventures.  X1-  11.` `  DISCRIM In addition, a BOC may have an incentive to discriminate in providing exchange  d(#access services and facilities that its affiliate's rivals need to compete in the interLATA  d(#telecommunications services and information services markets. For example, a BOC may have  d(#an incentive to degrade services and facilities furnished to its affiliate's rivals, in order to deprive  d(#those rivals of efficiencies that its affiliate enjoys. Moreover, to the extent carriers offer both  d(#local and interLATA services as a bundled offering, a BOC that discriminates against the rivals  d(#of its affiliates could entrench its position in local markets by making these rivals' offerings less  d(#attractive. With respect to BOC manufacturing activities, a BOC may have an incentive to  d(#purchase only equipment manufactured by its section 272 affiliate, even if such equipment is  Xb-more expensive or of lower quality than that available from other manufacturers. bx yO- v ԍWhenever a competing manufacturer sells its product at a price that exceeds the marginal cost of producing  d(#xit, the possibility exists that a BOC would have an incentive to favor its affiliate's product over the competitor's,  d(#even when it is inefficient to do so. In general, the greater the difference between the competitor's price and cost, the greater the incentive for the BOC to favor its affiliate.  X4-   12.` ` Moreover, if a BOC charges other firms prices for inputs that are higher than the  d(#prices charged, or effectively charged, to the BOC's section 272 affiliate, then the BOC could  X- d(#=create a "price squeeze."`  yO- v ԍSee, e.g., P.L. Joskow, Mixing Regulatory and Antitrust Policies in the Electric Power Industry: The Price  yO- d(#Squeeze and Retail Market Competition, in Antitrust and Regulation: Essays in Memory of John J. McGowan 173 yO - d(#K239 (F.M. Fisher ed., 1985); S.C. Salop and D.T. Scheffman, Raising Rivals' Costs, 73 Am. Econ. Rev. Papers &  yOo!- d(#,Proc. 267 (1983); T.G. Krattenmaker and S.C. Salop, Anticompetitive Exclusion: Raising Rivals' Costs to Achieve  yO7"-Power over Price, 96 Yale L.J. 209 (1986).  In that circumstance, the BOC affiliate could lower its retail price to  d(#.reflect its unfair cost advantage, and competing providers would be forced either to match the  d(#\price reduction and absorb profit margin reductions or maintain their retail prices at existing  d(#levels and accept market share reductions. This artificial advantage may allow the BOC affiliate  d(#to win customers even though a competing carrier may be a more efficient provider in serving  d(#the customer. Unlawful discriminatory preferences in the quality of the service or preferential",-(-(ZZ"  d(#/dissemination of information provided by BOCs to their section 272 affiliates, as a practical  d(#matter, can have the same effect as charging unlawfully discriminatory prices. If a BOC charged  d(#the same rate to its affiliate for a higher quality access service than the BOC charged to  d(#unaffiliated entities for a lower quality service, or disclosed information concerning future  d(#[changes in network architecture to its manufacturing affiliate before disclosing it to others, the BOC could effectively create the same "price squeeze" discussed above.  X_- 2 13.` ` The structural and nondiscrimination safeguards contained in section 272 ensure  d(#.that competitors of the BOC's section 272 affiliate have access to essential inputs, namely, the  d(#provision of local exchange and exchange access services, on terms that do not discriminate  d(#Lagainst the competitors and in favor of the BOC's affiliate. Because the BOC has the incentive  d(#to provide its affiliate with the most efficient access, the statute requires the BOC to provide  d(#competitors the same access. Access to such inputs on nondiscriminatory terms will enable a new  d(#=entrant to compete effectively, assuming it is at least as efficient as the BOC and/or its section  d(#272 affiliate. At the same time, Congress also was sensitive to the value to the BOCs of potential  d(#]efficiencies stemming from economies of scale. Our task is to implement section 272 in a  d(#manner that ensures that the fundamental goal of the 1996 Act is attained to open all  d(#telecommunications markets to robust competition but at the same time does not impose  d(#requirements on the BOCs that will unfairly handicap them in their ability to compete. The rules  d(#and policies adopted in this order seek to preserve the carefully crafted statutory balance to the  d(#kextent possible until facilitiesbased alternatives to the local exchange and exchange access  X-services of the BOCs make those safeguards no longer necessary. yO- v ԍAccess Charge Reform, CC Docket No. 96262, Notice of Proposed Rulemaking, FCC 96488 (rel. Dec.  yO^-24, 1996) (Access Charge Reform NPRM).  X- B.XOverview and Summary (#  X-  14.` ` Section 272 allows a BOC to engage in the manufacturing of telecommunications  X- d(#-equipment and CPE, the origination of certain interLATA telecommunications services,VX  yO{- v ԍSpecifically, the separate affiliate requirement applies to the origination of interLATA telecommunications  d(#services, other than specified incidental interLATA services, outofregion services, and previously authorized activities. 47 U.S.C.  272(a)(2)(B).V and the  X- d(#provision of interLATA information services,M@ yO -ԍId.  272(a)(2)(C).M as long as the BOC provides these activities  d(#through a separate affiliate. Unless extended by the Commission, the statutory separate affiliate  d(#requirements for manufacturing and interLATA telecommunications services expire three years  XN- d(#after a BOC or any BOC affiliate is authorized to provide inregion interLATA services.JN yO$-ԍId.  272(f)(1).J The"N ` ,-(-(ZZ"  d(#.statutory interLATA information services separate affiliate requirement expires on February 8,  X-2000, four years after enactment of the 1996 Act, unless extended by the Commission.J yOb-ԍId.  272(f)(2).J  X- 15.` ` This order implements the structural separation requirements mandated by section  d(#272 in a manner that is designed to prevent improper cost allocation between the BOC and its  d(#]section 272 affiliate and discrimination by the BOC in favor of its section 272 affiliate. In  d(#particular, we construe the section 272(b)(1) "operate independently" requirement to prohibit the  d(#BOC and its section 272 affiliate from jointly owning transmission and switching facilities or the  d(#land and buildings on which such facilities are located. Moreover, we prohibit a BOC and its  d(#affiliates, other than the section 272 affiliate itself, from providing operating, installation, and  d(#maintenance services associated with the facilities owned by the section 272 affiliate. Similarly,  d(#a section 272 affiliate may not provide such services associated with the BOC's facilities. These  d(#requirements should reduce the potential for the improper allocation of costs to the BOC that  d(#-should be allocated to the section 272 affiliate. In addition, they should ensure that a section 272  d(#affiliate must follow the same procedures as its competitors in order to gain access to a BOC's  d(#facilities. Consistent with these requirements and those established pursuant to sections 272(b)(5)  d(#.and 272(c)(1), however, a section 272 affiliate may negotiate with an affiliated BOC on an arm's  d(#<length basis to obtain transmission and switching facilities, to arrange for collocation of facilities, and to provide or obtain services other than those expressly prohibited herein.  X4- $16.` ` The structural separation requirements of section 272, in conjunction with the  d(#affirmative nondiscrimination obligations imposed by that section, also are intended to address  d(#=concerns that the BOCs could potentially use local exchange and exchange access facilities to  d(#discriminate against competitors in order to gain an anticompetitive advantage for their affiliates  d(#that engage in competitive activities. We interpret section 272(c)(1) as imposing a flat  d(#prohibition against discrimination more stringent than the bar on "unjust and unreasonable"  d(#discrimination contained in section 202 of the Act. In short, the BOCs must treat all other  d(#entities in the same manner in which they treat their section 272 affiliates. We conclude that a  d(#LBOC may not discriminate in favor of its section 272 affiliate by: 1)providing exchange access  d(#services to competing interLATA service providers at a higher rate than the rate offered to its  d(#section 272 affiliate; 2)providing a lower quality service to competing interLATA service  d(#providers than the service it provides to its section 272 affiliate at a given price; 3)giving  d(#<preference to its affiliate's equipment in the procurement process; or 4) failing to provide advance  d(#information about network changes to its competitors. We seek comment in a Further Notice of Proposed Rulemaking on specific disclosure requirements to implement section 272(e)(1).  X -  _17.` ` In this order, we also seek to ensure that BOC section 272 affiliates have the same  d(#opportunity to compete for customers as other long distance service providers. The joint  d(#marketing rules we have established limit the ability of the largest interexchange carriers to  d(#market jointly their interLATA service with resold BOC local exchange service, until the BOC  d(#receives in-region, interLATA authority under section 271 or until 36 months after enactment of"h$ X,-(-(ZZF#"  d(#the 1996 Act. Once the BOC receives interLATA authority, the restrictions on interexchange  d(#carrier joint marketing expire, and the interexchange carriers and the BOCs and their section 272 affiliates may engage in the same types of marketing activities.  X- 18.` ` In addition, we clarify that the Communications Act allows a section 272 affiliate  X- d(#Zto purchase unbundled elements pursuant to section 251(c)(3)J yO-ԍ47 U.S.C.  251(c)(3).J and telecommunications services  Xv- d(#0at wholesale rates under section 251(c)(4).JvX yO -ԍ47 U.S.C.  251(c)(4).J Thus, the section 272 affiliate may provide  d(#xintegrated services in the same manner as other competitors. Such an approach is consistent with  d(#the objectives of the 1996 Act, which are to give service providers the freedom to develop a wide  d(#jarray of service packages and allow consumers to select what best suits their needs. We note,  d(#however, that the BOC may not transfer local exchange and exchange access facilities and  d(#capabilities to the section 272 affiliate, or another affiliate, in order to evade regulatory requirements.  X - 19.` ` We recognize that no regulatory scheme can completely prevent or deter  d(#?discrimination, particularly in its more subtle forms. In this order, we shift the burden of  d(#production to the BOCs in the context of section 271(d)(6) enforcement proceedings in order to  d(#alleviate the burden on the complainant and facilitate the detection of anticompetitive behavior.  d(#Because the BOC is likely to be in sole possession of most of the relevant information necessary  d(#to establish the complainant's case, shifting the burden is the most efficient way of resolving  d(#complaints alleging violations of the conditions of inregion interLATA entry under section  d(#271(d)(3). The goal of this proceeding and others is to establish a regulatory framework that  d(#enables service providers to enter each other's markets and compete on an equal footing by not  d(#allowing one service provider to game regulatory requirements in such a way as to hinder competition.9!}K )B J:\POLICY\SAFE\ORDER\MASTER\SCOPE) 9    X-_  II. SCOPE OF COMMISSION AUTHORITY Đ\  Xe- A.XRulemaking Authority (#   X7- 1.` ` Background (#`  X - _20.` ` In the Notice, we addressed the scope of the Commission's authority, pursuant_ to  X- d(#@sections 271 and 272, over interLATA services, interLATA information services and" ,-(-(ZZ"  X- d(#manufacturing activities.F yOy-ЍNotice at  1930. In the Notice, in addressing the scope of sections 271 and 272, we referred to "interLATA services" and "interLATA information services" separately (but in the same analysis). In part III.A.1 of this Order, we determine that "interLATA services" includes "interLATA information services." Accordingly, in the discussion in this section regarding the scope of sections 271 and 272, we refer only to interLATA services, but intend that the use of that term include interLATA information services.F Although we did not seek comment on whether the Commission has authority to adopt rules implementing section 272, several commenters addressed this issue.  X- 2.` ` Comments  X- 21.` ` Certain BOCs and USTA maintain that the Commission lacks authority to adopt  Xv- d(#rules implementing the nonaccounting safeguards contained in section 272.Xvx yO -ЍBell Atlantic at 23 (with regard to intrastate services); BellSouth at 36; SBC at 25 (Commission has authority to implement and enforce section 272, but may not expand those requirements); USTA at 23, 78; USTA Reply at 3. They further  d(#maintain that, even if the Commission has such authority, it should not adopt any rules because  d(#Zthey are not necessary. These and other parties argue that section 272 contains detailed separate  X1- d(#affiliate requirements and therefore is selfexecuting and needs little or no interpretation.@1 yOz-ЍUSTA at 34, 78; Bell Atlantic at 23; BellSouth at 36. BellSouth also argues that Congress did not grant the Commission authority to adopt "legislative" rules other than accounting rules, and therefore any rules the Commission adopts would constitute "interpretive" rules not entitled to judicial deference. BellSouth at 3  yO-(citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 84243 (1984)); see also SBC at 25; U S West Reply at 4 (stating that, "although the Commission certainly retains its general rulemaking authority, it should tread lightly here"); PacTel at 34 (stating that there are ambiguities in section 272 for which the "Commission's guidance would be helpful," but stating that "[b]eyond those difficulties, the only specific areas where Congress envisioned further rulemaking by the FCC were accounting and record keeping"). They  d(#<further suggest that all of the Commission's proposed regulations are impermissible because they  X - d(#go beyond the basic terms of section 272.   yOT-ЍBell Atlantic at 23; BellSouth at 46; USTA at 8; SBC at 25 (stating that the Commission has authority to implement and enforce section 272, but may not expand those requirements). Bell Atlantic and USTA assert that Congress clearly  d(#Nintended for section 272 to be a selfexecuting provision because a Senate bill provision  d(#specifying that the Commission implement regulations under section 272 was removed from the  X -legislation in conference.Y!  yOg -ЍBell Atlantic at 3; USTA at 3.Y  X- Q22.` ` In response, other parties argue that the Commission has the authority to, and  d(#should, promulgate rules implementing section 272. AT&T, TIA, and Time Warner maintain that  d(#jthe Commission has authority, pursuant to other provisions of the Act, including sections 4(i),  d(#201(b), and 303(r), to adopt rules implementing section 272, even though section 272 does not"K !,-(-(ZZI"  X- d(#/specifically direct the Commission to adopt rules." yOy-ЍAT&T Reply at 67 & n.14; TIA Reply at 67; Time Warner Reply at 46; see also LDDS Reply at 24; MCI Reply at 2 n.6. AT&T and Time Warner state that the  d(#Commission has the authority to adopt implementing rules when Congress enacts broad principles  X- d(#that require interpretation,#  yO-ЍAT&T Reply at 6 (citing Morton v. Ruiz, 415 U.S. 199, 231 (1974), and Chevron, U.S.A., Inc. v.  yOk-Natural Resources Defense Council, 467 U.S. 837 (1984)); Time Warner Reply at 6. and that section 272 contains ambiguities that require explanation in  X- d(#Norder to effectuate the 1996 Act's purposes.$ x yO -ЍAT&T Reply at 814; LDDS Reply at 34; MCI Reply at 2; see also PacTel at 3 (stating that "it would serve the interests of justice for the Commission to indicate in advance whether by rule or otherwise how it interprets any ambiguous requirements in  272 so that the BOCs may be advised of what is necessary to comply"); Sprint Reply at 23.  Time Warner argues that the courts have  d(#\consistently held that the Commission has expansive rather than limited powers to conduct  d(#general rulemakings, so long as those rulemakings are based on permissible public interest goals  Xv- d(#=and are a reasonable means to achieve those goals.%v`  yO-ЍTime Warner Reply at 56 (citing Nat'l Broadcasting Co. v. United States, 319 U.S. 190, 219 (1943)  yOO-and Fed. Communications Comm'n v. Nat'l Citizens Comm.for Broadcasting, 436 U.S. 775, 776, 793 (1978));  yO-see also Sprint Reply at 23 (stating that "[t]he ability of the Commission to use general rulemaking procedures to provide further guidance to the states and interested parties and to thereby explicate the policies and interpretations it intends to adopt in its administration of the statute entrusted to its jurisdiction so as to carry out the intent of Congress is at the heart of the regulatory process"). Finally, in response to the claim that the  d(#removal of specific 272 rulemaking authority indicates that Congress intended for section 272 to  d(#>be selfexecuting, AT&T argues that Congress could have precluded the Commission from  X1-adopting rules, but did not.K&1 yO-ЍAT&T Reply at 6.K  X -X 3.X` ` Discussion (#`  X - 23.` ` We reject as unfounded the assertion that the Commission lacks authority to adopt  d(#=regulations implementing section 272. Sections 4(i), 201(b), and 303(r) of the Act authorize the  d(#Commission to adopt any rules it deems necessary or appropriate in order to carry out its  X- d(#responsibilities under the Act, so long as those rules are not otherwise inconsistent with the Act.'h yO -ЍSee United States v. Storer Broadcasting Co., 351 U.S. 192, 20203 (1956).  d(#Nothing in section 272 bars the Commission from exercising the rulemaking authority granted  d(#-by these sections of the Act to clarify and implement the requirements of section 272. Moreover,  d(#ycourts repeatedly have held that the Commission's general rulemaking authority is "expansive"  X4- d(#[rather than limited. (4 yO%-ЍNat'l Broadcasting Co. v. United States, 319 U.S. 190, 219 (1943); see also Fed. Communications  yO&-Comm'n v. Nat'l Citizens Comm. for Broadcasting, 436 U.S. 775, 793 (1978).  In addition, as AT&T notes, it is wellestablished that an agency has the"4 P(,-(-(ZZH"  X- d(#authority to adopt rules to administer congressionally mandated requirements.)  yOy-ЍSee Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984); Morton v. Ruiz, 415 U.S. 199, 231 (1974) (holding that "[t]he power of an administrative agency to administer a congressionally created. . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress"). Contrary to those  d(#parties that argue that section 272 is selfexecuting, we find that Congress enacted in section 272  d(#broad principles that require interpretation and implementation in order to ensure an efficient,  d(#orderly, and uniform regime governing BOC entry into inregion interLATA telecommunications  d(#and other markets covered by section 272. In the Notice, we identified areas of ambiguity in the  d(#requirements of section 272 with the specific goal of clarifying and implementing Congress's  d(#intent in that provision. That remains our goal in this Order. Due to the importance of the  d(#introduction of competition to the local exchange market, we believe this Order to be both  d(#important and necessary to protect BOC customers and new entrants. Further, we agree with  d(#PacTel that it serves the interests of justice for us to clarify in advance the section 272  d(#zrequirements so that BOCs and other parties may be advised of what is required to meet the  d(#<condition for 271 authorization that inregion interLATA services be provided in compliance with  X -section 272.Q*  yOM-ЍSee PacTel at 3.Q  X - C24.` ` We are not persuaded by the argument that the removal of the Senate bill's  d(#provision regarding implementing regulations from the 1996 Act indicates Congress's intent that  d(#section 272 be selfexecuting. Parties advancing this argument rely on a rule of statutory  d(#construction providing that, when a provision in a prior draft is altered in the final legislation,  d(#Congress intended a change from the prior version. The courts have rejected this rule of statutory  XK- d(#kconstruction, however, when changes from one draft to another are not explained.+K@ yO<-ЍMead Corp v. Tilley, 490 U.S. 714, 723 (1989); Rastelli v. Warden, 782 F.2d 17, 23 (2d Cir. 1986);  yO-Drummond Coal v. Watt, 735 F.2d 469, 474 (11th Cir. 1984). In this  d(#instance, the only statement from Congress regarding the meaning of the omission of the Senate  d(#xprovision appears in the Joint Explanatory Statement. According to that Statement, all differences  d(#between the Senate Bill, the House Amendment, and the substitute reached in conference are  d(#inoted therein "except for clerical corrections, conforming changes made necessary by agreements  X- d(#lreached by the conferees, and minor drafting and clerical changes."^, yO! -ЍJoint Explanatory Statement at 113.^ Because the Joint  d(#Explanatory Statement did not address the removal of the Senate bill provision, the logical  d(#inference is that Congress regarded the change as an inconsequential modification, rather than a  d(#Ksignificant alteration. Moreover, it seems implausible that, in enacting the final version of section  d(#272, Congress intended a radical alteration of the Commission's general rulemaking authority. "|( ,,-(-(ZZ"  X- d(#We therefore conclude that elimination of the proposed provision was a nonsubstantive change.O-X yOy-ЍIn addition, even if the removal were considered as more than inconsequential, we believe that the most plausible explanation is that Congress found such a specification unnecessary in light of sections 4(i), 201(b), 303(r), and longstanding principles of administrative law.O  d(#kBased on the foregoing, we find, pursuant to the general rulemaking authority vested in the  d(#kCommission by sections 4(i), 201(b), and 303(r) of the Act, and consistent with fundamental  d(#Lprinciples of administrative law, that the Commission has the requisite authority to promulgate rules implementing section 272 of the Act.  Xv- B.XScope of Commission's Authority Regarding InterLATA Services (#  XH-XX` ` a.X Background (#  X - Q25.` ` In the Notice, we tentatively concluded that the Commission's authority under  d(#sections 271 and 272 applies to intrastate and interstate interLATA services provided by BOCs  X - d(#or their affiliates.M.  yO-ЍNotice at  25.M We based this tentative conclusion in part on our analysis that Congress  d(#jintended sections 271 and 272 to replace the preAct restrictions on the BOCs contained in the  X - d(#MFJ, which barred their provision of both intrastate and interstate interLATA services.P/ x yO-ЍId. at  21.P We also  d(#observed that the interLATA/intraLATA distinction appears to some extent to have supplanted  X- d(#<the traditional interstate/intrastate distinction for purposes of sections 271 and 272.P0 yOI-ЍId. at  22.P We further  d(#noted that reading sections 271 and 272 as applying to all interLATA services fits well with the  Xb- d(#istructure of the statute as a whole,P1b yO-ЍId. at  23.P and that reading the sections as limited to interstate services  XK- d(#=would lead to implausible results.P2K(  yO$-ЍId. at  25.P We also indicated that we do not believe that section 2(b)  d(#of the Act precludes the conclusion that our authority under sections 271 and 272 applies to  X- d(#Kintrastate as well as interstate interLATA services.P3  yO -ЍId. at  26.P Finally, we asked parties that disagreed with  d(#=the foregoing analysis to comment on the extent to which the Commission may have authority  d(#to preempt state regulation with respect to some or all of the nonaccounting matters addressed  X-by sections 271 and 272.P4H  yO$-ЍId. at  28.P "4,-(-(ZZ"Ԍ X-XX` ` b.X Comments (#  X- _26.` ` Many parties, including BellSouth, PacTel, USTA and the New York Commission,  X- d(#agree that sections 271 and 272 cover both intrastate and interstate services.i5 yO4-ЍDOJ Reply at 47; New York Commission at 23 (but arguing that the Commission lacks authority to establish rules applicable to intrastate interLATA services); BellSouth at 15; PacTel at 3 (maintaining, however, that "Congress did not give the FCC plenary authority over those services to implement any and all regulations and safeguards whatsoever."); USTA at 7 (but arguing that section 272 is selfexecuting); AT&T at 8; AT&T Reply at 34; Sprint at 910; Sprint Reply at 4; MCI at 3; MCI Reply at 34; Excel at 11; CompTel at 36; TRA at 56; ITAA at 57.i DOJ, BellSouth,  d(#iand AT&T maintain that the Act, by its terms, explicitly covers intrastate interLATA services and  d(#thus, grants the Commission authority over intrastate interLATA services for purposes of sections  Xv- d(#271 and 272.6v@ yOg -ЍDOJ Reply at 45 (arguing that the Act's definitions of the terms "LATA," and "interLATA" include intrastate services); AT&T at 8 (arguing that the Act's definition of the term "interLATA" applies to both intrastate and interstate services so long as they cross a LATA boundary); BellSouth at 1516 (stating that "[t]he explicit grants of FCC jurisdiction in Sections 271 and 272 override the generic restrictions on FCC jurisdiction in Section 2(b)," but arguing that "these exemptions must be narrowly construed in order to preserve the meaning  yOO-of 2(b)"); see also CompTel at 4, 5 (stating that "[p]ursuant to the MFJ, LATAs were defined based 'upon a city or other identifiable community or interest,' without limitation by state boundaries. Because a single state may contain more than one LATA, interLATA communications may be intrastate as well as interstate in nature." (footnote omitted)). DOJ and AT&T argue that, because the grant is explicit, section 2(b) does not  d(#zbar the Commission from adopting rules that apply to the provision of intrastate interLATA  XH- d(#services.Y7H yO -ЍDOJ Reply at 67; AT&T at 89.Y These and other parties generally argue, as a separate basis for finding that sections  d(#271 and 272 extend to both intrastate and interstate interLATA services, that Congress intended  X - d(#for the Act to replace the MFJ.N8X  yOk-ЍNew York Commission at 24 (maintaining, however, that the Commission lacks authority to establish rules applicable to intrastate interLATA services); BellSouth at 15; USTA at 7; DOJ Reply at 56; AT&T at 8 n.7; MCI at 3; Excel at 11; CompTel at 56; TRA at 56; ITAA at 57.N These parties contend that, since the MFJ restrictions applied  d(#to the BOCs' provision of both intrastate and interstate interLATA services, Congress intended  X - d(#kfor sections 271 and 272 to apply to the BOCs' provision of both types of services as well.N9X  yO]-ЍNew York Commission at 24 (maintaining, however, that the Commission lacks authority to establish rules applicable to intrastate interLATA services); BellSouth at 15; USTA at 7; AT&T at 8 n.7; DOJ Reply at 56; MCI at 3; Excel at 11; CompTel at 56; TRA at 56; ITAA at 57.N  d(#Indeed, several of these parties maintain that interpreting sections 271 and 272 as covering both  X - d(#intrastate and interstate interLATA services is the only reasonable interpretation.:  yOO$-ЍDOJ Reply at 7; MCI at 5; MCI Reply at 34; Excel at 11; ITAA at 56; CompTel at 56. Several parties  X -further maintain that section 2(b) of the Act does not affect this analysis.; p yO&-ЍAT&T at 89; Sprint Reply at 5; MCI at 5; TRA at 67; see also DOJ Reply at 67. " ;,-(-(ZZ "Ԍ X- Bԙ27.` ` State representatives and some of the BOCs, however, challenge our tentative  d(#conclusion that sections 271 and 272 give the Commission authority over intrastate interLATA  X- d(#services.< yOK-ЍBell Atlantic at 3; BellSouth at 1517; California Commission at 29; Missouri Commission at 3; New York Commission at 26; Ohio Commission at 25; Wisconsin Commission Reply at 311; NARUC at 47. These parties argue that sections 2(b) and 601(c) of the Act bar the Commission from  d(#exercising authority under sections 271 and 272 to establish rules applicable to intrastate  X- d(#services.=  yOu-ЍBell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 3; New York Commission at 35; Ohio Commission at 2; Wisconsin Commission Reply at 3; NARUC at 7. Although the New York Commission agrees with our tentative view that the term  X- d(#"interLATA" covers both intrastate and interstate services,V>x yO -ЍNew York Commission at 23.V other parties objecting to our reading  d(#kof the scope of sections 271 and 272 generally do not address the issue of whether the term  d(#"interLATA services" as used in the Act or the MFJ includes intrastate interLATA services.  d(#Instead, they appear to contend that, even if the term "interLATA services" includes both  d(#intrastate and interstate services, section 2(b) precludes the Commission from establishing rules  X - d(#applicable to intrastate interLATA services.*?  yO-ЍBell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 23; New  yO-York Commission at 25; Ohio Commission at 2; NARUC at 7; see Wisconsin Commission Reply at 2, 68.* According to these parties, states have authority  X - d(#to establish rules to govern the BOCs' provision of intrastate interLATA services,@ `  yO-ЍBellSouth at 1517; California Commission at 56, 9; Missouri Commission at 23; New York Commission at 25; Ohio Commission at 25; Wisconsin Commission Reply at 35, 611; NARUC at 57. and it is  X - d(#zpremature for the Commission at this time to preempt states from exercising that authority.A  yOU-ЍNew York Commission at 56; Wisconsin Commission Reply at 56; NARUC at 45.  d(#NARUC and the Missouri Commission claim that the legislative history shows that Congress  d(#.intended to limit the Commission's authority under sections 271 and 272 to interstate services.  d(#In support of this claim, these parties point to the fact that the House and Senate versions of the  d(#preconference bill exempted sections 271 and 272 from section 2(b), but those exemptions were  Xy-removed in the final legislation.ByH  yOr-ЍNARUC at 7; Missouri Commission at 3; see also Bell Atlantic at 3.  XK- $28.` ` Parties opposing our tentative conclusions also argue that, although the MFJ  d(#restrictions on the BOCs applied to both interstate and intrastate interLATA services, the states  d(#.retained authority to regulate a BOC's intrastate interLATA services when such services were  X- d(#yauthorized by the MFJ Court.C yO$-ЍCalifornia Commission at 34; Missouri Commission at 2; New York Commission at 34; NARUC at 6. They assert, therefore, that, even if sections 271 and 272 apply  d(#[to intrastate services, those provisions would not divest the states of authority over intrastate"hC,-(-(ZZ'"  X- d(#services,D yOy-ЍCalifornia Commission at 3; Missouri Commission at 2; New York Commission at 3; Ohio Commission  yOA-at 2; Wisconsin Commission Reply at 4; NARUC at 57. and that the Commission's authority, if it exists, under sections 271 and 272, is not  X-plenary.E  yO-ЍBellSouth at 15; PacTel at 3. BellSouth and PacTel argue that Congress did not intend to give the Commission plenary jurisdiction over intrastate interLATA services. BellSouth at 15; PacTel at 3.   X-  `29.` ` None of the parties opposing our reading of the scope of sections 271 and 272  d(#Lcontends that the Commission's authority under section 271(d) to authorize BOC entry into in d(#region interLATA services does not extend to BOC provision of intrastate interLATA services.  d(#/The Wisconsin Commission argues, however, that "a state might decide that, for intrastate  d(#interLATA purposes, BOC (or affiliate) entry into intrastate interLATA markets should be  d(#delayed subject to satisfaction of previouslymade infrastructure investment commitments, needed  d(#quality of service improvements, universal service obligations, or some other factor for which  d(#delayed or conditioned entry into intrastate interLATA markets is appropriate leverage exercised  X -in the public interest."[F x yO,-ЍWisconsin Commission Reply at 7.[  X -X 3.X` ` Discussion (#`  X -  30.` ` For the reasons set forth below, we  271-ST conclude that sections 271 and 272, and the  d(#Commission's authority thereunder, apply to intrastate as well as interstate interLATA services  d(#yprovided by the BOCs or their affiliates. We base this conclusion on the scope of the pre1996  d(#MAct MFJ restrictions on the BOCs' provision of interLATA services, as well as on the plain  d(#[language of sections 271 and 272, and the requirements of those sections. In addition, we find  d(#that section 2(b) does not bar the Commission from establishing regulations to clarify and  d(#implement the requirements of section 272 that apply to intrastate interLATA services and other  d(#intrastate matters that are within the scope of section 272. We hold, therefore, that the rules we  d(#kestablish to implement section 272 are binding on the states, and the states may not impose  d(#regulations with respect to BOC provision of intrastate interLATA service that are inconsistent  d(#with section 272 and the Commission's rules under section 272. We emphasize, however, that  d(#the scope of the Commission's authority under sections 271 and 272 extends only to matters  d(#covered by those sections. Those sections do not alter the jurisdictional division of authority with  d(#respect to matters falling outside their scope. For example, rates charged to end users for  d(#intrastate interLATA service have traditionally been subject to state authority, and will continue to be.  X7-"7F,-(-(ZZ"Ԍ X-  #31.` `  SCOPMFJ We stated in the Notice, and several parties agree, that section 601(a) of the 1996  X- d(#Act indicates that Congress intended the provisions of the Act to supplant the MFJ.Gx yOb-ЍNotice at  21; DOJ Reply at 56; New York Commission at 24 (maintaining, however, that the Commission lacks authority to establish rules applicable to intrastate interLATA services); Missouri Commission at 2 (but arguing that states still retain jurisdiction, as they did under the MFJ); BellSouth at 1516 (stating that "the FCC unquestionably has authority to entertain and act upon Section 271 applications for BOC interLATA entry, whether interstate or intrastate;" but asserting that "Congress did not intend to give the Commission plenary jurisdiction over intrastate interLATA services"); AT&T at 8 n.7; Excel at 11; CompTel at 56; TRA at 56; ITAA Comments at 5. That section provides:  XAny conduct or activity that was, before the date of enactment of this Act, subject  to any restriction or obligation imposed by the [MFJ] shall, on and after such date,  be subject to the restrictions and obligations imposed by the Communications Act  of 1934 as amended by this Act and shall not be subject to the restrictions and the  XH-obligations imposed by [the MFJ].HH yO-Ѝ1996 Act,  601(a), 110 Stat. 56, 143 (to be codified as a note following 47 U.S.C.  152).   d(#No party challenges the fact that the MFJ generally prohibited the BOCs and their affiliates from  X - d(#Kproviding any interLATA services interstate or intrastate.I  yOL-ЍSee United States v. Western Electric Co., 552 F. Supp. 131, 227 (D.D.C. 1982) (subsequent history omitted). Moreover, no party challenges the  d(#fact that the term "interLATA services" as used in the MFJ referred to both intrastate and  X -interstate services. JX  yOv-ЍSee id., 552 F. Supp. at 229 (defining "exchange area" and "interexchange telecommunications"); United  yO>-States v. Western Electric Co., 569 F. Supp. 990, 993 (D.D.C. 1983) (explaining that the term "local access and transport area" was being used as a replacement for "exchange area") (subsequent history omitted).  X - 32.` ` Similarly, with respect to the term "interLATA services" as used in sections 271  d(#Nand 272, the DOJ, AT&T, and BellSouth maintain that, because the Act defines the term  d(#"interLATA" to include intrastate services, references in sections 271 and 272 to interLATA services apply to both intrastate and interstate services. We agree.  X4- P 33.` ` The Act defines "interLATA service" as "telecommunications between a point in  X- d(#a local access and transport area and a point located outside such area."RK yO"-Ѝ47 U.S.C.  153(21).R The Act further defines  d(#the term "LATA" as "a contiguous geographic area . . . established before the date of enactment  d(#of the [1996 Act] by a Bell operating company such that no exchange area includes points within  d(#kmore than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State,  d(#=except as expressly permitted under the [MFJ]" or subsequently modified with approval of the"K,-(-(ZZ"  X- d(#Commission.cLX yOy-Ѝ47 U.S.C.  153(25). As the court stated, "simply put, [a Standard Metropolitan Statistical Area] is a  yOA-U.S. Department of Commerce designation that includes a city and its suburbs. United States v. Western Electric  yO -Co., 569 F.Supp. at 993, n.8. c This definition expressly recognizes that a LATA may comprise an area, such as  X- d(#a metropolitan statistical area, that is smaller than a state.cMX yO-ЍStates served by a BOC with only one LATA are: Delaware, Maine, New Hampshire, New Mexico, Rhode Island, South Dakota, Utah, Vermont, and Wyoming. The District of Columbia is covered entirely by one LATA that also covers portions of southern Maryland and northern Virginia. DOJ Reply at 6 n.4.c Indeed, the DOJ notes that most  d(#LATAs established by the MFJ consist of only parts of individual states; only nine LATAs out  X- d(#of a total of 158 encompass an entire state.JN yOt -ЍDOJ Reply at 6.J Thus, by defining an interLATA service as  d(#.telecommunications from a point inside a LATA to a point outside a LATA, the Act expressly  d(#Krecognizes that interLATA services may include telecommunications between two LATAs within  d(#a single state. Accordingly, we find that the term "interLATA services," as used in sections 271 and 272, expressly refers to both intrastate and interstate services.  X1- !34.` ` Although the term "interLATA services" as used in the MFJ and in sections 271  d(#Land 272 refers to both interstate and intrastate interLATA services, the New York Commission  d(#and others assert that, when Congress transferred responsibility for enforcing the prohibition on  d(#the BOCs' provision of interLATA services from the U.S. District Court to the Commission, it  X - d(#intended to limit our authority only to interstate interLATA services. O  yO-ЍSee Bell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 23; New York Commission at 25; Ohio Commission at 2; Wisconsin Commission Reply at 34; NARUC at 57.  To the contrary, we find  d(#=that reading sections 271 and 272 as granting the Commission authority over intrastate as well  d(#as interstate interLATA services is consistent with, and indeed necessary to effectuate, Congress's  d(#Kintent that sections 271 and 272 replace the restrictions of the MFJ with respect to BOC provision of interLATA services.  XK- 3"35.` ` The jurisdictional limitation that the New York Commission and others seek to  d(#lread into sections 271 and 272 would lead to implausible results. Specifically, under that  d(#statutory interpretation, the BOCs would have been permitted to provide inregion, intrastate,  d(#interLATA services upon enactment, without complying with the section 271 entry requirements  d(#jor the section 272 safeguards, and subject only to any existing, generally applicable state rules  d(#on interexchange entry. Any such rules, presumably, would not have been specifically directed  d(#at BOC entry, because of the longstanding MFJ prohibition on entry. Because concerns about  d(#BOC control of bottleneck facilities needed for the provision of inregion interLATA services are  d(#iapplicable to both interstate and intrastate services, it seems clear that sections 271 and 272 apply  d(#yequally to the BOCs' provision of both intrastate and interstate, inregion, interLATA services.  d(#-We find no reasonable basis for concluding that Congress intended to lift the MFJ's ban on BOC  d(#provision of intrastate interLATA services, which constitute approximately 30 percent of  d(#interLATA traffic, and permit the BOCs to offer such services before satisfying the requirements"7 O,-(-(ZZ"  X- d(#yof sections 271 and 272.P yOy-ЍSee Industry Analysis Division, Telecommunications Industry Revenue: TRS Fund Worksheet Data, Table 6 (Com. Car. Bur. Feb. 1996). As the DOJ notes, "Congress could not have intended, for example,  d(#to open up the intrastate interLATA market immediately for BOC entry, without the carefully d(#Zdevised entry requirements of Section 271, while at the same time establishing those requirements  d(#with respect to interstate interLATA entry. Nor could Congress have meant to defeat the  d(#safeguards carefully imposed under Section 272 by permitting the BOCs to engage in the  X- d(#behavior which Section 272 prohibits, as long as they do it within the individual states."JQ  yO^ -ЍDOJ Reply at 7.J  d(#Indeed, we find it significant that neither the states nor the BOCs have argued that such a result  d(#[was intended. In light of this analysis, we find that the Commission's authority under sections 271 and 272 extends to both intrastate and interstate interLATA services.  X - }#36.` ` Similarly, several parties support the conclusion that our authority to consider the  d(#applications of BOCs seeking to provide inregion interLATA service pursuant to section 271(d)  X - d(#applies to both interstate and intrastate services.NR  yOM-ЍDOJ Reply at 47; New York Commission at 2 (maintaining, however, that the Commission lacks authority to establish rules regarding intrastate services); AT&T at 8; AT&T Reply at 35; MCI at 3; MCI Reply at 34; Sprint at 910; Sprint Reply at 4; USTA at 7 (but arguing that section 272 is selfimplementing); Excel at 11; CompTel at 34; TRA at 56; ITAA at 57; BellSouth at 15 (maintaining, however, that Congress did not intend to give the Commission plenary jurisdiction over intrastate interLATA services); PacTel at 3.N None of the state representatives and BOCs  d(#commenting on this issue claims that the Commission's authority under section 271(d) does not  d(#apply to a BOC's provision of intrastate interLATA services. Despite the lack of controversy on  d(#<this point, several commenters claim that rules adopted under section 272 apply only to interstate  X- d(#.services.S`  yO-ЍBell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 23; New  yOi-York Commission at 25; Ohio Commission at 2; NARUC at 7; see Wisconsin Commission Reply at 2, 68. We believe that the requirements of sections 271 and 272 repudiate this argument.  d(#In granting an application under section 271(d), the Commission must determine, among other  d(#=things, that the BOC meets the requirements of section 271(d)(3)(B). Under this provision, the  d(#Commission must find that the requested authorization "will be carried out in accordance with  X4- d(#the requirements of section 272."[T4  yO-ЍX47 U.S.C. 271(d)(3).(#[ In light of the Commission's authority to approve entry into  d(#both intrastate and interstate inregion interLATA service, pursuant to section 271, it seems  d(#logical and necessary that the Commission's authority to impose safeguards established by section 272, should similarly extend to both intrastate and interstate interLATA service.  X- $37.` ` Several parties have argued that, although the MFJ restrictions on the BOCs  d(#applied to both interstate and intrastate interLATA services, the states retained authority to  d(#regulate a BOC's intrastate interLATA services when such services were authorized by the MFJ  d(#icourt. They assert, therefore, that, even if sections 271 and 272 apply to intrastate services, those"|H T,-(-(ZZ2"  d(#provisions would not divest the states of authority over intrastate services. As we stated at the  d(#=outset of this discussion, the scope of the Commission's authority under sections 271 and 272  X- d(#Kextends only to matters covered by those sections, i.e., authorization for BOC entry into inregion  d(#KinterLATA service and the safeguards imposed in section 272. We do not dispute that the states retain their authority to regulate intrastate services in other contexts.  Xv- %38.` ` We further find that the requirements of sections 271 and 272 buttress our  d(#conclusions regarding the scope of the Commission's jurisdiction. For example, we find it  d(#significant that section 271(h) directs the Commission to address intrastate matters relating to  d(#BOC provision of incidental interLATA services. That section states that "[t]he Commission shall  X - d(#ensure that the provision of [incidental interLATA services] by a Bell operating company or its  X - d(#affiliate will not adversely affect telephone exchange service ratepayers or competition in any  X - d(#telecommunications market."bU  yOe -ЍId.  271(h) (emphasis added).b Telephone exchange service is primarily an intrastate service.  d(#This reference to a plainly intrastate service indicates that the scope of section 271 encompasses  d(#intrastate matters, and thus the Commission's authority thereunder applies to both intrastate and interstate interLATA services.  Xy- &39.` ` State representatives and some BOCs argue that sections 2(b) and 601(c) of the  d(#xAct preserve the states' authority to adopt rules regarding BOC provision of intrastate interLATA  d(#services. They argue that section 2(b) bars the Commission from exercising authority under  X4- d(#sections 271 and 272 to establish rules applicable to intrastate interLATA services.V 4X yO=-ЍAs noted above, with the exception of the New York Commission, the parties challenging the Commission's authority to preempt state regulation do not address the issue of whether the term "interLATA services" should be interpreted by definition or otherwise to include both intrastate as well as interstate  yO-services. ` `  For the  d(#-reasons set forth below, we find that section 2(b) does not preclude us from finding that sections  d(#271 and 272, and our authority to promulgate rules thereunder, apply to BOC provision of  X-intrastate interLATA services.  X-  2'40.` ` In Louisiana Public Service Commission v. Federal Communications Commission,  d(#the Supreme Court determined that, in order to overcome section 2(b)'s limits on the  d(#Commission's jurisdiction with respect to intrastate communications service, Congress must either  X|- d(#modify section 2(b) or grant the Commission additional authority.MW|@ yOm!-ЍLouisiana Public Service Comm'n v. Fed. Communications Comm'n, 476 U.S. 355, 377 (1986). Section 2(b) provides that, except as provided in certain enumerated sections [not including sections 271 and 272], "nothing in [the Communications Act] shall be construed to apply or to give the Commission jurisdiction with respect to . . . charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communications service by wire or radio of any carrier." 47 U.S.C.  152(b).M As explained above, we find  d(#<that the term "interLATA services," by the Act's own definition, includes intrastate services, and  d(#that Congress, in sections 271 and 272, expressly granted the Commission authority over  d(#intrastate interLATA services for purposes of those sections. Accordingly, consistent with the"7 W,-(-(ZZ"  X- d(#Court's statement in Louisiana, we find that section 2(b) does not limit our authority over intrastate interLATA services under sections 271 and 272.  X-  (41.` ` In addition, we find that, in enacting sections 271 and 272 after section 2(b), and  d(#squarely addressing therein the issues before us, Congress intended for sections 271 and 272 to  X- d(#take precedence over any contrary implications based on section 2(b).X yO-ЍSee, e.g., Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992). In construing these  d(#jprovisions, we are mindful that "it is a commonplace of statutory construction that the specific  X_- d(#governs the general."xY_X yOh -ЍMorales v. Trans World Airlines, Inc., 504 U.S. at 384.x Moreover, where amended and original sections of a statute cannot be  d(#harmonized, the new provisions should be construed to prevail as the latest declaration of  X1- d(#legislative will.Z1 yO -Ѝ 2 J. Sutherland, Statutory Construction 22.34 (6th ed.); see also American Airlines, Inc. v. Remis  yO-Industries, Inc., 494 F.2d 196, 200 (2nd Cir. 1974). We find also that, in enacting the 1996 Act, there are other instances where  d(#Congress indisputably gave the Commission intrastate jurisdiction without amending section 2(b).  d(#For instance, section 251(e)(1) provides that "[t]he Commission shall have exclusive jurisdiction  X - d(#over those portions of the North American Numbering Plan that pertain to the United States."T[ @ yO-Ѝ47 U.S.C.  251(e)(1).T  d(#Section 253 directs the Commission to preempt state regulations that prohibit the ability to  d(#provide intrastate services. Section 276(b) directs the Commission to "establish a per call  d(#compensation plan to ensure that payphone service providers are fairly compensated for each and  X- d(#every completed intrastate and interstate call."Q\ yO-ЍId.  276(b).Q Section 276(c) provides that, "[t]o the extent that  d(#Many State [payphone] requirements are inconsistent with the Commission's regulations, the  Xb- d(#Commission's regulations on such matters shall preempt such State requirements."Q]b`  yOs-ЍId.  276(c).Q None of  XK- d(#these provisions is specifically excepted from section 2(b), yet all of them explicitly give the  d(#Commission jurisdiction over intrastate matters. Thus, we find that the lack of an explicit  d(#iexception in section 2(b) does not require us to conclude that the Commission's jurisdiction under  d(#=sections 271 and 272 is limited to interstate services. A contrary holding would nullify several  d(#explicit grants of authority to the Commission, noted above, and would render substantial parts  d(#0of the statute meaningless. Thus, in this instance, we believe that the lack of an explicit exception in section 2(b) is not dispositive of the scope of the Commission's jurisdiction.  X- )42.` ` Moreover, as stated above, with the exception of the New York Commission, the  d(#-parties challenging the Commission's authority to preempt state regulation under sections 272 do  d(#not address the issue of whether "interLATA services" are defined by the Act to include intrastate  d(#.services. The New York Commission agrees with us that it does. These parties (including the  d(#New York Commission) also do not challenge the proposition that Congress vested in the"9 ],-(-(ZZ"  d(#Commission authority over BOC entry into all inregion interLATA services intrastate and  d(#interstate. We find it difficult to reconcile these parties' silence on these issues, as well as the  d(#New York Commission's agreement that "interLATA services" includes intrastate services, with  d(#their position that section 2(b) limits the application of the Commission's implementing rules  d(#under section 272 to interstate interLATA services. If, as it remains undisputed in the record,  d(#jthe Commission would necessarily determine, in assessing whether to allow BOC entry into in d(#?region interLATA services, whether a BOC's provision of intrastate as well as interstate  d(#NinterLATA services complies with section 272, we can find no basis to maintain that the  d(#Commission's authority under sections 271 and 272 does not include authority to apply its  d(#<interpretation of section 272 to all of the interLATA services intrastate and interstate at issue in the BOC's 271 inregion interLATA services application.  X - *43.` ` NARUC and the Missouri Commission stress that earlier drafts of the legislation  d(#would have amended section 2(b) to make an exception for certain sections of Title II, including  d(#xsections 271 and 272, but the enacted version did not include that exception. They argue that this  d(#change demonstrates that Congress intended that section 2(b)'s limitations remain fully in force with regard to sections 271 and 272. We find this argument unpersuasive.  Xb- +44.` ` As noted above, parties that attach significance to the omission of the proposed  d(#amendment of section 2(b) rely on a rule of statutory construction providing that, when a  d(#jprovision in a prior draft is altered in the final legislation, Congress intended a change from the  d(#iprior version. This rule of statutory construction has been rejected, however, when changes from  X- d(#zone draft to another are not explained.^ yO-ЍMead Corp v. Tilley, 490 U.S. at 723; Rastelli v. Warden, 782 F.2d at 23; Drummond Coal v. Watt, 735 F.2d at 474. In this instance, the only statement from Congress  d(#regarding the meaning of the omission of the section 2(b) amendment appears in the Joint  d(#.Explanatory Statement. According to the Joint Explanatory Statement, all differences between  d(#the Senate Bill, the House Amendment, and the substitute reached in conference are noted therein  d(#"except for clerical corrections, conforming changes made necessary by agreements reached by  X- d(#the conferees, and minor drafting and clerical changes."^_  yOd-ЍJoint Explanatory Statement at 113.^ Because the Joint Explanatory  d(#MStatement did not address the removal of the section 2(b) amendment from the final bill, the  d(#logical inference is that Congress regarded the change as an inconsequential modification rather  d(#Lthan a significant alteration. It seems implausible that, by enacting the final version, Congress  d(#intended a radical alteration of the Commission's authority under sections 271 and 272, given the  d(#total lack of legislative history to that effect. Based on the foregoing, we conclude that elimination of the proposed amendment of section 2(b) was a nonsubstantive change.  X- 4,45.` ` Moreover, even if it were appropriate to speculate as to the meaning of the  d(#?omission of the section 2(b) exception, we disagree with the argument that the omission  X!- d(#knecessarily indicates that Congress intended not to provide the Commission authority over"!_,-(-(ZZ "  d(#intrastate services in sections 271 and 272. We find it is equally possible that Congress omitted  d(#the exception based on an understanding that the use of the term interLATA in sections 271 and  d(#z272 established a clear grant of authority over intrastate services and therefore that such an exception was unnecessary.  X- -46.` ` We similarly are not persuaded that section 601(c) of the 1996 Act evinces an  d(#intent by Congress to preserve states' authority over intrastate matters. Section 601(c) of the  d(#1996 Act provides that the Act and its amendments "shall not be construed to modify, impair,  d(#1or supersede Federal, State, or local law unless expressly so provided in such Act or  X1- d(#amendments."`1 yO -Ѝ 1996 Act,  601(c)(1), 110 Stat. 56, 143 (to be codified as a note following 47 U.S.C.  152). As explained above, we conclude that sections 271 and 272, which apply to  d(#[interLATA services, were expressly intended to modify federal and state law and jurisdictional authority.   X -  .47.` ` For all of the reasons discussed above, we conclude that sections 271 and 272, and  d(#the Commission's authority thereunder, apply to intrastate and interstate interLATA services  d(#provided by the BOCs or their affiliates. We hold, therefore, that the rules we establish to  d(#implement section 272 are binding on the states, and the states may not impose, with respect to  d(#BOC provision of intrastate interLATA service, requirements inconsistent with sections 271 and  d(#=272 and the Commission's rules under those provisions. In this regard, based on what we find  d(#is clear congressional intent that the Commission is authorized to make determinations regarding  d(#ZBOC entry into interLATA services, we reject the suggestion by the Wisconsin Commission that,  d(#kafter the Commission has granted a BOC application for authority under section 271, a state  X-nonetheless may condition or delay BOC entry into intrastate interLATA services.QaXX yO-ЍWe note that a state would retain authority to enforce obligations relating to a BOC's provision of intrastate interLATA service, such as those identified by the Wisconsin Commission, through mechanisms other than denial or delayed of entry into the intrastate interLATA market.Q  X- C.XScope of Commission's Authority Regarding Manufacturing Services (#  X- Q/48.` ` In the Notice, we tentatively concluded that the Commission's authority under  X-section 272 extends to all BOC manufacturing of telecommunications equipment and CPE.(#(# d(#jOnly two parties, Sprint and TIA, commented on this issue, and both agreed with our tentative conclusion.  X7- 049.` ` We adopt our tentative conclusion that our authority under section 272 extends to  d(#yall BOC manufacturing of telecommunications equipment and CPE. As we stated in the Notice,  d(#to the extent that sections 271 and 272 address BOC manufacturing activities, we believe that the  d(#isame statutory analysis set forth above with respect to interLATA services would apply. We see  d(#no basis for distinguishing among the various subsections of sections 271 and 272. Even apart  d(#from that analysis, however, we believe that the provisions concerning manufacturing clearly  d(#!apply to all manufacturing activities. Section 2(b) of the Communications Act limits the"!xa,-(-(ZZ "  d(#Commission's authority over "charges, classifications, practices, services, facilities, or regulation  X- d(#for or in connection with intrastate communications service."Qb yOb-Ѝ47 U.S.C.  152(b).Q Even though, for the reasons  d(#stated above, we find section 2(b) not to be relevant to sections 271 and 272, we find that the  d(#manufacturing activities addressed by sections 271 and 272 are not, in any event, within the scope  d(#of section 2(b). Alternatively, even if section 2(b) were deemed to apply with respect to BOC  d(#manufacturing, we find that such manufacturing activities plainly cannot be segregated into  d(#interstate and intrastate portions. Thus, any state regulation inconsistent with sections 271 and  d(#=272 or our implementing regulations would necessarily thwart and impede federal policies, and  XH-should be preempted.scHX yOQ -ЍSee Louisiana Public Service Comm'n, at 377.s @!}K 0dJ:\POLICY\SAFE\ORDER\MASTER\BAS\GENL.DEF0 @  X -V III. ACTIVITIES SUBJECT TO SECTION 272 REQUIREMENTS ׃  X - 150.` ` Section 272(a) provides that a BOC (including any affiliate) that is a LEC subject  d(#to the requirements of section251(c) may provide certain services only through a separate  X - d(#affiliate.Jd  yO@-ԍ47 U.S.C.  272(a)(1).J Under section 272, BOCs (or BOC affiliates) may engage in the following activities  d(#]only through one or more affiliates that are separate from the incumbent LEC entity: (A)  Xy- d(#manufacturing activities; (B) interLATA telecommunications services that originate inregion;e yx yO- v ԍSection 272(a)(2)(B) exempts from the separate affiliate requirement for origination of interLATA  d(#;telecommunications services certain incidental interLATA services (as described in sections 271(g)(1), (2), (3), (5),  d(#;and (6)), outofregion services (as described in section 271(b)(2)), and previously authorized activities (as described in section 271(f)).  Xb- d(#and (C) interLATA information services.f b`  yOs- v ԍAlthough they are information services (see 47 U.S.C.  153(20), 272(a)(2)(C)), electronic publishing (as  d(#defined in section 274(h)) and alarm monitoring services (as defined in section 275(e)) are exempted from the section  d(#272 separate affiliate requirements, and are subject to their own specific statutory separate affiliate and/or nondiscrimination requirements. We discuss below both the activities subject to the  d(#section 272 separate affiliate requirements and the activities that are exempt from these requirements. "H f,-(-(ZZ "Ԍ X- _A.XGeneral Issues (#  X-X 1.X` ` Definition of "interLATA services" (#`  X-XX` ` a.X Background (#  Xv- o251.` ` In the Notice, we indicated that the 1996 Act defines "interLATA service" as _a  X_- d(#telecommunications service.Hg_ yO-ԍNotice at  41 n.80.H We further stated that, where the 1996 Act draws distinctions  d(#Lbetween inregion and outofregion "interLATA services," these distinctions do not apply to  X1-interLATA information services.:h1X yO: -ԍId.:  X -XX` ` b. Comments (#`  X - 352.` ` Although we did not specifically seek comment on this analysis, several parties  d(#[disagree with our interpretation of the scope of the term "interLATA services." BellSouth and  d(#NMFS argue that the definition of "interLATA services" includes interLATA information  X- d(#services.i yO)- v ԍBellSouth at 19 n.45; accord ITAA at 7; MFS at 10; Ameritech Reply at 33; MFS Reply at 67; see also MCI Reply at 8. They further dispute our view that "interLATA service" only refers to  d(#"telecommunications services," arguing that the statutory definition in section 3(21) refers to  d(#"telecommunications" provided across LATA boundaries, not to "telecommunications services"  XK- d(#provided across LATA boundaries.[jK@ yO<-ԍBellSouth at 2223 & n.55; MFS Reply at 6.[ MFS states that "telecommunications" is defined in section  d(#@3(43) as the transmission of information without change in the form or content of the  d(#information, whereas "information services" are defined in section 3(20) as the "offering of a  X- d(#{capability for generating, . . . or making available information via telecommunications."@k yO-ԍMFS Reply at 6.@  d(#Therefore, argues MFS, "interLATA information services" must logically incorporate the  d(#0transmission of, or capability for transmitting, information between LATAs, which is an  X-interLATA service.Yl`  yO!-ԍId.; accord BellSouth at 23.Y  X- 453.` ` In addition, BellSouth states that section 271(b) describes how section 271 applies  d(#-to several categories of "interLATA services," including "incidental interLATA services." Since  Xe- d(#certain of the "incidental interLATA services" set forth in section 271(g) are indisputably  XN- d(#information services, BellSouth argues that "interLATA services" must encompass interLATA"N l,-(-(ZZ"  X- d(#information services.mX yOy- v ԍBellSouth at 2122; see also Letter from Robert T. Blau, Vice President Executive and Federal Regulatory  d(#Affairs, BellSouth, to Carol Mattey, Deputy Division Chief, Policy and Program Planning Division, Common Carrier  yO -Bureau, at 12 (filed Oct. 29, 1996) (BellSouth Oct. 29 Ex Parte). MFS also argues that, because Congress distinguished between  d(#ZinterLATA telecommunications services and interLATA information services in section 272(a)(2),  d(#-its use of the term "interLATA services" in section 271 clearly indicates an intent to include both  X- d(#information and telecommunications services.;n yOT-ԍMFS at 10.; MFS specifically argues that the section 271  d(#xrestrictions apply to "interLATA services" and are not limited to "interLATA telecommunications  X-services.":ox yO -ԍId.:  X_- O554.` ` MCI notes that BellSouth's interpretation of "interLATA services" as encompassing  XH- d(#both interLATA telecommunications and information services in section 271(b) would mean that  d(#a BOC could not provide inregion interLATA information services until it had obtained section  X - d(#271 authorization.@p  yO-ԍMCI Reply at 8.@ In response, BellSouth acknowledges that, prior to providing interLATA  d(#information services that are neither previously authorized activities under section 271(f) nor  X - d(#incidental interLATA services under section 271(g), the BOCs are required to obtain section 271  X -authorization from the Commission.cq  yO-ԍSee BellSouth Oct. 29 Ex Parte at 12.c  X -XX` ` c.X Discussion (#  Xy- 655.` ` Upon consideration of the arguments raised in the record, we modify our  d(#interpretation of the scope of the term "interLATA service." Consistent with the views of the  d(#0commenters that addressed this point, we conclude that the term "interLATA services"  X4- d(#encompasses both interLATA information services and interLATA telecommunications services.r4(  yO - v /ԍE.g., BellSouth at 19 n.45; accord ITAA at 7; MFS at 10; Ameritech Reply at 33; MFS Reply at 67; see  yO-also MCI Reply at 8.  X- 756.` ` We are persuaded that the definition of "interLATA service," which is  X- d(#"telecommunications between a point located in a [LATA] and a point located outside such  X- d(#Zarea,"Hs  yO $-ԍ47 U.S.C.  153(21).H does not limit the scope of the term to telecommunications services because, as MFS and  X- d(#BellSouth point out, information services are also provided via telecommunications. Elsewhere  X- d(#in this Report and Order, we conclude that "interLATA information services" must include a"s,-(-(ZZ"  X- d(#zbundled, interLATA transmission component.Tt yOy-ԍSee infra part III.F.2.T Thus, interLATA information services are  d(#kprovided via interLATA telecommunications transmissions and, accordingly, fall within the  d(#definition of "interLATA service." Moreover, we believe that it is a more natural, commonsense  d(#reading of "interLATA services" to interpret it to include both telecommunications services and  d(#information services. In addition, as MFS argues, in section 272(a)(2), Congress uses and  d(#distinguishes between "interLATA telecommunications services" and "interLATA information  d(#services," demonstrating that it limited the term "interLATA services" to transmission services  d(#when it wished to. Further, if Congress had intended the term "interLATA services" to include  d(#xonly interLATA telecommunications services, its use of the term "interLATA telecommunications services" in section 272(a)(2) would have been unnecessary and redundant.  X - 857.` ` As MCI points out, interpreting the term "interLATA services" to include both  d(#interLATA telecommunications and interLATA information services means that a BOC may not  X - d(#provide inregion interLATA information services until it obtains section 271 authorization.@u X yO-ԍMCI Reply at 8.@  d(#=As a practical matter, we believe that interpreting "interLATA services" to include interLATA  d(#information services will not alter the application of section 271. As noted above, and discussed  d(#jin greater detail below, we conclude that the term "interLATA information service" refers to an  d(#Oinformation service that incorporates as a necessary, bundled element an interLATA  Xb- d(#telecommunications transmission component provided to the customer for a single charge.Tvb yO-ԍSee infra part III.F.2. T  d(#Thus, regardless of whether we interpret "interLATA service" to include interLATA information  d(#services, a BOC would be required to obtain section 271 authorization prior to providing, in d(#Zregion, the interLATA telecommunications transmission component of an interLATA information service.  X-X 2.X` ` Application of Section 272 Safeguards to International InterLATA Services(#`  X-   X- 958.` ` In the Notice, we tentatively concluded that Congress intended the section 272  X- d(#safeguards to apply to all domestic and international interLATA services.Cwx yO-ԍNotice at  32.C A  ll of the parties  X|- d(# that commented on this point supported this tentative conclusion.x| yO5"- v ԍAT&T at 910; Comptel at 8; Excel at 12; ITAA at 5; USTA at 9; TRA at 8; MCI at 6; Sprint at 11; DOJ Reply at 8. As noted above, the 1996  d(#Act defines "interLATA services" as "telecommunications between a point located in a [LATA]  XN- d(#and a point located outside such area."HyN`  yO_&-ԍ47 U.S.C.  153(21).H The definition does not distinguish between domestic  X7- d(#and international interLATA services. Further, international telecommunications services, which"7 y,-(-(ZZ"  d(#originate in a LATA and terminate in a country other than the United States, or vice versa, fit  d(#kwithin the statutory definition of interLATA services. Thus, we hereby adopt our tentative conclusion.  X-X 3.X` ` Provision of Services through a Single Affiliate (#`  Xv-XX` ` a.X Background (#  XH- :59.` ` In the Notice, we te ntatively concluded that BOCs may conduct all, or some  X1- d(#combination of, manufacturing activities, interLATA telecommunications services, and interLATA  d(#information services through a single separate affiliate, so long as the affiliate satisfies all  X - d(#/statutory and regulatory requirements imposed on the provision of each type of service.Cz  yO| -ԍNotice at  33.C  d(#.Elsewhere in the Notice, we sought comment on whether the 1996 Act permits us to, and if so,  d(#whether we should, interpret or apply any of the requirements of section 272(b) differently with  d(#respect to a BOC's provision of interLATA telecommunications services, which are regulated  d(#under Title II, as opposed to a BOC's engagement in manufacturing and provision of interLATA  X- d(#iinformation services, which are unregulated activities.{X yO- v 1ԍThe Commission retains ancillary jurisdiction over unregulated services pursuant to Title I of the  yOa-Communications Act of 1934. See 47 U.S.C.  154(i). In addition, we sought comment on how  d(#lwe could impose different regulatory requirements if a BOC provides both regulated and  Xb-unregulated services through a single affiliate.F|b yO-ԍId. at  56.F  X4-XX` ` b. Comments (#`  X- ;60.` ` The majority of parties agree that BOCs may engage in manufacturing activities,  d(#and also provide interLATA telecommunications services and interLATA information services,  X- d(#ythrough the same affiliate.}@ yO- v ԍAmeritech at 63; Bell Atlantic, Exhibit 1, at 1; NYNEX at 38 n.52; PacTel at 4; US West at 19; USTA at 10; Sprint at 1213; TIA at 15. Further, most of the parties that commented on these issues state  d(#that neither the text of the statute nor regulatory concerns mandate that we apply the section  X- d(#272(b) requirements differently to regulated services and unregulated activities offered through  X- d(#such an affiliate.~ yO"- v ԍE.g., MCI at 22 (expressing no opinion as to manufacturing); PacTel at 1819; TIA at 1920; USTA at 18 yO#-19. Contra Ohio Commission at 8. The Ohio Commission asserts, however, that BOCs should not be permitted  d(#<to offer regulated interLATA telecommunications services together with unregulated competitive  Xe- d(#services, unless they are willing to have their unregulated services subject to the same scrutiny"e ~,-(-(ZZ"  X- d(#as their regulated services.F yOy-ԍOhio Commission at 8.F VoiceTel argues that BOCs should be required to separate the  d(#provision of manufacturing activities from other competitive services, to prevent the interLATA  d(#Lservice operations provided by the BOC's affiliate from obtaining an unfair advantage through  X-access to information about manufacturing developments.CX yO-ԍVoiceTel at 1011.C  X-XX` ` c.X Discussion (#  X_-  A<61.` ` Based on the comments submitted in the record and our analysis of the 1996 Act,  d(#we adopt our tentative conclusion that BOCs may conduct all, or some combination, of  d(#[manufacturing activities, interLATA telecommunications services, and interLATA information  d(#/services through a single separate affiliate. Section 272(a) requires a BOC to provide these  d(#yservices through "one or more affiliates" that are "separate from any operating company entity  X - d(#>that is subject to the requirements of section 251(c)."J  yO-ԍ47 U.S.C.  272(a)(1).J We conclude that this language is  d(#.intended to allow the BOCs flexibility in structuring their provision of competitive services, so  d(#ilong as those services are separated from the BOCs' provision of any local exchange services that are subject to the requirements of section 251(c).  Xy-  =62.` ` We further conclude, as a policy matter, that it is not necessary to require the  Xb- d(#}BOCs to separate their manufacturing activities from their provision of interLATA  XK- d(#telecommunications services and interLATA information services, as suggested by VoiceTel. Kx yOt- v ԍSee VoiceTel at 1011. In contrast, the Telecommunications Industry Association, a national trade  d(#association representing manufacturers and suppliers of telecommunications equipment and customer premises  d(#wequipment (CPE), agrees that the BOCs may provide manufacturing activities through the same section 272 affiliate that provides interLATA telecommunications services and interLATA information services. TIA at 1516.  d(#/First, a BOC's manufacturing activities do not entail control over bottleneck local exchange  d(#]facilities. Second, during the period that the MFJ prohibited the BOCs from engaging in  X- d(#Lmanufacturing activities, a competitive market for these activities developed.x`  yO- v /ԍUnder the MFJ, the BOCs were not prohibited from providing CPE. In 1987, the Commission lifted the  d(#structural separation requirement it had imposed on BOC provision of CPE, based in part on a determination that  yO - d(#jthe CPE industry was substantially competitive. See Furnishing of Customer Premises Equipment by the Bell  yOo!- d(#Operating Companies and the Independent Telephone Companies, CC Docket No. 8679, Report & Order, 2 FCC  yO7"- d(#yRcd 143, 147,  25 (1987) (BOC CPE Relief Order); see also Procedures for Implementing the Detariffing of  yO"- d(#Customer Premises Equipment and Enhanced Services (Second Computer Inquiry), CC Docket No. 81893, Memorandum Opinion & Order, 8 FCC Rcd 3891, 3891,  5 (1993). The market for",-(-(ZZ"  X- d(#information services is fully competitive;C  yOy- v ԍSee, e.g., Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer  yOA- d(#.Inquiry), CC Docket No. 20828, Final Order, 77 FCC 2d 384, 433,  128 (1980) (Computer II Final Order);  yO - d(#Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), CC Docket  yO-No.85229, Report & Order, 104 FCC 2d 958, 1010,  95 (1986) (Computer III Phase I Order).C the market for  X- d(#interLATA telecommunications services is also substantially competitive. yOJ- v kԍSee, e.g., Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket No. 9661,  yO- d(#Second Report & Order, FCC 96424, at  2122 (rel. October 31, 1996) (Tariff Forbearance Order); Motion of  yO- d(#AT&T to be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271, 32783279, 3288,  9, 26 (1995)  yO - d(#;(AT&T Nondominance Order); Competition in the Interstate Interexchange Marketplace, CC Docket No. 90132,  yOj -Report & Order, 6 FCC Rcd 5880, 5887,  36 (1991) (First Interexchange Competition Order). Thus, while a BOC  d(#.may achieve certain efficiencies and economies of scope by conducting all three categories of  d(#activity through the same section 272 affiliate, it cannot thereby increase its ability to exercise  d(#Kmarket power in either the manufacturing, interLATA telecommunications services, or interLATA  d(#information services markets. Further, we note that section 273, which is the subject of a  Xv- d(#\separate proceeding,jXv`  yO- v ԍSee Implementation of Section 273 of the Communications Act of 1934, as amended by the  yOO- d(#;Telecommunications Act of 1996, CC Docket No. 96254, Notice of Proposed Rulemaking, FCC 96472 (rel. Dec.  yO-11, 1996) (Manufacturing NPRM). j establishes additional safeguards applicable to BOC manufacturing  X_- d(#.activities, which are intended to promote competition and prevent discrimination._  yO- v \ԍSee, e.g., 47 U.S.C.  273(c) (requiring the BOCs to file with the Commission and disclose to competitors  d(#wand interconnecting carriers information regarding protocols and technical requirements for connection with and use  d(#of its telephone exchange service facilities); 47 U.S.C.  273(e) (imposing nondiscrimination requirements,  d(#Kprocurement standards, joint network planning and design requirements, and proprietary information protection  yO-requirements on BOCs and their manufacturing affiliates).Đ For these  d(#reasons, we conclude that BOCs may conduct all, or some combination of, manufacturing  d(#activities, interLATA telecommunications services, and interLATA information services through the same section 272 affiliate.  X - 2>63.` ` Further, we decline to adopt different requirements pursuant to section 272(b) for  d(#=regulated and unregulated activities. The safeguards of section 272(b) apply to any "separate  X - d(#Laffiliate required by" section 272(a).H 0 yO-ԍ47 U.S.C.  272(b).H Thus, the section 272(b) safeguards address the BOCs'  d(#Lpotential to allocate costs improperly and to discriminate in favor of their section 272 affiliates, irrespective of the activities in which those affiliates engage.  Xb-X 4.X` ` Manufacturing Activities (#`  XK-  X4- ?64.` ` In the Notice, we stated that BOCs may only engage in manufacturing activities  X- d(#<through a separate affiliate that meets the requirements of section 272, and noted that section 273" ,-(-(ZZ "  X- d(#{sets forth additional safeguards applicable to BOC entry into manufacturing activities.C yOy-ԍNotice at  35.C  d(#Subsequent to the closing of the record in this proceeding, the Commission released a Notice of  X- d(#yProposed Rulemaking to clarify and implement the provisions of section 273.ZX yO-ԍSee Manufacturing NPRM.Z Several parties  X- d(#have raised arguments relating to the section 273 provisions on the record in this proceeding.X yOT- v 0ԍSee, e.g., TIA at 1015 (addressing the scope of the term "manufacturing"); US West Reply at 2024  d(#(arguing that section 273(b)(1) authorizes a BOC to participate with a manufacturer in the design of equipment on  yO -an unseparated basis and without awaiting section 271(d) authorization); see also ITI/ITAA Reply at 23, 9-10.  d(#Because this proceeding implements the nonaccounting safeguards provisions of sections 271 and  d(#Z272, arguments relating to the specific provisions of section 273 are more appropriately addressed  d(#yin the section 273 proceeding. We note that BOCs must conduct their manufacturing activities  d(#through a section 272 separate affiliate, manufacture and provide telecommunications equipment  d(#Land CPE in accordance with section 273, and comply with the regulations that the Commission promulgates to implement both sections 272 and 273.B!}K 2J:\POLICY\SAFE\ORDER\MASTER\BAS\MERGER.ALL2 B    X - ^ B.XMergers/Joint Ventures of Two or More BOCs (#  X -X 1.X` ` Background (#`  X - A@65.` ` In the Notice, we tentatively concluded that, pursuant to sections 271(i)(1)   yO`- v ?ԍSection 271(i)(1) provides that "[t]he term "inregion State" means a State in which a Bell operating  d(#company or any of its affiliates was authorized to provide wireline telephone exchange service pursuant to the  d(#reorganization plan approved under the AT&T Consent Decree, as in effect on the day before the date of enactment of the Telecommunications Act of 1996." 47 U.S.C.  271(i)(1). and  X- d(#^ 153(4)(B),X  yO1- v ԍSection 3(4) provides that "[t]he term 'Bell operating company' . . . (B) includes any successor or assign  d(#hof any such company that provides wireline telephone exchange service; but (C) does not include an affiliate of such company, other than an affiliate described in subparagraph (A) or (B)." 47 U.S.C.  153(4). if two or more of the BOCs combine their operations through merger or acquisition,  d(#jthe inregion states of the resultant entity shall include all of the inregion states of each of the  Xb- d(#BOCs involved in the merger/acquisition.xb yO# - v ԍ Notice at  40. Specifically, we noted that Bell Atlantic had announced plans to acquire NYNEX, and that  yO - d(#ZSBC and PacTel had announced their intent to merge. Id. at n.74. These mergers have not yet been completed,  d(#although on November 5, 1996, the Department of Justice announced that it was closing its investigation into the  yO{"- d(#ZSBCPacTel merger, having concluded that the merger does not violate the antitrust laws. See U. S. Department  yOC#- d(#;of Justice, Antitrust Division, Antitrust Division Statement Regarding Pacific Telesis/SBC Communications Merger,  d(#News Release, DOJ 96542 (November 5, 1996). In this Order, as in the Notice, we intend that our analysis of mergers between or among BOCs be extended to the acquisition of one BOC by another. We sought comment on whether the entry into a  d(#merger agreement or a joint venture arrangement by two or more BOCs affects the application  d(#of the section 271 and 272 nonaccounting separate affiliate and nondiscrimination requirements"4!P,-(-(ZZH"  d(#.to those BOCs. We further sought comment on whether additional safeguards are required to  d(#ensure that these BOCs do not provide the affiliates of their merger partners with an unfair competitive advantage during the pendency of their merger agreement.  X-X 2.X` ` Comments (#`  Xv- QA66.` ` All parties that commented on this issue unanimously agree with our tentative  d(#=conclusion that, upon completion of a merger between or among BOCs, the inregion states of  XH-a merged entity shall include all of the inregion states of the BOCs involved in the merger.H yO - v ԍAmeritech at 66; AT&T at 15; Comptel at 1112; Excel at 3; USTA at 13; MCI at 14; Sprint at 15; ITAA at 9 n.22; New York Commission at 6; TRA at 10; DOJ Reply at 8.  X - B67.` ` Existing and potential competitors of the BOCs express concern about the incentive  d(#and ability of the BOCs to discriminate in favor of the affiliates of their merger or joint venture  d(#Mpartners during the pendency of a merger or joint venture. For the purpose of applying the  d(#section 272 safeguards, they urge the Commission to treat the regions of BOCs entering a merger  d(#or joint venture as combined from the time that they enter into the merger or joint venture  X - d(#agreement.  yOx- v =ԍAT&T at 15; Comptel at 1213; Excel at 24; TRA at 1011; Sprint at 15; Sprint Reply at 89; accord New York Commission at 67. Further, competitors argue that all nondiscrimination safeguards that apply to the  d(#BOC's dealings with its own section 272 affiliates should apply to the BOC's dealings with the  d(#section 272 affiliates of its merger or acquisition partner, as well as to dealings with a joint  Xb-venture partner.jbx yO-ԍTRA at 1011; Sprint at 15; accord MCI Reply at 7. j  X4- BC68.` ` In contrast, the DOJ and several BOCs contend that because BOCs would not  d(#.become affiliates of one another until a merger is consummated, entry into a merger agreement  d(#would have no effect on the application of the section 272 safeguards, which pertain to a BOC's  X- d(#krelationship with (and potential discrimination in favor of) its own affiliate.r yO-ԍDOJ Reply at 9; USTA at 1314; NYNEX Reply at 2829; PacTel at 8.r USTA further  d(#-contends that a rule attributing the inregion service area of merging BOCs to one another during  X- d(#Lthe pendency of a merger would be very difficult to administer.a yO !-ԍUSTA at 1314; see also PacTel Reply at 5.a These parties argue that the  d(#xCommission need not adopt any additional regulations to govern the conduct of proposed merger  d(#Zpartners during the pendency of a proposed merger. They claim that sufficient protection against  d(#kunfair discrimination by BOCs in conjunction with mergers, acquisitions, and joint ventures  Xe-already exists.e(  yO>&-ԍDOJ Reply at 9; USTA at 13; Ameritech at 66; Nynex Reply at 2829; PacTel at 8. "N" ,-(-(ZZ"Ԍ X-X 3.X` ` Discussion (#`  X- _D69.` ` We note the unanimous support among parties that commented on the issue, and  d(#zhereby affirm our tentative conclusion that, upon completion of a merger between or among  d(#BOCs, the inregion states of the merged entity shall include all of the inregion states of each  X- d(#of the BOCs involved in the merger.X yO- v \ԍSimilarly, where such a transaction takes the form of an acquisition, rather than a merger, pursuant to 47  d(#xU.S.C.  153(4)(B), the surviving BOC shall become the successor or assign of the acquired BOC, and thus the inregion area of the surviving BOC shall include the inregion states of the acquired BOC. We decline, however, to adopt a general rule that would  d(#{treat the regions of merging BOCs as combined prior to completion of the merger, for the  d(#xpurposes of applying the section 272 separate affiliate and nondiscrimination safeguards. Section  d(#272 requires a BOC to provide certain services (interLATA telecommunications and information  d(#=services and manufacturing activities) through one or more separate affiliates, and establishes  d(#nondiscrimination requirements that apply to the BOC's conduct and its relationship with these  d(#kaffiliates. Section 3(1), in turn, defines an "affiliate" as "a person that (directly or indirectly)  d(#owns or controls, is owned or controlled by, or is under common ownership and control with,  X - d(#another person."  yOn- v ԍSection 3(1) further provides, "[f]or the purposes of this paragraph, the term 'own' means to own an equity interest (or the equivalent thereof) of more than 10 percent." 47 U.S.C. 153(1). Prior to completion of a merger, the merging BOCs are neither affiliates, nor  d(#successors or assigns, of one another. Thus, entry into a merger agreement does not render the  d(# section 272 safeguards applicable to a BOC's relationship with its merger partner, nor to its  d(#relationship with its merger partner's affiliates. Moreover, treating the regions of merging BOCs  d(#as combined from the inception of a merger agreement might create considerable problems in  d(#applying the section 271 and 272 safeguards. For example, if BOC A were offering outofregion  d(#interLATA services in BOC B's region at the time the two entered a merger agreement, BOC A  d(#might be required immediately to cease the provision of such services until it had received  d(#approval under section 271 to offer inregion interLATA services. That result would be both disruptive and confusing to customers.  X- E70.` ` We further decline to adopt any additional regulations applicable to pending  d(#mergers or joint ventures between or among BOCs. We are persuaded that adequate protections  d(#against discriminatory and anticompetitive conduct already apply to mergers, acquisitions, and  d(#joint ventures among BOCs. As the DOJ and other commenters point out, these protections  d(#Linclude the nondiscrimination obligations of sections 201 and 202 of the Communications Act,  d(#.which, among other things, prevent the BOCs from unjustly or unreasonably discriminating in  d(#lproviding facilities or services to interexchange carriers, and would thus govern a BOC's  d(#relationship with the longdistance affiliate of its merger partner. Continuing enforcement of the  d(#MFJ equal access requirements and preexisting Commissionprescribed interconnection  d(#requirements, pursuant to section 251(g), also safeguards against BOC discrimination in favor of  X- d(#jthe affiliates of their merger partners . Further, as USTA notes, BOCs will be subject to the pre"#@,-(-(ZZ"ԫ X- d(#-merger review process under the HartScottRodino amendment to the Clayton Act. yOy- v ԍUSTA at 1314; see HartScottRodino Antitrust Improvement Act of 1976, P.L. 94435, Title II, 201,  yOA- d(#90 Stat. 1390, codified at 15 U.S.C. 18a. The HartScottRodino review process provides an opportunity for the  d(#DOJ or the FTC to block a proposed merger that would be anticompetitive and would violate federal antitrust laws.  d(#By subjecting merging BOCs to the scrutiny of these agencies during the period prior to consummation of their merger, HartScottRodino review may curb their incentive to engage in discriminatory conduct during this period. Moreover,  d(# as MCI suggests, we retain our authority to impose additional safeguards in the context of  d(#particular mergers, should circumstances demonstrate the need for such safeguards, on a caseby X-case basis.x yO -ԍSee MCI at 1415 (citing Interim BOC OutofRegion Order at  33).D!}K 4~ J:\POLICY\SAFE\ORDER\MASTER\BAS\GRANDFAT.HER4 D  X- C.XPreviously Authorized Activities (#  X_-X 1.X` ` Background (#`  X1- $F71.` ` In the Notice, we sought comment on the meaning of and interaction between  X - d(#zsections 271(f), 272(a)(2)(B)(iii), and 272(h).N  yO-ԍNotice at  34, 3839.N Specifically, we sought comment on whether,  d(#subject to the exception established by section 272(a)(2)(B)(iii), section 272(h) requires the BOCs  d(#to come into compliance with the section 272 safeguards with respect to all of the activities listed  X - d(#in section 272(a)(2)(A)(C) that they were providing on the date of enactment of the 1996 Act.J  yO-ԍId. at  34, 38.J  d(#=We observed that section 272(a)(2)(B)(iii) establishes an exemption for "previously authorized  d(#=activities described in section 271(f)" from the separate affiliate requirement for "origination of  X- d(#interLATA telecommunications services."F(  yOi-ԍId. at  38.F We sought comment on whether Congress intended,  d(#through section 272(h), to require BOCs engaged in previously authorized manufacturing  d(#kactivities and interLATA information services to come into compliance with the section 272  XK-requirements.FK  yO-ԍId. at  39.F  X-X 2.X` ` Comments (#`  X- G72.` ` Section 271(f). In general, the BOCs interpret section 271(f) to mean that section  d(#271(a), which prohibits BOCs from providing inregion interLATA services prior to obtaining  d(#Zsection 271 authorization, does not affect their provision of interLATA services that have already  X- d(#been authorized by the MFJ court, as long as they continue to provide such services in accordance"$H ,-(-(ZZ"  X- d(#with the terms and conditions imposed by the MFJ court. yOy-ԍBellSouth at 1819, 24; NYNEX at 39; U S West at 15; cf. Ameritech at 6364. Several potential competitors argue  d(#that section 271(f) does not address whether BOCs must provide previously authorized services  X- d(#through a section 272 separate affiliate, but rather authorizes the BOCs to continue to provide in d(#[region interLATA services for which they had obtained MFJ waivers prior to enactment of the  X- d(#1996 Act, without first obtaining section 271 authorization.X yO-ԍSee, e.g., MCI Reply at 56; see also TRA at 9; ITAA at 8; Comptel at 1011. Interexchange carriers argue that,  d(#yto the extent certain previously authorized activities are not required eventually to comply with  Xv- d(#xsection 272 separate affiliate requirements, they must continue to be provided subject to the terms  X_-and conditions contained in an order of the MFJ court._ yO -ԍAT&T at 12 n.12; Comptel at 1011; MCI at 9 n.21; Sprint at 13 n.10; MCI Reply at 45.  X1- H73.` ` Section 272(a)(2)(B)(iii). Bell Atlantic and BellSouth argue that section  d(#L272(a)(2)(B)(iii) exempts all previously authorized activities described in section 271(f) from the  X - d(#section 272 separate affiliate requirements.a x yO,-ԍBell Atlantic, Exhibit 1, at 2; BellSouth at 19.a Ameritech and PacTel argue that section  X - d(#272(a)(2)(B)(iii) exempts from the section 272 separate affiliate requirements all previously  X - d(#[authorized interLATA telecommunications services and interLATA information services.  yO- v PԍAmeritech at 6465 (arguing that interLATA information services are covered by the section  d(#272(a)(2)(B)(iii) exemption because they are a subset of interLATA telecommunications services); PacTel at 56;  d(#Ameritech Reply at 3233; PacTel Reply at 3 (arguing that the scope of section 272(a)(2)(B) is not limited to  d(#"telecommunications services" because the excepted categories of "incidental interLATA services" and "previously  yO-authorized services" both include information services); see also USTA at 1213; NYNEX Reply at 28 n.87. In  X - d(# general, potential competitors to the BOCs argue that section 272(a)(2)(B)(iii) only exempts  d(#previously authorized interLATA telecommunications services from the section 272 separate  X- d(#affiliate requirements.k  yO-ԍMCI at 89; Sprint at 1314; ITAA at 8; Sprint Reply at 6.k One BOC agrees with this interpretation.OH  yO-ԍU S West at 1617.O These parties argue that  Xy- d(#ysection 272(a)(2)(B)(iii) does not exempt previously authorized interLATA information services  d(#from the separate affiliate requirements, because section 272(a)(2)(B)(iii) only applies to  XK- d(#interLATA telecommunications services.zK yO!-ԍMCI at 89; ITAA at 8; U S West at 16; MCI Reply at 6; Sprint Reply at 6.z Although the BOCs and their competitors disagree  d(#as to the scope of the section 272(a)(2)(B)(iii) exemption, they agree that the exemption is  X-permanent.h yO6%-ԍAmeritech at 65; BellSouth at 19; NYNEX at 42; MCI at 89; Sprint at 13. "%,-(-(ZZF"Ԍ X- }I74.` ` Section 272(h). Although the BOCs generally agree that section 272(h) authorizes  X- d(#a transition period for compliance with the separate affiliate requirements, yOb-ԍSee NYNEX at 4142; Bell Atlantic, Exhibit 1, at 2; PacTel at 6; SBC at 11; see also MFS Reply at 16. their views diverge  d(#as to the effect of the section. At one extreme, PacTel argues that section 272(h) does not apply  d(#xto previously authorized interLATA information or telecommunications services or manufacturing  X- d(#kactivities, but rather provides a oneyear transition period for compliance with requirements  d(#imposed on the telephone exchange and exchange access activities BOCs were providing on the  Xv- d(#Ldate of enactment of the 1996 Act, e.g., compliance with section 272(e).?vX yO -ԍPacTel at 56.? Several BOCs argue  d(#that section 272(h) requires only previously authorized manufacturing activities to come into  d(#ycompliance with the separate affiliate requirements, because section 272(a)(2)(B)(iii) exempts all  X1- d(#previously authorized services involving interLATA telecommunications, including information  X - d(#jservices.   yO- v ԍUSTA at 1213; Ameritech Reply at 33; cf. NYNEX at 39; Ameritech at 6566 (section 272(h) allows one  d(# year for the BOCs to come into compliance with the section 272 requirements for all interLATA information services  d(#and interLATA telecommunications services they are providing pursuant to MFJ waivers that incorporate a separate  yO -affiliate requirement.) At the other extreme, U S West argues that section 272(h) applies to all previously  X - d(#jauthorized manufacturing and interLATA information services, giving BOCs one year from the  X - d(#ydate of enactment of the 1996 Act to move these services into section 272 separate affiliates.C  yOm-ԍU S West at 1718.C  X -MCI, Sprint, and ITAA endorse U S West's position. `  yO-ԍMCI at 89; Sprint at 1314; see also ITAA at 8 (specifically referring to interLATA information services).  X - J75.` ` Differential Treatment. A majority of the BOCs propose interpretations of sections  d(#271(f), 272(a)(2)(B)(iii), and 272(h) that would result in differential treatment for different types  d(#-of previously authorized services. NYNEX and U S West argue that permanently exempting only  Xb- d(#previously authorized interLATA telecommunications services from the section 272 separate  d(#yaffiliate requirements makes sense, because most of the telecommunications services for which  d(# BOCs obtained MFJ waivers would be impossible, or too costly, to provide on a separated  X- d(#.basis.'   yO- v ԍNYNEX at 3940; U S West at 17. NYNEX and U S West state that most waivers granted by the MFJ  d(#hcourt for provision of interLATA telecommunications services contemplated integrated provision of these services,  d(#including numerous waivers to provide Extended Area Service (EAS) by expanding the local calling area of a small  yO"-number of usually rural customers to include nearby "communities of interest" located in another LATA.' Ameritech, however, contends that the Commission should not differentiate between  X- d(#previously authorized interLATA telecommunications services and previously authorized"&,-(-(ZZ "  d(#information services, arguing that certain previously authorized interLATA information services  X-cannot efficiently be provided on a separated basis.-  yOb- v ԍAmeritech at 6364 (citing United States v. Western Electric, No. 820192 (D.D.C. Feb. 6, 1989) (granting  yO*- d(#xa waiver for a reverse directory service provided through the telephone operating company) and United States v.  yO- d(#;Western Electric, No. 820192 (D.D.C. Sept. 11, 1989) (granting a waiver for "telecommunications devices for the deaf" (TDDS) and specifically finding that service to be an information service)). -  X-X 3.X` ` Discussion (#`  X-  K76.` ` Based on the record before us and our analysis of the relevant statutory terms, we  d(#?conclude that BOCs may continue to provide all previously authorized services without  d(#Zinterruption, pursuant to the terms and conditions set forth in the MFJ court orders that authorize  d(#those services. Previously authorized interLATA information services and manufacturing  d(#jactivities must come into compliance with the section 272 separate affiliate requirements within  d(#one year. Previously authorized interLATA telecommunications services, which do not have to  d(#comply with the section 272 separate affiliate requirements, must continue to be provided  X -pursuant to the terms and conditions of the MFJ court orders that authorize them.  X - L77.` ` Section 271(f). A s a general matter, section 271 addresses the timing and  d(#zrequirements for BOC entry into the interLATA market. Section 271(f) specifies that neither  d(#[section 271(a) nor section 273 "prohibits" a BOC or its affiliate from engaging, at any time after  d(#enactment, in any activity previously authorized by an order of the MFJ court, subject to the  Xb- d(#[terms and conditions imposed by the court.b yO- v ԍSection 273(a), like section 271, incorporates a timing element, permitting a BOC to manufacture and  d(#provide equipment "if" the FCC authorizes that BOC (or its affiliate) to provide interLATA services under 271(d).  d(#=47 U.S.C  273(a). The Joint Explanatory Statement indicates that this section permits a BOC to engage in  d(#manufacturing after the Commission authorizes the company to provide interLATA services under section 271(d)  yO-in any inregion state. Joint Explanatory Statement at 154 . We conclude that the purpose of Section 271(f)  d(#is to preserve the BOCs' ability to engage in previously authorized activities, without first having  d(#to obtain section 271 authorization from the Commission. Section 271(f) by its terms does not  d(#Zaddress, and thus does not preclude, application of the section 272 separate affiliate requirements  d(#to previously authorized services. Except for specifying that BOCs may continue to provide  d(#jpreviously authorized services pursuant to the terms and conditions contained within the MFJ  d(#Lcourt order authorizing the service, section 271(f) does not address the manner in which BOCs  d(#[must structure their provision of previously authorized services, or whether they must provide these services through a separate affiliate. These issues are addressed in section 272.  X|-  M78.` ` Section 272(a)(2)(B)(iii). Section 272 sets forth separate affiliate and  d(#nondiscrimination requirements with which the BOC must comply in order to provide certain  d(#yservices. Separate subsections of section 272(a)(2) establish separate affiliate requirements for  d(#/BOC provision of manufacturing activities (section 272(a)(2)(A)), origination of interLATA  d(#telecommunications services (section 272(a)(2)(B)), and interLATA information services (section" '` ,-(-(ZZ\"  d(#272(a)(2)(C)). Section 272(a)(2)(B)(iii) exempts "previously authorized activities described in  d(#section 271(f)" from the separate affiliate requirement for "origination of interLATA  d(#telecommunications services." We conclude that, because this exemption appears in section  d(#272(a)(2)(B), it applies by its terms only to previously authorized activities that involve the origination of interLATA telecommunications services.  Xv- N79.` ` Previously authorized activities described in section 271(f) may include both  d(#?manufacturing activities and interLATA information services. Neither of these types of  d(#previously authorized activities, however, is exempt from the section 272 separate affiliate  d(#requirements, because neither section 272(a)(2)(A) nor section 272(a)(2)(C) contains an  d(#exemption for previously authorized activities similar to the explicit exemption set forth in section  d(#|272(a)(2)(B)(iii). We reject Ameritech's argument that section 272(a)(2)(B)(iii) exempts  d(#previously authorized interLATA information services from the section 272 separate affiliate  d(#requirements, because section 272(a)(2)(B) applies only to origination of interLATA  X - d(#Ztelecommunications services.N  yO7-ԍSee Ameritech at 6465.N Section 272(a)(2)(C) establishes the separate affiliate requirement  d(#Lfor BOC provision of interLATA information services; there are exceptions to this requirement  d(#for electronic publishing services and alarm monitoring services, but there is no exception specified for previously authorized activities.  XK- O80.` ` Section 272(h). As the majority of commenters agree, section 272(h) establishes  d(#a oneyear transition period for BOCs to comply with the separate affiliate requirements of  d(#section 272 for all services they were providing on the date of enactment of the 1996 Act that  d(#-are not exempt from these requirements. Because we concluded in the preceding paragraphs that  d(#Mpreviously authorized interLATA information services and manufacturing activities are not  d(#exempt from the section 272 separate affiliate requirements, BOCs providing these services must  d(#comply with those requirements within one year of enactment. We reject PacTel's argument that  d(#section 272(h) gives the BOCs one year to comply with the various requirements imposed by  d(#section 272 on their provision of exchange and exchange access services, because we find these  d(#requirements are effective immediately upon a BOC's entry into the inregion interLATA market pursuant to section 271.  X7- P81.` ` Differential Treatment. We conclude that, with respect to requiring compliance  d(#with the section 272 separate affiliate requirements, Congress intended to treat previously  d(#authorized interLATA telecommunications services differently from previously authorized  d(#interLATA information services and manufacturing activities. Certain of the BOCs argue that  d(#such a distinction is justified because it would be more difficult to provide previously authorized  X - d(#xinterLATA telecommunications services on a separated basis.a X yO$-ԍSee, e.g., NYNEX at 3940; U S West at 17.a Ameritech, however, argues that  X!- d(#certain previously authorized interLATA information services, such as TDDS, would be equally"!(,-(-(ZZ "  X- d(#.difficult to provide on a separated basis.D yOy-ԍAmeritech at 6364.D Section 10 of the Communications Act requires us  d(#to forbear from applying any provision of the Act that is not necessary to ensure just and  X- d(#reasonable charges and practices in the telecommunications marketplace, or to protect consumers,  d(#if we find that such forbearance would promote competition and is consistent with the public  X- d(#interest.JX yO-ԍ47 U.S.C.  160. J Thus, to the extent a BOC demonstrates, with respect to a particular previously  d(#<authorized interLATA information service, that forbearance from the section 272 separate affiliate  d(#requirement fully satisfies the section 10 test, we must forbear from requiring the BOC to provide that service through a section 272 affiliate.?!}K /J:\POLICY\SAFE\ORDER\MASTER\BAS\OOR.INF/ ?  X1-   D.XOutofregion interLATA information services (#  X -X 1.X` ` Background (#`  X - Q82.` ` In the Notice, we tentatively concluded that the BOCs must provide interLATA  d(#information services through a separate affiliate, regardless of whether these services are provided  d(#>inregion or outofregion. We observed that section 272(a)(2)(B)(ii) exempts outofregion  d(#interLATA services from the separate affiliate requirement for "origination of interLATA  d(#telecommunications services," but there is no analogous exemption from the section 272(a)(2)(C)  d(#jseparate affiliate required for interLATA information services (other than electronic publishing  XK-and alarm monitoring services).CK yO-ԍNotice at  41.C  X-X 2.X` ` Comments (#`  X- nR83.` ` BellSouth is the only BOC that addresses this issue, arguing that the statute does  d(#Lnot require BOCs to provide outofregion interLATA information services through a separate  X- d(#affiliate.Dx yO-ԍBellSouth at 2025.D BellSouth asserts that the Commission's conclusion is based on the faulty premise  d(#ithat interLATA information services do not fall within the definition of "interLATA services" and  X- d(#therefore are not subject to the "inregion"/"outofregion" dichotomy of section 271.H yOL!-ԍBellSouth at 20, 2123.H BellSouth  d(#further suggests that imposition of a separate affiliate requirement constitutes a prior restraint  d(#upon BOC provision of outofregion information services and may violate the First  XN-Amendment.DN yO%-ԍId. at 2021.D "7)( ,-(-(ZZ"Ԍ X- S84.` ` All of the other parties that responded to this inquiry support the Commission's  d(#tentative conclusion that BOCs must provide outofregion interLATA information services  X- d(#through a section 272 separate affiliate. yOK- v kԍAT&T at 1213; LDDS at 12 n.10; MCI at 15; Sprint at 16; ITAA at 89; VoiceTel at 12; MCI Reply at 78; Sprint Reply at 11; CIX Reply at 4. Several parties reject BellSouth's argument that the  d(#Commission is prevented by the First Amendment from requiring BOCs to provide outofregion  X-interLATA information services through a separate affiliate.X  yOu-ԍSprint Reply at 11; CIX Reply at 5 n.4.X  Xv-X 3.X` ` Discussion (#`  XH-  T85.` ` Based on the record before us and our own statutory analysis, we hereby adopt our  d(#tentative conclusion that BOCs must provide outofregion interLATA information services  d(#through a section 272 separate affiliate. Although we concluded above that "interLATA  X - d(#\information services" are included within the term "interLATA services " as used in section  d(#=271(b), that determination does not alter the conclusion that BOCs must provide outofregion  X - d(#interLATA information services through a section 272 separate affiliate.N  yO6-ԍSee supra part III.A.1.N Section 271(b)(2)  d(#permits a BOC or its affiliate to provide interLATA services, including interLATA information  d(#services, that originate outside its inregion states, immediately upon enactment of the 1996 Act.  d(#\Section 271, however, does not address whether such services must be provided through a separate affiliate; that issue is addressed in section 272(a).  XK- AU86.` ` Section 272(a)(2)(B) requires a separate affiliate for the "origination of interLATA  d(#telecommunications services," but exempts from that requirement "outofregion services  X- d(#described in section 271(b)(2)."M@ yO-ԍ47 U.S.C.  272(a)(2)(B).M We conclude that the exception created by section  d(#272(a)(2)(B)(ii) extends only to outofregion interLATA services that are telecommunications  d(#services. Section 272(a)(2)(C) requires a separate affiliate for "interLATA information services,"  d(#Land exempts electronic publishing and alarm monitoring services from that requirement. There  d(#\are no other exceptions to the requirements of section 272(a)(2)(C). As several commenters  d(#noted, section 272(a)(2)(B) explicitly excludes outofregion services, but section 272(a)(2)(C)  X- d(#does not.s yO"-ԍMCI at 15; see also Sprint at 16; ITAA at 9; CIX Reply at 4.s We agree with MCI that the explicit exclusion of outofregion interLATA  d(#xtelecommunications services in one subsection of the statute, and the absence of such an express  d(#exclusion of outofregion interLATA information services in another subsection of the same  XN- d(#=provision, suggests that Congress intended not to exclude the latter from the separate affiliate"N*` ,-(-(ZZ"  X- d(#requirement. yOy-ԍMCI at 15 n.36 (citing League to Save Lake Tahoe, Inc. v. Trounday, 598 F.2d 1164, 1171 (9th Cir. 1979)). Therefore, we find that outofregion interLATA information services are not excluded from the separate affiliate requirement for interLATA information services.  X- oV87.` ` BellSouth has argued that requiring BOCs to provide outofregion interLATA  X- d(#information services through a section 272 separate affiliate violates the First Amendment.DX yO-ԍBellSouth at 2021.D As  d(#xnoted above, we find that this result is required by the statute. Although the courts have ultimate  d(#=authority to determine the constitutionality of this and other statutes, we find it appropriate to  X_- d(#state that we find BellSouth's argument to be without merit.X_ yO - v ԍThe Commission has previously offered its opinion on the constitutionality of other statutory provisions.  yO - d(#See Inquiry Into Section 73.1910 of the Commission's Rules and Regulations Concerning the General Fairness  yO -Doctrine Obligations of Broadcast Licensees, 102 F.C.C. 2d 143, 155156,  18 (1985). BellSouth bases its argument on  d(#an assertion that as "contentrelated" services, information services are commercial speech entitled  X1- d(#jto First Amendment protections.A1 yO-ԍBellSouth at 20.A We conclude, first, that with respect to certain information  X - d(#services, a BOC neither provides, nor exercises editorial discretion over, the content of the  X - d(#information associated with those particular services, and therefore provision of those information  X - d(#services does not constitute speech subject to First Amendment protections.I  yO5- v ԍ Cf. Turner Broadcasting System, Inc. v. FCC, 114 S. Ct. 2445, 2456 (1994) (Turner). Protocol processing  yO-services are examples of information services that do not constitute commercial speech. See infra part III.F.1.I Second, to the  d(#extent that BOC provision of other interLATA information services constitutes speech for First  d(#Amendment purposes, the section 272 separate affiliate requirement neither prohibits the BOCs  d(#[from providing such services, nor places any restrictions on the content of the information the  X- d(#BOCs may provide.;  yO1- v ԍLike the mustcarry rules at issue in Turner, the section 272 separate affiliate requirement "on [its] face  yO-impose[s] burdens and confer[s] benefits without reference to the content of speech." Turner, 114 S. Ct. at 2460.; Instead, the section 272 separate affiliate requirement is a contentneutral  d(#restriction on the manner in which BOCs may provide interLATA information services, intended  Xb- d(#by Congress to protect against improper cost allocation and discrimination concerns. Thus, we  d(#yconclude that the separate affiliate requirement imposed by section 272 of the Communications  d(#Act on BOC provision of interLATA information services does not violate the First  X-Amendment.bXH  yO"- v ?ԍContentneutral time, place, and manner restrictions that serve a substantial government interest are  yO"- d(#iconstitutionally permissible. See, e.g., City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, reh'g denied, 475 U.S. 1132 (1986). b @!}K 0dJ:\POLICY\SAFE\ORDER\MASTER\BAS\INCI.OGC0 @"+h,-(-(ZZ "Ԍ X- vE.XIncidental InterLATA Services (#  X- X 1.X` ` Background (#`  X- W88.` ` In the Notice, we sought comment on whether we should establish any non d(#vaccounting structural or nonstructural safeguards for BOC provision of the "incidental interLATA  Xv- d(#/services" set forth in section 271(g), in light of section 271(h).Cv yO-ԍNotice at  37.C Section 271(h) directs the  d(#Commission to ensure that the provision of incidental interLATA services "will not adversely  d(#affect telephone exchange service ratepayers or competition in any telecommunications market,"  X1- d(#and states that the provisions of section 271(g) "are intended to be narrowly construed."G1X yO: -ԍ47 U.S.C.  271(h).G We  d(#jalso sought comment regarding the interplay between section 271(h) and section 254(k), which  d(#<prohibits telecommunications carriers from "us[ing] services that are not competitive to subsidize  X -services that are subject to competition."C  yO-ԍNotice at  37.C  X -X 2.X` ` Comments (#`  X- X89.` ` The majority of parties that addressed the issue, BOCs and competitors alike,  d(#contend that section 272(a)(2)(B)(i) exempts all incidental interLATA services from the separate  d(#affiliate requirements of section 272, except section 271(g)(4) information storage and retrieval  XK- d(#services.FXKx yOt- v ԍUSTA at 1011; AT&T at 10; MCI at 910; Ameritech Reply at 3738; BellSouth Reply at 2526; see also  yO<- d(#BellSouth at 2324; PacTel at 7; Time Warner at 1415. But see ITAA at 89; CIX Reply at 45; cf. MCI Reply at 8.F In their comments, however, several parties note that the "incidental interLATA  d(#services" listed in section 271(g) include information services as well as telecommunications  X-services. yOf- v ԍBellSouth at 23; see also PacTel Reply at 3. BellSouth asserts that audio, video, and other programming  d(#,services, interactive programming services (47 U.S.C.  271(g)(1)), alarm monitoring (47 U.S.C.  271(g)(1)), two d(#wway interactive video and Internet services to schools (47 U.S.C.  271(g)(2)), and information storage and retrieval  yO- d(#systems (47 U.S.C.  271(g)(4)) are all information services. BellSouth at 21 n.50; see also BellSouth Oct. 29 Ex  yO -Parte at 12.  X- PY90.` ` Although they generally acknowledge that incidental interLATA services are not  d(#?subject to section 272 separate affiliate requirements, several competitors argue that the  d(#>Commission has the authority to, and should, impose separate affiliate requirements on the",H ,-(-(ZZ"  X- d(#provision of these services.  yOy- v ԍTime Warner at 3334 (specifically addressing video services); VoiceTel at 11 (section 254(k) provides  d(#authority); AT&T at 11 n.11 (sections 254(k) and 271(h) provide authority to impose separation requirements on a  d(#casebycase basis); TRA at 910 (section 271(h) provides authority); NCTA at 34; MCI at 1011 (incidental  yO-interLATA services should be subject to Competitive Carrier separation requirements). In the alternative, competitors propose that incidental interLATA  d(#services should be subject to a variety of nonstructural safeguards. AT&T recommends that we  d(#apply the nondiscrimination provisions of sections 272(c) and (e) to BOC provision of incidental  d(#interLATA services, and that we enforce these requirements through network disclosure,  X- d(#accounting, cost allocation, and reporting requirements. yO - v ԍAT&T at 1112. But see BellSouth Reply at 2526 (sections 272(c), 272(e)(2), and 272(e)(4) apply by their terms to BOCs' dealings with affiliates). MCI argues that, for each service listed  d(#in section 271(g), BOCs must unbundle and make available on a nondiscriminatory basis to all  d(#carriers the same network elements, facilities, and services used in providing that service,  X_- d(#pursuant to the Commission's comparably efficient interconnection (CEI) parameters.P_ yO- v ԍ MCI at 1112. But see BellSouth Reply at 26 (arguing that, under the statute, the Commission cannot  d(#Lrequire BOCs to unbundle and provide nondiscriminatory access to interLATA transmission services that are  d(#components of incidental interLATA services, because although BOCs may provide incidental interLATA services  d(#on an unseparated basis without prior section 271 authorization, they may not provide unbundled interLATA transmission services on a similar basis).P NCTA  d(#contends that the Commission should prescribe safeguards related to inbound and outbound  X1-telemarketing of video programming services by the BOCs.<1  yO-ԍ NCTA at 4.<  X - Z91.` ` In response, USTA and the BOCs argue that the Commission should not adopt any  d(#additional nonaccounting structural or nonstructural safeguards to govern BOC provision of the  X - d(#incidental interLATA services enumerated in section 271(g). H  yO- v ԍAmeritech at 66; Bell Atlantic, Exhibit 1, at 1; PacTel at 67; U S West at 18; USTA at 11; Ameritech Reply at 37. They argue that the Commission  d(#already has in place regulations applicable to incidental interLATA services that will protect  d(#telephone exchange ratepayers, such as the Part 61 price cap rules and the Part 32 accounting  d(#rules and Part 64 cost allocation rules, as well as regulations that ensure telecommunications  Xy- d(#competition, such as the section 251 interconnection and unbundling rules.y yO -ԍBell Atlantic, Exhibit 1, at 12; U S West at 1819; see also PacTel at 7; PacTel Reply at 45. They further argue  d(#that additional safeguards are not warranted by any specific potential competitive harms, and  d(#would undercut the efficiencies of integration that Congress intended to permit the BOCs to  X4-obtain.o40 yO%-ԍUSTA at 11; see also PacTel at 7; Ameritech Reply at 38.o "-,-(-(ZZG"Ԍ X-X 3.X` ` Discussion (#`  X- [92.` ` Section 271(b)(3) permits the BOCs to provide incidental interLATA services  d(#described in section 271(g) immediately after the date of enactment of the 1996 Act. Thus,  d(#unlike other inregion interLATA services, BOCs may provide incidental interLATA services  d(#originating in their own inregion states without receiving prior authorization from the  Xv- d(#Commission pursuant to section 271(d). Neither section 271(b) nor section 271(g) addresses  d(# whether BOCs must provide incidental interLATA services through a section 272 separate affiliate; this issue is addressed by section 272 itself.  X - \93.` ` Scope of the section 272(a)(2)(B)(i) exemption. Section 272(a)(2)(B)(i) sets forth  d(#?an exception to the separate affiliate requirement imposed on "origination of interLATA  d(#telecommunications services." Congress specifically limited this exception to the "incidental  X - d(#interLATA services described in paragraphs (1), (2), (3), (5), and (6) of section 271(g)."P  yON-ԍ47 U.S.C.  272(a)(2)(B)(i).P  d(#.Consistent with the analysis set forth in the two immediately preceding sections of this Order,  d(#we conclude that the section 272(a)(2)(B)(i) exception applies, by its terms, to the origination of  X-incidental interLATA services that are telecommunications services.]X yO-ԍSee supra parts III.C and III.D. ]  Xb- ]94.` ` For the most part, the incidental interLATA services enumerated within the section  XK- d(#-272(a)(2)(B)(i) exception are telecommunications services.lXK yO- v ԍCongress deliberately excluded remote data storage and retrieval services that fall within section 271(g)(4)  yO- d(#from the section 272(a)(2)(B)(i) exception. These services are interLATA information services. See infra paragraph  yOt-271G4121.l Although the incidental interLATA  d(#services set forth in sections 271(g)(1)(A), (B), and (C) include audio, video, and other  d(#xprogramming services that do not appear to be solely telecommunications services, section 271(h)  X- d(#<specifies that these incidental interLATA services "are limited to those interLATA transmissions  X- d(#incidental to the provision by a [BOC] or its affiliate of video, audio, and other programming  X- d(#services that the company or its affiliate is engaged in providing to the public."X yO-ԍ47 U.S.C.  271(h) (emphasis added).X We therefore  d(#conclude that, pursuant to section 272(a)(2)(B)(i), BOCs are not required to provide the  d(#<interLATA telecommunications transmission incidental to provision of the programming services  X- d(#listed in sections 271(g)(1)(A), (B), and (C) through a section 272 separate affiliate.  yO"- v ԍAlthough this determination reflects a refinement in our analysis of the meaning of sections 271(g)(1)(A),  yO#- d(#i(B), and (C), and section 272(a)(2)(B)(i), since our issuance of the OVS Second Report and Order, it is consistent  d(#with our determination in that proceeding that BOCs are not required to provide open video services through a  yO4%- d(#,section 272 affiliate. See Implementation of Section 302 of the Telecommunications Act of 1996, CS Docket No.  yO%- d(#h9646, Second Report & Order, FCC 96249,  249 (rel. June 3, 1996) (OVS Second Report & Order); see also Time  d(#hWarner at 3334. In that proceeding, we concluded that section 653 was silent as to the need for a separate affiliate"&,-(-('"  d(#hrequirement on provision of open video services, and that Congress had expressly directed that Title II requirements  yOX- d(#not be applied to the establishment and operation of an open video system under section 653. OVS Second Report  yO - d(#[& Order at  249. To the extent we interpreted the section 272(a)(2)(B)(i) exemption more broadly in that proceeding than we do in this proceeding, we determine that our current interpretation is correct. Moreover,".,-(-(ZZ3"  d(#alarm monitoring services, listed as incidental interLATA services under section 271(g)(1)(D),  d(#0are explicitly excepted from the section 272 separate affiliate requirements under section 272(a)(2)(C).  X- ^95.` ` In addition, section 271(g)(2), which designates as "incidental interLATA services"  d(#the interLATA provision of "twoway interactive video services or Internet services over  d(#dedicated facilities to or for elementary and secondary schools as defined in section 254(h)(5),"  X_- d(#Zmay encompass services that are not solely telecommunications services._ yO - v ?ԍFor simplicity, we refer below to the incidental interLATA services described by section 271(g)(2) as "educational interactive interLATA services." The statute does not  d(#classify educational interactive interLATA services as either telecommunications services or  d(#.information services. We conclude, however, that the explicit inclusion of section 271(g)(2) in  d(#-the list of services subject to the section 272(a)(2)(B)(i) exception exempts educational interactive  d(#.interLATA services from the section 272 separate affiliate requirements. This interpretation is  d(#Kconsistent with Congress's clear intent, expressed in other provisions of the 1996 Act, to promote  d(#Lthe provision of advanced telecommunications and information services, of which educational  d(#interactive interLATA services are examples, to eligible public and nonprofit elementary and  X - d(#secondary schools.9  yO`- v zԍFor example, section 254(h)(2) of the Communications Act requires the Commission to establish rules to  yO(- d(#,enhance the availability of advanced telecommunications and information services to public institutional users. See  d(#47 U.S.C.  254(h)(2); Joint Explanatory Statement at 133. In addition, section 706(a) of the 1996 Act requires the  d(#Commission to "encourage the deployment on a reasonable and timely basis of advanced telecommunications  yO- d(#capability to all Americans (including, in particular, elementary and secondary schools and classrooms)." See 1996 Act,  706(a), 110 Stat. 56, 153 (codified as a note following 47 U.S.C. 157). 9 The inclusion of educational interactive interLATA services among the list  d(#of "incidental interLATA services" that BOCs could provide immediately upon enactment of the  d(#1996 Act without prior Commission authorization promotes the congressional goal of rapidly  d(#deploying advanced telecommunications by permitting the BOCs to offer such services. Thus,  d(#kwe further find it reasonable to conclude that Congress did not wish to impose a significant  d(#>regulatory barrier, in the form of a separate affiliate requirement, on BOC provision of these  X-services.  yON!- v ԍWe note that even if any of the section 271(g)(2) educational interactive interLATA services were subject  d(#to the section 272 separate affiliate requirements under section 272(a)(2)(C), section 10 mandates that we forbear  d(#from enforcing any statutory or regulatory requirement that is not necessary to ensure just and reasonable charges  d(#and practices in the telecommunications marketplace, or to protect consumers, if we determine that such forbearance  yOn$-would promote competition and is consistent with the public interest. See 47 U.S.C.  160.  X- _96.` ` Additional regulation of incidental interLATA services. We decline to impose the  d(#jsection 272 separate affiliate requirements on incidental interLATA services that, as discussed"/0,-(-(ZZr"  X- d(#above, are exempt from those requirements under section 272(a)(2)(B)(i). yOy- v ԍAs noted above, remote data storage and retrieval services that fall within section 271(g)(4) are subject to  yOA-the section 272 separate affiliate requirements. Section 272 itself  d(#does not require the BOCs to provide these services through a separate affiliate. Further, we  d(#conclude as a legal matter that neither section 271(h) nor section 254(k) requires us to impose  d(#the section 272 separate affiliate requirements on exempt incidental interLATA services in order  d(#Mto protect telephone exchange ratepayers or competition in the telecommunications market.  d(#Moreover, we decline to do so as a matter of policy, because we see no present need to impose  d(#structural separation requirements beyond those mandated by Congress in order to protect against  d(#improper cost allocation and access discrimination. We likewise decline to impose any other  d(#structural separation requirements on BOC provision of these services, as suggested by certain  X1- d(#Zcommenters.1  yO - v ԍSee, e.g., MCI at 1011 (incidental interLATA services should be subject to Competitive Carrier requirements). This decision comports with the Commission's prior determinations not to impose  d(#structural separation requirements in contexts in which it found that nonstructural safeguards  X - d(#provide sufficient protection against improper cost allocation and access discrimination (e.g., BOC  X -provision of enhanced services). x yO- v ԍ COMP3 See Amendment of Section 64.702 of the Commission's Rules and Regulations (Computer III), CC Docket  yO- d(#No. 85229, Phase I, 104 FCC 2d 958 (1986) (Phase I Order), recon., 2 FCC Rcd 3035 (1987) (Phase I  yO-Reconsideration Order), further recon., 3 FCC Rcd 1135 (1988) (Phase I Further Reconsideration Order),  yOm- d(#second further recon., 4 FCC Rcd 5927 (1989) (Phase I Second Further Reconsideration Order); Phase I Order and  yO5- d(#Phase I Reconsideration Order vacated, California v. FCC, 905 F.2d 1217 (9th Cir. 1990) (California I); Phase II,  yO- d(#2 FCC Rcd 3072 (1987) (Computer III Phase II Order), recon., 3 FCC Rcd 1150 (1988) (Phase II Reconsideration  yO- d(#Order), further recon., 4 FCC Rcd 5927 (1989) (Phase II Further Reconsideration Order); Phase II Order vacated,  yO- d(#California I, 905 F.2d 1217 (9th Cir. 1990); Computer III Remand Proceeding, 5 FCC Rcd 7719 (1990) (ONA  yOU- d(#ZRemand Order), recon., 7 FCC Rcd 909 (1992), pets. for review denied, California v. FCC, 4 F.3d 1505 (9th Cir.  yO- d(#1993) (California II); BOC Safeguards Order, 6 FCC Rcd 7571 (1991), vacated in part and remanded, California v.  yO-FCC, 39 F.3d 919 (9th Cir. 1994) (California III), cert. denied, 115 S. Ct. 1427 (1995).  X - `97.` ` Under our rules, the BOCs are subject to existing nonstructural safeguards in their  d(#-provision of incidental interLATA services, and we conclude that these safeguards are sufficient  d(#to protect telephone exchange ratepayers and competition in telecommunications markets, in  d(#accordance with section 271(h). For accounting purposes, incidental interLATA services will be  d(#treated as nonregulated services under our Part 32 affiliate transaction rules and Part 64 cost  d(#[allocation rules, and accordingly costs associated with provision of those services may not be  X4- d(#yallocated to regulated services accounts. X4 yO"- v ԍSee 47 C.F.R.  32.23; 32.27; 64.901 et seq. See also Implementation of the Telecommunications Act of  yO#- d(#1996: Accounting Safeguards Under the Telecommunications Act of 1996, CC Docket No. 96150, Report & Order,  yOM$-FCC 96490, parts III.B.2.b, IV.B.4 (rel. Dec. 24, 1996) (Accounting Safeguards Order). Further, at the federal level and in many states, the  d(#BOCs are subject to price cap regulation, which reduces their incentive to engage in strategic"0,-(-(ZZ"  X- d(#costshifting behavior.c yOy-ԍSee, e.g., Bell Atlantic, Exhibit 1, at 12.c The BOCs are also subject to the section 251 interconnection and  d(#unbundling requirements, which compel them to make available to other telecommunications  d(#carriers the local network elements and local exchange facilities that such carriers may require  X- d(#yto provide services comparable to the incidental interLATA services listed in section 271(g).X yO- v ԍSee 47 U.S.C.  251(c)(2) and (3). In addition, the Commission's Open Network Architecture (ONA) rules  d(#provide a mechanism for competitors that are not telecommunications carriers to obtain access to network elements  yOT- d(#-and facilities used in the provision of information services. See Computer III Further Remand Proceedings: Bell  yO - d(#Operating Company Provision of Enhanced Services, CC Docket No. 9520, Notice of Proposed Rulemaking, 10 FCC  yO - d(#JRcd 8360, 837475,  1922 (1995) (Computer III Further Remand Proceedings). These ONA requirements apply  yO - d(#jto the BOCs regardless of whether they provide information services on an integrated or separated basis. See  yOt - d(#Computer III Remand Proceedings, CC Docket No. 90368, Report & Order, 5 FCC Rcd 7719 (1990) (ONA Remand  yO< - d(#Order). As discussed infra at part III.F.4, the ONA requirements remain in place pending our completion of the  yO -Computer III Further Remand Proceedings.  d(#Further, the BOCs are subject to network disclosure requirements imposed by section 251(c)(5),  d(#which require them to give timely information about network changes to their affiliates'  Xv-competitors.Xv(  yOO- v ԍSee Second Interconnection Order at  165260. Pending conclusion of the Computer III Further Remand  yO- d(#iProceedings, BOCs are also subject to the Computer III network disclosure requirements. See Computer III Phase  yO-II Order, 2 FCC Rcd at 3086, 30913093,  102, 134140.  XH- _a98.` ` Given the complement of nonstructural safeguards to which the BOCs are subject  d(#in their provision of incidental interLATA services, we find that the record in this proceeding  d(#does not justify the imposition of additional nonstructural safeguards on these services. We  d(#decline to extend to the integrated provision of incidental interLATA services any of the section  d(#y272(c) and 272(e) nondiscrimination requirements that depend on the existence of a section 272  X - d(#affiliate, as suggested by AT&T.n H  yO-ԍSee AT&T at 1112; see also infra parts V and VI.n Further, we decline to adopt any additional unbundling  d(#requirements applicable to BOC provision of incidental interLATA services, as suggested by  X - d(#MCI.H  yO0-ԍSee MCI at 1112.H We agree with BellSouth that it would be inconsistent with the 1996 Act for us to  d(#require the BOCs to unbundle and make available interLATA transmission services that they are  Xy- d(#not authorized to provide except as components of an incidental interLATA service (i.e., without  d(#obtaining prior authorization under section 271 or complying with the section 272 separation  XK- d(#requirements).QKh yOd#-ԍSee BellSouth Reply at 26.Q For the foregoing reasons, we decline to adopt any additional structural or  X4- d(#/nonstructural safeguards applicable specifically to BOC provision of incidental interLATA services.D!}K 4%J:\POLICY\SAFE\ORDER\MASTER\BAS\INTERLAT.ALL4 D "1,-(-(ZZ "Ԍ X-_ F.XInterLATA Information Services (#  X-X 1.X` ` Relationship Between Enhanced Services and Information Services (#`  X-XX` ` a.X Background (#  Xv-  b99.` ` In the Notice, we sought comment on the services that are included in the_ statutory  X_- d(#definition of "information service,"' _ yO- v ԍThe Act defines "information service" as "the offering of a capability for generating, acquiring, storing,  d(#wtransforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes  d(#Jelectronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service." 47 U.S.C.  153(20). ' and whether that term encompasses all activities that the  XH- d(#zCommission classifies as "enhanced services."H yO - v [ԍNotice at  42. Under the Commission's rules, the term "enhanced services" refers to "services, offered over  d(#common carrier transmission facilities used in interstate communications, which employ computer processing  d(#[applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted  d(#information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction  yO- d(#xwith stored information." See 47 C.F.R.  64.702(a); see also North American Telecommunications Association  d(#Petition for Declaratory Ruling under Section 64.702 of the Commission's Rules Regarding the Integration of  yOY- d(#Centrex, Enhanced Services, and Customer Premises Equipment, ENF No. 842, Memorandum Opinion & Order,  yO!- d(#101 FCC 2d 349 (1985) (NATA Centrex Order), recon., 3 FCC Rcd 4385 (1988) (NATA Centrex Reconsideration  yO-Order). We noted that the statutory definition of  d(#"information service" is based on the definition used in the MFJ, and that prior to passage of the  d(#1996 Act, neither the Commission nor the MFJ court resolved the question of whether the  d(#definition of enhanced services under the Commission's rules was synonymous with the definition of information services under the MFJ.  X -XX` ` b.X Comments (#  X- $c100.` ` Virtually all parties that commented on this issue agree that the statutory term  Xy- d(#"information services" encompasses all activities that fall within the Commission's definition of  Xb- d(#"enhanced services." RELATION ~Xb  yO- v ԍBut see Ameritech at 69 (asserting that an enhanced service is not the same as an information service); Bell  d(#YAtlantic, Exhibit 1, at 23 (asserting that "information services" do not include protocol processing services, which, with three limited exceptions, are considered "enhanced services").~ The majority of commenters, including BOCs, interexchange carriers, and  XK- d(#certain organizations representing information service providers (ISPs), advocate that the"K2,-(-(ZZ "  X- d(#Commission interpret "information services" to be coextensive with "enhanced services." yOy- v ԍSee, e.g., PacTel at 9; USTA at 16; MCI at 16; Sprint at 1617; ITAA at 1214; IIA Reply at 13; CIX Reply at 34; ITI/ITAA Reply at 15. Other  X-commenters interpret "information services" to be broader than "enhanced services."   yO- v ԍSee, e.g., BellSouth at 27 n.67 ("information services" include live operator telemessaging services, but  d(#"enhanced services" do not, because such services are not "computer processing applications"); AT&T at 12 n.13  d(#(same); U S West at 1112 ("enhanced services" are limited to those services offered over common carrier transmission facilities used in interstate communications); CIX Reply at 3.  X- d101.` ` Parties disagree about whether "protocol processing" services fall within the  X- d(#statutory definition of "information services."y  yO] -ԍThe Common Carrier Bureau previously explained the term "protocol processing" as follows:  X"Protocol" refers to the ensemble of operating disciplines and technical parameters that must be  observed and agreed upon by subscribers and carriers in order to permit the exchange of  information among terminals connected to a particular telecommunications network. A subscriber's  }digital transmission necessarily consists of two components: informationbearing symbols and  protocolrelated symbols. . . . "Protocol processing" is a generic term, which subsumes "protocol  conversion" and refers to the use of computers to interpret and react to the protocol symbols as the  information contained in a subscriber's message is routed to its destination. "Protocol conversion"  is the specific form of protocol processing that is necessary to permit communications between disparate terminals or networks.   yO- d(#IDCMA Petition for a Declaratory Ruling That AT&T's Interspan Frame Relay Service is a Basic Service,  yO-Memorandum Opinion & Order, 10 FCC Rcd 13,717, 13,71718 n.5 (Com. Carrier Bur. 1995) (Frame Relay Order).y Bell Atlantic and U S West argue that protocol  d(#processing services are not information services, because they do not transform or process the  Xv- d(#[content of the information transmitted by the subscriber.SXv yO- v ԍBell Atlantic, Exhibit 1, at 23; accord US West at 13. Compare PacTel at 9 (Commission should exclude  d(#from the definition of information services the three types of protocol conversion that it does not consider to be enhanced services). S In contrast, ITI, ITAA, and Sprint  d(#assert that protocol conversion falls within the statutory definition of an information service,  d(#xbecause that definition does not specify that such services must transform or process the content  X1-of information transmitted.]1 yO-ԍITI/ITAA Reply at 1516; Sprint Reply at 10.]  X -XX` ` c.X Discussion (#  X - 1e102.` ` We conclude that all of the services that the Commission has previously considered  d(#kto be "enhanced services" are "information services." We are persuaded by the arguments  X- d(#advanced by ITAA, CIX, and others, that the differentlyworded definitions of "information"3p,-(-(ZZ "  d(#?services" and "enhanced services" can and should be interpreted to extend to the same  X- d(#functions.[ yOy-ԍSee ITAA at 1314; CIX Reply at 34.[ We believe that interpreting "information services" to include all "enhanced  d(#services" provides a measure of regulatory stability for telecommunications carriers and ISPs  d(#alike, by preserving the definitional scheme under which the Commission exempted certain  d(#services from Title II regulation. We agree with ISPs that regulatory certainty and continuity  X- d(#benefits both large and small service providers.no yO-ԍCf. ITAA at 14; IIA Reply at 13; ITI/ITAA Reply at 18.n In sum, we find no basis to conclude that by  d(#=using the MFJ term "information services" Congress intended a significant departure from the Commission's usage of "enhanced services."  X1- }f103.` ` We also find, however, that the term "information services" includes services that  d(#are not classified as "enhanced services" under the Commission's current rules. Stated differently,  d(#we conclude that, while all enhanced services are information services, not all information  d(#services are enhanced services. As noted by U S West, "enhanced services" under Commission  d(#precedent are limited to services "offered over common carrier transmission facilities used in  d(#-interstate communications," whereas "information services" may be provided, more broadly, "via  X - d(#?telecommunications."C  yOW-ԍU S West at 1112.C  LIVEOP Further, we agree with BellSouth and AT&T that live operator  d(#telemessaging services that do not involve "computer processing applications" are information  Xy-services, even though they do not fall within the definition of "enhanced services."Ny yO-ԍSee infra part III.G.2.N  XK- `g104.` ` We further conclude that, subject to the exceptions discussed below, protocol  d(#-processing services constitute information services under the 1996 Act. We reject Bell Atlantic's  d(#iargument that "information services" only refers to services that transform or process the content  d(#of information transmitted by an enduser, because we agree with Sprint that the statutory  d(#definition makes no reference to the term "content," but requires only that an information service  X- d(#transform or process "information."n yO-ԍSee Bell Atlantic, Exhibit 1, at 2; Sprint Reply at 10.n We also agree with ITI and ITAA that an endtoend  d(#protocol conversion service that enables an enduser to send information into a network in one  d(#@protocol and have it exit the network in a different protocol clearly "transforms" user  X- d(#xinformation.P yO!-ԍSee ITI/ITAA Reply at 17.P We further find that other types of protocol processing services that interpret and  d(#react to protocol information associated with the transmission of enduser content clearly  d(#-"process" such information. Therefore, we conclude that both protocol conversion and protocol processing services are information services under the 1996 Act. "74? ,-(-(ZZ"Ԍ X- h105.` ` This interpretation is consistent with the Commission's existing practice of treating  X- d(#endtoend protocol processing services as enhanced services. yOb- v ԍSee Bell Operating Companies Joint Petition for Waiver of Computer II Rules, Order, 10 FCC Rcd 13,758,  yO*- d(#13,766,  51 and 13,77013,774, app. A (1995) (BOC CEI Plan Approval Order) (approving PacTel CEI plan for  d(#Zprovision of enhanced protocol processing services, as well as CEI plan amendments by Bell Atlantic, BellSouth,  yO- d(#[SWBT, and U S West); see e.g., The Ameritech Operating Companies Plan to Provide Comparably Efficient  yO- d(#Interconnection to Providers of Enhanced Protocol Processing Services, Memorandum Opinion & Order, 5 FCC Rcd  yOJ- d(#w3231 (Com. Car. Bur. 1990); New England Telephone and Telegraph Company and New York Telephone Company  yO- d(#Plan to Provide Comparably Efficient Interconnection to Providers of Enhanced Protocol Processing Services,  yO- d(#;Memorandum Opinion & Order, 5 FCC Rcd 56 (Com. Car. Bur. 1990); South Central Bell Telephone Company and  d(#-Southern Bell Telephone and Telegraph Company Plan for Comparably Efficient Interconnection of Enhanced  yOj - d(#;Services Providers for Synchronous Protocol Processing Services, Memorandum Opinion & Order, 4 FCC Rcd 6825 (Com. Car. Bur. 1989).  We find no reason to depart  d(#from this practice, particularly in light of Congress's deregulatory intent in enacting the 1996  X- d(#Act.x(  yO- v LԍWe observe that the arguments raised by Bell Atlantic and U S West in favor of treating protocol processing  d(#services as telecommunications services are quite similar to arguments that the Commission considered and rejected  yO$- d(#nearly ten years ago in the Computer III Phase II Order, which affirmed the status of protocol processing as an  yO- d(#Zenhanced service. See Computer III Phase II Order, 2 FCC Rcd at 3078,  43. In that decision, the Commission  d(#found, among other things, that protocol processing services were being effectively provided on a competitive,  d(#unregulated basis, and that reclassifying such services as basic services could cloud the regulatory boundary between basic and enhanced services. Treating protocol processing services as telecommunications services might make them  d(#\subject to Title II regulation. Because the market for protocol processing services is highly  d(#Lcompetitive, such regulation is unnecessary to promote competition, and would likely result in  d(#a significant burden to small independent ISPs that provide protocol processing services. Thus,  d(#policy considerations support our conclusion that endtoend protocol processing services are  XH-information services.MHh yOa- v ]ԍTo the extent that BOCs suggest that the section 272 separate affiliate requirements will impair their  yO)- d(#,provision of protocol processing services, we note that under our Computer III rules, they may continue to provide  d(#intraLATA protocol processing services on an integrated basis, pursuant to a CEI plan that has been approved by  d(#,the Commission. We agree with ITI and ITAA that requiring the BOCs to provide interLATA protocol processing  d(#service through a section 272 separate affiliate merely requires them to negotiate the same organizational boundaries  yOI-and service integration issues that their ISP competitors routinely face. See ITI/ITAA Reply at 1819.M  X - i106.` ` We note that, under Computer II and Computer III, we have treated three  d(#Ycategories of protocol processing services as basic services, rather than enhanced services, because  X - d(#they result in no net protocol conversion to the enduser. These categories include protocol  X - d(#.processing: 1) involving communications between an enduser and the network itself (e.g., for  d(#initiation, routing, and termination of calls) rather than between or among users; 2) in connection  X - d(#with the introduction of a new basic network technology (which requires protocol conversion to  d(#maintain compatibility with existing CPE); and 3) involving internetworking (conversions taking  d(#place solely within the carrier's network to facilitate provision of a basic network service, that"y5,-(-(ZZK"  X- d(#result in no net conversion to the enduser).  yOy- v ԍFrame Relay Order, 10 FCC Rcd at 13,719,  1416; Computer III Phase II Order, 2 FCC Rcd at 308182,  d(# 6471. An example of the third type of protocol conversion occurs when a carrier converts from X.25 to X.75  d(#Jformatted data at the originating end within the network, transports the data in X.75 format, and then converts the data back to X.25 format at the terminating end. We agree with PacTel that analogous treatment  d(#Jshould be extended to these categories of "no net" protocol processing services under the statutory  X- d(#regime.= yO3-ԍPacTel at 9.= Because "no net" protocol processing services are information service capabilities used  d(#y"for the management, control, or operation of a telecommunications system or the management  d(#of a telecommunications service," they are excepted from the statutory definition of information  X- d(#<service.R@ yO~ -ԍSee 47 U.S.C.  153(20).R Thus, "no net" protocol conversion services constitute telecommunications services, rather than information services, under the 1996 Act.  XH- j107.` `  ADJUNCT We further find, as suggested by PacTel, that services that the Commission has  d(#classified as "adjuncttobasic" should be classified as telecommunications services, rather than  X - d(#information services.   yO- v ԍPacTel at 9. PacTel argues that such treatment of "adjuncttobasic" services would correspond to the  d(#statutory definition of information services, which "does not include any use of any such capability for the  d(#management, control, or operation of a telecommunications system or the management of a telecommunications  yO-service." 47 U.S.C.  153(20); see also U S West at 13.  In the NATA Centrex order, the Commission held that the enhanced  X - d(#services definition did not encompass adjuncttobasic services.X  yOl- v [ԍNATA Centrex Order, 101 FCC 2d at 359361,  2428. Adjuncttobasic services include, inter alia, speed  d(#dialing, call forwarding, computerprovided directory assistance, call monitoring, caller i.d., call tracing, call blocking, call return, repeat dialing, and call tracking, as well as certain Centrex features. Although the latter services  d(#may fall within the literal reading of the enhanced service definition, they facilitate establishment  d(#of a basic transmission path over which a telephone call may be completed, without altering the  d(#jfundamental character of the telephone service. Similarly, we conclude that "adjuncttobasic"  d(#jservices are also covered by the "telecommunications management exception" to the statutory  d(#Kdefinition of information services, and therefore are treated as telecommunications services under the 1996 Act.  XK-  _X 2.X` ` Distinguishing InterLATA Information Services subject to Section 272 from  X4-IntraLATA Information Services (#`  X-XX` ` a.X Background (#  X- $k108.` ` In the Notice, we sought comment on how to distinguish between interLATA  d(#_information services, which are subject to the section 272 separate affiliate requirements, and"6,-(-(ZZ"  X- d(#KintraLATA information services, which are not.C yOy-ԍNotice at  44.C In particular, we asked whether an information  d(#service should be considered an interLATA service only when the service actually involves an  d(#interLATA telecommunications transmission component, or, alternatively, when it potentially  X- d(#involves interLATA telecommunications transmissions (e.g., the service can be accessed across  X- d(#jLATA boundaries).FX yO-ԍId. at  44.F We further sought comment regarding how the manner in which a BOC  d(#structures its provision of an information service may affect whether the service is classified as  Xv-interLATA.cXv yO - v zԍId. at  45. For example, we asked whether an interLATA information service required nontransmission  d(#computer facilities used in the provision of the service located in a different LATA from the enduser, or nontransmission facilities located in different LATAs.c  XH- Bl109.` ` We also invited comment on whether a particular service for which a BOC had  X1- d(#lapplied for or received an MFJ waiver should presumptively be treated as an interLATA  X - d(#jinformation service subject to the separate affiliate requirements of section 272.F  yO-ԍId. at  46.F In addition,  d(#we sought comment on whether we should presume that services provided by BOCs pursuant to  d(#CEI plans approved by the Commission prior to the enactment of the 1996 Act are intraLATA  X -information services.F  yO-ԍId. at  47.F  X -XX` ` b.X Comments (#  Xy- m110.` ` InterLATA Transmission/Resale. The BOCs, AT&T, and MCI argue that, for an  d(#[information service to be considered an interLATA information service, the BOC must provide  d(#Zas a necessary component thereof telecommunications between a point located in one LATA and  X4- d(#a point outside that LATA.4(  yO - v .ԍAmeritech at 6769; AT&T at 1314; Bell Atlantic, Exhibit 1, at 35; BellSouth at 25; MCI at 17; NYNEX at 4245; PacTel at 10; U S WEST at 9; Bell Atlantic Reply at 1517; NYNEX Reply at 2728. Certain of the BOCs argue that only interLATA information  X- d(#services in which the BOC's own facilities or services carry the information service across LATA  d(#boundaries are subject to section 272 separate affiliate requirements; services in which the  d(#interLATA telecommunications transmission component is provided through resale are not subject  X- d(#yto section 272.   yO $- v ԍBell Atlantic, Exhibit 1, at 35; see also U S West at 9; USTA at 14; Ameritech Reply at 34; U S West  yO$- d(#wReply at 29. But see Bell Atlantic Reply at 16 (arguing that interLATA information services are those services that  d(#a BOC or its affiliate carries across LATA boundaries, either through its own facilities, or via facilities it leases and resells as its own). USTA argues that BOC provision of interLATA transmission through resale"7h,-(-(ZZ"  X- d(#\does not raise improper cost allocation and discrimination concerns.N yOy-ԍUSTA at 14; USTA Reply at 17.N In contrast, several  d(#=potential telecommunications competitors argue that, in accordance with MFJ precedent, BOC  d(#provision of an information service with an interLATA transmission component is an interLATA  X- d(#[information service, regardless of whether transmission is provided over resold facilities or the  X-BOC's own facilities.X yO- v ԍAT&T Reply at 4 n.6 (citing United States v. Western Electric, 907 F.2d 160, 163 (D.C. Cir. 1990)); see  yOu-also MCI at 17; MFS Reply at 9.  Xv- n111.` ` InterLATA Access. AT&T and the BOCs argue that an information service may  d(#not be considered interLATA merely because it may be accessed on an interLATA basis by  d(#,means independently chosen by the customer, such as the services of the customer's presubscribed  X1- d(#interexchange provider.DX1 yO- v jԍE.g., AT&T at 14; Bell Atlantic, Exhibit 1, at 4; BellSouth at 25; NYNEX at 4344; PacTel at 12; U S West  d(#iat 910; Ameritech Reply at 3334; Bell Atlantic Reply at 1516; BellSouth Reply at 23; PacTel Reply at 5; U S West Reply at 2728.D In contrast, several potential telecommunications competitors and ISPs  d(#iurge the Commission to define interLATA information services to include any information service  X -that is capable of being accessed across LATA boundaries.X  yO- v kԍE.g., ITAA at 910 (arguing that information services capable of providing access to or being accessed by  d(#interLATA facilities should be classified as interLATA information services); Sprint at 1718; TRA at 1112;  yO-ITI/ITAA Reply at 78; see also VoiceTel at 1112; MFS Reply at 1213.  X - ~o112.` ` Bundling. AT&T and several of the BOCs assert that an information service is  d(#only subject to the section 272 separate affiliate requirement if the interLATA  X - d(#telecommunications transmission component is a bundled component of the information service.  yOH- v ԍNYNEX at 43, 45; Ameritech at 67 (specifying that the interLATA transmission service and the information  yO-service must be provided together for a single charge); see also AT&T at 1314.   X- d(#The BOCs further state that where an interLATA telecommunications service and information  d(#[service are separately purchased, even if both services are provided by the BOC or its affiliate,  Xb- d(#they should not be treated together as an interLATA information service.mbH  yO[-ԍNYNEX at 43; U S West at 910; accord BellSouth at 25.m MCI conditionally  XK-agrees with that position.K yO!- v ԍMCI Reply at 1011 (the BOC must provide the interLATA telecommunications service through a section  yO"- d(#272 affiliate, after having obtained Commission authorization under section 271); see also MFS Reply at 9 (customer  yOd#- d(#must establish an independent relationship with interLATA telecommunications carrier). But see Time Warner Reply  d(# at 78 (arguing that allowing BOCs separately to provide intraLATA information service and interLATA transmission would permit them to circumvent Congress's clear separate affiliate requirement). "48,-(-(ZZf"Ԍ X- `p113.` ` Remote Databases/Network Efficiency. Several of the BOCs argue that certain  d(#interLATA information services should not be subject to the section 272 separate affiliate  d(#requirements. For example, they argue that information services in which the BOC locates a non d(#transmission database or processor in another LATA are not interLATA information services  X- d(#[subject to section 272, but are incidental interLATA services, pursuant to section 271(g)(4). yO- v ԍBell Atlantic, Exhibit 1, at 5; see also Ameritech at 6768; BellSouth Reply at 2324. But see MCI Reply at 910; Sprint Reply at 10.  d(#[They also contend that, where an information service involves interLATA transmission that is  d(#provided outside the control of the user solely to incorporate network efficiencies, that  X_-information service is excluded from the definition of interLATA information services. _  yO0 - v .ԍBellSouth at 25; see also U S West at 10; PacTel at 1011; PacTel Reply at 6. PacTel notes that, under the  d(#MFJ, a BOC could route exchange and exchange access traffic outside the LATA in which it originated for call  d(#wprocessing (switching and screening) so long as the traffic returned to the original LATA for termination or delivery to an interexchange provider's point of presence. PacTel at 1011.  X1-  Bq114.` ` Presumptions Regarding Previously Authorized Information Services. Certain  d(#BOCs argue that we should presume that BOC provision of an information service without an  X - d(#MFJ waiver (i.e., pursuant to a CEI plan) is an intraLATA service.   yO- v ԍNYNEX at 45 n.61; Bell Atlantic, Exhibit 1, at 4; U S West at 21. But see MFS Reply at 15 (satisfaction of the CEI requirements is irrelevant to classification of services as interLATA or intraLATA).  MCI and TRA argue that,  d(#when a BOC has sought or obtained an MFJ waiver to provide an information service prior to  X -enactment of the 1996 Act, that information service should be presumed to be interLATA.I `  yO-ԍMCI at 17; TRA at 1112.I  X -XX` ` c.X Discussion (#  Xy- r115.` ` InterLATA Transmission/Resale. We conclude that, as used in section 272, the  d(#term "interLATA information service" refers to an information service that incorporates as a  d(#necessary, bundled element an interLATA telecommunications transmission component, provided  X4- d(#jto the customer for a single charge.4  yO- v ԍAn interLATA transmission component is "necessary" to an interLATA information service if it must be  d(#used in order for the enduser to make use of the information service capability. For example, a BOC may provide  d(#data storage and retrieval services to customers throughout its service region, using one centralized computer data  d(#Jstorage facility and dedicated interLATA transmission links that connect the enduser with the data storage facility.  d(#In this case, the dedicated interLATA transmission links are "necessary" to the BOC's provision of centralized, interLATA data storage and retrieval services. We find, as noted in the comments of AT&T, MCI, and  d(#the BOCs, that this definition of interLATA information service conforms to the MFJ precedent  X- d(#Kin this area. h yO&- v ԍSee United States v. Western Electric, 907 F.2d 160, 163 (D.C. Cir. 1990) ("[W]hen information services are . . . bundled with leased interexchange lines, the activity is covered by the [AT&T Consent] decree.") We further conclude that a BOC provides an interLATA information service when"9 ,-(-(ZZ"  d(#Kit provides the interLATA telecommunications transmission component of the service either over  X- d(#its own facilities, or by reselling the interLATA telecommunications services of an interexchange  X-provider. This conclusion also comports with MFJ precedent.a  yOK- v kԍSee United States v. Western Electric, 907 F.2d at 163 ("We do not agree . . . that a distinction should be  d(#drawn between leasing lines, on the one hand, and acquiring or constructing them, on the other. A taxi company,  d(#for instance, offers taxi service for hire whether or not it owns or leases its cabs. The critical distinction under the  d(#decree, is not whether the BOC owns the interexchange capacity, but whether it 'provide[s]' interexchange service to its customers.")a  X- s116.` ` USTA contends that BOC provision of interLATA transmission through resale  d(#should be permitted because it does not raise improper cost allocation and discrimination  Xv- d(#concerns.B vx yO -ԍUSTA Reply at 17.B This argument, however, does not address the key issue of what is required by the  d(#statute. As discussed above, we find that section 601(a) of the 1996 Act indicates that Congress  XH- d(#-intended the provisions of the 1996 Act to supplant the MFJ._ H yO-ԍSee supra paragraph SCOPMFJ31._ Therefore, we conclude that the  d(#restrictions imposed by the 1996 Act on BOC provision of interLATA services, like the  d(#interLATA restrictions imposed under the MFJ, apply to services provided through resale, as well  d(#as to services provided through the BOC's own transmission facilities. Moreover, we decline to  d(#-adopt PacTel's suggestion that enduser receipt of an "interLATA benefit" should be the test for  X - d(#determining whether an information service is interLATA.n   yO- v ԍPacTel at 1112. PacTel's example of a service that should be classified as an intraLATA information  d(#Kservice, because it provides no direct interLATA benefit to the enduser, is a gateway service located in a distant  d(#LATA used by a San Francisco enduser to obtain information from San Francisco area libraries. PacTel's example  d(#of an information service that provides a direct interLATA benefit to the enduser is an email service that allows exchange of messages between users in different LATAs.n PacTel's proposed test is  d(#inconsistent with MFJ precedent and would be very difficult to administer. Finally, we reject the  d(#arguments raised by Sprint and MFS that we should classify all information services as  d(#iinterLATA services because of the difficulties inherent in distinguishing between interLATA and  Xy- d(#MintraLATA information services.PXyH  yOr- v ԍSprint at 1718; MFS Reply at 1213 (because major ISPs do not provide intraLATAonly information  yO:- d(#hservices, the Commission should declare that all BOC information services are interLATA); see also VoiceTel at 11; ITI/ITAA Reply at 78. P We conclude that it is possible to distinguish between interLATA and intraLATA information services by applying the rule established by this Order.  X4- t117.` ` InterLATA Access. We agree with AT&T and the BOCs that an information  d(#service may not be considered interLATA merely because it may be accessed on an interLATA  d(#basis by means independently chosen by the customer, such as a presubscribed interexchange  d(#carrier. In interpreting the statutory restrictions on BOC provision of interLATA information  d(#zservices, we are concerned not with the manner in which an information service is used, but  d(#rather with the components of the service that are provided by the BOC. When a BOC is neither":h,-(-(ZZ"  d(#providing nor reselling the interLATA transmission component of an information service that may  d(#ybe accessed across LATA boundaries, the statute does not require that service to be provided  d(#ythrough a section 272 separate affiliate. We reject MFS's contention that, where an interLATA  d(#ytransmission service is necessary for a customer to obtain access to a particular BOCprovided  d(#information service, that information service should be considered interLATA, even if the  X- d(#Lnecessary interLATA transmission component is separately provided by another carrier.J yO-ԍSee MFS Reply at 9.J In  d(#zsuch circumstances, the BOC is not providing any interLATA services, and therefore is not  d(#Zrequired by section 272 to provide the information service in question through a separate affiliate.  X1-  u118.` ` Moreover, as the BOCs point out, if we were to determine that the mere possibility  d(#of interLATA access was sufficient to classify an information service as an interLATA service,  X - d(#jthat rule would render any telecommunications service that carries traffic that originates in one  d(#LATA and terminates in another, including local exchange service and exchange access service,  X -an interLATA service. X yO-ԍNYNEX at 43; U S West at 10; Ameritech Reply at 3334; Bell Atlantic Reply at 1516. Congress clearly did not intend that result.  X - v119.` ` In addition, we agree with the BOCs that classifying information services as  d(#interLATA solely because endusers may obtain access to the service across LATA boundaries  Xy- d(#would represent a significant departure from Commission precedent, as well as from MFJ  Xb- d(#=precedent.Xb yO- v ԍE.g., Bell Atlantic, Exhibit 1, at 45; PacTel at 1011 (under the MFJ, if a necessary interLATA transmission  d(#component of an information service is provided by an interexchange carrier that is not selected by the BOC, the  yO-service would not be considered a BOCprovided interLATA information service); see also Ameritech Reply at 33. BOCs are currently providing a number of information services on an integrated  XK- d(#basis pursuant to the Commission's Computer III regulations, and users may obtain access to  X4- d(#[some, if not all, of these services on an interLATA basis.4 yO-ԍSee BOC CEI Plan Approval Order, 10 FCC Rcd at 13,77074, app. A. If we were to determine that these  d(#=services were interLATA services simply because endusers may obtain access across LATA  d(#boundaries, BOCs would have to change the manner in which they are providing many of these  X- d(#yservices, which would likely result in lost efficiency and disruption of services to customers.c yO8-ԍSee, e.g., Bell Atlantic, Exhibit 1, at 45.c  d(#We see no basis in the statute to adopt such an interpretation, as sections 271 and 272 are  d(#intended to govern the BOCs' provision of services that they were previously prohibited from  d(#providing under the MFJ, not services that they were previously authorized to provide under the MFJ.  Xe- w120.` ` Bundling. As we concluded above, an interLATA information service incorporates  d(#a bundled interLATA telecommunications transmission component. When a customer obtains  d(#interLATA transmission service from an interexchange provider that is not affiliated with a BOC,"7;( ,-(-(ZZ"  d(#the use of that transmission service in conjunction with an information service provided by a  d(#BOC or its affiliate does not make the information service a BOC interLATA service offering.  d(#A customer also may obtain an inregion interLATA telecommunications service from a BOC  X- d(#-section 272 affiliate that the customer uses in conjunction with an intraLATA information service  d(#provided by that affiliate or by the BOC itself. When such telecommunications and information  d(#services are provided, purchased, and priced separately, we conclude that they do not collectively  Xv- d(#constitute an interLATA information service offering by the BOC.Xv yO- v ԍWe note that even when an information service and interLATA transmission service are ostensibly separately  d(#priced, if the BOC offers special discounts or incentives to customers that take both services, this would constitute  yO -sufficient evidence of bundling to render the information service an interLATA information service. į In such a situation, the  d(#zBOC would, of course, be required to provide the inregion interLATA transmission service  d(#<pursuant to section 271 authorization and the section 272 separate affiliate and nondiscrimination  d(#.requirements. The BOC could choose to provide the separate, intraLATA information service  X - d(#yeither on an integrated basis, in compliance with the Commission's CEI and ONA requirements, or through a separate affiliate.  X -  4x121.` `  271G4 Remote Databases/Network Efficiency. BOCs may not provide interLATA  d(#jservices in their own regions, either over their own facilities or through resale, before receiving  X - d(#authorization from the Commission under section 271(d). Therefore, we conclude that BOCs may  d(#not provide interLATA information services, except for information services covered by section  Xy- d(#271(g)(4), in any of their inregion states prior to obtaining section 271 authorization. Section  d(#[271(g)(4) designates as an incidental interLATA service the interLATA provision by a BOC or  d(#.its affiliate of "a service that permits a customer that is located in one LATA to retrieve stored  d(#information from, or file information for storage in, information storage facilities of such  X- d(#jcompany that are located in another LATA."J yO-ԍ47 U.S.C.  271(g)(4).J Because BOCs were able to provide incidental  d(#interLATA services immediately upon enactment of the 1996 Act, they may provide interLATA  d(#zinformation services that fall within the scope of section 271(g)(4) without receiving section  d(#271(d) authorization from the Commission. Since section 271(g)(4) services are not among the  d(#{incidental interLATA services exempted from section 272 separate affiliate requirements,  d(#>however, they must be provided in compliance with those requirements. To the extent that  d(#parties have argued in the record that centralized data storage and retrieval services that fall  d(#within section 271(g)(4) either are not interLATA information services, or are not subject to the  Xe-section 272 separate affiliate requirements, we specifically reject these arguments.ex yO!-ԍE.g., Bell Atlantic, Exhibit 1, at 5; see also Ameritech at 67; BellSouth Reply at 2324.  X7- y122.` ` We also reject the BOCs' argument that their use of interLATA transmission,  d(#outside the control of the enduser and solely to maximize network efficiencies, in connection  X - d(#with the provision of an information service, does not render that information service interLATA" <,-(-(ZZ["  X- d(#in nature. yOy-ԍPacTel at 1011; PacTel Reply at 6; see also BellSouth at 25; U S West at 10. Whenever interLATA transmission is a component of an information service, that  d(#service is an interLATA information service, unless the enduser obtains that interLATA  X- d(#transmission service separately, e.g., from its presubscribed interexchange provider. To the extent  d(#Lthat BOCs are allowed to perform certain interLATA call processing functions associated with  d(#their provision of telephone exchange service or exchange access service in connection with an  X- d(#intraLATA information service, however, they may continue to do so without transforming that  Xv-information service into an interLATA information service.vX yO - v lԍFor example, under the MFJ, BOCs were permitted to use interLATA "Official Services Networks" to  d(#perform on a centralized basis certain network functions associated with their provision of exchange and exchange  d(#haccess services, including trunk and switch monitoring and control, call routing, directory assistance, repair calls, and  yO - d(#internal business communications. See United States v. Western Electric, 569 F. Supp. 1057, 10971101 (D.D.C.  d(#1983). Although BOCs were entitled to provide outofband signalling associated with their own exchange services  d(#Zon a centralized basis, the MFJ court denied their request to furnish such signalling to interexchange carriers on a  d(#;centralized basis, instead requiring them to establish interconnection with their signal transfer points (STPs) in each  yO- d(#LATA. See United States v. Western Electric, 131 F.R.D. 647 (D.D.C. 1990), aff'd, 969 F.2d 1231 (D.C. Cir.  d(#1992). Under the 1996 Act, the BOCs are now entitled to provide signaling information associated with both  yO-intraLATA services and interLATA services on a centralized basis. See 47 U.S.C.  271(g)(5) and (g)(6).  XH- z123.` ` We also reject PacTel's claim that a BOC's use of interLATA transmission solely  d(#Ofor its own business convenience in providing an information service falls within the  X - d(#"telecommunications management exception" to "information service."a  yO-ԍPacTel at 1011 (citing 47 U.S.C.  153(20)).a We disagree with  d(#xPacTel's assertion that this practice is covered by the "technical management exception," because  d(#the BOC would be providing interLATA transmission in connection with the management of an  d(#information service, not "the management of a telecommunications service," as specified by  d(#section 3(20). Further, as noted above, we believe that the "telecommunications management  d(#exception" is analogous to the Commission's classification of certain services as "adjunctto d(#basic;" that is, it covers services that may fit within the literal reading of the information services  Xy- d(#Kdefinition, but that are used to facilitate the provision of a basic telecommunications transmission  Xb- d(#service, without altering the character of that service.`b  yO-ԍSee supra paragraph ADJUNCT107.` In other words, the "technical  d(#management exception" relates to the classification of services as either telecommunications  d(#-services or information services; it has no bearing upon the classification of either of these types  d(#of services as intraLATA or interLATA. As such, the "telecommunications management  d(#exception" provides no safe harbor for interLATA transmission services employed by BOCs in connection with the provision of information services.  X-  {124.` ` Presumptions Regarding Previously Authorized Information Services. With respect  d(#to information services that the BOCs were authorized to provide prior to passage of the 1996  d(#Act, we conclude that as a matter of administrative convenience it is helpful to establish several"=,-(-(ZZ3"  d(#rebuttable presumptions regarding intraLATA or interLATA classification. Thus, we will  X- d(#presume that information services that BOCs were authorized to provide pursuant to CEI plans,  d(#without MFJ waivers, are intraLATA information services. Similarly, we will presume that  d(#information services for which BOCs were required to obtain MFJ waivers are interLATA  d(#information services. We conclude that these presumptions are rebuttable, rather than conclusive,  d(#because the BOCs have noted that, for expediency purposes, they sometimes requested and  Xv- d(#obtained MFJ waivers in order to provide services that were not clearly interLATA in nature.v yO- v ԍNYNEX at 45 n.61; Ameritech at 69 (noting that prior to 1991, BOCs required MFJ waivers to provide information services at all, even on an intraLATA basis); PacTel Reply at 67.  X_- d(#Thus, a BOC would be able to rebut the presumption that an information service provided  d(#pursuant to an MFJ waiver is an interLATA information service by showing that it had obtained  d(#a waiver to provide the service on an intraLATA basis prior to 1991. Similarly, the presumption  d(#that an information service provided pursuant to a CEI plan is an intraLATA information service  d(#[may be rebutted by a showing that the information service incorporates a bundled, interLATA telecommunications transmission component, as specified in this Order.  X -vX 3.X` ` BOCprovided Internet Access Services (#`  X-XX` ` a.X Background (#  Xb- &|125.` ` On June 6, 1996, the Common Carrier Bureau (Bureau) released an order  XK- d(#vapproving a CEI plan filed by Bell Atlantic for the provision of Internet Access Service.3K  yO- v jԍBell Atlantic Telephone Companies Offer of Comparably Efficient Interconnection to Providers of Internet  yO-Access Services, Order, 11 FCC Rcd 6919 (Com. Car. Bur. 1996) (Bell Atlantic Internet Access CEI Plan Order).3 MFS  X4- d(#had filed comments opposing Bell Atlantic's plan, arguing, inter alia, that Bell Atlantic's Internet  d(#access service offering is an interLATA service that Bell Atlantic may only provide through a  X- d(#section 272 affiliate after obtaining section 271 authorization from the Commission.x yO/- v ?ԍSee Bell Atlantic Internet Access CEI Plan Order at  48 (citing Comments of MFS Communications Company, Inc., at 8 (filed April 12, 1996)). Following  X- d(#release of the Bell Atlantic CEI Plan Order, MFS filed a petition for reconsideration of that  X- d(#Order, raising similar arguments.  yOY- v ԍPetition for Reconsideration of MFS Communications Company, Inc., CCBPol 9609, at 1220 (filed July  yO! - d(#3, 1996). This petition was subsequently put on public notice by the Bureau. See Pleading Cycle Established on  yO - d(#MFS Communications Company Inc.'s Petition for Reconsideration, CCBPol 9609, Public Notice, DA 961102 (rel. Jul. 10, 1996). At about the same time, Southwestern Bell Telephone  X- d(#yCompany (SWBT) filed a CEI plan for Internet Support Services.2  yO*$- v ԍSee Pleading Cycle Established for Comments on SWBT's Comparably Efficient Interconnection Plan for  yO$-Internet Support Services, CC Docket Nos. 85229, 90623 & 9520, Public Notice, DA 961031 (rel. June 26, 1996).2 On July 25, 1996, one week  d(#after the Commission released the Notice in this proceeding, MFS filed with the Commission a  X- d(#petition seeking to consolidate proceedings related to the Bell Atlantic CEI Plan Order">,-(-(ZZQ"  d(#reconsideration and the SWBT Internet support CEI plan with the instant proceeding, on the  X- d(#.grounds that the three proceedings raise similar novel, policy, factual, and legal arguments.  yOb-ԍPetition to Consolidate Proceedings by MFS Communications Company, Inc. (filed July 25, 1996).  d(#yAlthough the Notice in the instant proceeding did not specifically seek comment on the proper  d(#classification or regulatory treatment of BOCprovided Internet services and Internet access  d(#services under the 1996 Act, several parties discussed these matters in their comments, in the course of addressing how we should define "interLATA information services."  X_-XX` ` b.X Comments (#  X1- _}126.` ` MFS argues that all Internet services are interLATA services and, hence, Internet  d(#services provided by the BOCs are interLATA information services subject to the section 272  X - d(#separate affiliate requirements.w! X yO -ԍMFS at 79, 1112; MFS Reply at 1012; see also ITAA at 12 n.31.w In response, the BOCs argue that it is possible for them to  d(#provide on an intraLATA basis an Internet access service that allows a customer to connect to  d(#Lan Internet service provider's point of presence (POP) using the traditional local loop, and that  X -such service should be classified as an intraLATA information service."  yOW- v zԍU S West at 11; Ameritech Reply at 34; PacTel Reply at 78; USTA Reply at 17; SBC Reply at 3536; U S West Reply at 2526.  X-XX` ` c.X Discussion (#  Xb- ~127.` ` The preceding sections of this Order establish a definition of "interLATA  d(#information service" that should assist the BOCs and other interested parties in determining the  d(#types of information services that the BOCs are statutorilyrequired to provide through section  X- d(#272 affiliates. If a BOC's provision of an Internet or Internet access service#@ yO- v ԍThe Internet is an interconnected global network of thousands of interoperable packetswitched networks  d(#Zthat use a standard protocol, Transmission Control Protocol/Internet Protocol (TCP/IP), to enable information  yO- d(#exchange. See Universal Service Joint Board Recommended Decision at  457. An enduser may obtain access to  d(#the Internet from an Internet service provider, by using dialup or dedicated access to connect to the Internet service  d(#wprovider's processor. The Internet service provider, in turn, connects the enduser to an Internet backbone provider that carries traffic to and from other Internet host sites. (or for that matter,  d(#any information service) incorporates a bundled, inregion, interLATA transmission component  d(#provided by the BOC over its own facilities or through resale, that service may only be provided  d(#through a section 272 affiliate, after the BOC has received inregion interLATA authority under  d(#section 271. We believe that this is not the appropriate forum for considering whether the  d(#jvarious specific Internet services provided by the BOCs are "interLATA information services"  d(#because such determinations must be made on a casebycase basis. We believe that the  d(#]lawfulness of the specific Internet services provided by Bell Atlantic and SWBT is more  d(#Zappropriately analyzed in the context of the separate CEI plan proceedings regarding each service  d(#-that are currently pending before the Bureau, consistent with the rules and policies enunciated in"N? #,-(-(ZZ"  d(#this rulemaking proceeding. Therefore, we deny MFS's request to consolidate proceedings related  d(#to the provision of Internet and Internet access services by Bell Atlantic and SWBT with the  X-instant proceeding.  X- _X 4.X` ` Impact of the 1996 Act on the Computer II, Computer III, and ONA  X-requirements (#`  X_-XX` ` a.X Background (#  X1- 128.` ` In the Notice, we concluded that, because the 1996 Act does not establish  X - d(#[_regulatory requirements for BOC provision of intraLATA information services, Computer II,W$   yO - v ԍAmendment of Section 64.702 of the Commission's Rules and Regulations, 77 FCC 2d 384 (1980)  yO[ - d(#(Computer II Final Order), recon., 84 FCC 2d 50 (1980) (Computer II Reconsideration Order), further recon., 88  yO# - d(#FCC 2d 512 (1981) (Computer II Further Reconsideration Order), affirmed sub nom. Computer and Communications  yO -Industry Ass'n v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983).W  X - d(#Computer III,%  yOd-ԍSee supra note COMP3217 for full citation for Computer III proceeding. and ONA& @ yO- v !ԍONASee Filing and Review of Open Network Architecture Plans, 4 FCC Rcd 1 (1988) (BOC ONA Order),  yO- d(#krecon., 5 FCC Rcd 3084 (1990) (BOC ONA Reconsideration Order); 5 FCC Rcd 3103 (1990) (BOC ONA  yO- d(#<Amendment Order), erratum, 5 FCC Rcd 4045, pets. for review denied, California v. FCC, 4 F.3d 1505 (9th Cir.  yOL- d(#1993), recon., 8 FCC Rcd 97 (1993) (BOC ONA Amendment Reconsideration Order); 6 FCC Rcd 7646 (1991) (BOC  yO- d(#<ONA Further Amendment Order); 8 FCC Rcd 2606 (1993) (BOC ONA Second Further Amendment Order), pet.  yO-for review denied, California v. FCC, 4 F.3d 1505 (9th Cir. 1993) (collectively referred to as the ONA Proceeding). requirements continue to govern BOC provision of these services,  X - d(#jto the extent that these requirements are consistent with the 1996 Act.F'  yOU-ԍNotice at  4849.F We sought comment  d(#Kon which of the Commission's existing requirements were inconsistent with, or had been rendered  d(#unnecessary by, the 1996 Act, as well as on the specific provisions of the 1996 Act that supersede  X - d(# the existing requirements.M( H  yO-ԍId. at  4950.M We also sought comment on the impact of the statute on our  X-pending Computer III Further Remand Proceedings.s) yO-ԍComputer III Further Remand Proceedings, 10 FCC Rcd at 8360.s  Xb-XX` ` b.X Comments (#  X4- $129.` ` Consistency of Commission's Computer II, Computer III, and ONA Rules with  X- d(#[the 1996 Act. Bell Atlantic and NYNEX argue that enactment of the 1996 Act has rendered the  X- d(#=Computer II, Computer III, and ONA rules unnecessary and redundant.*h yO&-ԍBell Atlantic, Exhibit 1, at 56; NYNEX at 4748; see also LDDS Worldcom at 12 n.10. The majority of the  X- d(#BOCs, however, contend that the Commission's existing Computer III and ONA interconnection"@*,-(-(ZZ"  d(#and unbundling requirements are consistent with the 1996 Act and should remain in place to  X- d(#allow them to provide intraLATA information services on an integrated basis.+ yOb- v >ԍBellSouth at 2728; PacTel at 13; SBC at 1317; U S West at 20; USTA at 1516; Bell Atlantic Reply at 17; PacTel Reply at 1415. Several of the  X- d(#KBOCs' potential telecommunications competitors and certain organizations representing ISPs also  X- d(#-agree that the Computer III and ONA safeguards should be retained if the Commission continues  X-to permit BOCs to provide intraLATA information services on an unseparated basis.,  yOu- v =ԍTRA at 12; MCI at 17, 1920; Sprint at 1819; MCI Reply at 13; cf. ATSI at 813 (arguing that a minimum set of interconnection points and unbundled elements should be made available to information service providers).  X-  Xv- 130.` ` Requiring section 272 affiliates for intraLATA information services. MCI, ITAA,  d(#and CIX argue that, in the interest of regulatory consistency, the Commission should require the  XH- d(#.BOCs to provide all information services through a section 272 separate affiliate.-XHx yOq- v ԍCompare MCI at 19; ITAA at 1112; MCI Reply at 14; CIX Reply at 67; with U S West at 2021 (arguing  yO9- d(#that the Commission should harmonize the Computer III and ONA requirements with the provisions of the 1996 Act, to develop a single regulatory structure for the provision of information services). Several of  d(#the BOCs object to this proposal on the ground that such a requirement would be directly  X -contrary to congressional intent.R.  yOc-ԍBellSouth at 2628; PacTel at 13.R  X - 131.` ` Application of Computer II, Computer III, and ONA requirements to section 272  X - d(#?affiliate activities. Several of the BOCs argue that the Commission should not apply the  X - d(#KComputer III and ONA requirements to any BOC information services provided through a section  X - d(#272 separate affiliate (either interLATA information services, as required by statute, or  X- d(#-intraLATA information services, provided on a separate basis by choice).q/(  yOi-ԍU S West at 20; USTA at 15; SBC Reply at 1214; YPPA Reply at 5.q In contrast, ITI and  Xy- d(# ITAA argue that the Computer III and ONA requirements should be applied to section 272  d(#yaffiliates, prohibiting such affiliates from bundling equipment or information services with local  d(#exchange, exchange access, or interLATA services, until local exchange markets become fully  X4-competitive.I04  yO-ԍITI/ITAA Reply at 1112.I  X-XX` ` c.X Discussion (#  X- $132.` ` Consistency of Commission's Computer II, Computer III, and ONA Rules with  X- d(#the 1996 Act. We conclude that the Computer II, Computer III, and ONA requirements are  d(#consistent with the 1996 Act, and continue to govern BOC provision of intraLATA information  d(#@services. By its terms, the 1996 Act imposes separate affiliate and nondiscrimination  X|- d(#requirements on BOC provision of "interLATA information services," but does not address BOC"|AH 0,-(-(ZZP"  X- d(#provision of intraLATA information services.W1 yOy-ԍSee 47 U.S.C.  272(a)(2)(C).W We concluded above that, for the purposes of  d(#!applying sections 271 and 272, interLATA information services must include a bundled  X- d(#interLATA transmission component.N2X yO-ԍSee supra part III.F.2.N We further conclude, in light of our definition of  d(#zinterLATA information services, that BOCs are currently providing a number of information  X- d(#services on an intraLATA basis.3 yO= -ԍSee BOC CEI Plan Approval Order, 10 FCC Rcd at 13,77074, app. A. We find that the BOCs may continue to provide such  X- d(#intraLATA information services on an integrated basis, in compliance with the nonstructural  Xv-safeguards established in Computer III and ONA.<4vx yO - v ԍBOCs currently provide intraLATA information services on an integrated basis pursuant to servicespecific  yOg - d(#CEI plans. See Bell Operating Companies' Joint Petition for Waiver of Computer II Rules, 10 FCC Rcd 1724 (1995)  yO/- d(#K(Interim Waiver Order). Contrary to the assertions of MCI and ITAA (see MCI at 18; ITAA at 11 & n.30), we  yO- d(# concluded that California III returned the regulation of information services not to a Computer II structural separation  yO- d(#,regime, but rather to a Computer III servicespecific CEI plan regime. BOC CEI Plan Approval Order, 10 FCC Rcd at 13,762,  22 (1995).<  XH- 133.` ` We reject Bell Atlantic's conclusory assertions that the 1996 Act's customer  d(#proprietary network information (CPNI), network disclosure, nondiscrimination, and accounting  X - d(#Zprovisions supersede various of the Commission's Computer III nonstructural safeguards.Z5  yO-ԍSee Bell Atlantic, Exhibit 1, at 6.Z We  d(#also reject NYNEX's claim that the section 251 interconnection and unbundling requirements  X - d(#render the Commission's Computer III and ONA requirements unnecessary.J6  yO-ԍSee NYNEX at 4748.J Based on our  X - d(#/review of the record in this proceeding, we conclude that the pending Computer III Further  X - d(#KRemand Proceedings are the appropriate forum in which to examine the necessity of retaining any  X - d(#or all of these individual Computer III and ONA requirements.7  yOh- v ԍWe have already initiated a proceeding in which we are examining which, if any, of the Commission's CPNI  yO0- d(#requirements should be retained in light of the CPNI restrictions set forth in section 222. See Implementation of  d(#jthe Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network  yO- d(#Information and Other Customer Information, CC Docket No. 96115, Notice of Proposed Rulemaking, 11 FCC Rcd  yO -12,513 (1996) (CPNI NPRM). We therefore plan to issue a  X- d(#Further Notice in that proceeding to determine how to regulate BOC provision of intraLATA information services in light of the 1996 Act.  XK- 3134.` ` In the interim, the Commission's Computer II, Computer III, and ONA rules are  X- d(#the only regulatory means by which certain independent ISPs are guaranteed nondiscriminatory"B7,-(-(ZZf"  d(#access to BOC local exchange services used in the provision of intraLATA information  X- d(#services.@8 yOy-ԍCIX Reply at 8.@ As noted above, the section 272 nondiscrimination requirements do not apply to BOC  d(#provision of intraLATA information services, and ISPs that are not telecommunications carriers  X- d(#cannot obtain interconnection or access to unbundled elements under section 251._9o yO-ԍFirst Interconnection Order at  995._ Thus, we  X- d(#believe that continued enforcement of these safeguards is necessary pending the conclusion of the  X- d(#yComputer III Further Remand Proceedings and establishes important protections for small ISPs that are not provided elsewhere in the Act.  XH- 135.` ` Requiring section 272 affiliates for intraLATA information services. We decline  d(#to require the BOCs to provide intraLATA information services through section 272 affiliates.  d(#It is clear that section 272 does not require the BOCs to offer intraLATA information services  d(#=through a separate affiliate. We further decline to exercise our general rulemaking authority to  d(#.impose such a requirement. We conclude that the record in this proceeding does not justify a  X - d(#!departure from our determination, in Computer III, to allow BOCs to provide intraLATA  d(#information services on an integrated basis, subject to appropriate nonstructural safeguards. Some  d(#-parties in this proceeding argue that we should harmonize our regulatory treatment of intraLATA  d(#information services provided by the BOCs with the section 272 requirements imposed by  Xy- d(#LCongress on interLATA information services.T:y yO)-ԍSee, e.g., U S West at 2021.T We invite these parties to comment on these  Xb- d(#matters in response to the Further Notice we intend to issue in the Computer III Further Remand  XK-Proceedings.  X- 136.` ` Application of Computer II, Computer III, and ONA requirements to section 272  X- d(#affiliate activities. We conclude that a BOC that provides interLATA telecommunications  d(#xservices and information services through the same section 272 affiliate may bundle such services  d(#>without providing comparably efficient interconnection to the basic underlying interLATA  X- d(#telecommunications services.G; yO-ԍSee NYNEX at 49.G Under our definition of "interLATA information service," as  d(#explained above, such service must include a bundled interLATA telecommunications element.  d(#Hence, to prohibit a BOC affiliate from bundling interLATA telecommunications and information  d(#services would effectively prevent the BOCs from offering any interLATA information services,  d(#a result clearly not contemplated by the statute. Further, we note that the market for information  XN- d(#services is fully competitive,<N yO#- v /ԍSee, e.g., Computer II Final Order, 77 FCC 2d at 433,  128; Computer III Phase I Order, 104 FCC 2d at  yO#-1010,  95. and the market for interLATA telecommunications services is  X7- d(#substantially competitive.B=7w yO_&- v ԍSee, e.g., Tariff Forbearance Order at  2122; AT&T Nondominance Order, 11 FCC Rcd at 32783279,  yO''-3288,  9, 26; First Interexchange Competition Order, 6 FCC Rcd at 5887,  36.B Thus, we see no basis for concern that a section 272 affiliate"7C =,-(-(ZZ"  d(#providing an information service bundled with an interLATA telecommunications service would  X- d(#be able to exercise market power. If, however, a BOC's section 272 affiliate were classified as  X- d(#`a facilitiesbased telecommunications carrier (i.e., it did not provide interLATA  X- d(#telecommunications services solely through resale), the affiliate would be subject to a Computer  X- d(#II obligation to unbundle and tariff the underlying telecommunications services used to furnish  X-any bundled service offering.h> yO-ԍFrame Relay Order, 10 FCC Rcd at 13,719,  13.h  X_- 2137.` ` Under our current regulatory regime, a BOC must comply fully with the Computer  XH- d(#II separate subsidiary requirements in providing an information service in order to be relieved of  d(#the obligation to file a CEI plan for that service. We decline to adopt NYNEX's proposal that  d(#-we find that all BOC information services provided through a section 272 separate affiliate satisfy  X - d(#=the Computer II separate subsidiary requirements, because we conclude that the record in this  X - d(#proceeding is insufficient to support such a conclusion.\? X yO-ԍNYNEX at 48; see also U S West at 20.\ Instead, we intend to examine this  X - d(#issue further in the context of the Computer III Further Remand Proceedings. Further, we reject  X - d(#USTA's argument that ONA reporting requirements do not extend to intraLATA information  X - d(#services provided through a section 272 separate affiliate.<@  yO@-ԍUSTA at 15.< BOCs must comply with the ONA  d(#requirements regardless of whether they provide information services on a separated or integrated  Xy-basis.eAyx yO-ԍSee ONA Remand Order, 5 FCC Rcd at 7719.eC!}K 3J:\POLICY\SAFE\ORDER\MASTER\BAS\ELECTEL.MES3 C  XK- _G.XInformation Services Subject to Other Statutory Requirements (#  X- X1.X` ` Electronic Publishing (section 274) (#`  X-XX` ` a.X Background (#  X- 138.` ` In the Notice, we observed that, although electronic publishing is specifically_  d(#identified as an information service, interLATA provision of electronic publishing is exempt from  X- d(#section 272, and is instead subject to section 274.CB yOL!-ԍNotice at  51.C Noting that we had initiated a separate  X|- d(#proceeding to clarify and implement, inter alia, the requirements of section 274,|CX| yO#- v MԍSee Implementation of the Telecommunications Act of 1996: Telemessaging, Electronic Publishing, and  yO$- d(#<Alarm Monitoring Services, CC Docket No. 96152, Notice of Proposed Rulemaking, FCC 96310 (rel. July 18,  yOU%-1996) (Electronic Publishing NPRM). | we sought  d(#Kcomment on how to distinguish information services subject to the section 272 requirements from"eD C,-(-(ZZ1"  X- d(#Kelectronic publishing services subject to the section 274 requirements.CD yOy-ԍNotice at  53.C We also invited parties  d(#to comment on whether, in situations involving services that do not clearly fall within either the  d(#definition of "electronic publishing" (section 274(h)(1)) or the enumerated exceptions thereto  d(#(section 274(h)(2)), we should identify as "electronic publishing" those services for which the  X- d(#carrier controls, or has a financial interest in, the content of information transmitted by the  X-service.EX yO- v kԍId. This "financial interest or control" test is derived from the MFJ definition of "electronic publishing."  yO^ -See United States v. Western Electric, 552 F. Supp. at 178, 181.  X_-XX` ` b.X Comments (#  X1- 139.` ` Several parties assert that the section 274(h)(1) definition of "electronic publishing"  d(#needs no further refinement because it is clear, when read in conjunction with the exceptions set  X - d(# forth in section 274(h)(2).F  yOd-ԍSee, e.g., Ameritech at 70; USTA at 1718; Ameritech Reply at 36; cf. MFS at 17. Several BOCs argue that the Commission should not develop  d(#Kanother rule for classifying ambiguous services, but rather should handle them on a casebycase  X - d(#basis.G @ yO- v MԍSee e.g., Bell Atlantic, Exhibit 1, at 6; PacTel at 1516; see also NYNEX at 46 (classification of services  yO-as electronic publishing should be done in Electronic Publishing proceeding). Generally, the BOCs also resist the idea of applying a "financial interest or control" test  X - d(#ito determine whether ambiguous information services are subject to section 272 or section 274;H  yO- v ԍPacTel at 1415; Ameritech at 7071. But see U S West at 15 (test should be the BOC's ability to control the content of information provided to endusers).  X - d(#in contrast, MCI supports adoption of such a test.;I  yOH-ԍMCI at 21.; Several existing and potential competitors  d(#Lto the BOCs suggest that it may not be necessary to distinguish between information services  Xy-subject to section 272 and electronic publishing services subject to section 274.TJy  yO-ԍITAA at 1516; AT&T Reply at 4 n.7.T  XK-XX` ` c.X Discussion (#  X- o140.` ` Upon review of the record and further consideration, we conclude that it is not  d(#Znecessary to adopt the "financial interest or control" test in determining whether a particular BOC  d(#service involves the provision of electronic publishing, in addition to the definitions set forth in  d(#sections 274(h)(1) and 274(h)(2). Generally speaking, if a particular service does not appear to  d(#fit clearly within either the definition of "electronic publishing," set forth in section 274(h)(1),  d(#or the exceptions thereto listed in section 274(h)(2), determining the appropriate classification of  d(#that service will involve a highly factspecific analysis that is better performed on a casebycase"EJ,-(-(ZZ"  d(#kbasis. In the context of such a casebycase determination, the Commission may consider a  X- d(#number of factors, including whether the BOC controls, or has a financial interest in, the content  X- d(#lof information transmitted to endusers.K yOK- v .ԍThe Commission may also consider whether the BOC has "generated or altered" the content of information  yO-provided to endusers, as Ameritech suggests. See Ameritech Reply at 37. We also note that the definition of electronic  d(#=publishing, as well as specific services encompassed by that definition, may be further refined  X-in the Electronic Publishing proceeding.  Xv- 141.` ` We also decline to adopt ITAA's suggestion that, because of potential difficulties  d(#in distinguishing between information services and electronic publishing services, we should  XH- d(#impose substantially the same separate affiliate requirements on both.ELH  yO -ԍITAA at 1516.E Such an approach would  X1- d(#be directly contrary to the statute.aM1 yO-ԍAccord Bell Atlantic Reply at 1819.a Congress set forth distinct separate affiliate and  d(#=nondiscrimination requirements in sections 272 and 274, and specified that the former apply to  d(#interLATA information services, while the latter apply to all BOCprovided electronic publishing  d(#-services. To impose the section 272 requirements on electronic publishing services, or to impose  d(#the section 274 requirements on interLATA information services, would be inconsistent with the clear statutory scheme.  X-  `142.` ` Moreover, we specifically reject AT&T's contention that electronic publishing  d(#services are subject to the section 272 separate affiliate requirements, pursuant to section  d(#L272(a)(2)(B), which imposes a separate affiliate requirement on interLATA telecommunications  XK- d(#services.ENK@ yO<-ԍAT&T Reply at 4 n.7.E Electronic publishing services, however, are specifically included within the statutory  X4- d(#definition of information services.HO4 yO-ԍ47 U.S.C.  153(20).H Accordingly, electronic publishing services would be subject  d(#to section 272(a)(2)(C), which imposes a separate affiliate requirement on interLATA information  d(#services, except that section 272(a)(2)(C) specifically exempts "electronic publishing (as defined in section 274(h))."  X-"F` O,-(-(ZZ"Ԍ X- vX2.X` ` Telemessaging (section 260) (#`  X-  X-XX` ` a.X Background (#  X- `143.` ` In the Notice, we tentatively concluded that "telemessaging" is an information  X- d(#vservice.P yO- v 0ԍNotice at  54. The 1996 Act defines "telemessaging" as "voice mail and voice storage and retrieval  d(#services, any live operator services used to record, transcribe, or relay messages (other than telecommunications relay  d(#services), and any ancillary services offered in combination with these services." 47 U.S.C.  260(c). LECs must  yO^ - d(#provide telemessaging services in compliance with section 260, which is the subject of a separate proceeding. See  yO& -Electronic Publishing NPRM. ė We further tentatively concluded that BOC provision of telemessaging on an  d(#LinterLATA basis is subject to the section 272 separate affiliate requirements, in addition to the  X_-section 260 safeguards.CQ_x yO -ԍNotice at  54.C  X1-XX` ` b.X Comments (#  X - 144.` ` In general, parties agree with our tentative conclusions that telemessaging is an  d(#Zinformation service, and that when a BOC provides telemessaging on an interLATA basis, it must  X - d(#do so in accordance with the section 272 separate affiliate requirements.R  yO- v =ԍBell Atlantic, Exhibit 1, at 5; BellSouth at 25 n.61; AT&T at 12 n.13, 1415; Sprint at 1617 n.12; see also ITAA at 15. Several parties also  d(#iassert that, with respect to interLATA telemessaging services, it is possible to apply both section  X - d(#260 and section 272 simultaneously.\S `  yO-ԍITAA at 15; see also MCI Reply at 12.\ PacTel, however, disagrees with both of our tentative  d(#yconclusions, arguing that because "telemessaging" includes live operator services that are not  d(#information services, it constitutes a distinct category of service that is subject only to the section  Xb-260 requirements.XTXb  yO- v ԍPacTel at 16; PacTel Reply at 9; see also MCI at 2122 (questioning whether live operator services can be  yO- d(#considered "information services"). But see MCI Reply at 12 (conceding that live operator services constitute information services).X  X4-XX` ` c.X Discussion (#  X-  145.` ` Based on our review of the comments and analysis of the statute, we hereby adopt  d(#our tentative conclusion that telemessaging is an information service. We reject PacTel's  d(#contention that live operator services do not constitute information services. Under the statute,"GT,-(-(ZZ"  X- d(#live operator services "used to record, transcribe, or relay messages" are telemessaging services.UX yOy- v ԍ47 U.S.C.  260(c). In general, these services involve live operators that answer calls intended for  d(#Kunavailable endusers, transcribe messages, and relay them to the enduser. Live operator services are often used  yO -in health care contexts, where "persontoperson" communication is important. See ATSI at 2.  d(#Because these functions plainly provide "the capability for . . . storing . . . or making available  d(#information" via telecommunications, we conclude that live operator telemessaging services fall  X- d(#iwithin the statutory definition of information services.VX yOT- v ԍAs discussed above at  LIVEOP103, live operator services do not appear to fall within the Commission's definition  d(#of "enhanced" services, because they do not employ "computer processing applications." Thus, they are an example of one area in which the "information service" definition is broader than that of "enhanced services." We also adopt our tentative conclusion  d(#-that BOCs that provide telemessaging services that meet the definition of interLATA information  d(#yservices must do so in accordance with the section 272 requirements, in addition to the section  Xv-260 requirements..Wv yO/- v \ԍOne example of an telemessaging service that is an interLATA information service might be a voicemail  yO-service that is bundled with a personal 800 number, offered to the customer for a single price. See NYNEX at 44.. 7!}K 'dJ:\POLICY\SAFE\ORDER\MASTER\SEW' 7  XH-* vIV. STRUCTURAL SEPARATION REQUIREMENTS OF SECTION 272 Đ\  X - A.Application of the Section 272(b) Requirements  X - 146.` ` Section 272(b) of the Communications Act establishes five structural and  d(#vtransactional requirements for separate affiliate(s) established pursuant to section 272(a). We  d(#address each of the requirements below, with the exception of section 272(b)(2), which we  X -discuss in the Accounting Safeguards Order.aX `  yO-ԍAccounting Safeguards Order part IV.B.1.c.a  Xy- B.The "Operate Independently" Requirement  XK- 1.` ` Background  X- P147.` ` Section 272(b)(1) states that a separate affiliate "shall operate independently from  X- d(#<the BOC."JY  yO -ԍ47 U.S.C.  272(b)(1).J The Act does not elaborate on the meaning of the phrase "operate independently."  d(#\We stated in the Notice that under principles of statutory construction, a statute should be  X- d(#interpreted so as to give effect to each of its provisions.CZ  yO $-ԍNotice at  57.C We therefore tentatively concluded  d(#Zthat the section 272(b)(1) "operate independently" provision imposes requirements beyond those contained in subsections 272(b)(2)(5). "HZ,-(-(ZZo"Ԍ X- _148.` ` As we observed in the Notice, section 274(b) contains similar language to section  d(#272(b)(1). It states that "[a] separated affiliate or electronic publishing joint venture shall be  d(#operated independently from the [BBC]." Subsections 274(b)(1)(9) list several requirements that  d(#govern the relationship of an electronic publishing entity and the BBC with which it is  X- d(#affiliated.G[ yO-ԍ47 U.S.C.  274(b).G We sought comment on the relevance of the "operated independently" language of  X-section 274(b) when construing the "operate independently" requirement of section 272(b)(1).C\X yO-ԍNotice at  60.C  X_- 149.` ` In addition, we sought comment on what rules, if any, we should adopt to  XH- d(#implement the requirements of section 272(b)(1).F]H yO -ԍId. at  57.F Moreover, we asked whether we should  X1- d(#impose one or more of the separation requirements established in the Computer II or Competitive  X -Carrierw^X x yOC- v ԍPolicy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations  yO - d(#wThereof, CC Docket No. 79252, Fifth Report and Order, 98 FCC 2d 1191, 1198 (1984) (Competitive Carrier Fifth  yO-Report and Order).w proceedings.C_  yOc-ԍNotice at  59.C  X - %150.` ` In the Computer II proceeding, the Commission required AT&T to provide  d(#ienhanced services through a separate affiliate, a requirement that the Commission extended to the  X - d(#.BOCs following divestiture.d` (  yO-ԍBOC Separations Order, 95 FCC 2d 1117 (1983).d The Commission required the enhanced services subsidiary to  d(#"have its own operating, marketing, installation and maintenance personnel for the services and  X- d(#jequipment it offer[ed],"ra  yO-ԍComputer II Final Order, 77 FCC 2d at 477,  23839.r to comply with information disclosure requirements, and to maintain  Xy- d(#its own books of account.`byH  yOr-ԍId. at 476, 48081,  236, 24549.` The Commission prohibited the regulated entity and its enhanced  d(#=services subsidiary from using in common any leased or owned physical space or property on  XK- d(#Lwhich transmission equipment or facilities used in basic transmission services were located,OcK yO!-ԍId. at 47778,  240.O  d(#barred them from sharing computer capacity, and limited the regulated entity's ability to provide  X- d(#software to the affiliate.ddXh yO6%- v MԍId. at 47880,  24144; Computer II Reconsideration Order, 84 F.C.C.2d at 81,  91 (requiring affiliate  d(#or its outside contractors to perform all software development, other than generic software embodied in equipment sold to any interested purchaser).d Moreover, the Commission barred the enhanced services subsidiary"Id,-(-(ZZe"  d(#from constructing, owning, or operating its own transmission facilities, thereby requiring it to  X-obtain such facilities from a local exchange carrier pursuant to tariff.ke yOb-ԍComputer II Final Order, 77 FCC 2d at 474,  229.k  X- 151.` ` In the Competitive Carrier proceeding, the Commission prescribed the separation  d(#Lrequirements to which independent LECs must conform to be regulated as nondominant in the  d(#provision of domestic, interstate, interexchange services. Specifically, an independent LEC must provide interstate interexchange services through an affiliate that:  d(#1) maintains separate books of account; 2) does not jointly own transmission or switching  d(#Kfacilities with its affiliated exchange telephone company; and 3) acquires that exchange telephone  X1-company's services at tariffed rates and conditions.{f1X yO: -ԍCompetitive Carrier Fifth Report and Order, 98 FCC 2d at 1198.{  X -  2.` ` Comments  X - 152.` ` Relationship of Section 272(b)(1) to Section 274(b)(1). Several commenters rely  d(#Lon the rule of statutory construction that similar terms in related parts of an act should be read  X - d(#similarly.wg  yO@-ԍITAA at 1718 & n.49; MCI at 2627; PacTel at 21; U S West at 29 n.43.w Two such commenters propose that the requirements listed under both sections  d(#K272(b) and 274(b) define the term "operate independently," and, consequently, that the additional  Xy- d(#prohibitions of subsection 274(b) must be read into subsection 272(b).hyx yO- v |ԍITAA at 1718 & n.49; MCI at 2627. Contra U S West at 29 n.43 (citing same rule of statutory construction to argue that provision is used as summary language in both sections). In contrast, several  Xb- d(#BOCs cite the doctrine of inclusio unius est exclusio alterius, the "inference [applied in statutory  XK- d(#construction] that all omissions should be understood as exclusions."iK yO-ԍ HISTORY See 2A Norman J. Singer, Statutes and Statutory Construction  47.23 (5th ed. 1992). They argue that, because  d(#1Congress required electronic publishing affiliates and joint ventures to be "operated  d(#>independently" and then imposed additional restrictions on activities that are not explicitly  d(#restricted in section 272(b), those activities cannot be barred by the "operate independently"  X- d(#Zprovision of section 272(b).j`  yO - v ԍE.g., Ameritech Reply at 11; BellSouth at ii, 30; BellSouth Reply at 19; PacTel at 21; see also YPPA Reply at 34. Other commenters focus on the structural differences between the  d(#Ltwo subsections as evidence that we should construe "operate independently" and "operated  X-independently" differently.lkX  yO*$- v ԍSee AT&T Reply at 17 & n.40; SBC Reply at 20 n.33; Letter From David F. Brown, Attorney, SBC, to  yO$- d(#Regina Keeney, Chief, Common Carrier Bureau, at 45 (filed Nov. 14, 1996) (SBC Nov. 14 Ex Parte). Contra U S West at 29 n.43.l "Jk,-(-(ZZ"Ԍ X- 2153.` ` Defining "operate independently." With the exception of NYNEX, the BOCs and  d(#/USTA interpret the term "operate independently" to impose a straightforward, descriptive  X- d(#irequirement that needs no further clarification through the rulemaking process.l yOK- v ԍSee Ameritech at 3839 (contending provision raises question of fact best evaluated on a casebycase basis  d(#xin the context of section 271 applications to provide inregion interLATA services); Ameritech Reply at 7; Bell  d(#Atlantic at 4; BellSouth at 2830; PacTel at 20 (characterizing provision as "a 'gloss' on the other requirements");  yO- d(#iPacTel Reply at 910; SBC at 7; U S West at 29; see also SBC Nov. 14 Ex Parte at 23 (reading the provision to  d(#;impose a "qualitative 'piercing the corporate veil' standard"); USTA at 1920; USTA Reply at 3, 67; YPPA at 56; YPPA Reply at 3. They generally  d(#kcontend that the omission of additional structural separation requirements in section 272(b)  X- d(#Zrepresents a deliberate congressional choice not to impose such restrictions.m@ yO - v MԍE.g., Ameritech at 38; Ameritech Reply at 10; Bell Atlantic at 5; BellSouth at 2930; BellSouth Reply at 18; NYNEX Reply at 1719; USTA at 18; U S West at 24; YPPA Reply at 2, 56. They particularly  X- d(#<oppose adoption of the Computer II structural separation requirements to implement the "operate  d(#independently" requirement. Indeed, they assert that adopting such restrictions would be  d(#inconsistent with congressional intent, as well as changes in the industry and common carrier  XH- d(# regulation since the Computer II proceeding.QnXH yO- v ԍE.g. Ameritech Reply at 89 (citing interconnection, unbundling, and collocation obligations); NYNEX at  d(#,25; SBC at 12; USTA at 4, 18; USTA Reply at 45 (citing price cap regulation); U S West Reply at 6 (citing regime for pricing of interconnection).Q These commenters suggest that imposing  d(#additional structural separation requirements would result in a loss of efficiency and economies  X -of scope, decreased innovation, and fewer new services.fo  yO-ԍSee, e.g., SBC at 1317; USTA Reply at 4.f  X - 154.` ` The majority of commenters, other than the BOCs, urge us to construe the "operate  X - d(#=independently" requirement as imposing additional structural separation requirements.vpX H  yO- v ԍE.g., AT&T at 20; CompTel at 1314 (advocating "complete segregation of affiliate interexchange  d(#subsidiary"); Excel at 45; IDCMA at 34; LDDS WorldCom at 13 n.12; LDDS WorldCom Reply at 7; MCI at 23; MFS at 1516; Ohio Commission at 8; Sprint at 1920; Time Warner at 1617; TRA at 13.v For  d(# instance, the DOJ contends that additional structural separation requirements are the most  X - d(#ieffective means of reducing the risks of crosssubsidization.q h yO-ԍDOJ Reply at 10 (providing example that sharing of all personnel should be prohibited).Ĕ Commenters supporting this view  d(#=argue that the "operate independently" requirement must be read to impose, at a minimum, the  Xy- d(#structural separation rules established in the Computer II proceeding, including those elements  Xb- d(#outlined above.rb yO $- v ԍE.g., AT&T at 2023 (contending that while some of those requirements are expressly mandated by the  d(#ilanguage of section 272, all of them as outlined above are necessary elements of operational independence);  d(#JExcel at 57 (advocating all requirements except for requirement that affiliate maintain separate books); IDCMA at  yOc&- d(#4; ITAA at 1819; ITI & ITAA Reply at 1011; Ohio Commission at 9; Ohio Commission Reply at 45; Time  yO+'- d(#Warner at 1718 & n.30; Time Warner Reply at 14; see also TRA at 13 (urging us to use Computer II proceeding"+'q,-(-(b'"  yO- d(#Jas a guide). But see CompTel at 1516 (proposing safeguards devised by DOJ in response to Ameritech's Customers First Plan, Ameritech's plan to offer inregion interLATA service through an interexchange affiliate). Among those commenters, several emphasize that a BOC and its affiliate"bK r,-(-(ZZ"  X- d(#should not be permitted to engage in joint marketing.,s   yO- v ԍE.g., AT&T at 57; MFS at 1516 (also reading provision to forbid BOC and affiliate to refer customers to  d(#one another or to jointly advertise but to require the entities to have "separate logos, distinct names, no shared  d(#customer databases or information systems, and separate billing, collections, and ordering processes"); TIA at 22;  yO)-see also CompTel at 16 (advocating that affiliate be forbidden to use BOC's brand name)., Several commenters also propose  X- d(#restrictions that appear to go beyond those adopted in the Computer II proceeding, including a  X- d(#yprohibition on shared administrative services,t yO - v ԍE.g., CompTel at 1920; ITAA at 1819; MCI Reply at 2 (advocating administrative separation); TIA at 2223, 25 n.55; TRA at 1314. a complete prohibition on common use of any  X- d(#=leased or owned physical space,u`  yO - v ԍE.g., ITAA at 17 (advocating no sharing of property); MCI at 23; Sprint at 2123 (advocating prohibition  yO- d(#on common use of switches, facilities, buildings, and space); see also CompTel at 16 (advocating prohibition on  d(#sharing or colocation of facilities, assets, and personnel, except leasing telecommunications equipment space in same  d(#building and sharing power equipment on same terms, rates, and conditions available to nonaffiliated interexchange carriers); IDCMA at 5 (advocating physically separate facilities). a prohibition on jointly owned property,v yO|- v {ԍE.g., ITAA at 17; ITI & ITAA Reply at 1011; MCI at 2324 (advocating prohibition on joint use or ownership of property); Sprint at 2122. and a complete  X-prohibition on joint research and development, including joint equipment design.wh yO- v ԍE.g., AT&T at 23 (urging us to preclude joint planning and joint services development); IDCMA at 56; MCI at 27; TIA at 2223; TRA at 13.  Xv- 155.` ` Other commenters propose that "the standards for independent operation established  X_- d(#in the Competitive Carrier decision are the most appropriate for this section of the Act." x_ yO- v ԍNYNEX Reply at 1718; Teleport at 19; see also CompTel at 15 n.44 (proposing these standards as a  d(#minimum to be supplemented); Frontier at 45 (advocating standards as a minimum); PacTel Reply at 10 (stating  yO`- d(#that if additional restrictions are necessary, Competitive Carrier requirements are the most appropriate). In contrast,  yO(- d(#several commenters state that the structural safeguards established in the Competitive Carrier proceeding would be  yO- d(#,insufficient to protect ratepayers or establish operational independence. E.g., AT&T at 23; IDCMA at 3; ITAA at 1819 & n.53.   d(#Suggesting that two of the three requirements are implemented elsewhere in section 272, they  d(#igenerally propose that we read "operate independently" to forbid joint ownership of transmission  X - d(#and switching facilities.ByX 8 yO#- v ԍE.g., NYNEX Reply at 1718; Teleport at 19; see also Excel at 8; Frontier at 45 (contending that  d(#,requirement would force BOC affiliates, like competitors, to invest capital and resources in interexchange business). B Other parties advocate that we adopt individual requirements, rather  d(#\than a particular set of structural separation requirements established in another context, or"LXy,-(-(ZZ_ "  d(#>recommend that we use other proceedings in which structural separation was imposed as a  X-guide.`z yOy- v .ԍE.g., Excel at 6 (advocating adoption of Computer II and Competitive Carrier requirements as appropriate);  d(#Sprint at 2021 (advocating that we seek guidance in interpreting the provision from the orders pursuant to which  d(#GTE Corporation was permitted to acquire Sprint's long distance predecessors in interest and urging us to read the  d(#provision to limit a BOC's ability to engage in common activities with a section 272 affiliate through its parent  yO- d(#hcompany); TIA at 2325 (noting that neither the Computer II nor Competitive Carrier proceedings addressed cross yOa-subsidy and discrimination issues associated with BOC entry into manufacturing); TRA at 13. `  X- 3.` ` Discussion  X- A156.` ` We adopt our tentative conclusion that the "operate independently" requirement  d(#of section 272(b)(1) imposes requirements beyond those listed in sections 272(b)(2)(5). This  d(#-conclusion is based on the principle of statutory construction that a statute should be construed  XH-so as to give effect to each of its provisions.{HW yOP-ԍ2A Singer, supra note HISTORY362, at  46.06; see Notice at  57.  X - 2157.` ` Relationship of Section 272(b)(1) to Section 274(b). Section 274(b) mandates that  d(#a separated affiliate or electronic publishing joint venture be "operated independently" and then  d(# lists nine specific requirements governing the relationship between a BOC and a separated  d(#affiliate. In contrast, section 272(b) imposes five structural and transactional requirements  d(#governing the relationship between a BOC and a section 272 affiliate, one of which is that the  d(#0affiliate "shall operate independently from the [BOC]." The structural differences in the  d(#organization of the two sections suggest that the term "operate independently" in section 272(b)(1)  d(#should not be interpreted to impose the same obligations on a BOC as section 274(b). In  d(#particular, while the enumerated requirements of section 274(b) may be interpreted to define the  d(#term "operated independently" in that context, they do not define the term "operate  X4- d(#independently" as used in section 272(b).;|4 yO- v ԍSee SBC Reply at 20 n.33. We will construe the "operated independently" language of section 274(b) in  yO-a separate proceeding and do not purport to do so at this time. See Electronic Publishing NPRM at  35.; We agree with SBC that, because the requirements  d(#listed in sections 274(b)(1)(9) of the Act overlap with the requirements of sections 272(b), (c),  d(#/and (e), it would be redundant to incorporate all of the section 274(b) requirements into the  X-"operate independently" requirement of section 272(b)(1).P}?  yO-ԍSee SBC Reply at 20 n.33.P  X- _158.` ` Defining "Operate Independently." The requirements that we adopt to implement  d(#section 272(b)(1) are intended to prevent a BOC from integrating its local exchange and exchange  d(#-access operations with its section 272 affiliate's activities to such an extent that the affiliate could  d(#jnot reasonably be found to be operating independently, as required by the statute. In order to  d(# protect against the potential for a BOC to discriminate in favor of a section 272 affiliate in a  d(#manner that results in the affiliate's competitors' operating less efficiently, we seek to ensure that  d(#^a section 272 affiliate and its competitors enjoy the same level of access to the BOC's"7M },-(-(ZZ"  d(#transmission and switching facilities. Accordingly, we conclude that operational independence  d(#yprecludes the joint ownership of transmission and switching facilities by a BOC and its section  d(#272 affiliate, as well as the joint ownership of the land and buildings where those facilities are  d(#located. Furthermore, operational independence precludes a section 272 affiliate from performing  d(#operating, installation, and maintenance functions associated with the BOC's facilities. Likewise,  d(#Mit bars a BOC or any BOC affiliate, other than the section 272 affiliate itself, from performing  d(#Koperating, installation, or maintenance functions associated with the facilities that the section 272  d(#affiliate owns or leases from a provider other than the BOC with which it is affiliated. Consistent  d(#with these requirements and those established pursuant to sections 272(b)(5) and 272(c)(1), a  d(#section 272 affiliate may negotiate with an affiliated BOC on an arm's length and  d(#-nondiscriminatory basis to obtain transmission and switching facilities, to arrange for collocation of facilities, and to provide or to obtain services other than those expressly prohibited herein.  X - 159.` ` We agree with several commenters that joint ownership of transmission and  d(#switching facilities and the property on which they are located would permit such substantial  d(#integration of the BOCs' local operations with their interLATA activities as to preclude  X- d(#independent operation, in violation of section 272(b)(1).~ yO -ԍSee, e.g., Frontier at 45; ITAA at 17; MCI at 24; Sprint at 2123; Sprint Reply at 2425; TRA at 13. Imposing a prohibition on such joint  d(#Zownership also avoids the need to allocate the costs of such transmission and switching facilities  d(#zbetween BOC activities and the competitive activities in which a section 272 affiliate may be  d(#involved. We agree with the claims of some commenters that, because the costs of wired  d(#>telephony networks and network premises are largely fixed and largely shared among local,  d(#access, and other services, sharing of switching and transmission facilities may provide a  d(#significant opportunity for improper allocation of costs between the BOC and its section 272  X-affiliate.X yO- v \ԍSee Letter From Leonard J. Cali, General Attorney, AT&T, to William F. Caton, Acting Secretary, FCC,  yO-filed Oct. 4, 1996 (AT&T Oct. 4 Ex Parte); Excel at 56; Sprint at 2223.  X- 160.` ` By prohibiting joint ownership of transmission and switching facilities, we also  d(#reduce the potential for a BOC to discriminate in favor of its section 272 affiliate. Consistent  d(#with this purpose, we define transmission and switching facilities broadly to include the facilities  d(#used to provide local exchange and exchange access service. The prohibition ensures that a  d(#section 272 affiliate must obtain any such facilities pursuant to section 272(b)(5), which requires  d(#all transactions between a BOC and its section 272 affiliate to be on an arm's length basis and  d(#<reduced to writing. Requiring section 272 affiliates to obtain transmission and switching facilities  d(#from a BOC on an arm's length basis will increase the transparency of such transactions, thereby  d(#-facilitating monitoring and enforcement of the section 272 requirements. Moreover, a section 272  d(#affiliate and its interLATA competitors will have to follow the same procedures when obtaining  d(#>services and facilities from a BOC. As described below, sections 272(c)(1) and (e) require a  d(#section 272 affiliate to obtain services and facilities on the same rates, terms, and conditions" N,-(-(ZZ"  X- d(#>available to unaffiliated entities. Contrary to the suggestion of some commenters,fX yOy- v ԍSee SBC Nov. 14 Ex Parte at 78 (arguing that "as long as the BOC affiliate's joint use or sharing of  d(#switching, transmission, or computer facilities is nondiscriminatory and otherwise complies with the terms of Section 272, it should be allowed"); USTA Reply at 7.f those  d(#nondiscrimination safeguards would offer little protection if a BOC and its section 272 affiliate  d(#were permitted to own transmission and switching facilities jointly. To the extent that a section  d(#272 affiliate jointly owned transmission and switching facilities with a BOC, the affiliate would  d(#not have to contract with the BOC to obtain such facilities, thereby precluding a comparison of  d(#-the terms of transactions between a BOC and a section 272 affiliate with the terms of transactions  d(#Lbetween a BOC and a competitor of the section 272 affiliate. Together, the prohibition on joint  d(#ownership of facilities and the nondiscrimination requirements should ensure that competitors can  d(#obtain access to transmission and switching facilities equivalent to that which section 272 affiliates receive.  X - o161.` ` The requirement that a BOC and its section 272 affiliate not commonly own the  d(#land and buildings where their transmission and switching facilities are located, like the  d(#>prohibition on joint ownership of facilities, should ensure that a section 272 affiliate and its  d(#competitors both receive the best available access to transmission and switching facilities. It does  d(#not, however, preclude a section 272 affiliate from collocating its equipment in end offices or on  d(#other property owned or controlled by its affiliated BOC. Rather, as IDCMA recognizes, the  d(#requirement should ensure that collocation agreements between a BOC and its section 272  d(#0affiliate are reached pursuant to arm's length negotiations and that the same collocation  XK- d(#yopportunities are available to similarly situated nonaffiliated entities.CK yO-ԍIDCMA at 5 n.11. C Moreover, the ban on  d(#joint ownership of facilities should protect local exchange competitors that request physical  d(#ycollocation by ensuring that a BOC's section 272 affiliate does not obtain preferential access to  X-the limited available space in the BOC's central office.Xx yO/- v ԍSection 251(c)(6) of the Act requires a BOC to provide for physical collocation of a requesting carrier's  d(#xequipment necessary for interconnection unless it can demonstrate "that physical collocation is not practical for  yO-technical reasons or because of space limitations." 47 U.S.C.  251(c)(6); see First Interconnection Order at 267.  X- 162.` ` We decline to read the "operate independently" requirement to impose a blanket  d(#prohibition on joint ownership of property by a BOC and a section 272 affiliate. Rather, we limit  d(#the restriction to joint ownership of transmission and switching facilities and the land and  d(#buildings where those facilities are located. We conclude that the prohibition we have adopted  d(#should ensure that the section 272 affiliate's competitors gain nondiscriminatory access to those  d(#transmission and switching facilities that both section 272 affiliates and their competitors may be  d(#unable to obtain from other sources. We find that joint ownership of other property, such as  d(#yoffice space and equipment used for marketing or the provision of administrative services, may  d(#provide economies of scale and scope without creating the same potential for discrimination by" O,-(-(ZZz"  X- d(#the BOCs. Moreover, we believe that the Commission's accounting rules;c yOy-ԍSee 47 C.F.R.  32.27, 64.90164.904.c the separate books,  d(#records, and accounts requirement of section 272(b); and the audit requirement of section 272(d) provide adequate protection against the potential for improper cost allocation.  X- 163.` ` We further conclude that allowing the same personnel to perform the operating,  d(#jinstallation, and maintenance services associated with a BOC's network and the facilities that a  d(#?section 272 affiliate owns or leases from a provider other than the BOC would create the  d(#opportunity for such substantial integration of operating functions as to preclude independent  d(#operation, in violation of section 272(b)(1). Regardless of whether the BOC or the section 272  d(#yaffiliate were to provide such services, we agree with AT&T that allowing the same individuals  d(#?to perform such core functions on the facilities of both entities would create substantial  d(#opportunities for improper cost allocation, in terms of both the personnel time spent in  X - d(#performing such functions and the equipment utilized.R X yO-ԍAT&T Oct. 4 Ex Parte.R We conclude, as we did in the BOC  X - d(#Separations Order, that allowing the sharing of such services would require "excessive, costly and  d(#burdensome regulatory involvement in the operation, plans and daytoday activities of the carrier  X - d(#>. . . to audit and monitor the accounting plans necessary for such sharing to take place."X  yO@- v ԍSee BOC Separations Order, 95 FCC 2d at 1144,  70 (rejecting BOCs' argument that their enhanced  d(#services and CPE separate subsidiaries should be able to contract with regulated operations for provision of  yO-engineering, installation and maintenance, and similar services). ĉ  d(#Accordingly, we read section 272(b)(1) to bar a section 272 affiliate from contracting with a BOC  d(#or another entity affiliated with the BOC to obtain operating, installation, and maintenance  d(#Lfunctions associated with the section 272 affiliate's facilities. As stated above, we believe that  d(#ya prohibition on joint ownership of transmission and switching facilities is necessary to ensure  d(#that a BOC complies with the nondiscrimination requirements of section 272. Consistent with  d(#that approach, we further interpret the term "operate independently" to bar a BOC from  d(#contracting with a section 272 affiliate to obtain operating, installation, or maintenance functions  d(#associated with the BOC's facilities. Allowing a BOC to contract with the section 272 affiliate  d(#for operating, installation, and maintenance services would inevitably afford the affiliate access to the BOC's facilities that is superior to that granted to the affiliate's competitors.  X- 164.` ` We clarify that section 272(b)(1) does not preclude a BOC or a section 272  d(#/affiliate from providing telecommunications services to one another, so long as each entity  d(#{performs itself, or obtains from an unaffiliated third party, the operating, installation, and  d(#]maintenance functions associated with the facilities that it owns or leases from an entity  d(#unaffiliated with the BOC. In particular, if a section 272 affiliate obtains unbundled elements  d(#from a BOC, that BOC can perform the operating, installation, and maintenance functions  d(#associated with those facilities. Moreover, we recognize the need for an exception to the  d(#prohibition on shared operating, installation, and maintenance services to allow the BOC to obtain"P,-(-(ZZ<"  d(#support services for sophisticated equipment purchased from the affiliate on a compensatory  X- d(#ybasis. yOy- v ԍSee Computer II Final Order, 77 FCC 2d at 477,  239 (adopting a similar exception to a prohibition on shared services). For instance, the BOC could contract with the section 272 affiliate for the installation,  d(#=maintenance, or repair of equipment, or the affiliate could train the BOC's personnel to perform  d(#such functions. We further note that the limited prohibition on shared services that we adopt is  d(#Mconsistent with section 272(e)(4), which states that a BOC or BOC affiliate that is subject to  d(#section 251(c) "may provide any interLATA or intraLATA facilities or services to its interLATA  d(#affiliate if such services or facilities are made available to all carriers at the same rates and on  X_- d(#-the same terms and conditions."J_7 yOG -ԍ47 U.S.C.  272(e)(4).J As we discuss below, section 272(e)(4) does not grant a BOC  d(#the authority to provide particular services to its affiliate, but rather prescribes the manner in  X1- d(#which a BOC must provide those services that it is otherwise authorized to provide.K1 yO -ԍSee infra part VI.D.K Thus,  d(#/section 272(e)(4) does not grant a BOC the authority to provide operating, installation, and  d(#maintenance services associated with the facilities that a section 272 affiliate owns or leases from a provider other than the BOC.  X - 165.` ` In imposing these requirements, we reject the contention of some commenters that  d(#.Congress considered and rejected a prohibition on the joint ownership of telecommunications  X- d(#transmission or switching equipment or other property.lW yO-ԍU S West Reply at 9 n.25; see also USTA Reply at 78.l Although the House bill contained such  Xy- d(#=a prohibition, the Senate bill did not.y yO-ԍSee H.R. 1555, 104th Cong., 1st Sess.,  246 (1995); S. 652, 104th Cong., 1st Sess.  252 (1995). The Joint Explanatory Statement indicates merely that  d(#Zthe conference committee adopted the Senate version of this provision with several modifications  XK- d(#and does not offer any specific explanation for the exclusion of the joint ownership restriction.TKw yOs-ԍJoint Explanatory Statement at 152.T  d(#In these circumstances, our obligation is to interpret the language of section 272(b)(1) in a  d(#<manner consistent with its purpose, which is to ensure the operational independence of a section  X-272 affiliate from its affiliated BOC.   yO- v ԍSee, e.g., Mead Corp. v. Tilley, 490 U.S. at 723 (refusing to draw inference from change in committee draft  yO - d(#of bill); Rastelli v. Warden, 782 F.2d at 24 n.3 (declining to draw conclusions from ambiguous indications of  yON!- d(#statutory purpose); Drummond Coal v. Watt, 735 F.2d at 474 (concluding that "[u]nexplained changes made in committee are not reliable indications of congressional intent").   X- 166.` ` The limited prohibition on shared services that we impose rests on the "operate  d(#independently" requirement of section 272(b)(1), rather than the requirement of section 272(b)(3)  X- d(#that a BOC and its section 272 affiliate have "separate officers, directors, and employees."J  yOJ'-ԍ47 U.S.C.  272(b)(3).J "Q,-(-(ZZ"  d(#Accordingly, we reject the statutory construction argument advanced by several BOCs, which is  d(#jpredicated on the text of the latter provision. Those BOCs argue that, if a rule against separate  d(#employees were sufficient to prevent the sharing of inhouse services, Congress would not have  d(#prohibited a BOC from engaging in purchasing, installation, maintenance, hiring, training, and  d(#.research and development for the separated affiliate, in addition to forbidding the BOC and its  X- d(#yseparated affiliate from having common officers, directors, and employees, in section 274(b).u yO-ԍE.g., Ameritech at 42; BellSouth at 31 n.79; U S West at 24. u  XH-  167.` ` We believe it is consistent with both the letter and purposes of section 272 to strike  d(#an appropriate balance between allowing the BOCs to achieve efficiencies within their corporate  d(#.structures and protecting ratepayers against improper cost allocation and competitors against  d(#discrimination. We decline to impose additional structural separation requirements given the  d(#nondiscrimination safeguards, the biennial audit requirement, and other public disclosure  d(#requirements imposed by section 272. In combination with the accounting protections established  X - d(#in the Accounting Safeguards Order, we believe the requirements set forth herein will protect against potential anticompetitive behavior.  Xy- 168.` ` In particular, we decline to read the "operate independently" requirement to impose  Xb- d(#a prohibition on all shared services.bX yOk- v ԍWe further discuss our reasons for declining to do so in connection with our analysis of section 272(b)(3), below. We recognize the inherent tension between the "operate  d(#independently" requirement and allowing the integration of services. As we discuss further  d(#below, however, we believe the economic benefits to consumers from allowing a BOC and its  d(#section 272 affiliate to derive the economies of scale and scope inherent in the integration of  X- d(#some services outweigh any potential for competitive harm created thereby.` yOg-ԍSee infra paragraph HOCKEY179. ` Therefore, we  X- d(#permit the sharing of administrative and other services.K@ yO-ԍSee infra part IV.C.K For example, we read section 272(b)(1)  d(#not to preclude a BOC and a section 272 affiliate from contracting with one another to provide  X-marketing services. yOB -ԍWe further discuss the marketing provisions below in our analysis of section 272(g).  X- 169.` ` In construing other provisions of section 272, we address the concerns of those  d(#commenters who urge us to interpret section 272(b)(1) to prohibit a BOC and a section 272  Xe- d(#yaffiliate from engaging in various forms of joint research and development.{e`  yOv%-ԍE.g., AT&T at 23 ; IDCMA at 56; MCI at 27; TIA at 2223; TRA at 13.{ As a preliminary  d(#zmatter, we note that the MFJ Court considered equipment design and development to be an"NR ,-(-(ZZ"  X- d(#integral part of "manufacturing," as the term was used in the MFJ. yOy- v kԍSee, e.g., United States v. Western Elec. Co., 675 F. Supp. 655, 66263, 66768 (D.D.C. 1987), aff'd 894 F.2d 1387 (D.C. Cir. 1990). We emphasize that to the  d(#jextent that research and development is a part of manufacturing, it must be conducted through  X- d(#ya section 272 affiliate, pursuant to section 272(a).   yO- v !ԍWe will address the scope of the BOC's authority to engage in manufacturing activities further in our  yOk-proceeding to implement section 273 of the Act. See Manufacturing NPRM.  To the extent that a BOC seeks to develop  d(#services for or with its section 272 affiliate, the BOC must develop services on a  X-nondiscriminatory basis for or with other entities, pursuant to section 272(c)(1).Jx yO -ԍSee infra part V.B.J  Xv- _170.` ` Finally, although a number of commenters support a Computer IIĩtype prohibition  d(#|on a section 272 affiliate's ability to construct, own, or operate its own local exchange  XH- d(# facilities,aH yO-ԍE.g., AT&T at 2022; Time Warner at 1718.a we conclude that such a prohibition is not required by the language of section  X1- d(#272(b)(1). As several BOCs suggest, limiting a section 272 affiliate to resale would not  d(#necessarily increase the affiliate's operational independence, particularly if the affiliate had to  X -acquire facilities from its affiliated BOC as a result of the requirement.h  yOL-ԍSee Ameritech Reply at 10; BellSouth Reply at 19.h  X - C. Section 272(b)(3) and Shared Services  X - 1.` ` Background  Xy- }171.` ` In the Notice, we tentatively concluded that the section 272(b)(3) requirement that  Xb- d(#-a BOC and its section 272 affiliate have "separate officers, directors, and employees"Jb(  yO;-ԍ47 U.S.C.  272(b)(3).J prohibits  d(#the sharing of inhouse functions, including operating, installation, and maintenance, as well as  X4- d(#administrative services.C4  yO-ԍNotice at  62.C We noted that, pursuant to the Computer II proceeding, the  d(#iCommission allowed AT&T and its enhanced services subsidiaries to share certain administrative  d(#services accounting, auditing, legal services, personnel recruitment and management, finance,  X- d(#tax, insurance, and pension services |H  yO#-ԍComputer II Reconsideration Order, 84 FCC 2d at 8485, 102.| on a cost reimbursable basis, but required the subsidiary  X- d(#ito have its own operating, marketing, installation, and maintenance personnel for the services and"S,-(-(ZZ"  X- d(#=equipment it offered.k yOy-ԍComputer II Final Order, 77 FCC 2d at 477,  239.k We sought comment on whether section 272(b)(3) forbids the sharing  X-of outside services or other types of personnel sharing.CX yO-ԍNotice at  62.C  X- 172.` ` In the context of our discussion of section 272(g), we sought comment on the  d(#zrelated question of whether a section 272 affiliate must purchase marketing services from an  d(#affiliated BOC on an arm's length basis, pursuant to section 272(b)(5). Moreover, we sought  d(#zcomment on whether it is necessary to require a BOC and its section 272 affiliate to contract  d(#jointly with an outside marketing entity for joint marketing of interLATA and local exchange  d(#services in order to comply with section 272(b)(3). Finally, we invited parties to comment on  d(#Lthe corporate and financial arrangements that are necessary to comply with sections 272(g)(2),  X -272(b)(3), and 272(b)(5).F  yO-ԍId. at  92.F  X - 2.` ` Comments  X - 173.` ` Sharing of Services. The BOCs, USTA, and the Yellow Pages Publishers  d(#jAssociation argue that section 272(b)(3) does not preclude the sharing of "inhouse" services,  X- d(#=those services provided by a BOC or its separate affiliate.x yO- v ԍE.g. Ameritech at 41; Bell Atlantic Reply at 34; Bell Atlantic at 67; BellSouth at 31; PacTel at 2122; U S West at 2224; USTA at 21; YPPA at 78. Similarly, they assert that section  d(#272(b)(3) does not prohibit BOC employees from performing marketing services on behalf of a  Xb-section 272 affiliate.b yO-ԍE.g., Ameritech at 51; Ameritech Reply at 2627; BellSouth at 10 & n.17; U S West at 2728.  X4- 174.` ` In response, a majority of commenters contend that section 272(b)(3) supports a  X- d(#broad prohibition on the sharing of services.`  yO.- v ԍE.g., DOJ Reply at 10; Florida Commission Reply at 35 (urging us to read section 272(b)(3), in concert  d(#xwith section 272(b)(1), to preclude sharing of administrative services, as well as sharing of operating, installation  d(#and maintenance personnel, research and development activities, and marketing); ITAA at 19; MCI at 2728 (arguing  d(#Jthat allowing a BOC to provide services for a section 272 affiliate that would otherwise have been performed by the  d(#affiliate's own employees would undermine the separate employees requirement); MCI Reply at 2; Teleport at 20; TIA at 27; Time Warner at 1819; TRA at 1314. For instance, AT&T argues that BOC personnel  X- d(#should not be involved in any way in the activities of the section 272 affiliate, and vice versa.< yO$-ԍAT&T at 24.<  X- d(#yMFS urges us to construe section 272(b)(3) to mean that employees may provide services only"Th,-(-(ZZ "  X- d(#for the BOC or its section 272 affiliate, not both.D yOy-ԍMFS Reply at 1920.D In particular, interexchange carriers construe  d(#section 272(b)(3) as imposing a variety of restrictions on joint marketing activities. AT&T  d(#contends that a BOC and its affiliate may each jointly market exchange and interexchange  X- d(#services, but may not integrate their marketing operations or their product design and  X- d(#idevelopment.BX yO-ԍAT&T Reply at 31.B Whereas, MCI argues that joint marketing must be conducted either by the BOC  X- d(#or its section 272 affiliate, but not both.< yO& -ԍMCI at 48. < Finally, Sprint maintains that BOC employees may  Xv- d(#not market the section 272 affiliate's services, because they are not employed by the BOC  X_-affiliate.G_x yO -ԍSprint Reply at 2728.G  X1- 2175.` ` Services Provided by an Outside Entity. The BOCs and USTA argue that neither  d(#the statute nor legislative history can be read to prohibit a BOC and its section 272 affiliate from  X - d(#obtaining services from the same outside provider.  yO- v ԍE.g., Ameritech at 40; Bell Atlantic at 7; BellSouth at 31; PacTel at 23; SBC Reply at 89; USTA at 2021. Sprint does not object to such sharing  X - d(#"provided that each [party] pays fair market value in writing for those services."E `  yO-ԍSprint at 26 n.19. E Other  X - d(#commenters contend, however, that sharing a common outside provider creates the same  X - d(#0opportunity for improper cost allocation as the sharing of inhouse services.  yO_- v ԍE.g., AT&T at 25; see also CompTel at 1820; TIA at 23, 27 (arguing that together with the "operate independently" requirement, section 272(b)(3) forbids such sharing); TIA Reply at 9; TRA at 14.  Several  X -commenters suggest that we place specific limits on outside contracting._ H  yO- v zԍMCI at 28 (urging us to allow outsourcing only for "those services and functions that the BOC outsourced  d(#prior to the date of passage of the 1996 Act" and to require any sharing of outside services to be performed in  d(#Yaccordance with requirements of section 272(b)(5)); Time Warner at 1920 (suggesting we should allow such sharing  d(#only "where that third party actively provides services to other firms at large" and, in any event, prohibit it in the context of accounting and auditing)._  Xy-  176.` ` Sprint and Time Warner argue that we should require a BOC and its section 272  Xb- d(#>affiliate to contract with an outside firm for the provision of joint marketing and advertising"bU,-(-(ZZ"  X- d(#Kservices.Z yOy- v zԍTime Warner at 25; Sprint at 49 (asserting that although the statute does not require such a restriction, it  yOA- d(#would facilitate monitoring of such joint activities); Sprint Reply at 28; see also Florida Commission Reply at 45  d(#(seeking a requirement that "an independent third party" provide such services, to the extent they are provided by  yO- d(#a single entity). But see AT&T at 57 (concluding it may be possible for a BOC and its section 272 affiliate to  d(#contract with the same outside marketing entity for any joint marketing of interLATA and local exchange service, provided that the contract does not extend beyond marketing to joint services and development and planning). Z The BOCs and the Citizens for a Sound Economy Foundation object to the proposed  X-requirement on the grounds that it would be contrary to the statute.@ yO- v ԍE.g., Ameritech at 5152; BellSouth at 10; Citizens for a Sound Economy Foundation Reply at 4; NYNEX Reply at 16; PacTel at 41; PacTel Reply at 25.  X- 177.` ` Other Activities. AT&T argues that we "should prohibit the BOCs from using any  d(#kcompensation system that directly or indirectly bases any part of the compensation of BOC  X- d(#officers, directors, or employees on the performance of the affiliate, or vice versa." yO- v ԍAT&T at 26; see also CompTel at 1516 (advocating a similar requirement pursuant to section 272(b)(1)). The BOCs  d(#generally reply that there is no statutory basis for such a requirement, which would "deny the  X_- d(#\RBOC the ability to utilize stockbased compensation plans (e.g., stock options), a common  XH-compensation mechanism" and "powerful recruiting tool" used in the industry.H  yO-ԍSee, e.g., Ameritech Reply at 1213; see also U S West Reply at 12 n.36.  X - 3.` ` Discussion  X -  3178.` ` Sharing of Services. Based on the record before us, we decline to prohibit the  d(#sharing of services other than operating, installation, and maintenance services, as described  X - d(#[above.E  yO-ԍSee part IV.B.E We clarify that "sharing of services" means the provision of services by the BOC to  d(#-its section 272 affiliate, or vice versa. In response to our tentative conclusion on this issue in the  d(#-Notice, the BOCs have argued persuasively that such a prohibition is neither required as a matter  Xy- d(#of law, nor desirable as a matter of policy. We note that section 272(b)(3) on its face is silent  d(#on the issue of shared services. We are persuaded by the arguments of the BOCs that the section  d(#272(b)(3) requirement that a BOC and a section 272 affiliate have separate officers, directors, and  d(#employees simply dictates that the same person may not simultaneously serve as an officer,  X- d(#director, or employee of both a BOC and its section 272 affiliate.p yO"- v ԍSee, e.g., Ameritech at 41; BellSouth at 31; YPPA at 78; see also SBC Nov. 14 Ex Parte at 3 (reading  d(#the "operate independently" requirement to mandate that a section 272 affiliate have a separate board of directors,  d(#chief executive officer, chief financial officer, and operating personnel, each of whom is not also an officer, director,  d(#or employee of the affiliated BOC). Although AT&T cites the legislative history of section 272 for the proposition  d(#that Congress intended to achieve "fully separate operations" between a BOC and its section 272 affiliate, the carrier  yO&- d(#cites to language from the House Report regarding the House bill. See AT&T at 24; see also H.R. 1555, 104th"&,-(-('"  d(#iCong., 1st Sess.,  246 (1995). As discussed above, the section 272 requirements were taken from the Senate bill with several modifications. Joint Explanatory Statement at 152. p Thus, as MFS asserts, an"V ,-(-(ZZ "  X- d(#individual may not be on the payroll of both a BOC and a section 272 affiliate.A  yO-ԍMFS Reply at 20.A As discussed  d(#below, to the extent that a BOC provides services to its section 272 affiliate, it must provide them  X-to other entities on the same rates, terms, and conditions, pursuant to section 272(c)(1).J yO3-ԍSee infra part V.B.J  X- 179. HOCKEY ` ` We also decline to impose a prohibition on the sharing of services other than  d(#.operating, installation, and maintenance services, on policy grounds. We find that, if we were  d(#to prohibit the sharing of services, other than those restricted pursuant to section 272(b)(1), a  d(#BOC and a section 272 affiliate would be unable to achieve the economies of scale and scope  XH- d(#=inherent in offering an array of services.<H@ yO9- v ԍSee, e.g., Ameritech at 4345; Bell Atlantic at 7; Bell Atlantic Comments, Exhibit 2 at 34 (predicting  d(#prohibition on shared administrative services would increase costs by as much as 15 percent); USTA at 22; USTA  d(#iReply, Haussman Affidavit at 9 (stating that "[a]dministrative services are a classic example of a situation where  yO- d(#common costs are an important component of overall costs"); see also Sprint Reply Comments at 24 (stating that  d(#the "operate independently" requirement should not be interpreted to prevent the parent holding company of a BOC and its section 272 affiliate to provide various services and perform various functions for both entities). < We do not believe that the competitive benefits of  d(# allowing a BOC and a section 272 affiliate to achieve such efficiencies are outweighed by a  d(#BOC's potential to engage in discrimination or improper cost allocation. As we have noted, the  X - d(#[Commission permitted the sharing of administrative services in the Computer II Final Order, on  d(#the grounds that "[w]ith an appropriate accounting system, whatever administrative efficiencies  X - d(#may exist are preserved."  yO>- v kԍComputer II Final Order, 77 FCC 2d at 484; see, e.g., Bell Atlantic Reply at 34; PacTel at 2122; USTA at 2122; USTA Reply at 910. We reject the arguments of some parties that, because of changes  d(#in the telecommunications marketplace and the language of the 1996 Act, a different outcome is  X -warranted in this case.f  yOh-ԍSee, e.g., CompTel at 1920; MCI Reply at 19. f  Xy- o180.` ` We recognize that allowing the sharing of inhouse services will require a BOC  d(#-to allocate the costs of such services between the operating company and its section 272 affiliate  d(#and provide opportunities for improper cost allocation, exchanges of information, and  X4- d(#discriminatory treatment that may not be revealed in a subsequent audit.4 yO#- v ԍE.g., AT&T at 2425; AT&T Reply at 19; DOJ Reply at 10; Florida Commission Reply at 4; Teleport at  yOM$-20; Time Warner at 1819; Time Warner Reply at 1516, 20; see CompTel at 1820.  Indeed, in the  X- d(#<Computer II proceeding, the Commission indicated that a major reason for prohibiting the sharing  X- d(#of particular services, such as marketing services, was its desire to eliminate "the inherent"W,-(-(ZZ "  X- d(#difficulties in allocating joint and common costs."k yOy-ԍComputer II Final Order, 77 FCC 2d at 477,  238.k For these reasons, we conclude that a BOC  d(#and a section 272 affiliate may share inhouse services with each other only to the extent that  X-such sharing is consistent with sections 272(b)(1), 272(b)(5), and 272(c)(1) of the Act.YX yO-ԍ47 U.S.C.  272(b)(1) and (b)(5).Y  X-  X- 181.` ` Consistent with section 272(b)(1), a BOC and its section 272 affiliate may not  X- d(#Zshare operating, installation, and maintenance services, as discussed above.K yO& -ԍSee infra part IV.B.K In addition, as we  Xv- d(#yconclude in the Accounting Safeguards Order, an agreement to provide inhouse services by a  d(#BOC to its section 272 affiliate (or vice versa) constitutes a transaction between that BOC and  XH- d(#its section 272 affiliate, so that the requirements of section 272(b)(5) govern.Hx yOq- v ԍSee, e.g., Letter from Celia Nogales, Ameritech, to William F. Caton, Acting Secretary, FCC, Attachment  yO9- d(#iat 3 (filed Sept. 19, 1996) (stating that sharing of services would be subject to section 272(b)(5) and the Part 64  d(#xrules); PacTel Reply at 11 (stating that a BOC would charge affiliates for any services it provides pursuant to the  d(#affiliate transaction rules); Letter from Gina Harrison, Director of Federal Regulatory Relations, to William F. Caton,  yO- d(#Acting Secretary, FCC, Attachment at 14 (filed Sept. 26, 1996) (PacTel Sept. 27 Ex Parte); see also AT&T at 57; MCI at 48; TRA at 1920. Accordingly,  d(#such transactions must be conducted on an arm's length basis, reduced to writing, and made  d(#-available for public inspection. Moreover, such transactions must be consistent with the affiliate  X - d(#xtransaction rules, as modified in the Accounting Safeguards Order._  yO-ԍAccounting Safeguards Order part IV.B.1._ In addition, the section 272  d(#requirements that a BOC and its section 272 affiliate maintain separate books, records, and  d(#Zaccounts, and be subject to an audit every two years should strengthen the ability of competitors  d(#and regulators to detect any inequities in cost allocation for shared services. We agree with  d(#commenters who contend that, in any event, federal price cap regulation reduces a BOC's  X- d(#incentives to allocate costs improperly.  yO-ԍSee, e.g., Ameritech Reply at 1314; Bell Atlantic Reply at 34; USTA Reply at 9. Finally, section 272(c)(1) ensures that to the extent that  d(#[a BOC provides services to its section 272 affiliate, it must make them available to the affiliate's  Xb-competitors on the same rates, terms, and conditions.Jb yO# -ԍSee infra part V.B.J  X4- n182. ` ` We further conclude that section 272(b)(3) does not preclude the parent company  d(#zof the BOC and the section 272 affiliate from performing functions for both the BOC and the  d(#section 272 affiliate, subject to the requirements of section 272(b)(1). Similarly, an affiliate of  d(#the BOC, such as a services affiliate, could provide services to both a BOC and a section 272  d(#affiliate. We are not persuaded by claims that the sharing of services provided to a BOC and its  d(#ysection 272 affiliate by a parent company or another BOC affiliate would allow the BOC and the"X,-(-(ZZ"  X- d(#<section 272 affiliate to achieve an unacceptable level of integration.  yOy- v mԍE.g., AT&T at 25; AT&T Reply at 18; Teleport Reply at 5; Time Warner at 19. But see Florida  d(#Commission Reply at 56 (suggesting that"[a]dministrative and other activities . . . [should] only be performed by  d(#,a holding company on a consolidated, limited basis and should be subject to review and approval by federal and state commissions").  Instead, we agree with the  d(#view that the section 272(b)(3) separate employees requirement extends only to the relationship  X- d(#zbetween a BOC and its section 272 affiliate. yO3- v ԍE.g., Ameritech at 40; Ameritech Reply at 13; Bell Atlantic at 56; BellSouth at 3031; NYNEX at 23; PacTel at 1718; SBC at 7; Sprint at 24; USTA Reply at 9; YPPA at 1011. To the extent that the BOC contracts with an  X- d(#iunregulated affiliate, it is subject to the affiliate transaction rules.iX yOt - v ԍ Separation of Costs of Regulated Telephone Service From Costs of Nonregulated Activities, CC Docket No.  yO< - d(#,86111, Report and Order, 2 FCC Rcd 1298, 133437,  284301; recon., 2 FCC Rcd 6283 (1987); further recon., 3 FCC Rcd 6701 (1988). i Moreover, a parent company  d(#or a BOC affiliate that performs services for both a BOC and its section 272 affiliate must fully  X-document and properly apportion the costs incurred in furnishing such services.y(  yOf-ԍSee 47 C.F.R.  64.90164.904; see also Sprint at 26.y  X_- 2183.` ` Consistent with our conclusions, we decline to read section 272(b)(3) to preclude  XH- d(#ythe sharing of marketing services.H  yO-ԍMoreover, as discussed above, section 272(b)(1) does not preclude joint marketing. Given that section 272(g) expressly contemplates that the  d(#each entity may market or sell the services of the other, we conclude that a BOC and its section  X - d(#272 affiliate may provide marketing services for each other.x H  yO-ԍSee, e.g., NYNEX at 15; PacTel at 41; SBC at 11; U S West at 26. x We agree with those commenters  d(#that assert that the entities must provide such services pursuant to arm's length transactions,  X - d(#consistent with the requirements of section 272(b)(5).  yOu- v ԍSee, e.g., Ameritech at 5051; PacTel at 15, 41; PacTel Reply at 11, 25; USTA at 30; USTA Reply at 14;  yO=- d(#U S West at 27; see also Ameritech Sept. 19 Ex Parte, Attachment at 3; PacTel Sept. 27 Ex Parte, Attachment at  d(#14. Several BOC competitors argue that, to the extent joint marketing is consistent with other provisions of section  d(#272, a separate affiliate must, at a minimum, purchase joint marketing services from the BOC on an arm's length  yO-basis. E.g. AT&T at 57; MCI at 48; TRA at 19. Moreover, the parent of a BOC and its section 272 affiliate or another BOC affiliate may perform marketing functions for both entities.  X - %184.` ` Services Provided By an Outside Entity. We further conclude that section  d(#.272(b)(3) does not prohibit a BOC and its section 272 affiliate from obtaining services from the  d(#-same outside supplier. Indeed, we find no statutory support for limiting permissible outsourcing,  Xb-as proposed by MCI or Time Warner.Xb yO%-ԍSee MCI at 28; Time Warner at 20.X "KY,-(-(ZZ"Ԍ X- 185.` ` Nor do we construe section 272(b)(3), when read in light of section 272(b)(1), to  d(#require a BOC and a section 272 affiliate to contract with outside entities to perform their joint  d(#marketing services. We agree with the Citizens for a Sound Economy Foundation that such a  d(#requirement would reduce the BOCs' ability to serve consumers without providing additional  X- d(#protection against anticompetitive behavior.d yO-ԍCitizens for a Sound Economy Foundation Reply at 4.d Each entity, however, must pay its full share of any outsourced services that it receives.  X_- 186.` ` Other activities. We reject AT&T's request that we interpret section 272(b)(3) to  d(#xprohibit compensation schemes that base the level of remuneration of BOC officers, directors, and  d(#employees on the performance of the section 272 affiliate, or vice versa. We conclude that tying  d(#Mthe compensation of an employee of a section 272 affiliate to the performance of a Regional  d(#Holding Company and all of its enterprises as a whole, including the performance of the BOC,  X - d(#jdoes not make that individual an employee of the BOC.T X yO-ԍSee Ameritech Reply at 1213.T Similarly, tying the compensation of  d(#a BOC employee to the performance of a Regional Holding Company and all of its enterprises  d(#yas a whole, including the performance of the section 272 affiliate, does not make that individual an employee of the section 272 affiliate.  Xy- E.Section 272(b)(4)  XK- 1.` ` Background  X- 187.` ` Section 272(b)(4) states that a section 272 affiliate "may not obtain credit under  d(#any arrangement that would permit a creditor, upon default, to have recourse to the assets of the  X- d(#[BOC]."J yO-ԍ47 U.S.C.  272(b)(4).J In the Notice, we tentatively concluded "that a BOC may not cosign a contract or  d(#any other instrument with a separate affiliate that would allow the affiliate to obtain credit in a  d(#<manner that violates" this section. We sought comment on what other types of activities section  d(#272(b)(4) prohibits, whether the Commission should establish specific requirements regarding  X-those activities, and the relative costs and benefits of such regulation. Cx yO-ԍNotice at  63.C  Xe- 2.` ` Comments  X7- 188.` ` Commenters generally agree with our tentative conclusion that section 272(b)(4)  d(#prohibits a BOC from signing a contract or other instrument with an affiliate that allows a" Z,-(-(ZZ"  X- d(#<creditor, upon default, to have recourse to the BOC's assets.  yOy- v LԍE.g. AT&T at 2627 (urging us to require "that any contract or other document in which an affiliate obtains  d(#xcredit contain a provision expressly stating that the creditor, upon default by the affiliate, has no recourse to the  d(#Kassets of the BOC"); Bell Atlantic, Exhibit 1 at 67; MCI at 29; Ohio Commission at 9; Sprint at 27; TIA at 28; TRA at 14. Time Warner and others contend  X- d(#that no regulations are necessary to implement this provision. yOJ-ԍBell Atlantic, Exhibit 1 at 67; NYNEX Reply at 20; Time Warner at 18; USTA at 22. In contrast, TIA urges us to  d(#kadopt regulations precluding all arrangements that would result in the BOC having direct or  X- d(#xindirect responsibility for the financial obligations of the separate affiliate. @ yO - v LԍTIA at 2829 (urging us to forbid "any reference to the [affiliated] BOC in debentures, reference to the BOC  d(#in any equity instruments, use of the same underwriting facilities, or other arrangements" that shift responsibility for  yO< - d(#wcost, debt, equity, or business risk to the BOC away from the affiliate); see also CompTel at 18 (urging us to prohibit all credit arrangements between BOCs and their affiliates). AT&T and Teleport  d(#!further suggest that we should preclude a BOC affiliate from obtaining credit under any  d(#arrangement that would permit a creditor, upon default, to have recourse to the assets of any  Xv-parent of the BOC.v(  yOO- v ԍAT&T at 27 n.27; Teleport at 2021. But see NYNEX Reply at 2021 (countering that section 272(b)(4) cannot be read to extend to the assets of a BOC's parent); Bell Atlantic Reply at 5.  XH- 3.` ` Discussion  X -   189.` ` As we stated in the Notice, the intent of this provision is to protect ratepayers from  X - d(#shouldering the cost of a default by a section 272 affiliate.C  yO4-ԍNotice at  63.C We adopt our tentative conclusion  d(#.that section 272(b)(4) prohibits a BOC from cosigning a contract or any other instrument with  d(#a section 272 affiliate that would allow the affiliate to obtain credit in a manner that grants the  d(#creditor recourse to the BOC's assets in the event of default by the section 272 affiliate.  d(#Moreover, because the provision precludes the section 272 affiliate from obtaining credit under  d(#Z"any arrangement that would permit a creditor, upon default, to have recourse to the assets of the  d(#[BOC]," we find that section 272(b)(4) likewise prohibits the parent of a BOC or any non272  d(#affiliate from cosigning a contract or any other arrangement with the BOC's section 272 affiliate  d(#that would allow the creditor to obtain such recourse to the BOC's assets in the event of default  d(#by the section 272 affiliate. Indeed, we conclude that section 272(b)(4) prohibits a section 272  d(#.affiliate from entering into any arrangement to obtain credit that permits the lender recourse to the BOC in the event of default.  X- 190.` ` While preventing the affiliate from jeopardizing ratepayer assets, we conclude that  d(#Lsection 272(b)(4) does not forbid a section 272 affiliate from using assets other than its own as  d(#.collateral when seeking credit. To impose such a restriction where, as here, it is not needed to  d(#protect ratepayer assets, would force section 272 affiliates to operate inefficiently, to the detriment"[,-(-(ZZQ"  d(#of consumers and competition. In particular, we agree with MCI and Sprint that a BOC's parent  d(#[could secure credit, whether through the issuance of bonds or otherwise, for the benefit of the  X-section 272 affiliate, provided that BOC assets are not at risk.b yOK-ԍSee, e.g., MCI at 29; Sprint at 28. b  X- F.Section 272(b)(5)  Xv- 1.` ` Background  XH- ~191.` ` Section 272(b)(5) states that an affiliate "shall conduct all transactions with the  d(#L[BOC] of which it is an affiliate on an arm's length basis with any such transactions reduced to  X - d(#.writing and available for public inspection."J X yO# -ԍ47 U.S.C.  272(b)(5).J In the Notice, we sought comment on whether  X -this provision necessitates the adoption of any nonaccounting safeguards.C  yO-ԍNotice at  64.C  X - 2.` ` Comments   X - %192.` ` Several parties contend that we need not adopt additional nonaccounting  d(#.safeguards, stating that other provisions of section 272(b) and accounting regulations should  Xy- d(#zsuffice to implement section 272(b)(5).Xyx yO- v ԍE.g., PacTel at 2324; Teleport at 21; USTA at 2223. Other commenters do not advocate particular  yOj- d(#Ysafeguards but view the provision as supplementing or reinforcing other provisions of section 272. E.g., MCI at 2930; Sprint at 2829 (advocating interpretation similar to "operate independently" requirement); TIA at 30. Other commenters propose that we adopt a broad  d(#definition of "transaction" to prevent improper cost allocation and to facilitate monitoring of the  XK- d(#BOCs' compliance with the nondiscrimination requirements.ZK yO-ԍE.g., AT&T at 2729; ITAA at 1920.Z CompTel urges us to use this  d(#provision to impose several of the requirements established in the Ameritech Customers First  X- d(#.Plan, Ameritech's plan to offer inregion interLATA service through an interexchange affiliate,  d(#.including annual reporting and audit requirements, information disclosure requirements, and a  d(#Lrequirement that an interexchange subsidiary "purchase any inputs or data from the BOC local  d(#yexchange operations on the same rates, terms, and conditions" that are available to unaffiliated  X-carriers.?(  yO"-ԍCompTel at 17.?  X- 3.` ` Discussion  Xe- o 193.` ` We conclude that we need not adopt additional nonaccounting safeguards to  XN- d(#yimplement section 272(b)(5). In the Accounting Safeguards Order, we address the definition of"N\ ,-(-(ZZ"  d(#"transactions" and consider the provision's requirement that all transactions be "reduced to writing  X- d(#=and available for public inspection."a yOb-ԍAccounting Safeguards Order part IV.B.1.e.a Moreover, in our discussion of sections 272(b)(1) and  d(#(b)(3), we make clear that "transactions" include the provision of services and transmission and  d(#switching facilities by the BOC and its affiliate to one another. We reject CompTel's proposal  d(#to adopt additional requirements, which are addressed generally in other parts of this Order and  X-the companion Accounting Safeguards Order. X yO- v ԍIn particular, see our rejection of additional reporting requirements in part IX and our discussion of sections  d(#272(c) and (e). We agree with Ameritech that in proposing an annual audit requirement, CompTel ignores the  yO& - d(#;biannual audit requirement of section 272(d) of the Act. See Ameritech Reply Comments at 5 n.9; CompTel at 17.  yO -  !}K   !}K   XH-  V. NONDISCRIMINATION SAFEGUARDS ׃  X -  194.` ` As we observed in the Notice, after a BOC enters a competitive market, such as  d(#long distance, it may have an incentive to use its control of local exchange facilities to  d(#discriminate against its affiliate's rivals. Section 272(c) of the Act responds to these competitive  d(#concerns by establishing nondiscrimination safeguards that apply to the BOCs' provision of  d(#manufacturing, interLATA telecommunications, and interLATA information services. We address  X -the requirements of this section below. @ yO- v ԍWe note that the nondiscrimination requirement of section 272(c)(2) is an accounting safeguard that is  yO`-addressed in the Accounting Safeguards Order.  Xy- A.XRelationship of Section 272(c)(1) and Preexisting Nondiscrimination Requirements (#  XK- 1.` ` Background  X- 195.` ` Section 272(c)(1) states that "[i]n its dealings with its affiliate described in  d(#subsection (a), a [BOC] (1) may not discriminate between that company or affiliate and any other  d(#entity in the provision or procurement of goods, services, facilities, and information, or in the  X- d(#establishment of standards."J yO! -ԍ47 U.S.C.  272(c)(1).J In the Notice, we sought comment on the relationship between  X- d(#\the nondiscrimination obligations imposed by sections 272(c)(1) and the Commission's pre X- d(#existing nondiscrimination obligations in sections 201 and 202.C(  yO#-ԍNotice at  69.C In particular, we sought  d(#comment on whether the flat prohibition against discrimination in section 272(c)(1) imposes a  X|-stricter standard for compliance than the "unjust and unreasonable" standard in section 202.R|  yO&-ԍId. at  72.R "|]H ,-(-(ZZ2"Ԍ X-ԙ 2.` ` Comments  X- '196.` ` Many BOCs assert that Congress did not intend to impose a stricter  X- d(#nondiscrimination standard in section 272(c)(1) than that contained in section 202. yO4- v =ԍBell Atlantic, Exhibit 1 at 7; BellSouth at 34; PacTel at 29; PacTel Reply at 1213; U S West at 32; USTA at 25; YPAA at 12. For  d(#yexample, BellSouth, U S West, and USTA claim that the term "discriminate" in section 272(c)(1)  d(#Lincludes unjust and unreasonable discrimination and, therefore, is not materially different from  Xv- d(#the standard of section 202.]v  yOG -ԍBellSouth at 32; U S West at 32; USTA at 25.] Potential competitors and various trade associations, in contrast,  d(#assert that the flat prohibition in section 272(c)(1) was clearly intended to be more stringent than  XH- d(#the general ban on "unjust and unreasonable" discrimination in section 202.GXH yO - v ԍ AT&T Reply at 24; CIX Reply at 56; CompTel at 22; IDCMA at 6; ISA at 2; ITI and ITAA Reply at 14;  d(#LDDS at 13, n.13; LDDS Reply at 78; MCI at 34; Sprint at 3940; TIA at 37; TIA Reply at 45; Time Warner at 2122; TRA at 15; VoiceTel at 1314.G These commenters  d(#xargue, therefore, that the unqualified prohibition against discrimination in section 272(c)(1) should  X - d(#be construed as stringently as similarly unqualified language in section 251(c)(2) was in the First  X -Interconnection Order.  yO- v zԍAT&T Reply at 2324; CompTel at 22; ISA at 2; LDDS Reply at 78; MCI at 34; MCI Reply at 23; TIA Reply at 1012; Time Warner at 2122; Time Warner Reply at 2022.  X -  X - 3.` ` Discussion  X - 197.` `  UNQUAL We find that section 272(c)(1) establishes an unqualified prohibition against  d(#\discrimination by a BOC in its dealings with its section 272 affiliate and unaffiliated entities.  d(#Section 202(a), by contrast, prohibits "any unjust or unreasonable discrimination . . . , or . . . any  Xb- d(#undue or unreasonable preference or advantage."Gb(  yO;-ԍ47 U.S.C.  202(a).G Because the text of the section 272(c)(1)  d(#nondiscrimination bar differs from the section 202(a) prohibition, we conclude that Congress did  d(#not intend section 272's prohibition against discrimination in the 1996 Act to be synonymous  d(#with the "unjust and unreasonable" discrimination language used in the 1934 Act, but rather,  d(#intended a more stringent standard. We therefore reject the arguments of those who argue that  X-the section 272(c)(1) standard is not materially different from the standard in section 202.  yOX"- v ԍWe note that this conclusion is consistent with the Commission's recent interpretation of similar language  yO #-in section 251(c)(2). See First Interconnection Order at  217.  X- "^,-(-(ZZ"Ԍ X- vB.Meaning of Discrimination in Section 272(c)(1)   X- 1.` ` Background  X- }198.` ` We tentatively concluded in the Notice that the prohibition against discrimination  d(#/in section 272(c)(1) means, at a minimum, that BOCs must treat all other ventities in the same  Xv- d(#jmanner as they treat their section 272 affiliates, and must provide and procure goods, services,  d(#facilities, and information to and from these other entities under the same terms, conditions, and  XH- d(#rates.CH yO -ԍNotice at  73.C We noted, however, that a requesting entity may have equipment with different technical  d(#specifications than the equipment of the BOC section 272 affiliate. We sought comment,  d(#>therefore, on whether the terms of section 272(c)(1) could be construed to require a BOC to  d(#provide a requesting entity with a quality of service or "functional outcome" identical to that  X - d(#provided to its affiliate even if this would require the BOC to provide goods, facilities, services,  X -or information to a requesting entity that are different from those provided to the affiliate. X yO- v /ԍNotice at  67. We suggested, for example, that such disparate treatment may be justified by differences  yO-in the unaffiliated entity's network architecture. Id. at  73.  X - 2.` ` Comments  Xy- B199.` ` Both BOCs and potential competitors agree with our tentative conclusion that  d(#section 272(c)(1) requires a BOC to treat all other entities in the same manner as it treats its  XK- d(#0section 272 affiliate.xK yO- v ԍSee, e.g., Ameritech at 54, U S West at 3435; see also Frontier at 56; IDCMA at 6; ISA at 23; LDDS  d(#at 1415; LDDS Reply at 6 (BOCs cannot take any action in regards to its affiliate without offering the very same  d(#deal to any other competing entity); MCI at 36; MFS Reply at 2021; Sprint at 39; Teleport at 14; TIA at 3839;  d(#Time Warner at 22; VoiceTel at 14 (all services and facilities provided by a BOC to its affiliate should be pursuant  d(#to tariff). Some BOCs maintain, however, that section 272(c)(1) does not require identical treatment between a BOC  d(#;affiliate and an unaffiliated entity in the provision of administrative and "corporate governance" services, and non yO\-telecommunications facilities or goods. We will discuss this issue below. See infra part V.C. LDDS asserts that, if the BOC affiliate is required to obtain local  d(#exchange service in the same fashion as competitors, it is much more likely that the BOC will  d(#provide local exchange service on a nondiscriminatory basis, at nondiscriminatory prices, and  X-with adequate operational support.<  yO -ԍLDDS at 15.<  X- a200.` ` BOCs claim, however, that this section does not require a BOC to provide a  d(#requesting entity with a quality of service or a functional outcome identical to the section 272  d(#Laffiliate in order to offset differences in technical design, architecture, software or performance  X- d(#[specifications between the affiliate's network and that of the requesting carrier.f  yO&-ԍSee, e.g., BellSouth at 32; NYNEX Reply at 22. f They assert"_,-(-(ZZ3"  d(#jthat unlawful discrimination occurs only when similarly situated entities are treated differently;  d(#it is not unlawfully discriminatory under section 272(c)(1) for a BOC to treat differently  d(#0unaffiliated companies whose capabilities or requirements vary from those of the BOC's  X-affiliate. yO4-ԍSee Ameritech at 5556; BellSouth at 32; NYNEX Reply at 22; U S West at 33.  X-  X- 201.` ` Potential competitors, on the other hand, argue that a BOC should be required to  d(#provide different goods, services, and facilities to other entities than it provides to its own  X_- d(#affiliate in order to provide "functional equality" or service of equal quality.w_X yOh -ԍSee, e.g., AT&T at 31; MCI at 31; Sprint Reply at 15; TRA at 16.w Sprint concedes  d(#Lthat different treatment is permissible if required by variations in network architecture between  d(#Lthe section 272 affiliate and the unaffiliated entity and if the prices charged to different entities  X - d(#receiving disparate treatment are based on costs.   yO- v Lԍ Sprint at 39; Sprint Reply at 15; see also Time Warner at 2223; Time Warner Reply at 22 (allowing prices  d(#to reflect underlying costs of providing a good, service, or facility does not demonstrate that discrimination is just  d(#and reasonable, rather it allows BOCs to demonstrate that no discrimination is present because the price accurately reflects the cost of provision). AT&T points out that, if nondiscrimination  d(#in section 272(c)(1) means only that a BOC has to provide the goods, services, facilities, and  d(#[information to an unaffiliated entity that it provides to its own affiliate, the options available to  X - d(#competitors would be confined entirely to those the BOC affiliate finds useful.X  yOV- v zԍAT&T Reply at 21; see also AT&T at 32 (if an unaffiliated entity requests new access arrangements that  d(#will allow new or more cost effective long distance services, the Commission should not permit a BOC to deny the request on the ground that everyone is receiving the same access at the same price). This, some  d(#commenters claim, may give BOCs an incentive to design interfaces that work optimally only  X - d(#with its affiliate's specifications and not the specifications of other entitiesa  yOH-ԍAT&T at 31; MCI Reply at 22; Sprint Reply at 15.a or to discriminate  d(#against unaffiliated entities by anticompetitively cooperating in the development of new services  Xy-with its affiliate.fy  yO-ԍAT&T Reply at 2122; see also AT&T at 32.f  XK- 3. ` ` Discussion  X- 202.` `  TENT.PRO We affirm our tentative conclusion that BOCs must treat all other entities in the  d(#=same manner as they treat their section 272 affiliates. We conclude therefore that, pursuant to  d(#section 272(c)(1), a BOC must provide to unaffiliated entities the same goods, services, facilities,  d(#and information that it provides to its section 272 affiliate at the same rates, terms, and  X- d(#conditions. yO&- v ԍThe BOCs' obligations with respect to procurement under section 272(c)(1) are discussed below. See infra part V.E. We decline, as some commenters suggest, to interpret section 272(c)(1) more"`h,-(-(ZZ"  d(#\broadly to conclude that a BOC must provide unaffiliated entities different goods, services,  d(#=facilities, and information than it provides to its section 272 affiliate in order to ensure that it is  d(#yproviding the same quality of service or functional outcome to both its affiliate and unaffiliated  d(#\entities. To do so would, in effect, be interpreting this section the same way we interpreted  X- d(#section 251(c)(2) in the First Interconnection Order. We believe that to interpret the  d(#nondiscrimination requirement of section 272(c)(1) in this manner would be inappropriate as a matter of statutory construction, inconsistent with its legislative purpose, and unenforceable.  XH- 203.` ` As a matter of statutory construction, we find that the nondiscrimination provision  d(#Mof section 272(c)(1), by its terms, is much narrower in scope than the requirement in section  d(#.251(c)(2). Section 251(c)(2) imposes on incumbent LECs "the duty to provide, for the facilities  d(#kand equipment of any requesting telecommunications carrier, interconnection with the local  d(#exchange carrier's network . . . that is at least equal in quality to that provided by the [LEC] to  d(#itself or to any subsidiary, affiliate, or any other party to which the carrier provides  X - d(#Zinterconnection."J  yO7-ԍ47 U.S.C.  251(c)(2).J In the First Interconnection Order, we interpreted the term "equal in quality"  d(#as requiring an incumbent LEC to provide interconnection to its network at a level of quality that  d(#Mis at least indistinguishable from that which the incumbent LEC provides itself. Further, we  d(#yfound that, to the extent a carrier requests interconnection that is of a superior or lesser quality  d(#than the incumbent LEC currently provides, the incumbent LEC is obligated to provide the  XK-requested interconnection to the extent technically feasible.kKX yOT-ԍFirst Interconnection Order at  22425, 314.k  X- 204.` ` The language of section 272(c)(1), in contrast, contains no such "equal in quality"  d(#requirement; it simply requires that unaffiliated entities receive the same treatment as the BOC  X- d(#gives to its section 272 affiliate. Unlike section 251, therefore, section 272(c) is not a vehicle  d(#by which requesting entities can require a BOC to provide goods, facilities, services, or  X- d(#information that are different from those that the BOC provides to itself or to its affiliates.  yOZ- v ԍAmeritech at 56; see also Ameritech Reply at 28 (to obligate a BOC to provide a different service to an  d(#Kunaffiliated entity at the same price that it is charging an affiliate for another service, even though the costs are  d(#different, is at odds with the section 252(d) costbased pricing requirements for interconnection, unbundled elements, and reciprocal compensation arrangements.)  d(#Nor is it, as some commenters suggest, designed to prevent a BOC from discriminating between  X-unaffiliated competitors.O yO"-ԍSee, e.g., MCI at 5152.O  Xe- 205.` ` Our reading of the statutory language of sections 251 and 272 is consistent with  d(#the differing underlying purposes of those provisions. The section 251 requirements are designed  d(#to ensure that incumbent LECs do not discriminate in opening their bottleneck facilities to  X - d(#=competitors. As we stated in the First Interconnection Order, "[u]nder section 251, incumbent" a` ,-(-(ZZ"  d(#[LECs], including [BOCs], are mandated to take several steps to open their network to  d(#competition, including providing interconnection, offering access to unbundled elements to their  d(#networks, and making their retail services available at wholesale rates so that they can be  X- d(#\resold."] yO4-ԍFirst Interconnection Order at  4.] In implementing section 251, therefore, we adopted rules to open one of the last  d(#monopoly bottleneck strongholds in telecommunications the local exchange and exchange  X-access market.JX yO-ԍSee id.J  X_-  P206.` ` In adopting rules in this proceeding, however, our goal is to ensure that BOCs do  d(#not use their control over local exchange bottlenecks to undermine competition in the new  d(#-markets they are entering interLATA services and manufacturing. The section 272 safeguards,  d(#among other things, are intended to protect competition in these markets from the BOCs' ability  d(#to use their existing market power in local exchange services to obtain an anticompetitive  d(#advantage. We find that when viewed in this context, the section 272(c)(1) nondiscrimination  X - d(#provision is designed to provide the BOC an incentive to provide efficient service to rivals of its  d(#section 272 affiliate, by requiring that potential competitors do not receive less favorable prices or terms, or less advantageous services from the BOC than its separate affiliate receives.   Xy- 207.` ` We find that interpreting section 272 to require "functional equality" between a  d(#BOC section 272 affiliate and any unaffiliated entity would not only be impractical, but  d(#.unenforceable. The "functional equality" standard would require a BOC to provide additional  X4- d(#services or functions to other entities that it does not provide to its own affiliate.\4 yO-ԍSee USTA at 2324; USTA Reply at 12. \ Because  d(#section 272, unlike section 251, contains no requirement that a BOC must provide goods,  d(#services, facilities, and information to the extent "technically feasible," it would be extremely  d(#>difficult, as a practical matter, to limit the types of goods, services, and facilities that a BOC  d(#would be obligated to provide to requesting entities. Further, the terms "functional outcome" or  d(#Z"functional equality" are likely to mean different things to different entities. Because the meaning  d(#of these terms is likely to depend on the particular characteristics of each requesting entity, the  d(#Commission would be required to apply this standard to a myriad of factual circumstances on a  d(#casebycase basis. As one commenter observes, ensuring this type of equality would be  Xe-impossible to do, as well as impossible to enforce.Dex yO!-ԍPacTel Reply at 12.D  X7- 208.` `  EQUALITY  We reject the argument that, because our interpretation of section 272(c)(1)  d(#effectively limits competitors to those options that the BOC affiliate finds "useful," a BOC will  d(#be able to design network interfaces that work optimally only with its section 272 affiliate's  d(#specifications and not with the specifications of other entities. Section 272(c)(1) prohibits a BOC  d(#from discriminating in the establishment of standards. As we conclude below, a BOC's adoption"b,-(-(ZZ;"  d(#of a network interface that favors its section 272 affiliate and disadvantages an unaffiliated entity  X- d(#will establish a prima facie case of discrimination under section 272(c)(1).s yOb-ԍSee infra paragraph STANDARD229.s Further, section  d(#272(c)(1) prohibits a BOC from discriminating in the provision of facilities or information, and  X- d(#section 251(c)(5) imposes upon BOCs certain network disclosure requirements./X yO- v ԍWe conclude below that the information required to be disclosed under section 251(c)(5) is included within  yO-the definition of "information" under section 272(c)(1). See infra at paragraph NETWORK222. / As mentioned  d(#above, section 251(c)(5) requires incumbent LECs to provide reasonable public notice of network  d(#changes affecting competing service providers' performance or ability to provide  d(#!telecommunications services, as well as changes that would affect the incumbent LEC's  X_- d(#iinteroperability with other service providers. In the Second Interconnection Order, we interpreted  XH- d(#this provision to require incumbent LECs to disclose changes subject to this requirement at the  X1- d(#"make/buy" point.ZX1 yO- v \ԍSee Second Interconnection Order at  216217 for a discussion of the "make/buy" point; see also id. at  d(# 224 (incumbent LECs should not make preferential disclosure to selected entities prior to disclosure at the make/buy point).Z In light of the requirements of sections 272(c)(1) and 251(c)(5), we decline  d(#at this time to impose additional obligations on the BOCs to ensure that they structure their own  d(#networks to achieve the same level of interoperability that the section 272 affiliate receives from the BOC.  X - ~ 209.` ` We also decline to adopt MCI's suggested presumption that the specifications  d(#requested by an unaffiliated entity are the appropriate ones for a truly separate and independent  d(#=affiliate and that any different specifications needed by the BOC's section 272 affiliate reflect a  Xy- d(#<lack of proper physical and operational separation from the BOC.y yO- v ԍSee MCI at 3132 (if the BOC section 272 affiliate is truly separate it should not require services or facilities that are technically different than those required by its competitors) We recognize that there may  d(#be circumstances, such as the adoption of a new and innovative technology by the BOC section  d(#j272 affiliate, where differences in technical specifications between a section 272 affiliate and an  d(#xunaffiliated entity do not evidence a lack of structural separation between the BOC and its section 272 affiliate.  X- P210.` `  SERV As discussed below, we conclude that the protection of section 272(c)(1) extends  X- d(#to any good, service, facility, or information that a BOC provides to its section 272 affiliate.J(  yO!-ԍSee infra part V.C.J  d(#We therefore agree with AT&T that to the extent a BOC develops new services for or with its  d(#section 272 affiliate, it must develop new services for or with unaffiliated entities in the same  d(#manner. That is, we find that the development of new services, including the development of  d(#xnew transmission offerings, is the provision of service under section 272(c)(1) that, once provided  d(#by the BOC to its section 272 affiliate, must be provided to unaffiliated entities in a  d(#nondiscriminatory manner. In the Notice, we recognized the potential for competitive harm in"Nc ,-(-(ZZ"  d(#La situation in which a BOC failed to cooperate with an interLATA carrier that is introducing an  d(#innovative new service until the BOC's section 272 affiliate is ready to initiate the same  X- d(#service.J yOK-ԍNotice at  139 n.266.J Similarly, AT&T asserts that the section 272(c)(1) nondiscrimination requirement  d(#should be interpreted to prevent BOCs from denying a competitor's request for a new or more  d(#xcost effective access arrangement on the ground that all entities, including its section 272 affiliate,  X- d(#are receiving the same access service at the same price.<X yO-ԍAT&T at 32.< We find that the BOC, under section  d(#272(c)(1), is obligated to work with competitors to develop new services if it cooperates in such a manner with its section 272 affiliate.  X1-  4211.` ` We agree with AT&T therefore that if, as we outlined in our Notice, a BOC  d(#Lpurposely delayed the implementation of an innovative new service by denying a competitor's  d(#[reasonable request for interstate exchange access until the BOC section 272 affiliate was ready  d(#to provide competing service, such conduct may constitute unlawful discrimination under the Act.  d(#Moreover, as we observed in the Notice, although the 1996 Act imposes specific  d(#nondiscrimination obligations on the BOCs and their section 272 affiliates, the Communications  d(#Act imposed certain preexisting nondiscrimination requirements on common carriers providing  d(#interstate communications service. Among them, section 201 provides that all common carriers  d(#have a duty "to establish physical connections with other carriers," and to furnish  Xb- d(#telecommunications services "upon reasonable request therefor."Gb yO-ԍ47 U.S.C.  201(a).G We conclude, therefore, that  d(#if a BOC were to engage in strategic behavior to benefit its section 272 affiliate, in the manner  d(#suggested by AT&T, such action may not only violate section 272(c)(1), but would also violate  X-sections 201(a) of the Act.x yOF- v ԍWe also note such anticompetitive behavior regarding the provision of intrastate services would be unlawful  yO- d(#under various state provisions. See, e.g., Mich. Comp. Laws Ann.  484.2305(1)(g) (West 1996) (a provider of basic  d(#local exchange service shall not refuse or delay access service or be unreasonable in connecting anther provider to  d(#Zthe local exchange whose product or service requires novel or specialized access service requirements); N.Y. Pub. Serv.  91 (McKinney 1996); N.D. Cent. Code  492107 (1995).  X-  _212.` ` Finally, we conclude that a complainant will be found to have established a prima  X- d(#facie case of unlawful discrimination under section 272(c)(1) if it can demonstrate that a BOC  d(#has not provided unaffiliated entities the same goods, services, facilities, and information that it  d(#provides to its section 272 affiliate at the same rates, terms, and conditions. To rebut the  d(#complainant's case, the BOC may demonstrate, among other things, that rate differentials  d(#kbetween the section 272 affiliate and unaffiliated entity reflect differences in cost or that the  Xe- d(#Zunaffiliated entity expressly requested superior or less favorable treatment in exchange for paying"ed( ,-(-(ZZ"  X- d(#[a higher or lower price to the BOC. yOy- v LԍSee AT&T at 33 (Commission should make explicit that any difference in treatment between BOC affiliates  d(#and their competitors is unlawful unless it results from a competitor's deliberate choice to receive different or less  d(#Yfavorable treatment in exchange for lower prices); PacTel Reply at 1213 (if an unaffiliated entity wants something  d(#idifferent than the BOC affiliate, the other entity should request something different, instead of requiring BOC to figure out what entity needs to get the same end result as affiliate). We recognize, as Sprint and Time Warner suggest, there  d(#will be some instances where the costs of providing certain goods, services, or facilities to its  X- d(#affiliate and to an unaffiliated entity differ.Tx yO-ԍSprint at 3940; Time Warner at 22.T As we stated in the First Interconnection Order,  d(#where costs differ, rate differences that accurately reflect those differences are not unlawfully  X- d(#discriminatory._ yO] -ԍFirst Interconnection Order at  860._ Strict application of the section 272(c)(1) prohibition on discrimination would  X- d(#itself be discriminatory if the costs of supplying customers are different. yO- v ԍSee BellSouth at 32 (a blanket prohibition on discrimination when justified by differences in cost would  yO- d(#be anticompetitive); see also id. ("Strict application of the term 'nondiscriminatory' . . . would itself be  d(#discriminatory according to the economic definition of price discrimination. If the 1996 Act is read to allow no price  d(#distinctions between companies that impose very different . . . costs on LECs, competition for all competitors, including small companies, could be impaired."). Similarly, we also  Xv- d(#=conclude, as we did in the First Interconnection Order, that "price differences, such as volume  d(#and term discounts, when based upon legitimate variations in costs, are permissible under the  XH-1996 Act when justified."_HH  yOA-ԍFirst Interconnection Order at  860._  X - C.Definition of "Goods, Services, Facilities and Information" in Section 272(c)(1)   X - 1. Background  X - 213.` ` In the Notice we sought comment on the interplay among the definitions of the  d(#terms "services," "facilities," and "information" in various subsections of 272, and between section  d(#272 and section 251(c). We also sought comment on what regulations, if any, are necessary to  d(#Lclarify the types or categories of services, facilities, or information that must be made available  d(#under section 272(c)(1). We asked parties to comment on whether further defining the terms  d(#"goods," "services," "facilities," and "information" would enable competing providers to detect  d(#violations of this section by enabling them to compare more accurately a BOC's treatment of its  X-affiliate with a BOC's treatment of unaffiliated competing providers.C yO#-ԍNotice at  67.C "eh,-(-(ZZ "Ԍ X- 2. Comments  X- B214.` ` PacTel, U S West, and NYNEX urge the Commission to exclude administrative  X- d(#.and support services from the scope of the term "services" in section 272(c)(1). yO4- v NԍNYNEX at 3435; PacTel at 30; U S West at 3637 (BOCs have no monopoly over the provision of  d(#administrative and support services so if these are withheld from competitors, this will not force those competitors  yO- d(#from the market). But see Frontier at 6 (Commission should interpret the phrase "facilities, services, or information"  d(#to include not only tariffed access elements, but also the provision of nontariffed services and information such as business office services, computing services, customer information, and the like). Similarly, U  d(#S West maintains that a BOC should not be required to provide nontelecommunications goods,  X- d(#services, facilities, and information.x yO - v kԍU S West at 37; see also PacTel Reply at 17 (section 272(c)(1) is limited to regulating goods and services that are part of a common carrier service). TIA urges the Commission to construe the terms "goods"  d(#and "services" to encompass, at a minimum, all types of telecommunications equipment, CPE,  X_- d(#=and related software and services.;_ yO-ԍTIA at 33.; Sprint asserts that the term "service" in section 272(c)(1)  d(# should encompass at least telecommunications and information services, and that the term  X1- d(#"facilities" should include all unbundled elements required under section 251(c)(3). 1`  yOB- v yԍSprint at 3234; see also id. at 34 n.23 ("facilities" under section 272 may include not only section 251(c)(2) "facilities" but also the "network equipment" referred to in section 251(c)(2)).  CIX  d(#maintains that, because the terms in section 272(c)(1) are not conditioned or qualified in any  d(#manner, "facilities, services and information" should be interpreted to encompass the meaning of  X -those terms as used in section 251(c).A  yOU-ԍCIX Reply at 6. A  X - 215.` ` Sprint argues that, because the term "information" in section 272(e)(2) is limited  X - d(#to information "concerning [a BOC's] provision of exchange access," the Commission should  X- d(#place no limit on the meaning of "information" as used in section 272(c)(1).A H  yO-ԍSprint at 3435.A Several  d(#commenters disagree on whether the term "information" under section 272(c)(1) includes CPNI.  d(#zPacTel and U S West contend that, because the Act includes a separate provision covering  XK- d(#yCPNI,e K yO!-ԍ47 U.S.C.  222; see CPNI NPRM.e the term information in section 272(c)(1) must exclude CPNI.j Kh yOd#-ԍPacTel Reply at 16; U S West at 38; U S West Reply at 15.j They argue, therefore,  d(#that section 272(c)(1) does not require a BOC to provide CPNI to other entities when the BOC  d(#[provides it to its section 272 affiliate. AT&T and MCI, in contrast, argue that section 272(c)(1)  d(#should include CPNI to ensure that a BOC will not use, disclose, or permit access to CPNI of"f ,-(-(ZZ("  X- d(#BOC customers for the benefit of its separate affiliate unless the CPNI is made available to all  X-competing carriers.   yOb- v \ԍAT&T at 34; AT&T Reply at 2425; MCI at 38 (section 272(c)(1) should apply to CPNI to ensure that BOCs do not impose more demanding requirements on unaffiliated entities than they impose on their affiliates).  v  X- 3. Discussion  X- #216.` ` We conclude that any attempt to define exhaustively the terms "goods, services,  d(#facilities, and information" in section 272(c)(1) may unnecessarily limit the scope of this section's  X_- d(#othverwise unqualified nondiscrimination requirement.w _  yO0 - v ԍSee ITAA at 21. As U S West observes, in interpreting section 272(c)(1), we are determining the scope  d(#of the goods, services, facilities, and information that are subject to the nondiscrimination requirement. U S West  yO - d(#-at 32; see also ISA at 3 (maintaining that section 272(c)(1) should be interpreted to ensure that a BOC does not  d(#provide or procure any good, service, facility, or information in a manner that could adversely affect competition on the information services industry).w At the same time, however, we disagree  d(#.with ITAA that the Commission should refrain from attempting to clarify the meaning of these  X1- d(# terms.F1 yO-ԍSee ITAA at 21.F We find instead that clarifying the types of activities these terms encompass will  d(#provide useful guidance to potential competitors that seek to avail themselves of the protections  d(#of section 272(c)(1). In enforcing the nondiscrimination requirement of section 272(c)(1), we  d(#intend to construe these terms broadly to prevent BOCs from discriminating unlawfully in favor  X -of their section 272 affiliates.> `  yO-ԍSee id.>  X - 217.` ` We find that neither the terms of section 272(c)(1), nor the legislative history of  d(#=this provision, indicates that the terms "goods, services, facilities, and information" should be  d(#zlimited in the manner suggested by some commenters. We therefore decline to interpret the  d(#|terms in section 272(c)(1) as including only telecommunicationsrelated or, even more  XK- d(#specifically, common carrierrelated "goods, services, facilities, and information."XK  yO- v !ԍSee, e.g., U S West at 37 (contending that section 272 cannot logically be read as requiring a BOC to  d(#Kprovide nontelecommunicationsrelated items, over which it has no monopoly, to an unaffiliated entity simply  yO|- d(#because it has provided that item to a separate affiliate); PacTel Reply at 17 (arguing that the terms of section  d(#272(c)(1) should be limited to goods and services that are part of a common carrier service regulated under Title II of the Act).X Similarly,  d(#we reject arguments set forth by NYNEX, PacTel, and U S West that the term "services" should  d(#exclude administrative and support services. Although NYNEX contends that, as a practical  X- d(#matter, unaffiliated entities are unlikely to avail themselves of such services,= yOW%-ԍNYNEX at 34.= we find that there  X- d(#xare certain administrative services, such as billing and collection services, that unaffiliated entities"g0,-(-(ZZ"  X- d(#may find useful. yOy- v ԍSee ISA at 3 (stating that the discriminatory provision of billing and collection services could adversely affect competition in the information services market). Further, as discussed above, we construe the term "services" to encompass  d(#/any service the BOC provides to its section 272 affiliate, including the development of new  X-service offerings.a  yO-ԍSee supra at paragraph  SERV210 . a  X- 218.` `  RESOSN We conclude therefore that the protection of section 272(c)(1) extends to any good,  d(#Lservice, facility, or information that a BOC provides to its section 272 affiliate. For example, we  d(#find that if a BOC were to decide to transfer ownership of a unique facility, such as its Official  d(#Services network, to its section 272 affiliate, it must ensure that the transfer takes place in an  XH- d(#open and nondiscriminatory manner.yH yO -ԍSee discussion of Official Services network infra part VI.D.y That is, pursuant to the nondiscrimination requirement  d(#.of section 272(c)(1), the BOC must ensure that the section 272 affiliate and unaffiliated entities have an equal opportunity to obtain ownership of this facility.  X - 219.` ` We also conclude that the terms "services," "facilities," and "information" in  d(#section 272 should be interpreted to include, among other things, the meaning of these terms  d(#under section 251(c). The term "facilities," therefore, includes but is not limited to the seven  X - d(#unbundled network elements described in the First Interconnection Order.X @ yO- v /ԍThese include the local loop, the network interface device, switching capability, interoffice transmission  d(#facilities, signalling networks and callrelated databases, operations support system functions, and operator services  yO(-and directory assistance. See First Interconnection Order, Appendix B, at 2024. We decline to limit  d(#the scope of these terms to their meaning in section 251 because section 272 encompasses a  d(#broader range of activities than does section 251. We also emphasize that in contrast to section  d(#251, where an incumbent LEC is prohibited from discriminating against any requesting  d(#telecommunications carrier, section 272(c)(1) prohibits BOCs from discriminating against "any  d(#Zother entity." Because section 272 does not define the term "entity," we interpret this unqualified  d(#term broadly to ensure that all competitors may benefit from the protections of section 272(c)(1).  d(#Thus, we agree with Sprint that this term should include the definition of the term "entity" as set  X- d(#.forth in the electronic publishing section of the Act; `  yO - v ԍSprint at 37. Section 274 provides that "the term 'entity' means any organization, and includes corporations, partnerships, sole proprietorships, associations, and joint ventures." 47 U.S.C.  274(i)(6).  however, we also find it appropriate to  d(#include within the meaning of "entity" the providers of the activities encompassed by section 272.  d(#=We conclude, therefore, that the term "entity" includes telecommunications carriers, ISPs, and manufacturers.  X|- _220.` ` MFSCOLLOCWe disagree with ATSI and CIX, however, that by interpreting "any other entity"  d(#=to include information service providers and by concluding that the term "facilities" in section  d(#[272(c)(1) encompasses the meaning of that term as it is used in section 251(c), ISPs acquire the"Nh ,-(-(ZZ"  d(#right to obtain unbundled access to the local loop and other network elements whenever BOCs  X- d(#provide their section 272 affiliates with such access.M yOb-ԍATSI at 89; CIX Reply at 6.M Pursuant to section 251(c)(3), only  d(#telecommunications carriers providing a telecommunications service are entitled to obtain access  d(#to unbundled network elements. Because ISPs may only obtain access to unbundled elements  X- d(#zpursuant to section 251 to the extent they are providing telecommunications services,oX yO-ԍSee First Interconnection Order at  992.o we  d(#conclude that they may not attempt to circumvent the limitations of section 251 by virtue of their  Xv- d(#zrights under section 272(c)(1). This conclusion is consistent with our finding in the Second  X_- d(#=Interconnection Order that the inclusion of information services in the definition of "services"  d(#under section 251(c)(5) "does not vest information service providers with substantive rights under  d(#other provisions of section 251, except to the extent that they are also operating as  X - d(#ktelecommunications carriers."`  yO-ԍSecond Interconnection Order at  176.` To the extent, however, that a BOC chooses voluntarily to  d(#provide facilities, including network elements, to a section 272 affiliate that is solely providing  d(#information services (and thus does not qualify as a telecommunications carrier under section  d(#251), we conclude that a BOC must, pursuant to section 272(c)(1), provide such facilities to other requesting ISPs.  X- 221.` ` We therefore agree with MFS that, if a BOC chooses to allow its information  d(#jservice affiliate to collocate routers, servers, or other equipment, section 272(c)(1) requires that  Xb- d(#the same accommodations be extended, on a nondiscriminatory basis, to competing ISPs.Dbx yO-ԍMFS Reply at 2021.D  d(#Collocation is a means of achieving interconnection and access to unbundled network elements  X4- d(#that incumbent LECs, including BOCs, must provide to requesting carriers under section 251.4 yO-ԍSee First Interconnection Order at  542617 (discussing collocation).  d(#Although section 251 does not require incumbent LECs to permit entities other than  X- d(#telecommunications carriers to collocate equipment on an incumbent LEC's premises,_ yOO-ԍFirst Interconnection Order at  581._ sections  d(#251 and 272 do not prohibit BOCs from voluntarily allowing ISPs to collocate equipment on their  d(#premises. Thus, we find that, if a BOC permits its section 272 affiliate to collocate facilities used  d(#to provide information services, the BOC must permit collocation, under section 272(c)(1), by  d(#similarly situated entities. If the BOC's section 272 affiliate qualifies as a "telecommunications  d(#carrier," the BOC need only permit other telecommunications carriers to collocate their  d(#Lequipment. If, however, the BOC's section 272 affiliate only provides information services, the  d(#BOC must permit similarly situated ISPs to collocate equipment at the BOCs premises, even if such entities do not qualify as telecommunications carriers.  X7-"7i( ,-(-(ZZ"Ԍ X- $222.` `  NETWORK  As Sprint points out, the term "information" in section 272(c)(1) is not limited  d(#as it is in section 272(e)(2) to information "concerning [the BOC's] provision of exchange  X- d(#Laccess."2 yOK- v ԍSee 47 U.S.C.  272(e)(2). Similarly, we note that the term "facilities" in section 272(c)(1) is not limited  yO-as it is in section 272(e)(4) to "interLATA or intraLATA facilities." See 47 U.S.C.  272(e)(4).2 In fact, as noted above, we find no limitation in the statutory language on the type  d(#of information that is subject to the section 272(c)(1) nondiscrimination requirement. For this  d(#-reason, we reject U S West's assertion that section 272(c)(1) only governs that information which  X- d(#may give a separate affiliate an "unfair advantage."  yO^ - v ԍU S West at 3738 (arguing that, if the information cannot give an unfair advantage to a separate affiliate, there is no reason under the 1996 Act to interfere with its flow between the BOC and its affiliate). We conclude, however, that the term  Xv- d(#L"information" includes, but is not limited to, CPNI and network disclosure information.dvx yO -ԍSee, e.g., 47 U.S.C.  222, 251(c)(5).d We  d(#therefore reject arguments made by some BOCs that the nondiscrimination provision of section  d(#272(c)(1) does not govern the BOCs use of CPNI. With respect to CPNI, we conclude that  d(#zBOCs must comply with the requirements of both sections 222 and 272(c)(1). We decline to  d(#address parties' arguments raised in this proceeding regarding the interplay between section  d(#272(c)(1) and section 222 to avoid prejudging CPNI issues that will be addressed in a separate  X -proceeding.x X  yO- v ԍSee CPNI NPRM. Several BOCs assert that there are certain instances under section 222 where it would  yOm- d(#be unlawful for them to distribute CPNI to other entities. See Ameritech Reply at 29, NYNEX Reply at 1314; PacTel Reply at 1617; U S West Reply at 1415. x  X - vD.Establishment of Standards   X- 1.` ` Background  Xb- 223.` ` Section 272(c)(1) prohibits a BOC from discriminating between its section 272  d(#-affiliatve and other entities in the "establishment of standards." In the Notice we sought comment  d(#zon what "standards" are encompassed by this provision. We observed that a BOC may act  d(#]anticompetitively by creating standards that require or favor equipment designs that are  d(#Mproprietary to its section 272 affiliate. We sought comment on what procedures, if any, we  d(#kshould implement to ensure that a BOC does not discriminate between its affiliate and other  d(# entities in setting standards. We asked parties to comment, for example, on whether BOCs  d(#should be required to participate in standardsetting bodies in the development of standards  X-covered by section 272(c)(1).C!(  yO#-ԍNotice at  78.C "j !,-(-(ZZQ"Ԍ X- 2.` ` Comments  X- &224.` ` Although we received only a few comments on the meaning of the term  X- d(#<"standards" in section 272(c)(1)," yO4- v ԍMCI at 39 (the term "standards" should encompass any that affect interconnection and interoperability  d(#between two or more public network operators); Sprint at 42 (there is nothing to suggest that the term "standards"  d(#means something other than its commonly understood dictionary definition); TIA at 44 (the term "standards" should  d(#Jencompass all activities undertaken in connection with a BOC's efforts to establish technical specifications for BOC network operation and interconnection of equipment and services to a BOC network). many parties expressed views on the need for the adoption of  d(#procedures to ensure nondiscrimination in the establishment of standards, the need for mandatory  d(#BOC participation in standardsetting, and whether the failure of BOC participation in standard d(#setting should be considered discrimination. Bellcore, ITAA, and PacTel argue it is unnecessary  X_- d(#<to adopt procedures to ensure the nondiscriminatory establishment of standards.#_x yO - v ԍBellcore Reply at 23; ITAA at 21 (arguing that the nondiscrimination language of section 272(c)(1) is absolute); PacTel Reply at 18. For example,  d(#Bellcore and PacTel maintain that nondiscriminatory standardssetting need not be addressed in  X1- d(#kthe context of section 272(c)(1) because it is already addressed by sections 273(d)(4)h$X1 yO- v MԍSection 273(d)(4) prescribes procedures that are intended to open to all interested parties the process for  d(#setting and establishing industrywide standards and generic requirements for telecommunication equipment and CPE.  yOB-See Manufacturing NPRM.h and  X - d(#273(d)(5).%  yO- v =ԍSection 273(d)(5) requires that the Commission prescribe a dispute resolution process to be used if all parties  d(#cannot agree on a dispute resolution process when establishing and publishing any industrywide standard or generic  yOK- d(#requirement. See Implementation of the Section 273(d)(5) of the Telecommunications Act of 1996, Dispute  yO- d(#iResolution Regarding Equipment Standards, GC Docket No. 9642, Report and Order, FCC No. 96205 (rel. May  yO-7, 1996) (Dispute Resolution Order). Ę These provisions, they state, establish "reasonable and nondiscriminatory"  d(#procedures for Bellcore and nonaccredited standards development organizations to follow in  d(#creating industrywide standards and generic requirements for telecommunications equipment and  X - d(#-CPE.e&  yO&-ԍSee Bellcore Reply at 23; PacTel Reply at 18.e Congress, Bellcore asserts, did not purposefully create a process under section 273(d)(4)  X -only to prevent BOCs from using the fruits of that process in section 272.E' 0 yO-ԍBellcore Reply at 3.E  X- 2225.` ` AT&T asserts that, in appropriate cases, the Commission should involve itself in  Xy- d(#the standardsetting process.<(y yO#-ԍAT&T at 35.< Similarly, MCI proposes that the Commission act as or appoint  Xb- d(#an arbitrator to resolve disputes that arise in the public standardssetting process.;)bP yOc&-ԍMCI at 40.; USTA and  d(#iU S West, on the other hand, argue that industry consensus rather than Commission involvement"Kk),-(-(ZZ"  X- d(#is required in the development of standards.m*X yOy- v ԍUSTA Reply at 1213 (in an era of open competition where BOCs compete against each other, BOCs have  d(#no incentive to collaborate with other BOCs in setting standards); U S West Reply at 14 (asserting that the Commission's complaint procedures should address any abuse of this process).m MCI contends that, as a matter of policy, BOCs  d(#lshould be required to participate in all public fora that are developing interconnection or  d(#interoperability standards concerning their current or foreseeable services and that all technical  d(#standards involving the BOCs or their affiliates should be developed in open, nondiscriminatory  X- d(#xpublic standardsetting bodies and fora.+  yO= - v ]ԍMCI at 39; see also ITI and ITAA Reply at 14 (Commission should require BOCs to establish fair and  d(#I nondiscriminatory network performance, interconnection, and equipment interoperability standards); TIA at 43 (BOCs  d(#Kshould be strongly encouraged, if not required, to participate in standardsetting activities of accredited standardsetting groups.) PacTel and Sprint, in contrast, assert that participation  X-in standardsetting bodies should not be required.e, yO-ԍPacTel at 35; PacTel Reply at 18; Sprint at 43 n.31.e  X_- 226.` ` Sprint argues, however, that a BOC's failure to participate or its refusal to abide  d(#by the standards selected may be evidence of its intent to discriminate in the "establishment of  X1- d(#standards."D-1`  yOB-ԍSprint at 43 n.31. D Similarly, AT&T maintains that the Commission should treat the adoption of a  X - d(#standard that favors a BOC affiliate and harms unaffiliated entities as establishment of a prima  X - d(#facie case of discrimination under section 272(c)(1).<.  yO-ԍAT&T at 35.< In addition, MCI argues that the  d(#Commission should refuse to recognize standards not established in an open, nondiscriminatory  X -forum for purposes of resolving discrimination claims.;/  yO-ԍMCI at 39.;   X - 3.` ` Discussion  Xy- #227.` ` We conclude that the term "standards" in section 272(c)(1) includes the meaning  Xb- d(#of this term as it is used in section 273. In the Manufacturing NPRM, we sought comment on  d(#how the term "standards" should be defined "for purposes of implementation of the 1996 Act to  X4- d(#ensure that standards processes are open and accessible to the public."U04 yO!-ԍManufacturing NPRM at  34.U We note, however, that  d(#yunlike the use of the term "standards" in sections 273(d)(4) and 273(d)(5), the term "standards"  X- d(#kin section 272(c)(1) is not limited by the term "industrywide." We conclude, therefore, that"l0,-(-(ZZ("  X- d(#section 272(c)(1) prohibits discrimination in the establishment of any standard, not only those that  X-are "industrywide."'1  yOb- v ԍThe term "industrywide" as defined in section 273 means "activities funded by or performed on behalf of  d(#local exchange carriers for use in providing wireline telephone exchange service whose combined total of deployed  d(#access lines in the United States constitutes at least 30 percent of all access lines deployed by telecommunications  yO-carriers in the United States" as of February 8, 1996. See 47 U.S.C.  273(d)(8)(C).'  X- 228.` ` As we observed in the Manufacturing NPRM, the process by which standards are  X- d(#established may present opportunities for anticompetitive behavior by the BOCs.U2 yO -ԍManufacturing NPRM at  31.U We decline,  d(#however, to implement additional procedures, beyond those outlined in section 273, to ensure that  d(#=BOCs do not discriminate between their section 272 affiliates and other entities in establishing  d(#industrywide standards. Rather, we agree with Bellcore and PacTel that the procedures for the  d(#kestablishment of industrywide standards and generic requirements for telecommunications  d(#iequipment and CPE appear at this time to be adequately addressed by the requirements contained  d(#in section 273(d)(4). For example, in response to MCI, we note that section 273(d)(4) already  d(#provides for an open standardssetting process whereby all interested parties have the opportunity  d(#Zto fund and participate in the development of industrywide standards or generic requirements on  X - d(#a "reasonable and nondiscriminatory" basis."[3 @ yO-ԍSee 47 U.S.C.  273(d)(4)(A)(ii).[ We find no basis in the record for concluding  d(#that the requirements established by section 273, and any regulations adopted thereunder, will not be sufficient to deter discrimination in the establishment of industrywide standards.  Xy- _ 229.` ` Although we decline at this time to establish additional procedures beyond those  d(#required in section 273(d)(4), we recognize that t STANDARD here is a distinct potential competitive danger  d(#that a BOC will use standards in its own and its section 272 affiliate's network that are not  d(#"industrywide" (that is, not employed by "at least 30 percent of all access lines") or established  X- d(#by an accredited standards development organization,Z4X yO- v MԍAn "accredited standards development organization" is an entity composed of industry members that has