End User Common Line Charges

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 69

[CC Docket No. 95-72; FCC95-212]

End User Common Line Charges

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This Notice of Proposed Rulemaking seeks comment on the

application of End User Common Line Charges, hereinafter referred to as

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Subscriber Line Charges (SLCs), to local loops used with Integrated

Services Digital Network (ISDN) and other services that permit the

provision of multiple voice-grade-equivalent channels to a customer

over a single facility. This proceeding was instituted to give the

Commission an opportunity to reexamine existing rules and make changes

in light of new technologies and services.

DATES: Comments are to be filed on or before June 29, 1995, and replies

are to be filed on or before July 14, 1995.

FOR FURTHER INFORMATION CONTACT: Claudia Pabo, (202) 418-1595, Common

Carrier Bureau, Policy and Program Planning Division.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's

Notice of Proposed Rulemaking in CC Docket No. 95-72, adopted May 24,

1995 and released May 30, 1995.

The complete text of this Notice of Proposed Rulemaking is

available for inspection and copying during normal business hours in

the FCC Reference Center, Room 239, 1919 M St. NW., Washington, D.C.

20554, and may be purchased from the Commission's copy contractor,

International Transcription Service, Inc., at (202) 857-3800, 1919 M

Street NW., room 246, Washington, D.C. 20554.

Synopsis of Notice of Proposed Rulemaking

I. Introduction

1. In this Notice of Proposed Rulemaking, we seek comment on the

application of End User Common Line Charges, hereinafter referred to as

Subscriber Line Charges (SLCs), to local loops used with Integrated

Services Digital Network (ISDN) and other services that permit the

provision of multiple voice-grade-equivalent channels to a customer

over a single facility. We believe that the question of SLCs for ISDN

and similar services must be considered in the broader context of

competitive developments in the interstate access market, and the

resulting pressure to reduce unnecessary support flows in order to

ensure fair competition and preserve universal service.

II. Background

A. ISDN and Other Derived Channel Technology and Services

2. ISDN permits digital transmission over ordinary local loops and

T-1 facilities through the use of advanced central office equipment and

customer premises equipment (CPE). Currently, LECs offer two basic

types of ISDN service. Basic Rate Interface (BRI) Service allows a

subscriber to obtain two voice-grade-equivalent channels and a

signalling/data channel over an ordinary local loop, which is generally

provided over a single twisted pair of copper wires. Primary Rate

Interface (PRI) Service allows subscribers to obtain 23 voice-grade-

equivalent channels and one signalling/data channel over a single T-1

facility with two pairs of twisted copper wires.

3. There are services in addition to ISDN that use derived channel

technology to provide multiple channels over a single facility. The

LECs also use derived channel technologies within their networks to

provide customers with individual local loops, as opposed to BRI or PRI

ISDN. In such situations, the end user would not be aware that the LEC

was using this technology to provide their local loop.

B. Subscriber Line Charges

4. In the 1983 Access Charge Order, 48 FR 10319, March 11, 1983,

the Commission adopted rules prescribing a comprehensive system of

tariffed access charges for the recovery of LEC costs associated with

the origination and termination of interstate calls. The access charge

rules called for recovery of a major portion of the local loop costs

assigned to the interstate jurisdiction through SLCs. The remainder of

local loop costs are recovered from interexchange carriers (IXCs)

through the per minute CCL charge. The CCL charges paid by the IXCs are

reflected in the charges paid by interstate toll users.

5. Multiline business SLCs are currently capped at $6.00 per line

per month. Residential and single line business SLCs are capped at

$3.50 per line per month. The basic interstate toll rate decreased

approximately 34% between 1984 and the end of 1992, much of this due to

the shift in the recovery of common line costs from CCL rates to SLCs

and the resulting stimulation in demand.

C. Recent Decisions on SLCs for ISDN

6. The Commission first addressed the application of SLCs to ISDN

and other technologies that permit the provision of multiple voice

grade channels over a two- or four-wire facility in 1992 when the

Common Carrier Bureau adopted an order concluding the local exchange

carriers must apply a SLC to each derived channel even when the

channels were provided over a single facility. The Commission

subsequently affirmed the Bureau's order. At the same time, the

Commission recognized that this question involved policy issues best

considered in the context of a rulemaking proceeding.

D. Competition

7. The interstate access market has changed since the Commission

adopted the access charge rules at issue here. Alternative service

providers such as Teleport, which is owned by a group of large cable

companies, and MFS have deployed fiber optic networks in core business

areas of many large cities, providing interstate access services, and,

in some areas, local exchange service as well. Cable television

companies, in addition to those with an ownership interest in Teleport,

have also entered the local telephone and/or interstate access market

in certain areas, and have expressed an intention to enter the

telephone market on a broader basis. Interexchange carriers, such as

MCI and AT&T, have also entered the market or announced an intention to

do so. In addition, the Commission has required expanded

interconnection for the provision of special access service and

switched transport. New York State has also required LECs to unbundle

their local loops in order to permit the competitive provision of local

exchange service, and a number of other states are considering similar

measures.

8. The developments tend to bring pressure to bear on support flows

in the current access charge structure. LEC rates that significantly

exceed cost will tend to attract new entrants who may be able to offer

service at lower rates. As a result, it may be necessary to reduce

support flows that are not specifically tailored to produce social

benefits.

III. Discussion

A. Overview

9. In this proceeding, we seek comment on the proper application of

SLCs to BRI and PRI ISDN service provided to residential and business

customers as well as to other services that permit the provision of

multiple derived channels over a single facility.

B. Analytical Framework

10. We believe that several basic principles should guide our

resolution of these issues. While these considerations are sometimes in

potential conflict with one another, we believe that they all must be

considered to assure a sound, principled resolution of the issues

before us in this proceeding.

11. This rulemaking proceeding gives the Commission an opportunity

to reexamine existing rules, and make changes in light of new

technologies and services. We must be careful to

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avoid erecting regulatory barriers to the development of beneficial new

technologies. This is particularly important when these services and

technologies can facilitate access to the benefits of the National

Information Infrastructure. At the same time, we should not amend our

rules to favor new technologies and services simply because they are

new. Any difference in the regulatory treatment of new technologies and

services must have a sound basis in public policy.

12. We also believe that it is desirable to avoid measures that

could reduce the level of nontraffic sensitive (NTS) local loop costs

now recovered through flat charges. Any reduction in SLC revenues will

tend to increase interstate toll rates because lower SLC revenues will

cause LECs to seek to recover additional revenues through the per

minute CCL charge. We also believe that policies that would appear to

reduce dramatically SLC charges to large business customers, but not to

residential customers, must be carefully examined.

13. Resolution of the issues in this proceeding should also take

into account competitive developments in the interstate access market,

and the accompanying need to identify and reduce unnecessary support

flows. In light of competitive developments in the interstate access

market, rule changes that could result in lower SLC revenues and higher

CCL rates, thus potentially increasing support flows, must be carefully

examined. Increasingly, IXCs and large business customers have

alternatives to use of LEC facilities and can avoid support flows

inherent in the current access charge rate structure, including the CCL

charge. In the long run, inefficient bypass of the LEC networks by high

volume toll customers could threaten to undermine the support flows

that foster universal service.

C. Options

1. Overview

14. There are potentially many ways that the number of SLCs for

ISDN and similar derived channel services could be computed. At one

extreme, we might require customers to pay one SLC for each physical

facility serving a given customer, such as a standard local loop or T-1

facility. At the other extreme, we could maintain the current rule

under which an SLC is applied to each derived communications channel.

15. There are also intermediate options. For example, the number of

SLCs to be applied to ISDN facilities could be based on a ratio of the

average LEC cost of providing a derived channel service, such as a BRI

or PRI ISDN connection, to the average cost of providing an ordinary

local loop or

T-1 connection, including the line or trunk card costs in both cases.

Under this option, a PRI customer would, for example, pay six SLCs if

the average LEC cost of providing an ISDN T-1 connection, including

line cards, is six times the average cost of providing an ordinary T-1

facility. It would also be possible to apply one SLC for every two

derived channels, an option that would reduce by 50 percent the SLC

revenues that would be generated under the current requirement that one

SLC be assessed for each derived channel.

16. Another set of options would focus on the increasingly

competitive interstate access market in determining how to compute the

SLC to be paid by customers of derived channel services. One

possibility is to combine a reduction in the currently required level

of SLC charges for derived channel services with a small increase in

the per-channel SLC for all local loops. Another option involves giving

the LECs some flexibility in setting SLC rates for derived channel

services, but modifying the price cap rules so that any reduction in

SLC flat rate recovery does not increase the CCL rate.

2. The Per-Facility Approach

17. Under this approach, customers pay a single SLC per derived

channel service connection. Thus, under this option, both BRI and PRI

ISDN customers would pay a single SLC. Under a variation on this

option, an ISDN BRI customer with one copper pair would pay a single

SLC, and a PRI customer with two copper pairs would pay two SLCs.

3. Intermediate Options

18. An option that may represent a potential middle ground between

the per facility and the per derived channel approaches would be to

charge SLCs based on a ratio of the average LEC cost of providing a

derived channel service, including line or trunk cards, to the average

LEC cost of providing an ordinary local loop or T-1 facility. Under

this approach, a PRI customer, for example, would pay six SLCs if the

LEC cost of providing an ISDN T-1 connection, including line or trunk

cards, is six times the cost of providing an ordinary T-1 facility.

This approach also includes the cost of the line cards in developing

the cost relationship between ISDN connections and non-ISDN connections

even though line cards are treated as switching, not local loop

facilities for jurisdictional separations and Part 69 cost allocation

purposes.

19. Reducing SLCs for derived channel connections to 50 percent of

the level required by the current rules is another intermediate option

between the per-facility and per-derived channel approaches. Under this

approach, the LECs would charge one SLC for every two derived channels.

4. The Per-Derived Channel Approach

20. The existing rules require that the LECs charge a SLC for each

derived channel in the case of ISDN and other similar services.

5. Additional Options

21. There are also several other options that combine reductions in

the number of SLCs that our current rules impose on derived channel

services with measures to ensure that this does not increase per minute

CCL charges, putting upward pressure on interstate toll rates. One such

option would be to permit the LECs to impose a reduced number of SLCs

for derived channel services, accompanied by a small increase in SLC

rates. For example, the current caps on SLCs could be increased by $.25

per month for all subscribers. A second approach would be to permit,

but not require, the LECs to apply fewer SLCs for derived channel

services than the current rules require, but to adjust the price cap

rule to prevent a reduction in SLC revenues from causing an increase in

CCL rates.

6. Request for Comments

22. We ask interested parties to comment on the analytical

framework and options for defining the SLCs that subscribers to ISDN

and other derived channel services must pay. We also seek comment on

our analysis of the various options described in this Notice.

Commenting parties are urged to suggest additional or different policy

goals as part of the analytical framework for evaluating options as

well as to present additional options for the Commission's

consideration. We also seek comment on whether any new rules for the

application of SLCs for ISDN and similar derived channel services

should apply to all local loops provisioned by the telephone company

through the use of derived channel technology, regardless of whether

the use of derived channel technology in the provisioning of the loop

is apparent to the subscriber or not.

23. In addition, we note that it would be helpful if interested

parties provide us with specific information concerning the perceived

elasticity of demand for ISDN services, the various ISDN service

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options available in the marketplace, the total intrastate charges for

each of these service options, as well as the advantages and

disadvantages of alternative service and equipment configurations that

offer communications capabilities comparable to those of ISDN.

Moreover, certain of the options for applying SLCs under our part 69

access charge rules described above would use a definition of the term

``line'' that differs from the current separations definition in Part

36.\1\ We seek comment on whether we should initiate the process of

considering conforming separations changes through a referral to a

Joint Board in the event that we adopt such an approach. In light of

competitive developments in the interstate access market, interested

parties may also wish to take this opportunity to comment more

generally on the need for additional changes to the way carriers can

recover the interstate assignment of local loop costs and local

switching or other costs that the parties view as NTS.

\1\See para. 11 supra.

IV. Ex Parte Presentations

24. This proceeding is a non-restricted notice and comment

rulemaking. Ex parte presentations are permitted, except during the

Sunshine Agenda period, provided that they are disclosed as provided in

the Commission's rules.

V. Regulatory Flexibility Analysis

25. We certify that the Regulatory Flexibility Act is not

applicable to the rule changes we are proposing in this proceeding. The

Secretary shall send a copy of the Notice to the Chief Counsel for

Advocacy of the Small Business Administration in accordance with

Section 603(a) of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.

VI. Comment Filing Dates

26. Interested parties may file comments with the Office of the

Secretary, Federal Communications Commission, Washington, D.C. 20554 on

or before June 29, 1995, and reply comments on or before July 14, 1995.

Parties are to provide a copy of any filings in this proceeding to

Peggy Reitzel of the Policy and Program Planning Division, Common

Carrier Bureau, Room 544, 1919 M Street, N.W., Washington, D.C. 20554.

Parties are also to file one copy of any documents in this docket with

the Commission's copy contractor, International Transcription Services,

Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.

VII. Ordering Clauses

27. Accordingly, it is ordered That, pursuant to the authority

contained in Sections 1, 4, and 201-205 of the Communications Act of

1934, as amended, 47 U.S.C. 151, 154, & 201-205, a Notice of Proposed

Rulemaking is Hereby Adopted.

List of Subjects in 47 CFR Part 69

Communications common carriers, Reporting and record keeping

requirements, Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 95-14509 Filed 6-13-95; 8:45 am]

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