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The path and name of the Word97, and Acrobat files will be the same as the ASCII Text file except that they will end with the letters wp, doc, or pdf respectively, instead of the letters txt. **************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of Application of Verizon Pennsylvania Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services Inc. for Authorization To Provide In-Region, InterLATA Services in Pennsylvania ) ) ) ) ) ) ) ) ) CC Docket No. 01-138 MEMORANDUM OPINION AND ORDER Adopted: September 19, 2001 Released: September 19, 2001 By the Commission: Commissioner Copps dissenting and issuing a statement. TABLE OF CONTENTS Paragraph I. INTRODUCTION 1 II. BACKGROUND 4 III. CHECKLIST COMPLIANCE 9 A. PRIMARY ISSUES IN DISPUTE 9 1. Checklist Item 2 - Unbundled Network Elements 11 2. Checklist Item 4 - Unbundled Local Loops 76 3. Checklist Item 14 - Resale 93 B. OTHER ITEMS 99 1. Checklist Item 1 - Interconnection 99 2. Checklist Item 5 - Unbundled Transport 109 3. Checklist Item 8 - White Pages Directory Listings 114 C. CHECKLIST ITEM 13 - RECIPROCAL COMPENSATION 118 D. REMAINING CHECKLIST ITEMS (3, 6, 7, AND 9-12) 120 IV. COMPLIANCE WITH SECTION 271(C)(1)(A) 121 V. SECTION 272 COMPLIANCE 124 VI. PUBLIC INTEREST ANALYSIS 125 A. ASSURANCE OF FUTURE COMPLIANCE 127 B. OTHER PUBLIC INTEREST ISSUES 133 VII. SECTION 271(d)(6) ENFORCEMENT AUTHORITY 135 VIII. CONCLUSION 139 IX. ORDERING CLAUSES 140 APPENDIX A - LIST OF COMMENTERS APPENDIX B - PENNSYLVANIA PERFORMANCE DATA APPENDIX C - STATUTORY REQUIREMENTS I. INTRODUCTION 1. On June 21, 2001, Verizon Pennsylvania Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services Inc. (Verizon) filed this application pursuant to section 271 of the Communications Act of 1934, as amended, for authority to provide in-region, interLATA service originating in the state of Pennsylvania. We grant the application in this Order based on our conclusion that Verizon has taken the statutorily required steps to open its local exchange markets in Pennsylvania to competition. 2. According to Verizon, competing carriers in Pennsylvania serve approximately one million lines, one-third of which are residential, using all three entry paths available under the Act. Across the state, competitors serve more than 600,000 lines solely over their own facilities; more than 385,000 lines through unbundled network elements; and more than 160,000 lines through resale. In addition, Verizon asserts that competitors exchange approximately two billion minutes of traffic each month with Verizon over local interconnection facilities that are more than three-fourths the size of Verizon's own local interoffice network. Verizon also states that competitors have access to more than 90 percent of Verizon's access lines in Pennsylvania through approximately 2,000 collocation arrangements. 3. In granting this application, we recognize the hard work of the Pennsylvania Public Utility Commission (Pennsylvania Commission) in laying the foundation for approval of this application. The Pennsylvania Commission conducted extensive proceedings concerning Verizon's section 271 compliance, which were open to participation by all interested parties. In addition, the Pennsylvania Commission adopted a broad range of performance measures and standards as well as a Performance Assurance Plan (PAP) designed to create a financial incentive for post-entry compliance with section 271. Moreover, the Pennsylvania Commission will continue its oversight of Verizon's performance through ongoing state proceedings. As the Commission has recognized, state proceedings demonstrating a commitment to advancing the pro-competitive purposes of the Act serve a vitally important role in the section 271 process. II. BACKGROUND 4. In the 1996 amendments to the Communications Act, Congress required that the Bell Operating Companies (BOCs) demonstrate compliance with certain market-opening requirements contained in section 271 of the Act before providing in-region, interLATA long distance service. Congress provided for Commission review of BOC applications to provide such service in consultation with the affected state and the Attorney General. 5. On January 8, 2001, Verizon filed a preliminary application for section 271 approval with the Pennsylvania Commission (the Compliance Filing). A majority of the Pennsylvania Commission conditionally approved Verizon's Compliance Filing on June 6, 2001. Specifically, the Pennsylvania Commission found that Verizon demonstrated compliance with the statutory requirements of section 271 in most respects, but that further action would be necessary to demonstrate that the local exchange and access markets in Pennsylvania were fully and irreversibly open to competition. Verizon filed a letter with the Pennsylvania Commission on June 7, 2001 accepting the terms of the June 6, 2001 conditional approval. Verizon thereafter filed its application for section 271 authority in Pennsylvania with this Commission on June 21, 2001. Comments concerning the instant application were filed on July 11, 2001, and reply comments were filed on August 6, 2001. The Pennsylvania Commission filed both comments and a reply in this proceeding, supporting Verizon's application in both instances. 6. The Department of Justice does not oppose Verizon's section 271 application for Pennsylvania, but states that it is unable fully to endorse it due to concerns about Verizon's wholesale billing systems. The Department of Justice also states, however, that local markets in Pennsylvania show a substantial amount of competitive entry, and does not foreclose the possibility that this Commission may be able to approve Verizon's application. The evaluation explains that, due to the timing of the application, "Verizon has not been able to demonstrate that its billing system modifications have fully resolved its billing problems in actual commercial operations." The Department of Justice recognizes that the Commission may gather additional information on this issue during the pendency of this proceeding, and "may therefore be able to assure itself that Verizon's billing problems have been resolved." As discussed below, in reviewing this application, we do consider additional information regarding Verizon's billing performance that was not available to the Department of Justice at the time it prepared its evaluation. 7. In reviewing this application, which was filed on June 21, 2001, we examine performance data as reported in carrier-to-carrier reports reflecting service in the period from February through June 2001. We examine Verizon's June performance data for the purpose of confirming acceptable performance or a trend of improvement shown in earlier months' data. We also examine data reflecting Verizon's June billing performance to verify that the billing system fixes implemented by Verizon in June were effective. Although as a general rule we do not rely on factual evidence that post-dates the application in assessing checklist compliance, the Commission has previously considered performance that covered a time period slightly beyond the comment filing date, and we believe it is appropriate to do so here. Verizon's application was submitted a few days after Verizon implemented changes to its billing process to address problems with electronic bills. Neither the June carrier-to-carrier performance data nor the data reflecting Verizon's June billing performance, however, could be generated until the end of the calendar month. We believe it is reasonable, therefore, to consider both Verizon's June carrier- to-carrier and billing data and do not believe that any party to this proceeding is prejudiced by such consideration. 8. We also note that the Act does not require Verizon to make a showing of checklist compliance with respect to the former GTE operating company it acquired in Pennsylvania in order to obtain section 271 authorization for this state. Section 271(c) establishes the checklist requirements that a BOC must meet in order to provide in-region interLATA services. Section 271(c) applies only to BOCs themselves, and not to BOC affiliates. The Act defines "Bell operating company" to include 20 companies specifically named in the statute, and "any successor or assign of such company that provides wireline telephone exchange service," but expressly excludes "an affiliate of such company" other than one of the specifically named companies or their successors or assigns. Although the former GTE operating company became an affiliate of Verizon as a result of the parent company merger, it is neither a BOC nor a successor or assign of Verizon. Thus, we find that Verizon is not required to show checklist compliance for GTE North, the former GTE LEC, to receive section 271 authorization for the state of Pennsylvania. III. CHECKLIST COMPLIANCE A. Primary Issues In Dispute 9. In a number of prior orders, the Commission discussed in considerable detail the analytical framework and particular legal showing required to establish checklist compliance. In this Order, we rely upon the legal and analytical precedent established in those prior orders. Additionally, as in the Verizon Connecticut Order, we include comprehensive appendices containing performance data and the statutory framework for approving section 271 applications. 10. As in our most recent orders on section 271 applications, we focus in this Order on the issues in controversy in the record. Accordingly, we begin by addressing checklist item numbers 2, 4, and 14, which encompass access to unbundled network elements, access to unbundled local loops, and resale of Verizon's service offerings, respectively. Next, we address checklist item numbers 1, 5, 8, and 13, which cover interconnection and collocation issues, access to unbundled transport, directory listings, and reciprocal compensation, respectively. The remaining checklist requirements are then discussed briefly, as they received little or no attention from commenting parties, and our own review of the record leads us to conclude that Verizon has satisfied these requirements. We then consider whether Verizon has satisfied the requirements for Track A in Pennsylvania. Finally, we discuss issues concerning compliance with section 272 and the public interest requirement. 1. Checklist Item 2 - Unbundled Network Elements 11. Checklist item 2 of section 271 states that a BOC must provide "[n]ondiscriminatory access to network elements in accordance with the requirements of sections 251(c)(3) and 252(d)(1)" of the Act. Based on the record, we agree with the conclusions of the Pennsylvania Commission and find that Verizon has satisfied the requirements of checklist item 2. In this section, we address those aspects of this checklist item that raised significant issues concerning whether Verizon's performance demonstrated compliance with the Act: (1) Operations Support Systems (OSS), particularly billing; (2) UNE pricing; and (3) provisioning of UNE combinations. a. OSS 12. Under checklist item 2, a BOC must demonstrate that it provides non- discriminatory access to the five OSS functions: (1) pre-ordering; (2) ordering; (3) provisioning; (4) maintenance and repair; and (5) billing. In addition, a BOC must show that it has an adequate change management process in place to accommodate changes made to its systems. We find that Verizon provides non-discriminatory access to its OSS. Consistent with prior Commission orders, we do not address each OSS element in detail where our review of the record satisfies us there is little or no dispute that Verizon meets the nondiscrimination requirements. Rather, we focus our discussion on those issues in controversy, which, in this instance, primarily involve certain elements of Verizon's billing systems. We also specifically address issues related to loop qualification and flow-through. (i) Billing 13. In previous section 271 decisions, the Commission has held that, pursuant to checklist item 2, BOCs must provide competitive LECs with two essential billing functions: (i) complete, accurate and timely reports on the service usage of competing carriers' customers and (ii) complete, accurate and timely wholesale bills. Service-usage reports and wholesale bills are issued by incumbent LECs to competitive LECs for two different purposes. Service-usage reports generally are issued to competitive LECs that purchase unbundled switching and measure the types and amounts of incumbent LEC services that a competitive LEC's end-users use for a limited period of time, usually one day. In contrast, wholesale bills are issued by incumbent LECs to competitive LECs to collect compensation for the wholesale inputs, such as unbundled elements, used by competitive LECs to provide service to their end users. Generally, wholesale bills are issued on a monthly basis. Service-usage reports are essential because they allow competitors to track and bill the types and amounts of services their customers use. Wholesale bills are essential because competitive LECs must monitor the costs they incur in providing services to their customers. We discuss both elements of billing below. (a) Service Usage 14. Consistent with prior section 271 orders, a BOC must demonstrate that it provides competing carriers with complete, accurate and timely reports on the service usage of their customers in substantially the same time and manner that a BOC provides such information to itself. We find that Verizon provides timely and accurate service usage data to competitive LECs. Specifically, Verizon provides competitive LECs with a cumulative record of their customers' usage called the Daily Usage File (DUF). Competitive LECs then are able to reconcile Verizon's DUF with their own usage records to ensure Verizon only charges them for their customers' usage. If the Verizon DUF and the competitive LEC's internal usage records adequately match, the competitive LEC may use the DUF as one means of calculating its own end-user bills by multiplying its customers' total daily usage against the rates it charges end users for service. Verizon generally delivers the DUF to competitive LECs in a timely and accurate manner. Few competitive LECs dispute that Verizon consistently provides accurate and timely DUF information to its wholesale customers. Finally, an independent, third-party test that KPMG performed for the Pennsylvania Commission provides additional assurance that Verizon's DUF is delivered in a timely and accurate manner. Based on the evidence in the record, we conclude that Verizon provides its competitors with non-discriminatory access to service usage data. (b) Wholesale Bills 15. Consistent with prior section 271 orders, a BOC must demonstrate that it provides competing carriers with wholesale bills in a manner that gives competing carriers a meaningful opportunity to compete. In this case, despite some historical problems in producing a readable, auditable and accurate wholesale bill, we find that Verizon now provides a wholesale bill that gives competitive LECs a meaningful opportunity to compete. Although as an evidentiary matter this finding is a close call, we believe that Verizon ultimately satisfies its evidentiary burden for wholesale billing and, in combination with its strong DUF performance, complies with the OSS billing requirements under checklist item 2. 16. We begin our analysis with an overview of Verizon's wholesale billing systems and summarize the various steps Verizon has taken to provide a BOS BDT wholesale bill. Next, we describe the commercial performance of Verizon's wholesale billing systems. We then analyze the results of third-party reviews of Verizon's billing systems. We also discuss the sufficiency of the evidence presented to demonstrate that Verizon provides complete, accurate and timely wholesale bills. Finally, we discuss various measures that Verizon has undertaken to ensure that Verizon's wholesale billing practices will not deteriorate in the future. 17. Background. In Pennsylvania, Verizon uses one of two systems to generate monthly wholesale bills for competitors, depending upon the type of service the competitive LEC uses. Verizon relies on the Customer Record Information System (CRIS) to generate bills for some UNEs, UNE-P and resale offerings. Verizon relies on the Carrier Access Billing System (CABS) to generate bills for access services, collocation, and the remaining UNEs, such as interoffice facilities and switching. Once Verizon generates a competitive LEC's wholesale bills using the CRIS or CABS systems, Verizon can provide a competitive LEC with its bill in two formats: a "retail-formatted" bill or a "BOS BDT" bill. A retail-formatted bill appears in the same type of end-user format that a Verizon retail customer would receive. Although Verizon can transmit a retail-formatted bill to competitive LECs in a variety of mediums, such as CD- ROM or magnetic tape, Verizon usually prints its retail-formatted wholesale bills on paper. A BOS BDT bill, by contrast, appears in the industry-standard Billing Output Specification (BOS) Bill Data Tape (BDT) format that allows a wholesale carrier to use computer software to readily audit the data. As with the retail-formatted bills, Verizon can transmit a BOS BDT bill to competitive LECs across various mediums, including Verizon's "Connect:Direct" electronic transmission system, but Verizon usually provides BOS BDT bills on magnetic tape. 18. Since the introduction of local competition in Pennsylvania, Verizon has offered retail-formatted bills to competitive LECs. In December 2000, KPMG issued a report that found that the retail-formatted bills KPMG received from Verizon during the course of its testing were accurate. Despite KPMG's findings, competitive LECs contested the accuracy of the retail- formatted bills before and after KPMG's tests. Common errors included charges for lines and services not provided, misrated charges for services received, double billing for services which were incorporated in other charges, assessments of taxes when Verizon is not the remitting carrier or on accounts on which no taxes are due, subtotaled charges that could not be reconciled with totaled charges, and miscrediting or unidentifiable crediting of earlier billing errors. Over time, Verizon has taken a number of steps to eliminate the inaccuracies contained in the retail-formatted bills. 19. Verizon first offered BOS BDT bills in January 2000 as a supplement to its retail- formatted bills. Verizon, however, experienced problems with its BOS BDT bills and suspended BOS BDT billing after four months to allow for system corrections. When Verizon reintroduced BOS BDT billing in October 2000, Verizon and various competitive LECs identified a number of problems that required correction. In response, Verizon began modifying its BOS BDT billing system to correct these problems and at least one competitive LEC has acknowledged that Verizon's BOS BDT billing performance improved, albeit unevenly, over the next several months. 20. In April 2001, Verizon implemented a process, which it continues to rely on at least on an interim basis, to manually review and adjust the BOS BDT bills to match them to the retail-formatted bills and to reconcile internal inconsistencies. During the manual review process, a "BDT Quality Team" comprised of Verizon employees uses computer software to determine whether the BDT balances internally and to flag any inconsistencies. A "Validation Group" comprised of Verizon employees then investigates and resolves any errors that the BDT Quality Team finds. Once the Validation Group enters the manual adjustments necessary to balance the retail-formatted bill and the BOS BDT bill, the BDT Quality Team then re-examines the BOS BDT bill to ensure that the Validation Group's adjustments correct the imbalance. In addition, a "Wholesale Billing Services Group" (WBSG) comprised of Verizon employees runs its own independent computer program on the BOS BDT bill to provide additional verification of the Validation Group's work. If the WBSG finds errors, it can return the BOS BDT bill to the Validation Group for further review. 21. After adopting the manual review process, Verizon then contracted with PriceWaterhouseCoopers (PWC) to review whether Verizon's BOS BDT bills were comparable to its retail-formatted bills and to test the readability and auditability of the BOS BDT bill. With a few noted exceptions, PWC concluded that the BOS BDT bill matches the retail-formatted bill for key billing elements and summarization points; that the dollar amounts charged on the BOS BDT bill for those billing elements and summarization points match the retail-formatted bill; that the BOS BDT bill contains enough information for a third party to recalculate the charges; and that the BOS BDT bill is in balance. Verizon did not ask PWC to test the completeness or accuracy of the billing information on the BOS BDT bill because KPMG had already done so for the retail-formatted bill. After the PWC test ended, Verizon announced that competitive LECs could elect to treat either the retail-formatted bill or the BOS BDT bill as the "bill of record" beginning on May 22, 2001. Verizon continued to make additional software modifications to the BOS BDT billing system after the PWC review, including modifications in March, April, May and June that, according to Verizon, resolved all but a handful of minor issues with the BOS BDT bill. 22. Discussion. Based on the record, there appear to be a number of issues related to the quality of Verizon's wholesale bills, particularly the BOS BDT bill generated by Verizon's CRIS system. As an initial matter, we note that, while we agree with Verizon that the appropriate standard to apply to the wholesale billing function is the "meaningful opportunity to compete" standard, we disagree with Verizon's assertion that we should dismiss any problems that competitive LECs experience with their wholesale bills because the wholesale bill does not directly affect a competitive LEC's ability to bill its end-user customers. Rather, we agree with the competitive LECs that the BOC must demonstrate that it can produce a readable, auditable and accurate wholesale bill in order to satisfy its nondiscrimination requirements under checklist item 2. 23. Inaccurate or untimely wholesale bills can impede a competitive LEC's ability to compete in many ways. First, a competitive LEC must spend additional monetary and personnel resources reconciling bills and pursuing bill corrections. Second, a competitive LEC must show improper overcharges as current debts on its balance sheet until the charges are resolved, which can jeopardize its ability to attract investment capital. Third, competitive LECs must operate with a diminished capacity to monitor, predict and adjust expenses and prices in response to competition. Fourth, competitive LECs may lose revenue because they generally cannot, as a practical matter, back-bill end users in response to an untimely wholesale bill from an incumbent LEC. Accurate and timely wholesale bills in both retail and BOS BDT formats thus represent a crucial component of OSS. 24. In past section 271 orders, the Commission has determined checklist compliance for OSS functions primarily by relying on performance data that reflects actual commercial usage. Although the Commission has never required applicants to provide particular forms of evidence to demonstrate checklist compliance, it has consistently held that commercial performance data is the most persuasive form of evidence. In this case, however, we cannot rely exclusively on past commercial performance data because, among other things, Verizon has made significant changes to its wholesale billing systems in the most recent months leading up to this application. Therefore, although we are able to rely on some evidence reflecting commercial usage from Verizon's most recent billing cycles, we must supplement our analysis by relying on third-party testing to find that Verizon's current systems provide competitors with a meaningful opportunity to compete. Despite the historical problems that competitors have experienced with Verizon's billing system, we find that Verizon has satisfied the wholesale billing component of checklist item 2. 25. Commercial Usage. A number of commenters challenge the commercial reliability of Verizon's wholesale bill. Competitors contend that Verizon has not clearly demonstrated its ability to deliver a BOS BDT bill that is readable, accurate and auditable. These commenters recount Verizon's history of billing inaccuracies in 2000 and 2001. 26. While Verizon concedes past problems, particularly with its BOS BDT bill, Verizon contends that recent data show significantly improved performance. Verizon notes that it allowed competitors to designate the BOS BDT bill as the bill of record in May and implemented a series of software fixes, including changes in March, April, May and June of this year. Verizon also implemented a series of system fixes, including changes in March, April, May and June of this year that addressed major systemic problems. As evidence that these fixes have improved its performance, Verizon notes that the total dollar amounts in dispute in Pennsylvania for each month from January through June 2001 show a steady positive trend: from 26.59 percent of total charges in February, to 13.08 percent of total charges in March, to 9.47 percent of total charges in April, to 2.36 percent of total charges in May, to 2.21 percent of total charges in June. Moreover, for Verizon's historic problem areas, such as the appearance of incorrect tax charges, the creation of improper stand-alone bills and the inclusion of improper directory advertising charges, the error rate has dropped steadily to the point where, as of June, the amounts under dispute are relatively nominal both in dollar value and as a percentage of current charges billed. Specifically, the value of incorrect taxes on both retail-formatted and BOS BDT bills now represents less than one tenth of one percent of current billed charges; the number of new improperly issued stand-alone bills now measures less than one-hundredth of one percent of the number of component accounts; and the improper assessment of inter-exchange carrier directory advertising charges now constitutes well under one tenth of one percent of current charges. In short, recent commercial data demonstrates that Verizon has steadily improved its wholesale billing systems to the point where error rates no longer differ materially from wholesale billing data for those states in which BOCs have already received section 271 authority. 27. One competitive LEC concedes that Verizon's fixes have resulted in a marked improvement in recent bills and another LEC reports receiving bills with few, if any, errors. In addition, Z-Tel, which continues to dispute a higher proportion of its monthly bills from Verizon Pennsylvania than it does in other Verizon states, such as New York and Massachusetts, acknowledges that, once cumulative disputes are accounted for, the percentage of the bill under dispute diminishes greatly. Although Z-Tel initially stated that various billing problems have not been fixed, it later clarified that much of its current billing disputes with Verizon are cumulative and span multiple billing periods other than the month in which Z-Tel filed the dispute. Thus, while Z-Tel reports disputing 36.51 percent of its total June bill from Verizon, it acknowledges that only 11.33 percent of its total June bill arose from errors that actually appeared on the June bill. 28. To the extent that other competitive LECs report errors, these errors do not appear to reflect systemic wholesale billing problems that are likely to recur. WorldCom, for example, attributes the majority of its total billing disputes with Verizon for May and June to just two items: erroneous port-charge rates and questionable late fees. Verizon acknowledges that the erroneous port-charge rates result from its failure to enter a state-mandated additional port charge into its billing systems. Verizon asserts that it has corrected this problem and its billing system now contains the two port-charge rates available in Pennsylvania. Although Verizon acknowledges that it owes WorldCom for past improperly billed port charges, WorldCom and Verizon continue to disagree about whether WorldCom is entitled to a credit based on the relatively small number of ports that Verizon actually billed to WorldCom or on the much larger number of ports that WorldCom ordered from Verizon. Similarly, WorldCom's late-fee dispute originally arose from WorldCom's decision to withhold payment for bills issued in the winter and early spring. As with the port-charge issue, the late-fee dispute does not stem from any systemic flaws in Verizon's billing systems or processes, but rather from a still-unsettled disagreement between WorldCom and Verizon about whether WorldCom could rightfully withhold payment on its bills when it was experiencing its most acute problems with Verizon's bills. While these disputes reflect past performance problems with Verizon's billing system, they do not demonstrate that Verizon's current wholesale billing systems are flawed today or were flawed at the time Verizon filed its application. 29. As described above, moreover, improper retail charges have declined to extremely low levels. Verizon also claims that many of the remaining charges listed as "resale" or "retail" on a wholesale bill may actually represent properly billed charges. For instance, Verizon may have properly applied charges to a UNE-P account, but incorrectly listed those charges as "resale" items when Verizon produced the BOS BDT bill. Although Verizon acknowledges that it continues to improperly assess a small number of retail charges on UNE-P bills, it has scheduled system corrections to fix this problem for August and, in the meantime, has initiated a new policy of not requiring competitive LECs to pay these charges from their BOS BDT bills while Verizon investigates the improper resale charges. In any case, Verizon seems to exercise reasonable diligence in crediting improper resale charges. Thus, while the BOS BDT bills do not precisely balance and mirror the retail-formatted bills, we find that the minor remaining differences between the retail-formatted and BOS BDT bills are nominal, credited in a reasonable time frame and, thus, not competitively significant. 30. In addition to the extensive comments regarding Verizon's wholesale billing accuracy, a few parties have commented on the timeliness of Verizon's wholesale bills. Indeed, some competitive LECs claim that these temporary delays constitute an independent basis to find Verizon does not comply with checklist item 2. For its part, Verizon notes that some of the solutions it implemented to correct wholesale billing issues temporarily created a backlog of BOS BDT bills, which decreased BOS BDT bill timeliness for a discrete and isolated time period. Verizon, however, states that "[a]s of June 20, Verizon has cleared virtually the entire backlog" and can deliver a large volume of electronic [BOS BDT] bills, which require a certain amount of manual processing, on time. Performance data indicate that any delay associated with BOS BDT bills was temporary, associated with on-going improvements to the billing process and not indicative of a larger, systemic problem with delivering timely bills. 31. Third-Party Testing. Third-party studies of Verizon's billing systems, processes and performance bolster Verizon's recent commercial data. For Verizon's retail-formatted bills, KPMG issued a report in December 2000 that found that the retail-formatted bills KPMG received from Verizon during the course of its testing were accurate and timely. During the test period, KPMG issued 67 observations and exceptions concerning Verizon's retail-formatted bill and Verizon implemented the necessary fixes for all competitive LEC accounts. Using military- style testing techniques, KPMG then re-tested Verizon's billing system after Verizon modified its system and found in its final December 2000 report that Verizon had satisfied all test points. 32. For Verizon's BOS BDT bills, PWC, with a few exceptions, concluded that the BOS BDT bill matches the retail-formatted bill for key billing elements and summarization points, that the dollar amounts charged on the BOS BDT bill for those billing elements and summarization points match the retail-formatted bill, that the BOS BDT bill contains enough information for a third party to recalculate the charges, and that the BOS BDT bill is in balance. PWC also determined that the absolute value of the manual adjustments needed to match the BOS BDT bill to the retail-formatted bill decreased by more than half from the April-May billing cycle to the May-June billing cycle. 33. Several competitive LECs, however, assert that we should not rely on the KPMG and PWC studies in assessing Verizon's wholesale billing performance. We do not find these arguments persuasive. Although we acknowledge, consistent with prior section 271 orders, that third-party studies are not the most probative evidence of a BOC's compliance with section 271 and that a third-party test alone cannot outweigh reliable commercial data, the Commission has held that third-party studies nevertheless can provide valuable, relevant evidence of OSS performance. In this case, both KPMG's and PWC's studies provide relevant evidence of Verizon's billing performance that supplement the commercial performance data that Verizon has presented in this proceeding. 34. We also reject arguments that the KPMG study is flawed. KPMG used a "military-style" test in which it tested various billing functions, identified exceptions and re-tested until Verizon had eliminated the exceptions. While some of the wholesale billing errors that KPMG identified continued to occur for a time after the KPMG study ended, we find that the recurrence of some errors does not diminish the value of the KPMG study. Verizon made three types of software changes in response to KPMG's study: (i) changes affecting bill calculation input; (ii) changes affecting the bill calculation logic; and (iii) changes affecting bill output (i.e., formatting). Verizon could make relatively straightforward software changes to implement changes to the bill calculation logic and the bill output. For these problems, one software change would correct the errors for all competitive LECs. Verizon could not make simple software changes to correct errors in bill calculation input, however, because the errors vary by individual competitive LEC account. For these problems, Verizon had to address each existing competitive LEC account individually. According to Verizon, many of the wholesale billing problems competitive LECs have experienced - improper resale charges, inappropriate stand-alone bills and improper tax charges - stemmed from errors embedded in competitive LECs' existing accounts. Verizon asserts that such embedded errors in existing accounts now have been repaired. In any case, as explained above, remaining errors as of the date of filing were at de minimis levels. 35. PWC's two reports also provide additional assurance that the BOS BDT bill is largely comparable to the retail-formatted bill and that the BOS BDT bill was readable and auditable. Although we agree with the Department of Justice and several commenters that PWC's reports should carry less weight than the KPMG study that the Pennsylvania Commission oversaw and in which the competitive LECs could participate, we do not discredit PWC's reports in their entirety because the authors qualified some of their results, conducted their studies at different times from KPMG, or could have conducted a more comprehensive study of Verizon's BOS BDT billing. As the commenters observe, PWC's first report did not "test the completeness or accuracy of the billing information on the BDT." Rather, PWC's first report determined whether Verizon's BOS BDT bills were comparable to Verizon's retail-formatted bills, which KPMG's nineteen-month study had already established as accurate. 36. PWC's second report establishes that a competitive LEC could use commercially available software to read and audit the vast majority of charges on the BOS BDT bill. Given that the commercial experience on this point appears to be mixed, we rely on the PWC report to confirm that Verizon's BOS BDT bills appear to conform to the industry standard and can be loaded, read and audited electronically. PWC's second report also found that the absolute value of manual adjustments made to the BOS BDT bills have declined by about half following certain improvements to Verizon's BOS BDT billing systems. WorldCom asserts that a reduction in the level of manual adjustments might just as likely result from Verizon employees under- reporting billing errors in Verizon's wholesale bills, which would artificially reduce the absolute value of manual adjustments. We disagree with WorldCom's assertion. First, increased error seems unlikely to account for a full fifty-percent reduction in the absolute value of manual adjustments, particularly in light of the well-defined procedure that Verizon has established to correct errors and issue manual adjustments. Second, the record contains no evidence of accidental or intentional under-reporting from any party. Third, Verizon's June commercial performance data is consistent with the PWC results. Thus, despite their limited scope, the two PWC reports add to the record of Verizon's BOS BDT billing performance. 37. Sufficiency of Evidence. Ultimately, the competitive LECs challenging Verizon's wholesale billing performance contend that, despite improved performance in billing accuracy, Verizon's recent improvements to its BOS BDT billing system have not been sufficiently commercially tested. According to these parties, we should insist on reviewing several months of commercial performance evidence to determine whether Verizon's latest modifications have sufficiently improved the manner in which Verizon bills its wholesale customers. As stated above, although we acknowledge that the evidentiary showing that Verizon relies on makes this issue a close call, we find the evidence minimally sufficient, especially in light of the showing it has made for billing as a whole. 38. Rather than wait for several months of commercial data, Verizon sought to bolster its limited commercial showing in two ways. First, as discussed above, Verizon engaged PWC to examine the comparability of the BOS BDT bill to the retail-formatted bill, both with respect to the amount of detail provided on the BOS BDT bill and with respect to the actual dollar amounts charged to the competitive LECs at each level of detail. Although the PWC study is not dispositive, we find that it provides valuable evidence that helps bolster Verizon's limited commercial performance data since the results from the study and the data from Verizon's commercial performance are consistent. Second, as explained above, while Verizon was implementing its software fixes, it began a manual review and balancing process for the BOS BDT bills to ensure that the BOS BDT bill balances internally and that it matches the retail-formatted bill. 39. Competitive LECs assert that, as a result of these manual adjustments, they can no longer audit Verizon's BOS BDT bill by tallying the detailed credits and debits on Verizon's bill, reaching a total and comparing that total with the total that Verizon provides. While we agree that the manual adjustments prevent a precise accounting for all possible charges, we reject competitive LEC requests that we find the manual adjustment process results in an inadequately accurate wholesale bill. First, the overall amounts involved in Verizon's manual adjustment process are nominal and have been consistently decreasing over time. Second, Verizon continues to implement software fixes to its BOS BDT billing system that ultimately should eliminate the need for the manual adjustment process. Third, despite the manual nature of this workaround process for reducing errors in Verizon's wholesale BOS BDT bills, Verizon claims, and PWC affirms, that Verizon could handle many more BOS BDT bills than the current demand of approximately 110 BOS BDT bills per month. As a result, we do not find competitive LEC criticisms of the manual-adjustment process persuasive. Under these particular circumstances, we agree with the Pennsylvania Commission that delaying our decision on Verizon's application for several additional months to obtain new wholesale billing data is unnecessary. 40. In addition to the evidence Verizon has advanced in this record to prove the efficacy of its billing systems, Verizon has made several clarifications on the record to explain the existing procedures it follows to resolve billing disputes. These clarifications give us assurance that any remaining issues with Verizon's BOS BDT bills will be handled in a manner that reduces the burden on competitive LECs to initiate and resolve disputes. First, Verizon states that competitive LECs do not need to submit end-user-level detail to file disputes they believe to be of a systemic nature. Instead, competitive LECs only need to provide "an indication of why the [competitive LEC] is questioning the charge" and some minimal amount of information to allow Verizon to investigate the issue, such as a single billing account number. Second, Verizon does not require competitive LECs to pay disputed amounts until the dispute is settled. Third, if Verizon does not render a bill to a competitive LEC within the ten business days provided for in the Pennsylvania Carrier-to-Carrier guidelines, Verizon will automatically extend the payment period in which the competitive LEC can pay the bill by the number of days the bill arrives late. We fully expect Verizon to closely adhere to its official policies so that its dispute-resolution procedures are clearly articulated and consistently applied to all parties. 41. Finally, while Verizon has maintained its position that its wholesale billing systems comply with checklist item 2, we take additional comfort that Verizon has responded to the concerns raised in the record by voluntarily committing to a series of undertakings aimed at ensuring continued acceptable performance and curing past deficiencies. Although we do not rely on these undertakings in finding that Verizon provides non-discriminatory access to its OSS billing functions, they give us additional confidence that Verizon will continue to deliver timely and accurate wholesale bills and endeavor to remedy past wholesale billing problems expeditiously. First, Verizon has engaged PWC again to conduct an additional test of its BOS BDT billing system without the exclusions that commenters found objectionable in the April-May study. Second, Verizon has made significant resources immediately available for additional competitive LEC training on using the BOS BDT bill effectively. To the extent competitive LECs continue to experience problems loading and using the BOS BDT bill, Verizon also has offered to send technical teams to certain competitive LEC sites on request. Third, Verizon has adopted a policy of proactively forgiving certain late fees and other mischarges that competitive LECs may have incurred during the period in which the BOS BDT bill underwent significant modifications. Fourth, Verizon will work with competitive LECs that did not receive the BOS BDT bill prior to May 22, 2001 to help them analyze their bills and to provide information in a file format that could be used with a standard spreadsheet program. Finally, Verizon has voluntarily offered to allow competitors to opt into the latest performance metrics for billing currently being developed in the New York collaborative as an alternative to the current Pennsylvania metric for wholesale billing accuracy. These new performance measurements - for dispute-acknowledgement timeliness and dispute-resolution timeliness - represent important new steps to discourage wholesale billing errors and to ensure that any errors that occur are resolved as quickly as possible. We are encouraged by the efforts Verizon is making to continue to improve its business-to-business relationship with competitive LECs. 42. Taken together, Verizon's proof of system performance through both commercial evidence and third-party testing as well as its record of steady improvement demonstrate that Verizon's wholesale billing systems provide competing carriers a meaningful opportunity to compete. Working in concert with the Pennsylvania Commission, we intend to monitor Verizon's post-approval compliance to ensure that Verizon does not "cease [] to meet any of the conditions required for [section 271] approval." If Verizon's performance deteriorates, we will not hesitate to invoke our enforcement authority to ensure that Verizon continues to provide non- discriminatory access to its wholesale billing functions. (ii) Billing Notifiers 43. We find that Verizon provides Billing Completion Notifiers (BCNs) to its competitors in a non-discriminatory manner. BCNs inform competitors that all provisioning and billing activities necessary to migrate an end user from one carrier to another are complete and thus the competitor can begin to bill the customer for service. Premature, delayed or missing BCNs can cause competitors to double-bill, fail to bill or lose their customers. As a preliminary matter, we note that the Pennsylvania Commission currently does not require Verizon to track the timeliness and accuracy of BCNs. However, the absence of a particular performance metric is not, in and of itself, fatal to the ability of the applicant to demonstrate checklist compliance. Instead, we rely on a variety of performance measurements to examine a BOCs compliance with the competitive checklist. 44. In this case, Verizon has committed to implement a BCN timeliness metric in Pennsylvania in the future and, for the purposes of this application, has provided BCN timeliness information in Pennsylvania based upon the New York BCN metric. The New York BCN metric measures the time elapsed from the moment that Verizon's Service Order Processor (SOP) records a service order as complete to the moment Verizon's gateway system generates a BCN. According to Verizon, the SOP does not transmit information to the gateway system instantaneously. In New York, this cycle generally ranges from two to three days. In Pennsylvania, however, this cycle generally ranges from three to four days. Accordingly, while the New York BCN timeliness metric uses a benchmark of three business days, Verizon uses a benchmark of four business days to demonstrate that it provides BCNs to competitors in a non- discriminatory manner for purposes of this application. Using the four-day benchmark to account for Pennsylvania's different billing cycles, Verizon reports 98.1% and 98.55% performance levels for May and June 2001, respectively. Significantly, it appears that at least one of the competitive LECs that alleged untimely and inaccurate BCNs in the past now acknowledges that Verizon has demonstrated significantly improved performance in recent months. For purposes of this application, therefore, we find that Verizon's reliance on the four- day benchmark is reasonable and that Verizon delivers BCNs in a timely manner. (iii) Access to Loop Qualification Information 45. In the UNE Remand Order, the Commission concluded that all incumbent LECs must provide nondiscriminatory access to the same loop information that is available to the incumbent. We find that Verizon provides competitive LECs with access to loop qualification information in a manner consistent with the requirements of the UNE Remand Order. We note that the Pennsylvania Commission also found that Verizon provides nondiscriminatory access to loop qualification information. In our Verizon Massachusetts Order, the Commission concluded that Verizon's interim process for access to loop qualification information, coupled with Verizon's work in the formal change management process to implement enhanced permanent loop qualification processes, was sufficient for checklist compliance. In addition, we are encouraged by Verizon's indication, in the instant application, that it is on track to provide access to loop qualification information through the permanent fix described in its Massachusetts application by October 2001. After October 2001, therefore, in future section 271 applications, we would expect to review Verizon's permanent OSS process for access to loop qualification information. 46. POCA complains that Verizon has not yet included in its loop qualification database information on all loops in its network inventory. We note that under our current rules Verizon does not have an affirmative duty to create additional loop qualification information but rather an obligation to share with requesting carriers all such information that exists anywhere in Verizon's back office and can be accessed by any of Verizon's personnel. We do not find any evidence in the record to support allegations that Verizon is not in compliance with our rules. 47. We find unpersuasive Covad's assertion that a recent Arthur Anderson audit of Verizon found evidence that Verizon possesses loop make-up information that it only makes available to itself. As Verizon explains, this audit reviewed its provision of loop qualification information prior to its implementation of the interim process approved by the Commission in the Verizon Massachusetts Order. The record contains no evidence to suggest that Verizon's current OSS process for access to loop qualification information have not addressed any section 271 concerns raised by the audit Covad cites. Moreover, we note that audit findings do not contain legal determinations and, accordingly, find that they do not necessarily warrant a finding of checklist noncompliance. (iv) Flow-Through 48. Verizon provides adequate electronic processing of orders. Flow-through measures the percentage of orders that pass through an incumbents' ordering systems without the need for manual intervention. Flow-through rates are not an end in themselves, but rather a tool used to indicate a wide range of possible deficiencies in a BOC's OSS that may deny an efficient competitor a meaningful opportunity to compete in the local market. Contrary to the claims of some commenters, we do not specifically require Verizon to provide data on its achieved flow- through rate to determine that Verizon's OSS are capable of offering high flow-through. 49. Some parties complain that Verizon's flow-through rates for Pennsylvania are low, but there is no further evidence that there are OSS deficiencies related to an insufficient level of flow-through in OSS access for competitive LECs in the state. In Pennsylvania, Verizon measures "total" and "simple" flow through. Although Verizon's commercial data show relatively low average total flow-through rates - ranging from about 54 to 66.5 percent from February 2001 through June 2001 - we agree with the Pennsylvania Commission and conclude that Verizon's OSS is capable of flowing through competing carriers' orders in substantially the same time and manner as Verizon's own orders. We reach this conclusion for several reasons. First, since April 2001, Verizon has demonstrated a steady improvement in its flow-through performance. Second, Verizon's accuracy in processing orders is on par with the performance levels that we found acceptable in the New York and Massachusetts section 271 applications. Third, Verizon's carrier-specific performance reports show that some competing carriers in Pennsylvania attain much higher flow-through rates than others. Because all competing carriers interface with the same Verizon system, we find, on this record, that it would not be appropriate to attribute this wide range of results entirely to Verizon. Finally, our conclusion that Verizon's systems are capable of achieving high overall levels of order flow-through is reinforced by KPMG's testing, which found that Verizon satisfied all test criteria for flow-through performance. In these circumstances, we do not find competitive LEC arguments concerning flow-through rates persuasive and conclude that Verizon provides sufficient flow-through of orders to meet checklist item 2. (v) Other OSS Issues 50. Commercial data demonstrates that Verizon electronic interfaces support a robust volume of commercial activity in Pennsylvania. Nevertheless, some commenters allege that Verizon's Electronic Data Interchange (EDI) interface has serious shortcomings and others claim to have experienced problems with Verizon's Web-based Graphical User Interface (Web GUI). According to AT&T, for example, KPMG tested the wrong version of Verizon's EDI interface. AT&T adds that Verizon's pre-ordering metrics fail to capture long response times and outages and that certain other metrics for ordering are similarly flawed. We do not find these arguments persuasive. KPMG tested LSOG 2, which was the current EDI version deployed by Verizon when KPMG began its test. Moreover, KPMG's testing involved more than seven times the number of transactions that AT&T's testing did. In addition, Verizon has provided convincing information concerning EDI implementation, jeopardy notices over the EDI interface and the processing of Local Service Requests with multiple blocking options. Verizon also has demonstrated that most of the remaining competitive LEC claims regarding its OSS interfaces result in large part from errors in compiling data. Under these circumstances, we find that Verizon provides nondiscriminatory access to its electronic interfaces. 51. A few commenters also allege that Verizon's change-management performance is sub-standard. Some competitive LECs assert that Verizon makes improvements to its BOS BDT bill without notifying competitive LECs through the change management process. Verizon responds that the changes to the BOS BDT bill systems are "back-office" OSS changes that do not impact OSS interfaces, and therefore, are not subject to the same business rules and specification requirements as interface software releases. CompTel alleges that competitive LEC-initiated change management proposals languish compared to Verizon-initiated change management proposals. Even if we were to credit CompTel's claims, however, Verizon has shown that competing carriers can influence the change management process in many ways other than initiating new proposals. Based on Verizon's explanations, we agree with the Pennsylvania Commission and find that Verizon is not violating the principles of change management. 52. Finally, some commenters claim that Verizon's "line-loss" notifications are inaccurate. "Line loss" occurs when a competitive LEC loses a customer to another competitive LEC or back to the incumbent LEC. If a carrier does not receive complete, timely and accurate line-loss notifications, a carrier will continue to bill an end-user even though the end- user has discontinued service with that carrier. While Verizon notes that a line-loss reporting error did occur in the past, Verizon represents that it notified the industry, fixed the problem and provided competitive LECs with corrected files in a timely manner. In addition, Verizon represents that the percentage of working telephone numbers reported as missing or incorrect has averaged less than one percent across the entire Verizon South footprint and adds that this one- percent figure actually overstates the trouble ticket tally in Pennsylvania, of which Verizon asserts approximately one-third result from competitive LEC error. We are persuaded by Verizon's showing on this issue. b. Pricing of Network Elements (i) Background 53. In setting UNE rates, the Pennsylvania Commission has conducted numerous proceedings that have culminated in three rate proceedings. On April 10, 1997, the Pennsylvania Commission released the MFS III Order, setting forth interim rates for unbundled elements. On August 7, 1997, the Commission made the rates in the MFS III Order permanent. The Pennsylvania Commission stated in the MFS III Order that its rates were set using Total Service Long-Run Incremental Cost (TSLRIC), a forward-looking costing methodology similar to TELRIC. Subsequently, a federal district court remanded for reconsideration the manner in which the Pennsylvania Commission established the pricing of UNEs in the MFS III Order. The court found that the Pennsylvania Commission had failed to demonstrate that the TSLRIC methodology it applied complies with TELRIC. The district court's order is currently on appeal. 54. In the Global Order, released on September 30, 1999, the Pennsylvania Commission ordered Verizon to adjust its rates to reflect modifications the Pennsylvania Commission made to its earlier decisions. On June 8, 2001, the Pennsylvania Commission released an interim order reviewing Verizon's implementation of the Global Order rates, and setting rates for unbundled elements related to DSL, line sharing, collocation in remote terminals, dark fiber, and sub-loops. Verizon has filed revisions to its tariff to implement most of these rates, and, pursuant to an order by the Pennsylvania Commission, will file the remainder on September 28, 2001. (ii) Discussion 55. Based on the evidence in the record, we find that Verizon's charges for UNEs made available in Pennsylvania to other telecommunications carriers are just, reasonable, and nondiscriminatory in compliance with checklist item 2. The Pennsylvania Commission concludes that Verizon has satisfied the requirements of this checklist item. The Commission has previously held that it will not conduct a de novo review of a state's pricing determinations and will reject an application only if "basic TELRIC principles are violated or the state commission makes clear errors in factual findings on matters so substantial that the end result falls outside the range that the reasonable application of TELRIC principles would produce." In reviewing Verizon's Pennsylvania pricing, we find that the Pennsylvania Commission generally followed basic TELRIC principles, and that the resulting rates are within the range that reasonable application of TELRIC would produce. 56. As an initial matter, we find that the Pennsylvania Commission followed basic TELRIC principles. We reject AT&T's and WorldCom's assertion that the district court's findings demonstrate that the Pennsylvania Commission did not apply TELRIC in its MFS III cost proceeding. The Commission, in adopting the TELRIC methodology, specifically noted that TELRIC is "a version of the methodology commonly referred to as TSLRIC." Thus, the Pennsylvania Commission's use of TSLRIC does not necessarily result in UNE rates that violate TELRIC. Similarly, AT&T and WorldCom assert that Verizon's Pennsylvania UNE rates use an embedded cost methodology, and estimate the cost of replicating rather than replacing Verizon's network, in violation of our TELRIC methodology. We are unconcerned with labels and general characterizations of the approach a state commission uses in setting rates. Instead, we consider allegations of specific decisions in violation of a TELRIC approach, and the actual rates that are in effect. 57. The orders of the Pennsylvania Commission provide numerous indicia that it has followed a forward-looking approach that is consistent with TELRIC. In the MFS III Order, the Pennsylvania Commission made a decision to use Next Generation Digital Loop Carriers rather than existing Digital Loop Carriers. In the Final MFS III Order, the Pennsylvania Commission adjusted the common overhead factor to prevent Verizon from being made whole in the face of anticipated losses arising from competition. In the Global Order, the Pennsylvania Commission made adjustments to the cost of capital and the copper feeder fill factor to better reflect forward- looking levels. We note that these, as well as the vast majority of the specific decisions made by the Pennsylvania Commission, are consistent with the TELRIC methodology, and are not challenged here. 58. We also find that the Pennsylvania Commission properly applied the TELRIC methodology with respect to several issues disputed by the parties. First, WorldCom asserts that the fill factors for copper cable and DLCs are unreasonably low. A fill factor is the estimate of the proportion of a facility that will be used. In other words, the per-unit cost associated with a particular element should take into account the total cost associated with the element divided by a reasonable projection of the actual total usage of the element. In its Global Order, the Pennsylvania Commission set copper cable fill factors at eighty-five percent. We find nothing unreasonable in the copper cable fill factor adopted by the Pennsylvania Commission, and WorldCom has not presented any evidence in support of its contention that this fill factor was set too low. We also note that this fill factor is above what the Commission adopted in the Universal Service proceeding. In the MFS III Order, the Pennsylvania Commission set the DLC fill factor at eighty-five percent. The Pennsylvania Commission decided that Verizon's DLC fill factor struck the appropriate balance between necessary reserve capacity and efficient facility utilization, but that the ninety percent fill factor proposed by AT&T and MCI's witness failed to allow for unforeseen requirements. We find nothing unreasonable in this conclusion, and note that this fill factor adopted is only slightly below the ninety percent level adopted in the Universal Service proceeding. 59. Second, AT&T criticizes the fact that Verizon's loop rates improperly include the cost of a one hundred percent fiber network in anticipation of Verizon someday providing broadband services. We reject AT&T's concerns with respect to Verizon having twenty percent of all loops use one hundred percent fiber cable. The Commission has previously found that, even though fiber can be more expensive than copper in shorter loop lengths, the use of fiber can be consistent with TELRIC. In the Bell Atlantic New York Order, the Commission rejected the argument that Verizon "installed all-fiber feeder in order to subsidize its own broadband network for the provision of future services, and that competitors should not be required to subsidize such costs." Consistent with the New York Commission's findings, the Pennsylvania Commission also found that costs associated with fiber loops are likely to be lower than those of copper loops. The Pennsylvania Commission noted that in setting its loop rates, Verizon only included the voice-grade, narrowband costs, and not the costs of the electronics associated with broadband deployment. We believe that the Pennsylvania Commission's findings here are reasonable, and find that AT&T has not presented evidence sufficient to prove that the Pennsylvania Commission erred in this decision. 60. Third, we reject WorldCom's assertion that Verizon overstates switching costs in the manner by which it incorporates the cost of features. WorldCom claims that certain features are not included within the switching rates, and that Verizon has included the costs for features as if they were separate retail services. Verizon has provided two separate rates for switching ports: one that includes all features, set at $2.67; and one that includes all except four features, set at $1.90. The four features are priced separately. WorldCom provides no evidence that the rates for the full-featured switch port do not incorporate features using a TELRIC methodology, and fails to identify any features that are excluded from the higher switching port rate. The fact that Verizon offers a cheaper alternative with less than all the available features does not render the price for a switch port with all features unlawful. 61. We note that AT&T and WorldCom allege additional specific TELRIC violations not addressed above. Even assuming, arguendo, that all of AT&T's and WorldCom's pricing claims are correct and that the specific inputs do not comply with TELRIC, we conclude that the alleged errors do not yield an end result outside a TELRIC-based range. After comparing relevant rates and costs in Pennsylvania with those in New York, we conclude that the Pennsylvania Commission's calculations result in rates that a reasonable application of TELRIC would produce. 62. Rate Comparison. The Pennsylvania Commission has expended an enormous amount of effort in its ratemaking proceedings, and we applaud the Pennsylvania Commission for the tremendous amount of work it has done. The Pennsylvania Commission's approach is generally compliant with our TELRIC methodology. Indeed, of the literally hundreds of decisions the Pennsylvania Commission has had to make in setting rates, parties allege that only a handful of them are suspect. In examining the rates adopted by the Pennsylvania Commission, we must determine whether Pennsylvania loop and non-loop recurring UNE rates fall outside the range that a reasonable TELRIC-based ratemaking would produce. 63. The Commission has stated that when a state commission does not apply TELRIC or does so improperly (e.g., there was a major methodological mistake or incorrect input or several smaller mistakes or incorrect inputs that collectively could render rates outside the reasonable range that TELRIC would permit), then we will look to rates in other section 271- approved states to see if rates nonetheless fall within the range that a reasonable TELRIC-based ratemaking would produce. In comparing the rates, the Commission has used its USF cost model to take into account the differences in the underlying costs between the applicant state and the comparison state. The Commission has stated that a comparison is permitted when the two states have a common BOC; the two states have geographic similarities; the two states have similar, although not necessarily identical, rate structures for comparison purposes; and the Commission has already found the rates in the comparison state to be reasonable. 64. We find that New York is a permissible state for comparison purposes here. New York is adjoining, has a similar rate structure, and has been found to have adopted reasonable rates in compliance with TELRIC. The Commission's previous orders did not make clear whether two states would be considered as having the same BOC if they were part of the same BOC upon divestiture, when the pricing dockets were considered, or at the time of application. New York and Pennsylvania, although both part of Verizon's service territory, were not part of the same original BOC. We find, however, that while a comparison state's rates must have been found reasonable, the remaining criteria previously set forth should be treated as indicia of the reasonableness of the comparison. This change in our test is mandated because, on review, it is clear that the most relevant factor of the four-part test is TELRIC compliance. Without a finding of TELRIC compliance for the benchmark state, a comparison loses all significance. The other criteria do not rise to such a level. They are useful to assure us that a comparison is meaningful, but the absence of any one of them does not render a comparison meaningless. In this instance, we find that given that New York meets at least three of the four indicia, we are confident that the comparison is sound. The cost model makes no distinction between data among BOCs, and we have no reason to suspect that such a comparison has been made less significant because different BOCs served the two states. 65. As the Commission has previously noted, our USF cost model provides a reasonable basis for comparing cost differences between states. For recurring charges, if the percentage difference between the applicant state's rates and the benchmark state's rates does not exceed the percentage difference between the applicant state's costs and the benchmark state's costs, as predicted by the USF model, then we will find that the applicant has met its burden to show that its rates are TELRIC-compliant. 66. We consider the reasonableness of loop and non-loop rates separately. Where the Commission finds that the state commission correctly applied TELRIC for one category of rates, it will only compare the rates of the other category. If, however, there are problems with the application of TELRIC for both loop and non-loop rates, as is the case with Verizon's rates here, then the same benchmark state must be used for all rate comparisons to prevent a BOC from choosing for its comparisons the highest of approved rates for both loop and non-loop UNEs. 67. We conclude that Pennsylvania recurring UNE rates fall within the range that TELRIC-based ratemaking would produce. Specifically, with respect to loops, in taking a weighted average in Pennsylvania and New York, we find that Pennsylvania's rates are roughly the same as those in New York, even though the USF cost model suggests that costs in Pennsylvania are roughly one-third more than the costs in New York. With respect to non-loop elements, we find that the rates in Pennsylvania are over forty-one percent less than the rates in New York, even though the USF cost model suggests that non-loop costs in Pennsylvania are around six percent more than the costs in New York. In approving Verizon's application in Massachusetts, we also relied on a comparison with New York rates. We note that the rates in Pennsylvania, in contrast to those in Massachusetts, are well below the cost-adjusted rates in New York. This fact gives us even greater confidence as to the reasonableness of the Pennsylvania recurring UNE rates. 68. Non-recurring Charges. We also conclude that based upon the evidence in the record, Verizon has demonstrated that its non-recurring UNE rates are in compliance with TELRIC. The Pennsylvania Commission has reached the same conclusion, and no party has raised allegations challenging these rates. 69. Because we find the rates currently in effect to fall within the range that TELRIC- based ratemaking would produce, we find the concerns of WorldCom regarding a potential delay to the pending UNE cost proceeding before the Pennsylvania Commission to be unwarranted. We also note that the Pennsylvania Commission recently issued an order requiring the UNE rate proceeding to begin on September 17, 2000, and requiring the presiding administrative law judge to issue a decision by April 30, 2002. 70. Finally, we reject WorldCom's and AT&T's contention that competitors lack a sufficient profit margin between Verizon's retail and wholesale rates to allow local residential competition over the UNE-P, which indicates that the UNE rates are not TELRIC-based. In the SWBT Kansas/Oklahoma Order, the Commission held that this profitability argument is not part of the section 271 evaluation of whether an applicant's rates are TELRIC-based. The Act requires that we review whether the rates are cost-based, not whether a competitor can make a profit by entering the market. In this case, we have conducted an analysis of Verizon's recurring UNE rates and concluded that their rates meet this requirement. Questions of profitability are independent of this determination. 71. In addition, conducting a profitability analysis would require us to consider the level of a state's retail rates, because such an analysis requires a comparison between the UNE rates and the state's retail rates. Retail rate levels, however, are within the state's jurisdictional authority, not the Commission's. Conducting such an analysis would further require a determination of what a "sufficient profit margin" is. We are hesitant to engage in such a determination. Moreover, even if this were a relevant consideration, WorldCom has not demonstrated that the rates set by the Pennsylvania Commission do not allow for profitable entry. WorldCom's own submission indicates that the state average rate provides a gross margin of roughly thirty percent for residential lines, and the margin is substantially higher for forty-six percent of the residential lines. WorldCom does not provide any evidence with respect to business lines, where we expect the profitability is even greater. WorldCom's contentions notwithstanding, we note that competition currently exists in Pennsylvania through the use of the UNE-P. 72. For these reasons, we conclude that Verizon meets its pricing obligations under the requirements of checklist item 2. c. Provision of UNE Combinations 73. In order to comply with checklist item 2, a BOC also must demonstrate that it provides nondiscriminatory access to network elements in a manner that allows requesting carriers to combine such elements and that the BOC does not separate already-combined elements, except at the specific request of the competitive carrier. We conclude, based upon the evidence in the record, that Verizon demonstrates that it provides nondiscriminatory access to network element combinations as required by the Act and our rules. We note also that the Pennsylvania Commission found Verizon's provisioning of UNE combinations was compliant with the requirements of this checklist item. 74. In Pennsylvania, Verizon provides access to both combinations of the loop-switch- transport elements (UNE-platform) and the loop-transport elements (enhanced extended loop or EEL). At the time of its application, Verizon had provisioned over 220,000 UNE-platform combinations and 770 EELs, of which approximately 700 were conversions from existing special access circuits. 75. Although commenters do not raise any issues with Verizon's provisioning performance for UNE combinations, several commenters assert that contrary to our rules, Verizon refuses to convert special access circuits to EELs or charges unreasonable termination fees. In reply, Verizon states that it is providing conversions of special access circuits to EELs in compliance with its obligations under our rules and that any termination fees associated with such conversions are reasonable and allowed by our rules. We find that Verizon's position in regards to the conversion of special access circuits to EELs, as presented in this docket, complies with our current rules and that commenters have not presented evidence that Verizon has systematically deviated from its stated policies for such conversions. We further note that our current rules do not require incumbent LECs to waive tariffed termination fees for carriers requesting special access circuit conversion. 2. Checklist Item 4 - Unbundled Local Loops 76. Section 271(c)(2)(B)(iv) of the Act requires that a BOC provide, "[l]ocal loop transmission from the central office to the customer's premises, unbundled from local switching or other services." We conclude that Verizon demonstrates that it provides unbundled local loops in accordance with the requirements of section 271 and our rules. Our conclusion is based on our review of Verizon's performance for all loop types, which include, as in past section 271 orders, voice grade loops, hot cuts, xDSL-capable loops, digital loops, and high capacity loops, and our review of Verizon's processes for line sharing and line splitting. 77. In analyzing Verizon's compliance with this checklist item, we note first that the Pennsylvania Commission approved Verizon's performance as meeting the requirements of section 271. We also recognize that, as of the date of Verizon's application, competitors have acquired and placed into use over 164,000 loops from Verizon in Pennsylvania, which is significantly more than were provided by other applicants at the time previous section 271 applications were filed with the Commission. Finally, we note that commenters have not raised any significant issues with voice grade loops, which comprise the overwhelming majority of loops ordered by competitive LECs. As in past section 271 proceedings, in the course of our review, we look for patterns of systemic performance disparities that have resulted in competitive harm or that have otherwise denied new entrants a meaningful opportunity to compete. Isolated cases of performance disparity, especially when the margin of disparity is small, generally will not result in a finding of checklist noncompliance. 78. Upon review, we find that Verizon provides nondiscriminatory access to all loop types. We also find that Verizon has demonstrated that it adequately provisions line-sharing and line-splitting. Furthermore, as described above in Section A.1.a., we find that Verizon provides access to loop makeup information in compliance with our rules. 79. xDSL-Capable Loops. We find that Verizon demonstrates that it provides stand- alone xDSL-capable loops in accordance with the requirements of checklist item 4. Verizon makes available xDSL-capable loops in Pennsylvania through interconnection agreements and pursuant to tariffs approved by the Pennsylvania Commission. In analyzing Verizon's showing, we review performance measures comparable to those we have relied upon in prior section 271 orders: order processing timeliness, installation timeliness, missed installation appointments, installation quality, and the timeliness and quality of the maintenance and repair functions. 80. We find that Verizon demonstrates that it provisions xDSL-capable loops in a nondiscriminatory fashion. Five of the six performance measures listed above demonstrate that Verizon's performance for competitive LECs is generally in parity with benchmarks established in Pennsylvania. Specifically, Verizon provides responses to competing carrier requests for loop information in substantially the same time and manner as for itself and provides timely order confirmation notices to competitors. Further, Verizon has generally met the benchmark for installation timeliness and missed installation appointments for each month from February through May. Pennsylvania data for maintenance and repair timeliness and quality also show nondiscriminatory performance between competitors and Verizon's retail customers. Both the mean time to repair and the repeat trouble rate are in parity, and Verizon missed fewer repair appointments for competitors than for its own retail customers for most months reported. In addition, the overall level of trouble reports for stand-alone xDSL-capable loops in Pennsylvania is very low. 81. Upon initial review, Verizon's performance for installation quality appears to be out of parity. This is because the current benchmark in Pennsylvania for this metric is a comparison with Verizon's performance for its advanced services affiliate. Verizon explains that although it provides primarily stand-alone xDSL-capable loops to competitive LECs, which generally require the dispatch of a field technician, its advanced services affiliate has exclusively deployed line-sharing, which generally does not require a dispatch. Verizon asserts, therefore, that a more appropriate benchmark for its installation quality performance is its installation quality performance for POTS service orders that require a dispatch. Consistent with the Commission's analysis in previous section 271 orders, we agree that this appears to be a more probative comparison. Viewed against this benchmark, Verizon's performance is in parity. 82. Covad alleges that Verizon excludes a majority of loop orders from its xDSL performance measures, providing an inaccurate picture of Verizon's performance. In its reply comments, Verizon acknowledges that a system programming error caused some competitive LEC orders to be excluded from its performance measures for xDSL. Verizon recalculated the affected metrics to include these improperly excluded orders and submitted this revised data in reply comments it filed in this proceeding. The inclusion of previously excluded orders in the revised data did not affect Verizon's performance under this measure. We find that the revised data supports our conclusion that Verizon's performance is in compliance. 83. Covad also alleges that Verizon designates a majority of Covad trouble reports as "no trouble found," permitting Verizon to exclude reported trouble from the performance metrics prior to final resolution of the trouble. In its reply comments, Verizon denies Covad's allegations, explaining that it does not exclude "no trouble found" orders from the performance measures and moreover, it attempts to contact the competitive LEC to verify the location of the trouble, often obtaining confirmation from the competitor that there was no trouble found. We note that trouble reports are a subject of ongoing dispute between Covad and Verizon. We find that a section 271 application is not an appropriate forum for the resolution of such inter-carrier disputes. 84. NAS asserts that Verizon has failed to conduct cooperative testing on a significant percentage of its xDSL-capable loop orders. Verizon states that it performs cooperative testing on NAS loop orders except in those circumstances where it is not possible to do so, such as when testing equipment is unavailable at the time Verizon installs the loop. Although we expect Verizon to continue to lower the percentage of orders in which it fails to engage in cooperative testing as it gains more experience with this relatively new process, we find that, even assuming that NAS's version of the facts is correct, the evidence presented by NAS is insufficient to show that Verizon's implementation of its corporate policy for cooperative loop testing is discriminatory. 85. Digital Loops. We find that Verizon provisions digital loops to competitors at an acceptable level of performance in Pennsylvania. Verizon's performance for competitive LECs is generally in parity with benchmarks established in Pennsylvania. In particular, Verizon's installation intervals and missed appointments metrics, as well as its repair and maintenance measurements, have shown parity or very low trouble rates in recent months. In addition, while Verizon's performance for installation quality has shown some limited disparity, we find this disparity is minor and therefore not competitively significant. Finally, we note that no commenter raises specific issues with digital loops and that the volume of digital loops ordered by competitors remains relatively low. 86. Hot Cut Activity. We find that Verizon is providing voice grade loops through hot-cuts in Pennsylvania in accordance with the requirements of checklist item 4. We note that no commenter has raised concerns with Verizon's hot-cut provisioning activity. Verizon has satisfied its benchmark for on-time performance for hot-cuts for every month since February 2001, and Verizon indicates that trouble reports received within seven days of installation have been fewer than one percent. In addition, since February, Verizon on average has provided all hot-cuts in just over one day longer than the six-day interval for ten or fewer lines. We note, however, that the data used to calculate Verizon's performance for hot-cuts includes orders of ten or fewer lines as well as orders of greater than ten lines. We, therefore, find that the difference between Verizon's overall hot-cut performance and the six-day benchmark is not competitively significant in these circumstances. 87. Voice Grade Loops. We find that Verizon provides new voice grade loops to competitors in Pennsylvania in accordance with the requirements of checklist item 4. Although Verizon's performance for installation quality has not met parity for each reported month, we find that the difference between the reported numbers for competitors and its own retail customers is nominal and thus, not competitively significant. Verizon's performance for installation intervals also appears out of parity, but in April 2001, Verizon changed the manner in which it provisions voice grade loops for competitors to conform to the manner it provisions service to its own retail customers. Using the new process, Verizon's performance has improved. We also note that no commenter has raised an issue relating to voice grade loops. 88. Line Sharing. We find that Verizon demonstrates that it provides nondiscriminatory access to the high frequency portion of the loop, pursuant to its interconnection agreements and in accordance with our rules. Although ordering volumes have been low, Pennsylvania performance data demonstrate that Verizon's performance for provisioning and maintaining line-shared DSL loops to competitors is generally in parity. 89. Line Splitting. Based on the evidence in the record, we find that Verizon complies with its line-splitting obligations and that Verizon demonstrates it provides access to network elements necessary for competing carriers to provide line splitting. Verizon states that, since June 2001, it has accepted line-splitting orders through an interim process. Competitive LECs have raised no complaints about Verizon's interim process or its plan for permanent line-splitting OSS. We find, therefore, given the record before us, that Verizon's interim process for line- splitting orders is in compliance with the requirements of this checklist item. In addition, Verizon asserts that it will transition to a permanent OSS process for line splitting in Pennsylvania by October 2001. We expect Verizon to meet its commitment to implement permanent OSS for line splitting by October 2001. 90. High Capacity Loops. Given the totality of the evidence, we find that Verizon's performance with respect to high capacity loops does not result in a finding of noncompliance for checklist item 4. Verizon's performance data for installation quality and maintenance and repair functions demonstrate that it has been comparable for Verizon retail customers and competitors. We recognize, however, that Verizon's performance with respect to other performance measures for high capacity loops has been poor in Pennsylvania. Verizon's installation intervals for competitive LECs are consistently longer than those for its retail customers, and Verizon has missed a significant percentage of appointments to provision high capacity loops for competitors. High capacity loops, however, represent a small percentage of all loops ordered by competitors in Pennsylvania. Given the relatively low volume of orders for high capacity loops compared to all loop types, we cannot find that Verizon's performance for high capacity loops warrants a finding of checklist noncompliance for all loop types. 91. In addition to Verizon's performance-related issues, several competing carriers allege that Verizon refuses to provide high capacity loops as unbundled network elements unless all necessary equipment and electronics are present on the line and at the customer's premises. According to commenters, this practice violates Commission rules. Verizon responds that its policy is to provide unbundled high capacity loops when all facilities, including central office and end-user equipment and electronics, are currently available. Moreover, Verizon explains that, where facilities are currently unavailable, but Verizon has construction underway to meet its own future demand, it will provide competitive LECs with an installation date based on the anticipated completion date of the pending job. Further, when requisite electronics, such as line cards, have not been deployed but space exists for them in the multiplexers at the central office and end- user premises, Verizon will order and place the necessary line cards in order to provision the high capacity loop. Verizon will also perform the cross connection work between the multiplexers and the copper or fiber facility running to the end user. In the event that spare facilities and/or capacity on those facilities is unavailable, Verizon will not provide new facilities solely to complete a competitor's order for high-capacity loops. In those circumstances, Verizon will only provide a high-capacity facility pursuant to tariff. 92. We disagree with commenters that Verizon's policies and practices concerning the provisioning of high capacity loops, as explained to us in the instant proceeding, expressly violate the Commission's unbundling rules. Accordingly, we decline to find that these allegations warrant a finding of checklist non-compliance. To the extent that commenters have specific disputes with Verizon's actual practice in implementing these policies, such disputes are best addressed in an alternative forum. As we have stated in other section 271 orders, new interpretative disputes concerning the precise content of an incumbent LEC's obligations to its competitors, disputes that our rules have not yet addressed and that do not involve per se violations of the Act or our rules, are not appropriately dealt with in the context of a section 271 proceeding. 3. Checklist Item 14 - Resale 93. Section 271(c)(2)(B)(xiv) of the Act requires that a BOC make "telecommunications services . . . available for resale in accordance with the requirements of section 251(c)(4) and section 252 (d)(3)." Based on the record in this proceeding, we conclude that Verizon satisfies the requirements of this checklist item in Pennsylvania. In reaching this conclusion, we reaffirm our determination in the Verizon Connecticut Order concerning the scope of Verizon's DSL resale obligations after the United States Court of Appeals decision in ASCENT v. FCC. Thus, for the reasons set forth in the Verizon Connecticut Order, we conclude that, post-ASCENT, it would be unreasonable under sections 251(c)(4) and 252(d)(3) of the Act for Verizon to limit the resale of DSL to customers receiving retail voice service from Verizon. Accordingly, we cannot accept Verizon's contention that it is not required to permit the resale of DSL unless Verizon also provides voice service on the line involved. 94. We find that Verizon demonstrates that it is currently in compliance with the requirements of this checklist item in Pennsylvania. Verizon has a concrete and specific legal obligation in its interconnection agreements and tariffs to make its retail services available for resale to competing carriers at wholesale rates. None of the commenting parties question Verizon's showing of compliance with the requirements of this checklist item except in the area of DSL resale. Our review of the record confirms that Verizon clearly demonstrates checklist compliance in those areas not involving DSL. 95. We further conclude that Verizon demonstrates current compliance with the checklist requirements with regard to DSL resale. As discussed in more detail below, in reaching this conclusion, we waive our procedural requirements to permit consideration of information and events taking place after the deadline for filing comments. Verizon Advanced Data Inc.'s (VADI's) tariff revisions making expanded DSL resale available in the former Bell Atlantic areas in Pennsylvania became effective on September 1, 2001. This offering is the same as that in Connecticut except for certain implementation details. The tariff provides that VADI will process up to 100 orders for the expanded DSL resale offering per day until October 1, 2001. From October 1, 2001 through December 1, 2001, VADI will process up to 200 orders per day, with no cap on the number of orders the company will process per day thereafter. The tariff also states that there is no limit on the number of expanded DSL resale orders that carriers may submit, adding that the company will process all orders in the order in which they are received. 96. In light of this, we cannot agree with commenting parties that argue Verizon has failed to demonstrate present compliance with the requirements of this checklist item. Based on the current record before us, we conclude that the order processing obligations in the tariff are sufficient to accommodate reasonably anticipated current commercial demand for the expanded DSL resale offering. In particular, we conclude that VADI's obligation to process up to 100 orders per day is sufficient to address initial demand based on the current record, and thus demonstrate current compliance with its resale obligations. We also note that the obligation to process up to 200 orders per day beginning on October 1, 2001, and to eliminate this limit on December 1, 2001, should ensure that Verizon remains in compliance with its section 271 resale obligations. In particular, these steps appear reasonably calculated to address increases in demand that are likely to occur in the future as resellers expand their marketing efforts and increase the availability of resold DSL to consumers. 97. Moreover, we cannot agree with commenting parties arguing that Verizon must permit resale of DSL service in conjunction with voice service provided using the UNE loop or UNE-P in order to demonstrate compliance with this checklist item. As stated in the Verizon Connecticut Order, we continue to believe that resale of DSL in this context "raises significant additional issues concerning the precise extent of an incumbent LEC's resale obligations." Such issues would require additional proceedings to resolve, and we do not consider them in the context of this application. 98. As previously stated, we waive the Commission's general procedures restricting the submission of late filed information and the consideration of developments that occur after the date for filing comments. This will allow us to rely on VADI's tariff filing offering expanded DSL resale that became effective on September 1, 2001 and the information contained in Verizon's August 31 Ex Parte Letter. We recognize that "a waiver is appropriate only if special circumstances warrant a deviation from the general rule and such deviation will serve the public interest." Under the present circumstances, however, we conclude that this test is satisfied. Special circumstances exist that satisfy the first prong of the waiver test. First, these tariff revisions are virtually identical to those previously filed for Connecticut, with the exception of the order processing provisions. As a result, they place a very limited additional analytical burden on the staff. The tariff revisions filed by VADI also constitute positive action that will actively facilitate the development of competition. In addition, modifying the VADI and Verizon internal order processing systems to accommodate these resale obligations is relatively complex, and the Commission did not address the extent of Verizon's DSL resale obligations in light of the ASCENT decision until after this application was filed. We also find that grant of this waiver to allow consideration of late-filed information and recent developments will serve the public interest under the present circumstances by avoiding the administrative delay inherent in rejecting an otherwise persuasive application for failure to demonstrate compliance with this checklist item. In light of the fact that Verizon now has ample notice of the Commission's determination concerning its DSL resale obligations, we do not expect to grant similar waivers to Verizon in the context of future section 271 applications. B. Other Items 1. Checklist Item 1 - Interconnection 99. Section 271(c)(2)(B)(i) requires the BOC to provide equal-in-quality interconnection on terms and conditions that are just, reasonable and nondiscriminatory in accordance with the requirements of sections 251 and 252. Based on our review of the record, we conclude that Verizon demonstrates that it is in compliance with the requirements of this checklist item. We also note that the Pennsylvania Commission found that Verizon satisfied this checklist item and that no commenters raised any issues concerning Verizon's performance for the provisioning of interconnection. 100. Although several commenters assert that Verizon does not permit interconnection at a single point per LATA, we conclude that Verizon's policies do not represent a violation of our existing rules. Verizon states that it does not restrict the ability of competitors to choose a single point of interconnection per LATA because it permits carriers to physically interconnect at a single point of interconnection (POI). Verizon acknowledges that its policies distinguish between the physical POI and the point at which Verizon and an interconnecting competitive LEC are responsible for the cost of interconnection facilities. The issue of allocation of financial responsibility for interconnection facilities is an open issue in our Intercarrier Compensation NPRM. We find, therefore, that Verizon complies with the clear requirement of our rules, i.e., that incumbent LECs provide for a single physical point of interconnection per LATA. Because the issue is open in our Intercarrier Compensation NPRM, we cannot find that Verizon's policies in regard to the financial responsibility for interconnection facilities fail to comply with its obligations under the Act. 101. Covad claims that Verizon's process for migrating virtual collocation arrangements to physical collocation arrangements violates section 251(c)(6) of the Act. Our collocation rules do not explicitly address the appropriate terms and conditions for collocation migration, but we note that the incumbent LEC has a statutory duty to provide for physical collocation at rates, terms, and conditions that are just, reasonable, and nondiscriminatory. The record before us is insufficient to show that Verizon's migration process violates section 251(c)(6), and thus in turn, affects section 271 compliance. Covad's claim is a fact-specific dispute concerning Verizon's statutory obligations. We find, therefore, that a complaint brought before the Commission through the section 208 complaint process is the more appropriate place for this allegation to be examined. As the Commission has found in past proceedings, given the time constraints, the section 271 process simply could not function if we were required to resolve every interpretive dispute between a BOC and each competitive LEC about the precise content of the BOC's obligations to its competitors. 102. In addition, we reject Sprint's contention that Verizon impermissibly attempts to impose a collocation obligation on competitive LECs through the negotiation of interconnection agreements. Although the 1996 Act does not impose a collocation obligation on non- incumbent LECs, we find no evidence in the record that Verizon has conditioned its provision of collocation on a competitive LEC's agreement to provide collocation to Verizon. 103. Finally, parties assert that an independent audit report demonstrates that Verizon does not comply with all of the Commission's collocation rules. In response, Verizon states that it has modified and improved its collocation procedures to address the issues raised in the audit and by the commenters and is thus now in compliance with this checklist item. There is no evidence in the record to suggest that Verizon's current collocation procedures have not addressed any section 271 concerns raised by the audit cited by these commenters. Moreover, we note that audit results are not a legal determination of Verizon's section 271 compliance. Based on the record in this proceeding, we believe that Verizon has demonstrated compliance with this checklist item. a. Pricing of Interconnection 104. Checklist item 1 requires a BOC to provide "interconnection in accordance with the requirements of sections 251(c)(2) and 252(d)(1)." The Commission's pricing rules require, among other things, that in order to comply with its collocation obligations, an incumbent LEC provide collocation based on TELRIC. Based on the record, we find that Verizon offers interconnection in Pennsylvania to other telecommunications carriers at just, reasonable and nondiscriminatory rates and is therefore in compliance with checklist item 1. The Pennsylvania Commission concludes that Verizon currently provides collocation under approved interconnection agreements and tariffs, consistent with Commission and Pennsylvania Commission orders. 105. We find that the collocation pricing issue raised by Sprint does not cause Verizon to fail this checklist item. Sprint asserts that by charging per feed rather than based on the amount of power the feed actually drains, Verizon double charges competitive LECs for DC power. Sprint states that competitive LECs order double power feeds to ensure that at least one feed will be able to deliver the necessary amps should the other one fail. Sprint cites to an industry letter from Verizon stating that "Verizon East will provision and bill DC power applications in accordance with the prevailing tariff terms, conditions, and rates in effect." Sprint contends, however, that the "prevailing tariff terms, conditions and rates in effect" in Pennsylvania today allow Verizon to double charge for back-up power. 106. Verizon disputes Sprint's assertion that most competitive LECs configure their equipment to use either the primary feed or the back-up feed, but not both. Verizon contends that most competitive LECs have collocation equipment that is designed to draw power from two power feeds simultaneously. To support this statement, Verizon surveyed over 806 power feeds at collocation arrangements in Pennsylvania, and found that eighty-one percent were drawing power on both feeds at the time of the test. Verizon also asserts it does not require competitive LECs to take a primary feed and a back-up feed; rather, it is up to the competitive LEC to determine the number of feeds delivered. 107. Verizon asserts that it has worked cooperatively with competitive LECs, and has agreed to charge competitive LECs for the number of load amps actually ordered rather than the number of fused amps. Verizon filed the required tariff amendments on April 2, 2001. Additionally, Verizon issued the above-mentioned industry letter clarifying how competitive LECs should order DC power. Verizon states that it provides competitive LECs with a way of purchasing only the power they want because, regardless of the number of power feeds requested by the competitive LEC, all power feeds in a central office draw power from the same power source. If that power source fails, none of the other power feeds to the competitive LECs or Verizon's telecommunications equipment will be able to supply power. 108. This issue was also raised in Massachusetts, and as was the case there, the issue is currently before the state commission. As we noted in the SWBT Texas Order, the Act authorizes the state commissions to resolve specific carrier-to-carrier disputes arising under the local competition provisions, and it authorizes the federal district courts to ensure that the results of the state arbitration process are consistent with federal law. Although we have an independent obligation to ensure compliance with the checklist, section 271 does not compel us to preempt the orderly disposition of intercarrier disputes by the state commissions, particularly now that the Supreme Court has restored our pricing jurisdiction and has thereby directed the state commissions to follow our pricing rules in their disposition of those disputes. As we do with respect to the Massachusetts Department, we have confidence in the Pennsylvania Commission's ability to resolve this matter consistent with our rules. Verizon has amended its collocation tariff to address the concerns of the parties, and parties have presented no evidence that Verizon is not fully cooperating with the efforts of the Pennsylvania Commission to resolve these issues. We therefore find that these disputes do not cause Verizon to fail this checklist item. 2. Checklist Item 5 - Unbundled Transport 109. Section 271(c)(2)(B)(v) of the competitive checklist requires a BOC to provide "[l]ocal transport from the trunk side of a wireline local exchange carrier switch unbundled from switching or other services." Verizon provides unbundled transport pursuant to interconnection agreements and tariffs. We conclude, based upon the evidence in the record, that Verizon demonstrates that it provides both shared and dedicated transport in compliance with the requirements of checklist item 5. We also note that the Pennsylvania Commission found that Verizon complies with this checklist item. 110. In prior section 271 orders, the Commission has reviewed the missed appointment rates for the provision of interoffice facilities to competitive LECs to determine compliance with checklist item 5. On first examination, the missed appointment rate performance appears to depict a significant difference in the provision of interoffice facilities for competitive LECs compared to the retail analogue described in the carrier-to-carrier guidelines. All parties appear to agree, however, that the revised retail analogue used for this measure in New York and Massachusetts should be adopted in Pennsylvania. As we found in the Verizon Connecticut Order, we agree that the revised retail analogue provides a more appropriate standard to gauge Verizon's unbundled transport performance. Using the revised retail analogue, the weighted average for Verizon's missed installation appointment rate in Pennsylvania for retail DS-3 service was 19.27 percent, as compared to the reported competitive LEC transport performance of 12.31 percent. Based on this data, we conclude that Verizon provides unbundled transport to competitive LECs in a nondiscriminatory manner. 111. Commenters also argue that Verizon attempts to mask poor transport provisioning performance by seeking to exclude from the performance measurements orders for which no facilities are available. As noted above, the revised retail analogue for missed transport provisioning appointments supports our conclusion that Verizon complies with this checklist item. We have not relied on Verizon's proposed exclusion of "no facilities" orders from the performance measurements in finding compliance with this checklist item. Commenters also assert that Verizon claims UNE transport facilities are unavailable in order to force requesting carriers to order transport circuits through Verizon's special access tariffs. The record does not offer sufficient evidence to support that claim. We do, however, expect Verizon to meet its obligations to take those steps necessary to make UNEs available to requesting carriers as required by our rules. We will continue to monitor Verizon's performance in this area, and will take swift and appropriate enforcement action in the event such action is warranted by the facts. 112. Verizon has established two trial programs to address commenters concerns regarding parallel provisioning under Verizon's current ordering systems for both dark fiber and transport facilities in general. One of the ongoing trials allows Cavalier to request collocation and the provision of dark fiber contemporaneously. If this trial is successful, the new provisioning process for dark fiber ordering will be expanded to all carriers, subject to the negotiation of interconnection agreement amendments, as necessary. Sprint and Verizon also have established a similar trial to test the technical and practical viability of implementing a parallel provisioning structure for DS-3 interoffice transport facilities and collocation arrangements. In light of these facts, we believe that commenters' transport and dark fiber ordering concerns have been adequately addressed. 113. Finally, we reject Yipes' arguments that the restrictions Verizon places on the provisioning of unbundled dark fiber deny competitors the opportunity to meaningfully compete. As both Yipes and Verizon acknowledge, the dark fiber issues raised by Yipes are currently before the Pennsylvania Commission for arbitration. Moreover, some of these issues now appear to be moot. We believe that Yipes' concerns are best resolved through the section 252 negotiation and arbitration process, which Yipes has already invoked, or through the section 208 complaint process. 3. Checklist Item 8 - White Pages Directory Listings 114. Section 271(c)(2)(B)(viii) of the competitive checklist requires a BOC to provide "[w]hite page directory listings for customers of the other carrier's telephone exchange service." Based on the evidence in the record, we conclude that Verizon satisfies the requirements of checklist item 8. Verizon asserts that KPMG found Verizon's performance acceptable and that Verizon provides directory listings to competitive LECs in Pennsylvania under the same business rules as the Commission previously approved in Verizon's New York and Massachusetts applications. We also note that the Pennsylvania Commission found that Verizon complies with this checklist item. 115. XO and CTSI allege that Verizon's accuracy rate for their customers' directory listings is higher than Verizon's accuracy rate for its own retail customers. XO states that Verizon committed several errors for individual listings in the Allentown/ Bethlehem, Harrisburg, and Philadelphia directory listing verification report (LVR). Verizon, however, explains that the LVR is intended to provide an opportunity for competitors to detect and correct potential listings errors before publication and therefore the LVR is not representative of the accuracy of the published directory. Verizon further explains that it has established additional measures to further improve the accuracy of its order process. As the Commission has noted in prior orders, we require BOCs to implement procedures that are intended to minimize the potential for errors in the listings provisioned for the customers of competing LECs. We accept as reasonable Verizon's contention that the listing verification report and its quality-assurance procedures are designed to minimize potential directory listings errors and, based on our review of the record, we find that Verizon satisfies our requirements. Accordingly, we reject XO's contention that errors contained in an LVR are evidence of discriminatory treatment. 116. For similar reasons, we reject CTSI's contention that Verizon's error rate for two directories represents discriminatory treatment. The record indicates that Verizon failed to correct 87 out of 205 errors CTSI identified in the Lancaster LVR and "approximately 188" out of 1004 errors it identified in the Wyoming Valley LVR. Verizon, however, contends that these LVR "error rates" are not representative of the actual accuracy rate for CTSI and overall competitive LEC entries in the published directories. We agree with Verizon that evidence concerning the number of corrections made to errors reported in an LVR does not necessarily reflect actual provisioning accuracy for published directories. Based on our review of the evidence in the record, we do not find that the number of errors present in the published directories cited by CTSI to be competitively significant. 117. Commenters also allege that Verizon's manual method for processing facilities- based competitors' directory listings orders unnecessarily introduces opportunity for additional error. Based on our conclusion above that Verizon meets this checklist item, we reject commenters contentions that such manual treatment is a per se violation. As we have concluded in previous orders, the Commission does not require incumbent LECs to provide a certain level of automation in the provision of wholesale services, rather incumbent LECs must undertake additional automation as necessary to ensure that it can provide nondiscriminatory treatment to competitive LECs in light of existing and reasonably foreseeable commercial volume. We nevertheless acknowledge commenters' concerns about Verizon's manual processing and the increased need for automation as competitive volumes increase in Pennsylvania. Therefore, while we do not rely on such evidence for our finding of present compliance, we take additional comfort that Verizon has committed to further automate many of the manual processes identified by commenters in this record. C. Checklist Item 13 - Reciprocal Compensation 118. Section 271(c)(2)(B)(xiii) of the Act requires that a BOC enter into "[r]eciprocal compensation arrangements in accordance with the requirements of section 252(d)(2)." In turn, section 252(d)(2)(A) specifies when a state commission may consider the terms and conditions for reciprocal compensation to be just and reasonable. Based on the record, we conclude that Verizon demonstrates that it provides reciprocal compensation as required by checklist item 13. We reject Sprint's contention that Verizon is not in compliance with the reciprocal compensation requirements of the Act. Sprint asserts that Verizon is characterizing all outbound operator services "00 minus" calls as access traffic, even though a user can dial "00 minus" to make a local call. Sprint argues that Verizon's decision to subject all "00 minus" calls to access charges is violative of the Act. We observe that Sprint's dispute over reciprocal compensation and access charges is currently before the Pennsylvania Commission in an arbitration proceeding. As the Commission noted in the SWBT Texas Order, the Act authorizes the state commissions to resolve specific carrier-to-carrier disputes arising under the local competition provisions, and it authorizes the federal district courts to ensure that the results of the state arbitration process are consistent with federal law. Although we have an independent obligation to ensure compliance with the checklist, section 271 does not compel us to preempt the orderly disposition of intercarrier disputes by the state commissions. 119. We also reject commenters' assertion regarding reciprocal compensation for ISP- bound traffic. Under a prior Commission order, ISP-bound traffic is not subject to the reciprocal compensation provisions of section 251(b)(5) and 252(d)(2). This decision was reaffirmed by the recent Commission order on remand, which found that ISP-bound traffic is information access traffic under section 251(g) and thus not subject to reciprocal compensation. Therefore, we continue to find that whether a carrier pays such compensation is "irrelevant to checklist item 13." We therefore conclude that Verizon has met its obligations under Checklist Item 13. D. Remaining Checklist Items (3, 6, 7, and 9-12) 120. In addition to showing that it is in compliance with the requirements discussed above, an applicant under section 271 must demonstrate that it complies with checklist item 3 (access to poles, ducts, and conduits), item 6 (unbundled local switching), item 7 (911/E911 access and directory assistance/operator services), item 9 (numbering administration), item 10 (databases and associated signaling), item 11 (number portability), and item 12 (local dialing parity). Based on the evidence in the record, we conclude that Verizon demonstrates that it is in compliance with checklist items 3, 6, 7, 9, 10, 11, and 12 in Pennsylvania. We also note that the Pennsylvania Commission concluded that Verizon complies with the requirements of each of these checklist items. IV. COMPLIANCE WITH SECTION 271(C)(1)(A) 121. In order for the Commission to approve a BOC's application to provide in-region, interLATA services, a BOC must first demonstrate that it satisfies the requirements of either section 271(c)(1)(A) (Track A) or section 271(c)(1)(B) (Track B). To qualify for Track A, a BOC must have interconnection agreements with one or more competing providers of "telephone exchange service . . . to residential and business subscribers." 122. We conclude, as the Pennsylvania Commission did, that Verizon demonstrates that it satisfies the requirements of Track A based on the interconnection agreements it has implemented with competing carriers in Pennsylvania. In support of its Track A showing, Verizon relies on interconnection agreements with AT&T, WorldCom, RCN and Commonwealth Telephone Services (CTSI) in Pennsylvania. Specifically, Verizon contends that AT&T serves residential customers, WorldCom serves business customers and RCN and CTSI serve both residential and business customers. Collectively, these companies provide telephone exchange service, predominantly over their own facilities, to residential and business subscribers. 123. We conclude that a sufficient number of residential and business customers are being served by competing LECs through the use of their own facilities to demonstrate that there is an actual commercial alternative to Verizon in Pennsylvania. Verizon has shown that facilities-based competing carriers serve more than a de minimis number of residential customers in Pennsylvania. No carrier has challenged Verizon's evidence with regard to the level of facilities-based business competition. V. SECTION 272 COMPLIANCE 124. Section 271(d)(3)(B) provides that the Commission shall not approve a BOC's application to provide interLATA services unless the BOC demonstrates that the "requested authorization will be carried out in accordance with the requirements of section 272." Based on the record, we conclude that Verizon has demonstrated that it will comply with the requirements of section 272. Significantly, Verizon provides evidence that it maintains the same structural separation and nondiscrimination safeguards in Pennsylvania, as it does in Connecticut, New York and Massachusetts, states in which Verizon has already received section 271 authority. No party challenges Verizon's section 272 showing. VI. PUBLIC INTEREST ANALYSIS 125. Separate from determining whether a BOC satisfies the competitive checklist and will comply with section 272, Congress directed the Commission to assess whether the requested authorization would be consistent with the public interest, convenience, and necessity. We conclude that approval of this application is consistent with the public interest. From our extensive review of the competitive checklist, which embodies the critical elements of market entry under the Act, we find that barriers to competitive entry in the local exchange markets have been removed and the local exchange markets today are open to competition. We further find that the record confirms our view, as noted in prior section 271 orders, that BOC entry into the long distance market will benefit consumers and competition if the relevant local exchange market is open to competition consistent with the competitive checklist. 126. We disagree with those commenters that assert under our public interest examination we must consider the level of competitive LEC market share, the financial strength of competitive LECs and the failure of other BOCs to enter the market in Pennsylvania as evidence that, despite checklist compliance, the local market is not yet truly open to competition. For example, one commenter argues that the relatively low percentage of residential customers served by competitive LECs indicates the market is not yet open. Another commenter suggests that the failure of other BOCs to compete with Verizon in Pennsylvania raises similar questions as to whether the market is truly open. Given an affirmative showing that the competitive checklist has been satisfied, low customer volumes or the failure of any number of companies to enter the market in and of themselves do not undermine that showing. Factors beyond the control of the BOC, such as individual competitive LEC entry strategies might explain a low residential customer base. We note that Congress specifically declined to adopt a market share or other similar test for BOC entry into long distance and we have no intention of establishing one here. A. Assurance of Future Compliance 127. As set forth below, we find that the existing performance assurance plan ("PAP") currently in place for Pennsylvania provides assurance that the local market will remain open after Verizon receives section 271 authorization. The plan in combination with the Pennsylvania Commission's active oversight of the PAP and its stated intent to adopt revised metrics and performance assurance remedies provides additional assurance the local market will remain open. In prior orders, the Commission has explained that one factor it may consider as part of its public interest analysis is whether a BOC would have adequate incentives to continue to satisfy the requirements of section 271 after entering the long distance market. Although it is not a requirement for section 271 authority that a BOC be subject to such performance assurance mechanisms, the Commission previously has stated that the existence of a satisfactory performance monitoring and enforcement mechanism would be probative evidence that the BOC will continue to meet its section 271 obligations after a grant of such authority. 128. In prior section 271 orders, the Commission has reviewed performance assurance plans modeled after either the New York Plan or the Texas Plan. Although similar in some respects, the current Pennsylvania plan, however, differs significantly from each of these two plans. As stated above, we do not require any monitoring and enforcement plan and therefore, we do not impose requirements for its structure if the state has chosen to adopt such a plan. We recognize that states may create plans that ultimately vary in their strengths and weaknesses as tools for post-section 271 authority monitoring and enforcement. We also recognize that the development of performance measures and appropriate remedies is an evolutionary process that requires changes to both measures and remedies over time. We anticipate that state commissions will continue to build on their own work and the work of other states in order for such measures and remedies to most accurately reflect actual commercial performance in the local marketplace. 129. We conclude that the Pennsylvania PAP provides incentives to foster post-entry checklist compliance. We note that the Pennsylvania PAP was developed in an open proceeding with participation by all sectors of the industry. We further note that the Pennsylvania Commission is presently conducting a proceeding intended to adopt revised metrics and performance assurance remedies. As in prior section 271 orders, our conclusions are based on a review of several key elements in any performance assurance plan: total liability at risk in the plan; performance measurement and standards definitions; structure of the plan; self-executing nature of remedies in the plan; data validation and audit procedures in the plan; and accounting requirements. We discuss only those elements that parties have raised substantial issues with in the record. 130. Commenters assert that although the PAP does not place a cap on total payments to competitive LECs, the actual amount Verizon is likely to pay for discriminatory performance to competitive LECs is insufficient to deter Verizon activity. In response we note that, the PAP is not the only means of ensuring that Verizon continues to provide nondiscriminatory service to competing carriers. In addition to the monetary payments at stake under this plan, Verizon faces other consequences if it fails to sustain an acceptable level of service to competing carriers, including: enforcement provisions in interconnection agreements, federal enforcement action pursuant to section 271(d)(6) and remedies associated with antitrust and other legal actions. 131. Commenters also argue that the effectiveness of the PAP is limited because of incomplete or missing important metrics, improper implementation of existing metrics, ineffective metrics and change management process and unverified performance results. We recognize that development and implementation of metrics and inclusion in a PAP is an ongoing process. During this year the Pennsylvania Commission already has updated the PAP by requiring Verizon to separately report line-sharing and DSL metrics, revise certain billing metrics, and increase the penalty for missing a metric for four months or more. We also note that Verizon has agreed to adapt the performance measurements and standards used in New York to Pennsylvania. In addition, commenters assert that New York metrics must be implemented in Pennsylvania by Verizon prior to section 271 approval. We disagree. As we stated above, we believe that in combination with the existing PAP, the ongoing work by the Pennsylvania Commission to revise the performance measurements and standards is sufficient to provide us with assurance that Verizon will continue to comply with its section 271 obligations after approval. 132. Finally, commenters assert that the public interest requires Verizon to commit not to challenge the Pennsylvania Commission's authority to implement or modify the PAP. We note that the Pennsylvania Commission was satisfied by Verizon's withdrawal of its previous lawsuit challenging the Pennsylvania Commission's authority to implement a PAP. B. Other Public Interest Issues 133. WorldCom asserts that Verizon's Local Service Provider Protection Service ("local freeze") is anti-competitive. We have previously stated, however, that a "local freeze" program is not a per se violation of our rules, but rather there must be some anti-competitive impact from the particular implementation of the program. Based on the record before us, we are not able to find this service to have such an anti-competitive impact as to raise public interest concerns necessitating withholding of section 271 approval. WorldCom has taken appropriate action, that is, filed a complaint with the appropriate state commission and may do so with this Commission. 134. AT&T asserts that prior to a grant of section 271 authority for Pennsylvania, Verizon should be required to demonstrate that its affiliate, GTE North, complies with the checklist, or in the alternative, Verizon should not receive section 271 authority to provide interLATA services from GTE North's territory. As discussed in Section II above, the Act requires Verizon to demonstrate checklist compliance for the BOC or its successor or assign but not for its affiliates. GTE North is not a successor or assign of the BOC applicant described in the Act, namely "The Bell Telephone Company of Pennsylvania," but rather is an affiliate acquired as a result of the merger between Bell Atlantic and GTE. Once the requirements of section 271 are met, the statute provides for a grant of interstate authority to the BOC for the entire state. Nothing in the Act or the Commission's own review of the record supports a subsequent modification of the grant of authority to prohibit such service in the GTE North territory. VII. SECTION 271(d)(6) ENFORCEMENT AUTHORITY 135. Section 271(d)(6) of the Act requires Verizon to continue to satisfy the "conditions required for . . . approval" of its section 271 application after the Commission approves its application. Thus, the Commissi