Re: Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Service Area; Policy and Rules Concerning Interstate, Interexchange Marketplace

Good government requires knowing when to intervene, and when to step back. Today, we step back from a market segment where active regulation would do more harm than good.

Our order today clarifies the circumstances under which the interstate interexchange services of local exchange carriers will be treated as "nondominant." We specify the conditions under which the local telephone companies, including the Bell companies, can provide interstate, interexchange services free of requirements for cost support data, advance review of tariff changes, and other trappings of dominant carrier regulation.

In making our determination of nondominance, we are not blinking at the market power possessed by local exchange carriers. To the contrary, we will continue to focus our rules and our regulatory resources on controlling, and ultimately dissipating, that market power. That means directing our attention to the services and facilities where the LECs possess market power -- i.e., local exchange and exchange access services -- and policing the relationship between the operating companies and their interexchange affiliates. So long as these matters are properly attended to, as contemplated by our interconnection and structural separation rules, dominant carrier regulation of the interexchange services themselves would be unnecessary and possibly counterproductive.