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BACKGROUND p>"(#v 4  X -XX` ` A.` ` Relevant Provisions of the Communications Act ` p>"(#v 4  X!-XX` ` B.` ` A Brief History of GTA ` p>"(#v 6  X"-XX` ` C.` ` The Parties' Positions ` p!(#p 10  Xj$-XUIII. DECLARATORY RULING p"(#s 14  XS%-XX` ` A.` ` GTA's Status under Section 251(h)(1) ` p"(#s 14"S%0*&&CC $"Ԍ X-XX` ` B.` ` GTA's Status under Section 3(37) ` p"(#s 21 XUIV. NOTICE OF PROPOSED RULEMAKING p"(#s 22  X-XX` ` A.` ` Overview ` p"(#s 22  X-XX` ` B.` ` Discussion ` p"(#s 26  X-XX` ` X ` ` 1. Section 251(h)(2)(A) p"(#s 26  Xv-XX` ` X ` ` 2. Section 251(h)(2)(B) p"(#s 28  X_-XX` ` X ` ` 3. Section 251(h)(2)(C) p"(#s 40  XH-XX` ` X ` ` 4. Proposal to Treat GTA and Possibly ` `  Others as an Incumbent LECp"(#s 43  X -XX` ` C.` ` Procedural Matters ` p"(#s 44  X -XX` ` X ` ` 1. Ex Parte Presentations p"(#s 44  X -XX` ` X ` ` 2. Initial Regulatory Flexibility Analysis p"(#s 45  X -XX` ` X ` ` 3. Comment Filing Procedures p"(#s 46 XUV. ORDERING CLAUSES p"(#s 47   Xd-M- I. INTRODUCTION ׃  X6-1.` ` On August 13, 1996, the Public Utilities Commission of the Territory of Guam (Guam Commission) filed a Petition for Declaratory Ruling (Petition) seeking a declaratory ruling on two questions arising from application of certain provisions of the  X-Telecommunications Act of 1996 (1996 Act)\8c {Oj-ԍPub. L. No. 104104, 110 Stat. 56, codified at 47 U.S.C.  151 et seq. The 1996 Act amended the  {O4-Communications Act of 1934 (Act or Communications Act), 47 U.S.C.  151 et seq. All citations herein to the 1996 Act will be to the 1996 Act as codified in Title 47 of the United States Code. to the circumstances in the Territory of Guam (Guam):   X-X ` ` (A) Is the Guam Telephone Authority (GTA) the local exchange carrier (LEC) throughout Guam an "incumbent local exchange carrier" within  X~-the meaning of section 251(h)(1) of the Communications Act,J~8c yO-ԍ47 U.S.C.  251(h)(1).J and thus subject to the interconnection, unbundling, resale, and other obligations imposed by  XP-section 251(c) of the Act?GP|8c yO}"-ԍ47 U.S.C.  251(c).G  "9 0* % %CC"ԌX` ` (B) Is GTA a "rural telephone company" within the meaning of section  X-3(37) of the Communications Act,H8c yOb-ԍ47 U.S.C.  153(37).H and thus exempt (at least initially) under  X-section 251(f)(1) of the ActJX8c yO-ԍ47 U.S.C.  251(f)(1).J from the obligations of section 251(c)?   X-2.` ` We address these questions in Part III, below. With regard to the first question, we determine that GTA is not an "incumbent local exchange carrier" within the meaning of section 251(h)(1). GTA is not an incumbent LEC under that provision because it was not deemed to be a member of the National Exchange Carrier Association, Inc. (NECA) as of February 8, 1996, the date of enactment of the 1996 Act, and it has not since become a  X1-successor or assign of a NECA member.^18c {O -ԍSee 47 U.S.C.  251(h)(1)(B). NECA is an association of LECs established by the Commission in the  {O-early 1980s to administer the interstate access tariff and revenue distribution processes. See MTS and WATS  {O^-Market Structure, CC Docket No. 7872, Phase I, Third Report and Order, 93 FCC 2d 241, 33334 (1983).  With regard to the second question, we determine that GTA is a "rural telephone company" within the meaning of section 3(37). GTA is a rural telephone company under that provision because it is a local exchange carrier operating entity that provides telephone exchange service to a local exchange study areaGuamwith  X -fewer than 100,000 access lines.&Z 8c {O-ԍSee 47 U.S.C.  153(37)(C); Guam Telephone Authority Petition for Declaratory Ruling , Report and Order, DA 97595 (Accg. & Aud. Div. rel. March 21, 1997)(granting GTA's request for designation of Guam as a study area).&  X -3.` ` Our determination that GTA is not an incumbent LEC under section 251(h)(1) means that the obligations of section 251(c) do not apply to GTA at this time. Section  Xy-251(h)(2) of the Communications Act,Jy0 8c yOZ-ԍ47 U.S.C.  251(h)(2).J however, allows us to treat a local exchange carrier such as GTA as an incumbent LEC for purposes of section 251 if certain statutory criteria are  XK-met.c K 8c {O-ԍWe list those criteria in Part II(A), infra.c Because of the importance of the question for the development of telecommunications competition in Guam, we initiate a rulemaking proceeding pursuant to section 251(h)(2) to determine whether GTA should be treated as an incumbent LEC for purposes of section 251. We tentatively conclude that the statutory criteria for such treatment set forth in section 251(h)(2) are satisfied, and that such treatment is necessary to avoid frustrating the Congressional intent to include Guam within the new national policy framework of competition in telecommunications. We propose, therefore, to provide for the treatment of"R 0* % %CC" GTA as an incumbent LEC for section 251 purposes. We invite comment on these tentative conclusions and proposal. We also seek comment whether LECs situated similarly to GTA exist and, if so, whether we should adopt the same rule with respect to such class or category of LECs.  Xv- g/ II. BACKGROUND ׃  XH- A.` ` Relevant Provisions of the Communications Act   X -4.` ` Section 251(h) establishes two alternative grounds for classifying a LEC such as GTA as an incumbent LEC. First, a LEC may satisfy the statutory definition of an incumbent LEC set forth in section 251(h)(1): XX` ` [T]he term "incumbent local exchange carrier" means, with respect to an area, the local exchange carrier that (A) on the date of enactment of the Telecommunications Act of 1996, provided telephone exchange service in such area; and (B)(i) on such date of enactment, was deemed to be a member of the exchange carrier association pursuant to section 69.601(b) of the Commission's regulations (47 C.F.R.  69.601(b)); or (ii) is a person or entity that, on or after such date of enactment, became  X-a successor or assign of a member described in clause (i).C 8c yO-ԍ47 U.S.C.  251(h)(1). Section 69.601(b) of the Commission's rules provides: XX` ` All telephone companies that participate in the distribution of Carrier Common Line revenue requirement, pay long term support to association Common Line Tariff participants, or receive payments from the transitional support fund administered by the association shall be deemed to be members of the association. x` 47 C.F.R.  69.601(b). The "association" to which section 251(h)(1) and this rule refer is NECA.C x` Second, under section 251(h)(2), the Commission "may, by rule, provide for the treatment of a local exchange carrier(or class or category thereof) as an incumbent local exchange carrier  X-for purposes of [section 251]"J 8c yO!-ԍ47 U.S.C.  251(h)(2).J if: "( 0* % %CC"ԌXX` ` (A) such carrier occupies a position in the market for telephone exchange service within an area that is comparable to the position occupied by a carrier described in paragraph (1); (B)such carrier has substantially replaced an incumbent local exchange carrier described in paragraph (1); and (C) such treatment is consistent with the public interest, convenience, and  Xv-necessity and the purposes of this section.: v8c {O-ԍId.:x`  XH-5.` ` Section 251(c) requires incumbent LECs and only incumbent LECs to meet certain specified obligations with respect to interconnection, access to unbundled  X -network elements,  Z8c yO' -ԍ"Network element" means "a facility or equipment used in the provision of a telecommunications service," and "includes features, functions, and capabilities that are provided by means of such facility or equipment, including subscriber numbers, databases, signaling systems, and information sufficient for billing and  yO-collection or used in the transmission, routing, or other provision of a telecommunications service." 47 U.S.C. 153(29). resale of their retail services, notification of interoperability changes to  X -their facilities or networks, and collocation. 8c {O-ԍSee 47 U.S.C.  251(c)(2)(6). See also Joint Statement of Managers, S. Conf. Rep. No. 104230, 104th  {O-Cong., 2d Sess., 12122 (1996)(Joint Explanatory Statement). Section 251(f)(1), however, provides an automatic exemption from section 251(c) for any incumbent LEC that is a "rural telephone  X -company,"P f 8c yO-ԍ47 U.S.C.  251(f)(1).P which section 3(37) defines as: XX` ` a local exchange carrier operating entity to the extent such entity (A) provides common carrier service to any local exchange carrier study area that does not include either (i) any incorporated place of 10,000 inhabitants or more, or any part thereof, based on the most recently available population statistics of the Bureau of the Census; or (ii) any territory, incorporated or unincorporated, included in an urbanized area, as defined by the Bureau of the Census as of August 10, 1993; (B) provides telephone exchange service, including exchange access, to fewer than 50,000 access lines; (C) provides telephone exchange service to any local exchange study area with fewer than 100,000 access lines; or (D) has less than 15 percent of its access lines in" 0* % %CCR" communities of more than 50,000 on the date of enactment of  X-the Telecommunications Act of 1996.H8c yOb-ԍ47 U.S.C.  153(37).Hx` The automatic exemption from section 251(c) terminates if and when the rural telephone company receives a "bona fide request for interconnection, services, or network elements" that the relevant State commission determines is not unduly economically burdensome, technically  Xv-infeasible, or inconsistent with statutory universal service requirements.JvX8c yO -ԍ47 U.S.C.  251(f)(1).J Moreover, section 251(f)(2) of the Communications Act provides that a LEC "with fewer than 2 percent of the  XH-Nation's subscriber lines installed in the aggregate nationwide"JH8c yO -ԍ47 U.S.C.  251(f)(2).J may: XX` ` petition a State commission for a suspension or modification of the application of a requirement or requirements of [section 251(b)] or [section 251(c)] to telephone exchange service facilities specified in such petition. The State Commission shall grant such petition to the extent that, and for such duration as, the State commission determines that such suspension or modification (A) is necessary (i) to avoid a significant adverse economic impact on users of telecommunications services generally; (ii) to avoid imposing a requirement that is unduly economically burdensome; or (iii) to avoid imposing a requirement that is technically infeasible; and (B) is consistent  X-with the public interest, convenience, and necessity.:x8c {OF-ԍId.:x`  X-  B.` ` A Brief History of GTA   X-6.` ` In 1973, the government of the Territory of Guam created GTA as a notforprofit public corporation to provide local exchange and exchange access services to the  X-Territory.( 8c {ON!-ԍSee IT&E Overseas, Inc. and PCI Communications, Inc. Petition for Emergency Relief and Expedited  {O"-Declaratory Ruling, Memorandum Opinion and Order, 7 FCC Rcd 4023 (1992)(Guam Jurisdictional Order), as  {O"-modified in 7 FCC Rcd 4670 (1992), 7 FCC Rcd 7270 (1992), 8 FCC Rcd 8381 (1993)(all extending filing  {O#-dates), petitions for recon. pending. Since that time, GTA has operated as a semiautonomous agency of the Territory" 0* % %CC3"  X-of Guam._8c {Oy-ԍSee GTA NECA Membership Order at 2._ GTA is regulated by the Guam Commission, which is also an agency of the government of the Territory of Guam. By 1995, GTA operated the twentyninth largest local  X-telephone network in the United States, serving approximately 67,000 access lines.NZ8c {O-ԍPhone Facts at 9 (United States Telephone Association 1996 ed.)(indicating that in fiscal year 1995  {O-GTA was the twentyninth largest telephone company, with 66,587 access lines). See Comments of Guam Cable  {Oq-Telecommunications, Inc. in Applications for GTA Interconnection and Resale Under the 1996  {O;-Telecommunications Act, Guam Commission Docket No. 96006, at 2 (attached to the Guam Commission's  {O -Petition); Comments of TelePacific Network, Inc. in Applications for GTA Interconnection and Resale Under the  {O -1996 Telecommunications Act, Guam Commission Docket No. 96006, at Exhibit C (attached to the Guam  {O -Commission's Petition). See also Comments of Guam Cable Telecommunications, Inc. at 3; Comments of MCI Telecommunications Corp. at 3.  GTA appears to be the sole provider of local telephone service to the more than 130,000 residents  X-of Guam.p 8c {O-ԍSee Bureau of the Census, United States Department of Commerce, 1990 Census of Population and  {O-Housing: Guam at 1; Letter dated February 5, 1997 from Veronica M. Ahern, GTA's outside counsel, to Alex Starr, FCC's Common Carrier Bureau, CCB Pol. 9618; Comments of the Guam Telephone Authority in  {O!-Applications for GTA Interconnection and Resale Under the 1996 Telecommunications Act, Guam Commission  {O-Docket No. 96006, at 3 n.4 (attached to the Guam Commission's Petition). See also Comments of MCI Telecommunications Corp. at 3.  Xv-7.` ` On June 2, 1992, the Commission determined, inter alia, that GTA and Guam are subject to the Communications Act of 1934, even though that Act makes no explicit mention of Guam. The Commission based its finding of jurisdiction on its statutory mandate  X3-to "regulat[e] interstate and foreign commerce in communication by wire and radio."38c {O-ԍGuam Jurisdictional Order, 7 FCC Rcd at 4024 (quoting 47 U.S.C.  151). The Commission noted that the Act expressly defines such communication to include transmissions  X -to or from any Territory of the United States. 8c {O8-ԍId. See 47 U.S.C.  153(e)(1991)(now codified at 47 U.S.C.  153(22)), 153(g)(1991)(now codified at 47 U.S.C.  153(50)), 153(f)(1991)(now codified at 47 U.S.C. 153(17)). The Commission concluded, therefore, "that the Communications Act was intended by Congress to apply,...in every respect, to all radio  X -and wire communications originating or terminating on the Territory of Guam."d 8c {Od -ԍGuam Jurisdictional Order, 7 FCC Rcd at 4024.d  X -8.` ` In the Guam Jurisdictional Order, the Commission also concluded that GTA  X-had engaged in unjust, unreasonable, and unreasonably discriminatory practices in violation of"n0* % %CC"  X-sections 201 and 202 of the Act.V8c yOy-ԍ47 U.S.C.  201, 202.V In particular, the Commission found that GTA had favored one interexchange carrier over all others by refusing to provide access services, providing inferior access services, using a nonstandard network interface, and imposing  X-excessive access charges.gX8c {O-ԍGuam Jurisdictional Order, 7 FCC Rcd at 402526.g As a result, the Commission ordered GTA, inter alia, to show cause why it should not be required to file lawful interstate and foreign exchange access  X-service tariffs with the Commission pursuant to sections 201 and 202 of the Act.R8c {O* -ԍId. at 402627.R  Xx-  Xa-9.` ` The Guam Jurisdictional Order triggered a series of reforms in GTA's  XL-practices and policies that continues to this day.pL|8c {Oy-ԍSee generally Guam Telephone Authority Tariff No. 1, Transmittal Nos. 7, 9, Order, 10 FCC Rcd 9930  {OC-(Com. Car. Bur. 1995); Guam Telephone Authority Petition for Declaratory Ruling, Memorandum Opinion and  {O -Order, 9 FCC Rcd 4890 (1994); Guam Telephone Authority Tariff F.C.C. No. 1, Transmittal Nos. 5 and 6,  {O-Order, 9 FCC Rcd 1042 (Com. Car. Bur. 1994); Guam Telephone Authority Tariff F.C.C. No. 1, Transmittal  {O-No.1, Order, 8 FCC Rcd 3640 (Com. Car. Bur. 1993). p As of the date of enactment of the 1996  X5-Act, however, GTA had not participated in NECA's carrier common line pool, paid long term support to NECA common line tariff participants, or received payments from NECA's  X -transitional support fund. 6 8c {O-ԍSee 47 C.F.R.  69.601(b) (listing conditions for being deemed a NECA member). See also 47 C.F.R.  {O- 69.2(y), 69.2(ii), 69.612; Safeguards to Improve the Administration of the Interstate Access Tariff and  {O-Revenue Distribution Processes, Report and Order and Order to Show Cause, 10 FCC Rcd 6243 (1995) (describing aspects of NECA programs relevant to conditions for NECA membership listed in 47 C.F.R. 69.601(b)).  Since that date of enactment, GTA has successfully petitioned the Commission to become a member of NECA and thereby participate in NECA's common line  X -pool.p ^ 8c {Ov-ԍSee Guam Telephone Authority Petition for Declaratory Ruling to Participate in the National Exchange  {O@-Carrier Association, Inc., Memorandum Opinion and Order, DA 971007, CCB/CPD File No. 9629 (Com. Car.  {O -Bur. rel. May 12, 1997)(GTA NECA Membership Order).p     X - C.` ` The Parties' Positions   X}- 10.` ` In its Petition, the Guam Commission states that, in the spring of 1996, GTA received requests from TelePacific Network, Inc. (TNI) and Guam Cable Telecommunications, Inc. (GCT) to interconnect with GTA's network and resell GTA's local"O 0* % %CCg" exchange services pursuant to section 251(c). The Guam Commission also states that GTA responded to those requests by asserting in a letter to the Guam Commission that, under sections 3(37) and 251(f)(1) of the Act, GTA would be exempt from the requirements of  X-section 251(c) if the Guam Commission determined, inter alia, that GTA is a rural telephone  X-company.Q!8c yO-ԍGuam Commission Petition at 23.Q The Guam Commission initiated a proceeding to resolve the issues raised by the  X-requests and GTA's letter."X8c {O-ԍSee Applications for GTA Interconnection and Resale under the 1996 Telecommunications Act, Guam Commission Docket No. 96006. In connection with that proceeding, the Guam Commission filed the Petition described above, asking this Commission to determine whether GTA is an "incumbent local exchange carrier" under section 251(h)(1) and a "rural telephone company" under section 3(37). The Guam Commission takes no position on the merits of either of those  X3-questions.Q#38c yO-ԍGuam Commission Petition at 39.Q Ten parties filed comments on the Guam Commission's Petition, and four parties  X -replied.$ B8c yO-ԍThese parties are GTA, GCT, IT&E Overseas, Inc. (IT&E), Guam Cellular Telephone Company, Inc. (Guam Cellular), MCI Telecommunications Corp. (MCI), PCI Communications, Inc. (PCI), Sprint Communications Company, L.P. (Sprint), The Employers Council, Speaker Don Parkinson of the Guam Legislature (Speaker Parkinson), Senator Thomas Ada of the Guam Legislature (Senator Ada), and Guam resident Joseph Stoll (Stoll).  X -  11.` ` GTA asserts that, "[u]nder a strict interpretation of section 251(h)(1) of the Act,  X -GTA is not an incumbent local exchange carrier because it was not a member of NECA."E% 8c yOz-ԍGTA Comments at 34.E GTA professes no desire, however, "to avoid the obligations of" section 251(c) as long as the Commission rules that GTA qualifies as a "rural telephone company" under section  X-3(37).:& 8c {O-ԍId.:  Xd- 12.` ` All of the other commenters urge the Commission to minimize GTA's ability  XM-to impede competitive entry and preserve its monopoly status.d'"M8c {O!-ԍSee GCT Comments at 18; Guam Cellular Comments at 23; MCI Comments at 24; PCI Comments at 46; Sprint Comments at 17; Speaker Parkinson Comments at 12; Senator Ada Comments at 12; The Employers Council Comments at 1; Stoll Comments at 12; GCT Reply at 14; MCI Reply at 13; IT&E Reply at 47.d Several of those commenters"M '0* % %CCg"  X-argue that GTA possesses substantial financial resources and economies of density, connectivity, and scale comparable to those possessed by LECs that are clearly incumbent LECs under section 251(h)(1). Therefore, according to these commenters, a determination that GTA is not an incumbent LEC would retard the development of competition in the local exchange and exchange access markets on Guam, in contravention of the procompetitive  X-purposes of the 1996 Act.(8c {O-ԍSee GCT Comments at 24, 7; MCI Comments at 24; PCI Comments at 46; Senator Ada Comments at 12; Speaker Parkinson Comments at 12; GCT Reply at 34; IT&E Reply at 47. GCT, MCI, and PCI maintain that GTA's status as a non Xv-member of NECA stems from GTA's failure to comply with the Guam Jurisdictional Order  Xa-in a timely manner, conduct from which GTA allegedly should not benefit.o)a"8c {O4 -ԍSee PCI Comments at 45; GCT Reply at 3; MCI Reply at 2.o GCT and MCI claim that other statutory provisions permit the Commission to impose the obligations of  X3-section 251(c) on GTA, even if GTA is not an incumbent LEC under section 251(h)(1).*38c {O-ԍSee GCT Comments at 78, citing 47 U.S.C.  251(a)(1), (b)(1); MCI Reply at 13, citing 47 U.S.C. 154(i). IT&E and GCT contend that section 251(h)(2) permits the Commission to rule that GTA must  X -comply with those obligations.+" 8c {O-ԍSee GCT Comments at 7; IT&E Reply at 5. The Guam Commission notes that "the Commission may,  yO-by rule, provide that GTA is comparable to an incumbent LEC pursuant to Section 251(h)(2)," but "Section 251(h)(2) may not be applicable in this instance" because "GTA has not replaced an [incumbent LEC]." Petition at 9, 9n.23.  X -  X - 13.` ` With respect to whether GTA is a "rural telephone company" under section  X -3(37), GTA does not contend that it qualifies as a "rural telephone company" under sections 3(37)(A), (B), or (D). GTA does contend, however, that it qualifies under section 3(37)(C),  X-because its telephone exchange service area has fewer than 100,000 access lines., 8c {O;-ԍSee GTA Comments at 12; GTA Reply at 2. In its Petition, the Guam Commission represents that it "has confirmed that GTA serves an area with fewer than 100,000 access lines...." Petition at 5 n.11. The other commenters identify only one potential obstacle to determining that GTA is a rural telephone company within the meaning of section 3(37)(C) the Commission had not formally classified GTA's service area as a "study area" prior to the close of the comment period in  X6-this proceeding.-$6R 8c {O9!-ԍSee GCT Comments at 47; PCI Comments at 14; Sprint Comments at 17; GCT Reply at 23; IT&E Reply at 57. The Communications Act does not define "study area." The Commission has defined "study area" as a geographical segment of a carrier's telephone operations that typically corresponds to a carrier's entire  {O#-service area within a state or territory. See, e.g., Micronesian Telecommunications Corp. Request for a"#,0* % %#"  {O-Declaratory Ruling, Report and Order, 9 FCC Rcd 2032 (Com. Car. Bur. 1994)(granting study area waiver for  {OZ-the Commonwealth of the Northern Mariana Islands); Petitions for Waivers Filed by Golden Belt Telephone  {O$-Association, Inc., et al., Memorandum Opinion and Order, 11 FCC Rcd 10165 (Accg. & Aud. Div. 1996). Thus, carriers operating in more than one state or territory usually have one study area for each state or territory, and  {O-carriers operating in a single state or territory ordinarily have a single study area. See id. Because the  yO-Commission froze all study area boundaries effective November 15, 1984, a local exchange carrier must apply to  {OH-the Commission for a waiver of the freeze in order to create a new study area. See 47 C.F.R. Part 36  {O-(AppendixGlossary); Request for Clarification Filed by the National Exchange Carrier Association, Inc.,  yO-Memorandum Opinion and Order, 11 FCC Rcd 8646 (Com. Car. Bur. 1996).  Thus, the commenters discuss whether GTA needs to seek a waiver to"6 -0* % %CC*" create a new study area in order to attain the status of a rural telephone company in Guam,  X-and, if so, whether the Commission should grant such a waiver..8c {O> -ԍSee GCT Comments at 47; PCI Comments at 14; Sprint Comments at 17; GCT Reply at 23; IT&E Reply at 57.  X-b  III. DECLARATORY RULING ׃  Xv- A.` ` GTA's Status under Section 251(h)(1)   XH- 14.` ` Under section 251(h)(1), a LEC is an incumbent LEC with respect to a given service area if two conditions are met. The LEC must have provided telephone exchange service in that area on the date of enactment of the 1996 Act; and the LEC must have either been deemed to be a NECA member pursuant to section 69.601(b) of the Commission's rules as of that date of enactment, or become a successor or assign of a NECA member after that  X -date.Z/ 8c {O-ԍSee 47 U.S.C.  251(h)(1).Z GTA meets the first of these requirements. It provided local telephone exchange service in Guam on the date of enactment of the 1996 Act; indeed, it apparently was the only entity that did so. GTA, however, does not meet the second requirement. As of the date of enactment of the 1996 Act, GTA was not engaged in any of the activities that would have  Xy-allowed it to be deemed a NECA member under section 69.601(b) of the Commission's rules. Moreover, since that date, GTA has not become a successor or assign of any NECA member. Consequently, we conclude that GTA is not an incumbent LEC within the meaning of section 251(h)(1).  X-15.` ` As described above,S0 8c {OG"-ԍSee Part II(C), supra.S several commenters suggest that GTA's status as a nonmember of NECA should not prevent us from classifying GTA as an incumbent LEC under section 251(h)(1). They argue that the Commission should overlook the NECAmembership" "00* % %CCr" requirement of section 251(h)(1)(B) because, in their view, GTA possesses potentially anticompetitive characteristics of incumbency that Congress designed section 251(c) specifically to redress. These characteristics allegedly include dominance in the local exchange and exchange access markets, formidable financial resources, and economies of density, connectivity, and scale. Congress, however, defined incumbent LEC in section 251(h)(1), and the Congressional definition requires NECA membership. Accordingly, we reject the suggestions of those commenters that urge us to overlook the NECA membership requirement.  XH-16.` ` GCT, MCI, and PCI assert that GTA's refusal to comply promptly with the  X1-Guam Jurisdictional Order has enabled it to avoid meeting the requirements of section 251(h)(1) and, as a consequence, the obligations imposed on incumbent LECs by the Act.  X -These parties contend that GTA should not be allowed to benefit from its improper conduct.o1 8c {O~ -ԍSee PCI Comments at 45; GCT Reply at 3; MCI Reply at 2.o PCI claims, for example, that: XX` ` the fact that [GTA] has never been "deemed" to be a NECA member under section 69.601(b) . . . is solely a result of its historic and continued policy of excluding itself from compliance with the Commission's Part 69 and other related rules in general. Over four years ago, the Commission directed GTA [in the  XM-Guam Jurisdictional Order] to show cause why it should not be required to file lawful interstate and foreign access tariffs in compliance with applicable requirements. . . . To date, GTA has still not submitted to the Commission an access tariff which complies with the Commission's Part 69 rules, despite continued assurances that it will ultimately do so. For the Commission to reward such noncompliance by declining to classify GTA as an "incumbent local exchange carrier" would stand logic on its head, place form over substance, and contradict the plain goals  X-which the Telecommunications Act of 1996 . . . advances.^2Z8c yO-ԍPCI Comments at 45 (citation omitted).^ x`  XR- 17.` ` Given that these parties have not fully explained how GTA would have been "deemed" to be a NECA member under section69.601(b) of the Commission's rules had GTA complied with Part 69 of those rules, we see no basis for resorting to an analysis akin to  X -the equitable doctrine of "unclean hands." Instead, we conclude, as set forth in Part IV, infra, that the best approach is to undertake a rulemaking pursuant to section 251(h)(2) to determine whether GTA should be treated as an incumbent LEC for purposes of section 251. Therefore," 20* % %CC"  X-we reject the argument that GTA's actions in response to the Guam Jurisdictional Order  X-require us to classify GTA as an incumbent LEC under section 251(h)(1).38c {Od-ԍWe express no opinion herein whether GTA's response to the Guam Jurisdictional Order has been appropriate.   X-18.` ` MCI suggests that the Commission rely on section 4(i) of the ActL4Z"8c yO-ԍ47 U.S.C.  154(i). Section 4(i) authorizes the Commission to "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this Act, as may be necessary in the execution  {O -of its functions." Id.  L to classify  X-GTA as an incumbent LEC.J5D8c {O -ԍSee MCI Reply at 2.J Section 4(i) gives the Commission broad authority to "perform any and all acts . . . and issue such orders . . . as may be necessary in the execution of its  Xx-functions," but only where doing so is "not inconsistent with this Act."G6x8c yO-ԍ47 U.S.C.  154(i).G Consequently, section 4(i) arguably does not permit us to circumvent the NECA membership requirement of section 251(h)(1). We need not resolve the extent of our authority under section 4(i), however, because we tentatively conclude below that GTA may be classified as an incumbent LEC pursuant to the authority of section 251(h)(2).  X -19.` ` GCT urges the Commission to rule that, given the unique circumstances here,  X -GTA's general duties of interconnection under section 251(a)(1)b7Z f 8c yO-ԍ47 U.S.C.  251(a)(1). Section 251(a)(1) provides, in pertinent part, that "[e]ach telecommunications carrier has the duty ...to interconnect directly or indirectly with the facilities and equipment of other  {O~-telecommunications carriers...." Id.b and of resale under section  X -251(b)(1)n8Z 8c yO-ԍ47 U.S.C.  251(b)(1). Section 251(b)(1) provides, in pertinent part, that "[e]ach local exchange carrier has ...[t]he duty not to prohibit, and not to impose unreasonable or discriminatory conditions or limitations on,  {O-the resale of its telecommunications services...." Id.n are equivalent to the specific duties of interconnection and resale delineated in  X -section 251(c).O9 8c {O-ԍSee GCT Comments at 78.O The express language and structure of section 251 compel rejection of that approach. Sections 251(a) through 251(c) create a threetiered hierarchy of escalating obligations based on the type of carrier involved. Section 251(a) imposes relatively limited duties on all telecommunications carriers; section 251(b) imposes more extensive duties on telecommunications carriers that are LECs; and section 251(c) imposes the most extensive duties on LECs that are incumbent LECs. Imposing the section 251(c) obligations on a"6 <90* % %CCf" carrier that is not an incumbent LEC would contravene the carefullycalibrated regulatory  X-regime crafted by Congress.:t 8c {Ob-ԍSee Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC  {O,-Docket No. 9698, First Report and Order, 11 FCC Rcd 15499, 16110, 1248 (1996)(Local Competition  {O-Order)(holding that Commission cannot impose on nonincumbent LECs the obligations of section 251(c) unless  {O-the criteria set forth in section 251(h)(2) are met), recon., 11 FCC Rcd 13042 (1996), further recon., FCC 96 {O-476 (rel. Dec. 13, 1996), additional petitions for recon. pending, petitions for review pending sub nom., Iowa  {OT-Utilities Board, et al. v. FCC, No. 963321 and consolidated cases (8th Cir. argued Jan. 17, 1997). See also  {O-Local Competition Order, 11 FCC Rcd at 15518, 15991, 15996, 1610710,  37, 997, 1006, 124148 (holding that states may not impose on nonincumbent LECs the obligations of section 251(c)). On October 15, 1996, the  {O -United States Court of Appeals for the Eighth Circuit issued an order staying certain provisions of the Local  {Oz -Competition Order not relevant here. Iowa Utilities Board v. FCC, 1996 WL 589204 (8th Cir.), application to  {OD -vacate stay denied, 117 S.Ct. 379 (Thomas, J.), further applications to vacate stay denied, 117 S.Ct. 429 (1996)(full Court).  X-20.` ` In sum, because GTA was not deemed to be a member of NECA as of the date of enactment of the 1996 Act and subsequently has not become a successor or assign of a NECA member, we conclude that GTA is not an "incumbent local exchange carrier" within the meaning of section 251(h)(1). As discussed below, however, we propose to treat GTA as an incumbent LEC under section 251(h)(2). Consistent with the authorization in section  XH-251(h)(2) that we may provide for such treatment "by rule,"J;H 8c yO-ԍ47 U.S.C.  251(h)(2).J and consistent with several  X1-parties' suggestions,}<1 8c {Ov-ԍSee Guam Commission Petition at 9; GCT Comments at 7; IT&E Reply at 5.} we initiate a Notice of Proposed Rulemaking regarding whether such  X -treatment would be consistent with the language and purposes of section 251(h)(2).P= &8c {O-ԍSee Part IV, infra.P  X - B.` ` GTA's Status under Section 3(37)   X -21.` ` Under section 3(37)(C), a local exchange carrier that "provides telephone exchange service to any local exchange study area with fewer than 100,000 access lines" is a  X-"rural telephone company.">8c yO-ԍ47 U.S.C.  153(37)(C). GTA does not contend that it meets the criteria for rural telephone company status in sections 3(37)(A), (B), or (D). GTA serves fewer than 100,000 access lines in its operating  Xy-territory.f?y8c {O:#-ԍSee Petition at 5 n.11; Phone Facts at 9.f Nevertheless, GCT and Sprint argue that GTA does not qualify as a rural telephone company under section 3(37)(C) because the Commission has never designated that"b?0* % %CC"  X-operating territory as a study area.y@8c {Oy-ԍSee GCT Comments at 47; Sprint Comments at 17; GCT Reply at 23.y Subsequent to the close of the comment period in this proceeding, however, the Common Carrier Bureau granted GTA's request for a waiver to  X-create a new study area encompassing Guam.AZ8c {O-ԍ Guam Telephone Authority Petition for Declaratory Ruling , Report and Order, DA 97595 (Accg. & Aud. Div. rel. March 21, 1997)(granting GTA's request for designation of Guam as a study area). We determine, therefore, that GTA falls within the definition of "rural telephone company" set forth in section 3(37)(C).  Xv-x  IV. NOTICE OF PROPOSED RULEMAKING ׃  XH-(# U A.` ` Overview   X -22.` ` In Part III, supra, we determine that GTA is not an "incumbent local exchange carrier" within the meaning of section 251(h)(1). This determination means that, absent ax Commission decision to provide for the treatment of GTA as an incumbent LEC for purposes of section 251, GTA will presently be under no legal mandate to comply with the obligations  X -of section 251(c).B 8c {O%-ԍSee Local Competition Order, 11 FCC Rcd at 1610710, 124148.  X-23.` ` IT&E and GCT suggest section 251(h)(2) as an alternative for applying the obligations of section 251(c) to GTA. IT&E asserts that section 251(h)(2) permits the application of the obligations of section 251(c) to GTA because "GTA meets the spirit, if not  XM-the letter, of the statutory definition of an 'incumbent LEC.'"ACMF8c yOD-ԍIT&E Reply at 5.A GCT maintains that section 251(h)(2) permits the application of the obligations of section 251(c) to GTA because GTA  X-"occupies a position 'comparable' to the position occupied by an incumbent LEC (i.e., a  X -quasimonopoly position)."CD 8c yO-ԍGCT Comments at 7.C The Guam Commission notes that "the Commission may, by  X-rule, provide that GTA is comparable to an incumbent LEC pursuant to Section 251(h)(2)," but "Section 251(h)(2) may not be applicable in this instance" because "GTA has not replaced  X-an ILEC."GEf 8c yO!-ԍPetition at 9, 9 n.23.G " E0* % %CC"Ԍ X-24.` ` Section 251(h)(2) allows the Commission to treat a LEC (or class or category of LECs) as an incumbent LEC, for purposes of section 251, when the LEC "occupies a position in the market for telephone exchange service within an area that is comparable to the  X-position occupied by a carrier described in [section 251(h)(1)]";MF8c yO4-ԍ47 U.S.C.  251(h)(2)(A).M the LEC has "substantially  X-replaced an incumbent local exchange carrier described in [section 251(h)(1)]";SGX8c yO-ԍ47 U.S.C.  251(h)(2)(B).S and "such treatment is consistent with the public interest, convenience, and necessity and the purposes of  Xv-[section 251]."SHv8c yO -ԍ47 U.S.C.  251(h)(2)(C).S In this Notice, we tentatively conclude that each of these requirements is met with respect to GTA.  X1-25.` ` Regarding the first requirement, we tentatively conclude that GTA occupies a position in the market for telephone exchange service in its service area that is comparable to an incumbent LEC's, because GTA appears to occupy a dominant position in that market. Regarding the second requirement, we tentatively reject an overly literal reading of the statutory language that would produce absurd results at odds with manifest Congressional intent. Instead, we tentatively conclude that the second requirement is satisfied where the LEC at issue provides local exchange service to all or virtually all of the subscribers in an area that did not receive telephone exchange service from a NECA member as of the date of enactment of the 1996 Act. Accordingly, we also tentatively conclude that GTA satisfies the second requirement, because GTA apparently provides all or virtually all of the telephone exchange service in Guam, and no NECA member provided telephone exchange service in Guam as of February 8, 1996. Regarding the third requirement, we tentatively conclude that treatment of GTA as an incumbent LEC would serve the public interest, convenience, and necessity and the purposes of section 251, because such treatment would foster the development of competitive telecommunications markets in Guam. In light of the foregoing tentative conclusions, we propose, pursuant to section 251(h)(2), to adopt a rule providing for the treatment of GTA as an incumbent LEC for purposes of section 251. We also seek comment whether LECs situated similarly to GTA exist and, if so, whether we should adopt the same rule with respect to such class or category of LECs. "|xH0* % %CC"Ԍ X-_ B.` ` Discussion   X-` ` 1. Section 251(h)(2)(A)   X-  X-26.` ` Under section 251(h)(2)(A), in order for the Commission to treat GTA as an incumbent LEC, GTA must "occup[y] a position in the market for telephone exchange service _within an area that is comparable to the position occupied by a carrier described in [section  X_-251(h)(1)]."MI_8c yO-ԍ47 U.S.C.  251(h)(2)(A).M Incumbent LECs typically occupy a dominant position in the market for telephone exchange service in their respective operating areas, and possess economies of density, connectivity, and scale that make efficient competitive entry quite difficult, if not  X -impossible, absent compliance with the obligations of section 251(c).zJ X8c {O# -ԍSee Local Competition Order, 11 FCC Rcd at 1550512,  120.z  X -27.` ` GTA seems to exercise such dominance in Guam. It apparently is the sole provider of local exchange and exchange access services on Guam. It therefore appears to control the bottleneck local exchange network on Guam and possess substantial economies of density, connectivity, and scale that, absent compliance with the obligations of section 251(c),  X-can impede the development of telephone exchange service competition in Guam.cKr 8c {O+-ԍSee GCT Comments at 18; Guam Cellular Comments at 23; MCI Comments at 24; PCI Comments at 46; Sprint Comments at 17; Speaker Parkinson Comments at 12; Senator Ada Comments at 12; The Employers Council Comments at 1; Stoll Comments at 12; GCT Reply at 14; MCI Reply at 13; IT&E Reply  {O-at 47. See also Letter dated February 5, 1997 from Veronica M. Ahern, GTA's outside counsel, to Alex Starr,  {OO-FCC's Common Carrier Bureau, CCB Pol. 9618; Comments of the Guam Telephone Authority in Applications  {O-for GTA Interconnection and Resale Under the 1996 Telecommunications Act, Guam Commission Docket No.  {O-96006, at 3 n.4 (attached to the Guam Commission's Petition); Phone Facts at 9; Comments of Guam Cable  {O-Telecommunications, Inc. in Applications for GTA Interconnection and Resale Under the 1996  {Ow-Telecommunications Act, Guam Commission Docket No. 96006, at 2 (attached to the Guam Commission's  {OA-Petition); Comments of TelePacific Network, Inc. in Applications for GTA Interconnection and Resale Under the  {O -1996 Telecommunications Act, Guam Commission Docket No. 96006, at Exhibit C (attached to the Guam Commission's Petition). c Consequently, we tentatively conclude that GTA occupies a position in the market for telephone exchange service in Guam that is comparable to the position typically occupied by statutorilydefined incumbent LECs. Accordingly, we also tentatively conclude that GTA satisfies the requirement of section 251(h)(2)(A). We invite comment on these tentative conclusions.  X- "R  "R ` ` 2. Section 251(h)(2)(B)   X-28.` ` Under Section 251(h)(2)(B), in order for the Commission to treat GTA as an incumbent LEC, GTA must have "substantially replaced an incumbent local exchange carrier  X- "R  "R described in [section 251(h)(1)]."ML8c yO-ԍ47 U.S.C.  251(h)(2)(B).M The word "replace" can mean "to take the place of : serve  X-as a substitute for or successor of : SUCCEED, SUPPLANT...."MX8c {O-ԍWebster's Third New International Dictionary of the English Language Unabridged (1993) at 1925. Consequently, if construed literally, section 251(h)(2)(B) would mean that GTA must have supplanted an incumbent LEC (as defined in section 251(h)(1)) in its service area in order to be treated as an incumbent LEC for purposes of section 251. GTA did not supplant such an incumbent  X1-LEC, because none existed as of the date of enactment of the 1996 Act.N18c yO -ԍIndeed, since its inception in 1973, GTA apparently has been the sole provider of local telephone  {O-exchange service in Guam. See Part II(B), supra.  X -29.` ` We invite comment on whether we should construe section 251(h)(2)(B) so literally. The Supreme Court has long and consistently recognized that the "plain meaning" rule of statutory construction must give way when its application would result in an absurd outcome contrary to the clear intent of Congress: XIt is a familiar rule, that a thing may be within the letter of the statute and yet not within the statute, because not within its spirit, nor within the intention of its makers. . . . If a literal construction of the words be absurd, the Act must  XK-be construed to avoid the absurdity.OJKD8c {O@-ԍHoly Trinity Church v. United States, 143 U.S. 457, 459 (1898). See, e.g., Public Citizen v. United  {O -States Department of Justice, 491 U.S. 440, 454455 (1989)("Where the literal reading of a statutory term would compel an odd result, we must search for other evidence of congressional intent to lend the term its proper scope. The circumstances of the enactment of a particular legislation, for example, may persuade a court that  {Od-Congress did not intend words of common meaning to have their literal effect"); United States v. Ron Pair  {O.-Enterprises, Inc., 489 U.S. 235, 242 (1989)(where "the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters[,]...the intention of the drafters, rather than the strict  {O-language, controls"); United Steelworkers of America v. Weber, 443 U.S. 193, 20104 (1979).    X- Indeed, the Supreme Court has further instructed that "even when the plain meaning [of statutory language] d[oes] not produce absurd results but merely an unreasonable one plainly"V O0* % %CC" at variance with the policy of the legislation as a whole this Court has followed that purpose,  X-rather than the literal words."P$8c {Ob-ԍUnited States v. American Trucking Associations, 310 U.S. 534, 543 (1967)(citations, footnote, and  {O,-quotation marks omitted). Compare MCI Telecommunications Corp. v. American Telephone and Telegraph Co., 512 U.S. 218 (1994)(adhering to literal meaning of tariff provision of Communications Act partly because doing otherwise would frustrate purposes of complaint provisions of that Act).  X-  X-30.` ` The United States Courts of Appeals have followed these precedents when  X-necessary to avoid results that are clearly inconsistent with Congressional intent.Q8c {O -ԍSee, e.g., Environmental Defense Fund v. Environmental Protection Agency, 82 F.3d 451, 468469 (D.C.  {O -Cir.), amended on other grounds, 92 F.3d 1209 (D.C. Cir 1996)("Because this literal reading of the statute would actually frustrate the congressional intent supporting it, we look to the EPA for an interpretation of the statute  {Oe -more true to Congress's purpose"); In re Nofziger, 925 F.2d 428, 434435 (D.C. Cir. 1991)("In statutory interpretation it is a given that statutes must be construed reasonably so as to avoid absurdities manifest intent  {O -prevails over the letter"); Quinn v. Butz, 510 F.2d 743, 75354 (D.C. Cir. 1975)("The Secretary's interpretation obviously rests upon a literal reading of the language, a technique which may well stifle true legislative intent");  {O-Red River Broadcasting Co. v. Federal Communications Commission, 98 F.2d 282, 287 (D.C. Cir.), cert. denied, 305 U.S. 625 (1938)("A wellsettled rule of statutory construction enjoins courts not to attribute to the  yO-Legislature a construction which leads to absurd results").  So, too,  X-has the Commission.XRV 8c {O-ԍSee Application of Fox Television Stations, Inc., Third Memorandum Opinion and Order, 10 FCC Rcd  {O^-8452, 8471 (1995), recon. denied, 11 FCC Rcd 7773 (1996)(rejecting literal "counttheshares" methodology for  {O(-determining whether foreign ownership ceiling in 47 U.S.C.  310(b)(4) is reached), petitions for review pending  {O-sub nom., Metropolitan Council of NAACP Branches, et al. v. FCC, No. 951424 and consolidated case (D.C. Cir. filed Aug. 21, 1995).X  X_-31.` ` In keeping with this consistent precedent, we tentatively conclude that we should find section 251(h)(2)(B) satisfied where, as here, the LEC at issue provides local exchange service to all or virtually all of the subscribers in an area that did not receive telephone exchange service from a NECA member as of the date of enactment of the 1996 Act. In our tentative view, we must so construe section 251(h)(2)(B) in order to avoid absurd and unreasonable results clearly contradictory of Congressional intent. We seek comment on these tentative conclusions.  X - 32.` ` These tentative conclusions are premised on Congress' clearly expressed  X-purpose in the 1996 Act "to provide for a procompetitive, deregulatory national policy framework designed to accelerate rapidly private sector deployment of advanced  Xd-telecommunications and information technologies and services to all Americans by opening"dR0* % %CC,"  X-all telecommunications markets to competition...."S8c {Oy-ԍJoint Explanatory Statement at 1 (emphasis added). See generally 47 U.S.C.  160(b)(providing in the 1996 Act that "forbearance is in the public interest" if it "will promote competitive market conditions" and "enhance competition among providers of telecommunications services"); 47 U.S.C.  253(authorizing Commission to preempt state or local laws that "may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service"); 47 U.S.C. 257(b)(describing the "policies and purposes of this [1996] Act" as "favoring . . . vigorous economic competition").  To accomplish this purpose, Congress  X-chose, inter alia, to impose on entities that are classified as incumbent LECs the duties of interconnection, Maccess to unbundled network elements, resale of retail services, collocation, public notification of interoperability changes, and good faith negotiation specified in section  X-251(c).WTB8c {O -ԍSee 47 U.S.C.  251(c).W These duties require incumbent LECs Mto share with competitors some of their inherent economic advantages advantages that would otherwise render competitive entry very difficult, if not impossible. For example, the existing infrastructure of the incumbent LEC in an area enables the incumbent LEC to serve new customers therein at a much lower incremental cost than a facilitiesbased entrant that must install its own switches, trunking, and  X5-loops to serve its customers.  Because the incumbent LEC is typically dominant in its service area, it has little economic incentive to assist new entrants. Prior to the enactment of section 251(c), an incumbent LEC also had the ability to discourage entry and robust competition by refusing to interconnect its network with the new entrant's network or by insisting on supracompetitive prices or other unreasonable conditions for terminating calls from the  X -entrant's customers to its customers.~U 8c {OG-ԍSee Local Competition Order, FCC Rcd at 1550512, 120. ~  X- 33.` ` An unduly literal construction of section 251(h)(2)(B) would mean that these statutory objectives would be thwarted in Guam unless GTA were to comply voluntarily with each of the obligations of section 251(c). Indeed, GTA appears to possess all of the advantages of incumbency characteristic of the incumbent LECs described in section 251(h)(1), advantages that can impede the development of competitive markets. For example, GTA apparently has substantial financial resources, significant economies of density, connectivity, and scale, and, most importantly, control of the bottleneck local exchange  X-network in Guam.QVf 8c {O -ԍSee GCT Comments at 18; Guam Cellular Comments at 23; MCI Comments at 24; PCI Comments at 46; Sprint Comments at 17; Speaker Parkinson Comments at 12; Senator Ada Comments at 12; The Employers Council Comments at 1; Stoll Comments at 12; GCT Reply at 14; MCI Reply at 13; IT&E Reply  {Od"-at 47. See also Letter dated February 5, 1997 from Veronica M. Ahern, GTA's Outside Counsel, to Alex Starr,  {O.#-FCC's Common Carrier Bureau, CCB Pol. 9618; Comments of the Guam Telephone Authority in Applications  {O#-for GTA Interconnection and Resale Under the 1996 Telecommunications Act, Guam Commission Docket No."#U0* % %3$"  yO-96006, at 3 n.4 (attached to the Guam Commission's Petition); Comments of Guam Cable Telecommunications,  {OX-Inc. in Applications for GTA Interconnection and Resale Under the 1996 Telecommunications Act, Guam Commission Docket No. 96006, at 2 (attached to the Guam Commission's Petition); Comments of TelePacific  {O-Network, Inc. in Applications for GTA Interconnection and Resale Under the 1996 Telecommunications Act, Guam Commission Docket No. 96006, at Exhibit C (attached to the Guam Commission's Petition). Q Thus, the seemingly dominant market presence of GTA in Guam appears"|V0* % %CC" to be precisely the type of noncompetitive situation that Congress intended section 251(c) to redress.  X-!34.` ` Moreover, we note that Congress left intact several provisions of the  X-Communications Act that led the Commission in 1992 to conclude that "the Communications Act was intended by Congress to apply,...in every respect, to all radio and wire  Xv-communications originating or terminating on the Territory of Guam."dWv|8c {O -ԍGuam Jurisdictional Order, 7 FCC Rcd at 4024.d First, in the 1996  X_-Act, Congress incorporated by reference the definitions in the 1934 Act.GX_8c yO-ԍ47 U.S.C.  153(b).G Those definitions  XH-define the "United States" as including "the several States and Territories...and the  X3-possessions of the United States...;"YY38c yO-ԍ47 U.S.C.  153(50)(emphasis added). Y define "State" as including "the Territories";HZ3. 8c yO-ԍ47 U.S.C.  153(40).H and define "interstate communication" as including "communication or transmission...from any  X -State, Territory, or possession of the United States...to any other State, Territory, or  X -possession of the United States...."X[ 8c yO_-ԍ47 U.S.C.  153(22)(emphasis added).X Furthermore, despite amending section 1 of the 1934 Act in other respects, Congress left unchanged that section's command to the Commission "to  X -make available, so far as possible, to all the people of the United States...a rapid, efficient,  X -Nationwide, and worldwide wire and radio communication service with adequate facilities at  X-reasonable charges...."\N 8c {O-ԍ47 U.S.C.  151(emphasis added). See Joint Explanatory Statement at 32. These provisions appear to make clear that Congress believed that "the residents of Guam are just as entitled to the benefits of competition in"\0* % %CC"  X-telecommunications as any other Americans,"]$8c {Oy-ԍGuam Jurisdictional Order, 7 FCC Rcd at 4024, 4026. See Policy and Rules Concerning the Interstate,  {OC-Interexchange Marketplace, Implementation of Section 254(g) of the Communications Act of 1934, as amended, Report and Order, 11 FCC Rcd 9564, 958999 (1996)(applying rate integration requirements of section 254(g) to Guam because section 153(40) defines "State" to include "the Territories"). and suggest that Congress did not intend to  X-exclude GTA from treatment as an incumbent LEC for purposes of section 251(c).3^~8c {ON-ԍSee generally 142 Cong. Rec. H1145, 1175 (Feb. 1, 1996)(statement of Representative Underwood)("My focus on this telecommunications legislation has been on ensuring that Guam has the same access to  {O-telecommunications technology and advances in the information superhighway as other U.S. citizens"); cf. Guam  {O -Telephone Authority Petition for Declaratory Ruling, Memorandum Opinion and Order, 9 FCC Rcd 4890 (1994)(ordering GTA to implement Feature Group D Equal Access, because doing so would promote interexchange competition and technological development of new telecommunications services in Guam and thereby prevent Guam from becoming a "technological backwater with inferior communications services"). 3   X-"35.` ` Of course, under section 251(f), our holding that GTA is a "rural telephone  X-company" within the meaning of section 3(37) would entitle GTA to an exemption, at least initially, from the obligations of section 251(c), should GTA be treated as an incumbent LEC  Xv-in the future.\_v 8c {O!-ԍSee Parts II(A), III(B), supra.\ Congress included within section 251(f), however, a procedure for terminating such an exemption under appropriate circumstances. Construing section 251(h)(2)(B) to foreclose the possibility of classifying GTA as an incumbent LEC would thwart that procedure, substituting a permanent exemption for the potentially temporary exemption expressly set forth in section 251(f).  X -#36.` ` An overly literal interpretation of section 251(h)(2)(B) would also exalt form over substance. As indicated previously, on May 12, 1997, the Commission granted NECA's  X -petition to become a member of NECA.U` 8c {O-ԍSee  9, supra.U GTA apparently could have filed that petition at  X -any time after the release of the Guam Jurisdictional Order on June 2, 1992. Thus, it appears that only the date of initial NECA membership will distinguish GTA from LECs that are incumbent LECs under section 251(h)(1).  XM-$37.` ` In sum, the circumstances with respect to GTA and Guam appear to counsel  X6-against an overly literal construction of statutory language.na68c {O"-ԍSee, e.g., EDF v. EPA, 82 F.3d at 46869. n Construed so literally, the language of section 251(h)(2)(B) would produce absurd results "demonstrably at odds with the"a0* % %CC "  X-intention of its drafters."Yb8c {Oy-ԍU.S. v. Ron Pair, 489 U.S. at 242.Y The most immediate absurdity would be a permanent exemption of a seemingly dominant provider of local exchange and exchange access services GTA from the very requirements that Congress designed specifically to end such dominance and foster competition in local exchange and exchange access markets. Furthermore, this result would not be benign; rather, it apparently would conflict with Congress' pro-competitive objectives with respect to the twentyninth largest local telephone network in the United  Xv-States. We seek comment, therefore, on whether the outcome suggested by an unduly literal reading of the statute's language would be an "unreasonable one 'plainly at variance with the  XH-policy of the legislation as a whole.'"cHZ8c {OS -ԍQuinn v. Butz, 510 F.2d at 753 (quoting U.S. v. A.T.A., 310 U.S. at 543).  X -%38.` ` To avoid these absurd results and to construe the statute consistently with Congress' obvious procompetitive purpose, we propose to interpret section 251(h)(2)(B) to include any LEC that provides telephone exchange service to all or virtually all of the subscribers in its service area, where, as here, no NECA member served the area at issue as of the date of enactment of the 1996 Act. Accordingly, we also propose to find that GTA satisfies section 251(h)(2)(B) as construed in this manner. We invite comment on these proposals.  Xb-&39.` ` We also seek comment whether reading section 251(h)(2) in conjunction with other provisions of the Communications Act creates ambiguity in section 251(h)(2)'s meaning and intended application such that we may reasonably exercise our discretion to construe the statute to permit treating GTA as an incumbent LEC. Applying section 251(h)(2) so as to exempt GTA permanently from the statutory responsibilities of an incumbent LEC would, as described above, arguably conflict with sections 251(c) and 251(f), among other  X-Communications Act provisions.d8c {Ou-ԍCf. Lyons v. Ohio Adult Parole Authority, 105 F.3d 1063, 106768 (6th Cir. 1997)(holding that two statutory provisions were in direct conflict, creating "a rare but difficult form of ambiguity").  X-` ` 3. Section 251(h)(2)(C)   X|-'40.` ` Under section 251(h)(2)(C), in order for the Commission to treat GTA as an incumbent LEC for purposes of section 251, "such treatment [must be] consistent with the  XN-public interest, convenience, and necessity and the purposes of [section 251]."MeNF8c yOE#-ԍ47 U.S.C.  251(h)(2)(C).M As described"Ne0* % %CC"  X-above,Vf8c {Oy-ԍSee Part IV(B)(2), supra.V Congress has declared unequivocally that promoting competition in local exchange and exchange access markets serves the public interest, convenience, and necessity. Treating GTA as an incumbent LEC would promote competition in the local exchange and exchange access markets in Guam, because such treatment would require GTA to comply with the procompetitive obligations of section 251(c), absent an exemption, suspension, or modification under section 251(f). Moreover, because GTA appears to be the sole provider of local exchange and exchange access services in Guam, we tentatively conclude that GTA has market power, economies of density, connectivity, and scale, and control of the local network comparable to that possessed by entities that are incumbent LECs under section 251(h)(1). Consequently, treating GTA as an incumbent LEC may well be a prerequisite for the development of competition in the local exchange and exchange access markets in Guam. Thus, we tentatively conclude that treating GTA as an incumbent LEC for purposes of section 251 would be consistent with the public interest, convenience, and necessity.  X -(41.` ` For similar reasons, we also tentatively conclude that treating GTA as an incumbent LEC would be consistent with the purposes of section 251. Section 251's primary purpose is to foster competition that otherwise would not likely develop in local exchange and exchange access markets. It is possible that failing to treat GTA as an incumbent LEC would stifle competition in Guam.  X-)42.` ` Having tentatively concluded that GTA has market power, economies of density, connectivity, and scale, and control of the local network, and that treating GTA as an incumbent LEC would be consistent with the public interest, convenience, and necessity and the purposes of section 251, we further conclude tentatively that the circumstances here satisfy the requirements of section 251(h)(2)(C). We invite comment regarding these tentative conclusions.  X|-` ` 4. Proposal to Treat GTA and Possibly  Xe-` `  Others as an Incumbent LEC   X7-*43.` ` For all of the reasons explained above, we tentatively conclude that the relevant facts and circumstances meet the requirements of section 251(h)(2) for treating GTA as an incumbent LEC for purposes of section 251. Accordingly, we propose to provide for the treatment of GTA as an incumbent LEC for purposes of section 251. We seek comment regarding this tentative conclusion and proposal. We also seek comment whether LECs situated similarly to GTA exist and, if so, whether we should adopt the same rule with respect to such class or category of LECs. "!Zf0* % %CC "Ԍ X-ԙb C.` ` Procedural Matters   X<` ` 1. Ex Parte Presentations  X- +44. ` ` With respect to the rulemaking proposal in Part IV, supra, to treat GTA as an incumbent local exchange carrier pursuant to section 251(h)(2), this is a nonrestricted notice Xy-bandcomment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as required by the Commission's  XM-rules.sgM8c {O -ԍSee generally 47 C.F.R.  1.1201, 1.1203, and 1.1206.s  X -` ` 2. Initial Regulatory Flexibility Analysis   X -,45.` ` Section 603 of the Regulatory Flexibility Act, as amended,Ch Z8c yO-ԍ5 U.S.C.  603.C requires an initial regulatory flexibility analysis in notice and comment rulemaking proceedings, unless we certify that "the rule will not, if promulgated, have a significant economic impact on a  X -substantial number of small entities."Fi 8c yOG-ԍ5 U.S.C.  605(b).F Our proposal in Part IV, supra, to treat GTA as an incumbent local exchange carrier pursuant to section 251(h)(2) will affect only GTA and the limited number of entities that seek to interconnect with GTA's network or resell GTA's services. Even if all of these entities can be classified as small entities, we do not believe that they constitute a "significant number of small entities" for purposes of the Regulatory Flexibility Act. Therefore, we certify that the proposed rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. The Secretary shall  X -send a copy of this Notice of Proposed Rulemaking, including this certification and statement,  X-to the Chief Counsel for Advocacy of the Small Business Administration.Pjz8c {O!-ԍSee 5 U.S.C.  605(b).P A copy of this certification also will be published in the Federal Register notice.  X-` ` 3. Comment Filing Procedures   X--46.` ` Pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the  Xl-Commission's rules,Qkl 8c yO)#-ԍ47 C.F.R.  1.415, 1.419.Q interested parties may file comments on or before July 7, 1997 and  XU-reply comments on or before July 28, 1997 . To file formally in this proceeding, you must"Uk0* % %CC" file an original and six copies of all comments, reply comments, and supporting comments. If you would like each Commissioner to receive a personal copy of your comments, you must file an original and eleven copies. Comments and reply comments should be sent to Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Room 222, Washington, D.C. 20554. Parties should also file copies of any documents filed in this docket with Janice Myles of the Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C. 20554, and with the Commission's copy contractor, International Transcription Services, Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C. 20554.  X - 6 V. ORDERING CLAUSES ׃  X -.47.` ` ACCORDINGLY, IT IS ORDERED, pursuant to sections 4(i) and 251(h)(1) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 251(h)(1), section 5(e) of the Administrative Procedure Act, 5 U.S.C.  554(e), and section 1.2 of the Commission's rules, 47 C.F.R.  1.2, that the Guam Telephone Authority is not an "incumbent local exchange carrier" within the meaning of section 251(h)(1) of the Communications Act of 1934, as amended, 47 U.S.C.  251(h)(1).  X-/48.` ` IT IS FURTHER ORDERED, pursuant to sections 4(i) and 251(h)(1) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 251(h)(1), section 5(e) of the Administrative Procedure Act, 5 U.S.C.  554(e), and section 1.2 of the Commission's rules, 47 C.F.R.  1.2, that the Guam Telephone Authority is a "rural telephone company" within the meaning of section 3(37)(C) of the Communications Act of 1934, as amended, 47 U.S.C.  153(37)(C).  X|-049.` ` IT IS FURTHER ORDERED, pursuant to sections 4(i) and 251(h)(1) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 251(h)(1), section 5(e) of the Administrative Procedure Act, 5 U.S.C.  554(e), and section 1.2 of the Commission's rules, 47 C.F.R.  1.2, that the Petition for Declaratory Ruling filed by the Public Utility Commission of the Territory of Guam IS GRANTED to the extent discussed herein, and in all other respects IS DENIED.  X-150.` ` IT IS FURTHER ORDERED that, pursuant to sections 4(i), 4(j), and 251(h)(1) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 251(h)(1), section 5(e) of the Administrative Procedure Act, 5 U.S.C.  554(e), and section 1.2 of the Commission's rules, 47 C.F.R.  1.2, the Declaratory Ruling contained in Part III of this document IS EFFECTIVE upon release."#k0* % %CCG""Ԍ X-ԙ 251.` ` IT IS FURTHER ORDERED that, pursuant to sections 1, 2, 4, 251, and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  151, 152, 154, 251, and 303(r), the NOTICE OF PROPOSED RULEMAKING contained in Part IV of this document is hereby ADOPTED. A summary of the Notice will be published in the Federal Register.  X-352.` ` IT IS FURTHER ORDERED that the Secretary shall send a copy of this NOTICE OF PROPOSED RULEMAKING, including the regulatory flexibility certification, to the Chief Counsel for Advocacy of the Small Business Administration, in accordance with  XH-paragraph 603(a) of the Regulatory Flexibility Act, 5 U.S.C.  601 et seq. (1981). ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh, ` `  hh,William F. Caton ` `  hh,Acting Secretary