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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Silver Star Telephone Company, Inc. ) CCB Pol 97-1 Petition for Preemption ) and Declaratory Ruling ) MEMORANDUM OPINION AND ORDER Adopted: September 23, 1997 Released: September 24, 1997 By the Commission: TABLE OF CONTENTS Paragraph I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . 1 II. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . 6 A. Silver Star's Efforts to Obtain a CPCN for the Afton Exchange 6 1. The Wyoming Commission's Final Order for the Sale of Telephone Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2. The Wyoming Commission's Denial Order . . . . 11 B. The Wyoming Telecommunications Act of 1995 . . . . . 15 C. Section 253 of the Telecommunications Act of 1996. . 17 III. POSITIONS OF THE PARTIES . . . . . . . . . . . . . . . . 18 A. Silver Star. . . . . . . . . . . . . . . . . . . . . 18 B. The Commenters . . . . . . . . . . . . . . . . . . . 24 IV. DISCUSSION. . . . . . . . . . . . . . . . . . . . . . . . 34 V. ORDERING CLAUSE. . . . . . . . . . . . . . . . . . . . . . 48 I. INTRODUCTION 1. On January 16, 1997, Silver Star Telephone Company, Inc. (Silver Star) filed the above-captioned petition (Petition) asking the Commission to: (i) preempt the Order Denying Concurrent Certification issued by the Wyoming Public Service Commission (Wyoming Commission) on December 4, 1996, and (ii) direct the Wyoming Commission to grant Silver Star a Certificate of Public Convenience and Necessity (CPCN) for the Afton, Wyoming local exchange area. The Wyoming Commission's Denial Order rejected Silver Star's application for a "concurrent" CPCN to provide local exchange service in competition with the incumbent certificated local exchange carrier (LEC) in the Afton, Wyoming local exchange area. Silver Star's Petition asserts that the Wyoming Commission's Denial Order violates section 253(a) of the Communications Act of 1934, as amended, falls outside the scope of authority reserved to the Wyoming Commission by section 253(b) of the Act, and thus satisfies the requirements for preemption by the Commission pursuant to section 253(d) of the Act. 2. The Commission placed Silver Star's Petition on public notice on January 21, 1997. The Association for Local Telecommunications Services (ALTS), U S WEST Communications, Inc. (U S WEST), and Union Telephone Company (Union) filed comments, and Silver Star, ALTS, RT Communications, Inc. (RTC), and TCT West, Inc. and Tri County Telephone Exchange, Inc. (collectively, TCT) filed replies. Moreover, local government officials and bodies, local businesses, and local residents filed letters supporting the Petition. 3. On April 22, 1997, Silver Star filed a pleading amending its Petition (Amended Petition). The Amended Petition seeks preemption of certain provisions of the Wyoming Telecommunications Act of 1995, as well as preemption of the Denial Order, because those statutory provisions were "the basis of [the] Wyoming PSC's decision." On April 24, 1997, the Commission placed Silver Star's Amended Petition on Public Notice. AT&T Corp. (AT&T) and Union filed comments, and Silver Star filed a reply. 4. Neither the State of Wyoming nor the Wyoming Commission filed comments, formal or informal, at any stage of this proceeding. By letter dated May 30, 1997, however, Silver Star filed a permissible ex parte submission and attached a Memorandum dated February 27, 1997 from the Office of the Attorney General of the State of Wyoming to the Wyoming Commission. This Memorandum of the Wyoming Attorney General is an "Opinion on preemption issues created by the enactment of the Federal Telecommunications Act of 1996." 5. For the reasons described below, we grant Silver Star's Amended Petition in part and deny it in part. Specifically, we preempt the Wyoming Commission's Denial Order and the section of the Wyoming Telecommunications Act of 1995 on which that Order is based (i.e., Wyo. Stat. Ann.  37-15-201(c)), but we decline to preempt other statutory provisions or to direct the Wyoming Commission to grant Silver Star's CPCN application. We expect, however, that upon a request from Silver Star, the Wyoming Commission will expeditiously reconsider Silver Star's application in a manner consistent with the Communications Act and this Memorandum Opinion and Order. II. BACKGROUND A. Silver Star's Efforts to Obtain a CPCN for the Afton Exchange 6. Silver Star is an incumbent LEC certificated by the Wyoming Commission to provide local exchange telecommunications services in Lincoln County in western Wyoming. Its exchange boundary is approximately eight miles from the Town of Afton, Wyoming. The Afton exchange area serves approximately 2336 access lines. 1. The Wyoming Commission's Final Order for the Sale of Telephone Exchanges 7. The Wyoming Commission determined in 1993 that U S WEST provided inadequate telephone service to subscribers in many of its rural telephone exchanges in Wyoming. The Wyoming Commission subsequently ordered U S WEST to upgrade its Wyoming telephone exchanges. U S WEST chose to sell twenty-seven of its most rural exchanges rather than make the necessary upgrades to those exchanges. In 1993, U S WEST agreed to sell some of those exchanges to TCT's parent company (Tri County Telephone Association, Inc.), others to RTC's parent company (Range Telephone Cooperative, Inc.), and the remainder -- including the Afton exchange -- to Union. In doing so, U S WEST rejected a bid by Silver Star to purchase the Afton exchange. 8. U S WEST and each of the three purchasers filed with the Wyoming Commission joint applications for approval of the sales and for the requisite amendments to their various CPCNs. The Wyoming Commission consolidated those applications in one proceeding. Silver Star intervened in that proceeding and sought an amendment to its CPCN that would allow it, rather than Union, to serve the Afton exchange. 9. The Wyoming Commission issued its order in that proceeding on February 18, 1994. The Wyoming Commission granted all but one of the requested sale approvals and CPCN amendments, with certain conditions not relevant here. The disapproved sale and amendment concerned the Afton exchange. The Wyoming Commission concluded that Silver Star could provide higher quality service to the Afton exchange than Union. Consequently, the Wyoming Commission: (i) denied the joint application of U S WEST and Union to issue certificate authority to Union to serve the Afton exchange; (ii) granted Silver Star's application for amendment of its CPCN to authorize service to the Afton exchange; and (iii) directed U S WEST and Silver Star to negotiate an agreement to sell the Afton exchange to Silver Star rather than to Union. Moreover, the Wyoming Commission directed all of the purchasing parties "to complete the upgrade of the purchased facilities to the modern service level required by the Commission within a three-year period from the date of this Order." The Wyoming Commission observed that "the utility facilities which U S WEST proposes to sell are outmoded and substandard for current service requirements of its customers, and do not meet the statutory requirements that service facilities must be adequate and efficient. . . ." 10. U S WEST and Union appealed parts of the Wyoming Commission's Sale Order, arguing, inter alia, that the Wyoming Commission lacked authority to invalidate U S WEST's sale of the Afton exchange to Union and to direct the sale of that exchange to Silver Star. Approximately two years later, in February 1996, the Supreme Court of Wyoming agreed with U S WEST and Union. The Wyoming Supreme Court reversed the grant of authority to Silver Star to serve the Afton exchange, reversed the direction to U S WEST to sell the Afton exchange to Silver Star, and remanded the case to the Wyoming Commission for further proceedings consistent with the Court's opinion. On remand, the Wyoming Commission approved the sale of the Afton exchange to Union and denied Silver Star's application to amend its CPCN to serve the Afton exchange. 2. The Wyoming Commission's Denial Order 11. On February 27, 1996, Silver Star filed with the Wyoming Commission an application requesting CPCN authority to provide local exchange telecommunications service in the Afton local exchange in competition with the incumbent certificated provider. Union and U S WEST opposed Silver Star's application. They relied on a provision of the Wyoming Telecommunications Act of 1995 (Wyoming Act) that, under certain circumstances, insulates qualifying local exchange carriers from competition (the rural incumbent protection provision). As more fully described below, that provision allows a LEC that (i) was the incumbent certificated provider in an area as of January 1, 1995, and (ii) has 30,000 or fewer access lines in the State of Wyoming, to block the grant of a CPCN to any carrier seeking to provide local exchange service in competition with the incumbent LEC until at least January 1, 2005. 12. The disposition of Silver Star's application hinged on whether U S WEST or Union was the incumbent certificated LEC for the Afton exchange as of January 1, 1995. If Union was the incumbent certificated LEC, the rural incumbent protection provision would require the Wyoming Commission to grant Union's opposition to Silver Star's application, because Union had fewer than 30,000 access lines in Wyoming; if it was U S WEST, the rural incumbent protection provision would not allow U S WEST (or any other LEC) to veto Silver Star's application, because U S WEST had more than 30,000 access lines in Wyoming. 13. On December 4, 1996, the Wyoming Commission held that Union, not U S WEST, was the incumbent certificated provider for the Afton exchange as of January 1, 1995. Accordingly, as required by the rural incumbent protection provision, the Wyoming Commission implemented Union's veto and denied Silver Star's application for certificate authority to provide local exchange telecommunications service in the Afton local exchange in competition with Union: The Commission concludes based upon the clear language of W.S.  37-15- 201(c) and the exercise by Union of the certificate protection provided for in subparagraph (iii) that the Commission must deny, based upon Wyoming law, the concurrent certificate application of Silver Star to provide local exchange service to the Afton, Wyoming, exchange. The Wyoming Commission also stated that, "[i]n deciding as we do, we do not express any opinion of the rights which any party may have or come to have under the federal Telecommunications Act of 1996." 14. On January 2, 1997, Silver Star filed a petition for judicial review of the Denial Order in the District Court of the First Judicial District in and for the County of Laramie, State of Wyoming. That petition for judicial review apparently remains pending to date. B. The Wyoming Telecommunications Act of 1995 15. The Wyoming Telecommunications Act of 1995 became law on March 1, 1995. In a provision entitled "Legislative Intent," the Wyoming Act describes its purpose as follows: It is the intent of this act to ensure essential telecommunications services are universally available to the citizens of this state while encouraging the development of new infrastructure, facilities, products and services. . . . It is the intent of this act to provide a transition from rate of return regulation of a monopolistic telecommunications industry to competitive markets and to maintain affordable essential telecommunications services through the transition period. . . . 16. As mentioned above, the Wyoming Act contains a provision -- Wyo. Stat. Ann.  37-15-201(c) -- that, under certain circumstances, allows small incumbent LECs to decide whether they will face competition before January 1, 2005. This rural incumbent protection provision requires the Wyoming Commission to honor a qualifying LEC's veto of a potential competitor's CPCN application: Prior to January 1, 2005, in the service territory of a local exchange telecommunications company with thirty thousand (30,000) or fewer access lines in the state, the commission shall, after notice and opportunity for hearing, issue a concurrent certificate or certificates of public convenience and necessity to provide local exchange service, only if the application clearly shows the applicant is willing and able to provide safe, adequate and reliable local exchange service to all persons within the entire existing local exchange area for which certification is sought and the incumbent local exchange service provider: (i) Consents to a concurrent certificate; or (ii) Is unable or unwilling to provide the local exchange service for which the concurrent certificate is sought; or (iii) Fails to protest the application for the certificate after notice and opportunity for a hearing; or (iv) Has applied for and received a concurrent certificate to provide competitive local exchange telecommunications services in any area of this state; or (v) On or after the effective date of this chapter, begins to provide one-way transmission of radio or video signals through terrestrial, nonsatellite local distribution facilities in an area with existing service. Moreover, incumbent LECs protected by the rural incumbent protection provision may extend that protection for an additional three years, up to and including January 1, 2008, if: the commission finds that the applicant has demonstrated by clear and convincing evidence that it has yet to substantially recover its investment for upgraded services ordered by the commission or for which it has committed as of [March 1, 1995]. . . . Once the protection of the rural incumbent protection provision lapses, the Wyoming Commission: shall . . . issue a concurrent certificate or certificates of public convenience and necessity to provide local exchange service, if the applicant has a sufficient plan under which it will provide service to the entire local exchange area within five (5) years, or a longer time period as determined by the commission, of the date upon which the applicant first begins to provide local exchange service to the area for which the concurrent certificate is sought. C. Section 253 of the Telecommunications Act of 1996 17. Through the 1996 Act, Congress sought to establish "a pro-competitive, de- regulatory national policy framework" for the United States telecommunications industry. It also sought "to accelerate deployment of advanced telecommunications services to all Americans by opening all telecommunications markets to competition." To accomplish those objectives, the 1996 Act, among other things, amended the Communications Act by adding new section 253. Section 253(d) directs the Commission to preempt, to the extent necessary, the enforcement of any State or local statute, regulation, or legal requirement that is proscribed by section 253(a) and is outside the authority reserved to State and local governments by section 253(b). Section 253(a) provides that: [n]o State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. Section 253(b) provides that nothing in section 253: shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers. III. POSITIONS OF THE PARTIES A. Silver Star 18. Silver Star argues that because the Denial Order precludes Silver Star from lawfully providing local exchange service in the Afton exchange, the Denial Order violates section 253(a)'s proscription of State legal requirements that prohibit the ability of any entity to provide any telecommunications service. According to Silver Star, the Denial Order, like the franchise denials that our Classic Telephone Decision preempted, runs afoul of section 253(a) by barring all but one entity from providing a certain telecommunications service. Silver Star also contends that, even though the Denial Order arguably may pertain only to intrastate services, section 2(b) of the Communications Act does not prevent the Commission from preempting the Denial Order, because section 253 expressly empowers the Commission to preempt State and local laws that restrict the provision of intrastate as well as interstate services. 19. Silver Star further argues that section 253(b) does not save the Denial Order from preemption, because: (i) section 253(b) applies only to post-certification "requirements" attendant to providing service, not to bans on service altogether; (ii) the Denial Order makes no finding that its result is "necessary" to accomplish any of the objectives listed in section 253(b); (iii) the Sale Order's finding that Silver Star's ability to serve the Afton exchange exceeded Union's ability to do so means that preventing Silver Star from serving the Afton exchange could not possibly be "necessary" within the meaning of section 253(b); (iv) the Denial Order is not "competitively neutral" under section 253(b) because it favors the incumbent LEC over new entrants; and (v) neither the Wyoming Commission nor the Wyoming Attorney General has participated in this proceeding to defend the Denial Order or the Wyoming Act as either "competitively neutral" or "necessary" under section 253(b). 20. Silver Star relies on the Attorney General Opinion as support for its position regarding section 253(b). The Attorney General Opinion responds to, inter alia, the following question from the Wyoming Commission: "Is the [Wyoming Act], specifically Wyo. Stat.  37- 15-201, preempted by the [Communications Act]?" The Attorney General Opinion appears to answer that question in the affirmative. It seems to conclude that Wyo. Stat. Ann.  37-15-201 conflicts with sections 251(b) and 251(c) of the Communications Act and is not "competitively neutral," "consistent with section 254" of the Communications Act, or "necessary" within the meaning of section 253(b). 21. According to Silver Star, because the Denial Order derives directly from the statutory rural incumbent protection provision, the Commission can preempt that statutory provision for essentially the same reasons (described above) that require preemption of the Denial Order. Moreover, in Silver Star's view, the absence of legislative history concerning the rural incumbent protection provision -- or any other provision of the Wyoming Act -- makes it impossible to conclude that the Wyoming legislature believed the rural incumbent protection provision to be necessary to ensure the continued quality of telecommunications services or to preserve and enhance universal service. Silver Star argues, furthermore, that the Wyoming legislature enacted the rural incumbent protection provision to protect the investments of LECs that purchased exchanges from U S WEST, not to protect consumers. 22. Silver Star also maintains that the provisions of the Communications Act pertaining to rural areas -- primarily sections 214(e)(2), 251(f), and 253(f) -- do not authorize States to erect entry barriers to protect rural carriers. Instead, according to Silver Star, those sections create potential protections for rural carriers far short of entry barriers, and they must be read in harmony with section 253(a)'s clear proscription of such barriers. 23. Silver Star contends, in addition, that the Commission has provided adequate public notice under section 253(d). Silver Star points out that the second Public Notice specifies the provisions of the Wyoming Act at issue and was served on the Wyoming Attorney General; the Wyoming Commission was aware of this proceeding from the beginning; and numerous individuals, local businesses, and local officials filed comments. B. The Commenters 24. For essentially the same reasons explained by Silver Star, ALTS and AT&T argue that the Commission should preempt the rural incumbent protection provision and any Wyoming Commission decision implementing that provision. ALTS and AT&T add that preemption is appropriate also because: (i) the delay in competition mandated by the rural incumbent protection provision is so long as to be tantamount to an absolute entry barrier proscribed by section 253(a), and (ii) the rural incumbent protection provision fails to satisfy section 253's requirements that any State effort to achieve the objectives listed in section 253(b) must employ means "carefully tailored and limited to satisfy those [objectives]," avoid entry barriers proscribed by section 253(a), and eschew prohibitions on entry applicable only to certain carriers and not others. 25. All of the commenters who filed letters support Silver Star's position. They state generally that competition in the local exchange market in the Afton exchange would benefit the Afton community. The Afton Government asserts, for example, that "[i]n the new age of technological advances, Afton and much of rural America has been left behind. . . . [O]pen access and competition will substantially improve the substandard communication services Afton and the surrounding areas have endured in the past." 26. U S WEST, Union, RTC, and TCT oppose Silver Star's Petition. U S WEST characterizes the Petition as a ploy by Silver Star to abort U S WEST's sale of its Afton exchange to Union. Union, RTC, and TCT agree with U S WEST's characterization of the Petition, and provide reasons for their position based on the language and intent of the Wyoming Act and the Communications Act. 27. Union challenges the Commission's power to grant Silver Star's Petition. According to Union, the Commission cannot preempt a Wyoming Commission order issued pursuant to Wyoming law where, as here, the petitioner has not sought preemption of the law on which the order is based. Moreover, in Union's view, neither section 253 nor any other section of the Communications Act empowers the Commission to direct the Wyoming Commission to issue a certificate to Silver Star, even if the Commission preempts the Denial Order and/or the rural incumbent protection provision. 28. Union also challenges the procedures by which the Commission solicited comments in this proceeding. With respect to Silver Star's Petition, Union claims that the Commission failed to comply with the notice and comment requirement of section 253(d), because the Commission's Public Notice did not: (i) identify the statute, regulation, or legal requirement that might violate section 253; (ii) describe the Commission's actions under consideration; or (iii) indicate the Commission's interpretation of the phrase "to the extent necessary" in section 253(d) in the context of this matter. With respect to Silver Star's Amended Petition, Union claims that the Commission again violated the notice and comment requirement of section 253(d), because the Commission's Public Notice did not (i) indicate the subject matter of the Wyoming law at issue; (ii) state why the Commission was contemplating preemption of the Wyoming law; (iii) provide meaningful notice to "ordinary Wyoming consumers and consumers of other States that may be concerned with the Commission's contemplated preemption action;" or (iv) "provide States and their consumers with any specific guidelines as to what state action [the Commission] deems either consistent or inconsistent with Section 253(b)." 29. Union further argues that the Wyoming Act's preclusion of certain competition until at least January 1, 2005 "does not constitute an absolute prohibition against entry" proscribed by section 253(a), because it "merely determines an orderly time period for the transition of rural areas from a form of regulation that correlates investment commitment with reasonable assurances of cost recovery to a new form that will no longer present similar risk and reward characteristics." Union claims, in other words, that "[e]ntry restrictions limited to a reasonable time period to assure stability in a state as extremely rural as Wyoming are not in violation of, or inconsistent with, the 1996 Act." According to Union, the ten-to-thirteen year period at issue is reasonable, because: (i) rural incumbents need that time to recoup the substantial network investments mandated by the Wyoming Commission, and (ii) rural incumbents "operat[e] under the constraints imposed by limited customer pools, the risks carried by the revenue reliance on few large-volume customers, and the dependence on regulatory mechanisms for high-cost recovery." 30. Union also contends that, by affording small rural carriers exemptions from and suspensions of interconnection obligations pursuant to sections 3(37) and 251(f) of the Act, Congress showed its concern that small rural carriers may need special protections from the advent of competition in order to preserve and advance universal service. According to Union, like section 251(f) of the Communications Act, Wyoming's rural incumbent protection provision stems from "the recognition that all areas of the country, or of a single state, may not be subject concurrently to the same market conditions that would sustain the introduction of competitive local exchange service in a manner that will serve the public interest." 31. Union, RTC, and TCT claim that, even if the rural incumbent protection provision falls within the proscription of section 253(a), section 253(b) saves that provision from preemption. In their view, section 253(b) "reflects the Congressional recognition that a state should maintain the authority to enact measures to ensure that the introduction of competition proceeds in a manner that will serve the overall public interest of the citizenry of its state." They argue, therefore, that: [t]he Wyoming legislature understood in enacting [the rural incumbent protection provision] that if small, rural telephone companies are to be expected to continue to invest in uneconomic areas, they must have some assurances that their market and their future revenue streams are predictable and sufficient to risk such investments. . . . [T]he temporary measures set forth in the Wyoming law are necessary to ensure that the plan the state established for modernization and infrastructure development in rural Wyoming will be carried out. 32. According to Union, RTC, and TCT, the Wyoming Commission has determined, after extensive expert inquiry, that massive improvements must be made to many rural telephone exchanges in order to provide safe, reliable, modern, high-quality telecommunications services to all of Wyoming's citizens; that such improvements will be made only if the investing carriers are guaranteed a reasonable recovery of their investments; and that the rural incumbent protection provision implements a reasonable method to accomplish such recovery. Indeed, Union, RTC, and TCT profess to have relied on the rural incumbent protection provision in deciding to invest heavily in modern, high-quality infrastructure, facilities, products, and services for their rural exchanges. Thus, in the view of Union, RTC, and TCT, the rural incumbent protection provision is "necessary" to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers within the meaning of section 253(b). 33. RTC and TCT also argue that the rural incumbent protection provision is "consistent with section 254" of the Act within the meaning of section 253(b). They state, in particular, that by encouraging small rural carriers to make the investments necessary to provide high-quality telecommunications services to all residents in their territories, the rural incumbent protection provision adheres to the "principles" set forth in section 254(b) "for the preservation and advancement of universal service." IV. DISCUSSION 34. Contrary to Union's argument, we find that the notice-and-comment procedures utilized in this proceeding are fully consistent with relevant statutory provisions. Declaratory rulings issued pursuant to section 253 are informal adjudications. The Administrative Procedure Act (APA) provides no notice-and-comment procedures applicable to agency informal adjudication. We therefore look to our organic statute for guidance regarding the required procedure in this context. 35. Section 253(d) of the Communications Act requires the Commission to provide "notice and an opportunity for public comment" before determining whether to preempt a State or local legal requirement pursuant to section 253. Section 253(d) does not, however, specify any particular means of providing such notice and opportunity for comment. The procedures that we followed in this proceeding are consistent with those that the Commission has used for years with respect to informal adjudications. Specifically, we issued written notices regarding Silver Star's Petition and Amended Petition. These notices briefly summarized the Petition and Amended Petition and described how and when to submit written comments. These notices were available to the public at the Commission, on the Internet, and via numerous subscription services. The Petitions themselves were available to the public for inspection and copying at the Commission. As noted above, we received comments in response to these notices from affected local residents, local businesses, and local government officials and bodies, as well as interested telecommunications entities and trade associations. 36. Had Congress intended to require the Commission to follow more elaborate notice-and-comment procedures in preemption proceedings, it could have directed the Commission to employ those mandated by the APA for rulemakings or other types of agency action or included more specific procedures in section 253. Because Congress did not do so, we believe that section 253 affords us discretion to use in the preemption context our existing notice-and-comment procedures for informal adjudications. We conclude, therefore, that the procedures we followed in this proceeding afforded adequate notice and opportunity for comment within the meaning of section 253(d). 37. In assessing whether to preempt the Denial Order and the rural incumbent protection provision of the Wyoming Act pursuant to section 253, we first determine whether those legal requirements are proscribed by the terms of section 253(a), which states: No State or local statute or regulation, or other State or local requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. If we find that the Denial Order and the rural incumbent protection provision are proscribed by section 253(a), considered in isolation, we then determine whether they fall within the exception to section 253(a)'s proscription set forth in section 253(b). If the Denial Order and the rural incumbent protection provision are impermissible under section 253(a), and do not satisfy the requirements of section 253(b), we must preempt the enforcement of those legal requirements in accordance with section 253(d). If, however, the Denial Order and the rural incumbent protection provision satisfy section 253(b), they are not preemptable under section 253(d), even if they are inconsistent with section 253(a), considered in isolation. 38. Wyoming's rural incumbent protection provision gives incumbent LECs with 30,000 or fewer access lines the ability to block the grant of CPCN applications of potential competitors. The incumbent LEC involved in this matter, Union, exercised that veto power with respect to Silver Star's CPCN application to provide competing local exchange service in the Afton exchange; in turn, as required by the Wyoming Act's rural incumbent protection provision, the Wyoming Commission denied Silver Star's application and thereby barred Silver Star from entering the Afton local exchange market. Consequently, the rural incumbent protection provision and the Denial Order clearly prohibit Silver Star from providing telecommunications service in the Afton exchange, a prohibition proscribed by section 253(a). Indeed, section 253(a), at the very least, proscribes State and local legal requirements that prohibit all but one entity from providing telecommunications services in a particular State or locality. Congress intended primarily for competitive markets to determine which entrants shall provide the telecommunications services demanded by consumers. The express preemption authority granted to the Commission under section 253 is designed to ensure that State and local governments implement the 1996 Act in a manner consistent with these goals. 39. The opposing commenters point out that the rural incumbent protection provision may effectively expire as "soon" as January 1, 2005, and certainly no later than January 1, 2008. Section 253(a), however, does not exempt from its reach State-created barriers to entry that are scheduled to expire several years in the future. In any event, a "temporary" ban on competition that lasts for a minimum of nine years and a maximum of twelve years from the date of enactment of the 1996 Act is, for all practical purposes, an absolute prohibition. Indeed, any law freezing the telecommunications status quo for a nine-to-twelve year period would severely restrict the development of competition that Congress sought to promote by passing the 1996 Act. Thus, this absolute prohibition on Silver Star's competitive entry for a minimum of nine years from the date of enactment of the 1996 Act is precisely the type of action Congress intended to proscribe under section 253(a), absent a demonstration that the rural incumbent protection provision and the Denial Order are an exercise of authority specifically reserved to the State of Wyoming under section 253(b). 40. Section 253(b) preserves a State's authority to impose a legal requirement affecting the provision of telecommunications services, but only if the legal requirement is: (i) "competitively neutral"; (ii) consistent with the Act's universal service provisions; and (iii) "necessary" to accomplish certain enumerated public interest goals. Thus, we must preempt the Denial Order and the rural incumbent protection provision pursuant to section 253(d) unless they meet all three of the criteria set forth in section 253(b). 41. The opposing commenters argue that the Denial Order and the rural incumbent protection provision meet the latter two of those three criteria. None of the opposing commenters, however, contends that the Denial Order and the rural incumbent protection provision meet the first criterion, competitive neutrality. 42. We find that the rural incumbent protection provision is not competitively neutral. This State statutory provision favors certain incumbent LECs over all potential new entrants and allows those incumbent LECs, entirely at their own discretion, to determine if and when they will face competition until at least January 1, 2005. Further, the rural incumbent protection provision awards those incumbent LECs the ultimate competitive advantage -- preservation of monopoly status -- and saddles potential new entrants with the ultimate competitive disadvantage -- an insurmountable barrier to entry. Such disparity in the treatment of classes of providers violates the requirement of competitive neutrality and undermines the pro-competitive purpose of the 1996 Act. We reiterate what we stated in the Classic Telephone Decision: "Congress envisioned that in the ordinary case, States and localities would enforce the public interest goals delineated in section 253(b) through means other than absolute prohibitions on entry. . . ." 43. The terms of section 251(f) bolster rather than contradict that conclusion. Section 251(f) affords rural and small LECs certain avenues of relief from the so-called "interconnection" duties set forth in sections 251(b) and (c). Congress did recognize, therefore, that the special circumstances of rural and small LECs do, indeed, warrant special regulatory treatment. By granting rural and small LECs relief from interconnection obligations instead of an outright prohibition on competition, however, Congress demonstrated its intent to open all markets to potential competitors -- even markets served by rural or small LECs that may qualify for interconnection relief. In other words, in choosing a less competitively restrictive means of "protecting" rural and small LECs, Congress revealed its intent to preclude States from imposing the far more competitively restrictive protection of an absolute ban on competition. 44. In sections 253(f) and 214(e)(2) of the Act we find similar support for our determination that the rural incumbent protection provision falls outside the authority reserved for the States by section 253(b). Both of those sections afford States special latitude in regulating emerging competition in markets served by rural telephone companies. Section 253(f) allows a State, notwithstanding sections 253(a) and (d), to require a telecommunications carrier to meet certain universal service requirements as a condition for obtaining permission to compete with a rural telephone company. Section 214(e)(2) permits a State, with respect to an area served by a rural telephone company, to decline to designate more than one common carrier as an "eligible telecommunications carrier" for purposes of receiving universal service support; and if a State wishes, nevertheless, to designate more than one such carrier, it must first find that doing so would be in the public interest. These accommodations to the unique circumstances of rural telephone companies, like those in section 251(f), indicate that Congress did not contemplate that States could "protect" rural telephone companies with the much more competitively restrictive method of a categorical ban on entry. 45. The question of whether the rural incumbent protection provision and the Denial Order are "necessary" to achieve the public interest objectives enumerated in section 253(b) is more fact-specific than the competitive neutrality query in this proceeding. The "necessary" question requires a detailed analysis of means and ends, whereas the competitive neutrality query requires, in the context of an outright ban on competition, only a facial review of the text of the challenged law. The present record on the "necessary" question is not robust, however. On the one hand, certain provisions of the Wyoming Act itself and the opposing commenters plausibly indicate that the rural incumbent protection provision promotes the universal service and quality objectives specified in section 253(b). On the other hand, the absence of direct participation in this proceeding by the State of Wyoming and the Wyoming Commission leaves the record without perhaps the most probative evidence concerning whether the rural incumbent protection provision is "necessary" to achieve those section 253(b) goals. Given these circumstances, we conclude that the present record does not permit us to make a determination on the merits of the "necessary" issue. The lack of competitive neutrality is, in any event, dispositive standing alone. Therefore, we need not and do not reach the question of whether the rural incumbent protection provision and the Denial Order are "necessary" within the meaning of section 253(b). 46. Given our conclusion that the Wyoming Act's rural incumbent protection provision lacks competitive neutrality, we further conclude that the rural incumbent protection provision and the Denial Order implementing it fall outside the scope of authority reserved for the States by section 253(b). Preempting only the Denial Order would be an empty act, because the rural incumbent protection provision, if still in force, would require the Wyoming Commission to deny Silver Star's CPCN application again, if and when Silver Star refiled it. Accordingly, pursuant to section 253(d), we preempt the enforcement of the Denial Order and the rural incumbent protection provision, Wyo. Stat. Ann.  37-15-201(c). 47. We decline, however, to grant Silver Star's request for preemption of other provisions of the Wyoming Act, i.e., Wyo. Stat. Ann.  37-15-201(d), (e), and (f). Those provisions are derivative of the rural incumbent protection provision and/or not implicated by the instant circumstances. Thus, preemption of those provisions is not "necessary" within the meaning of section 253(d). We also decline Silver Star's request to "direct the Wyoming Public Service Commission to reverse its denial of a concurrent CPCN to Silver Star. . . ." Such action appears unnecessary at this time, especially because Silver Star observes in its comments that it is "confident that the PSC . . . will quickly and completely abide by this Commission's preemption decision. . . ." We expect that the Wyoming Commission will promptly respond to any request by Silver Star to reconsider Silver Star's application for a concurrent CPCN to serve the Afton exchange consistent with the Communications Act and our decision to preempt the enforcement of the Denial Order and the Wyoming Act's rural incumbent protection provision. V. ORDERING CLAUSE 48. Accordingly, IT IS ORDERED, pursuant to section 253 of the Communications Act of 1934, as amended, 47 U.S.C.  253, that the Petition for Preemption and Declaratory Ruling filed by Silver Star Telephone Company, Inc. on January 16, 1997, as amended on April 22, 1997, IS GRANTED to the extent discussed herein, and in all other respects IS DENIED. 49. Accordingly, IT IS FURTHER ORDERED, pursuant to section 253 of the Communications Act of 1934, as amended, 47 U.S.C.  253, that the enforcement of the Denial Order and the rural incumbent protection provision, Wyo. Stat. Ann.  37-15-201(c), are preempted. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary