[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]


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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.

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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