980811.docx

MEMORANDUM
TO:COMMISSIONER HANSEN
COMMISSIONER NELSON
COMMISSIONER SMITH
DON HOWELL
JOE CUSICK
RITA SCOTT
FROM:WELDON STUTZMAN
DATE:August 11, 1998
RE:SHARED TRANSPORT AS AN UNBUNDLED NETWORK ELEMENT.
The Eighth Circuit Court of Appeals on August 11, 1998, issued a decision on petitions for review filed by numerous incumbent local exchange carriers (ILECs).  The ILECs filed the petitions requesting review of an order of the Federal Communications Commission (Third Order on Reconsideration) issued in August, 1997.  The ILECs’ petitions challenged the FCC’s determination that shared transport constitutes a network element as defined by the Telecommunications Act and that  ILECs must make shared transport available to new entrants on an unbundled basis.
The Eighth Circuit of Appeals first concluded that shared transport is a network element as defined by the Telecommunications Act.  The definition of a network element at 47 USC Section 153(29) states that both the individual “facilities or equipment” of the local exchange and the “features, functions, and capabilities which are provided by means of such facilities or equipment constitute network elements for purposes of the Act.”  The Eighth Circuit Court concluded that “the plain meaning of the statute supports the FCC’s determination that shared transport is a network element as defined in Section 153(29).”  
The Court also upheld the FCC’s requirement that ILECs make shared transport available to competitors as an unbundled network element.  The Court held that the FCC acted within the statutory framework, and noted that the ILECs’ argument of FCC over reaching was based on an assumption about possible pricing of shared transport.  The Court noted that the “pricing scheme for shared transport (and all other unbundled elements) will be determined by the state commissions, [and thus] it is impossible for this court to determine at this time whether shared transport will be priced in such a way as to erode the distinction between resale and unbundled access.”  The Court thus upheld the FCC’s determination that shared transport should be made available to entrants on an unbundled basis.
This Commission previously reached the same conclusion.  In Order No. 27236 issued December 1, 1997, the Commission concluded “that providing shared transport as an unbundled network element is reasonable and consistent with the requirements of the Act.”  Order No. 27236  p. 9.  The Commission also determined that “AT&T’s ability to provide local telecommunications service is impaired if shared transport is not available as a network element.”  Order No. 27236 p. 10.  The Commission thus found it appropriate for the final interconnection agreement to make shared transport available to AT&T as an unbundled network element.
Weldon Stutzman
cm\M:shrdtran.ws