[Federal Register Volume 66, Number 98 (Monday, May 21, 2001)]
[Rules and Regulations]
[Pages 27892-27901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12758]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 61

[CC Docket No. 96-262; FCC 01-146]


Access Charge Reform; Reform of Access Charges Imposed by 
Competitive Local Exchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, we limit the application of our tariff rules 
to CLEC access services in order to prevent use of the regulatory 
process to impose excessive access charges on IXCs and their customers. 
Under the detariffing regime we adopt, CLEC access rates that are at or 
below the benchmark that we set will be presumed to be just and 
reasonable and CLECs may impose them by tariff. Above the benchmark, 
CLEC access services will be mandatorily detariffed, so CLECs must 
negotiate higher rates with the IXCs. We also adopt a rural exemption 
to our benchmark scheme, recognizing that a higher level of access 
charges is justified for certain CLECs serving truly rural areas. To 
avoid too great a disruption for competitive carriers, we implement the 
benchmark in a way that will cause CLEC rates to decrease over time 
until they reach the rate charged by the incumbent LEC. We also make 
clear that an IXC's refusal to serve the customers of a CLEC that 
tariffs access rates within our safe harbor, when the IXC serves ILEC 
end users in the same area, generally constitutes a violation of the 
duty of all common carriers to provide service upon reasonable request.

DATES: Effective June 20, 2001.

FOR FURTHER INFORMATION CONTACT: Jeffrey H. Dygert, Common Carrier 
Bureau, (202) 418-1500.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Seventh Report and Order in CC Docket No. 96-262, released on April 27, 
2001. The full text of this document is available for public inspection 
during regular business hours in the FCC Reference Center, Room CY-
A257, 445 Twelfth Street, SW., Washington, D.C., 20554.

I. Introduction

    1. By this order, we seek to ensure, by the least intrusive means 
possible, that CLEC access charges are just and reasonable. 
Specifically, we limit the application of our tariff rules to CLEC 
access services in order to prevent use of the regulatory process to 
impose excessive access charges on IXCs and their customers. 
Previously, certain CLECs have used the tariff system to set access 
rates that were subject neither to negotiation nor to regulation 
designed to ensure their reasonableness. These CLECs have then relied 
on their tariff to demand payment from IXCs for access services that 
the long distance carriers likely would have declined to purchase at 
the tariffed rate.
    2. Under the detariffing regime we adopt, CLEC access rates that 
are at or below the benchmark that we set will be presumed to be just 
and reasonable and CLECs may impose them by tariff. Above the 
benchmark, CLEC access services will be mandatorily detariffed, so 
CLECs must negotiate higher rates with the IXCs. During the pendency of 
negotiations, or if the parties cannot agree, the CLEC must charge the 
IXC the appropriate benchmark rate. We also adopt a rural exemption to 
our

[[Page 27893]]

benchmark scheme, recognizing that a higher level of access charges is 
justified for certain CLECs serving truly rural areas. To avoid too 
great a disruption for competitive carriers, we implement the benchmark 
in a way that will cause CLEC rates to decrease over time until they 
reach the rate charged by the incumbent LEC.
    3. We also make clear that an IXC's refusal to serve the customers 
of a CLEC that tariffs access rates within our safe harbor, when the 
IXC serves ILEC end users in the same area, generally constitutes a 
violation of the duty of all common carriers to provide service upon 
reasonable request.
    4. We intend to allow CLECs a period of flexibility during which 
they can conform their business models to the market paradigm that we 
adopt herein. In addition, these rules should continue to ensure the 
ubiquity of a fully interconnected telecommunications network that 
consumers have come to expect. Finally, by ensuring that CLECs do not 
shift an unjust portion of their costs to interexchange carriers, our 
actions should help continue the downward trend in long-distance rates 
for end users.
    5. We view the mechanism we adopt today as a means of moving the 
marketplace for access services closer to a competitive model. Because 
our tariff benchmark is tied to the incumbent LEC rate, we will re-
examine these rates at the close of the period specified in the CALLS 
Order, 65 FR 38684, June 21, 2000. Through a separate further notice of 
proposed rulemaking, published elsewhere in this issue, we also 
evaluate the access charge scheme as part of a broader review of inter-
carrier compensation.

II. CLEC Switched Access Services

A. The Structure of the Access Service Market

    6. It appears that certain CLECs have availed themselves of the 
tariff system and have refused to enter meaningful negotiations on 
access rates, choosing instead simply to file a tariff and bind IXCs 
receiving their access service to the rates therein. Providers of 
terminating access may be particularly insulated from the effects of 
competition in the market for access services. The party that actually 
chooses the terminating access provider does not also pay the 
provider's access charges and therefore has no incentive to select a 
provider with low rates. Indeed, end users may have the incentive to 
choose a CLEC with the highest access rates because greater access 
revenues likely permit CLECs to offer lower rates to their end users. 
The record also indicates that CLEC originating access service may also 
be subject to little competitive pressure, notwithstanding the fact 
that the IXCs typically have a relationship with the local exchange 
provider in order to be included on the LEC's list of presubscribed 
IXCs.
    7. CLECs' ability to impose excessive access charges seems 
attributable to two separate factors. First, although the end user 
chooses her access provider, she does not pay that provider's access 
charges. Rather, the access charges are paid by the caller's IXC, which 
has little practical means of affecting the caller's choice of access 
provider. Second, the Commission has interpreted section 254(g) to 
require IXCs geographically to average their rates and thereby to 
spread the cost of both originating and terminating access over all 
their end users. Consequently, IXCs have little or no ability to create 
incentives for their customers to choose CLECs with low access charges. 
Since the IXCs are effectively unable either to pass through access 
charges to their end users or to create other incentives for end users 
to choose LECs with low access rates, the party causing the costs--the 
end user that chooses the high-priced LEC--has no incentive to minimize 
costs.
    8. We are concerned that, in this environment, permitting CLECs to 
tariff any rate that they choose may allow some CLECs inappropriately 
to shift onto the long distance market in general a substantial portion 
of the CLECs' start-up and network build-out costs. Such cost shifting 
may promote economically inefficient entry into the local markets and 
may distort the long distance market.
    9. We decline to conclude, in this order, that CLEC access rates, 
across the board, are unreasonable. Nevertheless, there is ample 
evidence that the combination of the market's failure to constrain CLEC 
access rates, our geographic rate averaging rules for IXCs, the absence 
of effective limits on CLEC rates and the tariff system create an 
arbitrage opportunity for CLECs to charge unreasonable access rates.

B. Tariff Benchmark Mechanism

    10. A substantial majority of commenters strongly oppose the 
mandatory detariffing of CLEC access services. Apart from their 
opposition to mandatory detariffing, however, the two sides of the 
debate have been largely unable to agree about how CLECs should set 
rates for their switched access services.
    11. In their provision of access services, competitive carriers 
actually serve two distinct customer groups. The first is the IXCs, 
which purchase access service as an input for the long distance service 
that they provide to their end-user customers. An equally important 
group of customers for access services is the end users who benefit 
from the ability, provided by access service, to place and receive long 
distance calls. The noteworthy aspect of this second group of access 
consumers, or beneficiaries, is that, unlike IXCs, they have 
competitive alternatives in the market in which they purchase CLEC 
access service.
    12. Under the regime we adopt in this order, CLECs will be 
restricted only in the manner that they recover their costs from those 
access-service consumers that have no competitive alternative. We 
implement this restriction on the CLECs' exercise of their monopoly 
power by establishing a benchmark level at which CLEC access rates will 
be conclusively presumed to be just and reasonable and at (or below) 
which they may therefore be tariffed. Above the benchmark, CLECs will 
be mandatorily detariffed. The benchmark approach has several virtues 
that recommend it.
    13. First, a benchmark provides a bright line rule that permits a 
simple determination of whether a CLEC's access rates are just and 
reasonable. Such a bright line approach is particularly desirable given 
the current legal and practical difficulties involved with comparing 
CLEC rates to any objective standard of ``reasonableness.'' Second, by 
permitting CLECs to file access tariffs at or below a benchmark rate, 
our interim approach continues to allow the carriers on both sides of 
the access transaction to enjoy the convenience of a tariffed service. 
Third, adopting a benchmark for tariffed rates allows CLECs the 
flexibility to obtain additional revenues from alternative sources. 
They may obtain higher rates through negotiation.

C. Level and Structure of the Tariff Benchmark

    14. In setting the level of our benchmark, we seek, to the extent 
possible, to mimic the actions of a competitive marketplace, in which 
new entrants typically price their product at or below the level of the 
incumbent provider. We conclude that the benchmark rate, above which a 
CLEC may not tariff, should eventually be equivalent to the switched 
access rate of the incumbent provider operating in the CLEC's service 
area. We do not, however, immediately set the benchmark rate at the 
competing ILEC rate because such a flash cut likely would be unduly 
detrimental to the competitive carriers that have not

[[Page 27894]]

previously been held to the regulatory standards imposed on ILECs. Our 
benchmark mechanism, with certain exceptions, will permit CLECs 
initially to tariff rates for their switched access service of up to 
2.5 cents per minute, or the rate charged by the competing incumbent 
LEC, whichever is higher. For those carriers competing with ILECs that 
have tariffed rates below the benchmark (generally, the Bell operating 
companies), the benchmark rate will decline over the course of three 
years until it reaches the competing ILEC's rate. For at least one 
additional year, CLECs will be permitted to continue to tariff this 
rate, even if we decide to move other access traffic to a bill-and-keep 
regime. We also adopt rules to ensure that no CLEC avails itself of our 
benchmark scheme to increase its access rates, and we adopt a separate 
benchmark for certain firms operating in rural areas.
    15. In determining the initial level for the safe harbor rates 
which may be imposed by tariff, we use current CLEC rates as a starting 
point for analysis because, as noted, we lack an established framework 
for translating CLEC costs into access rates. By analyzing the IXC data 
on actual amounts billed and actual minutes of use, we can calculate 
composite access rates and largely avoid the problems that arise from 
the fact that CLEC rate structures vary widely and that many rely, in 
part, on flat-rated, or distance-sensitive, charges. Taken together, 
the IXC submissions show a range of 0.4 cents to 9.5 cents per minute 
for CLEC-provided switched access service. From the underlying, 
individual CLEC data, we have determined the average, weighted by 
minutes of use, for tariffed access rates.
    16. It is important that the benchmark, though within this range, 
also move CLEC access charges appreciably closer to the competing ILEC 
rate. Accordingly, setting the initial benchmark toward the lower end 
of the range appears to be justified. Based on our review of the 
universe and concentration of tariffed access rates being charged to 
these three IXCs, we conclude that--again, subject to certain 
exceptions that we discuss--our safe harbor for CLEC tariffed access 
rates will begin at 2.5 cents. This rate is within the current range of 
rates, but represents an appreciable reduction in the tariffed rate for 
many CLECs.
    17. We draw additional support for this initial benchmark level 
from a consensus solution submitted by parties on both sides of the 
present dispute. In comments to the Safe Harbor Public Notice, 65 FR 
77545, December 12, 2000, the Association for Local Telecommunications 
Services (ALTS) filed a proposed resolution, negotiated with WorldCom, 
suggesting, in relevant part, that a benchmark of 2.5 cents per minute 
for CLEC tariffed access rates would be a reasonable one in at least 
some markets. It appears that this rate is acceptable to a substantial 
number of CLECs, although it represents a significant reduction in 
access rates.
    18. On the effective date of the rules we promulgate today, CLECs 
will be permitted (subject to a rural exemption discussed) to tariff 
their access rates, for those areas where they have previously offered 
service, at either the benchmark of 2.5 cents per minute, or the rate 
of the corresponding incumbent carrier in the study area of the 
relevant end-user customer, whichever is higher. One year after the 
effective date of these rules, the benchmark rate will drop from 2.5 to 
1.8 cents per minute, or the ILEC rate, whichever is higher. On the 
second anniversary of the rules' effective date, the rate will drop to 
1.2 cents per minute, or the ILEC rate, whichever is higher. Finally, 
three years after the rules become effective, the benchmark figure will 
drop to the switched access rate of the competing ILEC. It will remain 
at that level through the rule's fourth year. We conclude that such a 
transition period is appropriate because, as discussed, we are 
concerned about the effects of a flash-cut to the ILEC rate.
    19. By moving CLEC tariffs to the ``rate of the competing ILEC'' we 
do not intend to restrict CLECs to tariffing solely the per-minute rate 
that a particular ILEC charges for its switched, interstate access 
service. We intend to permit CLECs to receive revenues equivalent to 
those the ILECs receive from IXCs, whether they are expressed as per-
minute or flat-rate charges. For example, CLECs shall be permitted to 
set their tariffed rates so that they receive revenues equivalent to 
those that the ILECs receive through the presubscribed interexchange 
carrier charge (PICC), to the extent that it survives in the wake of 
our CALLS Order. This does not entitle CLECs to build into their 
tariffed per-minute access rates a component representing the 
subscriber line charge (SLC) that ILECs impose on their end users, or 
any other charges that ILECs recover from parties other than the IXCs 
to which they provide access service.
    20. A number of CLEC commenters urge the Commission not to set the 
benchmark at ``the ILEC rate'' because they claim that CLECs structure 
their service offerings differently than ILECs. We seek to preserve the 
flexibility which CLECs currently enjoy in setting their access rates. 
Thus, in contrast to our regulation of incumbent LECs, our benchmark 
rate for CLEC switched access does not require any particular rate 
elements or rate structure; for example, it does not dictate whether a 
CLEC must use flat-rate charges or per-minute charges, so long as the 
composite rate does not exceed the benchmark. Rather it is based on a 
per-minute cap for all interstate switched access service charges. In 
this regard, there are certain basic services that make up interstate 
switched access service offered by most carriers. Switched access 
service typically entails a connection between the caller and the local 
switch, a connection between the LEC switch and the serving wire center 
(often referred to as ``interoffice transport''), and an entrance 
facility which connects the serving wire center and the long distance 
company's point of presence. Using traditional ILEC nomenclature, it 
appears that most CLECs seek compensation for the same basic elements, 
however precisely named common line charges; local switching; and 
transport. The only requirement is that the aggregate charge for these 
services, however described in their tariffs, cannot exceed our 
benchmark. In addition, by permitting CLECs to decide whether to tariff 
within the safe harbor or to negotiate terms for their services, we 
allow CLECs additional flexibility in setting their rates and the 
amount that they receive for their access services.
    21. We will apply the benchmark for both originating and 
terminating access charges. That is, it will apply to tariffs for both 
categories of service, including to toll-free, 8YY traffic, and will 
decline toward the rate of the competing ILEC for each category of 
service. We note, however, that shortly before the issuance of this 
order, AT&T raised questions regarding the application of our benchmark 
to originating 8YY traffic generated by CLEC customers. Because these 
issues arose so late in the proceeding, and because of the sparse 
record on them, we decline to do as AT&T suggests and immediately 
detariff this category of CLEC services above the rate of the competing 
ILEC. Instead, in this order, we solicit comment on the issues AT&T has 
raised so that we may decide them on an adequately developed record.
    22. Our benchmark mechanism may create the possibility for carriers 
with lower rates to raise their rates to the benchmark. We seek to 
avoid this result, which could have the consequence of increasing the 
amount that IXCs pay for some CLECs' access service. This, in turn, 
would again allow these CLECs to

[[Page 27895]]

shift a portion of their costs onto the long distance market generally. 
Accordingly, we further restrict the tariff benchmark that may be 
charged to a particular IXC by tariff to the lower of: (1) The 2.5 
figure, declining as discussed, or (2) the lowest rate that a CLEC has 
tariffed for access, during the 6 months immediately preceding the 
effective date of these rules. Any rate above this level (unless it is 
still below the competing ILEC's rate) will be conclusively deemed to 
be unreasonable in any proceeding challenging the rate. Additionally, 
we expect that our benchmark rule will have no effect on negotiated 
contracts, under which CLECs have chosen to charge even more favorable 
access rates to particular IXCs. Rather, these contracts will remain in 
place and the participating IXCs will continue to be entitled to any 
lower access rates for which they provide.
    23. We also find that it is prudent to permit CLECs to tariff the 
benchmark rate for their access services only in the markets where they 
have operations that are actually serving end-user customers on the 
effective date of these rules. We intend the declining benchmark scheme 
to wean competitive carriers off of their dependence on tariffed, 
supra-ILEC access rates without the disruption of a flash-cut to the 
prevailing market rate. We therefore think it important to ensure that 
this transitional mechanism serves that purpose, rather than presenting 
CLECs with the opportunity to enter additional markets in a potentially 
inefficient manner through reliance on tariffed access rates above 
those of the competing ILEC. Accordingly, we restrict the availability 
of the transitional benchmark rate to those metropolitan statistical 
areas (MSAs) in which CLECs are actually serving end users on the 
effective date of these rules. In MSAs where they begin serving end 
users after the effective date of these rules, we permit CLECs to 
tariff rates only equivalent to those of the competing ILEC; they will 
have to achieve rates above this level by negotiation.

D. Safe Harbor Rates for Rural CLECs

    24. Limiting CLECs to the higher of the benchmark rate or the 
access rate of its ILEC competitor could prove rather harsh for some of 
the small number of CLECs that operate in rural areas. The difficulty 
would likely arise for those CLECs that operate in a rural area served 
by a price-cap incumbent with state-wide operations. Our rules require 
such ILECs to geographically average their access rates. During the 
course of this proceeding, we became concerned that tying the access 
rates of rural CLECs to those of such non-rural ILECs could unfairly 
disadvantage CLECs that lacked urban operations with which they could 
similarly subsidize their service to rural areas.
1. Whether To Create a Rural Exemption
    25. We conclude that the record supports the creation of a rural 
exemption to permit rural CLECs competing with non-rural ILECs to 
charge access rates above those charged by the competing ILEC. First, 
we note that such a device is consistent with the Commission's 
obligations, under section 254(d)(3) of the Act and section 706 of the 
1996 Act, to encourage the deployment to rural areas of the 
infrastructure necessary to support advanced telecommunications 
services and of the services themselves. The record indicates that 
CLECs often are more likely to deploy in rural areas the new facilities 
capable of supporting advanced calling features and advanced 
telecommunications services than are non-rural ILECs, which are more 
likely first to deploy such facilities in their more concentrated, 
urban markets. Given the role that CLECs appear likely to play in 
bringing the benefits of new technologies to rural areas, we are 
reluctant to limit unnecessarily their spread by restricting them to 
the access rates of non-rural ILECs.
    26. We are persuaded by the CLEC comments indicating that they 
experience much higher costs, particularly loop costs, when serving a 
rural area with a diffuse customer base than they do when serving a 
more concentrated urban or suburban area. The CLECs argue that, lacking 
the lower-cost urban operations that non-rural ILECs can use to 
subsidize their rural operations, the CLECs should be permitted to 
charge more for access service, as do the small rural incumbents that 
charge the National Exchange Carrier Association (NECA) schedule rates. 
We note in this regard that a rural exemption will also create parity 
between the rural CLECs competing with NECA carriers and those 
competing with non-rural ILECs.
    27. In adopting the rural exemption, we reject the characterization 
of the exemption as an implicit subsidy of rural CLEC operations. It is 
true that an exemption scheme will permit rural CLECs to charge IXCs 
more for access to their end-user customers than was charged by the 
non-rural ILECs from whom the CLECs captured their customers. The 
exemption we adopt today merely deprives IXCs of the implicit subsidy 
for access to certain rural customers that has arisen from the fact 
that non-rural ILECs average their access rates across their state-wide 
study areas.
    28. Our level of comfort in creating a rural exemption is markedly 
increased by the fact that the record indicates it likely will apply to 
a small number of carriers serving a tiny portion of the nation's 
access lines. The Rural Independent Competitive Alliance (RICA) asserts 
that, fewer than 100,000 access lines are served by carriers falling in 
the definition that it proffers for a rural CLEC.
    29. We reject AT&T's argument that CLECs must rely solely on the 
CALLS Order's interstate access support when entering the territories 
of non-rural ILECs. This interstate access support mechanism is 
portable, but that does not necessarily indicate that it fully reflects 
the costs (above those recovered through ILEC access rates) that a 
rural CLEC would encounter in serving customers in the high-cost areas 
for which the subsidy is available.
    30. We are also skeptical of AT&T's assertions about the incentives 
that would flow from a rural exemption. First, AT&T argues that the 
exemption would ``create perverse incentives for uneconomic competitive 
entry by CLECs in any ``rural'' areas in which it might be 
applicable.'' It appears from the record that both AT&T and Sprint have 
routinely been paying for CLEC access billed at the rate charged by the 
competing incumbent. If AT&T were accurate in its projection about 
higher access rates spurring a rash of uneconomic market entry in rural 
areas, such uneconomic entry should already have occurred in the 
territories of the rural incumbent carriers that charge the higher NECA 
rates. However, the record fails to indicate such a trend.
    31. We thus conclude that the record supports the creation of a 
rural exemption to the benchmark scheme that we adopt for CLEC access 
charges. Under this exemption, a CLEC that is operating in a rural 
area, as defined, and that is competing against a non-rural ILEC may 
tariff access rates equivalent to those of NECA carriers.
2. Carriers Eligible for Rural Exemption
    32. Administrative simplicity is an important consideration in our 
choice of a way to define rural CLECs. Thus, we conclude that the 
availability of the exemption (and the higher access rates that come 
with it) should be determined based on the CLEC's entire service area, 
not on a subscriber-by-subscriber basis. Similarly, we are concerned 
that the definition rely on objectively available information that will 
not require extensive calculation or analysis by either carriers or 
this Commission.

[[Page 27896]]

    33. We conclude that the rural exemption to our benchmark 
limitation on access charges will be available for a CLEC competing 
with a non-rural ILEC, where no portion of the CLEC's service area 
falls within any incorporated place of 50,000 inhabitants or more, 
based on the most recently available population statistics of the 
Census Bureau or an urbanized area, as defined by the Census Bureau. 
Thus, if any portion of a CLEC's access traffic originates from or 
terminates to end users located within either of these two types of 
areas, the carrier will be ineligible for the rural exemption to our 
benchmark rule. Relying on information that is readily and publicly 
available, this definition excludes from the exemption those CLECs 
operating within reasonably dense areas that are not typically 
considered to be rural. It does not, however, exclude from eligibility 
entire counties that border high population areas, as would a 
definition based on MSAs.
    34. Sprint has raised the issue of how best to ensure that the 
rural exemption does not create the potential for abuse and that it is 
restricted to CLECs that are serving rural end users. Thus, Sprint is 
concerned about the potential for competitive carriers, with some 
qualifying end users, creating two separate operating entities so that 
the one serving rural end users could tariff the higher access rate 
permitted under the exemption. While we want to forestall that strategy 
for exploiting our rule, we also realize that certain incumbents with 
urban (or non-rural) operations may choose to enter adjacent rural 
markets as a competitive carrier. To the extent that such carriers 
provide the benefit of competition in rural markets, their non-
qualifying incumbent operations should not operate entirely to deny 
them the benefit of the rural exemption. Accordingly, we decline 
Sprint's invitation to examine all of the subsidiary operations of a 
holding company in order to determine the applicability of the rural 
exemption. We expect that we will be able to address, on a case-by-case 
basis, the improper exploitation of our rule--such as a competitive 
carrier's splitting itself into two subsidiaries to qualify, in part, 
for the exemption rates where it would not otherwise do so.
    35. Our definition for rural CLECs closely resembles the first 
major division of the Act's definition for rural telephone companies. 
It departs from the remaining three major divisions of the definition 
either because they would be administratively burdensome, or because 
they would be overly inclusive or irrational when applied solely to 
CLECs. Our definition adopts 50,000, rather than 10,000, as the 
population cut-off for incorporated places because we are concerned 
that, without the statute's remaining three portions of the definition 
as a way for a company to attain rural status, the 10,000-person 
threshold would be unduly restrictive and deny the exemption to 
companies operating in areas that would generally be viewed as rural.
    36. This exemption will permit a CLEC to tariff access rates above 
the competing ILEC's only when the competing ILEC has broad-based 
operations that include concentrated, urban areas that allow it to 
subsidize its rural operations and therefore charge an artificially low 
rate for access to its rural customers. We conclude that the most 
effective and objective means of accomplishing this is to allow the 
rural exemption only to those CLECs that are competing with price-cap 
ILECs that do not qualify as ``rural telephone companies'' under the 
Act's definition. Those CLECs competing with carriers that qualify as 
rural under the Act's definition are excluded from the rural exemption 
and are therefore limited, under the rule we announced, to tariffing 
access rates equal only to those of the competing ILEC.
3. Rate for Exemption Carriers
    37. The final question with respect to the rural exemption is what 
the access service benchmark is for those carriers that qualify. We 
adopt the NECA tariff for switched access service as the standard that 
is the most appropriately reflective of the considerations that should 
go into pricing the access service of rural CLECs. Accordingly, 
qualifying rural CLECs may tariff rates at the level of those in the 
NECA access tariff, assuming the highest rate band for local switching 
and the transport interconnection charge, minus the tariff's carrier 
common line (CCL) charge if the competing ILEC is subject to our CALLS 
Order. Above this benchmark, rural CLECs will be mandatorily detariffed 
in their provision of access services.
    38. We adopt the NECA access rate because it is tariffed on a 
regular basis and is routinely updated to reflect factors relevant to 
pricing rural carriers' access service. We choose the highest rate 
bands for the two variable rate elements because the opportunity to 
tariff those rates will most effectively spur the development of local-
service competition in the nation's rural markets and because the 
burden created by choosing the highest rate will be relatively minor, 
owing to the small number of carriers involved. We deny rural CLECs the 
NECA tariff's CCL charge when they compete with a CALLS ILEC because 
the price-cap LECs' CCL charge has been largely eliminated through 
implementation of higher subscriber line charge (SLC) caps and the 
multi-line business PICC. CLECs competing with CALLS ILECs are free to 
build into their end-user rates a component approximately equivalent to 
(or slightly below) the ILEC's SLC, as well as assessing IXCs a multi-
line business PICC. These potential revenue sources obviate the need 
for a CCL charge, which NECA carriers use to recover loop costs that 
cannot be recovered because of their lower SLC caps and the absence of 
PICCs.

E. Forbearance Analysis for Rates Above the Benchmark

    39. Section 10 of the Act requires, inter alia, that the Commission 
forbear from applying any regulation or provision of the Act to 
telecommunications carriers or telecommunications services, or classes 
thereof, if the Commission determines that certain statutory conditions 
are satisfied. Because section 10 permits us to exercise our 
forbearance authority with respect to classes of services, we conduct a 
forbearance analysis only for those CLEC interstate access services for 
which the aggregate charges exceed our benchmark. For this class of 
services, we conclude that the section 10 forbearance criteria are 
satisfied; accordingly, we must take action pursuant to the terms of 
this statute.
    40. Under the first criterion for forbearance, we examine whether 
our tariff filing requirements for CLEC interstate access services 
priced above the benchmark are necessary to ensure that rates for these 
services are just and reasonable and not unreasonably discriminatory. 
We conclude they are not. As noted, CLECs are positioned to wield 
market power with respect to access service. Requiring CLECs to 
negotiate with their IXC customers in order to obtain access rates 
above the benchmark will limit the CLECs' ability to exercise this 
market power and unilaterally impose rates above the level that we have 
found to be presumptively reasonable.
    41. We are not persuaded by CLEC commenters that contend they will 
be unable to negotiate agreements with IXCs because IXCs wield 
significant market power in the purchase of access services. We find 
these claims of IXC monopsony power unsupported in the record. We note 
that three major IXCs are purchasers in the market for access services, 
and numerous smaller players also purchase LEC access services.

[[Page 27897]]

Moreover, we note that our tariff rules were historically intended to 
protect purchasers of services from monopoly providers, not to protect 
sellers from monopsony purchasing power. We conclude that other 
remedies, like those under the antitrust laws, are available to protect 
CLECs from the exploitation of any monopsony power that IXCs may 
possess.
    42. Under the second forbearance criterion, we must determine 
whether tariffing of CLEC access charges above the benchmark is 
necessary to protect consumers. Requiring negotiation of access rates 
above the benchmark will provide greater assurance that the rates are 
just and reasonable and will likely prevent CLECs from using long 
distance ratepayers to subsidize their operational and build-out 
expenses. It is possible that the reduction of CLEC access revenue 
caused by the benchmark scheme will increase the rates CLECs charge 
their end users. However, all CLEC end users have competitive 
alternative service providers, in the form of regulated incumbents. We 
are therefore not concerned that any increase in CLEC end-user rates 
will unduly harm consumers. To the extent that this provision requires 
us to examine the effect on the IXC consumers of CLEC access services, 
mandatory detariffing likely will protect that group by removing the 
CLEC's ability unilaterally to impose excessive rates through the 
tariff process.
    43. The third forbearance criterion requires that we determine 
whether mandatory detariffing of CLEC access services priced above the 
benchmark is consistent with the public interest and, in particular, 
whether it will promote competitive market conditions. We conclude, as 
discussed, that adopting mandatory detariffing for access rates in 
excess of the safe harbor limit will subject to negotiation between two 
willing parties any access services offered at a rate above the 
benchmark. The negotiation-driven approach that we adopt will provide a 
better mechanism for IXCs to control costs, since they will not be 
subject to tariffs with unilaterally established rates at excessive 
levels. In addition, our benchmark system, with its presumption that 
qualifying rates are reasonable, will provide greater certainty for 
CLECs that they will receive full compensation for the access services 
that they provide. By limiting a CLEC's ability to shift its start-up 
costs onto the long-distance market, our benchmark approach will 
restrict market entry to the efficient providers. Accordingly, 
mandatory detariffing of CLEC access services above the benchmark 
fulfills all three of the criteria for forbearance.

III. Interconnection Obligations

    44. Although we have created a safe harbor for CLEC access rates, 
within which they will be presumed to be just and reasonable, the 
question remains of whether and under what circumstances an IXC can 
decline to provide service to the end users of a CLEC.

A. Interconnection and Sections 201 and 251

    45. Sections 201(a) and 251(a)(1) do not expressly require IXCs to 
accept traffic from, and terminate traffic to, all CLECs, regardless of 
their access rates. The Commission has previously found that a section 
251(a)(1) duty to interconnect, directly or indirectly, is central to 
the Communications Act and achieves important policy objectives. 
However, the Commission construed the statute to require only the 
physical linking of networks, not to impose obligations relating to the 
transport and termination of traffic. Section 201 empowers the 
Commission, after a hearing and a determination of the public interest, 
to order the physical connection of networks and to establish routes 
and charges for certain communications. This also falls short of 
creating the blanket duty that the CLECs seek to impose on the IXCs to 
accept all access service, regardless of the rate at which it is 
offered. Certainly, we have made no finding that the public interest 
dictates such broad acceptance of access service, whatever its price. 
Nevertheless, we conclude that section 201(a) places certain 
limitations on an IXC's ability to refuse CLEC access service.
    46. We agree that universal connectivity is an important policy 
goal that our rules should continue to promote. The public has come to 
value and expect the ubiquity of the nation's telecommunications 
network. Accordingly, any solution to the current problem that allows 
IXCs unilaterally and without restriction to refuse to terminate calls 
or indiscriminately to pick and choose which traffic they will deliver 
would result in substantial confusion for consumers, would 
fundamentally disrupt the workings of the public switched telephone 
network, and would harm universal service.
    47. We therefore conclude that an IXC that refuses to provide 
service to an end user of a CLEC charging rates within the safe harbor, 
while serving the customers of other LECs within the same geographic 
area, would violate section 201(a). That section imposes on common 
carriers the obligation to furnish communication service ``upon 
reasonable request therefor.'' As set out above, we will conclusively 
presume that a CLEC's access rates are reasonable if they fall at or 
below the benchmark that we establish herein. When an IXC's end-user 
customer attempts to place a call either from or to a local access 
line, that customer makes a request for communication service--from the 
originating LEC, the IXC and the terminating LEC. When that customer 
attempts to call from and/or to an access line served by a CLEC with 
presumptively reasonable rates, that request for communications service 
is a reasonable one that the IXC may not refuse without running afoul 
of section 201(a). This obligation may be enforced through a section 
208 complaint before the Commission.

B. Section 214 and Discontinuance of Service

    48. Section 214 of the Communications Act and 63.71 of the 
Commission's rules govern an IXC's withdrawal of service. Section 214 
of the Communications Act provides, in relevant part, that ``[n]o 
carrier shall discontinue, reduce, or impair service to a community, or 
part of a community, unless and until there shall first have been 
obtained from the Commission a certificate that neither the present nor 
future public convenience and necessity will be adversely affected 
thereby.'' In light of the solution we adopt herein, we need not 
address the application of either section 214 or our rule 63.17.
    49. We conclude that it would be a violation of section 201(a) for 
an IXC to refuse CLEC access service, either terminating or 
originating, where the CLEC has tariffed access rates within our safe 
harbor and, in the case of originating access, where the IXC is already 
providing service to other members in the same geographical area. Since 
section 201(a) already prohibits such a withdrawal of service, we need 
not address the question of whether section 214 applies to an IXC that 
finds itself in that position.
    50. The remaining possible scenario to which section 214 might 
apply is that in which a CLEC wishes to charge access rates above our 
benchmark and an IXC will not agree to pay them. Under the rules we 
adopt today, a CLEC must charge the benchmark rate during the pendency 
of negotiations or if the parties cannot agree to a rate in excess of 
the benchmark. In either case, since the benchmark rate is conclusively 
presumed reasonable, an IXC cannot refuse to provide service to an end 
user served by the CLEC without violating

[[Page 27898]]

section 201. Here again, we need not address the applicability of 
section 214.

IV. Procedural Matters

A. Paperwork Reduction Act

    51. The action contained herein has been analyzed with respect to 
the Paperwork Reduction Act of 1995 (PRA) and found to impose new or 
modified reporting and/or recordkeeping requirements or burdens on the 
public. Implementation of these new or modified reporting and/or 
recordkeeping requirements will be subject to approval by the Office of 
Management and Budget (OMB) as prescribed by the PRA, and will go into 
effect upon announcement in the Federal Register of OMB approval.

B. Final Regulatory Flexibility Analysis

    52. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the Pricing 
Flexibility Order and Further Notice, 64 FR 51280, September 22, 1999. 
The Commission sought written comments on the proposals in the Pricing 
Flexibility Order and Further Notice, including the IRFA. The 
Commission's Final Regulatory Flexibility Analysis (FRFA) in this order 
conforms to the RFA, as amended.
1. Need for, and Objectives of, the Proposed Action
    53. With this order, we address a number of interrelated issues 
concerning charges for interstate switched access services provided by 
competitive local exchange carriers (CLECs) and the obligations of 
interexchange carriers (IXCs) to exchange access traffic with CLECs. In 
so doing, we seek to ensure, by the least intrusive means possible, 
that CLEC access charges are just and reasonable. We also seek to 
reduce regulatory arbitrage opportunities that previously have existed 
with respect to tariffed CLEC access services. This order is designed 
to spur more efficient local competition and to avoid disrupting the 
development of competition in the local telecommunications market.
    54. We accomplish these goals by revising our tariff rules more 
closely to align tariffed CLEC access rates with those of the incumbent 
LECs. Under the detariffing regime we adopt, CLEC access rates that are 
at or below the benchmark that we set will be presumed to be just and 
reasonable and CLECs may impose them by tariff. Above the benchmark, 
CLEC access services will be mandatorily detariffed, so CLECs must 
negotiate higher rates with the IXCs. However, to avoid too great a 
disruption for competitive carriers (many of which may fall within the 
SBA's definition of a small entity), we implement this approach in a 
way that will cause CLEC tariffs to ramp down over time until they 
reach the level tariffed by the incumbent LEC. This mechanism will 
mimic the operation of the marketplace, as competitive LECs ultimately 
will have tariffed rates at or below the prevailing market price. At 
the same time, this approach maintains the ability of CLECs to 
negotiate access service arrangements with IXCs at any mutually agreed 
upon rate. In this order, we also make clear that an IXC's refusal to 
serve the customers of a CLEC that tariffs access rates within our safe 
harbor constitutes a violation of the duty of all common carriers to 
provide service upon reasonable request.
2. Summary of Significant Issues Raised by Public Comment in Response 
to the IRFA
    55. In the Pricing Flexibility Order and Further Notice, we sought 
comment on various, alternative proposals to prevent CLECs from 
charging unreasonable rates for their switched access services. In the 
IRFA, we tentatively concluded that the proposed rule changes would 
have no effect on the administrative burdens of competitive LECs 
because they would have no additional filing requirement. In response 
to the Further Notice, we received comments from more than 40 parties 
and held a series of ex parte meetings addressing these issues. Among 
those parties, only ALLTEL and the Rural Independent Competitive 
Alliance (RICA) commented specifically on the IRFA.
    56. We disagree with ALLTEL's contention that the Commission's IRFA 
was incomplete. ALLTEL argues that the Commission, in the IRFA, did not 
adequately address proposals in the Further Notice that might affect 
originating access and ``open-end'' access services; the potential 
burden on CLECs to modify their tariffs or to eliminate those tariffs 
and negotiate individual contracts; and potential burdens on other 
carriers, such as ILECs (which, ALLTEL asserts, might have to modify 
their tariffs and perform cost studies). To the contrary, for several 
different reasons, we conclude that the IRFA gave adequate notice of 
our proposals to address CLEC access service. First, we chose to 
discuss, in the IRFA, the primary proposals set out in the Notice, 
though we sought comment in the Notice on a number of variations to 
those primary proposals. Thus, while the IRFA only expressly mentions 
proposals to address terminating access, it includes cross-references 
to the text of the Further Notice, which discusses all variations of 
the Commission's proposals. Moreover, we observe that the Further 
Notice and the IRFA were sufficient to generate a very sizable record, 
including comments from many competitive LECs that likely would be 
considered small businesses under the closest applicable SBA 
definition. The IRFA provided sufficient information so that the public 
could react to the Commission's proposals in an informed manner.
    57. Second, with respect to the administrative burdens associated 
with our proposals in the Further Notice, we have reconsidered our 
tentative conclusion to adopt mandatory detariffing. We note that many 
commenters, large and small, oppose the Commission's proposal to adopt 
mandatory detariffing for all CLEC access services. These commenters, 
like ALLTEL, argue that while mandatory detariffing would reduce 
burdens associated with filing tariffs, it would increase 
administrative burdens overall by imposing greater transaction costs on 
CLECs and IXCs. Having received these almost unanimous comments, we 
conclude that we should not adopt our proposal to implement mandatory 
detariffing, at this time. Rather, we only adopt mandatory detariffing 
to the extent that a CLEC chooses to charge a rate that exceeds our 
defined benchmark. Under this approach, CLECs and IXCs--both large and 
small-- will be able to continue to enjoy the benefits of a tariffed 
service.
    58. Similarly, we take into account RICA's assertion that mandatory 
detariffing, as proposed, might cause particular hardship for CLECs 
operating in rural areas. Again, we have factored these comments into 
our decision to adopt a benchmark system, pursuant to which CLECs will 
continue to be permitted to file tariffs for their switched access 
services. Thus, we believe that our approach adequately addresses the 
concerns of these CLEC commenters. Moreover, we restate that our 
decision to detariff rates above the benchmark was motivated by our 
conclusion that rates above that level would be excessive (absent an 
agreement between the parties) and would place an inappropriate burden 
on IXCs and long distance customers. In this regard, we note that even 
the small CLECs covered by our RFA analysis are clearly prohibited by 
the Act and our rules from charging unjust or unreasonable rates. This 
order is designed to prevent such unjust or unreasonable rates.

[[Page 27899]]

    59. Finally, we reject ALLTEL's assertion that the proposals in the 
Notice would place additional regulatory burden on ILECs. The proposals 
applied solely to CLECs and IXCs and we find ALLTEL's arguments to be 
unsupported in the record.
    60. Although not responding specifically to the IRFA, many parties 
commented generally on the potential regulatory burdens associated with 
the Commission's various proposals. In brief, IXC commenters typically 
sought a mechanism to constrain CLEC access charges. In contrast, CLEC 
commenters typically sought to preserve their freedom to set access 
rates as they choose. We note that there are small entities on both 
sides of this debate. We encourage readers of this FRFA also to consult 
the complete text of this order, which describes in detail our analysis 
of the issues.
3. Description and Estimate of the Number of Small Entities To Which 
the Rules Apply
    61. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. To estimate the number of 
small entities that may be affected by the proposed rules, we first 
consider the statutory definition of ``small entity'' under the RFA. 
The RFA generally defines ``small entity'' as having the same meaning 
as the term ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' In addition, the term ``small business'' 
has the same meaning as the term ``small business concern'' under the 
Small Business Act, unless the Commission has developed one or more 
definitions that are appropriate to its activities. Under the Small 
Business Act, a ``small business concern'' is one that is independently 
owned and operated; is not dominant in its field of operation; and 
meets any additional criteria established by the SBA. 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 no more than 1,500 employees.
    62. The rules adopted in this order apply to CLECs and IXCs. 
Neither the Commission nor the SBA has developed a definition of small 
CLECs or small IXCs. The closest applicable definition for these 
carrier-types under SBA rules is for telephone communications companies 
other than radiotelephone (wireless) companies. The most reliable 
source of information regarding the number of these carriers nationwide 
of which we are aware appears to be the data that telecommunications 
carriers file annually in connection with the Commission's universal 
services requirements. According to our most recent data, 349 companies 
reported that they were engaged in the provision of either competitive 
access services or competitive local exchange services (referred to 
collectively as CLECs) and 204 companies reported that they were 
engaged in the provision of interexchange services. Among these 
companies, we estimate that approximately 297 of the CLECs have 1500 or 
fewer employees and that approximately 163 of the IXCs have 1500 or 
fewer employees. Although it seems certain that some of these carriers 
are not independently owned and operated, we are unable at this time to 
estimate with greater precision the number of these carriers that would 
qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are 297 or fewer small CLECs, and 
163 or fewer small IXCs that may be affected by the decisions and rules 
adopted in this order.
4. Description of Reporting, Recordkeeping, and Other Compliance 
Requirements
    63. ALLTEL asserts that the Commission's proposals in the Further 
Notice ``could require CLECs to modify their tariffs or to eliminate 
those tariffs and negotiate individual contracts.'' This argument was 
echoed by other commenters who assert that the Commission's proposal to 
adopt mandatory detariffing would increase carriers' transaction costs, 
even though tariff filing requirements would be eliminated. We 
acknowledge these concerns and have decided not to adopt mandatory 
detariffing for all CLEC switched access services, at this time.
    64. Thus, pursuant to this order, we allow competitive LECs to 
continue to file tariffs, as long as the rates for those services are 
within the defined safe harbor. We recognize that many CLECs--we 
estimate between 100-150 CLECs--may be required to re-file their 
tariffs in order to comply with this order. Given that ALTS, an 
organization which represents many CLECs, has supported this proposal, 
we believe that any increased burden will be outweighed by the benefits 
associated with resolving these issues. Further, we conclude that it is 
a burden that is justified by the Act's requirement that all rates be 
just and reasonable. We are optimistic that this approach will provide 
a bright line rule that permits a simple determination as to whether 
CLEC access charges are just and reasonable and, at the same time, will 
enable both sellers and purchasers of CLEC access services to avail 
themselves of the convenience of a tariffed service offering. Thus, we 
believe that this approach should minimize reporting and recordkeeping 
requirements on IXCs and CLECs, including any small entities, while 
also providing carriers with considerable flexibility.
5. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    65. Through this order, we seek to resolve contentious issues that 
have arisen with respect to CLEC switched access services. Because 
there are both small entity IXCs and small entity CLECs `` often with 
conflicting interests in this proceeding--we expect that small entities 
will be affected by any approach that we adopt. As discussed, we 
conclude that our approach best balances these goals by removing 
opportunities for regulatory arbitrage and minimizing the burdens 
placed on carriers.
    66. In this order, we adopt a benchmark approach to CLEC access 
charges. We find that this approach will minimize the impact of the 
rules on small entities in several ways. First, it allows small 
business CLECs to continue to enjoy the convenience of offering a 
tariffed service, an advantage sought by CLECs, many of which may be 
relatively new and small businesses. Second, it will enable small IXCs 
to purchase most access services via tariff, rather than having to 
negotiate agreements with every CLEC. Finally, our approach ensures 
that IXCs will continue to accept and pay for CLEC switched access 
services, as long as the CLEC tariffs rates within the Commission's 
benchmarks. Many CLECs argued that such an outcome was essential for 
new, relatively small CLECs to continue to offer services.
    67. In this order, we consider and reject several alternatives to 
the benchmark approach. In particular, we also considered continuing to 
rely on market forces to constrain CLEC switched access charges; 
adopting a mandatory detariffing policy, which would prohibit CLECs 
from filing any tariffs for their switched access services; and, 
subjecting CLECs to the panoply of regulation with which incumbents 
must comply.
    68. Although many CLECs contend that the Commission need not take 
any particular action with respect to CLEC

[[Page 27900]]

switched access charges, we disagree. We conclude that our action is 
compelled by several factors, including our desire to reduce regulatory 
arbitrage opportunities and to revise our rules to allow competitive 
market forces to constrain CLEC access charges; growing evidence that 
CLEC switched access charges do not appear to be constrained by market 
forces; significant concerns that allowing IXCs to refuse to exchange 
traffic without restriction may lead to a decline in the universal 
connectivity upon which telephone users have come to rely.
    69. On the other hand, we do not impose mandatory detariffing for 
all CLEC switched access services because we believe that our benchmark 
approach will provide a less drastic alternative for carriers, 
including small entity CLECs and small entity IXCs. For example, by 
enabling CLECs to continue to file tariffs within a safe harbor range, 
we respond to concerns expressed by many CLECs that complete 
detariffing of CLEC services would cause significantly increased 
transaction costs. We note, as well, that many IXC commenters supported 
this solution.
    70. We also conclude that our benchmark approach is more desirable 
than subjecting CLECs to the panoply of ILEC regulation. The Commission 
has long stated its desire to allow competitive forces to constrain 
access charges. By adopting a benchmark approach, we continue to allow 
CLECs to tariff their services, while ensuring IXCs and long distance 
customers, generally, that CLEC rates will be just and reasonable. We 
note that no commenter favors subjecting CLECs to dominant carrier 
regulation.
    71. We also adopted a transition mechanism that should minimize the 
impact of the decision on all carriers, including small entities. While 
we considered adopting a benchmark that would immediately drop CLEC 
access rates to that level charged by the competing incumbent LEC, we 
instead implement the benchmark through a three-year transition. This 
will allow CLECs, including any small businesses, a period of 
flexibility during which they can conform their business models to the 
new market paradigm that we adopt, herein. At the same time, by 
effecting significant reductions in switched access charges 
immediately, we will minimize the impact that excessive access rates 
might have on IXCs, including any small businesses. We believe that 
this transition should significantly reduce the impact of this order on 
small businesses.
    72. In addition, by clarifying rules for the transport and 
origination of traffic between CLECs and IXCs, this order should 
continue to ensure the ubiquity of a fully interconnected 
telecommunications network that consumers have come to expect. We 
considered counter-proposals from some carriers that there should be no 
obligation to exchange traffic; however, we believe that our approach 
will best satisfy the expectations of end users who have come to rely 
on a seamless, fully-interconnected telephone network. Further, these 
rules should provide considerable assurance to CLECs, many of which may 
be small businesses, that seek to offer their customers access to the 
broadest range of IXCs possible. Many of these CLECs asserted that, 
without such a rule, larger, more established IXCs likely would refuse 
to exchange traffic with them, essentially driving them out of 
business. Our rules should address this concern by requiring IXCs to 
exchange traffic with CLECs that tariff rates within the benchmark, 
where IXCs already exchange traffic with other carriers in the same 
geographic area.
    73. Overall, we believe that this order best balances the competing 
goals that we have for our rules governing CLEC switched access 
charges. We have not identified any additional alternatives that would 
have further limited the impact on small entities across-the-board 
while remaining consistent with Congress' pro-competitive objectives 
set out in the 1996 Act.
    74. Report to Congress: The Commission will send a copy of this 
CLEC Access Charge Reform Order, including this FRFA, in a report to be 
sent to Congress pursuant to the Congressional Review Act. See 5 U.S.C. 
801(a)(1)(A). In addition, the Commission will send a copy of this CLEC 
Access Charge Reform Order, including FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. A copy of the CLEC 
Access Charge Reform Order and FRFA (or summaries thereof) will also be 
published in the Federal Register. See 5 U.S.C. 604(b).

V. Ordering Clauses

    75. Pursuant to sections 1-5, 201-205, 303(r), 403, 502, and 503 of 
the Communications Act of 1934, as amended, this Report and Order, with 
all attachments, including revisions to part 61 of the Commission's 
rules, is hereby adopted.
    76. The rule revisions adopted in this Order shall become effective 
thirty days after publication in the Federal Register.
    77. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this CLEC Access Charge Order, 
including the Final and Initial Regulatory Flexibility Analyses, to the 
Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 61

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

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

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 61 as follows:

PART 61--TARIFFS

Subpart C--General Rules for Nondominant Carriers

    1. The authority citation for part 61 continues to read as follows:

    Authority: 47 U.S.C. 1, 4(i), 4(j), 201-205 and 403 unless 
otherwise noted.

    2. Add Sec. 61.26 to subpart C to read as follows:


Sec. 61.26  Tariffing of competitive interstate switched exchange 
access services.

    (a) Definitions. For purposes of this section 61.26, the following 
definitions shall apply:
    (1) CLEC shall mean a provider of interstate exchange access 
services that does not fall within the definition of ``incumbent local 
exchange carrier'' in 47 U.S.C. 251(h).
    (2) Competing ILEC shall mean the incumbent local exchange carrier, 
as defined in 47 U.S.C. 251(h), that would provide interstate exchange 
access service to a particular end user if that end user were not 
served by the CLEC.
    (3) Interstate switched exchange access services shall include the 
functional equivalent of the ILEC interstate exchange access services 
typically associated with following rate elements: carrier common line 
(originating); carrier common line (terminating); local end office 
switching; interconnection charge; information surcharge; tandem 
switched transport termination (fixed); tandem switched transport 
facility (per mile); tandem switching.
    (4) Non-rural ILEC shall mean an incumbent local exchange carrier 
that is not a rural telephone company under 47 U.S.C. 153(37).
    (5) The rate for interstate switched exchange access services shall 
mean the composite, per-minute rate for these

[[Page 27901]]

services, including all applicable fixed and traffic-sensitive charges.
    (6) Rural CLEC shall mean a CLEC that does not serve (i.e., 
terminate traffic to or originate traffic from) any end users located 
within either:
    (i) Any incorporated place of 50,000 inhabitants or more, based on 
the most recently available population statistics of the Census Bureau 
or
    (ii) An urbanized area, as defined by the Census Bureau.
    (b) Except as provided in paragraphs (c) and (e) of this section, a 
CLEC shall not file a tariff for its interstate switched exchange 
access services that prices those services above the higher of:
    (1) The rate charged for such services by the competing ILEC or
    (2) The lower of:
    (i) The benchmark rate described in paragraph (c) of this section 
or
    (ii) The lowest rate that the CLEC has tariffed for its interstate 
exchange access services, within the six months preceding June 20, 
2001.
    (c) From June 20, 2001 until June 20, 2002, the benchmark rate for 
a CLEC's interstate switched exchange access services will be $0.025 
per minute. From June 20, 2002 until June 20, 2003, the benchmark rate 
for a CLEC's interstate switched exchange access services will be 
$0.018 per minute. From June 20, 2003 until June 21, 2004, the 
benchmark rate for a CLEC's interstate switched exchange access 
services will be $0.012 per minute. After June 20, 2005, the benchmark 
rate for a CLEC's interstate switched exchange access services will be 
the rate charged for similar services by the competing ILEC, provided, 
however, that the benchmark rate for a CLEC's interstate switched 
exchange access services will not move to bill-and-keep, if at all, 
until June 20, 2005.
    (d) Notwithstanding paragraphs (b) and (c) of this section, in the 
event that, after June 20, 2001, a CLEC begins serving end users in a 
metropolitan statistical area (MSA) where it has not previously served 
end users, the CLEC shall not file a tariff for its interstate exchange 
access services in that MSA that prices those services above the rate 
charged for such services by the competing ILEC.
    (e) Rural exemption. Notwithstanding paragraphs (b) through (3) of 
this section, a rural CLEC competing with a non-rural ILEC shall not 
file a tariff for its interstate exchange access services that prices 
those services above the rate prescribed in the NECA access tariff, 
assuming the highest rate band for local switching and the transport 
interconnection charge. If the competing ILEC is subject to the 
Commission's CALLS Order, 65 FR 38684, June 21, 2000, this rate shall 
be reduced by the NECA tariff's carrier common line charge.

[FR Doc. 01-12758 Filed 5-18-01; 8:45 am]
BILLING CODE 6712-01-P