[Federal Register Volume 61, Number 202 (Thursday, October 17, 1996)]
[Rules and Regulations]
[Pages 54099-54104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26517]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 51

[CC Docket Nos. 96-98 and 95-185; FCC 96-378]


Implementation of the Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Final rule; Denial of petitions for stay of rules.

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SUMMARY: The Federal Communications Commission here denies two 
petitions seeking a stay of the rules contained in

[[Page 54100]]

the Commission's First Report and Order implementing the 
Telecommunications Act of 1996. The Commission concluded that 
petitioners failed to meet the legal criteria required to obtain a stay 
of the rules. Denial of the petitions seeking a stay of the rules 
allows the implementation of the Telecommunications Act of 1996 to 
proceed without delay.

EFFECTIVE DATE: September 16, 1996.

FOR FURTHER INFORMATION CONTACT: David A. Konuch, 202-418-0199.

SUPPLEMENTARY INFORMATION:

Adopted: September 16, 1996
Released: September 17, 1996

I. Introduction

    1. On August 1, 1996, the Commission adopted rules implementing the 
local competition provisions of the Telecommunications Act of 1996 
(1996 Act). Implementation of the Local Competition Provisions in the 
Telecommunications Act of 1996, CC Docket No. 96-98, First Report and 
Order, FCC 96-325 (released August 8, 1996), 61 FR 45476 (August 29, 
1996) (First Report and Order). On August 28, 1996, GTE Corporation 
(GTE) and the Southern New England Telephone Company (SNET) filed a 
joint motion for stay of the Commission's rules pending judicial 
review. Oppositions to the joint motion for stay were filed by the 
United States Department of Justice and 16 private parties. On 
September 6, 1996, after we received these oppositions, U S West, Inc. 
(``U S West'') filed a stay petition similar to that filed by GTE and 
SNET. The Competitive Telecommunications Association and ALTS filed 
oppositions to U S West's petition.
    2. For the reasons set forth below, we deny the motions for stay.

II. Summary of the Motions and Oppositions

    3. GTE and SNET assert that a petition for review of the 
Commission's First Report and Order is likely to succeed on the merits 
because the Commission has exceeded its statutory authority and has 
acted arbitrarily and capriciously in implementing provisions of the 
1996 Act. In particular, GTE and SNET contend that the Commission lacks 
authority to establish national pricing standards for interconnection 
and unbundled network elements. GTE and SNET argue that, even if the 
Commission has such authority, the pricing standards in the First 
Report and Order would force incumbent LECs to offer interconnection, 
unbundled network elements, and resold services at below-cost rates, 
allegedly effecting an uncompensated taking in violation of the Fifth 
Amendment to the United States Constitution. GTE and SNET also maintain 
that the Commission has established default pricing proxies that are 
inconsistent with the 1996 Act and the cost study methodology the 
Commission adopted for use by state commissions. In addition, GTE and 
SNET assert that the ability of competitors to ``reassemble'' unbundled 
network elements nullifies the resale and exchange access provisions of 
the 1996 Act. Finally, GTE and SNET argue that the First Report and 
Order establishes a number of specific requirements with regard to 
resale and exchange access charges that conflict with express terms of 
the 1996 Act.
    4. GTE and SNET contend that they will suffer irreparable harm in 
the absence of a stay because the Commission's rules will stifle the 
negotiation process and will require incumbent LECs to offer unbundled 
elements or services to competitors at below-cost prices. GTE and SNET 
argue that a stay will cause no harm to others because private 
negotiations and state-supervised arbitrations can proceed in the 
absence of Commission rules. GTE and SNET also assert that the public 
interest favors a stay because of the disruption to business plans that 
would result if the Court of Appeals reverses the First Report and 
Order and the Commission subsequently modifies its rules.
    5. U S West agrees with SNET and GTE's arguments, but additionally 
claims that our default proxy prices, along with our misinterpretation 
of 47 U.S.C. 252(i), the 1996 Act's ``most favored nation'' provision, 
will impermissibly ``dictate'' the result of negotiations, as a 
practical matter. Section 252(i) of the 1996 Act provides that a 
``local exchange carrier shall make available any interconnection, 
service, or network element provided under an agreement approved under 
[section 252] to which it is a party to any other requesting 
telecommunications carrier upon the same terms and conditions as those 
provided in the agreement.'' 47 U.S.C. 252(i). Section 252(i) is known 
as the 1996 Act's ``most favored nation'' provision, because it enables 
carriers to obtain any interconnection, service, or network element on 
terms as favorable as those contained in any state-commission-approved 
interconnection agreement.
    6. In general, parties opposing grant of the stay motion contend 
that GTE's and SNET's motion does not satisfy the four factors that we 
must consider in deciding whether to stay one of our orders. These 
parties contend movants are unlikely to prevail on the merits of their 
claims; that movants will suffer no irreparable harm if a stay is not 
granted; that grant of a stay will harm third parties; and that the 
public interest does not favor the grant of a stay.

III. Discussion

    7. Petitioners' motions do not justify relief under the four-part 
test for evaluating requests for interim relief. That test requires 
proponents of a stay to demonstrate: (1) That they are likely to 
prevail on the merits; (2) that they will suffer irreparable harm if a 
stay is not granted; (3) that other interested parties will not be 
harmed if the stay is granted; and (4) that the public interest favors 
the grant of a stay. See Wisconsin Gas Co. v. FERC, 758 F.2d 669, 673-
74 (D.C. Cir. 1985); Washington Metropolitan Area Transit Authority v. 
Holiday Tours, Inc., 559 F.2d 841, 843-43 (D.C. Cir. 1977); Virginia 
Petroleum Jobbers Ass'n v. FPC, 259 F.2d 921, 925 (D.C. Cir. 1958). As 
discussed below, we do not believe that petitioners have satisfied any, 
much less all, of these requirements.

A. Irreparable Harm

    8. A concrete showing of irreparable harm is an essential factor in 
any request for a stay. `` `The key word' '' in an analysis of 
irreparable harm is `` `irreparable.' '' ``[E]conomic loss does not, in 
and of itself, constitute irreparable harm.'' Also, because competitive 
harm is merely a type of economic loss, ``revenues and customers lost 
to competition which can be regained through competition are not 
irreparable.'' Moreover, even if the alleged harm is not fully 
remediable, the irreparable harm factor is not satisfied absent a 
demonstration that the harm is ``both certain and great; * * * actual 
and not theoretical.'' ``Bare allegations of what is likely to occur 
are of no value'' under this factor, because we ``must decide whether 
the harm will in fact occur.'' Petitioners' three different claims of 
harm absent a stay do not satisfy these exacting standards.
    9. First, GTE and SNET argue specifically that they are harmed by 
our interpretation of the ``just and reasonable'' standard of 47 U.S.C. 
251(c) (2) and (3) for the pricing of interconnection and unbundled 
network elements. They complain, in particular, that the pricing 
methodology adopted in the First Report and Order unconstitutionally 
prevents them from recovering the joint and common costs (hereinafter 
collectively referred to as ``common costs''), and the historical 
``embedded'' costs of such offerings to competing carriers. The First 
Report and

[[Page 54101]]

Order generally uses the term ``common costs'' to refer to both joint 
and common costs. Such ``below-cost'' pricing of section 251 offerings, 
they claim, will result in unrecoverable lost revenues, customers, and 
goodwill, particularly if state regulators do not allow them to 
``rebalance'' (raise) rates for certain retail services that allegedly 
have been subsidized in the past by the pricing regime that the section 
251 offerings will erode.
    10. These claims mischaracterize the First Report and Order. 
Contrary to GTE's and SNET's assertions, our pricing methodology does 
not require ``below-cost'' pricing. On the contrary, it affirmatively 
provides for the recovery of all the economic costs of providing 
interconnection and unbundled network elements, and includes a 
reasonable profit. We refer to the general pricing methodology we 
adopted as Total Element Long Run Incremental Cost or ``TELRIC''. As we 
explained, economic costs are forward-looking costs or, in other words, 
the costs that an efficient provider would incur to provide the service 
or facility. We also specifically provided that unbundled element 
prices shall include a ``normal profit.'' In mischaracterizing our 
pricing methodology as ``below-cost,'' GTE and SNET must be claiming 
that historical embedded costs are always greater than economic costs, 
and that sections 251 and 252 must be read to entitle them to recover 
historical costs even where those costs exceed economic costs. Both 
assertions are unfounded. Nothing in section 251 or 252 creates an 
entitlement for GTE, SNET and other incumbent LECs to assess rates for 
interconnection and unbundled network elements that are designed to 
recover historical costs that exceed economic costs. Economists 
generally agree that historical embedded costs are not the relevant 
costs in competitive markets, and would, in fact, interfere with the 
development of efficient competition. Moreover, GTE and SNET are simply 
wrong in claiming that the Commission's pricing methodology denies them 
an opportunity to recover common costs. We stated clearly in the First 
Report and Order that ``for the aggregate of all unbundled elements, 
incumbent LECs must be given a reasonable opportunity to recover their 
forward-looking common costs attributable to operating the wholesale 
network.''
    11. Even accepting GTE's and SNET's reliance on historical costs, 
their contention that the First Report and Order requires below-cost 
pricing is speculative. In any given instance, forward-looking costs 
``may be higher or lower than historical embedded costs.'' Thus, the 
claimed loss of revenues--which does not present a question of 
constitutional deprivation in any event--is premature because the 
actual revenues that GTE and SNET will receive will not be known until 
completion of the voluntary negotiations and state arbitration 
proceedings that will actually set interconnection and unbundled 
element prices. We expressly stated in the First Report and Order that 
``[i]ncumbent LECs may seek relief from the Commission's pricing 
methodology if they provide specific information to show that the 
pricing methodology, as applied to them, will result in confiscatory 
rates.'' Moreover, as DOJ correctly notes in its Opposition at page 3, 
the Commission possesses discretion in ratemaking matters, so long as 
the rates that result are just. See, e.g., Duquesne Light Co. v. 
Barasch, 488 U.S. 299 (1989) (in which the Court rejected a takings 
claim where a utility was denied recovery of a $34 million capital 
investment, prudent and reasonable when made, because the financial 
integrity of the company was not jeopardized). Speculation about 
anticipated lost revenues in the future does not approach, at this 
stage, a showing of irreparable harm.
    12. Second, petitioners contend that they will be harmed by the 
application of the interim default proxy rates that the Commission 
adopted. This argument is fatally flawed in that there is no certainty 
that those proxies will ever be applied to petitioners. These proxies 
were established for use by the states if a state was not able to set 
prices based on economic cost studies consistent with our methodology 
within the statutory arbitration periods. If, as these carriers assert, 
the proxy rates are unreasonably below costs, they have every 
incentive, and possess the information necessary, to present credible 
economic cost studies to the relevant state commissions to allow the 
state commissions to set prices for interconnection and unbundled 
network elements that are based on actual cost studies, rather than by 
proxies. Their claims of harm thus lack the requisite certainty and 
concreteness for a stay. Further, as discussed below, the carriers' 
challenges to those proxies mischaracterize the Commission's action and 
are unfounded on the merits.
    13. Third, petitioners argue that the Commission's rules 
unreasonably constrain both their ability to negotiate the terms of 
voluntary agreements with other telecommunications carriers that 
request interconnection or unbundled network elements, and the states' 
ability to arbitrate the terms of such agreements if voluntary 
negotiations fail. Quite apart from the fact that the statute directs 
the Commission to adopt implementing rules in 47 U.S.C. 251(d)(1), 
these allegations of harm also are too speculative to justify 
injunctive relief. Section 251(d)(1) provides that, ``[w]ithin 6 months 
after the date of enactment of the Telecommunications Act of 1996, the 
Commission shall complete all actions necessary to establish 
regulations to implement the requirements of this section.'' We also 
note that section 253(a) provides that ``[n]o State or local statute or 
regulation, or other State or local legal requirement, may prohibit or 
have the effect of prohibiting the ability of any entity to provide any 
interstate or intrastate telecommunications service.'' Further, section 
253(d) provides that ``[i]f, after notice and an opportunity for public 
comment, the Commission determines that a State or local government has 
permitted or imposed any statute, regulation, or legal requirement that 
violates subsection (a) or (b) [relating to the states' ability to take 
certain actions], the Commission shall preempt the enforcement of such 
statute, regulation, or legal requirement to the extent necessary to 
correct such violation or inconsistency.'' Our rules clearly do not 
prohibit voluntary negotiations between incumbent LECs and their 
potential competitors, as contemplated in 47 U.S.C. 252(a). Indeed, 
they facilitate them. Petitioners are free to negotiate agreements with 
other carriers upon any terms they choose so long as they are not 
discriminatory and are consistent with the public interest. Although we 
fully expect the existence of our rules to provide a context in which 
free negotiations can proceed consistent with the pro-competitive 
purposes of the 1996 Act, petitioners cannot plausibly suggest in view 
of the explicit mandate of 47 U.S.C. 251(d)(1) that they have a 
cognizable right to negotiate without any rules adopted by the FCC.
    14. We also conclude that petitioners have not demonstrated that 
the FCC's decision to interpret the just and reasonable rate standard 
would necessarily harm them, as compared with a decision to allow 
states independently to interpret that standard in arbitration 
proceedings. To the extent that states might adopt different standards 
absent any FCC guidance, such standards could conceivably be either 
more or less favorable to incumbent local exchange carriers.
    15. Finally, it is a meaningful response to all of the harms that 
petitioners allege that nothing in the

[[Page 54102]]

First Report and Order prevents incumbent local exchange carriers from 
taking steps substantially to protect themselves by seeking to insert 
into their voluntary agreements provisos that permit reformation of the 
terms of those agreements in the event that the order is overturned or 
modified pursuant to judicial review. Similarly, nothing in the order 
prevents states, in arbitrating such agreements, from imposing such 
provisos.

B. Harm to Others

    16. Petitioners also have not proved that a grant of their motions 
would not harm others. As discussed more fully below (paras. 28-31), 
the ``stay'' they seek would not simply maintain the status quo, but 
rather would have a significant impact on whether potential new 
competitors currently involved in negotiations and state arbitration 
proceedings choose to enter local exchange and exchange access markets 
at this crucial time, and, if so, whether their entry would be pursuant 
to statutory standards as interpreted by the Commission, or some other 
standards. To the extent that petitioners claim that the Commission's 
interpretations burden them with lost revenues and competitive harm, 
other interpretations allowing them to charge new entrants higher rates 
or to impose upon them more restrictive terms likely would burden new 
entrants and, consequently, retard or even eliminate competitive entry. 
As between incumbent LECs and new entrants, the former are more likely 
to be able to repair the adverse consequences of any erroneous decision 
on whether to grant a stay.
    17. Moreover, to the extent that petitioners argue not only that 
the Commission adopted an erroneous pricing standard, but also that the 
Commission erred by failing to leave the standard to individual states, 
the carriers are advocating a system that clearly would cause new 
entrants particular harm and might even discourage them from entering 
these markets. As we noted in the First Report and Order, efficient 
entry strategies in many cases require entry on a regional, rather than 
state-by-state, basis. The removal of national standards could severely 
impede, or at least increase the cost of, such strategies.

C. Public Interest

    18. GTE and SNET assert that a stay would serve the public interest 
because it would leave interconnection negotiations to private parties, 
and arbitrations in the hands of state regulators, where Congress 
intended them to be. They also contend that ``progress toward 
competition will be gravely impaired'' in the absence of a stay because 
the Commission's rules will give potential competitors false signals 
that may ``encourage entry by companies that would not normally enter 
if they had known the true costs involved.'' GTE and SNET claim that 
this means that a stay is necessary to protect the public from such 
``uneconomic entry'' and from the disruptions that would attend 
corrective actions if the Commission's rules were overturned. U S West 
additionally claims that the public interest will be harmed because the 
Commission's rules and ``inflexible prices'' will ``prevent carriers 
from negotiating interconnection agreements with each other on terms 
that are more advantageous than the defaults.''
    19. Contrary to GTE's and SNET's argument that a stay is needed to 
avoid ``entry by companies that would not normally enter,'' a stay 
might discourage entry by some who have every reasonable qualification 
to compete and would do so under our rules. A stay in this crucial 
initial period for the development of local exchange and local access 
competition would not serve the public interest unless our rules were 
virtually certain to be set aside on review and the actions taken on 
interconnection requests in the meantime were irreversible. We believe 
that our rules correctly carry out the objectives of Congress in 
adopting section 251. Congress expressly mandated rulemaking by the 
Commission to implement effectively the new statutory requirements. 
Congress also made clear that time was of the essence, directing us to 
``complete all actions necessary to establish [such] regulations'' by 
August 8, 1996. As explained more fully below (paras. 30-31), a stay of 
our rules would subvert Congress' plan to have such rules in place 
during arbitration proceedings. Moreover, as we emphasized in the First 
Report and Order, the rules we adopted under section 251 will have a 
significant impact on the implementation of other provisions of the 
1996 Act. We noted, for example, that our 251 rules ``will help the 
states, the DOJ, and the FCC carry out their responsibilities under 
section 271, and assist BOCs in determining what steps must be taken to 
meet the requirements of section 271(c)(2)(B), the competitive 
checklist.'' Section 271 establishes the requirements that a BOC must 
satisfy in order to receive authorization to provide in-region 
interLATA telecommunications services. Section 271(c)(2)(B) sets forth 
a specific ``checklist'' of requirements that a BOC must meet as part 
of the authorization process.
    20. As to any necessary corrections after the fact, we believe that 
agreements and arbitrations can take account of this possibility. As 
noted above (paragraph 15), agreements and arbitrations could include 
provisos calling for revisions if the Commission's rules should be 
struck down. The joint motion acknowledges that the agreements can be 
revised after the fact if the Commission's rules are upheld after a 
stay is granted; its assertion that such revisions would not work if a 
stay is denied and the rules later are struck down is implausible and 
unexplained.
    21. We further reject U S West's argument that our rules will harm 
the public interest by providing carriers with insufficient flexibility 
to negotiate agreements. For the reasons set out in this Order and in 
the First Report and Order, we believe that our rules provide all 
carriers with a full and fair opportunity, pursuant to the requirements 
of the 1996 Act, voluntarily to negotiate interconnection agreements.
    22. In summary on this point, the primary beneficiary of the 
competitive policies our rules were designed to implement is the 
public. We conclude that a stay would disserve the public interest 
profoundly by eliminating our rules from the process of negotiation and 
arbitration at the very most crucial time.

D. Likelihood of Success on the Merits

    23. Because of the clear failure of petitioners to meet the 
irreparable harm, harm to others, and public interest requirements for 
obtaining a stay, we do not address specifically in this order all 
their claims that we exceeded our statutory authority or that we acted 
arbitrarily or capriciously. All the significant arguments raised by 
the petitioners were squarely addressed in the First Report and Order. 
We addressed issues concerning the Commission's authority under the 
1996 Act to establish national pricing rules in section II.C. and II.D. 
of the order. We discussed the legal and economic bases for the 
establishment of the Commission's pricing methodology, including the 
Fifth Amendment takings issue and the justification for the default 
proxy ceilings and ranges, in section VII of the order. We addressed 
arguments about whether we should permit competitors to reassemble 
unbundled network elements, including possible effects on the resale 
provisions of the 1996 Act and our access charge rules, in sections 
V.H. and VII.B., respectively. In

[[Page 54103]]

section V.J., we set forth our rationale for including vertical 
features within the definition of unbundled local switching; and in 
sections IV.H., V.J., and VII.B., we discussed the compensation to 
incumbent LECs for modifications made to their networks to accommodate 
interconnection and unbundling. Finally, in section XIV.B of the First 
Report and Order, we addressed arguments regarding the rights of third 
parties to obtain ``any individual interconnection, service, or network 
element arrangement'' under section 252(i). We need not repeat those 
discussions in this order.
    24. We will note, however that where the GTE and SNET address the 
merits of the First Report and Order, they often mischaracterize and 
distort the import of our analysis and conclusions. For instance, our 
default proxy pricing measures are only interim approaches, setting 
bounds for unbundled element pricing in the absence of state-approved 
forward-looking cost studies. Our proxies will assist states in the 
very near term when, because of time or staff resource constraints, 
they may be unable to set prices by conducting or approving forward-
looking economic cost studies within the statutory time period set for 
arbitrations. Indeed, the first set of state arbitrations must be 
completed in early November under the deadlines established in the Act.
    25. An example of GTE and SNET's misguided arguments on the merits 
is their criticism of the Commission's unbundled loop proxy 
calculation. In asserting that the Commission ``might just as well have 
picked the default prices out of a hat,'' petitioners omit any mention 
of the several pages of the order describing how we calculated our loop 
proxy figures. As detailed in section VII.C. of the First Report and 
Order, our proxy ceilings are based on prices set by six state 
commissions as their best estimates of forward-looking costs after 
analysis of economic cost studies. We then derived price ceilings for 
individual states throughout the nation by adjusting the average of the 
prices in these six states by the relative loop costs in those states, 
as estimated by the two forward-looking economic cost-based models that 
received significant comment by parties during this proceeding. To 
allow a reasonable margin to enable the proxy ceiling to capture the 
variation among states' forward-looking economic costing prices, we 
then adjusted the resulting prices upward by five percent.
    26. Contrary to GTE and SNET's arguments, it is no surprise, and 
certainly not error, that the price ceiling for Florida--or for 
Connecticut, Colorado, Michigan, Illinois, or Oregon, for that matter--
does not equal the results of the cost studies in those individual 
states. We concluded that an average of the six states' prices 
represented the best estimate of forward-looking loop costs available 
to us at that time, and that relying on an average of the nationwide 
relative costs from the Hatfield and BCM models was the best method for 
deriving proxy price ceilings in individual states. We believe our 
methodology is reasonable, even though our proxy ceiling in Florida is 
$13.68 while the Florida Commission set a $20 per loop price for GTE 
Florida. We note that the price set by the Florida Commission for GTE-
Florida was itself significantly higher than those the commission set 
for BellSouth and United/Centel--the other local telephone companies 
for which the state commission has set unbundled loop prices in 
Florida. We concluded that the reliability of our foundation estimate 
was enhanced by using an average of the prices established in all six 
states for which information was available, rather than using just one 
state or the six states individually. We did not, and could not in the 
time frame permitted under the statute, independently verify the 
accuracy of the six states' unbundled loop prices, many of which also 
were interim in nature. Instead, we emphasized that each state, in our 
judgment, used a standard that appeared to be reasonably close to the 
forward-looking economic cost methodology specified in the First Report 
and Order, although perhaps not consistent in every detail with our 
prescribed methodology. Finally, we also are unpersuaded by GTE and 
SNET's assertion that it was a fatal error to rely on the Florida cost 
studies because the Florida Commission failed to include any 
``significant'' contribution to GTE Florida's common costs. It is not 
clear on its face that the ``insignificant'' contribution to common 
costs is inconsistent with our requirement that there be a reasonable 
allocation of common costs. In addition, the Florida Commission 
affirmatively found that their rates were not below GTE Florida's 
costs, and explicitly provided for recovery of a reasonable profit. GTE 
and SNET have not demonstrated that use of the Florida Commission 
prices as part of setting a proxy ceiling for unbundled loop prices was 
so unreasonable as to result in a flawed loop proxy methodology. In 
sum, we set default proxy price ceilings and ranges for use by state 
commissions, in the absence of fully approved forward-looking cost 
studies, based on the best evidence available to us within the 
statutory time period for our decision.
    27. Finally, petitioners' discussion of our proxy prices simply 
ignores two key characteristics of our proxy rules. First, our order 
makes clear that these proxies are interim in nature, and that states 
utilizing the proxies must replace them with prices based on the 
results of forward-looking cost studies as they become available. 
Second, our rules permit incumbent LECs to obtain a price higher than 
the Commission's proxy ceiling by submitting to a state commission 
during an arbitration an economic cost study that demonstrates that the 
incumbent LEC's costs do in fact exceed the proxy price. If the 
forward-looking costs for petitioners are in fact higher than our proxy 
price ceiling, as applied in an individual state, they need only 
demonstrate that to the state commission.

E. Special Circumstances of This Case

    28. In addition to movants' failure to satisfy the four-part test 
for evaluating requests for stay, the circumstances of this specific 
case particularly militate against the grant of their motions. 
Ordinarily when we are asked to stay the effectiveness of one of our 
orders or rules, the moving party seeks to maintain the status quo 
until a reviewing authority can sort out the issues and render its 
decision on the merits. That is not the case here, as the Joint Motion 
itself recognizes. Under the terms of the 1996 Act, many voluntary 
negotiations for private interconnection agreements and state-
supervised arbitrations that are now under way will be completed before 
the end of the year, because Congress established strict timetables to 
govern the negotiation and arbitration process. The question is whether 
those proceedings will reflect the principles established by the 
Commission to implement section 251.
    29. Petitioners do not seek to preserve the status quo, but to 
overturn Congress's requirement that state arbitrators ensure that 
approved interconnection agreements reflect the Commission's 
regulations implementing section 251. It is doubtful, in these 
circumstances, that the ordinary standards for evaluating stay motions 
should apply because, where the objective of the motion is not to 
maintain the status quo, the courts have applied a more demanding 
standard.
    30. In our view, it is important that the regulations established 
in the First Report and Order not be stayed while negotiation and 
arbitration proceedings are taking place. As we stated in the First 
Report and Order, the negotiations between incumbent LECs and new

[[Page 54104]]

entrants are not analogous to traditional commercial negotiations in 
which each party owns or controls something the other party desires. 
Under section 251, monopoly providers are required to make available 
their facilities and services to requesting carriers that intend to 
compete directly with the incumbent LECs for their customers and, 
consequently, incumbents have strong incentives to resist such 
obligations. Our national rules serve the critical role of equalizing 
bargaining power by establishing certain baseline principles that will 
``reduce delay and lower transaction costs''--burdens that we have 
found ``impose particular hardships for small entities that are likely 
to have less of a financial cushion than larger entities.'' A stay 
would undermine that critical role at a most important time, 
disproportionately harming the competition that the statute 
contemplates from new entrants.
    31. Moreover, Congress made clear that it wants our rules to be in 
place at this critical time. Congress specifically ordered the 
Commission to ``complete all actions necessary to establish regulations 
to implement the requirements'' of section 251 by August 8, 1996. It 
explained that it is ``important that the Commission rules to implement 
new section 251 be promulgated within six months after the date of 
enactment, so that potential competitors will have the benefit of being 
informed of the Commission's rules in requesting access and 
interconnection before the statutory window in new section 271(c)(1)(B) 
shuts.'' Section 271(c)(1)(B) authorizes a Bell Operating Company (BOC) 
to apply for approval to offer in-region interLATA telecommunications 
services if it does not receive a request for access and 
interconnection from a facilities-based competitor within seven months 
after enactment. In section 252(c)(1), Congress further ordered state 
arbitrators resolving interconnection disputes and imposing conditions 
on telecommunications companies to ``ensure that such resolution and 
conditions meet the requirements of section 251, including the 
regulations prescribed by the Commission.'' Under the statute, those 
state arbitrators must ``conclude the resolution of any unresolved 
issues not later than 9 months after the date on which the local 
exchange carrier received the [interconnection] request.'' Because many 
LECs requested interconnection shortly after the enactment of the 1996 
Act on February 8, 1996 (with the consequence that arbitration of such 
requests must be completed soon), a stay of our rules would frustrate 
implementation of the procedure established by Congress. As a matter of 
mathematical certainty, the arbitrations cannot be completed on the 
timetable established by Congress--with the arbitrators ensuring that 
the agreements reflect the regulations prescribed by the Commission, as 
Congress directed in section 252(c)(1)--if the regulations are stayed.

IV. Ordering Clauses

    32. Accordingly, it is ordered that the joint motion for stay filed 
by GTE Corporation and the Southern New England Telephone Company is 
denied.
    33. It is further ordered that the motion for stay filed by U S 
West, Inc., is denied.

List of Subjects in 47 CFR Part 51

    Communications common carriers, Telephone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-26517 Filed 10-16-96; 8:45 am]
BILLING CODE 6712-01-P