In the Matter of Implementation of Section 34(a)(1) of the Public Utility Holding Company Act of 1935, as Added by the Telecommunications Act of 1996

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[GC Docket No. 96-101, FCC 96-192]

In the Matter of Implementation of Section 34(a)(1) of the Public

Utility Holding Company Act of 1935, as Added by the Telecommunications

Act of 1996

agency: Federal Communications Commission.

action: Proposed rule.

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summary: This notice of proposed rulemaking (NPRM) seeks comment on

proposed regulations which implement new section 34(a)(1) of the Public

Utility Holding Company Act of 1935 (PUHCA), as added by section 103 of

the Telecommunications Act of 1996. Under new section 34, registered

public utility

[[Page 24744]]

holding companies may now enter the telecommunications industry without

prior Securities and Exchange Commission (``SEC'') approval by

acquiring or maintaining an interest in an ``exempt telecommunications

company'' (``ETC''). Moreover, exempt public utility holding companies,

by owning or acquiring an interest in an ETC, may now acquire a ``safe

harbor'' from potential SEC regulation under PUHCA section 3(a).

Section 34(a)(1) requires the Commission to promulgate rules

implementing the procedure of determining ETC status within one year of

the date of enactment of the Telecommunications Act of 1996.

DATES: Interested parties may file comments on or before June 17, 1996

and reply comments on or before July 5, 1996. Written comments by the

public on the proposed and/or modified information collections are due

June 17, 1996. Written comments must be submitted by the Office of

Management and Budget (OMB) on the proposed and/or modified information

collections on or before July 15, 1996.

ADDRESSES: Comments and reply comments should be sent to the office of

the Secretary, Federal Communications Commission, 1919 M Street NW.,

Washington, DC 20554, with a copy to Lawrence J. Spiwak, Competition

Division, Office of General Counsel, Federal Communications Commission,

1919 M Street NW., Washington, DC 20554. Parties should also file one

copy of any documents filed in this docket with the Commission's copy

contractor, International Transcription Services, Inc., 2100 M Street

NW., Suite 140, Washington, DC 20037. Comments and reply comments will

be available for public inspection during regular business hours in the

FCC Reference Center, 1919 M Street NW., Room 239, Washington, DC

20554.

In addition to filing comments with the Secretary, a copy of any

comments on the information collections contained herein should be

submitted to Dorothy Conway, Federal Communications Commission, Room

234, 1919 M Street NW., Washington, DC 20554, or via the Internet to

[email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725

17th Street NW., Washington, DC 20503 or via the Internet to

[email protected].

FOR FURTHER INFORMATION CONTACT: Lawrence J. Spiwak, Competition

Division, Office of General Counsel. (202) 418-1870. For additional

information concerning the information collections contained in this

NPRM contact Dorothy Conway at 202-418-0217, or via the Internet at

[email protected].

SUPPLEMENTARY INFORMATION: This NPRM contains proposed or modified

information collections subject to the Paperwork Reduction Act of 1995

(PRA). It has been submitted to the Office of Management and Budget

(OMB) for review under the PRA. OMB, the general public, and other

Federal agencies are invited to comment on the proposed or modified

information collections contained in this proceeding.

Paperwork Reduction Act

This NPRM contains either a proposed or modified 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. No. 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: None.

Title: In the Matter of Implementation of Section 34(a)(1) of the

Public Utility Holding Company Act of 1935, as amended by the

Telecommunications Act of 1996, Notice of Proposed Rulemaking.

Type of Review: New collection.

Respondents: 15. There are fifteen registered public utility

holding companies.

Number of Respondents: 15. We anticipate that each registered

public utility holding company will make at least one application

annually.

Estimated Time Per Response: We estimate that each application will

take 16 hours to prepare. However, the Commission estimates that

respondents will hire attorneys to prepare information. The time for

coordinating the submission is ten hours per respondent.

Total Annual Burden: 150 hours.

Estimated costs per respondent: We estimate that the cost to each

respondent will be approximately $3,200, assuming 16 hours at $200/hour

for outside counsel.

Needs and Uses: The information will be used by the Commission to

determine whether persons satisfy the statutory criteria for ``exempt

telecommunications company'' status. Without such information, the

Commission could not determine whether persons satisfied the requisite

statutory criteria and therefore fulfill its responsibility under

section 34(a)(1) of PUHCA, as amended.

I. Introduction

1. This notice of proposed rulemaking (NPRM) seeks comment on

proposed regulations which implement new section 34(a)(1) of the Public

Utility Holding Company Act of 1935 (PUHCA), 15 U.S.C. 79 et seq., as

added by section 103 of the Telecommunications Act of 1996, Pub. L. No.

104-104, 110 Stat. 56 (1996).\1\ Under new section 34, registered

public utility holding companies may now enter the telecommunications

industry without prior Securities and Exchange Commission (``SEC'')

approval by acquiring or maintaining an interest in an ``exempt

telecommunications company'' (``ETC'').\2\ Moreover, exempt public

utility holding companies, by owning or acquiring an interest in an

ETC, may now acquire a ``safe harbor'' from potential SEC regulation

under PUHCA section 3(a).\3\ The new law vests the Commission with

jurisdiction to determine whether a company warrants ETC status based

on specific statutory criteria.

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\1\ The Telecommunications Act was enacted on February 8, 1996.

\2\ See PUHCA section 34(d).

\3\ See PUHCA section 34(c).

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2. As explained below, we propose to implement section 34(a)(1) by

providing for a simple procedure for ETC determination, under which

applicants briefly describe their planned activities and certify that

they satisfy the specific statutory requirements and any applicable

Commission regulations. The Commission believes that its

responsibilities under section 34(a)(1) are limited to whether the

applicant meets the express statutory criteria for ETC status. Thus, we

believe that an ETC determination should not involve an inquiry into

the public interest merits of entry by the applicant. Nor would the

public interest or the intent of Congress be served if this process

became a regulatory barrier to

[[Page 24745]]

significant new entry into the telecommunications industry.

Accordingly, the proposed rules are limited to the filing requirements

and procedures for persons seeking exempt telecommunications company

status.\4\ We believe that this approach is the best mechanism to

expedite Congress's policy to allow holding companies to become

vigorous competitors in the telecommunications industry in order to

promote the public interest.\5\

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\4\ The proposed rules would create a new subpart S, part 1

under title 47, chapter I of the Code of Federal Regulations.

\5\ See Report of the Committee on Commerce, Science and

Transportation on S. 652, S. Rep. No. 104-23, 104th Cong., 1st Sess.

at 8 (1995) (``Senate Report'').

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3. The Commission invites interested parties to comment on the

matters raised in the proposed rules.

II. Background

4. PUHCA was designed to prevent financial abuse among public

utility holding companies and their affiliates.\6\ PUHCA accomplished

this goal by, among other things, restricting the activities and

investments that holding companies are permitted to make outside of

their core public utility businesses. Prior to the Telecommunications

Act of 1996, the provisions of PUHCA strongly deterred entry by

registered public utility holding companies into the telecommunications

industry.\7\ Somewhat anomalously, however, utilities that are not

public utility holding companies have always been free to enter the

telecommunications industry without prior SEC approval, regardless of

their size or scope.

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\6\ See Arcadia, Ohio v. Ohio Power, 498 U.S. 73, 87, 111 S.Ct.

415, 423 (1990) (Stevens, J. concurring) (citations omitted).

\7\ See PUHCA sections 3(a), 11(b)(1).

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5. Section 103 of the Telecommunications Act of 1996, which adds

new PUHCA section 34(a)(1), ends this disparate treatment by allowing

previously restricted holding companies to enter telecommunications

industries without prior SEC permission by acquiring or maintaining an

interest in an ``exempt telecommunications company.'' Under section

34(a)(1), an ETC is any person determined by the Commission to be

engaged directly or indirectly, wherever located, through one or more

affiliates (as defined in section 2(a)(11)(B) of PUHCA \8\), and

exclusively in the business of providing: (A) telecommunications

services \9\; (B) information services \10\; (C) other services or

products subject to the jurisdiction of the Commission; or (D) products

or services that are related or incidental to the provision of a

product or service described in (A), (B), or (C).

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\8\ PUHCA section 2(a)(11)(B) defines ``affiliate'' as ``any

company 5 per centum or more of whose outstanding voting securities

are owned, controlled, or held with power to vote, directly or

indirectly, by such specified company.''

\9\ See Communications Act of 1934 section (3)(51), as added by

the Telecommunications Act of 1996, which provides that the term

``telecommunications service'' means the ``offering of

telecommunications for a fee directly to the public, or to such

classes of users as to be effectively available directly to the

public, regardless of the facilities used to transmit the

telecommunications service.''

\10\ See Communications Act of 1934 section (3)(41), as added by

the Telecommunications Act of 1996, which provides that the term

``information service'' means the ``offering of a capability for

generating, acquiring, storing, transforming, processing,

retrieving, utilizing, or making available information via

telecommunications, and includes electronic publishing, but does not

include any use of any such capability for the management, control,

or operation of a telephone system or the management of a

telecommunications service.''

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6. Section 34(a)(1) provides that an applicant who has applied in

good faith for a determination of ETC status is deemed an ETC until the

Commission makes such a determination. Section 34(a)(1) requires the

Commission to render its determination of whether a person is an ETC

within 60 days of the receipt of an application. Section 34(a)(1) also

requires the Commission to notify the Securities and Exchange

Commission (SEC) whenever it determines that a person is an ETC.

Finally, Section 34(a)(1) requires the Commission to promulgate rules

implementing the procedure of determining ETC status within one year of

the date of enactment of the Telecommunications Act of 1996.

7. By obtaining ETC status, holding companies can now be vigorous

competitors in the telecommunications industry, and, with such

competition, bring more benefits to consumers.11 Indeed, Congress

recognized that utilities in general have experience in

telecommunications operations, as these companies already operate

telecommunications systems for the operation and monitoring of electric

generation, transmission and distribution for reliability

purposes.12 Moreover, Congress recognized that holding companies

have sufficient size and capital to be effective competitors to

incumbent telecommunications companies.13 Finally, Congress also

found that electric utilities, by entering into telecommunications, can

provide more efficient and more ecologically-sound energy service in

the form of ``peak-shaving'' and real-time energy management.14

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\11\ See Senate Report at 7-8.

\12\ Id.

\13\ Id.

\14\ Id.

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III. Discussion

A. Commission Responsibilities

8. We have previously held that the Commission's responsibilities

under section 34(a)(1) do not appear to extend beyond a determination

of whether an applicant complies with the relatively narrow

certification criteria enumerated above.15 This is evident not

only from the unambiguous language of section 34(a)(1), but from other

provisions of section 34, which preserve other statutory provisions

where the merits of ETC entry can be evaluated. For example, section

34(n) preserves this Commission's and applicable states' authority to

regulate the activities of an ETC under provisions of the

Communications Act of 1934 and any applicable state laws. In addition,

section 34(j) retains the jurisdiction of the Federal Energy Regulatory

Commission (FERC) and state commissions to determine whether a public

utility company may recover in its rates the costs of products or

services purchased from or sold to an associate or affiliate company

that is an ETC, regardless of whether such costs are incurred through

the direct or indirect purchase or sale of products or services from

the affiliate or associate company. Finally, section 34(m) provides

state commissions the authority to conduct independent audits of public

utility holding companies and their affiliates. We request comment on

whether our existing interpretation of the scope of our inquiry under

section 34(a)(1) is correct.

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\15\ See Entergy Technology Company, (FCC 96-163, released April

12, 1996) (Entergy Technology).

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B. Filing Requirements

9. We note that PUHCA section 34(a)(1) is similar to the ``exempt

wholesale generator'' paradigm of PUHCA section 32 which permits, inter

alia, public utility holding companies to enter into the independent

power production business.16 FERC, the agency responsible for

implementing PUHCA section 32, interpreted that statute as intended to

give it only narrowly circumscribed authority, and therefore

implemented a procedure whereby an applicant need only briefly describe

its planned activities and certify that it satisfies the requisite

statutory criteria.17

[[Page 24746]]

We believe that similar filing requirements should be required under

section 34(a)(1).

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\16\ See PUHCA section 32, as added by section 711 of the

Energy Policy Act of 1992. 15 U.S.C. 79z-5a.

\17\ See Filing and Ministerial Procedures for Persons Seeking

Exempt Wholesale Generator Status, Order No. 550, 58 FR 8897

(February 18, 1993); order on reh'g, Order No. 550-A, 58 FR 21250

(April 20, 1993); see also 18 CFR 365.1 through 365.7.

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10. Accordingly, for the company or companies which are eligible

companies owned and/or operated by the applicant, the proposed rules

would first require the applicant to provide a brief description of the

planned activities of the company or companies which are eligible

companies owned and/or operated by the applicant. Second, the proposed

rules would require a person seeking ETC status (applicant) to file a

sworn statement, by a representative legally authorized to bind the

applicant, attesting to any facts or representations presented to

demonstrate eligibility for ETC status, including a representation that

the applicant is engaged directly, or indirectly, wherever located,

through one or more affiliates (as defined in section 2(a)(11)(B) of

the Public Utility Holding Company Act of 1935), and exclusively in the

business of providing: (A) telecommunications services; (B) information

services; (C) other services or products subject to the jurisdiction of

the Commission; or (D) products or services that are related or

incidental to the provision of a product or service described in (A),

(B), or (C). Finally, the proposed rules would require an applicant to

provide a sworn statement, by a representative legally authorized to

bind the applicant, certifying that the applicant satisfies Part 1,

Subpart P, of the Commission's regulations, 47 CFR 1.2001 through

1.2003r, regarding the Anti-Drug Abuse Act of 1988, 21 U.S.C. 862. The

application would then be placed on public notice for comment on the

adequacy or accuracy of the representations contained therein.18

The Commission would review the application and any comments to

determine whether the application meets the statutory requirements for

ETC status. This analysis would be the extent of the Commission's

inquiry. To the extent parties believe that our inquiry should either

be more expansive or narrow, we invite them to comment on this issue.

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\18\ See Section III.C.

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11. We also seek comment on whether we should adopt rules governing

applications seeking ETC status filed by different entities that are

affiliates of a common holding company parent. While the Act apparently

contemplates that every entity seeking ETC status must apply to the

Commission,19 we see no reason why this should require separate

entities affiliated with the same holding company parent to seek ETC

status through separate applications and proceedings. Such a process

seems administratively wasteful and duplicative.20 Accordingly we

propose to allow multiple entities seeking ETC status, which are

affiliated with the same public utility holding company parent, to seek

a determination for all such entities through a single consolidated

application. In such a case, the application should contain for each

affiliate sufficient information as required by our rules to make a

separate ETC determination for that affiliate. We seek comment on this

proposal.

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\19\ Section 34(a) provides that ``No person shall be deemed to

be an exempt telecommunications company under this section unless

such person has applied to the [Commission] for a determination

under this paragraph.''

\20\ For example, six affiliates of a single public utility

holding company recently filed six separate applications for

determination of ETC status.

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12. The proposed rules also require applicants to serve a copy of

the ETC application on the SEC and affected State commissions. An

affected State commission is defined as the State commission of each

state in which the ETC will be located or doing business. Although

service of applications on the SEC and State commissions is not

required by law, section 34 of PUHCA specifically contemplates a role

for the SEC and State commissions insofar as certain eligible companies

are concerned. It also contemplates that the SEC be aware of ETC

determinations. The Commission sees no reason not to inform these

agencies of pending ETC applications at an early stage, particularly

since the copying and mailing costs associated with serving filings on

the SEC and affected State commissions will be minimal. We note that

FERC took a similar approach in its analogous rules.21 We invite

parties to comment on this proposal.

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\21\ See 18 CFR Sec. 365.3.

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C. Notice and Comment

13. As of April 25, 1995, the Commission has received 11

applications for ETC status, three of which have been granted.22

While staff placed these applications on public notice for comment,

there is no requirement in the Telecommunications Act that the

Commission do so. On the other hand, neither is there any prohibition

on the Commission's discretion to do so. The proposed rules would

provide for public notice and comment on ETC applications, but would

limit consideration of any submissions that might be made in response

to such public notices to the narrow purpose of determining the

adequacy or accuracy of the certification made to satisfy the statutory

criteria. Given the limited focus of the Commission's inquiry under

section 34(a)(1), we do not believe that it would be appropriate to

allow persons to raise issues that fall outside the purview of the

statutorily fixed determination, and that go to the public interest

merits of an applicant's proposed entry. Accordingly, the proposed

rules specify that parties may file comments on a proposed application,

but that any comments must be limited to the adequacy and accuracy of

the representations contained therein. Comments on the adequacy of the

representations may include whether the application is within the scope

of the ETC criteria, e.g., the extent to which applicant's services

constitute telecommunications, information or related services.

Applicants would then have the opportunity to respond to any comments

filed. The Commission requests comments on the tentative conclusion to

allow comments, but to limit such comments to the accuracy and adequacy

of the representations contained in the applications. We also request

comments on the length of the time period which should be set for such

comments.

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\22\ See CSW Communications, Inc., (FCC 96-152, released April

4, 1996); Entergy Technology, supra n. 15; Entergy Technology

Holding Company, (FCC 96-162, released April 12, 1996).

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D. Implementation

14. The proposed rules specify that the Commission must act within

60 days of receipt of an application. Applications that do not meet the

requirements of the proposed rule set forth in proposed 1.4002 will be

rejected. Under the proposed rules, if the Commission does not act

within 60 days, the application is deemed to have been granted.

15. Proposed Sec. 1.4005 requires the Secretary of the Commission

to notify the SEC whenever an application for ETC status is granted, as

explicitly required by section 34(a)(1) of PUHCA.

E. Change in Circumstances

16. An ETC determination is based on the facts that are presented

to the Commission. Any material variation from those facts may render

an ETC determination invalid. Accordingly, proposed section 1.4006

requires ETCs, within 30 days of any material change in facts that may

affect an ETC's eligibility for ETC status under section 34(a)(1) of

the Public Utility Holding Company Act of 1935, to either: (a)

[[Page 24747]]

apply to the Commission for a new determination of ETC status; (b) file

a written explanation with the Commission of why the material change in

facts does not affect the ETC's status; or (c) notify the Commission

that it no longer seeks to maintain ETC status. To the extent persons

other than the ETC applicant inform the Commission of a material change

of circumstances, the ETC will be given the opportunity to respond and

the Commission will take further action as appropriate. The Commission

requests comments on this proposed rule.

IV. Procedural Matters

A. Regulatory Flexibility Act

17. As required by Section 603 of the Regulatory Flexibility Act,

the Commission has prepared an Initial Regulatory Flexibility Analysis

(IRFA) of the expected impact on small entities of the proposals

suggested in the document. The IRFA is set forth below. Written public

comments are requested on the IRFA. These comments must be filed in

accordance with the same filing deadlines as comments on the rest of

the NPRM, but they must have a separate and distinct heading

designating them as responses to the Initial Regulatory Flexibility

Analysis. The Secretary shall send a copy of the NPRM, including the

IRFA, to the Chief Counsel for Advocacy of the Small Business

Administration in accordance with section 603(a) of the Regulatory

Flexibility Act.23

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\23\ Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et seq.

(1981).

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B. Ex Parte Rules--Non-Restricted Proceeding

18. This is a non-restricted notice and comment rulemaking

proceeding. Ex parte presentations are permitted except during the

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

Commission's rules.24

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\24\ See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).

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C. Comment Dates

19. Pursuant to applicable procedures set forth in Secs. 1.415 and

1.419 of the Commission's rules, interested parties may file comments

on or before June 17, 1996, and reply comments on or before July 5,

1996.25 To file formally in this proceeding, parties must file an

original and four copies of all comments, reply comments, and

supporting comments. If parties want each Commissioner to receive a

personal copy of their comments, parties must file an original plus

nine copies. Parties should send comments and reply comments to Office

of the Secretary, Federal Communications Commission, 1919 M Street NW.

Washington, D.C., 20554. Comments and reply comments will be available

for public inspection during regular business hours in the Reference

Center of the Federal Communications Commission, Room 239, 1919 M

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

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\25\ See 47 CFR 1.415 and 1.419.

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D. Paperwork Reduction Act

20. This NPRM contains either a proposed or modified 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. No. 104-13. Public and agency comments are due at the

same time as other comments on this NPRM; OMB comments are 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.

21. Written comments by the public on the proposed and/or modified

information collection are due on or before June 17, 1996 and reply

comments on or before July 5, 1996. Written comments must be submitted

by the Office of Management and Budget (OMB) on the proposed and/or

modified information collections on or before 60 days after date of

publication in the Federal Register. In addition to filing comments

with the Secretary, a copy of any comments on the information

collection contained herein should be submitted to Dorothy Conway,

Federal Communications Commission, Room 234, 1919 M Street NW.,

Washington, DC 20554, or via the Internet to [email protected] and to

Timothy Fain, OMB Desk Officer, 10236 NEOB, 725 - 17th Street NW.,

Washington, DC 20503 or via the Internet to [email protected].

E. Legal Authority

22. Authority for issuance of this NPRM is contained in section

34(a)(1) of the Public Utility Holding Company Act of 1935 (PUHCA), as

amended by section 103 of the Telecommunications Act of 1996, Pub. L.

No. 104-104, 110 Stat. 56 (1996), and sections 4(i), 4(j) and 303(r) of

the Communications Act of 1934, as amended, 47 U.S.C. Secs. 154(i),

154(j), and 303(r).

F. Further Information

23. For further information concerning this proceeding, contact

Lawrence J. Spiwak, Competition Division, Office of General Counsel at

(202) 418-1870.

Initial Regulatory Flexibility Analysis

As required by Section 603 of the Regulatory Flexibility Act, the

Commission has prepared an Initial Regulatory Flexibility Analysis

(IRFA) of the expected impact on small entities of the policies and

rules proposed in this Notice of Proposed Rule Making (NPRM). Written

public comments are requested on the IRFA.

Reason for Action: This rulemaking proceeding was initiated to

secure comment on proposals for establishing filing requirements and

procedures for implementing section 34(a)(1) of the Public Utility

Holding Company Act of 1935 (PUHCA), as amended by section 103 of the

Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56

(1996), and sections 4(i), 4(j) and 303(r) of the Communications Act of

1934, as amended, 47 U.S.C. 154(i), 154(j), and 303(r).

Objectives: The proposed rules, if adopted, would provide filing

requirements and procedures to expedite public utility holding company

entry into the telecommunications industry. To achieve this goal, the

proposed regulations require persons seeking a determination of ETC

status to file in good faith for a determination by the Commission.

Applicants would be required to file with the Commission a brief

description of their planned activities, and a sworn statement

attesting to any facts presented to demonstrate eligibility for ETC

status and attesting to any representation otherwise offered to

demonstrate eligibility for ETC status. Applicants would also be

required to submit sworn statements certifying that they complied with

part 1, subpart P, of the Commission's regulations, 47 CFR 1.2001

through 1.2003, regarding implementation of the Anti-Drug Abuse Act of

1988, 21 U.S.C. 862. Finally, applicants would be required to serve

copies of their application with the SEC and affected state

commissions.

Legal Basis: The proposed action is authorized by section 34(a)(1)

of the Public Utility Holding Company Act of 1935 (PUHCA), as amended

by section

[[Page 24748]]

103 of the Telecommunications Act of 1996, Pub. L. No. 104-104, 110

Stat. 56 (1996), and sections 4(i), 4(j) and 303(r) of the

Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j) and

303(r).

Reporting, Recordkeeping, and Other Compliance Requirements: Under

the proposal contained in the NPRM, within thirty days of any change in

material fact that may affect ETC status, persons who received ETC

status have an affirmative duty to either: (a) apply to the Commission

for a new determination of ETC status; (b) file a written explanation

with the Commission of why the material change in facts does not affect

the ETC's status; or (c) notify the Commission that it no longer seeks

to maintain ETC status.

Federal Rules Which Overlap, Duplicate or Conflict With These

Rules: None.

Description, Potential Impact, and Number of Small Entities

Involved: The proposed rules are designed to provide an expedited

procedural process as contemplated in the Section 34(a)(1) of PUHCA.

The proposed rules should therefore increase the flexibility of small

businesses with minimal administrative burden. After evaluating

comments filed in response to the NPRM, the Commission will examine

further the impact of all rule changes on small entities and set forth

its findings in the Final Regulatory Flexibility Analysis.

Significant Alternatives Minimizing the Impact on Small Entities

Consistent with the Stated Objectives: This NPRM solicits comment on a

variety of alternatives. Any additional significant alternatives

presented in the comments will also be considered.

IRFA Comments: We request written public comment on the foregoing

Initial Regulatory Flexibility Analysis. Comments must have a separate

and distinct heading designating them as responses to the IRFA and must

be filed by the comment deadlines set forth in this NPRM.

List of Subjects in 47 CFR Part 1

Administrative practice and procedure, Telecommunications.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 1 of title 47 of the Code of Federal Regulations is proposed

to be amended as follows:

PART 1--PRACTICE AND PROCEDURE

The authority citation for part 1 continues to read as follows:

Authority: 47 U.S.C. 151, 154, 303, and 309(j) unless otherwise

noted.

2. A new subpart S is added to part 1 to read as follows:

Subpart S--Exempt Telecomunications Companies

Sec.

1.4000 Purpose.

1.4001 Definitions.

1.4002 Contents of application and procedure for filing.

1.4003 Effect of filing.

1.4004 Commission action.

1.4005 Notification of Commission action to the Securities and

Exchange Commission.

1.4006 Procedure for notifying Commission of material change in

facts.

1.4007 Comments.

Subparts--Exempt Telecommunications Companies

Sec. 1.4000 Purpose.

The purpose of part 1, subpart S, is to implement section 34(a) of

the Public Utility Holding Company Act of 1935, 15 U.S.C. 79 through

79z-56 as added by section 103 of the Telecommunications Act of 1996,

Public Law No. 104-104, 110 Stat. 56.

Sec. 1.4001 Definitions.

(a) For the purpose of this part, the terms telecommunications

services and information services shall have the same meanings as

provided in the Communications Act of 1934, as amended;

(b) Commission shall be defined as the Federal Communications

Commission; and

(c) ETC shall be defined as an exempt telecommunications company.

Sec. 1.4002 Contents of application and procedure for filing.

A person seeking status as an exempt telecommunications company

(applicant) must file with the Commission with respect to the company

or companies which are eligible companies owned and/or operated by the

applicant, and serve on the Securities and Exchange Commission and any

affected State commission, the following:

(a) A brief description of the planned activities of the company or

companies which are or will be eligible companies owned and/or operated

by the applicant;

(b) A sworn statement, by a representative legally authorized to

bind the applicant, attesting to any facts or representations presented

to demonstrate eligibility for ETC status, including a representation

that the applicant is engaged directly, or indirectly, wherever

located, through one or more affiliates (as defined in section

2(a)(11)(B) of the Public Utility Holding Company Act of 1935), and

exclusively in the business of providing:

(1) Telecommunications services;

(2) Information services;

(3) Other services or products subject to the jurisdiction of the

Commission; or

(4) Products or services that are related or incidental to the

provision of a product or service described in paragraphs (b)(1), (2),

or (3) of this section; and

(c) A sworn statement, by a representative legally authorized to

bind the applicant, certifying that the applicant satisfies part 1,

subpart P, of the Commission's regulations, 47 CFR 1.2001 through

1.2003, regarding implementation of the Anti-Drug Abuse Act of 1988, 21

U.S.C. 862.

Sec. 1.4003 Effect of filing.

A person applying in good faith for a Commission determination of

exempt telecommunications company status will be deemed to be an exempt

telecommunications company from the date of receipt of the application

until the date of Commission action pursuant to Sec. 1.4004.

Sec. 1.4004 Commission action.

If the Commission has not issued an order granting or denying an

application within 60 days of receipt of the application, the

application will be deemed to have been granted as a matter of law.

Sec. 1.4005 Notification of Commission action to the Securities and

Exchange Commission.

The Secretary of the Commission will notify the Securities and

Exchange Commission whenever a person is determined to be an exempt

telecommunications company.

Sec. 1.4006 Procedure for notifying commission of material change in

facts.

If there is any material change in facts that may affect an ETC's

eligibility for ETC status under section 34(a)(1) of the Public Utility

Holding Company Act of 1935, the ETC must, within 30 days of the change

in fact, either:

(a) Apply to the Commission for a new determination of ETC status;

(b) File a written explanation with the Commission of why the

material change in facts does not affect the ETC's status; or

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(c) Notify the Commission that it no longer seeks to maintain ETC

status.

Sec. 1.4007 Comments.

(a) Any person wishing to be heard concerning an application for

ETC status may file comments with the Commission within fifteen (15)

days from the release date of a public notice regarding the

application, or such other period of time set by the Commission. Any

comments must be limited to the adequacy or accuracy of the

application.

(b) Any person who files comments with the Commission must also

serve copies of all comments on the applicant.

(c) An applicant has seven (7) days to reply to any comments filed

regarding the adequacy and accuracy of its application, or such other

period of time as set by the Commission. Such reply shall be served on

the commenters.

[FR Doc. 96-11964 Filed 5-15-96; 8:45 am]

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