WPC( 2BJ CourierCG TimesCG Times BoldXw PE37XPCG Timeset 4_230_1HPLAS4.PRS 4x  @\oeX@2G 6 ZFX3|w HP LaserJet 4_230_1HPLAS4.PRS 4Xw P7\oeXPic (Scalable)Univers (Scalable)Univers Bold (Scalable)Courier 10cpiY8wC;,Xw PE37XPZx/c81,Apc PE37PD7zC;, c!Xz_ pi7Xncaption SS888WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNxxxSSS?SJJSSSSSS8SSSS888YYS..SSffSSxS```8YS8"xxSxixxS哓S88xfxxxxxxxxxxx8SoS]SxoS8SxJS`xrxxxxxxxxxxPxxxxxxofxGcxxxxxxxSxxxxxxxSxxxxSxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxxofo]f]oJoAfJJxJA.oJo]]xJoSxJxffSfSSfJfJofo]fffooASxfffJffff88SSSSoSSSffff8fSJ8 Y-#c P7ApP#X01Í ÍX81Í Í#Xw P7XP#dd~d~d<|8tddddddlLkdkd~d~d~ddddddXCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"Ȑdhd岲dCCȐzȲxCddodȐȅdCdYdsȐ]ȐȐȧzȐUvŐdȐYYCCCCŐz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC2+ Zy v vI l HP LaserJet IIISiHPLASIII.PRSXw P7HN[XPheading 1heading 1 heading 2heading 2 heading 3heading 325v] v vIvheading 4heading 4 heading 5heading 5 heading 6heading 6 heading 7heading 7 21vg l vI rheading 8heading 8 Default Paragraph FoDefault Paragraph Font endnote textendnote text  endnote referenceendnote reference 2z vc e>\footnote textfootnote text  footnote referencefootnote reference toc 1toc 1` hp x (#(#`(#`` hp x (#toc 2toc 2` hp x (#` (#`` (#`` hp x (#2$toc 3toc 3` hp x (#` (#` (#` hp x (#toc 4toc 4` hp x (# (# (#` hp x (#toc 5toc 5` hp x (#h(#h(#` hp x (#toc 6toc 6` hp x (#(# (# ` hp x (#2&&vV!$toc 7toc 7 toc 8toc 8` hp x (#(# (# ` hp x (#toc 9toc 9` hp x (#(#`(#`` hp x (#index 1index 1` hp x (#` (#` (#` hp x (#2v+X&v(v*l +index 2index 2` hp x (#` (#`` (#`` hp x (#toa headingtoa heading` hp x (#(#(#` hp x (#captioncaption _Equation Caption_Equation Caption 2d-v+p,k,k,a8DocumentgDocument Style StyleXX` `  ` a4DocumentgDocument Style Style . a6DocumentgDocument Style Style GX  a5DocumentgDocument Style Style }X(# 2/ -!v;."t.#%/a2DocumentgDocument Style Style <o   ?  A.  a7DocumentgDocument Style Style!yXX` ` (#` BibliogrphyBibliography":X (# a1Right ParRight-Aligned Paragraph Numbers#:`S@ I.  X(# 22$/%0&;1'1a2Right ParRight-Aligned Paragraph Numbers$C @` A. ` ` (#` a3DocumentgDocument Style Style%B b  ?  1.  a3Right ParRight-Aligned Paragraph Numbers&L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph Numbers'Uj` `  @ a. ` (# 25(2)3*U4+%5a5Right ParRight-Aligned Paragraph Numbers(_o` `  @h(1)  hh#(#h a6Right ParRight-Aligned Paragraph Numbers)h` `  hh#@$(a) hh#((# a7Right ParRight-Aligned Paragraph Numbers*pfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph Numbers+yW"3!` `  hh#(-@p/a) -pp2(#p 29,06-+6.'8/'9a1DocumentgDocument Style Style,Xqq   l ^) I. ׃  Doc InitInitialize Document Style-  0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgTech InitInitialize Technical Style.. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technicala5TechnicalTechnical Document Style/)WD (1) . 2b<091g:2;3;a6TechnicalTechnical Document Style0)D (a) . a2TechnicalTechnical Document Style1<6  ?  A.   a3TechnicalTechnical Document Style29Wg  2  1.   a4TechnicalTechnical Document Style38bv{ 2  a.   2eB4<5V=6=7b>a1TechnicalTechnical Document Style4F!<  ?  I.   a7TechnicalTechnical Document Style5(@D i) . a8TechnicalTechnical Document Style6(D a) . PleadingHeader for numbered pleading paper7P@n   $] X X` hp x (#%'0*,.8135@8:><q*"xxxxWWxxxWWkkxxxA.SSxSSJJSJSSSSSS8SSSSSSSSS.xJxJxJxJxJorJiJiJiJiJ8.8.8.8.{SxSxSxSxS{S{S{S{SxSxJ{SxSxSxS{S`SxSxSxSrSrSrS{SiSiSiSiSxSxSxSxSxS{S{SS.SSSSz]SSuSiSiSk2g/a{S{SxSxSxoSoSZ?YSYSiSiSiS{S{S{S{SxxSkI8SS888WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNxxxSSS8JDDSSSSSS;SSSS;88VVS++SSffSSxSc]]8VS;"xxSxWxxS唔S88xfxxxxxxxxxxx8SxS]SxoS8SxJS`xlxxxxxxxxxxMxxxxxxofxGcxxxxxxxSxxxxxxxJxxxxJxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxxxfi]f]oJiAlJ{SxJ8.uJo]]{JoSxJxf`SfSSiJxJofx]fffxi{8SxxxfJffff88SSSSx{SSSxxxf8`SJ82jX\ra"f"Sh5^!.22YN!!!2Y!!!!2222222222!!dYd,YH?EJ?;HJ!'F?[JH9HC6?JH^HHA!!!22!,2,2,!222N2222%'22H22,,2,d222222!222222222H,H,H,H,H,YCE,?,?,?,?,!!!!J2H2H2H2H2J2J2J2J2H2H,J2H2H2H2J292H2H2H2E2E2E2J2?2?2?2?2H2H2H2H2H2J2J222222I822F2?2?2@>:J2J2H2H2YHC2C26&6262?2?2?2J2J2J2J2^HH2@,!22!!!WddddddddddddddddddddddddddddddddddddddddddddddddxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHHH222!,))22X222YY2#2222Y#!!442Ydd22==Ld2d2H2;SS88Y!42^x#"ddddHHddd2Hdd4HHYYddd2YYddd Y2!!dddddH=dYHHHHHHHHHHx!d2H282YdHdC2!2H,29HNAddHHHHHHHHHHddddd.dHHHHdddddddddddddddddddHHddddddSC=NdHddd+;HHHHddddddHHH2HHdHHdddHHH,HHHH,HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!HHH!HHH!HHH!HHHHHHHHHHHHHH=?8=8C,?'A,J2H,!F,C8[8J,C2H,H=92=22?,H,C=H8N===H?J!2HHH=,====!!2222HJ222HHH=!92,!d"Sh5^18PSS888S8888SSSSSSSSSS88Sddoxd`xx8Jo]oxdxdS]xdd]]888SS8SSJSJ.SS..J.xSSSS??.SJoJJ?JSJSSSSSS8SSSSSSSSS.dSdSdSdSdSooJdJdJdJdJ8.8.8.8.oSxSxSxSxSxSxSxSxS]JdSxSxSxS]JxSdSdSdSdSoSoSoSxSdSdSdSdSxSxSxSxSxSxSxSS/SSSSSSSoS]S]S]/]/doSoSxSxSodSdSS?SSSS]S]S]SxSxSxSxSo]S]?8SS888WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNxxxSSS8SMMSSSSSS;SSSS;88SSS..SSffSSxSYSS8SS;"xxSxSxxS哓S88xfxxxxxxxxxxx8SfS]SxoS8SxJS`xlxxxxxxxxxxMxxxxxxofxGcxxxxxxxSxxxxxxxJxxxxJxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxxfff]f]oJfA]JxSxJ8.oJo]]oJoSxJxffSfSS]J]Joff]fffffx8Sx]]fJffff88SSSSfxSSS]]]f8`SJ8"Sh5^18MSS888S8888SSSSSSSSSS88SxoxxodAPoxdx]oxxxxo888SS8S]J]J;S].8].]S]]JA8]SxSSJSSSSSSSSS8SSSSSSSS].xSxSxSxSxSxxJoJoJoJoJA.A.A.A.x]SSSSx]x]x]x]xSxSx]SSxSxSd]xSxSxSxSxSxSx]oSoSoSoSSSSSS]]S.S]SS_SS]oSoSoAo.x]x]SS{xSxS]A]S]SoSoSoSx]x]x]x]xxSoJ8SS888WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNxxxSSS8SGGSSSSSS;SSSS;88``S++SSffSSxSi]]8`S;"xxSx`xxS唔S88xfxxxxxxxxxxx8SxS]SxoS8SxJS`xrxxxxxxxxxxPxxxxxxofxGcxxxxxxxSxxxxxxxSxxxxSxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxxxfo]f]oJoAoJJxJA.Jo]]xJoSJxffSfSSoJxJofx]fffxoASxxfJffff88SSSSxSSSxxxf8fSJ8"Sh5^;LhddCCCdCCCCddddddddddCCȰdxLdxxoxxxCCCddCddYdYFdo88d8odddLL8oYdYLdddddddddCddddddddd8dddddYYYYYL8L8L8L8oddddoooozYddddxYdxdddddddddddddddddood8ddddkdddxdxdxDx8ooddהddpLododxdxdxdooooxdxLCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddLdYYddddddCddddCCCkkd88ddzzdddsssCkdC"Ȑd~d尰dCCȐzȲxCddodȐȅdCdYdsȐ`ȐȐȮzȐUvŐdȐddCCCCŅzozoYNzYYYN8YooYdYzzdzddzYzYzozzzNdzzzYzzzzCCdddddddzzzzCzdYC2}kodty"Sh5^CCd||ȘCCC|CCCC||||||||||CChȔ|so8okv|ȐxCCCddCkskskHss00k0ssssFdHsooo`YdY||||||C||||||d|x0kkkkkĨksksksksk80808080sssssssssok|ssosvsk||||||||||||||s|||||||0||||`|||||||lHl0||||ȵ||d||||||||s|||Ȭ|x`CddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNd||Choo||~QQ|LLdd|LCCdd~JJ~~zzdddzzCddL"Ȑdjd dCCȐvȐxCd|o~ȐȔdC~d~sȐkȐȐȧzȐUvŐdȐYYCCCCŔo~kodks]zUsk80dhoo~UssvkvvY~]k`sC~koCC~~~~~~~CsdYC"Sh5^CCh||ȘCCC|CCCC||||||||||CChȔ|so8okv|ȐxCCCddCkskskHss00k0ssssFdHsooo`ddd||||||C||||||d|x0kkkkkĨksksksksk80808080sssssssssok|ssosvsk||||||||||||||s|||||||0||||`|||||||lNl8||||ȵ||d||||||||s|||Ȭ|x`CddCCCWddddddddddddddddddddddddddddddddddddddddNd||Choo||~QQ|LNdd|LCCdd~JJ~~zzdddzzCddL"Ȑdod dCCȐzȐxCd|v~ȣȔ`C~o~sȐdȐȐȮzȐUvŐdȐddCCCCŔs~vodssdz]sz84ddvo`szvsz]~]vosC~sCC~~~~~~~CzdYC"Sh5^88Sgg888g8888gggggggggg88V{gux`]{x.]oYxckkgxxxrd888SS8Y`Y`Y<``((Y(````;S<`]]]PJSJgggggg8ggggggSgd({Y{Y{Y{Y{YuY`Y`Y`Y`Y.(.(.(.(x`````x`x`x`x`r]{Yxg``r]x`c`{Y{g{gugugugxggggggggg{`{g{g{g{gxgxgg(ggggPggogggggZ>iiffSSxSrff8SS?"xxSxXxxS姧 S88xcxxxxxxxxxxx8S{g]ix{S8ixSi`xlxxxxxxxxxxYxxxxxxofxGcxxxxxxxSxxxxxxxJxxxxJxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxx{]iY]S{Y`MfGx`Y.(oS{V]x]iG`x`cYccJiMrYuxPr{{`x8irr{Y]rr88iiii{xiiirrr{8`SJ8"Sh5^88Vgg888g8888gggggggggg88V{gux`]{x.]oYxckkgxxxrd888SS8Y`Y`Y<``((Y(````;S<`]]]PSSSgggggg8ggggggSgd({Y{Y{Y{Y{YuY`Y`Y`Y`Y.(.(.(.(x`````x`x`x`x`r]{Yxg``r]x`c`{Y{g{gugugugxggggggggg{`{g{g{g{gxgxgg(ggggPggogggggZAZ/xxgxgggkgkgkSkgkgggggggx`xgxgxgrgdP8SS888WddddddddddddddddddddddddddddddddddddddddNxxxSgg8V]]ggiDDg?ASSg?88SSi>>iiffSSxSrff8SS?"xxSx]xxS姧 S88xfxxxxxxxxxxx8S{gci{P8ix]i`xrxxxxxxxxxxSxxxxxxofxGcxxxxxxxSxxxxxxxSxxxxSxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx8xxx8xxx8xxx8xxxxxxxxxxxxx{`ic]S{``SfMx`f.+oS{Scx]xP`fc`flMiMrcxx]x{`x8irr`lrx88iiii{xiiirrr8fSJ82}> b""Sh5^7>V]]>>>]>>>>]]]]]]]]]]>>]||pIZ|ph||>>>]]>]hShSB]h4>h4h]hhSI>h]]]S]]]]]]]]]>]]]]]]]]h4]]]]]‡S|S|S|S|SI4I4I4I4h]]]]hhhh]]h]]]]ph]]]]]]h|]|]|]|]]]]]]hh]4]h]]k]]h|]|]|I|4hh]]ӊ]]hIh]h]|]|]|]hhhh]|S>]]>>>WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN]]]>]OO]]]]]]B]]]]B>>kk]00]]rr]]]vhh>k]B"]k]妦]>>rx>]]h]|]>]S]kZ|rOoŇ]]]>>>>Ňr|hrh|S|I|SSSI4S|hhS|]Srr]r]]|SS|rhrrr|I]rSrrrr>>]]]]]]]r>r]S>"i~'K2^18MSS888S8888SSSSSSSSSS88Jxir{icx{8Aui{x`xoYi{xxxl888SS8JSJSJ8SS..S.SSSS>A.SSxSSJJSJS+SSSSS8SSSSSSSSS.xJxJxJxJxJorJiJiJiJiJ8.8.8.8.{SxSxSxSxS{S{S{S{SxSxJ{SxSxSxS{S`SxIxSxIqIqIrSrS{dgIiSiSgIxSxSxSxSxS{S{S8.SSSS8Sz]SSuSg/g7,l0r_ p^70$@NE,!3_ p^72r Qf (G"4|Jf n ^ENluuNNNuNNNNuuuuuuuuuuNNu[pNNNuuN||pIZ|ph||uuuuuuuuuNuuuuuuuuhA||||[I[I[I[Ip||||u]u]u]u]||||hhh||||rrrrrrrrrrrrrNuuNNNWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNuuuNuccuuuuuuRuuuuRNNu<<uuuuuNuR"uuuNNxNuuuuNuhupcuuuNNNN|r|||[I||rr||r[uhNNuuuuuuuNuhN",tB^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d<|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`L2f &",tB^ f ^;C]ddCCCdCCCCddddddddddCCdxN`xoCCCddCdoYoYFdo8Co8odooYNCodddYdddd4dddddCddddddddo8dddddYYYYYN8N8N8N8oddddooooddpddddxodddXXddXddXdddddooL8doddNorddo8PdN8ppoddXXdpLoNpLodPDdopoopodXYXodoodddCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCdUUddddddFddddFCCssd44ddzzddd~ooCsdF"dsd9dCCzCddoddCdYds`zUvdddCCCCzozoYNYYYN8YooYdYzzdzddYYzozzzNdzYzzzzCCdddddddzCzdYC\   pxtll\tll@\@\`L Y4s  Xsa(#\X Ċ#XR  P7jQXP# FCC 9658  X'(#  Y4(#(# \ @hBefore the FEDERAL COMMUNICATIONS COMMISSION >Washington, D.C. 20554  Y_4In the Matter of hhCq) ` `  hhCq)  Y14Ameritech Operating CompanieshhCq)pp ` `  hhCq)  Y 4Petition for a Declaratory Ruling hhCq)  Y 4and Related Waivers hhCq)  Y 4to Establish a New Regulatory Modelq)  Y 4for the Ameritech RegionhhCq)  Y4j ORDER ă  Yc4Adopted: February 14, 1996hhCqppReleased: February 15, 1996 By the Commission, Chairman Hundt and Commissioner Barrett issuing separate statements:  Y4  Y4 STable of Contentsă  Y4`(#zPara. No.  Y4  Y4 I.Introductionp"(#1  Y4II.Backgroundp"(#4  Y}4A.` ` The Access Charge Rulesp"(#5  Yf4B.` ` The Modification of Final Judgmentp`"(#11  YO4C.` ` Similar Proposals by Other LECsp`"(#12  Y84D.` ` The Customers First Planp`"(#16  Y!4` ` 1. Overviewp`"(#16  Y 4` ` 2. Department of Justice InterLATA Trialp`"(#19  Y4` ` 3. State Actionsp`"(#20  Y4` ` 4. Ameritech's Waiver Requestsp`"(#25  Y 4` `  a.Overviewp`"(#25  Y!4` `  b.Access Charge Restructuringp`"(#27  Y"4` `  c.Pricing Flexibilityp`"(#34  Yi$4III.Discussionp`"(#35  YR%4A.` ` Legal Standard for Granting a Waiver and Other General IssuesxxXp`"(#35  Y;&4` ` 1. Positions of the Partiesp`"(#35  Y$'4` ` 2. Discussionp`"(#41ك"$'0*((aa,%"Ԍ Y4B.` ` Special Circumstances: Assessment of the State of Competitionp`"(#45  Y4` ` 1. Positions of the Partiesp`"(#45  Y-x` ` 2. Discussionp`"(#J61  Y-X` hp x (#%'0*,.8135@8: -Bell Tel. Co. Proposed Introduction of a Trial of Ameritech's Customers First Plan in Illinois, Case No.94-0096, Proposed Order at 3435 (Ill. Comm. Comm'n Jan. 24, 1995). In its Brief on Exceptions to the Hearing Examiner's Proposed Order, Ameritech stated that it would not challenge this finding before the full  zP-Illinois Commerce Commission. Brief on Exceptions of Illinois Bell Telephone Company, at34-35, Illinois Bell  zPb-Tel. Co., Proposed Introduction of a Trial of Ameritech's Customers First Plan in Illinois, Case No.94-0096, (Ill. Comm. Comm'n Feb. 8, 1995). The Michigan Public Service Commission similarly rejected Ameritech's  zP-interLATA linkage condition.  Application of City Signal, Inc. for an Order Establishing and Approving  zP-Interconnection Arrangements with Ameritech Michigan, Case No. U10647, Opinion and Order, at 9, (Mich. Pub. Serv. Comm'n Feb. 23, 1995) (Michigan Order).? Ameritech's proposals are described in greater  Y-detail below.T zP-ԍxSee infra paras. 2534.T  Yv-x17.` ` Ameritech's waiver petition summarizes its proposals for opening its network to facilitate local exchange competition. Specifically, Ameritech proposes to unbundle the elements of its local exchange and interoffice network, and make these elements available to parties that seek to provide competing local telephone service. The elements that Ameritech would make available for purchase are: local loops, local switching, dedicated transport,  Y -common transport, and SS7 call setup.@ > xP-ԍxPetition at 13.@ In addition, Ameritech proposes the establishment of reciprocal compensation agreements for terminating local traffic between Ameritech and  Y -new providers of local exchange services.B  zPT -ԍxId. at A3.B Ameritech also states in its Petition that it will offer exchange support functions such as 911, directory assistance, and operator services on a  Y -contractual basis to carriers that offer switching.A ` zP#-ԍxId. at 14.A Ameritech would relinquish its role as central office code administrator for its region and would transfer control of number"  0*&&aaZ"  Y-assignment to a third party.!$ zPy-ԍxId. Subsequent to Ameritech's proposal, the Commission issued an order mandating that Ameritech's responsibilities as central office code administrator, as well as those of other LECs, be transferred to a new  zP -North American Numbering Plan administrator. Administration of the North American Numbering Plan, Report and Order, FCC 95283, CC Docket No.92237, 7380 (released July13, 1995).  Finally, Ameritech asserts that it will guarantee fair pricing of  Y-local loops and switching capabilities" xPN-ԍxAmeritech notes that the pricing of unbundled loops and switching capability is a matter for state regulators. Petition at 15. and nondiscrimination in the provision of the unbundled services.  Y-x18.` ` We solicited public comment on Ameritech's Petition and Update. Comments to the Petition were submitted on June 11, 1993 and replies on July 12, 1993. Comments to the Update were submitted on May 16, 1995 and replies on May 31, 1995.   XH-x 2.` ` Department of Justice InterLATA Trial  Y -x19.` ` As part of its initial filing, Ameritech requested that this Commission issue a declaratory ruling that the provision of interexchange service by Ameritech would serve the  Y -public interest.D#  zP-ԍxId. at 1819.D On April 3, 1995, after extensive negotiations with Ameritech and discussions with other parties, the DOJ submitted to the U.S. District Court for the District of Columbia a Proposed Order for a trial waiver of the MFJ. Grant of the waiver would have allowed Ameritech to offer interLATA services on a trial basis in the portion of the  Y-Chicago LATA that is located in Illinois, and in the Grand Rapids, Michigan LATA.$| xP-ԍxPreliminary Memorandum of the United States In Support of a Motion for a Modification of the Decree  zP-to Permit a Limited Trial of Interexchange Service by Ameritech, United States v. Western Elec. Co., Civ. Action No. 820192 (HHG) (filed Apr. 3, 1995) (DOJ Proposed Order). DOJ subsequently filed a more detailed memorandum with the MFJ court in support of its preliminary memorandum. Memorandum of the United States in Support of Its Motion for a Modification of the Decree to Permit a Limited Trial of  zP-Interexchange Service by Ameritech, United States v. Western Elec. Co., Civ. Action No. 820192 (HHG) (filed May 1, 1995) (DOJ Supporting Memorandum). Ameritech would have been permitted to offer this service only through a structurally separate subsidiary, and only after the DOJ determined that no substantial possibility existed  YK-that Ameritech's entry would have impeded competition in the interLATA market.S%K xP!-ԍxDOJ Proposed Order  1920.S On May  Y4-31, 1995, we filed an amicus curiae brief with the MFJ court generally supporting the"4 r%0*&&aa "  Y-principles of the DOJ Proposed Order.n&\ xPy-ԍxMemorandum of the Federal Communications Commission as Amicus Curiae in Support of Motion for  zPA-Modification of Decree to Allow Limited Trial of Interexchange Service By Ameritech, United States of  zP -America v. Western Elec. Co., Civ. Action No. 820192 (HHG) (May 31, 1995).n The MFJ court has not acted on Ameritech's request. Because the Telecommunications Act of 1996 supersedes the MFJ, the DOJ waiver  Y-process no longer governs the terms of RBOC interLATA entry.J' zPo-ԍxSee supra para. 11.J  X-x 3.` ` State Actions  Yv-x20.` ` On April 7, 1995, the Illinois Commerce Commission (Illinois Commission) issued an Order addressing both the Customers First tariffs filed by Ameritech as well as  YH-related issues that were under review in separate proceedings.(H~ zPw-ԍxIllinois Bell Tel. Co., Proposed Introduction of a Trial of Ameritech's Customers First Plan in Illinois,  xPA-Order, Docket No. 940301 (Ill. Comm. Comm'n Apr. 7, 1995) (Illinois Order). The tariffs filed by Ameritech indicated that they would become effective upon Ameritech's receipt of a waiver of the MFJ to provide interexchange service. The Illinois Commission rejected this condition as an improper restraint on its authority to establish regulations for the provision of local  Y -exchange service in Illinois.A)  zPu-ԍxId. at 37.A It also rejected Ameritech's unbundling tariff that would have required a party to purchase entire loops. The Illinois Commission found that unbundling subelements of loops (such as feeder and distribution plant) upon bona fide request would better serve the public interest because a competing carrier may be capable of replicating part of the local loop and would need to purchase from Ameritech only the portion it cannot  Yy-replicate.D*yj  zP-ԍxId. at 4748.D Although the Illinois Commission generally found that subloop unbundling would serve the public interest, it concluded that issues arising out of requests for subloop unbundling would be addressed in a pending rulemaking proceeding on line side  Y4-interconnection.B+4  zP-ԍ xId. at 48.B In addition, the Illinois Commission rejected Ameritech's initial tariff for the pricing of unbundled network elements because the sum of the charges for the unbundled elements would have exceeded the total price of the bundled line providing the same  Y-functionalities, thus resulting in a possible price squeeze for competitors.,"L  zP.#-ԍxId. at 6061. A price squeeze can occur when an entity that provides both a retail product and a necessary input for providing that retail product possesses market power over the input. A price squeeze exists when the price of the input product is so high, relative to the price of the retail product, that competing"%+0*&&$"  zPX-providers of the retail service are unable to make a profit. See Janusz A. Ordover & Garth Saloner, Predation,  zP"-Monopolization, and Antitrust, in 1 Richard Schmalensee & Robert Willig, Handbook of Industrial  zP-Organization, 537, 56570 (1989); T.G. Krattenmaker and Steven Salop, Anticompetitive Exclusion: Raising  zP-Rivals' Costs to Achieve Power over Price, 96 Yale L.J. 209 (1986); Steven Salop and D.T. Scheffman, Raising  zP-Rivals' Costs, 73 American Econ. Rev. 267 (1983). Although the Illinois Commission discounted the concerns expressed by some parties about the likelihood of a price squeeze, the Illinois Commission concluded that the  zP-pricing rule it imposed would reduce the possibility that a price squeeze would occur. Id. " ,0*&&aa"Ԍ Y-ԙx21.` ` The Illinois Commission generally approved the technical parameters for end Y-office integration between Ameritech and its competitors.O- xPv -ԍxIllinois Order at 7981.O It agreed with Ameritech that Ameritech and new local exchange providers should compensate each other at the same rate for terminating each other's traffic, but rejected Ameritech's proposal to use switched access rates as a basis for such reciprocal compensation because these rates would prevent  Y-competitors "from providing local exchange service in a financially viable manner."A.l  zP-ԍxId. at 96.A The Illinois Commission also concluded, contrary to Ameritech's assertions, that a new provider of local exchange service would initially terminate much more traffic on Ameritech's network than Ameritech would terminate on the new local service provider's network. Consequently, even if both carriers paid the same reciprocal compensation rates, new local service providers would end up making substantial net payments to Ameritech, thereby creating the possibility of a price squeeze in which new entrants would be unable to establish  Y -competitive prices for local exchange service.D/  zP-ԍxId. at 9698.D The Illinois Commission therefore adopted a reciprocal compensation rate structure based on Ameritech's actual long run service  Y -incremental costs for providing termination services.K0  zP-ԍxId. at 98.  K The Illinois Commission also directed Ameritech to tariff interim number portability mechanisms and to participate in an industry  Y-task force to develop a long term solution to this problem.N1\" zPc-ԍxId. at 10910. The Commission has initiated a proceeding to examine the costs and benefits of both  zP--interim and various longerterm number portability solutions. See Telephone Number Portability, Notice of Proposed Rulemaking, 10 FCC Rcd 12350 (1995).N Finally, in an interim order for which hearings were consolidated with the Customers First hearings, the Illinois Commission ordered Ameritech to implement intraLATA toll presubscription within one year of the  YK-issuance of the order.2KF zPB$-ԍxIntraMarket Service Area Presubscription and Changes in Dialing Arrangements Related to the  zP %-Implementation of Such Presubscription, Interim Order at 20 (Ill. Comm. Comm'n Apr. 7, 1995). "420*&&aa"Ԍ Y-x22.` ` Ameritech refiled its tariff to comply with the Illinois order on May 22, 1995. The tariff went into effect on one day's notice, and is currently effective, but several parties petitioned the Illinois Commission to begin an investigation. On June 21, 1995, the Illinois Commission initiated an investigation into allegations that certain tariff provisions created a  Y-"price squeeze" or were unreasonably discriminatory.3 zP-ԍxIllinois Comm. Comm'n vs. Ill. Bell Tel. Co., Citation Order, Dkt. No. 950296 (June 21, 1995). If the Illinois Commission determines that any provisions of the tariff are invalid, it will modify those provisions and  Yv-order refunds to any competitors that purchased services at rates deemed unlawful.r4vZ xP -ԍxIll. Ann. Stat. ch. 220, 9250, 9252 (SmithHurd 1995).r  YH-x23.` ` The Michigan Public Service Commission (Michigan Commission) addressed many of the issues involved with the Customers First plan in a proceeding that initially  Y -focused on establishing interconnection arrangements between Ameritech and US Signal,5  xP-ЍxUS Signal's local exchange subsidiary is known as City Signal. We use "US Signal" throughout this order for consistency. a  Y - new local service provider in Grand Rapids, Michigan.6B B xP-ԍxMichigan Order. On October 12, 1994, the Michigan Commission granted US Signal a license to provide local exchange service in the Grand Rapids District exchange. Michigan law required US Signal to have an interconnection agreement with Ameritech before US Signal could begin providing service. US Signal was unable to reach agreement on interconnection with Ameritech and requested that the Michigan Commission establish the terms of such agreement after a hearing. At the same time, US Signal filed a motion asking the Michigan Commission to establish transitional cocarrier interconnection arrangements with Ameritech. The Michigan Commission granted this motion, and in the course of the proceeding, established several interim rules  zPn-governing the entry of new providers of local exchange services into Michigan's local exchange market.  Id.ĝ The Michigan Commission granted US Signal's motion to consider in the proceeding other issues involved with local exchange  competition in addition to interconnection arrangements. The Michigan Commission found that US Signal, as a competitor to Ameritech, was entitled to interconnect its network with Ameritech's network in a manner comparable to the way independent LECs in neighboring  Y-territories interconnect with Ameritech's network.A7L  zP-ԍxId. at 17.A In reaching this decision, the Michigan Commission found unpersuasive Ameritech's attempts to distinguish a carrier operating in an adjacent market from a carrier operating within Ameritech's service area. The Michigan Commission cited with approval testimony from an MCI witness who stated that the same type of transmission link that connects Ameritech with neighboring carriers would also  Y-permit Ameritech and US Signal to exchange traffic.D8 zP#-ԍxId. at 1718.D "p80*&&aa"Ԍ Y-x24.` ` The Michigan Commission also ordered Ameritech to unbundle its loops from its switches, concluding that it is unreasonable to expect a new entrant initially to be able to  Y-rely on its own facilities to serve all customers in an area.:9 zPK-ԍxId.: In addition, the Michigan Commission concluded that the pricing of unbundled loops and other network functionalities should be determined by the total service long run incremental cost (TSLRIC) for each  Y-functionality.D:Z zP-ԍxId. at 5557.D With regard to number portability, the Michigan Commission required Ameritech to offer interim solutions to number portability at a "transitional price" that would  Y_-be based on incremental costs.A;_ zP -ԍxId. at 67.A Finally, the Michigan Commission found that until it can adopt permanent rules governing interconnection by competitors, the interconnection arrangements between Ameritech and US Signal would be the tariffed terms under which other new statecertified providers of local exchange service could interconnect with  Y -Ameritech.D< ~ zP2-ԍxId. at 8384.D Ameritech has filed a tariff to implement the requirements of the Michigan  Y -Order, and that tariff is now in effect.=  xP-ԍxAmeritech's initial tariff filings in response to the Michigan order were rejected by Michigan Commission staff on the grounds that Ameritech proposed to permit interconnection only on the basis of virtual collocation, rather than allowing an alternate mechanism proposed by US Signal. Letter from Anthony M. Alessi, Director, Federal Relations, Ameritech, to William F. Caton, Acting Secretary, FCC (August 10, 1995)  zP-(Ameritech August 10 Ex Parte); Letter from Martin W. Clift, Jr., Director Regulatory Affairs, US Signal  zP-Corp., to William F. Caton, Acting Secretary, FCC (July26, 1995) (US Signal July 26 Ex Parte); Letter from William J. Celio, Director Communications Division, Michigan Public Service Commission, to Gail Torreano, Vice President, Regulatory and Governmental Relations, Ameritech Michigan (June 13, 1995) (attached to US  zP-Signal July 26 Ex Parte). The Michigan Commission subsequently ordered Ameritech to provide an alternate  zP-method of interconnection. Application of City Signal, Inc. for an Order Establishing Interconnection  zP-Arrangements with Ameritech Michigan, Case No, U10647, Order Clarifying Prior Order (Michigan PSC, Oct.  xPO-3, 1995) (Michigan Clarification Order). Ameritech filed a revised tariff in response to the Michigan Clarification Order that was accepted by the Michigan Commission staff and is now in effect. Letter from Nancy M. Short, Director, Public Policy, Ameritech to William J. Celio, Director, Communications Division, Michigan Public Service Commission (Oct. 13, 1995). x  X -x 4.` ` Ameritech's Waiver Requests  Y-x` ` a.  Overview  Yc-x25.` ` The waivers Ameritech requests from this Commission fall into two categories: restructuring of certain access charges, and pricing flexibility. Access charge restructuring refers to the recovery of certain costs, currently embedded in perminute"5=0*&&aa " switched access rates paid by IXCs, through a flat charge on IXCs based on their market shares. To accomplish this, Ameritech seeks waivers of Part 69 of the Commission's Rules to remove certain revenues from the CCL charge and the transport interconnection charge, and to establish new rate elements that would be billed to IXCs by a third party billing agent based on their share of total interstate retail toll minutes, regardless of their use of Ameritech's access services. Ameritech also raised the possibility that these costs could be allocated back to the services to which they belong and recovered outside of perminute interstate access charges to IXCs. With respect to pricing flexibility, Ameritech requests that its transport and switching services be immediately removed from price cap regulation and that it be permitted to implement rate changes for these services without cost support and on one day's notice. In addition, Ameritech seeks waivers that would permit it to deaverage its switched access services by geographic zones, and to offer term, volume, and growth discounts on various services.  Y -x26.` ` Ameritech contends that the removal of legal barriers to local exchange competition on the state level and the unbundling of its network will rapidly produce competition in all aspects of its local exchange and exchange access business. Ameritech maintains that its unbundled network is now vulnerable to bypass by IXCs that can either obtain exchange access from other local carriers (who may be reselling Ameritech's service) or provide their own access by purchasing unbundled functionality from Ameritech. Ameritech argues that because the CCL and TIC are collected based on minutes of use measured at Ameritech's local switches, to the extent that these charges reflect noncostbased elements, customers will have an incentive to shift to competitors' local switches for access. Under these circumstances, Ameritech argues that IXCs can and will avoid paying perminute rates for switched access as long as those rates recover costs unrelated to the service. According to Ameritech, bypass of its switched access service to avoid payment of  Y-noncostbased rate elements will have two effects.A> xP#-ԍ xPetition at 11.A First, as users who have paid higher rates that include subsidies switch to other carriers whose rates are not required to include such subsidies, the funding base for those subsidies will evaporate. Second, maintenance of the current Part 69 rate elements will encourage entry by carriers that may be less efficient than Ameritech, solely because such carriers need not contribute to the existing subsidy mechanisms. Ameritech states that such inefficient entry would raise the cost to society of providing telecommunications service. Thus, Ameritech argues that the waivers it seeks from the Commission are a necessary corollary to the unbundling taking place at the state level. "X>0*&&aa "Ԍ X-XxX` ` b.X Access Charge Restructuring (#  Y-x27.` ` Ameritech maintains that the network unbundling and interconnection that it proposes in its Customers First Plan and has implemented pursuant to the Illinois and Michigan Orders, has produced, and will continue to produce, increasingly vigorous competition in the provision of switched access. In this competitive environment, Ameritech claims that it will be forced to charge artificially high interstate switched access rates due to Commission regulations that require it to recover certain costs in its switched access rates that are unrelated to the provision of switched access. Specifically, Ameritech identifies several components of its CCL and TIC that it asserts are unrelated to the provision of those services. Ameritech maintains that, in a competitive environment, it would be inefficient and inequitable for it to continue to be the only local carrier to impose these surcharges in its interstate switched access rates.  Y -x28.` ` To remedy this alleged competitive imbalance, and pending comprehensive reform of the access charge rules, Ameritech proposes a "bulk billing" mechanism that would require all IXCs that purchase interstate switched access services whether from it or from a competing provider to pay Ameritech (through an independent third party) their proportionate shares of the public policy costs now embedded in these rates, thereby removing these costs from Ameritech's perminute switched access rates. Ameritech asserts that this mechanism would operate as an interim measure until comprehensive proceedings can be conducted to address these access charge issues.  Y-x29.` ` Ameritech argues that the components of its CCL charge that recover a portion of Ameritech's interstate loop costs and fund Ameritech's longterm support contributions to NECA are costs imposed by public policy, and should be recovered through bulk billing  Y-because they are not borne by Ameritech's competitors in their rates for switched access.y? zP#-ԍxSee supra para. 6 for a fuller description of these charges.y Similarly, Ameritech proposes to split the revenues recovered through the TIC in half, and to label one half the "Switched Transport Surcharge," to continue to be recovered from Ameritech's switched access customers. The other half of the TIC revenues, which Ameritech refers to as the "Public Policy Element," would be recovered through a bulk  Y7-billing mechanism under Ameritech's plan.B@7Z xPB -ԍxUpdate at 1617. B Ameritech contends (without providing quantitative support) that the bulkbilled portion of the TIC would recover costs that have  Y -been misallocated (or unnecessarily incurred) as a result of regulatory mandates.A j  xP#-ԍxAccording to Ameritech, these costs include the following: First, Ameritech submits that the TIC recovers a portion of the costs of tandem switching that are not recovered through the tandem switching charge under the interim transport rate structure. The interim transport rate structure and pricing rules directed that the"%@0*&&W%" initial rate for the tandem switching component of tandemswitched transport be set to recover 20 percent of the fully allocated costs of tandem switching. xSecond, Ameritech contends that the TIC also recovers a portion of the transmission costs associated with tandemswitched transport. Under the interim transport rules, the initial perminute rate for the transmission component of tandemswitched transport was derived from the flat rates for comparable directtrunked transport using a conversion factor of 9000 minutes of use (MOU) per voicegrade circuit. Ameritech contends that its actual fill factor is closer to 7000 MOU per circuit. If a lower conversion factor had been used, the initial rate for tandemswitched transport would have been higher, and the TIC would have been lower by a corresponding amount. xThird, Ameritech argues that the "equal charge per minute" transport pricing rule, which the interim transport rate structure superseded, created incentives for IXCs to use transport facilities inefficiently, as compared with special access service. (The equal charge rule, which was imposed by the MFJ, required LECs to charge usagesensitive rates even for the use of dedicated facilities, the costs of which are not affected by the  zP-amount of traffic carried over them. See Transport Rate Structure and Pricing, Order and Further Notice of Proposed Rulemaking, 6 FCC Rcd 5341, 5344  13 (1991) (concluding that equal charge rule did not reflect the manner in which LECs incurred costs).) When the initial transport rates under the interim rate structure were based primarily on comparable special access rates, the allegedly elevated costs associated with these inefficiencies had to be recovered through the TIC." A0*&&aa"Ԍ Y-ԙx30.` ` Under Ameritech's proposal, each IXC with a Carrier Identification Code (CIC) would be billed for a share of the following: (1) the Ameritech loop and LTS revenues formerly recovered in the CCL; (2) TIC revenues that Ameritech calls the Public Policy Element; and (3) the administrative costs incurred in recovering these charges. Each IXC would pay, on a monthly basis, its share of this total amount based on its share of the total interstate switched access minutes originating and terminating in the territory covered by the waiver. Ameritech proposes that, in the first year of implementation, it would calculate the total amount to be collected and would perform the bulk billing itself. In subsequent years, an independent organization, to be established within the first year after the Customers First plan goes into effect, would determine the total amount to be recovered and each  Y -carrier's share, and would perform the collection and distribution functions. B  xP-ԍxUpdate, Attach. D. Ameritech describes its plan as an interim response to alleged inefficiencies created by the existing access rate structure, although Ameritech does not place a time limit on the waivers it requests.  To calculate each IXC's share of the bulk billing amount, this independent organization would determine the respective IXC's share of the interstate switched retail toll minutes of use (MOU) originated or terminated in the territory covered by the waiver, based on an annual report  Y -from each IXC.1C  R xP"-ԍxAmeritech proposes to include in the calculation only minutes of interstate switched service that originate and/or terminate in the waiver area and that are sold to end users. In Ameritech's original proposal, IXCs' shares would be based on their shares of interstate and intrastate interLATA and intraLATA toll revenues, as reported by the Common Carrier Bureau's "Longdistance Market Shares" report. Petition at A"%B0*&&7%"ԫ13. In the Update, Ameritech proposes to use only the IXCs' interstate toll MOU to apportion the recovery of bulk billed charges. Ameritech states that its proposal to use a third party billing administrator eliminates the need to rely on the Common Carrier Bureau's market share report. Update, Attach. D.1 The independent organization would collect the revenues and remit the" C0*&&aa/ " total amount to Ameritech each month without providing Ameritech a breakdown of how much each IXC contributed. Ameritech contends that such a bulk payment would prevent it from ascertaining IXCs' proprietary market share data.  Y-x31.` ` In calculating the total bulk billing amount for an upcoming year, Ameritech states that it will cap certain components of the bulk billing amount. Specifically, under Ameritech's proposal, the loop costs recoverable through the bulkbilled charge would  Y_-remain subject to the perline price cap provided in the price cap rules,SD_ zP -ԍxSee 47C.F.R. 61.45(c).S and would only vary based on the change in the number of access lines provided by Ameritech. The bulkbilled portion of the TIC would be subject to the same restrictive upper band that the price  Y -cap rules apply to the TIC.E B xP -ԍxUnder the price cap rules, LECs may not increase the TIC by more than the percentage increase in the  zP-overall price cap index for the trunking basket. See 47C.F.R. 61.47(g)(3). LTS amounts would be determined by NECA, as they are today.  Y -x32.` ` With respect to the entry of new IXCs (such as Ameritech's interexchange affiliate) into the territory covered by the waivers, Ameritech proposes that for the first tariff year after an IXC obtains a CIC and begins providing service, that carrier not be subject to bulk billing. Instead, the new market entrants would be billed the CCL and TIC rates on a perminute basis, just as they are now. Beginning the following year, the new entrant would participate in the bulk billing arrangement and would be billed monthly based on its market share from the previous year.  Y-x 33.` ` Ameritech also describes in its Petition an alternative to bulk billing for the recovery of common line costs that it refers to as "allocating costs back to the services to  Y-which they belong."BF xP<-ԍxPetition at A13.B Ameritech argues that from an economic perspective, loop costs that are currently recovered through perminute interstate access charges should be recovered  Y-through the flat subscriber line charges paid by end users.NG,  xP"-ԍxAmeritech Update Reply at 18.N According to Ameritech, increasing subscriber line charges to recover these costs would be a superior longterm" G0*&&aa" solution. Bulk billing, however, could be implemented quickly and easily, and would  Y-address Ameritech's shortterm competitive concerns.AH xPb-ԍxUpdate at 1415.A   X-x ` ` c. Pricing Flexibility  Y-x!34.` ` Ameritech also requests flexibility "to compete on a level playing field" with carriers that it asserts will enter the market in response to Ameritech network unbundling and  Y_-compete with Ameritech to provide exchange access to IXCs.AI_X zPh -ԍxId. at 18.A Ameritech requests waivers to remove its transport and switching services and current interexchange services from price  Y1-caps, and it requests that the Commission deem these services to be "competitive.":J1 zP -ԍxId.: In addition, Ameritech seeks permission to: (1) deaverage the pricing for these services according to geographic zones; (2) to change the rates for these services on one day's notice without filing cost support information; and (3) to offer contract pricing for these services. Ameritech also proposes to cap the rates for transport, switching, and current interexchange services at the rate of inflation for three years. Ameritech's proposal would have the Commission declare Ameritech's remaining service elements "noncompetitive" and would continue to subject these service elements to price caps. The remaining services elements include: (1) the residual carrier common line charge (after the bulk billing elements have  Yb-been removed);~KZb| xP-ԍxUnder Ameritech's proposal, the remaining costs recovered through the perminute CCL charge would relate to payphone costs and intrabuilding cable. These costs comprise 14.3 percent of Ameritech's current  zP-CCL charge. See supra para. 7 for a description of the costs recovered through the CCL charge today.~ (2) bulkbilled elements; (3) the end user common line charge;Lb xP-ԍxAmeritech states that "common line recovery would be restricted by applying the cap to an imputed revenue per line figure (to allow for line growth)." Update at 20. and (4) charges for expanded interconnection service. Ameritech also proposes to introduce new, nonmandatory services on 14 days' notice without first receiving a Part 69 waiver for  Y-introducing new service elements, and without filing cost support data pursuant to Part 61.:M  zP-ԍxId.: The Commission has issued a Notice of Proposed Rulemaking to address issues of LEC  Y-pricing flexibility generally,N  zP(#-ԍ xPrice Cap Performance Review for Local Exchange Carriers, Second Further Notice of Proposed Rulemaking, FCC 95393 (released Sept. 20, 1995). and as noted earlier, this aspect of Ameritech's waiver requests will be the subject of a future order. "N0*&&aa"Ԍ Y-ԙ III. DISCUSSION  X-A.xLegal Standard for Granting a Waiver and Other General Issues  X- x1.` ` Positions of the Parties  Yw- x"35.` ` Several commenters assert that the Commission lacks jurisdiction over many of the issues raised in the Petition. They contend that the issues of whether an RBOC may enter the longdistance business and whether the MFJ's restrictions should be waived are  Y2-antitrust questions, within the jurisdiction of the federal courts.O2 zP -ԍxSee, e.g., AARP Comments at 23, 1516; Illinois Cable Reply at 12; MFS Comments at 2; National Rural Telecom Association Comments at 1314; Sprint Comments at 35; Ohio Consumer's Counsel Reply at 38; Teleport Reply at 25; Wiltel Comments at 2 n.1 (arguing, however, that the Commission should issue a Declaratory Ruling as part of a multifront strategy); AT&T Comments at 44; Citizens for a Sound Economy Comments at 9. The Organization for the Protection and Advancement of Small Telephone Companies and LDDS Worldcom argue that Ameritech must first pursue its Plan with DOJ and the MFJ Court before requesting waivers  Y -from the Commission.hP z xP-ԍxOPASTCO Comments at 1011; LDDS Worldcom Comments at 7.h Others maintain that the issues surrounding unbundling are largely  Y -state issues, and hence also outside the purview of the Commission.Q  zP-ԍxSee, e.g., Ohio Consumer's Counsel Reply at 38; Teleport Reply at 25; Illinois Commerce Commission Comments at 6.  Y -x#36.` ` Some commenters argue that the Petition is premature or repetitive, because similar issues were considered in the Commission's price cap proceeding, and insufficient  Yz-time has elapsed for the Commission to assess the effectiveness of these regulations.Rzd  zP-ԍxSee, e.g., AARP Comments at 46, 16; Ohio Consumers' Counsel Comments at 1517. AT&T argues that Ameritech cannot even begin to support the proposed changes to the price  YL-cap formulas.ESL  xP-ԍxAT&T Comments at 41.E Incumbent LECs endorse the Customers First Plan, arguing that it will lead to the development of a wide variety of economical and highquality telecommunications  Y-services.T  zPU!-ԍxSee, e.g., Pacific Bell Comments; Bell Atlantic Update Comments; Southwestern Bell Update Comments; USTA Update Comments. The Arizona Payphone Association similarly supports Ameritech's requests.\U xP#-ԍxArizona Payphone Association Comments at 2.\ These commenters submit that there already is substantial access competition, and that such competition will undoubtedly increase."pU0*&&aa"Ԍ Y-ԙx$37.` ` Several commenters maintain that given the sweeping nature of the Petition, which raises issues of a national scope such as pricing flexibility and recovery of alleged social subsidies, the appropriate forum for considering the Petition and the type of relief  Y-sought is a formal rulemaking proceeding.{V" zP4-ԍxSee, e.g., AARP Comments at 34; International Communications Association Reply at 2; MCI Comments at 5254; MCI Reply at 23; National Telephone Cooperative Association Comments at 47; NYNEX Comments at 2033; Sprint Comments at 6; John Staurulakis Comments at 5; Time Warner Reply at 46; LDDS Worldcom Comments at 1720.{ These commenters ask the Commission to address such issues in a manner more efficient than the waiver process, and seek an evidentiary record on the conditions extant in the nation as a whole. Moreover, they note that the Commission is already grappling with most of these issues in various rulemaking proceedings. Others argue that the Petition is procedurally improper. CompTel claims that Ameritech's request for waiver of almost forty rules to effect a broad restructuring of policy, rather than pleading unique and special circumstances justifying a limited waiver, improperly  Y -proposes a "new model" of regulation.HW  xP}-ԍxCompTel Comments at 23.H ALTS contends that Ameritech's extensive waivers  Y -(as compared to those requested in the NYNEX USPP Order) can only be granted in a  Y -rulemaking proceeding.KX B xP-ԍxALTS Update Comments at 9.K ICA states that if all of Ameritech's waivers were granted and  Y -applied to all RBOCs, the Plan would be the equivalent of a rulemaking.@Y  xPZ-ԍxICA Reply at 4.@  Y -x%38.` ` Several commenters object to the use of either a waiver or a rulemaking to address the issues raised by Ameritech's petition. Four of the five state commissions in Ameritech's region propose that the FCC convene a Joint Conference pursuant to Section  Yd-410(b) of the Communications Act, with participation limited to the five Ameritech states.8ZXdb  xPw-ԍxIndiana/Michigan/Ohio/Wisconsin Comments at 3; Indiana/Michigan/Ohio/Wisconsin Staff Update Comments at 1. The first round of comments reflected the views of the four commissions, while the second round of comments were submitted by the four commissions' staffs.8 These parties argue that such a conference could provide for valuable dialogue in areas such as determination of the competitiveness of services, the streamlined review of tariffs, unbundling, and universal service. The four state commission staffs also urge the FCC to authorize technical conferences to permit Ameritech and the five state commissions to identify and obtain needed information and attempt to negotiate a compromise plan for  Y-submission to the FCC._[  xP $-ԍxIndiana/Michigan/Ohio/Wisconsin Comments at 4._ TCG supports the use of informal workshops to resolve issues and suggests that the Ameritech Region Regulatory Committee, which is comprised of the state public utility commissions from the five states served by Ameritech, could conduct such a"[0*&&aa"  Y-proceeding.E\ xPy-ԍxTCG Comments at 78.E ICA disagrees with such an approach, on the grounds that it represents an asymmetrical strategy to deal with national issues; one that will ultimately disrupt  Y-competition on a national basis and will benefit no one but individual companies.B]X xP-ԍxICA Reply at 56.B The National Rural Telecom Association argues that state authorities have more detailed knowledge of local conditions, and that the Commission should not adopt policies contingent on states adopting policies that encourage intrastate toll competition and abolish the local  Yv-exchange franchise.c^v xP -ԍxNational Rural Telecom Association Comments at 14.c GTE and other LECs favor USTA's proposal for reform of the access charge and price cap rules, arguing that the USTA proposal will promote new services, establish a mechanism for adjusting the degree of regulation to match the development of  Y1-competition in each access market, and preserve universal service._1x zPZ-ԍxSee, e.g., GTE Comments at 1617; GTE Reply at 57. GTE urges the Commission to begin a rulemaking proceeding based upon the USTA proposal. GTE Comments at 17.  Y -x&39.` ` While they generally support the Plan, several LECs argue that it should not be the blueprint for other LEC relief because: (1) access reform and regulatory relief for LECs should proceed without the need for additional removal of barriers to competition as proposed by Ameritech; (2) any LEC unbundling must reflect the specific conditions existing in the various regions, and be based on technical and economic data; and because (3) the  Y-extent of unbundling and network integration are largely state matters.` xP-ԍxSouthwestern Bell Comments at 2, 5, 18; Bell Atlantic Comments at 2; Pacific Bell Comments at 1214. The Utilities Telecommunications Council urges the Commission to tailor its decision to the Ameritech  Yb-region only.dab*  xP=-ԍxUtilities Telecommunications Council Comments at 6.d  Y4-x'40.` ` Various commenters argue that the Commission should deny Ameritech's petition because of the pending DOJ interLATA trial proposal and the conditions in that proposal. CompTel contends that the Commission should not preempt the DOJ trial by granting waivers of the Commission's rules in the absence of data that Ameritech faces  Y-substantial local exchange and exchange access competition.Nb  xPC#-ԍxCompTel Update Comments at 2.N ALTS argues that DOJ's request for an experimental waiver of the interLATA prohibition demonstrates that the Commission should deny the waiver request because DOJ's motion: (1) is not based on the Customer's First Plan Ameritech has presented to the Commission; (2) would create only an"J b0*&&aa" experiment subject to termination at DOJ's discretion; and (3) covers only the Chicago and Grand Rapids LATAs. Moreover, ALTS claims that the DOJ's decision to impose conditions of its own design on Ameritech renders the Customers First Plan as proposed  Y-moot.Kc xP4-ԍxALTS Update Comments at 8.K AT&T contends that the DOJ's motion presumes that although competition does not exist anywhere in Ameritech's region, competition would be beneficial and should be  Y-tested.MdX xP-ԍxAT&T Update Comments at 68.M   X_- x2.` ` Discussion  YH-  Y1-x(41.` ` Section 1.3 of the Commission's Rules provides the Commission with the  Y -authority to grant waivers "if good cause therefor is shown."De  xP-ԍx47 C.F.R. 1.3.D Courts have interpreted this Rule as requiring petitioners to demonstrate that special circumstances warrant a deviation  Y -from the general rule and that such a deviation will serve the public interest.f x zP-ԍxNortheast Cellular Tel. Co. v. FCC, 897 F.2d 1164 (D.C. Cir. 1990); WAIT Radio v. FCC, 418 F.2d 1153 (D.C. Cir. 1969). Moreover, the Commission has ample authority to address the issues presented here by ruling on  Y -Ameritech's waiver request rather than undertaking a general rulemaking.g&  zPA-ԍxSee, e.g., SEC v. Chenery Corp., 332 U.S. 194, 203 (1947) (choice between rulemaking and  zP -adjudication should be left to the informed discretion of the administrative agency); Atochem N. Am., Inc. v.  zP-U.S. EPA, 759 F. Supp. 861 (D.D.C. 1991) (agency choice between rulemaking and adjudication is subject to deferential "abuse of discretion" standard of judicial review).  Y-x)42.` ` We conclude that a waiver is the appropriate mechanism for this situation. The requested waivers apply only to one carrier and only to certain areas within two states. Moreover, Ameritech's filings suggest that competition has begun to develop more rapidly in a few areas in the Ameritech region than elsewhere in the country. This geographicallylimited showing is more appropriate for a waiver than for a nationwide rulemaking. In addition, for the reasons described below, we conclude that the market conditions in the Chicago and Grand Rapids local telecommunications markets justify granting limited waivers to Ameritech at this time, rather than waiting until we complete broadbased rulemaking proceedings. We find that the procompetitive benefits likely to result from the grant of these waivers justify our decision to use our waiver authority in this matter. We also note" g0*&&aa" that we have ample authority to grant waivers that are relatively broad in scope, such as the  Y-waivers Ameritech requests.h zPb-ЍxSee, e.g., NYNEX USPP Order, 10 FCC Rcd at 746667  48;  MTS and WATS Market Structure,  xP,-Memorandum Opinion and Order, 97 FCC 2d 834, 862 (1984).     Y-x*43.` ` We are not deciding the merits of Ameritech's proposals to unbundle its local exchange network, and we express no views regarding specific aspects of the Illinois and Michigan commissions' decisions in this area. Matters addressed by the state commissions are relevant here, as discussed below, only to the extent that the development of competition for intrastate services affects the competitiveness of markets for interstate services. Contrary to the assertion of some commenters, a FederalState Joint Conference is not necessary to address waivers of the interstate access charge rules. These issues are squarely within our jurisdiction, and state representatives have had opportunities to express their concerns.  Y -x+44.` ` Finally, we conclude that the Telecommunications Act of 1996, by establishing requirements for RBOC provision of inregion interLATA services, has rendered moot Ameritech's request for a declaratory ruling with respect to MFJ relief and interLATA  Y -entry.Ci " xPz-ԍxPetition at 1823.C For similar reasons, we reject the arguments of commenters that the DOJ Proposed Order somehow precludes or counsels against our granting waivers to allow Ameritech to restructure certain access charges. Although Ameritech argues that its evidence of competitive developments and regulatory reforms support both interLATA entry and certain modifications of access charges, we conclude that these are distinct issues and may be addressed separately. The Telecommunications Act of 1996 sets forth the conditions for RBOC interLATA entry in states in which they offer telephone service. Nothing in the Act is inconsistent with our exercise of our authority to waive our rules in this situation.  X- #XQ\  P6U[hXP# #XQ\  P6U[hXP# aB.xSpecial Circumstances: Assessment of the State of Competition  X-x 1.` ` Positions of the Parties  Y|- x,45.` ` In General. Ameritech argues that the requested waivers should be evaluated based on the likelihood that the development of competition in local telecommunications amarkets that Ameritech currently dominates will accelerate as a result of the unbundling and  Y9-related actions Ameritech has undertaken as part of the Customers First Plan.Gj9 xP"-ԍxAmeritech Reply at ii.G Accordingly, Ameritech argues that grant of the waivers would serve the public interest by allowing Ameritech to respond effectively to competitive entry and by deterring inefficient entrants from capturing significant shares of the market. By contrast, according to"Bj0*&&aa " Ameritech, application of the existing rules would "deny customers the full benefits of  Y-competition, frustrate economic efficiency and development and impair universal service."Mk xPb-ԍxAmeritech Update Reply at 7.M Thus, according to Ameritech, it is contestability, and not actual competition, that is the critical determining factor. Ameritech's economic expert, David Teece, submits that: (1) access services are competitive, and more importantly, contestable; (2)local exchange services are contestable under the Plan; (3)competition in the local exchange will exert competitive pressures on access services; (4)under the terms of the waiver request, Ameritech will have no ability to harm competition in access services; and (5)authorization  YH-of the requested waivers will bring greater, more efficient competition to the marketplace.KlHX zPQ -ԍxId., App. E, at2-3.K  Y -x-46.` ` Other LECs agree with Ameritech's assertion that the grant of regulatory relief should not be premised on findings that particular services are subject to effective competition, but rather as part of the creation of a regulatory regime that can adapt to the  Y -inevitable development of effective competition.m  xPp-ԍxUSTA Comments at 3; Ameritech Update Reply at 5; GTE Reply at 34; NYNEX Comments at46. Many LECs join Ameritech in contending  Y -that they are already subject to considerable, and increasing, competition.n z zP-ԍxSee, e.g., Bell Atlantic Comments at 27; NYNEX Comments at 820; USTA Comments at 3. In addition, they predict substantially increased competitive pressure due to the development of alternatives to their own local exchange and switched access service by wireless telephone  Yy-and cable companies.coy  zP6-ԍxId.; Southwestern Bell Update Comments at 2.c As a result of the development of competition that has already occurred, some of the LECs conclude that the extensive unbundling and network integration proposed by Ameritech are not even necessary to promote further competition in local  Y4-exchange markets.Tp4 xP-ԍxSouthwestern Bell Comments at 610.T  Y-x.47.` ` IXCs, competitive access providers (CAPs), cable companies, wireless telephone companies, enhanced service providers, end users, and consumer advocacy groups argue that actual competition should be in place in exchange and access markets before the  Y-Commission grants relief to Ameritech.q.  zP"-ԍxE.g. AARP Comments at 5, 29; ALTS Comments at 4; AT&T Update Comments at922; CompTel Update Comments at3-12; Fleet Call Reply at 3; Illinois Cable TV Association Comments at2-5; McCaw Reply at 45; LCI Comments at 2; LDDS Worldcom Update Comments at 914; MCI Reply at 1; MFS Comments at4-5; Sprint Update Comments at 15; TCG Update Comments at 5-6, 1012; Telecommunications Resellers Association Comments at4; Teledial Comments at 2; WilTel Comments at36. In particular, AT&T submits that DOJ's motion"q0*&&aa" does not contain an assessment of the current state of competition in Chicago and Grand Rapids, but rather, contains a list of necessary preconditions for competition, and that DOJ  Y-proposes to retain the ability to cancel the waiver if competition does not emerge.Kr xPK-ԍxAT&T Update Comments at 6.K CompTel, Allnet, and the Ohio Consumers Counsel argue that local interconnection and unbundling will not necessarily lead to competition (particularly if Ameritech engages in strategic pricing and conduct), and therefore, that waivers should not be granted until  Yv-competition has actually emerged.svX xP -ԍxAllnet Comments at 812; CompTel Update Comments at 1011; Ohio Consumers Counsel Comments at2129. In addition, Allnet argues that resale of a monopolist's  Y_-facilities is not the same as effective competition,Mt_ xP -ԍxAllnet Update Comments at 5.M and the Illinois Cable Television Association argues that niche entry and potential competition are not the same as effective competition, and therefore, that the Commission should not attach the same weight to resale  Y -competition and niche entry as it would to facilitiesbased competition.du @ xP -ԍxIllinois Cable Television Association Reply at 14.d Finally, MCI argues that the Commission should consider whether sufficient pricing and costing safeguards are in place, and also contends that nascent competition must be allowed "breathing space"  Y -prior to relaxation of regulatory controls.Kv  xPV-ԍxMCI Update Comments at 15.K  Y -x/48.` ` The Indiana, Michigan, Ohio and Wisconsin Commissions suggest that the FCC employ the same criteria that they use to assess competitiveness, including, among other things, consideration of the number and size of unaffiliated service providers, with there being at least one such provider, and the availability of functionally equivalent or  YK-substitute service at comparable rates, terms and conditions from unaffiliated providers.jwK`  xP\-ԍxIndiana/Michigan/Ohio/Wisconsin Commission Comments at 4.j Many commenters add that there must be an enforceable, meaningful obligation for LECs to provide essential network services and functions to all competitors, including wireless service  Y-providers, on an unbundled and nondiscriminatory basis at reasonable rates.x  xP -ԍxFleet Call Comments at 35; McCaw Comments at 1213; North American Telecommunications Association Comments at 47.  Y-x049.` ` Removal of Barriers to Entry. Ameritech assesses the contestability of its markets by reference to the conditions for competition that are enumerated in the DOJ"H x0*&&aa"  Y-Proposed Order.Ky xPy-ԍxDOJ Proposed Order 9.K Ameritech contends that its compliance with those conditions makes these waivers necessary because large carriers such as AT&T and MCI have filed applications in those states to become certified providers of local exchange services, which  Y-will allow them to avoid Ameritech's access charges.NzX xP-ԍxAmeritech Update Reply at 15.N Ameritech also argues that the Commission should grant the requested waivers under the same standard the Commission  Y-used in the NYNEX USPP Order.|{ zP& -ԍxId. at 6 (citing NYNEX USPP Order, 10 FCC Rcd at 7462 38).|  Ya-x150.` ` According to Ameritech, all of the prerequisites for local exchange and switched access competition identified by the DOJ have been implemented in Illinois and Michigan. In particular, Ameritech submits that it is implementing the prewaiver requirements enumerated in the DOJ Motion in conjunction with the Illinois and Michigan commissions, including: (1) unbundling loops, ports, and other components of its local network (tariffs are effective in both states); (2)implementing intraLATA toll dialing parity (by April 1996 in both states); (3)permitting resale competition; (4)permitting nondiscriminatory access to poles, conduit space, risers, and telephone closets; (5)interconnecting with the networks of competing local service providers and implementing mutual compensation arrangements for termination of local traffic; (6)sharing its directory assistance information; (7)providing interim number portability and working to develop a longterm solution to the problem; and (8)working to assign central office code  YM-administration to independent third parties.C|Mz zPx-ԍxId.  at 45.C Ameritech states that it is entering into interconnection agreements with local exchange carrier competitors that provide for mutual compensation in Michigan at $0.015 per MOU, and in Illinois at $0.005 per MOU for direct routed and $0.0075 per MOU for tandem routed traffic, which are significantly lower than  Y-the switched access rates it currently charges IXCs.T}Z  zP-ԍxId. For comparison, Ameritech states that its current switched access rates for terminating traffic in Illinois and Michigan are approximately 2.2 cents per minute on average. Telephone conversation with Anthony M. Alessi, Director, Federal Relations, Ameritech (October 12, 1995). T Ameritech also claims that the members of the Illinois Commerce Commission's Number Portability Workshop have unanimously selected a longterm number portability solution for Illinois, and that the  Y-implementation schedule is currently under discussion.~.  xP#-ЍxLetter from Anthony M. Alessi, Director, Federal Relations, Ameritech, to William F. Caton, Acting  zPS$-Secretary, FCC (October 2, 1995) (Ameritech October 2 Ex Parte). " ~0*&&aa"Ԍ Y-x251.` ` Ameritech also argues that the elasticity of demand is very high for its switched access and local exchange services that customers will switch to alternative  Y-providers of such services in response to relatively small changes in prices.? xPK-ԍxUpdate at 89.? According to Ameritech, 85 percent of Ameritech's access revenues are generated by three large and very sophisticated IXCs that have demonstrated their willingness to use CAPs to provide transport  Y-services.:X zP-ԍxId.: Similarly, Ameritech argues that elasticity of supply for such servicesis high that alternative suppliers of such services will quickly respond to relatively small changes in  Y_-prices by offering competing services.B_ zP -ԍxId. at 910B  Y1-x352.` ` The CAPs and IXCs argue that Ameritech has not fully implemented the measures that are necessary to remove barriers to entry and open local exchange and  Y -switched access markets to competition.$ | zP0-ԍxSee, e.g., Time Warner Update at 1719; CompTel Update Comments at 35, Attach.A (study by Joseph Gillan showing that resale competition is a theoretical possibility for only 4 percent of all access lines due to the absence of wholesale prices, and even then with very low margins); Sprint Update Comments at 13.  zP-See also MCI Comments at 2641. According to MFS, although Illinois and Michigan have taken actions to authorize competitors and establish conditions for interconnections, "these arrangements have not yet been implemented in either state, and to the best of MFS's knowledge, no competitor has begun to provide basic switched service  Y -(other than pure resale of Ameritech services) in either jurisdiction."J h  xP-ԍxMFS Update Comments at 3.J TCG argues that those arrangements will not be implemented in the next few months because: (a)the Illinois tariff "creates more barriers to competition than it removes," which has caused AT&T, MCI, MFS, and TCG to ask the Illinois Commission to conduct an expedited investigation; and  YK-(b)the Michigan tariff is inconsistent with the Michigan order.cK  xP-ԍxTCG Update Comments at 24; TCG Update Reply at 4.c  Y-x453. Competitive Presence. In addition to its arguments concerning the removal of barriers to entry, Ameritech identifies the following facts to demonstrate that competitors are prepared to compete for a substantial percentage of its exchange and access services in Illinois and Michigan:  Y-X` h(#%'0*,.8135@8:63.` ` Although we cannot predict the exact manner in which competitive markets will develop, we believe that the disparities between costs and prices created by our access charge rules create substantial incentives for uneconomic bypass in markets exposed to  Y-competitive entry.N  zP:-ЍxSee infra para. 101. Some have predicted that end users, rather than IXCs, are likely to control the choice of access provider in competitive local markets, and thus argue that distortions in LEC perminute switched access rates charged to IXCs would not cause traffic to be shifted to competing local service providers.  zP-See, e.g., Joseph Gillan & Peter Rohrbach, The Potential Impact of Local Competition on Telecommunications  zP^-Market Structure: Diversity or Reconcentration? (March 1994). While this may be the case in some circumstances, we believe that the risks of inefficient entry and competitive distortions are sufficiently great to warrant the relief that we grant here. Even if end users effectively select the access provider when they choose their local telephone company, IXCs are likely to take steps to influence that choice since access costs constitute a substantial portion of long distance costs. An IXC could, for instance, restructure rates to pass on at least some of the access cost savings to end users that switch to alternative local service providers, or offer targeted promotional packages to achieve this goal. IXCs may also develop different strategies in different areas or in different market segments. In addition, as competition develops, access and interexchange services may be provided by carriers that have developed business relationships with each other (such as that between TCG and Sprint), or by vertically integrated carriers (such as MCI with its affiliate MCI Metro, and Ameritech with its interexchange affiliate). In those scenarios, competitors will be able to take more direct advantage of any uneconomic incentives in LEC access rates. The extent to which those scenarios will develop in the Ameritech"%0*&&$" region or elsewhere is unclear, and it is likely that both IXCs and local service providers without partners or affiliates in other markets will continue to thrive as local markets become more competitive. We need not, however, determine the exact means or full extent to which IXCs or end users will bypass LEC facilities before we act.  As discussed below,   when such uneconomic bypass can occur on a"%x0*&&aap" large scale, it may encourage potentially inefficient entry seeking to take advantage of the pricing distortions resulting from our access charge rules. These conditions constitute special circumstances that support waivers of our rules regarding Ameritech's recovery of the carrier common line and transport interconnection charges in the Chicago and Grand Rapids LATAs. Ameritech has not, however, demonstrated the necessary special circumstances outside of those LATAs.  Y_-x?64.` ` Our conclusion that Ameritech has demonstrated special circumstances justifying the specific waivers discussed below relating to the carrier common line and transport interconnection charges does not necessarily mean that the same circumstances justify any other relief. In particular, we reach no conclusion regarding the other waivers Ameritech proposed in connection with the Customers First Plan, including waivers to remove transport, switching, and interexchange services from price caps, to apply zone density pricing to those services, and to permit rate changes for these services with no cost support on one day's notice. We intend to address those proposals in a subsequent order. We also emphasize that nothing in this order should be taken as a determination that Ameritech has satisfied any of the requirements of the Telecommunications Act of 1996. Specifically, we reach no conclusion as to whether Ameritech has or has not met the  Yb-conditions for inregion interLATA entry set forth in Section 271 of the Act.]bx xP-ԍ xTelecommunications Act of 1996 at  271.]  X4-x` ` a. Removal of Barriers to Entry  Y-x@65.` ` We previously have modified our rules to remove barriers to the competitive provision of certain interstate access services, and to foster the development of access  Y-competition. In particular, our decisions in the Expanded Interconnection proceeding facilitate the competitive provision of interstate special access service and the transport  Y-component of interstate switched access service.x zPe -ЍxSee Special Access Expanded Interconnection Order, Report and Order and Notice of Proposed  zP/!-Rulemaking, 7 FCC Rcd at 7452 174 n.403 (1992); Expanded Interconnection with Local Tel. Co. Facilities, Second Report and Order and Third Notice of Proposed Rulemaking, 8 FCC Rcd 7374, 742629 98104  zP"-(1993) (Transport Expanded Interconnection Order); Expanded Interconnection with Local Tel. Co. Facilities,  zP#-Transport Phase II, Third Report and Order, 9 FCC Rcd 2718 (1994) (Third Report and Order);  Expanded  zPU$-Interconnection with Local Tel. Co. Facilities, Memorandum Opinion and Order, 9 FCC Rcd 5154, 519697  zP%-15356 (1994) (Virtual Collocation Order).x Nevertheless, in most parts of the"&T 0*&&aao" country, entry barriers continue to hamper the development of competition for other components of interstate switched access service, particularly the local switching and common line elements. In some states, statutes or regulations have prohibited parties other than the franchised monopoly LECs from providing switched local exchange service. Because customers use the same local switching and loop facilities for local exchange calling and interstate calling, it is also difficult for competitors to provide the local switching and local loop components of interstate switched access service unless competition for local exchange service is also possible. In most other states, it is difficult for local exchange competition to emerge even in the absence of legal prohibitions because there are no arrangements in place governing the technical and financial aspects of interconnection between competing local networks.  Y -xA66.` ` Typically, there are also substantial technical and economic barriers to entry in local exchange markets. Most LECs offer local exchange service as a bundled package, rather than offering local loops and local switching on an unbundled basis. Unbundling these services would reduce the investment needed for new competitors to enter the local exchange market by enabling them to combine their own facilities with resold LEC facilities to provide service. Because of these and other regulatory, technical, and economic factors, LECs in most parts of the country continue to exercise market power in the provision of both intrastate local exchange service and the local switching and common line components of interstate switched access service.  Y-xB67.` ` Removal of Barriers in Illinois. Unlike much of the country, the most significant barriers to entry for local exchange service have been removed in Illinois, which makes possible competition for all components of interstate switched access service as well. The Illinois legislature removed its statutory prohibition against the competitive provision of  Y-local exchange service in 1988, xP%-ԍxUniversal Telephone Service Protection Law of 1985, Ill. Ann. St. ch. 220 5/13405 (1995). and at least seven competitive local exchange service providers have been certified by the Illinois Commission. As part of its Customers First  Y~-Plan, Ameritech proposed, inter alia, the following: (1)to offer local loops, local switching, SS7, and other services on an unbundled basis; (2)to establish interconnection and joint traffic arrangements with competing local carriers, including mutual compensation for the termination of local traffic; (3)to offer competing providers of local switched service functions such as 911, directory assistance, and operator services; and (4)to divest its responsibilities as central office code administrator and to cooperate in developing number  Y-portability solutions.sX xP"-ԍxPetition at 1314; Update at 56, Ameritech Update Reply at 1011.s The Illinois Commerce Commission accepted those proposals, and in a number of instances, directed Ameritech to go further in facilitating local exchange"'0*&&aa "  Y-competition than Ameritech had proposed.N zPy-ԍxSee supra paras. 2122.N Ameritech has now established unbundled loop  Y-charges and reciprocal compensation rates in Illinois.zZ xP-ԍxAmeritech's monthly unbundled loop rates in Chicago (zone 1) are $7.49 for business and $4.80 for residential lines, compared to $22.85 (including the federal subscriber line charge) for both types of lines  zP-provided by NYNEX in New York at the time of the NYNEX USPP Order. Ameritech Oct. 4, 1995 Ex Parte at App. 1. The Illinois Commission mandated that Ameritech's reciprocal compensation rate be set at $0.0075 perminute for tandemrouted traffic and $0.005 per minute for directrouted traffic; the comparable rate in New York is approximately $0.014 per minute. Although Ameritech's interconnection tariff is in effect in Illinois, the Illinois Commissions has an ongoing tariff investigation.  Y-xC68.` ` We recognize that many issues relating to local exchange competition remain unresolved before the Illinois Commission. Competing local service providers have challenged the interconnection tariff, arguing that it is anticompetitive and inconsistent with the commission's orders, and the Illinois Commission has initiated an investigation of those  Y_-tariffs.(~_ zP-ԍxIllinois Comm. Comm'n v. Illinois Bell Tel. Co. (Citation to Investigate Illinois Bell Tel. Co.'s Rates, Rules, and Regulations for its Unbundled Network Component Elements, Local Transport Facilities, and End  zP>-Office Integration Services), Citation Order, Dkt. No. 95-0296 (Ill. Comm. Comm'n June21, 1995);  zN-Application of City Signal, Inc. for an Order Establishing and Approving Interconnection Arrangements with  zP-Mich. Bell Tel. Co., MPSC Staff's Request for Clarification, Case No. U-10647 (Mich. Pub. Serv. Comm'n July24, 1995) (attached to Letter from Martin W. Clift, Jr., Director, Regulatory Affairs, US Signal Corp., to William F. Caton, Acting Secretary, FCC (July 26, 1995)).( The Illinois Commission also has initiated rulemaking and other proceedings to address universal service, number portability, and other matters relating to local exchange  Y1-competition.N1 zP-ԍxSee supra paras. 2021.N As discussed below, however, competitive entry is occurring in the Chicago LATA, indicating that entrants have concluded that changes they have seen and expect to see provide a meaningful opportunity for entry. Every step in this implementation process need not have been completed before we conclude that Ameritech and the Illinois Commission have removed the most significant barriers to entry.  Y -xD69.` ` Removal of Barriers in Michigan. Significant barriers to entry in local telecommunications markets have also been removed in Michigan. The Michigan legislature removed that state's statutory prohibition against the competitive provision of local exchange  Yd-service in 1991, and took additional steps intended to further competition in 1995.dt xP"-ԍxMich. Telecom. Act. sec. 302(1), Mich. Comp. Laws 484.2103 (1995); 1995 Mich. Legis. Serv.  xPQ#-P.A. 216 (S.B. 722) (West). As discussed above, the Michigan Public Service Commission has ordered Ameritech to interconnect with US Signal's network and has specified certain interim interconnection"6(0*&&aa "  Y-requirements.N zPy-ԍxSee supra paras. 2324.N Pursuant to orders by the Michigan Commission, Ameritech has also filed a tariff permitting the purchase of unbundled loops and switching facilities at prices determined by total service long run incremental costs and ordered Ameritech to offer interim number portability at a "transitional price" based on incremental costs. Ameritech is now offering  Y-unbundled loops at relatively low tariffed rates mandated by the Michigan Commission.6Z xP-ԍxAmeritech's monthly unbundled loop rates in Michigan are $8.00 for business lines and $11.00 for residential lines, compared to NYNEX's rate of $22.85 (including the federal subscriber line charge) for both  zP? -business and residential lines in New York at the time of the NYNEX USPP Order. Ameritech Oct. 4, 1995 Ex  zP -Parte at App. 1. We acknowledge that there may be differences in retail rates between Michigan and New York that make this comparison less meaningful.6 The Michigan Telecommunications Act of 1995 further clarified the framework for exchange  Yv-and access competition in Michigan.dv xP5-ԍx1995 Mich. Legis. Serv. P.A. 216 (S.B. 722) (West).d  YH-xE70.` ` As is the case in Illinois, significant issues concerning barriers to entry also remain unresolved in Michigan. The Michigan Commission has initiated generic dockets to develop longterm interconnection rules to replace the interim measures in place today.  Y -Nonetheless, competitive entry is occurring in Grand Rapids,N  zPR-ԍxSee infra paras. 7879.N indicating that entrants have concluded that changes they have seen, and expect to see, in Grand Rapids provide a meaningful opportunity for entry. Therefore, based on the evidence before us, we conclude that significant barriers to entry been removed in the Grand Rapids LATA even though some issues remain unresolved.   Yy-xF71.` ` In sum, the Illinois and Michigan commission orders have established interim frameworks under which competition can develop in local telecommunications markets in those states. The presence of effective tariffs means that competitors can take advantage of  Y4-those frameworks. We emphasize that our conclusion here regarding Ameritech's interconnection tariffs in Illinois and Michigan is limited to a finding that Ameritech has shown special circumstances that justify a waiver in certain parts of those states. We do not address more generally whether steps such as those that the Illinois and Michigan commissions are taking in rulemaking or tariff review proceedings would justify any other policy changes, nor do we consider the sufficiency of local interconnection tariffs Ameritech has filed, or that it or other LECs might file in other states. "|)0 0*&&aa|"  X-x` ` b. Emergence of Competition  Y-xG72.` ` The removal of barriers to entry, by itself, would not be sufficient to provide the requisite special circumstances justifying the waivers sought by Ameritech. The development of the facilities necessary to provide competitive exchange and access services requires significant investment, which makes it unlikely that Ameritech would be exposed to a serious threat of uneconomic bypass that would justify a waiver of our rules until some actual competition has emerged. It would be imprudent for us to conclude that a meaningful opportunity exists to enter and challenge Ameritech effectively for the right to serve potential customers without a demonstration that at least some actual competition is beginning to develop. Moreover, we do not accept Ameritech's contention that the requested waivers are  Y -justified solely on the basis of market contestability.  xP| -ԍxWe note that Ameritech's use of the term "contestability" appears to refer to the theory of contestable  zPD -markets. See, e.g., William J. Baumol, John C. Panzar & Robert D. Willig, Contestable Markets and the  zP-Theory of Industry Structure (1982). In general, the theory of contestable markets suggests that where competitors can enter and exit a singleprovider market quickly, easily, and without incurring substantial sunk costs or costs not borne by the incumbent firm, the threat of entry will constrain the incumbent's ability to exercise market power. As a result, it is postulated that where the specified conditions apply, even if there is only a sole provider, it is possible to obtain market performance approaching that which would be observed if competition were possible within the market. Here, however, the conditions appear not to apply: entry and exit are neither lowcost nor rapid. In addition, the extent to which contestable markets exist in the real world  zP-has been challenged by other economists. See, e.g., William G. Shepherd, "Contestability" vs. Competition, 74 American Economic Review 572 (1994).   Y -xH73.` ` On the other hand, it is not necessary to conclude that fully effective competition has developed in the interstate access and local exchange markets to establish that special circumstances exist that justify the limited waiver described below. Under the increasingly competitive environment in certain of Ameritech's service areas, the existing access charge rules create incentives for switching to alternative providers for reasons unrelated to the relative economic merits of competing providers. In an environment where competition has begun to emerge, those incentives could encourage inefficient entry in markets for services where access charges artificially inflate prices and could prevent end  Y-users from receiving the full benefits of competition..  zP-ЍxThese problems are described in greater detail below. See infra para. 101.   Y-xI74.` ` Emergence of Competition in the Chicago LATA. The record evidence demonstrates that seven potential competitors have received certification as providers of local exchange service in the Chicago LATA. It appears that competitors are originating significant and rapidly increasing amounts of local exchange traffic, as demonstrated by the millions of minutes of traffic exchanged pursuant to reciprocal compensation agreements. In addition, Ameritech has presented evidence that AT&T and other large potential competitors"~* 0*&&aa^" have targeted the Chicago and Grand Rapids areas for largescale entry into the local  Y-exchange market in the near future.b zPb-ЍxAmeritech July 18, 1995 Ex Parte.b  Y-xJ75.` ` Certified competitive local exchange providers have established networks in the Chicago area that provide them with the capability of entering the market for local exchange service without substantial delay. Ameritech has presented evidence that competitors are currently in business within the Illinois portion of the Chicago LATA and have the network capacity to provide a substantial portion of the exchange and access services currently provided by Ameritech. Competitive providers of local exchange service have six switches in place in the Chicago LATA, and AT&T has announced plans to install  Y -an additional three switches in the area.$\ Z zP% -ԍxThis compares favorably with the situation in New York City when we decided the NYNEX USPP  zP -Order, where competitors had a total of four switches in place. NYNEX USPP Order, 10 FCC Rcd at 745859, 34.$ The record contains evidence indicating that MFS's network covers a total of 124 miles in the Chicago area, serving 134 buildings, and  Y -TCG's network covers 280 miles, serving 114 buildings in the area.<\ ~ zP-ԍxThese figures are also comparable to the evidence presented in the NYNEX USPP Order, which indicated that MFS's network covered 64.6 miles, serving 283 buildings, and TCG's network covered 325  zP-miles, serving nearly 300 buildings. Id. <  Y -xK76.` ` Ameritech also submitted evidence demonstrating that it exchanged 6,484,000 minutes of local exchange traffic with competitors in the Chicago and Grand Rapids LATAs pursuant to reciprocal compensation agreements in October 1995, and that 9,176,980 such  Yy-minutes were exchanged in November 1995.Xy zP-ԍxAmeritech Jan. 17, 1996 Ex Parte.X Although, for customer confidentiality and other reasons, Ameritech has not disclosed the percentage of those minutes attributable to  YK-each of the two LATAs,XK4  xP0-ԍxAmong other things, Ameritech would risk exposing competitors' confidential business information if it were to provide the actual apportionment of reciprocal compensation minutes between Chicago and Grand Rapids. it is clear that at least some interconnection is occurring in both places. It is also reasonable to conclude based on the numbers of interconnected facilities that a substantial majority of that traffic is being exchanged in Chicago. The pace at which the total number of minutes is increasing is also evidence of burgeoning competitive entry. In addition, it appears that competitors have activated 59 NXX codes in Chicago, which  Y-provide them with approximately 590,000 potential phone numbers.^T  zP$-ԍx Ameritech Jan. 17, 1996 Ex Parte.^ In addition, the evidence indicates that Ameritech has ported 630 numbers to competitors in Chicago as of"+0*&&aa"  Y-January 15, 1996.: zPy-ԍxId.: Ameritech has provided evidence that, as of January 15, 1996, 4,482 endoffice integration trunks, and 722 DID trunks have been connected with competitors in  Y-Chicago.@Z zP-ԍx Id.@ Overall, the evidence presented leads us to conclude that entry is occurring to such an extent that, if the Commission's current rules continue to apply, substantial uneconomic bypass could develop.  Yv-xL77.` ` As many competitors argue, actual competition does in fact remain quite limited -- most customers in most of the Chicago LATA are still unable to choose the services of a competing provider of local exchange services. In addition, as of January 15,  Y1-1996, no unbundled loops had been sold in Chicago.;1 zP -ԍ xId.; This does not, however, negate the showing of special circumstances in the LATA. The investment decisions of actual and potential entrants and their prospective customers are very likely to be affected by the opportunity to bypass the components of Ameritech's perminute interstate switched access charges that are not related to the costs of providing those services. The evidence in the record demonstrates that competing local service providers in Chicago are interconnecting their facilities with Ameritech's local network. These arrangements provide the additional evidence necessary to demonstrate the likelihood that the components of Ameritech's access charges that are unrelated to the costs of providing the underlying services will cause distortions in the economic incentives of entrants and customers. The fact that, in contrast to Grand Rapids, competitors in Chicago have not yet purchased unbundled loops, is not fatal to our finding. Competitors to incumbent LECs may pursue different strategies for developing a market presence, including resale of bundled LEC facilities, use of unbundled loops, and total bypass of LEC facilities. In a densely populated urban area such as Chicago, where major CAPs have been established for some time, competitors may initially focus their efforts on areas where they already have facilities in place to reach customer premises without relying on resold LEC facilities. The substantial number of end office integration and DID trunks in place, and the substantial and growing number of reciprocal compensation minutes, suggest that competitive entry is beginning in Chicago, and that the absence of purchased unbundled loops may not accurately reflect the state of competition in that LATA. As a result, we conclude that the earlier monopoly environment has eroded to a sufficient degreeto justify granting the limited waivers of the Commission's access charge rules described below.  Y -xM78.` ` Emergence of Competition in the Grand Rapids LATA. In Grand Rapids, US Signal has already entered the local exchange market, and expects to obtain a substantial share of the exchange and access market in that area once it resolves the terms of",~0*&&aa "  Y-interconnection with Ameritech.b zPy-ЍxUS Signal July 26, 1995 Ex Parte.b The evidence presented by Ameritech concerning Grand  Y-Rapids is consistent with the evidence presented by NYNEX that led us to issue the NYNEX  Y-USPP Order. US Signal has a switch in place in the Grand Rapids LATA that should permit it to handle a substantial amount of the LATA's switched traffic. US Signal's network  Y-covers 220 miles and serves 250 buildings in the area.@Z zP-ԍx Id.@  Yz-xN79. ` ` As discussed above, Ameritech has submitted evidence that appears to demonstrate that it is exchanging a substantial and increasing amount of local exchange traffic with competitors in Grand Rapids LATAs pursuant to reciprocal compensation  Y5-agreements.X5 zP -ԍxAmeritech Jan. 17, 1996 Ex Parte.X In many other respects, the evidence before us concerning actual competition in the Grand Rapids LATA is comparable to that presented for the Chicago LATA. It appears that competitors have activated 16 NXX codes in Grand Rapids, which provide them  Y -with approximately 160,000 possible phone numbers.@ ~ zP-ԍx Id.@ In addition, the evidence indicates that Ameritech has ported 5,854 numbers to competitors in Grand Rapids as of January 15,  Y -1996.@  zP-ԍx Id.@ The evidence indicates that US Signal had purchased 2,429 unbundled loops from  Y -Ameritech as of January 15, 1996.@  zP-ԍx Id.@ Similarly, Ameritech's evidence indicates that 964 endoffice integration trunks have been connected in Grand Rapids, and US Signal has  Y}-implemented interconnection arrangements in four central offices in Grand Rapids.@}4  zPb-ԍx Id.@  YO-xO80.` ` As with Chicago, competition clearly remains limited in Grand Rapids. The early stage of competitive development, however, does not negate the showing of special circumstances in the LATA. Once again, the evidence indicates that competing local service providers are interconnecting their facilities with Ameritech's local network, and that the investment decisions of actual and potential entrants and their prospective customers are very likely to be affected by the manner in which our access charge structure modifies economic incentives by distorting the relationship between costs and prices. As a result, we conclude competition has emerged in Grand Rapids to the point that where our access charge structure may interfere with the efficient operation of an emerging competitive market. This could prevent end users from receiving the full benefits of competition and, therefore, we conclude"- 0*&&aa" that Ameritech has met its burden of demonstrating that special circumstances justify the waivers described herein in the Grand Rapids LATA.  Y-xP81.` ` Related Matters. We conclude that LATAs are appropriate boundaries for the waivers we grant today. Limiting relief to geographic areas smaller than LATAs would not be in the public interest because it would result in greater administrative costs and complexity than would be justified by the benefits provided by more narrowly defining the waiver territories. Conversely, the evidence presented by Ameritech in this proceeding does not justify expansion of the relief beyond the two LATAs. Ameritech requests waivers for the entire states of Illinois and Michigan, arguing that because the state commissions have  Y -eliminated barriers throughout those states, access services are contestable statewide.>  xP -ԍxUpdate at 16.> Ameritech has been unable, however, to show that a measurable competition for exchange and switched access services is emerging anywhere in Illinois or Michigan outside the Chicago and Grand Rapids LATAs. Specifically, the record evidence does not indicate that competitors with sufficient capacity to divert significant business from Ameritech have interconnected with it and are competing to provide intrastate exchange and switched access services outside of those LATAs. Therefore, it does not appear that competition has begun  Y{-to emerge in the remainder of Illinois and Michigan. As in the NYNEX USPP Order, the adverse public interest consequences that could result if customers move traffic from Ameritech's network to competitive providers' networks in response to the distorted incentives created by our access charge rules are likely to happen more quickly and to have a greater impact in those LATAs than elsewhere.  Y-xQ82.` ` We also disagree with certain parties' arguments that no waiver should be granted to Ameritech because it has failed to demonstrate that exchange and access competition has developed, even in Chicago and Grand Rapids, to the extent shown by  Y-NYNEX in the NYNEX USPP Order. The evidence concerning the removal of barriers to entry and the emergence of competition in the two LATAs is generally comparable to that presented by NYNEX, and the evidence supports the conclusion that competitive activity in Chicago and Grand Rapids is likely to increase significantly in the near future. In short, we conclude that the record evidence in this case shows that new entrants have a realistic opportunity to compete in the Chicago and Grand Rapids exchange and switched access markets, and that several such firms have begun to compete directly with Ameritech in those LATAs. In these circumstances, the continued application of all of our current access charge rules would create a serious risk of significant uneconomic bypass. Accordingly, we believe that the public interest will be better served by granting Ameritech waivers in those areas  Y -than by applying the existing rules. In addition, our decision in the NYNEX USPP Order, while providing useful guidance on the factors to consider in evaluating similar proposals, should not be taken as defining an absolute minimum degree of competition that must be"".X0*&&aa#" demonstrated to justify a waiver. Our inquiry in waiver proceedings must necessarily proceed on a casebycase basis.   X- C.xPublic Interest Analysis of the Bulk Billing Proposal  Y-  X- x1.` ` Positions of the Parties  X_-x` ` a. General Comments  Y1-xR83.` ` Ameritech claims in its Petition that bulk billing advances three goals: recovering subsidies and regulatoryrelated costs in a competitively neutral manner; eliminating price dislocations and distortions; and adjusting rates for competitive services to  Y -competitive levels.B  xPe -ԍxPetition at A12.B Ameritech states that the CCL charge and TIC currently recover costs not related to the provision of switched access, but in effect, function as a surcharge on local  Y -switching rates.N X xP-ԍxAmeritech Update Reply at 18.N According to Ameritech, this misallocation of costs keeps Ameritech's access rates artificially high compared to local access competitors. Thus, under the current system, competitors may be able to price their access services below Ameritechs rates even if Ameritech is the most efficient carrier. Such inefficient entry could lead to wasteful investment and could harm consumers. To bolster its argument, Ameritech notes that in the  YK-NYNEX USPP Order, the Commission found that the CCL charge and the TIC artificially create incentives for IXCs to seek alternative sources of supply for interstate switched  Y-access. zP-ԍxId. at 1820 (citing NYNEX USPP Order, 10 FCC Rcd at 7456  28).  Y-xS84.` ` Some enduser groups, the Information Technology Association of America (ITAA), and the BOCs offer general support for Ameritech's bulk billing proposal as a way to reduce inefficiencies in the current access rate structure, but encourage the Commission to  Y-examine access charge reform more broadly.z xP-ԍxITAA Comments at 910; Pacific Bell Comments at 2024, 28; NYNEX Comments at 2728; Bell Atlantic Comments at 4. AARP generally supports the bulk billing  Y-proposal as a means to reform access charges without raising local residential rates.l zP"-ԍxAARP Comments at 20; see alsoAARP Reply at 13 & n.2.l The"/d 0*&&aa" General Services Administration commends Ameritech for "fleshing out" a proposal that  Y-could serve as an effective interim means of funding public policy subsidies.  xPb-ԍxGeneral Services Administration Update Comments at 78; General Services Administration Reply at1516. Although the General Services Administration generally supports the use of bulk billing, it opposes the inclusion of the TIC in the charges to be bulk billed, because it contends that the TIC recovers costs that should be the responsibility of Ameritech.  Y-xT85.` ` A number of commenters challenge Ameritech's assessment of the level of misallocated costs in existing access rates. MCI, ALTS, Time Warner, and Cox assert that Ameritech has not offered sufficient information in support of its proposal and its characterization of certain costs as "subsidies," and that Ameritech should be required to  Y_-provide additional data, such as the underlying costs of its local transport and local loops._ xP -ԍxMCI Update Comments at 18; MCI Reply at 2021; ALTS Comments at 11; Cox Reply at 17; Time Warner Update Comments at 56, 1113. State commission commenters and the Ohio Consumers' Counsel similarly press for additional information about Ameritechs method for determining what Ameritech considers  Y -to be regulatorilyimposed surcharges on its local switching.  xP-ԍxIllinois Commerce Commission Comments at 9; Ohio Consumers' Counsel Comments at 37.  Y -xU86.` ` Potential local exchange competitors to Ameritech claim that bulk billing, rather than redressing inefficiencies in the current access charge system, would only guarantee Ameritechs monopoly revenue stream and shift Ameritech's costs to its  Y -competitors.  xP-ԍxLDDS Update Comments at 18; Cox Reply at 17; TCG Update Comments at 78; Allnet Update Comments at 14. TCG asserts that bulk billing would preserve Ameritech's "monopoly claim" on subsidy revenues even when customers bypass elements of Ameritech's network, and  Yy-thereby give Ameritech a competitive advantage.Ly  xP-ԍxTCG Update Comments at 78.L According to Sprint, Ameritech's plan fails to address the need to reduce and narrowly target subsidies in existing access rates and  YK-does not address intrastate subsidies.r K  xP|-ԍxSprint Comments at 16; Sprint Update Comments at 19. The Information Technology Association of America, although generally supporting Ameritech's proposal, makes similar arguments that Ameritech fails to address the full extent of subsidies embedded in existing access and local switching rates. ITAA Comments at 1011.r Sprint and Time Warner state that bulk billing would remove incentives for Ameritech to increase its productivity, and claim that, to the extent that the CCL charge and TIC recover excess costs incurred under rate of return regulation or"0h0*&&aa "  Y-obsolete plant and equipment, Ameritech should write off those costs.t xPy-ԍxSprint Update Comments at 1719; Time Warner Update Comments at 15.t Similarly, MCI and MFS argue that competition should be permitted to drive out inefficiencies embedded in Ameritech's current rates, and that Ameritech will have no incentive to operate efficiently if  Y-it is guaranteed recovery of costs through a bulk billing mechanism.|X xP-ԍxMFS Update Comments at 6; MCI Comments at 43; MCI Update Comments at 1718.|  Y-xV87.` ` Ameritech responds that bulk billing would not place competitors at a disadvantage. According to Ameritech, bulkbilled costs would be recovered in a manner that neither encourages nor discourages the purchase of Ameritech or any other carriers'  YH-access services.HH xP -ԍxAmeritech Update at 15.H Ameritech acknowledges that bulk billing does not represent a longterm solution to the industrywide problem of subsidy recovery. Rather, Ameritech advocates bulk billing as an interim response that addresses the threat of inefficient entry while not  Y -disturbing existing subsidy flows.: x zP,-ԍxId.:  Y -xW88.` ` Small LECs contend that Ameritech's bulk billing proposal is poorly thought Y -out, and could undermine the system for ensuring universal service.I  xPy-ԍxOPASTCO Comments at 56.I OPASTCO and Staurulakis also express concern that the Customers First Plan would result in geographic  Y-deaveraging of toll rates, which would increase rates in rural areas.}\ zP-ԍxId. at 6; Staurulakis Comments at 56. OPASTCO and Staurulakis argue that the possibility of geographic deaveraging of toll rates demonstrates that the effects of the Customers First Plan will be nationwide  zPm-in scope, and that a rulemaking proceeding is therefore necessary to consider the Plan. Id.} Nevertheless, OPASTCO acknowledges that bulk billing might be appropriate for adapting universal service mechanisms to a competitive market, so long as the Commission reviews the proposal  YK-in a comprehensive rulemaking.KK  xP-ԍxOPASTCO Comments at 6 n.7.K Staurulakis asserts that bulk billing might provide Ameritech with an unfair advantage over carriers whose rates reflect high cost program funding requirements, and thereby create an incentive for customers to bring business to the  Y-Ameritech region and to avoid other service areas.KN  xP#-ԍxStaurulakis Comments at 4.K  Y-xX89.` ` Ameritech asserts in response that its bulk billing plan will preserve and strengthen universal service in a competitive environment, and will not affect independent"10*&&aa"  Y-telephone companies.J xPy-ԍxAmeritech Reply at 2527.J Ameritech explains that the Plan does not interfere with the current Universal Service Fund and Lifeline Assistance charges, which NECA bills directly to  Y-IXCs.AX zP-ԍxId. at 26.A According to Ameritech, the current access rate system would eventually lead IXCs to reduce the volume of traffic using Ameritech's switching in order to avoid paying for public policy subsidies, leading to a "spiral" which would ultimately destroy the funding base  Y-for those subsidies.A zP( -ԍxId. at 27.A  Y_-xY90.` ` Several IXCs and the Indiana Utility Consumer Counselor raise questions about the mechanics of the proposed bulk billing mechanism. Sprint and Allnet suggest that the billing agent hired by Ameritech to administer the bulk billing system might not be  Y -impartial.z | xPG-ԍxSprint Update Comments at 20 & n.12; Allnet Update Comments at 14 & n.21.z Sprint claims that IXCs will be required to establish billing and audit mechanisms to handle the new bulk billing mechanism, and that the process of tracking access payments will become increasingly complex as more LECspecific access rate  Y -structures are permitted.U  xP-ԍxSprint Update Comments at 20 & n.12.U MCI asserts that Ameritech's proposal to use minutes of use as the basis of calculating market share conflicts with the method the Commission allowed in  Y -the NYNEX USPP Order.K  xP-ԍxMCI Update Comments at 21.K The Indiana Utility Consumer Counselor argues that Ameritech's proposal to base apportionment on market share would benefit Ameritech if and when Ameritech enters the interLATA market, because the annual assessment of market share would lag behind the actual state of the market and would undercharge IXCs with a  YM-growing market share, such as Ameritech's interexchange affiliate.fM,  xP*-ԍxIndiana Utility Consumer Counselor Comments at 3233.f  Y-xZ91.` ` Ameritech replies that its proposal would distribute the burden of costs on IXCs in roughly the same allocation as it exists today, and new IXCs will pay their fair share  Y-of costs as they enter the business.N  xP^"-ԍxAmeritech Update Reply at 17.N In response to commenters who attack the mechanics of the bulk billing process, Ameritech asserts that a system based on market share would be more consistent with the existing burden on IXCs than a mechanism based on presubscribed"2L 0*&&aa"  Y-lines.H zPy-ԍxId. at 17 & n.41.H Ameritech states that it will hire an independent billing agent to administer the bulk billing system and collect market share information from carriers, in order to avoid the need for disclosure of competitively sensitive data.  X-  X-x` ` b. Carrier Common Line Charge  Y-  Yv-x[92.` ` Long Term Support. Commenters acknowledge that NECA longterm support payments represent true subsidies, and generally do not object to Ameritechs proposal to recover them through a bulk billing mechanism. Both AT&T and CompTel, although expressing opposition to most of Ameritechs proposal, specifically acknowledge that LTS  Y -payments are subsidies that are appropriately addressed through a bulk billing mechanism.g Z xP' -ԍxAT&T Comments at 2, 34; CompTel Update Comments at 13.g AT&T draws an analogy between Ameritech's proposal to bulk bill LTS costs and the  Y -existing mechanism used to recover interstate telecommunications relay service costs.H  xP-ԍxAT&T Comments at 2, 34.H The General Services Administration argues that an increase in the SLC would be the preferred  Y -longterm means of recovering subsidies for residents of high cost areas.` z xP-ԍxGeneral Services Administration Reply at 1516.`  Y-x\93.` ` Common Line Recovery. Potential local service competitors to Ameritech argue that the Ameritech's proposal to bulk bill CCL common line revenues would harm competition. AT&T and Cox claim that Ameritech's own enduser customers would pay only a portion of Ameritech's loop costs, whereas competitors would have to pay all of their  Y8-own costs plus a portion of Ameritech's costs.s8  xP-ԍxAT&T Comments at 3031; AT&T Update Reply at 89; Cox Reply at 17.s According to AT&T, the result would be  Y!-to "virtually preclude competitive opportunities for a number of exchange functions,"E! xPl-ԍxAT&T Comments at 30.E because competitors would be unable to undercut Ameritech's artificiallydepressed local rates. US Signal explains that its interstate access tariff does not distinguish between subscriber loop facilities it owns and facilities it leases from Ameritech for purposes of billing CCL charges to IXCs. US Signal argues that it is entitled to recover CCL charges when it provides access to IXCs, including situations where it uses unbundled loops purchased from Ameritech, and that as a result, IXCs will be billed for the same costs by"3* 0*&&aa"  Y-Ameritech and US Signal.P xPy-ԍxUS Signal Update Comments at 2.P The American Petroleum Institute asserts that Ameritech's  Y-proposal would violate the Commission's 1986 Guidelines Order. X zP-ԍxAmerican Petroleum Institute Comments at 1617 (citing Petitions for Waiver of Various Sections of  zP-Part 69 of the Commission's Rules, 104 FCC 2d 1132 (1986), recon., 2 FCC Rcd 28 (1987)).   Y-x]94.` ` In response to those who demand additional information about Ameritech's  Y-basis for assessing the level of charges to be bulk billed, Ameritech in three ex parte  Y-submissions provides a detailed breakdown of its average loop costs in each state of its region, and the level by which its interstate loop costs exceed the recovery permitted through  Yc-the SLC.N\c xP -ԍxLetter from Cronan O'Connell, Director, Federal Relations, Ameritech, to William F. Caton, Acting  zP -Secretary, FCC (May 5, 1995) (Ameritech May 5, 1995 Ex Parte); Ameritech June 2, 1995 Ex Parte;  zPZ-Ameritech June 21, 1995 Ex Parte.N Based on estimated 1995 demand, the CCL bulk billing amount would be $69.9 million in Illinois and $43.6 million in Michigan, and the bulk billed portion of the TIC would be $55.8 million in Illinois and $32.7 million in Michigan. Ameritech denies that bulk billing would guarantee Ameritech recovery of its costs. Ameritech explains that loop costs recovered through bulk billing would be capped at a putative cost per line which would be subject to the current price cap index, and, under Ameritech's modified price cap  Y -proposal, would be subject to a supplemental cap at its current level for three years.N  xPb-ԍxAmeritech Update Reply at 21.N(#(#X  Y -x^95.` ` Two methods for recovering loop costs other than bulk billing are discussed in the record. In its original Petition, Ameritech raises the possibility that, as an alternative to bulk billing, misallocated costs in existing access rates could be "allocated back to the  Yf-services to which they belong."Bfh  xP-ԍxPetition at A13.B Ameritech includes similar language in the Update, and states that, although "allocating back" is more desirable from an economic perspective, bulk  Y8-billing represents an interim solution that can be implemented quickly.A8  xP-ԍxUpdate at 1415.A In its Update Reply, Ameritech clarifies that it believes that all loop costs ultimately should be recovered  Y -directly from endusers through the SLC.   xPC"-ԍxAmeritech Update Reply at 18. Ameritech states in its original Reply that it does not propose to increase the SLC at this time. Ameritech Reply at 26, G2 n.5.  Y-x_96.` ` Commenters are split on the merits of this approach. AARP argues that increasing the SLC would upset the compromise reached between the FCC and state"40*&&aa" commissions to apportion loop costs among local and longdistance users, and argues that  Y-residential and other endusers would face increased rates.H xPb-ԍxAARP Comments at 1920.H The General Services Administration urges the Commission to "revisit" the SLC cap, but agrees that bulk billing  Y-could suffice as an interim measure.]X xP-ԍxGeneral Services Administration Reply at 15.] NYNEX advocates increasing the SLC as a longterm solution to certain pricing distortions created by the existing switched access charge  Y-regime.F xP& -ԍxNYNEX Comments at 31.F Southwestern Bell states that, even if the Commission grants Ameritech a waiver to implement is bulk billing plan, the Commission should not foreclose other LECs from  Y_-proposing other mechanisms for recovering loop costs such as increasing the SLC.X_x xP -ԍxSouthwestern Bell Update Comments at 2.X  Y1-x`97.` ` AT&T argues that, rather than adopting Ameritech's proposal, the Commission should allow Ameritech to recover the SLC, as well as a flat charge representing the remaining interstate loop costs not recovered by the SLC, from companies  Y -that buy Ameritech's unbundled loops.L  xP-ԍxAT&T Update Comments at 33.L AT&T characterizes such an approach as consistent with the waivers the Commission granted in connection with Rochesters Open  Y -Market Plan.y  zP-ԍxId.Ġ(citing Rochester Waiver Order, 10 FCC Rcd 6776 (1995)).y Ameritech responds that its provision of unbundled loops is an intrastate offering. Because Ameritech intends to recover all of the costs of the unbundled loop via its intrastate unbundled loop charge, the federal SLC would not apply to unbundled loops. Consequently, as loops are converted to unbundled status, they would be removed from the interstate common line revenue requirement and the bulkbilled costs attributable to common  YK-line costs would be reduced.UK*  xP&-ԍxAmeritech Update Reply at 18 & n.44.U   X- x` ` c. Transport Interconnection Charge  Y-xa98.` ` Several commenters raise specific objections to Ameritech's characterization of 50 percent of the TIC as a "public policy element." The General Services Administration and MFS state that the TIC, regardless of whether it is "correctly" allocated, recovers Ameritech's own costs, and therefore should not be recovered through a "de facto tax on  Y-interexchange carriers."  zP%-ԍxMFS Comments at 6. See also General Services Administration Reply at 16. Sprint and CompTel argue that Ameritech has not sufficiently"5L 0*&&aa"  Y-explained the basis of its claim that the TIC subsidizes tandem switching costs.m xPy-ԍxCompTel Update Comments at 14; Sprint Update Comments at 18.m CompTel contends that Ameritech's own cost analyses, entered into the record before the Illinois Commerce Commission, show that Ameritech's current tandem switching rate exceeds its  Y-tandem switching costs.OX xP-ԍxCompTel Update Comments at 14.O CompTel also argues that Ameritech has skewed the design of its network to favor directtrunked traffic over tandem switched traffic, and that Ameritech should not be permitted to impose costs on IXCs that result from Ameritech's own network  Yv-design and pricing practices.Av zP -ԍxId. at 15.A  YH-xb99.` ` Ameritech responds that its proposal for bulk billing 50 percent of the TIC is  Y1-"a modest one."N1z xP\-ԍxAmeritech Update Reply at 21.N Ameritech contends that the TIC was established as a temporary mechanism to recover certain public policy costs associated with transport rates in  Y -conjunction with the transition away from the old "equal charge per minute of use" rule.D  zP-ԍxId. at 1920.D  Y -According to Ameritech, the Commission's intent in the Transport docket was that the TIC eventually be recovered from all users of switched transport, including those utilizing non Y -LEC providers.A  zP -ԍxId. at 20.A Ameritech notes that it has already voluntarily reduced its TIC by $59.4 million, and that it would remain responsible for recovering 50 percent of the TIC from its customers under its plan. Consequently, Ameritech argues that it would not be guaranteed  Y{-recovery of its TIC costs under the bulk billing proposal.A{.  zPZ-ԍxId. at 22.A   XM- x2.` ` Discussion  Y6-  X-x` ` a. Overview  Y-  Y-xc100.` ` As discussed above, we conclude that the competitive conditions in the portions of the Chicago and Grand Rapids LATAs within Illinois and Michigan merit some interim regulatory relief, pending a comprehensive review of access charges. In the following sections, we address the issues raised by Ameritech's bulk billing proposal and discuss why granting limited waivers to Ameritech will better serve the public interest than"6 0*&&aa" application of the Commission's rules. We do not address Ameritech's proposals relating to pricing flexibility. We intend to consider those requests in a future order.  Y-xd101.` ` Artificially high perminute rates for switched access tend to suppress demand for switched access and longdistance services. Switched access rates that are set above cost also create uneconomic incentives for IXCs to shift traffic from Ameritech's switched network to alternative carriers (or to Ameritech's special access lines, in cases where they  Y_-would be less efficient than switched access)."_ xP-ЍxAs discussed above, the likelihood of this development will depend on the degree to which IXCs  zP -determine which access provider will be used. See supra note 172. Given the competitive developments in the Ameritech region, we are persuaded that the inefficient incentives created by the existing access rate structure pose a sufficient threat of competitive distortions to justify granting Ameritech the relief described herein.  In the monopoly environment that still persists in most areas of the country, rules that elevate LECs' perminute switched access rates above economicallyefficient levels may be sustainable and serve other policy objectives. In areas such as Chicago and Grand Rapids where competitive providers of access and exchange service have opportunities to grow, however, rules that raise a LEC's perminute switched access rates above costbased levels can result in inaccurate price signals to potential market entrants, thereby encouraging inefficient entry and wasteful investment decisions and preventing consumers from enjoying the full benefits of competition. Ameritech's proposal to remove certain charges from its switched access rates and to recover some of these charges in an alternative manner will help align its price of interstate switched access with the cost of providing this service. Such a development is particularly important in areas such as Chicago and Grand Rapids, where competition is most likely to occur and the competitive presence is greatest. Finally, the reduction in Ameritech's switched access rates in these areas should lead to lower overall access costs, stimulate growth in the purchase of access services, and establish a reasonable basis for a competitive access marketplace, thereby helping to maximize consumer welfare. Thus, the public interest will be better served by a grant of a limited waiver than it would by rigid adherence to the existing rules.   X- x` ` b. NECA Long Term Support  Y-  Y|-xe102.` ` We conclude that Ameritech should be granted a waiver of Commission rules to remove the longterm support component of its CCL rate in the areas covered by this waiver and to recover these revenues through a bulk billing mechanism. As we noted in the  Y7-NYNEX USPP Order, the longterm support payments do not compensate Ameritech for the  Y"-costs it incurs in providing switched access.k" zP#-ԍxNYNEX USPP Order, 10 FCC Rcd at 7475  7172.k Rather, Ameritech remits these revenues to NECA to contribute to the recovery of interstate common line costs of LECs in the NECA CCL pool. This mechanism ensures that those carriers can charge CCL rates that are no"7D0*&&aa" higher than the national average CCL rate, computed on the basis of the CCL costs of all  Y-LECs. zPb-ԍxSee supra note 9 for further discussion of the rationale for LTS payments. In the environment now existing in Chicago and Grand Rapids, the present method of collecting long term support revenues hinders Ameritech's ability to compete with carriers that do not bear this cost. All IXCs should be responsible for contributing their share of LTS payments, regardless of which access provider they use, and LTS payments should not alter the competitive balance between competing providers of local exchange service.  Y_-xf103.` ` Commenters agree that longterm support payments represent a subsidy and  YH-should be recovered through some type of bulk billing arrangement.xHZ zPS -ԍxSee, e.g., AT&T Comments at 2, 34; CompTel Update Comments at 13.x Given the competitive circumstances of the Chicago and Grand Rapids LATAs, we find that Ameritech's recovery of long term support payments through perminute switched access charges is inequitable and inefficient. We conclude that longterm support payments should be recovered through the bulk billing mechanism proposed by Ameritech, subject to the modifications we discuss below.  Y -xg104.` ` We find that the mechanics of bulk billing as proposed by Ameritech are generally reasonable and we permit the creation of a bulk billing mechanism subject to the adjustments and conditions specified herein. MFS argues that because loop costs are nontraffic sensitive, the Commission should require Ameritech to determine each IXC's market share based on the number of access lines presubscribed to each IXC, as we did with  Y4-NYNEX's bulk billing proposal.4 zP-ԍxMFS Update Comments at 56 (citing NYNEX USPP Order, 10 FCC Rcd at 747778  79). We agree with MFS that the nontraffic sensitive nature of loop costs is an important consideration in the allocation of loop costs. However, in the context of ascertaining market share for bulk billing of NECA longterm support revenues, the measuring factor (minutes of use or number of presubscribed access lines) is less significant than it would be in other contexts. The total amount of Ameritech's LTS payments is determined by NECA and therefore will not be affected by the allocation method used in Ameritech's bulk billing mechanism. We conclude that, for purposes of this waiver, Ameritech's proposed method for allocating bulk billed costs among IXCs is reasonable. Allocating these costs on the basis of switched access minutes of use is a reasonable method, as IXCs currently pay these charges through switched access rates that are assessed based on minutes of use. Accordingly, we will permit Ameritech to establish each IXC's share of the bulk billed charges based on each IXC's interstate switched minutes of use provided to end"78~0*&&aa=" users and originating or terminating in the portion of the Chicago and Grand Rapids LATAs  Y-within Illinois and Michigan.^ X xPb-ԍxThe minutes of use included in this measure should include those that originate or terminate through Ameritech's or a competing provider's local switching facilities, but should not include traffic originating or terminating over Ameritech's or a competitor's special access (nonswitched) facilities.^  Y-xh105.` ` We also determine that Ameritech's proposal to fund an independent billing organization is an acceptable mechanism for collecting bulk billed funds. We are persuaded that this arrangement will prevent Ameritech from ascertaining proprietary market share data from its competitors. We direct Ameritech to ensure that the billing agent is in place no later than the end of the first year of bulk billing (as Ameritech proposes), and sooner if possible. To enhance the independence of this entity, we direct Ameritech to work with IXCs and competitive local service providers in the establishment or selection of the entity, and we expect Ameritech to report periodically to our staff regarding the implementation of this billing process.  Y -xi106.` ` Finally, we modify that aspect of Ameritech's bulk billing proposal that would require IXCs to report their total interstate switched minutes of use in the territories subject  Y -to the waiver annually.C   xP@-ԍxUpdate, Attach. D.C As proposed by Ameritech, each IXC would pay a portion of the  Y-bulk billed charges based on its market share from the previous year.J x zP-ԍxSee supra para. 30.J We agree with the Indiana Utility Consumer Counselor that reporting market share on an annual basis could  Yb-create an unnecessary and unacceptable lag time.f b  xP-ԍxIndiana Utility Consumer Counselor Comments at 3233.f This lag could result in undercharging an IXC whose market share is increasing, such as a newlycreated interexchange subsidiary of Ameritech, and overcharging an IXC whose market share is diminishing. Therefore, we conclude that IXCs operating in the Chicago and Grand Rapids LATAs should provide updated information to the independent organization no less frequently than quarterly. The billing agent should recalculate each IXC's monthly share of bulkbilled costs on the basis of this updated information.   X-x ` ` c. Common Line Recovery  Y|-xj107.` ` Overview. The CCL charge also recovers a portion of Ameritech's interstate loop costs. Pursuant to our Part 36 and Part 69 rules, Ameritech each year calculates its common line revenue requirement on the basis of its forecasted loop costs for that year. Twentyfive percent of this annual common line revenue requirement is then assigned to the interstate jurisdiction according to the jurisdictional separations rules. The multiline""9 0*&&aa<" business SLC is determined by dividing this interstate revenue requirement, on a permonth  Y-basis, by the total number of subscriber lines in the Ameritech region.> X xPb-ЍxIn study areas where the multiline business SLC would be greater than $6.00 per month according to this formula, the multiline business SLC is set at $6.00. In Ameritech's serving area, the multiline business SLC is below the $6.00 cap in all five states.> Although the majority of Ameritech's loop costs that have been assigned to the interstate jurisdiction are now recovered directly from local subscribers through the SLC, the residential SLC is capped at $3.50 per line per month, which does not fully recover the costs of Ameritech's  Y-residential loops." xP& -ԍ xAccording to data presented by Ameritech, the portion of common line costs allocated to the interstate jurisdiction that is not recovered through the current SLC for residential and singleline business users equates  zP -to $0.43 per line per month in Illinois and $1.65 per line per month in Michigan. Ameritech June 2, 1995 Ex  zN -parte.ī The remaining loop costs, although they are not traffic sensitive, are recovered on a minutesofuse basis through the CCL charge paid to Ameritech by IXCs. Ameritech argues that, like its long term support payments, common line costs recovered through the CCL represent a regulatorilyimposed surcharge on Ameritech's perminute switched access rates assessed on the traffic of most enduser customers. Therefore, Ameritech proposes that this element also be removed from the perminute CCL charge.  Y -xk108.` ` We conclude that Ameritech has demonstrated that, under the special circumstances present in the Chicago and Grand Rapids LATAs, and subject to certain conditions, the public interest would, on an interim basis, be served by the removal of the costs of common line recovery from Ameritech's perminute switched access rates assessed on IXCs in those LATAs. We therefore grant Ameritech a waiver to remove its interstate common line costs from the CCL charge applicable to minutes originating or terminating in the two affected LATAs, and to recover those costs through a modified bulk billing  YK-mechanism. Such a waiver, similar to the one we granted to NYNEX in the NYNEX USPP  Y6-Order, would eliminate a pricing distortion that, in the increasingly competitive environment in the waiver territories, could stimulate uneconomic entry and divert traffic from Ameritech to lessefficient competitors.  Y-xl109.` ` Treatment of Common Line Costs. We have long recognized that the per Y-minute recovery of local loop costs leads to price distortions.A^ zPJ -ԍxSee, e.g., NYNEX USPP Order, 10 FCC Rcd at 757576 73; MTS and WATS Market Structure,  zP!-Report and Order, 2 FCC Rcd 2953, 2954,  911, 2957, 2829 (1987) (Common Line Cost Recovery  zP!-Order).A The recovery of nontraffic sensitive local loop costs through a usage charge on interexchange carriers tends to shift cost recovery onto highvolume longdistance users, thereby artificially suppressing demand for longdistance services. In addition, IXCs currently pay more, in usagesensitive CCL charges, to serve customers with higher usage levels than they pay to serve other customers,"k: 0*&&aa]" even though Ameritech's costs to provide loops to those highvolume users are not higher than for lowvolume users.  Y-xm110.` ` The removal of the common line recovery element from the perminute CCL charge would create significant public interest benefits. In a competitive environment like that developing in Chicago and Grand Rapids, other carriers that can charge access rates that more closely reflect the cost of providing service may be able to price their perminute switched access services below those of Ameritech. Such price variations would result solely from the regulatory process, rather than from any underlying differences between the carriers' cost structures. Competitors might find it profitable to enter the access market even when those competitors experience higher costs than Ameritech, because Ameritech's access rates are inflated above the level that would reflect its costs, and its ability to respond to the presence of competitors by lowering its usagesensitive rates closer to cost is limited. Such inefficient entry would lead to wasteful investment and distorted pricing. Moreover, as highervolume users abandon Ameritech purely to avoid paying rates that reflect an access rate structure that shifts costs from longdistance to residential users, the funding base for that mechanism will erode. Ameritech might be forced to increase its perminute CCL charge in order to recover its costs, thus increasing the access charges paid by IXCs and possibly forcing those IXCs to increase their longdistance rates.  Y4-xn111.` ` These distorted incentives generally have not resulted in significant deleterious consequences in the past because of the presence of other barriers to competition. The current access rate structure was established in an environment in which incumbent LECs held a monopoly often legally-enforced on providing local exchange service, including local loops and switching. Legal, technical, and economic barriers effectively precluded potential competitors from challenging the local switching and loop elements of incumbent LECs' interstate switched access offerings, so that competitive entry into this segment of the access market has been extremely limited. Such an environment persists in much of the country. As described in detail above in our discussion of special circumstances, however, competition for a wide array of services, including the local switching and loop elements of interstate switched access, has begun to develop in parts of Illinois and Michigan. With other barriers to entry eliminated, pricing distortions created by the federal access charge structure will exert far greater importance upon carriers' investment decisions and ultimate consumer welfare than they have previously. Under these circumstances, we conclude that the removal of interstate loop costs from the CCL charge paid by IXCs serving customers in the Chicago and Grand Rapids LATAs will better serve the public interest than application of the existing rules.  Y"-xo112.` ` Bulk Billing. We conclude that granting Ameritech a waiver to recover the portion of its common line costs currently recovered through perminute interstate access charges through a bulkbilled charge on IXCs, with certain technical modifications, would better serve the public interest than the continued operation of the current rules. Bulk billing"S%;0*&&aap&" would address the problem of inefficient entry created by application of the existing method for recovering common line costs to the areas covered by the waiver, because Ameritech's perminute interstate switched access rates would more closely track Ameritech's costs of providing switched access. Moreover, bulk billing could be implemented relatively easily and without creating substantial additional burdens on other carriers.  Yv-xp113.` ` Bulk billing based on interstate switched minutes of use provided to end users would allow recovery of interstate loop costs to be allocated among IXCs in the same relative proportions, initially, as under the existing rules. As discussed above in the context of Ameritech's waiver request for its longterm support payments, we believe that an allocation among IXCs based on minutes of use is a reasonable mechanism of determining relative  Y -market share for bulk billing purposes.K  zP| -ԍxSee supra para. 104.K We also incorporate herein our conclusions above that the independent billing agent proposed by Ameritech would be sufficiently impartial, and that the billing agent should assess monthly bulkbilled charges to IXCs on the basis of  Y -quarterly market share data.O Z zP-ԍxSee supra paras. 10506.O With the implementation of bulk billing, Ameritech's perminute interstate switched access rates would be reduced to a point that more closely reflects Ameritech's actual costs of providing access, thus allowing competition to develop on the basis of more rational pricing and investment decisions.  YK-xq114.` ` Ameritech's bulk billing proposal does raise competitive concerns, however, and even Ameritech admits that bulk billing is not a longterm industrywide solution to the problems engendered by the effects of nascent competition on the current access rate structure. These concerns, however, are not fatal to the proposal, subject to the modifications discussed below. First, bulk billing of the common line recovery element of the CCL charge would alleviate incentives for inefficient entry, but would not address the more fundamental problem-- the recovery of nontraffic sensitive loop costs from end users on a usage basis (indirectly, through longdistance rates). Bulk billing would merely shift existing misallocated loop costs from perminute access rates to a bulkbilled charge. We do not believe that this characteristic justifies rejection of Ameritech's proposal. To the extent that bulk billing is an appropriate interim measure that, in Ameritech's case, would serve the public interest, we should not refuse to grant a waiver because certain broader industrywide problems remain to be addressed.  Y -xr115.` ` Second, unlike longterm support, the common line recovery component of the CCL charge recovers Ameritech's own costs. Ameritech's bulk billing mechanism as proposed therefore effectively would require IXCs to pay a portion of Ameritech's loop costs even when they completely bypass Ameritech's loops. In addition, because Ameritech would be able to recover a portion of its costs for loops that have been bypassed by competing"!<0*&&aa"" providers, Ameritech would have a greater assurance of a revenue stream than under the current system. Currently, Ameritech recovers its interstate common line costs not recovered through the SLC through a perminute CCL charge based solely on minutes passing through Ameritech switches, while under Ameritech's proposal Ameritech would recover these costs even for traffic that totally bypasses the Ameritech network. As a result, Ameritech's incentives to operate efficiently could be reduced. Under Ameritech's proposal, even when an IXC's end users switch from using Ameritech loops to an alternative facilitiesbased providers' loops, that IXC would not see a decrease in its bulkbilled costs on an incremental basis, because the minutes passing over the competitor's loop would still be counted in determining that IXC's bulkbilled charge. These IXCs would therefore have incentives to use Ameritech loops even when Ameritech is not the lowestcost loop provider. Ameritech's proposal to remove the cost of unbundled loops sold to competitors from the interstate common line revenue requirement has no relevance to this competitive concern regarding facilitiesbased bypass. Thus, we reject Ameritech's proposal to include all retail toll minutes sold to end users in the waiver territories in the calculation of bulkbilled charges.  Yy-xs116. ` ` Instead, we require that the bulkbilled charge for the recovery of common line costs be calculated solely on the basis of traffic originated or terminated over loops that Ameritech sells to end users. This change is consistent with the bulk billing mechanism we  Y4-recently permitted NYNEX to implement.k4 zP-ԍxNYNEX USPP Order, 10 FCC Rcd at 7478 8182.k The recovery of common line revenues associated with both unbundled and bundled loops sold to resellers will be addressed in the  Y-context of a separate Part 69 waiver petition Ameritech has filed on that subject.ZZ zP-ԍxSee Ameritech Petition for Waiver of Part 69 of the Commission's Rules to Permit the Assessment of the End User Common Line Charge to Reseller of Local Exchange Service, CCBPol 9527 (filed Nov. 30, 1995).   Y-xt117.` ` Finally, under Ameritech's bulk billing proposal, competing providers of local telephone service to residential and singleline business customers would have to recover all of their loop costs through the rates they charge end users and/or IXCs, whereas Ameritech's flat subscriber line charges for these customers would be, in effect, subsidized by the recovery of a portion of Ameritech's loop costs directly from IXCs. With the limitations we have placed on Ameritech's bulk billing mechanism, however, this distortion should be no greater than it is today. Our requirement that Ameritech assess bulkbilled charges based only on traffic passing over Ameritech loops means that when an IXC's enduser customer switches from Ameritech to a facilitiesbased competitor, that IXC's bulkbilled charge will decrease, because the switched access minutes attributable to that enduser customer will be" =|0*&&aa"  Y-removed from Ameritech's bulk billing calculation.)X xPy-ԍ xAs stated in the previous paragraph, the method by which Ameritech may recover common line costs when competitors resell, rather than bypass, Ameritech loops will be addressed in connection with Ameritech's Part 69 waiver petition on that subject.) Competing local service providers could recover their loop costs in a costcausative manner, or, if they wish, in the same manner as Ameritech: with flat rates to residential and singleline business endusers set somewhat below cost, and the remainder recovered through perminute access charges to IXCs. Assuming that Ameritech and the competing local service provider have equivalent cost structures, the reduced bulkbilled charge from switching to the competitor will mirror the difference between the "subsidized" SLC charged by Ameritech and the competitor's charge to recover the full interstate cost of the loop. As a result, the bulk billing mechanism will give IXCs no different incentives than exist today in choosing either Ameritech or competing providers of interstate access. While, as noted earlier, bulk billing raises some concerns about competitive distortions, we conclude that, as an interim measure, pending a more comprehensive reform of our access charge rules, bulk billing under the conditions we have described better serves the public interest than the existing rules by reducing incentives for inefficient entry.  Y -xu118.` ` We grant Ameritech substantial flexibility in implementing this bulk billing mechanism. Specifically, we allow Ameritech to decide whether to allocate bulkbilled common line costs among IXCs on the basis of minutes of use (as Ameritech proposes),  Yb-presubscribed lines (as we permitted NYNEX to do in the NYNEX USPP Order), or interstate  YM-access revenues received by Ameritech from the respective IXCs.M xP-ЍxAn allocation based on revenue would closely resemble an allocation based on minutes of use, because Ameritech's gross access revenues are generally derived from perminute charges. Although a minutes of use allocator more closely tracks the existing distribution among IXCs, a presubscribed line allocator would more closely mimic the effect of increasing the subscriber line charge,  Y-especially if IXCs flow through the charge to their customers on a flat perline basis.  Y-xv119.` ` The independent billing agent will be required to assess the bulkbilled charges to IXC based on data collected no less frequently than quarterly. Because we are requiring Ameritech to use only minutes passing over Ameritech loops in determining the bulkbilled charge, Ameritech's bulk billing revenues will decrease as traffic shifts from Ameritech to facilitiesbased competitors. This restriction will help ensure that bulk billing would only give Ameritech a reasonable opportunity to recover its costs, and would not guarantee Ameritech recovery of its full monopoly revenue stream, as some commenters suggest. Ameritech must also, as it proposes, cap the costs recoverable through bulk billing on a perline basis, so that any annual increase in the total level of bulkbilled recovery would be attributable solely to growth in the number of lines provided by Ameritech. Even if Ameritech's perline loop costs increase over time, Ameritech will be limited to recovering a">@0*&&aa" total amount through bulk billing equivalent to the cost per line during the first year in which bulk billing is put into effect. As competitors enter the access market, Ameritech's rates will be subject to market pressures, and Ameritech will be required to increase its productivity while keeping rates at reasonable levels in order to retain its current customers and to obtain new business. Moreover, we accept Ameritech's commitment to remove the cost of loops  Y-sold to competitors from its interstate CCL revenue requirement. xP-ԍxWe do not, however, waive our Part 36 Rules, and we take no position on whether Ameritech's proposal in this area complies with our jurisdictional separations rules.  Y_-xw120.` ` Therefore, the monthly bulkbilled charges on IXCs will be determined by the following calculations. For each state, Ameritech should first determine the total annual  Y1-amount to be recovered.1  xP -ЍxThis calculation uses a methodology similar to that described by Ameritech in its Update, modified  zP -according to the requirements described in this order. See Update, Attach. D. To determine this amount, Ameritech should divide the base factor portion overflow in the state by the CCL revenue requirement for that state to determine the percentage of the total perminute CCL rate that recovers common line costs in that state. This percentage should be multiplied by the perminute regional CCL rate, calculated as under the status quo, to obtain the perminute common line recovery element, which should then be multiplied by the total number of interstate switched toll minutes passing over Ameritech common lines in the waiver territories in that state to determine the total amount to be recovered through bulk billing in that state. Ameritech would then allocate the total bulkbilled amount among IXC on the basis of those IXCs' market share based on presubscribed lines, minutes, or gross revenues.  Y4-xx121.` ` Implementation Issues. Ameritech must continue to include its waiverarea lines and minutes of use in its calculations of the perminute CCL charges for the areas not subject to this order. This condition is necessary to protect customers elsewhere in the Ameritech region. Although Ameritech's loop costs vary from state to state, Ameritech  Y-currently has one averaged CCL charge for its entire region.ZXz xP-ЍxAmeritech has chosen to average its CCL charge, rather than calculating the charge on a statebystate basis. Our rules do not prohibit Ameritech from using a different CCL charge for each of the states it serves, and nothing in this order should be taken as imposing such a restriction.Z Areas such as the Chicago LATA, which generally have higher densities (and thus lower loop costs) than elsewhere in Illinois, tend to bring down the average loop cost and the perminute CCL charge. Thus, this requirement should prevent undue increases in the CCL rates paid by customers outside the LATAs subject to this waiver.  YP-xy122.` ` For the purpose of adjusting the price cap index (PCI) for the common line basket, we direct Ameritech to determine the growth factor based on the number of bundled"9?0*&&aa="  Y-loops it provides, excluding all unbundled loops.& zPy-ԍx The growth factor is the percentage change between the minutes of use per access line during the base  zPC-period and the minutes of use per access line during the previous base period. See 47 C.F.R.61.45(c). & The PCI is adjusted through the growth factor to account for the cost reductions resulting from increased usage over a fixed number of common lines. If we were to permit the growth factor to include Ameritech's unbundled loops, any growth in usage on the unbundled loops would be attributed to Ameritech. Such incentives are inappropriate when the traffic traversing common lines is being handled by a  Y-competing carrier.$$ xPb -ԍxIn addition, we recently determined that it is not necessary to create price cap incentives for LECs to  zP* -increase growth in common line usage, because they have little influence over such growth. Price Cap  zP -Performance Review for Local Exchange Carriers, First Report and Order, FCC 95132, CC Docket No.941 26473 (released April7, 1995).  Moreover, Ameritech cannot measure the traffic on unbundled loops it has sold to competing local exchange providers. Including those loops in the calculation of the growth factor would either show those loops as having no traffic, or would require competitors to report to Ameritech the minutes passing over unbundled loops they had purchased.  Y -xz123.` ` Other Issues Raised by Commenters.  Contrary to some parties' arguments, Ameritech has presented sufficient data to support a waiver to alter the recovery of the  Y -common line component of its CCL charge. With its ex parte filings, Ameritech has provided sufficientlydetailed information about its average loop costs and CCL charge rates on which to base the grant of a waiver. Ameritech need not make any additional showing of the level of "subsidy" embedded in CCL rates to justify a waiver. As we have stated above, the recovery of nontraffic sensitive loop costs in perminute access rates charged to IXCs inherently shifts a cost burden from lowervolume users to highervolume users, and from end users who make predominantly local calls to those who are heavy longdistance users. There is no uncertainty about the origin of the costs recovered through the CCL charge, unlike, for example, the transport interconnection charge. Of course, when Ameritech files a tariff implementing this waiver, it will be required to provide the requisite cost support data, including information demonstrating that the revenues associated with bulk billing do not exceed the amount by which the CCL charge is reduced, and that all applicable price cap restrictions are satisfied.  Y-x{124.` ` We decline to adopt AT&T's alternative proposal to allow Ameritech to recover its loop costs from companies that purchase unbundled loops. AT&T's suggestion departs substantially from Ameritech's waiver request, and the record before us is  YR-insufficient to consider such a proposal. As we concluded in the Rochester Waiver Order, the model described by AT&T may be a reasonable method for recovering CCL charges  Y&-from parties that purchase unbundled loops but no switching from the LEC.l& zP%-ԍxRochester Waiver Order, 10 FCC Rcd 6776 (1995).l AT&T's"&@0*&&aa" proposal, however, appears not to address the problem identified by Ameritech: the uneconomic effects of recovering common line costs through the perminute CCL assessed on all access customers, not only purchasers of unbundled loops. Although AT&T raises some intriguing issues, we choose not to explore them in this waiver proceeding.  Y-x|125.` ` In response to the American Petroleum Institute's argument that Ameritech's  Yv-proposal for the recovery of common line costs is inconsistent with the 1986 Guidelines  Ya-Order,a zP-ԍxPetition for Waiver of Various Sections of Part 69 of the Commission's Rules, 104 FCC 2d 1132 (1986). we note that in the NYNEX USPP Order we specifically concluded that the criteria  YL-in the Guidelines Order are no longer controlling with respect to our decision to grant or to  Y7-deny a waiver to recover some non-traffic sensitive costs in an alternative manner.n7Z zPB -ԍxNYNEX USPP Order, 10 FCC Rcd at 747475  6970.n We see no reason to find otherwise in the context of Ameritech's Petition. As we found in the  Y -NYNEX USPP Order, regulatory and market conditions have changed substantially in recent  Y -years, to the point at which the Guidelines Order should no longer apply.  X - x` ` d. Transport Interconnection Charge  Y -  Y-x}126.` ` Ameritech's final request for a bulk billing waiver involves the transport interconnection charge. The TIC was established on an interim basis as part of the Commission's efforts to implement a more costbased structure for switched transport  YU-pricing.U zP-ԍxSee generally Transport Rate Structure and Pricing, Third Memorandum Opinion and Order on Reconsideration and Supplemental Notice of Proposed Rulemaking, 10 FCC Rcd 3030 (1994). We established the TIC initially at a residual level to provide the LECs with revenue neutrality during the shift from the "equal charge per minute of use" rate structure mandated by the MFJ court at divestiture to the more costbased interim transport rate structure. We have acknowledged our uncertainty about the nature of the costs recovered through this charge, and have asked parties to provide estimates of the breakdown of costs  Y-now embedded in the TIC.F zP-ԍxTransport Rate Structure and Pricing, Report and Order and Further Notice of Proposed Rulemaking, 7  zP-FCC Rcd 7006, 706366  13341 (1992) (First Transport Order).  Y-x~127.` ` Ameritech provides little support for its claim that 50 percent of the TIC represents a "public policy element." In its Update, Ameritech refers generally to "inefficiencies" created by the equal charge structure, and claims that the TIC includes costs that should be allocated to tandem switching rates. We conclude that this showing does not provide a sufficient basis to allow Ameritech to bulk bill 50 percent of the TIC. In the context of the CCL charge, we have agreed to permit Ameritech to bulk bill IXCs for certain costs whose level and origins are wellestablished. By contrast, Ameritech's "Public Policy"*A0*&&aa<" Element" of the TIC represents an arbitrarilydefined component of a rate element that was originally established on a residual basis, rather than to recover the costs of providing any  Y-specific service. Numerous parties have submitted comments in the Transport proceeding on the nature of revenues recovered by the TIC. Ameritech fails to address that record or to offer any detailed analysis that would lead us to accept its characterization of the TIC in this waiver proceeding. We recently rejected a request by NYNEX to bulk bill the TIC, on the grounds that NYNEX had not provided convincing information about the composition of the  Ya-TIC.n a zP-ԍxNYNEX USPP Order, 10 FCC Rcd at 746768  5253.n Based on the current record, we decline at this time to grant Ameritech a waiver to implement its specific proposal to bulk bill an arbitrary percentage of the TIC.  Y -x128.` ` Although we reject Ameritech's request for bulk billing of part of the TIC, we recognize that the TIC was originally established at a residual, rather than a costbased, level, and that it is likely that the TIC includes some revenues not attributable to the costs of providing transport services. In a competitive environment, the presence of the TIC in Ameritech's rates may artificially inflate Ameritech's switched transport prices and create inefficient incentives for carriers to bypass Ameritech's transport network, especially in highdensity areas. Ameritech also seeks a waiver to establish different TIC rates in different geographic zones. Unlike bulk billing, deaveraging would not force carriers to pay an imperfectlyunderstood portion of Ameritech's rates regardless of whether they purchase switched transport from Ameritech. Such a waiver would, however, address the concerns Ameritech raises about competitive distortions created by the TIC, because Ameritech would be able to respond to the growing competition in Chicago and Grand Rapids by lowering its TIC rate in those areas.  Y-x129.` ` Geographic deaveraging of the TIC would create significant public interest benefits. The TIC includes some revenues related to transport costs, which we have already found are lower in higher-density zones. To the extent that the transport interconnection charge recovers revenues related to the costs of other access elements or other telecommunications services, these costs also are likely to be lower in zones with a more dense concentration of traffic. Geographic deaveraging would therefore allow Ameritech to move its prices towards cost in Chicago and Grand Rapids, reducing incorrect pricing signals that could trigger entry by competitors that may be less efficient than Ameritech. Moreover, the densest zones represent the areas in which competition is likely to grow most rapidly. By permitting Ameritech to move its prices towards cost in those areas that have the densest traffic patterns and are open to competitive entry, we will enable Ameritech to minimize distortions in the total switched access per-minute rate that have the greatest adverse impact.  Y!-x130.` ` With the implementation of the Customers First Plan at the state level, competitive service providers will be able to use Ameritech's unbundled loops to bypass some of Ameritech's switched access services. Therefore, Ameritech is likely to be under"#BZ 0*&&aa$" some competitive pressure to reduce its per-minute transport interconnection charge in high-density zones. Permitting Ameritech to deaverage this charge would enable Ameritech to target rate reductions to the zone in which customers are most likely to bypass its switched services in favor of potentially less efficient services. We conclude that the public interest would be served by giving Ameritech the flexibility to respond in this way to the market conditions that exist in Chicago and Grand Rapids, which, in the previous section of this order, we found constitute special circumstances. This waiver is comparable to the waiver  Y_-we granted to NYNEX in the NYNEX USPP Order.!_ zP-ԍxId.,10 FCC Rcd at 746870  5458. See also Special Access Expanded Interconnection Order, 7 FCC Rcd at 745456.  Y3-x131.` ` We therefore conclude that the public interest will be served by permitting Ameritech to reduce the TIC on a geographicallydeaveraged basis for the Chicago and Grand Rapids LATAs. Ameritech may establish four separate rate elements within the interconnection charge category, one for each of the three density pricing zones in the LATAs covered by the waiver, and a baseline element for usage outside the two affected LATAs. In order to ensure that other customers are not harmed by Ameritech's reduction of the TIC in the waiver area, Ameritech's geographic deaveraging of the TIC will be subject to three conditions. First, Ameritech may not raise any interconnection charge rate above the interconnection charge rate that is in its tariff on the day before the tariff implementing this  Yd-aspect of the waiver takes effect.I"Xd" xP7-ԍxSince Ameritech has characterized this waiver as being interim in nature, we have not provided for upward pricing flexibility to reflect increases in the PCI. If we expected this waiver to be of a more permanent nature, we would have considered an upward PCI adjustment mechanism.I Thus, Ameritech will not be able to raise the rate for any interconnection charge element to offset a reduction in the rate for another interconnection charge element. Second, Ameritech may not, once it lowers the rate for any interconnection charge element, thereafter raise the rate for that element. This will prevent Ameritech from alternatively raising or lowering the rate for one element deliberately to undermine a rival's business plan. Third, because some of the revenues recovered through the interconnection charge are transportrelated, we believe it necessary to establish a floor  Y-below which the rate for the interconnection charge may not go.l#ZB xP-ЍxIn the interim transport rate structure, we required that the tandem switching charge recover 20 percent of the fully allocated costs of tandem switching, with the remaining tandem switching costs initially recovered  zPF -through the TIC. First Transport Order, 7 FCC Rcd at 703738.l Therefore, we conclude that the rate for any interconnection charge must be sufficient to recover the share of fully Y-allocated tandem switching costs that are included in the interconnection charge.;$Zd  xP#-ЍxWe take no position on the question of whether the tandem switching costs now recovered through the TIC should ultimately be recovered through the tandem switching charge. That issue will be addressed in the  zP:%-Transport proceeding.;"C $0*&&aa}"Ԍ Y-ԙt IV. CONCLUSION ă  Y-x130.` ` The steps that Ameritech has taken thus far in conjunction with the Illinois and Michigan commissions have significantly increased the opportunities for competitors to offer exchange and access services in competition with Ameritech. These steps, however, have also created a situation where application of certain of the Commission's rules would no longer be in the public interest. Continuing to require Ameritech's compliance with such rules might create uneconomic incentives and interfere with the efficient operation of an increasingly competitive market. In addition to preventing such unwanted distortions, the waivers we grant today should help achieve the Commission's goal of facilitating fair and efficient competition. Such competition will ultimately generate significant consumer benefits, including speedier technological innovation, increased carrier responsiveness and quality of service, and lower overall price levels. We recognize that the transformation from monopoly to fully competitive markets will not take place overnight. We also realize that the steps taken thus far will not result in the immediate arrival of fullyeffective competition. Accordingly, the Commission and state regulators must continue to ensure against any anticompetitive abuse of residual monopoly power, and to protect consumers from the unfettered exercise of that power. As anticompetitive concerns recede in the face of  Yc-competition, the Commission will continue to remove unnecessary regulatory restraints.%c zP-ԍxSee NYNEX USPP Order, 10 FCC Rcd 7445, Separate Statement of Commissioner Rachelle B. Chong.  Y5-x132.` ` We conclude that granting Ameritech waivers as described above will better serve the public interest than will the continued application of our existing rules. Ameritech has demonstrated that, as a result of the actions of Ameritech, state regulators, and competitors, special circumstances exist in portions of the Chicago and Grand Rapids LATAs within Illinois and Michigan. Under these conditions, limited waivers of some of our access charge rules for these areas are justified. We note that Ameritech has expressly characterized the Customers First Plan as interim in nature. As the telecommunications industry continues to evolve, we believe that there is a need for comprehensive access reform to consider more broadly issues such as those raised by Ameritech in this proceeding. Given the special circumstances described by Ameritech, however, we conclude that granting Ameritech the relief described herein represents an appropriate response to Ameritech's  Y8-interim proposal. "!DZ%0*&&aa"Ԍ X--V. ORDERING CLAUSES ĐTP  Y-x133.` ` Accordingly, IT IS ORDERED, pursuant to Section 4(i) of the Communications Act, 47 U.S.C. 154(i), and Section 1.3 of the Commission's Rules, 47C.F.R. 1.3, that the Ameritech Operating Companies' Petition for Waivers to Establish a New Regulatory Model for the Ameritech Region IS GRANTED IN PART subject to the limitations and conditions described herein; and  YH-x134. ` ` IT IS FURTHER ORDERED that the Ameritech Operating Companies' Petition for a Declaratory Ruling IS DENIED. X` hp x (#%'0*,.8135@8: