Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Petition of U S West Communications, Inc. for Forbearance From Regulation as a Dominant Carrier in the Phoenix, AZ MSA; Interexchange Carrier Purchases of Switched Access Services Offered by Competitive Local Exchange Carriers
Federal RegisterSep 22, 1999
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 0, 1, 61 and 69
[CC Docket Nos. 96-262, 94-1, 98-157; CCB/CPD File No. 98-63; FCC 99-
206]
Access Charge Reform; Price Cap Performance Review for Local
Exchange Carriers; Petition of U S West Communications, Inc. for
Forbearance From Regulation as a Dominant Carrier in the Phoenix, AZ
MSA; Interexchange Carrier Purchases of Switched Access Services
Offered by Competitive Local Exchange Carriers
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document revises the rules that govern the provision of
interstate access services by those incumbent local exchange carriers
subject to price cap regulation to advance the pro-competitive, de-
regulatory national policies embodied in the Telecommunications Act of
1996. With these revisions, the Commission continues the process it
began in 1997 to reform the regulation of interstate access charges in
order to accelerate the development of competition in all
telecommunications markets and to ensure that the Commission's own
regulations do not unduly interfere with the operation of these markets
as competition develops.
DATES: Effective October 22, 1999, except for 47 CFR 1.774, 61.47,
69.709, 69.711, 69.713, 69.729, which contain information collection
requirements that have not been approved by OMB. The Commission will
publish a document in the Federal Register announcing the effective
date.
FOR FURTHER INFORMATION CONTACT: Tamara Preiss, Deputy Division Chief,
Common Carrier Bureau, Competitive Pricing Division, (202) 418-1520.
For additional information concerning the information collections
contained in this Report and Order contact Judy Boley at 202-418-0214,
or via the Internet at [email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Access
Reform Fifth Report and Order adopted August 5, 1999, and released
August 25, 1999. The Order was accompanied by a Further Notice of
Proposed Rulemaking (Notice) printed elsewhere in this Federal Register
issue. The full text of this Report and Order (and the accompanying
Notice), as well as the complete files for the relevant dockets, is
available for inspection and copying during the weekday hours of 9:00
a.m. to 4:30 p.m. in the Commission's Reference Center, 445 12th St.
SW, Room CY-A257, Washington DC, or copies may be purchased from the
Commission's duplicating contractor, ITS Inc., 1231 20th St. NW,
Washington DC 20036; (202) 857-3088. The complete text of the Order
also may be obtained through the World Wide Web, at http://www.fcc.gov/
Bureaus/Common__Carrier/Orders/1999/fcc99206.wp.
This Report and Order contains new and/or modified information
collections subject to the Paperwork Reduction Act of 1995 (PRA). It
has been submitted to the Office of Management and Budget (OMB) for
review under the PRA.
Paperwork Reduction Act
This Report and Order contains either a new or modified information
collection. The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public and the Office of
Management and Budget (OMB) to comment on the information collections
contained in this Order, as required by the Paperwork Reduction Act of
1995, Public Law 104-12. Written comments by the public on the
information collections are due 30 days after date of publication in
the Federal Register. OMB notification of action is due November 22,
1999.
[[Page 51259]]
Comments should address: (1) Whether the new or modified collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information shall practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents including the use of automated
collection techniques or other forms of information technology.
OMB Approval Number: 3060-0760.
Title: Access Charge Reform--CC Docket No. 96-262 (First Report and
Order), Second Order on Reconsideration and Memorandum Opinion and
Order, Third Report and Order, and Fifth Report and Order.
Form No.: N/A.
Type of Review: Revised collection.
Respondents: Businesses or other for profit.
----------------------------------------------------------------------------------------------------------------
Number of Est. time per Total annual
Section/title responses response burden
----------------------------------------------------------------------------------------------------------------
Showings Under Market-Based Approach............................ 13 2117 27,520
Cost Study...................................................... 13 8 104
Tariff Filings.................................................. 13 35 455
Third Party Disclosure.......................................... 14 160 2,240
Contract Based Tariffs.......................................... 13 60 780
----------------------------------------------------------------------------------------------------------------
Total Annual Burden: 30,829 hrs.
Estimated Cost Per Respondent: $600.
OMB Control No.: 3060-0526.
Title: Density Pricing Plan.
Form No.: N/A.
Type of Review: Revised Collection.
Respondents: Businesses or other for Profit.
----------------------------------------------------------------------------------------------------------------
Number of Est. time per Total annual
Section/title responses response burden
----------------------------------------------------------------------------------------------------------------
Density Pricing Plan......................................... 13 48 624
----------------------------------------------------------------------------------------------------------------
Estimated Costs Per Respondents: $0.
OMB Control No.: 3060-0770.
Title: Price Cap Performance Review for Local Exchange Carriers--CC
Docket No. 94-1 (New Services).
Form No.: N/A.
Type of Review: Revised Collection.
Respondents: Businesses or other for Profit.
----------------------------------------------------------------------------------------------------------------
Number of Est. time per Total annual
Section/title responses response burden
----------------------------------------------------------------------------------------------------------------
New Services................................................. 13 10 130
----------------------------------------------------------------------------------------------------------------
Estimated Costs Per Respondents: $0.
Needs and Uses: The Commission provides detailed rules for
implementing the market-based approach, pursuant to which price cap
LECs would receive pricing flexibility in the provision of interstate
access services as competition for those services develops. The Order
grants immediate pricing flexibility to price cap LECs in the form of
streamlined introduction of new services, geographic deaveraging of
rates for services in the trunking basket, and removal of certain
interstate interexchange services from price cap regulation and
provides for additional pricing flexibility upon showings.
Regulatory Flexibility Certification
As required by the Regulatory Flexibility Act, the Fifth Report and
Order contains a Final Regulatory Flexibility Analysis regarding the
Order which is set forth in the Order. A brief description of the
analysis follows. Pursuant to section 604 of the Regulatory Flexibility
Act, the Commission performed a comprehensive analysis of the Order
with regard to small entities. This analysis includes: (1) A succinct
statement of the need for, and objectives of, the Commission's
decisions in the Order; (2) a summary of the significant issues raised
by the public comments in response to the initial regulatory
flexibility analysis, a summary of the Commission's assessment of these
issues, and a statement of any changes made in the Order as a result of
the comments; (3) a description of and an estimate of the number of
small entities to which the Order will apply; (4) a description of the
projected reporting, recordkeeping and other compliance requirements of
the Order, including an estimate of the classes of small entities which
will be subject to the requirement and the type of professional skills
necessary for compliance with the requirement; and (5) a description of
the steps the Commission has taken to minimize the significant economic
impact on small entities consistent with the stated objectives of
applicable statutes, including a statement of the factual, policy, and
legal reasons for selecting the alternative adopted in the Order and
why each one of the other significant alternatives to each of the
Commission's decisions which affect small entities was rejected.
Synopsis of Order
I. Introduction
1. In this Order, the Commission revises the rules that govern the
provision of interstate access services by those incumbent local
exchange carriers (ILECs) subject to price cap regulation
(collectively, ``price cap LECs'') to advance the pro-competitive, de-
regulatory national policies embodied in the Telecommunications Act of
1996
[[Page 51260]]
(1996 Act). With these revisions, the Commission continues the process
it began in 1997, with the Access Reform First Report and Order (62 FR
31868, June 11, 1997), to reform regulation of interstate access
charges in order to accelerate the development of competition in all
telecommunications markets and to ensure that the Commission's own
regulations do not unduly interfere with the operation of these markets
as competition develops.
2. In the Access Reform First Report and Order, the Commission
adopted a primarily market-based approach to drive interstate access
charges toward the costs of providing these services. The Commission
envisioned that this approach would enable it to give carriers
progressively greater flexibility to set rates as competition develops,
until competition gradually replaces regulation as the primary means of
setting prices. In this Order, the Commission fulfills its commitment
to provide detailed rules for implementing the market-based approach,
pursuant to which price cap LECs would receive pricing flexibility in
the provision of interstate access services as competition for those
services develops.
3. The pricing flexibility framework the Commission adopts in this
Order is designed to grant greater flexibility to price cap LECs as
competition develops, while ensuring that: (1) Price cap LECs do not
use pricing flexibility to deter efficient entry or engage in
exclusionary pricing behavior; and (2) price cap LECs do not increase
rates to unreasonable levels for customers that lack competitive
alternatives. In addition, these reforms will facilitate the removal of
services from price cap regulation as competition develops in the
marketplace, without imposing undue administrative burdens on the
Commission or the industry.
4. Specifically, this Order grants immediate pricing flexibility to
price cap LECs in the form of streamlined introduction of new services,
geographic deaveraging of rates for services in the trunking basket,
and removal, upon implementation of toll dialing parity, of certain
interstate interexchange services from price cap regulation. The
Commission also establishes a framework for granting price cap LECs
greater flexibility in the pricing of all interstate access services
once they satisfy certain competitive criteria. In Phase I, the
Commission allows price cap LECs to offer contract tariffs and volume
and term discounts for those services for which they make a specific
competitive showing. In Phase II, the Commission permits price cap LECs
to offer dedicated transport and special access services free from the
Commission's part 69 rate structure and part 61 price cap rules,
provided that the LECs can demonstrate a significantly higher level of
competition for those services. This Order amends the Commission's
rules, as revised in 1998 Beinnial Regulatory Review--Part 61 of the
Commission's Rules and Related Tariffing Requirements, 64 FR 46584
(August 26, 1999).
II. Background
A. Price Cap Regime
5. To recover the costs of providing interstate access services,
incumbent LECs charge IXCs and end users for access services in
accordance with the Commission's part 69 access charge rules. Part 69
establishes two basic categories of access services: Special access
services and switched access services. Special access services do not
use local switches; instead they employ dedicated facilities that run
directly between the end user and the IXC's point of presence (POP).
Switched access services, on the other hand, use local exchange
switches to route originating and terminating interstate toll calls.
The Commission has not prescribed specific rate elements in part 69 for
special access services. Part 69 does establish specific switched
access elements and a mandatory switched access rate structure for each
element.
6. Interoffice transmission services, known as transport services,
carry interstate switched access traffic between an IXC's POP and the
end office that serves the end user customer. Incumbent LEC
transmission facilities that carry switched interstate traffic between
an IXC's POP and the incumbent LEC end office serving the POP (this
office is called the serving wire center, or SWC), are known as
entrance facilities. Incumbent LECs currently offer two types of
interstate switched transport service between a SWC and an end user's
end office. Under the first service, direct-trunked transport, calls
are transported between the SWC and the end office by means of a direct
trunk, a dedicated facility, that does not pass through an intervening
switch. The second service, tandem-switched transport, routes calls
from the SWC to the end office through a tandem switch located between
the SWC and the end office. Traffic travels over a dedicated circuit
from the SWC to the tandem switch and then over a shared circuit, which
carries the calls of many different IXCs, from the tandem switch to the
incumbent LEC end office. Incumbent LEC tandem switches and end office
switches switch interstate traffic between the transport trunks
carrying traffic to and from the IXC POPs and the end users' local
loops.
7. Charges for special access services generally are divided into
channel termination charges and channel mileage charges. Channel
termination charges recover the costs of facilities between the
customer's premises and the LEC end office and the costs of facilities
between the IXC POP and the serving wire center. Channel mileage
charges recover the costs of facilities (also known as interoffice
facilities) between the serving wire center and the LEC end office
serving the end user.
8. In 1990, the Commission replaced rate-of-return regulation for
the BOCs and GTE with an incentives-based system of regulation that
encourages companies to: (1) Improve their efficiency by developing
profit-making incentives to reduce costs; (2) invest efficiently in new
plant and facilities; and (3) develop and deploy innovative service
offerings. The price cap plan is designed to replicate some of the
efficiency incentives found in fully competitive markets and to act as
a transitional regulatory scheme until actual competition makes price
cap regulation unnecessary.
9. Under the original price cap plan, interstate access services
were grouped into four different baskets: The common line, traffic-
sensitive, special access, and interexchange baskets. In the Second
Transport Order (59 FR 10300, March 4, 1994), the Commission combined
transport and special access services into the newly created trunking
basket. Each basket is subject to a price cap index (PCI), which caps
the total charges a LEC may impose for interstate access services in
that basket. The PCI is adjusted annually by a measure of inflation
minus a ``productivity factor,'' or ``X-Factor.'' A separate adjustment
is made to the PCI for ``exogenous'' cost changes, which are changes
outside the carrier's control and not otherwise reflected in the price
cap formula.
10. Within the traffic-sensitive and trunking baskets, services are
grouped into service categories and subcategories. Rate revisions for
these services are limited by upper and, in the original price cap
plan, lower pricing bands established for that particular service.
Originally, the pricing band limits for most of the service categories
and subcategories were set at five percent above and below the Service
Band Index (SBI). In 1995, however, the Commission increased the lower
pricing bands to ten percent for those service categories in the
trunking and traffic-sensitive baskets and 15 percent for those
services subject to density zone
[[Page 51261]]
pricing. These pricing bands give price cap LECs the ability to raise
and lower rates for elements or services as long as the actual price
index (API) for the relevant basket does not exceed the PCI for that
basket, and the prices for each category of services within the basket
are within the established pricing bands. Together, the PCI and pricing
bands restrict a price cap LEC's ability to offset price reductions for
services that are subject to competition with price increases for
services that are not subject to competition.
B. Pricing Flexibility
11. When it adopted the LEC Price Cap Order (55 FR 42375, October
19, 1990), the Commission required price cap LECs to offer all
interstate special and switched access services at geographically
averaged rates for each study area. Since that time, the Commission has
taken significant steps to increase the LECs' pricing flexibility and
ability to respond to the advent of competition in the exchange access
market. In the Special Access and Switched Transport Expanded
Interconnection Orders (57 54323, November 19, 1992; 58 FR 48756,
September 17, 1993), the Commission permitted LECs to introduce density
zone pricing for high capacity special access and switched transport
services in a study area, provided that they could demonstrate the
presence of ``operational'' special access and switched transport
expanded interconnection arrangements and at least one competitor in
the study area. The Commission also permitted price cap LECs to offer
volume and term discounts for special access and switched transport
services upon specific competitive showings.
12. Subsequently, the Commission eliminated the lower service band
indices, concluding that this action would lead to lower prices and
encourage LECs to charge rates that reflect the underlying costs of
providing exchange access services. The Commission found that the PCI
and upper pricing bands adequately control predatory pricing and that
greater downward pricing flexibility would benefit consumers both
directly through lower prices and indirectly by encouraging only
efficient competitive entry.
13. In that same order, the Commission also relaxed the procedures
for introducing new switched access services, in response to arguments
that new services and technologies do not fit the part 69 rate
structure requirements. The Commission prescribed the original rate
structure for introducing new switched access services in 1983. At that
time, incumbent LECs were required to file a part 69 waiver each time
they wanted to introduce a new rate element for switched access service
that did not conform to the prescribed switched access rate structure.
A part 69 waiver required incumbent LECs to demonstrate that ``special
circumstances warrant deviation from the general rule and that such
deviation will serve the public interest.'' Incumbent LECs also had to
comply with the ``new services'' test, which required an incumbent LEC
to demonstrate that its tariffed rates for new services would recover
no more than the carrier's direct costs of providing the service, plus
a reasonable amount of overhead, and no less than the carrier's direct
costs of providing the service. Finally, incumbent LECs were directed
to file their tariffs introducing a new service on at least fifteen
days' notice and to incorporate the new service into the appropriate
price cap basket and indices within six to eighteen months after the
new service tariff became effective.
14. The Commission found that the part 69 rate structure imposed a
costly, time-consuming, and unnecessary burden on incumbent LECs and
significantly impeded the introduction of new services. Accordingly,
the Commission modified the part 69 rate structure rules to permit an
incumbent LEC to introduce a new service by filing a petition based on
a ``public interest'' standard that is easier to satisfy than the
general standard applicable to waivers of the its rules. In addition,
under the new rules, once an initial incumbent LEC has satisfied the
public interest requirement for establishing new rate elements for a
new switched access service, another incumbent LEC may file a petition
seeking authority to introduce an identical new service, and its
petition will be reviewed within ten days of the release of a Public
Notice. The LEC may introduce the new rate element following the ten-
day period, unless the Common Carrier Bureau (the Bureau) informs the
LEC before that time that its new service does not qualify for ``me
too'' treatment.
15. The Commission also recognized that additional modifications to
the Part 69 rate structure could increase consumer choice, streamline
regulation, and increase consumer welfare by increasing incentives for
innovation. The Commission, therefore, sought comment on whether to
permit price cap LECs to establish new switched access rate elements
without prior approval. It also invited comment on whether to eliminate
the new services test and permit LECs to offer new services free from
price cap regulation. In the Access Reform First Report and Order, the
Commission deferred resolution of these issues, as well as other issues
concerning the timing and degree of pricing flexibility, to a future
report and order.
III. Summary
A. Pricing Flexibility
16. Since the release of the Access Reform First Report and Order,
the Commission has re-examined the record generated in response to the
Access Reform NPRM (62 FR 4670, January 31, 1997) and the Price Cap
Second FNPRM (60 FR 49539, September 26, 1995); it has observed
competition develop in the marketplace; and the it has invited parties
to update and refresh the record relating to access charge reform to
reflect any changes that may have taken place since May 1997. In
addition, the Commission has received and reviewed several petitions
(and the associated records) from BOCs seeking pricing flexibility in
the form of forbearance from dominant carrier regulation in the
provision of certain special access and high capacity services.
Although the Commission's current price cap regime gives LECs some
pricing flexibility and considerable incentives to operate efficiently,
significant regulatory constraints remain. As the market becomes more
competitive, such constraints become counter-productive. The Commission
recognizes that the variety of access services available on a
competitive basis has increased significantly since the adoption of its
price cap rules. Therefore, in response to changing market conditions,
the Commission grants price cap LECs immediate flexibility to deaverage
services in the trunking basket and to introduce new services on a
streamlined basis. The Commission also removes certain interstate
interexchange services from price cap regulation upon implementation of
intra-and interLATA toll dialing parity, and the it establishes a
framework for granting price cap LECs further pricing flexibility upon
satisfaction of certain competitive showings and seek comment on
additional flexibility for certain switched access services.
1. Immediate Regulatory Relief
17. As discussed above, the original rate structure for interstate
switched transport services required price cap LECs to charge averaged
rates throughout a study area. The Commission subsequently found that
this requirement forced LECs to price above cost in the high-traffic,
lower-cost
[[Page 51262]]
areas where competition is more likely to develop. In the Switched
Transport Expanded Interconnection Order, therefore, the Commission
created a density zone pricing plan that allows some degree of
deaveraging of rates for switched transport services. It concluded that
relaxing the pricing rules in this manner would enable price cap LECs
to respond to increased competition in the interstate switched
transport market.
18. Although the density zone pricing plan afforded some pricing
flexibility to price cap LECs, it contained several constraints, such
as the increased scrutiny applicable to plans with more than three
zones. The Commission now concludes that market forces, as opposed to
regulation, are more likely to compel LECs to establish efficient
prices. Accordingly, for purposes of deaveraging rates for services in
the trunking basket, the Commission eliminates the limitations inherent
in the its current density zone pricing plan and allow price cap LECs
to define the scope and number of zones within a study area, provided
that each zone, except the highest-cost zone, accounts for at least 15
percent of the incumbent LEC's trunking basket revenues in the study
area and that annual price increases within a zone do not exceed 15
percent. In addition, the Commission eliminates the requirement that
LECs file zone pricing plans prior to filing their tariffs.
19. The Commission also permits price cap LECs to introduce new
services on a streamlined basis, without prior approval. Generally, the
Commission modifies the its rules to eliminate the public interest
showing required by Sec. 69.4(g) and to eliminate the new services test
(except in the case of loop-based new services) required under
Secs. 61.49(f) and (g) of the Commission's rules. These modifications
will eliminate the delays that now exist for the introduction of new
services as well as encourage efficient investment and innovation.
20. Certain interstate interexchange services provided by price cap
LECs are found in the interexchange basket, including interstate
intraLATA services and certain interstate interLATA services called
``corridor services.'' In this Order, the Commission allows price cap
LECs to remove from the interexchange basket, and, hence, price cap
regulation, their interstate intraLATA toll services and corridor
services, provided the price cap LEC has implemented intra-and
interLATA toll dialing parity in all of the states in which it provides
local exchange service. The presence of competitive alternatives for
these services, coupled with implementation of dialing parity, should
prevent price cap LECs from exploiting over a sustained period any
market power may possess with respect to these services and thus
warrants removal of these services from price cap regulation.
2. Relief That Requires a Competitive Showing
21. In addition, the Commission adopts a framework for granting
further regulatory relief upon satisfaction of certain competitive
showings. Relief generally will be granted in two phases and on an MSA
(Metropolitan Statistical Area) basis. To obtain Phase I relief, price
cap LECs must demonstrate that competitors have made irreversible, sunk
investments in the facilities needed to provide the services at issue.
For instance, for dedicated transport and special access services,
price cap LECs must demonstrate that unaffiliated competitors have
collocated in at least 15 percent of the LEC's wire centers within an
MSA or collocated in wire centers accounting for 30 percent of the
LEC's revenues from these services within an MSA. Higher thresholds
apply, however, for channel terminations between a LEC end office and
an end user customer. In that case, the LEC must demonstrate that
unaffiliated competitors have collocated in 50 percent of the price cap
LEC's wire centers within an MSA or collocated in wire centers
accounting for 65 percent of the price cap LEC's revenues from this
service within an MSA. For traffic-sensitive, common line, and the
traffic-sensitive components of tandem-switched transport services, a
LEC must show that competitors offer service over their own facilities
to 15 percent of the price cap LEC's customer locations within an MSA.
Phase I relief permits price cap LECs to offer, on one day's notice,
volume and term discounts and contract tariffs for these services, so
long as the services provided pursuant to contract are removed from
price caps. To protect those customers that may lack competitive
alternatives, however, LECs receiving Phase I flexibility must maintain
their generally available, price cap constrained tariffed rates for
these services.
22. To obtain Phase II relief, price cap LECs must demonstrate that
competitors have established a significant market presence (i.e., that
competition for a particular service within the MSA is sufficient to
preclude the incumbent from exploiting any individual market power over
a sustained period) for provision of the services at issue. Phase II
relief for dedicated transport and special access services is warranted
when a price cap LEC demonstrates that unaffiliated competitors have
collocated in at least 50 percent of the LEC's wire centers within an
MSA or collocated in wire centers accounting for 65 percent of the
LEC's revenues from these services within an MSA. Again, a higher
threshold applies to channel terminations between a LEC end office and
an end user customer. In that case, a price cap LEC must show that
unaffiliated competitors have collocated in 65 percent of the LEC's
wire centers within an MSA or collocated in wire centers accounting for
85 percent of the LEC's revenues from this service within an MSA. Phase
II relief permits price cap LECs to file tariffs for these services on
one day's notice, free from both the Commission's Part 61 rate level
and its Part 69 rate structure rules.
B. CLEC Access Charges
23. In the Access Reform NPRM, the Commission sought comment on
whether CLECs have market power in the provision of terminating access
services and whether to regulate these services. In the Access Reform
First Report and Order, it decided to treat CLECs as non-dominant in
the provision of terminating access service, because they did not
appear at that time to possess market power. The Commission stated,
however, that it would revisit the issue of regulating CLEC terminating
access rates if there were sufficient indications that CLECs were
imposing unreasonable terminating access charges.
24. On October 23, 1998, AT&T filed a petition for declaratory
ruling requesting that the Commission confirm that, under existing
Commission rules and policies, an IXC may elect not to accept service
at a price chosen by the CLEC. In its petition, AT&T alleges that some
CLECs impose switched access charges significantly higher than those
charged by the ILEC competitors in the same area. AT&T points to a
Commission pronouncement in the Access Reform First Report and Order
that ``terminating rates that exceed those charged by the ILEC serving
the same market may suggest that a CLEC's terminating access rates are
excessive,'' thereby warranting Commission regulation.
25. In this Order, the Commission denies AT&T's petition. The
Commission finds, however, that the record developed in response to
AT&T's petition suggests the need for the it to revisit the issue of
CLEC access rates.
[[Page 51263]]
IV. Procedural Issues and Ordering Clauses
A. Final Regulatory Flexibility Analysis
25. As required by the Regulatory Flexibility Act (RFA), an Initial
Regulatory Flexibility Analysis (IRFA) was incorporated in Access
Reform NPRM. The Commission sought written comments on the proposals in
the Access Reform NPRM, including the IRFA. Its Final Regulatory
Flexibility Analysis (FRFA) in this Order conforms to the RFA, as
amended. To the extent that any statement contained in this FRFA is
perceived as creating ambiguity with respect to the Commission's rules
or statements made in preceding sections of this Order, the rules and
statements set forth in those preceding sections shall be controlling.
1. Need For and Objectives of This Report and Order
27. This proceeding is being conducted to advance the pro-
competitive, de-regulatory national policies embodied in the
Telecommunications Act of 1996. The Commission continues the process it
began in 1997 with the Access Reform First Report and Order to reform
regulation of interstate access charges in order to accelerate the
development of competition in all telecommunications markets and to
ensure that the its own regulations do not unduly interfere with the
operation of these markets as competition develops.
2. Summary of Significant Issues Raised by the Public Comments in
Response to the IRFA
28. The Commission has already addressed the general concerns
raised by Rural Telephone Coalition that this proceeding may ``prejudge
and prejudice'' a later rulemaking for non price cap LECs, and that the
delay in implementing that rulemaking may injure non-price cap LECs.
Otherwise, the comments filed do not address the specific issues
contained in this Order.
3. Description and Estimate of the Number of Small Entities to Which
the Rules Will Apply
29. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``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). The Small Business Administration has defined a
small business for Standard Industrial Classification (SIC) category
4813 (Telephone Communications, Except Radiotelephone) to be a small
entity that has no more than 1500 employees.
Total Number of Telephone Companies Affected:
30. The Commission has included small incumbent LECs in this
present RFA analysis. As noted above, a ``small business'' under the
RFA is one that, inter alia, meets the pertinent small business size
standard (e.g., a telephone communications business having 1,500 or
fewer employees), and ``is not dominant in its field of operation.''
The SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent LECs are not dominant in their field of operation because any
such dominance is not ``national'' in scope. The Commission has
therefore included small incumbent LECs in this RFA analysis, although
it emphasizes that this RFA action has no effect on FCC analyses and
determinations in other, non-RFA contexts.
31. Price Cap Local Exchange Carriers. The rulemaking contained in
this Order applies only to price cap LECs. The Commission does not have
data specifying the number of these carriers that are either dominant
in their field of operations, are not independently owned and operated,
or have more than 1,500 employees, and thus are unable at this time to
estimate with greater precision the number of price cap LECs that would
qualify as small business concerns under the SBA's definition. However,
there are only 13 price cap LECs. Consequently, the Commission
estimates that significantly fewer than 13 providers of local exchange
service are small entities or small price cap LECs that may be affected
by these proposals.
4. Summary Analysis of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements
32. In this Report and Order, the Commission adopts changes in
pricing flexibility to price cap LECs in the form of streamlined
introduction of new services, geographic deaveraging of rates for
services in the trunking basket, and removal of interexchange services
from price cap regulation. These changes will affect all price cap
LECs, including small price cap LECs, and will require small price cap
LECs to make one or more tariff filings should they desire to obtain
the additional pricing flexibility, which will involve the usage of
legal skills, and possibly accounting, economic, and financial skills.
5. Burdens on Small Entities, and Significant Alternatives Considered
and Rejected
33. In Sections III, IV, and V, the Commission adopts forms of
regulatory relief for price cap LECs that can be granted under current
market conditions and do not require a further competitive showing.
Price cap LECs each will have to file at least one tariff to implement
this relief, but the administrative burdens they will face in future
filings will diminish as a result. In Section VI, the Commission grants
additional pricing flexibility to price cap LECs that make
``competitive showings,'' or satisfy ``triggers,'' to demonstrate that
market conditions in particular areas warrant the relief at issue. In
order to minimize the administrative burdens on price cap LECs, the
Commission bases its triggering mechanisms on objectively measurable
criteria.
34. The Commission considered and rejected alternative triggers and
granting a different amount of pricing flexibility. In setting the
triggers and relief in the manner the Commission did, it attempted to
balance the interests of price cap LECs in being able to gain
regulatory relief, with its interest in protecting ratepayers from
unreasonable rate levels and new entrants from anti-competitive
actions.
6. Report to Congress
35. The Commission will send a copy of this Report and Order,
including this FRFA, in a report to be sent to Congress pursuant to the
Small Business Regulatory Enforcement Fairness Act of 1996. In
addition, the Commission will send a copy of this Report and Order,
including FRFA, to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of this Report and Order and FRFA (or summaries
thereof) will also be published in the Federal Register.
C. Paperwork Reduction Act
36. On April 1, 1997, the Office of Management and Budget (OMB)
approved all of the Commission's proposed information collection
requirements in accordance with the Paperwork Reduction Act. The OMB
made one recommendation, suggesting that the Commission tries ``to
minimize the number of new filings that firms must create in order to
be compliant with the rules adopted * * *'' The
[[Page 51264]]
Commission has carefully considered the recommendation of OMB, and in
the course of preparing this Order, it has decided to modify several of
the collection requirements proposed in the Access Reform NPRM. This
Order has greatly reduced the number of filings a price cap LEC will
have to submit to receive pricing flexibility. In addition, many of the
filings should take less time to make than was originally proposed. For
example, the Commission estimates that based on the competitive
triggers it adopted, it should only take five hours each to make two
Phase II showings per MSA for all special access and dedicated
transport services, whereas the original filing to OMB estimated that
each Phase II showing would take approximately 300 hours.
D. Ordering Clauses
37. Accordingly, It is Ordered, pursuant to sections 1, 4(i), 4(j),
201-205, 303(r), and 403 of the Communications Act of 1934, as amended,
47 U.S.C. 151, 154(i), 154(j), 201-205, 303(r), 403, and section 553 of
Title 5, United States Code, that revisions to Parts 1, 61, and 69 of
the Commission's rules, 47 CFR Parts 1, 61, 69, are adopted as set
forth in the rule changes in this Order.
38. It is further ordered that the rule revisions adopted in this
Order will be effective 30 days after publication of this Order in the
Federal Register. The collections of information contained within are
contingent upon approval by the Office of Management and Budget.
39. It is further ordered that, pursuant to section 10(c) of the
Communications Act of 1934, 47 USC. 160(c), the period for review by
the Commission of the petition for forbearance filed by U S West
Communications, Inc., CC Docket No. 98-157, is extended by 90 days.
40. It is further ordered that the petition for declaratory ruling
filed by AT&T, CCB/CPD File No. 98-63, is denied.
List of Subjects
47 CFR Part 0
Organization and functions.
47 CFR Part 1
Administrative practice and procedure, Communications common
carriers, Telecommunications.
47 CFR Part 61
Communications common carriers, Telephone.
47 CFR Part 69
Communications common carriers, Telephone.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Accordingly, parts 0, 1, 61, and 69 of Title 47 of the Code of
Federal Regulations are amended to read as follows:
PART 0--COMMISSION ORGANIZATION
1. The authority citation for part 0 continues to read as follows:
Authority: Sec. 5, 48 Stat. 1068, as amended; 47 U.S.C. 155,
225, unless otherwise noted.
2. Section 0.291 is amended by adding paragraph (i) to read as
follows:
Sec. 0.291 Authority delegated.
* * * * *
(j) Authority concerning petitions for pricing flexibility. (1) The
Chief, Common Carrier Bureau, shall have authority to act on petitions
filed pursuant to part 69, subpart H, of this chapter for pricing
flexibility involving special access and dedicated transport services.
This authority is not subject to the limitation set forth in paragraph
(a)(2) of this section.
(2) The Chief, Common Carrier Bureau, shall not have authority to
act on petitions filed pursuant to part 69, subpart H, of this chapter
for pricing flexibility involving common line and traffic sensitive
services.
PART 1--PRACTICE AND PROCEDURE
3. The authority citation for part 1 continues to read as follows:
Authority: 15 U.S.C. 79 et seq., 47 U.S.C. 151, 154(i), 154(j),
155, 225, and 303(r).
4. Amend Sec. 1.773 by adding paragraph (a)(1)(v) to read as
follows:
Sec. 1.773 Petitions for suspension or rejection of new tariff
filings.
(a) * * *
(1) * * *
(v) For the purposes of this section, any tariff filing by a price
cap LEC filed pursuant to the requirements of Sec. 61.42(d)(4)(ii) of
this chapter will be considered prima facie lawful, and will not be
suspended by the Commission unless the petition requesting suspension
shows each of the following:
(A) That there is a high probability the tariff would be found
unlawful after investigation;
(B) That any unreasonable rate would not be corrected in a
subsequent filing;
(C) That irreparable injury will result if the tariff filing is not
suspended; and
(D) That the suspension would not otherwise be contrary to the
public interest.
* * * * *
5. Add Sec. 1.774 to read as follows:
Sec. 1.774 Pricing flexibility
(a) Petitions. (1) A petition seeking pricing flexibility for
specific services pursuant to part 69, subpart H, of this chapter, with
respect to a metropolitan statistical area (MSA), as defined in
Sec. 22.909(a) of this chapter, or the non-MSA parts of a study area,
must show that the price cap LEC has met the relevant thresholds set
forth in part 69, subpart H, of this chapter.
(2) The petition must make a separate showing for each MSA for
which the petitioner seeks pricing flexibility, and for the portion of
the study area that falls outside any MSA.
(3) Petitions seeking pricing flexibility for services described in
Secs. 69.709(a) and 69.711(a) of this chapter must include:
(i) The total number of wire centers in the relevant MSA or non-MSA
parts of a study area, as described in Sec. 69.707 of this chapter;
(ii) The number and location of the wire centers in which
competitors have collocated in the relevant MSA or non-MSA parts of a
study area, as described in Sec. 69.707 of this chapter;
(iii) In each wire center on which the price cap LEC bases its
petition, the name of at least one collocator that uses transport
facilities owned by a provider other than the price cap LEC to
transport traffic from that wire center; and
(iv)(A) The percentage of the wire centers in the relevant MSA or
non-MSA area, as described in Sec. 69.707 of this chapter, in which
competitors have collocated and use transport facilities owned by a
provider other than the price cap LEC to transport traffic from that
wire center; or
(B) The percentage of total base period revenues generated by the
services at issue in the petition that are attributable to wire centers
in the relevant MSA or non-MSA area, as described in Sec. 69.707 of
this chapter, in which competitors have collocated and use transport
facilities owned by a provider other than the price cap LEC to
transport traffic from that wire center.
(4) Petitions seeking pricing flexibility for services described in
Sec. 69.713(a) of this chapter must make a showing sufficient to meet
the relevant requirements of Sec. 69.713 of this chapter.
(b) Confidential treatment. A price cap LEC wishing to request
confidential treatment of information contained in a pricing
flexibility petition should
[[Page 51265]]
demonstrate, by a preponderance of the evidence, that the information
should be withheld from public inspection in accordance with the
requirements of Sec. 0.459 of this chapter.
(c) Oppositions. Any interested party may file comments or
oppositions to a petition for pricing flexibility. Comments and
oppositions shall be filed no later than 15 days after the petition is
filed. Time shall be computed pursuant to Sec. 1.4.
(d) Replies. The petitioner may file a reply to any oppositions
filed in response to its petition for pricing flexibility. Replies
shall be filed no later than 10 days after comments are filed. Time
shall be computed pursuant to Sec. 1.4.
(e) Copies, service. (1)(i) Any price cap LEC filing a petition for
pricing flexibility must submit its petition pursuant to the
Commission's Electronic Tariff Filing System (ETFS), following the
procedures set forth in Sec. 61.14(a) of this chapter.
(ii) The price cap LEC must provide to each party upon which the
price cap LEC relies to meet its obligations under paragraph
(a)(3)(iii) of this section, the information it provides about that
party in its petition, even if the price cap LEC requests that the
information be kept confidential under paragraph (b) of this section.
(A) The price cap LEC must certify in its pricing flexibility
petition that it has made such information available to the party.
(B) The price cap LEC may provide data to the party in redacted
form, revealing only that information to the party that relates to the
party.
(C) The price cap LEC must provide to the Commission copies of the
information it provides to such parties.
(2)(i) Interested parties filing oppositions or comments in
response to a petition for pricing flexibility may file those comments
through ETFS.
(ii) Any interested party electing to file an opposition or comment
in response to a pricing flexibility petition through a method other
than ETFS must file an original and four copies of each opposition or
comment with the Commission, as follows: the original and three copies
of each pleading shall be filed with the Secretary, FCC, Room CY-A257,
445 Twelfth St. S.W., Washington, D.C., 20554; one copy must be
delivered directly to the Commission's copy contractor, International
Transcription Service, Inc., 1231 Twentieth St. N.W., Washington, D.C.
20036. Additional, separate copies shall be served simultaneously upon
the Chief, Common Carrier Bureau; the Chief, Competitive Pricing
Division; and the Chief, Tariff and Pricing Analysis Branch of the
Competitive Pricing Division.
(iii) In addition, oppositions and comments shall be served either
personally or via facsimile on the petitioner. If an opposition or
comment is served via facsimile, a copy of the opposition or comment
must be sent to the petitioner via first class mail on the same day as
the facsimile transmission.
(3) Replies shall be filed with the Commission through ETFS. In
addition, petitioners choosing to file a reply must serve a copy on
each party filing an opposition or comment, either personally or via
facsimile. If a reply is served via facsimile, a copy of the reply must
be sent to the recipient of that reply via first class mail on the same
day as the facsimile transmission.
(f) Disposition. (1) A petition for pricing flexibility pertaining
to special access and dedicated transport services shall be deemed
granted unless the Chief, Common Carrier Bureau, denies the petition no
later than 90 days after the close of the pleading cycle. The period
for filing applications for review begins the day the Bureau grants or
denies the petition, or the day that the petition is deemed denied.
Time shall be computed pursuant to Sec. 1.4.
(2) A petition for pricing flexibility pertaining to common-line
and traffic-sensitive services shall be deemed granted unless the
Commission denies the petition no later than five months after the
close of the pleading cycle. Time shall be computed pursuant to
Sec. 1.4.
PART 61--TARIFFS
6. The authority citation continues to read as follows:
Authority: Secs. 1, 4(i), 4(j), 201-205, and 403 of the
Communications Act of 1934, as amended; 47 U.S.C. 151, 154(i),
154(j), 201-205, and 403, unless otherwise noted.
7. Amend Sec. 61.3 by revising paragraph (m) and adding paragraphs
(nn), (oo), and (pp), to read as follows:
Sec. 61.3 Definitions.
* * * * *
(m) Contract-based tariff. A tariff based on a service contract
entered into between a non-dominant carrier and a customer, or between
a customer and a price cap local exchange carrier which has obtained
permission to offer contract-based tariff services pursuant to Part 69,
Subpart H, of this chapter.
* * * * *
(nn) Corridor service. ``Corridor service'' refers to interLATA
services offered in the ``limited corridors'' established by the
District Court in United States v. Western Electric Co., Inc., 569 F.
Supp. 1057, 1107 (D.D.C. 1983).
(oo) Toll dialing parity. ``Toll dialing parity'' exists when there
is dialing parity, as defined in Sec. 51.5 of this chapter, for toll
services.
(pp) Loop-based services. Loop-based services are services that
employ Subcategory 1.3 facilities, as defined in Sec. 36.154 of this
chapter.
* * * * *
8. Amend Sec. 61.42 by redesignating paragraph (d)(4) as (d)(4)(i),
and adding paragraph (d)(4)(ii), to read as follows:
Sec. 61.42 Price cap baskets and service categories.
* * * * *
(d) * * *
(4) * * *
(ii) If a price cap carrier has implemented interLATA and intraLATA
toll dialing parity everywhere it provides local exchange services at
the holding company level, that price cap carrier may file a tariff
revision to remove corridor and interstate intraLATA toll services from
its interexchange basket.
* * * * *
9. Amend Sec. 61.45 by revising paragraph (d)(1)(vii) to read as
follows:
Sec. 61.45 Adjustments to the PCI for local exchange carriers.
* * * * *
(d) * * *
(1) * * *
(vii) Retargeting the PCI to the level specified by the Commission
for carriers whose base year earnings are below the level of the lower
adjustment mark, subject to the limitation in Sec. 69.731 of this
chapter.
* * * * *
10. Amend Sec. 61.46 to add paragraph (i) to read as follows:
Sec. 61.46 Adjustments to the API.
* * * * *
(i) In no case shall a price cap local exchange carrier include
data associated with services offered pursuant to contract tariff in
the calculations required by this section.
11. Section 61.47 is amended by revising paragraphs (a),
introductory text, (e) introductory text, and (e)(1) and by adding
paragraphs (f) and (k) to read as follows:
Sec. 61.47 Adjustments to the SBI; pricing bands.
(a) In connection with any price cap tariff filing proposing
changes in the rates of services in service categories, subcategories,
or density zones, the
[[Page 51266]]
carrier must calculate an SBI value for each affected service category,
subcategory, or density zone pursuant to the following methodology: * *
*
* * * * *
(e) Pricing bands shall be established each tariff year for each
service category and subcategory within a basket. Each band shall limit
the pricing flexibility of the service category, subcategory, as
reflected in the SBI, to an annual increase of a specified percent
listed in this paragraph, relative to the percentage change in the PCI
for that basket, measured from the levels in effect on the last day of
the preceding tariff year. For local exchange carriers subject to price
cap regulation as that term is defined in Sec. 61.3(x), there shall be
no lower pricing band for any service category or subcategory.
(1) Five percent:
(i) Local switching (traffic sensitive basket)
(ii) Information (traffic sensitive basket)
(iii) Database Access services (traffic sensitive basket)
(iv) 800 Database Vertical Services subservice (traffic sensitive
basket)
(v) Billing Name and Address (traffic sensitive basket)
(vi) Local switching trunk ports (traffic sensitive basket)
(vii) Signalling Transfer Point Port Termination (traffic sensitive
basket)
(viii) Voice grade (trunking basket)
(ix) Audio/Video (trunking basket)
(x) Total High Capacity (trunking basket)
(xi) DS1 subservice (trunking basket)
(xii) DS3 subservice (trunking basket)
(xiii) Wideband (trunking basket)
(f) A local exchange carrier subject to price cap regulation may
establish density zones pursuant to the requirements set forth in
Sec. 69.123 of this chapter, for any service in the trunking basket,
other than the interconnection charge set forth in Sec. 69.124 of this
chapter. The pricing flexibility of each zone shall be limited to an
annual increase of 15 percent, relative to the percentage change in the
PCI for that basket, measured from the levels in effect on the last day
of the preceding tariff year. There shall be no lower pricing band for
any density zone.
* * * * *
(k) In no case shall a price cap local exchange carrier include
data associated with services offered pursuant to contract tariff in
the calculations required by this section.
12. In Sec. 61.49, revise paragraphs (f)(2) and (g) introductory
text, and add paragraphs (f)(3) and (f)(4) to read as follows:
Sec. 61.49 Supporting information to be submitted with letters of
transmittal for tariffs of carriers subject to price cap regulation.
* * * * *
(f) * * *
(2) Each tariff filing submitted by a price cap LEC that introduces
a new loop-based service, as defined in Sec. 61.3(pp) of this part--
including a restructured unbundled basic service element (BSE), as
defined in Sec. 69.2(mm) of this chapter, that constitutes a new loop-
based service--that is or will later be included in a basket, must be
accompanied by cost data sufficient to establish that the new loop-
based service or unbundled BSE will not recover more than a just and
reasonable portion of the carrier's overhead costs.
(3) A price cap LEC may submit without cost data any tariff filings
that introduce new services, other than loop-based services.
(4) A price cap LEC that has removed its corridor or interstate
intraLATA toll services from its interexchange basket pursuant to
Sec. 61.42(d)(4)(ii), may submit its tariff filings for corridor or
interstate intraLATA toll services without cost data.
(g) Each tariff filing submitted by a local exchange carrier
subject to price cap regulation that introduces a new loop-based
service or a restructured unbundled basic service element (BSE), as
defined in Sec. 69.2(mm) of this chapter, that is or will later be
included in a basket, or that introduces or changes the rates for
connection charge subelements for expanded interconnection, as defined
in Sec. 69.121 of this chapter, must also be accompanied by:
* * * * *
13. Add Sec. 61.55 to read as follows:
Sec. 61.55 Contract-based tariffs.
(a) This section shall apply to price cap LECs permitted to offer
contract-based tariffs under Sec. 69.727(a) of this chapter.
(b) Composition of contract-based tariffs shall comply with
Secs. 61.54(b) through (i).
(c) Contract-based tariffs shall include the following:
(1) The term of contract, including any renewal options;
(2) A brief description of each of the services provided under the
contract;
(3) Minimum volume commitments for each service;
(4) The contract price for each service or services at the volume
levels committed to by the customers;
(5) A general description of any volume discounts built into the
contract rate structure; and
(6) A general description of other classifications, practices, and
regulations affecting the contract rate.
14. Amend Sec. 61.58 to add paragraphs (b), (c) and (d) to read as
follows:
Sec. 61.58 Notice requirements.
* * * * *
(b) Tariffs for new services filed by price cap local exchange
carriers shall be filed on at least one day's notice.
(c) Contract-based tariffs filed by price cap local exchange
carriers pursuant to Sec. 69.727(a) of this chapter shall be filed on
at least one day's notice.
(d)(1) A local exchange carrier that is filing a tariff revision to
remove its corridor or interstate intraLATA toll services from its
interexchange basket pursuant to Sec. 61.42(d)(4)(ii) shall submit such
filing on at least fifteen days' notice.
(2) A local exchange carrier that has removed its corridor and
interstate intraLATA toll services from its interexchange basket
pursuant to Sec. 61.42(d)(4)(ii) shall file subsequent tariff filings
for corridor or interstate intraLATA toll services on at least one
day's notice.
* * * * *
PART 69--ACCESS CHARGES
15. The authority citation for part 69 continues to read as
follows:
Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254,
403.
16. Amend Sec. 69.3 by revising paragraph (e)(7) to read as
follows:
Sec. 69.3 Filing of access service tariffs.
* * * * *
(e) * * *
(7) Such a tariff shall not contain charges for any access elements
that are disaggregated or deaveraged within a study area that is used
for purposes of jurisdictional separations, except as otherwise
provided in this chapter.
* * * * *
17. Amend Sec. 69.4 by revising paragraph (g)(1) and adding
paragraph (i), to read as follows:
Sec. 69.4 Charges to be filed.
* * * * *
(g)(1) Local exchange carriers subject to price cap regulation, as
that term is defined in Sec. 61.3(x) of this chapter, may establish
appropriate rate elements for a new service, within the meaning of
Sec. 61.3(t) of this chapter, in any tariff filing with a scheduled
effective date after October 22, 1999.
* * * * *
(i) Paragraphs (b) and (h) of this section are not applicable to a
price cap local exchange carrier to the extent that
[[Page 51267]]
it has been granted the pricing flexibility in Sec. 69.727(b)(1).
18. In Sec. 69.110, revise paragraph (e) to read as follows:
Sec. 69.110 Entrance facilities.
* * * * *
(e) Except as provided in paragraphs (f), (g), and (h) of this
section, and subpart H of this part, telephone companies shall not
offer entrance facilities based on term discounts or volume discounts
for multiple DS3s or any other service with higher volume than DS3.
* * * * *
19. Amend Sec. 69.123 by revising paragraphs (a), (b), (e)(2), and
(f)(1), to read as follows:
Sec. 69.123 Density pricing zones.
(a)(1) Incumbent local exchange carriers not subject to price cap
regulation may establish a reasonable number of density pricing zones
within each study area that is used for purposes of jurisdictional
separations, in which at least one interconnector has taken the
subelement of connection charges for expanded interconnection described
in Sec. 69.121(a)(1).
(2) Such a system of pricing zones shall be designed to reasonably
reflect cost-related characteristics, such as the density of total
interstate traffic in central offices located in the respective zones.
(3) Non-price cap incumbent local exchange carriers may establish
only one set of density pricing zones within each study area, to be
used for the pricing of both special and switched access pursuant to
paragraphs (c) and (d) of this section.
(b)(1) Incumbent local exchange carriers subject to price cap
regulation may establish any number of density zones within a study
area that is used for purposes of jurisdictional separations, provided
that each zone, except the highest-cost zone, accounts for at least 15
percent of that carrier's trunking basket revenues within that study
area, calculated pursuant to the methodology set forth in Sec. 69.725.
(2) Price cap incumbent local exchange carriers may establish only
one set of density pricing zones within each study area, to be used for
the pricing of all services within the trunking basket for which zone
density pricing is permitted.
(3) An access service subelement for which zone density pricing is
permitted shall be deemed to be offered in the zone that contains the
telephone company location from which the service is provided.
(4) An access service subelement for which zone density pricing is
permitted which is provided to a customer between telephone company
locations shall be deemed to be offered in the highest priced zone that
contains one of the locations between which the service is offered.
* * * * *
(e) * * *
(2) Notwithstanding Sec. 69.3(e)(7), incumbent local exchange
carriers subject to price cap regulation may charge different rates for
services in different zones pursuant to Sec. 61.47(f) of this chapter,
provided that the charges for any such service are not deaveraged
within any such zone.
(f)(1) An incumbent local exchange carrier that establishes density
pricing zones under this section must reallocate additional amounts
recovered under the interconnection charge prescribed in Sec. 69.124 of
this subpart to facilities-based transport rates, to reflect the higher
costs of serving lower density areas. Each incumbent local exchange
carrier must reallocate costs from the interexchange charge each time
it increases the ratio between the prices in its lowest-cost zone and
any other zone in that study area.
* * * * *
20. Amend part 69 by adding subpart H to read as follows:
Subpart H--Pricing Flexibility
Sec.
69.701 Application of rules in this supbart.
69.703 Definitions.
69.705 Procedure.
69.707 Geographic scope of petition.
69.709 Dedicated transport and special access services other than
channel terminations between LEC end offices and customer premises.
69.711 Channel terminations between LEC end offices and customer
premises.
69.713 Common line, traffic-sensitive, and tandem-switched
transport services.
69.714-69.724 [Reserved]
69.725 Attribution of revenues to particular wire centers.
69.727 Regulatory relief.
69.729 New services.
69.731 Low-end adjustment mechanism.
Subpart H--Pricing Flexibility
Sec. 69.701 Application of rules in this subpart.
The rules in this subpart apply to all incumbent LECs subject to
price cap regulation, as defined in Sec. 61.3(x) of this chapter,
seeking pricing flexibility on the basis of the development of
competition in parts of its service area.
Sec. 69.703 Definitions.
For purposes of this subpart:
(a) Channel terminations.
(1) A channel termination between an IXC POP and a serving wire
center is a dedicated channel connecting an IXC POP and a serving wire
center, offered for purposes of carrying special access traffic.
(2) A channel termination between a LEC end office and a customer
premises is a dedicated channel connecting a LEC end office and a
customer premises, offered for purposes of carrying special access
traffic.
(b) Metropolitan Statistical Area (MSA). This term shall have the
definition provided in Sec. 22.909(a) of this chapter.
(c) Interexchange Carrier Point of Presence (IXC POP). The point of
interconnection between an interexchange carrier's network and a local
exchange carrier's network.
(d) Wire center. For purposes of this subpart, the term ``wire
center'' shall refer to any location at which an incumbent LEC is
required to provide expanded interconnection for special access
pursuant to Sec. 64.1401(a) of this chapter, and any location at which
an incumbent LEC is required to provide expanded interconnection for
switched transport pursuant to Sec. 64.1401(b)(1) of this chapter.
(e) Study area. A common carrier's entire service area within a
state.
Sec. 69.705 Procedure.
Price cap LECs filing petitions for pricing flexibility shall
follow the procedures set forth in Sec. 1.774 of this chapter.
Sec. 69.707 Geographic scope of petition.
(a) MSA. (1) A price cap LEC filing a petition for pricing
flexibility in an MSA shall include data sufficient to support its
petition, as set forth in this subpart, disaggregated by MSA.
(2) A price cap LEC may request pricing flexibility for two or more
MSAs in a single petition, provided that it submits supporting data
disaggregated by MSA.
(b) Non-MSA. (1) A price cap LEC will receive pricing flexibility
with respect to those parts of a study area that fall outside of any
MSA, provided that it provides data sufficient to support a finding
that competitors have collocated in a number of wire centers in that
non-MSA region sufficient to satisfy the criteria for the pricing
flexibility sought in the petition, as set forth in this subpart, if
the region at issue were an MSA.
(2) The petitioner may aggregate data for all the non-MSA regions
in a single study area for which it requests pricing flexibility in its
petition.
(3) A petitioner may request pricing flexibility in the non-MSA
regions of
[[Page 51268]]
two or more of its study areas, provided that it submits supporting
data disaggregated by study area.
Sec. 69.709 Dedicated transport and special access services other than
channel terminations between LEC end offices and customer premises.
(a) Scope. This paragraph governs requests for pricing flexibility
with respect to the following services:
(1) Entrance facilities, as described in Sec. 69.110.
(2) Transport of traffic over dedicated transport facilities
between the serving wire center and the tandem switching office, as
described in Sec. 69.111(a)(2)(iii).
(3) Direct-trunked transport, as described in Sec. 69.112.
(4) Special access services, as described in Sec. 69.114, other
than channel terminations as defined in Sec. 69.703(a)(2) of this part.
(b) Phase I Triggers. To obtain Phase I pricing flexibility, as
specified in Sec. 69.727(a) of this part, for the services described in
paragraph (a) of this section, a price cap LEC must show that, in the
relevant area as described in Sec. 69.707 of this part, competitors
unaffiliated with the price cap LEC have collocated:
(1) In fifteen percent of the petitioner's wire centers, and that
at least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center; or
(2) In wire centers accounting for 30 percent of the petitioner's
revenues from dedicated transport and special access services other
than channel terminations between LEC end offices and customer
premises, determined as specified in Sec. 69.725 of this part, and that
at least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center.
(c) Phase II Triggers. To obtain Phase II pricing flexibility, as
specified in Sec. 69.727(b) of this part, for the services described in
paragraph (a) of this section, a price cap LEC must show that, in the
relevant area as described in Sec. 69.707 of this part, competitors
unaffiliated with the price cap LEC have collocated:
(1) in 50 percent of the petitioner's wire centers, and that at
least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center; or
(2) in wire centers accounting for 65 percent of the petitioner's
revenues from dedicated transport and special access services other
than channel terminations between LEC end offices and customer
premises, determined as specified in Sec. 69.725 of this part, and that
at least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center.
Sec. 69.711 Channel terminations between LEC end offices and customer
premises.
(a) Scope. This paragraph governs requests for pricing flexibility
with respect to channel terminations between LEC end offices and
customer premises.
(b) Phase I Triggers. To obtain Phase I pricing flexibility, as
specified in Sec. 69.727(a) of this part, for channel terminations
between LEC end offices and customer premises, a price cap LEC must
show that, in the relevant area as described in Sec. 69.707 of this
part, competitors unaffiliated with the price cap LEC have collocated:
(1) In 50 percent of the petitioner's wire centers, and that at
least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center; or
(2) In wire centers accounting for 65 percent of the petitioner's
revenues from channel terminations between LEC end offices and customer
premises, determined as specified in Sec. 69.725 of this part, and that
at least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center.
(c) Phase II Triggers. To obtain Phase II pricing flexibility, as
specified in Sec. 69.727(b) of this part, for channel terminations
between LEC end offices and customer premises, a price cap LEC must
show that, in the relevant area as described in Sec. 69.707,
competitors unaffiliated with the price cap LEC have collocated:
(1) In 65 percent of the petitioner's wire centers, and that at
least one such collocator in each wire center is using transport
facilities owned by a transport provider other than the price cap LEC
to transport traffic from that wire center; or
(2) In wire centers accounting for 85 percent of the petitioner's
revenues from channel terminations between LEC end offices and customer
premises, determined as specified in Sec. 69.725, and that at least one
such collocator in each wire center is using transport facilities owned
by a transport provider other than the price cap LEC to transport
traffic from that wire center.
Sec. 69.713 Common line, traffic-sensitive, and tandem-switched
transport services.
(a) Scope. This paragraph governs requests for pricing flexibility
with respect to the following services:
(1) Common line services, as described in Secs. 69.152, 69.153, and
69.154.
(2) Services in the traffic-sensitive basket, as described in
Sec. 61.42(d)(2) of this chapter.
(3) The traffic-sensitive components of tandem-switched transport
services, as described in Secs. 69.111(a)(2)(i) and (ii).
(b) Phase I Triggers. (1) To obtain Phase I pricing flexibility, as
specified in Sec. 69.727(a), for the services identified in paragraph
(a) of this section, a price cap LEC must provide convincing evidence
that, in the relevant area as described in Sec. 69.707, its
unaffiliated competitors, in aggregate, offer service to at least 15
percent of the price cap LEC's customer locations.
(2) For purposes of the showing required by paragraph (b)(1) of
this section, the price cap LEC may not rely on service the competitors
provide solely by reselling the price cap LEC's services, or provide
through unbundled network elements as defined in Sec. 51.5 of this
chapter, except that the price cap LEC may rely on service the
competitors provide through the use of the price cap LEC's unbundled
loops.
(c) [Reserved.]
Secs. 69.714-69.724 [Reserved.]
Sec. 69.725 Attribution of revenues to particular wire centers.
If a price cap LEC elects to show, in accordance with Sec. 69.709
or Sec. 69.711, that competitors have collocated in wire centers
accounting for a certain percentage of revenues from the services at
issue, the LEC must make the following revenue allocations:
(a) For entrance facilities and channel terminations between an IXC
POP and a serving wire center, the petitioner shall attribute all the
revenue to the serving wire center.
(b) For channel terminations between a LEC end office and a
customer premises, the petitioner shall attribute all the revenue to
the LEC end office.
(c) For any dedicated service routed through multiple wire centers,
the petitioner shall attribute 50 percent of the revenue to the wire
center at each end of the transmission path, unless the petitioner can
make a convincing case in its petition that some other allocation would
be more representative of the extent of competitive entry in the MSA or
the non-MSA parts of the study area at issue.
[[Page 51269]]
Sec. 69.727 Regulatory relief.
(a) Phase I Relief. Upon satisfaction of the Phase I triggers
specified in Secs. 69.709(b), 69.711(b), or 69.713(b) for an MSA or the
non-MSA parts of a study area, a price cap LEC will be granted the
following regulatory relief in that area for the services specified in
Secs. 69.709(a), 69.711(a), or 69.713(a), respectively:
(1) Volume and term discounts;
(2) Contract tariff authority, provided that
(i) Contract tariff services are made generally available to all
similarly situated customers; and
(ii) The price cap LEC excludes all contract tariff offerings from
price cap regulation pursuant to Sec. 61.42(f)(1) of this chapter.
(iii) Before the price cap LEC provides a contract tariffed
service, under Sec. 69.727(a), to one of its long-distance affiliates,
as described in section 272 of the Communications Act of 1934, as
amended, or Sec. 64.1903 of this chapter, the price cap LEC certifies
to the Commission that it provides service pursuant to that contract
tariff to an unaffiliated customer.
(b) Phase II Relief. Upon satisfaction of the Phase II triggers
specified in Secs. 69.709(c) or 69.711(c) for an MSA or the non-MSA
parts of a study area, a price cap LEC will be granted the following
regulatory relief in that area for the services specified in
Secs. 69.709(a) or 69.711(a), respectively:
(1) Elimination of the rate structure requirements in subpart B of
this part;
(2) Elimination of price cap regulation; and
(3) Filing of tariff revisions on one day's notice, notwithstanding
the notice requirements for tariff filings specified in Sec. 61.58 of
this chapter.
Sec. 69.729 New services.
(a) Except for new services subject to paragraph (b) of this
section, a price cap LEC may obtain pricing flexibility for a new
service that has not been incorporated into a price cap basket by
demonstrating in its pricing flexibility petition that the new service
would be properly incorporated into one of the price cap baskets and
service bands for which the price cap LEC seeks pricing flexibility.
(b) Notwithstanding paragraph (a) of this section, a price cap LEC
must demonstrate satisfaction of the triggers in Sec. 69.711(b) to be
granted pricing flexibility for any new service that falls within the
definition of a ``channel termination between a LEC end office and a
customer premises'' as specified in Sec. 69.703(a)(2).
Sec. 69.731 Low-end adjustment mechanism.
(a) Any price cap LEC obtaining Phase I or Phase II pricing
flexibility for any service in any MSA in its service region, or for
the non-MSA portion of any study area in its service region, shall be
prohibited from making any low-end adjustment pursuant to
Sec. 61.45(d)(1)(vii) of this chapter in all or part of its service
region.
(b) Any affiliate of any price cap LEC obtaining Phase I or Phase
II pricing flexibility for any service in any MSA in its service region
shall be prohibited from making any low-end adjustment pursuant to
Sec. 61.45(d)(1)(vii) of this chapter in all or part of its service
region.
[FR Doc. 99-24141 Filed 9-21-99; 8:45 am]
BILLING CODE 6712-01-U
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