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Separate Statement wof Commissioner Susan Ness  Xv2x  V 2Re: Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 (CC Docket 9698); and Intercarrier Compensation for ISPBound Traffic (CC  V 2Docket No. 9968) This proceeding is one of unusual importance and unusual complexity.  X2The debate over reciprocal compensation for ISPbound traffic is important for three main reasons. First, the issues we review here involve access to the Internet, a unique,  Xd2extraordinary, and everevolving national and international network of networks that is rapidly transforming communication, commerce, and communities. Second, reciprocal compensation may substantially affect the nature and the extent of local telephone competition, which was a principal objective of the Telecommunications Act of 1996. Third, any decision in this area may affect relationships between state and federal regulatory authorities, who must work in  X2harmony to achieve successful implementation of the Telecommunications Act.  X2The debate is complex because it involves the application of legal precedents from the early 1980s to services and carrier arrangements that were unimaginable only a few short years ago, as well as provisions of the 1996 Act that have already led to considerable controversy and litigation. We must grapple with equities that may be quite different when viewed prospectively than when viewed retrospectively. A further complication is that reciprocal compensation involves certain issues that can better be assessed by state public utility commissions than by the FCC, and yet it also implicates important national interests affecting access to an interstate (and international) service. At the end of the day, however, I believe the case boils down to elementary and straightforward propositions. Switched network telephone calls to Internet service providers are inherently interstate, which is the decision most consistent with our prior creation of an ESP exemption from interstate access charges and with the interstate and international  X"2nature of the Internet. But to say this is not to overrule, undermine, or prevent state commission decisions that construe interconnection agreements to require reciprocal compensation for ISPbound traffic. It was, and remains, reasonable for the states (and federal district courts) to so rule, given our prior decisions and the practices of the ILECs"W%0*0*0*Z#"  b<themselves to treat this traffic as local.#footnote reference##Xv6X@C7X@#X01Í ÍX01ÍÍ & H; P2footnote text#Xv6X@C7X@#۠$footnote text$#footnote reference##Xv6X@C7X@##C\  P6QQwP#э)footnote reference)#C\  P6QQwP##x P7 ApP#Since 1983, the Commission has consistently and consciously permitted enhanced service providers, a category that now includes Internet service providers (ISPs) to connect to their customers using local business  zP(lines. See, e.g., MTS and WATS Market Structure, 97 FCC 2d 682, 715, para. 83 (1983) (subsequent history  zPo(omitted). Enhanced service providers use "interstate access" but pay "local business exchange service rates."  zP9(Id. (emphasis added); see also Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service  zP(Providers, 3 FCC Rcd. 2631, 2635 n.8 (1988) ("enhanced service providers generally pay local business rates and interstate subscriber line charges for their switched access connections to local exchange company central  zP(offices") (emphasis added); accord id. at 2637 n.53. This decision was not altered by passage of the Telecommunications Act of 1996. After that law was  zP (passed, we expressly reiterated that ISPs "purchase services from incumbent LECs under the same intrastate  zP (tariffs available to end users" and determined that, if intrastate rate structures fail to compensate incumbent LECs adequately for providing service to customers with high volumes of incoming calls, incumbent LECs may  zPK (address their concerns to state regulators." Access Charge Reform, 12 FCC Rcd. 15982, 16132, para. 342 &  zP (16135, para. 346 (1997), aff'd Southwestern Bell Telephone Co. v. FCC, 153 F.3d 523 (8th Cir. 1998) (emphasis added). The Eighth Circuit explicitly recognized that the manner in which Internetbound traffic is  zP(treated is a product of FCC discretion. Southwestern Bell Telephone, 153 F.3d at 543. It is significant that,  zPq(in the aforementioned Access Charge Reform proceeding, we implicitly affirmed both the FCC's ultimate authority over this traffic and the state commissions' competence to handle it unless and until directed  zP(otherwise. It is especially telling that the Southwestern Bell Telephone decision, acknowledging the Commissions ultimate authority over such inherently interstate traffic, came from a court that was otherwise quite resistant to FCC encroachment on matters that it deemed to be on the states side of a horsehigh, hog zP](tight, and bullstrong fence. Iowa Utilities Bd. v. FCC, 120 F.3d 753, 800 (8th Cir. 1997), revd in pertinent  zP'(part, AT&T Corp. v. Iowa Utilities Bd., __U.S.__, 1999 WL 24569 (Jan. 25, 1999).# b6X@CQ@#& # P7ܼP#  X2#Xj\  P6G;XP#And, although we are declaring that there are national interests that must be respected on a goingforward basis, it may well be that these interests can be protected without changing the longstanding decision to treat this traffic as local. One could readily imagine, for example, that states will not seek to assess perminute fees on Internetbound calls, just as the FCC has repeatedly resisted entreaties to do so. One can also reasonably foresee that, even if ISPbound traffic continues to be handled by the state commissions under the usual 251/252 process, the parties themselves (in voluntarily negotiated agreements) or the state commissions (if called upon to arbitrate agreements between incumbents and new entrants) will in future agreements address the issues associated with ISPbound traffic in ways that avoid some of the obvious anomalies and competitive distortions that may result from some of the current ILECCLEC arrangements.  X 2 In short, I believe the decision we have adopted is one that (1) comports with the law, (2) is fair both to incumbent local exchange carriers and to competitive local exchange carriers, (3) does not unravel the core determinations of the more than two dozen state commissions that have addressed this issue, (4) sets the stage for future determinations that will eliminate or at least attenuate any anomalies inherent in current compensation arrangements, and (5) preserves this Commission's ability to safeguard the innovative, competitive, and unregulated character of the Internet. I hope that parties responding to the Notice of Proposed  X_2Rulemaking will focus on ways in which all of these objectives may continue to be advanced.#|\  P6G; CP#