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SCOPE OF COMMISSION AUTHORITY p"(# 20  X-XX` ` A.` ` Rulemaking Authority ` p"(# 20  X-XX` ` B.` ` Scope of Commission's Authority Regarding InterLATA Services ` p"(# 25 X\III. ACTIVITIES SUBJECT TO SECTION 272 REQUIREMENTS p"(# 50  X-XX` ` A.` ` General Issues ` p"(# 51  X -XX` ` X ` ` 1. Definition of "interLATA services" p"(# 51  Xk!-XX` ` X ` ` 2. Application of Section 272 Safeguards to International InterLATA Services p"(# 58  X=#-XX` ` X ` ` 3. Provision of Services through a Single Affiliate p"(# 59  X&$-XX` ` X ` ` 4. Manufacturing Activities p"(# 64  X%-XX` ` B.` ` Mergers/Joint Ventures of Two or More BOCs ` p"(# 65  X%-XX` ` C.` ` Previously Authorized Activities ` p"(# 71  X&-XX` ` D.` ` Outofregion interLATA information services ` p"(# 82"&,-(-(ZZ%"Ԍ X-XX` ` E.` ` Incidental InterLATA Services ` p"(# 88  X-XX` ` F.` ` InterLATA Information Services ` p"(# 99  X-XX` ` X ` ` 1. Relationship Between Enhanced Services and Information Services p"(# 99  X-XX` ` X ` ` 2. Distinguishing InterLATA Information Services subject to Section 272 from IntraLATA Information Services p!(# 108  Xv-XX` ` X ` ` 3. BOCprovided Internet Access Services p!(# 125  X_-XX` ` X ` ` 4. Impact of the 1996 Act on the Computer II, Computer III, and  XH-ONA requirements p!(# 128  X1-XX` ` G.` ` Information Services Subject to Other Statutory Requirements ` p!(# 138  X -XX` ` X ` ` 1. Electronic Publishing (section 274) p!(# 138  X -XX` ` X ` ` 2. Telemessaging (section 260) p!(# 143 X\IV. STRUCTURAL SEPARATION REQUIREMENTS OF SECTION 272 p!(# 146  X -XX` ` A.` ` Application of the Section 272(b) Requirements ` p!(# 146  X -XX` ` B.` ` The "Operate Independently" Requirement ` p!(# 147  X-XX` ` C. ` ` Section 272(b)(3) and Shared Services ` p!(# 171  Xy-XX` ` E.` ` Section 272(b)(4) ` p!(# 187  Xb-XX` ` F.` ` Section 272(b)(5) ` p!(# 191 X\V. NONDISCRIMINATION SAFEGUARDS p!(# 194  X-XX` ` A.` ` Relationship of Section 272(c)(1) and Preexisting Nondiscrimination Requirements ` p!(#195  X-XX` ` B.` ` Meaning of Discrimination in Section 272(c)(1) ` p!(# 198  X-XX` ` C.` ` Definition of "Goods, Services, Facilities and Information" in Section 272(c)(1) ` p!(#213  X-XX` ` D.` ` Establishment of Standards ` p!(#223  X-XX` ` E.` ` Procurement Procedures ` p!(#231  X|-XX` ` F.` ` Enforcement of Section 272(c)(1) ` p!(#236 X\VI. FULFILLMENT OF CERTAIN REQUESTS PURSUANT TO SECTION 272(e) p!(#237  X7-XX` ` A.` ` Section 272(e)(1) ` p!(#237  X -XX` ` B.` ` Section 272(e)(2) ` p!(#246  X -XX` ` C.` ` Section 272(e)(3) ` p!(#254  X-XX` ` D.` ` Section 272(e)(4) ` p!(#259  X-XX` ` E.` ` Sunset of Subsections 272(e)(2) and (4) ` p!(#268 X\VII. JOINT MARKETING p!(#272  X"-XX` ` A.` ` Joint Marketing Under Section 271(e) ` p!(#272  X#-XX` ` B.` ` Section 272(g) ` p!(#283  Xh$-XX` ` X ` ` 1. Marketing Restrictions on BOC Section 272 Affiliates p!(#283  XQ%-XX` ` X ` ` 2. Marketing Restrictions on BOCs p!(#288  X:&-XX` ` X ` ` 3. Section 272(g)(3)q p!(#294":&,-(-(ZZ$"Ԍ X-XX` ` C.` ` Interplay Between Sections 271(e), 272(g) and Other Provisions of the Statute ` p!(#297 X\VIII. PROVISION OF LOCAL EXCHANGE AND EXCHANGE ACCESS  BY BOC AFFILIATES p!(#301 X\IX. ENFORCEMENT p!(#318  X_-XX` ` A.` ` Reporting Requirements under Section 272 ` p!(#318  XH-XX` ` B.` ` Section 271(d)(6) Enforcement Provisions ` p!(#329  X1-XX` ` X ` ` 1. Commission's Enforcement Authority under Section 271(d)(6) p!(#330  X -XX` ` X ` ` 2. Legal and Evidentiary Standards p!(#335  X -XX` ` X ` ` 3. Prima Facie Standard p!(#338  X -XX` ` X ` ` 4. BurdenShifting and Presumption of Reasonableness p!(#342  X -XX` ` X ` ` 5. Enforcement Measures under Section 271(d)(6)(A)(# p!(#352 X\X. FINAL REGULATORY FLEXIBILITY CERTIFICATION p!(#357 XI. FURTHER NOTICE OF PROPOSED RULEMAKINGp!(#362  Xb-XX` ` A.` ` Information Disclosure Requirements under Section 272(e)(1) ` p!(#362  XK-XX` ` B.` ` Procedural Matters ` p!(#383 X\XII. ORDERING CLAUSES p!(#390  X-ԛ  X-APPENDIX A List of Commenters  X-APPENDIX B Final Rules  X-APPENDIX C Format for Information Disclosures Pursuant to Section 272(e)(1)<!}K ,!J:\POLICY\SAFE\ORDER\MASTER\272INTRO, <    Xe-MI kI. INTRODUCTION ă  X7- 1.` ` In February 1996, the Telecommunications Act of 1996 became law. 7 yO- v ԍTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996 Act), to be codified at 47 U.S.C.  yOx- d(# 151 et seq. Hereinafter, all citations to the 1996 Act will be to the 1996 Act as it will be codified in the United  d(#States Code. The 1996 Act amended the Communications Act of 1934. We will refer to the Communications Act of 1934, as amended, as "the Communications Act" or "the Act." Thek intent  d(#of the 1996 Act is "to provide for a procompetitive, deregulatory national policy framework  d(#jdesigned to accelerate rapidly private sector deployment of advanced telecommunications and  d(# information technologies and services to all Americans by opening all telecommunications  X-markets to competition." yO<&- v ԍSee Joint Statement of Managers, S. Conf. Rep. No. 104230, 104th Cong., 2d Sess. 1 (1996) (Joint Explanatory Statement). ",-(-(ZZ"Ԍ X- _ԙ2.` ` In this proceeding, we adopt nonaccounting safeguards, pursuant to section 272  d(#of the Communications Act, to govern entry by the Bell Operating Companies (BOCs) into  X- d(#Ncertain new markets.{ yOK-ԍWe define the term "BOC" as that term is defined in 47 U.S.C.  153(4).{ This proceeding is one of a series of interrelated rulemakings that  d(#jcollectively will implement the telephony provisions of the 1996 Act. Other proceedings under  X- d(#the 1996 Act have focused on opening markets to entry by new competitors,tX yO- v ԍSee Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC  yOu- d(#Docket No. 9698, First Report and Order, FCC 96325 (rel. Aug. 8, 1996) (First Interconnection Order), Motion  yO= - d(#for stay of the FCC's Rules Pending Judicial Review denied, FCC 96378 (rel. Sep. 17, 1996), partial stay granted,  yO - d(#Iowa Util. Bd. v. Federal Communications Commission, No. 963321, WL 589204 (8th Cir. Oct. 15, 1996) (Iowa  yO - d(#Utilities Board v. FCC), Order Lifting Stay in Part, (8th Cir. Nov. 1, 1996); Implementation of the Local  yO - d(#;Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 9698, Second Report and Order,  yO] - d(#and Memorandum Opinion and Order, FCC 96333 (rel. Aug. 8, 1996) (Second Interconnection Order); appeal  yO% - d(#docketed Bell Atlantic Telephone Companies v. FCC, No. 90567 (D.C. Cir. Sept. 16, 1996), People of the State  yO - d(#of California v FCC, No. 963519 (8th Cir. Sept.23, 1996), SBC Communications Inc, v. FCC, No. 961414 (D.C. Cir. Nov. 1, 1996). t establishing rules  X- d(#to preserve and advance universal service,X  yO.-ԍSee FederalState Joint Board on Universal Service, CC Docket No. 9645, Recommended Decision,  yO- d(#FCC 96J3 (rel. Nov. 8, 1996) (Universal Joint Board Recommended Decision); Order Establishing Joint Board on  yO-Universal Service, CC Docket No. 9645, Notice of Proposed Rulemaking, FCC 9693 (rel. Mar. 8, 1996). establishing rules for competition in those markets that  Xv-are opened to competitive entry,Xv yO7- v ԍSee Amendment of the Commission's Rules to Establish Competitive Service Safeguards for Local Exchange  yO- d(#Carrier Provision of Commercial Mobile Radio Services, WT Docket No. 96162, Notice of Proposed Rulemaking, Order on Remand, and Waiver Order, FCC 96319 (rel. Aug. 13, 1996). and on lifting legal and regulatory barriers to competition.  v0 yOW- v ԍSee Common Carrier Bureau Seeks Suggestions on Forbearance, DA 96798, Public Notice (rel. May 17,  yO- d(#1996); Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 254(g)  yO- d(#of the Communications Act of 1934, CC Docket No. 9661, Second Report and Order, FCC 96424 (rel. Oct. 31,  yO-1996) (Second Interexchange Order).   XH- 3.` ` Upon enactment, the 1996 Act permitted the BOCs immediately to provide  X1- d(#interLATA1 yO- v lԍ LATA Under the 1996 Act, a "local access and transport area" (LATA) is "a contiguous geographic area (A)  d(#established before the date of enactment of the [1996 Act] by a [BOC] such that no exchange area includes points  d(#within more than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State, except as  d(#expressly permitted under the AT&T Consent Decree; or (B) established or modified by a [BOC] after such date of  d(#>enactment and approved by the Commission." 47 U.S.C.  153(25). LATAs were created as part of the  d(#,Modification of Final Judgment's (MFJ) "plan of reorganization" under which the BOCs were divested from AT&T.  yO#- d(#,United States v. Western Elec. Co., 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460  yOr$- d(#U.S. 1001 (1983); United States v. Western Elec. Co., 569 F. Supp. 1057 (D.D.C. 1983) (Plan of Reorganization),  yO:%- d(#aff'd sub nom. California v. United States, 464 U.S. 1013 (1983); see also United States v. Western Elec. Co., No.  d(#820192 (D.D.C. Apr. 11, 1996) (vacating the MFJ). Pursuant to the MFJ, "all BOC territory in the continental  d(#United States [was] divided into LATAs, generally centering upon a city or other identifiable community of interest." "&,-(-(='"  yO-United States v. Western Elec. Co., 569 F. Supp. 990, 993 (D.D.C. 1983).  services  1X yO - v ԍ SERVICE The 1996 Act defines "interLATA services" as "telecommunications between a point located in a local access and transport area and a point located outside such area." 47 U.S.C.  153(21).  that originate outside of their inregion states. x1 yOx- v ԍFor purposes of this proceeding, we have defined the term "inregion state" as that term is defined in 47  d(#U.S.C.  271(i)(1). We note that section 271(j) provides that a BOC's inregion services include 800 service, private  d(#line service, or their equivalents that terminate in an inregion state of that BOC and that allow the called party to  yO- d(#Jdetermine the interLATA carrier, even if such services originate outofregion. Id.  271(j); see also Bell Operating  yO- d(#;Company Provision of OutofRegion Interstate, Interexchange Services, CC Docket No. 9621, Report and Order,  yO` - d(#iFCC 96288 (rel. July 1, 1996) (Interim BOC OutofRegion Order) (addressing BOC provision of outofregion, domestic, interstate, interexchange services). The 1996 Act conditions"1  ,-(-(ZZa"  d(#Lthe BOCs' entry into inregion interLATA services on their compliance with certain provisions  d(#of section 271. Under section 271, we must determine, among other things, whether the BOC  X- d(#<has complied with the safeguards imposed by section 272 and the rules adopted herein.? @  yOs- v Nԍ47 U.S.C.  271(d)(3)(B). The Commission also must find, within 90 days, that the interconnection  d(#agreements or statements approved by the appropriate state commission under section 252 satisfy the competitive  yO- d(#checklist contained in section 271(c)(2)(B), and that the BOC's entry into the inregion interLATA market is  yO- d(#"consistent with the public interest, convenience and necessity." Id.  271(d)(3)(A), (d)(3)(C). In acting on a  d(#xBOC's application for authority to provide inregion interLATA services, the Commission must consult with the  d(#Attorney General and give substantial weight to the Attorney General's evaluation of the BOC's application. In  d(#addition, the Commission must consult with the applicable state commission to verify that the BOC complies with  yO-the requirements of section 271(c). Id.  271(d)(2)(B).? Section  d(#272 addresses the BOCs' provision of interLATA telecommunications services originating in  d(#states in which they provide local exchange and exchange access services, interLATA information  X-services,9 X yO6- v =ԍThe 1996 Act excludes electronic publishing (as defined in section 274(h)) and alarm monitoring (as defined  d(#in section 275(e)) from the separate affiliate requirement for interLATA information services. 47 U.S.C.  272(a)(2)(C).9 and BOC manufacturing activities. `  yOV- v ԍThe MFJ prohibited the BOCs from providing information services, providing interLATA services,  d(#manufacturing and selling telecommunications equipment, and manufacturing customer premises equipment (CPE).  d(#The information services restriction was modified in 1987 to allow BOCs to provide voice messaging services and  yO- d(#hto transmit information services generated by others. United States v. Western Elec. Co., 673 F. Supp. 525 (D.D.C.  yOv- d(#1987); United States v. Western Elec. Co., 714 F. Supp. 1 (D.D.C. 1988).  In 1991, the restriction on BOC  yO>- d(#ownership of contentbased information services was lifted. United States v. Western Elec. Co., 767 F. Supp. 308  yO - d(#i(D.D.C. 1991), stay vacated, United States v. Western Elec. Co., 19911 Trade Cases (CCH)  69,610 (D.C. Cir.  d(#1991). The 1996 Act defines the term "AT&T Consent Decree" to refer to the MFJ and all subsequent judgments  d(#hor orders related to the MFJ. 47 U.S.C. 153(3). In the text of this order, we use the term "MFJ" and "MFJ Court"  yO^"- d(#-only to refer to the AT&T Consent Decree as defined in the 1996 Act and by the decisions of the D.C. District  yO&#- d(#Court. We will cite with particularity to the terms of the original Modification of Final Judgment cited at United  yO#-States v. Western Elec. Co. 552 F. Supp. at 226232. "v@ ,-(-(ZZ"Ԍ X- 4.` ` On July 18, 1996, we initiated this proceeding by releasing a Notice of Proposed  X- d(#Rulemaking (Notice)X yOb- v ԍImplementation of the NonAccounting Safeguards of Sections 271 and 272 of the Communications Act of  d(#h1934, as amended; and Regulatory Treatment of LEC Provisions of Interexchange Services Originating in the LEC's  yO-Local Exchange Area, CC Docket No. 96149, Notice of Proposed Rulemaking, FCC 96308 (rel. July 18, 1996). that sought comment on the nonaccounting separate affiliate and  d(#nondiscrimination safeguards of the 1996 Act. These provisions govern the BOCs' entry into  d(#ycertain new markets. We initiated a separate proceeding to address the accounting safeguards  X- d(#required to implement sections 260 and 272 through 276 of the Communications Act.& yO= - v ԍ See Accounting Safeguards for Common Carriers Under the Telecommunications Act of 1996, CC Docket  yO -No. 96150, Notice of Proposed Rulemaking, 11 FCC Rcd 9054 (1996) (Accounting Safeguards NPRM).&  d(#Comments on the nonaccounting separate affiliate and nondiscrimination safeguards were filed  Xv-on August 15, 1996, and reply comments were filed on August 30, 1996.nv@ yOg -ԍAppendix A lists the parties that filed comments and replies.n  XH- _5.` ` The Notice also sought comment on whether we should relax the dominant carrier  d(#Nclassification that under our current rules would apply to inregion, interstate, domestic,  X - d(#interLATA services provided by the BOCs' interLATA affiliates. Further, the Notice sought  d(#Mcomment on whether we should modify our existing rules for regulating the provision of in d(#region, interstate, interexchange services by independent local exchange carriers (LECs) (namely,  X - d(#carriers not affiliated with a BOC). Finally, the Notice considered whether to apply the same  d(#lregulatory treatment to the BOC affiliates' and independent LECs' provision of inregion,  d(#]international services, as would apply to the provision of inregion, interstate, domestic,  d(#ZinterLATA services and inregion, interstate, domestic interexchange services, respectively. This  d(#order addresses only the nonaccounting separate affiliate and nondiscrimination safeguards in  d(#sections 271 and 272. The classification of BOC affiliates or independent LECs (and their  d(#affiliates) as dominant or nondominant will be addressed in a separate Report and Order in this docket.  X- q6.` ` In this order, we promulgate rules and policies implementing, and, where  d(#necessary, clarifying the nonaccounting separate affiliate and nondiscrimination safeguards  d(#prescribed by Congress in sections 271 and 272. These safeguards are intended both to protect  d(#subscribers to BOC monopoly services, such as local telephony, against the potential risk of  d(#zhaving to pay costs incurred by the BOCs to enter competitive markets, such as interLATA  d(#services and equipment manufacturing, and to protect competition in those markets from the  d(#BOCs' ability to use their existing market power in local exchange services to obtain an  d(# anticompetitive advantage in those new markets the BOCs seek to enter. Our action today  d(#-continues the process of enhancing competition in all telecommunications markets as envisioned by the 1996 Act. " ,-(-(ZZz"Ԍ X- A.Background  X- 7.` ` The fundamental objective of the 1996 Act is to bring to consumers of  d(#ktelecommunications services in all markets the full benefits of vigorous competition. As we  X- d(#recognized in the First Interconnection Order, "[t]he opening of all telecommunications markets  d(#to all providers will blur traditional industry distinctions and bring new packages of services,  Xv- d(#lower prices, and increased innovation to American consumers."]v yO-ԍFirst Interconnection Order at  4.] With the removal of legal,  d(#xeconomic, and regulatory impediments to entry, providers of various telecommunications services  d(#=will be able to enter each other's markets and provide various services in competition with one  d(#another. Both the BOCs and other firms, most notably existing interexchange carriers, will be  d(#Zable to offer a widely recognized brand name that is associated with telecommunications services.  d(#KAs firms expand the scope of their existing operations to new product lines, they will increasingly  d(#.offer consumers the ability to purchase local, intraLATA, and interLATA telecommunications  X - d(#services, as well as wireless, information, and other services, from a single provider (i.e., "one  X -stop shopping"), and other advantages of vertical integration. X yO- v !ԍThere are economies of scope where it is less costly for a single firm to produce a bundle of goods or  d(#services together, than it is for two or more firms, each specializing in distinct product lines, to produce them  yOW- d(#separately. See, e.g., John C. Panzar and Robert D. Willig, Economies of Scope, 71 Am. Econ. Rev. of Papers and  yO- d(#Proc. 268 (1981); William J. Baumol, John C. Panzar, and Robert D. Willig, Contestable Markets and the Theory  yO-of Industry Structure 7179 (1982); Daniel F. Spulber, Regulation and Markets 11415 (1989).   X- p8.` ` The 1996 Act opens local markets to competing providers by imposing new  d(#interconnection and unbundling obligations on existing providers of local exchange service,  d(#Lincluding the BOCs. The 1996 Act also allows the BOCs to provide interLATA services in the  d(#states where they currently provide local exchange and exchange access services once they satisfy  d(#the requirements of section 271. Moreover, by requiring compliance with the competitive  d(#checklist set out in section 271(c)(2)(B) as a prerequisite to BOC provision of inregion  d(#interLATA service, the statute links the effective opening of competition in the local market with  d(#the timing of BOC entry into the long distance market, so as to ensure that neither the BOCs nor  d(#the existing interexchange carriers could enjoy an advantage from being the first to enter the other's market.  X- 9.` ` In enacting section 272, Congress recognized that the local exchange market will  d(#not be fully competitive immediately upon its opening. Congress, therefore, imposed in section  d(#272 a series of separate affiliate requirements applicable to the BOCs' provision of certain new  d(#services and their engagement in certain new activities. These requirements are designed, in the  d(#absence of full competition in the local exchange marketplace, to prohibit anticompetitive discrimination and costshifting, while still giving consumers the benefit of competition.  X-  10.` ` As we observed in the Notice, BOC entry into inregion interLATA services raises  d(#<issues for competition and consumers, even after a BOC has satisfied the requirements of section",-(-(ZZ"  d(#271(d)(3). BOCs currently are the dominant providers of local exchange and exchange access  d(#[services in their inregion states, accounting for approximately 99.1 percent of the local service  X- d(#Lrevenues in those markets.I yOK- v ԍ Industry Analysis Division, Telecommunications Industry Revenue: TRS Worksheet Data (Com. Car. Bur.  d(#\Feb. 1996). Tables 18 and 15 show that BOC local and access revenues in 1994 were $61.4 billion, while  d(#Competitive Access Provider (CAP) local and access revenues both in and out of BOC regions were only $281  d(#Ymillion. We acknowledge that the CAP rate of growth is high, but their share of the overall end market is small and is the key factor.I If a BOC is regulated under rateofreturn regulation, a price caps  d(#structure with sharing (either for interstate or intrastate services), a price caps scheme that adjusts  d(#Mthe Xfactor periodically based on changes in industry productivity, or if any revenues it is  d(#allowed to recover are based on costs recorded in regulated books of account, it may have an  d(#Mincentive to allocate improperly to its regulated core business costs that would be properly attributable to its competitive ventures.  X1-  11.` `  DISCRIM In addition, a BOC may have an incentive to discriminate in providing exchange  d(#access services and facilities that its affiliate's rivals need to compete in the interLATA  d(#telecommunications services and information services markets. For example, a BOC may have  d(#an incentive to degrade services and facilities furnished to its affiliate's rivals, in order to deprive  d(#those rivals of efficiencies that its affiliate enjoys. Moreover, to the extent carriers offer both  d(#local and interLATA services as a bundled offering, a BOC that discriminates against the rivals  d(#of its affiliates could entrench its position in local markets by making these rivals' offerings less  d(#attractive. With respect to BOC manufacturing activities, a BOC may have an incentive to  d(#purchase only equipment manufactured by its section 272 affiliate, even if such equipment is  Xb-more expensive or of lower quality than that available from other manufacturers. bx yO- v ԍWhenever a competing manufacturer sells its product at a price that exceeds the marginal cost of producing  d(#xit, the possibility exists that a BOC would have an incentive to favor its affiliate's product over the competitor's,  d(#even when it is inefficient to do so. In general, the greater the difference between the competitor's price and cost, the greater the incentive for the BOC to favor its affiliate.  X4-   12.` ` Moreover, if a BOC charges other firms prices for inputs that are higher than the  d(#prices charged, or effectively charged, to the BOC's section 272 affiliate, then the BOC could  X- d(#=create a "price squeeze."`  yO- v ԍSee, e.g., P.L. Joskow, Mixing Regulatory and Antitrust Policies in the Electric Power Industry: The Price  yO- d(#Squeeze and Retail Market Competition, in Antitrust and Regulation: Essays in Memory of John J. McGowan 173 yO - d(#K239 (F.M. Fisher ed., 1985); S.C. Salop and D.T. Scheffman, Raising Rivals' Costs, 73 Am. Econ. Rev. Papers &  yOo!- d(#,Proc. 267 (1983); T.G. Krattenmaker and S.C. Salop, Anticompetitive Exclusion: Raising Rivals' Costs to Achieve  yO7"-Power over Price, 96 Yale L.J. 209 (1986).  In that circumstance, the BOC affiliate could lower its retail price to  d(#.reflect its unfair cost advantage, and competing providers would be forced either to match the  d(#\price reduction and absorb profit margin reductions or maintain their retail prices at existing  d(#levels and accept market share reductions. This artificial advantage may allow the BOC affiliate  d(#to win customers even though a competing carrier may be a more efficient provider in serving  d(#the customer. Unlawful discriminatory preferences in the quality of the service or preferential",-(-(ZZ"  d(#/dissemination of information provided by BOCs to their section 272 affiliates, as a practical  d(#matter, can have the same effect as charging unlawfully discriminatory prices. If a BOC charged  d(#the same rate to its affiliate for a higher quality access service than the BOC charged to  d(#unaffiliated entities for a lower quality service, or disclosed information concerning future  d(#[changes in network architecture to its manufacturing affiliate before disclosing it to others, the BOC could effectively create the same "price squeeze" discussed above.  X_- 2 13.` ` The structural and nondiscrimination safeguards contained in section 272 ensure  d(#.that competitors of the BOC's section 272 affiliate have access to essential inputs, namely, the  d(#provision of local exchange and exchange access services, on terms that do not discriminate  d(#Lagainst the competitors and in favor of the BOC's affiliate. Because the BOC has the incentive  d(#to provide its affiliate with the most efficient access, the statute requires the BOC to provide  d(#competitors the same access. Access to such inputs on nondiscriminatory terms will enable a new  d(#=entrant to compete effectively, assuming it is at least as efficient as the BOC and/or its section  d(#272 affiliate. At the same time, Congress also was sensitive to the value to the BOCs of potential  d(#]efficiencies stemming from economies of scale. Our task is to implement section 272 in a  d(#manner that ensures that the fundamental goal of the 1996 Act is attained to open all  d(#telecommunications markets to robust competition but at the same time does not impose  d(#requirements on the BOCs that will unfairly handicap them in their ability to compete. The rules  d(#and policies adopted in this order seek to preserve the carefully crafted statutory balance to the  d(#kextent possible until facilitiesbased alternatives to the local exchange and exchange access  X-services of the BOCs make those safeguards no longer necessary. yO- v ԍAccess Charge Reform, CC Docket No. 96262, Notice of Proposed Rulemaking, FCC 96488 (rel. Dec.  yO^-24, 1996) (Access Charge Reform NPRM).  X- B.XOverview and Summary (#  X-  14.` ` Section 272 allows a BOC to engage in the manufacturing of telecommunications  X- d(#-equipment and CPE, the origination of certain interLATA telecommunications services,VX  yO{- v ԍSpecifically, the separate affiliate requirement applies to the origination of interLATA telecommunications  d(#services, other than specified incidental interLATA services, outofregion services, and previously authorized activities. 47 U.S.C.  272(a)(2)(B).V and the  X- d(#provision of interLATA information services,M@ yO -ԍId.  272(a)(2)(C).M as long as the BOC provides these activities  d(#through a separate affiliate. Unless extended by the Commission, the statutory separate affiliate  d(#requirements for manufacturing and interLATA telecommunications services expire three years  XN- d(#after a BOC or any BOC affiliate is authorized to provide inregion interLATA services.JN yO$-ԍId.  272(f)(1).J The"N ` ,-(-(ZZ"  d(#.statutory interLATA information services separate affiliate requirement expires on February 8,  X-2000, four years after enactment of the 1996 Act, unless extended by the Commission.J yOb-ԍId.  272(f)(2).J  X- 15.` ` This order implements the structural separation requirements mandated by section  d(#272 in a manner that is designed to prevent improper cost allocation between the BOC and its  d(#]section 272 affiliate and discrimination by the BOC in favor of its section 272 affiliate. In  d(#particular, we construe the section 272(b)(1) "operate independently" requirement to prohibit the  d(#BOC and its section 272 affiliate from jointly owning transmission and switching facilities or the  d(#land and buildings on which such facilities are located. Moreover, we prohibit a BOC and its  d(#affiliates, other than the section 272 affiliate itself, from providing operating, installation, and  d(#maintenance services associated with the facilities owned by the section 272 affiliate. Similarly,  d(#a section 272 affiliate may not provide such services associated with the BOC's facilities. These  d(#requirements should reduce the potential for the improper allocation of costs to the BOC that  d(#-should be allocated to the section 272 affiliate. In addition, they should ensure that a section 272  d(#affiliate must follow the same procedures as its competitors in order to gain access to a BOC's  d(#facilities. Consistent with these requirements and those established pursuant to sections 272(b)(5)  d(#.and 272(c)(1), however, a section 272 affiliate may negotiate with an affiliated BOC on an arm's  d(#<length basis to obtain transmission and switching facilities, to arrange for collocation of facilities, and to provide or obtain services other than those expressly prohibited herein.  X4- $16.` ` The structural separation requirements of section 272, in conjunction with the  d(#affirmative nondiscrimination obligations imposed by that section, also are intended to address  d(#=concerns that the BOCs could potentially use local exchange and exchange access facilities to  d(#discriminate against competitors in order to gain an anticompetitive advantage for their affiliates  d(#that engage in competitive activities. We interpret section 272(c)(1) as imposing a flat  d(#prohibition against discrimination more stringent than the bar on "unjust and unreasonable"  d(#discrimination contained in section 202 of the Act. In short, the BOCs must treat all other  d(#entities in the same manner in which they treat their section 272 affiliates. We conclude that a  d(#LBOC may not discriminate in favor of its section 272 affiliate by: 1)providing exchange access  d(#services to competing interLATA service providers at a higher rate than the rate offered to its  d(#section 272 affiliate; 2)providing a lower quality service to competing interLATA service  d(#providers than the service it provides to its section 272 affiliate at a given price; 3)giving  d(#<preference to its affiliate's equipment in the procurement process; or 4) failing to provide advance  d(#information about network changes to its competitors. We seek comment in a Further Notice of Proposed Rulemaking on specific disclosure requirements to implement section 272(e)(1).  X -  _17.` ` In this order, we also seek to ensure that BOC section 272 affiliates have the same  d(#opportunity to compete for customers as other long distance service providers. The joint  d(#marketing rules we have established limit the ability of the largest interexchange carriers to  d(#market jointly their interLATA service with resold BOC local exchange service, until the BOC  d(#receives in-region, interLATA authority under section 271 or until 36 months after enactment of"h$ X,-(-(ZZF#"  d(#the 1996 Act. Once the BOC receives interLATA authority, the restrictions on interexchange  d(#carrier joint marketing expire, and the interexchange carriers and the BOCs and their section 272 affiliates may engage in the same types of marketing activities.  X- 18.` ` In addition, we clarify that the Communications Act allows a section 272 affiliate  X- d(#Zto purchase unbundled elements pursuant to section 251(c)(3)J yO-ԍ47 U.S.C.  251(c)(3).J and telecommunications services  Xv- d(#0at wholesale rates under section 251(c)(4).JvX yO -ԍ47 U.S.C.  251(c)(4).J Thus, the section 272 affiliate may provide  d(#xintegrated services in the same manner as other competitors. Such an approach is consistent with  d(#the objectives of the 1996 Act, which are to give service providers the freedom to develop a wide  d(#jarray of service packages and allow consumers to select what best suits their needs. We note,  d(#however, that the BOC may not transfer local exchange and exchange access facilities and  d(#capabilities to the section 272 affiliate, or another affiliate, in order to evade regulatory requirements.  X - 19.` ` We recognize that no regulatory scheme can completely prevent or deter  d(#?discrimination, particularly in its more subtle forms. In this order, we shift the burden of  d(#production to the BOCs in the context of section 271(d)(6) enforcement proceedings in order to  d(#alleviate the burden on the complainant and facilitate the detection of anticompetitive behavior.  d(#Because the BOC is likely to be in sole possession of most of the relevant information necessary  d(#to establish the complainant's case, shifting the burden is the most efficient way of resolving  d(#complaints alleging violations of the conditions of inregion interLATA entry under section  d(#271(d)(3). The goal of this proceeding and others is to establish a regulatory framework that  d(#enables service providers to enter each other's markets and compete on an equal footing by not  d(#allowing one service provider to game regulatory requirements in such a way as to hinder competition.9!}K )B J:\POLICY\SAFE\ORDER\MASTER\SCOPE) 9    X-_  II. SCOPE OF COMMISSION AUTHORITY Đ\  Xe- A.XRulemaking Authority (#   X7- 1.` ` Background (#`  X - _20.` ` In the Notice, we addressed the scope of the Commission's authority, pursuant_ to  X- d(#@sections 271 and 272, over interLATA services, interLATA information services and" ,-(-(ZZ"  X- d(#manufacturing activities.F yOy-ЍNotice at  1930. In the Notice, in addressing the scope of sections 271 and 272, we referred to "interLATA services" and "interLATA information services" separately (but in the same analysis). In part III.A.1 of this Order, we determine that "interLATA services" includes "interLATA information services." Accordingly, in the discussion in this section regarding the scope of sections 271 and 272, we refer only to interLATA services, but intend that the use of that term include interLATA information services.F Although we did not seek comment on whether the Commission has authority to adopt rules implementing section 272, several commenters addressed this issue.  X- 2.` ` Comments  X- 21.` ` Certain BOCs and USTA maintain that the Commission lacks authority to adopt  Xv- d(#rules implementing the nonaccounting safeguards contained in section 272.Xvx yO -ЍBell Atlantic at 23 (with regard to intrastate services); BellSouth at 36; SBC at 25 (Commission has authority to implement and enforce section 272, but may not expand those requirements); USTA at 23, 78; USTA Reply at 3. They further  d(#maintain that, even if the Commission has such authority, it should not adopt any rules because  d(#Zthey are not necessary. These and other parties argue that section 272 contains detailed separate  X1- d(#affiliate requirements and therefore is selfexecuting and needs little or no interpretation.@1 yOz-ЍUSTA at 34, 78; Bell Atlantic at 23; BellSouth at 36. BellSouth also argues that Congress did not grant the Commission authority to adopt "legislative" rules other than accounting rules, and therefore any rules the Commission adopts would constitute "interpretive" rules not entitled to judicial deference. BellSouth at 3  yO-(citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 84243 (1984)); see also SBC at 25; U S West Reply at 4 (stating that, "although the Commission certainly retains its general rulemaking authority, it should tread lightly here"); PacTel at 34 (stating that there are ambiguities in section 272 for which the "Commission's guidance would be helpful," but stating that "[b]eyond those difficulties, the only specific areas where Congress envisioned further rulemaking by the FCC were accounting and record keeping"). They  d(#<further suggest that all of the Commission's proposed regulations are impermissible because they  X - d(#go beyond the basic terms of section 272.   yOT-ЍBell Atlantic at 23; BellSouth at 46; USTA at 8; SBC at 25 (stating that the Commission has authority to implement and enforce section 272, but may not expand those requirements). Bell Atlantic and USTA assert that Congress clearly  d(#Nintended for section 272 to be a selfexecuting provision because a Senate bill provision  d(#specifying that the Commission implement regulations under section 272 was removed from the  X -legislation in conference.Y!  yOg -ЍBell Atlantic at 3; USTA at 3.Y  X- Q22.` ` In response, other parties argue that the Commission has the authority to, and  d(#should, promulgate rules implementing section 272. AT&T, TIA, and Time Warner maintain that  d(#jthe Commission has authority, pursuant to other provisions of the Act, including sections 4(i),  d(#201(b), and 303(r), to adopt rules implementing section 272, even though section 272 does not"K !,-(-(ZZI"  X- d(#/specifically direct the Commission to adopt rules." yOy-ЍAT&T Reply at 67 & n.14; TIA Reply at 67; Time Warner Reply at 46; see also LDDS Reply at 24; MCI Reply at 2 n.6. AT&T and Time Warner state that the  d(#Commission has the authority to adopt implementing rules when Congress enacts broad principles  X- d(#that require interpretation,#  yO-ЍAT&T Reply at 6 (citing Morton v. Ruiz, 415 U.S. 199, 231 (1974), and Chevron, U.S.A., Inc. v.  yOk-Natural Resources Defense Council, 467 U.S. 837 (1984)); Time Warner Reply at 6. and that section 272 contains ambiguities that require explanation in  X- d(#Norder to effectuate the 1996 Act's purposes.$ x yO -ЍAT&T Reply at 814; LDDS Reply at 34; MCI Reply at 2; see also PacTel at 3 (stating that "it would serve the interests of justice for the Commission to indicate in advance whether by rule or otherwise how it interprets any ambiguous requirements in  272 so that the BOCs may be advised of what is necessary to comply"); Sprint Reply at 23.  Time Warner argues that the courts have  d(#\consistently held that the Commission has expansive rather than limited powers to conduct  d(#general rulemakings, so long as those rulemakings are based on permissible public interest goals  Xv- d(#=and are a reasonable means to achieve those goals.%v`  yO-ЍTime Warner Reply at 56 (citing Nat'l Broadcasting Co. v. United States, 319 U.S. 190, 219 (1943)  yOO-and Fed. Communications Comm'n v. Nat'l Citizens Comm.for Broadcasting, 436 U.S. 775, 776, 793 (1978));  yO-see also Sprint Reply at 23 (stating that "[t]he ability of the Commission to use general rulemaking procedures to provide further guidance to the states and interested parties and to thereby explicate the policies and interpretations it intends to adopt in its administration of the statute entrusted to its jurisdiction so as to carry out the intent of Congress is at the heart of the regulatory process"). Finally, in response to the claim that the  d(#removal of specific 272 rulemaking authority indicates that Congress intended for section 272 to  d(#>be selfexecuting, AT&T argues that Congress could have precluded the Commission from  X1-adopting rules, but did not.K&1 yO-ЍAT&T Reply at 6.K  X -X 3.X` ` Discussion (#`  X - 23.` ` We reject as unfounded the assertion that the Commission lacks authority to adopt  d(#=regulations implementing section 272. Sections 4(i), 201(b), and 303(r) of the Act authorize the  d(#Commission to adopt any rules it deems necessary or appropriate in order to carry out its  X- d(#responsibilities under the Act, so long as those rules are not otherwise inconsistent with the Act.'h yO -ЍSee United States v. Storer Broadcasting Co., 351 U.S. 192, 20203 (1956).  d(#Nothing in section 272 bars the Commission from exercising the rulemaking authority granted  d(#-by these sections of the Act to clarify and implement the requirements of section 272. Moreover,  d(#ycourts repeatedly have held that the Commission's general rulemaking authority is "expansive"  X4- d(#[rather than limited. (4 yO%-ЍNat'l Broadcasting Co. v. United States, 319 U.S. 190, 219 (1943); see also Fed. Communications  yO&-Comm'n v. Nat'l Citizens Comm. for Broadcasting, 436 U.S. 775, 793 (1978).  In addition, as AT&T notes, it is wellestablished that an agency has the"4 P(,-(-(ZZH"  X- d(#authority to adopt rules to administer congressionally mandated requirements.)  yOy-ЍSee Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984); Morton v. Ruiz, 415 U.S. 199, 231 (1974) (holding that "[t]he power of an administrative agency to administer a congressionally created. . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress"). Contrary to those  d(#parties that argue that section 272 is selfexecuting, we find that Congress enacted in section 272  d(#broad principles that require interpretation and implementation in order to ensure an efficient,  d(#orderly, and uniform regime governing BOC entry into inregion interLATA telecommunications  d(#and other markets covered by section 272. In the Notice, we identified areas of ambiguity in the  d(#requirements of section 272 with the specific goal of clarifying and implementing Congress's  d(#intent in that provision. That remains our goal in this Order. Due to the importance of the  d(#introduction of competition to the local exchange market, we believe this Order to be both  d(#important and necessary to protect BOC customers and new entrants. Further, we agree with  d(#PacTel that it serves the interests of justice for us to clarify in advance the section 272  d(#zrequirements so that BOCs and other parties may be advised of what is required to meet the  d(#<condition for 271 authorization that inregion interLATA services be provided in compliance with  X -section 272.Q*  yOM-ЍSee PacTel at 3.Q  X - C24.` ` We are not persuaded by the argument that the removal of the Senate bill's  d(#provision regarding implementing regulations from the 1996 Act indicates Congress's intent that  d(#section 272 be selfexecuting. Parties advancing this argument rely on a rule of statutory  d(#construction providing that, when a provision in a prior draft is altered in the final legislation,  d(#Congress intended a change from the prior version. The courts have rejected this rule of statutory  XK- d(#kconstruction, however, when changes from one draft to another are not explained.+K@ yO<-ЍMead Corp v. Tilley, 490 U.S. 714, 723 (1989); Rastelli v. Warden, 782 F.2d 17, 23 (2d Cir. 1986);  yO-Drummond Coal v. Watt, 735 F.2d 469, 474 (11th Cir. 1984). In this  d(#instance, the only statement from Congress regarding the meaning of the omission of the Senate  d(#xprovision appears in the Joint Explanatory Statement. According to that Statement, all differences  d(#between the Senate Bill, the House Amendment, and the substitute reached in conference are  d(#inoted therein "except for clerical corrections, conforming changes made necessary by agreements  X- d(#lreached by the conferees, and minor drafting and clerical changes."^, yO! -ЍJoint Explanatory Statement at 113.^ Because the Joint  d(#Explanatory Statement did not address the removal of the Senate bill provision, the logical  d(#inference is that Congress regarded the change as an inconsequential modification, rather than a  d(#Ksignificant alteration. Moreover, it seems implausible that, in enacting the final version of section  d(#272, Congress intended a radical alteration of the Commission's general rulemaking authority. "|( ,,-(-(ZZ"  X- d(#We therefore conclude that elimination of the proposed provision was a nonsubstantive change.O-X yOy-ЍIn addition, even if the removal were considered as more than inconsequential, we believe that the most plausible explanation is that Congress found such a specification unnecessary in light of sections 4(i), 201(b), 303(r), and longstanding principles of administrative law.O  d(#kBased on the foregoing, we find, pursuant to the general rulemaking authority vested in the  d(#kCommission by sections 4(i), 201(b), and 303(r) of the Act, and consistent with fundamental  d(#Lprinciples of administrative law, that the Commission has the requisite authority to promulgate rules implementing section 272 of the Act.  Xv- B.XScope of Commission's Authority Regarding InterLATA Services (#  XH-XX` ` a.X Background (#  X - Q25.` ` In the Notice, we tentatively concluded that the Commission's authority under  d(#sections 271 and 272 applies to intrastate and interstate interLATA services provided by BOCs  X - d(#or their affiliates.M.  yO-ЍNotice at  25.M We based this tentative conclusion in part on our analysis that Congress  d(#jintended sections 271 and 272 to replace the preAct restrictions on the BOCs contained in the  X - d(#MFJ, which barred their provision of both intrastate and interstate interLATA services.P/ x yO-ЍId. at  21.P We also  d(#observed that the interLATA/intraLATA distinction appears to some extent to have supplanted  X- d(#<the traditional interstate/intrastate distinction for purposes of sections 271 and 272.P0 yOI-ЍId. at  22.P We further  d(#noted that reading sections 271 and 272 as applying to all interLATA services fits well with the  Xb- d(#istructure of the statute as a whole,P1b yO-ЍId. at  23.P and that reading the sections as limited to interstate services  XK- d(#=would lead to implausible results.P2K(  yO$-ЍId. at  25.P We also indicated that we do not believe that section 2(b)  d(#of the Act precludes the conclusion that our authority under sections 271 and 272 applies to  X- d(#Kintrastate as well as interstate interLATA services.P3  yO -ЍId. at  26.P Finally, we asked parties that disagreed with  d(#=the foregoing analysis to comment on the extent to which the Commission may have authority  d(#to preempt state regulation with respect to some or all of the nonaccounting matters addressed  X-by sections 271 and 272.P4H  yO$-ЍId. at  28.P "4,-(-(ZZ"Ԍ X-XX` ` b.X Comments (#  X- _26.` ` Many parties, including BellSouth, PacTel, USTA and the New York Commission,  X- d(#agree that sections 271 and 272 cover both intrastate and interstate services.i5 yO4-ЍDOJ Reply at 47; New York Commission at 23 (but arguing that the Commission lacks authority to establish rules applicable to intrastate interLATA services); BellSouth at 15; PacTel at 3 (maintaining, however, that "Congress did not give the FCC plenary authority over those services to implement any and all regulations and safeguards whatsoever."); USTA at 7 (but arguing that section 272 is selfexecuting); AT&T at 8; AT&T Reply at 34; Sprint at 910; Sprint Reply at 4; MCI at 3; MCI Reply at 34; Excel at 11; CompTel at 36; TRA at 56; ITAA at 57.i DOJ, BellSouth,  d(#iand AT&T maintain that the Act, by its terms, explicitly covers intrastate interLATA services and  d(#thus, grants the Commission authority over intrastate interLATA services for purposes of sections  Xv- d(#271 and 272.6v@ yOg -ЍDOJ Reply at 45 (arguing that the Act's definitions of the terms "LATA," and "interLATA" include intrastate services); AT&T at 8 (arguing that the Act's definition of the term "interLATA" applies to both intrastate and interstate services so long as they cross a LATA boundary); BellSouth at 1516 (stating that "[t]he explicit grants of FCC jurisdiction in Sections 271 and 272 override the generic restrictions on FCC jurisdiction in Section 2(b)," but arguing that "these exemptions must be narrowly construed in order to preserve the meaning  yOO-of 2(b)"); see also CompTel at 4, 5 (stating that "[p]ursuant to the MFJ, LATAs were defined based 'upon a city or other identifiable community or interest,' without limitation by state boundaries. Because a single state may contain more than one LATA, interLATA communications may be intrastate as well as interstate in nature." (footnote omitted)). DOJ and AT&T argue that, because the grant is explicit, section 2(b) does not  d(#zbar the Commission from adopting rules that apply to the provision of intrastate interLATA  XH- d(#services.Y7H yO -ЍDOJ Reply at 67; AT&T at 89.Y These and other parties generally argue, as a separate basis for finding that sections  d(#271 and 272 extend to both intrastate and interstate interLATA services, that Congress intended  X - d(#for the Act to replace the MFJ.N8X  yOk-ЍNew York Commission at 24 (maintaining, however, that the Commission lacks authority to establish rules applicable to intrastate interLATA services); BellSouth at 15; USTA at 7; DOJ Reply at 56; AT&T at 8 n.7; MCI at 3; Excel at 11; CompTel at 56; TRA at 56; ITAA at 57.N These parties contend that, since the MFJ restrictions applied  d(#to the BOCs' provision of both intrastate and interstate interLATA services, Congress intended  X - d(#kfor sections 271 and 272 to apply to the BOCs' provision of both types of services as well.N9X  yO]-ЍNew York Commission at 24 (maintaining, however, that the Commission lacks authority to establish rules applicable to intrastate interLATA services); BellSouth at 15; USTA at 7; AT&T at 8 n.7; DOJ Reply at 56; MCI at 3; Excel at 11; CompTel at 56; TRA at 56; ITAA at 57.N  d(#Indeed, several of these parties maintain that interpreting sections 271 and 272 as covering both  X - d(#intrastate and interstate interLATA services is the only reasonable interpretation.:  yOO$-ЍDOJ Reply at 7; MCI at 5; MCI Reply at 34; Excel at 11; ITAA at 56; CompTel at 56. Several parties  X -further maintain that section 2(b) of the Act does not affect this analysis.; p yO&-ЍAT&T at 89; Sprint Reply at 5; MCI at 5; TRA at 67; see also DOJ Reply at 67. " ;,-(-(ZZ "Ԍ X- Bԙ27.` ` State representatives and some of the BOCs, however, challenge our tentative  d(#conclusion that sections 271 and 272 give the Commission authority over intrastate interLATA  X- d(#services.< yOK-ЍBell Atlantic at 3; BellSouth at 1517; California Commission at 29; Missouri Commission at 3; New York Commission at 26; Ohio Commission at 25; Wisconsin Commission Reply at 311; NARUC at 47. These parties argue that sections 2(b) and 601(c) of the Act bar the Commission from  d(#exercising authority under sections 271 and 272 to establish rules applicable to intrastate  X- d(#services.=  yOu-ЍBell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 3; New York Commission at 35; Ohio Commission at 2; Wisconsin Commission Reply at 3; NARUC at 7. Although the New York Commission agrees with our tentative view that the term  X- d(#"interLATA" covers both intrastate and interstate services,V>x yO -ЍNew York Commission at 23.V other parties objecting to our reading  d(#kof the scope of sections 271 and 272 generally do not address the issue of whether the term  d(#"interLATA services" as used in the Act or the MFJ includes intrastate interLATA services.  d(#Instead, they appear to contend that, even if the term "interLATA services" includes both  d(#intrastate and interstate services, section 2(b) precludes the Commission from establishing rules  X - d(#applicable to intrastate interLATA services.*?  yO-ЍBell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 23; New  yO-York Commission at 25; Ohio Commission at 2; NARUC at 7; see Wisconsin Commission Reply at 2, 68.* According to these parties, states have authority  X - d(#to establish rules to govern the BOCs' provision of intrastate interLATA services,@ `  yO-ЍBellSouth at 1517; California Commission at 56, 9; Missouri Commission at 23; New York Commission at 25; Ohio Commission at 25; Wisconsin Commission Reply at 35, 611; NARUC at 57. and it is  X - d(#zpremature for the Commission at this time to preempt states from exercising that authority.A  yOU-ЍNew York Commission at 56; Wisconsin Commission Reply at 56; NARUC at 45.  d(#NARUC and the Missouri Commission claim that the legislative history shows that Congress  d(#.intended to limit the Commission's authority under sections 271 and 272 to interstate services.  d(#In support of this claim, these parties point to the fact that the House and Senate versions of the  d(#preconference bill exempted sections 271 and 272 from section 2(b), but those exemptions were  Xy-removed in the final legislation.ByH  yOr-ЍNARUC at 7; Missouri Commission at 3; see also Bell Atlantic at 3.  XK- $28.` ` Parties opposing our tentative conclusions also argue that, although the MFJ  d(#restrictions on the BOCs applied to both interstate and intrastate interLATA services, the states  d(#.retained authority to regulate a BOC's intrastate interLATA services when such services were  X- d(#yauthorized by the MFJ Court.C yO$-ЍCalifornia Commission at 34; Missouri Commission at 2; New York Commission at 34; NARUC at 6. They assert, therefore, that, even if sections 271 and 272 apply  d(#[to intrastate services, those provisions would not divest the states of authority over intrastate"hC,-(-(ZZ'"  X- d(#services,D yOy-ЍCalifornia Commission at 3; Missouri Commission at 2; New York Commission at 3; Ohio Commission  yOA-at 2; Wisconsin Commission Reply at 4; NARUC at 57. and that the Commission's authority, if it exists, under sections 271 and 272, is not  X-plenary.E  yO-ЍBellSouth at 15; PacTel at 3. BellSouth and PacTel argue that Congress did not intend to give the Commission plenary jurisdiction over intrastate interLATA services. BellSouth at 15; PacTel at 3.   X-  `29.` ` None of the parties opposing our reading of the scope of sections 271 and 272  d(#Lcontends that the Commission's authority under section 271(d) to authorize BOC entry into in d(#region interLATA services does not extend to BOC provision of intrastate interLATA services.  d(#/The Wisconsin Commission argues, however, that "a state might decide that, for intrastate  d(#interLATA purposes, BOC (or affiliate) entry into intrastate interLATA markets should be  d(#delayed subject to satisfaction of previouslymade infrastructure investment commitments, needed  d(#quality of service improvements, universal service obligations, or some other factor for which  d(#delayed or conditioned entry into intrastate interLATA markets is appropriate leverage exercised  X -in the public interest."[F x yO,-ЍWisconsin Commission Reply at 7.[  X -X 3.X` ` Discussion (#`  X -  30.` ` For the reasons set forth below, we  271-ST conclude that sections 271 and 272, and the  d(#Commission's authority thereunder, apply to intrastate as well as interstate interLATA services  d(#yprovided by the BOCs or their affiliates. We base this conclusion on the scope of the pre1996  d(#MAct MFJ restrictions on the BOCs' provision of interLATA services, as well as on the plain  d(#[language of sections 271 and 272, and the requirements of those sections. In addition, we find  d(#that section 2(b) does not bar the Commission from establishing regulations to clarify and  d(#implement the requirements of section 272 that apply to intrastate interLATA services and other  d(#intrastate matters that are within the scope of section 272. We hold, therefore, that the rules we  d(#kestablish to implement section 272 are binding on the states, and the states may not impose  d(#regulations with respect to BOC provision of intrastate interLATA service that are inconsistent  d(#with section 272 and the Commission's rules under section 272. We emphasize, however, that  d(#the scope of the Commission's authority under sections 271 and 272 extends only to matters  d(#covered by those sections. Those sections do not alter the jurisdictional division of authority with  d(#respect to matters falling outside their scope. For example, rates charged to end users for  d(#intrastate interLATA service have traditionally been subject to state authority, and will continue to be.  X7-"7F,-(-(ZZ"Ԍ X-  #31.` `  SCOPMFJ We stated in the Notice, and several parties agree, that section 601(a) of the 1996  X- d(#Act indicates that Congress intended the provisions of the Act to supplant the MFJ.Gx yOb-ЍNotice at  21; DOJ Reply at 56; New York Commission at 24 (maintaining, however, that the Commission lacks authority to establish rules applicable to intrastate interLATA services); Missouri Commission at 2 (but arguing that states still retain jurisdiction, as they did under the MFJ); BellSouth at 1516 (stating that "the FCC unquestionably has authority to entertain and act upon Section 271 applications for BOC interLATA entry, whether interstate or intrastate;" but asserting that "Congress did not intend to give the Commission plenary jurisdiction over intrastate interLATA services"); AT&T at 8 n.7; Excel at 11; CompTel at 56; TRA at 56; ITAA Comments at 5. That section provides:  XAny conduct or activity that was, before the date of enactment of this Act, subject  to any restriction or obligation imposed by the [MFJ] shall, on and after such date,  be subject to the restrictions and obligations imposed by the Communications Act  of 1934 as amended by this Act and shall not be subject to the restrictions and the  XH-obligations imposed by [the MFJ].HH yO-Ѝ1996 Act,  601(a), 110 Stat. 56, 143 (to be codified as a note following 47 U.S.C.  152).   d(#No party challenges the fact that the MFJ generally prohibited the BOCs and their affiliates from  X - d(#Kproviding any interLATA services interstate or intrastate.I  yOL-ЍSee United States v. Western Electric Co., 552 F. Supp. 131, 227 (D.D.C. 1982) (subsequent history omitted). Moreover, no party challenges the  d(#fact that the term "interLATA services" as used in the MFJ referred to both intrastate and  X -interstate services. JX  yOv-ЍSee id., 552 F. Supp. at 229 (defining "exchange area" and "interexchange telecommunications"); United  yO>-States v. Western Electric Co., 569 F. Supp. 990, 993 (D.D.C. 1983) (explaining that the term "local access and transport area" was being used as a replacement for "exchange area") (subsequent history omitted).  X - 32.` ` Similarly, with respect to the term "interLATA services" as used in sections 271  d(#Nand 272, the DOJ, AT&T, and BellSouth maintain that, because the Act defines the term  d(#"interLATA" to include intrastate services, references in sections 271 and 272 to interLATA services apply to both intrastate and interstate services. We agree.  X4- P 33.` ` The Act defines "interLATA service" as "telecommunications between a point in  X- d(#a local access and transport area and a point located outside such area."RK yO"-Ѝ47 U.S.C.  153(21).R The Act further defines  d(#the term "LATA" as "a contiguous geographic area . . . established before the date of enactment  d(#of the [1996 Act] by a Bell operating company such that no exchange area includes points within  d(#kmore than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State,  d(#=except as expressly permitted under the [MFJ]" or subsequently modified with approval of the"K,-(-(ZZ"  X- d(#Commission.cLX yOy-Ѝ47 U.S.C.  153(25). As the court stated, "simply put, [a Standard Metropolitan Statistical Area] is a  yOA-U.S. Department of Commerce designation that includes a city and its suburbs. United States v. Western Electric  yO -Co., 569 F.Supp. at 993, n.8. c This definition expressly recognizes that a LATA may comprise an area, such as  X- d(#a metropolitan statistical area, that is smaller than a state.cMX yO-ЍStates served by a BOC with only one LATA are: Delaware, Maine, New Hampshire, New Mexico, Rhode Island, South Dakota, Utah, Vermont, and Wyoming. The District of Columbia is covered entirely by one LATA that also covers portions of southern Maryland and northern Virginia. DOJ Reply at 6 n.4.c Indeed, the DOJ notes that most  d(#LATAs established by the MFJ consist of only parts of individual states; only nine LATAs out  X- d(#of a total of 158 encompass an entire state.JN yOt -ЍDOJ Reply at 6.J Thus, by defining an interLATA service as  d(#.telecommunications from a point inside a LATA to a point outside a LATA, the Act expressly  d(#Krecognizes that interLATA services may include telecommunications between two LATAs within  d(#a single state. Accordingly, we find that the term "interLATA services," as used in sections 271 and 272, expressly refers to both intrastate and interstate services.  X1- !34.` ` Although the term "interLATA services" as used in the MFJ and in sections 271  d(#Land 272 refers to both interstate and intrastate interLATA services, the New York Commission  d(#and others assert that, when Congress transferred responsibility for enforcing the prohibition on  d(#the BOCs' provision of interLATA services from the U.S. District Court to the Commission, it  X - d(#intended to limit our authority only to interstate interLATA services. O  yO-ЍSee Bell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 23; New York Commission at 25; Ohio Commission at 2; Wisconsin Commission Reply at 34; NARUC at 57.  To the contrary, we find  d(#=that reading sections 271 and 272 as granting the Commission authority over intrastate as well  d(#as interstate interLATA services is consistent with, and indeed necessary to effectuate, Congress's  d(#Kintent that sections 271 and 272 replace the restrictions of the MFJ with respect to BOC provision of interLATA services.  XK- 3"35.` ` The jurisdictional limitation that the New York Commission and others seek to  d(#lread into sections 271 and 272 would lead to implausible results. Specifically, under that  d(#statutory interpretation, the BOCs would have been permitted to provide inregion, intrastate,  d(#interLATA services upon enactment, without complying with the section 271 entry requirements  d(#jor the section 272 safeguards, and subject only to any existing, generally applicable state rules  d(#on interexchange entry. Any such rules, presumably, would not have been specifically directed  d(#at BOC entry, because of the longstanding MFJ prohibition on entry. Because concerns about  d(#BOC control of bottleneck facilities needed for the provision of inregion interLATA services are  d(#iapplicable to both interstate and intrastate services, it seems clear that sections 271 and 272 apply  d(#yequally to the BOCs' provision of both intrastate and interstate, inregion, interLATA services.  d(#-We find no reasonable basis for concluding that Congress intended to lift the MFJ's ban on BOC  d(#provision of intrastate interLATA services, which constitute approximately 30 percent of  d(#interLATA traffic, and permit the BOCs to offer such services before satisfying the requirements"7 O,-(-(ZZ"  X- d(#yof sections 271 and 272.P yOy-ЍSee Industry Analysis Division, Telecommunications Industry Revenue: TRS Fund Worksheet Data, Table 6 (Com. Car. Bur. Feb. 1996). As the DOJ notes, "Congress could not have intended, for example,  d(#to open up the intrastate interLATA market immediately for BOC entry, without the carefully d(#Zdevised entry requirements of Section 271, while at the same time establishing those requirements  d(#with respect to interstate interLATA entry. Nor could Congress have meant to defeat the  d(#safeguards carefully imposed under Section 272 by permitting the BOCs to engage in the  X- d(#behavior which Section 272 prohibits, as long as they do it within the individual states."JQ  yO^ -ЍDOJ Reply at 7.J  d(#Indeed, we find it significant that neither the states nor the BOCs have argued that such a result  d(#[was intended. In light of this analysis, we find that the Commission's authority under sections 271 and 272 extends to both intrastate and interstate interLATA services.  X - }#36.` ` Similarly, several parties support the conclusion that our authority to consider the  d(#applications of BOCs seeking to provide inregion interLATA service pursuant to section 271(d)  X - d(#applies to both interstate and intrastate services.NR  yOM-ЍDOJ Reply at 47; New York Commission at 2 (maintaining, however, that the Commission lacks authority to establish rules regarding intrastate services); AT&T at 8; AT&T Reply at 35; MCI at 3; MCI Reply at 34; Sprint at 910; Sprint Reply at 4; USTA at 7 (but arguing that section 272 is selfimplementing); Excel at 11; CompTel at 34; TRA at 56; ITAA at 57; BellSouth at 15 (maintaining, however, that Congress did not intend to give the Commission plenary jurisdiction over intrastate interLATA services); PacTel at 3.N None of the state representatives and BOCs  d(#commenting on this issue claims that the Commission's authority under section 271(d) does not  d(#apply to a BOC's provision of intrastate interLATA services. Despite the lack of controversy on  d(#<this point, several commenters claim that rules adopted under section 272 apply only to interstate  X- d(#.services.S`  yO-ЍBell Atlantic at 3; BellSouth at 1516; California Commission at 23; Missouri Commission at 23; New  yOi-York Commission at 25; Ohio Commission at 2; NARUC at 7; see Wisconsin Commission Reply at 2, 68. We believe that the requirements of sections 271 and 272 repudiate this argument.  d(#In granting an application under section 271(d), the Commission must determine, among other  d(#=things, that the BOC meets the requirements of section 271(d)(3)(B). Under this provision, the  d(#Commission must find that the requested authorization "will be carried out in accordance with  X4- d(#the requirements of section 272."[T4  yO-ЍX47 U.S.C. 271(d)(3).(#[ In light of the Commission's authority to approve entry into  d(#both intrastate and interstate inregion interLATA service, pursuant to section 271, it seems  d(#logical and necessary that the Commission's authority to impose safeguards established by section 272, should similarly extend to both intrastate and interstate interLATA service.  X- $37.` ` Several parties have argued that, although the MFJ restrictions on the BOCs  d(#applied to both interstate and intrastate interLATA services, the states retained authority to  d(#regulate a BOC's intrastate interLATA services when such services were authorized by the MFJ  d(#icourt. They assert, therefore, that, even if sections 271 and 272 apply to intrastate services, those"|H T,-(-(ZZ2"  d(#provisions would not divest the states of authority over intrastate services. As we stated at the  d(#=outset of this discussion, the scope of the Commission's authority under sections 271 and 272  X- d(#Kextends only to matters covered by those sections, i.e., authorization for BOC entry into inregion  d(#KinterLATA service and the safeguards imposed in section 272. We do not dispute that the states retain their authority to regulate intrastate services in other contexts.  Xv- %38.` ` We further find that the requirements of sections 271 and 272 buttress our  d(#conclusions regarding the scope of the Commission's jurisdiction. For example, we find it  d(#significant that section 271(h) directs the Commission to address intrastate matters relating to  d(#BOC provision of incidental interLATA services. That section states that "[t]he Commission shall  X - d(#ensure that the provision of [incidental interLATA services] by a Bell operating company or its  X - d(#affiliate will not adversely affect telephone exchange service ratepayers or competition in any  X - d(#telecommunications market."bU  yOe -ЍId.  271(h) (emphasis added).b Telephone exchange service is primarily an intrastate service.  d(#This reference to a plainly intrastate service indicates that the scope of section 271 encompasses  d(#intrastate matters, and thus the Commission's authority thereunder applies to both intrastate and interstate interLATA services.  Xy- &39.` ` State representatives and some BOCs argue that sections 2(b) and 601(c) of the  d(#xAct preserve the states' authority to adopt rules regarding BOC provision of intrastate interLATA  d(#services. They argue that section 2(b) bars the Commission from exercising authority under  X4- d(#sections 271 and 272 to establish rules applicable to intrastate interLATA services.V 4X yO=-ЍAs noted above, with the exception of the New York Commission, the parties challenging the Commission's authority to preempt state regulation do not address the issue of whether the term "interLATA services" should be interpreted by definition or otherwise to include both intrastate as well as interstate  yO-services. ` `  For the  d(#-reasons set forth below, we find that section 2(b) does not preclude us from finding that sections  d(#271 and 272, and our authority to promulgate rules thereunder, apply to BOC provision of  X-intrastate interLATA services.  X-  2'40.` ` In Louisiana Public Service Commission v. Federal Communications Commission,  d(#the Supreme Court determined that, in order to overcome section 2(b)'s limits on the  d(#Commission's jurisdiction with respect to intrastate communications service, Congress must either  X|- d(#modify section 2(b) or grant the Commission additional authority.MW|@ yOm!-ЍLouisiana Public Service Comm'n v. Fed. Communications Comm'n, 476 U.S. 355, 377 (1986). Section 2(b) provides that, except as provided in certain enumerated sections [not including sections 271 and 272], "nothing in [the Communications Act] shall be construed to apply or to give the Commission jurisdiction with respect to . . . charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communications service by wire or radio of any carrier." 47 U.S.C.  152(b).M As explained above, we find  d(#<that the term "interLATA services," by the Act's own definition, includes intrastate services, and  d(#that Congress, in sections 271 and 272, expressly granted the Commission authority over  d(#intrastate interLATA services for purposes of those sections. Accordingly, consistent with the"7 W,-(-(ZZ"  X- d(#Court's statement in Louisiana, we find that section 2(b) does not limit our authority over intrastate interLATA services under sections 271 and 272.  X-  (41.` ` In addition, we find that, in enacting sections 271 and 272 after section 2(b), and  d(#squarely addressing therein the issues before us, Congress intended for sections 271 and 272 to  X- d(#take precedence over any contrary implications based on section 2(b).X yO-ЍSee, e.g., Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992). In construing these  d(#jprovisions, we are mindful that "it is a commonplace of statutory construction that the specific  X_- d(#governs the general."xY_X yOh -ЍMorales v. Trans World Airlines, Inc., 504 U.S. at 384.x Moreover, where amended and original sections of a statute cannot be  d(#harmonized, the new provisions should be construed to prevail as the latest declaration of  X1- d(#legislative will.Z1 yO -Ѝ 2 J. Sutherland, Statutory Construction 22.34 (6th ed.); see also American Airlines, Inc. v. Remis  yO-Industries, Inc., 494 F.2d 196, 200 (2nd Cir. 1974). We find also that, in enacting the 1996 Act, there are other instances where  d(#Congress indisputably gave the Commission intrastate jurisdiction without amending section 2(b).  d(#For instance, section 251(e)(1) provides that "[t]he Commission shall have exclusive jurisdiction  X - d(#over those portions of the North American Numbering Plan that pertain to the United States."T[ @ yO-Ѝ47 U.S.C.  251(e)(1).T  d(#Section 253 directs the Commission to preempt state regulations that prohibit the ability to  d(#provide intrastate services. Section 276(b) directs the Commission to "establish a per call  d(#compensation plan to ensure that payphone service providers are fairly compensated for each and  X- d(#every completed intrastate and interstate call."Q\ yO-ЍId.  276(b).Q Section 276(c) provides that, "[t]o the extent that  d(#Many State [payphone] requirements are inconsistent with the Commission's regulations, the  Xb- d(#Commission's regulations on such matters shall preempt such State requirements."Q]b`  yOs-ЍId.  276(c).Q None of  XK- d(#these provisions is specifically excepted from section 2(b), yet all of them explicitly give the  d(#Commission jurisdiction over intrastate matters. Thus, we find that the lack of an explicit  d(#iexception in section 2(b) does not require us to conclude that the Commission's jurisdiction under  d(#=sections 271 and 272 is limited to interstate services. A contrary holding would nullify several  d(#explicit grants of authority to the Commission, noted above, and would render substantial parts  d(#0of the statute meaningless. Thus, in this instance, we believe that the lack of an explicit exception in section 2(b) is not dispositive of the scope of the Commission's jurisdiction.  X- )42.` ` Moreover, as stated above, with the exception of the New York Commission, the  d(#-parties challenging the Commission's authority to preempt state regulation under sections 272 do  d(#not address the issue of whether "interLATA services" are defined by the Act to include intrastate  d(#.services. The New York Commission agrees with us that it does. These parties (including the  d(#New York Commission) also do not challenge the proposition that Congress vested in the"9 ],-(-(ZZ"  d(#Commission authority over BOC entry into all inregion interLATA services intrastate and  d(#interstate. We find it difficult to reconcile these parties' silence on these issues, as well as the  d(#New York Commission's agreement that "interLATA services" includes intrastate services, with  d(#their position that section 2(b) limits the application of the Commission's implementing rules  d(#under section 272 to interstate interLATA services. If, as it remains undisputed in the record,  d(#jthe Commission would necessarily determine, in assessing whether to allow BOC entry into in d(#?region interLATA services, whether a BOC's provision of intrastate as well as interstate  d(#NinterLATA services complies with section 272, we can find no basis to maintain that the  d(#Commission's authority under sections 271 and 272 does not include authority to apply its  d(#<interpretation of section 272 to all of the interLATA services intrastate and interstate at issue in the BOC's 271 inregion interLATA services application.  X - *43.` ` NARUC and the Missouri Commission stress that earlier drafts of the legislation  d(#would have amended section 2(b) to make an exception for certain sections of Title II, including  d(#xsections 271 and 272, but the enacted version did not include that exception. They argue that this  d(#change demonstrates that Congress intended that section 2(b)'s limitations remain fully in force with regard to sections 271 and 272. We find this argument unpersuasive.  Xb- +44.` ` As noted above, parties that attach significance to the omission of the proposed  d(#amendment of section 2(b) rely on a rule of statutory construction providing that, when a  d(#jprovision in a prior draft is altered in the final legislation, Congress intended a change from the  d(#iprior version. This rule of statutory construction has been rejected, however, when changes from  X- d(#zone draft to another are not explained.^ yO-ЍMead Corp v. Tilley, 490 U.S. at 723; Rastelli v. Warden, 782 F.2d at 23; Drummond Coal v. Watt, 735 F.2d at 474. In this instance, the only statement from Congress  d(#regarding the meaning of the omission of the section 2(b) amendment appears in the Joint  d(#.Explanatory Statement. According to the Joint Explanatory Statement, all differences between  d(#the Senate Bill, the House Amendment, and the substitute reached in conference are noted therein  d(#"except for clerical corrections, conforming changes made necessary by agreements reached by  X- d(#the conferees, and minor drafting and clerical changes."^_  yOd-ЍJoint Explanatory Statement at 113.^ Because the Joint Explanatory  d(#MStatement did not address the removal of the section 2(b) amendment from the final bill, the  d(#logical inference is that Congress regarded the change as an inconsequential modification rather  d(#Lthan a significant alteration. It seems implausible that, by enacting the final version, Congress  d(#intended a radical alteration of the Commission's authority under sections 271 and 272, given the  d(#total lack of legislative history to that effect. Based on the foregoing, we conclude that elimination of the proposed amendment of section 2(b) was a nonsubstantive change.  X- 4,45.` ` Moreover, even if it were appropriate to speculate as to the meaning of the  d(#?omission of the section 2(b) exception, we disagree with the argument that the omission  X!- d(#knecessarily indicates that Congress intended not to provide the Commission authority over"!_,-(-(ZZ "  d(#intrastate services in sections 271 and 272. We find it is equally possible that Congress omitted  d(#the exception based on an understanding that the use of the term interLATA in sections 271 and  d(#z272 established a clear grant of authority over intrastate services and therefore that such an exception was unnecessary.  X- -46.` ` We similarly are not persuaded that section 601(c) of the 1996 Act evinces an  d(#intent by Congress to preserve states' authority over intrastate matters. Section 601(c) of the  d(#1996 Act provides that the Act and its amendments "shall not be construed to modify, impair,  d(#1or supersede Federal, State, or local law unless expressly so provided in such Act or  X1- d(#amendments."`1 yO -Ѝ 1996 Act,  601(c)(1), 110 Stat. 56, 143 (to be codified as a note following 47 U.S.C.  152). As explained above, we conclude that sections 271 and 272, which apply to  d(#[interLATA services, were expressly intended to modify federal and state law and jurisdictional authority.   X -  .47.` ` For all of the reasons discussed above, we conclude that sections 271 and 272, and  d(#the Commission's authority thereunder, apply to intrastate and interstate interLATA services  d(#provided by the BOCs or their affiliates. We hold, therefore, that the rules we establish to  d(#implement section 272 are binding on the states, and the states may not impose, with respect to  d(#BOC provision of intrastate interLATA service, requirements inconsistent with sections 271 and  d(#=272 and the Commission's rules under those provisions. In this regard, based on what we find  d(#is clear congressional intent that the Commission is authorized to make determinations regarding  d(#ZBOC entry into interLATA services, we reject the suggestion by the Wisconsin Commission that,  d(#kafter the Commission has granted a BOC application for authority under section 271, a state  X-nonetheless may condition or delay BOC entry into intrastate interLATA services.QaXX yO-ЍWe note that a state would retain authority to enforce obligations relating to a BOC's provision of intrastate interLATA service, such as those identified by the Wisconsin Commission, through mechanisms other than denial or delayed of entry into the intrastate interLATA market.Q  X- C.XScope of Commission's Authority Regarding Manufacturing Services (#  X- Q/48.` ` In the Notice, we tentatively concluded that the Commission's authority under  X-section 272 extends to all BOC manufacturing of telecommunications equipment and CPE.(#(# d(#jOnly two parties, Sprint and TIA, commented on this issue, and both agreed with our tentative conclusion.  X7- 049.` ` We adopt our tentative conclusion that our authority under section 272 extends to  d(#yall BOC manufacturing of telecommunications equipment and CPE. As we stated in the Notice,  d(#to the extent that sections 271 and 272 address BOC manufacturing activities, we believe that the  d(#isame statutory analysis set forth above with respect to interLATA services would apply. We see  d(#no basis for distinguishing among the various subsections of sections 271 and 272. Even apart  d(#from that analysis, however, we believe that the provisions concerning manufacturing clearly  d(#!apply to all manufacturing activities. Section 2(b) of the Communications Act limits the"!xa,-(-(ZZ "  d(#Commission's authority over "charges, classifications, practices, services, facilities, or regulation  X- d(#for or in connection with intrastate communications service."Qb yOb-Ѝ47 U.S.C.  152(b).Q Even though, for the reasons  d(#stated above, we find section 2(b) not to be relevant to sections 271 and 272, we find that the  d(#manufacturing activities addressed by sections 271 and 272 are not, in any event, within the scope  d(#of section 2(b). Alternatively, even if section 2(b) were deemed to apply with respect to BOC  d(#manufacturing, we find that such manufacturing activities plainly cannot be segregated into  d(#interstate and intrastate portions. Thus, any state regulation inconsistent with sections 271 and  d(#=272 or our implementing regulations would necessarily thwart and impede federal policies, and  XH-should be preempted.scHX yOQ -ЍSee Louisiana Public Service Comm'n, at 377.s @!}K 0dJ:\POLICY\SAFE\ORDER\MASTER\BAS\GENL.DEF0 @  X -V III. ACTIVITIES SUBJECT TO SECTION 272 REQUIREMENTS ׃  X - 150.` ` Section 272(a) provides that a BOC (including any affiliate) that is a LEC subject  d(#to the requirements of section251(c) may provide certain services only through a separate  X - d(#affiliate.Jd  yO@-ԍ47 U.S.C.  272(a)(1).J Under section 272, BOCs (or BOC affiliates) may engage in the following activities  d(#]only through one or more affiliates that are separate from the incumbent LEC entity: (A)  Xy- d(#manufacturing activities; (B) interLATA telecommunications services that originate inregion;e yx yO- v ԍSection 272(a)(2)(B) exempts from the separate affiliate requirement for origination of interLATA  d(#;telecommunications services certain incidental interLATA services (as described in sections 271(g)(1), (2), (3), (5),  d(#;and (6)), outofregion services (as described in section 271(b)(2)), and previously authorized activities (as described in section 271(f)).  Xb- d(#and (C) interLATA information services.f b`  yOs- v ԍAlthough they are information services (see 47 U.S.C.  153(20), 272(a)(2)(C)), electronic publishing (as  d(#defined in section 274(h)) and alarm monitoring services (as defined in section 275(e)) are exempted from the section  d(#272 separate affiliate requirements, and are subject to their own specific statutory separate affiliate and/or nondiscrimination requirements. We discuss below both the activities subject to the  d(#section 272 separate affiliate requirements and the activities that are exempt from these requirements. "H f,-(-(ZZ "Ԍ X- _A.XGeneral Issues (#  X-X 1.X` ` Definition of "interLATA services" (#`  X-XX` ` a.X Background (#  Xv- o251.` ` In the Notice, we indicated that the 1996 Act defines "interLATA service" as _a  X_- d(#telecommunications service.Hg_ yO-ԍNotice at  41 n.80.H We further stated that, where the 1996 Act draws distinctions  d(#Lbetween inregion and outofregion "interLATA services," these distinctions do not apply to  X1-interLATA information services.:h1X yO: -ԍId.:  X -XX` ` b. Comments (#`  X - 352.` ` Although we did not specifically seek comment on this analysis, several parties  d(#[disagree with our interpretation of the scope of the term "interLATA services." BellSouth and  d(#NMFS argue that the definition of "interLATA services" includes interLATA information  X- d(#services.i yO)- v ԍBellSouth at 19 n.45; accord ITAA at 7; MFS at 10; Ameritech Reply at 33; MFS Reply at 67; see also MCI Reply at 8. They further dispute our view that "interLATA service" only refers to  d(#"telecommunications services," arguing that the statutory definition in section 3(21) refers to  d(#"telecommunications" provided across LATA boundaries, not to "telecommunications services"  XK- d(#provided across LATA boundaries.[jK@ yO<-ԍBellSouth at 2223 & n.55; MFS Reply at 6.[ MFS states that "telecommunications" is defined in section  d(#@3(43) as the transmission of information without change in the form or content of the  d(#information, whereas "information services" are defined in section 3(20) as the "offering of a  X- d(#{capability for generating, . . . or making available information via telecommunications."@k yO-ԍMFS Reply at 6.@  d(#Therefore, argues MFS, "interLATA information services" must logically incorporate the  d(#0transmission of, or capability for transmitting, information between LATAs, which is an  X-interLATA service.Yl`  yO!-ԍId.; accord BellSouth at 23.Y  X- 453.` ` In addition, BellSouth states that section 271(b) describes how section 271 applies  d(#-to several categories of "interLATA services," including "incidental interLATA services." Since  Xe- d(#certain of the "incidental interLATA services" set forth in section 271(g) are indisputably  XN- d(#information services, BellSouth argues that "interLATA services" must encompass interLATA"N l,-(-(ZZ"  X- d(#information services.mX yOy- v ԍBellSouth at 2122; see also Letter from Robert T. Blau, Vice President Executive and Federal Regulatory  d(#Affairs, BellSouth, to Carol Mattey, Deputy Division Chief, Policy and Program Planning Division, Common Carrier  yO -Bureau, at 12 (filed Oct. 29, 1996) (BellSouth Oct. 29 Ex Parte). MFS also argues that, because Congress distinguished between  d(#ZinterLATA telecommunications services and interLATA information services in section 272(a)(2),  d(#-its use of the term "interLATA services" in section 271 clearly indicates an intent to include both  X- d(#information and telecommunications services.;n yOT-ԍMFS at 10.; MFS specifically argues that the section 271  d(#xrestrictions apply to "interLATA services" and are not limited to "interLATA telecommunications  X-services.":ox yO -ԍId.:  X_- O554.` ` MCI notes that BellSouth's interpretation of "interLATA services" as encompassing  XH- d(#both interLATA telecommunications and information services in section 271(b) would mean that  d(#a BOC could not provide inregion interLATA information services until it had obtained section  X - d(#271 authorization.@p  yO-ԍMCI Reply at 8.@ In response, BellSouth acknowledges that, prior to providing interLATA  d(#information services that are neither previously authorized activities under section 271(f) nor  X - d(#incidental interLATA services under section 271(g), the BOCs are required to obtain section 271  X -authorization from the Commission.cq  yO-ԍSee BellSouth Oct. 29 Ex Parte at 12.c  X -XX` ` c.X Discussion (#  Xy- 655.` ` Upon consideration of the arguments raised in the record, we modify our  d(#interpretation of the scope of the term "interLATA service." Consistent with the views of the  d(#0commenters that addressed this point, we conclude that the term "interLATA services"  X4- d(#encompasses both interLATA information services and interLATA telecommunications services.r4(  yO - v /ԍE.g., BellSouth at 19 n.45; accord ITAA at 7; MFS at 10; Ameritech Reply at 33; MFS Reply at 67; see  yO-also MCI Reply at 8.  X- 756.` ` We are persuaded that the definition of "interLATA service," which is  X- d(#"telecommunications between a point located in a [LATA] and a point located outside such  X- d(#Zarea,"Hs  yO $-ԍ47 U.S.C.  153(21).H does not limit the scope of the term to telecommunications services because, as MFS and  X- d(#BellSouth point out, information services are also provided via telecommunications. Elsewhere  X- d(#in this Report and Order, we conclude that "interLATA information services" must include a"s,-(-(ZZ"  X- d(#zbundled, interLATA transmission component.Tt yOy-ԍSee infra part III.F.2.T Thus, interLATA information services are  d(#kprovided via interLATA telecommunications transmissions and, accordingly, fall within the  d(#definition of "interLATA service." Moreover, we believe that it is a more natural, commonsense  d(#reading of "interLATA services" to interpret it to include both telecommunications services and  d(#information services. In addition, as MFS argues, in section 272(a)(2), Congress uses and  d(#distinguishes between "interLATA telecommunications services" and "interLATA information  d(#services," demonstrating that it limited the term "interLATA services" to transmission services  d(#when it wished to. Further, if Congress had intended the term "interLATA services" to include  d(#xonly interLATA telecommunications services, its use of the term "interLATA telecommunications services" in section 272(a)(2) would have been unnecessary and redundant.  X - 857.` ` As MCI points out, interpreting the term "interLATA services" to include both  d(#interLATA telecommunications and interLATA information services means that a BOC may not  X - d(#provide inregion interLATA information services until it obtains section 271 authorization.@u X yO-ԍMCI Reply at 8.@  d(#=As a practical matter, we believe that interpreting "interLATA services" to include interLATA  d(#information services will not alter the application of section 271. As noted above, and discussed  d(#jin greater detail below, we conclude that the term "interLATA information service" refers to an  d(#Oinformation service that incorporates as a necessary, bundled element an interLATA  Xb- d(#telecommunications transmission component provided to the customer for a single charge.Tvb yO-ԍSee infra part III.F.2. T  d(#Thus, regardless of whether we interpret "interLATA service" to include interLATA information  d(#services, a BOC would be required to obtain section 271 authorization prior to providing, in d(#Zregion, the interLATA telecommunications transmission component of an interLATA information service.  X-X 2.X` ` Application of Section 272 Safeguards to International InterLATA Services(#`  X-   X- 958.` ` In the Notice, we tentatively concluded that Congress intended the section 272  X- d(#safeguards to apply to all domestic and international interLATA services.Cwx yO-ԍNotice at  32.C A  ll of the parties  X|- d(# that commented on this point supported this tentative conclusion.x| yO5"- v ԍAT&T at 910; Comptel at 8; Excel at 12; ITAA at 5; USTA at 9; TRA at 8; MCI at 6; Sprint at 11; DOJ Reply at 8. As noted above, the 1996  d(#Act defines "interLATA services" as "telecommunications between a point located in a [LATA]  XN- d(#and a point located outside such area."HyN`  yO_&-ԍ47 U.S.C.  153(21).H The definition does not distinguish between domestic  X7- d(#and international interLATA services. Further, international telecommunications services, which"7 y,-(-(ZZ"  d(#originate in a LATA and terminate in a country other than the United States, or vice versa, fit  d(#kwithin the statutory definition of interLATA services. Thus, we hereby adopt our tentative conclusion.  X-X 3.X` ` Provision of Services through a Single Affiliate (#`  Xv-XX` ` a.X Background (#  XH- :59.` ` In the Notice, we te ntatively concluded that BOCs may conduct all, or some  X1- d(#combination of, manufacturing activities, interLATA telecommunications services, and interLATA  d(#information services through a single separate affiliate, so long as the affiliate satisfies all  X - d(#/statutory and regulatory requirements imposed on the provision of each type of service.Cz  yO| -ԍNotice at  33.C  d(#.Elsewhere in the Notice, we sought comment on whether the 1996 Act permits us to, and if so,  d(#whether we should, interpret or apply any of the requirements of section 272(b) differently with  d(#respect to a BOC's provision of interLATA telecommunications services, which are regulated  d(#under Title II, as opposed to a BOC's engagement in manufacturing and provision of interLATA  X- d(#iinformation services, which are unregulated activities.{X yO- v 1ԍThe Commission retains ancillary jurisdiction over unregulated services pursuant to Title I of the  yOa-Communications Act of 1934. See 47 U.S.C.  154(i). In addition, we sought comment on how  d(#lwe could impose different regulatory requirements if a BOC provides both regulated and  Xb-unregulated services through a single affiliate.F|b yO-ԍId. at  56.F  X4-XX` ` b. Comments (#`  X- ;60.` ` The majority of parties agree that BOCs may engage in manufacturing activities,  d(#and also provide interLATA telecommunications services and interLATA information services,  X- d(#ythrough the same affiliate.}@ yO- v ԍAmeritech at 63; Bell Atlantic, Exhibit 1, at 1; NYNEX at 38 n.52; PacTel at 4; US West at 19; USTA at 10; Sprint at 1213; TIA at 15. Further, most of the parties that commented on these issues state  d(#that neither the text of the statute nor regulatory concerns mandate that we apply the section  X- d(#272(b) requirements differently to regulated services and unregulated activities offered through  X- d(#such an affiliate.~ yO"- v ԍE.g., MCI at 22 (expressing no opinion as to manufacturing); PacTel at 1819; TIA at 1920; USTA at 18 yO#-19. Contra Ohio Commission at 8. The Ohio Commission asserts, however, that BOCs should not be permitted  d(#<to offer regulated interLATA telecommunications services together with unregulated competitive  Xe- d(#services, unless they are willing to have their unregulated services subject to the same scrutiny"e ~,-(-(ZZ"  X- d(#as their regulated services.F yOy-ԍOhio Commission at 8.F VoiceTel argues that BOCs should be required to separate the  d(#provision of manufacturing activities from other competitive services, to prevent the interLATA  d(#Lservice operations provided by the BOC's affiliate from obtaining an unfair advantage through  X-access to information about manufacturing developments.CX yO-ԍVoiceTel at 1011.C  X-XX` ` c.X Discussion (#  X_-  A<61.` ` Based on the comments submitted in the record and our analysis of the 1996 Act,  d(#we adopt our tentative conclusion that BOCs may conduct all, or some combination, of  d(#[manufacturing activities, interLATA telecommunications services, and interLATA information  d(#/services through a single separate affiliate. Section 272(a) requires a BOC to provide these  d(#yservices through "one or more affiliates" that are "separate from any operating company entity  X - d(#>that is subject to the requirements of section 251(c)."J  yO-ԍ47 U.S.C.  272(a)(1).J We conclude that this language is  d(#.intended to allow the BOCs flexibility in structuring their provision of competitive services, so  d(#ilong as those services are separated from the BOCs' provision of any local exchange services that are subject to the requirements of section 251(c).  Xy-  =62.` ` We further conclude, as a policy matter, that it is not necessary to require the  Xb- d(#}BOCs to separate their manufacturing activities from their provision of interLATA  XK- d(#telecommunications services and interLATA information services, as suggested by VoiceTel. Kx yOt- v ԍSee VoiceTel at 1011. In contrast, the Telecommunications Industry Association, a national trade  d(#association representing manufacturers and suppliers of telecommunications equipment and customer premises  d(#wequipment (CPE), agrees that the BOCs may provide manufacturing activities through the same section 272 affiliate that provides interLATA telecommunications services and interLATA information services. TIA at 1516.  d(#/First, a BOC's manufacturing activities do not entail control over bottleneck local exchange  d(#]facilities. Second, during the period that the MFJ prohibited the BOCs from engaging in  X- d(#Lmanufacturing activities, a competitive market for these activities developed.x`  yO- v /ԍUnder the MFJ, the BOCs were not prohibited from providing CPE. In 1987, the Commission lifted the  d(#structural separation requirement it had imposed on BOC provision of CPE, based in part on a determination that  yO - d(#jthe CPE industry was substantially competitive. See Furnishing of Customer Premises Equipment by the Bell  yOo!- d(#Operating Companies and the Independent Telephone Companies, CC Docket No. 8679, Report & Order, 2 FCC  yO7"- d(#yRcd 143, 147,  25 (1987) (BOC CPE Relief Order); see also Procedures for Implementing the Detariffing of  yO"- d(#Customer Premises Equipment and Enhanced Services (Second Computer Inquiry), CC Docket No. 81893, Memorandum Opinion & Order, 8 FCC Rcd 3891, 3891,  5 (1993). The market for",-(-(ZZ"  X- d(#information services is fully competitive;C  yOy- v ԍSee, e.g., Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer  yOA- d(#.Inquiry), CC Docket No. 20828, Final Order, 77 FCC 2d 384, 433,  128 (1980) (Computer II Final Order);  yO - d(#Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry), CC Docket  yO-No.85229, Report & Order, 104 FCC 2d 958, 1010,  95 (1986) (Computer III Phase I Order).C the market for  X- d(#interLATA telecommunications services is also substantially competitive. yOJ- v kԍSee, e.g., Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket No. 9661,  yO- d(#Second Report & Order, FCC 96424, at  2122 (rel. October 31, 1996) (Tariff Forbearance Order); Motion of  yO- d(#AT&T to be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271, 32783279, 3288,  9, 26 (1995)  yO - d(#;(AT&T Nondominance Order); Competition in the Interstate Interexchange Marketplace, CC Docket No. 90132,  yOj -Report & Order, 6 FCC Rcd 5880, 5887,  36 (1991) (First Interexchange Competition Order). Thus, while a BOC  d(#.may achieve certain efficiencies and economies of scope by conducting all three categories of  d(#activity through the same section 272 affiliate, it cannot thereby increase its ability to exercise  d(#Kmarket power in either the manufacturing, interLATA telecommunications services, or interLATA  d(#information services markets. Further, we note that section 273, which is the subject of a  Xv- d(#\separate proceeding,jXv`  yO- v ԍSee Implementation of Section 273 of the Communications Act of 1934, as amended by the  yOO- d(#;Telecommunications Act of 1996, CC Docket No. 96254, Notice of Proposed Rulemaking, FCC 96472 (rel. Dec.  yO-11, 1996) (Manufacturing NPRM). j establishes additional safeguards applicable to BOC manufacturing  X_- d(#.activities, which are intended to promote competition and prevent discrimination._  yO- v \ԍSee, e.g., 47 U.S.C.  273(c) (requiring the BOCs to file with the Commission and disclose to competitors  d(#wand interconnecting carriers information regarding protocols and technical requirements for connection with and use  d(#of its telephone exchange service facilities); 47 U.S.C.  273(e) (imposing nondiscrimination requirements,  d(#Kprocurement standards, joint network planning and design requirements, and proprietary information protection  yO-requirements on BOCs and their manufacturing affiliates).Đ For these  d(#reasons, we conclude that BOCs may conduct all, or some combination of, manufacturing  d(#activities, interLATA telecommunications services, and interLATA information services through the same section 272 affiliate.  X - 2>63.` ` Further, we decline to adopt different requirements pursuant to section 272(b) for  d(#=regulated and unregulated activities. The safeguards of section 272(b) apply to any "separate  X - d(#Laffiliate required by" section 272(a).H 0 yO-ԍ47 U.S.C.  272(b).H Thus, the section 272(b) safeguards address the BOCs'  d(#Lpotential to allocate costs improperly and to discriminate in favor of their section 272 affiliates, irrespective of the activities in which those affiliates engage.  Xb-X 4.X` ` Manufacturing Activities (#`  XK-  X4- ?64.` ` In the Notice, we stated that BOCs may only engage in manufacturing activities  X- d(#<through a separate affiliate that meets the requirements of section 272, and noted that section 273" ,-(-(ZZ "  X- d(#{sets forth additional safeguards applicable to BOC entry into manufacturing activities.C yOy-ԍNotice at  35.C  d(#Subsequent to the closing of the record in this proceeding, the Commission released a Notice of  X- d(#yProposed Rulemaking to clarify and implement the provisions of section 273.ZX yO-ԍSee Manufacturing NPRM.Z Several parties  X- d(#have raised arguments relating to the section 273 provisions on the record in this proceeding.X yOT- v 0ԍSee, e.g., TIA at 1015 (addressing the scope of the term "manufacturing"); US West Reply at 2024  d(#(arguing that section 273(b)(1) authorizes a BOC to participate with a manufacturer in the design of equipment on  yO -an unseparated basis and without awaiting section 271(d) authorization); see also ITI/ITAA Reply at 23, 9-10.  d(#Because this proceeding implements the nonaccounting safeguards provisions of sections 271 and  d(#Z272, arguments relating to the specific provisions of section 273 are more appropriately addressed  d(#yin the section 273 proceeding. We note that BOCs must conduct their manufacturing activities  d(#through a section 272 separate affiliate, manufacture and provide telecommunications equipment  d(#Land CPE in accordance with section 273, and comply with the regulations that the Commission promulgates to implement both sections 272 and 273.B!}K 2J:\POLICY\SAFE\ORDER\MASTER\BAS\MERGER.ALL2 B    X - ^ B.XMergers/Joint Ventures of Two or More BOCs (#  X -X 1.X` ` Background (#`  X - A@65.` ` In the Notice, we tentatively concluded that, pursuant to sections 271(i)(1)   yO`- v ?ԍSection 271(i)(1) provides that "[t]he term "inregion State" means a State in which a Bell operating  d(#company or any of its affiliates was authorized to provide wireline telephone exchange service pursuant to the  d(#reorganization plan approved under the AT&T Consent Decree, as in effect on the day before the date of enactment of the Telecommunications Act of 1996." 47 U.S.C.  271(i)(1). and  X- d(#^ 153(4)(B),X  yO1- v ԍSection 3(4) provides that "[t]he term 'Bell operating company' . . . (B) includes any successor or assign  d(#hof any such company that provides wireline telephone exchange service; but (C) does not include an affiliate of such company, other than an affiliate described in subparagraph (A) or (B)." 47 U.S.C.  153(4). if two or more of the BOCs combine their operations through merger or acquisition,  d(#jthe inregion states of the resultant entity shall include all of the inregion states of each of the  Xb- d(#BOCs involved in the merger/acquisition.xb yO# - v ԍ Notice at  40. Specifically, we noted that Bell Atlantic had announced plans to acquire NYNEX, and that  yO - d(#ZSBC and PacTel had announced their intent to merge. Id. at n.74. These mergers have not yet been completed,  d(#although on November 5, 1996, the Department of Justice announced that it was closing its investigation into the  yO{"- d(#ZSBCPacTel merger, having concluded that the merger does not violate the antitrust laws. See U. S. Department  yOC#- d(#;of Justice, Antitrust Division, Antitrust Division Statement Regarding Pacific Telesis/SBC Communications Merger,  d(#News Release, DOJ 96542 (November 5, 1996). In this Order, as in the Notice, we intend that our analysis of mergers between or among BOCs be extended to the acquisition of one BOC by another. We sought comment on whether the entry into a  d(#merger agreement or a joint venture arrangement by two or more BOCs affects the application  d(#of the section 271 and 272 nonaccounting separate affiliate and nondiscrimination requirements"4!P,-(-(ZZH"  d(#.to those BOCs. We further sought comment on whether additional safeguards are required to  d(#ensure that these BOCs do not provide the affiliates of their merger partners with an unfair competitive advantage during the pendency of their merger agreement.  X-X 2.X` ` Comments (#`  Xv- QA66.` ` All parties that commented on this issue unanimously agree with our tentative  d(#=conclusion that, upon completion of a merger between or among BOCs, the inregion states of  XH-a merged entity shall include all of the inregion states of the BOCs involved in the merger.H yO - v ԍAmeritech at 66; AT&T at 15; Comptel at 1112; Excel at 3; USTA at 13; MCI at 14; Sprint at 15; ITAA at 9 n.22; New York Commission at 6; TRA at 10; DOJ Reply at 8.  X - B67.` ` Existing and potential competitors of the BOCs express concern about the incentive  d(#and ability of the BOCs to discriminate in favor of the affiliates of their merger or joint venture  d(#Mpartners during the pendency of a merger or joint venture. For the purpose of applying the  d(#section 272 safeguards, they urge the Commission to treat the regions of BOCs entering a merger  d(#or joint venture as combined from the time that they enter into the merger or joint venture  X - d(#agreement.  yOx- v =ԍAT&T at 15; Comptel at 1213; Excel at 24; TRA at 1011; Sprint at 15; Sprint Reply at 89; accord New York Commission at 67. Further, competitors argue that all nondiscrimination safeguards that apply to the  d(#BOC's dealings with its own section 272 affiliates should apply to the BOC's dealings with the  d(#section 272 affiliates of its merger or acquisition partner, as well as to dealings with a joint  Xb-venture partner.jbx yO-ԍTRA at 1011; Sprint at 15; accord MCI Reply at 7. j  X4- BC68.` ` In contrast, the DOJ and several BOCs contend that because BOCs would not  d(#.become affiliates of one another until a merger is consummated, entry into a merger agreement  d(#would have no effect on the application of the section 272 safeguards, which pertain to a BOC's  X- d(#krelationship with (and potential discrimination in favor of) its own affiliate.r yO-ԍDOJ Reply at 9; USTA at 1314; NYNEX Reply at 2829; PacTel at 8.r USTA further  d(#-contends that a rule attributing the inregion service area of merging BOCs to one another during  X- d(#Lthe pendency of a merger would be very difficult to administer.a yO !-ԍUSTA at 1314; see also PacTel Reply at 5.a These parties argue that the  d(#xCommission need not adopt any additional regulations to govern the conduct of proposed merger  d(#Zpartners during the pendency of a proposed merger. They claim that sufficient protection against  d(#kunfair discrimination by BOCs in conjunction with mergers, acquisitions, and joint ventures  Xe-already exists.e(  yO>&-ԍDOJ Reply at 9; USTA at 13; Ameritech at 66; Nynex Reply at 2829; PacTel at 8. "N" ,-(-(ZZ"Ԍ X-X 3.X` ` Discussion (#`  X- _D69.` ` We note the unanimous support among parties that commented on the issue, and  d(#zhereby affirm our tentative conclusion that, upon completion of a merger between or among  d(#BOCs, the inregion states of the merged entity shall include all of the inregion states of each  X- d(#of the BOCs involved in the merger.X yO- v \ԍSimilarly, where such a transaction takes the form of an acquisition, rather than a merger, pursuant to 47  d(#xU.S.C.  153(4)(B), the surviving BOC shall become the successor or assign of the acquired BOC, and thus the inregion area of the surviving BOC shall include the inregion states of the acquired BOC. We decline, however, to adopt a general rule that would  d(#{treat the regions of merging BOCs as combined prior to completion of the merger, for the  d(#xpurposes of applying the section 272 separate affiliate and nondiscrimination safeguards. Section  d(#272 requires a BOC to provide certain services (interLATA telecommunications and information  d(#=services and manufacturing activities) through one or more separate affiliates, and establishes  d(#nondiscrimination requirements that apply to the BOC's conduct and its relationship with these  d(#kaffiliates. Section 3(1), in turn, defines an "affiliate" as "a person that (directly or indirectly)  d(#owns or controls, is owned or controlled by, or is under common ownership and control with,  X - d(#another person."  yOn- v ԍSection 3(1) further provides, "[f]or the purposes of this paragraph, the term 'own' means to own an equity interest (or the equivalent thereof) of more than 10 percent." 47 U.S.C. 153(1). Prior to completion of a merger, the merging BOCs are neither affiliates, nor  d(#successors or assigns, of one another. Thus, entry into a merger agreement does not render the  d(# section 272 safeguards applicable to a BOC's relationship with its merger partner, nor to its  d(#relationship with its merger partner's affiliates. Moreover, treating the regions of merging BOCs  d(#as combined from the inception of a merger agreement might create considerable problems in  d(#applying the section 271 and 272 safeguards. For example, if BOC A were offering outofregion  d(#interLATA services in BOC B's region at the time the two entered a merger agreement, BOC A  d(#might be required immediately to cease the provision of such services until it had received  d(#approval under section 271 to offer inregion interLATA services. That result would be both disruptive and confusing to customers.  X- E70.` ` We further decline to adopt any additional regulations applicable to pending  d(#mergers or joint ventures between or among BOCs. We are persuaded that adequate protections  d(#against discriminatory and anticompetitive conduct already apply to mergers, acquisitions, and  d(#joint ventures among BOCs. As the DOJ and other commenters point out, these protections  d(#Linclude the nondiscrimination obligations of sections 201 and 202 of the Communications Act,  d(#.which, among other things, prevent the BOCs from unjustly or unreasonably discriminating in  d(#lproviding facilities or services to interexchange carriers, and would thus govern a BOC's  d(#relationship with the longdistance affiliate of its merger partner. Continuing enforcement of the  d(#MFJ equal access requirements and preexisting Commissionprescribed interconnection  d(#requirements, pursuant to section 251(g), also safeguards against BOC discrimination in favor of  X- d(#jthe affiliates of their merger partners . Further, as USTA notes, BOCs will be subject to the pre"#@,-(-(ZZ"ԫ X- d(#-merger review process under the HartScottRodino amendment to the Clayton Act. yOy- v ԍUSTA at 1314; see HartScottRodino Antitrust Improvement Act of 1976, P.L. 94435, Title II, 201,  yOA- d(#90 Stat. 1390, codified at 15 U.S.C. 18a. The HartScottRodino review process provides an opportunity for the  d(#DOJ or the FTC to block a proposed merger that would be anticompetitive and would violate federal antitrust laws.  d(#By subjecting merging BOCs to the scrutiny of these agencies during the period prior to consummation of their merger, HartScottRodino review may curb their incentive to engage in discriminatory conduct during this period. Moreover,  d(# as MCI suggests, we retain our authority to impose additional safeguards in the context of  d(#particular mergers, should circumstances demonstrate the need for such safeguards, on a caseby X-case basis.x yO -ԍSee MCI at 1415 (citing Interim BOC OutofRegion Order at  33).D!}K 4~ J:\POLICY\SAFE\ORDER\MASTER\BAS\GRANDFAT.HER4 D  X- C.XPreviously Authorized Activities (#  X_-X 1.X` ` Background (#`  X1- $F71.` ` In the Notice, we sought comment on the meaning of and interaction between  X - d(#zsections 271(f), 272(a)(2)(B)(iii), and 272(h).N  yO-ԍNotice at  34, 3839.N Specifically, we sought comment on whether,  d(#subject to the exception established by section 272(a)(2)(B)(iii), section 272(h) requires the BOCs  d(#to come into compliance with the section 272 safeguards with respect to all of the activities listed  X - d(#in section 272(a)(2)(A)(C) that they were providing on the date of enactment of the 1996 Act.J  yO-ԍId. at  34, 38.J  d(#=We observed that section 272(a)(2)(B)(iii) establishes an exemption for "previously authorized  d(#=activities described in section 271(f)" from the separate affiliate requirement for "origination of  X- d(#interLATA telecommunications services."F(  yOi-ԍId. at  38.F We sought comment on whether Congress intended,  d(#through section 272(h), to require BOCs engaged in previously authorized manufacturing  d(#kactivities and interLATA information services to come into compliance with the section 272  XK-requirements.FK  yO-ԍId. at  39.F  X-X 2.X` ` Comments (#`  X- G72.` ` Section 271(f). In general, the BOCs interpret section 271(f) to mean that section  d(#271(a), which prohibits BOCs from providing inregion interLATA services prior to obtaining  d(#Zsection 271 authorization, does not affect their provision of interLATA services that have already  X- d(#been authorized by the MFJ court, as long as they continue to provide such services in accordance"$H ,-(-(ZZ"  X- d(#with the terms and conditions imposed by the MFJ court. yOy-ԍBellSouth at 1819, 24; NYNEX at 39; U S West at 15; cf. Ameritech at 6364. Several potential competitors argue  d(#that section 271(f) does not address whether BOCs must provide previously authorized services  X- d(#through a section 272 separate affiliate, but rather authorizes the BOCs to continue to provide in d(#[region interLATA services for which they had obtained MFJ waivers prior to enactment of the  X- d(#1996 Act, without first obtaining section 271 authorization.X yO-ԍSee, e.g., MCI Reply at 56; see also TRA at 9; ITAA at 8; Comptel at 1011. Interexchange carriers argue that,  d(#yto the extent certain previously authorized activities are not required eventually to comply with  Xv- d(#xsection 272 separate affiliate requirements, they must continue to be provided subject to the terms  X_-and conditions contained in an order of the MFJ court._ yO -ԍAT&T at 12 n.12; Comptel at 1011; MCI at 9 n.21; Sprint at 13 n.10; MCI Reply at 45.  X1- H73.` ` Section 272(a)(2)(B)(iii). Bell Atlantic and BellSouth argue that section  d(#L272(a)(2)(B)(iii) exempts all previously authorized activities described in section 271(f) from the  X - d(#section 272 separate affiliate requirements.a x yO,-ԍBell Atlantic, Exhibit 1, at 2; BellSouth at 19.a Ameritech and PacTel argue that section  X - d(#272(a)(2)(B)(iii) exempts from the section 272 separate affiliate requirements all previously  X - d(#[authorized interLATA telecommunications services and interLATA information services.  yO- v PԍAmeritech at 6465 (arguing that interLATA information services are covered by the section  d(#272(a)(2)(B)(iii) exemption because they are a subset of interLATA telecommunications services); PacTel at 56;  d(#Ameritech Reply at 3233; PacTel Reply at 3 (arguing that the scope of section 272(a)(2)(B) is not limited to  d(#"telecommunications services" because the excepted categories of "incidental interLATA services" and "previously  yO-authorized services" both include information services); see also USTA at 1213; NYNEX Reply at 28 n.87. In  X - d(# general, potential competitors to the BOCs argue that section 272(a)(2)(B)(iii) only exempts  d(#previously authorized interLATA telecommunications services from the section 272 separate  X- d(#affiliate requirements.k  yO-ԍMCI at 89; Sprint at 1314; ITAA at 8; Sprint Reply at 6.k One BOC agrees with this interpretation.OH  yO-ԍU S West at 1617.O These parties argue that  Xy- d(#ysection 272(a)(2)(B)(iii) does not exempt previously authorized interLATA information services  d(#from the separate affiliate requirements, because section 272(a)(2)(B)(iii) only applies to  XK- d(#interLATA telecommunications services.zK yO!-ԍMCI at 89; ITAA at 8; U S West at 16; MCI Reply at 6; Sprint Reply at 6.z Although the BOCs and their competitors disagree  d(#as to the scope of the section 272(a)(2)(B)(iii) exemption, they agree that the exemption is  X-permanent.h yO6%-ԍAmeritech at 65; BellSouth at 19; NYNEX at 42; MCI at 89; Sprint at 13. "%,-(-(ZZF"Ԍ X- }I74.` ` Section 272(h). Although the BOCs generally agree that section 272(h) authorizes  X- d(#a transition period for compliance with the separate affiliate requirements, yOb-ԍSee NYNEX at 4142; Bell Atlantic, Exhibit 1, at 2; PacTel at 6; SBC at 11; see also MFS Reply at 16. their views diverge  d(#as to the effect of the section. At one extreme, PacTel argues that section 272(h) does not apply  d(#xto previously authorized interLATA information or telecommunications services or manufacturing  X- d(#kactivities, but rather provides a oneyear transition period for compliance with requirements  d(#imposed on the telephone exchange and exchange access activities BOCs were providing on the  Xv- d(#Ldate of enactment of the 1996 Act, e.g., compliance with section 272(e).?vX yO -ԍPacTel at 56.? Several BOCs argue  d(#that section 272(h) requires only previously authorized manufacturing activities to come into  d(#ycompliance with the separate affiliate requirements, because section 272(a)(2)(B)(iii) exempts all  X1- d(#previously authorized services involving interLATA telecommunications, including information  X - d(#jservices.   yO- v ԍUSTA at 1213; Ameritech Reply at 33; cf. NYNEX at 39; Ameritech at 6566 (section 272(h) allows one  d(# year for the BOCs to come into compliance with the section 272 requirements for all interLATA information services  d(#and interLATA telecommunications services they are providing pursuant to MFJ waivers that incorporate a separate  yO -affiliate requirement.) At the other extreme, U S West argues that section 272(h) applies to all previously  X - d(#jauthorized manufacturing and interLATA information services, giving BOCs one year from the  X - d(#ydate of enactment of the 1996 Act to move these services into section 272 separate affiliates.C  yOm-ԍU S West at 1718.C  X -MCI, Sprint, and ITAA endorse U S West's position. `  yO-ԍMCI at 89; Sprint at 1314; see also ITAA at 8 (specifically referring to interLATA information services).  X - J75.` ` Differential Treatment. A majority of the BOCs propose interpretations of sections  d(#271(f), 272(a)(2)(B)(iii), and 272(h) that would result in differential treatment for different types  d(#-of previously authorized services. NYNEX and U S West argue that permanently exempting only  Xb- d(#previously authorized interLATA telecommunications services from the section 272 separate  d(#yaffiliate requirements makes sense, because most of the telecommunications services for which  d(# BOCs obtained MFJ waivers would be impossible, or too costly, to provide on a separated  X- d(#.basis.'   yO- v ԍNYNEX at 3940; U S West at 17. NYNEX and U S West state that most waivers granted by the MFJ  d(#hcourt for provision of interLATA telecommunications services contemplated integrated provision of these services,  d(#including numerous waivers to provide Extended Area Service (EAS) by expanding the local calling area of a small  yO"-number of usually rural customers to include nearby "communities of interest" located in another LATA.' Ameritech, however, contends that the Commission should not differentiate between  X- d(#previously authorized interLATA telecommunications services and previously authorized"&,-(-(ZZ "  d(#information services, arguing that certain previously authorized interLATA information services  X-cannot efficiently be provided on a separated basis.-  yOb- v ԍAmeritech at 6364 (citing United States v. Western Electric, No. 820192 (D.D.C. Feb. 6, 1989) (granting  yO*- d(#xa waiver for a reverse directory service provided through the telephone operating company) and United States v.  yO- d(#;Western Electric, No. 820192 (D.D.C. Sept. 11, 1989) (granting a waiver for "telecommunications devices for the deaf" (TDDS) and specifically finding that service to be an information service)). -  X-X 3.X` ` Discussion (#`  X-  K76.` ` Based on the record before us and our analysis of the relevant statutory terms, we  d(#?conclude that BOCs may continue to provide all previously authorized services without  d(#Zinterruption, pursuant to the terms and conditions set forth in the MFJ court orders that authorize  d(#those services. Previously authorized interLATA information services and manufacturing  d(#jactivities must come into compliance with the section 272 separate affiliate requirements within  d(#one year. Previously authorized interLATA telecommunications services, which do not have to  d(#comply with the section 272 separate affiliate requirements, must continue to be provided  X -pursuant to the terms and conditions of the MFJ court orders that authorize them.  X - L77.` ` Section 271(f). A s a general matter, section 271 addresses the timing and  d(#zrequirements for BOC entry into the interLATA market. Section 271(f) specifies that neither  d(#[section 271(a) nor section 273 "prohibits" a BOC or its affiliate from engaging, at any time after  d(#enactment, in any activity previously authorized by an order of the MFJ court, subject to the  Xb- d(#[terms and conditions imposed by the court.b yO- v ԍSection 273(a), like section 271, incorporates a timing element, permitting a BOC to manufacture and  d(#provide equipment "if" the FCC authorizes that BOC (or its affiliate) to provide interLATA services under 271(d).  d(#=47 U.S.C  273(a). The Joint Explanatory Statement indicates that this section permits a BOC to engage in  d(#manufacturing after the Commission authorizes the company to provide interLATA services under section 271(d)  yO-in any inregion state. Joint Explanatory Statement at 154 . We conclude that the purpose of Section 271(f)  d(#is to preserve the BOCs' ability to engage in previously authorized activities, without first having  d(#to obtain section 271 authorization from the Commission. Section 271(f) by its terms does not  d(#Zaddress, and thus does not preclude, application of the section 272 separate affiliate requirements  d(#to previously authorized services. Except for specifying that BOCs may continue to provide  d(#jpreviously authorized services pursuant to the terms and conditions contained within the MFJ  d(#Lcourt order authorizing the service, section 271(f) does not address the manner in which BOCs  d(#[must structure their provision of previously authorized services, or whether they must provide these services through a separate affiliate. These issues are addressed in section 272.  X|-  M78.` ` Section 272(a)(2)(B)(iii). Section 272 sets forth separate affiliate and  d(#nondiscrimination requirements with which the BOC must comply in order to provide certain  d(#yservices. Separate subsections of section 272(a)(2) establish separate affiliate requirements for  d(#/BOC provision of manufacturing activities (section 272(a)(2)(A)), origination of interLATA  d(#telecommunications services (section 272(a)(2)(B)), and interLATA information services (section" '` ,-(-(ZZ\"  d(#272(a)(2)(C)). Section 272(a)(2)(B)(iii) exempts "previously authorized activities described in  d(#section 271(f)" from the separate affiliate requirement for "origination of interLATA  d(#telecommunications services." We conclude that, because this exemption appears in section  d(#272(a)(2)(B), it applies by its terms only to previously authorized activities that involve the origination of interLATA telecommunications services.  Xv- N79.` ` Previously authorized activities described in section 271(f) may include both  d(#?manufacturing activities and interLATA information services. Neither of these types of  d(#previously authorized activities, however, is exempt from the section 272 separate affiliate  d(#requirements, because neither section 272(a)(2)(A) nor section 272(a)(2)(C) contains an  d(#exemption for previously authorized activities similar to the explicit exemption set forth in section  d(#|272(a)(2)(B)(iii). We reject Ameritech's argument that section 272(a)(2)(B)(iii) exempts  d(#previously authorized interLATA information services from the section 272 separate affiliate  d(#requirements, because section 272(a)(2)(B) applies only to origination of interLATA  X - d(#Ztelecommunications services.N  yO7-ԍSee Ameritech at 6465.N Section 272(a)(2)(C) establishes the separate affiliate requirement  d(#Lfor BOC provision of interLATA information services; there are exceptions to this requirement  d(#for electronic publishing services and alarm monitoring services, but there is no exception specified for previously authorized activities.  XK- O80.` ` Section 272(h). As the majority of commenters agree, section 272(h) establishes  d(#a oneyear transition period for BOCs to comply with the separate affiliate requirements of  d(#section 272 for all services they were providing on the date of enactment of the 1996 Act that  d(#-are not exempt from these requirements. Because we concluded in the preceding paragraphs that  d(#Mpreviously authorized interLATA information services and manufacturing activities are not  d(#exempt from the section 272 separate affiliate requirements, BOCs providing these services must  d(#comply with those requirements within one year of enactment. We reject PacTel's argument that  d(#section 272(h) gives the BOCs one year to comply with the various requirements imposed by  d(#section 272 on their provision of exchange and exchange access services, because we find these  d(#requirements are effective immediately upon a BOC's entry into the inregion interLATA market pursuant to section 271.  X7- P81.` ` Differential Treatment. We conclude that, with respect to requiring compliance  d(#with the section 272 separate affiliate requirements, Congress intended to treat previously  d(#authorized interLATA telecommunications services differently from previously authorized  d(#interLATA information services and manufacturing activities. Certain of the BOCs argue that  d(#such a distinction is justified because it would be more difficult to provide previously authorized  X - d(#xinterLATA telecommunications services on a separated basis.a X yO$-ԍSee, e.g., NYNEX at 3940; U S West at 17.a Ameritech, however, argues that  X!- d(#certain previously authorized interLATA information services, such as TDDS, would be equally"!(,-(-(ZZ "  X- d(#.difficult to provide on a separated basis.D yOy-ԍAmeritech at 6364.D Section 10 of the Communications Act requires us  d(#to forbear from applying any provision of the Act that is not necessary to ensure just and  X- d(#reasonable charges and practices in the telecommunications marketplace, or to protect consumers,  d(#if we find that such forbearance would promote competition and is consistent with the public  X- d(#interest.JX yO-ԍ47 U.S.C.  160. J Thus, to the extent a BOC demonstrates, with respect to a particular previously  d(#<authorized interLATA information service, that forbearance from the section 272 separate affiliate  d(#requirement fully satisfies the section 10 test, we must forbear from requiring the BOC to provide that service through a section 272 affiliate.?!}K /J:\POLICY\SAFE\ORDER\MASTER\BAS\OOR.INF/ ?  X1-   D.XOutofregion interLATA information services (#  X -X 1.X` ` Background (#`  X - Q82.` ` In the Notice, we tentatively concluded that the BOCs must provide interLATA  d(#information services through a separate affiliate, regardless of whether these services are provided  d(#>inregion or outofregion. We observed that section 272(a)(2)(B)(ii) exempts outofregion  d(#interLATA services from the separate affiliate requirement for "origination of interLATA  d(#telecommunications services," but there is no analogous exemption from the section 272(a)(2)(C)  d(#jseparate affiliate required for interLATA information services (other than electronic publishing  XK-and alarm monitoring services).CK yO-ԍNotice at  41.C  X-X 2.X` ` Comments (#`  X- nR83.` ` BellSouth is the only BOC that addresses this issue, arguing that the statute does  d(#Lnot require BOCs to provide outofregion interLATA information services through a separate  X- d(#affiliate.Dx yO-ԍBellSouth at 2025.D BellSouth asserts that the Commission's conclusion is based on the faulty premise  d(#ithat interLATA information services do not fall within the definition of "interLATA services" and  X- d(#therefore are not subject to the "inregion"/"outofregion" dichotomy of section 271.H yOL!-ԍBellSouth at 20, 2123.H BellSouth  d(#further suggests that imposition of a separate affiliate requirement constitutes a prior restraint  d(#upon BOC provision of outofregion information services and may violate the First  XN-Amendment.DN yO%-ԍId. at 2021.D "7)( ,-(-(ZZ"Ԍ X- S84.` ` All of the other parties that responded to this inquiry support the Commission's  d(#tentative conclusion that BOCs must provide outofregion interLATA information services  X- d(#through a section 272 separate affiliate. yOK- v kԍAT&T at 1213; LDDS at 12 n.10; MCI at 15; Sprint at 16; ITAA at 89; VoiceTel at 12; MCI Reply at 78; Sprint Reply at 11; CIX Reply at 4. Several parties reject BellSouth's argument that the  d(#Commission is prevented by the First Amendment from requiring BOCs to provide outofregion  X-interLATA information services through a separate affiliate.X  yOu-ԍSprint Reply at 11; CIX Reply at 5 n.4.X  Xv-X 3.X` ` Discussion (#`  XH-  T85.` ` Based on the record before us and our own statutory analysis, we hereby adopt our  d(#tentative conclusion that BOCs must provide outofregion interLATA information services  d(#through a section 272 separate affiliate. Although we concluded above that "interLATA  X - d(#\information services" are included within the term "interLATA services " as used in section  d(#=271(b), that determination does not alter the conclusion that BOCs must provide outofregion  X - d(#interLATA information services through a section 272 separate affiliate.N  yO6-ԍSee supra part III.A.1.N Section 271(b)(2)  d(#permits a BOC or its affiliate to provide interLATA services, including interLATA information  d(#services, that originate outside its inregion states, immediately upon enactment of the 1996 Act.  d(#\Section 271, however, does not address whether such services must be provided through a separate affiliate; that issue is addressed in section 272(a).  XK- AU86.` ` Section 272(a)(2)(B) requires a separate affiliate for the "origination of interLATA  d(#telecommunications services," but exempts from that requirement "outofregion services  X- d(#described in section 271(b)(2)."M@ yO-ԍ47 U.S.C.  272(a)(2)(B).M We conclude that the exception created by section  d(#272(a)(2)(B)(ii) extends only to outofregion interLATA services that are telecommunications  d(#services. Section 272(a)(2)(C) requires a separate affiliate for "interLATA information services,"  d(#Land exempts electronic publishing and alarm monitoring services from that requirement. There  d(#\are no other exceptions to the requirements of section 272(a)(2)(C). As several commenters  d(#noted, section 272(a)(2)(B) explicitly excludes outofregion services, but section 272(a)(2)(C)  X- d(#does not.s yO"-ԍMCI at 15; see also Sprint at 16; ITAA at 9; CIX Reply at 4.s We agree with MCI that the explicit exclusion of outofregion interLATA  d(#xtelecommunications services in one subsection of the statute, and the absence of such an express  d(#exclusion of outofregion interLATA information services in another subsection of the same  XN- d(#=provision, suggests that Congress intended not to exclude the latter from the separate affiliate"N*` ,-(-(ZZ"  X- d(#requirement. yOy-ԍMCI at 15 n.36 (citing League to Save Lake Tahoe, Inc. v. Trounday, 598 F.2d 1164, 1171 (9th Cir. 1979)). Therefore, we find that outofregion interLATA information services are not excluded from the separate affiliate requirement for interLATA information services.  X- oV87.` ` BellSouth has argued that requiring BOCs to provide outofregion interLATA  X- d(#information services through a section 272 separate affiliate violates the First Amendment.DX yO-ԍBellSouth at 2021.D As  d(#xnoted above, we find that this result is required by the statute. Although the courts have ultimate  d(#=authority to determine the constitutionality of this and other statutes, we find it appropriate to  X_- d(#state that we find BellSouth's argument to be without merit.X_ yO - v ԍThe Commission has previously offered its opinion on the constitutionality of other statutory provisions.  yO - d(#See Inquiry Into Section 73.1910 of the Commission's Rules and Regulations Concerning the General Fairness  yO -Doctrine Obligations of Broadcast Licensees, 102 F.C.C. 2d 143, 155156,  18 (1985). BellSouth bases its argument on  d(#an assertion that as "contentrelated" services, information services are commercial speech entitled  X1- d(#jto First Amendment protections.A1 yO-ԍBellSouth at 20.A We conclude, first, that with respect to certain information  X - d(#services, a BOC neither provides, nor exercises editorial discretion over, the content of the  X - d(#information associated with those particular services, and therefore provision of those information  X - d(#services does not constitute speech subject to First Amendment protections.I  yO5- v ԍ Cf. Turner Broadcasting System, Inc. v. FCC, 114 S. Ct. 2445, 2456 (1994) (Turner). Protocol processing  yO-services are examples of information services that do not constitute commercial speech. See infra part III.F.1.I Second, to the  d(#extent that BOC provision of other interLATA information services constitutes speech for First  d(#Amendment purposes, the section 272 separate affiliate requirement neither prohibits the BOCs  d(#[from providing such services, nor places any restrictions on the content of the information the  X- d(#BOCs may provide.;  yO1- v ԍLike the mustcarry rules at issue in Turner, the section 272 separate affiliate requirement "on [its] face  yO-impose[s] burdens and confer[s] benefits without reference to the content of speech." Turner, 114 S. Ct. at 2460.; Instead, the section 272 separate affiliate requirement is a contentneutral  d(#restriction on the manner in which BOCs may provide interLATA information services, intended  Xb- d(#by Congress to protect against improper cost allocation and discrimination concerns. Thus, we  d(#yconclude that the separate affiliate requirement imposed by section 272 of the Communications  d(#Act on BOC provision of interLATA information services does not violate the First  X-Amendment.bXH  yO"- v ?ԍContentneutral time, place, and manner restrictions that serve a substantial government interest are  yO"- d(#iconstitutionally permissible. See, e.g., City of Renton v. Playtime Theatres, Inc., 475 U.S. 41, reh'g denied, 475 U.S. 1132 (1986). b @!}K 0dJ:\POLICY\SAFE\ORDER\MASTER\BAS\INCI.OGC0 @"+h,-(-(ZZ "Ԍ X- vE.XIncidental InterLATA Services (#  X- X 1.X` ` Background (#`  X- W88.` ` In the Notice, we sought comment on whether we should establish any non d(#vaccounting structural or nonstructural safeguards for BOC provision of the "incidental interLATA  Xv- d(#/services" set forth in section 271(g), in light of section 271(h).Cv yO-ԍNotice at  37.C Section 271(h) directs the  d(#Commission to ensure that the provision of incidental interLATA services "will not adversely  d(#affect telephone exchange service ratepayers or competition in any telecommunications market,"  X1- d(#and states that the provisions of section 271(g) "are intended to be narrowly construed."G1X yO: -ԍ47 U.S.C.  271(h).G We  d(#jalso sought comment regarding the interplay between section 271(h) and section 254(k), which  d(#<prohibits telecommunications carriers from "us[ing] services that are not competitive to subsidize  X -services that are subject to competition."C  yO-ԍNotice at  37.C  X -X 2.X` ` Comments (#`  X- X89.` ` The majority of parties that addressed the issue, BOCs and competitors alike,  d(#contend that section 272(a)(2)(B)(i) exempts all incidental interLATA services from the separate  d(#affiliate requirements of section 272, except section 271(g)(4) information storage and retrieval  XK- d(#services.FXKx yOt- v ԍUSTA at 1011; AT&T at 10; MCI at 910; Ameritech Reply at 3738; BellSouth Reply at 2526; see also  yO<- d(#BellSouth at 2324; PacTel at 7; Time Warner at 1415. But see ITAA at 89; CIX Reply at 45; cf. MCI Reply at 8.F In their comments, however, several parties note that the "incidental interLATA  d(#services" listed in section 271(g) include information services as well as telecommunications  X-services. yOf- v ԍBellSouth at 23; see also PacTel Reply at 3. BellSouth asserts that audio, video, and other programming  d(#,services, interactive programming services (47 U.S.C.  271(g)(1)), alarm monitoring (47 U.S.C.  271(g)(1)), two d(#wway interactive video and Internet services to schools (47 U.S.C.  271(g)(2)), and information storage and retrieval  yO- d(#systems (47 U.S.C.  271(g)(4)) are all information services. BellSouth at 21 n.50; see also BellSouth Oct. 29 Ex  yO -Parte at 12.  X- PY90.` ` Although they generally acknowledge that incidental interLATA services are not  d(#?subject to section 272 separate affiliate requirements, several competitors argue that the  d(#>Commission has the authority to, and should, impose separate affiliate requirements on the",H ,-(-(ZZ"  X- d(#provision of these services.  yOy- v ԍTime Warner at 3334 (specifically addressing video services); VoiceTel at 11 (section 254(k) provides  d(#authority); AT&T at 11 n.11 (sections 254(k) and 271(h) provide authority to impose separation requirements on a  d(#casebycase basis); TRA at 910 (section 271(h) provides authority); NCTA at 34; MCI at 1011 (incidental  yO-interLATA services should be subject to Competitive Carrier separation requirements). In the alternative, competitors propose that incidental interLATA  d(#services should be subject to a variety of nonstructural safeguards. AT&T recommends that we  d(#apply the nondiscrimination provisions of sections 272(c) and (e) to BOC provision of incidental  d(#interLATA services, and that we enforce these requirements through network disclosure,  X- d(#accounting, cost allocation, and reporting requirements. yO - v ԍAT&T at 1112. But see BellSouth Reply at 2526 (sections 272(c), 272(e)(2), and 272(e)(4) apply by their terms to BOCs' dealings with affiliates). MCI argues that, for each service listed  d(#in section 271(g), BOCs must unbundle and make available on a nondiscriminatory basis to all  d(#carriers the same network elements, facilities, and services used in providing that service,  X_- d(#pursuant to the Commission's comparably efficient interconnection (CEI) parameters.P_ yO- v ԍ MCI at 1112. But see BellSouth Reply at 26 (arguing that, under the statute, the Commission cannot  d(#Lrequire BOCs to unbundle and provide nondiscriminatory access to interLATA transmission services that are  d(#components of incidental interLATA services, because although BOCs may provide incidental interLATA services  d(#on an unseparated basis without prior section 271 authorization, they may not provide unbundled interLATA transmission services on a similar basis).P NCTA  d(#contends that the Commission should prescribe safeguards related to inbound and outbound  X1-telemarketing of video programming services by the BOCs.<1  yO-ԍ NCTA at 4.<  X - Z91.` ` In response, USTA and the BOCs argue that the Commission should not adopt any  d(#additional nonaccounting structural or nonstructural safeguards to govern BOC provision of the  X - d(#incidental interLATA services enumerated in section 271(g). H  yO- v ԍAmeritech at 66; Bell Atlantic, Exhibit 1, at 1; PacTel at 67; U S West at 18; USTA at 11; Ameritech Reply at 37. They argue that the Commission  d(#already has in place regulations applicable to incidental interLATA services that will protect  d(#telephone exchange ratepayers, such as the Part 61 price cap rules and the Part 32 accounting  d(#rules and Part 64 cost allocation rules, as well as regulations that ensure telecommunications  Xy- d(#competition, such as the section 251 interconnection and unbundling rules.y yO -ԍBell Atlantic, Exhibit 1, at 12; U S West at 1819; see also PacTel at 7; PacTel Reply at 45. They further argue  d(#that additional safeguards are not warranted by any specific potential competitive harms, and  d(#would undercut the efficiencies of integration that Congress intended to permit the BOCs to  X4-obtain.o40 yO%-ԍUSTA at 11; see also PacTel at 7; Ameritech Reply at 38.o "-,-(-(ZZG"Ԍ X-X 3.X` ` Discussion (#`  X- [92.` ` Section 271(b)(3) permits the BOCs to provide incidental interLATA services  d(#described in section 271(g) immediately after the date of enactment of the 1996 Act. Thus,  d(#unlike other inregion interLATA services, BOCs may provide incidental interLATA services  d(#originating in their own inregion states without receiving prior authorization from the  Xv- d(#Commission pursuant to section 271(d). Neither section 271(b) nor section 271(g) addresses  d(# whether BOCs must provide incidental interLATA services through a section 272 separate affiliate; this issue is addressed by section 272 itself.  X - \93.` ` Scope of the section 272(a)(2)(B)(i) exemption. Section 272(a)(2)(B)(i) sets forth  d(#?an exception to the separate affiliate requirement imposed on "origination of interLATA  d(#telecommunications services." Congress specifically limited this exception to the "incidental  X - d(#interLATA services described in paragraphs (1), (2), (3), (5), and (6) of section 271(g)."P  yON-ԍ47 U.S.C.  272(a)(2)(B)(i).P  d(#.Consistent with the analysis set forth in the two immediately preceding sections of this Order,  d(#we conclude that the section 272(a)(2)(B)(i) exception applies, by its terms, to the origination of  X-incidental interLATA services that are telecommunications services.]X yO-ԍSee supra parts III.C and III.D. ]  Xb- ]94.` ` For the most part, the incidental interLATA services enumerated within the section  XK- d(#-272(a)(2)(B)(i) exception are telecommunications services.lXK yO- v ԍCongress deliberately excluded remote data storage and retrieval services that fall within section 271(g)(4)  yO- d(#from the section 272(a)(2)(B)(i) exception. These services are interLATA information services. See infra paragraph  yOt-271G4121.l Although the incidental interLATA  d(#services set forth in sections 271(g)(1)(A), (B), and (C) include audio, video, and other  d(#xprogramming services that do not appear to be solely telecommunications services, section 271(h)  X- d(#<specifies that these incidental interLATA services "are limited to those interLATA transmissions  X- d(#incidental to the provision by a [BOC] or its affiliate of video, audio, and other programming  X- d(#services that the company or its affiliate is engaged in providing to the public."X yO-ԍ47 U.S.C.  271(h) (emphasis added).X We therefore  d(#conclude that, pursuant to section 272(a)(2)(B)(i), BOCs are not required to provide the  d(#<interLATA telecommunications transmission incidental to provision of the programming services  X- d(#listed in sections 271(g)(1)(A), (B), and (C) through a section 272 separate affiliate.  yO"- v ԍAlthough this determination reflects a refinement in our analysis of the meaning of sections 271(g)(1)(A),  yO#- d(#i(B), and (C), and section 272(a)(2)(B)(i), since our issuance of the OVS Second Report and Order, it is consistent  d(#with our determination in that proceeding that BOCs are not required to provide open video services through a  yO4%- d(#,section 272 affiliate. See Implementation of Section 302 of the Telecommunications Act of 1996, CS Docket No.  yO%- d(#h9646, Second Report & Order, FCC 96249,  249 (rel. June 3, 1996) (OVS Second Report & Order); see also Time  d(#hWarner at 3334. In that proceeding, we concluded that section 653 was silent as to the need for a separate affiliate"&,-(-('"  d(#hrequirement on provision of open video services, and that Congress had expressly directed that Title II requirements  yOX- d(#not be applied to the establishment and operation of an open video system under section 653. OVS Second Report  yO - d(#[& Order at  249. To the extent we interpreted the section 272(a)(2)(B)(i) exemption more broadly in that proceeding than we do in this proceeding, we determine that our current interpretation is correct. Moreover,".,-(-(ZZ3"  d(#alarm monitoring services, listed as incidental interLATA services under section 271(g)(1)(D),  d(#0are explicitly excepted from the section 272 separate affiliate requirements under section 272(a)(2)(C).  X- ^95.` ` In addition, section 271(g)(2), which designates as "incidental interLATA services"  d(#the interLATA provision of "twoway interactive video services or Internet services over  d(#dedicated facilities to or for elementary and secondary schools as defined in section 254(h)(5),"  X_- d(#Zmay encompass services that are not solely telecommunications services._ yO - v ?ԍFor simplicity, we refer below to the incidental interLATA services described by section 271(g)(2) as "educational interactive interLATA services." The statute does not  d(#classify educational interactive interLATA services as either telecommunications services or  d(#.information services. We conclude, however, that the explicit inclusion of section 271(g)(2) in  d(#-the list of services subject to the section 272(a)(2)(B)(i) exception exempts educational interactive  d(#.interLATA services from the section 272 separate affiliate requirements. This interpretation is  d(#Kconsistent with Congress's clear intent, expressed in other provisions of the 1996 Act, to promote  d(#Lthe provision of advanced telecommunications and information services, of which educational  d(#interactive interLATA services are examples, to eligible public and nonprofit elementary and  X - d(#secondary schools.9  yO`- v zԍFor example, section 254(h)(2) of the Communications Act requires the Commission to establish rules to  yO(- d(#,enhance the availability of advanced telecommunications and information services to public institutional users. See  d(#47 U.S.C.  254(h)(2); Joint Explanatory Statement at 133. In addition, section 706(a) of the 1996 Act requires the  d(#Commission to "encourage the deployment on a reasonable and timely basis of advanced telecommunications  yO- d(#capability to all Americans (including, in particular, elementary and secondary schools and classrooms)." See 1996 Act,  706(a), 110 Stat. 56, 153 (codified as a note following 47 U.S.C. 157). 9 The inclusion of educational interactive interLATA services among the list  d(#of "incidental interLATA services" that BOCs could provide immediately upon enactment of the  d(#1996 Act without prior Commission authorization promotes the congressional goal of rapidly  d(#deploying advanced telecommunications by permitting the BOCs to offer such services. Thus,  d(#kwe further find it reasonable to conclude that Congress did not wish to impose a significant  d(#>regulatory barrier, in the form of a separate affiliate requirement, on BOC provision of these  X-services.  yON!- v ԍWe note that even if any of the section 271(g)(2) educational interactive interLATA services were subject  d(#to the section 272 separate affiliate requirements under section 272(a)(2)(C), section 10 mandates that we forbear  d(#from enforcing any statutory or regulatory requirement that is not necessary to ensure just and reasonable charges  d(#and practices in the telecommunications marketplace, or to protect consumers, if we determine that such forbearance  yOn$-would promote competition and is consistent with the public interest. See 47 U.S.C.  160.  X- _96.` ` Additional regulation of incidental interLATA services. We decline to impose the  d(#jsection 272 separate affiliate requirements on incidental interLATA services that, as discussed"/0,-(-(ZZr"  X- d(#above, are exempt from those requirements under section 272(a)(2)(B)(i). yOy- v ԍAs noted above, remote data storage and retrieval services that fall within section 271(g)(4) are subject to  yOA-the section 272 separate affiliate requirements. Section 272 itself  d(#does not require the BOCs to provide these services through a separate affiliate. Further, we  d(#conclude as a legal matter that neither section 271(h) nor section 254(k) requires us to impose  d(#the section 272 separate affiliate requirements on exempt incidental interLATA services in order  d(#Mto protect telephone exchange ratepayers or competition in the telecommunications market.  d(#Moreover, we decline to do so as a matter of policy, because we see no present need to impose  d(#structural separation requirements beyond those mandated by Congress in order to protect against  d(#improper cost allocation and access discrimination. We likewise decline to impose any other  d(#structural separation requirements on BOC provision of these services, as suggested by certain  X1- d(#Zcommenters.1  yO - v ԍSee, e.g., MCI at 1011 (incidental interLATA services should be subject to Competitive Carrier requirements). This decision comports with the Commission's prior determinations not to impose  d(#structural separation requirements in contexts in which it found that nonstructural safeguards  X - d(#provide sufficient protection against improper cost allocation and access discrimination (e.g., BOC  X -provision of enhanced services). x yO- v ԍ COMP3 See Amendment of Section 64.702 of the Commission's Rules and Regulations (Computer III), CC Docket  yO- d(#No. 85229, Phase I, 104 FCC 2d 958 (1986) (Phase I Order), recon., 2 FCC Rcd 3035 (1987) (Phase I  yO-Reconsideration Order), further recon., 3 FCC Rcd 1135 (1988) (Phase I Further Reconsideration Order),  yOm- d(#second further recon., 4 FCC Rcd 5927 (1989) (Phase I Second Further Reconsideration Order); Phase I Order and  yO5- d(#Phase I Reconsideration Order vacated, California v. FCC, 905 F.2d 1217 (9th Cir. 1990) (California I); Phase II,  yO- d(#2 FCC Rcd 3072 (1987) (Computer III Phase II Order), recon., 3 FCC Rcd 1150 (1988) (Phase II Reconsideration  yO- d(#Order), further recon., 4 FCC Rcd 5927 (1989) (Phase II Further Reconsideration Order); Phase II Order vacated,  yO- d(#California I, 905 F.2d 1217 (9th Cir. 1990); Computer III Remand Proceeding, 5 FCC Rcd 7719 (1990) (ONA  yOU- d(#ZRemand Order), recon., 7 FCC Rcd 909 (1992), pets. for review denied, California v. FCC, 4 F.3d 1505 (9th Cir.  yO- d(#1993) (California II); BOC Safeguards Order, 6 FCC Rcd 7571 (1991), vacated in part and remanded, California v.  yO-FCC, 39 F.3d 919 (9th Cir. 1994) (California III), cert. denied, 115 S. Ct. 1427 (1995).  X - `97.` ` Under our rules, the BOCs are subject to existing nonstructural safeguards in their  d(#-provision of incidental interLATA services, and we conclude that these safeguards are sufficient  d(#to protect telephone exchange ratepayers and competition in telecommunications markets, in  d(#accordance with section 271(h). For accounting purposes, incidental interLATA services will be  d(#treated as nonregulated services under our Part 32 affiliate transaction rules and Part 64 cost  d(#[allocation rules, and accordingly costs associated with provision of those services may not be  X4- d(#yallocated to regulated services accounts. X4 yO"- v ԍSee 47 C.F.R.  32.23; 32.27; 64.901 et seq. See also Implementation of the Telecommunications Act of  yO#- d(#1996: Accounting Safeguards Under the Telecommunications Act of 1996, CC Docket No. 96150, Report & Order,  yOM$-FCC 96490, parts III.B.2.b, IV.B.4 (rel. Dec. 24, 1996) (Accounting Safeguards Order). Further, at the federal level and in many states, the  d(#BOCs are subject to price cap regulation, which reduces their incentive to engage in strategic"0,-(-(ZZ"  X- d(#costshifting behavior.c yOy-ԍSee, e.g., Bell Atlantic, Exhibit 1, at 12.c The BOCs are also subject to the section 251 interconnection and  d(#unbundling requirements, which compel them to make available to other telecommunications  d(#carriers the local network elements and local exchange facilities that such carriers may require  X- d(#yto provide services comparable to the incidental interLATA services listed in section 271(g).X yO- v ԍSee 47 U.S.C.  251(c)(2) and (3). In addition, the Commission's Open Network Architecture (ONA) rules  d(#provide a mechanism for competitors that are not telecommunications carriers to obtain access to network elements  yOT- d(#-and facilities used in the provision of information services. See Computer III Further Remand Proceedings: Bell  yO - d(#Operating Company Provision of Enhanced Services, CC Docket No. 9520, Notice of Proposed Rulemaking, 10 FCC  yO - d(#JRcd 8360, 837475,  1922 (1995) (Computer III Further Remand Proceedings). These ONA requirements apply  yO - d(#jto the BOCs regardless of whether they provide information services on an integrated or separated basis. See  yOt - d(#Computer III Remand Proceedings, CC Docket No. 90368, Report & Order, 5 FCC Rcd 7719 (1990) (ONA Remand  yO< - d(#Order). As discussed infra at part III.F.4, the ONA requirements remain in place pending our completion of the  yO -Computer III Further Remand Proceedings.  d(#Further, the BOCs are subject to network disclosure requirements imposed by section 251(c)(5),  d(#which require them to give timely information about network changes to their affiliates'  Xv-competitors.Xv(  yOO- v ԍSee Second Interconnection Order at  165260. Pending conclusion of the Computer III Further Remand  yO- d(#iProceedings, BOCs are also subject to the Computer III network disclosure requirements. See Computer III Phase  yO-II Order, 2 FCC Rcd at 3086, 30913093,  102, 134140.  XH- _a98.` ` Given the complement of nonstructural safeguards to which the BOCs are subject  d(#in their provision of incidental interLATA services, we find that the record in this proceeding  d(#does not justify the imposition of additional nonstructural safeguards on these services. We  d(#decline to extend to the integrated provision of incidental interLATA services any of the section  d(#y272(c) and 272(e) nondiscrimination requirements that depend on the existence of a section 272  X - d(#affiliate, as suggested by AT&T.n H  yO-ԍSee AT&T at 1112; see also infra parts V and VI.n Further, we decline to adopt any additional unbundling  d(#requirements applicable to BOC provision of incidental interLATA services, as suggested by  X - d(#MCI.H  yO0-ԍSee MCI at 1112.H We agree with BellSouth that it would be inconsistent with the 1996 Act for us to  d(#require the BOCs to unbundle and make available interLATA transmission services that they are  Xy- d(#not authorized to provide except as components of an incidental interLATA service (i.e., without  d(#obtaining prior authorization under section 271 or complying with the section 272 separation  XK- d(#requirements).QKh yOd#-ԍSee BellSouth Reply at 26.Q For the foregoing reasons, we decline to adopt any additional structural or  X4- d(#/nonstructural safeguards applicable specifically to BOC provision of incidental interLATA services.D!}K 4%J:\POLICY\SAFE\ORDER\MASTER\BAS\INTERLAT.ALL4 D "1,-(-(ZZ "Ԍ X-_ F.XInterLATA Information Services (#  X-X 1.X` ` Relationship Between Enhanced Services and Information Services (#`  X-XX` ` a.X Background (#  Xv-  b99.` ` In the Notice, we sought comment on the services that are included in the_ statutory  X_- d(#definition of "information service,"' _ yO- v ԍThe Act defines "information service" as "the offering of a capability for generating, acquiring, storing,  d(#wtransforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes  d(#Jelectronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service." 47 U.S.C.  153(20). ' and whether that term encompasses all activities that the  XH- d(#zCommission classifies as "enhanced services."H yO - v [ԍNotice at  42. Under the Commission's rules, the term "enhanced services" refers to "services, offered over  d(#common carrier transmission facilities used in interstate communications, which employ computer processing  d(#[applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted  d(#information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction  yO- d(#xwith stored information." See 47 C.F.R.  64.702(a); see also North American Telecommunications Association  d(#Petition for Declaratory Ruling under Section 64.702 of the Commission's Rules Regarding the Integration of  yOY- d(#Centrex, Enhanced Services, and Customer Premises Equipment, ENF No. 842, Memorandum Opinion & Order,  yO!- d(#101 FCC 2d 349 (1985) (NATA Centrex Order), recon., 3 FCC Rcd 4385 (1988) (NATA Centrex Reconsideration  yO-Order). We noted that the statutory definition of  d(#"information service" is based on the definition used in the MFJ, and that prior to passage of the  d(#1996 Act, neither the Commission nor the MFJ court resolved the question of whether the  d(#definition of enhanced services under the Commission's rules was synonymous with the definition of information services under the MFJ.  X -XX` ` b.X Comments (#  X- $c100.` ` Virtually all parties that commented on this issue agree that the statutory term  Xy- d(#"information services" encompasses all activities that fall within the Commission's definition of  Xb- d(#"enhanced services." RELATION ~Xb  yO- v ԍBut see Ameritech at 69 (asserting that an enhanced service is not the same as an information service); Bell  d(#YAtlantic, Exhibit 1, at 23 (asserting that "information services" do not include protocol processing services, which, with three limited exceptions, are considered "enhanced services").~ The majority of commenters, including BOCs, interexchange carriers, and  XK- d(#certain organizations representing information service providers (ISPs), advocate that the"K2,-(-(ZZ "  X- d(#Commission interpret "information services" to be coextensive with "enhanced services." yOy- v ԍSee, e.g., PacTel at 9; USTA at 16; MCI at 16; Sprint at 1617; ITAA at 1214; IIA Reply at 13; CIX Reply at 34; ITI/ITAA Reply at 15. Other  X-commenters interpret "information services" to be broader than "enhanced services."   yO- v ԍSee, e.g., BellSouth at 27 n.67 ("information services" include live operator telemessaging services, but  d(#"enhanced services" do not, because such services are not "computer processing applications"); AT&T at 12 n.13  d(#(same); U S West at 1112 ("enhanced services" are limited to those services offered over common carrier transmission facilities used in interstate communications); CIX Reply at 3.  X- d101.` ` Parties disagree about whether "protocol processing" services fall within the  X- d(#statutory definition of "information services."y  yO] -ԍThe Common Carrier Bureau previously explained the term "protocol processing" as follows:  X"Protocol" refers to the ensemble of operating disciplines and technical parameters that must be  observed and agreed upon by subscribers and carriers in order to permit the exchange of  information among terminals connected to a particular telecommunications network. A subscriber's  }digital transmission necessarily consists of two components: informationbearing symbols and  protocolrelated symbols. . . . "Protocol processing" is a generic term, which subsumes "protocol  conversion" and refers to the use of computers to interpret and react to the protocol symbols as the  information contained in a subscriber's message is routed to its destination. "Protocol conversion"  is the specific form of protocol processing that is necessary to permit communications between disparate terminals or networks.   yO- d(#IDCMA Petition for a Declaratory Ruling That AT&T's Interspan Frame Relay Service is a Basic Service,  yO-Memorandum Opinion & Order, 10 FCC Rcd 13,717, 13,71718 n.5 (Com. Carrier Bur. 1995) (Frame Relay Order).y Bell Atlantic and U S West argue that protocol  d(#processing services are not information services, because they do not transform or process the  Xv- d(#[content of the information transmitted by the subscriber.SXv yO- v ԍBell Atlantic, Exhibit 1, at 23; accord US West at 13. Compare PacTel at 9 (Commission should exclude  d(#from the definition of information services the three types of protocol conversion that it does not consider to be enhanced services). S In contrast, ITI, ITAA, and Sprint  d(#assert that protocol conversion falls within the statutory definition of an information service,  d(#xbecause that definition does not specify that such services must transform or process the content  X1-of information transmitted.]1 yO-ԍITI/ITAA Reply at 1516; Sprint Reply at 10.]  X -XX` ` c.X Discussion (#  X - 1e102.` ` We conclude that all of the services that the Commission has previously considered  d(#kto be "enhanced services" are "information services." We are persuaded by the arguments  X- d(#advanced by ITAA, CIX, and others, that the differentlyworded definitions of "information"3p,-(-(ZZ "  d(#?services" and "enhanced services" can and should be interpreted to extend to the same  X- d(#functions.[ yOy-ԍSee ITAA at 1314; CIX Reply at 34.[ We believe that interpreting "information services" to include all "enhanced  d(#services" provides a measure of regulatory stability for telecommunications carriers and ISPs  d(#alike, by preserving the definitional scheme under which the Commission exempted certain  d(#services from Title II regulation. We agree with ISPs that regulatory certainty and continuity  X- d(#benefits both large and small service providers.no yO-ԍCf. ITAA at 14; IIA Reply at 13; ITI/ITAA Reply at 18.n In sum, we find no basis to conclude that by  d(#=using the MFJ term "information services" Congress intended a significant departure from the Commission's usage of "enhanced services."  X1- }f103.` ` We also find, however, that the term "information services" includes services that  d(#are not classified as "enhanced services" under the Commission's current rules. Stated differently,  d(#we conclude that, while all enhanced services are information services, not all information  d(#services are enhanced services. As noted by U S West, "enhanced services" under Commission  d(#precedent are limited to services "offered over common carrier transmission facilities used in  d(#-interstate communications," whereas "information services" may be provided, more broadly, "via  X - d(#?telecommunications."C  yOW-ԍU S West at 1112.C  LIVEOP Further, we agree with BellSouth and AT&T that live operator  d(#telemessaging services that do not involve "computer processing applications" are information  Xy-services, even though they do not fall within the definition of "enhanced services."Ny yO-ԍSee infra part III.G.2.N  XK- `g104.` ` We further conclude that, subject to the exceptions discussed below, protocol  d(#-processing services constitute information services under the 1996 Act. We reject Bell Atlantic's  d(#iargument that "information services" only refers to services that transform or process the content  d(#of information transmitted by an enduser, because we agree with Sprint that the statutory  d(#definition makes no reference to the term "content," but requires only that an information service  X- d(#transform or process "information."n yO-ԍSee Bell Atlantic, Exhibit 1, at 2; Sprint Reply at 10.n We also agree with ITI and ITAA that an endtoend  d(#protocol conversion service that enables an enduser to send information into a network in one  d(#@protocol and have it exit the network in a different protocol clearly "transforms" user  X- d(#xinformation.P yO!-ԍSee ITI/ITAA Reply at 17.P We further find that other types of protocol processing services that interpret and  d(#react to protocol information associated with the transmission of enduser content clearly  d(#-"process" such information. Therefore, we conclude that both protocol conversion and protocol processing services are information services under the 1996 Act. "74? ,-(-(ZZ"Ԍ X- h105.` ` This interpretation is consistent with the Commission's existing practice of treating  X- d(#endtoend protocol processing services as enhanced services. yOb- v ԍSee Bell Operating Companies Joint Petition for Waiver of Computer II Rules, Order, 10 FCC Rcd 13,758,  yO*- d(#13,766,  51 and 13,77013,774, app. A (1995) (BOC CEI Plan Approval Order) (approving PacTel CEI plan for  d(#Zprovision of enhanced protocol processing services, as well as CEI plan amendments by Bell Atlantic, BellSouth,  yO- d(#[SWBT, and U S West); see e.g., The Ameritech Operating Companies Plan to Provide Comparably Efficient  yO- d(#Interconnection to Providers of Enhanced Protocol Processing Services, Memorandum Opinion & Order, 5 FCC Rcd  yOJ- d(#w3231 (Com. Car. Bur. 1990); New England Telephone and Telegraph Company and New York Telephone Company  yO- d(#Plan to Provide Comparably Efficient Interconnection to Providers of Enhanced Protocol Processing Services,  yO- d(#;Memorandum Opinion & Order, 5 FCC Rcd 56 (Com. Car. Bur. 1990); South Central Bell Telephone Company and  d(#-Southern Bell Telephone and Telegraph Company Plan for Comparably Efficient Interconnection of Enhanced  yOj - d(#;Services Providers for Synchronous Protocol Processing Services, Memorandum Opinion & Order, 4 FCC Rcd 6825 (Com. Car. Bur. 1989).  We find no reason to depart  d(#from this practice, particularly in light of Congress's deregulatory intent in enacting the 1996  X- d(#Act.x(  yO- v LԍWe observe that the arguments raised by Bell Atlantic and U S West in favor of treating protocol processing  d(#services as telecommunications services are quite similar to arguments that the Commission considered and rejected  yO$- d(#nearly ten years ago in the Computer III Phase II Order, which affirmed the status of protocol processing as an  yO- d(#Zenhanced service. See Computer III Phase II Order, 2 FCC Rcd at 3078,  43. In that decision, the Commission  d(#found, among other things, that protocol processing services were being effectively provided on a competitive,  d(#unregulated basis, and that reclassifying such services as basic services could cloud the regulatory boundary between basic and enhanced services. Treating protocol processing services as telecommunications services might make them  d(#\subject to Title II regulation. Because the market for protocol processing services is highly  d(#Lcompetitive, such regulation is unnecessary to promote competition, and would likely result in  d(#a significant burden to small independent ISPs that provide protocol processing services. Thus,  d(#policy considerations support our conclusion that endtoend protocol processing services are  XH-information services.MHh yOa- v ]ԍTo the extent that BOCs suggest that the section 272 separate affiliate requirements will impair their  yO)- d(#,provision of protocol processing services, we note that under our Computer III rules, they may continue to provide  d(#intraLATA protocol processing services on an integrated basis, pursuant to a CEI plan that has been approved by  d(#,the Commission. We agree with ITI and ITAA that requiring the BOCs to provide interLATA protocol processing  d(#service through a section 272 separate affiliate merely requires them to negotiate the same organizational boundaries  yOI-and service integration issues that their ISP competitors routinely face. See ITI/ITAA Reply at 1819.M  X - i106.` ` We note that, under Computer II and Computer III, we have treated three  d(#Ycategories of protocol processing services as basic services, rather than enhanced services, because  X - d(#they result in no net protocol conversion to the enduser. These categories include protocol  X - d(#.processing: 1) involving communications between an enduser and the network itself (e.g., for  d(#initiation, routing, and termination of calls) rather than between or among users; 2) in connection  X - d(#with the introduction of a new basic network technology (which requires protocol conversion to  d(#maintain compatibility with existing CPE); and 3) involving internetworking (conversions taking  d(#place solely within the carrier's network to facilitate provision of a basic network service, that"y5,-(-(ZZK"  X- d(#result in no net conversion to the enduser).  yOy- v ԍFrame Relay Order, 10 FCC Rcd at 13,719,  1416; Computer III Phase II Order, 2 FCC Rcd at 308182,  d(# 6471. An example of the third type of protocol conversion occurs when a carrier converts from X.25 to X.75  d(#Jformatted data at the originating end within the network, transports the data in X.75 format, and then converts the data back to X.25 format at the terminating end. We agree with PacTel that analogous treatment  d(#Jshould be extended to these categories of "no net" protocol processing services under the statutory  X- d(#regime.= yO3-ԍPacTel at 9.= Because "no net" protocol processing services are information service capabilities used  d(#y"for the management, control, or operation of a telecommunications system or the management  d(#of a telecommunications service," they are excepted from the statutory definition of information  X- d(#<service.R@ yO~ -ԍSee 47 U.S.C.  153(20).R Thus, "no net" protocol conversion services constitute telecommunications services, rather than information services, under the 1996 Act.  XH- j107.` `  ADJUNCT We further find, as suggested by PacTel, that services that the Commission has  d(#classified as "adjuncttobasic" should be classified as telecommunications services, rather than  X - d(#information services.   yO- v ԍPacTel at 9. PacTel argues that such treatment of "adjuncttobasic" services would correspond to the  d(#statutory definition of information services, which "does not include any use of any such capability for the  d(#management, control, or operation of a telecommunications system or the management of a telecommunications  yO-service." 47 U.S.C.  153(20); see also U S West at 13.  In the NATA Centrex order, the Commission held that the enhanced  X - d(#services definition did not encompass adjuncttobasic services.X  yOl- v [ԍNATA Centrex Order, 101 FCC 2d at 359361,  2428. Adjuncttobasic services include, inter alia, speed  d(#dialing, call forwarding, computerprovided directory assistance, call monitoring, caller i.d., call tracing, call blocking, call return, repeat dialing, and call tracking, as well as certain Centrex features. Although the latter services  d(#may fall within the literal reading of the enhanced service definition, they facilitate establishment  d(#of a basic transmission path over which a telephone call may be completed, without altering the  d(#jfundamental character of the telephone service. Similarly, we conclude that "adjuncttobasic"  d(#jservices are also covered by the "telecommunications management exception" to the statutory  d(#Kdefinition of information services, and therefore are treated as telecommunications services under the 1996 Act.  XK-  _X 2.X` ` Distinguishing InterLATA Information Services subject to Section 272 from  X4-IntraLATA Information Services (#`  X-XX` ` a.X Background (#  X- $k108.` ` In the Notice, we sought comment on how to distinguish between interLATA  d(#_information services, which are subject to the section 272 separate affiliate requirements, and"6,-(-(ZZ"  X- d(#KintraLATA information services, which are not.C yOy-ԍNotice at  44.C In particular, we asked whether an information  d(#service should be considered an interLATA service only when the service actually involves an  d(#interLATA telecommunications transmission component, or, alternatively, when it potentially  X- d(#involves interLATA telecommunications transmissions (e.g., the service can be accessed across  X- d(#jLATA boundaries).FX yO-ԍId. at  44.F We further sought comment regarding how the manner in which a BOC  d(#structures its provision of an information service may affect whether the service is classified as  Xv-interLATA.cXv yO - v zԍId. at  45. For example, we asked whether an interLATA information service required nontransmission  d(#computer facilities used in the provision of the service located in a different LATA from the enduser, or nontransmission facilities located in different LATAs.c  XH- Bl109.` ` We also invited comment on whether a particular service for which a BOC had  X1- d(#lapplied for or received an MFJ waiver should presumptively be treated as an interLATA  X - d(#jinformation service subject to the separate affiliate requirements of section 272.F  yO-ԍId. at  46.F In addition,  d(#we sought comment on whether we should presume that services provided by BOCs pursuant to  d(#CEI plans approved by the Commission prior to the enactment of the 1996 Act are intraLATA  X -information services.F  yO-ԍId. at  47.F  X -XX` ` b.X Comments (#  Xy- m110.` ` InterLATA Transmission/Resale. The BOCs, AT&T, and MCI argue that, for an  d(#[information service to be considered an interLATA information service, the BOC must provide  d(#Zas a necessary component thereof telecommunications between a point located in one LATA and  X4- d(#a point outside that LATA.4(  yO - v .ԍAmeritech at 6769; AT&T at 1314; Bell Atlantic, Exhibit 1, at 35; BellSouth at 25; MCI at 17; NYNEX at 4245; PacTel at 10; U S WEST at 9; Bell Atlantic Reply at 1517; NYNEX Reply at 2728. Certain of the BOCs argue that only interLATA information  X- d(#services in which the BOC's own facilities or services carry the information service across LATA  d(#boundaries are subject to section 272 separate affiliate requirements; services in which the  d(#interLATA telecommunications transmission component is provided through resale are not subject  X- d(#yto section 272.   yO $- v ԍBell Atlantic, Exhibit 1, at 35; see also U S West at 9; USTA at 14; Ameritech Reply at 34; U S West  yO$- d(#wReply at 29. But see Bell Atlantic Reply at 16 (arguing that interLATA information services are those services that  d(#a BOC or its affiliate carries across LATA boundaries, either through its own facilities, or via facilities it leases and resells as its own). USTA argues that BOC provision of interLATA transmission through resale"7h,-(-(ZZ"  X- d(#\does not raise improper cost allocation and discrimination concerns.N yOy-ԍUSTA at 14; USTA Reply at 17.N In contrast, several  d(#=potential telecommunications competitors argue that, in accordance with MFJ precedent, BOC  d(#provision of an information service with an interLATA transmission component is an interLATA  X- d(#[information service, regardless of whether transmission is provided over resold facilities or the  X-BOC's own facilities.X yO- v ԍAT&T Reply at 4 n.6 (citing United States v. Western Electric, 907 F.2d 160, 163 (D.C. Cir. 1990)); see  yOu-also MCI at 17; MFS Reply at 9.  Xv- n111.` ` InterLATA Access. AT&T and the BOCs argue that an information service may  d(#not be considered interLATA merely because it may be accessed on an interLATA basis by  d(#,means independently chosen by the customer, such as the services of the customer's presubscribed  X1- d(#interexchange provider.DX1 yO- v jԍE.g., AT&T at 14; Bell Atlantic, Exhibit 1, at 4; BellSouth at 25; NYNEX at 4344; PacTel at 12; U S West  d(#iat 910; Ameritech Reply at 3334; Bell Atlantic Reply at 1516; BellSouth Reply at 23; PacTel Reply at 5; U S West Reply at 2728.D In contrast, several potential telecommunications competitors and ISPs  d(#iurge the Commission to define interLATA information services to include any information service  X -that is capable of being accessed across LATA boundaries.X  yO- v kԍE.g., ITAA at 910 (arguing that information services capable of providing access to or being accessed by  d(#interLATA facilities should be classified as interLATA information services); Sprint at 1718; TRA at 1112;  yO-ITI/ITAA Reply at 78; see also VoiceTel at 1112; MFS Reply at 1213.  X - ~o112.` ` Bundling. AT&T and several of the BOCs assert that an information service is  d(#only subject to the section 272 separate affiliate requirement if the interLATA  X - d(#telecommunications transmission component is a bundled component of the information service.  yOH- v ԍNYNEX at 43, 45; Ameritech at 67 (specifying that the interLATA transmission service and the information  yO-service must be provided together for a single charge); see also AT&T at 1314.   X- d(#The BOCs further state that where an interLATA telecommunications service and information  d(#[service are separately purchased, even if both services are provided by the BOC or its affiliate,  Xb- d(#they should not be treated together as an interLATA information service.mbH  yO[-ԍNYNEX at 43; U S West at 910; accord BellSouth at 25.m MCI conditionally  XK-agrees with that position.K yO!- v ԍMCI Reply at 1011 (the BOC must provide the interLATA telecommunications service through a section  yO"- d(#272 affiliate, after having obtained Commission authorization under section 271); see also MFS Reply at 9 (customer  yOd#- d(#must establish an independent relationship with interLATA telecommunications carrier). But see Time Warner Reply  d(# at 78 (arguing that allowing BOCs separately to provide intraLATA information service and interLATA transmission would permit them to circumvent Congress's clear separate affiliate requirement). "48,-(-(ZZf"Ԍ X- `p113.` ` Remote Databases/Network Efficiency. Several of the BOCs argue that certain  d(#interLATA information services should not be subject to the section 272 separate affiliate  d(#requirements. For example, they argue that information services in which the BOC locates a non d(#transmission database or processor in another LATA are not interLATA information services  X- d(#[subject to section 272, but are incidental interLATA services, pursuant to section 271(g)(4). yO- v ԍBell Atlantic, Exhibit 1, at 5; see also Ameritech at 6768; BellSouth Reply at 2324. But see MCI Reply at 910; Sprint Reply at 10.  d(#[They also contend that, where an information service involves interLATA transmission that is  d(#provided outside the control of the user solely to incorporate network efficiencies, that  X_-information service is excluded from the definition of interLATA information services. _  yO0 - v .ԍBellSouth at 25; see also U S West at 10; PacTel at 1011; PacTel Reply at 6. PacTel notes that, under the  d(#MFJ, a BOC could route exchange and exchange access traffic outside the LATA in which it originated for call  d(#wprocessing (switching and screening) so long as the traffic returned to the original LATA for termination or delivery to an interexchange provider's point of presence. PacTel at 1011.  X1-  Bq114.` ` Presumptions Regarding Previously Authorized Information Services. Certain  d(#BOCs argue that we should presume that BOC provision of an information service without an  X - d(#MFJ waiver (i.e., pursuant to a CEI plan) is an intraLATA service.   yO- v ԍNYNEX at 45 n.61; Bell Atlantic, Exhibit 1, at 4; U S West at 21. But see MFS Reply at 15 (satisfaction of the CEI requirements is irrelevant to classification of services as interLATA or intraLATA).  MCI and TRA argue that,  d(#when a BOC has sought or obtained an MFJ waiver to provide an information service prior to  X -enactment of the 1996 Act, that information service should be presumed to be interLATA.I `  yO-ԍMCI at 17; TRA at 1112.I  X -XX` ` c.X Discussion (#  Xy- r115.` ` InterLATA Transmission/Resale. We conclude that, as used in section 272, the  d(#term "interLATA information service" refers to an information service that incorporates as a  d(#necessary, bundled element an interLATA telecommunications transmission component, provided  X4- d(#jto the customer for a single charge.4  yO- v ԍAn interLATA transmission component is "necessary" to an interLATA information service if it must be  d(#used in order for the enduser to make use of the information service capability. For example, a BOC may provide  d(#data storage and retrieval services to customers throughout its service region, using one centralized computer data  d(#Jstorage facility and dedicated interLATA transmission links that connect the enduser with the data storage facility.  d(#In this case, the dedicated interLATA transmission links are "necessary" to the BOC's provision of centralized, interLATA data storage and retrieval services. We find, as noted in the comments of AT&T, MCI, and  d(#the BOCs, that this definition of interLATA information service conforms to the MFJ precedent  X- d(#Kin this area. h yO&- v ԍSee United States v. Western Electric, 907 F.2d 160, 163 (D.C. Cir. 1990) ("[W]hen information services are . . . bundled with leased interexchange lines, the activity is covered by the [AT&T Consent] decree.") We further conclude that a BOC provides an interLATA information service when"9 ,-(-(ZZ"  d(#Kit provides the interLATA telecommunications transmission component of the service either over  X- d(#its own facilities, or by reselling the interLATA telecommunications services of an interexchange  X-provider. This conclusion also comports with MFJ precedent.a  yOK- v kԍSee United States v. Western Electric, 907 F.2d at 163 ("We do not agree . . . that a distinction should be  d(#drawn between leasing lines, on the one hand, and acquiring or constructing them, on the other. A taxi company,  d(#for instance, offers taxi service for hire whether or not it owns or leases its cabs. The critical distinction under the  d(#decree, is not whether the BOC owns the interexchange capacity, but whether it 'provide[s]' interexchange service to its customers.")a  X- s116.` ` USTA contends that BOC provision of interLATA transmission through resale  d(#should be permitted because it does not raise improper cost allocation and discrimination  Xv- d(#concerns.B vx yO -ԍUSTA Reply at 17.B This argument, however, does not address the key issue of what is required by the  d(#statute. As discussed above, we find that section 601(a) of the 1996 Act indicates that Congress  XH- d(#-intended the provisions of the 1996 Act to supplant the MFJ._ H yO-ԍSee supra paragraph SCOPMFJ31._ Therefore, we conclude that the  d(#restrictions imposed by the 1996 Act on BOC provision of interLATA services, like the  d(#interLATA restrictions imposed under the MFJ, apply to services provided through resale, as well  d(#as to services provided through the BOC's own transmission facilities. Moreover, we decline to  d(#-adopt PacTel's suggestion that enduser receipt of an "interLATA benefit" should be the test for  X - d(#determining whether an information service is interLATA.n   yO- v ԍPacTel at 1112. PacTel's example of a service that should be classified as an intraLATA information  d(#Kservice, because it provides no direct interLATA benefit to the enduser, is a gateway service located in a distant  d(#LATA used by a San Francisco enduser to obtain information from San Francisco area libraries. PacTel's example  d(#of an information service that provides a direct interLATA benefit to the enduser is an email service that allows exchange of messages between users in different LATAs.n PacTel's proposed test is  d(#inconsistent with MFJ precedent and would be very difficult to administer. Finally, we reject the  d(#arguments raised by Sprint and MFS that we should classify all information services as  d(#iinterLATA services because of the difficulties inherent in distinguishing between interLATA and  Xy- d(#MintraLATA information services.PXyH  yOr- v ԍSprint at 1718; MFS Reply at 1213 (because major ISPs do not provide intraLATAonly information  yO:- d(#hservices, the Commission should declare that all BOC information services are interLATA); see also VoiceTel at 11; ITI/ITAA Reply at 78. P We conclude that it is possible to distinguish between interLATA and intraLATA information services by applying the rule established by this Order.  X4- t117.` ` InterLATA Access. We agree with AT&T and the BOCs that an information  d(#service may not be considered interLATA merely because it may be accessed on an interLATA  d(#basis by means independently chosen by the customer, such as a presubscribed interexchange  d(#carrier. In interpreting the statutory restrictions on BOC provision of interLATA information  d(#zservices, we are concerned not with the manner in which an information service is used, but  d(#rather with the components of the service that are provided by the BOC. When a BOC is neither":h,-(-(ZZ"  d(#providing nor reselling the interLATA transmission component of an information service that may  d(#ybe accessed across LATA boundaries, the statute does not require that service to be provided  d(#ythrough a section 272 separate affiliate. We reject MFS's contention that, where an interLATA  d(#ytransmission service is necessary for a customer to obtain access to a particular BOCprovided  d(#information service, that information service should be considered interLATA, even if the  X- d(#Lnecessary interLATA transmission component is separately provided by another carrier.J yO-ԍSee MFS Reply at 9.J In  d(#zsuch circumstances, the BOC is not providing any interLATA services, and therefore is not  d(#Zrequired by section 272 to provide the information service in question through a separate affiliate.  X1-  u118.` ` Moreover, as the BOCs point out, if we were to determine that the mere possibility  d(#of interLATA access was sufficient to classify an information service as an interLATA service,  X - d(#jthat rule would render any telecommunications service that carries traffic that originates in one  d(#LATA and terminates in another, including local exchange service and exchange access service,  X -an interLATA service. X yO-ԍNYNEX at 43; U S West at 10; Ameritech Reply at 3334; Bell Atlantic Reply at 1516. Congress clearly did not intend that result.  X - v119.` ` In addition, we agree with the BOCs that classifying information services as  d(#interLATA solely because endusers may obtain access to the service across LATA boundaries  Xy- d(#would represent a significant departure from Commission precedent, as well as from MFJ  Xb- d(#=precedent.Xb yO- v ԍE.g., Bell Atlantic, Exhibit 1, at 45; PacTel at 1011 (under the MFJ, if a necessary interLATA transmission  d(#component of an information service is provided by an interexchange carrier that is not selected by the BOC, the  yO-service would not be considered a BOCprovided interLATA information service); see also Ameritech Reply at 33. BOCs are currently providing a number of information services on an integrated  XK- d(#basis pursuant to the Commission's Computer III regulations, and users may obtain access to  X4- d(#[some, if not all, of these services on an interLATA basis.4 yO-ԍSee BOC CEI Plan Approval Order, 10 FCC Rcd at 13,77074, app. A. If we were to determine that these  d(#=services were interLATA services simply because endusers may obtain access across LATA  d(#boundaries, BOCs would have to change the manner in which they are providing many of these  X- d(#yservices, which would likely result in lost efficiency and disruption of services to customers.c yO8-ԍSee, e.g., Bell Atlantic, Exhibit 1, at 45.c  d(#We see no basis in the statute to adopt such an interpretation, as sections 271 and 272 are  d(#intended to govern the BOCs' provision of services that they were previously prohibited from  d(#providing under the MFJ, not services that they were previously authorized to provide under the MFJ.  Xe- w120.` ` Bundling. As we concluded above, an interLATA information service incorporates  d(#a bundled interLATA telecommunications transmission component. When a customer obtains  d(#interLATA transmission service from an interexchange provider that is not affiliated with a BOC,"7;( ,-(-(ZZ"  d(#the use of that transmission service in conjunction with an information service provided by a  d(#BOC or its affiliate does not make the information service a BOC interLATA service offering.  d(#A customer also may obtain an inregion interLATA telecommunications service from a BOC  X- d(#-section 272 affiliate that the customer uses in conjunction with an intraLATA information service  d(#provided by that affiliate or by the BOC itself. When such telecommunications and information  d(#services are provided, purchased, and priced separately, we conclude that they do not collectively  Xv- d(#constitute an interLATA information service offering by the BOC.Xv yO- v ԍWe note that even when an information service and interLATA transmission service are ostensibly separately  d(#priced, if the BOC offers special discounts or incentives to customers that take both services, this would constitute  yO -sufficient evidence of bundling to render the information service an interLATA information service. į In such a situation, the  d(#zBOC would, of course, be required to provide the inregion interLATA transmission service  d(#<pursuant to section 271 authorization and the section 272 separate affiliate and nondiscrimination  d(#.requirements. The BOC could choose to provide the separate, intraLATA information service  X - d(#yeither on an integrated basis, in compliance with the Commission's CEI and ONA requirements, or through a separate affiliate.  X -  4x121.` `  271G4 Remote Databases/Network Efficiency. BOCs may not provide interLATA  d(#jservices in their own regions, either over their own facilities or through resale, before receiving  X - d(#authorization from the Commission under section 271(d). Therefore, we conclude that BOCs may  d(#not provide interLATA information services, except for information services covered by section  Xy- d(#271(g)(4), in any of their inregion states prior to obtaining section 271 authorization. Section  d(#[271(g)(4) designates as an incidental interLATA service the interLATA provision by a BOC or  d(#.its affiliate of "a service that permits a customer that is located in one LATA to retrieve stored  d(#information from, or file information for storage in, information storage facilities of such  X- d(#jcompany that are located in another LATA."J yO-ԍ47 U.S.C.  271(g)(4).J Because BOCs were able to provide incidental  d(#interLATA services immediately upon enactment of the 1996 Act, they may provide interLATA  d(#zinformation services that fall within the scope of section 271(g)(4) without receiving section  d(#271(d) authorization from the Commission. Since section 271(g)(4) services are not among the  d(#{incidental interLATA services exempted from section 272 separate affiliate requirements,  d(#>however, they must be provided in compliance with those requirements. To the extent that  d(#parties have argued in the record that centralized data storage and retrieval services that fall  d(#within section 271(g)(4) either are not interLATA information services, or are not subject to the  Xe-section 272 separate affiliate requirements, we specifically reject these arguments.ex yO!-ԍE.g., Bell Atlantic, Exhibit 1, at 5; see also Ameritech at 67; BellSouth Reply at 2324.  X7- y122.` ` We also reject the BOCs' argument that their use of interLATA transmission,  d(#outside the control of the enduser and solely to maximize network efficiencies, in connection  X - d(#with the provision of an information service, does not render that information service interLATA" <,-(-(ZZ["  X- d(#in nature. yOy-ԍPacTel at 1011; PacTel Reply at 6; see also BellSouth at 25; U S West at 10. Whenever interLATA transmission is a component of an information service, that  d(#service is an interLATA information service, unless the enduser obtains that interLATA  X- d(#transmission service separately, e.g., from its presubscribed interexchange provider. To the extent  d(#Lthat BOCs are allowed to perform certain interLATA call processing functions associated with  d(#their provision of telephone exchange service or exchange access service in connection with an  X- d(#intraLATA information service, however, they may continue to do so without transforming that  Xv-information service into an interLATA information service.vX yO - v lԍFor example, under the MFJ, BOCs were permitted to use interLATA "Official Services Networks" to  d(#perform on a centralized basis certain network functions associated with their provision of exchange and exchange  d(#haccess services, including trunk and switch monitoring and control, call routing, directory assistance, repair calls, and  yO - d(#internal business communications. See United States v. Western Electric, 569 F. Supp. 1057, 10971101 (D.D.C.  d(#1983). Although BOCs were entitled to provide outofband signalling associated with their own exchange services  d(#Zon a centralized basis, the MFJ court denied their request to furnish such signalling to interexchange carriers on a  d(#;centralized basis, instead requiring them to establish interconnection with their signal transfer points (STPs) in each  yO- d(#LATA. See United States v. Western Electric, 131 F.R.D. 647 (D.D.C. 1990), aff'd, 969 F.2d 1231 (D.C. Cir.  d(#1992). Under the 1996 Act, the BOCs are now entitled to provide signaling information associated with both  yO-intraLATA services and interLATA services on a centralized basis. See 47 U.S.C.  271(g)(5) and (g)(6).  XH- z123.` ` We also reject PacTel's claim that a BOC's use of interLATA transmission solely  d(#Ofor its own business convenience in providing an information service falls within the  X - d(#"telecommunications management exception" to "information service."a  yO-ԍPacTel at 1011 (citing 47 U.S.C.  153(20)).a We disagree with  d(#xPacTel's assertion that this practice is covered by the "technical management exception," because  d(#the BOC would be providing interLATA transmission in connection with the management of an  d(#information service, not "the management of a telecommunications service," as specified by  d(#section 3(20). Further, as noted above, we believe that the "telecommunications management  d(#exception" is analogous to the Commission's classification of certain services as "adjunctto d(#basic;" that is, it covers services that may fit within the literal reading of the information services  Xy- d(#Kdefinition, but that are used to facilitate the provision of a basic telecommunications transmission  Xb- d(#service, without altering the character of that service.`b  yO-ԍSee supra paragraph ADJUNCT107.` In other words, the "technical  d(#management exception" relates to the classification of services as either telecommunications  d(#-services or information services; it has no bearing upon the classification of either of these types  d(#of services as intraLATA or interLATA. As such, the "telecommunications management  d(#exception" provides no safe harbor for interLATA transmission services employed by BOCs in connection with the provision of information services.  X-  {124.` ` Presumptions Regarding Previously Authorized Information Services. With respect  d(#to information services that the BOCs were authorized to provide prior to passage of the 1996  d(#Act, we conclude that as a matter of administrative convenience it is helpful to establish several"=,-(-(ZZ3"  d(#rebuttable presumptions regarding intraLATA or interLATA classification. Thus, we will  X- d(#presume that information services that BOCs were authorized to provide pursuant to CEI plans,  d(#without MFJ waivers, are intraLATA information services. Similarly, we will presume that  d(#information services for which BOCs were required to obtain MFJ waivers are interLATA  d(#information services. We conclude that these presumptions are rebuttable, rather than conclusive,  d(#because the BOCs have noted that, for expediency purposes, they sometimes requested and  Xv- d(#obtained MFJ waivers in order to provide services that were not clearly interLATA in nature.v yO- v ԍNYNEX at 45 n.61; Ameritech at 69 (noting that prior to 1991, BOCs required MFJ waivers to provide information services at all, even on an intraLATA basis); PacTel Reply at 67.  X_- d(#Thus, a BOC would be able to rebut the presumption that an information service provided  d(#pursuant to an MFJ waiver is an interLATA information service by showing that it had obtained  d(#a waiver to provide the service on an intraLATA basis prior to 1991. Similarly, the presumption  d(#that an information service provided pursuant to a CEI plan is an intraLATA information service  d(#[may be rebutted by a showing that the information service incorporates a bundled, interLATA telecommunications transmission component, as specified in this Order.  X -vX 3.X` ` BOCprovided Internet Access Services (#`  X-XX` ` a.X Background (#  Xb- &|125.` ` On June 6, 1996, the Common Carrier Bureau (Bureau) released an order  XK- d(#vapproving a CEI plan filed by Bell Atlantic for the provision of Internet Access Service.3K  yO- v jԍBell Atlantic Telephone Companies Offer of Comparably Efficient Interconnection to Providers of Internet  yO-Access Services, Order, 11 FCC Rcd 6919 (Com. Car. Bur. 1996) (Bell Atlantic Internet Access CEI Plan Order).3 MFS  X4- d(#had filed comments opposing Bell Atlantic's plan, arguing, inter alia, that Bell Atlantic's Internet  d(#access service offering is an interLATA service that Bell Atlantic may only provide through a  X- d(#section 272 affiliate after obtaining section 271 authorization from the Commission.x yO/- v ?ԍSee Bell Atlantic Internet Access CEI Plan Order at  48 (citing Comments of MFS Communications Company, Inc., at 8 (filed April 12, 1996)). Following  X- d(#release of the Bell Atlantic CEI Plan Order, MFS filed a petition for reconsideration of that  X- d(#Order, raising similar arguments.  yOY- v ԍPetition for Reconsideration of MFS Communications Company, Inc., CCBPol 9609, at 1220 (filed July  yO! - d(#3, 1996). This petition was subsequently put on public notice by the Bureau. See Pleading Cycle Established on  yO - d(#MFS Communications Company Inc.'s Petition for Reconsideration, CCBPol 9609, Public Notice, DA 961102 (rel. Jul. 10, 1996). At about the same time, Southwestern Bell Telephone  X- d(#yCompany (SWBT) filed a CEI plan for Internet Support Services.2  yO*$- v ԍSee Pleading Cycle Established for Comments on SWBT's Comparably Efficient Interconnection Plan for  yO$-Internet Support Services, CC Docket Nos. 85229, 90623 & 9520, Public Notice, DA 961031 (rel. June 26, 1996).2 On July 25, 1996, one week  d(#after the Commission released the Notice in this proceeding, MFS filed with the Commission a  X- d(#petition seeking to consolidate proceedings related to the Bell Atlantic CEI Plan Order">,-(-(ZZQ"  d(#reconsideration and the SWBT Internet support CEI plan with the instant proceeding, on the  X- d(#.grounds that the three proceedings raise similar novel, policy, factual, and legal arguments.  yOb-ԍPetition to Consolidate Proceedings by MFS Communications Company, Inc. (filed July 25, 1996).  d(#yAlthough the Notice in the instant proceeding did not specifically seek comment on the proper  d(#classification or regulatory treatment of BOCprovided Internet services and Internet access  d(#services under the 1996 Act, several parties discussed these matters in their comments, in the course of addressing how we should define "interLATA information services."  X_-XX` ` b.X Comments (#  X1- _}126.` ` MFS argues that all Internet services are interLATA services and, hence, Internet  d(#services provided by the BOCs are interLATA information services subject to the section 272  X - d(#separate affiliate requirements.w! X yO -ԍMFS at 79, 1112; MFS Reply at 1012; see also ITAA at 12 n.31.w In response, the BOCs argue that it is possible for them to  d(#provide on an intraLATA basis an Internet access service that allows a customer to connect to  d(#Lan Internet service provider's point of presence (POP) using the traditional local loop, and that  X -such service should be classified as an intraLATA information service."  yOW- v zԍU S West at 11; Ameritech Reply at 34; PacTel Reply at 78; USTA Reply at 17; SBC Reply at 3536; U S West Reply at 2526.  X-XX` ` c.X Discussion (#  Xb- ~127.` ` The preceding sections of this Order establish a definition of "interLATA  d(#information service" that should assist the BOCs and other interested parties in determining the  d(#types of information services that the BOCs are statutorilyrequired to provide through section  X- d(#272 affiliates. If a BOC's provision of an Internet or Internet access service#@ yO- v ԍThe Internet is an interconnected global network of thousands of interoperable packetswitched networks  d(#Zthat use a standard protocol, Transmission Control Protocol/Internet Protocol (TCP/IP), to enable information  yO- d(#exchange. See Universal Service Joint Board Recommended Decision at  457. An enduser may obtain access to  d(#the Internet from an Internet service provider, by using dialup or dedicated access to connect to the Internet service  d(#wprovider's processor. The Internet service provider, in turn, connects the enduser to an Internet backbone provider that carries traffic to and from other Internet host sites. (or for that matter,  d(#any information service) incorporates a bundled, inregion, interLATA transmission component  d(#provided by the BOC over its own facilities or through resale, that service may only be provided  d(#through a section 272 affiliate, after the BOC has received inregion interLATA authority under  d(#section 271. We believe that this is not the appropriate forum for considering whether the  d(#jvarious specific Internet services provided by the BOCs are "interLATA information services"  d(#because such determinations must be made on a casebycase basis. We believe that the  d(#]lawfulness of the specific Internet services provided by Bell Atlantic and SWBT is more  d(#Zappropriately analyzed in the context of the separate CEI plan proceedings regarding each service  d(#-that are currently pending before the Bureau, consistent with the rules and policies enunciated in"N? #,-(-(ZZ"  d(#this rulemaking proceeding. Therefore, we deny MFS's request to consolidate proceedings related  d(#to the provision of Internet and Internet access services by Bell Atlantic and SWBT with the  X-instant proceeding.  X- _X 4.X` ` Impact of the 1996 Act on the Computer II, Computer III, and ONA  X-requirements (#`  X_-XX` ` a.X Background (#  X1- 128.` ` In the Notice, we concluded that, because the 1996 Act does not establish  X - d(#[_regulatory requirements for BOC provision of intraLATA information services, Computer II,W$   yO - v ԍAmendment of Section 64.702 of the Commission's Rules and Regulations, 77 FCC 2d 384 (1980)  yO[ - d(#(Computer II Final Order), recon., 84 FCC 2d 50 (1980) (Computer II Reconsideration Order), further recon., 88  yO# - d(#FCC 2d 512 (1981) (Computer II Further Reconsideration Order), affirmed sub nom. Computer and Communications  yO -Industry Ass'n v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983).W  X - d(#Computer III,%  yOd-ԍSee supra note COMP3217 for full citation for Computer III proceeding. and ONA& @ yO- v !ԍONASee Filing and Review of Open Network Architecture Plans, 4 FCC Rcd 1 (1988) (BOC ONA Order),  yO- d(#krecon., 5 FCC Rcd 3084 (1990) (BOC ONA Reconsideration Order); 5 FCC Rcd 3103 (1990) (BOC ONA  yO- d(#<Amendment Order), erratum, 5 FCC Rcd 4045, pets. for review denied, California v. FCC, 4 F.3d 1505 (9th Cir.  yOL- d(#1993), recon., 8 FCC Rcd 97 (1993) (BOC ONA Amendment Reconsideration Order); 6 FCC Rcd 7646 (1991) (BOC  yO- d(#<ONA Further Amendment Order); 8 FCC Rcd 2606 (1993) (BOC ONA Second Further Amendment Order), pet.  yO-for review denied, California v. FCC, 4 F.3d 1505 (9th Cir. 1993) (collectively referred to as the ONA Proceeding). requirements continue to govern BOC provision of these services,  X - d(#jto the extent that these requirements are consistent with the 1996 Act.F'  yOU-ԍNotice at  4849.F We sought comment  d(#Kon which of the Commission's existing requirements were inconsistent with, or had been rendered  d(#unnecessary by, the 1996 Act, as well as on the specific provisions of the 1996 Act that supersede  X - d(# the existing requirements.M( H  yO-ԍId. at  4950.M We also sought comment on the impact of the statute on our  X-pending Computer III Further Remand Proceedings.s) yO-ԍComputer III Further Remand Proceedings, 10 FCC Rcd at 8360.s  Xb-XX` ` b.X Comments (#  X4- $129.` ` Consistency of Commission's Computer II, Computer III, and ONA Rules with  X- d(#[the 1996 Act. Bell Atlantic and NYNEX argue that enactment of the 1996 Act has rendered the  X- d(#=Computer II, Computer III, and ONA rules unnecessary and redundant.*h yO&-ԍBell Atlantic, Exhibit 1, at 56; NYNEX at 4748; see also LDDS Worldcom at 12 n.10. The majority of the  X- d(#BOCs, however, contend that the Commission's existing Computer III and ONA interconnection"@*,-(-(ZZ"  d(#and unbundling requirements are consistent with the 1996 Act and should remain in place to  X- d(#allow them to provide intraLATA information services on an integrated basis.+ yOb- v >ԍBellSouth at 2728; PacTel at 13; SBC at 1317; U S West at 20; USTA at 1516; Bell Atlantic Reply at 17; PacTel Reply at 1415. Several of the  X- d(#KBOCs' potential telecommunications competitors and certain organizations representing ISPs also  X- d(#-agree that the Computer III and ONA safeguards should be retained if the Commission continues  X-to permit BOCs to provide intraLATA information services on an unseparated basis.,  yOu- v =ԍTRA at 12; MCI at 17, 1920; Sprint at 1819; MCI Reply at 13; cf. ATSI at 813 (arguing that a minimum set of interconnection points and unbundled elements should be made available to information service providers).  X-  Xv- 130.` ` Requiring section 272 affiliates for intraLATA information services. MCI, ITAA,  d(#and CIX argue that, in the interest of regulatory consistency, the Commission should require the  XH- d(#.BOCs to provide all information services through a section 272 separate affiliate.-XHx yOq- v ԍCompare MCI at 19; ITAA at 1112; MCI Reply at 14; CIX Reply at 67; with U S West at 2021 (arguing  yO9- d(#that the Commission should harmonize the Computer III and ONA requirements with the provisions of the 1996 Act, to develop a single regulatory structure for the provision of information services). Several of  d(#the BOCs object to this proposal on the ground that such a requirement would be directly  X -contrary to congressional intent.R.  yOc-ԍBellSouth at 2628; PacTel at 13.R  X - 131.` ` Application of Computer II, Computer III, and ONA requirements to section 272  X - d(#?affiliate activities. Several of the BOCs argue that the Commission should not apply the  X - d(#KComputer III and ONA requirements to any BOC information services provided through a section  X - d(#272 separate affiliate (either interLATA information services, as required by statute, or  X- d(#-intraLATA information services, provided on a separate basis by choice).q/(  yOi-ԍU S West at 20; USTA at 15; SBC Reply at 1214; YPPA Reply at 5.q In contrast, ITI and  Xy- d(# ITAA argue that the Computer III and ONA requirements should be applied to section 272  d(#yaffiliates, prohibiting such affiliates from bundling equipment or information services with local  d(#exchange, exchange access, or interLATA services, until local exchange markets become fully  X4-competitive.I04  yO-ԍITI/ITAA Reply at 1112.I  X-XX` ` c.X Discussion (#  X- $132.` ` Consistency of Commission's Computer II, Computer III, and ONA Rules with  X- d(#the 1996 Act. We conclude that the Computer II, Computer III, and ONA requirements are  d(#consistent with the 1996 Act, and continue to govern BOC provision of intraLATA information  d(#@services. By its terms, the 1996 Act imposes separate affiliate and nondiscrimination  X|- d(#requirements on BOC provision of "interLATA information services," but does not address BOC"|AH 0,-(-(ZZP"  X- d(#provision of intraLATA information services.W1 yOy-ԍSee 47 U.S.C.  272(a)(2)(C).W We concluded above that, for the purposes of  d(#!applying sections 271 and 272, interLATA information services must include a bundled  X- d(#interLATA transmission component.N2X yO-ԍSee supra part III.F.2.N We further conclude, in light of our definition of  d(#zinterLATA information services, that BOCs are currently providing a number of information  X- d(#services on an intraLATA basis.3 yO= -ԍSee BOC CEI Plan Approval Order, 10 FCC Rcd at 13,77074, app. A. We find that the BOCs may continue to provide such  X- d(#intraLATA information services on an integrated basis, in compliance with the nonstructural  Xv-safeguards established in Computer III and ONA.<4vx yO - v ԍBOCs currently provide intraLATA information services on an integrated basis pursuant to servicespecific  yOg - d(#CEI plans. See Bell Operating Companies' Joint Petition for Waiver of Computer II Rules, 10 FCC Rcd 1724 (1995)  yO/- d(#K(Interim Waiver Order). Contrary to the assertions of MCI and ITAA (see MCI at 18; ITAA at 11 & n.30), we  yO- d(# concluded that California III returned the regulation of information services not to a Computer II structural separation  yO- d(#,regime, but rather to a Computer III servicespecific CEI plan regime. BOC CEI Plan Approval Order, 10 FCC Rcd at 13,762,  22 (1995).<  XH- 133.` ` We reject Bell Atlantic's conclusory assertions that the 1996 Act's customer  d(#proprietary network information (CPNI), network disclosure, nondiscrimination, and accounting  X - d(#Zprovisions supersede various of the Commission's Computer III nonstructural safeguards.Z5  yO-ԍSee Bell Atlantic, Exhibit 1, at 6.Z We  d(#also reject NYNEX's claim that the section 251 interconnection and unbundling requirements  X - d(#render the Commission's Computer III and ONA requirements unnecessary.J6  yO-ԍSee NYNEX at 4748.J Based on our  X - d(#/review of the record in this proceeding, we conclude that the pending Computer III Further  X - d(#KRemand Proceedings are the appropriate forum in which to examine the necessity of retaining any  X - d(#or all of these individual Computer III and ONA requirements.7  yOh- v ԍWe have already initiated a proceeding in which we are examining which, if any, of the Commission's CPNI  yO0- d(#requirements should be retained in light of the CPNI restrictions set forth in section 222. See Implementation of  d(#jthe Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network  yO- d(#Information and Other Customer Information, CC Docket No. 96115, Notice of Proposed Rulemaking, 11 FCC Rcd  yO -12,513 (1996) (CPNI NPRM). We therefore plan to issue a  X- d(#Further Notice in that proceeding to determine how to regulate BOC provision of intraLATA information services in light of the 1996 Act.  XK- 3134.` ` In the interim, the Commission's Computer II, Computer III, and ONA rules are  X- d(#the only regulatory means by which certain independent ISPs are guaranteed nondiscriminatory"B7,-(-(ZZf"  d(#access to BOC local exchange services used in the provision of intraLATA information  X- d(#services.@8 yOy-ԍCIX Reply at 8.@ As noted above, the section 272 nondiscrimination requirements do not apply to BOC  d(#provision of intraLATA information services, and ISPs that are not telecommunications carriers  X- d(#cannot obtain interconnection or access to unbundled elements under section 251._9o yO-ԍFirst Interconnection Order at  995._ Thus, we  X- d(#believe that continued enforcement of these safeguards is necessary pending the conclusion of the  X- d(#yComputer III Further Remand Proceedings and establishes important protections for small ISPs that are not provided elsewhere in the Act.  XH- 135.` ` Requiring section 272 affiliates for intraLATA information services. We decline  d(#to require the BOCs to provide intraLATA information services through section 272 affiliates.  d(#It is clear that section 272 does not require the BOCs to offer intraLATA information services  d(#=through a separate affiliate. We further decline to exercise our general rulemaking authority to  d(#.impose such a requirement. We conclude that the record in this proceeding does not justify a  X - d(#!departure from our determination, in Computer III, to allow BOCs to provide intraLATA  d(#information services on an integrated basis, subject to appropriate nonstructural safeguards. Some  d(#-parties in this proceeding argue that we should harmonize our regulatory treatment of intraLATA  d(#information services provided by the BOCs with the section 272 requirements imposed by  Xy- d(#LCongress on interLATA information services.T:y yO)-ԍSee, e.g., U S West at 2021.T We invite these parties to comment on these  Xb- d(#matters in response to the Further Notice we intend to issue in the Computer III Further Remand  XK-Proceedings.  X- 136.` ` Application of Computer II, Computer III, and ONA requirements to section 272  X- d(#affiliate activities. We conclude that a BOC that provides interLATA telecommunications  d(#xservices and information services through the same section 272 affiliate may bundle such services  d(#>without providing comparably efficient interconnection to the basic underlying interLATA  X- d(#telecommunications services.G; yO-ԍSee NYNEX at 49.G Under our definition of "interLATA information service," as  d(#explained above, such service must include a bundled interLATA telecommunications element.  d(#Hence, to prohibit a BOC affiliate from bundling interLATA telecommunications and information  d(#services would effectively prevent the BOCs from offering any interLATA information services,  d(#a result clearly not contemplated by the statute. Further, we note that the market for information  XN- d(#services is fully competitive,<N yO#- v /ԍSee, e.g., Computer II Final Order, 77 FCC 2d at 433,  128; Computer III Phase I Order, 104 FCC 2d at  yO#-1010,  95. and the market for interLATA telecommunications services is  X7- d(#substantially competitive.B=7w yO_&- v ԍSee, e.g., Tariff Forbearance Order at  2122; AT&T Nondominance Order, 11 FCC Rcd at 32783279,  yO''-3288,  9, 26; First Interexchange Competition Order, 6 FCC Rcd at 5887,  36.B Thus, we see no basis for concern that a section 272 affiliate"7C =,-(-(ZZ"  d(#providing an information service bundled with an interLATA telecommunications service would  X- d(#be able to exercise market power. If, however, a BOC's section 272 affiliate were classified as  X- d(#`a facilitiesbased telecommunications carrier (i.e., it did not provide interLATA  X- d(#telecommunications services solely through resale), the affiliate would be subject to a Computer  X- d(#II obligation to unbundle and tariff the underlying telecommunications services used to furnish  X-any bundled service offering.h> yO-ԍFrame Relay Order, 10 FCC Rcd at 13,719,  13.h  X_- 2137.` ` Under our current regulatory regime, a BOC must comply fully with the Computer  XH- d(#II separate subsidiary requirements in providing an information service in order to be relieved of  d(#the obligation to file a CEI plan for that service. We decline to adopt NYNEX's proposal that  d(#-we find that all BOC information services provided through a section 272 separate affiliate satisfy  X - d(#=the Computer II separate subsidiary requirements, because we conclude that the record in this  X - d(#proceeding is insufficient to support such a conclusion.\? X yO-ԍNYNEX at 48; see also U S West at 20.\ Instead, we intend to examine this  X - d(#issue further in the context of the Computer III Further Remand Proceedings. Further, we reject  X - d(#USTA's argument that ONA reporting requirements do not extend to intraLATA information  X - d(#services provided through a section 272 separate affiliate.<@  yO@-ԍUSTA at 15.< BOCs must comply with the ONA  d(#requirements regardless of whether they provide information services on a separated or integrated  Xy-basis.eAyx yO-ԍSee ONA Remand Order, 5 FCC Rcd at 7719.eC!}K 3J:\POLICY\SAFE\ORDER\MASTER\BAS\ELECTEL.MES3 C  XK- _G.XInformation Services Subject to Other Statutory Requirements (#  X- X1.X` ` Electronic Publishing (section 274) (#`  X-XX` ` a.X Background (#  X- 138.` ` In the Notice, we observed that, although electronic publishing is specifically_  d(#identified as an information service, interLATA provision of electronic publishing is exempt from  X- d(#section 272, and is instead subject to section 274.CB yOL!-ԍNotice at  51.C Noting that we had initiated a separate  X|- d(#proceeding to clarify and implement, inter alia, the requirements of section 274,|CX| yO#- v MԍSee Implementation of the Telecommunications Act of 1996: Telemessaging, Electronic Publishing, and  yO$- d(#<Alarm Monitoring Services, CC Docket No. 96152, Notice of Proposed Rulemaking, FCC 96310 (rel. July 18,  yOU%-1996) (Electronic Publishing NPRM). | we sought  d(#Kcomment on how to distinguish information services subject to the section 272 requirements from"eD C,-(-(ZZ1"  X- d(#Kelectronic publishing services subject to the section 274 requirements.CD yOy-ԍNotice at  53.C We also invited parties  d(#to comment on whether, in situations involving services that do not clearly fall within either the  d(#definition of "electronic publishing" (section 274(h)(1)) or the enumerated exceptions thereto  d(#(section 274(h)(2)), we should identify as "electronic publishing" those services for which the  X- d(#carrier controls, or has a financial interest in, the content of information transmitted by the  X-service.EX yO- v kԍId. This "financial interest or control" test is derived from the MFJ definition of "electronic publishing."  yO^ -See United States v. Western Electric, 552 F. Supp. at 178, 181.  X_-XX` ` b.X Comments (#  X1- 139.` ` Several parties assert that the section 274(h)(1) definition of "electronic publishing"  d(#needs no further refinement because it is clear, when read in conjunction with the exceptions set  X - d(# forth in section 274(h)(2).F  yOd-ԍSee, e.g., Ameritech at 70; USTA at 1718; Ameritech Reply at 36; cf. MFS at 17. Several BOCs argue that the Commission should not develop  d(#Kanother rule for classifying ambiguous services, but rather should handle them on a casebycase  X - d(#basis.G @ yO- v MԍSee e.g., Bell Atlantic, Exhibit 1, at 6; PacTel at 1516; see also NYNEX at 46 (classification of services  yO-as electronic publishing should be done in Electronic Publishing proceeding). Generally, the BOCs also resist the idea of applying a "financial interest or control" test  X - d(#ito determine whether ambiguous information services are subject to section 272 or section 274;H  yO- v ԍPacTel at 1415; Ameritech at 7071. But see U S West at 15 (test should be the BOC's ability to control the content of information provided to endusers).  X - d(#in contrast, MCI supports adoption of such a test.;I  yOH-ԍMCI at 21.; Several existing and potential competitors  d(#Lto the BOCs suggest that it may not be necessary to distinguish between information services  Xy-subject to section 272 and electronic publishing services subject to section 274.TJy  yO-ԍITAA at 1516; AT&T Reply at 4 n.7.T  XK-XX` ` c.X Discussion (#  X- o140.` ` Upon review of the record and further consideration, we conclude that it is not  d(#Znecessary to adopt the "financial interest or control" test in determining whether a particular BOC  d(#service involves the provision of electronic publishing, in addition to the definitions set forth in  d(#sections 274(h)(1) and 274(h)(2). Generally speaking, if a particular service does not appear to  d(#fit clearly within either the definition of "electronic publishing," set forth in section 274(h)(1),  d(#or the exceptions thereto listed in section 274(h)(2), determining the appropriate classification of  d(#that service will involve a highly factspecific analysis that is better performed on a casebycase"EJ,-(-(ZZ"  d(#kbasis. In the context of such a casebycase determination, the Commission may consider a  X- d(#number of factors, including whether the BOC controls, or has a financial interest in, the content  X- d(#lof information transmitted to endusers.K yOK- v .ԍThe Commission may also consider whether the BOC has "generated or altered" the content of information  yO-provided to endusers, as Ameritech suggests. See Ameritech Reply at 37. We also note that the definition of electronic  d(#=publishing, as well as specific services encompassed by that definition, may be further refined  X-in the Electronic Publishing proceeding.  Xv- 141.` ` We also decline to adopt ITAA's suggestion that, because of potential difficulties  d(#in distinguishing between information services and electronic publishing services, we should  XH- d(#impose substantially the same separate affiliate requirements on both.ELH  yO -ԍITAA at 1516.E Such an approach would  X1- d(#be directly contrary to the statute.aM1 yO-ԍAccord Bell Atlantic Reply at 1819.a Congress set forth distinct separate affiliate and  d(#=nondiscrimination requirements in sections 272 and 274, and specified that the former apply to  d(#interLATA information services, while the latter apply to all BOCprovided electronic publishing  d(#-services. To impose the section 272 requirements on electronic publishing services, or to impose  d(#the section 274 requirements on interLATA information services, would be inconsistent with the clear statutory scheme.  X-  `142.` ` Moreover, we specifically reject AT&T's contention that electronic publishing  d(#services are subject to the section 272 separate affiliate requirements, pursuant to section  d(#L272(a)(2)(B), which imposes a separate affiliate requirement on interLATA telecommunications  XK- d(#services.ENK@ yO<-ԍAT&T Reply at 4 n.7.E Electronic publishing services, however, are specifically included within the statutory  X4- d(#definition of information services.HO4 yO-ԍ47 U.S.C.  153(20).H Accordingly, electronic publishing services would be subject  d(#to section 272(a)(2)(C), which imposes a separate affiliate requirement on interLATA information  d(#services, except that section 272(a)(2)(C) specifically exempts "electronic publishing (as defined in section 274(h))."  X-"F` O,-(-(ZZ"Ԍ X- vX2.X` ` Telemessaging (section 260) (#`  X-  X-XX` ` a.X Background (#  X- `143.` ` In the Notice, we tentatively concluded that "telemessaging" is an information  X- d(#vservice.P yO- v 0ԍNotice at  54. The 1996 Act defines "telemessaging" as "voice mail and voice storage and retrieval  d(#services, any live operator services used to record, transcribe, or relay messages (other than telecommunications relay  d(#services), and any ancillary services offered in combination with these services." 47 U.S.C.  260(c). LECs must  yO^ - d(#provide telemessaging services in compliance with section 260, which is the subject of a separate proceeding. See  yO& -Electronic Publishing NPRM. ė We further tentatively concluded that BOC provision of telemessaging on an  d(#LinterLATA basis is subject to the section 272 separate affiliate requirements, in addition to the  X_-section 260 safeguards.CQ_x yO -ԍNotice at  54.C  X1-XX` ` b.X Comments (#  X - 144.` ` In general, parties agree with our tentative conclusions that telemessaging is an  d(#Zinformation service, and that when a BOC provides telemessaging on an interLATA basis, it must  X - d(#do so in accordance with the section 272 separate affiliate requirements.R  yO- v =ԍBell Atlantic, Exhibit 1, at 5; BellSouth at 25 n.61; AT&T at 12 n.13, 1415; Sprint at 1617 n.12; see also ITAA at 15. Several parties also  d(#iassert that, with respect to interLATA telemessaging services, it is possible to apply both section  X - d(#260 and section 272 simultaneously.\S `  yO-ԍITAA at 15; see also MCI Reply at 12.\ PacTel, however, disagrees with both of our tentative  d(#yconclusions, arguing that because "telemessaging" includes live operator services that are not  d(#information services, it constitutes a distinct category of service that is subject only to the section  Xb-260 requirements.XTXb  yO- v ԍPacTel at 16; PacTel Reply at 9; see also MCI at 2122 (questioning whether live operator services can be  yO- d(#considered "information services"). But see MCI Reply at 12 (conceding that live operator services constitute information services).X  X4-XX` ` c.X Discussion (#  X-  145.` ` Based on our review of the comments and analysis of the statute, we hereby adopt  d(#our tentative conclusion that telemessaging is an information service. We reject PacTel's  d(#contention that live operator services do not constitute information services. Under the statute,"GT,-(-(ZZ"  X- d(#live operator services "used to record, transcribe, or relay messages" are telemessaging services.UX yOy- v ԍ47 U.S.C.  260(c). In general, these services involve live operators that answer calls intended for  d(#Kunavailable endusers, transcribe messages, and relay them to the enduser. Live operator services are often used  yO -in health care contexts, where "persontoperson" communication is important. See ATSI at 2.  d(#Because these functions plainly provide "the capability for . . . storing . . . or making available  d(#information" via telecommunications, we conclude that live operator telemessaging services fall  X- d(#iwithin the statutory definition of information services.VX yOT- v ԍAs discussed above at  LIVEOP103, live operator services do not appear to fall within the Commission's definition  d(#of "enhanced" services, because they do not employ "computer processing applications." Thus, they are an example of one area in which the "information service" definition is broader than that of "enhanced services." We also adopt our tentative conclusion  d(#-that BOCs that provide telemessaging services that meet the definition of interLATA information  d(#yservices must do so in accordance with the section 272 requirements, in addition to the section  Xv-260 requirements..Wv yO/- v \ԍOne example of an telemessaging service that is an interLATA information service might be a voicemail  yO-service that is bundled with a personal 800 number, offered to the customer for a single price. See NYNEX at 44.. 7!}K 'dJ:\POLICY\SAFE\ORDER\MASTER\SEW' 7  XH-* vIV. STRUCTURAL SEPARATION REQUIREMENTS OF SECTION 272 Đ\  X - A.Application of the Section 272(b) Requirements  X - 146.` ` Section 272(b) of the Communications Act establishes five structural and  d(#vtransactional requirements for separate affiliate(s) established pursuant to section 272(a). We  d(#address each of the requirements below, with the exception of section 272(b)(2), which we  X -discuss in the Accounting Safeguards Order.aX `  yO-ԍAccounting Safeguards Order part IV.B.1.c.a  Xy- B.The "Operate Independently" Requirement  XK- 1.` ` Background  X- P147.` ` Section 272(b)(1) states that a separate affiliate "shall operate independently from  X- d(#<the BOC."JY  yO -ԍ47 U.S.C.  272(b)(1).J The Act does not elaborate on the meaning of the phrase "operate independently."  d(#\We stated in the Notice that under principles of statutory construction, a statute should be  X- d(#interpreted so as to give effect to each of its provisions.CZ  yO $-ԍNotice at  57.C We therefore tentatively concluded  d(#Zthat the section 272(b)(1) "operate independently" provision imposes requirements beyond those contained in subsections 272(b)(2)(5). "HZ,-(-(ZZo"Ԍ X- _148.` ` As we observed in the Notice, section 274(b) contains similar language to section  d(#272(b)(1). It states that "[a] separated affiliate or electronic publishing joint venture shall be  d(#operated independently from the [BBC]." Subsections 274(b)(1)(9) list several requirements that  d(#govern the relationship of an electronic publishing entity and the BBC with which it is  X- d(#affiliated.G[ yO-ԍ47 U.S.C.  274(b).G We sought comment on the relevance of the "operated independently" language of  X-section 274(b) when construing the "operate independently" requirement of section 272(b)(1).C\X yO-ԍNotice at  60.C  X_- 149.` ` In addition, we sought comment on what rules, if any, we should adopt to  XH- d(#implement the requirements of section 272(b)(1).F]H yO -ԍId. at  57.F Moreover, we asked whether we should  X1- d(#impose one or more of the separation requirements established in the Computer II or Competitive  X -Carrierw^X x yOC- v ԍPolicy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations  yO - d(#wThereof, CC Docket No. 79252, Fifth Report and Order, 98 FCC 2d 1191, 1198 (1984) (Competitive Carrier Fifth  yO-Report and Order).w proceedings.C_  yOc-ԍNotice at  59.C  X - %150.` ` In the Computer II proceeding, the Commission required AT&T to provide  d(#ienhanced services through a separate affiliate, a requirement that the Commission extended to the  X - d(#.BOCs following divestiture.d` (  yO-ԍBOC Separations Order, 95 FCC 2d 1117 (1983).d The Commission required the enhanced services subsidiary to  d(#"have its own operating, marketing, installation and maintenance personnel for the services and  X- d(#jequipment it offer[ed],"ra  yO-ԍComputer II Final Order, 77 FCC 2d at 477,  23839.r to comply with information disclosure requirements, and to maintain  Xy- d(#its own books of account.`byH  yOr-ԍId. at 476, 48081,  236, 24549.` The Commission prohibited the regulated entity and its enhanced  d(#=services subsidiary from using in common any leased or owned physical space or property on  XK- d(#Lwhich transmission equipment or facilities used in basic transmission services were located,OcK yO!-ԍId. at 47778,  240.O  d(#barred them from sharing computer capacity, and limited the regulated entity's ability to provide  X- d(#software to the affiliate.ddXh yO6%- v MԍId. at 47880,  24144; Computer II Reconsideration Order, 84 F.C.C.2d at 81,  91 (requiring affiliate  d(#or its outside contractors to perform all software development, other than generic software embodied in equipment sold to any interested purchaser).d Moreover, the Commission barred the enhanced services subsidiary"Id,-(-(ZZe"  d(#from constructing, owning, or operating its own transmission facilities, thereby requiring it to  X-obtain such facilities from a local exchange carrier pursuant to tariff.ke yOb-ԍComputer II Final Order, 77 FCC 2d at 474,  229.k  X- 151.` ` In the Competitive Carrier proceeding, the Commission prescribed the separation  d(#Lrequirements to which independent LECs must conform to be regulated as nondominant in the  d(#provision of domestic, interstate, interexchange services. Specifically, an independent LEC must provide interstate interexchange services through an affiliate that:  d(#1) maintains separate books of account; 2) does not jointly own transmission or switching  d(#Kfacilities with its affiliated exchange telephone company; and 3) acquires that exchange telephone  X1-company's services at tariffed rates and conditions.{f1X yO: -ԍCompetitive Carrier Fifth Report and Order, 98 FCC 2d at 1198.{  X -  2.` ` Comments  X - 152.` ` Relationship of Section 272(b)(1) to Section 274(b)(1). Several commenters rely  d(#Lon the rule of statutory construction that similar terms in related parts of an act should be read  X - d(#similarly.wg  yO@-ԍITAA at 1718 & n.49; MCI at 2627; PacTel at 21; U S West at 29 n.43.w Two such commenters propose that the requirements listed under both sections  d(#K272(b) and 274(b) define the term "operate independently," and, consequently, that the additional  Xy- d(#prohibitions of subsection 274(b) must be read into subsection 272(b).hyx yO- v |ԍITAA at 1718 & n.49; MCI at 2627. Contra U S West at 29 n.43 (citing same rule of statutory construction to argue that provision is used as summary language in both sections). In contrast, several  Xb- d(#BOCs cite the doctrine of inclusio unius est exclusio alterius, the "inference [applied in statutory  XK- d(#construction] that all omissions should be understood as exclusions."iK yO-ԍ HISTORY See 2A Norman J. Singer, Statutes and Statutory Construction  47.23 (5th ed. 1992). They argue that, because  d(#1Congress required electronic publishing affiliates and joint ventures to be "operated  d(#>independently" and then imposed additional restrictions on activities that are not explicitly  d(#restricted in section 272(b), those activities cannot be barred by the "operate independently"  X- d(#Zprovision of section 272(b).j`  yO - v ԍE.g., Ameritech Reply at 11; BellSouth at ii, 30; BellSouth Reply at 19; PacTel at 21; see also YPPA Reply at 34. Other commenters focus on the structural differences between the  d(#Ltwo subsections as evidence that we should construe "operate independently" and "operated  X-independently" differently.lkX  yO*$- v ԍSee AT&T Reply at 17 & n.40; SBC Reply at 20 n.33; Letter From David F. Brown, Attorney, SBC, to  yO$- d(#Regina Keeney, Chief, Common Carrier Bureau, at 45 (filed Nov. 14, 1996) (SBC Nov. 14 Ex Parte). Contra U S West at 29 n.43.l "Jk,-(-(ZZ"Ԍ X- 2153.` ` Defining "operate independently." With the exception of NYNEX, the BOCs and  d(#/USTA interpret the term "operate independently" to impose a straightforward, descriptive  X- d(#irequirement that needs no further clarification through the rulemaking process.l yOK- v ԍSee Ameritech at 3839 (contending provision raises question of fact best evaluated on a casebycase basis  d(#xin the context of section 271 applications to provide inregion interLATA services); Ameritech Reply at 7; Bell  d(#Atlantic at 4; BellSouth at 2830; PacTel at 20 (characterizing provision as "a 'gloss' on the other requirements");  yO- d(#iPacTel Reply at 910; SBC at 7; U S West at 29; see also SBC Nov. 14 Ex Parte at 23 (reading the provision to  d(#;impose a "qualitative 'piercing the corporate veil' standard"); USTA at 1920; USTA Reply at 3, 67; YPPA at 56; YPPA Reply at 3. They generally  d(#kcontend that the omission of additional structural separation requirements in section 272(b)  X- d(#Zrepresents a deliberate congressional choice not to impose such restrictions.m@ yO - v MԍE.g., Ameritech at 38; Ameritech Reply at 10; Bell Atlantic at 5; BellSouth at 2930; BellSouth Reply at 18; NYNEX Reply at 1719; USTA at 18; U S West at 24; YPPA Reply at 2, 56. They particularly  X- d(#<oppose adoption of the Computer II structural separation requirements to implement the "operate  d(#independently" requirement. Indeed, they assert that adopting such restrictions would be  d(#inconsistent with congressional intent, as well as changes in the industry and common carrier  XH- d(# regulation since the Computer II proceeding.QnXH yO- v ԍE.g. Ameritech Reply at 89 (citing interconnection, unbundling, and collocation obligations); NYNEX at  d(#,25; SBC at 12; USTA at 4, 18; USTA Reply at 45 (citing price cap regulation); U S West Reply at 6 (citing regime for pricing of interconnection).Q These commenters suggest that imposing  d(#additional structural separation requirements would result in a loss of efficiency and economies  X -of scope, decreased innovation, and fewer new services.fo  yO-ԍSee, e.g., SBC at 1317; USTA Reply at 4.f  X - 154.` ` The majority of commenters, other than the BOCs, urge us to construe the "operate  X - d(#=independently" requirement as imposing additional structural separation requirements.vpX H  yO- v ԍE.g., AT&T at 20; CompTel at 1314 (advocating "complete segregation of affiliate interexchange  d(#subsidiary"); Excel at 45; IDCMA at 34; LDDS WorldCom at 13 n.12; LDDS WorldCom Reply at 7; MCI at 23; MFS at 1516; Ohio Commission at 8; Sprint at 1920; Time Warner at 1617; TRA at 13.v For  d(# instance, the DOJ contends that additional structural separation requirements are the most  X - d(#ieffective means of reducing the risks of crosssubsidization.q h yO-ԍDOJ Reply at 10 (providing example that sharing of all personnel should be prohibited).Ĕ Commenters supporting this view  d(#=argue that the "operate independently" requirement must be read to impose, at a minimum, the  Xy- d(#structural separation rules established in the Computer II proceeding, including those elements  Xb- d(#outlined above.rb yO $- v ԍE.g., AT&T at 2023 (contending that while some of those requirements are expressly mandated by the  d(#ilanguage of section 272, all of them as outlined above are necessary elements of operational independence);  d(#JExcel at 57 (advocating all requirements except for requirement that affiliate maintain separate books); IDCMA at  yOc&- d(#4; ITAA at 1819; ITI & ITAA Reply at 1011; Ohio Commission at 9; Ohio Commission Reply at 45; Time  yO+'- d(#Warner at 1718 & n.30; Time Warner Reply at 14; see also TRA at 13 (urging us to use Computer II proceeding"+'q,-(-(b'"  yO- d(#Jas a guide). But see CompTel at 1516 (proposing safeguards devised by DOJ in response to Ameritech's Customers First Plan, Ameritech's plan to offer inregion interLATA service through an interexchange affiliate). Among those commenters, several emphasize that a BOC and its affiliate"bK r,-(-(ZZ"  X- d(#should not be permitted to engage in joint marketing.,s   yO- v ԍE.g., AT&T at 57; MFS at 1516 (also reading provision to forbid BOC and affiliate to refer customers to  d(#one another or to jointly advertise but to require the entities to have "separate logos, distinct names, no shared  d(#customer databases or information systems, and separate billing, collections, and ordering processes"); TIA at 22;  yO)-see also CompTel at 16 (advocating that affiliate be forbidden to use BOC's brand name)., Several commenters also propose  X- d(#restrictions that appear to go beyond those adopted in the Computer II proceeding, including a  X- d(#yprohibition on shared administrative services,t yO - v ԍE.g., CompTel at 1920; ITAA at 1819; MCI Reply at 2 (advocating administrative separation); TIA at 2223, 25 n.55; TRA at 1314. a complete prohibition on common use of any  X- d(#=leased or owned physical space,u`  yO - v ԍE.g., ITAA at 17 (advocating no sharing of property); MCI at 23; Sprint at 2123 (advocating prohibition  yO- d(#on common use of switches, facilities, buildings, and space); see also CompTel at 16 (advocating prohibition on  d(#sharing or colocation of facilities, assets, and personnel, except leasing telecommunications equipment space in same  d(#building and sharing power equipment on same terms, rates, and conditions available to nonaffiliated interexchange carriers); IDCMA at 5 (advocating physically separate facilities). a prohibition on jointly owned property,v yO|- v {ԍE.g., ITAA at 17; ITI & ITAA Reply at 1011; MCI at 2324 (advocating prohibition on joint use or ownership of property); Sprint at 2122. and a complete  X-prohibition on joint research and development, including joint equipment design.wh yO- v ԍE.g., AT&T at 23 (urging us to preclude joint planning and joint services development); IDCMA at 56; MCI at 27; TIA at 2223; TRA at 13.  Xv- 155.` ` Other commenters propose that "the standards for independent operation established  X_- d(#in the Competitive Carrier decision are the most appropriate for this section of the Act." x_ yO- v ԍNYNEX Reply at 1718; Teleport at 19; see also CompTel at 15 n.44 (proposing these standards as a  d(#minimum to be supplemented); Frontier at 45 (advocating standards as a minimum); PacTel Reply at 10 (stating  yO`- d(#that if additional restrictions are necessary, Competitive Carrier requirements are the most appropriate). In contrast,  yO(- d(#several commenters state that the structural safeguards established in the Competitive Carrier proceeding would be  yO- d(#,insufficient to protect ratepayers or establish operational independence. E.g., AT&T at 23; IDCMA at 3; ITAA at 1819 & n.53.   d(#Suggesting that two of the three requirements are implemented elsewhere in section 272, they  d(#igenerally propose that we read "operate independently" to forbid joint ownership of transmission  X - d(#and switching facilities.ByX 8 yO#- v ԍE.g., NYNEX Reply at 1718; Teleport at 19; see also Excel at 8; Frontier at 45 (contending that  d(#,requirement would force BOC affiliates, like competitors, to invest capital and resources in interexchange business). B Other parties advocate that we adopt individual requirements, rather  d(#\than a particular set of structural separation requirements established in another context, or"LXy,-(-(ZZ_ "  d(#>recommend that we use other proceedings in which structural separation was imposed as a  X-guide.`z yOy- v .ԍE.g., Excel at 6 (advocating adoption of Computer II and Competitive Carrier requirements as appropriate);  d(#Sprint at 2021 (advocating that we seek guidance in interpreting the provision from the orders pursuant to which  d(#GTE Corporation was permitted to acquire Sprint's long distance predecessors in interest and urging us to read the  d(#provision to limit a BOC's ability to engage in common activities with a section 272 affiliate through its parent  yO- d(#hcompany); TIA at 2325 (noting that neither the Computer II nor Competitive Carrier proceedings addressed cross yOa-subsidy and discrimination issues associated with BOC entry into manufacturing); TRA at 13. `  X- 3.` ` Discussion  X- A156.` ` We adopt our tentative conclusion that the "operate independently" requirement  d(#of section 272(b)(1) imposes requirements beyond those listed in sections 272(b)(2)(5). This  d(#-conclusion is based on the principle of statutory construction that a statute should be construed  XH-so as to give effect to each of its provisions.{HW yOP-ԍ2A Singer, supra note HISTORY362, at  46.06; see Notice at  57.  X - 2157.` ` Relationship of Section 272(b)(1) to Section 274(b). Section 274(b) mandates that  d(#a separated affiliate or electronic publishing joint venture be "operated independently" and then  d(# lists nine specific requirements governing the relationship between a BOC and a separated  d(#affiliate. In contrast, section 272(b) imposes five structural and transactional requirements  d(#governing the relationship between a BOC and a section 272 affiliate, one of which is that the  d(#0affiliate "shall operate independently from the [BOC]." The structural differences in the  d(#organization of the two sections suggest that the term "operate independently" in section 272(b)(1)  d(#should not be interpreted to impose the same obligations on a BOC as section 274(b). In  d(#particular, while the enumerated requirements of section 274(b) may be interpreted to define the  d(#term "operated independently" in that context, they do not define the term "operate  X4- d(#independently" as used in section 272(b).;|4 yO- v ԍSee SBC Reply at 20 n.33. We will construe the "operated independently" language of section 274(b) in  yO-a separate proceeding and do not purport to do so at this time. See Electronic Publishing NPRM at  35.; We agree with SBC that, because the requirements  d(#listed in sections 274(b)(1)(9) of the Act overlap with the requirements of sections 272(b), (c),  d(#/and (e), it would be redundant to incorporate all of the section 274(b) requirements into the  X-"operate independently" requirement of section 272(b)(1).P}?  yO-ԍSee SBC Reply at 20 n.33.P  X- _158.` ` Defining "Operate Independently." The requirements that we adopt to implement  d(#section 272(b)(1) are intended to prevent a BOC from integrating its local exchange and exchange  d(#-access operations with its section 272 affiliate's activities to such an extent that the affiliate could  d(#jnot reasonably be found to be operating independently, as required by the statute. In order to  d(# protect against the potential for a BOC to discriminate in favor of a section 272 affiliate in a  d(#manner that results in the affiliate's competitors' operating less efficiently, we seek to ensure that  d(#^a section 272 affiliate and its competitors enjoy the same level of access to the BOC's"7M },-(-(ZZ"  d(#transmission and switching facilities. Accordingly, we conclude that operational independence  d(#yprecludes the joint ownership of transmission and switching facilities by a BOC and its section  d(#272 affiliate, as well as the joint ownership of the land and buildings where those facilities are  d(#located. Furthermore, operational independence precludes a section 272 affiliate from performing  d(#operating, installation, and maintenance functions associated with the BOC's facilities. Likewise,  d(#Mit bars a BOC or any BOC affiliate, other than the section 272 affiliate itself, from performing  d(#Koperating, installation, or maintenance functions associated with the facilities that the section 272  d(#affiliate owns or leases from a provider other than the BOC with which it is affiliated. Consistent  d(#with these requirements and those established pursuant to sections 272(b)(5) and 272(c)(1), a  d(#section 272 affiliate may negotiate with an affiliated BOC on an arm's length and  d(#-nondiscriminatory basis to obtain transmission and switching facilities, to arrange for collocation of facilities, and to provide or to obtain services other than those expressly prohibited herein.  X - 159.` ` We agree with several commenters that joint ownership of transmission and  d(#switching facilities and the property on which they are located would permit such substantial  d(#integration of the BOCs' local operations with their interLATA activities as to preclude  X- d(#independent operation, in violation of section 272(b)(1).~ yO -ԍSee, e.g., Frontier at 45; ITAA at 17; MCI at 24; Sprint at 2123; Sprint Reply at 2425; TRA at 13. Imposing a prohibition on such joint  d(#Zownership also avoids the need to allocate the costs of such transmission and switching facilities  d(#zbetween BOC activities and the competitive activities in which a section 272 affiliate may be  d(#involved. We agree with the claims of some commenters that, because the costs of wired  d(#>telephony networks and network premises are largely fixed and largely shared among local,  d(#access, and other services, sharing of switching and transmission facilities may provide a  d(#significant opportunity for improper allocation of costs between the BOC and its section 272  X-affiliate.X yO- v \ԍSee Letter From Leonard J. Cali, General Attorney, AT&T, to William F. Caton, Acting Secretary, FCC,  yO-filed Oct. 4, 1996 (AT&T Oct. 4 Ex Parte); Excel at 56; Sprint at 2223.  X- 160.` ` By prohibiting joint ownership of transmission and switching facilities, we also  d(#reduce the potential for a BOC to discriminate in favor of its section 272 affiliate. Consistent  d(#with this purpose, we define transmission and switching facilities broadly to include the facilities  d(#used to provide local exchange and exchange access service. The prohibition ensures that a  d(#section 272 affiliate must obtain any such facilities pursuant to section 272(b)(5), which requires  d(#all transactions between a BOC and its section 272 affiliate to be on an arm's length basis and  d(#<reduced to writing. Requiring section 272 affiliates to obtain transmission and switching facilities  d(#from a BOC on an arm's length basis will increase the transparency of such transactions, thereby  d(#-facilitating monitoring and enforcement of the section 272 requirements. Moreover, a section 272  d(#affiliate and its interLATA competitors will have to follow the same procedures when obtaining  d(#>services and facilities from a BOC. As described below, sections 272(c)(1) and (e) require a  d(#section 272 affiliate to obtain services and facilities on the same rates, terms, and conditions" N,-(-(ZZ"  X- d(#>available to unaffiliated entities. Contrary to the suggestion of some commenters,fX yOy- v ԍSee SBC Nov. 14 Ex Parte at 78 (arguing that "as long as the BOC affiliate's joint use or sharing of  d(#switching, transmission, or computer facilities is nondiscriminatory and otherwise complies with the terms of Section 272, it should be allowed"); USTA Reply at 7.f those  d(#nondiscrimination safeguards would offer little protection if a BOC and its section 272 affiliate  d(#were permitted to own transmission and switching facilities jointly. To the extent that a section  d(#272 affiliate jointly owned transmission and switching facilities with a BOC, the affiliate would  d(#not have to contract with the BOC to obtain such facilities, thereby precluding a comparison of  d(#-the terms of transactions between a BOC and a section 272 affiliate with the terms of transactions  d(#Lbetween a BOC and a competitor of the section 272 affiliate. Together, the prohibition on joint  d(#ownership of facilities and the nondiscrimination requirements should ensure that competitors can  d(#obtain access to transmission and switching facilities equivalent to that which section 272 affiliates receive.  X - o161.` ` The requirement that a BOC and its section 272 affiliate not commonly own the  d(#land and buildings where their transmission and switching facilities are located, like the  d(#>prohibition on joint ownership of facilities, should ensure that a section 272 affiliate and its  d(#competitors both receive the best available access to transmission and switching facilities. It does  d(#not, however, preclude a section 272 affiliate from collocating its equipment in end offices or on  d(#other property owned or controlled by its affiliated BOC. Rather, as IDCMA recognizes, the  d(#requirement should ensure that collocation agreements between a BOC and its section 272  d(#0affiliate are reached pursuant to arm's length negotiations and that the same collocation  XK- d(#yopportunities are available to similarly situated nonaffiliated entities.CK yO-ԍIDCMA at 5 n.11. C Moreover, the ban on  d(#joint ownership of facilities should protect local exchange competitors that request physical  d(#ycollocation by ensuring that a BOC's section 272 affiliate does not obtain preferential access to  X-the limited available space in the BOC's central office.Xx yO/- v ԍSection 251(c)(6) of the Act requires a BOC to provide for physical collocation of a requesting carrier's  d(#xequipment necessary for interconnection unless it can demonstrate "that physical collocation is not practical for  yO-technical reasons or because of space limitations." 47 U.S.C.  251(c)(6); see First Interconnection Order at 267.  X- 162.` ` We decline to read the "operate independently" requirement to impose a blanket  d(#prohibition on joint ownership of property by a BOC and a section 272 affiliate. Rather, we limit  d(#the restriction to joint ownership of transmission and switching facilities and the land and  d(#buildings where those facilities are located. We conclude that the prohibition we have adopted  d(#should ensure that the section 272 affiliate's competitors gain nondiscriminatory access to those  d(#transmission and switching facilities that both section 272 affiliates and their competitors may be  d(#unable to obtain from other sources. We find that joint ownership of other property, such as  d(#yoffice space and equipment used for marketing or the provision of administrative services, may  d(#provide economies of scale and scope without creating the same potential for discrimination by" O,-(-(ZZz"  X- d(#the BOCs. Moreover, we believe that the Commission's accounting rules;c yOy-ԍSee 47 C.F.R.  32.27, 64.90164.904.c the separate books,  d(#records, and accounts requirement of section 272(b); and the audit requirement of section 272(d) provide adequate protection against the potential for improper cost allocation.  X- 163.` ` We further conclude that allowing the same personnel to perform the operating,  d(#jinstallation, and maintenance services associated with a BOC's network and the facilities that a  d(#?section 272 affiliate owns or leases from a provider other than the BOC would create the  d(#opportunity for such substantial integration of operating functions as to preclude independent  d(#operation, in violation of section 272(b)(1). Regardless of whether the BOC or the section 272  d(#yaffiliate were to provide such services, we agree with AT&T that allowing the same individuals  d(#?to perform such core functions on the facilities of both entities would create substantial  d(#opportunities for improper cost allocation, in terms of both the personnel time spent in  X - d(#performing such functions and the equipment utilized.R X yO-ԍAT&T Oct. 4 Ex Parte.R We conclude, as we did in the BOC  X - d(#Separations Order, that allowing the sharing of such services would require "excessive, costly and  d(#burdensome regulatory involvement in the operation, plans and daytoday activities of the carrier  X - d(#>. . . to audit and monitor the accounting plans necessary for such sharing to take place."X  yO@- v ԍSee BOC Separations Order, 95 FCC 2d at 1144,  70 (rejecting BOCs' argument that their enhanced  d(#services and CPE separate subsidiaries should be able to contract with regulated operations for provision of  yO-engineering, installation and maintenance, and similar services). ĉ  d(#Accordingly, we read section 272(b)(1) to bar a section 272 affiliate from contracting with a BOC  d(#or another entity affiliated with the BOC to obtain operating, installation, and maintenance  d(#Lfunctions associated with the section 272 affiliate's facilities. As stated above, we believe that  d(#ya prohibition on joint ownership of transmission and switching facilities is necessary to ensure  d(#that a BOC complies with the nondiscrimination requirements of section 272. Consistent with  d(#that approach, we further interpret the term "operate independently" to bar a BOC from  d(#contracting with a section 272 affiliate to obtain operating, installation, or maintenance functions  d(#associated with the BOC's facilities. Allowing a BOC to contract with the section 272 affiliate  d(#for operating, installation, and maintenance services would inevitably afford the affiliate access to the BOC's facilities that is superior to that granted to the affiliate's competitors.  X- 164.` ` We clarify that section 272(b)(1) does not preclude a BOC or a section 272  d(#/affiliate from providing telecommunications services to one another, so long as each entity  d(#{performs itself, or obtains from an unaffiliated third party, the operating, installation, and  d(#]maintenance functions associated with the facilities that it owns or leases from an entity  d(#unaffiliated with the BOC. In particular, if a section 272 affiliate obtains unbundled elements  d(#from a BOC, that BOC can perform the operating, installation, and maintenance functions  d(#associated with those facilities. Moreover, we recognize the need for an exception to the  d(#prohibition on shared operating, installation, and maintenance services to allow the BOC to obtain"P,-(-(ZZ<"  d(#support services for sophisticated equipment purchased from the affiliate on a compensatory  X- d(#ybasis. yOy- v ԍSee Computer II Final Order, 77 FCC 2d at 477,  239 (adopting a similar exception to a prohibition on shared services). For instance, the BOC could contract with the section 272 affiliate for the installation,  d(#=maintenance, or repair of equipment, or the affiliate could train the BOC's personnel to perform  d(#such functions. We further note that the limited prohibition on shared services that we adopt is  d(#Mconsistent with section 272(e)(4), which states that a BOC or BOC affiliate that is subject to  d(#section 251(c) "may provide any interLATA or intraLATA facilities or services to its interLATA  d(#affiliate if such services or facilities are made available to all carriers at the same rates and on  X_- d(#-the same terms and conditions."J_7 yOG -ԍ47 U.S.C.  272(e)(4).J As we discuss below, section 272(e)(4) does not grant a BOC  d(#the authority to provide particular services to its affiliate, but rather prescribes the manner in  X1- d(#which a BOC must provide those services that it is otherwise authorized to provide.K1 yO -ԍSee infra part VI.D.K Thus,  d(#/section 272(e)(4) does not grant a BOC the authority to provide operating, installation, and  d(#maintenance services associated with the facilities that a section 272 affiliate owns or leases from a provider other than the BOC.  X - 165.` ` In imposing these requirements, we reject the contention of some commenters that  d(#.Congress considered and rejected a prohibition on the joint ownership of telecommunications  X- d(#transmission or switching equipment or other property.lW yO-ԍU S West Reply at 9 n.25; see also USTA Reply at 78.l Although the House bill contained such  Xy- d(#=a prohibition, the Senate bill did not.y yO-ԍSee H.R. 1555, 104th Cong., 1st Sess.,  246 (1995); S. 652, 104th Cong., 1st Sess.  252 (1995). The Joint Explanatory Statement indicates merely that  d(#Zthe conference committee adopted the Senate version of this provision with several modifications  XK- d(#and does not offer any specific explanation for the exclusion of the joint ownership restriction.TKw yOs-ԍJoint Explanatory Statement at 152.T  d(#In these circumstances, our obligation is to interpret the language of section 272(b)(1) in a  d(#<manner consistent with its purpose, which is to ensure the operational independence of a section  X-272 affiliate from its affiliated BOC.   yO- v ԍSee, e.g., Mead Corp. v. Tilley, 490 U.S. at 723 (refusing to draw inference from change in committee draft  yO - d(#of bill); Rastelli v. Warden, 782 F.2d at 24 n.3 (declining to draw conclusions from ambiguous indications of  yON!- d(#statutory purpose); Drummond Coal v. Watt, 735 F.2d at 474 (concluding that "[u]nexplained changes made in committee are not reliable indications of congressional intent").   X- 166.` ` The limited prohibition on shared services that we impose rests on the "operate  d(#independently" requirement of section 272(b)(1), rather than the requirement of section 272(b)(3)  X- d(#that a BOC and its section 272 affiliate have "separate officers, directors, and employees."J  yOJ'-ԍ47 U.S.C.  272(b)(3).J "Q,-(-(ZZ"  d(#Accordingly, we reject the statutory construction argument advanced by several BOCs, which is  d(#jpredicated on the text of the latter provision. Those BOCs argue that, if a rule against separate  d(#employees were sufficient to prevent the sharing of inhouse services, Congress would not have  d(#prohibited a BOC from engaging in purchasing, installation, maintenance, hiring, training, and  d(#.research and development for the separated affiliate, in addition to forbidding the BOC and its  X- d(#yseparated affiliate from having common officers, directors, and employees, in section 274(b).u yO-ԍE.g., Ameritech at 42; BellSouth at 31 n.79; U S West at 24. u  XH-  167.` ` We believe it is consistent with both the letter and purposes of section 272 to strike  d(#an appropriate balance between allowing the BOCs to achieve efficiencies within their corporate  d(#.structures and protecting ratepayers against improper cost allocation and competitors against  d(#discrimination. We decline to impose additional structural separation requirements given the  d(#nondiscrimination safeguards, the biennial audit requirement, and other public disclosure  d(#requirements imposed by section 272. In combination with the accounting protections established  X - d(#in the Accounting Safeguards Order, we believe the requirements set forth herein will protect against potential anticompetitive behavior.  Xy- 168.` ` In particular, we decline to read the "operate independently" requirement to impose  Xb- d(#a prohibition on all shared services.bX yOk- v ԍWe further discuss our reasons for declining to do so in connection with our analysis of section 272(b)(3), below. We recognize the inherent tension between the "operate  d(#independently" requirement and allowing the integration of services. As we discuss further  d(#below, however, we believe the economic benefits to consumers from allowing a BOC and its  d(#section 272 affiliate to derive the economies of scale and scope inherent in the integration of  X- d(#some services outweigh any potential for competitive harm created thereby.` yOg-ԍSee infra paragraph HOCKEY179. ` Therefore, we  X- d(#permit the sharing of administrative and other services.K@ yO-ԍSee infra part IV.C.K For example, we read section 272(b)(1)  d(#not to preclude a BOC and a section 272 affiliate from contracting with one another to provide  X-marketing services. yOB -ԍWe further discuss the marketing provisions below in our analysis of section 272(g).  X- 169.` ` In construing other provisions of section 272, we address the concerns of those  d(#commenters who urge us to interpret section 272(b)(1) to prohibit a BOC and a section 272  Xe- d(#yaffiliate from engaging in various forms of joint research and development.{e`  yOv%-ԍE.g., AT&T at 23 ; IDCMA at 56; MCI at 27; TIA at 2223; TRA at 13.{ As a preliminary  d(#zmatter, we note that the MFJ Court considered equipment design and development to be an"NR ,-(-(ZZ"  X- d(#integral part of "manufacturing," as the term was used in the MFJ. yOy- v kԍSee, e.g., United States v. Western Elec. Co., 675 F. Supp. 655, 66263, 66768 (D.D.C. 1987), aff'd 894 F.2d 1387 (D.C. Cir. 1990). We emphasize that to the  d(#jextent that research and development is a part of manufacturing, it must be conducted through  X- d(#ya section 272 affiliate, pursuant to section 272(a).   yO- v !ԍWe will address the scope of the BOC's authority to engage in manufacturing activities further in our  yOk-proceeding to implement section 273 of the Act. See Manufacturing NPRM.  To the extent that a BOC seeks to develop  d(#services for or with its section 272 affiliate, the BOC must develop services on a  X-nondiscriminatory basis for or with other entities, pursuant to section 272(c)(1).Jx yO -ԍSee infra part V.B.J  Xv- _170.` ` Finally, although a number of commenters support a Computer IIĩtype prohibition  d(#|on a section 272 affiliate's ability to construct, own, or operate its own local exchange  XH- d(# facilities,aH yO-ԍE.g., AT&T at 2022; Time Warner at 1718.a we conclude that such a prohibition is not required by the language of section  X1- d(#272(b)(1). As several BOCs suggest, limiting a section 272 affiliate to resale would not  d(#necessarily increase the affiliate's operational independence, particularly if the affiliate had to  X -acquire facilities from its affiliated BOC as a result of the requirement.h  yOL-ԍSee Ameritech Reply at 10; BellSouth Reply at 19.h  X - C. Section 272(b)(3) and Shared Services  X - 1.` ` Background  Xy- }171.` ` In the Notice, we tentatively concluded that the section 272(b)(3) requirement that  Xb- d(#-a BOC and its section 272 affiliate have "separate officers, directors, and employees"Jb(  yO;-ԍ47 U.S.C.  272(b)(3).J prohibits  d(#the sharing of inhouse functions, including operating, installation, and maintenance, as well as  X4- d(#administrative services.C4  yO-ԍNotice at  62.C We noted that, pursuant to the Computer II proceeding, the  d(#iCommission allowed AT&T and its enhanced services subsidiaries to share certain administrative  d(#services accounting, auditing, legal services, personnel recruitment and management, finance,  X- d(#tax, insurance, and pension services |H  yO#-ԍComputer II Reconsideration Order, 84 FCC 2d at 8485, 102.| on a cost reimbursable basis, but required the subsidiary  X- d(#ito have its own operating, marketing, installation, and maintenance personnel for the services and"S,-(-(ZZ"  X- d(#=equipment it offered.k yOy-ԍComputer II Final Order, 77 FCC 2d at 477,  239.k We sought comment on whether section 272(b)(3) forbids the sharing  X-of outside services or other types of personnel sharing.CX yO-ԍNotice at  62.C  X- 172.` ` In the context of our discussion of section 272(g), we sought comment on the  d(#zrelated question of whether a section 272 affiliate must purchase marketing services from an  d(#affiliated BOC on an arm's length basis, pursuant to section 272(b)(5). Moreover, we sought  d(#zcomment on whether it is necessary to require a BOC and its section 272 affiliate to contract  d(#jointly with an outside marketing entity for joint marketing of interLATA and local exchange  d(#services in order to comply with section 272(b)(3). Finally, we invited parties to comment on  d(#Lthe corporate and financial arrangements that are necessary to comply with sections 272(g)(2),  X -272(b)(3), and 272(b)(5).F  yO-ԍId. at  92.F  X - 2.` ` Comments  X - 173.` ` Sharing of Services. The BOCs, USTA, and the Yellow Pages Publishers  d(#jAssociation argue that section 272(b)(3) does not preclude the sharing of "inhouse" services,  X- d(#=those services provided by a BOC or its separate affiliate.x yO- v ԍE.g. Ameritech at 41; Bell Atlantic Reply at 34; Bell Atlantic at 67; BellSouth at 31; PacTel at 2122; U S West at 2224; USTA at 21; YPPA at 78. Similarly, they assert that section  d(#272(b)(3) does not prohibit BOC employees from performing marketing services on behalf of a  Xb-section 272 affiliate.b yO-ԍE.g., Ameritech at 51; Ameritech Reply at 2627; BellSouth at 10 & n.17; U S West at 2728.  X4- 174.` ` In response, a majority of commenters contend that section 272(b)(3) supports a  X- d(#broad prohibition on the sharing of services.`  yO.- v ԍE.g., DOJ Reply at 10; Florida Commission Reply at 35 (urging us to read section 272(b)(3), in concert  d(#xwith section 272(b)(1), to preclude sharing of administrative services, as well as sharing of operating, installation  d(#and maintenance personnel, research and development activities, and marketing); ITAA at 19; MCI at 2728 (arguing  d(#Jthat allowing a BOC to provide services for a section 272 affiliate that would otherwise have been performed by the  d(#affiliate's own employees would undermine the separate employees requirement); MCI Reply at 2; Teleport at 20; TIA at 27; Time Warner at 1819; TRA at 1314. For instance, AT&T argues that BOC personnel  X- d(#should not be involved in any way in the activities of the section 272 affiliate, and vice versa.< yO$-ԍAT&T at 24.<  X- d(#yMFS urges us to construe section 272(b)(3) to mean that employees may provide services only"Th,-(-(ZZ "  X- d(#for the BOC or its section 272 affiliate, not both.D yOy-ԍMFS Reply at 1920.D In particular, interexchange carriers construe  d(#section 272(b)(3) as imposing a variety of restrictions on joint marketing activities. AT&T  d(#contends that a BOC and its affiliate may each jointly market exchange and interexchange  X- d(#services, but may not integrate their marketing operations or their product design and  X- d(#idevelopment.BX yO-ԍAT&T Reply at 31.B Whereas, MCI argues that joint marketing must be conducted either by the BOC  X- d(#or its section 272 affiliate, but not both.< yO& -ԍMCI at 48. < Finally, Sprint maintains that BOC employees may  Xv- d(#not market the section 272 affiliate's services, because they are not employed by the BOC  X_-affiliate.G_x yO -ԍSprint Reply at 2728.G  X1- 2175.` ` Services Provided by an Outside Entity. The BOCs and USTA argue that neither  d(#the statute nor legislative history can be read to prohibit a BOC and its section 272 affiliate from  X - d(#obtaining services from the same outside provider.  yO- v ԍE.g., Ameritech at 40; Bell Atlantic at 7; BellSouth at 31; PacTel at 23; SBC Reply at 89; USTA at 2021. Sprint does not object to such sharing  X - d(#"provided that each [party] pays fair market value in writing for those services."E `  yO-ԍSprint at 26 n.19. E Other  X - d(#commenters contend, however, that sharing a common outside provider creates the same  X - d(#0opportunity for improper cost allocation as the sharing of inhouse services.  yO_- v ԍE.g., AT&T at 25; see also CompTel at 1820; TIA at 23, 27 (arguing that together with the "operate independently" requirement, section 272(b)(3) forbids such sharing); TIA Reply at 9; TRA at 14.  Several  X -commenters suggest that we place specific limits on outside contracting._ H  yO- v zԍMCI at 28 (urging us to allow outsourcing only for "those services and functions that the BOC outsourced  d(#prior to the date of passage of the 1996 Act" and to require any sharing of outside services to be performed in  d(#Yaccordance with requirements of section 272(b)(5)); Time Warner at 1920 (suggesting we should allow such sharing  d(#only "where that third party actively provides services to other firms at large" and, in any event, prohibit it in the context of accounting and auditing)._  Xy-  176.` ` Sprint and Time Warner argue that we should require a BOC and its section 272  Xb- d(#>affiliate to contract with an outside firm for the provision of joint marketing and advertising"bU,-(-(ZZ"  X- d(#Kservices.Z yOy- v zԍTime Warner at 25; Sprint at 49 (asserting that although the statute does not require such a restriction, it  yOA- d(#would facilitate monitoring of such joint activities); Sprint Reply at 28; see also Florida Commission Reply at 45  d(#(seeking a requirement that "an independent third party" provide such services, to the extent they are provided by  yO- d(#a single entity). But see AT&T at 57 (concluding it may be possible for a BOC and its section 272 affiliate to  d(#contract with the same outside marketing entity for any joint marketing of interLATA and local exchange service, provided that the contract does not extend beyond marketing to joint services and development and planning). Z The BOCs and the Citizens for a Sound Economy Foundation object to the proposed  X-requirement on the grounds that it would be contrary to the statute.@ yO- v ԍE.g., Ameritech at 5152; BellSouth at 10; Citizens for a Sound Economy Foundation Reply at 4; NYNEX Reply at 16; PacTel at 41; PacTel Reply at 25.  X- 177.` ` Other Activities. AT&T argues that we "should prohibit the BOCs from using any  d(#kcompensation system that directly or indirectly bases any part of the compensation of BOC  X- d(#officers, directors, or employees on the performance of the affiliate, or vice versa." yO- v ԍAT&T at 26; see also CompTel at 1516 (advocating a similar requirement pursuant to section 272(b)(1)). The BOCs  d(#generally reply that there is no statutory basis for such a requirement, which would "deny the  X_- d(#\RBOC the ability to utilize stockbased compensation plans (e.g., stock options), a common  XH-compensation mechanism" and "powerful recruiting tool" used in the industry.H  yO-ԍSee, e.g., Ameritech Reply at 1213; see also U S West Reply at 12 n.36.  X - 3.` ` Discussion  X -  3178.` ` Sharing of Services. Based on the record before us, we decline to prohibit the  d(#sharing of services other than operating, installation, and maintenance services, as described  X - d(#[above.E  yO-ԍSee part IV.B.E We clarify that "sharing of services" means the provision of services by the BOC to  d(#-its section 272 affiliate, or vice versa. In response to our tentative conclusion on this issue in the  d(#-Notice, the BOCs have argued persuasively that such a prohibition is neither required as a matter  Xy- d(#of law, nor desirable as a matter of policy. We note that section 272(b)(3) on its face is silent  d(#on the issue of shared services. We are persuaded by the arguments of the BOCs that the section  d(#272(b)(3) requirement that a BOC and a section 272 affiliate have separate officers, directors, and  d(#employees simply dictates that the same person may not simultaneously serve as an officer,  X- d(#director, or employee of both a BOC and its section 272 affiliate.p yO"- v ԍSee, e.g., Ameritech at 41; BellSouth at 31; YPPA at 78; see also SBC Nov. 14 Ex Parte at 3 (reading  d(#the "operate independently" requirement to mandate that a section 272 affiliate have a separate board of directors,  d(#chief executive officer, chief financial officer, and operating personnel, each of whom is not also an officer, director,  d(#or employee of the affiliated BOC). Although AT&T cites the legislative history of section 272 for the proposition  d(#that Congress intended to achieve "fully separate operations" between a BOC and its section 272 affiliate, the carrier  yO&- d(#cites to language from the House Report regarding the House bill. See AT&T at 24; see also H.R. 1555, 104th"&,-(-('"  d(#iCong., 1st Sess.,  246 (1995). As discussed above, the section 272 requirements were taken from the Senate bill with several modifications. Joint Explanatory Statement at 152. p Thus, as MFS asserts, an"V ,-(-(ZZ "  X- d(#individual may not be on the payroll of both a BOC and a section 272 affiliate.A  yO-ԍMFS Reply at 20.A As discussed  d(#below, to the extent that a BOC provides services to its section 272 affiliate, it must provide them  X-to other entities on the same rates, terms, and conditions, pursuant to section 272(c)(1).J yO3-ԍSee infra part V.B.J  X- 179. HOCKEY ` ` We also decline to impose a prohibition on the sharing of services other than  d(#.operating, installation, and maintenance services, on policy grounds. We find that, if we were  d(#to prohibit the sharing of services, other than those restricted pursuant to section 272(b)(1), a  d(#BOC and a section 272 affiliate would be unable to achieve the economies of scale and scope  XH- d(#=inherent in offering an array of services.<H@ yO9- v ԍSee, e.g., Ameritech at 4345; Bell Atlantic at 7; Bell Atlantic Comments, Exhibit 2 at 34 (predicting  d(#prohibition on shared administrative services would increase costs by as much as 15 percent); USTA at 22; USTA  d(#iReply, Haussman Affidavit at 9 (stating that "[a]dministrative services are a classic example of a situation where  yO- d(#common costs are an important component of overall costs"); see also Sprint Reply Comments at 24 (stating that  d(#the "operate independently" requirement should not be interpreted to prevent the parent holding company of a BOC and its section 272 affiliate to provide various services and perform various functions for both entities). < We do not believe that the competitive benefits of  d(# allowing a BOC and a section 272 affiliate to achieve such efficiencies are outweighed by a  d(#BOC's potential to engage in discrimination or improper cost allocation. As we have noted, the  X - d(#[Commission permitted the sharing of administrative services in the Computer II Final Order, on  d(#the grounds that "[w]ith an appropriate accounting system, whatever administrative efficiencies  X - d(#may exist are preserved."  yO>- v kԍComputer II Final Order, 77 FCC 2d at 484; see, e.g., Bell Atlantic Reply at 34; PacTel at 2122; USTA at 2122; USTA Reply at 910. We reject the arguments of some parties that, because of changes  d(#in the telecommunications marketplace and the language of the 1996 Act, a different outcome is  X -warranted in this case.f  yOh-ԍSee, e.g., CompTel at 1920; MCI Reply at 19. f  Xy- o180.` ` We recognize that allowing the sharing of inhouse services will require a BOC  d(#-to allocate the costs of such services between the operating company and its section 272 affiliate  d(#and provide opportunities for improper cost allocation, exchanges of information, and  X4- d(#discriminatory treatment that may not be revealed in a subsequent audit.4 yO#- v ԍE.g., AT&T at 2425; AT&T Reply at 19; DOJ Reply at 10; Florida Commission Reply at 4; Teleport at  yOM$-20; Time Warner at 1819; Time Warner Reply at 1516, 20; see CompTel at 1820.  Indeed, in the  X- d(#<Computer II proceeding, the Commission indicated that a major reason for prohibiting the sharing  X- d(#of particular services, such as marketing services, was its desire to eliminate "the inherent"W,-(-(ZZ "  X- d(#difficulties in allocating joint and common costs."k yOy-ԍComputer II Final Order, 77 FCC 2d at 477,  238.k For these reasons, we conclude that a BOC  d(#and a section 272 affiliate may share inhouse services with each other only to the extent that  X-such sharing is consistent with sections 272(b)(1), 272(b)(5), and 272(c)(1) of the Act.YX yO-ԍ47 U.S.C.  272(b)(1) and (b)(5).Y  X-  X- 181.` ` Consistent with section 272(b)(1), a BOC and its section 272 affiliate may not  X- d(#Zshare operating, installation, and maintenance services, as discussed above.K yO& -ԍSee infra part IV.B.K In addition, as we  Xv- d(#yconclude in the Accounting Safeguards Order, an agreement to provide inhouse services by a  d(#BOC to its section 272 affiliate (or vice versa) constitutes a transaction between that BOC and  XH- d(#its section 272 affiliate, so that the requirements of section 272(b)(5) govern.Hx yOq- v ԍSee, e.g., Letter from Celia Nogales, Ameritech, to William F. Caton, Acting Secretary, FCC, Attachment  yO9- d(#iat 3 (filed Sept. 19, 1996) (stating that sharing of services would be subject to section 272(b)(5) and the Part 64  d(#xrules); PacTel Reply at 11 (stating that a BOC would charge affiliates for any services it provides pursuant to the  d(#affiliate transaction rules); Letter from Gina Harrison, Director of Federal Regulatory Relations, to William F. Caton,  yO- d(#Acting Secretary, FCC, Attachment at 14 (filed Sept. 26, 1996) (PacTel Sept. 27 Ex Parte); see also AT&T at 57; MCI at 48; TRA at 1920. Accordingly,  d(#such transactions must be conducted on an arm's length basis, reduced to writing, and made  d(#-available for public inspection. Moreover, such transactions must be consistent with the affiliate  X - d(#xtransaction rules, as modified in the Accounting Safeguards Order._  yO-ԍAccounting Safeguards Order part IV.B.1._ In addition, the section 272  d(#requirements that a BOC and its section 272 affiliate maintain separate books, records, and  d(#Zaccounts, and be subject to an audit every two years should strengthen the ability of competitors  d(#and regulators to detect any inequities in cost allocation for shared services. We agree with  d(#commenters who contend that, in any event, federal price cap regulation reduces a BOC's  X- d(#incentives to allocate costs improperly.  yO-ԍSee, e.g., Ameritech Reply at 1314; Bell Atlantic Reply at 34; USTA Reply at 9. Finally, section 272(c)(1) ensures that to the extent that  d(#[a BOC provides services to its section 272 affiliate, it must make them available to the affiliate's  Xb-competitors on the same rates, terms, and conditions.Jb yO# -ԍSee infra part V.B.J  X4- n182. ` ` We further conclude that section 272(b)(3) does not preclude the parent company  d(#zof the BOC and the section 272 affiliate from performing functions for both the BOC and the  d(#section 272 affiliate, subject to the requirements of section 272(b)(1). Similarly, an affiliate of  d(#the BOC, such as a services affiliate, could provide services to both a BOC and a section 272  d(#affiliate. We are not persuaded by claims that the sharing of services provided to a BOC and its  d(#ysection 272 affiliate by a parent company or another BOC affiliate would allow the BOC and the"X,-(-(ZZ"  X- d(#<section 272 affiliate to achieve an unacceptable level of integration.  yOy- v mԍE.g., AT&T at 25; AT&T Reply at 18; Teleport Reply at 5; Time Warner at 19. But see Florida  d(#Commission Reply at 56 (suggesting that"[a]dministrative and other activities . . . [should] only be performed by  d(#,a holding company on a consolidated, limited basis and should be subject to review and approval by federal and state commissions").  Instead, we agree with the  d(#view that the section 272(b)(3) separate employees requirement extends only to the relationship  X- d(#zbetween a BOC and its section 272 affiliate. yO3- v ԍE.g., Ameritech at 40; Ameritech Reply at 13; Bell Atlantic at 56; BellSouth at 3031; NYNEX at 23; PacTel at 1718; SBC at 7; Sprint at 24; USTA Reply at 9; YPPA at 1011. To the extent that the BOC contracts with an  X- d(#iunregulated affiliate, it is subject to the affiliate transaction rules.iX yOt - v ԍ Separation of Costs of Regulated Telephone Service From Costs of Nonregulated Activities, CC Docket No.  yO< - d(#,86111, Report and Order, 2 FCC Rcd 1298, 133437,  284301; recon., 2 FCC Rcd 6283 (1987); further recon., 3 FCC Rcd 6701 (1988). i Moreover, a parent company  d(#or a BOC affiliate that performs services for both a BOC and its section 272 affiliate must fully  X-document and properly apportion the costs incurred in furnishing such services.y(  yOf-ԍSee 47 C.F.R.  64.90164.904; see also Sprint at 26.y  X_- 2183.` ` Consistent with our conclusions, we decline to read section 272(b)(3) to preclude  XH- d(#ythe sharing of marketing services.H  yO-ԍMoreover, as discussed above, section 272(b)(1) does not preclude joint marketing. Given that section 272(g) expressly contemplates that the  d(#each entity may market or sell the services of the other, we conclude that a BOC and its section  X - d(#272 affiliate may provide marketing services for each other.x H  yO-ԍSee, e.g., NYNEX at 15; PacTel at 41; SBC at 11; U S West at 26. x We agree with those commenters  d(#that assert that the entities must provide such services pursuant to arm's length transactions,  X - d(#consistent with the requirements of section 272(b)(5).  yOu- v ԍSee, e.g., Ameritech at 5051; PacTel at 15, 41; PacTel Reply at 11, 25; USTA at 30; USTA Reply at 14;  yO=- d(#U S West at 27; see also Ameritech Sept. 19 Ex Parte, Attachment at 3; PacTel Sept. 27 Ex Parte, Attachment at  d(#14. Several BOC competitors argue that, to the extent joint marketing is consistent with other provisions of section  d(#272, a separate affiliate must, at a minimum, purchase joint marketing services from the BOC on an arm's length  yO-basis. E.g. AT&T at 57; MCI at 48; TRA at 19. Moreover, the parent of a BOC and its section 272 affiliate or another BOC affiliate may perform marketing functions for both entities.  X - %184.` ` Services Provided By an Outside Entity. We further conclude that section  d(#.272(b)(3) does not prohibit a BOC and its section 272 affiliate from obtaining services from the  d(#-same outside supplier. Indeed, we find no statutory support for limiting permissible outsourcing,  Xb-as proposed by MCI or Time Warner.Xb yO%-ԍSee MCI at 28; Time Warner at 20.X "KY,-(-(ZZ"Ԍ X- 185.` ` Nor do we construe section 272(b)(3), when read in light of section 272(b)(1), to  d(#require a BOC and a section 272 affiliate to contract with outside entities to perform their joint  d(#marketing services. We agree with the Citizens for a Sound Economy Foundation that such a  d(#requirement would reduce the BOCs' ability to serve consumers without providing additional  X- d(#protection against anticompetitive behavior.d yO-ԍCitizens for a Sound Economy Foundation Reply at 4.d Each entity, however, must pay its full share of any outsourced services that it receives.  X_- 186.` ` Other activities. We reject AT&T's request that we interpret section 272(b)(3) to  d(#xprohibit compensation schemes that base the level of remuneration of BOC officers, directors, and  d(#employees on the performance of the section 272 affiliate, or vice versa. We conclude that tying  d(#Mthe compensation of an employee of a section 272 affiliate to the performance of a Regional  d(#Holding Company and all of its enterprises as a whole, including the performance of the BOC,  X - d(#jdoes not make that individual an employee of the BOC.T X yO-ԍSee Ameritech Reply at 1213.T Similarly, tying the compensation of  d(#a BOC employee to the performance of a Regional Holding Company and all of its enterprises  d(#yas a whole, including the performance of the section 272 affiliate, does not make that individual an employee of the section 272 affiliate.  Xy- E.Section 272(b)(4)  XK- 1.` ` Background  X- 187.` ` Section 272(b)(4) states that a section 272 affiliate "may not obtain credit under  d(#any arrangement that would permit a creditor, upon default, to have recourse to the assets of the  X- d(#[BOC]."J yO-ԍ47 U.S.C.  272(b)(4).J In the Notice, we tentatively concluded "that a BOC may not cosign a contract or  d(#any other instrument with a separate affiliate that would allow the affiliate to obtain credit in a  d(#<manner that violates" this section. We sought comment on what other types of activities section  d(#272(b)(4) prohibits, whether the Commission should establish specific requirements regarding  X-those activities, and the relative costs and benefits of such regulation. Cx yO-ԍNotice at  63.C  Xe- 2.` ` Comments  X7- 188.` ` Commenters generally agree with our tentative conclusion that section 272(b)(4)  d(#prohibits a BOC from signing a contract or other instrument with an affiliate that allows a" Z,-(-(ZZ"  X- d(#<creditor, upon default, to have recourse to the BOC's assets.  yOy- v LԍE.g. AT&T at 2627 (urging us to require "that any contract or other document in which an affiliate obtains  d(#xcredit contain a provision expressly stating that the creditor, upon default by the affiliate, has no recourse to the  d(#Kassets of the BOC"); Bell Atlantic, Exhibit 1 at 67; MCI at 29; Ohio Commission at 9; Sprint at 27; TIA at 28; TRA at 14. Time Warner and others contend  X- d(#that no regulations are necessary to implement this provision. yOJ-ԍBell Atlantic, Exhibit 1 at 67; NYNEX Reply at 20; Time Warner at 18; USTA at 22. In contrast, TIA urges us to  d(#kadopt regulations precluding all arrangements that would result in the BOC having direct or  X- d(#xindirect responsibility for the financial obligations of the separate affiliate. @ yO - v LԍTIA at 2829 (urging us to forbid "any reference to the [affiliated] BOC in debentures, reference to the BOC  d(#in any equity instruments, use of the same underwriting facilities, or other arrangements" that shift responsibility for  yO< - d(#wcost, debt, equity, or business risk to the BOC away from the affiliate); see also CompTel at 18 (urging us to prohibit all credit arrangements between BOCs and their affiliates). AT&T and Teleport  d(#!further suggest that we should preclude a BOC affiliate from obtaining credit under any  d(#arrangement that would permit a creditor, upon default, to have recourse to the assets of any  Xv-parent of the BOC.v(  yOO- v ԍAT&T at 27 n.27; Teleport at 2021. But see NYNEX Reply at 2021 (countering that section 272(b)(4) cannot be read to extend to the assets of a BOC's parent); Bell Atlantic Reply at 5.  XH- 3.` ` Discussion  X -   189.` ` As we stated in the Notice, the intent of this provision is to protect ratepayers from  X - d(#shouldering the cost of a default by a section 272 affiliate.C  yO4-ԍNotice at  63.C We adopt our tentative conclusion  d(#.that section 272(b)(4) prohibits a BOC from cosigning a contract or any other instrument with  d(#a section 272 affiliate that would allow the affiliate to obtain credit in a manner that grants the  d(#creditor recourse to the BOC's assets in the event of default by the section 272 affiliate.  d(#Moreover, because the provision precludes the section 272 affiliate from obtaining credit under  d(#Z"any arrangement that would permit a creditor, upon default, to have recourse to the assets of the  d(#[BOC]," we find that section 272(b)(4) likewise prohibits the parent of a BOC or any non272  d(#affiliate from cosigning a contract or any other arrangement with the BOC's section 272 affiliate  d(#that would allow the creditor to obtain such recourse to the BOC's assets in the event of default  d(#by the section 272 affiliate. Indeed, we conclude that section 272(b)(4) prohibits a section 272  d(#.affiliate from entering into any arrangement to obtain credit that permits the lender recourse to the BOC in the event of default.  X- 190.` ` While preventing the affiliate from jeopardizing ratepayer assets, we conclude that  d(#Lsection 272(b)(4) does not forbid a section 272 affiliate from using assets other than its own as  d(#.collateral when seeking credit. To impose such a restriction where, as here, it is not needed to  d(#protect ratepayer assets, would force section 272 affiliates to operate inefficiently, to the detriment"[,-(-(ZZQ"  d(#of consumers and competition. In particular, we agree with MCI and Sprint that a BOC's parent  d(#[could secure credit, whether through the issuance of bonds or otherwise, for the benefit of the  X-section 272 affiliate, provided that BOC assets are not at risk.b yOK-ԍSee, e.g., MCI at 29; Sprint at 28. b  X- F.Section 272(b)(5)  Xv- 1.` ` Background  XH- ~191.` ` Section 272(b)(5) states that an affiliate "shall conduct all transactions with the  d(#L[BOC] of which it is an affiliate on an arm's length basis with any such transactions reduced to  X - d(#.writing and available for public inspection."J X yO# -ԍ47 U.S.C.  272(b)(5).J In the Notice, we sought comment on whether  X -this provision necessitates the adoption of any nonaccounting safeguards.C  yO-ԍNotice at  64.C  X - 2.` ` Comments   X - %192.` ` Several parties contend that we need not adopt additional nonaccounting  d(#.safeguards, stating that other provisions of section 272(b) and accounting regulations should  Xy- d(#zsuffice to implement section 272(b)(5).Xyx yO- v ԍE.g., PacTel at 2324; Teleport at 21; USTA at 2223. Other commenters do not advocate particular  yOj- d(#Ysafeguards but view the provision as supplementing or reinforcing other provisions of section 272. E.g., MCI at 2930; Sprint at 2829 (advocating interpretation similar to "operate independently" requirement); TIA at 30. Other commenters propose that we adopt a broad  d(#definition of "transaction" to prevent improper cost allocation and to facilitate monitoring of the  XK- d(#BOCs' compliance with the nondiscrimination requirements.ZK yO-ԍE.g., AT&T at 2729; ITAA at 1920.Z CompTel urges us to use this  d(#provision to impose several of the requirements established in the Ameritech Customers First  X- d(#.Plan, Ameritech's plan to offer inregion interLATA service through an interexchange affiliate,  d(#.including annual reporting and audit requirements, information disclosure requirements, and a  d(#Lrequirement that an interexchange subsidiary "purchase any inputs or data from the BOC local  d(#yexchange operations on the same rates, terms, and conditions" that are available to unaffiliated  X-carriers.?(  yO"-ԍCompTel at 17.?  X- 3.` ` Discussion  Xe- o 193.` ` We conclude that we need not adopt additional nonaccounting safeguards to  XN- d(#yimplement section 272(b)(5). In the Accounting Safeguards Order, we address the definition of"N\ ,-(-(ZZ"  d(#"transactions" and consider the provision's requirement that all transactions be "reduced to writing  X- d(#=and available for public inspection."a yOb-ԍAccounting Safeguards Order part IV.B.1.e.a Moreover, in our discussion of sections 272(b)(1) and  d(#(b)(3), we make clear that "transactions" include the provision of services and transmission and  d(#switching facilities by the BOC and its affiliate to one another. We reject CompTel's proposal  d(#to adopt additional requirements, which are addressed generally in other parts of this Order and  X-the companion Accounting Safeguards Order. X yO- v ԍIn particular, see our rejection of additional reporting requirements in part IX and our discussion of sections  d(#272(c) and (e). We agree with Ameritech that in proposing an annual audit requirement, CompTel ignores the  yO& - d(#;biannual audit requirement of section 272(d) of the Act. See Ameritech Reply Comments at 5 n.9; CompTel at 17.  yO -  !}K   !}K   XH-  V. NONDISCRIMINATION SAFEGUARDS ׃  X -  194.` ` As we observed in the Notice, after a BOC enters a competitive market, such as  d(#long distance, it may have an incentive to use its control of local exchange facilities to  d(#discriminate against its affiliate's rivals. Section 272(c) of the Act responds to these competitive  d(#concerns by establishing nondiscrimination safeguards that apply to the BOCs' provision of  d(#manufacturing, interLATA telecommunications, and interLATA information services. We address  X -the requirements of this section below. @ yO- v ԍWe note that the nondiscrimination requirement of section 272(c)(2) is an accounting safeguard that is  yO`-addressed in the Accounting Safeguards Order.  Xy- A.XRelationship of Section 272(c)(1) and Preexisting Nondiscrimination Requirements (#  XK- 1.` ` Background  X- 195.` ` Section 272(c)(1) states that "[i]n its dealings with its affiliate described in  d(#subsection (a), a [BOC] (1) may not discriminate between that company or affiliate and any other  d(#entity in the provision or procurement of goods, services, facilities, and information, or in the  X- d(#establishment of standards."J yO! -ԍ47 U.S.C.  272(c)(1).J In the Notice, we sought comment on the relationship between  X- d(#\the nondiscrimination obligations imposed by sections 272(c)(1) and the Commission's pre X- d(#existing nondiscrimination obligations in sections 201 and 202.C(  yO#-ԍNotice at  69.C In particular, we sought  d(#comment on whether the flat prohibition against discrimination in section 272(c)(1) imposes a  X|-stricter standard for compliance than the "unjust and unreasonable" standard in section 202.R|  yO&-ԍId. at  72.R "|]H ,-(-(ZZ2"Ԍ X-ԙ 2.` ` Comments  X- '196.` ` Many BOCs assert that Congress did not intend to impose a stricter  X- d(#nondiscrimination standard in section 272(c)(1) than that contained in section 202. yO4- v =ԍBell Atlantic, Exhibit 1 at 7; BellSouth at 34; PacTel at 29; PacTel Reply at 1213; U S West at 32; USTA at 25; YPAA at 12. For  d(#yexample, BellSouth, U S West, and USTA claim that the term "discriminate" in section 272(c)(1)  d(#Lincludes unjust and unreasonable discrimination and, therefore, is not materially different from  Xv- d(#the standard of section 202.]v  yOG -ԍBellSouth at 32; U S West at 32; USTA at 25.] Potential competitors and various trade associations, in contrast,  d(#assert that the flat prohibition in section 272(c)(1) was clearly intended to be more stringent than  XH- d(#the general ban on "unjust and unreasonable" discrimination in section 202.GXH yO - v ԍ AT&T Reply at 24; CIX Reply at 56; CompTel at 22; IDCMA at 6; ISA at 2; ITI and ITAA Reply at 14;  d(#LDDS at 13, n.13; LDDS Reply at 78; MCI at 34; Sprint at 3940; TIA at 37; TIA Reply at 45; Time Warner at 2122; TRA at 15; VoiceTel at 1314.G These commenters  d(#xargue, therefore, that the unqualified prohibition against discrimination in section 272(c)(1) should  X - d(#be construed as stringently as similarly unqualified language in section 251(c)(2) was in the First  X -Interconnection Order.  yO- v zԍAT&T Reply at 2324; CompTel at 22; ISA at 2; LDDS Reply at 78; MCI at 34; MCI Reply at 23; TIA Reply at 1012; Time Warner at 2122; Time Warner Reply at 2022.  X -  X - 3.` ` Discussion  X - 197.` `  UNQUAL We find that section 272(c)(1) establishes an unqualified prohibition against  d(#\discrimination by a BOC in its dealings with its section 272 affiliate and unaffiliated entities.  d(#Section 202(a), by contrast, prohibits "any unjust or unreasonable discrimination . . . , or . . . any  Xb- d(#undue or unreasonable preference or advantage."Gb(  yO;-ԍ47 U.S.C.  202(a).G Because the text of the section 272(c)(1)  d(#nondiscrimination bar differs from the section 202(a) prohibition, we conclude that Congress did  d(#not intend section 272's prohibition against discrimination in the 1996 Act to be synonymous  d(#with the "unjust and unreasonable" discrimination language used in the 1934 Act, but rather,  d(#intended a more stringent standard. We therefore reject the arguments of those who argue that  X-the section 272(c)(1) standard is not materially different from the standard in section 202.  yOX"- v ԍWe note that this conclusion is consistent with the Commission's recent interpretation of similar language  yO #-in section 251(c)(2). See First Interconnection Order at  217.  X- "^,-(-(ZZ"Ԍ X- vB.Meaning of Discrimination in Section 272(c)(1)   X- 1.` ` Background  X- }198.` ` We tentatively concluded in the Notice that the prohibition against discrimination  d(#/in section 272(c)(1) means, at a minimum, that BOCs must treat all other ventities in the same  Xv- d(#jmanner as they treat their section 272 affiliates, and must provide and procure goods, services,  d(#facilities, and information to and from these other entities under the same terms, conditions, and  XH- d(#rates.CH yO -ԍNotice at  73.C We noted, however, that a requesting entity may have equipment with different technical  d(#specifications than the equipment of the BOC section 272 affiliate. We sought comment,  d(#>therefore, on whether the terms of section 272(c)(1) could be construed to require a BOC to  d(#provide a requesting entity with a quality of service or "functional outcome" identical to that  X - d(#provided to its affiliate even if this would require the BOC to provide goods, facilities, services,  X -or information to a requesting entity that are different from those provided to the affiliate. X yO- v /ԍNotice at  67. We suggested, for example, that such disparate treatment may be justified by differences  yO-in the unaffiliated entity's network architecture. Id. at  73.  X - 2.` ` Comments  Xy- B199.` ` Both BOCs and potential competitors agree with our tentative conclusion that  d(#section 272(c)(1) requires a BOC to treat all other entities in the same manner as it treats its  XK- d(#0section 272 affiliate.xK yO- v ԍSee, e.g., Ameritech at 54, U S West at 3435; see also Frontier at 56; IDCMA at 6; ISA at 23; LDDS  d(#at 1415; LDDS Reply at 6 (BOCs cannot take any action in regards to its affiliate without offering the very same  d(#deal to any other competing entity); MCI at 36; MFS Reply at 2021; Sprint at 39; Teleport at 14; TIA at 3839;  d(#Time Warner at 22; VoiceTel at 14 (all services and facilities provided by a BOC to its affiliate should be pursuant  d(#to tariff). Some BOCs maintain, however, that section 272(c)(1) does not require identical treatment between a BOC  d(#;affiliate and an unaffiliated entity in the provision of administrative and "corporate governance" services, and non yO\-telecommunications facilities or goods. We will discuss this issue below. See infra part V.C. LDDS asserts that, if the BOC affiliate is required to obtain local  d(#exchange service in the same fashion as competitors, it is much more likely that the BOC will  d(#provide local exchange service on a nondiscriminatory basis, at nondiscriminatory prices, and  X-with adequate operational support.<  yO -ԍLDDS at 15.<  X- a200.` ` BOCs claim, however, that this section does not require a BOC to provide a  d(#requesting entity with a quality of service or a functional outcome identical to the section 272  d(#Laffiliate in order to offset differences in technical design, architecture, software or performance  X- d(#[specifications between the affiliate's network and that of the requesting carrier.f  yO&-ԍSee, e.g., BellSouth at 32; NYNEX Reply at 22. f They assert"_,-(-(ZZ3"  d(#jthat unlawful discrimination occurs only when similarly situated entities are treated differently;  d(#it is not unlawfully discriminatory under section 272(c)(1) for a BOC to treat differently  d(#0unaffiliated companies whose capabilities or requirements vary from those of the BOC's  X-affiliate. yO4-ԍSee Ameritech at 5556; BellSouth at 32; NYNEX Reply at 22; U S West at 33.  X-  X- 201.` ` Potential competitors, on the other hand, argue that a BOC should be required to  d(#provide different goods, services, and facilities to other entities than it provides to its own  X_- d(#affiliate in order to provide "functional equality" or service of equal quality.w_X yOh -ԍSee, e.g., AT&T at 31; MCI at 31; Sprint Reply at 15; TRA at 16.w Sprint concedes  d(#Lthat different treatment is permissible if required by variations in network architecture between  d(#Lthe section 272 affiliate and the unaffiliated entity and if the prices charged to different entities  X - d(#receiving disparate treatment are based on costs.   yO- v Lԍ Sprint at 39; Sprint Reply at 15; see also Time Warner at 2223; Time Warner Reply at 22 (allowing prices  d(#to reflect underlying costs of providing a good, service, or facility does not demonstrate that discrimination is just  d(#and reasonable, rather it allows BOCs to demonstrate that no discrimination is present because the price accurately reflects the cost of provision). AT&T points out that, if nondiscrimination  d(#in section 272(c)(1) means only that a BOC has to provide the goods, services, facilities, and  d(#[information to an unaffiliated entity that it provides to its own affiliate, the options available to  X - d(#competitors would be confined entirely to those the BOC affiliate finds useful.X  yOV- v zԍAT&T Reply at 21; see also AT&T at 32 (if an unaffiliated entity requests new access arrangements that  d(#will allow new or more cost effective long distance services, the Commission should not permit a BOC to deny the request on the ground that everyone is receiving the same access at the same price). This, some  d(#commenters claim, may give BOCs an incentive to design interfaces that work optimally only  X - d(#with its affiliate's specifications and not the specifications of other entitiesa  yOH-ԍAT&T at 31; MCI Reply at 22; Sprint Reply at 15.a or to discriminate  d(#against unaffiliated entities by anticompetitively cooperating in the development of new services  Xy-with its affiliate.fy  yO-ԍAT&T Reply at 2122; see also AT&T at 32.f  XK- 3. ` ` Discussion  X- 202.` `  TENT.PRO We affirm our tentative conclusion that BOCs must treat all other entities in the  d(#=same manner as they treat their section 272 affiliates. We conclude therefore that, pursuant to  d(#section 272(c)(1), a BOC must provide to unaffiliated entities the same goods, services, facilities,  d(#and information that it provides to its section 272 affiliate at the same rates, terms, and  X- d(#conditions. yO&- v ԍThe BOCs' obligations with respect to procurement under section 272(c)(1) are discussed below. See infra part V.E. We decline, as some commenters suggest, to interpret section 272(c)(1) more"`h,-(-(ZZ"  d(#\broadly to conclude that a BOC must provide unaffiliated entities different goods, services,  d(#=facilities, and information than it provides to its section 272 affiliate in order to ensure that it is  d(#yproviding the same quality of service or functional outcome to both its affiliate and unaffiliated  d(#\entities. To do so would, in effect, be interpreting this section the same way we interpreted  X- d(#section 251(c)(2) in the First Interconnection Order. We believe that to interpret the  d(#nondiscrimination requirement of section 272(c)(1) in this manner would be inappropriate as a matter of statutory construction, inconsistent with its legislative purpose, and unenforceable.  XH- 203.` ` As a matter of statutory construction, we find that the nondiscrimination provision  d(#Mof section 272(c)(1), by its terms, is much narrower in scope than the requirement in section  d(#.251(c)(2). Section 251(c)(2) imposes on incumbent LECs "the duty to provide, for the facilities  d(#kand equipment of any requesting telecommunications carrier, interconnection with the local  d(#exchange carrier's network . . . that is at least equal in quality to that provided by the [LEC] to  d(#itself or to any subsidiary, affiliate, or any other party to which the carrier provides  X - d(#Zinterconnection."J  yO7-ԍ47 U.S.C.  251(c)(2).J In the First Interconnection Order, we interpreted the term "equal in quality"  d(#as requiring an incumbent LEC to provide interconnection to its network at a level of quality that  d(#Mis at least indistinguishable from that which the incumbent LEC provides itself. Further, we  d(#yfound that, to the extent a carrier requests interconnection that is of a superior or lesser quality  d(#than the incumbent LEC currently provides, the incumbent LEC is obligated to provide the  XK-requested interconnection to the extent technically feasible.kKX yOT-ԍFirst Interconnection Order at  22425, 314.k  X- 204.` ` The language of section 272(c)(1), in contrast, contains no such "equal in quality"  d(#requirement; it simply requires that unaffiliated entities receive the same treatment as the BOC  X- d(#gives to its section 272 affiliate. Unlike section 251, therefore, section 272(c) is not a vehicle  d(#by which requesting entities can require a BOC to provide goods, facilities, services, or  X- d(#information that are different from those that the BOC provides to itself or to its affiliates.  yOZ- v ԍAmeritech at 56; see also Ameritech Reply at 28 (to obligate a BOC to provide a different service to an  d(#Kunaffiliated entity at the same price that it is charging an affiliate for another service, even though the costs are  d(#different, is at odds with the section 252(d) costbased pricing requirements for interconnection, unbundled elements, and reciprocal compensation arrangements.)  d(#Nor is it, as some commenters suggest, designed to prevent a BOC from discriminating between  X-unaffiliated competitors.O yO"-ԍSee, e.g., MCI at 5152.O  Xe- 205.` ` Our reading of the statutory language of sections 251 and 272 is consistent with  d(#the differing underlying purposes of those provisions. The section 251 requirements are designed  d(#to ensure that incumbent LECs do not discriminate in opening their bottleneck facilities to  X - d(#=competitors. As we stated in the First Interconnection Order, "[u]nder section 251, incumbent" a` ,-(-(ZZ"  d(#[LECs], including [BOCs], are mandated to take several steps to open their network to  d(#competition, including providing interconnection, offering access to unbundled elements to their  d(#networks, and making their retail services available at wholesale rates so that they can be  X- d(#\resold."] yO4-ԍFirst Interconnection Order at  4.] In implementing section 251, therefore, we adopted rules to open one of the last  d(#monopoly bottleneck strongholds in telecommunications the local exchange and exchange  X-access market.JX yO-ԍSee id.J  X_-  P206.` ` In adopting rules in this proceeding, however, our goal is to ensure that BOCs do  d(#not use their control over local exchange bottlenecks to undermine competition in the new  d(#-markets they are entering interLATA services and manufacturing. The section 272 safeguards,  d(#among other things, are intended to protect competition in these markets from the BOCs' ability  d(#to use their existing market power in local exchange services to obtain an anticompetitive  d(#advantage. We find that when viewed in this context, the section 272(c)(1) nondiscrimination  X - d(#provision is designed to provide the BOC an incentive to provide efficient service to rivals of its  d(#section 272 affiliate, by requiring that potential competitors do not receive less favorable prices or terms, or less advantageous services from the BOC than its separate affiliate receives.   Xy- 207.` ` We find that interpreting section 272 to require "functional equality" between a  d(#BOC section 272 affiliate and any unaffiliated entity would not only be impractical, but  d(#.unenforceable. The "functional equality" standard would require a BOC to provide additional  X4- d(#services or functions to other entities that it does not provide to its own affiliate.\4 yO-ԍSee USTA at 2324; USTA Reply at 12. \ Because  d(#section 272, unlike section 251, contains no requirement that a BOC must provide goods,  d(#services, facilities, and information to the extent "technically feasible," it would be extremely  d(#>difficult, as a practical matter, to limit the types of goods, services, and facilities that a BOC  d(#would be obligated to provide to requesting entities. Further, the terms "functional outcome" or  d(#Z"functional equality" are likely to mean different things to different entities. Because the meaning  d(#of these terms is likely to depend on the particular characteristics of each requesting entity, the  d(#Commission would be required to apply this standard to a myriad of factual circumstances on a  d(#casebycase basis. As one commenter observes, ensuring this type of equality would be  Xe-impossible to do, as well as impossible to enforce.Dex yO!-ԍPacTel Reply at 12.D  X7- 208.` `  EQUALITY  We reject the argument that, because our interpretation of section 272(c)(1)  d(#effectively limits competitors to those options that the BOC affiliate finds "useful," a BOC will  d(#be able to design network interfaces that work optimally only with its section 272 affiliate's  d(#specifications and not with the specifications of other entities. Section 272(c)(1) prohibits a BOC  d(#from discriminating in the establishment of standards. As we conclude below, a BOC's adoption"b,-(-(ZZ;"  d(#of a network interface that favors its section 272 affiliate and disadvantages an unaffiliated entity  X- d(#will establish a prima facie case of discrimination under section 272(c)(1).s yOb-ԍSee infra paragraph STANDARD229.s Further, section  d(#272(c)(1) prohibits a BOC from discriminating in the provision of facilities or information, and  X- d(#section 251(c)(5) imposes upon BOCs certain network disclosure requirements./X yO- v ԍWe conclude below that the information required to be disclosed under section 251(c)(5) is included within  yO-the definition of "information" under section 272(c)(1). See infra at paragraph NETWORK222. / As mentioned  d(#above, section 251(c)(5) requires incumbent LECs to provide reasonable public notice of network  d(#changes affecting competing service providers' performance or ability to provide  d(#!telecommunications services, as well as changes that would affect the incumbent LEC's  X_- d(#iinteroperability with other service providers. In the Second Interconnection Order, we interpreted  XH- d(#this provision to require incumbent LECs to disclose changes subject to this requirement at the  X1- d(#"make/buy" point.ZX1 yO- v \ԍSee Second Interconnection Order at  216217 for a discussion of the "make/buy" point; see also id. at  d(# 224 (incumbent LECs should not make preferential disclosure to selected entities prior to disclosure at the make/buy point).Z In light of the requirements of sections 272(c)(1) and 251(c)(5), we decline  d(#at this time to impose additional obligations on the BOCs to ensure that they structure their own  d(#networks to achieve the same level of interoperability that the section 272 affiliate receives from the BOC.  X - ~ 209.` ` We also decline to adopt MCI's suggested presumption that the specifications  d(#requested by an unaffiliated entity are the appropriate ones for a truly separate and independent  d(#=affiliate and that any different specifications needed by the BOC's section 272 affiliate reflect a  Xy- d(#<lack of proper physical and operational separation from the BOC.y yO- v ԍSee MCI at 3132 (if the BOC section 272 affiliate is truly separate it should not require services or facilities that are technically different than those required by its competitors) We recognize that there may  d(#be circumstances, such as the adoption of a new and innovative technology by the BOC section  d(#j272 affiliate, where differences in technical specifications between a section 272 affiliate and an  d(#xunaffiliated entity do not evidence a lack of structural separation between the BOC and its section 272 affiliate.  X- P210.` `  SERV As discussed below, we conclude that the protection of section 272(c)(1) extends  X- d(#to any good, service, facility, or information that a BOC provides to its section 272 affiliate.J(  yO!-ԍSee infra part V.C.J  d(#We therefore agree with AT&T that to the extent a BOC develops new services for or with its  d(#section 272 affiliate, it must develop new services for or with unaffiliated entities in the same  d(#manner. That is, we find that the development of new services, including the development of  d(#xnew transmission offerings, is the provision of service under section 272(c)(1) that, once provided  d(#by the BOC to its section 272 affiliate, must be provided to unaffiliated entities in a  d(#nondiscriminatory manner. In the Notice, we recognized the potential for competitive harm in"Nc ,-(-(ZZ"  d(#La situation in which a BOC failed to cooperate with an interLATA carrier that is introducing an  d(#innovative new service until the BOC's section 272 affiliate is ready to initiate the same  X- d(#service.J yOK-ԍNotice at  139 n.266.J Similarly, AT&T asserts that the section 272(c)(1) nondiscrimination requirement  d(#should be interpreted to prevent BOCs from denying a competitor's request for a new or more  d(#xcost effective access arrangement on the ground that all entities, including its section 272 affiliate,  X- d(#are receiving the same access service at the same price.<X yO-ԍAT&T at 32.< We find that the BOC, under section  d(#272(c)(1), is obligated to work with competitors to develop new services if it cooperates in such a manner with its section 272 affiliate.  X1-  4211.` ` We agree with AT&T therefore that if, as we outlined in our Notice, a BOC  d(#Lpurposely delayed the implementation of an innovative new service by denying a competitor's  d(#[reasonable request for interstate exchange access until the BOC section 272 affiliate was ready  d(#to provide competing service, such conduct may constitute unlawful discrimination under the Act.  d(#Moreover, as we observed in the Notice, although the 1996 Act imposes specific  d(#nondiscrimination obligations on the BOCs and their section 272 affiliates, the Communications  d(#Act imposed certain preexisting nondiscrimination requirements on common carriers providing  d(#interstate communications service. Among them, section 201 provides that all common carriers  d(#have a duty "to establish physical connections with other carriers," and to furnish  Xb- d(#telecommunications services "upon reasonable request therefor."Gb yO-ԍ47 U.S.C.  201(a).G We conclude, therefore, that  d(#if a BOC were to engage in strategic behavior to benefit its section 272 affiliate, in the manner  d(#suggested by AT&T, such action may not only violate section 272(c)(1), but would also violate  X-sections 201(a) of the Act.x yOF- v ԍWe also note such anticompetitive behavior regarding the provision of intrastate services would be unlawful  yO- d(#under various state provisions. See, e.g., Mich. Comp. Laws Ann.  484.2305(1)(g) (West 1996) (a provider of basic  d(#local exchange service shall not refuse or delay access service or be unreasonable in connecting anther provider to  d(#Zthe local exchange whose product or service requires novel or specialized access service requirements); N.Y. Pub. Serv.  91 (McKinney 1996); N.D. Cent. Code  492107 (1995).  X-  _212.` ` Finally, we conclude that a complainant will be found to have established a prima  X- d(#facie case of unlawful discrimination under section 272(c)(1) if it can demonstrate that a BOC  d(#has not provided unaffiliated entities the same goods, services, facilities, and information that it  d(#provides to its section 272 affiliate at the same rates, terms, and conditions. To rebut the  d(#complainant's case, the BOC may demonstrate, among other things, that rate differentials  d(#kbetween the section 272 affiliate and unaffiliated entity reflect differences in cost or that the  Xe- d(#Zunaffiliated entity expressly requested superior or less favorable treatment in exchange for paying"ed( ,-(-(ZZ"  X- d(#[a higher or lower price to the BOC. yOy- v LԍSee AT&T at 33 (Commission should make explicit that any difference in treatment between BOC affiliates  d(#and their competitors is unlawful unless it results from a competitor's deliberate choice to receive different or less  d(#Yfavorable treatment in exchange for lower prices); PacTel Reply at 1213 (if an unaffiliated entity wants something  d(#idifferent than the BOC affiliate, the other entity should request something different, instead of requiring BOC to figure out what entity needs to get the same end result as affiliate). We recognize, as Sprint and Time Warner suggest, there  d(#will be some instances where the costs of providing certain goods, services, or facilities to its  X- d(#affiliate and to an unaffiliated entity differ.Tx yO-ԍSprint at 3940; Time Warner at 22.T As we stated in the First Interconnection Order,  d(#where costs differ, rate differences that accurately reflect those differences are not unlawfully  X- d(#discriminatory._ yO] -ԍFirst Interconnection Order at  860._ Strict application of the section 272(c)(1) prohibition on discrimination would  X- d(#itself be discriminatory if the costs of supplying customers are different. yO- v ԍSee BellSouth at 32 (a blanket prohibition on discrimination when justified by differences in cost would  yO- d(#be anticompetitive); see also id. ("Strict application of the term 'nondiscriminatory' . . . would itself be  d(#discriminatory according to the economic definition of price discrimination. If the 1996 Act is read to allow no price  d(#distinctions between companies that impose very different . . . costs on LECs, competition for all competitors, including small companies, could be impaired."). Similarly, we also  Xv- d(#=conclude, as we did in the First Interconnection Order, that "price differences, such as volume  d(#and term discounts, when based upon legitimate variations in costs, are permissible under the  XH-1996 Act when justified."_HH  yOA-ԍFirst Interconnection Order at  860._  X - C.Definition of "Goods, Services, Facilities and Information" in Section 272(c)(1)   X - 1. Background  X - 213.` ` In the Notice we sought comment on the interplay among the definitions of the  d(#terms "services," "facilities," and "information" in various subsections of 272, and between section  d(#272 and section 251(c). We also sought comment on what regulations, if any, are necessary to  d(#Lclarify the types or categories of services, facilities, or information that must be made available  d(#under section 272(c)(1). We asked parties to comment on whether further defining the terms  d(#"goods," "services," "facilities," and "information" would enable competing providers to detect  d(#violations of this section by enabling them to compare more accurately a BOC's treatment of its  X-affiliate with a BOC's treatment of unaffiliated competing providers.C yO#-ԍNotice at  67.C "eh,-(-(ZZ "Ԍ X- 2. Comments  X- B214.` ` PacTel, U S West, and NYNEX urge the Commission to exclude administrative  X- d(#.and support services from the scope of the term "services" in section 272(c)(1). yO4- v NԍNYNEX at 3435; PacTel at 30; U S West at 3637 (BOCs have no monopoly over the provision of  d(#administrative and support services so if these are withheld from competitors, this will not force those competitors  yO- d(#from the market). But see Frontier at 6 (Commission should interpret the phrase "facilities, services, or information"  d(#to include not only tariffed access elements, but also the provision of nontariffed services and information such as business office services, computing services, customer information, and the like). Similarly, U  d(#S West maintains that a BOC should not be required to provide nontelecommunications goods,  X- d(#services, facilities, and information.x yO - v kԍU S West at 37; see also PacTel Reply at 17 (section 272(c)(1) is limited to regulating goods and services that are part of a common carrier service). TIA urges the Commission to construe the terms "goods"  d(#and "services" to encompass, at a minimum, all types of telecommunications equipment, CPE,  X_- d(#=and related software and services.;_ yO-ԍTIA at 33.; Sprint asserts that the term "service" in section 272(c)(1)  d(# should encompass at least telecommunications and information services, and that the term  X1- d(#"facilities" should include all unbundled elements required under section 251(c)(3). 1`  yOB- v yԍSprint at 3234; see also id. at 34 n.23 ("facilities" under section 272 may include not only section 251(c)(2) "facilities" but also the "network equipment" referred to in section 251(c)(2)).  CIX  d(#maintains that, because the terms in section 272(c)(1) are not conditioned or qualified in any  d(#manner, "facilities, services and information" should be interpreted to encompass the meaning of  X -those terms as used in section 251(c).A  yOU-ԍCIX Reply at 6. A  X - 215.` ` Sprint argues that, because the term "information" in section 272(e)(2) is limited  X - d(#to information "concerning [a BOC's] provision of exchange access," the Commission should  X- d(#place no limit on the meaning of "information" as used in section 272(c)(1).A H  yO-ԍSprint at 3435.A Several  d(#commenters disagree on whether the term "information" under section 272(c)(1) includes CPNI.  d(#zPacTel and U S West contend that, because the Act includes a separate provision covering  XK- d(#yCPNI,e K yO!-ԍ47 U.S.C.  222; see CPNI NPRM.e the term information in section 272(c)(1) must exclude CPNI.j Kh yOd#-ԍPacTel Reply at 16; U S West at 38; U S West Reply at 15.j They argue, therefore,  d(#that section 272(c)(1) does not require a BOC to provide CPNI to other entities when the BOC  d(#[provides it to its section 272 affiliate. AT&T and MCI, in contrast, argue that section 272(c)(1)  d(#should include CPNI to ensure that a BOC will not use, disclose, or permit access to CPNI of"f ,-(-(ZZ("  X- d(#BOC customers for the benefit of its separate affiliate unless the CPNI is made available to all  X-competing carriers.   yOb- v \ԍAT&T at 34; AT&T Reply at 2425; MCI at 38 (section 272(c)(1) should apply to CPNI to ensure that BOCs do not impose more demanding requirements on unaffiliated entities than they impose on their affiliates).  v  X- 3. Discussion  X- #216.` ` We conclude that any attempt to define exhaustively the terms "goods, services,  d(#facilities, and information" in section 272(c)(1) may unnecessarily limit the scope of this section's  X_- d(#othverwise unqualified nondiscrimination requirement.w _  yO0 - v ԍSee ITAA at 21. As U S West observes, in interpreting section 272(c)(1), we are determining the scope  d(#of the goods, services, facilities, and information that are subject to the nondiscrimination requirement. U S West  yO - d(#-at 32; see also ISA at 3 (maintaining that section 272(c)(1) should be interpreted to ensure that a BOC does not  d(#provide or procure any good, service, facility, or information in a manner that could adversely affect competition on the information services industry).w At the same time, however, we disagree  d(#.with ITAA that the Commission should refrain from attempting to clarify the meaning of these  X1- d(# terms.F1 yO-ԍSee ITAA at 21.F We find instead that clarifying the types of activities these terms encompass will  d(#provide useful guidance to potential competitors that seek to avail themselves of the protections  d(#of section 272(c)(1). In enforcing the nondiscrimination requirement of section 272(c)(1), we  d(#intend to construe these terms broadly to prevent BOCs from discriminating unlawfully in favor  X -of their section 272 affiliates.> `  yO-ԍSee id.>  X - 217.` ` We find that neither the terms of section 272(c)(1), nor the legislative history of  d(#=this provision, indicates that the terms "goods, services, facilities, and information" should be  d(#zlimited in the manner suggested by some commenters. We therefore decline to interpret the  d(#|terms in section 272(c)(1) as including only telecommunicationsrelated or, even more  XK- d(#specifically, common carrierrelated "goods, services, facilities, and information."XK  yO- v !ԍSee, e.g., U S West at 37 (contending that section 272 cannot logically be read as requiring a BOC to  d(#Kprovide nontelecommunicationsrelated items, over which it has no monopoly, to an unaffiliated entity simply  yO|- d(#because it has provided that item to a separate affiliate); PacTel Reply at 17 (arguing that the terms of section  d(#272(c)(1) should be limited to goods and services that are part of a common carrier service regulated under Title II of the Act).X Similarly,  d(#we reject arguments set forth by NYNEX, PacTel, and U S West that the term "services" should  d(#exclude administrative and support services. Although NYNEX contends that, as a practical  X- d(#matter, unaffiliated entities are unlikely to avail themselves of such services,= yOW%-ԍNYNEX at 34.= we find that there  X- d(#xare certain administrative services, such as billing and collection services, that unaffiliated entities"g0,-(-(ZZ"  X- d(#may find useful. yOy- v ԍSee ISA at 3 (stating that the discriminatory provision of billing and collection services could adversely affect competition in the information services market). Further, as discussed above, we construe the term "services" to encompass  d(#/any service the BOC provides to its section 272 affiliate, including the development of new  X-service offerings.a  yO-ԍSee supra at paragraph  SERV210 . a  X- 218.` `  RESOSN We conclude therefore that the protection of section 272(c)(1) extends to any good,  d(#Lservice, facility, or information that a BOC provides to its section 272 affiliate. For example, we  d(#find that if a BOC were to decide to transfer ownership of a unique facility, such as its Official  d(#Services network, to its section 272 affiliate, it must ensure that the transfer takes place in an  XH- d(#open and nondiscriminatory manner.yH yO -ԍSee discussion of Official Services network infra part VI.D.y That is, pursuant to the nondiscrimination requirement  d(#.of section 272(c)(1), the BOC must ensure that the section 272 affiliate and unaffiliated entities have an equal opportunity to obtain ownership of this facility.  X - 219.` ` We also conclude that the terms "services," "facilities," and "information" in  d(#section 272 should be interpreted to include, among other things, the meaning of these terms  d(#under section 251(c). The term "facilities," therefore, includes but is not limited to the seven  X - d(#unbundled network elements described in the First Interconnection Order.X @ yO- v /ԍThese include the local loop, the network interface device, switching capability, interoffice transmission  d(#facilities, signalling networks and callrelated databases, operations support system functions, and operator services  yO(-and directory assistance. See First Interconnection Order, Appendix B, at 2024. We decline to limit  d(#the scope of these terms to their meaning in section 251 because section 272 encompasses a  d(#broader range of activities than does section 251. We also emphasize that in contrast to section  d(#251, where an incumbent LEC is prohibited from discriminating against any requesting  d(#telecommunications carrier, section 272(c)(1) prohibits BOCs from discriminating against "any  d(#Zother entity." Because section 272 does not define the term "entity," we interpret this unqualified  d(#term broadly to ensure that all competitors may benefit from the protections of section 272(c)(1).  d(#Thus, we agree with Sprint that this term should include the definition of the term "entity" as set  X- d(#.forth in the electronic publishing section of the Act; `  yO - v ԍSprint at 37. Section 274 provides that "the term 'entity' means any organization, and includes corporations, partnerships, sole proprietorships, associations, and joint ventures." 47 U.S.C.  274(i)(6).  however, we also find it appropriate to  d(#include within the meaning of "entity" the providers of the activities encompassed by section 272.  d(#=We conclude, therefore, that the term "entity" includes telecommunications carriers, ISPs, and manufacturers.  X|- _220.` ` MFSCOLLOCWe disagree with ATSI and CIX, however, that by interpreting "any other entity"  d(#=to include information service providers and by concluding that the term "facilities" in section  d(#[272(c)(1) encompasses the meaning of that term as it is used in section 251(c), ISPs acquire the"Nh ,-(-(ZZ"  d(#right to obtain unbundled access to the local loop and other network elements whenever BOCs  X- d(#provide their section 272 affiliates with such access.M yOb-ԍATSI at 89; CIX Reply at 6.M Pursuant to section 251(c)(3), only  d(#telecommunications carriers providing a telecommunications service are entitled to obtain access  d(#to unbundled network elements. Because ISPs may only obtain access to unbundled elements  X- d(#zpursuant to section 251 to the extent they are providing telecommunications services,oX yO-ԍSee First Interconnection Order at  992.o we  d(#conclude that they may not attempt to circumvent the limitations of section 251 by virtue of their  Xv- d(#zrights under section 272(c)(1). This conclusion is consistent with our finding in the Second  X_- d(#=Interconnection Order that the inclusion of information services in the definition of "services"  d(#under section 251(c)(5) "does not vest information service providers with substantive rights under  d(#other provisions of section 251, except to the extent that they are also operating as  X - d(#ktelecommunications carriers."`  yO-ԍSecond Interconnection Order at  176.` To the extent, however, that a BOC chooses voluntarily to  d(#provide facilities, including network elements, to a section 272 affiliate that is solely providing  d(#information services (and thus does not qualify as a telecommunications carrier under section  d(#251), we conclude that a BOC must, pursuant to section 272(c)(1), provide such facilities to other requesting ISPs.  X- 221.` ` We therefore agree with MFS that, if a BOC chooses to allow its information  d(#jservice affiliate to collocate routers, servers, or other equipment, section 272(c)(1) requires that  Xb- d(#the same accommodations be extended, on a nondiscriminatory basis, to competing ISPs.Dbx yO-ԍMFS Reply at 2021.D  d(#Collocation is a means of achieving interconnection and access to unbundled network elements  X4- d(#that incumbent LECs, including BOCs, must provide to requesting carriers under section 251.4 yO-ԍSee First Interconnection Order at  542617 (discussing collocation).  d(#Although section 251 does not require incumbent LECs to permit entities other than  X- d(#telecommunications carriers to collocate equipment on an incumbent LEC's premises,_ yOO-ԍFirst Interconnection Order at  581._ sections  d(#251 and 272 do not prohibit BOCs from voluntarily allowing ISPs to collocate equipment on their  d(#premises. Thus, we find that, if a BOC permits its section 272 affiliate to collocate facilities used  d(#to provide information services, the BOC must permit collocation, under section 272(c)(1), by  d(#similarly situated entities. If the BOC's section 272 affiliate qualifies as a "telecommunications  d(#carrier," the BOC need only permit other telecommunications carriers to collocate their  d(#Lequipment. If, however, the BOC's section 272 affiliate only provides information services, the  d(#BOC must permit similarly situated ISPs to collocate equipment at the BOCs premises, even if such entities do not qualify as telecommunications carriers.  X7-"7i( ,-(-(ZZ"Ԍ X- $222.` `  NETWORK  As Sprint points out, the term "information" in section 272(c)(1) is not limited  d(#as it is in section 272(e)(2) to information "concerning [the BOC's] provision of exchange  X- d(#Laccess."2 yOK- v ԍSee 47 U.S.C.  272(e)(2). Similarly, we note that the term "facilities" in section 272(c)(1) is not limited  yO-as it is in section 272(e)(4) to "interLATA or intraLATA facilities." See 47 U.S.C.  272(e)(4).2 In fact, as noted above, we find no limitation in the statutory language on the type  d(#of information that is subject to the section 272(c)(1) nondiscrimination requirement. For this  d(#-reason, we reject U S West's assertion that section 272(c)(1) only governs that information which  X- d(#may give a separate affiliate an "unfair advantage."  yO^ - v ԍU S West at 3738 (arguing that, if the information cannot give an unfair advantage to a separate affiliate, there is no reason under the 1996 Act to interfere with its flow between the BOC and its affiliate). We conclude, however, that the term  Xv- d(#L"information" includes, but is not limited to, CPNI and network disclosure information.dvx yO -ԍSee, e.g., 47 U.S.C.  222, 251(c)(5).d We  d(#therefore reject arguments made by some BOCs that the nondiscrimination provision of section  d(#272(c)(1) does not govern the BOCs use of CPNI. With respect to CPNI, we conclude that  d(#zBOCs must comply with the requirements of both sections 222 and 272(c)(1). We decline to  d(#address parties' arguments raised in this proceeding regarding the interplay between section  d(#272(c)(1) and section 222 to avoid prejudging CPNI issues that will be addressed in a separate  X -proceeding.x X  yO- v ԍSee CPNI NPRM. Several BOCs assert that there are certain instances under section 222 where it would  yOm- d(#be unlawful for them to distribute CPNI to other entities. See Ameritech Reply at 29, NYNEX Reply at 1314; PacTel Reply at 1617; U S West Reply at 1415. x  X - vD.Establishment of Standards   X- 1.` ` Background  Xb- 223.` ` Section 272(c)(1) prohibits a BOC from discriminating between its section 272  d(#-affiliatve and other entities in the "establishment of standards." In the Notice we sought comment  d(#zon what "standards" are encompassed by this provision. We observed that a BOC may act  d(#]anticompetitively by creating standards that require or favor equipment designs that are  d(#Mproprietary to its section 272 affiliate. We sought comment on what procedures, if any, we  d(#kshould implement to ensure that a BOC does not discriminate between its affiliate and other  d(# entities in setting standards. We asked parties to comment, for example, on whether BOCs  d(#should be required to participate in standardsetting bodies in the development of standards  X-covered by section 272(c)(1).C!(  yO#-ԍNotice at  78.C "j !,-(-(ZZQ"Ԍ X- 2.` ` Comments  X- &224.` ` Although we received only a few comments on the meaning of the term  X- d(#<"standards" in section 272(c)(1)," yO4- v ԍMCI at 39 (the term "standards" should encompass any that affect interconnection and interoperability  d(#between two or more public network operators); Sprint at 42 (there is nothing to suggest that the term "standards"  d(#means something other than its commonly understood dictionary definition); TIA at 44 (the term "standards" should  d(#Jencompass all activities undertaken in connection with a BOC's efforts to establish technical specifications for BOC network operation and interconnection of equipment and services to a BOC network). many parties expressed views on the need for the adoption of  d(#procedures to ensure nondiscrimination in the establishment of standards, the need for mandatory  d(#BOC participation in standardsetting, and whether the failure of BOC participation in standard d(#setting should be considered discrimination. Bellcore, ITAA, and PacTel argue it is unnecessary  X_- d(#<to adopt procedures to ensure the nondiscriminatory establishment of standards.#_x yO - v ԍBellcore Reply at 23; ITAA at 21 (arguing that the nondiscrimination language of section 272(c)(1) is absolute); PacTel Reply at 18. For example,  d(#Bellcore and PacTel maintain that nondiscriminatory standardssetting need not be addressed in  X1- d(#kthe context of section 272(c)(1) because it is already addressed by sections 273(d)(4)h$X1 yO- v MԍSection 273(d)(4) prescribes procedures that are intended to open to all interested parties the process for  d(#setting and establishing industrywide standards and generic requirements for telecommunication equipment and CPE.  yOB-See Manufacturing NPRM.h and  X - d(#273(d)(5).%  yO- v =ԍSection 273(d)(5) requires that the Commission prescribe a dispute resolution process to be used if all parties  d(#cannot agree on a dispute resolution process when establishing and publishing any industrywide standard or generic  yOK- d(#requirement. See Implementation of the Section 273(d)(5) of the Telecommunications Act of 1996, Dispute  yO- d(#iResolution Regarding Equipment Standards, GC Docket No. 9642, Report and Order, FCC No. 96205 (rel. May  yO-7, 1996) (Dispute Resolution Order). Ę These provisions, they state, establish "reasonable and nondiscriminatory"  d(#procedures for Bellcore and nonaccredited standards development organizations to follow in  d(#creating industrywide standards and generic requirements for telecommunications equipment and  X - d(#-CPE.e&  yO&-ԍSee Bellcore Reply at 23; PacTel Reply at 18.e Congress, Bellcore asserts, did not purposefully create a process under section 273(d)(4)  X -only to prevent BOCs from using the fruits of that process in section 272.E' 0 yO-ԍBellcore Reply at 3.E  X- 2225.` ` AT&T asserts that, in appropriate cases, the Commission should involve itself in  Xy- d(#the standardsetting process.<(y yO#-ԍAT&T at 35.< Similarly, MCI proposes that the Commission act as or appoint  Xb- d(#an arbitrator to resolve disputes that arise in the public standardssetting process.;)bP yOc&-ԍMCI at 40.; USTA and  d(#iU S West, on the other hand, argue that industry consensus rather than Commission involvement"Kk),-(-(ZZ"  X- d(#is required in the development of standards.m*X yOy- v ԍUSTA Reply at 1213 (in an era of open competition where BOCs compete against each other, BOCs have  d(#no incentive to collaborate with other BOCs in setting standards); U S West Reply at 14 (asserting that the Commission's complaint procedures should address any abuse of this process).m MCI contends that, as a matter of policy, BOCs  d(#lshould be required to participate in all public fora that are developing interconnection or  d(#interoperability standards concerning their current or foreseeable services and that all technical  d(#standards involving the BOCs or their affiliates should be developed in open, nondiscriminatory  X- d(#xpublic standardsetting bodies and fora.+  yO= - v ]ԍMCI at 39; see also ITI and ITAA Reply at 14 (Commission should require BOCs to establish fair and  d(#I nondiscriminatory network performance, interconnection, and equipment interoperability standards); TIA at 43 (BOCs  d(#Kshould be strongly encouraged, if not required, to participate in standardsetting activities of accredited standardsetting groups.) PacTel and Sprint, in contrast, assert that participation  X-in standardsetting bodies should not be required.e, yO-ԍPacTel at 35; PacTel Reply at 18; Sprint at 43 n.31.e  X_- 226.` ` Sprint argues, however, that a BOC's failure to participate or its refusal to abide  d(#by the standards selected may be evidence of its intent to discriminate in the "establishment of  X1- d(#standards."D-1`  yOB-ԍSprint at 43 n.31. D Similarly, AT&T maintains that the Commission should treat the adoption of a  X - d(#standard that favors a BOC affiliate and harms unaffiliated entities as establishment of a prima  X - d(#facie case of discrimination under section 272(c)(1).<.  yO-ԍAT&T at 35.< In addition, MCI argues that the  d(#Commission should refuse to recognize standards not established in an open, nondiscriminatory  X -forum for purposes of resolving discrimination claims.;/  yO-ԍMCI at 39.;   X - 3.` ` Discussion  Xy- #227.` ` We conclude that the term "standards" in section 272(c)(1) includes the meaning  Xb- d(#of this term as it is used in section 273. In the Manufacturing NPRM, we sought comment on  d(#how the term "standards" should be defined "for purposes of implementation of the 1996 Act to  X4- d(#ensure that standards processes are open and accessible to the public."U04 yO!-ԍManufacturing NPRM at  34.U We note, however, that  d(#yunlike the use of the term "standards" in sections 273(d)(4) and 273(d)(5), the term "standards"  X- d(#kin section 272(c)(1) is not limited by the term "industrywide." We conclude, therefore, that"l0,-(-(ZZ("  X- d(#section 272(c)(1) prohibits discrimination in the establishment of any standard, not only those that  X-are "industrywide."'1  yOb- v ԍThe term "industrywide" as defined in section 273 means "activities funded by or performed on behalf of  d(#local exchange carriers for use in providing wireline telephone exchange service whose combined total of deployed  d(#access lines in the United States constitutes at least 30 percent of all access lines deployed by telecommunications  yO-carriers in the United States" as of February 8, 1996. See 47 U.S.C.  273(d)(8)(C).'  X- 228.` ` As we observed in the Manufacturing NPRM, the process by which standards are  X- d(#established may present opportunities for anticompetitive behavior by the BOCs.U2 yO -ԍManufacturing NPRM at  31.U We decline,  d(#however, to implement additional procedures, beyond those outlined in section 273, to ensure that  d(#=BOCs do not discriminate between their section 272 affiliates and other entities in establishing  d(#industrywide standards. Rather, we agree with Bellcore and PacTel that the procedures for the  d(#kestablishment of industrywide standards and generic requirements for telecommunications  d(#iequipment and CPE appear at this time to be adequately addressed by the requirements contained  d(#in section 273(d)(4). For example, in response to MCI, we note that section 273(d)(4) already  d(#provides for an open standardssetting process whereby all interested parties have the opportunity  d(#Zto fund and participate in the development of industrywide standards or generic requirements on  X - d(#a "reasonable and nondiscriminatory" basis."[3 @ yO-ԍSee 47 U.S.C.  273(d)(4)(A)(ii).[ We find no basis in the record for concluding  d(#that the requirements established by section 273, and any regulations adopted thereunder, will not be sufficient to deter discrimination in the establishment of industrywide standards.  Xy- _ 229.` ` Although we decline at this time to establish additional procedures beyond those  d(#required in section 273(d)(4), we recognize that t STANDARD here is a distinct potential competitive danger  d(#that a BOC will use standards in its own and its section 272 affiliate's network that are not  d(#"industrywide" (that is, not employed by "at least 30 percent of all access lines") or established  X- d(#by an accredited standards development organization,Z4X yO- v MԍAn "accredited standards development organization" is an entity composed of industry members that has  yOf- d(#been accredited by an institution vested with the responsibility for standards accreditation by the industry. See 47 U.S.C.  273(d)(8)(E). Z but rather specifically tailored to meet  d(#<its own needs or those of its section 272 affiliate. Because such standards may not be developed  d(#in an open and nondiscriminatory process, such as the one required for the establishment of  d(#industrywide standards in section 273(d)(4), we find that those standards may place unaffiliated  d(#entities at a competitive disadvantage. For example, if a BOC adopts a particular nonaccredited  d(#Lor nonindustrywide protocol or network interface, it may, by virtue of its substantial size and  d(#market share, effectively force competing entities to alter their specifications in order to maintain  d(#the same level of interoperability with the BOC or the BOC affiliate. We conclude, therefore,  Xe- d(#[that the adoption of any standard that has the effect of favoring the BOC's section 272 affiliate  XN- d(#Nand disadvantaging an unaffiliated entity will establish a prima facie violation of section 272(c)(1). "7m 4,-(-(ZZ"Ԍ X-  _ԙ230.` ` We also conclude, on the basis of the record before us, that it is not necessary as  d(#a matter of law, nor desirable as a matter of policy, to require BOC participation in the standards d(#xsetting process. The language of section 272(c)(1) cannot be read as requiring such participation;  d(#.moreover, BOCs have an interest in participating voluntarily in standardsetting organizations  d(#Mbecause standards that are ultimately adopted may materially impact the BOCs' competitive  X- d(#position.H5 yO-ԍCf. PacTel at 35.H Further, we decline to become involved at this time in the standardsetting process,  d(#as suggested by AT&T, in order to accomplish the purposes of section 272(c)(1). Unlike section  d(#256, which, among other things, permits the Commission to participate in the development of  d(#public telecommunications network interconnectivity standards that promote access, section  X1- d(#-272(c)(1) does not contemplate Commission involvement.S61X yO: - v ԍSee 47 U.S.C.  256. We note that the Commission has asked its federal advisory committee, the Network  d(#Reliability and Interoperability Council, for recommendations on how the Commission should implement section 265.  d(#These recommendations will provide the basis for a notice of proposed rulemaking that will consider, among other  d(#.things, Commission rules and policies dealing with telecommunications standardssetting activities, including Commission involvement.S Moreover, we reject MCI's proposal  d(#that we insert ourselves into the dispute resolution process to accomplish the purposes of section  d(#=272(c)(1). Section 273(d)(5) requires the Commission to prescribe a dispute resolution process  d(#to address the anticompetitive harms that may result from the establishment of industrywide  d(#<standards under section 273(d)(4) and expressly prohibits the Commission from becoming a party  X - d(#to this process.t7  yOw-ԍSee 47 U.S.C.  273(d)(5); Dispute Resolution Order.t As to disputes that may arise in the context of other public standardsetting  d(#jprocesses, we find, on the basis of the record before us, that Commission involvement beyond  X-its existing role in the section 208 complaint process is unnecessary.8 yO- v ԍSee U S West Reply at 14 (if process is abused, Commission's complaint procedures are available to address the problem).  Xb- E.Procurement Procedures   X4- 1.` ` Background  X- a231.` ` Section 272(c)(1) also prohibits the BOCs from discriminating between their  d(#section 272 affiliates and other entities in their procurement of goods, services, facilities, and  d(#information. In the Notice, we observed that this provision prohibits a BOC from purchasing  d(#manufactured network equipment solely from its affiliate, purchasing the equipment from the  d(#affiliate at inflated prices, or giving any preference to the affiliate's equipment in the procurement  d(#\process and thereby excluding rivals from the market in the BOC's service area. We sought  d(#comment on how the BOCs could establish nondiscriminatory procurement procedures designed  Xe- d(#to ensure that other entities are treated on the same terms and conditions as a BOC affiliate. We"en 8,-(-(ZZ"  d(#invited comment, specifically, on the nature and extent of rules necessary to ensure that such  X-procedures are implemented.C9 yOb-ԍNotice at  77.C  X- 2. Comments  X-  232.` ` PacTel and U S West maintain that, in light of the procurement standards set forth  d(#in sections 273(e)(1) and 273(e)(2), it is unnecessary to adopt additional procurement procedures  X_- d(# to implement the nondiscrimination requirement of section 272(c)(1).g:_X yOh -ԍPacTel at 35; PacTel Reply at 17; U S West at 36 n.58.g ITAA asserts that,  d(#Lbecause the section 272(c)(1) language is absolute, it is unnecessary to prescribe procurement  X1- d(#yprocedures to ensure that BOCs do not discriminate.<;1 yO -ԍITAA at 21.< TIA, in contrast, contends that section  X - d(#K272(c)(1) requires BOCs to establish specific procurement procedures.;< x yOC-ԍTIA at 46.; According to TIA, each  d(#BOC should specify the standards that it uses to make procurement decisions and file these with  X - d(#[the Commission.D=  yO-ԍId. at 4142.D TIA also suggests that the Commission adopt a classification scheme that  X -identifies discrete categories of products and related services procured by BOCs.>  yO-ԍId. at 34 n.74 (noting that its own "Buyer's Guide" may be useful in this process).  X - 3. Discussion  Xy- 233.` ` As stated above, we find that section 272(c)(1) establishes an unqualified  d(# prohibition against discrimination by a BOC in its dealings with its section 272 affiliate and  XK- d(#yunaffiliated entities.b?K(  yO$-ԍSee supra at paragraph UNQUAL197.b We conclude, therefore, that any discrimination with respect to a BOC's  d(#procurement of goods, services, facilities, or information between its section 272 affiliate and an  X- d(#unaffiliated entity establishes a prima facie case of discrimination under section 272(c)(1). For  X- d(#example,  PROCURE consistent with our observations in the Notice, we find that a prima facie case of  d(#zdiscrimination under section 272(c)(1) may be established if a BOC purchases manufactured  d(#network equipment solely from its section 272 affiliate, purchases such equipment from its  d(#affiliate at inflated prices, or gives any preference to the affiliate's equipment in the procurement process, thereby excluding rivals from the market in the BOC's service area.  X|- p234.` ` Insofar as section 272(c)(1) governs a BOC's procurement of manufacturing  d(#services, we find that BOC procurement of telecommunications equipment should be performed  d(#in a manner consistent with the manufacturing requirements of section 273. We conclude,"No ?,-(-(ZZ0"  d(#therefore, that section 272(c)(1) requires a BOC to adhere to the nondiscrimination and  d(#procurement standards governing the procurement of telecommunications equipment set forth in  X- d(#Msections 273(e)(1) and 273(e)(2) of the Act. H@ yOK- v ԍSection 273(e)(1), entitled "Nondiscrimination Standards for Manufacturing" requires, inter alia, that "[i]in  d(#the procurement or awarding of supply contracts for telecommunications equipment, a [BOC], or any entity acting  d(#on its behalf . . . may not discriminate in favor of equipment produced or supplied by an affiliate or related person.  d(#KSection 273(e)(2), entitled "Procurement Standards," provides that each BOC or entity acting on its behalf shall  d(#"make procurement decisions and award all supply contracts for equipment, services, and software on the basis of an objective assessment of price, quality, delivery, and other commercial factors." 47U.S.C. 273(e)(1)(B), (e)(2).H We therefore defer consideration of detailed  X- d(#procurement procedures with respect to telecommunications equipment to the Manufacturing  X- d(#-NPRM, which specifically addresses the requirements of these sections. We conclude, however,  d(#that the BOCs must, at a minimum, comply with any and all regulations adopted to implement  d(#Othe standards of sections 273(e)(1) and 273(e)(2); failure to do so may be evidence of discrimination under section 272(c)(1).  X1-  235.` ` We recognize, however, that the nondiscrimination requirement of section  d(#x272(c)(1) encompasses a broader range of activities than those described in sections 273(e)(1) and  d(#273(e)(2). Nevertheless, because the record is largely silent on the nature and extent of rules  d(#\necessary to ensure that BOCs do not discriminate in their procurement of goods, services,  d(#facilities, and information under section 272(c)(1), we decline, at this time, to adopt rules to  d(#kimplement this requirement. In response to TIA's concerns, therefore, we conclude that the  d(#.record in this proceeding does not support adoption of any concrete procurement procedures  d(#beyond those already mandated by sections 273(e)(1) and 273(e)(2). Although we decline to  d(#issue rules, we caution BOCs that allegations of discrimination in their procurement of goods,  d(#services, facilities, and information under section 272(c)(1) will be evaluated in light of that  d(#section's unqualified prohibition on discrimination. Further, we note that allegations of  d(#discrimination may more easily be rebutted by demonstrated compliance with preexisting, publicly available procedures for procurement.  X- F.Enforcement of Section 272(c)(1)   X- #236.` ` In the Notice, we observed that the Commission previously adopted a regulatory  d(#.scheme to ensure that the BOCs do not discriminate in the provision of basic services used to  d(#>provide enhanced services or in disclosing changes in the network that are relevant for the  d(#<competitive manufacture of CPE. We sought comment on whether any of the reporting and other  Xe- d(#@requirements that the Commission applied to the BOCs in the Computer III and ONA  XN- d(#jproceedings, which were adopted in lieu of the structural separation requirements of Computer  X7- d(#[II, are sufficient to implement section 272(c)(1) and provide protection against the type of BOC  X - d(#0behavior that section 272(c)(1) seeks to curtail.CA @ yO%-ԍNotice at  75.C We address this issue, as well as the" pA,-(-(ZZ>"  d(#requirements and mechanisms necessary to facilitate the detection and adjudications of section  X-272 violations, below.IB yOb-ԍSee infra part IX.I;!}K + J:\POLICY\SAFE\ORDER\MASTER\272E.CL+ ;  X-} VI. FULFILLMENT OF CERTAIN REQUESTS PURSUANT TO SECTION 272(e) Đ\  Xv- A.XSection 272(e)(1) (#  XH- 1.` ` Background (#`  X - 237.` ` Section 272(e)(1) states that a BOC and a BOC affiliate subject to section 251(c)  d(#K"shall fulfill any requests from an unaffiliated entity for telephone exchange service and exchange  d(#jaccess within a period no longer than the period in which it provides such telephone exchange  X - d(#Nservice and exchange access to itself or to its affiliates."mCX X yO- v /ԍ47 U.S.C.  272(e)(1).  272EILEC Section 272(e) applies to a BOC or a BOC affiliate subject to section 251(c). 47  yO- d(#ZU.S.C.  272(e). An affiliate subject to section 251(c) is an incumbent LECs as defined in section 251(h). Id.  251(c), 251(h).m In the Notice, we tentatively  d(#concluded that the term "unaffiliated entity" includes "any entity, regardless of line of business,  X - d(#/that is not affiliated with a BOC" as defined under section 153(1) of the Act.CD x yO-ԍNotice at  82.C We sought  X- d(#comment on the scope of the term "requests" and on whether it included, inter alia, "initial  d(#!installation requests, as well as any subsequent requests for improvement, upgrades or  Xb- d(#modifications of service, or repair and maintenance of . . . services."FEb yO-ԍId. at  83.F We tentatively concluded  d(#-that section 272(e)(1) requires the BOCs to treat unaffiliated entities on a nondiscriminatory basis  d(#in completing orders for telephone exchange service and exchange access, but does not grant  d(#xunaffiliated entities any additional rights beyond those otherwise granted by the Communications  X- d(#MAct or Commission rules.FF yOO-ԍId. at  84.F We also sought comment regarding how to implement section  d(#<272(e)(1) and specifically inquired whether reporting requirements for service intervals analogous  X-to those imposed by Computer III and ONA would be sufficient.FG(  yO!-ԍId. at  85.F  X-"q G,-(-(ZZ"Ԍ X-X 2.X` ` Comments (#`  X- 238.` ` Commenters generally support the Notice's analysis regarding the scope and  X- d(#kpurpose of section 272(e)(1).H yO4-ԍE.g., AT&T at 37; MCI at 4142; Sprint at 4344; TRA at 17; ITAA at 23; TIA at 45; PacTel at 36. AT&T, Sprint, MCI, TRA, Teleport, and ITAA support the  X- d(#imposition of reporting requirements to implement section 272(e)(1),IX yO-ԍAT&T at 37; MCI at 42; Sprint at 44 & n.32; TRA at 1718; Teleport at 1315; ITAA at 23. while BOCs generally  X- d(#oppose the imposition of reporting requirements.Jx yO& - v ԍE.g., Ameritech Reply at 30; Bell Atlantic Reply at 1112; NYNEX Reply at 23 & n.72; SBC at 1317; U  d(#;S West Reply at 16; PacTel Reply at 1819. NYNEX and Ameritech specifically argue that reporting is not needed  d(#kbecause their internal procedures are automated and designed to be nondiscriminatory, and that therefore,  d(#,discrimination would require expensive coordination by the BOCs. Letter from Suzanne Guyer, Executive Director,  d(#ZFederal Regulatory Policy Issues, NYNEX to William F. Caton, Acting Secretary, FCC at 5 (filed Oct. 23, 1996)  yO- d(#h(NYNEX Oct. 23 Ex Parte); Letter from Gary L. Phillips, Director of Legal Affairs, Washington Office, Ameritech  yO-to William F. Caton, Acting Secretary, FCC, Attachment (filed Oct. 23, 1996) (Ameritech Oct. 23 Ex Parte). Several parties question the utility of  Xv- d(#kreporting that follows the format of Computer III and ONA reporting.uKv(  yOO-ԍREPORTCONTROAT&T at 3637; PacTel at 37; Time Warner at 23.u In an ex parte letter  d(#yfiled after the official pleading cycle closed, AT&T suggests an alternative format for reporting  d(#[based on measures it currently uses to monitor the quality of access services provided to it by  X1-various LECs.SLX1  yO- v ԍLetter from Charles E. Griffin, Government Affairs Regulatory Director, AT&T to William F. Caton, Acting  yOb- d(#Secretary, FCC at 35 (filed Oct. 3, 1996) (AT&T Oct. 3 Ex Parte). This proposal is discussed more fully infra in part XI.S  X -X 3.X` ` Discussion (#`  X - 239.` ` Based on our analysis of the record, we adopt our tentative conclusion that the  d(#term "unaffiliated entity" includes "any entity, regardless of line of business, that is not affiliated  X - d(#with a BOC" as defined under section 153(1) of the Act.cM  yO0-ԍE.g., Sprint at 3637; TRA at 17; TIA at 45.c E1-NOTAGRANTAlso based on the record, we  d(#conclude that section 272(e)(1) requires the BOCs to treat unaffiliated entities on a  d(#nondiscriminatory basis in completing orders for telephone exchange service and exchange access,  d(#but does not grant unaffiliated entities any additional rights to make requests beyond those  XK- d(#lgranted by the Communications Act or Commission rules.[NKh yOd#-ԍE.g., PacTel at 36; Sprint at 4344.[ We conclude that the term  X4- d(#"requests" should be interpreted broadly, and that it includes, but is not limited to, initial"4rN,-(-(ZZf"  d(#iinstallation requests, subsequent requests for improvement, upgrades or modifications of service,  X-or repair and maintenance of these services.rO yOb-ԍAT&T at 37; MCI at 4142; Sprint at 4344; TRA at 17; ITAA at 23.r  X- 240.` ` Section 272(e)(1) unambiguously states that a BOC must fulfill requests from  d(#unaffiliated entities at least as quickly as it fulfills its own or its affiliates' requests. To  d(#implement this statutory directive, we conclude that, for equivalent requests, the response time  d(#La BOC provides to unaffiliated entities should be no greater than the response time it provides  X_- d(#to itself or its affiliates.P_X yOh -ԍAT&T at 3638. Contra Bell Atlantic Reply at 11; Ameritech Reply at 30. We are not persuaded by the BOCs' argument that variations among  d(#individual requests make any comparison between requests meaningless, and thus make such a  X1- d(#standard unachievable.Q1 yO -ԍAmeritech Reply at 30; Bell Atlantic Reply at 1112; NYNEX Reply at 23; US West Reply at 16. The BOC must fulfill equivalent requests within equivalent intervals.  d(#Thus, for example, an unaffiliated entity's request of a certain size, level of complexity, or in a  d(#specific geographic location must be fulfilled within a period of time that is no longer than the  d(# period of time in which a BOC responds to an equivalent request from itself or its affiliates.  d(#-Because we anticipate that the facts relating to each request will vary, we believe it is appropriate to determine whether requests are equivalent on a casebycase basis.  X- 241.` ` Section 272(e)(1) requires a BOC to fulfill the requests of unaffiliated entities  d(#Mwithin a period no longer than the period in which it fulfills its own or its affiliates requests.  d(#LBecause the statute does not mandate that a BOC follow a particular procedure in meeting this  d(#Krequirement, we decline to adopt the proposals of AT&T and Teleport to require the BOCs to use  d(#<electronic order processing systems or to use the identical systems that the BOCs use to process  X- d(#their own service requests.LRx yOF-ԍAT&T at 38; Teleport at 13.L We emphasize, however, regardless of the procedures that a BOC  d(#employs to process service orders from unaffiliated entities, it must be able to demonstrate that  d(#those procedures meet the statutory standard. Under current industry practice, BOCs and  X- d(#interexchange carriers use electronic mechanisms to implement PIC changes;S  yO- v ԍA PIC change is a change in a customer's selection of her presubscribed interexchange carrier. At one time  d(#hthe term "PIC" referred to "primary" or "preferred interexchange carrier." Although we have retained the acronym  yO! - d(#"PIC," we now define it as any toll carrier for purposes of our presubscription rules under the Second Interconnection  yO -Order. Second Interconnection Order at  5, n.15. exchange billing  d(#Ninformation; and, in some instances, provide ordering, repair, and trouble administration  X- d(#information.uTX  yOK$- v ԍSee First Interconnection Order at  507, 511512, 520 (describing the use of automated PIC changes,  d(#electronic ordering and repair and trouble administration information, the Customer Account Record Exchange (CARE) system, and the Billing Name and Address (BNA) database).u We believe that these current mechanisms, and the requirement that incumbent  d(#LECs provide nondiscriminatory access to operation support systems functions pursuant to"sT,-(-(ZZo"  d(#sections 251(c)(3) and 251(c)(4) of the Act, will promote the use of electronic interfaces between  X-unaffiliated entities and the BOCs.lU yOb-ԍFirst Interconnection Order at  312, 516528.l  X- 242.` ` REPORTINGWe also conclude that the BOCs must make available to unaffiliated entities  d(#yinformation regarding the service intervals in which the BOCs provide service to themselves or  d(#their affiliates. The statute imposes a specific performance standard on the BOCs in section  d(#272(e)(1), and we conclude that, absent Commission action, the information necessary to detect  d(#yviolations of this requirement will be unavailable to unaffiliated entities. Unlike the information  d(#necessary to ensure compliance with other subsections of section 272, there is no requirement that  d(#=the information necessary to verify compliance with section 272(e)(1) must be disclosed under  d(#other provisions of the Act or Commission rules. Without the disclosure requirements imposed  d(#here, parties will be unable readily to ascertain how long it takes a BOC to fulfill its own or its  d(#affiliates' requests for service. Section 272(b)(5), which requires that all transactions between  d(#|a BOC and its section 272 affiliate be reduced to writing and made available for public  d(#inspection, does not provide parties an adequate mechanism to obtain information necessary to  d(#evaluate compliance with section 272(e)(1) because section 272(b)(5) is necessarily prospective  d(#in nature. The information disclosed pursuant to section 272(b)(5) will allow unaffiliated entities  d(#to determine that a BOC and its section 272 affiliate have reached an agreement and the relevant  d(#terms and conditions of that agreement, but the document produced to satisfy section 272(b)(5)  d(#will not allow parties to determine the time it actually takes for a BOC to fulfill its own or it  d(#affiliates' requests. Section 272(e)(1) governs actual BOC performance, not contractual  d(#arrangements. Moreover, section 272(b)(5) by itself is insufficient to implement section 272(e)(1)  d(#-because it will only make information available about transactions between a BOC and its section  d(#M272 affiliate; section 272(e)(1), in contrast, governs requests by the BOC itself and all of the  d(#jBOC's affiliates. We also conclude that, in order to provide meaningful enforcement of section  d(#M272(e)(1), interval response times must be disclosed more frequently than the biennial audit  d(#.required by section 272(d). Finally, a disclosure obligation will allow all entities to compare, in  X- d(#a timely fashion, their own service intervals with those provided to the BOC or its affiliates.VX yO- v zԍAs we indicate below, we are seeking additional comment before adopting the specific requirements of the disclosure obligation we impose in this Order.  d(#Contrary to the contentions of some BOCs, vendor management programs similar to the one  Xe- d(#jutilized by AT&T would not provide this information.|WXe yO - v ԍSee, e.g., Letter from Cyndie Eby, Executive Director, Federal Regulatory, U S West to Cheryl Leanza,  d(#Policy and Program Planning Division, Common Carrier Bureau, FCC at 2 (filed Nov. 19, 1996) (U S West Nov.  yOV"-19 Ex Parte); Bell Atlantic Oct. 16 Ex Parte at 12.| These vendor management programs  d(#provide information to a BOC customer about the service intervals the BOC provides to that  d(#customer, but do not provide comparative data about the service intervals provided to other entities, such as BOC affiliates. " tW,-(-(ZZ["Ԍ X- `243.` ` We do not agree with PacTel that the absence of discrimination found in ONA  X- d(#reports indicates that disclosure requirements are of little value in enforcing section 272(e)(1).>X yOb-ԍPacTel at 37.>  d(#kDisclosure requirements are valuable because they promote compliance and give aggrieved  d(#=competitors a basis for seeking a remedy directly from a BOC. If competitors can easily obtain  d(#data about a BOC's compliance with section 272(e)(1), this increases the likelihood that potential  d(#Odiscrimination can be detected and penalized; this, in turn, decreases the danger that  d(#discrimination will occur in the first place. Disclosure requirements also minimize the burden  d(#yon the Commission's enforcement process because entities will have the information needed to  d(#resolve disputes informally prior to submitting a complaint to the Commission. We also are not  d(#persuaded by NYNEX and Ameritech that the automation and nondiscriminatory design of their  X - d(# provisioning and maintenance procedures obviate the need for disclosure requirements.Y X yO# -ԍNYNEX Oct. 23 Ex Parte at 5; Ameritech Oct. 23 Ex Parte, Attachment.  d(#Although the BOCs' use of nondiscriminatory, automated order processing systems is important  d(#for meeting the requirements of section 272(e)(1), the existence of these systems does not  d(#guarantee that requests placed via these systems are actually completed within the requisite period  d(#[of time. Finally, we are not persuaded by the arguments of US West and PacTel that, because  d(#Lparties are able to incorporate information disclosure requirements into agreements negotiated  d(#under sections 251 and 252 of the Act, a separate information disclosure requirement is  Xy- d(#unnecessary.|Zy yO-ԍU S West Nov. 19 Ex Parte at 23; PacTel Oct. 18 Ex Parte at 4.| Section 272(e)(1) and section 251 do not govern similar activities. Section 251  Xb- d(#provides a framework that requires incumbent LECs to provide, inter alia, interconnection,  d(#unbundled network elements, and wholesale services to requesting telecommunications carriers.  d(#<In contrast, section 272(e)(1) requires BOCs to fulfill requests for telephone exchange service and  d(#exchange access from unaffiliated entities on a nondiscriminatory basis. To link compliance with  d(#section 272(e)(1) to the outcome of individual negotiations would not adequately implement  d(#Ksection 272(e)(1), particularly because the class of entities entitled to nondiscriminatory treatment  d(#under section 272(e)(1) is much broader than the class of entities who may make requests under section 251.  X-  244.` ` In response to the comments raised in the record, we conclude that we should seek  d(#[further comment on the specific information disclosure requirements proposed by AT&T in an  Xe- d(#ex parte letter filed after the official pleading cycle closed.V[ex yO!-ԍAT&T October 3 Ex Parte at 36.V In the Notice, we sought comment  XN- d(#on whether reporting requirements analogous to the Computer III and ONA reporting  d(#[requirements would be sufficient to implement section 272(e)(1). The parties are divided about  X - d(#the usefulness of service interval reporting similar to ONA reporting for implementing section  X - d(#272(e)(1)`\  yO&-ԍSee supra note REPORTCONTRO588.` and on the merits of AT&T's proposal.]`  yO- v ԍA number of other parties have also submitted Ex Parte letters in response to AT&T's proposal. Letter from  d(#Teresa Marrero, Regulatory Affairs, Teleport Communications Group to Regina Keeney, Chief, Common Carrier  yO - d(#Bureau, FCC (filed Oct. 8, 1996) (Teleport Oct. 8 Ex Parte); Letter from Edward Shakin, Regulatory Council, Bell  d(#Atlantic to Cheryl A. Leanza, Policy and Program Planning Division, Common Carrier Bureau, FCC (filed October  yO- d(# 16, 1996) (Bell Atlantic Oct. 16 Ex Parte); Letter from Gina Harrison, Director, Federal Regulatory Relations, Pacific  yOx- d(#xTelesis Group Washington to William F. Caton, Acting Secretary, FCC (filed Oct. 18, 1996) (PacTel Oct. 18 Ex  yO@- d(#Parte); Ameritech Oct. 23 Ex Parte; NYNEX Oct. 23 Ex Parte; Letter from Gina Harrison, Director, Federal  d(#,Regulatory Relations, Pacific Telesis Group Washington to William F. Caton, Acting Secretary, FCC (filed Oct. 23,  yO- d(#1996) (PacTel Oct. 23 Ex Parte); Letter from Teresa Marrero, Regulatory Affairs, Teleport Communications Group  yO- d(#to Regina Keeney, Chief, Common Carrier Bureau, FCC (filed Oct. 24, 1996) (Teleport Oct. 24 Ex Parte); Letter  d(#from Charles E. Griffin, Government Affairs Regulatory Director, AT&T to William F. Caton, Acting Secretary,  yO( -FCC (filed Oct. 24, 1996) (AT&T Oct. 24 Ex Parte). We agree with NYNEX that we should" u ],-(-(ZZy"  d(#iprovide an additional opportunity for parties to comment on the specific aspects of the disclosure  d(#requirements needed to implement section 272(e)(1); therefore, we include a Further Notice of  X-Proposed Rulemaking infra in Part XI of this Order.S^  yOs-ԍNYNEX Oct. 23 Ex Parte at 6.S  X- 245.` ` We reject at this time, however, AT&T's more expansive proposal to require BOCs  d(#to submit to the Commission the underlying data for the information they must make publicly  Xv- d(#available.]_v  yO-ԍAT&T at 37; AT&T Oct. 3 Ex Parte at 6.] The submission of data necessary to meet this requirement including, for  d(#example, every trouble report submitted to a BOC for a given period would impose a  d(#substantial administrative burden on the BOCs, and possibly on the Commission as well, and is  d(#unnecessary to enforce section 272(e)(1). We also decline to order the BOCs to publicize the  d(#response times for all entities, as suggested by AT&T and Teleport, because the standard  X -established by section 272(e)(1) is the response time given to the BOC itself and its affiliates.x`X  yO- v ԍSee AT&T Oct. 3 Ex Parte at 6; Teleport Oct. 8 Ex Parte at 8. Ameritech supports disclosures regarding  yO- d(#;the service intervals provided to BOC affiliates rather than to individual competing carriers. Ameritech Oct. 23 Ex  yOT-Parte, Attachment.x  X - B.XSection 272(e)(2) (#  X - 1.` ` Background  Xy-  246.` ` Section 272(e)(2) states that a BOC and a BOC affiliate that is subject to section  d(#251(c) "shall not provide any facilities, services, or information concerning its provision of  d(#yexchange access to [a section 272(a) affiliate] unless such facilities, services, or information are  d(#made available to other providers of interLATA services in that market on the same terms and  X- d(#conditions."va0 yO%-ԍ47 U.S.C.  272(e)(2); see supra note 272EILEC580.v In the Notice, we sought comment on the scope of the term "facilities, services,  d(#or information concerning its provision of exchange access" and the term "other providers of"va,-(-(ZZ"  X- d(#xinterLATA services in that market."Cb yOy-ԍNotice at  86.C We also sought comment on the relevance of the MFJ and  X-prior Commission proceedings, including our equal access rules, in implementing this provision.ScX yO-ԍNotice at 8687 & n.160. S  X-X 2.X` ` Comments (#`  X- 247.` ` Several parties suggest that the nondiscrimination obligation imposed on a BOC  Xv- d(#by section 272(e)(2) extends to ISPs.ndv yO -ԍITAA at 24-25; MFS at 2728. Contra U S West at 4041.n U S West indicates that the term "in that market" implies  X_- d(#a geographic limitation coextensive with the geographic territory served by a BOC affiliate.@e_x yO -ԍU S West at 41.@  XH- d(#BOCs generally argue that implementing regulations under section 272(e)(2) are unnecessary.=fH yO-ԍ X` hp x (#%'0*,.8135@8:- v yԍComputer III Phase II Reconsideration Order, 3 FCC Rcd at 1164,  116 (1988). Although the Ninth Circuit  yO- d(#vacated this order, the Commission reimposed the network disclosure requirements on remand. BOC Safeguards  yO-Order, 6 FCC Rcd at 76027604  6870. We emphasize that if a BOC preferentially  d(#!disclosed information to its section 272 affiliate or withheld information from competing  d(#providers of interLATA services, that BOC would be in violation of section 272(e)(2). Our rules  d(#implementing section 251(c)(5) explicitly prohibit this behavior: they require LECs to make  d(#network disclosures according to a specific timetable, and prohibit preferential disclosures in  Xb- d(#\advance of that timetable.| b yO - v ԍDISCLNOTE2In general, public notice is required under section 251(c)(5) at the "make/buy" point, but at a minimum of  d(#;12 months prior to implementation; if the planned changes can be implemented within 12 months of the make/buy  yO{"- d(#Ypoint, public notice must be given at least six months prior to implementation. Second Interconnection Order at  214,224. We do not address IDCMA's concerns regarding information"bz|,-(-(ZZ"  d(#disclosures for manufacturers because section 273 addresses the needs of manufacturers in detail,  X-and we are addressing the implementation of section 273 in a separate proceeding.} yOb- v ԍSee IDCMA at 67 (arguing that current network disclosure rules are insufficient for manufacturers);  yO*-Manufacturing NPRM.  X- C.XSection 272(e)(3) (#  X- 1.` ` Background  X_-  B254.` ` Section 272(e)(3) provides that a BOC and a BOC affiliate that is subject to the  d(#>requirements of section 251(c) "shall charge [a section 272(a) affiliate], or impute to itself (if  d(#using the access for its provision of its own services), an amount for access to its telephone  d(#iexchange service and exchange access that is no less than the amount charged to any unaffiliated  X - d(#Zinterexchange carriers for such service."v~  yO-ԍ47 U.S.C.  272(e)(3); see supra note 272EILEC580.v In the Notice, we tentatively concluded that a section  d(#=272 affiliate's purchase of telephone exchange service and exchange access at tariffed rates, or  d(#[imputation of tariffed rates to the BOC, would be sufficient to implement section 272(e)(3). We  d(#jadditionally sought comment regarding the appropriate mechanism to enforce this provision in  X -the absence of tariffed rates.X  yO- v ԍNotice at  88. We also sought comment regarding the accounting safeguards necessary to implement this  yO- d(#/provision in our companion Accounting Safeguards NPRM, 11 FCC Rcd at 9091,  79, and address those  yO-requirements in the Accounting Safeguards Order at parts III.B.2.c and IV.B.1.b.  Xy-X 2.` ` Comments (#  XK-  %255.` ` Commenters overwhelmingly support our tentative conclusion.XK yO- v zԍE.g., Ameritech Reply at 31; Bell Atlantic, Exhibit 1 at 89; PacTel Reply at 20; USTA at 2627; Sprint  d(#hat 45; TRA at 18. Some parties support the Commission's tentative conclusion, but also argue additional regulations  yO\-are necessary. E.g., AT&T 3940; MCI at 43; ITAA at 26. Several  d(#commenters indicate that the purchase of interconnection or unbundled elements at prices that are  d(#javailable on a nondiscriminatory basis from an agreement negotiated pursuant to sections 252,  X- d(#251(c)(2) and (c)(3) would also satisfy section 272(e)(3).j  yO -ԍITAA at 26; VoiceTel at 1516; Ameritech Reply at 3132.j Several parties suggest additional  X- d(#safeguards in addition to the use of tariffed rates.W  yO #-ԍAT&T at 40; ALTS at 56; MCI at 4344.W MCI argues that, because access charges do  X- d(#not reflect costs, the requirements of section 272(e)(3) are meaningless if BOC affiliates are"{,-(-(ZZ"  X- d(#<allowed to price interLATA services below the price of access.> yOy-ԍMCI at 4344.> BOCs oppose these additional  X-safeguards and reject MCI's argument.X yO- v ԍSee e.g., Ameritech Reply at 31; Bell Atlantic Reply at 1215; PacTel Reply at 20; U S West Reply at 1617.  X- X3.` ` Discussion (#  X- R256.` ` We adopt our tentative conclusion that a section 272 affiliate's purchase of  d(#/telephone exchange service and exchange access at tariffed rates, or a BOC's imputation of  d(#=tariffed rates, will ensure compliance with section 272(e)(3). If a section 272 affiliate purchases  d(#telephone exchange service or exchange access at the highest price that is available on a  d(#ynondiscriminatory basis under tariff, section 272(e)(3)'s requirement that a BOC must charge its  d(#section 272 affiliate an amount for access to its telephone exchange service and exchange access  d(#that is no less than the amount charged to any unaffiliated interexchange carrier will be fulfilled.  d(#In addition, we conclude that other mechanisms are available under the Act to ensure that BOCs  X - d(#charge nondiscriminatory prices in accordance with section 272(e)(3). If a section 272 affiliate  d(#\were to acquire services or unbundled elements from a BOC at prices that are available on a  X - d(#nondiscriminatory basis under section 251, the terms of section 272(e)(3) would be met.X  yO- v jԍITAA at 26; VoiceTel at 16; Ameritech Reply at 3132. The Commission's pricing rules and interpretation  yO- d(#<of section 252(i) are currently under stay by the 8th Circuit Court of Appeals. Iowa Utilities Board v. FCC, No. 963321 (8th Cir. Oct. 15, 1996) (order granting stay pending judicial review). To  d(#zthe extent that a statement of generally available terms filed pursuant to section 271(c)(1)(B)  d(#would include prices that are available on a nondiscriminatory basis in a manner similar to  d(#Ltariffing, and a BOC's section 272 affiliate obtains access or interconnection at a price set forth  XK- d(#in the statement, this would also demonstrate compliance with section 272(e)(3). K yO- v kԍSee First Interconnection Order at  130132 (concluding that the Commission's rules under section 251  d(#/should be equally applicable to statements of generally available terms under section 271(c)(2)(B)). The  yO\- d(#Commission's pricing rules are currently under stay by the 8th Circuit Court of Appeals. Iowa Utilities Board v.  yO$-FCC. We address  d(#the appropriate allocation and valuation of these transactions for accounting purposes in our  X-companion Accounting Safeguards Order.z  yO -ԍSee Accounting Safeguards Order parts III.B.2.c and IV.B.1.b.z  X- _257.` ` We further conclude that section 272(e)(3) requires that a BOC must make volume  d(#and term discounts available on a nondiscriminatory basis to all unaffiliated interexchange  d(#carriers. We272EEXTRA1 do not agree, however, with those parties that suggest that additional requirements  d(#are necessary to implement section 272(e)(3). AT&T, for example, proposes that a BOC or  d(#section 272 affiliate pay "a price per unit of traffic that reflects the highest unit price that any"|H ,-(-(ZZQ"  X- d(#interexchange carrier pays for a like exchange or exchange access service."  yOy- v ԍAT&T at 40 (in the alternative favoring a rule that any tariff that has the effect of giving a BOC or BOC  yOA- d(#affiliate a lower charge per unit of traffic than other interexchange carriers is presumptively invalid); cf. ALTS at  d(#-5 (arguing the Commission should require the BOCs to show that nonaffiliates purchase at least 10% of a given tariff). We agree with the  d(#BOCs that AT&T's suggested rule would unfairly disadvantage BOC affiliates by preventing  d(#them from receiving volume discounts that other interexchange carriers with similar access traffic  X- d(#volumes would receive. yO -ԍAmeritech Reply at 31; Bell Atlantic Reply at 12; PacTel Reply at 20; U S West Reply at 1617. We agree with Ameritech that, because the provision of services that  d(#fall under section 272(e)(3) must either be tariffed or made publicly available under section  X- d(#[252(h), unaffiliated interexchange carriers will be able to detect discriminatory arrangements.J@ yO~ -ԍAmeritech Reply at 3132.J  d(#NWe recognize that a BOC may have an incentive to offer tariffs that, while available on a  d(#knondiscriminatory basis, are in fact tailored to its affiliate's specific size, expansion plans, or  d(#other needs. Our enforcement authority under section 271(d)(6) and section 208 are available to address this and other forms of potential discrimination by a BOC.  X - C258.` ` 272EEXTRA2We reject MCI's proposal that the Commission review the BOC section 272  d(#affiliates' prices, or profits, or both, to ensure that the section 272 affiliates' prices cover their  X - d(#Zaccess charges and all other costs.>  yOV-ԍMCI at 4344.> MCI's contention that access charges are excessive is more  X - d(#Zappropriately addressed in the Commission's forthcoming proceeding on access charge reform. `  yO-ԍAccess Charge Reform NPRM; see First Interconnection Order at  716732.  d(#We also note that the ability of competing carriers to acquire access through the purchase of  d(#unbundled elements (if those unbundled elements are properly priced) will increase pressure on  d(#the BOCs to decrease access charges, and will give competing carriers the opportunity to charge  Xb- d(#retail prices that reflect the lower cost of unbundled elements.!b  yO- v \ԍSee 47 U.S.C.  252(d)(1)(A)(i). The Commission's pricing rules interpreting section 252(d)(1)(A)(i) are  yO-currently under stay by the 8th Circuit Court of Appeals. Iowa Utilities Board v. FCC.! We interpret section 272(e)(3)  d(#Mto require the BOCs to charge nondiscriminatory prices, as indicated above, and to allocate  d(#properly the costs of exchange access according to our affiliate transaction and joint cost rules,  X- d(#as modified by our companion Accounting Safeguards Order.zH  yO"-ԍSee Accounting Safeguards Order parts III.B.2.c and IV.B.1.b.z We conclude that further rules  d(#addressing predatory pricing by BOC section 272 affiliates are not necessary because adequate  d(#mechanisms are available to address this potential problem. A BOC section 272 affiliate that  d(#charges a rate for interstate services below its incremental cost of providing such services would  X- d(#.be in violation of sections 201 and 202 of the Act.` yOJ'-ԍSee USTA Reply, Haussman Statement at 10.` Federal antitrust law also would apply to"}h,-(-(ZZ"  d(#the predatory pricing of interstate and intrastate services; and the pricing of intrastate services can  X- d(#\also be addressed at the state level. yOb- v ԍWe emphasize that these pricing limitations should not be interpreted to preclude the section 272 affiliates from offering innovative service packages and pricing plans. Further, as we indicated in the Notice, the danger of  X- d(#ksuccessful predation by BOCs in the interexchange market is small.D  yO-ԍNotice at  137.D We also reject MCI's  d(#proposal because, as the BOCs argue and MCI concedes, Commission review of affiliates' retail  X- d(#prices would place an enormous administrative burden on the Commission.N yO -ԍMCI at 44; NYNEX Reply at 25.N Such a review  d(#lwould also discourage BOC section 272 affiliates from competing on the basis of service  Xv- d(#prices.Uv@ yOg -ԍSee Bell Atlantic Reply at 12.U Because we find that adequate remedies exist to address anticompetitive pricing by  d(#BOC section 272 affiliates, we believe that regulation of these new interLATA providers' retail  d(#=prices pursuant to section 272(e)(3) would not conform with the deregulatory, procompetitive goals of the 1996 Act.  X - D.XSection 272(e)(4)(#  X -1.` ` Background  X -  259.` ` Section 272(e)(4) states that a BOC and a BOC affiliate that is subject to section  d(#251(c) "may provide any interLATA or intraLATA facilities or services to its interLATA affiliate  d(#if such services or facilities are made available to all carriers at the same rates and on the same  Xb- d(#terms and conditions, and so long as the costs are appropriately allocated."Kb yO-ԍ47 U.S.C.  272(e)(4). K In the Notice, we  d(#<sought comment regarding the scope of the term "interLATA or intraLATA facilities or services"  d(#including, for example, whether it included "information services and all facilities used in the  X-delivery of such services."C`  yO.-ԍNotice at  89.C  X- 2.` ` Comments (#`  X- 260.` ` Parties are divided on the significance of section 272(e)(4). Several BOCs argue  d(#that section 272(e)(4) should be construed as a grant of authority specifying the facilities and  X- d(#services that a BOC may provide to its section 272 affiliate.  yO4%-ԍBell Atlantic Reply at 14; NYNEX Reply at 2526; PacTel Reply at 2122; U S West Reply at 1718. NYNEX argues that there is no  d(#basis on which to limit the scope of "interLATA or intraLATA facilities or services" that a BOC"|~ ,-(-(ZZn"  X- d(#Mcan make available to its affiliate.= yOy-ԍNYNEX at 36.= AT&T, supported by Ameritech and MCI, argues that  d(#jsection 272(e)(4) applies only to services and facilities that the BOC is separately authorized to  X- d(#provide.X yO-ԍAT&T at 44; Ameritech Reply at 32; MCI Reply at n.67; MCI Nov. 1 Ex Parte at 12. PacTel argues, in the alternative, that if section 272(e)(4) is not a grant of authority,  d(#the definition of "telecommunications services" indicates that a BOC may provide wholesale,  X- d(#="carrier to carrier" interLATA services directly, rather than through the section 272 affiliate. yO= - v !ԍLetter from Michael Yourshaw, Wiley, Rein & Fielding to William F. Caton, Acting Secretary, FCC,  yO -Attachment at 12 (filed Nov. 27, 1996) (PacTel Nov. 27 Ex Parte).  d(#Parties disagree over whether, and under what circumstances, a BOC could be allowed to utilize  d(#capacity on its local network or its Official Services network to offer interLATA service to the  X_- d(#Zpublic through its affiliate.x_@ yOP- v ԍSee, e.g., AT&T at 44; ALTS at 15; Bell Atlantic Reply at 14; NYNEX Reply at 2526; PacTel Reply at  d(#;2022; U S West Reply at 1718. Under the MFJ, the BOCs were authorized to maintain interLATA networks that  d(#are used to manage the operation of local exchange services; these services are commonly known as "Official  yO- d(#wServices." See generally United States v. Western Elec. Co., 569 F. Supp. at 10971101 (D.D.C. 1983) (determining  d(#that the RBOCs, and not AT&T, should own the Official Services networks) (subsequent history omitted). These  d(#networks perform various support functions, such as connecting directory assistance operators in different LATAs  yO-with customers and monitoring and controlling trunks and switches. Id. at n.179. Finally, parties dispute the extent to which section 272(e)(4) applies  XH-to ISPs.XH  yOy- v ԍE4INTERLATASERVDEFTwo BOCs argue that the definition of interLATA service precludes including information services within  d(#Zthe scope of "interLATA or intraLATA facilities or services." PacTel at 38; U S West at 42. ITAA and Sprint believe that section 272(e)(4) applies to ISPs. ITAA at 2425; Sprint at 45.  X - 3.` ` Discussion  X -  261.` ` We conclude that section 272(e)(4) does not alter the requirements of sections 271  d(#\and 272(a). Section 272(e)(4) is not a grant of authority for BOCs to provide "interLATA or  d(#intraLATA facilities or services" in contravention of the scheme governing BOC provision of in d(#Zregion interLATA services in section 271 or the requirement that these services must be provided  X- d(# through a separate affiliate in section 272(a). yO- v ԍAT&T at 4244. We note that the record supports the Commission's tentative conclusion that section  yO -272(e)(1) is not a grant of authority. See supra paragraph E1-NOTAGRANT239. Section 272(e)(4) is intended to ensure the  d(#Lnondiscriminatory provision of services that the BOCs are authorized to offer directly, and not  d(#through an affiliate, such as those services exempted from section 271 prior to the sunset of the  XK- d(#separate affiliate requirement.QXK yO$- v /ԍFor example, section 272(e)(4) requires BOCs to provide on a nondiscriminatory basis "network control  d(#;signalling," which is an incidental service exempted from the section 271 approval process under section 271(b)(3). 47 U.S.C.  271(b)(3), (g)(6).Q Like the other subsections of section 272, section 272(e)(4)"K,-(-(ZZg"  d(#prescribes the manner in which a BOC must offer services and facilities it is authorized to  X-provide. yOb- v ԍWe note that, by its terms, section 272(e)(4) applies only to services and facilities that a BOC provides to its section 272 affiliate.  X-  `262.` ` We find no basis in the 1996 Act for the BOCs' argument that section 272(e)(4)  X- d(#is a grant of authority for the BOCs to provide interLATA services and facilities.  yOu- v ԍBell Atlantic Reply at 14; NYNEX Reply at 2526; PacTel Reply at 2122; U S West Reply at 1718; Bell  yO= -Atlantic Sept. 27 Ex Parte at 2; PacTel October 18 Ex Parte. By its terms,  d(#Zsection 272(e)(4) contains no reference to the provisions of section 271 governing BOC entry into  d(#inregion interLATA services. Therefore, interpreting section 272(e)(4) as an immediate and  X_- d(#independent grant of authority that allows BOCs to provide "interLATA or intraLATA facilities  XH- d(#or services,"]Hx yOq-ԍ47 U.S.C.  272(e)(4) (emphasis added). ] even where such provision is prohibited by other sections of the statute, would  d(#>contravene the requirement of section 271 that BOCs receive Commission approval prior to  X -providing these services.G  yO-ԍ47 U.S.C.  271(d).G  X - 263.` ` We are also unpersuaded by PacTel's alternative argument that section 272(e)(4)  d(#is not a grant of authority, but that section 272 allows the BOCs to provide wholesale, "carrier  X - d(#=to carrier" interLATA services directly, rather than through the section 272 affiliate.V  yO-ԍPacTel Nov. 27 Ex Parte at 12.V PacTel  d(#states that section 271 requires BOCs to obtain authorization from the Commission before  d(#providing "interLATA services," but, in contrast, section 272(a)(2)(B) only requires BOCs to  d(#offer interLATA "telecommunications service" through a separate affiliate. PacTel also states that  d(#>the definition of "interLATA service" is broad and makes no distinction between retail and  XK- d(#>wholesale offerings, K(  yO$- v ԍ"InterLATA services" are defined as "telecommunications" between a point located in LATA and a point  d(#Youtside that LATA. 47 U.S.C.  153(21). "Telecommunications" is defined as the "transmission between or among  d(#Kpoints specified by the user, of information of the user's choosing, without change in the form or content of the  yO|-information as sent and received." Id. at 153(43). but that "telecommunications service" is defined as "the offering of  d(#Ktelecommunications for a fee directly to the public, or to such classes of users as to be effectively  X- d(#available directly to the public, regardless of the facilities used."K yO"-ԍId. at  153(46).K PacTel therefore argues that  d(#only interLATA telecommunications services offered "directly to the public" must be offered  X- d(#through a separate affiliate.T yO@&-ԍPacTel Nov. 27 Ex Parte at 2.T PacTel contends that retail services are services offered "directly  d(#ito the public" that must be offered through a section 272 affiliate, but that wholesale services may"0,-(-(ZZ"  X- d(#kbe offered from the BOC because they are not "telecommunications services.": yOy-ԍId.: We reject  d(#PacTel's argument because it is inconsistent with language of section 251(c)(4) and because the  d(#legislative history indicates that the definition of telecommunications services is intended to  d(#=clarify that telecommunications services are common carrier services, which include wholesale services to other carriers.  Xv- A264.` ` A comparison between the definitions relied upon by PacTel and the language of  d(#isection 251(c)(4) leads us to conclude that wholesale services are not excluded from the definition  d(#=of "telecommunications service." Unlike the definition of telecommunications service, section  d(#?251(c)(4) explicitly uses the terms "retail" and "wholesale." Section 251(c)(4) states that  d(#incumbent LECs must offer, "at wholesale rates any telecommunications service that the carrier  X - d(#provides at retail to subscribers who are not telecommunications carriers..."J X yO -ԍ47 U.S.C.  251(c)(4).J This language  d(#implicitly recognizes that some telecommunications services are wholesale services. If this were not the case, the qualifying phrase "that the carrier provides at retail" would be superfluous.  X - 2265.` ` The legislative history and the definition of common carriage further support this  d(#conclusion. The Joint Explanatory Statement states that the definition of telecommunications  d(#yservice "recognize[s] the distinction between common carrier offerings that are provided to the  Xb- d(#=public. . . and private services."Tb yO-ԍJoint Explanatory Statement at 115.T Therefore, the term "telecommunications service" was not  d(#intended to create a retail/wholesale distinction, but rather a distinction between common and  d(#?private carriage. Common carrier services include services offered to other carriers. For  d(#.example, exchange access service is offered on a common carrier basis, but is offered primarily  X- d(#to other carriers.PXx yO/- v ԍSee 47 C.F.R.  69; see generally MTS and WATS Market Structure, Phase I, CC Docket 7872, Third  d(#Report and Order, 93 FCC 2d 241,  13, 23 (1982) (access charges are regulated services and include "carrier's carrier" services).P In addition, both the Commission's rules and the common law have held that  d(#offering a service to the public is an element of common carriage. The Commission's rules  d(#define a "communication common carrier" as "any person engaged in rendering communication  X- d(#for hire to the public,"E yO !-ԍ47 C.F.R.  21.2.E and the courts have held that the indiscriminate offering of a service to  X- d(#the public is an essential element of common carriage.(  yO#- v >ԍNARUC v. FCC, 525 F.2d 630, 641 (D.C. Cir. 1976) (NARUC I) (citing Semon v. Royal Indemnity Co., 279 F.2d 737, 739 (5th Cir. 1960)). Neither the Commission nor the courts,  X- d(#however, has construed "the public" as limited to endusers of a service. In NARUC I, the Court  d(#=of Appeals for the D.C. Circuit held that an entity may qualify as a common carrier even if "the  d(#Znature of the service rendered is sufficiently specialized as to be of possible use to only a fraction"e ,-(-(ZZ1"  X- d(#of the total population." yOy- v ԍNARUC I, 525 F.2d at 641. See also Southwestern Bell Telephone Company v. FCC, 19 F.3d 1475, 148081 (D.C. Cir. 1994) (describing the test for common carriage). In light of the statutory language of section 251(c)(4), legislative  d(#{history, Commission precedent, and the common law, we decline to limit the definition of telecommunications services to retail services.  X-   266.` ` If a BOC wishes to utilize the capacity on its Official Services network to provide  d(#interLATA services to other carriers or to endusers, it must do so in accordance with the  d(#requirements of the 1996 Act and our rules. Specifically, the BOC must provide inregion,  d(#interLATA services through a section 272 affiliate as required by section 272(a). If a BOC,  d(#therefore, seeks to transfer ownership of its Official Services network to its section 272 affiliate,  X1- d(#it must ensure that the transfer takes place in a nondiscriminatory manner, as explained supra in  X -part V.C, and must comport with our affiliate transaction rules.  yO - v >ԍ47 C.F.R.  32.27(b). See also infra part VIII.B for a discussion of the limitations on a BOC's transfer of local bottleneck facilities.  X -  % 267.` ` Finally, although the term "interLATA services" includes both interLATA  X - d(#information services and interLATA telecommunications services, x yO-ԍSee supra note E4INTERLATASERVDEF668. We discuss the definition of interLATA services supra at part III.A.1. we conclude that ISPs are  d(#not entitled to nondiscriminatory treatment under section 272(e)(4). The definitional sections of  d(#\the Act make clear that the term "carriers" is synonymous with the term "common carriers,"  X- d(#=which does not include ISPs.R yOI-ԍSee 47 U.S.C.  153(10).R Therefore, the requirement that the BOCs provide interLATA  d(#or intraLATA facilities or services to "all carriers" on a nondiscriminatory basis does not extend  Xb-to ISPs under section 272(e)(4).b yO- v ԍBut cf. ITAA at 2425 (arguing that, as in section 272(e)(2), section 272(f) demonstrates that all subsections of 272(e) apply to ISPs).  X4- E.XSunset of Subsections 272(e)(2) and (4) (#  X-X 1.X` ` Background (#`  X-  268.` ` The Notice sought comment regarding how to reconcile an apparent conflict  d(#between sections 272(e) and 272(f). We noted that subsections 272(e)(2) and (e)(4) establish  X- d(#<standards that refer to BOC affiliates.H X  yOK$- v ԍSection 272(e)(2) states that the BOC and its affiliate subject to section 251(c) "shall not provide any  yO%- d(#wfacilities, services, or information concerning its provision of exchange access to the affiliate described in subsection  yO%- d(#(a) . . . unless such facilities, services, or information are made available to other providers of interLATA services  d(#in that market on the same terms and conditions." 47 U.S.C.  272(e)(2) (emphasis added). Section 272(e)(4) states"&,-(-(&"  d(#the BOC or its affiliate subject to section 251(c) "may provide any interLATA or intraLATA facilities or services  yOX- d(#to its interLATA affiliate if such services or facilities are made available to all carriers at the same rates and on the  yO -same terms and conditions, and so long as the costs are appropriately allocated." Id.  272(e)(4) (emphasis added).H On the one hand, those sections could be interpreted as",-(-(ZZp"  d(#xsubject to sunset because they depend on the existence of a separate affiliate. On the other hand,  X- d(#Lsection 272(f) specifically exempts section 272(e) from the sunset requirements. yO- v jԍSection 272(f)(1) states: "The provisions of this section (other than subsection (e)) shall cease to apply with  d(#wrespect to manufacturing activities or the interLATA telecommunications services of a [BOC] 3 years after the date  d(#such [BOC] or any [BOC] affiliate is authorized to provide interLATA telecommunications services under section  d(#271(d), unless the Commission extends such 3year period by rule or order." 47 U.S.C. 272(f)(1) (emphasis  d(#added). Section 272(f)(2) contains similar language regarding section 272(e) in relation to the fouryear sunset period  yOj -for information services. Id.  272(f)(2). We sought  d(#icomment regarding whether Congress intended to eliminate the requirements of sections 272(e)(2)  d(#and (e)(4) once the BOCs were no longer required to maintain separate affiliates under section  X-272(a).C`  yO-ԍNotice at  80.C  Xv-X 2.X` ` Comments (#`  XH-  269.` ` Several BOCs contend that sections 272(e)(2) and (e)(4) cease to have meaning  X1- d(#once the separate affiliate requirements of section 272 expire.z1  yO-ԍBell Atlantic, Exhibit 1 at 8; PacTel at 3536; SBC at 10; USTA at 2526.z In contrast, Teleport and ITAA  d(#yargue that the language of section 272(f) makes clear that Congress intended to exempt section  X - d(#i272(e) in its entirety from the sunset requirements.O  yO4-ԍTeleport at 1718; ITAA at 25.O MCI and TRA argue that subsections (e)(2)  X -and (e)(4) could be applied as long as a BOC utilized an affiliate to offer interLATA services.F  yO-ԍMCI at 41; TRA at 17.F  X -X 3.X` ` Discussion (#`  X-   270.` ` We find that the plain language of the statute compels us to conclude that sections  d(#L272(e)(2) and 272(e)(4) can be applied to a BOC after sunset only if that BOC retains a separate  d(#affiliate. The nondiscrimination obligations imposed by subsections (e)(2) and (e)(4) are framed  d(#in reference to a BOC's treatment of its affiliates. In contrast, the nondiscrimination obligations  d(#imposed by subsections (e)(1) and (e)(3) are framed in reference to the BOC "itself" as well as  d(#the BOC affiliate. If a BOC does not maintain a separate affiliate, subsections (e)(2) and (e)(4)  d(#cannot be applied because there will be no frame of reference for the BOC's conduct. Section  d(#272(f), however, exempts section 272(e) from sunset without qualification. In order to give  d(#meaning to section 272(f), we conclude that subsections (e)(2) and (e)(4) will apply to a BOC's",-(-(ZZ"  X- d(#jconduct so long as that BOC maintains a separate affiliate.S yOy-ԍAccord MCI at 41; TRA at 17.S Subsections (e)(1) and (e)(3) will continue to apply in all events.  X- 271.` ` A number of safeguards will be available to prevent discriminatory behavior by  d(#BOCs after the separate affiliate requirements of section 272 cease to apply. As we explain in  d(#detail above, section 251(c)(5), section 251(g), and the Commission's rules imposing network  d(#]disclosure and equal access requirements oblige BOCs to provide exchange access on a  X_- d(#nondiscriminatory basis.K_X yOh -ԍSee supra part VI.B.K In addition, intraLATA services and facilities must be provided on  d(#a nondiscriminatory basis under section 251(c)(3), and the provision of interLATA services and  d(#[facilities will continue to be governed by the nondiscrimination provisions of sections 201 and  d(#202 of the Act. In addition, once local competition develops, it will provide a check on the  d(#LBOCs' discriminatory behavior because competitors of the BOC affiliates will be able to turn to other carriers for local exchange service and exchange access.>!}K .J:\POLICY\SAFE\ORDER\MASTER\MARKET.LIK. >  X-6.#XP PxXP# HVII. JOINT MARKETING  Xy-\  Xb-A.Joint Marketing Under Section 271(e)   XK-  X4- 1.` ` Background  X- p272.` ` Section 271(e)(1) limits the ability of certain interexchange carriers to market  d(#<interLATA services jointly with BOC local services purchased for resale. Specifically, the Hstatute states that:  p S Until a Bell operating company is authorized pursuant to [section 271(d)] to  Pprovide interLATA services in an inregion State, or until 36 months have passed  ~since the date of enactment of the Telecommunications Act of 1996, whichever  `is earlier, a telecommunications carrier that serves greater than 5 percent of the  Nation's presubscribed access lines may not jointly market in such State telephone  Aexchange service obtained from such company pursuant to section 251(c)(4) with interLATA services offered by that telecommunications carrier.  S   X- d(#In the Notice, we sought comment on whether we should interpret section 271(e) to prohibit, for  d(#example, promoting the availability of interLATA services and local exchange services in the  X - d(#same advertisement, making these services available from a single source, or providing bundling  X!- d(#discounts for the purchase of both services.C! yOF'-ԍNotice at  91.C We also observed that the clear language of the"!x,-(-(ZZ "  X- d(#statute only restricts covered interexchange carriers (i.e., those carriers that fall within the scope  X- d(#of section 271(e) of the Act) from joint marketing interLATA services and BOC local services  X- d(#Kpurchased for resale.]X yOM- v LԍId. Only three interexchange carriers are covered by section 271(e) AT&T, MCI, and Sprint. See Federal  yO- d(#Communications Commission, CCB, Industry Analysis Division, Long Distance Market Shares: Fourth Quarter 1995, Tbl. 4 (March 1996).] Thus, section 271(e) does not preclude these interexchange carriers from  d(#jointly marketing local exchange services provided over their own facilities, or through the  X- d(#purchase of unbundled network elements pursuant to section 251(c)(3).: yO? -ԍId.: Nor does section  d(#l271(e) prohibit those interexchange carriers from "marketing" BOC resold local exchange  d(#services. Rather, the prohibition is limited to "jointly marketing" BOC resold local services with interLATA services.   X3- 2.` ` Comments  X - "273.` ` Most commenters agree that bundling local and interLATA services constitutes the  X - d(#type of joint marketing that is prohibited by section 271(e). x yO-ԍSee, e.g., MCI at 4647; Ameritech at 4849; PacTel at 40; TRA at 1819; Bell Atlantic Reply at 1011. MCI argues, however, that the  d(#>scope of "joint marketing" includes only those activities that involve the combining of two  d(#categories of services in a package for a bundled price or a package that constitutes a single  X - d(#?product.A  yOb-ԍMCI Reply at 27.A Thus, according to MCI, the other restrictions proposed in the Notice i.e.,  d(#promoting the availability of interLATA services and local exchange services in the same  X{- d(#[advertisement and making such services available from a single source are not prohibited.D{ yO-ԍId. at 2627.D  Xd- d(#-The BOCs and USTA oppose MCI's interpretation of section 271(e).d(  yO=- v ԍSee, e.g., SBC Reply at 19 n.31; NYNEX at 1314; USTA Reply at 1516; PacTel Reply at 24 n.26; Ameritech Reply at 27; Bell Atlantic Reply at 10. They argue that allowing  d(#a covered interexchange carrier to produce joint advertisements and to sell both local and  X6-interLATA service from a single source would render section 271(e) meaningless.@6  yOg -ԍId.@  X- 274.` ` AT&T further contends that "marketing" should only encompass efforts by a firm  d(#to persuade a potential customer to purchase or subscribe to its services, and not "customer care"  X- d(#]that occurs after the customer has signed up.? yO%-ԍAT&T at 5354.? Such an interpretation would enable an  d(#jinterexchange carrier subject to section 271(e) to deal jointly with existing customers who have",-(-(ZZ"  d(#=purchased both services by providing a single bill, or establishing a single pointofcontact to  X- d(#respond to maintenance and other customer inquiries.@ yOb-ԍId.@ The BOCs and USTA, on the other  d(#khand, contend that AT&T's proposal deliberately ignores the reality of telecommunications  X- d(#marketing.X yO- v ԍSBC Reply at 1819; see also USTA Reply at 1516; PacTel Reply at 24 n.26; Ameritech Reply at 27; Bell Atlantic Reply at 1011. They argue that telecommunications providers must constantly engage in marketing  d(#activities, even to existing subscribers, in order to win business for new services and to maintain  X-goodwill.D yO -ԍSBC Reply at 1819.D  X_- 275.` ` Most commenters agree with our observation in the Notice that section 271(e) only  d(#{restricts joint marketing of interLATA services and local exchange services that covered  X1- d(#interexchange carriers purchase for resale pursuant to section 251(c)(4).r1@ yO"-ԍSee, e.g., AT&T at 53; Sprint at 4748; MCI Reply at 2930.r USTA argues,  d(#however, that interexchange carriers should also be prohibited from jointly marketing local  d(#jexchange services provided through the purchase of unbundled network elements pursuant to  d(#section 251(c)(3), because the purchase of such elements from a BOC is the equivalent of  X - d(#kpurchasing a BOC's local exchange services for resale.<  yOV-ԍUSTA at 29.< Ameritech agrees that the section  d(#271(e) jointmarketing prohibition only applies to BOC services purchased for resale under  d(#section 251(c)(4), but argues that the Commission should clarify that interexchange carriers may  d(#jointly market local and interLATA services only to the extent that their joint marketing  d(#campaign does not reach any customers to whom they provide BOC resold local exchange  Xb-services.Db`  yOs-ԍAmeritech at 4950.D  X4- 3.` ` Discussion  X-  276.` ` Scope of section 271(e).  PARA5 We agree with the consensus of the commenters that the  d(#language in section 271(e) is clear the joint marketing prohibition applies only to the marketing  d(#of interLATA services together with BOC local exchange services purchased for resale pursuant  X- d(#to section 251(c)(4).  yOb#-ԍSee e.g., AT&T at 53; Sprint at 4748; MCI at 4546; Ameritech at 4950. We refer to the latter services in the balance of this discussion as "BOC  X- d(#resold local services." In the First Interconnection Order, we stated that the terms of section  X- d(#271(e) do not prevent affected interexchange carriers from marketing interLATA services jointly  X|- d(#with local exchange services provided through the use of unbundled network elements obtained"| ,-(-(ZZn"  X- d(#\pursuant to section 251(c)(3).e yOy-ԍFirst Interconnection Order at  335.e We affirm that conclusion and, accordingly, reject USTA's  d(#Lsuggestion that we extend the section 271(e) restriction to apply to the joint marketing of such  X- d(#services.<X yO-ԍUSTA at 29.< We find that the express text of the statute limits the prohibition to BOC resold local  d(#services obtained pursuant to section 251(c)(4) and we decline to extend the restriction beyond  d(#the limits mandated by Congress. We further conclude, for the same reason, that the joint  d(#Lmarketing restriction does not apply if the covered interexchange carrier provides local service  d(#=over its own facilities, or by reselling local exchange services purchased from a local exchange carrier that is not a BOC.  X1- @277.` ` Specific Joint Marketing Restrictions. We conclude that Congress adopted the joint  d(#marketing restriction in section 271(e) in order to limit the ability of covered interexchange  d(#icarriers to provide "onestopshopping" of certain services until the BOC is authorized to provide  X - d(#interLATA service in the same territory.~X  yO- v ԍSee, e.g., S. Rep. No. 10423 104th Cong., 1st Sess. 43 (1995) (stating that the Committee intends [section  d(#271(e)] to provide parity between the Bell operating companies and other telecommunications carriers in their ability to offer 'one stop shopping' for telecommunications services). ~ We agree with the majority of commenters that  X - d(#bundling BOC resold local services and interLATA services (including interLATA  X - d(#=telecommunications and interLATA information services  yOw- v ]ԍSee supra part III.A.1 (defining "interLATA services" to include interLATA telecommunications and interLATA information services).) into a package that can be sold in  d(#a single transaction constitutes the type of joint marketing that Congress intended to restrict by  X- d(#enacting section 271(e). `  yO- v ԍ As the Senate Commerce Committee observed, "the ability to bundle [a variety of telecommunications  d(#services] into a single package to create "onestopshopping" will be a significant competitive marketing tool." S.  yO1- d(#Rep. No. 10423 at 2223. See MCI at 4647; Ameritech at 4849; PacTel at 40; TRA at 1819; Bell Atlantic Reply at 1011. We define "bundling" to mean offering BOC resold local exchange  Xy- d(#-services and interLATA services as a package under an integrated pricing schedule.yH  yOr-ԍSee generally Computer II Final Order, 77 FCC 2d at 442; 47 C.F.R.  64.702(e). Thus, we  d(#find that section 271(e) restricts covered interexchange carriers from, among other things,  XK- d(#providing a discount if a customer purchases both interLATA services and BOC resold local  d(#services, conditioning the purchase of one type of service on the purchase of the other, and  X- d(#-offering both interLATA services and BOC resold local services as a single combined product.U yO#-ԍSee, e.g., MCI at 4647.U  d(#ZThis restriction applies until the BOC receives authorization under section 271 to offer interLATA service in an inregion state, or February 8, 1999, whichever comes first. "h,-(-(ZZ"Ԍ X- Q278.` ` We also conclude that section 271(e) bars covered interexchange carriers from  d(#marketing interLATA services and BOC resold local services to consumers through a single  d(#transaction. We define a "single transaction" to include, at a minimum, the use of the same sales  X- d(#agent to market both products to the same customer during a single communication. Although  d(#\requiring separate transactions for different types of services might preclude interexchange  X- d(#.carriers from taking advantage of economies of scale,@ yO-ԍId.@ we agree with those commenters who  d(#argue that such a restriction is an essential element of the joint marketing prohibition in section  X_- d(#271(e) during the period the limitation remains in effect._X yOh - v ԍSee generally SBC Reply at 19 n.31; NYNEX at 1314; USTA Reply at 1516; Ameritech Reply at 27; Bell Atlantic Reply at 10. We reject the suggestion of some  d(#kBOCs that the section 271(e) restriction requires covered interexchange carriers to establish  X1- d(#separate sales forces for marketing interLATA services and BOC resold local services. 1 yO- v kԍSee, e.g., Letter from Michael Kellogg, Counsel for Bell Atlantic, to Christopher Wright, Deputy General  yOZ- d(#Counsel, FCC at 4 (filed Dec. 9, 1996) (Bell Atlantic Dec. 9 Ex Parte); Letter from Robert Pettit, Counsel for Pacific  yO"- d(#xTelesis Group, to Christopher Wright, Deputy General Counsel, FCC at 6 (filed Dec. 9, 1996) (PacTel Dec. 9 Ex  yO-Parte). We  d(#agree with the commenting parties that claim neither the statute nor the legislative history  X - d(#indicates that Congress intended to impose such a requirement.X  yOL- v ԍSee, e.g., Letter from Frank W. Krogh, MCI, to Christopher Wright, Deputy General Counsel, FCC at 12  yO- d(#(filed Dec. 13, 1996) (MCI Dec. 13 Ex Parte); Letter from E. E. Estey, Government Affairs Vice President, AT&T,  yO-to William F. Caton, Acting Secretary, FCC at 4 (filed Dec. 13, 1996) (AT&T Dec. 13 Ex Parte). Moreover, in our view,  d(#requiring a separate sales force is not necessary to accomplish the primary congressional objective  d(#Lof barring the affected interexchange carrier from offering "onestop shopping" for interLATA  d(#jand BOC resold local services. Thus, a single agent is permitted to market interLATA services  d(#in the context of one communication, and to market BOC resold local services to the same potential customer in the context of a separate communication.  Xb- 279.` ` The application of the section 271(e) joint marketing restriction to advertising  d(#implicates constitutional issues. We are aware of our obligation under Supreme Court precedent  X4- d(#hto construe the statute "where fairly possible so as to avoid substantial constitutional questions."4  yO-ԍ United States v. XCitement Video, 115 S.Ct. 464, 467, 469 (1994).  d(#[In the advertising context, the Supreme Court has held that the First Amendment protects "the  d(#dissemination of truthful and nonmisleading commercial messages about lawful products and  X- d(#services."H  yO#-ԍSee 44 Liquormart, Inc. v. Rhode Island, 116 S.Ct. 1495, 1504 (1996). We must be careful, therefore, not to construe section 271(e) as imposing an  d(#advertising restriction that is overly broad. The fact that section 271(e) permits a covered  X- d(#interexchange carrier to offer and market separately both interLATA services and BOC resold  X- d(#services and also permits such carriers to offer and market jointly interLATA services and local",-(-(ZZ"  X- d(#services provided through means other than BOC resold local services (e.g., through the use of  d(#Munbundled network elements, over its own facilities, or by reselling local exchange services  d(#purchased from a local exchange carrier that is not a BOC) makes the task of crafting an effective  X- d(#advertising restriction particularly difficult. For example, we see no lawful basis for restricting  d(#<a covered interexchange carrier's right to advertise a combined offering of local and long distance  d(#\services, if it provides local service through means other than reselling BOC local exchange  Xv- d(#service.kv yO-ԍSee paragraph PARA5276, supra.k In addition, we cannot adopt a blanket rule that prohibits interexchange carriers from  d(#publicizing in one advertisement that they offer interLATA services and publicizing in a separate  d(#advertisement that they offer BOC resold local services. As MCI points out, the statute permits  d(#interexchange carriers to offer both types of services through the same corporate entity and under  X - d(#ythe same brand name.; X yO# -ԍMCI at 46.; Thus, such advertisements would be truthful statements about lawful activities.  X - B280.` ` A closer question is whether we may ban a covered interexchange carrier from  d(#claiming in a single advertisement that it offers both interLATA services and local services in  d(#instances where the carrier intends to furnish the latter through BOC resold local services, which  d(#it is authorized to market only on a standalone basis. On the one hand, such an advertisement  d(#ywould contain truthful statements about services that the interexchange carrier is authorized to  d(#provide. On the other hand, such an advertisement may be inconsistent with the section 271(e)  d(#prohibition against jointly marketing the two types of services. As some BOCs appear to  d(#recognize, however, the principal concern with the promotion of both services in a single  d(#advertisement is that it may suggest "to consumers that the services are available jointly as a  X- d(#package when in fact they are not."Z yO-ԍBell Atlantic Dec. 9 Ex Parte at 4.Z We agree with these commenters that the First  d(#Amendment does not confer the right to deceive the public. Indeed, the Supreme Court has  d(#Nemphasized that the First Amendment does not prevent the government from regulating  X- d(#-commercial speech to avoid such deceptions.dx yO-ԍ44 Liquormart, 116 S.Ct. at 1505 n.7, 1506. d Further, the Court has held that the government  d(#"may require commercial messages to appear in such a form, or include such additional  X- d(# information, warnings and disclaimers, as are necessary to prevent its being deceptive."r yOL!-ԍId. at 1506 (internal quotation marks omitted).r  d(#Consistent with this precedent, we conclude that a covered interexchange carrier may advertise  d(#[the availability of interLATA services and BOC resold local services in a single advertisement,  d(#>but such carrier may not mislead the public by stating or implying that it may offer bundled  d(#{packages of interLATA service and BOC resold service, or that it can provide "onestop  d(#Zshopping" of both services through a single transaction. As discussed above, both activities are prohibited under section 271(e). " ,-(-(ZZ"Ԍ X- ԙ281.` ` We further conclude that the joint marketing restriction in section 271(e) applies  d(#only to activities that take place prior to the customer's decision to subscribe. We agree with  d(#/AT&T that, after a potential customer subscribes to both interLATA and BOC resold local  d(#services from a covered interexchange carrier, that carrier should be permitted to provide joint  X- d(#"customer care" (i.e., a single bill for both BOC resold local services and interLATA services,  X- d(#and a single pointofcontact for maintenance and repairs).? yO-ԍAT&T at 5354.? Such activities are postmarketing  d(#yactivities. To impose additional prohibitions on postmarketing activities would add additional  d(#jburdens not required by the statute. Furthermore, a rule that would require a customer to send  d(#separate payments to the same corporate entity would be confusing and burdensome, and  d(#therefore would not serve the public interest. Customers should also be permitted to make a  d(#single phone call for complaints and repairs about both local and long distance services once they  d(#have ordered both services. Because we interpret section 271(e) to apply only to activities that  d(#take place prior to a customer's decision to subscribe, we conclude that, once a customer  d(#subscribes to both local exchange and interLATA services from a carrier that is subject to the restrictions of 271(e), that carrier may market new services to an existing subscriber.  X- #282.` ` We recognize that the principles we have adopted to implement the requirements  d(#?of section 271(e) may not address all of the possible marketing strategies that a covered  d(#jinterexchange carrier might initiate to sell BOC resold local services and interLATA services to  d(#ithe public. We emphasize, however, that in enforcing this statutory section, we intend to examine  d(#the specific facts closely to ensure that covered interexchange carriers are not contravening the  d(#letter and spirit of the congressional prohibition on joint marketing by conveying the appearance of "onestop shopping" BOC resold local services and interLATA services to potential customers.  X- _B.Section 272(g)  X- 1.` ` Marketing Restrictions on BOC Section 272 Affiliates   X|-` ` a. Background  XN- ~283.` ` Section 272(g)(1) provides that a BOC affiliate may not market or sell _telephone  d(#exchange services provided by the BOC "unless that company permits other entities offering the  d(#same or similar service to market and sell its telephone exchange services." In the Notice, we  X -requested comment on what regulations, if any, are necessary to implement this provision.C X yO"-ԍNotice at  90.C ",-(-(ZZ"Ԍ X-` ` b. Comments  X- A284.` ` The BOCs, USTA, and Citizens for a Sound Economy argue that 272(g)(1) is clear  X- d(#on its face, and thus no implementing regulations are necessary. yO4- v {ԍSee, e.g., Ameritech at 46; PacTel at 39; BellSouth Reply at i; U S West Reply at 4; USTA Reply at i; Citizens for a Sound Economy Reply at 34. According to PacTel, it will  d(#kbe apparent when a section 272 affiliate is marketing and selling its affiliated BOC's services  X- d(#/because those activities will be conducted publicly.>  yO^ -ԍPacTel at 39.> Also, PacTel argues that the public  d(#disclosure requirements of section 272(b)(5) will ensure that others will know what BOC services  X_-the section 272 affiliate is marketing and selling and the applicable terms and conditions.:_ yO -ԍId.:  X1- 285.` ` AT&T, on the other hand, proposes that the Commission adopt a requirement that  d(#the BOC announce the availability and terms of any joint marketing arrangement with a BOC  d(#affiliate at least three months prior to implementing it, so that any such joint marketing  d(#opportunity is made available to affiliated and unaffiliated providers on a truly nondiscriminatory  X - d(#Zbasis.` @ yO-ԍAT&T at 55; see also Teleport Reply at 6.` Sprint asserts that the term "same or similar service" in section 272(g)(1) means not only  X - d(#the interLATA services of the affiliate, but information services as well.>  yO?-ԍSprint at 47.> Thus, the joint  d(#marketing by a BOC affiliate of information service and telephone exchange service would not  d(#be permitted unless other information service providers may jointly market those services as  Xy- d(#well.:y`  yO-ԍId.: MCI also requests that we clarify that the joint marketing provisions of section 272(g)(1)  d(#apply to the international sphere, "because BOCs already have a variety of relationships with  d(#]foreign carriers that would make it possible for a BOC interLATA affiliate to market BOC  d(#/special features available only from the BOC's local exchange platform to foreign end users  X-through a switch in the foreign country.";  yO-ԍMCI at 45.;  X-` ` c. Discussion  X- 286.` ` We agree with the BOCs that no regulations are necessary to implement section  X- d(#M272(g)(1).  yO%- v {ԍSee, e.g., Ameritech at 46; PacTel at 39; BellSouth Reply at i; U S West Reply at 4; USTA Reply at i; Citizens for a Sound Economy Reply at 34. We do not adopt the threemonth advance notice period proposed by AT&T,",-(-(ZZ"  X- d(#because it is not required by the statute.` yOy-ԍAT&T at 55; see also Teleport Reply at 4.` Nor do we believe that such a notice period is  d(#xnecessary in order for other carriers to receive nondiscriminatory treatment. As PacTel notes, any  X- d(#Nagreement between a BOC and its affiliate that enables the affiliate to market or sell BOC  d(#zservices must be conducted on an arm's length basis, reduced to writing, and made publicly  X- d(#available as required by section 272(b)(5).DX yO-ԍPacTel at 41.D Thus, under section 272(g)(1), other entities  d(#offering services that are the same or similar to services offered by the BOC affiliate would have  d(#the same opportunity to market or sell the BOC's telephone exchange service under the same conditions as the BOC affiliate.  X1- 4287.` ` We also agree with Sprint that the term "same or similar service" in section  X - d(#=272(g)(1) encompasses information services.>  yO-ԍSprint at 47.> Thus, a section 272 affiliate may not market or  d(#sell information services and BOC telephone exchange services unless the BOC permits other  X - d(#-information service providers to market and sell telephone exchange services. Finally, we decline  X - d(#to adopt MCI's requested clarification that 272(g)(1) applies to the international sphere.; x yO-ԍMCI at 45.; MCI  d(#appears to be concerned about a BOC's discriminatory provision of exchange access to foreign  X - d(#carriers. We conclude, however, that section 272(g)(1) applies only to the provision of  X- d(#"telephone exchange" service, not to the provision of "exchange access."U yOI-ԍ47 U.S.C.  272(g)(1). U Section 202 bars a  d(#BOC from unreasonable discrimination in the provision of exchange access services used to  Xb-originate and terminate domestic interstate and international toll traffic.Sb yO-ԍId. at  202.S  X4- 2.` ` Marketing Restrictions on BOCs   X-` ` a. Background  X- 288.` ` Section 272(g)(2) states that "[a BOC] may not market or sell interLATA service  X- d(#\provided by an affiliate required by this section within any of its inregion States until such  X- d(#company is authorized to provide interLATA services in such State under section 271(d)." In  d(#]the Notice, we sought comment on whether section 272(g)(2) imposes the same types of  X|-restrictions on the BOCs that section 271(e) imposes on the interexchange carriers.C|(  yOU%-ԍNotice at  91.C  Xe-"e ,-(-(ZZO"Ԍ X-` ` b. Comments  X- D 289.` ` With respect to section 272(g)(2), the BOCs argue that no implementing  X- d(#regulations are necessary.o yO4-ԍSee, e.g., BellSouth at 7; Bell Atlantic Reply at 56. o They state that, once they have received interLATA authority under  X- d(#.section 271, the BOC and its section 272 affiliate should be able to engage in all marketing and  d(#sales activities that other service providers are permitted to engage in, including advertising the  d(#availability of interLATA services combined with local exchange services, making these services  d(#available from a single source, and providing discounts for the bundled purchase of both  XH- d(#<services.eHX yOQ -ԍSee, e.g., PacTel at 40; BellSouth at 7.e In addition, they request that the Commission clarify that section 272(g) applies only  X1- d(#to the relationship between a BOC and its section 272 affiliate.m1 yO -ԍSee, e.g., NYNEX Reply at 1516; U S West Reply at 18.m Thus, the BOCs assert that  d(#they are not prohibited from aligning also known as "teaming" with a nonaffiliate that  d(#<provides interLATA services and marketing their respective services to the same customers prior  X -to receiving interLATA authority under section 271.] x yO-ԍSee, e.g., NYNEX Reply at 1516.]  X - n!290.` ` Other commenters argue that some marketing restrictions should be placed on the  d(#BOCs after section 271 authorization because of their status as incumbent local exchange  X- d(#Mcarriers. yOI- v ԍSee, e.g., CompTel at 2425; Time Warner Reply at 1819; AT&T Reply at 3031; MCI Reply at 34; NCTA Reply at 3. For example, MCI contends that BOCs should not be permitted to condition the  d(#availability of one category of service on the other, and that a discount should not be so great that  Xb- d(#xit compels the customer to purchase both services.b`  yOs- v NԍMCI Reply at 30; see also LDDS at 1617; USTA Reply, Haussman Statement at 10 (opposing MCI's suggestion). Various other commenters argue that, when  d(#[a customer calls a BOC to place an order for local service or to request a primary interexchange  d(#carrier, the BOC should be prohibited from turning such "inbound" communications into  X-marketing opportunities for its longdistance affiliate.   yO - v ԍAT&T at 58; CompTel at 24; MCI Reply at 49; Sprint Reply at 28; see also NCTA at 46 (stating that the  d(#YCommission should prohibit the BOC from conducting inbound telemarketing or referrals of its video services unless it provides the same marketing services to all cable operators and other providers of video programming in the same area).  ",-(-(ZZ("Ԍ X-` ` c. Discussion  X- "291.` ` We agree with the BOCs that no regulations are necessary to implement section  X- d(#272(g)(2). yO4-ԍSee, e.g., BellSouth at 89; Ameritech Reply at 2225; U S West Reply at 4. The statute clearly states that BOCs are prohibited from either selling or marketing  d(#xinregion interLATA services provided by a section 272 affiliate until they have received approval  X- d(#from the Commission under section 271.JX yO-ԍ47 U.S.C.  272(g)(2).J We note, however, that section 272 does not prohibit  d(#a BOC that provides outofregion interLATA services, or intraLATA toll service, from  d(#Nmarketing or selling those services in combination with local exchange services. If such  XH- d(#{advertisements reach inregion customers, however, the BOC must make it clear to those  X1- d(#customers that the advertisements do not apply to inregion interLATA services.1 yO - v ԍSee e.g., LDDS at 1516 (stating that section 272(g) ensures that the operating company would not be able to create a selffulfilling prophecy through premature advertising and marketing activities). This  X - d(#obligation is similar to the obligation discussed above, which requires covered interexchange  d(#ycarriers to disclose to consumers receiving BOC resold local service that bundled packages are  X - d(#not available to them.R @ yO-ԍSee supra part VII.A.R After a BOC receives authorization under section 271, the restriction  d(#in section 272(g)(2) is no longer applicable, and the BOC will be permitted to engage in the same type of marketing activities as other service providers.  X- #292.` ` Inbound Marketing. We conclude that BOCs must continue to inform new local  d(#exchange customers of their right to select the interLATA carrier of their choice and take the  d(#[customer's order for the interLATA carrier the customer selects. The obligation to continue to  d(#<provide such nondiscriminatory treatment stems from section 251(g) of the Act, because we have  X4- d(#not adopted any regulations to supersede these existing requirements.4 yO-ԍSee, e.g., PacTel Reply at 2425; NYNEX Oct. 23 Ex Parte at 23. Specifically, the BOCs  d(#must provide any customer who orders new local exchange service with the names and, if  d(#\requested, the telephone numbers of all of the carriers offering interexchange services in its  X- d(#-service area.`  {O - v ԍSee Investigation of Access and Divestiture Related Tariffs, CC Docket No. 831145, 101 FCC 2d 935, 950  yO -(1985); see also 47 U.S.C.  251(g). A customer orders "new service" when the customer either receives service from  X- d(#the BOC for the first time, or moves to another location within the BOC's inregion territory.  yOC#-ԍUnited States v. Western Elec. Co., 578 F.Supp 668, 67677 (D.D.C. 1983).  d(#As part of this requirement, a BOC must ensure that the names of the interexchange carriers are  X- d(#-provided in random order.J  {O&-ԍSee Investigation of Access and Divestiture Related Tariffs, 101 FCC 2d at 950. We decline to adopt NCTA's request that we extend this obligation",-(-(ZZ"  d(#kto require that BOCs inform inbound callers of other cable operators and providers of video  X- d(#services in the area,= yOb-ԍNCTA at 46.= however, because no such obligation currently exists, and no new  d(#requirement is imposed by the statute. We further conclude that the continuing obligation to  X- d(#advise new customers of other interLATA options is not incompatible with the BOCs' right to  X- d(#[market and sell the services of their section 272 affiliates under section 272(g).SX yO-ԍNYNEX Oct. 23 Ex Parte at 3.S Thus, a BOC  d(#kmay market its affiliate's interLATA services to inbound callers, provided that the BOC also  Xv-informs such customers of their right to select the interLATA carrier of their choice.:v yO -ԍId.:  XH- $293.` ` Teaming. We conclude that section 272(g) is silent with respect to the question  d(#of whether a BOC may align itself with an unaffiliated entity to provide interLATA services prior  d(#to receiving section 271 approval. We agree with the BOCs that the language of section 272(g)  d(#only restricts the BOC's ability to market or sell interLATA services "provided by an affiliate  X - d(#required by [section 272]."J x yO-ԍ47 U.S.C.  272(g)(2).J We note, however, that any equal access requirements pertaining  d(#to "teaming" activities that were imposed by the MFJ remain in effect until the BOC receives  d(#section 271 authorization. Thus, to the extent that BOCs align with nonaffiliates, they must continue to do so on a nondiscriminatory basis.  Xy- 3.` ` Section 272(g)(3) hhC  XK-` ` a. Background  X- %294.` ` Section 272(g)(3) states that "[t]he joint marketing and sale of services permitted  d(#under this subsection shall not be considered to violate the nondiscrimination provisions of  X-subsection [272](c)."J yO-ԍ47 U.S.C.  272(g)(3).J  X- ` ` b. Comments  X- Q&295.` ` During the course of this proceeding, various commenters suggested types of  X|- d(#marketing activities that fall within the scope of section 272(g)(3)+| yO#- v ԍSee, e.g., NYNEX at 1314; Letter from Robert Blau, Vice President, Executive and Federal Regulatory  yO$-Affairs, BellSouth, to William Caton, Acting Secretary, FCC at attachment 3 (BellSouth Nov. 14 Ex Parte).+ and, therefore, would not  d(#be subject to the nondiscrimination requirements in section 272(c). For example, NYNEX states  d(#that marketing activities encompassed by section 272(g) should include: sales activities (the use  d(#Mof sales channels to make customer referrals, to act as a sales agent, and to resell services);"7 ,-(-(ZZ"  d(#advertising and promotion activities; and other marketing activities (such as product development,  X- d(#[product management, market management, channel management, market research, and product  X- d(#.pricing).F yOK-ԍNYNEX at 1314.F NYNEX also suggests that the following activities do not fall within the definition  d(#of marketing: strategic planning and resource allocation, as well as the corporate responsibility  X-for coordination and oversight of all corporate functions and activities, including marketing.IX yO-ԍId. at n.13.I  Xv-` ` c. Discussion  XH- '296.` ` Some of the activities identified by the parties appear to fall clearly within the  d(#scope of section 272(g)(3) and hence would be excluded from the section 272(c)  d(#nondiscrimination requirements. For example, activities such as customer inquiries, sales  d(#functions, and ordering, appear to involve only the marketing and sale of a section 272 affiliate's  d(#\services, as permitted by section 272(g). Other activities identified by the parties, however,  d(#Lappear to be beyond the scope of section 272(g), because they may involve BOC participation  d(#in the planning, design, and development of a section 272 affiliate's offerings. In our view, such  d(#activities are not covered by the section 272(g) exception to the BOC's nondiscrimination  d(#obligations. We see no point to attempt at this time to compile an exhaustive list of the specific  d(#BOC activities that would be covered by section 272(g). We recognize that such determinations are fact specific and will need to be made on a casebycase basis.  X4- C.XInterplay Between Sections 271(e), 272(g) and Other Provisions of the Statute (#   X- 1.` ` Background  X-  (297.` ` In the Notice, we sought comment on whether the affiliate may purchase marketing  d(#services from the BOC on an arm's length basis pursuant to section 272(b)(5), or whether a BOC  d(#.and its affiliate should be required to contract jointly with an outside marketing entity for joint  X- d(#marketing of interLATA and local exchange service in order to comply with section 272(b)(3).C yO,-ԍNotice at  92.C  d(#We also sought comment on the interplay between the marketing restrictions in sections 271 and  d(#|272 and the CPNI provisions set forth in section 222 that are the subject of a separate  XN- d(#Lproceeding.FNx yOw"-ԍId. at  93.F In addition, we requested comment on whether the joint marketing provision in  d(#isection 274(c) has any bearing on how we should apply the joint marketing provisions in sections  X -271 and 272.:  yO%-ԍId.:" ,-(-(ZZ"Ԍ X-ř 2.` ` Comments  X- _)298.` ` The BOCs oppose any proposal that would require them to obtain joint marketing  X- d(#services from an unaffiliated entity. yO4-ԍSee, e.g., Ameritech at 50; Bell Atlantic at 9; NYNEX at 1417; PacTel at 41. They argue that such a requirement would directly  X- d(#contravene rights granted to them under section 272(g) and, therefore, would violate the Act.:X yO-ԍId.:  d(#They contend that section 272(b)(5) merely requires that all transactions between a BOC and its  d(#section 272 affiliate, including the provision of marketing services, be on an "armslength basis,"  X_- d(#in writing, and made available for public inspection.[_ yO -ԍSee, e.g., Bell Atlantic at 9.[ Sprint asserts that, while the statute does  d(#not require that an outside entity be used, such a requirement would make it easier for the  d(#Commission and the public to ensure that neither competition nor monopoly local ratepayers are  X -harmed by such joint activities.>  x yOC-ԍSprint at 49.>  X -  *299.` ` With respect to CPNI, NYNEX argues that a BOC should be allowed to use a  X - d(#.customer's local exchange CPNI to sell its affiliate's interLATA services to the same customer,  d(#or to transfer a customer's local exchange CPNI to its affiliate under a referral arrangement,  X - d(#provided the customer orally consents to such use of information during the call.=   yO`-ԍNYNEX at 19.= AT&T and  d(#~Time Warner assert that CPNI may be made available to a BOC affiliate only on  Xy- d(#nondiscriminatory terms, in accordance with section 272(c)(1).R y yO-ԍAT&T at 5960; Time Warner at 26.R PacTel and Time Warner assert  d(#\that the joint marketing provisions in section 272(g) do not modify the statutory provisions  XK- d(#concerning CPNI.Q K(  yO$-ԍPacTel at 41; Time Warner at 26.Q Consequently, they argue that BOCs that engage in joint marketing activities  d(#are required to comply with rules that the Commission adopts in CC Docket No. 96115 to  X- d(#implement section 222 of the 1996 Act.@   yO -ԍId.@ With respect to the interplay between sections 272(g)  d(#.and 274(c), PacTel and the Yellow Pages Publishers Association argue that section 272(g) has  d(#no bearing on section 274(c) because Congress intended to create separate requirements for  X-electronic publishing.JH  yO$-ԍPacTel at 41; YPPA at 10.J",-(-(ZZ"Ԍ X-ř 3.` ` Discussion  X-  +300.` ` As discussed above in Part IV.C, we conclude that a BOC and its affiliate are not  d(#>required to contract jointly with an outside entity in order to comply with section 272(b)(3).  d(#Thus, a BOC and its affiliate may provide marketing services for each other, provided that such  d(#-services are conducted pursuant to an arm'slength transaction, consistent with the requirements  Xv- d(#of section 272(b)(5).~v yO-ԍFor further discussion of section 272(b)(5), see supra part IV.F.~ We decline to address parties' arguments raised in this proceeding  d(#regarding the interplay between section 272(g) and either section 222 or section 274(c) to avoid  d(#kprejudging issues in our pending CPNI proceeding, CC Docket No. 96115, or our electronic  d(#publishing proceeding, CC Docket No. 96152. We emphasize that, if a BOC markets or sells  d(#the services of its section 272 affiliate pursuant to section 272(g), it must comply with the statutory requirements of section 222 and any rules promulgated thereunder. !}K   !}K   X -6 VIII. PROVISION OF LOCAL EXCHANGE AND EXCHANGE ACCESS  X -:k BY BOC AFFILIATES  Đ\  Xy- A. Background  XK- ,301.` ` In the Notice, we expressed concern that a BOC might attempt to circumvent the  d(#section 272 safeguards by transferring local exchange and exchange access facilities and  X- d(#capabilities to one of its affiliates.X yO&- v kԍNotice at  70. We note that such a transfer could occur between a BOC and any of its affiliates, not just a section 272 affiliate. We requested comment on whether we should prohibit all  X- d(#transfers of network capabilities from a BOC to an affiliate.: yOg-ԍId.: Alternatively, we sought comment  d(#on whether a BOC transfer of network capabilities to an affiliate would make that affiliate a  d(#Zsuccessor or assign of the BOC pursuant to section 3(4)(B) of the Act and, consequently, subject  X-the affiliate to the nondiscrimination requirements of section 272(c)(1) and 272(e).:@ yO-ԍId.:  X- A6-302.` ` We also requested comment on whether, if a BOC were permitted to transfer local  d(#{exchange and exchange access capabilities to an affiliate, we should exercise our general  d(#rulemaking authority to adopt regulations to prevent such an affiliate from engaging in  d(#ldiscriminatory practices, or whether existing statutory prohibitions on discrimination are  X7- d(#sufficient.F7 yO%-ԍId. at  71.F For example, we noted that BOC affiliates that provide interstate interLATA  d(#[telecommunications services already would be subject to the requirements of sections 201 and" ` ,-(-(ZZ"  X- d(#202, which are applicable to all common carriers.: yOy-ԍId.: Those obligations would not apply to  d(#information services affiliates and manufacturing affiliates, however, because they are not  X- d(#"common carriers" under the Act.:X yO-ԍId.: As an additional matter, we tentatively concluded that a  d(#BOC affiliate that is classified as an incumbent LEC would also be subject to the  X-nondiscrimination requirements of section 272(c).F yO= -ԍId. at  79.F  Xv- B.Comments  XH- .303.` ` Interexchange carriers and other potential local exchange competitors argue that  d(#Meither a BOC should be prohibited from transferring any of its local exchange and exchange  d(#access facilities or capabilities to an affiliate, or, if any transfer occurs, the affiliate should be  X - d(#considered a successor or assign that is subject to the requirements of section 272.E  x yO,- v kԍSee, e.g., Letter from Jeffrey Sinsheimer and Lesla Lehtonen, California Cable Television Association, to  yO- d(#William F. Caton, Acting Secretary, FCC, at 2 (filed Oct. 15, 1996) (CCTA Oct. 15 Ex Parte) (stating that, at a bare  yO- d(#iminimum, the FCC must act to ensure that the BOCs are not permitted to transfer hard assets such as switches or subscribers or intangible assets such as intellectual property to unregulated affiliates). E BOCs, on  d(#Zthe other hand, argue that an absolute prohibition on the transfer of network capabilities is overly  X - d(#<broad.U `  yO-ԍSee, e.g., Ameritech at 5960.U They further assert that a BOC affiliate should not be considered a successor or assign  d(#Lof the BOC merely because a transfer of network capabilities has occurred between a BOC and  d(#Lan affiliate. Rather, such affiliate should only become a successor or assign if it "substantially  X- d(#take[s] the place of the BOC in the operation of one of the BOC's core businesses."  {O1-ԍAmeritech at 60; see also BellSouth at 3334; PacTel at 2425. Because,  d(#.in their view, only substantial transfers should affect a BOC affiliate's status as a successor or  d(#assign, the BOCs contend that the real issue is what constitutes a "substantial transfer of network  XK-capabilities."RK  yO~-ԍSee, e.g., PacTel at 2526.R  X-  /304.` ` In addition, the BOCs assert that, based on the plain language of the statute, the  d(#section 272(c) safeguards only apply to the BOC or an affiliate that is a "successor or assign" of  X- d(#the BOC.U yO$-ԍSee, e.g., Ameritech at 6061.U They argue that, unlike sections 272(a) and (e), section 272(c) does not apply to  d(#OBOC affiliates merely because they qualify as incumbent LECs that are subject to the",-(-(ZZ"  X- d(#requirements of section 251(c).: yOy-ԍId.: Ameritech also requests that we clarify that a BOC affiliate  d(#will not be regulated as an incumbent LEC solely because it offers local exchange and exchange  X- d(#access services.eX yO-ԍNotice at  79; Ameritech at 58 n.68.e According to Ameritech, section 251(c) only applies to entities that meet the  X- d(#definition of incumbent LEC under section 251(h).L yOT-ԍId.L Thus, if an affiliate provides local  d(#exchange service through its own facilities or by reselling the BOC's local exchange service, it  X-would not necessarily be classified as an incumbent LEC.:x yO -ԍId.:  X_- }0305.` ` Through comments and ex parte presentations, several potential local competitors  d(#argue that BOCs also might be able to circumvent the separation requirements of section 272 by  d(#creating an integrated affiliate that offers a combination of local, intraLATA, and interLATA  X - d(#services.   yO-ԍSee, e.g., Teleport Oct. 8 Ex Parte at 2; CCTA Oct. 15 Ex Parte at 12. These parties assert that several BOCs have already submitted applications to state  d(#regulatory commissions seeking authority to provide both local exchange services and interLATA  X - d(#services through the same affiliate.n!Z  {O5- v ԍId. The Ohio and Michigan commissions confirm in their comments that they have already received requests  d(#Jfrom BOC 272 affiliates for authorization to offer local exchange services in conjunction with interLATA services. Michigan Commission at 46; Ohio Commission at 68.n According to Teleport, if such integrated affiliates are  d(#!permitted, the development of effective competition in the local exchange market will be  X - d(#jeopardized.U"  yO)-ԍTeleport Oct. 8 Ex Parte at 5.U One of Teleport's concerns is that the BOC or its parent may choose to upgrade  d(#.the section 272 affiliate's network rather than the incumbent LEC network in order to avoid the  d(#<obligation imposed by section 251(c) of the Act to offer such facilities, and the new services they  Xy- d(#are capable of providing, to their competitors.^#yJ  yOt-ԍTeleport at 5; see also AT&T at 2122. ^ Thus, potential local competitors urge us either  d(#{to clarify that the Act prohibits a BOC from creating such an integrated affiliate or, in the  XK-alternative, to use our discretionary authority to prevent such activities.$XK yO!- v ԍE.g., Teleport at 713; NCTA at 10; Time Warner Reply at 19; CCTA Oct. 15 Ex Parte at 12 (stating that,  d(#Kalthough the 1996 Act does not address the provision of local service either on a resale or facilities basis by a BOC section 272 affiliate, the Commission should adopt a prohibition against such activities as a policy matter).   X- D1306.` ` The BOCs, on the other hand, argue that section 272(g) and section 251  d(#specifically allow them to create a section 272 affiliate that offers both local exchange and  d(#\interLATA services, and that section 272(a) of the 1996 Act does not prohibit a section 272"$,-(-(ZZE"  d(#affiliate from providing local exchange service either by reselling BOC local service or through  X- d(#=the purchase of unbundled elements.% yOb-ԍ BOC272A E.g., Ameritech Reply at 1719; NYNEX Reply at 9 n.23; PacTel Reply at 22; U S West at 57. They also assert that, as a policy matter, allowing the  d(# section 272 affiliate to provide service through unbundled elements on the same terms and  d(#\conditions as other local providers will promote competition and encourage the section 272  X-affiliate to provide innovative new services.i&X yO-ԍSee, e.g., Ameritech Sept. 19 Ex Parte at 3.i  Xv-  2307.` ` In response to the BOCs, CCTA argues that there is no statutory basis for allowing  d(#a section 272 affiliate to provide local exchange services. According to CCTA, section 272(g)(1)  d(#Zdoes not permit section 272 affiliates to provide both local and interLATA services; rather, it only  X1- d(#grants them the authority to market such services jointly.'1 yO - v kԍLetter from Alan J. Gardner, Vice President Regulatory & Legal Affairs, CCTA to John Nakahata, Senior  yO-Legal Advisor to Chairman Reed Hundt, FCC at 3 (filed Dec. 2, 1996) (CCTA Dec. 2 Ex Parte). CCTA further argues that section 272  d(#affiliates should be prohibited from offering local exchange service, because "the Senate stated  d(#unequivocally that the long distance operations of the BOCs must be structurally separate from  X - d(#any entities providing local exchange services."@( @ yO-ԍId. at 4.@ In addition, CCTA asserts that section 251  d(#cannot be relied upon as a basis for allowing section 272 affiliates to provide local exchange  d(#"services, because the Act does not treat RBOCs or their affiliates as new entrants or  X - d(#telecommunications carriers that are entitled to request nondiscriminatory access to unbundled  X-elements pursuant to section 251.#) yO- v \ԍMemorandum from Alan Gardner, Glenn Semow, and Peter Casciato, CCTA to Linda Kinney, Policy and  yO-Program Planning Division, Common Carrier Bureau, FCC at 12 (filed Dec. 12, 1996) (CCTA Dec. 12 Ex Parte). #  Xb- 3308.` ` AT&T and MCI, on the other hand, argue that section 272(g)(1) allows section 272  d(#affiliates to resell the BOC's local services, but does not permit section 272 affiliates to purchase  X4- d(#unbundled network elements from the BOC.*4(  yO -ԍSee MCI Nov. 1 Ex Parte at 23; AT&T Oct. 15 Ex Parte at 2; see also Time Warner Reply at 19. According to AT&T, section 272 affiliates will  d(#be able to avoid paying access charges if they are permitted to provide local exchange services  d(#]using unbundled elements, which will also enable such affiliates to avoid the imputation  X- d(#Lrequirements of section 272(e)(3).X+  yOX"-ԍAT&T Oct. 15 Ex Parte at 2.X AT&T further argues that, to the extent that a section 272  d(#>affiliate is able to avoid the imputation requirements of section 272(e), the BOC would have  d(#zperverse incentives to maintain access charges at rates above those for unbundled network  X- d(#elements.:,H  yO&-ԍId.: MCI asserts that opportunities for discrimination and crosssubsidy are substantially",,-(-(ZZ"  d(#ygreater when a BOC provides network elements to its affiliate than when it offers retail services  X-at a standard wholesale discount.V- yOb-ԍMCI Nov. 1 Ex Parte at 3.V   X- C.Discussion  X- A4309.` ` Transfer of local exchange and exchange access capabilities. We conclude that a  d(#lBOC cannot circumvent the section 272 requirements by transferring local exchange and  X_- d(#exchange access facilities and capabilities to an affiliate. As we discussed above, all goods,  d(#jservices, facilities, and information that the BOC provides to its section 272 affiliate are subject  X1- d(#to the section 272(c)(1) nondiscrimination requirement.J.1X yO: -ԍSee supra part V.C.J Application of section 272(c)(1) to the  d(#]BOC's provision of such items should address to a large extent concerns about the BOC  d(#j"migrating" or "transferring" key local exchange and exchange access services and facilities to  d(#kthe 272 affiliate. We note, however, that there are still legitimate concerns that a BOC could  d(#potentially evade the section 272 or 251 requirements by, for example, first transferring facilities  d(#jto another affiliate or the BOC's parent company, which would then transfer the facilities to the  d(#]section 272 affiliate. To address this problem, we conclude that, if a BOC transfers to an  d(#Kaffiliated entity ownership of any network elements that must be provided on an unbundled basis  d(#/pursuant to section 251(c)(3), we will deem such entity to be an "assign" of the BOC under  d(#section 3(4) of the Act with respect to those network elements. Any successor or assign of the  XK- d(#BOC is subject to the section 272 requirements in the same manner as the BOC./ K yO- v kԍSee 47 U.S.C.  153(4)(B) (defining a "BOC" to include any successor or assign of any BOC that provides  d(#Ywireline telephone exchange service). Thus, the interLATA and manufacturing operations contemplated by section  d(#w272 would need to occur in an affiliate other than the one to which the local exchange and exchange access facilities have been transferred.  We also note  d(#that, based on the plain language of the statute, section 272(c) only applies to the BOC or an  d(#affiliate that is a "successor or assign" of the BOC. We agree with Ameritech that, unlike  d(#ksections 272(a) and (e), section 272(c) does not apply to BOC affiliates merely because they  X-qualify as incumbent LECs.N0 yOp-ԍSee Ameritech at 6061.N   X- 5310.` ` We decline to adopt an absolute prohibition on a BOC's ability to transfer local  d(#exchange and exchange access facilities and capabilities to an affiliate, because we conclude based  d(#xon the record before us that such a restriction would be overly broad and exceed the requirements  X|- d(#of the Act.n1|`  yO$-ԍSee, e.g., Ameritech at 57; see also USTA at 24. n We note, however, that our determination does not preclude a state from  d(#prohibiting a BOC's transfer of local exchange facilities under its regulatory framework for incumbent LECs. REJECTLEGAL"7 1,-(-(ZZ"Ԍ X-  6311.` ` In view of our decision to treat a BOC affiliate as a "successor or assign" of the  X- d(#BOC if the BOC transfers network elements to the affiliate, we find it unnecessary at this time  d(#to adopt additional nondiscrimination regulations applicable to section 272 affiliates. A section  d(#272 affiliate that is not deemed a "successor or assign" of a BOC would nevertheless be subject  d(#to the obligations imposed by section 202 which prohibits common carriers from, among other  d(#things, engaging in "unjust and unreasonable" practices with respect to the provision of interstate  d(#services. Moreover, BOC interLATA services affiliates that offer intrastate interLATA  d(#telecommunications services would be subject to corresponding nondiscrimination obligations that  d(#state statutes and regulations typically impose on common carriers. We conclude based on the  d(#=current record that these existing requirements should be adequate to protect competition and consumers against anticompetitive conduct by a BOC section 272 affiliate.  X - }7312.` ` Integrated affiliates. Numerous commenters also request that we address whether  d(#Mthe separate affiliate safeguards imposed by section 272 prohibit a section 272 affiliate from  d(#offering local exchange service through the same corporate entity. Based on our analysis of the  d(#record and the applicable statutory provisions, we conclude that section 272 does not prohibit a  d(#.section 272 affiliate from providing local exchange services in addition to interLATA services,  Xy-nor can such a prohibition be read into this section.q2y yO-ԍSee, e.g., PacTel Oct. 23 Ex Parte at 1.q Specifically, section 272(a)(1) states that    A Bell operating company (including any affiliate) which is a local exchange  carrier that is subject to the requirements of section 251(c) may not provide any  service described in [section 272(a)(2)] unless it provides that service through one  or more affiliates that . . . are separate from any operating company entity that is subject to the requirements of section 251(c) . . .     d(#We find that the statutory language is clear on its face a BOC section 272 affiliate is not  d(#precluded under section 272 from providing local exchange service, provided that the affiliate  d(#does not qualify as an incumbent LEC subject to the requirements of section 251(c). Because  X|- d(#the text and the purpose of the statute are clear, there is no need, as CCTA suggests,W3|X yO-ԍCCTA Dec. 2 Ex Parte at 4.W to resort  Xe- d(#Kto legislative history.4e yO- v MԍSee, e.g., Darby v. Cisneros, 113 S.Ct. 2539, 2545 (1993); Connecticut Nat'l Bank v. Germain, 112 S.Ct. 1146, 1149 (1992). We also agree with Ameritech that a BOC affiliate should not be deemed  d(#an incumbent LEC subject to the requirements of section 251(c) solely because it offers local  d(#exchange services; rather, section 251(c) applies only to entities that meet the definition of an  X - d(#incumbent LEC under section 251(h).F5 @ yO%-ԍAmeritech at 58 n.68.F Section 251(h)(1) defines an incumbent LEC as, inter  X - d(#alia, a local exchange carrier that: (1) on the date of enactment of the Telecommunications Act  X- d(#.of 1996, provided telephone exchange service, and (2) was a member of the National Exchange"5,-(-(ZZZ"  X- d(#Carrier Association (NECA) or becomes a successor or assign of such a member.V6 yOy-ԍSee 47 U.S.C.  251(h)(1). V Because no  d(#BOC affiliate was a member of NECA when the 1996 Act was enacted, such affiliates may be  d(#classified as incumbent LECs under this statutory provision only if they are successors or assigns  d(#of their affiliated BOCs. Alternatively, under section 251(h)(2), if the Commission determines  d(#that a carrier occupies a position in the market for telephone exchange service within an area that  d(#is comparable to the position occupied by the incumbent LEC, and such carrier has substantially  d(#]replaced an incumbent LEC, such carrier may be treated by rule as an incumbent LEC for  X_- d(#purposes of section 251.7_X yOh -ԍ47 U.S.C.  251(h)(2); see also First Interconnection Order at  1248. We find no basis in the record of this proceeding to find that a BOC  d(#kaffiliate must be classified as an incumbent LEC under section 251(h)(2) merely because it is  d(#engaged in local exchange activities. Absent such a finding, BOC affiliates that are neither one  d(#of the Bell operating companies listed under 153(4)(A), nor a successor or assign of any such company, are not subject to the separation requirements of section 272.  X - }8313.` ` Furthermore, we conclude that section 251 does not preclude section 272 affiliates  d(#from obtaining resold local exchange service pursuant to section 251(c)(4) and unbundled  d(#Kelements pursuant to section 251(c)(3), because the statute does not place any restrictions on the  d(#-types of telecommunications carriers that may qualify as "requesting carriers." We disagree with  Xy- d(#CCTA's assertion that section 272 affiliates cannot be treated as requesting carriers, because such  d(#zaffiliates are "part of the standard for determining nondiscriminatory interconnection by the  XK- d(#[[incumbent LEC] for all other telecommunications carriers."S8K yO-ԍCCTA Dec. 12 Ex Parte at 2. S The fact that a determination of  d(#whether an incumbent LEC provides nondiscriminatory access may be based on a comparison of  d(#the access that the incumbent LEC provides itself or its affiliate does not preclude such affiliate  d(#from being a "requesting carrier" under section 251. There is nothing inconsistent with both  d(#yrequiring nondiscriminatory access and at the same time allowing an affiliate to be a requesting  X- d(#carrier. Moreover, we find nothing in the statute or in the First Interconnection Order that limits  d(#the definition of "requesting carrier" to nonaffiliates. Thus, section 272 affiliates cannot be  d(#-precluded under section 251 from qualifying as "requesting carriers" that are entitled to purchase unbundled elements or retail services at wholesale rates from the BOC.  Xe- 9314.` ` We further conclude that section 272(g)(1) cannot be read as imposing a limitation  XN- d(#on the ability of section 272 affiliates to exercise their rights under section 251(c)(3). We are  d(#not persuaded by AT&T's argument that, because section 272(g)(1) sets forth limited conditions  d(#=under which section 272 affiliates may "market or sell" local exchange services, allowing those  X - d(#affiliates to purchase unbundled elements is inconsistent with the Act.9 x yO2%- v ԍAT&T at 22. AT&T also argues this prohibition is part of the operate independently requirement of section  yO%-272(b)(1). Id. We address the meaning of that term supra in part IV.B. Rather, we agree with  d(#CCTA that section 272(g)(1) speaks only to marketing issues, and does not address the conditions"9,-(-(ZZZ"  X- d(#under which a section 272 affiliate may provide local exchange services.Q: yOy-ԍCCTA Dec. 2 Ex Parte at 3.Q Furthermore, we find  d(#MAT&T's claim that allowing section 272 affiliates to provide local exchange service through  X- d(#junbundled elements will "artificially and decisively slant [the] playing field in the BOC's favor"  X- d(#iunpersuasive,[;X yO-ԍSee AT&T Oct 15 Ex Parte at 2.[ because other telecommunications carriers will be able to provide local exchange  d(#xservice through unbundled elements on the same terms and conditions. AT&T's concern that the  d(#affiliate will be able to avoid access charges by obtaining the unbundled elements appears to be  Xv- d(#premised on the view that access charges are currently too high.:<v yO -ԍId.: The issue of reforming access  X_- d(#=charges will, however, be addressed in a separate proceeding.h=_x yO -ԍSee Access Charge Reform NPRM.  h Moreover, we conclude that  XH- d(#MCI's argument that opportunities for discrimination and crosssubsidy are greater when the  d(#lBOC provides network elements to its affiliate than when it provides resold services is  X - d(#speculative.V>  yO-ԍMCI Nov. 1 Ex Parte at 2.V To the extent that concerns over discrimination arise, there are safeguards in  X - d(#sections 251 and 252 to address such concerns.i?  yOL-ԍSee, e.g., Ameritech Sept. 19 Ex Parte at 3.i We therefore decline to distinguish between  d(#a section 272 affiliate's ability to provide local service by reselling BOC local exchange service and its ability to offer such service by purchasing unbundled elements from the BOC.  X - :315.` ` We also conclude as a matter of policy that regulations prohibiting BOC section  d(#=272 affiliates from offering local exchange service do not serve the public interest. The goal of  d(#the 1996 Act is to encourage competition and innovation in the telecommunications market. We  d(#agree with the BOCs that the increased flexibility resulting from the ability to provide both  d(#\interLATA and local services from the same entity serves the public interest, because such  X4- d(#flexibility will encourage section 272 affiliates to provide innovative new services.@4(  yO -ԍSee, e.g., PacTel Oct. 23 Ex Parte at 12; Ameritech Sept. 19 Ex Parte at 23. To the  d(#extent that there are concerns that the BOCs will unlawfully subsidize their affiliates or accord  X- d(#=them preferential treatment,wA  yOo!-ԍNCTA at 10; CCTA at 7, 10; Teleport at 35, 89; Ohio Commission at 7.w we reiterate that improper cost allocation and discrimination are  d(#prohibited by existing Commission rules and sections 251, 252, and 272 of the 1996 Act, and that  d(#predatory pricing is prohibited by the antitrust laws. Our affiliate transaction rules, as modified  X- d(#iby our companion Accounting Safeguards Order, address the BOCs' ability to engage in improper  X- d(#cost allocation. The rules in this Order and our rules in our First Interconnection Order and our  X- d(#LSecond Interconnection Order ensure that BOCs may not favor their affiliates. In sum, we find  d(#.no basis in the record for concluding that competition in the local market would be harmed if a"|H A,-(-(ZZ"  d(#section 272 affiliate offers local exchange service to the public that is similar to local exchange service offered by the BOC.   X- a;316.` ` Although we conclude that the 1996 Act authorizes section 272 affiliates to  d(#-purchase unbundled elements, we emphasize that BOC facilities and services provided to section  X- d(#K272 affiliates must be made available to others on the same terms, conditions, and prices provided  d(#!to the BOC affiliate pursuant to the nondiscrimination requirements of sections 272 and  X_- d(#]251(c)(3).sBX_ yO- v ԍSection 251(c)(3) requires incumbent LECs to provide access to network elements on rates, terms and  yO - d(#conditions that are just, reasonable, and nondiscriminatory. 47 U.S.C.  251(c)(3). See also First Interconnection  yOh -Order at  298316.s Thus, if a BOC affiliate is a requesting carrier under section 251, the BOC is  XH- d(#required to treat unaffiliated requesting carriers in the same manner that the BOC treats its  X1- d(#affiliate, unless the unaffiliated entity has requested different treatment.IC1 yO -ԍSee AT&T at 3233.I For example, if a BOC  d(#were to provide its section 272 affiliate with access to operational support systems (OSS)  d(#functions via a different method or system than it provides to requesting carriers under section  X - d(#251, we would regard such discriminatory treatment as a violation of section 251(c)(3).D  x yO- v ?ԍFirst Interconnection Order at  504528. Therefore, if BOCs are providing access to preordering,  d(#ordering, provisioning, maintenance and repair, and billing functions to competing providers of local service through  d(#a separate system or "gateway" than they provide for themselves internally, then the BOC affiliate must use the same separate system or "gateway" in order to obtain access to these OSS functions. We  d(#believe such nondiscrimination requirements will prevent BOCs from providing special treatment to their affiliates.  X- <317.` ` State regulation. As mentioned above, several BOCs have already submitted  d(#[applications to state regulatory commissions seeking authority to provide both local exchange  Xb- d(#services and interLATA services from the same affiliate.Eb`  {Os- v ԍTeleport at 5. The Ohio and Michigan commissions confirm in their comments that they have already  d(#<received requests from BOC 272 affiliates for authorization to offer local exchange services in conjunction with  yO- d(#interLATA services. Michigan Commission at 46; Ohio Commission at 68. See also CCTA Dec. 2 Ex Parte at  d(#2 (asserting that PB COM has filed for authority in California to provide local exchange services, interLATA and intraLATA services, and discretionary services on both a facilities and resale basis). Although we conclude that the 1996  d(#Act permits section 272 affiliates to offer local exchange service in addition to interLATA  d(#Zservice, we recognize that individual states may regulate such integrated affiliates differently than  X-other carriers.[F yO"-ԍSee, e.g., Ohio Commission at 6 n.6.[ ;!}K + J:\POLICY\SAFE\ORDER\MASTER\ENF.MMC+ ; "F,-(-(ZZ"Ԍ X-F_ IX. ENFORCEMENT ׃  X- A.Reporting Requirements under Section 272    X- 1.` ` Background  Xv- =318.` ` BOCs are required under Computer III to provide information to third parties_  d(#regarding changes to the network and new network services and to report periodically on the  XH- d(#quality and timeliness of installation and maintenance.GH yO - v \ԍSee, e.g., Computer III Phase II Order, 2 FCC Rcd at 3091; BOC ONA Reconsideration Order, 5 FCC Rcd at 3093. We sought comment in the Notice on  d(#what requirements or mechanisms were necessary to facilitate the detection of violations of the  X - d(#separate affiliate and nondiscrimination requirements of section 272.CH  yO -ԍNotice at  94.C We asked parties to  d(#comment on whether we should impose reporting and other requirements on BOCs analogous to  X - d(#those requirements imposed in the Computer III and subsequent ONA proceedings to ensure  X - d(#compliance with section 272 requirements.FI  yO6-ԍId. at  95.F We specifically requested comment on whether  d(#these requirements are sufficient to implement the section 272(c)(1) nondiscrimination  X -requirement.FJ @ yO-ԍId. at  75.F  Xy- 2.` ` Comments  XK- >319.` ` BOCs and USTA generally argue against the imposition of additional reporting  d(#requirements in addition to those required in the 1996 Act to facilitate detection and adjudication  X- d(#lof violations of section 272 requirements.K yO-ԍBell Atlantic at 9; NYNEX at 63; PacTel at 4647; SBC at 89; U S West at 60; USTA at 3233. To the extent the Commission does impose  X- d(#jadditional requirements, several parties maintain, it should model them after Computer III/ONA  X- d(#requirements.iL`  yO -ԍPacTel at 4647; U S West Reply at 30; USTA Reply at 20.i Many commenters, including BOC competitors, argue that additional reporting  X- d(#requirements are needed to ensure BOC compliance with the requirements of section 272. M   yOy"- v ԍAT&T at 48; DOJ Reply at 12 ( recommending two specific reporting requirements, one to detect cost  d(#misallocations and another to detect discrimination in the quantity, quality, and time of service between BOCs and  yO $- d(#their 272 affiliates); ITAA at 2728; MCI at 50; Teleport at 1517 ( suggesting quarterly reporting on objective performance standards); TIA at 4749; TRA at 1617; VoiceTel at 5.  TIA"M,-(-(ZZ"  d(#contends that if reporting requirements are inadequate, the section 272 safeguards will be rendered  X-ineffective.;N yOb-ԍTIA at 47.;  X- ?320.` ` On the specific issue of whether the reporting and other requirements of Computer  X- d(#III/ONA are sufficient to implement section 272(c)(1), commenters generally advance three  d(#alternative views. They argue that: (1) no rules or reporting requirements are necessary to  Xv- d(#implement section 272(c)(1);OvX yO - v ԍSome parties maintain that no rules are necessary because other statutory provisions developed by Congress  yOG - d(#(e.g., sections 251(c)(5), 272(b)(5), and 272(d)(2)) are sufficient to protect against discriminatory behavior. Bell  d(#Atlantic at 89; ITAA at 21; ITI and ITAA Reply at 6 (section 272(c)(1)'s absolute prohibition on discrimination  d(#makes detailed regulation unnecessary); USTA at 25; USTA Reply at 1314. Others argue that no rules are necessary  d(#hbecause claims of discrimination are best resolved on a casebycase basis. Ameritech at 53; NYNEX at 36; NYNEX Reply at 2122; Sprint at 38. (2) no rules are needed but that if the Commission were to adopt  X_- d(#rules, it should extend the existing Computer III reporting and other requirements;,P_ yO- v ԍPacTel at 32; PacTel Reply at 14; see also SBC at 1314; cf. Ohio Commission at 9 (supports application  yO-of Computer II provisions to prevent discrimination because these require structural separation)., or (3)  XH- d(#although the extension of Computer III requirements is necessary, these requirements are  d(#/insufficient to implement section 272(c)(1) and additional reporting requirements should be  X -imposed.@Q  (  yO- v kԍAT&T at 33 (Computer III rules not fashioned to require equal treatment between a BOC affiliate and its  yO- d(#competitor); MCI at 3738; MCI Reply at 2122; MFS Reply at 2021 (section 272(c)(1) goes further than Computer  yO- d(#III requirements); Teleport at 14; Time Warner at 23; TIA at 3940 (existing Computer III rules do not guarantee equal treatment in the use of information between a BOC affiliate and unaffiliated entities); TRA at 17.@  X - 3.` ` Discussion  X - C@321.` ` We conclude that none of the reporting or other requirements of Computer  X - d(#III/ONA is necessary to implement the requirements of section 272(c)(1) at this time. For the  X- d(#same reasons, we further conclude that (with the exception of section 272(e)(1)),iR yOQ-ԍSee supra part VI.A; see also infra part XI.i no reporting  d(#requirements are needed to facilitate the detection and adjudication of violations of the separate  Xb- d(#affiliate and nondiscrimination requirements of section 272.Sb yO!- v /ԍWe note that our conclusion is consistent with the Commission's policy to eliminate or reduce reporting  yO{"- d(#requirements wherever possible. See Revision of Filing Requirements, Report and Order, CC Docket No. 9623,  d(#DA 961873 (Com. Car. Bur. rel. Nov. 13, 1996) (eliminating thirteen reporting requirements imposed on  d(#,communications carriers by the Commission's rules and policies and reducing frequency of filing obligations for four other reporting requirements imposed pursuant to Commission orders).  As many commenters observe,  d(#@reporting requirements serve two primary purposes. First, they act to deter potential  d(#anticompetitive behavior by requiring BOCs to provide objective proof of their compliance with"4PS,-(-(ZZH"  d(#jthe separate affiliate and nondiscrimination requirements. Second, they enable competitors, as  d(#well as the Commission, to detect any potential violations of these requirements. We believe,  d(#however, that sufficient mechanisms already exist within the 1996 Act both to deter  X- d(#anticompetitive behavior and to facilitate the detection of potential violations of section 272  X- d(#jrequirements.T yO- v MԍOur discussion will be primarily focused on the nonaccounting mechanisms that already exist in the Act.  yO-Accounting requirements imposed by the Act are discussed in the Accounting Safeguards Order. Nevertheless, we intend to monitor compliance with section 272 requirements  d(#and, of course, reserve the ability to undertake appropriate measures in the event that future developments warrant.  XH- "A322.` ` The requirements of section 272(b), as discussed above, discourage anticompetitive  d(#behavior by the BOC by requiring the BOC and its section 272 affiliate to adhere to certain  d(#structural and transactional requirements, including the requirement to "operate independently."  X - d(#lWe therefore conclude that it is unnecessary to impose the Computer III/ONA reporting  d(#jrequirements in order to implement the separate affiliate and nondiscrimination requirements of  X - d(#Msection 272. Further, we note that even some commenters that support imposing Computer  X -III/ONA reporting requirements on BOCs admit that they do not seem useful or practical.UX  yO- v ԍSee AT&T at 3334, 37; PacTel at 37; PacTel Reply at 15 (citing Commission finding that Computer  yOW- d(#III/ONA nondiscrimination reports have not disclosed any discrimination in the BOC provision of CPE or resulted in the filing of any formal complaints); Sprint at 41 n.29; Time Warner at 23.   X- B323.` ` We find, instead, that several of the disclosure requirements established in the 1996  d(#lAct will facilitate the detection of anticompetitive behavior. Section 272(d), for example,  d(#Lrequires that a BOC obtain and pay for a biennial joint federal/state audit to determine whether  XK- d(#=it has "complied with [section 272] and the regulations promulgated under this section. . . ."VK@ yO<-ԍSee 47 U.S.C.  272(d). This requirement is addressed in the Accounting Safeguards Order.  d(#We conclude that this broad audit requirement is intended to verify BOC compliance with the  X- d(#accounting and nonaccounting requirements of section 272, as implemented.W yO- v kԍSee Florida Commission at 5 (a joint audit, if performed according to the guidelines suggested by NARUC, will facilitate detection of separate affiliate and nondiscrimination requirements of section 272). In addition, we  d(#=note that, pursuant to section 271(d)(3)(B), a BOC may not receive authorization to provide in d(#region interLATA services until it shows, among other things, that the "requested authorization  X- d(#will be carried out in accordance the requirements of section 272."MX(  yO!-ԍ47 U.S.C.  271(d)(3)(B).M In view of these  d(#requirements, we reject ITAA's suggestion that BOCs should submit to the Commission section  d(#272 compliance plans, and periodic reports regarding their implementation of those plans, as  X-unnecessarily burdensome.?Y  yO%-ԍITAA at 2728.? "|H Y,-(-(ZZP"Ԍ X- PC324.` ` In addition, the section 272(b)(5) requirement that all transactions between a BOC  d(#and its section 272 affiliate be reduced to writing and made publicly available should serve as  d(#a powerful mechanism both to detect violations of the section 272 requirements and to deter  d(#Lanticompetitive behavior. Similarly, we find that our interpretation of section 272(c)(1) as a flat  d(#prohibition against discrimination will work in conjunction with the section 272(b)(5) disclosure  d(#requirement to deter anticompetitive behavior. Under section 272(c)(1), any difference between  d(#the goods, services, and facilities given to a section 272 affiliate and those given to an  d(#unaffiliated entity may give rise to a claim of discrimination. Some commenters argue that the  d(#Zrequirement of section 272(b)(5) should be extended to encompass not only transactions between  d(#]a BOC and its section 272 affiliate, but also transactions between a BOC and unaffiliated  X - d(#Zentities.Z  yO - v ԍDOJ Reply at 12 (Commission should require reporting of costs arising from transactions between third parties and the BOC or its section 272 affiliate); MCI at 5051; TIA at 48, n.104. We find, however, that section 272(b)(5), by its terms, applies only to the transactions  d(#Mbetween the BOC and its section 272 affiliate. Extending such a requirement to transactions  d(#kbetween a BOC and unaffiliated entities would expand the scope of this section beyond the  d(#statutory requirements and is not necessary to detect the type of discrimination that section 272  d(#>is intended to prevent. As discussed below, parties may make a request for such reporting  d(#irequirements in the context of their interconnection negotiations with BOCs. Presented with such  d(#ya request, the BOC will have the obligation to negotiate this proposal in good faith pursuant to  Xy-section 251(c)(1).I[y  yOJ-ԍ47 U.S.C. 251(c)(1).I  XK- D325.` ` In addition to the requirements of section 272, the Act also imposes other  d(#disclosure requirements on the BOCs that, in our view, largely address the concerns cited by  d(#parties arguing for additional reporting requirements. For example, section 251(c)(5) requires all  d(#yincumbent LECs, including BOCs, to disclose publicly information about network changes that  d(#jwill affect a competing service provider's performance or ability to provide service or will affect  X- d(#the incumbent LEC's interoperabiltiy with other service providers.\ yO9-ԍId.  251(c)(5). For further discussion of this requirement, see Second Interconnection Order at  165260. In implementing this  X- d(#jrequirement in our Second Interconnection Order, we found that this disclosure about network  d(#xchanges "promotes open and vigorous competition" and provides "sufficient disclosure to insure  X- d(#Lagainst anticompetitive acts."i]@ yO -ԍSecond Interconnection Order at  171, 173.i Similarly, section 273(c)(1) requires BOCs to maintain and file  d(#ywith the Commission full and complete information of the protocols and technical requirements  d(#-used for network connection, and section 273(c)(4) requires BOCs to provide "to interconnecting  d(#carriers providing telephone exchange service, timely information on the planned deployment of  X7-telecommunications equipment."^7 yO%-ԍSee 47 U.S.C. 273(c)(1), (c)(4). These requirements are addressed in the Manufacturing NPRM. " ` ^,-(-(ZZ"Ԍ X- E326.` ` We also find that, beyond the reporting requirements mandated under the 1996 Act,  d(#ythere are other avenues by which a telecommunications carrier may obtain information relevant  d(#to detecting anticompetitive BOC conduct. For example, competitive telecommunications  d(#carriers, on their own initiative, could seek to incorporate certain performance and quality  d(#standards into their negotiated or arbitrated interconnection agreements to ensure that BOCs  X- d(#satisfy their obligation to provide service in a nondiscriminatory manner._X yO- v ԍSee 47 U.S.C.  252. We also note that competing carriers, in order to ensure they have a recourse for  d(#anticompetitive behavior by BOCs, may seek to include liquidated damage clauses, dispute resolution mechanisms, and other common commercial arrangements into their negotiated or arbitrated agreements. As noted above,  d(#\BOCs, like any other incumbent LEC, are obligated to negotiate such requests in good faith  X_- d(#pursuant to section 251(c)(1).J`_ yO -ԍ47 U.S.C.  251(c)(1).J Through this process, competitive carriers will be able to tailor  d(#\the interconnection agreement to include only those reporting requirements that they deem  X1- d(#necessary or find to be most useful.a 1x yOZ- v ԍSee, e.g., Letter from Todd F. Silbergeld, Director, Federal Regulatory, SBC to William F. Caton, Acting  yO"- d(#Secretary, FCC at 2 (filed Nov. 6, 1996) (SBC Nov.6 Ex Parte) (stating that requesting carriers have been sufficiently  d(#concerned about service quality and performance levels to have negotiated specific performance standards into interconnection agreements with SWBT). Further, pursuant to section 252(a), BOCs must file all  d(#xinterconnection agreements with the appropriate state commission and under section 252(h) these  d(#agreements must be made publicly available; the terms and conditions of these interconnection  X - d(#=agreements, therefore, are on public record and available to competitors.Vb `  yO-ԍ47 U.S.C.  252 (a), (h), (i).V We also note that  d(#there are several state utility commissions that, pursuant to state administrative code, require  d(#LECs to conform to certain service standards and make service quality reports publicly  X - d(#0available.ucX  yOH- v ԍSee, e.g., 83 Ill. Admin. Code tit. 83,  730 (1996); NJ Admin Code tit. 14,  1011.10 (1996), NY Comp.  d(#hCodes R. & Regs, tit. 16,  603 (1996), Or. Admin R. 86023055 (1995); Mo. Code Regs. Ann. tit. 4 24032.070 (1996); Va. Admin. Code tit. 20,  5400100 (1996). u New York and Virginia, for example, require all LECs to file periodic service quality or standard of service reports.  Xb- RF327.` ` We believe that the reporting requirements required by the 1996 Act, those  d(#.required under state law, and those that may be incorporated into interconnection agreements  d(#negotiated in good faith between BOCs and competing carriers will collectively minimize the  d(#potential for anticompetitive conduct by the BOC in its interexchange operations. In addition to  d(#deterring potential anticompetitive behavior, these information disclosures will also facilitate  d(#-detection of potential violations of the section 272 requirements. We, therefore, agree with those  d(#parties who argue that there is no need to impose additional reporting requirements at this time.  X- d(#=Further, we note that even several parties who advocate the imposition of additional reporting"c,-(-(ZZ"  d(#requirements recognize the inherent difficulty of identifying and preventing every type of  X-discrimination through regulatory measures."d yOb- v =ԍSee, e.g., DOJ Reply at 13; MCI at 50; Letter from Charles E. Griffin, Government Affairs Director, AT&T  yO*-to William F. Caton, Acting Secretary, FCC at 1 (filed Oct. 3, 1996) (AT&T Oct. 3 Ex Parte)."  X- G328.` ` Finally, we believe that the complaint process will bring violations of section 272  d(#to the attention of the Commission. Congress has established a mechanism in section 271(d) to  d(#facilitate the enforcement of the requirements of section 272. Further, as discussed below, if the  d(#information necessary to prove a complainant's claim is not publicly available, the complainant  X_- d(#has the opportunity to obtain the necessary documentation from the BOC in the context of an  XH- d(#[enforcement proceeding.keH  yO -ԍSee infra part IX.B.4 (discussing burdenshifting). k We expect that BOC competitors will be vigilant in detecting BOC  X1- d(#deficiencies and will avail themselves of the expedited complaint process established by section  X -271(d)(6).Yf  yO{-ԍSee U S West at 61; USTA at 3133.Y  X -  X - B.Section 271(d)(6) Enforcement Provisions   X - H329.` ` As discussed in the Notice, section 271(d)(6) of the Communications Act gives the  d(#Commission specific authority to enforce the conditions that a BOC is required to meet in order  d(# to obtain Commission authorization to provide inregion interLATA services. Specifically, section 271(d)(6) states:  X(A) COMMISSION AUTHORITY. If at any time after the approval of an  Bapplication under [section 271(d)(3)], the Commission determines that a [BOC]  has ceased to meet any of the conditions required for such approval, the Commission may, after notice and opportunity for a hearing-  ` ` (i) issue an order to such company to correct the deficiency;x` ` ` (ii) impose a penalty on such company pursuant to title V; orx` ` ` (iii) suspend or revoke such approval.x`  X-  X(B) RECEIPT AND REVIEW OF COMPLAINTS.-The Commission shall  establish procedures for the review of complaints concerning failures by [BOCs]  XN- to meet conditions required for approval under [section 271(d)(3)]. Unless the  3parties otherwise agree, the Commission shall act on such complaint within 90  X -days._gX @ yO%- v ԍWe recently initiated a separate proceeding addressing the expedited complaint procedures mandated by this  yO%- d(#subsection as well as those mandated by other provisions of the 1996 Act. See Amendment of Rules Governing  yO&- d(#Procedures to be Followed When Formal Complaints are Filed Against Common Carriers, CC Docket No. 96238,"&f,-(-(&"  yO-Notice of Proposed Rulemaking, FCC 96460, (rel. Nov. 27, 1996) (Enforcement NPRM)._ " Xg,-(-(ZZz"Ԍ X-ԙ 1.` ` Commission's Enforcement Authority under Section 271(d)(6)  X-` ` a. Background  X- I330.` ` In the Notice, we sought to clarify the relationship between the Commission's  d(#authority under section 271(d)(6) and the Commission's existing enforcement authority under  Xv- d(#Lsections 206209 of the Communications Act.hxvX yO - v ԍSection 206 provides that "any common carrier" found to be in violation of the Communications Act shall  d(#"be liable to the person or persons injured thereby for the full amount of damages sustained in consequence of any  d(#such violation." Section 207 of the Communications Act permits any person "damaged" by the actions of any  d(#common carrier to bring suit for the recovery of these damages. Section 208(a) authorizes complaints by any person  d(#"complaining of anything done or omitted to be done by any common carrier" subject to the Communications Act  d(#,or its provisions. Section 209 specifies that the Commission will "make an order directing the carrier to pay to the complainant" any damages amount a complainant successfully establishes. 47 U.S.C. 206209. We tentatively concluded that, in the context  d(#of "complaints concerning failures by [BOCs] to meet the conditions required for approval under  d(#[section 271(d)(3)]," section 271(d)(6) generally augments the Commission's existing enforcement  d(#authority. We sought comment on whether, in a situation where a complaint alleges that a BOC  d(#has ceased to meet the conditions for approval to provide inregion interLATA  d(#[telecommunications services and seeks damages as a result of the underlying alleged unlawful  d(#=conduct, a Commission determination that the BOC has ceased to meet the conditions and the  d(#imposition of a section 271(d)(6)(A) sanction would fulfill the Commission's duty to "act on such  X -complaint within 90 days."Ci  yO-ԍNotice at  97.C   X- J331.` ` In order to approve a BOC's application to provide inregion interLATA services  d(#pursuant to section 271(d)(3), the Commission must determine that the BOC: meets the  d(#\requirements of section 271(c)(1); satisfies the competitive checklist in section 271(c)(2)(B);  d(#lcomplies with the requirements of section 272; and demonstrates that the approval of its  X4- d(#application is consistent with the public interest, convenience, and necessity.Tj4(  yO -ԍSee 47 U.S.C.  271(d)(3).T Section  d(#L271(d)(6)(A) sets forth various actions the Commission may take at any time after the approval  d(#of an application, and after notice and opportunity for a hearing, if it determines that a BOC has  d(# ceased to meet any of these conditions. In the Notice, we stated that the Commission may  d(#ydetermine that a BOC has ceased to meet the conditions of its approval under section 271(d)(3)  d(#[either via the resolution of an expedited complaint proceeding pursuant to section 271(d)(6)(B) or in a proceeding commenced on its own motion. " j,-(-(ZZ"Ԍ X- ` ` b. Comments  X- K332.` ` Nearly all the commenters agree with our tentative conclusion that section  X- d(#y271(d)(6) generally augments the Commission's existing enforcement authority.5kX yO4- v \ԍAT&T at 49; CompTel at 26; Excel at 14; LDDS at 2930; MCI at 52; PacTel at 47; Sprint at 55, n.35;  yO- d(#Teleport at 22; TIA at 49; TRA at 20; U S West at 59; USTA at 33. But see NYNEX at 6465; SBC Reply at 3233.5 Commenters  d(#also agree that, where a complainant seeks damages or other relief that is not available under  d(#section 271(d)(6), the Commission need not decide the question of additional relief in order to  Xv- d(#"act on" the complaint within 90 days.klv yO -ԍSee, e.g., Sprint at 55 n.35; USTA at 34 n.14.k In addition, all parties agree that the Commission may  d(#Ldetermine whether a BOC has ceased to meet the conditions for entry either on its own motion  XH-or in the context of a complaint proceeding.mHx yOq- v jԍAT&T at 50; BellSouth at 35; CompTel at 28; Excel at 14 n.41; LDDS at 31; MCI at 53; Sprint at 58; TRA at 21.  X -` ` c. Discussion  X - L333.` ` We affirm our tentative conclusion that section 271(d)(6) augments the  d(#\Commission's existing enforcement authority. We reject both NYNEX's contention that the  d(#specific remedies of section 271(d)(6)(A) supersede the general sanctions contained in sections  d(#206209 of the Act as well as SBC's assertion that there is no statutory basis for applying the  d(#provisions of section 206209 when a violation of section 271(d)(3) has been alleged. As AT&T  d(#observes, there is no support in the statute or its legislative history for the assertion that Congress  d(#intended to eliminate the damages remedy that applies to all other violations of Title II for  d(#Lviolations of sections 271 and 272, especially in light of the competitive concerns that underlie  X4- d(#=the 1996 Act.n4 yO- v ԍAT&T Reply at 28 n.62 (stating that the suggestion that Congress would have chosen to reduce incentives for BOC compliance and leave injured parties uncompensated is absurd). We also conclude that, where a complainant seeks damages as a result of the  d(#\underlying alleged violative conduct, a Commission determination on whether the BOC has  d(#/ceased to meet the conditions and the imposition of a section 271(d)(6)(A) sanction, where  d(#appropriate, would fulfill the Commission's statutory duty to "act on such complaint within 90  d(#days." Completion of this statutory obligation, however, would not preclude the complainant  X-from filing a supplemental complaint to determine the actual amount of damages.Xo(  yO"-ԍSee 47 C.F.R.  1.722. X  X-  X- nM334.` ` With respect to imposition of a Title V penalty (e.g., forfeiture and fines) pursuant  X|- d(#to section 271(d)(6)(A)(ii), we note that Title V provides for a separate process that is initiated"| o,-(-(ZZ2"  X- d(#by the issuance of a notice of apparent liability.zp yOy-ԍXSee also infra at paragraph  TITV355 . (#z We find, therefore, that the Commission's  d(#obligation under section 271(d)(6) is satisfied with respect to Title V penalties if, within 90 days  d(#[(or longer if parties agree) of receiving a complaint, the Commission, upon finding a BOC liable  X- d(#for unlawful conduct, issues a notice of apparent liability pursuant to section 503.qX yO-ԍ47 U.S.C.  503(b); 47 C.F.R.  1.80 et seq; see also NYNEX at 7475. Finally, we  d(#.affirm our tentative conclusion that the Commission may make a determination that a BOC has  d(#ceased to meet the conditions for entry either in a proceeding commenced on its own motion or  d(#via the resolution of a complaint proceeding. We further find, as most commenters suggest, that  d(#the Commission is not bound by the 90day time constraint when it initiates a proceeding on its own motion.   X - 2.` ` Legal and Evidentiary Standards  X -  X -` ` a. Background and Comments  X - ON335.` ` We sought comment in the Notice on the legal and evidentiary standards necessary  d(#to establish that a BOC has ceased to meet the conditions required for its approval to provide in X- d(#[region interLATA service.Cr yO)-ԍNotice at  99.C The majority of commenters assert that prescribing the elements  d(#of every claim that could conceivably be brought before the Commission would, at this point, be  Xb- d(#@a fruitless exercise.sbx yO- v 0ԍAmeritech at 73; CompTel at 30; cf. Sprint at 57 n.38 (stating that it is not possible at this point to determine legal and evidentiary standards for the imposition of sanctions). USTA maintains that, in order to invoke section 271(d)(6), the  d(# complainant's allegations and supporting proof must be of such character that, had it been  X4- d(#presented prior to entry, the Commission would not have approved the BOC's application.<t4 yO-ԍUSTA at 34.<  d(#Similarly, MCI contends that a complainant seeking section 271(d)(6) relief should state that the  d(#ydefendant BOC is no longer meeting the conditions for entry, cite the specific requirements the  X-BOC is violating, and describe how it is violating them.;u`  yO -ԍMCI at 53.;  X-` `  b. Discussion  X-  X-  O336.` ` MCI and USTA correctly point out that section 271(d)(6) cannot be invoked unless  d(#the complainant alleges that the BOC has failed to meet the conditions of entry under section  Xe- d(#i271(d)(3). We conclude, however, that the procedural aspects of this showing are best addressed"e u,-(-(ZZ1"  X- d(#>in our pending proceeding to adopt expedited complaint procedures.Rv yOy-ԍSee Enforcement NPRM.R  We agree with the  d(#majority of commenters and conclude that, beyond the duties and obligations discussed elsewhere  d(#in this Order, we need not establish at this time substantive rules that would define the specific  d(#jlegal elements of a claim that a BOC has failed or ceased to meet the conditions for entry under  d(#section 271(d)(3). Although we recognize that the establishment of substantive standards or  d(#"bright line" tests could assist in expediting the ultimate disposition of complaints invoking the  d(#90day statutory resolution deadline under section 271(d)(6), the conditions for entry include not  d(#jonly compliance with the section 272 requirements, but also satisfaction of the requirements of  d(#the competitive checklist in section 271(c)(2)(B), as well as a demonstration that the BOC  d(#application is consistent with the public interest, convenience, and necessity. Given the widely  d(#varying circumstances that may arise in the context of complaints alleging failure to meet the  X - d(#conditions of entry, we conclude that it is best to determine a BOC's compliance or  d(#noncompliance with these requirements on the basis of concrete facts presented in particular  X -cases, rather than by substantive rule in this noticeandcomment proceeding.w X yO- v LԍWe expect to give content to the substantive requirements of the competitive checklist, for example, in the context of adjudicatory proceedings pursuant to section 271.  X -  2P337.` ` For these same reasons, we agree with a majority of the commenters that it would  d(#be impractical to prescribe specific evidentiary standards for establishing violations of all of the  d(#substantive requirements contained in the competitive checklist. Just as the circumstances that  d(#arise in the context of 271(d)(6) complaints are likely to vary from case to case, so too will the  XK- d(#information necessary to prove or disprove allegations that the BOC has ceased to meet the  d(#conditions of entry. We note as a general matter that, consistent with the requirements of the  d(#APA, the Commission's practice in formal complaint proceedings pursuant to section 208 has  d(#been to determine compliance or noncompliance with the Act or the Commission's rules and  X- d(#-orders according to a "preponderance of the evidence" standard of proof.xb  yOP- v ԍSee, e.g., General Plumbing Corp. v. New York Telephone Co. and MCI, Memorandum Opinion and Order,  d(#iDA 96966 (Com. Car. Bur. rel. June 20, 1996). Proof by a preponderance of the evidence is applicable in most  d(#administrative and civil proceedings unless otherwise prescribed by statute or where other countervailing factors  {O- d(#<warrant a higher standard. See Sea Island Broadcasting Corp. v. FCC, 627 F.2d 240, 242 (D.C. Cir. 1980) ("The  d(#xuse of the 'preponderance of evidence' standard is the traditional standard in civil and administrative proceedings.  yO:- d(#It is the one contemplated by the APA, 5 U.S.C.  556(d)."), cert. denied, 449 U.S. 834 (1980); see also Grogan v.  yO - d(#xGarner, 498 U.S. 279, 285 (1991) (because the "preponderance of the evidence" standard results in roughly equal  d(#allocation of risks of error between litigants, the Supreme Court presumes that such a standard is applicable in civil  d(#,actions between private litigants unless particularly important individual interests or rights are at stake). Generally,  d(#preponderance of the evidence means the "greater weight of evidence, evidence which is more convincing than the  yO"#- d(#Yevidence which is offered in opposition to it." Hale v. Department of Transportation, 772 F.2d 882, 885 (Fed. Cir.  yO#-1985). ā Neither section 271  d(#nor its legislative history prescribe a different standard of proof for establishing a BOC's failure  d(#to meet the conditions required for entry; we conclude, therefore, that this evidentiary standard  d(#-applies equally to section 271(d)(6) complaints. In the paragraphs that follow, we address related"x,-(-(ZZ4"  X- d(#Lissues regarding what constitutes a prima facie showing that a BOC has ceased to meet one or  d(#more of the conditions for interLATA entry and whether the burden of proof should shift to the  d(#defendant BOC once the complainant makes such a showing. Notwithstanding the existence of  X- d(#a prima facie showing or any shift in the burden of production, as discussed below, to the extent  d(#{that a complainant and defendant BOC differ over the material facts underlying a section  d(#271(d)(6) complaint, the preponderance of evidence standard will guide our ultimate disposition  Xx-of the complaint.  XJ- 3.` ` Prima Facie Standard  X -` ` a. Background  X - _Q338.` ` We sought comment in the Notice on what constitutes a prima facie showing that  d(#a BOC has ceased to meet one or more of the conditions for interLATA entry. We asked parties  d(#to comment on whether it is enough for complainants invoking the expedited complaint  d(#=procedures under section 271(d)(6)(B) to plead, along with proper supporting evidence, "facts  d(#which, if true, are sufficient to constitute a violation of the Act or Commission order or  X{- d(#Mregulation" in order to establish a prima facie showing that the BOC has ceased to meet the  Xd-conditions for approval in section 271(d)(3).Dyd yO-ԍNotice at  100.D  X6-` ` b. Comments  X-  X- R339.` ` Bell Atlantic, CompTel, LDDS, Sprint, Time Warner, and TRA all agree that a  X- d(#prima facie case can be made by pleading facts that are sufficient to constitute a violation of the  X- d(#iAct, Commission order, or regulation.zX yO- v kԍBell Atlantic at 10 n.26; CompTel at 29; LDDS at 30; Sprint at 5556; Sprint Reply at 36; Time Warner at 3637; TRA at 21. Bell Atlantic and Sprint observe, however, that, because  X- d(#=a prima facie case will vary with each factual context, it is not possible to go further and define  X- d(#yall the requirements for a prima facie case under various factual circumstances. NYNEX argues  d(#that simply permitting a complainant to allege facts without requiring the submission of "proper  X~- d(#supporting evidence" constitutes a "serious denial of due process."n{~ yO-ԍNYNEX at 6566; see also PacTel at 45; SBC Reply at 34.n AT&T and MCI propose  Xg- d(#specific examples of BOC behavior that should be deemed sufficient to constitute prima facie  XP-showings that a BOC has ceased to meet the section 272 requirements.N|P@ yOA#-ԍAT&T at 31, 35; MCI at 5355.N  X9-"9|,-(-(ZZ"Ԍ X-` `  c. Discussion  X-  X- S340.` ` We conclude that complainants invoking the expedited complaint procedures of  d(#section 271(d)(6)(B) must plead, along with proper supporting evidence, facts which, if true, are  d(#sufficient to constitute a violation of the Act or Commission order or regulation in order to  X- d(#establish a prima facie showing that a BOC has ceased to meet the conditions for entry. Contrary  d(# to the suggestion of NYNEX and others, we did not propose in our Notice that it would be  X_- d(#sufficient for a complainant to establish a prima facie case without the submission of "proper  XH- d(#[supporting evidence."N}H yO -ԍSee Notice at  100.N Such a showing is not permissible under either our present pleading  X1- d(#=requirements or under the rules we propose in the Enforcement NPRM on expedited complaint  d(#procedures. Under our present rules, a formal complaint is required to include certain categories  X - d(#of information, including specific facts and legal authorities upon which the complaint is based.P~ X yO -ԍSee 47 C.F.R.  1.721.P  d(#MIn addition, a formal complaint must identify or describe specifically and in detail the carrier  X - d(#conduct that forms the basis for the complaint as well as the nature of injury sustained.L  yOn-ԍ47 C.F.R.  1.721(a)(6).L  X - d(#Further, in our Enforcement NPRM, we recently proposed to augment these requirements by  d(#requiring that a formal complaint include facts supported by relevant documentation or  X- d(#!affidavits.Wx yO-ԍEnforcement NPRM at  37.W Under our proposed rules, a complainant that fails to meet these pleading  d(#requirements may face either a dismissal of the complaint or a summary denial of the relief  Xb- d(#/sought.Lb yO-ԍId. at  85.L Thus, in light of the pleading requirements that presently exist, as well as those  XK- d(#.proposed in the Enforcement NPRM, we reject allegations by some commenters that the prima  X4- d(#facie standard we are adopting in this Order will violate the defendant's procedural rights, allow  d(#\a complainant to file only a "bare noticetype complaint," or invite a flood of frivolous suits  X-designed to harass the BOCs.f yOO-ԍSee NYNEX at 66; PacTel at 45; SBC Reply at 34.f  X- 2T341.` ` We reject the recommendations of AT&T and MCI that we adopt specific criteria  X- d(#the complainant must demonstrate in order to establish a prima facie showing. As we stated  d(#.above, beyond the legal and evidentiary standards established in this proceeding, it would be  d(#.imprudent for us, at this time, to attempt to propose a comprehensive list of the showings that complainants will be required to make in order to demonstrate violations of  d(#the conditions of entry. Rather, we find it more appropriate to establish a generally applicable  XN- d(#prima facie standard that is suitable for all complaints invoking section 271(d)(6), not just those alleging specific violations of the section 272 requirements. "7( ,-(-(ZZ"Ԍ X-ԙ 4.` ` BurdenShifting and Presumption of Reasonableness  X-` ` a. Background   X- U342.` ` In the Notice, we sought comment on whether the procompetitive goals of the Act  d(#are advanced by shifting the ultimate burden of proof from the complainant to a defendant BOC,  d(#not just in complaints alleging discrimination under section 202(a), but in all complaints alleging  X_- d(#Mthat a BOC has ceased to meet any of the conditions for its approval to provide interLATA  d(#Kservices under section 271(d)(3). We sought comment specifically on whether the burden should  X1- d(#shift to the defendant BOC once the complainant makes a prima facie showing that a BOC has  X -ceased to meet the conditions of section 271(d)(3).D  yO -ԍNotice at  102.D  X - V343.` ` We also observed in the Notice that in complaints challenging the rates, terms, and  d(#conditions of nondominant carrier service offerings under sections 201(b) and 202(a), the  X - d(#Commission has effectively established a rebuttable presumption that such rates and practices are  X - d(#=lawful." X yO- v ?ԍSee, e.g., Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities  yOz-Authorizations Therefor, CC Docket No. 79252, First Report and Order, 85 FCC 2d 1, 3133 (1980)." We tentatively concluded that, in the context of complaints alleging that a BOC has  X- d(#ceased to meet the conditions required for the provision of inregion interLATA services, we will  d(#not employ a presumption of reasonableness in favor of the BOC or BOC affiliate, regardless of  Xd-whether the BOC or BOC affiliate is regulated as a dominant or nondominant carrier.Dd yO-ԍNotice at  104.D  X6- ` ` b. Comments  X- W344.` ` All BOCs and USTA oppose shifting the ultimate burden of proof to the defendant  X- d(#.BOC after the complainant has established a prima facie case that the BOC has ceased to meet  X- d(#Lthe conditions of entry.@ yO- v jԍAmeritech at 7475; Bell Atlantic at 1011; BellSouth at 3637; NYNEX at 7072; PacTel at 42; SBC Reply at 34; U S West at 62; USTA at 36. BOCs assert, among other things, that shifting the burden of proof  d(#?would violate due process and the APA, result in the filing of frivolous, anticompetitive  d(#complaints, and require them to prove a negative by continually demonstrating that they are not  d(#violating the conditions of entry. Some BOCs, however, support the idea of shifting the burden  X~- d(#!of producing evidence.e~ yO#-ԍNYNEX at 66; PacTel Reply at 3738; SBC Reply at 34.e All other commenters, including potential competitors, trade  Xg- d(#=associations and DOJ, support shifting the burden of proof.g(  yO@&- v yԍSee, e.g., AT&T at 5051, CompTel at 29; DOJ Reply at 1314; Excel at 14; ITAA at 28; LDDS at 30; MCI at 55; Sprint at 5556; Teleport at 22; Time Warner at 37; TRA at 21. In addition, most commenters,"g ,-(-(ZZ"  d(#including DOJ, agree with our tentative conclusion that the Commission should not employ a  d(#Lpresumption of reasonableness in favor of the BOC or BOC affiliate in complaints alleging that  X-a BOC has ceased to meet the conditions of entry. yOK- v ԍCompTel at 30; DOJ Reply at 15; LDDS at 3031; MCI at 56; NYNEX Reply at 37 n.113; Teleport at 22;  yO-TRA at 22. But see PacTel at 46; SBC Reply at 34.  X-` ` c. Discussion  X-  Xv- AX345.` ` For the reasons and in the manner discussed below, we conclude that the burden  d(#lof production with respect to an issue should shift to the BOC after the complainant has  XH- d(#idemonstrated a prima facie case that a defendant BOC has ceased to meet the conditions of entry.  d(#As an initial matter, we note that the term "burden of proof" has historically been used to  d(#describe two separate but related concepts. First, it has been used to describe the burden of  d(#persuasion with respect to a particular issue which, under the traditional view, never shifts from  d(#one party to the other at any stage in the proceeding. Second, it has been used to describe the  d(#burden of going forward with evidence necessary to avoid an adverse decision on that issue. This  X - d(#<burden may shift back and forth between the parties.t  yO-ԍSee Black's Law Dictionary 136 (Abridged 6th ed. 1991). t Under the approach we adopt today, the  d(#burden of production or coming forward with evidence will shift to the defendant BOC once the  X- d(#<complainant has established a prima facie case that the conditions of interLATA entry have been  d(#/violated. In other words, the defendant BOC will have an affirmative obligation to produce  Xd- d(#evidence and arguments necessary to rebut the complainant's prima facie case or risk an adverse  d(#Lruling. The complainant, however, will have the ultimate burden of persuasion throughout the  d(#proceeding; that is, to show that the "preponderance of the evidence" produced in the proceeding  d(#kweighs in its favor. As explained more fully below, shifting the burden of production to the  X- d(#defendant BOC once a prima facie case has been made will require the party most likely to have  d(#lrelevant information in its possession to produce the information at an early stage in the proceeding.  X- Y346.` ` Currently, in a typical complaint proceeding, the complainant has the burden of  d(#=establishing that a common carrier has violated the Communications Act or a Commission rule  X- d(#or order.{X yO- v ԍSee generally, Amendment of Rules Governing Procedures to be Followed When Formal Complaints Are  yO - d(#Filed Against Common Carriers, CC Docket No. 9226, Report and Order, 8 FCC Rcd 2614 (1993) (1993  yOq!-Enforcement Order); 47 C.F.R.  1.721 1.735.{ This burden of persuasion does not shift to the defendant carrier at any time in the  Xi- d(#-proceeding.i yO#- v ԍIn any complaint proceeding initiated under Section 208 of the Communications Act, the Commission, and  d(#wthe staff pursuant to delegated authority, may exercise discretion to require a defendant carrier to come forward with  yOz%- d(#Yinformation or evidence determined to be in the sole possession or control of the carrier. See,e.g., General Services  yOB&- d(#Admin. v. AT&T, 2 FCC Rcd 3574, 3576 n.31 (1987). In such cases, however, the burden of establishing a violation remains with the complainant. As Sprint observes, however, in view of the statutory mandate to resolve section"i ,-(-(ZZ"  d(#271(d)(3) complaints in 90 days, the Commission must balance the need for expeditious  X- d(#resolution of the complaint against the need to develop a full record.D yOb-ԍSprint Reply at 31.D We recognize, as do  d(#many commenters, that, even though some information may be publicly available, in many cases  d(#the BOC will be the sole possessor of certain information relevant to the disposition of the  d(#complainant's case. Our primary goal, as we expressed in the Notice, is to give full force and  d(#.effect to the procompetitive policies underlying section 271(d)(6) by ensuring the full and fair  d(#resolution of complaints challenging a BOC's compliance with the conditions for interLATA  d(#yentry within the statutory 90day period. We find that shifting the burden of production to the  XH- d(#defendant BOC after a prima facie showing has been made by the complainant will facilitate our ability to reach this goal.  X - Z347.` ` Further, as we observed in the Notice, effective enforcement of the conditions of  d(#interLATA entry, including the separate affiliate and nondiscrimination requirements of section  d(#272, is critical to ensuring the full development of competition in the local and interexchange  d(#telecommunications markets. Many commenters argue that prompt enforcement of these  d(#conditions is essential not only to ensure the advent of true competition, but also to ensure that  d(#the BOCs take the conditions of entry seriously, particularly after they enter the inregion  d(#interLATA market. We conclude that shifting the burden of production to the BOC will facilitate  d(#the detection of anticompetitive behavior by the BOC and will enable us to adjudicate  XK- d(#yexpeditiously complaints alleging violations of section 271(d)(3). Further, as mentioned above,  d(#in the context of a complaint proceeding, BOCs will have an affirmative obligation to produce  d(#\all relevant evidence in their possession to rebut the complainant's claim or face an adverse  d(#ruling. Shifting the burden of production, therefore, may ultimately reduce the number of  d(#complaints filed against the BOCs by encouraging them to divulge exculpatory evidence before enforcement proceedings begin.  X- [348.` ` Many commenters that support shifting the burden of proof do not specify whether  d(#they advocate shifting the burden of persuasion or the burden of production. It is evident from  d(#the context of some comments, however, that a few commenters support a shift in the burden of  Xe- d(#persuasion, rather than a shift in the burden of production.SXeX yOn- v ԍSee CompTel at 29; DOJ Reply at 13; LDDS at 30; MCI Reply at 3233; Time Warner at 37; TRA at 21;  yO6- d(#isee also Sprint at 5557 (there is no way, absent discovery, to require a BOC to produce relevant evidence that is harmful to its case).S In response to these commenters,  d(#we find that most of the competitive concerns they raise in support of shifting the burden of  X7- d(#persuasion are more than adequately addressed by shifting the burden of production.7x yO`#- v ԍBut see Sprint Reply at 34 (stating that it is unclear whether Commission means shift in burden of going forward or shift in burden of ultimate persuasion). For  d(#yexample, some parties that advocate shifting the burden of persuasion argue that complainants  d(#frequently will require specific information that is within the exclusive possession of the BOC  d(#zin order to substantiate their claim. These parties contend that requiring the complainant to",-(-(ZZ<"  d(#zmaintain the burden of proof would result in needless, extensive discovery, and shifting the  d(#burden will give BOCs the incentive to produce information necessary to resolve the complaint.  X- d(#We conclude that these concerns, as well as our goal of facilitating the full and fair resolution  d(#of claims alleging violations of the conditions of entry within the statutory 90day period, are  d(#satisfied without requiring BOCs to prove a negative in order to avoid liability, i.e., to prove, by  d(#ja preponderance of the evidence, that they did not violate the conditions of entry. Further, we  d(#find it unnecessary to address most of the BOCs' arguments against burdenshifting because they  d(#Nare directed against shifting the ultimate burden of persuasion rather than the burden of production.  X - p\349.` ` We do find it necessary, however, to respond to Ameritech's argument that  d(#Zinformational asymmetry between the complainant and defendant is best addressed in the context  X - d(#of the discovery process.D  yOe -ԍAmeritech at 7475.D Ameritech maintains that, if the Commission's discovery processes  X - d(#are too cumbersome, they ought to be reformed rather than replaced with burdenshifting.A X yO-ԍId. at 74.A  d(#.Similarly, other commenters propose various procedural requirements that we might impose to  X - d(#{enable us to resolve complaints within the 90day statutory window.  yO@- v ԍSee, e.g., AT&T at 5152; New Jersey Division of Ratepayer Advocate at 45; NYNEX at 76; USTA Reply at 2122. Moreover, a few  d(#<commenters suggest that Alternative Dispute Resolution may be another mechanism by which to  Xy-facilitate resolution of complaints alleging a violation of section 271(d)(3).y@ yOj- v \ԍATSI at 1516; NYNEX at 76; PacTel Reply at 38. But see AT&T at 5253 n.44 (Commission may not adopt any procedures that would delay its decision beyond 90 days).  XK- 2]350.` ` In response to these arguments, we note that purpose of the Enforcement NPRM  d(#=is to streamline our current procedures and pleading requirements so that we may expedite the  d(#processing of all formal complaints and resolve complaints within the deadlines imposed by the  d(#1996 Act. We therefore find that it would be inadvisable to attempt to establish any new  d(#Zprocedural rules in this proceeding. Moreover, as PacTel points out, we do not have an adequate  X- d(#record on which to base any such rules.D yO! -ԍPacTel Reply at 38.D In response to Ameritech, we note that in the  X- d(#Enforcement NPRM we specifically proposed to reform our discovery process. Specifically, we  X- d(#[sought comment on a range of options to eliminate or modify the discovery process, including  d(#prohibiting discovery as a matter of right, limiting the amount or scope of discovery, and  X|- d(#allowing the state to set timetables for completion of discovery on an individual case basis.\|(  yOU%-ԍEnforcement NPRM at  4856. \  Xe- d(#jBy shifting the burden of production to the BOC after a prima facie showing has been made by  d(#-the complainant, we are ensuring that information relevant to the complainant's claim is disclosed"N ,-(-(ZZ"  d(#early in the process, and thereby providing the Commission a sufficient record on which to make a decision, even in the potential absence of traditional discovery.  X- p^351.` ` Finally, we affirm our tentative conclusion that, in the context of complaints  d(#alleging that a BOC has ceased to meet the conditions required for the provision of inregion  d(#interLATA services, we will not employ a presumption of reasonableness in favor of the BOC  d(#or BOC affiliate, regardless of whether the BOC or BOC affiliate is regulated as a dominant or  d(#nondominant carrier. The presumption of lawfulness given to nondominant carrier rates and  d(#practices is employed in the context of complaints alleging violations of sections 201(b) and  d(#Z202(b), where the complaint must demonstrate that the defendant's rates and practices are "unjust  d(#.and unreasonable." We agree with MCI that a presumption of reasonableness is an irrelevant  d(#concept in the context of complaints alleging violations of the conditions of interLATA approval  d(#in section 271(d)(3), particularly given our interpretation of section 272(c)(1) as an unqualified  X -prohibition on discrimination.E  yON-ԍSee MCI at 56.E  X -  X - 5.` ` Enforcement Measures under Section 271(d)(6)(A)  X-  Xy- ` ` a.  Background  XK- _352.` ` Section 271(d)(6)(A) provides that if, at any time after approval of a BOC  d(#application, the Commission determines that the BOC has ceased to meet any of the conditions  d(#<of its approval to provide interLATA services, the Commission may, after notice and opportunity for a hearing: (1) issue an order to the BOC to "correct the deficiency;"  X- d(#(2) impose a penalty pursuant to Title V;H@X yO- v ԍPursuant to section 503(b)(1)(B), a person who "willfully or repeatedly" fails to comply with any of the  d(#provisions of the Communications Act or any rule, regulation, or order issued by the Commission under the  d(#KCommunications Act, is liable to the United States for a forfeiture penalty. Section 503(b)(2)(B) authorizes the  d(#Commission to assess forfeitures against common carriers of up to one hundred thousand dollars for each violation,  d(#or each day of a continuing violation, up to a statutory maximum of one million dollars for a single act or failure  d(#ito act. In exercising such authority, the Commission is required to take into account "the nature, circumstances,  d(#+ extent, and gravity of the violation and, with the respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require." 47U.S.C.  503(b)(1)(B), (b)(2)(B). H or (3) suspend and revoke the BOC's approval to  X-provide inregion interLATA services.M`  yO -ԍ47 U.S.C.  271(d)(6)(A).M  X- `353.` ` In the Notice, we tentatively concluded that we will follow the procedures set forth  d(#in Title V to impose Title V penalties, including forfeitures, under section 271(d)(6)(A). As to  d(#xthe nonforfeiture enforcement measures, we sought comment on whether the Commission should  d(#.exercise its enforcement discretion and impose these sanctions on an individual case basis, or  d(#whether we should establish specific legal and evidentiary standards for each type of sanction.  d(#=Further, we sought comment on the appropriate "notice and opportunity for a hearing" for the"7 ,-(-(ZZ"  d(#imposition of these nonforfeiture sanctions, both in the context of a complaint proceeding and  d(#<on the Commission's own motion. We interpreted "opportunity for hearing" not to require a trial X- d(#type hearing before an Administrative Law Judge (ALJ).[ yOK-ԍSee 5 U.S.C.  554, 556, 557.[ We also tentatively concluded that  d(#yCongress, by imposing a 90day deadline for complaints, did not intend to afford the BOC trial X-type hearings in enforcement proceedings pursuant to section 271(d).DX yO-ԍNotice at  106.D  Xv- ` ` b. Comments  XH- ba354.` ` All commenters agree with our tentative conclusion to follow the Title V  d(#!procedures to impose Title V penalties in enforcement actions alleging violations of the  X - d(#conditions of entry under section 271(d)(3). Commenters also agree that we should exercise our  d(#enforcement discretion and impose nonforfeiture sanctions on an individual case basis and should  X - d(#not attempt to establish specific legal and evidentiary standards for each type of sanction.h  yO-ԍAT&T at 51; NYNEX Reply at 38 n.118; Sprint at 57 n.38.h  X - d(#.AT&T proposes, however, that any sanction must ensure that the penalty for the misconduct  d(#exceeds any competitive benefit the BOC may have received as a result of the violation and that  d(#the BOC not be permitted to continue to provide long distance until it has corrected its  X- d(#violation.<x yO-ԍAT&T at 51.< Commenters were generally split on the issue of whether "opportunity for hearing"  Xy- d(#requires a trialtype hearing before an ALJ prior to the imposition of a nonforfeiture sanction. y yO2- v ԍPacTel and USTA argue that a trialtype hearing for section 271(d)(3) violations will afford parties full due  d(#Jprocess rights and help resolve highly technical, complex matters. PacTel at 45; USTA at 37. AT&T, Excel, MCI,  d(#and Sprint agree that no trialtype hearings before an ALJ are required prior to imposition of nonforfeiture sanctions. AT&T at 50; Excel at 13 n.37; MCI at 57; Sprint at 56 n.37.  X4-` ` c. Discussion  X-  X- b355.` `  TITV We affirm our tentative conclusion that we will follow the procedures set forth in  X- d(#.Title V to impose Title V penalties in enforcement actions alleging violations of the conditions  d(#yof entry under section 271(d)(3). As to nonforfeiture enforcement measures, we conclude that  d(#it is impractical, at this point in time, to prescribe the specific elements and factors that would  d(#warrant issuance of an order to "correct the deficiency" or an order suspending or revoking a  d(#BOC's approval to provide inregion interLATA service. We agree with AT&T that to do so  X|- d(#!would limit our remedial flexibility.<|  yO&-ԍAT&T at 51.< Nor do we find it appropriate to establish specific  d(#yevidentiary standards; rather, our determination of which nonforfeiture measure to impose will"e ,-(-(ZZ1"  X- d(#?depend on the specific facts and circumstances presented in a particular case. We find,  d(#nevertheless, that a BOC will have a full and fair opportunity to submit evidence and arguments challenging the imposition of a prescribed sanction within the statutory 90day period.  X- "c356.` ` We conclude that the phrase "opportunity for hearing" in section 271(d)(6)(A) does  d(#mnot require a trialtype hearing before an ALJ prior to the imposition of nonforfeiture  d(#<enforcement measures. Although we recognize, as PacTel and USTA suggest, that hearings may  d(#be necessary to resolve material questions of fact, such as when oral testimony or cross d(#/examination is required, we do not agree that trialtype hearings before an ALJ are required  X1- d(#before the Commission imposes any nonforfeiture sanction.1 yO - v MԍSee 1993 Enforcement Order, 8 FCC Rcd at 26252626,  65; see also, e.g., Elehue Kawika Freemon and  yOr -Lucille K. Freemon v. AT&T, Hearing Designation Order, 9 FCC Rcd 4032 (1994). We find instead that, regardless  d(#of whether the Commission is imposing a nonforfeiture sanction in a proceeding commenced on  d(#/its own motion or in the context of a complaint proceeding, the Commission can satisfy the  d(#hearing requirement of section 271(d)(6)(A) through written submissions rather than oral  X - d(#.testimony.H  yO-ԍSee AT&T at 50. H Finally, we affirm our tentative conclusion that Congress, by imposing a 90day  d(#kdeadline for complaints, did not intend to afford BOCs trialtype hearings in all enforcement proceedings pursuant to section 271(d)(6)(B).  Xy- - X. FINAL REGULATORY FLEXIBILITY CERTIFICATION ă  XK- d357.` ` The Commission certified in the Notice that the proposed rules would not have a  d(#-significant economic impact on a substantial number of small entities because the proposed rules  X- d(#did not pertain to small entities.h yO~-ԍNotice at  165 (citing 5 U.S.C.  605(b)).h Written public comment was requested on this proposed  X- d(#certification, and only one comment was received.l@ yO-ԍNational Telephone Cooperative Association Comments at 56.l For the reasons stated below, we certify that  d(#the rules adopted herein will not have a significant economic impact on a substantial number of  d(#=small entities. This certification conforms to the Regulatory Flexibility Act (RFA), as amended  X-by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). yOB - v ԍ5 U.S.C.  601 et seq. SBREFA was enacted as Subtitle II of the Contract With America Advancement Act of 1996, Pub.L. No. 104121, 110 Stat. 847 (1996).  X- `e358.` ` The RFA incorporates the definition of small business concerns set forth in 15  d(#jU.S.C.  632 (small business concerns are independently owned and operated, not dominant in  d(# their field of operations, and meet any additional criteria established by the Small Business  d(#Administration (SBA)). The rules we adopt in this Order implement the nonaccounting separate  d(#=affiliate and nondiscrimination provisions of sections 271 and 272 of the Act, and will apply to"7( ,-(-(ZZ"  d(#the BOCs when they enter previously restricted markets. The Notice stated that, because BOCs  d(#are dominant in their field of operations, they are by definition not small entities and therefore  X- d(#.no regulatory flexibility analysis is required.F yOK-ԍNotice at  165. F We now note as well that none of the BOCs is  d(#a small entity because each BOC is an affiliate of a Regional Holding Company (RHC), and all  X- d(#of the BOCs or their RHCs have more than 1,500 employees.X yO- v  1500 ׍Federal Communications Commission, CCB, Industry Analysis Division, Preliminary Domestic Information  yOu-From Statistics of Communications Common Carriers, Tbl. 1.1 (July 1996). The order also clarifies the joint  X- d(#ymarketing restrictions that will apply to the nation's largest interexchange carriers for an interim  Xv- d(#Kperiod pursuant to section 271.MXv yO - v NԍSpecifically, the Order implements the joint marketing restrictions of section 271(e), which apply to  yO - d(#interexchange carriers that serve "greater than 5 percent of the nation's presubscribed access lines." See 47 U.S.C.  271(e). M The most recent data shows that only AT&T, MCI, and Sprint  X_- d(#.meet the statutory threshold._ yO- v ԍFederal Communications Commission, CCB, Industry Analysis Division, Long Distance Market Shares:  yO-Second Quarter, 1996, Tbl. 4 (Sept. 1996). Moreover, these carriers are not small entities under the SBA  XH-definition because each has more than 1,500 employees.H(  yO!- v mԍSBA regulations, 13 C.F.R.  121.201, define small telecommunications entities in SIC Code 4813 (Telephone Communications Except Radiotelephone) as entities with fewer than 1,500 employees.  X1-  X - f359.` ` NTCA contends that small incumbent LECs should be considered small entities  X - d(#Kunder the SBA's definition, and therefore, the basis of the proposed certification was incorrect.F  yO4-ԍNTCA Comments at 56.F  d(#The certification contained in the Notice applied both to our proposed rules implementing sections  d(# 271 and 272 and to our proposed rules addressing LEC interexchange services. This Order  d(#implements only sections 271 and 272, and, as we have indicated, affects only the BOCs, AT&T,  d(#=MCI and Sprint. NTCA's arguments concerning small incumbent LECs are not relevant to this Order, therefore, and will be addressed in a separate Order in this docket.  Xb- g360.` ` We therefore certify, pursuant to section 605(b) of the RFA, that the rules adopted  d(#in this order do not have a significant economic impact on a substantial number of small entities.  d(#The Commission shall provide a copy of this certification to the Chief Counsel for Advocacy of  X- d(#the SBA, and include it in the report to Congress pursuant to the SBREFA.L yO"-ԍ5 U.S.C.  801(a)(1)(A).L The certification  X-will also be published in the Federal Register.F yOW%-ԍ5 U.S.C.  605(b).F "0,-(-(ZZ'"Ԍ X-  Ph361.` ` Report to Congress. The Commission shall send a copy of this FRFA, along with  d(#this Order, in a report to Congress pursuant to the SBREFA, 5 U.S.C.  801(a)(1)(A). A copy  d(#Hof this FRFA will also be published in the Federal Register.:!}K *J:\POLICY\SAFE\ORDER\MASTER\NOTICE* :  А X-    X- _XI. FURTHER NOTICE OF PROPOSED RULEMAKING Đ\  X_- A.Information Disclosure Requirements under Section 272(e)(1)  X1-1.` ` Background  X - i362.` ` Section 272(e)(1) states that BOCs "shall fulfill any requests from an_ unaffiliated  d(#entity for telephone exchange service and exchange access within a period no longer than the  d(#period in which it provides such telephone exchange service and exchange access to itself or to  X - d(#[its affiliates."J  yO7-ԍ47 U.S.C.  272(e)(1).J In the Notice, we sought comment on how to implement section 272(e)(1) and  X - d(#specifically inquired whether reporting requirements for service intervals analogous to those  X- d(#.imposed by Computer III and ONA would be sufficient.CX yO-ԍNotice at  85.C We concluded above, in Part VI.A,  d(#{that specific public disclosure requirements are necessary to implement section 272(e)(1)  d(#effectively. We also noted that the record does not provide sufficient detail for us to determine  XK- d(#whether the current ONA disclosure requirements are suitable for assessing compliance with  d(#xsection 272(e)(1), or whether another proposal, such as AT&T's proposed reporting requirements, would be a better approach.  X- 2.` ` Comments  X- `j363.` ` AT&T, Teleport, and MCI support the imposition of reporting requirements to  X- d(#implement section 272(e)(1) and argue that the existing ONA installation and maintenance  X- d(#reporting requirements are insufficient.X yO,- v ԍAT&T at 3637; Teleport Oct. 8 Ex Parte at 1; Letter from Frank W. Krogh, Appellate Counsel, Regulatory  yO- d(#Law, MCI to William F. Caton, Acting Secretary, FCC at 1 (MCI Nov. 1 Reporting Ex Parte). Other parties also  yO-express dissatisfaction with ONA reporting. See e.g., Time Warner at 23. AT&T suggests, for example, that the service interval  X|- d(#reporting requirements established in the ONA proceeding measure average response times, and  d(#would not provide an adequate mechanism for determining whether a BOC is complying with  XN-section 272(e)(1). N yO$- v =ԍAT&T at 3637. According to AT&T, reliance on average response times allows a BOC to respond quickly  d(#,to urgent requests of its affiliate and slowly to the less important requests of its affiliate, while doing the reverse for  d(#unaffiliated entities, thereby maintaining identical average response times for both entities, but discriminating against  yO_&-unaffiliated entities. Id. "7 ,-(-(ZZ"Ԍ X- k364.` ` AT&T proposes a reporting scheme that is based on measures it currently uses to  X- d(#-monitor the quality of access services provided to it by LECs.Q yOb-ԍAT&T Oct. 3 Ex Parte at 5.Q AT&T proposes that the BOCs  d(#report data in eleven categories, most of which are broken down into subcategories according to  d(# the type of access service provided. AT&T's proposal includes relatively specific units of  d(#Zmeasure for these categories, such as, for example, the percentage of circuits installed within each  X- d(#successive twentyfour hour period, until a ninetyfive percent installation level is reached.:X yO-ԍId.:  d(#According to AT&T, LECs currently track information in these categories to monitor the service  X_- d(#\they provide to AT&T.@_ yO -ԍId. at 2.@ Teleport proposes a reporting format that includes eight service  XH- d(#categories for both installation and service performance.fHx yOq-ԍTeleport Oct. 24 Ex Parte, Attachments 1 and 2.f MCI proposes categories based on  d(#kthose used in Automated Reporting Management Information Systems (ARMIS), including  X - d(#additional categories for billing disputes and payment intervals.\  yO-ԍMCI Nov. 1 Reporting Ex Parte at 23.\ MCI proposes quarterly  X -reporting broken down among the BOC, its affiliate, and all other unaffiliated entities.:  yOL-ԍId.:  X - }l365.` ` The BOCs oppose AT&T's proposal. Bell Atlantic, for instance, states that some  d(#{of the categories in AT&T's proposal ask for information beyond the information AT&T  X - d(#currently requests from the BOCs._ (  yO-ԍBell Atlantic Oct. 16 Ex Parte at 2 n.1._ Bell Atlantic further argues that AT&T improperly proposes  d(#-that the BOCs report on intermediate checkpoints that do not provide information on the ultimate  Xy- d(#timeliness of the BOCs' provision of service.@y  yO-ԍId. at 2.@ Several BOCs argue that the information AT&T  Xb- d(#<seeks is already available in existing ARMIS reports.{bH  yO[-ԍBellSouth Oct. 29 Ex Parte at 2; PacTel Oct. 18 Ex Parte at 4.{ Ameritech opposes the monthly updates  XK- d(#Lproposed by AT&T, favoring quarterly updates instead.^K yO!-ԍAmeritech Oct. 23 Ex Parte, Attachment.^ Ameritech opposes reporting that  X4- d(#kwould provide detail below a BOC's total service region.:4h yOM$-ԍId.: Ameritech favors consolidating  X- d(#yAT&T's DS0 subcategories into a single DS0 category.: yO&-ԍId.: PacTel argues that the disclosure of",-(-(ZZ"  d(#>the absolute number of requests placed by its affiliate would reveal competitively sensitive  d(#information, and that disclosure of relative data, such as the percentage of missed appointments  X-and average time intervals, would provide sufficient information to monitor BOC behavior.T yOK-ԍPacTel Oct. 18 Ex Parte at 4.T  X- m366.` ` BOCs also oppose Teleport's proposal. PacTel disagrees with Teleport's  X- d(#/suggestion that BOCs provide data for each exchange area in their territory.TX yO-ԍPacTel Oct. 23 Ex Parte at 4.T PacTel also  d(#zindicates that reporting on DS0 as a separate category would unfairly disadvantage the one  X_-interexchange carrier that dominates the DS0 market.@_ yO -ԍId. at 3.@  X1- n367.` ` While the BOCs generally oppose reporting requirements, they state that, if the  X - d(#Commission imposes a reporting requirement, the ONA format should be utilized because it is  X - d(#currently in place and is wellunderstood. x yO,-ԍE.g., PacTel at 37; USTA at 26; Bell Atlantic Oct. 15 Ex Parte at 2; NYNEX Oct. 23 Ex Parte at 4. PacTel provides an example of a modified ONA  X - d(#report that reflects the services provided to interLATA telecommunications providers.b  yO-ԍPacTel Oct. 18 Ex Parte at 4, Attachment 6.b  d(#KAmeritech indicates that it would not oppose a reporting requirement that compares data for BOC  X -affiliates with aggregated data for all unaffiliated carriers.^  yO-ԍAmeritech Oct. 23 Ex Parte, Attachment.^  X- 3.` ` Discussion  Xb- o368.` ` In order to implement section 272(e)(1) effectively, we concluded that the BOCs  d(#must make publicly available the intervals within which they provide service to their affiliates.  d(#We concluded that, without this requirement, competitors will not have the information they  d(#require to evaluate whether the BOCs are fulfilling their requests for telephone exchange service  X-and exchange access in compliance with section 272(e)(1).b(  yO-ԍSee supra paragraph REPORTING242.b  X- #p369.` ` Method of information disclosure. In requiring the BOCs to disclose information  d(#regarding the service intervals within which they provide telephone exchange service and  d(#exchange access, we seek to avoid imposing any unnecessary administrative burdens on the  d(#BOCs, unaffiliated entities, and the Commission. Consequently, we tentatively conclude that the  d(#BOCs need not submit directly to the Commission the data that must be disclosed under section  d(#i272(e)(1). Instead, we tentatively conclude that, upon receiving permission to provide interLATA  d(#[services pursuant to section 271, each BOC must submit a signed affidavit stating: 1)the BOC"N ,-(-(ZZ0"  d(#?will maintain the required information in a standardized format; 2)the information will be  d(# updated in compliance with our rules; 3)the information will be maintained accurately; and  d(#4)how the public will be able to access the information. We tentatively conclude that, if a BOC  d(#makes any material change in the manner in which the information covered by the affidavit is  d(#.made available to the public, it must submit an updated affidavit within 30 days of the change.  d(#Further, we tentatively conclude that each BOC must submit an annual affidavit each year  d(#thereafter, affirming that the BOC has complied with the four requirements set out above during  d(#Zthe preceding year. We note that, in order to address potential complaints alleging discrimination  d(#[pursuant to section 272(e)(1), the BOCs are likely to maintain information regarding the service  d(#they provide to their affiliates and to unaffiliated entities, regardless of whether they must  d(#[disseminate such information publicly or file it with the Commission. Therefore, we tentatively  d(#conclude that maintaining this information for public dissemination will not impose a significant additional burden on the BOCs. We seek comment on the foregoing tentative conclusions.  X - q370.` ` We tentatively conclude that the BOCs must make such information available to  d(#the public in at least one of their business offices during regular business hours, and must include  d(#jthis information in their annual affidavits. We seek comment on this tentative conclusion. We  d(#seek comment on whether this information should also be available electronically. For example,  d(#jwe seek comment on whether the BOCs should make this information available on the Internet,  d(#or whether the information should be available through another electronic mechanism. We also  d(#iseek comment on other methods to facilitate the access and use of this information by unaffiliated entities, including small entities.  X- nr371.` ` Service categories and units of measure. We seek comment on whether the BOCs  d(#should maintain the information described below in a standardized format, and seek comment on  d(#Lwhether the format in Appendix C would be appropriate. Parties favoring an alternative format should submit examples of their proposals.  X|- s372.` `  CATEGORY We seek comment on whether we should require the BOCs to maintain information  d(#in the following service categories: 1)successful completion according to desired due date,  d(#measured in a percentage; 2)time from the BOCpromised due date to circuit being placed in  d(#service, measured in terms of the percentage installed within each successive twentyfour hour  d(#.period until ninetyfive percent complete; 3)time to firm order confirmation, measured in terms  d(#zof the percentage received within each successive twentyfour hour period until ninetyfive  d(#percent complete; 4)time from PIC change requests to implementation, measured in terms of  d(#percentage implemented within each successive six hour period until ninetyfive percent complete;  d(#5)time to restore and trouble duration, measured in terms of the percentage restored within each  d(#successive one hour interval until ninetyfive percent of incidents are resolved; 6)time to restore  d(#PIC after trouble incident, measured by percentage restored within each successive one hour  X#- d(#interval until ninetyfive percent restored; and 7)mean time to clear network and the average"#,-(-(ZZG""  d(#duration of trouble, measured in hours. We seek comment on whether any additional categories  X-proposed by commenters should be included. yOb- v ԍSee AT&T Oct. 3 Ex Parte at 5; Teleport Oct. 24 Ex Parte, Attachment 1; MCI Nov.1 Reporting Ex Parte, Attachment.  X- t373.` ` We have sought comment on whether the BOCs should disclose the interval  d(#between the due date promised by the BOC and the time a circuit is actually placed in service,  d(#<measured in terms of the percentage of circuits installed within each successive twentyfour hour  Xv- d(#<period.v  yOG - v zԍThe date promised by a BOC is sometimes referred to as the "FOC date." See Teleport Oct. 24 Ex Parte, Attachment 2 at 1. We have sought comment on a category that differs from AT&T's proposed category,  d(#which would measure a BOC's response time in relation to a customer's desired due date,  XH- d(#=because we recognize that the BOCs have no control over a customer's requested due date.Hx yOq- v ԍSee Bell Atlantic Oct. 16 Ex Parte at 2; NYNEX Oct. 23 Ex Parte at 6, n.10; Ameritech Oct. 23 Ex Parte, Attachment.  d(#We have proposed this category because the BOCs have control over the due date they promise  d(#at the time an order is placed. Further, the amount of delay in installing a circuit, and not just  X - d(#whether a due date was missed, may be a significant source of difficulty to a customer.   yO- v ԍFor example, if a BOC misses a due date by several hours, this will probably cause less harm to a  yOL- d(#xcompetitor than if the BOC misses a due date by several days. See Teleport Oct. 8 Ex Parte at 7 (indicating that  d(#reporting a BOC's total repair time provides more complete information regarding the service interval provided by the BOC than reporting only whether a due date has been met).  d(#Because our service category differs from the service category proposed by AT&T, we seek comment on whether any corresponding changes to the unit of measure are warranted.  X - u374.` ` We seek comment on whether we should require the BOCs to disclose the BOC X- d(#promised due date itself, i.e., the length of the interval promised by the BOCs to their affiliates  d(#at the time an order is placed. Parties favoring such a disclosure should provide a detailed description of the appropriate unit of measure and level of aggregation for these disclosures.  X4- @v375.` ` We seek comment on whether our proposed service categories and units of measure  d(#\for these categories are more appropriate to implement section 272(e)(1) than the categories  X- d(#=currently included in the ONA installation and maintenance reports or than PacTel's proposed  X- d(#modification of ONA installation and maintenance reports.]  yOX"-ԍPacTel Oct. 18 Ex Parte, Attachment 6.] Our proposal addresses the  X- d(#provision of exchange access to interLATA service providers, unlike ONA reports, which address  X- d(#the provision of ONA unbundled elements to enhanced service providers.RXH  yO%- v ԍIn the BOC ONA Reconsideration Order, the Commission determined that the ONA installation and  yO&- d(#maintenance reporting requirements should include 49 service categories presented in a standardized format. Filing  yOJ'- d(#[and Review of Open Network Architecture Plans, CC Docket No. 882, Memorandum Opinion and Order on"J',-(-(m'" Reconsideration, 5 FCC Rcd 3084, 3093,  7679 and app. B (1990) (subsequent history omitted). R The units of measure"X,-(-(ZZ"  X- d(#Kin our proposal are more precise than the ONA intervals. We therefore seek comment on whether  d(#these measures will provide a better guide for unaffiliated entities and the Commission to determine whether the BOCs are complying with section 272(e)(1).  X- w376.` ` We recognize that our proposal is patterned after arrangements regarding the  d(#provision of access between interexchange carriers and LECs. We seek comment on whether  d(#these categories will also provide sufficient information to ISPs, and whether our proposal is  d(#sufficient to implement the nondiscriminatory provision of telephone exchange service in accordance with section 272(e)(1).  X - x377.` ` We do not believe that the requirements proposed here will impose a significant  d(#additional administrative burden on the BOCs, particularly because under our existing price cap  d(#Zrules, the BOCs must track service intervals for endusers as part of their service quality reporting  X - d(#requirements.ZX X yO- v !ԍSee generally, Policy and Rules Concerning Rates for Dominant Carriers, AAD 9247, Memorandum  d(#Opinion and Order, 8 FCC Rcd 7474 (1993) (modifying the service quality and other reporting requirements imposed after the imposition of price cap regulation).Z Nevertheless, we seek comment on whether, and to what extent, the industry or  d(#state regulators currently collect data using the service categories and units of measure included  d(#=in our proposal, and the need for the BOCs to modify their current tracking systems to comply  X-with our proposal.x yO-ԍCompare AT&T Oct. 3 Ex Parte at 2 with Bell Atlantic Oct. 16 Ex Parte at 2 n.1.  Xb- y378.` ` Several BOCs argue that extensive reporting of their affiliates' requests could cause  XK- d(#=competitive harm to their affiliates.K yO- v .ԍNYNEX Reply at 23 & n.72; PacTel Reply at 1819; Bell Atlantic Sept. 27 Ex Parte at 12; BellSouth Oct.  yO-29 Ex Parte at 3. Specifically, PacTel argues that relative data such as the  d(#percentage of missed appointments and average time intervals provide sufficient information to  d(#>monitor BOC behavior, and that the disclosure of absolute figures for the number of orders  X- d(#jplaced by an affiliate would reveal competitively sensitive proprietary information.T`  yO-ԍPacTel Oct. 18 Ex Parte at 4.T We seek  d(#ycomment on whether our proposal, which uses percentages and averages and does not require  d(#disclosure of the absolute number of BOC affiliate requests, adequately protects the competitive  d(#interests of BOC affiliates. Any party favoring other levels of aggregation should provide a  d(#specific alternative proposal and explain why that alternative proposal is sufficient to implement  d(#section 272(e)(1). The party should also explain how its alternative proposal addresses  X|- d(#commenters' concerns regarding the inadequacy of ONA installation and maintenance reporting  Xe-requirements.Oe  yO'-ԍSee e.g., AT&T at 3638.O"e ,-(-(ZZ"Ԍ X- Pԙz379.` ` Frequency of Updates and Length of Retention. We seek comment on how often  X- d(#<the BOCs should be required to update the data that they must maintain. yOb-ԍAmeritech Oct. 23 Ex Parte, Attachment; MCI Nov. 1 Reporting Ex Parte at 12. For example, we seek  d(#comment on whether the BOCs should update the data quarterly or monthly. Parties should  X- d(#substantiate their positions by comparing the amount of underlying data used to produce ONA  d(#jreports or other reports that are prepared on a quarterly basis, with the amount of data that will  d(#be used to produce the information in our proposal. We also seek comment on how long the BOCs must retain the data that they must maintain.  XH- {380.` ` Levels of Aggregation. Because section 272(e)(1) states that the BOCs must fulfill  d(#requests for unaffiliated entities in the period of time that the BOCs provide service to "itself or  d(#Zto its affiliates," we seek comment on whether the BOCs should aggregate their own requests and  d(#=the requests of all of their affiliates for each service category, or whether they should maintain  X - d(#data for each affiliate and themselves separately.J X yO-ԍ47 U.S.C.  272(e)(1).J We seek comment on whether the BOCs  d(#<should maintain separate data for each state in their service regions. Parties favoring other levels  d(#of aggregation, such as by BOC region, or by exchange area, should provide detailed support for  X -their proposals.  yO@-ԍSee e.g., Teleport Oct. 24 Ex Parte; Ameritech Oct. 23 Ex Parte at 1.  Xy- #|381.` ` We seek comment on whether the BOCs should provide the information required  d(#Kin service categories four and six, described above in paragraph CATEGORY372, by carrier identification code  d(#M(CIC). We seek comment on whether the BOCs should provide the information required by  d(#Kservice category seven in two subcategories: DS1 NonChannelized and DS0. We seek comment  d(#?on whether information in all other service categories should be broken down into three  d(#subcategories: DS3, DS1, and DS0. We also seek comment on whether, in the alternative, we  d(#should further divide the DS0 subcategory into DS0 Voice Grade and DS0 Digital, as suggested  X-by AT&T.x yO-ԍAT&T Oct. 3 Ex Parte at 5. Contra Ameritech Oct. 23 Ex Parte, Attachment.  X- }382.` ` Consistency with other reporting requirements. We seek comment on the extent  d(#of overlap, if any, between the disclosure requirements we propose in this Further Notice and  X|- d(#reporting currently required by state commissions.| yO5"- v kԍSee e.g., SBC Oct. 8 Ex Parte, Attachments; PacTel Oct. 18 Ex Parte, Attachments 1 and 1; SBC Nov. 6  yO"-Ex Parte at 23; U S West Nov. 19 Ex Parte at 2. We also seek comment on whether the  d(#zinformation provided under ARMIS form 4305 provides sufficient information to implement  XN- d(#section 272(e)(1), as several BOCs suggest,N`  yO_&-ԍPacTel Oct. 18 Ex Parte at 4; BellSouth Oct. 29 Ex Parte at 23; U S West Nov. 19 Ex Parte at 2. or whether further disaggregation of the ARMIS"N ,-(-(ZZ"  X- d(#service categories is necessary, as MCI suggests.V yOy-ԍ MCI Nov. 1 Reporting Ex Parte.V Parties that favor relying on ARMIS data  d(#Kalone, rather than imposing an information disclosure requirement under section 272(e)(1), should  d(#explain why ARMIS reports are sufficient, given that ARMIS reports must be filed on an annual  d(#basis and that they focus on services provided to the enduser, rather than services provided  X- d(#between carriers. X yO- v ԍThe 1996 Act requires ARMIS reports to be filed annually. 1996 Act, 110 Stat. 56, 129, sec. 402(B)(2)(b)  yOu- d(#J(to be codified at a note following 47 U.S.C.  214); see generally, Policy and Rules Concerning Rates for Dominant  yO= - d(#-Carriers, AAD 9247, Memorandum Opinion and Order, 8 FCC Rcd 7474 (1993) (modifying service quality and other reporting requirements). Any parties contending that sufficient information to enforce section  d(#272(e)(1) is available from other sources should explain, in detail, the categories and units of  d(#jmeasure included in these alternative sources as compared with our proposal. Finally, 251-272(E)we note  d(#<that much of Teleport's proposal appears directed toward the implementation of local competition  d(#by incumbent LECs, and therefore does not address service intervals provided by the BOCs.  X1- d(#Teleport has raised many of these same proposals in its petition for reconsideration of the First  X - d(#Interconnection Order.  @ yO - v .ԍSee Teleport Communications Group, Inc., Petition for Reconsideration of the First Interconnection Order,  d(#CC Docket No. 9698 at 56 (Sept. 30, 1996); Letter from J. Manning Lee, Vice President Regulatory Affairs,  d(#;Teleport Communications Group, Inc., to William F. Caton, Secretary, FCC, Oct. 14, 1996, CC Docket No. 9698, Attachments 1 and 2. We tentatively conclude, therefore, that we should limit the scope of  d(#kthe proposals considered in this docket to requirements necessary to implement the service  X -interval requirements of section 272(e)(1). (  yO- v ]ԍSee also SBC Nov. 6 Ex Parte at 1, 3 (arguing that AT&T's proposal contains reporting requirements relating to the provision of unbundled network elements). We seek comment on this tentative conclusion.  X - B.Procedural Matters  X- 1.` ` Ex Parte Presentations  Xb- ~383.` ` This is a nonrestricted noticeandcomment rulemaking proceeding. Ex parte  d(#Lpresentations are permitted, in accordance with the Commission's rules, provided that they are  X4-disclosed as required.w4  yOe -ԍSee generally 47 C.F.R.  1.1200, 1.1202, 1.1204, 1.1206.w  X-K 2.` ` Regulatory Flexibility Analysis  X- ~384.` ` Section 603 of the Regulatory Flexibility Act, (RFA) as amended,C yO%-ԍ5 U.S.C.  603.C requires anK  d(#=initial regulatory flexibility analysis in noticeandcomment rulemaking proceedings, unless we",-(-(ZZ"  d(#certify that "the rule will not, if promulgated, have a significant economic impact on a significant  X- d(#number of small entities."G yOb-ԍId.  605(b).G A "small entity" is an entity that is "independently owned and  d(#operated, . . . not dominant in its field of operation," and meets any additional criteria established  X- d(#3by the Small Business Administration (SBA).X yO- v ԍThe RFA incorporates the definition of small business concerns set forth in 15 U.S.C.  632. 5 U.S.C.  601(3). SBA regulations define small  d(#[telecommunications entities in SIC code 4813 (Telephone Companies Except Radio Telephone)  X- d(#as entities with fewer than 1,500 employees.H yO -ԍ13 C.F.R.  121.20. H This proceeding pertains to the BOCs which,  d(#because they are dominant in their field of operation and have more than 1,500 employees, do  X_- d(#not qualify as small entities under the RFA._@ yOP- v  1500 ׍Federal Communications Commission, CCB, Industry Analysis Division, Preliminary Domestic Information  yO-From Statistics of Communications Common Carriers table 1.1 (July 1996). We now note as well that none of the BOCs is  d(#a small entity because each BOC is an affiliate of a Regional Holding Company (RHC), and all  X1- d(#Lof the BOCs or their RHCs have more than 1,500 employees.G1 yOz- 1500 ׍Id.G We therefore certify, pursuant  d(#to section 605(b) of the RFA, that the rules, if promulgated, will not have a significant economic  d(#impact on a substantial number of small entities. The Secretary shall send a copy of this Further  d(#-Notice, including this certification and statement, to the Chief Counsel for Advocacy of the Small  X - d(#Business Administration.F (  yO-ԍ5 U.S.C.  605(b).F A copy of this certification will also be published in the Federal Register.  X- 3.` ` Initial Paperwork Reduction Act of 1995 Analysis  Xb- n385.` ` This Further Notice contains either a proposed or modified information collection.  d(#KAs part of its continuing effort to reduce paperwork burdens, we invite the general public and the  d(#Office of Management and Budget (OMB) to take this opportunity to comment on the  d(#information collections contained in this Further Notice, as required by the Paperwork Reduction  d(#yAct of 1995, Pub. L. No. 10413. Public and agency comments are due at the same time as other  d(#comments on this Further Notice; OMB comments are due 60 days from date of publication of  d(#this Notice in the Federal Register. Comments should address: (a) whether the proposed  d(#Ncollection of information is necessary for the proper performance of the functions of the  d(#Commission, including whether the information shall have practical utility; (b) the accuracy of  d(#the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the  d(#information collected; and (d) ways to minimize the burden of the collection of information on  d(#]the respondents, including the use of automated collection techniques or other forms of information technology."N ,-(-(ZZ"Ԍ X-ԙ 4.` ` Comment Filing Procedures  X- 386.` ` Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the  d(#jCommission's rules, 47 C.F.R.  1.415, 1.419, interested parties may file comments on or before  d(#>February 19, 1997, and reply comments on or before March 21, 1997. To file formally in this  d(#proceeding, you must file an original and six copies of all comments, reply comments, and  d(#supporting comments. If you want each Commissioner to receive a personal copy of your  d(#jcomments, you must file an original and eleven copies. Comments and reply comments should  d(#be sent to Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W.,  d(#]Room 222, Washington, D.C., 20554, with a copy to Janice Myles of the Common Carrier  d(#=Bureau, 1919 M Street, N.W., Room 544, Washington, D.C., 20554. Parties should also file one  d(#copy of any documents filed in this docket with the Commission's copy contractor, International  d(#Transcription Services, Inc., 2100 M Street, N.W., Suite 140, Washington, D.C., 20037.  d(#Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C., 20554.  X- #387.` ` Comments and reply comments must include a short and concise summary of the  d(#substantive arguments raised in the pleading. Comments and reply comments must also comply  Xb- d(#with Section 1.49 and all other applicable sections of the Commission's Rules.NXb yO- v /ԍSee 47 C.F.R.  1.49. However, we require here that a summary be included with all comments and reply  yO- d(#comments, regardless of length. This summary may be paginated separately from the rest of the pleading (e.g., as "i, ii").N We also direct  d(#all interested parties to include the name of the filing party and the date of the filing on each  d(#Mpage of their comments and reply comments. All parties are encouraged to utilize a table of  d(#Lcontents, regardless of the length of their submission. Parties may not file more than a total of  X- d(#ten (10) pages of ex parte submissions, excluding cover letters. This 10 page limit does not  X- d(#include: (1) written ex parte filings made solely to disclose an oral ex parte contact; (2) written  d(#material submitted at the time of an oral presentation to Commission staff that provides a brief  d(# outline of the presentation; or (3) written materials filed in response to direct requests from  X- d(#kCommission staff. Ex parte filings in excess of this limit will not be considered as part of the record in this proceeding.  Xe- P388.` ` Parties are also asked to submit comments and reply comments on diskette. Such  d(#|diskette submissions would be in addition to and not a substitute for the formal filing  d(#requirements addressed above. Parties submitting diskettes should submit them to Janice Myles  d(#of the Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C., 20554.  d(#jSuch a submission should be on a 3.5 inch diskette formatted in an IBM compatible form using  d(#MS DOS 5.0 and WordPerfect 5.1 software. The diskette should be submitted in "read only"  d(#lmode. The diskette should be clearly labelled with the party's name, proceeding, type of  d(#0pleading (comment or reply comments) and date of submission. The diskette should be accompanied by a cover letter. "",-(-(ZZ!"Ԍ X- 3389.` ` Written comments by the public on the proposed and/or modified information  d(#\collections are due February 19, 1997, and reply comments must be submitted not later than  d(#zMarch 21, 1997. Written comments must be submitted by the OMB on the proposed and/or  d(#modified information collections on or before 60 days after date of publication in the Federal  d(#\Register. In addition to filing comments with the Secretary, a copy of any comments on the  d(# information collections contained herein should be submitted to Dorothy Conway, Federal  d(#MCommunications Commission, Room 234, 1919 M Street, N.W., Washington, D.C., 20554, or  d(#via the Internet to dconway@fcc.gov and to Timothy Fain, OMB Desk Officer, 10236 NEOB,  d(#725 17th Street, N.W., Washington, D.C., 20503 or via the Internet to fain_t@al.eop.gov.>!}K .*!J:\POLICY\SAFE\ORDER\MASTER\CNCLSN.272. >Ԑ X1-   X -/XII. ORDERING CLAUSES   X - \390.` ` Accordingly, IT IS ORDERED that pursuant to sections 1, 2, 4, 201205, 215, 218,  d(#220, 271, 272, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  151,  d(#152, 154, 201205, 215, 218, 220, 271, 272, and 303(r) the REPORT AND ORDER IS  d(#ADOPTED, effective 30 days after publication of a summary in the Federal Register. The  d(#collections of information contained within are contingent upon approval by the Office of Management and Budget.  X4- $391.` ` IT IS FURTHER ORDERED that pursuant to sections 1, 2, 4, 201205, 215, 218,  X- d(#220, 271, 272, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  151,  d(#152, 154, 201205, 215, 218, 220, 271, 272, and 303(r) the FURTHER NOTICE OF PROPOSED RULEMAKING IS ADOPTED.  X- 392.` ` IT IS FURTHER ORDERED that the Secretary shall send a copy of this  d(#FURTHER NOTICE OF PROPOSED RULEMAKING, including the regulatory flexibility  d(#certification, to the Chief Counsel for Advocacy of the Small Business Administration, in  X|-accordance with paragraph 603(a) of the Regulatory Flexibility Act, 5 U.S.C.  601 et seq.  XN- $393.` ` IT IS FURTHER ORDERED that the MFS Petition to Consolidate Proceedings  d(#{in CC Docket Nos. 96149, 85229, 90623, 9520, and CCBPol 9609 filed on July 25, 1996 is DENIED.  X- 394.` ` IT IS FURTHER ORDERED that Part 53 of the Commission's Rules, 47 C.F.R.  53 is ADDED as set forth in Appendix B attached hereto. ` `  hhCFEDERAL COMMUNICATIONS COMMISSION ` `  ` `  hhCWilliam F. Caton  X:&-` `  hhCActing Secretarypp>!}K .J:\POLICY\SAFE\ORDER\MASTER\CNCLSN.272. >":&,-(-(ZZ$"   7!}K 'dJ:\POLICY\SAFE\ORDER\RULES\APPA' 7  #Xj\  P6G;xXP# X-l#Xj\  P6G;xXP# Appendix A Đ(#\Ԛ  @A-@  X-  List of Commenters in CC Docket No. 96149 ă Ameritech Association for Local Telecommunications Services (ALTS) Association of Directory Publishers (ADP) Association of Telemessaging International (ATSI) AT&T Corp. (AT&T) Bell Atlantic Telephone Companies (Bell Atlantic) Bell Communications Research, Inc. (Bellcore)  X -BellSouth Corporation (BellSouth)hhC California Cable Television Association (CCTA) California Public Utilities Commission (California Commission) Centra Health Citizens for a Sound Economy Foundation (CSEF) Citizens Utilities Companies Commercial Internet Exchange Association (CIX) Commonwealth of the Northern Mariana Islands Competitive Telecommunications Association (CompTel) Economic Strategy Institute Excel Telecommunications, Inc. (Excel) Exco Noonan Inc. Florida Public Service Commission (Florida Commission) Frontier Corporation (Frontier) GST Telecom, Inc. GTE Service Corporation (GTE) Hudson United Bank, Inc. Independent Data Communications Manufacturers Association (IDCMA) Independent Coalition Independent Telephone & Telecommunications Alliance (ITTA) Information Industry Association (IIA) Information Technology Association of America (ITAA) Information Technology Industry Council (ITIC) Interactive Services Association (ISA) LDDS WorldCom Inc. (LDDS)  X-MCI Telecommunications Corporation (MCI) MFS Communications Company, Inc. (MFS) Michigan Public Service Commission (Michigan Commission) Missouri Public Service Commission (Missouri Commission) Nabisco National Association of Regulatory Utility Commissioners (NARUC) National Cable Television Association, Inc. (NCTA) National Telephone Cooperative Association (NTCA) New Jersey Division of the Rate Payer Advocate (New Jersey Rate Payer Advocate)"#',=(=(JJ%"Ԍ X-New York State Department of Public Service (New York Commission)xxX D  X-`(#l Appendix A ăDNYNEX Telephone Companies (NYNEX) Owens & Minor Pacific Telesis Group (PacTel) PNC Bank, N.A. Prebon Yamane Public Utilities Commission of Ohio (Ohio Commission) SBC Communications, Inc. (SBC) SmithKline Beecham Southern New England Telephone Company (SNET) Sprint Corporation (Sprint) Telecommunications Industry Association (TIA) Telecommunications Resellers Association (TRA) Telefonica Larga Distancia de Puerto Rico, Inc. (TLD) Teleport Communications Group, Inc. (Teleport) Temple University Time Warner Cable (Time Warner) UGI Utilities, Inc. United States Telephone Association (USTA) U. S. Department of Justice (DOJ) U S West VoiceTel West Virginia Dept. of Administration Wisconsin Public Service Commission (Wisconsin Commission) Yellow Pages Publishers Association (YPPA)  X-7!}K 'dJ:\POLICY\SAFE\ORDER\RULES\APPA' 7",=(=(JJ"  X-  :!}K *dJ:\POLICY\SAFE\ORDER\RULES\RLS-TOP* :P^ X-l Appendix B P  @A-B-@c Final Rules ă  X- AMENDMENTS TO THE CODE OF FEDERAL REGULATIONS  X- 1. Part 53 of Title 47 of the Code of Federal Regulations (C.F.R.) is added to read as follows:  Xv-  PART 53 SPECIAL PROVISIONS CONCERNING  X_- BELL OPERATING COMPANIES \  X1- Subpart A General Information Sec.  X -53.1` `  Basis and purpose.  X -53.3` `  Terms and definitions. Subpart B Bell Operating Company Entry into InterLATA Services.  Xy-53.101` `  Joint marketing of local and long distance services by interLATA  Xb-carriers. (#  X4- Subpart C Separate Affiliate; Safeguards.  X-53.201` `  Services for which a separate affiliate is required.  X-53.203` `  Structural and transactional requirements.  X- 53.205` `  Fulfillment of certain requests.  X-53.207` `  Successor or assign.  X- Subpart D Manufacturing by Bell Operating Companies.  Xe- 53.301` `  [Reserved]  X7- Subpart E ` ` Electronic Publishing by Bell Operating Companies.  X -53.401 ` `  [Reserved]  X- Subpart F Alarm Monitoring Services.  X!-53.501 ` `  [Reserved]  X#-AUTHORITY: Sections 15, 7, 20105, 218, 251, 253, 27175, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 15155, 157, 20105, 218, 251, 253, 27175, unless otherwise noted."h$,&)&)aa(#"  X- Subpart A General Information.  X- 53.1` ` Basis and purpose.  X-  X-(a) Basis. These rules are issued pursuant to the Communications Act of 1934, as amended.  Xa-(b) Purpose. The purpose of these rules is to implement sections 271 and 272 of the Communications Act of 1934, as amended, 47 U.S.C. 271 and 272. =!}K -dJ:\POLICY\SAFE\ORDER\RULES\DEFINS.RLS- =  X -  53.3` ` Terms and definitions. Terms used in this part have the following meanings:  X -Act. The "Act" means the Communications Act of 1934, as amended.  X-Affiliate. An "affiliate" is a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, another person. For purposes of this part, the term 'own' means to own an equity interest (or the equivalent  X<-thereof) of more than 10 percent.  X-AT&T Consent Decree. The "AT&T Consent Decree" is the order entered August 24, 1982, in the antitrust action styled United States v. Western Electric, Civil Action No. 82-0192, in the United States District Court for the District of Columbia, and any judgment or order with respect to such action entered on or after August 24, 1982.  X-Bell Operating Company (BOC). The term "Bell operating company" (A) means any of the following companies: Bell Telephone Company of Nevada, Illinois Bell Telephone Company, Indiana Bell Telephone Company, Incorporated, Michigan Bell Telephone Company, New England Telephone and Telegraph Company, New Jersey Bell Telephone Company, New York Telephone Company, U S West Communications Company, South Central Bell Telephone Company, Southern Bell Telephone and Telegraph Company, Southwestern Bell Telephone Company, The Bell Telephone Company of Pennsylvania, The Chesapeake and Potomac Telephone Company, The Chesapeake and Potomac Telephone Company of Maryland, The Chesapeake and Potomac Telephone Company of Virginia, The Chesapeake and Potomac Telephone Company of West Virginia, The Diamond State Telephone Company, The Ohio Bell Telephone Company, The Pacific Telephone and Telegraph Company, or Wisconsin Telephone Company; and (B) includes any successor or assign of any such company that provides wireline telephone exchange service; but (C) does not include an affiliate of any such company, other than an affiliate described in clause (A) or (B) of this paragraph.  X/'-InRegion InterLATA service. "Inregion interLATA service" is interLATA service that originates in any of a BOC's inregion states, which are the states in which the BOC or"(,&)&)aa&" any of its affiliates was authorized to provide wireline telephone exchange service pursuant to the reorganization plan approved under the AT&T Consent Decree, as in effect on February 7, 1996. For the purposes of this part, 800 service, private line service, or equivalent services that terminate in a BOC's inregion state and allow the called party to determine the interLATA carrier are considered to be inregion interLATA service.  Xv-InterLATA Service. An "interLATA service" is a service that involves telecommunications between a point located in a LATA and a point located outside such area. The term "interLATA service" includes both interLATA telecommunications services and interLATA information services.  X -InterLATA Information Service. An "interLATA information service" is an information service that incorporates as a necessary, bundled element an interLATA telecommunications transmission component, provided to the customer for a single charge.  X -Local Access and Transport Area (LATA). A "LATA" is a contiguous geographic area: (A) established before February 8, 1996 by a BOC such that no exchange area includes points within more than one metropolitan statistical area, consolidated metropolitan statistical area, or state, except as expressly permitted under the AT&T Consent Decree; or (B) established or modified by a BOC after February 8, 1996 and approved by the Commission.  X#-Local Exchange Carrier (LEC). A "LEC" is any person that is engaged in the provision of telephone exchange service or exchange access. Such term does not include a person insofar as such person is engaged in the provision of commercial mobile service under section 332(c) of the Act, except to the extent that the Commission finds that such service should be included in the definition of such term.  X-OutofRegion InterLATA service. "Outofregion interLATA service" is interLATA service that originates outside a BOC's inregion states.  XX-Section 272 affiliate. A "section 272 affiliate" is a BOC affiliate that complies with the separate affiliate requirements of section 272(b) of the Act and the regulations contained in this part. =!}K -dJ:\POLICY\SAFE\ORDER\RULES\MARKET.RLS- =  X- vSubpart B Bell Operating Company Entry Into InterLATA Services.  X!-\  53.100 ` ` Joint marketing of local and long distance services by interLATA carriers.  X"- (a) Until a BOC is authorized pursuant to section 271(d) of the Act to provide vinterLATA services in an inregion State, or until February 8, 1999, whichever is earlier, a telecommunications carrier that serves greater than 5 percent of the Nation's presubscribed access lines may not jointly market in such State telephone exchange service obtained from such company pursuant to section 251(c)(4) of the Act with interLATA services offered by  X(-that telecommunications carrier."(,&)&)aa&"Ԍ(b) For purposes of applying section 271(e) of the Act, telecommunications carriers described in paragraph (a) of this section may not: ` ` (1) market interLATA services and BOC resold local exchange services through a "single transaction." For purposes of this section, we define a "single transaction" to include the use of the same sales agent to market both products to the same customer during a single communication; ` ` (2) offer interLATA services and BOC resold local exchange services as a bundled package under an integrated pricing schedule. (c) If a telecommunications carrier described in paragraph (a) of this section advertises the availability of interLATA services and local exchange services purchased from a BOC for resale in a single advertisement, such telecommunications carrier shall not mislead the public by stating or implying that such carrier may offer bundled packages of interLATA service and BOC local exchange service purchased for resale, or that it can provide both services through a single transaction. ;!}K +J:\POLICY\SAFE\ORDER\RULES\272A.RLS+ ;  XK- Subpart C Separate Affiliate; Safeguards.  X-  53.201` ` Services for which a section 272 affiliate is required. For the purposes of applying section 272(a)(2) of the Act:  X-(a) Previously authorized activities. When providing previously authorized activities described in section 271(f) of the Act, a BOC shall comply with the following: ` ` (1) A BOC shall provide previously authorized interLATA information services and manufacturing activities through a section 272 affiliate no later than February 8, 1997. ` ` (2) A BOC shall provide previously authorized interLATA telecommunications services in accordance with the terms and conditions of the orders entered by the United States District Court for the District of Columbia pursuant to section VII or VIII(C) of the AT&T Consent Decree that authorized such services.  X!-(b) InterLATA information services. A BOC shall provide an interLATA information service through a section 272 affiliate when it provides the interLATA telecommunications transmission component of the service either over its own facilities, or by reselling the interLATA telecommunications services of an interexchange provider.  X>&-(c) Outofregion interLATA information services. A BOC shall provide outofregion  X)'-interLATA information services through a section 272 affiliate.6!}K &J:\POLICY\SAFE\ORDER\RULES\SEW& 6 "(,&)&)aa&"Ԍ X- 53.203` ` Structural and transactional requirements.  X-(a) Operational independence. ` ` (1) A section 272 affiliate and the BOC of which it is an affiliate shall not jointly own transmission and switching facilities or the land and buildings where those facilities are located.  XJ-` ` (2) A section 272 affiliate shall not perform any operating, installation, or  X3-maintenance functions associated with facilities owned by the BOC of which it is an affiliate. ` ` (3) A BOC or BOC affiliate, other than the section 272 affiliate itself, shall not perform any operating, installation, or maintenance functions associated with facilities that the BOC's section 272 affiliate owns or leases from a provider other than the BOC.  X -(b) Separate books, records, and accounts. A section 272 affiliate shall maintain books, records, and accounts, which shall be separate from the books, records, and accounts maintained by the BOC of which it is an affiliate.  XO-(c) Separate officers, directors, and employees. A section 272 affiliate shall have separate officers, directors, and employees from the BOC of which it is an affiliate.  X -(d) Credit arrangements. A section 272 affiliate shall not obtain credit under any arrangement that would permit a creditor, upon default, to have recourse to the assets of the BOC of which it is an affiliate.  X-(e) Arm'slength transactions. A section 272 affiliate shall conduct all transactions with the BOC of which it is an affiliate on an arm's length basis, pursuant to the accounting rules described in  32.27 of this chapter, with any such transactions reduced to writing and available for public inspection. >!}K .dJ:\POLICY\SAFE\ORDER\RULES\SUCCESR.RLS. >  XA-    X*- 53.205` ` Successor or assign. If a BOC transfers to an unaffiliated entity ownership of any network elements that must be provided on an unbundled basis pursuant to section 251(c)(3) of the Act, such entity will be deemed to be an "assign" of the BOC under section 3(4) of the Act with respect to such transferred network elements. A BOC affiliate shall not be deemed a "successor or assign" of a BOC solely because it obtains network elements from the BOC pursuant to section 251(c)(3) of the Act. >!}K . J:\POLICY\SAFE\ORDER\RULES\SUCCESR.RLS. >"#,&)&)aaG""  X-  9!}K )dJ:\POLICY\SAFE\ORDER\RULES\REPORT) 9s+^ X-l Appendix C Đ(#\s XX   @B-C-@   Format for Information Disclosures Pursuant to Section 272(e)(1)  X- \ T ddx !ddx4 T  z  g   Xz- Service Category c  Xz- Types of Access c  Xz- Outcome for BOC  Xc-and BOC Affiliates z   g   X- 1) Successful Completion According to Desired Due Date (measured in a percentage)m DS3 and above  q L h!  Y DS1Nh q q  oY DS0h q  N h!   Xg - 2) Time from BOC Promised Due Date to Circuit being placed in service (measured in terms of percentage installed within each successive 24 hour period, until 95% installation completed){  DS3 and above{     w  7  DS17    {  w    DS0    7  w   X- 3) Time to Firm Order Confirmation (measured in terms of percentage received within each successive 24 hour period, until 95% completed)b DS3 and above  q   o,   DS1 q q  d DS0f q 5   o,   X- 4) Time from PIC Change request to implementation (measured in terms of percentage implemented within each successive 6 hour period, until 95% completed)  By CIC (10XXX)  5  f  o,   XC- 5) Time to Restore and trouble duration (percentage restored within each successive 1 hour interval, until resolution of 95% of incidents)  DS3 and above,  q  o,   DS1 q q ,   DS0 q L  )o,   X- 6) Time to restore PIC after trouble incident (measured by percentage restored within each successive 1 hour interval, until resolution of 95% restored)Z ) By CIC (10XXX)Z ) L   )o,   X!- 7) Mean time to clear network / average duration of trouble (measured in hours) " DS1 NonChannelized "   Z  # DS0#   "