Implementation of Section 273(d)(5) of the Communications Act of 1934, as Amended by the Telecommunications Act of 1996Dispute Resolution Regarding Equipment Standards

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[GC Docket No. 96-42, FCC 96-87]

Implementation of Section 273(d)(5) of the Communications Act of

1934, as Amended by the Telecommunications Act of 1996--Dispute

Resolution Regarding Equipment Standards

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is proposing to adopt a rule which will

establish a dispute resolution process to be used by non-accredited

standards development organizations in the event that a dispute

resolution process is not agreed upon by all parties when establishing

industry-wide standards or generic requirements for telecommunications

equipment or customer premises equipment as required by 47 U.S.C.

Sec. 273(d)(5). The rule will also establish penalties to be assessed

against delaying parties. This proposal is in response to legislation

enacted by Congress.

DATES: Comments must be submitted on or before April 1, 1996 and reply

comments are due on or before April 11, 1996.

ADDRESSES: Comments and Reply Comments may be mailed to the Office of

the Secretary, Federal Communications Commission, Washington, D.C.

20554.

FOR FURTHER INFORMATION CONTACT: Sharon B. Kelley. Office of General

Counsel, at (202)418-1720.

SUPPLEMENTARY INFORMATION:

I. Introduction

1. The Telecommunications Act of 1996 1, amended the

Communications Act by creating a new section 273, 47 U.S.C. Sec. 273,

which sets forth procedures to be followed by non-accredited standards

development organizations 2 that set industry-wide 3

standards and requirements for manufacturing telecommunications

equipment. The procedures allow interested industry parties to

participate in setting industry-wide standards or generic requirements

and require the organization and such parties to attempt to develop a

dispute resolution process in the event of disputes on technical

issues. 47 U.S.C. Sec. 273(d)(4). Section 273(d)(5) requires the

Commission to prescribe within 90 days of enactment a dispute

resolution process to be used in the event all parties cannot agree to

a dispute resolution process. 47 U.S.C. Sec. 273(d)(5). Thus, the

Commission's dispute resolution process is triggered only if the

parties fail to agree to a process for resolving technical issues on

their own. Section 273(d)(5) also requires the Commission to

``establish penalties to be assessed for delays caused by referral of

frivolous disputes to the dispute resolution process.'' Id.

\1\ Pub. L. No. 104-104, 110 Stat. 56 (1996).

\2\ As defined in section 273(d)(8)(E), [t]he term `accredited

standards development organization' means any entity composed of

industry members which has been accredited by an institution vested

with the responsibility for standards accreditation by the industry.

47 U.S.C. Sec. 273(d)(8)(E). Thus, for example, Bell

Communications Research, Inc. (Bellcore) would not be an accredited

standards development organization and is subject to the section 273

procedures. H.R. Conf. Rep. No. 230, 104th Cong., 2d Sess. 39

(1996).

\3\ As defined in section 273(d)(8)(C), [t]he term `industry-

wide' means activities funded by or performed on behalf of local

exchange carriers for use in providing wireline telephone exchange

service whose combined total of deployed access lines in the United

States constitutes at least 30 percent of all access lines deployed

by telecommunications carriers in the United States as of the date

of the enactment of the Telecommunications Act of 1996.

47 U.S.C. Sec. 273(d)(8)(C).

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2. The purpose of this proceeding is to establish dispute

resolution procedures as provided for in section 273(d)(5). In section

II(A) below, members of the public are requested to comment on the

proposal set forth here and are also encouraged to submit alternative

dispute resolution proposals that they believe would better implement

this statutory section. Comment is also sought on methods for selecting

an arbitrator or neutral and on the issue of whether the Commission

should make its employees available for that purpose. In section II(B),

we solicit proposals or recommendations concerning the types of

penalties that should be assessed for referral of frivolous disputes.

II. Proposed Regulations

A. Binding Arbitration Proposal

3. As explained above, section 273(d)(5) directs the Commission to

prescribe a dispute resolution process to be used by non-accredited

standards development organizations in situations where the parties

involved cannot agree on the dispute resolution process to be used. 47

U.S.C. 273(d)(5). Specifically, section 273(d)(5) provides:

--[w]ithin 90 days after the date of enactment of the

Telecommunications Act of 1996, the Commission shall prescribe a

dispute resolution process to be utilized in the event that a

dispute resolution process is not agreed upon by all the parties

when establishing and publishing an industry-wide standard or

industry-wide generic requirement for telecommunications

[[Page 9967]]

equipment or customer premises equipment, pursuant to paragraph

(4)(A)(v). The Commission shall not establish itself as a party to

the dispute resolution process. Such dispute resolution process

shall permit any funding party to resolve a dispute with the entity

conducting the activity that significantly affects such funding

parties interests, in an open, nondiscriminatory, and unbiased

fashion within 30 days after the filing of such dispute. Such

disputes may be filed within 15 days after the date the funding

party receives a response to its comments from the entity conducting

the activity. The Commission shall establish penalties to be

assessed for delays caused by referral of frivolous disputes to the

dispute resolution process.

47 U.S.C. 273(d)(5). According to the Conference Report, the intended

purpose of the Commission's dispute resolution process is to ``enable

all interested parties to influence the final resolution of the dispute

without significantly impairing the efficiency, timeliness, and

technical quality of the activity.'' \4\

\4\ H.R. Conf. Rep. No. 230, 104th Cong., 2d Sess. 39 (1996).

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4. We propose here to require binding arbitration as the dispute

resolution process. Binding arbitration involves the submission of the

dispute to a third party or arbiter who renders a decision after

hearing arguments and reviewing evidence. The parties to the dispute

are bound by this final decision. Because it is less formal and complex

than a formal hearing (i.e., procedural and evidentiary rules may be

relaxed), arbitration is often less costly and time consuming than

other dispute resolution mechanisms. Given the short 30-day period for

completing the dispute resolution process, we believe binding

arbitration presents the most feasible dispute resolution approach. We

also seek comment on whether additional procedures are necessary in the

event that the dispute resolution process is not resolved within the

allotted 30-day time period.

5. Although binding arbitration appears to be the only dispute

resolution method that could be accomplished within the short statutory

period for completion of the dispute resolution process, we also seek

comments on other approaches that might be used. For example, other

methods of alternative dispute resolution include mediation,

conciliation, neutral evaluation, settlement judges, mini-trial, or

hybrids of these methods, such as ``med-arb'' (first, the neutral third

party serves as a mediator and then as an arbitrator empowered to

decide any issues not resolved through mediation). Although the

Administrative Dispute Resolution Act, Pub. L. No. 101-552 (Nov. 15,

1990), contained a sunset date of October 1, 1995, we also invite

parties to review its provisions in making recommendations to us.

6. In addition, we seek comment on what types of procedures are

needed to govern the selection of an arbitrator or neutral fact-finder.

For example, should the arbitrator or neutral be selected by agreement

of the involved parties? If so, what procedures should apply in the

event parties are unable to reach agreement on the arbitrator? We ask

commenters to address these issues. Commenters may also wish to address

whether Commission staff who have expertise in the area of dispute

resolution should be available to serve as neutrals/arbitrators. We

note, however, that any such proposal to use Commission staff could

raise issues concerning the staff's delegated authority and the

procedures for application for review to the full Commission in section

5(c)(4) of the Act, 47 U.S.C. 155(c)(4).

B. Complaints of Frivolous Disputes

7. Section 273(d)(5) directs the Commission to establish penalties

for delays caused by the referral of frivolous disputes to the dispute

resolution process. We request commenters to assist us in defining what

constitutes a ``frivolous dispute.'' For example, section 1.52 of the

Commission's rules requires that any document filed with the Commission

be signed by the party or his counsel and that such signatures certify

that the party or attorney has read the document, that ``to the best of

his knowledge, information and belief there is good ground to support

it'' and that ``it is not interposed for delay.'' 47 CFR 1.52.\5\ This

appears to be a useful definition in this context as well. We expect

that findings concerning possible frivolous disputes and

recommendations for an appropriate penalty could be made in the first

instance by the resolver of the dispute, e.g., the arbitrator. We

encourage commenters to present specific proposals concerning

procedures for the referral of complaints of frivolous disputes to the

Commission.

\5\ See generally, FCC Public Notice, ``Commission Taking Tough

Measures Against Frivolous Pleadings,'' FCC 96-42, released February

9, 1996.

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8. In addition, we seek public comment on the penalties that should

be assessed against delaying parties. Specifically, we ask commenters

to address whether the Commission should rely solely on its forfeiture

authority contained in section 503(b) of the Communications Act, or in

the alternative or in addition, whether it should, or could, impose

other penalties such as barring the party from further participation in

the standards and requirements development processes or the imposition

of costs on the complainant if its complaint is found to be frivolous.

In addressing these issues, commenters should consider what procedural

protections might be necessary to protect the party subject to such a

complaint. Further, in addressing the potential use of forfeitures,

commenters should consider the impact of section 503(b)(5), requiring

that, for certain persons, there be a citation and subsequent

misconduct before a forfeiture can be assessed. 47 U.S.C. 503(b)(5).

III. Conclusion

9. As discussed above, we have proposed a dispute resolution

process, binding arbitration, that may be used in the event that

disputes arise over technical issues when setting standards pursuant to

section 273(d)(5) of the Act. To assist us in our efforts, we invite

public comment on this proposal and any other possible rules and

procedures that would enable us to fulfill the congressional directive.

IV. Procedural Matters

10. Pursuant to the applicable procedures set forth in sections

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

1.419, interested parties may file comments on or before April 1, 1996

and reply comments on or before April 11, 1996. All relevant and timely

comments will be considered by the Commission before final action is

taken in this proceeding. To file formally in this proceeding,

participants must submit an original and four copies of all comments,

reply comments and supporting comments. If participants want each

Commissioner to receive a personal copy of their comments, an original

and nine copies must be filed. Comments and reply comments should be

sent to the Office of the Secretary, Federal Communications Commission,

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

for public inspection during regular business hours in the FCC

Reference Center (Room 239) of the Federal Communications Commission.

11. This Notice of Proposed Rulemaking is a non-restricted notice

and comment proceeding. Ex parte presentations are permitted, except

during the Sunshine Agenda period, provided they are disclosed as

provided in Commission rules. See generally 47

[[Page 9968]]

CFR Sections 1.1202, 1.1203, and 1.1206(a).

12. As required by section 603 of the Regulatory Flexibility Act of

1980, the Commission has prepared an Initial Regulatory Flexibility

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

proposals in this document. The IRFA is set forth in the paragraph

below. Written public comments are requested on the IRFA. These

comments must be filed in accordance with the same filing deadlines as

comments on the rest of the Notice, but they must have a separate and

distinct heading designating them as responses to the Initial

Regulatory Flexibility Analysis. The Secretary shall send a copy of

this Notice of Proposed Rulemaking, including the Initial Regulatory

Flexibility Analysis, to the Chief Counsel for Advocacy of the Small

Business Administration in accordance with paragraph 603(a) of the

Regulatory Flexibility Act. P.L. No. 96-354, 94 Stat. 1164, 5 U.S.C.

Section 601, et seq. (1980).

13. Initial Regulatory Flexibility Analysis. Reason for Action: The

Telecommunications Act of 1996 permits a Bell Operating Company,

through a separate subsidiary, to engage in the manufacture of

telecommunications equipment and customer premises equipment after the

Commission authorizes the company to provide in-region interLATA

services. As one of the safeguards for the manufacturing process, the

Telecommunications Act of 1996 amended the Communications Act by

creating a new section 273, which sets forth procedures for a ``non-

accredited standards development organization,'' such as Bell

Communications Research, Inc., to set industry standards for

manufacturing such equipment. The statutory procedures allow outside

parties to participate in setting the organization's standards and

require the organization and the parties to attempt to develop a

process for resolving any technical disputes. Section 273(d)(5)

requires the Commission ``to prescribe a dispute resolution process''

to be used in the event that all parties cannot agree to a mutually

satisfactory dispute resolution process. 47 U.S.C. Sec. 273(d)(5). This

rulemaking proceeding was initiated to secure comment on our proposal

to rely on binding arbitration as this dispute resolution process. The

proposals advanced in this Notice are also designed to implement

Congress' goal of establishing procedures ``to enable all interested

parties to influence the final resolution of the dispute without

significantly impairing the efficiency, timeliness and technical

quality of the activity.'' H.R. Conf. Rep. No. 230, 104th Cong., 2d

Sess. 39 (1996).

Objectives: The Commission proposes a dispute resolution process

that requires parties to rely on binding arbitration which appears to

be the most feasible option given the 30 day period for completing the

dispute resolution process. It also seeks to adopt rules that conform

to specific statutory parameters. Section 273(d)(5) directs that the

Commission ``shall not establish itself as a party to the dispute

resolution process,'' that the process shall permit resolution ``in an

open, non-discriminatory and unbiased fashion within 30 days after the

filing of such dispute'' and that the Commission will ``establish

penalties to be assessed for delays caused by referral of frivolous

disputes to the dispute resolution process.'' 47 U.S.C. 273(d)(5).

Legal Basis: The proposed action is authorized under the

Communications Act, sections 4(i), 4(j), 273(d)(5), 303(r) and 403 of

the Communications Act, 47 U.S.C. Secs. 154 (i) and (j), 273(d)(5),

303(r), and 403.

Reporting, Recordkeeping, and Other Compliance Requirements: The

dispute resolution requirement contained in this Notice, if adopted,

will require parties to use binding arbitration in the event that all

parties cannot agree to a dispute resolution process. No reporting or

recordkeeping requirements are proposed in this Notice.

Federal Rules Which Overlap, Duplicate or Conflict With These

Rules: None.

Significant Alternatives Minimizing the Impact on Small Entities

Consistent with the Stated Objectives: This Notice solicits comments on

a variety of alternatives. Any additional significant alternatives

presented in the comments will also be considered.

IRFA Comments: We request written comments on the foregoing Initial

Regulatory Flexibility Analysis. Comments must have a separate and

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

filed by the comment deadlines set forth in this Notice.

14. Authority to conduct this inquiry is given in sections 4(i),

4(j), 273(d)(5), 303(r) and 403 of the Communications Act, 47 U.S.C.

154 (i) and (j), 273(d)(5), 303(r) and 403.

15. Further information on this proceeding may be obtained by

contacting Sharon B. Kelley, Office of the General Counsel, 202/418-

1720.

List of Subjects in 47 CFR Part 64

Communications common carriers, Dispute resolution process,

Manufacturing by Bell operating companies, Non-accredited standards

development organization, Penalties for delaying parties.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 96-5824 Filed 3-11-96; 8:45 am]

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