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

   (a) An incumbent LEC's rates for transport and termination of
   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  Sec.  Sec. 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.