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October 1 >!" , 1996 pX` hp x (#%'0*,.8135@8:"(# 2  X 4  X 4X\II.BACKGROUND p>"(# 2  X4X\III.DISCUSSION p!(#  8  X 4A.` ` Ripeness and Other Procedural Issuesp>"(# 9  X!4X\B.` ` Section 253(a) p`"(#10  X"4` ` ` ` C.` ` Sections 253(b) and 253(c)p"(# 16  X#4XX` ` D.` ` Section 251(f)(1)(A) ` p"(# 24  Xh$4XX` ` E.` ` Conclusion and Remedies ` p"(# 25 X\IV. ORDERING CLAUSES p"(# 27":&0*''99i$"Ԍ X4J: I. INTRODUCTION ׃  X41. ` ` On March 19, 1996, Classic Telephone, Inc. (Classic) filed the abovecaptioned Petition for Preemption, Declaratory Ruling and Injunctive Relief. Classic claims that two Kansas municipalities, Hill City and Bogue (the Cities), have blocked Classic's entry into the  X4local markets in violation of Section 253 of the Communications Act of 1934,D+j yO'ԍ47 U.S.C.  253.D added by the  Xv4Telecommunications Act of 1996 (1996 Act).vX+j {O ' Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56, codified at 47 U.S.C.  151 et  {OI 'seq. (1996 Act). Section 253(a) bars State and local governments from imposing legal requirements that may prohibit or have the effect of prohibiting the provision of telecommunications services. Accordingly, Classic requests that the Commission preempt the Cities' conduct, direct the Cities to issue telecommunications franchises to Classic, and enjoin the municipalities from further interfering with Classic's right to provide telecommunications services in those municipalities. For the reasons discussed below, we grant Classic's request to the extent that we conclude that the Cities' decisions denying Classic's franchise applications are preempted under section 253, and deny Classic's petition in all other respects.  X'<g II. BACKGROUND    Xb4\2.` ` Classic is a whollyowned subsidiary of Classic Communications, a holding company that controls various subsidiaries providing telecommunications services. On March 10, 1995, Classic entered into a purchase and sale agreement to acquire four telephone service  X4exchanges in northwestern Kansas from United Telephone Company of Kansas (United).G+j yO'ԍClassic Petition at 3.G One of these exchanges was the Hill City Exchange, which serves both Hill City and Bogue, Kansas (the Cities). Classic Cable, another subsidiary of Classic Communications, provides  X4cable television services to the Cities as well as other communities in Kansas. D+j {O'ԍSee Classic Petition, Exhibit 12 at 23, Order and Certificate, United Tel. Co. of Kansas and Classic  {O'Tel., Inc., KCC Case No. 192521U (issued Dec. 8, 1995) (KCC Dec. 8th Order).   X43.` ` United has been the certified incumbent provider of local exchange and exchange access telephone services in the Hill City Exchange, pursuant to a certificate of public convenience and necessity (CPCN) granted by the Kansas Corporation Commission  Xe4(KCC).Ge+j yO$'ԍClassic Petition at 3.G Until 1993, United also held the local franchise authorizing it to operate a telephone"e0 0*%%99~"  X4business and system in Hill City.^+j {Oy'ԍ See Hill City Comments, Exhibit 1, United Tel. Co. of Kansas v. City of Hill City, 258 Kan. 208, 213,  {OC'899 P.2d 489 (Kan. 1995) (United Tel. Co. of Kansas). United had received a tenyear franchise from Hill City  {O 'in 1974 that was automatically renewed through 1993. Id. Although United never held a local franchise for Bogue, it provided telephone service to that city during the same period it provided service to Hill  X4City.x+j {Oq'ԍSee United Tel. Co. of Kansas, 258 Kan. at 213.x In August 1993, Hill City terminated United's franchise effective December 31, 1993,  X4on the ground it was dissatisfied with the quality of United's local telephone service.K+j yO 'ԍHill City Comments at 45.K Since terminating United's franchise, Hill City has permitted United to continue operating with an  X4expired franchise to ensure continuation of telephone service to its residents.G +j yON 'ԍClassic Petition at 3.G Similarly, at  Xv4Bogue's request, United continues to operate in Bogue without a franchise.l v+j {O'ԍClassic Petition at 3 n.2. See para. 5, infra.l  X_4  XH44.` ` In March 1994, United sought declaratory and injunctive relief in Kansas state  X14court against Hill City regarding its refusal to renew United's telephone franchise.i 12 +j {O'ԍUnited Tel. Co. of Kansas, 258 Kan. at 211.i On  X 4appeal from the state district court, the Supreme Court of Kansas held in United Tel. Co. of  X 4Kansas that, under Kansas law, a city may require a telephone company holding a CPCN from the KCC to obtain a local franchise in order to provide telecommunications services to  X 4residents of that city.: +j {ON'ԍId.: Kansas law permits local units of government to determine "which company or companies shall serve their communities so long as that decision does not  X 4interfere with intrastate and interstate communications."  V +j {O'ԍUnited Tel. Co. of Kansas, 258 Kan. at 222 (citing KAN. STAT. ANN. 171901, 171902, 122001, and 66131). The Supreme Court of Kansas concluded that: XWhile a telephone company with a certificate of convenience and necessity to serve an area may construct lines through a city, it may not serve that city without a franchise. While a city may grant a franchise to a telephone company, that company must obtain a certificate of convenience and necessity from the KCC. Finally, while the KCC may grant or deny certificates of  X4convenience and necessity based on its powers to regulate the statewide" 0*%%99" telecommunications system, it may not force a city to grant a franchise to a  X4telephone company.$+j {Ob'ԍUnited Tel. Co. of Kansas, 258 Kan. at 223. In the case before us, the Hill City Exchange serves both Hill City and Bogue. Although a telecommunications provider needs only one CPCN to serve the entire Hill City Exchange, under Kansas law the provider must obtain a franchise from each city in the exchange to serve  {O'those cities. Id.ġ   X45.` ` In May 1995, soon after having entered into the purchase and sale agreement for the Hill City Exchange from United, Classic applied for telephone franchises to serve Hill  X4City and Bogue.m+j yO 'ԍClassic Petition at 45; Classic Petition, Exhibits 3 and 5.m Each of the Cities denied Classic's application for a franchise to serve that  Xv4city.eXvD+j yOk 'ԍHill City denied Classic's franchise application pursuant to a written decision on September 20, 1995. It appears from the record that Bogue did not issue a formal written decision denying Classic's franchise  yO'application, but apparently conveyed this information to Classic orally.e Each city had previously granted a franchise to another company, Rural Telephone Service Co. (Rural), to construct a telephone system and operate a telephone business within  XH4the Cities.Hd +j {O]'ԍSee United Tel. Co. of Kansas, 258 Kan. at 214. Hill City granted Rural a franchise on March 7, 1994. It is unclear from the record exactly when Bogue granted Rural a franchise. As noted above, however, the Cities allowed United to continue to provide service until Rural was operational.  X 46.` ` In its September 1995 decision denying Classic's franchise request, Hill City noted that it did not "want to see two telephone companies in Hill City, competing side by  X 4side, in a situation that [would] be financially uneconomic for either company." +j yOD'ԍClassic Petition, Exhibit 4, Letter from City of Hill City, Kansas to Classic Telephone, Inc. (September 20, 1995) denying telephone franchise (Hill City Initial Decision). Hill City then stated its reasons for selecting Rural, rather than Classic, as Hill City's telephone franchisee: (i) Rural is a local company with a good reputation for telecommunications services, whereas Classic's corporate headquarters is in Texas, and Classic did not have a track record for furnishing telephone services; (ii) Rural's subscribers are its owners, whereas  Xb4Classic's owners are unknown; and (iii) Rural has shown that it has the financial resources with which to build an advanced telecommunications network, whereas Classic has only  X44claimed that it is financially secure without revealing its balance sheet.W4+j yO!'ԍHill City Initial Decision at 3.W Moreover, Hill City  X4claimed that the KCC's "long standing policy of certificating only one telephone provider in"0*%%99"  X4each service territory may have a rational basis.""+j {Oy'ԍId. Kansas law prohibits the grant of exclusive franchises. KAN. STAT. ANN. 122001(b)(2)(3). The Cities argue in their comments, however, that by denying Classic's franchise applications, they were not granting Rural an exclusive franchise, but were simply denying the franchise of an applicant (Classic) that was not qualified to provide telecommunications services. As for Bogue, it does not appear from the record before us that it issued a formal written decision explaining why it denied Classic's  X4franchise petition.+j yO5'ԍOn March 13, 1996, Bogue issued a Decision on Reconsideration of its denial of Classic's franchise  {O'application. See para. 11, infra.  X47.` ` On December 8, 1995, the KCC approved the sale of United's Kansas exchanges (the Exchanges) to Classic, granted Classic a CPCN, authorized the transfer of the  Xv4franchise, plant, property and equipment of United to Classic, and designated Classic as the  X_4carrier of last resort for the Hill City Exchange service area, which serves both the Cities.D_ +j yO'ԍKCC Dec. 8th Order.D In its decision, the KCC determined that Classic had "demonstrated it has sufficient managerial, technical, and financial capabilities to operate a telecommunications public utility in the described service territory;" that Classic is capitalized in an amount sufficient to assure  X 4the smooth operation of the Exchanges; that the close proximity of the Exchanges to various operations of Classic gives Classic the opportunity to consolidate services in the Exchanges; and that Classic will assume all responsibility to complete the modernization activity  X 4associated with the Exchanges by December 31, 1997.X +j yO 'ԍKCC Dec. 8th Order at 34 and 11.X The KCC also found that because  X 4Classic was purchasing the assets of United, the existing certificated incumbent local exchange carrier (LEC) for the Hill City Exchange, Classic would assume the obligation to be  Xy4the provider of last resort for the entire Hill City Exchange.y, +j yOV'ԍKCC Dec. 8th Order at 11. Although the KCC does not define the term "provider of last resort," historically, the incumbent LEC is expected to provide service to all customers in the service area, whether or not it is economically beneficial to do so. In exchange for this obligation, the carrier is eligible for universal  {O'service funds. In the instant case, Classic is purchasing the system of the incumbent LEC, United. See  {Ox'Universal Service and the Information Superhighway: Perspectives from the Telecommunications Experience, 64 Fordham L. Rev. 782 (1995). Furthermore, in light of the  Xb4Kansas Supreme Court's ruling in United Tel. Co. of Kansas, the KCC held that while the lack of a local franchise may actually prevent Classic from providing service within the city limits of Hill City and Bogue, the failure of the Cities to grant Classic permission to provide  X4service does not affect Classic's willingness or managerial, technical, and financial capabilities"0*%%99"  X4to provide service within the Hill City Exchange.P+j yOy'ԍKCC Dec. 8th Order at 13.P The KCC also noted that, under Kansas  X4law, a local franchise cannot be exclusive.X+j {O'ԍId. at 1213 (citing KAN. STAT. ANN. 122001(b)(2)(3)). In a separate decision issued on December 8th, the KCC also granted Rural a CPCN to provide local exchange service in Kansas, but did not  X4designate Rural as the carrier of last resort in the Hill City Exchange.4Z+j {OV'ԍClassic Petition at n.9 (citing Rural Telephone Service Company, Inc., Order and Certificate, KCC Case No. 190843U (Dec. 8, 1995)). The record before us in this proceeding does not reflect the basis for the KCC's decision granting Rural a CPCN.4   X48.` ` The Cities immediately filed Petitions for Reconsideration of the KCC's December 8th Order granting Classic a CPCN and designating Classic as the carrier of last resort. Hill City requested that the KCC clarify whether its designation of Classic as the carrier of last resort was only until Rural's system was fully constructed, or if the designation  X14was in perpetuity.1 +j {O'ԍClassic Petition, Exhibit 13, In re: United Telephone Co. of Kansas and Classic Tel., Inc., Order on Reconsideration, KCC Case No. 192521U, 95CLST508COC (Jan. 11, 1996) (KCC Order on Recon.). Bogue argued in its reconsideration petition that the KCC erred in granting Classic a CPCN and in designating Classic as the carrier of last resort because  X 4neither United nor Classic currently had an official franchise in Hill City or Bogue.J f +j yO'ԍKCC Order on Recon. at 3.J On  X 4January 11, 1996, the KCC affirmed and clarified its December 8th Order, stating that its decision to designate Classic as the carrier of last resort was reasonable based on the ability  X 4of Classic to provide "efficient and sufficient telephone service to the entire [Hill City]  X 4Exchange."@ +j {ON'ԍId. at 5.@ The KCC stated that at the time of its decision, no other telecommunications provider, including Rural, had a complete network to provide "necessary intrastate and  Xy4interstate services to all subscribers within the exchange.":y +j {O'ԍId.: The KCC noted that its decision could be reconsidered at any time, and that when Rural completed its network, it could file a  XK4petition to reopen the docket to consider the issue of carrier of last resort designation. For  X44similar reasons, the KCC also affirmed its decision to grant Classic a CPCN.: 4+j {O!'ԍId.:  X4  X49.` ` On February 14, 1996, Classic formally requested Hill City and Bogue to  X4reconsider their denials of Classic's franchise applications in light of the enactment of the" 0*%%99"  X41996 Act.!+j yOy'ԍClassic Petition, Exhibit 9, Hill City Decision on Recon.; Classic Petition, Exhibit 10, Bogue Decision on Recon. Classic stated in its requests for reconsideration that section 253 and other provisions of the 1996 Act dealing with telephony favor competitive, not monopoly, provision  X4of such services." +j yO'ԍClassic Petition, Exhibit 7, Classic Request for Reconsideration of Hill City's Decision. Classic asserted that, pursuant to section 253, the Cities "must grant competitive franchises when requested," and it notified the Cities that if they did not act on  X4Classic's renewed franchise requests, it would pursue all available remedies for noncompliance  X4under the 1996 Act.#+j {O 'ԍId.; Classic Petition, Exhibit 8, Classic Request for Reconsideration of Bogue's Decision.  X_4 10.` ` Both cities rejected the renewed requests. Hill City stated in its denial that it would not grant Classic a franchise for the reasons set forth in its September 20, 1995 denial,  X14and further, that it did not agree with Classic's "broad" interpretation of the 1996 Act.Y$1B+j yO$'ԍ Hill City Decision on Recon.Y Hill City also asserted that it was inappropriate to grant Classic a franchise for two additional reasons: (i)because the U.S. District Court for the District of Kansas had yet to issue a decision on the Cities' petitions, filed on February 9, 1996, requesting review of the KCC's  X 4December 8th and January 11th orders; and (ii) the FCC had not approved the transfer of  X 4FCC licenses from United to Classic, or ruled on Classic's price cap waiver requests.^% +j {OA'ԍId. On November 8, 1995, Classic, in concurrence with United, filed an application with this Commission pursuant to section 214 of the Communications Act of 1934, as amended, 47 U.S.C.  214, and Part 63 of the Commission's rules, 47 C.F.R. Part 63, seeking Commission authority to acquire control of United's facilities located in several Kansas telephone exchanges, including the Hill City Exchange. On June 5, 1996, the Common Carrier Bureau granted Classic's application, finding that the transfer of control would serve  {O+'the present or future public convenience and necessity. Classic Tel., Inc., Order and Certificate, DA 96895, File No. WPC7127 (Com. Car. Bur., rel. June 5, 1996). Also on November 8th, Classic and United filed a petition for waiver of two Commission rules. First, United and Classic requested a waiver of the definition of "Study Area" contained in Part 36 AppendixGlossary of the Commission's rules, which effectively freezes all study area boundaries, as of November 15, 1984. In addition, Classic requested a waiver of Commission rule section 61.41(c)(2), which requires nonprice cap companies, and the telephone companies with which they are affiliated, to become subject to price cap regulation after acquiring a price cap company or any part thereof. The Cities filed comments in opposition to Classic's waiver petition. On June 3, 1996, the Common Carrier Bureau granted the requested waivers, finding that the public interest would be served by allowing United to alter its study area boundary, and allowing Classic to establish a new Kansas study area operating under rateofreturn regulation. The Bureau also determined that the objections of Bogue and Hill City had been adequately  {O"'addressed by the KCC and did not warrant denial of the petition.  Classic Tel., Inc. and United Tel. Co. of  {O#'Kansas, Memorandum Opinion and Order, FCC File No. AAD 95171, DA 96885 (Com. Car. Bur., rel. June 3,  {OY$'1996) (Classic Study Area Waiver).^" |%0*%%99~ "Ԍ X4ԙ 11.` ` Bogue denied Classic's request for reconsideration on the grounds that: (i) Classic did not show that it would provide a telephone system equal in quality to the system that Rural was constructing, which Bogue interpreted to mean that Classic would retain the existing "obsolete" system, whereas Rural was already constructing an entirely "new, modern, all buried, one party system;" (ii) Classic failed to provide Bogue sufficient financial information that demonstrated Classic possessed the resources necessary to furnish telephone  Xv4service; and (iii) Classic did not show that service by two telephone exchange carriers was an  X_4economical and efficient use of Bogue's rightsofway.g&_+j yO'ԍClassic Petition, Exhibit 10, Bogue Decision on Recon.g  X14 12.` ` Based on the Cities denials of Classic's requests for reconsideration, on March 19, 1996, Classic filed the abovecaptioned petition for preemption, declaratory ruling, and injunctive relief. On March 26, 1996, the Common Carrier Bureau issued a public notice establishing the pleading cycle for comments on Classic's petition. Eleven parties filed  X 4comments, oppositions, or replies regarding Classic's petition.P' X+j yO'ԍParties filing pleadings in the instant proceeding include: Association for Local Telecommunications Service (ALTS), AT&T Corp. (AT&T), the Cable Telecommunications Association, Inc. (CATA), MCI Telecommunications Corporation (MCI), Sprint Corporation (Sprint), Texas Cable & Telecommunications Association (TC&TA), Telecommunications Resellers Association (TRA), and National Cable Television Association, Inc., the city of Hill City, Kansas (Hill City), the city of Bogue, Kansas (Bogue), and the National Telephone Cooperative Association.P In addition, Classic filed  X 4several notifications of permitted ex parte presentations before the Commission.( +j {O?'ԍApril 22, 1996 (regarding ex parte meeting between VicePresident of Classic Telephone, Inc, counsel for Classic, Chief of the Program Policy and Planning Division of the Common Carrier Bureau, and Commission  yO'staff); June 7, 1996 (regarding letter from Rural referencing Classic's Opposition to Petition for Waiver in File  {O'No. AAD 9638); June 10, 1996 (regarding ex parte meetings between Chairman and CEO of Classic Communications, Inc., counsel for Classic, and the Legal Advisors to Chairman Reed Hundt, Commissioner James Quello, Commissioner Rachelle Chong, and Commissioner Susan Ness); July 22, 1996 (alleging efforts by Hill City to prevent Classic Telephone and its affiliates, Classic Communications and Classic Cable, from  {O'providing telecommunications and cable service in Hill City); August 15, 1996 (regarding ex parte  {O'communications between counsel for Classic and Commission staff); August 15, 1996 (regarding ex parte  communications between counsel for Classic and Legal Advisor to Chairman Reed Hundt).  X4C III.  DISCUSSION  X{4  Xd4 13.` ` The issue before us in this proceeding is whether section 253 preempts the  XM4Cities' decisions denying Classic's franchise requests.)XH Mp+j yOn#'ԍSection 253, in relevant part, provides: XSEC. 253. REMOVAL OF BARRIERS TO ENTRY.(# X(a) IN GENERAL.--No State or local statute or regulation, or other State or local legal"$(0*%%%" requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.  X(b) STATE REGULATORY AUTHORITY.--Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.  X(c) STATE AND LOCAL GOVERNMENT AUTHORITY.--Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.  X(d) PREEMPTION.--If, after notice and an opportunity for public comment, the Commission determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b), the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency. 47 U.S.C. 253. ƹ"M)0*%%99"Ԍ X'ԙ A.` ` Ripeness and Other Procedural Issues   X4  X4 14.` ` Bogue contends that we need not reach the merits of Classic's petition because it is premature. Specifically, Bogue asserts that we are required by section 257 of the Communications Act to complete a rulemaking to determine what constitutes a barrier to  X4entry before we may rule on the merits of any petition that seeks to invoke our preemption  Xv4authority under section 253.*Zv+j {O'ԍBogue Comments at 45; Bogue Reply Comments at 8. See also ALTS Comments at 23 (requesting that the Commission establish guidelines as to what types of actions the Commission would view as violative of section 253). Classic disputes Bogue's contentions on the grounds that  X_4section 253 "authorizes the Commission to preempt any law or regulation" that violates the  XH4section's prohibition against State and local entry barriers.N+H+j yO'ԍClassic Reply Comments at 13.N According to Classic, the Commission is required, pursuant to this section, to issue a public notice and provide an  X 4opportunity for public comment before reaching a decision on a petition that seeks to invoke  X 4its authority under section 253, but is not required to conduct a rulemaking.N, +j yO>'ԍClassic Reply Comments at 14.N Moreover, Classic contends that the delay that would result if the Commission were to defer action on this petition pending the adoption of rules pursuant to section 257 would put Classic at a  X 4competitive disadvantage in providing service in the Cities.N- +j yO#'ԍClassic Reply Comments at 15.N " -0*%%99[ "Ԍ X415.` ` We find that Classic's petition is not premature and is properly before us . We reject Bogue's assertion that section 257 of the Communications Act requires us to complete a rulemaking prior to considering the merits of a petition filed under section 253. Section 257 requires the Commission to establish regulations "for the purpose of identifying and  X4eliminating . . . market entry barriers for entrepreneurs and other small business.".+j yO'ԍSection 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, Notice of Inquiry, GN Docket No. 96113, 11 FCC Rcd. 6280 (Section 257 NOI) (1996). We find that our authority under section 257 to identify and eliminate "market entry barriers" complements our authority under section 253 more broadly to preempt legal requirements that "may prohibit or have the effect of prohibiting" the provision of telecommunications services. There is nothing in the language of section 257 or its legislative history even remotely suggesting that it requires a rulemaking proceeding to implement section 253. We determine that the Commission's rulemaking responsibility under section 257 does not affect the issues raised in this proceeding.  X 416.` ` Moreover, section 253 itself does not require the Commission to conduct a rulemaking prior to considering requests for preemption under section 253 and in fact, requires a different procedure. Rather, section 253(d) directs the Commission to rule on a petitioner's preemption request after public notice and an opportunity for comment on a  Xy4particular State or local requirement.Q/y +j {OJ'ԍSee 47 U.S.C.  253(d).Q While the Commission certainly could adopt rules to  Xb4implement section 253,l0b+j {O'ԍSee, e.g., 47 U.S.C.  154(i), 201(b), 303(r).l it need not do so. Where Congress required the Commission to conduct a rulemaking proceeding prior to implementing a particular provision of the 1996  X44Act, the statutory provision makes that requirement explicit.14D+j {O)'ԍSee, e.g., 47 U.S.C.  251(d) (requiring the Commission "to establish regulations to implement the requirements of this section"). Section 253 contains no such implementation requirements.  X'   B.` ` Section 253(a)  X417.` ` Classic claims that the Cities have awarded "de facto" exclusive franchises to  X4Rural for the provision of telecommunications services within Hill City and Bogue.G2+j yO!'ԍClassic Petition at 2.G Classic  X4contends that the Cities' decisions to deny Classic's franchise application were based on allegedly invalid concerns regarding the economic effects of having two competing telephone"~ . 20*%%99"  X4companies.V3+j {Oy'ԍSee Hill City Initial Decision.V Classic maintains, therefore, that the Cities' decisions violate section 253(a) which states that "[n]o State or local statute or regulation, or other State or local legal  X4requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide  X4any interstate or intrastate telecommunications service."4Z+j yO'ԍ47 U.S.C.  253(a). Additionally, Classic notes that the Cities' actions violate Kansas law which  {O'prohibits municipalities from granting an exclusive telephone franchise. KAN. STAT. ANN.  12.2001(b)(3). See  {OX'Classic Reply Comments at 6 (citing United Tel. Co. of Kansas, 258 Kan. at 222) (recognizing that the express intent of the Kansas Franchise Act was to vest cities with the power to grant franchises, but only to the extent  {O 'that such cities' "decision does not interfere with intrastate and interstate communications")); see also National  yO 'Telephone Cooperative Association Reply Comments at 2. Classic argues that the Commission must exercise its explicit preemption authority under section 253 to prevent local governments, such as the Cities, from frustrating the procompetitive, deregulatory purpose of the 1996 Act, and to remove decisions concerning the provision of telecommunications  X_4services "from the vicissitudes of local politics and arbitrary regulatory restraints."K5_+j yO'ԍClassic Petition at 1011.K  X1418.` ` The supporting commenters generally argue that by not granting a franchise to Classic, the Cities are prohibiting Classic from providing telecommunications services in violation of section 253, and that pursuant to this statute, the Commission must preempt the actions of the Cities. These commenters argue that the legislative history of section 253 demonstrates that Congress intended this section to remove all barriers to entry in the  X 4provision of telecommunications services.6$ h +j {O'ԍSee ALTS Comments at 34 and CATA Comments at 6 (citing S. CONF. REP. NO. 230, 104th Cong., 2d Sess. 1, at 126 (1996) (Joint Explanatory Statement) (explaining the intent of the identical Senate provision that  {Oi'Congress ultimately adopted as the official language of section 253)); see also MCI Comments at 3; TRA Comments at 2.  X419.` ` The Cities maintain that their franchise denials do not prohibit the provision of  Xy4telecommunications services, and therefore, the decisions do not violate section 253(a).  Xb4Specifically, Bogue contends that the Cities' actions are permitted because the real intent of  XK4the 1996 Act is to protect competition, not individual competitors such as Classic.7KT +j {OP 'ԍBogue Comments at 12 (citing Brown Shoe Co. v. United States, 370 U.S. 294, 344, 82 S.Ct. 1502 (1961)). Bogue maintains that its denial of Classic's franchise request was not an explicit prohibition on entry, but the denial of a franchise to a single company because that company is unqualified to" 70*%%99"  X4provide service.M8+j yOy'ԍBogue Reply Comments at 56.M Similarly, Hill City asserts that it has "no desire or intention to limit qualified or trustworthy entities from providing telecommunication services within its  X4boundaries," but that it is permitted to deny the request of an unqualified company for a  X4franchise to operate a telephone system and business.O9X+j yO'ԍHill City Comments at 3 and 8.O  X420.` ` Moreover, Bogue argues that section 253 does not give the Commission authority to preempt the purely local matter of franchising authority. Bogue maintains that Congress did not intend to alter the "dual regulatory system" set out in section 2(b) of the Communications Act, which provides that, with certain exceptions, nothing in the Act shall  X14be construed to give the Commission jurisdiction with respect to "regulations for or in  X 4connection with intrastate communication service by wire or radio of any carrier . . ."G: +j yO'ԍ47 U.S.C.  152(b).G If Congress had intended to modify this jurisdictional limitation, Bogue contends that Congress would have explicitly granted the Commission authority to regulate local matters, including  X 4matters relating to franchise issues.P; x+j {O'ԍSee Bogue Comments at 14.P Bogue further argues that because there is no clear expression of preemption of franchising power in the 1996 Act, the Cities retain the authority,  X 4which existed prior to the 1996 Act, to deny franchises, and not just impose conditions on  X4franchises.< +j {OK'ԍBogue Comments at 11. See National Telephone Cooperative Association Reply Comments at 2.  Xy4  Xb421.` ` Furthermore, the Cities argue that construing a locality's denial of a franchise application as a barrier to entry eliminates the ability of State or local governments to deny a franchise under any circumstances. Bogue contends, for example, that if the Commission interprets section 253 to remove from State and local governments all authority to deny franchises, State and local governments "would be required, without question, to issue a local  X4telephone exchange franchise" regardless of the technical, financial, and other qualifications of  X4an applicant.G=X+j yO% 'ԍBogue Reply Comments at 3. Classic argues that section 253 permits local governments to "place necessary competitively neutral conditions on the operations of telecommunications providers, but withdraws from the localities the power to deny franchises." Classic Petition at 11.G  X422.` ` Classic replies that based on the unambiguous language of section 253, the Commission's preemption authority extends to all barriers to entry, including those erected by" =0*%%99"  X4local authorities pursuant to their limited franchising power.D>+j yOy'ԍClassic Reply at 5.D In addition, Classic contends that section 2(b) of the Communications Act does not restrict the Commission's preemption authority over legal requirements that violate section 253 because section 253 makes clear that State or local barriers to entry affect competition in general and the harm to competition cannot be separated into interstate and intrastate components of our nation's  X4telecommunications system.D?X+j yO'ԍClassic Reply at 8.D  X_423.` ` Scope of Section 253. Section 253(a) proscribes State or local statutes,  XJ4regulations, or legal requirements that "may prohibit or have the effect of prohibiting the  X34ability of any entity to provide any interstate or intrastate telecommunications services."X@3+j yO 'ԍ47 U.S.C.  253(a) (emphasis added).X Section 253 preempts legal requirements that may prohibit or have the effect of prohibiting intrastate telecommunications services whether or not such legal requirements affect interstate  X 4telecommunications services. Contrary to Bogue's arguments, the plain language of section 253 does not exempt from the scope of federal preemption purely local matters of franchising authority. In addition, the legislative history confirms that Congress intended to preempt  X 4purely intrastate matters; section 253 does not exclude all franchising issues.Az x+j yO'ԍThe language of the identical Senate provision that Congress ultimately adopted as the official language of section 253 preempts barriers to entry in the provision of both interstate and intrastate telecommunications  {Ob'services. See, e.g., Joint Explanatory Statement at 126 and S. REP. NO. 23, 104th Cong., 1st Sess. at 35. As Senator Hollings observed, such preemption is necessary for "uniformity, understanding, [and] open competition in interstate telecommunications and intrastate . . . telecommunications." 141 Cong. Rec. S8174 (daily ed.  yO'June 12, 1995) (statement of Sen. Hollings).   X{424.` ` Moreover, the standards for preemption established in Louisiana PSC do not  Xf4foreclose preemption of State and local entry restrictions under section 253.BHf +j {O'ԍLouisiana Pub. Serv. Comm'n, 476 U.S. 355 (1986) (Louisiana PSC). Under Louisiana PSC, the Commission may preempt State regulation of intrastate service when it is not possible to separate the interstate  {Oc'and intrastate components of the asserted Commission regulation. Louisiana PSC, 476 U.S. at 375 n.4. In  {O- 'construing the "inseparability doctrine" recognized by the Supreme Court in Louisiana PSC, federal courts have held that where interstate services are jurisdictionally "mixed" with intrastate services and facilities otherwise regulated by the states, state regulation of the intrastate service that affects interstate service may be preempted  {O"'where the State regulation thwarts or impedes a valid Federal policy. See Illinois Bell Tel. v. FCC, 883 F.2d 104 (D.C. Cir. 1989); California v. FCC, 905 F.2d 1217 (9th Cir. 1990). In Louisiana  XQ4PSC the Supreme Court found that section 2(b) of the Communications Act prohibits the  X<4Commission from exercising federal jurisdiction with respect to "charges, classifications,"< B0*%%99" practices, services, facilities, or regulations for or in connection with intrastate  X4communications services."|C+j {Ob'ԍLouisiana PSC, 476 U.S. at 373 (quoting 47 U.S.C.  152(b)).| Thus, section 2(b) makes clear that, in the absence of a grant of authority to the Commission, State and local regulators retain jurisdiction over intrastate  X4matters. But neither on its face nor as construed in Louisiana PSC does section 2(b) override express statutory preemption by Congress as found in section 253. Moreover, as we held in  X4the Local Competition First Report and Order, where section 2(b) conflicts with a later and  Xz4more direct provision of the Act, we will apply the latter provision despite section 2(b).DD^zZ+j {O 'ԍImplementation of the Local Competition Provisions in the Telecommunications Act of 1996, Report and  {OO 'Order, FCC Docket No. 9698, FCC 96325 at  93 (rel. August 8, 1996) (Local Competition First Report and  {O 'Order).D Thus, to the extent that section 2(b) would otherwise preclude preemption of certain State or local legal restrictions on the provision of intrastate telecommunications services, section 253 removes that limitation.  X 4  X 425.` ` Section 253(a). We conclude that section 253(a), at the very least, proscribes State and local legal requirements that prohibit all but one entity from providing  X 4telecommunications services in a particular State or locality. Such legal requirements undeniably "may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service," as proscribed by section 253(a). The  X4legislative history confirms this straight forward interpretation of se ction 253(a) .E+j yO'ԍFor example, Senator Pressler, the Senate manager of the legislation, stated that some "States have granted . . . certain exclusive franchises, not allowing competition . . . and if we are having deregulation here, removal of barriers to entry, we have to take this step." 141 Cong. Rec. S8175 (daily ed. June 12, 1995)  yO'(statement of Sen. Pressler). "[S]ection [253] goes to the very heart of this bill because removal of barriers to  {O'entry is what we are trying to accomplish." Id. See also, 141 Cong. Rec. S8174 (daily ed. June 12, 1995) (statement of Sen. Hollings) (stating that the intent of section 253 "is the removal of the barriers to entry"). Moreover,  X4this reading of section 253(a) is consistent with the overriding goals of the 1996 Act. As  Xh4explained in the Local Competition First Report and Order, under the 1996 Act, the opening of the local exchange and exchange access markets to competition "is intended to pave the  X<4way for enhanced competition in all telecommunications markets, by allowing all providers to  X'4enter all markets."F' +j {O'ԍLocal Competition First Report and Order at  4 (emphasis added). Section 253's focus on State and local requirements that may prohibit or have the effect of prohibiting any entity from providing any telecommunications services complements the obligations and responsibilities imposed on telecommunications carriers by  X4the 1996 Act that are intended to "remove not only statutory and regulatory impediments to" F0*%%99 "  X4competition, but economic and operational impediments as well."#G+j {Oy'ԍLocal Competition First Report and Order at  3. Congress's intention to eliminate all economic and operational barriers to entry is reflected in newly enacted section 251, which requires incumbent local exchange carriers (LECs) to offer interconnection and network elements on an unbundled basis to requesting  {O'telecommunications carriers, and also provides for resale of LECs' retail services. See 47 U.S.C.  251(c)(2), 251(c)(3), and 251(c)(4). # Congress intended primarily for competitive markets to determine which entrants shall provide the telecommunications services demanded by consumers, and by preempting under section 253 sought to ensure that State and local governments implement the 1996 Act in a manner consistent with these goals.  Xv426.` ` We find that the evidence presented in this case supports Classic's contention that the manner in which the Cities implemented their franchise requirements, as reflected in their decisions denying Classic's franchise requests, prohibits Classic from providing interstate and intrastate telecommunications services in Bogue and Hill City, Kansas. Therefore, the decisions appear to violate section 253(a)'s proscription against prohibitions on the provision of telecommunications service by any entity, as well as the fundamental procompetitive goal of the 1996 Act. For example, Hill City confirmed its intention to limit competition by permitting only one company, Rural, to provide telecommunications services, stating in its decision that Hill City does not "want to see two telephone companies . . . competing side by  X 4side, in a situation that will be financially uneconomic for either company,"lH |+j yO'ԍClassic Petition, Exhibit 4, Hill City Decision at 2.l and that it may  X4be a couple of years before true local service competition is present in Hill City.II +j yOM'ԍHill City Decision at 2.I Furthermore, as a basis for its denial, Hill City relied on the problems the community faced  Xb4with United's provision of telecommunications services, rather than examining Classic's ability to provide quality telecommunications services. Additionally, Bogue explained that its decision to deny Classic's franchise request "is properly read as finding that [Classic] has not  X4demonstrated that two telephone exchange carriers could exist in the small city of Bogue."nJ+j {Oj'ԍBogue Comments at 8 (quoting Bogue Decision on Recon.).n  X427.` ` In their decisions, Hill City and Bogue both relied heavily on a comparison of the relative capabilities of Classic and Rural to provide local telephone service. The emphasis placed on the comparative capabilities of the two providers suggests that the Cities intended to choose only one entity as the telecommunications service provider for Bogue and Hill City, the result of which was to impose an absolute prohibition on Classic from providing telecommunications services. This absolute prohibition on Classic's competitive entry is precisely the type of action Congress intended to proscribe under section 253(a), absent a"e. J0*%%99q" demonstration that the franchise denials are an exercise of authority specifically reserved to State and local governments under sections 253(b) or 253(c). As stated previously, based on the reasoning used by the Cities in their decisions denying Classic's franchise requests, the Cities' application of their franchising requirements to Classic prevents Classic from providing telecommunications services, and therefore, on its face, appears to violate section 253(a). In their pleadings in this proceeding, the Cities seek to justify their actions under sections 253(b) and 253(c). We address those claims below.  XH428.` ` The Cities argue that a finding that the denials of Classic's franchise applications violate section 253(a) has the untenable result of eliminating the authority of States or localities to make franchising decisions. We reject this contention. We do not believe that Congress intended to remove franchising authority from State and local governments. Nothing in the language of the 1996 Act or the legislative history reflects this  X 4intention.KX +j yON'ԍIn the Joint Explanatory Statement, Congress explained that States must retain the ability to "reasonably condition telecommunications activities" in order to safeguard the rights of consumers. Joint Explanatory Statement at 127. In fact, as discussed below, sections 253(b) and 253(c) recognize the authority of States and localities (including the Cities) to impose franchise requirements for certain purposes, and as such, these sections preserve the authority of States and localities to deny a franchise application until such time the applicant complies with these permitted legal requirements. We find here only that, on this record, the Cities' exercise of their franchising authority to prevent Classic from providing service appears, without further examination, to  XK4be prohibited by section 253(a).hhC  X' C.` ` Sections 253(b) and 253(c)   X429.` ` Although the Cities did not specifically offer these reasons in their decisions denying Classic's franchise applications, the Cities now claim in their submissions in this proceeding that they denied Classic's franchise applications on consumer protection grounds, the need to protect the public safety and welfare, and in order to manage the public rights of  X4way, pursuant to authority preserved under sections 253(b) and 253(c).~L+j {O,'ԍSee Bogue Comments at 6; see also Hill City Comments at 17.~ First, Bogue asserts  X|4that section 253(b) permits competitively neutral franchise denials,KM|z+j yO 'ԍBogue Reply Comments at 5.K and that "there is nothing in the Communications Act of 1934 that requires a franchising authority to authorize"e M0*%%99W"  X4inadequate local exchange service."bN+j yOy'ԍBogue Comments at 7. Bogue believes that Classic's use of the existing United system is inadequate, and argues that permitting Classic to operate the "existing dilapidated system" while requiring Rural to construct  {O 'a high cost, state of the art system would not be competitively neutral. Id. at 78. In addition, Bogue expresses concern regarding the ability of Classic to provide essential communications services in light of the poor  {O'financial ratings of Classic's affiliate, Classic Cable. Id. at 610.b Bogue claims that commenters fail to explain why the Cities' efforts to protect the local community through the Cities' franchising power should be  X4preempted.KO|+j yO'ԍBogue Reply Comments at 4.K Bogue also maintains that the powers accorded to the States in section 253(b)  X4extend to localities by delegation under Kansas law.P( +j {Ox 'ԍBogue Comments at 2 n.3. As a result of the holding by the Supreme Court of Kansas in United Tel.  {OB 'Co. of Kansas, the Cities and the National Telephone Cooperative Association argue that the State of Kansas has  {O 'delegated to Cities the authority Congress granted to the States in section 253(b). United Tel. Co. of Kansas,  {O '258 Kan. at 220225. See para. 4, supra. Furthermore, Hill City contends that its denial was consistent with section 253(b) because it was attempting to protect its citizens  X4from a harmful telecommunications provider.MQ +j yO:'ԍHill City Comments at 1718.M Hill City also maintains that section 253(c) "creates an express and reasonable exception to the general prohibition of new section 253(a)" against barriers to entry, permitting the city to refuse to allow inadequate or harmful  XH4telecommunications systems to dig up public areas for construction or modification.ARH +j {O'ԍId. at 13.A Hill City claims, and the National Telephone Cooperative Association agrees, that section 253(c) permits the Cities to exercise police power over public rightsofway to preclude unqualified  X 4and/or untrustworthy entities from providing inadequate or unlawful telecommunications  X 4services.S +j {O'ԍId. at 3; National Telephone Cooperative Association Reply Comments at 2. The Cities contend that their decisions denying Classic's franchise applications are appropriate pursuant to sections 253(b) and 253(c), and that the Commission, therefore, must  X 4deny Classic's petition for preemption.   X430.` ` In this regard, Hill City also raises allegations of general misconduct against Classic. Hill City claims that Classic was "attempting to monopolize local cable and telephone service," would not be responsive to local service needs, was engaging in deceptive and illegal tying practices, and had developed a "highly antagonistic relationship" with the  X44Cities.MT4+j yO#'ԍHill City Comments at 1718.M "@T0*%%99"Ԍ X431.` ` Classic replies that the Cities' decisions were not based on concerns about consumer protection, quality of service, or management of the public rightsofway, pursuant to sections 253(b) or 253(c), and that the Cities' arguments are based on an unjustifiable  X4expansive reading of the limited powers given to States and localities under those sections.MU+j yO4'ԍClassic Reply Comments at 7.M Classic argues that the Cities may not invoke the rights specifically reserved to the States under section 253(b). Classic contends, moreover, that even assuming local governments, by delegation, have authority to impose requirements under section 253(b), nothing in this section  X_4permits the Cities to impose preconditions on Classic in such a way as to prohibit entry.NV_X+j {Oh 'ԍSee Classic Reply at 3.N Commenters note that the Cities' legitimate service quality concerns should be addressed by some means other than denying a franchise such as the introduction of the very competition  X 4the Cities seek to prohibit.HW +j yO'ԍAT&T Comments at 3 n.4.H Furthermore, commenters argue that management of the public rightsofway under section 253(c) does not include denial of entry or interference with the provision of interstate or intrastate telecommunications services. Classic and commenters also  X 4assert that because Classic is purchasing the assets of the incumbent provider whose facilities already occupy the rightsofway that the Cities' claim would be overburdened, the Cities' denials of Classic's franchise requests also exceed the authority reserved to local governments  X4in section 253(c).Xz+j {O'ԍSee CATA Comments at 34; TC&TA Comments at 5; AT&T Reply Comments at 34; MCI Reply Comments at 5; National Cable Television Association Reply Comments at 3.  Xy4  Xb432.` ` Classic disputes the Cities' allegations of misconduct and maintains that it has not engaged in deceptive marketing practices, has been found by the KCC to be fully qualified to provide telephone service in the Cities, and has fulfilled all of its obligations with  X4respect to upgrading the existing United system, as ordered by the KCC.RY+j yO'ԍClassic Reply Comments at 1725. R Furthermore, Classic argues that, even assuming that the allegations of misconduct were well founded, it does not change the fact that the Cities unlawfully prohibited Classic from providing telecommunications services.  X4  33.` ` Classic Motion to Strike Hill City Comments. Classic urges the Commission to strike the majority of the Hill City comments in this proceeding on the basis that the  X~4allegations of misconduct "run afoul of the Commission's recent reaffirmation of its"~d Y0*%%99"  X4commitment to eliminate frivolous pleadings."Z+j {Oy'ԍId. at 17 & n.10 (citing Commission Taking Tough Measures Against Frivolous Pleadings, FCC Public Notice No. FCC 9642, 11 FCC Rcd. 3030 (Feb. 9, 1996)). We deny Classic's request to strike without  X4reaching the issue of whether Hill City's allegations have merit. As discussed, infra, to the extent that Hill City shows that the alleged misconduct was an appropriate basis for denial pursuant to section 253(b) or 253(c), the allegations of misconduct are relevant to a determination of whether Hill City's denial of Classic's franchise application is preempted  X4under section 253. We note that Classic's record as a cable operator, its promises to upgrade the existing system, and its marketing practices are all actions the Cities may legitimately regulate by requiring Classic, Rural, and all other qualified entities to abide by the same competitively neutral requirements consistent with sections 253(b) and 253(c), or by taking legitimate enforcement actions against Classic to address any violation of State laws. Moreover, as intended by Congress, the introduction of competition in the Cities should create an incentive for Classic, Rural, and other potential carriers to provide high quality systems and services at competitive rates. Accordingly, we will not strike these arguments as frivolous.  X 4!34.` ` Authority of Localities Pursuant to Section 253(b). As an initial matter, we must determine whether section 253(b) applies only to States, as argued by Classic and other  X}4commenters,_[}"+j {OP'ԍSee, e.g., Classic Reply Comments at 10._ or also to their political subdivisions. Unlike section 253(c), which refers to both State and local government authority, section 253(b) refers only to the authority of  XO4States. It appears from the titles of the subsections and the history of this provision that Congress deliberately separated the functions included under section 253(b) and 253(c). Previous versions of subsection (b) gave similar regulatory authority to both State and local officials, but the text of the provision enacted limited to the States the authority of subsection  X4(b).y\+j yOX'ԍH.R. REP. NO. 204, 104th Cong., 1st Sess. pt. 1 at 5 (1995).y Nonetheless, this statutory language does not necessarily preclude States from delegating their regulatory authority to local political subdivisions. The Supreme Court, in  X4Wisconsin Public Intervenor v. Mortier,]D+j {O'ԍWisconsin Public Intervenor v. Mortier, 501 U.S. 597 (1991) (WPI v. Mortier). found that a federal statute that plainly authorizes  X4States to regulate, and is also plainly silent with reference to local governments, should not be construed as leaving localities with no regulatory authority, but only that the localities "could  X4not claim the regulatory authority explicitly conferred upon the States that might otherwise  Xk4have been preempted" by federal law.R^k+j {O#'ԍId., 501 U.S. at 607.R The Court explained that "[t]he principle is well settled that local governmental units are created as convenient agencies for exercising such of"Th ^0*%%99h"  X4the governmental powers of the State as may be entrusted to them in its absolute discretion."j_+j {Oy'ԍId., 501 U.S. at 607608 (citations omitted).j  X4As with section 253(b), earlier versions of the statutory provision at issue in Mortier included both States and political subdivisions, but the provision as ultimately enacted referred only to  X4the States. The Court in Mortier stated that while this change indicated "an unwillingness by  X4Congress to grant political subdivisions regulatory authority, it does not demonstrate an intent to prevent the States from delegating such authority to its subdivisions, and still less does it  Xz4show a desire to prohibit local regulation altogether."L`zZ+j {O 'ԍId., 501 U.S. at 609.L Accordingly, section 253(b) may be read to preserve certain regulatory powers of the States, and if there is a specific delegation by the State, local governments as well. Kansas law envisions a role for both the KCC and  X54local units of government.Pa5+j {O 'ԍSee para. 4, supra.P Thus, for purposes of this order, we will assume that the Cities may attempt to justify their actions pursuant to section 253(b).  X 4"35.` ` Section 253(b). Section 253(b) preserves the authority of States to impose requirements to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of  X 4consumers, provided that such requirements are necessary, competitively neutral, and consistent with the statute's universal service requirements, set forth in section 254 of the  X4Communications Act, as amended.|b~+j {O'ԍ47 U.S.C.  253(b). See Joint Explanatory Statement at 127.| Section 253(b), for example, ensures that States continue to have authority to require telecommunications service providers to make emergency services available to the public and comply with local consumer protection laws.  X#4#36.` ` We conclude that the Cities have failed to provide sufficient evidence to show that their denials of Classic's franchise requests are permitted pursuant to section 253(b). Rather, as discussed, the reasons set forth by the Cities in their decisions denying Classic's franchise requests clearly indicate that the Cities simply did not want to authorize the entry of a competitive telecommunications provider.  X4$37.` ` Furthermore, while the Cities have stated that their goals in denying Classic's franchise applications were to ensure the continued quality of telecommunications services, the Cities have not shown, or even attempted to show, that they applied their franchising requirements in a "competitively neutral" manner as required under section 253(b). In fact, based on the evidence before us in this proceeding, it appears the Cities in effect applied their  X&4franchise requirements to Classic in a manner that is not competitively neutral. At the very"&b0*%%99" least, this mandate of competitive neutrality requires the Cities to treat similarly situated entities in the same manner. In this instance, the Cities denied Classic's franchise applications outright while granting the application of Rural, subject to certain conditions subsequent concerning service quality. We find no basis in the record of this proceeding that would justify such discrimination, which has the effect of foreclosing entry by one competitor while allowing another to enter.  X_4%38.` ` Moreover, the Cities have not provided any evidence that their absolute denials of franchises to Classic were "necessary" to achieve the stated public interest goals as  X14required by section 253(b). Congress envisioned that in the ordinary case, States and localities would enforce the public interest goals delineated in section 253(b) through means  X 4other than absolute prohibitions on entry,McX +j yO| 'ԍ In describing the identical Senate provision that Congress ultimately adopted as the official language of section 253(b), Congress stated that "States may not exercise this authority in a way that has the effect of imposing entry barriers." Joint Explanatory Statement at 126.M such as clearly defined service quality requirements or legitimate enforcement actions. We find that the record in this proceeding does not support the Cities' claim that Classic is "unqualified" to provide local telephone service in the affected areas and that, therefore, the denials were necessary to protect the public interest goals set out in section 253(b). To the contrary, the record reveals that unlike the Cities' decisions, the KCC based its Dec. 8th decision to grant Classic a CPCN on a  Xy4record of empirical evidence including, among other information, Classic's debt to asset ratio,  Xb4projected income, and a stipulation regarding the gain on sale of the United system.jdb+j {O'ԍSee KCC Dec. 8th Order at 3, 11, and Attachment A.j Relying on that comprehensive evidentiary record, the KCC found that Classic is capitalized in an amount sufficient to assure the smooth operation of the exchanges; that the close proximity of the exchanges to various operations of Classic gives Classic the opportunity to  X4consolidate services in the exchanges; and that Classic will assume all responsibility to  X4complete the modernization activity associated with the exchanges by Dec. 31, 1997.Nez+j {O'ԍSee KCC Dec. 8th Order.N These findings by the relevant state regulatory commission support the view that Classic is qualified to provide telecommunications services to the residents of the Hill City Exchange and belie  X4the Cities' assertions to the contrary that their franchise denials are permitted pursuant to section 253(b) as necessary to "preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and  Xe4safeguard the rights of consumers."Gfe +j yO"#'ԍ47 U.S.C.  253(b).G  XN4   X74 >!" "7f0*%%99+"  X4 >!"  &39.` ` Section 253(c). Section 253(c) preserves the authority of State and local governments to manage the public rightsofway, but requires such regulations to be both competitively neutral and nondiscriminatory. In addition, section 253(c) permits State and local governments to impose compensation requirements for the use of the public rightsofway so long as such compensation is fair and reasonable, competitively neutral, non X4discriminatory, and is publicly disclosed.Gg+j yO'ԍ47 U.S.C.  253(c).G The legislative history sheds light on permissible management functions under section 253(c). During the Senate floor debate on section 253(c), Senator Feinstein offered examples of the types of restrictions that Congress intended to permit under section 253(c), including State and local legal requirements that: (1) "regulate the time or location of excavation to preserve effective traffic flow, prevent hazardous road conditions, or minimize notice impacts;" (2) "require a company to place its facilities underground, rather than overhead, consistent with the requirements imposed on other utility companies;" (3) "require a company to pay fees to recover an appropriate share of the increased street repair and paving costs that result from repeated excavation;" (4) "enforce local zoning regulations;" and (5) "require a company to indemnify the City against any  X 4claims of injury arising from the company's excavation."/h$ X+j yO'ԍ141 Cong. Rec. S8172 (daily ed. June 12, 1995) (statement of Sen. Feinstein, quoting letter from the  {Oz'Office of City Attorney, City and County of San Francisco). See also, Implementation of Section 302 of the  {OD'Telecommunications Act of 1996, Second Report and Order, CS Docket No. 9646, FCC 96249, 61 Fed. Reg.  yO'28698 at  210 (1996) (describing additional examples of legitimate public rightsofway management authority)./  X{4'40.` ` We find that the Cities have failed to show that their franchise denials reflect an exercise of public rightsofway management authority or the imposition of compensation requirements for the use of such rightsofway. The Cities' denials, therefore, do not trigger section 253(c). Instead, the Cities merely claim that section 253(c) permits their decisions, without providing any support for this contention. Based on the record before us, we conclude that the Cities have not established an adequate premise to invoke the provisions of section 253(c).  X4(41.` ` Neither City relied on authority to manage public rightsofway in its initial  X4decision denying Classic's franchise request.iD+j yO'ԍIndeed, as noted previously, the record does not reflect that Bogue issued a written decision explaining  {Oi 'why it denied Classic's franchise application initially. See para. 6, supra. Although both of the Cities issued their reconsideration decisions after enactment of the 1996 Act, neither decision relied on the Cities' authority to manage public rightsofway in affirming its earlier denial of a franchise to Classic. Specifically, in its decision on reconsideration Hill City simply reiterated that its denial of Classic's franchise request was based on the reasons set forth in its September 20,  X941995 decision. Hill City's initial denial predated by more than four months passage of the"9i0*%%99" 1996 Act and did not discuss issues relating to its management of the public rightsofway or related compensation. Similarly, Bogue's decision on reconsideration did not refer to, or specifically rely on section 253(c), nor did it invoke concerns about management of rightsof X4way or related compensation.jx+j yO4'ԍBogue based its denial on a comparative evaluation between Rural and Classic and on economic considerations of having multiple providers in a small community. In fact, Bogue's decision only mentioned rightsofway in passing in the broader context of the economic considerations of multiple providers. Specifically, Bogue found that "Classic Telephone, Inc. cannot match the economy to subscribers of the service to be provided by Rural; and that the use of the city streets, alleys and public ways by two telephone companies to serve a City with the population of 191 persons of all ages, is not an economical or efficient use." Bogue Decision on Recon. at 1.  X4)42.` ` Indeed, in its pleadings in this proceeding Bogue did not argue that its denial of Classic's franchise was an exercise of its authority to manage the public rightsofway or related compensation requirements. Moreover, Hill City advanced its arguments based on management of rightsofway and section 253(c) for the first time in conclusory fashion in its pleadings in this proceeding. In its comments in opposition to Classic's petition, Hill City claimed that, pursuant to section 253(c) it retained authority to deny Classic's franchise request because "police and franchise powers [preserved by section 253(c)] permit it to deny  X 4franchises to those who attempt to deceive its citizens, to monopolize critical telecommunications services and links, and to intimidate local governments and  X 4individuals."k +j yOw'ԍHill City Comments at 16. We note that Hill City relied on the same allegations in support of its claim that the franchise denial was permitted pursuant to section 253(b). Hill City stated that its actions were consistent with section 253(b) because "Hill City must protect the local public safety and welfare from any entity that appears to be attempting to monopolize local cable and telephone service, to be deceiving local residents . . . , to developing highly antagonistic relationships with many local governments, and to be willing to  yO_'use lawsuits to intimidate potential opposition." Hill City Comments at 18.  Hill City asserted that, from the beginning, it was merely attempting "to obtain access to quality and reasonably priced telecommunications facilities and services for  X4its residents and businesses."Jl +j yO'ԍHill City Comments at 15.J These conclusory statements are inadequate to establish that the Cities actions reflect an exercise of public rightsofway management authority or the imposition of compensation requirements for the use of such rightsofway. Thus, upon evaluation of the record before us, we conclude that the denials did not involve the Cities' efforts "to manage the public rightsofway" or to impose compensation requirements "for use of public rightsofway," and therefore, do not trigger section 253(c). X` hp x (#%'0*,.8135@8:!" "l0*%%99)"  X' >!" D.` ` Section 251(f)(1)(A)  X4  X4*43.` ` Bogue also contends that, although it has shown other valid reasons for denying Classic's franchise application, as a rural locality it is entitled pursuant to section  X4251(f) to deny Classic's franchise on economic grounds.km yO'ԍBogue Comments at 15 n.20. Section 251(f) provides: pp X(f) RURAL MARKETS.--It shall not be a violation of this section for a State to require a telecommunications carrier that seeks to provide telephone exchange service or exchange access in a service area served by a rural telephone company to meet the requirements in section 214(e)(1) for designation as an eligible telecommunications carrier for that area before being permitted to provide such service. This subsection shall not apply-- "(1) to a service area served by a rural telephone company that has obtained an exemption, suspension, or modification of section 251(c)(4) that effectively prevents a competitor from meeting the requirements of section 214(e)(1); and "(2) to a provider of commercial mobile services. 47 U.S.C. 251(f). k Bogue asserts that section 251(f) expressly prohibits local telecommunications exchange competition in rural areas, absent an affirmative finding by the appropriate State agency that such competition is not unduly  X_4economically burdensome.n$_(  yO8'ԍBogue argues that because the State of Kansas regulates telephone exchange carriers at both the State level and through its various municipalities, section 251(f) must be read to include municipalities to the extent  {O'that a particular state may have delegated its franchising authority. Bogue Comments at 1718 & n.24 (citing  {O'Gregory v. Ashcroft, 501 U.S. 452, 460, 111 S.Ct. 2395 (1991)).  X14+44.` ` Classic replies that the Cities' reliance on section 251(f) to justify their denials of Classic's franchise applications is misplaced. First, Classic argues that section 251(f) permits States, not localities, to make a determination as to whether a rural LEC shall be  X 4exempted from section 251(c) obligations.Eo  yO'ԍClassic Reply at 11.E In addition, Classic contends that the key distinction made between rural and nonrural markets under section 253 is in subsection 253(f) which declares that a State may require a telecommunications carrier in a rural area "to meet the requirements in section 214(e)(1) for designation as an eligible telecommunications  X4carrier before being able to provide such service."ip yO'ԍ47 U.S.C.  214(e)(1). Classic Reply Comments at 10.i  Xb4,45.` ` Section 251(f)(1)(A) provides that the obligations imposed on incumbent LECs pursuant to section 251(c) "shall not apply to a rural telephone company until (i) such company has received a bona fide request for interconnection, services, or network elements, and (ii) the State commission determines . . . that such request is not unduly economically"4p0*%%99"  X4burdensome [and] is technically feasible . . . "Gq yOy'ԍ47 U.S.C.  251(f).G Section 251(f) permits the State commission, not the local government, to decide on a casebycase basis whether a rural LEC has offered evidence that application of the Commission's section 251(c) requirements "would be likely to cause undue economic burdens beyond the economic burdens typically associated  X4with efficient competitive entry."rX {O'ԍ47 U.S.C.  251 (f). See Local Competition First Report and Order at  1262. Even assuming that the KCC  has properly delegated its  X4authority under section 251(f) to the Cities,s yO( 'ԍThe record does not reflect whether the KCC has delegated its authority under 251(f) to the Cities. that section has no bearing on franchising decisions and opportunities for entry. Because the record does not reflect that the KCC (or even Bogue) has made such a decision, that Classic is a rural LEC, or that section 251(f) has bearing on these issues, section 251(f) does not appear to be applicable to the franchise issue before us.  X ' E.` ` Conclusion and Remedies   X 4-46.` ` As stated previously, the Cities' decisions reflect the application of their franchise requirements in a manner that prohibits Classic from providing telecommunications services. The decisions, on their face, appear to violate section 253(a). Moreover, the Cities have failed to provide any evidence to show that their franchise denials are permitted pursuant to section 253(b). In addition, the Cities have not demonstrated that their actions were public rightsofway management or related compensation actions so as to trigger section 253(c). We find, therefore, that section 253 preempts the Cities' decisions denying Classic's franchise applications for the provision of telecommunications services.  X4.47.` ` In its petition, Classic requests that the Commission: (1) declare that the Cities' denials of franchises to Classic have prohibited Classic from providing telecommunications services in violation of section 253(a); (2) declare that the Cities' denials are preempted pursuant to section 253(d); (3) declare that the Cities "must immediately grant to Classic all necessary franchise authorizations to offer telecommunications services within their corporate limits;" and (4) enjoin the Cities "from taking any action that has the purpose or effect of directly or indirectly interfering with Classic's provision of telecommunications  Xe4services anywhere within Classic's service area."Ktez yO!'ԍClassic Petition at 1415.K Classic maintains that the Commission's authority encompasses more than the ability to preempt any legal requirements that violate  X74section 253, but also extends to the power to strike the barrier and issue injunctions to effect"7 t0*%%99+"  X4the procompetitive policies of section 253.u {Oy'ԍClassic Ex Parte Presentation at 4 (June 10, 1996) (citing 47 U.S.C.  154(i) and (j); Southwestern  {OC'Cable Co., 392 U.S 157, 178, 88 S.Ct. 1994; Policy Rules Concerning Rates for Dominant Carriers (Part I of  {O 'II), 3 FCC Rcd. 3195, 329697 (1988); In re Exclusive Jurisdiction With Respect to Potential Violations of the  {O'Lowest Unit Charge Requirements, 6 FCC Rcd. 7511, 7513 (1991), recon., 7 FCC Rcd. 4123 (1992); Southern New England Telephone Company Expedited Petition for Emergency Interim Relief, Preliminary Injunction and  {Oi'Stay, 10 FCC Rcd. 13194 (1995); Applications of Craig O. McCaw and AT&T For Consent to Transfer Control  {O3'of McCaw Cellular Communications and Its Subsidiaries, 9 FCC Rcd. 5836, 5920 (1995)). Classic contends that in addition to the explicit  X4preemption authority pursuant to section 253, the Communications Act of 1934, as amended,  X4empowers and requires the Commission to "execute and enforce the provisions of this Act,"Cv yO 'ԍ47 U.S.C. 151.C  X4and that under this directive, the Commission has broad discretion to determine the appropriate tools to remedy any violation of the prohibition on barriers to entry articulated in  X4section 253.mw {O'ԍClassic Ex Parte Presentation at 13 (June 10, 1996). m  Xv4  X_4/48.` ` Bogue contends that the Commission is prohibited from declaring that the  XH4Cities "must immediately grant to Classic all necessary franchises."FxH6  yO/'ԍBogue Comments at 19.F Bogue argues that the Tenth Amendment of the U.S. Constitution prohibits the Commission from issuing an order to a State or locality that requires the State to take action in furtherance of a federal regulatory  X 4objective.y  {Oz'ԍBogue Comments at 19 (citing New York v. United States, 505 U.S. 144 (1992)).  X 4049.` ` In the instant proceeding, section 253 preempts the Cities' decisions denying Classic's franchise applications. It appears from the record that the relevant Kansas franchising statute and regulations, which prohibit exclusive franchises, do not themselves prohibit or have the effect of prohibiting the ability of any entity to provide telecommunications services in violation of section 253. They do not create explicit barriers to entry and are facially competitively neutral. Section 253 does not, therefore, as suggested  XK4by some of the commenting parties,zKX  yOT 'ԍMCI suggests that Congress deliberately separated the functions preserved under sections 253(b) and 253(c) to remove from local governments the authority to regulate entry. MCI Reply at 34. preempt the applicable franchising statute or local regulations. Likewise, we do not find it necessary to examine the decision of the Supreme  X4Court of Kansas in United Tel. Co. of Kansas, confirming that under Kansas law a telephone  >!"  >!" "z0*%%99"  >!" company holding a CPCN from the KCC must also obtain a franchise from the city the  X4telephone company intends to serve.r{ {Ob'ԍSee United Tel. Co. of Kansas, 258 Kan. at 211.r  X4150.` ` Section 253 preempts the Cities from enforcing their franchise requirements as reflected in the record in this proceeding with the effect of precluding Classic from providing local telecommunications services within the Cities. We expect the Cities to  Xv4expeditiously reconsider Classics' franchise applications, i.e., within 60 days from the release of this order, in a manner consistent with this opinion. At this time, however, we decline Classic's request to "enjoin Hill City and Bogue from taking any action that has the purpose or effect of directly or indirectly interfering with Classic's provision of telecommunications  X 4services anywhere within Classic's service area."H| Z yO' 'ԍClassic Petition at 15.H We do not believe such action is  X 4necessary at this time. We believe that, in this decision, we have provided the Cities sufficient guidance to implement their franchising requirements in a manner that does not prohibit the ability of any entity, including Classic, from providing telecommunications services and we expect they will do so. We note that, contrary to Bogue's arguments, the Tenth Amendment of the U.S. Constitution is not offended by federal preemption pursuant to section 253. Section 253 explicitly preempts State and local legal requirements. In this situation, pursuant to the Supremacy Clause of Article VI of the Constitution, federal law governs.  X6'! IV. ORDERING CLAUSESא\  X4 251.` ` Accordingly, pursuant to section 253 of the Communications Act of 1934, as amended by the Telecommunications Act of 1996, 47 U.S.C.  253, IT IS ORDERED that the Petition for Preemption, Declaratory Ruling and Injunctive Relief filed by Classic Telephone, Inc. IS GRANTED to the extent discussed herein, and is in all other respects DENIED. ` `  hhCFEDERAL COMMUNICATIONS COMMISSION ` `  hhCWilliam F. Caton  X"4` `  hhCActing Secretary