[Federal Register Volume 64, Number 79 (Monday, April 26, 1999)]
[Proposed Rules]
[Pages 20238-20245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10307]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 96-98, FCC 99-70]


Implementation of the Local Competition Provisions of the 
Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In response to the Supreme Court's January 25, 1999 decision, 
the Second Further Notice of Proposed Rulemaking (Second FNPRM) seeks 
public comment on issues related to how the Commission should identify 
the network elements incumbent local exchange carriers must make 
available to requesting carriers, pursuant to sections 251(c)(3) and 
251(d)(2) of the Telecommunications Act of 1996. The ability of 
requesting carriers to use unbundled network elements is integral to 
achieving Congress' objective of promoting rapid competition in the 
local telecommunications marketplace. In this proceeding, we seek to 
move forward to resolve this issue in a timely manner, in order to 
further reduce uncertainties in the marketplace and to promote robust 
competition in local telecommunications markets.

DATES: Comments are due on or before May 26, 1999 and reply comments 
are due on or before June 10, 1999.

ADDRESSES: Federal Communications Commission, Office of the Secretary, 
445 Twelfth Street, S.W., Room TW-A325, Washington, D.C. 20554, with a 
copy to Janice Myles of the Common Carrier Bureau, 445 12th Street, 
S.W., Room 5-C327, Washington, D.C. 20554. Parties should also file one 
copy of any documents filed in this docket with the Commission's copy 
contractor, International Transcription Services, Inc., 1231 20 St., 
N.W., Washington, D.C. 20036.

FOR FURTHER INFORMATION CONTACT: Jake Jennings or Claudia Fox, Common 
Carrier Bureau, Policy and Program Planning Division, (202) 418-1580. 
Further information may also be obtained by calling the common Carrier 
Bureau's TTY number: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Further Notice of Proposed Rulemaking adopted April 8, 1999, and 
released April 14, 1999 (FCC 99-70). The full text of this Second FNPRM 
is available for inspection and copying during normal business hours in 
the FCC Reference Center, 445 12th Street, S.W., Room CY-A257, 
Washington, D.C 20554. The complete text also may be obtained through 
the World Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/
Orders/fcc99070.wp, or may be purchased from the Commission's copy 
contractor, International Transcription Service, In., (202) 857-3800, 
1231 20th St., N.W., Washington, D.C. 20036.

I. Synopsis of Second Further Notice of Proposed Rulemaking

    1. On January 25, 1999, the United States Supreme Court upheld all 
but one of the Commission's local competition rules that had been 
challenged before the United States Court of Appeals for the Eighth 
Circuit (Eighth Circuit). The Supreme Court rejected, in part, the 
Commission's implementation of the network element unbundling 
obligations set forth in section 251(c)(3) of the Telecommunications 
Act of 1996, and concluded that section 51.319 of the Commission's 
rules should be vacated. Section 51.319, which was adopted in the Local 
Competition First Report and Order, CC Docket No. 96-98, sets forth the 
minimum set of network elements that incumbent local exchange carriers 
(LECs) must make available on an unbundled basis to requesting carriers 
pursuant to sections 251(c)(3) and 251(d)(2). The Supreme Court found 
that the Commission, in determining which network elements must be 
unbundled pursuant to section 251(c)(3), had not adequately considered 
the ``necessary'' and ``impair'' standards of section 251(d)(2). By 
this Second Further NPRM, we seek to refresh the record in CC Docket 
96-98, specifically on the issues of: (1) how, in light of the Supreme 
Court ruling, the Commission should interpret the standards set forth 
in section 251(d)(2); and (2) which specific network elements

[[Page 20239]]

the Commission should require incumbent LECs to unbundle under section 
251(c)(3).
    2. The ability of requesting carriers to use unbundled network 
elements, including combinations of unbundled network elements, is 
integral to achieving Congress' objective of promoting rapid 
competition in the local telecommunications market. Our identification 
of the network elements that must be unbundled pursuant to section 251 
is therefore a critical tool for promoting the goals of the 1996 Act. 
In this proceeding, we seek to move forward quickly to resolve the 
issue of which network elements incumbent LECs must make available on 
an unbundled basis, in order to reduce uncertainties in the marketplace 
and to allow carriers to make informed and rational business decisions 
in order to provide service on a competitive basis to consumers.
    3. We seek to build on industry experience and technological 
changes that have occurred in the telecommunications marketplace since 
the 1996 Act was enacted three years ago. Today, both incumbent LECs 
and requesting carriers are at the early stages of deploying innovative 
technologies to meet the ever-increasing demand for high-speed, high-
capacity advanced services. In order to encourage competition among 
carriers to develop and deploy new advanced services, it is critical 
that the marketplace for these services be conducive to investment, 
innovation, and meeting the needs of consumers. Accordingly, as we 
revisit our rule implementing the network unbundling obligations of the 
Act, we will consider, as well, how the unbundling obligations of the 
Act can best facilitate the rapid and efficient deployment of all 
telecommunications services, including advanced services.
    4. We need to move quickly in this proceeding but, as always, we 
must also move with precision. The Supreme Court's opinion requires the 
Commission to take a hard look at the question of when an incumbent 
local exchange carrier must make parts of its network available to 
competitors at cost-based rates. In the words of the Court, we are to 
``determine on a rational basis which network elements must be made 
available taking into account the objectives of the Act and giving some 
substance to the `necessary' and `impair' requirements.'' We therefore 
seek further comment to refresh the record in this proceeding in order 
to identify those network elements to which incumbent local exchange 
carriers must provide nondiscriminatory access--giving substance to the 
requirements of section 251(d)(2).

II. Background

    5. On August 8, 1996, the Commission adopted the Local Competition 
First Report and Order, implementing the local competition provisions 
of the 1996 Act. In that order, the Commission established rules 
governing the obligations and responsibilities of incumbent LECs to 
open their local networks to competition pursuant to the requirements 
of section 251 of the 1996 Act. Among other things, the order adopted 
rules implementing the network unbundling requirements of sections 
251(c)(3) and 251(d)(2) of the 1996 Act. Section 251(c)(3) imposes a 
duty on all incumbent LECs to provide to competitors access to network 
elements on an unbundled basis. Section 251(d)(2) provides that, in 
determining which network elements should be unbundled under section 
251(c)(3), the Commission shall consider, ``at a minimum, whether--(A) 
access to such network elements as are proprietary in nature is 
necessary; and (B) the failure to provide access to such network 
element would impair the ability of the telecommunications carrier 
seeking access to provide the services that it seeks to offer.''
    In the Local Competition First Report and Order, the Commission 
applied its interpretation of the ``necessary'' and ``impair'' 
standards of section 251(d)(2) to the unbundling requirements of 
section 251(c)(3). Specifically, the Commission defined ``necessary'' 
to mean ``an element is a prerequisite for competition,'' and it 
defined ``impair'' to mean ``to make or cause to become worse; diminish 
in value.'' The Commission also determined that a requesting carrier's 
ability to offer service is ``impaired'' (``diminished in value'') if 
``the quality of the service the entrant can offer, absent access to 
the requested element, declines'' or if ``the cost of providing the 
service rises.''
    After addressing the ``necessary'' and ``impair'' standards, the 
Commission adopted rule 51.319, which sets forth the network elements 
that incumbent LECs must make available to requesting carriers on an 
unbundled basis. Section 51.319 of the Commission's rules required 
incumbent LECs to make available, on an unbundled basis, the following 
network elements: (1) local loops; (2) network interface devices; (3) 
local switching; (4) interoffice transmission facilities; (5) signaling 
networks and call-related databases; (6) operations support systems; 
and (7) operator services and directory assistance.
    Following adoption of the Local Competition First Report and Order, 
incumbent LECs and state commissions filed various challenges to the 
Commission's rules; these appeals were consolidated in the Eighth 
Circuit. Among other holdings, the Eighth Circuit rejected incumbent 
LECs' argument that, in determining which elements were subject to the 
unbundling requirements, the Commission had not properly applied the 
``necessary'' and ``impair'' standards of section 251(d)(2). 
Accordingly, the Eighth Circuit upheld section 51.319. A number of 
parties sought and were granted review of the Eighth Circuit's decision 
by the Supreme Court.
    9. In its January 25, 1999 opinion, the Supreme Court reversed the 
Eighth Circuit's decision on this issue, stated that section 51.319 
should be vacated, and remanded the matter for further proceedings. The 
Court concluded that the Commission had not adequately considered the 
``necessary'' and ``impair'' standards of section 251(d)(2). The Court 
found, among other things, that the Commission, in deciding which 
elements must be unbundled, did not adequately take into consideration 
the ``availability of elements outside the incumbent's network.'' The 
Court also faulted the Commission's ``assumption that any increase in 
cost (or decrease in quality) imposed by a denial of a network element 
renders access to that element `necessary,' and causes the failure to 
provide that element to `impair' the entrant's ability to furnish its 
desired services.'' In addition, the Court criticized the Commission's 
interpretation of section 251(d)(2) because it ``allows entrants, 
rather than the Commission, to determine'' whether the requirements of 
that section are satisfied.

III. Request for Further Comments

    10. In response to the Supreme Court ruling, we must further 
consider the ``necessary'' and ``impair'' standards of section 
251(d)(2) in identifying network elements that are subject to the 
unbundling requirements of section 251(c)(3). Although we retain the 
right to consider and rely upon comments previously filed in this 
docket, any comments parties want the Commission to consider on this 
issue must be filed in response to this Notice, and commenters should 
not simply incorporate by reference previous arguments made in this 
proceeding.
    11. We seek comment on a number of issues related to the 
interpretation of section 251(d)(2), including identification of 
unbundled network elements on a nationwide basis, the

[[Page 20240]]

interpretation of the ``necessary'' and ``impair'' standards of section 
251(d)(2), and the criteria the Commission and states should consider 
in determining whether a network element is subject to the unbundling 
obligations of section 251(c)(3) of the 1996 Act. In determining which 
network elements are subject to the unbundling obligations of section 
251(c)(3), we seek comment on an approach that would allow sunset or 
modification of the unbundling obligations as technology and market 
conditions evolve over time. Such an approach would allow the 
Commission and the states to identify particular network elements that 
should be sunsetted or removed from, or added to, the initial list of 
elements subject to the unbundling obligations of the Act, as 
warranted.
    12. As we have stated, the Supreme Court found that the Commission, 
in deciding which elements must be unbundled, did not adequately take 
into consideration the availability of elements outside the incumbent's 
network. More generally, we note that application of the ``necessary'' 
and ``impair'' standards that we develop pursuant to section 251(d)(2) 
may be relatively fact-intensive. At the same time, we recognize that 
in resolving these fact-intensive questions, particularly in an 
expedited time frame, it may be beneficial to consider what evidentiary 
standards and presumptions are most appropriate, both in the context of 
the initial designation of network elements subject to unbundling 
requirements, and any subsequent proceedings to modify the unbundling 
obligations. We ask parties to comment on the types of evidentiary 
standards or approaches that should govern application of the section 
251(d)(2) standards in determining which network elements must be 
unbundled. Commenters should address which parties should bear the 
burdens of proof and production, whether any presumptions should apply, 
and why. Commenters are also requested to justify the evidentiary 
standards or approaches they advocate, especially in light of the kinds 
of data that can be made available in this proceeding, the purposes and 
structure of the Act, and the identity of the parties most likely to be 
in control of relevant data.

A. Identification of Unbundled Network Elements on a Nationwide Basis

    13. In the Local Competition First Report and Order, the Commission 
concluded that, by identifying a specific list of network elements that 
must be unbundled, applicable uniformly in all states and territories, 
we would best further the ``national policy framework'' established by 
Congress to promote competition. The Commission adopted a minimum list 
of network elements that must be unbundled on a national basis, and 
permitted states to impose additional unbundling requirements.
    14. We find nothing in the Supreme Court's decision that calls into 
question our decision to establish minimum national unbundling 
requirements. We therefore tentatively conclude that the Commission 
should continue to identify a minimum set of network elements that must 
be unbundled on a nationwide basis. We seek comment on this tentative 
conclusion. We also seek comment on whether the existence of geographic 
variations in the availability of elements outside the incumbent LEC's 
network is relevant to a decision to impose minimum national unbundling 
requirements. We also seek comment on the relevance, if any, to the 
interpretation of the ``necessary'' and ``impair'' standard that we are 
reexamining these issues today, more than three years after passage of 
the Act. We note that, under our rules, the states have authority to 
impose additional unbundling requirements, pursuant to our 
interpretation of section 251(d)(2). We do not propose to eliminate the 
states' authority to impose additional unbundling requirements, 
pursuant to the standards and criteria we adopt in this proceeding. In 
addition, we seek comment on whether states may, consistent with the 
Supreme Court's decision, apply our interpretation of section 251(d)(2) 
to determine in the first instance that a network element need not be 
unbundled in light of the availability of that element outside the 
incumbent's network in that state. If so, under what circumstances, if 
any, should the Commission review state decisions?

B. Interpretation of the Term ``Proprietary'' in Section 251(d)(2)(A)

    15. Section 251(d)(2)(A) refers to network elements that are 
``proprietary'' in nature. We seek comment on the meaning of the term 
``proprietary'' for purposes of this section. In the Local Competition 
First Report and Order, the Commission referred to proprietary network 
elements as including, for example, ``those elements with proprietary 
protocols or elements containing proprietary information.'' The 
Commission also concluded that the incumbent LEC's signaling protocols 
that adhere to Bellcore standards are not proprietary in nature because 
they use industry-wide, rather than LEC-specific, protocols. We seek 
comment on whether we should consider network elements as non-
proprietary if the interfaces, functions, features, and capabilities 
sought by the requesting carrier are defined by recognized industry 
standard-setting bodies (e.g., ITU, ANSI, or IEEE), are defined by 
Bellcore general requirements, or otherwise are widely available from 
vendors. We also seek comment on whether non-carrier specific standards 
can be proprietary. What effect, if any, could Commission action have 
on whether a network element is proprietary? Commenters should discuss 
whether the term ``proprietary'' should be limited to information, 
software, or technology that can be protected by patents, copyrights, 
or trade secrecy laws, or whether it can also apply to materials that 
do not qualify for such legal protection. If a network element contains 
what parties assert to be proprietary information, but access to that 
information is not accessible by third parties seeking access to a 
particular element, should the entire element be considered 
``proprietary'' for purposes of section 251(d)(2)(A)? We also seek 
comment on whether the term ``proprietary'' refers solely to 
proprietary interests the incumbent LEC may have in an element, or 
whether it may also refer to proprietary interests of third parties 
(e.g., vendors).

C. Interpretation of ``Necessary'' in Section 251(d)(2)(A)

    16. In the Local Competition First Report and Order, the Commission 
defined a ``necessary'' network element as one that is a 
``prerequisite'' to competition. We seek comment on the definition of 
``necessary'' for the purpose of determining proprietary network 
elements that must be unbundled pursuant to the requirements of section 
251(d)(2)(A) and on the Commission's application of this term in the 
Local Competition First Report and Order.

D. Interpretation of ``Impair'' in Section 251(d)(2)(B)

    17. Section 251(d)(2)(B) requires us to consider whether the 
failure to provide access to an element would ``impair'' the ability of 
a new entrant to provide a service it seeks to offer. In the Local 
Competition First Report and Order, the Commission adopted a dictionary 
definition of the term ``impair'' that means ``to make or cause to 
become worse; diminish in value.'' The Commission stated that 
``generally * * * an entrant's ability to offer a telecommunications 
service is `diminished in value' if the quality of the service the 
entrant can offer, absent access to the requested element,

[[Page 20241]]

declines and/or the cost of providing the service rises.'' We seek 
comment on the meaning of the term ``impair.'' Should the Commission 
adopt a standard by which we examine whether the new entrant's ability 
to offer a telecommunications service in a competitive manner is 
materially diminished in value? Would a new entrant be ``impaired'' 
from providing service in a certain area if there is no additional 
collocation space available in the incumbent LECs' central office?

E. The Difference Between the ``Necessary'' and ``Impair'' Standards

    18. We seek comment on the difference between the ``necessary'' 
standard under section 251(d)(2)(A) and the ``impair'' standard of 
section 251(d)(2)(B). Since the 1996 Act employs two different terms, 
must the Commission apply different criteria to determine whether a 
network element meets these standards? To the extent parties propose 
using the same criteria, we seek comment on the legal basis for 
applying the same criteria as well as on how we should apply the 
criteria to differentiate between the ``necessary'' and ``impair'' 
standards.
    19. In the Local Competition First Report and Order, the Commission 
found that the ``necessary'' standard only applies to ``proprietary'' 
network elements, and that the ``impair'' standard applies to 
``nonproprietary'' network elements. This construction was also applied 
by the Eighth Circuit and, apparently, by the Supreme Court in 
reviewing the Commission's analysis of unbundling requirements under 
section 251(d)(2). We seek comment on whether our understanding of the 
courts' interpretation should govern in this proceeding.

F. Criteria for Determining ``Necessary'' and ``Impair'' Standards

    20. We seek more specific comment on what factors or criteria the 
Commission should adopt in determining whether access to network 
elements is necessary and whether failure to provide such access would 
impair an entrant's ability to provide service. The Supreme Court has 
provided some guidance in this respect. The Court stated that ``the Act 
requires the FCC to apply some limiting standard, rationally related to 
the goals of the Act, which it has simply failed to do.'' The Court 
stated further that ``[w]e cannot avoid the conclusion that, if 
Congress had wanted to give blanket access to incumbents' networks on a 
basis as unrestricted as the scheme the Commission has come up with, it 
would not have included section 251(d)(2) in the statute at all. It 
would simply have said (as the Commission in effect has) that whatever 
requested element can be provided must be provided.''
    21. Although the Supreme Court acknowledged incumbent LEC arguments 
that section 251(d)(2) codifies ``something akin'' to the essential 
facilities doctrine, the Court did not find that section 251(d)(2) 
mandates that standard. We nevertheless seek comment on the 
significance of the essential facilities standard under section 
251(d)(2). Next, the Supreme Court concluded that we must take into 
account the availability of substitutes for incumbent LEC network 
elements outside of the incumbent's network. We thus seek comment on 
when we should deem a substitute sufficiently available so as to render 
access to the incumbent's network element unnecessary. Finally, the 
Court found that the Commission erred in concluding that ``any'' 
increase in cost or decrease in quality resulting from the failure to 
gain access to a network element satisfied the necessary and impair 
standard. We therefore seek comment on whether and the extent to which 
an increase in cost or decrease in quality caused by the inability of 
obtaining access to an incumbent's network element meets the 
``necessary'' or ``impairment'' standard. In addressing these factors, 
commenters should distinguish between the ``necessary'' and ``impair'' 
standards if appropriate to do so in light of the factor being 
discussed.
1. Essential Facilities Doctrine
    22. In their arguments before the Supreme Court, incumbent LECs 
asserted that section 251(d)(2) codifies a standard similar to the 
``essential facilities'' doctrine, as defined in antitrust 
jurisprudence. We ask parties to describe this doctrine and how it 
should be applied, if at all, to the determination of which network 
elements incumbent LECs must provide on an unbundled basis pursuant to 
sections 251(c)(3) and 251(d)(2). Parties should also cite any relevant 
legislative history that would indicate Congress' views on this 
standard or any similar standard.
    23. In discussing the ``essential facilities'' doctrine, the 
Supreme Court observed that ``it may be that some other standard would 
provide an equivalent or better criterion for the limitation upon 
network-element availability that the statute has in mind.'' 
Accordingly, we seek comment on alternative standards that should be 
considered in determining which network elements must be unbundled 
pursuant to sections 251(c)(3) and 251(d)(2).
2. Availability and Cost of Network Elements Outside the Incumbent 
LEC's Network
    24. The Supreme Court stated that, in determining the list of 
elements that incumbent LECs must provide on an unbundled basis 
pursuant to sections 251(c)(3) and 251(d)(2) of the Act, the Commission 
must take into consideration the availability of network elements 
outside the incumbent's network. We seek comment on how the Commission 
should consider the availability of network elements outside of the 
incumbent's network. We ask commenters to discuss potential alternative 
sources of network elements from other competing carriers, as well as 
availability of network elements through self-provisioning. We also ask 
commenters to provide information on the costs of alternatives, the 
length of time it takes to obtain alternatives, and the extent to which 
alternatives to unbundled elements are being utilized now. We also seek 
comment on how the Commission, in assessing potential alternative 
sources of network elements, should evaluate alternatives available 
from other competing carriers if those carriers are not subject to 
unbundling obligations of 251(c)(3).
    25. In determining whether a requesting carrier's ability to 
provide a service would be impaired if it did not obtain a network 
element on an unbundled basis from the incumbent LEC, how should we 
assess and treat the additional cost of utilizing an alternative source 
for that element? The Supreme Court found insufficient the Commission's 
``assumption that any increase in cost would impair a requesting 
carrier's ability to provide service.'' We therefore seek comment on 
whether and the extent to which the Commission should consider 
differences in costs between obtaining the network element from the 
incumbent versus through self-provisioning or from an alternative 
source. Should the Commission adopt a standard under which we examine 
whether the difference in cost between obtaining a network element from 
an incumbent LEC as opposed to obtaining it through self-provisioning 
or from an alternative source is a ``material'' difference? If so, what 
constitutes a ``material'' difference? For example, if the cost of 
obtaining the network element from the incumbent LEC is half of the 
cost of obtaining it from another source, should the incumbent be 
required to unbundle it? How would

[[Page 20242]]

this work in practice? Should the threshold vary by the network 
element?
    26. We also seek comment on what specific cost differences the 
Commission should include in evaluating the ``necessary'' and 
``impair'' standards. In the Local Competition First Report and Order, 
the Commission stated that incumbent LECs ``have economies of density, 
connectivity, and scale * * * [that must] be shared with entrants.'' We 
seek comment on the extent to which we should consider cost differences 
based on economies of density, connectivity, and scale in determining 
whether a network element must be unbundled pursuant to sections 
251(c)(3) and 251(d)(2). We also seek comment on whether the Commission 
should evaluate ``sunk'' costs that would be incurred by requesting 
carriers if they were to obtain the network elements through self-
provisioning or from other sources outside the incumbent LEC's network 
(e.g., those costs associated with entry that are not fully recoverable 
if the requesting carrier exits the market).
    27. We seek comment on the extent to which we should consider the 
quantity of facilities that may be necessary for competitors to obtain 
in order to compete effectively. For example, a competitor's ability to 
compete may not be ``impaired'' if it is required to self-provision 
only one switch. With respect to some entry strategies, however, in 
order to compete effectively, the new entrant may need to obtain 
multiple switches. Accordingly, we ask parties to comment on the extent 
to which such factors as economies of scale, penetration assumptions, 
and the requesting carrier's particular market entry strategies should 
be considered as part of the ``necessary'' and ``impair'' analysis.
    28. In addition to cost, we seek comment on other factors that the 
Commission should consider in evaluating the availability of network 
elements from alternative sources. For example, how should the 
Commission assess factors such as the difference in the length of time 
it takes to obtain a network element from an incumbent LEC versus 
obtaining it from an alternative source. We seek comment, in 
particular, on whether and the extent to which the language of the 
statute and the Supreme Court's opinion constrain the factors that we 
can or should consider in evaluating the availability of elements 
outside the incumbent's network. We also seek comment on whether 
differences in quality that result from acquiring a network element 
from the incumbent LEC compared to an alternative source are relevant 
to our analysis of the ``necessary'' and ``impair'' standards of 
section 251(d)(2). Parties advocating the application of such factors 
for analyzing unbundling requirements under the ``necessary'' and 
``impair'' standards of section 251(d)(2) should discuss specific 
methods for measuring and applying those differences to specific 
network elements.

G. Weight To Be Given to Various Factors

    29. Section 251(d)(2) states that the Commission shall ``consider, 
at a minimum'' whether access is necessary or lack of access would 
impair a requesting carrier's ability to provide service. In explaining 
the Commission's duty when directed by Congress to ``consider'' a 
particular factor, the D.C. Circuit has held: ``That means only that 
[the Commission] must `reach an express and considered conclusion' 
about the bearing of a factor, but is not required `to give any 
specific weight' to it.'' At the same time, the Supreme Court observed 
in its remand of the Local Competition First Report and Order that, in 
determining which network elements must be unbundled, ``the Commission 
cannot consistent with the statute, blind itself to the availability of 
elements outside the incumbent's network.'' The Court also observed 
that ``giving some substance to the `necessary' and `impair' 
requirements * * * is not achieved by disregarding entirely the 
availability of elements outside the network. * * *'' What weight, 
then, should the Commission attach to the ``necessary'' and ``impair'' 
requirements of section 251(d)(2)? In particular, commenters should 
address how much weight the Commission must give to these requirements 
in order to satisfy section 251(d)(2) and the Supreme Court decision.
    30. We also seek comment on what other factors the Commission 
should consider, in addition to the ``necessary'' and ``impair'' 
standards, in determining whether a particular network element should 
be unbundled, and on how any proposed additional criteria would 
interrelate with the ``necessary'' and ``impair'' standards set forth 
in the statute. Commenters should specifically identify any factors 
deemed sufficiently important in meeting the goals of the 1996 Act to 
require the unbundling of a network element, even if such unbundling 
did not otherwise meet the ``necessary'' or ``impair'' standards of 
sections 251(d)(2)(A) or (B) standing alone.
    31. Finally, we ask commenters addressing particular standards and 
criteria for interpreting the ``necessary'' and ``impair'' standards of 
section 251(d)(2) to discuss how those standards and criteria are 
consistent with, and further the goals of the 1996 Act.

H. Application of Criteria to Previously Identified and Other Network 
Elements

    32. In the Local Competition First Report and Order, the Commission 
identified seven network elements that were subject to the unbundling 
obligations of section 251(c)(3). We note that in the Local Competition 
proceeding, even incumbent LECs agreed that the local loop is a network 
element that must be unbundled pursuant to sections 251(c)(3) and 
251(d)(2) of the Act. It is our strong expectation that under any 
reasonable interpretation of the ``necessary'' and ``impair'' standards 
of section 251(d)(2), loops will generally be subject to the section 
251(c)(3) unbundling obligations. We seek comment on this analysis. We 
also see nothing in the statute or the Supreme Court's opinion that 
would preclude us from requiring that loops that must be unbundled must 
also be conditioned in a manner that allows requesting carriers 
supplying the necessary electronics to provide advanced 
telecommunications services, such as digital subscriber line technology 
(xDSL). We seek comment on this analysis.
    33. Parties are requested to apply their proposed standards and 
criteria, as well as other proposed standards, to the loop and the 
other six network elements previously identified in the Local 
Competition First Report and Order. Parties should also apply their 
proposed standards and criteria to any other network elements they 
contend should be unbundled. For example, we seek comment on whether, 
due to technology changes, we should require sub-loop unbundling at the 
remote terminal or at other points within the incumbent LEC's network. 
Parties should also comment on situations where the incumbent LEC owns 
facilities on the end user's side of the network demarcation point and 
whether those facilities should be unbundled under section 251(c)(3). 
In light of the Supreme Court decision, we also seek comment on whether 
the Commission can require incumbent LECs to combine unbundled network 
elements that they do not already combine (e.g., an unbundled loop 
combined with unbundled transport). To the extent parties advocate that 
certain network elements fail to meet the ``necessary'' or

[[Page 20243]]

``impair'' standard, we ask that parties provide the Commission 
sufficient information regarding the competitive availability of 
alternatives to such network elements. Parties are requested to include 
specific costs and availability of such network elements, on an 
element-by-element basis. Additionally, we ask commenters to provide 
factual information comparing the quality of alternatives to those 
network elements that they request to be unbundled.
    34. We also ask parties to comment on whether, in light of 
technological advances or experience in the marketplace since adoption 
of the Local Competition First Report and Order, the Commission should 
modify the definition of any of its previously identified network 
elements. For example, should we modify the definition of ``loops'' or 
``transport'' to include dark fiber?
    35. In light of the Supreme Court remand, we seek additional 
comment on whether network elements used in the provision of advanced 
services should be unbundled, as discussed in the Advanced Services 
NPRM. For example, parties should comment on whether digital subscriber 
line access multiplexers and/or packet switches should be unbundled 
pursuant to section 251(c)(3). Parties should also comment on whether 
there is any basis for treating network elements used in the 
provisioning of packet-switched advanced services any differently than 
those used in the provisioning of traditional circuit-switched voice 
services.

I. Modifications to Unbundling Requirements

    36. Given that technological, competitive, and economic factors 
may, over time, affect the availability of network elements from 
sources outside the incumbent LEC's network, we seek comment on whether 
the Commission should adopt a mechanism by which network elements would 
no longer have to be unbundled at a future date. In particular, we seek 
comment on whether affirmative steps by the parties or the Commission 
should be necessary to remove a particular element from unbundling 
requirements, or whether affirmative action should be necessary to 
continue requiring the unbundling of particular elements. Commenters 
should address this question in light of the language and purposes of 
the statute, as well as the Supreme Court's opinion. If there 
subsequently is a modification to an unbundling requirement, should an 
incumbent LEC be required to continue to unbundle that element 
identified in an interconnection agreement until the date that the 
agreement expires? Under such a scenario, should an incumbent LEC be 
able to refuse to unbundle a network element that is no longer required 
when negotiating a new contract with other parties?
    37. Parties advocating that we adopt a mechanism for removing 
particular elements from the unbundling requirements should provide 
specific details and explain the legal basis under section 251(d)(2) 
for doing so. Parties should discuss what factors the Commission should 
consider in determining whether to remove an element from the 
unbundling obligations of section 251(c)(3), how the Commission should 
apply those factors to the particular element, and what conditions 
would trigger removal from the unbundling requirements. If the 
Commission adopts a mechanism for removing the unbundling obligation 
for specified network elements, to what extent should the Commission 
consider whether to phase out the use of such unbundled network 
elements in a manner that avoids market disruptions? Should the 
incumbent LEC bear the burden of demonstrating to the Commission that a 
particular network element no longer need be unbundled, and what 
showing should be necessary to overcome any presumption in favor of 
continuing the unbundling requirement? Alternatively, should competing 
LECs bear the burden of demonstrating that unbundling is still required 
pursuant to section 251(d)(2)? Should we restrict incumbents from 
seeking removal of certain network elements from the unbundling 
requirements for a specific period of time following implementation of 
our new unbundling rules (e.g., two years), or in the case of regional 
Bell Operating Companies (BOCs), until after section 271 authority is 
obtained?
    38. We also seek comment on whether section 251(d)(2), or any other 
provision of the Act, provides the Commission with the authority to 
delegate to the states responsibility for removing network elements 
from any national unbundling requirements, applying the standards for 
section 251(d)(2) we adopt in this proceeding. If we were to delegate 
such responsibility to the states, what procedure should apply for 
appeals to the Commission from a state's determination that a network 
element no longer qualified for unbundling under section 251(c)(3)?
    39. We also seek comment on whether the Commission has authority to 
adopt a ``sunset'' provision under which unbundling obligations for 
particular elements or all elements would no longer be required, upon 
the passage of time or occurrence of certain events, without any 
subsequent action by the Commission. Inasmuch as Congress included 
``sunset'' provisions in other parts of the 1996 Act, how does the lack 
of reference to one here affect our authority to adopt such a 
provision? We seek comment on specific criteria that the Commission 
should consider in determining whether to ``sunset'' a requirement to 
provide unbundled network elements, if the Commission has such 
authority. Parties should comment on what predictive judgments about 
the future would be needed, if any, and they should provide the 
information the Commission would need in order to make a determination 
that a ``sunset'' provision is appropriate. Parties advocating a sunset 
provision should address any possible uncertainties and incentives 
created by such an approach and any possible effects on local 
competition and future new entrants.
    40. We also seek comment on the extent to which adoption of a 
``sunset'' provision would constitute forbearance prohibited under 
section 10(d) of the Act. Section 10(d) forbids the Commission from 
forbearing ``from applying the requirements of section 251(c) or 271 * 
* * until it determines that those requirements have been fully 
implemented.'' We also seek comment on the meaning of ``fully 
implemented'' in this provision of the Act. Would it be considered 
forbearance if unbundling of a particular element were no longer 
required because that element no longer satisfied the requirements of 
section 251(d)(2)?

J. Additional Questions

    41. We seek comment on what effect, if any, the fact that Congress 
required BOCs seeking in-region interLATA authority to unbundle certain 
network elements should have on our interpretation of section 
251(d)(2). For example, should there be a presumption that the network 
elements set forth in the competitive checklist of section 271(c)(2)(B) 
are subject to the unbundling obligation contained in section 
251(c)(3)? Conversely, what would be the effect on future 271 
applications of concluding that a network element identified in section 
271(c)(2)(B) is not subject to the 251(c)(3) unbundling obligations? 
For example, if after considering the ``necessary'' and ``impair'' 
standards of section 251(d)(2) we determine that a network element need 
not be unbundled pursuant to section 251(c)(3), what terms and 
conditions would still apply to that element if it must be provided as 
part of the competitive checklist of

[[Page 20244]]

section 271? Commenters should address what pricing standard, if any, 
would apply in such a situation, and what pricing rule would govern in 
arbitrations where the parties had been unable to negotiate a price.
    42. In addition, we seek comment on whether the existence of a 
competitive market for a network element is necessary to demonstrate 
that an element is sufficiently available outside the incumbent's 
network so that failure of the incumbent to provide the element would 
not be ``necessary'' or would not ``impair'' a carrier's ability to 
provide service. What relevance is the fact that those entities that 
could provide alternative sources of the element do not have a legal 
obligation to unbundle that element? For example, section 251(b)(3) 
requires all local exchange carriers to provide operator services and 
directory assistance (OS/DA) to competing providers of telephone 
exchange carriers. Assuming there is a competitive market for OS/DA, 
and LECs are obligated to provide those services under section 251(b), 
is a competitor's ability to compete ``impaired'' if these functions 
are not provided by incumbent LECs as an unbundled network element 
under section 251(c)(3)?
    43. In the Local Competition First Report and Order, the Commission 
explicitly rejected the argument that would allow incumbent LECs to 
deny access to unbundled elements if the element is equivalent to a 
service available at resale. The Commission stated that such a 
conclusion would lead to impractical results, because incumbents could 
completely avoid section 251(c)(3) unbundling obligations by offering 
unbundled elements to end users as retail services. In light of the 
Supreme Court decision, we seek comment on the extent to which, if any, 
the availability of resold services obtained from the incumbent LEC 
should be considered in determining whether a particular network 
element should be unbundled. More specifically, we ask parties to apply 
their interpretations of the ``necessary'' and ``impair'' standards in 
light of the availability of incumbent LEC resold services. Is there a 
legal or policy basis for concluding that the inability to obtain 
access to combinations of network elements could impair a requesting 
carrier's ability to provide service to residential customers, but not 
business customers?
    44. Parties should submit the text of any proposed rules they urge 
the Commission to adopt as part of their filings in this proceeding.

IV. Procedural Issues

A. Ex Parte Presentations

    45. The matter in Docket No. 96-98, initiated by this Second 
Further NPRM, shall be treated as a ``permit-but-disclose'' proceeding 
in accordance with the Commission's ex parte rules. Persons making oral 
ex parte presentations are reminded that memoranda summarizing the 
presentations must contain summaries of the substance of the 
presentations and not merely a listing of the subjects discussed. More 
than a one or two sentence description of the views and arguments 
presented is generally required. Other rules pertaining to oral and 
written presentations are set forth in section 1.1206(b) as well. 
Interested parties are to file with the Secretary, FCC, and serve 
Janice Myles and International Transcription Services (ITS) with copies 
of any written ex parte presentations or summaries of oral ex parte 
presentations in these proceedings in the manner specified below for 
filing comments.

B. Supplemental Initial Regulatory Flexibility Analysis

    46. In the Local Competition First Report and Order, the Commission 
prepared a Final Regulatory Flexibility Analysis (FRFA) addressing the 
impact of the local competition rules on small businesses, including 
section 51.319. In AT&T v. Iowa Utils. Bd. the Supreme Court vacated 
section 51.319 because it found that the Commission had not properly 
considered and applied the ``necessary'' and ``impair'' standards of 
section 251(d)(2) when it identified network elements that must be 
unbundled pursuant to section 251(c)(3) of the Act. This proceeding 
will further consider, in light of the Supreme Court's decision in AT&T 
v. Iowa Utils. Bd., how the Commission should interpret the standards 
set forth in section 251(d)(2), and which network elements should be 
unbundled under section 251(c)(3). This may require modification of the 
portion of the Local Competition First Report and Order FRFA addressing 
former section 51.319. Therefore, we have prepared this Supplemental 
Initial Regulatory Flexibility Analysis (SIRFA) to address any possible 
significant economic impact on small entities that may result from our 
further consideration. Written public comments are requested on this 
SIRFA. These comments must be filed in accordance with the same filing 
deadlines for comments on the rest of the Second Further NPRM, but they 
must have a separate and distinct heading, designating the comments as 
responses to the SIRFA. The Commission will send a copy of the Second 
Further NPRM, including this SIRFA, to the Chief Counsel for Advocacy 
of the Small Business Administration. In addition, the Second Further 
NPRM and SIRFA (or summaries thereof) will be published in the Federal 
Register.
    47. Reason for Action: This further proceeding is required by the 
remand following the Supreme Court order vacating section 51.319.
    48. Objectives: The objective of this Second Further NPRM is to 
afford the public the opportunity to supplement the record previously 
adduced concerning the ``necessary'' and ``impair'' standards of 
section 251(d)(2) and the identification of network elements that are 
subject to the unbundling requirements of section 251(c)(3).
    49. Legal Basis: Sections 1-4, 10, 201, 202, 251-254, 271, and 
303(r) of the Communications Act, as amended, 47 U.S.C. 151-154, 160, 
201, 202, 251-254, 271, and 303(r).
    50. Description and estimate of the number of small entities 
affected: We anticipate no change in the description and estimate of 
the number of small entities that might be affected by our further 
consideration from the description and estimate adopted in the Local 
Competition Report and Order FRFA.
    51. Description of projected reporting, recordkeeping, and other 
compliance requirements: None are anticipated from the further 
consideration.
    52. Federal rules that may duplicate, overlap, or conflict with the 
proposed rule: None.
    53. Any significant alternatives minimizing the impact on small 
entities consistent with the stated objectives: We have outlined and 
sought comment on the many issues involved in the further 
consideration. We seek comment on any interpretation of the 
``necessary'' and ``impair'' standards of section 251(d)(2) used to 
identify network elements that are subject to the unbundling 
requirements of section 251(c)(3) that would minimize the impact on 
small entities.

C. Comment Filing Procedures

    54. Interested parties may file any comments in response to this 
Second Further NPRM no later than May 26, 1999, with the Secretary, 
FCC, at 445 12th Street, S.W., Washington, D.C. 20554. Reply comments 
may be filed with the Secretary, FCC, no later than June 10, 1999. All 
pleadings are to reference CC Docket No. 96-98. Interested parties 
should file an original and 12 copies of all pleadings. An

[[Page 20245]]

additional copy of all pleadings must also be sent to Janice M. Myles, 
Common Carrier Bureau, FCC, 445 12th Street, S.W., Room 5-C327, 
Washington, D.C. 20554, and to the Commission's contractor for public 
service records duplication, ITS, 1231 20th Street, N.W., Washington, 
D.C. 20036. Comments and reply comments will be available for 
inspection and copying during normal business hours in the FCC's 
Reference Center, 445 12th Street, S.W., Washington, D.C. 20554. Copies 
also can be obtained from ITS at 1231 20th Street, N.W., Washington, 
D.C. 20036, or by calling ITS at (202) 857-3800 or faxing ITS at (202) 
857-3805.
    55. Parties are required to file a copy of all pleadings 
electronically via the Internet to <http://www.fcc.gov/e-file-
ecfs.html>. Generally, only one copy of an electronic submission must 
be filed. If multiple docket or rulemaking numbers appear in the 
caption of this proceeding, however, commenters must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, 
commenters should include their full name, Postal Service mailing 
address, and the applicable docket or rulemaking number. Parties may 
also submit an electronic comment by Internet e-mail. To get filing 
instructions for e-mail comments commenters should send an e-mail to 
[email protected], and should include the following words in the body of the 
message, ``get form, your e-mail address.'' A sample form and 
directions will be sent in reply.
    56. We will treat this proceeding as permit-but-disclose for 
purposes of the Commission's ex parte rules. See generally 47 CFR 
1.1200-1.1216. Parties making oral ex parte presentations are reminded 
that memoranda summarizing the presentation must contain a summary of 
the substance of the presentation and not merely a listing of the 
subjects discussed. More than a one or two sentence description of the 
views and arguments presented is generally required. See 47 CFR 
1.1206(b)(2), as revised. Other rules pertaining to oral and written 
presentations are set forth in section 1.1206(b) as well. Interested 
parties are to file with the Secretary, FCC, and serve Janice Myles and 
ITS, with copies of any written ex parte presentations or summaries of 
oral ex parte presentations in these proceedings in the manner 
specified.

V. Ordering Clauses

    57. Accordingly, it is ordered that pursuant to Sections 1, 3, 4, 
201-205, 251, 252, 254, 256, and 271 of the Communications Act of 1934, 
as amended, 47 U.S.C. 151, 153, 154, 251, 252, 256, and 271, the second 
further notice of proposed rulemaking is hereby adopted.
    58. It is further ordered that, the Office of Public Affairs, 
Reference Operations Division shall send a copy of this second further 
notice of proposed rulemaking, including the SIRFA, to the Chief 
Counsel for Advocacy of the Small Business Administration, in 
accordance with section 603(a) of the Regulatory Flexibility Act, 5 
U.S.C. 601 et seq. (1981).

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 99-10307 Filed 4-23-99; 8:45 am]
BILLING CODE 6712-01-P