Unbundled Access to Network Elements; Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 8940-8955 [05-3511]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 70, Number 36 (Thursday, February 24, 2005)]
[Rules and Regulations]
[Pages 8940-8955]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-3511]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[WC Docket No. 04-313, CC Docket No. 01-338; FCC 04-290]


Unbundled Access to Network Elements; Review of the Section 251 
Unbundling Obligations of Incumbent Local Exchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) adopts rules concerning the unbundling obligations of 
incumbent local exchange carriers (LECs), with respect to the dedicated 
transport, high-capacity loop, and mass market circuit switching 
elements of their networks. This document also adopts appropriate 
transition periods to allow competitive LECs sufficient time to migrate 
their services to alternative facilities, or to negotiate alternative 
commercial arrangements, where unbundled network elements (UNEs)

[[Page 8941]]

must no longer be made available pursuant to our rules. The rules set 
forth in this Order on Remand encourage the innovation and investment 
that come from facilities-based competition. By implementing the 
Commission's unbundling authority pursuant to section 251 of the 
Communications Act, in a targeted manner, this Order imposes unbundling 
obligations only in those situations where the Commission finds that 
carriers genuinely are impaired without access to particular network 
elements and where unbundling does not frustrate sustainable, 
facilities-based competition. This approach satisfies the guidance of 
courts to weigh the costs of unbundling, and ensures that the 
Commission's rules provide the right incentives for both incumbent and 
competitive LECs to invest rationally in the telecommunications market 
in the way that best allows for innovation and sustainable competition.

DATES: Effective March 11, 2005.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554. See Supplementary Information for further filing 
instructions.

FOR FURTHER INFORMATION CONTACT: Erin Boone, Attorney-Advisor, Wireline 
Competition Bureau, at (202) 418-0064 or via the Internet at 
erin.boone@fcc.gov. The complete text of this Order on Remand is 
available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street, SW., 
Room CY-A257, Washington, DC 20554. Further information may also be 
obtained by calling the Wireline Competition Bureau's TTY number: (202) 
418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Remand in WC Docket No. 04-313 and CC Docket No. 01-338, adopted 
December 15, 2004, and released February 4, 2005. The full text of this 
document may be purchased from the Commission's duplicating contractor, 
Best Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room 
CY-B402, Washington, DC 20554, telephone 1-800-378-3160. It is also 
available on the Commission's Web site at https://www.fcc.gov.

Synopsis of the Order on Remand

    1. Background. The Commission took several steps to avoid excessive 
disruption of the local telecommunications market while it wrote new 
rules following the D.C. Circuit's decision in United States Telecom 
Association v. FCC, 359 F.3d 554 (D.C. Cir. 2004), cert. denied, 160 L. 
Ed 2d 223 (2004), which vacated and remanded significant portions of 
the unbundling rules set forth in the Commission's Triennial Review 
Order, 68 FR 52276 (Sept. 2, 2003), CC Docket Nos. 01-338, 96-98, 98-
147, Report and Order and Order on Remand and Further Notice of 
Proposed Rulemaking, 18 FCC Rcd 16978 (2003). One of these steps 
included the release, on August 20, 2004, of Unbundled Access to 
Network Elements; Review of the Section 251 Unbundling Obligations of 
Incumbent Local Exchange Carriers, 69 FR 55111, 69 FR 55128 (Sept. 13, 
2004), CC Docket No. 01-338, WC Docket No. 04-313, Order and Notice of 
Proposed Rulemaking, 19 FCC Rcd 16783, 16785-87, paras. 3-7 (2004) 
(Interim Order and Triennial Remand NPRM). The Interim Order required 
carriers to adhere to the commitments they made in their 
interconnection agreements, applicable statements of generally 
available terms (SGATs), and relevant state tariffs that were in effect 
on June 15, 2004 for an ``interim period'' beginning on the effective 
date of the Interim Order and NPRM and ending on the earlier of (1) six 
months after that effective date or (2) the effective date of final 
rules issued in this proceeding. The Commission also set forth and 
sought comment on a transition plan to govern the period following the 
interim period. The associated Triennial Remand NPRM sought comment on 
how to respond to the USTA II decision in its revised final rules. In 
this Order on Remand, the Commission promulgates those final rules 
based on guidance from the courts and comment received in response to 
the Triennial Remand NPRM.
    2. Unbundling Framework. In the USTA II decision, the D.C. Circuit 
upheld the general impairment framework the Commission established in 
the Triennial Review Order, but sought several clarifications and, in 
several cases, criticized the manner in which the Commission applied 
that framework to particular elements. In response to those criticisms, 
the Commission clarifies the impairment standard adopted in the 
Triennial Review Order in one respect and modifies its unbundling 
framework in three other respects. First, the Commission clarifies that 
it evaluates impairment with regard to the capabilities of a reasonably 
efficient competitor. Second, it sets aside the Triennial Review 
Order's ``qualifying service'' interpretation of section 251(d)(2), but 
prohibits the use of UNEs for the exclusive provision of 
telecommunications services in the mobile wireless and long-distance 
markets, which the Commission previously has found to be competitive. 
Third, the Commission notes that in applying its impairment test, it 
draws reasonable inferences regarding the prospects for competition in 
one geographic market based on the state of competition in other, 
similar markets. Fourth, it considers the appropriate role of tariffed 
incumbent LEC services in its unbundling framework, and determines that 
in the context of the local exchange market, a general rule prohibiting 
access to UNEs whenever a requesting carrier is able to compete using 
an incumbent LEC's tariffed offering would be inappropriate.
    3. Dedicated Interoffice Transport. In this Order, the Commission 
tailors its unbundling requirements regarding dedicated interoffice 
transport narrowly to ensure that unbundling obligations apply only 
where competitive deployment of these facilities is not economic. The 
Commission finds that competing carriers are impaired without access to 
DS1 transport except on routes connecting a pair of wire centers, where 
both wire centers contain either at least four fiber-based collocators 
or at least 38,000 business access lines. The Commission also finds 
that competing carriers are impaired without access to DS3 or dark 
fiber transport except on routes connecting a pair of wire centers, 
each of which contains at least three fiber-based collocators or at 
least 24,000 business lines. Finally, the Commission finds that 
competing carriers are not impaired without access to entrance 
facilities connecting an incumbent LEC's network with a competitive 
LEC's network in any instance. In addition to these findings, the 
Commission adopts a 12-month plan for competing carriers to transition 
away from use of DS1- and DS3-capacity dedicated transport where they 
are not impaired, and an 18-month plan to govern transitions away from 
dark fiber transport. These transition plans apply only to the embedded 
customer base, and do not permit competitive LECs to add new dedicated 
transport UNEs in the absence of impairment. The Commission also 
requires that during the transition periods, competitive carriers 
retain access to unbundled dedicated transport at a rate equal to the 
higher of (1) 115% of the rate the requesting carrier paid for the 
transport element on June 15, 2004, or (2) 115% of the rate the state 
commission has established or establishes, if any, between June 16, 
2004 and the effective date of this Order.
    4. High-Capacity Loops. The Commission finds that competitive

[[Page 8942]]

LECs are impaired without access to DS3-capacity loops except in any 
building within the service area of a wire center containing 38,000 or 
more business lines and four or more fiber-based collocators. In 
addition, the Commission finds that competitive LECs are impaired 
without access to DS1-capacity loops except in any building within the 
service area of a wire center containing 60,000 or more business lines 
and four or more fiber-based collocators. Finally, the Commission finds 
that competitive LECs are not impaired without access to dark fiber 
loops in any instance. In addition to these findings, the Commission 
adopts a 12-month plan for competing carriers to transition away from 
use of DS1- and DS3-capacity loops where they are not impaired, and an 
18-month plan to govern transitions away from dark fiber loops. These 
transition plans apply only to the embedded customer base, and do not 
permit competitive LECs to add new high-capacity loop UNEs in the 
absence of impairment. The Commission requires that during the 
transition periods, competitive carriers retain access to unbundled 
facilities at a rate equal to the higher of (1) 115% of the rate the 
requesting carrier paid for the high-capacity loop element on June 15, 
2004, or (2) 115% of the rate the state commission has established or 
establishes, if any, between June 16, 2004 and the effective date of 
this Order.
    5. Mass Market Local Circuit Switching. In this Order, the 
Commission finds that incumbent LECs have no obligation to provide 
competitive LECs with unbundled access to mass market local circuit 
switching. The Commission concludes that competitive LECs have deployed 
a significant, growing number of their own switches, often using new, 
more-efficient technologies such as packet switches, and could do so in 
areas they do not yet serve as well. Thus, the Commission concludes 
that requesting carriers in most cases are not impaired without access 
to local circuit switching. Moreover, the Commission finds that 
regardless of any limited potential impairment requesting carriers may 
still face, the continued availability of unbundled mass market 
switching would impose significant costs in the form of decreased 
investment incentives. It therefore determines, pursuant to section 
251(d)(2)'s ``at a minimum'' authority, not to require unbundled access 
to mass market switching even in those areas where competitive LECs 
might face impairment. In addition, the Commission adopts a 12-month 
plan for competing carriers to transition away from use of unbundled 
mass market local circuit switching. This transition plan applies only 
to the embedded customer base, and does not permit competitive LECs to 
add new mass market switching UNEs. During the transition period, the 
Commission states that competitive carriers will retain access to the 
unbundled network element platform (i.e., the combination of an 
unbundled loop, unbundled local circuit switching, and shared 
transport) at a rate equal to the higher of (1) the rate at which the 
requesting carrier leased that combination of elements on June 15, 
2004, plus one dollar, or (2) the rate the state public utility 
commission establishes, if any, between June 16, 2004, and the 
effective date of this Order, for this combination of elements, plus 
one dollar.

Final Regulatory Flexibility Analysis

    6. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Interim Order and NPRM in this proceeding. The 
Commission sought written comment on the proposals in the Interim Order 
and NPRM, including comment on the IRFA. The present Final Regulatory 
Flexibility Analysis (FRFA) addresses comments received on the IRFA and 
conforms to the RFA.

Need for, and Objectives of, the Order on Remand

    7. This Order responds to the United States Court of Appeals for 
the District of Columbia's USTA II decision, which vacated and remanded 
significant portions of the Triennial Review Order's unbundling rules. 
Based on the record compiled in response to the Interim Order and NPRM, 
the Commission adopted, in the Triennial Review Order, new unbundling 
rules implementing section 251 of the 1996 Act. The Triennial Review 
Order reinterpreted the statute's ``impair'' standard and reevaluated 
incumbent LECs' unbundling obligations with regard to particular 
elements. Various parties appealed the Triennial Review Order, and on 
March 2, 2004, the D.C. Circuit decided USTA II, vacating and remanding 
several of the Triennial Review Order's unbundling rules. In this 
Order, we address the remanded issues and take additional steps to 
encourage the innovation and investment that results from facilities-
based competition.
    8. Specifically, this Order clarifies the Triennial Review Order's 
impairment standard in one respect and modifies its application in 
three respects. First, we clarify that we evaluate impairment with 
regard to the capabilities of a reasonably efficient competitor. 
Second, we set aside the Triennial Review Order's ``qualifying 
service'' interpretation of section 251(d)(2), but prohibit the use of 
UNEs for the provision of telecommunications services in the mobile 
wireless and long-distance markets, which we previously have found to 
be competitive. Third, in applying our impairment test, we draw 
reasonable inferences regarding the prospects for competition in one 
geographic market based on the state of competition in other, similar 
markets. Fourth, we consider the appropriate role of tariffed incumbent 
LEC services in our unbundling framework, and determine that in the 
context of the local exchange markets, a general rule prohibiting 
access to UNEs whenever a requesting carrier is able to compete using 
an incumbent LEC's tariffed offering would be inappropriate. We then 
apply this revised unbundling framework to the dedicated transport 
network element, the high-capacity loop network element, and the mass 
market local circuit switching network element. In each case, we adopt 
a result that will promote the deployment of competitive facilities 
wherever possible, spreading the benefits of facilities-based 
competition to market entrants and end-user customers alike, including 
small businesses falling into each category.

Summary and Discussion of Significant Issues Raised by Public Comments 
in Response to IRFA

    9. In this section, we respond to comments filed in response to the 
IRFA. To the extent we received comments raising general small business 
concerns during this proceeding, those comments are discussed 
throughout the Order and are summarized in part E, below.
    10. First, we reject TeleTruth's contention that the Commission 
fails to assess the impact of its unbundling rules on small Internet 
Service Providers (ISPs), and that this failure violates the RFA. 
Although we understand that our rules will have an economic impact in 
many sectors of the economy, including the ISP market, the RFA only 
requires the Commission to consider the impact on entities directly 
subject to our rules. The RFA is not applicable to ISPs because, as we 
previously noted, ISPs are only indirectly affected by our unbundling 
actions and were not formally included in the IRFA or formally included 
in this FRFA. In the interest of ensuring notice

[[Page 8943]]

to all interested parties and out of an abundance of caution, we have 
previously included ISPs among the entities potentially indirectly 
affected by our unbundling rules, although we have been explicit in 
emphasizing that ISPs are only indirectly affected by these rules. On 
this subject, we note that the D.C. Circuit ``has consistently held 
that the RFA imposes no obligation to conduct a small entity impact 
analysis of effects on entities which [the agency conducting the 
analysis] does not regulate.'' Thus, we emphasize that the RFA imposes 
no independent obligation to examine the effects an agency's action 
will have on the customers, clients, or end users of the companies it 
regulates--including ISPs--unless such entities are, themselves, 
subject to regulation by the agency. In any event, we have considered 
the needs of small business customers of competitive (and incumbent) 
LECs throughout this Order and previous Orders, in each case choosing 
the outcome that will foster facilities-based competition and the 
benefits such competition will bring to small businesses and other 
consumers of telecommunications.
    11. We also reject TeleTruth's argument that the Commission 
violates the RFA by relying on outdated 1997 Census Bureau data to 
identify the number of ISPs potentially affected by our final rules in 
the IRFA. The 1997 Census Bureau data were and still are the most 
current data available. According to TeleTruth, data compiled by both 
the SBA and Boardwatch/ISP-Planet, an ISP-focused periodical, indicate 
that the number of ISPs is close to 7,000, rather than the 2,751 ISPs 
identified by the IRFA. Although TeleTruth cites to higher numbers, the 
Census Bureau has not released the more recent (2002) results for 
telecommunications providers or for ISPs. Thus, the IRFA in this 
proceeding and this FRFA appropriately rely on the most up-to-date 1997 
Census Bureau data and therefore comply with the RFA.
    12. We disagree with TeleTruth's claim that by relying on 1997 
Census Bureau data in the IRFA, the Commission violates the Data 
Quality Act (DQA). We conclude that the IRFA's description of the ISP 
marketplace based on 1997 Census Bureau data was consistent with the 
Commission's DQA guidelines. As an initial matter, the DQA requires 
federal agencies to issue information quality guidelines ensuring the 
quality, utility, objectivity and integrity of information that they 
disseminate, and to provide mechanisms by which affected persons can 
take action to correct any errors reflected in such information. In 
2002, the Commission adopted guidelines implementing the DQA stating 
that it is dedicated to ensuring that all data that it disseminates 
reflect a level of quality commensurate with the nature of the 
information. Specifically, these guidelines require the Commission to 
review and substantiate the quality of information before it is 
disseminated to the public and describe the administrative mechanisms 
allowing affected persons to seek and obtain correction of information 
that does not comply with the guidelines. By relying on the most recent 
Census Bureau data, the Commission complied with DQA guidelines as the 
Census Bureau is the leading source of high-quality data of the sort 
set forth in the IRFA--and a source on which we have consistently 
relied. In this regard, we note that the Census Bureau data and SBA 
generic small business size standards track each other precisely, as 
intended by both the Census Bureau and SBA. Moreover, as indicated 
above, we have updated this FRFA based on the recent preliminary 2002 
Census Bureau Industry Series data, mitigating the concern that the 
data set out in the IRFA was too old to be of use in assessing the 
impact our conclusions might have on small entities.
    13. We also reject TeleTruth's argument that the Commission 
violates the RFA by failing to conduct proper outreach to small 
businesses for purposes of compiling a comprehensive record in this 
proceeding. The Commission has satisfied its RFA obligation to assure 
that small companies were able to participate in this proceeding. 
Specifically, the RFA requires the Commission to ``assure that small 
entities have been given an opportunity to participate in the 
rulemaking,'' and proposes as example five ``reasonable techniques'' 
that an agency might employ to do so. In this proceeding, the 
Commission has complied with the RFA by employing several of these 
techniques: it (1) has published a ``notice of proposed rulemaking in 
publications likely to be obtained by small entities''; (2) has 
``inclu[ded] * * * a statement that the proposed rule may have a 
significant economic effect on a substantial number of small entities'' 
in the Interim Order and NPRM; (3) has solicited comments over its 
computer network; and (4) has acted ``to reduce the cost or complexity 
of participation in the rulemaking by small entities'' by, among other 
things, facilitating electronic submission of comments.
    14. We also disagree with commenters that claim that the Commission 
did not specifically consider the impact of eliminating UNEs on small 
businesses or describe alternatives to minimize any impact in the IRFA. 
Although the Small Business Administration Office of Advocacy (SBA 
Advocacy) recommends that we issue a revised IRFA to account for the 
impact our rules might have on small competitive LECs, we believe it is 
not necessary since the Interim Order and NPRM explained in detail the 
ruling of the D.C. Circuit in USTA II, which gave rise to this 
proceeding; posed specific questions to commenters regarding the proper 
implementation of that decision; and solicited comment from all 
parties. While the NPRM did not specify particular results the 
Commission would consider--and the IRFA therefore did not catalogue the 
effects that such particular results might have on small businesses--
the Commission provided notice to parties regarding the range of policy 
outcomes that might result from this order. As indicated above, a 
summary of the Interim Order and NPRM was published in the Federal 
Register, and we believe that such publication constitutes appropriate 
notice to small businesses subject to this Commission's regulation. 
Indeed, far from discouraging small entities from participating, the 
Interim Order and NPRM and the associated IRFA elicited extensive 
comment on issues affecting small businesses. These comments have 
enabled us to consider the concerns of competitive LECs throughout this 
order. Moreover, in Part C, below, we attempt to estimate the number of 
competitive LECs that will be affected by the rules we adopt herein. We 
therefore reject arguments that small entities were prejudiced by any 
lack of specificity regarding specific results potentially resulting 
from this proceeding.

Description and Estimate of the Number of Small Entities to Which the 
Rules Would Apply

    15. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of, the number of small entities that may 
be affected by the rules adopted herein. The RFA generally defines the 
term ``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which (1) is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria

[[Page 8944]]

established by the Small Business Administration (SBA).
    16. In this section, we further describe and estimate the number of 
small entity licensees and regulatees that may be affected by our 
action. The most reliable source of information regarding the total 
numbers of certain common carrier and related providers nationwide, as 
well as the number of commercial wireless entities, appears to be the 
data that the Commission publishes in its Trends in Telephone Service 
report. The SBA has developed small business size standards for 
wireline and wireless small businesses within the three commercial 
census categories of Wired Telecommunications Carriers, Paging, and 
Cellular and Other Wireless Telecommunications. Under these categories, 
a business is small if it has 1,500 or fewer employees. Below, using 
the above size standards and others, we discuss the total estimated 
numbers of small businesses that might be affected by our actions.
    17. We have included small incumbent LECs in this present RFA 
analysis. As noted above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' SBA 
Advocacy contends that, for RFA purposes, small incumbent LECs are not 
dominant in their field of operation because any such dominance is not 
``national'' in scope. We have therefore included small incumbent LECs 
in this RFA analysis, although we emphasize that this RFA action has no 
effect on Commission analyses and determinations in other, non-RFA 
contexts.
    18. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 or fewer employees. 
According to Census Bureau data for 1997, there were 2,225 firms in 
this category, total, that operated for the entire year. Of this total, 
2,201 firms had employment of 999 or fewer employees, and an additional 
24 firms had employment of 1,000 employees or more. Thus, under this 
size standard, the great majority of firms can be considered small.
    19. Incumbent Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
incumbent local exchange services (LECs). The appropriate size standard 
under SBA rules is for the category Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 1,310 carriers have 
reported that they are engaged in the provision of incumbent local 
exchange services. Of these 1,310 carriers, an estimated 1,025 have 
1,500 or fewer employees and 285 have more than 1,500 employees. 
Consequently, the Commission estimates that most providers of incumbent 
local exchange service are small businesses that may be affected by our 
proposed action.
    20. Competitive Local Exchange Carriers, Competitive Access 
Providers (CAPs), ``Shared-Tenant Service Providers,'' and ``Other 
Local Service Providers.'' Neither the Commission nor the SBA has 
developed a small business size standard specifically for these service 
providers. The appropriate size standard under SBA rules is for the 
category Wired Telecommunications Carriers. Under that size standard, 
such a business is small if it has 1,500 or fewer employees. According 
to Commission data, 563 carriers have reported that they are engaged in 
the provision of either CAP services or competitive LEC services. Of 
these 563 carriers, an estimated 472 have 1,500 or fewer employees and 
91 have more than 1,500 employees. In addition, 14 carriers have 
reported that they are ``Shared-Tenant Service Providers,'' and all 14 
are estimated to have 1,500 or fewer employees. In addition, 37 
carriers have reported that they are ``Other Local Service Providers.'' 
Of the 37, an estimated 36 have 1,500 or fewer employees and one has 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of competitive local exchange service, competitive 
access providers, ``Shared-Tenant Service Providers,'' and ``Other 
Local Service Providers'' are small entities that may be affected by 
our proposed action.
    21. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
providers of interexchange services. The appropriate size standard 
under SBA rules is for the category Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 281 carriers have 
reported that they are engaged in the provision of interexchange 
service. Of these, an estimated 254 have 1,500 or fewer employees and 
27 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of IXCs are small entities that may be 
affected by our proposed action.
    22. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
OSPs. The appropriate size standard under SBA rules is for the category 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 23 carriers have reported that they are engaged in the 
provision of operator services. Of these, an estimated 22 have 1,500 or 
fewer employees and one has more than 1,500 employees. Consequently, 
the Commission estimates that the majority of OSPs are small entities 
that may be affected by our proposed action.
    23. Prepaid Calling Card Providers. The SBA has developed a size 
standard for a small business within the category of Telecommunications 
Resellers. Under that SBA size standard, such a business is small if it 
has 1,500 or fewer employees. According to Commission data, 32 
companies reported that they were engaged in the provision of prepaid 
calling cards. Of these 32 companies, an estimated 31 have 1,500 or 
fewer employees and one has more than 1,500 employees. Consequently, 
the Commission estimates that the great majority of prepaid calling 
card providers are small entities that may be affected by the rules and 
policies adopted herein.
    24. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to ``Other Toll Carriers.'' This category includes toll carriers that 
do not fall within the categories of interexchange carriers, OSPs, 
prepaid calling card providers, satellite service carriers, or toll 
resellers. The closest applicable size standard under SBA rules is for 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission's data, 65 companies reported that their primary 
telecommunications service activity was the provision of other toll 
services. Of these 65 companies, an estimated 62 have 1,500 or fewer 
employees and three have more than 1,500 employees. Consequently, the 
Commission estimates that most ``Other Toll Carriers'' are small 
entities that may be affected by the rules and policies adopted herein.
    25. Wireless Service Providers. The SBA has developed a small 
business size standard for wireless firms within the two broad economic 
census categories of ``Paging'' and ``Cellular and Other Wireless 
Telecommunications.''

[[Page 8945]]

Under both SBA categories, a wireless business is small if it has 1,500 
or fewer employees. For the census category of Paging, Census Bureau 
data for 1997 show that there were 1,320 firms in this category, total, 
that operated for the entire year. Of this total, 1,303 firms had 
employment of 999 or fewer employees, and an additional 17 firms had 
employment of 1,000 employees or more. Thus, under this category and 
associated small business size standard, the great majority of firms 
can be considered small. For the census category Cellular and Other 
Wireless Telecommunications, Census Bureau data for 1997 show that 
there were 977 firms in this category, total, that operated for the 
entire year. Of this total, 965 firms had employment of 999 or fewer 
employees, and an additional 12 firms had employment of 1,000 employees 
or more. Thus, under this second category and size standard, the great 
majority of firms can, again, be considered small.
    26. Broadband PCS. The broadband PCS spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission defined ``small entity'' for 
Blocks C and F as an entity that has average gross revenues of $40 
million or less in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years.'' These standards defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses, within the SBA-approved small business size standards 
bid successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auctions. A 
total of 93 small and very small business bidders won approximately 40 
percent of the 1,479 licenses for Blocks D, E, and F. On March 23, 
1999, the Commission re-auctioned 347 C, D, E, and F Block licenses. 
There were 48 small business winning bidders. On January 26, 2001, the 
Commission completed the auction of 422 C and F Broadband PCS licenses 
in Auction No. 35. Of the 35 winning bidders in this auction, 29 
qualified as ``small'' or ``very small'' businesses. Subsequent events, 
concerning Auction 305, including judicial and agency determinations, 
resulted in a total of 163 C and F Block licenses being available for 
grant. In addition, we note that, as a general matter, the number of 
winning bidders that qualify as small businesses at the close of an 
auction does not necessarily represent the number of small businesses 
currently in service. In addition, the Commission does not generally 
track subsequent business size unless, in the context of assignments or 
transfers, unjust enrichment issues are implicated.
    27. Narrowband Personal Communications Services (PCS). The 
Commission held an auction for Narrowband PCS licenses that commenced 
on July 25, 1994, and closed on July 29, 1994. A second auction 
commenced on October 26, 1994 and closed on November 8, 1994. For 
purposes of the first two Narrowband PCS auctions, ``small businesses'' 
were entities with average gross revenues for the prior three calendar 
years of $40 million or less. Through these auctions, the Commission 
awarded a total of 41 licenses, 11 of which were obtained by four small 
businesses. To ensure meaningful participation by small business 
entities in future auctions, the Commission adopted a two-tiered small 
business size standard in the Narrowband PCS Second Report and Order. A 
``small business'' is an entity that, together with affiliates and 
controlling interests, has average gross revenues for the three 
preceding years of not more than $40 million. A ``very small business'' 
is an entity that, together with affiliates and controlling interests, 
has average gross revenues for the three preceding years of not more 
than $15 million. The SBA has approved these small business size 
standards. A third auction commenced on October 3, 2001 and closed on 
October 16, 2001. Here, five bidders won 317 (Metropolitan Trading 
Areas and nationwide) licenses. Three of these claimed status as a 
small or very small entity and won 311 licenses.
    28. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
definition of small entities specifically applicable to such incumbent 
220 MHz Phase I licensees. To estimate the number of such licensees 
that are small businesses, we apply the small business size standard 
under the SBA rules applicable to ``Cellular and Other Wireless 
Telecommunications'' companies. This category provides that a small 
business is a wireless company employing no more than 1,500 persons. 
According to the Census Bureau data for 1997, only twelve firms out of 
a total of 1,238 such firms that operated for the entire year in 1997, 
had 1,000 or more employees. If this general ratio continues in the 
context of Phase I 220 MHz licensees, the Commission estimates that 
nearly all such licensees are small businesses under the SBA's small 
business standard.
    29. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
a new service, and is subject to spectrum auctions. In the 220 MHz 
Third Report and Order, we adopted a small business size standard for 
defining ``small'' and ``very small'' businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits and installment payments. This small business standard 
indicates that a ``small business'' is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
not exceeding $15 million for the preceding three years. A ``very small 
business'' is defined as an entity that, together with its affiliates 
and controlling principals, has average gross revenues that do not 
exceed $3 million for the preceding three years. The SBA has approved 
these small size standards. Auctions of Phase II licenses commenced on 
September 15, 1998, and closed on October 22, 1998. In the first 
auction, 908 licenses were auctioned in three different-sized 
geographic areas: three nationwide licenses, 30 Regional Economic Area 
Group (EAG) Licenses, and 875 Economic Area (EA) Licenses. Of the 908 
licenses auctioned, 693 were sold. Thirty-nine small businesses won 373 
licenses in the first 220 MHz auction. A second auction included 225 
licenses: 216 EA licenses and 9 EAG licenses. Fourteen companies 
claiming small business status won 158 licenses. A third auction 
included four licenses: 2 BEA licenses and 2 EAG licenses in the 220 
MHz Service. No small or very small business won any of these licenses.
    30. Specialized Mobile Radio. The Commission awards ``small 
entity'' bidding credits in auctions for Specialized Mobile Radio (SMR) 
geographic area licenses in the 800 MHz and 900 MHz bands to firms that 
had revenues of no more than $15 million in each of the three previous 
calendar years. The Commission awards ``very small entity'' bidding 
credits to firms that had revenues of no more than $3 million in each 
of the three previous calendar years. The SBA has approved

[[Page 8946]]

these small business size standards for the 900 MHz Service. The 
Commission has held auctions for geographic area licenses in the 800 
MHz and 900 MHz bands. The 900 MHz SMR auction began on December 5, 
1995, and closed on April 15, 1996. Sixty bidders claiming that they 
qualified as small businesses under the $15 million size standard won 
263 geographic area licenses in the 900 MHz SMR band. The 800 MHz SMR 
auction for the upper 200 channels began on October 28, 1997, and was 
completed on December 8, 1997. Ten bidders claiming that they qualified 
as small businesses under the $15 million size standard won 38 
geographic area licenses for the upper 200 channels in the 800 MHz SMR 
band. A second auction for the 800 MHz band was held on January 10, 
2002 and closed on January 17, 2002 and included 23 BEA licenses. One 
bidder claiming small business status won five licenses.
    31. Common Carrier Paging. The SBA has developed a small business 
size standard for wireless firms within the broad economic census 
categories of ``Cellular and Other Wireless Telecommunications.'' Under 
this SBA category, a wireless business is small if it has 1,500 or 
fewer employees. For the census category of Paging, Census Bureau data 
for 1997 show that there were 1,320 firms in this category, total, that 
operated for the entire year. Of this total, 1,303 firms had employment 
of 999 or fewer employees, and an additional 17 firms had employment of 
1,000 employees or more. Thus, under this category and associated small 
business size standard, the great majority of firms can be considered 
small.
    32. In the Paging Second Report and Order, the Commission adopted a 
size standard for ``small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A small business is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
not exceeding $15 million for the preceding three years. The SBA has 
approved this definition. An auction of Metropolitan Economic Area 
(MEA) licenses commenced on February 24, 2000, and closed on March 2, 
2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven 
companies claiming small business status won 440 licenses. An auction 
of MEA and Economic Area (EA) licenses commenced on October 30, 2001, 
and closed on December 5, 2001. Of the 15,514 licenses auctioned, 5,323 
were sold. One hundred thirty-two companies claiming small business 
status purchased 3,724 licenses. A third auction, consisting of 8,874 
licenses in each of 175 EAs and 1,328 licenses in all but three of the 
51 MEAs commenced on May 13, 2003, and closed on May 28, 2003. Seventy-
seven bidders claiming small or very small business status won 2,093 
licenses. Currently, there are approximately 74,000 Common Carrier 
Paging licenses. According to the most recent Trends in Telephone 
Service, 379 private and common carriers reported that they were 
engaged in the provision of either paging or ``other mobile'' services. 
Of these, we estimate that 373 are small, under the SBA-approved small 
business size standard. We estimate that the majority of common carrier 
paging providers would qualify as small entities under the SBA 
definition.
    33. 700 MHz Guard Band Licenses. In the 700 MHz Guard Band Order, 
we adopted size standards for ``small businesses'' and ``very small 
businesses'' for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. A small 
business in this service is an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 million for the preceding three years. Additionally, a 
very small business is an entity that, together with its affiliates and 
controlling principals, has average gross revenues that are not more 
than $15 million for the preceding three years. SBA approval of these 
definitions is not required. An auction of 52 Major Economic Area (MEA) 
licenses commenced on September 6, 2000, and closed on September 21, 
2000. Of the 104 licenses auctioned, 96 licenses were sold to nine 
bidders. Five of these bidders were small businesses that won a total 
of 26 licenses. A second auction of 700 MHz Guard Band licenses 
commenced on February 13, 2001, and closed on February 21, 2001. All 
eight of the licenses auctioned were sold to three bidders. One of 
these bidders was a small business that won a total of two licenses.
    34. Rural Radiotelephone Service. The Commission has not adopted a 
size standard for small businesses specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the BETRS. The Commission uses the SBA's small business size standard 
applicable to ``Cellular and Other Wireless Telecommunications,'' i.e., 
an entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and the Commission 
estimates that there are 1,000 or fewer small entity licensees in the 
Rural Radiotelephone Service that may be affected by the rules and 
policies adopted herein.
    35. Air-Ground Radiotelephone Service. The Commission has not 
adopted a small business size standard specific to the Air-Ground 
Radiotelephone Service. We will use SBA's small business size standard 
applicable to ``Cellular and Other Wireless Telecommunications,'' i.e., 
an entity employing no more than 1,500 persons. There are approximately 
100 licensees in the Air-Ground Radiotelephone Service, and we estimate 
that almost all of them qualify as small under the SBA small business 
size standard.
    36. Aviation and Marine Radio Services. Small businesses in the 
aviation and marine radio services use a very high frequency (VHF) 
marine or aircraft radio and, as appropriate, an emergency position-
indicating radio beacon (and/or radar) or an emergency locator 
transmitter. The Commission has not developed a small business size 
standard specifically applicable to these small businesses. For 
purposes of this analysis, the Commission uses the SBA small business 
size standard for the category ``Cellular and Other 
Telecommunications,'' which is 1,500 or fewer employees. Most 
applicants for recreational licenses are individuals. Approximately 
581,000 ship station licensees and 131,000 aircraft station licensees 
operate domestically and are not subject to the radio carriage 
requirements of any statute or treaty. For purposes of our evaluations 
in this analysis, we estimate that there are up to approximately 
712,000 licensees that are small businesses (or individuals) under the 
SBA standard. In addition, between December 3, 1998 and December 14, 
1998, the Commission held an auction of 42 VHF Public Coast licenses in 
the 157.1875-157.4500 MHz (ship transmit) and 161.775-162.0125 MHz 
(coast transmit) bands. For purposes of the auction, the Commission 
defined a ``small'' business as an entity that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $15 million dollars. In 
addition, a ``very small'' business is one that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $3 million dollars. There are 
approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the above special small business size standards.
    37. Fixed Microwave Services. Fixed microwave services include 
common

[[Page 8947]]

carrier, private operational-fixed, and broadcast auxiliary radio 
services. At present, there are approximately 22,015 common carrier 
fixed licensees and 61,670 private operational-fixed licensees and 
broadcast auxiliary radio licensees in the microwave services. The 
Commission has not created a size standard for a small business 
specifically with respect to fixed microwave services. For purposes of 
this analysis, the Commission uses the SBA small business size standard 
for the category ``Cellular and Other Telecommunications,'' which is 
1,500 or fewer employees. The Commission does not have data specifying 
the number of these licensees that have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of fixed microwave service licensees that would qualify as small 
business concerns under the SBA's small business size standard. 
Consequently, the Commission estimates that there are up to 22,015 
common carrier fixed licensees and up to 61,670 private operational-
fixed licensees and broadcast auxiliary radio licensees in the 
microwave services that may be small and may be affected by the rules 
and policies proposed herein. We noted, however, that the common 
carrier microwave fixed licensee category includes some large entities.
    38. Offshore Radiotelephone Service. This service operates on 
several ultra high frequencies (UHF) television broadcast channels that 
are not used for television broadcasting in the coastal areas of states 
bordering the Gulf of Mexico. There are presently approximately 55 
licensees in this service. We are unable to estimate at this time the 
number of licensees that would qualify as small under the SBA's small 
business size standard for ``Cellular and Other Wireless 
Telecommunications'' services. Under that SBA small business size 
standard, a business is small if it has 1,500 or fewer employees.
    39. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services (WCS) auction as an entity with average gross 
revenues of $40 million for each of the three preceding years, and a 
``very small business'' as an entity with average gross revenues of $15 
million for each of the three preceding years. The SBA has approved 
these definitions. The Commission auctioned geographic area licenses in 
the WCS service. In the auction, which commenced on April 15, 1997 and 
closed on April 25, 1997, there were seven bidders that won 31 licenses 
that qualified as very small business entities, and one bidder that won 
one license that qualified as a small business entity. An auction for 
one license in the 1670-1674 MHz band commenced on April 30, 2003 and 
closed the same day. One license was awarded. The winning bidder was 
not a small entity.
    40. 39 GHz Service. The Commission created a special small business 
size standard for 39 GHz licenses--an entity that has average gross 
revenues of $40 million or less in the three previous calendar years. 
An additional size standard for ``very small business'' is: an entity 
that, together with affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards. The auction of the 2,173 
39 GHz licenses began on April 12, 2000 and closed on May 8, 2000. The 
18 bidders who claimed small business status won 849 licenses. 
Consequently, the Commission estimates that 18 or fewer 39 GHz 
licensees are small entities that may be affected by the rules and 
policies proposed herein.
    41. Multipoint Distribution Service, Multichannel Multipoint 
Distribution Service, and Instructional Television Fixed Service. 
Multichannel Multipoint Distribution Service (MMDS) systems, often 
referred to as ``wireless cable,'' transmit video programming to 
subscribers using the microwave frequencies of the Multipoint 
Distribution Service (MDS) and Instructional Television Fixed Service 
(ITFS). In connection with the 1996 MDS auction, the Commission defined 
``small business'' as an entity that, together with its affiliates, has 
average gross annual revenues that are not more than $40 million for 
the preceding three calendar years. The SBA has approved of this 
standard. The MDS auction resulted in 67 successful bidders obtaining 
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 
auction winners, 61 claimed status as a small business. At this time, 
we estimate that of the 61 small business MDS auction winners, 48 
remain small business licensees. In addition to the 48 small businesses 
that hold BTA authorizations, there are approximately 392 incumbent MDS 
licensees that have gross revenues that are not more than $40 million 
and are thus considered small entities.
    42. In addition, the SBA has developed a small business size 
standard for Cable and Other Program Distribution, which includes all 
such companies generating $12.5 million or less in annual receipts. 
According to Census Bureau data for 1997, there were a total of 1,311 
firms in this category, total, that had operated for the entire year. 
Of this total, 1,180 firms had annual receipts of under $10 million, 
and an additional 52 firms had receipts of $10 million or more but less 
than $25 million. Consequently, we estimate that the majority of 
providers in this service category are small businesses that may be 
affected by the proposed rules and policies.
    43. Finally, while SBA approval for a Commission-defined small 
business size standard applicable to ITFS is pending, educational 
institutions are included in this analysis as small entities. There are 
currently 2,032 ITFS licensees, and all but 100 of these licenses are 
held by educational institutions. Thus, we tentatively conclude that at 
least 1,932 ITFS licensees are small businesses.
    44. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (LMDS) is a fixed broadband point-to-multipoint 
microwave service that provides for two-way video telecommunications. 
The auction of the 986 Local Multipoint Distribution Service (LMDS) 
licenses began on February 18, 1998 and closed on March 25, 1998. The 
Commission established a small business size standard for LMDS licenses 
as an entity that has average gross revenues of less than $40 million 
in the three previous calendar years. An additional small business size 
standard for ``very small business'' was added as an entity that, 
together with its affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards in the context of LMDS 
auctions. There were 93 winning bidders that qualified as small 
entities in the LMDS auctions. A total of 93 small and very small 
business bidders won approximately 277 A Block licenses and 387 B Block 
licenses. On March 27, 1999, the Commission re-auctioned 161 licenses; 
there were 32 small and very small business winners that won 119 
licenses.
    45. 218-219 MHz Service. The first auction of 218-219 MHz 
(previously referred to as the Interactive and Video Data Service or 
IVDS) spectrum resulted in 178 entities winning licenses for 594 
Metropolitan Statistical Areas (MSAs). Of the 594 licenses, 567 were 
won by 167 entities qualifying as a small business. For that auction, 
we defined a small business as an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in

[[Page 8948]]

annual profits each year for the previous two years. In the 218-219 MHz 
Report and Order and Memorandum Opinion and Order, we defined a small 
business as an entity that, together with its affiliates and persons or 
entities that hold interests in such an entity and their affiliates, 
has average annual gross revenues not exceeding $15 million for the 
preceding three years. A very small business is defined as an entity 
that, together with its affiliates and persons or entities that hold 
interests in such an entity and its affiliates, has average annual 
gross revenues not exceeding $3 million for the preceding three years. 
The SBA has approved of these definitions. At this time, we cannot 
estimate the number of licenses that will be won by entities qualifying 
as small or very small businesses under our rules in future auctions of 
218-219 MHz spectrum. Given the success of small businesses in the 
previous auction, and the prevalence of small businesses in the 
subscription television services and message communications industries, 
we assume for purposes of this analysis that in future auctions, many, 
and perhaps all, of the licenses may be awarded to small businesses.
    46. Incumbent 24 GHz Licensees. This analysis may affect incumbent 
licensees who were relocated to the 24 GHz band from the 18 GHz band, 
and applicants who wish to provide services in the 24 GHz band. The 
applicable SBA small business size standard is that of ``Cellular and 
Other Wireless Telecommunications'' companies. This category provides 
that such a company is small if it employs no more than 1,500 persons. 
According to Census Bureau data for 1997, there were 977 firms in this 
category, total, that operated for the entire year. Of this total, 965 
firms had employment of 999 or fewer employees, and an additional 12 
firms had employment of 1,000 employees or more. Thus, under this size 
standard, the great majority of firms can be considered small. These 
broader Census data notwithstanding, we believe that there are only two 
licensees in the 24 GHz band that were relocated from the 18 GHz band, 
Teligent and TRW, Inc. It is our understanding that Teligent and its 
related companies have less than 1,500 employees, though this may 
change in the future. TRW is not a small entity. Thus, only one 
incumbent licensee in the 24 GHz band is a small business entity.
    47. Future 24 GHz Licensees. With respect to new applicants in the 
24 GHz band, we have defined ``small business'' as an entity that, 
together with controlling interests and affiliates, has average annual 
gross revenues for the three preceding years not exceeding $15 million. 
``Very small business'' in the 24 GHz band is defined as an entity 
that, together with controlling interests and affiliates, has average 
gross revenues not exceeding $3 million for the preceding three years. 
The SBA has approved these definitions. The Commission will not know 
how many licensees will be small or very small businesses until the 
auction, if required, is held.
    48. Internet Service Providers. While ISPs are only indirectly 
affected by our present actions, and ISPs are therefore not formally 
included within this present FRFA, we have addressed them informally to 
create a fuller record and to recognize their participation in this 
proceeding. The SBA has developed a small business size standard for 
ISPs. This category comprises establishments ``primarily engaged in 
providing direct access through telecommunications networks to 
computer-held information compiled or published by others.'' Under the 
SBA size standard, such a business is small if it has average annual 
receipts of $21 million or less. According to Census Bureau data for 
1997, there were 2,751 firms in this category that operated for the 
entire year. Of these, 2,659 firms had annual receipts of under $10 
million, and an additional 67 firms had receipts of between $10 million 
and $24,999,999. Thus, under this size standard, the great majority of 
firms can be considered small entities.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements for Small Entities

    49. Pursuant to sections 251(c) and (d) of the Act, incumbent LECs, 
including those that qualify as small entities, are required to provide 
nondiscriminatory access to UNEs to requesting telecommunications 
carriers in certain circumstances. In this Order, we modify our 
unbundling rules, as described above. Specifically, we conclude, except 
as set forth in other Commission orders, that requesting carriers: (1) 
Shall be afforded unbundled access to DS1-capacity dedicated transport 
except on routes connecting a pair of wire centers, where both wire 
centers contain at least four fiber-based collocators or at least 
38,000 business access lines; (2) shall be afforded unbundled access to 
DS3-capacity dedicated transport except on routes connecting a pair of 
wire centers, each of which contains at least three fiber-based 
collocators or at least 24,000 business lines; (3) shall be afforded 
unbundled access to dark fiber dedicated transport except on routes 
connecting a pair of wire centers, each of which contains at least 
three fiber-based collocators or at least 24,000 business lines; (4) 
shall not be afforded unbundled access to entrance facilities in any 
instance; (5) shall be afforded unbundled access to DS1-capacity loops 
except in any building within the service area of wire centers with 
60,000 or more business lines and 4 or more fiber-based collocators; 
(6) shall be afforded unbundled access to DS3-capacity loops except in 
any building within the service area of wire centers with 38,000 or 
more business lines and 4 or more fiber-based collocators; (7) shall 
not be afforded unbundled access to dark fiber loops in any instance; 
and (8) shall not be afforded unbundled access to mass market local 
circuit switching in any instance. We also set forth specific 
transition plans to govern competitive carriers' migration from UNEs to 
alternative arrangements, where necessary. The various compliance 
requirements contained in this Order will require the use of 
engineering, technical, operational, accounting, billing, and legal 
skills. The carriers that are affected by these requirements already 
possess these skills.

Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered

    50. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    51. In this Order, we adopt rules implementing section 251(c)(3) of 
the Communications Act, which requires that incumbent LECs make 
elements of their networks available on an unbundled basis to new 
entrants at cost-based rates, pursuant to standards set out in section 
251(d)(2). As noted above, these rules respond to the D.C. Circuit's 
decision in USTA II. Particularly, we focus on those items that the 
court remanded for our consideration. Our actions will affect both 
telecommunications carriers that request access to UNEs and the 
incumbent LECs that must provide access to UNEs under section 
251(c)(3).

[[Page 8949]]

    52. In arriving at the conclusions described above, the Commission 
considered various alternatives, which it rejected or accepted for the 
reasons set forth in the body of this Order, and made certain changes 
to the rules to reduce undue regulatory burdens, consistent with the 
Communications Act and with guidance received from the courts. These 
efforts to reduce regulatory burden will affect both large and small 
carriers. The significant alternatives that commenters discussed and 
that we considered are as follows.
    53. Reasonably Efficient Competitor. In this Order, we clarify 
that, in assessing impairment pursuant to the standard set forth in the 
Triennial Review Order, we presume a reasonably efficient competitor. 
Specifically, we presume that a requesting carrier will use reasonably 
efficient technology and we consider all the revenue opportunities that 
such a competitor can reasonably expect to gain over the facilities, 
taking into account limitations on entrants' ability to provide 
multiple services. This clarification, we conclude, will encourage 
facilities-based competitors, including small businesses, to deploy 
efficient technologies so as to maximize quality of service and 
minimize costs. Thus, while we recognize that our approach might 
prevent inefficient small entities from using UNEs to compete (i.e., in 
those cases where a reasonably efficient small entity would not require 
access to UNEs), we believe that the alternative approach, which would 
reward inefficiency and produce overbroad unbundling rules, would be 
inconsistent with the Communications Act.
    54. Service Considerations. In response to the USTA II court's 
guidance, we revise our approach to unbundling for the exclusive 
provision of long distance and mobile wireless services. Specifically, 
we abandon the ``qualifying services'' approach set forth in the 
Triennial Review Order, which limited the section 251(d)(2) inquiry to 
a subset of telecommunications services and which was rejected by the 
D.C. Circuit. Based on the record, the court's guidance, and the 
Commission's previous findings, we find that the mobile wireless 
services market and long distance services market are markets where 
competition has evolved without access to UNEs. We have therefore 
determined, pursuant to our ``at a minimum'' authority to consider 
factors other than impairment when assessing unbundling obligations, to 
prohibit access to UNEs for exclusive provision of service to those 
markets. We also considered, but declined to adopt, an approach also 
barring use of UNEs for provision of other services specified in the 
Act--namely, telephone exchange service and exchange access service, 
the two services LECs provide. We recognize that the use restrictions 
adopted in this Order may prevent small providers of mobile wireless 
and long di