IV. CONCLUSION

We grant limited rehearing to modify our holding that the FCC's DS1 cap applies on all routes. We have carefully reconsidered this issue and have determined that the DS1 cap applies only on routes where DS3 transport is not available as a UNE. In addition, we correct clerical errors. The rehearing of D.06-02-035, as modified, is denied in all respects.

THEREFORE, IT IS ORDERED:

1. Limited rehearing of D. 06-02-035 is granted for the purpose of making the following modifications:

a. On page 36 of D.06-02-035, the paragraphs 1 and 2, immediately following the quotation, shall be deleted, and replaced with the following:

"On January 24, 2006, a federal district court from the Western District of Texas issued CBeyond Communications of Texas, L.P. v. The Public Utility Commission of Texas (W. D. Tex. Jan. 24, 2006) ___ F. Supp. ___ , 2006 U.S. Dist LEXIS 7381. That court held that the ten-circuit DS1 transport cap set forth in the FCC's regulations in Section 51.319(e)(2)(ii)(B) applies on all routes, without regard to whether DS3 is available as a UNE. The opinion stated further that when there is a conflict between a regulation and an order, the regulation controls. On January 25, 2006, Verizon filed a motion for official notice of CBeyond.

"Prior to issuing D.06-02-035, we were persuaded by the court's decision in CBeyond. However, for the reasons articulated in this decision, we are modifying our ruling. We find CBeyond's rationale to be without adequate legal support, materially deficient in explaining the economic and competitive policy behind the DS1 ten-circuit cap, and we do not concur with the outcome. Accordingly, we choose not to follow CBeyond. The CLECs' language in Section 3.5.1.1.2 is adopted, and Verizon's language is rejected."

b. Finding of Fact No. 16 on p. 139 is modified to read as follows:

"The DS1 limitation applies only on those routes for which the FCC determines that there is no unbundling obligation for DS3 transport."

2. D.06-02-035 is further modified as follows:

a. On page 2, "March 2003" should be "March 2004."

b. On page 104, "failutre" should be "failure."

3. Rehearing of D.06-02-035, as modified, is denied in all respects.

This order is effective today.

Dated February 15, 2007, at San Francisco, California.

MICHAEL R. PEEVEY

President

DIAN M. GRUENEICH

JOHN A. BOHN

RACHELLE B. CHONG

Commissioners