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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                )
                                )
Petition for Declaratory Ruling )
Regarding US West Petitions to  )       NSD-L-97-6
Consolidate LATAs in Minnesota  )
and Arizona                     )

                             ORDER

Adopted:  April 21, 1997                     Released:  April 21, 1997

By the Chief, Common Carrier Bureau:

                         I.  INTRODUCTION

     1.   On March 4, 1997, the Competition Policy Institute ("CPI") and the Minnesota
Department of Public Service ("MDPS," collectively "Petitioners") filed a petition ("Petition")
requesting the Federal Communications Commission ("FCC" or "Commission") to issue a
Declaratory Ruling pursuant to Section 1.2 of its rules to clarify that the Second Report and Order
did not delegate to the states the Commission's authority to approve the establishment of or
modification to Local Access Transport Area ("LATA") boundaries and that this authority remains
with the Commission.  Petitioners request this clarification because US West has filed petitions with
two state commissions requesting that those commissions modify the LATA boundaries in each of
their states to make those boundaries coextensive with state boundaries.  For the reasons discussed
herein, the Petition is granted.

                         II.  BACKGROUND

     2.   Section 251(b)(3) of the Communications Act of 1934 ("the Act"), as amended by
the Telecommunications Act of 1996 ("1996 Act"), requires all telecommunications carriers to
provide dialing parity to competing providers of telephone exchange service and telephone toll
service.  The Commission concluded that section 251(b)(3) requires that customers be entitled to
choose different carriers to carry both their intraLATA and interLATA toll calls on a 1+ dialing
basis.  In reaching this conclusion, the Commission was building upon the experiences and
accomplishments of state commissions that had implemented toll dialing parity.  The Commission
recognized that "toll dialing parity typically has been based on LATA boundaries [i.e.presubscription on a LATA-wide basis for each LATA] in multi-LATA states where it has been
implemented."  The Commission acknowledged that "the Bell Operating Companies' (BOCs')
operations are likely to be shaped by LATA boundary restrictions for a period of unforeseeable
duration," and that some BOCs may find it technically infeasible, or otherwise undesirable, to
implement toll dialing parity across an entire state without considering the effect of the state's LATA
boundaries on the BOC's implementation of toll dialing parity.  The Commission, however, also
observed that "implementation of the 1996 Act over time may diminish the significance of LATA
boundaries," and therefore did not impose a requirement that toll dialing parity be implemented
solely on a LATA by LATA basis.  Instead, the Commission concluded that states should be able
to take into account such factors as the effect of LATA boundary restrictions on BOC
implementation of toll dialing parity, and thus have the flexibility to require that toll dialing parity
be implemented on the basis of state boundaries rather than on a LATA by LATA basis where the
state determines that to do so would be pro-competitive and otherwise in the public interest.

     3.   On November 22, 1996, US West filed a petition before the Minnesota PUC
("MPUC") requesting that the MPUC redefine the boundaries of the five LATAs within the state so
that Minnesota would become a one LATA state.  On January 17, 1997, US West filed a petition
with the Arizona Corporation Commission ("ACC") requesting that the ACC redefine the boundaries
of the two LATAs within the state so that Arizona would become a one LATA state. In supporting
those requests before the state commissions, US West stated that in the 1996 Act Congress vested
authority in the Commission to change LATA boundaries, and that the Commission delegated this
authority to the states in the Second Report and Order.

                         III.  PLEADINGS

     4.   The Petition.  Petitioners request a declaratory ruling that the Commission did not
delegate to the states the Commission's authority to establish or modify LATA boundaries. 
Petitioners first argue that the 1996 Act gives authority over LATA boundaries solely to the
Commission.  Petitioners state that Section 601(a) of the 1996 Act makes any conduct or activity
formerly subject to the AT&T Consent Decree subject to the Act.  Petitioners contend that, because
LATA boundaries were established as part of the rulings administering the decree, Section 601(a)
transfers authority over LATA boundaries to the Commission.  Petitioners further contend that
Section 3(25) of the Act explicitly authorizes the Commission to approve LATA boundaries.  The
petitioners conclude that the 1996 Act requires that LATA boundaries either be those established
under the AT&T Consent Decree or those established or modified by the BOC and approved by the
Commission.  Petitioners assert that, although the 1996 Act grants the Commission authority over
LATA boundaries, it does not authorize the Commission to delegate its authority over the
establishment or modification of LATA boundaries to the states.

     5.   Petitioners argue further that the Commission did not delegate its authority over
LATA boundaries to the states.  According to Petitioners, there is no statement, either in the NPRMor in the Second Report and Order, of any intent to delegate Commission authority over the
definition of LATA boundaries.  Petitioners state that US West has misconstrued Commission
statements solely intended to give states the choice of implementing the 1+ toll dialing parity
requirement on a state-wide basis or on a LATA-wide basis, but with all LATA restrictions
remaining unchanged.

     6.   Moreover, according to Petitioners, allowing a state to redefine intrastate LATA
boundaries would effectively allow the states to determine the conditions under which the BOCs
would be allowed to provide intrastate, interLATA service, an outcome inconsistent with the
requirements of Section 271, which requires the Commission to approve any BOC applications to
provide interLATA service.

     7.   Petitioners express concern that a state PUC could grant US West the relief it
requested.  They further note that legislation has recently been introduced in Minnesota that directs
the MPUC to modify LATA boundaries to convert Minnesota into a single-LATA state. 
Petitioners request that the Commission act promptly to resolve this matter to avoid the preemption
petitions that parties would file with the Commission if a state granted the request of US West (or
any other BOC) to combine LATAs within a state.

     8.   Comments in Support of the Petition.  AT&T Corporation ("AT&T"), the
Competitive Telecommunications Association ("CompTel"), MCI Telecommunications Corporation
("MCI"), the Telecommunications Resellers Association ("TRA"), Teleport Communications Group,
Inc. ("TCG"), and WorldCom, Inc. ("WorldCom") have filed comments in support of the Petition. 
Commenters supporting the Petition agree that the Commission did not delegate authority over
LATA boundaries to the states.  Moreover, all commenters agree with Petitioners that the 1996 Act
gave the Commission exclusive authority over the administration of LATA boundaries, and that
the Commission cannot delegate this authority to the states.  Commenters concur that, if exercised,
the authority that US West claims was delegated would impermissibly circumvent Section 271 of
the Act.  In addition, AT&T states that the 1996 Act prohibits the Commission from forbearing to
enforce any of the requirements of Section 271 until the Commission determines that those
requirements "have been fully implemented."

     9.   Comments Opposing the Petition.  US West contends that when the Commission
authorized states "to redefine the toll dialing parity requirement based on state, rather than on LATA,
boundaries where a state deems such a requirement to be pro-competitive and otherwise in the public
interest" in the Second Report and Order, the Commission acknowledged that state commissions
have authority to redefine LATA boundaries.  US West states that, as a consequence, it filed the
State Petitions.  US West argues that denying the Petitioners' request for clarification and
permitting Minnesota and Arizona to grant the State Petitions will allow US West to compete fully
in those states' intraLATA markets.  US West asserts that, rather than harming consumers and
competition, the additional choice (i.e., U.S. West) that would be available to consumers in the
intrastate long distance market will benefit the public.

     10.  In support of its contention that the Commission delegated LATA modification
authority to the states, US West first argues that under the AT&T Consent Decree, state commissions
retained limited jurisdiction over local and intraLATA calls.  Second, US West asserts that the
FCC, as part of its implementation of the Act's dialing parity requirement in the Second Report and
Order, recognized that state commissions play an important role in implementing the pro-
competitive objectives of the 1996 Act, and, for this reason, permitted the state commissions to
modify LATA boundaries to allow incumbent LECs (ILECs) like US West to compete fully in the
intrastate toll market.

     11.  Third, US West states that the Commission did not link the introduction of statewide
dialing parity to the requirements of Section 271, and that Section 271 does not bar the
modification of LATA boundaries.  US West argues that the determination of an intrastate LATA
boundary is the type of wholly intrastate matter over which Section 2(b) of the Act precludes
Commission jurisdiction.  US West contends that under the Act's definition, the Commission
should be limited to approval of interstate LATA modifications; but, even if the definition could be
expanded to include intrastate boundaries, the states are not precluded from playing a role where
intrastate LATA boundaries are concerned, and the Commission is not prohibited from permitting
the states to exercise that role.

     12.  The Arizona Corporation Commission states that it is considering the US West
application to expand LATA boundaries.  The ACC further contends that it is committed to
pursuing an orderly transition to competition, and that it is in the best position to make any
determinations that affect intrastate matters over which it retains jurisdiction pursuant to Section 2(b)
of the Act.  As a consequence, the ACC asserts that it is the appropriate governmental entity to
make a decision regarding intrastate telecommunications matters, including the petition filed by US
West. 

     13.  In addition, the ACC states that while it recognizes that changing intraLATA
boundaries may have an interstate effect and that the Commission may have a role in a process that
alters those borders, the Commission should not decide at this time whether Arizona may alter
intrastate LATA boundaries.  Instead, the ACC states that it will open a docket to determine
whether US West has met the requirements of the Section 271 checklist before it will reach a
decision as to whether the expansion of LATA boundaries is pro-competitive and in the public
interest.  The ACC argues that such a process is consistent with the dual jurisdiction that remains
intact in Section 2(b) of the Act.

     14.  Replies. Petitioners, AT&T, MCI, TCG, US West and the Antitrust Division of the
Department of Justice ("DOJ") have filed reply comments.  Most commenters argue that the
Second Report and Order does not support US West's argument, that the 1996 Act gives
unambiguous authority over LATA boundaries to the Commission, and that US West's request is
inconsistent with the requirements that Congress established in Section 271 of the Act to allow
BOCs to enter the interLATA market.  In its Reply, US West asserts that granting the State
Petitions will correct the customer confusion and competitive imbalance that have resulted from the
introduction of 1+ intraLATA presubscription in the intrastate toll market.  US West also observes
Section 271(e)(2)(B) allows states that had initiated 1+ toll dialing parity prior to December 19,
1996 to keep such regulations in place.

     15.  US West reiterates its contention that in the Second Report and Order the
Commission gave the states the choice to "redefine the [LATA] boundaries so that presubscription
for toll services would occur in an intrastate/interstate basis, consistent with the historical jurisdiction
reserved to the states over intrastate telecommunications services."  US West asserts that, contrary
to arguments raised by AT&T, TCG and WorldCom, the Commission may delegate authority over
LATA boundaries subject to conditions that it chooses to attach to the delegation.  The US West
Response states that the local conditions upon which Judge Greene relied have changed during the
last 14 years, and, as a result, the original LATA boundaries may no longer reflect the
telecommunications needs of certain states.  US West argues that state commissions have greater
knowledge of local conditions than a federal agency, and that changes in LATA boundaries would
affect matters (such as intraLATA service) over which US West believes the Act gives states
primary responsibility.  According to US West, the Commission, rather than blocking the states from
examining this issue, should permit the states to consider whether conditions justify LATA
modification and, if so, what type of modification may be appropriate.

                         IV.  DISCUSSION

A.   Congress Vested Exclusive Authority to Define LATA Boundaries Within the FCC's
     Jurisdiction

     16.  US West's and ACC's argument that Commission jurisdiction over LATA boundaries
is limited by Section 2(b) of the Act is incorrect.  In Louisiana Public Service Com'n v. F.C.C.,
the Supreme Court determined that, in order to overcome Section 2(b)'s limits on the Commission's
jurisdiction with respect to intrastate communications service, Congress must either modify Section
2(b) or grant the Commission additional authority.  As explained below, in the AT&T Consent
Decree, the U.S. District Court created LATAs pursuant to federal antitrust law, then acted as the
sole forum for matters concerning LATA boundaries.  The Commission's subsequent authority to
administer LATA boundary modification results from supervening legislation that explicitly and
exclusively transfers this authority to the Commission, and, by its terms, is not subject to Section
2(b) of the 1934 Communications Act.

     17.  On August 24, 1982, the U.S. District Court entered the AT&T Consent Decree,
which required AT&T to divest its ownership of the BOCs.  The Court held that the decree
preempted all inconsistent state law and conditioned its approval of the decree on, inter alia,
modification of the decree "to confirm the Court's authority to initiate enforcement proceedings sua
sponte." The U.S. District Court subsequently divided all territory in the continental United States
served by the BOCs into LATAs.  Under the decree, BOCs were permitted to provide telephone
service within a LATA, intraLATA service, but were not permitted to carry traffic that crossed
LATA boundaries, interLATA service.  InterLATA traffic was to be carried by interexchange
carriers.  The U.S. District Court was the sole forum for matters concerning LATA boundaries.

     18.  In its administration of LATA boundaries, the U.S. District Court received numerous
requests for waivers of the AT&T Consent Decree to permit exceptions to LATA restrictions to
preserve local calling.  In its rulings on these requests, the U.S. District Court recognized state
expertise over local issues, but never ceded jurisdiction over the modification of LATA boundaries
to the states, even where those boundaries were wholly intrastate.  For example, the U.S. District
Court granted such waivers only when the competitive effects were minimal and a sufficient
community of interest across LATA boundaries had been clearly shown.  The Court granted
waivers to permit BOCs to offer flat-rate, non-optional expanded local calling area (ELCS) plans
to permit traditional local telephone service between nearby exchanges, but refused to grant waivers
for measured-rate ELCS plans calling for subscribers to pay measured-rates based on such factors
as duration, distance, and time of day.  The Court found that granting the latter type of waiver could
have an anticompetitive effect because the services that would have been offered under such plans
were similar to the toll service normally provided by interexchange carriers.  Further, the Court
expressed concern that allowing exceptions for measured-rate plans could lead to a "piecemeal
dismantling" of the prohibition on the BOCs' provision of interLATA service.  Thus, the U.S.
District Court retained sole authority over any change to all LATA boundaries until the enactment
of the 1996 Act.

     19.  The 1996 Act shifts the Court's exclusive authority over LATA boundaries to the
Commission.  Section 601 of the Act transfers authority over any "conduct or activity" previously
subject to the AT&T Consent Decree to the requirements and obligations of the Act, as amended. 
Section 251(g) then explicitly delegates to the Commission sole authority to administer the "equal
access and nondiscriminatory interconnection restrictions and obligations" that applied under the
AT&T Consent Decree.  Exclusive authority over LATA boundary establishment or modification
is an essential component of the Commission's authority to enforce the equal access and
interconnection restrictions established under the AT&T Consent Decree.  Congress underscored the
Commission's sole authority over LATA boundaries in new Section 3(25) of the Act by defining a
LATA to mean a "contiguous geographic area . . . established or modified by a Bell operating
company after such date of enactment [February 8, 1996] and approved by the Commission."  The
Act thus gives the Commission sole authority to approve any BOC action to establish or to modify
LATA boundaries as they existed on February 8, 1996.  The Commission's jurisdiction over the
administration of LATA boundary establishment and modification comes directly from the 1996 Act
which gives the Commission explicit, exclusive authority.  No construction of the statute is
necessary and Section 2(b) thus imposes no limit upon the Commission's authority to approve the
establishment of, or modification to, LATA boundaries.

B.   The Commission Has Not Delegated its Authority to Redefine LATA Boundaries to the
     States

     20.  US West relies on the language of paragraph 5 of the Second Report and Order to
support its argument that the Commission delegated to the states its authority to establish or modify
LATA boundaries.  That paragraph, however, explicitly recognizes the significance of current LATA
boundaries to states' decisions to implement dialing parity on a state border basis.  Paragraph five
states in relevant part:

     [t]he toll dialing parity requirement we adopt is defined by LATA boundaries given
     that the Bell Operating Companies' (BOCs') operations are likely to be shaped by
     LATA boundary restrictions for a period of unforeseeable duration.  Given that
     implementation of the 1996 Act over time may diminish the significance of LATA
     boundaries, however, we permit states to redefine the toll dialing parity requirementbased on state, rather than LATA, boundaries where a state deems such a requirement
     to be pro-competitive and otherwise in the public interest.

     21.  US West incorrectly concludes that this language means that "the Commission has
specifically delegated its power to modify LATA boundaries to the states, who may redefine LATAs
to be co-extensive with state borders."  The paragraph says nothing about changing LATA
boundaries, but rather allows the states to implement dialing parity across LATAs or across the
whole state.  In contrast to US West's assertion, paragraph 5 discusses the diminution of the
significance of LATAs over time rather than the delegation or redefinition of LATA boundaries.

     22.  US West also contends that paragraph 37 contains language delegating to the states
the authority to modify LATA boundaries.  In paragraph 37, however, the Commission qualified its
"expectation that implementation of the 1996 Act eventually will diminish the significance of LATA
boundaries" with the statement that "BOCs remain subject to certain LATA boundary restrictions
for at least the near-term and that some BOCs may find it technically infeasible, or otherwise
undesirable, to implement toll dialing parity based on state boundaries."  Moreover, the Commission
observed that BOCs will be subject to the requirements of Section 272 that a BOC offer in-region
interLATA service only through a separate affiliate for at least three years after that BOC receives
permission to offer such service.  The Commission explained that the separate affiliate requirement
would cause the LATA distinction to remain relevant because LATA boundaries will continue to
define the geographic areas in which a BOC that provides toll services must do so through an
affiliate (interLATA) and those in which it may provide toll services directly (intraLATA).  The
Commission concluded that states should "be able to take the relevance of those factors," (i.e., the
impact of LATA restrictions on the state's resident BOC), into account, and "have the flexibility to
require that toll dialing parity implementation be based on state boundaries where they determine
that implementing toll dialing parity on the basis of state boundaries would be pro-competitive and
otherwise in the public interest." Consequently, the Second Report and Order did not explicitly
delegate authority over LATA boundary modification to the states.

     23.  The plain language of the Second Report and Order repudiates US West's argument
that the Commission implicitly delegated LATA modification authority to the states.  As indicated
in the previous paragraphs, the only implication consistent with the Act and the Second Report and
Order is that the Commission was anticipating that the significance of LATA boundaries would
decrease once the BOCs complied with the Section 271 checklist, began to offer in-region
interLATA service, and eventually no longer needed to comply with the Section 272 requirement
that they provide interLATA service through a separate affiliate.  At that time, as the Commission
explained in paragraph 37 of the Second Report and Order, the states would have the flexibility to
implement in-region dialing parity on the basis of state or LATA boundaries after taking into
account the current relevance of LATA boundaries.  Thus, a plain reading of the language in the
Second Report and Order shows that the Commission neither explicitly nor implicitly delegated to
the states authority to modify LATA boundaries, and that the Commission fully expected that all
LATA restrictions will continue to remain in place for the foreseeable future unless the Commission
explicitly approved a BOC petition to modify those boundaries.

     24.  Finally, whenever the Commission has delegated authority to the states, it has done
so explicitly.  For example, in paragraphs 272 and 315 of the Second Report and Order, the
Commission explicitly delegated limited authority over certain numbering administration functions
such as area code relief.  As discussed above, it is clear that the Commission made no such
delegation concerning LATA boundaries in the Second Report and Order.

C.   The LATA Modification Authority US West Claims Was Delegated Would
     Impermissibly Circumvent Section 271 of the Communications Act

     25.  Section 271 of the Act creates a structured statutory scheme for the entry of the BOCs
into the interLATA market and sets strict requirements that must be met before a BOC may enter
into that market.  Central to these Section 271 requirements is that the Commission -- not the states
-- approve BOC entry into the interLATA market after the Commission consults with state
commissions and the Department of Justice.  Further, the Commission must apply all Section 271
requirements because Section 10(d) of the Act prohibits the Commission from forbearing to apply
"the requirements of . . . Section 271 .  .  . until it determines that those requirements have been fully
implemented."  The Section 10(d) requirement means that the Commission must ensure that all the
requirements of Section 271 are implemented before a BOC may offer interLATA service.  Thus,
Section 10(d) limits the manner in which the Commission may exercise its sole and exclusive
authority to approve the establishment of or modification to LATA boundaries.

     26.  US West argues that the Commission delegated to the states the authority to collapse
their intrastate LATA boundaries to make each state a one LATA state.  Should a state exercise such
authority, it would be permitting the BOCs to supply service between areas from which they had
been barred by the AT&T Consent Decree, but without requiring the Commission to approve the
BOCs' 271 application to supply such service.  Had US West made this request directly to the
Commission, the restrictions of Section 10(d) would have prohibited the Commission from granting
the request until such time as US West had entirely satisfied the requirements of Section 271. 
Commission delegation of its authority over LATA boundaries faces the same restriction.  The Act
expressly prohibits the Commission from abstaining in any way from applying the requirements of
Section 271 until those requirements have been fully implemented.  Because the FCC has not yet
concluded that any BOC has met the requirements of Section 271, the Commission could not have
lawfully delegated its exclusive authority to approve modifications to LATA boundaries to the states.

     27.  Even if Section 10(d) did not bar the Commission from allowing the states to collapse
LATA boundaries, intrastate LATA boundaries continue to serve a pro-competitive purpose.  The
U.S. District Court established LATAs to "mark the boundary beyond which a Bell Operating
Company may not carry telephone calls."  The U.S. District Court held that the size of the LATAs
as determined by the boundary drawing process (most of which involved the establishment of
intrastate LATA boundaries), could favor the BOCs or competitive carriers, depending on the size
of the LATA.  As indicated in paragraph 18, supra, the U.S. District Court strictly limited its grant
of LATA boundary waivers to those that permitted traditional local service between nearby
exchanges, and never condoned waiver requests that could permit a "piecemeal dismantling" of the
prohibition on the BOCs' provision of interLATA service.  Rather, the U.S. District Court allowed
the BOCs to engage in what would normally be interLATA service "only in carefully limited areas
and for carefully limited purposes, that is, when this serves the public convenience and does not
harm competition."  The U.S. District Court continued to limit its grant of LATA boundary waivers
to local service type calls throughout its administration of the AT&T Consent Decree. 

     28.  Nothing has changed since the passage of the 1996 Act to justify the "piecemeal
dismantling" of the LATAs prohibited by Judge Greene.  As indicated supra, in the Second Report
and Order, the Commission contemplated that intrastate LATA restrictions would remain in place
for "a period of unforeseeable duration."  Further, even according to the figures employed by US
West, intrastate interLATA revenues represented 30 percent of all 1995 access revenues.  This
figure does not support US West's position, but rather indicates that the intrastate interLATA market
is an essential component of the structured federal scheme contemplated in Section 271 of the Act
because the possibility of BOC participation in this market should act as a powerful incentive for
BOCs to open up the local market.  It would be contrary to congressional intent, and would vitiate
much of the incentive offered under Section 271 of the Act for the Commission to condone an
interpretation of the Second Report and Order that would allow states to eliminate the intrastate
interLATA market.

D.   Conclusion

     29.  In conclusion, we find that the Commission did not and could not delegate its
authority over the definition of LATA boundaries to the states.  Accordingly, the Petition is granted.

                       V.  ORDERING CLAUSES

     30.  Accordingly, IT IS ORDERED, pursuant to Sections 0.291 and 1.2 of the
Commission's rules, 47 C.F.R.  0.291 and 1.2, that the Petition for Declaratory Ruling filed by the
Competition Policy Institute and the Minnesota Department of Public Service to clarify that the
Second Report and Order did not delegate to the states the Commission's authority over the
definition of LATA boundaries and that this authority remains with the Commission, IS GRANTED.

     31.  IT IS FURTHER ORDERED, pursuant to Section 408 of the Communications Act
of 1934, as amended, 47 U.S.C.  408, that this Order SHALL BE EFFECTIVE IMMEDIATELY
UPON RELEASE.


                              FEDERAL COMMUNICATIONS COMMISSION


                              Regina M. Keeney
                              Chief, Common Carrier BureauAPPENDIX

Parties Filing Comments

The Arizona Corporation Commission
AT&T Corporation 
The Competitive Telecommunications Association
MCI Telecommunications Corporation
The Telecommunications Resellers Association
Teleport Communications Group Inc.
U S West Communications, Inc.
WorldCom, Inc


Parties Filing Reply Comments

AT&T Corporation 
The Competition Policy Institute/Minnesota Department of Public Service (Joint Reply)
The United States Department of Justice (Antitrust Division)
MCI Telecommunications Corporation
Teleport Communications Group Inc. 
U S West Communications, Inc. (also filed Response to DOJ Reply)