DA 97-2351 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Ameritech, The Bell Atlantic Telephone ) Companies, BellSouth Telecommunications, Inc.. ) GTE Service Corporation, NYNEX ) Telephone Companies, Pacific Bell, ) Southwestern Bell Telephone ) Company, U S West Communications, Inc., ) National Exchange Carrier Association, Inc., ) ALLTEL Telephone Services Corporation. Sprint ) Local Telephone Companies, and Southern New ) England Telephone Company ) ) Petitions for Waivers of Part 69 to ) Provide Resold Local Exchange Services and ) Unbundled Common Lines ) MEMORANDUM OPINION AND ORDER Adopted: November 13, 1997 Released: November 13, 1997 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. In response to state commission initiatives and in anticipation of local exchange competition, Ameritech, the Bell Atlantic Telephone Companies (Bell Atlantic), BellSouth Telecommunications, Inc. (BellSouth), GTE Service Corporation (GTE), NYNEX Telephone Companies (NYNEX), Pacific Bell (Pacific), Southwestern Bell Telephone Company (SWBT), U S West Communications, Inc. (U S West), National Exchange Carrier Association, Inc. (NECA), ALLTEL Telephone Services Corporation (ALLTEL), Sprint Local Telephone Companies (Sprint LTCs) and Southern New England Telephone Company (SNET) filed petitions seeking waivers of the Commission's Part 69 rules.1 These waiver 1 Petitions are listed in Appendix A. In its August 30, 199S petitions, NYNEX also requests permission to withdraw the Petition for Waiver of Part 69 of the Commission's rules that it tiled on October 3, 1994 in connection with its offering of unbundled common lines to competitive local exchange carriers in the State of New York. NYNEX states that its August 30, 1995 petition supersedes its earlier petition. We grant NYNEX's request to withdraw its 1994 petition. 18249 requests involve the recovery of several types of charges the end user common line charge, the carrier common line charge, and the charge assessed to an end user for changing its presubscribed interexchange carrier when they provide unbundled loops to competing carriers under state regulatory regimes established independently of the local competition provisions of the Telecommunications Act of 1996 (1996 Act).2 These waiver petitions were submitted prior to the Commission's adoption of rules in the Local Competition Order2 implementing the local competition provisions of the 1996 Act, and we consider them separately from the various requirements established under section 251 of that Act. Nothing in this Order affects the charges that are to be levied when an incumbent LEG provides unbundled network elements, including loops and wholesale services, under the negotiation and arbitration procedures of section 252.4 For the reasons stated below, we grant the petitions.5 H. BACKGROUND 2. The petitioning parties are local exchange carriers (LECs) and two associations of exchange carriers providing interstate and intrastate access services that enable interexchange carriers (IXCs) to originate and terminate interstate and intrastate long-distance calls. Part 69 of the Commission's rules .governs the rate structure and pricing of interstate access charges, and prescribes the rate elements for switched access services offered in LEC interstate tariffs.6 2 Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56 (1996) (codified at 47 U.S.C. §§ 151 et seq.) (1996 Act). 3 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, First Report and Order, 11 FCC Red 15499 H996) (Local Competition Order), Order on Reconsideration, 11 FCC Red 13042 (1996), petition for review pending and partial stay granted, sub nom. Iowa Utilities Board v. FCC, 109 F.3d 418 (8th Cir. 1996), vacated in part, Iowa Utilities Board v. FCC, No. 96-3321 (8th Cir. July 18, 1997). 4 47 U.S.C. § 252. 5 We note that SWBT and Pacific Bell filed petitions seeking recovery of unbundled loop costs on an unseparated basis. See In the Matter of Pacific Bell Petition for Waivers to Implement Loop Unbundling in California, filed January 26, 1996 and In the Matter of Southwestern Bell Telephone Company, Petition for Waivers to Implement 1995 Texas Telecommunications Law, filed October 27, 1995. These petitioners subsequently filed motions to withdraw their respective petitions. Motion to Withdraw Pacific Bell's Expedited Petition for Waivers, filed September 24, 1997; Motion to Withdraw Southwestern Bell Telephone Company's Expedited Petitions for Waivers, filed September 24, 1997. We grant these motions for withdrawal. 6 47 C.F.R. Part 69. 18250 3. Under the Part 69 Rules, before their recent amendment by the Access Reform First Report and Order,7 LECs recover the portion of the cost of common lines that is allocated to the interstate jurisdiction8 through two charges: (1) end users pay a flat monthly charge per line, known as the end user common line (EUCL) charge or subscriber line charge; and (2) IXCs pay a charge known as the carrier common line (CCL) charge that is assessed per-minute of interstate switched access usage. The Part 69 rules currently require a LEG to charge residential customers and single-line customers a monthly EUCL of $3.50 or the LEC's actual allocated interstate cost per loop, whichever is lower.9 A LEC is required to charge multi-line business customers a monthly EUCL of $6.00 per line or the LEC's actual allocated interstate cost per loop, whichever is lower.10 The CCL charge is customarily billed by the LEC based upon the IXC's minutes of use (MOU) over a common line, which are measured at the end office switch. 11 In accordance with the Commission's price cap rules, price cap LECs adjust the per-minute CCL charge annually to account for usage growth. 12 The third type of charge at issue in the instant petitions is the presubscribed interexchange carrier (PIC) change charge. In 1985 the Commission issued an order allowing LECs to recover from the end user customer a nonrecurring charge for executing a change in the customer's PIC. 13 4. In March 1995, in the Rochester Waiver Order, the Commission approved a petition filed by Rochester Telephone Corporation (Rochester) requesting waivers of the 7 Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, Transport Rate Structure and Pricing and End User Common line Charges, FCC 97-158, CC Docket Nos. 96-262, 94-1, 91- 213, 95-72 (rel. May 16, 1997) ("Access Reform First Report and Order"), Reconsideration granted in part, Access Charge Reform, et. al., Order on Reconsideration, 12 FCC Red 10119 (\997)(Access Charge Sua Sponte Reconsideration Order); Second Order on Reconsideration and Memorandum Opinion and Order, FCC 97-368, CC Docket Nos. 96-262, 94-1 and 91-213 (rel. October 9, 1997). 8 The Commission's separations rules allocate 25 percent of the common line costs of most LECs to the interstate jurisdiction, and 75 percent to the intrastate jurisdiction. LECs with especially high common line costs allocate a higher percentage of these costs to the interstate jurisdiction. 47 C.F.R. § 36.154(c). 9 47 C.F.R. § 203(a). 10 47 C.F.R. § 69.104(d). " Most LECs recover at least two types of costs through the CCL charge: (1) the interstate portion of the cost of providing local loops that is not recovered by the EUCL paid by end users; and (2) the cost of long-term support (LTS) payments remitted by the LEC to the National Exchange Carrier Association (NECA) to reduce the CCL charges of the LECs remaining in the NECA common line pool. See 47 C.F.R. § 69.612. 12 The growth or "g" factor is the percentage change between the minutes of use per access line during the base period and the minutes of use per access line during the previous base period. See 47 C.F.R. § 61.45(c). 13 See Investigation of Access and Divestiture Related Tariffs, CC Docket No. 83-1145, Memorandum Opinion & Order, 101 FCC 2d 911, 932 (Appendix B, J 27) (1985) ("Access Charge Investigation"). 18251 Commission's Part 69 rules to permit Rochester: (1) to recover the EUCL and PIC-change charges from carriers that purchase subscriber lines for resale and from carriers that purchase unbundled exchange access, rather than recovering the EUCL and PIC-change directly from end users; and (2) to recover the CCL charges from any entity that purchases Rochester's unbundled exchange access but does not purchase local switching from Rochester, rather than recovering the charge from IXCs. 14 The Commission found that Rochester showed good cause for the requested waivers because of the special circumstances created by Rochester's proposal to permit carriers to purchase subscriber lines for resale to end users. The Commission stated that by offering the local exchange service for resale and by unbundling subscriber lines from other network functions, Rochester created a situation where it would no longer have a direct relationship with end users, IXCs, or both, and that this was not contemplated when the Commission created the rules governing the recovery of access charges. 15 Specifically, in situations where Rochester provided unbundled loops, Rochester would no longer have a direct relationship with end users or IXCs and would need to recover the EUCL and PIC-change charges from the purchasers of the unbundled loops instead of the end user, and the CCL charge from the purchasers of the unbundled loops instead of the IXC. And in situations where Rochester provided local exchange service for resale, it would no longer have a relationship with the end user and thus would need to recover the EUCL and PIC-change charges from the reseller instead of the end user. The Commission therefore permitted Rochester to collect the EUCL, PIC-change, and CCL charges from carriers that purchase and resell Rochester's unbundled common lines. 16 5. The Commission also permitted Rochester to collect the CCL charge from carriers that purchase Rochester's unbundled loops, through a flat-rated charge rather than a per-minute charge because Rochester would be unable to measure the originating or terminating minutes of use on lines for which it does not provide the local switching function. The Commission required Rochester to calculate its initial flat-rated CCL charge by multiplying its average monthly interstate MOU by its per-minute CCL rate and dividing by the total number of access lines. 17 The Commission found that this calculation would result in a flat-rated charge equal to the total CCL charges that the competitive provider would have paid if each of the lines Rochester was reselling carried the same level of traffic that Rochester averages on its subscriber lines. The Commission determined that the growth in MOUs used to adjust the common line price cap basket should be calculated in a manner that reasonably estimates the growth rates of competitive local retail service providers that use Rochester's subscriber lines, rather than permitting Rochester to calculate the growth rate 14 Rochester Telephone Corporation, Petition for Waivers to Implement its Open Market Plan, Order, 10 FCC Red 6776 (1995) ("Rochester Waiver Order"). 15 Id at 6781, para. 12. 16 Id at 6783, para. 16. 17 Id . at 6783, para. 17. 18252 based solely upon the lines it can measure. The Commission adopted this approach because, under the current formula for the common line price cap basket, if the rate of growth in interstate switched access minutes of use on Rochester's measured lines was lower than the growth rate on the unmeasured lines, the "g" factor used to adjust the common line price cap index would be understated and the price cap applicable to Rochester's CCL rates would be artificially high. 18 The Commission suggested that Rochester use the traffic growth rate of its affiliate, Frontier, as a surrogate for other carriers that use Rochester's common lines. The Commission also stated that it would consider, in the tariff process, reasonable alternative mechanisms that Rochester might suggest. 19 6. On February 8, 1996, the President signed into law the 1996 Act, which establishes a pro-competitive deregulatory national communications policy. On August 8, 1996, the Commission released the Local Competition Order, which implemented Section 251 of the 1996 Act. Section 251 of the 1996 Act requires all incumbent LECs to offer unbundled network elements to interconnecting carriers.20 Prices for unbundled network elements are set either by negotiated agreements among the parties, or by states in the Section 252 arbitration process.21 Section 251 also requires incumbent LECs to offer for resale any telecommunications service at wholesale rates that the LEC offers at retail to subscribers. 7. The Commission, in the Local Competition Order, also concluded that purchasers of unbundled network elements that used those elements, including unbundled loops, to provide local exchange service to end user customers were not subject to access charges including the CCL charge and the EUCL for traffic traversing those elements.22 With respect to resale, the Commission determined that resellers of retail incumbent LEC services were still required to pay access charges to the incumbent LEC.23 The Commission observed that the resale requirements of the 1996 Act create a situation for the entire industry 18 Id at 6784, para. 19. 19 Id at 6784, para. 20. 20 47 U.S.C. § 251. 21 Local Competition Order, 11 FCC Red at 15812. 22 Id at 15864. For a limited period of time, the Commission permitted incumbent LECs to recover the CCL charge and a charge equal to 75% of the transport interconnection charge (TIC) from carriers that used unbundled local switching elements to provide interstate switched access service, in order to minimize the possibility that implementation of section 251 would have an adverse affect on universal service. Although the specific rules promulgated pursuant to the Local Competition Order that affect intrastate pricing were vacated by the United States Court of Appeals for the Eighth Circuit, the Commission's authority regarding the application of access charges to unbundled elements used to provide interstate access were upheld. See Iowa Utilities Board v. FCC, No. 96-3321, (8th Cir. July 18, 1997). 23 Idat 15982-83. 18253 that is analogous to the situation Rochester Telephone faced in 1995.24 Because incumbent LECs will no longer have a direct relationship with the end user customer, the Commission determined that similar relief is warranted when carriers resell local exchange service pursuant to Section 251 and permitted incumbent LECs to assess the EUCL and PIC-change charge on purchasers of wholesale services under section 251.25 8. In the May 7, 1997 Access Reform First Report and Order, the Commission amended the access charge rules governing price cap LECs to rationalize the access charge rate structure, ensuring that charges more accurately reflect the manner in which the costs of providing access are incurred. The Access Reform First Report and Order adjusted the regulatory system for recovery of common line costs, establishing a flat-rated presubscribed interexchange carrier charge (PICC) that replaced in large part the recovery of such costs through the CCL. The Commission determined that to the extent common line costs are not recovered through EUCL charges and the PICC, price cap LECs may recover such costs through a residual per-minute CCL charge on originating minutes.26 The Access Reform First Report and Order also reaffirmed the Commission's decision to exclude access charges from the sale of unbundled network elements.27 III. POSITIONS OF THE PARTIES A. Waiver Petitions 9. The Regional Bell Holding Companies, GTE, NECA, ALLTEL, Sprint LTCs, and SNET request waivers of Section 69.104 of the Commission's rules28 to permit recovery of EUCL charges associated with local exchange services offered for resale and with unbundled subscriber lines from the carriers that purchase the services or unbundled loops rather than from end users. Petitioners assert that a waiver is necessary because resellers, purchasers of unbundled loops, or both, would become the LEC's customer, and the LEG would no longer have a direct relationship with the end user. Petitioners contend that the waivers would not change the amount of the EUCL charged, but would simply permit LECs to bill the EUCL to the competitive carrier, that, in turn, could recover these costs from its end user customers. Petitioners state that the Part 69 restrictions on the EUCLs charged to 2" Id. at para. 983. 25 Id at para. 983. 26 To the extent that the sum of a LEC's originating local switching charge and any residual per-minute CCL, transport interconnection charge (TIC) and marketing expense charge collectively exceed the sum of its originating local switching, CCL and TIC charges on December 31, 1997, the excess may be collected through a per-minute charge on terminating access. Id at n.54. 27 Id at para.337. 2S 47 C.F.R. § 69.104. 18254 residential, single-line business, and multi-line business users will continue to apply.29 Ameritech and ALLTEL contend that failure to grant this waiver would provide resellers with a windfall and increase the subsidy borne by IXCs, through an increased CCL charge.30 10. Pacific, GTE, Ameritech, SWBT, ALLTEL, Sprint LTCs, and SNET additionally request waivers of the Commission's 1985 order that authorizes LECs to assess a charge to an end user for changing the customer's presubscribed interexchange carrier (PIC).31 The petitioning LECs seek waivers in order to assess the PIC-change charge to a carrier in cases where the carrier purchases local exchange service for resale or unbundled local loops. They argue that the same rationale that justifies a waiver for EUCL charges justifies a similar waiver for the PIC-change charge.32 Ameritech, Pacific, GTE, BellSouth, SWBT, and ALLTEL state that their requested EUCL charge waiver would apply only to resellers of local exchange services.33 11. In addition to the foregoing waivers, U S West, GTE, NYNEX, Bell Atlantic, BellSouth,34 NECA, ALLTEL, and SNET request waivers of Section 69.105 of the Commission's rules to enable them to collect CCL charges from competing carriers that purchase unbundled common lines35 rather than from interexchange carriers (IXCs),36 and to assess the charge on a fiat-rated basis instead of a per-minute basis as specified under current Commission rules.37 As in the Rochester Waiver Order, these carriers argue that the waivers 29 See BellSouth Petition at 3-4; Pacific Petition at 3; GTE Petition at 4-5; U S West Petition (WY/Uf) at 3-4; U S West Petition (Iowa) at 4; Ameritech Petition at 2-3; Bell Atlantic Petition at 3-4; NECA Petition at 4- 5; SNET Petition at 4. 30 Ameritech Petition at 3; ALLTEL Petition at 4 and n.2. 31 See Access Charge Investigation, 101 FCC 2d at 932. 32 Pacific Petition at 4; SWBT Petition at 7-8; GTE Petition at 6; Ameritech Petition at 4-5; ALLTEL Petition at 4-5; Sprint LTC Petition at 3; SNET Petition at 5. 33 See Ameritech Petition at 2; Pacific Petition at 3; GTE Petition at 1; BellSouth Petition at 3-4; SWBT Petition at 5; NECA Petition at 4; ALLTEL Petition at 3. 34 Although BellSouth's original petition, filed October 3, 1995, only requested waivers to recover EUCL charges from resellers, BellSouth subsequently filed an ex parte presentation on April 26, 1996, requesting waivers to collect the CCL charge from local exchange carriers that purchase BellSouth's unbundled common lines. On May 2, 1996, MCI filed comments in opposition to BellSouth's ex parte filing. 35 US West specifies that the requested waiver would apply where U S West provides the unbundled lines, but the reseller provides its own switching facilities. 36 Where the LEC continues to provide switched access service, it will continue to recover the usage sensitive CCL charge from IXCs as required by the Commission's Part 69 rules. 37 47 C.F.R. §§ 69.603(e), 69.612. 18255 are necessary because the LECs would be unable to measure the interstate switched access usage on unbundled loops, and even if that were possible, the LECs would be unable to identify the IXC that used the unbundled loops to originate and terminate interstate toll calls.38 The requested waivers would permit these carriers to charge purchasers of unbundled loops a monthly flat-rated CCL charge equal to the total CCL charges that the reseller would pay if each of its resold lines carried the LEC's average monthly per-line interstate minutes of use.39 12. Ameritech, Bell Atlantic, GTE, Pacific, NYNEX, BellSouth, and Sprint LTCs request that their waivers apply throughout their respective local telephone service areas.40 ALLTEL requests that the waiver apply to all of the ALLTEL companies.41 NECA requests that the waivers apply to all exchange carriers that either concur in its Carrier Common Line or End User Common Line Tariffs or incorporate those tariffs by reference in their own interstate access tariffs.42 U S West requests that the waivers apply in all areas of Iowa, Wyoming, and Utah where U S West is providing local exchange service.43 Petitioners argue that separate filings for each local exchange area are unnecessary to advance the Commission's goals of promoting local competition and that a region-wide waiver will reduce the Commission's administrative burden.44 U S West states that, at the Commission's request, it will notify the Commission of each state tariff filing that includes the recovery of EUCL, PIC-change, or CCL charges as requested in the instant waivers, along with tariff transmittal 58 See, e.g., U S West (Iowa) Petition at 5-6; U S West (WY/UT) Petition at 4-6; Bell Atlantic Petition at 3-4; NECA Petition at 5-6. 39 US West (Iowa) Petition at 4-5; U S West (WY/UT) Petition at 4-5; GTE Petition at 5-7 and n. 10; NECA Petition at 5-6; ALLTEL Petition at 5-6; SNET Petition at 5-6; NYNEX Petition at 4-5 (NYNEX also states that it will file a matching rate reduction in its New York State tariff to reflect the revenues that it would recover in the interstate jurisdiction through the flat-rated CCL charge); Bell Atlantic Petition at 3-4 and n.9 (Bell Atlantic also states that in the future, it may choose to bill carriers for CCL charges on a MOU basis, consistent with existing rules, using the carriers1 reported usage or another method determined at a later time). 40 Ameritech Petition at 1; Bell Atlantic Petition at 4; GTE Petition at 2; NYNEX Petition at 1; BellSouth Petition at 1-2; Sprint LTC Petition at 5-6. 41 See ALLTEL Petition at Attachment A for a listing of ALLTEL companies, and ALLTEL's applicable tariff for terms, conditions and rates for the EUCL, CCL, and PIC-change charges. 42 NECA states that "[concurring [exchange carriers] are those that participate in NEC A's..Traffic Sensitive, Carrier Common Line, End User Common Line, or some combination of those tariffs." NECA further states that, "[fjor purposes of this petition, concurring [exchange carriers] are limited to those [exchange carriers] who participate in NECA's Carrier Common Line or End User Common Line tariffs, and exchange carriers who reference the terms and conditions in NECA's tariff for those access services." NECA Petition at n.9. 4) US West (Iowa) at 1; US West (WY/UT) at 1. 44 See. e.g., U S West (WY/UT) Petition at 6-7. 18256 information, the proposed effective date, and the outcome of the filing in order to eliminate delays and administrative costs associated with processing individual waiver applications.45 13. Petitioners state there is good cause for the waivers because by offering local exchange services for resale, providing unbundled access to local loops, or both, the LECs create the special circumstances that would justify a waiver under Section 1.3 of the Commission's rules.46 Petitioners .contend that with resale and unbundling of the local loop, the LEG will no longer have a direct relationship with the end user customer, IXC, or both, and that it will therefore be difficult, if not impossible, to recover the EUCL and PIC-change charges from end users and CCL charges from IXCs as contemplated by the Commission's rules.47 B. Comments 14. SWBT and United States Telephone Association (USTA) filed comments in support of U S West's (Iowa) Petition and SNET's Petition, respectively. SWBT states that because Section 69.104 does not contemplate that LECs may supply local exchange service to resellers or access to unbundled loop rather than directly to end users, a waiver of Commission rule 69.104 is necessary so that U S West can recover EUCL charges from entities that resell its local exchange services and from purchasers of unbundled loop. USTA states that SNET's waiver requests are consistent with the relief granted by the Commission in the Rochester Waiver Order. USTA reiterates that because SNET will not be providing local exchange service to the end users served by resellers of SNET's exchange service and purchasers of SNET's unbundled loops, waivers of the Commission's rules are necessary to permit SNET to recover the EUCL and PIC-change charges from resellers and flat-rated CCL charges from purchasers of SNET's unbundled loops.48 15. AT&T Corp. (AT&T), MCI Communications Corporation (MCI), Telecommunications Resellers Association (TRA), Teleport Communications Group, Inc. (Teleport), and McLeod Telemanagement, Inc. (McLeod) oppose the requested waivers, on the grounds that the petitioners have not satisfied the "good cause" standard for approval of a waiver.49 They argue that the circumstances presented in Rochester, which the Commission 45 US West (WY/UT) Petition at 6-7. 46 See 47 C.F.R. § 1.3. 47 See, e.g., SWBT Petition at 8-9; GTE Petition at 8-10; SNET Petition at I; NECA Petition at 6. 48 USTA Comments on SNET Petition at 2. 49 See, e.g., MCI Comments on GTE 1-2; TRA Comments on GTE at 2; Ameritech Comments on GTE at 2; TRA Comments on Bell Atlantic at 2; MCI Comments on Bell South at 3. But see AT&T Comments on GTE Petition at 2 (stating that, in principle, it supports waivers of FCC rules that facilitate increased competition in local exchange); AT&T Comments on Ameritech at 1-2 (noting that if Ameritech's statements regarding its 18257 found justified a waiver, are not present in many of the instant petitions because these LECs have not established comprehensive plans to promote competition in the local exchange market place, their respective states have not authorized such competition, or both.50 TRA and MCI assert that the instant petitioners offer only broad promises of competition. TRA and MCI also claim that the waivers should be denied because, rather than voluntarily providing access to network elements or permitting resale of local exchange services, the LECs have been required by state statute to unbundle local loop facilities.51 Opponents of the waivers also argue that because such competition does not yet exist in many of the subject service areas, waiver of the Commission's rules at this time is premature.52 In addition, AT&T, TRA, MCI, and Teleport oppose Commission approval of region-wide waivers. Instead, they urge the Commission to examine each state's plans for promoting local competition, and to review each LEC's proposal for recovering the EUCL, PIC-change, and CCL charges.53 16. Opposing commenters also contend that waiver of the Commission's rules is not in the public interest because it would permit LECs to over-recover the cost of the local loop. These parties generally premise their arguments regarding the possibility of over- recovery on the specific circumstances raised by the actions of two states, and the concern that other states may impose similar requirements which permit LECs to over-recover the costs of the local loop. The Texas Public Utility Regulatory Act of 1995 (PURA 95)54 and Illinois intrastate resale rates were correct, it would not oppose a waiver permitting Ameritech to impose the EUCL on resellers in Illinois); MCI Comments on U S West (Iowa) at 5 (requesting grant of the waiver for a limited period of time); AT&T Comments on NYNEX at 1 and 4 (stating that it does not oppose many key elements of the waiver requests, including a fiat-rated CCL charge for resale of unbundled lines). 50 See, e.g., McLeod Comments on U S West (Iowa) at 3-4. McLeod asserts that the public interest would not be served because U S West will not have an effective unbundled loop tariff in Iowa until the Iowa Department of Commerce Utilities Board (IUB) issues a decision, and U S West has demonstrated hostility to the prospect of competition. Id 51 See, e.g., TRA Comments on Ameritech Petition at 2-3; TRA Comments on Bell Atlantic Petition at 5- 6; TRA Comments on Pacific at 4-6; MCI Comments on SWBT at 5; MCI Comments on U S West (Iowa) at 3. 52 For example, Teleport argues that until competitors receive central office codes, SWBT will continue to have a direct relationship with end users, and can continue to recover the EUCL from the end user. Teleport Comments on SWBT at 1-3. Similarly, McLeod urges the Commission not to act on U S West's (Iowa) petition until such time that the ILiB issues a decision on U S West's intrastate tariffs and the Commission thereafter provides time for further comments. McLeod Comments on U S West (Iowa) at 4. See also AT&T Comments on NEC A at 1; AT&T Comments on ALLTEL at 1-2. 53 TRA Comments on GTE at 4-5; MCI Comments on NYNEX at 5; Teleport Comments on SWBT at 1- 3; TRA Comments on Pacific at 2; MCI Comments on NECA at 5. 54 Tex. Rev. Civ. Stat Ann. art 144c-0 (West Supp. 1996). 18258 the Final Decision and Order of the State of Iowa Department of Commerce Utilities Board55 both require, inter alia, that LECs recover the cost of unbundled facilities on the basis of total unseparated costs.56 Commenters argue that if state tariffed rates recover the full unseparated costs of the local loops, granting the petitions for waiver would permit the LECs to recover again the allocated interstate loop costs.57 17. In the alternative, opponents of the waivers argue that if the Commission grants the requested waivers, it must condition any waiver on a requirement that the costs used to determine intrastate rates for local exchange service should exclude costs assigned to the interstate jurisdiction and that interstate access purchasers should be permitted to recoup from LECs the differential if the combined intrastate and interstate rates, including the EUCL and the CCL charges, are greater than the full cost of providing the common lines.58 In addition, AT&T contends that the PIC-change charge should not be recovered from carriers that only purchase unbundled local loops because the carrier selection in such cases is made by the alternative carrier, not the LEG; therefore, the LEG incurs no cost when a PIC change is made.59 18. MCI contends that the Commission should deny the requested waivers because the LECs' federally tariffed retail EUCL, PIC-change, and flat-rated CCL charges do not reflect the economic cost of providing exchange and exchange access to resellers. Rather, MCI asserts, when LECs resell loops, certain costs, including marketing and local business office costs, will be avoided.60 MCI contends that the Commission must require the LECs to develop a "wholesale" rate that reflects the interstate portion of the true economic cost of the unbundled local loop, excluding embedded LEG inefficiencies. In addition, MCI and AT&T argue that the waiver requests are inconsistent with the pricing requirements in the 1996 Act 55 In Re: McLeod Telemanagement. Inc., Docket No. TCU-94-4, Final Decision and Order (Issued Mar. 31, 1995). See U S West (Iowa) Petition, Exhibit 1. 56 See, e.g., Teleport Comments on SWBT at 1-3; AT&T Comments on GTE at 3-4; TRA Comments on GTE at 2-4; MCI Comments on SWBT at 2-4; AT&T Comments on U S West (Iowa) at 1-2. " See, e.g., MCI Comments on SWBT at 2-5.; AT&T Comments on GTE at 3; AT&T Comments on SNET at 3. In addition, MCI contends that Bell Atlantic's proposal to compute the flat-rated CCL charges based on Bell Atlantic's average usage per line differs from the recovery method approved in the Rochester Waiver Order. MCI further contends that Bell Atlantic's assertion that in the future Bell Atlantic might elect to request that purchasers of unbundled loops directly pass through to Bell Atlantic the CCL charges the purchaser collects from the IXCs, would make the purchaser nothing more than Bell Atlantic's retail arm. MCI Comments on Bell Atlantic at 4-5. " AT&T Comments on Pacific at 2-3; AT&T Comments on SNET at n.4. 59 AT&T Comments on SNET at n.4; AT&T Comments on Sprint LTC at 4. 60 MCI Comments on BellSouth at 4; MCI Comments on NECA at 3-4; MCI Comments on ALLTEL at 3-4. 18259 because sections 251(c)(2) and (3) require incumbent LECs to provide interconnection and unbundled access to any requesting telecommunications carrier "on rates terms and conditions that are just, reasonable, and nondiscriminatory."61 The just and reasonable rate, they argue, must be "based on the cost (determined without reference to a rate-of-return or other rate- based proceeding) of providing the interconnection or network element (whichever is applicable)," and must be "nondiscriminatory, and may include a reasonable profit."62 MCI also argues that under section 251(c)(4) of the 1996 Act, incumbent LECs are required "to offer for resale at wholesale rates any telecommunications service the carrier provides at retail to subscribers who are not telecommunications carriers,"63 and "a State commission shall determine wholesale rates on the basis of retail rates charged to subscribers for the telecommunications service requested, excluding the portion thereof attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier."64 MCI maintains, therefore, that if the Commission grants the waiver request, at the very least, it must subject those rates to an accounting order so that any overcharges can be returned to customers when the Commission completes rulemakings on the relevant provisions of the Act.65 19. TRA, MCI, AT&T, and McLeod argue that the Commission should consolidate its review of these Petitions into a rulemaking proceeding, either alone or with the pending Petition for Rulemaking filed by MFS Communications Company, Inc., to determine the proper interstate access charge structure and rate levels that will allow competition to develop.66 TRA contends that the Commission may not grant waivers that collectively have the effect of repealing certain Part 69 requirements. TRA further asserts that grant of the " requested waivers would in effect rewrite the Commission's rules without the proper safeguards of the rulemaking process.67 61 47 U.S.C. §§ 251(c)(2) and (c)(3). 62 47 U.S.C. § 252(d)(l). See AT&T Comments on SNET at 3; MCI Comments on Sprint LTC at 5-6; MCI Comments on BellSouth ex pane filing at 4; MCI Comments on SNET at 4. 63 47 U.S.C. § 251(cX4). 64 47 U.S.C. § 252(d)(3). See, e.g., MCI Comments on SNET at 4-5. 65 MCI Comments on Sprint LTC at 5-6; MCI Comments on SNET at n.IO. 66 TRA Comments on GTE Petition at 6; TRA Comments on Bell Atlantic Petition at 3-4; MCI Comments on Pacific at 1, 4; AT&T Comments on BellSouth Petition at 3-4 & n.4.; MCI Comments on Southwestern Bell at 4; AT&T Comments on Sprint LTC at 4. See MFS Communications Company Inc., Unbundling of Local Exchange Carrier Common Line Facilities, Petition for Rulemaking, RM8614, DA 95-744 (filed March 7, 1995); Public Notice, Report No. 2061 (rel. March 10, 1995). 67 TRA Comments on Ameritech at 6-7. 18260 20. MCI contends that because the Commission granted the Rochester Waiver Order in part because it believed that experimentation with different rate structures might be useful to determine the effect on the development of competition, the requested waivers should not be extended to others until the Commission has had the opportunity to assess the impact of Rochester's waivers.63 21. AT&T, MFS, and MCI additionally question the methodology for calculating the CCL charge used in the Rochester Waiver Order. Assuming the waivers are granted, AT&T and MFS recommend that the Commission require LECs to exclude unbundled loops entirely from their calculation of the "g" factor in their price cap indices.69 MCI suggests that the Commission direct the LECs to compute "g" by either excluding the lines lost to resellers and their associated minutes in both the test year and the preceding year, or by including both the lines and an estimate of the minutes sold over those lines in both years.70 Furthermore, AT&T contends that if the Commission grants the waivers, it should require price cap LECs to distribute changes in their LTS costs proportionately between per-minute of use CCL charges for bundled loops and flat-rated charges for unbundled loops. Such a distribution is necessary, AT&T argues, because the LECs will not be able to measure interstate usage on resold common lines; therefore, that usage cannot be included in the LTS calculation. AT&T contends that as more interstate minutes migrate to resold common lines, price cap LECs will have to increase their usage-based CCL charges in order to recover their higher LTS costs.71 22. Moreover, MCI contends that changes in common line revenues associated with resold loops will affect the sharing obligations of LECs that are subject to price cap regulation.72 MCI urges the Commission to direct these LECs to remove the common line plant and expenses for resold loops when computing their price cap sharing obligation. Such a condition is necessary, MCI argues, because the LECs' reported earnings will decline due to 68 See MCI Comments on BellSouth at 3; MCI Comments on U S WEST/NYNEX at 3-4; MCI Comments SNET at 3-4; MCI Comments on NECA at 3-4; MCI Comments on BellSouth ex pane filing at 3. 69 See supra note 10 for an explanation, of the "g" factor. See also AT&T Comments on NYNEX at 2 n.2; AT&T Comments on U S West (WY/UT) at 3 n.2. 70 See, e.g., MCI Comments on GTE at 5-6; MCI Comments on BellSouth ex pane filing at 5. 71 See AT&T Comments on NYNEX at 3-4. 72 We note that, in April 1995, the Commission released the Price Cap Performance Review Order, in which it established three productivity factors, or "X"-Factors. The Commission determined that LECs that chose the highest X-Factor, 5.3 percent, would not be required to share any of their interstate earnings. LECs electing either of the two lower X-Factors would be subject to sharing obligations if their interstate earnings exceed specified levels. Thus, MCI's concern relates only to those LECs that have chosen one of the two lower X-Factors. Price Cap Performance Review for Local Exchange Carriers, First Report and Order, 10 FCC Red 8962 (1995) ("Price Cap Performance Review"), affd. Bell Atlantic Telephone Companies v. FCC, 79 F.3d 1195 (D.C. Cir. 1996) (Reconsideration Pending). 68 on 18261 a decline in the common line revenues with no change in reported common line expenses and plant.73 C. Reply Comments 23. NYNEX, GTE, Bell Atlantic, U S West, NECA, and Sprint LTCs reply that their petitions show the same justification the Commission relied upon in granting the Rochester Waiver Order; therefore, they have shown good cause for granting the requested waivers and the waivers are in the public interest.74 U S West and GTE explain that, in the Rochester Waiver Order, the existence of competition and the severance of the direct relationship between Rochester and its end user and IXC customers were the key factors, and the Commission found that the presence of resellers and purchasers of unbundled loop represented the "special circumstances" needed to justify a waiver.75 24. In response to arguments that grant of the requested waivers are premature because competition does not yet exist in many of the subject service areas, Ameritech, Bell Atlantic, NECA, and NYNEX assert that waivers that apply to their entire service areas would allow them to respond more quickly to state pro-competitive regulatory initiatives.76 A region-wide waiver, NYNEX argues, would avoid the administrative burden of processing repetitive waiver requests.77 Bell Atlantic states that instead of waiting until each state enacts local competition rules, the Commission should grant the waivers on the condition that the LEC is offering its services for resale, has provided access to its network elements on an unbundled basis, or both. Otherwise, competitors would have an unfair advantage following implementation of resale or unbundling in any state while the Commission processed each of the waivers.78 25. Petitioners argue that none of their waiver requests proposes to alter the existing common line rate structure or to change the manner in which local exchange facility costs are recovered from a combination of state and interstate charges. Consequently, they assert that the total EUCL and CCL revenues collected by the LECs if the waivers are granted n See MCI Comments on GTE at 6. 74 NYNEX Reply at 3; U S West (WY/UT) Reply at 2; U S West (Iowa) Reply at 4-6; GTE Reply at 7; Bell Atlantic Reply at 5; NECA Reply at 1; Sprint LTC Reply at 1. 75 See U S West (Iowa) Reply at 4. 76 Ameritech contends that resale of certain business services is already permitted in all Ameritech states. Ameritech Reply at 2. Similarly, Bell Atlantic replies that, contrary to TRA's arguments, state laws in all Bell Atlantic jurisdictions except the District of Columbia permit local competition. Bell Atlantic Reply at 4. 77 See NYNEX Reply at 6. 7g See Bell Atlantic Reply at 4-5. 18262 would equal the revenues that the LECs would collect in the absence of the waivers.79 Bell Atlantic maintains that the charges it seeks to impose are simply intended to cover the loop costs now allocated to the interstate jurisdiction the same amount the LEG would recover without a waiver not the costs of any particular facility or service.80 U S West asserts that its Iowa intrastate tariff does not recover interstate costs now recovered by the CCL and EUCL.81 Therefore, petitioners assert, the requested waivers will not result in over-recovery of common line costs. Furthermore, NYNEX contends that the broader issue of wholesale pricing raised by MCI is not an issue that the Commission needs to decide in the context of the instant waiver request.82 26. The petitioning LECs agree with the opponents that the Commission should act as quickly as possible on fundamental interstate access charge reform. They assert, however, that, in the interim, there is an immediate need for action because these waivers are necessary to enable LECs to adapt to the new circumstances of competition in local markets.83 In addition, NYNEX states that in the Rochester Waiver Order, the Commission already rejected arguments that it should delay approval of such waivers pending completion of an access reform proceeding.84 Pacific and GTE also argue that approval of these petitions would not eviscerate the Part 69 rules governing the recovery of EUCL and CCL charges because LECs would continue to apply these rules where a LEC provides exchange and exchange access directly to end users and IXCs. In fact, they aver, these waivers are consistent with the policies underlying the Part 6.9 rules by promoting continued recovery of common line charges from those customers that incur the costs.85 U S West argues that the Rochester Waiver Order was not granted because Rochester's unbundling plan was experimental, but, 19 See. e.g., Bell Atlantic Reply at 3; GTE Reply at 2; NECA Reply at 3; ALLTEL Reply at 2; SNET Reply at 6; Pacific Reply at 3. 80 Bell Atlantic contends that, contrary to MCI's assertion, it is asking for a flat-rated CCL, exactly as the Commission granted in the Rochester Waiver Order and that the section of the Rochester Waiver Order cited by MCI refers to subsequent adjustments to the price cap common line basket, not the calculation of the flat-rate CCL. Bell Atlantic Reply at 2-3, 5-6, and n.7 (citing 47 C.F.R. § 69.105(b)) (noting that today, the CCL charge is derived under the Price Cap formulas). 81 SeeVS West (Iowa) Reply at 7-10, and n.31. 82 NYNEX Reply at 4-5. Pacific maintains that the line charges that resellers will pay under Pacific's state tariff were originally set to recover much less than the state revenue requirement for the service being provided and that whether it should be required to offer line service to resellers at a rate that subsidizes service to end users is not at issue in this proceeding. Pacific Reply at 2-3. " See. e.g., NYNEX Reply at 3-4; GTE Reply at 6-7; Bell Atlantic Reply at 3-5; Pacific Reply at 3-4; BellSouth Reply at 3 & n.6; NECA Reply at 3-4. 84 NYNEX Reply at 2-3 (citing Rochester Waiver Order at para. 13). " GTE Reply at 7; Pacific Reply at 3-4. 18263 rather, because nothing in that experiment compromised the public interest. Therefore, U S West argues, there is no need to wait for an examination of the results of the Rochester Waiver Order.*6 27. Regarding the calculation of the CCL growth factor, NYNEX states that it is prepared, as a condition of its waiver, either to exclude unbundled common lines from the "g" factor as well as the associated minutes of use, or to include the assumed traffic growth on unbundled common lines in calculating the "g" factor as required in the Rochester Waiver Order.™ GTE and SNET reply that they do not object either to excluding resold lines and their associated minutes from their calculation of the "g" factor in the base period for purposes of the next annual price cap filing, or alternatively, including the resold lines and their minutes in the test-year calculation,88 and GTE states that it prefers this approach to that imposed on Rochester.89 GTE also replies that the two methods that MCI suggests for the calculation of "g" do not produce consistent results. In addition, SNET agrees with AT&T that, because no CCL rate will be charged for resold lines, the Commission should require resold lines and the associated usage be excluded from the "g" factor calculation.90 U S West replies that it will defer to the 1995 Price Cap Order, which indicates the Commission's intention to address the adjustments to the common line formula in its further rulemaking. If these issues are not resolved as anticipated, U S West states, it will propose a methodology in its 1996 Annual Filing.91 28. NYNEX replies to AT&T that it does not need to distribute LTS charges proportionately between its per-minute CCL charges and its flat-rated CCL charges for unbundled common lines because NYNEX will calculate the flat-rated CCL charge using its per-minute CCL rate, which includes a full loading of LTS costs, resulting in an accurate flat- rated CCL charge.92 IV. DISCUSSION 86 See U S West (Iowa) Reply at 7 n.22. 87 NYNEX Reply at 6. M SNETHeply at 7; GTE Reply at n.3. 89 GTE Reply at n.3. 90 SNET Petition at 7. 91 US West (Iowa)"Reply at 6-7 n.21. US West's 1996 Annual Filing does not reflect an alternative methodology for calculating the "g" factor. 97 NYNEX Reply at 6. 18264 29. As described above, section 251 of the 1996 Act requires the unbundling of network elements and the resale of local exchange service by incumbent LECs pursuant to a process of voluntary negotiation between incumbent LECs and requesting carriers, and then arbitration by state public utility commissions.93 The 1996 Act did not, however, generally revoke the authority of either the states or the Commission to require the provision by incumbent LECs of unbundled or resold facilities and services under pre-existing state and federal statutes. The petitions before us are based on state actions taken under the pre existing jurisdictional framework that continues outside the scope of Section 251 of the Act. Accordingly, these petitions raise issues that appear to remain ripe for decision. These petitions concern state actions relating to the intrastate jurisdiction that may require waiver of certain of our interstate access charge rules. We address those waiver requests here. 30. Further, we will address the waiver petitions notwithstanding the Commission's recent revisions to the access charge rules. Those revisions do not become effective until January 1, 1998.94 Further, the revisions to access charges that will become effective on that date change the rate structure for recovery of costs from IXCs from per-minute charges under the CCL charge to flat-rated charges under the PICC.95 These changes, however, do not address whether the PICC may be recovered from the purchaser of unbundled loops where states have permitted offering of unbundled loops pursuant to state authority. The premise of petitioners' claim that they must recover the CCL charge from the purchaser of unbundled loops rather than the IXC is not vitiated merely because the structure of the charge to IXCs has changed. Thus, the requested waivers have continued vitality notwithstanding the recent changes to our access charge rules. 31. Under Section 1.3 of the Commission's rules, we are authorized to grant waivers "if good cause therefor is shown."96 As interpreted by the courts, this requires that a petitioner demonstrate that "special circumstances warrant a deviation from the general rule and that such a deviation will serve the public interest."97 We address, first, whether petitioners have shown special circumstances warranting a departure from our rules, and then whether that would be in the public interest. A. Special Circumstances 91 47 U.S.C. § 252. 94 Access Reform First Report and Order at para. 94. 95 Id. at para. 91. 96 47C.F.R. § 1.3. 97 Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990); WATT Radio v. FCC, 418 F.2d 1 153 (D.C. Cir. 1969). 18265 32. We conclude that where a LEG provides local exchange service for resale, access to unbundled local loops, or both, sufficient special circumstances exist to allow recovery of the EUCL, and PIC-change charges from the resellers of the local exchange service and purchasers of unbundled local loops rather than from end users as specified in Part 69 of the Commission's rules.98 Similarly, we find that where a LEG sells unbundled loops, sufficient special circumstances exist to allow the LEG to recover the CCL charge, and after January 1, 1998, the PICC. from purchasers of the unbundled loops rather than from the IXC. 33. We are unpersuaded by any of the arguments in the record that special circumstances do not exist for granting the requested waivers. We reject suggestions that these requests should be denied based on claims that, in contrast to the Rochester waiver petition, some of the LECs proposals are not part of a comprehensive plan to open their markets to competing providers; some LECs are not currently offering services for resale or access to the unbundled exchange; that some LECs are not facing local service competitors; or that some LECs ask for region-wide waivers. The key point common to all of these waiver requests is that a LEG does not have a direct relationship with an end user that obtains its local loop from a carrier that has purchased the loop from the LEG for resale or on an unbundled basis. Similarly, a LEG does not have a direct relationship with an IXC that provides interstate toll service over a loop that a local carrier has purchased from the LEG. Furthermore, we are imposing conditions on our waivers that limit them to situations where a LEG is providing service to a reseller or purchaser of unbundled local loops and there is no direct relationship with end users or IXCs. We will additionally require that carriers notify the Commission of each instance where they implement the waiver. This notice may take the form of a brief letter describing generally the services provided and any relevant state regulatory actions. This will assure that the petitioning LECs can use the waivers only where the necessary special circumstances exist. In this regard, we reject assertions that granting the waivers will eviscerate our rules. Our rules will continue to require that, where carriers provide service directly to end users or IXCs, EUCL and PIC-change charges be recovered from end users, and CCL charges from IXCs.99 The PICC must also be recovered from IXCs where incumbent LECs provide service directly to them. Moreover, our waivers apply only to those carriers who have requested them. Thus, our rules have continued applicability. B. Public Interest 34. We believe that the requested waivers would serve the public interest. 100 State initiatives that require LECs to offer local exchange services for resale and to provide unbundled exchange access separate from Section 251 can form part of the evolutionary 98 See 47 C.F.R. Part 69. 99 See47C.F.R. §69.104(a): 100 47 C.F.R. § 1.3. 18266 process toward local competition. We believe that the requested waivers would serve the public interest by facilitating the development of local competition with the attendant benefits of greater consumer choice and lower prices. 101 35. We are also not persuaded that our waivers will be contrary to the public interest because they will result in over-recovery of access charges. In this order, we are permitting petitioners to recover the EUCL and PIC-change charges, as calculated in accordance with our rules, from resellers of local loops and to recover the residual CCL charge and PICC from resellers instead of IXCs. And, as discussed below, we are permitting computation of CCL charges on an average, flat-rated basis, that does not create any risk of over-recovery of common line costs. We are not authorizing these carriers to recover interstate charges in a manner that permits recovery of more than the amount specified in our rules or in this Order. 36. Moreover, the petitions have not requested, nor do we authorize, recovery of the costs of the local loop on an unseparated cost basis. Instead, as stated, these carriers will merely recover the applicable charges from a different entity than that contemplated in our rules. Further, the waivers do not request, nor do we establish, pricing standards for unbundling of network elements or resale of the local loop. Again, in this Order, we merely permit carriers to recover existing interstate access charges as requested in the petitions. We do not assume that this will lead to over-recovery of costs where carriers offer unbundling and resale outside of Section 251. Accordingly, we reject commenters' arguments that the requested waivers are not in the public interest and should be denied because they will lead to over-recovery of costs. 37. We agree with the petitioners and commenters that legal, economic, and technological conditions have changed since the existing access charge rate structure was developed. Indeed, these forces were recognized by the Commission in the recent adoption of the Access Reform First Report and Order.™2 The passage of the 1996 Act has additionally created the conditions for the development of competition in all telecommunications markets. The more far-reaching steps identified by opponents of the waivers are among the issues the Commission addressed in the Local Competition Order. We believe that region-wide waivers in this instance will reduce regulatory burdens by eliminating the need for repetitive filings that do not raise any new issues. In addition, we are conditioning our waivers on the existence of circumstances that will justify the requested waivers. Thus, although the waivers will apply throughout the carriers' entire service areas, carriers may only implement the requested waivers as the need arises. C. Recovery of the Carrier Common Line Charge 101 See Local Competition Order, 11 FCC Red at 15506. 102 Access Reform First Report and Order at para. 32. 18267 38. We permit petitioners that have requested it to recover the CCL charge from purchasers of unbundled local loops based on the average MOU of the LECs' lines. After January 1, 1998, we will permit these petitioners to recover the PICC from purchasers of unbundled local loops. To the extent petitioners have common line costs after recovery of revenues through EUCL charges and PICCs, we will allow petitioners to impose residual CCL charges on purchasers of unbundled loops, basing such recovery on the average MOU per line. The Commission approved use of average MOUs in similar situations in the Rochester Waiver Order as an administratively efficient means of recovering common line costs while avoiding the likely verification difficulties and controversies associated with relying on MOU levels reported by reseller customers. 103 We also believe that the use of the average MOU per subscriber line proposed by some petitioners for recovery of the CCL charge makes it unlikely that the LECs will over-recover common line revenues from retail customers that take service from competing providers of local switching. As the Commission observed in the Rochester Waiver Order, the customers likely to be the most attractive to carriers that purchase unbundled local loops are those with higher-than-average MOU per line. 104 Thus, applying average MOUs for these lines is more likely to result in reduced charges than would be the case absent a waiver. Accordingly, we will permit petitioners to use the same procedure here. We note that, with regard to Bell Atlantic's proposal to bill carriers for CCL charges on an MOU basis using the carriers' reported usage, to the extent that a LEG is able to measure the MOUs on its subscriber lines, waiver of section 69.105 is not necessary, and the LEG will continue to recover the CCL charge as required by the Commission's rules.105 39. Under our price cap rules, LECs subject to price cap regulation are required to adjust the price cap index (PCI) based on changes in growth in MOUs. 106 The PCI is adjusted through the growth factor to account for the cost reductions resulting from increased usage of common lines.107 For purposes of adjusting the price cap index for the common line basket, as in the Rochester Waiver Order, we direct the petitioners to calculate the growth in MOU, "g," in a manner that reasonably estimates the growth rates of competitive providers of local retail service that use the LECs' subscriber lines. If we permit the growth factor to include the LEC's unbundled loops, any growth in usage on the unbundled loops would be attributed to the LEG. In addition, the LEG cannot measure the MOUs on unbundled loops it has sold to competing carriers. Including those loops in the calculation of the growth factor would require competitors to report to the LECs the minutes passing over unbundled loops purchased 101 Rochester Waiver Order, 10 FCC Red at 6783. 104 Rochester Waiver Order, 10 FCC Red at 6783. 1W 47 C.F.R.§ 69.105