[Federal Register Volume 59, Number 146 (Monday, August 1, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-18589] [[Page Unknown]] [Federal Register: August 1, 1994] ======================================================================= ----------------------------------------------------------------------- FEDERAL COMMUNICATIONS COMMISSION 47 CFR Parts 64 and 69 [CC Docket No. 91-141, FCC 94-190] Expanded Interconnection With Local Telephone Company Facilities agency: Federal Communications Commission. action: Final rule. ----------------------------------------------------------------------- summary: The FCC reaffirmed its commitment to its expanded interconnection policy, which creates new opportunities for competitive provision of access services that the local telephone companies traditionally have provided on a monopoly basis. The Commission acted in response to the June 10, 1994 decision of the U.S. Court of Appeals for the D.C. Circuit in Bell Atlantic Telephone Companies v. FCC. In that case, the court said it would vacate in part, and otherwise remand, the first two of the Commission's expanded interconnection orders, on the grounds that the agency lacked authority to require the telephone companies to provide expanded interconnection for special access through physical collocation. The Commission directed the local telephone companies to provide expanded interconnection through virtual collocation. The Commission concluded that, although its earlier orders found that physical collocation would be the optimal means to achieve the public interest benefits of expanded interconnection, virtual collocation also produces these benefits. The Commission found that it had legal authority to require virtual collocation. The FCC exempted telephone companies from the mandatory virtual collocation requirement at central offices in which they choose to offer physical collocation subject to non-streamline regulation by the Commission as a communications common carrier service. By acting expeditiously before the court issues its mandate, the FCC said that it sought to avoid the disruption to competition that might result if its expanded interconnection policy lapsed. This quick response to the court's decision should give affected parties clear guidance on their rights and obligations and preserve the public interest benefits of expanded interconnection. dates: Effective Date: December 15, 1994. Compliance Date: September 1, 1994, the carriers subject to these rules must file tariffs and notifications with respect to physical collocation offerings under exemption from the virtual collocation requirement. for further information contact: David L. Sieradzki, (202) 418-1576, or Suzanne M. Tetreault, (202) 418-1596, Policy and Program Planning Division, Common Carrier Bureau. supplementary information: This is a synopsis of the Commission's Memorandum Opinion and Order in CC Docket No. 91-141, adopted July 14, 1994, and released July 25, 1994. The complete text of this Memorandum Opinion and Order is available for inspection and copying during normal business hours in the FCC Reference Center, 1919 M St., NW., Room 239, Washington, DC 20554. The Federal Communications Commission has submitted the following information collection requirement to OMB for review and clearance under the Paperwork Reduction Act of 1980, 44 U.S.C. 3507. Persons wishing to comment on this information should contact Timothy Fain, Office of Management and Budget, Room 10236, New Executive Office Building, Washington, DC 20503, (202) 395-3561. For further information contact Judy Boley, Federal Communications Commission, (202) 418-0214. Please note: The Commission has requested expedited review of this collection by August 1, 1994, under the provisions of 5 CFR 1320.18. Title: Expanded Interconnection with Local Telephone Company Facilities. Respondents: Business or other for-profit. Frequency of Response: One-time collection. Estimated Annual Burden: 16 respondents; 1 response per respondent; 390 hours per response; 6240 hours total annual burden. Needs and Uses: The information required is necessary to ensure the provision of expanded interconnection services in a manner consistent with the requirements of the Communications Act of 1934, as amended, particularly 47 U.S.C. 201, 202, and 203, as well as other requirements established herein. Public reporting burden for this one-time collection of information is estimated as follows: for tariff filings, including supporting information, average 390 hours per response. These estimates include the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to the Federal Communications Commission, Office of Managing Director, Paperwork Reduction Project, Washington, DC 20554 and to the Office of Management and Budget, Paperwork Reduction Project, Washington, DC 20503. Synopsis of Memorandum Opinion and Order 1. Expanded interconnection is a local exchange carrier (LEC) offering that enables parties, by interconnecting their circuits with those of the LEC at a LEC central office through either physical collocation or virtual collocation, to compete on a facilities basis with certain LEC access services. Physical collocation, as defined by the Commission in this proceeding, is an offering that enables an interconnector to locate its own transmission equipment in a segregated portion of a LEC central office. The interconnector pays a tariffed charge to the LEC for the use of that central office space, and may enter the central office to install, maintain, and repair the collocated equipment. Virtual collocation is defined as an offering in which the LEC owns (or may lease) and exercises exclusive physical control over the transmission equipment, located in the central office, that terminates the interconnector's circuits. The LEC dedicates this equipment to the exclusive use of the interconnector, and provides installation, maintenance, and repair services on a non-discriminatory basis. Under our virtual collocation policy, the interconnector has the right to designate its choice of central office equipment, and to monitor and control the equipment remotely. The LEC connects this equipment to the interconnector's circuit outside the central office, with an interconnection point between LEC-owned facilities and interconnector-owned facilities as close as possible to the office. The standards governing physical collocation and virtual collocation arrangements are discussed in detail below. 2. In response to the court's decision in Bell Atlantic Telephone Companies v. FCC, No. 92-1619 (D.C. Cir., June 10, 1994), we first reaffirm our analysis and conclusion in the Special Access Expanded Interconnection Order, 57 FR 54323 (November 18, 1992) and the Switched Transport Expanded Interconnection Order, 58 FR 48756 (September 17, 1993) that expanded interconnection for special access and switched transport is in the public interest. We reaffirm that the benefits of expanded interconnection outweigh any disadvantages of the policy. We next conclude that, although expanded interconnection through physical collocation is the optimal means to realize these benefits, expanded interconnection through virtual collocation also produces these benefits and is in the public interest. We reaffirm that we have authority, pursuant to Section 1, 4(i), 201, 202, 205, 214(d), and 218 of the Communications Act, to mandate expanded interconnection and impose the related requirements specified in this order. I. Interconnection Architecture 3. Remand and New Mandatory Virtual Collocation Policy. In light of the D.C. Circuit's Bell Atlantic v. FCC decision and in anticipation of remand, we are adopting a new expanded interconnection policy that will facilitate the continued, uninterrupted provision of expanded interconnection and will reduce the practical problems that could arise in the wake of the court's decision. We will require, as of September 1, 1994, that Tier 1 LECs (other than NECA pool members) file generally available tariffs offering expanded interconnection through virtual collocation. LECs will be exempted from this requirement in central offices where they opt to provide physical collocation subject to the standard described in detail below. 4. Physical Collocation Exemption. A LEC will be exempted from our mandatory virtual collocation requirement at any specific central office or offices for which the LEC opts to offer under tariff expanded interconnection through physical collocation, subject to full regulation by the Commission as a communications common carrier service, including the standards we adopt below for such offerings. A LEC's physical collocation offering will exempt it from the general requirement to offer virtual collocation under tariff only if the LEC explicitly consents to offer physical collocation as a communications common carrier offering under non-streamlined Title II regulation. 5. A LEC will qualify for an exemption from the mandatory virtual collocation requirement only if it voluntarily provides physical collocation subject to all the rules relating to physical collocation that are set forth in this order. As part of that regulation, a LEC that has chosen to provide physical collocation at particular central offices will not be permitted to withdraw its physical collocation offering for customers' existing physical collocation nodes at those offices, for either current or new circuits, without Commission certification pursuant to Section 214 of the Communications Act that such a discontinuation of service will not adversely affect the present or future public convenience and necessity. The exemption from the virtual collocation requirement will apply as long as the LEC offers physical collocation. If a LEC has offered physical collocation pursuant to this exemption, and subsequently withdraws its physical collocation offering for new customers at a given location, it will no longer qualify for the exemption, and will be required to offer virtual collocation on a generally available, tariffed basis at that location. Similarly, if a LEC has offered virtual collocation on a generally available, tariffed basis, and later wants to withdraw that offering in a particular central office because it qualifies for the physical collocation exemption in that office, it may withdraw the offering for new interconnectors. In such a case, however, the LEC must continue to make virtual collocation available for existing and new circuits of interconnectors that are already using virtual collocation in that office, unless it obtains Commission certification that such a discontinuation of service will not adversely affect the present or future public convenience and necessity. 6. Alternative Interconnection Offerings. We remain open to alternative interconnection arrangements that telephone companies may propose in waiver petitions, if those proposals satisfy the public interest objectives achieved by our virtual collocation requirements. Moreover, LECs are free to tariff alternative virtual collocation, physical collocation, or other arrangements that interconnectors may want to take in addition to the baseline arrangements satisfying the LECs' basic obligations under the rules adopted herein. Such alternatives may be negotiated between the parties, although such negotiated arrangements must be filed as tariffs to enable other interconnectors desiring the same arrangement in the same central office to obtain them. 7. Implementation. The LECs subject to expanded interconnection requirements shall file tariffs offering virtual collocation as defined herein on September 1, 1994, to be effective on December 15, 1994. LECs must amend their initial tariff filings by October 3, 1994 if they are required to tariff rates for services using additional interconnector- specified circuit terminating equipment. Petitions to reject or suspend and investigate any of these tariffs should be filed by October 14, 1994; replies will be due on October 31, 1994. LECs that wish to be exempted from the virtual collocation requirement must, on September 1, 1994, file any necessary tariff revisions to implement physical collocation in accordance with the rules set forth in this order, or notify the Chief, Tariff Division, Common Carrier Bureau, in writing that no such revisions are necessary and explain the basis for that conclusion. We are not requiring LECs to obtain our advance approval before making use of the physical collocation exemption from the virtual collocation requirement. LECs will, however, be held to the rules set forth herein concerning physical collocation offerings made in lieu of the mandatory virtual collocation requirement. 8. We also emphasize that the mandatory physical collocation requirement adopted in our earlier orders, which the Bell Atlantic v. FCC court has stated it would vacate with respect to special access expanded interconnection, remains in effect until the court issues the mandate in that case, and the LECs may not propose to withdraw, suspend, or otherwise abrogate their current special access physical collocation offerings until then. Assuming the mandate does not issue before December 15, 1994, our rules requiring that LECs offer both special access and switched transport expanded interconnection through physical collocation will remain in effect until December 15, 1994. 9. Locations Where Expanded Interconnection Must Be Made Available. For purposes of implementing our mandatory virtual collocation regime, we require, as we did in the First Reconsideration Order, 57 FR 62481 (December 31, 1992), that LECs provide expanded interconnection in a subset of their central offices in their initial tariffs. In this instance, LECs should initially tariff expanded interconnection in all offices in which it is currently tariffed. If a LEC receives a bona fide request to make expanded interconnection available in additional central offices, the LEC must file tariff revisions offering virtual collocation (or, if it qualifies for an exemption, physical collocation) in such offices within 45 days of receipt of such a request. Such tariff revisions shall be effective on 45 days notice or less. We also reaffirm that, under the policies adopted in this order, LECs must provide: (1) Both special access and switched transport expanded interconnection at central offices that are classified as end offices and service wire centers, (2) special access expanded interconnection at remote nodes that are rating points for special access; and (3) switched transport expanded interconnection on a bona fide request at ``stand-alone tandems'' and at remote nodes that serve as rating points for switched transport and have the necessary space and technical capabilities to originate and terminate switched traffic. II. Standards 10. Overview. Except for the policy changes described below, we conclude on the basis of the record previously compiled that the virtual collocation standards adopted in earlier orders in this proceeding should continue to apply under the new mandatory virtual collocation requirement. We also find that the standards we adopted as part of our mandatory physical collocation requirement remain appropriate in the context of physical collocation provided voluntarily under the new rules. A. Standards Governing Virtual Collocation 1. In General 11. We here adopt rules governing mandatory virtual collocation that are similar to the rules we adopted in earlier orders in this proceeding to govern virtual collocation. Under these rules, LECs will be required to dedicate to interconnectors' use in terminating the interconnectors' circuits any kind of central office basic transmission equipment reasonably specified by the interconnector. LECs will be required to install, maintain, and repair this equipment, at a minimum, under the same time intervals and with the same failure rates that apply to comparable LEC equipment not dedicated to interconnectors. Interconnectors will be entitled to monitor and control this equipment remotely. LECs will be exempt from the virtual collocation requirement if they provide physical collocation offerings that satisfy our requirements. Tariffing, rate structure, and pricing requirements will ensure that virtual collocation is generally available on a nondiscriminatory basis and fulfills our public interest objectives. 12. In the unlikely event a court were to hold that we lack authority to require that interconnectors be able to specify the virtually collocated equipment dedicated to their use, we intend that, instead, LECs and interconnectors would negotiate the range of equipment available for virtual collocation. If a court were to hold that we lack authority to impose even that approach, we intend that an approach under which the LEC specifies the equipment that the interconnector could select be used as a replacement. Moreover, if a court were to hold that we lack authority to impose any of the other specific requirements included in the standards described in the preceding paragraph, we intend that the offending provision be removed. We find that these approaches would be acceptable, although substantially less desirable, options. 2. Equipment Designation 13. We reaffirm that under our virtual collocation policy, interconnectors have the right to select the type of central office equipment dedicated to their use. In addition to our requirement that LECs offer virtual collocation of any type of transmission equipment reasonably requested by interconnectors, we also require that LECs offer virtual collocation through generally available tariffs. We are specifying tariffing procedures for the LECs' service offerings involving collocation equipment to ensure that both these requirements are satisfied. 14. Prospective users of virtual collocation may request that LECs include specific types of equipment that they are likely to use initially, and would like to have included in the tariffs. If they submit such requests to the LECs by August 1, 1994, the LECs are required to include specific rates for the requested equipment in their virtual collocation tariffs filed on September 1, 1994. Prospective users of virtual collection may continue to give the LECs requests for tariffing specific equipment through September 1, 1994. By October 3, 1994, LECs must amend their initial tariff filings to include specific prices for all of the equipment identified by interconnectors by September 1. During the period from September 1 to December 15, interconnectors may continue to submit equipment requests, although in order to facilitate an orderly tariffing process, we will permit LECs to treat those requests as if they were received on the day after the tariffs become effective, subject to the procedure outlined in the next paragraph. 15. After the initial tariffs become effective, interconnectors will continue to have the right to specify additional types of virtual collocation equipment. An interconnector may request that a LEC modify its virtual collocation tariffs to offer additional types of transmission equipment. The LEC will be required to modify its tariff accordingly within 30 days of receiving such a request. Such tariff changes should be scheduled to become effective on 30 days notice. We reaffirm that, under our new expanded interconnection policy, LECs may proscribe the use of interconnector-designated equipment of practices that represent a significant and demonstrable technical threat to the LEC network. 3. Installation, Maintenance, and Repair 16. In our vital collocation regime, the LECs are responsible for installing, maintaining, and repairing the central office equipment that they own and dedicate to the use of interconnectors. In general, we reaffirm our conclusion in earlier orders that LECs must provide these services, at a minimum, under the same time intervals, and with the same failure rates, that apply to the performance of similar functions for comparable LEC equipment. Failure to provide these functions on equipment dedicated to interconnectors in a manner that is at least as timely and efficient as the service the LECs provide themselves for services that compete with interconnectors' offerings constitutes an unreasonable practice under Section 201(b) of the Communications Act. 17. If an interconnector designates equipment that a LEC currently uses in a given central office, the LEC will not need to provide training to its employees and therefore will not be permitted to charge the interconnector for training LEC personnel to service that equipment. Evidence in the record shows that many LECs have procedures for certifying or approving equipment manufacturers and independent contractor personnel to install electronic equipment, and in some cases, to maintain and repair such equipment. LECs that permit outside service representatives to enter their central offices to install, maintain, or repair LEC equipment must permit outside representatives to provide these services for the equipment dedicated to interconnectors' use under virtual collocation. If LECs can choose from a range of levels of service quality offered by outside service representatives (e.g., repair times), the LECs must offer the same range of service options to virtual collocation customers in their tariffs. LECs may impose conditions, including certification and bonding requirements, on the contractors that provide service for equipment dedicated to interconnectors, but these requirements must be the same as the requirements that apply to contractors that provide service for other LEC equipment. If LECs use outside contractors to install, maintain, or repair equipment, they must reasonably consider both price and service quality in selecting contractors to provide these services. 18. If an interconnector meets the LEC's standards for outside service representatives, then the interconnector should be certified as a possible outside contractor. Although LECs are generally required to consider cost in selecting a contractor, a LEC will not be required to choose an interconnector to perform installation, maintenance, and repair on this basis alone. LECs that do not permit outside contractors to enter their central offices are not required to permit such contractors to provide service for equipment dedicated to interconnectors' use, although they are permitted to do so, and may find it the most advantageous way of implementing virtual collocation. 19. We require the LECs to report on the timing and failure rates for providing such services for comparable LEC and interconnector- dedicated equipment and circuits. We increase the frequency of these required reports from annually, as currently required, to quarterly. We delegate authority to the Chief, Common Carrier Bureau, to specify the format and timing of these reports. LECs are not subject to this reporting requirement if they are exempt from the virtual collocation requirement because they provide physical collocation in all central offices in which they provide expanded interconnection. We decline to require the LECs to install, maintain, and repair interconnectors' virtual collocation equipment to meet the interconnectors' time intervals. 4. Other Requirements for Virtual Collocation 20. Except as stated elsewhere in this order, we reaffirm our existing rules on the tariffing of virtual collocation offerings, for the reasons stated in our original orders. We reaffirm that the cross- connect element must be tariffed at a study-area-wide averaged rate that is the same for both virtual collocation and physical collocation for LECs that choose to offer physical collocation. In addition, we require that LECs' rates for particular types of equipment offered to interconnectors may not vary within a study area. We also reaffirm, in the context of our mandatory virtual collocation policy, that rates for elements of virtual collocation other than the cross-connect element and elements recovering the cost of central office equipment may reasonably vary in different locations corresponding to cost differences. 21. In unusual circumstances, space may be so limited in particular central offices that even virtual collocation is infeasible in those locations. As noted in our earlier orders, we will entertain requests for waiver of the requirement that virtual collocation be made available in such offices. 22. We clarify that LECs need not set aside segregated space, which they could not then use for their own purposes, in anticipation of virtual collocation requests. Virtual collocation arrangements do not involve the reservation of segregated central office space for the use of interconnectors. LECs must consider the needs of virtual collocation customers, just as they consider the demand for other services in planning space usage. We will not tolerate any discrimination against interconnectors vis-a-vis other customers, however. B. Standards Governing Physical Collocation 23. LECs that are providing physical collocation on a voluntary basis and have been exempted from the virtual collocation requirements may exhaust the space available for interconnection in a central office. In that case, just as under the original rules, upon Commission approval of a showing that space is unavailable, the LEC will be required to provide generally available, tariffed virtual collocation to subsequent interconnectors. The same standards and procedures will apply to such requests based on space limitations that apply to such requests under our existing rules. 24. For LECs that choose to offer physical collocation pursuant to the terms of this order, a first-come, first-served process appears to be the most equitable manner to allocate space. LECs that qualify for exemptions to provide physical collocation in lieu of virtual collocation need not expand their facilities or relinquish space reasonably reserved for their future use, for the same reasons stated in the Special Access Expanded Interconnection Order, 57 FR 54323 (November 11, 1992). LEC tariffs may reasonably include provisions prohibiting interconnectors from warehousing central office space. 25. In earlier orders in this proceeding, we held that the cross- connect element should be tariffed at a study-area-wide averaged rate under both virtual collocation and physical collocation. We concluded that cost differences among central offices may justify different charges for central office space, power, environmental conditioning, and labor and materials charges for installing physical collocation arrangements, but charges should be uniform for all interconnectors in each individual central office. The same tariffing requirements should apply to physical collocation provided pursuant to exemption from the virtual collocation requirement. C. Standards that Apply to Both Virtual Collocation and Physical Collocation 1. State Expanded Interconnection Policies 26. The state policy exemption from the mandatory physical collocation requirement does not apply under our mandatory virtual collocation policy. If a LEC offers both interstate and intrastate expanded interconnection, it should do so in a manner that satisfies both federal and state requirements to the extent possible, and should provide mechanisms to avoid double payment for facilities used for both interstate and intrastate collocation. 2. Reporting Requirements 27. We conclude that a broader information collection program is necessary to gather empirical data that will better enable us to monitor the development of competition in interstate access markets. We delegate authority to the Chief, Common Carrier Bureau, to formulate the detailed elements of this reporting program, decide which carriers must provide information, and specify the format and timing of these reports. 3. Dispute Resolution 28. We delegate to the Chief, Common Carrier Bureau, authority to develop special dispute resolution mechanisms, possibly including the designation of a Commission representative to work personally with the parties to mediate disputes and ensure that they are settled expeditiously, fairly, and consistently. 4. Interconnection to LEC Facilities 29. Microwave. Microwave interconnection must be so tailored to specific interconnectors and to particular central offices that it does not readily lend itself to uniform tariff arrangements. We therefore modify our requirements to specify that the LECs must tariff microwave interconnection on a central office-specific, individual case basis, in response to bona fide requests. Such tariffed arrangements must be made available to other similarly situated parties at the same central office on non-discriminatory terms, and must be offered under general tariff at a given central office if the LECs gain sufficient experience to do so and if such arrangements can reasonably be standardized. Microwave interconnection should be offered through virtual collocation (using microwave transmission equipment that is owned by the LEC and dedicated to the interconnector's exclusive use) or, if the LEC wishes to qualify for an exemption, through physical collocation. 30. Copper or Coaxial Cable. Interconnection of copper or coaxial cable facilities will be permitted in specific cases only upon approval by the Common Carrier Bureau. The restriction on interconnecting copper or coaxial cable refers to the interconnector's facilities, and does not restrict the type of LEC services to which interconnectors are entitled to connect. 31. DS0 and Other Special Access Services. The LECs must provide interconnection to DS0 and all other special access services within 45 days of receiving a bona fide request for such a service. Our expanded interconnection policies do not require a LEC to connect interconnectors' facilities with any given LEC service (e.g., DS3 service) at a particular central office if the LEC does not offer that service at that central office. 5. Other Standards Issues 32. Equipment in LEC Central Offices. In our earlier orders, we required LECs to permit interconnectors to place, or designate for placement, in LEC central offices only equipment needed to terminate basic transmission facilities, including optical line terminating equipment and multiplexers. We concluded that the placement or dedication of other types of equipment, such as enhanced service equipment, in LEC central offices was unnecessary to foster competition in the provision of special access and switched transport services, and consequently we did not require the LECs to permit the collocation of such equipment in their central offices. We conclude that the same principles should apply under the mandatory virtual collocation and physical collocation exemption policies we adopt in this order, for the reasons stated in our previous orders. Only central office equipment needed to terminate basic transmission facilities must be collocated pursuant to this order. 33. Points of Entry. The LECs must offer interconnectors at least two separate points of entry to each central office if they have at least two entry points for their own cable, but this requirement applies only when there is space available for new facilities at each of two points entering the central office. LECs are not required to construct new entry points or reroute their own facilities to accommodate interconnectors. 34. Network Reliability Council. We decline to delay expanded interconnection pending action by the Network Reliability Council. We reaffirm our conclusion that LECs are permitted to proscribe use of interconnector equipment or operating practices that would constitute a significant and demonstrable technical threat to LEC networks. 35. Insurance. We reaffirm our conclusion that resolution of insurance issues is best addressed when we examine the reasonableness of specific LEC physical collocation tariff provisions. We add, however, that unless a LEC makes a compelling case to the contrary, in generally no liability insurance requirements should be imposed in connection with virtual collocation offerings. 36. Customer Proprietary Network Information (CPNI). We conclude that no special CPNI protection rules are necessary in the context of our new expanded interconnection regime. 37. Billing. The LECs should bill the transport interconnection charge to the customer of record, whether that party is a CAP or an IXC, even in cases where a CAP aggregates the traffic of several IXCs and the CAP is the customer of record. The LEC, of course, must be able to bill for the services it provides to its customers, and we will consider granting waivers in circumstances meeting the normal waiver standard. 38. Percentage of Interstate Use (PIU) Reporting. In cases in which IXCs are able to report end users' PIU data, LECs may, in their tariffs, require them to do so. LECs may use the same PIU verification procedures for end user access customers that they now use for IXC customers. 39. Collocation of Data-Over-Voice (DOV) Equipment. Because DOV equipment is basic transmission equipment, expanded interconnection customers have a right to virtual collocation of DOV equipment in LEC central offices (or physical collocation for LECs that qualify for exemptions from the virtual collocation requirement). III. Availability of Expanded Interconnection 40. Section 201(a) of the Act already requires CAPs and other common carriers to provide interconnections with other common carriers upon request. We conclude that this general requirement is sufficient with respect to parties other than LECs, and that our detailed mandatory virtual collocation rules should apply only to the Tier 1 LECs other than NECA pool members. 41. We reaffirm that AT&T may use expanded interconnection, and that if it does so, it must deploy the same facilities and pay the same charges as any other interconnector. We also reaffirm that all parties, including non-common carriers, may use expanded interconnection offerings. IV. Expanded Interconnection Rate Structure and Pricing A. Connection Charge Rate Structure 42. We reaffirm and expand our requirements regarding the rate structure of connection charges. We do not at this time impose a detailed rate structure for connection charges under our mandatory virtual collocation regime. We do, however, set forth additional requirements to guide the LECs' choice of expanded interconnection rate structures. 43. First, we reaffirm for our new regime the rate structure principles adopted in the Second Reconsideration Order, 58 FR 48752 (September 17, 1993), and the Switched Transport Expanded Interconnection Order, 58 FR 48756 (September 17, 1993) which require the LECs to establish reasonable, disaggregated subelements for connection charges pursuant to rate structures that (1) reflect cost- causation principles, (2) are unbundled to ensure that interconnectors are not forced to pay for services that they do not need, and (3) establish a cross-connect element that applies uniformly to both physical and virtual collocation. 44. In addition, the LECs' rate structures must be clear and easy to understand. Regardless of a LEC's individual choice of rate structure, the facilities and services provided under each rate element should be clear on the face of the tariff, and the tariff support information should identify the specific costs that are recovered by each rate element. In addition, each rate element should logically relate to the service function provided under that rate element. 45. Finally, we will require the LECs to provide cost support data for their September 1, 1994 virtual collocation tariff filings pursuant to a uniform Tariff Review Plan (TRP) format established by the Common Carrier Bureau. The TRP will disaggregate expanded interconnection service into broad categories, or ``functions.'' We delegate authority to the Chief, Common Carrier Bureau, to promulgate detailed requirements regarding the TRP format in a separate order. B. Connection Charge Pricing 46. We continue to believe that the LECs must cost-justify the rate levels for connection charges, and that these rate levels must receive careful scrutiny by Commission staff. The same scrutiny will be required for both initial rate levels and subsequent rate changes in connection charges assessed both by price cap LECs and by rate-of- return LECs. We also reaffirm that expanded interconnection services covered by connection charges will be excluded from the LECs' price cap baskets indefinitely and are subject to non-streamlined tariff review. 47. Direct Costs. We reaffirm that price cap LECs must derive the direct costs of expanded interconnection offerings as provided under the price cap new services test. Rate of returns LECs that provide expanded interconnection should provide the cost information required for new services under the applicable sections of our rules. Thus, under our new mandatory virtual collocation policy, the LECs must justify the direct costs related to all services covered by connection charges (including those related to physical collocation provided pursuant to an exemption), for both the initial level of these charges and subsequent changes. Specifically, we require the price cap LECs to derive the direct cost of providing similar types of new offerings, including expanded interconnection services covered by the connection charge rate elements, based on consistent methodologies, unless they can justify different methodologies. This requirement reflects our policy for the pricing of new services adopted in the LEC Price Cap proceeding. As noted in our earlier expanded interconnection orders, however, certain aspects of the new services test, such as risk premiums, are not applicable to expanded interconnection services. 48. We require the LECs to include in their September 1 tariff filings a description of the methodology they use to compute their rates for services that require the use of optical line terminating multiplexers (OLTMs), and other equipment used to terminate, multiplex, and demultiplex circuits, based on the purchase prices of the equipment. The LECs' methodologies must be consistent with all the rate structure and pricing rules set forth in this order. In addition, the LECs must specify in their tariffs the actual charges for the equipment, calculated using the general methodology. 49. LECs must base the direct costs of providing OLTMs and other equipment with similar functions used in virtual collocation arrangements on the lowest purchase price reasonably available to them to serve an interconnector. In applying this standard, we would find probative the price at which an interconnector may offer to sell the desired equipment to the LEC. Any costs incurred above the lowest reasonably available price are not prudently incurred, and thus should not be reflected in the LECs' rates. The LECs, however, are not required to purchase the equipment from interconnectors. 50. LECs may reasonably charge different rates to different customers if they incur different costs to serve those customers. To be sure, even virtual collocation offerings designed to meet the needs of individual interconnectors must be made generally available to all similarly situated interconnectors, and the actual rate levels (as well as the general methodology) must be specified in the tariffs. The LEC must use the same basic methodology specified in its tariff to compute all customers' rates. 51. LECs may, if they wish, offer to purchase virtual collocation equipment from interconnectors for a nominal amount (e.g., $1) and make it available for resale to the interconnectors for the same amount. We decline, however, to adopt the CAPs' recommendation that we require the LECs to offer such an arrangement. 52. Overhead Costs. LECs incur overhead costs in providing expanded interconnection services, and should be allowed to charge reasonable amounts to recover these costs in their rates for these services. The LECs may include no more than uniform overhead loadings in their rates for expanded interconnection services, or must justify any deviations from uniform loadings. In other words, LECs may not recover a greater share of overheads in rates for expanded interconnection services than they recover in rates for comparable services, absent justification. The LECs have the burden of demonstrating that their connection charges meet this overhead loading standard, and are otherwise just, reasonable, and not unreasonably discriminatory. The price cap LECs may be required to submit additional information to enable us to verify that the overhead loadings on the expanded interconnection connection charges do not unreasonably differ from the overhead loadings on other services, for which price cap LECs generally do not provide cost justification. 53. Other Pricing Issues. We decline to require the LECs to set connection charges to ensure that interconnectors using virtual and physical collocation arrangements pay the same total prices, or to require that virtual collocation be priced using physical collocation rates as a starting point and deducting the cost savings from using a virtual arrangement. We reaffirm our decision to require the LECs to provide cost justification for any connection charges that would vary on a per circuit basis because of the number or type of interconnected circuits ordered. We also reaffirm our conclusion that the LECs may not charge different rates for special access and switched interconnection rate elements, or for interconnection rate elements in different types of central offices (i.e., end offices, serving wire centers, tandem offices, etc.), unless costs differ. C. Contribution Charge 54. We reaffirm the principle that interconnectors, as well as LECs, should provide contributions to support any specifically identified regulatory subsidy mechanisms that are embedded in LEC rates for services subject to competition. Our rule on contribution charges for special access and expanded interconnection, 47 CFR 69.122, will advance this policy principle. Without evidence of other regulatory support flows within interstate special access rates, we decline to modify for our new regulatory regime the policy principle, the rule, or our procedures regarding contribution charges. As to switched transport, we find no reason to alter our conclusion that the transport interconnection charge obviates the need for any separate contribution charge. D. Separations 55. We reaffirm our earlier conclusions concerning the possible need for separations changes in response to the adoption of expanded interconnection requirements for special access and switched transport. Thus, while we find no reason to delay implementation of the requirements set forth in this order, we leave in place our current referrals to the Joint Board concerning whether separations changes are needed to ensure a reasonable jurisdictional allocation of expanded interconnection costs and revenues. We decline to broaden the scope of our referral to the Joint Board, or to modify our separations procedures. V. LEC Pricing Flexibility A. In General 56. We deny Teleport's petition requesting that that Commission eliminate the additional pricing flexibility granted to the LECs in the Special Access Expanded Interconnection Order, 57 FR 54323 (November 18, 1992), unless those LECs voluntarily provide physical collocation for special and switched access expanded interconnection, except that we slightly modify the threshold standard by changing the definition of when expanded interconnection is ``operational,'' as set forth below. We generally reaffirm our decisions in the expanded interconnection orders regarding LEC pricing flexibility. B. Density Zone Pricing 1. Threshold Required for Implementation 57. We reaffirm the LECs with ``operational'' expanded interconnection offerings for special access in a study area should be allowed to implement density zone pricing of special access in that study area, and similarly, that ``operational'' switched expanded interconnection should enable LECs to implement density zone pricing of switched transport. We modify our definition of when expanded interconnection offerings are ``operational,'' and define expanded interconnection offerings as ``operational'' when and if an interconnector has taken a cross-connect element in connection with a tariffed expanded interconnection offering after our new mandatory virtual collocation policy becomes effective. 58. Thus, an offering will be considered ``operational'' under our new regime in the following circumstances: (1) An interconnector has taken a cross-connect pursuant to a generally tariffed virtual collocation offering pursuant to our new rules; or (2) an interconnector has taken a cross-connect pursuant to a physical collocation offering subject to the terms of this order. In this second case, the interconnector need not have started taking the cross-connect after our new regime becomes effective, so long as it continues to take the cross-connect under the new rules. In study areas where a LEC has implemented density zone pricing, we will require the LEC to file, sixty days after the effective date of the LEC's new expanded interconnection offering, tariff revisions effective on 15 days notice that reestablish averaged rates throughout the study area pursuant to Sec. 69.3(e)(7) of our rules if no interconnector has taken a cross- connect under our new regime. 59. We reject proposals to delay any competitive rate changes by the LECs for an arbitrary time period (such as the 12 months proposed by MFS) or until after they have lost a specified proportion of market share. We also reject the CAPs' suggestion that LECs be permitted to reduce rates in high-density areas but not to increase rates in low- density areas, where they may be below cost due to past geographic rate averaging. Finally, making density zone pricing for price cap LECs conditional on cost-justification of special access volume discounts would be inconsistent with price cap regulation. 2. Price Cap Structure 60. We find no need to amend the price cap rules for density zone pricing under our mandatory virtual collocation regime. Moreover, we reaffirm our decisions regarding the price cap structure for density zone pricing under the pre-existing rules, including the +5%/-10% pricing bands that apply to the zone subindexes, the retention of the overall DS1 and DS3 pricing bands, and the existing tariff procedures for above-band rate changes. We also decline to adopt MFS's reconsideration proposal to require the LECs to demonstrate that the ratio of revenues to average variable cost in the highest-density zone is no less than that ratio in the lowest-density zone. 3. Definition of Zones 61. We reaffirm our decision to assign interoffice facilities between different zones to the higher-price, lower-density zone, and find no reason to apply a different rule under our mandatory virtual collocation policy. We decline to create separate zone systems for interoffice facilities and entrance facilities, or to impose substantially higher burdens of proof than those we already imposed if LECs propose zone plans with more than three zones. C. Volume and Term Discounts 62. We reaffirm our decision to permit LECs to offer volume and term discounts on switched transport services after the specified threshold has been reached, and find no reason for a different rule under our mandatory virtual collocation policy. We generally reaffirm that LECs may begin offering switched transport with volume and term discounts in any particular study area only after one of the following conditions is met: (1) 100 DS1-equivalent switched cross-connects are operational in the Zone 1 offices in the study area; or (2) an average of 25 DS1-equivalent switched cross-connects per Zone 1 office are operational. (Zone 1 refers to the LEC's density pricing zone with the greatest traffic density.) In study areas with no Zone 1 offices, the LECs may implement volume and term discounts once five DS1-equivalent switched cross-connects have been taken in the study area. LECs that have not implemented density zone pricing may implement volume and term discounts in a study area after customers have subscribed to 100 DS1- equivalent switched cross-connects in the study area. We adopt the definition of ``operational'' cross-connects that we adopted in the context of density zone pricing. We decline to set a threshold based on the market penetration of LEC competitiors. We delegate authority to the Chief, Common Carrier Bureau, to modify the threshold point for zone density pricing in unusual circumstances where a change in the strict requirements would advance the Commission's objectives. 63. We retain for our mandatory virtual collocation regime the rule regarding cost showings for discounted switched transport offerings, which qualify as new services under the price cap rules. We reject the proposals of MFS and Sprint to require LECs to demonstrate that discounted services recover the same proportion of overheads as non- discounted services, or to require that the ratio of revenues to average variable cost of discounted offerings be no less than that ratio for non-discounted services. We are not persuaded that any change is necessary to the 120-day notice period for these tariff filings. D. Other Forms of Pricing Flexibility 64. We do not grant the LECs authority for broader pricing flexibility at present. E. Fresh Look 65. We reaffirm our ``fresh look'' policy, limiting the charges a LEC may impose on certain customers who want to terminate long-term LEC special access arrangements to an amount that would place both the LEC and the customer in the same position they would have been had the customer chosen a shorter term arrangement from the beginning of the term. 66. USTA's proposal to allow LECs to file monthly transmittals including all new collocations that become operational within that month appears to be reasonable. We modify our fresh look policy, which currently requires LECs to file tariff transmittals giving public notice of the fresh look opportunity for each central office no later than five business days after the first special access expanded interconnection arrangement becomes operational in the central office. Instead, we will require the LECs to file tariff transmittals no later than five business days after the end of each calendar month giving public notice of the fresh look opportunity for each central office in which the first expanded interconnection arrangement became operational during that month. The fresh look period runs from the actual date that the first expanded interconnection arrangement becomes operational until 180 days following the filing date of the tariff providing notice of the beginning of the fresh look period. The same procedures will apply to fresh look periods triggered by switched transport expanded interconnection. In addition, we clarify that LECs need not file any tariff transmittals if their termination liabilities are less than or equal to the maximum liabilities specified by our fresh look policy. Accordingly, we dismiss GTE's petition for waiver as moot. Finally, we conclude that no additional fresh look periods are necessary under our mandatory virtual collocation rules. F. Non-Recurring Reconfiguration Charges 67. We reaffirm that all non-recurring charges applicable to customers shifting to an interconnector's services are to be set no higher than cost-based levels. We also reaffirm that the presumption of reasonableness in the price cap rules should not apply to these charges. In addition, we reaffirm that any difference between the charges applicable when a customer shifts to an interconnector's services and those applicable when a customer reconfigures its service with the LEC must be cost-based. VI. Other Matters 68. We delegate authority to the Chief, Common Carrier Bureau, to address certain transition issues raised by the CAPs. With respect to any other issues addressed in our previous expanded interconnection orders that are not specifically addressed in this order, we reaffirm our earlier conclusions for our new virtual collocation regime, based on the reasons stated in the earlier orders. VII. Ordering Clauses 69. Accordingly, it is ordered, pursuant to authority contained in Sections 1, 4, 201-205, 214, and 218 of the Communications Act of 1934, as amended, 47 USC 151, 154, 201-205, 214, and 218, that Parts 64 and 69 of the Commission's Rules ARE AMENDED as set forth below. 70. It is further ordered That the policies, rules, and requirements adopted in this Order shall be effective on December 15, 1994, except the requirements regarding the filing of tariffs and regarding notifications with respect to exempt physical collocation offerings, which shall be effective on September 1, 1994. 71. It is further ordered That Teleport's Petition for Declaratory Ruling is denied except to the extent specified in this order. 72. It is further ordered That GTE's Petition for Limited Waiver of the ``Fresh Look'' Policy is dismissed as moot. 73. It is further ordered That authority is delegated to the Chief, Common Carrier Bureau, as set forth herein. List of Subjects in 47 CFR Parts 64 and 69 Communications common carriers, Reporting and recordkeeping requirements, Telephone. Federal Communications Commission. William F. Caton, Acting Secretary. Amendatory Text Parts 64 and 69 of title 47 of the Code of Federal Regulations are amended as follows: PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS 1. The authority citation for part 64 continues to read as follows: Authority: Section 4, 48 Stat. 1066, as amended; 47 U.S.C. 154, unless otherwise noted. Interpret or apply secs. 201, 218, 225, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 225, unless otherwise noted. 2. Section 64.1401 is amended by revising paragraph (c), removing paragraphs (d) and (e), redesignating paragraphs (f) through (i) as paragraphs (d) through (g), respectively, and revising newly redesignated paragraph (f)(2), to read as follows: Sec. 64.1401 Expanded interconnection. * * * * * (c) The local exchange carriers specified in paragraph (a) of this section shall offer expanded interconnection for interstate special access and switched transport services through virtual collocation, except that they may offer physical collocation, instead of virtual collocation, in specific central offices, as a service subject to non- streamlined communications common carrier regulation under Title II of the Communications Act (47 U.S.C. 201-228). * * * * * (f) * * * (2) At least two such interconnection points at any local exchange carrier location at which there are at least two entry points for the local exchange carrier's cable facilities, and space is available for new facilities in at least two of those entry points. * * * * * PART 69--ACCESS CHARGES 1. The authority citation for part 69 continues to read as follows: Authority. Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat. 1066, 1070, 1072, 1077, 1094, as amended; 47 USC 154, 201, 202, 203, 205, 218, 403. 2. Section 69.121 is amended by revising paragraph (a)(2) to read as follows: Sec. 69.121 Connection charges for expanded interconnection. (a) * * * (2) Charges for subelements associated with physical collocation or virtual collocation, other than the subelement described in paragraph (a)(1) of this section and subelements recovering the cost of the virtual collocation equipment described in Sec. 64.1401(e)(1) of this chapter, may reasonably differ in different central offices, notwithstanding Sec. 69.3(e)(7). * * * * * [FR Doc. 94-18589 Filed 7-29-94; 8:45 am] BILLING CODE 6712-01-M