Table of Contents
III. DUTY TO NEGOTIATE IN GOOD FAITH
A. Background
138. Section 251(c)(1) of the statute imposes on incumbent LECs the "duty to
negotiate in good faith in accordance with section 252 the particular terms and conditions
of agreements to fulfill the duties described" in sections 251(b) and(c), and further
provides that "(t)he requesting telecommunications carrier also has the duty to
negotiate in good faith the terms and conditions of such agreements."(246) In the NPRM, we asked parties to comment on the extent
to which the Commission should establish national rules defining the requirements of the
good faith negotiation obligation.
B. Advantages and Disadvantages of National Rules
1. Comments
139. Some potential new entrants and other parties assert that clear national
guidelines will prevent incumbent LECs from abusing their bargaining power for the purpose
of undermining efforts to eliminate barriers to competition.(247)
Some parties also assert that, in the absence of specific rules, negotiations between
potential competitors are likely to be needlessly prolonged and contentious.(248) SBA claims that delay and other anticompetitive
tactics are particularly burdensome on small businesses.(249)
In addition, Independent Cable & Telecommunications Ass'n expresses concern that
states might establish guidelines that favor the incumbent.(250)
Other parties agree that national rules defining some limited aspects of good faith can
simplify both negotiations and dispute resolution, but nevertheless contend that the
Commission should not establish extensive or detailed rules in this area, because the
facts and tactics of various negotiations will display only a few characteristics in
common.(251)
140. Some incumbent LECs and other parties contend that the FCC need not establish any
rules regarding good faith negotiation, because the statute builds in a remedy of
arbitration for parties that are dissatisfied with the negotiation process.(252) They maintain that national rules are inappropriate
because a determination of whether a party has acted in good faith requires examination of
specific facts that will not describe a pattern across the country.(253)
SBC contends that national standards are inflexible, and thus will slow down the
negotiation process, and that national rules are unnecessary, because the 1996 Act
provides incentives for incumbents to negotiate.(254)
Some parties also claim that section 252(b)(5) sets forth standards for good faith
negotiation, and that provision makes no mention of a role for the FCC.(255)
2. Discussion
141. We conclude that establishing some national standards regarding the duty to
negotiate in good faith could help to reduce areas of dispute and expedite fair and
successful negotiations, and thereby realize Congress's goal of enabling swift market
entry by new competitors. In order to address the balance of the incentives between the
bargaining parties, however, we believe that we should set forth some minimum requirements
of good faith negotiation that will guide parties and state commissions. As discussed
above, the requirements in section 251 obligate incumbent LECs to provide interconnection
to competitors that seek to reduce the incumbent's subscribership and weaken the
incumbent's dominant position in the market. Generally, the new entrant has little to
offer the incumbent. Thus, an incumbent LEC is likely to have scant, if any, economic
incentive to reach agreement. In addition, incumbent LECs argue that requesting carriers
may have incentives to make unreasonable demands or otherwise fail to act in good faith.(256) The fact that an incumbent LEC has superior bargaining
power does not itself demonstrate a lack of good faith, or ensure that a new entrant will
act in good faith.
142. We agree with commenters that it would be futile to try to determine in advance
every possible action that might be inconsistent with the duty to negotiate in good faith.
As discussed more fully below, determining whether or not a party's conduct is consistent
with its statutory duty will depend largely on the specific facts of individual
negotiations. Therefore, we believe that it is appropriate to identify factors or
practices that may be evidence of failure to negotiate in good faith, but that will need
to be considered in light of all relevant circumstances.
143. Consistent with our discussion in Section II, above, we believe that the
Commission has authority to review complaints alleging violations of good faith
negotiation pursuant to section 208.(257) Penalties may
be imposed under sections 501, 502 and 503 for failure to negotiate in good faith. In
addition, we believe that state commissions have authority, under section 252(b)(5), to
consider allegations that a party has failed to negotiate in good faith. We also reserve
the right to amend these rules in the future as we obtain more information regarding
negotiations under section 252.
C. Specific Practices that May Constitute a Failure to Negotiate in Good Faith
1. Comments
144. The comments included numerous suggestions regarding what might constitute a
violation of the duty to negotiate in good faith. Commenters disagree about whether
requiring another party to sign a nondisclosure agreement constitutes failure to negotiate
in good faith. Some parties urge the Commission to prohibit nondisclosure agreements
altogether,(258) but other parties assert that there may
be legitimate reasons to seek nondisclosure.(259) Some
parties assert that the Commission should only prohibit overly broad or restrictive
nondisclosure agreements, such as agreements that cover information that is not
commercially sensitive, or that require withholding information from regulatory agencies.(260) Some potential competitors also propose that
incumbents should not be permitted to refuse to negotiate until a requesting carrier signs
a nondisclosure agreement.(261)
145. Commenters assert that other practices constitute a violation of the duty to
negotiate in good faith. For example, most commenters on this issue agree that demands
that a party limit its legal rights or remedies signal a lack of good faith.(262) Many new entrants also assert that actions that have
the purpose or effect of delaying or impeding negotiations constitute failure to negotiate
in good faith. For example, GST asserts parties should be required to respond within a
reasonable time to a request to begin negotiations.(263)
Some parties also claim that failing to respond to a proposal or participate meaningfully
and with the intention of reaching agreement demonstrates a lack of good faith.(264) For instance, Time Warner contends that a party may
not simply present proposals that do not include critical terms, or that it knows are
unacceptable.(265) Parties also maintain that
establishing preconditions, such as requiring requesting carriers to complete unnecessary
forms before beginning negotiations, should be prohibited.(266)
146. New entrants argue that the failure of an incumbent LEC to provide information
necessary to conduct meaningful negotiations constitutes a refusal to negotiate in good
faith.(267) Incumbent LECs similarly assert that
requesting carriers should be required to provide certain information necessary to respond
to their requests. For example, U S West states that an incumbent should be able to
require a carrier that seeks interconnection to disclose what it wants to obtain, where,
when, and for what duration.(268) U S West contends that
a requesting carrier should not be permitted to demand immediate unbundling or
interconnection, thereby forcing the incumbent to incur costs, while refusing to provide a
proposed purchase and deployment schedule. Some incumbent LECs advocate a "bona fide
request" requirement for all interconnection requests.(269)
Under such a requirement, a requesting carrier would have to: (1) certify that it will
make use of the services or facilities it requests within a specified period from the date
of the request; (2) describe the purpose of the request; (3) specify precisely what it was
requesting; and (4) agree to purchase the requested services or facilities for a minimum
time. Other parties specifically object to a "bona fide request" requirement.
For example, LCI states that such a requirement would force a carrier to agree to purchase
services or facilities before prices and other terms and conditions have been established.(270)
147. Other practices to which some commenters object include a refusal to negotiate any
proposed term or condition, or conditioning negotiation on one issue upon first reaching
agreement on another issue.(271) Time Warner contends,
for example, that parties should not be permitted to require agreement on non-price terms
before beginning to negotiate prices.(272) Time Warner
also contends that it is a failure to negotiate in good faith to link negotiations under
section 252 with negotiations between parties in another context. Some parties contend
that it demonstrates a lack of good faith for a party to fail to appoint a representative
in negotiations that has authority to bind the party it represents,(273)
or at least authority to enter into tentative agreements on behalf of such party,(274) and that such failure needlessly delays negotiations.
SCBA asserts that delays caused by failing to appoint an appropriate representative are
particularly burdensome on small cable operators, which lack the resources to endure
protracted negotiations and arbitrations.(275)
2. Discussion
148. The Uniform Commercial Code defines "good faith" as "honesty in fact in the conduct of the transaction concerned."(276) When looking at good faith, the question "is a narrow one focused on the subjective intent with which the person in question has acted."(277) Even where there is no specific duty to negotiate in good faith, certain principles or standards of conduct have been held to apply.(278) For example, parties may not use duress or misrepresentation in negotiations.(279) Thus, the duty to negotiate in good faith, at a minimum, prevents parties from intentionally misleading or coercing parties into reaching an agreement they would not otherwise have made. We conclude that intentionally obstructing negotiations also would constitute a failure to negotiate in good faith, because it reflects a party's unwillingness to reach agreement.
149. Because section 252 permits parties to seek mediation "at any point in the
negotiation,"(280) and also allows parties to seek
arbitration as early as 135 days after an incumbent LEC receives a request for negotiation
under section 252,(281) we conclude that Congress
specifically contemplated that one or more of the parties may fail to negotiate in good
faith, and created at least one remedy in the arbitration process.(282)
The possibility of arbitration itself will facilitate good faith negotiation. For example,
parties seeking to avoid a legitimate accusation of breach of the duty of good faith in
negotiation will work to provide their negotiating adversary all relevant information --
given that section 252(b)(4)(B) authorizes the state commission to require the parties
"to provide such information as may be necessary for the State commission to reach a
decision on the unresolved issues."(283) That
provision also states that, if either party "fails unreasonably to respond on a
timely basis to any reasonable request from the State commission, then the State
commission may proceed on the basis of the best information available to it from whatever
source derived."(284) The likelihood that an
arbitrator will review the positions taken by the parties during negotiations also should
discourage parties from refusing unreasonably to provide relevant information to each
other or to delay negotiations.
150. We believe that determining whether a party has acted in good faith often will
need to be decided on a case-by-case basis by state commissions or, in some instances the
FCC, in light of all the facts and circumstances underlying the negotiations.(285) In light of these considerations, we set forth some
minimum standards that will offer parties guidance in determining whether they are acting
in good faith, but leave specific determinations of whether a party has acted in good
faith to be decided by a state commission, court, or the FCC on a case-by-case basis.
151. We find that there may be pro-competitive reasons for parties to enter into
nondisclosure agreements. A broad range of commenters, including IXCs, state commissions,
and incumbent LECs, support this view. We conclude that there can be nondisclosure
agreements that would not constitute a violation of the good faith negotiation duty, but
we caution that overly broad, restrictive, or coercive nondisclosure requirements may well
have anticompetitive effects. We therefore will not prejudge whether a party has
demonstrated a failure to negotiate in good faith by requesting another party to sign a
nondisclosure agreement, or by failing to sign a nondisclosure agreement; such demands by
incumbents, however, are of concern and any complaint alleging such tactics should be
evaluated carefully. Agreements may not, however, preclude a party from providing
information requested by the FCC, a state commission, or in support of a request for
arbitration under section 252(b)(2)(B).
152. We reject the general contention that a request by a party that another party
limit its legal remedies as part of a negotiated agreement will in all cases constitute a
violation of the duty to negotiate in good faith. A party may voluntarily agree to limit
its legal rights or remedies in order to obtain a valuable concession from another party.
In some circumstances, however, a party may violate this statutory provision by demanding
that another waive its legal rights. For example, we agree with ALTS' contention that an
incumbent LEC may not demand that the requesting carrier attest that the agreement
complies with all provisions of the 1996 Act, federal regulations, and state law,(286) because such a demand would be at odds with the
provisions of sections 251 and 252 that are intended to foster opportunities for
competition on a level playing field. In addition, we find that it is a per se failure
to negotiate in good faith for a party to refuse to include in an agreement a provision
that permits the agreement to be amended in the future to take into account changes in
Commission or state rules. Refusing to permit a party to include such a provision would be
tantamount to forcing a party to waive its legal rights in the future.
153. We decline to find that other practices identified by parties constitute per
se violations of the duty to negotiate in good faith. Time Warner contends that we
should find that a party is not negotiating in good faith under section 252 if it seeks to
tie resolution of issues in that negotiation to the resolution of other, unrelated
disputes between the parties in another proceeding. On its face, the hypothetical practice
raises concerns. Time Warner, however, did not present specific examples of how linking
two independent negotiation proceedings would undermine good faith negotiations. We
believe that requesting carriers have certain rights under sections 251 and 252, and those
rights may not be derogated by an incumbent LEC demanding quid pro quo
concessions in another proceeding. Parties, however, could mutually agree to link section
252 negotiations to negotiations on a separate matter. In fact, to the extent that
concurrent resolution of issues could offer more potential solutions or may equalize the
bargaining power between the parties, such action may be pro-competitive.(287)
154. We agree with parties contending that actions that are intended to delay
negotiations or resolution of disputes are inconsistent with the statutory duty to
negotiate in good faith.(288) The Commission will not
condone any actions that are deliberately intended to delay competitive entry, in
contravention of the statute's goals. We agree with SCBA that small entities seeking to
enter the market may be particularly disadvantaged by delay. However, whether a party has
failed to negotiate in good faith by employing unreasonable delaying tactics must be
determined on a specific, case-by-case basis. For example, a party may not refuse to
negotiate with a requesting telecommunications carrier, and a party may not condition
negotiation on a carrier first obtaining state certification.(289)
A determination based upon the intent of a party, however, is not susceptible to a
standardized rule. If a party refuses throughout the negotiation process to designate a
representative with authority to make binding representations on behalf of the party, and
thereby significantly delays resolution of issues, such action would constitute failure to
negotiate in good faith.(290) In particular, we believe
that designating a representative authorized to make binding representations on behalf of
a party will assist small entities and small incumbent LECs by centralizing communications
and thereby facilitating the negotiation process.(291) On
the other hand, it is unreasonable to expect an agent to have authority to bind the
principal on every issue -- i.e., a person may reasonably be an agent of limited
authority.
155. We agree with incumbent LECs and new entrants that contend that the parties should
be required to provide information necessary to reach agreement.(292)
Parties should provide information that will speed the provisioning process, and incumbent
LECs must prove to the state commission, or in some instances the Commission or a court,
that delay is not a motive in their conduct. Review of such requests, however, must be
made on a case-by-case basis to determine whether the information requested is reasonable
and necessary to resolving the issues at stake. It would be reasonable, for example, for a
requesting carrier to seek and obtain cost data relevant to the negotiation, or
information about the incumbent's network that is necessary to make a determination about
which network elements to request to serve a particular customer.(293)
It would not appear to be reasonable, however, for a carrier to demand proprietary
information about the incumbent's network that is not necessary for such interconnection.(294) We conclude that an incumbent LEC may not deny a
requesting carrier's reasonable request for cost data during the negotiation process,
because we conclude that such information is necessary for the requesting carrier to
determine whether the rates offered by the incumbent LEC are reasonable. We find that this
is consistent with Congress's intention for parties to use the voluntary negotiation
process, if possible, to reach agreements. On the other hand, the refusal of a new entrant
to provide data about its own costs does not appear on its face to be unreasonable,
because the negotiations are not about unbundling or leasing the new entrants' networks.
156. We also find that incumbent LECs may not require requesting carriers to satisfy a
"bona fide request" process as part of their duty to negotiate in good faith.
Some of the information that incumbent LECs propose to include in a bona fide request
requirement may be legitimately demanded from the requesting carrier; some of the proposed
requirements, on the other hand, exceed the scope of what is necessary for the parties to
reach agreement, and imposing such requirements may discourage new entry. For example,
parties advocate that a "bona fide request" requirement should require
requesting carriers to commit to purchase services or facilities for a specified period of
time. We believe that forcing carriers to make such a commitment before critical terms,
such as price, have been resolved is likely to impede new entry. Moreover, we note that
section 251(c) does not impose any bona fide request requirement. In contrast, section
251(f)(1) provides that a rural telephone company is exempt from the requirements of
251(c) until, among other things, it receives a "bona fide request" for
interconnection, services, or network elements. This suggests that, if Congress had
intended to impose a "bona fide request" requirement on requesting carriers as
part of their duty to negotiate in good faith, Congress would have made that requirement
explicit.
D. Applicability of Section 252 to Preexisting Agreements
1. Background
157. Section 252(a)(1) provides that, "[u]pon receiving a request for
interconnection, services, or network elements pursuant to section 251, an incumbent local
exchange carrier may negotiate and enter into a binding agreement with the requesting
telecommunications carrier or carriers without regard to the standards set forth in
subsections (b) and (c) of section 251 . . . . The agreement, including any
interconnection agreement negotiated before the date of enactment of the
Telecommunications Act of 1996, shall be submitted to the State commission under
subsection (e) of this section."(295)
158. In the NPRM, we sought comment on whether sections 252(a)(1) and 252(e) require
parties that have negotiated agreements for interconnection, services or network elements
prior to the passage of the 1996 Act to submit such agreements to state commissions for
approval. We also asked whether one party to such an existing agreement could compel
renegotiation and arbitration in accordance with the procedures set forth in section 252.
2. Comments
159. In general, potential local competitors that addressed this issue argue that the
plain language of section 251(a)(1) requires such agreements to be filed with the
appropriate state commission for review under section 252(e).(296)
In addition, these parties assert that, pursuant to section 252(i), the terms of such
agreements must be made available to other carriers.(297)
These parties claim that filing such agreements also should be required as a matter of
public policy, because they provide evidence of existing interconnection terms that may
provide the baseline for other negotiations,(298) and
ensure that incumbents are not favoring some carriers over others.(299)
Parties also claim that preexisting agreements will provide useful information to the
states,(300) and that states should have the ability to
review preexisting agreements to ensure that they comply with the 1996 Act.(301)
160. Incumbent LECs allege that the statute does not require that preexisting
agreements be filed with state commissions. They contend that Congress only intended
parties to file agreements negotiated pursuant to section 251.(302)
These parties point out that section 252(a) specifically refers to requests for
interconnection, services, or network elements "pursuant to section 251," and
contend that an agreement reached prior to the enactment of the 1996 Act, by definition,
could not have been negotiated pursuant to section 251.(303)
Several parties suggest that the 1996 Act only requires filing of preexisting agreements
that have been amended subsequent to the enactment of the 1996 Act, or that have been
incorporated by reference into agreements negotiated pursuant to section 251.(304) Some commenters also contend that, as a policy matter,
there is no reason to require filing of preexisting agreements. The California Commission
asserts that requiring filing and review of preexisting agreements would be burdensome for
states, and is unnecessary, because many states already reviewed such agreements prior to
the passage of the 1996 Act.(305)
161. A related question is whether there should be a distinction between preexisting
interconnection agreements between competitors within the same service area and agreements
between non-competing or neighboring LECs. Several parties contend that the 1996 Act does
not exempt such agreements from the filing requirement.(306)
They also claim that it may be difficult to monitor whether parties are competing, and
that, in light of the 1996 Act, parties that did not compete in the past may do so in the
future.(307) ACTA asserts that such agreements will
provide the best information available on technically, economically and operationally
feasible interconnection arrangements, because these agreements were reached in a
noncompetitive context, where the incumbent was not striving to protect its market from
competition, and therefore, as a public policy matter, they should be publicly filed.(308) ALTS states that Wisconsin and other states have
already addressed this issue and reached the same conclusion.(309)
162. Incumbent LECs argue that Congress did not contemplate that agreements between
non-competing LECs would be used as models for agreements between competitors,(310) and that such agreements bear no relation to
competitive interconnection agreements.(311) Some parties
argue that requiring preexisting agreements between noncompeting LECs would jeopardize
universal service in many areas, especially where extended area service arrangements are
in place.(312) NYNEX and the Rural Telephone Coalition
contend that agreements between neighboring LECs fall within the provisions of section
259, which give rural LECs that lack economies of scope or scale the right to obtain or
continue "infrastructure sharing" with neighboring larger LECs.(313)
163. Several parties recommend that agreements reached before enactment of the 1996 Act
should be subject to a period of renegotiation.(314) For
example, Sprint contends that the passage of the 1996 Act constitutes a "changed
circumstance" that would justify renegotiation of preexisting agreements.(315) Sprint proposes that parties should be required to
file preexisting agreements with the state commission, but that parties should be given a
six-month period to renegotiate before the terms of such agreements are made available to
others under section 252(i). Intermedia Communications advocates that parties that signed
long-term contracts with incumbent LECs before additional rights and competitive
alternatives were available under the 1996 Act should be permitted to terminate those
agreements, with minimal liability, for a period of six months after such competitive
alternatives become available.(316) GST advocates that
only non-incumbent LECs that are parties to an agreement should have the right to
renegotiate contracts.(317) The Texas Commission states
that parties should be permitted to renegotiate in the event that the state determines
that the preexisting agreement violates section 252.(318)
164. Some parties contend that there is no basis for renegotiation of preexisting
contracts.(319) The Illinois Commission maintains that
parties have a legal obligation to abide by the terms of their contracts, and the 1996 Act
does not affect that obligation.(320) It claims that a
unilateral right to abrogate existing contracts could undo progress that has already been
made to foster local competition. The Illinois Commerce Commission notes that parties may
mutually agree to amend existing contracts, and that a party that already has an agreement
with an incumbent may request a new agreement under section 252(i) if the interconnection,
services, or access to unbundled elements it seeks are different from those encompassed in
the existing agreement. Pacific Telesis asserts that requiring renegotiation and
arbitration of existing agreements would waste resources and interfere with parties'
settled expectations.(321)
3. Discussion
165. We conclude that the 1996 Act requires all interconnection agreements, "including any interconnection agreement negotiated before the date of enactment of the Telecommunications Act of 1996," to be submitted to the state commission for approval pursuant to section 252(e).(322) The 1996 Act does not exempt certain categories of agreements from this requirement. When Congress sought to exclude preexisting contracts from provisions of the new law, it did so expressly. For example, section 276(b)(3) provides that "nothing in this section shall affect any existing contracts between location providers and payphone service providers or interLATA or intraLATA carriers that are in force and effect as of the date of enactment of the Telecommunications Act of 1996."(323) Nothing in the legislative history leads us to a contrary conclusion. Congress intended, in enacting sections 251 and 252, to create opportunities for local telephone competition. We believe that this pro-competitive goal is best effected by subjecting all agreements to state commission review.
166. The first sentence in section 252(a)(1) refers to requests for interconnection
"pursuant to section 251."(324) The final
sentence in section 252(a)(1) requires submission to the state commission of all
negotiated agreements, including those negotiated before the enactment of the
1996 Act. Some parties have asserted that there is a tension between those two sentences.
We conclude that the final sentence of section 252(a)(1), which requires that any
interconnection agreement must be submitted to the state commission, can and should be
read to be independent of the prior sentences in section 252(a)(1). The interpretation
suggested by some commenters that preexisting contracts need only be filed if they are
amended subsequent to the 1996 Act, or incorporated by reference into agreements
negotiated pursuant to the 1996 Act, would force us to impose conditions that were not
intended by Congress.
167. As a matter of policy, moreover, we believe that requiring filing of all
interconnection agreements best promotes Congress's stated goals of opening up local
markets to competition, and permitting interconnection on just, reasonable, and
nondiscriminatory terms. State commissions should have the opportunity to review all
agreements, including those that were negotiated before the new law was enacted, to ensure
that such agreements do not discriminate against third parties, and are not contrary to
the public interest. In particular, preexisting agreements may include provisions that
violate or are inconsistent with the pro-competitive goals of the 1996 Act, and states may
elect to reject such agreements under section 252(e)(2)(A). Requiring all contracts to be
filed also limits an incumbent LEC's ability to discriminate among carriers, for at least
two reasons. First, requiring public filing of agreements enables carriers to have
information about rates, terms, and conditions that an incumbent LEC makes available to
others. Second, any interconnection, service or network element provided under an
agreement approved by the state commission under section 252 must be made available to any
other requesting telecommunications carrier upon the same terms and conditions, in
accordance with section 252(i).(325) In addition, we
believe that having the opportunity to review existing agreements may provide state
commissions and potential competitors with a starting point for determining what is
"technically feasible" for interconnection.(326)
168. Conversely, excluding certain agreements from public disclosure could have
anticompetitive consequences. For example, such contracts could include agreements not to
compete. In addition, if we exempt agreements between neighboring non-competing LECs,
those parties might have a disincentive to compete with each other in the future, in order
to preserve the terms of their preexisting agreements. Such a result runs counter to the
goal of the 1996 Act to encourage local service competition. Moreover, preserving such
"non-competing" agreements could effectively insulate those parties from
competition by new entrants. For example, if a new entrant seeking to provide competitive
local service in a rural community is unable to obtain from a neighboring BOC
interconnection or transport and termination on terms that are as favorable as those the
BOC offers to the incumbent LEC in the rural area, the new entrant cannot effectively
compete.(327) This is because the new entrant will have
to charge its subscribers higher rates than the incumbent LEC charges to place calls to
subscribers of the neighboring BOC.
169. We find that section 259 does not compel us to reach a different conclusion
regarding the application of section 252 to agreements between neighboring LECs.(328) Section 259 is limited to agreements for
infrastructure sharing between incumbent LECs and telecommunications carriers that lack
"economies of scale or scope," as determined in accordance with regulations
prescribed by the Commission.(329) We conclude that the
purpose and scope of section 259 differ significantly from the purpose and scope of
section 251.(330) 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.
Moreover, section 259(b)(7) requires LECs to file with the Commission or the state
"any tariffs, contracts or other arrangements showing the rates, terms, and
conditions under which such carrier is making available public switched network
infrastructure and functions under this section."(331)
We believe that this language further supports our conclusion that Congress intended
agreements between neighboring LECs to be filed and available for public inspection.
Commenters also have failed to persuade us that universal service is jeopardized by our
finding that agreements between neighboring LECs are subject to section 252 filing and
review provisions. Concerns regarding universal service should be addressed by the
Federal-State Joint Board, empaneled pursuant to section 254 of the 1996 Act.(332) The Joint Board has initiated a comprehensive review
of universal service issues and is considering, among other matters, access to
telecommunications and information services in rural and high cost areas.(333)
In addition, as discussed in Section XII, infra, the 1996 Act provides for
exemptions, suspension, or modification of some of the requirements in section 251 for
rural or smaller carriers.
170. Some parties have suggested that we provide parties an opportunity to renegotiate
preexisting contracts. Parties, of course, may mutually agree to renegotiate agreements,
but we decline to mandate that parties renegotiate existing contracts. In addition, as
discussed below, commercial mobile radio service (CMRS) providers that are party to
preexisting agreements with incumbent LECs that provide for non-mutual compensation have
the option of renegotiating such agreements with no termination liabilities or contract
penalties.(334) We believe that generally requiring
renegotiation of preexisting contracts is unnecessary, however, because state commissions
will review preexisting agreements, and may reject any negotiated agreement that
"discriminates against a telecommunications carrier not a party to the
agreement," or that "is not consistent with the public interest, convenience,
and necessity."(335) We recognize that preexisting
agreements were negotiated under very different circumstances, and may not provide a
reasonable basis for interconnection agreements under the 1996 Act. For example,
non-competing neighboring LECs may have negotiated terms that simply are not viable in a
competitive market. It would not foster efficient long-term competition to force parties
to make available to all requesting carriers interconnection on terms not sustainable in a
competitive environment. In such circumstances, a state commission would have authority to
reject a preexisting agreement as inconsistent with the public interest. If a state
commission approves a preexisting agreement, that agreement will be available to other
parties in accordance with section 252(i). Contrary to NYNEX's assertion, once a state
approves an agreement under section 252(e), that agreement is "approved under"
section 252.
171. We decline to require immediate filing of pre-existing agreements. States should establish procedures and reasonable time frames for requiring filing of preexisting agreements in a timely manner. We leave these procedures largely in the hands of the states in order to ensure that we do not impair some states' ability to carry out their other duties under the 1996 Act, especially if a large number of such agreements must be filed and approved by the state commission. We believe, nevertheless, that we should set an outer time period to file with the appropriate state commission agreements that Class A carriers have with other Class A carriers that pre-date the 1996 Act.(336) We conclude that setting such a time limit will ensure that third parties are not prevented indefinitely from reviewing and taking advantage of the terms of preexisting agreements. We are concerned, however, about the burden that a national filing deadline might impose on small telephone companies that have preexisting agreements with Class A carriers or with other small carriers.(337) We therefore limit the filing deadline requirement to preexisting agreements between Class A carriers. We encourage all carriers to file preexisting contracts with the appropriate state commission no later than June 30, 1997, but impose this as a requirement only with respect to agreements between Class A carriers. We find that requiring preexisting agreements between Class A carriers to be filed no later than June 30, 1997 is unlikely to burden state commissions unduly, and will give parties a reasonable opportunity to renegotiate agreements if they so choose, while at the same time, establishing this outer time limit ensures that third parties will have access to the terms of such agreements, under section 252(i), within a reasonable period. We expect to have completed proceedings on universal service and access charges by this filing deadline. States may impose a shorter time period for filing preexisting agreements.
246. 246 47 U.S.C. 251(c)(1).
247. 247 See, e.g., AT&T comments at 86-88; CEDRA comments at 1-9; TCC comments at 7-13.
248. 248 See, e.g., ACSI comments at 7-11; AT&T comments at 86-88; Centennial Cellular Corp. comments at 2-10; Cox comments at 43-46; NCTA comments at 59-63.
249. 249 SBA comments at 8.
250. 250 Ind. Cable & Telecomm. Ass'n reply at 7.
251. 251 See, e.g., Georgia Commission comments at 6; Pennsylvania Commission comments at 19-20; SBA comments at 9; Sprint comments at 10-11; Attorneys General reply at 12-13.
252. 252 BellSouth comments at 10-11; Texas Commission comments at 6-8; USTA comments at 8; see also District of Columbia Commission comments at 14-17.
253. 253 See, e.g., Bell Atlantic comments at 47 (citing Amendment to the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation, WT Docket 95-157, Notice of Proposed Rulemaking, FCC 96-196 (rel. Apr. 30. 1996)); Citizens Utilities comments at 6; Illinois Commission comments at 20-21; Ohio Commission comments at 21.
254. 254 SBC comments at 12-15.
255. 255 Citizens Utilities comments at 6; SBC comments at 7, 20.
256. 256 See e.g., Bell Atlantic comments at 49; U S West comments at 40-42.
257. 257 We previously have held that parties may raise allegations regarding good faith negotiation pursuant to section 208. Cellular Interconnection Proceeding, 4 FCC Rcd 2369, 2371 (1989). The Commission also held in that case that "the conduct of good faith negotiations is not jurisdictionally severable." Id. at 2371.
258. 258 See, e.g., LCI comments at 24; SBA comments at 9; TCI comments at 24.
259. 259 See, e.g., Bell Atlantic comments at 48-49; GVNW comments at 3-4; Illinois Commission comments at 21; Sprint comments at 11-12; USTA comments at 8 n.11; U S West comments at 39-40.
260. 260 See, e.g., GST comments at 5; MFS comments at 10-14; TCC comments at 9 (very broad nondisclosure agreements puts the incumbent in a powerful position, because it has information about numerous companies and the competitor does not have access to that same information); Teleport comments at 5-10; Texas Commission comments at 6-8.
261. 261 See, e.g., ACTA comments at 6-7; Arch comments at 9-10; ITIC comments at 7-8; NCTA comments at 59-63; Teleport comments at 5-10; accord Washington Commission comments at 12.
262. 262 See, e.g., ACTA comments at 6-7; Illinois Commission comments at 21; SBA comments at 9; Sprint comments at 11; TCI comments at 24; Washington Commission comments at 12.
263. 263 GST comments at 5; accord ACSI comments at 7-11; Bell Atlantic comments at 49 (refusing to schedule negotiations after making a request demonstrates bad faith); MFS comments at 10-14; Time Warner comments at 22-23.
264. 264 MFS comments at 10-14; Time Warner comments at 22-23.
265. 265 Time Warner comments at 22.
266. 266 ALTS comments at 12; AT&T comments at 86-88; Cox comments at 45-46; Excel comments at 8-9; Intelcom comments at 3-13; ITIC comments at 7-8; MFS comments at 10-14; LCI comments at 23; NCTA comments at 59-60; Time Warner comments at 22; Washington Commission comments at 12; NTIA reply at 6 n.14.
267. 267 See, e.g., ACSI comments at 7-11; AT&T comments at 86-88; Cox comments at 45-46; GST comments at 6-7; MFS comments at 10-14 (for example, incumbent LECs must provide detailed documentation to support claims that a request to unbundle an element is technically infeasible); TCC comments at 9 (incumbent LECs must provide cost studies that underlie proposed rates); Time Warner comments at 22.
268. 268 U S West comments at 40-42.
269. 269 See, e.g., Cincinnati Bell comments at 8-9; GTE comments at 15-17; PacTel comments at 16-21; TDS comments at 5-6; Anchorage Tel. Utility reply at 6-7.
270. 270 LCI comments at 24; accord GCI reply at 3.
271. 271 ALTS comments at 12; AT&T comments at 86-88; BellSouth comments at 10-11; Time Warner comments at 22.
272. 272 Time Warner comments at 26.
273. 273 AT&T comments at 86-88; CEDRA comments at 8.
274. 274 MFS comments at 10-14.
275. 275 SCBA comments at 10; accord Excel comments at 8-9; SBA comments at 8; Frontier reply at 6.
276. U.C.C. 1-201(19) (1981); see also Black's Law Dictionary at 353 (Abridged ed. 1983) ("Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice, and the absence of design to defraud or to seek an unconscionable advantage . . .").
277. 277 U.C.C. 1-201 (84).
278. 278 Steven J. Burton and Eric G. Anderson, Contractual Good Faith, 8.2.2 at 332 (1995).
279. 279 Id., 8.3.1 at 335-341.
280. 280 47 U.S.C. 252(a)(2).
281. 281 47 U.S.C. 252(b)(1).
282. 282 Section 252(b)(4)(C) requires state commissions to "conclude the resolution of any unresolved issues not later than 9 months after the date on which the local exchange carrier received the request under this section." 47 U.S.C. 252(b)(4)(C).
283. 283 47 U.S.C. 252(b)(4)(B).
284. 284 Id.
285. 285 This is consistent with earlier Commission decisions. See Amendment to the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation, WT Docket 95-157, First Report and Order, FCC 96-196, at para. 20 (rel. Apr. 30, 1996).
286. 286 ALTS comments at Attachment A, 15.
287. 287 For example, an incumbent LEC that offers video programming may be negotiating for the right to use video programming owned by a cable company while the cable company is negotiating terms for interconnecting with the incumbent LEC. Addressing some or all of the issues in the two negotiations collectively could expand the options for reaching agreement, and would equalize the parties' bargaining power, because each has something that the other party desires.
288. 288 See United States v. American Tel. and Tel. Co., 524 F. Supp. 1336, 1356 and n.84 (D.D.C. 1981); see also National Labor Relations Board v. Katz, 369 U.S. 736, 742 (1962); Amendment of Rules and Policies Governing the Attachment of Cable Television Hardware to Utility Poles, 4 FCC Rcd 468, 472 (1989).
289. 289 See, e.g., ALTS comments at 12-13 (contending that U S West has refused to start negotiations until it formed its positions regarding section 251, and that SBC has attempted to interpret and "enforce" state certification requirements).
290. 290 The Commission has reached a consistent conclusion in other instances. See, e.g., Application of Gross Telecasting, Inc., 92 FCC 2d 250, 442 (1981); Public Notice, FCC Asks for Comments Regarding the Establishment of and Advisory Committee to Negotiate Proposed Regulations, 7 FCC Rcd 2370, 2372 (1992).
291. 291 For purposes of our analysis pursuant to the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., our use of the terms "small entities" and "small businesses" does not encompass "small incumbent LECs." We use the term "small incumbent LECs" to refer to any incumbent LECs that arguably might be defined by the Small Business Administration as "small business concerns."
292. 292 See National Labor Relations Board v. Truitt Mfg Co., 351 U.S. 149, 153 (1956) (the trier of fact can reasonably conclude that a party lacks good faith if it raises assertions about inability to pay without making the slightest effort to substantiate that claim); see also Microwave Facilities Operating in 1850-1990 MHz (2GHz) Band, 61 F.R. 29679, 29689 (1996).
293. 293 See discussion of technical feasibility, infra, Section IV. In addition, the Commission's federal advisory committee, the Network Reliability Council, has developed templates that summarize and list activities that need to occur when service providers connect their networks pursuant to defined interconnection specifications or when they are attempting to define a new network interface specification. As consensus recommendations from the Council, we presume the elements defined in the templates are "good faith" issues for negotiation. Comments of the Secretariat of the Second Network Reliability Council at 4-5 (citing Network Reliability: The Path Forward, (1996), Section 2, pp. 51-56).
294. 294 This is consistent with previous FCC determinations. See, e.g., Amendment of Rules and Policies Governing the Attachment of Cable Television Hardware to Utility Poles, 4 FCC Rcd 468, 472 (1989) (good faith negotiations necessitate that, at a minimum, one party must approach the other with a specific request).
295. 295 47 U.S.C. 252(a)(1). Section 252(e) provides that "(a)ny interconnection agreement adopted by negotiation or arbitration shall be submitted for approval to the State commission." 47 U.S.C. 252(e).
296. 296 See, e.g., ALTS comments at 14-16; CompTel comments at 104; GST comments at 7; Jones Intercable comments at 22-23; Ohio Consumers' Counsel comments at 6; Sprint comments at 12; TCC comments at 9-10; see also Louisiana Commission comments at 8 (carriers must submit preexisting agreements upon request by the state commission).
297. 297 Section 252(i) provides that a LEC "shall make available any interconnection, service, or network element provided under an agreement approved under this section to which it is a party to any other requesting telecommunications carrier upon the same terms and conditions as those provided in the agreement." 47 U.S.C. 252(i).
298. 298 AT&T comments at 88-90; Jones Intercable comments at 22-23.
299. 299 ALTS comments at 14-16, reply at 39-41.
300. 300 See, e.g., AT&T comments at 88-90.
301. 301 See, e.g., Arch comments at 9-10; Time Warner comments at 25.
302. 302 See, e.g., BellSouth comments at 10-11; Cincinnati Bell comments at 9-10; Home Tel. comments at 2;
J. Staurulakis comments at 3; F. Williamson comments at 5.
303. 303 See, e.g., Ameritech comments at 95-96; BellSouth comments at 10-11; NYNEX reply at 15-16 (section 251(i) also applies only to agreements approved under section 252).
304. 304 See, e.g., Ameritech comments at 95-96; BellSouth comments at 10-11.
305. 305 California Commission comments at 33.
306. 306 See, e.g., Colorado Commission comments at 50; MFS comments at 66; Michigan Commission Staff comments at 20; Ohio Consumers' Counsel comments at 34; Oregon Commission comments at 33; ALTS reply at 35; Cox reply at 38-39; WinStar reply at 18-19.
307. 307 See, e.g., MFS comments at 67; Oregon Commission comments at 34; ALTS reply at 36; Cox reply at 39.
308. 308 ACTA comments at 6-8; accord Cox reply at 38; WinStar reply at 19.
309. 309 ALTS reply at 35-36. See, e.g., Investigation of the Implementation of the Federal Telecommunications Act of 1996 in Wisconsin, 05-TI-140 (Wisconsin Commission May 17, 1996); In re Negotiated Interconnection Agreements of Telecommunications Carriers, Docket No. 96-098-U (Arkansas Commission rel. Apr. 1, 1996).
310. 310 See, e.g., NYNEX comments at 27 (citing Joint Explanatory Statement at 117, 120; Cong. Rec. S7893 (daily ed. June 7, 1995) (statement of Sen. Pressler)); Rural Tel. Coalition comments at 16; SBC comments at 53; USTA comments at 68-69.
311. 311 Cincinnati Bell comments at 9-10; MECA comments at 20-21; Texas Statewide Telephone Cooperative, Inc. reply at 8-9; U S West reply at 29-30.
312. 312 Home Tel. comments at 2; J. Staurulakis comments at 3; see also USTA comments at 69.
313. 313 NYNEX reply at 15; Rural Tel. Coalition reply at 12.
314. 314 Intermedia comments at 16; LCI comments at 24-26; Sprint comments at 12-13, reply at 13-14.
315. 315 Sprint comments at 12 (pre-Act agreements were entered into under a different regulatory scheme, and without contemplation by the parties that the local market might become competitive; in addition, such contracts might be inconsistent with section 251, and states should not expend resources reviewing them); accord Time Warner comments at 26 (the Commission should establish "fresh look" period as it has done in other cases involving changed circumstances).
316. 316 Intermedia comments at 16; accord LCI comments at 24-26.
317. 317 GST comments at 7.
318. 318 Texas Commission comments at 7-8.
319. 319 See, e.g., Illinois Commission comments at 23-24; Louisiana Commission comments at 8; F. Williamson comments at 5.
320. 320 Illinois Commission comments at 23-24.
321. 321 PacTel comments at 21.
322. 322 47 U.S.C. 252(a).
323. 323 47 U.S.C. 276(b)(3) (addressing nondiscrimination safeguards and regulations regarding payphone service).
324. 324 47 U.S.C. 252(a)(1).
325. 325 See infra, Section XV.B.
326. 326 See, e.g., 47 U.S.C. 251(c)(2)(B) and 251(c)(3).
327. 327 This analysis does not address the separate question of whether an incumbent LEC in a rural area must offer interconnection, resale services, or unbundled network elements. As discussed infra, Section XII, Congress provided rural carriers with an exemption from section 251(c) requirements until the state commission removes such exemption. 47 U.S.C. 251(f)(1).
328. 328 Section 259 requires the Commission to prescribe, within one year after the date of enactment of the 1996 Act, regulations that require incumbent LECs "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 to provide telecommunications services, or to provide access to information services . . . " 47 U.S.C. 259(a). A "qualifying carrier" is a telecommunications carrier that "lacks economies of scale or scope," and that offers telephone exchange service, exchange access, and any other service included in universal service to all consumers in the service area without preference. 47 U.S.C.
259(d).
329. 329 47 U.S.C. 259(d)(1).
330. 330 The Commission plans to initiate a proceeding to establish regulations pursuant to section 259.
331. 331 47 U.S.C. 259(b)(7).
332. 332 Universal Service NPRM, supra.
333. 333 See 47 U.S.C. 251(f).
334. 334 See infra, Section XI.A.
335. 335 47 U.S.C. 252(e)(2)(A).
336. 336 Class A companies are defined as companies "having annual revenues from regulated telecommunications operations of $100,000,000 or more." 47 C.F.R. 32.11(a)(1).
337. 337 See Regulatory Flexibility Act, 5 U.S.C. 601 et seq.
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First Created February 15, 1999
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