At&T Corp. v. Federal Communications Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 24, 2000 Decided August 1, 2000

No. 99-1538

AT&T Corporation,
Appellant

v.

Federal Communications Commission,
Appellee

Bell Atlantic, U S West Communications, Inc.,
Public Service Commission of the State of New York, et al.,
Intervenors

Consolidated with
99-1540

Appeals of An Order of the
Federal Communications Commission

David W. Carpenter argued the cause for appellants. With
him on the briefs were Mark E. Haddad, Peter D. Keisler,

Daniel Meron, Mark C. Rosenblum, Roy E. Hoffinger, and
Jonathan Jacob Nadler.

Randall B. Lowe, Renee R. Crittendon, Russell M. Blau,
Mark J. Tauber, Michael D. Hays, J. G. Harrington, and
John D. Seiver were on the briefs for intervenors Prism
Communication Services, RCN Telecom Services, Competi-
tive Telecommunications Commission, Close Call America,
Inc., and Global NAPs, Inc.

Jonathan E. Nuechterlein, Deputy General Counsel, Fed-
eral Communications Commission, argued the cause for ap-
pellee. With him on the brief were Christopher J. Wright,
General Counsel, John E. Ingle, Deputy Associate General
Counsel, and James M. Carr, Counsel. Joel Marcus, Coun-
sel, entered an appearance.

Michael E. Glover argued the cause for intervenors Bell
Atlantic and U S West Communications, Inc. With him on
the brief were Randal S. Milch, Edward Shakin, Mark L.
Evans, Henk Brands, William T. Lake, Lynn R. Charytan,
Dan L. Poole and Robert B. McKenna, Jr. John H. Har-
wood, II entered an appearance.

Lawrence G. Malone and Jonathan D. Feinberg were on
the brief for intervenor Public Service Commission of the
State of New York.

Before: Randolph, Tatel and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: Appellants challenge the Federal
Communications Commission's approval of an application by
Bell Atlantic to provide long distance service in New York,
arguing that the company failed to implement two elements of
a fourteen-point competitive checklist prescribed by the Tele-
communications Act of 1996. The FCC's approval of Bell
Atlantic's application was the first time since the 1982 break-
up of AT&T that a Bell operating company received regulato-
ry permission to offer long distance service in a state where it
provides local telephone service. Finding no defect in the
Commission's analysis, we affirm in all respects.

 I

Historically, local telephone companies operated as monop-
olies. "States typically granted an exclusive franchise in each
local service area to a local exchange carrier (LEC), which
owned, among other things, the local loops (wires connecting
telephones to switches), the switches (equipment directing
calls to their destinations), and the transport trunks (wires
carrying calls between switches) that constitute a local ex-
change network." AT&T Corp. v. Iowa Util. Bd., 119 S. Ct.
721, 726 (1999). For the better part of the twentieth century,
appellant AT&T Corporation provided most local and long
distance phone service throughout the country.

In 1974, the United States filed an antitrust action against
AT&T alleging "monopolization by the defendants with re-
spect to a broad variety of telecommunications services and
equipment in violation of section 2 of the Sherman Act."
United States v. American Tel. and Tel. Co., 552 F. Supp 131,
139 (D.D.C. 1982), aff'd sub nom. Maryland v. United States,
460 U.S. 1001 (1983). Following several years of discovery
and nearly a full year of trial, AT&T and the government
settled. Known as the Modification of Final Judgment
("MFJ"), the resulting consent decree required AT&T to
divest itself of the twenty-two Bell operating companies, or
"BOCs," that provided local telephone service.

Consolidated into seven regional holding companies (four
today as a result of mergers), the BOCs continued to have a
monopoly in local phone service in their respective service
areas. Because "there are many ways in which the company
controlling the local exchange monopoly could discriminate
against competitors in the interexchange [long distance] mar-
ket," the MFJ prohibited BOCs from offering so-called "inter-
LATA" or long distance service. AT&T, 552 F. Supp. at 188.
The MFJ left open the possibility that BOCs could someday
provide long distance service, but only if they "los[t] the
ability to leverage their monopoly power into the competitive
[long distance] markets," either "as a result of technological
developments which eliminate the [BOCs'] local exchange
monopoly or from changes in the structures of the competi-

tive markets." Id. at 194. No BOC ever obtained permission
to provide long distance telephone service under the MFJ.

This regulatory landscape remained largely unchanged un-
til Congress enacted the Telecommunications Act of 1996,
Pub. L. No. 104-104, 110 Stat. 56. That Act fundamentally
restructured local telephone markets by ending the BOCs'
local monopoly. Designed to "open[ ] all telecommunications
markets to competition," the Act established "a pro-
competitive, de-regulatory national policy framework" that
sought to eliminate the barriers that competitive local ex-
change carriers, known as "CLECs," faced in offering local
telephone service. S. Conf. Rep. No. 230, 104th Cong., 2d
Sess. 1 (1996). To this end, the 1996 Act requires BOCs to
offer CLECs access to their local telephone networks in three
ways: by selling local telephone services to competitors at
wholesale rates for resale to end users; by leasing network
elements to competitors on an unbundled basis; and by
interconnecting a requesting competitor's network with their
own. See 47 U.S.C. s 251(c)(2)-(4). The 1996 Act requires
BOCs to offer the latter two services on "rates, terms, and
conditions that are just, reasonable, and nondiscriminatory."
Id. s 251(c)(2)(D), (c)(3). Through any of these three routes,
CLECs may offer local phone service in competition with
BOCs.

Added by the 1996 Act, section 252 of the Communications
Act of 1934 established procedures for CLECs to request and
obtain access to network elements and other facilities. The
requesting carrier and the BOC "may" first attempt to nego-
tiate an agreement governing the rates, terms, and conditions
under which the CLEC accesses the BOC's facilities. See id.
s 252(a)(1). If the parties reach an agreement, they must
submit it to the appropriate state commission for approval.
See id. s 252(a)(1), (e)(1). If an agreement is not reached,
section 252 directs the state commission to arbitrate and
resolve the dispute. Id. s 252(b)(1), (b)(4)(C). The state
commission must "ensure that such resolution and conditions
meet the requirements of section 251" and "establish any
rates for interconnection, services, or network elements ac-
cording to subsection (d) of this section." Id. s 252(c)(1)-(2).

Subsection (d) requires rates to be "based on the cost ... of
providing the interconnection or network element (whichever
is applicable), and [ ] nondiscriminatory." Id. s 252(d)(1)(A).
Subsection (f) permits a BOC to file with the appropriate
state commission "a statement of the terms and conditions
that such company generally offers within that State to
comply with the requirements of section 251." Id. s 252(f)(1).
It also requires states to review such statements for compli-
ance with sections 251 and 252(d). Id. s 252(f)(2).

Section 601(a)(1) of the 1996 Act frees BOCs from all
restrictions and obligations imposed by the MFJ, including
the prohibition against providing long distance service. Tele-
communications Act of 1996 s 601(a)(1), Pub. L. No. 104-104,
110 Stat. at 143. To encourage BOCs to open their markets
to competition as quickly as possible, the Act permits them to
provide "in-region" long distance service (long distance ser-
vice originating in a state in which they offered local service
under the MFJ) if they demonstrate that they have opened
their local markets in that state to competition by fulfilling
the requirements of section 271. See 47 U.S.C. s 271(b)(1).
BOCs may immediately begin providing "out-of-region" long
distance service (long distance service originating outside the
states in which the particular BOC offered local service under
the MFJ). See id. s 271(b)(2).

Under section 271, a BOC wishing to provide in-region long
distance service must apply to the FCC for approval. Id.
s 271(b)(1). In its application, the BOC must first demon-
strate that it has satisfied either section 271(c)(1)(A), known
as "Track A," or section 271(c)(1)(B), known as "Track B."
To satisfy Track A, the BOC must show that it has entered
into an agreement to provide access and interconnection to
"one or more unaffiliated competing providers of telephone
exchange service ... to residential and business subscribers."
Id. s 271(c)(1)(A). If no such request for access and inter-
connection has been made, Track B requires the BOC to show
that "a statement of the terms and conditions that the [BOC]
generally offers to provide such access and interconnection
has been approved or permitted to take effect by the State
commission." Id. s 271(c)(1)(B).

 Once the BOC has shown that it has satisfied either Track
A or Track B, it must establish that its offering of services to
CLECs meets the fourteen requirements of a "competitive
checklist" contained in section 271(c)(2)(B). The checklist
incorporates by reference many of the substantive require-
ments of the Act's local competition provisions, sections 251
and 252, described supra at 4-5. See id. s 271(c)(2)(B). For
example, the BOC must demonstrate that it provides "[i]nter-
connection in accordance with the requirements of sections
251(c)(2) and 252(d)(1)"; "[n]ondiscriminatory access to net-
work elements in accordance with the requirements of sec-
tions 251(c)(3) and 252(d)(1)"; "[l]ocal loop transmission ...
unbundled from local switching"; "[l]ocal switching unbun-
dled from transport, local loop transmission, or other ser-
vices"; and "[n]ondiscriminatory access to [ ] 911 and E911
services [and] directory assistance services to allow the other
carrier's customers to obtain telephone numbers." Id.
s 271(c)(2)(B)(i), (ii), (iv), (vi), (vii)(I)-(II). In addition to
satisfying the competitive checklist's fourteen requirements,
the BOC must demonstrate that it will provide in-region long
distance service in accordance with the nondiscrimination and
separate affiliate requirements of section 272. See id.
ss 271(d)(3)(B), 272. Finally, the BOC must persuade the
FCC that "the requested authorization is consistent with the
public interest, convenience, and necessity." Id.
s 271(d)(3)(C).

The statute gives the FCC ninety days to determine wheth-
er an applicant has met section 271's requirements, including
whether it has "fully implemented the competitive checklist."
Id. s 271(d)(3). The Commission must "consult with the
Attorney General," who shall "provide to the Commission an
evaluation of the application using any standard the Attorney
General considers appropriate." Id. s 271(d)(2)(A). Al-
though "[t]he Commission shall give substantial weight to the
Attorney General's evaluation," that evaluation "shall not
have any preclusive effect on any Commission decision." Id.
The FCC must also "consult with the State commission of any
State that is the subject of the application in order to verify
the compliance of the [BOC] with the requirements [for

providing in-region long distance service]." Id.
s 271(d)(2)(B).

Since passage of the 1996 Act, the FCC has implemented
the statute's local competition provisions through a series of
regulations and orders. Of particular relevance to this case,
the Local Competition First Report and Order adopted "ini-
tial rules designed to ... open[ ] the local exchange and
exchange access markets to competition." In the Matter of
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, 11 F.C.C.R. 15499, 15507
p 6 (1996) ("Local Competition First Report and Order").
The Local Competition First Report and Order listed a
minimum set of network elements that BOCs must provide to
competing carriers, established interconnection rules, and
adopted a methodology for pricing network elements known
as "TELRIC" (total element long-run incremental cost). Id.
at 15514-15 pp 27-29.

Prior to the filing of the application at issue in this case, the
FCC had received and rejected five section 271 applications.
It rejected the first because the applicant, SBC Communica-
tions, failed to demonstrate that it satisfied Track A. In the
Matter of Application by SBC Communications, Inc., Pursu-
ant to Section 271 of the Communications Act of 1934, as
amended, to Provide In-Region, InterLATA Services in
Oklahoma, 12 F.C.C.R. 8685, 8686 p 1 (1997), aff'd, SBC
Communications v. FCC, 138 F.3d 410 (D.C. Cir. 1998). It
rejected the others because the applicants failed to comply
with various requirements of the competitive checklist. See
In the Matter of Application of Ameritech Michigan, Pursu-
ant to Section 271 of the Communications Act of 1934, as
amended, to Provide In-Region, InterLATA Services in
Michigan, 12 F.C.C.R. 20543, 20546-47 p 5 (1997) (failure to
provide nondiscriminatory access to operations support sys-
tem, interconnection, and 911 and E911 services); In the
Matter of Application of BellSouth Corporation, et al., Pur-
suant to Section 271 of the Communications Act of 1934, as
amended, to Provide In-Region, InterLATA Services in
South Carolina, 13 F.C.C.R. 539, 547 p 14 (1997) (failure to
(1) provide nondiscriminatory access to operations support

systems, (2) provide unbundled network elements in a man-
ner that permits competing carriers to combine them through
collocation, and (3) offer certain retail services at discounted
rates), aff'd, BellSouth Corp. v. FCC, 162 F.3d 678 (D.C. Cir.
1998); In the Matter of Application by BellSouth Corpora-
tion, et al., Pursuant to Section 271 of the Communications
Act of 1934, as amended, to Provide In-Region, InterLATA
Services in Louisiana, 13 F.C.C.R. 6245, 6246-47 p 1 (1998)
(failure to provide nondiscriminatory access to operations
support system and to make telecommunications services
available for resale); In the Matter of Application of Bell-
South Corporation, BellSouth Telecommunications, Inc., and
BellSouth Long Distance, Inc., for Provision of In-Region,
InterLATA Services in Louisiana, 13 F.C.C.R. 20599, 20605
p 10 (1998) (failure to provide nondiscriminatory access to
operations support system and unbundled network elements).
After oral argument in this case, however, the Commission
approved SBC Communications's application to provide long
distance service in Texas. In the Matter of Application by
SBC Communications, Inc., Southwestern Bell Tel. Co., And
Southwestern Bell Communications Services, Inc. d/b/a
Southwestern Bell Long Distance Pursuant to Section 271 of
the Telecommunications Act of 1996 To Provide In-Region,
InterLATA Services in Texas, FCC No. 00-238 (June 30,
2000).

Bell Atlantic filed its application to provide in-region long
distance service in New York on September 29, 1999. By
then, the Supreme Court had invalidated that portion of the
Local Competition First Report and Order, specifically Rule
319, which listed the network elements that BOCs must
provide to competitors. Iowa Util. Bd., 119 S. Ct. at 734-36.
According to the Court, "the FCC did not adequately consid-
er the 'necessary and impair' standards [of section 251(d)(2)
of the statute] when it gave blanket access to these network
elements." Id. at 734. Because Bell Atlantic filed its applica-
tion while the Commission was still revising its network
element rule in response to the Supreme Court's vacatur, the
company agreed to demonstrate compliance with the vacated
rule. See In the Matter of Application by Bell Atlantic New
York for Authorization Under Section 271 of the Communi-

cations Act to Provide In-Region, InterLATA Service in the
State of New York, 15 F.C.C.R. 3953, 3966-67 p 30 (1999)
("Bell Atlantic"). When this opinion was in page proofs, the
Eighth Circuit, acting on remand from the Supreme Court's
decision in Iowa Util. Bd., invalidated the TELRIC pricing
methodology. See Iowa Util. Bd. v. FCC, No. 96-3321 (8th
Cir. July 18, 2000). By basing rates on hypothetical rather
than actual costs, the court held, the TELRIC methodology
forced BOCs to charge less for network elements than Con-
gress intended. Id., slip op. at 7-8. That decision has no
effect on this case, however, because Bell Atlantic has in fact
shown compliance with the TELRIC methodology, just as it
did with the vacated Rule 319.

The Bell Atlantic application represented the culmination of
more than two years of work by the company and the New
York Public Service Commission ("NYPSC"). After Bell
Atlantic submitted a draft application in February 1997, the
NYPSC commenced collaborative proceedings involving the
company and its competitors to open New York's local ex-
change market to competition. The NYPSC also issued an
order establishing rates for access to certain Bell Atlantic
network elements. Spanning over one hundred pages, that
order set rates for local loops, local switching, tandem switch-
ing, interoffice transport, signal control points, etc. Opinion
and Order Setting Rates for First Group of Network Ele-
ments, Op. No. 97-2 (NYPSC Apr. 1, 1997) ("1997 NYPSC
Order").

At about the same time, the NYPSC began developing
performance measures and service quality standards to as-
sess whether Bell Atlantic was providing the nondiscriminato-
ry access to its network that the 1996 Act requires. Bell
Atlantic, 15 F.C.C.R. at 3959 p 11. The NYPSC also hired
the consulting firm KPMG to test Bell Atlantic's operations
support systems for processing orders from Bell Atlantic's
competitors. After extensive testing, during which Bell At-
lantic corrected many problems, KPMG concluded that the
company's operations support systems could adequately ac-
commodate "reasonable, anticipated commercial volumes" of
competitors' requests for network access. Id. at 3959 p 10.

 On December 21, 1999, the FCC approved Bell Atlantic's
application to provide long distance service in New York.
The Commission began by observing that "[t]he well estab-
lished pro-competitive regulatory environment in New York
in conjunction with recent measures to achieve section 271
compliance has, in general, created a thriving market for the
provision of local exchange and exchange access service.
Competitors in New York are able to enter the local market
using all three entry paths provided under the Act." Id. at
3959 p 13. The FCC cited Bell Atlantic's estimates that
competitors serve over one million phone lines in New York.
Id. at 3960 p 14. According to the Department of Justice,
moreover, CLECs in New York served approximately 8.9
percent of access lines as of June 1999, an amount "signifi-
cantly larger than the national average of less than five
percent." Evaluation of the United States Department of
Justice 9 (Nov. 1, 1999) ("DOJ Evaluation").

Relying on uncontested evidence that Bell Atlantic had
entered into interconnection agreements with several compet-
ing New York carriers, the Commission determined that the
company had satisfied Track A. Bell Atlantic, 15 F.C.C.R. at
3977 p 62. The Commission next examined Bell Atlantic's
compliance with the fourteen components of the competitive
checklist, concluding that the company had "fully implement-
ed" each. 47 U.S.C. s 271(d)(3)(A)(i). The Commission also
found that Bell Atlantic had demonstrated that it would
comply with the separate affiliate and nondiscrimination re-
quirements of section 272. Bell Atlantic, 15 F.C.C.R. at 4153
p 403. Finding approval of the company's application to be
"consistent with promoting competition in the local and long
distance telecommunications markets," the Commission con-
cluded that Bell Atlantic's provision of long distance service in
New York would be in the public interest. Id. at 4162 p 425.

On December 28, 1999, appellants AT&T and Covad Com-
munications, a provider of high-speed, data-oriented telecom-
munications services, appealed the FCC's decision pursuant
to 47 U.S.C. s 402(b)(6), (9), which gives this court exclusive
jurisdiction to review FCC orders relating to applications to
provide long distance service under section 271. After this
court denied appellants' request for stay pending appeal

AT&T v. FCC, Nos. 99-1538, 99-1540 (D.C. Cir. Jan. 4, 2000)
(order denying motion for stay), Bell Atlantic began providing
long distance service to customers in New York.

AT&T mounts four challenges to the FCC's approval of
Bell Atlantic's application, the first two of which Covad joins:
(1) Bell Atlantic's prices for certain network elements do not
conform to the TELRIC pricing methodology; (2) contrary to
the Commission's conclusion, Bell Atlantic fails to provide
competitors nondiscriminatory access to two types of unbun-
dled loops, DSL-capable loops and hot cut loops; (3) the
company imposes use restrictions on combinations of network
elements that violate the 1996 Act; and (4) the company's
proposed script for handling calls requesting new service or
changes to existing service conflicts with section 272's nondis-
crimination safeguards. Supported by intervenors NYPSC,
Bell Atlantic, and U S West, the FCC argues that the
company has satisfied both the competitive checklist and
section 272's nondiscrimination safeguards. We consider
each of appellants' arguments in turn.

II

Section 271's competitive checklist directs the FCC to
determine whether Bell Atlantic's rates (which have been
approved by the NYPSC) comply with section 252's require-
ment that the rates be "just and reasonable" and "based on
the cost ... of providing the ... network element." 47
U.S.C. s 252(d)(1), (d)(1)(A)(i). The FCC considers section
252 satisfied only if the rates conform to TELRIC. See Bell
Atlantic, 15 F.C.C.R. at 4081 p 237; see also Local Competi-
tion First Report and Order, 11 F.C.C.R. at 15844 p 672. A
forward-looking methodology, TELRIC bases rates on "the
cost of operating a hypothetical network built with the most
efficient technology available." Iowa Util. Bd., 119 S. Ct. at
728 n.3. TELRIC is not a specific formula, but a framework
of principles that govern pricing determinations. "[W]hile
TELRIC consists of 'methodological principles' for setting
prices, states retain flexibility to consider 'local technological,
environmental, regulatory, and economic conditions.' " Bell

Atlantic, 15 F.C.C.R. at 4084 p 244 (quoting Local Competi-
tion First Report and Order, 11 F.C.C.R. at 15812). In other
words, while state commissions use TELRIC to establish
rates, application of TELRIC principles may result in differ-
ent rates in different states.

The FCC does not conduct de novo review of state pricing
determinations in section 271 proceedings, nor does it adjust
rates to conform with TELRIC. See Bell Atlantic, 15
F.C.C.R. at 4084 p 244. It assesses only whether those rates
comply with basic TELRIC principles. In language critical
to this case, the FCC described its role this way:

In reviewing state pricing decisions in the context of
section 271 applications, we will not reject an application
because isolated factual findings by a commission might
be different from what we might have found if we were
arbitrating the matter under section 252(e)(5). Rather,
we will reject the application only if basic TELRIC
principles are violated or the state commission makes
clear errors in factual findings on matters so substantial
that the end result falls outside the range that the
reasonable application of TELRIC principles would pro-
duce.

Id.

Neither AT&T nor Covad challenges the TELRIC stan-
dard. They claim instead that rates established by the
NYPSC for leasing three network elements--switches, voice
grade loops, and DSL-compatible loops--violate TELRIC.

We review the FCC's TELRIC compliance determinations
pursuant to the arbitrary and capricious standard. See 5
U.S.C. s 706(2)(A); Achernar Broad. Co. v. FCC, 62 F.3d
1441, 1445 (D.C. Cir. 1995) (applying arbitrary and capricious
standard to FCC action). Highly deferential, that standard
presumes the validity of agency action, requiring us to deter-
mine whether the agency has considered the relevant factors
and "articulate[d] a rational connection between the facts
found and the choice made." Motor Vehicle Mfrs. Ass'n of
the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 43 (1983) (internal quotation marks omitted). We
"may reverse only if the agency's decision is not supported by
substantial evidence, or the agency has made a clear error in

judgment." Kisser v. Cisneros, 14 F.3d 615, 619 (D.C. Cir.
1994).

Three characteristics of section 271 proceedings call for
special deference to the FCC. For one thing, not only do
section 271 issues "require[ ] a high level of technical exper-
tise," Marsh v. Oregon Natural Resources Council, 490 U.S.
360, 377 (1989), but the Commission must consider those
issues in the context of rapid technological and competitive
change. As the agency points out, "at any given point at
which a section 271 application might be filed, the rapidly
changing telecommunications industry will have recently un-
leashed a handful of new technological challenges and unset-
tled legal disputes." Appellee's Br. at 12. To deal with these
constantly-unfolding changes, the section 271 process "must
have some play in the joints." Id. Second, unlike most
agency decisions that we review, much of the FCC's order is
itself a review of a state agency decision. Also possessing a
considerable degree of expertise, the NYPSC did a significant
amount of background work, such as establishing prices,
instituting collaborative proceedings to design provisioning
methods, and developing performance measures. Finally,
and perhaps most important with respect to appellants' chal-
lenges to the NYPSC pricing determinations, enormous flexi-
bility is built into TELRIC. In other words, we decide only
whether the FCC's determination that Bell Atlantic's rates do
not fall "outside the range that the reasonable application of
TELRIC principles would produce" is itself arbitrary or
capricious. Bell Atlantic, 15 F.C.C.R. at 4084 p 244. Cf.
Patrick Thomas v. NLRB, 213 F.3d 651, 2000 WL 694335, at
*6 (D.C. Cir. 2000) ("[A] court reviews with deference a
Board decision that was itself made with deference to the
Union."). Although we thus give substantial deference to the
Commission's decision, we emphasize that "[t]his does not
mean that our review is toothless but merely that we must be
very cautious in entertaining an invitation to reverse." Pat-
rick Thomas, 2000 WL 694335, at *6.

Switching costs

AT&T and Covad claim that the rates the NYPSC set for
switches--the equipment used to direct calls to their destina-

tion--violate TELRIC in two respects: first, the rates ignore
substantial discounts Bell Atlantic will likely receive on the
purchase of new switches, and second, they erroneously in-
clude the costs not just of new switches, but of more costly
"growth additions" to existing switches. With respect to the
latter argument, appellants claim that because TELRIC con-
templates construction of a new network using the most
efficient technology, it requires the NYPSC to have used the
less costly new switches as the basis for the rates. According
to appellants, these two errors caused Bell Atlantic's switch
rates to exceed substantially those that proper application of
TELRIC would have yielded.

Addressing switching costs in its April 1997 pricing order,
the NYPSC began by noting the wide disparity between the
estimates provided by Bell Atlantic ($586 per line) and AT&T
($125 per line). Based on that disparity, other evidence in
the record, and its own analysis, the agency found "neither
figure ... reliable." 1997 NYPSC Order at 84. "In these
circumstances," the NYPSC explained, "[its] staff examined
the data on switching costs closely." Id. at 85. Starting with
the historic cost of switches installed in 1993 and 1994, the
agency adjusted that cost downward to reflect the declining
price of switches, yielding a per-line price of $192.67. The
NYPSC acknowledged that its analysis did not take into
account "atypically large discounts" received by Bell Atlantic
"from its vendors after 1994 in connection with a major switch
replacement program." Id. at 85 n.1. The reason, the
agency explained in a subsequent order, was that it under-
stood that Bell Atlantic would not receive such large dis-
counts in the future. Order Denying Motion to Reopen
Phase 1 and Instituting New Proceeding 3-4 (NYPSC Sept.
30, 1998) ("1998 NYPSC Order Denying Motion to Reopen").

More than a year after the NYPSC issued its 1997 order,
AT&T and other long distance carriers petitioned the agency
to lower switching rates. They relied on evidence, only
recently revealed by Bell Atlantic, that it would in fact
continue to receive large discounts on purchases of all new
switches. Seeking to avoid piecemeal changes to the rates,
and explaining that the new information would affect its prior
analysis in several ways, the NYPSC concluded that "[t]he
web of interconnected effects argues strongly against making

the selective modification urged by the motion without a
comprehensive review of switching costs." Id. at 11. The
NYPSC went on to note that "[w]hile the effect of the
adjustment on switching prices cannot be presumed to be
trivial--though it might turn out to be so--switching costs in
general represent a much smaller component of CLEC ex-
pense than do the much more significant link costs." Id. at
12. Accordingly, the agency declined to revise the rates, but
scheduled a comprehensive review of switching costs to begin
in January 1999. See id.

The FCC found no problem with the NYPSC's resolution of
this issue. "AT&T has presented no evidence to persuade us
that New York did not conform to TELRIC principles simply
because it failed to modify one input into its cost model."
Bell Atlantic, 15 F.C.C.R. at 4085 p 245. Sympathetic to the
NYPSC's position that "its determination of allowable switch
costs was the result of a complex analysis that does not lend
itself to simple arithmetic correction through the adjustment
of a single input," the FCC concluded that the prospect of
future modification makes the rates no less TELRIC-
compliant. Id.

The FCC's decision seems reasonable to us. Not only are
state-agency-approved rates always subject to refinement, but
we suspect that rates may often need adjustment to reflect
newly discovered information, like that about Bell Atlantic's
future discounts. If new information automatically required
rejection of section 271 applications, we cannot imagine how
such applications could ever be approved in this context of
rapid regulatory and technological change. Moreover, both
the NYPSC and the FCC agree that adjusting switching
rates to reflect discounts is not so simple as subtracting the
amount of the discount; it requires other adjustments to the
cost model. Under these circumstances, we are comfortable
deferring to the Commission's conclusion that basic TELRIC
principles have not been violated and that the NYPSC has not
made such "clear errors in factual findings" that switching
costs fall "outside the range that the reasonable application of
TELRIC principles would produce." Id. at 4084 p 244. Af-
ter all, not only is the $193 per-line switching cost consider-

ably closer to AT&T's proposed $125 than to Bell Atlantic's
much higher estimate, and not only do "switching costs in
general represent a much smaller component of CLEC ex-
pense than do the much more significant link costs" (which
appellants have not challenged), 1998 NYPSC Order Denying
Motion to Reopen at 12, but the NYPSC has said it will
reexamine switching discounts, ordering refunds if appropri-
ate.

Appellants' challenge to the inclusion of so-called "growth
additions" is largely a corollary of their discount argument.
At oral argument, FCC counsel explained that growth addi-
tions to existing switches cost more than new switches only
because vendors offer substantial new switch discounts in
order to make telephone companies dependent on the ven-
dors' technology to update the switches. In fact, as far as we
can tell from the record, the growth addition issue did not
even surface in the NYPSC proceedings until after AT&T,
relying on the new evidence about discounts, requested recon-
sideration of switch costs. Accordingly, we think the Com-
mission reasonably concluded that because failure to reflect
discounts did not violate TELRIC, inclusion of growth addi-
tions did not either.

Voice Grade Loops

A loop is " 'a transmission facility between a distribution
frame, or its equivalent, in an incumbent LEC central office,
and the network interface device at the customer premises.' "
Bell Atlantic, 15 F.C.C.R. at 4095 p 268 (quoting Local Com-
petition First Report and Order, 11 F.C.C.R. at 15691). In
plain English, loops are the wires that connect telephones to
the switches that direct calls to their destination. There are
many different types of loops: "two-wire and four-wire analog
voice-grade loops, and two-wire and four-wire loops that are
conditioned to transmit the digital signals needed to provide
services such as ISDN, ADSL, HDSL, and DS1-level sig-
nals." Bell Atlantic, 15 F.C.C.R. at 4095 p 268. The 1997
NYPSC pricing order set rates for Bell Atlantic loops. 1997
NYPSC Order at Attachment D.

 AT&T and Covad challenge the rates for one type of loop--
voice grade local loops. They argue that the NYPSC violated
basic TELRIC principles by assuming that the "feeder"
portion of the loop would always use optical fiber, rather than
copper. This assumption, according to appellants, produced
rates for leasing loops fifteen percent higher than proper
application of TELRIC would have yielded.

AT&T originally advanced this argument in the NYPSC
rate proceeding, claiming that copper feeder should always be
used for loops less than 9,000 feet long. Rejecting this
argument in its 1997 order, the NYPSC based local loop rates
on the assumption that fiber feeder would be used for all
loops. The agency relied on a 1991 Bell Atlantic study
establishing that "the investment costs associated with fiber
exceeded those of copper, but the difference was found to be
more than offset by the lower provisioning and maintenance
costs of fiber." 1997 NYPSC Order at 83. In its rehearing
order, the NYPSC devoted twenty-nine more pages to this
issue, reaffirming its conclusion and elaborating on its reason-
ing. Opinion and Order Concerning Petitions for Rehearing
of Opinion No. 97-2, Op. No. 97-14 (NYPSC Sept. 22, 1997)
("1997 NYPSC Rehearing Order"). Emphasizing TELRIC's
forward-looking character, and relying on its own indepen-
dent analysis, the NYPSC pointed out that while Bell Atlan-
tic's plant includes substantial amounts of copper feeder,
"virtually none is being installed on a going-forward basis."
Id. at 23-24. The reason, the agency explained, is "fiber's
superiority with respect to its initial cost, its ongoing opera-
tion and maintenance expense, and its flexibility and reliabili-
ty." Id. at 24. Not only are fiber's material costs lower than
copper's for the same capacity, but copper's heavier weight
and greater volume make it both more difficult and more
expensive to install. See id. The smaller space taken up by
fiber, moreover, reduces costs substantially, an especially
critical consideration in dense cities like New York. See id.
Finally, fiber offers numerous operational advantages over
copper. See id. at 25. The NYPSC tied all these factors
back to TELRIC: "What TELRIC contemplates is the net-
work that would actually be built, using the most cost-

efficient, forward-looking technology available, which would
certainly lead us to posit all-fiber feeder." Id. at 26.

Largely reiterating the NYPSC's conclusion, the FCC re-
jected appellants' challenge to the use of fiber feeder. "We
have no reason to disagree with the [NYPSC's] conclusion
that Bell Atlantic's use of fiber ... does not make its rates
inconsistent with a TELRIC methodology." Bell Atlantic, 15
F.C.C.R. at 4087 p 249.

Appellants fault the FCC's decision on a host of largely
procedural grounds: the Commission failed to address a
detailed AT&T study that proves copper is more cost-
effective for shorter loops; it failed to consider AT&T's
evidence purportedly showing that other BOCs had conceded
that copper is more cost-effective; and it could not have
reasonably deferred to the NYPSC's findings because the
only evidence the NYPSC relied on (the 1991 Bell Atlantic
study) was never placed in the record and the only rationale
offered by that agency (that fiber feeder is more economical
in dense Manhattan) is "plainly inadequate." Appellants' Br.
at 30.

These arguments miss the mark. The question whether
the FCC adequately considered AT&T's comments is "sub-
sumed within [appellants'] substantive challenge" to the
FCC's conclusion that the assumption of fiber feeder was
appropriate, Chemical Mfrs. Ass'n v. EPA, 28 F.3d 1259, 1263
(D.C. Cir. 1994), and we find no basis for faulting the Com-
mission's decisionmaking on that point. The FCC analyzed
the NYPSC's original and rehearing orders, which exhaus-
tively evaluated AT&T's arguments, thoroughly explained
fiber's superiority, and relied on far more than the unique
characteristics of Manhattan and the 1991 Bell Atlantic study.
Based on this analysis, the Commission determined that
AT&T did not "present[ ] sufficient evidence to prove that the
[NYPSC] erred in its determination." Bell Atlantic, 15
F.C.C.R. at 4087 p 249.

Appellants make one additional argument. They claim that
in the Universal Service Tenth Report and Order the Com-
mission found copper to be more cost-effective than fiber for
short distances. In the Matter of Federal-State Joint Board

on Universal Service; Forward-Looking Mechanism for
High Cost Support for Non-Rural LECs, 14 F.C.C.R. 20156
(1999) ("Universal Service Tenth Report and Order"). That
order, however, expressly stated that "it may not be appropri-
ate to use [the nationwide values developed in the universal
service proceedings] ... for other purposes, such as deter-
mining prices for unbundled network elements." Id. at 20172
p 32. Explaining that the universal service model employed
nationwide, not state-specific, pricing inputs, the Commission
"caution[ed] parties from making claims in other proceedings
based upon the input values [adopted in the Tenth Report
and Order]." Id. In any event, the Tenth Report and Order
did not say that copper is more cost-effective. It said only
that "[w]hen fiber is more cost effective, the model will use it
to replace copper for loops that are shorter than 18,000 feet."
Id. at 20196 p 85 (emphasis added).

Relying on the NYPSC's comprehensive analysis, as the
1996 Act directs, the FCC concluded that Bell Atlantic's use
of fiber for voice grade loops conforms with TELRIC. Not
only have appellants offered no persuasive reason to disturb
that judgment, but we cannot imagine a question more suited
for administrative rather than judicial resolution than wheth-
er copper or fiber loops are more cost-effective. See Associa-
tion of Oil Pipe Lines v. FERC, 83 F.3d 1424, 1445 (D.C. Cir.
1996) ("Because the Commission's analysis required a high
level of technical expertise, the court owes deference to the
Commission's informed and rationally exercised discretion.").

DSL Loop Conditioning

"Digital Subscriber Line" or "DSL" technology "describes
a 'family of transmission technologies that use specialized
electronics at the customer's premises and at a telephone
company's central office ... to transmit high-speed data
signals over copper cables.' " Bell Atlantic, 15 F.C.C.R. at
4087 p 250 (quoting Bell Atlantic Affidavit in Support of DSL
Links). Only recently developed, DSL technology "allows
transmission of data ... at vastly higher speeds than can be

achieved with analog data transmission." Bell Atlantic, 15
F.C.C.R. at 4117 p 316 n.1000. When competitors seek to
provide DSL service over Bell Atlantic loops that exceed a
certain length, the company must sometimes "condition"
those loops to make them DSL-compatible by removing load
coils and bridge taps that interfere with transmission of
digital signals. See id. at 4088-89 p 252.

Although BOCs have been obligated to provide access to
unbundled loops capable of supporting DSL technologies
since the Local Competition First Report and Order was
issued in 1996, demand for DSL-compatible loops in New
York emerged only in the past year. See id. at 4117 pp 316-
17. In fact, a Covad witness testifying in late July 1999
explained that Covad had just begun ordering DSL loops.
For this reason, the 1997 NYPSC Order did not address rates
for DSL conditioning, so when Bell Atlantic filed its section
271 application in September 1999, the company had in place
only the interim conditioning rates that it had filed with the
NYPSC just one month earlier.

Responding to increased demand for DSL loops and to
complaints from competitors that Bell Atlantic's interim con-
ditioning charges were excessive, the NYPSC initiated fast-
track proceedings to set permanent conditioning rates. As a
result of those proceedings, the agency significantly reduced
Bell Atlantic's interim conditioning charges. It also created a
"placeholder" rate subject to future adjustment as the
NYPSC conducts further inquiry. See Order and Opinion
Concerning DSL Charges, Op. No. 99-12 (NYPSC Dec. 17,
1999). Because the NYPSC issued this order only one week
before the end of the FCC's ninety-day review period, the
Commission's order focuses only on Bell Atlantic's interim
rates.

Although concerned that interim rates "create uncertainty,"
the FCC concluded that "a BOC's application for in-region
[long distance service] should not be rejected solely because
permanent rates may not yet have been established for each
and every element or nonrecurring cost of provisioning an
element." Bell Atlantic, 15 F.C.C.R. at 4090-91 p 258.

"[T]his question," the Commission explained, "should be ad-
dressed on a case-by-case basis." Id. at 4091 p 258. The
Commission listed several factors that led it to conclude that
Bell Atlantic's use of interim rates did not preclude a finding
of checklist compliance: "[t]he conditioning of DSL loops is a
relatively new issue"; the NYPSC "has a substantial track
record of setting other applicable prices at TELRIC rates";
"Bell Atlantic's interim rates are subject to refund or true-up
if the [NYPSC] determines that they exceed applicable
TELRIC-based costs"; and the interim rates applied only to
"a few ancillary items" affecting a small percentage of unbun-
dled loops. Id. at 4090-91 pp 258-59. Noting that "[a]t some
point, states will have had sufficient time to complete [perma-
nent rate proceedings]," the FCC warned that it will "become
more reluctant to continue approving section 271 applications
containing interim rates. It would not be sound policy for
interim rates to become a substitute for completing these
significant proceedings." Id. at 4091 p 260.

AT&T and Covad argue that Bell Atlantic's interim condi-
tioning rates violate TELRIC. "When there is a substantial
challenge to a particular rate that has not been previously
reviewed by a state commission, the FCC's duty is to deter-
mine its lawfulness and grant the application only if it is
found lawful." Appellants' Reply Br. at 17.

Because AT&T and Covad's argument rests on their inter-
pretation of section 271, we employ the familiar two-step
Chevron process. Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 842-43 (1984). If "Con-
gress has directly spoken to the precise question at issue,"
the court "must give effect to the unambiguously expressed
intent of Congress." Id. In determining whether Congress
has spoken to the precise question at issue, we "exhaust the
traditional tools of statutory construction." Natural Re-
sources Defense Council, Inc. v. Browner, 57 F.3d 1122, 1125
(D.C. Cir. 1995) (internal quotation marks omitted). "[I]f the
statute is silent or ambiguous with respect to the specific
issue," the court must determine whether the agency's inter-
pretation "is based on a permissible construction of the
statute." Chevron, 467 U.S. at 843. In making this determi-

nation, we afford substantial deference to the agency's inter-
pretation of the statute because "the responsibilities for as-
sessing the wisdom of ... policy choices and resolving the
struggle between competing views of the public interest are
not judicial ones, and because of the agency's greater famil-
iarity with the ever-changing facts and circumstances sur-
rounding the subjects regulated." FDA v. Brown & William-
son Tobacco Corp., 120 S. Ct. 1291, 1300 (2000) (internal
quotation marks and citation omitted). As long as the agen-
cy's interpretation is reasonable, we uphold it "regardless
whether there may be other reasonable, or even more reason-
able, views." Serono Lab., Inc. v. Shalala, 158 F.3d 1313,
1321 (D.C. Cir. 1998).

In support of their argument that section 271 requires the
Commission to have denied Bell Atlantic's application on the
basis of its interim conditioning rates, appellants rely on
section 271(d)(3)'s requirement that the FCC "not approve
[an application] unless it finds that ... [the applicant] has
fully implemented the competitive checklist." 47 U.S.C.
s 271(d)(3). They also point out that the competitive check-
list requires Bell Atlantic to offer "[n]ondiscriminatory access
to network elements in accordance with the requirements of
section[ ] ... 252(d)(1)," which the FCC has interpreted to
require TELRIC-compliant rates. Id. s 271(c)(2)(B)(ii).
Neither provision, however, speaks, as Chevron put it, unam-
biguously to "the precise question at issue": Does the fact
that interim rates (reviewed by neither the NYPSC nor the
FCC) govern a small component of local loops that has only
recently become the subject of competitor demand preclude a
finding of checklist compliance?

Moving to Chevron step two, we think the FCC has reason-
ably answered this question in the negative. Rapid advances
in technology continuously spark demand for new products
and services. See Bell Atlantic, 15 F.C.C.R. at 4091 p 259.
As a result, competitors may often demand access to new
technologies before state agencies are able to set TELRIC-

compliant rates--exactly what happened here. Given this
fact of life in the telecommunication industry at this early
stage of the implementation of the 1996 Act, and given that
the FCC has only ninety days in which to act on section 271
applications, the agency's approach strikes a reasonable bal-
ance between ensuring that an applicant has opened local
markets to competition by charging just and reasonable rates
and not allowing technological developments to become obsta-
cles to an applicant's entry into in-region long distance mar-
kets.

In deferring to the Commission's resolution of the interim
rate issue, we are influenced by an additional factor. The
agency narrowly cabined its acceptance of interim rates to the
unique circumstances of this case: emergence of a recently
developed technology produced demand for a new service
before the state commission had an opportunity to approve
permanent rates; the state commission instituted fast-track
proceedings to set permanent rates; and those proceedings
ended just days before the FCC approved the section 271
application.

III

Checklist item four requires BOCs to show that they
provide competitors with "[n]ondiscriminatory access to net-
work elements," which include local loops, and "[l]ocal loop
transmission from the central office to the customer's premis-
es, unbundled from local switching or other services." 47
U.S.C. s 271(c)(2)(B)(ii), (iv). Appellants contend that Bell
Atlantic fails to provide nondiscriminatory access to two types
of unbundled loops: DSL-capable loops and voice grade, hot
cut loops.

DSL-capable loops

Comments submitted to the FCC opposing Bell Atlantic's
application charge the company with failing to provide access
to loops capable of supporting DSL technology on a nondis-
criminatory basis. For example, Covad summarized its data
as follows: "Covad's own, substantiated data shows that for
every 100 loop orders it places in New York, only 50% will

receive a due date within 72 hours. Of those 50 remaining
orders, only 74% (37) will be wired in the central office by the
time Bell Atlantic has committed to do so. And of those 37
remaining orders, only 78% (29) of them will actually be
provisioned to the customer's premises on time." The Justice
Department was also concerned about Bell Atlantic's provi-
sioning of DSL loops: "As to Bell Atlantic's historical perfor-
mance in provisioning DSL loops, we are unable to conclude
on the current record that Bell Atlantic has demonstrated an
acceptable level of performance. It is possible, however, that
the Commission may obtain information not currently avail-
able to the Department that would support such a conclu-
sion.... [W]e cannot conclude that CLECs currently have
access to DSL loops necessary for them to compete effective-
ly." DOJ Evaluation at 27-28.

The FCC took a different approach. Acknowledging the
concerns about Bell Atlantic's performance with respect to
DSL loops, the FCC based its finding of checklist compliance
on the company's provisioning of unbundled loops generally,
not of DSL-capable loops in particular. In reaching this
conclusion, the Commission relied on several factors. To
begin with, it observed that although BOCs have been obli-
gated to provide access to DSL-capable loops since 1996, the
Commission had not "previously provided guidance to the
BOCs as to the type and level of proof necessary in this area
to establish compliance with section 271." Bell Atlantic, 15
F.C.C.R. at 4117 p 316. Moreover, the Commission ex-
plained, "no previous applicant has made a separate showing
on the provision of xDSL loops." Id. (The "small 'x' before
the letters 'DSL' signifies the use of the term as a generic
transmission technology." Id. at 4087 p 250 n.818.)

Second, the FCC pointed out that because demand for DSL
loops did not surface until 1999, the NYPSC and other state
authorities had only recently begun developing and adopting
performance standards and measures for DSL loop ordering
and provisioning. See id. at 4117 p 317. Considering DSL
issues for the first time in August 1999, the NYPSC initiated
collaborative proceedings to address Bell Atlantic's DSL loop
provisioning by defining provisioning methods and developing

DSL-specific performance standards. See id. The FCC
explained: "Bell Atlantic and competing carriers have agreed
to joint testing and provisioning procedures for xDSL loops.
Provisioning xDSL loops to competitors involves processes
that are more complex than those involved with the provision
of a voice-grade loop." Id. at 4118 p 319.

Third, DSL loops represent only a "small fraction" of all
unbundled loops. Id. at 4118-19 pp 320-21. In support of
this finding, the Commission noted that Bell Atlantic provi-
sioned just seven DSL-specific loops in June 1999, fifty-six in
July, 449 in August, and 653 in September. Id. at 4118 p 320.
Although the company also provisioned more than 3,300
premium loops since January 1999 that could "on occasion" be
used for DSL service, the FCC was unable to determine what
portion, if any, was so used. Id. at 4119 p 320 n.1012. In
contrast to the small number of DSL loops, Bell Atlantic
provisioned 50,000 unbundled voice grade loops through Sep-
tember 1999. See id. at 4119 p 321.

Finally, Bell Atlantic and its competitors (including Covad)
submitted conflicting data about Bell Atlantic's provisioning
performance. Noting that "[t]he absence of a New York
performance benchmark or [NYPSC] reconciliation of con-
flicting data claims makes it difficult for this Commission to
decide between the competing statistics," the FCC explained
that different methodologies in calculating the statistics likely
accounted for the divergence and "complicate[d] its efforts to
analyze the data." Id. at 4120 p 326.

"In light of these unique circumstances," the Commission
concluded, "we should rely upon Bell Atlantic's overall show-
ing of loop performance in evaluating whether Bell Atlantic
has met its burden of demonstrating that it provides unbun-
dled local loops in accordance with checklist item 4." Id. at
4121 p 327. Acknowledging that this analysis diverged from
the Justice Department's, the FCC explained: "We have
given substantial weight to the Department of Justice's views,
but nonetheless, based upon our review of the record on loops
as a whole, find that Bell Atlantic establishes that it provi-
sions unbundled local loops at a level of performance suffi-
cient for checklist compliance." Id. at 4121 p 328. The

Commission cautioned, however, that "[i]f xDSL services
continue to grow rapidly ... the aggregate loop results will
be more heavily influenced by Bell Atlantic's performance in
provisioning xDSL-specific loops. If the future aggregate
performance declines from current levels, we will take appro-
priate enforcement action." Id. at 4122 p 329.

AT&T and Covad claim that the Commission's reasoning
suffers from several flaws. The first is statutory. Section
271, they point out, requires the FCC to determine whether
an applicant "has fully implemented the competitive checklist"
and denies the FCC the power to "limit or extend the terms
used in the competitive checklist." 47 U.S.C.
s 271(d)(3)(A)(i), (d)(4). According to appellants, the evi-
dence reveals systemic discrimination with respect to DSL
loops, thus precluding a finding that Bell Atlantic "fully
implemented" the competitive checklist.

Responding with a Chevron argument, the FCC contends
that Congress has not spoken to the "precise question" that
appellants raise: Must the Commission make a finding of
nondiscriminatory access with respect to each type of loop, or
does the statute permit the agency to evaluate a BOC's
overall loop performance? The Commission argues that the
statute speaks generally of nondiscriminatory access to "net-
work elements" and "local loop transmission," and that the
statute nowhere unambiguously requires it to make pass-fail
evaluations of each category of loop. According to the Com-
mission, the fact that section 271 says "fully implemented,"
not "substantially complied," does not answer the question of
what must be fully implemented.

We agree with the FCC that the statute is ambiguous with
respect to the precise issue before us. Section 271 does not
say that an applicant must show that it provides nondiscrimi-
natory access to each category of loop or to every single loop.
The statute requires only that the BOC provide "[n]ondis-
criminatory access to network elements" (which include local
loops) and "[l]ocal loop transmission." 47 U.S.C.
s 271(c)(2)(B)(ii), (iv). It thus leaves open precisely what

section 271's nondiscriminatory access requirement means.
That the FCC may not "limit or extend the terms used in the
competitive checklist," id. s 271(d)(4), changes nothing. The
Commission neither "limit[ed]" nor "extend[ed]" the term
"local loop transmission," nor did it disregard any checklist
item. Rather, it gave content to the statute by defining
nondiscriminatory access to unbundled local loops.

Because Congress has not spoken to the precise question at
issue, we ask whether the FCC reasonably interpreted sec-
tion 271 to allow assessment of an applicant's overall provi-
sioning of loops, as opposed to mandating pass-fail analysis
with respect to DSL-capable loops. See Chevron, 467 U.S. at
843. We think it did. To begin with, in reading the term
"nondiscriminatory access" not to require a separate showing
with respect to DSL-capable loops, the Commission relied on
the same characteristics of the DSL loop market that influ-
enced its decision regarding interim rates: "competitors have
been ordering xDSL-capable loops in New York for a rela-
tively short period of time; there has been a recent surge in
demand; and xDSL-capable loops remain a small percentage
of loop orders." Bell Atlantic, 15 F.C.C.R. at 4121 p 327. In
addition, the agency explained, "[p]rovisioning xDSL loops to
competitors involves processes that are more complex than
those involved with the provision of a voice-grade loop." Id.
at 4118 p 319. Moreover, not only did the NYPSC institute
proceedings to improve Bell Atlantic's DSL performance, but
the FCC might have been unable to complete its work within
the ninety-day statutory review period had it been required
to make separate determinations with respect to each and
every type of loop. As both the Commission and intervenors
point out, there are many different types of loops, including
two-wire loops, four-wire loops, analog loops, digital loops,
fiber loops, and copper loops. See id. at 4095 p 268, 4097
p 275; Bell Atlantic and U S West's Br. at 5. There are also
"countless uses to which loops can be put, including residen-
tial service, business service, voice service, data service, alarm
service, and so on. Under [appellants'] theory, each of these

different kinds and uses of loops could become independent
checklist items requiring stand-alone satisfaction." Id.

Our conclusion that the FCC's interpretation is reasonable
rests, as did the agency's decision, on the "unique factual
circumstances" presented by Bell Atlantic's application with
respect to DSL loops: demand for DSL loops had only
recently surfaced, DSL loops constitute but a small fraction of
total loop orders, and provisioning DSL loops involves techni-
cal difficulties not encountered in provisioning voice grade
loops. See Bell Atlantic, 15 F.C.C.R. at 4119 p 322. Unlike
Bell Atlantic, moreover, "[f]uture applicants ... may have the
benefit of clearly-defined performance standards and verified
performance data.... [and] will have a clear picture of the
evidentiary showing [the FCC] would expect for a showing of
checklist compliance with respect to xDSL-capable loops."
Id. at 4122 p 330 n.1032. We therefore expect, as did the
FCC, that as DSL-capable loops become a larger proportion
of unbundled loops, and as performance standards are devel-
oped, checklist compliance will require "a separate and com-
prehensive evidentiary showing with respect to the provision
of xDSL-capable loops." Id. at 4122 p 330.

That the Justice Department had a different view about
DSL-capable loops does not undermine the Commission's
order. The FCC never disputed the Justice Department's
concerns about Bell Atlantic's provisioning of DSL loops.
Acknowledging those concerns, the Commission disagreed
with the Department about what section 271 required. Inter-
preting the Telecommunications Act is the FCC's job, not the
Justice Department's, a proposition recognized by both Con-
gress and the Department. See 47 U.S.C. s 271(d)(2)(A)
("[T]he Attorney General's evaluation ... shall not have any
preclusive effect on any Commission decision"); DOJ Evalua-
tion at 13 n.25 ("We have examined these facts to assess their
impact on the development of competition in New York and
have not, however, attempted to determine whether they
establish compliance with the legal requirements of the com-
petitive checklist or the Commission's rules, matters which we
leave for the Commission's judgment.").

Appellants make one final argument about DSL loops.
They claim the FCC improperly relied on Bell Atlantic's

promise--made in an ex parte submission shortly before the
Commission approved its application--to establish a separate
affiliate to provide retail advanced services, such as DSL
services. See Bell Atlantic, 15 F.C.C.R. at 4123 p 331 n.1036.
In support, they point to this sentence from the Commission's
order: "In this case, we have further assurance that compet-
ing carriers in New York will have nondiscriminatory access
to xDSL-capable loops in the future as a result of Bell
Atlantic's commitment to establish a separate affiliate
through which it will offer retail advanced services." Id. at
4122-23 p 331. Notwithstanding this statement, the record
does not support appellants' argument. The Commission
rejected Covad's motion to strike Bell Atlantic's ex parte
submission, expressly stating that it had not relied on it in
approving the application. Id. at 3970 p 40. The order itself,
moreover, indicates that the Commission did not rely on the
Bell Atlantic submission. The order mentions the submission
only after concluding that the company provided nondiscrimi-
natory access to loops, and then only in the context of
advising future applicants about what they would need to do
to obtain approval. Id. at 4122-23 WW 331-33.

Hot Cut Loops

When a customer changes its local service provider from
Bell Atlantic to a competitor, Bell Atlantic must perform a
"hot cut," "manually disconnecting the customer's loop in the
Bell Atlantic central office and reconnecting the loop at the
competing carrier's collocation space." Id. at 4122-23 p 291
n.925. "The customer is taken out of service while the hot
cut is in progress, thereby making the cut 'hot,' although if
the cut is successful, the service disruption will last no more
than five minutes." Id.

AT&T and Covad mount two challenges to the FCC's
conclusion that Bell Atlantic provisions hot cut loops in a
nondiscriminatory manner. They challenge both the stan-
dard the Commission used and the factual basis for the
agency's conclusion.

The FCC has developed two standards for determining
whether BOCs provide nondiscriminatory access to certain

products or services, both of which it has applied in prior
section 271 proceedings. When considering "those functions
the BOC provides to competing carriers that are analogous to
the functions a BOC provides to itself in connection with its
own retail service offerings"--i.e., those with retail ana-
logues--the Commission asks whether the BOC has "pro-
vide[d] access that is equal to ... the level of access that the
BOC provides itself, its customers, or its affiliates, in terms of
quality, accuracy, and timeliness." Id. at 3971 p 44. With
respect to functions lacking retail analogues, the Commission
looks "to whether the BOC's performance offers an efficient
competitor a meaningful opportunity to compete." Id. at
4095 p 269. Because provisioning hot cuts has no retail
analogue, the FCC applied the "meaningful opportunity to
compete" standard to Bell Atlantic's hot cut performance.
Id.

Use of this standard was erroneous, appellants contend.
"The FCC should have required Bell Atlantic to prove that it
was providing hot cuts with the least amount of service
disruption and missed appointments that is technically and
commercially feasible." Appellants' Br. at 45. Appellants
derive this standard in the following way. They begin with
Rule 311(b), which governs functions having retail analogues:
"to the extent technically feasible," the rule says, BOCs must
provide access to network elements at the same level of
quality as they provide to their own customers. 47 C.F.R.
s 51.311(b). Appellants argue that Rule 311(b) applies to hot
cuts because the FCC said in the order approving Bell
Atlantic's application that the standard for compliance absent
retail analogues (as in the case of hot cuts) is no weaker than
the standard where there are retail analogues. Accordingly,
they argue, the meaningful opportunity to compete standard
employed in the former scenario must include a requirement
that the BOC take all technically feasible steps to provision
hot cut loops. Appellants also contend that their standard is
compelled by the statute's requirement that BOCs provide
nondiscriminatory access to local loops.

We are unconvinced. Applying to obligations that have
retail analogues, Rule 311(b) has nothing to do with obli-

gations, like hot cut provisioning, that have no such analogue.
As the FCC points out, the meaningful opportunity standard
"is neither stronger nor weaker than the standard for func-
tions with retail analogues. It is simply different, because it
requires an objective level of performance rather than a level
that varies with each carrier's individual retail performance."
Appellee's Br. at 33. Appellants thus may not import Rule
311(b)'s "technically feasible" requirement into the meaning-
ful opportunity to compete standard. Section 271's "nondis-
criminatory" requirement, moreover, is not self-defining.
While appellants' definition is plausible, the Commission in-
terprets the word differently, and it is to the Commission that
we owe deference.

Applying the meaningful opportunity standard, the FCC
determined that Bell Atlantic made "a minimally acceptable
showing" of checklist compliance with respect to hot cuts.
Bell Atlantic, 15 F.C.C.R. at 4115 p 309. It found that the
company completed over ninety percent of hot cuts within a
specified period of time, that fewer than five percent resulted
in service outages, and that fewer than two percent of hot cut
lines reported installation troubles. Id. at 4114-15 p 309.
Appellants advance several challenges to this conclusion.
Our review is pursuant to the arbitrary and capricious stan-
dard. See 5 U.S.C. s 706(2)(A).

Appellants first argue that the FCC failed to give "substan-
tial weight," 47 U.S.C. s 271(d)(2)(A), to the Justice Depart-
ment's finding that "the number and magnitude of the defi-
ciencies [in Bell Atlantic's hot cut provisioning] are imposing
a real constraint on competition through the use of unbundled
loops and that significant improvement is needed in this
area," DOJ Evaluation at 20. We disagree with appellants.
The Commission's analysis and the Justice Department's
evaluation rested on the same factual findings--those made
by the NYPSC--but differed over the standard a BOC must
meet to satisfy the statute. As the Justice Department itself
explained: "Our assessment of the facts regarding Bell Atlan-
tic's wholesale performance is substantially consistent with
the NYPSC's assessment.... To the extent there is a
difference between the Department's judgment and that of

the NYPSC, it arises largely from the Department's conclu-
sion that needed improvements should be achieved before
Bell Atlantic is authorized to provide [long distance service] in
New York, rather than relying on post-271 approval regulato-
ry mechanisms to attempt to ensure such improvements."
Id. at 13-14 (footnote omitted). Moreover, the Department
explained: "We have examined these facts to assess their
impact on the development of competition in New York and
have not, however, attempted to determine whether they
establish compliance with the legal requirements of the com-
petitive checklist or the Commission's rules, matters which we
leave for the Commission's judgment." Id. at 13 n.25.

The Commission and the Justice Department thus disa-
greed only about where to draw the line between acceptable
and unacceptable hot cut performance. The Commission was
satisfied with Bell Atlantic's level of performance; the De-
partment was not. As the Department recognized, line-
drawing is the agency's responsibility. Congress required
only that the FCC give the Department's evaluation "substan-
tial weight," admonishing that the evaluation should not have
"preclusive effect." 47 U.S.C. s 271(d)(2)(A). To accept
appellants' argument--particularly where the Justice Depart-
ment and the FCC agreed on the facts but disagreed about
the law--would give the Department's evaluation precisely
such preclusive effect.

AT&T and Covad next argue that the FCC failed to give
"substantial weight" to the Justice Department's conclusion
that Bell Atlantic's hot cut deficiencies had reduced competi-
tion in the New York market. But as the Commission noted
in the order approving the company's application, "the De-
partment did not specify in what manner and to what extent
the New York local exchange market is affected adversely by
these problems. Nor did the Department provide any indica-
tion as to what level of hot cut performance or what types of
improvements Bell Atlantic should be required to demon-
strate in order to satisfy section 271." Bell Atlantic, 15
F.C.C.R. at 4108 p 297. To be sure, the FCC conducted no
detailed analysis of the effect on competition, relying instead

on industry-approved metrics (such as on-time performance
and service outages) to conclude that Bell Atlantic provided
competitors with a meaningful opportunity to compete. The
Commission certainly could have undertaken its own competi-
tion studies, but given that it is the agency's responsibility to
determine precisely how to measure whether an applicant
provides nondiscriminatory access to local loops, we find its
reliance on industry-approved metrics neither arbitrary nor
capricious.

Appellants also contend that the FCC failed to provide
reasoned support for its conclusion that Bell Atlantic met the
Commission's performance targets. Noting that the NYPSC
advocated a ninety-five percent on-time performance rate,
they claim that the Commission failed to support its determi-
nation that a ninety percent rate represents a meaningful
opportunity to compete. As the FCC points out, however,
the NYPSC also said that a ninety percent rate cannot be
considered discriminatory. Appellee's Br. at 35. Equally
important, the Commission has wide discretion to determine
where to draw administrative lines, and appellants point to
nothing suggesting that the agency abused its discretion in
drawing the line at ninety as opposed to ninety-five percent.
See Department of Health and Human Svcs., Indian Health
Service, Oklahoma City v. FLRA, 885 F.2d 911, 917 (D.C.
Cir. 1989) ("Because of the need for expertise and judgment,
the drawing of the lines between [competing proposals] is
ultimately within the jurisdiction of the [agency], which has
been vested by Congress with administration of the statute,
whose decision must be sustained absent arbitrary action.").
The same principle refutes appellants' challenge to the Com-
mission's conclusion that Bell Atlantic satisfactorily per-
formed hot cuts with minimal service outages (five percent)
and installation troubles (two percent).

AT&T and Covad next argue that the FCC's conclusion
that fewer than five percent of customers suffered service
outages caused by Bell Atlantic rests on a legal error, i.e.,
that the five percent figure did not include service outages
where fault could be attributed to neither Bell Atlantic nor
AT&T. Because Bell Atlantic bears the burden of establish-

ing that it has satisfied the competitive checklist, appellants
argue, the FCC must assume that the company caused the
outages of unattributed origin, raising its error rate to 6.5
percent. But how does attributing outages of unknown origin
to Bell Atlantic follow automatically from the proposition that
the company has the burden of proof? Appellants never
explain this connection. Moreover, we find no reason to
disturb the Commission's judgment that Bell Atlantic satis-
fied its burden of proof. The company offered evidence about
the number of service outages, which AT&T attempted to
rebut with its own data. Relying on an NYPSC reconciliation
of this conflicting data, the FCC concluded that many of the
outages cited by AT&T could not fairly be attributed to Bell
Atlantic. See Bell Atlantic, 15 F.C.C.R. at 4110-11 pp 302-
03. The outages-of-unknown-origin problem thus represents
a failure of AT&T's rebuttal evidence, not of Bell Atlantic's
proof.

Equally unpersuasive is appellants' argument that "it was
absurd for the FCC to find that CLECs have nondiscrimina-
tory access to unbundled loops when unrebutted evidence
showed that more than 10 percent of CLEC loop orders
result in dropped [directory] listings." Appellants' Br. at 54.
The Commission responded to this argument in the order
approving Bell Atlantic's application, stating: "We find that
Bell Atlantic has taken adequate measures to detect any
dropped listings and restore them to the directory assistance
database promptly. No other commenter raises this objec-
tion, suggesting the difficulty is of little competitive conse-
quence. In fact, several parties support Bell Atlantic's asser-
tion of compliance with this checklist item." Bell Atlantic, 15
F.C.C.R. at 4134 p 355 (footnote omitted). Acknowledging
that the Justice Department, relying on an AT&T study, had
expressed concern about directory listings, the Commission
explained that the Department "did not have the benefit of
Bell Atlantic's reply [to AT&T's study], which we believe
sufficiently rebuts AT&T's claims." Id. at 4134 p 356. Al-
though the Commission did not document all problems with
AT&T's study, its conclusion finds sufficient support in the
record and is neither arbitrary nor capricious.

 IV

We turn to AT&T's challenge to the use restrictions Bell
Atlantic places on certain combinations of network elements.
Bell Atlantic and its competitors use network elements to
provide two types of telecommunications services: exchange
services, which subscribers use to make calls within local
exchange areas (local calls), and exchange access services,
which long distance carriers use to originate and terminate
long distance calls. Adhering to an NYPSC policy, Bell
Atlantic prohibits competing carriers from using a certain
combination of unbundled network elements--a combination
of loop and transport known as the enhanced extended link or
"EEL"--to provide exchange access (long distance) services
unless those carriers use those elements primarily to provide
exchange (local) services. In other words, Bell Atlantic de-
nies EEL access to carriers seeking to use them either
exclusively or predominately for long distance service; those
carriers must instead provide long distance service as they
had before the 1996 Act--by purchasing special access ser-
vices from Bell Atlantic. Special access charges for those
services exceed what competitive carriers like AT&T would
have to pay to lease EELs. Thus this dispute.

The Commission originally considered these use restric-
tions in its Local Competition First Report and Order, finding
them to violate section 251(c)(3)'s requirement that BOCs
"provide such unbundled network elements in a manner that
allows requesting carriers to combine such elements in order
to provide such telecommunications service." 47 U.S.C.
s 251(c)(3). Because long distance service is a "telecommuni-
cations service," the FCC reasoned, BOCs must provide
access to network elements to carriers wishing to use them to
provide long distance as well as local service. "Although we
conclude ... that we have discretion under the 1934 Act, as
amended by the 1996 Act, to adopt a limited, transitional plan
to address public policy concerns raised by the bypass of
access charges via unbundled elements," the FCC explained,
"we believe that our interpretation of section 251(c)(3) ... is
compelled by the plain language of the 1996 Act." Local

Competition First Report and Order, 11 F.C.C.R. at 15679
p 356.

In 1999, the Supreme Court vacated the rule listing the
network elements BOCs must provide to competitors, see
Iowa Util. Bd., 119 S. Ct. 721, leading the Commission to
reconsider its position with respect to EEL access. As part
of the process of developing new unbundled network element
rules, the Commission issued a Supplemental Order expressly
authorizing--indeed, mandating--the use restrictions that ap-
pellants challenge here. Issued approximately one month
before the FCC approved Bell Atlantic's application, the
Supplemental Order provides:

[U]ntil resolution of our Fourth [Further Notice of Pro-
posed Rulemaking], which will occur on or before June
30, 2000, interexchange carriers (IXCs) may not convert
special access services to combinations of unbundled
loops and transport network elements.... This con-
straint does not apply if an IXC uses combinations of
unbundled network elements to provide a significant
amount of local exchange service, in addition to exchange
access service, to a particular customer.

In the Matter of Implementation of the Local Competition
Provisions of the Telecommunications Act of 1996, 15
F.C.C.R. 1760, 1760 p 2 (1999) ("Supplemental Order") (em-
phasis added), clarified, In the Matter of Implementation of
the Local Competition Provisions of the Telecommunications
Act of 1996, FCC No. 00-183 (June 2, 2000) ("Supplemental
Order Clarification"). In other words, the Commission man-
dated these use restrictions on an interim basis. In a Supple-
mental Order Clarification, released June 2, 2000, the Com-
mission extended the temporary constraint beyond June 30,
"while we compile an adequate record ... for addressing the
legal and policy issues that have been raised." Supplemental
Order Clarification at p 8.

Acknowledging that it had changed its position, the FCC
explained that the interim rule "is consistent with the Com-
mission's finding in the Local Competition First Report and
Order, that we may, where necessary, establish a temporary
transitional mechanism to help complete all of the steps
toward the pro-competitive goals of the 1996 Act, including

the full implementation of a competitively-neutral system to
fund universal service and a completed transition to cost-
based access charges." Supplemental Order, 15 F.C.C.R. at
1763 p 7. Under the Commission's universal service program,
local telephone service in high-cost areas is subsidized by
incumbent LEC exchange access revenue. The FCC was
concerned that if it allowed carriers to bypass special access
charges by using network elements to provide their own
exchange access, LEC exchange access revenue would de-
cline, thus threatening universal service funding.

In comments opposing Bell Atlantic's application (submit-
ted before promulgation of the Supplemental Order), AT&T,
relying on the same reasons the FCC gave in the Local
Competition First Report and Order, contended that these
use restrictions are unlawful, precluding the Commission's
finding that Bell Atlantic provided "nondiscriminatory access
to network elements in accordance with the requirements of
sections 251(c)(3) and 252(d)(1)." 47 U.S.C. s 271(c)(2)(B)(ii).
The Commission responded in the order approving Bell At-
lantic's application:

In the wake of the Supreme Court's January 25, 1999
decision vacating the Commission's Rule 51.319 that iden-
tified the network elements incumbent LECs are re-
quired to provide on an unbundled basis, and prior to
adoption of our order reinstating that rule, the incum-
bents' obligations with regard to offering unbundled net-
work elements or combinations thereof has been unclear.

Bell Atlantic, 15 F.C.C.R. at 4080 p 236 (citing Iowa Util. Bd.,
119 S. Ct. 721). "Given this vacuum," the FCC reasoned, "it
would be inequitable to penalize Bell Atlantic for complying
with the rules established by the New York Commission,"
which permit these use restrictions. Id. The Commission
also relied on its determination in the Supplemental Order
that the imposition of use restrictions on an interim basis was
lawful. See id.

Renewing its argument here, AT&T claims that Bell Atlan-
tic's use restrictions violate section 251(c)(3). According to
AT&T, the Supplemental Order is unlawful and Bell Atlan-
tic's imposition of use restrictions precludes a finding of
checklist compliance. The FCC responds that compliance

with Commission orders cannot serve as a basis for rejecting
an application. The reason, the FCC explains, is that the
statute does not permit appellants in section 271 proceedings
to collaterally attack orders or rules adopted by the Commis-
sion in other proceedings. Calling its position "prudent," the
Commission further argues that "any such challenge could be
brought only through a petition for review of the Supplemen-
tal Order itself, see 47 U.S.C s 402 (a), not as a collateral
attack on this section 271 appeal, see 47 U.S.C. s 402 (b)(6),
(9)." Appellee's Br. at 40. "Because the Supplemental Or-
der must be deemed lawful for purposes of this case," the
Commission concludes, "Bell Atlantic's use restrictions cannot
be a basis for challenging its section 271 authorization." Id.

Since this issue presents a straightforward question of
statutory construction, we again invoke Chevron. Under
Chevron step one, the "precise question" is this: In a section
271 proceeding, may an applicant's compliance with a collater-
al order provide the basis for a finding that the applicant has
not "fully implemented the competitive checklist"? 47 U.S.C.
s 271(d)(3)(A)(i). Put another way, does the statute require
the Commission in section 271 proceedings to entertain chal-
lenges to orders adopted in other proceedings? We cannot
see how section 271(d)(3)(A)(i) speaks unambiguously to this
issue. The section says nothing about what full implementa-
tion requires, nor whether the Commission can interpret it as
being satisfied by compliance with agency orders.

The question, then, is whether the FCC's interpretation of
section 271(d)(3)(A)(i) is reasonable. See Chevron, 467 U.S.
at 843. The Commission based its interpretation on the "very
unfortunate practical consequences" that would result from
adopting AT&T's interpretation of the statute. Appellee's
Br. at 41. Under that interpretation, during the ninety-day
statutory review period the FCC would have to resolve all
collateral challenges to rules and orders issued in other
proceedings, and then defend its decision in a section 271
appeal to this court. According to the Commission, this
would risk converting "precisely focused, extremely expedit-
ed" section 271 "adjudications, as well as this Court's subse-

quent review proceedings, into forums for the mandatory
resolution of major industry-wide issues already pending in
traditional notice-and-comment rulemaking proceedings." Id.

Given the deference we owe the Commission, particularly
where, as here, it has made a judgment about the most
efficient way to proceed in a complex administrative matter,
we find its interpretation of the statute reasonable. The
Commission's concerns about encumbering the ninety-day
administrative process and prolonging litigation, thus delay-
ing BOC entry into long distance markets, seem well-founded.
Under AT&T's interpretation of the statute, parties to section
271 proceedings could challenge (before both the Commission
and this court) virtually every aspect of the agency's local
competition regulations--including TELRIC, as AT&T coun-
sel conceded at oral argument. Such a challenge would
further complicate these already enormously complex pro-
ceedings, requiring the Commission, in addition to resolving
the many other issues before it, to present a comprehensive
defense of TELRIC, all within the ninety days prescribed by
the statute. We would then have to determine whether
TELRIC was the appropriate pricing methodology, and in
doing so we would create a holding that would supplant any
pending petitions for review of the underlying TELRIC or-
ders, at least in this circuit. We thus agree with the FCC
that allowing collateral challenges could change the nature of
section 271 proceedings from an expedited process focused on
an individual applicant's performance into a wide-ranging,
industry-wide examination of telecommunications law and pol-
icy.

Perhaps allowing substantive challenges to collateral orders
would result in speedier realization of competitive local and
long distance telephone markets. But the FCC has a differ-
ent view, and this being a policy judgment, it is for the
agency--not this court--to make. "Congress quite clearly
gave the Commission the primary responsibility to make
delicate judgments under this statute...." SBC Communi-
cations, 138 F.3d at 421. We are particularly comfortable

deferring to the Commission's judgment because the agency
adopted the Supplemental Order only as "a limited, transi-
tional plan to address public policy concerns, relating to
universal service, raised by the bypass of access charges via
unbundled elements." Cf. Competitive Telecommunications
Ass'n v. FCC, 117 F.3d 1068, 1073-75 (8th Cir. 1997) ("Comp-
Tel").

We do not agree with AT&T that AT&T v. FCC, 978 F.2d
727 (D.C. Cir. 1992) requires a different result. There,
AT&T filed a section 208 complaint challenging a competitor's
failure to file a tariff in violation of the Communications Act.
The Commission, acknowledging that this court had invalidat-
ed a previous order exempting nondominant carriers from
filing tariffs, deferred consideration of the "validity" of the
policy to a future rulemaking and dismissed AT&T's com-
plaint. Id. at 731. Calling the Commission's action an "ad-
ministrative law shell game," id. at 732, we found the dismiss-
al of AT&T's complaint "with only a promise to address the
legal issue it raised in a future rulemaking" to be arbitrary
and capricious, id. at 733.

AT&T differs from this case in a fundamental respect.
Unlike there, where the Commission dismissed AT&T's sec-
tion 208 complaint, here the Commission fully considered
AT&T's challenges to the Commission's approval of Bell
Atlantic's section 271 application. Although the Commission
declined to consider AT&T's challenge to the Supplemental
Order, there is no evidence that its reason for doing so was,
as in AT&T, a desire to "avoid judicial review" motivated by a
"fear[ ] ... [that the order] cannot withstand judicial scruti-
ny." Id. at 731. Instead, the Commission relied on its
view--reasonable, we have held--that section 271 does not
permit collateral challenges to Commission orders. AT&T
could have challenged the Supplemental Order by filing a
petition for review pursuant to 47 U.S.C. s 402(a). In fact,
this is exactly what Bell Atlantic and other BOCs did when
challenging the TELRIC methodology--they filed a petition
for review of the Local Competition First Report and Order,
which the Eighth Circuit resolved just days ago. See Iowa
Util. Bd. v. FCC, No. 96-3321 (8th Cir. July 18, 2000). AT&T
may still be able to challenge the Supplemental Order by
filing a section 208 complaint when Bell Atlantic actually

refuses to permit it to use EELs to provide long distance
service. Thus this case involves neither an "administrative
law shell game" nor a "promise to address the legal issue ...
in a future rulemaking." Id. at 732-33.

A final note. The parties debate the implications of Comp-
Tel, 117 F.3d at 1073-75. The FCC argues that the decision
supports the interim restrictions authorized by the Supple-
mental Order. AT&T thinks that CompTel was wrongly
decided. We need not resolve that debate because the lawful-
ness of the Supplemental Order is not a proper subject of this
section 271 proceeding.

V

This brings us to AT&T's final challenge to the Commis-
sion's order. In Bell Atlantic's section 271 application, the
company stated its intention to market its affiliate's long
distance service to customers who call Bell Atlantic to estab-
lish or change their existing local service. Bell Atlantic
explained that when it receives calls relating to local service,
it will mention its affiliate's long distance service, then offer
to read the names of other long distance carriers in random
order.

AT&T claims that Bell Atlantic's practice violates section
272(c)(1), which prohibits BOCs from discriminating between
their long distance affiliate and other providers of long dis-
tance service. See 47 U.S.C. s 272(c)(1). Section 272(g)(2),
however, expressly permits BOCs to engage in joint market-
ing. See id. s 272(g)(2). Under section 272(g)(3), moreover,
"[t]he joint marketing and sale of services permitted under
this subsection shall not be considered to violate the nondis-
crimination provisions of subsection (c) of this section." Id.
s 272(g)(3). We read this provision to exempt joint market-
ing activities from section 272(c)(1)'s nondiscrimination re-
quirement. It is true, as AT&T points out, that section
272(g)(3) is titled "Rule of construction," but we do not see
how this alters its clear implications.

AT&T also argues that prior to the 1996 Act the FCC
required BOCs to read the names of available long distance
carriers in alphabetical order, showing favoritism to none.
According to AT&T, because section 251(g) requires BOCs to
adhere to all pre-Act nondiscrimination requirements until

"explicitly superseded by regulations prescribed by the Com-
mission," 47 U.S.C. s 251(g), BOCs may not deviate from the
prior practice of reading the list of all long distance carriers,
including themselves, in alphabetical order. The Commission
persuasively responded to this issue in its 1997 Order denying
BellSouth's South Carolina application:

[T]he equal access obligations requiring BOCs to provide
the names and telephone numbers of interexchange car-
riers in random order were written at a time when BOCs
could not provide (and therefore could not market) long
distance services. Now that BOCs ... are permitted
under the Act to market their services jointly, we must
harmonize the existing equal access requirements with
the right under the Act to engage in joint marketing.

In the Matter of Application of BellSouth Corp., 13 F.C.C.R.
at 671 p 238 (footnote omitted).

VI

Approving a section 271 application requires a delicate
judgment about the current state of competition in local
markets, as well as how best to foster future competition.
The FCC must ensure--as it has in five previous cases--that
BOCs failing to comply with the 1996 Act's local competition
provisions are not allowed to provide long distance service.
The Commission must be equally careful to ensure--as it has
in this case--that BOCs that satisfy the statute's require-
ments are not barred from long distance markets. "Setting
the bar for statutory compliance too high would inflict two
quite serious harms," as the FCC points out. Appellee's Br.
at 11. "First, it would dampen every BOC's incentive to
cooperate closely with state regulators to open its local mar-
kets to full competition.... Second, setting the bar too high
would simultaneously deprive the ultimate beneficiaries of the
1996 Act--American consumers--of a valuable source of
price-reducing competition in the long distance market." Id.

We believe that the Commission set the bar at a reasonable
height. It demanded real evidence that Bell Atlantic had
complied with all checklist requirements, but at the same
time, it did not allow " 'the infeasible perfect to oust the
feasible good.' " Edison Elec. Inst. v. ICC, 969 F.2d 1221,

1227 (D.C. Cir. 1992) (quoting Commonwealth of Pennsylva-
nia v. ICC, 535 F.2d 91, 96 (D.C. Cir. 1976)). Given the
evidence of growing competition in the New York local tele-
phone market, see supra at 9-10, the NYPSC's careful work
on a host of technical and complex issues, and the thorough
analysis conducted by the FCC in the limited time permitted
by section 271(c), we find no basis for faulting the Commis-
sion's conclusion that Bell Atlantic satisfied the statute's
requirements for entry into the long distance telephone mar-
ket.

The Commission's order approving Bell Atlantic's applica-
tion is affirmed.

So ordered.