******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 ) ) Implementation of Infrastructure CC Docket No. 96-237) Sharing Provisions in the ) Telecommunications Act of 1996 ) ) REPORT AND ORDER Adopted: February 6, 1997 Released: February 7, 1997 By the Commission: Table of Contents I. INTRODUCTION 1 II. BACKGROUND 3 A. Overview of Section 259 4 B. Summary of Decision 6 III. IMPLEMENTATION OF SECTION 259 20 A. General Issues 20 B. Requirements of Section 259(a) 32 1. Scope; Relationship Between Sections 259 and 25133 2. Intellectual Property and Information Issues 61 3. Dispute Resolution, Jurisdiction, and Other Issues72 C. Terms and Conditions Required by Section 259(b) 90 1. Section 259(b)(1) 90 2. Section 259(b)(2) 99 3. Section 259(b)(3) 104 4. Section 259(b)(4) 109 5. Section 259(b)(5) 118 6. Section 259(b)(6) 123 7. Section 259(b)(7) 132 D. Requirements of Section 259(c) 136 E. Qualifying Carriers Under Section 259(d) 153 IV. PROCEDURAL ISSUES 169 A. Final Regulatory Flexibility Act Analysis 169 B. Paperwork Reduction Act of 1995 Analysis 170 V. ORDERING CLAUSES 171 APPENDIX A List of Commenters APPENDIX B Final Rules APPENDIX C Final Regulatory Flexibility Act Analysis I. INTRODUCTION 1. In this Report and Order, part of the Commission's implementation of the Telecommunications Act of 1996, we adopt rules implementing new section 259 of the Communications Act of 1934, as amended. Section 259 generally requires an incumbent local exchange carrier (incumbent LEC) to make available "public switched network infrastructure, technology, information, and telecommunications facilities and functions" to "qualifying carriers" that are eligible to receive federal universal service support but that lack economies of scale or scope. In contrast to sections 251 and 252, which grant rights to requesting carriers irrespective of whether the requesting carrier intends to compete with the incumbent LEC, section 259 does not permit "qualifying carriers" to use an incumbent LEC's public switched network infrastructure, technology, information, and telecommunications facilities and functions obtained pursuant to section 259 to offer services or access to the incumbent LEC's customers in competition with the incumbent LEC. Section 259(a) directs the Commission to prescribe regulations that implement this requirement within one year after the date of enactment of the 1996 Act, i.e., by February 8, 1997. Pursuant to the Notice of Proposed Rulemaking that initiated this proceeding, we have elected, overall, to articulate general rules and guidelines to implement section 259. 2. With the 1996 Act, Congress sought to establish "a pro-competitive, de-regulatory national policy framework" for the United States telecommunications industry "designed to accelerate rapidly private sector deployment of advanced telecommunications and information technology to all Americans . . . ." This rulemaking implements section 259 in a manner that ensures that carriers that are eligible to receive universal service support but lack economies of scale or scope can provide advanced telecommunications and information services in the most efficient manner possible by taking advantage of economies of scale and scope possessed by incumbent LECs. At the same time, we ensure that the results of this implementation of section 259 will not serve to prevent competitive entry into any telecommunications market. II. BACKGROUND 3. In the 1996 Act, Congress moved to restructure the local telecommunications market so as to remove legal, regulatory, and economic impediments to market entry that exist in a monopoly environment. One aspect of this restructuring requires incumbent LECs to offer to requesting telecommunications carriers interconnection, unbundled network elements, and telecommunications services at wholesale rates for resale. At the same time, Congress acted to ensure that access to the evolving, advanced telecommunications infrastructure would be made broadly available in all regions of the nation at just, reasonable, and affordable rates. Consistent with these two major goals, Congress enacted Section 254, which, inter alia, directs the Commission to preserve and advance universal service by defining services that will receive universal service support, establish specific, predictable, sufficient, and explicit mechanisms to provide that support to eligible carriers, and ensure that quality services are available at just, reasonable, and affordable rates. Section 259 complements section 254 by requiring incumbent LECs to make available, under certain conditions, public switched network infrastructure and other capabilities to qualifying carriers that are providing universal service outside the providing incumbent LEC's telephone exchange area. A. Overview of Section 259 4. Section 259(a) directs the Commission, within one year after the date of enactment of the 1996 Act, to prescribe regulations that require incumbent LECs to make certain "public switched network infrastructure, technology, information, and telecommunications facilities and functions" available to any qualifying carrier in the service area in which the qualifying carrier has requested and obtained designation as an eligible carrier under section 214(e). An incumbent LEC cannot, however, be required to take any actions that are economically unreasonable or contrary to the public interest. Incumbent LECs are also not required to make available "services or access" that would be provided by the qualifying carrier to consumers in the incumbent LECs "telephone exchange area." The Commission may permit, but shall not require, joint ownership or operation of public switched network infrastructure and services, and must ensure that incumbent LECs are not treated as common carriers by virtue of meeting their section 259 obligations. Section 259(b) further directs the Commission to establish guidelines implementing infrastructure sharing pursuant to just and reasonable terms and conditions that permit the qualifying carrier to "fully benefit" from the economies of scale and scope of the incumbent LEC. The Commission must establish conditions to promote cooperation between incumbent LECs and qualifying carriers. The Commission must also require the incumbent LEC to file with the Commission or state "any tariffs, contracts, or other arrangements that show rates, terms, and conditions" under which the incumbent LEC is making available "public switched network infrastructure and functions" pursuant to section 259. 5. Section 259(c) requires incumbent LECs that have entered into infrastructure sharing agreements to "provide to each party to such agreement timely information on the planned deployment of telecommunications services and equipment, including any software or upgrades of software integral to the use or operation of such telecommunications equipment." Section 259(d) defines a "qualifying carrier" as a telecommunications carrier that: (1) lacks economies of scale or scope, as determined in accordance with regulations prescribed by the Commission pursuant to this section; and (2) offers telephone exchange service, exchange access, and any other service that is included in universal service, to all consumers without preference throughout the service area for which such carrier has been designated as an eligible telecommunications carrier under section 214(e). Section 214(e) provides that a common carrier designated as an eligible telecommunications carrier shall be eligible to receive universal service support and shall, throughout the service area for which designation is received, offer services that are supported by federal universal service support mechanisms promulgated under section 254(c), either by using its own facilities or a combination of its own facilities and resale of another carrier's services. Section 214(e) also states how eligible telecommunications carriers shall be designated. B. Summary of Decision 6. We determine that section 259 is complementary to the other sections of the 1996 Act and is a "limited and discrete" provision designed to promote universal service in areas that in many cases, at least initially, will be without competitive service providers, but without restricting the development of competition. Essential differences in the language of sections 259 and 251 make clear that these provisions address fundamentally different situations. First, in accord with section 259(b)(6), section 259 applies only in instances where the qualifying carrier does not seek to use shared infrastructure to offer certain services within the incumbent LEC's telephone exchange area, whereas section 251 applies irrespective of whether new entrants seek to provide local exchange or exchange access service within the incumbent's telephone exchange area. Second, section 259(a) establishes specific limitations on a qualifying carrier's use of an incumbent LEC's infrastructure, i.e., a qualifying carrier may use section 259 only "for the purpose of enabling such qualifying carrier to provide telecommunications services, or to provide access to information services, in the service area in which such qualifying carrier has requested and obtained designation as an eligible telecommunications carrier under section 214(e)." Third, section 259, in contrast to section 251, limits the telecommunications carriers that may obtain access to an incumbent LEC's network by the inclusion of qualifying criteria in subsection 259(d). 7. Thus, we conclude that while section 251 applies to all carriers in all situations -- including, but not limited to, new entrants competing with the incumbent LEC -- section 259 only applies in narrow circumstances, i.e., for the benefit of those carriers that are eligible to receive universal service support but lack economies of scale or scope and only to the extent that the qualifying carriers do not use section 259-obtained infrastructure to compete with the providing incumbent LEC. We conclude that a qualifying carrier that obtains, pursuant to section 259 arrangements, interconnection, unbundled network elements, and other telecommunications functionalities otherwise available pursuant to section 251, does not lose its section 251-derived obligation to provide interconnection to competitive LECs. We also find that section 259 arrangements can include additional functionalities that may be provided to qualifying carriers uniquely pursuant to section 259. Making clear that we will enforce the section 251-derived interconnection rights of competitive LECs, however, will help ensure that competitive entry into markets served by qualifying carriers markets is not hampered by the operation of otherwise valid section 259 arrangements. Moreover, we further promote competitive entry by finding that qualifying carriers may include any carrier that satisfies the requirements of section 259(d) -- in other words, not just incumbent LECs, but competitive LECs and any other carrier that satisfies section 259(d) requirements. 8. In this Report and Order, we choose to implement section 259 by adopting rules that recognize the central role played by private negotiations in promoting the ability of qualifying carriers to obtain access to "public switched network infrastructure, technology, information, and telecommunications facilities and functions" provided by other carriers. A negotiation-driven approach is appropriate because, inter alia, section 259, unlike section 251, contemplates situations where the requesting carrier is not using the incumbent LEC's facilities or functions to compete in the incumbent LEC's telephone exchange area. In such circumstances, we believe that the unequal bargaining power between qualifying carriers, including new entrants, and providing incumbent LECs is less relevant since the incumbent LEC has less incentive to exploit any inequality for the sake of competitive advantage. Thus, wherever possible we adopt specific rules that restate the statutory language. The approach we adopt, which relies in large part on private negotiations among parties to satisfy their unique requirements in each case, will help ensure that certain carriers who agree to fulfill universal service obligations pursuant to section 214(e) can implement evolving levels of technology to continue to fulfill those obligations. Again, because we also affirm the rights of competitive LECs to secure interconnection pursuant to section 251 our approach to implementing section 259 does not discourage the development of competition in any local market. 9. Regarding the scope of section 259(a), we allow the parties to section 259 agreements to negotiate what "public switched network infrastructure, technology, information, and telecommunications facilities and functions" will be made available, without per se exclusions. We also decide that, whenever it is the only means to gain access to facilities or functions subject to sharing requirements, section 259(a) requires the providing incumbent LEC to seek to obtain and to provide necessary licensing of any software or equipment necessary to gain access to the shared capability or resource by the qualifying carrier's equipment, subject to the reimbursement for or the payment of reasonable royalties. We decide that it shall be the responsibility of the providing incumbent LEC to find a way to negotiate and implement section 259 agreements that do not unnecessarily burden qualifying carriers with licensing requirements. In cases where the only means available is including the qualifying carrier in a licensing arrangement, the providing incumbent LEC must secure such licensing by negotiating with the relevant third party directly. 10. Regarding the implementation of section 259, we conclude that section 259(a) grants the Commission authority to promulgate rules concerning any section 259 agreement to share public switched network infrastructure, technology, information, and telecommunications facilities and functions, regardless of whether they are used to provide interstate or intrastate services. At the same time, we make clear that nothing in our analysis of section 259 indicates an intent to regulate intrastate services, as opposed to regulating agreements regarding the sharing of infrastructure. We also note that section 259 dictates two discrete roles for the states with respect to section 259: states may accept for public inspection the filings of section 259 agreements that are required by section 259(b)(7); and states must designate a carrier as an "eligible telecommunications carrier" pursuant to section 214(e)(2)-(3). We further conclude that it is unnecessary to adopt any particular rules to govern disputes between parties to section 259 agreements that may be brought before the Commission. Finally, we decide that it would be inappropriate to further construe the requirements of section 259(d)(2) in this proceeding because issues materially relating to section 259(d)(2) will be decided by the Commission in the universal service proceeding scheduled to be concluded by May 8, 1997. 11. We require that providing incumbent LECs may recover their costs associated with infrastructure sharing arrangements, and we conclude that incentives already exist to encourage providing and qualifying carriers to reach negotiated agreements that do so (section 259(b)(1)). We decide that no incumbent LEC should be required to develop, purchase, or install network infrastructure, technology, and telecommunications facilities and functions solely on the basis of a request from a qualifying carrier to share such elements when such incumbent LEC has not otherwise built or acquired, and does not intend to build or acquire, such elements. We also decide that a providing incumbent LEC may withdraw from a section 259 infrastructure sharing agreement upon an appropriate showing to the Commission that the arrangement has become economically unreasonable or is otherwise not in the public interest. 12. We permit but do not require providing incumbent LECs and qualifying carriers to develop through negotiation terms and conditions for joint ownership or operation of "public switched network infrastructure, technology, information, and telecommunications facilities and functions" (section 259(b)(2)). We decide that joint owners will be treated as providing incumbent LECs for purposes of section 259 regulations. We also decide that it is not necessary for the Commission to consider, at this time, the accounting and jurisdictional separations implications of joint ownership arrangements pursuant to section 259. 13. We conclude that infrastructure sharing does not subject providing incumbent LECs to common carrier obligations, including a nondiscrimination requirement, because such a result would be contrary to the clear mandate of section 259(b)(3). In the NPRM we asked whether an "implied nondiscrimination requirement" should be inferred based on the "just and reasonable" requirement included in Section 259(b)(4). We conclude that Section 259(b)(4) includes no nondiscrimination requirement, but we also conclude that the "just and reasonable" requirement will serve to ensure that all qualifying carriers receive the benefits of section 259. We reaffirm that, to the extent that requesting carriers seek access to elements pursuant to section 251, sections 201 and 251 expressly require rates set pursuant to those provisions not only to be just and reasonable, but also non-discriminatory or not unreasonably discriminatory. 14. We decide that, although the Commission may have pricing authority to prescribe guidelines to ensure that qualifying carriers "fully benefit from the economies of scale and scope of [the providing incumbent LEC]," it is not necessary at this time to exercise this authority (section 259(b)(4)). We anticipate that, in this negotiation-driven approach, qualifying carriers and providing incumbent LECs will face economic incentives that will allow them to reach mutually satisfactory terms for infrastructure sharing. In particular, we note that, because section 259 contemplates situations where requesting carriers are not using the incumbent LEC's facilities or functions to compete in the incumbent LEC's telephone exchange area, the unequal bargaining power between qualifying carriers, including new entrants, and providing incumbent LECs is less relevant since the incumbent LEC has less incentive to exploit any inequality for the sake of competitive advantage vis-a-vis a non-competing qualifying LEC. We further decide that availability, timeliness, functionality, suitability, and other operational aspects of infrastructure sharing also are relevant to determining whether the qualifying carrier receives the benefits mandated by section 259(b)(4). We conclude that the negotiation process, along with the available dispute resolution, arbitration, and complaint processes available from the Commission, will ensure that qualifying carriers fully benefit from the economies of scale and scope of providing incumbent LECs. We note that non-qualifying competitive LECs may avail themselves of these same processes to prevent unlawful anticompetitive outcomes resulting from section 259-negotiated arrangements. Further, we note that any anticompetitive outcomes may be proscribed by operation of the antitrust laws from which Congress has granted no exemption to parties negotiating section 259 agreements. We further note that the Commission has ample authority pursuant to Title II to set aside any intercarrier agreements found to be contrary to the public interest. 15. We conclude that it is unnecessary at this time for the Commission to establish detailed national rules to promote cooperation (section 259(b)(5)). We conclude that, because there is a requirement that infrastructure sharing arrangements not be used to compete with the providing incumbent LEC, and because a providing incumbent LEC is permitted to recover its costs incurred in providing shared infrastructure pursuant to section 259, sufficient incentives exist to encourage lawful cooperation among carriers. We also decide that the adoption of a good faith negotiation standard would promote cooperation between providing incumbent LECs and qualifying carriers. 16. We conclude that, for any services and facilities otherwise available pursuant to section 251, carriers that do not intend to compete using those services and facilities may request those services and facilities pursuant to either section 251 or 259, and carriers that do intend to compete using those services and facilities must request them pursuant to section 251. We decide that, with respect to facilities and information that are within the scope of section 259 but beyond the scope of section 251, carriers that do not intend to compete using those facilities and information may pursue agreements with incumbent LECs pursuant to section 259. We conclude that a providing incumbent LEC is not required to share services or access used to compete against it, and that an incumbent LEC's right to deny or terminate sharing arrangements extends to the full breadth of section 259. We also conclude that a qualifying carrier may not make available any information, infrastructure, or facilities it obtained from a providing incumbent LEC to any party that intends to use such information, infrastructure, or facilities to compete with the providing incumbent LEC. We emphasize that this will not otherwise affect the interconnection obligations of carriers pursuant to section 251. Moreover, competitive carriers, i.e., regardless of whether they qualify for infrastructure sharing pursuant to section 259(d), that require the use of information or facilities to compete with the providing incumbent LEC may request the necessary facilities pursuant to sections 251 and 252. We also find that nothing in section 259 permits a providing incumbent LEC to refuse to enter into a section 259 agreement simply because the qualifying carrier is competing with the providing incumbent LEC, provided that the qualifying carrier is not using any shared infrastructure obtained from the providing incumbent LEC pursuant to a section 259 agreement to compete. 17. We decide that section 259 agreements must be filed with the appropriate state commission, or with the Commission if the state commission is unwilling to accept the filing; must be made available for public inspection; and must include the rates, terms, and conditions under which an incumbent LEC is making available all "public switched network infrastructure, technology, information, and telecommunications facilities and functions" that are the subject of the negotiated agreement (section 259(b)(7)). We decide that this filing requirement refers only to agreements negotiated pursuant to section 259 and affirm that all previous interconnection agreements must be filed pursuant to section 252 as mandated by the Commission's Local Competition First Report and Order. 18. We decide that section 259(c) requires notice to qualifying carriers of changes in the incumbent LECs' network that might affect qualifying carriers' ability to utilize the shared public switched network infrastructure, technology, information and telecommunications facilities and functions; that section 259(c) requires timely information disclosure by each providing incumbent LEC for each of its section 259-derived agreements; and that such notice and disclosure, provided pursuant to a section 259 agreement, are only for the benefit of the parties to a section 259-derived agreement. We also decide that section 259(c) does not include a requirement that providing incumbent LECs provide information on planned deployments of telecommunications and services prior to the make/buy point. 19. We decide that no incumbent LEC is excused, per se, from sharing its infrastructure because of the size of the requesting carrier, its geographic location, or its affiliation with a holding company. A carrier qualifying under section 259(d) therefore may be entitled to request and share certain infrastructure and, at the same time, be obligated to share the same or other infrastructure. We conclude that parties to section 259 negotiations can and will make the necessarily fact-based evaluations of their relative economies of scale and scope pertaining to the infrastructure that is requested to be shared. To facilitate such negotiations, we adopt a presumption that a telecommunication carrier falling within the definition of "rural telephone company" in section 3(37) lacks economies of scale or scope under section 259(d)(1), but we decide to exclude no class of carriers from attempting to demonstrate to a providing incumbent LEC that they qualify under section 259(d)(1). In negotiations with a requesting carrier or in response to a complaint arising from a refusal to enter into a section 259 agreement, a providing incumbent LEC may rebut the presumption that a "rural telephone company" lacks economies of scale or scope. III. IMPLEMENTATION OF SECTION 259 A. General Issues 1. Background 20. As an initial matter, we stated in the NPRM our belief that we should adopt rules and guidelines that, in every case, promote the development of competition and the preservation and advancement of universal service. We maintained that any significant variance between our implementation of section 259 and our implementation of other sections of the 1996 Act would undermine these two important and interrelated goals of promoting the development of competition and universal service. To this end, we tentatively concluded that the requirements of section 259 should be interpreted as complementary to the Commission's implementation of other sections of the 1996 Act. We noted that section 259 is codified within a newly designated Part II of Title II of the 1934 Act, which part Congress designated "Development of Competitive Markets." We tentatively concluded that terms used in section 259 should be defined as they are defined in other Commission proceedings implementing the 1996 Act, except where section 259 clearly imposes a different definition. 21. At the same time, we also tentatively concluded that the best way for the Commission to implement section 259, overall, would be to articulate general rules and guidelines. We expressed our belief that section 259-derived arrangements should be largely the product of private negotiations among parties. 2. Comments 22. Some commenters state that the Commission, overall, should interpret section 259 in a way that is complementary to the other sections of the 1996 Act. There is a notable difference of opinion, however, about what should be considered a proper complementary approach. Basically, this controversy concerns the relationship between section 259 and sections 251 and 252. Accordingly, we discuss these issues and related comments in Section III. B. 1., infra. 23. A majority of commenters agree with the tentative conclusion in the NPRM that the Commission should articulate general rules and guidelines to implement section 259. Indeed, some commenters suggest that the Commission need only adopt the statutory language for its rules implementing section 259 because these, along with the analysis and directives set out in this Report and Order, will be enough to guide parties in their section 259 negotiations. In the words of the Minnesota Coalition, "[n]egotiations should be the primary avenue for the development of section 259 infrastructure sharing arrangements." Among the benefits of such a negotiation-driven approach to implementing section 259, NYNEX specifically identifies three: (1) it would accommodate evolving technologies and "unforeseen circumstances;" (2) it would promote negotiating flexibility so that parties can tailor agreements to meet individual needs; and (3) it would successfully reduce the need for government involvement. 24. Moreover, according to the commenting LECs, the Commission need not be concerned about the effects on competition of a negotiation-driven, flexible approach to implementing section 259. PacTel offers its view that it is precisely where there is a foreseeable lack of anticompetitive behavior that general guidelines are appropriate. PacTel references the limitation in section 259(b)(6) and states that its prohibition against qualifying carriers competing with the providing incumbent LEC in the latter's service area means that concerns about anticompetitive behavior are "absent." PacTel further offers the view that an approach that relies on general rules and guidelines is consistent with "the de-regulatory national policy framework of the 1996 Act." 25. Non-LEC commenters like MCI and NCTA, however, oppose this LEC-advocated approach to implementing section 259 in favor of approaches that would tie the implementation of section 259 overtly to the Commission's regulations implementing section 251. Although both MCI and NCTA contemplate section 259 arrangements that would be the result of negotiations by parties, both advocate imposing specific section 251-derived restrictions on the scope of such negotiations. Thus, MCI would have us adopt rules to implement section 259 that impose section 251-derived concepts like price regulation based on forward-looking costs. NCTA, on the other hand, would have us impose requirements on qualifying carriers to ensure, inter alia, that any competitive LEC obtains the benefit of infrastructure arrangements negotiated by the providing incumbent LEC and the qualifying LEC. 3. Discussion 26. First, we affirm our tentative conclusion in the NPRM that terms used in section 259 should be defined as they are defined in other Commission proceedings implementing the 1996 Act, except, as indicated herein, where we determine that section 259 clearly imposes a different definition. We also, as reflected in what follows, affirm our tentative conclusion and adopt general rules and guidelines to define the obligations imposed by section 259. Further, we adopt rules that restate the statutory language in most cases. Such an approach comports with a statutory scheme that, we conclude, depends in large part on negotiations among parties, negotiations that will vary depending upon the unique requirements of parties in each case. We believe that, at this time, all such negotiations should be constrained by very few explicit regulatory requirements. To this extent we agree with those commenters who have urged upon us just such a course of action. 27. We conclude, contrary to the arguments of some parties, that this approach also is the best way to satisfy our other stated general concern, namely, that rules implementing section 259 should not impede the development of competition in any market. We recognize that the primary goal of section 259 is to help ensure that certain carriers who agree to fulfill universal service obligations pursuant to section 214(e) continue to have access to "public switched network infrastructure, technology, information, and telecommunications facilities and functions." But, as discussed below, there is no evidence in the language of section 259 or its legislative history that Congress intended to use section 259 to insulate any telephone service area from the advent of competition and no commenter in this proceeding makes such a claim. Some commenters advocate rules, however, which we also discuss in the following sections of this Report and Order, that we think might tend to promote such an outcome. Moreover, to the extent some LEC commenters argue that Congress intended no connection between section 259 and the other pro-competitive sections of the 1996 Act, we agree with NCTA that, to the extent that these commenters rely upon history for legislation that was considered but never enacted, prior to the 1996 Act, this legislative history is entitled to no weight in our deliberations. Mindful of these concerns about the potential for insulating certain telephone service areas from competition, we believe that our approach adopted in this Report and Order is consistent with the Congressional policy goals, as set forth in Section 257, of promoting vigorous economic competition and eliminating market entry barriers for small businesses in the provision of telecommunications services and equipment. 28. We conclude that the economic incentives and disincentives facing the incumbent LEC differ substantially in the circumstances contemplated in section 259, as implemented in this Report and Order, vis-a-vis the circumstances in which section 251 may apply. We have noted elsewhere that an incumbent LEC has little economic incentive to assist new entrants (i.e., competitors) in their efforts to secure a share of the incumbent LEC's local exchange market, and that the incumbent LEC also has the ability to act on its incentive to discourage entry and robust competition by, among other possible actions, insisting on supracompetitive prices or other unreasonable conditions of interconnection. However, based on our interpretation of section 259(b)(6), section 259 applies only in instances where the qualifying carrier does not seek to use shared infrastructure to offer certain services within the incumbent LEC's telephone exchange area. Stated simply, the incumbent LEC will not lose market share in its telephone exchange area as a consequence of sharing infrastructure with a qualifying carrier under section 259. 29. An incumbent LEC that receives from a qualifying carrier a request to share infrastructure under section 259, as a result, does not face the incentives to charge excessive prices or to set other unreasonable conditions for the use of its infrastructure that arise in the competitive situation in which section 251 applies. At the same time, because we decide that an incumbent LEC may recover all the costs it incurs as a result of providing shared infrastructure pursuant to a section 259 agreement, the incumbent LEC will not be discouraged from entering into such an agreement out of concern that it will be financially harmed by doing so. Moreover, we are less concerned, as we are in competitive situations, about the relative bargaining power of the parties negotiating section 259 sharing agreements. Unlike competitive situations, the unequal bargaining equality between qualifying carriers and incumbent LECs is less relevant since the incumbent LEC has less incentive to exploit any inequality to achieve a competitive advantage. 30. In sum, we conclude, consistent with the goals of the 1996 Act, that it is vitally important that we adopt rules in this proceeding that do not serve to discourage the development of competition in any local market. The approach we take here will, we believe, help to ensure an interpretation of section 259 that fully serves the intent of the section and is fully complementary to the other sections of the Act -- particularly given the placement of section 259 within a newly designated Part II of Title II of the 1934 Act, which part Congress designated "Development of Competitive Markets." 31. Certain commenters apparently fear that the Commission will implement section 259 by adopting the same regulatory approach employed in our implementation of section 251. These commenters suggest that the measures adopted in section 251 -- designed to remove barriers to competitive entry in all telecommunications markets -- would essentially subvert the statutory purpose of section 259 to assist certain telecommunications carriers to upgrade their network capabilities through particular, i.e., cooperative, arrangements with other carriers. We agree that section 251 and section 259 fulfill different statutory purposes. In contrast to sections 251-253, which focus on eliminating the legal, regulatory, economic, and operational barriers to competition in telecommunications markets, and on interconnection agreements between carriers that may compete against one another, section 259 addresses infrastructure sharing between an incumbent LEC and a qualifying carrier that will not use shared infrastructure to compete with the incumbent LEC. In this context of cooperation between non-competing carriers, we believe, to the contrary, that our negotiation-driven structure -- as set out in this Report and Order -- fully effectuates the statutory purpose. Infrastructure sharing pursuant to section 259 is one means by which smaller LECs can implement evolving levels of advanced technology in order to continue to fulfill their universal service obligations. We have specifically considered the impact on small telecommunications companies of the regulatory regime we adopt here and we conclude that it imposes few burdens on such companies and none that are not explicitly required by the statute. We discuss in the following section other specific conclusions about the relationship between sections 259 and 251, and we set out in Sections C, D, and E, infra, other conclusions regarding these issues as they arise in interpreting the implementation criteria contained in sections 259(b), (c), and (d). B. Requirements of Section 259(a) 32. Section 259(a) requires the Commission to "prescribe" by February 8, 1997: [R]egulations that require incumbent local exchange carriers (as defined in section 251(h)) to make available to any qualifying carrier such public switched network infrastructure, technology, information, and telecommunications facilities and functions as may be requested by such qualifying carrier for the purpose of enabling such qualifying carrier to provide telecommunications services, or to provide access to information services, in the service area in which such qualifying carrier has requested and obtained designation as an eligible telecommunications carrier under section 214(e). 1. Scope; Relationship Between Sections 259 and 251 a. Background 33. In the NPRM, we first sought comment on how we should interpret the scope of the section 259(a) requirement. We asked what is included in "public switched network infrastructure, technology, information, and telecommunications facilities and functions . . . ." Specifically, we sought comment on what constitutes "public switched network infrastructure" for the purposes of section 259(a). Likewise, we sought comment on whether and how we should define the terms "technology, information, and telecommunications facilities and functions" to further the statutory goals of section 259(a). We asked what definitions for these terms would provide necessary or desirable flexibility as technology continues to evolve. We stated our belief that how these terms are defined has specific implications for the overall scope of section 259 and how section 259 relates to other sections of the 1996 Act, and we sought comment on whether other provisions in the statute, or its legislative history, could provide guidance on these issues. 34. We further noted that there could be an overlap between those "telecommunications facilities and functions" that are the subject of section 259(a) and interconnection, unbundled network facilities, and resale made available pursuant to section 251(b) and (c). We asked whether "telecommunication facilities and functions" provided under section 259(a) could include, for example, access to rights-of-way and resale made available under section 251(b), interconnection made available under section 251(c)(2), and unbundled network elements made available under section 251(c)(3). We offered the view that, because "telecommunications facilities and functions" in section 259(a) is stated without terms of limitation, we might conclude that resale, interconnection, and unbundled network elements are included within the scope of section 259(a). 35. We also noted statutory differences that distinguish who may obtain access to an incumbent LEC's network under section 251 and who may obtain infrastructure sharing under section 259. In this regard, we noted that section 251(c) requires incumbent LECs to provide interconnection and network element unbundling to all requesting telecommunications carriers, including carriers that plan to compete with the incumbents in the incumbents' service areas. On the other hand, section 259(b)(6) provides that an incumbent LEC shall not be required to "engage in any infrastructure sharing agreement for any services or access which are to be provided or offered to consumers by the qualifying carrier in such local exchange carrier's telephone exchange area." We sought comment on the implications of this distinction for our implementation of section 259. 36. We also sought comment on the implications of such an approach for qualifying carriers that might want to obtain certain "telecommunications facilities and functions" as unbundled network elements pursuant to section 251(c)(3). We asked whether the limitation provided in section 259(b)(6) means that qualifying carriers must take, for example, resale, interconnection, and unbundled network elements exclusively pursuant to section 259 where the qualifying carriers do not propose to compete in the incumbent LEC's telephone exchange area. 37. We pointed out that interpreting the scope of section 259(a) as relatively narrow appears to be supported by its requirement that only qualifying carriers, defined pursuant to section 259(d), may obtain section 259 arrangements from incumbent LECs. Such a definition would appear to apply to many small LECs. We asked whether this observation supports a conclusion that Congress primarily, or exclusively, intended section 259 to benefit small carriers in an effort to advance the universal service goals of the 1996 Act. We asked further whether such a conclusion would support a Commission decision to construe the provisions of section 259 so as to apply only to cases involving small LECs or, even more restrictively, to arrangements between such qualifying carriers and their adjacent incumbent LECs. 38. We also offered the view that it might be possible to interpret the scope of section 259 and its relationship to section 251 in a very different way. Neither section 251, on its face, nor the Commission's Orders in CC Docket No. 96-98 would appear to prohibit qualifying carriers, defined pursuant to section 259(d), from obtaining access to rights-of-way, resale facilities, interconnection, and unbundled network elements pursuant to section 251 (i.e., outside the framework of section 259 with its apparent restrictions on competition). We asked whether the Commission could conclude that section 251 grants rights of access to rights-of-way, resale, interconnection, and access to unbundled network elements, on terms that also satisfy section 259 criteria, as types or examples of "telecommunications facilities and functions." We sought comment about whether the Commission can and should find that qualifying carriers must take such resale, interconnection, and unbundled network facilities pursuant to section 251. On the other hand, we asked whether the Commission could give qualifying carriers the choice whether to obtain access pursuant to section 251 or section 259, or whether the Commission should apply section 259 only to elements of "public switched network infrastructure, technology, information, and telecommunications facilities and functions" that are not otherwise provided pursuant to section 251. 39. We offered the view that, besides promoting infrastructure development on behalf of qualifying carriers, requiring qualifying carriers to take, for example, interconnection and unbundled network elements pursuant to section 251(c) -- instead of pursuant to section 259 -- also might tend to promote competition in local exchange markets. As discussed in Section III. C. 6, infra, section 259(b)(6) does not require incumbent LECs to "engage in any infrastructure sharing agreement for any services or access which are to be provided or offered to consumers by the qualifying carrier in such local exchange carrier's telephone exchange area." No such limitation on the incumbent LEC's obligations appears in section 251, and, consequently, qualifying carriers are free, pursuant to section 251, to use interconnection and unbundled network elements whether or not they intended to compete in the providing incumbent LEC's telephone exchange area. We sought comment on this approach to defining any overlap between sections 251 and 259 and on the consequences of such an approach for promoting the development of competition, particularly in rural markets. b. Comments 40. Incumbent LECs and others urge us to avoid attempting to define with specificity the scope of public switched network infrastructure, technology, information, and telecommunications facilities and functions as set out in section 259(a). These commenters contend that Congress intended section 259 to narrowly focus on and benefit a certain class of carriers, namely, "qualifying" carriers defined pursuant to section 259(d), to the virtual exclusion of any concerns about the effects of infrastructure sharing on competition. To this end, some of them cite legislative history from earlier legislation -- never enacted -- that they think establishes such an intent. According to these commenters, carriers which, pursuant to the specific requirements of section 259(d)(1) and (2), are found to lack economies of scale or scope and which agree to undertake specified universal service obligations will be aided by section 259 to obtain that infrastructure -- including advanced technology -- to enable them to continue to meet their universal service obligations. 41. Universal service promotion, not the promotion of competition, is the true purpose behind section 259, according to these commenters. Accordingly, these parties argue that the Commission should avoid grafting pro-competition policy goals onto its implementation of section 259. According to ALLTEL, "infrastructure sharing is far less about promoting competition in small and rural markets (which are generally less attractive to competitors) as it is about elevating the service offerings available in those markets beyond that which the qualifying carrier's economies of scale and scope or finances would otherwise permit." ALLTEL further argues that sections 251 and 259 are "distinct, yet complementary." ALLTEL argues that section 251 is designed to "govern the relationship among carriers in competitive situations," whereas section 259 is a cooperative provision to assist "communications 'have-nots.'" Based on these asserted differences, ALLTEL argues that section 259 agreements should "sunset" when either the qualifying LEC's service territory becomes subject to competition, or where the qualifying LEC uses section 259 "facilities" to compete outside its service territory with the providing incumbent LEC. RTC, which also argues that sections 251 and 259 are distinct, nevertheless takes issue with ALLTEL's analysis as imposing an unwarranted limitation on the availability of infrastructure sharing arrangements. 42. LEC commenters by and large say that it is important for the Commission to ensure that qualifying carriers have the flexibility to define what infrastructure they can obtain pursuant to section 259 based on their individual requirements. Moreover, this flexibility is particularly important given that technology will continue to evolve. According to GTE, "[d]efining exactly what facilities are eligible to be shared will by necessity result in a static definition which would not adapt to rapidly changing technology." Those LEC commenters which addressed the issue also oppose an adjacency requirement, i.e., whereby infrastructure sharing could be obtained by qualifying carriers only from neighboring incumbent LECs. The Minnesota Coalition contends that, although some services or functionalities otherwise obtainable by infrastructure sharing might be distance sensitive and, thus, legitimately exempt from provision pursuant to the "economically unreasonable" stricture of section 259(b)(1), other services such as advanced CLASS features and Signalling System 7 may be provided "over substantial distances." Although some commenters note an apparent intent on the part of Congress to benefit "small, largely rural carriers," they largely oppose the adoption of size restrictions for carriers seeking to become "qualifying carriers." 43. LEC commenters disagree about how we should construe "public switched network infrastructure, technology, information, and telecommunications facilities and functions." Thus, for example, USTA takes issue with the Commission's proposal in the NPRM to read this phrase in a way that, according to USTA, would result in various types of technology, information, and telecommunications facilities and functions being improperly included in the scope of section 259(a). Instead of the proposed reading that would find that "public switched network" modifies only "infrastructure," USTA argues that the entire phrase should be read as modified by "public switched network." This results, according to USTA, in an interpretation of the infrastructure, technology, information, and telecommunications facilities and functions available under section 259 that is limited to that which is network-related. One result of this interpretation, according to USTA, is that services resale, intellectual property owned by third parties, and non-public information like marketing information would be clearly unavailable to qualifying carriers pursuant to section 259 agreements. Similarly, some larger LEC commenters advocate the elimination of resale and services from the scope of section 259. Frontier would have us limit the scope of section 259(a) to advanced services and functionalities like advanced signalling systems because, according to Frontier, even carriers which lack economies of scale or scope must "have the resources to deploy a network and, in the case of an incumbent rural telephone company, already has." 44. RTC disagrees that such limitations should be read into section 259(a). RTC argues that qualifying carriers should be able to obtain whatever they need "to modernize their networks and broaden the services they provide to their customers." According to RTC, this would allow qualifying carriers to obtain those facilities and functions otherwise available pursuant to section 251 -- including services resale, interconnection, and unbundled network elements -- "so long as such facilities and functions are a part of the public switched network." Rejecting assertions from PacTel, BellSouth, and GTE and others that services should be excluded as not belonging to infrastructure, technology, information, or telecommunications facilities and functions, RTC says that such distinctions "rely too heavily on semantics." This is so, according to RTC, because the same arrangement often can be classified as a service, as a network element, or as a "joint provision vehicle." According to RTC, this entire classification scheme should be rejected because it derives from common carrier regulation, and common carrier treatment of section 259-provided arrangements is specifically prohibited per the mandate of section 259(b)(3). RTC also disagrees with Frontier that section 259 should be viewed as providing only advanced services and functionalities. 45. The LECs and their representatives disagree about another issue as well. Some LEC commenters welcome the suggestion in the NPRM that the Commission could allow non-competing, qualifying carriers to choose between obtaining what they need pursuant to either section 259 infrastructure arrangements or pursuant to section 251 interconnection agreements. Other LECs, like Ameritech, argue that the Commission "should make clear that non-competing carriers are compelled to obtain shared infrastructure under section 259." 46. ALTS, NCTA, and MCI, in different ways, oppose the general view offered by the LECs and their representatives that the Commission should construe section 259 as focused solely on the promotion of universal service goals without regard to any effects on competition. All three argue that the Commission ought to recognize a close connection between the pro-competition policy goals of, e.g., section 251, and the infrastructure sharing goals of section 259. ALTS generally argues that qualifying carriers ought to be able to obtain "infrastructure, technology, information, and telecommunications facilities and functions" pursuant to section 259. But, reflecting its concerns about LEC assertions about the scope of section 259(b)(6), ALTS argues that anything thereby received should also serve, in the ordinary course, as "prima facie evidence that such services can and should be made available by the incumbent for any purposes pursuant to section 251, except in those few hypothetical situations where the matters provisioned pursuant to section 259 might extend beyond those provided under section 251." Thus, according to ALTS, qualifying carriers should be "permitted to use Section 259 services and facilities for any purpose, provided only that when such services are utilized outside the qualifying carrier's universal service territory, the provisioning incumbent must be compensated for such use pursuant to the pricing standards of Section 251." 47. NCTA urges us generally to understand that "[the] Commission's critical task in this proceeding is to implement Section 259 in a manner that fully accords with the Act's central purpose of promoting competition in all telecommunications markets." NCTA proposes, in line with its perspective, that the Commission construe the scope of section 259 as relatively narrow so that the scope of "public switched network infrastructure, technology, information, and telecommunications facilities and functions" used in section 259 "is no broader than the scope of features, functions, services and information available to CLECs [competitive local exchange carriers] under Section 251." Alternatively, NCTA would have us require qualifying carriers seeking infrastructure sharing under section 259 to demonstrate that the requested capability cannot be obtained from the incumbent LEC pursuant to section 251. Further, to ensure that qualifying carriers are not able to impede the development of competition in their service areas, NCTA urges us to find that qualifying carriers are obliged to provide section 259-obtained network capabilities to competitive LECs. "Absent such a requirement," according to NCTA, "a qualifying carrier would have an incentive to obtain network capabilities from an adjacent [incumbent LEC] under Section 259, rather than deploy its own features and functions that would be subject to unbundling under Section 251." Further, NCTA would have us impose this requirement even on qualifying carriers which have obtained exemption from section 251 responsibilities pursuant to section 251(f), because, according to NCTA, such exemption can only be predicated "upon the economic unreasonableness or technical infeasibility of meeting a particular Section 251(c) obligation," neither of which finding could obtain if the qualifying LEC successfully obtained a capability pursuant to Section 259. If, in any event, the qualifying carrier nevertheless cannot provide section 259-obtained network capabilities to competitive LECs for technical or economic reasons, NCTA would have us require the providing incumbent LEC to make available the requested capabilities directly to the requesting competitive LEC. 48. MCI agrees with NCTA's proposals regarding qualifying carrier obligations, and also argues, more generally, that the Commission should find that there is a close relationship between sections 251 and 259. MCI, indeed, would have us read sections 251 and 259 as essentially overlapping. Basically, this appears to mean, in MCI's view, that the Commission should recognize that section 259 is intended to provide qualifying carriers with a parallel opportunity -- as provided pursuant to statutory restrictions unique to section 259 -- to obtain, inter alia, those facilities and functions that are otherwise made available to interconnecting carriers pursuant to the Commission's implementation of section 251 in the Local Competition First Report and Order. But, according to MCI, Congress would not have intended to provide such a parallel provision unless non-competing qualifying carriers could receive an added benefit for negotiating pursuant to section 259, namely, the ability to negotiate better terms than they would receive pursuant to section 251. To this end, MCI urges us, generally, to make rules we adopted in the Local Competition First Report and Order regarding access to incumbent LEC facilities and services available as "baseline terms" to any section 259 qualifying carrier. 49. Moreover, MCI argues that we should ensure that qualifying carriers are able to obtain section 251 functionalities in infrastructure sharing arrangements at prices lower than those provided pursuant to the forward looking costs-derived prices for section 251 functionalities mandated by the Local Competition First Report and Order. Accordingly, MCI urges the Commission to assert pricing authority to ensure that prices negotiated pursuant to section 259 arrangements are less than or equal to the interim proxy prices the Commission adopted in the Local Competition First Report and Order, "minus an average amount of common costs and a normal rate of return." Beyond applying such an approach to those network features and functions otherwise available under section 251, MCI would also construe section 259(a) to include information services "and the facilities required to provide information services," subject to rejection only if the providing incumbent LEC demonstrates that it would, under the agreement, "have to provide access at prices lower than those consistent with the costing principles established in the First Report and Order in CC Docket 96-98." c. Discussion 50. We decline to adopt specific definitions of the "public switched network infrastructure, technology, information, and telecommunications facilities and functions" that providing incumbent LECs must make available to qualifying LECs. We do so because we believe that such a flexible approach best ensures that qualifying carriers are able to obtain that public switched network infrastructure, technology, information, and telecommunications facilities and functions they require to meet their universal service obligations, now and in the future as technology continues to evolve. We also find no reason to exclude any facilities, functions, or information from the negotiations and agreements under section 259. Moreover, we note that section 259 establishes specific limitations on a qualifying LEC's use of a providing incumbent LEC's infrastructure under section 259. Specifically, a qualifying LEC may use section 259 to gain access to another LEC's infrastructure only "for the purpose of enabling such qualifying carrier to provide telecommunications services, or to provide access to information services, in the service area in which such qualifying carrier has requested and obtained designation as an eligible telecommunications carrier under section 241(e)." In addition, the providing incumbent LEC is not required to share facilities that will be used to offer service or access in the providing incumbent LEC's telephone exchange area. As discussed below, other subsections of section 259 establish further limitations on the scope of section 259. We expect that section 259 agreements will reflect these limitations. 51. We also find that adopting limitations in this Report and Order on the type of infrastructure that must be made available to qualifying carriers under section 259 could be inconsistent with the conclusions reached in the universal service docket. One requirement for becoming a qualifying carrier under section 259 is designation as an "eligible telecommunications carrier" under section 214(e) to receive universal service support. The specific universal service mandates are currently being developed by the Commission and the states, and we cannot decide in the section 259 proceeding what requirements, if any, would best support the conclusions ultimately reached in the universal service proceeding. Further, because technology will continue to evolve, it is essential to ensure that the statutory purpose behind section 259 -- to provide qualifying carriers with specific opportunities to obtain infrastructure -- is not defeated by definitions that are restrictively based on perceptions of present network requirements. We also note that this approach is consistent with the Congressional mandate to eliminate market entry barriers for small businesses, in section 257 of the Act, because it enables small carriers to obtain access to advanced infrastructure that might otherwise be unavailable, for the purpose of providing telecommunications services and access to information services. 52. We are also not persuaded that we should restrict the class of qualifying carriers to "small" carriers. Although the qualifying criteria set out in section 259(d)(1) and (2) would, as we stated in the NPRM, "appear to apply to many small LECs," those criteria speak for themselves and we do not believe that we should, in effect, prejudge what carriers -- or class of carriers -- can satisfy the criteria of section 259(d). As noted in Section III. E., infra, we have decided to adopt a rebuttable presumption that certain carriers meet section 259(d)(1) criteria as "lacking economies of scale or scope," but such a presumption will not operate to preclude any carrier from demonstrating to an incumbent LEC that it does, in fact, lack economies of scale or scope for section 259(d)(1) purposes. Moreover, we promote competitive entry by finding that qualifying carriers may include any carrier that is found to satisfy the requirements of section 259(d), i.e., not only incumbent LECs but, perhaps, also competitive carriers. We have specifically considered the impact on small telecommunications companies of the flexible regulatory approach we adopt here to define the scope of the section 259(a) requirement. We find that a flexible approach that relies upon negotiation by parties will allow small companies to better negotiate section 259 agreements that respond to their individual requirements, with few regulatory burdens and none that are not explicitly required by the statute. 53. We also find that nothing in the language of section 259(a), the legislative history, or the record in this proceeding persuades us that we should limit the class of providing incumbent LECs to carriers that are "adjacent" to qualifying carriers. Section 259(a), on its face, merely defines providing incumbent LECs pursuant to the definition of incumbent LEC set out in section 251(h). Whether any specifically identified non-adjacent incumbent LEC may be required to provide any given element of "public switched network infrastructure, technology, information, and telecommunications facilities and functions" to a qualifying carrier will depend solely on the criteria set out in section 259(b), including the section 259(b)(1) prohibition against requiring incumbent LECs "to take any action that is economically unreasonable or that is contrary to the public interest." We discuss the interpretation of section 259(b) at Section III. C., infra. 54. Regarding the relationship between sections 251 and 259, we first decide that qualifying carriers should be able to obtain section 251-provided network facilities and functionalities -- including lease arrangements and resale -- alternatively pursuant to section 251 or pursuant to section 259 (except to the extent precluded by section 259(b)(6)), or pursuant to both if they so choose. (As discussed below at Section C, we also declare that any element of "public switched network infrastructure, technology, information, and telecommunications features and functions" that is not provided for under section 251 may be obtained pursuant to section 259.) Nothing in the statutory language of section 259 or its legislative history demonstrates that Congress intended to exclude section 251-provided interconnection elements from section 259 arrangements. 55. Section 259(a), on its face, broadly includes all "public switched network infrastructure, technology, information and telecommunication facilities and functions." At the same time, as the Commission stated in the Local Competition First Report and Order: The purpose and scope of section 259 differ significantly from the purpose and scope of section 251. Section 259 is a limited and discrete provision designed to bring the benefits of advanced infrastructure to additional subscribers, in the context of the pro-competitive goals and provisions of the 1996 Act. The restrictions on the scope of section 259 are explicitly stated in the statute. They include the "purpose" clause in section 259(a) previously cited in paragraph 49, supra; the limitation imposed pursuant to section 259(b)(6); and the qualifying criteria set out in section 259(d). We conclude that the negotiation-driven approach to regulation we adopt here will promote universal service in areas that in many cases, at least initially, will be without competitive service providers, and, at the same time, will not serve to inhibit the development of competition in any market. 56. To this end, we construe the language in section 259(b)(6) at Section III. C. 6., infra. Here it is enough to note that our interpretation of the "reach" of section 259(b)(6) is that it does not provide an invitation to insulate any telecommunications service areas -- including rural areas -- from competitive entry. We agree with ALTS and USTA, among others, that the only competitive significance of section 259(b)(6) is that qualifying carriers are allowed to use section 259 in certain specifically limited circumstances and may avail themselves of section 251 in all circumstances. 57. Further, given the express statutory limitations imposed pursuant to the use clause in section 259(a) and pursuant to the qualifying criteria in section 259(d), a proper understanding of the role of section 259(b)(6), and the filing requirement imposed by section 259(b)(7), we reject as unnecessary the approaches urged upon us by NCTA and MCI to conform our interpretation of section 259 to the section 251-driven carrier obligations in the Local Competition First Report and Order. Moreover, we do not believe that these approaches are contemplated by the language or the legislative history of section 259. 58. Specifically regarding NCTA's position, we conclude that there is no manifest intent, evidenced in either the statutory language or the legislative history of section 259, to suggest that we can or should force providing incumbent LECs to provide infrastructure sharing to competitive LECs who do not independently qualify under the criteria established in section 259(d). Moreover, to the extent that ALTS argues that we should order providing incumbent LECs to provide elements of infrastructure sharing-negotiated arrangements to non-qualifying carriers pursuant to the pricing standards imposed by section 251, we find that this requirement would not comport with our interpretation of the limitations in section 259(a) and (b)(6). Stated another way, although providing incumbent LECs are fully subject to section 251 interconnection obligations, we determine that section 259 establishes an alternative and separate means by which such carriers may be required to provide, to a narrowly defined class of qualifying carriers, inter alia, unbundled network functionalities, resale, and interconnection. We further determine that, pursuant to restrictions in section 259(b)(3) and (b)(6), such providing incumbent LECs shall not be required to provide such section 259 arrangements to non-qualifying carriers, to non-carriers, or to qualifying carriers that will use those functionalities to provide service in the providing incumbent LEC's telephone exchange area. Providing incumbent LECs are, however, fully required to provide functionalities, resale, and interconnection pursuant to requirements imposed by section 251. 59. In addition, we conclude that a qualifying carrier that obtains, pursuant to section 259 arrangements, interconnection, unbundled network elements, and other telecommunications functionalities otherwise available pursuant to section 251, is not released from its section 251- derived obligation to provide interconnection to competitive LECs. Thus, we find that there is no warrant in the language of section 259 to impose any section 259-specific common carrier requirements on qualifying carriers vis-a-vis possible competitive LEC requests for interconnection,i.e., outside of the scope of obligations we have already imposed pursuant to section 251. We do not think NCTA's proposals to impose section 259-specific common carrier requirements on qualifying carriers pursuant to their dealings with competitors are necessary to remedy any potential anticompetitive results that might be caused by the operation of specific section 259 arrangements. As noted previously, express limitations in section 259(a) and (d) limit the scope and applicability of infrastructure arrangements, which arrangements may, nevertheless, be negotiated by any carrier who meets the qualifying criteria set out in section 259(d). Further, section 251 already imposes interconnection requirements on all carriers except those carriers who qualify for exemption, suspension, or modification pursuant to section 251(f). We anticipate that section 259 agreements, as a result, could enhance the ability of qualifying carriers that are incumbent LECs to meet their section 251 obligations. Whether carriers who otherwise obtain infrastructure pursuant to section 259 arrangements -- including elements otherwise available pursuant to section 251 -- can maintain their exemption, suspension, or modification under section 251(f) should be decided by the appropriate state commission on a case by case basis. We believe that making clear that we will enforce the section 251-derived interconnection rights of competitive LECs will help ensure that competitive entry into markets served by qualifying carriers markets is not hampered by the operation of otherwise valid section 259 arrangements. Additionally, all section 259 arrangements must be publicly filed pursuant to section 259(b)(7). If, contrary to our expectations, any of these arrangements tends to establish competitive entry barriers, there will be ample opportunity for complaining parties, including competitive LECs -- or the Commission -- to investigate and to take appropriate action. We note that Congress apparently considered but refused a proposal to exempt section 259 arrangements from the application of the antitrust laws. We further note that there is ample authority granted to the Commission pursuant to Title II to set aside any carrier agreements that are found to violate the public interest. 60. We also reject MCI's suggestions as unsupported by the statutory language and legislative history of section 259 and otherwise unnecessary to secure the benefits of section 259 for qualifying carriers. As noted, MCI asserts that section 259 pricing requirements must be established by the Commission in relation to those section 251-derived pricing guidelines set out in the Local Competition First Report and Order or qualifying carriers (and others) will not receive the benefits that Congress intended. We find, however, nothing in either the express statutory language of section 259 or its legislative history that persuades us that Congress intended any particular price outcome at all pursuant to the negotiation-driven regime contemplated by section 259. Rather, we think that the statutory language evidences a belief that the parties to section 259 negotiations are best able to determine what suits their requirements, subject to certain explicitly stated statutory limitations. We discuss the necessity for pricing rules or guidelines more fully at Section III. C. 4.,infra. 2. Intellectual Property and Information Issues a. Background 61. We asked a variety of other questions about the meaning and scope of the language of section 259(a). We noted that each element of public switched network infrastructure, technology, information, and telecommunications facilities and functions made available pursuant to section 259 might pose unique questions and issues for this proceeding. For example, we asked whether technology sharing would require mandatory patent licensing to qualifying carriers so that these carriers can develop equipment or software that is fully interoperative with proprietary systems (if any) deployed by an incumbent LEC. In cases where licensed technology is the only means to gain access to facilities or functions subject to sharing requirements, we tentatively concluded that section 259 requires mandatory licensing, subject to the payment of reasonable royalties, of any software or equipment necessary to gain access to the shared capability or resource by the qualifying carrier's equipment. 62. We also sought comment on what types of information must be made available to qualifying carriers by incumbent LECs pursuant to section 259(a). We asked whether marketing or other proprietary business information should be found to be included. We asked whether the information sharing mandated by section 259(a) implies any sort of joint network planning requirement. Specifically, we asked whether section 259(a) requires incumbent LECs to make network information databases (other than those already required to be made available pursuant to section 251(c)(3)) available to qualifying carriers and, if so, how? We sought comment on whether and how network information made available pursuant to section 259(a) might vary from that type of information to be disclosed under section 251(c)(5), which requires reasonable public notice of changes in the information necessary for transmission and routing of services using the incumbent LECs' facilities or networks. b. Comments 63. The majority of the commenters, i.e., larger LECs and Octel, which address the protection of proprietary information and other intellectual property rights, raise concerns about the Commission's tentative conclusions in the NPRM. Several parties reject the Commission's tentative conclusion to require mandatory licensing in certain situations. A number of the larger LECs and USTA comment that patent licensing is not needed for infrastructure sharing. Other parties, such as Southwestern Bell, argue that, because incumbent LECs' networks are built upon licenses to use intellectual property, "the sharing of any intellectual property must be conditioned upon the qualifying carrier obtaining a sufficient license from parties that have a [protectable] interest in such property." Southwestern Bell argues that there is no authority in section 259 for the Commission to "override any party's intellectual property rights, or the binding legal obligations of incumbent LEC[s]." 64. Octel, a supplier of voice processing systems to government and businesses, including the larger LECs, argues that the property rights of third party providers that have licensing agreements with providing incumbent LECs should not be injured by the section 259-imposed sharing obligations placed on incumbent LECs. Octel notes that the Commission's tentative conclusion about mandatory licensing is limited to those situations where licensed technology is "the only means to gain access to facilities or functions subject to sharing requirements." Beyond those limited situations where mandatory licensing may be required, Octel argues that the Commission should not displace the commercial licensing process. Octel maintains that, to the limited extent that the Commission might approve mandatory licensing, it should be subject to the proprietary information restrictions in third party providers' licensing schemes. 65. A few parties, particularly RTC and AT&T, argue that proprietary information should be made available to qualifying carriers unconditionally. RTC supports the Commission's tentative conclusion to require mandatory licensing, subject to reasonable royalties, where necessary to gain access to a shared capability or resource by the qualifying carrier's equipment. AT&T contends that "[incumbent LECs] that have obtained the right to use software generics from their switching vendors are entitled to use those facilities to serve not only their own traffic, but also to serve qualifying carriers that share the incumbent carriers' infrastructure under Section 259 without any additional costs or fees." In fact, according to AT&T, "[i]f qualifying carriers were required to negotiate licensing agreements with all of an [incumbent LEC's] equipment vendors, none of which have any incentive to negotiate reasonable terms or to act expeditiously with a small, rural carrier, it is reasonable to assume that the carrier's ability actually to use the [incumbent LEC's] infrastructure to serve its customers will be seriously impeded." RTC comments that, in some cases, joint network planning will be required to implement sharing obligations. 66. Some commenters specify that marketing information should not be included within the scope of section 259(a). For example, PacTel and GTE contend that marketing information would not facilitate infrastructure sharing because it only relates to the providing incumbent LEC's customer base. USTA would except intellectual property and marketing information, but asserts that "[o]ther public information owned by the providing LEC . . . necessary for a [qualifying carrier] to provide services to its customers using the shared infrastructure, technology or telecommunications facilities, would plainly fall under the scope of Section 259." Without further specification, RTC argues that there may be databases that are necessary for a qualifying carrier to fully benefit from the sharing arrangement beyond that which an incumbent LEC is required by section 251(c)(3) to provide competitors. PacTel argues that, where proprietary information is necessary for the qualifying carrier to provide telecommunications services to its customers, it should be provided pursuant to nondisclosure agreements. c. Discussion 67. As described above, the negotiation-oriented framework we have decided to adopt in defining the scope of section 259(a) obviates the need to define specifically what is included in the "public switched network infrastructure, technology, information, and telecommunications facilities and functions" that incumbent LECs must make available to qualifying carriers. We are persuaded that an approach that attempts to identify discrete elements -- or even examples -- of public switched network infrastructure, technology, information, and telecommunications facilities and functions would tend to defeat the legislative purpose which is to better ensure that qualifying carriers have access to evolving technology. As we noted above, we conclude that the language in section 259(a) that requires section 259 arrangements be made available "for the purpose of enabling such qualifying carrier to provide telecommunications services, or to provide access to information services" acts as a limitation on the scope of information available under section 259. It is reasonable to assume that certain types of information could be found to be remotely connected, at best, to advancing this stated purpose of section 259. We have decided, nevertheless, not to exclude, per se, any type of information or information service from the negotiation process. 68. The very flexibility of our approach to defining the scope of section 259(a), however, would seem to exacerbate those disagreements between commenters about intellectual property issues, specifically, where otherwise protectable intellectual property is owned or controlled by incumbent LECs and is properly sought by qualifying carriers. There is, for example and as we have noted, sharp disagreement between larger LECs and Octel, on the one hand, and smaller LECs and other parties, on the other hand, about the scope of necessary protection for such proprietary information. The larger LECs and Octel appear to suggest that the possession of proprietary information, including information licensed from third parties like Octel, necessitates a Commission decision that imposes restrictions on the sharing of such information. According to these commenters, unless such information is provided to qualifying LECs pursuant to separately negotiated agreements or to restrictive non-disclosure clauses in section 259 agreements, the result will force incumbent LECs to breach their contracts with third parties. Smaller LEC commenters and their representatives, on the other hand, essentially argue that the restrictions proposed by the larger LECs would defeat the effectiveness of section 259 and, in effect, allow incumbent LECs to avoid their section 259 obligations altogether in many cases. 69. We affirm our tentative conclusion that, whenever it is "the only means to gain access to facilities or functions subject to sharing requirements," section 259 requires the providing LEC to seek, to obtain, and to provide necessary licensing, subject to reimbursement for or the payment of reasonable royalties, of any software or equipment necessary to gain access to the shared capability or resource by the qualifying carrier's equipment. In the ordinary course of providing "public switched network infrastructure, technology, information, and telecommunications facilities and functions" to qualifying carriers, we fully anticipate that such licensing will not be necessary. We believe that, as suggested by AT&T and Sprint, infrastructure sharing can be accomplished through the use of agreements whereby providing incumbent LECs who own or lease certain types of information or other intellectual property provide functionalities and services to qualifying carriers without the need to transfer information that is legitimately protectable. 70. We expect that the same process will occur in the context of negotiating section 259 agreements. At any rate, we agree with AT&T and RTC that providing incumbent LECs may not evade their section 259 obligations merely because their arrangements with third party providers of information and other types of intellectual property do not contemplate -- or allow -- provision of certain types of information to qualifying carriers. Therefore, we decide that the providing incumbent LEC must determine an appropriate way to negotiate and implement section 259 agreements with qualifying carriers, i.e., without imposing inappropriate burdens on qualifying carriers. In cases where the only means available is including the qualifying carrier in a licensing arrangement, the providing incumbent LEC will be required to secure such licensing by negotiating with the relevant third party directly. We emphasize that our decision is not directed at third party providers of information but at providing incumbent LECs. We merely require the providing incumbent LEC to do what is necessary to ensure that the qualifying carrier effectively receives the benefits to which it is entitled under section 259. 71. Regarding RTC's comments on the provision of network information databases (other than those already required to be made available pursuant to section 251(c)(3)) to qualifying carriers, we conclude that there is no independent network information disclosure requirement set out in section 259(a). Similarly, we determine that Section 259(a) infrastructure sharing requirements are independent of current disclosure requirements, or any that the Commission may hereafter adopt, pursuant to Section 251. Network information disclosure to qualifying carriers is properly the subject of section 259(c). As a result, we discuss commenters' positions on information disclosure and decide these issues in Section III. D., infra. 3. Dispute Resolution, Jurisdiction, and Other Issues a. Background 72. In the NPRM, we stated our general belief that rules implementing section 259(a) should be definitive enough so as to minimize disputes between or among the parties to section 259 agreements, but not so restrictive as to inhibit the Commission's ability to act flexibly to resolve disputes that may arise. We asked how best to achieve these goals, particularly given our tentative preference that section 259-derived arrangements should be largely the product of private negotiations among parties. Regarding possible disputes between parties to section 259 agreements, we noted that section 259(d) defines qualifying carriers based on decisions made by the Commission and the states. We asked whether this joint responsibility has implications for deciding who should resolve section 259 disputes. 73. The express language of section 259(a), on its face, grants the Commission sole authority to create rules to implement this section. We tentatively concluded that section 259, by its express terms, pertains to both interstate and intrastate communications. Further, we tentatively concluded that section 259 contemplates that the states may accept for public inspection the filings of section 259 agreements that are required by section 259(b)(7), and that they have authority to designate eligible carriers under section 214(e), as referenced in section 259(d)(2). We sought comment on each of these tentative conclusions. To ensure a complete record, we also asked whether the Commission has authority to preempt state regulation under Louisiana Public Service Commission v. FCC, in the event that section 259 does not apply to intrastate services, contrary to our tentative conclusion. 74. Finally, we noted that, while section 259(a) refers to carriers that have "requested and obtained designation . . ." as section 214(e)-eligible carriers, section 214(e) also provides that a state commission may designate a carrier as eligible on its own motion without a request, and that the states, with respect to intrastate services, and the Commission, with respect to interstate services, shall designate a carrier as an eligible carrier to provide service in unserved areas. In light of this provision, we asked whether we can and should adopt regulations to impose section 259(a) requirements on incumbent LECs in cases where the state has designated a qualifying carrier as an eligible carrier pursuant to section 214(e) but where the carrier did not request such designation. b. Comments 75. Most commenting parties, including RTC and USTA, support the Commission's tentative conclusion that "the best way for the Commission to implement section 259, overall, is to articulate general rules and guidelines." Consistent with that approach, the majority of commenters suggest that flexible rules that promote cooperation and negotiation among providing and qualifying carriers would be more useful than detailed rules that attempt to predict all possible disputes. For example, GTE argues that "[d]etailed, inflexible rules would discourage cooperation and prevent carriers from developing arrangements that meet unique needs." The Minnesota Coalition states that "[t]he adoption of definitive rules would be at odds with the reliance upon negotiations as the primary vehicle for implementing infrastructure sharing." Several parties comment that there is an extensive history of useful interconnection agreements between non- competing carriers that were reached without national rules. For example, RTC suggests that "[m]any of the qualifying carriers under Section 259 will be independent LECs that have been successfully negotiating mutually beneficial sharing arrangements for more than 100 years with virtually no federal government intrusion." 76. In contrast, MCI and NCTA envision a more detailed structure to implement section 259. MCI urges that Commission to adopt national rules to make unbundled elements available pursuant to Part 51 of the Commission's rules as a lower bound standard for qualifying carriers to obtain access to infrastructure under section 259. Similarly, NCTA recommends that the rules adopted under section 259 should be conformed to the requirements of section 251 and should include sufficient safeguards to prevent anticompetitive behavior by incumbent LECs. 77. There was near universal support among the commenting parties that the Commission need not adopt new procedures for resolution of disputes arising under section 259. For example, MCI agrees: "It is reasonable for the Commission to rely on informal consultations between the parties and the Commission and, if necessary, existing declaratory ruling procedures and the . . . complaint process, including settlement negotiations and alternative dispute resolution." A number of parties suggest that state commissions should also be available to resolve disputes under section 259, including the Minnesota Coalition which argues that states should be the primary forum for section 259 disputes. Only USTA responded to the Commission's question about whether the joint responsibility reflected in section 259(d) -- the Commission's role concerning economies of scale or scope in subsection (d)(1) and the states' role in designating eligible carriers in subsection (d)(2) -- has implications for who should resolve section 259 disputes. According to USTA, the joint responsibility in section 259(d) indicates that disputes should be resolved according to "the jurisdictional nature of the service to be provided using the facilities, technology or information to be shared." 78. Numerous parties comment that sharing agreements per section 259 may be used to provide interstate and intrastate communications. Among those parties to directly address the question of jurisdiction, the majority concur that section 259 contemplates a dual jurisdictional scheme in which the Commission and the states share authority. For example, GTE asserts that "[a]lthough it is true that Section 259 requires the Commission to adopt certain rules regarding infrastructure sharing, the states retain authority to regulate the intrastate aspects of infrastructure sharing arrangements . . . ." USTA, similarly, states that "[s]ection 259(a) is not an omnibus grant of authority over intrastate services to the Commission, only a directive to enact regulations to govern the obligations of [providing incumbent LECs] to share facilities and functions." A number of parties contend that section 259 does not in any way alter the traditional limits on Commission jurisdiction codified in section 2(b). In comments that are generally representative of these parties, Southwestern Bell articulates a view of the jurisdictional scheme in which: [J]urisdiction must be determined on a dispute-by-dispute basis, with the location of [the] sharing LEC, the infrastructure, and the interstate/intrastate jurisdiction of its use determining the proper forum for a specific dispute. Some of these parties seem to distinguish between jurisdiction over infrastructure sharing agreements as used to provide intrastate services, as opposed to the more narrow issue of jurisdiction over intrastate services, per se. Other parties cite the language of section 259(b)(7) as evidence that Congress intended for the Commission and the states to share jurisdiction over infrastructure sharing arrangements. 79. In contrast, several parties expressly indicate that section 259 grants the Commission plenary authority over infrastructure sharing under the Act. NCTA agrees with the Commission that "[T]he Act 'grants the Commission sole authority to create rules to implement' Section 259 and that such rules would pertain to 'both interstate and intrastate communications.'" NCTA argues that nothing in section 2(b) limits the Commission's jurisdiction with respect to the implementation of infrastructure sharing. US West reasons: We perceive that public switched network infrastructure made available pursuant to Section 259 will consist of facilities and services used by the qualifying carrier to provide both interstate and intrastate services. These services of the qualifying carrier will be subject to regulation by the appropriate jurisdiction. There is no reasonable way to separate these facilities at the level of the transaction between the qualifying carrier and the incumbent LEC. The Notice's analysis is correct. With respect to the Commission's authority under Louisiana PSC, PacTel advises that preemption is limited to those situations where "inconsistent state regulation frustrates federal policy." RTC comments that the Commission's preemption powers are limited; for example, the Commission could not preempt a state's designation of an eligible telecommunications carrier per section 214(e). 80. Both USTA and RTC agree that the Commission should require providing incumbent LECs to enter into sharing agreements with any requesting carrier that meets the requirements of section 259(d), regardless of whether the carrier requested designation as an eligible telecommunications carrier under section 214(e) or the state designated the carrier on its own motion. USTA argues that "[t]he universal service goals of Section 259 would be best served by determining that Section 259 obligations apply to a [providing incumbent LEC] who receives a request from any carrier who meets the definitional criteria in Section 259(d)." RTC advises that "[s]ome state commissions, in an effort to avoid unnecessary paperwork, may ask that incumbents not file requests and simply deem them eligible on their own motion." As a matter of statutory construction, USTA argues that "the specific language of Section 259(d) . . . should control over the more general language in Section 259(a)." c. Discussion 81. We encourage parties to bring disputes over section 259 agreements to the Commission. We decline to adopt particular rules to govern disputes between parties to section 259 agreements. First, because our negotiation-driven approach in implementing section 259 grants significant flexibility to parties, we expect that the parties themselves will be able to anticipate most difficulties and disputes and provide for routine means to resolve them. Second, it is predictable that the ability of parties to infrastructure sharing agreements to anticipate, and provide for, various contingencies will improve as more and more section 259 agreements are negotiated. Third, in the event of particular failures to anticipate or resolve disputes, our declaratory ruling and complaint processes are available. We expect that parties will routinely make good faith efforts to resolve disputes among themselves before availing themselves of formal or informal adjudication -- or arbitration -- before the Commission. Pursuant to our concerns about the proper scope of section 259 agreements, and the section 251 rights of non-qualifying competitive LECs, we also expect that carriers will utilize these same processes to bring to our attention any unlawful anticompetitive effects resulting from section 259-negotiated agreements. 82. On the question of the proper relative roles of the Commission and the states, we conclude that (1) section 259 directs the Commission to promulgate rules concerning any public switched network infrastructure, technology, information, and telecommunications facilities and functions, regardless whether they are used to provide interstate or intrastate services or, more commonly, both, and that (2) the states may accept filings pursuant to subsection (b)(7) and may designate eligible telecommunications carriers under subsection (d)(2). NCTA, RTC, and US West agree with the Commission's observation in the NPRM that section 259(a) grants the Commission authority to create rules to implement section 259 and that section 259 pertains to both interstate and intrastate communications. The remaining commenters who address jurisdiction assert that the Commission, in the NPRM, proposes to restrict impermissibly the role of the states in section 259 matters in contravention of sections 2(b), 261(b), and 261(c) of the Communications Act. These parties essentially argue that there is no justification for the Commission to usurp the role of the states in regulating intrastate services and, to the extent that qualifying carriers, for example, are utilizing section 259 agreements in order to provide intrastate services, the Commission may not regulate such services or agreements absent a showing that meets the standards set out in Louisiana PSC. 83. We believe that section 259 must be interpreted as encompassing all network infrastructure sharing agreements, regardless of whether the shared infrastructure is to be used to provide solely interstate services, or intrastate services as well. The language of the section makes no explicit distinction between interstate and intrastate matters, and certain aspects of section 259 suggest that no such distinction was intended. First, we note that subsection (b)(3) provides that the Commission's rules shall ensure that LECs subject to section 259 obligations "will not be treated by the Commission or any State as a common carrier for hire or as offering common carrier services with respect to any infrastructure, technology, information, facilities, or functions made available to a qualifying carrier in accordance with regulations issued pursuant to this section." States have no authority to regulate interstate services in any event. Thus, if section 259 is read as addressing only interstate matters, this reference to state regulation would be superfluous. This provision makes sense only when read in the context of a provision that addresses both interstate and intrastate matters -- the Commission is directed to adopt rules that prevent states from regulating (in a way that they otherwise might) the sharing of infrastructure used to provide, intra alia, intrastate services as common carriage. 84. Second, the tie between section 259 and the universal service provisions of the Act also supports a conclusion that section 259 encompasses both interstate and intrastate matters. A carrier qualifies for section 259 infrastructure sharing only if it "offers telephone exchange services, exchange access, and any other service that is included in universal service." Thus, we conclude that at least one purpose of section 259 is to advance the Act's universal service goals. Given the conditions on qualification, it is logical to conclude that the infrastructure obtained pursuant to section 259 may be used to provide "telephone exchange services, exchange access, and any other service that is included in universal service." Since telephone exchange service is essentially a local service, the scope of section 259, thus, encompasses both intrastate and interstate services. 85. Section 2(b) does not alter this conclusion. Section 2(b) is a rule of statutory construction and as such applies only where the authority-granting statutory provision in question is ambiguous. But there is nothing ambiguous about the authority-granting provisions in section 259. As explained above, section 259(a) must be read to direct the Commission to implement the requirements of section 259, without any distinction between interstate and intrastate matters. 86. Even if section 2(b) were applicable in construing section 259, we note that the network infrastructure addressed by section 259 can be used to provide both interstate and intrastate services. As US West aptly observes, there "is no reasonable way to separate these facilities at the level of the transaction between the qualifying carrier and the [providing] incumbent LEC." We agree with this analysis, and believe that, because of the inseverability, Commission regulation under section 259 is particularly warranted. 87. Moreover, we do not believe that section 261 affects the Commission's jurisdiction in this case. Section 261(b), on its face, applies only to states enforcing regulations prescribed prior to the enactment of the 1996 Act or to states regulations prescribed after said date "if such regulations are not inconsistent" with 1996 Act provisions. We hold, in this Report and Order, that the rules adopted herein apply only to section 259 agreements, i.e., those that are negotiated prospectively. By definition, state regulation that governed any previously negotiated intercarrier agreements would not apply since these agreements fall outside the scope of section 259. Section 261(c), on its face, applies only to affirm certain state regulation of intrastate services "that are necessary to further competition in the provision of telephone exchange service or exchange access . . .," and we have held here that section 259 is a "limited and discrete provision" designed to promote universal service by carriers who are not, by and large, competing with one another. 88. We affirm our tentative conclusion in the NPRM that the Commission has authority to create rules to implement the section, as it relates to both interstate and intrastate matters. Section 259(a) states that "The Commission shall prescribe, within one year after the date of enactment of the Telecommunications Act of 1996, regulations that require . . ." infrastructure sharing. Similarly, Section 259(b) refers to the terms and conditions of the regulations to be "prescribed by the Commission," and Section 259(d)(1) makes clear that the term "qualifying carrier" will be defined "in accordance with regulations prescribed by the Commission pursuant to this section." This language emphasizes the agency's already expansive general rulemaking powers, under sections 4(i) and 201(b). States generally are not empowered to implement the Communications Act, and nothing in section 259 suggests otherwise here. The only references to the states in section 259 concern the filing of agreements for public inspection, and the designation of "eligible" carriers pursuant to section 214(e) as part of the determination of who is a "qualifying" carrier under section 259. Section 259 emphasizes the role of the Commission, not the states. 89. Of course, this does not alter the states' authority to regulate the common carrier services provided by providing incumbent LECs and qualifying carriers. Intrastate services that make use of "public switched network infrastructure, technology, information and telecommunications facilities and functions" obtained pursuant to section 259 will be regulated by the states, just as interstate services will be regulated by the Commission. Nothing in our analysis above should be construed as establishing an intent to regulate intrastate services, as opposed to regulating agreements regarding the sharing of "public network infrastructure, technology, information and telecommunications facilities and functions" under section 259(a). Our conclusions regarding a limited role for the states only apply to the terms under which qualifying carriers negotiate and obtain section 259 agreements. C. Terms and Conditions Required by Section 259(b) 1. Section 259(b)(1) a. Background 90. Section 259(b)(1) provides that the Commission shall not adopt regulations that would "require a local exchange carrier to which this section applies to take any action that is economically unreasonable or that is contrary to the public interest." In the NPRM, we sought comment on what standard should be established for determining whether an action is economically unreasonable or not in the public interest. We tentatively concluded that no providing incumbent LEC should be required to develop, purchase, or install network infrastructure, technology, facilities, or functions solely on the basis of a request from a qualifying carrier to share such elements when such incumbent providing incumbent LEC has not otherwise built or acquired, and does not intend to build or acquire, such elements. We sought comment on whether an action could be considered economically unreasonable even if the requesting carrier agreed to pay the costs associated with the request. We tentatively concluded that a sharing request would be considered economically unreasonable if the terms proposed by the qualifying carrier were such that the providing carrier would incur costs that it could not recover. Finally, we sought comment on whether a providing incumbent LEC may withdraw from a sharing agreement if it later determines that such agreement is no longer economically reasonable. b. Comments 91. Many commenters claim that the Commission should set forth only general guidelines for determining what is "economically unreasonable or not in the public interest." GTE claims that this standard is "not susceptible of precise definition . . . [and thus] the Commission should not add further details to its rules." USTA argues that overly detailed standards could frustrate negotiated resolution of this issue. 92. ALLTEL urges that the Commission, either by specific example or through general guidelines, indicate the types of actions which are economically unreasonable under section 259(b)(1). Several commenters argue that the term "economically unreasonable" requires that providing carriers not be required to share infrastructure at below-cost rates. GTE and PacTel claim that Congress intended that sharing agreements exist only where the providing LEC is not financially harmed and the agreement is cost-effective. GTE argues that not allowing a providing LEC to recover its common costs or a return on its investment is by definition economically unreasonable and unconstitutional. Southwestern Bell suggests that the test for determining whether an agreement is economically unreasonable should be that agreements must use fewer resources than would be required for both firms to provide the infrastructure separately, and providing LECs must be fully compensated for costs associated with sharing. RTC claims, however, that, although it would be unreasonable to require a providing LEC to incur expenses which it could not recover, an incumbent's inability to earn a "fair" return on its investment with a requesting carrier because of competitive market conditions does not thereby excuse the providing LEC from its section 259 obligations. MCI argues that the Commission should apply its Part 51 standard of technical feasibility so long as the facilities would be included under section 251(c)(2)(A). The Oregon PUC contends that the Commission should make clear that carriers should not have to incur costs that they cannot recover, but that any calculation of rates for intrastate facilities remains under states' ratemaking authority. 93. Many carriers support the Commission's tentative conclusion that section 259 does not require a providing LEC to construct and share facilities that it neither currently owns, nor plans to own. MCI, however, argues that, as long as a providing LEC is compensated for the additional costs plus a reasonable profit, the providing LEC should be required to build facilities to satisfy section 259 requests. 94. Several commenters claim that section 259(b)(1) permits a providing LEC to discontinue an infrastructure sharing agreement if it becomes economically unreasonable. USTA claims that the Commission could require "a minimum of sixty days notice prior to discontinuing any infrastructure sharing arrangement." ALLTEL argues that providing carriers should not be required to provide infrastructure under section 259 where the qualifying carrier either offers, or may be required to offer, those services obtained under an infrastructure sharing agreement for resale. ALLTEL also argues that smaller carriers should not be burdened with infrastructure sharing requests from neighboring LECs who are able, but not willing, to deploy their own technology. Southwestern Bell claims that the Commission should not foreclose a providing LEC from refusing a request for sharing based on public interest grounds. c. Discussion 95. Section 259(b)(1) provides that the Commission not require a LEC to take any action in satisfying a request for infrastructure sharing that is economically unreasonable or that is contrary to the public interest. We affirm our tentative conclusion that section 259(b)(1) thus requires that the terms proposed by the qualifying carrier are such that the providing incumbent LEC does not incur costs that it cannot recover. We conclude that such a requirement will encourage and facilitate infrastructure sharing arrangements because such LECs will be assured the ability to recover their investment. We also conclude that the requirement that shared infrastructure not be used to compete against the incumbent LEC in its telephone exchange area will encourage such LECs to reach satisfactory agreements. As discussed at Section III. A., supra, an incumbent LEC considering a request to share infrastructure does not face the disincentive (e.g., loss of market share in its telephone exchange area) that is present in the competitive situations in which section 251 applies. We also note that a qualifying carrier is able to demand an infrastructure sharing agreement persection 259(a). Moreover, in the specific circumstances in which section 259 applies, we believe that the unequal bargaining power between qualifying carriers, including new entrants, and providing incumbent LECs is less relevant than it is in the more general competitive situation since the incumbent LEC has less incentive to exploit any inequality for the sake of competitive advantage. We thus conclude that the negotiation process should be permitted to proceed with only limited Commission regulation. 96. We also affirm our tentative conclusion that no incumbent LEC should be required to develop, purchase, or install network infrastructure, technology, facilities, or functions solely on the basis of a request from a qualifying carrier to share such elements when such incumbent LEC has not otherwise built or acquired, and does not intend to build or acquire, such elements. We agree with the comments of USTA and other parties that providing LECs should not be required to build or acquire such elements merely because a qualifying carrier agrees to pay the costs. Commenters have also not shown that there would exist any scale and scope benefits in situations where the providing carrier did not also use the facilities. Of course, parties are free to agree to such an arrangement if both sides determine it is in their best interests. We note, however, that, because providing LECs' networks may not be designed to provide the broad range of infrastructure sharing required by the language of section 259, providing incumbent LECs may be required to engage in some modifying of their network to accommodate sharing requests for existing infrastructure. In negotiating such build-out requirements, parties should be guided by the circumstances of the particular case and by the similar requirements in the Commission's local competition rules concerning build-out requirements for interconnection and unbundling requests. In the Local Competition First Report and Order, the Commission stated that "LEC networks were not designed to accommodate third-party interconnection or use of network elements" and that "[i]f incumbent LECs were not required, at least to some extent, to adapt their facilities to [permit] interconnection or use by other carriers, the purposes of sections 251(c)(2) and 251(c)(3) would often be frustrated." We also conclude that section 259 could be similarly frustrated and that, for section 259 requests, providing incumbent LECs must make such network modifications as are necessary to implement infrastructure sharing arrangements. 97. We also conclude that providing LECs should be permitted to withdraw from section 259 infrastructure sharing agreements if the arrangement subsequently becomes economically unreasonable or not in the public interest. We believe, however, that providing incumbent LECs should bear the burden of proving to the Commission that an existing arrangement has subsequently become economically unreasonable or not in the public interest. We believe that it is appropriate to place this burden on the party seeking relief from the obligations of its contract. Moreover, we believe that the providing incumbent LEC will have greater control over and access to information that would support a claim that an agreement has become economically unreasonable. We also conclude that, if an arrangement become economically unreasonable or not in the public interest and thus requires a providing incumbent LEC to end an agreement, the providing incumbent LEC must be required to attempt to renegotiate the agreement prior to termination. Also, qualifying carriers should be given adequate notice to protect their customers against sudden changes in service. We agree with USTA that providing carriers should give qualifying carriers sixty days notice prior to termination. We believe that this result both protects qualifying carriers and their customers from sudden service disruptions and still allows providing carriers to terminate in a timely fashion uneconomic agreements. These conclusions notwithstanding, we expect that parties should address contingencies, including the possibility that particular arrangements might become economically unreasonable at a subsequent date, in their infrastructure sharing agreements. 98. Section 259(b)(1) ensures that providing incumbent LECs are given the opportunity to recover the costs associated with infrastructure sharing arrangements. We thus conclude that the rates agreed to by providing incumbent LECs and qualifying carriers for infrastructure available pursuant to section 259, may assist parties and the states to arrive at rates for similar elements in arrangements reached pursuant to section 251. We also believe that although the rates for individual elements obtained pursuant to section 259 may be probative of the costs incurred by a providing LEC in making infrastructure available, it may be that, depending on the circumstances, these rates may not correspond with the rates competitive carriers can obtain pursuant to section 251 agreements because, among other reasons, providing incumbent LECs may be recovering costs for specific elements via other terms in the agreement. Similarly, when a party to a section 259 agreement is negotiating or arbitrating an interconnection agreement pursuant to section 251, information about the technical arrangements of that party's section 259 agreement may facilitate negotiation and arbitration of the technical feasibility of interconnection, unbundling, and collocation issues in the section 251 context. 2. Section 259(b)(2) a. Background 99. Section 259(b)(2) allows the Commission to "permit, but . . . not require, the joint ownership or operation of public switched network infrastructure and services by or among such local exchange carrier and a qualifying carrier." In the NPRM, the Commission noted that joint ownership of shared network infrastructure with a qualifying carrier thus appears to be one method by which a providing LEC may meet many of its sharing obligations under section 259, assuming the qualifying carrier agrees. We also tentatively concluded that providing LECs and qualifying carriers should be able to share the risk of development and/or purchase and installation of network infrastructure. We further tentatively concluded that, in the absence of evidence that there are problems in making these arrangements, we should let the participating carriers develop terms and conditions through their own negotiations. We proposed to treat the joint owners as the providing incumbent LEC for the purposes of our infrastructure sharing regulations. We sought comment on the implications of sharing and joint ownership for those carriers subject to the Commission's cost accounting rules. We also sought comment on whether joint ownership of technology, information, and telecommunications facilities and functions, specifically listed in section 259(a) but not included in section 259(b)(2), is permitted. Finally, we sought comment on methods for infrastructure sharing other than joint ownership that might satisfy the requirements of section 259. b. Comments 100. The majority of commenters expressly agree with the Commission's tentative conclusion that joint ownership arrangements are one means of meeting section 259 sharing obligations, and that, in the absence of evidence that there are serious problems, participating carriers should be both allowed and encouraged to develop terms and conditions through their own negotiations. GTE urges the Commission not to specify particular methods of infrastructure sharing that satisfy section 259 and explains that, "because each qualifying and providing LEC will have different network architectures and needs," any mutually agreed-to arrangement, including but not limited to joint ownership, should be presumed to comply." MCI states that the Commission may leave the terms of joint ownership to negotiation by the parties. RTC suggests that agreements similar to those described in section 259 have long been in use in the industry. In addition, RTC suggests that there is no reason not to allow joint ownership to extend to the complete list of "public switched network infrastructure, technology, information, and telecommunications facilities and functions" as set out in section 259(a). 101. Concurring with our tentative conclusion as offered in the NPRM, RTC advises that, where a qualifying carrier makes a request to share infrastructure jointly owned by an incumbent LEC and one or more qualifying carriers, the joint owners would be treated as the providing incumbent LEC for the purposes of our infrastructure sharing regulations. Some parties claim that the Commission's accounting and separations rules, Part 32 and Part 36 of the Commission's rules, need not be changed -- or need not be changed immediately -- to accommodate joint ownership under section 259. RTC states that each carrier would simply allocate its investment, expense, and revenue according to its ownership interest as determined in the sharing agreement. MCI further asserts that it anticipates that the scope of any joint ownership projects likely to be undertaken before the Commission completes its proceeding reforming Part 32 and Part 36 of its rules will be small. Thus, MCI argues that it is not necessary for the Commission to consider the accounting and separations implications of joint ownership in this docket. c. Discussion 102. The majority of commenters stated that the Commission should permit providing LECs and qualifying carriers to develop terms and conditions for joint ownership or operation of public switched network infrastructure and services through their own negotiations. We agree with this position. Joint ownership or operation of infrastructure and services is one method by which carriers can share infrastructure pursuant to the requirements of section 259. We note that section 259(b)(2) is permissive in nature and does not require providing LECs to engage in joint ownership or operation of infrastructure or services. We believe, given that section 259 arrangements generally are only permitted between carriers that are not competing using the shared infrastructure and, further, that providing incumbent LECs are permitted to recover all costs they incur as a result of providing the shared infrastructure, disincentives for cooperation that characterize a competitive situation are absent and, as a result, limited Commission regulation with respect to joint ownership or operation of infrastructure or services is justified at this time. Further, we affirm our tentative conclusion that all joint owners should be treated as providing incumbent LECs for purposes of our section 259 regulations. We believe that this requirement will facilitate the provision of infrastructure to other qualifying carriers by making clear that joint owners cannot avoid their section 259 sharing obligations. 103. Finally, we conclude that the term "public switched network infrastructure and services" in section 259(b)(2) includes all of the elements listed in section 259(a) (i.e., public switched network infrastructure, technology, information, and telecommunications facilities and functions). As no commenter suggested a narrower reading of the term, we believe that permitting carriers to jointly own or operate such elements or information will expand the opportunities for parties to create infrastructure sharing arrangements. Further, we agree with the position of MCI that the scope of joint ownership projects likely to be undertaken prior to the Commission's completion of its proceeding reforming Part 32 and 36 of its rules is small, and thus it is not necessary for the Commission to consider at this time the accounting and separations implications of joint ownership arrangements pursuant to section 259. 3. Section 259(b)(3) a. Background 104. Section 259(b)(3) provides that neither the Commission nor any state shall treat incumbent LECs as "common carrier[s] . . . or as offering common carrier services with respect to any infrastructure, technology, information, facilities, or functions made available to a qualifying carrier in accordance with regulations issued pursuant to this section." In the NPRM, the Commission sought comment on whether, and the extent to which, section 259(b)(3) imposes limits on the obligations of providing LECs to qualifying carriers. Notwithstanding the directive of section 259(b)(3), we also sought comment on whether the section 259(a) requirement that infrastructure sharing be made available "to any qualifying carrier" reflects an inherent nondiscrimination principle. b. Comments 105. Most commenters agree that section 259(b)(3) prohibits the Commission and the states from imposing any common carrier requirements with respect to any infrastructure technology, information, facilities or functions made available pursuant to section 259. For example, USTA states that "the Congressional language could not be more clear [--] providing LECs are to be treated as private carriers and need not provide the same capabilities on the same terms to all [qualifying carriers]." Several incumbent LECs argue that a providing incumbent LEC should have the option to make tariffed offerings available under section 259, although it cannot be compelled to make such an offering. A number of commenters addressed the issue of whether the Commission should read an inherent non-discrimination principle into section 259 and the vast majority of these commenters contend that there is no basis for such an interpretation. BellSouth states: "Any such inference . . . would be contrary to the express provisions of section 259(b)(3) and must be rejected." BellSouth and USTA comment that the language in section 259(a) that requires sharing with "any qualifying carrier" does not suggest any non-discrimination obligation, but simply indicates to whom infrastructure must be made available. Several carriers also argue that, although section 259(b)(3) requires the Commission to ensure that incumbent LECs are not treated as common carriers with respect to any infrastructure shared pursuant to section 259, it does not preclude providing incumbent LECs from electing to offer infrastructure sharing on a tariffed basis, i.e., as common carriers. 106. In contrast, AT&T and Frontier suggest that the Commission should impose a limited non-discrimination principle that would enable competing qualifying carriers to obtain section 259 offerings on comparable terms. AT&T states that "it is inherently reasonable to require that [incumbent LECs] which enter into sharing agreements do so on non-discriminatory terms to ensure that the [incumbent LECs] do not abuse their position to the detriment of similarly situated carriers." MCI argues that "[a]ll carriers, including qualifying Section 259 carriers, should be able to gain nondiscriminatory access to those facilities, services, etc., covered under Part 51 of the Commission's rules." MCI claims that the Commission need not be concerned whether different terms and conditions concerning access to facilities negotiated under section 259 are discriminatory because nondiscriminatory access to section 251 facilities will ensure that qualifying carriers have nondiscriminatory access to the providing LEC's facilities needed for them to maintain a competitive position against their potential rivals. Several parties counter that discrimination is not a significant issue because most section 259 agreements will be customized to reflect the unique needs of the qualifying carriers. BellSouth argues that the section 259(b)(4) requirement that sharing agreements be on just and reasonable terms that permit qualifying carriers to fully benefit from the economies of scale and scope of the providing incumbent LEC are "likely to drive many agreements to a substantial degree of sameness." Finally, USTA states that there is nothing in section 259 to indicate that Congress was concerned about qualifying carriers competing with one another, so there is no need for the Commission to equalize the opportunities available to qualifying carriers under section 259. c. Discussion 107. We conclude that section 259(b)(3) encourages the establishment of infrastructure sharing agreements by permitting providing incumbent LECs to negotiate agreements that satisfy the precise needs of particular qualifying carriers without subjecting providing incumbent LECs to common carrier obligations with respect to the provisions of such agreements. As discussed below, section 259(b)(4) requires that infrastructure sharing agreements make infrastructure, technology, information, facilities or functions available to qualifying carriers on just and reasonable terms and conditions. We believe that any agreement that treats one qualifying carrier in a substantially different manner from another competing qualifying carrier would likely raise questions concerning whether the terms and conditions of the less favorable agreements were just and reasonable. We note, moreover, that a LEC that does not qualify as a qualified carrier under section 259 may still, of course, obtain from a providing incumbent LEC any services and elements available to it pursuant to section 251. We note that sections 201 and 251 expressly require rates set pursuant to those provisions not only to be just and reasonable, but also non-discriminatory or not unreasonably discriminatory. Also, section 259 of the Act specifically carved out a special benefit for qualifying carriers that is unavailable to other nonqualifying competitive LECs. We note, however, that any collusive agreement between a providing LEC and a qualifying carrier, with the intent of restricting competitive entry into either the providing incumbent LEC's or the qualifying carrier's market, possibly would violate antitrust laws and subject both carriers to the appropriate legal sanctions. In addition, such agreements would likely be against the public interest and be unjust and unreasonable and, therefore, invite Title II sanctions. 108. We do not believe that the record is sufficient at this time to permit the Commission to decide whether providing incumbent LECs should be permitted to file tariffs for infrastructure sharing as common carrier services pursuant to section 259. Section 259(b)(7) specifically allows parties to file "tariffs," but the legal significance of such tariffs is difficult to determine given the section 259(b)(3) requirement that providing incumbent LECs not be treated as common carriers or as offering common carrier services with respect to section 259 infrastructure sharing. Although some parties suggested that the Commission permit carriers to file tariffs for infrastructure sharing, the record is not adequate to determine what the legal effect of such tariffs would be, e.g., what obligations a providing incumbent LEC could be subject to after a tariff was filed. We direct carriers that wish to pursue this matter to do so pursuant to our declaratory ruling provisions so that we may develop an adequate record on the issues. 4. Section 259(b)(4) a. Background 109. Section 259(b)(4) requires the Commission to adopt regulations to ensure that the providing LEC makes the "infrastructure, technology, information, facilities, or functions available to a qualifying carrier on just and reasonable terms and conditions that permit such qualifying carrier to fully benefit from the economies of scale and scope of such [providing] local exchange carrier, as determined in accordance with guidelines prescribed by the Commission in regulations issued pursuant to this section." In the NPRM, the Commission sought comment on how to ensure that qualifying carriers benefit fully from the economies of scale and scope of the providing LEC. Specifically, we sought comment on whether section 259 conferred on the Commission authority to promulgate rules or guidelines to govern the price of "infrastructure, technology, information, facilities or functions" made available by providing LECs. We also sought comment on whether the Commission should establish other terms and conditions for infrastructure sharing agreements or whether the parties themselves and the state commission are better suited to establish such provisions. b. Comments 110. Most commenting parties argue that questions about pricing are not implicated by the requirements of section 259(b)(4). GTE argues that the section 252 pricing standards referenced in section 251 are irrelevant to section 259. NYNEX agrees with GTE and argues that Congress intended pricing of infrastructure furnished under section 259 to be a matter of negotiation between the parties. BellSouth argues that providing shared infrastructure at a rate below the providing LEC's costs would constitute a subsidy and is not contemplated by section 259. MCI, however, contends that the phrase "fully benefit from economies of scale and scope" does implicate questions about pricing and, further, that the phrase requires a providing LEC to make its facilities available to qualifying carriers at the providing LEC's [average] short-run incremental cost, without recovering profit or common costs." 111. Parties disagreeing with MCI's view argue that, even if pricing standards are implicated in section 259(b)(4), the incremental cost standard MCI suggests would not be appropriate. USTA argues that the "fully benefit" language means a qualifying carrier should be able to realize the cost, per subscriber, that the providing LEC enjoys because of its economies of scope and scale and that the relevant costs are the actual costs of the providing incumbent LEC. NYNEX argues that it would be appropriate for the pricing of shared infrastructure to recover a pro rata share of fully allocated costs, based on actual accounting costs including a fair rate of return on investment reflecting business risk, etc. PacTel argues that the full benefits of economies of scale and scope are conferred whenever the qualifying carrier compensates the providing LEC the lowest amount that fully compensates the providing LEC for all relevant costs, which should include actual costs, a fair amount of shared costs and overheads, as well as a proper return on the providing LEC's investment -- and that this amount should be less than the stand-alone cost of the shared infrastructure if it were provided by the qualifying carrier. Southwestern Bell says that meeting the "fully benefit" mandate requires that the qualifying carrier pay a price that just compensates the providing LEC for all additional costs it incurs due to infrastructure sharing including: variable costs and any arrangement-specific fixed costs that arise from infrastructure sharing; a reasonable return to capital, including a risk premium; and the opportunity costs of engaging in infrastructure sharing, if any. Several of these parties assert that the pricing standard they would suggest, if a pricing standard were determined to be implied by the "fully benefit" language of section 259(b)(4), is a standard that would also be consistent with the section 259(b)(1) prohibition against requiring "economically unreasonable" agreements. 112. Concerning terms and conditions other than price that could affect whether and how a qualifying carrier can "fully benefit" from the economies of scale and scope of the providing incumbent local exchange carrier, RTC states that "[a]vailability, timeliness, functionality, suitability, and other operational aspects are [also] intended as benefits to be expected from infrastructure sharing." BellSouth argues that prices charged customers is the appropriate context in which to consider the "fully benefit" language and, further, that a qualifying carrier should be considered to fully benefit from the providing LEC's economies of scale or scope "if the sharing arrangement causes it to incur costs that allow it to charge its customers prices reasonably comparable to those charged by the providing LEC for comparable services." 113. In sum, with the exception of MCI and, to some extent, ALTS, commenting parties from industry argue that the Commission need not issue pricing guidelines or requirements, or other specific requirements, to define "fully benefit from the economies of scale and scope of [the] incumbent local exchange carrier." These parties are of the general view that appropriate terms and conditions, including compensation of the providing LEC by the qualifying carrier, will result from negotiations among the parties to infrastructure sharing agreements. 114. Several parties argue that section 259 does not confer on the Commission authority to promulgate pricing rules. BellSouth observes: "As other provisions of the Act make clear, where Congress believed pricing standards under the 1996 Act were warranted, Congress provided for them explicitly. Section 259 contains no such provisions." More generally, the Minnesota Coalition argues: "Clearly, Congress intended that requests made under section 259 not impose the duties of a common carrier on the incumbent LEC . . . ." c. Discussion 115. Section 259(b)(4) requires that the Commission "ensure that providing LECs make such infrastructure, technology, information, facilities, or functions available to a qualifying carrier on just and reasonable terms and conditions that permit such qualifying carrier to fully benefit from the economies of scale of [the providing LEC] as determined in accordance with guidelines prescribed by the Commission in regulations issued pursuant to this section." We believe that economies of scale and scope affect costs, and that costs incurred by a supplier generally are relevant to the prices charged by that supplier. To this extent, the "fully benefit" language of section 259(b)(4) appears to implicate questions concerning pricing. We conclude, however, that, although the Commission may have the authority to establish pricing guidelines pursuant to section 259, we do not need to address that issue at this time. 116. Although the Commission reserves the question of pricing authority, we conclude that it is not necessary at this time for the Commission to adopt pricing regulations because we believe that the negotiation process, along with the dispute resolution, arbitration, and complaint processes will ensure that qualifying carriers fully benefit from the economies of scale and scope of providing incumbent LECs. We conclude that, because section 259 requires that a qualifying carrier not use infrastructure obtained pursuant to a section 259 agreement to compete with the providing incumbent LEC, and as stated above, a providing incumbent LEC may recover all the costs it incurs as a result of providing shared infrastructure pursuant to a section 259 agreement, parties will be able to negotiate agreements beneficial to both, in accordance with the goals of section 259. In these circumstances, an incumbent LEC that receives from a qualifying carrier a request to share infrastructure under section 259 does not face the same incentives to charge excessive prices or to set other unreasonable conditions for the use of its infrastructure that arise in the competitive situations in which section 251 applies. Moreover, in the specific circumstances in which section 259 applies, we believe that the unequal bargaining power between qualifying carriers, including new entrants, and providing incumbent LECs is less relevant than it is in the more general competitive situation since the incumbent LEC has less incentive to exploit any inequality for the sake of competitive advantage. We believe that it is sufficient at this time to codify in our rules the requirements of section 259(b)(4) that infrastructure be made available on just and reasonable terms that permit a qualifying carrier to fully benefit from the economies of scale and scope of the providing incumbent LEC. If, however, parties are unable to reach satisfactory agreements, they may seek assistance through either the dispute resolution, arbitration, or complaint processes before the Commission. We reserve the right to revisit this issue if the need becomes apparent. 117. We also agree with RTC that terms and conditions of infrastructure sharing agreements relating to availability, timeliness, functionality, suitability, and other operational aspects are also relevant to whether or not the qualifying carrier fully benefits from the economies of scale and scope of the providing LEC. Consistent with our conclusion concerning pricing, we believe that the negotiation process will ensure that qualifying carriers obtain "just and reasonable" terms and conditions that permit such carriers to fully benefit from the economies of scale and scope of the providing incumbent LEC. 5. Section 259(b)(5) a. Background 118. Section 259(b)(5) requires the Commission to establish conditions that promote cooperation between incumbent LECs to which this sections applies and qualifying carriers. In the NPRM, the Commission sought comment on whether a good faith negotiation standard is required to promote cooperation between providing LECs and qualifying carriers. We tentatively concluded that, because agreements pursuant to section 259 must be between non-competing carriers, detailed national rules may not be necessary to promote cooperation. We further proposed not to create any new procedures to resolve disputes that may arise involving section 259, but to rely instead on informal consultations between the parties and the Commission, and, if necessary, the existing declaratory ruling procedures and the complaint process, including settlement negotiations and alternative dispute resolution. b. Comments 119. Many parties, including RTC and USTA, support the Commission's tentative conclusion that detailed national rules are not necessary to promote cooperation between providing incumbent LECs and qualifying carriers. Stressing a need for flexibility, the Minnesota Coalition indicates that, "[w]hile definitive rules might minimize disputes, they would also minimize opportunities for parties to craft arrangements that are appropriate for their specific circumstances." Other parties suggest that non-competing carriers have historically been able to achieve useful interconnection agreements without national rules. A number of these commenters would have the Commission issue broad guidelines and simply restate the statutory language of section 259 in the Commission's rules, to the greatest extent possible. Alternatively, there are several parties that ask the Commission to adopt detailed rules regarding one or more of the issues raised in the NPRM. For example, MCI suggests that the Commission adopt the national rules making unbundled elements available pursuant to Part 51 of the Commission's rules as a "lower- bound standard" for qualifying carriers to obtain access to infrastructure under section 259. 120. Both MCI and the Minnesota Coalition conclude that a "good faith negotiation standard" is not necessary to promote cooperation between qualifying carriers and providing incumbent LECs. A number of parties comment that the Commission's existing declaratory ruling and complaint processes are adequate to resolve any disputes. Alternatively, the Minnesota Coalition asserts that state commissions should play the primary role in resolving disputes under section 259. c. Discussion 121. We conclude that it is unnecessary at the present time for the Commission to establish detailed national rules to promote cooperation in the area of infrastructure sharing. We believe that, because there is a requirement that infrastructure sharing arrangements not be used to compete with the providing incumbent LECs, and because providing carriers are permitted to recover the costs associated with infrastructure sharing, sufficient incentives exist to encourage lawful cooperation between carriers. As previously discussed in Section III. B. 3., supra, we agree with NYNEX that informal consultation with the Commission, along with the Commission's complaint process, will likely be adequate to ensure that infrastructure sharing agreements further the purposes stated in section 259(a). Indeed, if we have any concerns regarding cooperation between providing incumbent LECs and qualifying carriers it is that these parties cooperate so as to achieve lawful objectives, for example, infrastructure sharing that reflects the limitations on the scope of such agreements imposed by section 259, and that does not unlawfully constrain the interconnection rights of non-qualifying competitive carriers. We are confident, however, that the availability of the Commission's declaratory ruling and complaint processes, both to parties and to competitors, will ensure that any problems in this regard will be brought to our attention expeditiously. 122. We also conclude that the adoption of a good faith negotiation standard would promote cooperation between providing incumbent LECs and qualifying carriers. We do not attempt to determine here every action that might be inconsistent with the duty to negotiate in good faith, but we believe that certain minimum standards can offer the parties some guidance. We decide that, at a minimum, the duty to negotiate in good faith means that parties are prevented from intentionally misleading or coercing other parties into reaching an agreement that they would not otherwise have made. In addition, we conclude that intentionally obstructing negotiations also would constitute a failure to negotiate in good faith. To the extent that some guidance may be appropriate, we believe that the examples concerning the duty to negotiate in good faith offered in the Commission's local competition rules illustrate the types of practices that may evidence a failure to meet a good faith standard. 6. Section 259(b)(6) a. Background 123. Section 259(b)(6) states that the Commission's regulations must not require infrastructure sharing "for services or access which are to be provided or offered to consumers by the qualifying carrier" in the providing LEC's telephone exchange area. In the NPRM, the Commission tentatively concluded that this provision encompassed any telecommunications or information service offered by the providing LEC directly to consumers, or any access service offered to other providers which in turn offered services to consumers. We also tentatively concluded that an incumbent LEC should not be required to share services or access, pursuant to section 259(b)(6), that would be used by the qualifying carrier to compete in the providing LEC's telephone exchange service area. Because section 259(b)(6) does not mandate infrastructure sharing between competing carriers, we tentatively concluded that a providing LEC may terminate an agreement in the event it discovers that the qualifying carrier is offering or providing service or access in the providing LEC's service area. We also tentatively concluded, however, that the providing LEC has the burden of proving that the qualifying carrier is providing or offering services or access obtained pursuant to section 259 to consumers in the providing LEC's telephone exchange area. 124. We sought comment on how disputes concerning violations of the section 259(b)(6) competition provision should be adjudicated by the Commission. We sought comment on whether sixty days was reasonable notice for a providing LEC to provide a qualifying carrier if a providing incumbent LEC seeks to terminate an infrastructure sharing arrangement for cause pursuant to section 259(b)(6). Finally, we sought comment on whether the term "services or access" in section 259(b)(6) applies to all "public switched network infrastructure technology, information, and telecommunications facilities and functions" available pursuant to section 259(a), or whether section 259(b)(6) limits an incumbent LEC's right to deny agreements to only a limited set of provisions, namely, "services or access." b. Comments 125. Many commenters argue that the Commission must make clear that qualifying carriers should not be able to use shared infrastructure to compete with the providing LEC. GTE claims that the Commission should ensure that a qualifying carrier does not try to evade the section 259(b)(6) restriction by permitting or enabling another carrier to resell facilities obtained through infrastructure sharing in the providing LEC's service area. RTC agrees that a providing LEC need not share infrastructure where a qualifying LEC is offering service in the providing LEC's exchange area, but claims that a providing LEC must not be able to escape its sharing obligations by expanding into a qualifying carrier's region. RTC suggests that the burden be placed on the providing LEC to prove a violation of section 259(b)(6) via the Commission's complaint process. 126. ALTS, on the other hand, argues that there is no requirement that a qualifying carrier and a providing LEC not compete in order to implement section 259. ALTS claims that section 259(b)(6) requires that carriers not be required to enter infrastructure agreements for any services or access which qualifying carriers intend to offer to end users in the providing LECs territory. ALTS suggests that this section in no way prohibits competition but rather simply requires a qualifying carrier to either build its own infrastructure for that purpose, or else pay for the infrastructure under the section 251 pricing standard. GTE states that section 259(b)(6) must be read as encompassing any public switched network infrastructure, technology, information, and telecommunications facilities and functions that the qualifying carrier might obtain. NYNEX claims that "services or access" refers not to any portion of the infrastructure made available, but instead, to the qualifying carrier's offerings which result as a benefit of the sharing. 127. Several commenters urge the Commission to permit parties to decide, during the negotiation process, the notice period that must be given prior to termination of a section 259 agreement because of a violation of the non-competition requirement in section 259(b)(6). RTC claims that a sixty-day notice should be provided to qualifying carriers and to the Commission. RTC argues that a qualifying carrier must be given an opportunity to discontinue any conduct inconsistent with section 259, explain why its conduct is not barred by the restriction on competitive use of shared infrastructure, or make alternative arrangements to supply the end users. NCTA contends that the features and functions obtained by the qualifying carrier under section 259 must be made available to competitive LECs competing in that qualifying carrier's market pursuant to section 251. NCTA claims that, otherwise, infrastructure sharing agreements will become a vehicle for distorting competition in small and rural markets. c. Discussion 128. Section 259(b)(6) provides that an incumbent LEC shall not be required to "engage in any infrastructure sharing agreement for any services or access which are provided or offered to consumers by the qualifying carrier in such [LEC's] telephone exchange area." As an initial matter, we agree with ALTS that section 259(b)(6) does not serve to prohibit competition between the providing incumbent LEC and qualifying carriers. Rather, section 259(b)(6) merely establishes a limitation on how qualifying carriers may use "public switched network infrastructure, technology, information, and telecommunications facilities and functions" they obtain pursuant to section 259(a). Where a qualifying carrier seeks to obtain "public switched network infrastructure, technology, information, and telecommunications facilities and functions" from an incumbent LEC, it may do so pursuant to section 259, but only if it does not use this infrastructure, technology, information, and telecommunications facilities and functions to compete with the incumbent LEC in the incumbent LEC's telephone exchange area. If a qualifying carrier does propose to use requested infrastructure, technology, information, and telecommunications facilities and functions to compete with an incumbent LEC in the incumbent LEC's telephone exchange area, the qualifying carrier must rely on section 251 to obtain capabilities that are available pursuant to section 251. Moreover, a qualifying carrier may rely on section 251 even if it does not intend to compete with the incumbent LEC because, as a fundamental matter, section 251(c) requires incumbent LECs to provide interconnection and access to unbundled network elements to all requesting telecommunications carriers, and such interconnection and access will predictably include at least some of the functionalities that are otherwise made available pursuant to section 259. 129. In sum, we conclude that, for any services and facilities that are available pursuant to section 251, qualifying carriers may request such services and facilities from incumbent LECs pursuant to either section 251 or 259. Carriers, however, must make such requests pursuant to section 251 to the extent that the requested facilities will be used to provide service or access in the providing incumbent LEC's telephone exchange area. We conclude that, with respect to any facilities and information that may be beyond the scope of section 251, carriers are limited to the provisions of section 259, including its limitation on using facilities and information to serve customers in the providing incumbent LEC's telephone exchange area. 130. Because we conclude that section 259(b)(6) mandates that providing LECs are not required to share services or access that would be used to compete against the providing LEC, we also find that section 259 agreements may be terminated by any party if the qualifying carrier begins to use the section 259 facilities to compete with the providing incumbent LEC in the incumbent LEC's telephone exchange area. This could happen either as a result of the qualifying carrier's decision to enter the incumbent LEC's telephone exchange area, or, in certain cases, where the providing incumbent LEC expands its operations into the qualifying carrier's telephone exchange area. We agree with Ameritech that the right to deny or terminate sharing arrangements extends to the full breadth of section 259 (i.e., public switched network infrastructure, technology, information, and telecommunications facilities and functions), but only to the extent that these facilities and functions would actually be used to provide service within the providing LEC's telephone exchange area. We conclude, however, that if a providing incumbent LEC seeks to terminate a sharing agreement as violating the restrictions in section 259(b)(6), qualifying carriers should be given adequate notice to protect their customers against sudden changes in service. We agree with USTA that providing carriers should give qualifying carriers sixty days notice prior to termination. We adopt these requirements to protect qualifying carriers and their customers from sudden service disruptions and, nevertheless, to allow providing carriers to terminate in a timely fashion agreements that are contrary to section 259(b)(6). Finally, we note our expectation that prudent parties will address such contingencies, i.e., changed circumstances that might implicate section 259(b)(6), as terms of their infrastructure sharing agreements. 131. We also conclude that a qualifying carrier may not make available any information, infrastructure, or facilities it obtains from a providing incumbent LEC to any party that the qualifying carrier knows intends to use such information, infrastructure, or facilities to compete with the providing LEC in the providing LEC's telephone exchange area. We believe that this would result in an easy evisceration of the section 259(b)(6) requirement. If other carriers require the use of such information or facilities, they may pursue their own section 259 arrangement with the providing LEC or, if the necessary facilities are available pursuant to section 251, they may request a section 251 arrangement. We believe that this requirement will encourage the use of infrastructure sharing arrangements by ensuring that providing LECs will not be forced to provide such arrangements to qualifying carriers that will in turn pass them on to carriers that compete with the providing carrier. 7. Section 259(b)(7) a. Background 132. Section 259(b)(7) requires that incumbent LECs file with the Commission or state for public inspection any tariffs, contracts, or other arrangements showing the conditions under which the incumbent LEC is making available public switched network infrastructure and functions. In the NPRM, the Commission tentatively concluded that the filing requirement in section 259(b)(7) refers only to agreements reached pursuant to section 259, because qualifying carriers obtaining interconnection or access to unbundled elements pursuant to section 251 or pursuant to agreements entered into prior to the enactment of the 1996 Act are under an obligation to file agreements with the state commission. We further tentatively concluded that incumbent LECs should be required to file all tariffs, contracts, or other arrangements reached pursuant to section 259 with the appropriate state commission. We also sought comment on whether an incumbent LEC must file agreements showing the rates, terms, and conditions under which such carrier is making available technology, information, and telecommunications facilities and functions listed in section 259(a) or whether section 259(b)(7) is limited only to public switched network infrastructure and functions. b. Comments 133. Both GTE and MCI supported the Commission's tentative conclusion that section 259(b)(7) applies only to sharing agreements reached pursuant to section 259, while RTC and the Minnesota Coalition opposed this proposition. The Minnesota Coalition suggests that an agreement between an incumbent LEC and a rural carrier or between two rural carriers, which could be invalid under the standards of section 251, could be fully justified under section 259. RTC argues that neither the language of section 252 and 259 nor the legislative history support the Commission's conclusions in the Local Competition First Report and Order. A number of other parties commented on the tentative conclusion that a filing required by section 259(b)(7) should be made with the appropriate state commission. Some argue that the language of section 259(b)(7) is evidence that Congress did not intend to alter the dual jurisdiction scheme in which the Commission exercises jurisdiction over interstate matters and the states exercise jurisdiction over intrastate matters. Parties agreed that section 259(b)(7) obligates LECs to file all agreements showing the rates, terms, and conditions under which such carrier is making available any public switched network infrastructure, technology, information, and telecommunications facilities or functions pursuant to section 259. MCI argues that section 259(b)(7) filings should "disclose rates, terms, and conditions under which information, data bases, and facilities are made available in order to evaluate specifically whether section 259 agreements are indeed more favorable to the requesting carrier" than section 251 agreements. c. Discussion 134. We affirm our tentative conclusion in the NPRM that section 259(b)(7), which requires incumbent LECs to file with the Commission or the state all agreements showing the conditions under which the incumbent LEC is making available "public switched network infrastructure and functions," refers only to agreements reached pursuant to section 259. We note that qualifying carriers obtaining interconnection or access to unbundled elements pursuant to section 251, or through agreements entered into prior to the enactment of the 1996 Act, are under a separate obligation to file such agreements with the appropriate state commission. We interpret the term "public switched network infrastructure and functions under this section" should be read to include all requirements listed in section 259(a) (i.e., public switched network infrastructure, technology, information, and telecommunications facilities and functions). 135. We also conclude that agreements reached pursuant to section 259 must be filed with the appropriate state commission, or the Commission if the state commission is unwilling to accept the filing, and that the agreement must be available for public inspection. These filed agreements must include the rates, terms, and conditions under which the providing carrier is making infrastructure available. As discussed above, we believe that this filing requirement will help ensure that all qualifying carriers obtain infrastructure at just and reasonable terms and conditions that are consistent with the public interest. Moreover, public filing promotes general scrutiny of section 259 agreements, including scrutiny by non-qualifying competitive carriers. As noted above, we are relying on such competitive carriers to bring to our attention any unlawful anticompetitive effects resulting from negotiated section 259 agreements pursuant to the Commission's declaratory ruling and complaint procedures. D. Requirements of Section 259(c) 1. Background 136. Section 259(c) states that "a local exchange carrier to which this section applies that has entered into an infrastructure sharing agreement under this section shall provide to each party to such an agreement timely information on the planned deployment of telecommunications services and equipment, including any software or upgrades of software integral to the use or operation of such telecommunications equipment." In the NPRM, we tentatively concluded that section 259(c) obligations should apply only to the providing incumbent LECs. We further noted that section 259(c) applies to providing incumbent LECs that have entered into an "infrastructure sharing agreement" and we tentatively concluded that the phrase "infrastructure sharing agreement" as used in section 259(c) should be construed to include agreements not only for public switched network infrastructure, but also for "technology, information, and telecommunications facilities and functions," i.e., all section 259 agreements. 137. We noted in the NPRM that sections 259(c) and 251(c)(5) seem to serve similar purposes. Section 251(c)(5) requires incumbent LECs to "provide reasonable public notice of changes" that may affect the use of the incumbent LECs' facilities or networks. The Commission has interpreted section 251(c) to require notice of such changes that might affect the ability of parties which have obtained interconnection pursuant to section 251 to provide service. In the NPRM, we tentatively concluded that Congress intended section 259(c) to provide similar notice to qualifying carriers of changes in the incumbent LECs' network that might affect qualifying carriers' ability to fully benefit from section 259 agreements. In addition, we asked parties to address overlap between section 259(c) and other existing network disclosure provisions, including sections 273(c)(1) and 273(c)(4), and the Commission's rules at 47 C.F.R.  64.702(d)(2) and 47 C.F.R.  68.110(b). 138. In the NPRM, we sought comment on whether the Commission should require providing incumbent LECs to furnish any particular information as a minimum threshold. Specifically, we asked parties to consider whether the Commission should require providing incumbent LECs to disclose: 1) the date changes are to occur; 2) the location at which changes will occur; 3) the type of changes; 4) the reasonably foreseeable impact of those changes, including pricing implications; and 5) a contact person to provide supplemental information. We also sought detailed comment on a variety of other issues, such as what constituted a planned deployment such that the section 259(c) obligations would be triggered, and when any required information disclosure should take place. We also asked parties to comment on the need for enforcement mechanisms to ensure compliance with section 259(c) and on the need for safeguards to ensure that competitively-sensitive, proprietary, or trade secret information of the providing incumbent LEC is not compromised. 2. Comments 139. Both MCI and RTC agree that the phrase "infrastructure sharing agreement," as used in section 259(c), is a generic term that covers all sharing under section 259. RTC comments that section 259(c)'s obligations fall solely on providing incumbent LEC, and no party suggests that there should be any alternative interpretation, e.g., reciprocal requirements placed on qualifying carriers. RTC, however, concludes that section 259(c) obligates not only providing incumbent LECs that have entered into section 259 agreements, but also "potential" providing incumbent LECs. RTC argues that potential providing incumbent LECs should be required to adhere to the requirements of section 259(c) so that qualifying carriers can make decisions about what sharing to request. 140. A number of commenters support the tentative conclusion in the NPRM that section 259(c) should provide notice to qualifying carriers of changes in the incumbent LECs' network that might affect qualifying carriers' ability to fully benefit from section 259 agreements. Assessing the disclosure requirements under sections 251(c)(5) and 259(c), NCTA notes that, "[w]hile Section 259(c) may require slightly different requirements with respect to the process of providing notice thereunder, the contents of the disclosures should be the same." Indeed, several parties comment that the information disclosed pursuant to section 259(c) would overlap with the information currently disclosed under section 251(c)(5). For example, GTE states that the disclosure rules in section 251(c)(5) are sufficient to ensure that qualifying carriers have access to the information needed to make use of shared facilities. 141. The vast majority of the commenters discussing section 259(c) argue that the Commission should not issues rules to implement this section. Several parties comment that section 259(c) does not contain a specific Congressional directive that the Commission issue rules, as opposed to subsections (a), (b), and (d). Indeed, GTE questions whether the Commission has authority to adopt rules implement section 259(c) and comments that, "[w]hen Congress expected implementing regulations, it stated so expressly." 142. Other parties maintain that no specific rules will be needed to implement section 259(c) because the parties will be able to negotiate mutually acceptable terms for information disclosure. USTA states that "parties will negotiate terms concerning the content and frequency of 'timely information' required under this section." Some parties urge the Commission not to adopt specific rules to implement this information disclosure section because it would duplicate the existing network disclosure provisions which are already available to qualifying carriers. PacTel argues that additional disclosure rules would be unnecessary, unduly burdensome, and confusing. 143. In contrast, RTC encourages the Commission not to reduce sections 251, 259, 273 and other existing disclosure requirements into a single, uniform network disclosure requirement. RTC argues that, because section 259 contemplates relationships between non-competing carriers, its information disclosure rules will need to serve a different purpose. RTC argues that section 259(c) should go beyond mere notice of changes and should give qualifying carriers an opportunity to take part in the providing incumbent LEC's decision-making process. In reply, several larger LECs respond that section 259 does not require joint planning, although parties should be allowed to negotiate such arrangements by mutual consent. PacTel suggests that, under RTC's proposal, the providing incumbent LEC "could lose control of its network planning which would be harmful to network efficiency for all customers." 144. MCI proposes that the Commission adopt the rules implementing section 251(c)(5) as the "benchmark upon which Section 259 negotiations can build." MCI recommends that the Commission issue rules requiring providing incumbent LECs to provide public notice of changes affecting requesting carriers' performance or ability to provide service or affecting interoperability. MCI would further require providing incumbent LECs to disclose: 1) the date changes are to occur; 2) the location at which changes will occur; 3) the type of changes; 4) the reasonably foreseeable impact of those changes; and 5) a contact person to provide supplemental information. In response, NYNEX rejects MCI's proposal as beyond the scope of section 259(c) and unnecessary. A number of parties, including RTC, state that section 259(c) only requires disclosure to parties to a sharing agreement. 145. NCTA urges the Commission to adopt rules that restrict the contents of section 259 notice so that providing incumbent LECs do not share any more information under Section 259(c) than is made public pursuant to section 251(c)(5). NCTA states that such a rule would prevent neighboring LECs from obtaining an advantage over [competitive LECs] by giving both types of carrier the same access to information regarding planned changes to an incumbent LEC's network. USTA suggests that competitively sensitive, proprietary, or trade secret information is not required to be shared. Nonetheless, according to USTA, the Commission should not preclude the use of non-disclosure agreements. 3. Discussion 146. We codify the requirements of section 259(c) in our rules, but we decline to adopt detailed standards to implement section 259(c) at this time because we believe that parties will be able to arrive at mutually acceptable terms for information disclosure through negotiation. While we are concerned that failure to convey timely information as required by section 259(c) would adversely impact qualifying carriers, we nonetheless are persuaded by the commenters' arguments that providing incumbent LECs and qualifying carriers have few, if any, incentives to withhold information on planned deployments of new services and equipment. We believe that individual circumstances of sharing agreements under section 259 will be dependent on the nature of the public switched network infrastructure, technology, information, and telecommunications facilities and functions to be shared and that parties to such agreements will be in a better position to determine information disclosure needs in each particular situation. Given our general desire to allow section 259 arrangements to develop as "the product of negotiation between the parties," we concur with Southwestern Bell that the "parameters of providing information on planned deployments would seem to fall squarely within the negotiations of an infrastructure sharing agreement." Having adopted an approach based on negotiations between parties, we do not need to reach conclusions on many of the specific issues raised in the NPRM regarding specific terms, contents, and timing of notice pursuant to section 259(c). 147. A number of commenters go further and essentially suggest that the Commission is not authorized to adopt rules to implement section 259(c). These parties point to specific language in subsections (a) and (b) that directs the Commission to issue regulations, and note the absence of such language in subsection (c). We are not persuaded that the absence of a specific directive in subsection (c) prohibits the Commission from issuing interpretive regulations. 148. Our decision not to adopt detailed interpretive regulations notwithstanding, we believe that guidance is appropriate and adopt the tentative conclusion offered in our NPRM that providing incumbent LECs should give notice to qualifying carriers of changes in the providing incumbent LECs' network that might affect qualifying carriers' ability to fully benefit from section 259 agreements. Without adequate notice of changes to an incumbent LEC's network that affect a qualifying carrier's ability to utilize the shared public switched network infrastructure, technology, information, and telecommunications facilities and functions, a qualifying carrier may be unable to maintain a high level of interoperability between its network and that of the providing incumbent LEC. At a minimum, we believe that it would be unreasonable to expect qualifying carriers to be able to react immediately to network changes that the providing incumbent LEC may have spent months or more planning and implementing. Consistent with our conclusion that the terms of information disclosure should be the product of negotiation between the parties, we conclude that there is no need to adopt any additional mechanisms specific to this section, at this time. Again, we reaffirm that parties may avail themselves of guidance from the Commission, pursuant to our declaratory ruling and complaint processes, if disputes arise. 149. We are not persuaded by commenters that suggest section 259(c) does not place any additional obligations on providing incumbent LECs. GTE argues that providing incumbent LECs need not furnish any additional notice beyond that already required under section 251(c)(5) because all of the information obtained in section 259 is encompassed in section 251(c)(5). NCTA urges the Commission to restrict the information that can be disclosed under section 259(c) so that it does exceed the public notice provided under section 251(c)(5). We agree, however, with RTC that Congress included section 259(c) to address the unique situation of carriers working in cooperative relationships. We believe that in certain circumstances parties may agree that section 251(c)(5) or other network disclosure provisions will provide sufficient information disclosure, yet it is not clear that parties will always reach such an agreement. With regard to NCTA's concerns about anticompetitive behavior between neighboring LECs, we reaffirm our conclusions as described in Section III. B. 1., supra, that the continued applicability of the antitrust laws and the Commission's authority under Title II are more than sufficient to address section 259 arrangements which are found to violate the public interest. 150. We believe that section 259(c) requires information disclosure only by providing incumbent LECs that have entered into section 259 agreements. We note that no parties indicated that qualifying carriers should be subject to the information disclosure requirements of section 259(c). While qualifying carriers must respond to changes in the providing incumbent LEC's network, the record contains no evidence that a qualifying carrier would make unilateral changes in its network that would affect the providing incumbent LEC's network. In addition, we raised the issue of whether the phrase "infrastructure sharing agreements," as used in section 259(c), would apply to all Section 259 agreements or only in those involving "infrastructure." RTC and MCI, the only parties to comment on this issue, agreed that the phrase "infrastructure sharing agreement" is a generic term that covers all sharing under section 259. We note that no other party indicated any contradictory interpretation. Accordingly, we conclude that the obligations to "provide timely information" in section 259(c) apply to providing incumbent LECs in all section 259 agreements. 151. We further conclude that section 259(c) contemplates information disclosure only to those qualifying carriers that have entered into section 259 agreements. We are not persuaded that section 259(c) requires public notice that could be used as a resource for potential qualifying carriers or that the obligations of section 259(c) should be placed on incumbent LECs that have not entered into sharing agreements. We note that the plain language of section 259(c) requires disclosure by a providing incumbent LEC that "has entered into an infrastructure sharing agreement . . . to eachparty to such an agreement" and we concur with USTA that section 259 disclosure requirements are only for the benefit of the parties to the agreement. Nothing in the statute indicates to us that public notice is required. Further, as several parties have noted, section 251(c)(5) places network disclosure obligations on all incumbent LECs and is available to the public, including potential qualifying carriers. Our Computer II rules and Part 68 rules also provide for public availability of network information. In light of these factors, we see no reason to expand the requirements in section 259(c) beyond the clear obligations on providing incumbent LECs to the qualifying carriers with which it has reached section 259 agreements. 152. We disagree with RTC's assertion that section 259(c) requires providing incumbent LECs to involve qualifying carriers in their network planning process. While we believe that parties to an infrastructure sharing agreement may find such an arrangement useful, we conclude that section 259(c) does not require the "coordinated deployment schedule" suggested by RTC. We do not believe that section 259(c) was intended to insert qualifying carriers into the network planning and decision-making process of the providing incumbent LECs. At the same time, we note that providing incumbent LECs may have obligations to coordinate network planning and design under sections 251(a), 256, 273(e)(3) and other provisions. Accordingly, we conclude that section 259(c) does not include a requirement that providing incumbent LECs provide information on planned deployments of telecommunications and services prior to the make/buy point, i.e., the point at which a providing incumbent LEC decides to manufacture itself, or to procure from an unaffiliated entity, products that affect telecommunications services or equipment. As discussed more fully in Section III. B. 2., supra, we agree with USTA that section 259 does not generally require providing incumbent LECs to share competitively sensitive, proprietary, or trade secret information. To the extent that section 259 agreements do involve such proprietary information, we believe that parties will be able to negotiate the appropriate use of non-disclosure agreements. E. Qualifying Carriers Under Section 259(d) 1. Background 153. In the NPRM, we sought comment on the definition of a qualifying carrier as a telecommunications carrier that "lacks economies of scale or scope, as determined in accordance with regulations prescribed by the Commission pursuant to section 259(d)(1)." We noted that "economies of scale" exist where a lower unit cost of production can be achieved by a production process that is designed to produce a larger total quantity of a particular product or service. We also noted that "economies of scope" exist where two or more products or services can be produced at a lower total cost if they are produced jointly rather than separately. We requested comment generally on how to determine whether a qualifying carrier lacks economies of scale or scope and, in particular, on whether there is a relationship of economies of scale or scope to carrier size. We inquired if there are classes of carriers that would, per se, qualify as lacking economies of scale or scope and, in particular, whether a carrier's status as a "rural telephone company" under the definition established in section 3(37) should create such a presumption. We also asked if the Commission should determine whether carriers lack economies of scale of scope at the holding company level or at some other level of organization. We inquired if an incumbent LEC could be both a "qualifying" and a "providing" carrier for purposes of section 259, for different items falling within the definition of "public switched infrastructure, technology, information, and telecommunications facilities and function." Finally, we tentatively concluded that a factor to be considered in whether an otherwise qualifying carrier lacks economies of scale or scope is the cost of the investment that the carrier would incur to acquire on its own the requested infrastructure, relative to the cost that it would incur to obtain the requested infrastructure from the incumbent LEC. 154. Section 259(d)(2) adds the additional requirement that a "qualifying carrier" is one that "offers universal telephone exchange service, exchange access, and any other service that is included in universal service, to all consumers without preference throughout the service area for which such carrier has been designated as an eligible telecommunications carrier under section 214(e)." We noted the recommendations of the Federal-State Joint Board on universal service and, further, that the Commission, pursuant to section 254(a)(2), must issue its final decision and rules on or before May 8, 1997. We stated that, consequently, the Commission need not consider or construe section 259(d)(2) in this rulemaking. 2. Comments 155. Frontier notes that neither the Act nor the legislative history define what constitutes a lack of economies of scale or scope. Those parties who comment on the textbook definitions of "economies of scale" and "economies of scope" cited in the NPRM restate the two definitions either directly or implicitly. 156. Regarding whether there is a necessary relationship of economies of scale or scope with carrier size, comments suggest that there may be such a relationship but that the nature of the relationship is complex and inherently based on the facts of particular situations. MCI provides an extensive discussion of the general relevance of size to economies of scale and scope in a discussion that indicates the practical complexities inherent in making any specific determination of the extent of either economies of scale or economies of scope. Size is related to the presence of economies of scale. Economies of scale exist whenoutput can be increased at a faster rate than costs are incurred. Being able to serve market large enough to take advantage of this phenomenon is a necessary condition for realizing economies of scale. Size economies may manifest themselves at the plant, company, or holding company level. Economies of financing are more likelyto occur at the holding company level. Economies of product and technological development may occur at the holding company and company level. Operational economies are more likely to occur at the plant level. Economies of scope exist when two or more products can be jointly produced, delivered, or marketed at a lower combined cost than if they were produced, delivered, or marketed separately. Economies of scope are more likely to occur at the plant and company level, since these are the levels where production, marketing, and distribution occur. Income is likely to be a condition necessary for the realization of scope economies, since scope economies pertain to the willingness of consumers to buy multiple, related products. That is more likely to occur in markets populated by higher, rather than lower, household income. MCI concludes with the observation that it is not aware of studies estimating the extent of scale and scope economies at different levels of aggregation (i.e., at the plant, company, and holding company level). Nor does any other party reference such studies. 157. With respect to whether classes of carriers would, per se, qualify as lacking economies of scale or scope, BellSouth, in remarks generally representative of the LEC commenters, argues that the Commission should resist the temptation to establish firm thresholds, such as any based on a carrier's size, as a means of defining qualifying carriers. NCTA disagrees strongly, asserting that Congress plainly did not intend for carriers as large as the BOCs or GTE to be eligible to obtain infrastructure from other carriers under section 259. The majority of commenting parties nevertheless support the concept of a rebuttable presumption. With some qualification, most commenting parties further support the establishment of a rebuttable presumption that companies meeting the definition of "rural telephone company" in section 3(37) of that Act also meet the requirements of section 259(d)(1). 158. Many of the parties that support establishing a rebuttable presumption also comment on various aspects of what should be rebuttable, and by whom. Southwestern Bell notes that even rural LECs may enjoy economies of scale and scope, and argues that an incumbent LEC that has been requested to share must be allowed to rebut any presumption. BellSouth asserts that the burden is on the requesting carrier to support its contention that it is a qualifying carrier. Some parties argue that telecommunications entities that are not rural telephone companies under the definition of Section 3(37) may nevertheless meet the requirements of Section 259(d)(1) if they can demonstrate a lack of economies of scope or scale. GTE argues, to similar practical effect, that the Commission must permit individual operating units that do not meet the statutory definition of rural telephone company to demonstrate that they are eligible to proceed under section 259 in a particular service area. 159. In contrast, NCTA would disqualify all non-rural telephone companies and require any otherwise qualified rural telephone company to show that because it lacks economies or scale or scope "it is economically unreasonable for [it] to deploy the capability, feature or function sought in the agreement." Similarly, NYNEX argues that a telecommunications carrier, including a rural telephone company, that is affiliated with a holding company does not lack economies of scale or scope. As noted earlier in this subsection, NCTA also opposes companies as large as the BOCs and GTE being able to qualify for sharing agreements under section 259. 160. Commenting parties generally agree that an incumbent LEC could be both a "qualifying" and a "providing" carrier for purposes of section 259. There is strong disagreement among the parties, however, about whether the holding company or an operating entity is the appropriate level of organization at which to consider whether a carrier lacks economies of scale or scope. AT&T, NYNEX, NCTA and apparently the Minnesota Coalition argue that the holding company is the appropriate level to consider and MCI, GTE, RTC, USTA, and apparently PacTel argue it is not. 161. Several parties observe that the making of comparisons is inherent in considering economies of scale and scope. Only a few parties, however, discuss our tentative conclusion that the cost of the investment that the carrier would incur to acquire on its own the requested infrastructure, relative to the cost that it would incur to obtain the requested infrastructure from an incumbent LEC, is a factor to be considered in whether a carrier lacks economies of scale or scope. MCI notes that the total costs of production include costs other than investment costs. Southwestern Bell says that an analysis of relative investment costs could be used if there is insufficient information to analyze both requesting and supplying firms' costs over a relevant range of output. The Minnesota Coalition argues against our tentative conclusion, arguing that project investment costs will be extremely difficult to determine. 162. Parties addressing section 259(d)(2) generally comment that the statutory qualification criteria are unproblematic since the underlying issues will be decided in the universal service proceeding. Nonetheless, two issues are raised. NYNEX, noting that section 259(d)(2) requires a qualifying carrier to make universal service offerings available "without preference" throughout the service area for which it has eligibility status under section 214(e), argues that the Commission should interpret section 259(d)(2) to mean the qualifying carrier must itself be an incumbent LEC in that area, and offer common carrier services on a facilities basis. USTA notes the relative timing of this docket and the universal service proceeding and asserts that carriers need not await the outcome of the universal service proceeding to begin negotiating section 259 agreements if they have already been subjected to carrier of last resort obligations by the state in which they operate. 3. Discussion 163. Section 259(d)(1) directs the Commission to prescribe regulations that determine whether a telecommunications carrier "lacks economies of scale or scope." In implementing this directive we are mindful of section 259(b)(4), which directs the Commission to prescribe regulations ensuring that a qualifying carrier fully benefits from "the economies of scale and scope" of the incumbent LEC that makes shared infrastructure available to it. We decide that, while neither the Act nor the legislative history defines either of these terms, it is reasonable to conclude that there is implicit in the two directives a comparison between carriers that have "greater" and "lesser" economies of scale or scope, and that a carrier that has lesser economies of scale or scope may obtain the benefits of shared infrastructure from an incumbent LEC that has greater economies of scale or scope. We therefore decide it is unnecessary to prescribe regulations to define an absolute lack of economies of scale or scope. Further, we concur with those commenters who observe that economies of scale or scope -- or their absence -- may characterize any firm, including a firm affiliated with a larger company. 164. We therefore conclude that neither the plain language of section 259(d)(1) nor the record of this proceeding support establishing regulations that would excuse, per se, an incumbent LEC from sharing its infrastructure because of the size of the requesting carrier, its geographic location, or its affiliation with a holding company. The record before us demonstrates that whether a telecommunications carrier "lacks economies of scale or scope" depends on the facts of the particular situation, including the specific terms of the request to share infrastructure, whether the incumbent LEC would incur lower costs to deploy that particular infrastructure than would the qualifying carrier, and the benefits that the qualifying carrier would receive from the availability, timeliness, functionality, suitability, and other operational aspects of the shared infrastructure. One predictable result of this approach to defining section 259(d)(1) is that a carrier may be entitled to share infrastructure with a particular incumbent LEC and, at the same time, be obligated to share infrastructure with one or more additional qualifying carriers. 165. We decide that parties negotiating infrastructure sharing agreements should undertake the necessarily fact-based evaluations of their relative economies of scale and scope pertaining to the infrastructure that is requested to be shared. In the event that parties cannot achieve satisfactory results, they will have recourse to informal consultations with the Commission and, if necessary, existing declaratory ruling procedures and the Commission's complaint process. 166. We expect that many if not most requests for infrastructure sharing agreements properly will be made by carriers whose customers reside predominantly, if not exclusively, in rural, sparsely-populated areas, because such carriers are more likely to lack economies of scale or scope in serving their customers. To facilitate the negotiation of infrastructure sharing agreements benefiting the customers of such carriers, we therefore adopt a rebuttable presumption that a telecommunication carrier falling within the definition of "rural telephone company" in section 3(37) of the Act lacks economies of scale or scope under section 259(d)(1), but we exclude no carrier or class of carriers from attempting to show that they lack economies of scale or scope for purposes of section 259(d)(1). Thus, an incumbent LEC receiving a request from a rural telephone company seeking to qualify under section 259(d)(1) may rebut the presumption by demonstrating that the requesting company does not lack economies of scale and scope, relative to those of the incumbent LEC receiving the request, with respect to the requested infrastructure. In so doing, the incumbent LEC may demonstrate the presence of any economies of scale or scope the rural telephone company may have, with respect to the requested infrastructure, by virtue of any affiliations it may have within a holding company structure. Also, a carrier that does not meet the definition of section 3(37) may qualify under section 259(d)(1) by demonstrating to the incumbent LEC to which it directs its infrastructure sharing request a relative lack of economies of scale or scope with respect to the requested infrastructure. We are convinced that this approach will facilitate the negotiation of infrastructure sharing agreements most likely to benefit customers served by carriers that lack economies of scale or scope, without excluding any group of customers from the benefits of infrastructure sharing. We note that a rebuttable presumption was supported by most parties commenting in this proceeding. We also note that parties may avail themselves of guidance from the Commission, pursuant to our declaratory ruling and complaints processes, if disputes arise. As always, we expect parties to make good faith efforts to negotiate resolutions of such disputes prior to requesting our assistance. 167. Although we expect that, in the ordinary course, most section 259 agreements will be negotiated between small, particularly rural telephone companies and larger incumbent LECs, there is nothing in the statutory language or legislative history to persuade us that Congress intended such a per se restriction on who can qualify under section 259(d). We anticipate, for example, that some carriers affiliated with larger carriers might be able to demonstrate that, for particular elements of infrastructure, they also lack "economies of scale or scope" per the requirements of section 259(d)(1). We do not believe that such carriers should be precluded from securing section 259 agreements upon a proper showing under section 259(d)(1). Nonetheless, as we have indicated supra, we have concerns about the effects on competitive entry as a result of the implementation of section 259 agreements. We expect that such agreements will not result in large companies effectively insulating particular markets from competitive entry. We emphasize that section 259, as articulated in this Report and Order, shall not be used to achieve such anticompetitive results. 168. We affirm our conclusion that, because a separate proceeding is underway to implement section 254 of the Act, the Commission need not consider or construe section 259(d)(2) in this rulemaking. Parties commenting in this proceeding generally agreed with this conclusion. We observe that NYNEX's assertion that a telecommunications carrier must be an incumbent LEC to meet the requirements of section 259(d)(2) would not appear to be mandated by the language of section 259(d)(2) and might be in direct conflict with the Act's objective to open all telecommunications markets to competition. Section 259(d)(2) imposes specific requirements on carriers. Such carriers will predictably include, but might not be limited to, incumbent LECs. We also decline to adopt USTA's interpretation of section 259(d)(2) that would allow carriers subjected to carrier of last resort obligations to negotiate infrastructure sharing arrangements prior to the issuance of an order in the universal service rulemaking, which will be adopted no later than May 8, 1997. We observe that section 259(d)(2) references section 214(e), which reserves designation authority to the states. Section 214(e)(1)(A), moreover, requires that eligible telecommunications carriers shall "offer the services that are supported by Federal universal support mechanisms under section 254(c) . . . ." By definition, however, such services will not be identified until the Commission adopts an order in the universal service proceeding. IV. PROCEDURAL ISSUES A. Final Regulatory Flexibility Act Analysis 169. Pursuant to the Regulatory Flexibility Act of 1980, as amended, 5 U.S.C. Section 601 et seq., the Commission's final analysis in this Report and Order is attached as Appendix C. B. Final Paperwork Reduction Act Analysis 170. As required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13, the NPRM invited the general public and the Office of Management and Budget (OMB) to comment on proposed information collection requirements contained in the NPRM. On January 22, 1997, OMB approved the proposed information collection requirements, as submitted to OMB, in accordance with the Paperwork Reduction Act. In this Report and Order, we adopt information collection requirements that are subject to OMB review. These requirements are contingent upon approval by OMB. V. ORDERING CLAUSES 171. Accordingly, IT IS ORDERED that, pursuant to sections 4(i), 4(j), 201-205, 259, 303(r), 403 of the Communications Act of 1934, as amended by the 1996 Act, 47 U.S.C.  154(i), 154(j), 201-205, 259, 303(r), 403, the rules, requirements and policies discussed in this Report and Order ARE ADOPTED and sections 59.1- 59.4 of the Commission's rules, 47 C.F.R.  59.1 - 59.4 ARE ADOPTED as set forth in Appendix B. 172. IT IS FURTHER ORDERED that the requirements and regulations established in this decision shall become effective upon approval by OMB of the new information collection requirements adopted herein, but no sooner than thirty days after publication in the Federal Register. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A - List of Commenters in Docket 96-237 Comments: ALLTEL Telephone Services Corporation (ALLTEL) Association for Local Telecommunications Services (ALTS) Ameritech AT&T Corp. (AT&T) BellSouth Corporation (BellSouth) Frontier Corporation (Frontier) GTE Service Corporation (GTE) Jackson Thornton & Company (on behalf of Castleberry Telephone Company, Ardmore Telephone Company, Hopper Telecommunications Co., Inc., Mon-Cre Telephone Cooperative, Inc., New Hope Telephone Cooperative, Inc., Ragland Telephone Co., Inc., Blountsville Telephone Co., Inc., Bledsoe Telephone Cooperative, and Farmers Telephone Cooperative, Inc.) (collectively, Castleberry Telephone Company et al.) MCI Communications Corporation (MCI) Minnesota Independent Coalition (Minnesota Coalition) National Rural Health Association* National Cable Television Association, Inc. (NCTA) NYNEX Telephone Companies (NYNEX) Octel Communications Corporation (Octel) Oregon Public Utility Commission (Oregon PUC) Pacific Telesis Group (PacTel) Rural Telephone Coalition (RTC) Southwestern Bell Telephone Company (Southwestern Bell) Sprint Corporation (Sprint) University of Alabama School of Medicine* United States Telephone Association (USTA) US WEST, Inc. (US West) * Referred to CC Docket No. 96-45 Reply Comments: ALTS AT&T BellSouth GTE MCI NCTA NYNEX Octel PacTel RTC Southwestern Bell Sprint USTA US West APPENDIX B - FINAL RULES 1. Part 59 of Title 47 of the Code of Federal Regulations (C.F.R.) is added to read as follows: PART 59 -- INFRASTRUCTURE SHARING Sec. 59.1 General Duty 59.2 Terms and Conditions of Infrastructure Sharing 59.3 Information Concerning Deployment of New Services and Equipment 59.4 Definition of "Qualifying Carrier" AUTHORITY: Sections 4(i), 4(j), 201-205, 259, 303(r), 403 of the Communications Act of 1934, as amended by the 1996 Act, 47 U.S.C.  154(i), 154(j), 201-205, 259, 303(r), 403, unless otherwise noted. Sec. 59.1 General Duty Incumbent local exchange carriers (as defined in 47 U.S.C. section 251(h)) shall make available to any qualifying carrier such public switched network infrastructure, technology, information, and telecommunications facilities and functions as may be requested by such qualifying carrier for the purpose of enabling such qualifying carrier to provide telecommunications services, or to provide access to information services, in the service area in which such qualifying carrier has obtained designation as an eligible telecommunications carrier under section 214(e) of this title (47 U.S.C. 214(e)). Sec. 59.2 Terms and Conditions of Infrastructure Sharing (a) An incumbent local exchange carrier subject to the requirements of section 59.1 shall not be required to take any action that is economically unreasonable or that is contrary to the public interest; (b) An incumbent local exchange carrier subject to the requirements of section 59.1 may, but shall not be required to, enter into joint ownership or operation of public switched network infrastructure, technology, information and telecommunications facilities and functions and services with a qualifying carrier as a method of fulfilling its obligations under section 59.1; (c) An incumbent local exchange carrier subject to the requirements of section 59.1 shall not be treated by the Commission or any State as a common carrier for hire or as offering common carrier services with respect to any public switched network infrastructure, technology, information, or telecommunications facilities, or functions made available to a qualifying carrier in accordance with regulations issued pursuant to this section; (d) An incumbent local exchange carrier subject to the requirements of section 59.1 shall make such public switched network infrastructure, technology, information, and telecommunications facilities, or functions available to a qualifying carrier on just and reasonable terms and pursuant to conditions that permit such qualifying carrier to fully benefit from the economies of scale and scope of such local exchange carrier. An incumbent local exchange carrier that has entered into an infrastructure sharing agreement pursuant to section 59.1 must give notice to the qualifying carrier at least sixty days before terminating such infrastructure sharing agreement. (e) An incumbent local exchange carrier subject to the requirements of section 59.1 shall not be required to engage in any infrastructure sharing agreement for any services or access which are to be provided or offered to consumers by the qualifying carrier in such local exchange carrier's telephone exchange area; and (g) An incumbent local exchange carrier subject to the requirements of section 59.1 shall file with the State, or, if the State has made no provision to accept such filings, with the Commission, for public inspection, any tariffs, contracts, or other arrangements showing the rates, terms, and conditions under which such carrier is making available public switched network infrastructure, technology, information and telecommunications facilities and functions pursuant to this Part. Sec. 59.3 Information Concerning Deployment of New Services and Equipment An incumbent local exchange carrier subject to the requirements of section 59.1 that has entered into an infrastructure sharing agreement under section 59.1 shall provide to each party to such agreement timely information on the planned deployment of telecommunications services and equipment, including any software or upgrades of software integral to the use or operation of such telecommunications equipment. Sec. 59.4 Definition of "Qualifying Carrier" For purposes of this Part, the term "qualifying carrier" means a telecommunications carrier that-- (1) lacks economies of scale or scope; and (2) offers telephone exchange service, exchange access, and any other service that is included in universal service, to all consumers without preference throughout the service area for which such carrier has been designated as an eligible telecommunications carrier under section 214(e) of this title. APPENDIX C FINAL REGULATORY FLEXIBILITY ACT ANALYSIS 1. As required by section 603 of the Regulatory Flexibility Act (RFA), 5 U.S.C.  603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking, Implementation of Infrastructure Sharing Provisions in the Telecommunications Act of 1996. The Commission sought written public comments on the proposals in the Infrastructure Sharing NPRM including on the IRFA. The Commission's Final Regulatory Flexibility Analysis (FRFA) in this Report and Order conforms to the RFA, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), Pub. L. 104-121, 110 Stat. 847 (1996). A. Need for and Objectives of this Report and Order and the Rules Adopted Herein 2. The Commission, in compliance with section 259(a) of the Communications Act of 1934, as amended by the Telecommunications Act of 1996, promulgates the rules in this Report and Order to ensure the prompt implementation of the infrastructure sharing provisions in section 259 of the 1996 Act. Section 259 directs the Commission, within one year after the date of enactment of the 1996 Act, to prescribe regulations that require incumbent LECs to make certain "public switched network infrastructure, technology, information, and telecommunications facilities and functions" available to any qualifying carrier in the service area in which the qualifying carrier has requested and obtained designation as an eligible carrier under section 214(e). B. Summary and Analysis of the Significant Issues raised by the Public Comments in Response to the IRFA 3. The only party to comment on our IRFA, the Rural Telephone Coalition (RTC), essentially argues that the Commission violated the RFA when we declined to include small incumbent LECs in our definition of the class of entities protected by the RFA. RTC argues that small incumbent LECs that meet the SBA definition of "small entities" are among the class of carriers that will be affected by these rules either as providing incumbent LECs or as qualifying carriers. RTC argues that the Commission has engaged in a "meaningless exercise" despite the fact that our IRFA included estimates of the number of small incumbent LECs potentially affected by the proposed rules and presented alternatives for comment by the public. 4. We disagree. Because the small incumbent LECs subject to these rules are either dominant in their field of operations or are not independently owned and operated, consistent with our prior practice, they are excluded from the definition of "small entity" and "small business concerns." Accordingly, our use of the terms "small entities" and "small businesses" does not encompass small incumbent LECs. Out of an abundance of caution, however, for regulatory flexibility analysis purposes, we did consider small incumbent LECs within the IRFA and used the term "small incumbent LECs" to refer to any incumbent LECs that arguably might be defined by SBA as "small business concerns." We find nothing in this record to persuade us that our prior practice of treating all LECs as dominant is incorrect. Thus, we conclude that we have fully satisfied the requirements and objectives of the RFA. C. Description and Estimate of the Number of Small Entities to which the Rules adopted in the Report and Order in CC Docket No. 96-237 will Apply 5. Section 259 of the 1934 Act, as added by the 1996 Act, establishes a variety of infrastructure sharing obligations. Many of the obligations adopted in this Report and Order will apply solely to providing incumbent LECs which may include small business concerns. The beneficiaries of section 259 infrastructure sharing agreements -- also affected by the rules adopted herein -- are the class of carriers designated as "qualifying carriers" under section 259(d). Such qualifying carriers must be telecommunications carriers, which, as defined in section 3(44) of the Act, may include LECs, non-LEC wireline carriers, and various types of wireless carriers. Because section 259(d)(1) limits qualifying carriers to those carriers that "lack economies of scale or scope," it is likely that there will be small business concerns affected by the rules proposed in this NPRM. We note, however, that section 259(d)(2) makes the definition of "qualifying carriers" dependent on the Commission's decisions in the universal service proceeding. Until the Commission issues an order pursuant to the Universal Service NPRM that addresses related issues, it is not feasible to define precisely the number of "qualifying carriers" that may be "small business concerns" or, derivatively, the number of incumbent LECs that may be "small business concerns." With that caveat, we attempt to estimate the number of small entities -- both providing incumbent LECs and qualifying carriers -- that may be affected by the rules included in this Report and Order. 6. For the purposes of this analysis, we examined the relevant definition of "small entity" or "small business" and applied this definition to identify those entities that may be affected by the rules adopted in this Report and Order. The RFA defines a "small business" to be the same as a "small business concern" under the Small Business Act, 15 U.S.C.  632, unless the Commission has developed one or more definitions that are appropriate to its activities. Under the Small Business Act, a "small business concern" is one that: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the Small Business Administration (SBA). Moreover, the SBA has defined a small business for Standard Industrial Classification (SIC) categories 4812 (Radiotelephone Communications) and 4813 (Telephone Communications, Except Radiotelephone) to be small entities when they have fewer than 1,500 employees. We first discuss generally the total number of small telephone companies falling within both of those categories. Then, we discuss the number of small businesses within the two subcategories, and attempt to refine further those estimates to correspond with the categories of telephone companies that are commonly used under our rules. 7. As discussed supra, and consistent with our prior practice, we shall continue to exclude small incumbent LECs from the definition of "small entity" and "small business concerns" for the purpose of this IRFA. Because the small incumbent LECs subject to these rules are either dominant in their field of operations or are not independently owned and operated, consistent with our prior practice, they are excluded from the definition of "small entity" and "small business concerns." Accordingly, our use of the terms "small entities" and "small businesses" does not encompass small incumbent LECs. Out of an abundance of caution, however, for regulatory flexibility analysis purposes, we will consider small incumbent LECs within this analysis and use the term "small incumbent LECs" to refer to any incumbent LECs that arguably might be defined by SBA as "small business concerns." 1. Telephone Companies (SIC 481) 8. Total Number of Telephone Companies Affected. The decisions and rules adopted herein may have a significant effect on a substantial number of small telephone companies identified by the SBA. The United States Bureau of the Census (Census Bureau) reports that, at the end of 1992, there were 3,497 firms engaged in providing telephone service, as defined therein, for at least one year. This number contains a variety of different categories of carriers, including local exchange carriers, interexchange carriers, competitive access providers, cellular carriers, mobile service carriers, operator service providers, pay telephone operators, PCS providers, covered SMR providers, and resellers. It seems certain that some of those 3,497 telephone service firms may not qualify as small entities or small incumbent LECs because they are not "independently owned and operated." For example, a PCS provider that is affiliated with an interexchange carrier having more than 1,500 employees would not meet the definition of a small business. It seems reasonable to conclude, therefore, that fewer than 3,497 telephone service firms are small entity telephone service firms or small incumbent LECs that may be affected by this Order. 9. Wireline Carriers and Service Providers. The SBA has developed a definition of small entities for telecommunications companies other than radiotelephone (wireless) companies (Telephone Communications, Except Radiotelephone). The Census Bureau reports that there were 2,321 such telephone companies in operation for at least one year at the end of 1992. According to the SBA's definition, a small business telephone company other than a radiotelephone company is one employing fewer than 1,500 persons. Of the 2,321 non-radiotelephone companies listed by the Census Bureau, 2,295 companies (or, all but 26) were reported to have fewer than 1,000 employees. Thus, at least 2,295 non-radiotelephone companies might qualify as small incumbent LECs or small entities based on these employment statistics. However, because it seems certain that some of these carriers are not independently owned and operated, this figure necessarily overstates the actual number of non-radiotelephone companies that would qualify as "small business concerns" under the SBA's definition. Consequently, we estimate using this methodology that there are fewer than 2,295 small entity telephone communications companies (other than radiotelephone companies) that may be affected by the proposed decisions and rules and we seek comment on this conclusion. 10. Local Exchange Carriers. Although neither the Commission nor the SBA has developed a definition of small providers of local exchange services, we have two methodologies available to us for making these estimates. The closest applicable definition under SBA rules is for telephone communications companies other than radiotelephone (wireless) companies (SIC 4813) (Telephone Communications, Except Radiotelephone) as previously detailed, supra. Our alternative method for estimation utilizes the data that we collect annually in connection with the Telecommunications Relay Service (TRS). This data provides us with the most reliable source of information of which we are aware regarding the number of LECs nationwide. According to our most recent data, 1,347 companies reported that they were engaged in the provision of local exchange services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of incumbent LECs that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 1,347 small LECs (including small incumbent LECs) that may be affected by the actions proposed in this NPRM. 11. Our remaining comments are directed solely to non-LEC entities that may eventually be designated as "qualifying carriers." Section 259(d)(2) requires qualifying carriers, inter alia, to offer "telephone exchange service, exchange access, and any other service that is included in universal service" within the carrier's service area per universal service obligations imposed pursuant to section 214(e). As addressed supra, because section 259(d)(2) makes the scope of potential "qualifying carriers" contingent upon the Commission's decisions in the universal service proceeding, we are unable to define the scope of small entities that might eventually be designated as "qualifying carriers." Thus, the remaining estimates of the number of small entities affected by our rules -- based on the most reliable data for the non-LEC wireline and non-wireline carriers -- may be overinclusive depending on how many such entities otherwise qualify pursuant to section 259(d)(2). 12. Non-LEC wireline carriers. We next estimate the number of non-LEC wireline carriers, including interexchange carriers (IXCs), competitive access providers (CAPs), Operator Service Providers (OSPs), Pay Telephone Operators, and resellers that may be affected by these rules. Because neither the Commission nor the SBA has developed definitions for small entities specifically applicable to these wireline service types, the closest applicable definition under the SBA rules for all these service types is for telephone communications companies other than radiotelephone (wireless) companies. However, the TRS data provides an alternative source of information regarding the number of IXCs, CAPs, OSPs, Pay Telephone Operators, and resellers nationwide. According to our most recent data: 130 companies reported that they are engaged in the provision of interexchange services; 57 companies reported that they are engaged in the provision of competitive access services; 25 companies reported that they are engaged in the provision of operator services; 271 companies reported that they are engaged in the provision of pay telephone services; and 260 companies reported that they are engaged in the resale of telephone services and 30 reported being "other" toll carriers. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of IXCs, CAPs, OSPs, Pay Telephone Operators, and resellers that would qualify as small business concerns under SBA's definition. Firms filing TRS Worksheets are asked to select a single category that best describes their operation. As a result, some long distance carriers describe themselves as resellers, some as OSPs, some as "other," and some simply as IXCs. Consequently, we estimate that there are fewer than 130 small entity IXCs; 57 small entity CAPs; 25 small entity OSPs; 271 small entity pay telephone service providers; and 260 small entity providers of resale telephone service; and 30 "other" toll carriers that might be affected by the actions and rules adopted in this Report and Order. 13. Radiotelephone (Wireless) Carriers: The SBA has developed a definition of small entities for Wireless (Radiotelephone) Carriers. The Census Bureau reports that there were 1,176 such companies in operation for at least one year at the end of 1992. According to the SBA's definition, a small business radiotelephone company is one employing fewer than 1,500 persons. The Census Bureau also reported that 1,164 of those radiotelephone companies had fewer than 1,000 employees. Thus, even if all of the remaining 12 companies had more than 1,500 employees, there would still be 1,164 radiotelephone companies that might qualify as small entities if they are independently owned and operated. Although it seems certain that some of these carriers are not independently owned and operated, and, we are unable to estimate with greater precision the number of radiotelephone carriers and service providers that would both qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 1,164 small entity radiotelephone companies that might be affected by the actions and rules adopted in this Report and Order. 14. Cellular and Mobile Service Carriers: In an effort to further refine our calculation of the number of radiotelephone companies affected by the rules adopted herein, we consider the categories of radiotelephone carriers, Cellular Service Carriers and Mobile Service Carriers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to Cellular Service Carriers and to Mobile Service Carriers. The closest applicable definition under SBA rules for both services is for telephone companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of Cellular Service Carriers and Mobile Service Carriers nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS. According to our most recent data, 792 companies reported that they are engaged in the provision of cellular services and 138 companies reported that they are engaged in the provision of mobile services. Although it seems certain that some of these carriers are not independently owned and operated, or have more than 1,500 employees, we are unable at this time to estimate with greater precision the number of Cellular Service Carriers and Mobile Service Carriers that would qualify as small business concerns under SBA's definition. Consequently, we estimate that there are fewer than 792 small entity Cellular Service Carriers and fewer than 138 small entity Mobile Service Carriers that might be affected by the actions and rules adopted in this Report and Order. 15. Broadband PCS Licensees. In an effort to further refine our calculation of the number of radiotelephone companies affected by the rules adopted herein, we consider the category of radiotelephone carriers, Broadband PCS Licensees. The broadband PCS spectrum is divided into six frequency blocks designated A through F. As set forth in 47 C.F.R.  24.720(b), the Commission has defined "small entity" in the auctions for Blocks C and F as a firm that had average gross revenues of less than $40 million in the three previous calendar years. Our definition of a "small entity" in the context of broadband PCS auctions has been approved by SBA. The Commission has auctioned broadband PCS licenses in Blocks A through F. We do not have sufficient data to determine how many small businesses bid successfully for licenses in Blocks A and B. There were 183 winning bidders that qualified as small entities in the Blocks C, D, E, and F auctions. Based on this information, we conclude that the number of broadband PCS licensees affected by the decisions in the Infrastructure Sharing Report & Order includes, at a minimum, the 183 winning bidders that qualified as small entities in the Blocks C through F broadband PCS auctions. D. Description of Projected Reporting, Recordkeeping and other Compliance Requirements and Steps Taken to Minimize the Significant Economic of this Report and Order on Small Entities and Small Incumbent LECs, Including the Significant Alternatives Considered and Rejected 16. In this section of the FRFA, we analyze the projected reporting, recordkeeping, and other compliance requirements that may apply to small entities and small incumbent LECs, and we mention some of the skills needed to meet these new requirements. We also describe the steps taken to minimize the economic impact of our decisions on small entities and small incumbent LECs, including the significant alternatives considered and rejected. Overall, we anticipate that the impact of these rules will be beneficial to small businesses since they may be able to share infrastructure with larger incumbent LECs, in certain circumstances, enabling small carriers to provide telecommunication services or information services that they otherwise might not be able to provide without building or buying their own facilities. 1. Section 259(a) 17. Summary of Projected Reporting, Recordkeeping, and other Compliance Requirements. Regarding the scope of section 259(a), we allow the parties to section 259 agreements to negotiate what "public switched network infrastructure, technology, information, and telecommunications facilities and functions" will be made available, without per se exclusions. In addition, we conclude that qualifying carriers should be able to obtain network facilities and functionalities available under section 251 -- including lease arrangements and resale -- alternatively pursuant to section 251 or pursuant to section 259 (subject to the limitations in section 259(b)(6)), or pursuant to both if they so choose. 18. To the extent that there are small businesses that are providing incumbent LECs, they will be required to make available "public switched network infrastructure, technology, information, and telecommunications facilities and functions" to defined qualifying carriers. We anticipate that compliance with such requests for infrastructure sharing may require the use of legal, engineering, technical, operational, and administrative skills. At the same time, these rules should create opportunities for small businesses that are qualifying carriers to utilize infrastructure that might not otherwise be available. To obtain access to infrastructure from a providing incumbent LEC, a qualifying carrier is required to pay the costs associated with the shared infrastructure. 19. Steps Taken to Minimize the Significant Economic Impact of this Report and Order on Small Entities and Small Incumbent LECs, Including the Significant Alternatives Considered and Rejected. We reject proposals offered by those parties who would assert limitations that remove whole classes or categories of "public switched network infrastructure, technology, information and telecommunications facilities and functions" -- e.g., resale services and classes of non-network information -- from the scope of section 259(a). Similarly, we declined to exclude section 251- provided interconnection elements from section 259 arrangements. We believe that the flexible approach that we adopt will give parties the ability to negotiate unique agreements that will vary based on individual requirements of parties in each case. Such an approach is particularly important because as technology continues to evolve, definitions based on present network requirements seem likely to limit qualifying carriers' opportunities to obtain infrastructure unnecessarily. Further, we found no clear evidence of Congressional intent to limit the broad parameters of section 259(a). 20. Overall, we believe that there will be a significant positive economic impact on small entity carriers that -- as a result of section 259 agreements -- will be able to provide advanced telecommunications and information services in the most efficient manner possible by taking advantage of the economies of scale and scope of incumbent LECs. With regard to any small incumbent LECs that might receive requests for infrastructure sharing from qualifying carriers, we believe that the statutory scheme imposed by Congress and adopted in our rules will promote small business interests. First, we note that section 259(b)(1) protects providing incumbent LECs -- small and large, alike -- from having to take any actions that are economically unreasonable. Second, we note that, under our rules, an incumbent LEC may demonstrate that the requesting carrier does not lack economies of scale and scope, relative to itself, with respect to the requested infrastructure and, thus, may avoid infrastructure sharing obligations in certain situations. 2. Section 259(b) Terms and Conditions of Infrastructure Sharing 21. Summary of Projected Reporting, Recordkeeping, and other Compliance Requirements. We require that providing LECs can recover their costs associated with infrastructure sharing arrangements, and we conclude that market incentives already exist to encourage providing and qualifying carriers to reach negotiated agreements that do so (section 259(b)(1)). Congress directed in section 259(b)(4) that providing incumbent LECs make section 259 agreements available to qualifying carriers on just and reasonable terms and conditions that permit such qualifying carrier to fully benefit from the economies of scale and scope of such providing incumbent local exchange carriers. We decide that, although the Commission has pricing authority to prescribe guidelines to ensure that qualifying carriers "fully benefit from the economies of scale and scope of [the providing incumbent LEC]," it is not necessary at this time to exercise this authority (section 259(b)(4)). 22. We decide that section 259 agreements must be filed with the appropriate state commission, or with the Commission if the state commission is unwilling to accept the filing, and must be made available for public inspection (section 259(b)(7)). Compliance with this rule will require legal and administrative skills. 23. Steps Taken to Minimize the Significant Economic Impact of this Report and Order on Small Entities and Small Incumbent LECs, Including the Significant Alternatives Considered and Rejected. We generally reject proposals that incumbent LECs should be required to develop, purchase, or install network infrastructure, technology, and telecommunications facilities and functions solely on the basis of a request from a qualifying carrier to share such elements when such incumbent LEC has not otherwise built or acquired, and does not intend to build or acquire, such elements. Because the record did not indicate that there would exist any scale and scope benefits in situations where the providing incumbent LEC did not also use the facilities, we concluded that such a result would be inappropriate. We believe that the approach that we adopt will enable small entity qualifying carriers to enjoy the benefits of section 259 sharing agreements without imposing undue burdens on providing incumbent LECs. 24. Further, we decline to accept various proposals that the Commission adopt pricing schemes for infrastructure shared per section 259. Instead, we conclude that the negotiation process, along with the available dispute resolution, arbitration, and formal complaint processes available from the states and the Commission, will ensure that qualifying carriers fully benefit from the economies of scale and scope of providing LECs. We believe that allowing providing incumbent LECs -- including any small business -- to recover the costs associated with infrastructure sharing will encourage and facilitate infrastructure sharing agreements. We believe that such agreements will lead to mutual benefits for both qualifying carriers and providing incumbent LECs. 3. Section 259(c) Information Disclosure Requirements 25. Summary of Projected Reporting, Recordkeeping, and other Compliance Requirements. The statute also requires incumbent LECs to provide "timely information on the planned deployment of telecommunications services and equipment" to any parties to infrastructure sharing agreements. The rules we adopt herein require disclosure by each providing incumbent LEC for each of its section 259-derived agreements and require that such notice and disclosure are only for the benefit of the parties to a section 259-derived agreement. Under our rules, providing incumbent LECs must provide notice of changes in their networks that might affect qualifying carriers' ability to utilize the shared infrastructure. Should a small incumbent LEC be subject to this requirement, we anticipate that it will require use of engineering, technical, operational, and administrative skills. 26. Steps Taken to Minimize the Significant Economic Impact of this Report and Order on Small Entities and Small Incumbent LECs, Including the Significant Alternatives Considered and Rejected. A number of parties suggest that the Commission need not adopt any new disclosure rules pursuant to section 259(c) because other network disclosure provisions provide similar notice of changes in the network. We conclude that specific notice of changes to an incumbent LEC's network that affect a qualifying carrier's ability to utilize the shared infrastructure, a qualifying carrier -- including small businesses -- will enable qualifying carriers, including small entities, to maintain a high level of interoperability between its network and that of the providing incumbent LEC. 27. We also decide that section 259(c) does not include a requirement that providing incumbent LECs provide information on planned deployments of telecommunications and services prior to the make/buy point. We conclude that section 259 does not require such mandatory joint planning, but we note that providing incumbent LECs may have obligations to coordinate network planning and design under sections 251(a), 256, 273(e)(3) and other provisions. 4. Section 259(d) Definition of Qualifying Carriers 28. Summary of Projected Reporting, Recordkeeping, and other Compliance Requirements. We adopt a rebuttable presumption that carriers satisfying the statutory definition of "rural telephone company" in section 3(37) also satisfy the qualifying criteria in section 259(d)(1) of lacking "economies of scale or scope," but we decide to exclude no class of carriers from attempting to show that they qualify under section 259(d)(1). A carrier otherwise qualifying under section 259(d) therefore may be entitled to request and share certain infrastructure and, at the same time, be obligated to share the same or other infrastructure. We conclude that parties to section 259 negotiations can and will make the necessarily fact-based evaluations of their relative economies of scale and scope pertaining to the infrastructure that is requested to be shared. Complying with the section 259 process set out in our rules may require small incumbent LECs and requesting small entities to use legal and negotiation skills. 29. Steps Taken to Minimize the Significant Economic Impact of this Report and Order on Small Entities and Small Incumbent LECs, Including the Significant Alternatives Considered and Rejected. We believe that the approach we take will facilitate negotiations between requesting carriers and incumbent LECs. We expect that many if not most requests for infrastructure sharing agreements will be made by carriers whose customers reside predominantly, if not exclusively, in rural, sparsely-populated areas. At the same time, there is nothing in the statutory language or legislative history to persuade us that Congress intended such a per se restriction on who can qualify under section 259(d). Thus, we rejected proposals that we limit qualifying carriers to those who meet the requirements of section 3(37). We opposed these proposals because they would unduly limit the opportunities to engage in section 259 sharing agreements to those qualifying carriers located in particular geographic areas. We believe that the approach that we have adopted will enable all small entity qualifying carriers to enjoy the benefits of section 259 sharing agreements without regard to their geographic location. F. Report to Congress 30. The Commission shall send a copy of this Final Regulatory Flexibility Analysis, along with this Report and Order, in a report to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.  801 (a)(1)(A). A copy of this FRFA will also be published in the Federal Register.