WPC 2;BVTZ73|P )6?xxxXOXx6X@DQX@HP LaserJet 5SitHPLAS5SI.WRSx  @,,,&MX@ X4#XP\  P6Q2XP##X\  P6G;/P#X01Í ÍX01Í Í#XP\  P6Q2XP#2 (mXCourier New (TT)Times New Roman (TT)"5^2CRdd$CCdq2C28dddddddddd88qqqYzoCNzoozzC8C^dCYdYdYCdd88d8ddddCN8ddddY`(`l2CCCCPCddYYYYYYzYzYzYzYC8C8C8C8ddddddddddYdddddoddYYYYzYzYzYdddddPdCdCCCdNdoNNF2ZdCYddddd7>d<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddnddddddd6?xxxXOXx6X@DQX@.F7PC2X2XP\  P6QXP.y.C8*X/C\  P6QPster (Medium) (TT)Terminator Two (TT)LinePrinter 8pt (16cpi) CG Omega (W1)CG "5^*8DSS88S^*8*.SSSSSSSSSS..^^^Jxooxf]xx8Axfxx]xo]fxxxxf8.8NS8JSJSJ8SS..S.SSSS8A.SSxSSJP!PZ*8888C8SSxJxJxJxJxJooJfJfJfJfJ8.8.8.8.xSxSxSxSxSxSxSxSxSxSxJxSxSxSxSxS]SxSxJxJoJoJfJfJfJxSxSxSxSxSCS8S888SAxSx]AN:*KS8JSSSSS.4}}S2S}288JJS88SS8J82N8\\^C`^SS`*8DSS88S^*8*.SSSSSSSSSS..^^^Jxooxf]xx8Axfxx]xo]fxxxxf8.8NS8JSJSJ8SS..S.SSSS8A.SSxSSJP!PZv8SJSS8]888JJ:S8A8xx*8SSSS!S8.S^8SC\228`K*824S}}}Jxxxxxxoffff8888xxxxxxx^xxxxxx]SJJJJJJoJJJJJ....SSSSSSS\SSSSSSS2    Z 3|x "5^(1<d<d<CCYYdCCddCYCdYzzzzCCCCqodYYYYYYYYYYY8888dddddddnddddddd"5^*8DSS88S^*8*.SSSSSSSSSS..^^^Jxooxf]xx8Axfxx]xo]fxxxxf8.8NS8JSJSJ8SS..S.SSSS8A.SSxSSJP!PZ*8888C8SSxJxJxJxJxJooJfJfJfJfJ8.8.8.8.xSxSxSxSxSxSxSxSxSxSxJxSxSxSxSxS]SxSxJxJoJoJfJfJfJxSxSxSxSxSCS8S888SAxSx]AN:*KS8JSSSSS.4}}S2S}288JJS88SS8J82N8\\^C`^SS`*8DSS88S^*8*.SSSSSSSSSS..^^^Jxooxf]xx8Axfxx]xo]fxxxxf8.8NS8JSJSJ8SS..S.SSSS8A.SSxSSJP!PZv8SJSS8]888JJ:S8A8xx*8SSSS!S8.S^8SC\228`K*824S}}}Jxxxxxxoffff8888xxxxxxx^xxxxxx]SJJJJJJoJJJJJ....SSSSSSS\SSSSSSS"5^2Coddȧ8CCdr2C28ddddddddddCCrrrdzNdzoȐC8CtdCdoYoYCdo8Co8odooYNCodddYO,Oh2CCCCPCdodddddȐYYYYYN8N8N8N8oddddooooddoddddzodddYYYYYdddooPoNoNCNoddȐoNNF2ldCddddddd<d<CCoodCCddCoCddzzzzzzzzzzCCCCozdddddddYYYYY8888dddddddndddddYd"5^!,8CCoh,,CZ!,!%CCCCCCCCCC,,ZZZC{QQY`QQ``,;YJoY`Q`QCJ`QoQJJ4%48C,CC;C;%CC%%;%`CCCC44%C;Y;;45%5H!,,,,5,CCQCQCQCQCQCwYY;Q;Q;Q;Q;,%,%,%,%YC`C`C`C`C`C`C`C`CJ;QC`C`C`CJ;`CQCQCQCQCY;Y;Q;Q;Q;`C`C`C`C`C5C,C,,,C;`C~YC4N/!FC4CCCCCC%)ddC(eeCd(,,JJCw,,CCw,J,(N,IIZ5MZCCM!,8CCoh,,CZ!,!%CCCCCCCCCC,,ZZZC{QQY`QQ``,;YJoY`Q`QCJ`QoQJJ4%48C,CC;C;%CC%%;%`CCCC44%C;Y;;45%5H_,CJwCC,C,~,,JJ/Cw,4,YJ!4CCCC%C,e%CZ,eC5I((,MF!,()CdddCQQQQQQwYQQQQ,,,,`Y`````Z`````JQCCCCCCCY;;;;;%%%%CCCCCCCICCCCC;C2r0>$ .' ** *H-"5^*8]SS.88S_*8*.SSSSSSSSSS88___SxoxxofASoxfx]oxxxxo8.8aS8S]J]J8S].8].]S]]JA8]SxSSJB%BW*8888C8S]xSxSxSxSxSxxJoJoJoJoJA.A.A.A.x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxJxJoJoJoJSSS]]C]A]A8A]SSx]AN:*ZS8SSSSSS27}}S2||S}288SSS88SS8S82N8\\_C`_SS`*8]SS.88S_*8*.SSSSSSSSSS88___SxoxxofASoxfx]oxxxxo8.8aS8S]J]J8S].8].]S]]JA8]SxSSJB%BWv8SSSS8]888SS:S8A8xx*8SSSS%S8|2S_8|SC\228`Z*827S}}}SxxxxxxxooooAAAAxx_xxxxxf]SSSSSSxJJJJJ....S]SSSSS\S]]]]S]"5^!,6CCoh,,CK!,!%CCCCCCCCCC%%KKK;{`YY`QJ``,4`Qw``J`YJQ``~``Q,%,?C,;C;C;,CC%%C%hCCCC,4%CC`CC;@@H!,,,,5,CC`;`;`;`;`;wYY;Q;Q;Q;Q;,%,%,%,%`C`C`C`C`C`C`C`C`C`C`;`C`C`C`C`CJC`C`;`;Y;Y;Q;Q;Q;`C`C`C`C`C5C,C,,,C4`Cw`J4N/!3<v< tN= =a2DocumentgDocument Style Style<o   ?  A.  a7DocumentgDocument Style StyleyXX` ` (#` BibliogrphyBibliography :X (# a1Right ParRight-Aligned Paragraph Numbers :`S@ I.  X(# 29A > 1? ?@a2Right ParRight-Aligned Paragraph Numbers C @` A. ` ` (#` a3DocumentgDocument Style Style B b  ?  1.  a3Right ParRight-Aligned Paragraph Numbers L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph NumbersUj` `  @ a. ` (# 2DkA*BBCa5Right ParRight-Aligned Paragraph Numbers_o` `  @h(1)  hh#(#h a6Right ParRight-Aligned Paragraph Numbersh` `  hh#@$(a) hh#((# a7Right ParRight-Aligned Paragraph NumberspfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph NumbersyW"3!` `  hh#(-@p/a) -pp2(#p 2GDEF$GTech InitInitialize Technical Style. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technicala1DocumentgDocument Style Style\s0  zN8F I. ׃  a5TechnicalTechnical Document Style)WD (1) . a6TechnicalTechnical Document Style)D (a) . 2JGH2IIa2TechnicalTechnical Document Style<6  ?  A.   a3TechnicalTechnical Document Style9Wg  2  1.   a4TechnicalTechnical Document Style8bv{ 2  a.   a1TechnicalTechnical Document StyleF!<  ?  I.   2QJRK3K Ma7TechnicalTechnical Document Style(@D i) . a8TechnicalTechnical Document Style(D a) . Doc InitInitialize Document Stylez   0*0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:za7Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrf;f  a8Paragraph R!1. a. i. (1) (a) (i) 1) a)D )DDDFrf?C ? A.` ` 2}?z@x{A!|B|a3IndentedLeft-indented text?HP ? ` ` 1. a4IndentedLeft-indented text@Qp- ? ` `  a.` 'a5IndentedLeft-indented textA[ܽ ? ` `  '(1) hh-a6IndentedLeft-indented textBdK ? ` `  'hh-(a)42YC}D~EsSFa7IndentedLeft-indented textCl݇ ? ` `  'hh-4i)h:a8IndentedLeft-indented textDu-b ? ` `  'hh-4:a)ppAa1InterrogatoresStarts with A. at margin, 1 at first indentEUZZI.a129f—+b—!tRight-Aligned Paragraph NumberswH(RK+PF8@   21GH'ÍJza229f—+b—!tRight-Aligned Paragraph NumberswH(RK+PGA@` `  ` ` ` a329f—+b—!tRight-Aligned Paragraph NumberswH(RK+PHJ` ` @  ` `  a429f—+b—!tRight-Aligned Paragraph NumberswH(RK+PIS` `  @  a529f—+b—!tRight-Aligned Paragraph NumberswH(RK+PJ\` `  @hh# hhh 2?KcL#MNa629f—+b—!tRight-Aligned Paragraph NumberswH(RK+PKe` `  hh#@( hh# a729f—+b—!tRight-Aligned Paragraph NumberswH(RK+PLn` `  hh#(@- ( a829f—+b—!tRight-Aligned Paragraph NumberswH(RK+PMw` `  hh#(-@pp2 -ppp a1AgendaE+7?tAgenda Items4 B7=(7 A@*7N%GH*  25OqqPqQqSRqća2AgendaE+7?tAgenda Items4 B7=(7 A@*7OIJa3AgendaE+7?tAgenda Items4 B7=(7 A@*7PKLa4AgendaE+7?tAgenda Items4 B7=(7 A@*7QMNa5AgendaE+7?tAgenda Items4 B7=(7 A@*7ROP29SqgTq؈UqIVa6AgendaE+7?tAgenda Items4 B7=(7 A@*7SQRa7AgendaE+7?tAgenda Items4 B7=(7 A@*7TSTa8AgendaE+7?tAgenda Items4 B7=(7 A@*7UUVhead1 #V'd#2p}wC@ #2WpkXqۊYeLZeDocument[8]C^iDocument StyleNeF2CC -2( -Ct )BW` ` ` Document[4]C^iDocument StyleNeF2CCW -2( -Ct )BX  . Document[6]C^iDocument StyleNeF2CCe -2( -Ct )BY  Document[5]C^iDocument StyleNeF2CCs -2( -Ct )BZ  2x[H\pی]K^ݍDocument[2]C^iDocument StyleNeF2CC -2( -Ct )B[*    Document[7]C^iDocument StyleNeF2CC -2( -Ct )B\  ` ` ` Right Par[1]C^iRight-Aligned Paragraph Numbers -2( -Ct )B]8@  Right Par[2]C^iRight-Aligned Paragraph Numbers -2( -Ct )B^A@` ` `  ` ` ` 2F_`?abDocument[3]C^iDocument StyleNeF2CC -2( -Ct )B_0     Right Par[3]C^iRight-Aligned Paragraph Numbers -2( -Ct )B`J` ` ` @  ` ` ` Right Par[4]C^iRight-Aligned Paragraph Numbers -2( -Ct )BaS` ` `  @  Right Par[5]C^iRight-Aligned Paragraph Numbers -2( -Ct )Bb\` ` `  @hhh hhh 2cxd7efГRight Par[6]C^iRight-Aligned Paragraph Numbers -2( -Ct )Bce` ` `  hhh@ hhh Right Par[7]C^iRight-Aligned Paragraph Numbers  -2( -Ct )Bdn` ` `  hhh@  Right Par[8]C^iRight-Aligned Paragraph Numbers -2( -Ct )Bew ` ` `  hhh@ppp ppp Document[1]C^iDocument StyleNeF2CCE -2( -Ct )BfF34   ׃  2ghAiƕjbTechnical[5]C^iTechnical Document StyleCCS -2( -Ct )Bg&56  . Technical[6]C^iTechnical Document StyleCCa -2( -Ct )Bh&78  . Technical[2]C^iTechnical Document StyleCCo -2( -Ct )Bi*9:    Technical[3]C^iTechnical Document StyleCC} -2( -Ct )Bj';<   2wk)lmmnTechnical[4]C^iTechnical Document StyleCC -2( -Ct )Bk&=>   Technical[1]C^iTechnical Document StyleCC -2( -Ct )Bl4?$@     Technical[7]C^iTechnical Document StyleCC -2( -Ct )Bm&AB  . Technical[8]C^iTechnical Document StyleCC -2( -Ct )Bn&CD  . 2ߛo}p&qrAParagraph[1]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )Bo$ab Paragraph[2]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )Bp/cd` ` ` Paragraph[3]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )Bq:ef` ` `  Paragraph[4]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )BrEgh` ` `  2stunv-Paragraph[5]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )BsPij` ` ` hhh Paragraph[6]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )Bt[kl Paragraph[7]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )Bufmn Paragraph[8]C^i1. a. i. (1) (a) (i) 1) a)C -2( -Ct )Bvqop 2w)xGyeztoc 1toc 1w` hp x (#44` hp x (#toc 2toc 2x` hp x (#4 4 ` hp x (#toc 3toc 3y` hp x (#4 4 ` hp x (#toc 4toc 4z` hp x (#4 <4 <` hp x (#2{ӧ|}v~toc 5toc 5{` hp x (#4<4<` hp x (#toc 6toc 6|` hp x (#44` hp x (#toc 7toc 7} toc 8toc 8~` hp x (#44` hp x (#2Mծ/toc 9toc 9` hp x (#44` hp x (#index 1index 1` hp x (#4 4 ` hp x (#index 2index 2` hp x (#4 4 ` hp x (#toatoa` hp x (#` hp x (#2-Cpcaptioncaption;1#XP\  P6QXP##C\  P6QP#_Equation Caption_Equation Caption11#XP\  P6QXP##C\  P6QP#endnote referenceendnote reference44#XP\  P6QXP##C\  P6QP#1S&C5C^fDocument StyleNF2CC -2( -Ct )qr` ` ` 2-q_eкe52S&C6C^fDocument StyleNF2CC -2( -Ct )s t . 3S&C7C^fDocument StyleNF2CC -2( -Ct ) uv 4S&C8C^fDocument StyleNF2CC! -2( -Ct ) wx 5S&C9C^fDocument StyleNF2CC/ -2( -Ct )*yz   2p_ϼa6S&C:C^fDocument StyleNF2CC= -2( -Ct ){|` ` ` 7S&C;C^fRight-Aligned Paragraph NumbersK -2( -Ct )8}~@  8S&C<C^fRight-Aligned Paragraph NumbersY -2( -Ct )A@` ` `  ` ` ` 9S&C=C^fDocument StyleNF2CCg -2( -Ct )0    2þg10S&C>C^fRight-Aligned Paragraph Numbersu -2( -Ct )J` ` ` @  ` ` ` 11S&C?C^fRight-Aligned Paragraph Numbers -2( -Ct )S` ` `  @  12S&C@C^fRight-Aligned Paragraph Numbers -2( -Ct )\` ` `  @hhh hhh 13S&CAC^fRight-Aligned Paragraph Numbers -2( -Ct )e` ` `  hhh@ hhh 2T14S&CBC^fRight-Aligned Paragraph Numbers -2( -Ct )n` ` `  hhh@  15S&CCC^fRight-Aligned Paragraph Numbers -2( -Ct )w` ` `  hhh@ppp ppp 16S&CDC^fDocument StyleNF2CC -2( -Ct )F   ׃  17S&CEC^fTechnical Document StyleCC -2( -Ct )&  . 2J{18S&CFC^fTechnical Document StyleCC -2( -Ct )&  . 19S&CGC^fTechnical Document StyleCC -2( -Ct )*    20S&CHC^fTechnical Document StyleCC -2( -Ct )'   21S&CIC^fTechnical Document StyleCC -2( -Ct )&   2xAv}22S&CJC^fTechnical Document StyleCC -2( -Ct )4$     23S&CKC^fTechnical Document StyleCC+ -2( -Ct )&  . 24S&CLC^fTechnical Document StyleCC9 -2( -Ct )&  . 25S&CMC^f1. a. i. (1) (a) (i) 1) a)CG -2( -Ct )$ 2 2c26S&CNC^f1. a. i. (1) (a) (i) 1) a)CU -2( -Ct )/` ` ` 27S&COC^f1. a. i. (1) (a) (i) 1) a)Cc -2( -Ct ):` ` `  28S&CPC^f1. a. i. (1) (a) (i) 1) a)Cq -2( -Ct )E` ` `  29S&CQC^f1. a. i. (1) (a) (i) 1) a)C -2( -Ct )P` ` ` hhh 2I>{30S&CRC^f1. a. i. (1) (a) (i) 1) a)C -2( -Ct )[ 31S&CSC^f1. a. i. (1) (a) (i) 1) a)C -2( -Ct )f 32S&CTC^f1. a. i. (1) (a) (i) 1) a)C -2( -Ct )q Default ParaC^fDefault Paragraph Font2CC -2( -Ct );;#PP##PP#2{I_Equation CaC^f_Equation CaptionF2CC -2( -Ct );;#PP##PP#endnote refeC^fendnote referenceF2CC -2( -Ct )>>#PP##PP#footnote refC^ffootnote referenceF2CC -2( -Ct )>#PP#toa headingtoa heading` hp x (#(#(#` hp x (#2Zd]ps1, 2, 3,?@65NumbersO@/"=(1*1÷$t ?.E1.A, B,t ?@65Uppercase Letters1 ?*1÷$t ?.E .footnote tex6footnote text̺=(?. 0&ܺ*?.ںd 0E2(33`O5hT(G2PDocument Style&^aO5h.K+&,$@`O5Bȗ+&>` ` ` 2qeeP34`O5iT(G2PDocument Style&^aO5i.K+&,$@`O5Bȗ+&>  . 35`O5jT(G2PDocument Style&^aO5j.K+&,$@`O5Bȗ+&>  36`O5kT(G2PDocument Style&^aO5k.K+&,$@`O5Bȗ+&>  37`O5lT(G2PDocument Style&^aO5l.K+&,$@`O5Bȗ+&>*   2Gp38`O5mT(G2PDocument Style&^aO5m.K+&,$@`O5Bȗ+&>` ` ` 39`O5nT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>8@   40`O5oT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>A@` `  ` ` ` 41`O5pT(G2PDocument Style&^aO5p.K+&,$@`O5Bȗ+&>0    2?y42`O5qT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>J` ` @  ` `  43`O5rT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>S` `  @  44`O5sT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>\` `  @hh# hhh 45`O5tT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>e` `  hh#@( hh# 2Iq9 46`O5uT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>n` `  hh#(@- ( 47`O5vT(G2PRight-Aligned Paragraph NumbersK+&,$@`O5Bȗ+&>w` `  hh#(-@pp2 -ppp 48`O5wT(G2PDocument Style&^aO5w.K+&,$@`O5Bȗ+&>F *  ׃  49`O5xT(G2PTechnical Document Stylex.K+&,$@`O5Bȗ+&>&  . 2{150`O5yT(G2PTechnical Document Styley.K+&,$@`O5Bȗ+&>&  . 51`O5zT(G2PTechnical Document Stylez.K+&,$@`O5Bȗ+&>*    52`O5{T(G2PTechnical Document Style{.K+&,$@`O5Bȗ+&>'   53`O5|T(G2PTechnical Document Style|.K+&,$@`O5Bȗ+&>&   2.,}54`O5}T(G2PTechnical Document Style}.K+&,$@`O5Bȗ+&>4$     55`O5~T(G2PTechnical Document Style~.K+&,$@`O5Bȗ+&>&  . 56`O5T(G2PTechnical Document Style.K+&,$@`O5Bȗ+&>&  . 57`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>$ 2`{58`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>/` ` ` 59`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>:` ` `  60`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>E` ` `  61`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>P` ` ` hhh 2'g162`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>[ 63`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>f 64`O5T(G2P1. a. i. (1) (a) (i) 1) a).K+&,$@`O5Bȗ+&>q 65`O5T(G2PDefault Paragraph Font5.K+&,$@`O5Bȗ+&>OO#P P##P P#2YOK66`O5T(G2P_Equation Caption^aO5.K+&,$@`O5Bȗ+&>OO#PP##PP#67`O5T(G2Pendnote reference^aO5.K+&,$@`O5Bȗ+&>RR#PP##PP#68`O5T(G2Pfootnote reference^aO5.K+&,$@`O5Bȗ+&>R#PP#69 _5(_>7footnote text _5dK+b70t _5xŗ+tZP2p)qe eo70 _5(_>7Document Style _5dK+b70t _5xŗ+t` ` ` 71 _5(_>7Document Style _5dK+b70t _5xŗ+t  . 72 _5(_>7Document Style _5dK+b70t _5xŗ+t  73 _5(_>7Document Style _5dK+b70t _5xŗ+t  26p 74 _5(_>7Document Style _5dK+b70t _5xŗ+t*   75 _5(_>7Document Style _5dK+b70t _5xŗ+t` ` ` 76 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+t8@   77 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+tA@` `  ` ` ` 2hN78 _5(_>7Document Style _5dK+b70t _5xŗ+t0     79 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+tJ` ` @  ` `  80 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+tS` `  @  81 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+t\  ` `  @hh# hhh 2H682 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+te  ` `  hh#@( hh# 83 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+tn ` `  hh#(@- ( 84 _5(_>7Right-Aligned Paragraph NumbersK+b70t _5xŗ+tw` `  hh#(-@pp2 -ppp 85 _5(_>7Document Style _5dK+b70t _5xŗ+tF *  ׃  2z 86 _5(_>7Technical Document StyledK+b70t _5xŗ+t&  . 87 _5(_>7Technical Document StyledK+b70t _5xŗ+t&  . 88 _5(_>7Technical Document StyledK+b70t _5xŗ+t*    89 _5(_>7Technical Document StyledK+b70t _5xŗ+t'   25{+90 _5(_>7Technical Document StyledK+b70t _5xŗ+t&   91 _5(_>7Technical Document StyledK+b70t _5xŗ+t4$     92 _5(_>7Technical Document StyledK+b70t _5xŗ+t&   . 93 _5(_>7Technical Document StyledK+b70t _5xŗ+t&!"  . 2}gl94 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+t$#$ 95 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+t/%&` ` ` 96 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+t:'(` ` `  97 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+tE)*` ` `  2x,98 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+tP+,` ` ` hhh 99 _5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+t[-. 100_5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+tf/0 101_5(_>71. a. i. (1) (a) (i) 1) a)dK+b70t _5xŗ+tq12 2FF-Ls102_5(_>7Default Paragraph Font5dK+b70t _5xŗ+tw3w4#PP##PP#103_5(_>7_Equation Caption _5dK+b70t _5xŗ+tw5w6#PP##PP#104_5(_>7endnote reference _5dK+b70t _5xŗ+tz7z8#PP##PP#105_5(_>7footnote reference _5dK+b70t _5xŗ+tz9:#PP#2 lx/ l l Document 8Document 8 Document 4Document 4  Document 6Document 6 Document 5Document 5 2l l   Document 2Document 2 Document 7Document 7 Right Par 1Right Par 1` hp x (#X` hp x (#0X` hp x (#0` hp x (#Right Par 2Right Par 2` hp x (#X` hp x (#X` hp x (#` hp x (#2 X4 X   )w X4x  #XP P2XP#Federal Communications Commission`(#ZFCC 99206 ă   yxdddy )Њ*` Before the x Federal Communications Commission  X'-Washington, D.C. 20554 ă  X4In the Matter of hhCq) ` `  hhCq)  X_4Access Charge ReformhhCq)ppCC Docket No. 96262 ` `  hhCq)  X14Price Cap Performance Review for Localq)ppCC Docket No. 941  X 4Exchange Carriers hhCq) ` `  hhCq)  X 4Interexchange Carrier Purchases of Switched)  X 4Access Services Offered by Competitive Local)ppCCB/CPD File No. 9863  X 4Exchange Carriers hhCq) ` `  hhCq)  X4Petition of U S West Communications, Inc.)  Xy4for Forbearance from Regulation as a Dominant)ppCC Docket No. 98157  Xb4Carrier in the Phoenix, Arizona MSAq) ` `  hhCq)  X't FIFTH REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED  X'M&RULEMAKING Đ\  X4 Adopted : August 5, 1999 hhCqppReleased : August 27, 1999  X|4NPRM Comment Date:hhCOctober 29, 1999  Xe4NPRM Reply Comment Date:hhCNovember 29, 1999  X 4By the Commission: Commissioner Ness issuing a statement; Commissioner FurchtgottRoth approving in part, concurring in part, dissenting in part, and issuing a statement.(# ",))ZZt"Ԍ X'9'u )J:\ACCESS.REF\AR1999\ITEM\TOC.ORD) 9E Table of Contentvs Đ\X` hp x (#%'0*,.8135@8:'u .J:\ACCESS.REF\AR1999\ITEM\INTROBAK.ORD. >:J I. INTRODUCTION Đ\#XP P2XP# 1. In this Order, we revise the rules that govern the provision of interstate access services by those incumbent local exchange carriers (ILECs) subject to price cap regulation  X4(collectively, "price cap LECs")= yO'ԍ The Commission instituted price cap regulation for the Regional Bell Operating Companies (BOCs) and GTE in 1991, and permitted other LECs to adopt price cap regulation voluntarily, subject to certain conditions. Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87313, Second Report and Order, 5  {Ou'FCC Rcd 6786, 681820 (LEC Price Cap Order). We emphasize that this Order applies only to price cap LECs.  {O? 'As stated in the Access Reform First Report and Order, the Commission intends to address interstate access  {O 'charge reform for rateofreturn LECs in a separate proceeding. Access Reform First Report and Order, 12 FCC Rcd 1612526. On June 4, 1998, the Commission released a Notice of Proposed Rulemaking initiating a comprehensive review of access charge reform for rateofreturn LECs. Access Charge Reform for Incumbent Local Exchange Carriers Subject to RateofReturn Regulation, CC Docket No. 9877, Notice of Proposed  {O+ 'Rulemaking, 13 FCC Rcd 14238 (1998) (Rate of Return Access Reform NPRM). to advance the procompetitive, deregulatory national  X4policies embodied in the Telecommunications Act of 1996 (1996 Act).h = {O'ԍ Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56, codified at 47 U.S.C.  151 et seq. With these revisions,  Xv4we continue the process the Commission began in 1997, with the Access Reform First Report  Xa4and Order, to reform regulation of interstate access charges in order to accelerate the development of competition in all telecommunications markets and to ensure that our own regulations do not unduly interfere with the operation of these markets as competition  X 4develops.~ = {O'ԍ  See Access Reform First Report and Order, 12 FCC Rcd at 15985, 16094. A list of parties submitting comments in response to various proceedings related to access reform is included at Appendix A. The list identifies the specific proceeding and how each commenter is identified in the text of this item. Unless otherwise noted, all cites to comments and replies refer to comments and replies submitted in response to Access  {O'Charge Reform, CC Docket No. 96262, Notice of Proposed Rulemaking, 11 FCC Rcd 21354 (1996) (Access  {O'Reform NPRM).~  X 42. In the Access Reform First Report and Order, the Commission adopted a primarily marketbased approach to drive interstate access charges toward the costs of providing these  X 4services.$ x= {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16094. The Commission also adopted a "prescriptive backstop" to its marketdriven approach: it required all price cap LECs to file cost studies no later than February 8, 2001, to demonstrate the forwardlooking cost of providing those services that remain subject to  {OG!'price cap regulation. Id. at 1609697. The Commission envisioned that this approach would enable it to give carriers progressively greater flexibility to set rates as competition develops, until competition  X4gradually replaces regulation as the primary means of setting prices.Gd= {O$'ԍ Id. at 15989, 1609495.G In this Order, the Commission fulfills its commitment to provide detailed rules for implementing the market",-(-(ZZp"ԫbased approach, pursuant to which price cap LECs would receive pricing flexibility in the  X4provision of interstate access services as competition for those services develops.E= {Ob' Id. at 15989, 16106.E 3. The pricing flexibility framework we adopt in this Order is designed to grant greater flexibility to price cap LECs as competition develops, while ensuring that: (1) price cap LECs do not use pricing flexibility to deter efficient entry or engage in exclusionary pricing behavior; and (2) price cap LECs do not increase rates to unreasonable levels for customers that lack competitive alternatives. In addition, these reforms will facilitate the removal of services   from price cap regulation as competition develops in the marketplace, without imposing undue administrative burdens on the Commission or the industry. 4. Specifically, this Order grants immediate pricing flexibility to price cap LECs in the form of streamlined introduction of new services, geographic deaveraging of rates for services in the trunking basket, and removal, upon implementation of toll dialing parity, of certain interstate interexchange services from price cap regulation. We also establish a framework for granting price cap LECs greater flexibility in the pricing of all interstate access services once they satisfy certain competitive criteria. In Phase I, we allow price cap LECs to offer contract tariffs and volume and term discounts for those services for which they make a specific competitive showing. In Phase II, we permit price cap LECs to offer dedicated transport and special access services free from our Part 69 rate structure and Part 61 price cap rules, provided that the LECs can demonstrate a significantly higher level of competition for those services. 5. We address additional pricing flexibility proposals in the Notice of Proposed Rulemaking (Notice) portion of this item. We seek comment on proposals for geographic deaveraging of the rates for services in the common line and trafficsensitive baskets. We also invite comment on the appropriate triggers for granting Phase II relief for services in the common line and trafficsensitive baskets, as well as for the trafficsensitive parts of tandemswitched transport service. 6. In addition to adopting rules to implement the marketbased approach to access reform, we take this opportunity to reexamine the rate structure for the local switching service category of the trafficsensitive basket. Accordingly, in the Notice, we seek comment on a number of proposed changes to the rate structure so that it better replicates the operation of a competitive market. Generally, we invite parties to discuss proposed revisions to our rules that would require price cap LECs to develop capacitybased local switching charges rather than perminute charges. We also solicit comment on whether the trafficsensitive price cap index (PCI) formula should be modified. For the same reasons that we consider revising the local switching rate structure, we also seek comment on whether similarly to revise the rate structure for tandemswitched transport. "h$Z,-(-(ZZ""Ԍ7. Finally, we deny a petition for declaratory ruling filed by AT&T requesting that the Commission confirm that interexchange carriers (IXCs) may elect not to purchase  X4switched access services offered under tariff by competitive local exchange carriers (CLECs)..\= yOK'ԍ Petition for Declaratory Ruling filed by AT&T Regarding Interexchange Carrier Purchases of Switched  {O'Access Services Offered by Competitive Local Exchange Carriers (Oct. 23, 1998) (AT&T Declaratory Ruling  {O'Petition).. We decline to address AT&T's concerns in a declaratory ruling; however, we find that AT&T's petition and supporting comments suggest a need for the Commission to revisit the issue of CLEC access rates. Therefore, in the Notice, we initiate a rulemaking regarding the reasonableness of these charges and whether the Commission might adopt rules to address, by the least intrusive means, any failure of market forces to constrain CLEC access charges.  XH'   X 46 II. BACKGROUND AND SUMMAR_Y Đ\  X ' A. Price Cap Regime  X ' X1. Background (#  X48. T_o recover the costs of providing interstate access services, incumbent LECs charge IXCs and end users for access services in accordance with our Part 69 access charge  Xb4rules.<b= yO'ԍ 47 C.F.R. Part 69.< Part 69 establishes two basic categories of access services: special access services and switched access services. Special access services do not use local switches; instead they employ dedicated facilities that run directly between the end user and the IXC's point of  X4presence (POP).} |= yOJ'ԍ A POP is the physical point where an IXC connects its network with the LEC network.} Switched access services, on the other hand, use local exchange switches to route originating and terminating interstate toll calls. The Commission has not prescribed  X4specific rate elements in Part 69 for special access services.X  = {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21367.X Part 69 does establish specific  X4switched access elements and a mandatory switched access rate structure for each element.= = {O' 'ԍ Id. at 21367.= 9. Interoffice transmission services, known as transport services, carry interstate switched access traffic between an IXC's POP and the end office that serves the end user customer. Incumbent LEC transmission facilities that carry switched interstate traffic between an IXC's POP and the incumbent LEC end office serving the POP (this office is"e0 ,-(-(ZZ"  X4called the serving wire center, or SWC), are known as entrance facilities. = {Oy'ԍ See 47 C.F.R.  69.110 (requiring LECs to impose flatrated charges on IXCs to recover the costs of entrance facilities). Incumbent LECs currently offer two types of interstate switched transport service between a SWC and an end user's end office. Under the first service, direct-trunked transport, calls are transported between the SWC and the end office by means of a direct trunk, a dedicated facility, that  X4does not pass through an intervening switch. "= {Ow'ԍ See 47 C.F.R.  69.112 (requiring LECs to impose a flatrated charge on IXCs to recover the costs of directtrunked transport). The second service, tandem-switched transport, routes calls from the SWC to the end office through a tandem switch located between the SWC and the end office. Traffic travels over a dedicated circuit from the SWC to the tandem switch and then over a shared circuit, which carries the calls of many different  XH4IXCs, from the tandem switch to the incumbent LEC end office."H|= {Ou'ԍ See 47 C.F.R.  69.111 (prescribing a threepart rate structure for LEC recovery from IXCs of tandemswitched transport costs: a flatrated charge for the dedicated facility from the LEC serving wire center to the tandem switch, a perminute tandem switching charge, and a perminute charge for common transport from the tandem switch to the LEC end office). Incumbent LEC tandem switches and end office switches switch interstate traffic between the transport trunks carrying traffic to and from the IXC POPs and the end users' local loops.  10. Charges for special access services generally are divided into channel termination charges and channel mileage charges. Channel termination charges recover the costs of facilities between the customer's premises and the LEC end office and the costs of facilities between the IXC POP and the serving wire center. Channel mileage charges recover the costs of facilities (also known as interoffice facilities) between the serving wire center and the LEC end office serving the end user.  XK'X 2. Price Caps (#  11. In 1990, the Commission replaced rateofreturn regulation for the BOCs and GTE with an incentivesbased system of regulation that encourages companies to: (1) improve their efficiency by developing profitmaking incentives to reduce costs; (2) invest efficiently in new plant and facilities; and (3) develop and deploy innovative service  X4offerings.\f = yO!'ԍ Price Cap Performance Review for Local Exchange Carriers, CC Docket No. 941, Second Further Notice  {O"'of Proposed Rulemaking, 11 FCC Rcd 858, 863 (1995) (Price Cap Second FNPRM). As noted supra at Section  {Oj#'I, other local exchange carriers could opt into price cap regulation. Id.Ć The price cap plan is designed to replicate some of the efficiency incentives found in fully competitive markets and to act as a transitional regulatory scheme until actual  X4competition makes price cap regulation unnecessary. = yO&'ԍ Rules governing price cap LECs are set forth in Part 61 of our rules. 47 C.F.R. Part 61. ",-(-(ZZ"Ԍ 12. Under the original price cap plan, interstate access services were grouped into four different baskets: the common line, trafficsensitive, special access, and interexchange  X4baskets.S= {OK'ԍ LEC Price Cap Order, 5 FCC Rcd at 6788. Originally, interexchange services were to be included in the basket containing special access offerings; however, the Commission concluded that combining these services into one basket "raised issues concerning the flowthrough of exogenous costs that can be solved by separating  {O'the interexchange activity from interstate access." Id. Accordingly, the Commission created the interexchange  {Oo'basket for those LECs that offer interexchange services. Id.S In the Second Transport Order, the Commission combined transport and special  X4access services into the newly created trunking basket.2\~= yO 'ԍ Transport services originally were placed in the trafficsensitive basket. Transport Rate Structure and  {O 'Pricing, CC Docket No. 91213, Second Report and Order, 9 FCC Rcd 615, 622 (1994) (Second Transport  {O~ 'Order).2 Each basket is subject to a price cap index (PCI), which caps the total charges a LEC may impose for interstate access services in  X4that basket.3= {O'ԍ Id.3 The PCI is adjusted annually by a measure of inflation minus a "productivity  Xx4factor," or "XFactor."Ux4 = {O]'ԍ Price Cap Second FNPRM, 11 FCC Rcd at 863. For a complete discussion of the "XFactor," see Price  {O''Cap Performance Review, 10 FCC Rcd at 90056; see also Price Cap Performance Review for Local Exchange  {O'Carriers, CC Docket No. 96262, Fourth Report and Order, 12 FCC Rcd 16642 (1997) (Price Cap Fourth Report  {O'and Order), aff'd in part, rev'd in part, U.S. Telephone Ass'n v. FCC, --- F.3d ----, 1999 WL 317035 (D.C.Cir. May 21, 1999) (NO. 97-1469).U A separate adjustment is made to the PCI for "exogenous" cost changes, which are changes outside the carrier's control and not otherwise reflected in the  XJ4price cap formula.WJ= {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6792.W  13. Within the trafficsensitive and trunking baskets, services are grouped into service categories and subcategories. Rate revisions for these services are limited by upper and, in  X 4the original price cap plan, lower pricing bands established for that particular service. & ~= yO'ԍ 1993 Annual Access Tariff Filings, CC Docket No. 93193, Phase I, Part 2, Memorandum Opinion and  {O'Order, 12 FCC Rcd 6277, 6286 (1997); see also Access Reform NPRM, 11 FCC Rcd at 21372; Price Cap  {O'Second FNPRM, 11 FCC Rcd at 864. We note that there are no upper and lower banding requirements imposed  {Oy'on the common line basket and the interexchange baskets. LEC Price Cap Order, 5 FCC Rcd at 6811.  Originally, the pricing band limits for most of the service categories and subcategories were  X 4set at five percent above and below the Service Band Index (SBI). l= yO"'ԍ 1993 Annual Access Tariff Filings, CC Docket No. 93193, Phase I, Part 2, Memorandum Opinion and Order, 12 FCC Rcd 6277, 6286 (1997). The SBI is a subindex of the prices for each category or subcategory. In 1995, however, the Commission increased the lower pricing bands to ten percent for those service categories in the trunking and trafficsensitive baskets and 15 percent for those services subject to density",-(-(ZZ"  X4zone pricing.|= yOy'ԍ Price Cap Performance Review for Local Exchange Carriers, CC Docket No. 941, First Report and  {OA'Order, 10 FCC Rcd 8961, 912930, 9141 (1995) (Price Cap Performance Review). Density zone pricing is a system that permits LECs to reduce gradually rates in geographic areas that are less costly to serve, and to increase rates in areas that are more costly to serve. Transport Rate Structure and Pricing, CC Docket No. 91213, Third Memorandum Opinion and Order on Reconsideration, 10 FCC Rcd 3030, 3042 (1994). As discussed  {Oc'in more detail below, the Commission subsequently eliminated the lower service band indices. See infra Section II.B. These pricing bands give price cap LECs the ability to raise and lower rates  X4for elements or services as long as the actual price index (API)  = yO 'ԍ The "actual price index" is a weighted index of the rates that a price cap carrier is charging, or proposes  {On 'to charge, for the services in a particular basket. See 47 C.F.R. 61.3(b), 61.46.  for the relevant basket does not exceed the PCI for that basket, and the prices for each category of services within the  X4basket are within the established pricing bands._f = {O 'ԍ Access Reform NPRM, 11 FCC Rcd at 21372, 21485._ Together, the PCI and pricing bands restrict a price cap LEC's ability to offset price reductions for services that are subject to competition  X4with price increases for services that are not subject to competition. = yO6'ԍ The ability of a price cap LEC to raise rates for some services as a result of rate reductions for other services within the same basket or band is referred to as "headroom."  X_' B. Pricing Flexibility  X14 14. When it adopted the LEC Price Cap Order in 1990, the Commission required price cap LECs to offer all interstate special and switched access services at geographically  X 4averaged rates for each study area. P = {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6788 (1990) (LEC Price Cap Order); see also Price Cap Second  {O'FNPRM, 11 FCC Rcd at 866. Since that time, the Commission has taken significant steps to increase the LECs' pricing flexibility and ability to respond to the advent of  X 4competition in the exchange access market. In the Special Access and Switched Transport  X 4Expanded Interconnection Orders, the Commission permitted LECs to introduce density zone pricing for high capacity special access and switched transport services in a study area, provided that they could demonstrate the presence of "operational" special access and switched transport expanded interconnection arrangements and at least one competitor in the  Xh4study area.0Hh= yO!'ԍ Expanded Interconnection with Local Telephone Company Facilities; Amendment of the Part 69 Allocation of General Support Facility Costs, CC Docket Nos. 91141 and 92333, Report and Order, 7 FCC Rcd  {OU#'7369, 7454 n.411 (1992) (Special Access Expanded Interconnection Order), vacated in part and remanded, Bell Atlantic Tel. Cos. v. FCC, 24 F.3d 1441 (D.C. Cir. 1994); Expanded Interconnection with Local Telephone  {O$'Company Facilities, 9 FCC Rcd 5154, 5196 (1994) (Virtual Collocation Order); Switched Transport Expanded Interconnection with Local Telephone Company Facilities, CC Docket No. 91141, Second Report and Order and  {Oy&'Third Notice of Proposed Rulemaking, 8 FCC Rcd 7374, 742532 (1993) (Switched Transport Expanded  {OC''Interconnection Order), aff'd, Virtual Collocation Order, 9 FCC Rcd 5196; see also Section V, infra. "Expanded"C',-(-(4'" interconnection" refers to the interconnection of one carrier's circuits with those of a LEC at one of the LEC's  {OX'wire centers so that the carrier can provide certain facilitiesbased access services. See Virtual Collocation  {O"'Order, 9 FCC Rcd at 5158. An expanded interconnection offering is deemed "operational" when at least one  {O'interconnector has taken a switched crossconnect element. Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 742627. 0 The Commission also permitted price cap LECs to offer volume and term"h ~,-(-(ZZM" discounts for special access and switched transport services upon specific competitive  X4showings.~= {O'ԍ Special Access Expanded Interconnection Order, 7 FCC Rcd at 7463; Switched Transport Expanded  {O'Interconnection Order, 8 FCC Rcd at 7435. The Commission allowed LECs to offer volume and term discounts for switched transport services in a study area upon demonstration of one of the following conditions: (1) 100  {Ot 'DS1equivalent switched crossconnects (i.e., the cabling inside the LEC central office that connects the LEC network to the collocated equipment dedicated to a competitive access provider using expanded interconnection) are operational in the Zone 1 offices in the study area; or (2) an average of 25 DS1equivalent switched crossconnects per Zone 1 office are operational. In study areas with no Zone 1 offices, volume and term discounts may be implemented once five DS1equivalent switched crossconnects are operational in the study area.  {O^'Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 7435.  X415. Subsequently, the Commission eliminated the lower service band indices, concluding that this action would lead to lower prices and encourage LECs to charge rates  X4that reflect the underlying costs of providing exchange access services.XV = {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21487.X The Commission found that the PCI and upper pricing bands adequately control predatory pricing and that greater downward pricing flexibility would benefit consumers both directly through lower  XH4prices and indirectly by encouraging only efficient competitive entry.3 H= {O'ԍ Id.3 16. In that same order, the Commission also relaxed the procedures for introducing new switched access services, in response to arguments that new services and technologies do  X 4not fit the Part 69 rate structure requirements.=! z= {O'ԍ Id. at 21488.= The Commission prescribed the original rate  X 4structure for introducing new switched access services in 1983.y"^ = {O'ԍ  See 47 C.F.R. Part 69; see also MTS and WATS Market Structure, CC Docket No. 7872, Phase I, Third  {O\ 'Report and Order, 93 FCC 2d 241 (1983) (Access Charge Order). The Commission has not prescribed a special  {O&!'access rate structure. Access Charge Order, 93 FCC 2d at 31415.y At that time, incumbent LECs were required to file a Part 69 waiver each time they wanted to introduce a new rate element for switched access service that did not conform to the prescribed switched access  X4rate structure.#2= yOs%'ԍ Section 1.3 permits the Commission to grant waivers of any of its rules if "good cause therefor is shown." 47 C.F.R.  1.3. A Part 69 waiver required incumbent LECs to demonstrate that "special circumstances warrant deviation from the general rule and that such deviation will serve the"y #,-(-(ZZ"  X4public interest."$$= {Oy'ԍ See Northeast Cellular Telephone Company v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast  {OC'Cellular); WAIT Radio v. FCC (WAIT Radio), 418 F.2d 1153 (D.C. Cir. 1969) ("Good cause" is interpreted to require petitioners to show that "special circumstances warrant deviation from the general rule and such deviation will serve the public interest.") Incumbent LECs also had to comply with the "new services" test, which required an incumbent LEC to demonstrate that its tariffed rates for new services would recover no more than the carrier's direct costs of providing the service, plus a reasonable  X4amount of overhead, and no less than the carrier's direct costs of providing the service.F%= {O 'ԍ A new service is one that expands the range of service options available to a customer. In the LEC Price  {O 'Cap Order, the Commission concluded that it would not limit the definition of "new services" to services that  {O 'employ a new technology or functional capability. LEC Price Cap Order, 5 FCC Rcd at 6824; see also 47 C.F.R.  61.49(f)(2); Amendments of Part 69 of the Commission's Rules Relating to the Creation of Access Charge Subelements for Open Network Architecture, CC Docket Nos. 8979 and 87313, Report and Order and Order on Further Reconsideration and Supplemental Notice of Proposed Rulemaking, 6 FCC Rcd 4524, 4531 (1991) (adopting the direct cost test); Amendments of Part 69 of the Commission's Rules Relating to the Creation of Access Charge Subelements for Open Network Architecture, CC Docket Nos. 8979 and 87313, Memorandum Opinion and Order on Second Further Reconsideration, 7 FCC Rcd 5235, 5237 (1992) (eliminating the preexisting net revenue test as superfluous).F Finally, incumbent LECs were directed to file their tariffs introducing a new service on at least fifteen days' notice and to incorporate the new service into the appropriate price cap basket and indices within six to eighteen months after the new service tariff became  X_4effective.!&_R = {Ob'ԍ See Implementation of Section 402(b)(1)(A) of the Telecommunications Act of 1996, CC Docket No. 96 {O,'187, Report and Order, 12 FCC Rcd 2170, 2203 (1997) (Tariff Streamlining Order) (LECs must file their tariffs introducing a new service on at least fifteen days' notice.); 47 C.F.R.  61.43 (Tariffs introducing a new service must be incorporated into the appropriate price cap basket and indices within six to eighteen months after the new service tariff takes effect.)!  X1417. The Commission found that the Part 69 rate structure imposed a costly, timeconsuming, and unnecessary burden on incumbent LECs and significantly impeded the  X 4introduction of new services.X' = {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21490.X Accordingly, the Commission modified the Part 69 rate structure rules to permit an incumbent LEC to introduce a new service by filing a petition based on a "public interest" standard that is easier to satisfy than the general standard  X 4applicable to waivers of the Commissions rules.[( = {O"'ԍ Id.; see also 47 C.F.R.  69.4(g).[ In addition, under the new rules, once an initial incumbent LEC has satisfied the public interest requirement for establishing new rate elements for a new switched access service, another incumbent LEC may file a petition seeking authority to introduce an identical new service, and its petition will be reviewed within ten days of the release of a Public Notice. The LEC may introduce the new rate element following the tenday period, unless the Common Carrier Bureau (the Bureau)"K *(,-(-(ZZ*" informs the LEC before that time that its new service does not qualify for "me too"  X4treatment.X)= {Ob'ԍ Access Reform NPRM, 11 FCC Rcd at 21490.X  X4 18. The Commission also recognized that additional modifications to the Part 69 rate structure could increase consumer choice, streamline regulation, and increase consumer  X4welfare by increasing incentives for innovation.@*Z= {O'ԍ Id. at 2144041.@ The Commission, therefore, sought comment on whether to permit price cap LECs to establish new switched access rate elements  X_4without prior approval.3+_= {O 'ԍ Id.3 The Commission also invited comment on whether to eliminate the  XH4new services test and permit LECs to offer new services free from price cap regulation.3,H~= {Ow'ԍ Id.3 In  X14the Access Reform First Report and Order, the Commission deferred resolution of these issues, as well as other issues concerning the timing and degree of pricing flexibility, to a  X 4future report and order.j- = {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16094.j  X ' C. Summary  X ' X1. Pricing Flexibility (#  X{419. Since the release of the Access Reform First Report and Order, we have re Xf4examined the record generated in response to the Access Reform NPRM and the Price Cap  XQ4Second FNPRM; we have observed competition develop in the marketplace; and we have invited parties to update and refresh the record relating to access charge reform to reflect any  X%4changes that may have taken place since May 1997.<.Z%= yOx'ԍ Commission Asks Parties to Update and Refresh the Record for Access Charge Reform and Seeks Comment on Proposals for Access Charge Reform Pricing Flexibility, CC Docket No. 96262, Public Notice, 13  {O'FCC Rcd 21522 (1998) (October 5 Public Notice). < In addition, we have received and reviewed several petitions (and the associated records) from BOCs seeking pricing flexibility in the form of forbearance from dominant carrier regulation in the provision of certain special  X4access and high capacity services.!/ = yOU#'ԍ In the order that they were filed, these forbearance petitions are: U S West Forbearance Petition (Phoenix), CC Docket No. 98157 (filed Aug. 24, 1998); SBC Communications, Inc. Forbearance Petition, CC Docket No, 98227 (filed Dec. 7, 1998); U S West Forbearance Petition (Seattle), CC Docket No. 991 (filed Dec. 30, 1998); Bell Atlantic Telephone Companies Forbearance Petition, CC Docket No. 9924 (filed Jan. 20, 1999); and Ameritech Forbearance Petition, CC Docket No. 9965 (filed Feb. 5, 1999).! Although our current price cap regime gives LECs some pricing flexibility and considerable incentives to operate efficiently, significant regulatory" t/,-(-(ZZ" constraints remain. As the market becomes more competitive, such constraints become counterproductive. We recognize that the variety of access services available on a competitive basis has increased significantly since the adoption of our price cap rules. Therefore, in response to changing market conditions, we grant price cap LECs immediate flexibility to deaverage services in the trunking basket and to introduce new services on a streamlined basis. We also remove certain interstate interexchange services from price cap regulation upon implementation of intra and interLATA toll dialing parity, and we establish a framework for granting price cap LECs further pricing flexibility upon satisfaction of certain competitive showings and seek comment on additional flexibility for certain switched access services.  X 4X ` ` a. Immediate Regulatory Relief (# 20. As discussed above, the original rate structure for interstate switched transport  X 4services required price cap LECs to charge averaged rates throughout a study area.x0 = {O7'ԍ Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 742324.x The Commission subsequently found that this requirement forced LECs to price above cost in the  X4hightraffic, lowercost areas where competition is more likely to develop.<1Z= {O'ԍ Id. at 7424.< In the Switched  X{4Transport Expanded Interconnection Order, therefore, the Commission created a density zone  Xf4pricing plan that allows some degree of deaveraging of rates for switched transport services.<2f= {O'ԍ Id. at 7426.< The Commission concluded that relaxing the pricing rules in this manner would enable price  X84cap LECs to respond to increased competition in the interstate switched transport market.338~= {Og'ԍ Id.3 21. Although the density zone pricing plan afforded some pricing flexibility to price cap LECs, it contained several constraints, such as the increased scrutiny applicable to plans with more than three zones. We now conclude that market forces, as opposed to regulation, are more likely to compel LECs to establish efficient prices. Accordingly, for purposes of deaveraging rates for services in the trunking basket, we eliminate the limitations inherent in our current density zone pricing plan and allow price cap LECs to define the scope and number of zones within a study area, provided that each zone, except the highestcost zone, accounts for at least 15 percent of the incumbent LEC's trunking basket revenues in the study area and that annual price increases within a zone do not exceed 15 percent. In addition, we eliminate the requirement that LECs file zone pricing plans prior to filing their tariffs. 22. We also permit price cap LECs to introduce new services on a streamlined basis, without prior approval. Generally, we modify the Commission's rules to eliminate the public interest showing required by Section 69.4(g) and to eliminate the new services test (except in" 3,-(-(ZZ"  X4the case of loopbased new services) required under Sections 61.49(f) and (g).M4= {Oy'ԍ See Section III, infra.M These modifications will eliminate the delays that now exist for the introduction of new services as well as encourage efficient investment and innovation. 23. Certain interstate interexchange services provided by price cap LECs are found in the interexchange basket, including interstate intraLATA services and certain interstate interLATA services called "corridor services." In this Order, we allow price cap LECs to remove from the interexchange basket, and, hence, price cap regulation, their interstate intraLATA toll services and corridor services, provided the price cap LEC has implemented intra and interLATA toll dialing parity in all of the states in which it provides local exchange service. The presence of competitive alternatives for these services, coupled with implementation of dialing parity, should prevent price cap LECs from exploiting over a sustained period any market power may possess with respect to these services and thus warrants removal of these services from price cap regulation.  X ' ` ` b. Relief that Requires a Competitive Showing (#` 24. In addition, we adopt a framework for granting further regulatory relief upon satisfaction of certain competitive showings. Relief generally will be granted in two phases  XK4and on an MSA (Metropolitan Statistical Area) basis.5KZ= yOV'ԍ Pricing flexibility also is available for the nonMSA sections of a study area, provided the price cap LEC satisfies the triggers adopted herein for MSAs. To obtain Phase I relief, price cap LECs must demonstrate that competitors have made irreversible, sunk investments in the facilities needed to provide the services at issue. For instance, for dedicated transport and  X4special access services,6= yOi'ԍ For purposes of this Order, "dedicated transport services" refer to entrance facilities, directtrunked transport, and the dedicated component of tandemswitched transport. price cap LECs must demonstrate that unaffiliated competitors have collocated in at least 15 percent of the LEC's wire centers within an MSA or collocated in wire centers accounting for 30 percent of the LEC's revenues from these services within an  X4MSA.97X = yO|'ԍ To satisfy the collocation triggers we adopt herein, an incumbent LEC must demonstrate, with respect to each wire center with collocation, that at least one of the competitors therein uses transport services provided by a transport provider other than the incumbent LEC. 9 Higher thresholds apply, however, for channel terminations between a LEC end office and an end user customer. In that case, the LEC must demonstrate that unaffiliated competitors have collocated in 50 percent of the price cap LEC's wire centers within an MSA or collocated in wire centers accounting for 65 percent of the price cap LEC's revenues from this service within an MSA. For trafficsensitive, common line, and the trafficsensitive components of tandemswitched transport services, a LEC must show that competitors offer service over their own facilities to 15 percent of the price cap LEC's customer locations"7* 7,-(-(ZZ_" within an MSA. Phase I relief permits price cap LECs to offer, on one day's notice, volume and term discounts and contract tariffs for these services, so long as the services provided pursuant to contract are removed from price caps. To protect those customers that may lack competitive alternatives, however, LECs receiving Phase I flexibility must maintain their generally available, price cap constrained tariffed rates for these services. 25. To obtain Phase II relief, price cap LECs must demonstrate that competitors have  X_4established a significant market presence (i.e., that competition for a particular service within the MSA is sufficient to preclude the incumbent from exploiting any individual market power over a sustained period) for provision of the services at issue. Phase II relief for dedicated transport and special access services is warranted when a price cap LEC demonstrates that unaffiliated competitors have collocated in at least 50 percent of the LEC's wire centers within an MSA or collocated in wire centers accounting for 65 percent of the LEC's revenues from these services within an MSA. Again, a higher threshold applies to channel terminations between a LEC end office and an end user customer. In that case, a price cap LEC must show that unaffiliated competitors have collocated in 65 percent of the LEC's wire centers within an MSA or collocated in wire centers accounting for 85 percent of the LEC's revenues from this service within an MSA. Phase II relief permits price cap LECs to file tariffs for these services on one day's notice, free from both our Part 61 rate level and our  XM4Part 69 rate structure rules.;8\M= yO'ԍ As discussed in more detail below, we eliminate the lowend adjustment mechanism for those price cap  {O'LECs qualifying for and electing to exercise either Phase I or Phase II pricing flexibility. See Section VI.D.2,  {OX'infra.;  X426. Because our ultimate goal is to continue to foster competition and allow market forces to operate where they are present, we also seek comment in the Notice on additional pricing flexibility for common line and trafficsensitive services. First, we consider permitting price cap LECs to deaverage rates for services in the common line and trafficsensitive baskets in conjunction with identification and removal of implicit universal service support in interstate access charges and implementation of an explicit high cost support  X4mechanism. We also invite parties to comment on how we should define zones for purposes of deaveraging. In addition, we seek comment on which rate elements may be deaveraged and whether deaveraging should be subject to subscriber line charge (SLC) and presubscribed interexchange carrier charge (PICC) caps or any other constraint. We also seek comment on the appropriate Phase II triggers for granting greater pricing flexibility for trafficsensitive, common line, and the trafficsensitive components of tandemswitched transport services.  X'X 2. Modifications to Rate Structure (#  X 427. The Notice also seeks comment on certain price cap regulation issues.  X!4Specifically, consistent with the Access Reform First Report and Order's efforts to reform access charges so costs are recovered in a manner that reflects how they are incurred, we seek""8,-(-(ZZ!" comment on adopting a capacitybased rate structure for local switching. The local switch, which consists of an analog or digital switching system and line and trunk cards, connects subscriber lines both with other local subscriber lines and with dedicated and common  X4interoffice trunks.9= yO4'ԍ Line cards connect subscriber lines to the switch, and trunk ports connect interoffice trunks to the switch.  {O'Access Reform First Report and Order, 12 FCC Rcd 16034. As discussed in more detail below, prior to the Access Reform First  X4Report and Order, the interstate allocated portion of these costs was recovered entirely  X4through perminute charges assessed on IXCs.@:"= yOd 'ԍ 47 C.F.R.  69.106.@  Xc428. Recognizing that a significant portion of these costs (i.e., the costs associated with line cards and trunk ports) do not vary with usage, however, the Commission determined that such nontrafficsensitive costs should be recovered on a flatrated, rather than usage  X 4sensitive, basis.j; = {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16034.j Accordingly, consistent with principles of costcausation and economic efficiency, the Commission directed price cap LECs to reassign all lineside port costs from the Local Switching rate element to the Common Line rate element and to recover these costs  X 4through the common line rate elements, including the SLC and flatrated PICC.3< D= {O'ԍ Id.3 Because the record in that proceeding was not adequate, however, to determine whether and to what extent the remaining local switching costs were trafficsensitive or nontrafficsensitive, LECs  X4continue to recover these costs through trafficsensitive charges.j== {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16040.j  Xh429. We take this opportunity to reexamine the local switching rate structure to determine whether it reasonably reflects the manner in which price cap LECs incur costs. In the Notice, we invite comment on whether and to what extent we should modify further our price cap rules for the trafficsensitive basket to reflect a capacitybased local switching rate  X 4structure.P> h = {O%'ԍ  See Section VIII.C, infra.P  X430. We also invite parties to discuss proposed revisions to our rules for the common line basket, and we consider redefining the price cap baskets and pricing bands. Specifically,  X4we solicit comment on whether to increase the "g" factorP? = {O[$'ԍ  See Section VIII.D, infra.P in the common line PCI formula and whether we should revise the baskets so that services with flat rates are not placed in the same basket as services with trafficsensitive rates. In addition, we seek comment on our" ?,-(-(ZZ=" tentative conclusion that the inflation measure in the PCI formula should be consistent with the measure defined by the Bureau of Labor Statistics (BLS).  X'X 3. CLEC Access Charges(#  X4  X431. In the Access Reform NPRM, the Commission sought comment on whether CLECs have market power in the provision of terminating access services and whether to  Xa4regulate these services.X@a= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21476.X In the Access Reform First Report and Order, the Commission decided to treat CLECs as nondominant in the provision of terminating access service,  X54because they did not appear at that time to possess market power.mA5Z= {O@ 'ԍ Access Reform First Report and Order, 12 FCC Rcd at 1614041.m The Commission stated, however, that it would revisit the issue of regulating CLEC terminating access rates if there were sufficient indications that CLECs were imposing unreasonable terminating access  X 4charges.=B = {O'ԍ Id. at 16142.=  X 432. On October 23, 1998, AT&T filed a petition for declaratory ruling requesting that the Commission confirm that, under existing Commission rules and policies, an IXC may  X4elect not to accept service at a price chosen by the CLEC.rC~= yO'ԍ AT&T Petition for Declaratory Ruling, CCB/CPD No. 9863 (Oct. 23, 1998).r In its petition, AT&T alleges that some CLECs impose switched access charges significantly higher than those charged by  Xf4the ILEC competitors in the same area.Df= yO%'ԍ We note that there are pending before the Commission several complaints concerning CLECs' terminating access charges. For instance, on October 18, 1996, Total Telecommunications Services, Inc (TTS) and Atlas Telephone Company filed a complaint against AT&T alleging that AT&T failed to compensate TTS for terminating access services provided by TTS. The complaint also alleges that AT&T wrongfully discontinued  {OE'service to TTS end users in violation of section 214 of the Act. See Total Telecommunications Services, Inc. and Atlas Telephone Company, Inc., File No. E9703, Complaint (Oct. 18, 1996). AT&T points to a Commission pronouncement in  XO4the Access Reform First Report and Order that "terminating rates that exceed those charged by the ILEC serving the same market may suggest that a CLEC's terminating access rates are excessive," thereby warranting Commission regulation.  X4 33. In this Order, we deny AT&T's petition. We find, however, that the record developed in response to AT&T's petition suggests the need for the Commission to revisit the issue of CLEC access rates. Accordingly, in the accompanying Notice, we initiate a rulemaking to determine the reasonableness of CLEC access rates and whether the Commission might adopt rules to address, by the least intrusive means, any failure of market forces to constrain CLEC access charges. >'u .J:\ACCESS.REF\AR1999\ITEM\INTROBAK.ORD. >"k D,-(-(ZZ"Ԍ X4ԙ='u -J:\ACCESS.REF\AR1999\ITEM\NEWSERV.ORD- =7 III. NEW SERVICES ă  X' A. Background  X4!34.  In 1983, the Commission prescribed a rate structure for switched access services  X4in Part 69 of its rules.E= {O'ԍ 47 C.F.R. Part 69; Access Charge Order, 93 FCC 2d 241. The Commission has not prescribed a special  {O'access rate structure. Access Charge Order, 93 FCC 2d at 31415. Originally, when an incumbent LEC wanted to offer a new switched access service, and the rate element or elements for that new service did not fit into the prescribed switched access rate structure, the LEC was required to obtain a waiver of Part 69  XJ4pursuant to Section 1.3 of the Commission's rules.F"J$= yO 'ԍ Section 1.3 permits the Commission to grant waivers of any of its rules if "good cause therefor is shown." 47 C.F.R.  1.3. The court has interpreted this "good cause" standard to require petitioners to show that "special circumstances warrant deviation from the general rule and such deviation will serve the public interest."  {Ow'Northeast Cellular; WAIT Radio.  In 1996, the Commission adopted Section 69.4(g) of its rules, which relaxed the switched access rate structure rules for price  X 4cap LECs.G = yO'ԍ 47 C.F.R.  69.4(g); Price Cap Performance Review for Local Exchange Carriers, CC Docket No. 941,  {O'Third Report and Order, 11 FCC Rcd 21354, 21490 (1996) (Price Cap Third Report and Order). Under Section 69.4(g), a price cap LEC is no longer required to demonstrate that "special circumstances" warrant a Part 69 waiver; instead, it need only file a petition showing that the proposed new rate element would be in the "public interest," or that another  X 4LEC previously has established the same rate element.CH h = yO'ԍ 47 C.F.R.  69.4(g). C  X 4"35. In addition, a price cap LEC filing a tariff for a new serviceYIZ = yOR'ԍ A "new service" is one that expands the range of service options available to a customer. The Commission expressly decided not to limit the definition of "new services" to services that employ a new  {O'technology or functional capability. LEC Price Cap Order, 5 FCC Rcd at 6824.Y must comply with  X4the new services test, which requires the LEC to show that its new service rates will recover no more than the carrier's direct costs of providing the service, plus a reasonable level of  Xd4overheads, and no less than the carrier's direct costs of providing the service.Jzd= {O/ 'ԍ See 47 C.F.R.  61.49(f)(2); Amendments of Part 69 of the Commission's Rules Relating to the Creation of Access Charge Subelements for Open Network Architecture, CC Docket Nos. 8979 and 87313, Report and Order and Order on Further Reconsideration and Supplemental Notice of Proposed Rulemaking, 6 FCC Rcd 4524, 4531 (1991) (adopting the direct cost test); Amendments of Part 69 of the Commission's Rules Relating to the Creation of Access Charge Subelements for Open Network Architecture, CC Docket Nos. 8979 and 87313, Memorandum Opinion and Order on Second Further Reconsideration, 7 FCC Rcd 5235, 5237 (1992) (eliminating the preexisting net revenue test as superfluous). Those tariffs  XM4must be filed on at least fifteen days' notice.hKM\= {OZ''ԍ See Tariff Streamlining Order, 12 FCC Rcd at 2203.h Finally, the LEC is required to incorporate its"MK,-(-(ZZ^" new services into the appropriate price cap basket and indices within six to eighteen months after the new service tariff takes effect, in conjunction with the carrier's annual access tariff  X4filing.?L= yOK'ԍ 47 C.F.R.  61.43.?  X4#36. In the December 1996 Access Reform NPRM, the Commission invited comment on three proposals for further relaxation of its new service rules to create incentives for price cap LECs to introduce services using new technologies: (1) enabling price cap LECs to establish new switched access rate elements without prior approval; (2) eliminating the new services test; and (3) permitting price cap LECs to offer new services outside of price cap  X34regulation.\M3X= {O< 'ԍ Access Reform NPRM, 11 FCC Rcd at 2144041. \ In the Access Reform First Report and Order, the Commission deferred consideration of pricing flexibility issues, including these new service issues, to a future  X 4Order.kN = {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16094. k Bell Atlantic later proposed removing new services from price cap regulation  X 4"immediately,"jO |= {O'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 34.j and the Commission invited comment on Bell Atlantic's proposal.]P = {O'ԍ October 5 Public Notice, 13 FCC Rcd at 21523.] Subsequently, the Commission granted a petition to forbear from enforcing Part 69 rate structure requirements with respect to new service tariffs filed by any incumbent LEC serving  X 4more than 50,000 access lines, but less than two percent of the nation's access lines. Q = yO'ԍ Petition for Forbearance of the Independent Telephone & Telecommunications Alliance, AAD File No.  {O'98-43, Sixth Memorandum Opinion and Order, FCC 99-108 (rel. June 30, 1999) (ITTA Forbearance Order).   X}' B. Discussion $37. We find that the record supports permitting incumbent LECs to introduce new services on a streamlined basis. The Commission adopted price cap regulation in part to  X!4encourage price cap LECs to innovate,WR! = {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6790.W and to develop new services.<S! = {O^!'ԍ Id. at 6825.< Thus, to the extent that our new service rules impede the introduction of new services, they undermine one of the Commission's goals in adopting price cap regulation. The new service rules clearly delay the introduction of new services, because the Commission needs time to review Section 69.4(g) public interest showings, and price cap LECs need time to prepare the cost support showing"S,-(-(ZZ"  X4required by the new services test.T= yOy'ԍ Some parties assert that meeting the Section 69.4(g) public interest standard is as burdensome or almost  {OA'as burdensome as meeting the Section 1.3 waiver standard. See, e.g., PacTel Comments at 23; GTE Comments at 52; Ameritech Oct. 26, 1998, Comments at 17. Petitioners seeking waiver of the Commission's rules under  {O'Section 1.3 must show that deviation from the general rule "will serve the public interest." Northeast Cellular, 897 F.2d at 1166. Similarly, Section 69.4(g) requires petitioners to show that establishing the new rate element "would be in the public interest."  Moreover, it is not clear that the new services rules provide any benefits that justify such delay. By definition, a new service expands the range  X4of service options available to consumers.ZUD= {O 'ԍ LEC Price Cap Order, 5 FCC Rcd at 682425.Z Thus, the introduction of a new service does not by itself compel any access customer to reconfigure its access services and so cannot adversely affect any access customer. Because new services may benefit some customers, and existing customers can continue to purchase existing services if they find the new service  Xv4rate structure or rate level unattractive,zVv= yO'ԍ Bell Atlantic Comments at 46; BellSouth Comments at 37; U S West Comments at 34.z we conclude that it serves the public interest to permit price cap LECs to introduce new services on a streamlined basis.  X14%38. In addition, the Commission adopted Part 69 before the advent of competition. Now, the delay caused by the new service rules can place price cap LECs at a competitive disadvantage. Competitive LECs that have notice of a price cap LEC's Section 69.4(g) petition may be able to begin offering the service before the incumbent LEC has been granted permission to establish new rate elements for the new service, thus diminishing the  X 4incumbent's incentives to develop and offer new services.W  f = yO'ԍ Reviewing a public interest petition can be a long process. For example, the Commission needed almost a year to act on some recent petitions seeking permission to establish rate elements for Synchronous Optical  {Oe'Network (SONET)based services. See, e.g., Petition to Establish Part 69 Rate Elements to Offer Switched Access Rate Elements for SONETbased Service, DA 99513 (Com. Car. Bur., Competitive Pricing Div.,  {O'released March 17, 1999) (U S West Petition); Bell Atlantic Telephone Companies Establishment of New Rate Elements to Offer Enterprise SONET Service, DA 99514 (Com. Car. Bur., Competitive Pricing Div., rel. March 17, 1999); BellSouth Telecommunications, Inc. Part 69.4(g)(1) Public Interest Petition to Establish New Rate Elements for Switched Access Versions of BellSouth's Smartgate Service and BellSouth SPA Managed Shared Network, DA 982271 (Com. Car. Bur., Competitive Pricing Div., rel. Nov. 9, 1998). With the removal of this competitive disadvantage, price cap LECs will be better able to respond to competition from CLECs.  Xb4&39. Accordingly, we revise Section 69.4 of the Commission's rules to eliminate the public interest showing required by Section 69.4(g), and to enable price cap LECs to establish any new switched access rate element, in addition to the access rate elements currently required by Section 69.4. We also eliminate the new services test in Sections 61.49(f) and (g) for all new services except loopbased services. We are concerned that new services that":W,-(-(ZZ"  X4employ local loop facilitiesX= yOy'ԍ For purposes of this section, we define loopbased new services in accordance with the definitions that  {OA'govern jurisdictional separations. See 47 C.F.R. Part 36. "Loopbased" services are services that employ  {O 'Subcategory 1.3 facilities. See 47 C.F.R.  36.154 (Subcategory 1.3 facilities are "[s]ubscriber or common lines that are jointly used for local exchange service and exchange access for state and interstate interexchange services.")  raise cost allocation issues that the Commission has not yet  X4addressed. In the GTE DSL Reconsideration Order,Y|= yO'ԍ GTE Telephone Operating Cos. GTOC Transmittal No. 1148, CC Docket No. 9879, FCC No. 9941,  {O'Memorandum Opinion and Order (rel. February 26, 1999) (GTE DSL Reconsideration Order). for example, we referred to the FederalState Joint Board for consideration in Docket No. 80286 a petition for clarification and/or  X4reconsideration filed by NARUC.YZ= {OD 'ԍ GTE DSL Reconsideration Order, at  9.Y NARUC's petition sought clarification regarding the application of our Part 36 separations rules while the Joint Board considered the proper  X4allocation of loop costs associated with special access tariffs such as the GTE DSL tariff.>[h = {O'ԍ Id. at  7.> Noting that the separations and cost allocation issues NARUC raised were beyond the scope of the limited investigation in the tariff proceeding, we stated that we would address these  XJ4important issues in conjunction with the Joint Board.>\J = {O'ԍ Id. at  9.> Until these issues are resolved, it is not appropriate to permit price cap LECs to file tariffs for new loopbased services without satisfying the cost support requirements of the new services test.  X 4'40. Bell Atlantic argues that price cap LECs should be permitted to file tariffs for  X 4new services on one day's notice.] = {O'ԍ Bell Atlantic Comments at 47. See also USTA Oct. 26, 1998 Comments at 36 and Att. E. We conclude that Bell Atlantic's request is in the public interest. The current fifteenday notice period is no longer warranted. A primary focus of our review of new service tariffs is to determine whether the LEC complied with the new service test. By eliminating the new services test, we greatly reduce the need for reviewing LEC new service tariff filings. In addition, no customer is required to purchase the new service. Furthermore, a longer notice period would delay the introduction of new services and thus undercut the reasons for revising the price cap new service rules here.  X4(41. We are not persuaded by the arguments advanced by parties opposing further deregulation of new services offered by price cap LECs. Some IXCs are concerned that incumbent LECs might offer new services in a manner that would make them available only  X4to the LECs' own long distance affiliates.l^= yO%'ԍ AT&T Comments at 8182; MCI Comments at 63; Sprint Comments at 43.l These IXCs do not explain why or how streamlined introduction of new services would in any way affect the Commission's ability to"^,-(-(ZZ"  X4enforce section 202 of the Act, which prohibits unreasonable discrimination.=_= yOy'ԍ 47 U.S.C.  202.= Accordingly, we conclude that permitting LECs to offer new services on a streamlined basis does not increase the likelihood of unreasonable discrimination. IXCs may file complaints under  X4section 208 of the Act,=`X= yO'ԍ 47 U.S.C.  208.= should they believe that such unreasonable discrimination has occurred.  Xv4)42. AT&T notes that the Commission made it easier for incumbent price cap LECs to  X_4introduce new services in the Price Cap Third Report and Order, and it argues that no further  XJ4deregulation is necessary to encourage LECs to introduce new services.>aJ= yO 'ԍ AT&T Comments at 81.> Regardless of LECs' incentives to introduce new services, we conclude above that the benefits of our current new service rules do not justify the delay caused by those rules, and we reject AT&T's argument. Elimination of the new services rules serves the Commission's goals of streamlining our regulations, removing unnecessary regulatory barriers, and increasing consumer choice.  X 4*43. We will not, however, permit price cap LECs to offer new services outside of  X4price cap regulation, as parties suggest.bx= {O'ԍ See, e.g., Bell Atlantic ex parte statement of April 27, 1998, at 34 (suggesting immediate removal of new services from price cap regulation). MCI argues that offering new services outside of price cap regulation will encourage incumbent LECs to create "new" services that differ little  Xd4from an existing service.@cd= yO'ԍ MCI Comments at 6263.@ Specifically, MCI theorizes that, as access customers shift to the new service, the demand weight placed on the existing service in calculating the actual price index (API) would decrease, thus enabling the LEC to raise the price of the existing service. Subsequently, according to MCI, the LEC could increase the new service price and leave  X4access customers with no lowerpriced alternatives.@db = yO'ԍ MCI Comments at 6263.@ We agree with MCI that the introduction of new services outside of price caps ultimately might enable price cap LECs to raise rates for both new services and existing services to unreasonable levels. In contrast to  X4the conditions we adopt elsewhere in this Order for removal of services from price caps,Re = {Of#'ԍ See, e.g., Section VI infra.R we do not predicate the new services relief we adopt here upon any showing of competition for" e,-(-(ZZ" the services at issue, thus we are not convinced by price cap LEC arguments that rates, terms,  X4and conditions for new services will be constrained by market forces.f"= {Ob'ԍ See, e.g., Bell Atlantic ex parte statement of April 27, 1998, at 34. In Section VI below, we establish a framework for granting price cap LECs greater pricing flexibility, including the ability to offer services pursuant to contract tariff and to remove services from price caps, if they satisfy certain competitive showings. In that section, we also adopt a procedure pursuant to which we will grant these types of flexibilities for new services.  X4+44. At this time, we revise only the new service requirements applicable to price cap LECs, not rateofreturn LECs, for several reasons. First, we have recently granted a petition to forbear from enforcing Part 69 rate structure requirements with respect to new service  Xv4tariffs filed by a considerable number of rateofreturn LECs, i.e., those serving more than  Xa450,000 access lines, but less than two percent of the nation's access lines.Lga= {O 'ԍ See ITTA Forbearance Order. L In addition, we note that the new services test is applicable only to price cap LECs, and so is irrelevant for rateofreturn LECs. Moreover, the Commission created a separate docket to consider the  X 4access reform issues specific to rateofreturn carriers.dh D= {O'ԍ Rate of Return Access Reform NPRM, 13 FCC Rcd 14238.d In that proceeding, the Commission invited comment on revising the new service requirements applicable to rateofreturn  X 4LECs,@i = {Ou'ԍ Id. at 1426970.@ and we will address those issues on the basis of the record in that docket. Finally, we relax the new service requirements for price cap LECs in part to remove a competitive disadvantage from price cap LECs, so that they can better respond to developing competition from CLECs. Because rateofreturn LECs do not face competition to the same extent as price cap LECs, there is less need to remove any competitive disadvantage they face at this time. ='u -J:\ACCESS.REF\AR1999\ITEM\NEWSERV.ORD- =  X6'>'u .J:\ACCESS.REF\AR1999\ITEM\IXBASKET.ORD. >  X _IV. REMOVAL OF INTERSTATE INTER AND INTRALATA TOLL SERVICES  X' FROM PRICE CAP REGULATION \  X' A. Introduction ,45. The Commission currently regulates in the interexchange basket the rates that  X4price _cap LECs charge for particular interstate interexchange services.j$h = {O"'ԍ See 47 C.F.R.  61.42(d)(4) (creating price cap LEC basket for "interstate interexchange services that are  {O#'not classified as access services for the purpose of part 69" of the Commission's rules). See also 47 C.F.R.  61.45(b) (explaining how price cap LECs must adjust their price cap indices for various baskets of price cap services, including the interstate interexchange basket). Among the services in this basket are certain interstate interLATA toll services, called "corridor" services, and"T j,-(-(ZZ"  X4interstate intraLATA toll services.k= {Oy'ԍ See LEC Price Cap Order, 5 FCC Rcd at 6811, 6812. For explanations of "LATA," as well as corridor and interstate intraLATA toll services, see Section IV.B. We conclude that price cap LECs' corridor and interstate intraLATA toll services will face sufficient competition upon full implementation of inter  X4and intraLATA toll dialing parityl"= {O'ԍ See 47 C.F.R.  51.205, 51.209, 51.211, 51.213; Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 9698, Second Report and Order and Memorandum  {O7'Opinion and Order, 11 FCC Rcd 19392 (1996) (Dialing Parity Order) (implementing dialing parity requirements  {O 'of 47 U.S.C.  251), vacated in part, California v. FCC, 124 F.3d 934 (8th Cir. 1997), rev'd, AT&T v. Iowa  {O 'Utils. Bd., 119 S.Ct. 721 (1999); Order, 14 FCC Rcd 5263 (1999) (Dialing Parity Extension Order). to preclude the price cap LECs from exploiting over a sustained period any individual market power they may have with respect to these services. Consequently, once a price cap LEC has implemented inter and intraLATA toll dialing parity everywhere it provides local exchange services at the holding company level, we will allow the price cap LEC to remove all of its corridor and interstate intraLATA toll services from  X_4price cap regulation,m_= yO'ԍ Thus, a BOC must provide inter and intraLATA toll dialing parity throughout its region before it may remove these services from price cap regulation. and subsequently to file tariffs for these services on one day's notice  XH4and without cost support.MnH2 = yO+'ԍ Thus, this Order addresses much of the relief Bell Atlantic sought in its 1995 petition to deregulate its  {O'provision of corridor service. See Bell Atlantic Petition for Regulation as a Nondominant Provider of Interstate InterLATA Corridor Service, Public Notice, 10 FCC Rcd 9873 (1995). We will address the provision of interstate intraLATA toll services by rateofreturn LECs in conjunction with our consideration of access reform  {OM'for those carriers. See Rate of Return Access Reform Notice.M Allowing price cap LECs to do so removes unnecessary regulatory constraints and enhances the operation of competitive forces where they provide  X 4corridor and interstate intraLATA toll services.o$ = {O'ԍ Compare Competition in the Interstate Interexchange Marketplace, CC Docket No. 90132, Report and  {O{'Order, 6 FCC Rcd 5880, 5881 (1991) (Interexchange Competition Order) (lifting certain tariff regulation of AT&T business services on the grounds that competition for those services was "sufficiently effective," and concluding that the regulatory relief would benefit consumers).  X ' B. Background  X 4-46. The 1982 AT&T consent decree divided the former Bell territory into geographic  X 4units called "Local Access and Transport Areas," or "LATAs."p = {O*"'ԍ See United States v. Western Elec. Co., 569 F. Supp. 990, 99394 (D.D.C. 1983) (Western Elec. Co. I).  {O"'See also 47 U.S.C. 153(25) (defining "LATA" as "a contiguous geographic area 8 established before the date of enactment of the Telecommunications Act of 1996 by a Bell operating company such that no exchange area includes points within more than 1 metropolitan statistical area, consolidated metropolitan statistical area, or State, except as expressly permitted under the AT&T Consent Decree," or as created or modified by a BOC after the date of enactment and approved by the Commission). Most states have multiple LATAs, and LATA boundaries generally are contained within a single state. Some LATAs,"Np,-(-(ZZ" however, cross state lines. With certain exceptions, the consent decree prohibited the BOCs  X4from transporting telecommunications traffic between LATAs (interLATA services), but  X4permitted them to carry traffic within a LATA (intraLATA services).\q= {OM'ԍ Western Elec. Co. I, 569 F. Supp. at 99394.\ Thus, at the time of divestiture, IXCs were permitted to transport interLATA traffic but BOCs generally were  X4not.3rZ= {O'ԍ Id.3 Telephone calls that do not leave customers' immediate local calling areas are intraLATA local calls and are subject only to the monthly rate that customers pay for local services. Telephone calls to destinations outside of the local calling area are toll calls subject to an additional charge. A LATA often encompasses more than one immediate local calling area, so intraLATA calls can be either local or toll calls.  X 4.47. Despite the consent decree's provisions prohibiting BOCs from providing interLATA services, it made an exception for certain interstate interLATA services, called  X 4corridor services.cs = {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6811, 6846 n.252.c Corridor services are toll services that carry traffic from five counties in Northern New Jersey into New York City, from Philadelphia and its suburbs into three  X 4counties in New Jersey, and from those three counties back into the Philadelphia area.t ~= {O'ԍ See Western Elec. Co. I, 569 F. Supp. at 1002 n.54, 10181024; United States v. Western Elec. Co., 569  {O'F. Supp. 1057, 1107 (D.D.C. 1983) (Western Elec. Co. II). At the time of the consent decree, these areas were in the Bell Atlantic and NYNEX regions. These companies have since merged.  Xf4/48. BOCs and independent incumbent LECs also provide interstate intraLATA toll services. Interstate intraLATA toll calls are calls that leave an immediate local calling area and cross state lines but remain within a single LATA, such as some calls from Chicago, Illinois, to Gary, Indiana. The BOCs and independent incumbent LECs provide corridor and interstate intraLATA toll services in competition with the longdistance services of AT&T, Sprint, MCI, and many other longdistance companies.  X4049. Because the Commission has treated incumbent LECs as having market power in the provision of most services within their service areas, the rates that incumbent LECs may charge for corridor and interstate intraLATA toll services currently are subject to dominant  X4carrier regulation.*uZ= {O #'ԍ See, e.g., Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87313, Order on Reconsideration, 6 FCC Rcd 2637, 2681 (1991) (observing that price cap LECs are treated as dominant providers of services in the interexchange basket).* Dominant carriers are subject to price cap or rateofreturn regulation, must file tariffs on a minimum of seven days' notice and often more and usually with"i u,-(-(ZZ"  X4cost support data.-vZ= {Oy'ԍ See 47 U.S.C.  203(b), 204(a)(3); 47 C.F.R.  61.38, 61.41, 61.58; Implementation of Section 402(b)(1)(A) of the Telecommunications Act of 1996, CC Docket No. 96187, Report and Order, 12 FCC Rcd 2170, 2182, 2188, 219192, 220203 (1997).- Nondominant carriers, on the other hand, are not subject to rate regulation and may file tariffs on one day's notice, without cost support, that are presumed  X4lawful.w= yOm'ԍ 47 C.F.R.  1.773(a)(ii), 61.24(c), 61.38(a); Tariff Filing Requirements for Nondominant Carriers, CC Docket No. 9336, Order, 10 FCC Rcd 13653, 1365354 (1995).  X4150. To spur competition, section 251(b)(3) of the Act requires LECs "to provide dialing parity to competing providers of telephone exchange service and telephone toll  Xv4service."CxvB= yOi 'ԍ 47 U.S.C.  251(b)(3).C "Dialing parity" exists when a LEC customer can route telephone calls to at least  X_4one carrier other than that LEC without having to dial an access code.y_= {O'ԍ See 47 U.S.C.  153(15) (defining "dialing parity"); 47 C.F.R.  51.5 (defining "dialing parity"); Dialing  {O'Parity Order, 11 FCC Rcd at 1939919400, 1940506, 19411. Pursuant to section 251(b)(3), the Commission issued an order in August 1996 requiring LECs to implement  X14inter and intraLATA toll dialing parity by February 8, 1999.z1. = {O'ԍ Dialing Parity Order, 11 FCC Rcd at 19400, 19401, 1940910, 19412, 1942426.  See 47 C.F.R.  51.205, 51.209. The Commission concluded that a LEC must meet those obligations by allowing its customers to presubscribe to at least one carrier other than the LEC for intraLATA toll services, and to at least one carrier other  X 4than the LEC for interLATA toll services.{J = {O%'ԍ Dialing Parity Order, 11 FCC Rcd at 19400, 19412, 19414.  See 47 C.F.R.  51.209. Presubscription is  {O'a process by which a customer selects a carrier to which certain types of calls are routed automatically. See 47 C.F.R.  51.209(b). Pursuant to the Commission's order, customers in states without LATAs such as Alaska and Hawaii must be able to presubscribe to one carrier for intrastate toll calls and the same or another carrier  {OI'for interstate toll calls.  Dialing Parity Order, 11 FCC Rcd at 19400, 19414. States that have one or more LATAs may modify the dialing parity requirement so that, like noLATA states, customers can presubscribe to  {O'one carrier for intrastate toll calls and to the same or another carrier for interstate toll calls. Dialing Parity  {O'Order, 11 FCC Rcd at 19400 & n.16, 19414. See 47 C.F.R.  51.209(d).  X 4251. On August 22, 1997, the United States Court of Appeals for the Eighth Circuit vacated, on jurisdictional grounds, the Commission's intraLATA dialing parity rules as applied  X4to intrastate intraLATA toll and interstate intraLATA local calls.S|= yO#'ԍ California v. FCC, 124 F.3d at 934 & n.6.S The United States  Xy4Supreme Court, however, reversed the Eighth Circuit decision on January 25, 1999.W}y*= yOT&'ԍ AT&T v. Iowa Utils. Bd., 119 S. Ct. 721, 732.W Following the Supreme Court decision, the Commission issued an order on March 23, 1999,"b},-(-(ZZ" in which it observed that intraLATA toll dialing parity had been implemented in most  X4states.r~= {Ob'ԍ See Dialing Parity Extension Order, 14 FCC Rcd at 5266 & nn.2021.r Nonetheless, the Commission concluded in light of the intervening Eighth Circuit and Supreme Court decisions that a limited waiver of the intraLATA toll dialing parity  X4deadlines and a revised implementation schedule were warranted.SZ= {O'ԍ Id. at 5265; 47 C.F.R.  51.211.S Under the revised schedule, almost all LECs will have implemented inter and intraLATA toll dialing parity by  X4September 6, 1999.= yO* 'ԍ Under the Commission's revised implementation schedule for toll dialing parity, the implementation deadline varies among carriers, depending upon whether and when they submitted implementation plans to their  {O 'relevant state commissions, and whether and when the state commissions took action. See Dialing Parity  {O 'Extension Order, 14 FCC Rcd at 5265, 526768; 47 C.F.R.  51.211. Most LECs should have implemented both  {ON 'intra and interLATA toll dialing parity by September 6, 1999. See Dialing Parity Extension Order, 14 FCC Rcd at 5265, 526768; 47 C.F.R.  51.211.  X_4352. Ameritech and USTA filed comments in January 1997, in response to the Access  XJ4Charge Reform NPRM, asking the Commission to cease price cap regulation of corridor and  X54interstate intraLATA toll services.f5j = {OP'ԍ See Ameritech Comments at 35; USTA Comments at 35, 38.f Specifically, Ameritech proposed that the Commission remove these services from price cap regulation once toll dialing parity becomes available  X 4because toll dialing parity will eliminate any market power BOCs might have had.C = yO'ԍ Ameritech Comments at 35.C Ameritech repeated its proposal regarding corridor and interstate intraLATA toll services in a  X 41998 ex parte letter.g = {O'ԍ See Ameritech ex parte statement of June 5, 1998.g Bell Atlantic filed a similar letter.l = {O'ԍ See Bell Atlantic ex parte statement of Apr. 27, 1998.l The Commission sought  X 4comment on the Ameritech and Bell Atlantic proposals in an October 1998 Public Notice.] = {O%'ԍ October 5 Public Notice, 13 FCC Rcd at 21523.]  X' vC. Discussion  Xh'X 1. Price Cap LEC Ability to Exploit Market Power (#  X:4453. A dominant carrier is "[a] carrier found by the Commission to have market power  X#4v(i.e., power to control prices)."A#B= yO&'ԍ 47 C.F.R.  61.3(o).A "Market power" is "the ability to raise prices by restricting output," or "to raise and maintain price above the competitive level without driving away so",-(-(ZZ6"  X4many customers as to make the increase unprofitable."= yOy'ԍ Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Therefor, CC Docket No. 79252, Fourth Report and Order, 95 FCC.2d 554, 558 (1983). Pursuant to the framework outlined  X4in the Dominant/NonDominant Order, the Commission determines whether a carrier is dominant or nondominant by: 1) delineating the relevant product and geographic markets for examination of market power, 2) identifying firms that are current or potential suppliers in that market, and 3) determining whether the carrier under evaluation possesses individual  X4market power in that market.& = {O` 'ԍ See Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area, CC Docket No. 96149, Second Report and Order in CC Docket No. 96149 and Third Report  {O 'and Order in CC Docket No. 9661, 12 FCC Rcd 15756, 15775, 15776, 15782 (1997) (Dominant/NonDominant  {O 'Order). As a result of the competition that has developed since the consent decree and the Telecommunications Act of 1996, price cap LECs may now be nondominant in the provision of corridor and interstate intraLATA toll services, particularly in light of the availability of inter and intraLATA toll dialing parity. Although the record in  X34this proceeding is insufficient for us to conduct the analysis outlined in the Dominant/Non X 4Dominant Order, we do conclude that developments in the markets for interexchange services make it unlikely that price cap LECs will be able to exploit over a sustained period any individual market power in their provision of corridor and interstate intraLATA toll  X 4services.LZ = {O'ԍ Compare Interexchange Competition Order, 6 FCC Rcd at 5882 (concluding that detailed advance regulatory scrutiny of most of AT&T's business services was no longer necessary based on finding that market forces made it unlikely that AT&T would file unlawful tariffs for those services).L  X 4554. First, there currently exist a number of competitive alternatives to provision of these services by price cap LECs. Nondominant IXCs such as AT&T, MCI, and Sprint already provide longdistance services in the price cap LECs' service areas. IXCs and competitive LECs not currently providing such services could do so quickly, either over their own facilities or by reselling the services of IXCs already in the market. Most customers of domestic interexchange services are sensitive to changes in price and are willing to shift their  X#4traffic if a carrier raises its prices.k#0 = {O'ԍ See Dominant/NonDominant Order, 12 FCC Rcd at 15811.k Thus, nondominant IXCs and competitive LECs can  X 4compete with price cap LEC provision of corridor and interstate intraLATA toll services.  = {O!'ԍ See, e.g., Ameritech ex parte statement of July 26, 1999 (providing copies of web pages marketing competing services provided by AT&T, Sprint, Qwest, and MCI). Inter and intraLATA toll dialing parity, which is or shortly will be available throughout  X4the country pursuant to the March 23, 1999, Dialing Parity Extension Order,= {O%'ԍ See Dialing Parity Extension Order, 14 FCC Rcd at 5265, 526768; 47 C.F.R.  51.211. will facilitate",-(-(ZZ{"  X4such competition.= {Oy'ԍ See, e.g., Ameritech ex parte statement of July 26, 1999 (stating percent of lines for interstate intraLATA toll service Ameritech has lost in each of its inregion states, ranging from 9 percent of residential and 12 percent of business since implementing dialing parity in Indiana in February 1999, to 31 percent of residential  {O'and 36 percent of business since implementing dialing parity in Wisconsin in September 1996). See also id. (stating that Ameritech's monthly intraLATA minutes of use have dropped 26 percent from 34,143 million in January 1999 to 25,248 million in February 1999). The existence of these competitive alternatives and the availability of toll dialing parity will limit the ability of price cap LECs to exploit over a sustained period any individual market power in their provision of corridor and interstate intraLATA toll services.  X4655. Second, some of the larger IXCs have nationwide brand identification in connection with longdistance services. This brand identification, and an IXC's ability to offer customers longdistance services that span the nation, rather than just in discrete geographies, should help offset any advantages a price cap LEC might enjoy based on its brand  X14identification and possible integration efficiencies in the provision of local services.l1D= {O&'ԍ Compare Dominant/NonDominant Order, 12 FCC Rcd at 1581112.l Moreover, as the Commission has noted in the past: X[a]n incumbent firm in virtually any market will have certain advantages -- including, perhaps, resource advantages, scale economies, established relationships with suppliers, ready access to capital, etc. Such advantages do not, however mean that these markets are not competitive, nor do they mean that it is appropriate for government regulators to deny the incumbent the efficiencies its size confers in order to make it easier for others to compete. Indeed, the competitive process itself is largely about trying to develop one's own advantages, and all firms need not be equal in all respects for this process  X44to work.c4= {O'ԍ Interexchange Competition Order, 6 FCC Rcd at 5892.c  The IXCs' nationwide brand identification and larger service areas will limit the ability of price cap LECs to exploit over a sustained period any individual market power in their provision of corridor and interstate intraLATA toll services.  X' 2. Removal of Services from Price Caps and Relaxation of Tariff Requirements  X|4756. In light of our determination that price cap LECs will be unable to exploit any individual market power over a sustained period in their provision of corridor and interstate intraLATA toll services, we will allow a price cap LEC to remove those services from price"Nh ,-(-(ZZ["  X4cap regulation on fifteen days notice,}"= yOy'ԍ When price cap LECs remove their corridor and interstate intraLATA toll services from their interexchange baskets, we will not require them to recalibrate their interexchange basket PCI. The interexchange  {O 'basket does not have service categories, thus obviating the need for an interexchange PCI recalibration. See LEC  {O'Price Cap Order, 5 FCC Rcd at 6811 (concluding "that the small amount of interexchange service subject to price cap regulation does not warrant the imposition of additional service categories"). When the Commission  {Oe'allowed AT&T to remove certain services from price cap regulation, it did require such recalibration. See Competition in the Interstate Interexchange Marketplace, CC Docket No. 90132, Second Report and Order, 8 FCC Rcd 3668, 3671 (1993) (removing all services except 800 directory assistance from Basket 2)  {O'(Interexchange Competition Second Report and Order); Motion of AT&T Corp. to be Reclassified as a Non {O 'Dominant Carrier, FCC 95427, Order, 11 FCC Rcd 3271 (1995) (AT&T NonDominance Order); Re {OS 'initialization of Indexes, Memorandum Opinion and Order, 11 FCC Rcd 1201 (Com. Car. Bur. 1995) (AT&T  {O 'NonDominant Reinitialization Order) (removing services except international services from Basket 1). In the AT&T cases, all the services except one service category were removed from the basket in question. Because the service band indices (SBIs) were designed to limit crosssubsidization between different types of services within a basket, and there is no danger of crosssubsidization when there is only one service category remaining in the basket, the Commission recalibrated AT&T's PCIs and APIs to eliminate the SBI for the remaining service  {O'category without affecting the headroom AT&T had previously. Interexchange Competition Second Report and  {O'Order, 8 FCC Rcd at 3671; AT&T NonDominant Reinitialization Order, 11 FCC Rcd at 1201.} and subsequently to file tariffs for those services on one day's notice without cost support and with a presumption of lawfulness, once it has implemented inter and intraLATA toll dialing parity everywhere it provides local exchange  X4services at the holding company level.F= {O'ԍ That date will vary among carriers, but in most cases will be by September 6, 1999. See Dialing Parity  {O'Extension Order, 14 FCC Rcd at 5265, 526768; 47 C.F.R.  51.211. We will not allow a price cap LEC to remove these services from price cap regulation in some states while it remains subject to price cap regulation for the provision of these services in other states. If we were to do so, the carrier might have an incentive to  yOB'shift costs to the services subject to price cap regulation to qualify for the protections of the lowend adjustment.  {O 'Cf. LEC Price Cap Order, 5 FCC Rcd at 6819 (describing "allornothing" rule, under which LEC seeking to participate in price cap regulation must convert all its cost affiliates to price cap regulation to remove incentive to shift costs from a price cap affiliate to a rateofreturn affiliate). The Commission retains, however, the ability to reimpose some or all of these regulations on one or more of the price cap LECs should this  X4prove necessary in the future.f = {O'ԍ Cf. Dominant/NonDominant Order, 12 FCC Rcd at 15834 (concluding that the Commission's finding that price cap LECs are nondominant in the provision of certain domestic, interstate, interexchange services did not prevent it from reimposing such regulation on certain price cap LECs, if necessary). We note that our finding that price cap LECs will be unable to exploit any individual market power over a sustained period in their provision of corridor and interstate intraLATA toll services does not place the price cap LECs in the same position as non-dominant providers of interstate interexchange services. We previously relieved those carriers of  {O!'the obligation to file certain tariffs altogether, although that order is currently subject to a stay. See Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket No. 9661, Second Report and Order, 11  {OB#'FCC Rcd 20730 (1996); recon., 12 FCC Rcd 15014 (1997); stayed sub nom. MCI Telecommunications Corp. v. FCC, No. 961459 (D.C. Cir. 1997). We have made no such finding of nondominance here. Thus, price cap LECs are still subject to tariff filing requirement including those pertaining to electronic filing even once they have removed their corridor and interstate intraLATA toll services from price cap regulation. The price cap LECs' provision of these services is also" ,-(-(ZZ" subject to Title II of the Act, enabling the Commission to continue to ensure that the rates are  X4just, reasonable, and nondiscriminatory.r= {Ob'ԍ See 47 U.S.C.  201209.  Accord USTA Comments at 39.r  X4857. Because price cap LECs will be unable to exploit any individual market power over a sustained period in their provision of corridor and interstate intraLATA toll services, we find that the burdens imposed by price cap regulation of those services outweigh the little  Xv4benefit such regulation might provide, especially considering the relatively de minimis nature  Xa4of corridor and interstate intraLATA toll traffic.JaZ= {Ol 'ԍ See Motion of AT&T Corp. to be Declared NonDominant for International Service, 11 FCC Rcd 17963,  {O6 '17999 (1996) (stating that the economic cost of dominant carrier regulation for routes with de minimis traffic can  {O 'impede rather than promote competitive market conditions). See also LEC Price Cap Order, 5 FCC Rcd at 6811 (concluding "that the small amount of interexchange service subject to price cap regulation does not warrant the imposition of additional service categories").J We also find that the operation of market  XJ4forces should make it unlikely that they will file unlawful tariffs.GZJ= {O 'ԍ Compare Interexchange Competition Order, 6 FCC Rcd at 5882, 5894 (concluding that detailed advance scrutiny of most of AT&T's business services was no longer necessary based on finding that market forces made it unlikely that AT&T would file unlawful tariffs for those services).G Thus, upon careful consideration of the benefits and burdens of our present regulations, we conclude that more limited advance review of price cap LECs' corridor and interstate intraLATA toll service filings, when combined with mechanisms such as the complaint process and our investigation  X 4authority, is in the public interest. 2 = {O'ԍ Compare id. at 588182, 5895 (concluding "that the costs and burdens associated with detailed advance tariff review procedures for [longdistance business] services outweigh their benefits to the public"). We will, therefore, allow price cap LECs to file tariffs for those services on one day's notice and without cost support. We do so under the authority of section 203(b)(2), which allows the Commission, "in its discretion and for good cause shown, [to] modify any requirement made by or under the authority of this section either in  X4particular instances or by general order applicable to special circumstances or conditions."" = {O'ԍ 47 U.S.C.  203(b)(2). See also Interexchange Competition Order, 6 FCC Rcd at 589697 & nn. 143145 (concluding that section 203(B)(2) authorized the Commission to change notice and cost support requirements for AT&T's business services in light of the "changed competitive situation") (quoting Southern Motor Carriers Rate Conference v. United States, 773 F.2d 1561, 1569, 1570 (11th Cir. 1985)). The growth in competition for longdistance services, and the availability of toll dialing parity, present just such special circumstances with regard to price cap LEC provision of corridor and interstate intraLATA toll services. >'u .J:\ACCESS.REF\AR1999\ITEM\IXBASKET.ORD. > "v,-(-(ZZ"Ԍ X'>'u .J:\ACCESS.REF\AR1999\ITEM\GEODVGTR.ORD. >ml V. GvEOGRAPHIC DEAVERAGING OF RATES FOR TRUNKING BASKET  X'_SERVICES Đ\  X' A. Background 958. Ovur Part 69 rules generally require that an incumbent LEC charge rates for access  Xv4elements that are geographically averaged across each of its study areas. v= yO'ԍ 47 C.F.R.  69.3(e)(7). A study area is a geographical segment of a carrier's telephone operations. Generally, a study area corresponds to a carrier's entire service territory within a state. Thus, carriers operating in more than one state typically have one study area for each state, and carriers operating in a single state typically have a single study area. Carriers perform jurisdictional separations at the study area level. For jurisdictional separations purposes, the Commission adopted a rule freezing study area boundaries effective November 15, 1984. Part 36 of the Commission's Rules, 47 C.F.R., Part 36, Appendix-Glossary, definition of  {O '"Study Area." See MTS and WATS Market Structure, Amendment of Part 67 of the Commission's Rules and Establishment of a Joint Board, CC Docket Nos. 78-72 and 80-286, 49 Fed. Reg. 48325 (Dec. 12, 1984), adopted by the Commission, 50 Fed. Reg. 939 (Jan. 8, 1985). The Commission has developed a system of density pricing zones, however, that permits an incumbent LEC to deaverage geographically its rates for special access and switched transport services if that  X14LEC meets certain threshold interconnection requirements.\1= {O|'ԍ 47 C.F.R.  69.123. See also Special Access Expanded Interconnection Order, 7 FCC Rcd at 7454-56. Section 69.123(a) of the Commission's rules allows LECs to establish traffic density pricing zones in study areas  {O'in which at least one interconnector has taken a crossconnect. See 47 C.F.R.  69.123(a). The density zone pricing rules permit incumbent LECs to establish a "reasonable" number of zones, but the Commission has noted in the past that "LECs seeking to establish more than three zones shall be subject to increased scrutiny and must carefully justify the number of zones proposed in their density  X 4pricing zone plan."u = {OD'ԍ Special Access Expanded Interconnection Order, 7 FCC Rcd 7454, n.413.u In addition, incumbent LECs must show that density zones reflect cost characteristics such as traffic density or other measures of traffic passing through particular  X 4central offices.D P = {O'ԍ Id., 7 FCC Rcd 7455.D The Commission sought comment in the Access Reform NPRM on whether  X4to grant incumbent LECs greater flexibility to deaverage access charges.L= {O%'ԍ Access Reform NPRM at 21433.L  Xd' B. Discussion :59. In this Order, we amend Section 69.123 of the Commission's rules to permit incumbent LECs to deaverage geographically their rates for access services in the trunking  X4basket.t= {O-&'ԍ We discuss deaveraging of the common line and trafficsensitive baskets in Section VIII.A, infra. We will permit price cap incumbent LECs to define both the scope and number of zones, provided that each zone, except the highestcost zone, accounts for at least 15 percent" ,-(-(ZZ" of the incumbent's trunking basket revenues in the study area, and we no longer require LECs to demonstrate that the zones reflect cost characteristics. Granting incumbent LECs more flexibility to deaverage these rates enhances the efficiency of the market for those services by allowing prices to be tailored more easily and accurately to reflect costs and, therefore, promotes competition in both urban and rural areas. ;60. Since 1992, the Commission has permitted LECs to deaverage certain rates by geographic zone because of the concern that averaged rates might create a pricing umbrella  XH4for competitors that would deprive customers of the benefits of more vigorous competition.H= {O 'ԍ Special Access Expanded Interconnection Order, 7 FCC Rcd at 7454; Switched Transport Expanded  {O 'Interconnection Order, 8 FCC Rcd at 7426. Adoption of this policy reflected the conclusion that non-cost-based, geographically-averaged  X 4access rates could not be maintained in a market subject to increasing competition. $= {O 'ԍ See, e.g., Special Access Expanded Interconnection Order, 7 FCC Rcd at 7454; Switched Transport  {O'Expanded Interconnection Order, 8 FCC Rcd 7374. Deaveraged rates promote efficiency by allowing an incumbent LEC to compete for customers when it is, in fact, the lowest cost service provider and by removing support flows  X 4to the incumbent LEC's highercost services. = {O'ԍ Special Access Expanded Interconnection Order, 7 FCC Rcd at 7454; Switched Transport Expanded  {O'Interconnection Order, 8 FCC Rcd at 7426. Incumbent LECs argue, however, that our current rules fail to achieve these goals for a variety of reasons. First, they argue that the "increased scrutiny" applicable to the creation of more than three pricing zones per study area  X4discourages LECs from offering such plans."= {O'ԍ See, e.g., SBC Nov. 9 Reply at 23. Few, if any, price cap incumbent LECs have proposed to offer density zone plans with more than three density zones in a study area. Sprint argues that carriers serving a variety of urban, suburban, and rural areas require more than three density zones to price their services accurately relative to cost. Sprint Nov. 9 Comments at 14.  As a result, incumbent LECs argue, the zones  Xy4in most zone density pricing plans are too large to be of practical value.ey = {O'ԍ See, e.g., Bell Atlantic Nov. 9 Reply at 17-18.e Finally, incumbent LECs argue that traffic density is not the most accurate means of determining appropriate  XK4geographic boundaries for deaveraging.KX = {OT 'ԍ See, e.g., Ameritech Nov. 9 Reply at 9; Bell Atlantic Nov. 9 Reply at 18. Ameritech, for example, argues that, in cases where it charges identical rates in two particular zones, competitors sometimes choose to enter in the less-dense zone, suggesting that the spread between actual cost and Ameritech's price is greater there than in a denser zone and, thus, that high traffic density does not necessarily result in lower costs. Ameritech Nov. 9 Reply at 9. <61. We agree with incumbent LECs that traffic density is not the optimal, or even an accurate, method of determining cost-based pricing zones and that LEC-designed zones are"! ,-(-(ZZ"  X4more likely to lead to efficient pricing that reflects underlying cost characteristics."= {Oy'ԍ See, e.g., Ameritech Nov. 9 Reply at 9; SBC Nov. 9 Reply at 23. For example, Ameritech argues that the average length of transport facilities and the varying means by which transport facilities are deployed (aerial cables, buried cables, cable in conduits, etc.), are also significant cost drivers. Ameritech Reply in Ameritech Chicago Forbearance Proceeding, CC Docket No. 9965, at Att. A, 16-17. As the  X4Commission observed in the Access Reform NPRM, averaging across large geographic areas distorts the operation of markets in high-cost areas because it requires incumbent LECs to offer services in those areas at prices substantially lower than their costs of providing those  X4services.b= {O 'ԍ See Access Reform NPRM, 11 FCC Rcd at 21434.b Prices that are below cost reduce the incentives for entry by firms that could  X4provide the services as efficiently, or more efficiently, than the incumbent LEC.GD= {O 'ԍ See id. at 21434.G Similarly, discrepancies between price and cost may create incentives for carriers to enter low-cost areas  Xa4even if their cost of providing service is actually higher than that of the incumbent LEC.=a= {O'ԍ See id.=  X34=62. Given these observations, if we grant incumbent LECs practical flexibility to choose the number of zones and the criteria for establishing zone boundaries, they are more likely to establish reasonable and efficient pricing zones than if their flexibility is more constrained. Therefore, in this Order, we amend our rules to eliminate all competitive prerequisites for the deaveraging of trunking basket service rates and to permit price cap incumbent LECs to define zone pricing plans in any manner they wish, so long as each zone, except the highestcost zone, accounts for at least 15 percent of the incumbent LEC's trunking basket revenues in the study area. This limitation ensures that incumbent LECs cannot define zones that are, for all practical purposes, specific to particular customers. As we explain in Section VI, below, we will not permit incumbent LECs to offer customer-specific contract tariffs until they satisfy certain triggers related to the development of competition, and we are concerned that, absent a rule establishing the minimum size of a zone, incumbents might circumvent this requirement by using zone pricing as a substitute for contract tariffs. At the same time, the limit we adopt permits a maximum of seven zones, which we believe should provide the ability to adjust to any likely variation in cost conditions. We note that no  X4incumbent LEC has requested more than five zones.h = {O 'ԍ Sprint, for instance, has suggested a minimum of four zones. Sprint ex parte statement of July 12, 1999. Our requirement that a zone, except the highestcost zone, account for at least 15 percent of trunking revenues within a study area ensures that any lower rates resulting from deaveraging are enjoyed by a range of customers. Section 69.123(c)(2) of our rules, which requires transport between points located in two different zones to be priced in accordance with the higher-priced zone, also limits incumbent LECs' ability to draw pricing zones too narrowly. "P" ,-(-(ZZ"Ԍ X4>63. The permissive geographic deaveraging we discuss here applies to rates for all  X4services in the trunking basket to which density zone pricing currently applies, i.e., rates for all services except for the transport interconnection charge (TIC), so long as the same zones  X4are used for all transport elements.= yO6'ԍ The Commission previously has imposed this requirement on geographically-deaveraged transport  {O'services. See Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 7428. We will continue to prohibit geographic deaveraging of  X4the TIC so as not to disrupt the scheduled phase-out of that charge.y"= {Oy'ԍ See Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 7427. The TIC was intended as a temporary measure to ameliorate potential negative effects on incumbent LECs and small IXCs of transport  {O 'rate structure changes made in 1992. See Access Reform NPRM, 11 FCC Rcd at 21402-03. We are in the process of eliminating the TIC through a combination of targeted reductions and reallocation to other access  {O 'charge rate elements. See id.; Access Reform First Report and Order, 12 FCC Rcd at 16073-86.y In addition, we relax the constraints on annual price increases within zones that are contained in Sections 69.123(e)(2) and 61.47(e) of our rules by raising the limit on permitted price increases within  Xa4zones from five percent to 15 percent.a= yO'ԍ Section 61.47(e) states, in pertinent part, "Each [pricing] band [for each service category and subcategory within a basket] shall limit the pricing flexibility of the service category, subcategory, or density zone, as reflected in the SBI, to an annual increase of [five percent]." 47 C.F.R.  61.47(e). In this Order, although we  {OB'maintain a fivepercent limit on annual price increases for service category or subcategory, on a studyareawide  {O 'basis, we add Section 61.47(f) to our rules, which permits price cap LECs to raise prices within a zone by up to  {O'15 percent, annually. See Appendix B, infra. Although such constraints limit price cap incumbent LECs' ability to implement deaveraging and rebalance rates in a manner that reflects the actual costs of providing the services at issue, some limit on the rate of price increases within zones remains desirable in order to prevent the disruptive effects of rapid and unexpected price increases. Under our price cap rules, however, deaveraging permits LECs to increase rates in one geographic zone only to the extent that they decrease rates in other geographic  X 4zones in the study area.S V = {O'ԍ See 47 C.F.R.  61.41-61.47.S As Sprint points out, particularly where demand has grown faster in highdensity zones than in lowdensity zones, the fivepercent limit on price increases sharply constrains the ability of incumbent LECs to make revenueneutral price cuts in high X4density zones.[= {O+'ԍ Sprint ex parte statement of July 12, 1999.[ Increasing to 15 percent the limit on price increases should allow more rapid movement to costbased rates without subjecting customers in highcost areas to rate shock. The requirement we adopt that each zone, except the highestcost zone, account for at least 15 percent of the incumbent's trunking basket revenues in a study area should deter incumbent LECs from establishing rates for lowcost zones that are so low as to enable them to raise rates to unreasonably high levels in highcost zones. Thus, we are not persuaded by AT&T's claims that greater geographic deaveraging flexibility will lead to predatory pricing"#z,-(-(ZZ" by incumbent LECs or arguments by CPI and the Washington Commission that any further  X4deaveraging should result only in price decreases, i.e., that it be "downward only."= {Ob'ԍ See AT&T Oct. 26 Comments at 9; CPI Oct. 26 Comments at 10; Washington Commission Oct. 26 Comments at 13.  X4?64. We reject the Washington Commission's argument that more liberal geographic  X4deaveraging rules might lead to IXC violations of sections 254(b)(3) and 254(k) of the Act.Z"= yOy'ԍ Washington Commission Oct. 26 Comments at 1314.Z Section 254(b)(3) of the Act requires the Joint Board and the Commission to ensure that consumers in rural, insular, and high cost areas have access to telecommunications services that are available at rates that are reasonably comparable to rates charged for similar services  XJ4in urban areas.CJ= yO 'ԍ 47 U.S.C.  254(b)(3).C We conclude that further geographic deaveraging of trunking services that may result from this Order is unlikely to place significantly greater pressures on IXCs (purchasers of trunking services) to deaverage their rates, in part because deaveraging implies  X 4price decreases as well as increases. Section 254(k) prohibits a telecommunications carrier from using services that are not competitive to subsidize services that are subject to  X 4competition.@ B= yO'ԍ 47 U.S.C.  254(k).@ As we discuss above, however, changes in incumbent LEC pricing zones  X 4resulting from this Order are likely to increase the degree to which trunking service prices  X 4reflect cost and thus would decrease the likelihood of crosssubsidization.  X4@65. We will no longer require incumbent LECs to file zone pricing plans in advance  Xh4of tariff filings, as the Commission has in the past,h= {O'ԍ See, e.g., Special Access Expanded Interconnection Order, 7 FCC Rcd at 7455. Ď because we presume that market forces, along with the limitation we adopt regarding the size of zones, will result in plans that reflect cost characteristics. Parties wishing to challenge the reasonableness of incumbent LEC zone pricing plans may do so as part of the tariff approval process, pursuant to which incumbent LECs must file any tariffs that include both a rate increase and rate decrease upon fifteen  X4days' notice,d = {O 'ԍ See Implementation of Section 402(b)(1)(A) of the Telecommunications Act of 1996, CC Docket No. 96187, Report and Order, 12 FCC Rcd 2170, 2202. or in a formal complaint under section 208 of the Act.= = yOd"'ԍ 47 U.S.C.  208.=  X4A66. We are not persuaded by arguments made by MCI that the failure of incumbent LECs to take full advantage of the geographic deaveraging currently available under our rules is sufficient grounds for not granting incumbent LECs greater flexibility to deaverage"$N ,-(-(ZZ9"  X4transport services.= {Oy'ԍ MCI Oct. 26 Comments at 38-39. See also Time Warner Oct. 26 Comments at 14. Contra Ameritech Nov. 9 Reply at 9; Bell Atlantic Nov. 9 Reply at 17-18. As we discuss above, lack of flexibility in our density zone pricing rules may be responsible for incumbent LECs' current failures to take full advantage of such opportunities. We conclude above that market forces are more likely to result in efficient pricing than is regulation, and, for this reason, the greater flexibility we grant here will benefit access customers through more efficient pricing of access services. >'u .J:\ACCESS.REF\AR1999\ITEM\GEODVGTR.ORD. >  X_'>'u .J:\ACCESS.REF\AR1999\ITEM\PFLEXSS1.ORD. > ({VI. PRICING FLEXIBILITY BASED ON A COMPETITIVE SHOWING ă  X1' A. Background B67. The Commission has long recognized that it should allow incumbent LECs  X 4progressively greater pricing flexibility as they face increasing competition.N "= {O'ԍ The Commission first sought comment on a "road map" for this transition in the Price Cap Second  {O'FNPRM, 11 FCC Rcd 858 (1995). Later, in the Access Reform NPRM, the Commission noted that the parties  {OS'filed pleadings in response to the Price Cap Second FNPRM prior to adoption of the Telecommunications Act of  {O'1996. Access Reform NPRM, 11 FCC Rcd at 21428; Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 154 (1996). Accordingly, the Commission refined its pricing flexibility proposals and invited parties to  {O'submit new comments. Access Reform NPRM, 12 FCC Rcd at 2142848. The Commission limited the record to  {Oy'pleadings filed in response to the Access Reform NPRM, although parties were permitted to resubmit their Price  {OC'Cap Second FNPRM comments. Id. at 21428.  In the Access  X 4Reform First Report and Order, the Commission adopted a marketbased approach to access charge reform, pursuant to which it would relax restrictions on incumbent LEC pricing as competition emerges, thereby ensuring that "our own regulations do not unduly interfere with  X4the development and operation of these markets as competition develops."j8 = {O}'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16094.j At that time, the Commission deferred resolution of the specific timing and degree of pricing flexibility to a  Xf4future Order.>f = {O'ԍ Id. at 15989. > C68. In the previous two sections, we adopt forms of regulatory relief for price cap LECs that can be granted under current market conditions and do not require a further competitive showing. Below, we consider forms of regulatory relief which, if granted prematurely, might enable price cap LECs to (1) exclude new entrants from their markets, or (2) increase rates to unreasonable levels. Accordingly, as a condition for granting further pricing flexibility, we require incumbent LECs to show that markets are sufficiently competitive both to warrant pricing flexibility to enable incumbent LECs to respond to competition and to discourage incumbents from either excluding new entrants or raising rates to unreasonable levels. In other words, we adopt requirements that price cap LECs make"%\ ,-(-(ZZ" "competitive showings," or satisfy "triggers," to demonstrate that market conditions in a particular area warrant the relief at issue. D69. The pricing flexibility framework we adopt consists of two phases. To obtain Phase I regulatory relief, the incumbent must show that competitors have made irreversible investments in the facilities needed to provide the services at issue, thus discouraging incumbent LECs from successfully pursuing exclusionary strategies. Phase I permits LECs to  X_4offer contract tariffs1_= {O'ԍ A contract tariff is a tariff based on an individuallynegotiated service contract. See Interexchange  {O 'Competition Order, 6 FCC Rcd at 5897; 47 C.F.R.  61.3(m). In order to comply with the nondiscrimination provisions of the Act, the Commission has required carriers to make all contract tariffs "generally available to  {O4 'similarly situated customers under substantially similar circumstances." See Interexchange Competition Order, 6 FCC Rcd at 5897. This requirement also will apply to contract tariffs offered by incumbent price cap LECs. We will require price cap LECs offering contract tariffs to include in those tariffs: (1) the term of the contract, including any renewal options; (2) a brief description of each of the services provided under the contract; (3) minimum volume commitments for each service; (4) the contract price for each service or services at the volume levels committed to by the customers; (5) a general description of any volume discounts built into the contract rate structure; and (6) a general description of other classifications, practices and regulations affecting the  {O'contract rate. See Section 61.55(c) of our rules, as set forth in Appendix B to this Order.1 and volume and term discounts, while requiring them to maintain their generally available price capconstrained tariffed rates, thus protecting those customers that lack competitive alternatives. To obtain Phase II relief, which allows LECs to raise and lower rates, the incumbent must demonstrate that competitors have established a significant market presence in the provision of the services at issue. Under those market conditions, the availability of alternative providers will ensure that rates are just and reasonable. The triggers we adopt below should permit incumbent LECs to make the required showings, with a minimum of administrative burden for the industry and the Commission. E70. In Section VI.B, we define the geographic areas within which we will grant pricing flexibility. In Section VI.C.2, we establish Phase I competitive showings for  Xb4(1)dedicated transport, (i.e., entrance facilities, directtrunked transport, and the dedicated component of tandemswitched transport service) and special access services other than  X64channel terminations;60 = {O'ԍ See Section II.A.1, supra, for a description of these services. See also Section 69.709(a) of our rules, as set forth in Appendix B to this Order. and (2) channel terminations.6 = {Oq 'ԍ See Section II.A.1, supra, for a description of channel terminations. See also Section 69.709(a) of our rules, as set forth in Appendix B to this Order. In Section VI.C.3, we adopt Phase I competitive showings for common line and trafficsensitive services, and the trafficsensitive components of tandemswitched transport service. We specify the regulatory relief to be afforded for all these services at Phase I in Section VI.C.4, and, in Section VI.C.5, we adopt Phase II competitive showings for dedicated transport and special access services and specify the relief that is available upon satisfaction of these showings. In the Notice accompanying this Order, we seek comment on appropriate Phase II triggers for the trafficsensitive"&,-(-(ZZ" components of tandemswitched transport service, and for services in the trafficsensitive and common line baskets. In Section VI.D, we revise our price cap lowend adjustment rules with respect to those price cap LECs that qualify for and elect to exercise any of the pricing flexibilities we grant in this section. We set forth the procedural requirements governing requests for pricing flexibility in Section VI.E. We base our conclusions in this section on  X4the record developed in response to the Price Cap Second FNPRM and the Access Reform  Xx4NPRM, supplemented by pleadings filed in response to the October 5 Public NoticeĠand the  Xc4pending forbearance petitions.$c= yO'ԍ The pending forbearance petitions are listed in Appendix A to this Order. Several parties recommend  {O 'that we treat the forbearance petitions as ex parte statements in this proceeding, or consider them in the context  {On 'of this proceeding. See, e.g., ALTS Comments in SBC Forbearance Proceeding, CC Docket No. 98227, at 3; NEXTLINK Opposition to Bell Atlantic Forbearance Petition, CC Docket No. 9924, at 3.  Finally, in Section VI.F, we extend by ninety days the statutory deadline applicable to U S West's pending petition for forbearance from dominant carrier regulation in Phoenix, Arizona.  X ' B. Geographic Scope of Relief  X 4F71. Background. In the Price Cap Second FNPRM, the Commission invited comment on the geographic area that it should use for purposes of reviewing requests for pricing  X 4flexibility.] = {O'ԍ Price Cap Second FNPRM, 11 FCC Rcd at 91114.] The Commission sought to define these geographic areas narrowly enough so that the competitive conditions within each area are reasonably similar, yet broadly enough to  X4be administratively workable.>F= {Ov'ԍ Id. at 91112.> Specifically, the Commission invited comment on whether  Xh4individual wire centers,;h= {O'ԍ Id. at 914.; zone density pricing zones,3hj = {O'ԍ Id.3 metropolitan statistical areas  XQ4(MSAs),9ZQ = {O'ԍ Id. For purposes of this Order, we use the term "MSA" to refer to MSAs as defined in Section 22.909(a) of the Commission's rules, 47 C.F.R.  22.909(a). MSAs are listed in Common Carrier Public Mobile Services Information, Public Notice, 7 FCC Rcd 742 (1992). 9 or local access and transport areas (LATAs)(Q= {O !'ԍ Price Cap Second FNPRM, 11 FCC Rcd at 91114. The Commission also invited comment on using  {O!'study areas for this purpose. Id. at 914. In the Access Reform NPRM, however, the Commission proposed not  {O"'to rely on statewide measures, because competitive conditions are likely to vary within a state. Access Reform  {O~#'NPRM, 11 FCC Rcd at 21423. are the most appropriate geographic  X:4areas within which to grant pricing flexibility. Later, in the Access Reform NPRM, the Commission solicited comment on using the geographic zones adopted by state public service"%',-(-(ZZ" commissions for pricing of unbundled network elements (UNEs), or the zones adopted in the  X4Universal Service proceeding for determining high cost areas.X= {Ob'ԍ Access Reform NPRM, 11 FCC Rcd at 21423.X  X4G72. Discussion. We will grant pricing flexibility relief for both Phase I and Phase II on an MSA basis. We agree with those commenters that maintain that MSAs best reflect the scope of competitive entry, and therefore are a logical basis for measuring the extent of  Xx4competition.$xZ= {O 'ԍ See USTA Oct. 26 Comments at 35 and Att. E; SBC Oct. 26 Comments at 18; Cincinnati Bell Oct. 26  {OM 'Comments at 8 (supporting MSAs). See also Ameritech Oct. 26 Comments, Att. N at 2; Bell Atlantic ex parte statement of April 27, 1998 at 15; Ad Hoc Comments at 5054 (supporting LATAs, which in some states are similar to MSAs). Because competitive LECs generally do not enter new markets on a statewide basis, we reject proposals to define the geographic scope of pricing flexibility on the  XJ4basis of states or study areas.yJF= yOA'ԍ USTA Comments at 27; Sprint Comments at 39; Southwestern Bell Comments at 26. y Granting pricing flexibility over such a large geographic area would increase the likelihood of exclusionary behavior by incumbent LECs by giving them flexibility in areas where competitors have not yet made irreversible investment in facilities.  X 4H73. We also decline to grant pricing flexibility on the basis of LATAs. Many LATAs  X 4include an entire state,L = {O^'ԍ See Excel Nov. 9 Reply at 7.L and in those cases, LATAs would be inappropriate for the same reasons we reject states and study areas as relevant markets. Of course, other states contain many LATAs, in which cases LATAs are similar to MSAs. In those cases, relying upon MSAs rather than LATAs should make little difference in determining whether to grant pricing flexibility.  XM4I74. We also reject proposals to grant pricing flexibility on the basis of wire centers or  X64central offices.`X6h = yOO'ԍ USTA Comments at 29; BellSouth Comments at 39; PacTel Comments at 26; California Commission Comments at 11; Pennsylvania ISPs Comments at 1718. Aliant also would use wire centers for Phase II, but it prefers determining whether there is "substantial competition" on a statewide basis. Aliant Comments at 9. ` CTSI and KMC suggest that competition may exist in only a small part of  X4an MSA,^ = yOX!'ԍ CTSI Nov. 9 Reply at 45; KMC Nov. 9 Reply at 56. ^ but we believe that the triggers we establish below are sufficient to ensure that competitors have made sufficient sunk investment within an MSA. In addition, defining geographic areas smaller than MSAs would force incumbents to file additional pricing flexibility petitions, and, although these petitions might produce a more finelytuned picture of competitive conditions, the record does not suggest that this level of detail justifies the increased expenses and administrative burdens associated with these proposals. "(,-(-(ZZ9"Ԍ X4J75. In addition, we reject proposals to permit incumbent LECs themselves to select  X4the geographic area for which they seek pricing flexibility.= yOb'ԍ BA/NYNEX Comments at 5253; BellSouth Comments at 39; TRA Comments at 2425; USTA Comments at 29. Determining whether the incumbent has chosen an appropriate area is likely to generate controversy, thus undermining our desire to create a framework for granting pricing flexibility, where warranted, without delay and without imposing undue burden on the industry or on Commission staff.   Xv4K76. Commenters supporting MSAs have provided little if any guidance for pricing flexibility in nonMSA areas. We will grant price cap LECs pricing flexibility within the  XH4nonMSA parts of a study area H = yO 'ԍ For cellular licensing purposes, the nonMSA part of a study area comprises one or more rural service areas (RSAs), as defined in Section 22.909(b) of the Commission's rules, 47 C.F.R.  22.909(b). RSAs are listed with MSAs in Common Carrier Public Mobile Services Information, Public Notice, 7 FCC Rcd 742 (1992). Together, MSAs and RSAs encompass all the territory included in the incumbent LECs' study areas. if they satisfy the triggers we adopt below throughout that area. We decline to mandate individual showings for each rural service area (RSA), as we do for MSAs, because we expect competitors to enter MSA markets first and then to extend their networks into less densely populated areas. Because rural areas by definition do not have large concentrations of population comparable to urban areas, we expect that competitive entry into rural areas will be less concentrated than in urban areas. Therefore, we do not expect that pricing flexibility will enable an incumbent to engage successfully in exclusionary pricing behavior with respect to one RSA because competitive entry is limited to another RSA. Because the danger of exclusionary pricing behavior is lessened, we place more weight on our goal of administrative ease, and permit incumbent LECs to file a single pricing flexibility petition for all the RSAs in a study area. In addition, price cap LECs report some  XK4service quality information on a nonMSA basis,K= {O'ԍ See Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87313, Memorandum Opinion and Order, 6 FCC Rcd 2974, 298990 (Com. Car. Bur. 1991). and so it should be easy for price cap  X44LECs to collect collocation information for pricing flexibility requests in those areas.X4b = yOG'ԍ For purposes of the remainder of this section, we will use the term "MSA" to refer to the geographic areas on which price cap LECs may base pricing flexibility petitions: (1) MSAs and (2) the nonMSA parts of study areas.  X' HC. Phase I and Phase II Pricing Flexibility  X4 1. General Approach  X4L77. We will grant Phase I pricing flexibility to a price cap incumbent LEC for special access and dedicated transport services when it demonstrates either that (1) competitors unaffiliated with the incumbent LEC have established operational collocation arrangements in a certain percentage of the incumbent LEC's wire centers inH an MSA, or (2) unaffiliated"e) ,-(-(ZZ" competitors have established operational collocation arrangements in wire centers accounting for a certain percentage of the incumbent LEC's revenues from the services in question in that  X4MSA.z= yOK'ԍ For purposes of our triggers, the term "wire center" shall refer to any location at which an incumbent LEC is required to provide expanded interconnection for special access pursuant to  64.1401(a) of the Commission's rules, and any location at which an incumbent LEC is required to provide expanded  {O'interconnection for switched transport pursuant to  64.1401(b)(1) of our rules. See 47 C.F.R.  64.1401(a), 64.1401(b)(1). For purposes of this Order, collocation by competitors refers to collocation by carriers unaffiliated with the incumbent LEC.z In both cases, the incumbent also must show, with respect to each wire center, that at least one collocator is relying on transport facilities provided by a transport provider other  X4than the incumbent LEC. B= yO 'ԍ This requirement that at least one collocator use competitive transport facilities excludes both transport provided by the incumbent LEC pursuant to tariff and unbundled transport leased from the incumbent LEC. Henceforth in this Order, references to collocation by competitors encompass only those collocated competitors that use transport provided by a transport provider other than the incumbent LEC. As explained above, Phase I of our pricing flexibility framework provides incumbent LECs with regulatory relief when competitors have made irreversible investments in facilities within a given MSA. At that point, we no longer need to protect competition from exclusionary pricing behavior by incumbent LECs, because efforts to exclude competitors are unlikely to succeed. In order to protect access customers that may lack competitive alternatives, we limit the extent to which Phase I flexibility permits incumbents to raise rates, because competitors that are sufficiently entrenched to survive attempts by incumbents to exclude them from the market may not yet have a sufficient market presence to constrain prices throughout the MSA.  X 4M78. For the reasons discussed below, and based on the record before us, we conclude that a collocationbased trigger for granting pricing flexibility for special access and dedicated transport reasonably balances our two goals: (1) having a clear picture of competitive conditions in the MSA, so that we can be certain that there is irreversible investment sufficient to discourage exclusionary pricing behavior; and (2) adopting an easily verifiable,  XK4brightline test to avoid excessive administrative burdens.?K* = {O&'ԍ See Price Cap Second FNPRM, 11 FCC Rcd at 908. See also USTA Oct. 26 Comments, Att. A at 31; Bell Atlantic Oct. 26 Comments, Exh. 1 at 11, 16. Bell Atlantic states that the history of transportation regulation, natural gas regulation, and Commission regulation of private lines in the 1960s and 1970s provides ample warning of the dangers inherent in relying upon myriad factfinding processes to implement regulatory policy in markets in which there are multiple sellers. Bell Atlantic Oct. 26 Comments, Exh. 1 at 17.? In Section VI.C.2, we adopt specific triggers for (1) dedicated transport and special access services other than channel terminations; and (2) channel terminations. As we explain in Section VI.C.3 below, however, we adopt a different approach to granting pricing flexibility for trafficsensitive and common line services, by requiring price cap LECs to demonstrate the extent to which competitors offer these services over their own facilities. "*,-(-(ZZ "Ԍ X4N79. Irreversible Investment. In the Access Reform NPRM, the Commission explained that the initial phase of pricing flexibility should enable incumbent LECs to "reprice access services in ways that respond to competitive pressure, but do not impede competitive  X4entry."X= {O6'ԍ Access Reform NPRM, 11 FCC Rcd at 21429.X We conclude that irreversible, or "sunk," investment in facilities used to provide competitive services is the appropriate standard for determining when pricing flexibility is  X4warranted.Z= {O'ԍ See ACTA Oct. 26 Comments at 4 nn. 3, 5 (arguing that the Commission should not adopt any new pricing flexibility rules until local exchange markets are fully and "irreversibly" open to competition). Phase I regulatory relief will increase the efficiency of the interstate access market and reduce prices to enduser customers; therefore, we should delay granting this relief no longer than necessary to protect the development of a competitive market. Although Phase I relief permits incumbent LECs to offer contract tariffs and expands their authority to offer volume and term discounts, it also requires LECs to maintain their existing price cap tariffed rates, thus precluding price cap LECs from abusing their market power by charging dramatically higher rates to customers that lack competitive alternatives. We are concerned, however, about the possibility that price cap LECs could use Phase I relief, which enables them to offer contract tariffs to individual customers, to engage in exclusionary pricing behavior and thereby thwart the development of competition. Economists have long noted the incentives that monopolists have to reduce prices in the short run and forgo current profits in order to prevent the entry of rivals or to drive them from the market. The monopolist then would be able to raise prices above competitive levels and earn higher profits than would have been possible if the exclusionary pricing behavior had not occurred and competitors had  XM4not exited or been deterred from entering the market.&M= {O'ԍ See, e.g., P. Areeda & D. Turner, Predatory Pricing and Related Practices under Section 2 of the  {O|'Sherman Act, 88 Harv. L. Rev. 697 (1975); O. Williamson, Predatory Pricing: A Strategic an Welfare Analysis,  {OF'87 Yale L.J. 284 (1977); J. McGee, Predatory Pricing Revisited, 23 J. Law & Econ. 289 (1980); F.M.  yO'Scherer, Industrial Market Structure and Economic Performance 468479 (1990). Joskow and Klevorick note the  X64conditions that increase the likelihood, and the social cost, of exclusionary pricing behavior.6= {O'ԍ P. Joskow & A. Klevorick, A Framework for Analyzing Predatory Pricing Policy, 89 Yale L.J. 213 (1979). Several of these conditions, including shortrun monopoly power, low elasticity of demand, and high profits in the absence of regulatory or competitive constraints, appear to characterize  X4the interstate access market. = {O!'ԍ See J. Bonbright, Principles of Public Utility Rates 711 (2d ed. 1988); C.F. Phillips, The  yOh"'Regulation of Public Utilities 5758 (1993). An incumbent can forestall the entry of potential competitors by "locking up" large customers by offering them volume and term discounts at or below  X4cost.XV = yO%'ԍ We recognize that using volume and term discounts may be a more profitable predatory strategy than traditional predatory pricing if the predator is subject to rate regulation but can use headroom created by the discounts to raise prices in areas, or to customers, not subject to competition. In such a case, the predator may"Z',-(-(j'" not have to forego profits or face the usual recoupment problem. Specifically, large customers may create the inducement for potential competitors to"+X,-(-(ZZX" invest in sunk facilities which, once sunk, can be used to serve adjacent smaller customers. To the extent the incumbent can lock in the larger business customers whose traffic would economically justify the construction of new facilities, the incumbent can foreclose  X4competition for the smaller customers as well.X= {O'ԍ See E. Rasmeusen, J.M. Ramseyer, and J.S. Wiley, Naked Exclusion, 81 Am. Econ. Rev. 113745 (December 1991). Consequently, we believe that pricing flexibility must be structured to prevent exclusionary pricing behavior so as to safeguard the development of competition.  X_4O80. An incumbent monopolist will engage in exclusionary pricing behavior only if it believes that it will succeed in driving rivals from the market or deterring their entry altogether. Otherwise, the reduced profits caused by exclusionary pricing behavior will not be recouped by other sales under the resulting conditions of reduced competition, and the incumbent will be worse off than if it had not engaged in exclusionary pricing behavior. Once multiple rivals have entered the market and cannot be driven out, rules to prevent exclusionary pricing behavior are no longer necessary. Investment in facilities, particularly those that cannot be used for another purpose, is an important indicator of such irreversible entry. If a competitive LEC has made a substantial sunk investment in equipment, that equipment remains available and capable of providing service in competition with the incumbent, even if the incumbent succeeds in driving that competitor from the market. Another firm can buy the facilities at a price that reflects expected future earnings and, as long as it can charge a price that covers average variable cost, will be able to compete with  X44the incumbent LEC.4= {O'ԍ See S. Martin, Industrial Economics: Economic Analysis and Public Policy 41415 (1998) (the  {Oa'likelihood of successful predation decreases to the extent of sunk investment by new entrants); see also  {O+'Incumbent LEC Regulatory Treatment Order, 12 FCC Rcd at 1581819 (even if a BOC interLATA affiliate could drive one of the three large IXCs from the market, that IXC's fiberoptic transmission capacity would remain intact, and another firm could buy that capacity at a distress sale and immediately undercut the affiliate's  {O'noncompetitive prices) (citing D.F. Spulber, Deregulating Telecommunications, 12 Yale J. on Reg. 25, 60 (1995)). In telecommunications, where variable costs are a small fraction of  X4total costs, = yO'ԍ B. Mitchell and I. Vogelsang, Telecommunications Pricing Theory and Practice 9 (1991). the presence of facilitiesbased competition with significant sunk investment makes exclusionary pricing behavior costly and highly unlikely to succeed. We conclude, therefore, that our Phase I triggers should measure the extent to which competitors have made sunk investments in facilities used to compete with the incumbent LEC. ", ,-(-(ZZ "Ԍ X'X` hp x (#%'0*,.8135@8:'ԍ The Commission noted that most of these criteria were contained in legislation pending at the time of the  {O'Price Cap Second FNPRM. See Price Cap Second FNPRM, 11 FCC Rcd at 906 n.159. The 1996 Act incorporated those seven criteria into the test for determining whether a Bell Operating Company (BOC) should be permitted into the market for inregion interLATA  X4services.= {OS'ԍ See 47 U.S.C.  271(c)(2)(A); 271(c)(2)(B)(ii), (iv), (vii), (x), (xi), (xiii). As a result of our review of several BOC 271 applications,H\= {O'ԍ See, e.g., Second BellSouth Louisiana Order; Application of Ameritech Michigan for Provision of In-Region, InterLATA Services in Michigan, CC Docket No. 97-137, Memorandum Opinion and Order, 12 FCC  {Ow'Rcd 20543 (1997) (Ameritech Michigan Order).H the Commission has found that ascertaining whether the BOC adequately has demonstrated that it is providing these checklist items on a nondiscriminatory basis is not administratively simple or easily verifiable. These applications produce voluminous records in which the parties hotly contest BOC compliance with the checklist, and resolution of these disputes within the ninety days permitted by the statute imposes considerable burdens on both industry and the Commission.  X 4T85. In order to avoid these burdensome and costly proceedings, we will rely instead on the eighth criterion collocation in wire centers that account for a significant portion of  X 4the incumbent LEC's business lines or interstate access revenues.c = {O:$'ԍ See Price Cap Second FNPRM, 11 FCC Rcd at 90607. c This approach has" 0F,-(-(ZZ "  X4widespread support from diverse segments of the industry.= yOy'ԍ Although several commenters support the use of collocation as a trigger, they propose granting regulatory relief at different percentage thresholds. We discuss these specific proposals below. MCI argues that, if we permit any pricing flexibility at all, we should do so only upon a showing that competitors have collocated in wire centers serving a certain percentage of the incumbent LECs'  X4demand.E = yO'ԍ MCI Oct. 26 Comments at 55.E Bell Atlantic and Ameritech also advocate granting regulatory relief when  X4competitors have collocated in a certain percentage of wire centers in a market area,v= {O 'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 2021.ppv or in  X4wire centers serving a certain percentage of the demand in a market area.cB= {O 'ԍ Ameritech ex parteĠstatement of June 5, 1998, at 2.c We further conclude that such a collocationbased standard is administratively simple because several  X_4BOCs have provided data of this type in support of pending forbearance petitions."_= {O'ԍ See, e.g., Petition of Bell Atlantic Telephone Companies for Forbearance from Regulation as a Dominant Carriers in Delaware; Maryland; Massachusetts; New Hampshire; New Jersey; New York; Pennsylvania; Rhode Island; Washington, D.C.; Vermont; and Virginia, CC Docket No. 9924, Public Notice, DA 99224 (rel. Jan. 21, 1999); SBC Reply in SBC Forbearance Proceeding, CC Docket No. 98227, at Att 2.  X14U86. Finally, we have determined that it is not burdensome to require incumbent LECs to demonstrate that at least one competitor relies on transport facilities provided by a transport provider other than the incumbent at each wire center listed in the incumbent's pricing flexibility petition as the site of an operational collocation arrangement. Competitors typically must hire the incumbent to install cable from the competitors' networks to their collocated  X 4equipment." = {O-'ԍ See Local Exchange Carriers' Rates, Terms, and Conditions for Expanded Interconnection Through Virtual Collocation for Special Access and Switched Transport, CC Docket No. 9497, Phase II, Order Designating Issues for Investigation, 10 FCC Rcd 11116, 11122 n.73 (1995) (brief description of cable installation services provided by incumbent LECs as part of their virtual collocation offerings).  Thus, incumbent LECs should be able to identify those collocators providing their own transmission facilities on the basis of their billing records. Furthermore, we do not  X4require incumbent LECs to identify allĠthe competitors collocated at each wire center and providing their own transport facilities, but rather merely to identify at least one competitor providing its own transport facilities at each wire center.  X64V87. Other Triggers. We conclude that none of the other triggers proposed in this record is preferable to collocation with competitive transport. Ameritech advocates granting pricing flexibility when competitors have collocated in wire centers from which they can provide service to a certain percentage of the demand for a service in the market area,  X4measured on the basis of DS1equivalents.= {O5''ԍ Ameritech Oct. 26 Comments, Att. N at 8; Ameritech ex parte statement of June 5, 1998, at 2. MCI argues, however, that a "DS1 equivalent""1:,-(-(ZZ" measure overstates competitive inroads in a market by placing disproportionate weight on entrance facilities (which are usually DS3 circuits) where competitive entry has been  X4greatest.E= yOK'ԍ MCI Oct. 26 Comments at 55.E Because the price of one DS3 circuit is less than the price of 28 DS1 circuits,_ZX= {O'ԍ See AT&T Opposition to SBC Forbearance Petition, CC Docket No. 98227, at 5; AT&T Opposition to U S West Phoenix Forbearance Petition, CC Docket No. 98157, at 7; BellSouth Telecommunications, Inc., Tariff F.C.C. No. 1, 4th Revised Page 7144.1 and 3rd Revised Page 7145.0.1.2 (effective July 1, 1998)._ even though they provide equal capacity, MCI argues that measuring competitors' market presence on the basis of revenues gives a better indication of the extent to which competitors  X4have made significant inroads into the market in question.Hz= yO 'ԍ MCI Oct. 26 Comments at 5556.H We agree with MCI. Because competitors are drawn to new markets by the prospect of earning revenues, rather than merely opportunities to provide capacity, we find that revenue is a more relevant measure of market entry. Moreover, we want to adopt Phase I triggers that ensure that incumbent LECs can no longer successfully drive new entrants from the market. If we adopted a trigger based on percentage of demand measured in terms of DS1 equivalents, then an incumbent LEC might receive Phase I pricing flexibility for all dedicated transport services and all special access services other than channel terminations, even though competitive alternatives may exist only for entrance facilities.  X 4W88. In the Access Reform NPRM, the Commission sought comment on adopting triggers related to the degree to which local markets are open to competition, such as availability of UNEs at forwardlooking economic cost, transport and termination at cost Xd4based rates, and resale of retail services at a wholesale price.fd = {O'ԍ See Access Reform NPRM, 11 FCC Rcd at 2142932. f We find that collocationbased standards provide a better basis for Phase I triggers than standards based on availability of UNEs and resale, because availability does not indicate whether they actually have been purchased. Further, a competitor's use of UNEs or resale does not indicate that it has sunk investments in facilities in the MSA, because services provided over UNEs or through resale make use of the incumbent's facilities. Purchase of UNEs by a competitor does not, by itself, constitute the type of investment in facilities that warrants pricing flexibility for special access and dedicated transport services. UNEs, by definition, comprise incumbent LEC facilities that are leased to competitors. Because competitors have few "sunk costs" associated with UNEs, if an incumbent drives a UNEbased competitor from the market, that competitor does not leave facilities in place that another firm then can buy at a discount. Instead, a subsequent  Xg4competitor would have to negotiate with the incumbent for use of those UNE facilities.g= yO$'ԍ In Section VI.C.3 of this Order, we explain why we will consider evidence of competitors' use of UNE loops as part of the required Phase I showings for other switched access services. As a result, such a competitor may be susceptible to an exclusionary pricing scheme. Similarly, the presence of a stateapproved interconnection agreement or Statement of Generally"92 ,-(-(ZZ_" Available Terms and Conditions, proposed as a trigger by USTA, does not by itself indicate that new market entrants have made sufficient sunk investments in facilities to resist  X4exclusionary pricing behavior.J= yOK'ԍ USTA Oct. 26 Comments, Att. E. J Finally, although a transport and termination agreement between an incumbent and a competitor may imply that the competitor is carrying traffic over its own network, that may not provide evidence of investment in facilities used to compete with an incumbent LEC. For example, the competitor may carry wireless traffic, which may or may not be a competitive substitute for wireline connections, or the competitor may provide service over UNEs. Accordingly, we conclude that collocation arrangements are more likely than transport and termination agreements to demonstrate that competitors have invested in facilities sufficiently to resist exclusionary pricing behavior.  X 4X89. We also reject CFA's proposal to grant pricing flexibility only upon a showing of  X 4compliance with the section 271 criteria, among other things. X= yO'ԍ Specifically, CFA would require "full and sustained compliance" with sections 251, 252, 253, 271, and 272 of the Act. CFA Nov. 9 Reply at 8. Section 271 compliance demonstrates that a BOC has opened its local markets to competition, but it may not show the extent of competitive alternatives in the market for interstate access services. Competition may have developed to such a degree as to warrant granting pricing flexibility to such a BOC in part of a state, even if the incumbent has not satisfied the checklist, either because it is not interested in section 271 relief, or because, for example, it is working to bring its operations support systems (OSS) into compliance. Delaying pricing flexibility under these circumstances denies access customers the benefits of increased efficiency in the interstate access market. Furthermore, we determine above not to grant pricing flexibility on a statebystate basis because competitors generally do not enter new markets on that basis. Because  X4section 271 requires the Commission to make statewide determinations,= yOg'ԍ Section 271 requires, among other things, a BOC to satisfy the 14point checklist throughout a state to  {O/'obtain authority to offer inregion, interLATA services in that state. See 47 U.S.C.  271(b)(1). granting pricing flexibility upon compliance with the 14point checklist raises the same concerns.  X4Y90. Furthermore, we will not require incumbent LECs to demonstrate that they no longer possess market power in the provision of any access services to receive pricing  X4flexibility, for two reasons. First, as we explain in more detail below,R = {ON!'ԍ See Section VI.C.5.a, infra.R regulation imposes costs on carriers and the public, and the costs of delaying regulatory relief outweigh any costs associated with granting that relief before competitive alternatives have developed to the point that the incumbent lacks market power. Second, non-dominance showings are neither administratively simple nor easily verifiable. As several BOCs note in their forbearance petitions, the Commission previously has based non-dominance findings on several complex" 3,-(-(ZZ<"  X4criteria, including market share and supply elasticity.= {Oy'ԍ See, e.g., Comsat Corporation, Petition Pursuant to Section 10(c) of the Communications Act of 1934, as amended, for Forbearance from Dominant Carrier Regulation and for Reclassification as a NonDominant  {O 'Carrier, Order and Notice of Proposed Rulemaking, 13 FCC Rcd 14083, 1411819 (1998), cited in U S West Phoenix Forbearance Petition at 14; U S West Seattle Forbearance Petition at 1432; Ameritech Forbearance Petition at 11.  Market share analyses require considerable time and expense, and they generate considerable controversy that is difficult to resolve. For example, in response to U S West's Phoenix forbearance petition, several commenters assert that U S West overstates its market share losses by treating resold services as services provided by competitors, even though U S West continues to provide the  X4underlying facilities."|= {O 'ԍ See CompTel Comments in U S West Phoenix Forbearance Proceeding at 34; MCI Comments in U S West Phoenix Forbearance Proceeding at 19; Sprint Comments in U S West Phoenix Forbearance Proceeding at 57; AT&T Comments in U S West Phoenix Forbearance Proceeding at 8; GST Comments in U S West Phoenix Forbearance Proceeding at 1316; Qwest Comments in U S West Phoenix Forbearance Proceeding at 6.  Sprint claims that we cannot rely on US West's market share analysis  Xv4without reviewing the underlying data.mvf = yO'ԍ Sprint Opposition in U S West Phoenix Forbearance Proceeding at 7. m Measuring supply elasticity also can be controversial; a number of commenters claim, for example, that U S West underestimates its  XH4competitors' costs of extending their networks."H = {O'ԍ See CompTel Comments in U S West Phoenix Forbearance Proceeding at 67; MCI Comments in U S West Phoenix Forbearance Proceeding at 1013; AT&T Comments in U S West Phoenix Forbearance Proceeding at 910; Sprint Comments in U S West Phoenix Forbearance Proceeding at 1011; Qwest Comments in U S West Phoenix Forbearance Proceeding at 3.  ALTS argues, moreover, that excess capacity in competitors' networks is generally limited to particular routes, and incumbent LECs should not, therefore, rely on that existing excess capacity to support claims regarding  X 4the elasticity of supply in the interstate access market.` = {O'ԍ ALTS ex parte statement of June 25, 1999, at 13.`  X 4Z91. We do not address in this Order whether any BOC has adequately supported its market share or supply elasticity claims in its forbearance petition. Rather, we conclude here that it would be administratively burdensome to require incumbent LECs to perform and the Commission to evaluate market share or supply elasticity analyses before the LECs may obtain any regulatory relief, and so we decline to adopt such a requirement here.  XK4[92. Finally, we disagree with commenters opposing any additional pricing flexibility for price cap LECs at this time. These commenters either argue generally that price cap LECs have sufficient pricing flexibility to respond to competition under the current price cap  X4rules,_r= {O)&'ԍ See, e.g., MCI Oct. 26 Comments at 3637._ or that price cap LECs must not face meaningful competition because rates in the"4,-(-(ZZ"  X4trunking basket are generally at the maximum permitted under the price cap rules.H= {Oy'ԍ See, id. at 3738.H First, the existing rules clearly limit price cap LECs' ability to respond to competition. Price cap LECs are subject to both our Part 61 rules regarding rate levels and the mandatory rate structure rules set forth in Part 69 of our rules. Our rules precluding LECs from offering contract tariffs and limiting volume and term discount offerings may create a price umbrella for competitors. Second, as mentioned above, delaying regulatory relief imposes costs on carriers and the public, the latter of which is deprived of the benefits of more vigorous competition. We see no public benefit in any further delay in regulatory relief, once an incumbent LEC has satisfied the triggers we adopt below. Finally, price cap LECs were required to eliminate at least some of the headroom in the trunking basket as a result of the  X 4XFactor increase adopted in Price Cap Fourth Report and Order.d Z= {O% 'ԍ Price Cap Fourth Report and Order, 12 FCC Rcd 16642.d Observing that there is no headroom in the trunking basket does not necessarily mean, therefore, that price cap LECs face no competition, because we cannot know the extent to which the XFactor puts downward pressure on rates that the price cap LECs otherwise might have lowered in response to competition. _  X'X` hp x (#%'0*,.8135@8:'u .J:\ACCESS.REF\AR1999\ITEM\PFLEXSS1.ORD. >  XR'='u -J:\ACCESS.REF\AR1999\ITEM\PFLEXEK.ORD- =  X 3. Phase I Triggers for Other Switched Access Services (# k108. We conclude that an incumbent price cap LEC should be allowed Phase I pricing flexibility for common line and traffic-sensitive services, and the traffic-sensitive" =&,-(-(ZZ" components of tandem-switched transport service, when it demonstrates that competitors, in aggregate, offer service over their own facilities to at least 15 percent of incumbent LEC  X4customer locations in the MSA.'z= yOK'ԍ Tandem-switched transport has three components: a per-minute charge for transport of traffic over common transport facilities between the incumbent LEC's end office and the tandem switching office; a per-minute tandem switching charge; and a flat-rated charge for transport of traffic over dedicated transport facilities between the serving wire center and the tandem switching office. 47 C.F.R.  69.111(a)(2). For the purposes of this section, we include traffic-sensitive components of tandem-switched transport service in the term "traffic-sensitive service." We address Phase I pricing flexibility for the dedicated component of  {O'tandem-switched transport, supra, in Section VI.C.2.b. l109. We conclude above that Phase I relief for a particular service is warranted when an incumbent LEC demonstrates that competitors have made irreversible investment in facilities used to compete with the incumbent LEC in the provision of that service. For special access and dedicated transport services, we adopt a trigger based on collocation by competitors because competitors historically have collocated in incumbent LEC wire centers  X14in order to provide transport and special access services.P(1 = {O'ԍ See Section VI.C.2, supra.P Thus collocation furnishes evidence of irreversible investment in facilities in part because it indicates competitive  X 4transmission facilities terminating at the collocation site.R) = {OP'ԍ See Section VI.C.2.a, supra.R Although we acknowledge that some competitors provide these services exclusively over their own facilities (total facilities bypass), the extent of such competition is difficult to measure. Because collocation traditionally has served as the building block for competitive transport services, we conclude that it constitutes a sufficient measure of the degree to which competitors have invested in facilities to provide these services. m110. Competition for common line and trafficsensitive services, however, is a much more recent phenomenon, and it may not develop in this same manner. For this reason, a different approach to granting pricing flexibility for these services is warranted. For trafficsensitive and common line services, we adopt a Phase I trigger that takes into account competitors that have wholly bypassed incumbent LEC facilities, as well as competitors that collocate in incumbents' wire centers so as to provide service over unbundled loops. n111. The 1996 Act opened the local exchange market and, hence, the market for  X4switched access services, to competition.r*. = {O#'ԍ See, e.g., Access Reform NPRM, 11 FCC Rcd at 2135859.r The Act envisions three alternatives that competitors might employ, either singly or in combination, to enter this market: total service resale, service using unbundled network elements, and service provided over the competitor's"|> *,-(-(ZZ"  X4own facilities.t+= {Oy'ԍ See, e.g., Local Competition Order, 11 FCC Rcd at 15509.t Not all of these entry strategies, however, indicate that competitors have made irreversible investment in facilities used to compete with incumbents in the provision of  X4switched access services. As we explain above,R,Z= {O'ԍ See Section VI.C.2.a, supra.R resold services employ only incumbent LEC facilities and thus do not indicate any irreversible investment by competitors whatsoever. Similarly, a competitor providing service solely over unbundled network elements leased from  X4the incumbent (the so-called "UNE platform"h-= {O* 'ԍ See Ameritech Michigan Order, 12 FCC Rcd at 20628.h) has little, if any, sunk investment in facilities  Xv4used to compete with the incumbent LEC.R.v~= {O 'ԍ See Section VI.C.2.a, supra.R For these reasons we do not allow an incumbent LEC to qualify for Phase I relief as a result of competition solely from resale or unbundled network elements.  X 4o112. If, however, competitors offer switched access services either entirely over their own facilities or by combining unbundled loops with their own switching and transport, this indicates the type of irreversible investment in facilities that warrants Phase I pricing flexibility for these services. In the first case, the competitor bypasses incumbent facilities altogether; in the latter case, a competitor must collocate in an incumbent's wire center to connect the leased loops to its transport facilities. Although a trigger based solely on collocation is administratively simpler and more easily verified, we decline in this case to adopt such a trigger because we lack sufficient experience with competition in the local exchange and switched access markets to know the extent to which competitors might rely on either of these entry strategies. We note, for example, that the time and expense required to  X44establish collocation arrangements+/Z4= {O'ԍ See id. See also Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98147, First Report and Order and Further Notice of Proposed Rulemaking, 14 FCC Rcd 4761,  yO'477193 (1999). + and the difficulties associated provisioning of UNEs by  X4incumbent LECs02 = {O'ԍ See, e.g., Second BellSouth Louisiana Order, 13 FCC Rcd at 20652706. may encourage competition through total bypass. Because it is unclear,  X4therefore, the extent to which competitors are pursuing UNE-based entry strategies,N1X = yO{!'ԍ Industry Analysis Division, Common Carrier Bureau, FCC, Local Competition, at Tables 3.4, 3.5 (1998) (Table 3.4 presents lines provided by large incumbent LECs to CLECs for resale, Table 3.5 presents lines provided by large incumbent LECs to CLECs as UNE loops).N we conclude that data concerning total bypass may be particularly important in assessing the degree of competitive entry in the markets for switched services. "?1,-(-(ZZ"Ԍ X4p113. Rather than looking solely at collocation, therefore, we adopt a Phase I trigger for switched services that measures the extent to which competitors offer these services either exclusively or largely over their own facilities. We will grant Phase I pricing flexibility for common line and trafficsensitive services to an incumbent LEC in an MSA if that LEC demonstrates that competitors offer service over their own facilities to 15 percent of the incumbent's customer locations in the MSA. As we explain above, a competitor provides service over its own facilities if it leases unbundled loops but provides its own switching and transport. A competitor is not, however, offering service over its own facilities to the extent it offers service through resale or exclusively through the use of unbundled network elements. We acknowledge that we have concluded, both for determining eligibility for universal service support under section 254(e) of the Act and for BOC applications under section 271 to provide inregion interLATA services, that a carrier's "own" facilities include UNEs provided  X 4by the incumbent LEC.2 = {Oe 'ԍ See FederalState Joint Board on Universal Service, Report and Order, 12 FCC Rcd 8776, 8862 (1997)  {O/'(Universal Service Order); Ameritech Michigan Order, 12 FCC Rcd at 20598. For purposes of this Order, however, we use "own facilities" in a narrower sense, excluding UNEs provided by the incumbent LEC, except in the case of CLECs using unbundled loops in conjunction with their own switching and transport facilities.  X4q114. We also decline at this time to permit incumbents to satisfy the Phase I trigger by showing that customer locations are served by mobile wireless competitors. Although Congress allowed the Commission to consider competition from Personal Communications Service (PCS) in the context of Bell Operating Company (BOC) applications for in-region  X44interLATA authority when PCS serves as a substitute for the BOC's services,34$= {O 'ԍ SeeĠ47 U.S.C.  271(c)(1)(A); Second BellSouth Louisiana Order, 13 FCC Rcd at 2062125. inclusion and evaluation of such data is problematic for purposes of determining whether an incumbent LEC is entitled to Phase I pricing flexibility, primarily because it is difficult to assess whether mobile (as opposed to fixed) wireless serves as a substitute for (and thus competes with)  X4wireline service provided by an incumbent LEC.i4= {O?'ԍ Second BellSouth Louisiana Order, 13 FCC Rcd at 2062530.i  X4r115. In arriving at the 15 percent trigger, we note that the relief granted upon satisfaction of the Phase I trigger for common line and traffic-sensitive services, together with the relief we grant immediately in Sections III and V above, is comparable to much of the"|@H4,-(-(ZZ"  X4switched services relief proposed in ex parte submissions by Bell Atlantic,5= {Oy'ԍ Bell Atlantic ex parte statement of April 27, 1998. Bell Atlantic proposes that, upon a showing that 25 percent of wire centers are "competitive" (based on the existence of any competitorserved telephone number in the wire center), we allow incumbent LECs to deaverage common line and local switching charges; offer volume and term pricing with growth options; offer promotions; and seek approval on an expedited basis to respond to  {O'requests for proposals (RFPs). Id. at 27. (Bell Atlantic proposes that we grant incumbent LECs some of this relief, such as geographic deaveraging, on a lesser showing). Ameritech,6D= {O'ԍ Ameritech ex parte statement of June 5, 1998, at 2 . Ameritech proposes that, upon a showing that competitors have collocated in incumbent LEC wire centers accounting for 25 percent of interstate local switching minutesofuse, we allow incumbent LECs to deaverage common line and local switching charges; offer bundled service packaging, contracts, and volume and term pricing (with growth options); and provide new  {O 'services on a relaxed basis. Id. at 2 . (Ameritech proposes that we grant incumbent LECs some of this relief, such as geographic deaveraging, on a lesser showing).  X4and USTA.7~ = {O\'ԍ USTA ex parte statement of June 1, 1999. USTA proposes that, upon a showing that 25 percent of total  {O&'lines in a market have "access to" alternative facilitybased local services (i.e., all lines served by a wire center with operational collocation and lines located within a 1000 feet of another provider's facility), we allow incumbent LECs to deaverage subscriber line charges (SLCs) and local switching charges; offer volume and term  {O'pricing; offer contracts and promotions; and seek approval on an expedited basis to respond to RFPs. Id. at 1. (USTA proposes that we grant incumbent LECs some of this relief, such as geographic deaveraging, on a lesser showing).  X4s116. Bell Atlantic recommends granting relief when competitors have "demonstrated the capability" to provide service in wire centers representing, in aggregate, at least 25  X4percent of the demand for the service in question, i.e., residential/single-line-business and  Xz4multi-line business.j8z= {O1'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 27.j Under Bell Atlantic's proposal, competitors have demonstrated the ability to provide service in a wire center if they provided service with their own or ported  XL4telephone numbers to any of the relevant class of customers.9$L= {O'ԍ Id. Bell Atlantic proposes that a wire center also be classified as "competitive" if competitors use  {O_'collocation and UNEs to provide service in the wire center. Id. Because UNE customers would be served through CLEC-ported or "owned" telephone numbers, this test appears to be merely a subset of the telephone number test. Ameritech proposes granting relief when competitors have collocated in wire centers serving 25 percent of the demand in a  X 4market area, measured on an interstate minutes-of-use basis.i: = {OS"'ԍ Ameritech ex parte statement of June 5, 1998, at 2 .i USTA also proposes a 25 percent threshold, but bases it on the sum of line demand attributable to (1) wire centers in  X 4which there is operational collocation and competitors are taking unbundled loop or" A:,-(-(ZZ " unbundled local switching UNEs and (2) lines located within 1000 feet of competitive  X4facilities.^;= {Ob'ԍ USTA ex parte statement of June 1, 1999, at 2.^  X4t117. For the reasons we discuss above, we find that a competitor has not made irreversible investment in facilities to provide common line and/or traffic-sensitive services unless it does so through its own facilities. We therefore reject the triggers proposed by the incumbent LECs and USTA to the extent they can be satisfied by UNE platform and resale  X_4competition.3<X_Z= yOj 'ԍ Customers served via resale or the UNE platform may represent significant numbers of "owned" or "ported" telephone numbers. Similarly, evidence of competitors using unbundled local switching UNEs does not, by itself, indicate competitors' investment in facilities.3 Given, however, that we require evidence that competitors offer service over their own facilities, and that we do not grant relief as extensive as that sought by the incumbent LECs, we adopt a trigger lower than the 25 percent threshold they propose. We will therefore grant an incumbent LEC Phase I relief for common line and traffic-sensitive services when it demonstrates that competitors, in aggregate, offer service over their own facilities to at least 15 percent of incumbent LEC customer locations in the MSA. Because competitive provision of both local switching and traffic-sensitive components of tandem switched transport service are dependent on switch ownership, we conclude that Phase I relief for these services should be tied directly to the Phase I relief for common line services.  Xy4u118. We reject Bell Atlantic and USTA's proposals that we allow incumbent LECs to  Xb4qualify for pricing flexibility by classofservice, e.g., for residential/single-line-business and  XM4multi-line business service,=$Mz= yOx'ԍ Like Bell Atlantic, USTA proposes that incumbent LECs may target showings to, and therefore request  {O@'relief for, residential/single-line-business or multi-line business services. USTA ex parte statement of June 1, 1999. USTA notes that when an incumbent LEC makes a separate showing for residential/single-line-business  {O'services, it may be appropriate to use a total bypass threshold less than 1000 feet. Id. because we wish to encourage competition for both high-volume business customers and residential and low-volume business customers.  X4v119. We acknowledge that demonstrating the degree to which competitors are providing service over their own facilities is more administratively burdensome than merely  X4measuring the extent to which competitors have collocated in incumbent LEC wire centers.R>f = {O 'ԍ See Section VI.C.2.a, supra.R As discussed above, however, total bypass may represent a significant portion of competition  X4for switched access services,?" = yOU$'ԍ In establishing our Phase I trigger for dedicated transport and special access services, based on our experience observing the development of the market for these services, we find it reasonable to use collocation  {O%'as a proxy for all forms of competition in the market for such services. As discussed, supra, however, we do not have such a history to evaluate in the switched access market and therefore are not as able to predict the"&>,-(-(&"  yO'relationship between collocation and total-facilities bypass-based entry in the switched access market.ã thus we will not rely solely on collocation as a measure of"BX?,-(-(ZZ" competition for these services. We therefore conclude that any increased administrative burdens in measuring total facilities bypass competition are in the public interest.  X4w120. We emphasize that incumbent LECs must demonstrate that competitors actually offer, not merely are capable of offering, common line and trafficsensitive services to 15 percent of an incumbent LEC's customer locations within an MSA to qualify for Phase I relief. On the other hand, we are not requiring that competitors actually provide service to a specific percentage of customers. "Offering service" is an appropriate measure of competitive entry for these services because of the difficulties inherent in determining the extent to which competitors actually provide service to current or former customers of the incumbent. This constitutes sensitive competitive information that the incumbent may be unable, and a competitor unwilling, to provide. Moreover, we see no need to require this information. In contrast to special access or even dedicated transport services, competitors are likely to employ more broadly based entry strategies for common line and trafficsensitive services. Once a competitor installs a switch in its network, it has every incentive to maximize the number of customers it serves with that switch, in order to spread the sunk switch investment over the broadest base possible. In addition, special access services may have diminished the demand among high volume users for competitive switched services, because high volume customers use special access as an alternative to switched access, an option that is not available to low volume users of switched services. Thus switched-based competitors may be more likely to seek customers through mass marketing than through highly-targeted sales.  X4x121. We do not establish rules pertaining to how an incumbent LEC might demonstrate that competitors "offer service" over their own facilities. As we note above, competitors are likely to market switched services broadly, thus we expect that competitors will advertise their services in a variety of media. These advertisements may well be probative of the extent of competitive offerings. Furthermore, incumbents are aware, of course, of competitors' purchase of unbundled loops, and the pending forbearance petitions suggest that they possess considerable intelligence regarding the extent and location of competitive facilities. ='u -J:\ACCESS.REF\AR1999\ITEM\PFLEXEK.ORD- =  X7'>'u .J:\ACCESS.REF\AR1999\ITEM\PFLEXSS2.ORD. > 4. Phase I Relief  X '` ` a. Introduction y122. Upon satisfaction of the Phase I triggers for particular services, we will permit price cap LECs to file, on one day's notice, tariffs offering volume and term discounts for those services, and we also will permit them to file contract tariffs for those services on one day's notice. Price cap LECs must remove their contract tariff offerings from price cap""CX?,-(-(ZZ "  X4regulation.[@X= yOy'ԍ Ad Hoc supports removing services offered under contract tariffs from price cap regulation. Ad Hoc Reply to U S West Phoenix Forbearance Petition, CC Docket No. 98-157, at 15-16. We address below the low-end adjustment issues raised by the removal of contract-tariff offerings from price cap regulation.[ Currently, an incumbent LEC is free to lower its access rates as much as it  X4wants,A= {O'ԍ In the Price Cap Third Report and Order, the Commission eliminated the lower service band indices.  {OL'Price Cap Third Report and Order, 11 FCC Rcd at 21487-88. provided that it lowers its rates throughout the study area or density pricing zone in  X4question.BD= {O 'ԍ Section 69.3(e)(7) requires all incumbent LECs to charge uniform rates throughout each study area. See 47 C.F.R.  69.3(e)(7). The Commission permitted incumbent LECs offering expanded interconnection to deaverage their special access and switched transport rates into three density pricing zones once demand for  {O! 'collocation services reached certain thresholds. Special Access Expanded Interconnection Order, 7 FCC Rcd at  {O '7454; Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 7426-27; Virtual Collocation Order, 9 FCC Rcd at 5196-97; 47 C.F.R.  61.47(e), 69.123. We relax these rules in Section III above, however. Under our Phase I regulatory relief, incumbent LECs are no longer required to choose between lowering a rate throughout the area at issue or not lowering the rate at all. Price cap LECs are required to maintain generally available tariffs subject to price cap regulation for all access services, however, so that access customers can choose between obtaining services pursuant to contract tariff or generally available tariff. This ensures that no access customer will be required to pay dramatically higher access rates as a result of Phase I pricing flexibility. In this section, we explain why we conclude that these two forms of relief  X14are warranted in Phase I.   X '` ` b. Volume and Term Discounts  X 4z123. Background. Price cap LECs currently may offer volume and term discounts for  X 4special access services without any competitive showing.~C = {O3'ԍ See Special Access Expanded Interconnection Order, 7 FCC Rcd at 7458-65.~ The Commission also permits incumbent LECs to offer cost-based volume and term discounts for several switched transport  X4servicesDT = yO'ԍ These switched transport services are entrance facilities, interoffice mileage, and tandem-switched  {O_'transport. Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 7433-34. when competitors have purchased either (1) 100 DS1-equivalent switched transport cross-connects in the incumbent LEC's "zone 1" wire centers, or (2) an average of 25  Xd4DS1-equivalent switched transport cross-connects per zone 1 wire center.]Ed= {O!'ԍ Switched Transport Expanded Interconnection Order, 8 FCC Rcd at 7434-36. In the Special Access  {O"'Expanded Interconnection Order, the Commission allowed incumbent LECs with operational expanded interconnection offerings to implement a system of traffic-density-related rate zones, to bring special access rates  {O$'more in line with costs. Special Access Expanded Interconnection Order, 7 FCC Rcd at 7454. The Commission  {O$'later expanded density zone pricing to switched transport. See Switched Transport Expanded Interconnection  {O%'Order, 8 FCC Rcd at 7426-27; Virtual Collocation Order, 9 FCC Rcd at 5196-97. For purposes of this Order, we use "zone 1" to refer to the zone with the heaviest traffic density.] By "cost-based""dDE,-(-(ZZM" discounts, the Commission meant that the discounts should be based on per-unit of capacity differences in embedded costs incurred to provide high-volume service relative to the costs of  X4non-high-volume offerings.F= {OK'ԍ See Special Access Expanded Interconnection Order, 7 FCC Rcd at 7463; Switched Transport Expanded  {O'Interconnection Order, 8 FCC Rcd at 7433. In the Access Reform NPRM, the Commission invited comment  X4on expanding volume and term discount authority upon satisfaction of Phase I triggers.[G$= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21435-38.[  X4{124. Discussion. Upon satisfaction of the Phase I triggers, we find that price cap LECs should be permitted to offer volume and term discounts to enable them to respond to  Xc4competition.[Hc= {O 'ԍ See USTA Comments at 28, 49, and Att. 1 at 30-31; USTA Reply at 26-27; Citizens Comments at 17-18; PacTel Comments at 26; U S West Comments at 32-33; Ameritech Comments at 41 and Att. B at 36; BA/NYNEX Comments at 49; BA/NYNEX Reply at 23-24; BellSouth Comments at 33-34; Cincinnati Bell Comments at 18; GTE Comments at 48; SNET Comments at 18; SNET Reply at 14-15. This authority to offer volume and term discounts upon satisfaction of the Phase I triggers is in addition to the existing authority price cap LECs have to offer volume and term discounts.[ Prohibiting incumbent LECs from offering volume and term discounts when they have satisfied the Phase I triggers could distort the market for access services by preventing incumbent LECs from competing efficiently. In addition, permitting volume and term discounts creates little headroom that an incumbent could use to increase rates for other access services. For several years, the Commission has allowed volume and term discounts  X 4for certain access services in the trunking and traffic-sensitive baskets.I 0 = {O'ԍ See Special Access Expanded Interconnection Order, 7 FCC Rcd at 7458-65; Switched Transport  {O'Expanded Interconnection Order, 8 FCC Rcd at 7433-34. There is nothing in the record before us to suggest either that the headroom resulting from those discounts has led to unreasonable rate increases for other access services in those baskets, or that headroom resulting from expanded volume and term discount authority will lead to unreasonable rate increases for other access services in those baskets in the future. Unlike contract tariffs, moreover, volume and term discounts are not tailored to individual customers, and incumbent LECs must make them available to any customer with sufficient volumes or willing to  XO4commit to a given term.PJZO = yO'ԍ Volume and term discounts for services in the common line basket raise issues that are not presented by volume and term discounts for services in the traffic-sensitive and trunking baskets. We address common line  {O!'issues further in Section VI.D.3 of this Order, infra.P  X!4|125. Several parties do not oppose volume and term discounts in their entirety, but rather oppose allowing volume and term discounts under conditions that might enable incumbent LECs to lock in customers or discriminate in favor of incumbents' long distance"EJ,-(-(ZZ"  X4affiliates.K= yOy'ԍ AT&T Comments at 80-81; MCI Comments at 58-59; Sprint Comments at 43-45; ACTA Comments at 18. The Phase I triggers we adopt above condition incumbent LEC volume and term discounts upon irreversible, sunk investment by competitors, thus making it less likely that an incumbent will try to use volume and term discounts to lock in customers. In addition,  X4section 202 of the Act=L = yO'ԍ 47 U.S.C.  202.= and our existing enforcement procedures are adequate to address  X4unreasonable discrimination._M= yO 'ԍ We address concerns regarding growth discounts below._  Xv4}126. According to MCI, the Commission proposed permitting volume discounts to facilitate the development of rate structures that reflect the manner in which costs are  XH4incurred. MCI argues further that the Access Reform First Report and Order eliminated inefficiencies in the common line and local switching rate structures, and so volume discounts  X 4are no longer warranted for these services.N @= {O 'ԍ MCI Nov. 9 Reply at 34-35 (citing Access Reform First Report and Order, 11 FCC Rcd at 21437). Contrary to these arguments, however, the Commission proposed relaxing volume and term discount requirements not only to encourage incumbent LECs to develop efficient rate structures, but also to avoid distorting the market or  X 4impeding the development of effective competition.jO = {OZ'ԍ Access Reform First Report and Order, 11 FCC Rcd at 21437.j Therefore, the rate structure revisions  X 4adopted in the Access Reform First Report and Order do not obviate the need for relaxing volume discount requirements.  X}4~127. The Illinois Commission supports permitting incumbent LECs to offer volume and term discounts, but it recommends setting a price floor at total service long incremental cost (TSLRIC), or some other measure of forward-looking economic costs, below which such  X84discounts would not be permitted because they could be anticompetitive.MP8d = yOM'ԍ Illinois Commission Comments at 21.M Historically, the Commission has required incumbent LECs to develop rate structures that reflect the manner  X 4in which they incur costs.Q  = yO 'ԍ Investigation of Interstate Access Tariff Non-Recurring Charges, CC Docket No. 85-166, Phase I, Part 3, 2 FCC Rcd 3498, 3501-02 (1987). Rate structures that are not cost-based tend to result in implicit  X4subsidies between high-volume and low-volume users.jRL = {O#'ԍ Access Reform First Report and Order, 12 FCC Rcd at 15998.j We find that this concern is reduced, however, when the incumbent has met the Phase I trigger, because the existence of sunk investment by competitors limits the incentive to engage in anticompetitive pricing behavior. Furthermore, we will consider complaints filed under section 208 of the Act"FR,-(-(ZZ" alleging that a rate charged pursuant to a volume discount is unreasonably low, in violation of  X4section 201 of the Act.PS= {Ob'ԍ See 47 U.S.C.  201, 208.P Moreover, any volume or term discount that results in a below-cost  X4offering would give rise to an antitrust claim,TZ= {O'ԍ See 15 U.S.C.  2; In re Air Passenger Computer Reservation Systems Antitrust Litigation, 694 F. Supp.  {O'1443 (C.D. Cal. 1988), aff'd, 948 F.2d 536 (9th Cir. 1991). which provides further protection to competitors. As a result, we conclude that the benefits of permitting volume and term discounts without requiring a cost showing outweigh any possible costs. We will not require that LECs demonstrate that the volume and term discounts they may offer at Phase I are cost-based.  XH'` ` c. Contract Tariffs  X 4128. Upon satisfaction of the Phase I triggers, we will permit price cap incumbent LECs to offer interstate access services pursuant to contract tariff. Access customers benefit from contract tariffs because they enable incumbent LECs to tailor services to their customers' individual needs. Incumbent LECs argue that they should be permitted to offer access services on a contract carriage basis, in part because these arrangements are common  X 4elsewhere in telecommunications and other industries.U = yO'ԍ USTA Comments at 49; BA/NYNEX Comments at 51; BellSouth Comments at 35-36; Ameritech Reply at 12-13; GTE Reply, App. D at 13. We agree that, once competitors have made irreversible, sunk investments in their networks, continuing to prohibit incumbent LECs from offering services under contract tariff could reduce the efficiency of the market for access services by reducing the incumbent LECs' ability to meet customers' needs.  X44129. AT&T, Frontier, and MCI submit that incumbent LECs will be able to tailor contract carriage tariffs to such a point that additional customers are unlikely to select the  X4tariff, leaving the incumbent LECs free to discriminate in favor of their affiliates.V= {O'ԍ AT&T Comments at 44-45; AT&T Reply at 45; Frontier Comments at 15; MCI Comments at 62. See  {O'also ACTA Comments at 18. Although any unreasonable restriction on the availability of contract tariff services would violate  X4Section 202 of the Act,=Wj = yO 'ԍ 47 U.S.C.  202.= and any party that believes that it may be disadvantaged by an allegedly discriminatory contract tariff offering may file a complaint under section 208 of the  X4Act,=X = yOU$'ԍ 47 U.S.C.  208.= we agree that special safeguards are warranted with respect to contracts with affiliates. Permitting incumbent LECs to file contract tariffs on one day's notice provides little opportunity for the Commission or competing carriers to review the terms of the tariffs before they take effect. Issues regarding whether a particular tariff condition is unreasonably"eG X,-(-(ZZ" discriminatory and whether another carrier is in fact "similarly situated" may prove difficult to determine in a subsequent complaint proceeding, which, in any event, takes time to resolve. We adopt, instead, a brightline rule to address concerns about discrimination in favor of affiliates. We will not permit an incumbent LEC to offer a contract tariff to an affiliate  X4unless and until an unaffiliated customer first purchases service pursuant to that contract.Y$= yO'ԍ Once the Commission grants BOCs permission, pursuant to section 271 of the Act, 47 U.S.C.  271, to  {O'provide inregion long distance services, they are required to offer those services through separate affiliates. See 47 U.S.C.  272. Similarly, the Commission's rules require incumbent independent (nonBOC) LECs to offer in {Ow'region long distance services through separate affiliates. See 47 C.F.R.  64.1903.  Xv4130. MCI contends that, if price cap LECs are permitted to offer contract tariffs before there is substantial competition in the market, those LECs will deter market entry  XH4through targeted rate reductions.ZH= {O 'ԍ MCI Oct. 26 Comments at 61-62. See also Time Warner Oct. 26 Comments at 14-16. We adopt Phase I triggers to ensure that incumbent LECs cannot drive competitors from the market through targeted rate reductions; these safeguards are adequate to address MCI's concern. Moreover, to the extent that an incumbent LEC attempts to use contract tariffs in an exclusionary manner by targeting them to specific customers, the Commission will enforce the requirement that they make contract tariffs  X 4available to all similarly situated customers.m[ F= {O'ԍ See Interexchange Competition Order, 6 FCC Rcd at 5897.m  X 4131. Intermedia argues that granting incumbent LECs contract tariff authority will result in a price squeeze with respect to facilitiesbased CLECs that purchase UNEs, because the Commission has adopted average variable cost as a price floor for incumbent LEC  Xb4wholesale and retail rates.e\b= {O'ԍ Intermedia ex parte statement of July 14, 1999, at 2.e According to Intermedia, CLECs providing service through the use of unbundled network elements are unable to compete with incumbent LEC services priced at average variable cost, because the Commission's pricing methodology for UNEs, Total Element Long Run Incremental Cost (TELRIC), includes costs, including joint and  X4common costs, depreciation, and a reasonable profit,d]j = {O!'ԍ See Local Competition Order, 11 FCC Rcd at 1585056.d that are excluded from the calculation  X4of average variable cost.e^ = {O!'ԍ Intermedia ex parte statement of July 14, 1999, at 2.e Intermedia proposes that the Commission address this price squeeze by requiring resale, at a wholesale discount, of all incumbent LEC contract tariff  X4offerings and volume and term discounts.;_ = {O%'ԍ Id. at 45.; Intermedia's concerns about potential a potential price squeeze are best addressed in the context of a complaint filed under section 208 of the Act alleging that a rate charged pursuant to a contract tariff or volume or term discount is"H _,-(-(ZZ`"  X4unreasonably low and thus violates section 201.P`= {Oy'ԍ See 47 U.S.C.  201, 208.P We note in this regard that such a complaint is not subject to dismissal merely because a given rate is at or above average variable cost; average variable cost is not necessarily a "reasonable" rate.  X4132. MCI and Time Warner argue that AT&T was permitted to offer contract tariff service only when the Commission found that AT&T faced "substantial competition," and that allowing incumbent LECs to offer contract carriage on a lesser showing is inconsistent with  X_4that precedent.a_Z= yOj 'ԍ MCI Comments at 60-61; Time Warner Comments at 31-33; MCI Nov. 9 Reply at 41 (citing  {O2 'Interexchange Competition Order, 6 FCC Rcd 5880). We find that the precedent cited by MCI and Time Warner is not entirely on point, because, in contrast to the relief granted to AT&T, Phase I relief does not permit  X14price cap LECs to provide services completely outside of price cap regulation.gb1= {O'ԍ  See Interexchange Competition Order, 6 FCC Rcd at 5894.g Rather, price cap LECs will be required to maintain generally tariffed access service offerings subject to price cap regulation. Because we are granting incumbent LECs much less pricing  X 4flexibility at Phase I than the Commission granted AT&T pursuant to the Interexchange  X 4Competition Order, we do not require price cap LECs to show that they face substantial competition.  X4133. Ameritech and Bell Atlantic also seek permission to respond to requests for  X}4proposals (RFPs).c}F= {Ot'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 22; Ameritech ex parte statement of June 5, 1998, at 3. We find that the contract tariff authority we grant here is sufficient to enable price cap LECs to respond to RFPs, and so we need not grant any further pricing flexibility for this purpose. ALTS maintains that granting flexibility to respond to RFPs is inconsistent with a previous Commission Order terminating an investigation, in which the Commission concluded that a Southwestern Bell tariff revision designed to respond to RFPs  X 4was unreasonably discriminatory.Ld\ = {O['ԍ ALTS ex parte statement of June 25, 1999, at 25 (quoting Southwestern Bell Telephone Company, CC Docket No. 97-158, Order Concluding Investigation and Denying Application for Review, 12 FCC Rcd 19311,  {O'19336 (1997) (Southwestern Bell Transmittal 2633 Order)).L ALTS's concern is unfounded. First, Southwestern Bell sought to respond to any RFP that indicated that the request involved a competitive  X4situation.xe = {OQ#'ԍ See Southwestern Bell Transmittal 2633 Order, 12 FCC Rcd at 19317.x Unlike the Phase I triggers we adopt in this Order, Southwestern Bell's tariff did not in any way indicate whether its competitors had made irreversible investment in facilities. Second, the Commission's decision rested in part on Southwestern Bell's failure to submit"IV e,-(-(ZZ\"  X4adequate evidence of competition in its region at that time.@f= {Oy'ԍ Id. at 19334-35.@ The Commission did not decide, as ALTS seems to imply, that any RFP authority is inherently unreasonable. Finally, the Commission noted the pendency of this rulemaking proceeding, and that the record in this proceeding might provide a basis for permitting contract tariffs or competitive response  X4tariffs.=gZ= {O'ԍ Id. at 19339.= Thus, rather than precluding consideration of this RFP issue, the Southwestern Bell  X4Transmittal 2633 Order expressly contemplated addressing that issue in this Order.  Xc'` ` d. Growth Discount  X54134. We reject Ameritech's and Bell Atlantic's proposal to allow incumbent LECs to  X 4offer growth discounts.h = {O'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 21, 29; Ameritech Oct. 26 Comments, Att. N at 9-10. Growth discounts refer to pricing plans under which incumbent LECs offer reduced per-unit access service prices to customers that commit to purchase a certain percentage above their past usage, or plans that offer reduced prices based on growth  X 4in traffic placed over an incumbent LEC's network.Xi F= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21437.X The Commission tentatively decided  X 4not to permit growth discounts in the Access Reform NPRM, because they create an artificial advantage for BOC long distance affiliates with no subscribers, relative to existing IXCs and  X4other new entrants.@j= {O'ԍ Id. at 21437-38.@ The Commission also invited parties to comment on whether growth  X4discounts would enhance the development of competitive access markets.=kj = {O'ԍ Id. at 21438.=  XQ4135. None of the parties supporting growth discounts explains why growth discounts enhance the development of competitive access markets. Instead, Ameritech asserts that the Commission could rely on the tariff review process to ensure that any growth discounts do  X 4not unreasonably advantage the incumbent LEC's long distance affiliate.Ul  = yO 'ԍ Ameritech Oct. 26 Comments, Att. N at 9-10.U Without any affirmative benefit to growth discounts presented in the record before us, we have no basis for allowing such discounts. "J l,-(-(ZZ"Ԍ X'` ` e. X-Factor Reductions  X4136. Ameritech, Bell Atlantic, and USTA recommend reducing or eliminating the  X4X-Factor in the price cap index (PCI) formula as competition grows.m= {O4'ԍ Ameritech ex parte statement of June 5, 1998, at 3; Bell Atlantic ex parte statement of April 27, 1998, at  {O'10; USTA Oct. 26 Comments at 37 and Att. E; see also SBC Oct. 26 Comments at 20. In price cap regulation, the "X-Factor" limits access rate increases. Access services are grouped into "baskets," and the weighted average of the rates in each basket may not exceed the price cap index (PCI). The PCI is adjusted annually by a  {OX'measure of inflation minus the X-Factor. See Price Cap Fourth Report and Order, 12 FCC Rcd at 16647-48. This regulatory relief is not warranted. Phase I pricing flexibility is designed to grant incumbent LECs more flexibility to lower prices for particular customers without subjecting other customers to higher rates. Because competition may not be sufficient to constrain prices throughout an MSA at Phase I, we require LECs to maintain their generally available tariffs in order to protect access customers. If we were to lower the X-Factor as competition increases, then the price cap-constrained tariffs might not be adequate to protect access customers from rate increases.  X 4137. Ameritech maintains that the X-Factor should be eliminated in its proposed "Phase II," which is roughly analogous to our Phase I, because competitive pressures will  X 4constrain the incumbent LEC's ability to earn excessive profits.Tn ~= yO'ԍ Ameritech Oct. 26 Comments, Att. N at 9-10.T We find this reasoning unpersuasive, because the services for which the incumbent feels competitive pressure are the ones most likely to be offered under contract tariff, outside of price cap regulation. Therefore, the services that remain subject to price cap regulation are likely to be those for which the incumbent faces less competition.  X44138. Moreover, the Commission designed price cap regulation in part to replicate, to  X4the extent possible, the results of a competitive market.eo= {O'ԍ LEC Price Cap Performance Review, 10 FCC Rcd at 9002.e Generally, as more competitors enter a market, supply increases, and this additional supply puts downward pressure on prices. Conversely, lowering the X-Factor decreases downward pressure on prices. Thus, lowering the X-Factor as competition increases would produce exactly the opposite result of a competitive market, thereby undercutting one of the Commission's goals in adopting price cap regulation.  X|'` ` f. Other Price Cap Revisions  XN4139. We reject the proposal by several LECs to consolidate the existing price cap  X74baskets into one basket.p7= yO&'ԍ Ameritech Oct. 26 Comments, Att. N at 9-10; USTA Oct. 26 Comments at 37, Att. E; SBC Oct. 26 Comments at 20. Ameritech states that this restructuring would permit incumbent"7K p,-(-(ZZ8"  X4LECs to raise prices for some services to offset reductions in prices for other services.Uq= yOy'ԍ Ameritech Oct. 26 Comments, Att. N at 9-10.U Nothing in the record suggests that the customers facing increased prices under this kind of pricing flexibility are likely to have many competitive alternatives relative to customers that benefit from price reductions. Thus, consolidating price cap baskets would deprive access customers of protection that remains necessary at Phase I.  Xv4140. For similar reasons, we also decline to adopt Bell Atlantic's suggestion that we increase upper service band index (SBI) limits to 10 percent per year for transport services upon satisfaction of its proposed "Phase II" triggers, which are similar to the Commission's  X14Phase I triggers.jr1X= {O: 'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 21.j Increasing the upper SBI limits upon satisfaction of our Phase I triggers could enable the incumbent LEC to increase a customer's access rates before that customer  X 4has a competitive alternative.Qs = {O'ԍ See Ad Hoc Oct. 26 Comments at 30.Q  X ' 5. Phase II for Special Access and Dedicated Transport  X '` ` a. Introduction  Xy4141. We adopt Phase II triggers comparable to our Phase I triggers: we will grant Phase II pricing flexibility to incumbent LECs when competitors have collocated in a certain percentage of the incumbent's wire centers in an MSA, or in wire centers generating a certain percentage of an incumbent's revenues for the services at issue within the MSA. Because Phase II grants incumbent LECs considerably greater flexibility than Phase I, we adopt  X4triggers to ensure that competitors have established a significant market presence, i.e., that competition for a particular service within the MSA is sufficient to preclude the incumbent  X4from exploiting any monopoly power over a sustained period.<t\|= yO'ԍ As we explain further in this Order below, determining that an incumbent LEC cannot exploit monopoly  {O'power over a sustained period is not equivalent to finding that carrier to be nondominant. See Section VI.C.4.b,  {O'infra.< Upon a Phase II showing for special access and dedicated transport services within an MSA, we will relax the price cap  X4rules and the Part 69 rate structure requirements applicable to those services in that MSA.ru= yO!'ԍ Part 69 does not prescribe a rate structure for special access services.r  X~4142. By significant market presence, we mean that IXCs have a competitive alternative for dedicated transport services needed to reach the majority, although not necessarily all, of their long distance customers throughout the MSA, and that almost all special access customers have a competitive alternative. We find that Phase II regulatory"9L0 u,-(-(ZZ" relief is warranted upon satisfaction of the Phase II triggers within an MSA, even though such relief might lead to higher rates for access to some parts of an MSA that lack a competitive alternative, for several reasons. First, the customers for the services we address in this section are IXCs and large businesses, not residential or small business end users. These large and sophisticated customers generate significant revenues for the incumbent and are not without bargaining power with respect to the incumbent.  X_4143. Second, delaying Phase II regulatory relief until access customers have a competitive alternative for access to each and every end user might give competitors the ability to "game the system." In other words, competitors might be able to prevent an incumbent from obtaining pricing flexibility in an MSA simply by choosing not to enter certain parts of that MSA or to serve certain customers. We will not distort the operation of the market in this manner.  X 4144. Finally, because regulation is not an exact science,Vv = {O7'ԍ United States v. FCC, 707 F.2d at 618.V we cannot time the grant of regulatory relief to coincide precisely with the advent of competitive alternatives for access to each individual end user. We conclude that the costs of delaying regulatory relief outweigh the potential costs of granting it before IXCs have a competitive alternative for each and every end user. The Commission has determined on several occasions that retaining regulations longer than necessary is contrary to the public interest. Almost 20 years ago, the Commission determined that regulation imposes costs on common carriers and the public, and  X4that a regulation should be eliminated when its costs outweigh its benefits.wZ= yO('ԍ Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities  {O'Authorizations Therefor, CC Docket No. 79252, First Report and Order, 85 FCC 2d 1, 3 (1980) (Competitive  {O'Carrier First Report and Order). The Court later overturned this Order, but only because the Commission did not have authority under the Communications Act at that time to forbear from regulation, not because it erred in  {OL'determining that the costs of regulation can outweigh its benefits. See MCI v. FCC, 765 F.2d 1186, 119596 (D.C. Cir. 1985); AT&T v. FCC, 978 F.2d 727, 736 (D.C. Cir. 1992). More recently, the Commission recognized that retaining tariffing requirements for nondominant IXCs  X4imposes costs in the form of a less efficient market.x= yOx'ԍ Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket No. 9661, Second Report and Order, 11 FCC Rcd 20730, 2076263 (1996). In Section III of this Order, we conclude that the new service rules currently in effect limit incumbents' incentives to innovate. The Part 69 rate structure can impose costs on an incumbent LEC by limiting its ability to develop rate structures in response to market forces. Thus, retaining the Part 69 rate structure imposes costs on society by perpetuating inefficiencies in the market for interstate access services. The triggers we adopt for Phase II flexibility are sufficient to ensure that incumbent LECs cannot exercise any remaining monopoly power indefinitely. If an incumbent LEC charges an unreasonably high rate for access to an area that lacks a competitive alternative, that rate will induce competitive entry, and that entry will in turn"7M0 x,-(-(ZZ8" drive rates down. Accordingly, we will not delay Phase II regulatory relief until access customers have a competitive alternative for access to every end user.   X4145. As we did in Phase I, we establish different triggers for (1) special access services (other than channel terminations) and dedicated transport services, and (2) channel terminations. In this section of the Order, we adopt triggers for each of these services and adopt specific forms of regulatory relief for Phase II. In the Noticeaccompanying this Order, we invite interested parties to comment on Phase II triggers for other switched access services.  X ' ` ` b. Phase II Triggers   X 4146. We note above that the regulatory relief proposed by Ameritech and Bell Atlantic for "Phase II" is analogous to our Phase I relief. Here, we find that Ameritech's and  X 4Bell Atlantic's Phase III proposals are analogous to the Phase II relief we adopt here.yD = yO7'ԍ In addition to all the forms of regulatory relief we grant immediately in Sections III and V of this Order and that we will grant upon satisfaction of Phase I triggers, in Phase II, we will (1) relax our Part 69 rate structure rules, and (2) permit price cap LECs to offer access services completely outside of price cap regulation. Ameritech and Bell Atlantic recommend removing services from price cap regulation upon demonstration that an  {OW'incumbent LEC has met their Phase III criteria. Ameritech ex parteĠstatement of June 5, 1998, at 3; Bell  {O!'Atlantic ex parte statement of April 27, 1998, at 22. USTA also recommends removing services from price caps upon its Phase III showing, and recommends eliminating Part 69 rate structure requirements upon a Phase I showing. USTA Oct. 26 Comments at Att. E. Therefore, we rely in part on the record developed in response to Bell Atlantic's and Ameritech's proposals in developing our Phase II triggers. Bell Atlantic proposes granting relief when competitors have collocated facilities, purchased UNEs, or installed their own  Xb4facilities in 75 percent of the wire centers in the market area.jzb= {O'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 21.j Ameritech recommends granting relief when competitors have collocated in wire centers serving 75 percent of the  X44demand in a market area, measured on a DS1equivalent basis.c{4f = {OK'ԍ Ameritech ex parteĠstatement of June 5, 1998, at 2.c  X4147. Access customers must have competitive alternatives throughout most of an MSA before we can grant Phase II regulatory relief to an incumbent LEC. The Ameritech and Bell Atlantic proposals recognize that our Phase II triggers must be high enough to ensure that competitive alternatives for the services at issue exist in the area for which flexibility is granted. The triggers we adopt, however, differ from those recommended by these incumbent LECs in two respects: as in Phase I, (1) we base our Phase II triggers on collocation in either a certain percentage of wire centers in an MSA, or in wire centers generating a certain percentage of the revenues for the services at issue in an MSA; and (2) we conclude that different services warrant different thresholds. "7N {,-(-(ZZ8"Ԍ X4148. We determined in our Phase I analysis above that evidence of collocation may underestimate the extent of competitive facilities within a wire center, because it fails to account for the presence of competitors that have wholly bypassed incumbent LEC facilities. For this reason, we adopt a threshold lower than the 75 percent recommended by Ameritech and Bell Atlantic. For dedicated transport, and for special access services other than channel terminations, we grant Phase II pricing flexibility to incumbent LECs that demonstrate that competitors have collocated in 50 percent of an incumbent LEC's wire centers in the MSA at issue. SBC has shown that competitors have collocated in 51 percent of its wire centers in  XH4the San Diego MSA.r|H= yO 'ԍ SBC Reply in SBC Forbearance Proceeding, CC Docket No. 98227, Att. 2. r According to SBC, competitors' networks in this MSA comprise at  X14least 1150 route miles, and there are more than 360 buildings on those networks.R}1X= yO: 'ԍ SBC Forbearance Petition, Att. A at 10. R Similarly,  X 4competitors have collocated in 58 percent of SBC's wire centers in the Los Angeles MSA.~ = yO'ԍ SBC Reply in SBC Forbearance Proceeding, CC Docket No. 98227, Att. 2. For purposes of its forbearance petition, SBC treats the Long Beach and Orange County MSAs as one MSA. SBC submits that competitors' networks in this MSA comprise more than 2530 route miles,  X 4and there are more than 950 buildings on those networks.R @= yO'ԍ SBC Forbearance Petition, Att. A at 10. R We explain above that  X 4establishing an operational collocation arrangement requires considerable time and expense.F = {OV'ԍ Section VI.C.2, supra.F This evidence suggests that collocation in 50 percent of an incumbent LEC's wire centers corresponds to considerable investment by competitors in transmission facilities and the ability of competitors to serve customers in a large number of buildings.  Xb4149. As we explain in our Phase I discussion, a few wire centers may account for a disproportionate share of revenues for a particular service. For this reason, we also will grant Phase II pricing flexibility for these services upon a demonstration that competitors have collocated in wire centers accounting for 65 percent of the incumbent LEC's revenues from those services in an MSA. Similarly, we will grant Phase II pricing flexibility for channel terminations between an IXC POP and a LEC serving wire center when an incumbent demonstrates that competitors have collocated in 50 percent of its wire centers in an MSA, or in wire centers accounting for 65 percent of the incumbent's revenue for this service. As we explained in our discussion of Phase I triggers above, these services carry traffic between points of high traffic concentration and therefore warrant lower triggers than those we adopt for channel terminations between a LEC end office and a customer premises.  XN4150. We adopt higher thresholds for channel terminations between an incumbent LEC's end office and customer premises, for the reasons we offered in our Phase I analysis. For these channel terminations, Phase II relief is available to LECs that demonstrate that" Ob ,-(-(ZZc" competitors have collocated in 65 percent of the incumbent LEC's wire centers in the MSA at issue, or in wire centers accounting for 85 percent of the incumbent's revenues from those services in that MSA. Because these services do not carry traffic between points of high traffic concentration, and because the collocated competitors still rely on incumbent LEC facilities to reach the end user, we find that higher thresholds are warranted.  Xv4151. MCI argues that price cap LECs should be permitted Phase II regulatory relief, such as removal of services from price cap regulation, only when those LECs are "non XH4dominant," i.e., no longer have market power in the provision of the services at issue.EH= yO 'ԍ MCI Oct. 26 Comments at 48.E We conclude that the Phase II regulatory relief we grant below is warranted when competitors have established a significant market presence in an MSA, and we need not require a showing of nondominance. Upon a Phase II showing, we will not grant incumbent LECs all the regulatory relief we afford to nondominant carriers. Specifically, incumbent LECs in Phase II are still required to file generally available tariffs, while nondominant LECs and CAPs are  X 4permitted, but not required, to file tariffs. X= {O'ԍ See Hyperion Telecommunications, Inc. Petition Requesting Forbearance, Memorandum Opinion and Order and Notice of Proposed Rulemaking, 12 FCC Rcd 8596, 861112 (1997). Furthermore, our relief is limited to certain services and certain areas, and will be granted only upon satisfaction of the triggers we adopt here. Thus, Phase II relief is not tantamount to nondominant treatment.  Xd4152. In the Interexchange Competition Order, the Commission allowed AT&T to remove some interexchange services from price cap regulation based on a finding of "substantial competition," but it based that finding on a more detailed analysis than the Phase  X!4II triggers we adopt here, including an examination of, inter alia, demand and supply  X 4elasticities, pricing behavior, and market share.j = {Oo'ԍ See Interexchange Competition Order, 6 FCC Rcd at 588793.j We conclude that this detailed substantial competition test is not warranted for special access and dedicated transport services because we grant incumbent LECs pricing flexibility only on a MSAbyMSA basis, while the Commission granted AT&T pricing flexibility on a nationwide basis. Furthermore, the administrative burdens of a detailed substantial competition test are magnified when done on an MSAbyMSA basis, and we believe our collocationbased triggers are sufficient to ensure that we do not grant pricing flexibility prematurely. Accordingly, we will rely on collocationbased triggers to indicate when competitors have established a significant market presence  XT4that warrants Phase II relief for special access and dedicated transport services.TD= yOI#'ԍ We seek comment on Phase II relief for common line and trafficsensitive services in the accompanying Notice. "=P,-(-(ZZ_"Ԍ X' ` ` c. Phase II Relief  X4153. Upon satisfaction of the Phase II triggers we adopt above for special access and dedicated transport services, we will no longer require price cap LECs to comply with our Part 69 rate structure rules or Part 61 price cap rules with respect to those services within an MSA. An incumbent LEC should be permitted to remove services from price cap regulation when that LEC's competitors have established a significant market presence in the provision  X_4of those services.+\_= {O'ԍ In the LEC Price Cap Order, the Commission explained that it is unnecessary to extend the efficiency  {O 'incentives of price cap regulation to services offered on a "contracttype basis." LEC Price Cap Order, 5 FCC Rcd at 6810. + A significant market presence in an MSA ensures that the incumbent will not be able to exploit any monopoly power for a sustained period. We will, however, continue to require LECs to maintain generally available tariffs, but we will permit them to file such tariffs on one day's notice. In this section, we explain why we conclude that these two forms of relief are warranted upon satisfaction of the Phase II triggers.  X 4154. Currently, Part 69 of the Commission's rules prescribes a rate structure for all switched access services, including dedicated transport. USTA recommends eliminating the  X 4Part 69 rate structure as a form of regulatory relief.H = yOD'ԍ USTA Oct. 26 Comments, Att. E.H In addition, in Section III above, we eliminate rate structure requirements for new services. We agree that elimination of our Part 69 rate structure rules for existing dedicated transport services is warranted, but not until the incumbent LEC meets our Phase II requirements. As explained in more detail in Section VIII.C. below, a rate structure can create implicit subsidies if it does not reflect accurately the manner in which incumbent LECs incur the costs of providing a service. Therefore, rate structure rules are necessary in the absence of a significant market presence by competitors. Once competitors have established a significant market presence in an MSA, however, we believe it is no longer necessary to impose efficient rate structures on incumbent LECs. Therefore, we will eliminate our rate structure rules for particular services once an incumbent LEC demonstrates the development of a significant market presence by competitors for those services by satisfying the Phase II trigger. Retaining our price cap and rate structure rules until LECs are nondominant is unwarranted because doing so would delay the action of competition in setting efficient rate levels and rate structures.  XN4155. We recognize that the regulatory relief we grant upon a Phase II showing may enable incumbent LECs to increase access rates for some customers. We conclude that this relief nonetheless is warranted upon a Phase II showing for two reasons. First, some access rate increases may be warranted, because our rules may have required incumbent LECs to price access services below cost in certain areas. Second, we find that a Phase II showing is sufficient evidence that competitors' market presences have become significant, and that the public interest is better served by permitting market forces to govern the rates for the access services at this point. In addition, we note that these services generally are purchased by"!Q|,-(-(ZZ? " IXCs, not individual end users. IXCs are sophisticated purchasers of telecommunications services, fully capable of finding competitive alternatives where they exist and determining which competitor can best meet their needs.  X4156. We decline to adopt any other Phase II regulatory relief proposed in the Access  X4Reform NPRM. Two of those proposals, elimination of price cap service categoriesX= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21445.X and  Xz4consolidation of price cap baskets,@zZ= {O 'ԍ Id. at 2144748.@ are not relevant because Phase II relief removes services from price cap regulation.  X54157. The Access Reform NPRM also proposed allowing incumbent LECs to charge  X 4IXCs different rates for access to different classes of end user./Z = yO'ԍ Specifically, the Commission proposed allowing incumbent LECs to charge an IXC different rates for local switching and transport services based on the class of end user to which the IXC provides long distance  {OM'service. Id. at 2144546./ Ameritech argues that class X 4ofcustomer pricing would enable incumbent LECs to respond to competition.C = yO'ԍ Ameritech Comments at 46.C We find that the pricing flexibility we grant in Phase I and Phase II is sufficient to enable incumbent LECs to respond to competition. Bell Atlantic argues that classofcustomer pricing is simply  X 4another form of deaveraging.g = {O'ԍ BA/NYNEX Comments at 51. See also USTA Comments at 28.g We grant price cap LECs considerable flexibility to deaverage their rates in Section V of this Order, and Bell Atlantic does not explain why deaveraging by class of customer is necessary to enable incumbent LECs to respond to competition. Thus, the record does not provide a basis for granting this relief.  XQ' D. Price Cap Issues  X#' 1. Revision of Price Cap Indices  X4158. We have determined that no adjustment to price cap LECs' PCIs is warranted when a LEC removes demand associated with services offered pursuant to contract tariff from a price cap basket, or when an entire service is removed from price cap regulation pursuant to a Phase II showing. When the Commission permitted AT&T to remove commercial long distance services from price cap regulation, it did not require AT&T to make any exogenous  X4cost adjustment to the PCI for the basket from which those services were removed.0 = yOc%'ԍ Revisions to Price Cap Rules for AT&T Corp., CC Docket No. 93197, Report and Order, 10 FCC Rcd  {O+&'3009, 3019 (1995) (Commercial Services Order). Specifically, the Commission found that the removal of an individual service from a basket"kR ,-(-(ZZ" has no effect on the PCI, and it affects the API only by altering the base period revenue weights of the services remaining in the basket at the time a carrier revises some other rate in  X4that basket.^= {OK'ԍ Commercial Services Order, 10 FCC Rcd at 3019.^ Thus, removing individual services from price cap regulation has only a de  X4minimisĠeffect on the headroom for the services remaining in the basket.Z= {O'ԍ See also USTA ex parteĠstatement of Jan. 27, 1999; U S West ex parte statement of Jan. 28, 1999.  X4159. In accordance with this precedent, we do not require incumbent LECs to make any exogenous adjustment to their PCIs to reflect the removal of demand associated with contract tariff services from price cap regulation. Although the Commission did require a "recalibration" of AT&T's PCIs when other services were removed from price cap  X54regulation,Z\5= {O 'ԍ Interexchange Competition Second Report and Order, 8 FCC Rcd at 3671 (removal of all services except  {O'800 directory assistance from Basket 2); AT&T NonDominantReinitialization Order, 11 FCC Rcd 1201 (removal of services except international services from Basket 1). Z we find that the recalibration required by those Orders is not needed for removal of contract tariff demand. In those cases, the Commission removed all the services except one service category from the basket in question. Because the service band indices (SBIs) were designed to limit crosssubsidization between different types of services within a basket, and there is no danger of crosssubsidization when there is only one service category remaining in the basket, the Commission recalibrated AT&T's PCIs and APIs to eliminate the  X 4SBI for the remaining basket without affecting the headroom AT&T had previously. = {Ol'ԍ Interexchange Competition Second Report and Order, 8 FCC Rcd at 3671; AT&T NonDominant  {O6'Reinitialization Order, 11 FCC Rcd at 1201. In the case of the relief we provide here, however, incumbent LECs will remove only some demand for some services from a basket; therefore, we will retain the SBIs, and there is no need for the recalibration we required of AT&T.  X8' 2. LowEnd Adjustment Mechanism  X 4160. Background. In the LEC Price Cap Order, the Commission adopted the lowend adjustment mechanism, which permits incumbent LECs earning rates of return less than 10.25 percent in a given year to increase their PCIs to a level that would enable them to earn 10.25  X4percent.Wl = {O!'ԍ LEC Price Cap Order, 5 FCC Rcd at 6804.W The Commission decided to retain the lowend adjustment mechanism in the Price  X4Cap Fourth Report and Order, to prevent confiscatory price cap rates in cases where differences in economic conditions in different price cap LECs' service regions might cause a  X4LEC to earn a confiscatory return in a given tariff year. = {O5&'ԍ See Price Cap Fourth Report and Order, 12 FCC Rcd at 16691, 1670405; Price Cap Performance  {O&'Review, 10 FCC Rcd at 9048. "SZ ,-(-(ZZ"Ԍ X4ԙ161. In its petition for reconsideration of the Price Cap Fourth Report and Order,&= {Oy'ԍ Price Cap Fourth Report and Order, 12 FCC Rcd 16642. For purposes of this Section VI.D.2 of the  {OC'Order, except as otherwise noted, "Petition" refers to petitions for reconsideration of the Price Cap Fourth  {O 'Report and Order filed July 11, 1997, "Comments" refers to comments filed in response to those petitions on August 18, 1997, and "Reply" refers to replies filed in response to those petitions on September 3, 1997.  AT&T questions whether it is reasonable to retain the lowend adjustment mechanism after  X4the elimination of sharing.E~= yO;'ԍ AT&T Petition at 1316. When price cap regulation included sharing obligations, incumbent LECs were required to "share" half or all their earnings above specified rates of return with their access customers through  {O 'lower PCIs during the following year. See Price Cap Fourth Report and Order, 12 FCC Rcd at 16649. The  {O 'Commission eliminated sharing obligations in the Price Cap Fourth Report and Order, in part because the benefits derived from those obligations were reduced by the adoption of an XFactor based on a more accurate measure of productivity growth and elimination of multiple XFactor options. As a result, the efficiencyblunting  {O 'effects of sharing began to outweigh its benefits. Id. at 16699702.E In this Order, for the reasons discussed below, we partially grant AT&T's petition on this issue. We will consider other issues raised in AT&T's petition,  X4along with other petitions for reconsideration of the Price Cap Fourth Report and Order, in a future Order.  Xc4162. Discussion. We eliminate the lowend adjustment mechanism for price cap LECs that qualify for and elect to exercise either the Phase I or Phase II pricing flexibility we  X74grant in this Order.X7 = yO'ԍ Streamlined treatment of new services, removal of interexchange services from price caps, and geographic deaveraging of rates for services in the trunking basket do not affect a LEC's entitlement to a lowend adjustment. AT&T argues that the lowend adjustment mechanism blunts efficiency incentives just as sharing does and that, therefore, retaining it is inconsistent with the  X 4Commission's decision to eliminate sharing.A = yO'ԍ AT&T Petition at 1315.A AT&T also notes that several LECs opposed retention of the lowend adjustment mechanism, and those that supported it did so only as a  X 4means to provide "symmetry" to the sharing obligation.R = {O8'ԍ Id. at 1314; AT&T Reply at 67. R AT&T requests that we eliminate  X 4the lowend adjustment mechanism or reintroduce sharing.A >= yO'ԍ AT&T Petition at 1516.A  X4163. We conclude that we should eliminate the lowend adjustment mechanism once price cap LECs qualify for and choose to exercise either the Phase I or Phase II pricing flexibility we grant in this Order. We agree with AT&T that the lowend adjustment mechanism tends to blunt efficiency incentives. We also conclude that this effect will be exacerbated by removing contract tariff services from price cap regulation, so that retention of the mechanism would be unreasonable for price cap LECs obtaining pricing flexibility. The lowend adjustment mechanism can create undesirable incentives for price cap LECs when" T,-(-(ZZ" they move some demand for some services out of price cap regulation. The lowend adjustment is a rateofreturnbased mechanism, and it therefore recreates some of the incentives of rateofreturn regulation, although not to the same extent as sharing  X4obligations.|= yO4'ԍ The Commission has concluded that sharing obligations severely blunt the efficiency incentives that it sought to create when it adopted price cap regulation, by requiring price cap LECs earning more than certain  {O'rates of return to share half or all those earnings with their customers. Price Cap Fourth Report and Order, 12  {O'FCC Rcd at 16699; LEC Price Cap Performance Review, 10 FCC Rcd at 904546. The lowend adjustment mechanism does not blunt efficiency incentives as much as sharing because it guarantees only a 10.25 percent rate of return, and price cap LECs should be able to achieve much greater profits by trying to increase their productivity growth.  Earnings from nonprice cap services are currently not considered part of "total  X4interstate earnings" = {Oa 'ԍ In the LEC Price Cap Reconsideration Order, the Commission explained that sharing and the lowend  {O+ 'adjustment mechanism are based on total interstate earnings rather than basketbybasket earnings. LEC Price  {O 'Cap Reconsideration Order, 6 FCC Rcd at 267980. See also LEC Price Cap Order, 5 FCC Rcd at 6805. The Commission also determined that sharing and the lowend adjustment mechanism should be based on earnings  {O'from all services subject to price cap regulation, rather than earnings exclusively from access services. LEC  {OQ'Price Cap Reconsideration Order, 6 FCC Rcd at 268081.  for purposes of calculating lowend adjustments.?\ = {O'ԍ See LEC Price Cap Reconsideration Order, 6 FCC Rcd at 2681 n.126. Earnings from services excluded from price cap regulation also are excluded from total interstate earnings for purposes of calculating lowend  {Ou'adjustments. Id. at 268182.? As a result, price cap LECs must remove the costs of nonprice cap services in order to calculate interstate earnings, and they have an incentive to underallocate those costs in order to minimize measured earnings. Currently, this underallocation incentive is not a serious concern, because nonprice cap services represent a very small fraction of the price cap LECs' federally tariffed  X14activities, and so the effects of any underallocation are minimal.W1= {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6810.W Once a LEC has removed a significant amount of demand associated with contract tariff offerings from price cap regulation, however, its incentive to underallocate the costs of nonprice cap services and the effects of such underallocation will be greater.  X 4164. Our decision to eliminate the lowend adjustment mechanism for parties obtaining pricing flexibility is consistent with a proposal made by the Ad Hoc  X4Telecommunications Users Committee (Ad Hoc) in response to the Access Reform NPRM. Ad Hoc argues that incumbent LECs either should be guaranteed a just and reasonable rate of return and recovery of all of their prudent investment, or they should be permitted to pursue  XM4market opportunities and maximize their earnings, but not both.CMD= yOB$'ԍ Ad Hoc Comments at 6669.C Ad Hoc reasons that an  X64incumbent LEC permitted unlimited profits under price cap regulation should not be shielded"6U,-(-(ZZ"  X4from any risk of stranded investment.:= {Oy'ԍ Id. 6768.: Alternatively, Ad Hoc argues that an incumbent LEC seeking some stranded investment recovery should be subject to 100 percent sharing  X4obligations for all earning in excess of 50 basis points over the authorized rate of return.:Z= {O'ԍ Id. at 67.: Although we decline to reimpose sharing obligations, we agree with Ad Hoc that an incumbent LEC seeking pricing flexibility to compete more vigorously in the marketplace should not be afforded any rateofreturnbased protection from any risk associated with its  Xv4competitive ventures.$v= yO 'ԍ Courts also have held that a utility company's captive customers should bear the risk of loss of the utility's investment only if those customers also are permitted to share in the benefits resulting from that  {O 'investment. See Democratic Cent. Comm. of the Dist. of Columbia v. Washington Metro. Area Transit Comm'n,  {Om '485 F.2d 786, 805 (D.C.Cir.1973), cert. denied, 415 U.S. 935 (1974); AT&T Info. Sys., Inc. v. FCC, 854 F.2d 1442, 1444 (D.C. Cir. 1988). $  XH4165. We have considered whether it is possible to modify the lowend adjustment mechanism to limit the undesirable incentives discussed above. For example, USTA proposed requiring price cap LECs to maintain records regarding demand for services removed from price cap regulation, but permitting them to keep that information confidential. Under USTA's proposal, a price cap LEC seeking to make a lowend adjustment would be required  X 4to reprice its removed service demand at an "average price cap tariff rate."a = {O&'ԍ USTA ex parte statement of Jan. 27, 1999, at 34.a It would be difficult, however, for the Commission or other interested parties to verify that a price cap LEC claiming a lowend adjustment has repriced its contract tariff demand properly. Specifically, whenever a contract tariff offering is a package of two or more access services, USTA's proposal requires the incumbent to allocate the contract rate among the services in the package. It would be difficult for the Commission to determine whether that allocation is reasonable, particularly in cases where the package includes nonregulated services and services removed from price cap regulation pursuant to a grant of pricing flexibility. Therefore, USTA's proposal would not be an adequate safeguard against crosssubsidization.  X4166. The other possible safeguard that we have considered would require the Commission to specify the cost allocation rules LECs would use to segregate costs and revenues from services in price cap regulation from the costs and revenues of services outside of price cap regulation. Such rules would be burdensome for carriers and the Commission and is inconsistent with the deregulatory framework envisioned by Congress when it adopted the Telecommunications Act of 1996. Indeed, we find that such cost accounting rules would make using the lowend adjustment mechanism just as burdensome as making an abovecap filing. We have retained the lowend adjustment mechanism in part to avoid costly abovecap"NV2 ,-(-(ZZ"  X4filings.= yOy'ԍ The Commission retained the lowend adjustment mechanism to help prevent price cap regulation from  {OA'becoming confiscatory. Price Cap Fourth Report and Order, 12 FCC Rcd at 16704. The abovecap filing is the only other mechanism in price cap regulation designed explicitly to prevent confiscatory rates. Any abovecap filing must be supported by the following: (1) cost support data broken down to the lowest possible level for each relevant basket for each of the most recent four years under price cap regulation; (2) a detailed explanation of the reasons for the prices of all rate elements to which the LEC does not assign costs; (3) a comprehensive explanation of how the carrier allocated costs among rate elements in the relevant basket; and (4) an explanation  {O'of the manner in which the LEC has allocated all costs, not just exogenous costs, among baskets. LEC Price  {O'Cap Order, 5 FCC Rcd at 6823. Burdening the lowend adjustment mechanism with cost allocation rules thus would undercut a major reason for retaining the lowend adjustment mechanism as part of the price cap plan. On the other hand, elimination of the lowend adjustment mechanism for an incumbent LEC might enable the Commission to relax, for that LEC, any accounting rules necessitated only by the rateofreturnbased lowend adjustment mechanism. For all these reasons, we eliminate the lowend adjustment mechanism for price cap LECs obtaining pricing flexibility.  XH4167. Any LEC obtaining Phase I regulatory relief in any MSA will be precluded from making any lowend adjustment throughout its entire, holdingcompanywide, service region, regardless of whether it files separate tariffs for each of its study areas. Permitting MSAbyMSA lowend adjustments would require the same kind of burdensome cost allocation rules that we describe above. Furthermore, eliminating the lowend adjustment will not result in confiscatory rates, because we will continue to permit price cap LECs to make abovecap tariff filings. We also conclude that an abovecap tariff investigation provides the best forum for determining whether the abovecap tariff would implicitly force the LEC's regulated  X4ratepayers to bear some of the risk of the LEC's competitive ventures.= yO'ԍ The Commission has stated that it would probably suspend any abovecap filing for the statutory five {O'month period. Id. at 682324.  Xb4168. We retain the lowend adjustment mechanism for price cap LECs that have not opted to exercise any Phase I or Phase II regulatory relief, however. As we note above, the flexibility we grant in Phase I and Phase II will exacerbate the efficiencyblunting effects of the lowend adjustment mechanism. By the same token, the inefficiencies associated with the lowend adjustment mechanism in the absence of these flexibilities are fairly minor. To be eligible for a lowend adjustment, a price cap LEC must earn less than a 10.25 percent rate of return, which would constitute a substantial earnings sacrifice for most price cap LECs. For those LECs, the benefits of the lowend adjustment mechanism would not justify such a sacrifice, because the mechanism permits only a onetime PCI adjustment to avoid backtoback annual earnings below 10.25 percent. For this reason, we find that the benefits of retaining the lowend adjustment mechanism for those LECs that have not obtained Phase I or Phase II relief (ensuring that LECs' rates are not confiscatory without requiring abovecap filings) outweigh its effects on efficiency incentives. "7W ,-(-(ZZ"Ԍ X4 3. Common Line Basket Issues  X4169. Above, we permit incumbent LECs to offer contract tariffs and volume and term discounts for access services once they satisfy the Phase I triggers. We also have designed our Phase I relief to limit headroom by requiring price cap LECs to remove the demand associated with contract tariff offerings from price caps, so that price cap LECs cannot use that pricing flexibility to raise access rates for those customers in the MSA that lack competitive alternatives. Phase I pricing flexibility for services in the common line basket does not raise the same concerns regarding headroom, because different price cap rules apply to the common line basket. There is no need to require price cap LECs to remove common line services offered pursuant to contract tariff from price caps, nor do we see any need for additional safeguards to prevent the creation of headroom as a result of volume and term discounts for services in the common line basket, because the current rules already preclude the creation of headroom in the common line basket. Specifically, Section 69.152(m) prohibits price cap carriers that choose to charge less than the maximum permitted end user common line charges (EUCLs) from making up any of that revenue through increases to other common line charges (primary interexchange carrier charges (PICCs) or carrier common line  Xy4CCL) charges).Dy= yO'ԍ 47 C.F.R.  69.152(m). D Similarly, Section 69.153 requires incumbent LECs to base their PICC calculations on the maximum revenues permitted under the rules, rather than the actual  XK4revenues recovered.@KX= yOT'ԍ 47 C.F.R.  69.153.@ Thus, our rules do not permit a LEC to charge a higher PICC for some subscriber lines simply by reducing the PICC for other lines. Finally, Section 69.154 allows price cap LECs to impose CCL charges only to the extent that their permitted common line revenues exceed the maximum amount the LECs could have recovered through EUCLs  X4and PICCs.`= yO'ԍ 47 C.F.R.  69.154. Other restrictions also apply.`  X' E. Procedural Issues  X' 1. Special Access and Dedicated Transport Services  Xe4170. Background. In the Access Reform NPRM, the Commission invited comment on  XP4the procedural requirements governing requests for pricing flexibility._Px= {Oy"'ԍ Access Reform NPRM, 11 FCC Rcd at 21432, 21444._ The Commission did not propose any specific pleading cycle, but it proposed establishing a deadline for  X"4Commission action of 90 days.>" = {O%'ԍ Id. at 21431. > " X,-(-(ZZM"Ԍ X4171. Discussion. An incumbent LEC seeking pricing flexibility for special access or dedicated transport services under the framework we adopt in this Order may file a petition with the Commission identifying the relief it seeks and demonstrating that it has satisfied the applicable triggers. Comments on petitions will be due fifteen days after the petition is filed. Replies will be due ten days after the comments are due. The triggers established for special access and dedicated transport services are administratively simple and easy to verify. A relatively short pleading cycle is, therefore, sufficient to enable interested parties to examine the incumbent LEC's petition and to draft a response. We will notify interested parties of a pending pricing flexibility petition through the Competitive Pricing Division's Tariff Public Reference Log. In addition, we require incumbent LECs to submit pricing flexibility petitions through our Electronic Tariff Filing System (ETFS), so that interested parties may obtain copies of petitions through the Commission's website.  X 4172. Incumbent LECs bear the burden of proving that they have satisfied the  X 4applicable trigger for the pricing flexibility they seek.O = {O9'ԍ See Spectranet Comments at 56.O An incumbent LEC is in the best position to present evidence of the extent of collocation in its wire centers within an MSA. We also adopt Ameritech's proposal to permit incumbent LECs to file petitions for multiple  X{4MSAs, as long as the data in those petitions are disaggregated by MSA.U{Z= yO'ԍ Ameritech Oct. 26 Comments, Att. N at 3, 5.U Specifically, to carry its burden of proof, the incumbent may show the following: (1) the total number of wire centers in the MSA; (2) the number and location of the wire centers in which competitors have collocated; (3) in each wire center on which the incumbent bases its petition, the name of at least one collocator that uses transport facilities owned by a provider other than the incumbent to transport traffic from that wire center; and (4) that the percentage of wire centers in which competitors have collocated satisfies the trigger we have adopted with respect to the pricing flexibility sought by the incumbent LEC. Alternatively, the  X4incumbent may show the following: (1) the total base period= {O^'ԍ For price cap LECs, the "base period" is the 12month period (i.e., the calendar year) ending six months  {O('before the effective date of the LECs' annual access tariffs. See 47 C.F.R.  61.3(e).  revenues generated by the services for which the incumbent seeks relief in the MSA for which the incumbent seeks relief; (2) in each wire center on which the incumbent bases its petition, the name of at least one collocator that uses transport facilities owned by a provider other than the incumbent to transport traffic from that wire center; and (3) that the wire centers in which competitors have collocated account for a sufficient percentage of the incumbent's base period revenues generated by the services at issue within the relevant MSA or nonMSA area to satisfy the trigger we have adopted with respect to the pricing flexibility sought by the incumbent LEC. We codify these requirements in a new Section 1.774 of our rules, as set forth in Appendix B to this Order. "YF,-(-(ZZ"Ԍ X4173. Currently, the Commission's new service rules require price cap LECs to determine the appropriate price cap basket and service band for their new services in the context of a subsequent annual access tariff filing, and to incorporate those new services into  X4those baskets in that annual access filing.X= yO4'ԍ Specifically, price cap LECs are required to incorporate new services into a price cap basket in the annual access tariff filing effective between 6 and 18 months after the new service tariff takes effect. 47 C.F.R. 61.42(g).  Whenever a price cap LEC can demonstrate in an annual access tariff filing that one of its new services would be properly incorporated into a basket or service band for which it has been granted Phase I or Phase II regulatory relief in any MSA or MSAs, it will be granted the same relief in the same MSAs for that new service.  XH4174. We also amend Section 0.291, listing the authority delegated to the Chief, Common Carrier Bureau (Bureau), explicitly to delegate authority to issue Orders acting on petitions for pricing flexibility involving special access and dedicated transport services. Because the pricing flexibility triggers we adopt for those services are administratively simple brightline tests, Bureaulevel review is sufficient to determine whether the incumbent LEC has satisfied the applicable test.  X 4175. Finally, a pricing flexibility petition for special access and dedicated transport services will be deemed granted unless the Bureau denies it within 90 days of the close of the  Xy4pleading cycle, as the Commission proposed in the Access Reform NPRM.Yy= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21431. Y Ameritech recommends adopting a deadline of 90 days after the filing date of the petition, rather than 90  XM4days after the close of the pleading cycle.SMz= yOx'ԍ Ameritech Comments, Attachment N at 3, 5.S Although we expect our pricing flexibility thresholds to be simple to administer, it is prudent to allow more time to review pricing flexibility petitions, at least until we gain more experience. The Bureau may, of course, issue an Order before this 90day deadline if it has completed the review. Also, if experience shows that a full 90 days is not necessary to review pricing flexibility petitions, we may consider relaxing this or other procedural requirements. The period for filing applications for review begins the day the Bureau grants or denies the petition, or the day that the petition is deemed denied.  X~' 2. Treatment of Proprietary Data  XP4176. In the event that a price cap LEC wishes to request confidential treatment of any information contained in a pricing flexibility petition, it should follow the procedures for obtaining confidential treatment of tariff cost support information. The price cap LEC must demonstrate, by a preponderance of the evidence, that the information should be withheld from public inspection in accordance with the requirements of Section 0.459 of the"Z ,-(-(ZZ"  X4Commission's rules.$= {Oy'ԍ See 47 C.F.R.  0.459. See also Examination of Current Policy Concerning the Treatment of Confidential Information Submitted to the Commission, CC Docket No. 9655, Report and Order, 13 FCC Rcd  {O '24816, 2484042 (1998) (Treatment of Confidential Information Order); Tariff Streamlining Order, 12 FCC Rcd at 221214.  A price cap LEC wishing to request confidential treatment of information contained in a pricing flexibility petition should demonstrate, by a preponderance of the evidence, that the information should be withheld from public inspection in accordance with the requirements of Section 0.459 of this chapter.  X4177. In their requests for confidentiality, carriers should indicate with specificity the extent to which they believe the information they submit, such as the identity of collocators,  X_4is subject to section 222(b) of the Act concerning confidential carrier information,J_= {O 'ԍ See 47 U.S.C.  222(b).J and the bases for that belief. The information will be kept confidential, as appropriate, subject to Commission procedures concerning Freedom of Information Act (FOIA) requests. Although the Commission will consider any FOIA requests on a casebycase basis, pursuant to applicable law, we note that FOIA exceptions, such as the exception for "trade secrets and  X 4commercial or financial information,"L F= {O'ԍ See 5 U.S.C.  552(b)(4).L may prevent disclosure of such information. A price cap LEC will be required, in any event: (1) to provide collocation information to parties to the extent that the parties are the collocators upon which the price cap LEC relies in its petition, (2) to certify in its petition that it has done so, and (3) to provide to the Commission a copy of the information it provides to those parties. In such cases, the LEC may provide the data to a party in redacted form, revealing to the party only the information relating to that party.  X4' 3. Other Switched Access Services  X4178. We will grant Phase I pricing flexibility for common line and trafficsensitive services, and the trafficsensitive components of tandemswitched transport service to a price cap LEC within an MSA if the LEC demonstrates that its competitors, in aggregate, offer service over their own facilities to at least 15 percent of incumbent LEC customer locations in the MSA. For the reasons we explain in Section VI.C.3, we do not prescribe a particular method by which a LEC may demonstrate satisfaction of this trigger. As a result, petitions seeking pricing flexibility for these services will not be as routine as petitions seeking pricing flexibility for special access and dedicated transport services. Because pricing flexibility petitions for common line, trafficsensitive, and the trafficsensitive components of tandemswitched transport services are not subject to a brightline rule, and will require more factintensive investigation, they are best addressed at the Commission level. Accordingly, we do not delegate authority to the Bureau at this time to act on petitions for pricing flexibility involving these services. A pricing flexibility petition for these services will be deemed"[,-(-(ZZ" granted unless the Commission denies it within five months of the close of the pleading cycle for that petition. Otherwise, we adopt the same procedural requirements for pricing flexibility petitions for these services as we adopt above for pricing flexibility petitions for special access and dedicated transport services. As the Commission gains experience with such petitions, it may be possible for the Commission to act in less than the full five months, or to delegate authority to the Bureau with respect to these petitions.  X_' F. U S West Forbearance Petition  X14179. As we note above, several BOCs have filed petitions seeking forbearance,  X 4pursuant to section 160 of the Act,= = yO 'ԍ 47 U.S.C.  160.= from dominant carrier regulation in the provision of  X 4certain special access and high capacity services.I X= {O 'ԍ See supra Section II.C.1.I The first of these petitions, filed by U S West, is deemed granted if not denied by the Commission by August 24, 1999, unless the  X 4Commission extends the deadline for an additional ninety days." = {Op'ԍ See Petition of U S West Communications, Inc. for Forbearance from Regulation as a Dominant Carrier in the Phoenix, Arizona MSA, CC Docket No. 98157 (filed Aug. 24, 1998); 47 U.S.C.  160(c) (imposing oneyear deadline for Commission action on forbearance petition; Commission may extend the deadline by 90 days if necessary to ensure compliance with the statutory forbearance criteria). We conclude that such an extension is warranted here. In this Order, we adopt a comprehensive framework for granting price cap LECs such as U S West progressively greater pricing flexibility as competition develops, including much of the relief sought by U S West in its petition, and an extension of the deadline for acting on that petition will allow the Commission to consider U S West's request for relief in the context of the rules we adopt here. Accordingly, we extend the deadline for acting on U S West's petition by ninety days. >'u .J:\ACCESS.REF\AR1999\ITEM\PFLEXSS2.ORD. >  X':'u *J:\ACCESS.REF\AR1999\ITEM\CLEC.ORD* :+ VII. CLEC ACCESS CHARGES Đ\  X' A. Background  X4180. In the Competitive Carrier Proceeding, the Commission established a  X4comprehensive framework for determining whether carriers are dominant or non-dominant.^= {O"'ԍ Dominant/NonDominant Order, 12 FCC Rcd 15766.^  X~4Dominant carriers~f = {O$'ԍ Competitive Carrier First Report and Order, 85 FCC 2d at 2022; see also 47 C.F.R.  61.3(o) (defining "dominant carrier"). are carriers that possess individual market power and those without"~\ ,-(-(ZZ"  X4market power are non-dominant carriers.|= {Oy'ԍ The Commission, in the Dominant/NonDominant Order, listed a number of factors that historically have been considered in determining whether a firm possesses market power, including market share, supply and demand substitutability, the cost structure, size, and resources of the firm, and control of bottleneck facilities.  {O'See Dominant/NonDominant Order, 12 FCC Rcd at 15766. See also Implementation of NonAccounting Safeguards of Sections 271 and 272 of the Communications Act of 1934 and Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area, CC Docket No. 94149, Notice of Proposed Rulemaking, 11 FCC Rcd 18877, at 1892938 (1996). The Commission's policy since Competitive  X4Carrier is that a carrier is non-dominant unless the Commission makes or has made a finding  X4that it is dominant. = {O 'ԍ See, e.g., Competitive Carrier First Report and Order, 85 FCC 2d at 1011; 47 C.F.R.  61.3(u) (defining "nondominant carrier"). New entrants into the exchange access market, such as competitive  X4local exchange carriers (CLECs),f = yO 'ԍ CLECs compete with incumbent LECs in the provision of local exchange and exchange access services. have been presumptively classified as non-dominant because the Commission has not found that they are able to exercise market power in  X4particular service areas.$ = yO8'ԍ See Tariff Filing Requirements for NonDominant Common Carriers, CC Docket No. 9336, Memorandum Opinion and Order, 8 FCC Rcd 6752, 6754 (1993) (CLECs are nondominant carriers because  {O'they have not been previously declared dominant), vacated and remanded in part on other grounds,  {O'Southwestern Bell Corp. v. FCC, 43 F.3d 1515 (D.C. Cir. 1995); on remand, 10 FCC Rcd 13653 (1995). To date, the Commission has applied Parts 61 (Tariffs) and 69  Xz4(Access Charges) of its rules only to incumbent LECs.z= {O 'ԍ  See Hyperion Telecommunications, Inc., Petition for Forbearance, Memorandum Opinion and Order, 12 FCC Rcd 8596 (1997) (granting petitions seeking permissive detariffing for provision of interstate exchange  {O'access services by providers other than the incumbent LEC) (Hyperion Order). Concomitantly with the  {Oi'Hyperion Order, the Commission issued a Notice of Proposed Rulemaking seeking comment on mandatory  {O3'detariffing for nonincumbent LEC providers of interstate exchange access services. See Complete Detariffing for Competitive Access Providers and Competitive Local Exchange Carriers, CC Docket No. 97146, Notice of Proposed Rulemaking, 12 FCC Rcd 8613 (1997).  XL4181. In the Access Reform NPRM, the Commission sought comment on whether CLECs have market power with regard to terminating access services and whether and to  X 4what extent it should regulate terminating access services provided by CLECs.X *= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21476.X The Commission noted that, with originating access, the calling party has the choice of service  X 4provider, the decision to place a call, and the ultimate obligation to pay for the call.= = {O_#'ԍ Id. at 21472.= The  X 4calling party is also the customer of the IXC that purchases the originating access service.3 N= {O%'ԍ Id.3 As long as IXCs can influence the choice of the access provider, a LEC's ability to charge" ],-(-(ZZN " excessive originating access rates is limited, as IXCs will shift their traffic from that carrier to  X4a competing access provider.3= {Ob'ԍ Id.3 The Commission noted that, with terminating access, the  X4choice of service provider for terminating access is made by the called party.=Z= {O'ԍ Id. at 21476.= The decision to place the call and payment for the call lies, however, with the calling party. The calling party, or its long-distance service provider, has little or no ability to influence the called  X4party's choice of service provider.3= {O* 'ԍ Id.3 Furthermore, IXCs are required by statute to charge  Xv4averaged rates.|"v~= {O 'ԍ See 47 U.S.C.  254(g); see also Policy and Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section 254(g) of the Communications Act of 1934, as amended, CC Docket No. 9661, Report and Order, 11 FCC Rcd 9564 (1996) (requiring IXCs to integrate and average the rates they charge for service).| Consequently, not only does the calling party not choose the terminating LEC, but section 254(g) requires IXCs to spread the cost of terminating access rates among all end users. Because the paying party does not choose the carrier that terminates its  X14interstate calls, CLECs may have incentive to charge excessive rates for terminating access."1h = {OJ'ԍ Access Reform NPRM, 11 FCC Rcd at 21476 (citing Joseph Gillan & Peter Rohrbach, The Potential Impact of Local Competition on Telecommunications Market Structure: Diversity or Reconcentration, 1994; Robert W. Crandall and Leonard Waverman, Talk is Cheap: The Promise  yO'of Regulatory Reform in North American Telecommunications, 1996, at 265265).  X 4Accordingly, the Commission tentatively concluded in the Access Reform NPRM that terminating access may remain a bottleneck controlled by whichever LEC provides  X 4terminating access to a particular customer, even if competitors have entered the market.X R = {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21476.X The Commission also recognized, however, that excessive terminating access charges might  X 4encourage IXCs to enter the access market in order to avoid paying these charges.= = {OU'ԍ Id. at 21473.=  X4182. In the Access Reform NPRM, the Commission also sought comment on whether it should continue to treat incumbent LEC originating "open end" minutes, such as originating access for 800 service, as terminating minutes for access charge purposes, and whether it  XO4should extend this approach to CLECs.ZOv= {Ov#'ԍ See id. at 21477. "The term open end of a call describes the origination or termination of a call that utilizes exchange carrier common line plant (a call can have no, one, or two open ends.") 47 C.F.R.  69.105(b)(1)(ii). The Commission noted that, in some cases, such as"O^,-(-(ZZx" 800 and 888 service, the called party, which pays for the call, is unable to influence the  X4calling party's choice of provider for originating access services.\= {Ob'ԍ See Access Reform NPRM, 11 FCC Rcd at 21477.\  X4183. In the Access Reform First Report and Order, the Commission decided not to adopt any regulations governing CLEC terminating access charges and did not address the  X4issue of CLEC originating access charges."Z= yO'ԍ With respect to incumbent LEC originating access charges, the Commission concluded that new entrants, by purchasing unbundled network elements or providing facilitiesbased competition, eventually will exert  {O* 'downward pressure on incumbent LEC originating access rates. Access Reform First Report and Order, 12 FCC Rcd at 1613536. Based on the available record, the Commission decided to continue to treat non-incumbent LECs as non-dominant in the provision of  Xa4terminating access service.jaD= {OV'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16140.j Although an IXC must use the CLEC serving an end user to terminate a call, the Commission found that the record did not indicate that CLECs previously had charged excessive terminating access rates or that CLECs distinguished between  X 4originating and terminating access in their service offerings. = {O'ԍ Id. The Commission noted, in fact, that the record indicated that the terminating rates of CLECs were  {Om'equal to or below the tariffed rates of incumbent LECs. Id. The Commission concluded that it did not appear that CLECs had structured their service offerings in ways designed to exercise any market power over terminating access and that, therefore, the concerns expressed  X 4in the Access Reform NPRM were not substantiated by the record.  X 4184. The Commission further observed that, as CLECs attempt to expand their market presence, the rates of incumbent LECs or other potential competitors should constrain the  X}4CLECs' terminating access rates.Z}2 = yO`'ԍ The Commission stated that the record indicated that longdistance carriers have established relationships with incumbent LECs for the provision of access services, and new market entrants are not likely to risk  {O'damaging their developing relationships with IXCs by charging unreasonable terminating access rates. Id.ā In addition, the Commission found that overcharges for terminating access could encourage access customers to take competitive steps to avoid  XO4paying unreasonable terminating access charges.3OT = {OT 'ԍ Id.3 The Commission explained that, although  X84high terminating access charges may not create a disincentive for the call recipient to retain its local carrier (because the call recipient does not pay the long distance charge), the call  X 4recipient may nevertheless respond to incentives offered by an IXC with an economic interest  X4in encouraging the end user to switch to another local carrier.== {O%'ԍ Id. at 16141.= Thus, the Commission"_x,-(-(ZZ" concluded that the possibility of competitive responses by IXCs would constrain  X4non-incumbent LEC pricing.~= {Ob'ԍ Id. at 16142. The Commission also decided to continue to treat "open end" originating minutes, such as those for 800 or 888 services, as terminating minutes for access charge purposes, recognizing, in these cases, that  {O'access customers have limited ability to influence the calling party's choice of access provider. Id. In order to address the potential that incumbent LECs might charge unreasonable rates for terminating access, the Commission limited price cap incumbent LEC recovery of TIC and common costs from terminating access rates for a limited period with the eventual elimination of any recovery of common line and TIC costs through  {O'terminating access charges. Id. at 16137.  X4185. Although the Commission declined at that time to adopt any regulations governing the provision of terminating access provided by CLECs because CLECs did not  X4appear to possess market power,== {OL 'ԍ Id. at 16141.= it noted that it could address the reasonableness of CLEC terminating access rates in individual instances through the exercise of its authority to  X_4investigate and adjudicate complaints under section 208.=_= yO'ԍ 47 U.S.C.  208.= Moreover, the Commission stated that it would be sensitive to indications that the terminating access rates of CLECs were  X14unreasonable.10 = {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 1614142. The Commission indicated that terminating access rates that exceed originating rates in the same market, for example, may suggest the need to revisit its regulatory approach. Similarly, the Commission noted that terminating rates that exceed those charged by the incumbent LEC serving the same market may suggest that a CLEC's terminating access rates are  {O4'excessive. Id. at 16142. The Commission committed to revisit the issue of CLEC access rates if there were sufficient indications that CLECs were imposing unreasonable terminating access  X 4charges.3 = {O'ԍ Id.3  X 4 B. AT&T's Petition for Declaratory Ruling  X 4186. On October 23, 1998, AT&T filed a petition requesting that the Commission  X4issue a declaratory rulingGv= {O 'ԍ See 47 C.F.R.  1.2.G confirming that, under existing law and Commission rules and policies, IXCs may elect not to purchase switched access services offered under tariff by  Xb4CLECs.:\b= {O$'ԍ  See AT&T Declaratory Ruling Petition. We note that, unless otherwise indicated, all citations to comments and replies in this section of the Order refer to comments and replies submitted in response to the  {O%'AT&T Declaratory Ruling Petition.: AT&T contends that a substantial number of CLECs impose switched access charges that are significantly higher -- in some cases, by more than twenty times -- than those"K`,,-(-(ZZ"  X4charged by the incumbent LEC against which the CLEC competes.s\= {Oy'ԍ AT&T Declaratory Ruling Petition, Appendix A. We note that this issue is also the subject of the Common Carrier Bureau's (Bureau) decision in MGC Communications, Inc. v. AT&T Corp., File No. EAD 99 {O '002, Memorandum Opinion and Order, DA 991395 (Com. Car. Bur. July 16, 1999) (MGC Communications).s AT&T's attempts to negotiate a resolution of this issue have stalled, it says, because many CLECs take the  X4position that, due to the "filed tariff doctrine,"= yOo'ԍ In general, the "filed tariff" or "filed rate" doctrine stands for the principle that "the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext . . . . Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed." Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 127 (1990) (quoting Louisville & Nashville R. Co. v. Maxwell, 237 U.S. 94 (1915)). The filed tariff doctrine is codified at 47 U.S.C.  203, which requires all common carriers of interstate and foreign telecommunications to file a schedule of their charges, as well as the classifications, practices, and regulations affecting such charges. A carrier may charge only the rates listed in the tariff. 47 U.S.C.  203(c)(1). The charges, classifications, regulations or practices in the filed tariff may be changed only after notice is given to the Commission and the public. 47 C.F.R.  203(b)(1). See also Cincinnati Bell Telephone v. Allent Communication Services, 17 F.3d 921, n.4 (6th Cir. 1994). AT&T is obligated to accept services from the CLEC at prices chosen by the CLEC, even though AT&T did not affirmatively order  X4access from the CLEC.  = {O'ԍ AT&T Declaratory Ruling Petition at 3, n.2. AT&T does not typically place access orders, or establish direct connections, with such CLECs. Id. Instead, the CLEC establishes an interconnection arrangement with  {Ok'the incumbent LEC serving the area, and it installs trunks to the incumbent LEC's access tandem.  Id. Calls originated from the CLEC's switch are routed to the incumbent LEC tandem, which then combines them with  {O'other traffic destined for AT&T or another IXC's network and routes that traffic to that IXC's POP. Id. Terminating traffic from AT&T and other IXCs similarly is routed through the incumbent LEC access tandem to  {O'the CLEC. Id.  AT&T alleges that its petition is consistent with the Access Reform  X4First Report and Order, in which the Commission stated that "terminating rates that exceed those charged by the ILEC serving the same market may suggest that a CLEC's terminating  Xc4access rates are excessive."c= {O'ԍ Id. at 9 (citing Access Reform First Report and Order, 12 FCC Rcd at 1613542).  X54187. The Commission has the discretion, on a case-by-case basis, to determine whether it is best to resolve a controversy by the adoption of a general rule or by an  X 4individual ad hoc proceeding, such as a declaratory ruling.\ ^= {O 'ԍ See, e.g., British Caledonian Airways Ltd. v. Civil Aeronautics Board, 584 F.2d 982, 993 (1978) (the choice made between proceeding by a general rule or by an individual ad hoc litigation is one that lies primarily  {O!'in the informed discretion of the administrative agency) (British Caledonian Airways Ltd.). The presence or absence of factual disputes is a significant factor in deciding whether a declaratory ruling is an  X 4appropriate method for resolving a controversy.Z = yO %'ԍ American Network, Inc. Petition for Declaratory Ruling Concerning Backbilling of Access Charges,  {O%'Memorandum Opinion and Order, 4 FCC Rcd 550, 551 (Com. Car. Bur. 1989), recon. denied, 4 FCC Rcd 8797 (Com. Car. Bur. 1989). We note that the factors for determining the propriety of a declaratory ruling are"&,-(-(&"  {O'different in the context of a court referral under the primary jurisdiction doctrine. See Texas & Pacific Ry. v. Abilene Cotton Oil Co., 204 U.S. 426 (1907) (creating "primary jurisdiction" doctrine); United States v. Western Pacific R.R., 352 U.S. 59, 6370 (1956) (explaining purpose of the doctrine); Far East Conference v. United States, 342 U.S. 570, 574 (1952) (same); MCI Communications Corp. v. AT&T, 496 F.2d 214, 22022 (3d Cir. 1974) (applying the doctrine in the telecommunications context)). AT&T contends that a declaratory ruling is" az,-(-(ZZ " appropriate here because the "facts are essentially undisputed and the governing law is  X4clear."Wz= {O'ԍ AT&T Declaratory Ruling Petition at 5. W Despite AT&T's allegations to the contrary, however, the facts are not undisputed here. A number of carriers assert that AT&T's calculations of CLEC originating and  X4terminating access ratesF = {Ox 'ԍ See id. at Appendix A.F are either incorrect or misleading.x= {O 'ԍ See WinStar Comments at 6; Optel Comments at 5; CTSI Comments at 10 (rates attributed to WinStar, Optel, and CTSI, respectively, are incorrect); ALLTEL Comments at 2 and ALTS Comments at 6 (AT&T's rate comparison is misleading because it does not reflect the fact that price cap carriers rates are reduced as a result of the introduction of presubscribed interexchange carrier charge); Teligent, Inc. Comments at 9 (AT&T fails to include an amount for transport in the rates charged by Ameritech, the local incumbent LEC, but does include an amount for transport in Teligent's rates).x In response to these  X4assertions, AT&T addressed only one of the concerns raised by commenters."= yOm'ԍ AT&T states that inclusion of the presubscribed interexchange carrier charge (PICC) would not make a material difference to its calculation, but it does not address the carriers' other concerns regarding AT&T's  {O'calculations, i.e., that rates were misquoted and did not include incumbent LEC transport charges. See AT&T Reply at 4, n.10, and Appendix B, providing a recomputed comparison including the PICC. Without agreement by the parties on the calculation and accuracy of both the incumbent LEC and  Xv4CLEC rates, it is impossible compare them. v= yO)'ԍ In its reply, AT&T argues that its petition is not a dispute over rate calculations because it is not limited to CLECs that charge rates exceeding the corresponding ILEC levels, but also applies to CLECs that charge rates that simply mirror incumbent LEC rates. AT&T Reply at 4. AT&T asserts that both rates that exceed and rates that mirror incumbent LEC rates distort the exchange access market by establishing the incumbent LECs' purportedly abovecost charges as a benchmark for CLECs. We do not find this argument convincing. At the heart of either complaint is the fact that AT&T views itself as a captive customer forced to pay excessively high terminating rates. In order to evaluate such a complaint, all parties must agree on the method of calculating the  {O'disputed rate, e.g., whether transport fees and PICCs are included. Based on the record, it appears that the parties do not. Nor can the Commission evaluate AT&T's claim that its request for declaratory ruling is consistent with the Commission's statements in  XH4the Access Reform First Report and Order that CLEC terminating access rates that exceed  X34those of the incumbent LEC may be excessive.3= {O#'ԍ AT&T Declaratory Ruling Petition at 9 (citing Access Reform First Report and Order, 12 FCC Rcd at 163542).  X 4188. Moreover, the parties also dispute the applicable law. A number of opponents to  X 4AT&T's petition assert that AT&T mistakenly relies upon the Capital Network decision, in" b.,-(-(ZZ " which the Commission found that an attempt to charge a party for a service that the party did not order would constitute an unreasonable practice within the meaning of section 201(b) of  X4the Act, 47 U.S.C.  201(b).s^= {OK'ԍ AT&T Declaratory Ruling Petition at 68 (citing Capital Network Systems, Inc., 6 FCC Rcd 5609 (Com.  {O'Car. Bur. 1992), application for review denied, 7 FCC Rcd 80921 (1992), aff'd, Capital Network Systems, Inc. v.  {O'FCC, 28 F.3d 201 (D.C. Cir. 1994) (Capital Network)).s These opponents assert that AT&T failed to address the  X4application of the constructive ordering doctrine, established in United Artists.T^= {OZ'ԍ See TRA Comments at 5; MGC Communications Comments at 13; MCI Comments at 4; Cablevision  {O$ 'Lightpath, Inc. and Nextlink, Inc. Comments at 3. See also United Artists Payphone Corp. v. New York Tel.  {O 'Co., 8 FCC Rcd 5562 (1993) (United Artists).T In United  X4Artists, the Commission found that affirmative consent was unnecessary to create a carrier- customer relationship when a carrier is interconnected with other carriers in such a manner that it can expect to receive access services, and when it fails to take reasonable steps to  Xc4prevent the receipt of access services and does in fact receive such services.c= {O('ԍ United Artists, 8 FCC Rcd at 556566. See also Capital Network, 28 F.3d. at 204 (taking notice of the principle of constructive ordering, but finding that the principle does not apply to the billing of incomplete calls). For all the foregoing reasons, and in the exercise of our discretion, we decline to address AT&T's  X54concerns regarding CLEC access charges through a declaratory ruling.5n = {OT'ԍ See SBC Comments at 67 (requesting that the Commission issue a notice of proposed rulemaking for further comment before deciding the matter because the decision may affect other parties and practices). We note that several parties have raised a number of other substantive objections to AT&T's petition that we need  {O'not consider because we are denying the petition on procedural grounds. See, e.g., BellSouth Comments at 3; Total Telecommunication Services Comments at 410; MGC Communications Comments at 5; CTSI Comments at 2 (AT&T's petition violates the interconnection policies of Telecommunications Act of 1996). We therefore deny AT&T's petition.  X 4189. In the Access Reform First Report and Order, however, the Commission committed to review the issue of CLEC access charges if there were evidence that CLECs  X 4were imposing unreasonable terminating access charges.m = {O_'ԍ Access Reform First Report and Order, 12 FCC Rcd at 1614142.m The AT&T Petition for  X 4Declaratory Ruling, the comments provided in support of it, |= {O'ԍ See AT&T Declaratory Ruling Petition; Cable & Wireless Comments at 1; U S West Comments at 1; Sprint Comments at 1. and the Bureau's recent  X4decision in MGC Communications= {O!#'ԍ MGC Communications, File No. EAD 99002, Memorandum Opinion and Order, DA 991395. suggest the need to revisit the issue of CLEC access"ch,-(-(ZZ"  X4rates.7= yOy'ԍ Although we are initiating a rulemaking into the issue of CLEC access charges, we take no position on the reasonableness of these charges at this time. We merely wish to reexamine the issue in light of the  {O 'arguments filed both in support of and in opposition to the AT&T Declaratory Ruling Petition. For example, the comments opposing AT&T's Petition argue that CLECs may have justifiably higher access charges due to their limited geographical scope and scale and their different cost structures.7 Accordingly, in the accompanying Notice, we initiate a rulemaking to examine  X4CLEC originating and terminating access rates.xz= {O'ԍ See, e.g., British Caledonian Airways Ltd., 584 F.2d at 993.x :'u *J:\ACCESS.REF\AR1999\ITEM\CLEC.ORD* :  X'>'u .J:\ACCESS.REF\AR1999\ITEM\GEODVGSW.NPR. >s  VIII. NOTICE OF PROPOSED RULEMAKING Đ\  Xv' A. Geographic Deaveraging for Switched Access Services 190. In this section, we seek comment on whether to amend our Part 69 rules to permit price cap incumbent LECs to deaverage interstate common line and traffic-sensitive access charges within study areas without a competitive showing. Currently, Section 69.3(e)(7) of our rules requires an incumbent LEC to charges rates for access elements that  X 4are averaged across each of its study areas. = yO'ԍ 47 C.F.R.  69.3(e)(7). A study area is a geographical segment of a carrier's telephone operations. Generally, a study area corresponds to a carrier's entire service territory within a state. Thus, carriers operating in more than one state typically have one study area for each state, and carriers operating in a single state typically have a single study area. Carriers perform jurisdictional separations at the study area level. For jurisdictional separations purposes, the Commission adopted a rule freezing study area boundaries effective November 15, 1984. Part 36 of the Commission's Rules, 47 C.F.R., Part 36, Appendix-Glossary, definition of  {OY'"Study Area." See MTS and WATS Market Structure, Amendment of Part 67 of the Commission's Rules and Establishment of a Joint Board, CC Docket Nos. 78-72 and 80-286, 49 Fed. Reg. 48325 (Dec. 12, 1984), adopted by the Commission, 50 Fed. Reg. 939 (Jan. 8, 1985). Section 69.123 permits incumbents to deaverage rates for services in the trunking basket except for the transport interconnection charge (TIC). In Section V,  {O{'supra, we grant incumbent LECs greater flexibility to deaverage rates for these services.  X 4191. Common Line Basket. In the Access Reform NPRM, the Commission requested comment on deaveraging all interstate access rate elements except for the subscriber line charge (SLC) (and the primary interexchange carrier charge (PICC), which did not exist at the  X{4time).X{p= {O!'ԍ Access Reform NPRM, 11 FCC Rcd at 21433.X At that time, however, the Commission proposed to permit deaveraging only upon a  Xd4showing of the degree to which local markets are open to competition.d= {O$'ԍ For further discussion and analysis of this proposal, see Section VI.C.1, supra. We now seek comment on whether to permit incumbent LECs to deaverage common line access elements without a competitive showing. To the extent that parties advocate conditioning deaveraging"6d,-(-(ZZ" upon satisfaction of a competitive showing, we seek comment on the appropriate showing and  X4the procedure by which evidence should be presented and evaluated.= yOb'ԍ We note that, if we permit incumbent LECs to deaverage common line and/or traffic-sensitive charges, IXCs may face significantly differing access costs within LEC study areas. This may increase pressure on IXCs to deaverage interstate interexchange service rates in a manner that conflicts with section 254(g) of the Act, which requires IXCs to charge subscribers in rural and high cost areas rates no higher than rates charged to subscribers in urban areas and to charge subscribers in each state rates no higher than rates charged in any other  {OJ'state. 47 U.S.C.  254(g). See also MCI Oct. 26 Comments at 32.  X4192. We also seek comment on whether to condition an incumbent LEC's authority to deaverage common line access elements on certain regulatory developments, such as  X4deaveraging of unbundled network elements in accordance with our rules,B= {O 'ԍ See 47 C.F.R.  51.507(f) (requiring states to deaverage UNEs across at least three geographic zones);  {OJ 'ALTS Oct. 26 Comments at 9. We recently issued a sua sponte stay of Section 51.507(f) that will remain in effect until six months after the Commission issues its order in CC Docket No. 96-45, finalizing and ordering implementation of high-cost universal service support for non-rural local exchange carriers under section 254 of  {O'the Act. See Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket No. 96-98, FCC No. 99-86, Stay Order (rel. May 7, 1999). or establishment of explicit universal service high cost support mechanisms, and, if so, how. Should we impose these conditions in addition to any competitive showing that we may require? We note that, where unbundled network elements are deaveraged, continuing to require incumbents to charge access rates that are averaged across the study area may foreclose the incumbent LEC from meeting competition from unbundled network elements in low-cost areas. Similarly, an incumbent LEC's averaged rates will be below that LEC's cost in high-cost areas, thus discouraging competitive entry in those areas. We also seek comment on whether incumbent LECs should be required, as opposed to merely permitted, to deaverage certain or all common line access rate elements based on any conditions, such as the deaveraging of unbundled network element rates in a state.  Xy4193. Currently, incumbent LECs recover interstate common line costs through the SLC, PICC, and carrier common line charge (CCLC). The SLC and PICC are flat-rated  XK4charges that vary by class of customer, e.g., multi-line business, single-line business, primary  X64residential line, and additional residential lines, subject to various caps.L6 = yO'ԍ 47 C.F.R.  69.152, 69.153.L The CCLC is a  X4per-minute charge that does not vary by class of customer.@P = yO "'ԍ 47 C.F.R.  69.154.@ The SLC is assessed directly on end users while the PICC and CCLC are assessed on IXCs. Incumbent LECs are required to recover their interstate-allocated common line costs first through SLCs (subject to caps), then from PICCs (again, subject to caps), and finally from the CCLC. As the SLC and PICC caps  X4rise,Y= {OT''ԍ See 47 C.F.R.  69.152(k), 69.153.Y the CCLC gradually decreases and will someday be eliminated."er,-(-(ZZ1"Ԍ X4ԙ194. Parties supporting the deaveraging of interstate common line access charges should comment on the appropriate means of distributing deaveraged cost recovery among such charges. We request comment on whether any deaveraging of the SLC and PICC should be subject to current caps on those charges. At present, our rules provide that, to the extent the SLC caps on all lines and the PICC ceilings on primary residential and single-line business (SLB) lines prevent recovery of the full common line revenues permitted by our price cap rules, incumbent LECs may recover the shortfall through non-primary residential  X_4(NPR) and multi-line business (MLB) PICCs.C_= yO'ԍ 47 C.F.R.  69.153(d).C Thus, if primary residential and SLB SLCs and PICCs have reached their caps, NPR and MLB PICCs may be funding at least part of this  X14shortfall, i.e., subsidizing residential and SLB PICCs. This subsidy will decrease over time as the caps on the primary-residential and single-line business SLCs rise. To what degree should we condition deaveraging of common line rate elements on developments such as the elimination of the MLB PICC? What constraints, if any, should we place on the means by which certain foregone revenue may be recovered? For example, should we permit  X 4deaveraging only within a customer class and for a particular type of charge, e.g., prohibit incumbent LECs from recovering foregone SLC revenue through the CCLC or prohibit incumbent LECs from raising the NPR SLC to fund lower MLB SLCs?  Xf4195. Further, we seek comment on the means of recognizing any geographic variation  XO4in common line costs, i.e., methods of defining geographic pricing zones. Many states have defined at least three geographic zones for the pricing of unbundled loops pursuant to section  X#4252(d)(1) of the Act.(B#X= {O,'ԍ See, e.g., Consolidated Petition of AT&T Communications, Inc., and MCI Telecomms. Corp. and Affiliates for Arbitration with Southwestern Bell Tel. Co., Case Nos. TO9740 and TO9767, at 3536 (Mo. P.S.C. Dec. 11, 1996); Petition of AT&T Communications, Inc. for Arbitration with GTE Hawaiian Tel. Co., Docket No. 960329, Decision No. 15528 at 36 (Haw. P.U.C. Apr. 18, 1997). Section 51.507(f) requires states to create at least three geographic rate zones for unbundled network elements. 47 C.F.R.  51.507(f). We note that despite the fact that Section 51.507(f) of our rules was ineffective when most states determined whether to deaverage geographically unbundled network element rates, many states, such as those listed here, chose to do so.( Universal service reform also may require defining zones to reflect  X 4different cost characteristics. b = yO'ԍ FederalState Joint Board on Universal Service, CC Docket 9645, ForwardLooking Mechanism for High Cost Support for NonRural LECs, CC Docket No. 97160, Access Charge Reform, CC Docket No. 96262, Seventh Report and Order and Thirteenth Order on Reconsideration in CC Docket No. 9645 and Fourth  {Ow!'Report & Order in CC Docket No. 96262, 14 FCC Rcd 8078, 812630 (1999) (Universal Service Seventh  {OA"'Report and Order). We seek comment on whether geographic pricing zones for common line charges should be based on UNE or universal service zones or, perhaps,  X4trunking basket service zones.= {O%'ԍ See, e.g., id. We relax our rules concerning zone pricing of trunking basket services in Section V, supra. Parties are invited to suggest additional bases for"f,-(-(ZZ-" establishing geographic zones. For example, should we require LECs to establish identical geographic pricing zones for all access elements?  X4196. We seek comment on whether to permit incumbent LECs to define their own zones. If so, should we place any constraints on incumbent LEC zone pricing plans for common line service? For example, must an incumbent LEC demonstrate that such zones are based on cost? If so, how? Should there be a limit on the number or size of such zones? We note, for example, that in the accompanying Order we grant incumbent LECs greater flexibility to deaverage rates for services in the trunking basket, but we require each zone, except the highestcost zone, to account for at least 15 percent of the incumbent's trunking  X 4basket revenues in the study area. = {O 'ԍ See Section V, supra. We adopt that requirement to ensure that incumbent LECs cannot define zones that are, for all practical purposes, specific to particular customers.  X 4197. In addition, we seek comment on the procedures by which the Commission might permit incumbent LECs to define common line access charge zones. Should we require parties to submit for prior approval such zone pricing plans in advance of tariff  X 4filings, as we initially required for special access and switched transport zone pricing plans? "= {Oz'ԍ See, e.g., Special Access Expanded Interconnection Order, 7 FCC Rcd at 7456-57. If so, what information should we require parties to submit?  Xb4198. We also seek comment on whether the use of different zones for unbundled network elements, universal service, and access charges would create inefficiencies and  X44arbitrage opportunities.|4= {O'ԍ See Universal Service Seventh Report and Order, 14 FCC Rcd at 812829.| We seek comment on alternative approaches for ensuring that the zones for these different purposes are compatible and that geographic zones generally reflect  X4cost differences.F= yO'ԍ For example, different geographic zones may work for these purposes so long as the results are not widely disparate in any particular location.  X4199. Traffic-sensitive basket. The traffic-sensitive basket includes local switching, information, data base access services, billing name and address, local switching trunk ports,  X4and signaling transfer point port termination.E= yO!'ԍ 47 C.F.R.  61.42(e)(2).E In the past, parties have argued that  X4traffic-sensitive service costs vary little, if at all, within study areas.. = {Ot$'ԍ See, e.g., MCI Nov. 5 Reply Comments at 3132, 3637; Time Warner Oct. 26 Comments at 14. Furthermore, we are unaware of any state commission that has deaveraged an incumbent LEC's rates for unbundled local switching. We invite parties to submit further evidence regarding the degree to which costs of traffic-sensitive services may vary geographically within incumbent LEC"Pg ,-(-(ZZ" study areas and whether any such variance warrants permitting incumbent LECs to deaverage traffic-sensitive charges. We seek comment on whether we should establish similar or identical rules concerning any deaveraging of traffic-sensitive elements as we may establish for common line elements. For example, should we establish similar or identical rules regarding the methods and procedures for establishing rate zones for traffic-sensitive services, to the extent that they should differ from common line or transport zones? In Section VIII.C,  Xv4infra, we seek comment on replacing the existing per-minute or per-call local switching rate structure rules with a capacity-based rate structure. How might deaveraging of traffic-sensitive charges be affected by such changes in the switching rate structure? >'u .J:\ACCESS.REF\AR1999\ITEM\GEODVGSW.NPR. >  X '<'u ,J:\ACCESS.REF\AR1999\ITEM\PFLEX2.NPR, < B. Phase II Pricing Flexibility for Switched Service pp 200. In this section, we seek comment on Phase II pricing flexibility for common line and traffic-sensitive services, and the traffic-sensitive components of tandem-switched  X 4transport services offered by price cap incumbent LECs. = yO9'ԍ As in our discussion of Phase I triggers for common line service, trafficsensitive service, and traffic {O'sensitive components of tandemswitched transport service in Section VI.C.3, supra, references to "trafficsensitive service" in this section include the trafficsensitive components of tandemswitched transport service.  {O'The elements of tandemswitched transport are discussed in Section VI.C.3, supra. See alsoĠ47 C.F.R.  69.111. We address Phase II pricing flexibility for the dedicated portion of tandem switched transport in Section VI.C.2,  {O%'supra. ķ We seek comment on the appropriate triggers for such relief and how Phase II relief for common line and traffic-sensitive services might differ from Phase II relief for dedicated transport and special  X{4access services that we establish in the Order accompanying this Notice.R{F= {Or'ԍ See Section VI.C.5.c, supra.R  XM'X 1. Triggers (# 201. As we discuss in the Order, Phase II relief is warranted when an incumbent LEC  X4demonstrates that competitors have established a significant market presence, i.e., that competition for a particular service within a geographic area is sufficient to preclude the  X4incumbent from exploiting any monopoly power over a sustained period.P= {Oe'ԍ See Section VI.C.5, supra.P In the Order, we conclude that an incumbent price cap LEC is entitled to Phase I pricing flexibility for common line and traffic-sensitive services in an MSA when it demonstrates that competitors, in aggregate, offer service over their own facilities to at least 15 percent of incumbent LEC  X4customer locations in the MSA.Pj = {O$'ԍ See Section VI.C.3, supra.P We seek comment on whether we should predicate Phase II relief for these services on a similar showing that competitors offer these services over their own facilities but adopt a threshold higher than 15 percent, and, if so, what this threshold"Rh ,-(-(ZZ" should be. If a different approach is warranted for Phase II relief, what should the relevant test(s) be? 202. In the Order, we decline to include customer locations served by mobile wireless competitors toward satisfaction of the Phase I trigger, due to the administrative burdens of determining when mobile wireless serves as a substitute for incumbent LEC wireline  Xv4service.7v= {O'ԍ See id.7 Should we exclude mobile wireless service from the Phase II trigger, as well? Are there reasons to believe that mobile wireless substitution will be easier or more important to measure in the context of requests for Phase II relief?  X 4203. Some parties, such as Bell Atlantic and USTA, have proposed that we allow incumbent LECs to seek pricing flexibility for these services with respect to certain classes of customer, such as multiline business customers, based on meeting triggers applicable only to  X 4a particular class of customers. Z= {O'ԍ Bell Atlantic ex parte statement of April 27, 1998, at 27; USTA ex parte statement of June 1, 1999, at 2. We conclude, above, that we should not allow such separate showings for Phase I relief because we wish to encourage competition for both  X 4high-volume business customers and residential and low-volume business customers.P = {OD'ԍ See Section VI.C.3, supra.P Should we decline to permit such separate showings for Phase II pricing flexibility for common line and trafficsensitive services?  XK'X 2. Relief (#  X4204. In the Order, we conclude that an incumbent LEC that qualifies for Phase II relief for dedicated transport and special access services need not comply with Part 69 rate structure rules with respect to these services, may remove these services from price caps, and may file tariffs for these services on one day's notice (so long as such tariffs are made  X4generally available).R~= {O'ԍ See Section VI.C.4.c, supra.R Should we grant similar Phase II relief for common line and traffic-sensitive service? If not, what relief is warranted upon satisfaction of the Phase II triggers for these services?  Xe4205. We also seek comment on whether we should impose certain safeguards with respect to Phase II relief for common line and traffic-sensitive services that we do not impose with respect to dedicated transport and special access services. Currently, incumbent LECs recover some of their common line costs through the SLC, which is assessed directly on the end user. As a condition of granting Phase II relief for common line services, should we require price cap incumbent LECs to charge some or all of the common line charge directly to the end user? If only some of the costs should be charged directly to the end user, on"i,-(-(ZZ" what basis should we establish a limit? What are the advantages and disadvantages of prohibiting some or all common line cost recovery from IXCs? What additional safeguards might we require? For example, should we limit in any way the extent to which incumbent LECs recover local switching costs from IXCs, as opposed to end users?  X4206. We also seek comment on the relationship between granting price cap LECs Phase II pricing flexibility for common line and trafficsensitive services and their receipt of universal service support with respect to these services. If, for example, a price cap LEC is  XH4entitled to universal service support for a line if its costsc\H= yO 'ԍ Cost could be determined in a number of ways, including, but not limited to, costs associated with a  {O 'particular line or a price cap LEC's average cost per line in a study area. See, e.g., Universal Service Seventh  {OS 'Report and Order, 14 FCC Rcd at 812630.c exceed a particular benchmark, should we prohibit the LEC from charging a rate above that benchmark? Similarly, if eligibility for high cost support were determined on the basis of a revenue benchmark, should common line charges be limited by that benchmark? In what other ways should Phase II pricing flexibility for common line and traffic sensitiveservices be affected or limited by universal service concerns? <'u ,J:\ACCESS.REF\AR1999\ITEM\PFLEX2.NPR, <  X '>'u .J:\ACCESS.REF\AR1999\ITEM\FLATRATE.NPR. > C. Switching Issue_s X'  Xy4 1. Local Switching  XK'` ` a. Introduction 207. W_e solicit comment on replacing the existing perminute or percall local  X4switching rate structure rules with a capacitybased rate structure. $= yO'ԍ We address tandem switching issues later in this Order. We do not consider revising Section 69.125, the rate structure rules for dedicated signalling transport services, or Section 69.129, the rate structure rules for  {O3'signalling for tandem switching. We reviewed our SS7 signalling rate structure rules in the Access Reform First  {O'Report and Order, 12 FCC Rcd at 1608991, and we see no reason to reopen those issues at this time.  Specifically, should we require price cap LECs to charge for local switching on the basis of the number of trunks connected to a given end office switch? Below, we seek comment on a capacitybased local switching rate structure. We then consider adding a factor to the trafficsensitive PCI formula, designed to serve a function similar to the "g" factor in the common line PCI formula, in order to give access customers a reasonable portion of the benefits of demand growth. Finally, we seek comment on whether to require LECs to decrease their trafficsensitive PCIs, so that LECs would not retain the benefits of past demand growth on a goingforward basis. "7j,-(-(ZZ"Ԍ X'` ` b. Background 208. The Commission's longstanding policy is to require, to the extent possible, rate structures to reflect the manner in which carriers incur costs. Inefficient rate structures lead to inefficient and undesirable economic behavior, and create an implicit subsidy between  X4highvolume users and lowvolume users.Z= {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 1599596, 15998; Investigation of Interstate Access Tariff NonRecurring Charges, CC Docket No. 85166, Phase I, Part 3, 2 FCC Rcd 3498, 350102 (1987). For example, a rate structure that recovers nontrafficsensitive costs through trafficsensitive access rates increases the perminute rates paid by IXCs and longdistance companies, thereby artificially suppressing demand for interstate longdistance services, and requiring highvolume customers to pay charges in excess of the costs of providing their service. Meanwhile, lowvolume customers pay rates that are less  X 4than the cost of the dedicated equipment.} = {O'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 15996, 16008. } 209. The Part 69 rules require incumbent LECs to charge perminute rates for local  X 4switching, |= {O'ԍ See, e.g., 47 C.F.R.  69.106; Access Charge Order, 93 FCC 2d at 304 (1983) (Access Charge Order). based on the Commission's 1983 finding that local switching services were  X 4trafficsensitive.Y  = {O}'ԍ Access Charge Order, 93 FCC 2d at 30405.Y In the Access Reform First Report and Order, the Commission recognized that the local switching costs associated with line cards and trunk ports are nontraffic X4sensitive, = yO'ԍ Line cards connect subscriber lines to the switch, and trunk ports connect interoffice trunks to the switch.  {O'Access Reform First Report and Order, 12 FCC Rcd at 16034. and revised the access charge rate structure to require incumbent LECs to recover  X{4those costs through nontrafficsensitive rates.@ { = {O&'ԍ Id. at 1603536.@ The Commission also concluded that the record at that time was not adequate to determine whether or to what extent the remaining local switching costs were trafficsensitive or nontrafficsensitive, and maintained the  X64requirement that LECs recover those costs through trafficsensitive rates.= 6 = {Os 'ԍ Id. at 16040.= The Commission did, however, revise the local switching rate structure to permit, but not require, incumbent  X4LECs to establish percall local switching charges, in addition to perminute rates.@ = {O#'ԍ Id. at 1604146.@  X4210. The Commission also considered the nature of switching costs in the Local  X4Competition Order, in the context of establishing pricing rules for local switching unbundled"k ,-(-(ZZ" network elements (UNEs). At least one party to that proceeding, the Washington Utilities and Transportation Commission, advocated a rate structure based on peak usage for local switching in 1996, arguing that a flat rate based upon the cost of providing capacity at peak  X4load is possibly the most economically correct pricing mechanism.= {O4'ԍ See Washington Utilities and Transportation Commission Comments in CC Docket No. 9698, at 2930,  {O'summarized in Local Competition Order, 11 FCC Rcd at 15900. In the Local  X4Competition Order, the Commission concluded that shared local switching costs, i.e., local switching costs other than the costs of line cards and trunk ports, could be reasonably recovered through either flat or perminute rate structures, and permitted state public service commissions to adopt either trafficsensitive or nontrafficsensitive rate structures for local  XL4switching unbundled network elements (UNEs).gL$= {O! 'ԍ Local Competition Order, 11 FCC Rcd at 1587879, 15905.g  X ' ` ` c. Capacitybased Local Switching Rate Structure 211. If costs are driven by peak demand, as suggested by the Washington Utilities and Transportation Commission, then local switching costs do not vary directly with total  X 4switched minutes in most cases. In the Access Reform First Report and Order, however, the Commission considered and rejected a proposal to require incumbent LECs to develop peak and offpeak rates for local switching, because the Commission concluded that LECs would have difficulty determining peak and offpeak hours with any degree of certainty, due to geographic, usertype, and service considerations. In addition, charging different prices for calls made during different times of the day may cause customers to shift their calling to less  X:4expensive times, thereby resulting in different peak times.1Z:= {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 1604647. See also Interconnection Between Local Exchange Carriers and Commercial Mobile Radio Service Providers, CC Docket No. 95185, Notice of Proposed Rulemaking, 11 FCC Rcd 5020, 5042 (1996).1 We know of no reason to revisit our conclusion to reject peak and offpeak rates for local switching. Instead, we consider adopting a capacitybased local switching rate structure. If an increase in total minutes or total number of calls would lead to a measurable increase in local switching costs only when the increase at times of peak demand is so great as to require an expansion of switch capacity, then a capacitybased rate structure may reflect the manner in which incumbent LECs incur local switching costs better than the existing rate structure, without the difficulties raised by determining peak and offpeak hours. 212. A capacitybased local switching rate structure may offer other benefits. Most notably, if IXCs purchased a greater portion of their access services through nontrafficsensitive rates, they would have an incentive to develop offpeak pricing plans to encourage long distance consumers to make more or longer offpeak calls. This, in turn, would encourage more efficient use of the public switched network. Such pricing plans are also likely to extend a greater share of the benefits of access cost reductions to residential long"l,-(-(ZZ" distance customers, because they are more likely than business customers to be offpeak users. 213. Accordingly, we seek comment on revising Section 69.106(f)(2) of the Commission's Rules to require price cap LECs to develop capacitybased local switching charges rather than perminute charges. For example, should we require price cap LECs to calculate a capacitybased local switching charge by considering the aggregate number of trunks switched by the LEC? If local switching rates are based on number of trunkside connections, how should we treat local switching access services with lineside connections,  X14such as Feature Group A?^1= yO 'ԍ For purposes of this Order, Feature Group A is line side access to telephone company end office switches with an associated seven digit telephone number for the customer's use in originating communications from and terminating communications to an IXC's interstate service or a customerprovided interstate  {O 'communications capability. See Contel of Indiana, Inc., Memorandum Opinion and Order, 3 FCC Rcd 4298,  {O '4303 n.5 (Com. Car. Bur., 1988) (citing Exchange Carrier Association Tariff F.C.C. No. 1, pp. 15759).^ 214. We also invite comment on the level of detail that we should specify in our local switching rate structure rules. Specifically, should Section 69.106 require incumbent LECs to charge for local switching based on the DS1 equivalent capacity of an access customer's trunks connected to a particular end office switch, so that the DS3 charge would be 28 times the DS1 charge? Should we instead establish some initial rate relationship  X4between DS1 and DS3, as the Commission did for transport?nZ|= yO'ԍ The Commission adopted a presumption of reasonableness for initial transport rates if incumbent LECs  {O'developed DS3 and DS1 rates with a ratio of 9.6to1. See 47 C.F.R.  69.108, Transport Rate Structure and Pricing, CC Docket No. 91213, First Reconsideration Order, 8 FCC Rcd 5370 (1993). n Is there some other rate structure we could prescribe that would better reflect how local switching costs vary with increases in peak demand that necessitate expansion of switch capacity? Alternatively, should we permit LECs to develop their own capacitybased local switching rate structures, and examine the reasonableness of those structures in the tariff review process?  X4 215. We tentatively conclude that a capacitybased local switching rate structure, if it indeed reflects cost causation, would not artificially disadvantage smaller IXCs in the market for long distance services. As the Commission concluded in its decision to eliminate the unitary rate structure for tandemswitched transport, rules that protect small IXCs in competition with AT&T, or other large IXCs, are unnecessary because the longdistance  X4market is competitive.j= {O"'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16060.j We seek comment on this conclusion. 216. In addition, we invite parties to comment on whether permitting volume and term discounts for switched access services, as we propose above, would exacerbate any negative impact for smaller IXCs. We invite comment on whether a resale market for local"7m0 ,-(-(ZZ8" switching services is likely to develop, and whether such a development would mitigate any negative impact that smaller IXCs might face. We note that the Commission already has a  X4policy prohibiting carriers from placing restrictions on resale in their tariffs.Z= {OK'ԍ Resale and Shared Use of Common Carrier Services and Facilities, 60 FCC 2d 261 (1976), cited in, e.g., Metro Communications, Inc., v. Ameritech Mobile Communications, Inc., 12 FCC Rcd 13083, 13092 (Wireless Tel. Bur., 1996). We invite comment on whether any further resale protection is necessary. Alternatively, we invite comment on whether we should permit or require incumbent LECs to retain existing perminute or percall local switching charges concurrently with nontrafficsensitive charges. Finally, we invite parties to make other proposals.  XH' ` ` d. Revision of TrafficSensitive PCI Formula  X 4217. In the LEC Price Cap Order, the Commission concluded that it needed to adopt a formula for the common line basket PCI different from the PCI formula for the other baskets, to reflect that carrier common line rates are trafficsensitive even though common  X 4line costs are nontrafficsensitive.W = {Or'ԍ LEC Price Cap Order, 5 FCC Rcd at 6793.W Accordingly, the Commission included a "g" factor in  X 4the common line PCI formula, where g represents perminute growth per access line.OZ |= yO'ԍ Id. at 6794. The g factor is defined as "the ratio of minutes of use per access line during the base  {O'period, to minutes of use per access line during the previous base period, minus 1." See Section 61.45(c)(1) of the Commission's Rules, 47 C.F.R.  61.45(c)(1). O The  X 4Commission found that including g would give all the benefits of demand growth to IXCs,  X4while excluding g would give all the benefits of demand growth to LECs.= {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6794. Setting g at zero would mean that the common line PCI is unaffected by demand growth. In this case, the LEC would keep all the increased revenue resulting from that demand growth. Alternatively, incorporating a "full g" into the common line PCI would require LECs to reduce their common line PCIs to reflect all demand growth. In this case, the IXC would receive all the benefits of demand growth in the form of lower common line rates. The Commission incorporated g/2 as a compromise, because it found that both IXCs and LECs contribute to  Xd4demand growth.>dP = {Oe'ԍ Id. at 6795. > The Commission did not attempt to measure at that time the relative contributions to demand growth made by IXCs and LECs, and expressly stated that a 5050  X64split was not a precise reflection of the LECs' ability to influence usage.36= {O"'ԍ Id.3 218. If we decide to adopt a capacitybased local switching rate structure, it may be appropriate to include a factor in the trafficsensitive PCI formula similar to the g factor currently in the common line PCI formula. Although, as discussed above, it is possible that a capacitybased local switching rate structure reflects costs better than a perminute rate"nt,-(-(ZZ" structure, capacitybased rates may not reflect local switching costs perfectly. More specifically, an increase in the number of trunks at a switch may not lead to a proportional increase in local switching costs. Rather, such an increase in trunks may lead to a measurable increase in local switching costs only when the increase of peak demand is so great as to require an expansion of switch capacity. If this is the case, then local switching costs may not vary directly with changes in pertrunk demand. We tentatively conclude that it would not be reasonable to permit incumbent LECs to retain all the benefits of trunk growth if they are not exclusively responsible for encouraging that growth. Accordingly, we invite parties to discuss whether the trafficsensitive PCI formula should include a "q" factor, similar to the "g" factor in the common line PCI formula, to incorporate growth in number of trunks into the trafficsensitive PCI formula. We also invite comment on whether to adopt a q factor if we decide not to revise the local switching rate structure as proposed above, or if we permit or require LECs to offer both usagesensitive and capacitybased local switching rates. 219. We also request comment on the definition of this q factor if we decide to adopt it. For example, should it be based on the change in DS1 equivalent capacity? Should price cap LECs measure changes in DS3 equivalent capacity on some basis other than DS1 equivalents? We intend to base any q factor we adopt on data that price cap LECs currently collect, or data that price cap LECs could collect at little or no additional cost. We therefore invite any party proposing a q factor definition to discuss whether and to what extent its definition would affect price cap LECs' data collection costs. 220. We also invite comment on the relationship between any q factor we add to the trafficsensitive PCI formula and the g factor in the common line PCI formula. Specifically, the common line PCI formula currently includes "g/2", because the Commission found in the  X4LEC Price Cap Order that both LECs and IXCs contribute to demand growth, and that "g/2"  X4gives both IXCs and LECs a reasonable share of the benefits of perminute demand growth.3= {O%'ԍ Id.3 We note that we invite comment below on increasing the g factor in the common line PCI  X~4formula from g/2 to a full g.S~Z= {O'ԍ See Section VIII.D.1, infra. S We therefore invite comment on whether any q factor we adopt for the trafficsensitive PCI formula should be consistent the common line g factor, as revised in this proceeding. Alternatively, we invite comment on whether we should base the q factor in the trafficsensitive basket on a different fraction than the common line g factor,  X"4because local switching does not make up all of the trafficsensitive basket.)"= yO"'ԍ The services other than local switching in the trafficsensitive basket are: (1) information; (2) database access services; (3) billing name and address (BNA); (4) trunk ports; and (5) signalling transfer point port  {OO$'termination. See Section 61.42(e)(1) of the Commission's Rules, 47 C.F.R.  61.42(e)(1). These services generate less revenue than local switching. Local switching generally makes up about 2/3 or 3/4 of the revenues associated with the trafficsensitive basket. ) " o,-(-(ZZ"Ԍ X' ` ` e. Adjustment to TrafficSensitive PCIs  X4221. In the LEC Price Cap Order, the Commission concluded that failing to include a  X4"g" factor in the common line PCI formula would not give IXCs any incentive to become  X4more productive through encouraging demand growth.W= {O'ԍ LEC Price Cap Order, 5 FCC Rcd at 6795.W In other words, failure to include "g" would have created an imbalance between the interests of IXC customers and LEC stockholders. This imbalance would have been substantially similar to the imbalance found  Xa4by the Commission in the 1995 LEC Price Cap Performance Review Order. In that Order, the Commission found that it had previously set the XFactor lower than it intended, due to  X54the inclusion of 198485 data in one of the original XFactor studies.k5Z= {O@ 'ԍ LEC Price Cap Performance Review Order, 10 FCC Rcd at 9069.k The Commission observed that LECs were supposed to become more efficient to earn more than would have been permitted under rateofreturn regulation, and ratepayers were to benefit from rates  X 4reduced to the level that would provide this challenge.< = {O'ԍ Id. at 9070.< The Commission then concluded that some portion of the LECs' earnings were obtained without any productivity  X 4improvements, and rates were not as low as the Commission intended.3  ~= {O'ԍ Id.3 222. If we find that local switching costs are more appropriately recovered through capacitybased charges, then permitting LECs to charge perminute local switching rates since LEC price cap regulation was adopted in 1991, without including a q factor in the trafficsensitive PCI formula, may have created an imbalance between the interests of IXC customers  X84and LEC stockholders, similar to the imbalance found in the LEC Price Cap Performance  X#4Review Order resulting from the 198485 data discussed above.!#= {O'ԍ See AT&T ex parte statement of Feb. 19, 1999, at 6 (alleging a 45 percent rate of return for all price cap LECs in the trafficsensitive basket). The existing perminute rate structure provides the incumbent LEC with more revenue whenever perminute demand increases, regardless of whether the LEC's costs have increased. This revenue increase results in higher earnings for the LEC, regardless of whether it has become more productive in its provision of local switching. This could explain, at least in part, why overall LEC earnings have increased in recent years, even though the Commission increased the XFactor in 1995  X4and 1997. Furthermore, such an imbalance would remain embedded in the incumbent LECs' trafficsensitive PCIs, regardless of whether we correct it by revising the local switching rate structure or including a q factor in the trafficsensitive PCI formula on a forwardlooking basis. Moreover, using perminute charges without simultaneously using a q factor may have exacerbated this imbalance. Accordingly, we seek comment on whether to require a onetime  X*4downward adjustment of the LECs' trafficsensitive PCIs to correct for any imbalance on a"*pj !,-(-(ZZc"  X4goingforward basis, similar to the adjustment required in the Price Cap Performance Review  X4Order."= {Od'ԍ Price Cap Performance Review Order, 10 FCC Rcd at 906973. See also Bell Atlantic v. FCC, 79 F.3d  {O.'at 120405 (affirming Price Cap Performance Review Order on this issue).  Specifically, price cap LECs were required to reduce their PCIs to the levels that would have resulted had the Commission excluded the 1984 data point in its 1990 XFactor determination. In this proceeding, we invite comment on whether price cap LECs should be required to reduce their trafficsensitive PCIs to the levels that would have resulted had the Commission incorporated a q factor in the trafficsensitive PCI formula that took effect in 1991. Alternatively, we invite comment on basing this PCI adjustment on a more recent year.  XL' 2. TandemSwitched Transport 223. We solicit comment on whether we should revise the rate structure for tandemswitched transport, for the same reasons we consider revising the local switching rate  X 4structure discussed above.T# $= {O'ԍ See Section VIII.C.1.c, supra.T We also invite comment on all the issues we discussed in this section above, to the extent that they are relevant to tandem switching. Is tandemswitched transport different from local switching, such that capacitybased tandem switching rates are inappropriate? If capacitybased tandem switching rates are appropriate, how would they be developed? For example, they could be established based on the number of trunks between the IXC POP and the tandem switch. 224. If the tandem switching rate structure should remain usagebased, how could we prevent larger IXCs from maintaining an inadequate number of trunks to the LEC switch, and using tandem switching as inexpensive overflow? Could LECs establish a rate for IXCs that only use tandemswitched transport, and recover a higher rate for overflow from local switching? If so, we recognize that IXCs rely exclusively on tandem switching for certain routes, and so we believe that an overflow rate should be applied only on routes for which an IXC also has trunks to the local switch. 225. In addition, we invite parties to discuss whether we should add a q factor to the trunking basket PCI, if we conclude that tandem switching costs are more appropriately recovered through capacitybased rates. If so, how should that q factor be defined? Parties may also discuss whether we should adjust the trunking basket PCI to reflect that price cap LECs have recovered essentially flat costs through trafficsensitive rates since LEC price cap regulation took effect in 1991, similar to the trafficsensitive PCI adjustment we propose above. "q#,-(-(ZZ"Ԍ X' D. Price Cap Issue_s  X4 1. Common Line Issues  X'` ` a. G Factor Đ  Xv4226. T_he Commission proposed revisions to the common line formula in the Price  Xa4Cap Fourth FNPRM, which established part of the record for the Price Cap Fourth Report  XL4and Order._$L= {O 'ԍ Price Cap Fourth FNPRM, 10 FCC Rcd at 1368081._ The Commission decided against revising the common line formula in the  X74Price Cap Fourth Report and Order, however, because it expected the common line PCI formula to be eliminated when perminute CCL charges were eliminated, as a result of rules  X 4adopted in the Access Reform First Report and Order.U% Z= {O'ԍ Price Cap Fourth Report and Order, 12 FCC Rcd at 16710 (citing Access Reform First Report and  {O'Order, 12 FCC Rcd at 16027). In the Access Reform First Report and Order, the Commission adopted rules to phase out perminute CCL charges through imposition of PICCs, and to replace the current common line PCI  {Or'formula with the formula used for other PCI baskets when perminute CCL charges are eliminated. Access  {O<'Reform First Report and Order, 12 FCC Rcd at 1602728).U The transition away from perminute CCL charges, however, is progressing slowly for certain incumbent LECs. Accordingly, we take this opportunity to review some of the common line issues addressed in  X 4the Price Cap Fourth Report and Order. 227. Above, we explain why the Commission included a "g/2" term in the common  X4line formula when it adopted LEC price cap regulation.J&= {OH'ԍ Section VIII.C.1.d, supra.J Later, in 1995, the Commission found evidence that IXCs influence perminute demand growth more than LECs, and considered increasing the g factor to reflect the IXCs' greater contribution to demand  X@4growth.n'@= {O'ԍ LEC Price Cap Performance Review Order, 10 FCC Rcd at 907880.n The Commission did not revise the common line formula at that time, however, because it found that the separate common line formula could be eliminated completely if it adopted a moving average TFPbased XFactor. The moving average XFactor would incorporate the effects of growth into the PCI, and a separate g factor would no longer be  X4necessary.?(6 = {O!'ԍ Id. at 907980.? Although the Commission did not adopt a moving averagebased XFactor in  X4the 1997 Price Cap Fourth Report and Order, it nevertheless decided against revising the  X4common line formula, because the Commission expected perminute CCL rates and the separate common line formula to be phased out relatively quickly as a result of common line"r (,-(-(ZZ"  X4rule revisions adopted concurrently in the Access Reform First Report and Order.)= {Oy'ԍ Price Cap Fourth Report and Order, 12 FCC Rcd at 1670910; Access Reform First Report and Order, 12 FCC Rcd at 1602728. Our access reform rules have not eliminated perminute CCL charges for some companies as quickly as the Commission had anticipated. As a result, this issue warrants reexamination. We invite comment on whether the g factor in the common line PCI formula should be increased, and if so, whether it should be increased to a full "g." Increasing the "g" factor would cause the common line PCI to decrease more quickly, which in turn would cause the perminute CCL rate to decrease more quickly. The g factor would still be eliminated when the CCL is eliminated in the access reform transition. Parties advocating a "g" factor between g/2 and g should specify what fraction of g they believe should be included in the common  X34line PCI formula, and explain their reasons.>*3"= yO 'ԍ The current rules require price cap LECs to replace the current common line PCI formula with the  {O 'formula used for other PCI baskets when they eliminate perminute CCL charges. Access Reform First Report  {O'and Order, 12 FCC Rcd at 1602728; Section 61.45(c)(2) of the Commission's Rules, 47 C.F.R.  61.45(c)(2). We do not contemplate revising the rules to permit or require price cap LECs to use the separate common line PCI formula after they have eliminated perminute CCL charges.>  X 'X` hp x (#%'0*,.8135@8:'u .J:\ACCESS.REF\AR1999\ITEM\FLATRATE.NPR. >  X '='u -J:\ACCESS.REF\AR1999\ITEM\CLECNPR.NPR- = E. CLEC Access Charges   X 'X 1. Background (#  X 4236. As we discuss above,O7 = {OB'ԍ See Section VII.A, supra.O the Commission requested comment in the Access  X4Reform NPRM on the regulation of terminating access charges of both incumbent LECs and CLECs. The Commission noted that, with originating access, the calling party has the choice of service provider, the decision to place a call, and the ultimate obligation to pay for the  XO4call.X8O|= {O|'ԍ Access Reform NPRM, 11 FCC Rcd at 21472.X The calling party also is the customer of the IXC that purchases the originating access  X84service.398= {O'ԍ Id.3 The Commission noted that, unlike originating access, the choice of an access provider for terminating access is made by the recipient of the call. It suggested that, because neither the originating caller nor its long-distance service provider can exert substantial influence over the called party's choice of terminating access provider, the terminating end of a long-distance call may remain a bottleneck, controlled by the LEC providing access to a particular customer. The Commission also sought comment on the continued treatment of incumbent LEC originating "open end" minutes as terminating minutes for access charge  X4purposes, and whether to extend that approach to CLECs.!:Z= {O"'ԍ See id. at 21477. "The term open end of a call describes the origination or termination portion of a call that utilizes exchange carrier common line plant (a call can have no, one, or two open ends)." 47 C.F.R.  69.105(b)(1)(ii).! The Commission noted that, in"v :,-(-(ZZ" some cases, such as 800 and 888 service, the called party, which pays for the call, is unable  X4to influence the calling party's choice of provider for originating access services.>;= {Ob'ԍ See id. >   X4237. Based on the record submitted in response to the Access Reform NPRM, the Commission concluded that non-incumbent LECs should be treated as non-dominant in the  X4provision of terminating access.<Z= {O'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16140; see also Section VII.A, supra for a definition of non-dominant carrier and a detailed discussion of the Commission's conclusions. The Commission found that there was insufficient evidence in the record to determine that CLECs had the ability to exercise market power in  Xa4the provision of terminating access.=a= {O 'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16140; see also Section VII.A. supra. The Commission further concluded that, as CLECs attempt to expand their market presence, the rates of incumbent LECs or other potential  X34competitors would constrain the CLECs' terminating access rates.>3F= {O*'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16140; see also Section VII.A. supra. The Commission decided, therefore, not to adopt any regulations at that time governing the provision of terminating access provided by CLECs because CLECs did not appear to possess market  X 4power.? = {Ow'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16141-42; see also Section VII.A, supra. The Commission indicated, however, that it would revisit the issue if there were  X 4sufficient indications that CLECs were imposing unreasonable terminating access charges.@" j = {O'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16140 (noting that CLEC terminating access rates exceeding originating rates in the same market may suggest the need to revisit the regulatory approach; similarly, CLEC rates that exceed incumbent LEC terminating rates in the same market may suggest that a CLEC's terminating access rates are excessive). Although the Commission did not address the issue of CLEC originating access, it indicated, in the context of incumbent LEC originating access, that it believed that new entrants would  X4eventually exert downward pressure on originating access rates.(AZT = yO'ԍ The Commission concluded that new entrants, by purchasing unbundled network elements or providing facilities-based competition, eventually will exert downward pressure on incumbent LEC originating access rates.  {O''Id. at 16135-36.( The Commission also concluded that the continued treatment of "open end" originating minutes, such as those for 800 or 888 services, as terminating minutes for access charge purposes was appropriate because the called party, which pays for the 800 or 888 calls, has limited ability to influence  X64the calling party's choice of access provider.B$6v= {O]$'ԍ Id. at 16140. The Commission noted that incumbent LEC access charges for "open end" minutes would  {O'%'be governed by the same requirements applicable to terminating access provided by incumbent LECs. Id. at 16142. In order to address the potential that incumbent LECs might charge unreasonable rates for terminating access, the Commission limited the price cap incumbent LEC recovery of TIC and common costs from"&A,-(-(&" terminating access rates for a limited period with the eventual elimination of any recovery of common line and  {OX'TIC costs through terminating access charges. Id."6w"B,-(-(ZZU"Ԍ X4ԙ238. Since that time, however, we have received indications that the Commission may have overestimated the ability of the marketplace to constrain CLEC access rates. In particular, IXCs allege that a substantial number of CLECs impose switched access charges that are significantly higher than those charged by the incumbent LECs with which they  X4compete,C"= {Ow'ԍ AT&T Declaratory Ruling Petition, Appendix A (alleging that a number of CLECs impose charges that are in some cases more than twenty times higher than those charged by incumbent LECs with which they compete); see also Sprint Reply at 3; Cable & Wireless Comments at 2. Unless otherwise indicated, all citations to comments and replies in this section of the Notice refer to comments and replies submitted in  {O 'response to the AT&T Declaratory Ruling Petition. suggesting that the Commission may need to revisit the issue of CLEC access rates. If market forces fail to constrain CLEC access rates, requiring IXCs to pay access charges set unilaterally by CLECs is not economically efficient and does not further the goals of the Telecommunications Act of 1996. We are reluctant, however, to regulate rates charged by competitive entrants to the local exchange and exchange access markets and prefer instead to seek a marketplace solution that might constrain CLEC access rates.  X 'X 2. Discussion (#  X 4239. Throughout the Access Reform proceeding, the Commission has questioned whether CLECs possess market power over terminating access service and whether such power precludes market forces from ensuring that terminating access charges are just and  X4reasonable. In the Access Reform NPRM, the Commission invited parties to comment on whether CLECs have market power over IXCs that need to terminate long-distance calls to CLEC customers, and, if so, whether the Commission should subject CLEC terminating  XO4access rates to some form of regulation.bDO= {O'ԍ See Access Reform NPRM, 11 FCC Rcd at 21476.b Given the rapidly evolving telecommunications industry, we again invite parties to comment on this issue.  X 4240. In particular, in response to the Access Reform NPRM, USTA challenges the fundamental premise that, because the called party is not paying for the call, terminating  X4access charges are shielded from downward market pressures.eEh = {O 'ԍ USTA Access Reform NPRM Comments, Attachment 3 at 12.e According to USTA, if a LEC overprices terminating access relative to originating access, a pair of callers in repeated communications would have an incentive to alter their pattern of calls to favor the  X4lower-priced alternative.,FZ = {OD%'ԍ Id.; see also TCI Access Reform NPRM Reply at 32 (the Commission's analysis of a calling party's incentives does not consider the incentives that called parties have because of the value they place on receiving calls as well as originating them)., In the Access Reform First Report and Order, the Commission"xF,-(-(ZZ" stated that it was not convinced that a significant competitive impact would result from  X4changes in calling patterns between pairs of callers.jG= {Ob'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16136.j Based on their experiences since the  X4Access Reform First Report and Order, we ask parties to comment on USTA's hypothesis. In  X4addition, in response to the Access Reform NPRM, TCI disputes the premise that CLECs may possess market power. TCI asserts that CLECs do not have market power because IXCs can  X4exercise bargaining power in negotiating terminating access charges with CLECs.HZ= yO'ԍ Although TCI's point is limited to terminating access charges, presumably it also could apply to originating access charges. TCI argues that the absence of an agreement will not prevent an IXC from completing many calls;  Xc4instead, the IXC simply will have to pay terminating access to a different carrier.`Ic= {O 'ԍ TCI Access Reform NPRM Reply, Attachment A at 8.` The absence of an agreement would be very costly to a CLEC, however, because it is quite possible that switched local service would not be a viable business without interconnection  X 4agreements with all the major IXCs.J\ D= {O'ԍ Id. TCI appears to assume that an IXC is not obligated to deliver traffic to a terminating access provider if the IXC believes the rates are too high. We note that this issue is raised by AT&T's Declaratory Ruling  {O'Petition that we denied in this Order and addressed in the Bureau's decision in MGC Communications. We ask parties to comment on TCI's hypothesis.  X 4241. TCI's comments also raise the fundamental question of an IXC's obligation to accept or deliver traffic from or to a LEC. The Bureau recently released an order in which it found that AT&T had failed to take reasonable and necessary steps to terminate its access  X 4service arrangement with MGC, a CLEC.NK h = {O'ԍ MGC Communications at  16.N The Bureau also found, however, that MGC had failed to identify a legal impediment to an IXC declining to purchase a particular LEC's  X}4access service,>L} = {O('ԍ Id. at  8.> but it emphasized that its holding was limited to the specific factual  Xf4recordM&f = yO'ԍ At the hearing, MGC appeared to concede that, under its tariff, an IXC prospectively may refuse to  {Ok'accept a LEC's originating access traffic. MGC Communications at  8. MGC also argued, however, that the  {O5 'equal access, dialing parity, and payphone provisions of the Act obligate IXCs to accept CLEC traffic. Id. The  {O 'Bureau rejected these arguments. Id. at  12. and the arguments raised by the parties.?Nfz= {O"'ԍ Id. at  12.? The Bureau stated that:  q ` by holding that none of the obligations we discuss above prevents AT&T  qfrom declining MGC's originating access service, we do not imply that  qAT&T is entirely without constraint in determining where, how, or whom  qjit will provide its long distance services. Naturally, in providing those"y N,-(-(ZZ"  qservices, AT&T remains subject to a broad variety of statutory and  qregulatory constraints that are too numerous to list here, but which include,  qwithout limitations, sections 201, 202, 203, and 214 of the Act and section  X463.71 of the Commission's rules.O[ {O4'ԍ Id. See also 47 U.S.C.  201, 202, 203, and 214; 47 C.F.R.  63.71 (establishing procedures for discontinuance or impairment of service by domestic, non-dominant carriers).  `    X4242. We now solicit comment on the issue the Bureau explicitly did not reach: whether any statutory or regulatory constraints prevent an IXC from declining a CLEC's access service. Commenters should identify any such constraints with particularity. If there are circumstances in which an IXC may decline to purchase a CLEC's access service, what are the ramifications for the customer of the CLEC? How would such a customer make or receive long-distance calls? Is such a regime consistent with the goals of section 254 of the Act that consumers in all regions of the nation have access to telecommunications services,  X 4including interexchange services?CP "= yO'ԍ 47 U.S.C.  254(b)(3).C Provided that an IXC may refuse a CLEC's access traffic, is this a market-based solution to excessive CLEC rates that obviates the need for any regulatory action by the Commission?  X4243. If an IXC may refuse a CLEC's access service, we also solicit comment on whether an IXC can refuse to accept traffic from an incumbent LEC when there are no  Xb4competitive alternatives to the LEC, e.g., a rural area with only one local exchange  XM4provider.QM= {O'ԍ We note that AT&T did not address the issue of incumbent LEC access services. AT&T Declaratory  {Oz'Ruling Petition at n.4. We note that the Commission regulates incumbent LEC access charges.qRM= {O 'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16135-38.q If an incumbent LEC's rates are within the Commission's mandates, should they be presumed to be just and reasonable? If so, should an IXC be allowed to refuse an incumbent LEC's access service despite the fact that the LEC's access rates are just and reasonable? What are the ramifications for the customer in that case? If there are no competitive alternatives, how would the end user of the LEC receive long-distance service if the IXC refused the LEC's access service? If in fact an IXC may refuse a LEC's access service, we also solicit comment on whether an IXC can accept traffic from incumbent LECs but refuse to accept traffic from CLECs. What are the ramifications for both the end users of the CLEC and the incumbent LEC? Would this lead to confusion on the part of the calling party who would not be aware until it placed its call, and the call did not go through, that the called party was served by a CLEC? Should an IXC's obligations to accept or deliver traffic from or to a CLEC differ for originating and terminating access services? ""zR,-(-(ZZ"Ԍ X4244. We acknowledge that CLEC access rates may, in fact, be higher due to the CLECs' high start-up costs for building new networks, their small geographical service areas,  X4and the limited number of subscribers over which CLECs can distribute costs.S= {OK'ԍ See, e.g., Cox Comments at 5 (a CLEC that primarily serves residential customers will have a low volume of access traffic (and hence higher per minute costs) relative to a CLEC of equal size that primarily serves businesses); OpTel Comments at 5 (CLECs' higher access rates often reflect the higher cost structure of a facilities-based CLEC in the process of building a new network relative to the cost structure of an incumbent LEC with an established network). Requiring IXCs to bear these costs, however, may impose unfair burdens on IXC customers that pay rates reflecting these CLEC costs even though the IXC customers may not subscribe to the CLEC. IXCs currently spread their access costs among all their end users. We solicit comments on solutions to this problem. Might the problem of excessive CLEC access rates  X_4be solved if IXCs charged different rates to end users within the same geographic area based upon the level of access charges levied by the end user's local exchange company? Because their long-distance bills would fluctuate based on the level of access charges, end users presumably would switch to LECs that charged lower access charges in order to reduce their long-distance bills. Is this a market-based solution to the issue of CLEC access rates?  X 4245. If it is a market-based solution, we solicit comments on whether section 254(g)  X 4permits IXCs to charge different rates to end users within the same geographic area based  X 4upon the level of access charges levied by the end user's local exchange company.tT z= {O'ԍ See 47 U.S.C.  254(g) (The Commission shall adopt rules to require that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas shall be no higher than the rates charged by each such provider to its subscribers in urban areas. Such rules shall also require that a provider of interstate interexchange services shall provide such services to its subscribers in each State at rates  {O'no higher than the rates charged to its subscribers in any other State); see also 47 C.F.R.  64.1801.t The  X4legislative history of section 254(g) indicates that it is intended to ensure that rates between  X4geographic areas are equal.0U. = yO^'ԍ In the Joint Explanatory Statement, the conferees stated that: "[n]ew section 254(g) is intended to incorporate the policies of geographic rate averaging and rate integration of interexchange services in order to ensure that subscribers in rural and high cost areas throughout the Nation are able to continue to receive both intrastate and interstate interexchange services at rates no higher than those paid by urban subscribers." S. Rep. No. 230, 104th Cong., 2nd Sess. at 132 (1996) (Joint Explanatory Statement).0 If section 254(g) permits IXCs to charge different rates to end  Xj4users within the same geographic area based upon the level of access charges levied by the end user's local exchange company, what practical difficulties might that raise with respect to ensuring that urban and rural rates are comparable? How, for example, might one compare urban and rural rates if IXCs charge different rates within an urban area?  X4246. We also seek comment on whether mandatory detariffing of CLEC interstate access charges might address any market failure to constrain terminating access rates. Mandatory detariffing would eliminate the CLECs' ability unilaterally to set terminating access rates by filing a tariff and to avoid negotiating those rates in the marketplace by"{U,-(-(ZZ"  X4relying on the filed tariff doctrine.V"= yOy'ԍ In its declaratory ruling petition, AT&T alleges that its attempts to negotiate terminating access charges have stalled because many CLECs take the position that, due to the "filed tariff doctrine," AT&T is obligated to  {O 'accept services from the CLEC at prices chosen by the CLEC. AT&T Declaratory Ruling Petition at 3, n. 2; see Section VII.B. for a discussion of the filed tariff doctrine. To the extent that detariffing encourages parties to negotiate rates for terminating access, is it a market-based solution to excessive terminating access charges? We note, however, that our decision to require mandatory detariffing by  X4IXCs has been stayed by the court of appeals,gW\= {O 'ԍ See Policy and Rules Concerning the Interstate, Interexchange Marketplace, CC Docket No. 96-61,  {O 'Second Report and Order, 11 FCC Rcd 20730, 20741-43 (1996) (Tariff Forbearance Order), stay granted, MCI Telecommunications Corp. v. FCC, No. 96-1459 (D.C. Cir. filed Feb. 13, 1997).g and the court's ultimate decision likely will implicate our ability to impose mandatory detariffing on CLECs. Finally, we seek comment on whether the adoption of any other solution should serve only as a "stopgap" measure until such time as we may be able to require detariffing.  XH4247. We strongly prefer to rely upon a marketplace solution, such as those discussed above, to constrain CLEC access rates. Nonetheless, in the event that we conclude that legal or other impediments preclude adoption of a market-based solution, we also seek comment on  X 4a regulatory backstop to constrain CLEC access rates. In the Access Reform NPRM, the Commission invited parties to address whether the incumbent LECs' terminating access charges should serve as a benchmark to evaluate the reasonableness of CLECs' terminating rates. It suggested that a CLEC's terminating access charges might be presumptively just and reasonable if they were less than or equal to the terminating access charges of the incumbent  X4LEC with which the CLEC competes.XX= {O'ԍ Access Reform NPRM, 11 FCC Rcd at 21476.X If, on the other hand, the CLEC's terminating access charges exceed the incumbent LEC's charges, the CLEC could be required to provide cost support for its charges or, alternatively, it might be required to collect the difference from its  XM4end users, rather than IXCs.3YMh = {Of'ԍ Id.3 We again seek comment on these proposals and whether they also should apply to originating access rates. Should access rates below a particular benchmark be presumed just and reasonable, thus providing CLECs with a defense in the  X4context of a section 208 complaint?=Z = yO 'ԍ 47 U.S.C.  208.= We seek comment on what rates to use as a  X4benchmark, e.g., the incumbent LEC rate in the area served by the CLEC, or some other  X4terminating access rate.[ = yO$'ԍ Commenters provide a number of suggestions on what rate to use as a benchmark. For example, Cox asserts that, if the Commission is going to use a benchmark, it should use the rates of smaller, more geographically dispersed non-price cap incumbent LECs, such as the incumbent LECs participating in the NECA  {Oo&'tariff. Cox Access Reform NPRM Comments at 6. Although MCI does not believe that the interstate access rates charged by NECA member companies are just and reasonable, it suggests that NECA rates levels may be a"9'Z,-(-(='" useful starting point in setting a benchmark because they are supposed to be set at a level equal to the national averaged rate had all incumbent LECs remained in the NECA pool. MCI Access Reform NPRM Reply Comments at 6 and n.24. Sprint states that, although it has no objection to paying NECA level terminating access charges to CLECs that serve high costs areas also served by NECA carriers, there is no justification for using NECA rates as a benchmark for CLEC rates in the low cost high-density metropolitan areas. Sprint Access Reform NPRM Reply Comments at 7."|@[,-(-(ZZ{"Ԍ  X4248. We also seek comment on whether any benchmark should vary depending on various criteria, such as, for example, whether the CLEC serves high cost areas or low cost areas. Alternatively, should any benchmark take the form of a sliding scale that declines as the number of access minutes per CLEC switch increases? Would it be appropriate to estimate this benchmark using incumbent LEC data? If parties believe that the benchmark should vary depending on various criteria, we solicit comment on these criteria, on what methodology we should use to establish alternative benchmarks, and what criteria we should use to determine which benchmark should apply to an individual CLEC.  X 4249. Assuming we were to employ some form of a benchmark, we seek comment on whether to provide an "escape valve" that would allow CLECs wishing to charge more than the benchmark to collect those charges from end users (either the called party or calling  X 4party).o\ @= {O'ԍ See, e.g., Access Reform NPRM, 11 FCC Rcd at 21476.o In particular, we seek comment on an "end party pays" proposal that would require CLECs to collect the difference between the benchmark terminating access rate and the CLEC terminating access rate from end users (either the calling or called party) rather than from the  X4IXC.P]= {O'ԍ See, e.g., id.P We note that this "end party pays proposal" would resolve the problems associated  Xy4with IXC averaging requirements,y^yd = {O'ԍ See Section VII.A. supra for a discussion of IXC averaging requirements. y by in essence, "deaveraging" terminating access by charging the end user, rather than the IXC, for the terminating access.  X44250. In particular, if the called party pays, the person receiving the call would be charged the difference between the CLEC terminating access rate and the benchmark terminating access rate. We ask parties to comment on whether charging the called party would yield an increase in the number of uncompleted calls due to the called parties' refusal  X4to accept the charges. In the Access Reform First Report and Order, the Commission found  X4that a "called party pays" proposal may be disruptive to wireline services._ = {Ol#'ԍ See Access Reform First Report and Order, 12 FCC Rcd at 16138. We note that, in response to the Access Reform NPRM, the California Commission indicated that it opposed any "called party pays" proposal because customers most likely would not understand why they were paying to receive a call and some customers would refuse to accept calls if they knew that doing so would mean incurring a charge. California Commission  {O&'Access Reform NPRM Comments at 18.  Given the"}_,-(-(ZZ " increasing popularity of wireless services and that most wireless companies charge the called parties for receiving calls, we seek comment on the continued validity of the Commission's concerns that consumers would be adverse to a "called party pays" proposal in the context of wireline services. In addition, we invite parties to address how to accomplish charging the customer receiving the call for terminating access.  Xv4251. If, conversely, the calling party pays, the person making the call, rather than the IXC, would be charged the difference between the CLEC terminating access rate and the benchmark terminating access rate. We seek comment on whether wireline consumers would be adverse to a "calling party pays" regime. We note that such a regime is offered widely by wireless providers abroad, and on a much more limited basis by some providers of cellular,  X 4paging and Personal Communications Service (PCS) in the United States.`F = {O| 'ԍ See Access Reform NPRM, 11 FCC Rcd at 21474. In the context of wireless services, the Commission recently adopted a declaratory ruling that clarified that calling party pays, a service whereby the party placing the  {O'call to a wireless customer pays the wireless airtime charges, is a commercial mobile radio service offering. See Calling Party Pays Service Offerings in the Commercial Mobile Radio Services, WT Docket No. 97-207, Declaratory Ruling and Notice of Proposed Rulemaking, FCC 99-137 (rel. July 7, 1999). In the same proceeding, the Commission also initiated a rulemaking requesting comments on a uniform notification requirement, the effect of competitive pressures on calling party pays rates, and whether it could and should  {O'require LECs to bill and collect for a CMRS carrier's calling party service. See id.Ğ Further, we seek comment on whether requiring called or calling parties to pay for a portion of terminating access might encourage competition for terminating access. In addition, we question whether these "end party pays" proposals should be limited only to CLECs, and if so, whether this  X 4would result in confusion on the part of end users, i.e., incumbent LEC end users would not be charged for terminating access but CLEC end users would be.   Xd4252. Adoption of a "calling party pays" regime would require notification to the party making the call that it would be responsible for terminating access charges in addition to a long distance charge from its IXC. We seek comment on the development of a notification system. In particular, we seek comment on a proposal that the notification be developed in cooperation with the States and include: (1) notice that the calling party will be responsible for the terminating access charges; (2) the terminating access rates that the calling party incurs will be charged by the terminating LEC provider; and (3) notice that the calling party may terminate the call prior to incurring any charges. If we were to adopt a "called party  X4pays" proposal, the called party would be notified at the time it signed up for service from a CLEC that it would have to pay terminating access charges for incoming long-distance calls. Accordingly, for the "called party pays proposal," we seek comment on the development of a more limited notification that merely delineates local calls from "called party pays" calls.   X;4253. In response to AT&T's Declaratory Ruling Petition, Bell Atlantic proposes that the Commission link the terminating access rates of all local carriers, both CLECs and"&~`,-(-(ZZ"  X4incumbent LECs, to originating access rates.aX= yOy'ԍ Bell Atlantic Comments at 2. See also Spectranet Access Reform NPRM Comments at 10 (supporting requiring that all LECs (both CLEC and incumbent LECs) price terminating access the same as originating access in each applicable geographic market). Bell Atlantic argues that originating rates are  X4not excessive because competitive forces keep them in check.3b= {O'ԍ Id.3 It hypothesizes that, if the Commission required every carrier to set terminating rates at a level no higher than its  X4originating rates, those competitive forces would constrain terminating access rates as well.3cz= {O 'ԍ Id.3 We seek comment on Bell Atlantic's proposal. In order to address the potential that incumbent LECs might charge unreasonable rates for terminating access, the Commission limited price cap incumbent LEC recovery of TIC and common line costs from terminating access rates for a limited period, with the eventual elimination of any recovery of common  XH4line and TIC costs through terminating access charges.jdH = {O'ԍ Access Reform First Report and Order, 12 FCC Rcd at 16136.j Furthermore, the Commission declined at that time to link terminating rates to originating rate levels because that approach would not substantially affect terminating access rates where originating access rates were not  X 4subject to competitive pressures.=e = {OR'ԍ Id. at 16137.= The Commission also found that linking an incumbent LEC's terminating access rates to its originating access rate might reduce the incumbent  X 4LEC's incentive to lower its originating access rates.3f 0 = {O'ԍ Id.3 We now seek comment on whether we should link the rates that all local carriers, both CLECs and incumbent LECs, charge for terminating access to originating access rates. We also seek comment on the possible effects on competition between incumbent LECs and CLECs if we were to adopt Bell Atlantic's proposal, but limit it to CLECs.  XK4254. Some commenters have suggested that CLECs are charging excessive originating  X44access rates.g4 = {O'ԍ AT&T Declaratory Ruling Petition at 2; Sprint Reply at 3; Cable & Wireless Comments at 2. In the Access Reform NPRM, the Commission stated that as long as IXCs can influence the choice of the access provider, a LEC's ability to charge excessive originating access rates is limited, as IXCs will shift their traffic from that carrier to a competing access  X4provider.XhT = {O#'ԍ Access Reform NPRM, 11 FCC Rcd at 21472.X In the Access Reform First Report and Order, the Commission did not specifically address the issue of CLEC originating access rates. Instead, in the context of incumbent LEC originating access rates, the Commission concluded that new entrants, by purchasing unbundled network elements or providing facilities-based competition, would"h,-(-(ZZ"  X4eventually exert downward pressure on originating access rates.=i= {Oy'ԍ Id. at 16136.= Given the complaints by  X4AT&T and others regarding excessive CLEC originating access rates,jZ= {O'ԍ AT&T Declaratory Ruling Petition at 2; Sprint Reply at 3; Cable & Wireless Comments at 2. we seek comment on a marketplace solution that would constrain CLEC originating access rates. In particular, we seek comment on whether any of the terminating access proposals discussed above also may apply to originating access rates. Finally, we seek comment on whether an entirely separate solution is necessary to resolve the issue of originating access charges. If a separate solution is necessary, we solicit comments on what that solution should be.  XH4255. In the case of both originating access associated with "open end" services, such as 800 or 888 calls, and terminating access, the party paying for the call does not choose the access provider. We invite parties to comment on whether, therefore, to treat CLEC "open end" originating minutes the same as CLEC terminating minutes for access charge  X 4purposes.AkD = {O'ԍ We note that, in response to the Access Reform NPRM, TCI argued that originating "open end" minutes do not constitute a bottleneck, and, thus should not be treated as terminating access minutes, because originating  {O'"open end" access rates will respond to the market. See TCI Access Reform NPRM Reply at 34 (An access provider with high originating access charges would discourage businesses from making open end services available. In such situations, the calling party would lose the benefit of that service and change to an access provider with lower originating access rates.) In making its argument that "open end" minutes should not be treated as terminating minutes for access charge purposes, TCI assumes that terminating access rates are regulated.A Assuming "open end" minutes are treated the same as terminating minutes for access charge purposes, we seek comment on whether the calling party and called party pays proposals set forth above also might work for "open end" minutes, or whether modifications  X 4are needed for "open end" minutes. For instance, if we were to adopt a calling party pays proposal for originating "open end" minutes, we might require the calling party to pay the portion of the access charges that exceed the benchmark for 800 or 888 calls, because it is the caller, in that instance, that makes the choice of provider for originating access. Finally, we seek comment on whether an entirely separate solution is necessary to resolve the issue of "open end" originating access charges. If a separate solution is necessary, we solicit comments on what that solution should be.  X4256. We strongly prefer not to intervene in the marketplace, particularly with respect to competitive new entrants, unless intervention is necessary to fulfill our statutory obligation to ensure just and reasonable rates. If market forces are not operating to constrain CLEC access charges, we seek the least intrusive means possible to correct any market failures.  X~4257. Finally, in the Access Reform NPRM, the Commission sought comment on any less intrusive methods of ensuring that a CLEC's originating and terminating access charges"i k,-(-(ZZ~"  X4are just and reasonable.Xl= {Oy'ԍ Access Reform NPRM, 11 FCC Rcd at 21476.X We do so again. We further invite parties to comment on how small business entities, including small incumbent LECs and new entrants, will be affected by the proposals above regarding CLEC access charges. ='u -J:\ACCESS.REF\AR1999\ITEM\CLECNPR.NPR- =  X'='u -J:\ACCESS.REF\AR1999\ITEM\REGFLEX.PRO- => IX. PROCEDURAL ISSUES c  X_'X` hp x (#%'0*,.8135@8:'u .J:\ACCESS.REF\AR1999\ITEM\IREGFLEX.PRO. > B. Initial Regulatory Flexibility Act Analysis  X44  268. As required by the Regulatory Flexibility Act (RFA),U{Z4= {O'ԍ 5 U.S.C.  603. The RFA, see 5 U.S.C.  601 et seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 10421, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).U the Commission has prepared this present Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities by the policies and rules proposed in this Further Notice of Proposed Rulemaking (Further Notice). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Further Notice provided below in Section IX.D. The Office of Public Affairs will send a copy of the Further Notice, including this IRFA, to the Chief Counsel for  X4Advocacy of the Small Business Administration.?| = yOP!'ԍ 5 U.S.C.  603(a).? In addition, the Further Notice and IRFA  X|4(or summaries thereof) will be published in the Federal Register.7}|= {O#'ԍ See id.7  XN4 269. Need for, and objectives of, the proposed rules. Consistent with the Telecommunications Act of 1996, the Commission has revised its interstate access charges to"7. },-(-(ZZ" facilitate competition in the provision of interstate access services. These proposals attempt to effect additional regulations reflective of the competitive marketplace. In Sections VIII.A and VIII.B we seek to establish additional pricing flexibilities for price cap incumbent LECs, while at the same time limit use of those flexibilities to deter entry, to drive existing competitors from the market, or to increase rates for those customers that lack competitive alternatives. In Section VIII.C, we seek to modify the common line rate structure should we determine that a capacitybased rate structure reflects the manner in which price cap LECs incur their costs better than the current trafficsensitive rate structure. In Section VIII.D, we seek to refine several of our price cap rules to better reflect the manner in which price cap incumbent LECs costs are incurred. In Section VIII.E, we seek to prevent CLECs from charging unreasonable rates for terminating access service.   X 4 270. Legal Basis. The proposed action is supported by Sections 4(i), 4(j), 201205, 208, 251, 252, 253 and 403 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 201, 205,208, 251, 252, 253, 403.  X4271. Description, potential impact and number of small entities affected. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of  Xb4small entities that may be affected by the proposed rules, if adopted.C~b= yO'ԍ 5 U.S.C.  603(b)(3). C The RFA generally defines the term "small entity " as having the same meaning as the terms "small business,"  X44"small organization," and "small governmental jurisdiction."L4X= {O='ԍ Id.  601(6). L In addition, the term "small business" has the same meaning as the term "small business concern" under the Small  X4Business Act.2= yO'ԍ 5 U.S.C.  601(3) (incorporating by reference the definition of "small business concern" in 15 U.S.C. 632). Pursuant to the RFA, the statutory definition of a small business applies "unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register." 5 U.S.C.  601(3).2 A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria  X4established by the Small Business Administration (SBA). X= yO# 'ԍ Small Business Act, 15 U.S.C.  632 (1996).X The Small Business Administration has defined a small business for Standard Industrial Classification (SIC) category 4813 (Telephone Communications, Except Radiotelephone) to be a small entity that  X4has no more than 1500 employees.A* = yOn$'ԍ 13 C.F.R.  121.201.A "| ,-(-(ZZ"Ԍ X4Total Number of Telephone Companies Affected: 272. We have included small incumbent LECs in this present RFA analysis. As  X4noted above, a "small business" under the RFA is one that, inter alia, meets the pertinent  X4small business size standard (e.g., a telephone communications business having 1,500 or  X4fewer employees), and "is not dominant in its field of operation."?= yO 'ԍ 5 U.S.C.  601(3).? The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their  Xc4field of operation because any such dominance is not "national" in scope.HcX= {Ol 'ԍ Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business Act contains a definition of "small business concern," which the RFA  {O 'incorporates into its own definition of "small business." See 15 U.S.C.  632(a) (Small Business Act); 5 U.S.C.  601(3) (RFA). SBA regulations interpret "small business concern" to include the concept of dominance on a national basis. 13 C.F.R.  121.102(b). Since 1996, out of an abundance of caution, the Commission has  {OX'included small incumbent LECs in its regulatory flexibility analyses. Implementation of the Local Competition  {O"'Provisions of the Telecommunications Act of 1996, CC Docket, 9698, First Report and Order, 11 FCC Rcd 15499, 16144-45 (1996). We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on FCC analyses and determinations in other, nonRFA contexts.  X 4 273. Price Cap Local Exchange Carriers. The proposals in Section VIII.AD apply only to price cap LECs. We do not have data specifying the number of these carriers that are either dominant in their field of operations, are not independently owned and operated, or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of price cap LECs that would qualify as small business concerns under the SBAs definition. However, there are only 13 price cap LECs. Consequently, we estimate that significantly fewer than 13 providers of local exchange service are small entities or small price cap LECs that may be affected by these proposals. X(#  X#4274. Competitive Local Exchange Carriers. The proposals in Section VIII.E apply only to competitive LECs. Neither the Commission nor the Small Business Administration has developed a definition of small providers of local exchange service. The closest applicable definition under Small Business Administration rules is for telephone  X4telecommunications companies other than radiotelephone (wireless) companies.]h = yO!'ԍ Standard Industrial Classification (SIC) Code 4813.] The most reliable source of information regarding the number of competitive LECs nationwide of which we are aware appears to be the data that we collect annually in connection with the Telecommunications Relay Service (TRS). According to our most recent data, 129 companies reported that they were engaged in the provision of either competitive access provider"m ,-(-(ZZ~"  X4services or competitive local exchange carrier services.= {Oy'ԍ FCC, Common Carrier Bureau, Carrier Locator: Interstate Service Providers, Figure 1 (number of carriers paying into the TRS Fund by type of carrier) (Jan. 1999). We do not have data specifying the number of these carriers that are either dominant in their field of operations, are not independently owned and operated, or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of competitive LECs that would qualify as small business concerns under the SBAs definition. Consequently, we estimate that fewer than 129 providers of local exchange service are small entities or small competitive LECs that may be affected by these proposals.  XH4275. Reporting, record keeping and other compliance requirements. We expect that, on balance, the proposals in this Further Notice will slightly increase price cap LECs administrative burdens. The proposals in Section VIII.A would require at least one additional tariff filing, and may require additional showings. The proposals in Section VIII.B will require a price cap LEC, to the extent that it chooses to avail itself of the additional flexibility, to file a petition demonstrating that it has met the triggers, and make an initial tariff filing. We expect that the proposals in Sections VIII.C and VIII.D would establish new methodologies that price cap LECs would need to apply in their tariff filings, but otherwise should not affect their administrative burdens.  Xb4276. We expect that the proposals in Section VIII.E will have no effect on the administrative burdens of competitive LECs, because they would have no additional filing requirement. They would only be required to respond to complaints. X(#  X4277. Steps taken to minimize significant economic impact on small entities, and  X4significant alternatives considered. In this Notice, we sought comment on how a number of proposals would affect small entities. We believe that overall, these proposals should have a positive economic impact on small price cap LECs. The proposals in Sections VIII.A, VIII.B, and VIII.C should enable small price cap LECs to price their regulated services in a manner that is more reflective of the underlying costs of these services. In Sections VIII.C, we have also sought comment on whether small interexchange carriers would be artificially disadvantaged if we adopt a capacitybased local switching rate structure. The proposals in Sections VIII.D and VIII.E should not have a significant economic impact on small entities. We seek comment on these proposals and urge that parties support their comments with specific evidence and analysis.  X4278. Federal rules which overlap, duplicate or conflict with this proposal. None. >'u .J:\ACCESS.REF\AR1999\ITEM\IREGFLEX.PRO. >  X '9'u )J:\ACCESS.REF\AR1999\ITEM\PRA.PRO) 9 C. Paperwork Reduction Act 279. On April 1, 1997, the Office of Management and Budget (OMB) approved all of our proposed information collection requirements in accordance with the Paperwork"#",-(-(ZZ!"  X4Reduction Act.= {Oy'ԍ Notice of Office Management and Budget Action, OMB No 30600760 (Apr. 1, 1997). The OMB made one recommendation, suggesting that we try "to minimize the number of new filings that firms must create in order to be compliant with the rules adopted . . . ." We have carefully considered the recommendation of OMB, and in the course of preparing this Order, we have decided to modify several of the collection requirements  X4proposed in the Access Reform NPRM.Z= yO'ԍ Access Charge Reform, CC Docket No. 96262, Notice of Proposed Rulemaking, 11 FCC Rcd 21354  {Ow'(1996) (Access Reform NPRM). This Order has greatly reduced the number of filings a price cap LEC will have to submit to receive pricing flexibility. In addition, many of the filings should take less time to make than was originally proposed. For example, we estimate that based on the competitive triggers we adopted, it should only take five hours each to make two Phase II showings per MSA for all special access and dedicated transport services, whereas the original filing to OMB estimated that each Phase II showing would take approximately 300 hours. 280. The Further Notice of Proposed Rulemaking contains either a proposed or modified information collection. As part of its continuing effort to reduce paperwork burdens, we invite the general public and the OMB to take this opportunity to comment on the information collections contained in the Further Notice of Proposed Rulemaking, as required by the Paperwork Reduction Act of 1995, 44 U.S.C.  35013520. Public and agency comments are due at the same time as other comments on the Further Notice of Proposed Rulemaking; OMB comments are due 60 days from date of publication of the Further Notice of Proposed Rulemaking in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.  X' D. Filing Comments 281. Pursuant to Sections 1.415 and 1.419 of the Commission's rules, 47 C.F.R.  1.415, 1.419, interested parties may file comments on or before October 29, 1999, and reply comments on or before November 29, 1999. Comments may be filed using the Commission's  X"4Electronic Comment Filing System (ECFS) or by filing paper copies. See Electronic of  X 4Documents in Rulemaking Proceedings, 63 Fed. Reg. 24,121 (1998). 282. Comments filed through the ECFS can be sent as an electronic file via the Internet to . Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appears in the caption of"!,-(-(ZZ? " this proceeding, however, commenters must transmit one electronic copy of the comments to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet email. To get filing instructions for email comments, commenters should send an email to ecfs@fcc.gov, and should include the following words in the body of the message, "get form ." A sample form and directions will be sent in reply. 283. Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appear in the caption of this proceeding, commenters must submit two additional copies for each additional docket or rulemaking number. All filings must be sent to the Commission's Secretary, Magalie Roman Salas, Office of the Secretary, Federal Communications Commission, 445 Twelfth St., S.W., Room TWA325, Washington, DC 20554.  X '9'u )J:\ACCESS.REF\AR1999\ITEM\PRA.PRO) 9  X 4  X4<'u ,J:\ACCESS.REF\AR1999\ITEM\CLAUSE.PRO, <5E X. ORDERING CLAUSES ă 284. Accordingly, IT IS ORDERED, pursuant to sections 1, 4(i), 4(j), 201205, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 154(j), 201205, 303(r), 403, and section 553 of Title 5, United States Code, that revisions to Parts 1, 61, and 69 of the Commission's rules, 47 C.F.R. Parts 1, 61, 69, ARE ADOPTED as set forth in Appendix B.  X4 285. IT IS FURTHER ORDERED that the rule revisions adopted in this Order will be effective 30 days after publication of this Order in the Federal Register. The collections of information contained within are contingent upon approval by the Office of Management and Budget. 286. IT IS FURTHER ORDERED that, pursuant to section 10(c) of the Communications Act of 1934, 47 U.S.C. 160(c), the period for review by the Commission of the petition for forbearance filed by U S West Communications, Inc., CC Docket No. 98157, IS EXTENDED by 90 days. 287. IT IS FURTHER ORDERED that the petition for declaratory ruling filed by AT&T, CCB/CPD File No. 9863, IS DENIED. 288. IT IS FURTHER ORDERED that NOTICE IS HEREBY GIVEN OF the rulemaking described above and that COMMENT IS SOUGHT on these issues.  289. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference Operations Division, SHALL SEND a copy of the Further Notice of Proposed"Q%,-(-(ZZe#" Rulemaking, including the Regulatory Flexibility Act analysis, to the Chief Counsel for Advocacy of the Small Business Administratio n. ` `  ,hh]FEDERAL COMMUNICATIONS COMMISSION ` `  ,hh]M agalie Roman Salas XX` ` X X,Xhh]XSecretary(# <'u ,J:\ACCESS.REF\AR1999\ITEM\CLAUSE.PRO, < " ,-(-(ZZ9 "  X'    @A-@:'u *J:\ACCESS.REF\AR1999\ITEM\APPA.APX* :u APPENDIX A   X'OParties Filing Pleadings Đc  X4 I. Price Cap Second FNRPM  X`4XA. Comments(#  X24XX` ` 1.X Ad Hoc Telecommunications Users Group (Ad Hoc)(#  X 4XX` ` 2.X Ameritech (#  X 4XX` ` 3.X Association for Local Telephone Services (ALTS)(#  X 4XX` ` 4.X AT&T Corp. (AT&T)(#  X 4XX` ` 5.X Bell Atlantic Telephone Companies (Bell Atlantic)(#  X 4XX` ` 6.X BellSouth Telecommunications, Inc. (BellSouth)(#  X 4XX` ` 7.X California Cable Television Association (CCTA)(#  X4XX` ` 8.X Cincinnati Bell Telephone Co. (Cincinnati Bell)(#  Xz4XX` ` 9.X Comcast Corp. (Comcast)(#  Xc4XX` ` 10.X Competitive Telecommunications Association (CompTel)(#  XL4XX` ` 11.X Cox Enterprises, Inc. (Cox)(#  X54XX` ` 12.X General Services Administration (GSA)(#  X4XX` ` 13.X GTE Service Corp. (GTE)(#  X4XX` ` 14.X ICG Access Services, Inc. (ICG)(#  X4XX` ` 15.X Information Industry Association (IIA)(#  X4XX` ` 16.X LCI International, Inc. (LCI)(#  X4XX` ` 17.X LDDS WorldCom (LDDS)(#  X4XX` ` 18.X Lincoln Telephone and Telegraph Co. (Lincoln)(#  X4XX` ` 19.X MCI Telecommunications Corp. (MCI)(#  X}4XX` ` 20.X Metropolitan Fiber Systems (MFS)(#  Xf4XX` ` 21.X National Telephone Cooperative Association (NTCA)(#  XO4XX` ` 22.X NYNEX Telephone Companies (NYNEX)(#  X84XX` ` 23.X Organization for the Protection and Advancement of Small Telephone Companies (OPASTCO)(#  X 4XX` ` 24.X Pacific Bell and Nevada Bell (together, Pacific Bell)(#  X4XX` ` 25.X Southern New England Telephone Co. (SNET)(#  X4XX` ` 26.X Southwestern Bell Telephone Co. (SBC)(#  X 4XX` ` 27.X Sprint Corporation (Sprint)(#  X!4XX` ` 28.X Sprint Telecommunications Venture (#  X"4XX` ` 29.X TeleCommunications Association (TCA)(#  X#4XX` ` 30.X Telecommunications Resellers Association (TRA)(#  Xi$4XX` ` 31.X Teleport Communications Group Inc. (Teleport)(#  XR%4XX` ` 32.X Time Warner Communications Holdings, Inc., (Time Warner)(#  X;&4XX` ` 33.X U S West Communications, Inc. (U S West)(#  X$'4XX` ` 34.X United States Telephone Association (USTA)(# "$',-(-(ZZ,%"Ԍ X4ԙXB. Replies(#  X4XX` ` 1.X Ad Hoc (#  X4XX` ` 2.X Ameritech (#  X4XX` ` 3.X Association for Local Telecommunications Services (ALTS)(#  X4XX` ` 4.X AT&T (#  Xv4XX` ` 5.X Bell Atlantic (#  X_4XX` ` 6.X BellSouth (#  XH4XX` ` 7.X Cincinnati Bell (#  X14XX` ` 8.X Comcast (#  X 4XX` ` 9.X Competitive Telecommunications Association (CompTel)(#  X 4XX` ` 10.X Cox (#  X 4XX` ` 11.X Frontier (#  X 4XX` ` 12.X General Services Administration (GSA)(#  X 4XX` ` 13.X GTE (#  X 4XX` ` 14.X LDDS (#  X4XX` ` 15.X MCI (#  Xy4XX` ` 16.X MFS (#  Xb4XX` ` 17.X National Cable Television Association, Inc. (NCTA)(#  XK4XX` ` 18.X NYNEX (#  X44XX` ` 19.X Pacific Bell (#  X4XX` ` 20.X Southwestern Bell (SBC)(#  X4XX` ` 21.X Sprint (#  X4XX` ` 22.X Sprint Telecommunications Venture (#  X4XX` ` 23.X Teleport (#  X4XX` ` 24.X Time Warner (#  X4XX` ` 25.X TRA (#  X4XX` ` 26.X U S West (#  X|4XX` ` 27.X USTA (#  X74 II. Access Reform NPRwM   X 4XA. Comments(#  X4XX` ` 1.X ACC Long Distance (#  X 4XX` ` 2.X Awd Hoc Telecommunications Users Committee (Ad Hoc)(#  X!4XX` ` 3.X AirTouch Communications, Inc. (AirTouch)(#  X"4XX` ` 4.X Alabama Public Service Commission (Alabama Commission)(#  X#4XX` ` 5.X Alaska Telephone Association (#  Xi$4XX` ` 6.X Aliant (#  XR%4XX` ` 7.X Alliance for Public Technology (#  X;&4XX` ` 8.X Allied Communications Group, Inc. (Allied)(#  X$'4XX` ` 9.X ALLTEL Telephone Services Corporation (ALLTEL)(# "$',-(-(ZZ,%"Ԍ X4XX` ` 10.X America OnLine (#  X4XX` ` 11.X American Association for Adult and Continuing Education, et al. (#  X4XX` ` 12.X American Association for Retired Person, Consumer Federation of America, and Consumers Union (AARP, et al.)(#  X4XX` ` 13.X American Library Association (#  X4XX` ` 14.X American Petroleum Institute (API)(#  Xv4XX` ` 15.X America's Carriers Telecommunication Association (ACTA)(#  X_4XX` ` 16.X Ameritech (#  XH4XX` ` 17.X Association for Local Telecommunications Services (ALTS)(#  X14XX` ` 18.X AT&T (#  X 4XX` ` 19.X Bankers Clearinghouse, et al. (#  X 4XX` ` 20.X Bell Atlantic Telephone Companies and NYNEX (BA/NYNEX)(#  X 4XX` ` 21.X BellSouth Corporation, BellSouth Telecommunications, Inc. (BellSouth)(#  X 4XX` ` 22.X California Cable Television Association (CCTA)(#  X 4XX` ` 23.X (People of the State of ) California and the Public Utility Commission of the State of California (California Commission)(#  X4XX` ` 24.X Cathey, Hutton & Associates (#  Xy4XX` ` 25.X Centennial Cellular Corp. (#  Xb4XX` ` 26.X Cincinnati Bell Telephone Company (Cincinnati Bell)(#  XK4XX` ` 27.X Citizens for a Sound Economy Foundation (CSE)(#  X44XX` ` 28.X Citizens Utilities Company (Citizens)(#  X4XX` ` 29.X Commercial Internet Exchange Association (CIX)(#  X4XX` ` 30.X Communications Workers of America (CWA)(#  X4XX` ` 31.X Competition Policy Institute (CPI)(#  X4XX` ` 32.X Competitive Telecommunications Association (CompTel)(#  X4XX` ` 33.X Compuserve, Inc. and Prodigy Services Corp. (Compuserve)(#  X4XX` ` 34.X Consumer Project on Technology (Consumer Project)(#  X4XX` ` 35.X District of Columbia Public Service Commission (District of Columbia Commission)(#  Xe4XX` ` 36.X Evans Telephone Company, et al. (Small Western LECs)(#  XN4XX` ` 37.X Excel Telecommunications, Inc. (Excel)(#  X74XX` ` 38.X Florida Public Service Commission (Florida Commission)(#  X 4XX` ` 39.X Frederick & Warinner, L.L.C. (#  X 4XX` ` 40.X Frontier Corporation (Frontier)(#  X4XX` ` 41.X General Communication, Inc. (GCI)(#  X4XX` ` 42.X General Services Administration/Department of Defense (GSA/DOD)(#  X 4XX` ` 43.X Gray Panthers (#  X!4XX` ` 44.X GTE Service Corp. (GTE)(#  X"4XX` ` 45.X GVNW Inc./Management (GVNW)(#  X#4XX` ` 46.X Harris, Skrivan & Associates, LLC (#  Xh$4XX` ` 47.X ICG Telecom Group, Inc. (ICG)(#  XQ%4XX` ` 48.X Illinois Commerce Commission (Illinois Commission)(#  X:&4XX` ` 49.X Illuminet (#  X#'4XX` ` 50.X Independent Telephone and Telecommunications Alliance (ITTA)(# "#',-(-(ZZ%"Ԍ X4XX` ` 51.X Information Industry Association (IIA)(#  X4XX` ` 52.X Interactive Services Association (#  X4XX` ` 53.X International Communications Association (ICA)(#  X4XX` ` 54.X Internet Access Coalition (#  X4XX` ` 55.X ITCs, Inc. (#  X4XX` ` 56.X IXC Long Distance, Inc. (#  Xv4XX` ` 57.X John Staurulakis, Inc. (Staurulakis)(#  X_4XX` ` 58.X Kansas Corporation Commission (Kansas Commission)(#  XH4XX` ` 59.X LCI International Telecom Corp. (LCI)(#  X14XX` ` 60.X MCI (#  X 4XX` ` 61.X Media Access Project, et al. (#  X 4XX` ` 62.X Microsoft Corporation (Microsoft)(#  X 4XX` ` 63.X Minnesota Independent Coalition (Minnesota Independent Coalition)(#  X 4XX` ` 64.X Missouri Public Service Commission (Missouri Commission)(#  X 4XX` ` 65.X National Association of Regulatory Utility Commissioners (NARUC)(#  X 4XX` ` 66.X National Cable Television Association, Inc. (NCTA)(#  X4XX` ` 67.X National Exchange Carrier Association, Inc. (NECA)(#  Xy4XX` ` 68.X New York State Department of Public Service (New York Commission)(#  Xb4XX` ` 69.X Northern Arkansas Telephone Company (#  XK4XX` ` 70.X Northern Marianna Islands (Commonwealth of)(#  X44XX` ` 71.X Ohio Consumers' Counsel (Ohio Consumers' Counsel)(#  X4XX` ` 72.X Ohio Public Utilities Commission (Ohio Commission)(#  X4XX` ` 73.X Ozarks Technical Community College (#  X4XX` ` 74.X Pacific Telesis Group (PacTel)(#  X4XX` ` 75.X Pennsylvania Internet Service Providers (Pennsylvania ISPs)(#  X4XX` ` 76.X Personal Communications Industry Association (PCIA)(#  X4XX` ` 77.X Public Utilities Commission of Texas (Texas Commission)(#  X4XX` ` 78.X Public Utility Commission of Oregon (Oregon Commission)(#  X|4XX` ` 79.X Puerto Rico Telephone Company (PRTC)(#  Xe4XX` ` 80.X Jon Radoff (#  XN4XX` ` 81.X Roseville Telephone Company (Roseville)(#  X74XX` ` 82.X Rural Telephone Coalition (RTC)(#  X 4XX` ` 83.X Rural Telephone Finance Cooperative (#  X 4XX` ` 84.X Rural Utilities Service (RUS)(#  X4XX` ` 85.X SDN Users Association, Inc. (#  X4XX` ` 86.X Serviceoriented Open Network Technologies, Inc. (SONETECH)(#  X 4XX` ` 87.X South Dakota Public Utilities Commission (South Dakota Commission)(#  X!4XX` ` 88.X Southern New England Telephone Co. (SNET)(#  X"4XX` ` 89.X Southwestern Bell (SBC)(#  X#4XX` ` 90.X Spectranet Interactive, Inc. (Spectranet)(#  Xh$4XX` ` 91.X Sprint (#  XQ%4XX` ` 92.X State Consumer Advocates (#  X:&4XX` ` 93.X TCA, Inc. (TCA)(#  X#'4XX` ` 94.X TDS Telecommunications Corporation (TDS)(# "#',-(-(ZZ%"Ԍ X4XX` ` 95.X Telco Communications Group, Inc. (#  X4XX` ` 96.X Telecommunications Resellers Association (TRA)(#  X4XX` ` 97.X TeleCommunications, Inc. (TCI)(#  X4XX` ` 98.X Teleport (#  X4XX` ` 99.X Tennessee Regulatory Authority (Tennessee Commission)(#  X4XX` ` 100.X Texas Office of Public Utility Counsel (Texas Public Utility Counsel)(#  Xv4XX` ` 101.X Time Warner Communications Holdings, Inc. (Time Warner)(#  X_4XX` ` 102.X U S West (#  XH4XX` ` 103.X USTA (#  X14XX` ` 104.X Washington Independent Telephone Association (WITA)(#  X 4XX` ` 105.X Washington Utilities and Transportation Commission (Washington Commission)(#  X 4XX` ` 106.X Lyman C. Welch (#  X 4XX` ` 107.X Western Alliance (#  X 4XX` ` 108.X WinStar Communications, Inc. (WinStar)(#  X 4XX` ` 109.X WorldCom, Inc. (WorldCom)(#  Xy4XB. Replies(#  XK4XX` ` 1.X ACC Long Distance (#  X44XX` ` 2.X Ad Hoc (#  X4XX` ` 3.X Alarm Industry Communications Committee (#  X4XX` ` 4.X State of Alaska (Alaska Commission)(#  X4XX` ` 5.X Aliant (#  X4XX` ` 6.X Alliance for Public Technology (#  X4XX` ` 7.X ALLTEL Telephone Services Corporation (ALLTEL)(#  X4XX` ` 8.X America OnLine (#  X4XX` ` 9.X American Association for Adult and Continuing Education, et al. (#  X|4XX` ` 10.X American Association for Retired Person, Consumer Federation of America, and Consumers Union, and Texas Office of Public Utility Counsel (AARP, et al.)(#  X74XX` ` 11.X American Communications Services, Inc. (#  X 4XX` ` 12.X Ameritech (#  X 4XX` ` 13.X API (#  X4XX` ` 14.X Arch Communications Group (#  X4XX` ` 15.X Association for Local Telecommunications Services (ALTS)(#  X 4XX` ` 16.X AT&T (#  X!4XX` ` 17.X Bankers Clearinghouse, et al. (#  X"4XX` ` 18.X Bell Atlantic Telephone Companies and NYNEX (BA/NYNEX)(#  X#4XX` ` 19.X BellSouth Corporation, BellSouth Telecommunications, Inc. (BellSouth)(#  Xh$4XX` ` 20.X (People of the State of) California and the Public Utility Commission of the State of California (California Commission)(#  X:&4XX` ` 21.X Colorado Library Education and Healthcare Telecommunications Coalition (# "#',-(-(ZZ%"Ԍ X4XX` ` 22.X Commercial Internet Exchange Association (CIX)(#  X4XX` ` 23.X Competitive Telecommunications Association (CompTel)(#  X4XX` ` 24.X Compuserve (#  X4XX` ` 25.X Consumer Project on Technology (Consumer Project)(#  X4XX` ` 26.X Cox (#  X4XX` ` 27.X General Communication, Inc. (GCI)(#  Xv4XX` ` 28.X General Services Administration/Department of Defense (GSA/DOD)(#  X_4XX` ` 29.X Consumers' Utility Counsel Division, [Georgia] Governor's Office of Consumer Affairs (Georgia Consumers' Utility Counsel)(#  X14XX` ` 30.X Georgia Public Service Commission (Georgia Commission)(#  X 4XX` ` 31.X GTE Service Corp. (GTE)(#  X 4XX` ` 32.X GVNW Inc./Management (GVNW)(#  X 4XX` ` 33.X State of Hawaii (Hawaii)(#  X 4XX` ` 34.X ICG Telecom Group, Inc. (ICG)(#  X 4XX` ` 35.X Internet Access Coalition (#  X 4XX` ` 36.X IXC Long Distance, Inc. (#  X4XX` ` 37.X LCI International Telecom Corp. (LCI)(#  Xy4XX` ` 38.X Maine Public Utilities Commission (Maine Commission)(#  Xb4XX` ` 39.X MCI (#  XK4XX` ` 40.X Media Access Project, et al. (#  X44XX` ` 41.X Minnesota Independent Coalition (Minnesota Independent Coalition)(#  X4XX` ` 42.X Minnesota Internet Services Trade Association (#  X4XX` ` 43.X National Cable Television Association, Inc. (NCTA)(#  X4XX` ` 44.X National Exchange Carrier Association, Inc. (NECA)(#  X4XX` ` 45.X Ohio Consumers' Counsel (Ohio Consumers' Counsel)(#  X4XX` ` 46.X Ohio Public Utilities Commission (Ohio Commission)(#  X4XX` ` 47.X Pacific Telesis Group (PacTel)(#  X4XX` ` 48.X Personal Communications Industry Association (PCIA)(#  X|4XX` ` 49.X PSINet, Inc. (PSINet)(#  Xe4XX` ` 50.X Puerto Rico Telephone Company (PRTC)(#  XN4XX` ` 51.X Roseville Telephone Company (Roseville)(#  X74XX` ` 52.X Rural Telephone Coalition (RTC)(#  X 4XX` ` 53.X Southern New England Telephone Co. (SNET)(#  X 4XX` ` 54.X Southwestern Bell Telephone Company (SBC)(#  X4XX` ` 55.X Sprint Corporation (Sprint)(#  X4XX` ` 56.X State Consumer Advocates (#  X 4XX` ` 57.X TDS Telecommunications Corporation (TDS)(#  X!4XX` ` 58.X Telco Communications Group, Inc. (#  X"4XX` ` 59.X TeleCommunications, Inc. (TCI)(#  X#4XX` ` 60.X Teleport Communications Group Inc. (Teleport)(#  Xh$4XX` ` 61.X Texas Association of Broadcasters (#  XQ%4XX` ` 62.X Texas Office of Public Utility Counsel (Texas Public Utility Counsel)(#  X:&4XX` ` 63.X The Gallegos Family Network (#  X#'4XX` ` 64.X Time Warner Communications Holdings, Inc. (Time Warner)(# "#',-(-(ZZ%"Ԍ X4XX` ` 65.X U S West (#  X4XX` ` 66.X USTA (#  X4XX` ` 67.X WorldCom, Inc. (WorldCom)(#  X4 III. October 5 Public Noticwe   X`4XA. Comments(#  X24XX` ` 1.X Ad Hoc (#  X 4XX` ` 2.X Awmerica's Carriers Telecommunication Association (ACTA)(#  X 4XX` ` 3.X Ameritech (#  X 4XX` ` 4.X API (#  X 4XX` ` 5.X Association for Local Telecommunications Services (ALTS)(#  X 4XX` ` 6.X AT&T (#  X 4XX` ` 7.X Bell Atlantic (#  X4XX` ` 8.X BellSouth (#  Xz4XX` ` 9.X Cable & Wireless (Cable & Wireless)(#  Xc4XX` ` 10.X Cincinnati Bell (#  XL4XX` ` 11.X CompTel (#  X54XX` ` 12.X Consumer Federation of America (CFA)(#  X4XX` ` 13.X Consumers Union (#  X4XX` ` 14.X CoreComm Newco, Inc. (CoreComm)(#  X4XX` ` 15.X CPI (#  X4XX` ` 16.X CTSI, Inc. (CTSI)(#  X4XX` ` 17.X CWA (#  X4XX` ` 18.X ENTUA (#  X4XX` ` 19.X Excel Telecommunications, Inc. (Excel)(#  X}4XX` ` 20.X General Services Administration (GSA)(#  Xf4XX` ` 21.X GTE (#  XO4XX` ` 22.X KMC Telecom, Inc. (KMC)(#  X84XX` ` 23.X MCI WorldCom, Inc. (MCI)(#  X!4XX` ` 24.X MediaOne Group, Inc. (MediaOne)(#  X 4XX` ` 25.X NEXTLINK Communications, Inc. (NEXTLINK)(#  X4XX` ` 26.X Operator Communications, Inc. (OCI)(#  X4XX` ` 27.X RCN Telecom Services, Inc. (RCN)(#  X 4XX` ` 28.X SBC (SBC)(#  X!4XX` ` 29.X United States Small Business Administration (SBA)(#  X"4XX` ` 30.X Small Business Survival Committee (#  X#4XX` ` 31.X Sprint (#  Xi$4XX` ` 32.X Time Warner (#  XR%4XX` ` 33.X TRA (#  X;&4XX` ` 34.X U S West (#  X$'4XX` ` 35.X USTA (# "$',-(-(ZZ,%"Ԍ X4XX` ` 36.X Washington Utilities and Transportation Commission (Washington Commission)(#  X4XX` ` 37.X Western Wireless Corporation (Western Wireless)(#  X4XB. Replies(#  Xv4XX` ` 1.X Ad Hoc (#  X_4XX` ` 2.X Ameritech (#  XH4XX` ` 3.X API (#  X14XX` ` 4.X AT&T (#  X 4XX` ` 5.X Bell Atlantic (#  X 4XX` ` 6.X BellSouth (#  X 4XX` ` 7.X CFA (#  X 4XX` ` 8.X Cincinnati Bell (#  X 4XX` ` 9.X CompTel (#  X 4XX` ` 10.X CTSI (#  X4XX` ` 11.X Excel (#  Xy4XX` ` 12.X General Services Administration (GSA)(#  Xb4XX` ` 13.X GST Telecom Inc. (GST)(#  XK4XX` ` 14.X GTE (#  X44XX` ` 15.X ITTA (#  X4XX` ` 16.X KMC (#  X4XX` ` 17.X MCI WorldCom, Inc. (MCI)(#  X4XX` ` 18.X NEXTLINK (#  X4XX` ` 19.X RCN Telecom Services, Inc. (RCN)(#  X4XX` ` 20.X SBC (SBC)(#  X4XX` ` 21.X Sprint (#  X4XX` ` 22.X TRA (#  X|4XX` ` 23.X U S West (#  Xe4XX` ` 24.X USTA (#  X 4 IV. AT&T Petition for Declaratory Ruling   X4XA. Comments(#  X 4XX` ` 1.X ALLTEL Communications (#  X!4XX` ` 2.X Ameritech (#  X"4XX` ` 3.X Association for Local Telecommunications Services (ALTS)(#  X#4XX` ` 4.X BellSouth Telecommunications, Inc. (BellSouth)(#  Xi$4XX` ` 5.X Cable & Wireless USA. Inc. (Cable & Wireless)(#  XR%4XX` ` 6.X Cablevision Lightpath, Inc. and NEXTLINK Communications, Inc. (#  X;&4XX` ` 7.X Cox Communications (Cox)(#  X$'4XX` ` 8.X CTSI, Inc. (CTSI)(# "$',-(-(ZZ,%"Ԍ X4XX` ` 9.X Freedom Ring Communications (#  X4XX` ` 10.X Frontier Corp. (Frontier)(#  X4XX` ` 11.X GTE Service Corp (GTE)(#  X4XX` ` 12.X GVNW Inc./Management (GVNW)(#  X4XX` ` 13.X Heart of Iowa Communications, Inc. (#  X4XX` ` 14.X MCI WorldCom, Inc. (MCI)(#  Xv4XX` ` 15.X MediaOne Group, Inc. (MediaOne)(#  X_4XX` ` 16.X MGC Communications, Inc. (#  XH4XX` ` 17.X Optel, Inc. (#  X14XX` ` 18.X Rainer Cable, Inc. (#  X 4XX` ` 19.X SBC Communications (SBC)(#  X 4XX` ` 20.X Sprint Communications Co., L.P. (Sprint)(#  X 4XX` ` 21.X Telecommunications Resellers Association (TRA)(#  X 4XX` ` 22.X Teligent, Inc. (#  X 4XX` ` 23.X The Orlando Telephone Company (#  X 4XX` ` 24.X Time Warner Telecom (Time Warner)(#  X4XX` ` 25.X Total Telecommunications Services, Inc. (#  Xy4XX` ` 26.X U S West Communications, Inc. (U S West)(#  Xb4XX` ` 27.X WinStar Communications, Inc. (WinStar)(#  X44XB. Replies(#  X4XX` ` 1.X Ameritech (#  X4XX` ` 2.X Association for Local Telecommunications Services (ALTS)(#  X4XX` ` 3.X AT&T Corp. (AT&T)(#  X4XX` ` 4.X Bell Atlantic (#  X4XX` ` 5.X CTSI, Inc. (CTSI)(#  X4XX` ` 6.X MCI WorldCom, Inc. (MCI)(#  X|4XX` ` 7.X MGC Communications, Inc. (#  Xe4XX` ` 8.X NEXTLINK Communications, Inc. (NEXTLINK)(#  XN4XX` ` 9.X SBC Communications, Inc. (SBC)(#  X74XX` ` 10.X Sprint Communications Co., L.P. (Sprint)(#  X 4XX` ` 11.X Total Telecommunications Services, Inc. (#  X 4XX` ` 12.X WinStar Communications, Inc. (WinStar)(#  X ' V. Forbearance PetitionHs  X"4X1. U S West, Phoenix MSA(#  Xh$4XX` ` a. Comments(#`  X:&4XX` ` X 1.X,Ameritech Operating Companies (Ameritech)(#  X#'4XX` ` X 2.X,AHT&T Corp. (AT&T)(#"#',-(-(ZZ%"Ԍ X4XX` ` X 3.X,BellSouth Telecommunications, Inc. (BellSouth)(#  X4XX` ` X 4.X,Competitive Telecommunications Association (CompTel)(#  X4XX` ` X 5.X,GST Telecom Inc. (#  X4XX` ` X 6.X,GTE Service Corp. (GTE)(#  X4XX` ` X 7.X,MCI WorldCom, Inc. (MCI)(#  X4XX` ` X 8.X,Qwest Communications Corp. (Qwest) (#  Xv4XX` ` X 9.X,SBC Communications, Inc. (SBC)(#  X_4XX` ` X 10.X,Sprint Corporation (Sprint)(#  XH4XX` ` X 11.X,TSR Wireless LLC (TSR)(#  X14XX` ` X 12.X,United States Telephone Association (USTA)(#  X 4XX` ` b. Replies(#`  X 4XX` ` X 1.X,Ad Hoc Telecommunications Users Committee (Ad Hoc)(#  X 4XX` ` X 2.X,AT&T Corp. (AT&T)(#  X 4XX` ` X 3.X,Bell Atlantic Telephone Companies (Bell Atlantic)(#  X4XX` ` X 4.X,GST Telecom Inc. (#  Xy4XX` ` X 5.X,MCI WorldCom, Inc. (MCI)(#  Xb4XX` ` X 6.X,U S West Communications, Inc. (U S West)(#  X44X2. SBC, Fourteen SBC MSAvs(#  X4XX` ` a. Comments(#`  X4XX` ` X 1.X,Ameritech Operating Companies (Ameritech)(#  X4XX` ` X 2.X,Avssociation for Local Telecommunications Services (ALTS)(#  X4XX` ` X 3.X,AT&T Corp. (AT&T)(#  X4XX` ` X 4.X,Competitive Telecommunications Association (CompTel)(#  X|4XX` ` X 5.X,GST Telecom Inc. (#  Xe4XX` ` X 6.X,Hyperion Telecommunications, Inc. (Hyperion)(#  XN4XX` ` X 7.X,KMC Telecom, Inc. (KMC)(#  X74XX` ` X 8.X,Logix Communications Corporation. (#  X 4XX` ` X 9.X,MCI WorldCom, Inc. (MCI)(#  X 4XX` ` X 10.X,MediaOne Group, Inc. (MediaOne)(#  X4XX` ` X 11.X,Network Access Solutions, Inc. (#  X4XX` ` X 12.X,NEXTLINK Communications, Inc. (#  X 4XX` ` X 13.X,Sprint Corporation (Sprint)(#  X!4XX` ` X 14.X,Telecommunications Resellers Association (TRA)(#  X"4XX` ` X 15.X,Time Warner Communications Holdings, Inc. d/b/a Time Warner (Time Warner)(#  Xh$4XX` ` X 16.X,U S West Communications, Inc. (U S West)(#  XQ%4XX` ` X 17.X,United States Telephone Association (USTA)(#  X:&4XX` ` X 18.X,UTC, The Telecommunications Association (# "#',-(-(ZZ%"Ԍ X4XX` ` b. Replies(#`  X4XX` ` X 1.X,Ad Hoc Telecommunications Users Committee (Ad Hoc)(#  X4XX` ` X 2.X,Bell Atlantic Telephone Companies (Bell Atlantic)(#  X4XX` ` X 3.X,Hyperion Telecommunications, Inc. (Hyperior)(#  X4XX` ` X 4.X,KMC Telecom, Inc. (KMC)(#  Xv4XX` ` X 5.X,Level 3 Communications Inc. (#  X_4XX` ` X 6.X,Logix Communications, Corporation (#  XH4XX` ` X 7.X,NEXTLINK Communications, Inc. (NEXTLINK)(#  X14XX` ` X 8.X,SBC Communications, Inc. (SBC)(#  X 4XX` ` X 9.X,Telecommunications Resellers Association (TRA)(#  X 4X3. U S West, Seattle MSvA(#  X 4XX` ` a. Comments(#`  X4XX` ` X 1.X,Association for Local Telephone Services (ALTS)(#  Xy4XX` ` X 2.X,AvT&T Corp. (AT&T)(#  Xb4XX` ` X 3.X,Competitive Telecommunications Association/America's Carriers Telecommunications Association (CompTel)(#  X44XX` ` X 4.X,Ms. Sue Conachan (#  X4XX` ` X 5.X,Ms. Kathryn Fancher (#  X4XX` ` X 6.X,Focal Communications, Inc. (Focal)(#  X4XX` ` X 7.X,General Services Administration (GSA)(#  X4XX` ` X 8.X,GST Telecom Inc. (#  X4XX` ` X 9.X,Hyperion Telecommunications, Inc. (Hyperion)(#  X4XX` ` X 10.X,MCI WorldCom, Inc. (MCI)(#  X4XX` ` X 11.X,Network Access Solutions, Inc. (#  X|4XX` ` X 12.X,NEXTLINK Communications Inc. and Electric Lightwave, Inc. (NEXTLINK)(#  XN4XX` ` X 13.X,SBC Communications (SBC)(#  X74XX` ` X 14.X,Sprint Corporation (Sprint)(#  X 4XX` ` X 15.X,Telecommunications Resellers Association (TRA)(#  X 4XX` ` X 16.X,Washington Association of Internet Service Providers (#  X4XX` ` X 17.X,WGHT Pompton Lakes NJ (#  X 4XX` ` b. Replies(#`  X"4XX` ` X 1.X,Bell Atlantic Telephone Companies (Bell Atlantic)(#  X#4XX` ` X 2.X,General Services Administration (GSA)(#  Xh$4XX` ` X 3.X,Qwest Communications Corp. (Qwest) (#  XQ%4XX` ` X 4.X,U S West Communications, Inc. (U S West)(# ":&,-(-(ZZB$"Ԍ X4X4. Bell Atlantic, Twelve Bell Atlantic Study Areavs(#  X4XX` ` a. Comments(#`  X4XX` ` X 1.X,Association for Local Telecommunications Services (ALTS)(#  X4XX` ` X 2.X,AvT&T Corp. (AT&T)(#  Xv4XX` ` X 3.X,Cablevision Lightpath, Inc (#  X_4XX` ` X 4.X,Capital One Financial Services (#  XH4XX` ` X 5.X,CBS Broadcasting Corporation, National Broadcasting Company, Turner Broadcasting System, Inc., and The Walt Disney Corporation (#  X 4XX` ` X 6.X,Competitive Telecommunications Association/America's Carriers Telecommunications Association (CompTel)(#  X 4XX` ` X 7.X,CTSI, Inc & RCN Telecom (#  X 4XX` ` X 8.X,General Services Administration (GSA)(#  X 4XX` ` X 9.X,Hyperion Telecommunications, Inc. (Hyperion)(#  X4XX` ` X 10.X,Mr. Marcel Kates (#  Xy4XX` ` X 11.X,KMC Telecom, Inc (#  Xb4XX` ` X 12.X,Marriott Corporation (Marriott)(#  XK4XX` ` X 13.X,MCI WorldCom, Inc. (MCI)(#  X44XX` ` X 14.X,MediaOne Group (MediaOne)(#  X4XX` ` X 15.X,Network Access Solutions, Inc. (#  X4XX` ` X 16.X,Network Plus, Inc. (#  X4XX` ` X 17.X,NEXTLINK Communications, Inc. (NEXTLINK)(#  X4XX` ` X 18.X,Sprint Corporation (Sprint)(#  X4XX` ` X 19.X,Telecommunications Resellers Association (#  X4XX` ` X 20.X,Mr. Jerry Thompson (#  X4XX` ` X 21.X,Time Warner Communications Holdings, Inc. d/b/a Time Warner (Time Warner)(#  Xe4XX` ` X 22.X,United States Telephone Association (USTA)(#  XN4XX` ` X 23.X,xDSL Networks, Inc. (#  X 4XX` ` b. Replies(#`  X4XX` ` X 1.X,Bell Atlantic Telephone Companies (Bell Atlantic)(#  X4XX` ` X 2.X,General Services Administration (GSA) (#  X!4X5. Ameritech, Chicago LATA(#  X#4XX` ` a. Comments(#`  XQ%4XX` ` X 1.X,Association for Local Telephone Services (ALTS)(#  X:&4XX` ` X 2.X,AT&T Corp. (AT&T)(#  X#'4XX` ` X 3.X,Competitive Telecommunications Association (CompTel)(#"#',-(-(ZZ%"Ԍ X4XX` ` X 4.X,Core Comm, Ltd. (CoreComm)(#  X4XX` ` X 5.X,Focal Communications Corporation and KMC Telecom, Inc. (#  X4XX` ` X 6.X,MCI WorldCom, Inc. (MCI)(#  X4XX` ` X 7.X,McLeod USA Telecommunications Services, Inc. (#  X4XX` ` X 8.X,NEXTLINK Communications, Inc. (NEXTLINK)(#  X4XX` ` X 9.X,SBC Communications, Inc. (SBC)(#  Xv4XX` ` X 10.X,Sprint Corporation (Sprint)(#  X_4XX` ` X 11.X,Telecommunications Resellers Association (TRA)(#  XH4XX` ` X 12.X,United States Telephone Association (USTA)(#  X 4XX` ` b. Replies(#`  X 4XX` ` X 1.X,Ameritech Operating Companies (Ameritech)(# :'u *J:\ACCESS.REF\AR1999\ITEM\APPA.APX* :X` hp x (#%'0*,.8135@8: