Sec. 51.705  Incumbent LECs' rates for transport and termination.

    (a) An incumbent LEC's rates for transport and termination of local 
telecommunications traffic shall be established, at the election of the 
state commission, on the basis of:
    (1) The forward-looking economic costs of such offerings, using a 
cost study pursuant to Secs. 51.505 and 51.511;
    (2) Default proxies, as provided in Sec. 51.707; or
    (3) A bill-and-keep arrangement, as provided in Sec. 51.713.
    (b) In cases where both carriers in a reciprocal compensation 
arrangement are incumbent LECs, state commissions shall establish the 
rates of the smaller carrier on the basis of the larger carrier's 
forward-looking costs, pursuant to Sec. 51.711.