Competitive Service Safeguards for Local Exchange Carrier Provision of Commercial Mobile Radio Services

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 22

[WT Docket No. 96-162; GEN Docket No. 90-314; FCC 96-319]

Competitive Service Safeguards for Local Exchange Carrier

Provision of Commercial Mobile Radio Services

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking (NPRM), in WT Docket No.

96-162 and GEN Docket No. 90-314, the Commission initiates a

comprehensive review of the existing regulatory framework of structural

and nonstructural safeguards for local exchange carrier (LEC) provision

of commercial mobile radio services (CMRS). The Commission proposes to

eliminate the current requirement that Bell Operating Companies (BOCs)

must provide cellular service through a structurally separate

corporation. The Commission also proposes rule changes necessary to

implement those provisions of the Telecommunications Act of 1996,

Public Law 104-104, 110 Stat. 56 (1996) (``the 1996 Act'') that govern

the joint marketing of CMRS and landline services, protections for

customer proprietary network information (CPNI) and network information

disclosure. The Commission's objective is to implement further the

mandate of the Omnibus Budget Reconciliation Act of 1993, Title VI,

Sections 6002(b)(2)(A), 6002(b)(2)(B), Public Law No. 103-66, 107 Stat.

312, 392 (1993) to treat similar commercial mobile radio services

similarly by placing all CMRS licensees under a uniform set of

nonstructural safeguards.

DATES: Comments must be filed on or before October 3, 1996. Reply

comments are to be filed on or before October 24, 1996. Comment of the

Office of Management and Budget on the information collections

contained herein are due November 4, 1996.

ADDRESSES: Federal Communications Commission, 1919 M Street, NW.,

Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Jane Halprin or Mika Savir, Commercial

Wireless Division, Wireless Telecommunications Bureau, at (202) 418-

0620.

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking in WT

Docket No. 96-162 and GEN Docket No. 90-314, adopted on July 25, 1996

and released on August 13, 1996, is available for inspection and

copying during normal business hours in the FCC Reference Center, Room

575, 2000 M Street, NW., Washington, DC. The complete text may also be

purchased from the Commission's copy contractor, International

Transcription Service, Inc., 2100 M Street, NW., Suite 140, Washington,

DC 20037, (202) 857-3800. Synopsis of the Notice of Proposed

Rulemaking:

I. Background

1. Currently, there are distinct rules for BOC provision of

cellular service versus non-BOC provision of personal communications

service (PCS) and other commercial mobile radio services. BOCs are

required to provide cellular service through structurally separate

subsidiary corporations, whereas all other LECs may provide cellular

service on an unseparated basis. Moreover, the Commission has declined

to impose these restrictions on LEC, including BOC, provision of other

CMRS, such as PCS and specialized mobile radio (SMR)

[[Page 46421]]

service. The BOCs have sought relief from the Commission's cellular

structural separation rule on the grounds of changed circumstances and

competitive necessity. The BOCs' challenges to the continued viability

of the restrictions contained in Section 22.903 are premised on two

points: (1) the Commission's existing interconnection rules and

accounting safeguards are sufficient to protect against anti-

competitive behavior by the BOCs; and (2) LECs that are not BOCs are

treated differently with respect to the provision of cellular service

and other commercial mobile radio services. In response, parties

opposing grant of such waivers have cited the broader competitive

implications of the individual waiver requests, and have generally

disputed the BOC claims.

2. A central purpose of the 1996 Act is to provide open access to

local and other telecommunications markets in order to encourage entry

by new competitors. Structural separation was originally imposed over a

decade ago on certain LECs to prevent them from leveraging their market

power in the local exchange market into other competitive markets, such

as cellular service. The Commission notes that CMRS providers will, in

the very near term, need to enter into a series of agreements with

local exchange incumbents for such things as the mutual exchange of

traffic, the location of equipment, and the sharing of network

functionalities. Effective competitive safeguards, where a demonstrated

need exists, should permit competitors to construct their networks,

implement their business plans, and begin offering service to customers

with the reasonable assurance that the incumbent LEC will not be able

to extend its market power into the critical new PCS market.

3. The original version of Section 22.903 was adopted as Section

22.901 in 1981 when the Commission amended Part 22 of the rules to

provide for the authorization of two cellular licensees in each

market--one wireline carrier and one non-wireline carrier. To preserve

the competitive potential of the non-wireline cellular provider, the

Commission required the wireline carrier to provide its cellular

service through a structurally separate subsidiary, i.e., an

independent corporation with separate officers, separate books of

account, and separate operating, marketing, installation and

maintenance personnel, and also prohibited cellular licensees

affiliated with landline LECs from owning facilities for the provision

of landline telephone service. The structural separation requirement

was intended to protect against improper cross-subsidization, to assure

equitable interconnection arrangements, and to make the detection of

anti-competitive conduct somewhat easier for regulatory authorities.

4. In 1982, the Commission revised Section 22.901 to apply only to

AT&T and its affiliates. In 1983, the Commission further amended

Section 22.901 in response to the breakup of AT&T under the divestiture

agreement entered into by AT&T and the Department of Justice. A final

revision of the cellular structural separation requirement occurred in

the Part 22 Rewrite Order, Revision of Part 22 of the Commission's

Rules Governing the Public Mobile Services, CC Docket No. 92-115,

Report and Order, 59 FR 59502 (November 17, 1994) (Part 22 Rewrite

Order), reconsideration pending, as part of the Commission's

comprehensive reorganization of Part 22 of the rules. In the Part 22

Rewrite Order, Section 22.903 was amended to incorporate the provisions

of former Section 22.901. Section 22.903 essentially consists of two

parts: (1) the requirement that BOCs provide cellular service through a

separate corporation; and (2) a series of restrictions on the operation

of that separate affiliate, including restrictions on use and ownership

of landline transmission facilities and requirements for the

independent operation of the separate cellular affiliate through

separate books of account, officers, operating, marketing, installation

and maintenance personnel and utilization of separate computer and

transmission facilities in the provision of cellular service. In

addition, Section 22.903(d) requires that all transactions between the

BOC and the cellular subsidiary or its affiliates be reduced to writing

and that a copy of all agreements (other than interconnection

agreements) between such entities be kept available for inspection upon

reasonable request by the Commission. It also requires that all

affiliate contracts with respect to cellular/landline interconnection

be filed with the Commission; however, this requirement does not apply

to any transaction governed by an effective state or federal tariff.

Section 22.903(e) prohibits BOCs from engaging in the sale or promotion

of cellular service on behalf of the separate corporation. This

prohibition does not extend to joint advertising or promotions by the

landline carrier and its cellular affiliate. Finally, the rule

prohibits the provision of BOC customer proprietary network information

(CPNI) to the cellular affiliate, unless such CPNI is made publicly

available on the same terms and conditions.

5. The Broadband PCS Order, Amendment of the Commission's Rules to

Establish New Personal Communications Services, GEN Docket No. 90-314,

Second Report and Order, 58 FR 59174 (November 8, 1993),

reconsideration, 59 FR 32830 (June 24, 1994) (Broadband PCS Order),

found that allowing LECs to participate in PCS may produce significant

economies of scope between wireline and PCS networks, and that these

economies will promote more rapid development of PCS, yield a broader

range of PCS services at lower costs to consumers, and should encourage

LECs to develop their wireline architectures to better accommodate all

PCS. Thus, the Commission declined to impose structural separation for

PCS providers affiliated with LECs, including the BOCs, reasoning that

such limitations on the ability of LECs to take advantage of their

potential economies of scope would jeopardize, if not eliminate, the

public interest benefits sought through LEC participation in PCS. The

Commission further concluded that the cellular-PCS cross-ownership

policies are adequate to ensure that LECs do not behave in an anti-

competitive manner. The Commission also found that existing accounting

safeguards were sufficient to protect against cross-subsidization by

the LECs, and therefore declined to impose additional cost-accounting

rules on LECs that provide PCS service. The Broadband PCS Order also

reiterated that commencement of PCS operations by LECs would be

contingent on the LEC implementing an acceptable non-structural

safeguards plan.

6. In the CMRS Second Report and Order, Implementation of Sections

3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile

Services, GEN Docket No. 93-252, Second Report and Order, 59 FR 18493

(April 19, 1994) CMRS Second Report and Order), reconsideration

pending, the Commission concluded that all LECs with CMRS affiliates

must follow the same accounting safeguards that were adopted in the PCS

proceeding. The Commission observed that these safeguards were

necessary to prevent cost-shifting from the non-regulated affiliates to

the regulated ratebase of the LEC. The Commission also noted that the

commenters had raised important issues with respect to the potential

role of accounting, structural separation, and other safeguards in

promoting a competitive CMRS environment. At that time, due to

inadequate notice and an insufficient record, the Commission

[[Page 46422]]

again declined to address the issue of removing the cellular structural

separations requirements for the BOCs.

7. In Cincinnati Bell, Cincinnati Bell Telephone v. FCC, 69 F.3d

752 (6th Cir. 1995) (Cincinnati Bell), the Sixth Circuit Court of

Appeals found that the Commission had failed to adequately justify its

retention of Section 22.903, in light of the Commission's decision

permitting LECs (including BOCs) to provide PCS under nonstructural

safeguards. The court stated that the Commission was required to give a

reasoned explanation of its disparate treatment of the Bell companies.

Accordingly, the court remanded the matter to the Commission with

instructions to promptly conduct an inquiry into whether the structural

separation requirement continues to serve as a necessary regulatory

restriction on BellSouth and other Bell Operating Companies. Both

before and after Cincinnati Bell, a number of BOCs filed waiver

petitions seeking varying forms of relief from the requirements of

Section 22.903. The Commission has granted one such waiver

(Southwestern), another has been withdrawn (BellSouth), and the

remainder (US West, Bell Atlantic) are pending.

8. The 1996 Act contains specific requirements that BOCs be

permitted to enter into previously prohibited or constrained lines of

business, including, inter alia, in-region interLATA telecommunications

services, interLATA manufacturing, information, and electronic

publishing services through a separate affiliate. In certain cases,

this separate subsidiary requirement ``sunsets'' after a number of

years. With respect to in-region interLATA service, these separate

affiliates are under additional structural and transactional

constraints including the requirement that the BOC deal with the

separate affiliate on an arm's length basis. Section 272(c), 47 U.S.C.

Sec. 272(c), imposes additional nondiscrimination safeguards on a BOC's

dealings with its separate affiliate. With the addition of Section

601(d), Public Law 104-104, 110 Stat. 56 (1996), the 1996 Act expressly

permits BOCs to market jointly and sell CMRS together with a variety of

landline services. Section 222, 47 U.S.C. Sec. 222, contains new

requirements for maintaining the confidentiality of proprietary

information.

II. Notice of Proposed Rulemaking

A. BOC Cellular Safeguards

In this NPRM, the Commission addresses one of the issues remanded

by the Sixth Circuit in Cincinnati Bell: whether the structural

separation requirement continues to serve as a necessary regulatory

restriction on the BOCs. The Commission proposes a series of amendments

to the rule intended to provide BOCs sufficient flexibility in serving

the public, while preserving the ability to detect and correct any

potential anti-competitive behavior, whether that be cost shifting,

interconnection discrimination, or some other form of leveraging the

BOCs' dominant position in the local exchange market. The Commission

also seeks comment on whether the public interest would be better

served by (1) a transitional arrangement whereby some aspects of the

current structural separation requirements would be retained during an

interim period; or (2) immediate replacement of Section 22.903 with the

uniform streamlined safeguards proposed for in-region LEC PCS and other

commercial mobile radio services.

10. One of the primary objectives underlying the Commission's

adoption of structural separations was to prevent interconnection

discrimination by BOCs in their relationship with affiliated and

unaffiliated cellular carriers. In considering whether to retain

structural separation for BOC cellular service, the Commission is

taking into account whether proposed changes to the existing LEC CMRS

interconnection policies either support retention of Section 22.903, or

demonstrate its obsolescence. In addition, the 1996 Act contains

significant new provisions with respect to interconnection. The

Commission has examined LEC CMRS interconnection issues in recent

dockets. In the Interconnection Compensation NPRM, Interconnection

Between Local Exchange Carriers and Commercial Mobile Radio Service

Providers, CC Docket No. 95-185, Notice of Proposed Rulemaking, 61 FR

03644 (February 1, 1996) (Interconnection Compensation NPRM), the

Commission found that if the commercial mobile radio services are to

compete directly against LEC landline services, it is important that

the prices, terms and conditions of interconnection arrangements not

serve to buttress LEC market power against erosion by competition.

Section 251, 47 U.S.C. Sec. 251, imposes extensive interconnection

obligations on all telecommunications carriers, and particularly on

LECs and incumbent LECs. Section 251(a) imposes a general duty on all

telecommunications carriers (1) to interconnect directly or indirectly

with the facilities and equipment of other telecommunications carriers;

and (2) not to install network features, functions, or capabilities

that do not comply with the guidelines and standards established

pursuant to Section 255 or 256. The new interconnection obligations in

Section 251(b) for LECs govern LEC provision of resale, number

portability, dialing parity, access to rights-of-way, and reciprocal

compensation for the transport and termination of traffic originating

on another carrier's facilities. Section 251(c) contains additional

obligations for incumbent LECs, which include, inter alia: (1) good

faith negotiation of terms and conditions of agreements to fulfill

Section 251 (b) and (c) interconnection obligations; (2) provision of

interconnection with the LEC's network for transmission and routing of

telephone exchange and exchange access service, at any technically

feasible point, that is at least equal in quality to that provided by

the LEC to itself or any affiliate or other party, on rates, terms and

conditions that are just, reasonable and nondiscriminatory; (3)

provision of unbundled, nondiscriminatory access to network elements to

any requesting telecommunications carrier, at any technically feasible

point on rates, terms and conditions that are just, reasonable and

nondiscriminatory; (4) provision of public notice of changes in the

information necessary for transmission and routing of services using

the LEC's network or of changes that would affect interoperabililty;

and (5) the duty to provide physical collocation of equipment necessary

for interconnection or access to unbundled network elements at the

premises of the LEC, on reasonable and nondiscriminatory rates, terms

and conditions, unless the LEC demonstrates to the State commission

that physical collocation is not practical due to technical reasons or

space limitations, in which case the LEC may provide virtual

collocation. Section 252 contains procedures for negotiation,

arbitration, and approval of agreements, and gives the States authority

to resolve interconnection disputes arising under Sections 251 and 252.

In addition, a LEC must make available to any requesting carrier, on

the same terms and conditions, any interconnection, service, or network

element provided under an approved agreement to which it is a party.

11. The question remanded by the Sixth Circuit is whether the

structural separation requirements of Section 22.903 continue to serve

as a necessary

[[Page 46423]]

regulatory restriction on the BOCs, or whether changed circumstances

have either obviated the need for such restrictions, or rendered them

contrary to the public interest. The Section 22.903 restrictions on the

BOCs were imposed, as a general matter, to prevent them from leveraging

their dominance into the newly created cellular service markets. The

structural separation requirements were specifically intended to

protect BOC local exchange ratepayers by preventing cross-subsidization

of the more competitive cellular service, and to prevent discriminatory

interconnection practices with respect to the non-wireline cellular

provider, by requiring that the wireline and non-wireline entities

exist independently from one another with respect to facilities,

operations, management and other personnel. With respect to both cross-

subsidization and interconnection, structural separation was believed

to permit easier detection and disclosure of improper activities and to

reduce unnecessary regulatory intrusion into competitive or unregulated

operations.

12. The Commission has also recognized that structural separation

entails costs to the carriers, in the form of lost efficiencies of

scope and added costs of establishing separate facilities, operations,

and personnel, as well as lost opportunities for customers to obtain

integrated and innovative service packages. In the case of CPE and

enhanced services, the Commission recognized costs to small business

and residential customers because the BOCs, which already had existing

marketing contacts with households in their service regions, could not

inform them of new and desirable enhanced service offerings, such as

voice messaging, through existing marketing contacts. The result, in

many cases, was that such customers would never learn of the

availability of such desired offerings at all. Thus, the public benefit

of dissemination of advanced telephone offerings that has been the

product of joint marketing of basic and enhanced services and CPE was

found to outweigh the costs to competition of integrated BOC offerings,

if such integrated services were provided pursuant to appropriate

nonstructural safeguards.

13. The Commission referred to the economies of scope arising from

the use of wireless loops and wireless tails in the broadband PCS

orders, but there were no specific findings about the public benefits

of integrated operations or joint marketing of BOC cellular and

landline services. The only nonstructural safeguards specifically

addressed in the broadband PCS proceeding were the cost accounting and

allocation rules contained in Parts 32 and 64 of the Commission's

rules. Thus, the nature of the nonstructural safeguards, other than the

accounting rules, that might be applied in lieu of structural

separations to LEC-provided CMRS has never been squarely addressed by

this Commission until this NPRM.

14. The Commission observes that Congress has concluded as a

general matter that such requirements, together with associated

nondiscrimination safeguards, constitute an appropriate initial

safeguard for BOC entry into the provision of certain competitive

services, which can be phased out as markets become more competitive.

At the same time, the Commission notes that the BOCs have been subject

to structural separation requirements for their cellular operations

since their inception, and that the BOCs are generally incumbents in

CMRS markets, facing market entry by PCS competitors. In this NPRM, the

Commission explores varying approaches to separate affiliate and

nondiscrimination safeguards for BOC cellular operations, while

proposing to give full expression to Congressional intent regarding

joint marketing, customer proprietary information and network

information disclosure requirements.

15. The Commission finds that although there have been vast changes

in the nature of the wireless market since the 1981 imposition of the

BOC cellular structural separation requirement, the market power of the

BOCs in the landline local exchange and exchange access markets has

remained relatively stable, and is likely to remain so until the market

entry and interconnection changes authorized by the 1996 Act occur. The

BOCs thus currently retain market power in the local exchange market,

and therefore control over public switched network interconnection

within their in-region states. The Commission seeks comment as to

whether in-region application of separate affiliate and

nondiscrimination requirements would continue to serve as an important

regulatory check on the BOCs' market power in local exchange.

16. Interconnection. Prevention of interconnection discrimination

was one of the central justifications for imposing structural

separation. A separate cellular affiliate provides a template by which

to measure the rates, terms, and conditions of these entities'

interconnection agreements with their affiliated LECs. The effective

enforcement of nondiscrimination rules depends on the visibility of the

transactions under scrutiny. Such visibility does not depend on

structural separation per se, but could be achieved through a more

limited separate affiliate requirement, including one that permitted

integrated management with affiliates providing landline services. The

Commission believes that it will be particularly crucial to retain some

form of separate affiliate requirement, either structural or non-

structural, as the new CMRS entrants begin to negotiate their

interconnection arrangements with the incumbent BOCs. The Commission

seeks comment on this analysis.

17. Price Discrimination. The Commission is concerned that the

possibility of discrimination by a BOC or incumbent LEC in favor of its

own cellular operations and against other CMRS providers could be

increased absent some form of separate subsidiary requirement, either

structural or non-structural, and that the Commission's tasks of

detecting such discrimination and determining whether it is reasonable

or unreasonable would be greatly complicated. The Commission seeks

comment on the value of separate affiliates in detecting and deterring

pricing discrimination, and whether the degree of separation (i.e.,

structural versus non-structural) has any effect on the value of this

safeguard.

18. Cross-subsidization. The Commission observes that some

commenters continue to argue that cross-subsidization is possible even

under a price cap regime, for those services that are either not

subject to a pure price cap option, or continue to be regulated under a

rate-of-return system at the intrastate level. Presumably, the cost-

shifting these parties are concerned with would occur between the as-

yet primarily intrastate competitive cellular service and the

intrastate as-yet primarily monopoly local exchange service. The

Commission seeks further comment on these issues, and urges the parties

alleging continued cross-subsidy problems under price caps to provide

specific data in support of their claims and to address the relative

value of structural and non-structural separate affiliate requirements

in this regard.

19. Leveraging of Market Power. The Commission notes that one

concern with respect to integrated landline and cellular operations has

been the incentives and opportunities such a corporate structure

provides for leveraging of the LEC's local exchange market power into

the more competitive cellular market. The Commission is concerned about

the potential for abuses in provisioning, installation, maintenance and

customer network design that might not be addressed adequately by the

uniform nonstructural

[[Page 46424]]

safeguards proposed for LEC provision of CMRS, at least during the

transitional period before implementation of the 1996 Act's

interconnection and network unbundling provisions. Structural

separation, if continued on an interim basis, could prevent, for

example, the BOC from tasking a single set of officers and personnel

with the interconnection arrangements for its cellular unit's PCS

competitor as well as dealings with that competitor's major customers

to provide local exchange service, or cellular service, or both. The

Commission notes that nonstructural safeguards would not prevent such

sharing of personnel and integrated management decisionmaking. The

Commission seeks comment on whether such integrated operations would

present realistic opportunities for anti-competitive conduct and, if

so, whether safeguards less restrictive than our current structural

separation rules would sufficiently constrain such conduct.

20. Costs and Benefits of Integrated Versus Structurally Separated

Operations. The Commission notes that the BOCs have sought relief from

Section 22.903 primarily so that they could benefit from the cost

efficiencies of integrated operations, and so that their customers

could benefit from ``one-stop-shopping,'' i.e., a single point of

contact for all service, repair and billing needs. The Commission

observes Section 601(d) increases the flexibility afforded the BOCs to

meet customer demands without necessarily eliminating the remainder of

the structural separation requirement. The Commission seeks comment on

this analysis. Additionally, the Commission seeks data on the relative

benefit of integrated operations other than those relating to joint

marketing. The Commission seeks comment on specific public benefits

from integrated cellular/landline operations that structural separation

precludes. Parties submitting comments should provide specific

instances of savings, economies of scale and/or scope, or other

consumer benefits that they contend would be impossible without

integrated operations. The Commission is particularly interested in

receiving information and comment on the effect on the cost-benefit

analysis of recent initiatives seeking to introduce greater flexibility

for CMRS licensees' use of their spectrum.

21. Proposed revisions to Section 22.903--limitation to in-region

BOC cellular services. The Commission tentatively concludes that, at a

minimum, certain aspects of Section 22.903 may be safely relaxed to

permit the BOCs increased flexibility in meeting customer needs, while

at the same time protecting BOC ratepayers and wireless competitors.

The Commission believes that for out-of-region combined service

offerings, the costs to the carrier of establishing a subsidiary in

addition to their structurally separate cellular subsidiary to provide

integrated competitive landline local exchange (CLLE) and cellular

services outweigh any possible benefits to the public of such

fragmented operations. The Commission also believes that additional

relief is warranted for BOC provision of out-of-region cellular

service. The Commission tentatively concludes that Section 22.903

should be limited in scope to in-region services of the BOC and its

cellular operations, or, in the case of a joint venture between two or

more BOCs, the in-region services of all of the joint venture

participants together. The Commission tentatively concludes that such

relief would promote local exchange competition in those areas in which

the affiliated LEC is not the incumbent local exchange provider. The

Commission seeks comment on these tentative conclusions.

22. Proposed revisions to Section 22.903--interim relief for out-

of-region operations. The Commission eliminates any out-of-region

effect of Section 22.903, as part of the effort to narrowly tailor

restrictions to reach only the relationship between the incumbent BOC

and its cellular subsidiary in the incumbent's in-region service area.

The Commission concludes that the public interest would be served by

granting the BOCs interim relief from the out-of-region reach of our

existing Section 22.903 requirements. The Commission also concludes

that immediate out-of-region relief from Section 22.903 will benefit

consumers by promoting competition in those areas in which the BOC

cellular operation is not affiliated with the incumbent LEC by

permitting the BOCs to structure their out-of-region offerings to suit

their business judgment. The Commission further concludes that the BOCs

may exercise this degree of flexibility in provisioning their out-of-

region cellular services without undermining the core protections of

the rule for either the BOCs' in-region local exchange ratepayers, or

their cellular competitors. The Commission is granting to all BOCs a

waiver of the requirements of Section 22.903 with respect to the

provision of cellular service outside of their in-region service areas.

23. Ownership of Landline Facilities. Section 22.903(a) prohibits,

inter alia, BOC separate cellular affiliates from owning any facilities

for the provision of landline service. The Commission proposes to amend

the portion of Section 22.903(a) prohibiting the cellular affiliate

from owning any facilities for the provision of landline service to

permit a BOC cellular affiliate to own landline facilities for the

provision of landline services, including competitive landline local

exchange (CLLE) and interexchange service, in the same market with the

affiliated incumbent LEC. Thus, the rule would be modified only to

prohibit the cellular affiliate from owning, including jointly owning

with the incumbent affiliated LEC, landline facilities that the latter

uses in the provision of landline local exchange services. The

Commission believes that retention of this prohibition is appropriate

for the same reasons that the Commission proposes to include a limited

separate affiliate requirement in the proposed uniform LEC/CMRS

safeguards, i.e., to distinguish clearly between charges applied to all

interconnectors and joint cost allocations resulting from integrated

operations. The Commission believes that such relief would benefit the

public by enabling a new entrant to the local exchange market to

provide a package of services without the risk of LEC monopoly cross-

subsidization or interconnection discrimination. The Commission seeks

comment on this proposal.

24. BOC CMRS Joint Marketing and Resale; Section 222 CPNI

Requirements; and Section 251(c)(5) Network Information Disclosure

Obligations. The 1996 Act expressly permits a BOC to market jointly and

sell CMRS in conjunction with several types of landline service in

Section 601(d). The Commission tentatively concludes that Section

601(d) does not necessarily require the elimination of the remainder of

our current structural separation requirements. As support for this

conclusion, the Commission notes that the authority to engage in joint

marketing and sale of landline and CMRS services is expressly made

subject to the provisions of Section 272, which include separate

affiliate requirements. The Commission believes that it retains

authority and responsibility to determine the scope of Section 601(d),

the definition of joint marketing intended, and the rules to define the

relationship between the affiliated entities engaged in such joint

marketing. The Commission seeks comment on this interpretation of the

effect of Section 601(d).

25. The Commission proposes to define ``joint marketing'' as

referenced in that provision as the advertising, promotion, and sale,

at a single point of

[[Page 46425]]

contact, of the CMRS, telephone exchange service, exchange access,

intraLATA and interLATA telecommunications, and information services

provided by the BOC. Such joint marketing also includes, but is not

limited to, activities such as promotion, advertising and in-bound

service marketing. The Commission further tentatively concludes that

Section 601(d) restores the ability of the BOCs to engage in the joint

sale or promotion of cellular and landline service. The Commission

tentatively concludes that the public interest in preventing, and

permitting easy detection of, cross-subsidization requires that such

joint marketing be done on behalf of the separate affiliate, subject to

affiliate transaction rules and classified as a non-regulated activity,

on a compensatory, arms-length basis. The Commission seeks comment on

these tentative conclusions, and whether it should impose a requirement

similar to that of Section 272(b)(5) requiring that all transactions be

reduced to writing and made available for public inspection.

26. Integrated sales and marketing of resold cellular and incumbent

LEC landline local exchange service are clearly permitted under Section

601(d). The Commission seeks comment on whether it should impose

conditions implementing the resale authority under Section 601(d) of

the 1996 Act, and if so, what these conditions should be. In addition,

the Commission seeks comment on whether it should mandate public

disclosure of rates, terms, and conditions of service in cases where

the LEC is reselling its cellular affiliate's service. In the

alternative, the Commission seeks comment on whether the general

proscription against unjust or unreasonable discrimination in Section

202(a) and the formal complaint process are sufficient deterrents to

discriminatory resale practices. In addition, the Commission seeks

comment as to how implementation of Section 601(d) should affect

potentially related joint marketing and sale activities that are

currently prohibited under Section 22.903, such as joint installation,

maintenance, and repair of BOC cellular and landline local exchange

services. The Commission also seeks comment on the effect of the joint

marketing authorization on activities such as billing and collection.

27. Section 22.903(f) currently prohibits BOCs from providing any

customer proprietary information to a cellular affiliate unless such

information is publicly available on the same terms and conditions. The

Commission seeks comment whether the current CPNI rule in Part 22 is

inconsistent with Section 222. The Commission notes that continued

application of the existing rule would limit a customer's options in

granting approval for use or disclosure of, or access to, individually

identifiable CPNI under Section 222(c)(1) and (2). In addition, the

Commission seeks comment whether it should eliminate Section 22.903(f)

even if it were to determine that continued application of this rule is

not inconsistent with Section 222, on the grounds that the current rule

would be superfluous in light of the comprehensive statutory scheme put

in place by Section 222. In addition, the Commission seeks comment on

whether, in considering the joint marketing authorization in Section

601(d) of the 1996 Act together with the CPNI requirements contained in

the new Section 222, the Commission should require any particular BOC

organizational structure or procedures to guard against the

unauthorized disclosure of CPNI in the context of joint marketing of

CMRS and other BOC-provided services. The Commission asks for comment

on the need for, and formulation of, appropriate organizational and

procedural guidelines specific to the BOC/CMRS joint marketing

situation that would be in accord with both Section 601(d) and Section

222.

28. The Commission tentatively concludes that no specific Part 22

rule pertaining to network information disclosure by the BOCs is

necessary or appropriate. The Commission seeks comment on this

tentative conclusion. Commenters supporting a specific Part 22 rule

should provide information about particular technical or regulatory

issues to be addressed by such a rule.

29. Sunset/Elimination of Section 22.903. Section 22.903 and its

predecessor, Section 22.901, were established without sunset

provisions, or the requirement that the Commission periodically review

the continued need for the restrictions contained therein. In contrast,

the general approach of the 1996 Act to BOC-provided competitive

services is initial entry pursuant to establishment of separate

subsidiary corporations, through which the competitive service must be

provided for a period of years. In the case of BOC entry into interLATA

services, a competitive checklist must be met prior to BOC entry into

that competitive market, and such entry must be through a structurally

separate corporation. This structural separation continues for three

years after the BOC receives in-region interLATA authorization, unless

extended by order of this Commission. With respect to other competitive

services, the Act imposes sunset provisions of varying lengths.

30. The Commission seeks ultimately to eliminate any regulatory

asymmetry between BOC provision of cellular services, on the one hand,

and BOC provision of other CMRS as well as LEC provision of any CMRS,

on the other. Yet, the competitive safeguards contained in Section

22.903, as modified through the proposals above, may continue to serve

the public interest during the present crucial phase of entry of new

wireless competitors into the CMRS markets. Further, the realization of

the fundamental regulatory reforms contained in the 1996 Act, including

the opening of the LEC network for purposes of local exchange

competition pursuant to Section 251, would reduce the need for these

safeguards in the not too distant future, and would provide a

convenient milepost to mark a transition period. The Commission

therefore seeks comment on the addition of a sunset provision to

Section 22.903, similar to those contained in the 1996 Act for BOC

provision of other competitive services. Upon the sunset of the Section

22.903 requirements for each BOC's cellular operations, the Commission

proposes that such service would be governed by the uniform set of

competitive safeguards proposed below for all in-region LEC CMRS.

31. The Commission proposes to sunset the effectiveness of the

Section 22.903 requirements for a particular BOC in tandem with that

BOC's receipt of authorization pursuant to Section 271(d) to provide

interLATA service originating in any in-region State. In addition to

the interconnection requirements, the competitive checklist requires

BOCs to provide, inter alia, further unbundling of local loops,

switching and transport; nondiscriminatory access to 911 and E911

services; directory assistance, and operator call completion services;

and nondiscriminatory access to databases and associated signaling

necessary for call routing and completing. The effective implementation

of these requirements should provide potential CMRS competitors with

sufficient protection from interconnection discrimination and monopoly

leveraging such that the Commission may safely relax the degree of

separation required for BOC cellular operations. The Commission

believes that effectively conditioning relief from Section 22.903 upon

each BOC's meeting a ``competitive checklist'' may be a viable approach

to assure that, from the regulator's and the competitor's standpoint, a

sufficiently level playing

[[Page 46426]]

field is in place such that structural safeguards may safely be

eliminated. Moreover, this approach to sunsetting Section 22.903 would

provide the BOCs with an added incentive to meet the requirements of

the competitive checklist. The Commission seeks comment on this

formulation of an approach to sunsetting Section 22.903.

32. The Commission also seeks comment on alternative sunset dates.

Parties advocating a different sunset should provide information

supporting their recommendations. Parties proposing a sunset date and/

or competitive checklist different than that contained in Section 271

(c)(2)(B) and (d) should detail why their proposed factors are relevant

to the question of BOC cellular safeguards. Parties may also suggest

alterations to the list for purposes of setting a sunset date for our

Section 22.903 requirements. The Commission also notes that BOC entry

in some areas could potentially occur without a single facilities-based

competitor actually obtaining interconnection arrangements consistent

with Sections 251 and 252 as long as the BOC is generally offering

access and interconnection in a manner that meets the requirements of

the competitive checklist. The Commission seeks comment on the effect

of this aspect of Section 271 on the proposal to tie sunset of Section

22.903 to BOC entry into in-region interLATA markets.

33. The Commission seeks comment on whether it should forgo the

transition period described above, where a streamlined Section 22.903

would be in effect for BOC cellular operations until a designated

sunset, in favor of immediate elimination of Section 22.903 and its

replacement by the uniform set of safeguards proposed below. The

Commission is concerned about whether transitional structural

separation for BOC provision of cellular service, which is more

restrictive than any rules applying to other cellular providers or any

provision of PCS, will promote or inhibit the development of

competition. The Commission seeks comment on this aspect of our two

alternative safeguards proposals, and whether immediate elimination of

Section 22.903 in favor of uniform LEC CMRS safeguards will promote

competition and the public interest more effectively than the sunset

approach outlined above.

34. The Commission seeks comment on the relative costs and benefits

for the public and the BOCs if the independent operation and joint

research requirements were eliminated before the BOCs meet the

requirements of the competitive checklist in Section 271. Parties

should focus specifically on how the relative costs and benefits of

independent versus integrated management and personnel bear upon the

competitive equity issues discussed above.

35. BOC Provision of Incidental InterLATA CMRS. The Commission does

not believe that the authorization contained in Sections 271(g)(3) and

272(a)(2)(B)(i) for immediate BOC provision of in-region, incidental

interLATA service, defined as commercial mobile radio service, limits

the Commission's authority to retain the current BOC cellular separate

affiliate rules, or to prescribe alternative rules, should the

Commission determine that such rules constitute an appropriate

competitive safeguard. The Commission notes that Section 271(f)(3)

preserves the Commission's authority to prescribe safeguards consistent

with the public interest, convenience, and necessity. The Commission

seeks comment on this analysis.

B. Symmetry of Cellular Safeguards

36. The Commission notes that one of the principal criticisms of

the cellular structural separation requirement is that it applies only

to the BOCs, but not to other large LECs with similar characteristics,

particularly GTE. The lack of regulatory symmetry between BOC-provided

cellular service and LEC-provided cellular service under Section 22.903

presents a difficult problem in this period of transition to more

competitive landline and wireless markets. Rather than distinguish

between BOCs and other LECs, it would arguably be more consistent to

apply Section 22.903 to GTE, which is similar in size to the BOCs, or

to all LECs above a particular size, e.g., all Tier 1 LECs. The

rationale for imposing structural separation on the BOCs' cellular

service would appear to apply to all Tier 1 LECs. The Commission does

not propose to apply Section 22.903 to any additional LECs at this

time. The Commission seeks comment on this approach.

37. The Commission also proposes to require all the Tier 1 LECs to

implement the same service safeguards for their in-region cellular

service that is proposed for in-region PCS and other CMRS below. The

Commission seeks comment on the costs to the Tier 1 LECs of

establishing nonstructurally separate affiliates. The Commission does

not believe it appropriate to impose either a streamlined Section

22.903 or the proposed nonstructural competitive safeguards on any non-

Tier 1 independent and rural LECs because, on balance, the cost and

potential disruption of requiring non-Tier 1 LECs to establish new

separate affiliates for the provision of cellular service would likely

be significant, both in terms of the direct costs of incorporation and

lost efficiencies of joint operations, facilities, and staff. These

costs are obviously different than the going-forward costs of retaining

a structurally separate corporate entity, discussed above. The

Commission seeks comment on the nature and extent of such costs, and

asks that commenters be specific in their quantification of both direct

costs of separate incorporation, and of lost economies of scope. The

Commission seeks comment on the tentative conclusion that such costs

likely outweigh the benefits of imposing a limited separate affiliate

requirement.

C. Safeguards for Provision of CMRS by LECS

38. Cellular/PCS Regulatory Parity. The Commission seeks comment on

whether there are differences between cellular and PCS that justify

different regulatory treatment, at least in the short term. The

Commission notes that PCS was intended to be competitive with both

incumbent cellular systems and landline networks, and its identity as a

new entrant places PCS providers in a different competitive situation

from incumbent cellular carriers. The Commission intended that PCS

would compete with cellular service at the outset, and eventually

compete with, complement, or, where appropriate, replace landline local

exchange service. In addition, PCS providers face competitive hurdles

unlike those existing when the cellular service was established, such

as auction payments, competition with incumbent cellular providers

themselves, and the need, in some cases, to relocate incumbent

microwave users before PCS can become fully operational. Permitting

LECs greater flexibility in the provision of PCS than the BOCs enjoy

with respect to cellular was part of the Commission's plan to get PCS

into the market quickly, and to encourage the LECs to engineer their

network architectures in a ``PCS-friendly'' manner. This added degree

of flexibility may act as a counterbalance to the competitive hurdles

unique to PCS. The Commission seeks comment on whether this analysis

pertains today in the same way as when PCS was established as a new

service.

39. Need for Uniform Safeguards. The Commission believes that the

imposition of competitive safeguards in addition to accounting

safeguards for LEC provision of in-region broadband PCS will serve the

public interest. The Commission believes it is time to

[[Page 46427]]

replace the initial case-by-case approach with a uniform set of

requirements. This should be more efficient for both the carriers and

the Commission, as it will streamline the review process and provide a

consistent regulatory framework for future competition. The Commission

seeks comment on this analysis. The potential costs of imposing

additional nonstructural safeguards on LEC provision of PCS at this

time are different from the costs for either retaining structural

separation for BOC cellular service, or for extending such structural

separation requirements for the first time to other LECs, such as GTE.

In the case of BOC cellular service, the costs of establishing the

subsidiary have already been incurred, whereas in the case of the

independent LECs, the re-arrangement of existing corporate structures

would entail additional costs of a particular scope and nature. The

Commission also recognizes that, in the case of an entirely new service

such as in-region LEC broadband PCS, the start-up costs of structural

separation would likely be of a different nature and scope altogether.

Few LECs currently have in-region PCS licenses as a result of the

cellular-PCS cross-ownership and spectrum cap requirements. It is also

not clear how far along those other LECs are in building-out their PCS

networks and in structuring their PCS operations from an organizational

perspective. The Commission seeks comment on this analysis and on the

relative costs of imposing the requirements proposed herein.

40. In-Region/Spectrum Allocation Limitations. With respect to the

imposition of nonstructural safeguards, the Broadband PCS Order did not

distinguish between in-region versus out-of-region PCS, nor did it

distinguish among LEC PCS providers on the basis of the amount of PCS

spectrum they would be utilizing to provide service. The Commission

does not believe that the competitive dangers of integrated LEC

provision of landline and PCS outside of the local exchange service

areas in which they are the incumbent LEC raises the same concerns as

in-region integrated services. In fact, the Commission has found that

out-of-region competition from LECs offering integrated service

packages will promote local exchange competition. The Commission

therefore proposes to limit LEC PCS nonstructural safeguards to in-

region broadband PCS service. The Commission seeks comment on this

tentative conclusion. In addition, the Commission seeks comment on the

relevance of the distinction raised in the record between LEC holders

of 30 MHz versus 10 MHz in-region PCS licenses for the proposed uniform

nonstructural safeguards. Specifically, the Commission seeks comment on

whether it should exempt LEC licensees with no more than 10 MHz of PCS

spectrum from some or all of the competitive safeguards discussed

herein, with the exception of those safeguards which arise from the

provisions of the 1996 Act.

41. Applicability to Tier 1 LECs. The Commission believes that the

goal of regulatory symmetry should be tempered by a realistic

assessment of the costs and benefits of applying the proposed

competitive safeguards to small telephone companies. The Commission

notes that small telephone companies, particularly those operating in

rural areas, are uniquely positioned to provide wireless services to

populations which might otherwise not receive them. The Commission does

not want to unduly burden or discourage small telephone company entry

into cellular and PCS markets. The Commission does not believe that

these companies pose a significant threat of anti-competitive conduct

toward potential wireless competitors, as their ability to leverage

their bottleneck local exchange facilities is limited as compared to

that of the BOCs and the larger independents. The Commission also seeks

to ensure that the local exchange and exchange access customers of the

small telephone companies are not unduly burdened with the costs of

these companies' ventures in competitive wireless markets. The

Commission therefore would apply the uniform set of competitive

safeguards proposed here only to the Tier 1 LECs. The Commission seeks

comment on this proposal and on what changes, if any, to our accounting

rules are necessary or appropriate to ensure that LECs not subject to

the proposed competitive safeguards will not cross-subsidize PCS

activities from the regulated telephone ratebase.

42. The Commission proposes that all Tier 1 LECs providing

broadband PCS within their in-region states implement a nonstructural

safeguard plan, and file the plan for approval with the Commission. The

plan would include the following elements: (1) a description of a

separate affiliate, as defined herein, for the provision of PCS; (2) a

description of compliance with Part 64 and Part 32 accounting rules,

with copies of the relevant CAM changes attached; (3) a description of

planned compliance with all outstanding interconnection obligations;

(4) a description of compliance with all outstanding network disclosure

rules; and (5) a description of planned compliance with the CPNI

requirements in new Section 222. Additionally, the Commission proposes

to require that LEC in-region broadband PCS services should be provided

through a corporate affiliate that is separate from the LEC.

43. The Commission proposes to require the affiliate to meet the

following separation conditions: the affiliate must (1) maintain

separate books of account; (2) not jointly own transmission or

switching facilities with the exchange telephone company; and (3)

obtain any exchange telephone company-provided communications services

at tariffed rates and conditions. The Commission proposes to modify the

second requirement to conform with the proposed modification of the

facilities-sharing prohibition of Section 22.903(a). That is, the

separate PCS affiliate would not be permitted to have joint ownership

with the incumbent LEC of transmission and switching facilities that

the latter uses in the provision of landline services in the same in-

region market. The Commission seeks comment on these proposals.

44. The Commission tentatively concludes that these requirements

will not impose excessive burdens on LECs, while providing some

protection against cost-shifting and anti-competitive conduct, in the

case of Tier 1 LEC in-region PCS. The Commission tentatively concludes

that the separate affiliate requirement permits greater flexibility for

the LEC than the Section 22.903 structural separation requirement,

while preserving the competitive safeguards of separate books of

account, facilities, and tariffed services between the PCS affiliate

and its affiliated LEC. The Commission seeks comment on the effect that

changes in interconnection tariffing requirements under Sections 251

and 252 have on the requirement that the separate affiliate obtain any

exchange telephone company service at tariffed rates and conditions. In

addition, the Commission tentatively concludes that joint marketing of

PCS and LEC landline services should be permitted on a compensatory,

arm's length basis. Any such joint marketing must be subject to the

Part 64 cost allocation and affiliate transaction rule and the CPNI

requirements. The Commission seeks comment on these tentative

conclusions.

45. The Commission believes that the nonstructural safeguards plan

should address the separation of costs engendered by joint marketing

operations. The Commission believes that even with these filing

requirements only an annual audit will help

[[Page 46428]]

determine compliance with the accounting, affiliate transaction and

cost allocation rules. The Commission notes that all CAM changes are

also subject to comment and review by the Commission and interested

parties. The Commission believes that a description of the carrier's

procedures to ensure compliance with the Part 32 and 64 rules, together

with copies of the relevant CAM changes, is sufficient for purposes of

initial review of the carriers' nonstructural safeguards plans. This

initial review will determine whether adequate accounting procedures

are in place. The company's compliance with these procedures, however,

can only be determined through the existing annual audit process. The

Commission seeks comment on this analysis.

46. The Commission seeks comment on whether the same type of

organizational and procedural guidelines for the protection and

dissemination of CPNI for which the Commission is seeking comment

relating to BOC cellular operations, should apply to the PCS operations

of any LEC (including non-Tier 1 LECs) or interexchange carrier

possessing CPNI gathered in the provision of landline services. The

Commission also seeks comment as to whether there are any circumstances

under which the Commission should forbear from requiring a description

of such organizational structures and procedures, and rely instead on

enforcement procedures for any violations of the CPNI statutory

mandates. Such circumstances could include a weighing of relative costs

and benefits, as well as the significance of the CPNI at issue. The

Commission tentatively concludes that the filing of such descriptions

by non-Tier 1 LECs and non-dominant interexchange carriers holding PCS

licenses is not needed. The Commission seeks comment on this tentative

conclusion and this issue generally. In addition, the Commission seeks

comment on whether, for purposes of applying Section 222, cellular

service and PCS should be considered the same service (i.e., CMRS) such

that CPNI gained in the provision of one could be utilized without

restriction in the marketing of the other. The Commission also seeks

comment whether other CMRS, such as paging and Specialized Mobile

Radio, should be considered the same service as cellular service and

PCS for purposes of implementing Section 222 and what distinctions, if

any, should be made among these different types of CMRS. Finally, the

Commission seeks comment whether a toll service provided by means of

CMRS (e.g., cellular long distance) should be treated as a distinct

telecommunications service for purposes of implementing the new Section

222.

47. The Commission believes that in the case of LEC PCS two factors

render a lesser degree of separation appropriate. First, and most

importantly, the public interest benefits the Commission anticipates

from permitting LECs somewhat more flexibility in establishing their

PCS operations counterbalance the loss of the added level of protection

that complete structural separation under Section 22.903 provides. The

Commission's proposal that LECs establish nonstructurally separate

affiliates for the provision of in-region PCS is intended as an

interconnection safeguard that will render visible the LEC's

interconnection arrangements with its affiliate. The second factor is

one of timing. The Commission believes that the possible retention of

structural separation for the in-region BOC cellular service may act as

additional protection against anti-competitive actions with respect to

PCS competitors of the BOC cellular providers who are seeking

interconnection arrangements. The Commission seeks comment on this, and

asks that parties disagreeing with this analysis provide specific

examples and argument in support of their position.

48. In light of the statutory provision regarding public notice by

incumbent LECs of network technical changes and the implementation of

that provision, the Commission seeks comment on the need for specific

PCS rules pertaining to network information disclosure. Commenters

supporting a specific Part 24 rule should provide information about

particular technical or regulatory issues to be addressed by such a

rule.

49. With respect to LEC in-region broadband PCS, the Commission has

proposed a set of flexible service safeguards that strike an

appropriate balance between the Commission's pro-competitive goals and

the goal of expediting in-region LEC-provided broadband PCS service.

Nonetheless, assuming that competition in the local exchange market

increases to the point where LECs do not have market power in the

provision of local exchange service, those safeguards that are not

mandated by statute could be relaxed or eliminated. The Commission

seeks comment on whether the rules proposed here should be subject to a

sunset provision. The Commission also seeks comment on the appropriate

term of such a provision, or the conditions that would justify relaxing

or eliminating these restrictions in the future.

50. The Commission notes that Congress created the CMRS regulatory

classification and mandated that similar commercial mobile radio

services be accorded similar regulatory treatment under the rules.

Therefore, the Commission tentatively concludes that the nonstructural

safeguards discussed above for LEC provision of PCS should apply to

Tier 1 LEC provision of other in-region CMRS. The Commission seeks

comment on this proposal.

III. Conclusion

51. The Commission believes that the proposals in this NPRM are

consistent with the legislative mandate in the 1996 Act and will

promote competition in wireless communications markets by applying the

least intrusive means to curb the residual market power of the LECs.

The Commission intends to move rapidly to complete the comprehensive

review of the CMRS safeguards initiated by this NPRM, and to put into

place new, streamlined rules which accomplish the goals of promoting

wireless competition, limiting the exercise of market power, and

establishing regulatory symmetry.

IV. Procedural Matters and Ordering Clauses

A. Regulatory Flexibility Act

Summary: 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 NPRM. Written public comments are

requested on the IRFA.

Reason for Action: The Commission is issuing this NPRM to review

the regulatory regime for the provision of commercial mobile services,

and to implement certain provisions of the Telecommunications Act of

1996. The proposals advanced in the NPRM are designed to explore

whether the BOC separate subsidiary requirement of Section 22.903

continues to be relevant in today's marketplace. The NPRM also proposes

streamlined safeguards for Tier 1 LECs seeking to provide PCS and other

commercial mobile services.

Objectives: The objective of the NPRM is to provide an opportunity

for public comment and to provide a record for a Commission decision

regarding appropriate competitive safeguards for landline telephone

companies seeking to provide wireless services. The NPRM proposes two

alternatives for modification of Section 22.903, the BOC/cellular

separate subsidiary

[[Page 46429]]

requirement. The first alternative is to retain the rule for in-region

provision of cellular service, subject to a sunset period. The second

alternative is to eliminate the rule immediately for in-region cellular

services. (The Commission waives the requirement for out-of-region

cellular service.) Further, the NPRM proposes a uniform set of

safeguards for Tier 1 LECs seeking to provide PCS and other CMRS

services.

Reporting, Recordkeeping and Other Compliance Requirements: The

LEC/PCS safeguards proposed in the NPRM would require that Tier 1 LECs

submit to the Commission a nonstructural safeguards plan. Smaller LECs

would not be subject to this requirement.

Federal Rules Which Overlap, Duplicate or Conflict With These

Rules: None.

Description and Number of Small Entities Involved: Because Section

22.903 only applies to the BOCs and because the proposed LEC/PCS

safeguards would apply only to the 23 Tier 1 LECs (including the BOCs),

no small entities would be affected by the proposals included in the

NPRM.

Significant Alternatives Minimizing the Impact on Small Entities

Consistent With the Stated Objectives: The NPRM proposes to adopt LEC/

PCS safeguards only for Tier 1 LECs and not for smaller LECs. A Tier 1

LEC is a local exchange carrier with over $100 million in revenues from

regulated telecommunications operations that are subject to the CAM

filing requirements of Section 64.903 of the Commission's Rules. The

Commission notes that small telephone companies are uniquely positioned

to provide wireless services to populations that might otherwise

receive them. The NPRM points out that the Commission wishes to take no

action that would unduly burden or discourage small telephone company

entry into cellular and PCS markets, nor do we believe that these

companies pose a significant threat of anti-competitive conduct toward

potential wireless competitors.

Legal Basis. The NPRM is adopted pursuant to Sections 1, 2, 4, and

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

152, 154, and 332.

IRFA Comments. The Commission requests written public comment on

the foregoing Initial Regulatory Flexibility Analysis. Comments must

have a separate and distinct heading designating them as responses of

the IRFA and must be filed by the deadline for comments in response to

the NPRM.

B. Paperwork Reduction Act

This NPRM contains a proposed information collection. As part of

its continuing effort to reduce paperwork burdens, the Commission

invites the general public and the Office of Management and Budget

(OMB) to take this opportunity to comment on the information

collections contained in this NPRM as required by the Paperwork

Reduction Act of 1995, Public Law No. 104-13. Public and agency

comments are due October 3, 1996; OMB notification of action is due

November 4, 1996. 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.

Dates: Written comments by the public on the proposed information

collections are due October 3, 1996. Written comments must be submitted

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

information collections on or before November 4, 1996.

Address: 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, N.W., Washington, D.C. 20554, or via the Internet

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

725-17th Street, N.W., Washington, D.C. 20503 or via the Internet to

[email protected].

Further Information: 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:

Title: Amendment of the Commission's Rules to Establish Competitive

Service Safeguards for Local Exchange Carrier Provision of Commercial

Mobile Radio Services.

Type of Review: New Collection.

Respondents: Business or other for profit.

Number of Respondents: We estimate that approximately 25 Tier 1

LECs may submit a nonstructural safeguard plan.

Estimated Time Per Response: The average burden on the LEC is 30

hours to do the research and development and 30 hours to write and

review the plan. 25 plans x 60 hours=1,500 hours.

Estimated Cost to the Respondent: We presume that the LECs would

use attorneys and engineers (average $200 per hour) to prepare the

information. 25 plans x $200 per hour x 60 hours=$300,000.

Needs and Uses: This proceeding initiates a comprehensive review of

the existing regulatory framework of structural and nonstructural

safeguards for local exchange carrier (LEC) provision of commercial

mobile radio services (CMRS). All Tier 1 LECs providing broadband

Personal Communications Service (PCS) within their in-region states

will be required to implement a nonstructural safeguard plan and file

the plan for approval with the Commission. The plan should include the

following elements: (1) a description of a separate affiliate for the

provision of PCS; (2) a description of compliance with Part 64 and Part

32 accounting rules, with copies of the relevant Cost Allocation Manual

(CAM) changes attached; (3) a description of planned compliance with

all outstanding interconnection obligations; (4) a description of

compliance with all outstanding network disclosure rules; and (5) a

description of planned compliance with the Customer Propriety Network

Information (CPNI) requirements in Section 702 of the

Telecommunications Act of 1996 (which creates a new Section 222 of the

Communications Act). The Commission will use the information to

determine if the Tier 1 LECs are in compliance with our rules.

C. Ex Parte Presentations--Non-Restricted Proceeding

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

Ex parte presentations are permitted, except during the Sunshine Agenda

period, provided that they are disclosed as provided in the

Commission's rules. See generally 47 CFR 1.1202, 1.1203, 1.1206(a).

D. Comment Period

Pursuant to applicable procedures set forth in Sections 1.415 and

1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested

parties may file comments on or before October 3, 1996. Reply comments

are to be filed on or before October 24, 1996. To file formally in this

proceeding, you must file an original and four copies of all comments,

reply comments, and supporting comments. If you want each

[[Page 46430]]

Commissioner to receive a personal copy of your comments, you must file

an original and nine copies. Comments and reply comments should be sent

to Office of the Secretary, Federal Communications Commission, 1919 M

Street, N.W., Room 222, Washington, D.C. 20554. Parties should also

submit two copies of comments and reply comments to Bobby Brown,

Commercial Wireless Division, Wireless Telecommunications Bureau, 2025

M Street, N.W., Room 7130, Washington, D.C. 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, N.W., Suite 140, Washington, D.C. 20037.

E. Authority

The above action is authorized under the Communications Act of

1934, Secs. 1, 4, 222, 252(c)(5), 301, and 303, 47 U.S.C. Secs. 151,

154, 222, 252(c)(5), 301, and 303, as amended, and Section 601(d) of

the Telecommunications Act of 1996, Section 601(d), Public Law 104-104,

110 Stat. 56 (1996).

F. Ordering Clauses

It is ordered that pursuant to Sections 1, 4, 222, 252(c)(5), 301,

and 303 of the Communications Act of 1934, as amended, 47 U.S.C.

Secs. 151, 154, 222, 252(c)(5), 301, and 303, and Section 601(d) of the

Telecommunications Act of 1996, Section 601(d), Public Law 104-104, 110

Stat. 56 (1996), a notice of proposed rulemaking is hereby adopted.

It is further ordered that comments in WT Docket No. 96-162 will be

due October 3, 1996 and reply comments will be due October 24, 1996.

It is further ordered that, pursuant to Sections 1.3 and 22.19 of

the Commission's Rules, 47 CFR 1.3, 22.19, all Bell Operating Companies

are hereby granted a WAIVER of the provisions of Section 22.903 of the

Commission's Rules, 47 CFR 22.903 with respect to the provision of

cellular service outside of their in-region service areas as defined

herein.

It is further ordered that, pursuant to Sections 1.3 and 22.19 of

the Commission's Rules, 47 CFR Secs. 1.3, 22.19, a waiver of Section

22.903 with respect to the provision of cellular service outside of

their in-region service areas as defined herein, is GRANTED to Bell

Atlantic NYNEX Mobile, Inc. and US West, Inc.

It is further ordered that, the Secretary shall send a copy of this

Notice of Proposed Rulemaking, including the regulatory flexibility

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

Administration, in accordance with paragraph 603(a) of the Regulatory

Flexibility Act, 5 U.S.C. Secs. 601 et seq.

List of Subjects in 47 CFR Part 22

Communications common carriers, Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 96-22348 Filed 8-30-96; 8:45 am]

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