Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Customer Information
Federal RegisterOct 1, 1999
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CC Docket No. 96-115; FCC 99-223]
Telecommunications Carriers' Use of Customer Proprietary Network
Information and Other Customer Information
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document reconsiders the first CPNI order, addresses
petitions for forbearance from the requirements of that order, and
establishes rules to implement section 222. The intended effect is to
further Congress' goals of fostering competition in telecommunications
markets and ensure the privacy of customer information.
DATES: All of these rules contain information collection requirements
that have not yet been approved by the Office of Management and Budget
(OMB). The Commission will publish a document in the Federal Register
announcing the effective date of these rules.
FOR FURTHER INFORMATION CONTACT: Eric Einhorn, Attorney Adviser, Common
Carrier Bureau, Policy and Program Planning Division, (202) 418-1580 or
via the Internet at [email protected]. Further information may also be
obtained by calling the Common Carrier Bureau's TTY number: 202-418-
0484.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
adopted August 16, 1999, and released September 3, 1999. The full text
of this Order on Reconsideration is available for inspection and
copying during normal business hours in the FCC Reference Center, 445
12th Street, S. W., Room CY-A257, Washington, D.C. The complete text
also may be obtained through the World Wide Web, at http://www.fcc.gov/
Bureaus/Common Carrier/Orders/fcc99223.wp, or may be
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purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 1231 20th St., N. W.,
Washington, D.C. 20036.
Regulatory Flexibility Certification:
As required by the Regulatory Flexibility Act, the Order contains a
Final Regulatory Flexibility. 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; (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. On February 26, 1998, the Commission released the CPNI Order, 63
FR 20326, April 24, 1998, adopting rules implementing the new statutory
framework governing carrier use and disclosure of customer proprietary
network information (CPNI) created by section 222 of the Communications
Act (hereinafter ``the Act''). CPNI includes, among other things, to
whom, where, and when a customer places a call, as well as the types of
service offerings to which the customer subscribes and the extent the
service is used.
2. This order on reconsideration is issued in response to a number
of petitions for reconsideration, forbearance, and/or clarification of
the CPNI Order. In this order we modify the CPNI Order, in part, to
preserve the consumer protections mandated by Congress while more
narrowly tailoring our rules, where necessary, to enable
telecommunications carriers to comply with the law in a more flexible
and less costly manner.
3. The Telecommunications Act of 1996 (1996 Act) became law on
February 8, 1996. Although most of the provisions in the 1996 Act aim
to implement Congress' intent that the 1996 Act ``provide for a pro-
competitive, de-regulatory national policy framework designed to
accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunications markets to competition,''
section 222 addresses a different and additional goal. CPNI is
extremely personal to customers as well as commercially valuable to
carriers. As we stated in the CPNI Order: Congress recognized * * *
that the new competitive market forces and technology ushered in by the
1996 Act had the potential to threaten consumer privacy interests.
Congress, therefore, enacted section 222 to prevent consumer privacy
protections from being inadvertently swept away along with the prior
limits on competition.
4. As the Commission previously noted in the CPNI Order, section
222 is largely a consumer protection provision that establishes
restrictions on carrier use and disclosure of personal customer
information. The aim of section 222 stands in contrast to the other
provisions of the 1996 Act that seek primarily to ``[open] all
telecommunications markets to competition,'' and mandate competitive
access to facilities and services. Section 222 reflects Congress' view
that as competition increases, it brings with it the potential that
consumer privacy interests will not be adequately protected by the
marketplace. Thus, section 222 requires all carriers, whether or not a
market is competitive, to protect CPNI and embodies the principle that
customers must be able to control their personal information from
unauthorized use, disclosure, and access by carriers. Where information
is not specific to the customer, or where the customer so directs,
section 222 permits the free flow or dissemination of information
beyond the existing customer-carrier relationship.
5. In most circumstances, the constraints placed on carriers by
section 222 only restrict the use or disclosure of CPNI without
customer approval. When carriers are prevented from using a customer's
CPNI by section 222, and the rules we promulgated in the CPNI Order,
carriers need only obtain the customer's approval to use that
customer's CPNI. Once a carrier has acquired customer approval, carrier
use or disclosure of CPNI, in most cases, is unrestricted. Thus,
section 222 enables customers to relinquish the presumption of privacy
as they see fit.
6. Congress' determination in section 222 to balance competitive
interests with consumers' interests in privacy and control over CPNI
governed the Commission's reasoning and conclusions in the CPNI Order.
This order is no different: we seek to carry out vigilantly Congress'
consumer protection and privacy aims, while simultaneously reducing the
burden of carrier compliance with section 222 by eliminating
unnecessary expense and administrative oversight where customer privacy
and control will not be sacrificed.
II. Overview
7. By this order, we respond to the requests for reconsideration,
clarification and forbearance as follows:
(a) We deny the petitions for reconsideration which ask us to amend
the CPNI rules to differentiate among telecommunications carriers.
(b) We decline to modify or forbear from the total service approach
adopted in the CPNI Order because the total service approach keeps
control over the use of CPNI with the customer and best protects
privacy while furthering fair competition. We also clarify a number of
aspects of the total service approach in response to petitioners'
requests.
(c) We grant, in part, the petitions for reconsideration which
request that we allow all carriers to use CPNI to market customer
premises equipment (CPE) and information services under section
222(c)(1) without customer approval. We conclude that all carriers may
use CPNI, without customer approval, to market CPE. We further conclude
that CMRS carriers may use CPNI, without customer approval, to market
all information services, while wireline carriers may do so for certain
information services. We deny the petitions for forbearance on these
issues.
(d) We eliminate the restrictions on a carrier's ability to use
CPNI to regain customers who have switched to another carrier,
contained in Section 64.2005(b)(3) of our rules. We find that
``winback'' campaigns are consistent with Section 222(c)(1). The Order
concludes, however, that if a carrier uses information regarding a
customer's decision to switch carriers derived from its wholesale
operations to retain the
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customer, such conduct violates the prohibitions in section 222(b)
against use of proprietary information gained from another carrier in
marketing efforts.
(e) We address various aspects of a customer's approval to use CPNI
consistent with section 222. We also grandfather a limited set of pre-
existing notifications to use CPNI and adopt the conclusions reached in
the Common Carrier Bureau's Clarification Order, 63 FR 33890, June 22,
1998. We also eliminate, in an effort to reduce confusion and
regulatory micro-management, Sec. 64.2007(f)(4) of our rules, which
requires a carrier's solicitation for approval, if written, to be on
the same document as the carrier's notification. Further, we affirm our
decision to exercise our preemption authority on a case-by-case basis
for state rules that conflict with our own.
(f) We lessen the regulatory burden of various CPNI safeguards
while continuing to require that carriers protect customer privacy. We
modify our flagging requirement so that carriers must clearly establish
the status of a customer's CPNI approval prior to the use of CPNI, but
leave the specific details of compliance with the carriers. In so
doing, we allow the carriers the flexibility to adapt their record
keeping systems in a manner most conducive to their individual size,
capital resources, culture and technological capabilities. Similarly,
we amend our rules to eliminate the electronic audit trail requirement
and instead require carriers to maintain a record of their sales and
marketing campaigns that use CPNI.
(g) We affirm our conclusion in the CPNI Order that the most
reasonable interpretation of the interplay between sections 222 and 272
is that section 272 does not impose any additional obligations on the
Bell operating companies (BOCs) when they share their CPNI with their
section 272 affiliates. We also adopt the Common Carrier Bureau's
conclusion in the Clarification Order that a customer's name, address
and telephone number are ``information'' for the purposes of section
272(c)(1), and consequently, if a BOC makes such information available
to its 272 affiliate, it must then make it available to non-affiliated
entities.
(h) We find that the relationship of sections 222 and 254 does not
confer any special status to carriers seeking to use CPNI to market
enhanced services and CPE in rural exchanges to select customers.
Moreover, the Order rejects the contention that the Commission should
apply the requirements of sections 201(b), 202(a) and 272 to incumbent
local exchange carriers (ILECs) to impose a duty on ILECs to
electronically transmit a customer's CPNI to any other entity that
obtains a customer's oral approval to do so.
III. Background
A. The CPNI Order
8. On May 17, 1996, the Commission initiated a rulemaking, in
response to various formal requests for guidance from the
telecommunications industry, regarding the obligation of carriers under
section 222 and related issues. The Commission subsequently released
the CPNI Order on February 26, 1998. The CPNI Order addressed the scope
and meaning of section 222, and promulgated regulations to implement
that section. It concluded, among other things, as follows: (a)
Carriers are permitted to use CPNI, without customer approval, to
market offerings that are related to, but limited by, the customers'
existing service relationship; (b) before carriers may use CPNI to
market outside the customer's existing service relationship, carriers
must obtain express written, oral, or electronic customer approval; (c)
prior to soliciting customer approval, carriers must provide a one-time
notification to customers of their CPNI rights; (d) in light of the
comprehensive regulatory scheme established in section 222, the
Computer III CPNI framework is unnecessary; and (e) sections 272 and
274 impose no additional CPNI requirements on the Bell Operating
Companies (BOCs) beyond those imposed by section 222.
B. The Clarification Order
9. On May 21, 1998, in response to a number of requests for
clarification of the CPNI Order, the Common Carrier Bureau released a
Clarification Order. This order addressed several issues. It concluded
that independently-derived information regarding customer premises
equipment (CPE) and information services is not CPNI and may be used to
market CPE and information services to customers in conjunction with
bundled offerings. In addition, it clarified that a customer's name,
address, and telephone number are not CPNI. Moreover, it stated that a
carrier has met the requirements for notice and approval under section
222 and the Commission's rules if it has both provided annual
notification to, and obtained prior written authorization from,
customers with more than 20 access lines in accordance with the
Commission's former CPNI rules. Finally, it determined that carriers
are not required to file their certifications of corporate compliance,
which carriers are required to issue by the CPNI Order, with the
Commission.
C. The Stay Order
10. In the CPNI Order, the Commission required, among other things,
that carriers develop and implement software systems that ``flag''
customer service records in connection with CPNI and that carriers
maintain an electronic audit mechanism (``audit trail'') that tracks
access to customer accounts. The Commission chose to defer the
enforcement of these rules until eight months after the effective date
of the rules: January 26, 1999. On September 24, 1998, however, the
Commission stayed, until six months after the release date of an order
addressing these issues on reconsideration, the enforcement of actions
against carriers for noncompliance with applicable requirements set
forth in the Commission's rules.
IV. Consistent Treatment for All Carriers
A. Incumbents vs. CLECs
11. Section 222(c)(1) restricts the ability of telecommunications
carriers to use CPNI without customer approval. In the CPNI Order, we
concluded that ``Congress did not intend to, and we should not at this
time, distinguish among carriers for the purpose of applying Section
222(c)(1).'' We found, based upon the language of the statute itself,
that section 222 applies to all carriers equally and, with few
exceptions, does not distinguish among classes of carriers. Various
parties on reconsideration, however, seek reversal of this conclusion.
One group of petitioners advocates that we impose stricter CPNI
restrictions on incumbent carriers than competitors, based upon the
greater potential for anticompetitive use or disclosure of CPNI by
ILECs. We previously rejected this very argument in the CPNI Order.
These parties have not raised any arguments or facts that persuade us
to reverse our conclusion that section 222 is intended to apply to all
segments of the telecommunications marketplace regardless of the level
of competition present in any segment. Accordingly, we affirm that
section 222 does not distinguish between classes of carriers and
applies to all carriers equally.
B. Wireline vs. Wireless
12. Congress enacted section 222 at a time when the wireless
industry had been subject to less regulatory requirements than wireline
carriers. Congress was fully aware that CMRS
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providers, and CLECs for that matter, were to evolve in more
competitive environments. Notwithstanding, there is nothing in the
statute or its legislative history to indicate that Congress intended
that the CPNI requirements in section 222 should not apply to wireless
carriers. Given the opportunity to exclude competitive carriers from
the scope of section 222, we must give meaning to the fact that
Congress did not exempt them. Moreover, the underlying policy objective
of section 222 is to protect consumers, while balancing competitive
interests. We believe that the privacy interests of CMRS customers are
no less deserving of protection than those of wireline customers,
although the differences in customer expectations may warrant different
approaches. We note too that this reconsideration lightens the impact
of compliance with the CPNI rules on all carriers by providing
flexibility for technological differences in administrative systems
with regard to the electronic safeguards rules, which should be
beneficial to all companies, including independent CMRS providers.
Finally, we note that a few parties urge the Commission to forbear from
enforcing CPNI obligations on CMRS providers generally. We address
these arguments in Part V.B.3.d. Therefore, we deny those petitions for
reconsideration that seek different treatment for CMRS carriers.
C. Small and Rural Carriers
13. As we noted in the CPNI Order, the Commission's CPNI rules
apply to small carriers just as they apply to other sized carriers
``because we are unpersuaded that customers of small businesses have
less meaningful privacy interests in their CPNI.'' Petitioners have not
raised any new arguments or facts that persuade us to reverse this
conclusion with respect to these carriers. Thus, we will not
distinguish among carriers based upon the number or density of lines
they serve either.
V. Carrier's Right to Use CPNI Without Customer Approval
A. The Total Service Approach
1. Background
14. In the CPNI Order, the Commission addressed the instances in
which a carrier could use, disclose, or permit access to CPNI without
prior customer approval under section 222(c)(1)(A). Section 222(c)(1)
provides that a telecommunications carrier that receives or obtains
CPNI by virtue of its ``provision of a telecommunications service shall
only use, disclose, or permit access to individually identifiable
[CPNI] in the provision of (A) the telecommunications service from
which such information is derived, or (B) services necessary to, or
used in, the provision of such telecommunications service, including
the publication of directories.''
15. After considering the record, statutory language, history, and
structure of section 222, we concluded that Congress intended that a
carrier's use of CPNI without customer approval should depend on the
service subscribed to by the customer. Accordingly, the Commission
adopted the ``total service approach'' which allows carriers to use a
customer's entire record, derived from complete service subscribed to
from that carrier, to market improved services within the parameters of
the existing customer-carrier relationship. The total service approach
permits carriers to use CPNI to market offerings related to the
customer's existing service to which the customer presently subscribes.
Under the total service approach, the customer retains ultimate control
over the permissible marketing use of CPNI, a balance which best
protects customer privacy interests while furthering fair competition.
Presented with the opportunity to permit or prevent a carrier from
accessing CPNI for marketing purposes, the customer has the ability to
determine the bounds of the carrier's use of CPNI.
2. Petitions for Reconsideration
16. GTE urges the Commission to reconsider the total service
approach to allow carriers to use, without customer consent, CPNI
derived from the provision of a package of telecommunications services
in order to market other telecommunications services to which a
customer does not subscribe. This ``package approach'' is only a slight
variation of the ``single category approach,'' which we specifically
analyzed and rejected in the CPNI Order. The single category approach
would have permitted carriers to use CPNI obtained from the provision
of any telecommunications service, including local or long distance or
CMRS, to market any other service offered by the carrier, regardless of
whether the customer subscribes to such service from that carrier.
17. We decline to grant GTE reconsideration on this issue because
that would vitiate the total service approach and the attendant
protection of a customer's sensitive information. The hallmark of the
total service approach is that the customer, whose privacy is at issue,
establishes the bounds of his or her relationship with the carrier. We
note, however, that to the extent a customer already subscribes to a
particular service or subscribes across services, GTE or any carrier
can use the customer's CPNI to market or create enhancements to those
services. Congress could not have intended an interpretation of section
222 that leaves the consumer without privacy protection. We concluded
in the CPNI Order, and nothing has persuaded us otherwise here, that
the total service approach best protects customer privacy while
furthering fair competition. GTE seeks to use CPNI derived from the
provision of certain telecommunications services to market other
telecommunications services to which the customer does not subscribe.
We conclude that this would not further the privacy goals that Congress
sought to achieve in section 222. Over time, the total service approach
rewards successful carriers who offer integrated packages by enabling
marketing in more than one category but in a manner that respects
customer privacy.
18. GTE requests, in the alternative, that the Commission adopt a
rule that permits the use of CPNI for the limited purpose of
identifying customers from whom it would like to solicit express,
affirmative approval to use their CPNI for marketing out-of-category
services. We conclude that such use of CPNI is implicit in section
222(c)(1) because the solicitation of approval is a logical
prerequisite to actually obtaining approval. The carrier's use of CPNI
under these limited circumstances, therefore, is merely a part of the
process of obtaining approval. Thus, the use of CPNI for solicitations
of approval to use CPNI to market services outside the bounds of the
existing customer-carrier relationship necessarily falls under the
customer approval exception stated in section 222(c)(1).
19. NTCA urges us to reconsider the total service approach because
it is particularly disadvantageous to small, rural LECs looking to
launch new service offerings. We addressed and rejected this argument
in the CPNI Order. NTCA has presented no new evidence to persuade us
that its members are disproportionately affected in any cognizable way
by these requirements.
3. Petitions for Forbearance
20. Alternatively, GTE and Ameritech seek forbearance from the
application of the total service approach to the marketing of out-of-
category packages or service enhancements to customers. After careful
review, we believe the forbearance test is not met. Forbearance
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under section 10 of the Act is required where:
(1) Enforcement of such regulation or provision is not necessary to
ensure that the charges, practices, classifications, or regulations by,
for, or in connection with that telecommunications carrier or
telecommunications service are just and reasonable and are not unjustly
or unreasonably discriminatory;
(2) Enforcement of such regulation or provision is not necessary
for the protection of consumers; and
(3) Forbearance from applying such provision or regulation is
consistent with the public interest.
Section 10(b) provides that, in making the determination whether
forbearance is consistent with the public interest, the Commission must
consider whether forbearance will promote competitive market
conditions, including the extent to which forbearance will enhance
competition among providers of telecommunications services.
21. Section 10(a)(1). GTE and Ameritech assert that the ability to
offer service packages will not result in unreasonable or
discriminatory rates.
22. The primary focus of the CPNI rules is not, nor ever has been,
intended to ensure reasonable rates or practices. Therefore, we
determine that enforcement of the total service approach is not
necessary to ensure that the charges, practices, classifications, or
regulations are just and reasonable and are not unjustly or
unreasonably discriminatory.
23. Section 10(a)(2). GTE asserts that prohibiting the use of CPNI
without approval to market package enhancements is not necessary to
protect consumers. Ameritech believes CPNI protection is not necessary
where, like here, the use is consistent with customer expectations.
24. We conclude that the second criterion for forbearance is not
met because customers' privacy interests would not be adequately
protected absent the total service approach. GTE and Ameritech would
have us forbear from enforcing the total service approach when consumer
protection is a primary concern of section 222. Specifically, the
customer approval process for the use of CPNI is necessary to protects
customers' privacy expectations because, as stated in the CPNI Order,
we do not believe that we can properly infer that a customer's decision
to purchase one type of service offering constitutes approval for a
carrier to use CPNI to market other service offerings to which the
customer does not subscribe. Nor are we aware of any other law,
regulation, agency or state requirement that would substitute for the
effectiveness of our approach. The total service approach protects
customer privacy expectations by placing the control over the approval
process in the hands of the customer. The total service approach also
protects customers in many instances where they would not realize
potentially sensitive, personal information had been accessed or used.
The GTE and Ameritech approaches lack this crucial element of consumer
protection.
25. Section 10(a)(3). GTE believes forbearance is in the public
interest because of the reduction in carriers' administrative costs to
communicate with customers where a carrier can use CPNI to market
across service categories without the need for customer approval.
26. We find that forbearance would not be in the public interest.
The privacy goals of the statute are not met where carriers can use
CPNI without customer approval to sell products and services outside
the existing customer-carrier relationship. Although reducing the
administrative costs to carriers may assist these companies in
competing with other carriers, we find that any potential benefit is
outweighed by the need to protect customer privacy. Customers who are
interested in obtaining more information can arrange to do so easily by
granting consent for their carriers' use of CPNI.
27. Pursuant to section 10(b) of the Act, we have evaluated whether
forbearance from the total service approach will promote competitive
market conditions, including the extent to which forbearance will
enhance competition among providers of telecommunications services. We
agree that, as a general matter, reducing carriers' administrative and
regulatory costs promotes competitive market conditions and would
improve the ability of new entrants to introduce new, improved
combinations of competitive services and products. However, we are
concerned that the GTE and Ameritech proposals, which eliminate the
boundaries we have established for the use of CPNI, may unreasonably
deprive other telecommunications carriers the opportunity to compete
for a customer's business. The ability to use CPNI from an existing
service relationship to market new services to a customer bestows an
enormous competitive advantage on those carriers that currently have a
service relationship with customers, particularly incumbent exchange
carriers and interexchange carriers with a large existing customer
base. This, in turn, poses a significant risk to the development of
competition. For this reason, as well, we cannot find that forbearance
is in the public interest.
4. Requests for Clarification
28. Several petitioners request clarification of aspects of the
total service approach and its application in specific contexts. We
address these requests.
a. Multiple Lines and Carriers. 29. MCI requests clarification as
to whether the total service approach should be applied on a subscriber
line-by-line basis or to the subscriber's services overall. MCI poses a
second, related question, whether a customer can have more than one
carrier in any given service category, thus allowing both carriers to
market other services in the same category to that customer.
30. We believe that the total service approach applies to the
customer's total telecommunications service subscription, and proper
use of CPNI is not necessarily limited to the line from which it was
derived. Section 64.2005(a) of our rules permits a telecommunications
carrier to use CPNI for the purpose of marketing service offerings
among the categories of service already subscribed to by the customer
from the same carrier. Although MCI proposes to use CPNI from one line
to market to another line of the same customer, the use of CPNI is
permissible because it remains within the category of service. As to
MCI's second question, we do not limit a customer's choice to select
more than one carrier in a given service category. For the same reasons
cited above, where the use of CPNI remains within a service category, a
carrier is able to market that same service to the customer without the
need for express customer approval. In this manner, a carrier's attempt
to garner more of the customer's business is pro-competitive and does
not impinge on a customer's privacy.
b. Codification of Service Categories. 31. MCI and CommNet request
that the Commission explicitly state that all telecommunications
services fall within three groupings--local, interLATA, and CMRS.
32. We decline to do so because it would have the effect of
grafting onto the total service approach one of the critical flaws of
the so-called ``three category'' approach. As explained in greater
detail in the CPNI Order, the three category approach parsed
telecommunications services into the three traditional service
distinctions--local, interLATA, and CMRS. Given the dynamic nature of
the telecommunications industry, we can not assume that all services
necessarily fall into such categories. We believe the
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total service approach is sufficiently flexible to incorporate new and
different categories without periodic reviews to ascertain whether
changes in the competitive environment should translate into changes in
service categories. Rather, it is unnecessary to modify the total
service approach in this regard or to further codify the three service
categories in the rules.
c. Use of CPNI to Market Paging.
33. In the CPNI Order, the Commission determined that CMRS should
be viewed in the entirety, when considering the ``total service
approach.'' CommNet urges the Commission to revise its rules to make it
clear that the service categories to which the ``total service''
relationship applies are only local exchange service, interexchange
service, and CMRS, so that a paging carrier could use CPNI to market
cellular service and vice versa.
U S WEST objects on the grounds that the language of the current rule
was taken directly from the statute and that the categories may blur
over time and may disappear as customers migrate to single source
providers.
34. We find that our rules are clear that under the total service
approach, a CMRS carrier may use CPNI to market any CMRS service,
including paging and cellular service. Therefore, no revision of the
rules is required.
d. IntraLATA Toll Services. 35. In the CPNI Order, the Commission
concluded that insofar as both local exchange carriers and
interexchange carriers currently provide short-haul toll, it should be
considered part of both local and long-distance service. We further
concluded that permitting short-haul toll to ``float'' between
categories would not confer a competitive advantage upon either
interexchange or local exchange carriers. MCI concludes that the
provision of short-haul toll may only be considered part of carrier's
``primary service category'' and requests that we make such a
clarification.
36. We agree with MCI that our prior conclusion requires
clarification. MCI argues that if a local exchange carrier is providing
local service, then it may use a customer's local service CPNI to
market intraLATA toll to that customer, and vice-versa, and if an
interexchange carrier is providing long distance service to a customer,
then it may use that customer's long distance CPNI to market intraLATA
toll to him or her, and vice versa. We conclude that short-haul toll
shall be considered as falling within the category of service the
carrier is already providing to the customer. Long distance carriers
providing intraLATA toll service, however, need obtain customer
approval to use intraLATA toll CPNI to market local service. Likewise,
local exchange carriers would need customer approval to use intraLATA
toll CPNI to market interLATA long distance service. In this way, the
rule is fair to both interexchange and local exchange carriers and
treats them symmetrically.
B. Use of CPNI to Market Customer Premises Equipment and Information
Services
1. Background
37. Section 222(c)(1) states that, ``[e]xcept as required by law or
with the approval of the customer, a telecommunications carrier that
receives or obtains [CPNI] by virtue of its provision of a
telecommunications service shall only use, disclose, or permit access
to individually identifiable [CPNI] in its provision of (A) the
telecommunications service from which such information is derived, or
(B) services necessary to, or used in, the provision of such
telecommunications service, including the publishing of directories.''
In the CPNI Order, we concluded that Congress intended that section
222(c)(1)(A) govern carriers' use of CPNI for providing
telecommunications services and that section 222(c)(1)(B) governs
carriers' use of CPNI for non-telecommunications services. Based upon
the language of section 222(c)(1), we further concluded that: (1)
inside wiring, CPE, and certain information services do not fall within
the scope of section 222(c)(1)(A) because they are not
``telecommunications services''; and (2) CPE and most information
services do not fall under section 222(c)(1)(B) because they are not
``services necessary to, or used in, the provision of such
telecommunications service.'' We now find that the phrase ``services
necessary to, or used in, the provision of such telecommunications
service'' should be given a broader reading than the one given in the
CPNI Order. The record produced on reconsideration persuades us that a
different statutory interpretation is permissible, and importantly,
would lead to appropriate policy results consistent with the statutory
goals. Therefore, we conclude that section 222(c)(1)(B) allows carriers
to use CPNI, without customer approval, to separately market CPE and
many information services to their customers. We further clarify that
the tuning and retuning of CMRS units and repair and maintenance of
such units is a service necessary to or used in the provision of CMRS
service under section 222(c)(1)(B). Finally, we deny petitioners'
requests that we forbear from applying these restrictions for related
CPE and information services.
2. Petitions for Reconsideration
38. Customer Premises Equipment and Information Services under
Section 222(c)(1). We grant the petitions for reconsideration that
argue that CPE and certain information services are ``necessary to, or
used in, the provision of'' telecommunications services, and therefore
use of CPNI derived from the provision of a telecommunications service,
without customer approval, to market CPE and information services would
be permitted under section 222(c)(1)(B). Under our previous
interpretation, the exception was narrowly construed, resulting in very
few services for which CPNI could be shared. Indeed, we rejected all
CPE because it was not a ``service'' and most information services
because they were not necessary to or used in the carrier's provision
of the telecommunications service. While this interpretation is not
inconsistent with the statutory language, we are persuaded that the
better interpretation is that the exception includes certain products
and services provisioned by the carrier with the underlying
telecommunications service to comprise the customer's total service.
This is because those related services and products facilitate the
underlying telecommunications service and customers expect that they
will be used in the provisioning of that service offering. Our new
interpretation accords with the Commission's stated intention in the
CPNI Order to revisit and if necessary revise its conclusions regarding
customer expectations as those expectations changed in the marketplace
with advancements in technology or as new evidence of the evolution of
customer expectations becomes available to the Commission. Such
evidence has now been made available to us by the record developed on
reconsideration.
39. When evaluated as a whole, the exception can be reasonably
interpreted to include those products used in the provision of
telecommunications, including directories and CPE. First, we find
statutory support for this interpretation through the only example
Congress included in the exception--the publishing of directories. As
described in the CPNI Order, directories are ``necessary to and used
in'' the provision of service because without access to phone numbers,
customers cannot complete calls. A directory is not a ``service,'' but
rather, like CPE, is a product. Consistent with the statutory
exception, however, the ``publishing'' of the directory is a service--
the service by
[[Page 53248]]
which the carrier provisions the product necessary to, or used in, the
customer's telecommunications service. Thus, Congress' publishing of
directories example supports including those products as well as
services provisioned by the carrier that are used in and necessary to
the customer's telecommunications service. We believe that our previous
interpretation construed the term ``services'' in isolation from the
phrase ``necessary to, or used in.'' While it is obvious that CPE
itself is not a service, the provision of CPE is a service that is
necessary to, or used in the provision of the underlying
telecommunications service. Customers cannot make, or complete, calls
without CPE. This is consistent with Congress' example of the
publishing of directories in section 222. Therefore, this finding
concerning CPE is limited to section 222. Also, the CPE that is
included in this exception is limited to CPE that is used in the
provision of the telecommunications service from which the CPNI is
derived.
40. Second, our broader statutory interpretation appropriately
protects the customer's reasonable expectations of privacy in
connection with CPNI, which many petitioners argue is the appropriate
test for determining the limitations on the use of CPNI without a
customer's approval. We are persuaded that CPE and many information
services properly come within the meaning of section 222(c)(1)(B).
41. In the wireless context, our regulation of CMRS providers and
the history of the industry has allowed the development of bundles of
CPE and information services with the underlying telecommunications
service. Thus, information services and CPE offered in connection with
CMRS are directly associated and developed together with the service
itself. Indeed, we are persuaded by the record and our observations of
the development of the CMRS market generally that the information
services and CPE associated with CMRS are reasonably understood by
customers as within the existing service relationship with the CMRS
provider. Customers expect to have CPE and information services
marketed to them along with their CMRS service by their CMRS provider.
Accordingly, we conclude that such CPE and information services come
within the meaning of ``necessary to, or used in,'' the provision of
service. In the CMRS context, carriers should be permitted to use CPNI,
without customer approval, to market information services and CPE to
their CMRS customers.
42. The wireline industry has developed somewhat differently from
CMRS and, while the analysis is the same, the results concerning how
carriers may use CPNI accordingly differ from the wireless industry. No
evidence has been produced on the record which shows that allowing
wireline carriers to market CPE to their customers, using CPNI without
customer consent, violates customers' expectations. We are convinced
that such usage by carriers would be beneficial to customers as new and
advanced products develop. Therefore, wireline carriers should be
permitted to use CPNI, without customer approval, to market CPE to
their customers.
43. Within the broader reading of the statute, we find that certain
wireline information services should also be considered necessary to,
or used in, the provision of the underlying telecommunications service.
In the CPNI Order, the Commission listed several information services
that it believed should not be considered necessary to, or used in, the
underlying telecommunications service: call answering, voice mail or
messaging, voice storage and retrieval services, and fax storage and
retrieval services. Applying the broader reading of the statute, along
with the new evidence on the record, we now believe that all of these
services should be considered necessary to, or used in, the provision
of the underlying telecommunications service because customers have
come to depend on these services to help them make or complete calls.
The record indicates that customers have come to expect that their
service provider can and will offer these services along with the
underlying telecommunications service. Therefore, carriers may use
CPNI, without customer approval, to market call answering, voice mail
or messaging, voice storage and retrieval services, and fax storage and
retrieval services.
44. We continue to exclude from this list, as the Commission did in
the CPNI Order, Internet access services. There is no convincing new
evidence on the record that shows that such services are necessary to,
or used in, the making of a call, even in the broadest sense. There is
also no evidence, currently, that customers expect to receive such
services from their wireline provider, or that they expect to use such
services in the way that they expect to receive or use the above-listed
services.
45. We will, however, add protocol conversions to the list of
services that carriers may market using CPNI without customer approval.
In its petition, Bell Atlantic requests that we redefine protocol
conversion as a telecommunications service. Bell Atlantic asserts that
protocol conversions that do not alter the underlying information sent
and received should not be defined as information services. We do not
believe that protocol conversions should be redefined as a
telecommunications service but because protocol conversions are
necessary to the provision of the telecommunications service, in the
instances where they are used, protocol conversions should be included
in the group of information services listed above. Accordingly, we
grant Bell Atlantic's request to use CPNI to market, without customer
approval, protocol conversions.
3. Petitions for Forbearance
a. Introduction. 46. In the alternative, many parties urge the
Commission to forbear from prohibiting CMRS providers and wireline
carriers from using CPNI to market CPE and/or information services
without customer approval. As we described in detail, section 10 of the
Act requires the Commission to forbear from regulation when: (1)
enforcement is not necessary to ensure that the carrier's charges and
practices are just and reasonable; (2) enforcement is not necessary for
the protection of consumers; and (3) forbearance is consistent with the
public interest.
b. CMRS Providers. 47. In the preceding section, we granted the
petitions for reconsideration to allow CMRS providers to use CPNI,
without customer approval, to market CPE and information services to
their customers. Therefore, we deny as moot the petitions for
forbearance from section 222's prohibition against CMRS providers using
CPNI to market, without customer approval, CPE and information
services.
c. Wireline Carriers. 48. In the preceding section, we granted the
petitions for reconsideration to allow wireline carriers to use CPNI,
without customer approval, to market CPE and some information services
to their customers. Therefore, we deny as moot the petitions requesting
that we forbear from enforcing section 222's prohibition against
wireline carriers to use CPNI to market CPE and information services
such as call answering, voice mail or messaging, voice storage and
retrieval services, fax storage and retrieval services, and protocol
conversions. Bell Atlantic has requested that we forbear from enforcing
section 222's prohibition against using CPNI without prior customer
consent to market all
[[Page 53249]]
information services. We deny this request.
49. Section 10(a)(1). The primary focus of the CPNI rules is not,
nor ever has been, intended to ensure reasonable rates or practices.
Therefore, we determine that enforcement of the restrictions on the use
of CPNI to market those information services that are not ``necessary
to, or used in, the provision of'' telecommunications services are not
necessary to ensure that the charges, practices, classifications, or
regulations are just and reasonable and are not unjustly or
unreasonably discriminatory.
50. Section 10(a)(2). We are unable to conclude that forbearing
from enforcement of restrictions on the use of CPNI for marketing all
information services would satisfy the second criterion. We note,
however, that the ``integrated'' services that Bell Atlantic identifies
include the information services which we have found above to be
necessary to, or used in, the provision of the underlying
telecommunications service. We have, on reconsideration, identified
those types of information services for which our broader
interpretation of section 222(c)(1)(B) is more in line with customer
expectations and congressional intent. For these services, forbearance
is not necessary. With regard to other information services such as
Internet access, we find that enforcing section 222(c)(1)(B) is still
necessary to protect consumers. Requiring prior consent protects
customers in many instances where they would not realize potentially
sensitive, personal information had been accessed or used. As noted
above, there is no evidence, currently, that customers expect to
receive such services from their wireline provider, or that they expect
to use such services in the way that they expect to receive or use more
integrated services. Nor are we aware of any other law, regulation,
agency or state requirement that would substitute for the effectiveness
of a prior consent requirement, which protects customer privacy
expectations by placing the control over the use of CPNI for purposes
of marketing non-integrated information services in the hands of the
customer.
51. Section 10(a)(3). We concluded in the CPNI Order, however, that
``[u]nlike the Commission's pre-existing policies under Computer III,
which were largely intended to address competitive concerns, section
222 of the Act explicitly directs a greater focus on protecting
customer privacy and control.'' We further concluded that ``[t]his new
focus embodied in section 222 evinces Congress' intent to strike a
balance between competitive and customer privacy interests different
from that which existed prior to the 1996 Act, and thus supports a more
rigorous approval standard for carrier use of CPNI than in the prior
Commission Computer III framework.'' More specifically, we concluded
that an opt-out scheme does not provide any assurance that consent for
the use of a customer's CPNI would be informed, and found that opt-out
does not adequately protect customer privacy interests. Bell Atlantic,
therefore, is incorrect in its assertion that our conclusions in
Computer III dictate our findings relating to the public interest. We
also conclude that the record on forbearance suggested here does not
convince us that the privacy goals of the statute are met where
carriers can use CPNI without express customer approval to sell
services outside the existing customer-carrier relationship. We
accordingly find that Bell Atlantic's request for forbearance of
section 222's affirmative approval requirement is generally
inconsistent with the public interest. Customers who are interested in
obtaining more information can arrange to do so easily by granting
consent for their carriers' use of CPNI. We have found no public
interest benefits that would outweigh these concerns.
52. Pursuant to section 10(b) of the Act, we have evaluated whether
forbearance from the prior consent requirement will promote competitive
market conditions, including the extent to which forbearance will
enhance competition among providers of telecommunications services. As
we concluded above, the ability to use CPNI from an existing service
relationship to market new services to a customer bestows an enormous
competitive advantage for those carriers that currently have a service
relationship with customers, particularly incumbent exchange carriers
and interexchange carriers with a large existing customer base. This,
in turn, poses a significant risk to the development of competition.
Therefore, to the extent that Bell Atlantic is requesting forbearance
from section 222's restrictions on the use of CPNI to market Internet
access service, we find that such forbearance would neither promote
competition nor enhance competition among telecommunications service
providers. For instance, we recently stated that, although many
Internet service providers (ISPs) ``compete against one another, each
ISP must obtain the underlying basic services from the incumbent local
exchange carrier, often still a BOC, to reach its customers.'' Because
of the competitive advantage that many BOCs retain, we concluded that
we would not remove certain safeguards designed to protect against BOC
discrimination despite the competitive ISP marketplace. We reach a
similar conclusion here: giving wireline carriers, particularly ILECs,
the right to use CPNI without affirmative customer approval to market
Internet access services could damage the competitive Internet access
services market at this point in time. Accordingly, we deny Bell
Atlantic's petition for forbearance on this issue.
d. Forbearance from all CPNI Rules for CMRS Providers. 53. A few
parties urge the Commission to forbear from imposing any CPNI
obligations on CMRS providers. Forbearance from enforcing all CPNI
rules against CMRS carriers, according to one petitioner, will permit
many beneficial and pro-competitive marketing practices to continue.
The Commission must forbear from enforcing its rules or any statutory
provision where the criteria of the forbearance test, set out in Part
V.A.3 are satisfied. We deny this request.
54. Section 10(a)(1). As we have previously stated, the primary
focus of the CPNI rules is not, nor ever has been, intended to ensure
reasonable rates or practices. Therefore, we determine that enforcement
of the CPNI rules for CMRS carriers is not necessary to ensure that the
charges, practices, classifications, or regulations are just and
reasonable and are not unjustly or unreasonably discriminatory.
55. Section 10(a)(2). We are unable to find that CMRS customers'
privacy interests would be adequately protected absent section 222 and
the rules promulgated in this proceeding. We are concerned, for
example, that customers would be harmed by elimination of the
restriction on carriers' use of CPNI to identify or track customers who
call competing service providers contained in section 64.2005(b)(1) of
our rules. Section 222 and our implementing rules protect customers in
many instances where they would not realize potentially sensitive,
personal information had been accessed or used. Moreover, we would be
remiss in our duty under the statute if we created an environment in
which CMRS customers' only recourse was to switch carriers after
discovering that their CPNI had been used without authorization. Nor
are we aware of any other law, regulation, agency or state requirement
that would substitute for the effectiveness of our rules implementing
section 222. Consequently, the second
[[Page 53250]]
criterion for forbearance has not been met.
56. Section 10(a)(3). We do not find that forbearance from section
222 and our CPNI rules for all CMRS providers is consistent with the
public interest. Complete forbearance would eliminate section 222's
procedures for the protection of both customers and carriers, such as
the process for transferring CPNI from a former carrier to a new
carrier pursuant to a customer's written request and the obligation to
protect carrier proprietary information. Pursuant to section 10(b) of
the Act, we have evaluated whether forbearance from section 222 for
CMRS carriers will promote competitive market conditions, including the
extent to which forbearance will enhance competition among providers of
telecommunications services. On balance, we find that forbearance from
the full range of CPNI protections would undermine consumer privacy to
an extent that outweighs the potential benefits demonstrated on the
record in terms of carrier cost savings. Therefore, we conclude that
there is insufficient basis for a public interest finding under the
third criterion.
C. Use of CPNI to Market to Former and ``Soon-to-be Former'' Customers
1. Background
57. The CPNI Order adopted section 64.2005(b)(3) to prohibit a
carrier from using or accessing CPNI to regain the business of a
customer who has switched to another provider. The Commission decided
as a matter of statutory interpretation that once a customer terminates
service from a carrier, CPNI derived from the previously subscribed
service may not be used to retain or regain that customer.
Specifically, the Commission foreclosed the use of CPNI for customer
retention purposes under section 222(c)(1) because it felt such use was
not carried out in the ``provision of'' service, but rather, for the
purpose of retaining a customer that has already taken steps to change
its provider. The CPNI Order also precluded the use of CPNI under
section 222(d)(1), insofar as such use would be undertaken to market a
service, rather than to ``initiate'' a service within the meaning of
that provision.
58. A significant majority of the petitioners have requested that
the Commission reconsider or forbear from the restrictions of section
64.2005(b)(3), which has been referred to as the ``winback''
prohibitions.
2. ``Winback''
a. Discussion. 59. Petitioners challenge the winback restrictions
on a variety of grounds. On reconsideration, we conclude that all
carriers should be able to use CPNI to engage in winback marketing
campaigns to target valued former customers that have switched to other
carriers. After reviewing the fuller record on this issue developed on
reconsideration, we are persuaded that winback campaigns are consistent
with section 222(c)(1) and in most instances facilitate and foster
competition among carriers, benefiting customers without unduly
impinging upon their privacy rights. Accordingly, we reverse our
position and eliminate rule 64.2005(b)(3).
60. On reconsideration, we believe that section 222(c)(1)(A) is
properly construed to allow carriers to use CPNI to regain customers
who have switched to another carrier. While section 222(c)(1) is
susceptible to different interpretations, we now think that the better
reading of this language permits use of CPNI of former customers to
market the same category of service from which CPNI was obtained to
that former customer. We agree with those petitioners who argue that
the use of CPNI in this manner is consistent with both the language and
the goals of the statute. Section 222(c)(1)(A) permits the use of CPNI
in connection with the ``provision of the telecommunications service
from which the information is derived.'' The marketing of service
offerings within a given presubscribed telecommunications service is
encompassed within the ``provision of'' that service. In developing the
total service approach, the Commission recognized that marketing is
implicit in the term ``provision'' as used in section 222(c)(1). The
CPNI Order stated that ``we believe that the best interpretation of
section 222(c)(1) is the total service approach, which affords carriers
the right to use or disclose CPNI for, among other things, marketing
related offerings within customers' existing service for their benefit
and convenience.'' While we recognize that this discussion in the CPNI
Order also referred to the customer's ``existing'' service, we now
conclude upon further reflection that our focus should not be so
limited. Common sense tells us that customers are aware of and expect
that their former carrier has information about the services to which
they formerly subscribed. Businesses do not customarily purge their
records of a customer when that customer leaves. We therefore disagree
with the assertion that extending winback marketing for the same
service to a former customer is an indefensible stretch of the total
service approach.
61. Because customer expectations form the basis of the total
service approach, they properly influence our understanding of the
statute, a goal of which is to balance competitive concerns with those
of customer privacy. Customers expect carriers to attempt to win back
their business by offering better-tailored service packages, and that
such precise tailoring is most effectively achieved through the use of
CPNI. Winback restrictions may deprive customers of the benefits of a
competitive market. Winback facilitates direct competition on price and
other terms, for example, by encouraging carriers to ``out bid'' each
other for a customer's business, enabling the customer to select the
carrier that best suits the customer's needs.
62. Some commenters argue that ILECs should be restricted from
engaging in winback campaigns, as a matter of policy, because of the
ILECs' unique historic position as regulated monopolies. We believe
that such action by an ILEC is a significant concern during the time
subsequent to the customer's placement of an order to change carriers
and prior to the change actually taking place. Therefore, we have
addressed that situation at Part V.C.3. However, once a customer is no
longer obtaining service from the ILEC, the ILEC must compete with the
new service provider to obtain the customer's business. We believe that
such competition is in the best interest of the customer and see no
reason to prohibit ILECs from taking part in this practice.
63. We are also unpersuaded by the allegations that an incumbent
carrier's use of CPNI in winback campaigns amounts to a predatory
practice designed to prevent effective market entry by new competitors.
Contrary to the commenters' suggestions, we believe such use of CPNI is
neither a per se violation of section 201 of the Communications Act, as
amended, nor the antitrust laws. Prior to the adoption of the rules
promulgated under 1996 Act, incumbent carriers were able to use CPNI to
regain customers lost to competitors. Assuming incumbent LECs have
sufficient market power to engage in predatory strategies, they are
constrained in their ability to raise and lower prices by our tariff
rules and non-discrimination requirements. Because winback campaigns
can promote competition and result in lower prices to consumers, we
will not condemn such practices absent a showing that they are truly
predatory.
[[Page 53251]]
64. Thus, we conclude that the statute permits a carrier evaluating
whether to launch a winback campaign to use CPNI to target valued
former customers who have switched service providers.
65. An important limitation derived from the statutory language is
that the carrier may use CPNI of the former customer to offer that
customer the service or services to which the customer previously
subscribed. It would be inconsistent with the total service approach
for a carrier to use such CPNI to offer new services outside the former
customer-carrier relationship.
66. Some petitioners assert that winback is permissible under the
exceptions enumerated in Section 222(d)(1) that allow the use of CPNI
without customer approval to ``render'' or ``initiate'' service. Based
upon our decision that the use of CPNI to winback customers is
consistent with section 222(c)(1), we decline to reach these arguments.
Similarly, we need not address arguments concerning the
constitutionality of, propriety under the APA, and forbearance from,
the former rule. Consequently, we eliminate Sec. 64.2005(b)(3). We
therefore do not need to reach the clarification petitions submitted on
the former rule.
3. Retention of Customers
a. Background. 67. As noted above, the CPNI Order also prohibited a
carrier's access to or the use of the CPNI of a ``soon-to-be-former''
customer to market the same services to retain that customer. The CPNI
Order did not distinguish between marketing for the purpose of
retaining customers versus regaining them. As explained above, on
reconsideration, we believe that use of CPNI to regain former customers
falls within the ambit of section 222(c)(1). We conclude here that use
of CPNI to retain customers ordinarily does not come under section
222(c)(1), and in such instances would likely violate section 222(b).
b. Discussion. 68. We conclude that section 222 does not allow
carriers to use CPNI to retain soon-to-be former customers where the
carrier gained notice of a customer's imminent cancellation of service
through the provision of carrier-to-carrier service. We conclude that
competition is harmed if any carrier uses carrier-to-carrier
information, such as switch or PIC orders, to trigger retention
marketing campaigns, and consequently prohibit such actions
accordingly.
69. The Commission previously determined that carrier change
information is carrier proprietary information under section 222(b). In
the Slamming Order, 64 FR 9219, February 24, 1999, the Commission
stated that pursuant to section 222(b), the carrier executing a change
``is prohibited from using such information to attempt to change the
subscriber's decision to switch to another carrier.'' Thus, where a
carrier exploits advance notice of a customer change by virtue of its
status as the underlying network-facilities or service provider to
market to that customer, it does so in violation of section 222(b). We
concede that in the short term this prohibition falls squarely on the
shoulders of the BOCs and other ILECs as a practical matter. As
competition grows, and the number of facilities-based local exchange
providers increases, other entities will be restricted from this
practice as well.
70. We agree that section 222(b) is not violated if the carrier has
independently learned from its retail operations that a customer is
switching to another carrier; in that case, the carrier is free to use
CPNI to persuade the customer to stay, consistent with the limitations
set forth in the preceding section. We thus distinguish between the
``wholesale'' and the ``retail'' services of a carrier. If the
information about a customer switch were to come through independent,
retail means, then a carrier would be free to launch a ``retention''
campaign under the implied consent conferred by section 222(c)(1).
c. Petitions for Forbearance. 71. A number of petitioners seek
forbearance from restrictions that limit the ability of a carrier to
retain a soon-to-be former customer who has indicated an intent to
switch carriers. Petitioners request forbearance from the application
of rules prohibiting retention marketing, however, as part of their
overall requests that the Commission forbear from applying winback
restrictions generally. Because the Commission has revised its
interpretation and eliminated rule 64.2005(b)(3), that portion of their
petitions is moot.
72. Section 10 of the Act requires the Commission to forbear from
regulation when: (1) enforcement is not necessary to ensure that the
carrier's charges and practices are just and reasonable; (2)
enforcement is not necessary for the protection of consumers; and (3)
forbearance is consistent with the public interest. For the reasons
discussed below, we conclude the forbearance standard has not been met
to the extent that carriers would seek to use CPNI to regain a soon-to-
be former customer, precipitated by the receipt of a carrier-to-carrier
order.
73. Section 10(a)(1). Petitioners assert that limiting the use of
CPNI in retention efforts is not necessary to ensure just, reasonable,
and nondiscriminatory rates.
74. We agree that the primary focus of the CPNI rules is not, nor
ever has been, intended to ensure reasonable rates or practices.
Therefore, we determine that enforcement of section 222's prohibition
against allowing a carrier to use proprietary information that it
receives by virtue of fulfilling carrier-to-carrier orders in a
``wholesale'' capacity is not necessary to ensure that the charges,
practices, classifications, or regulations are just and reasonable and
are not unjustly or unreasonably discriminatory.
75. Section 10(a)(2). Petitioners assert that retention
restrictions are not necessary to protect customers generally. Although
we agree that privacy concerns are not particularly jeopardized in
winback situations, generally, that does not mean that enforcement of
this restriction is unnecessary to protect customers. Rather, we
conclude that consumers' substantial interests in a competitive and
fair marketplace would be undermined if this restriction was not
enforced. Consequently, the second criterion is not satisfied.
76. Section 10(a)(3). Finally, petitioners contend that customer
retention is in the public interest. We are not persuaded, however,
that permitting carriers to unfairly use information that they obtain
in a ``wholesale'' capacity is in the public's interest. We conclude
that there is insufficient basis for a public interest finding in this
instance under the third criterion. Therefore, we deny the forbearance
petitions on this issue.
D. Disclosure of CPNI to New Carriers When a Customer is ``Won''
77. In the CPNI Order we definitively concluded that the term
``initiate'' in section 222(d)(1) does not require that a customer's
CPNI be disclosed by a carrier to a competing carrier who has ``won''
the customer as its own. We found that section 222(d)(1) applies only
to carriers already possessing the CPNI, within the context of the
existing service relationship, and not to any other carriers merely
seeking access to CPNI. We noted, however, that section 222(c)(1) does
not prohibit carriers from disclosing CPNI to competing carriers upon
customer approval. Accordingly, we reasoned that although an incumbent
carrier is not required to disclose CPNI pursuant to section 222(d)(1)
or section 222(c)(2) absent an affirmative written request, local
exchange carriers may need to disclose a customer's service record upon
oral approval of a customer to a competing
[[Page 53252]]
carrier prior to its commencement of service as part of a local
exchange carrier's section 251(c)(3) and (c)(4) obligations. In this
way, we concluded, section 222(c)(1) permits the sharing of customer
records necessary for the provisioning of service by a competitive
carrier. Finally, we also noted that a carrier's failure to disclose
CPNI to a competing carrier that seeks to initiate service to that
customer who wishes to subscribe to a competing carrier's service, may
well constitute an unreasonable practice in violation of section
201(b), depending on the circumstances.
78. We reject MCI's various requests for disclosure of CPNI by
former carriers, without customer approval, to new carriers to enable
the new carriers to initiate service. We deny MCI's petition in this
regard.
79. First, MCI and TRA ask that we find that section 222(d)(1)
allows ``one carrier to disclose CPNI to another to enable the latter
to initiate service without customer approval'' thereby reversing our
conclusion in the CPNI Order. Neither MCI nor TRA has presented any new
facts or arguments that the Commission did not fully consider in the
CPNI Order regarding the interpretation of section 222(d)(1). We
therefore deny MCI and TRA's request that we reverse this portion of
the CPNI Order.
80. Second, MCI also requests that the Commission, in any case,
find that section 222(c)(1) authorizes the disclosure of CPNI without
customer approval. We find that MCI's request is contrary to our
conclusion in the CPNI Order that the language of 222(c)(1)(A) reflects
Congress' judgment that customer approval for carriers to use,
disclose, and permit access to CPNI can be inferred in the context of
an existing customer relationship. We reasoned that such an inference
is appropriate because the customer is aware that his or her carrier
has access to CPNI, and, through subscription to the carrier's service,
has implicitly approved the carrier's use of CPNI within the existing
relationship. We are not persuaded that the disclosure of CPNI to a
different carrier to initiate service without customer approval for
that disclosure would be contemplated by a customer as a carrier's use
of his or her CPNI within the existing customer-carrier relationship.
As such, we deny MCI's request.
81. Third, MCI also asserts that sections 272, 201(b), and 202(a)
require BOCs and other ILECs that disclose CPNI to affiliates without
customer approval in order to initiate service to likewise disclose
CPNI to any other requesting carrier ``needing it to initiate service.
MCI has not provided any reasonable basis for altering these
conclusions. Further, we are not persuaded by MCI's unsupported request
that section 202(a) would require such relief. Accordingly, we deny
MCI's request.
82. Fourth, MCI further argues that if the Commission does not
grant any of the relief requested, then it should allow carriers to
notify customers that their failure to approve the disclosure of CPNI
to a new carrier may disrupt the installation of any new service they
may request. As MCI has not persuaded us, however, that a customer's
failure to approve such a disclosure may disrupt the installation of
service, we deny MCI's request.
83. Finally, MCI requests that the Commission ``reconfirm'' that
CPNI is an unbundled network element ``that BOCs and other ILECs must
provide to all requesting carriers under section 251(c)(3) of the
Act.'' This is not a fair characterization of the CPNI Order's
conclusion. Rather, the CPNI Order held that local exchange carriers
may need to disclose a customer's service record upon oral approval of
a customer to a competing carrier prior to its commencement of service
as part of a local exchange carrier's section 251(c)(3) and (c)(4)
obligations. This conclusion does not indicate, as MCI has implied,
that CPNI is an unbundled network element subject to section
251(c)(3)'s unbundling requirements separate from the Commission's
requirement that incumbent carriers provide unbundled access to
operations support systems and the information they contain. Therefore,
MCI incorrectly concludes that the CPNI Order found that CPNI is an
unbundled network element. In any case, the United States Supreme Court
recently concluded that the Commission's unbundling rule, Sec. 51.319
of the Commission's rules, should be vacated. As a result, the
Commission reopened CC Docket 96-98 to refresh the record on the issues
of (1) how, in light of the Supreme Court ruling, the Commission should
interpret the standards set forth in section 251(d)(2) of the
Telecommunications Act of 1996; and (2) which specific network elements
the Commission should require incumbent LECs to unbundle.
VI. ``Approval'' Under Section 222(c)(1)
A. Grandfathering Pre-existing Notifications
84. On May 21, 1998, the Common Carrier Bureau released the
Clarification Order clarifying several issues in the CPNI Order. Among
other things, the Clarification Order made it clear that carriers that
have complied with the Computer III notification and prior written
approval requirements in order to market enhanced services to business
customers with more than 20 access lines are also in compliance with
section 222 and the Commission's rules. CompTel and LCI request that
the Commission reverse the Clarification Order's conclusion. We decline
to do so for the reasons discussed below and, in fact, hereby adopt the
Clarification Order.
85. As discussed in the Clarification Order, the framework
established under the Commission's Computer III regime, prior to the
adoption of section 222, governed the use of CPNI by the BOCs, AT&T,
and GTE to market CPE and enhanced services. Under this framework,
those carriers were obligated to: (1) provide an annual notification of
CPNI rights to multi-line customers regarding enhanced services, as
well as a similar notification requirement that applied only to the
BOCs regarding CPE; and (2) obtain prior written authorization from
business customers with more than 20 access lines to use CPNI to market
enhanced services. The CPNI Order, however, replaced the Computer III
CPNI framework in all material respects. In its place, the CPNI Order
established requirements compelling carriers to provide customers with
specific one-time notifications prior and proximate to soliciting
express written, oral, or electronic approval for CPNI uses beyond
those set forth in sections 222(c)(1)(A) and (B). The CPNI Order
further established an express approval mechanism for such
solicitations as it is the ``best means to implement this provision
because it will minimize any unwanted or unknowing disclosure of CPNI''
and will also ``limit the potential for untoward competitive advantages
by incumbent carriers.''
86. The Clarification Order noted that, like the requirements
established in the CPNI Order, ``the notification obligation
established by the Computer III framework required, among other things,
that carriers provide customers with illustrative examples of enhanced
services and CPE, expanded definitions of CPNI and CPE, information
about a customer's right to restrict CPNI use at any time, information
about the effective duration of requests to restrict CPNI, and
background information to enable customers to understand why they were
being asked to make decisions about their CPNI.'' The Clarification
Order determined that these Computer III notifications comply
materially with the form and content of the notices
[[Page 53253]]
required by the CPNI Order. In addition, the Clarification Order
concluded that the Computer III requirement to obtain prior written
authorization constitutes a form of express, affirmative approval, as
required by section 222. Accordingly, the Clarification Order concluded
that carriers that complied with the Computer III notification and
prior written approval requirement in order to market enhanced services
to such carriers are also in compliance with section 222 and the
Commission's rules.
87. We agree with the Bureau that carriers that have complied with
the Computer III notification and prior written approval requirements
in order to market enhanced services to certain large business
customers should be deemed in compliance with section 222 and the
Commission's rules. For the reasons stated in the Clarification Order,
we agree that the Computer III framework required carriers to provide
these large business customers with adequate notice and obtain express,
affirmative approval in material compliance with the form and content
of those required by section 222 and the Commission's rules. Although
it is true that the Computer III consents were given prior to the
advent of local competition, we believe that the detailed notice and
express, affirmative consent required under that regime compensate for
this deficiency. Moreover, we are not persuaded by CompTel's assertion
that the BOCs warnings that they may have to change the customer's
account representatives put undue pressure on these business customers
to relent. Finally, we also conclude that although some of the Computer
III annual notifications may not have been ``proximate to'' the carrier
solicitations as required by section 222, the Computer III regime's
annual notification requirement and limitation to business customers
with more than 20 access lines--requirements that we note are more
stringent than required by section 222--materially satisfy the concerns
we intended to address by the proximate notification requirement
promulgated in the CPNI Order. As such, we agree with the Bureau that
the Computer III notifications are in material compliance with section
222 and the Commission's rules, and adopt the reasoning and conclusions
of the Clarification Order as our own.
88. Other carriers request that the Commission ``grandfather''
authorizations obtained subsequent to the enactment of section 222, but
prior to the promulgation of rules in the CPNI Order.
89. We conclude, based upon the evidence presented in the record of
this proceeding, that AT&T's solicitations constitute a good faith
effort to materially comply with section 222 provided they are
supplemented with the curative written notification of rights AT&T has
offered to distribute. Accordingly, we find that AT&T may continue to
rely on the approvals given, provided the approvals were obtained in
the manner detailed above, so long as AT&T supplements those approvals
with a written notice to customers of their rights including an
explanation that they have the right to withdraw their approval.
90. Other than AT&T, the parties in this proceeding have not
provided sufficient detail describing their solicitations for the
Commission to make a determination of material compliance. We urge them
to examine the showing made by AT&T as discussed above. We will accept
further waiver requests that are materially compliant with section 222,
provided the carriers requesting waivers can make a showing similar to
the one made by AT&T.
B. Oral and Written Notification
1. Background
91. Section 64.2007 of the Commission's Rules sets out several
requirements for carriers who wish to obtain a customer's consent for
the use of that customer's CPNI. Vanguard requests that the Commission
clarify the requirements established in the Order for
telecommunications providers seeking customer consent for the use of
CPNI. Vanguard expresses concern that the rules will hinder providers
from obtaining consent at the time of the execution of initial customer
agreements.
92. GTE requests clarification of the ``one-time'' notification
rules, noting that, under Sec. 64.2007(f)(3), solicitation of approval
to use CPNI must be proximate to the notification of a customer's CPNI
rights. GTE requests that the Commission ``clarify that written notice
followed proximately by either written or oral solicitation is
sufficient and is consistent with the FCC's finding that `one-time'
notice is sufficient.'' GTE contends that this would require amending
Sec. 64.2007(f)(4).
93. SBC also requests that the Commission clarify that written
notification followed by either an oral or written solicitation for
approval is appropriate under the one-time notification scheme.
94. Omnipoint requests that, for CMRS providers, the Commission
replace its ``opt-in'' requirement for approval of the use of CPNI with
an ``opt-out'' rule.
2. Discussion
95. We find that Omnipoint has presented no new circumstances that
warrant reversal of the Commission's conclusion that the requirement of
affirmative consent is consistent with Congressional intent, as well as
with the principles of customer control and convenience. Nor has
Omnipoint shown that wireless carriers should not be subject to the
requirement of affirmative consent.
96. We conclude, however, that the Commission should not attempt to
micro-manage the methods by which carriers meet their obligations to
secure customer consent. As long as the carrier can show that the rules
previously promulgated, which ensure that the customer has been clearly
notified of his or her right to refuse consent before the CPNI is used
and that the notification clearly informs the customer of the
consequences of giving or refusing consent, have been complied with,
the consent will be effective. However, we note that those rules are
specific in the requirements for written notification, e.g., that the
notice must be clearly legible, use sufficiently large type, and be
placed in an area so as to be readily apparent to the customer. We
intend to be vigilant in enforcing these rules, as we have in enforcing
the rules against slamming, which similarly provide for clear and
unambiguous notice to the telephone subscriber who signs a letter of
agency for authorizing a change in his or her primary interexchange
carrier. This policy is also consistent with the Commission's recent
action to help ensure that consumers are provided with essential
information in phone bills in a clear and conspicuous manner. We will
entertain complaints that carriers have not met these requirements on a
case-by-case basis.
97. We clarify, at Vanguard's request, that its plan for obtaining
consent at the time of the execution of initial customer agreements
would be appropriate assuming Vanguard provides ``complete disclosure''
prior to seeking customer approval as required by section 64.2007(f) of
the Commission's rules, and is otherwise compliant with the remainder
of section 64.2007. In other words, seeking customer consent at the
time of execution of initial customer agreements is not prohibited by
our rules. We also concur with U S WEST's assertion, however, that
carriers should be left with flexibility in implementing our rules.
Accordingly, Vanguard's proposal is merely one option among many that
could comply with our rules.
[[Page 53254]]
98. Moreover, in keeping with our desire to avoid micro-management
of the notification and authorization process, we shall grant SBC,
Frontier, and GTE's requests that we eliminate Sec. 64.2007(f)(4) of
the Commission's rules.
C. Preemption of State Notification Requirements
99. In the CPNI Order, we declined to exercise our preemption
authority, although we concluded that in connection with CPNI
regulation we ``may preempt state regulation of intrastate
telecommunications matters where such regulation would negate the
Commission's exercise of its lawful authority because regulation of the
interstate aspects of the matter cannot be severed from the intrastate
aspects.'' Rather, we stated that we would examine any conflicting
state rules on a case-by-case basis once the states have had an
opportunity to review the requirements we adopted in the CPNI Order. At
that time we noted that state rules that are vulnerable to preemption
are those that (1) permit greater carrier use of CPNI than section 222
and the Commission's rules allow, or (2) seek to impose additional
limitations on carriers' use of CPNI. We also indicated, however, that
state rules that would not directly conflict with the balance or goals
set by Congress were not vulnerable to preemption.
100. On reconsideration, we affirm our decision to exercise our
preemption authority on a case-by-case basis. While it is possible that
states might impose additional CPNI conditions that could require the
expenditure of resources, we conclude it would be inappropriate for the
Commission to speculate in this proceeding about what such conditions
might be and how much compliance might cost. We note that while
deciding to address preemption requests on a case-by-case basis, we
reserve the right to consider the potential costs and burdens imposed
by any state requirements that would apply retroactively. For these
same reasons, we also deny GTE's request that we find that ``additional
CPNI use restrictions will be expeditiously preempted, particularly
where other federal statutes, such as 47 U.S.C. 227(c), already address
customer privacy concerns.''
101. Neither AT&T nor GTE has presented any new facts or arguments
that require us to reconsider our prior ruling. Both GTE and AT&T point
to the Comments of the Texas Public Utility Commission, which describe
and attach a CPNI rule under consideration by the Texas Commission, as
support for the need to reconsider our conclusion on preemption in the
CPNI Order. They assert that the proposed Texas rule is in conflict
with the CPNI Order and the Commission's rules. That Texas, or any
other state, might implement CPNI rules that may be in conflict with
our rules was certainly considered in the CPNI Order. If such an event
occurs, AT&T, GTE, or any other party may request that we preempt the
alleged conflicting rules. We will then consider the specific
circumstances at that time.
D. Details of CPNI Notice
102. Section 64.2007 of our rules establishes the minimum form and
content requirements of the notification a carrier must provide to a
customer when seeking approval to use CPNI. Section 64.2007(f)(2)(ii)
requires that the notification must specify, inter alia, ``the types of
information that constitute CPNI'' and ``the specific entities'' that
will receive it. GTE requests that the Commission clarify the rule to
permit carriers to avoid exhaustively specifying all types of CPNI and
all of a carrier's subsidiaries and affiliates that may receive CPNI.
We decline to do so. The minimum requirements of Sec. 64.2007 were not
crafted to provide precise guidance, but rather as general notice
requirements. The rule seeks to strike an appropriate balance between
giving carriers flexibility to craft CPNI notices tailored to their
business plans and ensuring that customers are adequately informed of
their CPNI rights.
103. Thus, at a minimum, a carrier must inform a customer of the
types of CPNI it intends to use. We wish to ensure that any decision by
a customer to grant or deny approval is fully informed and that we
reduce the potential for carrier abuse. Also, to the extent a carrier
intends to disseminate a customer's CPNI, the customer has a right to
know the entities that will receive the CPNI derived from his or her
calling habits. Contrary to GTE's assertion, we don't believe that a
customer necessarily will be confused by the name of the recipient.
Importantly, the customer should have the option of restricting access
to CPNI among the carrier's intended recipients of his or her personal
information.
VII. Safeguards Under Section 222
A. Background
104. In the CPNI Order, the Commission concluded that ``all
telecommunications carriers must establish effective safeguards to
protect against unauthorized access to CPNI by their employees or
agents, or by unaffiliated third parties.'' To this end, we required
carriers to develop and implement software systems that ``flag''
customer service records in connection with CPNI, and maintain an
electronic audit mechanism (``audit trail'') that tracks access to
customer accounts. In addition, the CPNI Order stated that carriers
were to: train their employees as to when it would be permissible to
access customers' CPNI; establish a supervisory review process that
ensures compliance with CPNI restrictions when conducting outbound
marketing; and, on an annual basis, submit a certification signed by a
current corporate officer attesting that he or she has personal
knowledge that the carrier is in compliance with the Commission's
requirements. Because the Commission anticipated that carriers would
need time to conform their data systems and operations to comply with
the software flags and electronic audit mechanisms required by the
Order, we deferred enforcement of those rules until eight months from
when the rules became effective: specifically, January 26, 1999.
105. Following the release of the CPNI Order, several petitioners
sought reconsideration of a variety of issues, including the decision
to require carriers to implement the use of flags and audit trails.
Other carriers sought reconsideration of the CPNI Order's employee
training and discipline requirement in Sec. 64.2009(b) of the
Commission's rules, as well as the supervisory review requirement in
Sec. 64.2009(d) of the Commission's rules. On September 24, 1998, in
response to concerns raised by a number of parties, the Commission
ruled in the Stay Order that it would not seek enforcement actions
against carriers regarding compliance with the CPNI software flagging
and audit trail requirements as set forth in 47 CFR 64.2009(a) and (c)
until six months after the release date of this order on
reconsideration. We concluded that it serves the public interest to
extend the deadline for the initiation of enforcement of the software
flagging and audit trail rules so that the Commission could ``consider
recent proposals to tailor our requirements more narrowly and to reduce
burdens on the industry while serving the purposes of the CPNI rules.''
106. On November 9, 1998, PCIA filed a petition for reconsideration
of the Stay Order requesting that the Commission retract the additional
requirement for deployment of systems pending the Commission's
reconsideration of the CPNI Order. We deny PCIA's petition, however, as
we have granted, in part, the petitions for reconsideration with
respect to the flagging and audit trail requirements. Thus, although
new systems implemented prior to the
[[Page 53255]]
expiration of the stay period will be required to comply with the new
rules promulgated in this order, we believe the new rules are
significantly less burdensome. We have considered the potential impact
of our rules in this area on carriers' year 2000 (Y2K) remedial efforts
and their plans to stabilize their networks over the Y2K conversion. We
expect, however, that the increased flexibility, reduction in
compliance burden and additional time for implementation that we grant
here will greatly reduce the risk of such impact. Thus, and in light of
the facts before us, we believe that our rules will have no significant
detrimental effect on carriers' Y2K efforts. We conclude that it is in
the public interest to extend the stay period an additional two months
so as not to impede those efforts for carriers that chose to implement
electronic safeguards under the modified rules. Accordingly, the
Commission will not seek enforcement actions against carriers regarding
compliance with sections 64.2009(a) and (c) of the Commission's rules
until eight months after the release date of this order on
reconsideration.
107. An industry coalition (Coalition) comprised of a combination
of thirty-one industry representatives has proposed specific amendments
to Secs. 64.2009(a), 64.2009(c), and 64.2009(e) of the Commission's
rules (Coalition Proposal). After consideration of this proposal and
other comments in the record, we adopt modifications to our flagging
and audit trail requirements.
B. Notice
108. In the NPRM, we tentatively concluded that ``all
telecommunications carriers must establish effective safeguards to
protect against unauthorized access to CPNI by their employees or
agents, or by unaffiliated third parties.'' We further noted that we
previously required AT&T, the BOCs, and GTE to implement computerized
safeguards and manual file indicators to prevent unauthorized access to
CPNI, and sought comment on whether such safeguards should continue to
apply to those carriers. The NPRM also tentatively concluded that we
should not specify safeguard requirements for other carriers, but
sought comment on the issue.
109. We reject CompTel's assertion that the Commission failed to
give adequate notice of the ``systems modifications'' announced in the
CPNI Order because, in fact, the NPRM stated that the Commission might
require carriers other than AT&T, the BOCs, and GTE to implement
computerized safeguards and manual file indicators, and solicited
comment on the issue. As we modify the flagging and audit trail rules
on reconsideration to allow carriers to institute non-computerized
systems, we grant CompTel's Petition in this regard.
110. We also reject NTCA's argument that our description of the
projected reporting, record-keeping, and other compliance requirements
of the rule we proposed in the NPRM was inaccurate. As we described,
the NPRM tentatively concluded that we would not require carriers other
than AT&T, the BOCs, and GTE to implement specified safeguard
requirements as those carriers had been required to under Computer III.
Thus, the NPRM's Initial Regulatory Flexibility Analysis correctly
stated that there were no projected reporting, record-keeping, or other
compliance requirements for small business entities as a result of the
NPRM.
C. Evidence of Cost of Compliance
111. When we established the flagging and audit trail requirements
in the CPNI Order, the evidence before us was that carriers could, with
relative ease, modify their systems to accommodate these requirements.
Based upon many of the petitions filed on reconsideration, however, it
does not appear that all of the relevant facts were before the
Commission at that time. Numerous petitioners have now presented
evidence that the safeguards we adopted would be costly to implement.
D. The Flagging Requirement
112. Upon reconsideration, based upon the new evidence before us,
we agree with the petitioners that we should modify the flagging
requirement promulgated in the CPNI Order for all carriers. The goal of
the CPNI flagging rule is to ensure that carriers are aware of the
status of, and observe, a customer's CPNI approval status prior to any
use of that customer's CPNI. The Coalition proposes that we modify our
rule to require carriers to train their marketing personnel to
determine a customer's CPNI status prior to using that customer's CPNI
for ``out of category'' marketing, and to make customer approval status
available to such personnel in a readily accessible and easily
understandable format. As is only now evident from the new evidence
presented on reconsideration, implementation of the flagging rules
promulgated in the CPNI Order will require significant expenditures of
monetary and personnel resources for most carriers, regardless of size.
Although we agree in principle that the Coalition's proposal will
achieve the goals of the flagging requirements at a substantially
reduced cost, we conclude that the Coalition's proposal can be modified
to even simpler, less regulatory terms. We find that the carriers are
in a better position than the Commission to create individual systems
which ensure that their employees check each customer's CPNI approval
status prior to any use of that customer's CPNI for out of category
marketing. Accordingly, we amend section 64.2009(a) of our rules to
state that telecommunications carriers must implement a system by which
the status of a customer's CPNI approval can be clearly established
prior to the use of CPNI. This modification will permit all carriers to
develop and implement a system that is suitable to, among other things,
its unique size, capital resources, culture, and technological
capabilities.
E. The Audit Trail Requirement
113. We also agree with the petitioners, based upon the new
evidence before us, that we should modify the CPNI Order's electronic
audit trail requirement. This requirement was broadly intended to track
access to a customer's CPNI account, recording whenever customer
records are opened, by whom, and for what purpose. As AT&T points out,
the CPNI Order's electronic audit trail requirement would generate
``massive'' data storage requirements at great cost. As it is already
incumbent upon all carriers to ensure that CPNI is not misused and that
our rules regarding the use of CPNI are not violated we conclude that,
on balance, such a potentially costly and burdensome rule does not
justify its benefit. As an alternative to the CPNI Order's electronic
audit trail requirement, the Coalition has proposed that we require the
creation of such a record, but only with respect to ``marketing
campaigns.'' We find that the Coalition proposal is too narrow because,
as MCI noted in an ex parte meeting with the Common Carrier Bureau,
many carriers distinguish between ``sales'' and ``marketing.'' We
determine that carriers must maintain a record, electronically or in
some other manner, of their sales and marketing campaigns that use
CPNI. The record must include a description of each campaign, the
specific CPNI that was used in the campaign, the date and purpose of
the campaign, and what products or services were offered as part of the
campaign. We will also require carriers to retain the record for a
minimum of one year. We amend section 64.2009(c) accordingly.
[[Page 53256]]
F. The Corporate Officer Certification
114. The Coalition also requests that we amend the Officer
Certification rule to eliminate the requirement that the corporate
officer signing the certification have personal knowledge that the
carrier is in compliance with the Commission's CPNI rules. This we
decline to do. Our revisions of the flagging and audit trail
requirements in this order will allow telecommunications carriers more
flexibility in determining how they will ensure their compliance with
our CPNI rules. This flexibility puts the responsibility squarely on
the carriers to ensure their compliance. This flexibility, and its
concurrent responsibility, requires that some officer of the carrier
have personal knowledge that the scheme designed by the carrier is
adequate and complies with our CPNI rules. Because neither the
petitioners nor the Coalition have persuaded us that personal knowledge
on the part of an officer is unnecessary, we will not omit that
requirement from our rule. We will, however, amend the rule to omit the
word ``corporate'' because, as some parties explain, not all carriers
are organized as corporations.
115. We will also amend Sec. 64.2009(e) to require that
telecommunications carriers have an officer, as an agent of the
carrier, sign a compliance certificate on an annual basis stating that
the operating procedure established by the carrier is or is not in
compliance with the rules in this subpart. The carrier must provide a
statement accompanying the certificate detailing how the carrier's
operating procedure is and/or is not in compliance.
G. Other Safeguard Provisions
116. Parties also seek reconsideration of other safeguard
provisions. In light of the important role these rules play in
safeguarding the proper use of CPNI, we are not persuaded that these
rules are so burdensome that they warrant modification. Moreover, as we
have taken steps on reconsideration to allow carriers to decide for
themselves how to implement the flagging and audit trail rules, the
rules are now even less burdensome. It is, in fact, the continued
application of the employees training and discipline rules, and the
officer certification requirement, that permits us to make the
substantial modifications of the flagging and audit trail requirements
on reconsideration. Thus, we conclude the remaining requirements in
section 64.2009 are reasonable as presently written.
H. Petitions for Forbearance
117. We deny both as moot NTCA and PCIA's petitions for forbearance
from enforcement of the audit trail and flagging rules. Section 10 of
the Act requires the Commission to forbear from regulation when: (1)
Enforcement is not necessary to ensure that the carrier's charges and
practices are just and reasonable; (2) enforcement is not necessary for
the protection of consumers; and (3) forbearance is consistent with the
public interest. Both PCIA and NTCA premise their forbearance arguments
upon the fact that the flagging and audit trail requirements, as
detailed in the CPNI Order, require the implementation of electronic
safeguards. Based upon the new evidence the parties presented on
reconsideration, we agree with both NTCA and PCIA that the rules we
promulgated in the CPNI Order are unduly burdensome. We deny these
forbearance petitions, however, because we conclude that the revised
flagging and audit trail requirements resolve NTCA and PCIA's
criticisms of the former rules and the basis for their forbearance
requests. Under our new rules carriers, including NTCA and PCIA
members, may establish non-computerized systems of their own design to
comply with our requirements.
I. Small and Rural Carriers
118. We recognize, in light of the new evidence presented to the
Commission, that the flagging and audit trail requirements promulgated
in the CPNI Order might have a disparate impact on rural and small
carriers. Our modification of the flagging and audit trail requirements
in this order, however, effectively moots the requests we received from
the parties seeking special treatment for small and rural carriers with
respect to these requirements. In particular, under the amended rules,
carriers are not required to maintain flagging and audit capabilities
in electronic format. Rather, the amended rules leave it to the
carriers' discretion to determine what sort of system is best for their
circumstances. Thus, carriers whose records are not presently
maintained in electronic form are not required to implement electronic
systems if they do not wish to do so. We deny, therefore, the
Independent Alliance's petition to exempt small and rural carriers from
the provisions of sections 64.2009(a) and (c) because we have amended
our rules to accommodate, in part, the concerns of small and rural
carriers. Likewise, we deny NTCA's request that rural
telecommunications companies should be eligible for a blanket waiver of
the flagging and audit trail provisions, and TDS's request for
reconsideration of the flagging and tagging rules for small and mid-
sized carriers, for the same reason. Finally, on the same basis, we
reject ALLTEL's request that we reconsider the application of the
``enforcement time frames and other requirements to rural and small
carriers.''
J. Adequate Cost Recovery
119. We deny TDS's request that the Commission provide a mechanism,
in the form of a ``nationwide averaged [and] clearly identified flat
charge on all customers,'' to recover the costs that carriers will
incur complying with section 222, the CPNI Order, and the Commission's
rules. As we have now amended our rules to allow carriers the freedom
to implement these safeguards in a more effective and flexible manner,
we believe that carrier costs will be significantly reduced from the
costs estimated by carriers subsequent to the CPNI Order. Accordingly,
we reject TDS's request for a separate cost recovery mechanism at this
time.
K. Enforcement of CPNI Obligations
120. In this Order, we have amended our rules to reflect a
deregulatory approach which leaves many of the specific details of
compliance to the carriers. However, we intend to enforce the rules, as
amended, zealously. We expect carriers to protect the confidentiality
of the CPNI in their possession in accordance with our rules. Carriers
will be subject to penalties for improper use of CPNI. Moreover,
failure to develop and implement a compliance plan to safeguard CPNI
consistent with our rules will form a separate basis for liability. We
also note that we will address, in a separate order, the enforcement
and compliance issues raised in response to the FNPRM.
VIII. Section 222 and Other Act Provisions
A. Section 222 and Section 272
1. Background
121. Section 272(c)(1) states that, ``[i]n its dealings with its
[section 272 affiliates], a Bell operating company . . . may not
discriminate between the company or affiliate and any other entity in
the provision or procurement of goods, services, facilities, and
information, or in the establishment of standards.'' The Commission
concluded in the Non-Accounting Safeguards Order that: (1) The term
``information'' in section 272(c)(1) includes CPNI; and (2) the BOCs
must comply with the
[[Page 53257]]
requirements of both sections 222 and 272(c)(1). The Commission,
however, declined to address the parties' other arguments regarding the
interplay between section 272(c)(1) and section 222 to avoid prejudging
issues that would be addressed in the CPNI Order. The Commission also
declined to address the parties' arguments regarding the interplay
between section 222 and section 272(g), which permits certain joint
marketing between a BOC and its section 272 affiliate. The Commission
emphasized, however, that, if a BOC markets or sells the services of
its section 272 affiliate pursuant to section 272(g), it must comply
with the statutory requirements of section 222 and any rules
promulgated thereunder.
122. In the CPNI Order the Commission overruled the Non-Accounting
Safeguards Order, in part, concluding that the most reasonable
interpretation of the interplay between sections 222 and 272 is that
the latter does not impose any additional CPNI requirements on BOCs'
sharing of CPNI with their section 272 affiliates when they share
information with their section 272 affiliates according to the
requirements of section 222. The Commission reached this conclusion
only after recognizing an apparent conflict between sections 222 and
272. We noted in the CPNI Order that, on the one hand, certain parties
argued that under the principle of statutory construction the
``specific governs the general,'' and that section 222 specifically
governs the use and protection of CPNI, but section 272 only refers to
``information'' generally. As such, they claimed that section 222
should control section 272. On the other hand, under the same principle
of construction, other parties argued that section 272 specifically
governs the BOCs' sharing of information with affiliates, whereas
section 222 generally relates to all carriers. Therefore, they
asserted, section 272 should control section 222. Because either
interpretation is plausible, it was left to the Commission to resolve
the tension between these provisions, and to formulate the
interpretation that, in the Commission's judgment, best furthers the
policies of both provisions and the statutory design. We determine that
interpreting section 272 to impose no additional obligations on the
BOCs when they share CPNI with their section 272 affiliates according
to the requirements of section 222 most reasonably reconciles the goals
of these two principles.
2. Discussion
123. We affirm our conclusion in the CPNI Order that the most
reasonable interpretation of the interplay of sections 222 and 272 is
that section 272 does not impose any additional obligations on the BOCs
when they share CPNI with their section 272 affiliates. For the same
reasons described in the CPNI Order, however, we conclude that our
prior interpretation of the relationship between sections 222 and 272
is correct.
124. At the outset, we reject MCI's argument that there was not
adequate notice that the Commission might reverse its conclusion in the
Non-Accounting Safeguards Order relating to CPNI.
125. We further disagree with MCI's claim that the Commission's
``approach'' is flawed. We affirm our previous conclusion based upon
our prior reasoning.
126. We also reject MCI and TRA's argument that the ``except as
required by law'' clause in section 222(c)(1) encompasses, at least in
part, section 272(c)(1). We conclude, for the same reasons as those we
previously described in the CPNI Order, that the ``except as required
by law'' clause does not encompass section 272.
127. We affirm the CPNI Order's conclusion that the term
``information'' in section 272(c)(1) does not include CPNI despite
CompTel and Intermedia's assertion that such an interpretation is
contrary to the plain meaning of the Act and should be reconsidered.
128. While the legislative history is silent about the meaning of
``information'' in section 272(c)(1), the structure of the Act
indicates strongly that the provision is susceptible to differing
meanings. Indeed, as the courts have cautioned, the Commission is bound
to move beyond dictionary meanings of terms and to consider other
possible interpretations, assess statutory objectives, weigh
congressional policy, and apply our expertise in telecommunications in
determining the meaning of provisions. In this instance, we believe
that the structure of the Act belies petitioners' contention that the
term ``information'' has a plain meaning that encompasses CPNI. In
enacting section 222, Congress carved out very specific restrictions
governing consumer privacy in CPNI and consolidated those restrictions
in a single, comprehensive provision. We believe that the specific
requirements governing CPNI use are contained in that section and we
disfavor, accordingly, an interpretation of section 272 that would
create constraints for CPNI beyond those embodied in the specific
provision delineating those constraints. As a practical matter, the
interpretation proffered by petitioners would bar BOCs from sharing
CPNI with their affiliates: the burden imposed by the nondiscrimination
requirements would, in this context, pose a potentially insurmountable
burden because a BOC soliciting approval to share CPNI with its
affiliate would have to solicit approval for countless other carriers
as well, known or unknown. We do not believe that is what Congress
envisioned when it enacted sections 222 and 272. Rather, as we
concluded in the CPNI Order, we find it a more reasonable
interpretation of the statute to conclude that section 222 contemplates
a sharing of CPNI among all affiliates (whether BOCs or others),
consistent with customer expectations that related entities will share
information so as to offer services best tailored to customers' needs.
For these reasons, we find that the ``plain meaning'' argument raised
by Comptel and Intermedia is not persuasive, and further that their
meaning is not the one Congress most likely intended. Therefore, we
affirm our previous conclusion.
129. In addition, we are not persuaded by CompTel's assertion that
there is no indication that section 222 was intended to trump section
272 because the Commission previously recognized, in the First Report
and Order, that section 222's obligations are not exclusive. Because
Congress unambiguously prohibited the use of such CPNI in section
275(d), we concluded that the specific prohibition in section 275(d)
controls the general CPNI rules described in section 222. This stands
in stark contrast to the difficult task of reconciling sections 222 and
272.
130. Moreover, we do not agree with WorldCom's assertion that the
Commission ignored section 272(b)(1). Thus, we deny reconsideration on
this basis as WorldCom has not presented any new arguments or facts we
did not already consider.
131. Finally, several parties also argue that our interpretation of
the interplay of sections 222 and 272 gives BOC affiliates an unfair
competitive advantage over other competitors. These parties raise no
new arguments or facts on reconsideration of this point that we did not
already consider. We previously identified in detail specific
mechanisms in section 222 that address such competitive concerns. We
therefore deny these parties' requests for reconsideration of this
conclusion.
[[Page 53258]]
B. Disclosure of Non-CPNI Information Pursuant to Section 272
132. The Commission noted in a footnote in the CPNI Order that BOC
non-discrimination obligations under section 272 would apply to the
sharing of all other information and services with their section 272
affiliates. The Common Carrier Bureau further concluded in the
Clarification Order that a customer's name, address, and telephone
number are not CPNI. The Bureau reasoned that ``[i]f the definition of
CPNI included a customer's name, address, and telephone number, a
carrier would be prohibited from using its business records to contact
any of its customers to market any new service that falls outside the
scope of the existing service relationship with those customers.
133. We agree with the Common Carrier Bureau's clarification and
adopt its reasoning and conclusion as our own. Accordingly, we grant
MCI's request that we clarify that a customer's name, address, and
telephone number are ``information'' for purposes of section 272(c)(1),
and if a BOC makes such information available to its affiliate, then it
must make that information available to non-affiliated entities.
134. MCI also argues that the Commission should find that a
customer's PIC choice and PIC-freeze status are not CPNI as defined in
section 222(f)(1). We are not persuaded by MCI's statutory
interpretation. We conclude that a customer's PIC choice falls squarely
within the definition of CPNI set out in both sections 222(f)(1)(A) and
(B), and that PIC-freeze information meets the requirements of section
222(f)(1)(A). Finally, we agree with GTE that this result is consistent
with the privacy goals set out by Congress in section 222.
C. Section 222 and Section 254
135. CenturyTel also argues that restricting the use of CPNI in
marketing enhanced services and CPE to existing customers in rural
exchanges is inconsistent with Universal Service provisions of the Act.
136. We disagree with the arguments made by CenturyTel and NTCA. As
stated in Section V.A of this Order, we affirm the ``total service
approach'' for all carriers. We find no reason to impose different
notification requirements on large and small carriers. As we stated in
the CPNI Order, concerns regarding customer privacy are the same
irrespective of the carrier's size or identity. Further to the extent
that CenturyTel and NTCA are requesting to use CPNI, without customer
approval, to market CPE and certain information services, those
requests have been granted. We also disagree with CenturyTel and NTCA's
argument that section 254 requires the use of CPNI to allow rural
carriers to implement Congress' Universal Service standards. Section
254 envisions that rural carriers would introduce and make available
new technology to all of its customers. The CPNI rules in no way
discourage rural carriers from doing that. In fact, one could argue
that some of the CPNI rules require a carrier to make all of its
customers aware of such new technology rather than using CPNI to pick
and choose which customers to market the new technology to. The basis
of CenturyTel and NTCA's arguments, however, is that they do not want
to market the new technology to all of its customers. They want to make
it available only to certain customers that they select by using their
customers' CPNI. We fail to see how section 254 requires this outcome.
D. Application of Nondiscrimination Rules Under Sections 201(b) and
202(a)
137. We reject MCI's argument that the nondiscrimination
requirement described in section 272 should be applied to all ILECs
through the requirements of sections 201(b) and 202(a).
138. We agree with GTE that there is no justification to conclude,
as a matter of statutory construction, that the broad non-
discrimination requirements of these sections impose a specific
disclosure obligation on ILEC use of CPNI. In any case, the same
privacy concerns we identified in our discussion of the relationship
between sections 222 and 272 apply here equally. For instance,
requiring the disclosure of CPNI to other companies to maintain
competitive neutrality would defeat, rather than protect, customers'
privacy expectations and control over their own CPNI. We conclude that
the specific consumer privacy and consumer choice protections
established in section 222 supersede the general protections identified
in sections 201(b) and 202(a). Thus, we are not persuaded that section
201(b) or section 202(a) require the result MCI seeks. Accordingly, we
reject MCI's request.
IX. Other Issues
A. Status of Customer Rewards Program
139. Section 64.2005(b) of the Commission's Rules prohibits a
telecommunications carrier from using, disclosing, or permitting access
to CPNI to market to a customer, without customer approval, service
offerings that are within a category of service to which the customer
does not already subscribe.
140. Omnipoint and Vanguard contend that when a carrier provides
free rewards, such as free equipment, for the purpose of retaining its
accounts, the prohibition in section 64.2005(b) should not apply
because (1) the customer subscribes to the service for which the reward
is provided; and (2) the reward is free, and therefore is not
``marketed.'' Omnipoint and Vanguard request clarification because they
claim that carriers are more likely to offer rewards if they are able
to target them to high-volume or long-term customers, and if carriers
do not need to seek customer approval. No party has objected to this
proposal.
141. We agree with Omnipoint and Vanguard that, where a carrier
uses CPNI to provide free rewards to its customer, such use of CPNI is
within the scope of the carrier-customer relationship. As such, the use
of the CPNI is limited to the existing service relationship between the
carrier and the customer. Therefore, although the provision of free
rewards is a marketing activity, it does not violate the Act or our
rules, provided the telecommunications service being marketed is the
service currently subscribed to by the customer.
B. Non-telecommunications Services Listed on Telephone Bill
142. CPNI is defined in section 222(f)(1)(B) of the Act as
including ``information contained in the bills pertaining to telephone
exchange service or telephone toll service received by a customer of a
carrier; except that such term does not include subscriber list
information.'' However, section 222(c)(1) prohibits a carrier's use of
CPNI only where it receives the CPNI ``by virtue of its provision of a
telecommunications service.''
143. In the Common Carrier Bureau's Clarification Order, the Bureau
said that ``customer information derived from the provision of any non-
telecommunications service, such as CPE or information services * * *
may be used to provide or market any telecommunications service * * *''
Omnipoint asks the Commission to clarify that section 222 does not
prohibit the use of customer information derived from non-
telecommunications services bundled with telecommunications services
merely because charges for those services appeared on a customer's
telephone bill.
144. Section 222(c)(1) prohibits the use of CPNI only where it is
derived
[[Page 53259]]
from the provision of a telecommunications service. Consequently, we
find that information that is not received by a carrier in connection
with its provision of telecommunications service can be used by the
carrier without customer approval, regardless of whether such
information is contained in a bill generated by the carrier. Therefore,
consistent with the Clarification Order, customer information derived
from information services that are held not to be telecommunications
services may be used, even if the telephone bill covers charges for
such information services.
C. Provision of Calling Card as ``Provision'' of Service
145. LECs often offer so-called ``post-paid'' calling cards that
enable customers to complete long distance calls over a particular
interexchange carrier's network when the customer is away from home.
Such cards enable a customer to have the calls billed subsequently on
the customer's local bill issued by the LEC. MCI asks the Commission to
clarify that LECs may not use CPNI garnered in such circumstances to
market services that the LEC offers absent permission from the
customer.
146. We grant MCI's request for clarification. In the traditional
LEC post-paid calling card situation, the LEC serves merely as a
billing and collection agent on behalf of the interexchange carrier,
much as the LEC does when a customer places long distance calls from
home through the customer's pre-subscribed interexchange carrier (IXC).
In both instances, the customer has established a customer-carrier
relationship for the provision of interexchange services with the IXC
that carried the customer's call over its network. The LEC, on the
other hand, is standing in the place of the IXC only for billing and
collection purposes, a service which the IXC could have chosen to
provide itself. Where a LEC acts as a billing and collection agent, it
may not use CPNI without the customer's permission under the total
services approach.
D. Use of CPNI To Prevent Fraud
147. Section 222(d)(2) of the Act permits the use of CPNI to
``protect the rights or property of the carrier, or to protect users of
those services and other carriers from fraudulent, abusive, or unlawful
use of, or subscription to services * * *'' Section 64.2005 of the
Commission's rules provides that a telecommunications carrier may use,
disclose, or permit access to CPNI, without customer approval, for a
number of purposes, but does not mention the use of CPNI in connection
with fraud prevention programs.
148. Comcast requests that the Commission clarify its rules to
specify that (1) carriers are authorized to use CPNI in connection with
fraud prevention programs; and (2) such use is permissible even after a
customer has terminated service from the carrier making such use of the
customer's CPNI.
149. We agree that Section 222(d)(2) on its face permits the use of
CPNI in connection with fraud prevention programs, and does not limit
such use of CPNI that is generated during the customer's period of
service to any period of time. Since our rules do not cover the use of
CPNI for fraud prevention programs, we will amend our rules to do so,
in order to eliminate the possibility of misinterpretation.
E. Definition of ``Subscribed'' in Section 222(f)(1)(A)
150. We grant MCI's request for clarification of the meaning of the
phrase ``service subscribed to by any other customer'' in section
222(f)(1)(A).
F. CPNI ``Laundering''
151. MCI requests clarification that ``the status of information as
CPNI or carrier proprietary information [under section 222] is not lost
or altered if [a] carrier discloses or transmits such information to an
affiliated or unaffiliated entity, whether or not that entity transfers
such information to other parties or back to the original carrier.''
152. We agree that as the stewards of CPNI and carrier proprietary
information carriers must take steps to safeguard such information.
Moreover, we find that implicit in section 222 is a rebuttable
presumption that information that fits the definition of CPNI contained
in section 222(f)(1) is in fact CPNI. We decline, however, to speak to
MCI's other clarification requests as they regard issues relating to
carrier proprietary information in section 222(b) and enforcement
mechanisms to ensure carrier compliance with both sections 222(a) and
(b). As FNPRM in this docket seeks comment on those specific issues, we
would not want to prejudice resolution of those issues in this order.
G. Acts of Agents of Wireless Providers
153. Vanguard argues that sales agents of CMRS providers are not
subject to Commission rules, and that CMRS providers should not be held
responsible for the use of CPNI independently obtained by agents
because it would be difficult or impossible for CMRS providers to
enforce these obligations on agents.
154. We find that telecommunications service providers will be
responsible for the actions of their agents to comply with our CPNI
rules to the extent that telecommunications service providers share
CPNI with their agents. Moreover, telecommunications service providers
will be responsible for the actions of agents with respect to the use
of CPNI acquired by their agents. It is well established that
principals are responsible for the actions of their agents. In the
absence of such a rule, the important consumer protections enacted by
Congress in section 222 may be vitiated by the actions of agents.
155. We believe that telecommunications service providers can meet
these requirements through the private contract arrangements they have
with their agents. Carriers would normally have negotiating leverage to
enforce this requirement in the case of agents who serve more than one
carrier, since all carriers would be required to enforce the same
rules. To the extent that it may be shown that some carriers would not
be able to enforce these requirements, the Commission will address the
exceptions on a case-by-case basis.
H. Information Known to Employees
156. Section 222(f)(1)(A) defines CPNI, in part, as including
information ``that is made available to the carrier by the customer
solely by virtue of the carrier-customer relationship.'' We reject
Comcast's argument that, based upon this definition, CPNI should not
include ``institutional knowledge'' of the attributes of a particular
customer's account gained by a carrier's employee from his or her work
on the customer's account over the years if the employee does not
actually access the customer's record, and U S WEST's argument that so
long as an employee does not use a customer's record containing that
customer's CPNI, the employee has not violated section 222. We are not
persuaded that section 222(f)(1)(A) implies an exception based on
whether the information acquired as part of the carrier-customer
relationship is reduced to writing or is kept in the memory of a
carrier representative. Thus, if a customer tells a carrier's employee
information that otherwise fits the definition of CPNI provided in
section 222(f)(1)(A), then that information is CPNI, no matter how the
information is retained by the carrier.
[[Page 53260]]
I. Use of CPNI Under Section 222(d)(3) During Inbound Calls
157. Several carriers request that the Commission clarify the
requirements for obtaining customer approval under section 222(d)(3).
This section states that ``[n]othing in [section 222] prohibits a
telecommunications carrier from using, disclosing, or permitting access
to customer proprietary network information obtained from its
customers, either directly or indirectly through its agents . . . to
provide any inbound telemarketing, referral, or administrative services
to the customer for the duration of the call, if such call was
initiated by the customer and the customer approves of the use of such
information to provide such service.
158. We agree that the detailed notification outlined in section
64.2007(f) of our rules is not necessary prior to soliciting a
customer's approval to use his or her CPNI for the duration of an
inbound call. It is unduly burdensome to require carriers to comply
with the rule in light of the limited coverage of section 222(d)(3).
Moreover, the rule reflects a discussion in the CPNI Order of the
content of the general notification requirements under section
222(c)(1), and not those required for section 222(d)(3). Accordingly,
we clarify that section 64.2007(f) does not apply to solicitations for
customer approval under section 222(d)(3).
159. We deny, however, TDS's request that we reconsider our prior
conclusion that section 222(d)(3) requires an affirmative customer
approval. We previously stated in the CPNI Order that section 222(d)(3)
``contemplates oral approval.'' We conclude that a plain reading of the
statute contradicts TDS's conclusion: If Congress meant consent to be
inferred from the mere fact that the customer initiated the call, it
would not have required that the customer both initiate the call and
``approve[] of the use of such information to provide such service.''
We deny TDS's request for reconsideration for this reason and because
TDS has not presented any new arguments or facts that the Commission
did not consider in the CPNI Order with regard to this issue.
160. Finally, pursuant to GTE's request, we clarify that carriers
need not maintain records of notice and approval of carrier use of CPNI
during inbound calls under section 222(d)(3). Section 64.2007(e) of the
Commission's rules requires that carriers maintain customer
notification and approval records for one year. Notifications and
approvals under section 222(c)(1) and 222(d)(3), however, are markedly
different in scope. Notifications and approvals under section 222(c)(1)
are valid until revoked or limited by the customer, whereas
notifications and approvals for inbound calls pursuant to section
222(d)(3) are only valid for the duration of each call. Therefore,
unlike the retention of records of notifications and approvals under
section 222(c)(1), which we previously concluded would facilitate the
disposition of individual complaint proceedings if the sufficiency of a
customer's notification or approval is challenged at some later time,
requiring the retention of records of section 222(d)(3) notifications
and approvals would provide little evidentiary value because the
notification and customer's authorization to use CPNI automatically
evaporate upon completion of the call. We do not find any advantage to
requiring carriers to retain such records for purposes of section
222(d)(3). As such, we conclude that such a requirement would place an
unnecessary burden on carriers.
X. Procedural Issues
161. As required by the Regulatory Flexibility Act (RFA), an
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the
FNPRM. The Commission sought written public comment on the proposals in
the FNPRM, including comment on the IRFA. This present Final Regulatory
Flexibility Analysis (FRFA) conforms to the RFA.
I. Need for and Objectives of This Order on Reconsideration and the
Rules Adopted Herein
162. In the Order on Reconsideration, the Commission reconsiders
the rules promulgated in the CPNI Order in light of an expanded record
to better balance customer privacy concerns with those of customer
convenience with the effect of minimizing the impact of our
requirements on all carriers, including small and rural carriers. We
have amended our rules relating to flagging and audit trails for all
carriers, which will have a beneficial impact on small carriers.
Additionally, we modify our rules to permit all carriers to use CPNI to
market CPE to their customers, without express approval. We also find
that customers give implied consent to use CPNI to CMRS carriers for
the purpose of marketing all information services, but only give
implied consent to wireline carriers for certain information services.
We further modify our rules to allow carriers to use CPNI to regain
customers who have switched to another carrier.
II. Summary of Significant Issues Raised by Public Comments in Response
to the FRFA
163. As discussed in Section V, a number of small carriers or their
advocates present evidence that the safeguard requirements of the CPNI
rules are particularly burdensome for small and rural carriers. We
recognize, in light of the new evidence presented to the Commission,
that the flagging and audit trail requirements promulgated in the CPNI
Order might have a disparate impact on rural and small carriers. Our
modification of the flagging and audit trail requirements in this
order, however, effectively moots the requests we received from the
parties seeking special treatment for small and rural carriers with
respect to these requirements. Moreover, the restrictions lifted on the
marketing of CPE and information services will lessen the impact of
compliance with our rules for small and rural carriers, generally, and
enable these carriers to more efficiently use their marketing
resources.
III. Description and Estimates of the Number of Small Entities Affected
by the First Report and Order
164. 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 actions taken in this Order on Reconsideration. 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 SBA has defined a small
business for Standard Industrial Classification (SIC) categories 4812
(Radiotelephone Communications) and 4813 (Telephone Communications,
Except Radiotelephone) to be small entities when they have no more than
1,500 employees. We first discuss generally the total number of small
telephone companies falling within both of those SIC categories. Then,
we discuss the number of small businesses within the two subcategories,
and attempt to refine further those estimates to correspond with the
categories of telephone companies that are commonly used under our
rules.
[[Page 53261]]
165. Although affected ILECs may have no more than 1,500 employees,
we do not believe that such entities should be considered small
entities within the meaning of the RFA because they either are dominant
in their field of operations or are not independently owned and
operated, and are therefore by definition not ``small entities'' or
``small business concerns'' under the RFA. Accordingly, our use of the
terms ``small entities'' and ``small businesses'' does not encompass
small ILECs. Out of an abundance of caution, however, for regulatory
flexibility analysis purposes, we will separately consider small ILECs
within this analysis and use the term ``small ILECs'' to refer to any
ILECs that arguably might be defined by SBA as ``small business
concerns.''
166. Total number of telephone companies affected. The United
States Bureau of the Census (the Census Bureau) reports that at the end
of 1992, there were 3,497 firms engaged in providing telephone
services, as defined therein, for at least one year. This number
contains a variety of different categories of carriers, including local
exchange carriers, interexchange carriers, competitive access
providers, cellular carriers, mobile service carriers, operator service
providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. It seems certain that some of those 3,497
telephone service firms may not qualify as small entities because they
are not ``independently owned and operated.'' For example, a PCS
provider that is affiliated with an interexchange carrier having more
than 1,500 employees would not meet the definition of a small business.
It seems reasonable to conclude, therefore, that fewer than 3,497
telephone service firms are either small entities or small incumbent
LECs that may be affected by this order.
167. Wireline carriers and service providers. The SBA has developed
a definition of small entities for telephone communications companies
other than radiotelephone (wireless) companies. The Census Bureau
reports there were 2,321 such telephone companies in operation for at
least one year at the end of 1992. According to the SBA's definition, a
small business telephone company other than a radiotelephone company is
one employing fewer than 1,500 persons. All but 26 of the 2,321 non-
radiotelephone companies listed by the Census Bureau were reported to
have fewer than 1,000 employees. Thus, even if all 26 of those
companies had more than 1,500 employees, there would still be 2,295
non-radiotelephone companies that might qualify as small entities or
small incumbent LECs. Although it seems certain that some of these
carriers are not independently owned and operated, we are unable at
this time to estimate with greater precision the number of wireline
carriers and service providers that would qualify as small business
concerns under the SBA's definition. Consequently, we estimate that
fewer than 2,295 small entity telephone communications companies other
than radiotelephone companies are small entities or small ILECs that
may be affected by this order.
168. Local exchange carriers. Neither the Commission nor the SBA
has developed a definition of small providers of local exchange
services. The closest applicable definition under the SBA's rules is
for telephone communications companies other than radiotelephone
(wireless) companies. The most reliable source of information regarding
the number of LECs nationwide of which we are aware appears to be the
data that we collect annually in connection with the Telecommunications
Relay Service (TRS). According to our most recent data, 1,371 companies
reported that they were engaged in the provision of local exchange
services. Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, or
are dominant we are unable at this time to estimate with greater
precision the number of LECs that would qualify as small business
concerns under the SBA's definition. Consequently, we estimate that
fewer than 1,371 small providers of local exchange service are small
entities or small ILECs that may be affected by this order.
169. Interexchange carriers. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
providers of interexchange services (IXCs). The closest applicable
definition under the SBA's rules is for telephone communications
companies other than radiotelephone (wireless) companies. The most
reliable source of information regarding the number of IXCs nationwide
of which we are aware appears to be the data that we collect annually
in connection with TRS. According to our most recent data, 143
companies reported that they were engaged in the provision of
interexchange services. Although it seems certain that some of these
carriers are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of IXCs that would qualify as small business
concerns under the SBA's definition. Consequently, we estimate that
there are fewer than 143 small entity IXCs that may be affected by this
order.
170. Competitive access providers. Neither the Commission nor the
SBA has developed a definition of small entities specifically
applicable to providers of competitive access services (CAPs). The
closest applicable definition under the SBA's rules is for telephone
communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of CAPs nationwide of which we are aware appears to be the data that we
collect annually in connection with the TRS. According to our most
recent data, 109 companies reported that they were engaged in the
provision of competitive access services. Although it seems certain
that some of these carriers are not independently owned and operated,
or have more than 1,500 employees, we are unable at this time to
estimate with greater precision the number of CAPs that would qualify
as small business concerns under the SBA's definition. Consequently, we
estimate that there are fewer than 109 small entity CAPs that may be
affected by this order.
171. Operator service providers. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
providers of operator services. The closest applicable definition under
the SBA's rules is for telephone communications companies other than
radiotelephone (wireless) companies. The most reliable source of
information regarding the number of operator service providers
nationwide of which we are aware appears to be the data that we collect
annually in connection with the TRS. According to our most recent data,
27 companies reported that they were engaged in the provision of
operator services. Although it seems certain that some of these
companies are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of operator service providers that would qualify
as small business concerns under the SBA's definition. Consequently, we
estimate that there are fewer than 27 small entity operator service
providers that may be affected by this order.
172. Pay telephone operators. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
pay telephone operators. The closest applicable definition under the
SBA's rules is for telephone communications companies
[[Page 53262]]
other than radiotelephone (wireless) companies. The most reliable
source of information regarding the number of pay telephone operators
nationwide of which we are aware appears to be the data that we collect
annually in connection with the TRS. According to our most recent data,
441 companies reported that they were engaged in the provision of pay
telephone services. Although it seems certain that some of these
carriers are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of pay telephone operators that would qualify as
small business concerns under the SBA's definition. Consequently, we
estimate that there are fewer than 441 small entity pay telephone
operators that may be affected by this order.
173. Wireless carriers. The SBA has developed a definition of small
entities for radiotelephone (wireless) companies. The Census Bureau
reports that there were 1,176 such companies in operation for at least
one year at the end of 1992. According to the SBA's definition, a small
business radiotelephone company is one employing no more than 1,500
persons. The Census Bureau also reported that 1,164 of those
radiotelephone companies had fewer than 1,000 employees. Thus, even if
all of the remaining 12 companies had more than 1,500 employees, there
would still be 1,164 radiotelephone companies that might qualify as
small entities if they are independently owned and operated. Although
it seems certain that some of these carriers are not independently
owned and operated, we are unable at this time to estimate with greater
precision the number of radiotelephone carriers and service providers
that would qualify as small business concerns under the SBA's
definition. Consequently, we estimate that there are fewer than 1,164
small entity radiotelephone companies that may be affected by this
order.
174. Cellular service carriers. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
providers of cellular services. The closest applicable definition under
the SBA's rules is for telephone communications companies other than
radiotelephone (wireless) companies. The most reliable source of
information regarding the number of cellular service carriers
nationwide of which we are aware appears to be the data that we collect
annually in connection with the TRS. According to our most recent data,
804 companies reported that they were engaged in the provision of
cellular services. Although it seems certain that some of these
carriers are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of cellular service carriers that would qualify as
small business concerns under the SBA's definition. Consequently, we
estimate that there are fewer than 804 small entity cellular service
carriers that may be affected by this order.
175. Mobile service carriers. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
mobile service carriers, such as paging companies. The closest
applicable definition under the SBA's rules is for telephone
communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of mobile service carriers nationwide of which we are aware appears to
be the data that we collect annually in connection with the TRS.
According to our most recent data, 172 companies reported that they
were engaged in the provision of mobile services. Although it seems
certain that some of these carriers are not independently owned and
operated, or have more than 1,500 employees, we are unable at this time
to estimate with greater precision the number of mobile service
carriers that would qualify under the SBA's definition. Consequently,
we estimate that there are fewer than 172 small entity mobile service
carriers that may be affected by this order.
176. Broadband PCS licensees. The broadband PCS spectrum is divided
into six frequency blocks designated A through F, and the Commission
has held auctions for each block. The Commission has defined small
entity in the auctions for Blocks C and F as an entity that has average
gross revenues of less than $40 million in the three previous calendar
years. For Block F, an additional classification for ``very small
business'' was added and is defined as an entity that, together with
its affiliates, has average gross revenue of not more than $15 million
for the preceding three calendar years. These regulations defining
small entity in the context of broadband PCS auctions have been
approved by the SBA. No small business within the SBA-approved
definition bid successfully for licenses in Blocks A and B. There were
90 winning bidders that qualified as small entities in the Block C
auctions. A total of 93 small and very small businesses won
approximately 40 percent of the 1,479 licenses for Blocks D, E, and F.
However, licenses for Blocks C through F have not been awarded fully;
therefore, there are few, if any, small businesses currently providing
PCS services. Based on this information, we conclude that the number of
small broadband PCS licensees will include the 90 winning bidders and
the 93 qualifying bidders in the D, E, and F Blocks, for a total of 183
small PCS providers as defined by the SBA and the Commission's auction
rules.
177. Narrowband PCS licensees. The Commission does not know how
many narrowband PCS licenses will be granted or auctioned, as it has
not yet determined the size or number of such licenses. Two auctions of
narrowband PCS licenses have been conducted for a total of 41 licenses,
out of which 11 were obtained by small businesses owned by members of
minority groups and/or women. Small businesses were defined as those
with average gross revenues for the prior three fiscal years of $40
million or less. For purposes of this FRFA, the Commission is utilizing
the SBA definition applicable to radiotelephone companies, i.e., an
entity employing no more than 1,500 persons. Not all of the narrowband
PCS licenses have yet been awarded. There is therefore no basis to
determine the number of licenses that will be awarded to small entities
in future auctions. Given the facts that nearly all radiotelephone
companies have fewer than 1,000 or fewer employees and that no reliable
estimate of the number of prospective narrowband PCS licensees can be
made, we assume, for purposes of the evaluations and conclusions in
this FRFA, that all the remaining narrowband PCS licenses will be
awarded to small entities.
178. SMR licensees. Pursuant to 47 CFR 90.814(b)(1), the Commission
has defined ``small entity'' in auctions for geographic area 800 MHz
and 900 MHz SMR licenses as a firm that had average annual gross
revenues of less than $15 million in the three previous calendar years.
This definition of a ``small entity'' in the context of 800 MHz and 900
MHz SMR has been approved by the SBA. The rules adopted in this order
may apply to SMR providers in the 800 MHz and 900 MHz bands that either
hold geographic area licenses or have obtained extended implementation
authorizations. We do not know how many firms provide 800 MHz or 900
MHz geographic area SMR service pursuant to extended implementation
authorizations, nor how many of these providers have annual revenues of
less than $15 million. We assume, for purposes of this FRFA, that all
of the extended implementation
[[Page 53263]]
authorizations may be held by small entities, which may be affected by
this order.
179. The Commission recently held auctions for geographic area
licenses in the 900 MHz SMR band. There were 60 winning bidders who
qualified as small entities in the 900 MHz auction. Based on this
information, we conclude that the number of geographic area SMR
licensees affected by the rule adopted in this order includes these 60
small entities. No auctions have been held for 800 MHz geographic area
SMR licenses. Thus, no small entities currently hold these licenses. A
total of 525 licenses will be awarded for the upper 200 channels in the
800 MHz geographic area SMR auction. The Commission, however, has not
yet determined how many licenses will be awarded for the lower 230
channels in the 800 MHz geographic area SMR auction. Moreover, there is
no basis on which to estimate how many small entities will win these
licenses. Given that nearly all radiotelephone companies have fewer
than 1,000 employees and that no reliable estimate of the number of
prospective 800 MHz licensees can be made, we assume, for purposes of
this FRFA, that all of the licenses may be awarded to small entities
who, thus, may be affected by this order.
180. Resellers. Neither the Commission nor the SBA has developed a
definition of small entities specifically applicable to resellers. The
closest applicable definition under the SBA's rules is for all
telephone communications companies. The most reliable source of
information regarding the number of resellers nationwide of which we
are aware appears to be the data that we collect annually in connection
with the TRS. According to our most recent data, 339 companies reported
that they were engaged in the resale of telephone services. Although it
seems certain that some of these carriers are not independently owned
and operated, or have more than 1,500 employees, we are unable at this
time to estimate with greater precision the number of resellers that
would qualify as small business concerns under the SBA's definition.
Consequently, we estimate that there are fewer than 339 small entity
resellers that may be affected by this order.
IV. Steps Taken To Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered
181. We recognize, in light of the new evidence presented to the
Commission, that the flagging and audit trail requirements promulgated
in the CPNI Order might have a disparate impact on rural and small
carriers. We have amended the flagging and audit trail requirements,
and as more fully discussed in Section V, the amended rules leave it to
the carrier's discretion to determine what sort of system is best for
their circumstances. Thus, carriers whose records are not presently
maintained in electronic form are not required to implement electronic
systems if they do not wish to do so. We believe this modification of
our rules will significantly minimize any adverse economic impact on
small entities that our original rules may have had.
V. Report to Congress
182. The Commission shall send a copy of this Supplemental Final
Regulatory Flexibility Analysis, along with this Order on
Reconsideration, in a report to Congress pursuant to the Small business
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). A
copy of this SFRFA will also be published in the Federal Register.
B. Supplemental Final Paperwork Reduction Analysis
183. The CPNI Order from which this Order on Reconsideration issues
proposed changes to the Commission's information collection
requirements. As required by the Paperwork Reduction Act of 1995,
Public Law 104-13, the CPNI Order invited the general public and the
Office of Management and Budget (OMB) to comment on the proposed
changes. On June 23, 1998, OMB approved all of the proposed changes to
our information collection requirements in accordance with the PRA.
184. This Order on Reconsideration amends our rules to merely state
that telecommunications carriers must implement a system by which the
status of a customer's CPNI approval can be clearly established prior
to the use of CPNI, and must maintain an audit mechanism that tracks
CPNI usage. We have removed the requirements of Sec. 64.2009 (a) and
(c) that carriers must develop and implement software that flags a
customer's CPNI approval status and must maintain an electronic audit
mechanism that tracks access to customer accounts. These amendments are
new collections of information within the meaning of the PRA.
Implementation of these requirements is subject to approval by the OMB,
as prescribed by the PRA.
XI. Ordering Clauses
185. Accordingly, it is ordered that, pursuant to Sections 1, 4(i),
10, 222 and 303(r) of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154(i), 160, 222 and 303(r), the Order is hereby adopted.
The rules established by the Order contain information collection
requirements that have not yet been approved by the Office of
Management and budget (OMB). The Commission will publish a document in
the Federal Register announcing the effective date of these rules. It
is further ordered that, pursuant to sections 1, 4(i) and 222 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and 222,
the Petitions for Reconsideration, as listed in the Appendix to the
Order, are granted to the extent indicated herein and otherwise denied.
186. It is further ordered that, pursuant to sections 1, 4(i), 10
and 222 of the Communications Act of 1934, as amended, 47 U.S.C. 151,
154(i), 160 and 222, the Petitions for Forbearance, as listed in
Appendix A hereto, are denied.
187. It is further ordered that 64.2005(b)(3) of part 64 of the
Commission's rules, 47 CFR 64.2005(b)(3), is removed.
188. It is further ordered that 64.2007(f)(4) of part 64 of the
Commission's rules, 47 CFR 64.2007(f)(4), is removed.
189. It is further ordered, pursuant to sections 4(i) and 303(r) of
the Communications Act of 1934, as amended, 47 U.S.C. 154(i) and
303(r), that we shall not seek enforcement against carriers regarding
compliance with 64.2009(a) and (c) of part 64 of the Commission's
rules, 47 CFR 64.2009(a) and (c), as amended herein, until eight months
after the release of this Order.
190. It is further ordered that part 64 of the Commission's rules,
47 CFR is amended. These rules contain information collection
requirements that have not yet been approved by OMB. The Commission
will publish a document in the Federal Register announcing the
effective date of those sections. It is further ordered that the
Commission's Office of Public Affairs, Reference Operations Division,
shall send a copy of this Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
List of Subjects in 47 CFR Part 64
Communications common carriers, Reporting and recordkeeping
requirements, Telephone.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Appendix--Petition for Forbearance
Note: This Appendix will not appear in the Code of Federal
Regulations.
[[Page 53264]]
Petitions for Reconsideration Filed May 26, 1998
ALLTEL Communications, Inc. (ALLTEL)
AT&T Corp.
BellSouth Corporation
Comcast Cellular Communications, Inc.
Competitive Telecommunications Association (CompTel)
Independent Alliance (Alliance)
LCI International Telecom Corp.
MCI Telecommunications Corporation
Metrocall, Inc. (Metrocall)
Omnipoint Communications, Inc
Paging Network, Inc. (PageNet)
Personal Communications Industry Association (PCIA)
RAM Technologies, Inc. (RAM)
SBC Communications Inc.
Sprint Corporation
TDS Telecommunications Corporation
United States Telephone Association (USTA)
Vanguard Cellular Systems, Inc. (Vanguard)
Petitions for Forbearance
Personal Communications Industry Association (PCIA)
Petitions for Reconsideration/Forbearance
360 deg. Communications Company
Ameritech
Bell Atlantic Telephone Companies (Bell Atlantic)
Cellular Telecommunications Industry Association
CommNet Cellular Inc.
GTE Service Corporation (GTE)
National Telephone Cooperative Association (NTCA)
Paging Network, Inc.
PrimeCo Personal Communications, L.P.
United States Telephone Association
Rule Changes
For the reasons discussed in the preamble, 47 CFR Part 64 is
amended as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
1. The authority citation for part 64 continues to read as follows:
Authority: 47 U.S.C. 10, 201, 218, 226, 228, 332, unless
otherwise noted.
Sec. 64.2005 [Amended]
2. In Sec. 64.2005, paragraph(b)(1) is revised, paragraph (b)(3) is
removed, and paragraph (d) is added to read as follows:
* * * * *
(b) * * *
(1) A wireless provider may use, disclose, or permit access to CPNI
derived from its provision of CMRS, without customer approval, for the
provision of CPE and information service(s). A wireline carrier may
use, disclose or permit access to CPNI derived from its provision of
local exchange service or interexchange service, without customer
approval, for the provision of CPE and call answering, voice mail or
messaging, voice storage and retrieval services, fax store and forward,
and protocol conversions.
* * * * *
(d) A telecommunications carrier may use, disclose, or permit
access to CPNI to protect the rights or property of the carrier, or to
protect users of those services and other carriers from fraudulent,
abusive, or unlawful use of, or subscription to, such services.
Sec. 64.2007 [Amended]
3. In Sec. 64.2007 remove paragraph (f)(4).
Sec. 64.2009 [Amended]
4. In Sec. 64.2009, paragraphs (a), (c) and (e) are revised to read
as follows:
(a) Telecommunications carriers must implement a system by which
the status of a customer's CPNI approval can be clearly established
prior to the use of CPNI.
* * * * *
(c) All carriers shall maintain a record, electronically or in some
other manner, of their sales and marketing campaigns that use CPNI.
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