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                            Before the
                FEDERAL COMMUNICATIONS COMMISSION
                    Washington, D.C.  20554

In the Matter of                   )
                              )                             
Treatment of the Guam Telephone         )
Authority and Similarly Situated        )    CC Docket No. 97-134
Carriers as Incumbent Local Exchange    )
Carriers under Section 251(h)(2)        )    
of the Communications Act               )


                         REPORT AND ORDER

     Adopted:  July 15, 1998            Released:  July 20, 1998 

By the Commission:


                         I.  INTRODUCTION

     1.   Pursuant to our express rulemaking authority in section 251(h)(2) of the
Communications Act of 1934, as amended (Act or Communications Act), we adopt in this
Report and Order the rule proposed by the Commission in Guam Public Utilities Commission
Petition for Declaratory Ruling concerning Sections 3(37) and 251(h) of the Communications
Act, Treatment of the Guam Telephone Authority and Similarly Situated Carriers as Incumbent
Local Exchange Carriers under Section 251(h)(2) of the Communications Act.  In particular, we
adopt a rule treating Guam Telephone Authority (GTA) as an incumbent local exchange carrier
(LEC) for purposes of section 251.  Adoption of this rule will ensure that the Territory of Guam
(Guam) has the same opportunity as the rest of our Nation to benefit from the pro-competitive,
market-opening effects of the Telecommunications Act of 1996.  We decline at this time,
however, to adopt the same rule with respect to a class or category of LECs situated similarly to
GTA, because the record does not identify any members of such class or category.

                         II.  BACKGROUND

     2.   In the Guam Ruling/Notice, the Commission resolved a Petition for Declaratory
Ruling filed by the Public Utilities Commission of the Territory of Guam (Guam Commission)
regarding sections 251(h)(1) and 3(37) of the Communications Act.  The Commission held that (i)
GTA -- the only LEC throughout Guam -- is not an "incumbent local exchange carrier" within the
meaning of section 251(h)(1), and (ii) GTA is a "rural telephone company" within the meaning of
section 3(37).

     3.   One effect of the Commission's holdings in the Guam Ruling/Notice was that GTA
could permanently avoid the interconnection, unbundling, resale, and other obligations imposed
on incumbent LECs by section 251(c) of the Communications Act.  Imposing these obligations
on incumbent LECs, including rural telephone companies in appropriate circumstances, is one of
the 1996 Act's primary methods of fostering the development of competition in the local exchange
market.  As a result, in the Guam Ruling/Notice, the Commission also issued a Notice of
Proposed Rulemaking proposing that the Commission adopt, pursuant to section 251(h)(2) of the
Communications Act, a rule providing for the treatment of GTA as an incumbent LEC for
purposes of section 251.  Under section 251(h)(2), the Commission "may, by rule, provide for
the treatment of a local exchange carrier (or class or category thereof) as an incumbent local
exchange carrier for purposes of [section 251]" if:

                     (A) such carrier occupies a position in the market for telephone
          exchange service within an area that is comparable to the position
          occupied by a carrier described in paragraph (1); (B) such carrier
          has substantially replaced an incumbent local exchange carrier
          described in paragraph (1); and (C) such treatment is consistent
          with the public interest, convenience, and necessity and the
          purposes of this section.

     4.   In the Guam Ruling/Notice, the Commission sought comment on the proposal
therein to adopt a rule pursuant to section 251(h)(2) treating GTA as an incumbent LEC for
purposes of section 251.  The Commission also sought comment regarding whether LECs
situated similarly to GTA exist and, if so, whether the Commission should adopt the same rule
with respect to such class or category of LECs.                         III.  DISCUSSION

     5.   Eight parties filed comments and/or reply comments in response to the Guam
Ruling/Notice.  All seven of the commenters that address the issue -- including GTA -- support
our proposal to adopt a rule pursuant to section 251(h)(2) treating GTA as an incumbent LEC for
purposes of section 251.  In fact, GTA "requests that the Commission issue a ruling declaring
that GTA should be treated as an [incumbent] LEC."  GTA makes this request because GTA "is
the sole provider of local exchange and exchange access services on Guam and, in that respect, is
certainly comparable to incumbent LECs."  Moreover, "GTA believes that the public interest, as
well as the purposes of Section 251, would be served by providing for treatment of GTA as an
incumbent LEC."  Although "GTA believes that Section 251(h)(2) was intended to provide for
circumstances in which a 'new entrant' replaces an incumbent LEC . . . , [GTA] does not disagree
with the interpretation of Section 251(h)[(2)] proposed by the Commission in the NPRM, in so
far as it would be applied to GTA."  GTA takes this position because "the situation faced by
GTA is virtually unique and clearly not contemplated by Congress when considering Section
251." 

     6.   In light of the foregoing, we hereby adopt in this Report and Order the rule
proposed by the Commission in the Guam Ruling/Notice.  In particular, pursuant to our express
rulemaking authority in section 251(h)(2) of the Act, we adopt a rule treating GTA as an
incumbent LEC for purposes of section 251.

     7.   Two commenters urge us to adopt a similar rule for all LECs situated similarly to
GTA.  They support, in particular, adoption of a general rule that treats as an incumbent LEC
for purposes of section 251 any LEC that possesses market power in its local exchange service
area and control over bottleneck local exchange facilities comparable to those possessed by
statutorily-defined incumbent LECs.

     8.   Those same two commenters assert that Micronesian Telecommunications Corp.
(MTC), the sole provider of local exchange service in the Commonwealth of the Northern
Marianas (CNMI), is situated similarly to GTA within the context of section 251(h)(2).  They
ask us, therefore, to adopt a rule treating MTC as an incumbent LEC for purposes of section
251.  In response, MTC and its parent company, GTE Service Corporation, concede that MTC,
unlike GTA, is an incumbent LEC under section 251(h)(1), which they allege obviates the need
for a rule treating MTC as an incumbent LEC under section 251(h)(2):

                    MTC is an incumbent LEC under the definition of an incumbent
          LEC set forth in Section 251(h)(1) of the 1996 Act.  Neither MTC
          nor any other GTE-affiliated entity has disputed that MTC is an
          incumbent LEC.  There is, therefore, no need for any further ruling
          of this fact.

     9.   In light of the foregoing, we decline at this time to adopt a general rule under
section 251(h)(2) treating as incumbent LECs all members of a class or category of LECs situated
similarly to GTA.  We so decline because the record does not indicate that any LEC situated
similarly to GTA exists.  As far as the record in this proceeding shows, MTC is not such a LEC
for these purposes, because MTC (and its corporate parent), unlike GTA, concedes that it is an
incumbent LEC under section 251(h)(1).  We may revisit this issue if and when we become aware
of the existence of a LEC or class or category of LECs similarly situated to GTA. 

            IV.  FINAL REGULATORY FLEXIBILITY ANALYSIS

     10.  Pursuant to the Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), the Commission certified in
the Guam Ruling/Notice that the proposed rule would not have a significant economic impact on
a substantial number of small entities.  We received no comments regarding this certification.

     11.  In conformance with the RFA, as amended by the SBREFA, we certify that the
rule adopted herein will not have a significant economic impact on a substantial number of small
entities.  Our rule treating GTA as an incumbent LEC pursuant to section 251(h)(2) will affect
only GTA and the limited number of entities that seek to interconnect with GTA's network or
resell GTA's services.  Even if all of these entities can be classified as small entities, we do not
believe that they constitute a "substantial number of small entities" for purposes of the Regulatory
Flexibility Act.

     12.  The Commission's Office of Public Affairs, Reference Operations Division, shall
send a copy of this Report and Order, including the foregoing certification and statement, to the
Chief Counsel for Advocacy of the Small Business Administration.  The Secretary shall also
include a copy of this Report and Order, including the foregoing certification and statement, in the
report to Congress. A copy of this certification also will be published in the Federal Register.
                            V.  ORDERING CLAUSES

     13.  ACCORDINGLY, IT IS ORDERED, pursuant to sections 1, 2, 4, 251, and 303(r)
of the Communications Act of 1934, as amended, 47 U.S.C.  151, 152, 154, 251, and 303(r),
that the REPORT AND ORDER IS ADOPTED, and the requirements contained herein shall
become effective 30 days after publication of a summary in the Federal Register.

     14.  IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,
Reference Operations Division, SHALL SEND a copy of this Report and Order, including the
foregoing RFA certification and statement, to the Chief Counsel for Advocacy of the Small
Business Administration, in accordance with section 605(b) of the RFA, as amended by the
SBREFA, 5 U.S.C.  605(b).

                         FEDERAL COMMUNICATIONS COMMISSION  
               
                         Magalie Roman Salas
                         Secretary