The Need to Promote Competition and Efficient Use of Spectrum for Radio Common Carrier Services

FCC 87-163

Federal Communications Commission Record

2 FCC Red Vol. 10

Before the

Federal Communications Commission

Washington, D.C. 20554

Report No. CL-379

In the Matter of

The Need to Promote Competition

and Efficient Use of Spectrum for

Radio Common Carrier Services

DECLARATORY RULING

Adopted: April 30, 1987;

Released: May 18, 1987

By the Commission:

1. On March 25, 1986, Jubon Engineering. Inc. (Jubon)

filed a Petition for Partial Reconsideration or, in the

alternative, a Petition for Declaratory Ruling regarding

The Need to Promote Competition and Efficient Use of

Spectrum for Radio Common Carriers, Memorandum

Opinion and Order (Interconnection Order). '

Responsive

pleadings

were

filed

by

BellSouth

Corporation

(BellSouth), the Cellular Telecommunications Division of

Telocator Network of America (Telocator/Cellular), and

the New York Telephone Company and New England

Telephone and Telegraph Company (NYNEX).^ In addi

tion, a Petition for Clarification of the Interconnection

Order, as well as a letter updating the Petition, was filed

by the Radio Common Carrier Division of Telocator

Network of America (Telocator/RCC).

2. Subsequently, on October 6, 1986, Telocator/Cellular

filed its Cellular Interconnection Report and Request for

Further Relief (Cellular Report). The Cellular Report was

filed at the request of the Commission in the Interconnec

tion Order. Because the Cellular Report raised issues rel

evant to the Interconnection Order, we decided to consider

the report in this proceeding.' We then offered an op

portunity for the public to comment on the Report.^

Comments were filed by McCaw, BellSouth Corporation

(BellSouth), Allentown Cellular Telephone Company,

Harrisburg Cellular Telephone Company and Northeast

Pennsylvania Cellular Telephone Company (collectively.

Cellular One), NYNEX, Radiofone, Inc

e Interconnection Order, we decided to consider

the report in this proceeding.' We then offered an op

portunity for the public to comment on the Report.^

Comments were filed by McCaw, BellSouth Corporation

(BellSouth), Allentown Cellular Telephone Company,

Harrisburg Cellular Telephone Company and Northeast

Pennsylvania Cellular Telephone Company (collectively.

Cellular One), NYNEX, Radiofone, Inc. (Radiofone),

Southwestern Bell Telephone Company (Southwestern

Bell), Illinois Bell Telephone Company, Indiana Bell

Telephone Company, Inc., Michigan Bell Telephone

Company, The Ohio Bell Telephone Company and Wis

consin Bell, Inc. (collectively, Ameritech), Continental

Telephone Company of Maine (Contel), First Cellular

Group, GTE Service Corporation (GTE), Houston Cel

lular Telephone Company, Dallas Metrocel Cellular Tele

phone Company, Cellular One of Austin, Cellular One of

San Antonio and Metro Mobile CTS of El Paso

(collectively, Texas Nonwireline Carriers), American Cel

lular Network Corp. (AMCELL), and NewVector Com

munications, Inc. (NewVector). Reply Comments were

filed by Bell Atlantic, McCaw, Leibowitz and Spencer,

Lin Cellular Communications Corporation, Cellular

Communications, Inc., Bell

of Pennsylvania and

Telocator/Cellular.'

BACKGROUND

3. In Cellular Communications Systems, CC Docket No.

79-318 (Cellular Report and Order), the Commission re

quired the Bell Operating Companies (BOCs) to furnish

interconnection to cellular systems upon terms "no less

favorable than those offered to the cellular systems of

affiliated entities or independent telephone companies."*

The Commission left it to the carriers themselves to

negotiate the particular interconnection arrangements.' In

the Interconnection Order, the Commission considered,

inter alia, a proposal by Telocator/RCC to establish an

"Interconnection Ombudsman" to monitor interconnec

tion developments among Public Mobile Service (PMS)

licensees and exchange telephone companies

dependent telephone companies."*

The Commission left it to the carriers themselves to

negotiate the particular interconnection arrangements.' In

the Interconnection Order, the Commission considered,

inter alia, a proposal by Telocator/RCC to establish an

"Interconnection Ombudsman" to monitor interconnec

tion developments among Public Mobile Service (PMS)

licensees and exchange telephone companies. The pro

posal was rejected as unnecessary because the evidence of

record did not "demonstrate any widespread BOC dis

regard of the Commission's interconnection requirements

or [suggest] that any BOC is not negotiating in good faith

to resolve remaining interconnection issues."*

4. In recognition of "developments that have taken

place in cellular interconnection since 1982," however,

the Commission set forth its Policy Statement on PMS

interconnection.' The Policy Statement first stated that

under the reasonable interconnection standard, a cellular

carrier "should be permitted to choose the. type of inter

connection, Type 2 or Type 1, and that a telephone

company should not refuse to provide the type of inter

connection requested."'* Although we acknowledged that

Type 2 interconnection may not always be feasible, and

hence not required as "reasonable interconnection," we

noted that this type of interconnection is feasible as a

general matter. We then stated that because the terms and

conditions of interconnection depend upon numerous

local factors, "we must leave the terms and conditions to

be negotiated in good faith between the cellular operator

and the telephone company.""

5. The Policy Statement also provided that telephone

companies may not impose recurring charges solely for

the cellular oj>erator's use of NXX codes and telephone

numbers." A "reasonable initial connection charge" was

allowed to compensate the telephone company for the

costs of assigning new numbers

onditions to

be negotiated in good faith between the cellular operator

and the telephone company.""

5. The Policy Statement also provided that telephone

companies may not impose recurring charges solely for

the cellular oj>erator's use of NXX codes and telephone

numbers." A "reasonable initial connection charge" was

allowed to compensate the telephone company for the

costs of assigning new numbers. However, we stated that

because cellular companies are co-carriers in the local

exchange network, they are "entitled to reasonable accom

modation of their numbering requirements on the same

basis as an independent wireline telephone company.""

The Commission then added at footnote two:

|W]e recognize that after several years, if the cellular

carrier does not utilize all 10,000 numbers in the

NXX block and there is a shortage of telephone

numbers for landline subscribers, it may be neces

sary for the telephone company to regain access to

unused numbers for its landline customers.'^

6. Finally, the Commission stated that because cellular

carriers are "generally engaged in the provision of local,

intrastate, exchange telephone service," compensation ar

rangements among cellular carriers and local telephone

companies are largely a matter of state, not federal, con

cern." We therefore expressed no view as to the permis-

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Federal Communications Commission Record

FCC 87-163

sibility of particular compensation arrangments, such as

the agreed "costs of interconnection." We then explained,

at footnote three, that

some cellular carriers provide their customers with

a service whereby a call to a subscriber's local

cellular number will be routed to them over inter

state facilities when the customer is "roaming" in a

cellular system in another state. In this case, the

cellular carrier is providing not local exchange ser

vice but interstate, interexchange service. In this and

other situations ... the local telephone company

providing interconnection . .

rs with

a service whereby a call to a subscriber's local

cellular number will be routed to them over inter

state facilities when the customer is "roaming" in a

cellular system in another state. In this case, the

cellular carrier is providing not local exchange ser

vice but interstate, interexchange service. In this and

other situations ... the local telephone company

providing interconnection . . . may expect to be

paid the appropriate access charge.'^

7. Telocator's Cellular Report asserts that the cellular

operators are experiencing extensive problems in negotiat

ing mutually acceptable interconnection arrangements."

Telocator's findings can be summarized as follows: (1) the

landline companies have not accepted the co-carrier status

of cellular companies and, as a result, do not recognize

their obligation to negotiate cost-based mutual compensa

tion arrangements for originating and terminating traffic;

(2) many landline carriers do not view the Policy State

ment as legally binding upon them; (3) many landline

companies continue to impose recurring charges for NXX

codes, contrary to the Policy Statement, and impose excess

charges for the non-recurring functions; and (4) even

where landline carriers recognize their obligations in this

area, they have impeded competition by delaying the

provision of interconnection services, imposing unreason

able technical restrictions, and charging unjustifiably high

rates. In essence, Telocator accuses the wireline carriers of

refusing to negotiate in good faith.

DISCUSSION

8. In our Policy Statement we attempted to establish a

basic framework to guide local exchange carriers and

cellular operators in their mutual negotiations regarding

interconnection of cellular facilities to the landline tele

phone network. As evidenced by the petitions filed in

connection with this Policy Statement and the conclusions

of the Telocator Cellular Report, ouf efforts thus far only

have been partially successful

e attempted to establish a

basic framework to guide local exchange carriers and

cellular operators in their mutual negotiations regarding

interconnection of cellular facilities to the landline tele

phone network. As evidenced by the petitions filed in

connection with this Policy Statement and the conclusions

of the Telocator Cellular Report, ouf efforts thus far only

have been partially successful. This is due in part to the

technical and economic complexities of this subject mat

ter, the intricacies of a bifurcated jurisdictional scheme in

regulating these services, and the emotionally-charged at

mosphere that some parties are bringing to the negotia

tion table. As a result, we find a need to analyze the issues

raised and refine our basic framework. We recognize,

however, that this is an iterative process that may necessi

tate further policy guidance as the issues become more

focused, as well as Commission intervention in specific

problem areas brought to our attention through the com

plaint process.

9. In this regard, the Cellular Report and many com

ments filed in response to the Report raised allegations

concerning the interconnection negotiations of particular

landline telephone companies and cellular operators.

These allegations go beyond the scope of this proceeding,

which is to clarify the policies established in the Intercon

nection Order. Therefore, we will not address the allega

tions in here but will review them if raised in the

complaint process of Section 208 of the Act.'®

10. Jurisdiction. Policy statements concerning cellular

interconnection matters are necessarily predicated on an

implicit or explicit finding of jurisdiction. To date, our

policy statements have encouraged landline carriers to

provide interconnection to cellular carriers under reason

able terms and conditions. Our authority to promulgate

an interconnection policy has been based on our general

statutory authority to create the cellular service

cellular

interconnection matters are necessarily predicated on an

implicit or explicit finding of jurisdiction. To date, our

policy statements have encouraged landline carriers to

provide interconnection to cellular carriers under reason

able terms and conditions. Our authority to promulgate

an interconnection policy has been based on our general

statutory authority to create the cellular service. The

issues raised in the petitions now before us, as well as in

the the Cellular Report and the comments filed in re

sponse to these documents, require us to resolve in a

more specific manner the juri^ictional issues that are

presented when examining interconnection.

11. Furthermore, after the release of the Interconnection

Order, the Supreme Court rendered its decision in Louisi

ana Public Service Commission v. FCC (Louisiana), 106 S.

Ct. 1890 (1986). In light of this case. Southwestern Bell,

Bellsouth, GTE, NYNEX, Bell of PA, and Ameritech,

question the Commission's authority to regulate the terms

and conditions of cellular interconnection. Specifically,

they claim the Commission is prohibited by Section 2(b)

of the Act from regulating BOC charges to cellular oper

ators for certain switching services. In its Motion to

Dismiss in Contel, supra. Southwestern Bell also argues

that under Section 2(b), the Commission may not regu

late the allocation of NXX codes to cellular carriers.

Southwestern Bell also argues that the Commission's re

quirement that the terms and conditions of cellular inter

connection must be negotiated in "good faith" does not

extend to "intrastate communications services." Telocator

replies that federal jurisdiction may be asserted over all

aspects of cellular interconnection. Under its construction

of the Act, Section 2(b) does not apply to Commission

actions taken under Sections 201 through 205 of the Act,

which govern cellular interconnection.

12

cellular inter

connection must be negotiated in "good faith" does not

extend to "intrastate communications services." Telocator

replies that federal jurisdiction may be asserted over all

aspects of cellular interconnection. Under its construction

of the Act, Section 2(b) does not apply to Commission

actions taken under Sections 201 through 205 of the Act,

which govern cellular interconnection.

12. Based on our review of the jurisdictional issues, we

find that the physical plant used in interconnection of

cellular carriers to landline carriers is within our plenary

jurisdiction because the identical plant serves both intra

state and interstate cellular services. The charges for inter

connection, however, are

severable

between

the

jurisdictions because the underlying costs of interconnec

tion are segregable. Charges for switching of intercon

nected calls are also subject to dual jurisdiction. Further,

we find that the Commission has plenary jurisdiction over

NXX codes, as well as jurisdiction to require interconnec

tion negotiations to be conducted "in good faith."

13. The Communications Act creates a dual regulatory

structure for interstate and intrastate wire communica

tions. Section 2(a) of the Act confers upon the Commis

sion jurisdiction

over "all

interstate and foreign

communication by wire or radio . . . which originates

and/or is received within the United States . . . and to the

licensing and regulating of all radio stations . . . ." 47

U.S.C. Section 152(a). In furtherance of that jurisdictional

delegation. Sections 201 - 205 provide the general terms

and conditions under which common carriers, who are

engaged in interstate service, must furnish their service.

In addition, these sections provide the Commission with

the authority to enforce these provisions.

14

and to the

licensing and regulating of all radio stations . . . ." 47

U.S.C. Section 152(a). In furtherance of that jurisdictional

delegation. Sections 201 - 205 provide the general terms

and conditions under which common carriers, who are

engaged in interstate service, must furnish their service.

In addition, these sections provide the Commission with

the authority to enforce these provisions.

14. Section 2(b) of the Act, however, limits the Com

mission's jurisdiction "with respect to (1) charges, clas

sifications, practices, services, facilities, or regulations for

or in connection with intrastate communications service

by wire or radio of any carrier, or (2) any carrier engaged

in interstate or foreign communication solely through

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Federal Communications Commission Record

2 FCC Red Vol. 10

physical connection with the facilities of another carrier

not directly or indirectly controlling or controlled by, or

under direct or indirect common control with such car

rier ..." 47 U.S.C. Section 152(b).

15. Nevertheless, the jurisdictional demarcation is often

less clear than a reading of the statute would suggest. In

those instances where it is possible to separate the inter

state and intrastate comjjonents and the Act has not

provided otherwise for Commission oversight, such as

through separations, the Commission has no authority to

preempt state regulation. On the other hand, when inter

state and intrastate services are inseparable and state regu

lations make it impracticable for the Commission to

exercise its statutory powers, preemption may be war

ranted."

16. Although historically jointly used physical plant is

regarded as inseparable,^® the costs and rates relating to

the plant in accordance with Sections 201 to 205 are

usually separable. As explained in NCUC /,^' at n

inter

state and intrastate services are inseparable and state regu

lations make it impracticable for the Commission to

exercise its statutory powers, preemption may be war

ranted."

16. Although historically jointly used physical plant is

regarded as inseparable,^® the costs and rates relating to

the plant in accordance with Sections 201 to 205 are

usually separable. As explained in NCUC /,^' at n. 6,

ratemaking typifies those activities of the telephone

industry which lend themselves to practical separa

tion of the local from the interstate in such a way

that local regulation of one does not interfere with

national regulation of the other.

In Louisiana, supra, the Court held that the Commis

sion may not pre-empt state regulation of depreciation

charges for telephone plant and equipment because "it is

certainly possible to apply different rates and methods of

depreciation to plant once the correct allocation between

interstate and intrastate use has been made," and because

the section of the Act relied upon by the Commission was

not "so unambiguous or straight forward" as to override

the command of Section 2(b).

In general, the Court

believed that "costs such as taxes and operating expenses,"

which may be divided under the separations process of

Section 410(c) of the Act,^' warrant "distinct spheres of

regulation."^' Similarly, in California v. FCC, 567 F.2d 84,

86 (D.C. Cir. 1977), even though the Commission asserted

jurisdiction over the FX and CCSA physical plant, it

properly "refused to assert jurisdiction over those purely

local services that could be practicably separated from

interstate services supplied by the same facilities."^' As a

result, the interstate charges for common carrier services

are governed by the Commission while the intrastate

charges are regulated by the states.^'

17. In light of the above, we find that the Commission

has plenary jurisdiction, based on Sections 2(a) and 201

of the Act, over the physical plant used in the intercon

nection of cellular carriers

te services supplied by the same facilities."^' As a

result, the interstate charges for common carrier services

are governed by the Commission while the intrastate

charges are regulated by the states.^'

17. In light of the above, we find that the Commission

has plenary jurisdiction, based on Sections 2(a) and 201

of the Act, over the physical plant used in the intercon

nection of cellular carriers. Section 201 provides the

Commission with express authority over "physical con

nections with other carriers." Cellular physical plant is

inseparable and thus Section 2(b) does not limit our

juri^iction in this area. Like telephone terminal equip

ment, the interconnected trunk lines and equipment of a

cellular system are used to make both interstate and

intrastate calls. Moreover, it would not be feasible to

require one set of trunk lines and equipment for intra

state calls and another for interstate calls. We further

believe that any state regulation in this area would sub

stantially affect the development of interstate communica

tions; without a nationwide policy governing the

reasonable interconnection of cellular systems, many of

those systems may be barred from the interstate public

telephone network. A nationwide policy will also help

prevent increased costs and diminished signal quality

among cellular systems, as we will explain below.

18. Although we find that we have plenary jurisdiction

over the physical interconnections between cellular and

landline carriers, the actual costs and charges for the

physical interconnections" of cellular systems are suited

to dual intrastate and interstate regulation. "Charges ap

plicable" to cellular interconnection are separable

signal quality

among cellular systems, as we will explain below.

18. Although we find that we have plenary jurisdiction

over the physical interconnections between cellular and

landline carriers, the actual costs and charges for the

physical interconnections" of cellular systems are suited

to dual intrastate and interstate regulation. "Charges ap

plicable" to cellular interconnection are separable. As

with telephone plant depreciation costs, it is possible to

divide the actual interstate and intrastate costs of cellular

interconnection in a manner similar to the separations

process of Section 410(c), as implemented in Part 67 of

the rules for landline telephone companies.^® Although

we are not mandating a jurisdictional separations process

for the cellular service unless it becomes necessary to do

so, we emphasize that our jurisdiction is limited to the

actual interstate cost of interconnection and ensuring that

interconnection is provided for interstate service. We

recognize that at some point, the intrastate component of

charges for physical interconnection, as well as other

charges to cellular carriers, may be so high as to effec

tively preclude interconnection. This would "negate" the

federal decision to permit interconnection,'® thus war

ranting our preemption of some aspects of particular

intrastate charges. However, this circumstance has not yet

occurred."

19. The Commission also has plenary jurisdiction over

the allocation of NXX codes." The codes are an indispen

sable part of the "facilities and regulations for operating

(the) through routes" of physical interconnection, as con

templated by Section 201. Like cellular physical plant, the

codes are used to make both intrastate and interstate calls.

It may be not only infeasible but impossible as a matter of

engineering to separate one set of NXX codes for intra

state calls and one set for interstate calls

n

sable part of the "facilities and regulations for operating

(the) through routes" of physical interconnection, as con

templated by Section 201. Like cellular physical plant, the

codes are used to make both intrastate and interstate calls.

It may be not only infeasible but impossible as a matter of

engineering to separate one set of NXX codes for intra

state calls and one set for interstate calls. The very pur

pose of the North American Numbering Plan (NANF),

which has established the codes as a national resource of

the United States and Canada, is to ensure the equitable

distribution of the codes nationwide without duplicating

codes and numbers. Furthermore, any state regulation of

this national resource could substantially affect interstate

communications by disrupting the uniformity of the

NANP. It follows that the Commission may regulate the

rights of cellular carriers to obtain and use NXX codes.

20. Although NXX codes are inseparable, the costs of

allocating the codes can be separated. Therefore, we will

regulate only the interstate portion of the costs and

charges for NXX codes. Also, the costs incurred for the

switching" of interconnected calls between telephone

companies and cellular carriers can be separated. Thus,

we will regulate only their interstate component, as dis

cussed above.

21. We further believe the Commission has plenary

jurisdiction, under Section 2(a), to require that the terms

and conditions of cellular interconnection must be negoti

ated in good faith. Section 201 makes it "the duty of every

common carrier ... to furnish [its services] upon reason

able request." Furthermore, Section 202 prohibits

"unreasonable discrimination" in the provision of inter

state common carrier services. We interpret these sections

as requiring common carriers to negotiate the provision

of their services in good faith. Contrary to the assertion of

Southwestern Bell, we find that the conduct of intercon

nection negotiations cannot be separated into interstate

and intrastate components

rmore, Section 202 prohibits

"unreasonable discrimination" in the provision of inter

state common carrier services. We interpret these sections

as requiring common carriers to negotiate the provision

of their services in good faith. Contrary to the assertion of

Southwestern Bell, we find that the conduct of intercon

nection negotiations cannot be separated into interstate

and intrastate components. Good faith cannot be quanti-

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FCC 87-163

fied and allocated according to relative interstate and

intrastate use. Furthermore, any state regulation which

permits departures from our good faith requirement

could severely affect interstate communications by pre

venting cellular carriers from obtaining interconnection

agreements and consequently excluding them from the

nationwide public telephone network.

22. Our authority to mandate good faith negotiations is

also derived from Sections 309(a) and 314 of the Act and

Section 11 of the Clayton Act, which require the Com

mission to remedy anticompetitive conduct.^ A carrier

involved in cellular interconnection negotiations may ex

hibit anticompetitive conduct simply by causing delays in

the negotiating process, as this would delay service to the

other party's subscribers and hence place the latter at a

competitive disadvantage to other local exchange carriers.

23. The Policy Statement and RCCs: The Telocator/RCC

Petition expresses support for the Policy Statement but

notes that it is "solely directed to cellular interconnection

issues." According to Telocator/RCC, the Commission

should clarify the point that the Policy Statement also

applies to noncellular Radio Common Carrier (RCC)

interconnection issues. This request was uncontested.

24

ange carriers.

23. The Policy Statement and RCCs: The Telocator/RCC

Petition expresses support for the Policy Statement but

notes that it is "solely directed to cellular interconnection

issues." According to Telocator/RCC, the Commission

should clarify the point that the Policy Statement also

applies to noncellular Radio Common Carrier (RCC)

interconnection issues. This request was uncontested.

24. In the Interconnection Order, we stated the belief

that "whatever initial confusion [over our interconnection

policy] may have existed has been clarified by this time,"

but we continued to offer the availability of advice and

guidance in order to resolve any remaining interconnec

tion

questions.'' We will

therefore

address the

Telocator/RCC Petition.

25. The reason we directed our Policy Statement toward

cellular carriers was that we had made a commitment to

promote nationwide compatibility in the cellular service,

and we believed the interconnection discussion of the

Policy Statement was necessary to fulfill that commit

ment.'* In addition, cellular operators had received no

prior guidelines on the negotiation of interconnection

agreements. The RCCs, by contrast, had already benefited

from the guidance of two Memoranda of Understanding."

26. Although the Policy Statement speaks to cellular

carriers, we consider it equally applicable to RCCs. To

begin with, the Policy Statement provides that under the

reasonable interconnection standard, a telephone com

pany must provide the type of interconnection requested

by a cellular carrier.'® The reasonable interconnection

standard applies to all Part 22 licensees, including

RCCs." Therefore, a telephone company must also pro

vide the type of interconnection reasonably requested by

an RCC

RCCs. To

begin with, the Policy Statement provides that under the

reasonable interconnection standard, a telephone com

pany must provide the type of interconnection requested

by a cellular carrier.'® The reasonable interconnection

standard applies to all Part 22 licensees, including

RCCs." Therefore, a telephone company must also pro

vide the type of interconnection reasonably requested by

an RCC. The Policy Statement also states that telephone

companies must accommodate the NXX code and num

bering needs of cellular carriers.*® This is based on the

premise that the telephone companies "do not 'own'

codes or numbers, but rather administer their distribution

for the efficient operation of the public switched tele

phone network."*' We believe the telephone company's

role as administrator is not suspended when dealing with

other PMS carriers. Therefore, we find that the telephone

companies must give equal numbering treatment to

RCCs. Finally, the Policy Statement provision that com

pensation arrangements among telephone carriers and

cellular carriers are largely a matter of state concern must

also apply to RCCs because like the cellular carriers,

RCCs are "generally engaged in the provision of local,

intrastate, exchange telephone service."*^ In sum, we will

apply the Policy Statement, as well as the present order, to

ail PMS licensees.

27. Physical Interconnection. The Cellular Report argues

that under the reasonable interconnection standard, tele

phone companies may not refuse to provide Type 2

interconnection or unreasonably delay the provision of

interconnection.*' According to the Report, nonwireline

cellular carriers often prefer Type 2 because of its supe

rior technical capabilities and greater service quality. The

Report contends that a telephone company should not be

allowed to refuse Type 2 service as technically unfeasible

because such service has been feasible for years

Type 2

interconnection or unreasonably delay the provision of

interconnection.*' According to the Report, nonwireline

cellular carriers often prefer Type 2 because of its supe

rior technical capabilities and greater service quality. The

Report contends that a telephone company should not be

allowed to refuse Type 2 service as technically unfeasible

because such service has been feasible for years. In addi

tion, the Report claims that delays in the provision of

Type 2 may be caused when the landline company im

poses technical restrictions on Type 2 interconnection.

Finally, the Report finds it unreasonably discriminatory,

in violation of Section 202(a) of the Act, for a telephone

company to impose the same charges for Type 1 and Type

2 interconnection because the Type 2 connected system

imposes fewer initial capital and operating costs on the

landline company.** The Report and Radiofone therefore

advise the Commission to issue a Notice of Violation

under Section 1.89 of the Rules to any landline company

that fails to provide Type 2 interconnection "in a reason

able and prompt manner." In the alternative, the Report

advises the Commission to enforce interconnection provi

sions such as these by placing a condition on the au

thorization of any wireline cellular affiliate of a telephone

company which is found guilty of a rule violation.

28. Southwestern Bell and Ameritech insist that the

Commission's Policy Statement requires Type 2 availabil

ity "only where the cellular system is 'capable of func

tioning as an end office' and where there are 'no

technical reasons' for its unavailability."*' They add that

in some markets. Type 2 service is not technically possi

ble

until

the

landline

company

undergoes

the

"complicated and time consuming" process of converting

its central switching offices to equal access tandem offices

availabil

ity "only where the cellular system is 'capable of func

tioning as an end office' and where there are 'no

technical reasons' for its unavailability."*' They add that

in some markets. Type 2 service is not technically possi

ble

until

the

landline

company

undergoes

the

"complicated and time consuming" process of converting

its central switching offices to equal access tandem offices.

Southwestern Bell also claims that "there are no cost

differences between Type 1 and Type 2 service" sufficient

to justify lower interconnection charges for Type 2 cel

lular carriers.*' Finally, Southwestern Bell argues that a

Notice of Violation is unwarranted until it is shown that a

telephone company has violated a Commission rule. It

adds that the Commission should not condition the au

thorization of a wireline carrier based on the violations of

its affiliated telephone company. Under Section 22.901(c)

of the Commission's Rules, it explains, the two carriers

are separate entities and therefore not responsible for

each other's actions.

29. As we have stated above, the Policy Statement spe

cifically held that "reasonable interconnection" means a

cellular carrier may select Type 1 or Type 2 interconnec

tion, whichever form is reasonably appropriate to its

system design. Contrary to the assertions of Southwestern

Bell and Ameritech, we did not limit the requirement on

telephone companies to provide Type 2 service. We mere

ly explained that if Type 2 service is technically feasible,

it should be provided. In addition, we intended

"reasonable interconnection" to mean that BOCs would

provide the chosen form of interconnection within a

reasonable time. This policy clearly follows from the

Commission's longstanding goal of brinring cellular ser

vice to the public as rapidly as possible.*

30. Finally, we expected that under the reasonable

interconnection standard, charges for the interstate com

ponent of physical interconnection would be cost based.

This is inferrable from the fact that we require all inter-

2913

nnection within a

reasonable time. This policy clearly follows from the

Commission's longstanding goal of brinring cellular ser

vice to the public as rapidly as possible.*

30. Finally, we expected that under the reasonable

interconnection standard, charges for the interstate com

ponent of physical interconnection would be cost based.

This is inferrable from the fact that we require all inter-

2913

FCX: 87-163

Federal Communications Commission Record

2 FCC Red Vol. 10

state telephone charges to be cost based. Under a cost

based system of charges, when it is less expensive to the

landline carrier to provide Type 2 facilities (as opposed to

Type 1 facilities), charges should be lower for Type 2

service.^® Consequently, it may be discriminatory, in vio

lation of Section 202(a) of the Act, for a telephone

company to impose equal charges for Type 1 and Type 2

service. In order to clarify further these provisions of

Policy Statement, we will now discuss whether Type 2

service is technically feasible, how rapidly it should be

provided, and whether the differences between Type 2

and Type 1 service should produce differing charges un

der a cost based arrangement.

31. The record, which describes the history of cellular

interconnection, explains that cellular service was

originally designed as a self-contained telephone network

whose users would be interconnected through a central

switch. The central switch was designed to function as a

regular class 5 switch in a landline telephone system.

Thus, a cellular system's mobile telephone switching of

fice (MTSO) could be interconnected to a landline net

work as easily as any newly opened class 5 office. Today,

this method of interconnection is known as Type 2, and it

appears to be the most efficient method of connecting an

MTSO to a landline network. According to the Cellular

Report, numerous landline companies concede the fea

sibility of Type 2 facilities, and some have already made

such facilities available

d be interconnected to a landline net

work as easily as any newly opened class 5 office. Today,

this method of interconnection is known as Type 2, and it

appears to be the most efficient method of connecting an

MTSO to a landline network. According to the Cellular

Report, numerous landline companies concede the fea

sibility of Type 2 facilities, and some have already made

such facilities available. Based on this information, we

regard Type 2 interconnection as technically feasible.

32. We also expect that physical interconnection will be

provided without unreasonable delay or technical restric

tions. We recognize that complicated and time consuming

delays in providing Type 2 may be caused by the un

availability of necessary equiprhent or the need to lay

cable, et cetera. Nevertheless, the record reveals that even

considering such delays, a landline carrier would require

no more than six months to complete the Type 2 connec

tions. We therefore conclude that six months is the maxi

mum length of time a telephone company should require

to provide Type 2 interconnection to a cellular carrier.

This is discussed further below.

33. Contrary to the assertion of Southwestern Bell, the

record indicates that certain differences between Type 1

and Type 2 interconnection produce differences in their

respective costs. Under Type 1, which interconnects as a

PBX, the routing of calls between the landline network

and the cellular network requires a greater number of

switching centers. Specifically, a call sent from a wireline

unit to a cellular unit would be relayed first to the

telephone company's class 4 office, then to the telephone

company's class 5 office, and then to the cellular MTSO.

Under Type 2, which interconnects as a class 5 office, the

same call would travel directly from the class 4 office to

the MTSO. By eliminating the need to utilize a duplica-

tive switching center, the Type 2 design provides cost

savings for the telephone company

e relayed first to the

telephone company's class 4 office, then to the telephone

company's class 5 office, and then to the cellular MTSO.

Under Type 2, which interconnects as a class 5 office, the

same call would travel directly from the class 4 office to

the MTSO. By eliminating the need to utilize a duplica-

tive switching center, the Type 2 design provides cost

savings for the telephone company. In addition, the elimi

nation of a switch provides better signal quality for cel

lular customers. Type 2 also allows a cellular carrier to

custom design the "architecture" of its class MTSO, thus

making it more efficient than the standard class five

switch used in the Type 1 model. Finally, carriers choos

ing Type 2 need not purchase certain ancillary services,

such as operator assistance, which are tied to the Type 1

arrangement.

34. Based on the above, it appears logical that in most

circumstances it should be less expensive to provide Type

2 than Type 1 interconnection service, and that therefore,

the interstate cost based charges for Type 2 service should

be lower. We further conclude that the imposition of

similar charges for these dissimilar services may be un

justly discriminatory in violation of Section 202(a) of the

Act, depending on the facts of the case involved.

35. If a cellular carrier believes that a telephone com

pany has caused unreasonable delays in providing the

requested form of interconnection or has imposed un

reasonable charges or restrictions on its interconnection

services, the carrier may file a complaint with the Com

mission. We will review such complaints based on the

principles that cellular carriers are entitled to their choice

of interconnection within a reasonable time, and that

interstate physical interconnection charges should be low

er for Type 2 than Type 1 service

ection or has imposed un

reasonable charges or restrictions on its interconnection

services, the carrier may file a complaint with the Com

mission. We will review such complaints based on the

principles that cellular carriers are entitled to their choice

of interconnection within a reasonable time, and that

interstate physical interconnection charges should be low

er for Type 2 than Type 1 service. During the complaint

procedure, the telephone company will bear the burden

of coming forward with concrete evidence that its delay in

providing Type 2 interconnection or its level of rates was

reasonable under the Communications Act.^' The tele

phone company will bear this burden because it possesses

exclusive knowledge about its own interconnection ser

vices and costs. We will decide on a case-by-case basis

how to enforce our interconnection rules.

36. Assignment of NXX Codes and Telephone Numbers.

The Cellular Report contends that under the Policy State

ment, nonrecurring charges for the assignment of NXX

codes and telephone numbers should be cost based.'" The

Re port further argues that because BOCs do not impose

NXX assignment charges on ITCs, it is discriminatory for

them to impose the charges on cellular carriers. South

western Bell insists that BOCs do impose assignment

charges on ITCs through their participation in the intra-

state toll pools, and that therefore, the charges to cellular

carriers are not discriminatory.

37. As explained in the Cellular Report, when a BOC

"assigns" an NXX code to a cellular carrier, it allocates

the code for cellular use and meanwhile places the code

in the computer memorj' of its own switching offices.

This prepares the switches to recognize the cellular status

of all numbers dialed within that code. The assignment

service incurs the costs of programming the computers as

well as certain administrative expenses. Costs are also

incurred by the cellular carrier, which must program its

switches to read the codes allocated for landline use.

38

ode

in the computer memorj' of its own switching offices.

This prepares the switches to recognize the cellular status

of all numbers dialed within that code. The assignment

service incurs the costs of programming the computers as

well as certain administrative expenses. Costs are also

incurred by the cellular carrier, which must program its

switches to read the codes allocated for landline use.

38. The Policy Statement allowed telephone companies

to impose "a reasonable initial connection charge to com

pensate the costs of the software and other changes asso

ciated with new numbers."" This provision was intended

to establish that interstate charges for opening NXX codes

should be cost based. We regarded cost based NXX

charges, like cost based physical interconnection charges,

as an inherent part of reasonable interconnection.

39. We also stated that cellular carriers are "entitled to

reasonable accomodation of their numbering require

ments on the same basis as an independent telephone

company."'^ By comparing the NXX rights of cellular

operators to those of ITCs, we intended to create mutual

obligations between BOCs and cellular carriers, just as

they exist between BOCs and ITCs, so that each carrier

would recover any actual costs incurred by providing

interstate interconnection services to the other." The

specific issue of whether it is discriminatory for a BOC to

impose NXX assignment charges on cellular carriers but

2914

ular

operators to those of ITCs, we intended to create mutual

obligations between BOCs and cellular carriers, just as

they exist between BOCs and ITCs, so that each carrier

would recover any actual costs incurred by providing

interstate interconnection services to the other." The

specific issue of whether it is discriminatory for a BOC to

impose NXX assignment charges on cellular carriers but

2914

2 FCC Red Vol. 10

Federal Communications Commission Record

FCC 87-163

not on ITCs cannot be addressed until numerous subsid

iary issues are considered. These questions are currently

under review in Contel, supra. Therefore, we need not

pursue the subject in this proceeding.

40. Jubon agrees with footnote two of the Policy State

ment, which states that a local telephone company should

regain access to unused numbers. It believes, however,

that numbers should be reclaimed "uniformly among all

exchange service providers" (emphasis retained). Other

wise, Jubon contends, the telephone company might

"single out cellular carriers as initial targets for number

recapture." BellSouth considers it unlikely that a tele

phone company would be required to regain access to

numbers from cellular carriers. Hence, it regards the

Jubon argument as "pure speculation." NYNEX also re

jects the Jubon proposal, claiming that it would

"undermine" a telephone company's ability to allocate

unused numbers "based on all of the facts and circum

stances in each case."

41. "We re-emphasize that telephone companies must

provide PMS carriers with reasonable accommodation of

their numbering requirements, and that a telephone com

pany must only reclaim as many numbers as needed to

relieve its own shortage. Beyond this, we recognize that a

risk of unfair competition may arise where a telephone

company attempts to reclaim a disproportionate share of

its needed numbers from one co-carrier, especially where

this would benefit the telephone company's wireline cel

lular affiliate at the expense of its a nonwireline cellular

competitor

ust only reclaim as many numbers as needed to

relieve its own shortage. Beyond this, we recognize that a

risk of unfair competition may arise where a telephone

company attempts to reclaim a disproportionate share of

its needed numbers from one co-carrier, especially where

this would benefit the telephone company's wireline cel

lular affiliate at the expense of its a nonwireline cellular

competitor.

We believe, however, that Jubon's proposed

remedy is too inflexible. If telephone company reclaimed

an equal quantity of NXX codes and numbers from all

co-carriers, then some co-carriers might lose needed num

bers while others might retain unneeded numbers. There

fore, we will not prescribe any fixed formula for

reclaiming numbers. Instead, we will expect a telephone

company to reclaim from all other carriers based upon

such factors as their respective growth requirements and

unused surpluses, and thereby promote the most efficient

allocation of the shared resource.

42. Switching Charges. The Cellular Report and Cellular

One argue

that

because

cellular

operators

are

"co-carriers" with landline companies, the cellular oper

ators deserve the same switching ."compensation arrange

ments that exist between the LECs." Specifically, they

argue that because Type 2 connected cellular systems

perform their own switching functions, these carriers

deserve "mutual compensation" with landline operators,

so that each carrier will recover its actual switching costs

incurred by terminating traffic originated on the other

carrier's network. Without such a requirement, the Report

complains, many landline companies may discriminate

against Type 2 carriers by refusing to reimburse them for

any switching costs or by billing them for "non-traffic

sensitive access charges."

43. The landline telephone commentors argue, relying

on Indianapolis Telephone Company (Indianapolis),

that

cellular operators have no right to receive the same

arrangements for recurring charges as are received by

ITCs

ny landline companies may discriminate

against Type 2 carriers by refusing to reimburse them for

any switching costs or by billing them for "non-traffic

sensitive access charges."

43. The landline telephone commentors argue, relying

on Indianapolis Telephone Company (Indianapolis),

that

cellular operators have no right to receive the same

arrangements for recurring charges as are received by

ITCs. This ruling properly treats cellular operators dif

ferently from other co-carriers, they claim, because

"cellular carriers generally do not obtain state certifica

tion as franchised telephone companies, are not operating

under the jurisdiction of the state commissions, do not

accept the responsibilities of a franchised telephone com

pany as a provider of last resort, and do not participate in

the intrastate cost and revenue pools."'' Southwestern

Bell proceeds to list the specific switching costs which it

believes telephone companies should recover from cel

lular carriers. Incorporating by reference its Answer and

Motion to Dismiss in Contel, supra, it claims that tele

phone companies incur switching costs in "functions such

as memory, line and number review and administration."

In addition, it claims, there are "recurring cost-of-money

expenses, taxes and maintenance expenses," and the costs

of monitoring traffic load to guard against unbalanced

volumes of traffic and the depletion of numbers in an

NXX code.

44. Despite the telephone companies' reliance on In

dianapolis, supra, that case applied to financial arrange

ments relating "solely to intrastate communications."'*

We believe that under the reasonable interconnection

standard, interstate switching charges, like the interstate

charges for physical interconnection and the opening of

NXX codes, should be cost based. A cost based system of

compensation will allow telephone companies to recover

their costs of switching interconnected interstate traffic.

The same policy will apply to cellular carriers.

45

ions."'*

We believe that under the reasonable interconnection

standard, interstate switching charges, like the interstate

charges for physical interconnection and the opening of

NXX codes, should be cost based. A cost based system of

compensation will allow telephone companies to recover

their costs of switching interconnected interstate traffic.

The same policy will apply to cellular carriers.

45. In establishing the reasonable interconnection stan

dard, we also expected telephone companies and cellular

carriers to observe the principle of mutual compensation

for switching. That is, we expected each entity to recover

the costs of switching traffic for the other entity's net

work. This was regarded as necessary because just as a

telephone company performs switching functions to ter

minate mobile-to-land traffic, so may a cellular company

terminate land-to-mobile traffic. It was also considered

necessary in order to promote our policy of entitling

cellular carriers to interconnection on the same basis as

ITCs, which routinely receive mutual compensation for

switching from other local exchange carriers.

46. Although the Policy Statement contemplated a cost

based system of mutual compensation for switching, it did

not distinguish between Type 1 and Type 2 service.'" To

understand the importance of this distinction, a brief

description of switching functions is helpful. According to

the record, when a call originates on the cellular network,

it is sent to a switch. The switch screens the call to

determine whether the dialed area code and NXX code

are valid. It then routes the outgoing call to the landline

network, which performs similar screening and routing

functions to terminate the call. Conversely, when a call

originates on the landline network, the telephone com

pany performs the initial screening and routing, and the

switch serving the cellular network terminates the incom

ing call. Under Type 1 interconnection, the telephone

company owns the switch serving the cellular network

o the landline

network, which performs similar screening and routing

functions to terminate the call. Conversely, when a call

originates on the landline network, the telephone com

pany performs the initial screening and routing, and the

switch serving the cellular network terminates the incom

ing call. Under Type 1 interconnection, the telephone

company owns the switch serving the cellular network.

Therefore, it performs the origination and termination of

both incoming and outgoing calls. Under Type 2, by

contrast, the cellular carrier owns the switch, enabling it

to originate outgoing calls and terminate incoming calls.*®

Hence, the Type 2 carrier incurs the switching costs for

these origination and termination functions.

47. Based on the above, we believe the principle of

mutual switching compensation should apply to Type 2

but not Type 1 service. Cellular carriers and telephone

companies are equally entitled to just and reasonable

compensation for their provision of access, whether

through tariff or by a division of revenues agreement. "We

further find that telephone company switching charges

which fail to distinguish between Type 1 and Type 2

2915

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87-163

Federal Communications Commission Record

2 FCC Red Vol. 10

carriers may be unjustly discriminatory in violation of

Section 202 of the Act, depending on the facts of the

given case.

48. According to the Cellular Report, reciprocal switch

ing agreements between telephone companies and Type 2

connected cellular carriers have already been reached in

some communities,®' indicating that such arrangements

are feasible. We continue to believe that these switching

arrangements serve the public interest. We further believe

that cellular carriers are entitled as co-carriers to partici

pate in these arrangements, regardless of whether they

participate in existing revenue pools. Contrary to the

belief of the landline commentors, the right to recover

switching costs is not limited to state certified carriers.

49

sible. We continue to believe that these switching

arrangements serve the public interest. We further believe

that cellular carriers are entitled as co-carriers to partici

pate in these arrangements, regardless of whether they

participate in existing revenue pools. Contrary to the

belief of the landline commentors, the right to recover

switching costs is not limited to state certified carriers.

49. Should a carrier file a complaint involving inter

state switching costs or charges, we will judge the appro

priateness of the given arrangement using as a guide the

existing compensation agreements of connecting BOCs

and ITCs. Should telephone companies impose charges on

a cellular carrier that differ from the charges they impose

on each other, there may be discrimination under Section

202(a) of the Act. In that event, we will require the BOG

to make an affirmative, documented showing of why it

has imposed differing charges on the two carriers.

50. Interexchange Services. Jubon seeks clarification of

footnote three of the Policy Statement, which notes that if

a cellular carrier performs interexchange services in the

provision of interstate automatic roaming calls, it may be

regarded as an interexchange carrier and hence become

liable for access charges owed to the telephone company.

Jubon complains that this statement is true under some

interconnection arrangements but not others. It asserts

that unless the Commission's rules distinguish among

these different arrangements, certain telephone companies

may attempt to "impose" access charges on cellular car

riers for all interstate automatic roaming calls. In a series

of diagrams, Jubon proceeds to propose its own classifica

tions of carriers under different interconnection schemes.

51. NYNEX opposes Jubon's request to determine the

access status of cellular carriers in specific "hypothetical"

circumstances. It believes these matters were intended by

the Policy Statement to be negotiated by the given carriers,

subject to state regulatory jurisdiction

n a series

of diagrams, Jubon proceeds to propose its own classifica

tions of carriers under different interconnection schemes.

51. NYNEX opposes Jubon's request to determine the

access status of cellular carriers in specific "hypothetical"

circumstances. It believes these matters were intended by

the Policy Statement to be negotiated by the given carriers,

subject to state regulatory jurisdiction. BellSouth similarly

argues that the telephone companies are "fully capable of

determining the extent to which cellular carriers are

providing interstate, interexchange service for purposes of

access."

52. According to Section 69.5 of the Rules, access

charges are assessed upon "all interexchange carriers that

use local exchange switching facilities for the provision of

interstate or foreign telecommunications services . . . ."

PMS carriers are generally regarded as exchange service

providers, not interexchange carriers.®" This is reaffirmed

in the Policy Statement.*'^ Footnote three of the Policy

Statement merely observes that there may be exceptions to

that general rule.

53. We will not address Jubon's particular proposal for

classifying cellular roaming services provided under cer

tain interconnection schemes. Viewed as a petition for

reconsideration, the proposal exceeds the scope of the

original decision, and therefore need not be addressed.

Viewed as a petition for declaratory ruling, it is also not

deserving of review. The Commission is not required to

issue a declaratory ruling where critical facts are not

explicitly stated or there is a possibility that subsequent

events will alter them.®^ Here, Jubon's proposal is not

based on any particular facts or events. It does not refer to

a given set of parties operating under a certain intercon

nection agreement. On the contrary, the Petition raises a

variety of access issues affecting all PMS carriers.®' We

believe that any attempt to address these large concerns in

a single declaratory ruling would be unmanageable

vents will alter them.®^ Here, Jubon's proposal is not

based on any particular facts or events. It does not refer to

a given set of parties operating under a certain intercon

nection agreement. On the contrary, the Petition raises a

variety of access issues affecting all PMS carriers.®' We

believe that any attempt to address these large concerns in

a single declaratory ruling would be unmanageable. More

over, such an undertaking would involve the Commission

in unreliable speculations on how various PMS intercon

nection agreements will be structured.®® Finally, any

Commission ruling on the access status of PMS carriers

could never be comprehensive because the Commission's

jurisdiction over the subject is shared with other

authorities. We therefore prefer to review PMS access

issues on a case by case basis.

54. Good Faith. The Cellular Report and AMCELL

accuse landline companies of failing to negotiate in good

faith, as required by the Policy Statement.^'' The Report

claims that some landline companies, for example, have

"filed unilateral tariffs declaring what they will 'sell' to

the non-wireline cellular companies and at what

'price.'"®" In addition, the Report claims, "negotiations

after a tariff filing often amount to nothing more than

going through the motions."®" They therefore urge the

Commission to clarify that "good faith negotiation" re

quires landline companies to meet with the cellular car

riers, to make sincere efforts to reach agreements without

delay, and to do so within the framework of the Policy

Statement.

55. NYNEX, Southwestern Bell and Ameritech deny

that they have failed to negotiate in good faith.™ They

claim that they have negotiated dilligently but that in

many cases delays were caused when "the cellular carriers

withheld concurrence" on the terms of interconnection.

56. We re-emphasize the requirement in the Policy

Statement that the terms and conditions of cellular inter

connection must be negotiated in good faith

Bell and Ameritech deny

that they have failed to negotiate in good faith.™ They

claim that they have negotiated dilligently but that in

many cases delays were caused when "the cellular carriers

withheld concurrence" on the terms of interconnection.

56. We re-emphasize the requirement in the Policy

Statement that the terms and conditions of cellular inter

connection must be negotiated in good faith. As we have

stated above, the purpose of this proceeding is not to

resolve specific factual disputes. Therefore, we will not

herein address issues such as whether a certain tariff filing

constitutes a breach of good faith. However, we expect

that tariffs reflecting charges to cellular carriers will be

filed only after the co-carriers have negotiated agreements

on interconnection. We also expect the agreements to be

concluded without delay. We will review issues of good

faith on the same basis as issues of physical interconnec

tion, NXX codes and switching charges. That is, a carrier

may bring its case of good faith before the Commission

under Section 208 or 312 of the Act."

57. Accordingly, IT IS ORDERED, That the Petition

for Partial Reconsideration or, in the alternative, the

Petition for Declaratory Ruling, filed by Jubon Engineer

ing, IS GRANTED TO THE EXTENT INDICATED

HEREIN AND DENIED IN ALL OTHER RESPECTS.

58. IT IS FURTHER ORDERED, That the Petition for

Clarification filed by the Radio Common Carrier Division

of Telocator Network of America IS GRANTED.

59. IT IS FURTHER ORDERED, That the Petition for

Consolidation of Proceedings and the Petition for Stay

filed by the Cellular Communications Division of Teloca

tor Network of America and McCaw Communications

Companies ARE DENIED.

60. IT IS FURTHER ORDERED, That the the Request

for Further Relief filed by the Cellular Telecommunica

tions Division of Telocator Network of America IS

2916

IS GRANTED.

59. IT IS FURTHER ORDERED, That the Petition for

Consolidation of Proceedings and the Petition for Stay

filed by the Cellular Communications Division of Teloca

tor Network of America and McCaw Communications

Companies ARE DENIED.

60. IT IS FURTHER ORDERED, That the the Request

for Further Relief filed by the Cellular Telecommunica

tions Division of Telocator Network of America IS

2916

2 FCC Red Vol. 10

Federal Communications Commission Record

fcc 87-163

GRANTED TO THE EXTENT INDICATED HEREIN

FEDERAL COMMUNICATIONS COMMISSION

AND DENIED IN ALL OTHER RESPECTS.

William J. Tricarico

Secretary

FOOTNOTES

'

59 Rad. Reg. 2d (P&F) 1275 (1986).

^ Bellsouth requests the Commission to strike the Jubon

Petition because Jubon was not a party to the original proceed

ing in accordance with Section 1.106(b)(1) of the Rules, and

because Jubon did not timely serve its Petition on the parties to

the proceeding in accordance with Section 1.106(f) of the Rules.

Jubon's alternative request for declaratory ruling should also be

stricken, according to BellSouth, because the Petitioner has

failed to show a "controversy" or "uncertainty" in the Intercon

nection Order, as required by Section 1.2 of the Rules. Jubon, in

a Motion for Leave to File Supplemental Pleading, requests that

the Petition be reviewed despite its initial defects. In support of

the Motion, Jubon argues that it had no prior opportunity to

comment on the petitioned subject matter, which was newly

raised in the Interconnection Order, and that it belatedly served

the parties to that proceeding. We find that the issues raised in

the Petition are sufficiently important to warrant our consider

ation. Furthermore, the lateness of Jubon's service on the other

parties did not prejtidice their interests because they were given

an adequate opportunity to respond to the Petition. Therefore,

we will grant Jubon's Motion for Supplemental Pleading and

consider the procedural defects cured.

'

Telocator/Cellular and McCaw Communications Companies,

Inc

ufficiently important to warrant our consider

ation. Furthermore, the lateness of Jubon's service on the other

parties did not prejtidice their interests because they were given

an adequate opportunity to respond to the Petition. Therefore,

we will grant Jubon's Motion for Supplemental Pleading and

consider the procedural defects cured.

'

Telocator/Cellular and McCaw Communications Companies,

Inc. (McCaw) request the Commission to consolidate this pro

ceeding

with

two

other

proceedings. The

first

is

Telocator/Cellular's Application for Review of Indianapolis

Telephone Company v. Indiana Belt Telephone Company, Inc.

and

American

Information

Technologies

Corporation

(Indianapolis), Formal Complaint No. E-85-5, Mimeo No. DA

86-61, relea.sed October 16, 1986. The second proceeding is a

pending case before the Common Carrier Bureau's Enforce

ment Division, Contel Cellular of El Paso, Inc. v. Southwestern

Bell Telephone Company (Contel), Formal Complaint No. E-

86-93. They believe the proceedings should be consolidated

because of the similarity of the issues involved and because the

Indianapolis Order "appears to represent a significant departure

from prior Commission orders on cellular interconnection."

For the same reasons, they also request the Commission to stay

the effect of the Indianapolis Order. We deny the above re

quests. The purpose of this proceeding is to clarify the Intercon

nection Order, not to revisit particular factual disputes which

may have arisen from the Order. Furthermore, as we explain

below, the Indianapolis Order does not depart from our pre

vious decisions on the subject of cellular interconnection. The

Order conforms to the guidelines established in the Intercon

nection Order as clarified in today's proceeding.

^ See Public Notice of October 28, 1986, Mimeo No. 0392. The

deadline established for filing comments, November 12, 1986,

was later extended to November 19, 1986, at the request of

NewVector

Order does not depart from our pre

vious decisions on the subject of cellular interconnection. The

Order conforms to the guidelines established in the Intercon

nection Order as clarified in today's proceeding.

^ See Public Notice of October 28, 1986, Mimeo No. 0392. The

deadline established for filing comments, November 12, 1986,

was later extended to November 19, 1986, at the request of

NewVector.

'

The Reply Comments, as well as a Response to Reply

Comments by Southwestern Bell, were filed after the November

19, 1986 deadline for submitting comments on the Cellular

Report. We will therefore consider these untimely pleadings as

informal objections.

2917

FCC 87-163

Federal Communications Commission Record

2 FCC Red Vol. 10

'

86 FCC 2d 469, 496 (1981), modified. 89 FCC 2d 58 (1982),

further modified. 90 FCC 2d 571 (1982), appeal dismissed sub

nom. U. S. V. FCC, No. 82-1526 (D.C. Cir., March 3, 1983).

'

Cellular Communications Systems. 86 FCC 2d at 496; Ad

vanced Mobile Phone Service. Inc.. 47 Fed. Reg. 56703, published

December 20, 1982, at para. 5.

® Interconnection Order, supra, at 1278.

'

Id. at 1283 - 85.

Id. at 1284.

"

W.

For an explanation of NXX codes and telephone numbers

see note 32, infra.

Interconnection Order, supra, at 1284.

Id. at 1284, n. 2.

"

Id. at 1284-85.

Id. at 1284-85, n. 3. For further information on roaming

services, see. e.g., MCI Cellular Telephone Co., 96 FCC 2d 1040,

1050-51 (1983).

The Cellular Report was filed in response to the Commis

sion's invitation in the Interconnection Order for Telocator to

report on the status of interconnection arrangements between

cellular operators and landline companies. This report is based

on experience of non-wireline systems throughout the country.

This Section provides for the filing of complaints against

violations of law by common carriers.

"

See Louisiana Public Service Commission v. FCC, 106 S.Ct.

at 1902 n.4.

National Assn of Regulatory Util. Com'rs v. FCC, 746 F.2d

1492, 1498 (D.C. Cir. 1984).

North Carolina Utilities Commission v

d landline companies. This report is based

on experience of non-wireline systems throughout the country.

This Section provides for the filing of complaints against

violations of law by common carriers.

"

See Louisiana Public Service Commission v. FCC, 106 S.Ct.

at 1902 n.4.

National Assn of Regulatory Util. Com'rs v. FCC, 746 F.2d

1492, 1498 (D.C. Cir. 1984).

North Carolina Utilities Commission v. FCC (NCUC I), 537

F.2d 787, 793 (4th Cir. 1976), cert, denied. 429 US 1027 (1976).

Louisiana, supra, at 1902.

This Section provides for "the jurisdictional separation of

common carrier property and expenses between interstate and

intrastate operations."

Louisiana, supra, at 1902.

See also North American Telecomm., supra, at 1361-62:

"The fact that Centrex [plant] can be used to originate and

terminate interstate communications, standing alone, does not

subject . . . intrastate jCentrex rates] to federal jurisdiction."

Complaints regarding intrastate rates should be addressed

at the state level. North American Telecomm., supra, at 1361-62.

The term "physical interconnection" refers to the facilities

connection (by wire, microwave or other technologies) between

the end office of a landline network and the mobile telephone

switching office (MTSO) of a cellular network or the hardware

or software, located within a carrier's central office, which is

necessary to provide interconnection.

Landline telephone company costs initially are recorded

pursuant to the Uniform System of Accounts or a similar

accounting system. The costs recorded in these accounts are

then separated into intrastate and interstate costs pursuant to

the Part 67 separations process. The plant costs are usually

allocated based upon relative interstate and intrastate use. Most

of the costs allocated to interstate use are then recovered

through access charges imposed upon interexchange carriers

and end-users under Part 69 of the Rules

system. The costs recorded in these accounts are

then separated into intrastate and interstate costs pursuant to

the Part 67 separations process. The plant costs are usually

allocated based upon relative interstate and intrastate use. Most

of the costs allocated to interstate use are then recovered

through access charges imposed upon interexchange carriers

and end-users under Part 69 of the Rules. The Part 69 system of

recovery of interstate costs and imposition of access charges

does not apply to cellular carriers when they are providing only

local exchange service. Access Charge Order. 97 FCC 2d 834,

881-83 (1984).

We recognize that local exchange carriers frequently recover

their interconnection costs, such as physical interconnection

charges, switching charges and possibly NXX charges, through

private contracts. We are not therefore suggesting that we apply

the full panoply of accounting, jurisdictional separations and

cost recovery regulation to cellular services at this time. We

expect, however, that cellular and landline carriers allocate and

recover their interconnection costs through just and reasonable

interconnection contracts, just as local exchange carriers do

today in connecting carrier relationships.

Nor should the cost allocation and accounting mechanisms

suggested here be limited to physical interconnection of plant.

These mechanisms have utility in resolving a broad range of

interconnection issues. For example, each of the parties to a

cellular interconnection contract could maintain accounts, sub

ject to review and audit by the other connecting carrier, show

ing its separated and unseparated costs. The carriers may

employ Parts 67 and 69 of the Rules as a model for their

particular arrangements. This should assist the carriers in de

veloping charges for the interstate portion of the interconnec

tion that are just and reasonable in accordance with Section

202(a) of the Act and otherwise conform to the PMS require

ments of Part 22 of the Rules

ier, show

ing its separated and unseparated costs. The carriers may

employ Parts 67 and 69 of the Rules as a model for their

particular arrangements. This should assist the carriers in de

veloping charges for the interstate portion of the interconnec

tion that are just and reasonable in accordance with Section

202(a) of the Act and otherwise conform to the PMS require

ments of Part 22 of the Rules. Should the Commission, either

upon complaint or upon its own initiative, uncover evidence

that such charges are not just and reasonable, we will take

formal steps to enforce our statutory mandate. We may require,

for any'imposed charge, the filing of supporting documentation,

including schedules showing all interconnection costs and

charges imposed by the carriers for interstate and foreign wire

or radio communication and showing the classifications, prac

tices and regulations affecting such charges. Alternatively, we

may initiate hearings under Title 11 or III of the Act.

In other words, our present lack of formal rules in this

area is not intended to allow us to informally extend our

jurisdiction over all interconnection charges.

^ Louisiana, supra, at 1902 n.4, citing NCUC I, supra, and

North Carolina Utilities Commission v. FCC (NCUC II), 522 F.2d

1036 (4th Cir. 1977), cert, denied, 434 U.S. 874 (1977).

See North American, supra, at 1362.

An NXX code is the first three numbers of a typical seven

digit telephone number. Each NXX code includes a block of

10,000 telephone numbers. The function of the code is to

instruct switches to communicate with other switches in the

processing of a call. The codes are assigned by Bellcore to

telephone companies nationwide, which reserve some for their

own use and assign some to other carriers, such as independent

telephone companies and cellular carriers.

"Switching charges" refers to charges for the origination

and termination of traffic, the costs of which recur on a call by

call basis. This category of charges includes "recurring charges .

.

. The codes are assigned by Bellcore to

telephone companies nationwide, which reserve some for their

own use and assign some to other carriers, such as independent

telephone companies and cellular carriers.

"Switching charges" refers to charges for the origination

and termination of traffic, the costs of which recur on a call by

call basis. This category of charges includes "recurring charges .

. . for the use of NXX codes," and "compensation arrange

ments" as described in the Policy Statement. Although the

Policy Statement prohibited recurring charges "solely for the use

of numbers", such charges may be appropriate for Type 1

service, as we will explain below.

^ United States v. FCC, 652 F.2d 72, 88 (D.C. Cir. 1980).

Interconnection Order, supra, at 1279.

See CeUular Report and Order, 86 FCC 2d at 503.

See Interconnection Between Wireline Telephone Carriers

and Radio Common Carriers Engaged in the Provision of Do

mestic Public Land Mobile Radio Service Under Part 21 of the

Commission's Rules, 63 FCC 2d 87,88 (1977); Interconnection

Between Wireline Telephone Carriers and Radio Common Car-

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2 FCC Red Vol. 10

Federal Communications Commission Record

FCC 87-163

riers Engaged in The Provision of Domestic Public Land Mobile

Radio Service under Part 22 of the Commission's Rules, 80

FCC 2d 352 (1980).

See para. 4, supra.

Interconnection Order, supra, at 1278.

See para. 5, supra.

Interconnection Order, supra, at 1284.

See para. 6, supra.

Cellular Report at 8-11.

^

Cellular Report at 15-18.

See Southvi^estern Bell's Comments and Opposition

(Comments) at 10-11.

**' Southwestern Bell Comments, 18-19.

See Memorandum Opinion and Order on Reconsideration in

C.C. Docket No. 79-318, 89 FCC 2d 58, 70 (1982).

See paras. 33-34.

In particular, the six month guideline will be applied as

follows

ction Order, supra, at 1284.

See para. 6, supra.

Cellular Report at 8-11.

^

Cellular Report at 15-18.

See Southvi^estern Bell's Comments and Opposition

(Comments) at 10-11.

**' Southwestern Bell Comments, 18-19.

See Memorandum Opinion and Order on Reconsideration in

C.C. Docket No. 79-318, 89 FCC 2d 58, 70 (1982).

See paras. 33-34.

In particular, the six month guideline will be applied as

follows. Once a complainant cellular carrier makes a prima

facie showing that it has not received physical interconnection

within six months of the request date, then the burden will

shift to the BOC to show concrete evidence that its delay was

nonetheless reasonable. As always, the complainant bears the

ultimate burden of proof.

CeUular Report at 23-27.

"

See para. 5, supra.

Id.

Interconnecting local exchange carriers (LECs) impose cost

based charges on one another and recover those charges

through their toll pooling agreement. Under this arrangement,

many of the mutually imposed charges cancel out. Similarly,

we expect the LECs and cellular carriers to negotiate intercon

nection agreements under which the charges for opening NXX

codes and other interconnection charges will be mutually im

posed and cancelled out as applicable.

^ It is our longstanding policy to establish standards which

will assure competitive equality among wireline and non-

wireline carriers. See Allocation of Frequencies in the 150.8-162

Mc/s Band (Guardband), 12 FCC 2d 841, 849, recon. denied, 14

FCC 2d 269 (1968), affd sub nom. Radio Relay Corp. v. FCC,

409 F. 2d 322 (2d Cir. ,1969).

"

CeUular Report at 12-15.

Memorandum Opinion and Order id File No. E-85-5, re

leased October 16, 1986, review pending.

"

Southwestern Bell Comments at 16.

Iruiianapolis, supra, at 3.

Likewise, Southwestern Bell's list of switching costs does

not distinguish between the different forms of interconnection.

The difference is noted in the Cellular Report at page 19

C,

409 F. 2d 322 (2d Cir. ,1969).

"

CeUular Report at 12-15.

Memorandum Opinion and Order id File No. E-85-5, re

leased October 16, 1986, review pending.

"

Southwestern Bell Comments at 16.

Iruiianapolis, supra, at 3.

Likewise, Southwestern Bell's list of switching costs does

not distinguish between the different forms of interconnection.

The difference is noted in the Cellular Report at page 19.

^ We recognize that there are two forms of Type 2 intercon

nection, Type 2A and Type 2B, and that depending on the form

of Type 2 interconnection, the screening and routing functions

may be shared differently between the connecting carriers.

Therefore our policies may apply differently depending on the

exact form of interconnection.

See CeUular Report, p. 19, n. 13.

MTS and WATS Market Structure (Access Charge Order),

97 FCC 2d 834, 881-883 (1984). Contrary to the contentions of

NYNEX and BellSouth, the access status of an interstate carrier

is not decided by intercarrier negotiation but by Part 69 of the

Rules as interpreted and applied by the Commission. See Access

Charge Order, supra, at 882. Specifically, Section 69.2(a) states

that '"Access Service' includes services and facilities provided

for the origination or termination of any interstate or foreign

communication." According to Section 69.2(r), interexchange

services include "services or facilities provided as an integral

part of interstate or foreign telecommunications . . . ."

Interconnection Order, supra, at 1278.

^ Yale Broadcasting Co. v. FCC, 478 F. 2d 594, 602 (D.C. Cir.

1973), cert, denied, 414 US 914 (1973).

For example, Jubon states that "where a cellular user in

one service area . . . places a call which is interLATA ... for

that system, but the call is transported to the distant LATA

over cellular facilities . . . the call at the distant cellular-

to-telco meet-point is truly 'exchange access' traffic." Jubon

Petition at p. 3.

Many carriers have not yet reached interconnection agree

ments because the cellular industry is still in its infancy

ular user in

one service area . . . places a call which is interLATA ... for

that system, but the call is transported to the distant LATA

over cellular facilities . . . the call at the distant cellular-

to-telco meet-point is truly 'exchange access' traffic." Jubon

Petition at p. 3.

Many carriers have not yet reached interconnection agree

ments because the cellular industry is still in its infancy. As

these agreements are negotiated, we expect many access ques

tions to arise. We will prepare to address these questions by

asking the Common Carrier Bureau to study the issues in

volved.

67 Cellular Report at 20-23.

Id. at 22.

™ See NYNEX Comments at 4-7.

71 Under Section 312 of the Act, a party may request the

Commission to issue an order to show cause why an order of

revocation or cease and desist should not be issued against a

licensee.

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