Access Charge Reform for Incumbent Local Exchange Carriers Subject to Rate-of-Return Regulation

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 69

[CC Docket No. 98-77; FCC 98-101]

Access Charge Reform for Incumbent Local Exchange Carriers

Subject to Rate-of-Return Regulation

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: By this Notice of Proposed Rulemaking (NPRM), the Commission

commences a proceeding to reform access charge rules applicable to

incumbent local exchange carriers (LECs) subject to rate-of-return

regulation. The NPRM seeks comment on proposals to establish a

transition to access charges that more closely reflect economic costs,

with a goal of making our system of interstate access charges

compatible with a competitive paradigm. Specifically, the Commission

seeks comment on proposals to revise the switched access rate structure

for rate-of-return LECs. The Commission also solicits comments on some

additional issues relating to the regulation of interstate access

services of rate-of-return LECs.

DATES: Comments are due on or before August 17, 1998, and reply

comments are due on or before September 17, 1998. Written comments and

reply comments by the public on the proposed information collections

are due August 17 and September 17, 1998, respectively.

ADDRESSES: Federal Communications Commission, Secretary, Room 222, 1919

M Street N.W., Washington, DC 20554. In addition to filing comments

with the

[[Page 38775]]

Commission's Secretary, a copy of any comments on the proposed

information collections contained herein should be submitted to Judy

Boley, Federal Communications Commission, Room 234, 1919 M Street N.W.,

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

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

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

FOR FURTHER INFORMATION CONTACT: Douglas L. Slotten, Common Carrier

Bureau, Competitive Pricing Division, at (202) 418-1572. For additional

information concerning information collections, contact Judy Boley at

(202) 418-0214, or via the Internet at [email protected].

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

in the matter of Access Charge Reform for Incumbent Local Exchange

Carriers Subject to Rate-of-Return Regulation, CC Docket 98-77, adopted

May 26, 1998, and released June 4, 1998. The complete text of this NPRM

is available for inspection and copying during normal business hours in

the Commission's Reference Center, Room 239, 1919 M Street N.W.,

Washington, DC. In addition, the NPRM is available through the Internet

at http://www.fcc.gov/Bureaus/Common__Carrier/Notices/1998/fcc98101.wp.

The complete text may be purchased from the Commission's duplicating

contractor, International Transcription Service, Inc. (ITS, Inc.), at

1231 20th Street N.W., Washington, DC 20036 (202-857-3800).

Paperwork Reduction Act

This NPRM contains either proposed or modified information

collections. As part of our continuing effort to reduce paperwork

burdens, we invite the general public and OMB to take this opportunity

to comment on any additional information collections contained in this

NPRM, not previously approved by OMB, as required by the Paperwork

Reduction Act of 1995, Pubic Law 104-13. Public and agency comments and

reply comments are due August 17 and September 17, 1998, respectively.

Written comments by the Office of Management and Budget on the proposed

information collections are due September 18, 1998. 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 Control No.: None.

Title: Access Charge Reform for Incumbent Local Exchange Carriers

Subject to Rate-of-Return Regulation--CC Docket No. 98-77.

Form No.: N/A.

Respondents: Business or other for-profit entities.

Type of Review: New collection.

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Number of Estimated time per response

Proposed collection respondents (annual) Total annual burden

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Cost Study for Local Switching Port 155 400 Hours........................ 62,000 Hours.

Costs.

Tariff Filing...................... 51 200 Hours........................ 10,200 Hours.

New Services Requirement........... 10 10 Hours......................... 100 Hours.

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Frequency of Response: One-time requirement, on occasion.

Total Annual Burden: 72,300 Hours.

Estimated Costs Per Respondent: $600 per respondent.

Needs and Uses: The Commission commences a proceeding to reform

access charge rules applicable to incumbent local exchange carriers

(LECs) subject to rate-of-return regulation. We propose to require

rate-of-return LECs to conduct cost studies to determine the

geographically-averaged portion of local switching costs that is

attributable to the line-side ports and to dedicated trunk-side ports,

to be filed with the tariffs implementing these changes. The Commission

also proposes to allow rate-of-return carriers to file a petition for

new services based on a public interest standard. The information will

be used to determine whether the incumbent LECs should receive the

regulatory relief proposed in the NPRM. The information collections are

necessary to implement the Telecommunications Act of 1996.

Synopsis of Notice of Proposed Rulemaking

1. Access reform is one of a series of actions that collectively

are intended to foster and accelerate the introduction of efficient

competition in all telecommunications markets, pursuant to the mandate

of the 1996 Telecommunications Act (1996 Act). In the Access Charge

Reform Order, we set in motion the forces of competition and

deregulation in local telecommunications markets served by incumbent

LECs subject to price cap regulation. Access Charge Reform, CC Docket

No. 96-262, First Report and Order, 12 FCC Rcd 15982 (1997), 62 FR

31868 (June 11, 1997) (Access Charge Reform Order); Order on

Reconsideration, 12 FCC Rcd 10119 (1997), 62 FR 40460 (July 29, 1997);

appeal pending sub nom. Southwestern Bell Tel. Co. v. FCC, No. 97-2618

(and consolidated cases) (8th Cir. argued Jan. 15, 1998); Second Order

on Reconsideration, 12 FCC Rcd 16606 (1997), 62 FR 56121 (October 29,

1997) (Second Reconsideration Order). The 1996 Act, however, expressly

provides that ``Consumers in all regions of the Nation . . . should

have access to telecommunications and information services . . . that

are reasonably comparable to those services provided in urban areas and

that are available at rates that are reasonably comparable to rates

charged for similar services in urban areas.'' 47 U.S.C. 254(b)(3).

With this NPRM, we commence a further proceeding on access reform to

mobilize the same forces to serve the interests of consumers located in

those rural and suburban areas that are served by incumbent LECs

subject to rate-of-return regulation. The first step in this reform

process is to enable these rate-of-return LECs to assess interstate

access charges that are more consistent with principles of cost-

causation and economic efficiency.

2. With this NPRM, we continue the process of reforming the access

charge rate structure for rate-of-return LECs that was begun in the

Access Charge Reform Order with the modifications to the transport rate

structure, the reallocation of costs in the transport interconnection

charge (TIC), and the amendments reflecting the changes necessary to

implement universal service reform. In doing so, we intend to build on

the analysis of the access charge rate structure developed in the

Access Charge Reform Order. While rate-of-return LEC costs generally

may be higher than price cap LEC costs due to longer loops or lower

economies of

[[Page 38776]]

scale, the two groups of carriers incur costs in the same manner, and

similar economic principles should apply. Subject to receiving evidence

showing that differences exist between price cap LECs and rate-of-

return LECs that require different rules to achieve the goal of

fostering an efficient, competitive marketplace, we propose to amend

the access charge rules for rate-of-return LECs in a manner similar to

that adopted for price cap LECs.

3. We recognize that differences in the circumstances of rate-of-

return and price cap LECs may require different approaches to reform,

including a different transition to more economically efficient, cost-

based interstate access charges. We seek to ensure that, at the end of

the transition, all Americans enjoy the benefits of competition. By

varying the transitional mechanisms, we can ensure that the process of

getting to those benefits is as smooth as possible.

In this NPRM we propose to reform the access charge rate structure

of rate-of-return LECs. We address many of the most fundamental

economic inefficiencies in the current structure and will lay a

foundation on which to develop further initiatives for rate-of-return

LECs, including the rural LECs, most of whom are subject to rate-of-

return regulation. In a subsequent phase of this proceeding, we intend

to address the very difficult question of when, and how much,

additional pricing flexibility should be afforded to rate-of-return

LECs. We also intend to address, in a future proceeding, alternative

forms of regulation for LECs currently subject to rate-of-return

regulation. Such alternative regulatory structures could offer

incentives to rate-of-return LECs that are able to become more

efficient.

5. The Access Charge Reform Order, including subsequent

reconsideration and waiver orders, and the Universal Service Order,

made the modifications necessary to implement the revisions to the

universal service support mechanisms adopted in the Universal Service

Order. Federal-State Joint Board on Universal Service, CC Docket No.

96-45, First Report and Order, 12 FCC Rcd 8776 (1997), 62 FR 32862

(June 17, 1997) (Universal Service Order). This NPRM is not intended to

address contentions that some additional costs or services should

receive universal service support; those matters will be resolved in

the Universal Service proceeding. We note that the Commission has

determined that there shall be no change in the existing high cost

support mechanisms for rural LECs until January 1, 2001, at the

earliest. This means that, in the interim, the amount of universal

service support for rural LECs will be maintained initially at existing

levels and should increase in accordance with specified factors, such

as inflation, that have historically guided changes in such support.

6. Common Line Costs. Currently, rate-of-return LECs' subscriber

line charges (SLCs) are limited to recovering the lesser of the actual

cost of the interstate portion of the local loop, or $3.50 per month

for residential and single line business customers, or $6.00 per month

for multi-line business customers. Any remaining common line costs are

recovered through carrier common line (CCL) charges, which are per-

minute charges imposed on interexchange carriers (IXCs).

7. We tentatively conclude that we should adopt rate structure

modifications for rate-of-return LECs that are similar to those that

were adopted for price cap LECs in the Access Charge Reform Order. We

seek comment on the applicability of the rate structure modifications

adopted for price cap LECs to rate-of-return LECs. Specifically, the

Commission proposes to permit rate-of-return LECs to adjust their SLC

ceilings on non-primary residential and multi-line business lines to

the level necessary to recover their average per-line interstate-

allocated common line costs, subject to an inflation-adjusted $9.00

ceiling, while leaving the existing SLC ceiling of $3.50 for primary

residential and single-line business lines at its current level.

8. To ameliorate possible adverse impacts of an immediate SLC

adjustment for non-primary residential lines, the Commission proposes

to adjust the SLC ceilings for these lines gradually. The Commission

seeks comment on adjusting the monthly SLC ceiling initially to the

LEC's average per-line interstate-allocated costs, but not exceeding

$1.50 more than the current SLC ceiling. Annually thereafter, rate-of-

return LECs could adjust the monthly SLC ceiling for these lines for

inflation and could increase the ceiling by $1.00 per line, until the

SLC ceiling for non-primary residential lines is equal to the SLC

ceiling permitted for multi-line business lines.

9. To the extent that SLC ceilings prevent rate-of-return LECs from

recovering their allowed common line revenues from end users, the

Commission proposes to permit these LECs to recover the shortfall,

subject to a maximum charge, through a presubscribed interexchange

carrier charge (PICC), a flat, per-line charge assessed on the end-

user's presubscribed interexchange carrier. For the first year, the

proposed ceiling on the PICC will be $1.50 per month for non-primary

residential lines and $2.75 per month for multi-line business lines.

The Commission proposes adjusting the PICC for price cap non-primary

residential and multi-line business lines annually for inflation and

increasing the PICCs for non-primary residential and multi-line

business lines by a maximum of $1.00 and $1.50 per year, respectively,

until price cap LECs recover all their permitted common line revenues

through a combination of flat-rated SLC and PICCs. The Commission also

invites comment on whether the PICC for primary residential and single-

line business lines should be capped at $0.53 per month for the first

year, and adjusted annually thereafter for inflation, and increase by

$0.50 per year, until it equals one twelfth of the sum of the annual

per-line common line cost and residual interconnection charge cost

permitted under our rate-of-return rules, divided by the projected

average number of local exchange service subscriber lines in use during

such annual period, less the maximum primary residential and single-

line business lines SLC computed pursuant to our rules. If a customer

does not designate a presubscribed interexchange carrier, the

Commission proposes to permit rate-of-return LECs to collect directly

from the customer the PICC that could otherwise be assessed against the

presubscribed interexchange carrier.

10. To the extent that the SLC ceilings on all lines and the PICC

ceilings on primary residential and single-line business lines prevent

recovery of the full common line revenues permitted by the rate-of-

return rules, the Commission proposes to permit rate-of-return LECs to

recover the shortfall through a per-minute residual CCL charge. The

Commission proposes that rate-of-return LECs should assess the residual

CCL charge initially on originating minutes, subject to a rate cap,

with any residual being collected through a per-minute terminating CCL

charge. Rate-of-return LECs would, under the Commission's proposal, be

allowed to assess an originating CCL charge that, when added to the sum

of local switching charges, the per-minute residual TIC, and any per-

minute charges related to marketing expenses, does not exceed the sum

of local switching charges, the per-minute CCL charge, and TIC assessed

on originating minutes on December 31, 1997. A per-minute residual TIC

could also be assessed on IXCs by rate-of-return LECs to recover any

TIC costs not recovered through facility-based charges. The originating

residual TIC charge would be subject to the same

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ceiling mechanism as the residual CCL charge.

11. Under the Commission's proposal, the per-minute residual CCL

and residual TIC charges will be eliminated as the PICC ceilings

increase. After the residual CCL and the residual TIC charges are

eliminated, increases in the PICC for primary residential and single-

line business lines will reduce the PICCs on non-primary residential

and multi-line business lines by an amount that corresponds to the

total increases in PICCs for primary residential and single-line

business lines. Reductions will be targeted to the PICCs on multi-line

business lines until the PICCs for those lines are equal to the PICCs

for non-primary residential lines. Thereafter, reductions will be

applied to both classes of customers equally until the combined SLCs

and PICCs for primary residential and single-line business lines

recover the full average per-line common line costs permitted under our

rules, and the additional PICCs on non-primary residential and multi-

line business lines no longer recover common line costs. Under the

proposal, certain TIC costs and marketing expenses, in addition to

common line costs, will be recovered through non-primary residential

line and multi-line business PICCs, even though SLCs and PICCs for

primary residential and single-line business lines only recover the

average per-line common line costs permitted under our rules.

12. We conclude that modifications similar to those we made for

price cap LECs are needed to remove implicit subsidies and ensure that

charges more accurately reflect the manner in which the costs are

incurred, thereby promoting competition. We acknowledge that certain

rate-of-return LECs, especially those in rural and insular areas, face

different market conditions and incur higher costs than do many price

cap LECs due to the lack of economies of scale that result from low

subscriber density and small exchanges that characterize rural areas.

Smaller LECs serving more costly areas, however, will receive universal

service support based on their embedded costs until the Commission,

with the Universal Service Joint Board's assistance, develops an

appropriate model to ensure that rural carriers receive support at a

level that will enable them to provide supported services at affordable

rates. Adopting the same rate structure approach for rate-of return

LECs, therefore, most likely will not align rates with costs as quickly

as it will for price cap LECs. For many rate-of-return companies,

especially those located in rural and insular areas, longer loops and

difficult terrain result in average loop costs that significantly

exceed the average loop costs of price cap LECs. The cost recovery

mechanism for price cap LECs contemplates that price cap LECs will be

able to recover all of their interstate-allocated common line costs

through a combination of SLCs and PICCs, reducing the CCL charge to

zero in a relatively short amount of time.

13. If rate-of-return LECs were to implement the revised common

line rate structure applied to price cap LECs, multi-line business

PICCs and CCL charges would often go to their respective ceilings and

remain higher than those of price cap LECs for the foreseeable future,

because rate-of-return LEC common line costs are significantly higher

than those of price cap LECs. If we direct rate-of-return LECs to

recover certain switching, marketing, and residual TIC costs through

the common line SLCs and PICCs, per-line common line costs will

increase further. Under this scenario, the SLCs and/or PICCs for many

rate-of-return LECs would have to be adjusted to a level that would be

higher than the ceilings we adopted for price cap LECs if significant

reductions in the CCL rate were desired. We solicit comment on this

analysis.

14. We ask interested parties to discuss how we should determine

appropriate SLC ceilings. Several entities have expressed concern that

the immediate SLC increases to $9.00 for non-primary or multi-line

business lines will create a large disparity between SLCs charged by

rate-of-return LECs and neighboring price cap LECs, and that under the

1996 Act and applicable state laws, the lower-cost price cap carriers

will be able to ``cherry pick'' the high volume business customers of

the higher priced rate-of-return LECs. These entities urge the

Commission to grant them pricing flexibility and propose that SLCs be

set based on the national average or on the neighboring price cap LEC's

average SLC.

15. We invite comment on establishing a ceiling that is based on

the neighboring price cap LEC's average multi-line business SLC, or on

the national average. In addition, in some cases, as the non-primary

SLC cap increases, the disparity between the $3.50 SLC for primary

residential lines and the SLC for non-primary residential lines will

most likely be greater for rate-of-return carriers than it is for price

cap companies. Would this disparity warrant a different approach for

rate-of-return carriers' non-primary residential lines than we adopted

for price cap LECs?

16. Interested parties should discuss whether the PICC is an

effective cost recovery mechanism for rate-of-return LECs' common line

costs and, if so, to what extent the PICCs and CCL charges for rate-of-

return LECs should be comparable to those of price cap LECs. If

commenters believe that the plan we adopted in the Access Charge Reform

Order would not produce the expected economic benefits for rate-of-

return LECs and their customers, interested parties should submit

alternative plans. For example, should we prescribe higher ceilings for

PICCs that would permit rate-of-return LECs to reduce their CCL rates

to levels comparable to those of price cap LECs? Alternatively, should

we prescribe a maximum CCL charge and eliminate the PICC ceiling to

allow rate-of-return LECs to recover the shortfall through flat-rated

charges? In addition, in light of the higher common line costs incurred

by many rate-of-return LECs, and because, if adopted, other

modifications proposed in this NPRM will require rate-of-return LECs to

recover certain switching, marketing, and TIC costs through the common

line recovery mechanism, we invite parties to discuss whether we should

permit these carriers to recover relatively more of the common line

revenue requirement through terminating minutes. Given that local

switching per-minute rates will be reduced significantly by the

inclusion of dial equipment minutes (DEM) weighing in universal service

support, we ask interested parties to discuss whether a higher per-

minute CCL charge in the short run is unsatisfactory.

17. Interested parties should also discuss the extent to which, for

purposes of assessing SLCs and PICCs, residential and business lines

should be treated differently. For example, should non-primary

residential lines be assessed lower PICCs than multi-line business

lines and phased in over time, as we did for price cap LECs, or should

we permit the SLCs for non-primary residential lines to increase more

rapidly for rate-of-return LECs than for price cap LECs, in order to

allow carriers in high-cost areas to reduce their CCL charge more

rapidly than would otherwise be possible with graduated increases in

the SLC? Alternatively, should a uniform PICC be applied to all non-

primary residential and business lines to spread the revenue

requirement evenly across these classes of customers?

18. In the Second Reconsideration Order in the Access Charge Reform

proceeding, we concluded that with

[[Page 38778]]

respect to the PICC, Centrex customers should be treated similarly to

PBX customers, because the two arrangements are functionally

equivalent. Accordingly, we determined that Centrex lines should be

assessed PICCs using a 9:1 line-to-trunk equivalency ratio, except

where the multi-line business SLC ceiling does not permit the recovery

of all interstate-allocated loop costs from the end user. In those

instances, a PICC that includes the difference between the per-line

loop cost and the multi-line business SLC cap, subject to the multi-

line business PICC ceiling, will be assessed on Centrex lines. We seek

comment on the applicability of this approach and of the 9:1 ratio to

rate-of-return LECs. Parties proposing different ratios should submit

data supporting the ratio they propose.

19. We also seek comment on how the 1996 Act will affect the

development of competition in areas served by small and rural rate-of-

return LECs. While the entry of competitors in many rate-of-return LEC

service areas may be delayed due to the provisions of 47 CFR 251(f),

entry in these areas will likely occur in time. Specifically, section

251(f)(1) provides an exemption for certain rural telephone companies

from the duties of local exchange carriers enumerated in section

251(c), including but not limited to the duties to interconnect, to

provide access to network elements on an unbundled basis, and to resell

telecommunications services. Section 251(f)(2) provides a mechanism by

which local exchange carriers with fewer than two percent of the

nation's subscriber lines may petition the state for suspension or

modification of some of the duties imposed by the Act on local exchange

carriers. We ask interested parties to discuss the impact of these

statute sections and the development of competition as they relate to

the rate structure and transition mechanism we are proposing in this

NPRM.

20. We also seek comment on whether we should adopt one approach

for all rate-of-return LECs or whether our approach should vary

depending on size, population density, topography, or other factors

that may vary among rate-of-return LECs. Are there concerns that are

specific to National Exchange Carrier Association (NECA) pooling

companies that warrant separate treatment? Interested parties should

address the specific issues raised and submit proposals for

modifications that are consistent with the goals of the 1996 Act.

Interested parties should also propose a time frame for adopting

modifications to the rate structure. Should modifications adopted

become effective immediately or should they be phased in over time?

Finally, parties should address the extent to which options proposed

affect small business entities, including small incumbent LECs and new

entrants.

21. Assessment of SLCs and PICCs on Derived Channels. We propose to

adopt similar SLCs and PICCs for integrated services digital network

(ISDN) service offered by rate-of-return LECs. Specifically, we propose

to permit rate-of-return LECs to charge SLC and PICC rates for Primary

Rate Interface (PRI) ISDN service equal to five times the rate-of-

return LEC's multi-line business SLC and PICC, and SLC and PICC rates

for Basic Rate Interface (BRI) ISDN service equal to the rate-of-return

LEC's non-primary residential line SLC and PICC. We seek comment on

these conclusions and invite parties to comment on the impact that

assessing SLCs and PICCs on ISDN lines will have on rate-of-return

carriers and their customers. Parties should address whether the cost

relationship between ISDN and analog service provided by rate-of-return

LECs is similar to that of price cap LECs; if they believe it is not,

they should submit specific data supporting their position. We also

invite parties to discuss the relationship between proposed

modifications to the common line rate structure and our tentative

conclusion to treat rate-of-return LECs' ISDN lines in the manner

discussed above.

22. Local Switching Dedicated Facilities. The interstate portion of

local switching costs is currently recovered through per-minute local

switching charges levied on IXCs, even though a significant portion of

local switching costs is associated with ports and appears to be driven

by the number of lines or trunks connected to the switch, not by the

number of minutes of traffic routed by the switch. We propose to

require rate-of-return LECs to reassign all costs for line-side ports,

including the line card, protector, and main distribution frame, from

the local switching category to the common line category, for recovery

through the common line rate structure. We seek comment on this

proposal. We ask if there are any specific factors for rate-of-return

LECs that would preclude our adoption of this rate structure change at

this time.

23. We propose to require rate-of-return LECs to conduct cost

studies to determine the geographically-averaged portion of local

switching costs that is attributable to the line-side ports and to

dedicated trunk-side ports, to be filed with the tariffs implementing

these changes. We solicit comment on this cost study proposal. In the

alternative, commenters are requested to suggest a substitute mechanism

to identify and assign costs to line-side ports or to trunk-side ports.

24. We also propose to require rate-of-return LECs to recover

dedicated trunk port costs through a flat-rated trunk port charge

assessed on the purchaser of the dedicated trunk terminating at the

port. Analog switches require a voice-grade interface on the trunk-side

of the end office switch, thereby requiring DS1 transport trunks to be

demultiplexed into individual voice-grade circuits before being

switched at analog end office switches. DS1/voice-grade multiplexers

perform this function. A digital switch port includes the DS1/voice-

grade multiplexing function. In addition, we propose to establish a

separate rate element through which rate-of-return LECs can recover on

a flat-rated basis the additional costs of DS1/voice grade multiplexers

required in conjunction with terminating dedicated trunks at analog

switches that were reassigned from the TIC. We ask whether the benefits

to be gained from a more efficient, cost-causative rate structure

outweigh the burden on rate-of-return LECs of establishing these new

rate elements. In addition, we solicit suggestions as to what specific

modifications of the part 69 cost allocation rules we should make to

implement any rate structure changes for dedicated local switching

facilities.

25. Common line charges will recover the cost of a line port used

to provide basic, analog service, even when the end user has another

form of service. For some services, such as ISDN, the cost of a line

port is significantly more than the cost of a line port associated with

a basic, analog line. We propose to permit rate-of-return LECs to

assess a separate, monthly, flat-rated charge directly on end users of

such services, to recover the amount by which the cost of a line port

for ISDN, or the cost of a line port associated with other services,

exceeds the cost of a line port for basic, analog service. We request

comment on this proposal.

26. Local Switching Shared Facilities. We seek comment on our

tentative conclusion that rate-of-return LECs adhere to a per-minute

rate structure for shared local switching facilities, including the

central processing unit, switching matrix, and shared trunk ports.

Under this approach, the shared trunk ports and any associated DS1/

voice grade multiplexers required at analog local switches will be

assessed on a per-minute basis, separate from the charge for the switch

itself. We ask whether there are any factors inherent to

[[Page 38779]]

rate-of-return LECs that should lead us to change this tentative

conclusion.

27. Call Setup Charge. We propose to permit, but not require, rate-

of-return LECs to establish a charge for call setup, the process of

establishing a transmission path over which a phone call will be

routed. Costs for call setup using SS7 are incurred primarily on a per-

call rather than a per-minute basis. Under this proposed revision to 47

CFR 69.106, a rate-of-return LEC could elect to establish a separate

per-call setup charge assessed on IXCs for all originating interstate

calls handed off to the IXC's point of presence (POP), and on all

terminating interstate calls that are received from an IXC's POP,

whether or not a call is completed. We invite comment on this proposal

for an optional call setup charge, including specific language to

modify our part 69 cost allocation rules to implement this rate

structure change. Moreover, if a rate-of-return LEC elects to recover

revenue requirements through a call setup charge, we tentatively

conclude that this charge cannot overlap with any other local switching

charges, with charges for dedicated SS7 facilities, or with other

signalling charges. We request comment on our tentative conclusion

prohibiting double recovery for call setup charges by rate-of-return

LECs. Commenters also should suggest mechanisms that would prevent any

double recovery for rate-of-return LECs.

28. It would be extremely difficult to segregate the costs of the

switch central processing unit and other traffic-sensitive costs into

per-message and per-minute portions and to verify that the allocation

has been done properly. Therefore, we propose to limit the costs that a

rate-of-return LEC may recover through call setup charges to those

associated with signalling. We request comment on this proposal. We

seek comment on how call setup costs are affected by whether

multifrequency (MF) signalling or SS7 signalling is employed. We also

request estimates of the percentage of the total costs of a typical

call that are represented by call setup costs. To facilitate our

comparison of the estimates submitted, we request that commenters use

an average call duration of 3.86 minutes, which we used as the call

duration in our analysis in the Access Charge Reform Order.

29. Tandem-Switched Transport Issues. We request comment on our

analysis that we should require rate-of-return LECs to recover the

costs of trunk ports used to terminate dedicated trunks on the serving

wire center (SWC) side of the tandem switch through flat-rated charges

assessed on the purchaser of the dedicated trunk terminated at the

trunk port on the SWC side of the tandem switch. To ease the burdens of

implementing this unbundling, we propose to permit rate-of-return LECs

to use the dedicated trunk port rates at the local switch to establish

this unbundled charge. We ask for comment on this proposal. With regard

to shared facilities at the tandem switch, we solicit comment on our

tentative conclusion that there is no need to create a separate charge

for shared trunk ports on the end-office-side of the tandem switch

because this trunk port cost is included in the charge for the tandem

switch and there is no reason to charge separately for shared trunk

ports in the tandem switching context.

30. We also propose to require rate-of-return LECs to establish

separate rate elements to recover the costs of multiplexing equipment

on each side of the tandem switch that were reassigned to tandem

switching from the TIC in the Access Charge Reform First

Reconsideration Order. The rates for multiplexers on the SWC side of

the tandem switch would be flat rated because they are dedicated to a

single IXC. The rates for the multiplexers on the end office side of

the tandem switch would be per-minute charges because these

multiplexers are shared among all users of common transport. To

simplify the implementation process for rate-of-return LECs, we propose

to permit them to use multiplexer rates already established in their

special access tariff for similar multiplexers. We request comment on

these proposals. These provisions cover DS1/voice grade multiplexers

used with analog tandem switches, as well as other multiplexers that

are not included in transport rates.

31. Outstanding Transport Interconnection Charge Issues for Rate-

of-Return LECs. Although the Commission in the Access Charge Reform

Order directed rate-of-return LECs to make specified cost reallocations

from the TIC to other facilities-based rate elements, thereby reducing

the amount in the TIC, the reallocation of costs from the TIC to other

rate elements will not remove all of the costs from the TIC, leaving a

residual TIC. We propose to incorporate the residual TIC in the common

line pricing structure of rate-of-return LECs, just as we did for price

cap LECs. This will put in place a mechanism that will, at different

times for different rate-of-return LECs, begin the process of

transferring TIC costs to other rate elements. We ask for comment on

this analysis and on our proposal to adopt a similar rate structure to

that we employed for price cap LECs.

32. The Access Charge Reform Order reduces the TIC for price cap

LECs by targeting certain price cap index (PCI) reductions to reducing

the TIC. Price cap LECs will target price cap productivity (X-factor)

adjustments to the trunking basket's PCI, and therein to the TIC

service band index (SBI), thus reducing the amounts recovered through

the residual TIC and effectively spreading those residual TIC revenues

among the universe of access services. We ask whether any comparable

mechanism exists for rate-of-return LECs that would eliminate the

residual TIC in a reasonable time. We ask commenters whether it would

be practical to spread the residual TIC proportionately over the other

access elements in a manner comparable to that of targeting price cap

productivity reductions to the TIC. We seek comment on what would be a

reasonable time in which to accomplish such a reallocation. We ask

parties supporting such an approach to propose cost allocation rules to

implement their approach. Parties presenting data to quantify amounts

in the residual TIC should include sufficient detail to permit the

Commission and interested parties to evaluate the procedures used and

to adjust the results, if necessary, to address concerns raised by the

record. We seek comment on how these approaches affect small business

entities, including small incumbent LECs and new entrants.

33. We ask parties to address whether there are additional causes

of costs remaining in the residual TIC for rate-of-return LECs that

have not been identified previously that would justify further

reallocations of costs from the TIC. Parties identifying such costs

should indicate the other element(s) to which these additional costs

should be reallocated. We invite parties to comment on whether any

public policy reasons would support retaining some costs of rate-of-

return LECs in the residual TIC indefinitely. We ask parties to address

the competitive implications of waiting for completion of a Joint Board

review of separations procedures to determine which, if any, of the

costs in the TIC reflect the higher cost of providing transport

services in less densely populated areas, as compared with the costs

underlying transport rates that were derived from special access rates.

See Jurisdictional Separations Reform and Referral to the Federal-State

Joint Board, CC Docket No. 80-286, Notice of Proposed Rulemaking, 12

FCC Rcd 22120 (1997), 62 FR 59842 (November 5, 1997).

34. Signalling System Seven (SS7). SS7 is the international

standard

[[Page 38780]]

network protocol currently used to establish and close transmission

paths over which telephone calls are carried. Once the reallocation of

SS7 costs included in the TIC is completed, most, if not all, of SS7

costs presumably will be recovered through the local switching charge.

We invite comment on our proposal to continue the existing rate

structure for SS7 cost recovery by rate-of-return LECs, and to permit

these LECs to adopt the rate structure for SS7 services that we

approved in Ameritech Operating Companies Petition for Waiver of Part

69 of the Commission's Rules to Establish Unbundled Rate Elements for

SS7 Signalling, Order, 11 FCC Rcd 3839, 3841 (Com. Car. Bur. 1996). The

rate structure established by Ameritech pursuant to that waiver

recovers costs through four unbundled charges for the various functions

performed by SS7 networks: (1) Signal link; (2) STP port termination;

(3) signal transport; and (4) signal switching. We also solicit

additional, alternative SS7 rate structure proposals for rate-of-return

LECs. Any comments on this issue should include an assessment of the

expense of requiring rate-of-return LECs to install equipment in their

networks for metering SS7 traffic. Would the streamlined waiver

petition procedure we propose pursuant to section 69.4(g) be preferable

as a means to address alternative SS7 rate structures proposed by rate-

of-return LECs?

35. We recognize that some call setup is still performed using in-

band, MF signalling, rather than out-of-band signalling systems such as

SS7. SS7 signalling may be less prevalent for rate-of-return LECs than

for price cap LECs. Any determination we make concerning a SS7 rate

structure for rate-of-return LECs could be affected by the extent that

rate-of-return LEC networks use SS7. We also ask parties to comment on

the need for revisions to the cost allocation rules in part 69 to

accommodate the provision of SS7 signalling in accordance with the

provisions of the Ameritech SS7 waiver.

36. General Support Facilities Costs. To the extent that rate-of-

return LECs' costs are underallocated to the billing and collection

category, rate-of-return LECs' regulated services are recovering costs

associated with unregulated services through interstate access charges.

We solicit comment on our tentative conclusion that we should modify 47

CFR 69.307 for rate-of-return LECs to allocate general support

facilities (GSF) costs related to billing and collection services to

the billing and collection category. For rate-of-return LECs that

maintain accounts below the summary account level, we propose the use

of a general expense allocator to apportion the interstate share of

Accounts 2111 (Land), 2121 (Buildings), 2123 (Office Equipment), and

2124 (General Purpose Computers) between: (1) The billing and

collection category and (2) all other elements and categories. To

determine the amount to be assigned to the billing and collection

category, we propose to apply a modified ``Big Three Expense Factor''

allocator to the interstate investment recorded in these four accounts.

The interstate portion of Account 6120 (General Support Expenses) will

continue to be apportioned among all elements and categories, including

billing and collection, based upon the allocation rules contained in 47

CFR 69.401(a)(2). Access Charge Reform, Third Report and Order, CC

Docket No. 96-262, 12 FCC Rcd 22430 (1997) (Third Report and Order), 62

FR 65619 (December 15, 1997). Because certain small rate-of-return LECs

do not maintain accounts below the summary account level, we seek

comment on what adjustments, if any, we should make to the allocation

procedures to reflect this difference. It would be helpful if parties

would comment on how many rate-of-return LECs use general purpose

computers to provide billing and collection services. We also invite

parties to identify any changes that should be made to other access

elements as a result of any changes we may make to the GSF allocation

procedures. Finally, parties should also address the extent to which

these approaches affect large and small rate-of-return LECs differently

and how small business entities, including small incumbent LECs and new

entrants, will be affected.

37. Marketing Expenses. The Commission concluded in the Access

Charge Reform Order that price cap LECs' marketing costs that are not

related to the sale or advertising of interstate switched access

services are not appropriately recovered from IXCs through per-minute

interstate switched access charges. We seek comment on our tentative

conclusion that rate-of-return LECs' marketing expenses allocated to

the interstate jurisdiction should be recovered through the common line

recovery mechanism from end users on a per-line basis. Specifically, we

propose that rate-of-return LECs recover the revenues related to the

Account 6610 marketing expenses by increasing the SLCs for multi-line

business and non-primary residential lines, subject to the SLC

ceilings. To the extent the SLC ceilings prevent full recovery of these

amounts, rate-of-return LECs would be required to recover marketing

costs through equal increases on the PICCs for non-primary residential

and multi-line business lines, subject to the PICC ceilings. In the

event the PICC ceilings prevent full recovery of these expenses, any

residual marketing expenses may be recovered through per-minute charges

on originating access service, subject to the ceiling placed on

originating minutes. If rate-of-return LECs cannot recover their

remaining marketing expenses through per-minute charges on originating

access, any residual may be recovered through per-minute charges on

terminating access service. To the extent marketing expenses will be

recovered through the SLC, they shall not be included in the base

factor portion or considered common line revenues.

38. We also ask parties to propose a mechanism comparable to the

separate basket created for price cap LECs that will remove marketing

expenses from access charges assessed by rate-of-return LECs. We invite

parties to provide language for the amendment of our part 69 cost

allocation rules that affect the recovery of these marketing expenses

through the common line cost recovery mechanism.

39. Special Access. In light of the most recent changes to the

charges incurred by multi-line businesses, including the higher SLC and

the new multi-line business PICC, it may be cost effective for some

multi-line businesses to substitute the purchase of special access

lines for the use of switched access. We have already tentatively

concluded that we should permit price cap LECs to assess a PICC on

special access lines to recover revenues for the common line basket.

Access Charge Reform, CC Docket No. 96-262, Further Notice of Proposed

Rulemaking, 12 FCC Rcd 15982, 16154 para. 401 (1997), 62 FR 31868 (June

11, 1997) (Further Notice). The special access PICC would be no higher

than the PICC that a price cap LEC could charge for a multi-line

business line, would not recover TIC or marketing expenses, and would

be gradually eliminated as the single-line PICC is gradually

implemented for price cap LECs. We tentatively concluded that allowing

price cap LECs to impose such special access PICCs would be necessary

to facilitate the transition from current per minute CCL charges to the

flat-rate PICC.

40. We invite parties to comment on whether, if we apply a PICC to

special access services offered by price cap LECs, we should apply a

PICC to special access services offered by rate-of-return LECs. Parties

should comment on the

[[Page 38781]]

impact of PICCs on special access lines if the PICCs on rate-of-return

LECs' multi-line business lines remain in place for a considerably

longer time than they do for price cap LECs. To the extent parties

advocate assessing PICCs on special access lines, we seek comment on

how special access connections should be counted for purposes of

assessing a ``per line'' PICC. Parties should also address the extent

to which our proposal affects large and small LECs differently and how

small business entities, including small incumbent LECs and new

entrants, will be affected.

41. Part 69 Cost Allocation Rules. Under the Commission's

separations rules at 47 CFR part 36, certain costs of the incumbent LEC

network are assigned to the interstate jurisdiction. For rate-of-return

LECs, the Commission's cost allocation rules at 47 CFR part 69 allocate

these interstate costs among the various access and interexchange

services. In addition to the comment requested previously in this NPRM

on the need for changes to our cost allocation rules in conjunction

with specific proposals to revise certain rate structure provisions of

the part 69 rules, we ask whether we should make any other

modifications at this time to our cost allocation rules for rate-of-

return LECs to accommodate any of those changes, or to update the rules

in other respects. Parties making such suggestions should be specific

about the reasons the change is needed and include proposed language

for revising the cost allocation rules.

42. Modification of New Services Requirement. Rate-of-return LECs

currently must file a petition pursuant to 47 CFR 1.3 to request a part

69 waiver for the establishment of one or more new switched access rate

elements to accommodate a new service offering to switched access

customers. In order to streamline the part 69 waiver process for a

rate-of-return LEC wishing to offer a new service, we request comment

on our proposal to adopt for rate-of-return LECs the streamlined

petition provisions of section 69.4(g), which currently requires a

price cap LEC in similar circumstances to file a petition that

demonstrates one of two criteria: (1) That another LEC has previously

obtained approval to establish identical rate elements and that the

original petition did not rely upon a competitive showing as part of

its public interest justification, or (2) that the new rate elements

would serve the public interest. In addition, we request suggestions as

to any manner in which the procedures or standards of section 69.4(g)

should be modified for rate-of-return LECs. Parties should comment, for

instance, on whether a showing of prior approval should be limited to

petitions granted to other rate-of-return LECs.

Ex Parte Presentations

43. This Notice of Proposed Rulemaking is a permit-but-disclose

proceeding and is subject to the permit-but-disclose requirements under

47 CFR 1206(b), as revised. Persons making oral ex parte presentations

are reminded that memoranda summarizing the presentation must contain a

summary of the substance of the presentation and not merely a listing

of the subjects discussed. More than a one or two sentence description

of the views and arguments presented is generally required. Other rules

pertaining to oral and written presentations are set forth in section

1.1206(b), as well.

Regulatory Flexibility Analysis

44. As required by the Regulatory Flexibility Act (RFA), the

Commission has prepared this Initial Regulatory Flexibility Analysis

(IRFA) of the possible significant economic impact on small entities of

the proposals suggested in this NPRM. See 5 U.S.C. 603. The RFA, 5

U.S.C. 601 et seq., has been amended by the Contract With America

Advancement Act of 1996, Public Law 104-121, 110 Stat. 847 (1996)

(CWAAA). Title II of the CWAAA is the Small Business Regulatory

Enforcement Fairness Act of 1996 (SBREFA).

45. Written public comments are requested on the IRFA. Comments and

reply comments must be identified by a separate and distinct heading as

responses to the IRFA and must be filed on or before August 17 or

September 17, 1998 respectively. Parties should address the extent to

which our proposals affect large and small incumbent rate-of-return

local exchange carriers (LECs) differently and how small business

entities, including small incumbent LECs and new entrants, will be

affected. The Commission's Office of Public Affairs, Reference

Operations Division, will send a copy of this NPRM, including this

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

Administration, in accordance with 5 USC 603(a). In addition, the NPRM

and IRFA (or summaries thereof) will be published in the Federal

Register.

46. Need for, and Objectives of, the Proposed Rules. The

Commission's access charge rules for rate-of-return LECs were adopted

at a time when interstate access and local exchange services were

offered on a monopoly basis. We seek to revise the Commission's access

charge rules for local exchange carriers (LECs) subject to rate-of-

return regulation to make the rules consistent with the pro-

competitive, deregulatory policies contemplated by the

Telecommunications Act of 1996. In the 1997 Access Charge Reform Order,

we focused on setting in motion the forces of competition and

deregulation in local markets served by incumbent local exchange

carriers subject to price cap regulation. In this NPRM, we propose to

modify our rate structure requirements, to the extent possible, to

permit rate-of-return LECs to recover costs in a manner that more

accurately reflects the way those costs are incurred, identify implicit

subsidies, and reduce subsidies by recovering more costs from the cost

causer, thereby sending more accurate pricing signals to both consumers

and competitors, and facilitating the transformation from a regulated

to a competitive marketplace. Specifically, we propose to reduce usage-

sensitive interstate access charges by diminishing local loop and other

non-traffic sensitive costs and directing rate-of-return LECs to

recover those non-traffic sensitive costs through more economically

efficient, flat-rated charges.

47. Legal Basis. The proposed action is authorized by sections 1-4,

201-205, 251, 254, 303(r) and 403 of the Communications Act of 1934, as

amended, 47 U.S.C. 151-154, 201-205, 251, 254, 303(r) and 403.

48. Description and Estimate of the Number of Small Entities To

Which the Proposed Rules Will Apply. The Regulatory Flexibility Act

directs agencies to provide a description of and an estimate, where

feasible, of the number of small entities that may be affected by

proposed rules, if adopted. 5 U.S.C. 603(b)(3). The Regulatory

Flexibility Act generally defines the term ``small entity'' as having

the same meaning as the term ``small business.'' 5 U.S.C. 601(6). The

term ``small business'' has the same meaning as the term ``small

business concern'' under the Small Business Act. See 5 U.S.C. 601(3).

Under the Small Business Act, a ``small business concern'' is one that:

(1) Is independently owned and operated; (2) is not dominant in its

field of operation; and (3) meets any additional criteria established

by the Small Business Administration (SBA). 15 USC 632. See, e.g.,

Brown Transport Truckload, Inc. v. Southern Wipers, Inc., 176 B.R. 82

(N.D. Ga. 1994).

49. Because the small rate-of-return LECs that would be subject to

these rules are either dominant in their field of operations or are not

independently owned and operated, consistent with

[[Page 38782]]

our prior practice, they are excluded from the definition of ``small

entity'' and ``small business concerns.'' See Implementation of the

Local Competition Provisions of the Telecommunications Act of 1996, CC

Docket No. 96-98, First Report and Order, 11 FCC Rcd 15499, 16144-45

Paras. 1327-30 (1996) (Local Competition Order), 61 FR 45476 (August

29, 1996), Order on Reconsideration, 11 FCC Rcd 13042 (1996), 61 FR

52706 (October 8, 1996), vacated in part sub nom. Iowa Utils. Bd. v.

FCC, 120 F.3d 753 (8th Cir. 1997), cert. granted sub nom. AT&T Corp. v.

Iowa Utils. Bd., 118 S.Ct. 879 (1998). Accordingly, our use of the

terms ``small entities'' and ``small businesses'' does not encompass

small rate-of-return LECs. Out of an abundance of caution, however, for

regulatory flexibility analysis purposes, we will consider small rate-

of-return LECs within this analysis and use the term ``small incumbent

rate-of-return LECs'' to refer to any rate-of-return LECs that arguably

might be defined by SBA as ``small business concerns,'' including

consideration of any adverse impact of the rules we adopt and

consideration of alternatives that may reduce adverse impacts on such

entities. Since the time of the Commission's 1996 decision in the Local

Competition Order, 11 FCC Rcd at 16144-45, 61 FR 45476 (August 29,

1996), the Commission has consistently addressed in its regulatory

flexibility analyses the impact of its rules on incumbent LECs. See 13

CFR 121.210 (SIC 4813). See also Executive Office of the President,

Office of Management and Budget, Standard Industrial Classification

Manual (1987).

50. The SBA has defined a small business for Standard Industrial

Classification (SIC) category 4813 (Telephone Communications, Except

Radiotelephone) to be small telecommunications entities when they have

no more than 1,500 employees at the holding company level. 13 CFR

121.201. We invite interested parties to discuss the number of

telecommunications providers, if any, that can be considered ``small

entities'' within the meaning of the Regulatory Flexibility Act, and

whether there is any reason to establish different requirements for

small telecommunication providers. Below, we discuss the total

estimated number of telephone companies falling within these categories

and the number of small businesses in each category, and we then

attempt to refine further those estimates to correspond with the

categories of telephone companies that are commonly used under our

rules.

51. The most reliable source of information regarding the total

numbers of certain common carriers nationwide appears to be data the

Commission publishes annually in its Telecommunications Industry

Revenue report, regarding the Telecommunications Relay Service (TRS).

FCC, Telecommunications Industry Revenue: TRS Fund Worksheet Data,

Figure 2 (Number of Carriers Paying Into the TRS Fund by Type of

Carrier) (Nov. 1997) (Telecommunications Industry Revenue). According

to data in the most recent report, there are 3,459 interstate carriers.

These carriers include, inter alia, local exchange carriers, wireline

carriers and service providers, interexchange carriers, competitive

access providers, operator service providers, pay telephone operators,

providers of telephone toll service, providers of telephone exchange

service, and resellers. See 13 CFR 121.201, SIC code 4813.

52. Telephone Companies Affected. The United States Bureau of the

Census (Census Bureau) reports that, at the end of 1992, there were

3,497 firms engaged in providing telephone service, as defined therein,

for at least one year. United States Department of Commerce, Bureau of

the Census, 1992 Census of Transportation, Communications, and

Utilities, Establishment and Firm Size, at Firm Size 1-123 (1995) (1992

Census). This number contains a variety of different categories of

carriers, including incumbent LECs, interexchange carriers (IXCs),

competitive access providers, cellular carriers, mobile service

carriers, operator service providers, pay telephone operators, personal

communication service (PCS) providers, covered specialized mobile radio

(SMR) providers, and resellers. It seems certain that some of those

3,497 telephone service firms may not qualify as small entities or

small rate-of-return incumbent LECs because they are not independently

owned or operated. See generally 15 U.S.C. 632(a)(1). For example, a

PCS provider that is affiliated with an IXC having more than 1,500

employees would not meet the definition of a small business. It seems

reasonable to conclude that fewer than 3,497 telephone service firms

are small entity telephone service firms or small incumbent rate-of-

return LECs because some of them are not independently owned or

operated.

53. Wireline Carriers and Service Providers Affected. The SBA has

developed a definition of small entities for telephone communications

companies other than radiotelephone (wireless) companies. According to

the SBA's definition, a small business telephone company other than a

radiotelephone company is one employing no more than 1,500 persons. 13

CFR 121.201, SIC Code 4812. The Census Bureau reports that there were

2,321 such telephone companies in operation for at least one year at

the end of 1992. 1992 Census, supra, at Firm Size 1-123. All but 26 of

the 2,321 non-radiotelephone companies listed by the Census Bureau were

reported to have fewer than 1,000 employees. Thus, even if all 26 of

those companies had more than 1,500 employees, there would still be

2,295 non-radiotelephone companies that might qualify as small entities

or small rate-of-return LECs. We do not have data on the number of

carriers that are not independently owned and operated, and thus are

unable at this time to estimate with greater precision the number of

wireline carriers and service providers that would qualify as small

business concerns under the SBA's definition. Consequently, we estimate

that there are fewer than 2,295 small telephone communications

companies other than radiotelephone companies that may be affected by

the proposed rules, if adopted.

54. Incumbent Local Exchange Carriers Affected. Neither the

Commission nor the SBA has developed a definition of small providers of

local exchange service. The closest applicable definition under SBA

rules is for telephone telecommunications companies other than

radiotelephone (wireless) companies. Standard Industrial Classification

(SIC) Code 4813. The most reliable source of information regarding the

number of incumbent LECs nationwide appears to be the report that we

compiled from the 1997 Telecommunications Relay Service (TRS) Fund

worksheets and the Universal Service Fund (USF) worksheets of

September, 1997. According to our most recent data, 1,376 companies

that provided interstate telecommunications service as of June 30, 1997

reported that they were engaged in the provision of local exchange

service. Federal Communications Commission, Common Carrier Bureau,

Industry Analysis Division, Carrier Locator: Interstate Service

Providers, Figure 1 (Nov. 1997). Although it seems certain that some of

these carriers are not independently owned or operated, have more than

1,500 employees, or are subject to price cap regulation, we are unable

at this time to estimate with greater precision the number of rate-of-

return LECs that would qualify as small business

[[Page 38783]]

concerns under the SBA's definition. Consequently, we estimate that

there are fewer than 1,376 small rate-of-return LECs that may be

affected by the proposals in this NPRM, if adopted. We seek comment on

this estimate.

55. Interexchange Carriers. Neither the Commission nor the SBA has

developed a definition of small entities specifically applicable to

providers of interexchange services. The closest applicable definition

under the SBA rules is for telephone communications companies other

than radiotelephone (wireless) companies. 13 CFR 121.201, SIC code

4813. According to the most recent Telecommunications Industry Revenue

data, 143 carriers reported that they were engaged in the provision of

interexchange services. Telecommunications Industry Revenue, Figure 2.

We do not have data specifying the number of these carriers that are

not independently owned and operated or have more than 1,500 employees,

and thus are unable at this time to estimate with greater precision the

number of interexchange carriers (IXCs) that would qualify as small

business concerns under the SBA's definition. Consequently, we estimate

that there are fewer than 143 small entity IXCs that may be affected by

the proposed rules, if adopted.

56. Description of Projected Reporting, Recordkeeping, and Other

Compliance Requirements. It is not clear whether, on balance, proposals

in this NPRM would increase or decrease incumbent rate-of-return LECs'

administrative burdens. With respect to rate-of-return LECs, we believe

that the rate structure reforms that we propose in Sections II and III

would require at least one, and possibly several, additional filings,

and may reduce some administrative burdens. For example, if we adopt

the streamlined petition provisions of 47 CFR 69.4(g) for introduction

of new services by rate-of-return LECs, we expect that this would

decrease some administrative burdens of rate-of-return LECs.

57. If the rule revisions we propose are adopted, we estimate that

these rate-of-return LECs would make one tariff filing to bring their

access charges into compliance with the revised rules. We are unable to

estimate how extensive each tariff filing would be, on average. We

estimate that, on average, it would take approximately two hours per

page for the rate-of-return LEC to prepare each tariff filing, at a

cost of $35 per hour in professional level and support staff salaries.

If we decide to require the filing of a cost study for determining

local switching costs attributable to line-side ports and to trunk-side

ports, these rate-of-return LECs would file one cost study. We estimate

that, on average, it would take approximately 400 hours for the rate-

of-return LEC to prepare a cost study, at a cost of $30 per hour in

professional level and support staff salaries. Compliance with these

tariff and cost study requirements may compel the use of engineering,

technical, operational, accounting, billing, and legal skills.

58. Steps Taken to Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered. In Sections II and

III, for the subscriber line charge, the carrier common line charge,

non-traffic sensitive switching costs, the transport interconnection

charge, a special access PICC, and general purpose computer costs, we

have sought comment on how a number of proposals would affect small

entities. These proposals could have varying positive or negative

impacts on small entities, including small rate-of-return LECs and new

entrants. We seek comment on these proposals and urge that parties

support their comments with specific evidence and analysis.

59. Federal Rules that May Duplicate, Overlap, or Conflict with the

Proposed Rules. None.

Additional NPRM Filing Procedures

60. Pursuant to applicable procedures set forth in 47 CFR 1.399 and

1.411 et seq., interested parties may file comments with the Secretary,

Federal Communications Commission, Washington D.C. 20554, no later than

August 17, 1998. Interested parties may file replies no later than

September 17, 1998. To file formally in this proceeding, participants

must file an original and twelve copies of all comments, reply

comments, and supporting comments. If participants want each

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

plus 16 copies must be filed. In addition, parties must file two copies

of any such pleading with the Competitive Pricing Division, Common

Carrier Bureau, Room 518, 1919 M Street, N.W., Washington, D.C. 20554.

61. Parties submitting diskettes should submit them along with

their formal filings to the Commission's Office of the Secretary.

Submissions should be on a 3.5 inch diskette formatted in an DOS PC

compatible form. The document should be saved into WordPerfect 5.1 for

Windows format. The diskette should be submitted in ``read only'' mode.

The diskette should be clearly labelled with the party's name,

proceeding, type of pleading (comment or reply comment), docket number,

and date of submission.

62. Parties may also file informal comments electronically via e-

mail [email protected]>. Only one copy of electronically-filed

comments must be submitted. The docket number of this proceeding must

appear in the subject line, CC Docket No. 98-77. The subject line must

also disclose whether an electronic submission is an exact copy of

formal comments. Your full name and U.S. Postal Service mailing address

must be included in your submission.

63. Comments and replies must comply with 47 CFR 1.49 and all other

applicable sections of the Commission's Rules. We also direct all

interested parties to include the name of the filing party and the date

of the filing on each page of their comments and replies. Comments and

replies must also clearly identify the specific portion of the NPRM to

which a particular comment or set of comments is responsive. If a

portion of a party's comments does not fall under a particular topic

listed in the Table of Contents of this NPRM, such comments must be

included in a clearly labelled section at the beginning or end of the

submission.

Ordering Clauses

64. Accordingly, it is ordered, pursuant to sections 1-4, 201-205,

251, 254, 303(r) and 403 of the Communications Act of 1934, as amended,

47 U.S.C. 151-154, 201-205, 251, 254, 303(r) and 403, that notice is

hereby given of the rulemaking described above and that comment is

sought on these issues.

65. It is further ordered that the Commission's Office of Public

Affairs, Reference Operations Division, 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.

List of Subjects in 47 CFR Part 69

Access charges, Communications common carriers.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-19266 Filed 7-17-98; 8:45 am]

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