Telephone Number Portability

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 52

[CC Docket No. 95-116; FCC 96-286]

Telephone Number Portability

AGENCY: Federal Communications Commission.

ACTION: Proposed Rule.

-----------------------------------------------------------------------

SUMMARY: On July 13, 1995, the Commission issued a Notice of Proposed

Rulemaking (CC Docket No. 95-116) seeking comments on a wide variety of

policy and technical issues related to number portability. On June 27,

1996, the Commission adopted a First Report and Order which is

published elsewhere in this issue. On the same day, the Commission

adopted a Further Notice of Proposed Rulemaking (Further Notice or

FNPRM) seeking comment on the appropriate methods of cost recovery of

long-term number portability. Since the Telecommunications Act of 1996

requires that the costs of number portability be borne by all

telecommunications carriers on a competitively neutral basis, the

Commission will determine the appropriate method of cost recovery in

this proceeding.

DATES: Comments are due on or before August 16, 1996, and reply

comments are due on or before September 16, 1996.

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

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

222, Washington, DC 20554, with a copy to Wanda Harris of the

Competitive Pricing Division of the Common Carrier Bureau, 1919 M

Street, NW., Room 518, 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.

FOR FURTHER INFORMATION CONTACT: Neil Fried, Attorney, Common Carrier

Bureau, Competitive Pricing Division, (202) 418-1530.

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

Further Notice of Proposed Rulemaking June 27, 1996, and released July

2, 1996 (FCC 96-286). This FNPRM contains no proposed or modified

information collections subject to the Paperwork Reduction Act of 1995

(PRA). The full text of this Further 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, DC.

The complete text also may be obtained through the World Wide Web, at

http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc96286.wp, or may be

purchased from the Commission's copy contractor, International

Transcription Service, Inc., (202) 857-3800, 2100 M St., NW., Suite

140, Washington, DC 20037.

Initial Regulatory Flexibility Analysis

Pursuant to section 603 of the Regulatory Flexibility Act, 5 U.S.C.

603, the Commission prepared an Initial Regulatory Flexibility Analysis

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

rules proposed in the Further Notice of Proposed Rulemaking. The IRFA

is set forth in Appendix C of the FNPRM. The Commission, in compliance

with sections 251(b)(2) and 251(d)(1) of the Act, proposes rules

necessary to implement section 251(e)(2) of the Act, which requires

that the costs of number portability be borne by all telecommunications

carriers on a competitively neutral basis. The Commission's objective

in issuing the FNPRM is to propose and seek comment on rules

establishing a cost recovery mechanism for carriers to use in

implementing a long-term number portability method pursuant to the Act

and in accordance with the First Report and Order in this proceeding.

Specifically, the Commission's goal is to propose rules which implement

section 251(e)(2) of the Act, requiring that the cost of ``number

portability be borne by all telecommunications carriers on a

competitively neutral basis as determined by the Commission.'' 47

U.S.C. 251(e)(2). The legal basis for action as proposed in the FNPRM

is contained in sections 1, 4(i), 4(j), 201-205, 218, 251(b), 251(e),

and 332 of the Communications Act of 1934, as amended. 47 U.S.C. 151,

154(i), 154(j), 201-205, 218, 251(b), 251(d), 251(e), The Commission's

proposed rules governing cost recovery for long-term number portability

apply to all LECs, including incumbent LECs as well as new LEC

entrants, and also apply to cellular, broadband PCS, and covered SMR

providers. According to the SBA definition, incumbent LECs do not

qualify as small businesses because they are dominant in their field of

operation. However, the proposed rules may have a significant economic

impact on a substantial number of small businesses insofar as they may

apply to telecommunications carriers other than incumbent LECs. The

proposed rules may have such an impact upon new entrant LECs as well as

cellular, broadband PCS, and covered SMR providers. Based upon data

contained in the most recent census and a report by the Commission's

Common Carrier Bureau, the Commission estimates that 2,100 carriers

could be affected. The Commission requests comment on this estimate.

These entities could include various categories of carriers, including

competitive access providers, cellular carriers, interexchange

carriers, mobile service carriers, operator service providers, pay

telephone operators, PCS providers, covered SMR providers, and

resellers. The FNPRM requests comment on the appropriate method by

which the costs of long-term number portability should be recovered.

One possible cost recovery method would be based upon a percentage of a

carrier's gross revenues. Such a rule, if promulgated, would not impose

a reporting requirement on LECs because they already file information

about gross revenues with the Commission for other purposes. There are

no other reporting requirements contemplated by the FNPRM. There are no

federal rules

[[Page 38688]]

which overlap, duplicate or conflict with these proposed rules.

Synopsis of Further Notice of Proposed Rulemaking

Further Notice of Proposed Rulemaking

I. Long-Term Number Portability--Costs and Cost Recovery

A. Background

1. In the NPRM (Telephone Number Portability, Notice of Proposed

Rulemaking, 60 FR 39136 (August 1, 1995)), we requested comment on

appropriate cost recovery mechanisms regarding long-term number

portability. We also sought comment, data, studies, and other

information on the costs associated with designing, building, and

deploying long-term number portability. Section 251(e)(2) of the 1996

Act requires, inter alia, that the costs of number portability be borne

by all telecommunications carriers on a competitively neutral basis.

B. Positions of the Parties

2. In response to the July NPRM, many parties assert that the costs

of number portability cannot be estimated until the industry adopts a

particular architecture. While the incumbent LECs generally urge the

Commission to continue to gather information concerning the potential

costs and impacts on existing networks from ongoing state activities, a

few parties offer rough estimates regarding the costs of implementing

long-term number portability. We note that many of these estimates

assume a significant level of location portability.

3. The incumbent LECs generally assert that the costs of providing

long-term number portability should be borne on a ``competitively

neutral'' basis by those carriers that cause or benefit from number

portability. They assert that specific cost recovery mechanisms cannot

be established until a better understanding is developed regarding how

number portability should be provided. Ameritech, however, proposes a

cost recovery structure with three categories of costs: (1)

Administrative and overhead costs for SMS/databases--to be recovered

from all providers; (2) costs directly assignable to number portability

deployment--to be recovered from all LECs, both incumbents and new

entrants, in proportion to the amount of telephone numbers that each

has transferred to its switches; and (3) costs incurred to increase the

capacity of existing infrastructure--to be borne mostly by incumbent

LECs. Some incumbent LECs also contend that the costs of deploying

long-term number portability should be allocated between state and

federal jurisdictions.

4. Most other parties generally contend that all telecommunications

carriers and their customers should bear the costs of long-term number

portability because they all benefit from the service and price

competition stimulated by portability. Non-LEC parties generally

contend that carrier-specific costs incurred in adapting existing

systems to long-term number portability should be recovered, like other

network upgrades such as AIN and SS7, through tariff and contract

mechanisms. Sprint and AT&T advocate implementing portability on a

region-by-region basis (with costs amortized over several years) to

minimize incumbent carriers' greater burdens for upgrading existing

networks. Several parties also contend that the external costs of long-

term number portability, i.e., the costs of designing, deploying, and

operating facilities common to all carriers, should be shared equitably

among all affected carriers. Parties offer several different methods of

allocating costs among the relevant carriers.

5. After passage of the 1996 Act, and in response to the March

Public Notice, several parties addressed the meaning of the statutory

language ``competitively neutral'' as set forth in section 251(e)(2).

Ameritech asserts that this standard requires that all costs be

allocated to all telecommunications carriers on a basis that is

independent of who incurred the cost or who uses portability, and that

gives no competitor an advantage. Ameritech criticizes proposals that

would limit or exclude recovery of costs incurred by incumbent LECs or

allocate costs based on lines. BellSouth urges the Commission to

consider the types of infrastructure costs that all classes of carriers

will bear in implementing number portability, not just incumbent LECs,

in order to avoid imposing large financial burdens on any particular

class of carriers, especially those not required to participate in

portability. GTE and Pacific Bell argue that requiring each carrier to

bear its own costs would result in incumbent LECs paying most of the

implementation costs, which is not competitively neutral.

6. In contrast, ALTS, Omnipoint, and Cox maintain that competitive

neutrality requires each carrier to bear its own costs, and that no

carrier should be required to pay for upgrades to another carrier's

network. Moreover, Cox argues that incumbent LEC proposals to require

that the new entrants bear all number portability costs are not

competitively neutral because it would unreasonably burden those

carriers. In addition, Cox asserts that, because new entrants will

begin providing service at different times, it would be difficult to

allocate costs on a competitively neutral basis unless each carrier

bears its own costs of implementation. Omnipoint asserts that requiring

carriers to compensate other carriers with less efficient systems and

networks is competitively unfair.

7. US West advocates permitting LECs to recover their costs using a

per-line surcharge, claiming that all carriers are entitled to recover

their implementation costs under the 1996 Act. GTE suggests

establishment of a ``cost pool,'' under which each subscriber would be

assessed an amount, regardless of which carrier it used. Bell Atlantic

claims that allowing incumbent LECs to recover their costs only from

their customers, and not from other providers, is not competitively

neutral because costs would be recovered only from those end users who

do not use or benefit from portability, and higher incumbent LEC rates

would encourage their customers to switch providers. USTA cautions that

not permitting carriers to recover their costs through separate charges

for number portability will result in an across-the-board increase in

local rates, which, for incumbent LECs, must be approved by state

regulators.

8. In contrast, MFS maintains that the competitive neutrality

requirement does not apply to end users at all, but rather requires an

analysis of charges assessed to other, competing telecommunications

carriers. Teleport argues that number portability costs should not be

recovered from customers through a number portability surcharge, as

such charges would deter customers from transferring their numbers. Cox

asserts that GTE's pooling argument is not competitively neutral

because it would create incentives for incumbents to inflate costs.

9. MFS argues that the competitive neutrality standard in the 1996

Act requires that only the shared/common costs be borne by all

telecommunications carriers, and that such allocation should be done

based on net revenues. It notes that all telecommunications users

should not be interpreted to mean only a segment of the market, a

single class of carriers, or a single class of customers. MFS further

argues that the shared/common costs could be recovered from each

carrier's customer base, but not from other carriers in the form of

increased charges. TRA contends that section 251(e)(2) contemplates a

competitively fair distribution of the common costs associated with

number portability

[[Page 38689]]

among only those carriers engaged in the provision of local exchange/

exchange access services, not a general levy on all telecommunications

providers. Teleport and Time Warner Holdings propose similar cost

recovery mechanisms to MFS, but argue that the shared costs should be

allocated based on the number of lines served, rather than net

revenues. ALTS argues that, in order to expedite the implementation of

number portability, shared/common costs (e.g., costs associated with

the number portability database(s)) should be recovered by a third

party from all carriers on a per line basis, but notes that there is

considerable economic logic in recovering such costs according to net

revenues.

C. Discussion

10. We tentatively conclude that three types of costs are involved

in providing long-term service provider portability: (1) Costs incurred

by the industry as a whole, such as those incurred by the third-party

administrator to build, operate, and maintain the databases needed to

provide number portability; (2) carrier-specific costs directly related

to providing number portability (e.g., the costs to purchase the switch

software implementing number portability); and (3) carrier-specific

costs not directly related to number portability (e.g., the costs of

network upgrades necessary to implement a database method). We seek

comment on this tentative conclusion and ask whether other types of

costs are involved in the provision of long-term service provider

number portability.

11. New section 251(e)(2) of the Communications Act requires that

the costs of establishing ``number portability be borne by all

telecommunications carriers on a competitively neutral basis as

determined by the Commission.'' We tentatively conclude that the

``competitively neutral'' standard in section 251(e)(2) applies only to

number portability costs, and not to cost recovery of carrier-specific,

non-number portability-specific costs, such as upgrades to SS7 or AIN

technologies. This interpretation is borne out by the plain language of

the statute, which only requires that telecommunications carriers bear

the costs of number portability. We also tentatively conclude that

section 251(e)(2) does not address recovery of those costs from

consumers, but only the allocation of such costs among carriers. We

seek comment on these tentative conclusions. We also seek comment on

the meaning of the statutory language ``all telecommunications

carriers'' as that term is used in section 251(e)(2). We further seek

comment on whether the Commission has authority to exclude certain

groups of telecommunications carriers from the cost recovery mechanisms

for number portability, and, if so, which carriers should be excluded.

12. In determining the cost recovery mechanism for currently

available number portability measures, we set forth principles with

which any competitively neutral cost recovery mechanism should comply.

Specifically, we required that (1) a competitively neutral cost

recovery mechanism should not give one service provider an appreciable,

incremental cost advantage over another service provider, when

competing for a specific subscriber; and (2) a competitively neutral

cost recovery mechanism should not have a disparate effect on the

ability of competing service providers to earn a normal return. As in

the case of currently available number portability measures, we believe

that these principles equally apply to the allocation of costs incurred

due to the implementation of long-term number portability. We,

therefore, tentatively conclude that any long-term cost recovery method

should comply with these principles. We seek comment on this tentative

conclusion.

13. Pursuant to the requirement of section 251(e)(2) that number

portability costs be borne by all telecommunications carriers on a

competitively neutral basis as determined by this Commission, we must

establish pricing principles that are applied consistently to all

carriers. Consequently, we tentatively conclude that the pricing for

state-specific databases should be governed by the pricing principles

established in this proceeding. We believe the use of our pricing

mechanism--even in states that opt out of the regional database

system--will help to maintain consistency between states, thereby

improving the likelihood that competition will develop nationwide.

a. Costs of Facilities Shared by All Carriers for the Provision of

Number Portability

14. The costs of facilities shared by all telecommunications

carriers for providing long-term number portability include, for

example, the costs of building and administering regional databases. We

seek comment on whether the database administrator(s) selected through

the NANC should recover the costs of facilities shared by all

telecommunications carriers for the provision of long-term number

portability through a charge assessed only on those carriers using the

databases or on all carriers whether or not they use the databases. We

note that if a regional database consists only of the SMS, usage would

consist of uploading and downloading number portability routing

information. However, to the extent a database architecture is chosen

that utilizes an SMS/SCP pair, usage additionally may include carrier

queries to the regional SCP for purposes of providing routing

instructions to carriers for individual calls. We seek comment on

whether such costs, if recovered from all carriers, should be recovered

on a nationwide or regional basis, and how they should be recovered on

such bases. To the extent such costs are recovered on a nationwide

basis, and multiple entities are selected to administer the regional

databases, we seek comment on whether either one of the neutral third-

party administrators or a separate entity should be designated to

allocate the aggregate costs among each telecommunications carrier and

determine the method by which such payments should be made.

15. With regard to those carriers responsible for bearing the costs

of the shared facilities, we tentatively conclude that the recovery of

the costs associated with these databases should be allocated in

proportion to each telecommunications carrier's total gross

telecommunications revenues minus charges paid to other carriers. We

believe that the use of gross telecommunications revenues to allocate

costs best comports with our principles for competitively neutral cost

recovery set forth above. As we indicated in our discussion of

currently available number portability measures, such allocator would

not give any provider an appreciable, incremental cost advantage over

another service provider, nor have a disparate effect on the ability of

competing service providers to earn a normal return. In addition, gross

telecommunications revenues are the least distortionary, among

practical applications, of allocating costs across telecommunications

carriers. We also believe it is appropriate to subtract out charges

paid to other carriers, such as access charges, when determining the

relevant amount of each carrier's telecommunications revenues for

purposes of cost allocation. This is because the revenues attributable

to such charges effectively would be counted twice in determining the

relative number portability costs each carrier should pay--once for the

carrier

[[Page 38690]]

paying such charges and once for the carrier receiving them. We believe

that a reasonable, equitable, and competitively neutral measure of the

competitive benefits which will result from number portability is each

telecommunications carrier's gross telecommunications revenues minus

charges to other telecommunications carriers. We seek comment on

whether this proposal for recovery of the costs associated with

regional databases comports with the standard set forth in section

251(e)(2), and whether there exists alternative ways of allocating this

type of cost among the relevant carriers.

16. We currently require the NANPA to recover the costs of

administering the NANP, and operating databases to perform such

administration, from all telecommunications carriers. The recovery of

these costs is allocated among all telecommunications carriers based on

the carriers' gross revenues. In our recent Interconnection NPRM (61 FR

18311 (April 25, 1996)), we tentatively concluded that we need not take

any further action to comply with section 251(e)(2)'s mandate that the

cost of establishing telecommunications numbering administration

arrangements be borne by all telecommunications carriers on a

competitively neutral basis, in light of the action taken in the

Numbering Plan Order (60 FR 38737 (July 28, 1996)).

17. With the implementation of long-term number portability

measures, all carriers, including currently regulated incumbent LECs,

will incur costs specific to the deployment and usage of number

portability databases. Therefore, we seek comment on whether incumbent

LECs should be able to recover their portion of the costs of facilities

shared by all carriers in providing long-term number portability from

their end users or from other carriers, and whether the Commission

should prescribe the particular cost recovery mechanism. To the extent

parties argue that such costs should be recovered from other carriers,

we seek comment on whether such carriers should include all

telecommunications carriers, such as other local exchange providers,

CMRS providers, IXCs, and resellers, or only those carriers that have

received ported numbers. In addition, assuming that we prescribe a

particular recovery mechanism, we ask parties to identify alternative

ways carriers may recover this type of cost from carriers (or end

users).

18. We tentatively conclude the number portability costs of

facilities shared by all carriers fall into three subcategories: (a)

Non-recurring costs, including the development and implementation of

the hardware and software for the database; (b) recurring (monthly or

annually) costs, such as the maintenance, operation, security,

administration, and physical property associated with the database; and

(c) costs for uploading, downloading, and querying number portability

database information. We seek comment on this tentative conclusion and

ask whether there are other types of costs associated with the

facilities that will be shared by all carriers.

19. We seek comment on whether the first two subcategories, non-

recurring and recurring costs, should be recovered through monthly

charges to the individual carriers using the database, allocated in

proportion to each carrier's gross telecommunications revenues net of

payments to other carriers, or from all carriers operating in areas

where number portability is offered. We note that non-recurring charges

could be recovered in a one-time payment or over time.

20. We believe that there are at least two methods for recovering

the third subcategory of shared costs, i.e., the costs of uploading,

downloading, or querying the database. First, these costs could be

recovered through usage charges assessed on those carriers that either

access the database to upload number portability routing information,

download such information, or directly query the database. Those

carriers, including IXCs, could then either recover such costs from

their own customer base, or choose not to recover such costs.

21. Second, the upload, download, and/or per-query costs could be

folded into the monthly charges assessed on the carriers using the

databases, which would be allocated in proportion to each carrier's

gross telecommunications revenues. We believe this approach is most

appropriate in those instances where it is not practical to determine

the cost causer of the usage costs, e.g., per-query costs. Under

current database approaches, there is no direct correlation between the

number of queries made and the number of telephone numbers that have

been forwarded because queries will be performed on all calls to a

particular switch once any single number has been transferred from that

switch. We invite commenting parties to provide credible, substantiated

estimates of the amount of the usage costs, including upload, download,

and per-query costs, to the extent applicable, and whether such costs

will be incurred on a per-minute, per-call, or other basis. We also

seek comment on these and alternative methods for recovering per-query

costs. Parties are asked to state with specificity the advantages and

disadvantages of each.

22. In accordance with the 1996 Act, the costs of number

portability are to be recovered from all telecommunications carriers on

a competitively neutral basis. We seek comment on what steps we need to

take to ensure that this requirement is satisfied for all shared

industry costs. For instance, we seek comment on whether it is

necessary for the Commission to establish a mechanism to ensure that

the LNPA(s) recovers its costs in a competitively neutral fashion. We

also seek comment on what mechanism(s), e.g., federal tariffs, periodic

reports, etc., should be utilized to ensure compliance with the

statutory requirement and under what authority the Commission can

impose such obligations. We note that section 251(e)(1) requires the

Commission to create or designate one or more impartial entities to

administer telecommunications numbering, and provides the Commission

with exclusive jurisdiction over the NANP, and section 251(e)(2) gives

the Commission the authority to establish rules by which carriers must

bear the costs of telecommunications numbering administration and

number portability. We seek comment on the relevance of these

provisions to the Commission's authority to impose obligations on the

LNPA(s).

b. Direct Carrier-Specific Costs to Implement Number Portability

23. Carrier-specific costs directly related to number portability

include, for example, the costs of purchasing the switch software

necessary to implement a long-term number portability solution. There

are at least two ways of allocating these carrier-specific costs.

First, we could require individual carriers to bear their own costs of

deploying number portability in their networks. Second, we could

require all carriers in a given region to pool their number portability

costs, which then would be spread across all carriers providing and

using number portability based on some allocator, such as gross

telecommunications revenues or number of subscriber lines. We seek

comment on whether this proposal comports with the standard set forth

in section 251(e)(2), and whether there exist alternative ways of

allocating this type of cost among the relevant carriers.

24. We seek comment on whether we can and should mandate a

mechanism by which incumbent LECs or others then may recover these

costs, from either end users or other carriers (such as other local

exchange service

[[Page 38691]]

providers, CMRS providers, IXCs, and resellers), and ask that parties

identify the jurisdictional basis for such authority.

25. If the Commission were to permit costs to be recovered from

consumers, there are at least two options. One option would be to allow

carriers the flexibility to recover their number portability-specific

costs from their customers in whatever manner the carrier chooses. A

second option would be to require carriers to recover their number

portability-specific costs through a number portability charge assessed

on their end user customers located in areas where number portability

is available. We seek comment on the advantages and disadvantages of

these proposals and any alternative mechanisms for recovering these

costs from consumers. Parties favoring a specific option should comment

on whether their preferred approach is consistent with principles of

competitive neutrality.

26. We note that several additional issues are raised if the

carrier-specific, number portability-specific costs are to be passed on

to consumers. Therefore, we seek comment on whether, under any cost

recovery mechanism, the cost to consumers should: (1) Vary among

carriers in a given geographic region; (2) remain constant among all

carriers in a given geographic region; or (3) vary among different

geographic regions, e.g., states or LATAs (while remaining constant

within that region, i.e., state or LATA). For each of these approaches,

we ask whether the costs to consumers should be permitted to change,

for example, on a monthly or annual basis. We also seek comment on

whether carriers should charge their customers a single, one-time

charge, a monthly fee, or some percentage of the customer's monthly

bill, to recover their carrier-specific number portability-specific

costs. To the extent this Commission permits carriers to recover their

costs through use of a number portability charge, we seek comment on

whether such a charge should be specifically identified on consumer

bills from those carriers as a separate line item. We seek comment on

whether any such charge should be filed as a tariff at either the

federal or state level.

27. Finally, we seek comment on whether carriers should be

permitted to recover carrier-specific, number portability-specific

costs from other carriers, through increases in charges for regulated

services. Parties that advocate increases in charges for regulated

services are asked to specify which charges should be increased and

under what jurisdictional authority the Commission can prescribe such

increases.

c. Indirect Carrier-Specific Costs to Implement Number Portability

28. We tentatively conclude that carrier-specific costs not

directly related to number portability should be borne by individual

carriers as network upgrades. As such, carrier-specific costs not

directly related to number portability are not subject to the

requirements set forth in section 251. We seek comment on this

tentative conclusion and on alternative methods for recovering this

type of cost.

29. Carrier-specific costs that are not directly related to the

provision of number portability include, for example, the costs of

upgrading SS7 capabilities or adding intelligent network (IN) or

advanced intelligent network (AIN) capabilities. These costs are

associated with the provision of a wide variety of services unrelated

to the provision of number portability, such as CLASS features.

Provision of these services will facilitate the ability of incumbent

carriers to compete with the offerings of new entrants.

30. Incumbent LECs, as well as new entrants, will be required to

incur these costs to support the provision of number portability and

other services. While some incumbent LECs may have to upgrade existing

networks and infrastructure, new entrants will need to design their

networks from the outset to include these capabilities. Many incumbent

LECs, though, may already have the necessary network capabilities to

support the provision of long-term number portability, thus minimizing

the need to incur upgrade costs. By limiting the deployment of long-

term portability to those geographic areas where carriers are already

offering, or are likely to offer, competing telephone exchange and

exchange access services, we limit these expenditures and their

recovery to areas where the incumbent carriers would, solely for

competitive reasons, likely upgrade their networks. We note that this

approach is also consistent with that taken in implementing 800 number

portability, where LECs recovered the core costs of deploying SS7

capabilities as network upgrades from all end users.

31. We seek comment on whether we should specify a particular

recovery mechanism for carrier-specific costs not directly related to

number portability, and on alternative methods of recovering such costs

from consumers or other carriers. In addition, we believe that due to

the inevitable implementation of switch and other network upgrades to

support long-term number portability and other AIN capabilities,

networks will operate with greater efficiencies, resulting in increased

productivity. We seek comment on whether such future network design

modifications should be considered in determining the extent to which

carriers may recover carrier-specific, non-number portability-specific

costs, and if so, how they should be considered.

d. Price Cap Treatment

32. If this Commission were to specify a particular method of cost

recovery from end users, such requirement would include companies that

are subject to price cap treatment. Price cap regulation may affect

carriers' ability to recover their costs under the methods described

above, or other possible methods, because it restricts the flexibility

with which price cap carriers may price various services. We

tentatively conclude that price cap carriers should be permitted to

treat as an exogenous cost any carrier-specific, number portability-

specific costs they incur, but that such carriers should not be

permitted to treat as an exogenous cost any carrier-specific, non-

number portability-specific costs. These conclusions are consistent

with our 800 Access proceeding where costs specific to 800 access were

accorded exogenous cost treatment, while core SS7 costs were treated as

general network upgrades. We, therefore, seek comment specifically on

how price cap companies should be permitted to recover costs for

facilities shared by all carriers; carrier-specific, number

portability-specific costs; and carrier-specific, non-number

portability-specific costs. In particular, we seek comment on whether

price cap companies should be permitted to treat exogenously any of the

above number portability-specific cost categories. We also seek comment

on whether these costs, alternatively, should be placed in a new price

cap basket or an existing basket. If parties recommend that such costs

are to be placed in an existing basket, we ask parties to identify

which basket would be most appropriate.

II. Procedural Matters

A. Ex Parte

33. This is a non-restricted notice and comment rulemaking. Ex

parte presentations are permitted, except during the Sunshine period,

provided they are disclosed as provided in the Commission's rules.

B. Regulatory Flexibility Act

34. As required by section 603 of the Regulatory Flexibility Act, 5

U.S.C. 601

[[Page 38692]]

et seq. (1981), the Commission prepared an Initial Regulatory

Flexibility Analysis (IRFA) of the expected impact on small entities

resulting from the policies and proposals set forth in this FNPRM. The

IRFA appears at Appendix C of the FNPRM. Written public comments are

requested on the IRFA. These comments must be filed in accordance with

the same filing deadlines as comments on the remainder of the FNPRM,

but they must have a separate and distinct heading designating them as

responses to the regulatory flexibility analysis. The Secretary shall

cause a copy of the FNPRM, including the IRFA, to be sent to the Chief

Counsel for Advocacy of the Small Business Administration in accordance

with section 603(a) of the Regulatory Flexibility Act.

35. Reason for Action: The Commission, in compliance with sections

251(b)(2) and 251(d)(1) of the Act, proposes rules and procedures

intended to ensure the prompt implementation of telephone number

portability with the minimum regulatory and administrative burden on

telecommunications carriers. The rules proposed in the FNPRM are

necessary to implement section 251(e)(2) of the Act, which requires

that the costs of number portability be borne by all telecommunications

carriers on a competitively neutral basis.

36. Objectives and Legal Basis for Proposed Rules: The Commission's

objective in issuing the FNPRM is to propose and seek comment on rules

establishing a cost recovery mechanism for carriers to use in

implementing a long-term number portability method pursuant to the Act

and in accordance with our Report and Order in this proceeding.

Specifically, our goal is to propose rules which implement section

251(e)(2) of the Act, requiring that the cost of ``number portability

be borne by all telecommunications carriers on a competitively neutral

basis as determined by the Commission.'' 47 U.S.C. 251(e)(2). The legal

basis for action as proposed in the FNPRM is contained in sections 1,

4(i), 4(j), 201-205, 218, 251(b), 251(e), and 332 of the Communications

Act of 1934, as amended. 47 U.S.C. 151, 154(i), 154(j), 201-205, 218,

251(b), 251(d), 251(e), 332.

37. Description and Estimated Number of Small Entities Affected:

The rules governing long-term number portability apply to all LECs,

including incumbent LECs as well as new LEC entrants, and also apply to

cellular, broadband PCS, and covered SMR providers. According to the

SBA definition, incumbent LECs do not qualify as small businesses

because they are dominant in their field of operation. Accordingly, we

will not address the impact of these rules on incumbent LECs.

38. However, our rules may have a significant economic impact on a

substantial number of small businesses insofar as they apply to

telecommunications carriers other than incumbent LECs. The rules may

have such an impact upon new entrant LECs as well as cellular,

broadband PCS, and covered SMR providers. Based upon data contained in

the most recent census and a report by the Commission's Common Carrier

Bureau, we estimate that 2,100 carriers could be affected. We have

derived this estimate based on the following analysis:

39. According to the 1992 Census of Transportation, Communications,

and Utilities, there were approximately 3,469 firms with under 1,000

employees operating under the Standard Industrial Classification (SIC)

category 481--Telephone. See U.S. Dept. of Commerce, Bureau of the

Census, 1992 Census of Transportation, Communications, and Utilities

(issued May 1995). Many of these firms are the incumbent LECs and, as

noted above, would not satisfy the SBA definition of a small business

because of their market dominance. There were approximately 1,350 LECs

in 1995. Industry Analysis Division, FCC, Carrier Locator: Interstate

Service Providers at Table 1 (Number of Carriers Reporting by Type of

Carrier and Type of Revenue) (December 1995). Subtracting this number

from the total number of firms leaves approximately 2,119 entities

which potentially are small businesses which may be affected. This

number contains various categories of carriers, including competitive

access providers, cellular carriers, interexchange carriers, mobile

service carriers, operator service providers, pay telephone operators,

PCS providers, covered SMR providers, and resellers. Some of these

carriers--although not dominant--may not meet the other requirement of

the definition of a small business because they are not ``independently

owned and operated.'' See 15 U.S.C. 632. For example, a PCS provider

which is affiliated with a long distance company with more than 1,000

employees would be disqualified from being considered a small business.

Another example would be if a cellular provider is affiliated with a

dominant LEC. Thus, a reasonable estimate of the number of ``small

businesses'' affected by this Order would be approximately 2,100. We

request comment on this estimate. These entities could include various

categories of carriers, including competitive access providers,

cellular carriers, interexchange carriers, mobile service carriers,

operator service providers, pay telephone operators, PCS providers,

covered SMR providers, and resellers. The SIC codes which describe

these groups are 4812 and 4813.

40. Reporting, Recordkeeping and Other Compliance Requirements: The

FNPRM requests comment on the appropriate method by which the costs of

long-term number portability should be recovered. One possible cost

recovery method would be based upon a percentage of a carrier's gross

revenues. Such a rule, if promulgated, would not impose a reporting

requirement on LECs because they already file information about gross

revenues with the Commission for other purposes. There are no other

reporting requirements contemplated by the FNPRM.

41. Federal Rules Which Overlap, Duplicate or Conflict with these

Rules: None.

C. Notice and Comment Provision

42. Pursuant to applicable procedures set forth in sections

Secs. 1.415 and 1.419 of the Commission's Rules, 47 CFR 1.415 and

1.419, interested parties may file comments on this FNPRM on or before

August 16, 1996, and reply comments on or before September 16, 1996. To

file formally in this proceeding, parties must file an original and

twelve copies of all comments, reply comments, and supporting comments.

Parties wanting each Commissioner to receive a personal copy of their

comments must file an original plus sixteen copies. Comments and reply

comments should be sent to the Office of the Secretary, Federal

Communications Commission, 1919 M Street, NW., Room 222, Washington, DC

20554. In addition, parties should file two copies of any such

pleadings with the Competitive Pricing Division, Common Carrier Bureau,

Room 518, 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. (ITS, Inc.), 2100 M Street, NW., Suite 140, Washington, DC 20037

(202/857-3800). Comments and reply comments will be available for

public inspection during regular business hours in the FCC Reference

Center, Room 239, 1919 M Street, NW., Washington, DC 20554.

43. In order to facilitate review of comments and reply comments,

both by parties and by Commission staff, we require that comments be no

longer than forty (40) pages and reply comments be no longer than

twenty five (25) pages.

[[Page 38693]]

Empirical economic studies, copies of relevant state orders, and

proposed rule text will not be counted against these page limits.

Specific rule proposals should be filed as an appendix to a party's

comments or reply comments. Such appendices may include only proposed

text for rules that would implement proposals set forth in the parties'

comments and reply comments in this proceeding, and may not include any

comments or arguments. Proposed rules should be provided in the format

used for rules in the Code of Federal Regulations and should otherwise

conform to the Comment Filing Procedures set forth in this order.

Comments and reply comments must include a short and concise summary of

the substantive arguments raised in the pleading. Comments and reply

comments also must clearly identify the specific portion of this FNPRM

to which a particular comment or set of comments is responsive. Parties

will not be permitted to file more than a total of ten (10) pages of ex

parte submissions, excluding cover letters, except in response to

direct requests from Commission staff. This would not include written

ex parte filings made solely to disclose an oral ex parte contact. Ex

parte filings in excess of this limit will not be considered as part of

the record in this proceeding.

44. Parties also are asked to submit comments and reply comments on

diskette. Such diskette submissions would be in addition to and not a

substitute for the formal filing requirements addressed above. Parties

submitting diskettes should submit them to Wanda M. Harris, Competitive

Pricing Division of the Common Carrier Bureau, 1919 M Street, NW., Room

518, Washington, DC., 20554. Such a submission should be on a 3.5 inch

diskette formatted in an IBM compatible form using MS DOS 5.0 and

WordPerfect 5.1 software. The diskette should be submitted in ``read

only'' mode. The diskette should be clearly labelled with the party's

name, proceeding, type of pleading (comment or reply comments) and date

of submission. The diskette should be accompanied by a cover letter.

D. Ordering Clause

It is ordered that, pursuant to the authority contained in sections

1, 4(i), 4(j), 201-205, 218, 251, and 332 of the Communications Act as

amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 201-205, 218, 251, and

332, a further notice of proposed rulemaking is hereby adopted.

List of Subjects

47 CFR Part 20

Federal Communications Commission, Local number portability, Radio,

Telecommunications.

47 CFR Part 52

Federal Communications Commission, Cost recovery, Local exchange

carrier, Local number portability, Long-term database methods,

Numbering, Telecommunications.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 96-18479 Filed 7-24-96; 8:45 am]

BILLING CODE 6712-01-P