[Federal Register Volume 62, Number 42 (Tuesday, March 4, 1997)]
[Rules and Regulations]
[Pages 9704-9714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5177]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 59

[CC Docket 96-237, FCC 97-36]


Implementation of Infrastructure Sharing Provisions in the 
Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: On February 7, 1996, the Commission released Implementation of 
Infrastructure Sharing Provisions in the Telecommunications Act of 
1996, Report and Order, CC Docket 96-237, FCC 97-36, to implement new 
section 259 of the Communications Act of 1934, as added by the 
Telecommunications Act of 1996. Section 259 generally requires 
incumbent local exchange carriers (incumbent LECs) to make available 
``public switched network infrastructure, technology, information, and 
telecommunications facilities and functions'' to ``qualifying 
carriers'' that are eligible to receive federal universal service 
support but that lack economies of scale or scope. Wherever possible, 
the Commission adopts general rules that restate the statutory 
language. This approach, which relies in large part on private 
negotiations among parties to satisfy their unique requirements in each 
case, will help ensure that certain carriers who agree to fulfill 
universal service obligations pursuant to section 214(e) can implement 
evolving levels of technology to continue to fulfill those obligations.

EFFECTIVE DATE: The requirements and regulations established in this 
decision shall become effective upon approval by the Office of 
Management and Budget (OMB) of the new information collection 
requirements adopted herein, but no sooner than April 3, 1997. The 
Commission will publish a document in the Federal Register announcing 
the effective date of these regulations following OMB's approval of the 
information collections in this decision.

FOR FURTHER INFORMATION CONTACT: Thomas J. Beers, Deputy Chief, 
Industry Analysis Division, Common Carrier Bureau, at (202) 418-0952, 
or Scott Bergmann, Industry Analysis Division, Common Carrier Bureau, 
at (202) 418-7102. For additional information concerning the 
information collections in the Report and Order contact Dorothy Conway, 
at (202) 418-0217, or via the Internet to [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report

[[Page 9705]]

and Order, Implementation of Infrastructure Sharing Provisions in the 
Telecommunications Act of 1996 adopted February 6, 1997 and released 
February 7, 1997 (CC Docket 96-237, FCC 97-36). The full text of this 
Report and Order is available for inspection and copying during normal 
business hours in the FCC Reference Center, Room 239, 1919 M Street, 
Washington, D.C. 20554. This Report and Order contains new or modified 
information collection requirements subject to the Paperwork Reduction 
Act of 1995 (PRA). It has been submitted to the Office of Management 
and Budget (OMB) for review under the PRA. OMB, the general public, and 
other Federal agencies are invited to comment on the proposed and/or 
modified information collections contained in this proceeding. The 
complete text also may be purchased from the Commission's copy 
contractor, International Transcription Service, Inc. (202) 857-3800, 
2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

PAPERWORK REDUCTION ACT: As required by the Paperwork Reduction Act of 
1995 (PRA), Public Law 104-13, the NPRM invited the general public and 
the Office of Management and Budget (OMB) to comment on proposed 
information collection requirements contained in the NPRM.1 On 
January 22, 1997, OMB approved the proposed information collection 
requirements, as submitted to OMB, in accordance with the Paperwork 
Reduction Act.2
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    \1\ NPRM at para. 55.
    \2\ Notice of Office of Management and Budget Action (OMB No. 
3060-0755) (January 22, 1997).
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    In this Report and Order, we adopt new or modified information 
collection requirements that are subject to OMB review. These 
requirements are contingent upon approval by OMB. The Commission, as 
part of its continuing effort to reduce paperwork burdens, invites the 
general public and the Office of Management and Budget (OMB) to comment 
on the information collections contained in this Order, as required by 
the PRA. Written comments by the public on the information collections 
are due 30 days after date of publication in the Federal Register. OMB 
notification of action is due May 5, 1997. Comments should address: (1) 
whether the new or modified collection of information is necessary for 
the proper performance of the functions of the Commission, including 
whether the information shall have practical utility; (b) the accuracy 
of the Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the respondents 
including the use of automated collection techniques or other forms of 
information technology.
    OMB Approval Number: 3060-0755.
    Title: Policy and Rules Concerning the Implementation of 
Infrastructure Sharing Provisions in the Telecommunications Act of 
1996, CC Docket 96-237.
    Form Number: Not Applicable.
    Type of Review: Revision.
    Respondents: Business or other for profit, including small 
businesses.
    Burden Estimate:

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                                                               Est. time per   Frequency  (per    Annual burden 
               Section/title                   Respondents     resp.  (hrs.)        year)            (hrs.)     
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(1) Section 259(b)(7) filing of tariffs,                                                                        
 contracts or other arrangements...........               75                1                5               375
(2) Section 259(c) information concerning                                                                       
 deployment of new services and equipment..               75                2               12              1800
(3) Sixty day notice before termination of                                                                      
 agreement.................................               75                1                5               150
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    Total Annual Burden: 2,325 total hours.
    Estimated Costs Per Respondent: $0.00.
    Needs and Uses: The information collections for which approval is 
sought are contained in new section 259 (``Infrastructure Sharing'') of 
the Communications Act of 1934 (the Act), as amended. First, the 
information collections adopted pursuant to section 259(c) in this 
Report and Order will provide notice to third parties (qualifying 
carriers) of changes in the incumbent local exchange carrier's network 
that might affect the parties' ability to fully benefit from section 
259 agreements. Second, the information collected pursuant to section 
259(b)(7) will make available for public inspection any tariffs, 
contracts or other arrangements showing the conditions under which the 
incumbent LEC is making available public switched network 
infrastructure and functions pursuant to section 259. Third, the sixty 
day notice of termination requirement will ensure that third parties 
(qualifying carriers) will be able to anticipate service disruptions 
and to inform their customers accordingly. Fourth, placing the burden 
of proof on providing incumbent LECs to show that section 259 
agreements have become economically unreasonable is appropriate because 
such providing incumbent LECs are seeking to terminate the agreement 
and are in control of the necessary information. Failing to collect the 
information would violate the language and the intent of the 1996 Act 
to ensure that access to the evolving, advanced telecommunications 
infrastructure would be made broadly available in all regions of the 
nation at just, reasonable and affordable rates.

Summary of the Report and Order

    1. In this Report and Order, part of the Commission's 
implementation of the Telecommunications Act of 1996,3 we adopt 
rules implementing new section 259 of the Communications Act of 1934, 
as amended.4 Section 259 generally requires an incumbent local 
exchange carrier (incumbent LEC) 5 to make available ``public 
switched network infrastructure, technology, information, and 
telecommunications facilities and functions'' to ``qualifying 
carriers'' that are eligible to receive federal universal service 
support but that lack economies of scale or scope.6 In contrast to 
sections 251 and 252, which grant rights to requesting carriers 
irrespective of whether the requesting carrier intends

[[Page 9706]]

to compete with the incumbent LEC, section 259 does not permit 
``qualifying carriers'' to use an incumbent LEC's public switched 
network infrastructure, technology, information, and telecommunications 
facilities and functions obtained pursuant to section 259 to offer 
services or access to the incumbent LEC's customers in competition with 
the incumbent LEC. Section 259(a) directs the Commission to prescribe 
regulations that implement this requirement within one year after the 
date of enactment of the 1996 Act, i.e., by February 8, 1997.7 
Pursuant to the Notice of Proposed Rulemaking that initiated this 
proceeding,8 we have elected, overall, to articulate general rules 
and guidelines to implement section 259.9
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    \3\ Telecommunications Act of 1996, Public Law 104-104, 110 
Stat. 56 (1996 Act).
    \4\ The Communications Act of 1934, as amended, 47 U.S.C. 
Secs. 259, et seq. (1934 Act or Act).
    \5\ Section 251(h) of the Communications Act defines incumbent 
local exchange carriers as follows:
    (1) DEFINITION--For purposes of this section, the term 
`incumbent local exchange carrier' means, with respect to an area, 
the local exchange carrier that--
    (A) on the date of enactment of the Telecommunications Act of 
1996, provided telephone exchange service in such area; and
    (B)(i) on such date of enactment, was deemed to be a member of 
the exchange carrier association pursuant to section 69.601(b) of 
the Commission's regulations (47 CFR 69.601(b)); or
    (ii) is a person or entity that, on or after such date of 
enactment, became a successor or assign of a member described in 
clause (i).
    47 U.S.C. Sec. 251(h).
    \6\ 47 U.S.C. Sec. 259. See also 47 U.S.C. Sec. 214(e).
    \7\ 47 U.S.C. Sec. 259(a).
    \8\ Implementation of Infrastructure Sharing Provisions in the 
Telecommunications Act of 1996, Notice of Proposed Rulemaking, CC 
Docket 96-237, FCC 96-456, (released November 22, 1996) (NPRM) 61 FR 
63774 (December 2, 1996).
    \9\ Twenty parties filed comments in this proceeding and 
fourteen of these parties filed reply comments. Two additional 
parties filed comments to the Commission which were subsequently 
transferred to the universal service proceeding in CC Docket 96-45. 
The parties, along with the shorthand forms of identification used 
in the Report and Order, are listed in Appendix A of the Report and 
Order.
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    2. We determine that section 259 is complementary to the other 
sections of the 1996 Act and is a ``limited and discrete'' provision 
designed to promote universal service in areas that in many cases, at 
least initially, will be without competitive service providers, but 
without restricting the development of competition.10 Essential 
differences in the language of sections 259 and 251 make clear that 
these provisions address fundamentally different situations. First, in 
accord with section 259(b)(6), section 259 applies only in instances 
where the qualifying carrier does not seek to use shared infrastructure 
to offer certain services within the incumbent LEC's telephone exchange 
area, whereas section 251 applies irrespective of whether new entrants 
seek to provide local exchange or exchange access service within the 
incumbent's telephone exchange area.11 Second, section 259(a) 
establishes specific limitations on a qualifying carrier's use of an 
incumbent LEC's infrastructure, i.e., a qualifying carrier may use 
section 259 only ``for the purpose of enabling such qualifying carrier 
to provide telecommunications services, or to provide access to 
information services, in the service area in which such qualifying 
carrier has requested and obtained designation as an eligible 
telecommunications carrier under section 214(e).'' 12 Third, 
section 259, in contrast to section 251, limits the telecommunications 
carriers that may obtain access to an incumbent LEC's network by the 
inclusion of qualifying criteria in subsection 259(d).13
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    \10\ See Implementation of the Local Competition Provisions in 
the Telecommunications Act of 1996, First Report and Order, CC 
Docket 96-98, FCC 96-325, 11 FCC Rcd 15499 at Paras. 165 (released 
August 8, 1996), 61 FR 45476 (August 29, 1996) (Local Competition 
First Report and Order). We note that the U.S. Court of Appeals for 
the Eighth Circuit has stayed the pricing rules developed in the 
Local Competition First Report and Order, pending review on the 
merits. Iowa Utilities Board v. FCC, No. 96-3321 (8th Circuit, 
October 15, 1996).
    \11\ 47 U.S.C. Sec. 259(b)(6). See also Discussion at Section 
III. C. 6. of the Report and Order.
    \12\ 47 U.S.C. Sec. 259(a) (emphasis added). See also Discussion 
at Section III. A. 1. of the Report and Order.
    \13\ 47 U.S.C. Sec. 259(d). See also Discussion at Section III. 
E. of the Report and Order.
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    3. Thus, we conclude that while section 251 applies to all carriers 
in all situations--including, but not limited to, new entrants 
competing with the incumbent LEC--section 259 only applies in narrow 
circumstances, i.e., for the benefit of those carriers that are 
eligible to receive universal service support but lack economies of 
scale or scope and only to the extent that the qualifying carriers do 
not use section 259-obtained infrastructure to compete with the 
providing incumbent LEC. We conclude that a qualifying carrier that 
obtains, pursuant to section 259 arrangements, interconnection, 
unbundled network elements, and other telecommunications 
functionalities otherwise available pursuant to section 251, does not 
lose its section 251-derived obligation to provide interconnection to 
competitive LECs. We also find that section 259 arrangements can 
include additional functionalities that may be provided to qualifying 
carriers uniquely pursuant to section 259. Making clear that we will 
enforce the section 251-derived interconnection rights of competitive 
LECs, however, will help ensure that competitive entry into markets 
served by qualifying carriers markets is not hampered by the operation 
of otherwise valid section 259 arrangements. Moreover, we further 
promote competitive entry by finding that qualifying carriers may 
include any carrier that satisfies the requirements of section 259(d)--
in other words, not just incumbent LECs, but competitive LECs and any 
other carrier that satisfies section 259(d) requirements.
    4. In this Report and Order, we choose to implement section 259 by 
adopting rules that recognize the central role played by private 
negotiations in promoting the ability of qualifying carriers to obtain 
access to ``public switched network infrastructure, technology, 
information, and telecommunications facilities and functions'' provided 
by other carriers. A negotiation-driven approach is appropriate 
because, inter alia, section 259, unlike section 251, contemplates 
situations where the requesting carrier is not using the incumbent 
LEC's facilities or functions to compete in the incumbent LEC's 
telephone exchange area. In such circumstances, we believe that the 
unequal bargaining power between qualifying carriers, including new 
entrants, and providing incumbent LECs is less relevant since the 
incumbent LEC has less incentive to exploit any inequality for the sake 
of competitive advantage. Thus, wherever possible we adopt specific 
rules that restate the statutory language. The approach we adopt, which 
relies in large part on private negotiations among parties to satisfy 
their unique requirements in each case, will help ensure that certain 
carriers who agree to fulfill universal service obligations pursuant to 
section 214(e) can implement evolving levels of technology to continue 
to fulfill those obligations. Again, because we also affirm the rights 
of competitive LECs to secure interconnection pursuant to section 251 
our approach to implementing section 259 does not discourage the 
development of competition in any local market.
    5. Regarding the scope of section 259(a), we allow the parties to 
section 259 agreements to negotiate what ``public switched network 
infrastructure, technology, information, and telecommunications 
facilities and functions'' will be made available, without per se 
exclusions. We also decide that, whenever it is the only means to gain 
access to facilities or functions subject to sharing requirements, 
section 259(a) requires the providing incumbent LEC to seek to obtain 
and to provide necessary licensing of any software or equipment 
necessary to gain access to the shared capability or resource by the 
qualifying carrier's equipment, subject to the reimbursement for or the 
payment of reasonable royalties. We decide that it shall be the 
responsibility of the providing incumbent LEC to find a way to 
negotiate and implement section 259 agreements that do not 
unnecessarily burden qualifying carriers with licensing requirements. 
In cases where the only means available is including the qualifying 
carrier in a licensing arrangement, the providing incumbent LEC must 
secure such licensing by

[[Page 9707]]

negotiating with the relevant third party directly.
    6. Regarding the implementation of section 259, we conclude that 
section 259(a) grants the Commission authority to promulgate rules 
concerning any section 259 agreement to share public switched network 
infrastructure, technology, information, and telecommunications 
facilities and functions, regardless of whether they are used to 
provide interstate or intrastate services. At the same time, we make 
clear that nothing in our analysis of section 259 indicates an intent 
to regulate intrastate services, as opposed to regulating agreements 
regarding the sharing of infrastructure. We also note that section 259 
dictates two discrete roles for the states with respect to section 259: 
states may accept for public inspection the filings of section 259 
agreements that are required by section 259(b)(7); and states must 
designate a carrier as an ``eligible telecommunications carrier'' 
pursuant to section 214(e)(2)-(3). We further conclude that it is 
unnecessary to adopt any particular rules to govern disputes between 
parties to section 259 agreements that may be brought before the 
Commission. Finally, we decide that it would be inappropriate to 
further construe the requirements of section 259(d)(2) in this 
proceeding because issues materially relating to section 259(d)(2) will 
be decided by the Commission in the universal service proceeding 
scheduled to be concluded by May 8, 1997.
    7. We require that providing incumbent LECs may recover their costs 
associated with infrastructure sharing arrangements, and we conclude 
that incentives already exist to encourage providing and qualifying 
carriers to reach negotiated agreements that do so (section 259(b)(1)). 
We decide that no incumbent LEC should be required to develop, 
purchase, or install network infrastructure, technology, and 
telecommunications facilities and functions solely on the basis of a 
request from a qualifying carrier to share such elements when such 
incumbent LEC has not otherwise built or acquired, and does not intend 
to build or acquire, such elements. We also decide that a providing 
incumbent LEC may withdraw from a section 259 infrastructure sharing 
agreement upon an appropriate showing to the Commission that the 
arrangement has become economically unreasonable or is otherwise not in 
the public interest.
    8. We permit but do not require providing incumbent LECs and 
qualifying carriers to develop through negotiation terms and conditions 
for joint ownership or operation of ``public switched network 
infrastructure, technology, information, and telecommunications 
facilities and functions'' (section 259(b)(2)). We decide that joint 
owners will be treated as providing incumbent LECs for purposes of 
section 259 regulations. We also decide that it is not necessary for 
the Commission to consider, at this time, the accounting and 
jurisdictional separations implications of joint ownership arrangements 
pursuant to section 259.
    9. We conclude that infrastructure sharing does not subject 
providing incumbent LECs to common carrier obligations, including a 
nondiscrimination requirement, because such a result would be contrary 
to the clear mandate of section 259(b)(3). In the NPRM we asked whether 
an ``implied nondiscrimination requirement'' should be inferred based 
on the ``just and reasonable'' requirement included in Section 
259(b)(4). We conclude that Section 259(b)(4) includes no 
nondiscrimination requirement, but we also conclude that the ``just and 
reasonable'' requirement will serve to ensure that all qualifying 
carriers receive the benefits of section 259. We reaffirm that, to the 
extent that requesting carriers seek access to elements pursuant to 
section 251, sections 201 and 251 expressly require rates set pursuant 
to those provisions not only to be just and reasonable, but also non-
discriminatory or not unreasonably discriminatory.14
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    \14\ 47 U.S.C. Secs. 201 (not unreasonably discriminatory), 251 
(nondiscriminatory).
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    10. We decide that, although the Commission may have pricing 
authority to prescribe guidelines to ensure that qualifying carriers 
``fully benefit from the economies of scale and scope of [the providing 
incumbent LEC],'' it is not necessary at this time to exercise this 
authority (section 259(b)(4)). We anticipate that, in this negotiation-
driven approach, qualifying carriers and providing incumbent LECs will 
face economic incentives that will allow them to reach mutually 
satisfactory terms for infrastructure sharing. In particular, we note 
that, because section 259 contemplates situations where requesting 
carriers are not using the incumbent LEC's facilities or functions to 
compete in the incumbent LEC's telephone exchange area, the unequal 
bargaining power between qualifying carriers, including new entrants, 
and providing incumbent LECs is less relevant since the incumbent LEC 
has less incentive to exploit any inequality for the sake of 
competitive advantage vis-a-vis a non-competing qualifying LEC. We 
further decide that availability, timeliness, functionality, 
suitability, and other operational aspects of infrastructure sharing 
also are relevant to determining whether the qualifying carrier 
receives the benefits mandated by section 259(b)(4). We conclude that 
the negotiation process, along with the available dispute resolution, 
arbitration, and complaint processes available from the Commission, 
will ensure that qualifying carriers fully benefit from the economies 
of scale and scope of providing incumbent LECs. We note that non-
qualifying competitive LECs may avail themselves of these same 
processes to prevent unlawful anticompetitive outcomes resulting from 
section 259-negotiated arrangements. Further, we note that any 
anticompetitive outcomes may be proscribed by operation of the 
antitrust laws from which Congress has granted no exemption to parties 
negotiating section 259 agreements. We further note that the Commission 
has ample authority pursuant to Title II to set aside any intercarrier 
agreements found to be contrary to the public interest.
    11. We conclude that it is unnecessary at this time for the 
Commission to establish detailed national rules to promote cooperation 
(section 259(b)(5)). We conclude that, because there is a requirement 
that infrastructure sharing arrangements not be used to compete with 
the providing incumbent LEC, and because a providing incumbent LEC is 
permitted to recover its costs incurred in providing shared 
infrastructure pursuant to section 259, sufficient incentives exist to 
encourage lawful cooperation among carriers. We also decide that the 
adoption of a good faith negotiation standard would promote cooperation 
between providing incumbent LECs and qualifying carriers.
    12. We conclude that, for any services and facilities otherwise 
available pursuant to section 251, carriers that do not intend to 
compete using those services and facilities may request those services 
and facilities pursuant to either section 251 or 259, and carriers that 
do intend to compete using those services and facilities must request 
them pursuant to section 251. We decide that, with respect to 
facilities and information that are within the scope of section 259 but 
beyond the scope of section 251, carriers that do not intend to compete 
using those facilities and information may pursue agreements with 
incumbent LECs pursuant to section 259. We conclude that a providing 
incumbent LEC is not required to share services or access used to 
compete against it, and that an

[[Page 9708]]

incumbent LEC's right to deny or terminate sharing arrangements extends 
to the full breadth of section 259. We also conclude that a qualifying 
carrier may not make available any information, infrastructure, or 
facilities it obtained from a providing incumbent LEC to any party that 
intends to use such information, infrastructure, or facilities to 
compete with the providing incumbent LEC. We emphasize that this will 
not otherwise affect the interconnection obligations of carriers 
pursuant to section 251. Moreover, competitive carriers, i.e., 
regardless of whether they qualify for infrastructure sharing pursuant 
to section 259(d), that require the use of information or facilities to 
compete with the providing incumbent LEC may request the necessary 
facilities pursuant to sections 251 and 252. We also find that nothing 
in section 259 permits a providing incumbent LEC to refuse to enter 
into a section 259 agreement simply because the qualifying carrier is 
competing with the providing incumbent LEC, provided that the 
qualifying carrier is not using any shared infrastructure obtained from 
the providing incumbent LEC pursuant to a section 259 agreement to 
compete.
    13. We decide that section 259 agreements must be filed with the 
appropriate state commission, or with the Commission if the state 
commission is unwilling to accept the filing; must be made available 
for public inspection; and must include the rates, terms, and 
conditions under which an incumbent LEC is making available all 
``public switched network infrastructure, technology, information, and 
telecommunications facilities and functions'' that are the subject of 
the negotiated agreement (section 259(b)(7)). We decide that this 
filing requirement refers only to agreements negotiated pursuant to 
section 259 and affirm that all previous interconnection agreements 
must be filed pursuant to section 252 as mandated by the Commission's 
Local Competition First Report and Order.15
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    \15\ Local Competition First Report and Order at para. 165-171. 
We note that section 252(a) requires all interconnection agreements, 
``including any interconnection agreements negotiated before the 
date of enactment of the Telecommunications Act of 1996,'' to be 
submitted to the appropriate state commission for approval. In 
contrast, we note that section 259 does not include a comparable 
provision.
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    14. We decide that section 259(c) requires notice to qualifying 
carriers of changes in the incumbent LECs' network that might affect 
qualifying carriers' ability to utilize the shared public switched 
network infrastructure, technology, information and telecommunications 
facilities and functions; that section 259(c) requires timely 
information disclosure by each providing incumbent LEC for each of its 
section 259-derived agreements; and that such notice and disclosure, 
provided pursuant to a section 259 agreement, are only for the benefit 
of the parties to a section 259-derived agreement. We also decide that 
section 259(c) does not include a requirement that providing incumbent 
LECs provide information on planned deployments of telecommunications 
and services prior to the make/buy point.
    15. We decide that no incumbent LEC is excused, per se, from 
sharing its infrastructure because of the size of the requesting 
carrier, its geographic location, or its affiliation with a holding 
company. A carrier qualifying under section 259(d) therefore may be 
entitled to request and share certain infrastructure and, at the same 
time, be obligated to share the same or other infrastructure. We 
conclude that parties to section 259 negotiations can and will make the 
necessarily fact-based evaluations of their relative economies of scale 
and scope pertaining to the infrastructure that is requested to be 
shared. To facilitate such negotiations, we adopt a presumption that a 
telecommunication carrier falling within the definition of ``rural 
telephone company'' in section 3(37) lacks economies of scale or scope 
under section 259(d)(1), but we decide to exclude no class of carriers 
from attempting to demonstrate to a providing incumbent LEC that they 
qualify under section 259(d)(1). In negotiations with a requesting 
carrier or in response to a complaint arising from a refusal to enter 
into a section 259 agreement, a providing incumbent LEC may rebut the 
presumption that a ``rural telephone company'' lacks economies of scale 
or scope.

Final Regulatory Flexibility Act Analysis

    16. As required by section 603 of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. Sec. 603, an Initial Regulatory Flexibility Analysis 
(IRFA) was incorporated in the Notice of Proposed Rulemaking, 
Implementation of Infrastructure Sharing Provisions in the 
Telecommunications Act of 1996.16 The Commission sought written 
public comments on the proposals in the Infrastructure Sharing NPRM 
including on the IRFA. The Commission's Final Regulatory Flexibility 
Analysis (FRFA) in this Report and Order conforms to the RFA, as 
amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA), Public Law 104-121, 110 Stat. 847 (1996).17
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    \16\ NPRM at para. 55.
    \17\ SBREFA was codified as Title II of the Contract With 
America Advancement Act of 1996 (CWAAA), 5 U.S.C. Sec. 601 et seq.
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A. Need for and Objectives of This Report and Order and the Rules 
Adopted Herein

    17. The Commission, in compliance with section 259(a) of the 
Communications Act of 1934, as amended by the Telecommunications Act of 
1996, promulgates the rules in this Report and Order to ensure the 
prompt implementation of the infrastructure sharing provisions in 
section 259 of the 1996 Act. Section 259 directs the Commission, within 
one year after the date of enactment of the 1996 Act, to prescribe 
regulations that require incumbent LECs to make certain ``public 
switched network infrastructure, technology, information, and 
telecommunications facilities and functions'' available to any 
qualifying carrier in the service area in which the qualifying carrier 
has requested and obtained designation as an eligible carrier under 
section 214(e).18
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    \18\ 47 U.S.C. Sec. 259. See also 47 U.S.C. Sec. 214(e)(1).
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B. Summary and Analysis of the Significant Issues Raised by the Public 
Comments in Response to the IRFA

    18. The only party to comment on our IRFA, the Rural Telephone 
Coalition (RTC), essentially argues that the Commission violated the 
RFA when we declined to include small incumbent LECs in our definition 
of the class of entities protected by the RFA.19 RTC argues that 
small incumbent LECs that meet the SBA definition of ``small entities'' 
are among the class of carriers that will be affected by these rules 
either as providing incumbent LECs or as qualifying carriers.20 
RTC argues that the Commission has engaged in a ``meaningless 
exercise'' despite the fact that our IRFA included estimates of the 
number of small incumbent LECs potentially affected by the proposed 
rules and presented alternatives for comment by the public.
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    \19\ RTC Comments at 631.
    \20\ Id.
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    19. We disagree. Because the small incumbent LECs subject to these 
rules are either dominant in their field of operations or are not 
independently owned and operated, consistent with our prior practice, 
they are excluded from the definition of ``small entity'' and ``small 
business concerns.'' 21

[[Page 9709]]

Accordingly, our use of the terms ``small entities'' and ``small 
businesses'' does not encompass small incumbent LECs. Out of an 
abundance of caution, however, for regulatory flexibility analysis 
purposes, we did consider small incumbent LECs within the IRFA and used 
the term ``small incumbent LECs'' to refer to any incumbent LECs that 
arguably might be defined by SBA as ``small business concerns.'' 
22 We find nothing in this record to persuade us that our prior 
practice of treating all LECs as dominant is incorrect. Thus, we 
conclude that we have fully satisfied the requirements and objectives 
of the RFA.
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    \21\ See Implementation of the Local Competition Provisions in 
the Telecommunications Act of 1996, First Report and Order, CC 
Docket 96-98, FCC 96-325, 11 FCC Rcd 15499 at Paras. 1328-30, 1342 
(released August 8, 1996), 61 FR 45476 (August 29, 1996) (Local 
Competition First Report and Order). We note that the U.S. Court of 
Appeals for the Eighth Circuit has stayed the pricing rules 
developed in the Local Competition First Report and Order, pending 
review on the merits. Iowa Utilities Board v. FCC, No. 96-3321 (8th 
Circuit, October 15, 1996).
    \22\ See id.
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C. Description and Estimate of the Number of Small Entities to Which 
the Rules Adopted in the Report and Order in CC Docket 96-237 Will 
Apply

    20. Section 259 of the 1934 Act, as added by the 1996 Act, 
establishes a variety of infrastructure sharing obligations.23 
Many of the obligations adopted in this Report and Order will apply 
solely to providing incumbent LECs which may include small business 
concerns.24 The beneficiaries of section 259 infrastructure 
sharing agreements--also affected by the rules adopted herein--are the 
class of carriers designated as ``qualifying carriers'' under section 
259(d).25 Such qualifying carriers must be telecommunications 
carriers, which, as defined in section 3(44) of the act, may include 
LECs, non-LEC wireline carriers, and various types of wireless 
carriers.26 Because section 259(d)(1) limits qualifying carriers 
to those carriers that ``lack economies of scale or scope,'' it is 
likely that there will be small business concerns affected by the rules 
proposed in this NPRM. We note, however, that section 259(d)(2) makes 
the definition of ``qualifying carriers'' dependent on the Commission's 
decisions in the universal service proceeding.27 Until the 
Commission issues an order pursuant to the Universal Service NPRM that 
addresses related issues, it is not feasible to define precisely the 
number of ``qualifying carriers'' that may be ``small business 
concerns'' or, derivatively, the number of incumbent LECs that may be 
``small business concerns.'' 28 With that caveat, we attempt to 
estimate the number of small entities--both providing incumbent LECs 
and qualifying carriers--that may be affected by the rules included in 
this Report and Order.
---------------------------------------------------------------------------

    \23\ 47 U.S.C. Sec. 259.
    \24\ See, e.g., 47 U.S.C. Sec. 259(a).
    \25\ 47 U.S.C. Sec. 259(a), (d).
    \26\ 47 U.S.C. Sec. 259(d). See also 47 U.S.C. Sec. 3(44).
    \27\ 47 U.S.C. Sec. 259(d)(2). See Federal-State Joint Board on 
Universal Service, Notice of Proposed Rulemaking and Order 
Establishing Joint Board, CC Docket 96-45, FCC 96-93 (released March 
8, 1996), 61 FR 10499 (March 14, 1996) (``Universal Service NPRM'').
    \28\ See Universal Service NPRM; see also Joint Board 
Recommendation on Universal Service, Recommended Decision, CC Docket 
96-45, FCC 96J-3 (released November 8, 1996), 61 FR 63778 (December 
2, 1996) (Joint Board Recommendation on Universal Service) 
(recommending eligibility criteria for carriers seeking universal 
service support). We note that the Commission must complete a 
proceeding to implement the Joint Board's recommendations on or 
before May 8, 1997.
---------------------------------------------------------------------------

    21. For the purposes of this analysis, we examined the relevant 
definition of ``small entity'' or ``small business'' and applied this 
definition to identify those entities that may be affected by the rules 
adopted in this Report and Order. The RFA defines a ``small business'' 
to be the same as a ``small business concern'' under the Small Business 
Act, 15 U.S.C. Sec. 632, unless the Commission has developed one or 
more definitions that are appropriate to its activities.29 Under 
the Small Business Act, a ``small business concern'' is one that: (1) 
is independently owned and operated; (2) is not dominant in its field 
of operation; and (3) meets any additional criteria established by the 
Small Business Administration (SBA).30 Moreover, the SBA has 
defined a small business for Standard Industrial Classification (SIC) 
categories 4812 (Radiotelephone Communications) and 4813 (Telephone 
Communications, Except Radiotelephone) to be small entities when they 
have fewer than 1,500 employees.31 We first discuss generally the 
total number of small telephone companies falling within both of those 
categories. Then, we discuss the number of small businesses within the 
two subcategories, and attempt to refine further those estimates to 
correspond with the categories of telephone companies that are commonly 
used under our rules.
---------------------------------------------------------------------------

    \29\ See 5 U.S.C. Sec. 601(3) (incorporating by reference the 
definition of ``small business concern'' in 5 U.S.C. Sec. 632).
    \30\ 15 U.S.C. Sec. 632.
    \31\ 13 C.F.R. Sec. 121.201.
---------------------------------------------------------------------------

    22. As discussed supra, and consistent with our prior practice, we 
shall continue to exclude small incumbent LECs from the definition of 
``small entity'' and ``small business concerns'' for the purpose of 
this IRFA. Because the small incumbent LECs subject to these rules are 
either dominant in their field of operations or are not independently 
owned and operated, consistent with our prior practice, they are 
excluded from the definition of ``small entity'' and ``small business 
concerns.'' 32 Accordingly, our use of the terms ``small 
entities'' and ``small businesses'' does not encompass small incumbent 
LECs. Out of an abundance of caution, however, for regulatory 
flexibility analysis purposes, we will consider small incumbent LECs 
within this analysis and use the term ``small incumbent LECs'' to refer 
to any incumbent LECs that arguably might be defined by SBA as ``small 
business concerns.'' 33
---------------------------------------------------------------------------

    \32\ See Local Competition First Report and Order at Paras.  
1328-30, 1342.
    \33\ See id.
---------------------------------------------------------------------------

21. Telephone Companies (SIC 481)
    23. Total Number of Telephone Companies Affected. The decisions and 
rules adopted herein may have a significant effect on a substantial 
number of small telephone companies identified by the SBA. The United 
States Bureau of the Census (Census Bureau) reports that, at the end of 
1992, there were 3,497 firms engaged in providing telephone service, as 
defined therein, for at least one year. 34 This number contains a 
variety of different categories of carriers, including local exchange 
carriers, interexchange carriers, competitive access providers, 
cellular carriers, mobile service carriers, operator service providers, 
pay telephone operators, PCS providers, covered SMR providers, and 
resellers. It seems certain that some of those 3,497 telephone service 
firms may not qualify as small entities or small incumbent LECs because 
they are not ``independently owned and operated.'' 35 For example, 
a PCS provider that is affiliated with an interexchange carrier having 
more than 1,500 employees would not meet the definition of a small 
business. It seems reasonable to conclude, therefore, that fewer than 
3,497 telephone service firms are small entity telephone service firms 
or small incumbent LECs that may be affected by this Order.
---------------------------------------------------------------------------

    \34\ United States Department of Census, Bureau of the Census, 
1992 Census of Transportation, Communications, and Utilities: 
Establishment and Firm Size, at Firm Size 1-123 (1995) (``1992 
Census'').
    \35\ 15 U.S.C. Sec. 632(a)(1).
---------------------------------------------------------------------------

    24 Wireline Carriers and Service Providers. The SBA has developed a 
definition of small entities for telecommunications companies other 
than radiotelephone (wireless) companies (Telephone Communications, 
Except

[[Page 9710]]

Radiotelephone). The Census Bureau reports that there were 2,321 such 
telephone companies in operation for at least one year at the end of 
1992. 36 According to the SBA's definition, a small business 
telephone company other than a radiotelephone company is one employing 
fewer than 1,500 persons. 37 Of the 2,321 non-radiotelephone 
companies listed by the Census Bureau, 2,295 companies (or, all but 26) 
were reported to have fewer than 1,000 employees. Thus, at least 2,295 
non-radiotelephone companies might qualify as small incumbent LECs or 
small entities based on these employment statistics. However, because 
it seems certain that some of these carriers are not independently 
owned and operated, this figure necessarily overstates the actual 
number of non-radiotelephone companies that would qualify as ``small 
business concerns'' under the SBA's definition. Consequently, we 
estimate using this methodology that there are fewer than 2,295 small 
entity telephone communications companies (other than radiotelephone 
companies) that may be affected by the proposed decisions and rules and 
we seek comment on this conclusion.
---------------------------------------------------------------------------

    \36\ 1992 Census, supra, at Firm Size 1-123.
    \37\ 13 CFR Sec. 121.201, Standard Industrial Classification 
(SIC) Code 4812.
---------------------------------------------------------------------------

    25. Local Exchange Carriers. Although neither the Commission nor 
the SBA has developed a definition of small providers of local exchange 
services, we have two methodologies available to us for making these 
estimates. The closest applicable definition under SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies (SIC 4813) (Telephone Communications, Except Radiotelephone) 
as previously detailed, supra. Our alternative method for estimation 
utilizes the data that we collect annually in connection with the 
Telecommunications Relay Service (TRS). This data provides us with the 
most reliable source of information of which we are aware regarding the 
number of LECs nationwide. According to our most recent data, 1,347 
companies reported that they were engaged in the provision of local 
exchange services. 38 Although it seems certain that some of these 
carriers are not independently owned and operated, or have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of incumbent LECs that would qualify as small 
business concerns under SBA's definition. Consequently, we estimate 
that there are fewer than 1,347 small LECs (including small incumbent 
LECs) that may be affected by the actions proposed in this NPRM.
---------------------------------------------------------------------------

    \38\ Federal Communications Commission, CCB, Industry Analysis 
Division, Telecommunications Industry Revenue: TRS Fund Worksheet 
Data, Tbl. 1 (Number of Carriers Reporting by Type of Carrier and 
Type of Revenue) (December 1996) (``TRS Worksheet'').
---------------------------------------------------------------------------

    26. Our remaining comments are directed solely to non-LEC entities 
that may eventually be designated as ``qualifying carriers.'' Section 
259(d)(2) requires qualifying carriers, inter alia, to offer 
``telephone exchange service, exchange access, and any other service 
that is included in universal service'' within the carrier's service 
area per universal service obligations imposed pursuant to section 
214(e). As addressed supra, because section 259(d)(2) makes the scope 
of potential ``qualifying carriers'' contingent upon the Commission's 
decisions in the universal service proceeding, we are unable to define 
the scope of small entities that might eventually be designated as 
``qualifying carriers.'' 39 Thus, the remaining estimates of the 
number of small entities affected by our rules--based on the most 
reliable data for the non-LEC wireline and non-wireline carriers--may 
be overinclusive depending on how many such entities otherwise qualify 
pursuant to section 259(d)(2).
---------------------------------------------------------------------------

    \39\ See Universal Service NPRM; see also Joint Board 
Recommendation on Universal Service (recommending eligibility 
criteria for carriers seeking universal service support). We note 
that the Commission must complete a proceeding to implement the 
Joint Board's recommendations on or before May 8, 1997.
---------------------------------------------------------------------------

    27. Non-LEC wireline carriers. We next estimate the number of non-
LEC wireline carriers, including interexchange carriers (IXCs), 
competitive access providers (CAPs), Operator Service Providers (OSPs), 
Pay Telephone Operators, and resellers that may be affected by these 
rules. Because neither the Commission nor the SBA has developed 
definitions for small entities specifically applicable to these 
wireline service types, the closest applicable definition under the SBA 
rules for all these service types is for telephone communications 
companies other than radiotelephone (wireless) companies. However, the 
TRS data provides an alternative source of information regarding the 
number of IXCs, CAPs, OSPs, Pay Telephone Operators, and resellers 
nationwide. According to our most recent data: 130 companies reported 
that they are engaged in the provision of interexchange services; 57 
companies reported that they are engaged in the provision of 
competitive access services; 25 companies reported that they are 
engaged in the provision of operator services; 271 companies reported 
that they are engaged in the provision of pay telephone services; and 
260 companies reported that they are engaged in the resale of telephone 
services and 30 reported being ``other'' toll carriers.40 Although 
it seems certain that some of these carriers are not independently 
owned and operated, or have more than 1,500 employees, we are unable at 
this time to estimate with greater precision the number of IXCs, CAPs, 
OSPs, Pay Telephone Operators, and resellers that would qualify as 
small business concerns under SBA's definition. Firms filing TRS 
Worksheets are asked to select a single category that best describes 
their operation. As a result, some long distance carriers describe 
themselves as resellers, some as OSPs, some as ``other,'' and some 
simply as IXCs. Consequently, we estimate that there are fewer than 130 
small entity IXCs; 57 small entity CAPs; 25 small entity OSPs; 271 
small entity pay telephone service providers; and 260 small entity 
providers of resale telephone service; and 30 ``other'' toll carriers 
that might be affected by the actions and rules adopted in this Report 
and Order.
---------------------------------------------------------------------------

    \40\ TRS Worksheet, at Tbl. 1 (Number of Carriers Reporting by 
Type of Carrier and Type of Revenue).
---------------------------------------------------------------------------

    28. Radiotelephone (Wireless) Carriers: The SBA has developed a 
definition of small entities for Wireless (Radiotelephone) Carriers. 
The Census Bureau reports that there were 1,176 such companies in 
operation for at least one year at the end of 1992.41 According to 
the SBA's definition, a small business radiotelephone company is one 
employing fewer than 1,500 persons.42 The Census Bureau also 
reported that 1,164 of those radiotelephone companies had fewer than 
1,000 employees. Thus, even if all of the remaining 12 companies had 
more than 1,500 employees, there would still be 1,164 radiotelephone 
companies that might qualify as small entities if they are 
independently owned and operated. Although it seems certain that some 
of these carriers are not independently owned and operated, and, we are 
unable to estimate with greater precision the number of radiotelephone 
carriers and service providers that would both qualify as small 
business concerns under SBA's definition. Consequently, we estimate 
that there are fewer than 1,164 small entity radiotelephone companies 
that might be affected by the

[[Page 9711]]

actions and rules adopted in this Report and Order.
---------------------------------------------------------------------------

    \41\ 1992 Census, supra, at Firm Size 1-123.
    \42\  13 CFR Sec. 121.201, (SIC Code 4812).
---------------------------------------------------------------------------

    29. Cellular and Mobile Service Carriers. In an effort to further 
refine our calculation of the number of radiotelephone companies 
affected by the rules adopted herein, we consider the categories of 
radiotelephone carriers, Cellular Service Carriers and Mobile Service 
Carriers. Neither the Commission nor the SBA has developed a definition 
of small entities specifically applicable to Cellular Service Carriers 
and to Mobile Service Carriers. The closest applicable definition under 
SBA rules for both services is for telephone companies other than 
radiotelephone (wireless) companies. The most reliable source of 
information regarding the number of Cellular Service Carriers and 
Mobile Service Carriers nationwide of which we are aware appears to be 
the data that we collect annually in connection with the TRS. According 
to our most recent data, 792 companies reported that they are engaged 
in the provision of cellular services and 138 companies reported that 
they are engaged in the provision of mobile services.43 Although 
it seems certain that some of these carriers are not independently 
owned and operated, or have more than 1,500 employees, we are unable at 
this time to estimate with greater precision the number of Cellular 
Service Carriers and Mobile Service Carriers that would qualify as 
small business concerns under SBA's definition. Consequently, we 
estimate that there are fewer than 792 small entity Cellular Service 
Carriers and fewer than 138 small entity Mobile Service Carriers that 
might be affected by the actions and rules adopted in this Report and 
Order.
---------------------------------------------------------------------------

    \43\ TRS Worksheet, at Tbl. 1 (Number of Carriers Reporting by 
Type of Carrier and Type of Revenue).
---------------------------------------------------------------------------

    30. Broadband PCS Licensees. In an effort to further refine our 
calculation of the number of radiotelephone companies affected by the 
rules adopted herein, we consider the category of radiotelephone 
carriers, Broadband PCS Licensees. The broadband PCS spectrum is 
divided into six frequency blocks designated A through F. As set forth 
in 47 CFR Sec. 24.720(b), the Commission has defined ``small entity'' 
in the auctions for Blocks C and F as a firm that had average gross 
revenues of less than $40 million in the three previous calendar years. 
Our definition of a ``small entity'' in the context of broadband PCS 
auctions has been approved by SBA.44 The Commission has auctioned 
broadband PCS licenses in Blocks A through F. We do not have sufficient 
data to determine how many small businesses bid successfully for 
licenses in Blocks A and B. There were 183 winning bidders that 
qualified as small entities in the Blocks C, D, E, and F auctions. 
Based on this information, we conclude that the number of broadband PCS 
licensees affected by the decisions in the Infrastructure Sharing 
Report & Order includes, at a minimum, the 183 winning bidders that 
qualified as small entities in the Blocks C through F broadband PCS 
auctions.
---------------------------------------------------------------------------

    \44\ See Implementation of Section 309(j) of the Communications 
Act--Competitive Bidding, PP Docket 93-253, Fifth Report & Order, 9 
FCC Rcd 5532, 5581-84, 59 FR 37566 (July 22, 1994).
---------------------------------------------------------------------------

D. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements and Steps Taken To Minimize the Significant 
Economic of This Report and Order on Small Entities and Small Incumbent 
LECs, Including the Significant Alternatives Considered and Rejected

    31. In this section of the FRFA, we analyze the projected 
reporting, recordkeeping, and other compliance requirements that may 
apply to small entities and small incumbent LECs, and we mention some 
of the skills needed to meet these new requirements. We also describe 
the steps taken to minimize the economic impact of our decisions on 
small entities and small incumbent LECs, including the significant 
alternatives considered and rejected. Overall, we anticipate that the 
impact of these rules will be beneficial to small businesses since they 
may be able to share infrastructure with larger incumbent LECs, in 
certain circumstances, enabling small carriers to provide 
telecommunication services or information services that they otherwise 
might not be able to provide without building or buying their own 
facilities.45
---------------------------------------------------------------------------

    \45\ 47 U.S.C. Sec. 259(a).
---------------------------------------------------------------------------

Section 259(a)
    32. Summary of Projected Reporting, Recordkeeping, and other 
Compliance Requirements. Regarding the scope of section 259(a), we 
allow the parties to section 259 agreements to negotiate what ``public 
switched network infrastructure, technology, information, and 
telecommunications facilities and functions'' will be made available, 
without per se exclusions.46 In addition, we conclude that 
qualifying carriers should be able to obtain network facilities and 
functionalities available under section 251--including lease 
arrangements and resale--alternatively pursuant to section 251 or 
pursuant to section 259 (subject to the limitations in section 
259(b)(6)), or pursuant to both if they so choose.47
---------------------------------------------------------------------------

    \46\ See Infrastructure Sharing Report and Order Discussion at 
Section III. A. of the Report and Order.
    \47\ See Infrastructure Sharing Report and Order Discussion at 
Section III. B. 1. of the Report and Order.
---------------------------------------------------------------------------

    33. To the extent that there are small businesses that are 
providing incumbent LECs, they will be required to make available 
``public switched network infrastructure, technology, information, and 
telecommunications facilities and functions'' to defined qualifying 
carriers. We anticipate that compliance with such requests for 
infrastructure sharing may require the use of legal, engineering, 
technical, operational, and administrative skills. At the same time, 
these rules should create opportunities for small businesses that are 
qualifying carriers to utilize infrastructure that might not otherwise 
be available. To obtain access to infrastructure from a providing 
incumbent LEC, a qualifying carrier is required to pay the costs 
associated with the shared infrastructure.
    34. Steps Taken To Minimize the Significant Economic Impact of this 
Report and Order on Small Entities and Small Incumbent LECs, Including 
the Significant Alternatives Considered and Rejected. We reject 
proposals offered by those parties who would assert limitations that 
remove whole classes or categories of ``public switched network 
infrastructure, technology, information and telecommunications 
facilities and functions''--e.g., resale services and classes of non-
network information--from the scope of section 259(a).48 
Similarly, we declined to exclude section 251-provided interconnection 
elements from section 259 arrangements.49 We believe that the 
flexible approach that we adopt will give parties the ability to 
negotiate unique agreements that will vary based on individual 
requirements of parties in each case. Such an approach is particularly 
important because as technology continues to evolve, definitions based 
on present network requirements seem likely to limit qualifying 
carriers' opportunities to

[[Page 9712]]

obtain infrastructure unnecessarily. Further, we found no clear 
evidence of Congressional intent to limit the broad parameters of 
section 259(a).
---------------------------------------------------------------------------

    \48\ See, e.g., GTE Comments at 4 (``Section 259 requires only 
the sharing of infrastructure, not services. When Congress intended 
to include services, it did so specifically . . . .''); Southwestern 
Bell Comments at i, 5; Sprint Comments at 4 (``section 259 
establishes requirements for the sharing of infrastructure, not the 
provision of service''); NCTA Comments at 4 n.13 (scope of section 
259(a) should be no broader than section 251). But see RTC Comments 
at 7. See also Infrastructure Sharing Report and Order Discussion at 
Section III. B. 1. of the Report and Order.
    \49\ See Infrastructure Sharing Report and Order Discussion at 
Section III. B. 1. of the Report and Order.
---------------------------------------------------------------------------

    35. Overall, we believe that there will be a significant positive 
economic impact on small entity carriers that--as a result of section 
259 agreements--will be able to provide advanced telecommunications and 
information services in the most efficient manner possible by taking 
advantage of the economies of scale and scope of incumbent LECs. With 
regard to any small incumbent LECs that might receive requests for 
infrastructure sharing from qualifying carriers, we believe that the 
statutory scheme imposed by Congress and adopted in our rules will 
promote small business interests. First, we note that section 259(b)(1) 
protects providing incumbent LECs--small and large, alike--from having 
to take any actions that are economically unreasonable.50 Second, 
we note that, under our rules, an incumbent LEC may demonstrate that 
the requesting carrier does not lack economies of scale and scope, 
relative to itself, with respect to the requested infrastructure and, 
thus, may avoid infrastructure sharing obligations in certain 
situations.51
---------------------------------------------------------------------------

    \50\ See Infrastructure Sharing Report and Order Discussion at 
Section III. C. of the Report and Order.
    \51\ See Infrastructure Sharing Report and Order Discussion at 
Section III. E. of the Report and Order.
---------------------------------------------------------------------------

Section 259(b) Terms and Conditions of Infrastructure Sharing
    36. Summary of Projected Reporting, Recordkeeping, and other 
Compliance Requirements. We require that providing LECs can recover 
their costs associated with infrastructure sharing arrangements, and we 
conclude that market incentives already exist to encourage providing 
and qualifying carriers to reach negotiated agreements that do so 
(section 259(b)(1)).52 Congress directed in section 259(b)(4) that 
providing incumbent LECs make section 259 agreements available to 
qualifying carriers on just and reasonable terms and conditions that 
permit such qualifying carrier to fully benefit from the economies of 
scale and scope of such providing incumbent local exchange carriers. We 
decide that, although the Commission has pricing authority to prescribe 
guidelines to ensure that qualifying carriers ``fully benefit from the 
economies of scale and scope of [the providing incumbent LEC],'' it is 
not necessary at this time to exercise this authority (section 
259(b)(4)).53
---------------------------------------------------------------------------

    \52\ See Infrastructure Sharing Report and Order Discussion at 
Section III. C. 1. of the Report and Order.
    \53\ See Infrastructure Sharing Report and Order Discussion at 
Section III. C. 4. of the Report and Order.
---------------------------------------------------------------------------

    37. We decide that section 259 agreements must be filed with the 
appropriate state commission, or with the Commission if the state 
commission is unwilling to accept the filing, and must be made 
available for public inspection (section 259(b)(7)). Compliance with 
this rule will require legal and administrative skills.
    38. Steps Taken to Minimize the Significant Economic Impact of this 
Report and Order on Small Entities and Small Incumbent LECs, Including 
the Significant Alternatives Considered and Rejected. We generally 
reject proposals that incumbent LECs should be required to develop, 
purchase, or install network infrastructure, technology, and 
telecommunications facilities and functions solely on the basis of a 
request from a qualifying carrier to share such elements when such 
incumbent LEC has not otherwise built or acquired, and does not intend 
to build or acquire, such elements.54 Because the record did not 
indicate that there would exist any scale and scope benefits in 
situations where the providing incumbent LEC did not also use the 
facilities, we concluded that such a result would be inappropriate. We 
believe that the approach that we adopt will enable small entity 
qualifying carriers to enjoy the benefits of section 259 sharing 
agreements without imposing undue burdens on providing incumbent LECs.
---------------------------------------------------------------------------

    \54\ MCI Comments at 7. Contra NYNEX Reply Comments at 10. See 
Infrastructure Sharing Report and Order Discussion at Section III. 
C. 1. of the Report and Order.
---------------------------------------------------------------------------

    39. Further, we decline to accept various proposals that the 
Commission adopt pricing schemes for infrastructure shared per section 
259.55 Instead, we conclude that the negotiation process, along 
with the available dispute resolution, arbitration, and formal 
complaint processes available from the states and the Commission, will 
ensure that qualifying carriers fully benefit from the economies of 
scale and scope of providing LECs. We believe that allowing providing 
incumbent LECs--including any small business--to recover the costs 
associated with infrastructure sharing will encourage and facilitate 
infrastructure sharing agreements. We believe that such agreements will 
lead to mutual benefits for both qualifying carriers and providing 
incumbent LECs.
---------------------------------------------------------------------------

    \55\ See, e.g., MCI Comments at 7. Contra RTC Comments at 11. 
See Infrastructure Sharing Report and Order Discussion at Section 
III. C. 1. and 4. of the Report and Order.
---------------------------------------------------------------------------

Section 259(c) Information Disclosure Requirements
    40. Summary of Projected Reporting, Recordkeeping, and other 
Compliance Requirements. The statute also requires incumbent LECs to 
provide ``timely information on the planned deployment of 
telecommunications services and equipment'' to any parties to 
infrastructure sharing agreements.56 The rules we adopt herein 
require disclosure by each providing incumbent LEC for each of its 
section 259-derived agreements and require that such notice and 
disclosure are only for the benefit of the parties to a section 259-
derived agreement. Under our rules, providing incumbent LECs must 
provide notice of changes in their networks that might affect 
qualifying carriers' ability to utilize the shared infrastructure. 
Should a small incumbent LEC be subject to this requirement, we 
anticipate that it will require use of engineering, technical, 
operational, and administrative skills.
---------------------------------------------------------------------------

    \56\ See Infrastructure Sharing Report and Order at Section III. 
D. of the Report and Order.
---------------------------------------------------------------------------

    41. Steps Taken to Minimize the Significant Economic Impact of this 
Report and Order on Small Entities and Small Incumbent LECs, Including 
the Significant Alternatives Considered and Rejected. A number of 
parties suggest that the Commission need not adopt any new disclosure 
rules pursuant to section 259(c) because other network disclosure 
provisions provide similar notice of changes in the network.57 We 
conclude that specific notice of changes to an incumbent LEC's network 
that affect a qualifying carrier's ability to utilize the shared 
infrastructure, a qualifying carrier--including small businesses--will 
enable qualifying carriers, including small entities, to maintain a 
high level of interoperability between its network and that of the 
providing incumbent LEC.
---------------------------------------------------------------------------

    \57\ See, e.g., NYNEX Comments at 16-17; GTE Comments at 12.
---------------------------------------------------------------------------

    42. We also decide that section 259(c) does not include a 
requirement that providing incumbent LECs provide information on 
planned deployments of telecommunications and services prior to the 
make/buy point. We conclude that section 259 does not require such 
mandatory joint planning, but we note that providing incumbent LECs may 
have obligations to coordinate network planning and design under 
sections 251(a), 256, 273(e)(3) and other provisions.

[[Page 9713]]

Section 259(d) Definition of Qualifying Carriers
    43. Summary of Projected Reporting, Recordkeeping, and other 
Compliance Requirements. We adopt a rebuttable presumption that 
carriers satisfying the statutory definition of ``rural telephone 
company'' in section 3(37) also satisfy the qualifying criteria in 
section 259(d)(1) of lacking ``economies of scale or scope,'' but we 
decide to exclude no class of carriers from attempting to show that 
they qualify under section 259(d)(1).58 A carrier otherwise 
qualifying under section 259(d) therefore may be entitled to request 
and share certain infrastructure and, at the same time, be obligated to 
share the same or other infrastructure. We conclude that parties to 
section 259 negotiations can and will make the necessarily fact-based 
evaluations of their relative economies of scale and scope pertaining 
to the infrastructure that is requested to be shared. Complying with 
the section 259 process set out in our rules may require small 
incumbent LECs and requesting small entities to use legal and 
negotiation skills.
---------------------------------------------------------------------------

    \58\ See Infrastructure Sharing Report and Order Discussion at 
Section III. E. of the Report and Order.
---------------------------------------------------------------------------

    44. Steps Taken to Minimize the Significant Economic Impact of this 
Report and Order on Small Entities and Small Incumbent LECs, Including 
the Significant Alternatives Considered and Rejected. We believe that 
the approach we take will facilitate negotiations between requesting 
carriers and incumbent LECs. We expect that many if not most requests 
for infrastructure sharing agreements will be made by carriers whose 
customers reside predominantly, if not exclusively, in rural, sparsely-
populated areas.59 At the same time, there is nothing in the 
statutory language or legislative history to persuade us that Congress 
intended such a per se restriction on who can qualify under section 
259(d). Thus, we rejected proposals that we limit qualifying carriers 
to those who meet the requirements of section 3(37).60 We opposed 
these proposals because they would unduly limit the opportunities to 
engage in section 259 sharing agreements to those qualifying carriers 
located in particular geographic areas. We believe that the approach 
that we have adopted will enable all small entity qualifying carriers 
to enjoy the benefits of section 259 sharing agreements without regard 
to their geographic location.
---------------------------------------------------------------------------

    \59\ See RTC Comments at 19-20 (urging the Commission to adopt a 
rebuttable presumption in favor of ``rural telephone companies'').
    \60\ See NCTA Comments at 3.
---------------------------------------------------------------------------

F. Report to Congress
    45. The Commission shall send a copy of this Final Regulatory 
Flexibility Analysis, along with this Report and Order, in a report to 
Congress pursuant to the Small Business Regulatory Enforcement Fairness 
Act of 1996, 5 U.S.C. Sec. 801 (a)(1)(A). A copy of this FRFA will also 
be published in the Federal Register.

Ordering Clauses

    46. Accordingly, It is ordered That, pursuant to sections 4(i), 
4(j), 201-205, 259, 303(r), 403 of the Communications Act of 1934, as 
amended by the 1996 Act, 47 U.S.C. Secs. 154(i), 154(j), 201-205, 259, 
303(r), 403, the rules, requirements and policies discussed in this 
Report and Order are adopted and Secs. 59.1 through 59.4 of the 
Commission's rules, 47 CFR Secs. 59.1 through 59.4, are adopted as set 
forth below.
    47. It is further ordered That the requirements and regulations 
established in this decision shall become effective upon approval by 
OMB of the new information collection requirements adopted herein, but 
no sooner than April 3, 1997. The Commission will publish a notice in 
the Federal Register announcing OMB's approval of the information 
collections in this decision.

List of Subjects in 47 CFR Part 59

    Antitrust, Communications common carriers, Communications 
equipment, Reporting and recordkeeping requirements, Rural areas, 
Telegraph, Telephone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    Part 59 of Title 47 of the Code of Federal Regulations is added to 
read as follows:

PART 59--INFRASTRUCTURE SHARING

Sec.
59.1  General duty.
59.2  Terms and conditions of infrastructure sharing.
59.3  Information concerning deployment of new services and 
equipment.
59.4  Definition of ``qualifying carrier''.

    Authority: 47 U.S.C. 154(i), 154(j), 201-205, 259, 303(r), 403.


Sec. 59.1  General duty.

    Incumbent local exchange carriers (as defined in 47 U.S.C. section 
251(h)) shall make available to any qualifying carrier such public 
switched network infrastructure, technology, information, and 
telecommunications facilities and functions as may be requested by such 
qualifying carrier for the purpose of enabling such qualifying carrier 
to provide telecommunications services, or to provide access to 
information services, in the service area in which such qualifying 
carrier has obtained designation as an eligible telecommunications 
carrier under section 214(e) of 47 U.S.C.


Sec. 59.2  Terms and conditions of infrastructure sharing.

    (a) An incumbent local exchange carrier subject to the requirements 
of section 59.1 shall not be required to take any action that is 
economically unreasonable or that is contrary to the public interest.
    (b) An incumbent local exchange carrier subject to the requirements 
of section 59.1 may, but shall not be required to, enter into joint 
ownership or operation of public switched network infrastructure, 
technology, information and telecommunications facilities and functions 
and services with a qualifying carrier as a method of fulfilling its 
obligations under section 59.1.
    (c) An incumbent local exchange carrier subject to the requirements 
of section 59.1 shall not be treated by the Commission or any State as 
a common carrier for hire or as offering common carrier services with 
respect to any public switched network infrastructure, technology, 
information, or telecommunications facilities, or functions made 
available to a qualifying carrier in accordance with regulations issued 
pursuant to this section.
    (d) An incumbent local exchange carrier subject to the requirements 
of section 59.1 shall make such public switched network infrastructure, 
technology, information, and telecommunications facilities, or 
functions available to a qualifying carrier on just and reasonable 
terms and pursuant to conditions that permit such qualifying carrier to 
fully benefit from the economies of scale and scope of such local 
exchange carrier. An incumbent local exchange carrier that has entered 
into an infrastructure sharing agreement pursuant to section 59.1 must 
give notice to the qualifying carrier at least sixty days before 
terminating such infrastructure sharing agreement.
    (e) An incumbent local exchange carrier subject to the requirements 
of section 59.1 shall not be required to engage in any infrastructure 
sharing agreement for any services or access which are to be provided 
or offered to

[[Page 9714]]

consumers by the qualifying carrier in such local exchange carrier's 
telephone exchange area.
    (f) An incumbent local exchange carrier subject to the requirements 
of section 59.1 shall file with the State, or, if the State has made no 
provision to accept such filings, with the Commission, for public 
inspection, any tariffs, contracts, or other arrangements showing the 
rates, terms, and conditions under which such carrier is making 
available public switched network infrastructure, technology, 
information and telecommunications facilities and functions pursuant to 
this part.


Sec. 59.3  Information concerning deployment of new services and 
equipment.

    An incumbent local exchange carrier subject to the requirements of 
section 59.1 that has entered into an infrastructure sharing agreement 
under section 59.1 shall provide to each party to such agreement timely 
information on the planned deployment of telecommunications services 
and equipment, including any software or upgrades of software integral 
to the use or operation of such telecommunications equipment.


Sec. 59.4  Definition of ``qualifying carrier''.

    For purposes of this part, the term ``qualifying carrier'' means a 
telecommunications carrier that:
    (a) Lacks economies of scale or scope; and
    (b) Offers telephone exchange service, exchange access, and any 
other service that is included in universal service, to all consumers 
without preference throughout the service area for which such carrier 
has been designated as an eligible telecommunications carrier under 
section 214(e) of 47 U.S.C.

[FR Doc. 97-5177 Filed 3-3-97; 8:45 am]
BILLING CODE 6712-01-P