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A. 1. a.(1)(a) i) a) 1 A. 1. a.(1)(a) i) a)Adopted:` ` August 7, 1996hh@hppReleased:  August 7, 1996 By the Commission  1 A. 1. a.(1)(a) i) a) 1. 1. a.(1)(a) i) a) TABLE OF CONTENTS  X-X` hp x (#%'0*,.8135@8:.1 % yOh-ԍSprint Comments at 16.> Cable and Wireless claims that requiring carriers to offer discounts throughout their service areas would result in "less competition and fewer consumer choices, rather than more, for rural and high  X -cost areas."K/ % yO-ԍCable and Wireless Comments at 45.K  X -x18.` ` Alaska, Hawaii, and the RTC argue that the 1996 Act requires rural and urban customers to pay the same rates for similar services, and does not provide for any exceptions  X-for discounts or contract tariffs.0B% {O-ԍAlaska Reply Comments at 69; Hawaii Reply Comments at 46; RTC Reply Comments at 35; see also Missouri Public Service Commission Comments at 4 (customers in rural areas should pay rates comparable to rates urban customers pay for similar services); John Staurulakis, Inc. Comments at 4 (IXCs circumvent rate averaging by not offering discounts to their rural customers); Pennsylvania Public Utility Commission Comments at 1617 (no exceptions in statute though Joint Explanatory Statement is ambiguous); Pennsylvania Office of Consumer Advocate Comments at 67 (Congress intended that carriers average the rates users actually pay and not the undiscounted rate); Alabama Public Service Commission Comments at 8 (must offer discounts in rural areas). The RTC further claims that it is "premature" for the" 00*&&aa"  X-Commission to consider granting exceptions to statutory requirements so recently enacted.@1% yOy-ԍRTC Reply Comments at 7.@ Hawaii, Alaska, the RTC, and the Ohio Consumers' Counsel (OCC) argues that the  X-Commission's sole authority to grant exceptions is the forbearance authority in Section 10,>2X% yO-ԍ47 U.S.C.  160(a).> and that the IXCs have not attempted, and will not be able, to demonstrate that forbearance  X-will not lead to discrimination against rural customers and is in the public interest.3 % yO= -ԍAlaska Comments at 5 ("without actual experience under the new statutory scheme, the Commission cannot reasonably make the findings necessary to forbear from enforcing geographic rate averaging"), Reply Comments at 2; Hawaii Comments at 1213, Reply Comments at 11; RTC Reply Comments at 7; United States Telephone Association Reply Comments at 23; OCC Comments at 4 n.4.  Xv-x19.` ` The OCC and the RTC strongly urge the Commission to require carriers to  X_-make available and advertise promotional plans throughout their service areas.N4_% yO-ԍOCC Comments at 5; RTC Comments at 14.N The  XH-Telecommunications Resellers Association (TRA) opposes such a requirement.>5H` % yOY-ԍTRA Comments at 2930.>  X -x` `  c.Discussion  X -x20.` ` As discussed above, Section 254(g) and our geographic rate averaging rule will require carriers to charge subscribers in rural and highcost areas rates for telecommunications services that are no higher than rates offered to urban subscribers. The Commission's current policy as reflected in AT&T tariffs, however, has permitted AT&T to offer contract tariffs, Tariff 12 offerings, optional calling plans, and temporary promotions, subject to some limitations. Contract tariffs and Tariff 12 offerings generally involve discounts from basic rate schedules. Optional calling plans offer customers discounts from basic rate schedules, subject to terms and conditions specified in the optional calling plan. Temporary promotions involve discounts from basic rate schedules as well as limited signup periods for the promotional discount rates. As noted, we have also permitted AT&T to offer private line services at geographically deaveraged rates. AT&T rates for private line services vary from LATA (Local Access and Transport Area) to LATA, continuing pricing practices that AT&T  X-has historically used in setting rates for private line services.6 % {Oy"-ԍSee, e.g., AT&T Tariff FCC No. 11, 3d revised page 23 (eff. April 23, 1994).  X-x21.` ` The legislative history of Section 254(g) states that Congress intended that section to "incorporate" our existing policy concerning geographic rate averaging, and "that" 60*&&aao" the Commission, where appropriate, could continue to authorize limited exceptions to the general geographic rate averaging policy using the [forbearance] authority provided by new  X-section 10 of the Communications Act."K7% yOK-ԍJoint Explanatory Statement at 132.K Therefore, we will conduct a forbearance analysis to determine whether we should permit IXCs to depart from geographic rate averaging where we have permitted them to do so under current policy.  Xv-x22.` ` We do not believe that our current policy of allowing carriers to offer contract tariffs and Tariff 12 options conflicts with geographic averaging because we require that these offerings be available to similarly situated customers throughout the carrier's service area. The legislative history to Section 254(g), however, indicates that the conferees viewed contract tariffs and Tariff 12 offerings, at least to some extent, as permissible exceptions to  X -geographic rate averaging that could be authorized through forbearance.8 X% {O -ԍSee id. ("The conferees are aware that the Commission has permitted interexchange carriers to offer nonaveraged rates for specific services in limited circumstances (such as services offered under Tariff 12 contracts), and intend that the Commission, where appropriate, could continue to authorize limited exceptions to the general geographic rate averaging policy using the [forbearance] authority provided by new section 10 of the Communications Act [codified at 47 U.S.C.  160]."). Accordingly, our forbearance analysis will encompass contract tariffs and Tariff 12 offerings to ensure that our requirements implementing Section 254(g) are consistent with congressional intent.  X -x23.` ` Section 10 requires the Commission to forbear from applying any provision of the Act if we find that:  Xb-Xx(1)` ` enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations, by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory;   X-Xx(2)` ` enforcement of such regulation or provision is not necessary for the protection of consumers; and   X-Xx(3)` ` forbearance from applying such provision or regulation is consistent  X-with the public interest.9 % yON!-ԍ#Xj\  P6G;ynXP#The Communications Act of 1934,  10(a), 47 U.S.C.  160(a).#x6X@`7 X@#ľ  In addition, the Commission, in making its public interest determination, must "consider whether forbearance from enforcing the provision . . . will promote competitive market conditions, including the extent to which such forbearance will enhance competition among"7 90*&&aa"  X-providers of telecommunications services.":% yOy-ԍ#Xj\  P6G;ynXP#Id. at  10(b), 47 U.S.C.  160(b).#x6X@`7 X@#ī  X-x24.` ` We do not believe that permitting carriers to depart from geographic rate averaging to the extent necessary to offer contract tariffs, Tariff 12 offerings, optional calling plans, temporary promotions, and private line services in accordance with our current policy will subject rural and highcost area customers to unjust or unreasonable, or unjustly or unreasonably discriminatory, rates because: (1) we will continue to require carriers to make  X_-these services generally available under our current rules (e.g., contract tariffs and Tariff 12 offerings must be available to similarly situated customers) regardless of their geographic location, and (2) the only "geographicallyspecific" discounts that carriers may offer are temporary promotions. Thus, except for temporary promotions and private line services, interexchange telecommunications service offerings will be available on the same terms throughout a carrier's service area. In addition, we do not believe based on the record that  X -allowing geographically deaveraged private line rates will produce unjust or unreasonable or unjustly or unreasonably discriminatory rates, as it is our current practice and has not raised  X -such concerns. Thus, we find that enforcement of the geographic rateaveraging requirement for contract tariffs, Tariff 12 offerings, optional calling plans, temporary promotions, and private line services is not necessary to ensure that charges, practices, and classifications are just and reasonable and not unjustly and unreasonably discriminatory.  X6-x25.` ` Enforcement of the geographic rateaveraging requirement for these services is also not necessary to protect consumers because these service offerings are generally beneficial to consumers. For example, promotions, optional calling plans, and discounts facilitate introduction of new and beneficial services to consumers. Indeed, we are particularly concerned that carriers will cease to offer such service offerings, to the clear detriment of all consumers, unless carriers are permitted to offer them for a limited time on a narrower scale than throughout their entire service areas. We believe that the limited scope and nature of promotions offered on a geographically specific basis will protect consumers and that, to the extent that these service offerings promote new services, consumers will benefit, including rural customers. We also believe that it is not necessary to apply geographic averaging to private line services, contract tariffs, and Tariff 12 offerings to protect residential consumers because these services are normally provided to businesses. Business consumers benefit from these services because in many cases the services are provided at discounted rates. Thus, we conclude that enforcement of the geographic rateaveraging requirement for contract tariffs, Tariff 12 options, optional calling plans, temporary promotions, and private line services is not necessary to protect consumers.  X!-x26.` ` Finally, we believe that forbearance from applying the geographic rate  X"-averaging requirement to the extent permitted under our rules is consistent with the public  X#-interest. We come to this conclusion because we believe that allowing deaveraged rates , such"# X:0*&&aae""  X-as for temporary promotions, will ultimately benefit consumers by encouraging widespread offerings of new services. Moreover, it has been our practice to allow these exceptions to our existing policy, and we have no reason to believe this current practice is contrary to the public interest. In addition, excepting these specific types of service offerings from the geographic rate averaging requirement will continue to stimulate competition for customers among  X-interexchange carriers. Limited departures from geographic rate averaging, such as for private  Xv-line services and temporary promotions available only in some areas, are often designed to spur, or respond to, competition. For example, interexchange carriers often offer promotional  XH-discounts as a response to competition within the interexchange market.q;JH% yO -ԍ#Xj\  P6G;ynXP#See In re Motion of AT&T Corp. to be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271,  tM -3312,  78 (1995) (AT&T NonDominance Order) ("MCI and Sprint frequently initiate new discount plans and . . .  tMJ -AT&T responds.").q For these reasons, we conclude that limited forbearance from applying the geographic rate averaging requirement to contract tariffs, Tariff 12 offerings, temporary promotions, and private line services is consistent with the public interest.  X -x27.` ` Accordingly, we forbear from applying Section 254(g), consistent with the intent of Congress, to the extent necessary to permit carriers to depart from geographic rate averaging to offer contract tariffs, Tariff 12 offerings, optional calling plans, temporary promotions, and private line services in accordance with our policy as previously applied to AT&T. As with current policy, we will require carriers to offer the same basic service package to all customers in their service areas, and permit carriers to offer contract tariffs, Tariff 12 offerings, and optional calling plans provided they are available to all similarly situated customers, regardless of their geographic location. We will permit carriers to offer promotions that may be "geographically limited," provided that the promotions are temporary, as discussed further below.  X-x28.` ` These requirements are fully consistent with the Commission's past practices. Contrary to the claims of some IXCs, we have not in the past exempted from our geographic rate averaging policy entire groups of services, such as contract tariffs, negotiated arrangements, or optional calling plans, where carriers offer discounted rates on a permanent or longterm basis. The record is clear, in fact, that we have required optional calling plans to be generally available throughout a carrier's service area and prohibited geographic restrictions in contract tariffs because a service package that is available to only one customer  X7-"unreasonably discriminates among similarly situated customers," and is therefore unlawful.<^7% {O!-ԍIn re AT&T Communications, Memorandum Opinion and Order, 4 FCC Rcd 4932, 4938 (1989), rev'd and  {O"-remanded on other grounds, MCI Telecommunications Corp. v. FCC, 917 F.2d 30 (D.C. Cir. 1990); see also In  {OV#-re Competition in the Interstate Interexchange Marketplace, Report and Order, 6 FCC Rcd 5880, 5901 (1991). The only type of geographic restriction in a contract tariff that we have permitted is one that is necessary because of technical limitations imposed by a LEC's switching equipment or" <0*&&aa="  X-billing capabilities, or where the underlying basic service is limited.r=% {Oy-ԍSee, e.g., In re AT&T Communications, 4 FCC Rcd at 4938.r  X-x29.` ` As stated, we believe that temporary promotions benefit consumers because they facilitate the introduction of new services. We have permitted temporary promotions in the past for these reasons, and believe that Congress intended us to continue to do so. We conclude, however, that "temporary" promotions should, in fact, be temporary and not the basis for repeated offerings by carriers. Before AT&T was found nondominant for purposes  X_-of interexchange service,b>_Z% {Oj -ԍSee AT&T NonDominance Order, 11 FCC Rcd 3271.b we proposed to keep promotional rates outside of price caps as  XH-long as they were offered for no longer than 90 days.?H% {O -ԍSee, e.g., In re Policy and Rules Concerning Rates for Dominant Carriers, Further Notice of Proposed Rulemaking, 10 FCC Rcd 7854, 7865  53 (1995). Further, we find that a 90day period in which customers may receive discounted rates as part of a promotion is sufficient time for a targeted promotional offering to attract interest in new or revised services, but not so long as to undermine our geographic rate averaging requirement. Accordingly, even though AT&T  X -has tariffed longer promotions in the past,@" F% {O-ԍSee, e.g., Tariff 1,  8.1.1.745 (3month discount period); Tariff 27,  21.1.1.A.99 (6month discount period); Tariff 27,  21.1.1.B.43 (9month discount period); Tariff 27,  21.1.1.A.85 (discount periods ranging from 3 to 12 months); Tariff 1,  8.1.1.747, 8.1.1.979 (12month discount period); Tariff 27,  21.1.1.A.24 (24month discount period). we believe this length of time for temporary promotions not available throughout a carrier's service area best implements the statutory mandate for geographic averaging. Further, rather than specifying a range of permissible combinations of signup and discount periods, we believe that specifying a single time period for promotional discounts will facilitate administration of Section 254(g) and our implementing rules.  XK-x30.` ` We will therefore permit carriers, as part of temporary promotions not available throughout a carrier's service area, to offer discounted promotional rates for no more than 90  X-days.A0 % yO-ԍCarriers that wish to provide promotions that effectively last more than 90 days must seek a waiver under Section 1.3 of our rules. We will not at this time establish limits on the duration of signup periods for promotions, but we expect them to be relatively brief. We can review at a later time specific carriers' practices in this regard if necessary. We also expect that carriers' temporary promotions will not, when viewed over a number of years, reflect a pattern of undue discrimination against rural or highcost areas. Thus, we expect that, viewed over time, temporary promotions will be offered in rural and highcost areas, as well as to urban customers. We find it unnecessary to adopt advertising requirements concerning discounts" A0*&&aaQ" and promotions. We believe that consumers will be protected as long as longterm discounts and promotions are available to all similarly situated customers throughout a carrier's service area.  X-x` ` 3. Forbearance in Competitive Conditions  Xv-x` `  a.Background  XH-x31.` ` The NPRM sought comments on whether the Commission should forbear from enforcing geographic rate averaging in certain "competitive conditions," such as in lowcost regions where nationwide providers of interexchange service could be at a competitive  X -disadvantage with an RBOC unless they are permitted to offer regional discounts.?B % yO| -ԍNPRM  69 and n.154.?  X -x32.` ` As explained above, Section 10 of the 1934 Act requires the Commission to forbear from applying any regulation or provision of the Communications Act if the Commission determines that:  Xy- XxX` ` (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or service are just and reasonable and are not unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or  X-regulation is consistent with the public interest.;CX% yO-ԍ47 U.S.C.  160.; `  X-x` `  b.Comments  X-x 33.` ` All commenting IXCs and one LEC (BellSouth) urge the Commission to  X|-forbear from applying its proposed rate averaging rules in competitive conditions.D|% yO-ԍAT&T Comments at 2832, 33; MCI Comments at 2930; Sprint Comments at 1014; LDDS WorldCom  {O-Comments at 14; BellSouth Comments at 58; see also America's Carriers Telecommunications Association Comments at 8 (supports forbearance to ensure that "no carrier will be required to provide averaged pricing where its costs are not also averaged."); TRA Comments at 30 (competitive considerations argue against an "overly broad interpretation" of rate averaging, but not specifically urging forbearance); Florida Public Service Commission Comments at 14 (Commission's rate averaging proposal should be narrowed). Several IXCs argue that the Commission should forbear from enforcing rate averaging with respect to"eb D0*&&aa"  X-all nondominant carriers in the interstate interexchange market.E% {Oy-ԍSee AT&T Comments at 3334; Cable and Wireless Comments at 5 n.9; LDDS WorldCom Reply Comments at 12. MFS Communications more narrowly urges the Commission to exempt from rate averaging carriers with less than 5 percent of the sum total of access lines and presubscribed lines nationwide, because such providers often serve select, highcost areas and lack the nationwide base that larger providers can use to recoup these costs. MFS Comments at 9. IXCs assert that the  X-Commission's rigid enforcement of its rate averaging policy will lessen competition.}F"z% {O-ԍSprint Comments at 13; AT&T Reply Comments at 2021; see also TRA Comments at 30 ("IXCs which operate nationally would be unable to compete effectively in that RBOC region under a strict geographic averaging/rate integration regime because they could not lower their prices to match the RBOCs without pricing belowmarket elsewhere.").} They  X-contend that forbearance for nondominant carriers is justified, if not required.WGd % {O -ԍSee, e.g., AT&T Comments at 3134 & n.58.W  X-x!34.` ` IXCs, BellSouth, and the Florida Public Service Commission (PSC) argue that a nationwide carrier will be unable to compete with a BOC in a regional market characterized by lowcost interexchange services unless the Commission forbears with respect to geographic  X_-rate averaging, i.e., permits the IXC to offer a price that is below the national average.H"_ % {O-ԍId. at 2930, 40; Sprint Comments at 1114; LDDS WorldCom Comments at 14; MCI Comments at 30 n.47, 32; BellSouth Comments at 56 (averaging rules would prohibit a legitimate competitive response, such as lowering prices); Florida PSC Comments at 14 (rate averaging should be based on the LECs "inregion" area to permit IXCs to take advantage of lower access rates that may be offered in a particular region). AT&T notes that because access charges in some regions are approximately 10 percent below the national average, a LEC offering interexchange service from such a lowcost region would  X -have a substantial market advantage.6ID % {O-ԍAT&T Comments at 30 n.55; see also MCI Comments at 2728 n.42 (access charges in some regions were  {Ow-47 cents per minute while MCI's highest tariffed rate was 33 cents per minute). But see NYNEX Reply Comments at 15 (LECs lowered access charges but AT&T's rates rose; thus, access charges are irrelevant to rate averaging). AT&T urges the Commission to delay issuing this rulemaking until it is able to overhaul its access charge mechanisms completely and achieve lower and more uniform rates. AT&T Comments at 3435. Alaska responds that Congress adopted Section 254(g) knowing that access costs varied among regions, and argues that "the Commission simply does not have the authority to do what these parties suggest." Alaska Reply Comments at 9.6 AT&T argues that it would be unable to compete with  X -a LEC in a lowcost area.=J % yO!-ԍAT&T Comments at 30. = Thus, AT&T concludes that rigid rate averaging would force nationwide IXCs (and their customers) to make a difficult and unfair choice: "either the carrier must abandon high cost areas in order to compete effectively against regional IXCs in low cost areas, or abandon low cost areas and charge higher prices to customers in rural and high cost areas. Either way, each group of customers faces less competition and higher" |J0*&&aa "  X-prices."1K% {Oy-ԍId.1 America's Carriers Telecommunication Association (ACTA) and MFS also ask us to forbear in competitive conditions, arguing that small regional providers of interexchange service in highcost areas would be unable to compete with nationwide carriers that can  X-charge lower rates by spreading their costs over a larger customer base.LzZ% {O-ԍSee ACTA Comments at 79 (arguing that the access charges interexchange providers pay vary, that rate averaging would disproportionately burden smaller carriers serving highcost areas, and that the Commission should account for these concerns in its rules, require access charges and other provider costs to be averaged, or forbear); MFS Communications Comments at 810 (arguing that the Commission should forbear from applying rate averaging requirements to carriers with less than 5 percent of the nation's access and presubscribed lines because such carriers have smaller customer bases over which to spread their costs, which are often higher than those of larger carriers, frequently because of high access charges in lowvolume markets).  X-x"35.` ` Alaska, Hawaii, the United States Telephone Association (USTA), the RTC,  Xv-and the OCC strongly oppose forbearance based on the existence of competitive conditions.MXv% yO-ԍAlaska Comments at 45, Reply Comments at 2; Hawaii Comments at 1213, Reply Comments at 1011; USTA Reply Comments at 24; RTC Comments at 811, Reply Comments at 57; OCC Comments at 4 n.4, Reply Comments at 9. Hawaii and the RTC argue that, since all IXCs are nondominant, if the Commission exempts nondominant carriers, no carriers would be required to average interexchange rates a result  X1-that Congress could not have intended.NX1 % yO-ԍHawaii Reply Comments at 2223; RTC Reply Comments at 23 ("this preposterous suggestion would necessarily negate section 254(g), treating the mandate as if Congress had irrationally enacted it only to have it abandoned without implementation.").  X -x#36.` ` Hawaii and Alaska also argue that a competitive conditions exemption would be contrary to the Act's intent, which was to balance the goal of promoting competition with  X -other goals such as universal service.bO % yOb-ԍHawaii Reply Comments at 14; Alaska Reply Comments at 34.b Hawaii and Alaska further claim that AT&T  X -overstates the threat of regional competition.eP l% yO-ԍHawaii Reply Comments at 1415; Alaska Reply Comments at 56.e They argue that large nationwide carriers are unlikely to give up their national markets or fail to compete in regional markets because the IXCs have economies of scale and other incentives that offset any regional differences in  Xy-access charges.`Qy% yO&#-ԍAlaska Reply Comments at 5; Hawaii Reply Comments at 15.` Hawaii questions whether AT&T would abandon highcost markets, given  Xb-the potential loss of the goodwill that AT&T now gains from offering nationwide service.DRb% yO%-ԍHawaii Reply Comments at 15.D "bR0*&&aa" Supporters of rate averaging also claim that exempting IXCs on a regional basis would create  X-a loophole that would effectively nullify Section 254(g).S% {Ob-ԍId. at 22 ("it is difficult to imagine how the Commission could define a competitive situation so precisely that exceptions based on such situations would not begin to swallow the rule"); OCC Reply Comments at 9.  X-x$37.` ` Hawaii and USTA further argue that the Commission would not be able to  X-justify forbearance under the threepart analysis required by Section 10 of the 1934 Act.aT"% yOw-ԍHawaii Reply Comments at 34; USTA Reply Comments at 24.a Hawaii asserts that "competition is only one of several considerations under Section 10's forbearance test, and in no case can broad claims about promoting competition alone justify  X_-forbearance in these circumstances."U"_% {O -ԍHawaii Reply Comments at 3; see also Alaska Reply Comments at 4 ("if competition was the 'be all and end all' of telecommunications policy, there would be no section 254(g), there would be no universal service provisions in the Telecommunications Act, and there would be no need for the Commission to do anything other than allocate spectrum."). TDS Telecommunications Corporation argues that forbearance from rate averaging "would fly in the face of the Act's universal service  X1-principles and rate averaging policy and ignore the bidding of Congress."V1% {O~-ԍTDS Telecommunications Corporation Comments at 5; see OCC Reply Comments at 9 (deaveraging would "deprive rural and high cost customers of the assurances mandated by Congress.") USTA contends that Congress would not share the IXCs' apparent view that the public interest would be served by permitting interexchange carriers to discriminate against rural consumers by  X -charging them higher rates.W" % {O-ԍUSTA Reply Comments at 3; see also RTC Comments at 910 (deaveraging would dramatically harm rural consumers because calls to doctors, emergency services, and schools are often longdistance calls); John Staurulakis Inc. Comments at 23 (OPASTCO study concluded that deaveraging would increase rural customers' monthly charges by $7.44 for interstate toll calls and by $10.99 for intrastate calls).   X -x` `  c.Discussion  X-x%38.` ` We are not persuaded that we should establish an exception to our general rate averaging rule based on the existence of competing regional carriers that may be able to offer lower rates for interexchange services because of lower access charges or other costs. To establish such an exception we would need to forbear under Section 10 of the 1934 Act. As noted previously, we must forbear from applying any provision of the 1934 Act, as amended, when (1) enforcement of that provision is unnecessary to ensure that the relevant charges and practices are just and reasonable and not unjustly or unreasonably discriminatory; (2) enforcement of that provision is unnecessary to protect consumers; and (3) forbearance from applying the provision is consistent with the public interest. "W0*&&aa"Ԍ X-x&39.` ` Commenters have failed to justify this exception under Section 10 because they have based their claims entirely on generalized assertions of the alleged need for a competitive exception to geographic averaging requirements. With respect to the first prong of the forbearance test, we believe that establishing a broad exception to Section 254(g) for lowcost regions entails a substantial risk that many subscribers in rural and high cost areas may be charged more than subscribers in other areas. Accordingly, we cannot conclude that enforcing our rate averaging requirements is unnecessary to ensure just and reasonable and nondiscriminatory charges for subscribers. We also see no basis in the record to conclude that it is unnecessary to enforce Section 254(g) to ensure protection of consumers. We are concerned that widespread deaveraged rates for interexchange services could produce unreasonably high rates for some subscribers. Further, commenters have not made a persuasive case that our geographic rate averaging requirement may compel them to abandon service in some areas. Finally, we believe that, as part of our initial implementation of Section 254(g), it is not in the public interest to create the broad exception urged by commenters. Accordingly, we conclude that commenters have not justified forbearance to create a competitive exception to geographic rate averaging. We also will not forbear from enforcing our rate averaging policy against nondominant carriers. We note that Congress knew at the time the 1996 Act was passed that all IXCs were nondominant and we find that Congress would not have required us to adopt rules to implement geographic rate averaging if it had intended us to abandon this policy with respect to all IXCs so soon after enactment.  X-x'40.` ` We are also not persuaded that we should forbear for smaller carriers serving highcost areas on the grounds that they might have difficulty competing against nationwide carriers. These carriers have provided only conclusory allegations of harm and have not shown that they will be unable to compete with larger carriers in a rateaveraged environment, much less that they have satisfied all three of the requirements set forth in Section 10 for exercise of our forbearance authority. Thus, these carriers, like the nationwide carriers, have failed to justify forbearance on this record.  Xe-x(41.` ` We also reject AT&T's suggestion that we delay implementing Section 254(g) until access charges are lower and more cost based. We believe that Congress was fully aware of geographic differences in access charges when it adopted Section 254(g), and  X -intended us to require geographic rate averaging even under these conditions.X % yO-ԍThe Commission recognizes the importance of access charge reform and is committed to completing a proceeding on that issue by the first part of 1997, consistent with the statutory deadlines established for the  {O)!-Section 254 Universal Service rulemaking. See In re Implementation of the Local Competition Provisions in the  {O!-Telecommunications Act of 1996, Report & Order, CC Docket No. 9698, at Section VII (adopted Aug. 1, 1996). Moreover, nothing in the text or legislative history of Section 254(g) suggests that the Congress intended to delay implementation of the geographic rate averaging requirement. "|X0*&&aa"Ԍ X-xB.` ` STATE AUTHORITY  X-x` ` )1.  Background  X-x)42.` ` We noted in the NPRM that, although the statute requires the Commission to adopt rules to require geographic rate averaging for intrastate and interstate interexchange  Xv-services, the statute does not appear to foreclose consistent state action in this area.5Yv% yO-ԍNPRM  68.5 We noted that the Senate Report states that "States shall continue to be responsible for enforcing [intrastate geographic rate averaging], so long as the State rules are not inconsistent with" the  X1-regulations the Commission adopts.Z1X% yO: -ԍS. Rep. No. 23, 104th Cong., 1st Sess. 30 (1995) (Senate Commerce Committee report to accompany S.652).  X -x` ` 2. Comments  X -x*43.` ` The Alabama PSC, Florida PSC, Louisiana PSC, Missouri PSC, Pennsylvania Public Utility Commission (PUC), and Washington Utilities and Transportation Commission (UTC) support the Commission's proposal to preempt state laws requiring geographic rate averaging only to the extent they are inconsistent with regulations the Commission may  Xy-adopted regarding geographic rate averaging.[y% yO-ԍAlabama PSC Comments at 8 (intrastate rates would have to be consistent with the Commission's rate averaging policy); Florida PSC Comments at 1314 (States should have the flexibility to execute state policies designed to meet the spirit of the Act); Louisiana PSC Comments at 24; Missouri PSC Comments at 1 (States retain jurisdiction over intrastate matters); Pennsylvania PUC Comments at 1416; Washington UTC Comments at 3 (requires statewide toll averaged rates). The National Association of Regulatory Utility Commissioners (NARUC) believes that the issuance of a preemptive Commission rule  XK-is not required by the express terms of the statute.<\K` % yO\-ԍNARUC Comments at 3.< NARUC asserts, however, that to the extent the Commission does mandate preemption, the statute does not foreclose consistent  X-state action in this area.] % {O-ԍId; see also GTE Comments at 1415; Sprint Comments at 17 n.7; TCA Comments at 3 (FCC preemption is not necessary "as long as state rules require toll rate averaging"). MCI states that the Commission's proper role is to issue guidelines  X-for the states and "preserve the federal approach if any state action is inconsistent therewith."^J % yO#-ԍMCI Comments at 29 (noting also that Congress did not amend the Commission's jurisdiction under 47 U.S.C.  152, which is limited to "all interstate and foreign communication").  X-x+44.` ` AT&T argues that states should not be prohibited from requiring rate averaging"^0*&&aa" "on a less than statewide basis," so that the states may establish "multiple contiguous 'rate  X-zones' that associate urban and rural areas which have logical relationships with each other."C_% yOb-ԍAT&T Comments at 42 & n.74.C  X-The New York Department of Public Service (New York DPS) agrees.I`X% yO-ԍNew York DPS Reply Comments at 1.I  X-x,45.` ` LDDS WorldCom argues that the Commission's rules should "prevent the  X-appearance of an untenable patchwork of inconsistent state requirements."a% {O& -ԍLDDS WorldCom Comments at 13. But see OCC Reply Comments at 8 n.9 (Act is "not intended to require that intrastate interexchange rates be uniform between states"); GTE Comments at 1517. The RTC claims that if States do not adopt rate averaging requirements within the same deadline imposed by Congress on the Commission, "the Commission's rules should also act as the intrastate  XH-averaging requirement for IXCs operating in that state."DbHB% yO;-ԍRTC Comments at 1415. D  X -x` ` 3.  Discussion  X -x-46.` ` We conclude that Congress did not intend in Section 254(g) to eliminate state authority over intrastate rates. To the contrary, we conclude that Congress intended the states to play an active role in enforcing Section 254(g) with respect to intrastate geographic rate averaging. States have a role in ensuring that rates for intrastate interexchange calls offered to rural and highcost customer are no higher than those paid by urban customers. We believe that intrastate rate structures that are based on reasonable mileage bands will meet this requirement because that is the method traditionally used by carriers to offer geographically averaged rates. Thus, for example, carriers offering intrastate interexchange service may charge different intrastate rates for a call of 100 miles in Texas than for a call of the same distance in Virginia, pursuant to individual state decisions. Further, we find, as proposed in the NPRM, that states are free to establish intrastate rates, as long as they are not inconsistent with the rules we adopt in this proceeding. We will not, however, permit states to establish special rate zones within states because we believe that would result in geographically deaveraged rates in violation of Section 254(g). Section 254(g) requires that rates be no higher in any rural or highcost area than they are in any urban area. To the extent that AT&T proposes to associate some, but not all, rural areas with certain urban areas, we presume that some rural areas will experience higher rates than some urban areas, in violation of the statute. Because AT&T has not addressed this apparent flaw in its proposal for rate "zones," we reject the proposal. We also conclude that, because the Joint Explanatory Statement provides that states may not adopt rules that are inconsistent with the rules we establish in this proceeding, states will not be able to permit deaveraged rates in special rate zones absent forbearance by the Commission. " b0*&&aay"Ԍ X-ԙxC.` ` RATE INTEGRATION  X-x` ` .1. General Rule  X-x` `  .a. Background  Xv-x.47.` ` As noted, Section 254(g) requires that "a provider of interstate interexchange services shall provide such services to its subscribers in each State at rates no higher than the rates charged to its subscribers in any other State." This is referred to as rate integration. The Commission has a wellestablished policy of rate integration. Since 1972, the Commission has required any carrier that provides domestic interstate interexchange service between the contiguous fortyeight states and various offshore points to integrate its rates pursuant to a plan to integrate the carrier's rates and services for offshore points with its rates  X -for similar services on the mainland.c % {ON-ԍIn re Establishment of Domestic CommunicationsSatellite Facilities, Second Report and Order, 35 FCC 2d 844, 85666  3536 (1972) (conditioning domestic satellite authorization for message telephone service on integration of Alaska, Hawaii and Puerto Rico into the uniform milage rate pattern of the contiguous states, perhaps by extending the last mileage step to reach those distances, or by creating a new mileage step with a  {Op-proportionate increase in rates), aff'd on recon., Memorandum Opinion and Order, 38 FCC 2d 665, 69596  {O:-(1972), aff'd sub nom. Network Project v. FCC, 511 F.2d 786 (D.C. Cir. 1975). In 1976, the Commission required carriers that offered message toll, private line, and specialized services to or from Alaska, Hawaii, Puerto Rico, and the Virgin Islands to integrate their rates for those services into the rate structures and  X-uniform mileage rate patterns applicable to the mainland.d~F% {O-ԍIn re Integration of Rates and Services, Memorandum Opinion, Order and Authorization, 61 FCC 2d 380, 392 (1976) (ordering AT&T to implement full rate and service integration for all services it provides Hawaii,  {O-Alaska, Puerto Rico and the Virgin Islands); In re Integration of Rates and Services, Memorandum Opinion, 62  {O-FCC 2d 693, 695 (1976) (declining to limit rate integration requirements to certain services); In re Application of GTE Corp. and Southern Pac. Co. for Consent to Transfer Control of Southern Pac. Satellite Co., Memorandum Opinion and Order, 94 FCC 2d 235, 26263 (1983) (conditioning GTE's acquisition of Southern Pacific Satellite Co. upon integration of Hawaii). This policy required IXCs to lower their rates in the newly integrated areas to levels comparable to those prevailing in the  Xb-mainland for interexchange calls of similar distance, duration, and time of day.e"b % {O-ԍIn re Referral of Questions from General Communications Inc. v. Alascom Inc., Memorandum Opinion and Order, 2 FCC Rcd 6479, 6481 (1987) ( "The rate integration policy was developed to provide, in phased reductions, interstate MTS and WATS service to and from Alaska at rates comparable to those prevailing in the contiguous states for calls of similar distance, duration, and time of day."). We  XK-reaffirmed our commitment to rate integration as recently as the AT&T Reclassification Order, stating that: XxX` ` [t]he Commission has long supported the polic[y] of ... rate integration between the contiguous fortyeight states and various noncontiguous"ve0*&&aa" U.S. regions, including Alaska, Hawaii, Puerto Rico and the U.S. Virgin  X-Islands. We remain committed to [that] polic[y].f% {Ob-ԍSee In re Motion of AT&T Corp. to be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271, 3330 (1995) (AT&T NonDominance Order). `  X-x/48.` ` In the NPRM, we noted that the legislative history of the 1996 Act indicates that Congress intended us to incorporate into our rules the policy contained in the 1976  X-Integration of Rates and Services Order.5g"% yO` -ԍNPRM  76.5 We proposed to implement Section 254(g) by adopting a rule stating that "a provider of interstate interexchange telecommunications services shall provide such services to its subscribers in each State at rates no higher than the rates  XJ-charged to its subscribers in any other State."1hJ% {O -ԍId.1  X -x` `  b.Comments  X -x049.` ` Alaska and Hawaii contend that the 1996 Act codifies the Commission's  X -established rate integration policy and applies it to all interexchange carriers and services.gi D% yO-ԍAlaska Comments at ii, 89; Hawaii Comments at iii, 12, 67. g They argue that the Commission should promulgate rules formalizing its prior  X -pronouncements on rate integration.aj % yO.-ԍAlaska Comments at ii, 89; Hawaii Comments at iii, 12.a They also contend that the Commission should not  X-forbear in any respect from enforcing rate integration.[kd % yO-ԍAlaska Comments at 10; Hawaii Reply Comments at 18.[  Xd-x150.` ` IXCs urge the Commission to forbear from applying rate integration to  XM-nondominant IXCs, or to IXCs in competitive conditions.slM % yO-ԍAT&T Comments at 3342; Sprint Comments at 25; MCI Reply comments at 2122.s AT&T, for example, argues that the Commission should maintain flexible integration rules with exceptions, or should forbear  X-from requiring rate integration in certain circumstances.fm % yOT!-ԍAT&T Comments at 3242.#x6X@`7 X@#f Sprint argues the Commission should move cautiously before issuing its rate integration policy to ensure that the new rules  X-do not inhibit competition or cause IXCs to withdraw services.>n% yO$-ԍSprint Comments at 24.> If the Commission chooses not to forbear, Sprint contends that integration rules should only require carriers to integrate"n0*&&aa&" "offshore" points into at least one unified rate structure for a particular service, perhaps by  X-adding one or more mileage bands.;o% {Ob-ԍId. at 2526.; ACTA, Columbia Long Distance Services Inc. (CLDS), GTE, and IT&E urge the Commission to forbear from applying rate integration to small providers of interexchange service in highcost areas, arguing that they would be unable to compete with nationwide carriers that can charge lower rates by spreading their costs over a  X-larger customer base.pBZ% {O-ԍSee ACTA Comments at 1011 (stating that rate integration would disproportionately burden smaller carriers serving highcost areas, and that the Commission should account for these concerns in its rules or forbear); CLDS Comments at 79 (arguing that integration's belowcost rates would discourage new carriers from entering the Guam and Northern Marianas markets); GTE Comments at 21 (arguing that small regional carriers with a limited calling base and high costs would have difficulty competing under integration against carriers with lower costs and larger customer bases over which to spread these costs); IT&E Comments at 2021 (arguing that larger carriers can spread the costs for service to Guam and the Northern Marianas among their customers nationwide, but smaller carriers will be unable to subsidize belowcost rates mandated by rate integration).  X_-x251.` ` American Mobile Satellite Carriers Subsidiary Corp. (AMSC) points out that the Commission permitted it to charge higher rates for mobile satellite services to Alaska and Hawaii than for similar services in the mainland U.S. because the costs of mobile satellite service vary, unlike fixed satellite costs, and that it should be permitted to continue to do  X -so.q d % {O-ԍAMSC Comments at 23 (citing In re AMSC Subsidiary Corp., Order, 8 FCC Rcd 2871 (1993)).  X -x` `  c.Discussion  X -x352.` ` To implement the statutory requirements of Section 254(g), we will adopt our proposed rule that "a provider of interstate interexchange telecommunications services shall provide such services to its subscribers in each State at rates no higher than the rates charged to its subscribers in any other State." As with geographic rate averaging, this rule will incorporate our existing policies. This rule will apply to all domestic interstate interexchange telecommunications services as defined in the 1996 Act, and all providers of such services. As with our geographic rate averaging policy, carriers may comply with this rule by establishing reasonable mileage bands for calls. We are not persuaded that we must forbear from requiring carriers to comply with rate integration, either generally or in competitive conditions, for the same reasons discussed with respect to geographic rate averaging. Our rate integration policy has integrated offshore points into the domestic interstate interexchange rate structure so that the benefits of growing competition for interstate interexchange telecommunications services, as well as regulatory and other developments concerning interstate services, are available throughout our nation. Furthermore, absent forbearance, the  Xe-statute requires us to incorporate our 1976 Integration of Rates and Services Order requiring"e q0*&&aa" geographic rate integration.  X-x453.` ` We are also not persuaded that we should forbear from applying rate integration to smaller carriers serving highcost areas on the grounds that they might have difficulty competing against nationwide carriers. These carriers have provided only conclusory allegations of harm and have not shown that they will be unable to compete with larger carriers in a rateintegrated environment, much less that they have satisfied all three of the requirements set forth in Section 10 for exercise of our forbearance authority. Thus, these  XH-carriers have failed to make a showing on this record justifying forbearance.ErH% {O -ԍSee 47 U.S.C.  160.E  X -x554.` ` We believe that AMSC is required by the plain terms of the 1996 Act to integrate the rates charged for its offshore service into the rate structure for its mainland rates. Further, as with rate averaging, we interpret Section 254(g) to extend to all providers of  X -interexchange service the rate integration policy that previously was applied only to AT&T.MsZ Z% yO-ԍOur rate integration policy also had applied to carriers that served offshore points such as GTE and  {O-Alascom.  See, e.g., In re Application of GTE Corp., 94 FCC 2d 235, 25860 & 263 (1983); In re Application of Alascom Inc., 11 FCC Rcd 732, 74348 (1995).M AMSC's services would appear to fall within the definition of interstate interexchange telecommunications services subject to Section 254(g). The decision referred to by AMSC was a Bureau decision that permitted an AMSC tariff to take effect without any finding of  Xy-lawfulness.hty|% {O-ԍIn re AMSC Subsidiary Corp., Order, 8 FCC Rcd 2871 (1993).h It did not establish any policy of excluding AMSC services from rate integration. Accordingly, we reject AMSC's arguments on this issue.  X4-x` ` 2. U.S. Territories and Possessions  X-x` `  6a.Background  X-x655.` ` In the NPRM, we noted that "State" is defined in the Communications Act to  X-include all U.S. territories and possessions.Uu% yO-ԍNPRM  77 (citing 47 U.S.C.  153(40)).U Thus, we noted that the 1996 Act extends rate integration to U.S. territories and possessions, including Guam and the Northern Marianas, because rate integration obligations apply to providers of interexchange services between  X|-"states."K vX|% yO#-ԍU.S. territories and possessions are: Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Marianas, American Samoa, Baker Island, Howland Island, Jarvis Island, Johnston Atoll, Kingman Reef, the Midway  yO[%-Atoll, Navassa Island, the Palmyra Atoll, and Wake Island. As U.S. territories and possessions, they fall within"[%u0*&&~%" the definition of "state" in the Communications Act of 1934, as amended, and carriers that serve those points are required under Section 254(g) and our rules to do so on a rateintegrated basis with service provided to other  {O -states. Of these locations, Puerto Rico and the U.S. Virgin Islands are already rate integrated. See In re  yO-Integration of Rates and Services, Memorandum Opinion, Order and Authorization, 61 FCC 2d 380, 392 (1976) (ordering AT&T to implement full rate and service integration for all services it provides to Hawaii, Alaska,  yOz-Puerto Rico and the Virgin Islands). Of the other U.S. territories and possessions, only Guam, the Northern  {OB-Marianas, and American Samoa have more than de minimis interstate interexchange telecommunications traffic  {O -that originates or terminates in the 50 states or other U.S. territories and possessions. See Industry Analysis  yO-Division, FCC, 1994 Section 43.61: International Telecommunications Data tbl. A1 (1996). xStarting in 1947, the United States administered the United Nations Trust Territories of the Pacific Islands, consisting of the Republic of Palau, the Federated States of Micronesia, the Republic of the Marshall Islands, and the Northern Marianas. In negotiations over the last decade concerning the future status of these political entities, the Northern Marianas elected commonwealth status as a territory of the United States. The Marshall Islands, Micronesia, and Palau became independent, sovereign nations on October 21, 1986, November 3, 1986, and October 1, 1994, respectively, electing to enter into a Compact of Free Association with the United  {ON -States. See 48 U.S.C.A. Ch. 14, refs. & annos.; Temengil v. Trust Territory of the Pacific Islands, 881 F.2d 647, 65051 (9th Cir. 1989). Thus, Palau, the Federated States of Micronesia, and the Marshall Islands are not "states" within the meaning of that term in the Communications Act of 1934 to which carriers would be required to provide service on a rateintegrated basis.K We proposed "to adopt a rule requiring that 'a provider of interstate interexchange"|pv0*&&aa" telecommunications services shall provide such services to its subscribers in each State at rates  X-no higher than the rates charged to its subscribers in any other State.'"dwp% yO -ԍNPRM at  76 (quoting 47 U.S.C.  254(g), as amended).d We sought comment on appropriate mechanisms to implement rate integration to U.S. Territories and  X-possessions that currently are not subject to our rate integration policy.=x% {Ol-ԍId. at  77.= In addition, on June 5, 1996, the Chief of the Common Carrier Bureau requested the governors of Guam, the Northern Marianas, and American Samoa, as well as all carriers who provide interexchange service to those locations, to submit within two weeks a plan for implementing Section 254(g)  X_-with respect to those locations.yz_% {O-ԍSee Letters from Regina M. Keeney, Common Carrier Bureau Chief, to Mark Sisk, Counsel to the Governor of American Samoa; Robert F. Kelley Jr., Advisor to the Governor of Guam; Thomas K. Crowe, Counsel for the Commonwealth of the Northern Mariana Islands; David W. Carpenter, Counsel to AT&T Corp.; Raul R. Rodriguez, Counsel to CLDS.; Gail L. Polivy, Senior Attorney for GTE Services Corp.; Margaret L. Tobey, Counsel to IT&E Overseas Inc.; Donna N. Lampert, Counsel to JAMA Corp.; Donald J. Elardo, Director of Regulatory Law for MCI Telecommunications Corp.; Eric Fishman, Counsel to PCI Communications Inc.; and Leon M. Kestenbaum, Vice President of Regulatory Affairs for Sprint Corp. (June 5, 1996.)  X1-x` `  b.Comments, Responses to Bureau Letters, and the Working Group  X -x756.` ` IXCs who offer services primarily, or exclusively, in Guam and the Northern Marianas generally support the Commission's proposed rate integration rule, but urge the" y0*&&aa "  X-Commission to delay implementing rate integration for a variety of reasons.z% yOy-ԍGTE Comments at 1314, 2122; IT&E Comments at 12, 1415; JAMA Corp. Comments at 23.  IT&E, for example, urges a delay until Guam and the Commonwealth of Northern Mariana Islands are served by domestic satellites, rather than as now by INTELSAT, which costs almost four  X-times as much as domestic satellites.{X% yO-ԍIT&E Comments at 1520; GTE Comments at 20 (monthly charges for INTELSAT are $35,880 while similar rate for domestic satellite service is $9,920). GTE contends that rate integration must be implemented slowly because its wholly owned affiliate, the Micronesian Telecommunications Company (MTC), cannot compete with nationwide providers of interexchange service that  Xv-can offer lower prices by spreading their costs over a larger customer base.L|v% {O -ԍSee, e.g., GTE Comments at 21.L CLDS asserts that rate integration for Guam and the Northern Marianas is "fundamentally inconsistent" with the Commission's rationale for requiring rate integration to Alaska, Hawaii, Puerto Rico, and the Virgin Islands, which CLDS says was the availability of domestic satellite service to those  X -points.=} B% yO -ԍCLDS Comments at 47.=  X -x857.` ` The Governor of Guam and the Guam Telephone Authority (GTA), in comments filed jointly, and the Governor of the Northern Marianas, claim that the Commission is required by statute to mandate rate integration for Guam and the Northern  X -Marianas and may not forbear from implementing that mandate.~" % yO*-ԍGuam and the GTA Joint Reply Comments at 45 (Guam Joint Reply); Northern Marianas Reply  {O-Comments at 913; see also Guam PUC Comments at 2 (rate integration critical for Guam). The Northern Marianas also notes that the Commission did not propose to forbear or seek comment on forbearance with respect to rate integration. Northern Marianas Reply Comments at 9 n.20. Guam also rejects CLDS's claim that rate integration should not be extended to Guam and the Northern Marianas because these territories are not served by domestic satellites. Guam asserts that "nothing in the [1996 Act] limits [rate integration] only to those points that can be reached by  XK-domestic satellite."K % yO-ԍGuam Joint Reply Comments at 6. Guam also notes that, in fact, Intelsat satellites provide distance insensitive service to Guam. Guam Joint Reply Comments at 7. The Northern Marianas further notes that, although the Commission has stated that the availability of domestic satellites was a "catalyst" for integrating rates to Hawaii and Alaska, the Commission explicitly held that "implementation of rate integration  X-does not, and cannot, depend on the actual use of domestic satellite facilities."% {O#-ԍNorthern Marianas Reply Comments at 8 (quoting In re Integration of Rates and Services, Memorandum Opinion, 62 FCC 2d 693, 695 (1976)). Hence, the Northern Marianas argues, the Commission has made clear that distance insensitivity is not a"n0*&&aa "  X-prerequisite for the implementation of rate integration.9% {Oy-ԍId. at 78.9  X-x958.` ` IXCs also argue that rate integration should apply only to the standard  X-interexchange service package.yZ% yO-ԍCable and Wireless Comments at 56; Frontier Comments at 89; TRA Comments at 29.y Guam and the Northern Marianas oppose this proposal.r% yOV-ԍGuam Joint Reply Comments at 8; Northern Marianas Reply Comments at 1718.r The Northern Marianas argue that the 1996 Act unambiguously requires all services provided  X-by an IXC to be subject to rate integration.Oz% yO -ԍNorthern Marianas Reply Comments at 17.O Guam claims that carriers are required to provide MTS and private line services at integrated and averaged rates, and, although carriers may offer promotions and discounts, carriers should not exclude Guam from any service that  XH-is offered on a nationwide basis.GH % yO-ԍGuam Joint Reply Comments at 8.G  X -x:59.` ` In response to the Bureau's request for rate integration plans, Guam (jointly with the GTA) and the Northern Marianas propose that the Commission adopt rate integration rules that would take effect immediately but permit providers of interexchange service to implement rate integration after Guam and the Northern Marianas become part of the North American Numbering Plan (NANP) and are provided Feature Group D's "1+" equal access  X -dialing.QZ % {O-ԍSee Letter from the Governor of Guam and the GTA to Regina M. Keeney, Chief of the Common Carrier Bureau 34 (June 20, 1996); Letter from Thomas K. Crowe, Counsel for the Commonwealth of the Northern Mariana Islands, to Regina M. Keeney, Chief of the Common Carrier Bureau 3 (June 19, 1996).Q Guam also suggests that integration take place concurrently with GTA's adoption of  X-costbased interstate access charges.] % yO-ԍLetter from the Governor of Guam, at 34.] All three events are scheduled to occur by July 1,  Xy-1997.yL % {Ov-ԍSee id. at 3 (June 20, 1996); Letter from Thomas K. Crowe, at 3 (June 19, 1996). Guam also proposes allowing carriers to offer integrated rates by expanding existing  Xb-mileage bands, creating new mileage bands, or using postalized rates.ib% {O -ԍSee Letter from the Governor of Guam, at 2 (June 20, 1996).i Furthermore, Guam suggests that the Commission designate Comsat, as well as carriers providing domestic interstate service on nonIntelsat facilities, as eligible telecommunications carriers so that they  X-can receive universal service support funding.Cp% {O>%-ԍSee id. at 67.C American Samoa believes that its "people"0*&&aae" enjoy excellent long distance service at reasonable rates," and did not submit a plan because it  X-has "concluded that [it has] already achieved the benefits of rate integration."% yOb-ԍLetter from A.P. Lutali, Governor of American Samoa, to Regina M. Keeney, Chief of the Common Carrier Bureau 12 (June 12, 1996).  X-x;60.` ` In response to the Common Carrier Bureau's request for rate integration plans,  X-none of the interexchange service providers presents detailed integration plans. % {Ou-ԍSee Letter from R. Gerard Salemme, Vice President of Government Affairs for AT&T, to Regina M. Keeney, Chief of the Common Carrier Bureau (June 19, 1996); Letter from Raul R. Rodriguez and David S. Keir, Counsel to CLDS, to Regina M. Keeney, Chief of the Common Carrier Bureau (June 21, 1996); Letter from Gail Polivy, Attorney for GTE Service Corp., to Regina M. Keeney, Chief of the Common Carrier Bureau (June 20, 1996); Letter from Margaret L. Tobey and Phuong N. Pham, attorneys for IT&E Overseas Inc., to Regina M. Keeney, Chief of the Common Carrier Bureau (June 19, 1996); Letter from Donald J. Elardo, Director of Regulatory Law for MCI, to Regina M. Keeney, Chief of the Common Carrier Bureau (June 19, 1996); Letter from Eric Fishman, Counsel for PCI Communications Inc., to Regina M. Keeney, Chief of the Common Carrier Bureau (June 19, 1996); Letter from Leon M. Kestenbaum, Vice President of Regulatory Affairs for Sprint, to Regina M. Keeney, Chief of the Common Carrier Bureau (June 19, 1996). AT&T states that it cannot do so because Guam and the Northern Marianas are not yet part of the North American Numbering Plan, and because it has not decided whether to add a new mileage  X_-band or extend its longest existing rate band.V_ % {O-ԍSee Letter from R. Gerard Salemme, at 2.V MCI states that it cannot yet provide a plan detailing exact rates and services because it does not want to disclose proposed rates to  X1-potential competitors.K1L % yO.-ԍLetter from Donald J. Elardo, at 2.K PCI and IT&E argue that the request for a rate proposal is premature because the Commission has not yet adopted rate averaging and rate integration  X -rules.o % yO-ԍLetter from Eric Fishman, at n.1; Letter from Margaret L. Tobey, at 1.o  X -x<61.` ` Sprint, MCI, and IT&E state they would integrate Guam and the Northern Marianas into their existing interstate interexchange rate structures after July 1997, when  X -Guam and the Northern Marianas are scheduled to become part of NANP. l% yO-ԍLetter from Leon M. Kestenbaum, at 2; Letter from Donald J. Elardo, at 12; Letter from Margaret L. Tobey, at 23 (June 19, 1996). Sprint states it will include Guam and the Northern Marianas by creating one or two additional mileage  Xy-bands.y% yO#-ԍLetter from Leon M. Kestenbaum, Vice President of Regulatory Affairs for Sprint, to Regina M. Keeney, Chief of the Common Carrier Bureau 2 (June 19, 1996). Sprint states that it expects to offer service at rates significantly lower than existing rates offered by other carriers, provided that the GTA lowers its access charges to levels"b0*&&aa"  X-comparable to those of similar LECs that serve subscribers on the U.S. mainland.M% yOy-ԍLetter from Leon M. Kestenbaum, at 3.M MCI states it will either extend its longest existing band or create a new band to include Guam and  X-the Northern Marianas.X% yO-ԍLetter from Donald J. Elardo, Director of Regulatory Law for MCI, to Regina M. Keeney, Chief of the Common Carrier Bureau 12 (June 19, 1996). PCI and IT&E contend that they are not subject to Section 254(g) because the statute applies only to national carriers that provide service to subscribers in  X-multiple states.QX% yO -ԍLetter from Eric Fishman, Counsel for PCI Communications Inc., to Regina M. Keeney, Chief of the Common Carrier Bureau 2 (June 19, 1996); Letter from Margaret L. Tobey and Phuong N. Pham, attorneys for IT&E Overseas Inc., to Regina M. Keeney, Chief of the Common Carrier Bureau 4 (June 19, 1996).Q PCI and IT&E also argue that in any event their current rate schedules are  X-fully integrated because they originate services only from Guam and the Northern Marianas.l% yO-ԍLetter from Eric Fishman, at 2; Letter from Margaret L. Tobey, at 4.l x  X_-x=62.` ` GTE asserts that the existing rate structure of its affiliate, MTC, already complies with rate integration because it only originates traffic from the Northern Marianas  X1-and bases its rates on the cost of routing calls through expensive international satellites.1` % yOB-ԍLetter from Gail Polivy, Attorney for GTE Service Corp., to Regina M. Keeney, Chief of the Common Carrier Bureau 7 (June 20, 1996). GTE further argues that the statutory language requiring "each such provider" to integrate rates for "its subscribers" does not give the Commission authority to require MTC to integrate  X -its rates with other affiliates of GTE.9 % {OU-ԍId. at 23.9 Instead, according to GTE, each affiliate constitutes a  X -separate provider within the meaning of the statute.1 J % {O-ԍId.1  X -x>63.` ` AT&T opposes reclassifying service to Guam, the Northern Marianas, and American Samoa as "domestic" rather than "international" because it could lead foreign carriers to claim that these locations are entry points for calls to subscribers in the United States, thereby increasing AT&T's costs for delivering those calls to destinations on the U.S.  XK-mainland.K% {O!-ԍSee Letter from R. Gerard Salemme, Vice President of Government Affairs for AT&T, to Regina M. Keeney, Chief of the Common Carrier Bureau 3 (June 19, 1996).  X-x?64.` ` On July 8 and 9, 1996, the Guam/Northern Marianas Working Group on Rate Integration, consisting of representatives of the Governors of Guam and the Northern"60*&&aaF" Marianas, and the carriers that provide interexchange service to those points, met in Washington, D.C., to discuss the implementation of Section 254(g) for services provided to  X-Guam and the Northern Marianas.% {OK-ԍSee Letter from Robert F. Kelley, Advisor to the Governor of Guam, and Dave Ecret, Special Assistant to the Governor of the Northern Mariana Islands, to William F. Caton, Secretary to the Federal Communications Commission, at Appendix A (July 9, 1996). Present were representatives from the Northern Marianas, Guam, PCI Communications Inc., the GTA, NECA, Sprint, Sprint Guam, MCI, IT&E Overseas Inc., Coopers &  {Om-Lybrand, GTE/MTC, and the Guam Public Utilities Commission. Id. at Appendix A. Although invited, AT&T  {O7-was not present. Id. Commission staff also attended the meetings as observers. The Working Group adopted seven substantive resolutions that it believes should guide rate integration for these offshore points: x` ` Rate integration should involve the incorporation of Guam and the Northern Marianas into the domestic rate pattern for message telephone service (MTS). Each provider of interstate interexchange telecommunications services should establish rates consistent with its ratemaking methodology used for that service elsewhere in the United States, in compliance with the Act;x` x` ` As far as practicable, implementation of rate integration should be contingent upon the inclusion of Guam and the Northern Marianas within the North American Numbering Plan and conversion to equal access and costbased interstate access tariffs (currently anticipated on or about 1 July 1997);x` x` ` It is not possible to determine at this time whether support mechanisms for rate integrated services will be required to meet the goals of the [1996 Telecommunications] Act. Accordingly, if required, support mechanisms should be addressed after the release of the FCC ruling on rate integration and in the context of the notice of proposed rulemaking and order establishing the Universal Service Joint Board (CC Docket No. 9645);x` x` ` Each provider of interstate interexchange telecommunications services, other than MTS, to the extent those services are offered between Guam or the Northern Marianas and any other state, should establish rates consistent with its ratemaking methodology used for those services elsewhere in the United States, in compliance with the Act;x` x` ` The implementation of rate integration should not discourage flexibility and competitive responses among interstate" F0*&&aa" telecommunications providers serving Guam or the Northern Marianas;x` x` ` Optional calling plans, promotions, or discounts will be offered to subscribers in Guam and the Northern Marianas in compliance with the Act;x` x` ` None of these Resolutions shall supersede any provisions of the Act, or limit or restrict the authority of the Federal  X1-Communications Commission under the Act.F1% {O -ԍId. at Appendix B.Fx`  X -x@65.` ` The Working Group plans to meet again in late August to continue to work towards rate integration in light of requirements adopted by the Commission to implement  X -Section 254(g).7 Z% {O-ԍId. at 2.7  X -x` `  c.Discussion  Xy-xA66.` ` In making the Section 254(g) rate integration provision applicable to interstate  Xb-interexchange services provided between "states," as defined in the Communications Act,Ib% {O-ԍSee 47 U.S.C.  153(40).I Congress made rate integration applicable to interexchange services provided to U.S. possessions and territories, including Guam, the Northern Marianas, and American Samoa. Further, rate integration applies to all interstate interexchange telecommunications services as  X-defined in the Communications Act.~% {O5-ԍSee 47 U.S.C.  153(22), as amended (defining "interstate communication"), and  153(46), as amended (defining "telecommunication service"). Accordingly, under our rate integration rule implementing 254(g), providers of interexchange service to these points must do so on an integrated basis with services they provide to other states.  X-xB67.` ` We believe that the resolutions the Working Group adopted regarding rate integration for Guam and the Northern Marianas provide a reasonable framework to guide carriers towards implementing rate integration. Thus, a carrier should establish rates for services provided to Guam and the Northern Marianas consistent with the rate methodology it employs for services it provides to other states. Similarly, to the extent that a provider of interexchange service offers optional calling plans, contract tariffs, discounts, promotions, and private line services to its subscribers on the mainland, it should use the same ratemaking methodology and rate structure when offering those services to its subscribers in Guam or the" !0*&&aay" Northern Marianas. In addition, we do not view rate integration as inconsistent with flexibility and competitive responses by carriers, although carriers must continue to comply with rate integration requirements for these offshore points. We also agree with the Working Group that cost support and universal service issues should be addressed in the first instance  X-by the Universal Service Joint Board.*Z% {O-ԍSee Letter from Robert F. Kelley, Advisor to the Governor of Guam, and Dave Ecret, Special Assistant to the Governor of the Northern Mariana Islands, to William F. Caton, Secretary to the Federal Communications Commission, at Appendix B (July 9, 1996).* Guam has specifically raised these issues in CC  X-Docket No. 9645.[% yO( -ԍGuam Reply Comments in CC Docket No. 9645, at 57.[ Accordingly, we will address those issues in the context of any Joint Board recommendation. For purposes of our decision today, however, we do not view establishment of costsupport mechanisms as a precondition of rate integration. Nor have they been justified on the present record. Thus, we reject requests that we establish, or further consider, any costsupport mechanisms in this docket.  X -xC68.` ` The Working Group resolutions urge that rate integration for services provided to Guam and the Northern Marianas should take place concurrently with, or shortly after, the inclusion of Guam and the Northern Marianas into the NANP, the implementation of Feature Group D service, and the GTA's revision to its access charge structure. All three events are expected to occur by July 1, 1997. We do not view these developments as preconditions for rate integration of services provided to these points. Rather, the statute requires rate integration regardless of whether these developments occur. However, we believe that these developments will facilitate rate integration. Inclusion of Guam and the Northern Marianas in the NANP will help carriers integrate them into their nationwide service plans. Implementation of Feature Group D will provide subscribers with highquality equal access to providers of interexchange service serving Guam. Revision of access charges by GTA will help providers of interexchange service set final rate schedules for service to and from Guam. Accordingly, we require providers of interexchange service to integrate services offered to subscribers in Guam and the Northern Marianas with services offered in other states no later than August 1, 1997. We additionally require that carriers submit preliminary plans to achieve rate integration no later than February 1, 1997, and final plans no later than June 1, 1997. These plans will permit the Commission to review progress toward achieving rate integration, as required by the 1996 Act. The preliminary plans need not include rates, but at a minimum should resolve service and rateband issues. Final plans shall include a rate schedule. Carriers may integrate these points by expanding mileage bands, adding mileage bands, offering postalized rates, or other means that achieve rate integration. We also require that any rate changes between the adoption date of this Report and Order and August 1, 1997, must be consistent with achieving rate integration by August 1, 1997. We also believe that it would facilitate resolution of any further regulatory issues concerning rate integration for these points if the Common Carrier Bureau addresses them in the first instance. Accordingly,""z0*&&aa" we will delegate to the Chief, Common Carrier Bureau, authority to resolve any issues concerning carriers' plans for rate integration for these offshore points.  X-xD69.` ` We reject GTE's view that Section 254(g) does not require MTC to integrate rates with other GTE affiliates. The statute mandates that the Commission require rate integration among all states, territories, and possessions, and this goal is best achieved by interpreting "provider" to include parent companies that, through affiliates, provide service in more than one state. Moreover, nothing in the record supports a finding that Congress intended to allow providers of interexchange service to avoid rate integration by establishing or using their existing subsidiaries to provide service in limited areas. Thus, we determine that GTE, for the purposes of Section 254(g), constitutes a "provider" of interexchange services within the meaning of that section, and that it must integrate rates across affiliates. Accordingly, we require GTE to comply with the same timetable and requirements as the other carriers serving the Northern Marianas and Guam.  X -xE70.` ` We reject the contentions of PCI and IT&E that they are not subject to the rateintegration obligation. As noted, Section 254 applies to all providers of interexchange service. Therefore, PCI & IT&E must provide Guam and the Northern Marianas service on a rateintegrated basis. Based on the present record, however, there is insufficient evidence to evaluate whether PCI's and IT&E's rates for service originating in Guam and the Northern Marianas comply with Section 254(g). Consequently, we will also require PCI and IT&E to abide by the same timetable and requirements as the other carriers serving the Northern Marianas and Guam. They may demonstrate with more particularity that their current rates comply with rate integration when they submit their plans.  X-xF71.` ` Although carriers serving American Samoa are required to provide service on a rateintegrated basis, American Samoa has stated that it believes that rates for services provided to American Samoa are already rate integrated. Nevertheless, we will also direct providers of interexchange service serving American Samoa to submit plans for American Samoa in order to ensure that they will comply with the statute. To the extent services are provided to other U.S. possessions and territories by carriers subject to Section 254(g), the record does not reflect what carriers serve some of these points, such as Wake Island and Midway Island, or whether service is provided in special ways, such as in cooperation with military authorities, that might affect provision of service on a rateintegrated basis to these points. Accordingly, we are directing the Common Carrier Bureau to investigate service arrangements for these points and to take such steps as are necessary to assure compliance with Section 254(g) by August 1, 1997.  X"-xG72.` ` We also believe that AT&T's concerns about termination of foreign traffic in Guam, the Northern Marianas, and American Samoa do not justify delaying rate integration. Our decision to extend rate integration to Guam is intended to benefit U.S. consumers. We do not by this decision, however, affect the classification or treatment of the underlying costs"Q%#0*&&aa $" of facilities between these offshore points and other U.S. points for purposes of interconnection arrangements with foreign carriers.  X-xH73.` ` Our requirement that carriers implement rate integration by August 1, 1997, complies with Section 254(g). That section requires us to adopt rules requiring rate integration for Guam, the Northern Marianas and American Samoa by August 8, 1996. We do not read this provision as mandating rate integration for all points by that date. Instead, we interpret the statute to permit a reasonable transition period for the offshore points to which our rate integration policy is being applied for the first time.  X -xD.` ` AT&T'S COMMITMENTS  X -x` ` I1. Background  X -xI74.` ` In the 1995 AT&T Reclassification proceeding, AT&T committed, for three years, to give five days' advance notice before adopting new geographically deaveraged tariffs  X-for interstate residential direct dial services.% {O -ԍSee In re Motion of AT&T Corp. to be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271,  yO-333334, 3349 (1995) (AT&T NonDominance Order). AT&T also committed that it would continue to comply with Commission orders regarding rate integration between the contiguous forty Xd-eight states and Alaska, Hawaii, Puerto Rico, and the Virgin Islands.;d"% {O7-ԍSee id.; The NPRM proposed that AT&T would be subject to the new rules adopted by the Commission and released from its commitments when the new rules are adopted.  X-x` ` 2. Comments  X-xJ75.` ` AT&T believes that the rules adopted in this proceeding "will supersede  X-AT&T's existing commitments in those areas."A% yO(-ԍAT&T Comments at 28 n.52.A AT&T also notes that, although its rate integration commitments with respect to Alaska "would technically continue in effect, AT&T  X-assumes that the policy adopted here will also apply in Alaska."1D% {O -ԍId.1 MCI believes that AT&T should not be bound by any commitments "other than those that may arise from this  Xg-proceeding and apply equally to all nondominant carriers.";g% yO#-ԍMCI Comments at 36.;  X9-xK76.` ` Hawaii argues that AT&T's commitment to provide five days' notice is not the"9$f 0*&&aa"  X-issue.A% yOy-ԍHawaii Comments at 1314.A Instead, the State asserts that because Congress reaffirmed the goal of universal service, AT&T cannot be relieved of its commitment to offer geographically averaged  X-residential direct dial service to Hawaii.1X% {O-ԍId.1 Alaska, too, claims that the question of whether AT&T's commitments continue in effect is not significant. Rather, the more important issue is that providers of interexchange service should not be permitted to deaverage their rates  X-"regardless of how much notice is given."=% yO( -ԍAlaska Comments at 8.=  X_-xL77.` ` The Northern Marianas argues that AT&T should be required to comply with the 1996 Act, which requires integration with Guam and the Northern Marianas, rather than with the commitments, which do not commit AT&T to integrate rates with Guam and the  X -Northern Marianas.L z% yOE-ԍNorthern Marianas Comments at 1314.L  X -x` ` 3. Discussion  X -xM78.` ` The rules we adopt in this proceeding will require AT&T to provide interexchange service at geographically averaged and integrated rates. We believe these requirements incorporate the Commission's existing rate averaging and rate integration  Xy-policies and, thus, should supersede the commitments AT&T made in the AT&T  Xd-Reclassification proceeding concerning rate averaging and rate integration. Accordingly, we release AT&T from its commitments to continue to comply with the Commission's orders regarding rate integration and to file any tariff containing a geographically deaveraged rate on five business days' notice. We do not release AT&T from its more specific commitments  X -concerning Hawaii and Alaska.  % {O-ԍSee, e.g., In re Motion of AT&T Corp. to be Reclassified as a NonDominant Carrier, Order, 11 FCC Rcd 3271, 333334 & n. 329 (1995) (AT&T NonDominance Order). Nonetheless, AT&T is affirmatively bound by the rules we establish in this Report and Order, and by our prior opinions, rules and orders on geographic rate averaging and rate integration, which the rules incorporate. y IV. FINAL REGULATORY FLEXIBILITY ANALYSISTP  X-xN79.` ` As required by Section 603 of the Regulatory Flexibility Act, 5 U.S.C.  603  Xi-(RFA), we incorporated an Initial Regulatory Flexibility Analysis (IRFA) in the Notice of  XR-Proposed Rulemaking in this proceeding (NPRM). The Commission sought written public  X;-comments on the proposals in the NPRM, including on the IRFA. The Commission's Final";%d 0*&&aa" Regulatory Flexibility Analysis (FRFA) in this Report and Order conforms to the RFA, as amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110  X-Stat. 847 (1996).% yOK-ԍ Subtitle II of the CWAAA is "The Small Business Regulatory Enforcement Fairness Act of 1996"  {O-(SBREFA), codified at 5 U.S.C.  601 et seq.   X-xO80.` ` Need for and purposes of this action: The Commission promulgates the rules in this Report and Order to implement Section 254(g) of the Communication Act of 1934, as amended by the Telecommunications Act of 1996. In accordance with Section 254(g), our implementing rules will: Xxrequire that the rates charged by providers of interexchange telecommunications services to subscribers in rural and high cost areas shall be no higher than the rates charged by each such provider to its subscribers in urban areas. Such rules shall also require that a provider of interstate interexchange services shall provide such services to its subscribers in each State at rates no higher than the rates charged to its  X -subscribers in any other State. "% {O-#X\  P6G;ɒP#эIn re Policy and Rules Concerning the Interstate, Interexchange Marketplace, NPRM, CC Docket No. 9661, FCC 96123 (rel. March 25, 1996).(# The objective of these rules is "to incorporate the policies of geographic rate averaging and rate integration of interexchange services in order to ensure that subscribers in rural and high cost areas throughout the Nation are able to continue to receive both intrastate and interstate  XK-interexchange services at rates no higher than those paid by urban subscribers."K|% {Ox-ԍSee H.R. Rep. No. 458, 104th Cong., 2d Sess. 132 (1996) (joint explanatory statement).  X-xP81.` ` Description and estimate of small entities affected: The Regulatory Flexibility Act defines "small entity" to include the definition of "small business concern" under the  X-Small Business Act, 15 U.S.C.  632.% {O-ԍSee 5 U.S.C.  601(6) (incorporating by reference the definition of "small business concern" in 5 U.S.C.  632). Under the Small Business Act, a "small business concern" is one that (1) is independently owned and operated, (2) is not dominant in its field of operation, and (3) meets any additional criteria established by the Small Business  X-Administration (SBA).Kh % {O"-ԍSee 15 U.S.C.  632(1)(a).K Our geographic averaging and rate integration rules will apply to all providers of interexchange service. The SBA has not developed a definition of small entities specifically applicable to providers of interexchange service. The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone"e& 0*&&aa" (wireless) companies. According to SBA regulations, a telephone communications company other than a radiotelephone company is a small business concern if it has fewer than 1,500  X-employees.% {OK-ԍSee 13 C.F.R.  121.201, Standard Industrial Classification (SIC) Code 4813.  X-xQ82.` ` The most relevant employee data available from the SBA does not enable us to make a meaningful estimate of the number of providers of interexchange service that are small entities because it is based upon a 1992 Census of Transportation, Communications, and Utilities survey from which we can only calculate the average number of people employed by  XH-varioussized telephone entities other than radiotelephone companies.ZHZ% {OS -ԍSee Bureau of the Census, U.S. Department of Commerce, 1992 Census of Transportation,  yO -Communications, and Utilities: Establishment and Firm Size, tbl. 4 (1995) (Revenue Size of Firms: 1992, SIC Code 4813). Based on a  X1-Commission staff report entitled Long Distant Market Shares: Fourth Quarter, 1995,  X -however, we estimate that approximately 500 carriers provide interexchange service. |% {OI-ԍSee Industry Analysis Division, Federal Communications Commission, Long Distance Market  yO-Shares: Fourth Quarter 1995, at 3 (1996). Some of these carriers are not independently owned and operated, or have more than 1,500 employees. Consequently, we estimate that our geographic averaging and rate integration rules will apply to less than 500 "small entities." We are unable on the present record to estimate with more particularity how many of these entities would be considered small for the purposes of the Regulatory Flexibility Act.  X{-xR83.` ` Summary of public comments on the Initial Regulatory Flexibility Analysis: No comments specifically addressed the Commission's initial regulatory flexibility analysis. However, a number of associations that represent, at least to some extent, the interests of small telecommunications providers, generally supported the Commission's proposed rules to  X-implement geographic averaging and rate integration.Z% {O-ԍSee CompTel Comments at 7; RTC Comments at 3; TRA Comments at 29; see also USTA Comments at 24 (expressing support for codification of the Section 254(g)'s language on rate averaging, but not discussing rate integration). Other commenters asserted that these rules would harm small regional providers of interexchange service in highcost areas, arguing that such providers would be unable to compete with nationwide carriers that can charge  X-lower rates by spreading their costs over a larger customer base.n % {O"-ԍSee ACTA Comments at 79 (arguing that the access charges interexchange providers pay vary, that rate averaging would disproportionately burden smaller carriers serving highcost areas, and that the Commission should account for these concerns in its rules, require access charges and other provider costs to be averaged, or forbear); MFS Communications Comments at 810 (arguing that the Commission should forbear from applying rate averaging requirements to carriers with less than 5 percent of the nation's access and presubscribed lines"%0*&&%" because such carriers have smaller customer bases over which to spread their costs, which are often higher than those of larger carriers, frequently because of high access charges in lowvolume markets.); ACTA Comments at 1011 (incorporating its geographic averaging comments, on the contention that rate integration raises nearly identical concerns for smaller carriers); CLDS Comments at 78 (arguing that integration's belowcost rates would discourage new carriers from entering the Guam and Northern Mariana markets); GTE Comments at 21 (arguing that small regional carriers with a limited calling base and high costs would have difficulty competing under integration against carriers with lower costs and larger customer bases over which to spread these costs); IT&E Comments at 2022 (arguing that larger carriers can spread the costs for service to Guam and the Northern Marianas among their customers nationwide, but smaller carriers will be unable to subsidize belowcost rates mandated by rate integration).n A few suggested that"'` 0*&&aa"  X-subsidies or other support mechanisms might alleviate their concerns.` % {O -ԍSee IT&E Comments at 2022 & n.40;  Letter from the Governor of Guam and the GTA to Regina M. Keeney, Chief of the Common Carrier Bureau 67 (June 20, 1996). The record in this proceeding does not show that small interexchange service providers will be disproportionately harmed by implementation of rate integration. The practical impact of our rules will be to require all providers of interexchange service, including those that are small entities, to set rates on a geographically averaged and rateintegrated basis.  Xv-xS84.` ` Summary of reporting, recordkeeping and other compliance requirements: To comply with this Report and Order, carriers must charge rural and highcost area customers  XH-for interexchange service no more than they charge urban customers,LH % {O-ԍSee supra  2, 9.L and must charge customers for such services in one state no more than they charge customers in any other  X -state.Q L % {O-ԍSee supra  2, 47, 52.Q The NPRM proposed requiring providers of interexchange telecommunications services to file certifications that they were complying with these requirements in the event  X -the Commission decides to mandate permissive detariffing of interexchange services. % {O{-ԍIn re Policy and Rules Concerning the Interstate, Interexchange Marketplace, NPRM, CC Docket No. 96 yOE-61, FCC 96123, at  70 (rel. Mar. 25, 1996). We will consider later in this proceeding what enforcement mechanisms may be necessary to support geographic averaging and rate integration when the Commission addresses the detariffing issue. We have proposed a requirement that AT&T, Sprint, MCI, IT&E, GTE, and PCI submit preliminary plans no later than February 1, 1997, to achieve rate integration of Guam, the Northern Marianas, American Samoa, and other offshore points, and final plans  Xb-no later than June 1, 1997.Mb8% {OK#-ԍSee supra  6870.M The preliminary plans need not include rates, but at a minimum should resolve service and rateband issues. Final plans shall include a rate schedule. Carriers already have in place their own individualized rate schedules, which they have"4(0*&&aa*" presumably tailored to the areas they provide service. Consequently, carriers' staff preparing the preliminary and final plans will likely need no special skills other than general familiarity with the new rate schedules that these entities are planning, or have chosen, to adopt to comply with the rate averaging and rate integration requirements.  X-xT85.` ` Steps taken to minimize, consistent with statutory objectives, impact on small  Xv-businesses: Section 254(g) reflects a congressional determination that the country's highercost, lowervolume markets should share in the technological advances and increased competition characteristic of the nation's telecommunications industry as a whole, and that interexchange rates should be provided throughout the nation on a geographically averaged and rate integrated basis. As noted above, we have decided that the statutory objectives of Section 254(g) require us to apply our rules to all providers of interexchange service,  X -including small ones.k % {Oe -ԍSee supra  3, 9, 3840, 5254, 66, 6970.k We have chosen, however, to allow carriers to offer private line  X -service and temporary promotions on a deaveraged basis.M Z% {O-ԍSee supra  2130.M In so doing, we have minimized the impact our rules might otherwise have had, and enable carriers to use such devices to enter new markets.  Xy-xU86.` ` Significant alternatives considered and rejected: The Commission considered and rejected several significant alternatives. We could have reduced burdens on small carriers by exempting them from compliance through forbearance. However, we do not believe that forbearing at this time would be consistent with the congressional goals that underlie Section  X-254(g).[% {O-ԍSee supra  3132, 3840, 5253.[ We could also have reduced burdens on small carriers by establishing costsupport mechanisms. However, the present record does not justify any such costsupport  X-mechanisms.F~% {O-ԍSee supra  67.F Accordingly, we decline to adopt these alternative measures for small carriers.  X-xV87.` `  Report to Congress: The Commission shall send a copy of this Final Regulatory Flexibility Analysis, along with this Report and Order, in a report to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.  801(a)(1)(A). A copy of this FRFA will also be published in the Federal Register.  V. FINAL PAPERWORK REDUCTION ANALYSIS TP  X -xW88.` ` We have decided to require AT&T, Sprint, MCI, IT&E, GTE, and PCI to submit preliminary and final plans to achieve rate integration of Guam, the Northern" )0*&&aay"  X-Marianas, and American Samoa by August 1, 1997.S% {Oy-ԍSee supra  6870.S The requirement of these plans constitutes a new "collection of information," within the meaning of the Paperwork Reduction Act of 1995, 44 U.S.C.  35013520. Implementation of these requirements will be subject to approval by the Office of Management and Budget as prescribed by the Paperwork Reduction Act.   VI. ORDERING CLAUSES TP  XH-xX89.` ` Accordingly, IT IS ORDERED that pursuant to authority contained in sections 1, 4(i), 10, 201205, 214(e), 215 and 254(g) of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 160, 201205, 214(e) and 254(g), Part 64 of the Commission's rules are Amended as set forth in Appendix B hereto.  X -xY90.` ` IT IS FURTHER ORDERED that the policies, rules and requirements set forth herein ARE ADOPTED.  X-xZ91.` ` IT IS FURTHER ORDERED that the policies, rules and requirements adopted herein SHALL BE EFFECTIVE 30 days after publication in the Federal Register.  XK-x[92.` ` IT IS FURTHER ORDERED that with respect to interexchange services provided between any U.S. state, territory or, possession and Guam, the Northern Marianas, or American Samoa, AT&T, GTE, MCI, Sprint, PCI, and IT&E shall:  X-Xx(1)` ` submit to the Commission no later than February 1, 1997, preliminary plans to achieve rate integration by August 1, 1997, with respect to those points; and(#  X-Xx(2)` ` submit to the Commission no later than June 1, 1997, final plans to achieve rate integration by August 1, 1997, with respect to those points.(#  Xe-x\93.` ` IT IS FURTHER ORDERED that AT&T is released from the commitments it  XN-made in the AT&T Reclassification proceeding concerning rate averaging and rate integration, as described herein.  X -x]94.` ` IT IS FURTHER ORDERED that the Chief, Common Carrier Bureau, is delegated authority to resolve any regulatory issues concerning implementation of rate integration for offshore points consistent with this Report and Order. The Common Carrier Bureau is directed to investigate service arrangements for offshore points, as discussed in paragraph 71, and to take such steps as are necessary to ensure compliance with Section 254(g), by August 1, 1997, for such offshore points. "#*Z0*&&aae""Ԍx` `  hh@hFederal Communications Commission x` `  hh@hWilliam F. Caton x` `  hh@hActing Secretary"+0*&&aa" Q Appendix A List of Parties "(CC Docket No. 9161) R  X-TP Comments filed on or before April 19, 1996 in response to Notice of Proposed Rulemaking  X- Alabama Public Service Commission (Alabama PSC) Alaska America's Carriers Telecommunication Association (ACTA) American Petroleum Institute American Public Communications Council Ameritech American Mobile Satellite Carriers Subsidiary Corp. (AMSC) AT&T Bell Atlantic BellSouth Corp. Cable & Wireless Inc. Collins, Frank Columbia Long Distance Services Inc. (CLDS) Competitive Telecommunications Association (CompTel) Florida Public Service Commission (Florida PSC) Frontier Corp. General Communications Inc. General Services Administration GTE Service Corp. Guam, Governor of, and the Guam Telephone Authority (GTA), jointly Guam Public Utilities Commission (Guam PUC) Hawaii Hunter, Gerald Iowa Utilities Board IT&E Overseas Inc. JAMA Corp. John Staurulakis Inc. LDDS Worldcom Inc. Lee, Paul Loflin, Kevin MCI MFS Communications Co. Missouri Public Service Commission (Missouri PSC) National Association of Regulatory Utility Commissioners (NARUC) Northern Mariana Islands NYNEX"Q%,0*&&aa $"ԌOhio, Public Utilities Commission of (Ohio PUC) Ohio Consumers' Counsel (OCC) Orlic, Peggy Pacific Telesis Group Pennsylvania Office of Consumer Advocate Rural Telephone Coalition (RTC) SBC Communications Inc. Scherers Communications Group Southern New England Telephone Co. Sprint Corp. Stark, Kristine Sussman, Michael TCA Inc. TDS Telecommunications Corp. Telecommunications Resellers Association (TRA) United States Telephone Association (USTA) US West Inc. Vanguard Cellular Systems Inc. Ward, Harvey William Washington Utilities and Transportation Commission (Washington UTC) Zankle Worldwide Telecom  X- Latefiled Comments  X- Louisiana Public Service Commission (Louisiana PSC) (filed April 22, 1996) Pennsylvania Public Utility Commission (Pennsylvania PUC) (filed April 22, 1996)  X- Reply Comments filed  X|-on or before May 3, 1996 Alaska ALLTEL Corporate Services Inc. Ameritech AT&T Bell Atlantic BellSouth Corp. Citizens Utilities Co. Competitive Telecommunications Association (CompTel) General Communications Inc. General Services Administration GTE Service Corp. Guam, Governor of, and the Guam Telephone Authority (GTA), jointly"Q%-0*&&aa $"ԌGuam Public Utility Commission (Guam PUC) Hawaii IT&E Overseas Inc. LDDS WorldCom Inc. MCI MFS Communications Co. New York Department of Public Service (New York DPS) Northern Mariana Islands NYNEX Telephone Cos. Ohio Consumers' Counsel (OCC) PCI Communications Inc. Rural Telephone Coalition (RTC) SBC Communications Inc. Sprint Corp. United States Telephone Association (USTA) US West Inc. Vanguard Cellular Systems Inc.  Xb- Latefiled Reply Comments  XK- Telecommunications Resellers Association (TRA) (May 6, 1996)"4.0*&&aa" x4Appendix B x Amendments to the Code of Federal Regulations x Part 64 of Title 47 of the Code of Federal Regulations is amended as follows: PART 64 MISCELLANEOUS RULES RELATING TO COMMON CARRIERS  XH-1.xThe authority citation for Part 64 continues to read as follows:  X -xAuthority: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154, unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228, unless otherwise noted.  X -2.xSubpart R is Added to Part 64 to read as follows:  X -  X-. Subpart R Geographic Rate Averaging and Rate Integration ă  Xb- 64.1801` ` Geographic rate averaging and rate integration.  X4-xAuthority: 47 U.S.C.  151, 154(i), 201205, 214(e), 215 and 254(g)  X-  X-. Subpart R Geographic Rate Averaging and Rate Integration ă  X- 64.1801` ` Geographic rate averaging and rate integration.  X-x(a)` ` The rates charged by providers of interexchange telecommunications services to subscribers in rural and highcost areas shall be no higher than the rates charged by each such provider to its subscribers in urban areas.  XN-x(b)` ` A provider of interstate interexchange telecommunications services shall provide such services to its subscribers in each U.S. state at rates no higher than the rates  X -charged to its subscribers in any other state.