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 SEPARATE  STATEMENT  OF  COMMISSIONER  KATHLEEN  Q.  ABERNATHY 
 Re:  Review  of  the  Section  251  Unbundling  Obligations  of  Incumbent  Local  Exchange  Carriers,  Second  Report  and  Order  in  CC  Docket  No.  01-  338  (adopted 
 July  8,  2004). 
 I  strongly  support  the  Commission’s  decision  to  bolster  incentives  for  marketplace  negotiations  by  eliminating  the  “pick  and  choose”  rule.  In  enacting  the 
 Telecommunications  Act  of  1996,  Congress  envisioned  a  sharing  regime  built  primarily  upon  negotiated  access  arrangements,  rather  than  governmental  mandates.  To  be  sure, 
 the  Commission  was  required  to  establish  default  unbundling  rules,  and  state  commissions  were  expected  to  set  UNE  prices  and  resolve  interconnection  disputes.  But 
 Congress  anticipated  that  competitors  and  incumbents  would  establish  most  terms  and  conditions  at  the  bargaining  table,  rather  than  in  regulatory  tribunals  and  courtrooms. 


 Unfortunately,  this  vision  has  not  been  realized.  Instead,  we  have  endured  eight  years  of  pitched  regulatory  battles  and  resource-  draining  litigation,  and  industry 
 participants  of  all  stripes  agree  that  incumbent  LECs  and  new  entrants  almost  never  engage  in  true  give-  and-  take  negotiations.  There  are  undoubtedly  many  complex  reasons 
 why  the  Act’s  implementation  took  this  course,  many  of  which  have  nothing  to  do  with  the  “pick  and  choose”  rule.  But  I  believe  that  the  record  in  this  proceeding  confirms 
 something  I  have  long  suspected:  the  “pick  and  choose”  rule  impedes  marketplace  negotiations  and  is  not  necessary  to  prevent  discrimination.  When  the  Supreme  Court 
 upheld  the  “pick  and  choose”  rule  as  a  valid  interpretation  of  the  Act,  it  recognized  that  the  rule  might  “significantly  impede  negotiations  (by  making  it  impossible  for  favorable 
 interconnection-  service  or  network-  element  terms  to  be  traded  off  against  unrelated  provisions),”  and  suggested  that  the  Commission  would  be  able  to  change  course  if  that 
 came  to  pass.  1  That  absence  of  genuine  trade-  offs  is  precisely  what  has  occurred,  as  incumbent  LECs  have  proven  reluctant  to  make  significant  concessions  in  negotiations  as 
 long  as  third  parties  can  later  come  along  and  avail  themselves  of  the  benefit  without  making  the  same  trade-  off  as  the  contracting  party. 


 By  requiring  that  competitors  opt  into  interconnection  agreements  on  an  “all  or  nothing”  basis,  we  ensure  that  third  parties  take  the  bitter  with  the  sweet.  In  doing  so,  I 
 am  optimistic  that  we  will  promote  more  meaningful  negotiations.  Given  the  almost-complete  dearth  of  marketplace  deals,  this  change  can  only  improve  negotiations, 
 notwithstanding  claims  that  it  will  diminish  competitors’  leverage.  In  fact,  I  expect  that  the  continuing  application  of  the  statutory  duty  of  good  faith,  together  with  competitors’ 
 ability  to  opt  into  any  negotiated  or  arbitrated  agreement  (on  an  all-  or-  nothing  basis),  will  be  sufficient  to  prevent  discrimination. 


 The  reform  we  adopt  today  is  part  of  a  much  broader  transformation.  The  “pick  and  choose”  rule,  along  with  a  remarkably  expansive  unbundling  regime,  has  fostered  an 
 expectation  that  the  government  will  micromanage  every  aspect  of  the  relationship  between  an  incumbent  LEC  and  its  wireline  competitors.  The  courts  have  now  made 


 1  AT&  T  Corp.  v.  Iowa  Utils.  Bd.,  525  U.  S.  366,  396  (1999). 
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 unmistakably  clear  that  the  Commission  must  impose  meaningful  limits  when  adopting  new  unbundling  rules.  While  I  have  no  doubt  that  the  Commission  will  continue  to 
 mandate  the  unbundling  of  bottleneck  transmission  facilities,  it  is  equally  apparent  that  the  concept  of  maximum  unbundling  of  all  elements  in  all  geographic  markets  cannot  be 
 sustained.  As  we  move  toward  adopting  new  rules  under  which  competitors  will  be  increasingly  required  to  rely  on  their  own  facilities  and  to  differentiate  their  services,  the 
 availability  of  customized  interconnection  agreements  will  be  all  the  more  vital.  I  expect  that  our  elimination  of  the  “pick  and  choose”  rule  will  help  pave  the  way  toward  a  regime 
 that  is  more  dependent  on  negotiated  access  arrangements  and  less  dominated  by  regulatory  fiat. 
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