UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


AT&T CORP

v.

FCC


99-1538a

D.C. Cir. 2000


*	*	*


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


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


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."


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


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


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


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.


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


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.


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


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


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.


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


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


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


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


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


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


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


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


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


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


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


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


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.


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


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


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 


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


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


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."


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


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


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,


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


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 


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


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


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


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


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.


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


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


[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


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


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


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


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


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


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.