Common carrier services: Telecommunications Act of 1996; implementation— Access charge reform; local exchange carriers price cap performance review,

[Federal Register: September 22, 1999 (Volume 64, Number 183)]

[Proposed Rules]

[Page 51280-51284]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr22se99-33]

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 0, 1, 61 and 69

[CC Docket Nos. 96-262, 94-1, 98-157; CCB/CPD File No. 98-63; FCC 99- 206]

Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Petition of US West Communications, Inc. for Forbearance From Regulation as a Dominant Carrier in the Phoenix, Arizona MSA; Interexchange Carrier Purchases of Switched Access Services Offered by Competitive Local Exchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

SUMMARY: This document proposes to revise the rules that govern the provision of interstate access services by those incumbent local exchange carriers subject to price cap regulation to advance the pro- competitive, de-regulatory national policies embodied in the Telecommunications Act of 1996. The document seeks comment on: Pricing flexibility and geographic deaveraging of rates for services in the common line and traffic-sensitive baskets; the rate structure for the local switching service category of the traffic-sensitive basket and for tandem-switched transport and whether

[[Page 51281]]

capacity-based charges, rather than per-minute charges, better reflect the manner in which the underlying costs of these services are incurred; adjustments to the traffic-sensitive and trunking price cap index formulae for these charges so that price cap LECs do not enjoy all the benefits of growth if they have not been exclusively responsible for creating that growth; market-based or other approaches to ensure that rates charged by competitive carriers are just and reasonable.

DATES: Written comments from the public on the Notice and the proposed information collections are due on or before October 29, 1999. Reply comments are due on or before November 29, 1999. Written comments on the new and/or modified information collections must be submitted to the Office of Management and Budget (OMB) on or before November 22, 1999.

FOR FURTHER INFORMATION CONTACT: Tamara Preiss, Deputy Division Chief, Common Carrier Bureau, Competitive Pricing Division, (202) 418-1520. For additional information concerning the information collections contained in document contact Judy Boley at 202-418-0214, or via the Internet at jboley@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Further Notice of Proposed Rulemaking (Notice) adopted August 5, 1999, and released August 25, 1999. The full text of this Notice, as well as the complete files for the relevant dockets, is available for inspection and copying during the weekday hours of 9:00 a.m. to 4:30 p.m. in the Commission's Reference Center, 445 12th St. SW, Room CY- A257, Washington DC, or copies may be purchased from the Commission's duplicating contractor, ITS Inc., 1231 20th St. NW, Washington DC 20036; (202) 857-3088. The complete text of the Notice also may be obtained through the World Wide Web, at http://www.fcc.gov/Bureaus/ Common__Carrier/Orders/1999/fcc99206.wp.

In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Judy Boley, Federal Communications Commission, Room 1- C804, 445 12th Street, SW, Washington, DC 20554, or via the Internet to jboley@fcc.gov, and to Virginia Huth, OMB Desk Officer, 10236 NEOB, 725-17th Street, NW, Washington, DC 20503 or via the Internet to huth__v@al.eop.gov.

Paperwork Reduction Act

This NPRM contains either a proposed information collection. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collections contained in this NPRM, as required by the Paperwork Reduction Act of 1995, Pub. L. 104-13. Public and agency comments are due at the same time as other comments on this NPRM; OMB notification of action is due 60 days from date of publication of this NPRM in the Federal Register. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.

OMB Approval Number: 3060-0760.

Title: Access Charge Reform--CC Docket No. 96-262 (First Report and Order), Second Order on Reconsideration and Memorandum Opinion and Order, Third Report and Order, and Fifth Report and Order and FNPRM

Form No.: N/A.

Type of Review: Revised Collection.

Respondents: Business or other for profit.

Est. time Total Section/title

No. of

per

annual responses response burden

Proposed Deaveraging of Common

13

109

1,420 Line and Traffic Sensitive Access Elements (Tariff Filing). Proposed Common Line and Traffic

13

1,984 25,800 Sensitive Phase II Showings.....

Total Annual Burden: 27,220 Hrs.

Estimated costs per respondent: $600.

Needs and Uses: The Commission will use the information collected to provide price cap LECs with additional pricing flexibility. The pricing flexibility would permit price cap LECs to deaverage geographically their pricing of access services other than those in the trunking basket; and to make a showing in order to receive Phase II pricing flexibility for common line and traffic-sensitive services.

Regulatory Flexibility Certification

As required by the Regulatory Flexibility Act, the Notice contains an Initial Regulatory Flexibility Analysis regarding the Further Notice of Proposed Rulemaking (Notice). A brief description of the analysis follows. Pursuant to section 604 of the Regulatory Flexibility Act, the Commission performed a comprehensive analysis of the Order with regard to small entities. This analysis includes: (1) A succinct statement of the need for, and objectives of, the Commission's proposals in the Notice; (2) a description of and an estimate of the number of small entities to which the Notice may apply; (3) a description of the projected reporting, recordkeeping and other compliance requirements of the Notice, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for compliance with the requirement; (4) a description of the steps the Commission has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the Notice and why each one of the other significant alternatives to each of the Commission's decisions which affect small entities was rejected.

Synopsis of Notice

1. Summary of Notice

   1. This Further Notice of Proposed Rulemaking (Notice) accompanies an order, printed elsewhere in this Federal Register issue, in which the Commission revises the rules that govern the provision of interstate access services by those incumbent local exchange carriers (ILECs) subject to price cap regulation (collectively, ``price cap LECs'') to advance the pro-competitive, de-regulatory national policies embodied in the Telecommunications Act of 1996 (1996 Act). With the proposed revisions in the Notice and revisions made in the Order, the Commission continues the process it

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      began in 1997, with the Access Reform First Report and Order (62 FR 31868, June 11, 1997), to reform regulation of interstate access charges in order to accelerate the development of competition in all telecommunications markets and to ensure that the Commission's own regulations do not unduly interfere with the operation of these markets as competition develops.

   2. In the Access Reform First Report and Order, the Commission adopted a primarily market-based approach to drive interstate access charges toward the costs of providing these services. The Commission envisioned that this approach would enable it to give carriers progressively greater flexibility to set rates as competition develops, until competition gradually replaces regulation as the primary means of setting prices. In the accompanying Order, the Commission fulfills its commitment to provide detailed rules for implementing the market-based approach, pursuant to which price cap LECs would receive pricing flexibility in the provision of interstate access services as competition for those services develops.

   3. The pricing flexibility framework the Commission adopts in the Order is designed to grant greater flexibility to price cap LECs as competition develops, while ensuring that: (1) Price cap LECs do not use pricing flexibility to deter efficient entry or engage in exclusionary pricing behavior; and (2) price cap LECs do not increase rates to unreasonable levels for customers that lack competitive alternatives. In addition, these reforms will facilitate the removal of services from price cap regulation as competition develops in the marketplace, without imposing undue administrative burdens on the Commission or the industry.

   4. Specifically, the Order grants immediate pricing flexibility to price cap LECs in the form of streamlined introduction of new services, geographic deaveraging of rates for services in the trunking basket, and removal, upon implementation of toll dialing parity, of certain interstate interexchange services from price cap regulation. The Commission also establishes a framework for granting price cap LECs greater flexibility in the pricing of all interstate access services once they satisfy certain competitive criteria. In Phase I, the Commission allows price cap LECs to offer contract tariffs and volume and term discounts for those services for which they make a specific competitive showing. In Phase II, the Commission permits price cap LECs to offer dedicated transport and special access services free from the Commission's part 69 rate structure and part 61 price cap rules, provided that the LECs can demonstrate a significantly higher level of competition for those services.

   5. The Commission addresses additional pricing flexibility proposals in this Notice. The Commission seeks comment on proposals for geographic deaveraging of the rates for services in the common line and traffic-sensitive baskets. The Commission also invites comment on the appropriate triggers for granting Phase II relief for services in the common line and traffic-sensitive baskets, as well as for the traffic- sensitive parts of tandem-switched transport service.

   6. In addition to adopting rules to implement the market-based approach to access reform, the Commission takes this opportunity to re- examine the rate structure for the local switching service category of the traffic-sensitive basket. Accordingly, the Commission seeks comment on a number of proposed changes to the rate structure so that it better replicates the operation of a competitive market. Generally, the Commission invites parties to discuss proposed revisions to its rules that would require price cap LECs to develop capacity-based local switching charges rather than per-minute charges. The Commission also solicits comment on whether the traffic-sensitive price cap index (PCI) formula should be modified. For the same reasons that the Commission considers revising the local switching rate structure, it also seeks comment on whether similarly to revise the rate structure for tandem switched transport.

   7. In the accompanying Order, the Commission denies a petition for declaratory ruling filedby AT&T requesting that the Commission confirm that interexchange carriers (IXCs) may elect not to purchase switched access services offered under tariff by competitive local exchange carriers (CLECs). The Commission declines to address AT&T's concerns in a declaratory ruling; however, it finds that AT&T's petition and supporting comments suggest a need for the Commission to revisit the issue of CLEC access rates. Therefore, the Commission initiates a rulemaking regarding the reasonableness of these charges and whether it might adopt rules to address, by the least intrusive means, any failure of market forces to constrain CLEC access charges.

   8. Because the Commission's ultimate goal is to continue to foster competition and allow market forces to operate where they are present, it seeks comment on pricing flexibility for common line and traffic- sensitive services. First, the Commission considers permitting price cap LECs to deaverage rates for services in the common line and traffic-sensitive baskets in conjunction with identification and removal of implicit universal service support in interstate access charges and implementation of an explicit high cost support mechanism. The Commission also invites parties to comment on how it should define zones for purposes of deaveraging. In addition, the Commission seeks comment on which rate elements may be deaveraged and whether deaveraging should be subject to subscriber line charge (SLC) and presubscribed interexchange carrier charge (PICC) caps or any other constraint. The Commission also seeks comment on the appropriate Phase II triggers for granting greater pricing flexibility for traffic- sensitive, common line, and the traffic-sensitive components of tandem- switched transport services.

   9. The Notice also seeks comment on certain price cap regulation issues. Specifically, consistent with the Access Reform First Report and Order's efforts to reform access charges so costs are recovered in a manner that reflects how they are incurred, the Commission seeks comment on adopting a capacity-based rate structure for local switching. The local switch, which consists of an analog or digital switching system and line and trunk cards, connects subscriber lines both with other local subscriber lines and with dedicated and common interoffice trunks. As discussed in more detail below, prior to the Access Reform First Report and Order, the interstate allocated portion of these costs was recovered entirely through per-minute charges assessed on IXCs.

   10. Recognizing that a significant portion of these costs (i.e., the costs associated with line cards and trunk ports) do not vary with usage, however, the Commission determined that such non-traffic- sensitive costs should be recovered on a flat-rated, rather than usage sensitive, basis. Accordingly, consistent with principles of cost- causation and economic efficiency, the Commission directed price cap LECs to reassign all line-side port costs from the Local Switching rate element to the Common Line rate element and to recover these costs through the common line rate elements, including the SLC and flat-rated PICC. Because the record in that proceeding was not adequate, however, to determine whether and to what extent the remaining local switching costs were traffic-sensitive or

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       non-traffic-sensitive, LECs continue to recover these costs through traffic-sensitive charges.

   11. The Commission takes this opportunity to re-examine the local switching rate structure to determine whether it reasonably reflects the manner in which price cap LECs incur costs. The Commission invites comment on whether and to what extent it should modify further its price cap rules for the traffic-sensitive basket to reflect a capacity- based local switching rate structure.

   12. The Commission also invites parties to discuss proposed revisions to its rules for the common line basket, and it considers redefining the price cap baskets and pricing bands. Specifically, the Commission solicits comment on whether to increase the ``g'' factor in the common line PCI formula and whether it should revise the baskets so that services with flat rates are not placed in the same basket as services with traffic-sensitive rates. In addition, the Commission seeks comment on its tentative conclusion that the inflation measure in the PCI formula should be consistent with the measure defined by the Bureau of Labor Statistics (BLS).

   13. Finally, the Commission initiates a rulemaking to determine the reasonableness of CLEC access rates and whether it might adopt rules to address, by the least intrusive means, any failure of market forces to constrain CLEC access charges.

2. Procedural Issues and Ordering Clauses

   1. Initial Regulatory Flexibility Act Analysis

      14. As required by the Regulatory Flexibility Act (RFA), the Commission has prepared this present Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on small entities by the policies and rules proposed in this Further Notice of Proposed Rulemaking (Further Notice). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filedby the deadlines for comments on the Further Notice provided below in Section IX.D. The Office of Public Affairs will send a copy of the Further Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration. In addition, the Further Notice and IRFA (or summaries thereof) will be published in the Federal Register.

      15. Need for, and objectives of, the proposed rules. Consistent with the Telecommunications Act of 1996, the Commission has revised its interstate access charges to facilitate competition in the provision of interstate access services. These proposals attempt to effect additional regulations reflective of the competitive marketplace. In Sections VIII.A and VIII.B, the Commission seeks to establish additional pricing flexibilities for price cap incumbent LECs, while at the same time limit use of those flexibilities to deter entry, to drive existing competitors from the market, or to increase rates for those customers that lack competitive alternatives. In Section VIII.C, the Commission seeks to modify the common line rate structure should the Commission determine that a capacity-based rate structure reflects the manner in which price cap LECs incur their costs better than the current traffic-sensitive rate structure. In Section VIII.D, the Commission seeks to refine several of its price cap rules to better reflect the manner in which price cap incumbent LECs costs are incurred. In Section VIII.E, the Commission seeks to prevent CLECs from charging unreasonable rates for terminating access service.

      16. Legal Basis. The proposed action is supported by sections 4(i), 4(j), 201-205, 208, 251, 252, 253 and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 201, 205, 208, 251, 252, 253, 403.

      17. Description, potential impact and number of small entities affected. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term ``small entity'' as having the same meaning as the terms ``small business,'' ``small organization,'' and ``small governmental jurisdiction.'' In addition, the term ``small business'' has the same meaning as the term ``small business concern'' under the Small Business Act. A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). The Small Business Administration has defined a small business for Standard Industrial Classification (SIC) category 4813 (Telephone Communications, Except Radiotelephone) to be a small entity that has no more than 1500 employees.

          Total Number of Telephone Companies Affected:

      18. The Commission has included small incumbent LECs in this present RFA analysis. As noted above, a ``small business'' under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and ``is not dominant in its field of operation.'' The SBA's Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their field of operation because any such dominance is not ``national'' in scope. The Commission has therefore included small incumbent LECs in this RFA analysis, although it emphasizes that this RFA action has no effect on FCC analyses and determinations in other, non-RFA contexts.

      19. Price Cap Local Exchange Carriers. The proposals in Section VIII.A-D apply only to price cap LECs. The Commission does not have data specifying the number of these carriers that are either dominant in their field of operations, are not independently owned and operated, or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of price cap LECs that would qualify as small business concerns under the SBA's definition. However, there are only 13 price cap LECs. Consequently, the Commission estimates that significantly fewer than 13 providers of local exchange service are small entities or small price cap LECs that may be affected by these proposals.

      20. Competitive Local Exchange Carriers. The proposals in Section VIII.E apply only to competitive LECs. Neither the Commission nor the Small Business Administration has developed a definition of small providers of local exchange service. The closest applicable definition under Small Business Administration rules is for telephone telecommunications companies other than radiotelephone (wireless) companies. The most reliable source of information regarding the number of competitive LECs nationwide of which the Commission is aware appears to be the data that it collects annually in connection with the Telecommunications Relay Service (TRS). According to the Commission's most recent data, 129 companies reported that they were engaged in the provision of either competitive access provider services or competitive local exchange carrier services. The Commission does not have data specifying the number of these carriers that are either dominant in their field of operations, are not independently owned and operated, or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of competitive LECs that would qualify as small business concerns under the SBA's

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          definition. Consequently, the Commission estimates that fewer than 129 providers of local exchange service are small entities or small competitive LECs that may be affected by these proposals.

      21. Reporting, record keeping and other compliance requirements. The Commission expects that, on balance, the proposals in this Further Notice will slightly increase price cap LECs' administrative burdens. The proposals in Section VIII.A would require at least one additional tariff filing, and may require additional showings. The proposals in Section VIII.B will require a price cap LEC, to the extent that it chooses to avail itself of the additional flexibility, to file a petition demonstrating that it has met the triggers, and make an initial tariff filing. The Commission expects that the proposals in Sections VIII.C and VIII.D would establish new methodologies that price cap LECs would need to apply in their tariff filings, but otherwise should not affect their administrative burdens.

      22. The Commission expects that the proposals in Section VIII.E will have no effect on the administrative burdens of competitive LECs, because they would have no additional filing requirement. They would only be required to respond to complaints.

      23. Steps taken to minimize significant economic impact on small entities, and significant alternatives considered. In this Notice, the Commission sought comment on how a number of proposals would affect small entities. The Commission believes that overall, these proposals should have a positive economic impact on small price cap LECs. The proposals in Sections VIII.A, VIII.B, and VIII.C should enable small price cap LECs to price their regulated services in a manner that is more reflective of the underlying costs of these services. In Sections VIII.C, the Commission has also sought comment on whether small interexchange carriers would be artificially disadvantaged if it adopts a capacity-based local switching rate structure. The proposals in Sections VIII.D and VIII.E should not have a significant economic impact on small entities. The Commission seeks comment on these proposals and urge that parties support their comments with specific evidence and analysis.

      24. Federal rules which overlap, duplicate or conflict with this proposal. None.

   2. Paperwork Reduction Act

      25. The Further Notice of Proposed Rulemaking contains either a proposed or modified information collection. As part of its continuing effort to reduce paperwork burdens, the Commission invites the general public and the OMB to take this opportunity to comment on the information collections contained in the Further Notice of Proposed Rulemaking, as required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520. Public and agency comments are due at the same time as other comments on the Further Notice of Proposed Rulemaking; OMB comments are due 60 days from date of publication of the Further Notice of Proposed Rulemaking in the Federal Register. Comments should address: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology.

   3. Filing Comments

      26. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on or before October 29, 1999, and reply comments on or before November 29, 1999. Comments may be filedusing the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings (63 FR 24121, May 1, 1998).

      27. Comments filedthrough the ECFS can be sent as an electronic file via the Internet to ‹http://www.fcc.gov/e-file/ecfs.html›. Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appears in the caption of this proceeding, however, commenters must transmit one electronic copy of the comments to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message, ``get form ‹your e-mail address›.'' A sample form and directions will be sent in reply.

      28. Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appear in the caption of this proceeding, commenters must submit two additional copies for each additional docket or rulemaking number. All filings must be sent to the Commission's Secretary, Magalie Roman Salas, Office of the Secretary, Federal Communications Commission, 445 Twelfth St., SW., Room TW-A325, Washington, DC 20554.

   5. Ordering Clauses

      29. It is ordered, pursuant to sections 1, 4(i) and (j), 201-205, 303(r), and 403 of the Communications Act, as amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 303(r), and 403 that this Notice of Proposed Rulemaking is hereby adopted and comments are requested as described above.

      30. It is further ordered that the Commission's Office of Public Affairs Reference Operations Division, shall send a copy of this Notice of Proposed Rulemaking, including the Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

      List of Subjects

      47 CFR Part 0

      Organization and functions.

      47 CFR Part 1

      Administrative practice and procedure, Communications common carriers, Telecommunications.

      47 CFR Part 61

      Communications common carriers, Telephone.

      47 CFR Part 69

      Communications common carriers, Telephone.

      Federal Communications Commission. Magalie Roman Salas, Secretary.

      [FR Doc. 99-24142Filed9-21-99; 8:45 am]

      BILLING CODE 6712-01-U