Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory ReviewReview of Computer III and ONA Safeguards and Requirements

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 51, 53, and 64

[CC Docket No. 95-20, FCC 98-8]

Computer III Further Remand Proceedings: Bell Operating Company

Provision of Enhanced Services; 1998 Biennial Regulatory Review--Review

of Computer III and ONA Safeguards and Requirements

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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[[Page 9750]]

SUMMARY: The Commission is issuing this Notice of Proposed Rulemaking

seeking comment on the remand from the United States Court of Appeals

for the Ninth Circuit relating to the replacement of structural

separation requirements for Bell Operating (BOC) provision of enhanced

services with nonstructural safeguards, as well as the effectiveness of

the Commission's Computer III and ONA nonstructural rules in general.

The Commission believes it is necessary not only to respond to the

issues remanded by the Ninth Circuit, but also to reexamine the

Commission's nonstructural safeguards regime governing the provision of

information services by the BOCs in light of the Telecommunications Act

of 1996 and ensuing changes in telecommunications technologies and

markets.

DATES: Comments are due on or before March 27, 1998 and Reply Comments

are due on or before April 23, 1998. Written comments by the public on

the proposed information collections are due March 27, 1998. Written

comments must be submitted by the Office of Management and Budget (OMB)

on the proposed information collections on or before April 27, 1998.

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

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

222, Washington, D.C. 20554, with a copy to Janice Myles of the Common

Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C. 20554.

Parties should also file one copy of any documents filed in this docket

with the Commission's copy contractor, International Transcription

Services, Inc., 1231 20th St., N.W., Washington, D.C. 20036. In

addition to filing comments with the Secretary, a copy of any comments

on the information collections contained herein should be submitted to

Judy Boley, 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].

FOR FURTHER INFORMATION CONTACT: Lisa Sockett, Attorney, Common Carrier

Bureau, Policy and Program Planning Division, (202) 418-1580. For

additional information concerning the information collections contained

in this NPRM contact Judy Boley at (202) 418-0214, or via the Internet

at [email protected].

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

of Proposed Rulemaking adopted January 29, 1998 and released January

30, 1998 (FCC 98-8). This NPRM contains proposed or modified

information collections subject to the Paperwork Reduction Act of 1995

(PRA). It has been submitted to the OMB for review under the PRA. The

OMB, the general public, and other Federal agencies are invited to

comment on the proposed or modified information collections contained

in this proceeding. The full text of this Notice of Proposed Rulemaking

is available for inspection and copying during normal business hours in

the FCC Reference Center, 1919 M St., N.W., Room 239, Washington, D.C.

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

http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc988.wp, or may be

purchased from the Commission's copy contractor, International

Transcription Service, Inc., (202) 857-3800, 1231 20th St., N.W.,

Washington, D.C. 20036.

Paperwork Reduction Act

This 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 OMB to comment on the

information collections contained in this NPRM, as required by the

Paperwork Reduction Act of 1995, Pub. L. 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 27, 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 Approval Number: None.

Title: Computer III Further Remand Proceedings: Bell Operating

Company Provision of Enhanced Services; 1998 Biennial Regulatory

Review--Review of Computer III and ONA Safeguards and Requirements.

Form No.: N/A.

Type of Review: New collection.

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

No. of

Information collection respondents Estimated time per response Total annual

(approx.) burden

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

Consolidation of generic 5 4 hours (2 hours twice a year)..................... 20 hours.

information in semi-annual

reports.

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

Respondents: Bell Operating Companies.

Estimated costs per respondent: $0.

Needs and Uses: The NPRM seeks comment on a number of issues, the

result of which could lead to the imposition of information

collections.

Synopsis of Notice of Proposed Rulemaking

I. Introduction

1. In the Commission's Computer III and Open Network Architecture

(ONA) proceedings, the Commission sought to establish appropriate

safeguards for the provision by the Bell Operating Companies (BOCs) of

``enhanced'' services.\1\ Examples of enhanced services include, among

other things, voice mail, electronic mail, electronic store-and-

forward, fax store-and-forward, data processing, and gateways to online

databases. Underlying this effort, as well as our reexamination of the

Computer III and ONA rules in this Further Notice of Proposed

Rulemaking (Further Notice), are three complementary goals. First, we

seek to enable consumers and communities across the country to take

advantage of innovative ``enhanced'' or ``information'' services \2\

offered by both

[[Page 9751]]

the BOCs and other information service providers (ISPs). Second, we

seek to ensure the continued competitiveness of the already robust

information services market. Finally, we seek to establish safeguards

for BOC provision of enhanced or information services that make common

sense in light of current technological, market, and legal conditions.

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\1\ Basic services, such as ``plain old telephone service''

(POTS), are regulated as tariffed services under Title II of the

Communications Act. Enhanced services use the existing telephone

network to deliver services that provide more than a basic

transmission offering. Bell Operating Companies' Joint Petition for

Waiver of Computer II Rules, Memorandum Opinion & Order, 10 FCC Rcd

1724 n.3 (1995) (Interim Waiver Order); 47 CFR 64.702(a). The terms

``enhanced service'' and ``basic service'' are defined and discussed

more fully infra at para. 38.

\2\ The terms ``enhanced services'' and ``information services''

are used interchangeably in this Further Notice.

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2. Under Computer III and ONA, the BOCs are permitted to provide

enhanced services on an ``integrated'' basis (i.e., through the

regulated telephone company), subject to certain ``nonstructural

safeguards,'' as described more fully below. These rules replaced those

previously established in Computer II, which required AT&T (and

subsequently the BOCs) to offer enhanced services through structurally

separate subsidiaries. On February 21, 1995, the Commission released a

Notice of Proposed Rulemaking (Computer III Further Remand Notice)

following a remand from the United States Court of Appeals for the

Ninth Circuit (California III). The Computer III Further Remand Notice

sought comment on both the remand issue in California III relating to

the replacement of structural separation requirements for BOC provision

of enhanced services with nonstructural safeguards, as well as the

effectiveness of the Commission's Computer III and ONA nonstructural

rules in general.

3. Since the adoption of the Computer III Further Remand Notice,

significant changes have occurred in the telecommunications industry

that affect our analysis of the issues raised in this proceeding. Most

importantly, on February 8, 1996, Congress passed the

Telecommunications Act of 1996 (1996 Act) to establish ``a pro-

competitive, de-regulatory national policy framework'' in order to make

available to all Americans ``advanced telecommunications and

information technologies and services by opening all telecommunications

markets to competition.'' As the Supreme Court recently noted, the 1996

Act ``was an unusually important legislative enactment'' that changed

the landscape of telecommunications regulation.

4. The 1996 Act significantly alters the legal and regulatory

framework governing the local exchange marketplace. Among other things,

the 1996 Act opens local exchange markets to competition by imposing

new interconnection, unbundling, and resale obligations on all

incumbent local exchange carriers (LECs), including the BOCs. In

addition, the 1996 Act allows the BOCs, under certain conditions, to

enter markets from which they previously were restricted, including the

interLATA telecommunications and interLATA information services

markets. In some cases, the 1996 Act requires a BOC to offer services

in these markets through a separate affiliate.\3\ In addition, the 1996

Act incorporates new terminology and definitions that differ from those

the Commission had been using.

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\3\ We note that on December 31, 1997, the United States

District Court for the Northern District of Texas held that sections

271-275 of the Act are a bill of attainder and thus are

unconstitutional as to SBC Corporation and U S WEST. SBC

Communications, Inc. v. Federal Communications Comm'n, No. 7:97-CV-

163-X, 1997 WL 800662 (N.D. Tex. Dec. 31, 1997) (SBC v. FCC) (ruling

subsequently extended to Bell Atlantic), request for stay pending.

In general, the analysis in this Further Notice assumes the

continued applicability of these provisions to the Bell companies.

At appropriate places in this Further Notice, however, we ask

commenters to assess the impact of SBC v. FCC on our analysis.

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5. In light of the 1996 Act and ensuing changes in

telecommunications technologies and markets, we believe it is necessary

not only to respond to the issues remanded by the Ninth Circuit, but

also to reexamine the Commission's nonstructural safeguards regime

governing the provision of information services by the BOCs. Congress

recognized, in passing the 1996 Act, that competition will not

immediately supplant monopolies and therefore imposed a series of

safeguards to prevent the BOCs from using their existing market power

to engage in improper cost allocation and discrimination in their

provision of interLATA information services, among other things. These

statutory safeguards seek to address many of the same anticompetitive

concerns as, but do not explicitly displace, the safeguards established

by the Commission in the Computer II, , and ONA proceedings. We

therefore issue this Further Notice to address issues raised by the

interplay between the safeguards and terminology established in the

1996 Act and the regime. These 1996 Act-related issues were not raised

in the Computer III Further Remand Notice. We therefore ask interested

parties to respond to the issues raised in this Further Notice and, to

the extent that parties want any arguments made in response to the

Computer III Further Remand Notice to be made a part of the record for

this Further Notice, we ask them to restate those arguments in their

comments.

6. We note, in addition, that Congress required the Commission to

conduct a biennial review of regulations that apply to operations or

activities of any provider of telecommunications service and to repeal

or modify any regulation it determines to be ``no longer necessary in

the public interest.'' Accordingly, the Commission has begun a

comprehensive 1998 biennial review of telecommunications and other

regulations to promote ``meaningful deregulation and streamlining where

competition or other considerations warrant such action.'' In this

Further Notice, therefore, we seek comment on whether certain of the

Commission's current and ONA rules are ``no longer necessary in the

public interest.'' To the extent parties identify additional Computer

III and ONA rules they believe warrant review under the Act, we invite

those comments as well.

7. Consistent with the 1996 Act, in this Further Notice we seek to

strike a reasonable balance between our goal of reducing and

eliminating regulatory requirements when appropriate as competition

supplants the need for such requirements to protect consumers and

competition, and our recognition that, until full competition is

realized, certain safeguards may still be necessary. We want to

encourage the BOCs to provide new technologies and innovative

information services that will benefit the public, as well as ensure

that the BOCs will make their networks available for the use of

competitive providers of such services. We therefore seek comment in

this Further Notice on, among other things, the following tentative

conclusions:

--Notwithstanding the 1996 Act's adoption of separate affiliate

requirements for BOC provision of certain information services (most

notably, interLATA information services), the Act's overall pro-

competitive, de-regulatory framework, as well as our public interest

analysis, support the continued application of the Commission's

nonstructural safeguards regime to BOC provision of intraLATA

information services [paragraphs 43-59];

--Given the protections established by the 1996 Act and our ONA rules,

we should eliminate the requirement that BOCs file Comparably Efficient

Interconnection (CEI) plans and obtain Common Carrier Bureau (Bureau)

approval for those plans prior to providing new intraLATA information

services [paragraphs 60-65];

--At a minimum, we should eliminate the CEI-plan requirement for BOC

intraLATA information services provided through an Act-mandated

affiliate under section 272 or 274 [paragraphs 66-72]; and

--The Commission's network information disclosure rules established

pursuant to section 251(c)(5) should supersede certain,

[[Page 9752]]

but not all, of the Commission's previous network information

disclosure rules established in Computer II and Computer III [paragraph

122].

We also generally seek comment on, among other things, the

following issues:

--Whether enactment and implementation of the 1996 Act, as well as

other developments, should alleviate the Ninth Circuit's concern about

the level of unbundling mandated by ONA [paragraphs 29-36];

--Whether the Commission's definition of the term ``basic service'' and

the 1996 Act's definition of ``telecommunications service'' should be

interpreted to extend to the same functions [paragraphs 38-42];

--Whether the Commission's current ONA requirements have been effective

in providing ISPs with access to the basic services that ISPs need to

provide their own information service offerings [paragraphs 85-90];

--Whether the Commission, under its general rulemaking authority,

should extend to ISPs some or all section 251-type unbundling rights,

which the Commission previously concluded was not required by section

251 of the Act [paragraphs 94-96]; and

--How the Commission's current ONA reporting requirements should be

streamlined and modified [paragraphs 99-116].

8. As set forth in the 1998 appropriations legislation for the

Departments of Commerce, Justice, and State, the Commission is required

to undertake a review of its implementation of the provisions of the

1996 Act relating to universal service, and to submit its review to

Congress no later than April 10, 1998. The Commission must review,

among other things, the Commission's interpretations of the definitions

of ``information service'' and ``telecommunications service'' in the

1996 Act, and the impact of those interpretations on the current and

future provision of universal service to consumers, including consumers

in high cost and rural areas. We recognize that there is a some overlap

between the inquiry in this Further Notice about the relationship

between the Commission's definition of the term ``basic service'' and

the 1996 Act's definition of ``telecommunications service,'' and the

issues to be addressed in the Commission's report to Congress.

Furthermore, we recognize that other aspects of this Further Notice

also may be affected by the analysis in the Universal Service Report.

We note that the inquiry in this Further Notice is primarily focused on

the rules and terminology the Commission should be using in the context

of its Computer II and Computer III requirements. We also note that the

order in this proceeding will be issued after the Universal Service

Report is submitted to Congress, and will thus take into account any

conclusions made in that report.

II. Background

A. Overview of Computer III/ONA and Related Court Decisions

9. We discussed in detail the factual history of Computer III/ONA

in the Computer III Further Remand Notice. One of the Commission's main

objectives in the Computer III and ONA proceedings has been to permit

the BOCs to compete in unregulated enhanced services markets while

preventing the BOCs from using their local exchange market power to

engage in improper cost allocation and unlawful discrimination against

ESPs. The concern has been that BOCs may have an incentive to use their

existing market power in local exchange services to obtain an

anticompetitive advantage in these other markets by improperly

allocating to their regulated core businesses costs that would be

properly attributable to their competitive ventures, and by

discriminating against rival, unaffiliated ESPs in the provision of

basic network services in favor of their own enhanced services

operations. In Computer II, the Commission addressed these concerns by

requiring the then-integrated Bell System to establish fully

structurally separate affiliates in order to provide enhanced services.

Following the divestiture of AT&T in 1984, the Commission extended the

structural separation requirements of Computer II to the BOCs.

10. In Computer III, after reexamining the telecommunications

marketplace and the effects of structural separation during the six

years since Computer II, the Commission determined that the benefits of

structural separation were outweighed by the costs, and that

nonstructural safeguards could protect competing ESPs from improper

cost allocation and discrimination by the BOCs while avoiding the

inefficiencies associated with structural separation. The Commission

concluded that the advent of more flexible, competition-oriented

regulation would permit the BOCs to provide enhanced services

integrated with their basic network facilities. Towards this end, the

Commission adopted a two-phase system of nonstructural safeguards that

permitted the BOCs to provide enhanced services on an integrated basis.

The first phase required the BOCs to obtain Commission approval of a

service-specific CEI plan in order to offer a new enhanced service. In

these plans, the BOCs were required to explain how they would offer to

ESPs all the underlying basic services the BOCs used to provide their

own enhanced service offerings, subject to a series of ``equal access''

parameters. Thus, the CEI phase of nonstructural safeguards imposed

obligations on the BOCs only to the extent they offered specific

enhanced services. The Commission indicated that such a CEI requirement

could promote the efficiencies of competition in enhanced services

markets by permitting the BOCs to participate in such markets provided

they open their networks to competitors.

11. During the second phase of implementing Computer III, the

Commission required the BOCs to develop and implement ONA plans. The

ONA phase was intended to broaden a BOC's unbundling obligations beyond

those required in the first phase. ONA plans explain how a BOC will

unbundle and make available to unaffiliated ESPs network services in

addition to those the BOC uses to provide its own enhanced services

offerings. These ONA plans were required to comply with a defined set

of criteria in order for the BOC to obtain structural relief on a

going-forward basis. This means that a BOC would not need to obtain

approval of CEI plans prior to offering specific enhanced services on

an integrated basis. The Commission also required the BOCs to comply

with various other nonstructural safeguards in the form of rules

related to network disclosure, customer proprietary network information

(CPNI), and quality, installation, and maintenance reporting. All of

these nonstructural safeguards were designed to promote the efficiency

of the telecommunications network, in part by permitting the technical

integration of basic and enhanced services and in part by preserving

competition in the enhanced services market through the control of

potential anticompetitive behavior by the BOCs.

12. In 1990, the Court of Appeals for the Ninth Circuit vacated

three orders in the Computer III proceeding, finding that the

Commission had not adequately justified the decision to rely on

(nonstructural) cost accounting safeguards as protection against cross-

subsidization of enhanced services by the BOCs. In response to this

remand, the Commission adopted the BOC Safeguards Order, which

strengthened

[[Page 9753]]

the cost accounting safeguards, and reaffirmed the Commission's

conclusion that nonstructural safeguards should govern BOC

participation in the enhanced services industry, rather than structural

separation requirements.

13. During the period from 1988 to 1992, the Commission approved

the BOCs' ONA plans, which described the basic services that the BOCs

would provide to unaffiliated and affiliated ESPs and the terms on

which these services would be provided. During the two-year period from

1992 to 1993, the Bureau approved the lifting of structural separation

for individual BOCs upon their showing that their initial ONA plans

complied with the requirements of the BOC Safeguards Order, and these

decisions were later affirmed by the Commission.

14. After California I and the Commission's response in the BOC

Safeguards Order, the Ninth Circuit in California II upheld the

Commission's orders approving BOC ONA plans. In California II, the

court concluded that the Commission had scaled back its vision of ONA

since Computer III by approving BOC ONA plans before ``fundamental

unbundling'' had been achieved. The court also concluded that the issue

of whether implementation of ONA plans justified the lifting of

structural separation, as the Commission had determined, was not

properly before it.

15. In California III, the Court of Appeals for the Ninth Circuit

partially vacated the Commission's BOC Safeguards Order. The California

III court found that, in granting full structural relief based on the

BOC ONA plans, the Commission had not adequately explained its apparent

``retreat'' from requiring ``fundamental unbundling'' of BOC networks

as a component of ONA and a condition for lifting structural

separation. The court was therefore concerned that ONA unbundling, as

implemented, failed to prevent the BOCs from engaging in discrimination

against competing ESPs in providing access to basic services. The court

did find, however, that the Commission had adequately responded to its

concerns regarding cost-misallocation by strengthening its cost

accounting rules and introducing a system of ``price cap'' regulation;

the court indicated its belief that these strengthened safeguards would

significantly reduce the BOCs' incentive and ability to misallocate

costs. The court also upheld the scope of federal preemption adopted in

the BOC Safeguards Order.

16. In response to California III, the Bureau issued the Interim

Waiver Order, which reinstated the requirement that BOCs must file CEI

plans, and obtain Commission approval of those plans, to continue to

provide specific enhanced services on an integrated basis. Also in

response, the Commission issued the Computer III Further Remand Notice,

60 FR 12529, March 7, 1995, which sought comment on the California III

court's remand question regarding the sufficiency of ONA unbundling as

a condition of lifting structural separation, and on the general issue

of whether relying on nonstructural safeguards serves the public

interest.

B. Overview of the 1996 Act

17. Since the California III remand and the Commission's release of

the Computer III Further Remand Notice, the 1996 Act became law and the

Commission has conducted a number of proceedings to implement its

provisions. These developments give us a fresh perspective from which

to evaluate the Commission's current regulatory framework for the

provision of information services. In this section, we describe some of

the major provisions of the 1996 Act, and in later sections we examine

how those provisions may affect our current rules.

1. Opening the Local Exchange Market

18. Various provisions of the 1996 Act are intended to open local

exchange markets to competition. Section 251(c) of the Act requires,

among other things, incumbent LECs, including the BOCs and GTE, to

provide to requesting telecommunications carriers interconnection and

access to unbundled network elements at rates, terms, and conditions

that are just, reasonable, and nondiscriminatory, and to offer

telecommunications services for resale. Section 253(a) bars state and

local governments from imposing certain legal requirements that

prohibit or have the effect of prohibiting the ability of any entity to

provide any telecommunications service, and section 253(d) authorizes

the Commission to preempt such legal requirements to the extent

necessary to correct inconsistency with the Act. As a result,

telecommunications carriers may now enter the local exchange market,

and compete with the incumbent LEC, through access to unbundled network

elements, resale, or through construction of network facilities.

19. In implementing section 251 of the Act, the Commission

prescribed certain minimum points of interconnection necessary to

permit competing carriers to choose the most efficient points at which

to interconnect with the incumbent LEC's network. The Commission also

adopted a minimum list of unbundled network elements (UNEs) that

incumbent LECs must make available to new entrants, upon request. In

Parts III and IV below, we discuss and seek comment on the potential

impact of these unbundling requirements in more detail, both with

respect to the issue in California III regarding the Commission's

justification of ONA unbundling as a condition of lifting structural

separation, as well as our overall reexamination of the Commission's

current nonstructural safeguards framework.

2. BOC Provision of Information Services

20. The 1996 Act conditions the BOCs' entry into the market for

many in-region interLATA services, among other things, on their

compliance with the separate affiliate, accounting, and

nondiscrimination requirements set forth in section 272. In the Non-

Accounting Safeguards Order, 62 FR 2927, January 21, 1997, we noted

that these safeguards are designed to prohibit anticompetitive

discrimination and improper cost allocation while still permitting the

BOCs to enter markets for certain interLATA telecommunications and

information services, in the absence of full competition in the local

exchange marketplace. We also concluded in the Non-Accounting

Safeguards Order that the Commission's Computer II, Computer III, and

ONA requirements are consistent with section 272 of the Act, and

continue to govern the BOCs' provision of intraLATA information

services, since section 272 only addresses BOC provision of interLATA

services.

21. Sections 260, 274, and 275 of the Act set forth specific

requirements governing the provision of telemessaging, electronic

publishing, and alarm monitoring services, respectively, by the BOCs

and, in certain cases, by incumbent LECs. Section 260 delineates the

conditions under which incumbent LECs, including the BOCs, may offer

telemessaging services. We affirmed our conclusion in the Non-

Accounting Safeguards Order that, since telemessaging service is an

``information service,'' BOCs that offer interLATA telemessaging

services are subject to the separation requirements of section 272. We

further concluded that the Computer III/ONA requirements are consistent

with the requirements of section 260(a)(2), and, therefore, BOCs may

offer intraLATA telemessaging services on an integrated basis subject

to both Computer III/ONA and the requirements in section 260.

[[Page 9754]]

22. Section 274 permits the BOCs to provide electronic publishing

services, whether interLATA or intraLATA, only through a ``separated

affiliate'' or an ``electronic publishing joint venture'' that meets

certain separation, nondiscrimination, and joint marketing requirements

in that section. The Commission found that there was no inconsistency

between the nondiscrimination requirements of Computer III/ONA and

section 274(d). We therefore found that the Computer III/ONA

requirements continue to govern the BOCs' provision of intraLATA

electronic publishing. We also noted that the nondiscrimination

requirements of section 274(d) apply to the BOCs' provision of both

intraLATA and interLATA electronic publishing.

23. Section 275 of the Act prohibits the BOCs from providing alarm

monitoring services until February 8, 2001, although BOCs that were

providing alarm monitoring services as of November 30, 1995 are

grandfathered. Section 275 of the Act does not impose any separation

requirements on the provision of alarm monitoring services. We

concluded in the Alarm Monitoring Order, 62 FR 16093, April 4, 1997

that the Computer III/ONA requirements are consistent with the

requirements of section 275(b)(1), and therefore continue to govern the

BOCs' provision of alarm monitoring service. We discuss the potential

impact of the Act's new requirements for BOC provision of certain

information services on our cost-benefit analysis of structural versus

nonstructural safeguards in more detail in Part IV.B.

III. California III Remand

A. Background

24. In California III, the Ninth Circuit reviewed the BOC

Safeguards Order, in which the Commission reaffirmed its earlier

determination to remove structural separation requirements imposed on a

BOC's provision of enhanced services, based on a BOC's compliance with

ONA requirements and other nonstructural safeguards. The court found

that, in the BOC Safeguards Order, and in the orders implementing ONA,

the Commission had ``changed its requirements for, or definition of,

ONA so that ONA no longer contemplates fundamental unbundling.''

Because, in the Ninth Circuit's view, the Commission had not adequately

explained why this perceived shift did not undermine its decision to

rely on the ONA safeguards to grant full structural relief, the court

remanded the proceeding to the Commission.

25. In the Computer III Phase I Order, (51 FR 24350 (July 3, 1986))

the Commission declined to adopt any specific network architecture

proposals or specific unbundling requirements, but instead set forth

general standards for ONA. BOCs were required to file initial ONA plans

presenting a set of ``unbundled basic service functions that could be

commonly used in the provision of enhanced services to the extent

technologically feasible.'' The Commission stated that, by adopting

general requirements rather than mandating a particular architecture

for implementing ONA, it wished to encourage development of efficient

interconnection arrangements. The Commission also noted that

inefficiencies might result from ``unnecessarily unbundled or

splintered services.''

26. The Computer III Phase I Order required the BOCs to meet a

defined set of unbundling criteria in order for structural separation

to be lifted. In the BOC ONA Order, (54 FR 3435 (January 24, 1989)) the

Commission generally approved the ``common ONA model'' proposed by the

BOCs. The common ONA model was based on the existing architecture of

the BOC local exchange networks, and consisted of unbundled services

categorized as basic service arrangements (BSAs), basic service

elements (BSEs), complementary network services (CNSs), and ancillary

network services (ANSs).

27. In the BOC ONA proceeding, certain commenters criticized the

common ONA model. The commenters argued that the BOCs had avoided the

Computer III Phase I Order unbundling requirements by failing to

``disaggregate communications facilities and services on an element-by-

element basis.'' They urged the Commission to adopt a more

``fundamental'' concept of unbundling in the ONA context, by requiring

the BOCs to unbundle facilities such as loops, as well as switching

functions, inter-office transmission, and signalling. Specifically,

they claimed that BSAs could be further unbundled; e.g., trunks could

be unbundled from the circuit-switched, trunk-side BSA, so that ESPs

could connect their own trunks to BOC switches.

28. In the BOC ONA Order, the Commission rejected arguments that

ONA, as set forth in the Computer III Phase I Order, required

unbundling more ``fundamental'' than that set forth in the ``common ONA

model'' proposed by the BOCs. The Commission indicated that the

Computer III Phase I Order anticipated that the BOCs would unbundle

network services, not facilities, and determined that the ONA services

developed by the BOCs under the common ONA model were consistent with

the examples of service unbundling set forth in the Computer III Phase

I Order. The Ninth Circuit, however, agreed with the view that the

Commission's approval of the BOC ONA plans, and subsequent lifting of

structural separation, was a retreat from a ``requirement'' of

``fundamental unbundling.''

B. Subsequent Events May Have Alleviated the Ninth Circuit's California

III Concerns

29. In this section, we seek comment on whether the enactment and

implementation of the 1996 Act, as well as other developments, should

alleviate the Ninth Circuit's underlying concern about the level of

unbundling mandated by ONA. Section 251 of the Act requires incumbent

LECs, including the BOCs and GTE, to provide to requesting

telecommunications carriers interconnection and access to unbundled

network elements at rates, terms, and conditions that are just,

reasonable, and nondiscriminatory, and to offer telecommunications

services for resale. Section 251 also requires incumbent LECs to

provide for physical collocation at the LEC's premises of equipment

necessary for interconnection or access to unbundled network elements,

under certain conditions.

30. In its regulations implementing these statutory provisions, the

Commission identified a minimum list of network elements that incumbent

LECs are required to unbundle, including local loops, network interface

devices (NIDs), local and tandem switching capabilities, interoffice

transmission facilities (often referred to as trunks), signalling

networks and call-related databases, operations support systems (OSS)

facilities, and operator services and directory assistance. Additional

unbundling requirements may be specified during voluntary negotiations

between carriers, by state commissions during arbitration proceedings,

or by the Commission as long as such requirements are consistent with

the 1996 Act and the Commission's regulations. We note that the 1996

Act creates particular incentives for the BOCs to unbundle and make

available the elements of their local exchange networks. For example,

section 271 provides that a BOC may gain entry into the interLATA

market in a particular state by demonstrating, inter alia, that it has

entered into access and interconnection agreements with competing

telephone exchange service providers that satisfy the ``competitive

[[Page 9755]]

checklist'' set forth in section 271(c)(2)(B).

31. In our view, the unbundling requirements imposed by section 251

and our implementing regulations (hereinafter referred to as ``section

251 unbundling'') are essentially equivalent to the ``fundamental

unbundling'' requirements proposed by certain commenters, and rejected

by the Commission as premature, in the BOC ONA Order. These commenters

asked the Commission to require the BOCs to unbundle network elements

such as loops, switching functions, inter-office transmission, and

signalling. Section 251(c)(3) and the Commission's implementing

regulations require those elements, and others, to be unbundled by the

BOCs, and by other incumbent LECs that are subject to the requirements

of section 251(c). In addition, the type and level of unbundling under

section 251 is different and more extensive than that required under

ONA. This may be because one of Congress's primary goals in enacting

section 251--to bring competition to the largely monopolistic local

exchange market--is more far-reaching than the Commission's goal for

ONA, which has been to preserve competition and promote network

efficiency in the developing, but highly competitive, information

services market.

32. We recognize that, according to the terms of section 251, only

``requesting telecommunications carriers'' are directly accorded rights

to interconnect and to obtain access to unbundled network elements.\4\

In that regard, the section 251 unbundling requirements do not provide

access and interconnection rights to the identical class of entities as

does the ONA regime, since these rights do not extend to entities that

provide solely information services (``pure ISPs''). We also recognize

that the development of competition in the local exchange market has

not occurred as rapidly as some expected since the enactment of the

1996 Act.

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

\4\ See 47 U.S.C. 251(c)(2), (c)(3). The Commission determined

that entities that provide both telecommunications services and

information services are classified as telecommunications carriers

for the purposes of section 251, and are subject to the general

interconnection obligations of section 251(a), to the extent that

they are acting as telecommunications carriers. Local Competition

Order, 61 FR 45476, August 29, 1996. The Commission further

concluded that telecommunications carriers that have obtained

interconnection or access to unbundled network elements under

section 251 in order to provide telecommunications services, may

offer information services through the same arrangement, so long as

they are offering telecommunications services through the same

arrangement as well. Id. See infra paragraphs 92-96 for a more

complete discussion of section 251 unbundling vis-a-vis ONA. See

also paragraph 8 for a discussion of the Universal Service Report.

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

33. We believe, however, that section 251 is intended to bring

about competition in the local exchange market that, ultimately, will

result in increased variety in service offerings and lower service

prices, to the benefit of all end-users, including ISPs. Moreover,

because local telecommunications services are important inputs to the

information services ISPs provide, ISPs are uniquely positioned to

benefit from an increasingly competitive local exchange market. There

is evidence, for example, that carriers that have direct rights under

section 251 will compete with the incumbent LECs to provide pure ISPs

with the basic network services that ISPs need to create their own

information service offerings, either by obtaining unbundled network

elements for the provision of telecommunications services or through

the resale of such services. As a result, incumbent LECs have an

incentive to provide an increased variety of telecommunications

services to pure ISPs at lower prices in response to the market

presence of such competitors. Pure ISPs also could enter into

partnering or teaming arrangements with carriers that have direct

rights under section 251. In addition, ISPs can obtain certification as

telecommunications service providers in order to receive direct

benefits under section 251. We also note that many ISPs that currently

provide both telecommunications services and information services will

have the benefit of both section 251 unbundling as well as ONA.

34. For all these reasons, the fact that section 251's access and

interconnection rights apply by their terms only to a ``requesting

telecommunications carrier'' does not, in our view, change our

conviction that the 1996 Act, as well as other factors, should

alleviate the court's underlying concern in California III that the

level of unbundling required under ONA does not provide sufficient

protection against access discrimination. We seek comment on this

analysis. In light of several recent court decisions bearing on these

issues, we also ask commenters to address how the opinions of the

Eighth Circuit Court of Appeals, including the decision regarding the

recombination of unbundled network elements, as well as the decision of

the United States District Court for the Northern District of Texas

concerning the constitutionality of sections 271 through 275 of the

Act, affect our analysis.

35. In addition to the changes engendered by the 1996 Act, there

have been other regulatory and market-based developments that, we

believe, also should alleviate the court's underlying concern about

whether the level of unbundling mandated by ONA provides sufficient

protection against access discrimination. For example, the Commission's

Expanded Interconnection proceeding requires Class A LECs, including

the BOCs and GTE, to allow all interested parties to provide

competitive interstate special access, transport, and tandem switched

transport by interconnecting their transmission facilities with the

LECs' networks. Competing ISPs that utilize transmission facilities

thus may provide certain transport functions as part of their enhanced

services independent of the Computer III framework. These additional

interconnection requirements, together with section 251 unbundling and

the Commission's current ONA requirements, further help to protect ISPs

against access discrimination by the BOCs. We seek comment on this

analysis.

36. In addition, the level of competition within the information

services market, which the Commission termed ``truly competitive'' as

early as 1980, has continued to increase markedly as new competitive

ISPs have entered the market. The phenomenal growth of the Internet

over the past several years illustrates how robustly competitive one

sector of the information services market has become. Recent surveys

suggest that there are some 3,000 Internet access providers in the

United States; these providers range from small start-up operations, to

large providers such as IBM and AT&T, to consumer online services such

as America Online. We believe that other sectors of the information

services market have also continued to grow, as we observed in the

Computer III Further Remand Notice. The presence of well-established

participants in the information services market, such as EDS, MCI,

AT&T, Viacom, Times-Mirror, General Electric, and IBM, may make it more

difficult for BOCs to engage in access discrimination. For example, the

California I court indicated that ``the emergence of powerful

competitors such as IBM, which have the resources and expertise to

monitor the quality of access to the network, reduces the BOCs' ability

to discriminate in providing access to their competitors.'' We seek

comment on whether the sustained growth of competition within the

information services market,

[[Page 9756]]

including the continued participation of large information service

competitors, serves to diminish further the threat of access

discrimination and, consequently, the court's concern about whether the

level of unbundling mandated by ONA is sufficient.

IV. Effect of the 1996 Act

37. As detailed in the background section, the Commission issued

the Computer III Phase I Order more than ten years ago, shortly after

divestiture, and before the BOCs had obtained authorization from the

MFJ court to begin to provide information services. Similarly, the

implementation of ONA primarily took place between 1988 and 1992. Our

objective is now, as it was then, to promote efficiency and increased

service offerings while controlling anticompetitive behavior by the

BOCs. We therefore reevaluate below the continuing need for these

safeguards, in light of the 1996 Act and the significant technological

and market changes that have taken place since the Computer III

nonstructural safeguards were first proposed. This reevaluation is also

part of the Commission's 1998 biennial review of regulations as

required by the 1996 Act.

A. Basic/Enhanced Distinction

38. In the Computer II proceeding, the Commission adopted a

regulatory scheme that distinguished between the common carrier

offering of basic transmission services and the offering of enhanced

services. The Commission defined a ``basic transmission service'' as

the common carrier offering of ``pure transmission capability'' for the

movement of information ``over a communications path that is virtually

transparent in terms of its interaction with customer-supplied

information.'' The Commission further stated that a basic transmission

service should be limited to the offering of transmission capacity

between two or more points suitable for a user's transmission needs.

The common carrier offering of basic services is regulated under Title

II of the Communications Act. In contrast, the Commission defined

enhanced services as:

services, offered over common carrier transmission facilities used

in interstate communications, which employ computer processing

applications that act on the format, content, code, protocol or

similar aspects of the subscriber's transmitted information; provide

the subscriber additional, different, or restructured information;

or involve subscriber interaction with stored information.

Enhanced services are not regulated under Title II of the

Communications Act.

39. The 1996 Act does not utilize the Commission's basic/enhanced

terminology, but instead refers to ``telecommunications services'' and

``information services.'' The 1996 Act defines telecommunications as:

the transmission, between or among points specified by the user, of

information of the user's choosing, without change in the form or

content of the information as sent and received.

Telecommunications service is defined as:

the offering of telecommunications for a fee directly to the public,

or to such classes of users as to be effectively available directly

to the public, regardless of facilities used.

The 1996 Act defines information service as:

the offering of a capability for generating, acquiring, storing,

transforming, processing, retrieving, utilizing, or making available

information via telecommunications, and includes electronic

publishing, but does not include any use of any such capability for

the management, control, or operation of a telecommunications system

or the management of a telecommunications service.

40. We concluded in the Non-Accounting Safeguards Order that,

although the text of the Commission's definition of ``enhanced

services'' differs from the 1996 Act's definition of ``information

services,'' the two terms should be interpreted to extend to the same

functions. We found no basis to conclude that, by using the term

``information services,'' Congress intended a significant departure

from the Commission's usage of ``enhanced services.'' We further

explained that interpreting ``information services'' to include all

``enhanced services'' provides a measure of regulatory stability for

telecommunications carriers and ISPs by preserving the definitional

scheme under which the Commission exempted certain services from

traditional common carriage regulation.

41. Consistent with our conclusion in the Non-Accounting Safeguards

Order that ``enhanced services'' fall within the statutory definition

of ``information services,'' we seek comment in this Further Notice on

whether the Commission's definition of ``basic service'' and the 1996

Act's definition of ``telecommunications service'' should be

interpreted to extend to the same functions, even though the two

definitions differ. We ask parties to address whether there is any

basis to conclude that, by using the term ``telecommunications

services,'' Congress intended a significant departure from the

Commission's usage of ``basic services.'' As noted in the Non-

Accounting Safeguards Order, we believe the public interest is served

by maintaining the regulatory stability of the definitional scheme

under which the Commission exempted certain services from traditional

common carriage regulation. To the extent parties believe that

``telecommunications services'' differ from ``basic services'' in any

regard, they should identify the distinctions that should be drawn

between the two categories, describe any overlap between the two

categories, and delineate the particular services that would come

within one category and not the other.

42. In light of our conclusion in the Non-Accounting Safeguards

Order that the statutory term ``information services'' includes all

services the Commission has previously considered to be ``enhanced,''

and our decision in this proceeding to seek comment on whether the

statutory term ``telecommunications services'' includes all services

the Commission has previously considered to be ``basic services,'' we

seek comment on whether the Commission hereafter should conform its

terminology to that used in the 1996 Act. We ask commenters to discuss

whether the Commission's rules, which previously distinguished between

basic and enhanced services, should now distinguish between

telecommunications and information services. For example, we ask

whether the Commission's Computer II decision should now be interpreted

to require facilities-based common carriers that provide information

services to unbundle their telecommunications services and offer such

services to other ISPs under the same tariffed terms and conditions

under which they provide such services to their own information

services operations.

B. Cost-Benefit Analysis of Structural Safeguards

1. Background

43. The Commission's goals in addressing BOC provision of

information services have been both to promote innovation in the

provision of information services and to prevent access discrimination

and improper cost allocation. Because the BOCs control the local

exchange network and the provision of basic services, in the absence of

regulatory safeguards they may have the incentive and ability to engage

in anticompetitive behavior against ISPs that must obtain basic network

services from the BOCs in order

[[Page 9757]]

to provide their information service offerings. For example, BOCs may

discriminate against competing ISPs by denying them access to services

and facilities or by providing ISPs with access to services and

facilities that is inferior to that provided to the BOCs' own

information services operations. BOCs also may allocate costs

improperly by shifting costs they incur in providing information

services, which are not regulated under Title II of the Act, to their

basic services.

44. Under rate-of-return regulation, which allows carriers to set

rates based on the cost of providing a service, the BOCs may have had

an incentive to shift costs incurred in providing information services

to their basic service customers. In 1990, the Commission replaced

rate-of-return regulation with price cap regulation of the BOCs and

certain other LECs to discourage improper cost allocation, among other

things. Recently, the Commission revised its price caps regime to

eliminate the sharing mechanism, which required price cap carriers to

``share'' with their access customers half or all their earnings above

certain levels in the form of lower rates. This revision substantially

reduces the BOCs' incentive to misallocate costs.

45. Since the adoption of Computer I in 1971, the Commission has

employed various regulatory tools, including structural separation, to

prevent access discrimination and cost misallocation, first by AT&T and

then, after divestiture, by the BOCs, in providing information

services. In Computer I, we imposed a ``maximum separation policy'' on

the provision of ``data processing'' services by common carriers other

than AT&T and its Bell System subsidiaries. We continued to impose

structural separation on the provision of enhanced services by AT&T and

its Bell System subsidiaries in Computer II, until we replaced

structural separation with a system of nonstructural safeguards in

1986, in Computer III.

46. The Commission has long recognized both the benefits as well as

the costs of structural separation as a regulatory tool. The Commission

noted in Computer II that a structural separation requirement reduces

firms' ability to engage in anticompetitive activity without detection

because the extent of joint and common costs between affiliated firms

is reduced, transactions must take place across corporate boundaries,

and the rates, terms, and conditions on which services will be

available to all potential purchasers must be made publicly available.

Structural separation thus is useful as an enforcement tool and as a

deterrent, because firms are less likely to engage in anticompetitive

activity the more easily it can be detected. As for costs, the

Commission recognized that structural separation increases firms'

transaction and production costs, but did not agree with arguments

presented at the time that structural separation reduces innovation.

47. The Commission similarly weighed the benefits and costs of

structural separation in Computer III when, with the passage of time

and the accumulation of experience, it replaced the Computer II

structural separation requirements with a system of nonstructural

safeguards. The Commission concluded in Computer III that the benefits

of structural separation are not significantly greater than the

benefits of nonstructural safeguards in preventing anticompetitive

practices by the BOCs, and that structural separation imposes greater

costs on the public and the BOCs than nonstructural safeguards. The

Commission also found that the benefits of structural separation had

decreased since the adoption of the BOC Separation Order, 49 FR 1190,

January 10, 1984 due to technological and market developments that

diminished the BOCs' ability to misallocate costs and engage in access

discrimination. Further, the Commission found, based on its experience,

that the introduction of new information services by the BOCs was

slowed or prevented altogether by structural separation, thus denying

the public the benefits of innovation. The Commission also found that

structural separation imposed direct costs on the BOCs resulting from

duplication of facilities and personnel, limitations on joint

marketing, and deprivation of economies of scope. The Ninth Circuit

upheld the Commission's analysis of the costs of structural separation

in California I and California III.

2. Effect of the 1996 Act and Other Factors

48. In the Computer III Further Remand Notice, the Commission

sought comment on how various factors, including reports of

anticompetitive behavior by the BOCs and the increase in the number of

BOC information service offerings since the elimination of structural

separation, affected the Commission's cost-benefit analysis of

structural separation in Computer III. The 1996 Act was enacted after

the Commission issued the Computer III Further Remand Notice, and

raises additional issues that may affect this cost-benefit analysis. As

discussed in more detail below, we tentatively conclude that the Act's

overall pro-competitive, de-regulatory framework, as well as our public

interest analysis, support the continued application of the

Commission's nonstructural safeguards regime to the provision by the

BOCs of intraLATA information services. We also tentatively conclude

that allowing the BOCs to offer intraLATA information services subject

to nonstructural safeguards serves as an appropriate balance of the

need to provide incentives to the BOCs for the continued development of

innovative new technologies and information services that will benefit

the public with the need to protect competing ISPs against the

potential for anticompetitive behavior by the BOCs. We thus propose to

allow the BOCs to continue to provide intraLATA information services on

an integrated basis, subject to the Commission's Computer III and ONA

requirements as modified or amended by this proceeding, or on a

structurally separate basis. If a BOC chooses to provide intraLATA

information services on a structurally separate basis, we seek comment

on whether we should permit the BOC to choose between a Computer II and

an Act-mandated affiliate under section 272 or section 274, or whether

we should mandate one of these types of affiliates.

a. Section 251 and Local Competition

49. Competition in the local exchange and exchange access markets

is the best safeguard against anticompetitive behavior. BOCs are unable

to engage successfully in discrimination and cost misallocation to the

extent that competing ISPs have alternate sources of access to basic

services. Stated differently, when other telecommunications carriers,

such as interexchange carriers (IXCs) or cable service providers,

compete with the BOCs in providing basic services to ISPs, the BOCs are

less able to engage successfully in discrimination and cost

misallocation because they risk losing business from their ISP

customers for basic services to these competing telecommunications

carriers.

50. As discussed above, the 1996 Act affirmatively promotes local

competition. Sections 251 and 253, among other sections, are intended

to eliminate entry barriers and foster competition in the local

exchange and exchange access markets. Indeed, the market for local

exchange and exchange access services has begun to respond to some

degree to the pro-competitive mandates of the 1996 Act. Some ISPs, for

example, currently are obtaining basic services that underlie their

information services from competing

[[Page 9758]]

providers of telecommunications services that have entered into

interconnection agreements with the BOCs pursuant to section 251.

51. We recognize that the BOCs remain the dominant providers of

local exchange and exchange access services in their in-region states,

and thus continue to have the ability and incentive to engage in

anticompetitive behavior against competing ISPs. On the other hand, the

movement toward local exchange and exchange access competition should,

over time, decrease and eventually eliminate the need for regulation of

the BOCs to ensure that they do not engage in access discrimination or

cost misallocation of their basic service offerings. The Commission has

previously concluded that the nonstructural safeguards established in

Computer III could combat such anticompetitive behavior as effectively

as structural separation requirements, but in a less costly way. We

thus tentatively conclude that the de-regulatory, pro-competitive

provisions of the 1996 Act, and the framework the 1996 Act set up for

promoting local competition, are consistent with, and provide

additional support for, the continued application of the Commission's

current nonstructural safeguards regime for BOC provision of intraLATA

information services. We seek comment on this tentative conclusion.

b. Structural Separation and the 1996 Act

52. In the Computer III Further Remand Notice, we sought comment on

the issue of whether some form of structural separation should be

reimposed for the provision of information services by the BOCs, and we

discussed briefly the costs and benefits that the Commission previously

identified in granting structural relief to the BOCs. In this section,

we seek comment on the extent to which the Act-mandated separation

requirements may affect this cost-benefit analysis.

53. The 1996 Act permits the BOCs to enter markets from which they

were previously restricted, allowing the BOCs to develop and market

innovative new technologies and information services. In doing so,

Congress in certain cases imposed structural separation requirements on

the BOCs. Section 272, for example, allows the BOCs to provide certain

interLATA information services as well as in-region, interLATA

telecommunications services, and to engage in manufacturing activities,

only through a structurally separate affiliate. Section 274 imposes

structural separation requirements on BOC provision of intraLATA and

interLATA electronic publishing services. Congress did not, however,

mandate separation requirements for BOC provision of other information

services.

54. In the Non-Accounting Safeguards Order we recognized that

section 272 on its face does not require the BOCs to offer intraLATA

information services through a separate affiliate, and deferred to this

proceeding the question of whether the Commission should exercise its

general rulemaking authority to do so. We find it significant that

Congress limited the separate affiliate requirement in section 272 to

BOC provision of most interLATA information services, interLATA

telecommunications services, and manufacturing, and in section 274 to

BOC provision of electronic publishing services. We therefore

tentatively conclude that Congress' decision to impose structural

separation requirements in sections 272 and 274, while relevant to our

cost-benefit analysis, does not in itself warrant a return to

structural separation for BOC provision of intraLATA information

services not subject to those sections. We seek comment on this

tentative conclusion.

55. Congress's decision to mandate structural separation only for

certain information services does not necessarily foreclose the

Commission from mandating or allowing structural separation for other

information services. We recognize that, for example, the statutory

separate affiliate requirements may reduce the cost of returning to a

structural separation regime for BOC provision of intraLATA information

services, given that the BOCs already are required to establish at

least one structurally separate affiliate in order to provide the

services covered by sections 272 and 274. Some BOCs may find it more

efficient to provide all of their information services through a

statutorily-mandated affiliate. In addition, it may be in the public

interest for the Commission to prescribe a uniform set of regulations

for BOC provision of both intraLATA and interLATA information services,

by requiring, for example, that BOCs provide all information services

through an affiliate that complies with the statute. This approach

would eliminate the need to distinguish between intraLATA and interLATA

information services for purposes of regulation and, consequently,

lower compliance and enforcement costs.

56. On the other hand, mandatory structural separation would entail

increased transaction and production costs for the BOCs, as discussed

above. In addition, in the Computer III Further Remand Notice we noted

that all of the BOCs currently are offering some information services

on an integrated basis pursuant to CEI plans approved by the

Commission. Thus, our cost-benefit analysis should take into account

the costs today of returning to structural separation. These would

include the personnel, operational, and other changes the BOCs would

have to undergo in order to reinstate a regime of structural

separation, and the service disruptions, lower service quality, reduced

innovation, and higher user rates that may result. We must also

consider the effect on the public of the potential delay in the

development of new technologies and information services by the BOCs

that may result. In addition, once the separation requirements under

sections 272 and 274 sunset, structural separation for intraLATA

information services based on the existence of the statutorily-mandated

affiliates would have to be reexamined.

57. We also recognize the benefits of a flexible, regulatory

framework that would allow the BOCs, consistent with the public

interest, to structure their operations as they see fit in order to

maximize efficiencies and thus provide greater benefits to consumers.

We note that, under our current rules, a BOC may provide an intraLATA

information service either on an integrated basis pursuant to an

approved CEI plan or on a structurally separated basis pursuant to the

Commission's Computer II rules. SBC has argued that the BOCs continue

to need this type of flexibility to provide intraLATA information

services either on an integrated basis, subject to appropriate

safeguards, or through a separate affiliate, because the most

appropriate form of regulation varies service-by-service, depending on

the relative significance of cost considerations and other factors.

Although the Commission may need to devote more resources to administer

and enforce multiple regulatory regimes, this approach would allow the

BOCs to structure their intraLATA information service offerings more in

accordance with their business needs. In addition, such an approach may

minimize the risk of service disruptions, since the BOCs would not have

to change the manner in which they are providing their current

intraLATA information service offerings.

58. In addition to the factors cited by the Commission in the

Computer III Phase I Order, more recent events may affect the analysis

of the relative costs and benefits of structural and nonstructural

safeguards. In particular,

[[Page 9759]]

we earlier discussed how our Price Caps Fourth Report and Order, 62 FR

31939, June 11, 1997 eliminates the sharing mechanism from the price

caps regime, thereby reducing the BOCs' incentive to misallocate costs.

We also described previously how the local competition provisions of

the 1996 Act provide for alternate sources of access to basic services,

thereby diminishing the BOCs' ability to engage in anticompetitive

behavior against competing ISPs.

59. In light of this analysis, we continue to believe it is

preferable, as a matter of public interest, to continue with the

Commission's nonstructural safeguards regime rather than to reimpose

structural separation, notwithstanding the affiliate requirements of

sections 272 and 274 of the Act. We thus tentatively conclude that the

BOCs should continue to be able to choose whether to provide intraLATA

information services either on an integrated basis, subject to the

Commission's Computer III and ONA requirements as modified or amended

by this proceeding, or pursuant to a separate affiliate. We seek

comment on this tentative conclusion. In addition, if a BOC chooses to

provide intraLATA information services through a separate affiliate, we

seek comment on whether we should permit the BOC to choose between a

Computer II and an Act-mandated affiliate, or whether we should mandate

one of these types of affiliates. Finally, we seek comment on how the

recent SBC v. FCC decision in the United States District Court for the

Northern District of Texas affects this analysis.

C. Comparably Efficient Interconnection (CEI) Plans

1. Proposed Elimination of Current Requirements

60. In the Interim Waiver Order adopted in response to the

California III decision, the Bureau allowed the BOCs to continue to

provide existing enhanced services on an integrated basis, provided

that they filed CEI plans for those services. In addition, the Bureau

required the BOCs to file CEI plans for new enhanced services they

propose to offer, and to obtain the Bureau's approval for these plans

before beginning to provide service. We concluded that the partial

vacation of the BOC Safeguards Order in California III reinstated the

service-specific CEI plan regime, augmented by implementation of ONA,

until the Commission concluded its remand proceedings. BOCs were also

required to comply with the requirements established in their approved

ONA plans, because we had previously determined that ONA requirements

are independent of the removal of structural separation requirements.

61. In this Further Notice, we tentatively conclude that we should

eliminate the requirement that BOCs file CEI plans and obtain Bureau

approval for those plans prior to providing new information services.

We note that CEI plans were always intended to be an interim measure,

designed to bridge the gap between the Commission's decision to lift

structural separation in the Computer III Phase I Order and the

implementation of ONA. While CEI plans have been effective as interim

safeguards, we tentatively conclude that they are not necessary to

protect against access discrimination once the BOCs are providing

information services pursuant to approved ONA plans, which they have

been for several years. ONA provides ISPs an even greater level of

protection against access discrimination than CEI. Under ONA, not only

must the BOCs offer network services to competing ISPs in compliance

with the nine CEI ``equal access'' parameters, but the BOCs must also

unbundle and tariff key network service elements beyond those they use

to provide their own enhanced services offerings. BOCs are also subject

to ONA amendment requirements that constitute an additional safeguard

against access discrimination following the lifting of structural

separation.

62. Further, under the 1996 Act, the BOCs are now subject to

additional statutory requirements that will help prevent access

discrimination, including the section 251 unbundling requirements and

the network information disclosure requirements of section 251(c)(5).

These statutory requirements all serve as further protections against

access discrimination, both by requiring the BOCs to open the local

exchange market to competition, and by ensuring that the BOCs publicly

disclose on a timely basis information about changes in their basic

network services.

63. Given the protections afforded by ONA and the 1996 Act, we

believe that the substantial administrative costs associated with BOC

preparation, and agency review, of CEI plans outweigh their utility as

an additional safeguard against access discrimination. Moreover, the

time and effort involved in the preparation and review of the CEI plans

may delay the introduction of new information services by the BOCs,

without commensurate regulatory benefits. Such a result is contrary to

one of the Commission's original purposes in adopting a nonstructural

safeguards regime, which was to promote and speed introduction of new

information services, benefiting the public by giving them access to

innovative new technologies.

64. For the reasons outlined above, we tentatively conclude that we

should eliminate the requirement that BOCs file CEI plans and obtain

Bureau approval for those plans prior to providing new information

services. We believe the significant burden imposed by these

requirements on the BOCs and the Commission outweighs their possible

incremental benefit as additional safeguards against access

discrimination. In this light, we tentatively conclude that lifting the

CEI plan requirement will further our statutory obligation to review

and eliminate regulations that are ``no longer necessary in the public

interest.'' We seek comment on this tentative conclusion and our

supporting analysis.

Parties who disagree with this tentative conclusion should address

whether there are more streamlined procedures that could be adopted as

an alternative to the current CEI filing requirements.

65. We recognize that, as part of our effort to reexamine our

nonstructural safeguards regime, we seek comment in this Further Notice

on whether we should modify or amend certain ONA requirements. Because

we base our tentative conclusion that we should eliminate the CEI-plan

filing requirement in part on the adequacy of ONA, we ask that parties

comment on how any of the modifications the Commission proposes in Part

IV.D., or proposed by commenters in response to our questions, may

affect this tentative conclusion. We also seek comment on whether the

requirements that the 1996 Act imposes on the BOCs, such as those

relating to section 251 unbundling and network information disclosure,

are sufficient in themselves to provide a basis for eliminating CEI

plans.

2. Treatment of Services Provided Through 272/274 Affiliates

a. Section 272

66. In the Non-Accounting Safeguards Order, we noted that section

272 of the Act imposes specific separate affiliate and

nondiscrimination requirements on BOC provision of ``interLATA

information services,'' but does not address BOC provision of intraLATA

information services. We concluded that, pending the conclusion of the

Computer III Further Remand proceeding, BOCs may continue to provide

intraLATA information services on an integrated basis, in compliance

[[Page 9760]]

with the Commission's nonstructural safeguards established in Computer

III and ONA.

67. The Non-Accounting Safeguards Order also raised the related

issue of whether a BOC that provides all information services (both

intraLATA and interLATA) through a section 272 separate affiliate

satisfies the Commission's Computer II separate subsidiary

requirements, and therefore does not have to file a CEI plan for those

services. We noted that the record in the Non-Accounting Safeguards

Order was insufficient to make this determination, and that we would

examine this issue in the Computer III Further Remand proceeding.

68. If we do not adopt our tentative conclusion in this proceeding

to eliminate the CEI plan filing requirement for the BOCs, we

tentatively conclude that the BOCs should not have to file CEI plans

for information services that are offered through section 272 separate

affiliates, notwithstanding that section 272's requirements are not

identical to the Commission's Computer II requirements (all other

applicable Computer III and ONA safeguards, however, as amended or

modified by this proceeding, would continue to apply). We note that, to

the extent certain or all BOCs no longer have to provide interLATA

services through a section 272 affiliate as a result of the SBC v. FCC

decision by the United States District Court for the Northern District

of Texas, then this tentative conclusion would not apply.

69. We reach our tentative conclusion for several reasons. First,

we believe that the concerns underlying the Commission's Computer II

requirements regarding access discrimination and cost misallocation are

sufficiently addressed by the accounting and non-accounting

requirements set forth in section 272 and the Commission's orders

implementing this section. Second, after a BOC receives authority under

section 271 to provide interLATA services through a section 272

affiliate, the BOC in many cases may want to provide a seamless

information service to customers that would combine both the inter-and

intraLATA components of such service. For the Commission to require

that the BOC also receive approval under a CEI plan for the intraLATA

component of such service is, in our view, unnecessary, and likely to

delay the provision of integrated services that would be beneficial to

consumers. We seek comment on this tentative conclusion and supporting

analysis.

70. We also noted in the Non-Accounting Safeguards Order that other

issues raised regarding the interplay between the 1996 Act and the

Commission's Computer III/ONA regime would be addressed in the Computer

III Further Remand proceeding. These included whether: (1) the

Commission should harmonize its regulatory treatment of intraLATA

information services provided by the BOCs with the section 272

requirements imposed by Congress on interLATA information services; (2)

the 1996 Act's CPNI, network disclosure, nondiscrimination, and

accounting provisions supersede various of the Commission's Computer

III nonstructural safeguards; and (3) section 251's interconnection and

unbundling requirements render the Commission's Computer III and ONA

requirements unnecessary. These issues are either being addressed in

this Further Notice or have been covered in other proceedings.

b. Section 274

71. In the Telemessaging and Electronic Publishing Order, 62 FR

7690, February 20, 1997 we concluded that the Commission's Computer II,

Computer III, and ONA requirements continue to govern the BOCs'

provision of intraLATA electronic publishing services. We found,

however, that the record was insufficient to determine whether BOC

provision of electronic publishing through a section 274 affiliate

satisfied all the relevant requirements of Computer II, such that the

BOC would not have to file a CEI plan for that service. We noted that

we would consider that issue, as well as other issues raised regarding

the revision or elimination of the Computer III/ONA requirements, in

the Computer III Further Remand proceeding.

72. If we do not adopt our tentative conclusion in this proceeding

to eliminate the CEI plan filing requirement for the BOCs, we

tentatively conclude, as we do above for information services that are

provided through a section 272 affiliate, that BOCs should not have to

file CEI plans for electronic publishing services or other information

services provided through their section 274 affiliate (as noted above,

however, all other applicable Computer III and ONA safeguards, as

amended or modified by this proceeding, would continue to apply). As

noted above, to the extent certain or all BOCs no longer are subject to

section 274 for their provision of electronic publishing as a result of

the SBC v. FCC decision by the United States District Court for the

Northern District of Texas, then this tentative conclusion would not

apply.

73. Again, we reach our tentative conclusion for several reasons.

First, we believe the section 274 separation and nondiscrimination

requirements, and the Commission's rules implementing those

requirements, are sufficient to address concerns regarding access

discrimination and misallocation of costs in general. Second, given

that Congress set forth detailed rules in section 274 for the specific

provision of electronic publishing services, we do not believe the

Commission should continue to require the BOCs to file, and the

Commission to approve, CEI plans before the BOCs may provide such

services. We seek comment on this tentative conclusion and supporting

analysis.

3. Treatment of Telemessaging and Alarm Monitoring Services

74. In the Telemessaging and Electronic Publishing Order and the

Alarm Monitoring Order, respectively, we concluded that the

Commission's Computer II, Computer III, and ONA requirements continue

to govern the BOCs' provision of intraLATA telemessaging services and

alarm monitoring services. Because neither section 260 nor section 275

imposes separation requirements for the provision of intraLATA

telemessaging services or alarm monitoring services, respectively, BOCs

may provide those services, subject both to other restrictions in those

sections, as applicable, as well as the Commission's current

nonstructural safeguards regime, as modified by the proposals that we

may adopt in this proceeding.

4. Related Issues

75. If we adopt our tentative conclusion to eliminate the CEI plan

filing requirement for the BOCs, we seek comment on whether we should

dismiss all CEI matters pending at that time (including pending CEI

plans, pending CEI plan amendments, and requests for CEI waivers), on

the condition that the BOCs must comply with any new or modified rules

that may be established as a result of this Further Notice. We also

seek comment on whether we should require a BOC with CEI approval to

continue to offer service under the CEI requirements. To the extent

that parties involved in pending CEI matters raise issues other than

those directly related to the CEI requirements (e.g., whether the

service for which the BOC is seeking CEI-plan approval is a true

information service, as opposed to a telecommunications service that

should be offered under tariff), we seek comment on how and in what

forum those issues should be addressed.

[[Page 9761]]

76. We note that section 276 directs the Commission to prescribe a

set of nonstructural safeguards for BOC provision of payphone service,

which must include, at a minimum, the ``nonstructural safeguards equal

to those adopted in'' the Computer III proceeding. In implementing

section 276, the Commission required the BOCs, among other things, to

file CEI plans describing how they would comply with various

nonstructural safeguards. The Bureau approved the BOCs' CEI plans to

provide payphone service on April 15, 1997.

77. We seek comment on whether the changes that may be made to the

Commission's Computer III and ONA rules as a result of this Further

Notice should also apply to the nonstructural safeguards regime

established in the Payphone Order proceeding for BOC provision of

payphone service. For example, to the extent that we adopt our

tentative conclusion to eliminate the CEI plan filing requirement,

should we also relieve the BOCs from the requirement of filing

amendments to their CEI plans for payphone service? How does this

comport with the statutory requirement in section 276? We seek comment

on these issues.

D. ONA and Other Nonstructural Safeguards

1. ONA Unbundling Requirements

a. Introduction

78. The Commission's ONA unbundling requirements serve both to

safeguard against access discrimination and to promote competition and

market efficiency in the information services industry. As described

above, the Commission conditioned the permanent elimination of the

Computer II structural separation requirements imposed on the BOCs upon

the evolutionary implementation of ONA and other nonstructural

safeguards. The ONA requirements, however, have a significance

independent of whether they provide the basis for lifting structural

separation. In 1990, during the course of the remand proceedings in

response to California I, the Commission required the BOCs to implement

ONA regardless of whether ONA provided the basis for elimination of

structural separation. As discussed below, the Commission stated that

``[a] major goal of ONA is to increase opportunities for ESPs to use

the BOCs'' regulated networks in highly efficient ways, enabling ESPs

to expand their markets for their present services and develop new

offerings as well, all to the benefit of consumers.'' It was for this

reason that the Commission applied the ONA requirements to GTE in 1994.

79. ONA is the overall design of a carrier's basic network services

to permit all users of the basic network, including the information

services operations of the carrier and its competitors, to interconnect

to specific basic network functions and interfaces on an unbundled and

``equal access'' basis. The BOCs and GTE through ONA must unbundle key

components of their basic services and make them available under

tariff, regardless of whether their information services operations

utilize the unbundled components. Such unbundling ensures that

competitors of the carrier's information services operations can

develop information services that utilize the carrier's network on an

economical and efficient basis.

b. ONA Unbundling Requirements

80. In the Computer III Phase I Order we declined to adopt any

specific network architecture proposals for ONA and instead specified

certain standards that carriers' ONA plans must meet. The unbundling

standard for the BOCs required that: (1) the BOCs' enhanced services

operations obtain unbundled network services pursuant to tariffed

terms, conditions, and rates available to all ISPs; (2) BOCs provide an

initial set of basic service functions that could be commonly used in

the provision of information services to the extent technologically

feasible; (3) ISPs participate in developing the initial set of network

services; (4) BOCs select the set of network services based on the

expected market demand for such elements, their utility as perceived by

information service competitors, and the technical and costing

feasibility of such unbundling; and (5) BOCs comply with CEI

requirements in providing basic network services to affiliated and

unaffiliated ISPs. In the BOC ONA Order that reviewed the initial BOC

ONA plans for compliance with the Commission's requirements, the

Commission generally approved the use of the ``common ONA model'' that

described unbundled services BOCs would provide to competing ISPs.

Under the common ONA model, ISPs obtain access to various unbundled ONA

services, termed Basic Service Elements (BSEs), through access links

described as Basic Service Arrangements (BSAs). BSEs are used by ISPs

to configure their information services. Other ONA elements include

Complementary Network Services (CNSs), which are optional unbundled

basic service features (such as stutter dial tone) that an end user may

obtain from carriers in order to obtain access to or receive

information services, and Ancillary Network Services (ANSs), which are

non-Title II services, such as billing and collection, that may be

useful to ISPs.

81. The BOCs and GTE are also subject to the ONA amendment

requirement. Under this requirement, if a subject carrier itself seeks

to offer an information service that uses a new BSE or otherwise uses

different configurations of underlying basic services than those

included in its approved ONA plan, the carrier must amend its ONA plan

at least ninety days before it proposes to offer that information

service. The Commission must approve the amendment before the subject

carrier can use the new basic service for its own information services.

82. In addition to the ONA services that BOCs and GTE currently

provide, there are mechanisms to help ISPs obtain the new ONA services

they require to provide information services. When an ISP identifies a

new network functionality that it wants to use to provide an

information service, it can request the service directly from the BOC

or GTE through a 120-day process specified in our rules, or it can

request that the Network Interconnection Interoperability Forum (NIIF)

sponsored by the Alliance for Telecommunications Industry Solutions

(ATIS) consider the technical feasibility of the service.

83. Under the Commission's 120-day request process, an ISP that

requests a new ONA basic service from the BOC or GTE must receive a

response within 120 days regarding whether the BOC or GTE will provide

the service. The BOC or GTE must give specific reasons if it will not

offer the service. The BOC or GTE's evaluation of the ISP request is to

be based on the ONA selection criteria set forth in the original Phase

I Order: (1) market area demand; (2) utility to ISPs as perceived by

the ISPs themselves; (3) feasibility of offering the service based on

its cost; and (4) technical feasibility of offering the service. If an

ISP objects to the BOC or GTE's response, it may seek redress from the

Commission by filing a petition for declaratory ruling.

84. Additionally, ISPs can ask the NIIF for technical assistance in

developing and requesting new network services. Upon request, the NIIF

will establish a task force composed of representatives from different

industry sectors to evaluate the technical feasibility of the service,

and through a consensus process, make recommendations on how the

service can be implemented. ISPs can then take the information to a

specific BOC or GTE and request the service under the

[[Page 9762]]

120-day process using the NIIF result to show that the request is

technically feasible.

85. As part of the Commission's 1998 biennial review of

regulations, we seek comment on whether ONA has been and continues to

be an effective means of providing ISPs with access to the BOC/GTE

unbundled network services they need to structure efficiently and

innovatively their information service offerings. To the extent that

commenters assert that ONA is effective or ineffective, we request that

they cite to specific instances to support their claims.

86. In addition, we seek comment on whether the ``common ONA

model'' through which ISPs gain access to BSEs, BSAs, CNSs, and ANSs is

adequate to provide ISPs with the network functionalities they need. If

not, what specific changes to the ONA unbundling framework should be

made? Some parties have argued that the common ONA model forces ISPs to

purchase unnecessary services or functionalities that are embedded

within the BSEs, BSAs, CNSs, and ANSs. We seek comment on this

argument. In addressing these issues, commenters should take note of

our separate inquiry below regarding the impact of section 251 and its

separate unbundling regime.

87. We further seek comment on whether ISPs make use of the ONA

framework to acquire unbundled network services or whether they use

other means to obtain such services in order to provide their

information service offerings. Commenters that have used means other

than ONA to acquire or provide unbundled network services should

identify those means, state why ONA was not used, and discuss why the

alternative approach was more effective and efficient.

88. In addition, we seek comment on whether the ONA 120-day request

process established to help ISPs obtain new ONA services has been

effective. We seek comment, from ISPs in particular, regarding whether

they have made use of the 120-day request process, and the results from

using that process. If ISPs have not used the 120-day request process,

we request that they explain why they have not done so. We further

request that parties comment, with specificity, on what, if anything,

we should do to streamline the 120-day request process to make it more

useful. In the alternative, we seek comment on whether the 120-day

request process should be eliminated, in light of the fact that the

issues that must be resolved between the carrier and the requesting ISP

are technical and operational in nature, and may be most appropriately

addressed in an industry forum, such as the NIIF. We also seek comment

on whether the ONA amendment process has been effective.

89. We further seek comment regarding the role of the NIIF in

helping ISPs obtain basic services from the BOCs and GTE. We seek

comment, from ISPs in particular, regarding whether they have requested

assistance from the NIIF in determining the technical feasibility of

offering particular network functionalities as new basic services, and

if so, the results obtained. If ISPs have not done so, we request that

they tell us why not. We further seek comment on whether we should

continue to request that the NIIF perform the function of facilitating

ISP ONA requests or whether some other forum or industry group would be

more appropriate.

90. Finally, we seek comment on whether and how the development of

new information services, including, for example, Internet services,

should affect our analysis of the effectiveness of the Commission's

current ONA rules for ISPs. As we noted in the Information Service and

Internet Access NOI, 62 FR 4657, January 31, 1997, many of the

Commission's existing rules have been designed for traditional circuit-

switched voice networks rather than the emerging packet-switched data

networks. While the Information Service and Internet Access NOI sought

comment, in general, on identifying ways in which the Commission could

facilitate the development of high-bandwidth data networks while

preserving efficient incentives for investment and innovation in the

underlying voice network, we seek comment in this Further Notice

specifically on whether and how the Commission should modify the

Computer III and ONA rules in light of these technological

developments.

91. Specifically, we seek comment on how the Commission's Computer

III or ONA rules may impact the BOCs' incentive to invest in and deploy

data network switching technology. For example, the Commission's

existing ONA rules require the BOCs to unbundle and separately tariff

all basic services. We have interpreted this rule to require a BOC to

unbundle and separately tariff a basic service used in the provision of

an information service provided by the BOC affiliate, even where the

basic service is solely located in, and owned by, the BOC affiliate,

not the BOC. This situation may arise, for example, when a frame relay

switch is located in, and owned by, the BOC affiliate rather than the

BOC. We seek comment on the appropriate treatment of these types of

services.

c. Effect of the 1996 Act

(1) Section 251 Unbundling

92. Section 251 of the Act requires incumbent LECs, including the

BOCs and GTE, to provide to requesting telecommunications carriers

interconnection and access to unbundled network elements at rates,

terms, and conditions that are just, reasonable, and nondiscriminatory,

and to offer telecommunications services for resale. The Act defines

``telecommunications carrier'' as ``any provider of telecommunications

services, except that such term does not include aggregators of

telecommunications services (as defined in section 226).'' As we

concluded in the Local Competition Order, the term ``telecommunications

carrier'' does not include ISPs that do not also provide domestic or

international telecommunications. Thus, as discussed above, companies

that provide both information and telecommunications services are able

to request interconnection, access to unbundled network elements, and

resale under section 251, but companies that only provide information

services (``pure ISPs'') are not accorded such rights under section

251.

93. Despite this limitation, there are several ways that pure ISPs

may be able to obtain benefits from section 251, as discussed in Part

III.B. We recognize, however, that section 251 provides a level of

unbundling that pure ISPs do not receive under the Commission's current

ONA framework. Unbundling under section 251 includes the physical

facilities of the network, together with the features, functions, and

capabilities associated with those facilities. Section 251 also

requires incumbent LECs to provide for the collocation at the LEC's

premises of equipment necessary for interconnection or access to

unbundled network elements, under certain conditions. Unbundling under

ONA, in contrast, emphasizes the unbundling of basic services, not the

substitution of underlying facilities in a carrier's network. ONA

unbundling also does not mandate interconnection on carriers' premises

of facilities owned by others. These differences may be due to the

different policy goals that the two regimes were designed to serve.

94. Section 251 unbundling raises a number of issues relating to

the Commission's ONA framework. In the Non-Accounting Safeguards Order,

for example, some parties stated that section 251's interconnection and

[[Page 9763]]

unbundling requirements render the Commission's Computer III and ONA

requirements unnecessary. A related issue is whether the Commission,

pursuant to our general rulemaking authority, should extend section

251-type unbundling to ``pure ISPs.''

95. In this Further Notice, we seek comment on whether section 251,

as currently applied, obviates the need for ONA. We ask commenters to

analyze this issue with respect to both pure ISPs as well as ISPs that

are also telecommunications carriers. For example, is ONA unbundling

still necessary for ISPs that are also telecommunications carriers for

whom section 251 unbundling is available? As for pure ISPs, does the

fact that they can obtain the benefits of section 251 by becoming

telecommunications carriers, or by partnering with or obtaining basic

services from competitive telecommunications providers, render ONA

unnecessary? Commenters should address whether ONA should still be

available for pure ISPs or other ISPs in areas where there may not be

sufficient competition in the local exchange market.

96. We also seek comment on whether it is in the public interest

for the Commission to extend section 251-type unbundling to pure ISPs.

Put differently, we seek comment regarding whether, pursuant to our

general rulemaking authority contained in section 201-205 of the Act,

and as exercised in the Computer III, ONA, and Expanded Interconnection

proceedings, we can and should extend some or all rights accorded by

section 251 to requesting telecommunications carriers to pure ISPs.

Commenters who contend that it is in the public interest to extend

section 251-type unbundling should address why it is necessary to do

so, given the alternative options pure ISPs have to obtain the benefits

of section 251 unbundling, as well as the unbundling rights ISPs

currently enjoy under the Commission's existing ONA regime. Commenters

should also address whether the extension of section 251-type

unbundling to pure ISPs would be inconsistent with section 251, which

by its terms applies only to telecommunications carriers. Similarly,

commenters should address whether section 251-type unbundling is

appropriate for pure ISPs, given the different purposes section 251 and

ONA serve, and the different approaches to unbundling they encompass.

Furthermore, commenters that argue that we should extend the section

251 unbundling framework to pure ISPs should explain what such a

framework would include. For example, commenters should address, among

other things, whether extending section 251-type unbundling rights to

pure ISPs necessarily requires the extension to pure ISPs of any

obligations under section 251 or other Title II provisions. Commenters

should also address whether extending section 251-type unbundling to

pure ISPs obviates the need for ONA.

(2) InterLATA Information Services

97. As discussed, we tentatively conclude in this Further Notice

that the Commission's nonstructural safeguard regime should continue to

apply to BOC provision of intraLATA information services. Prior to the

enactment of the 1996 Act, however, we did not distinguish between

intraLATA and interLATA information services, and we did not explicitly

apply our Computer III and ONA rules to BOC provision of interLATA

information services since the BOCs were prevented under the MFJ from

providing interLATA services. Section 272 of the 1996 Act, however,

does distinguish between intraLATA and interLATA information services

by imposing separation and nondiscrimination requirements on BOC

provision of interLATA information services. We seek comment,

therefore, on whether the Commission's ONA requirements, as modified or

amended by this proceeding, should be interpreted as encompassing BOC

provision of interLATA information services. We also seek comment on

whether it would be inconsistent with section 272 for the Commission to

apply ONA requirements to BOC provision of interLATA information

services.

98. In addressing this issue, we ask that commenters take note of

the following policy considerations. As noted above, the Commission

required the BOCs to implement ONA regardless of whether ONA provided

the basis for elimination of structural separation. We stated that ONA

serves the public interest, not only by serving as a critical

nonstructural safeguard against anticompetitive behavior by the BOCs,

but also by promoting the efficient use of the network by ISPs, to the

benefit of consumers. On the other hand, section 272 already sets forth

the statutory requirements for BOC provision of interLATA information

services and, therefore, including such services within the

Commission's ONA framework may be unnecessary to protect the public

interest. Moreover, as discussed above, section 251 unbundling may

obviate ONA in some or all respects, including its application to BOC

provision of interLATA information services. We also seek comment, to

the extent commenters believe that ONA should encompass BOC provision

of interLATA information services, on how the Commission's current ONA

requirements, including ONA reporting requirements, may need to be

changed or supplemented, if at all, to take account of such services.

2. ONA and Nondiscrimination Reporting Requirements

a. Introduction

99. In this section of the Notice, we examine the various reporting

requirements imposed on the BOCs and GTE by the Computer III and ONA

regimes. These reporting requirements were originally intended as a

safeguard, in that the BOCs and GTE must disclose information that

would allow detection of patterns of access discrimination. In

addition, certain reporting requirements were intended to promote

competition, by providing interested parties (including ISPs and

equipment manufacturers) with information about service introduction

and deployment by the subject carriers, which may assist such parties

in structuring their own operations.

100. We recognize, however, that a number of years have passed

since certain of these reporting requirements were imposed, and that

some of the information we require to be disclosed may no longer be

useful, relevant, or related to either the safeguard or competition

promotion functions identified above. Thus, as part of the Commission's

1998 biennial review of regulations, we intend in this proceeding to

reexamine each of the reporting obligations imposed on the BOCs and GTE

by the Computer III and ONA regimes, to determine whether any of these

requirements should be eliminated or modified, consistent with the 1996

Act. We also seek comment on what, if any, different or additional

reporting requirements should be imposed to safeguard against

anticompetitive behavior by the BOCs and GTE and to promote competition

in the provision of information services. In particular, we also seek

comment on methods to facilitate access to and use of this information

by unaffiliated entities, including small entities.

101. We set forth the ONA reporting reporting requirements and make

specific inquiries regarding each requirement. The following are

general inquiries that apply to all ONA reporting requirements. We ask

parties to respond to both the specific and general inquiries in their

comments on each ONA reporting requirement.

[[Page 9764]]

a. Is the information reported necessary to or helpful in

monitoring the compliance of the subject carriers with their unbundling

and nondiscrimination obligations? If not, why not? Would other types

of information be more useful for compliance monitoring or enforcement

purposes?

b. Is this requirement duplicative? In other words, does the

Commission currently require other reports that disclose the same or

substantially similar information, or serve the same purposes? If so,

how should the Commission streamline these requirements?

c. Do industry groups, such as ATIS and/or NIIF, collect and

compile information that is duplicative of that required by the

Commission? If so, is that information readily available to interested

parties?

d. Should we continue to require the subject carriers to file this

report with the Commission both on paper and on disk, or should we

adopt streamlined filing proposals similar to those set forth in the

Further Notice of Proposed Rulemaking in the Non-Accounting Safeguards

proceeding? Specifically, should we require either:

(i) a certification process whereby the subject carrier must

maintain the required information in a standardized format, and file

with the Commission an annual affidavit stating: (1) the information is

so maintained; (2) the information will be updated in compliance with

our rules; (3) the information will be maintained accurately; and (4)

how the public will be able to access the information; or

(ii) electronic posting whereby the subject carriers must make the

required information available on the Internet (for example, by posting

it on their website) or through another similar electronic mechanism?

e. If we continue to maintain a paper filing requirement, is the

information presented in a clear, comprehensible format? If not, what

modifications to the format would improve clarity and accessibility?

f. If we continue to maintain a paper filing requirement, should we

alter the frequency with which we require this report to be filed? If

so, what alteration should be made, and what is the basis for that

alteration? In the alternative, if we impose a certification process or

electronic posting requirement, how often should subject carriers be

required to update the information they must maintain? How must the

subject carriers maintain historical data, and for what length of time?

102. In conjunction with our inquiries elsewhere in this item, we

seek to examine, and, if possible, clarify the relationship between the

ONA reporting requirements and the other obligations imposed on the

subject carriers by ONA. For example we seek comment above on whether

we should modify or eliminate the ONA unbundling requirements. To the

extent that parties argue that we should do so, we request that they

comment upon the effect that such action would have on the reporting

obligations of the subject carriers. It seems that if the subject

carriers were no longer required to unbundle and tariff ONA services,

much of the information we currently require to be disclosed in the

annual and semi-annual ONA reports would cease to exist. Does this mean

that all such reporting requirements should be eliminated? Are there

other meaningful reporting requirements that should be imposed instead?

b. Annual ONA Reports

103. The BOCs and GTE are required to file annual ONA reports that

include information on: (1) annual projected deployment schedules for

ONA service, by type of service (BSA, BSE, CNS), in terms of percentage

of access lines served system-wide and by market area; (2) disposition

of new ONA service requests from ISPs; (3) disposition of ONA service

requests that have previously been designated for further evaluation;

(4) disposition of ONA service requests that were previously deemed

technically infeasible; (5) information on Signaling System 7 (SS7),

Integrated Services Digital Network (ISDN), and Intelligent Network

(IN) projected development in terms of percentage of access lines

served system-wide and on a market area basis; (6) new ONA services

available through SS7, ISDN, and IN; (7) progress in the IILC (now

NIIF) on continuing activities implementing service-specific and long-

term uniformity issues; (8) progress in providing billing information

including Billing Name and Address (BNA), line-side Calling Number

Identification (CNI), or possible CNI alternatives, and call detail

services to ISPs; (9) progress in developing and implementing Operation

Support Systems (OSS) services and ESP access to those services; (10)

progress on the uniform provision of OSS services; and (11) a list of

BSEs used in the provision of BOC/GTE's own enhanced services. In

addition, the BOCs are required to report annually on the unbundling of

new technologies arising from their own initiative, in response to

requests by ISPs, or resulting from requirements imposed by the

Commission.

104. We believe that certain aspects of the annual reporting

requirements may be outdated and should be streamlined. We seek

comment, for example, on whether we should continue to require the

subject carriers to continue to report on projected deployment of ONA

services (item 1), particularly as this information does not appear to

change appreciably from year to year. Should we instead require the

subject carriers to make a one-time filing of a 5-year deployment

schedule at the time a new ONA service is introduced? In addition,

should we require the subject carriers to continue to report on the

disposition of ONA service requests from ISPs (items 2, 3, and 4),

despite evidence that the frequency of such requests has declined

appreciably since the initial implementation of ONA?

105. We seek comment on whether we should continue to require the

subject carriers to report on deployment of SS7 (items 5 and 6), which

has become available in most service areas. We further seek comment on

whether we should continue to require the subject carriers to report on

the availability and deployment of ISDN, IN, and AIN services (items 5

and 6). In addition, we seek comment regarding whether the requirement

that the BOCs report on ``new ONA services available through SS7, ISDN,

and IN, and plans to provide these services'' (item 6) overlaps so

significantly with the requirement that they report on the unbundling

of new technologies that one of these requirements should be

eliminated.

106. In addition, we seek comment on whether, and to what extent,

we should alter the requirement that carriers report on progress in

industry forums regarding uniformity issues. Currently, subject

carriers are required to report on progress in the IILC on continuing

activities implementing service-specific and long-term uniformity

issues (item 7). As a preliminary matter, we note that the functions

that used to be performed by the IILC were transferred, as of January

1, 1997, to the NIIF. We tentatively conclude that, at a minimum, the

ONA reporting requirement should be updated to reflect this change. We

believe that the BOCs have agreed to provide to the NIIF periodic

updates regarding issues that have been resolved. We seek comment on

the nature of such updates to the NIIF, including specifically what

information the BOCs provide. We further seek comment regarding whether

the information from such updates is comprehensive enough, and

sufficiently accessible to interested parties, to allow

[[Page 9765]]

us to eliminate the ONA reporting requirement covering progress of

matters in the NIIF. In the alternative, we seek comment regarding

whether there are other sources of information produced by or for ATIS

or the NIIF that may reasonably substitute for this ONA reporting

requirement.

107. We seek comment on whether we should continue to require the

subject carriers to report on progress in providing billing information

and call detail services to ISPs (item 8). We seek comment on whether

we should continue to require the subject carriers to report on

progress in developing, implementing, and providing access to Operation

Support Systems (OSS) services (items 9 and 10). We believe it is

important for such information to continue to be publicly available. We

recognize, however, that such information may be more appropriately

provided pursuant to other statutory provisions. For example, we issued

a Public Notice on June 10, 1997, asking for comment on LCI's petition

for expedited rulemaking to establish reporting requirements,

performance, and technical standards for OSS in the context of section

251 of the Act. We seek comment on the appropriate forum for collecting

information about OSS and whether continued reporting under Computer

III is necessary in light of other pending Commission proceedings. We

further seek comment on what, if any, changes we should make to the ONA

OSS reporting requirements, to better reflect the obligations with

respect to OSS imposed on carriers in the Local Competition Order.

c. Semi-Annual ONA Reports

108. In addition to the annual ONA reports discussed above, the

BOCs and GTE are required to file semi-annual ONA reports. These semi-

annual reports include: (1) a consolidated nationwide matrix of ONA

services and state and federal ONA tariffs; (2) computer disks and

printouts of data regarding state and federal tariffs; (3) a printed

copy and a diskette copy of the ONA Services User Guide; (4) updated

information on 118 categories of network capabilities requested by ISPs

and how such requests were addressed, with details and matrices; and

(5) updated information on BOC responses to the requests and matrices.

109. Considerable portions of the semi-annual reports filed by the

BOCs appear to be redundant, as each of the BOCs files identical

information. This generic information includes the ONA service matrix

and the Services Description section of the ONA Services User Guide, as

well as information on the 118 network capabilities originally

requested by ISPs, and how the BOCs collectively have responded to

these requests. Bell Communications Research, Inc. (Bellcore)

originated and, until its spin-off earlier this year, prepared these

portions of the BOCs' semi-annual reports; currently, an organization

called the National Telecommunications Alliance (NTA) has assumed this

responsibility. We see no benefit to continuing to require each of the

BOCs separately to file the generic portions of the semi-annual report,

particularly as there appear to be few changes in this information from

year to year. Thus, we tentatively conclude that the BOCs should be

permitted to make one consolidated filing (or posting) for all generic

information they currently submit in their semi-annual reports. We seek

comment on this tentative conclusion. We further seek comment on

whether we should allow GTE to join in this consolidated filing or

posting (to the extent that this arrangement would be mutually

agreeable to the parties) with respect to the information it files that

overlaps with that filed by the BOCs.

110. In addition, we seek comment on the frequency with which we

require the subject carriers to file the information contained in the

semi-annual ONA reports. In particular, we inquire as to whether we

should reduce the filing frequency, and restructure the semi-annual

reports to become part of the annual ONA reports filed by the subject

carriers. A reduction in filing frequency would decrease the burden

imposed on the subject carriers, without, we believe, significantly

affecting the quality or utility of the information supplied, much of

which is either generic or rather static in nature, or is available

through other means (for example, in the state and federal tariffs

filed by the subject carriers).

111. We also seek comment regarding whether certain information

required in the semi-annual reports overlaps with the information

required in the annual reports. For example, in the annual ONA reports,

the Commission requires the BOCs and GTE to supply information on the

disposition of several categories of ONA requests, whereas in the semi-

annual reports, the Commission requires the BOCs and GTE to supply

information regarding how they have responded to ISP requests for the

existing 118 categories of network capabilities. These separate

requirements seem to elicit similar, if not identical, information. To

the extent there is overlap, we seek comment regarding whether these

requirements may be simplified and consolidated, or, in the

alternative, whether either or both sets should be eliminated entirely.

We also seek comment on other, similar, overlaps among the ONA

reporting requirements, and what we should do to eliminate the burdens

or inefficiencies associated with them.

d. Nondiscrimination Reports

112. The BOCs and GTE are also required to establish procedures to

ensure that they do not discriminate in their provision of ONA

services, including the installation, maintenance, and quality of such

services, to unaffiliated ISPs and their customers. For example, they

must establish and publish standard intervals for routine installation

orders based on type and quantity of services ordered, and follow these

intervals in assigning due dates for installation, which are applicable

to orders placed by competing service providers as well as orders

placed by their own information services operations. In addition, they

must standardize their maintenance procedures where possible, by

assigning repair dates based on nondiscriminatory criteria (e.g.,

available work force and severity of problem), and handling trouble

reports on a first-come, first-served basis.

113. In order to demonstrate compliance with the nondiscrimination

requirements outlined above, the BOCs and GTE must file quarterly

nondiscrimination reports comparing the timeliness of their

installation and maintenance of ONA services for their own information

services operations versus the information services operations of their

competitors. If a BOC or GTE demonstrates in its ONA plan that it lacks

the ability to discriminate with respect to installation and

maintenance services, and files an annual affidavit to that effect, it

may modify its quarterly report to compare installation and maintenance

services provided to its own information services operations with

services provided to a sampling of all customers. In their quarterly

reports, the BOCs and GTE must include information on total orders, due

dates missed, and average intervals for a set of service categories

specified by the Commission, following a format specified by the

Commission.

114. We tentatively conclude that the nondiscrimination obligations

for provisioning and performing maintenance activities established by

Computer III continue to apply to the BOCs and GTE. We seek comment,

however, on whether the current quarterly installation and maintenance

reports are an appropriate and effective mechanism for monitoring the

BOCs'

[[Page 9766]]

and GTE's compliance with these nondiscrimination obligations. Are

there ways in which the quarterly reports, and the accompanying annual

affidavits, may be simplified, clarified, or otherwise made more useful

to the Commission and the interested public? Along these lines, we note

that the Commission issued a Further Notice of Proposed Rulemaking in

conjunction with its Non-Accounting Safeguards Order, seeking comment

on what types of reporting requirements are necessary to implement the

specific nondiscrimination requirement set forth in section 272(e)(1)

of the Communications Act. While we acknowledge that the

nondiscrimination obligations imposed on the BOCs by section 272(e)(1)

differ from those imposed by Computer III, we seek comment regarding

whether the information required to demonstrate compliance with both

sets of nondiscrimination requirements is sufficiently similar that we

should harmonize the ONA nondiscrimination reporting requirements with

the reporting requirements adopted in response to the Further Notice of

Proposed Rulemaking in the Non-Accounting Safeguards proceeding. We

also seek comment on whether we should harmonize the ONA

nondiscrimination reporting requirements with reporting requirements

being considered in other proceedings, such as in the LCI OSS Petition.

115. We note that, like the BOCs, AT&T was originally required to

file quarterly nondiscrimination reports on the provision of

installation and maintenance services to unaffiliated providers of

enhanced services. The Commission modified and reduced these reporting

requirements in 1991 and in 1993. In 1996, the Bureau eliminated the

requirement that AT&T file quarterly installation and maintenance

nondiscrimination reports, as well as the requirement that AT&T file an

annual affidavit that its quarterly reports are true and that it has

not discriminated in providing installation and maintenance services.

116. The Bureau declined to eliminate the requirement that AT&T

file a second affidavit, which affirms that AT&T has followed the

installation procedures in its ONA plan and has not discriminated in

the quality of network services provided to competing enhanced service

providers, deferring that determination to the instant proceeding. We

tentatively conclude that we should no longer require AT&T to file this

second affidavit because the level of competition in the interexchange

services market is an effective check on AT&T's ability to discriminate

in the quality of network services provided to competing ISPs. This

tentative conclusion is consistent with our previous finding that the

competitive nature of the interexchange market provides an important

assurance that access to those services will be open to ISPs, and that

much of the information of greatest use to ISPs is controlled by LECs

such as the BOCs, and not by interexchange carriers. We also find that

this tentative conclusion comports with our statutory obligation to

eliminate regulations that are no longer necessary due to ``meaningful

economic competition'' between providers of such service. We seek

comment on this tentative conclusion.

3. Other Nonstructural Safeguards

a. Network Information Disclosure Rules

117. The Commission's network information disclosure rules seek to

prevent anticompetitive behavior by ensuring that ISPs and other

interested parties can obtain timely access to information affecting

the interconnection of information services to the BOCs', AT&T's, and

other carriers' networks. Prior to the 1996 Act, the rules set forth in

the Commission's Computer II and Computer III proceedings governed the

disclosure of network information. Section 251(c)(5) of the Act

requires incumbent LECs to ``provide reasonable public notice of

changes in the information necessary for the transmission and routing

of services using that local exchange carrier's facilities or networks,

as well as of any other changes that would affect the interoperability

of those facilities or networks.'' The Commission recently adopted

network information disclosure requirements to implement section

251(c)(5) in the Local Competition Second Report and Order, 61 FR

47284, September 6, 1996. Although we discussed our preexisting network

information disclosure requirements in conjunction with the

requirements of section 251(c)(5) in the Local Competition Second

Report and Order, we did not address in that proceeding whether our

Computer II and Computer III network information disclosure

requirements should continue to apply independently of our section

251(c)(5) network information disclosure requirements. We address that

issue in this proceeding as part of our 1998 biennial review of

regulations, in an effort to eliminate unnecessary and possibly

conflicting requirements.

118. The rules established pursuant to section 251(c)(5) in some

respects appear to duplicate and even exceed the rules established

under Computer II and Computer III, while in other respects they do

not. For example, section 251(c)(5) of the Act, and the Commission's

rules implementing that section, only apply to incumbent LECs, while

some of the Computer II network information disclosure requirements

apply more broadly to ``all carriers owning basic transmission

facilities.'' We seek comment, therefore, on the extent to which the

Commission should retain its network information disclosure rules

established in the Commission's Computer II and Computer III

proceedings in light of the disclosure requirements stemming from

section 251(c)(5) of the 1996 Act. As a starting point, we set forth in

the following paragraphs a general description of the current network

disclosure requirements under Computer II, Computer III, and section

251(c)(5), and then we ask parties to comment on whether, and why,

specific requirements should be retained or eliminated. The following

descriptions are not intended to be an exhaustive list of every feature

of the Commission's current network disclosure requirements. These

descriptions are intended, rather, to serve as a basis for comparison

by parties commenting in this proceeding.

119. Computer II Network Disclosure Obligations.

a. Application of the Network Disclosure Obligations. The Computer

II network information disclosure rules consist of two requirements:

(1) a disclosure obligation which depends on the existence of a

Computer II separate subsidiary; and (2) a disclosure obligation that

applies independent of whether the carrier has a Computer II separate

subsidiary. The Commission initially imposed both requirements on AT&T

in the Computer II Final Decision. The Commission extended disclosure

requirement (2) in the Computer II Reconsideration Order, 46 FR 5984,

January 21, 1981, to ``all carriers owning basic transmission

facilities'' (hereinafter the ``all-carrier'' rule). After divestiture,

the Commission extended disclosure requirement (1) to the BOCs insofar

as they are providing information services in accordance with the

structural separation requirements of Computer II.

b. Events Triggering the Public Notice Requirement. The Computer II

``all-carrier'' rule is triggered by implementation of ``change[s] * *

* to the telecommunications network that would affect either

intercarrier interconnection or the manner in which interconnected CPE

must operate

[[Page 9767]]

* * *.'' The Computer II separate affiliate disclosure obligation is

triggered by any of three events: (1) the BOC communicates the relevant

network information directly to its Computer II separate affiliate; (2)

such information is used by the BOC or a third party to develop

services or products which reasonably can be expected to be marketed by

the Computer II separate affiliate; or (3) the BOC engages in joint

research and development with its Computer II separate affiliate,

leading to the design or manufacture of any product that either affects

the network interface or relies on a not-yet implemented interface.

c. Timing of Public Notice. Under Computer II, the disclosure

obligation of the ``all-carrier'' rule must be met ``in a timely manner

and on a reasonable basis.'' The Computer II separate affiliate network

disclosure obligation requires that disclosure be made to information

service competitors of the Computer II affiliate ``at the same time''

disclosure is made directly to the Computer II separate affiliate as

described in item (1). If the disclosure requirement is triggered by

the events described in items (2) and (3), then disclosure must be made

at the ``make/buy'' point, i.e., when the BOC or an affiliated company

decides, in reliance on previously undisclosed information, to produce

itself or to procure from a non-affiliated company any product, whether

it be hardware or software, the design of which either affects the

network interface or relies on the network interface.

d. Types of Information To Be Disclosed. The Computer II ``all-

carrier'' rule encompasses ``all information relating to network design

* * *, insofar as such information affects * * * intercarrier

interconnection * * *.'' For the separate affiliate network disclosure

requirement, the information required to be disclosed consists of, ``at

a minimum, * * * any network information which is necessary to enable

all [information] service * * * vendors to gain access to and utilize

and to interact effectively with [the BOCs'] network services or

capabilities, to the same extent that [the BOCs' Computer II separate

affiliate] is able to use and interact with those network services or

capabilities.'' This requirement includes information concerning

``network design, technical standards, interfaces, or generally, the

manner in which interconnected * * * enhanced services will

interoperate with [any of the BOCs'] network.'' In addition to

technical information, the information required includes marketing

information, such as ``commitments of the carrier with respect to the

timing of introduction, pricing, and geographic availability of new

network services or capabilities.''

e. How Public Notice Should Be Provided. Under Computer II,

carriers subject to the ``all-carrier'' rule must disclose in their

tariffs or tariff support material either the relevant network

information or a statement indicating where such information can be

obtained, that will allow competitors to use network facilities in the

same manner as the subject carrier. The separate affiliate network

disclosure obligation requires that the BOCs ``file with the

Commission, within seven calendar days of the date the disclosure

obligation arises, a notice apprising the public that the disclosure

has taken place and indicating in summary form the nature of the

information which has been disclosed [to its Computer II separate

affiliate], the identity of any source documents and where interested

parties can obtain additional details.'' Moreover, when a BOC ``files a

tariff for a new or changed network service where there has been a

prior disclosure to or for the benefit of [the Computer II separate

affiliate], the tariff support materials must list any disclosure

notices previously filed with the Commission that are relevant to the

tariffed offering.''

120. Computer III Network Disclosure Obligations.

a. Application of the Network Disclosure Obligations. The Computer

III network information disclosure rules initially were imposed on AT&T

and the BOCs in the Phase I Order and Phase II Order, 52 FR 20714, June

3, 1987. The Commission later extended the Computer III network

information disclosure rules and other nondiscrimination safeguards to

GTE in the GTE ONA Order, 59 FR 26756, May 24, 1994.

b. Events Triggering the Public Notice Requirement. The Computer

III public notice requirement is triggered at the ``make/buy'' point;

that is, when AT&T, any of the BOCs, or GTE ``makes a decision to

manufacture itself or to procure from an unaffiliated entity, any

product the design of which affects or relies on the network

interface.''

c. Timing of Public Notice. AT&T, the BOCs, and GTE must disclose

the relevant information concerning planned network changes at two

points in time. First, they must disclose the relevant technical

information at the ``make/buy'' point. They are permitted, however, to

condition this ``make/buy'' disclosure on the recipient's signing of a

nondisclosure agreement, upon which the relevant technical information

must be disclosed within 30 days. Second, they must make public

disclosure of the relevant technical information a minimum of twelve

months before implementation of the change; however, if the planned

change can be implemented between six and twelve months following the

``make/buy'' point, then public notice is permitted at the ``make/buy''

point, but at a minimum of six months before implementation.

d. Types of Information To Be Disclosed. Under Computer III, the

range of information encompassed by the network information disclosure

requirements is adopted from, and identical to, the Computer II

requirements. Specifically, at the ``make/buy'' point, AT&T, the BOCs,

and GTE must disclose that a network change or network service is under

development. The notice itself need not contain the full range of

relevant network information, but it must describe the proposed network

service with sufficient detail to convey what the new service is and

what its capabilities are. The notice must also indicate that technical

information required for the development of compatible information

services will be provided to any entity involved in the provision of

information services and may indicate that such information will be

made available only to such entities willing to enter into a

nondisclosure agreement. Once an entity has entered into a

nondisclosure agreement, AT&T, the BOCs, or GTE must provide the full

range of relevant information.

e. How Public Notice Should Be Provided. Under the Computer III

rules, public notice is made through direct mailings, trade

associations, or other reasonable means.

121. Section 251(c)(5) Network Disclosure Obligations.

a. Application of the Network Disclosure Obligations. These rules

apply to all incumbent LECs, as the term is defined in section 251(h)

of the Act.

b. Events Triggering the Public Notice Requirement. The incumbent

LEC makes a decision to implement a network change that either: (1)

affects ``competing service providers' performance or ability to

provide service; or (2) otherwise affects the ability of the incumbent

LEC's and a competing service provider's facilities or network to

connect, to exchange information, or to use the information

exchanged.'' Examples of network changes that would trigger the section

251(c)(5) public disclosure obligations include, but are not limited

to, changes that affect (1) transmission, (2) signalling standards, (3)

call routing, (4)

[[Page 9768]]

network configuration, (5) logical elements, (6) electronic interfaces,

(7) data elements, and (8) transactions that support ordering,

provisioning, maintenance, and billing.

c. Timing of Public Notice. Incumbent LECs must disclose planned

network changes at the ``make/buy'' point, but at least twelve months

before implementation of the change. If the planned change can be

implemented within twelve months of the ``make/buy'' point, then public

notice must be given at the ``make/buy'' point, but at least six months

before implementation. If the planned changes can be implemented within

six months of the make/buy point, then the public notice may be

provided less than six months before implementation, if additional

requirements set forth in section 51.333 of the Commission's rules are

met.

d. Types of Information To Be Disclosed. Under the Commission's

regulations, incumbent LECs are required to disclose, at a minimum,

``complete information about network design, technical standards and

planned changes to the network.'' Public notice of planned network

changes, at a minimum, shall consist of: (1) the carrier's name and

address; (2) the name and telephone number of a contact person who can

supply additional information regarding the planned changes; (3) the

implementation date of the planned changes; (4) the location(s) at

which the changes will occur; (5) a description of the type of changes

planned (including, but not limited to, references to technical

specifications, protocols, and standards regarding transmission,

signalling, routing, and facility assignment as well as references to

technical standards that would be applicable to any new technologies or

equipment, or that may otherwise affect interconnection); and (6) a

description of the reasonably foreseeable impact of the planned

changes.

e. How Public Notice Should Be Provided. Network disclosure may be

made either: (1) by filing public notice with the Commission in

accordance with section 51.329 of the Commission's rules; or (2)

providing public notice through industry fora, industry publications,

or on the incumbent LEC's own publicly accessible Internet sites, as

well as a certification filed with the Commission in accordance with

section 51.329 of the Commission's rules.

122. We tentatively conclude that the Commission's rules

established pursuant to section 251(c)(5) for incumbent LECs should

supersede the Commission's previous network information disclosure

rules established in Computer III. We also tentatively conclude that

the Commission's network disclosure rules established in Computer II

should continue to apply--specifically, the Computer II separate

affiliate disclosure rule should continue to apply to any BOC that

operates a Computer II subsidiary, and the all-carrier rule should

continue to apply to all carriers owning basic transmission facilities.

We reach our tentative conclusion regarding the Computer III network

disclosure rules since, in our view, the 1996 Act disclosure rules for

incumbent LECs are as comprehensive, if not more so, than the

Commission's Computer III disclosure rules. Parties who disagree with

this view should explain why all or some aspects of the Commission's

Computer III disclosure rules are still needed for incumbent LECs in

light of the rules established pursuant to section 251(c)(5) of the

Act.

123. We recognize, however, that some BOCs may still be providing

certain intraLATA information services through a Computer II

subsidiary, rather than on an integrated basis under the Commission's

Computer III rules. We tentatively conclude, therefore, that the

Computer II separate subsidiary disclosure rule should continue to

apply in such cases because, for instance, it encompasses marketing

information which is not included within the scope of information to be

disclosed under section 251(c)(5) and it requires disclosure under a

more stringent timetable than that required under section 251(c)(5). We

also tentatively conclude that the all-carrier rule should continue to

apply to all carriers owning basic transmission facilities, since it is

broader in certain respects than section 251(c)(5). First, it applies

to all carriers, whereas section 251(c)(5) just applies to incumbent

LECs. In addition, the all-carrier rule requires, among other things,

the disclosure of network changes that affect end users' CPE, whereas

our rules interpreting section 251(c)(5) only require the disclosure of

information that affects ``competing service providers.'' We seek

comment on these tentative conclusions and analyses.

b. Customer Proprietary Network Information (CPNI)

124. The Commission first established its CPNI rules in the

Computer II Final Decision in 1980 to encourage AT&T, the BOCs, and GTE

to develop and market efficient, integrated combinations of information

and basic services without the marketing restrictions imposed by

structural separation, while protecting the competitive interests of

information service competitors. While the CPNI rules are an integral

part of the Commission's current nonstructural regulatory framework for

the provision of information services by AT&T, the BOCs, and GTE, we

defer consideration of all CPNI issues relating to our Computer II and

Computer III rules to our CPNI rulemaking proceeding.

125. Section 702 of the 1996 Act, which added a new section 222 to

the Communications Act of 1934, as amended, sets forth requirements for

use of CPNI by telecommunications carriers, including the BOCs.

Although the requirements of section 222 were effective upon enactment

of the 1996 Act, we issued a CPNI Notice on May 17, 1996, 61 FR 26483,

May 28, 1996, which sought comment on, among other things, what

regulations we should adopt to implement section 222. We stated in the

CPNI Notice that the CPNI requirements the Commission previously

established in the Computer II and Computer III proceedings remain in

effect pending the outcome of the rulemaking, to the extent they do not

conflict with section 222. The CPNI proceeding will address whether

these pre-existing requirements should be retained, eliminated,

extended, or modified in light of the Act.

126. Under the Computer II structural separation requirements,

AT&T, the BOCs, and GTE were prohibited from jointly marketing their

basic services with the enhanced services provided through their

separate affiliate. Under the Computer III nonstructural safeguards

regime, AT&T, the BOCs, and GTE were permitted to engage in joint

marketing of basic and enhanced services subject to restrictions on

their use of CPNI. In the BOC Safeguards Order, the Commission

strengthened the CPNI rules by requiring that, for customers with more

than twenty lines, BOC personnel involved in marketing enhanced

services obtain written authorization from the customer before gaining

access to its CPNI.

127. On March 6, 1992, the Association of Telemessaging Services

International, Inc. (ATSI) filed a petition for reconsideration of the

BOC Safeguards Order in CC Docket No. 90-623, the Computer III Remand

proceeding. ATSI asked the Commission to modify the BOC Safeguards

Order by: (1) prohibiting joint marketing of basic and information

services; (2) extending the prior authorization requirement for CPNI to

all users, regardless of size; and (3) ensuring that users who restrict

access to their CPNI continue to receive nondiscriminatory treatment

and an adequate level of service. On May 17, 1996, the Commission

issued an order dismissing issues (2) and (3) as moot

[[Page 9769]]

because of the passage of the Telecommunications Act of 1996 and our

commencement of a new proceeding to address the obligations of

telecommunications carriers with respect to CPNI in light of the new

statute. The order also noted that issue (1) remained to be addressed

by the Commission. ATSI filed a motion to withdraw its petition for

reconsideration in CC Docket No. 90-623 and to incorporate its petition

into the Commission's Computer III Further Remand proceeding in CC

Docket No. 95-20, as well as other proceedings, on December 10, 1996.

On May 14, 1997, the Common Carrier Bureau partially granted the ATSI

Motion by agreeing to address in this proceeding whether joint

marketing of basic services and information services by the BOCs should

be prohibited.

128. We therefore seek comment on the issue raised in the ATSI

Petition: whether, to the extent the Commission continues to allow the

BOCs to provide information services subject to a nonstructural

safeguards regime, the BOCs should be prohibited from jointly marketing

basic services and information services when these services are

provided on an intraLATA basis. To the extent parties support the view

that the term ``telecommunications service'' in the Act encompasses the

same set of services as the term ``basic service'' did under the

Commission's previous rules, parties should discuss the issue raised in

the ATSI petition in terms of whether joint marketing should be allowed

between telecommunications services and information services. As noted

in the ATSI Order, we do not address this question with respect to

interLATA information services, since under section 272 of the Act BOCs

must provide interLATA information services pursuant to a section 272

affiliate and subject to the joint marketing provisions in that

section. Also, under section 274, BOCs providing electronic publishing,

whether on an interLATA or intraLATA basis, must do so pursuant to a

section 274 affiliate and subject to the joint marketing rules in that

section.

129. In its petition, ATSI argues that joint marketing of basic

services and information services harms consumers and diminishes

overall competition in the information services market. ATSI alleges

that the BOCs have abused the Commission's joint marketing rules by:

(1) routing calls to subscribers of competing voice messaging providers

to the BOC's own voice messaging service instead; (2) soliciting

customers of competing voice messaging providers who contact the BOCs

to request other BOC services; (3) providing customers with misleading

and disparaging information about the voice messaging services offered

by competing providers; and (4) engaging in other unfair practices.

ATSI therefore requests that the Commission prohibit the BOCs from

using the same personnel and facilities to market basic services and

information services. We seek comment on these issues. We also seek

comment on the costs and operational efficiencies or inefficiencies of

allowing the BOCs to provide intraLATA information services on an

integrated basis, but requiring different personnel and facilities to

market basic services and information services.

V. Jurisdictional Issues

130. Our authority, pursuant to section 2(a) of the Communications

Act, to establish, enforce, modify, or eliminate a regime of safeguards

for the provision of information services by the BOCs and GTE is well

settled. In addition, the scope of our authority to preempt

inconsistent regulation on the part of the states has been established

by the Commission in the previous Computer III orders and has been

affirmed on appeal.

131. In the Computer III Phase I Order, the Commission preempted:

(1) all state structural separation requirements applicable to the

provision of enhanced services by AT&T and the BOCs; and (2) all state

nonstructural safeguards applicable to AT&T and the BOCs that were

inconsistent with federal safeguards. The California I court vacated

these preemption actions, on the ground that the Commission had not

adequately justified imposing them. In response to the California I

remand, the Commission narrowed the scope of federal preemption to

cover only: (1) state requirements for structural separation of

facilities and personnel used to provide the intrastate portion of

jurisdictionally mixed enhanced services; (2) state CPNI rules

requiring prior authorization that is not required by federal

regulation; and (3) state network disclosure rules that require initial

disclosure at a time different than the federal rules. The Commission

reasoned that such state requirements would thwart or impede the

nonstructural safeguards pursuant to which the BOCs may provide

interstate enhanced services, and the federal goals such safeguards

were intended to achieve. The California III court upheld the

Commission's narrowly tailored preemption, stating that the Commission

had met its burden of demonstrating that it was preempting only state

regulations that would negate valid federal regulatory goals.

132. Thus, we believe that the proposals we make in the current

Further Notice, and the options upon which we seek comment, fall within

the scope of our authority previously established in the context of

this proceeding, as outlined above. To the extent that our proposals go

beyond our recognized preemption authority, we ask that commenters

identify those proposals and comment on our authority to adopt them.

VI. Procedural Matters

A. Ex Parte Presentations

133. This matter shall be treated as a ``permit-but-disclose''

proceeding in accordance with the Commission's revised ex parte rules,

which became effective June 2, 1997. See Amendment of 47 CFR 1.1200 et

seq. Concerning Ex Parte Presentations in Commission Proceedings, GC

Docket No. 95-21, Report and Order, 62 FR 15852, April 3, 1997, (citing

47 CFR 1.1204(b)(1)) (1997). Persons making oral ex parte presentations

are reminded that memoranda summarizing the presentations must contain

summaries of the substance of the presentations 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.

See 47 CFR 1.1206(b)(2), as revised. Other rules pertaining to oral and

written presentations are set forth in section 1.1206(b) as well.

B. Initial Paperwork Reduction Act Analysis

134. This Further Notice 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 Further Notice, as required

by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and

agency comments are due at the same time as other comments on this

Further Notice; OMB comments are due 60 days from the date of

publication of this Further Notice 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

[[Page 9770]]

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.

C. Initial Regulatory Flexibility Certification

135. The Regulatory Flexibility Act (RFA) requires that an initial

regulatory flexibility analysis be prepared for notice-and-comment

rulemaking proceedings, unless the agency certifies that ``the rule

will not, if promulgated, have a significant economic impact on a

substantial number of small entities.'' The RFA generally defines

``small entity'' as having the same meaning as the terms ``small

business,'' ``small organization,'' and ``small governmental

jurisdiction.'' In addition, the term ``small business'' has the same

meaning as the term ``small business concern'' under the Small Business

Act. A small business concern is one which: (1) is independently owned

and operated; (2) is not dominant in its field of operation; and (3)

satisfies any additional criteria established by the Small Business

Administration (SBA).

136. This Further Notice pertains to the Bell Operating Companies

(BOCs), each of which is an affiliate of a Regional Holding Company

(RHC), as well as to GTE and AT&T. Neither the Commission nor SBA has

developed a definition of ``small entity'' specifically applicable to

the BOCs, GTE, or AT&T. The closest definition under SBA rules is that

for establishments providing ``Telephone Communications, Except

Radiotelephone,'' which is Standard Industrial Classification (SIC)

code 4813. Under this definition, a small entity is one employing no

more than 1,500 persons. We note that each BOC is dominant in its field

of operation and all of the BOCs as well as GTE and AT&T have more than

1,500 employees. We therefore certify that this Further Notice will not

have a significant economic impact on a substantial number of small

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

Operations Division, will send a copy of this Further Notice, including

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

Business Administration. A copy will also be published in the Federal

Register.

D. Comment Filing Procedures

137. Pursuant to applicable procedures set forth in sections 1.415

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

parties may file comments on or before March 27, 1998, and reply

comments on or before April 23, 1998. To file formally in this

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

reply comments, and supporting comments. If you want each Commissioner

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

and eleven copies. Comments and reply comments should be sent to Office

of the Secretary, Federal Communications Commission, 1919 M Street,

N.W., Room 222, Washington, D.C., 20554, with a copy to Janice Myles of

the Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington,

D.C., 20554. Parties should also file one copy of any documents filed

in this docket with the Commission's copy contractor, International

Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C.,

20036. 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.

138. Comments and reply comments must include a short and concise

summary of the substantive arguments raised in the pleading. Comments

and reply comments must also comply with section 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 reply comments. All

parties are encouraged to utilize a table of contents, regardless of

the length of their submission.

139. Parties are also asked to submit comments and reply comments

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

a substitute for the formal filing requirements addressed above.

Parties submitting diskettes should submit them to Janice Myles of the

Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C.,

20554. Such a submission should be on a 3.5 inch diskette formatted in

an IBM compatible form using MS DOS 5.0 and WordPerfect 5.1 software.

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

should be clearly labeled with the party's name, proceeding, type of

pleading (comment or reply comments) and date of submission. The

diskette should be accompanied by a cover letter.

140. You may also file informal comments or an exact copy of your

formal comments electronically via the Internet at http://www.fcc.gov/

e-file/> or via e-mail [email protected]>. Only one copy of

electronically-filed comments must be submitted. You must put the

docket number of this proceeding in the subject line if you are using

e-mail (CC Docket No. 95-20), or in the body of the text if by

Internet. You must note whether an electronic submission is an exact

copy of formal comments on the subject line. You also must include your

full name and Postal Service mailing address in your submission.

VII. Ordering Clauses

141. Accordingly, It is ordered that, pursuant to sections 1, 2, 4,

10, 11, 201-205, 251, 271, 272, and 274-276, of the Communications Act

of 1934, as amended, 47 U.S.C. 151, 152, 154, 160, 161, 201-205, 251,

271, 272, and 274-276, a Further notice of proposed rulemaking is

adopted.

142. It is Further Ordered that the Commission's Office of Public

Affairs, Reference Operations Division, shall send a copy of this

Further notice of proposed rulemaking, including the Initial Regulatory

Flexibility Certification, to the Chief Counsel for Advocacy of the

Small Business Administration, in accordance with the Regulatory

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

List of Subjects

47 CFR Part 51

Communications common carriers, Interconnection.

47 CFR Part 53

Bell Operating Companies, Communications common carriers, InterLATA

services, Separate affiliate safeguards, Telephone.

47 CFR Part 64

Communications common carriers, Reporting and recordkeeping

requirements, Telephone.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-4650 Filed 2-25-98; 8:45 am]

BILLING CODE 6712-01-P