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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** SEPARATE STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH, CONCURRING IN PART AND DISSENTING IN PART Re: Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, CC Docket 96-98. I concur in the result reached by today's Order. Although I would not have interpreted section 251(d)(2) as the Commission has chosen to do, I believe that the statutory language is flexible enough to encompass the Commission's approach. I emphasize, however, that there is much in the detailed and lengthy language of this Order that I cannot endorse. I would have preferred to adopt a far simpler set of unbundling requirements, based on a far more transparent analysis of the record. In my view, the Commission should exercise the authority that it has to establish nationwide unbundling requirements with the utmost circumspection, brevity, and clarity. The elaborate unbundling rules set forth in this Order are out of keeping with this principle. Complex rules benefit neither incumbent nor competing carriers. Rather, complexity leads to uncertainty and litigation, and in the end, the biggest losers will be the American consumers. It would therefore have been much better for us to have left many of the difficult matters that the Order purports to resolve to the negotiation and arbitration processes of section 252. State commissions are better equipped to address these intricate and individualized issues. I also write to express my disagreement with three particular issues that I believe the Commission has incorrectly resolved. The Commission Has Adopted an Inappropriate Exception to the Switching Unbundling Requirements. I concur in the Commission's conclusion that, outside of certain densely populated areas (e.g., "density zone 1" of the top 50 metropolitan statistical areas in the country), local circuit switching should be unbundled nationwide on the basis of section 251(d)(2). Within these densely populated areas, however, I do not believe that the Commission has articulated a defensible explanation why, consistent with section 251(d)(2), switching is to be available as an unbundled element in some peculiar circumstances, but not in others. In my view, the "impair" standard adopted today is flexible enough to permit the Commission to have come down either way on the question whether to require the unbundling of switching in densely populated areas. The record reveals that competitive carriers have deployed many switching facilities with significant capacity in many densely populated areas, and it further shows that these carriers can use these switches to provide service to all classes of customers, regardless of the number of lines a customer has and regardless of whether the enhanced extended link ("EEL") is available. At the very least, this deployment demonstrates that self- provisioning of switching is feasible in densely populated areas, and therefore, as Commissioner Powell observes, switching may not merit designation as an unbundled element in these regions. At the same time, however, it at least conceivable that under the "impair" standard some competitive carriers would face material differences in cost unless switching is unbundled, although such a determination must be grounded in facts. Although I do not think that such facts are in the record before us, I am willing to entertain the possibility that they might be established. I cannot agree, however, that the "impair"standard is so malleable that the Commission may predicate the unbundling of a network element on the individual circumstances of an incumbent or competing carrier. Indeed, in other parts of the order, the Commission properly rejects the notion that unbundling should be required based on individual determinations of impairment, citing administrative and other concerns. See UNE Remand Order  66. Yet, despite this conclusion, the Commission chooses to base the availability of switching as a network element on whether an incumbent carrier has made available the EEL. Conditioning the availability of a network element in this way will result only in unproductive litigation and needless administrative expenses to determine whether the condition has been satisfied. I also share Commissioner Powell's view that this aspect of the order may reflect an attempt to circumvent litigation that is currently pending in the United States Court of Appeals for the Eighth Circuit, which is considering whether the EEL may be deemed a network element under section 251(c)(3). In addition, I do not believe that section 251(d)(2) permits the Commission to define switching as an unbundled element based on the number of lines that serve an individual customer. We have before us no clear evidence that there are material, switching-related differences in the cost of serving customers with different numbers of lines. Certainly, there is no basis whatsoever for concluding there are material differences in the cost of providing switching to customers with three lines, rather than four. I therefore cannot approve of the Commission's conclusion that carriers in densely populated areas will be impaired in their ability to offer local telephone service to customers with three or fewer lines unless they have access to local circuit switching. Moreover, I think that basing the availability of a network element on the identity of the ultimate retail customer may well violate section 251(c)(3)'s requirement that access to network elements be provided on a "nondiscriminatory" basis. From a technological and economic perspective, there is no difference between a carrier that serves four one-line customers and a carrier that serves one four-line customer. There is consequently no reason to discriminate between the two carriers by giving the first access to local circuit switching, but denying such access to the second. Finally, the administrative costs of implementing and enforcing the Commission's meaningless distinction between three- and four-line customers are daunting. Because of differences in billing arrangements and the availability of bundled service offerings, it is often difficult (if not impossible) to determine exactly how many lines a given customer has. If there are price advantages associated with having fewer than four lines, enterprising customers may well discover ways of appearing to have fewer than four lines. And even if it were possible to know how many lines a customer has, there are substantial administrative costs associated with keeping track of a customer's number of lines, and correspondingly, determining the network elements to which a competing carrier has access. The Commission offers no explanation how it plans to enforce the three-line restriction. How does it propose to handle the problem of a small business customer served by a competitor that has purchased unbundled switching from an incumbent, when that business decides to add a line, bringing its total number of lines from three to four? Does the Commission intend itself to monitor the market to determine whether switching should be unbundled as to a particular end user? Does it intend for State commissions to undertake this oversight function? In light of these legal and logistical difficulties, the appropriate course would have been simply to make switching available or unavailable as a network element in densely populated areas. I therefore dissent from the Commission's decision to require unbundling of local circuit switching for requesting carriers in densely populated areas under the particular circumstances adopted today. The Further Notice of Proposed Rulemaking Is Unwarranted. The Commission seeks further comment on whether it should impose restrictions on the use of the enhanced extended link for the provision of access services from an interexchange carrier's point of presence to an end user. See UNE Remand Order  493-498. The concern is that competitors may purchase unbundled local loops and local transport at cost-based rates, combine these elements, and offer the combinations to customers as a substitute for the existing special access services they purchase from incumbents. In ex parte filings submitted to the Commission in late summer, various parties urged the Commission to restrict the uses to which competitors may put these combinations, to prevent competitors from undercutting the prices charged for special access services (which traditionally have included subsidies used to support universal service). As an initial matter, I believe that Congress intended for the Commission to implement section 251's requirements expeditiously and in a single proceeding and then leave the market alone to function without government interference. To the extent that the Commission implements section 251 in a piecemeal fashion, as it apparently proposes to do, incumbent and competing local exchange carriers lack clear guidelines and certainty regarding their obligations and rights under the 1996 Act. I therefore object to the Commission's Further Notice of Proposed Rulemaking as improperly drawing out the process of implementing section 251. In any event, the Further Notice is unnecessary, since the statute supplies no basis for restricting a competitor's use of any network element or combination of network elements. The Commission resolved this very question in the Local Competition First Report and Order, and there is no reason to revisit the conclusion that we reached there. In the Local Competition First Report and Order, the Commission observed that section 251(c)(3) places no restriction on the uses to which a requesting carrier may put an unbundled network element. Nor does the Act authorize the Commission to limit the ways in which a requesting carrier may use an incumbent's network elements. Section 251(c)(3) simply imposes on incumbents the duty to give requesting carriers nondiscriminatory access to unbundled network elements "for the provision of a telecommunications service." 47 U.S.C.  251(c)(3). Thus, so long as a competitor uses unbundled network elements to provide "a telecommunications service" and exchange access service is inarguably a telecommunications service that use is permissible under section 251(c)(3). To the extent that incumbent carriers are worried that competitors will be able to offer combinations of network elements at prices that undercut the prices of incumbents' special access services, that problem results not from the Commission's local competition regulations, but from the structure of implicit access charges. As the Commission has recognized, requiring incumbents to include in their prices for access services implicit subsidies (as incumbents historically have been required to do) may place incumbents at a competitive disadvantage. But the solution to this problem lies not in imposing restrictions on competitors' uses of network combinations. Rather, the Commission should promptly revise its rules for access charges. See Texas Office of Public Utility Counsel v. FCC, 183 F.3d 393, 425 (5th Cir. 1999). Not only would limiting competing carriers' use of network elements be inconsistent with the statute, but also it would be bad policy. Congress did not intend for the Commission or state regulators to waste their resources policing the uses to which competitors put network elements. The Commission's Decision To Review Its National List of Network Elements Every Three Years Is Illegal. The Commission announces that it plans to reexamine the list of network elements that are subject to the Act's unbundling requirements every three years, beginning, presumably, in 2002. See UNE Remand Order  152. The Commission ignores entirely section 11's requirement that, "in every even-numbered year," the Commission is required to "review all regulations issued under this Act in effect at the time of the review that apply to the operations or activities of any provider of telecommunications service" in order to determine whether those regulations continue to serve the public interest. 47 U.S.C.  161(a) (emphasis added). Section 11 further directs the Commission to "repeal or modify any regulation" it determines is no longer necessary in the public interest. Id.  161(b). The next biennial review process will occur in 2000. By its plain terms, section 11 applies to all regulations issued under the Communications Act, including the unbundling requirements that the Commission adopts today. The Commission has no authority to ignore this requirement, even if it thinks such review is unneeded. To be sure, in its 2000 biennial review, the Commission might appropriately consider the short time the unbundling regulations had been in effect in assessing whether these requirements continue to serve the public interest. But it may not simply rewrite the law to suit its purposes.