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Z:(131Technical Document Style..   23  Ԁ. Z:(132Technical Document Style..   23  Ԁ. ^6 (1331. a. i. (1) (a) (i) 1) a)  23  0..^I (1341. a. i. (1) (a) (i) 1) a)0..  23  0` ..` ^\ (1351. a. i. (1) (a) (i) 1) a)0..0` ..`   23  0 .. ^o (1361. a. i. (1) (a) (i) 1) a)0..0` ..` 0 ..   23  0..^ (1371. a. i. (1) (a) (i) 1) a)0..0` ..` 0 .. 0..  23  0h..h^ (1381. a. i. (1) (a) (i) 1) a)0..0..0..0..0..  23  0..^ (1391. a. i. (1) (a) (i) 1) a)0..0..0..0..0..0..  23  0..  j '  C  $$C--  _  2F   @  XX2FFederalCommunicationsCommission&&J(#FCC99105  @ ?rE' xdEx? 0 (2j $ q!  C  $3tC--  ($      $  C  $$C--Ӏ  1    _  TheTelecommunicationsActof1996(1996Act)amendedtheCommunicationsActof1934.  TelecommunicationsActof1996,Pub.L.No.104104,110Stat.56,codifiedat47U.S.C.151etseq.(!2$ q!  C  $3tC--  Ӏ  0   S $  C  $$C--Ӏ  2    _  TheActdefines"localexchangecarrier"(_LEC_)asanypersonthatisengagedintheprovisionoftelephone  exchangeserviceorexchangeaccess,butnotincludingapersonengagedintheprovisionofacommercialmobileserviceundersection332(c),exceptbyCommissionfinding.See47U.S.C.153(26).  $  C  $$C--Ӏ  3      Inthisorder,weusetheterm"2%midsizedLECs"torefertocompaniesservinglessthan2percentofthe  nation'saccesslines,butwith50,000ormoreaccesslines.ThesearethecompaniesforwhichITTArequestsforbearance.SeeITTAPetitionati,2n.4.Wenotethattheterm"2%midsizedLECs"isnarrowerinscopethanthe D "ruralandmidsizedLECs"discussedintheLECClassificationSecondOrderonReconsideration,becausethelatter ^ termdoesnotexcludecompanieswithlessthan50,000accesslines.RegulatoryTreatmentofLECProvisionof ( InterexchangeServicesOriginatingintheLEC'sLocalExchangeAreaandPolicyandRulesConcerningtheInterstate,InterexchangeMarketplace;andLeacoRuralTelephoneCooperative,Inc.PetitionforWaiver,CCDocketNos.96149 l  and9661,SecondOrderonReconsiderationandMemorandumOpinionandOrder,FCC99103(rel.June30,1999)(LECClassificationSecondOrderonReconsideration). . $  C  $$C--Ӏ  4      AmendmentoftheCommission'sRulestoEstablishCompetitiveServiceSafeguardsforLocalExchangeCarrier  ProvisionofCommercialMobileRadioServices,ImplementationofSection601(d)oftheTelecommunicationsActof1996,WTDocketNo.96162,FirstOrderonReconsideration,PetitionforForbearanceoftheIndependentTelephone D &TelecommunicationsAlliance,AADFileNo.9843,FirstMemorandumOpinionandOrder,FCC99102(rel.June ^ 30,1999);PetitionforForbearanceoftheIndependentTelephone&TelecommunicationsAlliance,AADFileNo.98 ( 43,SecondMemorandumOpinionandOrder,FCC99104(rel.June30,1999);PetitionforForbearanceofthe  IndependentTelephone&TelecommunicationsAlliance,AADFileNo.9843,FourthMemorandumOpinionandOrder, l  FCC99106(rel.June30,1999);PetitionforForbearanceoftheIndependentTelephone&Telecommunications 6  Alliance,AADFileNo.9843,FifthMemorandumOpinionandOrder,FCC99107(rel.June30,1999);Petitionfor  P ForbearanceoftheIndependentTelephone&TelecommunicationsAlliance,AADFileNo.9843,SixthMemorandum    OpinionandOrder,FCC99108(rel.June30,1999).  $  C  $$C--Ӏ  5      IndependentTelephoneandTelecommunicationsAllianceFilesPetitionforForbearancefor2%MidSize  IncumbentLocalExchangeCompanies,PublicNotice,AAD9843,DA98480(rel.Apr.2,1998)(ITTAPublicNotice). J $  C  $$C--Ӏ  6      CommentersonITTA'sforbearancepetitionareAmeritech;AT&T;BellAtlantic;GTE;SBC;  TelecommunicationsResellersAssociation(TRA);andUnitedStatesTelephoneAssociation(USTA).ReplycommentswerefiledbytheAnchorageTelephoneUtility(ATU),CincinnatiBellTelephoneCompany(CincinnatiBell),GeneralCommunication,Inc.(GCI),andITTA.  $  C  $$C--Ӏ  7      PetitionforForbearanceoftheIndependentTelephoneandTelecommunicationsAlliance,AAD9843,Order,  DANo.99197(adoptedJan.19,1999).  $  C  $$C--Ӏ  8      47C.F.R.64.1903.Werefertotheseparationrequirementssetforthinsection64.1903oftheCommission's  rulesasthe"FifthReportandOrderrequirements"becausetheyweredevelopedintheFifthReportandOrderofthe z CompetitiveCarrierproceeding.PolicyandRulesConcerningRatesforCompetitiveCommonCarrierServicesand D FacilitiesAuthorizationsTherefor,CCDocketNo.79252,FifthReportandOrder,98FCC2d1191(1984). 8 $  C  $$C--Ӏ  9      IntheLECClassificationSecondOrderonReconsideration,wedefined"independentLECresellers"as  independentLECsthatprovideinregion,longdistanceservicesusingnointerexchangeswitchingortransmissionfacilitiesorcapabilityoftheLEC'sown.SeeLECClassificationSecondOrderonReconsideration,19. S $  C  $$C--Ӏ  10      RegulatoryTreatmentofLECProvisionofInterexchangeServicesOriginatingintheLEC'sLocalExchange  AreaandPolicyandRulesConcerningtheInterstate,InterexchangeMarketplace;SecondReportandOrderinCC z DocketNo.96149andThirdReportandOrderinCCDocketNo.9661,12FCCRcd15756(1997)(LEC D ClassificationOrder),OrderonReconsideration,12FCCRcd8730(1997)(LECClassificationOrderon ^ Reconsideration),Order,13FCCRcd6427(1998)(LECClassificationPartialStayOrder),LECClassificationSecond ( OrderonReconsideration,(collectivelyreferredtoastheLECClassificationproceeding).WenotethatITTAfiled  commentsintheLECClassificationSecondOrderonReconsiderationproceeding.  $  C  $$C--Ӏ  11      See,e.g.,LECClassificationSecondOrderonReconsiderationat23,n.89(notingthat,accordingtoasurvey  conductedbytheNationalTelephoneCooperativeAssociationthatwasansweredbynearlythreefourthsofitsmembers,139ofthe156independentLECmembersthatprovidedinregion,longdistanceservicesatthetimeofthesurveydidsosolelyonaresalebasis);ATUReplyCommentsinCCDocketNo.96149(filedSep.23,1997)(statingthat"virtuallyeveryindependentLECofferinglongdistanceserviceisdoingsoonaresalebasis");ITTACommentsinCCDocketNo.96149(filedSep.8,1997)(statingthat"mostmidsizedcompaniesdonotownandoperatetheirowninterexchangefacilities").WenotethatalthoughtheLECClassificationSecondOrderonReconsiderationgrantsrelief l  toallresellerindependentLECs,asnotedpreviously,ITTArequestsforbearanceonlyfor2%midsizedLECs.  $  C  $$C--Ӏ  12      IntheApplicationsofNYNEXCorporationTransferor,andBellAtlanticCorporationTransferee,ForConsent  toTransferControlofNYNEXCorporationandItsSubsidiaries,FileNo.NSDL9610,MemorandumOpinionand z Order,12FCCRcd19985(1997)(BellAtlantic/NYNEXOrder). ' $  C  $$C--Ӏ  13      SeeinfranoteBOURB269  Հandaccompanyingtext. $  C  $$C--Ӏ  14      See,e.g.,47U.S.C.154(i).  $  C  $$C--Ӏ  15      PolicyandRulesConcerningRatesforCompetitiveCommonCarrierServicesandFacilitiesAuthorizations  Therefor,CCDocketNo.79252,NoticeofInquiryandProposedRulemaking,77FCC2d308(1979);FirstReportand z Order,85FCC2d1(1980)(CompetitiveCarrierFirstReportandOrder);FurtherNoticeofProposedRulemaking,84 D FCC2d445(1981);SecondFurtherNoticeofProposedRulemaking,FCC82187,47Fed.Reg.17,308(1982);SecondReportandOrder,91FCC2d59(1982)(CompetitiveCarrierSecondReportandOrder);OrderonReconsideration, ( 93FCC2d54(1983);ThirdFurtherNoticeofProposedRulemaking,48Fed.Reg.28,292(1983);ThirdReportandOrder,48Fed.Reg.46,791(1983);FourthReportandOrder,95FCC2d554(1983)(CompetitiveCarrierFourth l  ReportandOrder),vacated,AT&Tv.FCC,978F.2d727(D.C.Cir.1992),cert.denied,MCITelecommunicationsCorp. 6  v.AT&T,509U.S.913,113S.Ct.3020(1993);CompetitiveCarrierFifthReportandOrder,98FCC2d1191(1984);  P SixthReportandOrder,99FCC2d1020(1985),vacated,MCITelecommunicationsCorp.v.FCC,765F.2d1186(D.C.    Cir.1985)(CompetitiveCarrierSixthReportandOrder)(collectivelyreferredtoastheCompetitiveCarrier     Proceeding).  $  C  $$C--Ӏ  16      See,e.g.,CompetitiveCarrierFirstReportandOrder,85FCC2d1.  $  C  $$C--Ӏ  17      See,e.g.,CompetitiveCarrierFirstReportandOrder,85FCC2d1.  $  C  $$C--Ӏ  18      See,e.g.,CompetitiveCarrierFirstReportandOrder,85FCC2d1.  $  C  $$C--Ӏ  19      CompetitiveCarrierFirstReportandOrder,85FCC2d1;CompetitiveCarrierFourthReportandOrder,95  FCC2d554;CompetitiveCarrierFifthReportandOrder,98FCC2d1191.Seealso47C.F.R. z 63.1(o),(u).  $  C  $$C--Ӏ  20      CompetitiveCarrierFourthReportandOrder,95FCC2dat57580,3138;CompetitiveCarrierFifth  ReportandOrder,98FCC2dat11951200,611;CompetitiveCarrierSixthReportandOrder,99FCC2dat1028 z n.29,12. . $  C  $$C--Ӏ  21      CompetitiveCarrierFourthReportandOrder,95FCC2dat57579,3137. # $  C  $$C--Ӏ  22      CompetitiveCarrierFifthReportandOrder,98FCC2dat1198,9. " $  C  $$C--Ӏ  23      CompetitiveCarrierFifthReportandOrder,98FCC2dat1198,9.TheCommissionnotedthat"[a]n  affiliatequalifyingfornondominanttreatmentisnotnecessarilystructurallyseparatedfromanexchangetelephonecompanyinthesenseorderedintheSecondComputerInquiry...."Id. ( $  C  $$C--Ӏ  24      CompetitiveCarrierFifthReportandOrder,98FCC2dat119899,9.  $  C  $$C--Ӏ  25      LECClassificationOrder,12FCCRcdat1584064,14392.  $  C  $$C--Ӏ  26      LECClassificationOrder,12FCCRcdat1584064,14392.TheCommissionconcludedthat,inlightof  itsfindingthatindependentLECsdonothavethepowertoraiseandsustaininterexchangeratesabovecompetitivelevels,itwouldbeinconsistentwithitsanalysistoallowindependentLECstochoosewhethertoberegulatedasadominantcarrierwhenprovidinginregion,longdistanceservices.  $  C  $$C--Ӏ  27      LECClassificationSecondOrderonReconsideration,22.Forexample,wefoundthat"independentLEC  longdistanceresellersareunlikelytoprovide'poorerqualityinterconnectionor[impose]unnecessarydelays'"whenconnectingtheunderlyinginterexchangecarriertotheindependentLEC'snetworkbecausesuchdiscriminationwouldharmtheabilityofboththeunderlyinginterexchangecarrierandtheLECtoprovideinterstate,longdistanceservices.Inaddition,wefoundthatindependentLECresellersarelesslikelytoattempttoallocatecostsimproperlythanLECsthatprovidefacilitiesbasedlongdistanceservicebecause,forinstance,thewholesalerateofresoldlongdistanceservicesismorereadilyvisibletoauditorsthantheunderlyingtransmissioncostsofafacilitiesbasedcarrier,forwhichtheCommissionandcarriersdonothavepreciseinformation.Finally,wefoundthatitisunlikelythatanindependentLECresellerwouldattemptapredatorypricesqueezeor,ifitattemptedone,thatitwouldsucceed,becausesuchcarriersgenerallyhavesmallserviceareasanddependontheexistenceofatleastonefacilitiesbasedinterexchangecarrierinordertoprovidelongdistanceservices.  $  C  $$C--Ӏ  28      LECClassificationSecondOrderonReconsideration,1718.  $  C  $$C--Ӏ  29      LECClassificationSecondOrderonReconsideration,1416. $  C  $$C--Ӏ  30      47U.S.C.160.  $  C  $$C--Ӏ  31      47U.S.C.160(b).Section10(b)alsoprovidesthat,"[i]ftheCommissiondeterminesthatsuchforbearance  willpromotecompetitionamongprovidersoftelecommunicationsservices,thatdeterminationmaybethebasisforaCommissionfindingthatforbearanceisinthepublicinterest."Id.  $  C  $$C--Ӏ  32      TheCommissionmayextendtheinitialoneyearperiodbyanadditional90daysiftheCommissionfindsthat  anextensionisnecessarytomeettherequirementsofsection10(a).47U.S.C.160(c).  $  C  $$C--Ӏ  33      TheFifthReportandOrderprohibitiononjointlyownedtransmissionandswitchingfacilitiesisnotapplicable  toindependentLECresellersbecause,bydefinition,theydonotownsuchfacilities.SeeLECClassificationSecond z OrderonReconsideration,25.  $  C  $$C--Ӏ  34      LECClassificationSecondOrderonReconsideration,2526.TheLECClassificationOrdermodifiedthe  thirdFifthReportandOrderrequirementtoallowindependentLECstotakeexchangeservicesnotonlybytariff,but z alsoonthesamebasisasrequestingcarriersthathavenegotiatedinterconnectionagreementspursuanttosection251oftheAct.LECClassificationOrder,12FCCRcdat1585051,164.  $  C  $$C--Ӏ  35      WelimitedthescopeofrelieftoindependentLECresellersbasedonourfindingthat,amongotherthings,such  LECsarelesslikelytoengageinanticompetitiveactivitythanfacilitiesbasedindependentLECprovidersofsuchservices.LECClassificationSecondOrderonReconsideration,22. ^ $  C  $$C--Ӏ  36      LECClassificationSecondOrderonReconsideration,2,18,27.Aswenotedinthatorder,accordingto  asurveyconductedbytheNationalTelephoneCooperativeAssociationthatwasansweredbynearlythreefourthsofitsmembers,139ofthe156independentLECmembersthatprovidedinregion,longdistanceservicesatthetimethesurveywasconducteddidsosolelyonaresalebasis.Id.at23,n.89,(citingletterfromR.ScottReiter,SeniorIndustry ^ Specialist,NTCA,toMagalieRomanSalas,Secretary,FederalCommunicationsCommission,Attachment(filedJan.16,1998).  $  C  $$C--Ӏ  37      SeeAmeritechCommentsat24;BellAtlanticCommentsat25;GTECommentsat48;SBCCommentsat  12;TRACommentsat26;USTACommentsat1819.  $  C  $$C--Ӏ  38      ITTAPetitionat3940. | $  C  $$C--Ӏ  39      ITTAPetitionat40.WenotethatITTAhasalsosoughtforbearancefrommanyoftheCommission's  accountingsafeguards.ITTAPetitionat1123. $  C  $$C--Ӏ  40      ITTAPetitionat40. $  C  $$C--Ӏ  41      ITTAPetitionat41. $  C  $$C--Ӏ  42      ITTAPetitionat41. $  C  $$C--Ӏ  43      ITTAPetitionat41.  $  C  $$C--Ӏ  44      SeeLECClassificationOrder,12FCCRcdat1584956,16273;LECClassificationSecondOrderon  Reconsideration,2526.  $  C  $$C--Ӏ  45      LECClassificationOrder,12FCCRcdat15853,169.  $  C  $$C--Ӏ  46      LECClassificationOrder,12FCCRcdat15853,169.  $  C  $$C--Ӏ  47      LECClassificationOrder,12FCCRcdat15850,163. $  C  $$C--Ӏ  48      ITTAPetitionat3942.  $  C  $$C--Ӏ  49      LECClassificationOrder,12FCCRcdat1584849,159. $  C  $$C--Ӏ  50      ITTAPetitionat4243. $  C  $$C--Ӏ  51      ITTAPetitionat42. $  C  $$C--Ӏ  52      ITTAPetitionat42. p $  C  $$C--Ӏ  53      SeeLECClassificationSecondOrderonReconsideration,21;LECClassificationOrder,12FCCRcdat  15854,170.  $  C  $$C--Ӏ  54      LECClassificationOrder,12FCCRcdat15852,167.  $  C  $$C--Ӏ  55      LECClassificationOrder,12FCCRcdat1585152,166. ! $  C  $$C--Ӏ  56      LECClassificationSecondOrderonReconsideration,1718. $  C  $$C--Ӏ  57      See,e.g.,47U.S.C.214. $  C  $$C--Ӏ  58      ITTAPetitionat3034.  $  C  $$C--Ӏ  59      ITTAstatesthat,whiletheapplicabilityofBellAtlantic/NYNEXis"unclear,itappearsthattheCommission  ...hascreatedanew'onesizefitsall'regulatoryrequirementapplicabletomidsizeandlargecompaniesalike."ITTAPetitionat31. $  C  $$C--Ӏ  60      ITTAPetitionat31. $  C  $$C--Ӏ  61      ITTAPetitionat31. $  C  $$C--Ӏ  62      ITTAPetitionat3132. $  C  $$C--Ӏ  63      ITTAPetitionat3233. $ $  C  $$C--Ӏ  64      ITTAPetitionat3034.SeegenerallyUSTACommentsat117(statingthat,whileforbearanceisdifficult  technicallybecausetheCommission'sanalysishasnotbeencodified,itagreesthattheextentofanalysisshouldbedeterminedonacasebycasebasis).SeveralpartiesgenerallysupportallofthereliefrequestedbyITTAbutarguethatthereliefshouldapplytoallcarriers,regardlessofsize.SeeAmeritechCommentsat24;BellAtlanticCommentsat ^ 25;GTECommentsat48;SBCCommentsat12;USTACommentsat1819. $  C  $$C--Ӏ  65      AT&TCommentsat910. $  C  $$C--Ӏ  66      AT&TCommentsat10. $  C  $$C--Ӏ  67      AT&TCommentsat11. ' $  C  $$C--Ӏ  68      SeeinfranoteBOURB269  Հandaccompanyingtext. z $  C  $$C--Ӏ  69       [  \ ApplicationsforConsenttotheTransferofControlofLicensesandSection214AuthorizationsfromTele  CommunicationsInc.,Transferor,ToAT&TCorp.,Transferee,CSDocketNo.98178,MemorandumOpinionand z Order,FCC9924,16(rel.Feb.18,1999)(AT&T/TCIOrder)(citingApplicationsofBourbeuseTelephoneCompany D andFidelityTelephoneCompanyforConsentToAssignmentofAuthorityUnderSection214oftheCommunications ^  Act,CCDocketNo.98210,MemorandumOpinionandOrder,DA982568(CommonCarrierBur.,rel.Dec.21,1998).BOURBEUSEBOURB2  $  C  $$C--Ӏ  70    ݀  ApplicationsofBourbeuseTelephoneCompanyandFidelityTelephoneCompanyforConsentToAssignment  ofAuthorityUnderSection214oftheCommunicationsAct,CCDocketNo.98210,MemorandumOpinionandOrder, z DA982568(CommonCarrierBur.,rel.Dec.21,1998). $  C  $$C--Ӏ  71      AT&TCommentsat910. f $  C  $$C--Ӏ  72      AsITTAconcedes,theBellAtlantic/NYNEXanalysisentailsdefiningrelevantmarkets,definingrelevant  marketparticipants,analyzingtheeffectsofthemergeroncompetition,analyzingthemergerspecificefficienciesoftheproposedtransactionandits"conformitywiththegeneralpolicyofpromotingcompetitionthatunderliesthe1996Act."ITTAPetitionat3031. $  C  $$C--Ӏ  73      TRACommentsat3.  $  C  $$C--Ӏ  74      UnitedStatesTelephoneAssociation,PhoneFacts1997at15(1997). $  C  $$C--Ӏ  75      ITTAPetitionat32. $  C  $$C--Ӏ  76      ITTAPetitionat32. 7 $  C  $$C--Ӏ  77      Seee.g.,AT&T/TCIOrderat45;ApplicationofWorldCom,Inc.andMCICommunicationsCorporationfor  TransferofControlofMCICommunicationsCorporationtoWorldCom,Inc.,CCDocketNo.97211,Memorandum z OpinionandOrder,FCC98225,166(rel.Sep.14,1998)(MCI/WorldComOrder). $  C  $$C--Ӏ  78      ITTAPetitionat32. $  C  $$C--Ӏ  79      ITTAPetitionat3233.  $  C  $$C--Ӏ  80      See,e.g.,AT&T/TCIOrderat14;MCI/WorldComOrderat12(notingthat"ourpublicinterestevaluation  isdistinctfrom,andbroaderthan,thecompetitiveanalysisconductedbyantitrustauthorities").  $  C  $$C--Ӏ  81    _  _ITTA_ԀPetitionat34.Wenoteaswellthattransactionsmustmeetcertainsizetestsinordertobereportable  undertheHartScott_Rodino_ԀActandthereforesubjecttopremergerreviewbytheDepartmentofJusticeandFederalTradeCommission.See15U.S.C.18a(a)(3);16_C.F.R._Ԁ820.20(b). ' $  C  $$C--Ӏ  82    _  SeesupranoteBOURBEUSE69  .4567 ;=CIOU]ekOrderI.A.1.a.(1)(a)i)a),-./0123 CyParagraph1. a. i. 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'dxd Level 1 Level 2 Level 3 Level 4 Level 5("$ q!  ($("$ q!  C<< c N )  _    )  QA=x h  p @XEyi ii(#(# 8 "  p  ! V (#X!XXXXXX          25        q!  C  $3tC--  _8dd8    XX@44+ Beforethe   @ FederalCommunicationsCommission@%Washington,D.C.20554  g  @0)IntheMatterof@0) 7 @0)PetitionforForbearanceofthe0 h  H! h   )   p _AAD_ԀFileNo.9843h(#h(# IndependentTelephone&@0)  TelecommunicationsAlliance@0) p  @0)@0)@0)@0  THIRDMEMORANDUMOPINIONANDORDER      pXӀ Adopted: May18,1999 p Released: June30,1999 w o[X` hp x (#%'0*,.8135@8:<H?AhoBytheCommission:CommissionerNessissuingastatement;Commissioners_Furchtgott_ԄRothandPowellconcurringinpart,dissentinginpartandissuingseparatestatements.@ZZ( I.INTRODUCTION        2  1  .3   ` TheIndependentTelephone&TelecommunicationsAlliance(_ITTA_)fileda !p petitiononFebruary17,1998,requestingthattheCommissionexerciseitsauthorityundersection10oftheCommunicationsActof1934,asamended(Act),   1      ׀toforbearfromapplyingto #P  localexchangecarriers_$   2      _Ԁservinglessthantwopercentofthenation'saccesslines(2%mid $@B _sizedLECs)   3      ׀severalofourexistingregulations.Inthisorder,weaddresstwoofITTA's    requests.TheremainderofITTA'srequestsareaddressedincompanionorders.   4       w    2  2  .3   ` TheAccountingandAuditsDivisionoftheCommonCarrierBureauissueda W  publicnoticeseekingcommentonITTA'spetitiononApril2,1998.    5      ׀Sevenpartiesfiled G  commentsonthepetitionandfourpartiesfiledreplycomments.F   6      ׀OnJanuary19,1999,the 7 deadlinefortheCommission'sactiononITTA'spetitionwasextendedby90daystoMay18,1999.   7      ׀ w     2  3  .3   ` Inthisorder,wefirstaddressITTA'srequestthat2%midsizedLECsbe W  permittedtoprovidelongdistanceserviceswithintheirlocalexchangeareasfreeoftheseparationrequirementssetforthinsection64.1903oftheCommission'srules.$   8      ׀Wefindthatthe 7 relieffromtheFifthReportandOrderrequirementsthatwerecentlygrantedto"independent ' LECresellers"   9      ׀intheLECClassificationSecondOrderonReconsideration:    10      ׀effectivelygrants  ITTA'srequest.    11      ׀Forthereasonsstatedbelow,wedenyITTA'spetitiontotheextentthatit  requestsforbearancefromtheFifthReportandOrderrequirementsthatisbeyondsuchrelief. p   `    2  4  .3   ` WealsoaddressinthisorderITTA'srequestthattheCommissionforbearfrom   applyingthemarketandeconomicanalysissetforthintheBellAtlantic/NYNEXOrder.!   12      ׀As w  ITTArequests,weconcludethatweneednotconductanextensiveBellAtlantic/NYNEXtype g  investigationinallinstancesinordertodeterminewhetheralicensetransferisinthepublicinterest.Indeed,wepresumethatwewillrarelyberequiredtoconductsuchananalysisfor2%midsizedcompanies.ITTA'srequestthatweconductacasebycaseanalysisisconsistentwithcurrentpractice.TheCommissionhasalreadyconcludedthatallmergersneednotbesubjecttothesamescrutiny,"   13      ׀andweutilizeacasebycaseapproachinmergerreview.  @  II.THEFIFTHREPORTANDORDERREQUIREMENTS  p   A.0  Background P (#(#   2  5  .3   ` UnderTitleIIoftheCommunicationsAct,theCommissiontraditionallyhas 0  appliedavarietyofregulationstocarriersinordertoprotectcustomersagainstunjust,unreasonable,anddiscriminatoryrates.IntheCompetitiveCarrierProceeding,whichwas  conductedbetween1979and1985,theCommissionunderitsbroadrulemakingauthority#   14        examinedhowtheseregulationsshouldberevisedtoaccommodateandpromoteincreasingcompetitionintelecommunicationsmarkets.$   15      ׀TheCommissionfoundthattheseregulations, g whichhadappliedtoallcarriersunderTitleII,wereunnecessaryforcarriersthatweresubjecttocompetitionandthereforelackedsufficientmarketpowertoengageinanticompetitiveactivity.%Z   16      ׀ w  TheCommission,moreover,determinedthatsuchregulationsevenwereharmfultocompetitionandconsumersbecausetheyimpairedmarketefficiencyandburdenedcarrierswithadministrativecosts.&   17      ׀TheCommissionthereforesoughttodistinguishcarriersforwhichthe G costsoftraditionaltarifffilingandfacilitiesauthorizationregulationsclearlyexceededthebenefits.'~   18      ׀ '   2  6  .3   ` Accordingly,theCommissionestablishedaregulatoryframeworktodistinguish  betweencarriersthattheCommissiondeterminedhavemarketpower,whichareclassifiedasdominant,andthosethatdonothavemarketpower,whichareclassifiedasnondominant.(   19      ׀The `  Commissionrelaxeditstarifffilingandfacilitiesauthorizationrequirementsfornondominantdomesticcarriersandfocuseditsregulatoryeffortsonconstrainingtheabilityofdominantcarrierstoexercisemarketpower.)6    20      ׀IntheCompetitiveCarrierFourthReportandOrder,the 0  CommissiondeterminedthatinterexchangecarriersaffiliatedwithindependentLECswouldberegulatedasnondominantinterexchangecarriers.*\    21      ׀IntheFifthReportandOrder,the  Commissionclarifiedthatan"affiliate"ofanindependentLECwas"acarrierthatisowned(inwholeorinpart)orcontrolledby,orundercommonownership(inwholeorinpart)orcontrolwith,anexchangetelephonecompany."+   22      ׀TheCommissionfurtherclarifiedthat,inorderto g qualifyfornondominanttreatment,theaffiliateprovidinginterstate,interexchangeservicesmust:(1)maintainseparatebooksofaccount;(2)notjointlyowntransmissionorswitchingfacilitieswithitsaffiliateexchangetelephonecompany;and(3)acquireanyservicesfromitsaffiliateexchangetelephonecompanyattariffedrates,terms,andconditions.,   23      ׀TheCommission W  addedthatanyinterstate,interexchangeservicesoffereddirectlybyanindependentLEC,ratherthanthroughaseparateaffiliate,orthroughanaffiliatethatdidnotsatisfythespecifiedconditions,wouldbesubjecttodominantcarrierregulation.-   24      ׀ '   2  7  .3   ` IntheLECClassificationOrderreleasedonApril18,1997,theCommission  classifiedallindependentincumbentLECsasnondominantandrequiredthemtocomplywiththeFifthReportandOrderrequirementsinordertoprovideinregion,longdistanceservices, `  basedonitsfindingthatsuchLECshavetheabilityandincentivetousetheirbottleneckfacilitiestoengageincostmisallocation,unlawfuldiscrimination,orapricesqueezeagainstrivalinterexchangecarriers..   25      ׀TheCommissionthuseliminatedtheexistingregulatoryschemeunder 0  whichindependentLECswerepermittedtochoosetoprovideinregion,longdistanceservicesonadominantbasis,subjecttomorestringentfacilitiesauthorizationandtariffingrequirements,oronanondominantbasis,subjecttotheFifthReportandOrderseparationrequirementsand  relaxedfacilitiesauthorizationandtariffingrequirements./   26      ׀IntheLECClassificationSecond w OrderonReconsiderationreleasedonJune30,1999,wegrantedsubstantialrelieffromtheFifth g ReportandOrderrequirementstoindependentLECsthatprovideinregion,longdistance W servicessolelyonaresalebasis.WepermittedindependentLECresellerstoprovideinregion,longdistanceservicesthroughaseparatecorporatedivision,ratherthanaseparatelegalentity, basedonourfindingthatsuchLECshavelessabilityandincentivetoengageinanticompetitive ' activitythanfacilitiesbasedLECs.0   27      ׀Wealsoreiteratedourpreviousconclusion,however,that    anindependentLEC'scontroloflocalexchangeandexchangeaccessfacilities,andnotitssizeorstatusasaruralcarrier,providesanincentivetoengageinanticompetitiveactivitysuchasaccessdiscrimination,costmisallocation,andapricesqueeze.WethereforedeclinedtograntrelieffromtheFifthReportandOrderrequirementssolelyonthebasisofanindependentLEC'ssize G orstatusasaruralcarrier.1>    28      ׀WealsodeclinedtograntfullrelieffromtheFifthReportandOrder 7 requirements.2    29      ׀ '  &  B.Discussion     2  8  .3   ` TheCommissionderivesitsauthoritytoforbearfromapplyingregulationsor `  provisionsoftheCommunicationsActfromsection10oftheAct.Undersection10,we'iw2mustforbearfromapplyinganyregulationorprovisionoftheActtoatelecommunicationscarrierorservice,orclassoftelecommunicationscarriersorservices,inanyorsomeofitsgeographicmarketsifathreeprongedtestismet.Specifically,section10requiresforbearanceiftheCommissiondeterminesthat:(1)enforcementofsuchregulationorprovisionisnotnecessarytoensurethatthecharges,practices,classifications,orregulationsby,for,orinconnectionwiththattelecommunicationscarrierortelecommunicationsservicearejustandreasonableandarenotunjustlyorunreasonablydiscriminatory;(2)enforcementofsuchregulationorprovisionisnotnecessaryfortheprotectionofconsumers;and(3)forbearancefromapplyingsuchprovisionorregulationisconsistentwiththepublicinterest.3b    30      ׀Inmakingthepublicinterestdetermination, G the1996ActrequirestheCommissiontoconsiderwhetherforbearancewillpromotecompetitivemarketconditions,includingtheextenttowhichforbearancewillenhancecompetitionamongprovidersoftelecommunicationsservices.4   31      ׀Section10alsoprovidesthatanyforbearance g  petitionshallbedeemedgrantedunlessitisdeniedbytheCommissionforfailuretomeettheforbearancerequirementsinsection10(a)withinoneyearofitsreceipt,unlesstheCommissionextendsthisperiod.5   32      ׀ 7   2  9  .3   ` WefindthatthereliefthatwerecentlygrantedtoindependentLECresellersin  theLECClassificationSecondOrderonReconsiderationeffectivelygrantsasubstantialpartof  ITTA'srequestthattheCommissionforbearfromapplyingtheFifthReportandOrder p  requirementsto2%midsizedLECs.TheLECClassificationSecondOrderonReconsideration `  allowsindependentLECresellerstoprovidelongdistanceservicesthroughaseparatecorporatedivisionoftheindependentLEC,ratherthanthroughanaffiliatethatisaseparatelegalentityaspreviouslyrequired,butstillrequiresindependentLECresellerstocomplywiththeremainingFifthReportandOrderrequirements:(1)maintainseparatebooksofaccount;(2)notjointly   owntransmissionorswitchingfacilities;6J   33      ׀and(3)acquireanyservicesattariffedrates,terms,  andconditions,orunderthetermsofsection252oftheActforunbundlednetworkelements.7p    34      ׀  ITTA'srequestiseffectivelygrantedbytheLECClassificationSecondReportandOrderonlyin w part,becausethescopeofitsrequestdiffersfromthereliefthatwegrantedinthatorderintwosignificantrespects.First,ITTArequestsforbearanceforall2%midsizedLECsprovidinginterexchangeservices,buttheLECClassificationSecondOrderonReconsiderationgrants G reliefonlytoindependentLECresellersofinterexchangeservices,definedasindependentLECs 7 thatprovideinterexchangeservicesusingnointerexchangeswitchingortransmissioncapabilityoftheirown.8   35      ׀AlthoughtheLECClassificationSecondOrderonReconsideration,likethe w  originalLECClassificationOrder,expresslydeclinedtograntrelieftoindependentLECsbased g  ontheirsizeorruralstatus,newevidencecontainedintherecordofthatproceedingsuggeststhatmanyindependentLECresellersalsoare2%midsizedLECs.9   36      ׀Second,ITTArequests G forbearancefromalloftheFifthReportandOrderrequirements,buttheLECClassification 7 SecondOrderonReconsiderationgrantspartialrelieffromtheserequirements,leavinginplace ' thethreeconditionsdescribedabove.  2   10  .3   ` ForthereasonswedeniedremovingallFifthReportandOrderrequirementsin p  theLECClassificationOrderandLECClassificationSecondOrderonReconsideration,we `  denyITTA'spetitiontoforbearinsofarasitextendsbeyondthereliefgrantedintheLEC P  ClassificationSecondOrderonReconsideration.ITTA'sargumentsfarenobetterunderthe @  threeprongsoftheforbearancetestthantheydidintheLECClassificationproceeding.Having 0  justdeterminedtherethatcontinuedapplicationoftheFifthReportandOrderrequirementswere   neededtoprotectagainstdiscriminationandcostmisallocation,weconcludeherethatsuchrequirementsarenecessaryandinthepublicinterest.Wethusrejectparties'suggestionsthatweforbearfromapplyingtheFifthReportandOrderrequirementstoallindependentLECsor, w alternatively,independentLECswith50,000orfeweraccesslines.:r    37      ׀ g   2   11  .3   ` WefindthatapplicationoftheFifthReportandOrderrequirementsto2%mid W sizedLECs,insofarastheydonotfallwithinthescopeofreliefgrantedtoindependentLECresellersintheLECClassificationSecondOrderonReconsideration,continuestobeavaluable 7 andnecessarysafeguardagainstanticompetitiveconduct.TheabilityofindependentLECstoengageinanticompetitiveactivity,andtheCommission'spriorconclusionsthattheFifthReport   andOrderrequirementsarenecessarytohelpdetectandpreventsuchactivity,precludeusfrom   findingthattheFifthReportandOrderrequirementsarenotnecessarytoensurethat2%mid w  sizedLECs'charges,practices,orclassificationsarejustandreasonable,andarenotunjustlyorunreasonablydiscriminatoryundersection10(a)oftheAct.WethereforeconcludethatITTAhasnotmetthefirstforbearancecriterion.ITTAarguesthattherequirementsoftheFifthReport G andOrderarenotnecessarytoguardagainstunjust,unreasonable,anddiscriminatoryconduct 7 becausesufficientprotectionsarealreadyinplace.ITTAarguesthat:(1)sections201and202oftheActprohibitunjust,unreasonable,anddiscriminatoryconduct;;   38      ׀(2)theCommissionhas  accountingandaffiliatetransactionrulestopreventcrosssubsidization;<Z   39      ׀and(3)the  Commissioncanaddressanyillegalcarrierconductthroughexerciseofitsauthoritytoinvestigateandadjudicatecomplaintsundersection208oftheAct.=   40      ׀ITTAalsoassertsthat `  competitiveforcesintheinterexchangemarketprevent2%midsizedLECsfromengaginginunjustorunreasonablydiscriminatorybehavior.>H   41      ׀Inparticular,ITTAarguesthatbecause @  domesticinterexchangeservicesarehighlydemandelastic,2%midsizedLECswouldlosetheiralreadysmallsharesofthemarketiftheyraisedratesabovecompetitivelevels.?   42      ׀ITTAalso   notesthat,astheCommissionconcludedintheLECClassificationOrder,incumbentLECsdo  nothavetheabilitytoraisepricesabovecompetitivelevelsbyrestrictingtheiroutputofinterexchangeservices.@l    43       w   2   12  .3   ` AsAT&Tnotes,theargumentsraisedbyITTAinconnectionwiththefirst W forbearancecriterionwereconsideredpreviouslybytheCommissionwhenitconcludedintheLECClassificationOrderandtheLECClassificationSecondOrderonReconsiderationthat 7 independentLECshavesufficientabilitythroughtheircontrolofbottleneckfacilitiestoharmtheinregion,longdistanceservicesmarketbyengagingincostmisallocation,accessdiscrimination,andpricesqueeze.TheCommissionthereforeconcludedthattheFifthReportandOrder ! requirements,includingthereducedrequirementsthatapplytoindependentLECresellers,arenecessarytohelppreventanddetectsuchanticompetitiveactivity.A   44      ׀Weseenoreasontochange w  ourpreviousconclusions.TheCommissionrecognizedintheLECClassificationOrderthatits g  "accesschargerules,imputationrequirements,andcostallocationandaffiliatetransactionrules...havesignificantbeneficialeffects,"butconcludednonethelessthat"theseregulationsalonearenotanadequatesubstitutefortheFifthReportandOrderseparationrequirements"todetectand 7 preventanticompetitiveactivity.B$   45      ׀Forinstance,theCommissionstatedthattheprohibition ' againstjointlyownedtransmissionandswitchingfacilitiesensuresthattheaffiliateobtainssuchfacilitiesonanarm'slengthbasis,andalsohelpstoensurethatallcompetinginregionprovidershavethesameaccesstoprovisioningoftransmissionandswitchingasthatprovidedtotheindependentLEC'saffiliate.C   46      ׀ThereisnootherCommissionrulethatprohibitsjointownership `  ofswitchingandtransmissionfacilities.TheCommissionalsofoundthattheseparatebooksofaccount& b requirementisnecessarytotraceanddocumentimproperallocationsofcostsorassetsbetweenaLECanditslongdistanceaffiliateandtodetectunlawfuldiscriminationinfavoroftheaffiliate.DH   47      ׀'b^   Ѐ  2   13  .3   ` Regardingthesecondforbearancecriterion,wecontinuetobelievethat  applicationoftheFifthReportandOrderrequirementsto2%midsizedLECs,totheextentthat w theydonotfallwithinthescopeofreliefthatwerecentlygrantedtoindependentLECresellersintheLECClassificationSecondOrderonReconsideration,isbeneficialtoconsumers.ITTA W arguesthattheFifthReportandOrderrequirementsareunnecessarytoprotectconsumersforthe G samereasonsthattheyareallegedtobeunnecessarytoensurejustandreasonablerates.E   48      ׀We 7 arenotpersuadedbyITTA'sarguments,asdiscussedabove.WebelievethattheFifthReport ' andOrderrequirements,asappliedintheLECClassificationOrderandtheLECClassification   SecondOrderonReconsideration,arenecessarytoprotectconsumersbecausetheyaidin ! preventionanddetectionofanticompetitiveconductbyindependentLECs.Forinstance,theCommissionstatedintheLECClassificationOrderthatcostmisallocationmayresultin "` distortedpricesignalsinthelocalexchangeandexchangeaccessmarketsand"maycausesubstantialharmtoconsumers,competition,andproductionefficiency."F   49       w  Ѐ  2   14  .3   ` Finally,weconcludethatapplicationoftheFifthReportandOrderrequirements W  to2%midsizedLECsthatdonotfallwithinthescopeofreliefthatwegrantedtoindependentLECresellers,isconsistentwiththepublicinterest.ITTAarguesthatforbearancewillservethepublicinterestindirectlybypromotingthedevelopmentofinterexchangecompetitioninruralareasandtheprovisionofonestopshoppingfortelecommunicationsservices.GZ   50      ׀ITTAargues  thattheFifthReportandOrderrequirementsdisproportionatelyburden2%midsizedLECs  becausetheyhavefewercustomerstoabsorb&  compliancecoststhantheirlargercompetitors.H   51      ׀ p  ITTAalsoarguesthat2%midsizedLECswillenjoyincreasedeconomiesofscopeiftheyarenotrequiredtomaintainseparateownershipoffacilitiesandswitches.I~   52      ׀'i P    2  15  .3   ` WearenotpersuadedbyITTA'sarguments.Asnotedabove,theLEC 0  ClassificationSecondOrderonReconsiderationgrantslimitedrelieffromtheFifthReportand   OrderrequirementstoindependentLECresellersbyallowingthemtoprovidelongdistance  servicesthroughaseparatecorporatedivisionoftheindependentLEC,ratherthanthroughaseparateaffiliatethatisaseparatelegalentityaspreviouslyrequired.Aswiththefirsttwoforbearancecriteria,wefindthatcommentersraisenoargumentsthattheCommissiondidnotalreadyconsiderandrejectintheLECClassificationOrderproceeding.Inthatproceeding,we W soughttobalancecarefullytheCommission'scompetingobjectivesofapplyingregulationstoaddressthepotentialforanticompetitiveconductbyindependentLECsagainstthepossibleburdensthatsuchregulationsmightimposeonthesecarriers.J   53      ׀TheCommissionappliedthe ' FifthReportandOrderrequirementstoindependentLECsassetforthintheLECClassification   OrderandtheLECClassificationSecondOrderonReconsideration,asaresultofthisanalysis. ! Inparticular,theCommissionpreviouslyconcludedthat,whiletheFifthReportandOrder !p requirements"imposesomeregulatoryburdens,wefindthattheseburdensarenotunreasonable "` inlightofthebenefitstheserequirementsyieldintermsofprotectionagainstimpropercostallocation,unlawfuldiscrimination,andpricesqueezes."K   54      ׀Forinstance,theCommission w  explainedthataseparateaffiliateundertheFifthReportandOrderrequirementscanbenefit g  fromeconomiesofscopeby"contract[ing]foruseoftheLEC'stransmissionandswitchingfacilitiesattariffedratesoronthesamebasisasrequestingcarriersthathavenegotiatedinterconnectionagreementspursuanttosection251...."LZ   55      ׀Finally,intheLECClassification 7 SecondOrderonReconsideration,wedeclinedtograntrelieffromtheFifthReportandOrder ' requirements& b basedpurelyonanindependentLEC'ssizeorruralstatus,eventhoughwerecognizedthatthecostsofcomplyingwiththeFifthReportandOrderrequirementsmaybe  moreburdensomeforsuchLECs.M   56      ׀'buԀ p    2  16  .3   ` Forthereasonsexplainedherein,weconcludethatITTAhasnotdemonstrated P  thattheforbearancecriteriacontainedinsection10oftheCommunicationsActaremetfor2%midsizedLECsthatarenotgrantedrelieffromtheserequirementsintheLECClassification 0  SecondOrderonReconsideration.AlthoughwemustthereforedenyITTA'srequestthatwe   forbearfromapplyingtheserequirementsto2%midsizedLECs,wenotethatITTAeffectivelyhasobtainedasubstantialamountoftheforbearanceitrequestsinthereliefthatwerecentlygrantedtoindependentLECresellersintheLECClassificationSecondOrderon w Reconsideration. g @hh III.THEBELLATLANTIC/NYNEXORDERMERGERANALYSIS G A.0  Background '(#(#   2  17  .3   ` TheCommissionisrequiredbystatutetoconsidertheeffectsonthepublic ! interestofanytransactioninvolvingthetransferofcertainFCClicensesandauthorizations.N~   57      ׀In !p itspetition,ITTArequeststhattheCommissionforbearfromapplyingtolicenseandauthorizationstransfersaccompanyingmergersbetween2%midsizedLECsorbetweena2%midsizedLECandanonincumbentLECthe"marketandeconomic"analysissetforthinthe $@ BellAtlantic/NYNEXOrder.O   58      ׀ITTAviewsBellAtlantic/NYNEXascreatinganewregulatory   reportingrequirementcallingonprospectivelymergingcompaniestoprovidedetailedeconomicandmarketplaceinformation.PZ   59      ׀Itcontendsthatthe"rigorouseconomicandmarketanalysis" g  conductedinBellAtlantic/NYNEXis"extremelyburdensome"for2%midsizedLECsandthat W  theCommissionshouldforbearfromimposingthisrequirementonsuchcompanies.Q   60      ׀ITTA G arguesthatthefirstprongofthestatutoryforbearancetestissatisfied,fortworeasons.R   61      ׀First, 7 ITTAmaintainsthattheBellAtlantic/NYNEXanalysisisunnecessarybecausethesecompanies ' withtheirsmallmarketsharesposeno"possibilityofseriousanticompetitiveconcernsfornationalmarkets."S   62      ׀Second,ITTAcontendsthattheanalysisisunnecessaryforthesecompanies  becausetheDepartmentofJusticeandtheFederalTradeCommissionconducttheirownreviewofthecompetitiveeffectsofthemerger.T6    63      ׀Finally,ITTAmaintainsthattherequested `  forbearanceisinthepublicinterestbecause,byrelievingthesecompaniesoftheBell P  Atlantic/NYNEXrequirements,mergersthatarebeneficialtothepubliccouldbeconsummated @  morequicklyandwithlessregulatorycost.U    64       0    2  18  .3   ` AT&T,theonlycommenterspecificallytoaddressforbearanceoftheBell  Atlantic/NYNEXanalysis,respondsthatITTAhasconfusedtheamountofdatarequiredtobe   filedinBellAtlantic/NYNEXwiththepublicinteresttestitself,whichissufficientlyflexibleto w accommodatethecircumstancesofeachtransaction.V   65      ׀Itcontendsthatmergersinvolving2%    midsizedincumbentLECswillrarelynecessitatethelevelofinformationandreviewundertakenintheBellAtlantic/NYNEXmerger.WZ   66      ׀AT&TmaintainsthattheCommissionmustretain g  sufficientflexibilitytoassessuniquefactsorcircumstanceswhichcannotbeanticipatedinadvanceandthustheITTA'srecommendationtoforbear"goestoofar."X   67       G  &  B.0  Discussion '(#(#   2  19  .3   ` AsITTArequests,weconcludethatweneednotconductanextensiveBell  Atlantic/NYNEXtypeinvestigationinallinstancesinordertodeterminewhetheralicense' p  transferisinthepublicinterest.Indeed,wepresumethatwewillrarelyberequiredtoconductsuchananalysisfor2%midsizedcompanies.ITTA'srequestthatweconductacasebycaseanalysisisconsistentwithcurrentpractice.TheCommissionhasalreadyconcludedthatallmergersneednotbesubjecttothesamescrutiny,Y~   68      ׀andweutilizeacasebycaseapproachin 0  mergerreview.Weexplainourconclusionsinfurtherdetailbelow.  2  20  .3   ` ITTAdoesnotdisputethatmergersinvolving2%midsizedLECsmustmeetthe  statutoryrequirementthatlicenseandauthorizationstransfersbeinthepublicinterest.Itisconcerned,however,thattheCommission,intheBellAtlantic/NYNEXOrder,createdamerger g relatedreportingrequirementequallyapplicabletolargeandsmallcompaniesthatwouldresultinonerousandburdensomecompliancecostsforthosesmallcompanies.WeagreewithITTAthatreflexivelyadoptingthesamedegreeofreviewandinformationgatheringforallmergersisinappropriate.TheCommissionrecentlynotedasmuchintheAT&T/TCIOrderwhereitstated, ' "[f]orsomemergersnoinquiryisnecessary...[i]ndeed,thefaceofsomemergerapplicationsmayrevealthatthemergercouldnotfrustrateorundermineourpolicies."Z   69      ׀TheCommission, ! consistentwithITTA'spetition,doesapplyacasebycaseanalysisandtailorsitsinformationrequestsaccordingly.Thus,inarecentmergerbetweentwosmallcompanies,theCommonCarrierBureaumadenoadditionalinformationrequestsandapprovedthemergerbasedonthefaceoftheapplication.]Z   70      ׀ W    2  21  .3   ` AlthoughweagreewithITTAthatacasebycaseapproachisappropriate,we 7 believethatforbearancefromtheBellAtlantic/NYNEXanalysisinallinstancesofmergers ' involvinga2%midsizedLECwouldbeunwise.WeagreewithAT&Tthat,althoughmergersinvolving2%midsizedLECsmayrarelyraiseconcernsnecessitatingthedegreeofinformationandreviewundertakenintheBellAtlantic/NYNEXmergerreviewprocess,theCommission p  cannotanticipateuniquefactsorcircumstancesthatmayarise.^   71      ׀TheBellAtlantic/NYNEX `  standardofreview,furtherelaboratedintheMCI/WorldCom,SBC/SNET,andAT&T/TCImerger P  reviews,isnotprincipallyanantitrustinquiry.ItispredominantlyanassessmentofwhetheramergermayviolatetheCommunicationsActorfrustratetheCommission'sabilitytoenforcetheActortoachieveitsgoals.Amergerbetween2%midsizedLECswillnotnecessarilyalwaysfurther,andpotentiallycouldfrustrate,thegoalsoftheCommunicationsAct.TheCommunicationsActspecifiescompetitive,deregulatorygoals.Therefore,theCommissionmustalsoretaintheflexibilitytoassessthecompetitiveeffectsofmergers._   72      ׀Moreover,ITTA's w exclusionofall2%mid-sizedcompanieswouldresultintheexclusionofnotjustsmallindependents,butmanylargercompaniesaswell.AsnotedbyTRA,2%midsizedLECsinclude,forexample,CincinnatiBellTelephoneand,beforeitsrecentacquisitionby SouthwesternBell,SouthernNewEnglandTelephoneCompany.`    73      ׀Thesecompanieshad 7 943,609and2,118,995accesslines,respectivelyandgeneratedoperatingrevenuesofover$650millionand$1.36billionrespectively.a   74      ׀ w     2  22  .3   ` WealsorejectITTA'sspecificargumentsastowhyforbearanceineveryinstance W  ofmergersinvolving2%midsizedcompaniesmeetstherequirementsofsection10.ITTAarguesthatforbearancemeetsthefirsttwoprongsoftheforbearancetestfortworeasons.ItmaintainsthattheBellAtlantic/NYNEXanalysisisunnecessarybecausenomergerbetweenor ' involving2%midsizedLECswouldeverpose"seriousanticompetitiveconcernsfornationalmarkets."bZ   75      ׀Wecannotacceptthisblanketassertion.Webelieveitwouldbeimprudenttomake  suchajudgmentinadvance.Moreover,ITTA'spredicatethatourconcernisonlywith"nationalmarkets"c   76      ׀ismisplaced.AstheCommissionhasrepeatedlynoted,therelevantgeographic `  marketforassessingpublicinteresteffectsmaybemuchnarrower,asnarrowasthelocalmarketinthecaseoflocaltelephoneexchangeservice.d~   77      ׀TheCommissionmustthusassesspotential @  competitiveeffectsonlocalareas,not"nationalmarkets."e   78      ׀ITTAnextcontendsthat 0  "enforcement"oftheBellAtlantic/NYNEXanalysisisnotnecessarytoprotectconsumers   becauseotherfederalagenciesmayreviewthepotentialcompetitiveeffectsofthemerger.f6    79      ׀The  CommissionhasemphasizedthatitsreviewoftransactionsisdistinctfromandbroaderthanthatconductedbytheDepartmentofJusticeortheFederalTradeCommission.g    80      ׀Thereviewofother w agenciesisthusnosubstituteforthestatutorilyprescribedreviewconductedbythisCommission. _ G   2  23  .3   ` Finally,wearenotpersuadedby_ITTA_'sargumentthatthepublicinterestwillbe    servedbyforbearanceinallcasesbecausebeneficialmergerscanbeconsummatedmorequickly._h   81      _ԀAsalreadynotedabove,theCommissioncanactswiftlywhereonthefaceofthe g  applicationnocompetitiveconcernsseemimplicatedbytheproposedtransfer.i   82      ׀The W  Commissioncanthusensurethatmergerswithclearpublicinterestbenefitscanreceivepromptreview.Ontheotherhand,thepublicinterestisnotservedbytheCommission'styingitshandsinadvanceofanyparticularapplicationbyforbearingfromconductingathoroughassessmentofthepublicinterestramificationsofallmergersinvolvinga2%midsized_LEC_.  2  24  .3   ` ByreaffirmingtheCommission'scasebycaseapproach,webelievewehave p  alleviatedtheconcernsanimating_ITTA_'spetition.Forthereasonsstatedabove,webelievethattogofurtherandcreateablanketexceptionforall2%midsized_LECs_Ԁwouldnotbeinthepublicinterest.@]]& IV.ORDERINGCLAUSE      2  25  .3   ` Accordingly,ITISORDEREDthatpursuanttosections1,2,4,10,201,and202,  oftheCommunicationsActof1934,asamended,47U.S.C.151,152,154,160,201,and202,thePetitionforForbearanceoftheIndependentTelephone&TelecommunicationsAllianceisRENDEREDMOOTinpart,andotherwiseisGRANTEDINPARTandDENIEDINPART,asdescribedherein.0  0` (#(#0 ` (#` (#0 (# (#0h(#(#FEDERALCOMMUNICATIONSCOMMISSION h(#h(# 0  0` (#(#0 ` (#` (#0 (# (#0h(#(#_Magalie_ԀRoman_Salas_ h(#h(# 0  0` (#(#0 ` (#` (#0 (# (#0h(#(#Secretary #Ph(#h(#  r   ___Separate_ԀStatementofCommissionerSusanNess  Re:_ITTA_ԀPetitionforForbearance ' Weareinthemiddleofaturbulentperiodaswetransitionfrommonopolytocompetition.Manyrulesandevenstatutoryprovisionsthatwereputintoplaceduringamonopolyregimemaynolongerbenecessarytoeffectuatetheirintendedpurpose.Recognizingthatthemarketplaceisrapidlyevolving,CongresswiselyprovidedtheCommissionwithaflexibletooltoforbearfromenforcementofprovisionsoflawandregulationswheretheCommissionfindsitservesthepublicinteresttodoso.TheforbearancepetitionfiledbytheIndependentTelephoneandTelecommunicationsAlliance(_ITTA_)affordsusanopportunitytoreviewparticularrulestodeterminewhethertheycontinuetobenecessarytoservethepublicinterest.Thepetitionrequestsregulatoryreliefformidsizedlocalexchangecarriersthatservelessthantwopercentofthenationsaccesslines.Underasection10forbearanceanalysis,theCommissionmustforbearfromapplyinganyruleorregulationiftheCommissiondeterminesthat(1)enforcementisnotnecessarytoensurethatchargesandpracticesarejustandreasonable,(2)enforcementisnotnecessaryfortheprotectionofconsumers,and(3)forbearanceisconsistentwiththepublicinterest.Inaseriesoforders,wegranttheforbearancerequestedinsomeinstances;wegobeyondwhatwasrequestedinsomeinstancesbyprovidingrelieftoabroaderclassofcarriers;andinafewlimitedinstancesweconcludethatcontinuedenforcementisnecessaryfortheprotectionofconsumers.OnerequestthatthemajoritydoesnotgrantisforbearancefromtheCommissionsrequirementthatincumbentlocalexchangecarriersoffercertainservicesthroughseparateaffiliates.Whileourseparateaffiliateruleshaveservedaveryimportantpurposeinthepast,separationmaybelessessentialascompetitionevolves.Basedontherecordinthisproceeding,however,Iamnotconvincedthatcompetitionhasdevelopedtothepointwhereconsumerswillbeadequatelyprotectedifweforbearfromourrules.Ilookforwardto 7-"% workingwiththepartiestodevelopabetterrecordandtodeterminewhetherstructuralseparationpromotescompetitionordetractsfromthecompetitivemarketplace.  g  Ѐ  & %XXCONSOLIDATEDSEPARATESTATEMENTOF w  COMMISSIONERHAROLD_FURCHTGOTT_-ROTH#XX %&n#Ԁ S    Re:0  PetitionforForbearanceoftheIndependentTelephone&Telecommunications 3 Alliance;RegulatoryTreatmentof_LEC_ԀProvisionof_Interexchange_ԀServicesOriginatinginthe_LEC_'sLocalExchangeArea (#(#   IsupporttheseitemstotheextentthattheyprovidethereliefrequestedbytheIndependentTelephone&TelecommunicationsAlliances(_ITTA_)petition.Iobject,however,totheextentthattheregulatoryreliefrequestedisdeniedorsomelesserregulatoryreliefisprovided.Moreover,IquestiontheoverallapproachthattheCommissionhastakentothisforbearancepetition.  Istartwiththepresumptionthatthe_ITTA_Ԁpetitionhasbeen"deemedgranted"infullbecauseoftheCommission'sfailureeither(_i_)todenythepetitionwithinoneyearafterreceivingit,or(ii)tomakeanexplicitfindingthata90dayextensionwasnecessarytomeetthestatutoryrequirements.Section10oftheCommunicationsActisveryclear:"TheCommissionmayextendtheinitialoneyearperiodbyanadditional90daysiftheCommissionfindsthatanextensionisnecessarytomeettherequirementsofsubsection(a)."Thestatuteisthusspecificthatitisthe"Commission"whichmustgrantanyextensionandmustdosouponafindingthattheextensionisnecessarytomeetthepurposesofsection10(a).Idonotbelievethatthebureau,actingonitsownmotionandwithoutevenpriorconsultationwiththe"Commission,"canacttoextendthisstatutorytimeframe.Idonotbelievethatthe90dayextensioncanbeeffectivelyusedbythebureauwithoutevenbriefingtheCommissiononthemeritsoftheunderlyingpetition,determiningwhetherornotthereareanynewornovelquestionsoffact,laworpolicy,andreceivingsomesignalfromamajorityofthe"Commission"thatanextensionoftimeiswarrantedundertheseparticularcircumstances.  Inaddition,IdisagreewithseveralaspectsoftheapproachthattheCommissionhastakentothisforbearancepetition.Inseveralinstances,theCommissiondeterminesthat_ITTA_Ԁhasnotmetthecriteriaforforbearancetotheextentthatthepetitionrequestsreliefbeyondthatwhichisgrantedinacontemporaneous_rulemaking_Ԁproceeding.Seee.g., c)! PetitionforForbearanceoftheIndependentTelephone&TelecommunicationsAlliance,ThirdMemorandumOpinionandOrderin_AAD_ԀFileNo.9843,atpara.10(denyingrelieftotheextentthatpetition"extendsbeyondthereliefgrantedinthe_LEC_ԀClassification 3,!$ SecondOrderonReconsideration.")Seealso,PetitionforForbearanceoftheIndependent   Telephone&TelecommunicationsAlliance,SixthMemorandumOpinionandOrderin_AAD_ԀFileNo.9843,atpara.2("Althoughwedonotgrantforbearancefromourrulesregardingapplicationsforspecialpermissionatthistime,weareconsideringwhether,andhow,weshouldmodifysomeofourrulesthatnecessitateapplicationsforspecialpermissionaspartofourongoingbiennialreview_rulemaking_Ԁandexpecttomakeafinaldecisiononthebasisofthatmorecompleterecordinthenearfuture.").IamtroubledthattheCommissionhasdecidedtoprovidesomelesserformofregulatoryreliefthanthatwhichwasrequesteddoingsoinaseparate_rulemaking_ԀwheretheCommissionhasmorediscretionandthenhasusedthatproceedingaspartofthejustificationfordenyingfullregulatoryforbearanceasrequested.Inotherwords,theCommissionhasdeterminedthatthesimplestmethodofdealingwiththesepetitionsistodenytheforbearancereliefatissuewhileatthesametimeprovidinglesserreliefinaseparate_rulemaking_Ԁproceeding.Butthatisnottheprocessthestatuterequires.Moreover,undersuchanapproach,theCommissionisabletoavoidthedifficultquestionofwhy,whenconsideringthesamefacts,particularregulatoryreliefisappropriateandotherregulatoryreliefwouldcontravenethestatute.Suchdistinctionswouldfrequentlybedifficulttojustifyastheforbearancecriteriafocusongeneralstandardse.g."protectionofconsumers,"or"inthepublicinterest."IobjecttotheCommission'sattempttoavoidtheobjectiverigorofthesection10forbearancetestbyprovidingregulatoryreliefinseparateproceedingswheretheCommissionhasmorediscretion.  Inaddition,thisapproachlendsitselftoeliminatingonesetofrequirementsandatthesametimeadoptingnewalbeitlesserregulatoryrestrictionsthatwouldnotbejustifiedundersection10alone.Seee.g.,BiennialRegulatoryreviewofAccountingand ! CostAllocationRequirements,PetitionforForbearanceoftheIndependentTelephone&TelecommunicationsAlliance,FourthMemorandumOpinionandOrderin_AAD_ԀFileNo.9843,atpar.25(reinterpreting_ITTA_ԀpetitionasnotaskingtoforbearfromClassAaccountingaltogetherbut"[_e]ssentially_Ԁ...askingustochangeourrules,nottoforbearfromapplyingthecurrentrules.").Whilesection10providesthattheCommissionmaybeabletoforbear"inwholeorinpart"fromaparticularprovisionorregulation,seesection &  10(c),itdoesnotprovidetheCommissionwithanyauthoritytoadoptnewregulationsorto ' imposeseparateconditionsinthecontextofaforbearancepetition.Section10'sprimary (  emphasisisonderegulation,andIwillnotsupportthisprovision,oranyoftheproceedingsrequiredbyasection10petition,beingusedasanopportunitytoauthorizenewregulatory restrictionsorconditions.IfearthatthistypeofexpansivereadingoftheCommission's W+ # authorityundertheAct'sforbearanceprovisionswillleadtheCommissionastrayfromitsclearstatutorydutiesandlimitations.     Finally,asIhavestatedpreviously,IamconcernedthattheCommissionisplacingtoohighaburdenonthepartiesrequestingforbearancerelief.IbelievethattheSection10forbearanceschemerequirestheCommissiontojustifycontinuedregulationinlightofthecompetitiveconditionsinthemarketplace.TheCommissioncannotmeettheirstatutoryobligationsbysimplyshiftingtheburdentopetitionerstojustifyforbearance.    XO   E14 <DL!T$XEXX#}}dd   '.#&   SEPARATESTATEMENTOFCOMMISSIONERMICHAELK.POWELL   XX... X ?+ ` hp x X?Re:  PetitionforForbearanceoftheIndependentTelephoneand g  TelecommunicationsAlliance(_AAD_ԀFileNo.9843),andrelatedproceedings W  (CCDocketNo.9711,CCDocketNo.9881,CCDocketNo.96150,CC G DocketNo.98117,_WT_ԀDocketNo.96162,CCDocketNo.96149,CCDocketNo.9661) XE+ ` hp x ` XE   B+ ` hp x XB   Iampleasedtojoinmycolleaguesingrantingsomeoftheregulatoryreliefrequested  intheforbearancepetitionfiledbytheIndependentTelephoneandTelecommunicationsAlliance(_ITTA_)onbehalfofmidsizedlocalexchangecarriers.AlthoughIconcurintheresultsofmostoftheseitems(especiallywhereregulatoryreliefisgranted),Iam,however,compelledtodissentinparttothreeofthedecisions,andIcontinuetobeconcernedabouttheCommissionshandlingandanalysisofforbearancerequestsundersection10oftheCommunicationsAct.݌̌     Inthesevariousitems(someconcernotherongoing_rulemaking_Ԁproceedings),weaddressnineregulatoryrequirementsfromwhich_ITTA_,onbehalfofmidsized_LECs_,requestedforbearance.WeadoptedsevendifferentOrdersinresponsetothepetition(andotherpetitionsornotices).InlookingattheseOrdersasapackageandindividually,whilesomereliefisgranted,Icontinuetobeconcernedthat,whereforbearanceisdenied,thesepetitionsarenotbeingtreatedinamannerfullyconsistentwiththeintentandspiritofsection10oftheAct.WhileIconcurwiththeoutcomeofmostoftheseitemssinceIbelievewearereachingthecorrectresultIdocontinuetoquestion(alonglinessimilartothoseIhaveexpressedelsewhere)ourmeansandmethodsforhandlingforbearancepetitions. "` Imustrespectfullydissent,however,fromthecontinuedapplicationofseparateaffiliaterequirementsfortheprovisionofinregion_interexchange_Ԁservicesandcommercialmobileradioservices(_CMRS_)bymidsized_LECs_.Myreasonsaretwofold.First,Icontinuetobeuneasywiththedegreetowhichrelianceonthisandsimilarregulatorydevicesisbasedonspeculationabout_anticompetitive_Ԁbehavior.Ifullyunderstandthatanyanalysisaboutpotentiallyharmfulfutureconductentailssomeassessmentoflikelyconduct.Historically,theagencyhasstewardedthebasicprincipleofnondiscrimination,resultinginregulatoryprotectionsagainstcost_misallocation_Ԁand_anticompetitive_Ԁbehaviorflowingfromcontrolofa"bottleneck"facility.Ourprecedents,suchasseparateaffiliaterequirements,wererightlypremisedontheexistenceofatruemonopolist(sanctionedbythestate)andtheassociatedrisks.Inthatenvironment,notonlydidtheincumbenthavemonopolypower,therewasnoprospectofcompetitionnoranywatchfulpresentorfuture '.#&     competitors.Thesesafeguardsweredesignedtoprotectconsumersfromthepotentialilleffectsofsuchaccumulatedpower. #  #$$!        W    W  !"  "Ibelieve,however,thatmuchhaschanged.Themovementtowardacompetitiveenvironmentmeansthatwemusttakeintofullerconsiderationthenecessity,viability,andthepotentiallydistortingcompetitiveconsequencesofoldfamiliarregulatorydevices.Thus,totheextentwemustspeculateaboutpotentialharm(tocompetitionandconsumers)wemust,too,factorinmorefullythepotentialdiscipliningeffectsofbothrealcompetitionandpotentialcompetition.Iseeacontinuedtendencytoinvoketheancientmantra"toprotectagainstdiscriminatorythisorthat"asglibjustificationforcontinuedregulatoryconstraints.Ibelievewemustworkharderandpressmoreheavilyonthetraditionalrationales.Idonotbelievewedidsointhiscase.Moreover,todosowilltaketimeandresources,whichwedonothavewhenforbearancepetitionsarepresentedfordeliberationwithonlyasecondortwoleftonthestatutoryshotclock,aswasthecasehere.%  %MysecondconcernrestswiththeextentthattheCommissionexpressesatendencytojustifycertainregulatoryrestrictionsinthenameofpromotingoradvancingcompetition.Thatalone,ofcourse,maybeworthy,butwearenotfreetodosoinamannerthatinvolvesintermediatejudgementsthatdifferfromthosereachedbyCongress.Letmeexplainmorefully.! !  XXXXXXXX    Priortothe1996Act,IbelievebothJudgeGreeneandtheFCCdidseektocreate 7 limitedcompetitivemarketsoutofthemonopolyproviderscontroland,concomitantly,imposesafeguardsdesignedtokeepthemonopolistfromthwartingfledglingcompetitorsaswellasensuringthatcoreregulatorygoalswerenotcompromisedbysuchcompetitiveforays.Thesecompetitiveexcursionswerelimitedandusuallymerelyincrementalvoyagesintocompetitiveservicemarkets.But,wemustberemindedthatthefundamentalparadigmremainedregulationandcentralcontroloverthemostprizedservices.ThekeypointisthatJudgeGreeneandtheCommissionhadafairlywidebirthtodeveloptheconditionsoftheirmarketopeningefforts.݌̌  XXXXXXXX   &  The1996Act,however,alteredtheparadigmandstructuredthebasictermsofcompetition.Competitiveservicesweretobecometherule,andregulatedservicesthelimitedexceptions.Byitsact,Congresscraftedacomprehensivecompetitivemodel,designedspecificallytosupplanttheMFJ.Inweavingthisfabric,Congressmadeanumberofsignificantjudgements.Theonemostrelevanthereisthatitconcludedthat,ratherthanrestricttheILECstoregulatedwholesaleservice,itallowedILECstocompeteattheretaillevelaswell.Thisjudgementmayproveunwiseorunworkable,butitistheonethatCongresschose. '.#& ЇCongresswasnotoblivioustothechallengesorperilsofallowingtheILECstocompete,however,inlongdistanceandotherserviceswhiletheystillcontrolledmanyofthenecessaryfacilitiesandinputsthatothercompetitorswouldneed.Itaddressedthisproblembycraftinganaccessandinterconnectionregime(sections251and252)thatplaceduniquedutiesandobligationsonILECs.Inaddition,CongressrecognizedthatdifferentclassesofLECsrequireddifferentlevelsofsafeguardsandincentives.BellOperatingCompanies(BOCs),andtheyalone,aresubjecttosections271and272.ILECshavemoredutiesandobligationsthanCLECs,andsoon.Thus,whetheronelikesitornot,Congresssubstantiallyaddressedthedangersof bottleneckcontroland  discriminatoryincentivesintheAct. `  Asaconsequence,Ibelieve,theCommissionisnotasfree(asitperhapswaspriortotheAct)tostewardatransitiontoacompetitionregimedifferentthanthatoftheonechosenbyCongress.Specifically,asitrelatestothequestionofseparateaffiliates,wemustbecarefulnottoimposeregulatoryrequirementsthatinpracticaleffectamounttowholesale/retailseparations,whereCongressintendednone.(Inotethatincontrasttothecarrierspetitioninghere,BOCsareexpresslysubjecttoseparateaffiliatesforsomeservices).Forthisreason,Iamuncomfortablewiththeanalysisprofferedtosupportcontinuedseparateaffiliaterequirements.Wecite bottlenecksand incentivesinwhatsubtly(thoughperhapsunintentionally)seemstomeapreferenceforwholesaleseparationinacompetitivemarket.Bywayofillustration,theOrdersoftenspeakoftheimportanceofseparateaffiliatestoensurethattheyobtainfacilitiesonan"armslengthbasis"andtoensurethatallcompetinginregionprovidersandothercarriershavethesameaccess(i.e., ' wholesale). ! ThoughCongressmadejudgementsaboutthecompetitivegroundrules,itdidnotendeavortosweepthroughourregulationsandapplythosejudgmentstoeachandeverystructuralrequirementonthebooks.Instead,itdirectedustosearchoutsuchrulesandapplythenewparadigm.Todoso,itgavetheCommissionthetwinenginesofthebiennialreviewandforbearance.ThisisonereasonIbelievethatsection10isimportantinevaluatingthecontinuedvalidityofseparateaffiliaterequirements,nototherwisemandatedbylaw,wherecompetitiveconditionsand/orotherregulatoryorenforcementmechanismsarealreadyinplace. w)! Ibelievethatthepetitionbeforeusraisedsubstantialquestionswithregardtotheneedforstructuralseparationinlightofpresentconditions.Accordingly,IbelievethatinresponsetoITTA'sforbearancepetition,weshouldhaveexaminedmorecarefullyalternativemethodsofenforcingcore_ILEC_Ԁresponsibilitiestoseeiftherewasn'tamorerational,limitedapproach.Forexample,weshouldhaveexploredincludingasunsetofthe '.#& structuralseparationrequirementforinregion_interexchange_Ԁserviceslikethatavailableto_BOCs_Ԁinsection272andtreatingmidsized_LECs_Ԁmorelikeruralcarriersunderthe_CMRS_separateaffiliaterequirement. W  Forthesereasons,Irespectfullydissentinpartfromtheseparticulardecisions.  #XXX##X#