Implementation of Section 402(b)(2)(A) of the Telecommunications Act of 1996

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[CC Docket No. 97-11; FCC 97-6]

Implementation of Section 402(b)(2)(A) of the Telecommunications

Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is issuing a Notice of Proposed Rulemaking

(``NPRM'') to seek comment on the scope of the statutory exemption

under Section 402(b)(2)(A) of the Telecommunications Act of 1996.

Section 402(b)(2)(A) provides that common carriers are exempt from the

requirements of Section 214 of the Communications Act of 1934, as

amended (``the Act'') ``for the extension of any line.'' The Commission

seeks comment on how ``extension of any line'' should be defined. It

tentatively concludes that an ``extension of a line'' is a line that

allows the carrier to expand its service into a geographic territory

that it is eligible to serve, but that its network does not currently

reach. The Commission also proposes to forbear, under Section 401 of

the 1996 Act (47 U.S.C. 160), from exercising Section 214 authority

over ``new'' lines with respect to local exchange carriers (``LECs'')

subject to price cap regulation, LECs that are considered average

schedule companies, and domestic carriers deemed non-dominant, whether

they are offering local or domestic, long distance services. In

addition, the Commission proposes to grant Section 214 blanket

authority for small projects undertaken by carriers to construct new

lines. Further, it seeks comment on other alternatives, including

whether to treat price cap LECs which have elected a ``no-sharing'' X-

factor differently from other price-cap LECs and whether to forbear

altogether from applying Section 214 to small carriers. The intended

effect of this action is to implement Section 402(b)(2)(A).

DATES: Comments are due on or before February 24, 1997 and Reply

Comments are due on or before March 17, 1997. Written comments must be

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

and/or modified information collections on or before April 4, 1997.

ADDRESSES: Office of the Secretary, Federal Communications Commission,

1919 M Street, N.W. Room 222, Washington, D.C. 20554. Secretary,

Network Services Division, Common Carrier Bureau, 2000 M Street, N.W.,

Room 235, Washington, D.C. 20554. International Transcription Services,

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

Conway, Federal Communications Commission, Room 234, 1919 M Street,

N.W., Washington, D.C. 20554, or via the Internet [email protected].

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

Washington, D.C. 20503 or via the Internet [email protected].

FOR FURTHER INFORMATION CONTACT: Marty Schwimmer, Attorney, Network

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Services Division, Common Carrier Bureau, (202) 418-2334. For

additional information concerning the information collections contained

in this NPRM contact Dorothy Conway, (202) 418-0217, or via the

Internet at [email protected].

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

Notice of Proposed Rulemaking adopted January 9, 1997, and released

January 13, 1997 (FCC 97-6). The full text of this Notice of Proposed

Rulemaking is available for inspection and copying during normal

business hours in the FCC Reference Center (Room 239), 1919 M St., NW.,

Washington, D.C. and is also available from the FCC's World Wide Web

site, http://www.fcc.gov. The complete text also may be purchased from

the Commission's copy contractor, International Transcription Service,

Inc., (202) 857-3800, 2100 M St., NW., Suite 140, Washington D.C.

20037.

Paperwork Reduction Act

The NPRM contains either a proposed or modified information

collection. The Commission, as part of its continuing effort to reduce

paperwork burdens, invites the general public and the Office of

Management and Budget (OMB) to comment on the information collections

contained in this NPRM, as required by the Paperwork Reduction Act of

1995, Public Law No. 104-13. Public and agency comments are due at the

same time as other comments on this NPRM; OMB notification of action is

due April 4, 1997. Comments should address: (a) whether the proposed

collection of information is necessary for the proper performance of

the functions of the Commission, including whether the information

shall have practical utility; (b) the accuracy of the Commission's

burden estimates; (c) ways to enhance the quality, utility, and clarity

of the information collected; and (d) ways to minimize the burden of

the collection of information on the respondents, including the use of

automated collection techniques or other forms of information

technology.

OMB Approval Number: 3060-0149.

Title: Application and Supplemental Information Requirements--Part

63, Section 214, Sections 63.01-63.601.

Form No.: N/A.

Type of Review: Proposed revision to Existing Collection.

Respondents: Businesses or others for profit, including small

businesses.

Number of Respondents: 255.

Estimate Hour Per Response: 10 hours.

Total Annual Burden: 2550.

Estimated Annual Reporting and Recordkeeping Cost Burden: $0.

Needs and Uses: The information is used to determine if proposed

facilities are needed and to monitor the growth of networks and the

availability of common carrier services in the telecommunications

market, to relieve carriers and the Commission of a review of each

subsequent facility addition.

Synopsis of Notice of Proposed Rulemaking

Table of Contents

Section Paragraph

I. INTRODUCTION AND BACKGROUND............................. 1

II. ISSUES................................................. 3

A. Overview.............................................. 3

1. Statutory Authority and Construction................ 4

2. Definitional Issues................................. 5

3. Discussion.......................................... 21

B. Section 214 Requirements for Price Cap Carriers,

Average Schedule Carriers, and Domestic, Non-dominant

Carriers................................................ 37

C. Section 214 Requirements for Domestic, Dominant, Rate-

of-Return Carriers...................................... 52

1. Streamlined Application Procedures.................. 52

2. Blanket Authority for Small Projects................ 59

D. Reporting Requirements................................ 63

1. Current Section 214 Reporting Requirements.......... 63

2. Elimination of Reports.............................. 65

E. Section 214 Discontinuance Requirements............... 68

F. Technical Amendments to 47 CFR Part 63................ 72

III. PROCEDURAL MATTERS.................................... 74

A. Ex Parte Presentations................................ 74

B. Regulatory Flexibility Act Analysis................... 75

C. Initial Paperwork Reduction Act Analysis.............. 76

D. Comment Filing Procedures............................. 78

IV. ORDERING CLAUSES....................................... 80

I. Introduction and Background

Section 214 of the Communications Act of 1934, as amended, imposes

regulatory obligations on common carriers seeking to change their

facilities or construct new facilities. Section 214 states that ``[n]o

carrier shall undertake the construction of a new line or of an

extension of any line, or shall acquire or operate any line, or

extension thereof, or shall engage in transmission over or by means of

such additional or extended line, unless and until there shall first

have been obtained from the Commission a certificate that the present

or future public convenience and necessity require or will require the

construction, or operation, or construction and operation, of such

additional or extended line.'' Congress enacted Section 214 to prevent

useless duplication of facilities that could result in increased rates

being imposed on captive telephone ratepayers.

On February 8, 1996, the Telecommunications Act of 1996 was signed

into law to ``establish a pro-competitive, de-regulatory national

policy'' framework for the United States telecommunications industry.

As part of this comprehensive legislation, Congress adopted Section

402(b)(2)(A) of the 1996 Act. This provision states that, ``[t]he

Commission shall permit any common carrier to be exempt from the

requirements of Section 214 of the Communications Act of 1934 for the

extension of any line . * * *'' Under this exemption, carriers seeking

to extend their lines of communication no longer need to seek

Commission authorization for their proposals under Section 214 or our

Part 63 rules. Accordingly, we have initiated this rulemaking

proceeding: (1) to implement Section 402(b)(2)(A) of the 1996 Act; and

(2) to determine the extent to which the Commission should exercise its

remaining Section 214 authority in light of the forbearance provisions

of the 1996 Act.

II. Issues

A. Overview

Section 402(b)(2)(A) exempts common carriers from the requirements

of Section 214 ``for the extension of any line.'' Accordingly, although

they must continue to obtain appropriate authorization for the use of

radio frequencies under Title III of the Communications Act of 1934,

carriers are free to construct, acquire, operate, or transmit over the

``extension'' of a line without receiving Section 214 or Part 63

approval. In this notice, we seek comment on the scope of this

statutory exemption and, in particular, on how ``extension of any

line'' should be defined. As discussed below, we tentatively conclude

that an ``extension of a line'' is a line that allows the carrier to

expand its service into a geographic territory that it is eligible to

serve, but that its network does not currently reach. We also propose

to forbear, under Section 401 of the 1996 Act, from exercising Section

214 authority over ``new'' lines with respect to local exchange

carriers (``LECs'') subject to price cap regulation, LECs that are

considered average schedule companies, and domestic carriers deemed

non-dominant, whether they are offering local or domestic, long

distance services. In addition, we propose to grant Section 214 blanket

authority for small projects undertaken by carriers to

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construct new lines. We also seek comment on other alternatives: namely

(1) whether we should treat price cap LECs which have elected a ``no-

sharing'' X-factor differently from other price-cap LECs; and (2)

whether we should forbear altogether from applying Section 214 to small

carriers.

1. Statutory Authority and Construction

4. Section 214 defines a ``line'' as ``any channel of communication

established by the use of appropriate equipment, other than a channel

of communications established by the interconnection of two or more

existing channels.'' Section 214 identifies two broad categories of

lines. A carrier may construct a ``new line'' or it may construct an

``extension'' of a line. Similarly, a carrier may acquire or operate a

``line'' or an ``extension thereof,'' and may transmit over ``such

additional * * * line'' or ``extended line.'' Section 402(b)(2)(A)

exempts carriers from the requirements of Section 214 with respect to

the ``extension of any line.'' Accordingly, the exemption created by

Congress in 402(b)(2)(A) applies to some, not all, of the carrier

activities otherwise subject to Section 214 certification.

2. Definitional Issues

5. Although the text of Section 214 identifies discrete categories

of transactions subject to Section 214 certification, historically, the

certification process, standards, and requirements applicable to all

such transactions have been identical. As a result, neither courts nor

the Commission has had a need to provide specific definitions of these

categories or to distinguish among them. The language of Section

402(b)(2)(A), however, requires that we now define the ``extension of

any line'' and distinguish such an extension from ``new lines,'' which

are not exempted from the requirements of Section 214.

6. In developing a definition of ``extension of any line,'' we

believe that appropriate guidance should be drawn from three sources:

(a) the meaning of the words, ``extension'' and ``new;'' (b) Congress's

original purposes in enacting Section 214 of the 1934 Act and Section

402(b)(2)(A) of the 1996 Act; and (c) court and Commission precedent

interpreting the text of Section 214 and Section 1(18-22) of the

Interstate Commerce Act, from which Section 214 was derived.

7. (a) Definitions of ``Extension'' and ``New.'' Webster's

dictionary defines ``extension'' as, inter alia, ``the act of extending

or state of being extended'' or ``an addition to a main structure.''

The verb ``extend'' means ``to expand the area or scope of'' or ``to

increase the influence of.'' By contrast, the word ``new'' is defined

as ``having existed or been made for only a short time,''

``unfamiliar,'' ``novel,'' or ``recently arrived or established in a

position, place or relationship.''

8. Thus, the phrase ``extension of a line'' implies that, to extend

its lines, a carrier should add to its network by beginning to serve

new territory, thereby expanding its area of service. As distinguished

from an extension, a ``new line'' suggests one which, independent of

location, has recently been created or is in some other way ``novel.''

9. (b) Legislative Intent. Section 214 was originally enacted to

prevent a monopoly carrier from engaging in ``useless duplication of

facilities, with consequently higher charges upon the users of the

service.'' The stated legislative purpose of the 1996 Act is ``to

promote competition and reduce regulation in order to secure lower

prices and higher quality services for American telecommunications

consumers and encourage the rapid deployment of new telecommunications

technologies.'' Consistent with this broad purpose, Congress enacted

Section 402(b)(2)(A), intending to ``eliminate[] the Section 214

approval requirement for extension of lines.'' In this proceeding, we

seek to give effect to the de-regulatory letter and spirit of the 1996

Act in general, and Section 402(b)(2)(A) specifically, thereby

promoting competition by removing outdated barriers to entry in

telecommunications markets.

10. (c) Precedent. In expanding their own networks, carriers

generally undertake one of two basic types of activities. They may

either (1) expand the geographic area covered by their facilities; or

(2) increase the capabilities of their network within their existing

service area. Each type of activity has implications with respect to

the definition of the ``extension'' of a line.

11. (1) Geographic Considerations. Congress patterned Section 214

on Section 1(18-22) of the Interstate Commerce Act. In interpreting

that provision, the Supreme Court defined ``extensions'' as lines ``the

purpose and effect [of which] is to extend substantially the line of a

carrier into new territory.'' Two 1938 Commission decisions generally

followed the Supreme Court's ``new territory'' language in the

communications context, and instruct our efforts to distinguish ``new''

lines from ``extensions.'' That year, the Commission used the term

``extension'' to describe the acquisition of telegraph lines to serve

``new territory not theretofore served'' by the acquiring carrier. In

another opinion issued the same day, the Commission used the term

``new, additional or supplemental facilities'' to describe lines

constructed by Southwestern Bell within its service area in Texas.

12. Other decisions, however, cloud the Commission's 1938

definition. Since that time, the Commission has also stated that:

``Section 214 is not confined to the `extension' of a line--which might

reasonably be construed as requiring some part of the common carrier

facilities to cross a state boundary--but includes the `construction of

a new line' even though wholly within a single [s]tate so long as it is

part of an interstate `channel of communication' or `line.'''

13. In the international context, in granting certain Section 214

authorizations, the Commission staff has cautioned that ``should [the

carrier] obtain any interest in facilities beyond the authorized

international points for the purpose of providing common carrier

services, including private line service, between the U.S. and other

international points, such action would constitute an extension of

lines under Section 214.'' We recently indicated, however, that we

would not be bound by this view and provided the following preliminary

guidance with respect to the expansion of service into a new

international market: ``When we grant a carrier initial authority to

acquire and operate facilities to a particular country, we do not grant

that carrier authority for an `extension of lines' within the meaning

of Section 214 * * * but instead grant that carrier authority to

acquire and operate new lines to a particular geographic market.''

Thus, in the international context, we have suggested that lines that

allow a carrier to serve new international markets should be considered

``new lines.''

14. (2) Capacity Considerations. Carriers can create new channels

of communication, not only by expanding into new territory, but also by

increasing the capabilities of their existing networks. Such increases

may result from the laying of lines between points the carrier serves

to supplement or supplant existing lines or from the use of

technologically advanced electronic multiplexing, switching, coding, or

similar central office or network equipment to allow a carrier to

derive additional channels of communication from its existing

facilities.

15. The Commission has consistently held that increases in capacity

by either method create channels of communication requiring Section 214

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authorization; however, the Commission has not clearly or consistently

stated whether these channels should be considered ``new lines'' or

``extensions.''

16. The Commission has suggested that in-region lines installed to

supplement existing ones constitute ``new lines.'' However, when it

first considered the issue of in-region increases in capacity, the

Commission stated that, in enacting Section 214, ``there was no

intention on the part of Congress to limit the right of carriers to

make full use of their own physical facilities by the derivation of as

many circuits thereon or therefrom as possible. Therefore, it is not

our opinion that Section 214 requires a certificate of convenience and

necessity when a company of the Bell System rearranges its circuits or

derives new circuits so as to make maximum use of its existing

facilities, when the result is not an extension of a particular

company's service into fields not theretofore served by it.''

Therefore, the Commission did not require Section 214 certification for

such projects until after Congress amended Section 214 in 1943 to

define a line as ``any channel of communication. * * *''

17. In light of the 1943 amendment, the Commission held that

channels produced through the use of electronic equipment in

conjunction with a pre-existing wire pair were ``lines'' within the

meaning of Section 214. The Commission did not, however, indicate

whether these lines were ``new'' lines or ``extensions.''

18. Noting that carriers are required to obtain Section 214

certification before installing multiplexing equipment, the Commission

more recently stated that such equipment creates ``new `lines' or

channels under Section 214.'' Consistent with that holding, the

Commission rejected a tariff filed by AT&T for Bell Packet Switching

Service (``BPSS'') based on the fact that AT&T had not obtained Section

214 authority to install the required equipment. The Commission stated

that ``the BPSS processor and interface facilities together perform

multiplex operations that effectively establish new or additional

channels of communication.'' Although both of these opinions

specifically use the term ``new lines'' to describe channels of

communication created electronically, we find little evidence to

suggest that the Commission deliberately chose that term with the

intent to distinguish such lines from ``extensions.''

19. Recent Commission precedent, also, fails to indicate whether

activities that increase the capabilities of a carrier's in-region

network create ``new'' lines or ``extensions.'' With respect to carrier

installation of facilities for the provision of video dialtone

(``VDT''), the Commission stated that, ``an upgrade of * * * facilities

to offer video dialtone service constitutes the establishment or

extension of a line. * * *'' Although the Commission continued its

discussion by stating that ``[b]y constructing video dialtone

platforms, LECs will be installing new systems and laying fiber to

create new channels of communication,'' the Commission did not indicate

clearly that it had consciously distinguished between ``new'' lines and

``extensions'' in characterizing VDT facilities.

20. With respect to international service, increases in a carrier's

capacity to serve a given country would be considered ``lines'' under

the Commission's interpretation of Section 214 since 1943. The

Commission, however, did not assert its Section 214 jurisdiction over

international lines created by electronically increasing the capacity

of existing facilitites until 1964. That year, the Commission stated:

AT&T, and the various record carriers, have increased the capacity

of, or the number of messages (voice and record) handled, by their

respective facilities by the use of appropriate equipment; e.g. the use

of Time Assignment Speech Interpolation (``TASI'') equipment by AT&T.

To date, we have not exercised the authority given us pursuant to the

provisions of Section 214 * * * to require the filing and a grant of

appropriate applications before installation of such equipment. We

feel, however, that, in view of the rapid growth of facilities in this

field, the imminence of satellite communications, and the vast increase

in facilities possible through heretofore unregulated installations, we

should require such an application, and a grant thereof before the

installation of such equipment.

The Commission went on to impose suitable conditions on the grant

of the application at issue. The Commission did not, however, provide

clear guidance as to whether it considered increases such as these to

be ``new lines'' or ``extensions,'' or whether it made any principled

distinction between channels created electronically and channels

created by constructing wholly separate, parallel facilities.

3. Discussion

21. After reviewing the legislative intent of Congress, and

Commission and court precedent, we find that, to date, the Commission

has not clearly defined ``extension of any line'' for purposes of

Section 214. We, therefore, take this opportunity to seek comment on an

appropriate definition. We tentatively conclude that an ``extension of

a line'' is a line that allows the carrier to expand its service into

geographic territory that it is eligible to serve, but that its network

does not currently reach. With respect to projects that increase the

capabilities of a carrier's existing network within an area it already

serves, we tentatively conclude, based on a review of Commission

precedent, that we should consider the resulting additional channels of

communication to be ``new lines.'' We seek comment on this tentative

conclusion, including comment on whether such upgrades should be

treated instead as ``extensions.''

22. Alternately, we seek comment on whether, consistent with the

Surface Transportation Board's treatment of ``double-tracking'' of rail

lines, we should treat in-region increases in network capacity as

``improvements,'' outside the scope of Section 214. We seek specific

comment on whether such treatment would be: (1) consistent with the

statutory definition of a line as ``any channel of communication''; and

(2) appropriate in light of the original intent of Section 214 to

inhibit network ``gold-plating'' and the intent of the 1996 Act to

promote competition by removing outdated barriers to entry in

telecommunications markets.

23. Extension Within the United States: The definition of extension

we have proposed exempts carriers from their obligation to obtain

Section 214 authorization for expansions into additional domestic

territory that they are otherwise eligible to serve. By relieving

carriers of the burden of obtaining Section 214 approval for such

projects, the definition would encourage carriers to expand their

service areas into territory served by other carriers. We tentatively

conclude that this definition would be consistent with the natural

meaning of ``extend,'' as well as court and Commission precedent

because it would exempt from Section 214 certification lines that

``expand the area or scope of'' a carrier's network. In addition, by

exempting carriers' efforts to expand their facilities or services

beyond the areas in which they are currently providing service, we

believe that we would encourage the development of competition,

consistent with the 1996 Act.

24. Consistent with the original purpose underlying Section 214,

under our proposed definition, the Commission would retain jurisdiction

over the construction of most in-region facilities. These projects take

place within the area where there is the potential danger that a

dominant carrier

[[Page 4969]]

will create needlessly duplicative facilities, the cost of which may be

borne by captive telephone ratepayers. These potential dangers are

especially great in the case of a LEC subject to rate-of-return

regulation, which would be in a position to recover the cost of

additional, unnecessary facilities from its ratepayers. We note,

however, that our proposed definition would allow even a rate-of-return

LEC to extend lines into additional geographic territory without

specific Section 214 certification. We tentatively conclude that our

existing accounting and cost allocation rules would help protect such a

LEC's captive ratepayers from bearing the cost of such extensions, even

if the LEC sought to build unneeded, out-of-region facilities. We

request comment on this tentative conclusion.

25. Under our proposed definition, a carrier would be able to

extend its lines only into additional domestic territory that it is

eligible to serve under the Communications Act, as amended, and the

Commission's rules and policies. In this respect, we note that most

LECs (i.e., all except the BOCs and GTE) were eligible to immediately

provide interstate, interexchange services, consistent with the

policies stated in the Competitive Carrier Proceeding, even before the

1996 Act became law. Under the 1996 Act, the Bell Operating Companies

(``BOCs'') are authorized to provide out-of-region, interLATA service,

and are eligible to provide in-region, interLATA service once they

comply with the requirements imposed by new Sections 271 and 272. In

addition, the 1996 Act replaced the GTE Consent Decree, which barred

GTE from providing domestic, interstate, interexchange services; GTE

may now do so consistent with the requirements of the Communications

Act, as amended, and the Commission's rules and policies. Furthermore,

all domestic carriers are eligible to provide exchange telephone

service on a competitive basis. Some carriers are already providing

such competitive local exchange service, and others may soon begin to

do so, either on a facilities or resale basis. Congress intended the

1996 Act to encourage such competitive activities and we believe that

the elimination of carriers' Section 214 obligations will further that

intent. We tentatively conclude, therefore, that a domestic carrier

wishing to serve new territory may extend its lines to do so without

obtaining Section 214 authority, as long as the carrier obtains any

other regulatory approvals that may still be required.

26. We recognize that this proposed definition of ``extension'' may

produce some anomalous results. For example, a domestic IXC that does

not currently have facilities that serve the entire geographic United

States would be able to extend lines into additional territory

consistent with the policies developed in the Competitive Carrier

proceeding. However, an IXC that already serves the entire domestic

United States with its own facilities would not be permitted, under our

proposed definition, to extend its lines without obtaining Section 214

approval. We note, however, that there should be no substantial or

practical impact on the domestic IXCs because, as discussed more fully

below, we tentatively conclude that we should forbear from applying

Section 214 and our Part 63 rules to non-dominant IXCs under Section

401 of the 1996 Act. We believe our proposed definition would create

fewer anomalies overall than other possible definitions. In addition,

we are confident that we will be able to correct such results through

the exercise of our forbearance authority.

27. Under our tentative definition, once a carrier has expanded

into new territory by ``extending'' its lines, additional activities

within that territory seemingly would create ``new'' lines. In the

Competitive Carrier proceeding, we determined that LECs could offer

interstate, interexchange services on a non-dominant basis through an

affiliate that met certain separation requirements; a LEC offering such

services directly, by contrast, would be regulated as dominant. We

recently extended this regulatory regime, on a temporary basis, to BOC

provision of out-of-region, interLATA telecommunications services to

provide interim protection from potential cost-shifting and

anticompetitive conduct by the BOCs. While we have recently sought

comment on whether it might be appropriate at some future date to

modify or eliminate the separation requirements thus imposed, those

requirements remain in place. In this proceeding, while we propose

forbearance from Section 214 regulation for most LECs and all non-

dominant carriers, as discussed below, we also propose that rate-of-

return LECs remain subject to streamlined Section 214 regulation.

Accordingly, rate-of-return LECs might find themselves subject to

Section 214 certification requirements only for their second and

subsequent lines into a given territory. We seek specific comment on

these and other potential anomalies, including possible remedies.

28. Accordingly, we ask parties to comment on whether our proposed

definition of line ``extensions,'' as it applies to all common

carriers, whether they are IXCs, LECs, resellers, international

carriers (discussed below), or others, satisfies the goals of Section

402(b)(2)(A). We seek specific discussion of our proposed definition's

impact on particular projects subject to Section 214 regulation or the

Section 402(b)(2)(A) exemption. In addition, commenters advocating

revisions to our definition should propose specific language and

discuss the basis for their proposals in light of the dictionary

meanings, legislative history, and precedents discussed above.

29. Our proposed definition would exclude all carrier lines in

areas within which the carrier is currently providing service.

Accordingly, under our tentative conclusion in paragraph 21, above,

channels of communication derived from in-region network upgrades would

be treated as ``new lines.'' Such treatment would be consistent with

past Commission characterizations of such lines. Furthermore, it would

preserve the Commission's Section 214 authority with respect to in-

region network upgrades by dominant carriers. In-region network

upgrades by dominant carriers present the greatest opportunities to

duplicate facilities unnecessarily, with consequently higher charges to

ratepayers. Although we expect the development of competition to lessen

those opportunities, we tentatively conclude that, currently, continued

Commission regulation of such projects remains consistent with the

goals of Section 214. As with the IXCs, however, we tentatively

conclude that the full exercise of this authority is not necessary to

protect ratepayers in every instance. Specifically, as discussed more

fully below, we tentatively conclude that we should forbear from

regulating the in-region activities of LECs that are subject to price

cap regulation (``price cap carriers''), LECs that are considered

average schedule companies, and competitive access providers

(``CAPs'').

30. International Lines: We have provided preliminary guidance with

respect to the definition of a line ``extension'' in the international

context by stating, with respect to Section 402(b)(2)(A), that:

We do not view this provision as applicable to our authority to

require common carriers to obtain Section 214 authority to acquire,

operate, or resell facilities or services to serve individual

countries. When we grant a carrier initial authority to acquire and

operate facilities to a particular country, we do not grant that

carrier authority for an ``extension of lines'' within the meaning

[[Page 4970]]

of Section 214 * * * but instead grant that carrier authority to

acquire and operate new lines to a particular geographic market.

31. Because the initiation of service to a new foreign point raises

an array of issues not associated with the expansion of service within

the domestic United States, we tentatively conclude that such

initiation of service involves the construction, acquisition, or

operation of ``new lines.'' This definition would be consistent with

the meaning of ``new,'' which, in contrast to an ``extension,'' implies

something ``unfamiliar'' or ``novel.'' We seek comment on this

tentative conclusion.

32. Within the international context, we have stated that ``the

international geographic market exists in terms of separate and

distinct areas determined by national borders.'' Therefore, we

tentatively conclude that the initiation of service to a new country is

an action fundamentally different in character from the extension of

facilities domestically, where carriers have much greater economic and

operational flexibility. Carrier initiation of international service

raises legal, economic, policy, and facility-specific issues different

from those raised by the provision of domestic service. The Commission,

for example, recently adopted a route-by-route approach to reviewing

foreign carrier Section 214 applications to provide international

services. Where a foreign carrier holds market power in a proposed

destination market, the Commission examines whether effective

competitive opportunities exist for U.S. carriers in that market. This

allows us to address the potential anticompetitive effects of

permitting a foreign carrier to provide U.S. telecommunications

services between the United States and a country where it has market

power. The legal, economic, policy, and facility-specific issues

involved in service to particular foreign points require individual

consideration, as well as consultation with the Executive Branch.

33. Accordingly, when we grant a carrier authority to acquire and

operate facilities to a particular country, we tentatively conclude

that we do not grant that carrier authority to ``extend'' lines within

the meaning of Section 214 and Section 402(b)(2)(A), but instead grant

that carrier authority to acquire and operate new lines. International

carriers are not eligible to initiate service to new international

points until they receive specific Section 214 authorization to do so.

We tentatively conclude, therefore, that few carrier activities

involving the provision of international services can properly be

considered line ``extensions'' within the meaning of Section 214 or

Section 402(b)(2)(A). Accordingly, under our proposed definition,

virtually all international lines must be classified as ``new.'' We

seek comment on this tentative conclusion.

34. Our proposed definition also would exclude projects that

increase a carrier's capacity to carry traffic between the United

States and another country it already serves. Such projects do not

involve the expansion of service into any new geographic territory.

Accordingly, we tentatively conclude that such capacity increases

constitute ``new'' lines subject to Section 214 regulation, consistent

with our characterization of domestic carrier in-region network

upgrades. Nevertheless, we seek specific comment on the impact of our

decision on all international carrier projects.

35. Other Options: We have tentatively concluded that an

``extension'' of a carrier's line should be defined as a line that

allows the carrier to expand its service into geographic territory that

it is eligible to serve, but that its network does not currently reach.

We seek comment, however, on other alternatives, such as defining

``extension of any line'' to include:

(i) any line, some part of which crosses a state boundary,

consistent with the language of General Tel. Co. of California. Lines

that are wholly within a single state, but that nevertheless form part

of an interstate channel of communication would be excluded from this

definition.

(ii) any augmentation of lines in a carrier's network, heretofore

subject to Section 214 certification, without distinguishing ``new''

lines from ``extensions.'' Such a definition would be consistent with

the Commission's historic treatment of ``new'' lines and ``extensions''

as one uniform group, without subdivision. Under such a definition, the

Commission would exempt all additions to a carrier's network from the

requirements of Section 214. Such a definition would subject to Section

214 review only discontinuance, reduction, or impairment of service.

(iii) any channel of communication that is not created with a

physically new facility. Under such a definition, capacity increases in

existing facilities would be considered extensions, while the

installation of physically new lines would remain subject to Section

214 certification. Such a definition potentially could influence

carrier business decisions, because physically new facilities would be

subject to a greater regulatory burden than capacity increases in

existing facilities.

(iv) any line that connects to a carrier's network. Such a

definition would include any line that augments a carrier's facilities

by connecting to them. It would exclude augmentations that do not

directly connect to the carrier's existing lines, as well as any

discontinuance, reduction, or impairment of service.

We seek comment on these alternatives and on whether another

definition would better address the considerations apparent in the

language of Sections 214 and Section 402(b)(2)(A), the legislative

history, and judicial and Commission precedents.

36. We note that carrier activities constituting the ``extension''

of a line, as defined in the course of this proceeding, are exempt from

the requirements of Section 214 as of the date of enactment of the 1996

Act, February 8, 1996.

B. Section 214 Requirements for Price Cap Carriers, Average Schedule

Carriers, and Domestic, Non-dominant Carriers

37. Under the definition of line ``extension'' proposed above,

Section 402(b)(2)(A) of the 1996 Act preserves the Commission's Section

214 authority over telecommunications carriers seeking to construct,

acquire, or operate new lines of communication, or engage in

transmission over such lines. Consistent with the forbearance authority

granted the Commission in Section 401 of the 1996 Act, however, and for

the reasons stated herein, we propose in this notice to forbear from

applying all Section 214 authorization requirements to LECs subject to

price cap regulation (``price cap carriers''), to LECs that are average

schedule companies, and to all domestic carriers classified as non-

dominant, whether they are offering local or long distance services.

Accordingly, we tentatively conclude that these carriers should no

longer be required to obtain Section 214 authorization for the

construction, acquisition, or operation of new lines between domestic

points, or for transmission over such lines. In light of this proposal,

we tentatively conclude that Section 63.07 of our rules should be

repealed.

38. Section 401 amends Title I of the Communications Act of 1934 by

adding a new Section 10. Section 10(a) directs the Commission to

forbear from enforcing a regulation or provision of the Communications

Act when: (1) Enforcement is not necessary to ensure that the charges,

practices, classifications, or regulations by, for, or in connection

with a carrier or service

[[Page 4971]]

are just and reasonable and not unjustly or unreasonably

discriminatory; (2) enforcement is not necessary to protect consumers;

and (3) forbearance is consistent with the public interest. Section

10(b) further instructs the Commission to consider whether forbearance

will promote competitive market conditions and enhance competition

among providers of telecommunications services. If the Commission

determines that such forbearance will promote competition among

providers of telecommunications services, that determination may

provide the basis for the Commission's finding, pursuant to subsection

10(a)(3), that forbearance is in the public interest.

39. We tentatively conclude that, under the first prong of the

three-part forbearance analysis set forth in Section 10(a), the

imposition of Section 214 authorization requirements on price cap,

average schedule, and non-dominant carriers is not necessary to ensure

that the charges, practices, classifications, or regulations by, for,

or in connection with these carriers or their services are just,

reasonable and not unreasonably discriminatory. This tentative

conclusion is based primarily on the presumption that price cap and

average schedule carriers, by virtue of the rate regulation schemes

applied to each, are constrained in their ability to raise interstate

telephone service rates. Non-dominant carriers, by virtue of facing

competition in their service areas also are constrained in their

ability to raise rates.

40. Price cap carriers are limited in their ability to realize a

regulatory benefit from overinvesting in facilities because rates for

interstate services are capped in accordance with preset formulas that

account for inflation and productivity growth. By capping prices rather

than carrier profits, price cap regulation discourages overinvestment

in facilities and encourages carriers to lower costs and increase

productivity. We recognize that, under the Commission's current price

cap regulations, carriers may elect a ``sharing'' option, which could

affect the rates charged for interstate services. In general, under our

current interim LEC price cap rules, a BOC could select an X-factor

option that requires it to share interstate earnings with its customers

that exceed specified benchmarks and permits the BOC to make a low-end

adjustment if interstate earnings fall below a specified floor.

Therefore, price cap regulation of a monopoly carrier that has elected

a sharing option may not eliminate entirely that carrier's incentive to

invest in unnecessary facilities. Such ``gold-plating'' activities may

have the potential to increase the carrier's costs and, therefore, to

reduce the carrier's obligation to share its regulated profits with its

customers.

41. Although price-cap regulation that includes a sharing option

preserves some of the incentives toward ``gold-plating'' that accompany

rate-of-return regulation, we believe that all forms of price cap

regulation nevertheless reduce these incentives. Price cap carriers

incur sharing obligations on a sliding scale once their profits exceed

certain levels; only when the carrier enters its ``100% sharing'' zone

would it reap the full benefit of an increase in its costs. Virtually

all of the price-cap carriers have adopted the ``no-sharing'' X-factor.

This fact seems to indicate strongly that, in general, the benefits

associated with the no-sharing option exceed the benefits of adopting a

sharing option and strategically overinvesting in facilities. Moreover,

we expect that growth in competition for local exchange and interstate

access will provide additional incentives for the price-cap LECs to

increase their efficiency. Therefore, whether a price cap carrier

elects a ``sharing'' or ``no sharing'' option, we tentatively conclude

that additional regulation under Section 214 is not required to protect

telephone service ratepayers adequately against potentially higher

rates resulting from investment in unnecessary facilities. Accordingly,

we tentatively conclude that ``sharing'' and ``no sharing'' price cap

carriers should be treated alike for purposes of applying forbearance

from the Section 214 authorization requirements. We seek comment on

this tentative conclusion, and request that commenters address whether

we should distinguish price cap carriers that have elected an X-factor

with no sharing requirement from other price cap carriers. We seek

specific comment on whether we should apply the streamlined Section 214

procedures that we propose for rate-of-return carriers to price cap

carriers that have a sharing obligation.

42. Similarly, average schedule companies are compensated for

interstate telephone services through access service rates developed by

the National Exchange Carrier Association (``NECA'') on the basis of

industry-wide averages. This constraint on the ability of average

schedule carriers to raise interstate telephone service rates reduces

the incentive that these carriers otherwise might have to overinvest in

facilities. Accordingly, we tentatively conclude that the first prong

of the Section 10 forbearance test is satisfied for carriers that are

average schedule companies.

43. In the Competitive Carrier proceeding, the Commission granted

blanket Section 214 authority to non-dominant domestic carriers based

on its finding that, in a competitive environment, market forces could

protect the public from unreasonably high rates and undue

discrimination. More recently, the Commission has reaffirmed its view

that marketplace forces can replace regulation and make burdensome

regulatory requirements unnecessary for both carriers and the

Commission. Based on our continuing belief that market forces limit the

ability of non-dominant carriers to recover the cost of unnecessary

facilities from telephone service ratepayers, we propose to forbear

from applying the Section 214 authorization requirements to all

domestic facilities of domestic non-dominant carriers. Such forbearance

would be consistent with our decision, under the forbearance provisions

of the 1996 Act, no longer to require or to allow nondominant

interexchange carriers to file tariffs for their interstate, domestic,

interexchange services.

44. As discussed above, Section 214 review was intended to protect

against duplicative and wasteful investments that could harm telephone

service ratepayers. Our concern is that interstate telephone ratepayers

not pay for such investments through increased rates for telephone

service, particularly when carriers' rates are based on their costs

plus a reasonable rate-of-return above those costs. Accordingly, our

tentative finding that price cap, average schedule, and non-dominant

carriers need not be required to obtain Section 214 authorizations is

consistent with the rationale for Section 214 review. Specific Section

214 review of these carriers' investments in facilities is not

necessary to ensure that their charges are just and reasonable because

competitive forces or other regulatory constraints on prices already

ensure that these classes of carriers have little economic incentive or

ability to invest in wasteful or duplicative facilities.

45. We also tentatively conclude that, under the first prong of the

Section 10(a) forbearance analysis, the imposition of Section 214

authorization requirements on price cap, average schedule, and domestic

non-dominant carriers is not necessary to prevent those carriers from

engaging in anticompetitive or discriminatory practices. The Section

214 certification process is not designed to prevent such abusive

practices and, furthermore, the Commission has in place rules

specifically addressing anticompetitive and discriminatory practices.

We retain the ability to

[[Page 4972]]

reimpose Section 214 requirements should it become necessary to ensure

that carrier rates and practices are just, reasonable, and

nondiscriminatory.

46. We tentatively conclude that, under the second prong of the

Section 10(a) forbearance analysis, imposition of the Section 214

authorization requirements on price cap (sharing and non-sharing),

average schedule, and domestic non-dominant carriers is not necessary

to protect consumers. Section 214 was originally enacted to protect

telephone ratepayers. The rate regulation scheme applied to price cap

and average schedule carriers, and market forces acting on domestic

nondominant carriers, however, minimize the risk that telephone

ratepayers will pay for wasteful investments by these carriers. We also

tentatively find that forbearance from imposing Section 214

authorization requirements will benefit consumers because it will

reduce the regulatory costs and delay currently imposed on carriers

seeking to introduce new services. Accordingly, forbearance treatment

should promote the ability of carriers to satisfy consumer demands more

efficiently and at lower rates.

47. We also seek comment on whether there are other factors, apart

from rate-of-return regulation or sharing obligations, that may affect

the potential for duplicative and wasteful investments. In particular,

we seek comment on the extent to which the rules and policies advocated

by LECs in the appeal of our interconnection order and in the universal

service proceeding could affect the incentives of carriers to make

investments that are inconsistent with the statutory objective(s) of

Section 214.

48. We tentatively conclude that, under the final prong of the

Section 10(a) forbearance analysis, forbearance is in the public

interest because it will promote competitive market conditions and

enhance competition among providers of telecommunications services. The

Commission's Section 214 review process currently appears to impose

regulatory barriers to the entry of new carriers and the creation or

expansion of facilities by all carriers because carriers proposing

projects that do not fall within one of the Commission's blanket

authority rules must engage in a potentially lengthy Commission review

of their proposals and disclose potentially competitively sensitive

information to rivals. By reducing the regulatory burden imposed by

Section 214, we would encourage the development of competition by

facilitating market-driven network expansion and reducing the costs of

obtaining regulatory approval. Accordingly, we tentatively conclude

that forbearance from applying the Section 214 authorization

requirements to price cap, average schedule, and domestic non-dominant

carriers would stimulate competition by facilitating entry of new

carriers, price decreases, and improved offerings. Accordingly, we

tentatively conclude, pursuant to Sections 10(a)(3) and 10(b), that the

forbearance policy proposed herein is in the public interest.

49. We seek comment on the forbearance policy proposed above. We

also seek comment on the advantages and disadvantages of alternative

reform proposals including, for example, streamlining our Section 214

application procedures with respect to one or more of these classes of

carriers instead of forbearing from applying the Section 214

authorization requirements. In addition, we seek comment on any

procedures which may be necessary with respect to Section 214 in the

event a carrier subject to forbearance treatment changes its cost

accounting method and, as a result, no longer falls within a forborne

class of carriers.

50. In the Competitive Carrier proceeding, the Commission found,

for purposes of assessing the market power of interexchange carriers

covered by that proceeding, that: ``(1) interstate, domestic,

interexchange telecommunications services comprise the relevant product

market, and (2) the United States (including Alaska, Hawaii, Puerto

Rico, U.S. Virgin Islands, and other U.S. offshore points) comprises

the relevant geographic market for this product, with no relevant

submarkets.''

51. The Commission recently tentatively concluded that, under

certain circumstances, narrower market definitions may provide a more

refined analytical tool for assessing market power. Specifically, its

tentative conclusions were: (1) to define as a ``relevant product

market an interstate, interexchange service for which there are no

close substitutes or a group of services that are close substitutes for

each other but for which there are no other close substitutes''; and

(2) to define the ``relevant geographic market for interstate,

interexchange services as all calls (in the relevant product market)

between two particular points.'' Although the Commission proposed

treating ``interstate, interexchange calling generally as one national

market,'' the Commission also proposed to examine credible evidence of

market power in particular product or point-to-point markets. We seek

comment on how revisions to the Commission's assessment of market power

in these differing contexts may affect our proposal to forbear from

Section 214 regulation of nondominant carriers, if we were to adopt

such revisions. In addition, we seek specific comment on the regulation

under section 214 of a carrier that might be regulated as dominant in

some product, geographic, or service markets, but nondominant in

others.

C. Section 214 Requirements for Domestic, Dominant, Rate-of-Return

Carriers

1. Streamlined Application Procedures

52. In this notice, we propose to amend Section 63.01 of our rules

to streamline Section 214 filing procedures for domestic carriers that

we tentatively conclude should remain subject to the Section 214

authorization requirements. We propose to limit this category of

carriers to domestic dominant carriers that are subject to rate-of-

return regulation (``dominant rate-of-return carriers''). We propose to

retain a Section 214 authorization requirement for these carriers given

our tentative conclusion that the rate regulation method applied to

them gives them an incentive to overinvest in facilities and because

they lack external constraints on their ability to pass such costs on

to telephone service ratepayers. As recently stated by the Commission,

``[w]e are mindful of our statutory obligations under the

Communications Act of 1934 to guard against abuses of market power in

situations where effective competition does not yet exist. We meet

these obligations through our Section 214 authorization process and

apply dominant carrier regulation and other safeguards where

circumstances warrant.'' Since dominant rate-of-return carriers have

both the incentive and the opportunity to recover the cost of

duplicative or wasteful facilities directly from telephone service

ratepayers, we believe that Section 214 review remains warranted for

such carriers' proposals to construct, acquire, or operate new or

additional domestic lines.

53. Nevertheless, we propose to amend Part 63 of our rules to

reduce the burden on carriers required to file Section 214

applications. Specifically, we propose to streamline the Section 63.01

filing requirements by eliminating the filing of unnecessary

information and providing for automatic approval of Section 214

applications thirty-one days after the Commission issues public notice

that the application has been accepted for filing, unless (1) the

Common Carrier Bureau (the ``Bureau'') notifies the applicant within

that period

[[Page 4973]]

that the grant will not be automatically effective; or (2) within

thirty days following the issuance of public notice a party both files

an opposition to the application with the Commission and serves a copy

on the applicant.

54. As reflected in the attached appendix of proposed rule

amendments, we propose to amend Section 63.01 to lessen the burden on

carriers and to require carriers to file only the following

information: (a) name and address of applicant; (b) state of

incorporation of corporate applicant; (c) information identifying the

officer to whom correspondence may be addressed; (d) points between

which proposed facilities are to be located; (e) a brief description of

the facilities to be added and of the applicant's existing facilities

between these points; (f) an affidavit, executed under penalty of

perjury: (1) that there is a public need for proposed facilities; and

(2) that the facilities are economically justified; and (g) a statement

whether authorization of facilities is categorically excluded from

Section 1.1306 of the Commission's rules.

55. We propose to eliminate from our current Section 63.01 filing

requirements information concerning: (a) whether the carrier is or will

become a carrier subject to Section 214 of the Communications Act; (b)

whether the facilities will be used to extend communication services

into territory at present not directly served by the applicant or to

supplement existing facilities of the applicant; (c) the types of

services to be provided over the proposed facilities; (d) the

applicant's present and estimated future facilities requirements; (e)

the map or sketch showing the proposed facilities; (f) a description of

the manner and means by which other interstate and foreign

communications services of a similar character are now being rendered

by the applicant and others in the area to be served by the proposed

facilities; (g) proposed tariff charges and regulations for domestic

applications; (h) a statement of the accounting proposed to be

performed in connection with the project; and (i) whether the carrier

has an affiliation with a foreign carrier. We tentatively conclude that

all of this information is either collected elsewhere by the

Commission, unnecessary, confusing in light of the provisions of

Section 402(b)(2)(A), or no longer of decisional significance to the

Commission.

56. Our proposed streamlined application procedure also would

revise the current requirement that a carrier provide a summary of the

factors showing the public need for the proposed facility and a

detailed economic justification. We propose to allow a carrier instead

to certify that there is a public need for its proposed facilities and

that they are economically justified. The filing of detailed statements

setting forth this information is burdensome on carriers and, in recent

years, it has been our experience that few (if any) carriers have filed

Section 214 applications proposing projects that do not meet these

requirements. Nevertheless, we retain the authority to request from a

carrier this or any other detailed information our review of a specific

application may require.

57. We also propose automatic approval of Section 214 applications

on the thirty-first day following the date on which each application is

placed on public notice, unless the Common Carrier Bureau notifies the

applicant that the grant will not be automatically effective, or

another party files an opposition with the Commission and serves the

opposition on the applicant. If the Bureau so notifies the applicant,

or an opposition is filed and served, within 30 days, final action by

the Bureau would be taken within 90 days of the expiration of the 30

day period (i.e., within 120 days of the issuance of public notice). We

seek comment on these proposed Part 63 rule amendments and on

alternative proposals to streamline the Section 214 approval process.

58. Although we have tentatively concluded that streamlined

regulation will be appropriate with respect to dominant rate-of-return

carriers, we recognize that the firms remaining under rate of return

regulation are generally small (accounting, in the aggregate, for less

than approximately 2% of interstate revenues), and that, as a practical

matter, few Section 214 applications from such firms have ever been

challenged or rejected. Accordingly, we seek comment on whether, as

with the other types of carriers discussed above, the Commission should

forbear from regulating these small carriers under Section 214

altogether.

2. Blanket Authority for Small Projects

59. Current Commission rules allow carriers to file streamlined,

informal applications for Section 214 certification for certain small,

in-region projects with a cost of less than $2,000,000 each or an

annual rental of less than $500,000 each. In recent years, it has been

our experience that few applications have been filed under this section

and those few have not been contested, but instead have been deemed

approved twenty one days after the Commission issues public notice that

the application has been accepted for filing. In addition, based on the

size of the projects involved, we believe that project-specific

applications are not required to protect ratepayers from unnecessary

rate increases. Accordingly, we tentatively conclude that we should

grant blanket authority for small projects involving the construction,

operation, or acquisition of new lines, or transmission over such

lines.

60. We believe that it would be difficult for a carrier to engage

in any substantial wasteful duplication of facilities or to raise its

rates significantly based on projects undertaken pursuant to this rule.

Not only are the dollar amounts involved small, but these projects

require investment in facilities that, as a general matter, must be

amortized over long periods of time, with the result that even a rate-

of-return carrier could include only a fraction of the total outlay in

its cost data for a single accounting period. As the rule is currently

written, however, a carrier may engage in as many projects as it deems

appropriate under this rule, subject to the approval of the Commission

under the streamlined provisions of Section 63.03. Therefore, we

tentatively conclude that a grant of blanket authority on any per-

project basis would leave no meaningful check on the ability of a rate-

of-return carrier to construct facilities at will, with the possible

result that rates will be raised unnecessarily. Instead, we propose to

grant blanket authority for carriers to construct, operate, or acquire

new lines, or engage in transmission over such lines, subject to an

annual cap on spending.

61. In developing an appropriate dollar amount for such an annual

cap, we take initial note of the current $2,000,000 per-project limit

under our streamlined rule. We propose that one such project could be

undertaken by a carrier on average every two months without any

significant adverse effect on ratepayers. However, we are also aware

that there are great size differences between the largest and smallest

rate-of-return carriers. Accordingly, for such large carriers, we

propose an alternate annual percentage cap. Specifically, we propose

that a carrier could increase the total book value of its lines by up

to 10% in any given year without any significant adverse effects on

ratepayers. Because these investments are typically amortized over long

periods of time, any potential rate increase from such projects would

necessarily be small.

62. In sum, we propose to replace the current $2,000,000 per-

project cap to allow carriers to engage in projects that,

[[Page 4974]]

in the aggregate, either: (1) Have a total annual cost of no more than

$12,000,000 or an annual rental of no more than $3,000,000; or (2)

increase the total book value of the carrier's lines by not more than

10%. Projects in excess of this annual cap would be subject to the

streamlined application procedures proposed above. We seek comment on

this proposal, including specific comment on several issues. We request

that commenters discuss: (a) Whether we should forbear from imposing

Section 214 regulation on these projects, including specific reference

to the forbearance criteria in the 1996 Act; (b) whether we should

subject these projects to the streamlined regulation proposed above;

and (c) whether the proposed cost limits are appropriate.

D. Reporting Requirements

1. Current Section 214 Reporting Requirements

63. In the past, the Commission has streamlined its Section 214

application process or granted blanket authorizations when it was able

to conclude that review of all information required by Section 63.01 no

longer was consistent with the public interest. In connection with such

streamlining or blanket authorization, the Commission has imposed

reporting obligations on carriers engaging in the activities covered by

these streamlined filing requirements or blanket authorizations. Part

63 of our rules currently imposes two such reporting requirements.

Section 63.03(e) of our rules requires annual reports from carriers

that have obtained continuing authority to commence small projects

within their existing service areas. Section 63.04(c) imposes a

similar, semiannual, reporting requirement on those carriers that have

obtained continuing authority to provide temporary or emergency

service.

64. If, as discussed above, we adopt a policy of forbearance toward

certain classes of carriers, then we tentatively conclude that those

classes of carriers would not be subject to any Section 214 reporting

requirements under the Commission's rules. In addition, we tentatively

conclude that the reporting burden should be substantially reduced for

carriers required to obtain Section 214 certification.

2. Elimination of Reports

65. We tentatively conclude that the Commission no longer needs to

require carriers to file routinely the reports required under Sections

63.03(e) and 63.04(c) of our rules. In recent years, neither the public

nor the Commission's staff has made significant use of the information

provided in these reports. Under Section 63.03(e), carriers may request

continuing authority to commence small projects to supplement existing

facilities within the carrier's service area. Projects commenced under

this authority must have a construction, installation, or acquisition

cost of no more than $70,000 or an annual rental cost of no more than

$14,000. Carriers subject to this requirement must file this report

annually.

66. Under Section 63.04(c), carriers may request continuing

authority to provide temporary or emergency service through the

construction or installation of facilities for which the estimated

construction, installation, and acquisition costs do not exceed $35,000

or an annual rental of $7000, as long as the project does not involve a

``major action'' under the Commission's environmental rules. Carriers

that obtain such authority are required to file semiannual reports

identifying the projects commenced over the preceding six months.

67. It would be extremely difficult for carriers to construct or

acquire significantly wasteful, duplicative facilities covered by

either Section 63.03 or 63.04 because of the relatively small cost of

the projects covered by those sections. Instead of obligating carriers

to file these reports, we propose to rely on the Commission's general

authority under the Communications Act to obtain information from

carriers in individual instances if the information becomes necessary

for us to perform our regulatory duties. Parties requesting that the

Commission retain these reporting requirements should explain clearly

how these reports have benefitted members of the public in the past and

how the reports would benefit the public in the future.

E. Section 214 Discontinuance Requirements

68. Section 214(a) requires carriers that discontinue, reduce, or

impair service to a community to obtain from the Commission a

certificate that neither the present nor future public convenience and

necessity will be adversely affected. In general, dominant carriers

seeking Commission authority to discontinue, reduce, or impair service

are required, pursuant to current Section 63.61 of our rules, to file a

formal application with the Commission. Depending on the nature of the

service for which authority to discontinue is sought, Section 63.62 of

our rules instructs applicants with respect to the contents of

particular applications. Upon reviewing an application for

discontinuance authority, the Commission then issues a formal order

granting or denying such authorization.

69. Under current Section 63.71 of our rules, non-dominant carriers

seeking to reduce or discontinue service are required to notify all

affected customers in writing of the planned discontinuance, reduction

or impairment of service unless the Commission authorizes another form

of notice in advance. Non-dominant carriers must also file with the

Commission an application that includes a description and the date of

the planned discontinuance, reduction or impairment, the geographic

areas of service affected, the dates and method of notice given to

customers, and any other information the Commission may require. The

application is automatically granted on the thirty-first day after its

filing with the Commission, unless the Commission notifies the

applicant within that time that the grant will not automatically be

effective.

70. The 1996 Act does not alter the Commission's authority under

Section 214(a) with respect to discontinuances or reductions in

services. We note, however, that carriers assume a certain amount of

risk when entering a new geographic or product market. If regulatory

requirements create significant barriers to exit, a carrier may be

reluctant to accept potential risks and, as a result, may never enter

the market. Accordingly, in order to further the 1996 Act's goal to

promote competition, we seek in this proceeding to eliminate any

unnecessary barriers to exit currently imposed by our rules.

Specifically, we seek comment on whether the streamlined discontinuance

procedures set forth in Section 63.71 of our rules, which currently

apply only to domestic non-dominant carriers, should apply to all

domestic common carriers. In doing so, we tentatively conclude that the

streamlined procedures contained in Section 63.71 appear to strike a

reasonable balance between protecting consumers and reducing

unnecessary barriers to exit for all carriers, whether dominant or non-

dominant. We seek comment on this tentative conclusion.

71. As local exchange markets becomes increasingly competitive,

however, many currently dominant LECs may find themselves under

increasing pressure to reduce or eliminate service in unprofitable

areas. Therefore, although we propose to extend the applicability of

Section 63.71 to domestic dominant carriers, we remain concerned that

the relatively short advance notification period

[[Page 4975]]

provided under Section 63.71 might allow a dominant carrier to obtain

automatic discontinuance authority even though it is the only carrier

serving a particular community. In addition, we are mindful of the

Commission's obligation under the new universal service provisions of

the 1996 Act to order a common carrier, or carriers, to provide

interstate telecommunications service to an unserved community, or

portion thereof, that requests such service. At a minimum, therefore,

we tentatively conclude that we should extend the advance notification

period contained in Section 63.71 to 60 days with respect to domestic,

dominant carriers, in the event that we do apply Section 63.71 to all

domestic carriers. We seek comment on this tentative conclusion,

including comment on (1) whether a 60 day advance notification period,

in conjunction with the universal service support mechanisms

recommended by the Joint Board and/or adopted by the Commission, will

provide adequate incentives to carriers and protection to consumers;

and (2) whether additional safeguards are necessary to protect

consumers against discontinuance of service by dominant carriers; and

(3) whether we should treat differently from all other carriers a

dominant carrier that is either (a) the sole service provider in a

particular community; or (b) relinquishing its designation as an

eligible telecommunications carrier under Section 214(e)(4).

F. Technical Amendments to 47 CFR Part 63

72. In light of the rule amendments proposed above, we tentatively

conclude that we should rewrite the entire text of Sections 63.01,

63.02, and 63.03 of our rules, to repeal Sections 63.06 and 63.07 of

our rules, and to make technical, conforming amendments to Sections

63.04, 63.08, 63.52, 63.61, 63.62 and 63.71 of our rules. We seek

comment on our proposal to repeal or amend these rule sections.

73. The 1996 Act also provides that ``a common carrier shall not be

required to obtain a certificate under [S]ection 214 with respect to

the establishment or operation of a system for the delivery of video

programming.'' Accordingly, we propose an amendment to our rules, in

the form of a new Section 63.01(b), to conform to this statutory

mandate.

III. Procedural Matters

A. Ex Parte Presentations

74. 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.

B. Regulatory Flexibility Act Analysis

75. We certify that the Regulatory Flexibility Act of 1980 is not

applicable to this rulemaking proceeding. If the proposed rule changes

are promulgated, there will not be a significant economic impact on a

substantial number of small business entities, as defined by Section

601(3) of the Regulatory Flexibility Act because these rule changes

would lessen, not increase, the regulatory burden on small businesses.

The Secretary shall send a copy of this Notice of Proposed Rulemaking

to the Chief Counsel for Advocacy of the Small Business Administration

in accordance with Section 605(b) of the Regulatory Flexibility Act.

C. Initial Paperwork Reduction Act Analysis

76. This NPRM contains either a proposed or modified information

collection. As part of its continuing effort to reduce paperwork

burdens, we invite 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 and agency comments are due at the same

time as other comments on this NPRM; OMB comments are due 60 days from

date of publication of this NPRM in the Federal Register. Comments

should address: (a) whether the proposed collection of information is

necessary for the proper performance of the functions of the

Commission, including whether the information shall have practical

utility; (b) the accuracy of the Commission's burden estimates; (c)

ways to enhance the quality, utility, and clarity of the information

collected; and (d) ways to minimize the burden of the collection of

information on the respondents, including the use of automated

collection techniques or other forms of information technology.

77. In addition to filing comments with the Secretary, as detailed

below, 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].

D. Comment Filing Procedures

78. Pursuant to applicable rules 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 February 24, 1997,

and reply comments on or before March 17, 1997, with the reference

number ``CC Docket 9-11'' on each document. To file formally in this

proceeding, commenters and reply commenters must file an original and

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

Commenters and reply commenters wishing each Commissioner to receive a

personal copy of their comments must file an original and eleven

copies. Comments and reply comments must comply with Section 1.49 and

all other applicable sections of the Commission's rules. However, we

require here that a summary be included with all comments, regardless

of length. All comments must be sent to Office of the Secretary,

Federal Communications Commission, 1919 M Street, N.W., Room 222,

Washington, D.C. 20554, with a copy to the Secretary, Network Services

Division, Common Carrier Bureau, 2000 M Street, N.W., Suite 235,

Washington, D.C. 20554. Parties must also file one copy of any

documents filed in this docket with the Commission's duplicating

contractor, International Transcription Services, Inc. (``ITS''), 2100

M Street, N.W., Suite 140, Washington, D.C. 20037 (tel. 202-857-3800).

Comments and reply comments will be available for public inspection

during regular business hours in the FCC Reference Center, 1919 M

Street, N.W., Room 239, Washington, D.C. 20554. Copies of comments and

reply comments will also be available through ITS.

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

diskette. Such diskette submissions are in addition to, and not a

substitute for, the formal filing requirements addressed above. Parties

submitting diskettes should submit them to Secretary, Network Services

Division, Common Carrier Bureau, 2000 M Street, N.W., Suite 235,

Washington, D.C. 20554. Diskette submissions 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 (comments or reply comments) and

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

letter.

[[Page 4976]]

IV. Ordering Clauses

80. Accordingly, it is hereby ordered that, pursuant to Sections 1,

4(i), 4(j), 10, 214, 218, 254 and 571 of the Communications Act of

1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 214, 218, 254

and 571, a NOTICE OF PROPOSED RULEMAKING is hereby ADOPTED.

81. 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 Section 605(b) of the

Regulatory Flexibility Act, 5 U.S.C. 605(b).

List of Subjects in 47 CFR Part 63

Communications common carriers, Reporting and recordkeeping

requirements, Telegraph, Telephone.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-2568 Filed 1-31-97; 8:45 am]

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