Full opinion text
OPINION SUE L. ROBINSON, District Judge. I. INTRODUCTION This is a consolidated action consisting of appeals filed by Bell Atlantic-Delaware, Inc. (“Bell”) and AT & T Communications of Delaware, Inc. (“AT & T”) from two orders entered by the Delaware Public Service Commission (“the Commission”). The parties bring this action under § 252(e)(6) of the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (1996) (“Act” or “Telecommunications Act”), which provides for federal judicial review of state commission determinations made pursuant to the Telecommunications Act. Bell challenges the Commission’s order rejecting Bell’s Statement of Generally Available Terms (“SGAT”) and establishing prices under which Bell must agree to sell elements of its local telephone network to its competitors. Bell alleges that the Commission’s order violates Bell’s rights under the Act by setting prices for the use of Bell’s services and network elements substantially below Bell’s actual costs. Bell seeks a permanent injunction to prevent the individual Commissioners (sued in their official capacities only) from enforcing the Commission’s order. Bell moves for summary judgment on its complaint. See Docket Item (“D.I.”) 45. Two of Bell’s competitors, AT & T and Conectiv Communications, Inc. (“Conec-tiv”), have intervened in defense of the Commission on Bell’s claims, but also have filed counterclaims challenging certain aspects of the Commission’s SGAT Order. AT & T also has filed a separate appeal from the Commission’s approval of an interconnection agreement between AT & T and Bell. AT & T challenges two aspects of the Interconnection Agreement as violative of the Telecommunications Act. Unlike Bell, AT & T has not submitted a formal motion relating to its appeal. The Delaware Public Advocate has intervened to argue in support of the Commission’s orders. For its part, the Commission has filed a motion to dismiss both Bell’s and AT & T’s appeals, arguing that the Telecommunications Act’s provision for federal judicial review of state commission determinations violates the Eleventh Amendment. The Civil Division of the United States Department of Justice has intervened to defend the constitutionality of the Act. II. THE TELECOMMUNICATIONS ACT OF 1996 A. Overview At issue are the “Development of Competitive Markets” provisions of the Telecommunications Act. See 47 U.S.C. §§ 251 and 252. These sections implement a “procompetitive, de-regulatory” framework designed to spur competition in local telephone markets. See S. Conf. Rep. No. 104-280, at 113 (1996). Local telephone markets typically are dominated by a single regulated monopoly, known as an Incumbent Local Exchange Carrier (“ILEC”), that owns all of the equipment and lines necessary to provide local telephone service. In order to foster competition in these markets, the Act preempts all state and local legal barriers to entry into the local telephone market, such as the exclusive local franchises formerly enjoyed by ILECs. See 47 U.S.C. § 253(a). The Act also attempts to alleviate some of the natural barriers to entry in local telecommunications markets, such as ILEC monopoly control over “bottleneck” or “essential” facilities. Bottleneck facilities are those needed by any competitor seeking entry in the local telecommunications market. See Joseph D. Kearney & Thomas W. Merrill, The Great Transformation of Regulated, Industries Law, 98 Colum. L.Rev. 1323, 1326 n. 6 (1998). Examples of such facilities are the copper wire “loops” that connect users to local telephone exchanges. See id. A local telephone network is composed of numerous “local loops” — cables strung on poles and buried underground — that connect each telephone subscriber to local or “central-office” switches that, in turn, route calls or “traffic” along the network and provide other features like call waiting and call forwarding. These central-office switches are connected to each other through “trunks” and other transport facilities. These and other facilities are integrated by various computer systems and databases that support network operations by providing connection to other telecommunications carriers and by coordinating marketing, billing, and collection. To compete in any meaningful way with an ILEC like Bell, a new entrant would have to construct its own fully redundant network (i.e., one coextensive with Bell’s) — a prohibitively expensive and time-consuming task. See Joint Explanatory Statement of the Committee of Conference, H.R.Rep. No. 104-458, at 148 (1996). Moreover, even if a competitor installed its own telecommunications network, an ILEC has a powerful economic incentive “to discourage entry and robust competition by not interconnecting its network with the new entrant’s network or by insisting on supra competitive prices or other unreasonable conditions for terminating calls from the entrant’s customers to the [ILEC’s] subscribers.” S. Conf. Rep. No. 104-230, at 113 (1996). Because of these significant barriers to entry, Congress concluded that robust competition in local markets would occur only if the Act put new entrants on a level playing field by mandating interconnection and “unbundled” access to an ILEC’s existing network. See In re Implementation of the Local Competition Provisions in the Telecomms. Act of 1996, 11 FCC Red. 15499 ¶¶ 11-12, at 11-12 (1996) (“Local Competition Order”). To this end, the Act establishes three mechanisms for entry into the local telephone market: (1) interconnection with an ILEC’s network (2) the use of “unbundled” elements of an incumbent’s network, and (3) resale of an ILEC’s retail telecommunications services purchased at wholesale by the new entrant. See 47 U.S.C. § 251(c)(2), (3), (4). A competitor’s use of all three mechanisms, depending upon economic exigencies, is possible. See Local Competition Order ¶ 12, at 12. Section 251 imposes specific obligations upon ILECs with respect to these three mechanisms, while § 252 establishes pricing standards appropriate to each strategy and procedures relating to interconnection agreements and SGATs. 1. Interconnection Some competitors, such as cable companies, will have existing networks of their own that enable their subscribers to communicate with each other. See id. ¶ 13, at 12. Although these types of new entrants will have little need for an ILEC’s services or facilities, a fair agreement with the ILEC will be required to enable the new entrant’s customers to place calls to, and receive calls from, the ILEC’s subscribers. See id. Sections 251(b)(5) and (c)(2), therefore, require ILECs to enter into interconnection agreements on just, reasonable, and nondiscriminatory terms. The Act also facilitates efficient interconnection by obhgating ILECs to lease space on their premises so that a new entrant may “collocate” any of its equipment necessary for interconnection. See 47 U.S.C. § 251(c)(6). 2. The Purchase of ILEC Network Elements More often than not, new entrants will lack a fully redundant network of their own and, consequently, new entrants will be unable to compete with the ILEC. See Local Competition Order ¶ 14, at 13. To address this scenario, the Act authorizes new entrants to purchase elements of an ILEC’s network on an “unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory.” 47 U.S.C. § 251(c)(3). This allows new entrants to fill in the gaps of their own network by purchasing pieces of an ILEC’s network. These pieces are known as “unbundled network elements” or “UNEs.” Section 252(d)(1) requires that an ILEC’s charges for its network elements be based on the “cost (determined without reference to a rate-of-return or other rate-based proceeding ) of providing the ... network element.” Id. § 252(d)(1). An ILEC’s charges for UNEs may include a reasonable profit. Id. Congress left the job of determining how to calculate the cost of providing these services to the FCC. In its Local Competition Order, the FCC adopted a “forward looking cost methodology” (also known as the “total-element-long-run-incremental-cost” (“TELRIC”) methodology) to calculate the cost of providing network elements. Cognizant that some network elements are the product of cutting edge innovations and not wishing to stifle creativity, Congress limited a new entrant’s ability to purchase these types of network elements. Accordingly, the Act requires the FCC to set standards governing access to “proprietary” network elements. Id. § 251(d). These standards, at a minimum, must take into account whether a new entrant’s access is “necessary,” see id. § 251(d)(2)(A), and whether denial of access to these elements would “impair the ability of the telecommunications carrier seeking access to provide the services that it seeks to offer.” Id. § 251(d)(2)(B). In addition to protecting an ILEC’s innovative network elements, this “necessary and impair” standard provides incentive for new entrants to develop their own innovative network elements, rather than simply purchasing (at cost-based prices) those developed by the ILECs. 3. Resale of Retail Services The Act also requires an ILEC to sell its retail telephone services at wholesale prices to new entrants, so that these competitors can resell those services (at a profit) to their own customers. Id. § 251(c)(4). The resale price is the retail rate the ILEC charges its subscribers for the service less “the portion thereof attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier.” Id. § 252(d)(3). The Act further mandates that ILECs permit competitors to collocate on an ILEC’s premises “equipment necessary for interconnection or access to unbundled network elements.” Id. § 251(c)(6). B. Implementation of the Act’s Provisions 1.Voluntary Negotiations Congress chose to rely primarily on private negotiations to implement the duties imposed by § 251. The Act charges ILECs with “the duty to negotiate in good faith ... the particular terms and conditions of agreements” with competitors who request interconnection, network elements, or services under § 251. Id. § 251(c)(1). Section 252 provides that an ILEC and a new entrant may “negotiate and enter into a binding agreement ... without regard” to any of the aforementioned pricing, technical, and quality standards set out in § 251(b) and (c). Id. § 252(a). Interconnection agreements reached through voluntary negotiation must be submitted to the state public utility commission for approval, but such agreements may be rejected only if they discriminate against a telecommunications carrier not a party to the agreement or if all or part of the agreement is not consistent with the public interest, convenience, and necessity. Id. § 252(e)(2)(A). 2. Compulsory Arbitration Where an entrant and an ILEC cannot agree on all the terms of an interconnection agreement (as was the case here), either party may petition the relevant state public service commission to mediate any “open issues'.” A state commission, however, may decline this invitation, in which case the FCC must conduct the arbitration. Id. § 252(e)(5). If it agrees to participate in the arbitration, the state commission must settle any unresolved issue no later than nine months after the date of the first request for arbitration. Id. § 252(b)(4)(C). The Act provides a disincentive to state commission mediation by allowing the commission to reject agreements that do not “meet the requirements of section 251” of the Act. This grants a state commission broader discretion to reject agreements (in whole or in part) that do not comport with the duties imposed in § 251 and the pricing standards in § 252(d). The Interconnection Agreement reached between Bell and AT & T in the present case was arrived at through commission-assisted mediation. 3. Statement of Generally Available Terms An ILEC also may offer all entrants a “Statement of Generally Available Terms” (“SGAT”). See id. § 252(f). This saves parties the time and expense of negotiating individual interconnection agreements. The relevant state commission (if it chooses to participate under the Act) must approve the SGAT and ensure that it complies with §§ 251 and 252(d) of the Act. Id. § 252(f)(2). If the state commission elects to not review the SGAT, it is deemed approved within sixty days. Id. § 252(f)(3). In the present case, the Delaware Commission rejected the SGAT offered by Bell for, inter alia, failure to comply with the pricing standards imposed by § 252(d). III. PROCEEDINGS BEFORE THE DELAWARE COMMISSION A. The SGAT Proceeding On December 16, 1996, Bell filed with the Commission an application for approval of its SGAT, along with supporting documentation and testimony. See Joint Appendix (“J.A.”) 73-85. The filing included prices that Bell proposed to charge for its unbundled network elements as well as the wholesale rate it would charge for purchases of its services for resale. The Commission appointed two Hearing Examiners to review the SGAT. On April 7, 1997, after discovery, three rounds of expert testimony, and a week of live hearings (in which Bell, the Commission, AT & T, Conectiv, the Public Advocate, and other intervenors participated), the Hearing Examiners issued their decision. See Findings and Recommendations of the Hearing Examiners, PSC Doc. No. 96-324 (Apr. 7, 1997) (“First Report”) (J.A. 1305-1427). In their First Report, the Hearing Examiners concluded that Bell’s proposed SGAT violated the standards imposed by the Telecommunications Act and, thus, recommended against approval of the SGAT by the Commission. The Examiners recommended disapproval of the SGAT primarily because Bell based its proposed rates for interconnection and network elements on assumptions (or “inputs”) inconsistent with the Act’s pricing standards. To calculate these rates, the Examiners recommended that the Commission adopt the Local Competition Order’s TELRIC methodology, which was not binding on the Commission at that time. Although they disagreed with the rates offered by Bell in its SGAT, the Examiners themselves did not recommend specific rates. Instead, they urged the Commission to adopt certain cost inputs, from which the parties could generate cost figures using the various cost models advanced by the parties. The Hearing Examiners suggested that the Commission then calculate Act-compliant rates from these cost figures. See id. ¶ 261(E)(1)-(14), at 113-14 (J.A. 1422-23). At an April 22, 1997 public meeting, the Commission adopted some of the Examiners’ recommendations (including their recommended cost inputs) while deferring consideration of other issues and any final decision on adoption of the SGAT. See Interlocutory Order No. 4488, PSC Doc. No. 96-324 (Apr. 29, 1997) (J.A. 1445-51). The Commission then remanded the SGAT to the Hearing Examiners and ordered them to recommend specific rate levels for interconnection, network elements, and resold services. See id. ¶ 2, at 5 (J.A. 1449). The Commission also ordered the Examiners to conduct further investigation into certain objections raised by AT & T, which the Examiners failed to address in their First Report. Those objections concerned (1) the resale charges Bell proposed to assess for access to Bell’s Operations Support Systems (“OSS”) and (2) network element charges that Bell proposed to assess for certain “non-recurring costs” borne by Bell in processing AT & T’s network element orders. See id. ¶ 4(a), (g), at 6-7 (J.A. 1450-51). AT & T continues to raise these issues in the present appeal, and more will be said about them later in the court’s opinion. On May 9, 1997, the Hearing Examiners issued a Second Report setting the specific rates called for by the Commission. See Findings & Recommendations of the Hearing Examiners on Remand from the Comm’n, PSC Doc. No. 96-324 (May 9, 1997) (“Second Report”) (J.A 1452-84). This Second Report also rejected AT & T’s objections to Bell’s OSS charges and nonrecurring cost assessments but, at a public hearing held on May 13, 1997, the Commission again remanded AT & T’s objections for further consideration by the Hearing Examiners. See Interlocutory Order No. 4508, PSC Doc. No. 96324 ¶ 2, at 3-4 (May 27, 1997) (J.A. 1575-76). After additional briefing by the parties, the Hearing Examiners issued a Third Report reaffirming their prior decision to adopt Bell’s proposed resale OSS charges and, with minor adjustments, Bell’s proposed non-recurring network element charges. See Findings & Recommendations of the Hearing Examiners on Further Remand from the Comm’n, PSC Doc. No. 96-324 (May 27, 1997) (“Third Report”) (J.A. 1578-93). At its June 3, 1997 public meeting, the Commission considered the Hearing Examiners’ First, Second, and Third Reports as well as submissions by the parties. After deliberations, the Commission issued its SGAT Order. See Findings, Opinion & Order No. 4542, PSC Doc. No. 96-324, (Jul. 8, 1997) (“SGAT Order”) (J.A. 1594-1660). With respect to the issues currently on appeal, the Commission rejected Bell’s SGAT and approved the specific rates recommended by the Hearing Examiners. It also directed Bell to incorporate these rates in a revised SGAT, should Bell choose to file one. See id. ¶ MM, at 59 (J.A. 1651). Further, the Commission affirmed the Hearing Examiners’ rejection of AT & T’s objections to Bell’s OSS and non-recurring network element charges. See id. ¶ V-51, at 27-31 (J.A. 1619-23). B. The Arbitration Proceeding During the SGAT Proceeding, AT & T and Bell also were engaged in arbitrated interconnection negotiations that ultimately produced the Interconnection Agreement under review here. A week after Bell filed its proposed SGAT with the Delaware Commission, AT & T filed with the Commission a petition for arbitration of unresolved issues arising out of its interconnection negotiations with Bell. See 47 U.S.C. § 252(b)(1) (providing for state commission arbitration of interconnection agreements). The Commission appointed an Arbitrator to resolve the outstanding issues between Bell and AT & T. The parties quickly realized that some of the disputed issues submitted for arbitration were identical to those simultaneously under review by the Commission in its SGAT Proceeding. Accordingly, the parties withdrew from arbitration their disputes relating to the pricing of interconnection, network elements, and resold services and agreed to have those issues determined in the SGAT Proceeding. See Agreement for Withdrawal & Modification of Arbitration Issues, PSC Doc. No. 96-331 (Jan. 17, 1997) (J.A. 349-72). The parties stipulated that the eventual Interconnection Agreement between them would incorporate the Commission’s rate determinations in the SGAT Proceeding, regardless of whether the SGAT was ultimately approved or rejected. See id. Several non-price disputes between AT & T and Bell remained subject to arbitration. Of these issues, AT & T raises two here on appeal: (1) the availability of customer specific contracts for resale and (2) the collocation of remote switching modules at Bell’s premises. There were no live hearings during the Arbitration Proceeding — the parties conducted limited discovery and then filed comments and replies with the Arbitrator. On April 10, 1997, the Arbitrator issued an Award resolving the outstanding issues between the parties. See Arbitration Award, PSC Doc. No. 96-331 (Apr. 10, 1997) (J.A. 1428-44). On May 9, 1997, AT & T filed a motion for reconsideration of the above issues, but the Arbitrator denied the motion. After completion of the SGAT Proceeding, the parties incorporated the results of the Arbitration Award and the Commission’s SGAT Order into the Interconnection Agreement. On September 30, 1997, Bell and AT & T jointly filed the finalized Interconnection Agreement with the Commission. See Interconnection Agreement (J.A. 1692-1720). On October 21, 1997, the Commission approved the Interconnection Agreement pursuant to 47 U.S.C. § 252(e)(2). See Order No. 4629, PSC Doc. No. 96-331 (Oct. 21, 1997) (J.A. 1741-44). Due to the time constraints imposed by the Telecommunications Act in § 252(e)(4), the Commission indicated that it would enter formal findings and an opinion at a later date. It did so on January 27, 1998. See Findings & Opinion for Order No. 4629, & 4709, PSC Doc. No. 96-331 (Jan. 27, 1998) (J.A. 1750-74) (“Interconnection Order”). Bell filed a Complaint in the nature of an appeal (“the SGAT Appeal”) on September 8, 1997. AT & T filed its appeal to the Interconnection Order on November 20, 1997 (“the Interconnection Appeal”). The court consolidated both appeals into the instant case. IY. STANDARD OF REVIEW The Telecommunications Act is silent as to the scope and standard of review federal district courts must employ in reviewing state commission actions. The Act’s provision for federal judicial review states only that federal courts must “determine whether the agreement or statement meets the requirements of section 251 and [252].” 47 U.S.C. § 252(e)(6). In the absence of a more explicit statutory command, the court shall adopt the standards employed in reviews of federal agency actions. In such cases, courts review “the administrative record already in existence, not some new record made initially in the reviewing court.” Florida Power & Light Co. v. Lorion, 470 U.S. 729, 743, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985) (quotations and citation omitted). Accordingly, the court shall conduct a review of the administrative record as it existed before the Commission. With respect to whether the Commission’s actions were proeedurally and substantively in compliance with the Telecommunications Act, the court shall adopt a de novo standard of review. State agencies have no expertise in interpreting federal law and, thus, are not entitled to the deference accorded a federal agency’s interpretation of its own statutes under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). See, e.g., Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1495 (9th Cir.1997); AT & T Communications of Southern States, Inc. v. BellSouth Telecomms., Inc., 7 F.Supp.2d 661, 668 (E.D.N.C.1998); U.S. West Communications, Inc. v. Hix, 986 F.Supp. 13, 19 (D.Colo.1997). Moreover, deferring to state commission interpretations of the Telecommunications Act would lead to fifty different interpretations of the Act and thereby frustrate Congress’ efforts to impose a degree of national uniformity in telecommunications regulation. See AT & T Communications of S. Cent. States, Inc. v. BellSouth Telecomms., Inc., 20 F.Supp.2d 1097, 1100 (E.D.Ky.1998). The Commission’s technical expertise in applying the Act’s mandates to the complex facts of the administrative record, however, deserves substantial deference. See, e.g., BellSouth Telecomms., Inc., 7 F.Supp.2d at 668. Accordingly, the court shall adopt the Federal Administrative Procedure Act’s “arbitrary and capricious” standard in its review of the Commission’s application of the law to the facts. See 5 U.S.C. § 706(2)(A); Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 414-16, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). The court shall review the administrative record “with an eye to whether the [Commission] has ‘examine[d] the relevant data and articulatefd] a rational connection between the facts found and the choice made.’ ” Time Warner Entertainment Co. v. FCC, 56 F.3d 151, 163 (D.C.Cir.1995) (citation omitted). V. DISCUSSION Two initial matters require the court’s attention before addressing the substance of the appeals. First, the Commission has moved the court to dismiss the entire action on Eleventh Amendment grounds. The court shall dismiss this motion because the Commission has waived its sovereign immunity and because, even if it did not, the Ex parte Young doctrine allows the parties to seek prospective injunctive relief from the Commission’s alleged ongoing violations of federal law. Second, the court must determine whether the FCC’s Local Competition Order affects the court’s review of the Commission’s decisions. Relevant provisions of the Local Competition Order were stayed and later vacated by the Eighth Circuit before the Commission issued the Orders under review. Those provisions since have been reinstated by the Supreme Court. At issue is whether they apply to the Commission’s Orders even though they were not in effect when the Commission rendered its decisions. A. The Commission’s Motion to Dismiss As an initial matter, the court notes that this is an atypical assertion of sovereign immunity. In essence, this case is an appeal from an administrative agency’s decision. Viewed in this light, it is odd indeed for an administrative agency to assert immunity from judicial review of its decisions. As will become evident, the court is skeptical that review of the Commission’s voluntary participation in a federal telecommunications regulatory regime presents the kind of affront to state sovereignty that the Eleventh Amendment sought to prevent. The Eleventh Amendment has its genesis in the Supreme Court’s decision in Chisholm v. Georgia, 2 U.S. (2 Dall.) 419, 1 L.Ed. 440 (1793), which permitted a South Carolina citizen to bring an action for damages against the state of Georgia in federal court. Chisholm “created ... a shock of surprise throughout the country,” Hans v. Louisiana, 134 U.S. 1, 11, 10 S.Ct. 504, 33 L.Ed. 842 (1890), and prompted a speedy passage of the Eleventh Amendment. See Alden v. Maine, 527 U.S. 706, --, 119 S.Ct. 2240, 2250, 144 L.Ed.2d 636 (1999) (describing rapid passage of the Amendment through Congress). The Eleventh Amendment states: The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State. Although by its terms the Amendment restricts only the Article III diversity jurisdiction of the federal courts, the Supreme Court has “understood the Eleventh Amendment to stand not so much for what it says, but for the presupposition ... which it confirms.” Blatchford v. Native Village of Noatak, 501 U.S. 775, 779, 111 S.Ct. 2578, 115 L.Ed.2d 686 (1991). That presupposition is that each state is a sovereign entity in our federal system and, consequently, the judicial authority conferred by Article III is limited by this sovereignty. See id.; see also Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996). Consistent with this interpretation of the Amendment, the Supreme Court has held repeatedly that “an unconsenting State is immune from suits brought in federal court by her own citizens as well as by citizens of another State.” Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) (citing Hans, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842; Duhne v. New Jersey, 251 U.S. 311, 40 S.Ct. 154, 64 L.Ed. 280 (1920); Great Northern Life Ins. Co. v. Read, 322 U.S. 47, 64 S.Ct. 873, 88 L.Ed. 1121 (1944); Parden v. Terminal Ry. of Alabama State Docks Dept., 377 U.S. 184, 84 S.Ct. 1207, 12 L.Ed.2d 233 (1964); Employees v. Department of Public Health & Welfare, 411 U.S. 279, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973)). A state’s sovereign immunity extends to its agencies, such as the Commission, and state officials, such as the individual Commissioners. See Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993). The Court has recognized certain exceptions to state sovereign immunity, the precise contours of which have undergone substantial change in recent years. Over a strenuous dissent authored by Justice Scalia, a plurality of the Court in Pennsylvania v. Union Gas Co. held that Congress could abrogate a state’s sovereign immunity when acting pursuant to the Commerce Clause. See 491 U.S. 1, 15, 109 S.Ct. 2273, 105 L.Ed.2d 1 (1989) (finding that “Congress has the power to abrogate immunity when exercising its plenary authority to regulate interstate commerce”). Seven years later, in Seminole Tribe the Court overruled Union Gas and held that Congress may not abrogate a state’s sovereign immunity when acting pursuant to its Article I powers. See Seminole Tribe, 517 U.S. at 72-73, 116 S.Ct. 1114 (“The Eleventh Amendment restricts the judicial power under Article III, and Article I cannot be used to circumvent the constitutional limitations placed upon federal jurisdiction.”). In the wake of Seminole Tribe, Congress may abrogate a state’s sovereign immunity only when legislating pursuant to the remedial provisions of § 5 of the Fourteenth Amendment. See Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976). Two other exceptions to state sovereign immunity also exist: (1) a state may waive its sovereign immunity by consenting to suit, see, e.g., Alden, 527 U.S. at -, 119 S.Ct. at 2258, and (2) under the so-called Ex parte Young doctrine, a private party may sue a state officer for prospective injunctive or declaratory relief from an on-going violation of the Constitution or federal laws. See Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). [i]n any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement or statement meets the requirements of Section 251 and this section [252]. The Commission argues that none of these exceptions applies in the present suit. First, it contends that § 252(e)(6) of the Act is an unconstitutional abrogation of Delaware’s sovereign immunity. Second, citing the Supreme Court’s recent decision in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 527 U.S. 666, 119 S.Ct. 2219, 144 L.Ed.2d 605 (1999) (“College Savings”), the Commission asserts that it could not have constructively waived its sovereign immunity by participating in arbitrations and reviews of interconnection agreements under the Act. Third, the Commission argues that the present suit may not proceed under the Ex parte Young exception. 1. Abrogation Relying on Seminole Tribe, the Commission asks the court to declare the Act’s provision for judicial review, § 252(e)(6), an unconstitutional abrogation of state sovereign immunity. See D.I. 128 at 7-9. Although § 252(e)(6) of the Act provides for federal review of state commission determinations under certain circumstances, it is hardly equivalent to the “abrogation” found unconstitutional in Seminole Tribe. In that case, the Supreme Court reviewed the constitutionality of the Indian Gaming Regulatory Act (“IGRA”), which Congress passed pursuant to its Article I power to regulate commerce with the Indian tribes. See U.S. Const., art. I, § 8, cl. 3. The IGRA imposed upon the states a duty to negotiate in “good faith” with an Indian tribe toward the establishment of a Tribal-State compact governing gaming activities on Indian reservations. The IGRA also authorized a tribe to bring suit in federal court against a state in order to compel the state to negotiate in good faith. The petitioner brought suit against the State of Florida under the IGRA, and Florida asserted its immunity from suit. In the Supreme Court, the petitioner argued that the Eleventh Amendment did not prohibit its suit because Congress, through the IGRA, had abrogated state sovereign immunity. The Supreme Court analyzed the IGRA under the two-part test for determining whether a federal statute validly abrogates state sovereign immunity. The first part of that, test, which the Commission does not address, asks whether Congress has “‘unequivocally expressed] its intent to abrogate the immunity.’ ” Seminole Tribe, 517 U.S. at 55, 116 S.Ct. 1114 (quoting Green v. Mansour, 474 U.S. 64, 68, 106 S.Ct. 423, 88 L.Ed.2d 371 (1985)). Congress must express this intent in “a clear legislative statement.” Blatchford, 501 U.S. at 786, 111 S.Ct. 2578. The Court in Seminole Tribe found that the IGRA clearly expressed an intent to abrogate state sovereign immunity by vesting jurisdiction in “ ‘[t]he United States district courts ... over any cause of action ... arising from the failure of a State to enter into negotiations ... or to conduct such negotiations in good faith.’ ” Seminole Tribe, 517 U.S. at 56-57, 116 S.Ct. 1114 (quoting § 2710(d)(7)(A)(i)). Only after concluding that Congress had unequivocally stated its intent to abrogate state sovereign immunity did the Court address the second prong of the test, which asks whether Congress had the constitutional authority to abrogate state immunity. The Commission, however, begins with the second prong of the abrogation test and does not address whether Congress clearly stated its intent to abrogate state sovereign immunity. The intent to abrogate is by no means clear from the face of the Telecommunications Act. See, e.g., MCI Telecomms. Corp. v. Illinois Commerce Comm’n, 183 F.3d 558, 566 (7th Cir.) (noting that the Act offers states “a genuine choice” to participate in the federal regulatory function delegated to them or to retain their sovereign immunity and allow the FCC to conduct the federal regulatory functions without state participation), rh’g granted, 183 F.3d 567 (7th Cir.1999). Unlike the IGRA, the Telecommunications Act permits state commissions to absent themselves entirely from participation under the Act and, consequently, from federal court review of their actions: (5) Commission to act if State will not act. If a State commission fails to act to carry out its responsibility under this section in any proceeding or other matter under this section, then the [FCC] shall issue an order preempting the State commission’s jurisdiction of that proceeding or matter within 90 days after being notified (or taking notice) of such failure, and shall assume the responsibility of the State commission under this section with respect to the proceeding or matter and act for the State commission. (6) Review of State commission Actions. In a case in which a State fails to act as described in paragraph (5), the proceeding by the [FCC] under such paragraph and any judicial review of the FCC’s actions shall be the exclusive remedies for a State commission’s failure to act.... Id. § 252(e)(5)-(6). The FCC’s implementing regulations construe a “failure to act” as a state commission’s failure to respond to a request for mediation or arbitration within a reasonable time or a failure to complete an arbitration within the statutory time limits. See 47 C.F.R. § 51.801 (1998). Thus, a state may avoid answering suit in federal court simply by declining a request to arbitrate an interconnection agreement or by not acting to approve or reject an interconnection agreement within 90 days of its submission by the parties. See id. § 252(e)(4) (deeming an interconnection agreement “approved” if the state commission does not act within 90 days of its submission). It is only where, as here, a state commission voluntarily participates in the federal regulatory scheme that its actions become subject to federal review: In any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the’ agreement or statement meets the requirements of section 251 and [252]. Id. § 252(e)(6). Legislation that enables a state to avoid federal jurisdiction entirely can hardly qualify as an unequivocal expression of Congress’s intent to abrogate state sovereign immunity. Congress did not offer a similar choice to the states in the IGRA, and it is this choice that distinguishes the IGRA from the Telecommunications Act. Because the Telecommunications Act premises federal review of state commission actions on a commission’s wholly voluntary participation under the Act, the court declines to find that § 252(e)(6) abrogates state sovereign immunity and, therefore, it need not reach the question of whether § 252(e)(6) is unconstitutional. The question is, then, whether some other exception to sovereign immunity permits the court to entertain this suit against the Commission and the Commissioners. 2. Waiver Generally, states waive their sovereign immunity when they voluntarily invoke federal jurisdiction, see Gunter v. Atlantic Coast Line R.R. Co., 200 U.S. 273, 284, 26 S.Ct. 252, 50 L.Ed. 477 (1906), or when the state makes a “clear declaration” of its intent to submit to federal jurisdiction. See, e.g., Read, 322 U.S. at 54, 64 S.Ct. 873. This intent to submit to federal jurisdiction must be “unequivocal,” see Pennhurst State Sch. & Hosp. v. Holderman, 465 U.S. 89, 99, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), and may occur by state statute or constitutional provision or by otherwise clearly waiving immunity from suit in the context of a particular federal program. See Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 238 n. 1, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985) (emphasis added). “[A] waiver may be found not only in the text of a state statute or constitution but also by examining the underlying facts and circumstances of the case.” Innes v. Kansas State Univ. (In re Innes), 184 F.3d 1275, 1280 (10th Cir.1999) (emphasis added); accord Georgia Dep’t of Revenue v. Burke (In re Burke), 146 F.3d 1313, 1318 (11th Cir.1998) (concluding that, “in the absence of explicit consent by state statute or constitutional provision, a state may consent to a federal court’s jurisdiction through its affirmative conduct”) (emphasis added), cert. denied, — U.S. -, 119 S.Ct. 2410, 144 L.Ed.2d 808 (1999). At issue is whether the “underlying circumstances” of this case support a finding that, through its “affirmative conduct,” Delaware has waived its immunity in the context of the federal regulatory scheme embodied in the Telecommunications Act. Significantly, Delaware enacted a law authorizing the Commission to act “in accord with the applicable provisions of the Telecommunications Act of 1996.” See 70 Del. Laws, c. 556 (1996) (codified at 26 Del. C. § 703(4) (Supp.1998)). Acting pursuant to this enabling legislation, the Commission arbitrated the Interconnection Agreement and approved the SGAT knowing full well that the Telecommunications Act provided for federal court review of its actions. Nonetheless, the Commission now argues that, in light of the Supreme Court’s decision in College Savings, its actions did not constitute a waiver of its sovereign immunity. The Commission, however, reads College Savings too broadly- In College Savings, the Supreme Court specifically addressed the question of whether Florida “constructively” waived its sovereign immunity by marketing a college tuition savings plan in interstate commerce. College Savings Bank sued Florida under the Lanham Act as amended by the Trademark Remedy Clarification Act (“TRCA”), which subjected the states to suit under the Lanham Act for false and misleading advertising in interstate commerce. See id. at 2222. Relying on the Court’s first enunciation of the doctrine of constructive waiver in Parden v. Terminal Railway, 377 U.S. 184, 84 S.Ct. 1207, 12 L.Ed.2d 233 (1964), College Savings Bank argued that Florida had constructively waived its sovereign immunity by marketing a college savings plan in interstate commerce. The Court rejected this argument and overruled Parden, explaining that “there is little reason to assume actual consent based upon the State’s mere presence in a field subject to congressional regulation.” Id. at 2228. The Court reasoned that a waiver of sovereign immunity must be voluntary, and the voluntariness of a waiver is destroyed when “what is attached to the refusal to waive is the exclusion of the State from otherwise lawful activity.” Id. at 2231. The state activity at issue in College Savings bears little resemblance to that undertaken by the Commission in the present case. Unlike Florida, Delaware is not merely participating in otherwise lawful activities subject to federal regulation. Instead, the Delaware Commission (with the Delaware legislature’s blessing) is actively regulating pursuant to a federal regulatory scheme. By contrast, Florida assumed no federal regulatory burdens by entering the market for college savings plans. What is more, the TRCA did not propose a federal-state regulatory partnership, nor did it explicitly condition Florida’s marketing efforts on consent to federal jurisdiction. Florida simply assumed the role of a private bank and marketed a college savings plan similar in many respects to plans offered by other private banks. The Supreme Court rejected the notion that a waiver of sovereign immunity could be presumed from Florida’s choice to engage in this type of “otherwise lawful” activity. In the present case, the Commission’s actions more closely resemble those recognized by the Court in College Savings as constituting a valid waiver of sovereign immunity. The Supreme Court explained in College Savings that Congress may condition a waiver of state sovereign immunity upon the state’s acceptance of federal “gratuities.” See id. at 2231. The Court offered two examples. In Petty v. Tennessee-Missouri Bridge Commission, 359 U.S. 275, 79 S.Ct. 785, 3 L.Ed.2d 804 (1959), the Court held that a bistate commission (which the Court assumed enjoyed state sovereign immunity) created pursuant to an interstate compact had consented to suit by reason of a suability provision attached to congressional approval of the compact. The Court explained in College Savings that, because the Compact Clause prohibits such interstate compacts without congressional approval, the granting of such approval was a gratuity and Congress could condition a waiver of sovereign immunity upon acceptance of the gratuity. See College Savings, 119 S.Ct. at 2231. Here, Congress conditioned the states’ regulation of interconnection agreements and SGATs upon state consent to federal court review of state commission actions. See U.S. West Communications, Inc. v. Mecham, No. 2:98CV-490K, slip op. at 6 (D.Utah Aug. 13, 1999) (noting that subsections 252(e)(4)-(6) “evince a clear [c]on-gressional intention to condition regulation by a state commission upon review of that commission’s actions in federal court”). Congress is not obligated to allow continued state participation in such regulation. See FERC v. Mississippi, 456 U.S. 742, 764, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982) (explaining that “the commerce power permits Congress to preempt the States entirely in the regulation of private utilities”); AT & T Communications of the Southwest, Inc. v. Southwestern Bell Tel. Co., 97-1573-CV-W-5, slip op. at 19 (W.D.Mo. Aug. 31, 1999) (noting that, “[ajbsent [congressional authority, the [state utility commission] would have no right to participate in the unique dispute resolution process devised by Congress”). As such, state participation in federal telecommunications regulation under the Act is a gratuity upon which Congress may condition a waiver of state sovereign immunity. Because the state of Delaware has accepted this gratuity, its waiver of sovereign immunity may be presumed. 3. Ex parte Young Even if Delaware’s voluntary acceptance of this congressional gratuity did not constitute an effective waiver of its sovereign immunity, the present suit still could proceed under the Ex parte Young doctrine. In Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), the Supreme Court held that, notwithstanding the Eleventh Amendment, federal courts have the jurisdiction to entertain a suit against a state officer to enjoin official actions violating federal law (statutory or constitutional), even though the state itself may be immune. Under the Young doctrine, “a federal court, consistent with the Eleventh Amendment, may enjoin state officials to conform their future conduct to the requirements of federal law.” Quern v. Jordan, 440 U.S. 332, 337, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). The Young doctrine enables “federal courts to vindicate federal rights and hold state officials responsible to ‘the supreme authority of the United States.’ ” Halderman, 465 U.S. at 105, 104 S.Ct. 900 (quoting Ex parte Young, 209 U.S. at 160, 28 S.Ct. 441). The Commission contends, however, that the Supreme Court’s decision in Seminole Tribe foreclosed Ex parte Young relief in cases where Congress provided a limited statutory remedial scheme. The Commission asserts that § 252(e)(6) of the Telecommunications Act provides a limited remedy and, therefore, that the court has no jurisdiction over the individual Commissioners. In Seminole Tribe, the Supreme Court addressed whether the Young doctrine permitted the tribe to seek prospective injunctive relief against Florida’s governor to enforce the good faith bargaining provisions of the IGRA. The IGRA purported to make the state’s statutory obligation to negotiate in good faith judicially enforceable in federal court. See 25 U.S.C. § 2710(d)(7)(A)(i), (B)(i). To that end, the IGRA permitted tribes to seek an order in federal court directing a state to conclude a compact within a sixty day period. See id. § 2710(d)(7)(B)(iii). If the state failed to comply with the court’s order, the IGRA delineated a complex, post-judgment remedial scheme that included mediation, see id. § 2710(d)(7)(B)(iv)-(vi) and, failing state consent to a compact, ultimately culminated in the issuance of gaming regulations by the Secretary of the Interior. See id. § 2710(d)(7)(B)(vii). In light of this “carefully crafted and intricate” post-judgment remedial scheme, see Seminole Tribe, 517 U.S. at 73-74, 116 S.Ct. 1114, the Court held that “where Congress has prescribed a detailed remedial scheme for the enforcement against a State of a statutorily created right, a court should hesitate before casting aside those limitations and permitting an action against a state officer based on Ex parte Young.” Id. at 74, 116 S.Ct. 1114. Unlike the remedial scheme of the IGRA, § 252(e)(6) of the Telecommunications Act provides the sole remedy for parties aggrieved by a state commission determination. Such parties may bring an action in federal district court “to determine whether the agreement or statement meets the requirements of section 251 [and 252].” 47 U.S.C. § 252(e)(6). There is no further administrative remedy provided after judicial review. Indeed, the Act is silent as to how federal district courts should enforce their rulings, thus implying that they enjoy the full panoply of remedies allowable in a Young suit for prospective relief of on-going violations of federal law. Indeed, the Telecommunications Act expressly states that it “shall not be construed to modify, impair or supersede Federal ... law unless expressly so provided in such Act or amendments.” 110 Stat. 143(c). As such, the court’s declaratory and injunctive powers under 28 U.S.C. §§ 1651 and 2201 are fully intact, and this is in keeping with the principle that where Congress establishes a cause of action, courts “presume the availability of all appropriate remedies unless Congress has expressly indicated otherwise.” Franklin v. Gwinnett County Pub. Schools, 503 U.S. 60, 66, 112 S.Ct. 1028, 117 L.Ed.2d 208 (1992). Thus, Seminole Tribe’s limitation of Young does not affect the court’s ability to entertain the present suit against the individual Commissioners. The court, therefore, shall deny the Commission’s motion to dismiss. B. The Applicability of the FCC Pricing Rules The court now turns to the question of whether the FCC pricing rules apply to the present review of the Commission’s Orders. First, though, a history of the FCC’s regulations is necessary. Section 251(d) of the Telecommunications Act requires the FCC to promulgate regulations implementing the Act’s rather broad interconnection mandates. See 47 U.S.C. § 251(d). Soon after the Act’s passage, the FCC issued its voluminous Local Competition Order, in which the FCC adopted the TELRIC methodology for determining the “just and reasonable” rates called for by the Act. See 47 U.S.C. § 252(d). These regulations were to take effect on September 30, 1996, see 61 Fed.Reg. 45,476 (1996), but on September 27, 1996 the Eighth Circuit temporarily stayed their effective date. See Iowa Utils. Bd. v. FCC, 96 F.3d 1116, 1118 (8th Cir.1996). Although the Eighth Circuit eventually lifted its stay with respect to some of these regulations, it continued to stay the Local Competition Order’s, pricing regulations, which are relevant to the appeals at bar. On July 18, 1997, the Eighth Circuit vacated many of the stayed FCC regulations (including the TELRIC pricing rules) on the ground that the FCC lacked the jurisdiction to issue them. See Iowa Utils. Bd. v. F.C.C., 120 F.3d 753, 796 & n. 15 (8th Cir.1997). During the Local Competition Order’s pilgrimage through judicial limbo, the Commission rejected Bell’s proposed SGAT and approved the parties’ Interconnection Agreement. See Final Order, PSC Doc. No. 96-324 (July 8, 1997) (J.A. 1594); Order No. 4629, PSC Doc. No. 96-331 (Oct. 21, 1997) (J.A. 1741). Significantly, in its SGAT Order the Commission voluntarily adopted the Local Competition Order’s TELRIC methodology even though that portion of the Local Competition Order had never gone into effect. The Commission noted that TELRIC was “appropriate as the standard for determining just and reasonable rates under § 252(d)(1) for unbundled network elements and interconnection in Delaware ... regardless of whether the FCC acted within its powers in imposing this standard on the states.” SGAT Order ¶ 23, at 13; see also id. ¶ B, at 50. On January 25, 1999 the Supreme Court reversed the Eighth Circuit in part, concluding that the FCC did have the jurisdiction to promulgate the Local Competition Order. See AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). Since this remand, the Eighth Circuit has vacated its previous order, thus reinstating the FCC pricing rules. See D.I. 125. The court ordered supplemental briefing on the impact of the Supreme Court’s decision in the present case. See D.I. 109. Both AT & T and the Commission argue that TELRIC governs the court’s disposition of the appeals. Conversely, Bell contends that TELRIC does not apply retroactively because it was not in effect when the Commission issued its Orders. Bell urges the court to test the legality of the Commission’s Orders solely by reference to the broad statutory pricing standards. The procedural posture of this case poses a perplexing dilemma for a reviewing court. On the one hand, the FCC regulations were not in effect when the Commission rejected Bell’s SGAT and “ ‘the legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took place.’ ” Landgraf v. USI Film Prods., 511 U.S. 244, 265, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994) (quoting Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 855, 110 S.Ct. 1570, 108 L.Ed.2d 842 (1990) (Scalia, J., concurring)). The conduct under review is the Commission’s rejection of Bell’s SGAT, and that conduct'occurred before the FCC’s Local Competition Order took effect. At least two district courts have concluded that the Eighth Circuit’s stay and vacatur bars retroactive application of the Local Competition Order. See U.S. West Communica tions, Inc. v. Jennings, 46 F.Supp.2d 1004 (D.Ariz.1999); MCI Telecomms. Corp. v. GTE Northwest, Inc., 41 F.Supp.2d 1157 (D.Or.1999). Unlike the state commissions in Jennings and GTE Northwest, Inc., however, the Delaware Commission (with the parties’ consent) voluntarily adopted the FCC’s TELRIC pricing methodology. See Final Order, ¶ 23, at 13; ¶ B, at 50 (J.A. 1594, 1605, 1644). At the time, none of the parties raised any objections to the Commission’s choice. See, e.g., id. ¶ 24, at 13 (J.A. 1605); In re Petition of Bell Atlantic-Delaware for Approval of its SGAT under § 252(f) of the Telecommunications Act of 1996, at 2 n. 2 (J.A. 74). Although the Commission was under no legal obligation to adopt TELRIC, it did so and TELRIC is now binding federal law by virtue of the Supreme Court’s decision in Iowa Utilities. The court, therefore, will hold the Commission and the parties to their choice and will assess the Commission’s actions in light of the Local Competition Order. The court also notes that Bell will suffer no harm from retroactively applying TELRIC because it had ample notice that the Commission would apply the Local Competition Order’s mandates. See GTE South, Inc. v. Morrison, 199 F.3d 733, 741-742 (4th Cir.1999) (applying Local Competition Order retroactively). VI. THE APPEALS A. The SGAT Appeal According to Bell, the Commission’s SGAT Order violated the Act in four respects. The first three of its objections relate to alleged errors in the setting of network element prices by the Commission. First, Bell argues that the Order set rates for competitors to use Bell’s switching facilities premised on the assumption (which Bell argues is fictional) that Bell will receive bulk discounts by completely replacing its existing central office switching equipment with new switches. Bell claims that this violates the Act’s requirement that ILECs recover their “cost ... of providing” facilities to competitors. See 47 U.S.C. § 252(d)(1)(A)(i). Second, Bell claims that the Commission based its cost of capital on “a decade-old rate-of-return proceeding.” D.I. 83 at 1. If true, this would violate the Act’s mandate that costs be “determined without reference to a rate-of-return or other rate-based proceeding.” 47 U.S.C. § 252(d)(1)(A)(i). Third, the Commission allegedly based the rates at which Bell must provide parts of its network to competitors on a “backward looking depreciation rate”- developed several years ago by the FCC. Bell argues that this prevents it from recovering its costs because the rate does not reflect the “much shorter economic life of assets ... in today’s competitive market.”D.I. 83 at 2. Bell’s fourth assertion of error relates to the Commission’s determination of a wholesale discount rate. Bell alleges that the Commission based the wholesale rates that competitors must pay Bell for its services on “cost savings that theoretically could be realized by a hypothetical carrier providing only wholesale service, rather than on cost savings that will be realized by Bell, which provides both retail and wholesale services.” D.I. 83 at 2. The court shall address each of these arguments in turn. 1. Network Element Rates a. Switch Discounts “Switches” are computer-like processors that route telephone calls to then-destinations, and they fall under the definition of “network elements” in the Telecommunications Act. As such, ILECs must make switches available to competitors on an unbundled basis at rates “based on the cost ... of providing the ... network element.” 47 U.S.C. § 252(d)(1); see also Local Competition Order ¶ 410, at 203. In its SGAT Order, the Commission set the rate that Bell could charge for unbundled switching based on the assumption that Bell would replace its switches in the long-run and receive large discounts offered by-switch sellers for bulk purchases. See SGAT Order ¶ 33 (J.A. 1611-12). Bell contends that its newly purchased switches are state-of-the-art and that any additions to its switching system will come only in the form of “add-on” line cards, for which it will receive much smaller discounts. Thus, Bell argues, the Commission’s Order forces Bell to pass along to competitors “massive” switch discounts that it will never receive. If true, this would violate the Act’s requirement that the rates charged for unbundled network elements reflect “the cost of providing” the network element. See 47 U.S.C. § 252(d)(1)(A)(i). To calculate the “cost of providing” switches, the Commission adopted the FCC’s TELRIC pricing methodology, which requires the Commission to set “forward-looking” or “long run” prices. See Local Competition Order ¶¶ 683-685, at 346. Bell does not dispute that TEL-RIC’s forward-looking pricing methodology provides the appropriate legal standard for resolving the switch discount issue. Instead, it challenges the Commission’s understanding of “long-run” switching costs and argues that the Commission ignored the Local Competition Order’s, requirement that TELRIC capture “the incremental costs that incumbents actually expect to incur in making new network elements available to new entrants.” Local Competition Order ¶ 685, at 346. At issue, then, is whether the Commission acted reasonably by including bulk discounts as part of the forward-looking, long-run price that Bell may charge for use of its switching equipment. The court shall review this issue under an arbitrary and capricious standard. To understand the TELRIC or “Total Element Long Run Incremental Cost,” pricing methodology, one must first grasp some basic definitions subsumed in the acronym itself. From an economic standpoint, “long-run” refers to “‘a period so long that all of the firm’s present contracts will have run out, its present plant and equipment will have been worn out or rendered obsolete and will therefore need replacement.’ ” Local Competition Order ¶ 677, at 343 n. 1682 (quoting William Baumol, Economic Theory and Operations Analysis 290 (4th ed. 1977)). “Incremental” costs are those additional costs that a firm incurs when expanding the output of a good or service by producing an additional quantity of the good or service. See id. ¶ 675, at 342. Incremental costs are forward-looking because firms will incur these costs as the output level changes by a given increment. Id. Conversely, historic or “embedded” costs represent past investments and costs that a firm already has incurred. In a competitive market, the actual price of a good or service will tend toward its long-run, incremental cost. Id. Thus, costs calculated according to the TELRIC methodology mimic those costs that an efficient company, constrained by competitive market forces, would incur in providing the requested network element. See MCI Telecomms. Corp. v. Pacific Bell, No. C 97-0670 SI, slip op. at 6 (N.D.Cal. Sept. 29, 1998). Consequently, TELRIC provides the best estimate of what it would cost an efficient competitor to enter, and compete in, the local telephone market. See Southwestern Bell, slip op. at 24. Because it seeks to mimic costs in a competitive market, TELRIC does not permit consideration of embedded costs. Calculating prices based on such costs would permit ILECs to pass on to competitors inflated, monopoly-era costs that have little relation to costs in a competitive environment. See Southwestern Bell, slip op. at 24; Local Competition Order ¶ 705, at 355-56 (characterizing an embedded cost methodology as pro-competitor, not pro-competition). Where, as here, the market is presently a monopoly, the Hearing Examiners and the Commission (which adopted the Hearing Examiners’ findings) estimated the efficient forward-looking, long-run costs of a local exchange provider based on the FCC’s particular formulation of TELRIC. According to the regulations implementing the FCC’s Local Competition Order, TEL-RIC’s forward-looking pricing methodology for interconnection and unbundled network elements “should be measured based on the use of the most efficient telecommunications technology currently available and the lowest cost network configuration, given the existing location of the [ILEC’s] wire centers.” 47 C.F.R. § 51.505(b)(1); see also Local Competition Order ¶ 685, at 346. The Hearing Examiners concluded that an efficient telecommunications provider would replace its obsolete switches (and receive bulk discounts) rather than adding