HomeMy WebLinkAboutCUP 154C; Pacific Bell Expansion; Conditional Use Permit (CUP) (9)City of Carlsbad
,
San Ramon, May 10, 1996
Legal File No.
R. Trinko:
Roger ,
Enclosed is the FCC decision stating that if we are offering
physical collocation and run out of space, then we must offer
virtual collocation. I've starred the specific language in
paragraph 70. Other paragraphs which might be of interest to the
City of Calsbad are paragraphs 3, 17 and 31-32.
Also, I've enclosed a copy of Pacific Bell's Notice of Exemption
to the FCC, indicating that we provide physical rather than
virtual collocation.
Joanne Wallin, in the Legal Department in San Francisco, is
overnighting to you the relevant CPUC decision. We were not able
this afternoon to find any specific language in the CPUC's
decision regarding space exhaustion. However, she is sending the
decision to me as well, and I should be able to look through it
Monday morning.
U Nancy McMahon c&)
Attorney
Enclosures
0114481.01 (0 WJ
c Sep. 2. 1994 9:39AM PACBELL LEGAL SF 140
CBF .-
,?
No. 3009 P. 213
c Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
)
In the Matter of 1 1
Local Telephone Company Facilities 1
Expanded Interconnection with 1 CC Docket No. 91-141
To: Chief, Tariff Division
Common Carrier Bureau
Pacific Bell and Nevada Bell provide this notice that we are making
use of the exemption from the Commission's mandatory virtual collocation
requirement.' In order to avoid mandatory virtual collocation, we consent to offer
physical collocation as a communications common carrier offering under
non-streamlined Tile II regulation2 We will continue to offer physical collocation on
a tariffed basis, with generally available rates, terms, and conditions, in all central
Com Fa-, CC Docket No. 91-
' We provide this consent, however, under protest and with a complete reservation of our (On August 10,1994,
1
, released July 25. 1994, paras. 31, 36 ("- 141, Or&
Remand).
rights to challenge any and all aspects of the
we filed a Petition For Review of the -. Pacificl.. Y. FS.&J 81, D.C. Circuit Case Nos. 94-1547 and 94-1548.) We are, for instance, providing physical collocation by tariff, rather than by mntract. only because the Commission requires the tariffing of physical collocation as a condition for obtaining the exemption. We believe that we should be allowed to lease our real estate pursuant to contracts with negotiated terminatiin provisions, rather than be forced to tariff our real estate offerings and obtain Section 214 authorization (47
U.S.C. 5 214) to discontinue the offerings. The D.C. Circuit U.S. Court of Appeals found that mandatory physical collocatian is unlawful. &ljA&nbc v. FCC ,24 F.3d 1441 (D.C. Cir. 1994).
The only alternative that the Commission has allowed, however, is a form of mandatory virtual collocation which we believe also will be found unlawful. A choice between two unlawful forms of
collocation is no legitimate choice at all.
..
Sep. 2. 1994 9:39AM PACBELL LEGAL SF 140
I No. 3009 Pa 3/3
,
. offices in which it is currently tariied and will add additional central offices in
accordance with the Commission's rules.
No tariff revisions are required for us to implement physical collocation
in accordance with the rules set forth in the Collocation Remand Order . Our existing
physical collocation tariffs meet all the Cornmission's standards governing physical
collocation ,3 requirements concerning the availability of expanded interconnection,'
and requirements concerning expanded interconnection rate structure and pricing.'
For all the above reasons, Pacific Bell and Nevada Bell quaiify for the
physical collocation exemption from the virtual collocation requirement.
Respectfully submitted,
PACIFIC BELL
NEVADA BELL
140 New Montgomery St., Rm. 1522A
San Francisco, California 941 05
(41 5) 542-7661
JAMES L. WURTZ
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 383-6472
Their Attorneys
Date: September 1, 1994
see- , paras. 67-101.
&&at paras. 102-111. %&at paras. 112-137.
A
2
FCC 94-190 Before the FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
) 1
Expanded Interconnection with 1
1
In the Matter of
Local Telephone Company Facilities 1 CC Docket No. 91-141
r
MEMORANDUM OPINION AND ORDER
Adopted: July 14, 1994 Released: July 25, 1994
By the Commission: Commissioners Quello, Barrett, and Chong issuing separate statements.
Table of Contents
mal>h No.
I. INTRODUCTION ......................................... 1
A. Summary ....................................... 1
B. Background ....................................... 5
n. PuBucPoLIcYANALYsIs.. ............................... 7
/ III. INTERCONNECTIONAR~ 13 .........................
A. PhysicalandVirtualColloCatiOn ......................... 13
B. Locations Where Expanded Inem 'on Must Be Made Available ... 38
IV. STANDARDS .......................................... 40
1. InGeneral ................................... 41 :<. *;.,i 47 Em' mat oeSi@im:~~ .................. _. , . . ..... 2. r4, 3. lilsEmiQn;w-,anbRepair .................... 54
4. Okf Requii.ancnt.s .for -virtual Coadon ............... 63
1. space .biu&x?ion ilBd&haudon: .
A. SolndardsGoverningViCollocation ...................... 41 .
>n
B. Standards Governing @iysi~&4-~~Oll&o~ . ':.
-. ~ ,g?-ii&%'f.rn e. B@.EjiJ.l '+i;rtUal, ... . . .. -* . ................ ... .5. .................... '74
S&SE Eqx~ad@ &~zmmection Pokies '. 74 .................. -._ I .i.c I
- 1. ........................... ' 76 2. Reporting Rq.ammepts
.... - ... .. ,.. .:.-. .
... .* -. '2 - ..
-. ..... .. . ._.
.... .. -." _--. . .Li-*- ,. ,--
... - .. . f ,.., . ..
3 . DisputeResolution ............................. 80 4 . Interconnection to LEC Facilities 82 !
a . Microwave .............................. 82
b . CopperorCoaxialCable ..................... 85
c . DSO and Other Special Access Services ............ 89
Other Standards Issues ........................... 94
.....................
5 .
V . AVAILABILITY OF EXPANDED INTERCONNECTION .............. 102
A . Parties that Offer Expanded Interco~eCtio~: Reciprocity ......... 102
B . Parties that May Use Expanded Interconnection ............... 106
1 . Restxidons on AT&T .......................... 107
2 . Restrictions on End Users ........................ 111
VI . EXPANDED INTERCONNECTION RATE STRUCIZTRE AND PRICING ... 112
A . Connection Charge Rate Structure ....................... 112
C . ConmbutionCharge ................................ 130
D . Separations ..................................... 134
B . COMdOn Charge Pricing ............................ 118
MI . LECPRICXNG- ............................... 138
A . InGeneral ....................................... 138
' B . DensityZonePricing ............................... 149
1 . Threshold Required for Implementation ................ 149
2 . PricccapstTucbl~ ............................ 157 I
3 . DefinitionofZones ............................ 164
B . Volume and Term Discounts ........................... 168
1 . SpecialAccess ............................... 168
2 . SwitchedTransport ............................ 172
a . InGeneral ............................. 172
b . ThresholdRequidforImplemencation ........... 177
c . Application of New Service Test to Discounts ....... 186
D . Other Forms of pricing Flexibility ....................... 193 E . Freshbok ..................................... 197
F . Non.R6curringRcconfigurationCharges .................... 209
VIII . OTHERMATrERS ..................................... 213
M . CONCLUSION ........................................ 215
X . ORDERING CLAUSES .................................... 21h
APPENDIX A: Petitions for Rsconsrbtrat! a 'OD. Oppositions. and Replies Filed
APPENDIX B: Rule Changes
2
I. INTRODUCTION
A. Summary
1. In a series of orders in the past two years, we have adapted and implemented
an expanded interconnection policy that creates new opportunities for the competitive provision
of access services that the local telephone companies traditionally have provided on a monopoly
basis.’ Our decisions mandating expanded interconnection and collocation are fundamental to
opening the interstate special access and switched transport markets to greater competition. Our
simultaneous grant of greater pricing flexibility to the local telephone companies enables those
companies to compete more vigorously as well, while assuring that we ntain necessary controls
on dominant access providers. We believe that expanded intercomedon, by fostering increased
competition in interstate access markets, should increase economic growth. Competition should
lead to lower special access and switched transport ~harges,~ which in turn will make it possible
for long-distaace companies to offer SeNiCe at lower rates, thus stimulating demand for
communications services. Lower prices for communications services not only benefit consumers
directly, they also make resoum available forproductive investment elsewhere in the economy.
Competition also gives local telephone companies, as well as their competitors and customers,
incentives to invest in advanced tel~mmunications technologies, develop innovative services,
and provide existing services more efficiently. Expanded intem~ection creates greater
opportunities for new entrants to compete by enabling them to rely in part on the
telecommunications facilities of established sewice providers, and thereby promotes broader
access to communications networks and services by all users. The competition.that expanded
interconnection makes possible should give users a greater range of choices in telecommuni-
cations services and increase opportunities for users to obtain redundant facilities, thus
contributing to network reliability.
2. On June 10, 1994, the U.S. Court of Appeals for the District of Columbia
Circuit issued an order Stating that it would vacate in part the fm two of our expanded
interco~ection orders on the grounds that the Commission does not have authority under the
Communications Act of 1934, as amended, to require local exchange caniers (LECs) to provide
j& ootes 11-13.
Interstate access is a service uaditionally provided by local telephone companies that
enables intenxchange carriers and other customers to originate and terminate interstate telephone
traffic. Special access is a form of interstate access that uses dedicated transmission lines
between two points, without switching the traffic on those lines. Switched transport is another
fonn of interstate access comprising the transmission of traffic between interexchange carriers’
(or other customers’) points of pnsence and local telephone companies’ end offices, where the
traffic is switched and routed to end users.
3
expanded interconnection through physical coII0cation.' The court held that Section 201 of the
Act, which authorizes the Commission to order den "to establish physical connections with
other carriers," does not empower the Commission "to grant third parties a license to exclusive
physical occupation of a section of the LEG' central offices. "' Underlying the court's statutory
construction was its concern that OUT physical Wll~tiOn requhment constituted a "taking" of
property.' The court also stated that it would remand our orders to permit us to consider whether and to what extent to impose virtual collocation requirements in the absence of a
physical collocation requirement. Finaily, the court stated that it would remand the question of
whether we would impose a "fresh look" requirement in the absence of mandatory physical
collocation. The court stated that "[tJhe orders an vacated insofar as they require physical
collocation; in all other respects the orders are remanded to the Commission for further
proceedings. "6
3. We are acting expeditiously to preserve the substantiaI public interest benefits
of expanded hte~~~ection. We here establish the rights and obligations of affected parties
under a modified expanded interconnection regime that takes the court's decision into account.
By responding quickly to the court's decision, our goal is to ensure uninterrupted availabiliv of
expanded interconnection services. We seek to avoid the &suption to compuition that would
result if new rules and miffs implementing our expanded htcmnncction policy are not in place
at the time the court's decision mkes effect. Thus, even though the court's maadate bas not yet
issued,' and even though the court's decision applies only to expanded intemMection for special
access, we adopt in this order kles designed to speed the process so as to ensure that 10cal
telqhone compauies offer expanded intcrcoonection for both special access and switched
3 BuAhti T ne co- 'CS V. FCC, NO. 92-1619,1994WL247134 (D.C:Cb.,
June 10, 1994)- v. FCQ . For definitions of "expanded interconnection," "physical
collocation," and "virnral COUdm," see 1 7 ipfra.
u., slipap. at9.
Id.
u., siipop. at 11.
t ' Under the local rules of the U.S. Court of Appeals for the District of Columbia Circuit, panics may file petitions for rehearing within 45 days of the issuance of an order. D.C. Cir.
R. 35. The Federal Rules of Appellate Procedure provide that the mandate of the court will be
stayed pending the filing of a petition for rehearing, unless otherwise OFdered by the court, and
that the mandate shall issue 7 days after entry of an order denying apditim for nhearing. The mandate also may be stayed pading application to the Sup- Court for a writ of certiorari. v. FCC , the anut of appeals stayed the
issuance of the mandate until 7 days after the deaial of a timely-filed petition for rehearing, or
7 days after the end of the 45 day period, whichever happens soonet. Thus, the earliest possible
date that the mandate could issue is August 1,1994.
Fed. R App. P. 41(a) & @). In
4
transport through generally available virtual collocation sexvices no later than December 15, ,>$,+
1994. We will exempt from this requirement companies that choose instead to offer physical +
to fie tariffs implementing our new mandatory virtual collocation policy on September 1, 1994; ''
in other respects, the rules and regulations adopted here wiU become effective on December 15, do'
1994, December 15 is the earliest date by which we can ensure that the new tariffs will have
undergone adequate review by the Commission's staff. To prevent any lapse in the effectiveness
of our overall expanded interconnection policy, we intend to seek a stay of the issuance of the
mandatory virtual collocation rules can be effective. We also Mm our fresh look
decision to remand this issue. Pending further judicial action or possible legislation, we leave
in place for the present our mandatory physical collocation rules, but will replace those rules with new mandatory virtual collocation rules on December 15, 1994.
collocation subject to the standards we set forth below. Under this order, the LECs are required I" ,<+,-a
pr"
court of appeals' mandate until December 15, 1994, by which time tariffs implementing our new
requirements in connection with the mandatory virtual collocation regime, in light of the court's
4. In this order we consider the entire extensive record already assembled in this
proaxding,* including that compiltd in xesponse to the pending petitions for remusideration of
all of our earlier order^.^ We find that the existing mrd is fully sufficient to support our
decision here, and find no policy mason to supplement the record before moving forward, nor
any legal requirement to do so. After reviewing the court's order, we conclude that, for the
most part, our decisions in earlier orders in this proceding 011 standards, tariffing, rate
structure, pricing, and other aspects of the provision of expanded interconnection services should
apply with qual force under the new mandatory virtual collocation regime. In particular, we
grant increased pricing flexibility to local telephone companies that have implemented expanded
interconnection through either virtual or physical collocation. In certain respects, however, we
arc m-g our requirements to reflect the use of mandatory virtual collocation and to reflect
policy changes that we conclude arc in the public intens based on paitions for reconsideration
of our earlier orders. Because we envision, under the new collocation policy, that some local
telephone companies may voluntarily provide physical collocation as a regulated common carrier
service, we are also rwffinllm . g many of our rules relathg to the rates, terms, and conditions
of physical collocation offerbgs, and are addressing certain issues regarding physical collocation
raised in pending petitions for mnsideration of earlier orders in this pioceeding. We deny a
petition for declaratory ruling filed by Teleport regarding restrictions on pricing flexibility for
LECs that do not opt to offer physical collocation. We also reaffirm our density zone pricing
system and other pricing flexibility rules under the new policy, but modify those rules to '
' The positions of the perties in earlier phases in this proceding are summarized at length on Orde r, the First Recons ideration Ord er, the
Second Reco , and the Switched Tm rt U-ccnon Ord er.
in the Special Access ExDanded Interconnecti
nsidemon
While we do not duplicate those comment summaries in this order, we take that record into
account in reaching our dbcisions here.
5
condition such pricing flexibility on expanded interconnection being operational under the rules
we adopt in this order.
B. Background
5. In earlier orders in this proccdng, we required the Tier 1 local exchange
carriers (LECs)," other than participants in National Exchange Carrier Association (NECA)
pools, to permit third parties to interconnect their transmission facilities with those of the LECs. In most cases, we gave ~temnnectors the right to obtain these COMCCtions by physically
collocating their own terminating equipment in LEC central offices. We permi#ed all parties,
inciuding competitive access providers (CAPS), interexchange carxiers (IXCs), and users, to
obtain expanded interconnection. We muired the WS to set rates for expanded inter-
connection services based on direct costs plus reasonable overhead loadings. We also authorized
additional pricing flexibirity for LECs that are actually providing expanded interconnection.
6. We introduced our expanded ~tcrconndon policy h stages. We decided in
September 1992 to require the LECs to provide expanded interconnection with their interstate
special access services, primarily through physical collocation.11 In August 1993, we required
the LECs to provide expanded interconnection with the switched aetwork, again primarily
through physical collocation, to enable interconnectors to compete more fully for the provision of switched transport scNict.12 We also adopted reconsideration orders that modified ctrtaiu
aspects of the ~mMection 0rQr;r in December 1992 and August
1993.'' The LECs' special access expanded interconnection r;uiffs became effective in June
lo Tier 1 LECs are companies having annual menw from regulated telecommunications
operations of $100 million or mom for a sustained perid of time.
11 &@j@pd Intetr;onnectlon with Local Te- F -, CCDocket
NO. 91-141, Report ad O&r and Notie Of Proposed Rulemahn ' g, 7 FCC Rcd 7369 (1992)
"), m., 8 FCC Rcd 127 (1992), -4
rccog., 8 FCC Rcd 7341 (1993).
, NO. 92-1619 @.C. Cir., JUC 10, 1994); ("sasa Accesson w 7-m v. FCC
*~ with Local Tel@one C3-v F aciliti;s, CCDocket. 12 ElEpaprbA
No. 91-141, Transpo~t WaSeI, Second Report and Order and Third Notice of Pmposed
"1, , NO. 93-1743 @.C. Ch., filed NOV. 12,
Rulemaking, 8 FCC Rcd 7374 (1993) ("gon order
get. for review sub Belltic v. FCC
1993).
, CCDOckd
NO. 91-141, Memorandum opiniotl d order, 8 FCC Rcd 127 (1992) ("-s ideration
Order") (modifying the set of offices at which we required e- interconnection to be
No. 92-1619 @.E.: Ee%, ?;;?Second M~~rn~~~*&~~~
13 TelW -a ...
tariffed initially), v suhQmA V
6
1993. Their switched transport expanded interconnection tariffs became effective in Febnrary
1994. Both sets of tariffs are currently under investigation.'* As noted above, on June 10,
1994, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion stating
that it would vacate the Spec ial Access ExDanded Interconnection Order and the First Recon- sideration Order insofar as they require physical collocation for special access services, and
would remand other aspects of the orders to the Commission for further proceedings.1s
JI. PUBLIC mucy ANALYSIS
7. orders /Backmound . Expanded interconnection is a LEC offering that enables
parties, by intercounezting their circuits with those of the LEC at a LEC central office through
either physical collocation or virtual collocation, to compete on a facilities basis with certain LLEC access services. Physical collocation, as defined by the Commission in this proceeding,
is an offering that enables an interconnector to locate its own transmission equipment in a
segregated portion of a LEc central office. The interconnector pays a tariffed charge to the
LEC for the use of that mtral office space, and may enter the central office to install, maintain,
and repair the collocated equipment. I6 The specific details of virtual collocation could be defined
in a number of different ways, as described further below in paragraphs 43-46. For purposes
of this order, however, we define virtuaI collocation as an offering in which the LEC owns (or
may lease) and exercises exclusive physical control over the transmission equipment, located in
Reansideration, 8 FCC Rcd 7341 (1993) ("Second Reconsideration "1 (modifying
requirements regarding "fresh look," non-recurring charges, the extent of the tariffing
requirement for virtual collocation, and the rate stnrctures used for expanded hterco~e~ti~n).
&e infra 11 197-208 for a definition and discussion of our "fresh look" policy.
e, CC Docket No. 93-162,8 FCC Rcd 4589 (Com. Car.
Bur. 1993) (instituting investigation into special access expanded interconnection tariffs);
Exchange Carriers' Rates. Terms. and Co nditions fo r Expanded Interc~~t~~ 'on for Special
Access, CC Docket No. 93-162, Order Designating Issues for Investigation, 8 FCC Rcd 6909
(Com. Car. Bur. 1993); Phase I, First Report and Ordtr, 8 FCC Rcd 8344 (1993) (prescribing
interim maximum overhead loadrng factors); Supplemental Designation Order and Order to Show
Cause, DA 94-556 (Corn. Car. Bur., released hday 31. 1994); Local &&me CCam 'en' Rates,
Terms. and Cm 'ons for ExDanded Interconnection for S witched Trgaspo rt, Memorandum
Opinion and Order, 9 FCC Rcd 817 (Com. Car. Bur. 1994) (instituting investigation into
switched transport expanded interconnection miffs).
*' 47 C.F.R. 6 64.1401(f) (redesignated in this order as 0 64.140l(d)); mded
Intercom- 'on with Local T elwhone Co mmv - - Facilities, CC Docket No. 91-141, Notice of
Proposed Rulemaking and Notice of Inquiry, 6 FCC Rcd 3259, 3262, 119 (1991) HQs&d; Special Access uded Interconnection order, 7 FCC Rcd at 7390, f 39.
7
the central office, that terminates the interconnector's circuits. The LEC dedicates this equip-
mat to the exclusive- use of the interconnector, and provides hUtiou, maintenance, and
repair services on a non-discriminatory basis. Under our virtual collocation policy, the inter- connector has the right to designare its choice of central office equipment, and to monitor and
control the equipment ~~~~oteiy.~~ The LEC connects this equipment to the interCOMCCtOr'S
circuit outside the centra.l office, with an interconnection point between E.-owoed facilities and
interconnector-owned facilities as close as possible to the office.'* The standards governing
physical collocation and virtual collocation arrangements are discussed in detail below.
,
8. Earlier orders in this proceeding have required the Tier 1 LECs to provide
expand& ktemmdon for interstate special access and switched himsport. We found that
expanded interconnection would promote gnater competition in the special access and switched
transport markets, and thereby produce substantial public interest benefits. We concluded that
such competition, like competition in the markets for long distance and customer-premises
equipment (CPE), should encourage LECs and their competitors to operatc more efficiently,
deploy new technologies facilitating innovative service offerings, increase the choices available
to acctss customers, and reduce the prices of services subject to competition. We found that,
given the pricing flexibility we granted to the LECs and (in the case of switched transport) the
application of the transport interconnection charge to both LEcs' and interconnecton' customers,
expanded intemnnection would not have any significant adverse impact on universal service.
Tbus, based on the record, we ,concluded that the likely benefits of expanded interconnection
outweighed any potential disadvantage^.'^
9. -. In response to the court's decision, we first reaffirm our analysis
and the Switched
that expanded intcmaaection for special access and
and conclusion in the &&I Access mded hte-
switched transport is in the public int~ast.~ Our expanded intcFcoMectl 'on policy is designed
to facilitate competition for special access and switched transport services, essentially by making
it possible to buy only those LEc tansmission and distribution linlcs that a customer wants, and
rt mdcd
I' "Monitoring and control" is a tern of an that describes a party's abii to track circuit
functions, remnfigune circuits, ami otherwise supervise the operation of communicafions circuits
temimthg in such quipment. As discussed above, the LE exeFcises exclusive physical
control of the aquiPmetrt used in virtual collocation arrangements, and is solely rtsponsible for ' . .. installing, mamtldllllpg , and rqairiq the equipment.
** 47 C.F.R 5 64.1401Q) (redesignated as 8 64.1401(e)); Nm 'q, 6 FCC Rcd at
3262,120; A--, 7 FCC Rcd at 7392-94, 71 44-46.
7FCC Rcd at 7378-81, 71 13-18;
Switched SDecial Tj AcgSSEECPiaPded TkC Rcd at 7383-86, 17 13-20.
8
to combine those links with the services of a competitor. This policy enables the LECs'
competitors to offer transmission segments that can substitute for the previously bundled
segments offend by the LECs, and to COMeCt their own transmission segments with
transmission and distribution iinks that the LECs continue to provide. As our experience with
the long-distance and customer-premises equipment markets demonstrates, increased competition
among interstate special access and switched transport service providers should increase
customer options, reduce rates, and speed the introduction of new technologies, and thereby
stimulate economic growth. We reaffirm that these benefits of expanded interconnection
outweigh any disadvantages of the policy.
10. We next conclude that, although expanded h~~MectiOn through physical
collocation is the optimal means to realize these benefits, expanded interconnection through
virtual collocation also produces these benefits and is in the public interest. Both virtual
collocation and physical collocation enable electronic equipment dedicated to an interconnector's
use to terminate that interconnector's transmission links and to interc~nnect them with the LEG'
network equipment inside LEC central offices. Without dedicated network equipment located
in the central office, interconnectors would be required to buy LEC transmission links that are
not needed with collocation. This would make it much more costly to provide competitive
access, inhibit interco~ect~r~' ability to price competitively with Ws, and limit the extent of
competition for transmission services. Specifically, interconnectors would be required to buy
LEC transmission service between intercoMector equipment located outside the central office
and the central office itself, which is a key point of network aaffic aggregation. Dedicated
network equipment in the central office allows interco~e~tor~ to provide tbcir own transmission
facilities to gain access to the traffic aggregated at the central office, and fosters competition in
the provision of such tlansmission facilities.
11. Moreover, the technical parameters of the equipment cumntly used in
communications networks make it necessary in most situations to locate the circuit terminating
equipment dedicated to an ktcrwnne!ctor's use in the LEC central office. To interconnect two
communications chits u, that of the LEC and tbat of tbe Competitor), the electronic
equipment that terminates each of the circuits must be co~ectcd together, or "crOss-COnneCtcd.~
The technical standards for armtly available CIDSS-COMCC~ technology require that a cross-
connecting cable be no longer than 450 feet, including cable beads.21 In most LEC central office
buildings, all cable enters the building through underground conduits, runs into a cable vault.
climbs up risers and sometimes passes through distribution frames, into a secu~, propert) conditioned mom that is often located on the second or higher floor of the building. There arc
substantial practical obstacles to intemnnectors' obtaining space for their equipment in buildings
close enough to LEC central office buildings to meet the 450 foot consmint. Thus, the currcnt
limitation on the length of cross-connect cables imposes a critically important technid
constraint. In most cases, it is not feasible to install a CTOSS-COMCC~ cable between the electrow
-
... 21w-m with Local Telephone C- FacU , Comments of
Metropolitan Fiber Systems, Inc. at 48-49 & n.69 (Aug. 6, 1991).
9
equipment terminating LEC circuits and the equipment terminating a competitor's circuit:
without duplicative equipment, such as additional repeaters, unless all the equipment is located
in the Same building -- the LEC central office.
l2. Thus, for the reasons set forth above and in our earlier orders," we conclude
that collocation of circuit te rminatiag equipment within LJX central offices semes the public
interest and is necessary to satisfy our policy goals fully. In our der orders, we concluded
that physical colldon best ensures that our objectives are fulfilled.23 If physical collocation
is unavailable, however, we conclude that vhhd coI.location is the best alternauve to Sene our
public interest objectives. We reaffvm and inmrporate herein our reasoning and conclusion in
and the Switcw Tmmrt ExDanded In ter-
common Order that we have authority, pursuant to Sections 1, qi), 201, 202, 205, 214(d),
and 218 of the Communications Act, to mandate expanded interconnection and impose the
related requirements specified in this order.u
the Special -ded h&I'C€)MdOn &da
III. "EXCONNECTION ARCHITECTURE
A. Physical and Vi1 ColIocation
W. -. Our previous orders in this procetding required the
LECS to provide expanded intcm 'on through physical coilocatiou in all central offices for
which inte~noectors make a bapa fi& We allowed LECs to appiy for cxcmptions
from this requirement and provide virtual collocation instead of physical Oollocation in central
offices in which space for physical collocation is unavailable, and in states that had adopted
specified virtual collocation policies.26 We found that the provision of ccotral office space used
, 7FCC Rcd at 7378-81, y(1 13-18; 22 A- -0"
&i&,bedTmrt-onm , 8 FCC Rcd at 7383-86, (11 13-20.
P lal A-cction Or&. 7 FCC Rcd at 7389-90, 7 39.
47 U.S.C. 86 151, 154(i), 201, 202, 205. 214(d), and 218. mAccws
m, 8 FCC Rcd at 7445, 7 144. As discussed below, we are
order, 7FCC Rcd u 7472-75, (17219-26; Switched Tw~
imposing mdatory virtual collocation requirements in this order.
For Summaries of the parties' comments on this point, see &&l Access
7 FCC Rcd at 7382-89, ff 20.38;
sonnectron 8 FkC Rcd at 7390-91, 11 27-28.
26 7 FCC Rcd at 7389-94,1(1 39-46; r-
, 8 FCC Rcd at 7391-96, (11 29-35. We also permittad LECs to negotiate
10
for physical collocaUon is incidental to communications, thus rendering it a communications
service under Section 3(a) of the Communications Act,n and that provision of such space is a
common caniet service. We therefore concluded that we have authority to impose Title II
regulation, including tariFfing requirements, on the provision of such space.'' We justified our
mandatory physical collocation rules as an exercise of our authority under Section 201(a) of the
Act to "establish physical connections with other carriers."29 We also concluded that the
physical collocation requirement is not a "taking" under the Fifth Amendment of the
Constitution, and that even if it were, such a taking would constitute a lawful exercise of our
statutory a~thority.~' Our conclusions with respect to our statutory authority to mandate physical
collocation, however, were rejected by the court in Bell Ahti c v. FCC.
nsideration. In petitions for nconsideration
rand other orders in this pmceeding, the
14. Pos itions of the &rh 'es on Reco
of the -Ac_ctssc&d Int emnnemon Orde
LEcs reiterate their arguments against mandatory pbysical collocation and the CAPs and other
parties reiterate their arguments in favor of it.31 Some CAPS, however, believe that expanded
interconnection through properly structured virtual colldoa is an effective alternative to
promote increased lod access ~o~~~petition.~~ The noadominant IXCs u, IXCs other than
interstate virtual collocation arrangements with interconnectors at specific central offices and
required them to offer the sank arrangements to other customers at those offices.
htCrCOMdOn , 7FCC Rcd at 7390-94, ff40-46; Second , 8 FCC Rcd at 7365-67, 17 56-59; Switched Treasport Ex- Inter-
Access banded
Reconsideration Order
connecb 'on Order , 8 FCC Rcd at 7391-96, 17 29-35.
47U.S.C. 6 153(a).
s mded htercOMdOn , 7 FCC Rcd at 744447, If 161-63.
3o u., 7 FCC Rcd at 7476-83,11 230-40. &bQ 'c v. FCC , slip~p. at9-10.
31 a, u, USTA Special PetitiOp at 2-8; Catel Special p#ition at 2-3, 5-8; United
Special Pebition at 24; GTE Special Mtka at 9-12; Rochester Special Petition at 11-14; USTA
Special Reply at 8; USTA Switched Petition at 2-3; MFS Special Opposition at 7-9, 13-15;
ALTS Special Opposition at 13-15; ALTS Switched Opposition at 1-3; MCI Special Opposition
at 17-20; Ad Hoc Special Opposition at 3-5, 8-10; API Special Opposition at 4. &g &g 7 42
*
and a submissions cited therein. ... 32 av Fm , Comments of
Teleport Communications Group at 20-37 (Aug. 6, 1991). alsp "FCC Studies Options in
Wake of Interconnection Ruling; LEC Willingness to offer Physical Collocation Erodes,"
umq@ons Rspnds (June 20, 1994) at 19,20 (quoting Andrew Lipman, Senior Vice-
prcsident--Legal and Regulatory Affairs, MFS).
..
11
AT&T) argue that under the mandatory physical collocation =*e, LECs should also be
required to offer virtual collocation on a generally taxiffed basis at every point at which they
offer physical collocation, pointing out some of the potential advantages of virtual collocation.
They contend that many interconnectors may prefer virtual collocation, LECs may be able to
provide central office equipment and services more efficiently than intercomectors, virtual
collocation would conserve central office space and enable more interconnectors to enter, and
widespread virtual collocation would enable more IXCs to obtain services comparable in total
cost to those obtained by ATJcT.’~
15. Amentech and USTA argue that LECs should be allowed to choose whether
to offer physical or virtual collocation. They assert that virtual collocation entails substantial,
burdensome implementation problems and costs (such as providing rapid installation intervals
demanded by interc~~e~t~rs and training technicians to repair and maintain different types of
interconnector equipment). They assert that, if LECs are alnady required to provide physical
collocation, it would be unreasonably burdensome for the UCs to be required to incur the
unique implementation problems and costs associated with virtual colldon (Ee, training
technicians to maintain and repair intemnnector equipment at short intervals) even in offices
where there is no dcmaad.”
16. ussion. JtmandBpd Ne w -om virtual Collocatian Poll ‘cy. The
il Atlantic v. FCC decision .presents practical difficulties for intercO~~~t~r~ and their
cu~t~mers even before the issuance of the court’s mandate. For example, intemnnectors (or
their customers) may be reluctant to activate new circuits to their physical collocation nodes in
LEC central offices before the issuance of the mandate since some LEcs may discontinue their
physical collocation offering if and when the mandate At the same time, many LEcs
have not tariffed a generally available virtual collocation offering as an alternative for inter-
COMeCtOrS.
17. Accordingly, in light of the D.C. Circuit’s v. FCC decision and
in anticipation of remand, we.= adopting a new expanded intcrconnccfion policy that will
facilitate the continued, unintermpted provision of expanded interconnection and will reduce the
practical problems that could arise in the wake of the court’s decision. As we explain in greater
detail below, we believe that this new expan&d interconnection policy is fully consistent with
the court’s view of our authority. Accordingly, we will require, as of September 1, 1994, that
Tier 1 LECs (otlm than NECA pool members) file generally available tariffs offering expandbd .
33 WdTel spscial Petitiaa at 4-7; WilTel Special Reply at 6; CompTel Special Opposition
at 4-6; MQ Spacial Reply at 9-10.
Ameritech Special opposition at 4-5; USTA Special Opposition at 14-15; alsp USTA
Special Petition at 2 & n.3 (noting that interconnection without any c0Uocation is possible).
” alsn MFS & && (July& 1994), Appendices B & C (alleging obstacles to continued functioning of physical collocation imposed by some LECs since the court’s decision 1
12
3
arrangements are discussed in detail below. LECs will be exempted from this requirement in $,$ interconnection through vimal collocation. The standards that will govern virtual collocation [
central offices where they opt to provide physical collocation subject to the standard described I ,$
in detail below.
t3
18. Authon 'Q. We find primary authority for the modified expanded
interconnection requirements adopted in this order in Section 201(a) of the Communications Act
of 1934, as amended.36 That provision authorizes the Commission, where necessary or desirable
in the public interest, to order common Carriers to establish physical connections with other
carriers, whether or not the common carriers might choose to do so voluntarily." As applicable
here, the LECs are "common carriers," the expanded interconnection arrangements required
under the terms of this order are forms of "physical co~ectioos," and most interconnectors --
including CAPS and IXCs - are "den" within the meaning of Section 201(a). Moreover,
as set out in detail above," we have concluded that the provision of the expanded interconnection
services requind in this order will produce substantial public interest benefits by removing
UM~CXSS~~~ barriers to ind competition. Such public interest benefits have lawfully
formed the basis for past mandatory interconnection and we hd that such benefits
jusnfy the interconnection requirements adopted here with respect to herconnectors that are
caRiefS.
L9. We find, in additioa, that tbe separate language in Section 201(a) requiring
telephooe companies to "furnish communicatioos scMce upon reasonable quest" gives the
Commission authority to order the LECs to provide expanded interconnection services to non-
carrier inter~o~ect~rs. In this regard, it has been established Commission policy - informed
by the statutory nquirements that rates and terms for communications service be just and
reasonable and not unreasonably discriminat0 ry"' - to prohibit differences in service rates and
terns that are predicated upon the type of customer involved." We see no reason to dcpart
37 sne,a,LincolnTel.Te V. 659 F.2d 1092, 1103-06 @.C. Cir. 1981);
Bell Telep hone Co. of Pa. v. FCC :'$ F.&%50, 1268-73 (3rd Cir. 1974), cert. de nied, 422 U.S. 1026 (1975).
39 & n. 37.
ctu , CC Docket NO. 78-72, 97 FCC 2d 682, 'm 97 FCC 2d 923,932- " %,e., V .. %:E,d3 I%?$g:;t3z1 i6 (1988), aftp, mblic 722 (1983); Private Line Rate stru
32 (1984). & j&g Atlant~c Izlchfi
0lM-l 'n of Texas v. FCC , 886 F.2d 1325 @.C. Cir. 1989) (noting long-established
13
from that general policy, particularly where, as here, we frnd affirmatve public intenst benefits
in the broad availability of expanded interconnection services.42
20. We also conclude that Sections 1, 4(i) and 214(d) of the Communications
Ad3 buttress further our legal authority to order the expanded interconnection services set out
in this order, including the requirement that LECs provide, for a just and reasonable charge,
dedicated circuit terminating equipment designated by the interconnector. Section 1 of the Act
states that the purpose of the Commission is to regulate "interstate and fonign commerce in
communications by wire and radio so as to make available, so far as possible, to all the people
of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio
communication service. " Section 4(i), the FCC's "necessary and proper clause,"" grants us
broad power to take actions necessary to mat our statutory mandate. Finally, Section 214(d)
authorizes the Commission "to require by order any Carrier ... to provide itself with adequate
facilities for the expeditious and efficient performance of its service as a common carrier. " We
find that, to the extent that there is any doubt whetber Sdon 201(a) alone fully authorizes all
aspects of our expanded interconnection order, these sections of the Act provide that
supplemental authority.
21. The foregoing discussion largely coincides with the analysis of legal authority
recognize that the D.C. Circuit, icr v. FCC , vacated the mandatory physical
colIocation rules adopted in that ordcr.ckxe arc Memcxs between those mles and
our new regime of mandatory virtual collocation (with an exemptioa for LECs choosing to offer
physical collocation) that axe fundamtntai to the court's analysis in that casc.
that the Commission undertook in the Wial Access Exg&d IntercopgpCtion m. 4' we '
22. ~~'s~~gin~ was that Section 201(a) did not
"grant third parties a license to exclusive g&y&,al of a section of the LECs' central
office^."^ While noting that our power to "order 'physical connections' [was] undoubtedly
FCC policy that carriers and nonders alike have a federal right to interconnect to the public
telephone network in ways that are privately beneficial if they are not publicly detrimental). Accord Ejush -- A m2rE CQPZ v* u- , 238 F.2d 266 @.C. Cir. 1956).
43 47 U.S.C. 56 151, 154(i), & 214(d).
44 Tel. & Tel. Co. v. FCC , 826 F.2d 1101, 1108 (D.C. Cir. 1983, M, 109 S. Ct. 1942 (1989);
1292 (7th Cir. 1985).
Am-. Ass 'n v. FCC , 772 F.2d 1282,
Sg: 7 FCC Rcd a 7472-75, 71 219-226.
46 v. FCC , slip ope at 9 (emphasis added).
14
broad of smpe,"*' the court refused to grant our interpretation the deference normally accorded
agencies under Chevron U.S.A . Inc. v. NRDC ,4g because it believed that such a physical occupation "would Seem necessarily to 'take' property" under the Fifth Amendment standard
established by the Supreme Court in boretto v. Teleurompter Manha ttan CATV Ca .*' While we do not share the D.C. Circuit's apparent view that mandatory physical collocation
requirements would constitute a "taking" of property, or its view that Chevron deference was
unwarmnted, factual differences between the mandatory physical collocation regime at issue in
Bell Atlan tic and the modified requirements we are adopting here completely distinguish this
order from the facts of Low.
23. la bntto, the Supreme Court found that a New York statute that required
landlords to pennit cable television companies to install facilities on their buildings effected a
Fifth Amendment taking of the landlords' property for which just compensation was due. The
Court noted that a takings analysis usually involves essentially ad hoc, factual inquiries regarding
factors such as the de- of interference with investment-backed expectations, the economic
impact of the regulation, and the character of the governmental action.% However, it distilled
from earlier takings jurisprudence a patters that when the character of the regulation reaches the
form of a "permanent physical occupation, " that factor alone becomes determinative and a taking
has occurred.51 While cautioning that its holding was a very narrow the Court explained
that a permanent physical occupation of property "effectively Qestroys" the bundle of rights
usually associated with property. ownership - including the right to exclude others.s3
24. We continue to believe that the mandatory physical collocation requirements
we previously adopted should not properly be seen to create a takings issue under bra&, both
because, under the technological and competitive circumstances that we prwiously advanced to
support such a regime, telephone companies have no reasonable historically mtcd expectation
of bekg able to exclude interco~ectors, and because the telephone companies were permitted
" Id.
467 U.S. 837 (1984).
49 458 U.S. 419, 426 (1982). V
a, 458 U.S. at 426 (citing $hn Central T- Co . v. New Yo* C ity, 438 U.S.
, slip op. at 6,9 (emphasis added).
104, 124, &g dcn~ 439 U.S. 883 (1978)).
51 my 458 US. at 426; &Q A. at 426-35.
'* u., 458 U.S. at 441.
53 u., 458 U.S. at 435.
15
to recover just and reasonable rates for the mandated service.” In any event, however, the
“permanent physical 6ccupation” analysis that is central to UEUQ has no bearing on the
modified ewded interconnection rules that we are adopting here, which require only virtual
collocation (with an exemption for carriers voluntarily choosing to offer physical collocation
subject to full regulation as a communications common carrier service).
25. The mandatory virtual collocation policy we adopt here in no way constitutes
a taking of property. Under virtual collocation, unlike physical cokation, ~~~CICOMCC~O~S
have no right to enter LEC-owned premises or to install their own equipment at such locations.
Instead, the LEcs purchase or least equipment designated by the interconnector, and install, maintain, and repair this equipment themselves (or through their designees)" in their centd
offices. While the interconnectordesignated equipment is dedicated to the use of a particular
interconnector, such dedication is not unusuaI in the telec~mmunicatiOns induw, particularly
where, as hen, the interconnector does not exert physical control over such equipment. (The
monitoring and control functions that the LECs must permit interconneaorS to perform are
conducted from remote locationS and involve only the intercoMcCtor’s ability to track,
reconfi@n, and otherwise supervise the apefation of the communications circuits terminating
in the designated equipment.) For example, telephone comjmks generally dedicate equipment
to the use of particular customers in providing private line sewice. Even local exchange service
involves the use of certain pieces of equipment that are dedicated to the exclusive use of a
particuiar customer, such as the line cards used in LEC switches and wire “drops” extending
from the E’s distribution cable to the customer’s resideace. The expanded inte~~~~action
nquirement that LECS dedicate circuit terminating equipment to particular customers may - as
with such other “dedicated” ScNices - affect the to which the telephone company can apply
its property, but it in no way consritutes a physical of the LECs’ propmy within the
contempiation of -.”
00 Ma, 7 FCC Rcd at 7478,7479-83, 17 233,
236, 237, & 240.
infra 11 58-60 (if LECs use outside contractors to inscall and maintain their other
equipment, they must do so for the equipment dedicated to the use of intcrco~ectors as well; LECs arc m, however, quirexi to permit interconnector personnel to enter central offices).
landlord-tenant co~ltcxt, that could be imposed without mating a
56 Indeed, the court in a gave similar examples of use requirements, in tbe
taking:
[O]ur holdiug in no way alters the analysis governing the State’s power to
require landlords to comply with building codes and provide utility ,andtheLiLeinthe connections, mailboxes, smoke detectors, frre cxtquhm
common area of a building. ... M, if [the pertinent statute had] required
landlords to provide cable installation if a tenant so desires, the statute might
present a different question from the question before us, since the landlord
would own the installatioa.
..
16
L
26. We also note that the physical collocation standards we are adopting for
telephone companies hat voluntarily choose to implement expanded interconnection through
physical collocation (thereby gaining an exemption from the virtual collocation requirements) do
not implicate bretto. Lo~c~~Q's er s rule, where applicable at all, applies only to physical
"invasions."5' Here, the choice to incur physical collocation obligations is voluntary and allows
the carrier to avoid the virtual collocation requirements that the Commission otherwise would
lawfully impose. This flexibility was not available to LECs under the expanded interconnection
regime reviewed by the MU Atlantl 'c court. Thus, the availability of the exemption for carriers
choosing physical collocation makes the regulatory regime we are adopting less burdensome,
rather than more so. We find, moreover, that the requirements we are imposing for carriers
making that choice arc necessary to the pro-cornpetitive purposes of our expanded
interconnection policy.
27. Finally, we find - and the court in Ikll Atlank did not suggest otherwise --
that the modified rules we are adopting easily survive the morc factually sensitive standards
appliable in "regulatory mkings" analysis. Indeed, we read the court's decision as encouraging
the Commission to "consider whether and to what extent virtual co-location should be imposed"
in the absence of physical c~llocation.~ In determining what constitutes a regulatory taking, the
courts focus on three main factors: (1) the character of the government action; (2) the
regulation's interference with investment-backed expectations; and (3) its economic impact.s
28. With respect to the first factor, the Supreme Court has stressed that "[a]
'taking' may more readily be found when the interference with property can be characterized
as a physical invasion by government, ... than when the interference arises from some public
prog-ram adjusting the benefits and burdens of economic life to promote the common good."6o
As already discussed, the regulations at issue here do not constitute a physical invasion of the
LECs' property. Rather, they adjust somewhat the "benefits and burdeas of economic life to
458 U.S. at 440 & n.19.
n& --coastal C& ' , 112 S. Ct. 2886, 2893 (19921; irlsp Ye v. Cltv of Esgg&& - , 112 S. Ct. 1522, 1530 (1992) ("Because they voluntarily open their . propcrty to Occupation by others, petitioners cannu assen a right to compensation based
on their inability to exclude particular individuals.'): FCC v. Flonda Po wer Corn,, 480 U.S.
245, 251-53 (1987) (the element of "required acquiescence is at the heart of the concept of
occupation" under-.
sa ~uw v. FCC , slip op. at 11.
J9 Rnn Central TI;lasD. Co,, 438 U.S. at 123-24. See alsq bcas v. south car0 ha
Cod Council, 112 S. Ct. at 2893.
Ce-. Co,, 438 U.S. at 124.
17
promote the common good."6' In particular, our expanded interconnection requirements are
designed to and, we .believe, will increase competition, lower prices, lead to varied new
services, and help improve the productivity of our economy as a whole,62 While the new rules
impose some increased regulatory burdens on the LECs, they also provide those Carriers with
offsetting pricing flexibility with which to compete in the more competitive environment."
,
29. Our action, momver, in no way interferes with the LECs' reasonable
investment-backed expectations concerning the use of their property. As a general matter,
private property used for common der pu~poses has always been imbued with a public
character.& Given their position as common carriers controlling bottleneck facilities, the LECs must expect that they will be subject to non-streamiined regulation as dominant carriers. Indeed,
as already noted, this Commission frequently has ordered common carriers to provide access to
bottleneck facilities in order to increase competition and facilitate the development of new
services.u The Commission bas also taken steps to require telepbo~~ companies to provide new
service features and technologies that we have found would promote cometion and improve
the functioning of the public telephone network.66 The LECs here are exchanging compliance
with lawful Commission regulation for the privilege, with attendaat licenses and franchises, of
providing telephone service to the public as interstate dominant common carriers. The Supreme
Court has employed similar analysis in finding that no taking has occuficd in other heavily-
regulated indust~ies.~'
UM V. -, 94 U.S. 113, 126 (1876). 64M
65 *, EOL, Lli€wh m. & T& co. v- FCC, 659 F.2d 1092; ' tin , 439 U.S. 980 (1978); Br;u Tel. Co. of , 86FCC 2d 469
m. v. FCC: ,580 F.2d590 @.C. Cir.), m. derunp
nnv uv. FCC , 503 F.2d 1250; Cellular C-ns Sm
(198l), ~ecop., 89 FCC 2d 58 (1982).
..
n&, CC Docket No. 86-10,6 FCC Rcd ..
66 SPri,&&,POIrlSfOllOfA=aL€W00Se 5421, 5425-27, 11 19-29 (1991),
fl al- v. FCC , D.C. Circuit No. 91-1507 (and consolidated cases) (rquirbg LECs to meet enhand 800 database service performance standards).
for re view Den- sub no= GTE Service Cow
67 SCG, SA&, Ruclrelsbaus v. Momto Co., 467 U.S. 986, 1007-08 (1984) (regulation
requiring disclosure by chemical companies of confidential research and development data in
exchange for the right to register and market pesticides in this country held not a taking).
18
30. Finally, we find under the last prong of the "regulatory takings" analysis, that
virtual collocation does not result in a total, or even a substantial, economic deprivation of the
LECs' economic property interests.6' The LECs will continue to be able to use their property,
including the equipment dedicated to interconnectors, in the provision of common carrier
services for which they are entitled to charge just and reasonable rates. The new, more competitive environment that expanded interconnection will foster wiil undoubtedly present the
LECs with increased competitive challenges, but the LECs have no property right to continuation
of a monopoly or quasi-monopoly environment for the provision of interstate access service.
Our decision specifreally permits LECs to recover from hterconnectors the cost of providing
expanded interco~ection. We are also granting the Tier 1 LECs continued pricing flexibility
in conjunction with expanded intercomdon. We do not expect that our virtual collocation
requirements will impose undue burdens on the LECs, and have structured our requirements to
avoid unnecessary difficulties.69 To the extent that virtual collocation requirements may be
shown, in specfie central offices in which space is extremely limited, to be prohibitively
burdensome, the waiver process is available as a safety valve." "9
3' fl 31. phrsical Coll-on Exe- '0 . A LEC will be exempted from our?" 2q
mandatory virnral collocafion requbent at any specific central office or offices for which the hY
LEC opts to offer under tariff expanded interconnection through physical collocation, subject to
full regulation by the Commission as a communications common carrier service, including the
standards we adopt below for such offerings. We believe that both LECs and intcrco~ecton
can benefit from the flexibility provided by such an exemption. We conclude that physical
collocation provides an adequate substitute for virtual collodon only if it is offered on a
tariffed basis, with generally available ratts, terms and mditiom, in order to protect inter-
connectors from potential anti-compaitive LEC behavior. Therefore, a LE'S physical
collocation offering will exempt it from the general requirement to offer virtual collocation under
tariff & if the LEC explicitly consents to offer physical collocatiOn as a communications
common der offering under non-screamlined Title 11 regulation.
32. A LEC will qualify for an exemption from the mandatory virtual collocation
requirement only if it volundy provides physical collocation subject to all the rules relating
to physical collocation that il~lt set forth in this order. As part of that regulation, a LEC that has
chosen to provide physical collocation at particuiar central offices will not be permitted to 2.~JpA'p
withdraw its physical collocation offering for customers' existing physical collocation nodes at /
those offices, for either current or new circuits, without Commission certification pursuant to w 2 Section 214 of the Communications Act that such a discontinuation of service will not adverxl) .~d-~'
61 a w, 112 S. Ct. at 2893-95, 2899-2902.
* &g, u, 11 44, 53, 58, 95, 98, & 208 inftp.
'' 165 infta.
19
affect the present or future public convenience and necessity.” The exemption from the virtual
collocation requiremerit will apply as long as the LEC offers physical collocation. Ifa LEC has
offered physical collocation pursuant to this exemption, and subsequently withdraws its physical
collocation offering for new customers at a given location, it will no longer qualify for the
exemption, and will be required to offer virtual collocation on a generally available, Wed
basis at that location. Similarly, if a LEC has offered virtual collocation on a genemy
available, tariffed basis, and later wants to withdraw tbat offering in a particular central office
because it qualifies for the physical collocation exemption in that office, it may withdraw the
offering for new interc~nnectors. In such a case, however, the LEC must continue to make
virtual collocation available for exisring and new circuits of ~tcm~ectors that are already
using virtual collocation in that ofice, uniess it obtains Cornmission certification that such a
discontinuation of service will not adversely affect the present or future public convenience and
necessity.
33. We find that we have authority to hpose these common Caniage standards
on the LECs’ voluntary physical collocation offerhgs. As previously explained in our SDeCid
piccess mdcd Interndon w,n all elemcats of physical collocation are
“communications services,” including the provision of ental office space, which falls within
the statutory definition because it is “incidental” to communication^.^ Moreover, absent the
common carriage standards we am imposing on the provision of physical collocation, LECs
could undermihe the pmcompetitive objectives of our expanded interrxnrnection policies, either
by charging unreasonably high rates to intcmon, or by giving special discounts to favored
customers. In these circumstances, where we are allowing physical collocation as a substitute
for the manwry virtual collocation quiremeats that we otherwise would lawfully impose, our
Title I powers7’ allow us to impose common Carriage conditions on tbat choice.7s Moreover,
because the LECs a~t voluntarily choosing to employ physical collocatioa, we find that that
choice coastitutes a voluntary holding out so as to coder common CaRiage status under Title II of the Act.76
7 FCC Rcd at 7443-47,fq 16043.
& 47 U.S.C. 0 153(a). ’‘ 47 U.S.C. 58 151, 152, & 154.
v. FCC , 19 F.3d 1475, 1483 @.C. Cir. 1994);
In Tel. & Tel. Co. v. FCC, 659 F.2d at 1107-09; 4usIndustry 7s w, EOL, - TeL CO- ..
Ass’n v. FCC, 693 F.2d 198, 212-14 @.C. CK. 1982),
@.C. Cir.), cert. de
, 461 U.S. 938 (1983).
525 F.2d 630, 641 v. FCC,
tory w, 425 U.S. 992 (1976) @ARUC I); Natiofial Ass’n of Repula . , 533 F.2d 601, 608 @.C. Cir. 1976) (NARUC (common
.. ..
76 sa National’n of RcmdaQP U-lonefS
20
L
34. In Southwestern Bell Telephone Co. v. FCC,n the D.C. Circuit remanded
an order of the Commission requiring LECs to continue offering under general tariff “dark
fiber“ services that the Canien had voluntarily initiated under individual case basis (ICB) tariffs.
The Commission in that case, however, had never made an affvmative finding that the dark
fiber services that the CaRiers had initiated on a limited, individually negotiated basis, needed
to be offered on a common carriage basis in order to advance the public interest objectives of
the Communications Act. Rather, the Commission had simply found that because the carriers
had documented their limited offerings by fig ICB tariffs, those filings alone conferred
common caniage status upon the offerings under the voluntary “holding out“ test established in
NARUC I and pARUC fI.7a The court in S held that the mere fact of such
filings, standing alone, was insufficient to impose general common Caniage obligations on the
LECs. By contrast, in this ptoceeding, we have explicitly determined, pursuant to Section
201(a) and other provisions of the Communications Act, that the expanded interconnection
services we are requiring are necessary or desirable in the public interest, and that any carrier
choosing the physical collocation option must provide such serviCe as a common carrier.” This
affvmative finding on the basis of an extensive record fully distinguishes this case! from
Southwestern Bell.
35. &ma ~~ ’ . Although we are moving forward now with the mandatory virtual collocation regime defined herein in response to the court’s order,
we remain open to alternative .interconnection anangements that telephone companies may
propose in waiver petitions, if those proposals satisfy the public interest objectives achieved by
our virtual collocation requirements. Moreover, LECs arc free to tarif€ altexnative virtual
collocation, physical collocation, or other arrangements that intcm~cctors may want to take
in addition to the baseline arrangements ming the LEcs’ basic obligations under the rules
adopted herein. Such alternatives may be negotiated between the parties, although such
negotiated arrangements must be filed as tariffs to enable other iaterconnectors desiring the Same
anangemeat in the same central office to obtain them. While LECs are not required to offer
such negotiated arrangements, we envision that LECs and intercoMectors will be able to
cooperate in developing pgltiariar arrangements that meet their mutual needs.
36. y . The LECs subject to expanded interconnection requirements
shall file tariffs offering virtual collocation as ddineed henin 011 September 1, 1994, to be
effective on December 15,1994. Given our previous experience with expanded interconnection
tariffs, and the likely complexity and need for detailed feview of these new tariffs, December
15 is the earfitst date by which we can ensure that the tariffs will have undergone adequate
carrier status can arise either from a voluntary holding out or from legal compulsion).
sl 19 F.3d 1475 @.C. Cir. 1994).
” WUC I, 525 F.2d at 641; WUC p, 533 F.2d at 608-09.
79 a 17 31-32.
21
review by the Commission's M. LECs must amend their initial tariff filings by October 3,
1994 if they are required to tariff rates for services using additional interconnector-specified
circuit te nninating equipment? Petitions to reject or suspend and investigate any of these taxiffs
should be filed by October 14, 1994; replies will be due on October 31, 1994. LEcs that wish
to be exempted from the virnral collocation requirement must, on September 1, 1994, file any
necessary tariff revisions to implement physical collocation in accordance with the rules set forth
in this order, or not@ the Chief, Tariff Division, Common Canier Bur&, in writing that no
such revisions are necessary and explain the basis for that conclusion. Uniike the procedure for
obtaining exemptions from the cumnt physical collocation requirement, we are not requiring
LECs to obtain our advance approval before making use of the physical collocation exemption from the virtual collocation requirement. LECs will, however, be held to the rules set forth
herein concerning physical collocation offerings made in lieu of the mandatory virtual collocation
nquircment.
37. We also emphasize that the mandatory physical collocation requirement
adopted in our earlier orders, which the Bell Atlantic v. FCC court has Soited it would vacate
with respect to special access expanded inter~~~~ti~n, remains in effect until the court issues
the mandate in that case, and the LECs may not propose to withdraw, suspend, or otherwise
abrogate their cumnt special access physical collocation offerings until then. Assuming the
mandate does not issue before December 15, 1994, our rules requixing that LECs offer both
special access and switched transport expanded interconnection through physical collocation will
remain in effect until December 15, 1994.
B. Locations Were Expanded Interconnndoa Must Be Made Available
38. -. Intbe~Access~~ '011 Ordet.
we required LECs to make expanded intemnnection for special access available in all end
offices, serving wire centers, and remote llodes used as rating points for special access.$' In the
First Recon- ordtf , we modikd this requirement, and decided that LECs must tariff
expanded intemnnection for special access initially only in a subset of offices that took account
of interconnectors' needs, as reflected in lists they submitted to the LECs. LECs were required
to provide ~~C~COMCC~~OII in additional offices upon bpna request.'2 In the Switctxqj
Or&, we adopted the same approach as the Eint
on Or&, and exteaded the requirements for switched transport expanded inter- request basis, to tandem offices and remote nodes or switches that
R
connection, on a - *
(o &gmqs1.
81 on w, 7 FCC Rcd at 7417-18, If 103-1W
, 8 FCC Rcd at 128-29, f( 7-18.
22
-*- e
sene as rating points.for switched transport and that have the necessary space and technical
capabilities.*
39. Discussion. For purposes of implementing our mandatory virtual collocation
regime, we require, as we did in the First Reconsideration Order, that LECs provide expanded
interconnection in a subset of their central ofices in their initial tariffs. In this instance, LECs
should initially tariff expanded htercoMeCti0n in all ofices in which it is currently tariffed.
Under either virtual collocation or physical collocation, this approach reduces the burdens on
the LECs, while making expanded interconnection available in all central offices in which inter-
connectors have a distic interest in the near future. Under the mandatory virtual collocation
rules, if a LEC receives a & f& request to make expanded interconnection available in
additional central offices, the LEC must fie tariff revisions offering virtUai collocation (or, if
it qualifies for an exemption, physical collocation) in such offices within 45 days of receipt of
such a request. Such tariff revisions shall be effective on 45 days notice or less. We also
reaffirm that, under the policies adopted in this order, ECs must provide: (1) both special
access and switched transport expanded interconnection at Wntd ofices that are classified as
end offices and service wire centers, (2) special access expanded interconnection at remote nodes
that are rating points for special and (3) switched transport expanded interconnection
on a fj& request at "stand-alone tandemsau and at remote nodes that serve as rating points
for switched transport and have the necessary space and technical capabilities to originate and
terminate switched traffic.'b .
IV. STAlbARDS
40. Overview. In this section, we address the detailed standards that wiU govern
mandatory virtual collocation. We also address the standids that will apply to physical
collocation when it is offered to obtain an exemption from the virtual collocation requirement.
Except for the policy changes described below, we CollCIudt on the basis of the record
previously compiled that the virtual collocation standards adopted in cariier orders in this
pmcccding shouid contioue to apply under the new mandatory virtual collocation requirement.
We also find that the standards we adopted as part of our mandatory physical collocation
Sw&&d Tm F~manded Interconnection Orde r, 8 FCC Rcd at 7407-09, 71 53-57.
A "rating point" is a point used in calculating the length of interoffice links. Special
Access --on O&, 7 FCC Rcd at 7417, 1 103.
A "stand-alone tandem" is defined as a LEC tandem office that is not collocated with a Switched Tranmrt Interconnection Ode r, LEC end ofice or serving wirt center.
8 FCC Rcd at 7409, q 56.
tb hl Access -bed htCKOMdOn ord 7 FCC Rcd at 7417-18, 11 103-04;
Switched Trans~ort Expan ded Int etcoIlIltcbon Order,
23
requirement remain appropriate in the context of physical collocation provided voluntarily under
the new rules."
A. Standards Governing Virtual Collocation
1. In General
41. In the *ial Access Expanded Intercorlgm 'on Orda , we rejected some LECs' contentions that the Commission should establish general interconnection goals or
principles in lieu of detailed rules. Instead, we concluded that the adoption of detailed standards
would speed the implementation of expanded intemMection by clarifying the rights and
obligations of L,ECs and interconneaors, thereby nducing the disputes that could arise during
the implementation process."
' . In rccfllt a filings, CAPS have argued that
virtual collocation should be defmed to impose more Stringent obligations on the LECs. For
instance, some CAPS urge that the Commission requin virtual collocation anangcments to be
"technically and economically comparable to actual collocation."m Other CAPS argue that any
expanded interconnection arrangement should be "technically and economically comparable" to
the LEC's own internal intemMcctioas.90 Bell Atlantic, by comast, argues that tbe Commission's existing virral collocation standards are fully adequate.9' Amentech asserts that
the Commission should not mandate any specific intcmnnectioa anangemcnt, but should just
set general standads with the choice among alternatives left strictly to the LECs.* US West
argues that it should be required to offer only a standardized list of central office equipment
under virtual collocation, rather than permitting interconnectors fnedom to designate any
equipment they choose.pJ
.. 42. pOsiQons of the
~
nw 7 FCC Mat 7391-94,7409-18, 43- jF8%% Rcd at 7391-96, 17 29-35; Switched Order, 8'FCC Rcd at 7392-96, 7407-16, 71 30-35, 53-69.
46, 84-104; &p
rt Eqgg&d
on w, 7 FCC Rcd at 7405-06, 11 69-72. U
a9 Teleport Ex htlg (July 1 , 1994) at 1-3; U S Signal COT. part& (July 7, 1994) at 1 -3 ; '
(July 7, 1994) at 2. (July 6, 1%) at 2-3; Ektric Lightwave, Inc. E,&
MFS Ea (July 5,1994) at 3; lntermedia Communications of Florida, Inc. &Parte
(July 6, 1994) at 2.
91 Bell Atlantic (July 7, 1994) at 2.
* Amentech (July 7, 1994) at 1.
24
-_
43. -n. The specific detaiis of virtual collocation could be defined in a
number of different ways. We here consider a range of Merent standards. At one extreme,
we could adopt the CAPS’ proposal to require virtual collocation offerings to be technically and
economically comparable to physical collocation, from the penpeCtive of the hterconnector.94
In our view, this standard would impose burdens on the LECs that are to protect
interconnectors’ interests, and in some cases may be unenforceable.95 Moreover, a court
applying the Bell Atlantl ‘c v. FCC decision could construe mandatory virtual collocation under
this standard to be an unauthorized taking of property, because this standard would appear to
impose requirements that, in practice, are equivalent to mandatory physical collocation.
44. Under the approach we choose here, we adopt NICS governing mandatory
virtual collocation that an similar to the rules we adopted in earlier orders in this proceeding
to govern virtual coUocation.% Under these Nlcs, ms will be required to dedicate to inter-
connectors’ use in terminating the interwnnectors’ Circuits any kind of central office basic
transmission equipment reasonably specified by the intercoanector. LECs wili be required to
install, maintain, and repair this equipment, at a minimum, under the same time intervals and
with the Same failure rates that apply to comparable LEC equipment not dedicated to inter-
COM~C~O~S. Interconnectors wili be entitled to monitor and control this equipment remotely.
LECs wiU be exempt from the virtual collocation requirement if they provide physical
collocation offerings that satisfy our requirements. Tariffing, rate structure, and pricing
requirements will ensure that vW collocation is generally available on a nondiscriminatory
basis and fulfills our public interest objectives. As explained in detail elsewhere in this order,
we conclude that these standards ensure that intemnnectors have a reahtic opportunity to
compete with LEC special access and switched traasport services, wide also minimizing burdens
on the LECs and satisfying the strictures on our authority announced in Bell Atlantic v. FCC. 91
45. Under a less detailed appnrach, ratber than giving interconnectors the right
to designate tbeir choice of central office transmission equipment, we could require LECs and
interconnectors to negotiate a limited amy of equipment that would satisfy both of their needs.
Under an even less specific approach, we could allow the LECs to pnwide virtual collocation
by offering a limited array of ctptral office transmission equipment reasonably selected by the
LEC, not the intcmnnector. Intemanectors would have the right only to select one of the
types of equipment offered by the LEC. Under either of these approaches, the requirements
discussed in this o&r would apply in other nspects: remote rnoniming and conml by inter-
% Snr; - 7 42 and = submissions cited therein.
, 7 FCC Rcd at 7392-94, 17 44-46;
8 FCC Rcd at 7392, 1 30; 47 C.F.R. 96 Special Access mdui Intemon Order
witch
QI 11 1637, j& 11 49-53, 57-62.
25
_-
connectors; LEC installation, maintenance, and repair standards; and rate structure and pricing
principles. We conclude that these approaches are less satisfactory than the standards we adopt
in this order, because any restrictions in the choice of equipment limits interconnectors' ability
to determine the configuration of circuits in their network.
46. On the other hand, in the unlikely event a court were to hold that we lack
authority to require that intexwnnectors be able to spec@ the virtually collocated equipment
dedicated to their use, we intend that this requirement be replaced by the first approach
described in the pncediag paragraph, under which LEcs and intcxw~ecto~s would negotiate
the range of equipment available for virtual collocation. We find this to be an acceptable
alternative that promotes most of our public interest objectives, and we would adopt it in place
of the requirements set forth henin. Ifa court wen to hold that we lack authority to impose
even that approach, we intend that the second approach described in the preceding paragraph,
under which the LEC specifies the equipment that the interconnector could select, be used as a
replacement. Moreover, if a court wen to hold that we lack authority to impose any of the
other specific requirements included in the standards described in paxagmph 44, we intend that
the offending provision be moved. We find that these approaches would be acceptable,
although substantially less desirable, options.
2. Equipment Designation
47. c)rdersjR?r Cm . Ow existing rules ddiae virtual collocation as "an
offering that enables intcxw~ectors to designate or specify equipment needed to terminate basic
transmission facilities. "*
'es. US West argues that it should be required to offer 48. monsofthePartl
only a standardizcd list of central office equipment under virtual collocation, rather than
pemitting intcxw~ectors freedom to designate any equipment they The CAPS
generally argue for imposing mort stringent nquiremats ngarding intcmnncctors' rights to
specrfy equipment under a mandatory vimral collocation Mps argues that it should
not be required to use LEC-spccifieti equipment, arguing that this would rsquire it to modify its
centralized network mazLagcmcot system to accommodate the unfamiliar equipment.'O'
..
49. . We redfirm that under our viraral collocation policy, inter- ,
COMCC~O~S have the right to select the type of central office equipment dedicated to their use.
The right to desigpate equipment is critical to enable interumectors to determine the
47 C.F.R. 6 64.1401(g)(l) (designated as 6 64.1401(e)(l)).
99 U S West (July 6,1994), Attachment.
142 and comments cited therein.
MFS (July 5, 1994) at 14.
26
configuration of their circuits that terminate in such equipment. In many cases, CAPS and other
parties may deploy equipment in their networks that differs from the types of equipment in
LECs’ networks. Under current technology, a circuit cannot function unless compatible
equipment, typically of the same type and made by the same manufacturer, is deployed on both
ends. Thus, a broad interconnector right to designate equipment helps ensure that virtual
collocation provides a realistic opportunity for access competition.
50. Ia addition to our qukment that LEcs offer viitual collocation of any type
of transmission equipment reasonably requested by inter~o~ectors, we also require that LECs
offer vimral collocation through generally available tariffs. We arc specifying tariffing procedures for the LECs’ service offerings involving virtual collocation equipment to ensure that
both these requirements are satisfied. The procedures we adapt are comparable to the process
we designed in the First Reconsideration Ma to govern the tariffing of central offices, which
accommodated both the LECs’ need for certainty in devising their physical collocation tariffs
and the interconnectors’ desires that expanded interCOMectiOn be Offered in specified locations.
In that order, we directed the LEG to publish lists Of central offices in which physical
collocation would be offered, authorized the interconnectors to quest that the lists be expanded
to include additional offices, and required the LECs to file tariffs that took into account the
inter~o~ectors’ submissions. We also required the LECs, after the initial physical collocation
tariffs took effect, to revise their tariffs to offer physical collocation in additional central ofices
upon f& requests from btemrs. We conclude that an analogous process would
be useful in assuring that interconnectors’ needs for particular types of equipment are satisfied,
while also giving the LECs greater certaioty about the mge of equipment likely to be used
initially, and facilitating a smootb pmss of fiIing and reviewing virtual collocation tariffs.
51. Prospective users of virtual collocati00 may quest that LEcs include
specific types of equipment that they an likely to use initially, and would like to have included
in the tariffs. If they submit such requests to the LECs by August 1, 1994, the LECs arc
required to include specific rates for the tequested equipment in their virtual collocation tariffs
filed on September 1, 1994. Prospective users of vixtual collocation may continue to give the
LECs requests for tariffing specific equipment thrwgh September 1,1994. By October 3,1994, LECs must amend their initial taxiff filings to include specific prices for all of the equipment
idcutifred by interco~eaors by September 1. During the period from September 1 to December
15, interconnectors may continue to submit equipment quests, although in order to facilitate ,
an orderly miffing process, we will permit LECs to vtat those quests as if they were received
on the day after the tariffs become effective, subject to the procedure outlined in the next
Paragraph.
52. Afterthe initial tariffs become effective, iu-rs will continue to have
the right to spec* additional types of virtual collocation equipment. An interconnector may
quest that a LEC modify its virtual collocation tariffs to offer additional types of transmission
equipment. The LEC will be required to mod@ its tariff accordingly within 30 days of
wiving such a request. Such tariff changes should be scheduled to become effective on 30
days notice. This procedure wiU ensure that interconnectors can make rapid modifications to
21
their networks and obtain corresponding additions to the LEC’s offerings of central ofice
equipment that is dedicated to their use. The requirement ensures that interconnecting parties
can upgrade their networks to take account of technological improvements, and will help achieve
our objective that access competition through virtual collocation spurs technological progress.
53. These equipment designation requirements are unlikely to impose substantial
burdens on the LECs. We anticipate that in most cases, LECs will not be called on to Serve
more than a few intem~e~t~rs in any given cad office, and the number of different types of dedicated transmission equipment is likely to be reasonably limited given that there is a
relatively small number of manufactum of such equipment. In addition, we reaffum that,
under our new expanded intercoanection policy, ws may proscribe the use of interconnector-
designated equipment or practices that represent a significant and demonstrable technical threat
to the LEC network. We will scrutinize any such allegations brought to our attention carefully,
however, and expect them to be rare.’02
3. Instahion, Maintenance, and Repair
54. prders/Raclsground. vi collocation requins that the LEC install,
maintain, and repair the central office electrOnic equipment dedicated to an interconnector’s use.
Existing rules quire the Es, at a minimum, to install, maintain, and repair this equipment
under the same time intervals and with the same failure rates that apply to the performaace of
similar functions for comparable LEC equipment. We have nquired LECs to keep ncords and
frle annual reports on the installation, maintenance, and Fepair times and failure rates for
comparable LEC and interconnection equipment and circuits.*”
’ . In petitions for reconsideration, Teleport and ALTS
argue that the LECs should be required to install, maintain, and repair virtual coilocation
equipment to mea the interconnector’s standards rather than the LEC’s standads, so that CAPs
can control the quality of tbeir sewices and so tbat virtual collocation can be technically and
economically equivalent to physical collocation.1a The LECs respond that the absolute
equivalence staodard requested by the CAPs is unworkable and could disadvantage LEC
customers other than intcrconneaor~. The LECs further assert that such a standard is
u~ece~~ary because either intcm~rs accept LEC performance standards for the LEC-
provisioned aansmission segment to which the intemnnector is COMectlII . g or they can bypass
.. 55. &$@ons&b#m
on m, 7 FCC Rcd at 7392, 144 n.101.
lo( Teleport Special Petition at 17-18; Teleport Special Reply at 67; ALE Special Petition
at 20-21; ALn Special Rcply at 13.
28
the LEC entirely rather than hterconnecting. The LEcs add that the existing virtual collocation
standard prevents disctimination and ensures efficient service to interconnectors. Iw
56. In more recent filings, CAPs argue that LEC charges for installation, maintenance, and repair under their current virtual collocation taxiffs are excessive. MFS asserts
that LECs have charged interc~~ector~ large sums for training multiple shifts of LEC personnel
in each office to install, maintain, and repair interconnectordesignated equipment. MFS also
states that LECs have required interconnectors to purchase *excessive amounts" of spare parts
to ensure prompt repair, and have then charged for the storage of those parts. The solution the
CAPs propose is to require all LECs that certdy third Wes to install, maintain, and repair
equipment in their central offices to cerUfy ~terco~ectors as Well on a nondiscriminatory basis,
and to allow the interc~~ectors to perform these functions themselves.106 LECs have also
indicated concerns about being held responsible for installing, maintaining, and repairing
unfamiliar equipment. IQI
57. ~uss~. In our virtual collucation regime, the LECs are responsible for
installing, maintaining, and repairiag the central office equipment that they own and dedicate to
the use of interc~~e~t~rs. In general, we ctaffirm our conclusion in carIier orders that LECs
must provide these services, at a minimum, under the same time intervals, and with the same
failure rates, that apply to the performance of similar functions for comparable LEC equipment.
Failure to provide these functions on equipment dedicated to htemmcctors in a manner that
is at least as timely and dficient as the service the LECs provide themselves for services that
compete with interco~ectors' offerings constitutes an unreasonable practice under Section 20 1 (b)
of the Communications Act. We conclude, conmy to the arguments of the LECs, that this
standard will not impose disproportioaate burdens on the LECs.
58. Evidence in the record shows tbat many LECs have procedures for certifying
or approving equipment manufacturers and independent colltiactot per~o~el to install electronic
equipment, and in some cases, to maintain and repair such equipment.*a Use of outside
convactors can reduce LEC cqsts, particulariy in cases when LEC employees do not mutineiy
install, maintain, or repair particular types of equipment, or an not qualified to do so. Using
outside COntractDrs could reduce or eliminate a LEC's need to traia empIoyees to provide service
lW Ameritech Special Opposition at 10-11; BeU Atlantic Special Opposition at 7; GTE
Special OppoSition at 20-22; United Special Opposition at 8-9; USTA Special Opposition at 10:
Amentech a (styled "Further Opposition to Petitions for Reconsideration") at 2-6
(Feb. 18, 1993).
IO6 MFS (July 5, 1994) at 12, 17-20; see als~ Electxic Lightwave, Inc.
(July 7, 1994) at 3; Intermedia (July 6, 1994) at 2-3.
IQI sw Bell Ea W (July 7, 1994) at 1; U S West (July 6, 1994), Attachmen
*01 MFS (July 5, 1994) at 17-18 and Appendices E & F.
29
on types of interconnectordesignated equipment that are not typiay deployed elsewhere in the
LEC’s network. Similarly, use of outside contractors would alow interconnectors to avoid the
substantial costs that might be incurred to train LEC personnel to install, maintain, and repair
interconnectordesignated equipment with which personnel are unfamiliar. nus, LECs,
as wel) as interconnectors, may benefit from the use of outside contractors. Of course, if an interconnector designates equipment that a LEC currently uses in a given central office, the LEC
will not need to provide txaining to its employees and thexefore will not be pexmitted to charge
the interconnector for training LEC personnel to service that equipment.
59. Virtual collocation customers should not be required to pay for costly training
of LEC employees if the LEC uses qualified outside contractors to install, maintain, and repaif
other equipment in its offices. We therefore conclude that LECs that pennit outside service
representatives to enter their central offices to install, maintain, or repair LEC equipment must
permit outside representatives to provide these services for the equipment.de!dicated to inter-
connectors’ use under virtual collocation. If LECs can choose from a range of levels of service
quality offered by outside service represcntarives u, repair times), the LECs must offer the
same mge of sewice options to virtual collacation customers in their tariffs. LECs may impose
conditions, including certification and bonding requirements, on the contractors that provide
sewice for equipment dedicated to intcrconnectors, but these requirements must be the same as
the requirements that apply to contradors that provide sewice for other LEC equipment. If
LECs use outside contractors to install, maintain, or repair equipment, they must reasonably
consider both price and service quality in selecting coutractols to pmvide these services.
60. If an intercoMactor mass the LEc’s standards for outside service
reprtsentatives, then the intcmnnector should be certified as a possible outside contractor.
Indeed, we see mutual benefits to the LEC and interconnector deriving from use of a ceMied
intewnnector’s represeotative for these functions, potentially simplifying tbe operation of virtual
collocation. However, in light of the D.C. Circuit’s decision striking down arguably similar
requirements in v. FCC , we do not here raquin a LEC to select the intcmmcctor
to provide these seIvicts for tbe LEC’s equipment dedicated to the interconnector. Although
LECs are generally required to umsidcrcost in selecting a contractor, a LEC will not be
required to choose an in-r to perform insallation, maintenance, and repair on this
basis alone. We therefore do aot adopt MFS’s proposal to give ht~f~~~ectors the right to
perfom installation, lnabmmw , and repair of the LEC equipment dedicated to their use.
permit such amtnctors to provide service for equipment dedicated to intefccmwdors’ use,
although they arc permittad to Q so, and may furd it the most advaatageous way of
implementing virtual collocation. Thus, any decision to grant physical access to certified inter-
connector representatives will be voluntary on the part of the LEC.
LECS that do not permit outside cootractors to entn theircenaal offices are not required to
61. To provide a basis for monitoring compliance with our prohibition of
discrimination in the installation, maintenance, and repair of virtual collocation equipment, we
require the LECs to rept 011 the timing and failure rates for providing such services for
comparable LEC and intcrconnector-dadicated equipment and circuits. In light of the importance
30
of nondiscriminatory hstallation, maintenance, and repair under our new mandatory virtual
collocation policy, we increase the frequency of these required reports from annually, as
currently required, to quarterly. We delegate authority to the Chief, Common Canier Bureau,
to spec* the fomt and timing of these reports. LECs are not subject to this reporting re- quirement if they are exempt from the virtual collocation requirement because they provide
physical collocation in all central offices in which they provide expanded interconn&on.
62. We fund no reason to impose more stringent installation, maintenance, or
repair standards upon LECs. Specifically, we decline to require the LECs to install, maintain,
and repair interconnectors’ virtual collocation quipment to meet the interconnmors’ time
intern&. We reaffirm our conclusion in the Special Access Expanded In terconnection Order
that such a requirement would be difficult or impossible to enforce, because it could require
LEKS to maintaio and repair their competitors’ equipment faster and more effectively than the
LECs maintain and repair their own.*09 Moreover, such a requirement would be of limited
utility because the interconnectors already essentially acquiesce to LEC performance standards
on the LEC circuits to which interconnector circuits arc connected, and because iatercO~e~t~rs
can achieve a high level of reliability through the use of electronics with redundant components
and remote monitoring and control ratber than through expedited repah procedures.
4. Other Requhents for Virtual Collocation
63. -. In der orders in this proceediag, we held that the
crossco~ect element, covering short cable connectims from the distribution frame to the
central ofice electronic equipment dedicated to or owned by the interconnector, should be
tariffed at a study-area-wide averaged ratc under both virtual collocation and physical
collocation. We concluded that certain other charges, such as labor and materials charges for
installation, maintenance, and repair ScNiCes, may differ in differeat central offices due to cost
variations, but should be uniform for all intercoaneCtors in each individual central office. We
allowed LECs and intcrc~nncctors to negotiate the rates, terms, and conditions for the use of
different types of central office electronic equipment dedicated to intcrconncctors’ use in order
to address particular intcmnnectors’ needs, but required such negotiated arrangements to be
made available to similarly situated ~WCOM~C~OI-S in the same central office under tarifT.”O
64. m. Except as stated elsewhere in this order, we reaffirm our
existing rules on the tarWing of virtual collocation offerings, for the ~tasotls stated in our 3
original orders. We naffirm that the cross-conoect element must be tariffed at a study-area-wide
averaged rate that is the same for both virtual collocation and physical collocation for LECs that
109 A-s -on Odq, 7 FCC Rcd at 7393-94, 1 45 n. 103.
ial Access ExDan 110 sDp&
iderasion
Interconnection Ma, 8 FCC Rcd at 7421-22, 1 86.
Second Recons
7 FCC Rcd at 744143, 11 156-59;
~~~~~ 56-59; Switched Transpo R Expanded
31
choose to offer physid collocation. In addition, because we now mgnize that the cost of
transmission equipmeat does not vary in different locations, we require that LECs' rates for
particular types of equipment offend to interconnectors may not vary within a study area.
While we are permitting certain cost-based variations in the rates for specific types of equipment
used by different interc~~e~tor~, as described below,"' such rate differences are not dependent
on the characteristics of particular central offices or locations within a study area. We also
reaffirm, in the context of our mandatory vimral collocation policy, that rates for elements of
virtual collocation other than the cross-connect element and elements recovering the cost of
central office equipment may reasonably vary in different locations corresponding to cost
differences.
65. In unusual circumstances, space may be so limited in particular central offices
that even virtual collocation is infeasible in those locations. As noted in our earlier orders,1'2
we will entertain requests for waiver of the requirement that virtual collocation be made
available in such offices.
66. Finally, SW Bell argues that the requirement in our earlier orders that it take
interconnector needs into account in planning its space needs for the future converts virtual
collocation into a taking of its property.113 SW BeU contends that virtual collocation requires
LECs to reserve central office space anticipated to be requested by htcrconncctors and refrain
from using that space for their,own purposes, and asserts that these requirements effectively
deprive the LEcs of all interest in that reserved space. SW Bell seems to have misinterpreted
the language of our earlier order as requirbg LECs affirmatively to set aside space in new and existing central offices to meet anticipated virtual colldon requests. We now clanfy that
LECs need not set aside segregated space, which they could not then use for their own purposes.
in anticipation of virtual collocation nquests. Virtual collocation arrangements do not involve
the Itscnmion of segregated central office space for the use of inmnncctors. LECs must
consider the needs of virtual collocation customers, just as they consider the demand for other
'on against interconnectors services in phmmg space usage. We will not tolerate any dwmmmtx
vis-a-vis other customers, however.
. ..
medon Order , 7 FCC Rcd at 7417, 1 103 11.240.
113 Southwestera Bell Telephone Company's Petition for Stay, hterconne~~~n , CC Docket No. 91-141 (filed Nov. 18, 1992) at 5-8. T-honc Co- '
7 FCC Rcd at 7392-93, 7403, 7408 & citinnSppcd *-sFxDanded~-~=tion-, n.191, 7490 n.605, 71 44, 65, 77, 79 & 11.191, 259 n.605.
*I4 SW ell Petition for Stay at 7.
32
B. Standards Governing Physical Collocation
1. Space Alloation and Exhaustion
67. OrderslBackmound. Our existing des require the LECs to offer space for
physical collocation on a fm-come, fmt-served basis, and to provide virtual collocation in
central offices in which space for physical collocation is unavailable or becomes exhausted.11s
We did not require LECs to expand their facilities or relinquish space reserved for their future
use in order to offer physical collocation, but we did state that we expected the LECs to consider
interconnector demand for central office space when remodeling or constructing new central
Officcs.116
'deration. USTA suggests that the 68. gOSltl0 ns of th e parties on RecQIls1
Commission permit LECs to initiate lotteries, or combinations of "first-come, first-served" and
lottery mechanisms, in appropriate circumstances, rather than quiring use of a "first-come,
ftm-served" MCI opposes USTA's idea, citing the Commission's experience
with the abuse of lotteries in the mobile service context by spec~lators.~~' Rochester argues, and
MFS agrees, that waivers should be available for certain situations in which space is so limited
that neither physical nor virtual collocation is feasible, particulariy if the IXC makes alternative
anangements available. 119
..
69. MFS and ALTS argue that to ju- an exemption from the physical
collocation requirement due to exhaustion of space in particular central offices, LECs should be
required to make a specific showing, including Hidavits detailing the planned uses of space
within the 24 months following the petition filing date.'2o The LECs respond that such
micro-management of LEC central office usage would amount to an u~ece~~ary intrusion into
LEC long-mge planning, could iaterfere with other Commission and state regulatory policies,
might require them to reveal coniidential and proprietary information about LEC business plans
such as growth projections and equipment upgrades, and essentially elevates the CAPS' interest
116 s Emwnded Intcrconnectl 'on Ord e€, 7 FCC Rcd at 7407-08, 11 77-80;
-4 lntcmnnection Oe ,8 FCC Rcd at 7403, 1 47.
USTA Special Petition at 10 n.27; USTA Special Reply at 9.
MCI Special Opposition at 9 n.8.
Rochester Special Petition at 7-10; MFS Special Opposition at 22.
ALTS Special Petition at 17-18; MFS S ial Petition at 20, 21. 3 5"
in LEC central ofice space over the Es’ interest in their own property to Serve their
customers’ future
70. Piscussion. The exemption from the physical collocation requirement due
to space limitations will generally not be relevant under our new mandatory virtual collocation
rules. LECs that are providing physical collocation on a voluntary basis and have been
exempted from the virtual collocation requirements may exhaust the space available for inter-
connection in a central ofice. In that case, just as un&r the original des, upon Commission
approval of a showing that space is unavailable, the LEC will be required to provide generally
available, tariffad vixtual collocation to subsequent intemnnmrs. For the same reasons set
forth in our earlier we conclude that under our new policy, if physical dlocation is
the only generally tariffed expanded interc~~~~ti~n offering, pexmitting LECs to turn away
interconnectors when space for physical collocation is exhausted could prevent interested parties
from bterCOM&g in offices where space is limited. In most cases, requiring LECs to
provide a vixtual collocation alternative when space has been exhausted in such offices will
ensure that all potential interco~ecton can be accommodated, without imposing unreasonable
burdens on the LECs.
71. We conclude that the same staadards and procedures will apply to such
requests based on space limitations that apply to such requests under our existing rules.1p We
decline to adopt the extensive requirements proposed by the CAPS regarding the processing of
requests to govern space limitations. The CAPS filed these proposals before the Common
Canier Bum processed the LECs’ petitions for exemptions due to space limitation. In the
procedngs initiated by those petitions, the LECs provided ddld idormation regarding
central office space availabii, in many casts including floor plans and statements regarding
future plans. We believe that in general, the existing pmceduxes worked well and CAPS’
concerns regarding possiik manipuMon were unfounded. If additid informarion in a
particular case is needed to analyze fully a LEC request for exemption due to space limitations,
the Common Carrier Bureau can require the LEC to submit such information when the need
arises.
72. We conclude that, for LECs that choose to offer physical collocation pursuant
to the terms of this order, a firstame, first-served process appuvs to be the most equitable
manner to allocate space. In geoeral, we do not believe that a sufficient number of prospective
interconnectors ale likely to request intemnnection in central offices with limited space at any *
one time to make lotteries a nasonable way to allocate space, and we are concerned that LECs
121 Ameritech Spacial Opposition at 12-13; Bell Atlantic Special Opposition at 5; GTE
Special Opposition at 18-20; “EX Special Opposition at 11-12; USTA Special Opposition
at 18.
34
could use a lottery process to delay fulfilling an early request for interconnection until a
sufficient number of other requests were received to permit a lottery. LECs that qual@ for
exemptions to provide physical collocation in lieu of virtual collocation need not expand their
facilities or relinquish space reasonably reserved for their future use, for the Same reasons stated
in the SDecial Access Exmded In terconuemon Ord er. We ah Mi our conclusion that
LEC tariffs may reasonably include provisions prohibiting intemmectors from warehousing
central office space.’”
2. Tariffii Requirements for Physical Collocation
73. In earlier orders in this proceeding, we held that the cross-connect element
should be tariffed at a study---wide averaged rate under both virbral collocation and physical
collocation. We concluded that cost differences among central offices may jus@ different
charges for central office space, power, environmental conditioning, and labor and materials
charges for installing physical collocation arrangements, but charges should be uniform for ail
~~~~COMCC~O~S in each individual cenrral ~ffice.’~ We now conclude, for the reasons given in
our prior orders, that the same tariffing requirements should apply to physical collocation
provided pursuant to exemption from the virtual collocation requirement.
C. Standards that Apply to Both Vi Collocation and Physical Collocation
1. state Expanded IntemMection Policies
74. In our earlier oders, we allowed the LECs to apply for exemptions from the
mandatory physical collocation rtquirement, and to provide virtual collocation instead, if the
states in which they operated had adopted policies requiring LEcs to offer intrastate expanded
interconnection.’n The state policy exemption from the physical collocation requirement does
not apply under our mandatory virtual collocation policy. Of course, Ws operating in a state
with an expanded ~D~~XOMCC~~O~ policy that favors physical collocation may obtain an
exemption from the intetstate~virtual collocation tariffing requirement by offering physical
collocation subject to the terms set forth in this order.
124 &&l m&j on Order, 7 FCC Rcd at 7408,179.
126 ial Access ‘n 7 FCC Rcd at 7441-43, 11 156-59;
S-nd RecQBsId4Tp,tion 1156-59; Switched T-D andd
hWCOM&On w, 8 FCC Rcd at 7421-22, 1 86.
7 FCC Rcd at 7391, 141; Switched
mrt Iff wial -~CXOMCC~~OU Access -w yF:C% Order at 7393-94, 1 31.
35
75. We Itaffirm our conclusion in tbe S~ecial Access Exmd ed IntercoMectiorI QI!mla& a LEC offers both interstate and intrastate expanded inttrconncction, it should do
so in a m er that satisfies both federal and state requirements to the extent possible, and
should provide mechanisms to avoid double payment for facilities used for both interstate and
intrastate As we stated in the Special Access dedbterconnectlo n Ord er,
we believe that this requirement should reduce the potential for federaUstate conflict and should
prevent manipulation of different approaches to expanded interconnection to disadvantage
unfairly inte~~~ectors (ie, requiring interconnectors to pay for different facilities for federal
and state interconnection due to slightly differing raqukments, when the same facilities could
Serve both purposes and satisfy both sets of requirements).
2. Reporting Requirements
76. Orders/Backmoubd. We have required the BOCs and GTE to report
biennially on the customers using special access expanded interconnection and the locations at
which they are i~efc~~tctcd.~~ We have also requid the BOCs and GTE to report annually
on the customers using switched transport expanded interconnection and the locations at which
they ktCl'COM&.'M
. USTA takes issue with the
reporting requirements applicable solely to the BOCs and GTE. USTA claims that these LECs
have no unique ability to gather or provide the data and should not be treated differentiy from '
other competitors. Instead, USTA contends that the Commission should quire alI special access competitors to provide infomarion ngarding the growth of access comp~ition.'~' GTE
argues that interconnectors, lather than LECs, sbould be requid to report on collocation as well
as quantities of circuits, number and location of network nodes, and numbers of customers, to
give the Commission data necessary to conduct a reasoaed analysis of the extent of
competition. 132
.. n. -DS Of the 08
78. ALTS and MCI respond that the existing requirement will assist in identifying
possible discrimination, involves a minimnl burden, and is appropriately imposed only on the
InmMdon Met, 7 FCC Rcd at 7488-89, 17 254-55.
I29 Intemnnection Order, 7 FCC Rcd at 7492, 1263.
on (&&, 8 FCC Rcd at 74441 142.
13' USTA Special Petition at 29-30; USTA Special Reply at 10; a &Q "Ex Special
OpPo~itiOn at 12-13.
la GTE Special Paition at 30-31; GTE Spacial Reply at 6-7; GTE Switched pdition at 17-
18.
36
LECs because it relates to the interconnection services they ~r0vide.l~~ In addition, MCI argues
that the BOCs should 6e required to fie quarterly reports idenwing the parties using expanded
interconnection and the offices in which they are interconnected, in order to enforce the new
restrictions it recommends imposing on intemnnection by AT&T.’% Sprint contends that the
information that the LEcs propose requiring-- the location of interconnection customers’
network nodes and the number of their users -- is irrelevant to monitoring the development of
local ~ompetition.‘~’ NARUC submits that the Commission should collect data on collocation
expenses, revenues, and deployment activity to facilitate Joint Board de~isionmaking.”~
79. D ‘scussion. We now conclude that a broader information collection program
is necessary to monitor the development of access competition. The extent to which access
competition develops is a significant gauge of the success of our expanded interconnection
policy. In addition, the extent to which competition actually develops is an important factor in
considering LEC requests for additional pricing flexibility in the future. The existing reporting
requirements were designed to monitor the limited question of which customers arc using
expanded interconnection and at what locations they art interconnected. We conclude that a
broader monitoring program is needed to gather empirical data that will better enable us to
monitor the development of competition in interstate access markets. We delegate authority to
the Chief, Common Carrier Bureau, to formulate the detailed elements of this reporting
program, decide which carriers must provide information, and specify the format and timing of
these reports.
3. Dispute Resolution
‘ . We sttlons of the hrtm 00 Reconsidcrau~
concluded in our initial order in this proceeding that existing dispute nsolution procedures - our
staodard tariff and complaint processes, as well as our new alternative dispute resolution
mechanisms137 - are adqutc to mIve disagreements regarding the implementation of
.. 80.
ALTS Special Opposition at 15-16; MCI Special Opposition at 12-13 (also noting that
it does not object to requiring submission of additional useful infommion by the CAPS).
MCI Special Petition at 10. &g gcorp 137 for a description of the restrictions MCI
PW=.
13J Sprint Special Opposition at 10.
NARUC Special Petition at 23.
I37 yse of ‘ve Diswte Resolution Procedures in Procecdines Before the Coruu * sion
Whlch the Com IS Not a m, GC Docket No. 91-119, Initial Policy Statement and
Order, 6 FCC Rcd 5669 (1991); Notice of Proposed Rulemaking and Second Notice of Inquiry,
7 FCC Rcd 2874 (1992); 47 C.F.R. 4 1.18.
.. .
37
expanded hter~onnection.~~' MFS argues that the Commission should delegate authority to
specific staff members to faditate expeditious, informal, and binding resolution of
implementation disputes.139 The LECs respond that MFS's request unjustifiedy presupposes bad
faith on behalf of the LECs, would unneCeSsarily tax the ~~mrnission's scarce resources, and
could discourage negotiated resolution and encourage pames to mxt to the FCC to settle
disputes. '40
81. pisc uss ioa. We ncognize that the implementation of mandatory virtual
collocation carries with it the potential for more disputes than arose under the physical
collocation regime. In particular, disagnements couid arise regarding the installation,
maintenance, and repair of the virtually collocated central office electronic equipment that
terminates hterco~e~t~r~' circuits. We encourage LECs and interconnectors to work together
to resolve these disputes amicably. In cases that the parties are unable to nsoive, however,
special dispute resolution mechanisms could expub& the mlution of these disagntments and
could help ensure that our new expanded iuterwnnection regime works smoothly. We delegate
to the Chief, Common Carrier Bureau, authority to develop special dispute resolution
mechanisms, possibly including the designation of a CommisSion representative to work
personally with the parties to mediate disputes and ensue that they are settled expeditiously,
fairly, and consistently.
4. Interconnection to LEC Facilities
a. Microwave
82. (srdcrs/BackmMlad. The Inmnnection Orde r
required LECs to permit intemnncction with microwave transmission facfitics where reasonably
feasible.'41 The Common carrier Bureau granted LECs a waiver of this tariffing quiremerit
to permit microwave expanded interconnection to be tariffed on an individual case basis (ICB)
in response to bna fidq requests. 142 The Commission adopted the same approach for microwave
switched transport interconnection in the Switched Transport Exminded htCrCOMeCtl 'on Order,
pending resolution of the issue on reconsideration of the ' Access Expanded Inter-
cornemon Order.
Interconnection Ordei, 7 FCC Rcd at 7493, 1 266.
MFS Spdd Petition at 18-19.
Amentech Special Opposition at 11-12; "Ex Special Opposition at 7-9.
ial Access Expapded Q-on Order, 7 FCC Rcd at 7416, 1 98. 141
142 &,&&
143 SwW Tranmrt mdcd In terconnectioa
,8 FCC Rcd at 4603,1178-79 (Com. Car. Bur. 1993).
, 8 FCC Rcd at 7415, 1 68.
38
83. Positions of the M ‘es on Reconsidem ‘on. USTA and GTE seek clarification that micmwave collocation “where reasonably feasible” must be tariffed only
through an office-specific bona fide request process, and only in central ofices in which there
are no safety or engineering risks and the costs ate not unreasonable. API responds that inter-
COMeCtiOn by microwave transmission facilities will be the principal cost-effective means for
sophisticated end users to obtain expanded interconnection, particularly in lowdensity rural areas, and argues that the LECs should be directed to make every reasonable effort to
accommodate requests for microwave interconnection anangements. ’“
84. Discussion. We agree with the Bureau’s conclusion that microwave inter-
COM€XtiOn must be so tailored to specific interconnectors and to particular central ofices that
it does not readily lead itself to unifonn tariff mgements.116 We therefore mod@ our
requirements to spec* that the LECs must tariff microwave intercoanectioa on a central office-
specific, individual case basis, in response to - fipcr requests. Such tariffed anangements
must be made available to other similarly situated parties at the same central office on non-
discximinatory terms, and must be offered under general tariff at a given centxal office if the
LECs gain sufficient experience to do SO and if such arrangements can reasonably be
standardized. Microwave i~t~~~~~ecti~n should be offered through vixtual collocation (using
microwave transmission equipment that is owned by the LEC and dedicated to the inter-
connector’s exclusive use) or, if the LEC wishes to quafify for an exemption, through physical
collocation. We expect the LECs to make reasonable efforts to accommodate requests for
mver the costs of offering such arrangements.
b. Copper or Coaxial Cable
microwave htClWMCZtiOU arraagernents. of COUrSe, the mS may CkgC rates that nasOnably
85. mckgxm$ Because the dmxmnmion of copper or coaxial cable
could rapidly exhaust available conduit and riser space, we held in our earlier orders that inter-
connection of such cable facitities is permitted in specific cases only upon the approval of the
Common Carrier Bu~au.~~ .
‘44 USTA Special Petition at 23-25; GTE Special Petition at 31-33; USTA Special Reply u
7-8.
14’ Am Special Opposition at 7-9; GTE Special Reply at 8 (stating that it stands read)
to work cooperatively with partics desiring microwave interconnection).
116 hefiwh ODerating, 8 FCC Rcd at 4603, ff78-79 (Corn. Car. Bur. 1993 1
s Interconamon Order 7 FCC Rcd at 7416, 199; SwitcW
Tmsg~rt Bpanded IntercQgnectioa w, 8 FCC Rui’at 7415-16, ‘1 69.
39
86. pos itions of the parti es on Recon sideraty ‘on. Penn Access argues that inter- COMeCtOrS should be-able to use coaxial cable facilities for interconnection. It asserts that
contrary to the Commission’s conclusion, intemnnection with coaxial cable can use space more
efficiently and require less maintenance than fiber because it eliminates the need for inter-
connector optical terminals and electronic equipment on LEC premises.149 Penn Access adds that
small- to medium-sized CAPS in particular can avoid u~cces~ costs by using coaxial cable
when they have lower capacity P~M Access suggests that rather than placing a burden
on coaxial interconnecton to make a showing to the Bureau, the LECs, which have more
information and monopoly power, should have the burden of showing that a specific coaxial
interconnection would sigmficantly limit conduit or riser
87. The LECs respond that coaxial cable is not widely favored by communi-
cations providers, is becoming less prevalent throughout the industry, and would consume
enmce space and user ducts far more rapidly than fiber due to differences in capacity and the
larger physical diameter of coaxial cable. They contend that coaxial cable interconnection is
costly and could crowd out fiber interconnection and force LECs to reconfigure central offices,
potentially leaving LECs with an unusable investment when interconnecton change over to
fiber.”’ WilTel, concerned about interconnection by ATBrT, recommends prohibiting inter-
connection with copper coaxial cable without Commission appro~aI.I~~
88. * . We reafhn our decision that ‘on of copper or coaxial cable facilities will be pkitted in specific cases only upon approval by the Common
Carrier Bureau. Copper and coaxial cables usc conduit space much less efficiently than fiber.
We remain concerned that if, under virtual collocation or physical collocation arrangements,
interconnectors quest that such cable be brought hto LEC central offices, conduit or riser
space might quickly be exhausted, which could impair the LECs’ ability to SeNe their other
customers or subsequent btemnnectors. Most cable television companies (and other parties
with substantial amounts of copper or coaxial cable in their networks) do not ktem~cct with
the LECs at present and will have to install new facilities to establish collocated intcrcoMection
at LEC central offices. We believe it is in the public interest to encourage them to deploy fiber
149 Run Access Special Petition at 3-7, Attachment B (stating that a 1 1/4 inch innerduct can
IJo knn Access Sped Reply at 2-10.
house 19 coaxial cables).
USTA Special Opposition at 21-22; Ameritech Special Opposiim at 8-9 (noting that a
one-inch Coaxiai cable could accommodate up to 16 DS3s, while a onc-inch fiber cable could
accommodate over 1 ,O00 DS3s); GTE Special Opposition at 15-17 (noting that at least four fiber
cables arc typically put in the same duct and riser space occupied by one or two coaxial cables).
lS3 WilTel Special Petition at 14-15
40
in making such interconnections in order to promote efficient use of available conduit and riser
space and thereby facilitate access to central office interconnection by the greatest number of
potentid interconnectors. We also clarify that the restriction on interconnecting copper or
coaxial cable refers to the interconnector’s facilities, and does not restrict the type of LEC
services to which interconnectors arc entitled to connect.
c. DSO and Other Special Access Services
89. Orders/Ba ckground. In the S~ecial Access FJCD . anded Interconnection Order, we required the LECs initially to tariff interconnection to DSI and DS3 services generally. We
required the LECs to fie tariffs within 45 days of fig& requests for interconnection to other
special access services. Such tariff revisions arc to be filed on 45 days ~otice.’~
f the Parties on Recons idem ‘on. Teleport submits that inter- 90. positions o
co~eCtion at the DSO levei should be generally tariffed like DS1 and DS3 interconnection.
Teleport argues that this would enable interconnectors to provide their om multiplexing from
high-capacity levels down to the DSO level, rather than handing off DS1 circuits to the LECs
and being dependent on (allegedly often overpriced) LEC multiplexing to obtain access to DSO
level circuits. Teleport contends that this would give CAPS more control over the speed of
provisioning and service quality to their DSO customers, and would facilitate greater competition
for DSO services.1ss The LECs, 011 the other hand, contend that universal Wig of DSO inter-
connection is unnectssary, would impose inefficiencies on LECs by requiring them to bypass
their own multiplexers and route large quantities of cable through their buildings to terminate
at interconnectors’ multiplexers, and might require LECs to equip central offices with facilities
for which there is no present demand.’%
..
91. GTE sctks clarification that cross-coDII(?ct elements for DS1, DS3, and other
services should be tariffed only if the LEC’s comsponding special access senrice is available
in a specific officeLn MFS agrees, but states that the LEC should be required to permit inter-
COM~C~OTS to cross-com~ to any special acccss service offend out of a specific office.1s’
‘on Order, 7 FCC Rcd at 7489-90,1259 & n.603. 1% m-&j hemnna
Is’ Telepon Special Won at 19-20; Teleport Special Reply at 7-9.
United Special Opposition at 13-14; USTA Special Oppositim at 22.
In GTE Special Mtion at 33-34; GTE Special Reply at 7-8. Accord, USTA Special Reply
at 9-10.
15* MFS Special Opposition at 23.
41
AL'TS, however, contends that this LEC argument amounts to an effort to limit artificially CAP
innovation.
!)2. GTE argues that the 45 day deadline for filing tariffs for the interconnection
of services other than DS1 and DS3 is too short given the dctailed engineering and costing
activities necessary, and contends that it is unlikely that any interconnector could design and
build transmission facilities to a centraI office in 45 days or less so that a reasonable extension
would not delay hterconndon in pxacti~f.'~ h@S argues that these tariffs are unlikely to be
pamcularly complex and that 45 days should be mort than sufficient.161
93. Disc. We believe that intcmnnection to the broadest my of special
access services is in the public interest because it facilitates competition for all these services.
The initial tariffing nquircment was limited to DS1 and DS3 services only to promote rapid
implementation, because these are the services that we beiieved intcrconncctors desired most and
for which competition would be most likely to develop in tbe short term. We conclude that,
under our new rules, the LECs must provide interconnection to DSO and all other special access
services within 45 days of receiving a hM;p & quest for such a seMce. We conclude that
mort time is UMCZCSS~~~ and could impede competition, thereby umcasad * y delaying service
to customers. Our expanded intemnnectioa policies do not require a LEC to CotlIlCct inter-
~~nncctors' facilities with any given LEC service -, DS3 service) at a particular central
office if the LEC does not offer that service at that central office.
5. othe!rstandardsIssues
94. in LFC central offices . In our earlier orders, we required LEcs
to pennit interconnectors to place, or designate for placement, in LZC central offices only
equipment Llceddd to texminatc basic transmission facilities, including optical line terminating
equipment and multiplexers. We concluded that the placement or dedication of other types of
equipment, such as enhanced sewice equipment, in LEC central offices was wnecessary to
foster ccimpdtion in the pnwision of special acass and switched transport services, and
consequently we did not rcquixe the LECs to pennit the collocation of such equipment in their
central offices.162 We conclude that the same principles should apply under the mandatory
virtual collocation and physical collocatioa exemption policies we adopt in this order, for the
reasons stated in our previous orders. Only central office equipment needed to terminate basic
transmission facilities must be collocated pursuant to this order.
ALTS Special Opposition at 17 a.36.
I6O GTE Special Petition at 33; GTE Special Reply at 8.
MFS Special Opposition at 24.
Intea- WE, 7 FCC Rcd at 7413-14, 71 93-94;
Switched Tm It ExDandcd hlk~MdOIl orde r, 8 FCC Rcd at 7412-13, 1 63.
42
95. points of Enm . In our earlier orders, we required the LEcs to offer inter-
connectors at least twb separate points of entry to each central office if they have at least two
entry points for their own cable.la USTA and GTE contend that the requirement should apply
only when there is space available for new facilities at. each of two points entering the central
office, and that LECs should not be required to construct new entry points or reroute their own
facilities to accommodate interconnectors.164 MFS responds that LECs should be required to
rearrange facilities or take other reasonable steps (short of installing new cable entrances) to
provide diverse cable entrances upon an interconnector's requestia Under our new regime, we
Mm the general requirement, but make the modifdon requested by USTA and GTE. We
conclude that this revision reasonably advances our policy objective of ensuring that in most cases interconnectors desiring reliability can obtain diverse entry points, while avoiding undue
burdens on the LLEcs.
& GTE submits that the Commission should not 96. JVetwork Rehabhty Counc
let expanded interconnection proceed until the Nemork Reliability Council has developed
standards and operational safeguards to ensure that network reliability is not compromised.1a
We decline to adopt GTE's suggestion under our new regime. The Network Reliability Council
has not becn delegated responsibility for developing specific technical guidelines. We reaffjm
our conclusion that LECs are permitted to proscribe use of interconnector equipment or
operating practices that would constitute a sisIIlficant and demonstrable technical threat to LEC
networks. 16'
97. -ran=. MFS suggests that a LEC tariff nquirement that an inter-
connector obtain $1 million in comprehensive general liability insuraace should be presumed
reasonable, and any more burdensome insumce requirement should be allowed only if the LEC
provides specific factual justification for it.1a The LECs respond that such a rule would be
unprecedented, u-, and overty intrusive into LEC property management.169 "Ex
. ..
nnection Ordct , 7 FCC Rcd at 7411-12,l 89; Switched
, 8 FCC Rcd at 7410-11,160. & &Q&neritech
rame Comma, CC Docket No. 93-162, 8 FCC Rcd 4589,4605, 1 91 (Corn. Car. Bur.
Tranmrt FxDanded IntercQpgection ordy
1993) (waiving application of this requirement when all entry points but one art at capacity).
163 &&j Access Fxpaaddd Intern
164 USTA Special Petition at 26; GTE Special Paition at 35; USTA Special Reply at 8-9.
'6~ MFS Special Opposition at 24.
166 GTE Special Petition at 26-27.
USTA Special 0ppo~itiOn at 18-19.
43
points out that Liability insurance requirements will reasonably differ in different parts of the
country and in different types of central office buildings, and contends that a $1 million policy
would almost always prove inadequate because a central Ofice fire or other casualty caused by
an interconnector's negligence could easily result in far more than $1 million in damage."0 We
reaffvm our conclusion that resolution of insurance issues is best addressed when we examine
the reasonableness of specific LEC physical collocation tariff provisions. *'* We add, however,
that unless a LEC makes a compelling case to the contrary, in general no liability insurance
requirements should bc imposed in comcction with virtual collocatiOa offerings.
98. Customer proorietarv Network &&,ma tion (CPNI) . MFSarguesthatthe
Commission should impose CPNI protection des 00 expanded ~~MCC~~OU arrangements to
prevent LECs from using their control of bottleneck facilities to obtain unfair competitive
advantages.1n The LECs respond that CPNI rules are UnntCa~ary because any competitor can
easily idenbfy potential access service customers, and CoLltCnds that such rules would split LEC
staffs into subgroups that are likely to be less efficient and perfom redundant work, and could
not be implemented at all due to the limited staff in many smaller bushes off~ces.'~ We are
persuaded by the LECs' arguments on this point, and Wncludc that no special CPNI protection
rules arc necessary in the context of our new expanded ~II~~KOMCU~OU regime.174
99. m. In the Switched mrt VMCC~~O~ Orde r, we
decided that the LECs should bill the interconnection charge to the customer of record, whether
that party is a CAP or an MC, even in cases where a CAP aggregates the traffic of several IXCs
and the CAP is the customer of record."' Rochester seeks clarification that it may bill the
transport intcmnnectioa charge and other switched access elements to the entity whose traff?c
it can measure, in circumstances when it cannot bill the customer of record. Rochester states
that this may occur when a CAP aggfegaw the Mic of several IXCs, the CAP is the customer
of record, and tbe carrier identifiation codes arc associated with the IXCs.*'* MFS supports
Rochester's petition, stating that the procedure Rochester proposes is technically unavoidable and
~~~
"Ex special opposition at 10.
171 & spacial h~rco-jon , 7 FCC Rcd at 7407, 1 77 n. 189. .
In MFS Special Won at 17.
In Ameritcch Special opposition at 14-15; Bell Atlantic Special Opposition at 9; USTA
Special Opposition at 23.
Rochester Switched petition at 8-10; Rochester Switched Reply at 6.
44
permits the charges to be billed to the actual underlying user of switched access services.ln
Sprint opposes Rocheixer's proposed clarification, arguing that the customer of record should
be billed, but states that it would not object to a waiver for Rochester limited to the
circumstances described in its petition.'" We will not issue Rochester's proposed clarification, because Rochester has presented no evidence persuading us that our decision in the Switched
Transport Expanded Interconnection Order was incorrect or unworkable, and we ctaffirm that
decision. We concluded that billing the customer of record would enable the LECs to measure
interstate minutes of use accurately and bill the charge to the appropriate party. The LEC, of
course, must be able to bill for the services it provides to its customers, and we will consider
granting waivers in circumstances meeting the normal waiver standard.l"
ntam of mrstate Use (pnn ReDo a. In theSwitched Tran- rt
Interconnection Order, we concluded that in cases in which IXCs arc able to report
loo. pen
end users' PIU data, LECs may, in their tariffs, require them to do SO.'^ .Sprint submits that
end users that are expanded interconnection customers of record - not the IXCs serving those
users -- should repon their own PN data to LECs. Sprint argues that requiring IXCs to report
PIU data to LECs when the customer of record is an etld user places an unwmted and
impractical burden on IXCs, because end users often split their Mic among several IXCs, and
IXCs may not be able to segregate aoy particular user's traffic for the purposes of PN
measurement."' No party apposes Sprint's request. We rcaffh our decision in our earlier
orders. If IXCs cannot accurately rcport end users' PIU data, it would be reasonable for LECs
to require the end user customer of record to report its FTU to the UC. LECs may use the
same PIU verification procedures for end user access customers that they now use for KXC
customers.
-Voice 0 Eauipmm . Thespec ial Access
mded htC~MeCU0n Order and the Switched Transwrt Eapanded In temnnm 'on Order
101. -n of Data-Over
required LECs to permit interconnectors laying their om circuit facilities to a LEC central
office to coilocate any type of basic transmission equipment, including data-over-voice @OW
MFS Switched Opposition at 6.
17* Sprint Switched Opposition at 5.
In general, to qualify for a waiver, a party must demonstrate that enforcement of a
generally applicable rule would not be in the public interest in the special circumstances under
consideration. Northeast Cew Tel. Co. v. FCC, 897 F.2d 1164, 1166 @.C. Cir. 19901.
WATT Radio v. FCC, 418 F.2d 1153, 1159 @.C. Cir. 1969); 47 C.F.R. Q 1.3.
.
I*' Sprint Switched petition at 13.
45
equipment, but not switches or enhanced service equipment.'n USTA and GTE argue that LEcs
should not be required to allow collocation of DOV equipment, because they assert that DOV
equipment is not used to provide a basic transmission service in conjunction with interstate
special access service &, as a substitute for LEC chamel terminations). Instead, USTA and
GTE contend that DOV equipment is generally used in conjunction with switched service
between copper-based local loops and split voice and data ports in the LECs' local switches, and
constitutes "equipment to be interconnected with LEC-provided transmission facilities" and not
included in the scope of expanded IDCMA and ITAA respond that DOV is
basic transmission equipment and note that several LECs offer tariffed services using such
equipment. They assert that iaterc~~ectors could use DOV equipment in COM~C~~OU with
special access services without conndg to the loop side of LEC switches and argue that
GTE's and USTA's proposed restriction would be anticompctitive.'' We mffirxn our
conclusion that because DOV equipment is basic transmission equipment, expanded inter-
connection customers have a right to vW collocation of DOV equipmet in LEC central
offices (or physical collocation for LECs that qualify for exemptiom from the vhd collocation
requirement). We clanfy, however, that we have not required the LECs to unbundle their loop-
side switched access common line services.
V. AVAILABILATY OF EXPANDED 3NTE.RCONNECTXON
102. QderslBac-. In our prior orders in this proceeding, we required all
Tier 1 UXs, except NECA pool members, to provide expanded herconnection, but did not
impose rccipmcai obligations on intcco~rs.lu
. GTE and USTA contend that
the Commission should require at least those common carrim that seek expanded inter-
connection to offer expanded-interconnection themselves on equivalent terms, as MFS had
origtnally proposed. GTE and USTA submit that reciprocity would help facilitate a level playing
field between competing Carriers, particularly given the policymakcrs' goal of a "network of
.. 103. (
in on Order, 7 FCC Rcd at 7413-14, 11 93-94 & '
n.224; -rt F- Lnter~o~ecti~ n Odq, 8 FCC Rcd at 7412-13, 7 63
la GTE Special Petition at 27-28; USTA Special Petition at 26-27; USTA Special Reply at
6; GTE Special Reply at 54. a, "Ex Special Opposition at 14-15.
lw IDCMA Special Opposition at 2-7; ITAA Special Opposition at 4-6.
Iu -A on Orclex, 7 FCC Rcd at 7398-99, 7403 n. 167.
11 56-58, 65 n. 167; Switched Tvrt EZrpanded IC nt mectioaQ& ,8 FCC Rcd at 7399
7400, f 40.
46
networks" in which LECs may wish to obtain fiber from CAPs or others, and given the
evolution of special kgernents between CAPS, cable television operators, IXCs, and others. '~6
104. MCI, Sprint, and AT&T appose requiring reciprocal interconnection obligations, because the LEcs, which possess bottleneck facilities, do not need access to
interconnector facilities to provide their services.'" MFS states that it is amenable to providing
collocation or equivalent interconnection to LEcs upon request, as long as other common
carriers using expanded interconnection @ut not end-users) are subject to similar obligations,
but adds that because it controls no bottleneck facilities, there is no need for the Commission
to require recipd intCIWMdOn rights.'w
105. piscu-. Section 201(a) of the Act alnady requires CAPs and other
common &ers to provide interconnections with other common carriers upon request. We
conclude that this general requirement is sufficient with respect to parties other than LECs, and
that our detailed mandatory virtual collocation rules should apply only to the Tier 1 LECs other
than NECA pool members. First, mandated expanded intemMection for parties other than
LECs is beyond the scope of this pmceding, because we did not propose in either of the notices
in this proceding to impose interconnection obligations on parties other than the Es. Second,
mandated expanded interconnection requirements are necessary because the LECs are dominant
carriers and control facilities to which other parties need access in order to provide service. In
the absence of any other identified public interest benefits in mandating reciprocity, we find no reason to impose expanded interconnection requirements on parties that lack market power and
do not control bottleneck facilities. MFS has indicated that it is willing to provide inter-
connection to its facilities voluntarily, and we believe that market foms are likely to induce
other nondominant interconaectors to do so to meet demand as well.
B. Parties that May Use Expand& Interconnection
106. (MedBac~. Currently, all piuties, including CAPS, MCs, and end
users, can make use of expanded intem~cct.ion. We concluded in our earlier orders that
AT&T and any other parties already located in the same building as a LEC central office could
use expanded interconx~&m to int~~~~ect with LEC facilities in the same manner, and at the
Same charges, as other parties.'"
IU GTE Special Paition at 24-26; USTA Special Petition at 27-29; USTA Switched Petition
MCI Special opposition at 11-12; Sprint Special Opposition at 9-10; Sprint Switched
at 10; USTA Switcbcd Reply at 5-6.
Opposition at 5; AT&T Switched Opposition at 2 n.2.
lU MFS Special Opposition at 21-22; MFS Switched Opposition at 6-7.
1. Restrictions on AT&T
107. pos itions of the partl 'es on Reconsideration. MCI contends that AT&T can
derive unique, unfair advantages from expanded interconndon using its collocated points of
presence (POPS) that result from its historical relationship with the BOCs. MCI provides
examples of ways it alleges AT&T could use interconnection arrangements to cut its access costs
by over 90% in many case^.'^ MCI recommends that AT&T be required to continue paying
channel termination charges in central offices when it currently bas POPS until another party
is taking expanded intercomdoo sexvice in that office, although MCI does not objezt to AT&T
obtaining expanded interconnection immediately in offices in which it did not have preexisting
collocated WilTel and CompTel argue that AT&T possesses monopsony power, and
could use that power to gain windfall benefits from interconnection. They contend that AT&T
may be the only IXC that can benefit from interwnnection. They thus assert that AT&T should
not become eligible for collocation pricing unless it installs an optical interhe, and recommend
prohibiting interconnection with copper cable without commission approval.192 WilTel
submits a quantitative analysis purporting to show that, given the LECs' rates for physical
collocation, an IXC or CAP located 1/2 mile from a cfntd office could justify interconnecting
only if it has enough traffic to fill at least 24 DS3s, while only 12 DS3s of traffic would be
needed to justify physical collocation for an IXC whose POP is at the central office.193
108. AT&T nsponds that these arguments amount to mmpts by its Competitofs
to obtain advantages through the regulatory process, and asserts that by requiring AT&T to pay
the same charges and use the same interconnection architecture as other interconnectors, the
orders already elimhatc any possible advantages it may have.lM GTK asserts that LEC pricing
should not depend on the identity of an intercomecting party, and that such distinctions may not
be consistent with Section 202 of the Communications
109. piscussiog. In the context of our mandatory virtual collocation policy, we
dm our conclusion that AT&T may use expanded in~~cm, and that if it does so,
MCI Special Petition at 3-9; MCI Switched Petition at 4-5; MCI Switched Reply a! 6-7.
19' MCI Special Mtion at 9-1 1, 13-14; MCI Special Reply at 2-7; d, CompTel Special .
Opposition at 6-8; Sprint Special Opposition at 10-11; WilTel Special Opposition at 15-17
(arguing that AT&T should not rcctive price ductions until a is ~IWXOM~X~C~).
lPL WilTel Special Petition at 3-4, 14-15; WilTel Special Reply at 8-9; WilTel Switched
Reply at 7-10; CompTel Special Opposition at 6-8.
193 WilTel Switched Petition at 9-1 1.
IM AT&T Special Opposition at 2-6; AT&T Switched Opposition at 2-6.
lcH GTE Special Reply at 3.
48
it must deploy the same facilities and pay the same charges as any other interconnector.'%
Restricting AT&T's ability to use expanded interconnection would impede the ability of the
largest potential access competitor to the LECs to enter the market, which would not be in the
public interest. Moreover, imposing such a restriction on AT&T would not promote cost-based
interexchange competition. To the extent AT&T has any advantage over other IXCs because
it has a larger number of POPS in closer proximity to LEC central ofices, this advantage is
offset by the added capital costs that AT&T incurred to deploy these facilities and the additional
operating expenses that they cause. Finally, such a restriction could remove an important market
check on abovecost pricing by the Tier 1 LECs in rural areas, where AT&T may be the only
party that could compete with LEC access services in the foreseeable future.
110. We arc unconvinced by the nondominant IXCs' arguments. In particular,
WilTel has offered insufficient information to assess the validity of the assumptions underlying
its quantitative analysis. Moreover, WilTel's analysis does not appear to take into account the
internal network costs of the party located at the LEC CtIltral office (such as the costs of
constructing and maintaining additional transmission facilities to reach the central office), as
opposed to those of parties located 1/2 mile from the LEC central office, which should offset
at least some of that party's benefits. Contrary to MCI's suggestions, AT&T cannot simply pay
C~OSS-COMCC~ charges instead of channel termination charges; if AT&T uses expanded inter-
connection, it must pay for and use the same co~ocation anangtments that other intem~cctors
use. In any case, for the policy .reasons given above, we reaffirm our existing rules relating to
AT&T's use of expanded interc~~tcti~n.
2. Restrictions on End Users
111. USTA submits that there is no nad to make collocation available to aon- 'on, because Section 201(a) explicitly common carriers to avoid unrtasonable dscnmmh
distinguishes caniers from others for in- 'on purposes, and the Commission need not
prejudge LECs' mdhods for responding to discrimination conmns.'" We are unconvinced by
USTA's argument, and rwffiw our decision that alJ parties, including non-common carriers,
may use expanded interconnection offerings - an approach that is consistent with our policy of
not distinguishing between caniers and users in the application of access charges.'m
. ..
.
7 FCC Rcd at 7403-04, 1, 65-68;
Switched Tmmrt handed Interconnection Order
IQT USTA Special petition at 6.
'- SUD~ 1 19 and authorities cited therein.
49
VI. EXPANDED INTERCONNECTION RATE STRUCTURE AND PRICING
A. Connection Charge Rate Structure
112. Ordersmackmo und. Connection charges arc the rates that LECs assess
interconnectors for the provision of expanded hterconndon services. In our earher FxDanded
Interconnection decisions, we did not impose detailed rate structure requirements for connection
charges, but did require that the co~ectioc charge rate structures that the LECs use reflect cost-
causation principles, and be unbundled to ensure that hterc~~ect~r~ are not forcsd to pay for
services that they do not need.'#
'a. In comments filed before the , which mandated unbundling of expanded inter-
ll3. bsitlons of the Fagties on reconsider at^
adoption of the Second RecQpsld '~ eration Order
connection rate structures, WilTel asserted that to prevent discrMnat~ 'on with respect to
individually negotiated virtual collocation offerings, LECs should be required to unbundle all
rate elements for such offerings to the maximum extent possible and should be permitted to offer
volume discounts only when justified by te~hnology.~ WilTel also submits that maximum
unbundling could enable the Commission to ensure that virtual collocation offerings are priced
consistently with physical collocation, and argues for pricing virtual collocation using physical
collocation rates as a starting point, and then deducting the cost savings resulting from using a
virtual anangemtllt.20' Ameritech contends that vixtual and physical collocation will be different
services, and terms and conditions will justifiably differ.=
..
114. -io n. In light of our decision to impose a mandatory virtual
colldon requirement, and based on the record on reconsideration, we naff'irm and expand
our requirements qarding the rate structure of connection charge. We conclude that we
should not at this time impose a Wed rate st~~cturc for connection charges under our
mandatory virtual collocation regime. For the reasons set forth in our eariier orders,= we
conclude that such a structure could be overly inflexible. We have found in our experience in
199 sm-o& 1, 8 FCC Rcd at 7368, 1 61; Switched Transport wded ,
IntercO&m my 8 FCC Rcd at 7417-18, 11 72-75.
WilTel Sw pdition at 7-10.
20' WilTei Special Paition at 11-13.
20) Ameritech Special Opposition at 15.
2of Smd Amss mw Intemmdon mer ,7 FCC Rcd at 7425-26,l 121; Second
ReconsrderaQon Ordcg , 8 FCC Rcd at 7368,161; SwitchedW~Interconn~or! m, 8 FCC Rcd at 7417-18, 1172-75.
50
the ongoing bv&gatiOn of the LEcs’ expanded interconnection tariffs,m however, that the use
of disparate rate structures can complicate the ability of interested parties and our staff to
evaluate the reasonableness of LEC rate structures and levels. Thus, we conclude that additional
guidance could facilitate the taxif‘f review process, and we set forth additional requirements to
guide the LECs’ choice of expanded interconnection rate StTUctllres.
115. First, we feaffirm for our new regime the rate structure principles adopted
in the Second Reco nsideratio n and the Switched Tranmrt Emanded Interconnection
Order, for the reasons stated in those orders.= Thus, we require the LECs to establish
reasonable, disagg~egated subelements for COMCC~~O~ charges pursuant to rate structures that (1)
to pay for services that they do not need, and (3) establish a cross-comect element that applies
uniformly to both physical and virtual collocation.
reflect costcausation principles, (2) are unbundled to ensure that inmmecton are not forced
116. In addition, the LECs’ rate svuctures must be clear and easy to understand.
Regardless of a LEC’s individual choice of rate structure, tbe facilities and services provided
under each rate element should be clear on the face of the tariff, and the tariff support information should idemfy the specific costs that are recovered by each rate element. In
addition, each rate element should logically relate to the Service function provided under that rate
element. For example, one of the basic functions of virtual collocation service is the provision
of a cable running from tbe point of interconnection of the LEC’s and intcmnnector’s networks
to.the temimion equipment in the LEC’s central office. An entrance cable rate element,
therefore, would logically recover the costs of cable running between these two locations.
117. Finally, we will require the LEcs to provide cost support data for their
September 1, 1994 virtual collocation tariff filings pursuant to a uniform Tariff Review Plan
(’I”) format established by the Common Carrier Bum. The TRP will dkggregate expanded
intem~ecti~n sewice into broad categories, or “functions.” For example, one TRP function
might bt the entrance cable function described above. Provision of basic cost data by TRP
function permits Commission staff and the interested public to compare the LECs’ various rate
svuctures and levels more effectively. We delegate authority to the Chief, Common Carrier
Bureau, to promulgate detailed reQuirements regarding the TRP format in a separate order.
B. ConnedionChargeRicing
118. -und. In the earlier mded Intcrconnct! ‘QB orders, we
concluded that LEcs should Iccover the costs of providing expanded interconnection services
through new CoMectiOIl charge elements. We required the LECs to set the initial rates for
nd ,8 FCC Rcd at 7368,
Interconnection w, 8 FCC Rcd at 7417-18, 11 72-75.
f 61; Switched Transport ExD anded
51
connection charges for
of overhead loadings.
expanded interconnection based on direct costs plus a mnable share
We required the LECs to derive direct costs using a consistent ,
methodology, and to just@ any deviation from uniform overfiead loadings that they propose for
connection charges. The same cost justification standards apply to both initial rate levels and
subsequent rate changes for connection
.. 119. mns of the Parties o n Reconside raleiap. ALTS quests ciarification of
the pricing standard to be used to just@ connection charge elements, arguing that there are
disparities between the application of overhead loadings to connection charges and to rates for
services subject to competition, and that such differences are anti-competitive and should be
eliminated.2m ALTS argues that the cumt pricing standard enables the ms to charge
exorbitant rates for expanded intcmnaection and engage in a classic codprice squeeze that
stifles competition.20d The LECs respond that they must be able to recover rcal overhead costs
in their rates.2o9
. TheCAPscomplainthatthe of the parties 1~1 Recent Fm
LEcs have imposed excessive charges for equipment under their cumt virtual collocation
tariffs.21o The CAPS pnopose that tbe LECs should be nquircd to purchase equipment from
bterco~e~t~r~ at $1 or other nominal amount, giving interconaectors the right of first refusal
to buy back the equipment at any timc for the same price. Under this approach, the CAPS asscrt
that the LECs would have no capital investment in equipment, and therefoe would be prohibited from marking up their costs to &flea cicprcciation, the cost of money, or ad va~om
.. 0. .. l20.
121. -. We continue to believe that the LECs must cost-justify the rate
levels for COMCC~~O~ charges, and that these rate levels must dve careful scrutiny by
Commission staff. The same scrutiny will be requid for both initial rate levels and subsequent
We also dm that expanded interconnection scMcts covered by connection charges will be
rate Changes in COM&O~ charges -sad both by price ~ap LECS and by rate-of-retum LECS.
, 7 FCC Rcd at 7428-33, fl 127-13 1,
134-37; Switched T-ded IntercqDnection Met, 8 FCCRcdat7419-21, f1 79-81,
206
83.
2m ALTS Spacial Petitioa at 19-20.
2o ALTS Switched Petition at 13-15.
USTA Special Opposition at 5; United Special Opposition at 15-16.
MFS J& (July 5, 1994) at 7-12.
MFS &r& (July 5, 1994) at 21-22; Electric Lightwave, Inc. (July 7, 1994)
at 3; Intermedia Communications of Florida, Inc. Ead& (July 6, 1994) at 2-3.
52
a excluded from the LECs' price cap baskets indefinitely and are subject to aon-streamhed tariff
review.z12 We are making some changes to our pricing rules, however, in light of our adoption
of a mandatory virtual collocation regime and our experience in reviewing the expanded inter-
connection tariffs filed under the existing rules. The LECs' cost-justified rates will be derived
from the direct costs of providing expanded interconnection service plus a reasonable amount
of overhead costs. We address these two types of costs in turn.
l22. pirectc osts. We reaffiRn that price cap LECs must derive the direct costs
of expanded interconnection offerings as provided under the price cap new services test. Rate
of return LECs that provide expanded interconnection should pmvide the cost information
required for new services under the applicable sections of our ~lt~.~'~ Thus, under our new
mandatory virtual collocation policy, the LECs must just@ the direct costs rcked to ail services
covered by connection charges (including those related to physical collocation provided pursuant
to an exemption), for both the initial level of these charges and subsequent changes.
Specifically, we quire the price cap LECs to derive the direct cost of providing similar types
of new offerings, including expanded interconnection services CoVercd by the connection charge
rate elements, based on consistent methodologies, unless they can just@ different
This requirement reflects our policy for the pricing of new services adopted
in the Price Cap proceeding.213 As notcd in our earlier expanded interCOMdO0 orders,
however, certain aspects of the new services test, such as risk premiums, arc not applicable to
expanded interconnection services.z16
123. The LECs' rates for virtual collocation services involving the central office
equipment dedicated to the use of ~~C~MCC~OIS arc likely to be the most expensive rate
elements in virtual collocation offerings. The purchase price of the equipment used to provide
these services will, of course, be an important factor in computing the LECs' cost-based rates
for these services, and we ncognize that then will be different purchase prices for different
types of equipment designated by intamnncctors. We therefore require the LECs to include
7 FCC Rcd , 8 FCC Rcd at
Access wed In terce w,
Intem~ection Orda
21z 47 C.F.R. 5 61.42(f). Snr;
at 7432-33, ff 136-37; Switched Tmn
7420-21, T 83.
213 47 C.F.R. 58 61.38 or 61.39.
214 a --&on , 7 FCC Rcd at 7428-29, 1127;
Switched Tvrt , 8 FCC Rcd at 7419, f 79.
53
in their September 1 tariff filings a description of the methodology they use to compute their
rates for services that-require the use of optical line terminating multiplexers (OLTMs), and
other equipment used to texminate, multiplex, and demultiplex circuits, based on the purchase
prices of the equipment. This will ensure that the rates paid by all interconnectors arc derived
in the same manner, and will enable interconnectors that wish to offer to sell equipment to the
LECs, or to designate equipment not previously tariffed, to pndict their charges for the services
that rely on the use of this equipment. The LEcs’ methodologies must be consistent with all
the rate structure and pricing rules set forth in this order. In addition, the LECs must specify
in their tariffs the actual charges for the equipment, calculated using the general methodology.
124. We are concerned about the reasonableness of the purchase prices of central
office virtual collocation equipment, as the rates for services involving use of this equipment will
be based on those purchase prices. For instance, LECs purchasing equipment that they do not
ordinarily use in their networks may not be able to obtain the volume discounts available to
interconnectors that regularly use such equipment in their naworks. Morc importantly, in
purchasing equipment, LECs do not have an incentive to obtain the lowest possible pritx, since
their costs will be passed on to their competitors, the interconnectors. To counter this problem,
we impose the following requirement on LEC pricing of OLTMs and other equipment with
similar functions used in virtual collocation arrangements. UECs must base the direct costs of
providing this equipment on the lowest purchase price reasonably available to them to serve an
interconnector. In applying this staadard, we would find prohive tbe price at which an inter-
connector may offer to sell the desired equipment to the LEC. Any costs incurred above the
lowest reasonably available price art not prudently incurred, and thus should not be reflected
in the LECs’ rates. The LECs, however, are not required to purchase the equipment from inter-
comectors.
125. This pricing approach will help ensure that LEC rates for use of this virtual
collocation equipment will be reasonable, and will limit the LECs’ ability to pay infiated prices
and pass them on in charges to intemnnectors. In addition, this approach will have the
desirable collateral effect of casing the transition from a mandatory physical collocation to a
mandatory virtual collocation enment. Specifidy, if a LEC were to stop providing
physical collocation, causing its expanded intcmnrxztion customers to shift to virtual collocation
arrangements, an r that currently uses tcnninating equipment in its collocated cage
may offer to sell that equipment to the LEC at a price lower than that otherwise available to the
LEC.
126. LECs may reasopably charge different rates to differeat customers if they
incur different costs to me tbase customers. To be sure, even virtual collocation offehgs
designed to meet the needs of individual intcmnnccton must be madc generally available to all
similarly situated intcrcowrs, and the actual rate kvels (as well as the gcnd methodology)
must be specified in the tariffs. In this context, however, an interconnector that relies on the
LEC to purchase equipment from a third party at a price the LEC negotiates is not similarly
situated to, and may not pay the same charges as, an interconnector that offers to sell the
equipment to the LEC itself at a lower price. Because the costs prudently incurred by the LECs
54
to Serve the different interconnectors are different in such cases, the difference i0 the rates
charged to different customers does not constitute unreasonable discrimination under Section 202
of the Communications Act.217 The LEC, however, must use the same basic methodology
specified in its tariff to compute all customers' rates.
127. We do not intend to limit the LECs' ability to use financial arrangements
other than purchasing equipment outright from third Wes. For instance, in their current
vimral collocation tariffs, some LECs allow the interconnector to purchase equipment and lease
it to the LEC. LECs may, if they wish, offer to purchase virtual collocation equipment from
interconnectors for a nominal amount u, $1) and make it available for resale to the inter-
connectors for the Same amount. We decline, however, to adopt the CAPS' recommendation
that we require the LEcs to offer such an anangement. Under our definition of virtual
collocation, the LECs own and control the central office equipment. A $1 sale and repurchase
right would effectively make the interconnector the owner of the equipment in all but formal
title, and would perhaps run afoul of the D.C. Circuit's analysis in &U &&mh 'c v. FCC. 218
US. Qverhead Costs. LECs incur overhead costs in providing expanded inter-
connection services, and should be allowed to charge reasonable amounts to recover these costs
in their rates for these services. We are concerned, however, that the LECs could attempt to
load excessive overhead costs on their connection charges. On the current record, we reaffirm
our decision in the &er orders in this proceeding that the LECs may include no more than
uniform overhead loadings in their rates for expanded interconnection services, or must justify
any deviations from uniform In other words, LECs may not mver a greater share
of overheads in rates for expaaded intercomdon seMcfs than they rccover in rates for
comparable services, absent justification. The LECs have the burden of demonstrating that their
connection charges mat this overhead loading standard, and an otherwise just, maable, and
not unreasonably discriminat0 ry. The price cap LECs may be required to submit additional
infodon to enable us to verify that the overhead loadings on the expandd interconnection
connection charges do not unreasonably differ from the overhead loadings on other services, for
which price cap LECs generally do not provide cost justification. We will carefully scrutinize
,998 F.2d 1058. 'tive Telecommumaons Ass 'n v. FCC
' ciDles and 1062 @.C. Cir. 1993), a 1 Alfred E. Kahn, The Eco normcs of Reeulabon: Pnn
63 (1970) (defining price discrimination as "charging differeat purchasers prices that
differ by varying proportions from the respective marginal costs of serving them"); Sea-LanQ
Service. Inc. v. ICC , 738 F.2d 311 (D.C. Cir. 1984) ("The core concern in the
nondiscrimiaatl 'on area has been to maintain equality of pricing for shipments subject IO
substantially sirnilat costs and CornpetitiVt conditions, while permitting Carriers to introduce
differential pricing where dissimilarities in those key variables exist.").
.. 217 47 U.S.C. 6 202. -
211 & A- 'c v. FCC , slip op. at 9.
7 FCC Rcd at 7429, 1128 & , 8 FCC Rcd at 7419, 1 79. n.291; Switched T~a,gmrt Fxpa~ded Interconnection Orda 219 ssr; SSEm Access -ded Inmtxmnection ordez,
55
the overhead costs that the LECs propose to recover through connection charges to ensurc that
they are reasonable. .
129. mer Pn 'cin~ Issues. We decline to require the LECs to set connection charges to ensure that hterconnectors using virtual and physical collocation arrangements pay
the same total prices, or to nqub that virtual collocation be priced using physical collocation
rates as a starting point and deducting the cost savings from using a virtual anangement, as
requested by WilTel. Virtual collocation and physical collocation an different services, and
each should be pnd based on the cost of providing it. We reaffirm our decision to require the
LECs to provide cost justification for any connection charges that would vary on a per circuit
basis because of the number or type of interconnected circuits we also mffixm our
conclusion that the LECs may not charge different rates for special acccss and switched inter-
connection rate elements, or for interconnection rate elements in different types of central offices
(Le., end offices, serving wire centers, m&m offices, aC.), unless costs differ.=' Inter-
connectors' wage rates are irrelevant to a determination of the cost of tbe service provided by
the LECs.
C. Contribution Charge
WO. orders/BackmMlad. A "contribution charge" is a rate element that r~~overs
subsidies or support flows embedded in LEC rates for services comparable to tbose provided by
~~~CWMCC~O~S. Certain soue~ permit a contribution charge in COMCCtioLl with expanded inter-
connection, and we conciuded in the Access -II Orde rthatin
theory a contribution charge would be reasonable if targabd to ncover specifically identified
regulatory support mechanisms or noncost-based allocations embedded in LEC rates subject to
contribution charge in the SDec;al Access med ~XOM&OQ . Instead, we took
steps to eliminatr. the only support flow that appeand on the existing Iccord to wanant a
contribution charge. We did, however, adopt a rule (47 C.F.R 0 69.122) permitting the LECs to seek the Commission's apgmval for a contribution charge applicable to special access
demonstrate the existence of any such support flows." In the Switched Twn ExDana
competition." We did not, however, permit tbe LECs to assess an intMstate special access
expanded htemMdon, aS Well aS to their own special accfss services, if they could
Inte- on& , we Co~lUdCd that tbe transport inte- 'on charge ~#;ovtrs revenues
on Or&, 7 FCC Rcd at 7425, 7 121 n.269. tzo
Sw&&~ed Tw FBI, 8 FCC Rcd at 7419-20, 7 80.
221 Switch& T rt Eapanded Lntermpnec tion Ordeg, 8 FCC Rcd at 7419-20, 7 80.
&&J
u., 7 FCC Rcd at 743639, 17 143-49.
-on &de I, 7 FCC Rcd at 7437, 1 146.
56
not recovered through other transport me elements, and therefore that there is no need for a
separate switched transport contribution charge?
l31. Positions of the Pam 'es on Reca nside ' &. MFS argues that individual LECs should not be allowed to seek permission to impose a contribution charge. Rather, it
contends that contribution charges should be slowed only following a rulemaking proceeding,
because any non-cost-based support flows that exist must exist for all LECs under the uniform
access rate structure. MFS asserts that any changes in the cost allocation and pricing rules
should be consistent across the LEC industry.= USTA responds that a E's own costs, not
an industrywide proceeding, should defme a cost-based contribution element.=
UZ. Discussioq. We feaffirm the principle, adopted in the Special Acr: ess
ded Interconnection Orde r, that interc~~ector~, as well as LECs, should provide
contributions to support any specifically identified regulatory subsidy mechanisms that are
embedded in LEC rates for seMces subject to competiti~n.~ This policy principle advances
our universal service goals in a manner that is consistent with the development of access
competition, by ensuring the continued recovery of any mgulatory subsidies or support flows that
clearly advance universal network access on an equitable basis.
133. Our rule on contribution charges for special access and expanded inter-
co~ection, 47 C.F.R. Q 69.122,, will advance this policy principle, under the new expanded
interconnection regime adopted in this order. No contribution charge was permitted in the
regulatory support flow identified in the record affecting the LECs' inters$ate special access
rates -- the over-allocation of General Support Facility costs. We eliminaterl that over-allocation
shortly thereafter.= Without evidence of other regulatory support flows within interstate special
access rates, we decline to modify for our new regulatory regime the policy principle, the rule,
or our procedures regarding contribution charges. We believe that MFS's challenge is
premature. If any LEC proposes a contribution charge, we will consider such a proposal on its
merits. As to switched transport, we find no reason to alter our conclusion that the transport
interconnection cbarge obviates the nccd for any separate contribution charge.
SDeC - ial Access Fspandcd Interconnection Ord er because we proposed to eliminate the only
D. Separations
Switched Transport mdcd Interconnection Order, 8 FCC Rcd at 7421, 1 84.
225 MFS special Petition at 22.
USTA Special Opposition at 5.
227-m- 'on ordel;, 7 FCC Rcd at 7436-39, 11 143-49.
9 Report and .. tu seat p& (jg 'on of Geaa Suprt FacJltlv Costs
Order, CC Docket No. 92-222, 8 FCC Rcd 3697 (1993), pets. for recon. -.
57
134. -. In earlier stages of this proceeding, some parties
argued that expanded interconnection should be accompanied by separ(uions changes because
interstate competition could lead to revenue shifts to the intrastate jurisdiction.229 We adopted
no separations changes in the Swial Access Feanded Interconnection Ord er and the Switched
TransDo rt ExDanded Inte rconnmon Orde r, because we found that any indirect cost reallocation
that might result from the implementation of expanded interconnection would not be of sufficient
magnitude to undermine universal service or threaten state regulatory Bdh orders
were, however, accompanied by notices of proposed rulemaking that referred to the Federal-
State Joint Board in CC Docket No. 80-286 the limited issue of whether separations changes are
needed to allocate properly the costs of, aud revenues from, expanded interconnection between
the state and federal jurisdictions.”’
135. - * * ns of the Parties on- ide m. NARUC submits that, pending
Joint Board action, the LECs should be required to exclude from the separations process an
amount of expense equivalent to the amount of revenues received for interstate expanded inter- c~~tction, to avoid cost-revenue mismatches.”’ The D.C. PSC argues that the Commission
should have dincted the Joint Board to consider the full impact of e- ~~~ICOMCC~~O~ on
separations, such as the reassignment of formerly interstate special acccss facilities to the state
jurisdiction caused by diversion of LEC interstare traffic to competitors. According to the D.C.
PSC, this trend could accelerate the reduction in telephone subscribcrshq in the District of
Columbia by increasing the costs that must be rccovercd from intrastate services.” GTE
responds that existing scpmi& jmccdum should continue to be used, rather than the interim
z9 w %?!mal Access ExDanAH1 IntmaBXmion order, 7 FCC RKI at 7483-85,Yf 242-46
and comments cited therein.
tK) Spec. Access F-dm r, 7 FCC Rcd at 7485-86,1247; Switched
rt FW In-n Q&, 8 FCC Rcd at 7446-48, 11 147-51
w, 7 FCC Rcd at 7485-86, 11 247-48; 231
Second Notie, 7 FCC Rcd at 7749, 71 54-55; Switched T-ded In tCtcOMCC tion
ptber, 8 FCC Rcd at 7446-48, 11 147-51.
252 NARUC Swhl Wtim at 22-23.
23’ D.C. PSC Special Petition at 1-5 (arguing that a~ competitioll develops ad the LECS lose
market share more rapidly with respect to interstate than intrastate services, a greater proportion
of the LECs’ facilities will be used for inuastatc purposes, causing a greater proportion of costs
to be allocated to the state jurisdiction).
58
procedures proposed by the states, but argues that a comprehensive separations review is
necessary?
136. Piscussioq. We feaffirm our earlier conclusions concerning the possible
need for separations changes in response to the adoption of expanded interconnection
requirements for special access and switched transp~rt.~’ The policies we adopt here create no
reason to alter those conclusions. Thus, while we find no reason to delay implementation of
the requirements set forth in this order, we leave in place our cumnt referrals to the Joint Board
concerning whether separations changes arc needed to ensuxe a mimable jurisdictional
allocation of expanded interconnection costs and revenues.
137. Having reviewed the record on reconsideration, we decline to broaden the
scope of our referral to the Joint Board. A comprehensive review of sepaxations and cost
recovery is not necessary to resolve the limited issue of the jurisdictional allocation of the costs
of and revenues from expanded interconnection. We also decline to modify our separations
procedures, as proposed by NARUC. Because the initial magnitude of expanded interconnection
costs and revenues is likely to be very small relative to LECs’ total regulated costs and revenues,
we conclude that any effect of the existing rules on the overall separations allocations should be
minimal and should permit ample time for the Joint Board to make a ncommendation to the
Commission.
A. InGenemI
l38. -d/Orde~~. Before we adopted the expanded interconnection
ordtrs, the LECs were permitted to offer special access - but not switched transport - with
term and volume discounts, and were required to offer all special and switched access services
at geographically averaged rates in each study area. In the Access F-ded Inte r-
common ordef, we permitted LECs with operational special access expanded intercomdon
arrangements in a study ana to introduce density zone pricing for special access in that study
arca. We defined special access expanded interconnection as “Operational” after at least one
interconnector has taken a spacial access crossconncct element.* Density zone pricing is a
systcm that pelmits the Es gradually to deaverage their special acctss rates by zones in a
study arca. In the Switched -mded Interconnection Order , we permitted LECS
GTE Special 0ppo~itiOa at 22-23.
a5 sbec ial Accws ExDanded Interconnectio n Orde r, 7 FCC Rcd at 7485-86, 11 247-49;
Second No0 ‘q, 7 FCC Rcd at 7749, 11 54-55; Switched Tranmrt Exrzgeded Interconnection m, 8 FCC Rcd at 7447-48,11 150-51.
59
with operational switched transport expanded interconnection arrangements in a study area to
implement density zode pricing for switched transport in that study area. We ais0 allowed the
LECs to offer volume and term discounts on switched transport services after interconnectors
have subscribed to a Certain number of switched expanded intercoanection cross-~~nnects.~~
l39. TheTeleportPeb 'ha. After the court issued its ruling in Bell Atlantic V.
the additional pricing flexibility granted to the LECs in the - Access Exuanded Inter-
FCC, Teleport fded a petition for declaratory ruling requesting that the Commission eliminate
gonnemon Ordeg unless those LECs voluntarily provide physical collocation for special and
switched access expanded hterconnection.U* Teleport argues that the Commission determined
that physical collocation is the best way to ensure that the LECs provide interconnection on the
same terms as the interconnection they provide to themselves. Teleport further contends that
the additional pricing flexibility granted to the LECs was pnmised on the mandate of physical
collocation, and that without physical collocation, "the rationale behind the FCC's pricing
flexibility standard falls away."239 According to Teleport, limiting the availability of pricing
flexibility will present a strong incentive for LECs to provide physical collocation, and an
"appropriate reward" to those who do.uo Finally, Teleport claims that if Lw3s continue to
benefit from pricing flexibility without any incentive to provide physical collocation, the pace of developing competition will be slowed.
140. ALTS'supports the Teleport petition, arguing that the policy and legal
underpinnings of increased pricing flexibility wen eliminated by the Court's decision in
mtlC V. FCC . ALTS argues that the "significantly increased potential for cornpetition made
possible by expanded interconnection" will not be achieved without physical mllocati~n.~~
Whereas Teleport's petition directly addresses only density zone pricing for special access,
ALTS urges that Telepxt's request is equally applicable to the pricing flexibility that the
Commission has granted for switched transport. ALTS notes, however, that it is not arguing
that there are no circumstances under which virtual collocation could create a level playing field.
Rather, ALTS argues that a level playing field is mom difficult to achieve where the only
interconnection available is virtual collocation, ad when the Commissioa's rules have not been
modified to adequately ensure that virnral collocation is compaablc in all relevant respecu to
237 sSu0=u - htercqf-im 7 FCC Rcd at 7451-58, 11 172-86; ~mumct.~on Order
120.
term discounts for switched transport, in more detail below.
We descnibe bow the da~sity pricing system works, and the N~CS on volume and
=* Teleport Petition for Declaratory Ruling (frled June 10, 1994).
ALTS Comments 0x1 Teleport Petition at 3-4.
60
_-
physical.az Electric Lightwave, Inc. (ELI) also fded comments in support of the Teleport
petition. ELI argues’that vixtuaJ collocation is inferior to physical collocation, reduces the
effectiveness of the Commission’s expanded interconnection policies, and justifies a retraction
of the previously granted pricing fle~ibility.~~
141. Bell Atlantic, GTE, Pacific, SW Bell, and Arneritech oppose the Teleport
petition. Some of these LECs argue that Telcport’s request is premature and procedurally
improper because the mandate in Bell A tlantic v. FCC has not yet iss~ed.~ The LECs assert
that under the Commission’s rules, density zone pricing is linked to any form of operational
expanded interconnection crosscoMtct, not necessarily a physical cokcation c~oss-coM~~~.~~
They contend that Teleport’s request would circumvent the effect of the Court’s order by
withholding the pricing flexibility that they assert they need to compete unless they allow third
parties to occupy their property.= Some LECs submit that more pricing flexibility is needed,
not less, given the growth of competition and the rigid limits on LEC pricing under the existing
density zone pricing and switched transport discount rules.” Amentech notes that CAPS’
representatives have stated publicly that their ability to compete is not affected by the
Atlantic v. FCC decision.w Finally, SW Bell asserts that at least some LECs wiU likely choose
to offer some form of expanded interconnection that is satisfactoxy to the Commission even after
the Coun’s mandate issues, and that the Commission should look to what the LECs are actually
offering, as opposed to what they arc legally nquired to offer, in making decisions concerning
pricing fl~xibility.~~ Sprint/Unitcd also opposes the petition. It renews its argument on
reconsideration that density zone pricing should be permitted even if expanded interconnection
u3 ELI Comments on Teleport Petition at 1-2.
Pacific Opposition to Tkleport Petition at 2-3; SW Bell Opposition to Teleport Petition
at 1-2.
GTE Opposition to Teleport Petition at 2-3; Pa& Opposition to Teleport Petition at 4;
SW Bell opposition to Telqxmt Petition at 2-3; Amentech Reply in Support of Oppositions to .
Teleport Petition at 2. & SprintAJnited Opposition to Teleport Petition at 2 n.4.
u6 GTE opposition to Teleport Petition at 1-2; Pacific Opposition to Teleprt Petition at 3-
4.
24’ Bell Atlantic Opposition to Telcport Petition at 1-5; Pacific Opposition to Teleport
Petition at 4-7; Amentech Reply in Support of Oppositions to Teleport Petition at 1-2.
Amentech Reply in Support of Oppositions to Teleport Petition a! 2-3.
SW Bell Opposition to Telqort Petition at 3-4.
61
is not operational, because it enables LEcs to tailor prices more closely to costs, and thus
creates correct economic signals that facilitate sound entry decisions by CAPS.^'
142. Positions of the Parties on Reconsiderao 'oq. Even under a general mandate
of physical collocation, the CAPs have generally advocated reversal of the grant of additional
pricing flexibility to the Es. Teleport argues that special access expanded interconnection
increased competition for only a limited market segment (for connections to MC Pops, not for
low density COMCZ~~OUS to end user premises), and that special access volume and term discounts
aiready give the LECs the practical benefits of deaveraged MFS and ALTS maintain
that the LECs have sufficient pricing flexibility for switched transport under the price cap rules,
continue to control bottleneck facilities and dominate markets, and do not need additional
flexibility (density zone pricing or volume and term discounts) to respond to competition before
a more substantial amount of competitive entry has occurred.s2 They assert that no additional
flexibility should be allowed until the Bureau completes its inquiry into special access volume
and term discounts.y3 ALTS and Hyperion argue that the Commission should move
restrictions on the LECs in the Same manner as it did for AT&T in the interexchange market --
gradually, and not until after competing providers had made substantial inroads in the market.2Y
143. The LECs contend that, in ligbt of the competitive inroads of CAPS and
others, and the likelihood of rapid competitive advances in the highly colKxIltratcd acccss
market, additional pricing flexibility is needed to prevent price umbrellas or market she
allocation that could deprive customers of the benefits of moR rigorous competition.tu Several
SprintNnited Opposition to Teleprt Petition at 2-3. This filing represents the company's
position both as LEC and as IXC.
u1 Teleport Special Petition at 15-17; Teleport Special Reply at 5-6.
y2 MFS Switched Petition at 4-10; MFS Switched Reply at 1-3; ALTS Switched Petition
at 5-13; ALTS Switched Reply at 1-3.
y3 ALTS Special Petition at 22-23; MFS Switched Petition at 13-14.
ALTS Switched Petition at 9-11; ALTS Switched Reply at 7-8; Hyperion Switched .
Petition at 8.
USTA Special Oppition at 2-4; Bell Atlantic Special Opposition at 2-3 (submitting
independent muket analysis pyrporring to show that CAPS have already obtained 20-3096 of
market share in targeted artas); Rochester Special Opposition at 6-8; United Special Reply at
1-7 (stating that delaying LE42 pricing flexibility will force AT&T, customtr of 60% of access,
to shift traftic from LECs to CAPs); USTA Special Reply at 1-2; Ameritech Switched
Opposition at 3-4; BellSouth Switcbcd Ojpsition at 2-6; "EX Switched Opposition at 4-6,
11-12 (noting that a large market sbare does not necessarily indicate market power, paxticularly
in undesirable, regulated markets); United Switched Opposition at 2-3; USTA Second Special
62
LECs note that ALTS’ and Hyperion’s arguments that restrictions on LECs be maintained until
they have lost a certairi share of the market ignore the realities of the access market: a few large
customers, high elasticity of supply and demand, and less potential overall market growth than
the interexchange
144. Discussion. We deny the Teleport petition and reject the claims for
wholesale reversal of our density mne pricing policy, except that we slightly modify the
threshold standard by changhg the definition of when expanded interconnection is
“operational,” as set forth in 11 154-56 below.
145. We deny Teleport’s quest because the need for additional LEC pricing
flexibility does not hinge upon the choice between virtual collocation and physical collocation.
Access competition should accelerate with the implementation of expanded interconnection, whether in the form of virtual collocation or physical collocation. In adopting a mandatory
virtual collocation policy, we intend to ensure the availability of a reasonable expanded inter-
connection offering that gives inter~o~e~tor~ a realistic opportunity to provide special access
and switched transport services in competition with the LECs. Thus, malting additional pricing
flexibility available only to LECs that opt to provide physical collocation appears unwarranted.
146. AS we stated in our earlier orders in this pmcecding,m excessive constraints
on LEC pricing and rate stnrcture flexibility during a time of increasing competition will deprive
cummen of the benefits of competition and give the new entrants false nomic signals. At
the same time, we mwgnize that inadequate restrictions on LEC pricing and rate structure could
permit competitive abuses that would stifle economic competitive entry and place excessive cost
burdens on customers of less comptitive services. We conclude that density zone pricing for
special access and switched transport, as well as our switched transport discount rules, strike a
reasonable balance between these compe%hg concerns under our mandatory virtual collocation
regime.
147. We rcaffim under the new regime our conclusion that retention of study-
area-wide rate averaging or a flat restriction on discounted offerings could maintain LECs’ prices
at artificially high levels in lowcost anas and thus create a pricing umbrella for the CAPS,
Reply at 1-3; GTE Switched Reply at 1-4; Rochester Switched Reply at 1-2. & & API
Special opposition at 9-10.
m &, u, Pacific Switched Opposition at 12-16, ca wial Access Errpandcd In ter-
common m, 7 FCC Rcd at 7422 n.253 (distinguishing the development of competition in
the acctss and interexchange markets); USTA Switched Reply at 2.
7 FCC Rcd at 7421-22, , 8 FCC Rcd 7451-55, 11 110-15, 172-79; Switched Tmrt Fspanded Internuslion order
s7 eeneraUv special Aaxss ded Interconnection Oda,
at 7426-27, 7433-34, 71 98-100, 115-17.
63
depriving customers of the benefits of more vigorous RcsU-aining full compeuion by the LECs even when they are the low cost sewice providers could further deny
consumers the benefits of reduced prices from competition, increase the LECs’ competitive
losses under expanded interconnection, and might cause LEC rates for less competitive services
to rise. Ln addition, some parties might enter the market who would not do so if LEC service
fates were permitted to reflect more dconomic pricing. Similarly, requiring the LECs to
maintain below-cost prices for potentially competitive services in high-cost arras could depress
LECs’ incentives to invest in modernizing their networirS, and could deter competitive entry.
We will not, therefore, limit pricing flexibility in the manner that Teleport requests.
148. With regard to the issues raised on reconsideration, and the question of whether any modifications to our previously adopted pricing flexibility rules is warranted under
our new regime, we generally rcaffLvm our decisions in the expanded interconnection orders
regarding LEC pricing flexibility. We address the specific issues relating to density zone
pricing, volume and term discounts, and related issues raised in petitions for rtconsideration at
greater length below.
B. DemityzoIlePricing
1. Threshold Required for Implementation
149. Orders/BackPFound. Inthc&r, we permitted LECs to inaoduce density me pricing of interstate high-capacity special access
in a study am after their expanded interconnection offerings am operatid in that study area -
that is, once at least one intcmr has taken a special access CTDSS~~ eIern~nt.”~ In
the Switched TreaspphEc_banded mmdn Order , we permitted LEG to impkmeat
density zone pricing of interstate switcbed transport in a study am once their e- inter-
connection offerings are operational in that study area -- that is, afttr at least one interconnector
has taken a switched crossaanect element.m
’ . Several LECs argue that zone
pricing should be available after expanded intcrconnaction tariffs am effective, rather than after
an interconnector takes the Service, in order to enable LECs to set ratts more in line with costs,
.. 150. -ofthew-
2s: lo” olr& , 7 FCC Rcd at 7454, f 178.
239 Aw-ection ordcc, 7 FCC Rcd at 7454, 7 179 & 11.41 1.
-on Onla, 8 FCC Rcd at 7426-27, 199 &
11.230.
and to avoid giving uneconomic incentives for entry?' SpMt and other IXCs maintain that
zone pricing should k available regardless of whether expanded interconnection is operational,
because zone pricing enables LECs to set rates closer to cost, facilitates sound network planniag
and decisionmaking by IXCs, and eliminates any justification for maintaining artificial DS3/DS 1
rate ratios or uneconomic volume
151. MFS and ALTS argue that instead of obtaining statewide pricing flexibility
in response to a collocation arrangement, LECs should obtain pricing flexibiIity only in the
specific metropolitan area where a CAP is providing competitive service using a collocation
arrangement.263 MFS proposes that density zone tariffs not be permitted to become effective
until the earlier of: (1) 12 months after a party other than AT&T has an operational inter-
connection arrangement, or (2) when interconnection arrangements are operational in central
offices that sexve at least 25 96 of the total interstate special access circuits, weighted by capacity,
in a geographic area.m MFS argues that since both density zone pricing and volume and term
discounts give the LECs substantial pricing flexibility, LEC density zone pricing should not be
permitted unless LEC volume discounts, including implicit volume discounts contained in
DS3/DSl/voice grade relationshrps, art justified separately by cost conditions in specific
zones.24J The CAPS, MCI, and Ad Hoc oppose the LECs' request to engage in density zone
pricing before an interconnector takes service, arguing that the existing requirement gives LEcs
an incentive to cooperate in implementing interc~~ecti~n, that no CAP would commjt "market
suicide" by avoiding interconnection to prevent deaveraging, and that averaged prices do not
give CAPs incorrect pricing signals because the CAPS take into account the likelihood of Iater
deaveraging.366
261 USTA Special Petition at 20-21; GTE Special Mtion at 22-23; Rochester Special
Petition at 15-17 (noting that two CAPS are providing service in competition with Rochester, but
that neither has used Rochester's inmastate collocation offering); United Special Mtion at 9- 12;
Amentech Special Opposition at 17; GTE Special Opposition at 6; USTA Switched Petition at
4-5.
262 Sprint Special Petition at 2-3; Sprint Special Opposition at 3-4; CompTel Special
Opposition at 10-1 1; WilTel Special Opposition at 11 ; Sprint Switched Opposition at 1-3.
363 ALTS Special Pdtiou at 23; ALTS Switched Reply at 3-4 (terming geographic
deaveraging a fonn of chammt~ '0x1 against customers in less dense service artas); MFS Spccul
Petition at 23; MFS Switched petitioa at 12-13.
. ..
* MFS Special Petition at 23-24.
IdJ MFS Special petition at 6; MFS Switched Petition at 11-12.
266 ALTS Special opposition at 9-10; MFS Special Opposition at 18-20; MCI Specul
Opposition at 5-6; Ad Hoc Special Opposition at 19-21.
65
l52. The LECs and Sprint oppose the delays in density zone pricing proposed
by the CAPS, contending that density zone pricing merely allow rates to reflect cost differences,
and that competition will begin even before, and certainly after, the fm crossannect is
~peratior,d.~~ United assem that the proposals of MFS and ALTS to allow LECs to lower rates
in dense areas but not to bring prices in other zones closer to cost is unfair and essentially would
force LECs to lose revenue.zu United contends that MFS's solution to the perceived problem
of AT&T's "headstart" -- resuaining LEC flexibility when AT&T uscs expanded inter-
connection, and permitting flexibility oniy when a party other than AT&T intercoMects -- only
exacerbates the problem and penalizes the LECs without rcstmnm * gAT&T, because AT&Tcan
and does compete with LECs in providing local transmission.m
153. -. We feaffirm for our new ngime the conclusion that LEcs
with "operational" expanded interconnection offerings for special access in a study area should
be allowed to implement density zone pricing of special access in that study arca, and similarly,
that "operational" switched expanded interconnextion should enable LECs to implement density
zone pricing of switched transpor~.~ Substantial changes in the LECs' expanded iatcrconnection
offerings are likely, however, in light of the Bell Atlantl 'c v. FCC decision and the mandatory
virtual collocation policy we adopt in this order. We believe it is important to reflect these
changes. Accordingly, we modij. our definition of when expanded interconnection offerings
are "operational."
154. For the purpose of our mandatory virtual coUocation ngime, we defme
expanded interconnection offerings as "aperational" when and if an interconnector has taken a
CIOSS-COM~~~ element in connection with a tariffed expanded interconnection offering our new mandatory virtual collocation policy becomes effective. We believe that this change will
give the LECs an incentive to cooptrate in providing expanded interconnection pursuant to our
new policy, and wiU ensun that expanded interconnection pmvidcd under the new rules gives
interconnectors a nalistic apportunity to compete with the LECs before we permit LEcs to
engage in density zone pricing. The fact that an intcmnneuor took a cmss-co~~l~cct prior to
implementation of the new rules will not qualify a LEC for density zone pricing if previous
%' Ameritech Sp&I Opposition at 17; GTE Special Opposition at 5-6; GTE Switched
Reply at 4-5; United Special Opposition at 2-4, 6 (noting that it docs not offer volume or term *
discounts on sped access); Amentech Switched Opposition at 3-4; Bell Atlantic Switched
Opposition at 5; "EX Switcbed Opposition at 5; Pacific Switched Opposition at 16-18.
United Switchad Opposition at 2-3; Sprint Switched Opposition at 1-3.
261 United Special Opposition at 2.
269 United Special opposition at 4-5.
66
interconnectors cease taking expanded interconnection, and no new interconnector takes service
after the mandatory virtual collocation rules are implemented.
155. Thus, an offering will be considered "operational" under our new regime
in the following circumstances: (1) an interconnector has taken a cross-connect pursuant to a
generally tariffed virtual collocation offering pursuant to our new rules; or (2) an interconnector
has taken a cross-connect pursuant to a physical collocation offering subject to the terms of this
order. In this second case, the interconnector need not have started taking the cross-connect
after our new regime becomes effective, so long as it continues to take the CroSS-COMect under
the new rules. In study areas where a LEC has implemented density zone pricing, we will
require the LEc to file, sixty days after the effective date of the LEc's new expanded inter-
connection offering, tariff revisions effective on 15 days notice that reestablish averaged rates
throughout the mdy area pursuant to 0 69.3(e)(7) of our rules if no intercomator has taken a
cross-connect under our new regime.n1
156. We reject proposals to &lay any competitive rate changes by the LEcs for
an arbitrary time period (such as the 12 months proposed by MFS) or until after they have lost
a specified proportion of market share. A threshold based on a simple percentage share of
mark& penetration by LEC competitors comes too close to allocating market shares among
competitors. We do not intend to try to determine competitive outcomes. Rather, we intend
to expand opportunities for new .entrants as well as incumbent providers to compw. As stated
above, we will consider empirical evidence on the development of access competition in
evaluating whether to grant the LECs additional pricing flexibility in the We also
reject the CAPS' suggestion that LECs be permitted to reduce rates in highdensity areas but not
to increase ram in lowdensity arcas, when they may be below cost due to past geographic rate
averaging. Finally, making density me pricing for price cap LECs umditional on cost-
justification of special access volume discounts would be inconsistent with price cap regulation.
Under price cap regulation, the threshold justification for subsequent rate changes is tested
primarily by reference to the indexes and bands of price cap regulation, not cost studies.
2. price cap structure
157. Ode-. In earlier orders, the Commission created new price
cap service subcategories for LEC offerings in different zones, within the existing service
categories and subcategories. The zone subcategories have upper pricing bands of 5 % and lower
bands of 10%. In the year during which a LEC introduces density zone pricing, the LEC must
apply the same upper and lower bands to all of the zone subcategories for a given service, but
*
zl* 47 C.F.R. 8 69.3(e)(7).
272 ~suora 179.
67
the rate levels may diverge to the extent permitted by the upper and lower bands without the
justifications that the price cap rules require for above- or below-band rates.m
158. Pos itions of the Parties on Recons ideration. USTA submits that LECs will be unable to use the +5 %/-lo% pricing bands for the zones because of the interplay with the
overall DS1 and DS3 subindexes. USTA also asserts that separate and overlapping DSl and DS3 subindexes with duplicative zone subindexes are redundant and reduce price competition,
and asks that the zone subindexes be widened and that other subindexes be USTA
contends that the upper bands in the highcost zone =move incentives to deliver service
improvements because rates will be substantially below cost.n’ USTA asserts that the 90 day
frling period and tariff support requirements for above band filings will deter and delay the
implementation of compensatory rates in high cost areas. It argues for reducing the filing period
and streamlining the cost support.n6 Specifically, USTA recommends modtfying the tariff
standard for above-band rate zone Nings to include a showing that the pmposed zone revenues,
when aggregated, are no greater than the study am revenues before zone pricing was
implemented.m Several other LECs also argue that the zone subindexes do not provide adequate
pricing flexibility and are inconsistent with full competition and with the rationale behind the
price cap system.m
159. United argues that broader annual pricing bands arc needed, such as
+20%/-20%, to enable LECS.~~ move pries rapidly toward costs.m united ah seeks
clarification that the LECs may continue to average multiple study areas and to use a single tariff
for multiple optrating companies.uo Sprint, CompTel, and WilTel argue that broader
differences should be pcrmiaed for initiaI rates in different ulna (iE, set iniW zone rates
based on the costs of service in each zone), or broader bands such as -20% and +lo% or
+20% for subsequent rate changes, to enable LECs to set prias based on cost and to give
~~
mw Ams ded btcrcom ‘on Me r, 7FCC Rcd at 7456, 11 181-83;
Switched Trarlgprt -dcd Wrcona aQiQn Qrder , 8 FCC Rcd at 7430-32, 11 109-112.
~7‘ USTA Special Petitioa at 18-20; USTA S@d Reply at 3.
f7s USTA Switched petitioa at 5.
n6 USTA Special Mtim at 20.
USTA Switched Petition at 5.
* GTE Special petition at 20-21; Rochester +cial Petition at 17-
Opposition at 7-8.
United Special Petition at 12-13.
uo u. at 13-15.
68
2; united special
proper access planning incentives to IXCS.~" WilTel also agrees with some ms' arguments
that the zone-&ific pricing subindexes eliminate the need for overall floors for DS3 and DSI
rates, and argues that the double layer of indexes could require a LEC to increase rates in low-
density zones to offset a decrease in the highdensity zone.*
160. The CAPs, MCI, WilTel, and Ad Hoc oppose LEC proposals to eliminate
pricing bands or otherwise substantially broaden LEX3 pricing flexibility, contending that the
price cap bands are necessary to protect against cross-subsidization of the LECs' competitive
services by captive rural customers and to prevent abuse of the LECs' market power.2a3 Ad Hoc
does not oppose a reasonable increase in the LECs' downward pricing flexibility in contested
markets, short of predation, but states that this right should not just@ predation in monopoly
markets.2w MFS argues that if density zone pricing is allowed, LECs should have to
demonstrate that the ratio of revenues to average variable cost in the highatdensity zone is no
less than that ratio in the lowestdensity zone.w
161. The LECs respond that MFS's proposed rigid ratio requirement would
restrict the LECs' ability to compete using cost-based prices, and would result in economic
inefficiencies and umbrella pricing. They also argue that MFS's proposal could unfairly require
LECs to lower prices throughout a study area, including in lowdensity artas where prices are
already below cost, to compete with CAPs, and would essentially constitute a return to
regulation based on fully distributed costs.- "Ex contends that price cap regulation was
dkveloped to enable IECs to price services efficiently k, servicw with elastic demand
relatively close to marginal cost and services with inelastic demand relatively high above
Sprint Special Petition at 3-6; Sprint Special Opposition at 4; Sprint Switched Petition at
3-5; Sprint Switched Opposition at 3-4; CompTel Sj~~ial Opposition at 12; WilTel Special
Opposition at 11-12.
tt2 WdTel Special opposition at 12-13. . ALTS Special Opposition at 10-11; MFS Special Opposition at 17-18; MCI Special
Opposition at 7; Ad Hoc Special Opposition at 19-2 1 ; MFS Special Mtion at 10-13; WilTel
Switched Oppsition at 5-6. United Special Reply at 4-5 (contending that density zone
ends an urban-twural cross-subsidy, rather than creating one).
Ad Hoc Special opposition at 21.
2~ MFS Switched Petition at 12; MFS Switched Opposition at 34.
216 USTA Switched Opposition at 5; GTE Switched Opposition at 11-12; "EX Switched
Opposition at 7-1 1.
69
marginal cost), and to avoid the inefficient incentives crated by costsf-service ng~lation.~*~
Rochester submits that subsidization only occurs when a company prices a service below
incremental cost, for which average variable cost is a surrogate. Thus, Rochester asserts that
MFS's concern would have merit only if the ratio of revenues to average variable cost were less
than one in any particular zone, regardless of the relative ratios among zones. Rochester also
argues that in a competitive market, profit margins can be expected to vary in different
geographic areas.2aa
162. Discussipg. We find no need to amend the price cap rules for density zone
pricing under our mandatory virtual collocation ngime. Moreover, we redfirm our decisions
regarding the price cap strumre for density zone pricing under the pre-existing rules, including
the +5 %/-lo% pricing bands that apply to the zone subindexes, the retention of the overall DS1
and DS3 pricing bands, and the existing tariff procedures for above-band rate changes. We
continue to believe that we granted the LECs a rtasonable degree of pricing flexibility with the density zone pricing system, and nothing in the record convinces us to the contrary. As we
stated in the Special Access Ebrpanded In temnngnipn , we intend to monitor the density zone pricing system carefully and to review it in 1995.m Measures to increase the LECs'
pricing flexibility may be appropriate in the future, however, as the access market grows more
competitive.
163. we also decline to adopt MFS'S masideration proposal to require the LECS to demonstrate that the do of revcaucs to average variable cost in the highestdcnsity zone is no less than that ratio in the lowestdensity zone. First, we believe that the problem
about which MFS is coacerned - ratcs that art well in excess of costs in low-density zones -
is unlikely to occur in the near future. Evidence in the record indicates that the differences
between the costs of serving different geographic arcas are substantial, although the rates were
averaged before the implementation of density zone pricing.m Thus, at present and for the next
few years, we believe that with the limited pricing flexibility permitted the LECs, rates in low-
"EX Switched Opposition at 3-7, Natiot2gl Rural Telecom Ass 'n v. FCC,
988 F.2d 174, 182 @.C. Cir. 1993) (upholding price cap reguhon of LECs, and pointing out
that it facilitates Ramsey pricing); a &Q 7 128 (LEC responses to similar arguments in
context of volume and term discounts).
zll Rochester Switched oppxition at 3, -. co .v .7&& hdi~ m, 475 U.S. 574 (1986) (subsidimtion occurs only in case of predatory pricing); &y Foods,
bc. v. Fe. IpEL , 614F. Supp. 1073 (N.D. Ill. 1985) (rejecting geographic cross-
subsidization argument and concluding that in a competitive market, pro& marghs can be
expected to vary in different gqmphic anas); Rochester Switched Reply at 3.
%%?sGiaJ A- ExDandedrcQmdon ordec, 7 FCC Rcd at 7452,l 175 & n.405
and evidence cited therein.
70
density zones are unlikely to be substantially above cost. Second, we conclude that the rate-to-
cost ratios may rcaso&bly differ for similar services in different zones, within the limits of our
price cap rules. When we adopted price cap regulation for the LECs, we explicitly recognized
that deviations from fully distributed cost (embedded costs plus a proportional share of joint
costs) may be desirable and in some cases can maximize the consumer welfare created by
regulated carriers.29* To protect against the LECs' ability to disadvantage one class of customers
to the benefit of another, the Commission used the baskets and bands mechanisms of price cap
regulation.
3. Defdion of Zones
164. orders/Backgpund. IntheSyd * Access Expanded Interconnq 'on Order,
the Commission directed LECs to assign central offices to zones based on cost based factors
such as the density of total interstate special and switched traffic. Channel termhations or
entrance facilities from a given central office are classified in the zone to which the office is
assigned. Interoffice facilities between central offices in different zones an classified in the
higher-priced, less dense of the zones, because the Commission concluded that "this
classification will be consistent with traffic density patterns and underlying costs."292 In the
Switched TmWn Fxpanded -M&On Order , the Commission directed the LECs to use
the same zooe definitions for switched transport and special access.m
'a. several IXCs argue that the
LECs should not use the same density pricing zooes for special access and switched transport,
or for entrance facilities and interoffice facilities. CompTel asserts that the zona created for
channel terminations m unsuited for interoffice transport. CompTel argues that the zones
developed for channel tcrminatioos, based on collection and dispersion of traffic at wire centers,
lead to little or no Zoae 1 interoffice transport in many states, while the costs of interoffice
transport relate to the technologies of inte!roffice networks and should be grouped in zones with
relatively large geographic areas.% WilTel submits that zones for interoffice special access and
switched transport should be broad in geographic scope and should reflect prevailing network
.. 165. mglemtl
29' & Tkl- hs'n v. FCC 988 F.2d 174, 182-83 @.C. Cir. 1993)
(afkning LEC price cap rules), Policv and Ru les Cone- Rates for Do minant
Carriers, CC Docket No. 87-313, Further Notice of Proposed Rulemaking, 3 FCC Rcd 3195, *
3257-58 (1988); WV Rules CO ncemg Rates f or Dormnant Cam 'en, CC Docket
No. 87-313, secoad Report and Order, 5 FCC Rcd 6786, 6810-11 & 11.299 (1990)' a,
Second Report and Order, CC Docka No. 91-213, 9 FCC Rcd 615, 623, 1 15 (1994).
.. National Ru- 'u v. FCC 9 SIPca. alsn Traaswfi s~~= and hcmg7
292 Acms , 7 FCC Rcd at 7455, 1 179 n.414.
$witad T- Interconnection Order, 8 FCC Rcd at 7428-29, 1 104.
2p1 CompTel Switched Petition at 7-9; CompTel Switched Reply at 7-8.
71
characteristic~.~' Sprint contends that the requirement that traffic between offices in different
zones must be charged the higher-rated zone rates would result in virtually no interoffice
switched transport Carried at highdensity rates. Accordingly, Sprint argues that density zone
pricing of switched transport would be ineffective unless LECs are allowed to establish density
zones for switched transport different from those for special access and are required to rate
interoffice traffic at the lower-priced zone, rather than the higher-priced zone.296 ALTS assens
that in order to establish more than three zones, LECs should be required to satisfy the Same
standard that applies to above-band filings under price caps: a compelling showing of substantial
cause, with a high likelihood of suspension.2"
166. The LECs oppose establishing separate zone plans for switched and special
access or for interoffice facilities and entrance facilities, and argue that their density zone pricing
plans defined their zones based on a dculatim that included special and switched volumes and
interoffice and entrance facility volumes, that interofice channels have cost characteristics
similar to those of entrance facilities, and that separate plans would be illogical in view of the
integrated services the LEG
167. pis-. We dm our decision to assign intcmffice facilities between
different mnes to the higkr-price, lowcr-deasity zone, and find no nason to apply a different
rule under our mandatory virtual collocation policy. In the Inter-
on Or&, we reached our decision bad on a coaclusion that interoffice traffic between different tones has cost characteristics more similar to the traffic in the less dense zone. There
is no basis in our policy on remand, and no new evidence in the mxmi&ration record, that
would justify reversing this decision. We also decline to cmtc separate zone systems for special
access and switched transport service$. This would be contrary to our conclusion in the
characteristic^.^ Moreover, we directed the LECs to COIlsidtt both special and switched access
proceeding that special access aad Switched transport have similar cost
4
WilTel Switched Petition at 7-8; WilTel Switched Reply at 5-7.
Sprint Switched Petition at 5-8; Sprint Switched Reply at 2-4. -, WilTel Switched
AL?s Special Petition at 23.
Opposition at 5-6.
Bell Atlantic Switched Opposition at 4-6; BellSouth Switcbcd Opposition at 7; GTE
Switched Opposition at 10-11 (stating that the Commission should pennit, but not require,
individual LECs to establish separate zones).
299 mfi bk smare pn 'cb, CC Docket No. 91-213, Report and Order and
Further Notice of Proposed Rulemaking, 7 FCC Rcd 7006, 7028, 7034, 17 42, 53 (1992); , CC Docket No. 91-213, Second Report and Order, 9 FCC
Rcd 615, 622, 7 12 (1994).
.. ~-rt ate strum ad rncw
72
,-
traffic in defining density zones.Mo Finally, we decline to create separate zone systems for
interoffice facilities arid entrance facilities, or to impose substantially higher burdens of proof
than those we already imposed if LECs propose zone plans with more than three zones. These
alternatives would be administratively burdensome and complex for the LECs, and do not appear
to provide benefits that would just@ the costs.
B. Volume and Term Discounts
1. SpecjaiAccess
168. ma. In the Special Access Expan dad Interconnectio nOrd er, we
concluded that hubbing and ratchethg amngements are reasonable means to give customers and LECs flexibility in structuring and engineering their special access arraagements. We also found
that volume and tern discounts are generally legitimate means of pricing special access services
to recognize the efficiencies associated with larger traffic volumes and the certainty of longer-
term arrangements. We stated, however, that some of the largest of the LECs' volume and term
discounts raised concerns of anti-competitiveness, and we directed the Common Carrier Bureau
to conduct an inquiry to help determine whether any additional guidelines might be
appropriate. 301
~~0x1s of the Parties on Reco ni s derabm - . MFsasSertsthattheLEcs 169. Epslbt
should be required to cost-just@ all volume and term discounts that exceed reasonable threshold
levels, such as the 20% maximum volume discount and 10% maximum term discount that MFS
had pr~posed.~ MFS alleges that LEC volume and term discount practices will become even
more pernicious if coupled with density zone pricing, and argues that LEC density zone pricing
should not be permitted unless LECs justify their volume discounts, including implicit volume
discounts contained in DS3/DSl/voice grade relationships, sepaately by cost conditions in
specific zones.3a3 MFS contuxis that it is unreasonable for LECs to charge less for unbundled,
hubbed service offerings than they charge for bundled point-to-point circuits that in most cases
use similar facilities, and asks that such hubbing discounts be addressed.m ALTS argues that
the Commission shouid broaden the scope of the Bureau's inquiry to address all Tier 1 LEC
..
300 Intercom ection m, 7 FCC Rcd at 7455, 1 179 n.415.
Interconnect ion m, 7 FCC Rcd at 7463, If 199-200. 301
Mz MFS Special Petition at 4-6; MFS Special Reply at 2-4.
3a3 MFS Special Petition at 6.
uy MFS Special Petition at 10-12; MFS Special Rcply at 4-6.
73
volume discounts in excess of 2096, term discounts in excess of IO%, and hubbing
arrangements.=
170. The LECs respond that the CAPS' arguments were considered previously
and rejected by the Commission, suggest that the Commission obtain information about CAP
volume and term discount practices, and assert that the volume and term discounts and hubbing
amngements are reasonable and have been cost-ju~tified.~~ Sprint supports requiring the LECs
to cost-just@ volume discounts, and contends that there would be no justification for volume
discounts in interofice channel mileage rate elernents.'O7 Sprint contends that intermediate
hubbing is reasonable, and serves as a critical tool for medium and small IXCs to mitigate in
part the price advantages the current rate structure gives AT&T.=
171. mu&. Pursuant to the Commission's dkction, the Common Carrier
Bureau conducted an inquiry into LlEc special access volume and term arrangements. The
Bureau required the four LECs that had been identified by MFS as offering the steepest
discounts to submit cost data to demonstrate whether the rates for one of their most discounted
offerings covered average variable cost and were otherwise just and reasonable. Certain CAPS
and LECs submitted comments on these data.- At this time, we arc not persuaded that LEC
offerings arc priced below their average variable cost. Nevertheless, we will continue to
examine IZC pricing behavior in the future, and will be vigilant in examining any evidence of
unreasonable pricing practices on the part of the LECs.
2. SwitchedTransport
a. In Gene4
. The IXCs other than AT&T 172. of ws on Reconsid-pg
generally seek reconsideration of the decision to permit volume discounts, arguing that such
..
3~ ALTS Special Petition at 15-17; ALTS Spe~id Reply at 10.
3~ USTA Special Opposition at 7-8; Bell Atlantic Special Opposition at 3-4; GTE Special
Opposition at 7-12; Rochester Special Opposition af 8-10: United Special Opposition at 14-15;
USTA Special Reply at 4.
Sprint Special opposition at 65.
ma Sprint Special opposition at 6.
309 ALTS (Oct. 29,1993); MFS @ec. 31,1992); MFS & Parte
(Mar. 3, 1993); MFS - (Mar. 30, 1993); MFS & (July 19, 1993); MFS parte
(Aug. 31, 1993); Teleport a (Dec. 8, 1993); "Ex & (June 14, 1993); SW Bell
(May 11, 1993); SW Bell & - (Aug. 11,
1993); U S West && (Aug. 25, 1993). Par& (Apr. 30, 1993); SW Bell a
(Aug. 12, 1993); U S West
74
,-
discounts will benefit AT&T, harm other IXCs, and interfere with the Commission's policies
on the transport resuu'cture and interexchange competition. CompTel, MCI, and WilTel contend
that volume discounts on interoffice Vansport cannot be justified by underlying costs, because
the cost of providing interoffice transport depends on the total traffic carried over the interofice
network, and all users should share the scale e~ono~es.~~~ Sprint does not object to term discounts that are uniform regardless of the amount or type of capacity ordered, and concedes
that cost-based volume discounts on entrance facilities should be permitted, but contends that
volume discounts should not be pexmitted on interoffice facilities because the cost of such
facilities is based on the total shared interoffice network."'
173. The LECs and AT&T defend the Commission's decision to permit volume
discounts, stating that the LECs' competitors and the small and medium IXCs offer volume
discounts on interofice facilities, and that although both DSl and DS3 services use the Same
vansport facilities, highercapacity services use less costly electronics and involve administrative
cost savings from ordering, billing, and BellSouth asserts that the small and
medium IXCs' complaints are premature, because LEC-proposed discounts can be implemented
only through a tariff filing with full cost support.313
174. JXscussiQa. We n&firm our decision to permit LECs to offer volume and
term discounts on switched transport sewices after the specifcd threshold has been reached, and
find no reason for a different rule under our mandatory virtual collocation policy. (we address
below the specific threshold to be applied.) First, we are not persuaded that cost differences do
not jus* volume and term discounts on both interoffice facilities and entrance facilities. The
cost of providing interoffice direct-trunked transport depends, at least in part, on the specific
facilities used by the customer.314 Transmission facilities carrying higher volumes of traffic tend
to be characterized by lower per-circuit costs than lowercapacity facilities. In addition, term
discounts cccognize cost savings due to the certainty of longer-tern commitments. when LECs
310 CompTel Switched Eetition at 3-4; CompTel Switched Reply at 3-7; MCX Switched
Petition at 1-2; MCI Switched Reply at 3-4; WilTel Switched Wtion at 3-4 (citing Amentech's
Bulk Capacity Transport and Bell Atlantic's Facilities Management Service as LEC offerings that
acknowledge interoffice network efficiencies), 5-6; WilTel Switched Opposition at 3-5; WilTel
Switched Reply at 2-5.
Sprint Switched Petition at l(F11; Sprint Switched Reply at 4-10.
'I2 Bell Atlantic Switched Opposition at 1-4; BellSouth Switched Opposition at 8-9; GTE
Switched Opposition at 13-15; GTE Switched Reply at 7-8; Rochester Switched Reply at 5-4.
USTA Switched Reply at 2-3; AT&T Switched Opposition at 8-10.
313 BellSouth Switched Opposition at 8.
314 %niuuw~-m 'cu, CC Docket No. 91-213, Report and Order and
Further Notice of pioposed Rulemaking, 7 FCC Rcd 7006, 7030-32, 11 4749 (1992).
75
first introduce such discounts on switched transport offerings, they will be required to provide
cost justification because such discounts are new services under the price cap rules.
175. Second, the record reflects that volume and term discounts are an
established and accepted feature of the communications marketplace. The LECs’ competitors,
as well as some of the IXCs that have argued against such discounts, offer these kinds of
discounts themselves. If the LECs are not permined to offer discounts on their services, we
customers can simply obtain the services from other providers at such discounts, or provide such
services for themselves.
176. Finally, we believe that permitting the LECs to offer volume and term
discounts, subject to the safeguards we have adopted, will stimulate economic growth and
enhance access to communications markets. ]Lower LEC prices for high-volume and long-term
services, if cost-justified, should reduce access costs for MCs, stimulate cost-based competition
in the interexchange market, and ultimately make possible lower long-distance prices. Lower
long-distance prices, in turn, should stimulate greater use of communications services, as well
as free resources for consumers to spend and businesses to invest eisewhcrc in the economy,
creating opportunities for new jobs and economic expansion. Lower long-distance prices should
also give more Americans access to a variety of scNices that are available over interstate
telecommunications facilities.
b. Tlmsboid Required for Implemeatrrtion
177. u. Inthe&&&edT~~mOrde~ ? we permitted the LECs to begin offering switched transport with volume and term discounts in any
particular study area only after one of the following conditions is mu: (1) 100 DSl-equivalent
switched cmssco~ arc operational in the Zone 1 office in the study am; or (2) an average
of 25 DSl-equivalat switched crossco~ects per Zone 1 office are operational. (Zone 1 refers
to the LEC’s density pricing zone with the greatest Mic density.) In study arcas with no Zone
1 offices, the LECs may implement volume and term discounts once five DSl-equivalent
switched cross-c~~ccts have been taken in the study area. LECs that have not implemented
density zone pricing may implement volume and term discounts in a study area after customen
have subscribed to 100 DSl-cquivalmt switched cmss-coMccts in the study area.”’
‘on. The CAPS and the IXCs other * of wes on Recons’ idem .. 178.
than AT&T argue that the threshold Constraints for allowing term and volume discounts are na
valid measurn of viable compdition because they bear no relationship to realities of Competition
in the marketplace, the numbers arc too small and easy to satisfy for large Ws, and the LECs
already have excessive pricing flexiiility. The CAPS recommend more stringent threshold tcss
for switched transpoa volume and tcrm discounts: ALTS and Hyperion argue for thresholds
~ -~
Intcmnncction m, 8 FCC Rcd at 7434-35,1118 &
~.263-65.
76
based on a certain percentage of market share for competitors, while MFS proposes to permit
LEC transport discounts in a study area only after an interconnector is present at central offices
serving 50% of a LEC’s switched access traff?c in the study area, and two or more
interconnectors are present in central offices serving 25% of the switched traffic in the study
area.316 Sprint contends that there is no need to require a particular level of competition before
allowing cost-based discounts for entrance facilities, and it makes no economic sense to allow
interoffice volume discounts even if viable competition is pre~ent.~” MCI asserts that the thresholds are meaningless if the density of interconnection criteria can be satisfied by AT&T
alone. 31 a
179. The LECs oppose delays in volume and term discounts. They argue that
their competitors provide such discounts and that because such dehys would create a pricing
umbrella and protections for LEC competitors that prevent real competition from developing,
they are not in the public interest. They also assert that interconnection by AT&T is properly
included in satisfying the threshold requirement, and argue that self-provisioning by AT&T
represents a competitive challenge to LEC switched transport offehgs as significant as the
introduction of CAP nttw~rks.~~~
180. USTA and GTE assert that the threshold required for volume and term
discounts on transport is inconsistent with the Commission’s policy of permitting the LECs to
Ixlterco nnectron
threshold will unfairly exacerbate LEC competitive losses and prevent genuine competition, and
offer special access discounts, which the CommisSion dmed in the Suecial Access Exp anded , and is unsupported by the Communications Act. They contend that the
ALTS Switched Petition at 12 (suggesting an “effective competition” standard under
which (1) a certain percentage of telephone subscribers have access to at least one competitor
to the LEC, and (2) a certain percentage of subscribers are receiving service from one of the
competitors); ALTS Switched Opposition at 3-7; ALTS Switched Reply at 3-7; Hyperion
Switched Petition at 3-9 (recommending competitive penetration of 20% of market as threshold);
MFS Switched Petition at 15-16; CompTel Switched Petition at 4-5; MCI Switched Petition at
2-3; Sprint Switched Petition at 11-12; Sprint Switched Opposition at 4; WilTel Switched
Petition at 4-5.
’” Sprint Switched Petition at 12-13.
31a MCI Switched Petition at 2-3.
’19 Amentech Switched Opposition at 3-4; BellSouth Switched Opposition at 26; BeU
Atlantic Switched Opposition at 1-4; Rochester Switched Paition at 4-6; USTA Switched
Opposition at 2-4; “EX Switched Opposition at 5-6; Pacific Switched Opposition at 16-18;
GTE Switched Opposition at 2-6, 8-9 (opposing MFS’s proposed standard because competitive
access markets are generally smaller than a study area, and opposing ALTS’s proposed standard
because numbers of Subscribers is an inapposite measure in the access mark&, in which some
subscribers have much higher levels of usage); GTE Switched Reply at 4-5.
77
,
is an arbitrary and capricious exercise in regulatory handicapping. They argue that a more reasonable threshold for volume and term discounts would be when switched expanded inter-
connection is tariffed (or, in the alternative, when it is ~perati~nal).~~~ USTA and GTE propose
that special access cross-connects be counted toward satisfaction of the thnshold requirement,
given that special and switched access services are substitutable and zone plans were constructed
based on total Mic density.32’
181. GTE, Rochester, and USTA note that the threshold essentially requires
substantial market share losses before LECs with smaller study areas may engage in volume and
term discounts.3p GTE asserts that in over half of its study areas, the 100 DS1 equivalents
threshold would require market share losses of 2596 or more, and that in the five GTE study
areas where the 25 DSI equivalents per Zone 1 office threshold applies, that threshold amounts
to a 43% to 60% loss of market share.’” Rochester states that the 100 DSI threshold, which
applies to it, would require loss of nearly half of its switched transport minutes to competitors.324
Sprint, MCI, MFS, and ALE oppose the LECs’ proposals, although these partics concede that
the threshold may be unreasonably high in some smaller study As already noted, Sprint
instead recommends permitting no volume discounts, MCI would permit only cost-based
discounts that apply equally to all interoffice network users, while MFS recommends using a
market penetration test as the threshold.
182. . For our new mandatory virtual collocation regime, we
generally reafbn the threshold that must be met befort a LEC may in- term and volume
discounts on switched transport. The threshold chosen npreseots a considered policy decision
balancing both the costs and benefits of higher and lower thresholds. The requirement that
LECs not offer transport volume or tern discounts until expanded interconnection is operational
on a broader scale than a single operational CIDSSCOMCC~ should provide an incentive for the
LECs to offer expanded interconneCtion for switched transport on nasoaable terms. In addition,
320 USTA Switched Paition at 6-9; GTE Switched Petition at 2-1 1.
321 USTA Switched Petition at 9; GTE Switched Petition at 12; GTE Switched Opposition
at 7-8; GTE Switched Reply at 6; &, “EX Switched Opposition at 6 n.16.
jP GTE Switched Petition at 9-11; GTE Switched Opposition at 6-7; Rochester Switched *
Petition at 4-8; USTA Switched Petition at 7-8.
323 GTE Switched Petition at 9-1 1; GTE Switched Opposition at 6-7; GTE Switched Rcply
at 5-6 (recommending ameading the threshold to become the smaller of the existing threshold
or 5% of the DSl equivalents in the Zone 1 area).
3a Rochester Switched Won at 4-8; Rochester Switched Reply at 3-5.
3y Sprint Switched Opposition at 4; MCI Switched Reply at 4-6; MFS Switched Opposition
at 5; ALTS Switched Opposition at 3-7.
78
a LEC’s flexibility to engage in volume and tern discounts for switched transport services
should be linked to a demonstration that the LEC’s switched expanded interconnection offering
presents a viable competitive opportunity. For this reason, in light of our mandatory vutual
collocation policy, we adopt the dcf~tion of “operational” CIUSS-COM~C~S that we adopted in
the context of density zone
183. The lower thresholds for density zone pricing (and special access volume
and term discounts) coupled with the higher threshold for switched transport discounts should
gradually introduce LEC pricing flexibility and facilitate the initial development of competitive
entry. A different standard for special access and switched transport is also reasonable:
interstate switched access services, unlike special access services, have always been subject to
close rate structure regulation and, until December 1993, wen prid at an equal charge per
minute of use. Permitting volume and term discounts for switched transport is a substantial
departure from our past practice, and must be done cautiously.
184. As with density zone we decline to set a threshold based on the
market penetration of LEC competitors, an action that may be perceived to endorse allocating
market shares among competitors. We do not intend to try to determine competitive outcomes.
Rather, we intend to expand new entrants’, as well as incumbent providers’, opportunities to
compete. We are, however, concerned about GTE’s and Rochester’s assertions that in smaller
study anas the 100 DSl-equivalent switched crossco~ects threshold requirement may require
LECs to lose 25% to 60% of their switched transport market share before they may implement
volume and tern discounts. Because this problem poter~tially may affact only a few Tier 1
carriers with small study areas, we &legate authority to the Chief, Common Carrier Bureau,
to modify the threshold point for zone density pricing in unusual circumstances where a change
in the strict requirements would advance the Commission’s objectives.
185. Finally, we do not adopt GTE’s and USTA’s proposal to cant special
access cross-conntcts toward any of the thresholds for switched transport discounts. Although
there is a degree of cross-elasticity demand between special access and switched transport, the
gradual introduction of LEC pricing flexibility wanants looking only to switched access cross-
connects in deciding when to allow more switched access flexibility.
c. Application of New Service Test to Dmnts
186. w. When LECs subject to the price cap rules offer volume and tern
discounts on switched transport, the LECs must satisfy the cost showing requirements for new
326 Srr; 17 154-55.
327 Sg; SMF~ 1 156.
79
services under those rules. A special 12O-day notice period, rather than the standard 45-day
notice period, applies to these tariff filings.32a
.. 187. posibons of the Parties on Reconsidem 'on. CompTel, Sprint, WilTel, and MFS object to the price cap new service test that will be used to evaluate the level of discounted
prices. CompTel asserts that LECs have excessive flexibility to define direct costs and to
employ non-uniform overhead loading^,'^ while Spht contends that the Commission should
require justification for any rate differences between Werent levels of capacity.3fo Sprint also
argues that LECs should be required to implement density pricing before offering volume
discounts, to prevent LECs from charging medium and small IXCs high, averaged rates for
transport in highdensity artas while giving AT&T volume discounts.'31 WilTel submits that the
new service test is inadequate to scrutinize discounts because it prevents over-pricing but not
discriminatory under-~ricing.~~~ WilTel opposes using the volume discounts in existing LEC
special access tariffs 8s the basis for switched transport rates, noting that the Commission is in
the process of investigating current LEC special access volume discounts.333 MFS contends that
the new service test does not place any meaningful lixnits 011 the magnitude of the discounts, and
instead proposes requiring the LECs to show that the ratio of revenues to average variable cost
of discounted services is not less than the same ratio for less discounted services (except for term
discounts less than 10% or voiume discounts less than 2O%).lW
188. "EX opposes proposals to compare the overhead loadings or revenue-to-
cost ratios of different sexvices. "EX argues that price cap regulation was developed to
enable LlEcs to price services efficiently (iE, semices with elastic demand relatively close to
marginal cost and services with inelastic demand relatively high above marginal cost), and to
avoid the inefficient incentives matcd by cost-of-semice regulation.w Rochester submits that
r, 8 FCC Rcd at 7435, 1 119. 321 *a A-4
329 CoqTel Switched Petition at 5.
'30 Sprint Switched Petition at 9-10; Sprint Switched Reply at 7.
331 Sprint Switched Petition at IO.
33* WilTel Switched Peritiatr at 4.
333 Wirrel Switched Opposition at 4.
3W MFS Switched Petition at 16-18.
33J "EX Switched Opposition at 3-7, Nationad Rural Telecom Ass 'n v. FCC,
988 F.2d 174, 182-83 @.C. Cir. 1993) (upholding price cap regulation of LECs, and pointing
out that it facilitates Ramsey pricing); &Q SUDR 1 161 (LEC responses to similar arguments
in context of density zone pricing).
80
.
subsidization ody occurs when a company prices a service below incremental cost, for which
average variable cost 'is a surrogate. Thus, Rochester asserts that MFS's concern would have
force only if the ratio of revenues to average variable cost were less than one for any particular
offering, regardless of the relative ratios among services.336
189. GTE argues that rates for discounted switched transport offerings should be
presumed reasonable if based on existing special access rates, like rates for non-discounted,
restructured transport, without additional cost support or lengthy review periods. GTE notes that
its volume and term special access arrangements have been cost-justified either under rate-of-
return regulation or under the price cap rules' below-band pricing test. GTE contends that
discounted transport offerings are "new services" only as an artifact of the sequence in which
the Commission permitted them to be introduced, and essentially are no more "new services"
than were the non-discounted restructured transport GTE also argues that the 120-day
tariff review period is ~~assarily long and contrary to the public inten~t.~'' ALTS responds
that improper pricing could be more disruptive for switched transport because of the size of the
market, and that it is essential to retain the 12O-day review period to give the Commission and interested parties additional time to assess whether the tariff ratcs are ~ost-justified.~~~
190. Piscussion. We retain for our mandatoq virtual collocation regime the rule
regarding cost showings for discounted switched transport offerings, which qualify as new
services under the price cap rules. New seMccs arc services that make additional options
available to customers, which discounted transport offerings clearly do. Volume or term
discounts for the transport component of interstate switched access have never been offered in
the past. Contrary to the IXCs' assertions, the new sewice test protects against under-pricing
as well as over-pricing. The cost justification that the LECs are required to submit enables us
to ascertain that raw for new services arc not less than direct costs.
191. We reject the proposals of MFS and Sprint to quin LECs to demonstrate
that discounted services mver the Same proportion of overheads as non-discounted services,
or to require that the ratio of rcvenues to average variable cost of discounted offerings be no less
than that ratio for non-discounted services. We conclude that the cost showing required by the
336 Rochester Switched Opposition at 3, &&g &j&ushita El=. Indus. Co. v. zenl 'th Radio con>., 475 U.S. 574 (1986) (subsidization occurs only in cast of predatory pricing).
337 GTE Switched Petition at 13-16; GTE Switched Reply at 8-9. a, USTA Switched
Reply at 34.
331 GTE Switched Petition at 16-17.
339 ALTS Switched Opposition at 8.
81
existing new service test adequately protects against possible unreasonable discrimination with
respect to newly intrdduced volume and term discounts for switched transp~rt.~
192. We believe that the cost justification required pursuant to the new service
standard is an essential safeguard against the LECs' offering of unreasonable volume and term
discounts on switched msport. Accordingly, we will not permit the discounted switched
transport rates to be set based on pre-existing discounted special access rates without such cost
justification. In addition, we are not persuaded that any change is necessary to the 12Oday
notice period for these tariff filings, which we conclude is reasonable in light of the extensive
cost showings that must accompany these tariffs.
D. other Fontls of Pricing Flexibility
193. W-. In the &&J Access Exeapded Interconnection Orda
and the Switched Twrt Exmnd ed Interconnection Ode1 , we did not grant the LECs broader pricing flexibility, such as individual case basis pricing of special access or switched transport
in response to competitors' offerings or differential pricing of loopsi& and trunk-side special
access services.
* . GTE and USTA argue that, 190. mons-
in order to compete fully with CAPS, LECs should be able to engage in individual casc basis
contxact pricing, competitive response pricing, or other USTA also argues for
comprehensive reform of the dctive Part 69 st~chrn and tariffing des applicable to the LEG in light of competition." Ad Hoc supports noa-predatory individual case basis pricing
of DS1 and DS3 sewices in coIltcstcd The CAPS and IXCs respond that such broad
pricingflexibilitycouldlead to widespread anti-compctitive behavior by LECs, such as
preferential arrangements benefiting AT&T, as demonstrated by the results of the Commission's
investigation of individual case basis pricing of DS3 offerings and the pending inquiry on volume
..
les &-to the Creation of Acces .
for oben Network Arc him , 6 FCC Rcd 4524, 4531 (1991), pan.,
7 FCC Rcd 5235, 5236-37 (1992) (adopting the current version of the new service test).
M1 on w, 7 FCC Rcd at 7457-58, 11 185-86;
Switched T-n -&on Order, 8 FCC Rcd at 7424-25, 1 94.
I 342
343
w
GTE Special Petition at 23-24; USTA Special Petition at 21; USTA Special Reply at 3-4.
USTA Special Petition at 21-23.
Ad Hoc Special Opposition at 21.
82
and term discounts, and is unnecessary given the flexibility already granted to the LECs."'
Sprint contends that with a properly implemented system of density zone pricing that enables
LECs to respond to competitive pressures in dense areas, there is no justification for individual
case basis or contract pricing.w6 In an a filing, Pacific argues that LECs should be permitted to institute differential rates for loop-side and trunk-side special access rates, whkh
Pacific contends would be co~t-justified.~'
l95. Piscussion. We do not grant the LECs authority for broader pricing
flexibility at present. We have taken a number of siwcant steps to increase the LECs' ability
to comw with new entrants. We also recognize, however, that the LECs continue to possess
substantial market power in the provision of special access and switched transport services. We
believe that the ability to introduce density zone pricing and volume and term discounts under
the criteria we have set is sufficient flexibility to facilitate the development of commtion at this
time.
196. As cornpetition develops, we may consider eliminating more of the pricing
restrictions imposed upon the LECs. As indicated in paragraph 79 above, however, we intend
to carefully monitor the development of competition in the access marketplace, and have
delegated to the Chief, Common Carrier Bureau, responsibility for instituting a monitoring
Program.
l97. Orders/Bac~. In general, "fresh look" means a policy that makes
it easier for an incumbent provider's established customen to consider taking service from a new
entrant. In the Second ReconmOrdet, we reconsidered & our "fresh look" policy
for special access expanded intemnnection. We concluded that certain long-term special access
arrangements may prevent customers from obtaining the benefits of the new, more competitive
access environment. For that xeason, we adopted a "fresh look" policy, limiting the charges a
LEC may impose on certain .customers who want to terminate long-term LEC special access
arrangements to an amount that would place both the LEC and the customer in the same position
they would have been had the customer chosen a shorter term arrangement from the beghung
of the term. We limited the fresh look opportunity to customers with LEC special access
arrangements for terms of three years or longer, mured into on or Won September 17, 1992,
the date of adoptim of the Spccial Access Expanded Interconnection Order . Therighttolimited .
ALTS Spccial Opposition at 1 1-12; MFS Special Opposition at 20-21; CompTel Special
Opposition at 11-12; MCI Special Opposition at 7; WilTel Special Opposition at 7-10
(contending that such individual case basis pricing would interfere with interexchange and access
competition, and would violate the MFJ and fr 202(a) of the Communications Act).
wb Sprint Special Opposition at 5-6.
34' pacific (April 7, 1994), Attachment at 24.
83
termination charges for services in a particular central office exists for a period of 180 days fron
the date of filing of the E's tariff transmittal giving public notice of the start of the fresh look
period. The LEC must fie that tariff transmittal within five business days of the date that the
first special access expanded intcmnneCtion arrangement is operational in that central office.
198. If a customer chooses to terminate a long-term arrangement pursuant to the
fresh look policy, its tenninatiOn liabilities will be limited to the difference between the amount
the customer bas already paid and any additional charges that the customer would have paid for
service under a shorter term offering corresponding to the term actually used, plus interest at
the IRS me for tax refunds, compounded daily from the date of each discounted payment that
the customer made while taking the Service. In addition, we created a second fresh look
opportunity that occurs when switched transport expanded interconnection becomes operational,
and applies only to LEC special access facilities used to transmit both special and switched
access traffk."' Like the original fresh look, this second opportunity applies only to long term
arrangements entered into on or before September 17, 1992.
199. IxlBellm 'c v. FCC , the Court of Appeals did not dinctly address the
LECs' challenges to our fresh look policy. The court held that "[a]lthough the temporary right to switch providers may have been intended as an independent regulatory remedy for the
problems of rate structure and barriers to competition that the Commission identified, the remedy
was tied to the details of celocation and would float unattached in their absence. We must
therefore remand that portion as we^.""^
. . MFSandTeleportarguethat 200. of on Reconsidelg$pp
to facilitate grwter acccss Competition, the fresh look requirement should eliminate term;ination
liabilities, rarher than merely limiting them.uo WilTel and MFS argue that AT&T's pre-existing
collocation at many BOC central offices and its dorninant market sb enable it to benefit
uniquely from expanded intcrcmncc~ 'on, assext that the benefits of fresh look will be lost if
access customers do not have compczitive alternatives to LEC services during the period in
which they can termiaate their access arrangements with LECs, and therefore ask that the fresh
look period not be mggcd by intcmnnection by a piny that already had collocated facilities
before September 1992 (iE, AT&")
..
349 pg v. FCC , slipop. at 11.
'50 MFS Second Special Petition at 3-6; Teleport Switched Perition at 5-6.
WiITel Second Special Petition at 2-3; WilTel Second Special Reply at 1-3; MFS Second
Special Petition at 6-8; MFS Second Special Opposition at 1-3; MFS Switched Reply at 2 n.2.
84
201. The LECs respond that the CAPS and WilTel raise no new arguments, that
the Commission’s fresh look rules properly permit the Es to collect cost-based non-recurring
charges and put both the LEC and the customer in the same position they would have been if
the customer had onginally chosen a shoxter term arrangement, and that customers with term
arrangements &e large sophisticated businesses that do not need additional protection.352 They
contend that LECs face real competition from self-provisioning by AT&T, that the expanded
interconnection proceeding is not intended to equalize the competitive positions of new enwts
and established providers, and that the fresh look period should NU from the Same date that
density zone pricing is implemented.3s3
202. USTA suggests that, instead of requiring LECs to Ne tariff transmittals
every time expanded interconnection becomes operational in a central office, the Commission
should require LEcs to file monthly transmittals to include all new collocations that become
operational within that MFS supports USTA’s proposal, Stating that it would reduce
administrative burdens on LEO, inter~~~ect~rs, and users by making the fresh look notice
process simpler and more predictable.3ss
203. ‘ . GTE filed a petition for waiver of the requirement that it fde
a tariff each time expanded intemnnection first becomes operational in a central office.u6
Instead, GTE proposes to reduce the termination charges in its tariff to enable all customers that
may become eligible for the fresh look to exercise that option at any time during the term of
their agreements. GTE also proposes not to charge customers any interest in computing the
applicable termination charges. GTE contends that these rneasuxes would benefit its customers.
and should relieve GTE of admbWab ‘ve burdens in calculating such charges. SW Bell does
not oppose GTE’s petition, but suggests that no waiver may be rr;quired, and contends that other
LECs should not be subject to similar requirements.”
3s2 Ameritecb Switched Opposition at 1-2; Bell Atlantic Second Special Opposition at 1-3:
GTE Second Special Opposition at 2-5; United Switched Opposition at 4; Rochester Switched
Opposition at 6; USTA Seoond Special Opposition at 2-3.
’” GTE Seami Special Opposition at 5-7; USTA Second Special Opposition at 3-5.
3y USTA Second Special Mtion at 1-2; USTA Switched Petition at 9-10; USTA Second
Special Reply at 3; USTA Switched Reply at 5.
355 MFS Switched Opposition at 6.
3M GTE Petition for Limited Waiver of the “Fresh bok” Policy (Nov. 16, 1993).
3s7 SW Bell Comments on GTE Petition for Limited Waiver ofthe “Fresb Look” Policy
(DATE) at 3.
85
204. WXQ. We Conclude that fresh look continues to be necessary, in
connection with our mandatory virtual collocation policy, to give customers with LEC term
discounts entered into on or before September 17, 1992, a reasonable chance to take advantage
of new competitive opportunities made possible by expanded interconnection. We feaffirm our
conclusion that the limited termination liabilities enable customers to benefit 'sooner from the
cornpsition generated by our expanded btemnnection policies. We also our
conclusion that fresh look does not place an unreasonable burden on the LECs, since the LECs
will obtain the compensation appropriate for the term actually taken by the customer. In addition, we find that the parties have presented no evidence or arguments in the reconsideration
record that persuade us that our earlier conclusion regarding the maximum reasonable amount
of termination liabilities was incorrect.
205. Some of the LECs challenged our fresh look policy in court on the grounds
that we did not provide adequate notice of the policy to satisfy the requirements of Section 553
of the Administra tive Procedure Act or Section 205 of the Communications Ad.3J* We disagree
with this contention. In the initial Notice of Proposed Rulemaking in this proceeding, we
focused on the anticompetitive effect of the LECs' then-existing special access tariff'sb~cture.~~~
Long-term contracts had the effect of locking in that tariff structure and scaling off portions of
the markct from competition, notwithstanding our expanded interconnection policy. Thus, in
the absence of fresh look, hnplementation of expanded htcmnnection would lead to only
limited special access competition because of the effects of long-term co~ltracts. While we
recognize that we did not ask for specific comment on the fresh look remedy, we continue to
believe that it is a "10gicaI outgrowth" of the compaitive concerns identified in the ~oti~e.~~
Finally, we reconsidered che fie& look issue & -, and made substantial changes to the
policy, in the -n , based on an extensive recod submiaed by a broad
range of parties. Thus, even if inadequate notice was given befm adopting fresh look in the
Special Access uded wmmection Order, any emr was harmless because we have
alrtady reconsidered the decision & m, with an open mind."'
~~ ~ ~ ~~~
351 5 U.S.C. 6 553; 47 U.S.C. 0 205.
hia v. Boweg, 846 F.2d 1449, 1455
-Down Task Force v. EPA , 705 F.2d 506, 547 , 735 F.2d 1101, 1118 v. Job (D.C. Cir. 1988); mer Phase
,719 F.2d 1283,1303 (5th Cir. 19841. (9tb Cir. 1984); -er & Stoxage co. . ICC
Rcd at 3266, 7 45 (requesting comment on "whether to establish new guidelines for review of
rate structure responses to competition.").
* ..
360 SB 4%abuww of Wor cltlzens of philadelp
.. ? ** @.C. cir. 1983); PeoDles UtllJty mct
Second -laswabn ordet, 8 FCC Rcd at 7343-44, 11 6.8. a plsn First Nm 'e, 6 FCC
V
v. FC(r , 865 F.2d 1298, 1304 @.C. Cir. 1989); mm, *n v. DOT. , 111 S.Ct. 9u
838 F.2 1317, 1323 @.C. Cir. 1988); Air mxt Ass 361 Peeder
V
EF.2d %y' @.C. Cir. 1990), e for cons' idexahon of mootnes
86
206. We also reaffii that intemnnection by any party, including AT&T, in a
given central office triggers the beginning of the fresh look period for that office. If AT&T (or
any other party) hterco~ects in a central ofice, it should be eligible for limited termination
liabilities for long-term LEC special access arrangements purchased by it or by its customers to
whom it sells access service. The fresh look period does not re-commence each time a new
interconnector enters a given central office. Interconnectors subsequent to the fmt must take
the access market as they find it. The LEC tariff filing giving customers public notice of the
beginning of the fresh look period for each central office gives potential subsequent inter-
COMCC~OCS notice of the activities of the earliest interconnector, and enables them to smt
providing service in the central office during the fmh look period if they can and choose to do
so. We are not placing any special restrictions on the ability of AT&T or other parties to
purchase and use expanded interconnection.M2
207. USTA’s proposal to allow LECs to file monthly transmittals including all
new colloc;uions that become aperational within that month appears to be reasonable. As noted
by MFS in support, this should reduce the tariff filing burdens on LECs, as well as the
information retrieval burdens on parties interested in these filings. Accordingly, we modify our
fresh look policy, which currently nquires LlEcs to file tariff transmittals giving public notice
of the fresh look opportunity for each central office no later than five business days after the first special access expanded intcmnneztion arrangement becomes operational in the central office.
Instead, we will require the LECs to file tariff transmittals no later than five business days after
the end of each calendar month giving public notice of the fresh look opportunity for each
central office in which the first expanded hmnncction mgement became operational during
that month. The fresh look period runs from the actual date that the first expanded inter-
connection amngcment becomes operational until 180 days following the filing date of the miff
providing hotice of tbe beginning of the fresh look period.m The same procedures will apply
to fresh look periods triggered by switched transport expanded inmmmca ‘on. Inaddition, we
or equal m the maximum Witits specified by our fresh look policy. Accordingly, we dismiss
GTE’s petition for waiver as moot.
clarify that LECS need not file any tariff transmittals if their termination liabilities arc less than
208. Finally, we conclude that no additioaal fresh look periods an necessary
under our mandatory viraral collocation rules. Once interconu~rs entered a market by using
physical collocation arrangements in a particular central office, LEC customers with term
discounts had the opportunity to switch their service to the interco~ectors with limited
termination liabilities. Such intercoMectors are likely to remain active in the same geographic
areas even if the LEC substitutes a vixtual collocation offering for its physical collocation
(1991).
362 &g suuq 11 109-110.
363 47 C.F.R. 6 1.4 (computation of time).
87
offering. Thus, if the fresh look period has already xun in a given central office, no new fresh
look period will be triggered by operational expanded interconnection under our new policies.
F. Non-Recurring Reconfiguration Charges
209. Order. h our ea;rlier orders, we decided that non-recuning charges
applicable to customers shifting to an interconnector's services are to be set no higher than cost-
based levels, and exempted such charges from the application of the presumption of
reasonableness in the price cap rules. h addition, we COnChded that any differenCe between the
charges applicable when a customer shifts to an interconnector's sewices and those applicable
when a customer reconfigures its service with the LEC must be cost-ha-url.w
210. Positions of the Parties on Reco nsidenQ * 'oq. Amentech asks the
Commission to reconsider the decision to ehhatc the pnce cap presumption of reasonableness
for non-recurring nconfiguration charges, expressing concern about the emsion of pricing
flexibility in the price cap system, and arguing that the price cap constraints and the existence
of access competition and intemnncction adequately protect COnSUmCfS.M MFS responds that
it is necessary to abandon the presumption of lawfulness in order to review the reasonableness
of the levels and differences in non-recurring charges, protect consumers and competitors, and 'on in this coatext.w enforce the Communications Act's prohibition of unreasonable cismmmb . ..
211. Telqrt OP~OSCS the pmvisi~~ "c~st-based" diff~m~es betwen
non-ncurring charges applicable to customers shifting to usc interconnector ScNiCes and those
applicable to customers reconfiguring services. Teleport argues that this exception creates
a huge loophole that enables LECs to discriminate against competitors, and instead
recommends a requirement that LECs waive all NRCs when customers shift Mic to
competitors within 180 days of the establishment of a collocation arrangement in a given central
throughout commerce, including by the CAPS, and reflect the ccoMlmics of protecting LECs and
offi~e.~' he LECS that terrmnatl * 'on liabilities an cost-based, are commonly used
3U-m , 8 FCC Rcd at 7361-63, (1 47-51; Switched Transport -, 8 FCC Rcd at 7439,l 130.
3a Amentech Second Spacial Petition at 1-3; Amentech Sccoud Special Reply at 1-2 (noting
that it has modified its non-recurring charges to establish a single rate structure applicable to
special access, switched transport, and interconnection).
MFS Second Special Opposition at 34.
%' Teleport Switched Petition at 4-6.
88
their ratepayers from premature customer departure from LEC facilities. They also argue that
Teleport’s proposal would constitute a rate prescription without the necessary procedures.36a
2l2. Discussion. We reaffirm our policies on non-recurring reconfiguration
charges. These charges raise special competitive concerns, and we conclude that elimination of
the price cap presumption of reasonableness for these charges is necessary to enforce our
requirement that the levels of and differences between these charges be cost-based, and to protect
competitors and consumers. We also reaffiRll that LECs may charge higher non-recurring
charges to customers reconfguMg to use interc0MectOrS’ Services than they Charge for other
reconfgurations if such rate differences are cost-justified. The LECs incur legitimate costs in
making service changes, and in general should be able to mover these costs from inter-
connectors and their customers. The only exception would be when the LEC does not mver
non-recurring reconfiguration costs from its own special access or switched transport customers.
In that case, the LEC must not charge customers who reconfigure in order to take service from
an interconnector more than an amount reflecting the difference between the costs of the two
Mereat types of reconfigurations.
vm. OTHERMATTERS
213. The CAPs have argued that the Commission should impose certain
requirements to govern the transition from a mandatory physical to a mandatory virtuai
collocation regime. Specifically, the CAPs argue that in the event LECs choose to terminate
their existing physical collocation offerings, those LECs should, bear the full cost of any LEC-
required mgements to virtual The CAPS ais0 argue that the LEcs should
reimburse interc~~ector~ for certain charges previously paid for physical collocation, such as
the costs of cage co~struction,~ and that LEcs that agrandfhthera existing physical collocation
arrangements should be required to permit htcmnncctors reasonably to expand those facilities
to meet demand.”’ We believe that the transition issues raised by the CAPS generally present
questions that should be addressed on a case-by-case basis. We delegate authority to the Chief,
Common Canier Bureau, to address these matters.
214. With respect to any other issues addressed in our previous expanded inter-
connection orders that am not specifically addressed in this order, we reaffirm our earlier .
MI USTA Switched Opposition at 6; Ameritech Switched Opposition at 1-2; GTE Switched
Opposition at 17-19; GTE Second Special Opposition at 2-5; United Switched Opposition at 4.
M9 MFS l3 Parte (July 5, 1994) at 23-24; U S Signal & Parte (July 7, 1994) at 3.
3’0 ALTS & (July 6, 1994) at 5; MFS & Parte (July 5, 1994) at 24-26.
MFS (July 5, 1994) at 26-27.
89
conclusions for our new virtual collocation regime, based on the nasons stated in the earlier
orders.
M. CONCLUSION
215. Our expanded ~~~CEOMCC~~O~ policy advances major Commission objectives
of promoting economic growth and increasing access to communications networks. Accordiagly,
we modify that policy to be consistent with the reccnt court decision in the &ll A tIantic v. FCC
case, and require the LECs to provide expanded interconnection thmugh virtual collocation,
unless they qualiQ for an exemption that would pennit them to offer physical collocation
instead. We have addressed in detail in this order the standards, terms, and conditions that will
apply to virtuaI collocation under our new policy. Because we expect that some LECs will
provide a Title II physical collocation offering under this new regime, we have ais0 addressed
the standards, terms, and conditions that will apply to physical colldon. In most respects,
the rules govcming the mandatory virtual collocation regime will be the same rules that applied
under our origud mandatory physical collocation policy.
X. ORDERINGCLAUSES
216. Accordingly, IT IS ORDERED, pursuant to authority contained in
Sections 1, 4, 201-205, 214, and 218 of the Communications Act of 1934, as amended,
47 U.S.C. 40 151, 154, 201-203, 214, and 218, that Part 64 of the Commission’s Rules IS
AMENDED as set forth h AppendixB of this Order.
217. IT IS FURTHER ORDERED tbat the policies, rules, and requirements
adopted in this Ordcr SHALL BE EFFECTNE on December 15,1994, except the requirements
regarding the Ning of tariffs and regatding notifications with respect to exempt physical
collocation offerings,m which SHALL BE EFFECTNE on September 1, 1994.
218. ITIS FURTHER ORDERED that Teleport’s Petition for Declaratory Ruling
IS DENIED except to the extent specifid in this order.
219. IT IS FURTHER ORDERED that GTE’s Petition for Limited Waiver of ‘
the “Fresh Look” Policy IS DISMISSED as moot.
220. IT IS ORDERED that authority is delegated to the Chief,
Common Carrier Bur&, as set forth herein.373
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton
Acting Secretary
373 &g jefra 11 61, 79, 81, 117, 184, & 213.
91
APPENDIX A PETITIONS FOR RECONSIDERATION,
OPPOSITIONS AND REPLIES FILED
Petitions for Reconsideration of the
Special Access Expanded Interconnection Order ("Special Petitions")
December 18, l%Qn4
Ameriun Telephone md Telegraph Co. (ATkT)
Association for Loccrl TeIecommuaicrtions Services
Central Telephone Co. (Centel)
GTE Service Corporation and its affiliated domestic
lndepmdent Data Commuoiutions Manufactunrs
MCI Telecommunicuions Cop. (MCI)
MFS Commuoicuioos Co. (MFS)
Nuiod Association of Regulltory Utility
Commissioners (NARUC)
(ALm
telephone operating companies (GTE)
Association. hc. (IDCMA)
New Yo& Telephone 0. and New Englmd
Penn Access cOrp0r;rtioo (Peon Access)
Rochester Telephone Corp. (Rochester)
Teleport Commuoiutions Group (Teleport)
Tennessee Public Service Commission (Tc.nnessa)
United Sutes Telephone Association (USTA)
United Telephone Companies (United)
WiITel, Inc. (WilTel)
Telephone and Telegraph Co. (NYNEX)
Sprint communiutioos co. (Sprint)
Oppositions to petitions for Reconsideration of the
Special Access Expanded Interconnection Order ("Special Oppositions")
February 3, 1993
Infodon Technology Association of America
lnrrmuiolul Communications Assoc~on OCA)
MCI
MFS
NARUC
NYNM
?dim Services CO. (Prodigy)
ROCberttr
somt ulliicsd
UsfA
W i llel
374 GTE tiled a documart captioned 'Saxad Petition for Rscoasidention" on F~~I'uu~ 1,1993. lhis
filing does not challcoge the Fi Recons iddon Order; io mbs~nce it mer~ly re cod^ GTE's c~ntbued
objections to the
reconsidemion. We consider this 'petition" u an p1;~4 filing.
A ccess ExDuldcd lotetcono ection Ordq discussed in its initial petitio0 for
92
ALTS
AT&T GTE
MCI
Ameritech
Bell Atlantic
Replies to Oppositions to Petitions for Reconsideration of the
Special Access Expanded hteX0MWtiOn Order ("Special Replies")
February 18, 1993
MFS
IDCMA "M
Penn Access Corp. UIlitCd
(Penn Access) USTA
sprint WilTel Telepon
petitions for Reconsideration of the
Second Reconsideration Order ("Second Special Petitions")
October 18, 1993
MFS USA WdTel
Oppositions to Petitions for Reconsideration of the
Second Reconsideration Order ("Second Special Oppositions")
November 23, 1993
GTE MFS USA
Replies to Oppositions to Petitions for Reconsideration of the
Second Reconsideration Order ("Second Special Replies") December9, 1993
Ameiitecb MFS USTA WilTel
Petitions for Reconsideration of the
Switched Transport Expanded Interconnection Order ("Switched Petitions")
October 18. 1993
ALTS Pmnrylvmia Public Utility Commission
CampTel (Pcausy lvmir)
Hyperion Telecodutianr, Inc. (HypeiiOn) W i lTel
MCI Teleport
MFS USfA
NARUC
GTE spnot
93
Oppositions to Petitions for Reconsideration of the Switched Transport Expanded Interconnection Order (“Switched Opppositiom”)
November 23, 1993
Ameritech NYNEX
BcI1South Telecommuniutions, Inc. (BellSouth) sprint
AT&T
&I1 Atlantic Rochester
GTE United and htnl Telephone Comp.aies (United) MFS USTA
WilTel
Pacific Bell md Nevada Bell (Pacific)
Replies to Oppositions to Petitions for Ftcconsideration of the
Switched Transport Expanded Intercomdon Order (“Switched Replies”)
December 9,1993
CompTel
GTE MCI
MFS Rochester
sprint USTA
WdTel
94
PART 64 - MISCELLANEOUS RULES RELATING TO COMMON CARRERS
1. The authority citation for Part 64 continues to read as follows:
AUTHOFUTY: Section 4,48 Stat. 1066, as amended; 47 U.S.C. 154, unless otherwise
noted. Interpret or apply secs. 201,218,225,48 Stat. 1070, as amended, 1077; 47 U.S.C. 201,
218, 225, unless otherwise noted.
2. Section 64.1401 of Subpart N of Part 64 is amended by revising paragraph (c), removing
paragraphs (d) and (e), redesignatkg parakaphs (f) through (h) as paragraphs (d) through (0,
respectively, and revising redesignated parag.l.aph (f)(2), to read as follows:
5 64.1401 Expanded Interconnection
*****
(c) The local exchange Carriers specified in paragraph (a) of this section shall offer
expanded interconnection for interstate special access and switched transport services through
virtual collocation, except that they may offer physical collocation, instcad of virtual collocation,
in specific central offices, as a service subject to non-streamlined communications common
carrier Title II regulation.
*****
(9 ***
(2) At least two such interconnection points at any local exchange canier
location at which then an at least two entry points for the local exchange carrier's cable
facilities, and space is available for new facilities in at least two of those entry points.
95
Separate Statmeat
of
Cd88ioner Jame8 H. Que110
Re: Expanded Interconnection with Local Telephone Company Facilities, CC Docket No. 91-141
I support this Memorandum Opinion and Order because I have consistently supported this Commission’s pro-competitive policy of expanded interconnection. The benefits of allowing competitive provision of communications access services are manifest in the record before this Commission and redound to the benefit of American consumers. It was not the policy se that was vacated on appeal, but, instead, the procedure by which we chose to implement the broader policy objectives. Although the interstices may have been deemed impermissible, the corpus remains sound.
While it is true that I had some reservations about mandating physical collocation, I do not believe that virtual collocation suffers the same flaws. The businesses affected by this decision, LECs, IXCs, and CAPS alike, need a reasonable and
predictable regulatory regime. Predictability engenders rational business planning and decisionmaking, which is in the ultimate interest of the public. I believe that virtual collocation meets these criteria and is a sound regulatory mechanism.
Moreover, this Commission is acting expeditiously to preserve such predictability by seeking to avoid a gap in regulatory continuity that would result if the expanded interconnection policy were to lapse before the new virtual collocation tariffs were in place. -This Memorandum Opinion and guidance to all parties during the transition virtual collocation.
I am convinced that this Commission has, exercising, the statutory authority to
Order provides from physical to
and is properly mandate virtual
collocation but am also pleased that this Memorandum Opinion and Order allows for flexibility. The local telephone companies are permitted to retain physical collocation or suggest other means of providing expanded interconnection. In my view, the proper balance between regulatory oversight and business practice ha8 been restored by returning this decision to the carriers.
SEPARATESTATEMENT
OF
COMMISSIONER ANDREW C. BARRE=
RE: Expanded Iuterconnection with Local Telephone Company Facilitis, JMemomd um ODGon and Order (CC Docket No. 91-141)
, the Commission responds to a decision of U.S. In this Memorandum Opmon and ordef ..
Court of Appcals for the District of Columbia CircUit, which vacated and remanded the
Commission's order on expanded 'on on the grounds that the Commission docs not
have authority to require local exchange carriers (LECS) to provide expamkd intercomtion
through physical collocation.' This &kmorandUm O~lat on &ordq mandates that LECs offer expanded interconnection in thc form of virtual collocation. As of September 1, 1994, Tier I
LECs (other than NECA pool members) must Ne gemrally available tariffs, offering expanded
interconnection through virtual collocation. LECs will be exempted from this requirement in central ofices where they agree to provide physical collocation subject to thc Ordefs policies.
..
I have previously supported the Commission's policies on expaded interconnection as
steps toward increased competition in lod and interstate access services.2 0x1 remand, I support
our efforts to implement expanded intercodon rules that will expand service choices for
telecommunications USCIS, and heighten thc imentives for efficient and flexible pricing by
existing carriers. Our expanded int.cIconncction rules arc necessary to thc development of a
competitive local exchange access structure, through competing acccs~ providers (CAPS) and
other intemnncctors. As a result, I support this action by the Commission to implement virtual
collocation rules which will continue to promote competition through flexible intcrconntCtion
armgcments, and provide a measure of ccrtaitlty to inttrconncctors seeking to provide interstate
acccss services.
I am also conccmd tbat tbe Commission balaacc its intncOMection policy by providing
sufficient flexibility to the LECs in conjunction with virtual collocation interconnection
requirements. In panicular, I am concerned that thc provisions regarding the designation of
equipment by thc CAPS properly balance the need to allow LEC's to manage and control their
network operations, while satisfymg interconnection nqucsts under virtual collocation tariffs. In
this regard, I believe that potential CAP demand for iarerconnection from the LECs is likely to
involve a reasonable number of rtqucsts in the vast majority of situations. The provisions
adopted for vimal collocation arc lilrcly to impose few= burdens on the LECs in terms of central
-
I &U Atlantic Telmhaot Commm 'csv. FG , NO, 92-1619 (D.C. Ci., JW 10. 1W) (v- in pm d
rrmrnding anain Orders in the Exproded lataconneca 'OU p-. CC Docks NO. 91-141).
2 See Sepantc suremtnt of Coannissiooa C. Bam~, September 17, 1992, CC Doaet No. 91-141.
office space in comparison to ~q~ihmtnts for physical collocation. This Order creates a process
for interconnectors to designate specific equipment for inclusion in the ECs' initial tariff filings.
This initial tariff requirement will provide LECs some mcasurc of certainty in terms of tht types
of equipment that interconnectors are likely to use. Furthcr, in the limited instances where the
LECs receive interconnection req~~sts that cannot be satisfied within tbc limitations of their technical network operations or central office configuati~ns, they can seek a good cause waiver
from virtual interconmction compIiancc in such cases.3 Given ow strong concerns for balancing
competitive market arrangements with reasonable LEC interconnection rtquirrments, this Order
achieves such a result. The burdcn to prove that certain virtual collocation arrangements may not
be feasible is properly placed upon the LEC-the entity With the most knowledge of the technical
coxQuration of its network and central offices.
Other options for virtual collocation that impost fewer cmxlitions on the LECs might not
offer the necessary certainty for intcrconmctors in order to avoid disruptions in competition.
Thus, I support this decision as a means of promoting the pbiic policy goals of competition
through interconnection while avoiding the legal concerns asso~iated with physical collocation.
7
The Commission may amsidcr dtcrnafjve in-on vrmgemmu proposed by telephone
companies in waiver paitions if those propods satisfy thc public intcrra objazives ldbprcd in this Ordcr
SEPARATE STATEMENT OF
COMMISSIONER RWHEXU B. CHONG
Re: Expanded I'ercomcfion with Lucal Telephone Compcmy Facilities,
CC DocAct NO. 91-141
Today we revise our expnded iotacomwcb '011 policy in hsponsc to a recent judicial decision reviewing the mandatory physical allocation raphnmt we adoped in previous
orders in this docket.' oIpeed# htmmmml *on rules require local accbange Carriers ("LEG") to offer virtual collocation to prospective mnnectom, with an uuanpticm hm this mquircmemt for any LEC that ow to provide physical collocation on a common
carrier basis in lieu of a virtual collocation offaing.
a 3Ss Ben 4ilaalk Teh2h9= CorSDgni- v. FCC No. 92-1619 @.C. CK. June 10,
1994).
c
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