[Federal Register Volume 62, Number 34 (Thursday, February 20, 1997)]
[Rules and Regulations]
[Pages 7690-7720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4020]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[CC Docket No. 96-152; FCC 97-35]
Implementation of the Telecommunications Act of 1996:
Telemessaging, Electronic Publishing, and Alarm Monitoring Services
AGENCY: Federal Communications Commission.
ACTION: Final rule; Clarification and interpretation.
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SUMMARY: The First Report and Order (Order), released February 7, 1997,
implements the non-accounting requirements prescribed by Congress in
sections 260 and 274 of the Telecommunications Act of 1996 (the Act),
which respectively govern the provision of telemessaging and electronic
publishing services. The Order promotes the pro-competitive and
deregulatory objectives of the Act.
EFFECTIVE DATE: March 24, 1997. The information collections in this
Order will not become effective until at least May 1, 1997.
FOR FURTHER INFORMATION CONTACT: Lisa Sockett, Attorney, Common Carrier
Bureau, Policy and Program Planning Division, (202) 418-1580. For
additional information concerning the information collections contained
in this Order contact Dorothy Conway at (202) 418-0217, or via the
Internet at dconway@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
adopted February 6, 1997, and released February 7, 1997. The full text
of this Order is available for inspection and copying during normal
business hours in the FCC Reference Center, 1919 M St., NW., Room 239,
Washington, DC. The complete text also may be obtained through the
World Wide Web, at http://www.fcc.gov/Bureaus/Common Carrier/Orders/
fcc9735.wp, or may be purchased from the Commission's copy contractor,
International Transcription Service, Inc., (202) 857-3800, 2100 M St.,
NW., Suite 140, Washington, DC 20037.
This Order contains new or modified information collections subject
to the Paperwork Reduction Act of 1995 (PRA). It has been submitted to
the Office of Management and Budget (OMB) for review under the PRA.
OMB, the general public, and other federal agencies are invited to
comment on the proposed or modified information collections contained
in this proceeding.
Regulatory Flexibility Certification
As required by the Regulatory Flexibility Act, the Order contains a
Final Regulatory Flexibility Certification which is set forth in the
Order. A brief description of the certification follows.
The Commission certifies, pursuant to 5 U.S.C. 605(b), that the
clarification and interpretation adopted in this Order will not have a
significant economic impact on a substantial number of ``small
entities,'' as this term is defined in 5 U.S.C. 601(6). The Commission
therefore is not required to prepare a final regulatory flexibility
analysis of the clarification and interpretation adopted in this Order.
This certification and a statement of its factual basis are set forth
in the Order, as required by 5 U.S.C. 605(b).
Paperwork Reduction Act
This Order contains either a new or modified information
collection. The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public and OMB to comment on the
information collections contained in this Order, as required by the
Paperwork Reduction Act of 1995, Public Law No. 104-12. Written
comments by the public on the information collections are due March 24,
1997. OMB notification of action is due April 21, 1997. Comments should
address: (a) Whether the new or modified collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents including the use of automated
collection techniques or other forms of information technology.
OMB Approval Number: 3060-0738
Title: Implementation of the Telecommunications Act of 1996:
Telemessaging, Electronic Publishing, and Alarm Monitoring Services, CC
Docket No. 96-152.
Form No.: N/A.
Type of Review: Revision.
Respondents: Business or other for profit.
Public reporting burden for the collection of information is
estimated as follows:
[[Page 7691]]
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Number of respondents Annual hour burden
Information collection (approx.) per response Total annual burden
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Third-party disclosure requirement: 7 BOCs........................ 1,200 to 30,000 7 x 120 to 3,000 =
To the extent a BOC refers a calls per BOC per 840 to 21,000
customer to a separated affiliate, year x \1/10\th burden hours.
electronic publishing joint venture hour per response =
or affiliate during the normal 120 to 3,000 hours.
course of its telemarketing
operations, it must refer that
customer to all unaffiliated
electronic publishers requesting
the referral service. In
particular, the BOC must provide
the customer the names of all
unaffiliated electronic publishers
requesting the referral service, as
well as affiliated electronic
publishers, in random order.
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Total Annual Burden: 3,000 burden hours.
Estimated Costs Per Respondent: $0.
Needs and Uses: The attached item imposes a third-party disclosure
requirement on BOCs in order to implement the nondiscrimination
requirement of section 274(c)(2)(A) of the Act.
Synopsis of First Report and Order
I. Introduction
1. In February 1996, the ``Telecommunications Act of 1996'' became
law. The intent of the 1996 Act is ``to 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.''
2. On July 18, 1996, the Commission released a Notice of Proposed
Rulemaking. 61 FR 39385 (July 29, 1996), (``NPRM'') regarding
implementation of sections 260, 274, and 275 of the Communications Act
addressing telemessaging, electronic publishing, and alarm monitoring
services, respectively. This Order implements the non-accounting
requirements of sections 260 and 274. We address in separate
proceedings the alarm monitoring provisions of section 275 and the
enforcement issues related to sections 260, 274, and 275. In addition,
the accounting safeguards required to implement sections 271 through
276 and section 260 are addressed in a separate proceeding.
3. The 1996 Act opens local markets to competing providers by
imposing new interconnection, unbundling, and resale obligations on
existing providers of local exchange services. In enacting sections 260
and 274, Congress recognized that the local exchange market will not be
fully competitive immediately. Congress therefore imposed requirements
applicable to local exchange carriers' (LECs') provision of
telemessaging services in section 260, and a series of requirements
applicable to Bell Operating Companies' (BOCs') provision of electronic
publishing services in section 274. Collectively, these requirements
are designed to prevent, or facilitate the detection of, improper cost
allocation, discrimination, or other anticompetitive conduct.
4. Section 260 permits incumbent LECs (including BOCs) to provide
telemessaging service subject to certain nondiscrimination safeguards.
Section 274 allows a BOC to provide electronic publishing service
disseminated by means of its basic telephone service only through a
``separated affiliate'' or an ``electronic publishing joint venture''
that meets the separation, joint marketing, and nondiscrimination
requirements in that section. BOCs that were offering electronic
publishing services at the time the 1996 Act was enacted must comply
with section 274 by February 8, 1997. As noted in part VII, infra, the
requirements of this Order will become effective 30 days after
publication of a summary in the Federal Register. In addition, the
collection of information contained in this Order is contingent upon
approval by the Office of Management and Budget (OMB). Accordingly, we
do not anticipate taking any enforcement action based on these
requirements until they become effective. The requirements under
section 274 expire on February 8, 2000.
5. In this proceeding, our goal is to implement the non-accounting
requirements in sections 260 and 274 in a manner that is consistent
with the fundamental goal of the 1996 Act--to open all
telecommunications markets to robust competition. By fostering
competition in these markets, we seek to produce maximum benefits for
consumers of telemessaging and electronic publishing services.
II. Scope of the Commission's Authority
A. Electronic Publishing
1. Background
6. In the NPRM, we sought comment on the extent to which section
274 grants the Commission authority over the intrastate provision of
electronic publishing services. We noted that section 274(b)(4)
specifically refers to ``such regulations as may be prescribed by the
Commission or a State commission'' for the valuation of BOC assets. We
therefore tentatively concluded that the Commission may not have
exclusive jurisdiction over all aspects of intrastate services provided
pursuant to section 274.
7. In addition, apart from any intrastate jurisdiction conferred by
section 274 itself, we sought comment on the extent to which the
Commission may have the authority to preempt inconsistent state
regulations with respect to matters addressed by section 274.
2. Comments
(Parties that filed comments and replies are listed in the Attachment
below.)
8. AT&T contends that section 274 covers both interstate and
intrastate provision of electronic publishing services, and that this
section confers on the Commission general jurisdiction over the
provision of intrastate electronic publishing services. In support of
its position, AT&T points to several sections that, in its view, refer
to Commission authority over intrastate electronic publishing,
including: (1) Section 274(e), which authorizes the Commission to hear
complaints for violations of section 274; (2) section 274(f), which
requires all separated BOC affiliates engaged in electronic publishing
to file reports with the Commission; and (3) section 274(c)(2)(C),
which grants the Commission the authority to determine whether the BOCs
may be authorized to have a greater financial control of a joint
venture with small, local electronic publishers. AT&T further maintains
that the reference to valuation of BOC assets by state commissions in
section 274(b)(4) does not restrict the Commission's general regulatory
authority to establish rules, but merely indicates that, if a state
commission has its own accounting rules, those rules
[[Page 7692]]
should be applied to the extent they are not inconsistent with the
Commission's rules.
9. NAA contends that, because section 274 is silent with respect to
whether it covers interstate or intrastate, and interLATA or intraLATA
electronic publishing, and because electronic publishing services are
not regulated telecommunications services, the Commission's authority
under section 274 is limited to enforcing BOC compliance with the
section's requirements that BOCs operate through a separated affiliate
or electronic publishing joint venture and make various filings and
reports. NAA further asserts that the Commission has authority to
adjudicate complaints and requests for cease and desist orders with
respect to violations of section 274, whether interstate or intrastate,
but that states are not precluded from also enforcing this law. NAA
also contends that states should be allowed to continue to use their
cost allocation procedures for intrastate purposes.
10. A number of BOCs and state commissions, on the other hand,
argue that section 274 does not give the Commission authority over
intrastate electronic publishing services. Some of these commenters
argue that section 274 covers such intrastate services, but that this
section does not divest the states of their authority over intrastate
services under section 2(b) of the Communications Act. These latter
commenters argue that section 274 contains new requirements that state
commissions will implement in their traditional role of regulating
intrastate electronic publishing services.
11. These BOCs and state commissions also argue that section 2(b)
of the Communications Act and section 601(c) of the 1996 Act bar the
Commission from exercising authority under section 274 with respect to
intrastate electronic publishing services absent an express grant of
authority from Congress. PacTel and Ameritech contend that such a grant
of authority is provided in section 274 in limited circumstances,
including receiving BOC filings, prescribing regulations to value BOC
asset transfers, and acting on complaints and applications for cease-
and-desist orders. The California Commission argues that, although
section 274(e) clearly supports our jurisdiction over complaints
alleging violations of section 274, that section does not preclude
states from trying to resolve disputes prior to the filing of a
complaint or lawsuit in the federal arena. BellSouth disputes even this
limited grant of authority over intrastate electronic publishing
services, arguing that section 274(e) does not give the Commission
either explicit or implicit statutory jurisdiction over intrastate
electronic publishing services.
12. Several BOCs and state commissions claim that the Commission
may preempt state regulations and exercise jurisdiction over intrastate
electronic publishing only to the extent that such services are
inseparably mixed interstate-intrastate communications, pursuant to the
standard set forth in Louisiana PSC. The New York and California
Commissions further argue that the Commission currently has no basis to
make the showing necessary to preempt state regulation of intrastate
electronic publishing.
13. AT&T and MCI contend that the Commission retains the authority
to preempt state regulatory requirements relating to electronic
publishing that are inconsistent with its policies and rules. AT&T
further argues that, because the interstate and intrastate aspects of
electronic publishing cannot be separated, the Commission's
jurisdiction over interstate electronic publishing services extends to
such intrastate services as well.
3. Discussion
14. As discussed above, in the NPRM, we tentatively concluded that
the Commission may not have exclusive jurisdiction over all aspects of
intrastate services provided pursuant to section 274, based on the
language of section 274(b)(4). This section provides that BOCs and
their separated affiliates or electronic publishing joint ventures must
``value any assets that are transferred * * * and record any
transactions by which such assets are transferred, in accordance with
such regulations as may be prescribed by the Commission or a State
commission to prevent improper cross subsidies.'' After examining the
language of the statute and the comments filed in this proceeding, we
conclude, for the reasons set forth below, that the Commission's
authority under section 274 applies to the provision of intrastate as
well as interstate electronic publishing services. We conclude,
therefore, that while states may impose regulations with respect to BOC
provision of electronic publishing services, those regulations must not
be inconsistent with section 274 and the Commission's rules thereunder.
We emphasize, however, that the scope of the Commission's authority
under section 274 extends only to matters covered by that section.
15. Thus, we agree with AT&T and Bell Atlantic that section 274
applies not only to the provision of interstate electronic publishing
services, but also to such services when they are provided on an
intrastate basis. The language in section 274 expressly demonstrates
that Congress intended this section to reach intrastate electronic
publishing services. For example, section 274(c)(2)(C) expressly limits
the permissible participation of a BOC or affiliate in electronic
publishing joint ventures to an interest of 50 percent or less, but
also provides that, ``[i]n the case of joint ventures with small, local
electronic publishers, the Commission for good cause shown may
authorize [a BOC] or affiliate to have a larger equity interest.''
Notwithstanding the local nature of small, local electronic publishers,
which suggests that they provide intrastate services, this section
confers authority on the Commission to determine whether BOCs may have
a greater interest in electronic publishing joint ventures with such
electronic publishers.
16. In addition, section 274 requires that a BOC or BOC affiliate
engage in the provision of electronic publishing services disseminated
by means of that BOC or its affiliate's ``basic telephone service''
only through a ``separated affiliate'' or an electronic publishing
joint venture.'' The statute defines ``basic telephone service'' to
mean ``any wireline telephone exchange service, or wireline telephone
exchange service facility * * *.'' The term ``telephone exchange
service,'' as defined in section 3(47), is a primarily intrastate
service. As we noted in the Accounting Safeguards Order (62 FR 2918
(January 21, 1997)), these references to primarily intrastate services
clearly indicate that the scope of section 274 encompasses intrastate
matters.
17. We further conclude that, given the jurisdiction granted by
section 274, the Commission also has jurisdiction under the
Communications Act to establish rules applicable to intrastate
electronic publishing services. Sections 4(i), 201(b), and 303(r) of
the Act authorize the Commission to adopt any rules it deems necessary
or appropriate in order to carry out its responsibilities under the
Act, so long as those rules are not otherwise inconsistent with the
Act. Nothing in section 274 bars the Commission from clarifying and
implementing the requirements of section 274. Moreover, courts
repeatedly have held that the Commission's general rulemaking authority
is ``expansive'' rather than limited. In addition, it is well-
established that an agency has the authority to adopt rules to
administer congressionally mandated requirements.
18. Our conclusion that the Commission has jurisdiction under the
[[Page 7693]]
Communications Act to establish rules applicable to the full scope of
section 274, including intrastate electronic publishing services, is
particularly appropriate where, as here, the Commission is authorized
to adjudicate complaints alleging violations of section 274. Section
274(e) provides a private right of action to any person claiming that
an act or practice of a BOC, affiliate, or separated affiliate has
violated any requirement of section 274. Under section 274(e)(1), such
person may file a complaint with the Commission or bring suit in a U.S.
District Court as provided in section 207. In addition to damages,
section 274(e)(2) permits an aggrieved person to apply to the
Commission for a cease-and-desist order or to a U.S. District Court for
an injunction or an order compelling compliance. We find that it serves
the public interest for us to clarify in advance the section 274
requirements imposed on the BOCs that parties may ask us to enforce
later. Such clarification of the requirements will reduce uncertainty,
aid BOCs and their affiliates in complying with the requirements of
section 274, and facilitate the prompt resolution of compliance
disputes that may be presented in complaint proceedings.
19. We reject the argument that section 2(b) of the Communications
Act requires the conclusion that section 274, and the Commission's
authority thereunder, apply only to the provision of interstate
electronic publishing services. As demonstrated, for example, by
section 274(c)(2)(C)'s grant of authority to the Commission to alter
the maximum interest that a BOC may hold in electronic publishing joint
ventures with small, local electronic publishers, Congress gave the
Commission intrastate jurisdiction without amending section 2(b). Thus,
we find that, in enacting section 274 after section 2(b), and squarely
addressing therein the issues before us by using the statutory language
discussed above, Congress intended for section 274 to take precedence
over any contrary implications based on section 2(b).
20. We similarly are not persuaded that section 601(c) of the 1996
Act evinces an intent by Congress to preserve states' authority over
intrastate matters arising under section 274. Section 601(c) of the
1996 Act provides that the Act and its amendments ``shall not be
construed to modify, impair, or supersede Federal, State, or local law
unless expressly so provided in such Act or amendments.'' As discussed
above, we conclude that section 274 expressly modifies federal law, and
the Commission's statutory authority thereunder, to reach intrastate
electronic publishing services.
B. Telemessaging
1. Background
21. In the NPRM, we sought comment on the extent to which section
260 grants the Commission statutory authority over the intrastate
provision of telemessaging services. We stated that telemessaging is an
information service that, when provided by a BOC or its affiliate on an
interLATA basis, is subject to the requirements of section 272 in
addition to the requirements of section 260. We also noted that, in the
Non-Accounting Safeguards NPRM (61 FR 39397 (July 29, 1996)), we
tentatively concluded that the Commission's authority under sections
271 and 272 applies to interstate and intrastate interLATA information
services provided by BOCs or their affiliates. Further, we pointed out
that section 260 applies not only to BOCs and their affiliates, but
also to all incumbent LECs. Finally, apart from any intrastate
jurisdiction conferred by section 260 itself, we sought comment in the
NPRM on the extent to which the Commission may have the authority to
preempt inconsistent state regulations with respect to matters
addressed by section 260.
2. Comments
22. AT&T, ATSI, and Voice-Tel contend that section 260, and the
Commission's authority thereunder, apply to all telemessaging services
provided by incumbent LECs, including interstate and intrastate, as
well as interLATA and intraLATA, telemessaging services. ATSI contends
that any attempt to limit the applicability of section 260 would deny
providers of telemessaging a remedy against anticompetitive practices
that Congress intended to provide them. AT&T further contends that
section 260 is an independent grant of authority to the Commission and
is not restricted in any way by sections 271 and 272. Rather, AT&T
contends that sections 271 and 272 complement section 260 by imposing
additional requirements on the BOCs.
23. Some BOCs and state commissions, on the other hand, argue that
section 2(b) of the Communications Act and section 601(c) of the 1996
Act bar the Commission from exercising authority under section 260 with
respect to any intrastate telemessaging services absent an express
grant of authority from Congress. Some of these commenters contend that
nothing in section 260 gives the Commission authority over any
intrastate telemessaging services. Ameritech argues that section 260
grants the Commission limited jurisdiction over both interLATA and
intraLATA telemessaging services, but only to the extent necessary to
adjudicate complaints by other telemessaging providers that an
incumbent LEC has improperly subsidized its telemessaging services or
discriminated against other telemessaging services in violation of
section 260. BellSouth argues that, although sections 271 and 272 give
the Commission limited reach over intrastate interLATA telemessaging
services, such jurisdiction is not comprehensive and does not reach
intrastate intraLATA telemessaging services.
24. Several BOCs and state commissions claim that the Commission
may preempt state regulations and exercise jurisdiction over intrastate
telemessaging services only subject to the Louisiana PSC exception for
inseparably mixed interstate-intrastate communications. The New York
Commission and BellSouth further argue that the Commission currently
has no basis to make the showing necessary to preempt state regulation
of intrastate telemessaging services.
25. AT&T, MCI, and Voice-Tel contend that the Commission has
authority to preempt state regulatory requirements relating to
telemessaging services that are inconsistent with its policies and
rules. Voice-Tel and AT&T further argue that, because the interstate
and intrastate aspects of telemessaging services cannot be separated,
the Commission's jurisdiction over interstate telemessaging services
extends to such intrastate services as well.
26. Cincinnati Bell argues that the Commission should preempt state
regulations that restrict the ability of small and mid-sized incumbent
LECs to provide telemessaging services on an integrated basis.
3. Discussion
27. For the reasons set forth below, we conclude that section 260,
and the Commission's authority thereunder, apply to the provision of
intrastate as well as interstate telemessaging services. Consequently,
we find that section 2(b) of the Communications Act does not bar the
Commission from establishing regulations to clarify and implement the
requirements of section 260 that apply to intrastate services. We
conclude, therefore, that the rules we may establish to implement
section 260 are binding on the states, and that the states may not
impose regulations with respect
[[Page 7694]]
to incumbent LEC provision of telemessaging services that are
inconsistent with section 260 and the Commission's rules thereunder.
28. In the Non-Accounting Safeguards Order (62 FR 2927 (January 21,
1997)), we concluded that telemessaging is an information service that,
when provided by a BOC or its affiliate on an interLATA basis, is
subject to the requirements of section 272. We further concluded that
section 272 applies to both intrastate and interstate interLATA
information services. We have therefore already concluded that the
Commission has jurisdiction over certain aspects of intrastate
telemessaging services.
29. Section 260 not only imposes additional obligations on BOCs to
prevent unlawful subsidization, and discrimination in favor, of its
telemessaging service, but also extends its requirements beyond BOCs
and their affiliates to all incumbent LECs. We conclude that section
260 applies to the provision of all telemessaging services by incumbent
LECs, whether interstate or intrastate, and for BOCs, whether interLATA
or intraLATA. This conclusion is supported by the terms of the statute.
Specifically, section 260 prohibits an incumbent LEC from, among other
things, subsidizing its telemessaging service from its ``telephone
exchange service or its exchange access.'' ``Telephone exchange
service,'' as defined in section 3(47), is a primarily intrastate
service. As we noted in the Accounting Safeguards Order, this reference
to a primarily intrastate service clearly indicates that the scope of
section 260 encompasses intrastate matters.
30. We reject BellSouth's argument that section 260 does not apply
to intrastate intraLATA services. As discussed below, section 260,
unlike section 272, does not make a distinction between interLATA and
intraLATA services. Moreover, the terms in section 260 encompass both
interLATA and intraLATA services.
31. We further conclude that, given the jurisdiction granted by
section 260, the Commission also has jurisdiction under the
Communications Act to establish rules applicable to intrastate
telemessaging services. As noted above, sections 4(i), 201(b), and
303(r) of the Act authorize the Commission to adopt any rules it deems
necessary or appropriate to carry out its responsibilities under the
Act, so long as those rules are not otherwise inconsistent with the
Act. Nothing in section 260 bars the Commission from clarifying and
implementing the requirements of this section.
32. Our conclusion that the Commission has jurisdiction to
establish rules applicable to intrastate telemessaging services is
particularly appropriate where, as here, the Commission exercises an
adjudicatory function. Section 260(b) requires that the Commission
establish expedited procedures for the receipt and review of complaints
alleging violations of the nondiscrimination provisions in section
260(a), or regulations adopted pursuant thereto, that result in
``material financial harm'' to a provider of telemessaging service. As
in our discussion of section 274 above, we find that it serves the
public interest for us to clarify in advance the section 260
requirements that are imposed on incumbent LECs and that parties may
ask us to enforce later. Such clarifications will reduce uncertainty,
aid incumbent LECs in complying with the requirements of section 260,
and facilitate the prompt resolution of compliance disputes that may be
presented in complaint proceedings.
33. We reject the argument that section 2(b) of the Communications
Act requires the conclusion that section 260, and the Commission's
authority thereunder, apply only to the provision of interstate
telemessaging services. Rather, as discussed above with respect to
electronic publishing under section 274, we find that, in enacting
section 260 after section 2(b), and squarely addressing therein the
issues before us, Congress intended for section 260 to take precedence
over any contrary implications based on section 2(b).
34. We similarly are not persuaded that section 601(c) of the 1996
Act evinces an intent by Congress to preserve states' authority over
intrastate matters arising under section 260. Section 601(c) of the
1996 Act provides that the Act and its amendments ``shall not be
construed to modify, impair, or supersede Federal, State, or local law
unless expressly so provided in such Act or amendments.'' As discussed
above, we conclude that section 260 expressly modifies federal law, so
that both federal law, and the Commission's authority thereunder, apply
to both interstate and intrastate provision of telemessaging services.
C. Constitutional Issues
35. BellSouth and U S WEST raise constitutional concerns with
respect to our implementation of sections 260 and 274. BellSouth
contends that the Commission must be ``circumspect'' in its
construction of sections 260 and 274 because both the separate
affiliate requirement of section 272 that we proposed applying to BOCs'
interLATA telemessaging services and the separated affiliate
requirement of section 274 ``impose impermissible prior restraints on
BOCs' speech activities,'' in violation of the First Amendment.
Further, it maintains that sections 260 and 274, as well as other
sections of the Act, are unconstitutional ``bills of attainder'' to the
extent they single out BOCs by name and impose restrictions on them
alone. Recognizing that we have no discretion to ignore Congress'
mandate to apply sections 260 and 274, BellSouth urges us to construe
these sections, and others, narrowly. U S WEST concurs with BellSouth
and urges the Commission not to adopt any structural rules beyond the
express terms of the statute.
36. NAA, in reply, dismisses BellSouth's constitutional arguments.
It rejects as frivolous the argument that the electronic publishing
safeguards are an unconstitutional prior restraint on BOCs' speech
activities. It further states that the separated affiliate requirement
(1) is a ``reasonable approach to detecting and preventing cross-
subsidy and discrimination that does not unnecessarily burden the BOCs'
right to speak;'' (2) does not violate the First Amendment because it
expires four years after enactment of the Act and serves important
government interests; and (3) is not a bill of attainder because BOCs
are only singled out for ``temporary, narrowly-focused, economic
regulation.''
37. Although decisions about the constitutionality of congressional
enactments are generally outside the jurisdiction of administrative
agencies, we have an obligation under Supreme Court precedent to
construe a statute ``where fairly possible to avoid substantial
constitutional questions'' and not to ``impute to Congress an intent to
pass legislation that is inconsistent with the Constitution as
construed by the [Supreme Court].'' As BellSouth concedes, we have no
discretion to ignore Congress' mandate respecting these sections or any
other sections of the Act. Nevertheless, we find BellSouth's argument
to be without merit.
38. With respect to section 274, we reject the argument that
requiring BOCs to provide electronic publishing services through a
separated affiliate violates the First Amendment. BellSouth bases its
argument on an assertion that, as ``content-related'' services,
electronic publishing services are commercial speech entitled to First
Amendment protection. We conclude that, to the extent that BOC
provision of electronic publishing services constitutes speech for
First Amendment
[[Page 7695]]
purposes, the section 274 separated affiliate requirement neither
prohibits the BOCs from providing such services, nor places any
restrictions on the content of the information the BOCs may provide.
Instead, the section 274 separated affiliate requirement is a content-
neutral restriction on the manner in which BOCs may provide electronic
publishing services that are disseminated by means of a BOC's basic
telephone service. These restrictions address the important
governmental interest of protecting against improper cost allocation
and discrimination by the BOCs, and they do so in a narrowly-tailored,
content-neutral manner. Thus, we conclude that the separated affiliate
requirement imposed by section 274 on BOC provision of electronic
publishing services does not violate the First Amendment.
39. Similarly, we reject BellSouth and U S WEST's argument that
section 274 is an unconstitutional ``bill of attainder'' because the
statute singles out BOCs by name and imposes restrictions on them
alone. We conclude that section 274 is not an unconstitutional bill of
attainder simply because it applies only to the BOCs. Rather, judicial
precedent teaches that, in determining whether a statute amounts to an
unlawful bill of attainder, we must consider whether the statute
``further[s] nonpunitive legislative purposes,'' and whether Congress
evinced an intent to punish. As noted above, the section 274
restrictions on BOC provision of electronic publishing services are
temporary requirements aimed at protecting against improper cost
allocation and discrimination by the BOCs. Moreover, we find no
evidence, and BellSouth and US WEST have offered none, that would
support a finding that Congress enacted section 274 to punish the BOCs.
In fact, in enacting the 1996 Act, Congress freed BOCs from the terms
of an antitrust consent decree. Thus, we conclude that the section 274
restrictions imposed on BOCs do not violate the Bill of Attainder
Clause.
40. With respect to section 260, BellSouth raises constitutional
issues in this proceeding regarding the tentative conclusion in the
Non-Accounting Safeguards NPRM that, under section 272, BOCs must
provide interLATA telemessaging services through a separate affiliate.
We find no merit in BellSouth's arguments for the same reasons
discussed above and in the Non-Accounting Safeguards Order.
III. BOC Provision of Electronic Publishing--Section 274
A. Definition of Electronic Publishing
1. Electronic Publishing Services Under Section 274(h)
a. Background
41. Section 274(h)(1) defines ``electronic publishing'' as: the
dissemination, provision, publication, or sale to an unaffiliated
entity or person, of any one or more of the following: news (including
sports); entertainment (other than interactive games); business,
financial, legal, consumer, or credit materials; editorials, columns,
or features; advertising; photos or images; archival or research
material; legal notices or public records; scientific, educational,
instructional, technical, professional, trade, or other literary
materials; or other like or similar information.
Section 274(h)(2) also lists specific services that are excluded
from the definition of electronic publishing. These excepted services
include, among other things, common carrier provision of
telecommunications service, information access service, information
gateway service, voice storage and retrieval, electronic mail, certain
data and transaction processing services, electronic billing or
advertising of a BOC's regulated telecommunications services, language
translation or data format conversion, ``white pages'' directory
assistance, caller identification services, repair and provisioning
databases, credit card and billing validation for telephone company
operations, E 911 and other emergency assistance databases, and video
programming and full motion video entertainment on demand.
42. In the NPRM, we sought comment on how to distinguish the
services that are properly included in the definition of electronic
publishing in section 274(h)(1) from those services that are excluded
under 274(h)(2). We asked parties to identify any enhanced services
that BOCs currently provide that appear to meet the definition of an
electronic publishing service under section 274. To the extent it is
unclear whether a particular service, or a particular group of
services, is encompassed by the statutory definition of electronic
publishing, we invited parties to identify the basis for the ambiguity
and to make recommendations on how the service, or services, should be
classified. For example, we cited the Non-Accounting Safeguards NPRM,
which sought comment on whether we should classify as ``electronic
publishing'' services those services for which the carrier ``controls,
or has a financial interest in, the content of the information
transmitted by the service.''
43. In addition, we observed in the NPRM that, although electronic
publishing is specifically included in the definition of information
services, BOC provision of electronic publishing is explicitly exempted
from the separate affiliate and nondiscrimination requirements of
section 272 that apply to BOC provision of interLATA information
services. We noted that, in contrast to section 272, which applies only
to BOC provision of interLATA information services, section 274 does
not distinguish between the intraLATA and interLATA provision of
electronic publishing services. We sought comment, therefore, on
whether section 274 applies to BOC provision of both intraLATA and
interLATA electronic publishing services.
b. Comments
44. NAA asserts that the definition of electronic publishing in
section 274(h) is clear and detailed; therefore, it contends, there is
no need to anticipate ambiguous services at this time. Other commenters
agree that the definition of electronic publishing in section 274(h)(1)
is clear, but suggest that Commission clarification of some of the
exceptions to electronic publishing in section 274(h)(2) would be
appropriate. For example, several parties ask us to clarify that the
``gateway'' exception in section 274(h)(2)(C) includes access to a home
page that electronically links selected Internet sites or other home
pages. Similarly, they contend that introductory information regarding
an Internet service provider's services and electronic linkage to these
services should also be included in the ``gateway'' exception. In
addition, they contend that software browsers should be considered
``navigational systems,'' which are also excluded from the definition
of electronic publishing under section 274(h)(2)(C). AT&T notes,
however, that, even where particular BOC services are exempt from the
requirements of section 274, the separate affiliate requirements of
section 272 may still apply.
45. Some commenters also ask us to clarify that BOC transmission of
information that falls within the definition of electronic publishing
under section 274(h)(1) does not make the BOC's transmission of such
information subject to the requirements of section 274 unless the BOC
has control of, or a financial interest in, the content of the
information transmitted. Those situations where a BOC merely
[[Page 7696]]
provides access to another entity's content, they argue, should not be
considered electronic publishing.
c. Discussion
46. We find, as the commenters indicate, that electronic publishing
services may include services provided through the Internet or through
proprietary data networks. We also find that, although the definition
of electronic publishing in section 274(h) is quite detailed,
clarification of the ``gateway'' exception of section 274(h)(2)(C) is
appropriate. Section 274(h)(2)(C) provides that electronic publishing
shall not include:
The transmission of information as part of a gateway to an
information service that does not involve the generation or alteration
of the content of information, including data transmission, address
translation, protocol conversion, billing management, introductory
information content, and navigational systems that enable users to
access electronic publishing services, which do not affect the
presentation of such electronic publishing services to users.
We conclude, consistent with the comments on this issue, that a
BOC's provision of access to introductory World Wide Web home pages,
other types of introductory information, and software (such as
browsers) does not constitute the provision of electronic publishing
services under section 274(h)(2)(C). We find that, as long as a BOC
merely provides access to a home page, or an initial screen that does
not include any of the enumerated content types in section 274(h)(1),
it is engaged in the provision of ``gateway'' services that section
274(h)(2)(C) excludes from the definition of electronic publishing
services. Further, the statute expressly excludes ``introductory
information content'' from the definition of electronic publishing
services. Similarly, we find that end user software products, such as
World Wide Web browsers, to the extent they enable users ``to access
electronic publishing services'' and do not themselves incorporate the
content types listed in section 274(h)(1), constitute ``navigational
systems'' that are excepted from the definition of electronic
publishing. Further, we conclude that hypertext ``links,'' and other
pointers, from any gateway or navigational system to electronic
publishing content are similarly ``navigational'' systems and thus are
not electronic publishing services under section 274(h)(1).
47. Moreover, we find that, to the extent BOCs engage in activities
that are excluded from the definition of electronic publishing under
section 274(h), they are not subject to the joint marketing
restrictions of section 274(c) with respect to those activities. We
find, however, that certain activities that are excluded from the
definition of electronic publishing may still be information services
subject to the separate affiliate, nondiscrimination, and joint
marketing requirements of section 272. For example, although
``gateway'' services, as discussed above, are generally excluded from
the definition of electronic publishing services, in the Non-Accounting
Safeguards Order we found that certain BOC-provided Internet access
services may be interLATA information services subject to the
requirements of section 272.
48. As to services that are neither expressly included nor excluded
from the definition of electronic publishing, or services whose proper
classification may be otherwise ambiguous, it would be speculative for
us to determine at this time whether such services are electronic
publishing services. Rather, we find that the appropriate
classification of an ambiguous service will necessarily involve a fact-
specific analysis that is best performed on a case-by-case basis.
Moreover, we decline to adopt NAA's proposal that we rely solely on
whether such service involves ``the generation or alteration of the
content of information.'' Although we recognize that Congress used this
language in describing several exceptions to the definition of
electronic publishing, we do not find this fact to be dispositive in
itself. There is no indication in section 274 or its legislative
history that Congress intended the ``generation or alteration''
language to be the controlling factor in determining the nature of
ambiguous services. We may, nevertheless, take it into consideration in
any determination we make concerning the classification of an ambiguous
service.
49. As to the electronic publishing services described in section
274(h)(1), we conclude, for the reasons discussed below, that a BOC
must control, or have a financial interest in, the content of
information transmitted over its basic telephone service in order to be
subject to the requirements of section 274. We therefore agree with
those parties that argue that a BOC is not subject to section 274
requirements merely because it provides the transmission component of
an electronic publishing service offered by an unaffiliated entity to
end users. We find support for our conclusion in two of the exceptions
to the definition of electronic publishing--section 274(h)(2)(B), which
excepts from the definition of electronic publishing ``[t]he
transmission of information as a common carrier,'' and section
274(h)(2)(M), which excludes ``[a]ny other network service of a type
that is like or similar to these network services and that does not
involve the generation or alteration of the content of information.''
We note further that this ``control or financial interest'' test is
consistent with the definition of electronic publishing in the
Modification of Final Judgment (MFJ). The MFJ, among other things,
prohibited AT&T from engaging in electronic publishing over its own
transmission facilities. It defined ``electronic publishing'' as the
``provision of any information which AT&T or its affiliates has, or has
caused to be, originated, authored, compiled, collected, or edited, or
in which it has a direct or indirect financial or proprietary interest,
and which is disseminated to an unaffiliated person through some
electronic means.'' See United States v. Western Electric, 552 F. Supp.
131, 180-81 (D.D.C. 1982) (emphasis added), aff'd sub nom. Maryland v.
United States, 460 U.S. 1001 (1983). As discussed below, however,
because we received very few comments on the exact meaning of
``control'' and ``financial interest,'' we are seeking additional
comment on this issue in a Further Notice of Proposed Rulemaking
(``FNPRM'').
50. Finally, we conclude that section 274 applies to a BOC's
provision of both intraLATA and interLATA electronic publishing
services. Nothing in the statute or its legislative history suggests
that Congress intended to distinguish between intraLATA and interLATA
electronic publishing services. We therefore agree with those
commenters that argue that, if Congress had intended to distinguish
between intraLATA and interLATA electronic publishing as it did in
describing information services subject to section 272, it would have
done so.
2. Dissemination by Means of ``Basic Telephone Service''
a. Background
51. Section 274 prescribes the terms under which a BOC may offer
electronic publishing. Section 274(a) states that no BOC or BOC
affiliate ``may engage in the provision of electronic publishing that
is disseminated by means of such [BOC's] or any of its affiliates'
basic telephone service, except that nothing in this section shall
prohibit a separated affiliate or electronic publishing joint venture
operated in accordance with
[[Page 7697]]
this section from engaging in the provision of electronic publishing.''
In the NPRM, we tentatively concluded that a BOC or BOC affiliate may
engage in the provision of electronic publishing services disseminated
by means of a BOC or its affiliate's basic telephone service only
through a ``separated affiliate'' or an ``electronic publishing joint
venture.''
b. Comments
52. No commenters disagree with our tentative conclusion that a BOC
or BOC affiliate may engage in the provision of electronic publishing
services disseminated by means of a BOC or its affiliate's basic
telephone service only through a ``separated affiliate'' or an
``electronic publishing joint venture.'' The majority of BOCs point
out, however, that electronic publishing not disseminated via the basic
telephone service of a BOC or its affiliate is not subject to the
requirements of section 274. For example, PacTel maintains that a BOC
or its affiliate may engage in the provision of electronic publishing
service disseminated by means of telephone exchange service or
facilities provided by a competitive wireline telephone service
provider without having to create a separated affiliate or electronic
publishing joint venture under section 274(a).
53. Similarly, Ameritech asserts, and SBC agrees, that if a BOC
only provides exchange access, and not basic telephone service, it is
not subject to section 274 requirements. For example, Ameritech
contends that, if a BOC originates or terminates a toll call
disseminating electronic publishing information, the BOC is providing
``exchange access,'' not exchange service. In response, AT&T asserts
that ``basic telephone service'' under section 274 extends to any
electronic publishing disseminated by means of either the BOC or its
affiliate's local exchange service or local exchange facilities. This
definition, AT&T argues, would include the exchange access service of a
BOC or its affiliate.
c. Discussion
54. We affirm our tentative conclusion that, pursuant to the plain
language of section 274(a), a BOC or BOC affiliate may engage in the
provision of electronic publishing services disseminated by means of a
BOC or its affiliate's basic telephone service only through a
``separated affiliate'' or an ``electronic publishing joint venture.''
Moreover, in reading section 274(a) together with the definition of
``basic telephone service'' in section 274(i)(2), we conclude that a
BOC or BOC affiliate is not required to provide electronic publishing
services through a separated affiliate or electronic publishing joint
venture if it disseminates its electronic publishing via the basic
telephone service of a competing wireline local exchange carrier or
commercial mobile radio service provider. We find that dissemination
via the basic telephone service of competing, unaffiliated providers
significantly reduces the ability of the BOC to allocate costs
improperly and to discriminate in favor of its affiliate. We therefore
decline to apply the requirement that a BOC provide electronic
publishing services through a separated affiliate or electronic
publishing joint venture where Congress did not. We also conclude that,
with respect to electronic publishing services provided through the
Internet, ``dissemination'' means the transmission of information via a
BOC or its affiliate's basic telephone service to the Internet, rather
than the transmission of information to the end user. Thus, a BOC that
is providing Internet access services to end users, and nothing more,
is not engaged in the provision of electronic publishing pursuant to
section 274.
55. We reject Ameritech's assertion, however, that a BOC's
dissemination of electronic publishing services through its exchange
access service is exempt from the requirements of section 274. Pursuant
to section 274(a), BOCs that provide electronic publishing services
disseminated via their own ``basic telephone service'' must do so
through a separated affiliate or electronic publishing joint venture.
Section 274(i)(2) defines ``basic telephone service'' as ``any wireline
telephone exchange service, or wireline telephone exchange service
facility, provided by a [BOC] in a telephone exchange area.'' We find
that, when a BOC provides exchange access service, it uses its
telephone exchange service facilities. Indeed, ``exchange access'' is
defined in section 153(16) as ``the offering of access to telephone
exchange services or facilities for the purpose of the origination or
termination of telephone toll services.'' Since the definition of
``basic telephone service'' in section 274(i)(2) encompasses both the
telephone exchange service and the exchange service facility, the use
of exchange access service, which in turn uses the BOC's telephone
exchange service facilities, for the dissemination of electronic
publishing falls within this definition and must be provided in
accordance with the requirements of section 274. This conclusion is
appropriate as a matter of policy, too, since the BOCs' near-monopoly
over exchange access service as well as local exchange service gives
them an incentive to allocate costs improperly and discriminate against
unaffiliated electronic publishing entities.
56. We conclude therefore that, to be engaged in the provision of
electronic publishing services subject to section 274, the BOC must
disseminate the information via its basic telephone service (as defined
by 274(i)(2)) and have control of, or a financial interest in, the
content of the information being provided. Similarly, we also conclude
that control of, or a financial interest in, the content of the
information alone, without BOC dissemination of information, is not
electronic publishing under section 274.
57. We note that, to the extent a BOC disseminates electronic
publishing services through the facilities of a competing wireline
local exchange carrier, or commercial mobile service provider, and thus
is not required to provide such services through a separated affiliate
or electronic publishing joint venture, it may still be subject to the
joint marketing prohibition of section 274(c)(1)(B). As discussed
below, this section contemplates situations in which a BOC affiliate is
involved in the provision of services that are ``related to'' the
provision of electronic publishing, but does not provide electronic
publishing services disseminated by means of a BOC or its affiliate's
basic telephone service.
B. ``Separated Affiliate'' and ``Electronic Publishing Joint Venture''
Requirements of Section 274
1. The ``Operated Independently'' Requirement of Section 274(b)
a. Background
58. Section 274(b) states that a separated affiliate or electronic
publishing joint venture established to provide electronic publishing
services pursuant to section 274(a) shall be ``operated independently''
from the BOC. Subsections 274(b) (1)-(9) then list nine structural
separation and transactional requirements that apply to the separated
affiliate or electronic publishing joint venture. In the NPRM we
addressed only the structural separation requirements of section 274(b)
and only those requirements are addressed herein. Subsections 274(b)
(1), (3), (4), (8), and (9) are transactional requirements that are
addressed in the Accounting Safeguards Order. We observed in the NPRM
that the structural separation requirements of section 274(b) do not
refer, in all
[[Page 7698]]
instances, to both separated affiliates and electronic publishing joint
ventures. We, therefore, sought comment on whether Congress intended
the phrase ``operated independently'' to have a different meaning for
separated affiliates and for electronic publishing joint ventures. We
also sought comment in the NPRM on whether the Commission should adopt
additional regulatory requirements to ensure compliance with the
``operated independently'' requirement of section 274(b).
b. Comments
59. Several commenters argue that Congress intended the phrase
``operated independently'' to have the same meaning for separated
affiliates and electronic joint publishing ventures when subsections
274(b) (1)-(9) refer to both separated affiliates and electronic
publishing joint ventures. They note, however, that some of the
requirements of section 274(b) do not apply to electronic publishing
joint ventures. Where the statutory language does not refer to both
separated affiliates and electronic publishing joint ventures, these
commenters maintain that the phrase ``operated independently'' should
not be read to render all the requirements in subsections (b)(1)-(9)
applicable to both separated affiliates and electronic publishing joint
ventures; they contend, for example, that sections 274(b)(5) and
274(b)(7) are inapplicable to electronic publishing joint ventures
since those subsections refer only to separated affiliates. Other
commenters argue that the language ``operated independently'' compels
us to apply all of the section 274(b) requirements to separated
affiliates and electronic publishing joint ventures.
60. As to the issue of whether we should adopt regulatory
requirements to ensure compliance with the ``operated independently''
requirement of section 274(b), BOCs and several trade associations
argue that the structural and transactional safeguards of section 274
are clear, self-executing and comprehensive. They assert that Congress
could have expressly provided for additional requirements had it deemed
them necessary to ensure the operational independence of BOCs from
their separated affiliates and electronic publishing joint ventures.
They further assert that the phrase ``operated independently'' is not a
separate substantive restriction, as their competitors maintain, but
that subsections 274(b) (1)-(9) reflect Congress' determination of the
requirements necessary to achieve operational independence. Several of
these commenters observe that this position is consistent with the
Commission's interpretation of the same language in Computer II and the
cellular separation rules, where ``operate independently'' is not given
an independent meaning. Finally, several commenters assert that
Congress did not grant the Commission authority to adopt additional
regulations in section 274(b).
61. Other commenters contend that the inclusion of the phrase
``operated independently,'' in addition to the requirements in
subsection 274(b) (1)-(9), supports the conclusion that we are
authorized to and should adopt additional regulations to ensure
compliance with section 274(b). They maintain that the ``operated
independently'' language is a separate substantive requirement from
those restrictions in subsections 274(b) (1)-(9). These commenters urge
us to read the ``operated independently'' language as authorizing us to
adopt additional rules such as those adopted in Computer II.
Specifically, they urge us to adopt regulations precluding the
separated affiliated or joint venture from: (1) Leasing or sharing
physical space collocated with regulated transmission facilities used
to provide basic service; (2) sharing computer facilities with the
local exchange carrier; (3) developing software jointly with the
regulated entity; and (4) marketing any other equipment or services to
any affiliate. Time Warner further proposes that we adopt regulations
precluding the separated affiliate or electronic publishing joint
venture from constructing, owning or operating its own transmission
facilities, thereby requiring the separated affiliate or joint venture
to purchase its capacity from the regulated carrier under tariff and
ensuring ``that local exchange monopoly power is not leveraged into the
provision of electronic publishing.''
c. Discussion
62. We conclude that the ``operated independently'' requirement of
section 274(b) obligates a separated affiliate to comply with all the
requirements of subsections 274(b) (1)-(9). We further conclude that an
electronic publishing joint venture, to comply with the ``operated
independently'' requirement of section 274(b), need only satisfy the
requirements of subsections 274(b) (1)-(4), (6), and (8)-(9), since
subsections 274(b)(5) and 274(b)(7) specifically refer to separated
affiliates and not to electronic publishing joint ventures. We discuss
more fully below the structural separation requirements of section
274(b), i.e., subsections 274(b) (2), and (5)-(7). As noted above, the
transactional requirements of section 274(b), i.e., subsections 274(b)
(1), (3), (4), (8), and (9), are discussed in the Accounting Safeguards
Order.
63. We reject the arguments made by certain commenters that the
phrase ``operated independently'' is a separate substantive restriction
that requires us to apply subsections 274(b) (1)-(9) to both separated
affiliates and electronic publishing joint ventures even where the
statute refers only to a separated affiliate. We see no reason for
Congress to have expressly referred in section 274(b)(5) and section
274(b)(7) to separated affiliates if the restrictions in those
subsections were intended to apply to both separated affiliates and
electronic publishing joint ventures.
64. We also reject the similar argument that the phrase ``operated
independently'' is a separate substantive restriction authorizing us to
adopt additional restrictions beyond those in subsections 274(b) (1)-
(9). There is no evidence in the statute or its legislative history
that Congress intended the restrictions in section 274(b) merely to be
a list of minimum requirements that need to be supplemented by
additional rules to be imposed on separated affiliates or electronic
publishing joint ventures. We find, therefore, that the ``operated
independently'' requirement in section 274(b) is satisfied if a BOC and
its separated affiliate or electronic publishing joint venture comply
with the applicable restrictions in subsections 274(b) (1)-(9), as
noted above. While we decline to adopt additional restrictions beyond
those in subsections 274(b) (1)-(9), we reject the argument that
Congress did not grant the Commission the authority to do so.
65. This interpretation of the ``operated independently''
requirement in section 274(b) is not inconsistent with our
determination in the Non-Accounting Safeguards Order that the section
272(b)(1) ``operate independently'' provision imposes requirements
beyond those contained in subsections 272(b)(2)-(5). The ``operated
independently'' requirement in section 274(b) is followed by nine
substantive restrictions that we read as the criteria to be satisfied
to ensure operational independence between a BOC and its electronic
publishing entity created pursuant to section 274(a). In contrast, the
``operate independently'' provision in section 272 appears in
subsection 272(b)(1), which is one of five separate substantive
requirements in section 272(b).
[[Page 7699]]
2. Section 274(b)(2)
a. Background
66. Section 274(b)(2) provides that a separated affiliate or
electronic publishing joint venture and the BOC with which it is
affiliated shall ``not incur debt in a manner that would permit a
creditor of the separated affiliate or joint venture upon default to
have recourse to the assets of the [BOC].'' We sought comment in the
NPRM on the types of activities a BOC, a separated affiliate, or an
electronic publishing joint venture are precluded from engaging in
under section 274(b)(2). We tentatively concluded that a BOC may not
cosign a contract, or any other instrument, with a separated affiliate
or an electronic publishing joint venture by which it would incur debt
in violation of section 274(b)(2). We also sought comment on: whether
this subsection affects a separated affiliate differently than an
electronic publishing joint venture because of their different
corporate relationships to the BOC, and whether we should establish
specific requirements regarding the types of activities contemplated by
section 274(b)(2).
b. Comments
67. A number of commenters generally agree with our tentative
conclusion that section 274(b)(2) prohibits a BOC from cosigning with a
separated affiliate or an electronic publishing joint venture a
contract, or any other instrument, that allows a creditor, upon
default, to have recourse to the assets of the BOC. AT&T and MCI
maintain that we should also interpret section 274(b)(2) to prohibit a
BOC's parent holding company from co-signing a debt of a separated
affiliate or electronic publishing joint venture. The BOCs, in reply,
assert that interpreting section 274(b)(2) to preclude a BOC's parent
company from cosigning a contract or any other instrument with a BOC's
separated affiliate or electronic publishing joint venture is neither
supported by the statutory language nor public policy. They further
state that there is no need for additional regulations to effectuate
section 274(b)(2).
c. Discussion
68. As stated in the NPRM, we find that the intent of section
274(b)(2) is to protect BOC local exchange and exchange access service
subscribers from bearing the cost of default by BOC affiliates. We
adopt our tentative conclusion that section 274(b)(2) prohibits a BOC
from cosigning with a separated affiliate or an electronic publishing
joint venture a contract, or any other instrument, that would incur
debt in a manner that grants the creditor recourse, upon default,
against the assets of a BOC. Consistent with this conclusion, we
further conclude that a BOC's parent is precluded from cosigning a
contract or other instrument for a BOC's separated affiliate or
electronic publishing joint venture, if the effect is to provide its
creditor with recourse, upon default, to a BOC's assets. We reject,
however, the arguments urging us to extend the restrictions in section
274(b)(2) to preclude a BOC's section 274 separated affiliate or
electronic publishing joint venture from incurring debt in a manner
that would permit a creditor, upon default, to have recourse to the
assets of a BOC's parent holding company, provided that this recourse
does not effectively result in recourse to the assets of the BOC. The
text of the statute does not support the proposed restriction.
Moreover, it would leave section 274 separated affiliates and
electronic publishing joint ventures at a disadvantage as compared with
other electronic publishing companies that are permitted to rely upon
the credit of their parent corporations.
69. We decline to apply this section differently as to separated
affiliates and electronic publishing joint ventures. No arguments were
advanced supporting the need for different treatment with respect to
these alternate vehicles for providing electronic publishing services,
and we see no evidence at this time indicating that this subsection
affects these entities differently. In this regard we agree with SBC
that ``no useful purpose would be served by * * * speculating as to
whether the subsection might affect a separated affiliate differently
than a joint venture,'' and that we should proceed on a case-by-case
basis, rather than adopt a ``one size fits all'' rule.
70. We reject AT&T's proposal that we require contracts or other
instruments through which a separated affiliate or electronic
publishing joint venture obtains credit to provide expressly that the
creditor has no recourse either to the assets of a BOC or to the assets
of the parent holding company of a BOC. As stated above, we do not read
section 274(b)(2) to preclude a creditor of a separated affiliate or
electronic publishing joint venture from having recourse, upon default,
to the assets of a BOC parent holding company. Further, given the
clarity of section 274(b)(2), we see no need to adopt a rule at this
time requiring contracts through which a separated affiliate or
electronic publishing joint venture obtains credit to provide expressly
that the creditor has no recourse to the assets of a BOC. BOCs,
nevertheless, may include such a provision in their contracts, if they
so choose.
3. Section 274(b)(5) and Shared Services
a. Background
71. Section 274(b)(5) provides that a separated affiliate and a BOC
shall ``(A) have no officers, directors, and employees in common after
the effective date of this section; and (B) own no property in
common.'' We tentatively concluded in the NPRM that, since this
subsection does not specifically refer to electronic publishing joint
ventures, BOCs are not precluded from sharing officers, directors, and
employees with an electronic publishing joint venture. We also
tentatively concluded in the NPRM that section 274(b)(5) does not
preclude a BOC from owning property in common with an electronic
publishing joint venture.
72. We also sought comment on the extent of the separation between
a BOC and a separated affiliate required by section 274(b)(5)(A). We
noted, for example, ``that section 274(c)(2) permits joint marketing
activities between a BOC and either a separated affiliate or electronic
publishing joint venture under certain conditions.'' With respect to a
BOC and a separated affiliate, we sought comment on ``whether, to the
extent that they are engaged in permissible joint marketing activities,
the separated affiliate may share marketing personnel with the BOC.''
We further sought comment on ``how BOCs may engage in joint marketing
activities with a separated affiliate pursuant to section 274(c)(2)(A)
if they cannot share marketing personnel.''
73. We invited comment on the types of property encompassed by the
phrase ``property in common.'' We tentatively concluded that section
274(b)(5)(B) prohibits a BOC and its separated affiliate from jointly
owning goods, facilities, and physical space. We also tentatively
concluded that it prohibits the joint ownership of telecommunications
transmission and switching facilities, one of the separation
requirements we adopted for independent LECs in the Competitive Carrier
Fifth Report and Order (49 FR 34824 (September 4, 1984)). Finally, we
sought comment on whether the section 274(b)(5) prohibition on joint
ownership of property between a BOC and its separated affiliate also
precludes a BOC and a separated affiliate from sharing the use of
property owned by one entity or the other and from jointly leasing any
property.
[[Page 7700]]
b. Comments
74. Applicability of Section 274(b)(5) to Electronic Publishing
Joint Ventures. The BOCs and NAA agree with our tentative conclusion
that section 274(b)(5) does not preclude a BOC from having officers,
directors, or employees in common with an electronic publishing joint
venture. These parties also agree with our tentative conclusion that
this section does not bar a BOC from owning property in common with its
electronic publishing joint venture. Other commenters disagree with our
tentative conclusions. MCI and Time Warner maintain that section
274(b)(5) should apply to both separated affiliates and electronic
publishing joint ventures and that interpreting this section to apply
only to BOCs and their separated affiliates would undermine what they
consider to be the separate substantive ``operate independently''
requirement of section 274(b). AT&T recognizes that section 274(b)(5),
on its face, does not prohibit a BOC from sharing common personnel or
owning property in common with an electronic publishing joint venture,
but argues that we have authority to proscribe such sharing
arrangements or ownership under section 274(b)(5), if necessary to
ensure compliance with the ``operated independently'' language.
75. Extent of the Separation Required Between a BOC and a Separated
Affiliate. Several BOCs state that section 274(b)(5)(A) should not be
interpreted to act as a limitation upon the permissible joint marketing
activities in section 274(c)(2). They contend that it is not necessary
for a BOC and its separated affiliate to have employees in common to
engage in the joint marketing activities permitted by section
274(c)(2). According to these commenters, employees of one entity may
perform inbound telemarketing or referral services permitted under
section 274(c)(2)(A) and (B) for the other entity.
76. SBC argues that a BOC and a separated affiliate, to the extent
they engage in permissible joint marketing activities, should be
allowed to employ individuals in common. Specifically, it states that
``where there is a conflict between the authority conferred by
[s]ection 274(c)(2) and the general operational independence
requirements of Section 274(b), the former, more specific provisions
should control.''
77. AT&T states that section 274(b)(5) ``prohibit[s] BOC personnel
from participating in the operation, planning, marketing or other
activities of the separated affiliate, and vice versa * * *.'' MCI
states that a BOC should only be allowed to provide telemarketing
services pursuant to nondiscriminatory, publicly disclosed contracts.
78. ``Property in Common.'' No commenters oppose and some
commenters agree with our tentative conclusion that section
274(b)(5)(B) prohibits a BOC and its separated affiliate from jointly
owning goods, facilities, and physical space. They further agree that
this section prohibits the joint ownership of telecommunications
transmission and switching facilities.
79. Shared Use or Joint Leasing of Property. The BOCs argue that
section 274(b)(5)(B) does not prohibit a BOC and its separated
affiliate from sharing the use of property owned by one of the
entities, or from jointly leasing property. They maintain that section
274(b)(5)(B) pertains only to ownership of property. Several BOCs note
that potential concerns arising from shared use of property are
addressed by the requirements of section 274(b)(3). AT&T and Time
Warner, on the other hand, urge us to interpret section 274(b)(5)(B) to
prohibit a BOC and its separated affiliate both from sharing property
owned by one of the entities and from jointly leasing property. MCI
does not address whether this section permits joint leasing of
property. It states, however, that joint use of property would invite
the improper allocation of costs against which the separated affiliate
requirement is intended to protect. MCI and Time Warner specifically
contend that a separated affiliate should not be permitted to collocate
its equipment with BOC local exchange and exchange access equipment or
to share computer facilities.
80. Sharing of Services. NYNEX and Ameritech argue that neither the
Act nor its legislative history can be read to prohibit a BOC and its
separated affiliate from utilizing the administrative and corporate
governance functions provided by their parent holding company. AT&T
argues that we should prohibit, pursuant to section 274(b)(5), a BOC
from establishing a second affiliate to perform services or own
property for both the BOC and its separated affiliate. MCI, in reply to
the BOCs' comments, states that we should preclude the sharing of in-
house functions, either by having one entity perform such functions for
the other or by having another affiliate, or the parent, perform them
for both a BOC and its separated affiliate.
81. Other Activities. AT&T argues that we ``should prohibit the
BOCs from using any compensation system that directly or indirectly
bases the compensation of BOC officers, directors, or other employees
on the performance of the affiliate, or vice versa.'' The BOCs
generally reply that there is no statutory basis for such a
requirement, which would effectively preclude BOCs from offering stock
options, other forms of deferred compensation, and bonuses which are
commonly used in industry and frequently are based, in part, upon the
performance of entities within a corporate family.
c. Discussion
82. Applicability of Section 274(b)(5) to Electronic Publishing
Joint Ventures. We adopt our tentative conclusion that section
274(b)(5)(A) does not preclude a BOC from having officers, directors,
and employees in common with an electronic publishing joint venture. We
also adopt our tentative conclusion that section 274(b)(5)(B) does not
preclude a BOC from owning property in common with an electronic
publishing joint venture. Congress expressly limited the scope of these
restrictions to a BOC's separated affiliate. Moreover, we find no basis
in this record for extending these restrictions to a BOC's electronic
publishing joint venture. This determination is consistent with our
finding above that the phrase ``operated independently'' in section
274(b) is not a separate substantive restriction and, therefore, does
not provide a basis for making section 274(b)(5) applicable to
electronic publishing joint ventures.
83. Extent of the Separation Required Between a BOC and a Separated
Affiliate. We find that section 274(b)(5)'s provision barring a BOC and
its separated affiliate from having ``officers, directors, and
employees in common'' does not limit the permissible joint activities
set forth in section 274(c)(2). As certain commenters note, it is not
necessary for a BOC and its separated affiliate to have employees in
common to engage in the joint activities permitted under section
274(c)(2). For this reason, we reject those comments urging us to read
section 274(c)(2) as allowing a BOC and its separated affiliate to have
personnel in common for the purpose of engaging in permissible joint
activities. Such an exception to the prohibition in section 274(b)(5)
is not necessary to give effect to sections 274(b)(5) and 274(c)(2) and
is not supported by the statutory language. While our interpretation of
the interplay between section 274(b)(5) and section 274(c)(2) may
result in some reduced efficiency in engaging in the joint activities
permitted under section 274(c)(2), we are not convinced that it will be
substantial enough to warrant our reading into section 274(b)(5) an
[[Page 7701]]
exception where none exists in the statutory language.
84. ``Property in Common.'' We adopt our tentative conclusion that
section 274(b)(5) prohibits a BOC and its separated affiliate from
jointly owning goods, facilities, and physical space, including
telecommunications transmission and switching facilities. The
prohibition against joint ownership of goods, facilities and physical
space is clear on the face of the statute. Moreover, none of the
commenters disagree with this tentative conclusion.
85. Shared Use or Joint Leasing of Property. We agree with the BOCs
that the statutory prohibition in section 274(b)(5) does not preclude a
BOC and its separated affiliate from either sharing the use of property
owned by either a BOC or its separated affiliate or jointly leasing
property. For example, we find that section 274(b)(5) permits a
separated affiliate to collocate its equipment in end offices or on
other property owned or controlled by the BOC, as long as such
collocation agreements satisfy section 274(b)(3). We also find that
this section permits a BOC and its separated affiliate to contract with
each other for the use of joint transmission and switching equipment,
again subject to the requirements of section 274(b)(3). Those
commenters arguing for an expanded interpretation of ``own'' to include
a prohibition against shared use of property and joint leasing of
property offer no statutory support for their position. We are
unwilling to assume that Congress intended the prohibition against
ownership of property in section 274(b)(5) to include leaseholds and
the shared use of property owned by either a BOC or its separated
affiliate. Further, we find that allowing shared use of property and
joint leases between a BOC and its separated affiliate enables the BOC
to take advantage of economies of scale and scope. Concerns about
anticompetitive behavior can be addressed through the transactional
requirements of section 274(b)(3), the nondiscrimination requirements
of section 274(d), and the Commission's affiliate transaction rules.
86. Sharing of Services. The prohibition in section 274(b)(5)(A)
against a BOC and its separated affiliate having ``officers, directors,
and employees in common'' is worded slightly differently from the
requirement in section 272(b)(3) that a BOC and its separate affiliate
have ``separate officers, directors, and employees.'' We interpret,
however, these two provisions to have the same substantive meaning.
Both sections 272 and 274 preclude the same person from serving
simultaneously as an officer, director, or employee of both a BOC and
its section 272 or 274 affiliate, respectively. Thus, an individual may
not be on the payroll of both entities. Based on the record before us,
we decline to read section 274(b)(5)(A) to prohibit a BOC and its
separated affiliate from utilizing the administrative and corporate
governance functions provided by their parent holding company or
another BOC affiliate. Section 274 does not address whether the parent
company of a BOC and its separated affiliate or another BOC affiliate
is permitted to perform functions for both a BOC and its separated
affiliate. There is no basis in the record for concluding that
administrative and corporate governance functions provided to a BOC and
its separated affiliate by a parent company or another BOC affiliate
would result in the BOC and its separated affiliate violating section
274(b)(5)(A)'s prohibition on having ``officers, directors, and
employees in common.'' Further, a parent company that performs services
for both a BOC and its section 274 separated affiliate must fully
document and properly apportion the costs incurred in furnishing such
services.
87. Other Activities. We reject AT&T's request that we interpret
section 274(b)(5)(A) to prohibit compensation schemes that base the
level of remuneration of BOC officers, directors, and employees on the
performance of the section 274 separated affiliate, or vice versa. We
find that tying the compensation of an employee of a section 274
separated affiliate to the performance, for example, of the BOC's
parent holding company and all of its enterprises as a whole, including
the performance of the BOC, does not make that individual an employee
of the BOC for purposes of section 274(b)(5)(A). Nor does such a
compensation arrangement for a BOC employee make that individual an
employee of the section 274 separated affiliate. Further, we agree with
those commenters stating that such a scheme would effectively preclude
BOCs from offering stock options, other forms of deferred compensation,
and bonuses, which are commonly used in industry and frequently are
based, in part, upon the performance of entities within a corporate
family. Indeed, as PacTel notes, ``[i]t is common for corporations to
have compensation systems that base a portion of compensation,
especially for officers and directors, on the performance of the
corporation as a whole. This is consistent with the fiduciary duty of
corporate officers and directors * * * .''
4. Section 274(b)(6)
a. Background
88. Section 274(b)(6) states that a separated affiliate or
electronic publishing joint venture and the BOC with which it is
affiliated shall ``not use for the marketing of any product or service
of the separated affiliate or joint venture, the name, trademarks, or
service marks of an existing [BOC] except for names, trademarks, or
service marks that are owned by the entity that owns or controls the
[BOC].'' We tentatively concluded that this provision is sufficiently
precise as to make unnecessary the adoption of implementing
regulations.
b. Comments
89. Time Warner asks us to clarify that the prohibition in section
274(b)(6) prevents a BOC from sharing a name, trademark, or service
mark with the Regional Bell Holding Company (``RBOC''). It argues that
the exception in section 274(b)(6) permitting the separated affiliate
or electronic publishing joint venture to use the name, trademark, or
service mark of the RBOC would ``vitiate the general prohibition
against cross-labeling if the BOC affiliates or joint ventures were
permitted to use names, trademarks, or service marks that are shared by
an operating company and the [RBOC].''
90. The BOCs and YPPA, in reply, state that Time Warner's
suggestion is unsupported by the statutory language and would eliminate
the express statutory exception Congress created in section 274(b)(6).
c. Discussion
91. We adopt our tentative conclusion that section 274(b)(6) does
not require the adoption of implementing regulations. We find that Time
Warner's suggestion is contradicted by the statutory language and
legislative history that expressly allow a separated affiliate or
electronic publishing joint venture to use ``the names, trademarks, or
service marks that are owned by the entity that owns or controls the
[BOC].'' We agree with BellSouth that the adoption of Time Warner's
suggestion ``would require the Commission to assume that Congress was
unaware that four of the seven [RBOCs] share their names with their BOC
subsidiaries.'' We decline to make this assumption.
[[Page 7702]]
5. Section 274(b)(7)
a. Background
92. Section 274(b)(7) states that a BOC is not permitted ``(A) to
perform hiring or training of personnel on behalf of a separated
affiliate; (B) to perform the purchasing, installation, or maintenance
of equipment on behalf of a separated affiliate, except for telephone
service that it provides under tariff or contract subject to the
provisions of this section; or (C) to perform research and development
on behalf of a separated affiliate.'' Since this subsection does not
specifically refer to electronic publishing joint ventures, we
tentatively concluded that BOCs are permitted to perform these
functions on behalf of an electronic publishing joint venture. In
addition, we sought comment on whether, ``[t]o the extent that a BOC
and a separated affiliate are engaged in permissible joint marketing
activities,'' a BOC may perform the hiring or training of marketing
personnel on behalf of its separated affiliate under section
274(b)(7)(A). We also sought comment on the type of ``equipment''
encompassed by section 274(b)(7)(B). We asked, for example, whether a
BOC providing telephone service to a separated affiliate under tariff
or contract subject to the requirements of section 274 is permitted
under section 274(b)(7)(B) to purchase, install, and maintain
transmission equipment for the separated affiliate.
93. With respect to section 274(b)(7)(C), we asked whether there
are any circumstances under which a BOC may share its research and
development with its separated affiliate. Specifically, we sought
comment on whether this provision simply limits a BOC's ability to
perform research and development for the sole and exclusive use of a
separated affiliate, or whether it requires a BOC to refrain from
performing any research and development that may be potentially useful
to a separated affiliate. We also asked about other ways in which this
provision may limit a BOC's ability to perform research and development
for the separated affiliate.
b. Comments
94. Applicability of Section 274(b)(7) to Electronic Publishing
Joint Ventures. The BOCs and NAA agree with our tentative conclusion
that BOCs are permitted to perform the functions in section 274(b)(7)
on behalf of an electronic publishing joint venture. Time Warner and
AT&T disagree with our tentative conclusion. They maintain, consistent
with their argument respecting section 274(b)(5), that section
274(b)(7) should apply to both a separated affiliate and an electronic
publishing joint venture. They state that this interpretation is
necessary to give effect to what they consider a separate substantive
requirement that a BOC be ``operated independently'' from its
electronic publishing joint venture.
95. Relationship Between Section 274(b)(7)(A) and Section
274(c)(2). Several commenters argue that there is no exception in
section 274(b)(7) for permissible joint marketing activities in section
274(c)(2) and, therefore, we should not permit a BOC, when engaged in
permissible joint marketing with its separated affiliate, to perform
the hiring or training of marketing personnel on behalf of the
separated affiliate. SBC, however, argues that we should allow a BOC to
hire and train marketing personnel to carry out the permissible joint
marketing activities in section 274(c)(2). It states that this approach
is not anticompetitive because teaming or other business arrangements
entered into by a BOC pursuant to section 274(c)(2)(B) must be
conducted on a nondiscriminatory basis.
96. The Type of ``Equipment'' Encompassed by Section 274(b)(7)(B).
The majority of commenters agree that section 274(b)(7)(B) permits a
BOC to purchase, install, and maintain transmission equipment for its
separated affiliate if the BOC is providing telephone service to the
separated affiliate under tariff or contract. Bell Atlantic urges us to
differentiate between ``provision of a service that uses equipment
owned by the BOC, an arrangement specifically permitted under this
subsection, from the purchasing, installation, and maintenance of
equipment 'on behalf of' the affiliate, which is barred.'' The
distinction, according to Bell Atlantic, is that in the latter
situation, the equipment would be owned by the separated affiliate. U S
WEST similarly states that this section prohibits a BOC from providing
any depreciable equipment to be used by its separated affiliate in
conducting the affiliate's business, but that it does not prohibit a
BOC from providing services to its section 274 affiliate operation.
Several other BOCs argue that the provision of telephone services
includes purchasing, installation, or maintenance of transmission
equipment, and any other equipment necessary or incidental to providing
such service. They note that section 274(b)(3) ensures that there are
ample safeguards that such transactions are conducted at arm's length.
Other commenters state only that section 274(b)(7)(B) requires BOCs to
provide telephone service pursuant to section 274(d). Time Warner
specifically urges us to require BOCs to provide unaffiliated
electronic publishers with the same access to wireline telephone
exchange services that they provide to their in-region separated
affiliate or electronic publishing joint venture.
97. Limitations on Research and Development. The BOCs, NAA, and
USTA generally argue that section 274(b)(7)(C) only limits their
ability to perform research and development for the sole and exclusive
use of the separated affiliate. They contend that it would be against
public policy to restrict BOCs from performing research and development
simply because the results might, at some later date, be applied to
electronic publishing. Time Warner argues that the statutory language
of section 274(b)(7)(C) should lead us to prohibit BOCs, under any
circumstances, from sharing any research and development work or
results with their in-region electronic publishing affiliates. It
further states that we should adopt the Computer II rules that preclude
specific research and development by the regulated entity on behalf of
the competitive affiliate. AT&T, in reply to the BOCs' comments, states
only that we ``should reject the BOCs' attempts to circumvent the
prohibition in [s]ection 274(b)(7)(C) against BOC research and
development on behalf of a separated affiliate through hypertechnical
constructions.''
c. Discussion
98. Applicability of Section 274(b)(7) to Electronic Publishing
Joint Ventures. We adopt our tentative conclusion that section
274(b)(7) does not preclude a BOC from performing the activities in
section 274(b)(7) on behalf of an electronic publishing joint venture.
The reasons supporting this determination are the same as those
supporting our determination that section 274(b)(5) is inapplicable to
electronic publishing joint ventures.
99. Relationship Between Section 274(b)(7)(A) and Section
274(c)(2). We agree with those commenters asserting that the
restrictions in section 274(b)(7)(A) on a BOC performing the hiring or
training of personnel on behalf of a separated affiliate apply even
when the BOC is engaged in permissible joint activities pursuant to
section 274(c)(2). Reading an exception into section 274(b)(7)(A) for
the joint activities permitted under section 274(c)(2) is neither
supported by the statutory language, nor necessary to give effect to
that section and section 274(c)(2). Thus, a BOC may not perform the
hiring or training of personnel on behalf of its separated affiliate,
even though it may
[[Page 7703]]
be engaged in permissible joint activities under section 274(c)(2),
such as providing inbound telemarketing services or engaging in
nondiscriminatory teaming or business arrangements, as discussed below.
100. The Type of ``Equipment'' Encompassed by Section 274(b)(7)(B).
We find that section 274(b)(7)(B) prohibits a BOC from purchasing,
installing, or maintaining equipment on behalf of its separated
affiliate, except for the telephone service that it provides under
tariff or contract. We agree with the position of several commenters
that the provision of telephone service includes purchasing,
installing, and maintaining equipment necessary or incidental to
providing such service. As long as the equipment providing the
telephone service is owned by a BOC, and not its separated affiliate,
such activities are permissible under this section. We note, as some
commenters suggest, that, even when engaging in permissible activities
under section 274(b)(7), BOCs remain subject to the nondiscrimination
requirements in section 274(d).
101. Limitations on Research and Development. We conclude that the
prohibition in section 274(b)(7)(C) on a BOC performing research and
development ``on behalf of'' its separated affiliate precludes a BOC,
at a minimum, from performing research and development for the sole and
exclusive use of the separated affiliate. We also find that it
precludes a BOC from performing research and development for the use or
benefit of its section 274 separated affiliate together with other
affiliates. We further conclude, however, that the prohibition in
section 274(b)(7)(C) on a BOC performing research and development ``on
behalf of'' its separated affiliate, as interpreted herein, does not
limit a BOC's ability to perform research and development simply
because the results might, at a future date, be applied to electronic
publishing. We agree with those commenters arguing that such an
interpretation ``would not serve the public's continued desire for new
and different communications solutions'' and would be ``antithetical to
the public interest and national policy under Section 7 of the
Communications Act.'' We also find that it would be impractical for a
BOC to anticipate all potential uses of research and development
activities it might undertake. We recognize that these principles may
not address all of the possible scenarios that may arise. Such
determinations are fact specific and will need to be made on a case-by-
case basis.
102. Further, we disagree with Time Warner that prohibiting a BOC
from sharing any research and development work or results with its
separated affiliate is supported by the statutory language. Time Warner
and AT&T fail to offer any persuasive statutory or policy arguments in
support of their position.
6. Comparison with ``Separate Affiliate'' Requirement of Section 272
a. Background
103. We sought comment in the NPRM on the interrelationship between
the requirements for a ``separate affiliate'' in section 272(b) and the
requirements for a ``separated affiliate'' and ``electronic publishing
joint venture'' in section 274(b). To the extent that certain BOCs
currently are providing all of their information services on an
integrated basis, we sought comment on what modifications these BOCs
would have to make to their current provision of service in order to
provide electronic publishing services in compliance with the separated
affiliate or electronic publishing joint venture requirements of
section 274.
104. We also sought comment on whether a BOC may provide electronic
publishing services through the same entity or affiliate through which
it provides in-region interLATA telecommunications services,
manufacturing activities, and interLATA information services. In
addition, we sought comment on whether a BOC providing any or all of
its section 272 services and its section 274 electronic publishing
services through the same entity would have to comply with the
requirements of section 272, section 274, or both.
b. Comments
105. There were few comments on the interrelationship between the
requirements in sections 272(b) and 274(b). Ameritech states that the
requirements of section 272(b) are a subset of those found in section
274(b), but that section 274(b) imposes additional requirements beyond
those in section 272(b). It notes that another principal difference
between the separation requirements of the two sections is that a
section 272 separate affiliate may own or be owned by a BOC as long as
the separation requirements of that section are satisfied; however, a
section 274 separated affiliate may not own or be owned by the BOC
entity. NYNEX states that sections 272 and 274 deal with considerably
different affiliate activities and should be construed to be
independent of each other. PacTel states that, to the extent there are
similarities in the requirements specified in sections 272(b) and
274(b), those requirements should be interpreted consistently.
106. AT&T also notes that several of the requirements in the two
sections overlap, but, like Ameritech states, that section 274(b)
imposes additional requirements having no counterpart in section
272(b). AT&T further asserts that all interLATA electronic publishing
services should be subject to the requirements of section 272, and that
section 274 merely supplements the requirements of section 272. In
reply, Bell Atlantic and YPPA state that a section 274 separated
affiliate need not also comply with section 272, even if the electronic
publishing services are interLATA. They maintain that Congress, in
enacting section 272(a)(2)(C), expressly exempted interLATA electronic
publishing services from the requirements of section 272.
107. All of the commenters agree that a BOC may provide electronic
publishing services through the same entity or affiliate through which
it provides section 272 services. They disagree, however, on whether an
affiliate providing both section 272 and section 274 services must
comply with all of the requirements of both sections. AT&T, MCI and
Time Warner state that a BOC offering electronic publishing services
and section 272 services through the same affiliate must comply with
all of the requirements of sections 272 and 274, i.e., the structural
separation and transactional requirements, as well as the joint
marketing and nondiscrimination provisions of both sections.
108. The BOCs and YPPA disagree with the other commenters. They
argue that a BOC providing electronic publishing services through the
same entity or affiliate through which it provides section 272 services
must comply with the separation requirements in both sections 272(b)
and 274(b) on a service-by-service basis. Specifically, they maintain
that the entity providing both section 272 services and electronic
publishing services must comply only with the requirements of each
section relevant to the particular service (i.e., a section 272 service
or electronic publishing services) being provided. They further argue
that a BOC need only comply with the joint marketing and
nondiscrimination restrictions of sections 272 and 274 on a service-by-
service basis.
109. There is some disagreement among the BOCs as to those
requirements in section 274(b) that they deem applicable when providing
[[Page 7704]]
section 272 and section 274 services through the same entity. Several
BOCs assert that the separation requirements unique to either section
272 or section 274 would apply only to those services specified in
their respective sections, e.g., because section 272 does not prohibit
the hiring and training of personnel, section 274(b)(7)(A) would only
apply with respect to the entity's electronic publishing activities. U
S WEST categorizes those requirements that the entity must comply with
in sections 272(b) and 274(b) as structural separation requirements,
arguing that compliance with the ``transactional'' requirements of
either section is necessitated on a service-by-service basis. It
categorizes section 274(b)(7)(A) as an example of a transactional
requirement. YPPA, too, distinguishes between the structural separation
requirements and the affiliate transaction requirements of sections
272(b) and 274(b), arguing that the latter need only be complied with
on a service-by-service basis. It cites sections 272(b)(5) and
274(b)(3) as examples of affiliate transaction requirements that need
only be complied with on a service-by-service basis.
c. Discussion
110. We conclude that a BOC may provide electronic publishing
services and section 272 services through the same entity or affiliate.
Nothing in the Act or its legislative history suggests otherwise. We
further conclude that the BOC or the entity providing both section 272
and section 274 services, as applicable, must comply with the
requirements of both these sections, including: (1) all of the
requirements of section 272(b) and section 274(b); (2) all applicable
requirements of section 272(g) and section 274(c); and (3) all
applicable requirements of section 272(c) and section 274(d). To the
extent there is a conflict between the provisions of sections 272 and
274, the BOC or the entity providing both section 272 and 274 services,
as applicable, must comply with the more stringent requirement of
either section. These conclusions are discussed more fully below. We
specifically reject AT&T's contention that electronic publishing
services are subject to the section 272 separate affiliate
requirements, pursuant to section 272(a)(2)(B), which imposes a
separate affiliate requirement on interLATA telecommunications
services. Electronic publishing services are included within the
statutory definition of information services in section 153(20). They
are specifically excluded, however, from the section 272 separate
affiliate requirement pursuant to section 272(a)(2)(C).
111. Section 272(b) and Section 274(b) Requirements. We agree with
those commenters asserting that a BOC providing electronic publishing
services through the same entity or affiliate through which it provides
section 272 services must comply with all of the requirements of both
section 272(b) and section 274(b). Allowing the BOCs to comply with the
requirements of sections 272(b) and 274(b) on a service-by-service
basis is likely to lead to ad hoc determinations as to those
requirements in both sections 272(b) and 274(b) with which the entity
must comply.
112. We find that allowing the entity performing section 272 and
section 274 services to determine how to comply with the section 272(b)
and section 274(b) requirements creates the potential for
administrative and enforcement problems. As a practical matter,
however, requiring the entity providing both section 272 and section
274 services to comply with all the requirements of sections 272(b) and
274(b) will not be substantially more onerous than requiring the entity
to comply with only those provisions of one section or the other. We
determined in the Non-Accounting Safeguards Order that the ``operate
independently'' requirement of section 272(b)(1) imposes requirements
beyond those listed in subsections 272(b)(2)-(5). We therefore adopted
additional requirements in our rules to implement section 272(b) to
ensure operational independence between a BOC and its section 272
affiliate; several of these are parallel to provisions in section
274(b). Thus, BOCs providing section 272 and section 274 services are
already required to comply with many of the same requirements; and to
the extent these services are combined the complications of complying
with both sections 272(b) and 274(b) will be few.
113. Joint Marketing and Nondiscrimination Provisions in Sections
272 and 274. As noted above, while a BOC may provide both section 272
services and electronic publishing services through the same entity, it
must comply with the applicable joint marketing and nondiscrimination
provisions in both sections 272 and 274. With respect to the joint
marketing provisions, if a BOC chooses to provide section 272 services
together with its electronic publishing services, it must comply with
the joint marketing restrictions of section 274(c)(1)(A) and section
272(g). Section 274(c)(1)(A) precludes the BOC from carrying out any
``promotion, marketing, sales, or advertising for or in conjunction
with a separated affiliate.'' An entity established by a BOC to provide
section 272 services and electronic publishing services is a section
274 ``separated affiliate'' for purposes of section 274(c)(1)(A), as it
will be a ``corporation * * * that engages in the provision of
electronic publishing services.'' The BOC, therefore, must comply with
all the section 274 joint marketing provisions pertaining to its
``separated affiliate.'' In addition, since the entity is also
providing section 272 services, the joint marketing provisions in
section 272(g) would apply as well.
114. The statutory language in sections 272(c) and 274(d) also
requires that a BOC providing both section 272 services and electronic
publishing services together in one entity comply with the
nondiscrimination provisions in both sections 272 and 274. To the
extent that a BOC under ``common ownership or control with a separated
affiliate or electronic publishing joint venture'' provides ``network
access and interconnections for basic telephone service to electronic
publishers,'' it must do so subject to the nondiscrimination
requirements in section 274(d). In addition, section 272(c) imposes
certain nondiscrimination safeguards on a BOC's dealings with an
affiliate providing section 272 services. The nondiscrimination
safeguards of section 272(c) thus pertain to the BOC's dealings with an
entity or affiliate providing both section 272 services and electronic
publishing services.
115. In sum, we find that a BOC may provide both section 272 and
section 274 services through the same entity, but in doing so, must
comply with the applicable joint marketing and nondiscrimination
requirements in each of those sections. We find that the express
statutory language in each of those sections compels this result. As
noted above, to the extent there is a conflict between the provisions
of sections 272 and 274, the BOC or the entity providing both section
272 and 274 services, as applicable, must comply with the more
stringent requirement of either section. For example, if a BOC is
permitted to engage in a joint marketing activity under section 272(g),
but that activity is barred under section 274(c)(1)(A), the latter
provision would preclude the BOC from engaging in that activity.
[[Page 7705]]
C. Joint Marketing
1. Restrictions on Joint Marketing Activities--Section 274(c)(1)
a. Scope of Section 274(c)(1)(B)
(1) Background
116. Section 274(c)(1) of the Act establishes several restrictions
on joint marketing activities in which a BOC may engage with either a
``separated affiliate'' or an ``affiliate.'' In particular, section
274(c)(1)(A) provides that ``a [BOC] shall not carry out any promotion,
marketing, sales, or advertising for or in conjunction with a separated
affiliate.'' Section 274(c)(1)(B) states that ``a [BOC] shall not carry
out any promotion, marketing, sales, or advertising for or in
conjunction with an affiliate that is related to the provision of
electronic publishing.''
117. In the NPRM, we observed that the clause ``that is related to
the provision of electronic publishing'' in section 274(c)(1)(B) may be
interpreted to modify either the ``promotion, marketing, sales, or
advertising'' activities that are circumscribed by that section, or the
word ``affiliate.'' We also noted that the definition of ``affiliate''
in section 274 expressly excludes a ``separated affiliate.'' We
therefore sought comment on the proper interpretation of section
274(c)(1)(B).
(2) Comments
118. Several commenters argue that section 274(c)(1)(B) of the Act
should be interpreted to prohibit a BOC from carrying out joint
marketing activities for or in conjunction with an affiliate if the
activities of the BOC relate to the provision of electronic publishing.
In particular, BellSouth argues that section 274(c)(1)(B) is intended
to address situations in which a BOC affiliate offers electronic
publishing services or services related to electronic publishing, and
non-electronic publishing services, i.e., an affiliate that provides
print directory services as well as electronic publishing services.
BellSouth contends that, by omitting the word ``separated'' in
subsection (c)(1)(B), Congress clarified that some activities of a BOC
affiliate that is engaged in the provision of electronic publishing
services may be unrelated to electronic publishing. According to
BellSouth, a BOC therefore may engage in joint marketing activities
with its directory affiliate so long as such activities ``relate to the
traditional directory products of the directory affiliate rather than
any electronic directory products.'' SBC argues that section
274(c)(1)(B) does not apply if a BOC performs services for an affiliate
that are unrelated to the provision of electronic publishing.
119. U S WEST, in contrast, argues that the phrase ``that is
related to the provision of electronic publishing'' modifies
``affiliate'' because such an interpretation provides BOCs with greater
flexibility in organizing their businesses and is consistent with
congressional intent. For example, U S WEST contends that, if we adopt
this interpretation, a BOC choosing to provide electronic publishing
services through a section 272 affiliate would be subject to the joint
marketing provisions of section 274(c)(1)(B), rather than section 272.
(3) Discussion
120. We conclude that the phrase ``that is related to the provision
of electronic publishing'' modifies the ``promotion, marketing, sales,
or advertising'' activities that are circumscribed by section
274(c)(1)(B). As such, we interpret section 274(c)(1)(B) of the Act to
prohibit a BOC from carrying out any promotion, marketing, sales or
advertising activities with an affiliate, if such activities ``relate
to'' the provision of electronic publishing. As an initial matter, we
find that the joint marketing prohibition in section 274(c)(1)(B) is
intended to address situations that are not otherwise covered by
section 274(c)(1)(A). Consequently, we conclude that section
274(c)(1)(B) contemplates situations in which a BOC affiliate is
involved in the provision of services that are in some manner ``related
to'' the provision of electronic publishing, but does not provide
electronic publishing services disseminated by means of a BOC's or any
of its affiliates' basic telephone service. Because a BOC or BOC
affiliate may engage in the provision of electronic publishing that is
disseminated by means of such BOC's or any of its affiliates' basic
telephone service only through a separated affiliate or an electronic
publishing joint venture, a BOC ``affiliate'' that falls under section
274(c)(2)(B) of the Act, by definition, must not engage in such
provision of electronic publishing. A BOC affiliate that provides
electronic publishing services by means of its basic telephone service
would constitute a ``separated affiliate'' subject to the joint
marketing restriction in section 274(c)(1)(A).
121. Consequently, section 274(c)(2)(B) addresses situations in
which a BOC may have, for example, an affiliated holding company that,
in turn, holds an ownership interest in a separated affiliate. Such a
BOC would be precluded from carrying out any promotion, marketing,
sales or advertising activities for or in conjunction with that
affiliated holding company if and to the extent that such activities
are ``related to the provision of electronic publishing.'' A BOC,
however, would not be prohibited from engaging in marketing activities
with the affiliated holding company that are unrelated to the provision
of electronic publishing. This interpretation of section 274(c)(1)(B)
effectively would prevent the BOCs from indirectly promoting,
marketing, selling, or advertising the electronic publishing services
of a separated affiliate.
122. We reject U S WEST's contention that section 274(c)(1)(B)
prohibits a BOC from carrying out marketing activities for or with an
affiliate that is related to the provision of electronic publishing.
Given the definition of ``separated affiliate,'' which contemplates the
provision of electronic publishing services by such entity, it is
difficult to conceive of an affiliate ``related to the provision of
electronic publishing'' that would not otherwise constitute a separated
affiliate, and thus be subject to the joint marketing restriction in
section 274(c)(1)(A). We also reject BellSouth's contention that
section 274(c)(1)(B) of the Act is intended to address situations in
which a BOC provides electronic publishing and non-electronic
publishing services through one affiliate. As noted above, a BOC
affiliate that provides electronic publishing services through the
BOCs' or any of its affiliates' basic telephone service would
constitute a ``separated affiliate'' that would be subject to the joint
marketing prohibition in section 274(c)(1)(A).
b. Scope of Section 274(c)(1)(A)
(1) Background
123. We sought comment in the NPRM on whether a BOC can carry out
both section 272 and section 274 activities through one entity or
affiliate, and, if so, whether the affiliate would have to comply with
the requirements of section 272, section 274, or both. We conclude in
this Order that a BOC may provide both section 272 and section 274
services through the same affiliate. In so doing, however, a BOC must
comply with the structural and transactional requirements of both
sections 272(b) and 274(b). We also conclude that a BOC providing
section 272 and section 274 services through the same affiliate must
comply with the applicable joint marketing provisions and
nondiscrimination provisions of both those sections.
[[Page 7706]]
124. Some parties raised the issue of whether and to what extent
the joint marketing restrictions of section 274 apply in cases where a
BOC provides through the same affiliate electronic publishing services
and non-electronic publishing services, i.e., print directory services,
that do not fall under section 272 of the Act. Because BOCs currently
may be providing electronic publishing and such non-electronic
publishing services through one affiliate, or may wish to provide such
services through one entity in the future, we address that issue in
this Order.
(2) Comments
125. U S WEST and BellSouth argue that, if a BOC provides
electronic publishing services and non-electronic publishing services,
such as print directory services, through the same affiliate, the joint
marketing restrictions of section 274 would apply only to the
electronic publishing activities of the affiliate. U S WEST argues,
inter alia, that Congress, in adopting the prohibitions in section
274(c)(1) of the Act, intended to circumscribe, for a limited time,
joint marketing activities between a BOC and its section 274 separated
affiliate because such affiliate would use the BOC's basic telephone
service to disseminate its electronic publishing services. U S WEST
argues that the section 274 joint marketing prohibitions thus were
intended to restrict the BOCs' ability to ``leverage those basic
services to favor its electronic publishing services which use [such]
services.'' U S WEST maintains therefore that, absent a connection
between a publishing activity and the BOC's network operations, there
is no indication that Congress meant to impede commercial speech
activities engaged in by a BOC corporate enterprise.
(3) Discussion
126. We conclude that, while a BOC may provide through the same
affiliate both electronic publishing services and non-electronic
publishing services, such as print directory services, which do not
fall under section 272 of the Act, it must comply with the joint
marketing requirements of section 274. The plain language of section
274(c)(1)(A) states that ``a [BOC] shall not carry out any promotion,
marketing, sales, or advertising for or in conjunction with a separated
affiliate.'' Section 274(c)(1)(A), therefore, precludes a BOC from
engaging in certain activities with a separated affiliate as a
corporate entity, even in connection with non-electronic publishing
services.
127. While our interpretation could provide a disincentive for BOCs
to offer electronic publishing and non-electronic publishing services
through the same affiliate, as U S WEST points out, the unambiguous
statutory language requires this interpretation. We thus conclude that
section 274(c)(1)(A) prohibits marketing and sales-related activities
carried out by a BOC for or in conjunction with a separated affiliate,
irrespective of whether such affiliate provides both electronic
publishing services and non-electronic publishing services, such as
print directory services, that do not fall under section 272 of the
Act.
c. Activities Prohibited under Section 274(c)(1)
(1) Background
128. In the NPRM, we observed that the activities proscribed by
section 274(c)(1) include the ``promotion, marketing, sales, or
advertising'' by a BOC for or with an affiliate. We tentatively
concluded that such activities ``encompass prohibitions on advertising
the availability of local exchange or other BOC services together with
the BOC's electronic publishing services, making those services
available from a single source and providing bundling discounts for the
purchase of both electronic publishing and local exchange services.''
We sought comment on that tentative conclusion and on whether any other
types of prohibitions were contemplated.
(2) Comments
129. Ameritech, AT&T and NAA generally agree with our tentative
conclusion regarding the types of activities that are prohibited under
sections 274(c)(1)(A) and (B) of the Act. Ameritech also argues,
however, that the only prohibited marketing activities are those that
``involve the BOC and the electronic publishing affiliate working
together,'' and therefore nothing precludes unilateral marketing,
promotion, or sales activities by either the BOC or its separated
affiliate. In addition, Ameritech contends that bundling discounts may
be offered in all cases of permissible joint marketing activities.
According to Ameritech, ``while the BOC requires regulatory authority
to discount regulated services, the electronic publisher is free to set
its unregulated price--and any promotional discounts--as it sees fit.''
AT&T disputes Ameritech's contention that section 274(c)(1) of the Act
permits a BOC to market the electronic publishing services of its
separated affiliate so long as it does not ``coordinate'' its
promotional activities with such affiliate.
130. U S WEST generally agrees that the activities prohibited under
sections 274(c)(1)(A) and (B) of the Act include making local exchange
or other BOC services available together with electronic publishing
services, but states that this prohibition is subject to the inbound
telemarketing exception in section 274(c)(2)(A) of the Act. PacTel
argues that a separated affiliate, electronic publishing joint venture,
teaming or other business entity is not precluded from purchasing the
telecommunications services of a BOC and then advertising such services
with electronic publishing services, making the services available from
a single entity, and providing bundled discounts.
131. A number of parties contend that sections 274(c)(1)(A) and (B)
of the Act prohibit only the BOCs from carrying out certain joint
marketing activities, and that the provisions should not be interpreted
to restrict the joint marketing activities that may be carried out by
either a ``separated affiliate'' under section 274(c)(1)(A), or an
``affiliate'' under section 274(c)(1)(B). SBC specifically argues that
the statute should not be interpreted to impose any restrictions on a
separated affiliate's ability ``to market and sell services or products
of the BOC, or those of any other affiliate or an unrelated party.''
Bell Atlantic similarly contends that an affiliate is not prohibited
under the statute ``from marketing the BOC's services and products or
acting as a single point of contact for the customer.''
132. NYNEX and YPPA argue that permitting a separated affiliate to
market jointly its electronic publishing services with BOC
telecommunications services would allow customers to realize the
benefits of one-stop shopping. In addition, NYNEX and PacTel maintain
that imposing marketing restrictions on a BOC separated affiliate that
do not also apply to such affiliate's competitors would place the
separated affiliate at a competitive disadvantage. A number of parties
also contend that nothing in the Act prohibits a BOC affiliate from
carrying out joint marketing activities as an agent for either or both
the BOC and the separated affiliate.
133. Conversely, AT&T and Time Warner argue that the marketing
prohibitions in section 274(c)(1) should not be construed to apply only
to the marketing activities of the BOC. According to AT&T, allowing a
separated affiliate to market jointly its electronic publishing
services with BOC telecommunications services would
[[Page 7707]]
allow the BOC to ``move its entire marketing department into the
separated affiliate'' in violation of the statutory prohibition against
a BOC carrying out any marketing in conjunction with' a separated
affiliate. Time Warner similarly states that interpreting section
274(c)(1) to apply only to the BOCs would allow the BOCs to circumvent
the joint marketing restrictions of section 274.
(3) Discussion
134. As an initial matter, we conclude that the prohibitions in
section 274(c)(1) apply only to activities carried out by a BOC.
Sections 274(c)(1)(A) and (B) of the Act only proscribe BOC activities.
We also find that neither a separated affiliate under section
274(c)(1)(A), nor an affiliate under section 274(c)(1)(B), is
prohibited from marketing its services together with BOC
telecommunications services, so long as such marketing activity is
performed unilaterally by the separated affiliate or affiliate,
respectively. Thus, a separated affiliate or affiliate is permitted
under sections 274(c)(1)(A) and (B) to market its electronic publishing
services with basic telephone service purchased from the BOC. We
conclude that this type of marketing, in which a separated affiliate or
affiliate unilaterally markets BOC local exchange service as an input
to its electronic publishing services, is not prohibited under sections
274(c)(1)(A) or (B). We specify that marketing by the separated
affiliate or affiliate must be unilateral not because section 274(c)(1)
directly imposes any marketing restrictions on such entities, but, as a
practical matter, because section 274(c)(1) bars a BOC from carrying
out ``marketing . . . for or in conjunction with'' such separated
affiliates or affiliates.
135. We reject AT&T's and Time Warner's contention that permitting
a separated affiliate to market BOC telecommunications services would
allow a BOC to circumvent the restrictions of section 274. As noted
above, section 274(c)(1), by its terms, applies only to activities
carried out by a BOC. While AT&T's and Time Warner's arguments pertain
only to a ``separated affiliate,'' we have no basis for concluding that
Congress intended to apply the restrictions in sections 274(c)(1)(A)
and (B) to either separated affiliates or affiliates, respectively.
Moreover, based on the plain language of sections 274(c)(1)(A) and (B),
which prohibits a BOC from carrying out any ``promotion, marketing,
sales, or advertising for or in conjunction with'' a separated
affiliate or affiliate, a BOC would be precluded from, for example,
``moving its entire marketing department into the separated affiliate''
in order to circumvent the section 274(c)(1) restrictions.
136. Based on the above analysis, we also find that a BOC affiliate
may carry out ``promotion, marketing, sales, or advertising''
activities as an agent for either a ``separated affiliate'' under
section 274(c)(1)(A), or another ``affiliate'' under section
274(c)(1)(B). Because neither a separated affiliate nor an affiliate is
subject to the restrictions in sections 274(c)(1)(A) and (B) of the
Act, a BOC affiliate that acts as an agent for such separated affiliate
or affiliate also is not subject to those restrictions. As in the case
of a separated affiliate or affiliate, however, the scope of the
agent's activities may be limited, as a practical matter, by the legal
bar on a BOC carrying out promotion, marketing, sales or advertising
activities ``for or in conjunction with'' such affiliates. We conclude,
however, that because section 274(c)(1)(A) applies to activities
carried out by BOCs, a BOC affiliate is prohibited from acting as an
agent for the BOC in performing marketing and sales-related activities
under that section, contrary to arguments raised by some parties. We
also note that, under the definition of ``Bell operating company'' in
section 274(i)(10), a BOC includes ``any entity or corporation that is
owned or controlled by'' such BOC. As such, the section 274(c)(1) joint
marketing prohibitions applicable to BOCs also would apply to entities
that are owned or controlled by a BOC, such as an entity that acts as
an agent for a BOC.
137. We also conclude, based on their language, that sections
274(c)(1)(A) and (B) of the Act prohibit a BOC or BOC agent from
advertising local exchange or other BOC services together with
electronic publishing services, making those services available from a
single point of contact and providing bundling discounts for the
purchase of both electronic publishing and local exchange services,
except as permitted under section 274(c)(2) of the Act. Since section
274 only proscribes BOC activities, however, we conclude, consistent
with our discussion above, that these activities may be carried out by
a separated affiliate or affiliate, subject only to the practical
limitation that a BOC may not participate owing to the legal bar on its
ability to carry out promotion, marketing, sales or advertising
activities ``for or in conjunction with'' a separated affiliate or an
affiliate.
138. In our Non-Accounting Safeguards Order implementing sections
271 and 272 of the Act, we recognized that ``bundling'' contemplates
the offering of BOC resold local exchange services and interLATA
services as a package under an integrated pricing schedule. As a
result, we concluded that the concept of ``bundling'' includes
``providing a discount if a customer purchases both interLATA services
and BOC resold local services, conditioning the purchase of one type of
service on the purchase of the other, and offering both interLATA
services and BOC resold local services as a single combined product.''
139. Based on the definition of ``bundling'' in our Non-Accounting
Safeguards Order, we conclude that ``bundling'' refers to the offering
by a BOC or BOC agent of BOC local exchange and electronic publishing
services as a package under an integrated pricing schedule. This
restriction flows not only from section 274(c)(1), but from the fact
that a BOC is forbidden by section 274(a) to engage in the provision of
electronic publishing disseminated by means of its basic telephone
service except through a separated affiliate or an electronic
publishing joint venture. By providing such bundled services, the BOC
or its agent would be engaged in the provision of electronic publishing
in contravention of section 274(a). We further find, consistent with
the Non-Accounting Safeguards Order, that sections 274(c)(1)(A) and (B)
of the Act prohibit a BOC or BOC agent from providing customer
discounts for the purchase of local exchange and electronic publishing
services, conditioning the purchase of one type of service on the
other, or offering both electronic publishing and local exchange
services as one product. Moreover, we conclude, based on the explicit
language of section 274(c)(1), that sections 274(c)(1)(A) and (B) of
the Act prohibit a BOC or BOC agent not only from offering for sale
both local exchange and electronic publishing services, but also from
advertising those services in a single advertisement, and from selling
both services through a single point of contact, e.g., a single sales
agent, except as permitted under section 274(c)(2). We find that
Congress intended to proscribe those activities in adopting sections
274(c)(1)(A) and (B) of the Act.
d. Interplay Between Section 274 Joint Marketing Provisions and Other
Provisions of the Act
(1) Background
140. In the NPRM, we sought comment on whether and to what extent
[[Page 7708]]
the joint marketing provisions in section 272(g) and the customer
proprietary network information (CPNI) provisions in section 222 of the
Act affect implementation of section 274.
(2) Comments
141. NYNEX argues that, because the marketing provisions in
sections 272 and 274 of the Act apply to different services, the
restrictions in section 274 should not be applied to the services and
facilities provided under section 272. PacTel maintains that sections
272(g) and 222 of the Act do not affect implementation of section 274.
U S WEST maintains that, based on implied consent gleaned from either
the business relationship or customer notification, CPNI may be used by
the BOC in marketing a separated affiliate's electronic publishing
offerings. U S WEST also contends that, under section 222(d)(3) of the
Act, a BOC could use CPNI on an inbound telemarketing call for both
telecommunications and electronic publishing services of the BOC and
third parties, provided the customer consented to such use on the call.
(3) Discussion
142. As discussed above, we conclude that, while a BOC may provide
through the same affiliate both section 272 and section 274 services,
it must comply with the applicable joint marketing restrictions of both
those sections. We decline to address arguments raised in this
proceeding regarding the interplay between section 274 and section 222
of the Act, relating to privacy of customer information. The Commission
has pending a proceeding to implement section 222 of the Act. Until the
completion of that proceeding, we defer any decision on the extent, if
any, that section 222 of the Act affects implementation of section 274.
As noted in the CPNI NPRM (61 FR 26483 (May 28, 1996)), the CPNI
requirements the Commission previously established in the Computer II
and Computer III proceedings remain in effect pending the outcome of
the CPNI proceeding, to the extent that they do not conflict with
section 222 of the Act.
2. Permissible Joint Activities--Section 274(c)(2)
a. Joint Telemarketing--Section 274(c)(2)(A)
(1) Background
143. As we observed in the NPRM, section 274(c)(2) of the Act
permits three types of joint activities between a BOC and a separated
affiliate, electronic publishing joint venture, affiliate, or
unaffiliated electronic publisher under specified conditions. Under
section 274(c)(2)(A) of the Act, a BOC may provide ``inbound
telemarketing or referral services related to the provision of
electronic publishing for a separated affiliate, electronic publishing
joint venture, affiliate or unaffiliated electronic publisher:
[p]rovided, [t]hat if such services are provided to a separated
affiliate, electronic publishing joint venture, or affiliate, such
services shall be made available to all electronic publishers on
request, on nondiscriminatory terms.''
144. We stated in the NPRM that the statute is silent as to the
specific obligations section 274(c)(2)(A) imposes on a BOC. We noted
that the term ``inbound telemarketing'' is defined in section 274(i)(7)
as ``the marketing of property, goods, or services by telephone to a
customer or potential customer who initiated the call.'' The term
``referral services,'' however, is not defined in the statute. As we
discussed in the NPRM, the Joint Explanatory Statement states that the
Conference Committee adopted the provisions of the House bill relating
to electronic publishing, with some modifications relating to sunset of
the section 274 requirements and use of BOC trademarks by separated
affiliates and electronic publishing joint ventures. The provision of
the House bill relating to electronic publishing joint ventures was
identical to the provision ultimately adopted by the Conference
Committee.
145. The Committee Report accompanying H.R. 1555 states that:
Subsection (c)(2)(A) permits a BOC to provide inbound
telemarketing or referral services related to the provision of
electronic publishing, if the BOC provides the same service on the
same terms and conditions, and prices to non-affiliates as to its
affiliates. The term `inbound telemarketing or referral services' is
defined . . . to mean `the marketing of property, goods, or services
by telephone to a customer or potential customer who initiated the
call.' Thus, a BOC may refer a customer who seeks information on an
electronic publishing service to its affiliate, but must make sure
that the referral service is available to unaffiliated providers. No
outbound telemarketing or similar activity, under which the call is
initiated by the BOC or its affiliate or someone on its behalf, is
permitted.
In the NPRM, we sought comment on whether the conditions imposed on
inbound telemarketing discussed in the House Report should be adopted,
and whether we should adopt any regulations pertaining to outbound
telemarketing.
(2) Comments
146. AT&T argues that we should adopt the conditions on inbound
telemarketing discussed in the House Report, i.e., that a BOC may offer
inbound telemarketing services to its affiliate only if it makes those
services available to unaffiliated providers of electronic publishing
services on the same terms, conditions and prices. In addition, it
contends that a BOC should be prohibited from engaging in outbound
telemarketing, consistent with the House Report. AT&T argues that
section 274(c)(2)(A) should not be construed as an ``open-ended
authorization for the BOCs to market the electronic publishing services
of their separated affiliates'' because such an interpretation would
result in the exception swallowing the rule. While NAA agrees that we
should adopt the conditions on inbound telemarketing discussed in the
House Report, it also argues that a BOC may provide outbound
telemarketing services to an electronic publishing joint venture under
section 274(c)(2)(C).
147. Conversely, the BOCs generally contend that they are permitted
to engage in a broader range of marketing activities under section
274(c)(2)(A). In particular, Ameritech argues that section 274(c)(2)(A)
expressly authorizes a BOC to handle all aspects of the electronic
publisher's sales process while on an inbound telephone call. NYNEX
similarly maintains that section 274(c)(2)(A) does not restrict in any
way the inbound telemarketing services that a BOC may provide to a
separated affiliate, electronic publishing joint venture or affiliate,
except to require the BOC to make such services available to all
electronic publishers ``on request, on nondiscriminatory terms.'' In
addition, SBC argues that section 274(c)(2)(A) allows a BOC not only to
refer a customer who requests information regarding an electronic
publishing service to its affiliate, but also permits a BOC to market
electronic publishing services to customers who inquire about them. SBC
also argues that section 274(c)(2)(A) ``allow[s] a separated affiliate
or a BOC to advertise a BOC call-in number to which potential customers
might choose to initiate a call.'' BellSouth argues that section
274(c)(2)(A) of the Act is clear on its face, and therefore ``no
further elucidation'' of that section is necessary.
148. PacTel argues that section 274(c)(2)(A)'s requirement that
inbound telemarketing or referral services ``be made available to all
electronic publishers on request, on nondiscriminatory terms'' means
that
[[Page 7709]]
the terms of the service must be generally available to all similarly
situated electronic publishers. U S WEST argues that the requirement
should be construed to apply only to services that are of ``like
kind.'' PacTel contends that section 274(c)(2)(A), like section 202(a)
of the Act, allows reasonable discrimination. Conversely, Time Warner
argues that nothing in the Act indicates that Congress intended to
limit the provision of inbound telemarketing or referral services
required by section 274(c)(2)(A) to competing electronic publishers
offering services ``comparable'' to those offered by a BOC separated
affiliate.
(3) Discussion
149. We conclude that a BOC may, pursuant to section 274(c)(2)(A),
both provide ``referral services'' and ``market'' property, goods, or
services related to the provision of electronic publishing by telephone
to a customer or potential customer who initiated the call. This is
consistent with the plain language of the statute, including the
definition of ``inbound telemarketing'' in section 274(i)(7), and with
the legislative history interpreting section 274(c)(2)(A). We also
conclude, however, consistent with the clear language of the statute
and with the House Report, that, to the extent a BOC provides inbound
telemarketing or referral services for a separated affiliate,
electronic publishing joint venture, or affiliate, it must make
available ``such services . . . to all electronic publishers on
request, on nondiscriminatory terms.'' Consistent with the legislative
history, this means that the BOC must offer ``the same service on the
same terms and conditions, and prices to non-affiliates as to its
affiliates.''
150. A BOC may choose to provide inbound telemarketing or referral
services either pursuant to a contractual arrangement or during the
normal course of its inbound telemarketing operations. To the extent a
BOC chooses either or both of these approaches in providing inbound
telemarketing or referral services to a separated affiliate, electronic
publishing joint venture or affiliate, we conclude, based on the
nondiscrimination proviso in section 274(c)(2)(A), that it must make
available the same approach to unaffiliated electronic publishers.
151. With regard to inbound telemarketing or referral services
provided by a BOC to its separated affiliate, electronic publishing
joint venture, or affiliate pursuant to a contractual arrangement, we
find that the BOC must make available the same terms, conditions, and
prices for such services to unaffiliated electronic publishers, except
to the extent legitimate price differentials may exist. For example,
such price differentials may reflect differences in cost, or may
reflect the fact that an unaffiliated electronic publisher has
requested superior or less favorable treatment in exchange for paying a
higher or lower price to the BOC. As we stated in the First
Interconnection Order (61 FR 45476 (August 29, 1996)), where costs
differ, rate differences that accurately reflect those differences are
not unlawfully discriminatory. We similarly conclude that price
differences, ``when based upon legitimate variations in costs, are
permissible under the 1996 Act when justified.'' PacTel's argument that
the ``nondiscriminatory'' requirement in section 274(c)(2)(A) means
that the terms of the service must be generally available to all
``similarly situated'' electronic publishers, therefore, has merit to
the extent that price differences among electronic publishers reflect
legitimate differences in cost.
152. The statute requires that, to the extent a BOC markets
property, goods or services related to the provision of electronic
publishing to a customer, or refers a customer to a separated
affiliate, electronic publishing joint venture or affiliate during the
normal course of its telemarketing operations, it must provide such
marketing or referral services to all unaffiliated electronic
publishers requesting such services, on nondiscriminatory terms. Thus,
to the extent that a BOC provides referral service if a customer has
not initially independently requested a specific referral to the BOC
affiliate, a BOC must provide the names of all such unaffiliated
electronic publishers, as well as its own affiliated electronic
publishers, in random order, to the customer. A similar standard may
also be appropriate for particular inbound telemarketing activities. We
find that our interpretation is consistent with the intent of section
274(c)(2)(A) to ensure that a BOC providing inbound telemarketing or
referral services to a separated affiliate provides such services on a
nondiscriminatory basis to all unaffiliated electronic publishers.
153. We reject U S WEST's argument that imposing such a requirement
on the BOCs with respect to referral services would be overly
burdensome. We note, for example, that BOCs currently are subject to
similar requirements in cases where a new local exchange customer of
the BOC requests information regarding interexchange service. In such
cases, BOCs are required, inter alia, to provide customers with the
names and, if requested, the telephone numbers of carriers offering
interexchange services. As part of this requirement, a BOC must ensure
that the names of the interexchange carriers are provided in random
order.
154. We disagree with U S WEST's contention that a BOC's obligation
to provide inbound telemarketing or referral services under section
274(c)(2)(A) applies only with respect to services that are
``comparable'' to those of its separated affiliate. We conclude that a
BOC's obligation under section 274(c)(2)(A) to make available inbound
telemarketing and referral services on a nondiscriminatory basis
requires that a BOC make available to unaffiliated electronic
publishers the same services it provides to an affiliated electronic
publisher, regardless of whether the unaffiliated electronic publishers
offer services that are ``comparable'' to those of the BOC. Nothing in
the statute or its legislative history indicates that a BOC must make
available inbound telemarketing and referral services only to
electronic publishing entities providing services ``comparable'' to
those of the BOC's affiliate. To the extent that a BOC's agreement with
its affiliated electronic publisher is limited to certain types of
marketing or referral services, however, the BOC is then only obligated
to make the same types of marketing or referral services available to
unaffiliated electronic publishers.
155. With respect to AT&T's concern that interpreting section
274(c)(2)(A) to allow BOCs to ``market'' the electronic publishing
services of their separated affiliates would circumvent the joint
marketing prohibitions in section 274(c)(1), we find that the
unambiguous statutory definition of ``inbound telemarketing'' in
section 274(i)(7), and the fact that the general prohibition in section
274(c)(1) applies ``except as provided in paragraph (2) [274(c)(2)],''
requires this interpretation. We note that the statutory language
allows BOCs to provide such marketing services only on
nondiscriminatory terms, as discussed above. In addition, while our
interpretation of the nondiscrimination requirement may serve as a
disincentive for certain BOCs to market the services of an affiliated
electronic publisher on an inbound call, we find that the statutory
language compels this interpretation.
156. Finally, we conclude that section 274(c)(2)(A) prohibits
outbound telemarketing or similar activities in which a call is
initiated by a BOC, its affiliate, or someone on its behalf. Because
section 274(c)(2)(A), by its terms, applies only to ``inbound
telemarketing'' or referral services
[[Page 7710]]
related to the provision of electronic publishing, we believe that
Congress did not intend to permit BOCs to engage in outbound
telemarketing activities in adopting section 274(c)(2)(A). To the
extent that the statutory language leaves any ambiguity on this
question, the House Report supports our interpretation that a BOC is
prohibited under section 274(c)(2)(A) from engaging in outbound
telemarketing. We also believe that allowing a BOC to engage in
outbound telemarketing activities to promote the electronic publishing
services of its separated affiliate would eviscerate the general
prohibition on BOC joint marketing activities in section 274(c)(1)(A)
of the Act.
b. Teaming Arrangements--Section 274(c)(2)(B)
(1) Background
157. In the NPRM, we observed that, in addition to certain joint
telemarketing activities, a BOC is permitted to engage in ``teaming''
or ``business arrangements'' to provide electronic publishing services
under certain conditions pursuant to section 274(c)(2)(B). Section
274(c)(2)(B) specifically states that a ``[BOC] may engage in
nondiscriminatory teaming or business arrangements to engage in
electronic publishing with any separated affiliate or with any other
electronic publisher if (i) the [BOC] only provides facilities,
services, and basic telephone service information as authorized by this
section, and (ii) the [BOC] does not own such teaming or business
arrangement.''
158. We sought comment in the NPRM on what types of arrangements
are encompassed by the terms ``teaming'' or ``business arrangements,''
and on the significance of section 274(c)(2)(B)'s placement under the
``Joint Marketing'' provisions in section 274(c). We also sought
comment on what regulations, if any, are necessary to ensure that the
arrangements in which BOCs engage pursuant to section 274(c)(2)(B) are
``nondiscriminatory,'' and on how the provision of ``basic telephone
service information'' under that section relates to the requirements in
section 222 for access to and use of CPNI.
(2) Comments
159. Ameritech, NAA, NYNEX, and PacTel generally argue that the
terms ``teaming'' or ``business arrangements'' in section 274(c)(2)(B)
contemplate a broad range of permissible activities. Ameritech argues
that, so long as all the conditions under section 274(c)(2)(B) are met
and the requirements of section 274 are otherwise satisfied, a BOC
should be free to enter into a teaming or business arrangement with a
separated affiliate or electronic publishing joint venture to jointly
market electronic publishing services. NYNEX contends that teaming
arrangements provide another form of ``one-stop shopping'' for
consumers and present minimal risk of anticompetitive behavior. PacTel
argues that the language of section 274(c)(2)(B) is so broad that it
includes any activity other than the provision of electronic publishing
itself, including promotion, marketing, sales and advertising
activities. SBC argues that section 274(c)(2)(B) should be interpreted
to permit a BOC and its separated affiliate jointly to promote, market,
sell, and advertise their respective services pursuant to any form of
business arrangement.
160. Bell Atlantic argues that the term ``teaming or business
arrangements'' as used in section 274(c)(2)(B) encompasses myriad
arrangements which include, but are not limited to, marketing proposals
in which a BOC and an electronic publisher each prepares its portion of
a joint bid to a customer. BellSouth contends that a teaming or
business arrangement is more substantial than a coordinated joint
marketing or sales campaign or joint bid preparation arrangement, given
the statute's reference to BOC ownership in section 274(c)(2)(B). YPPA
argues that teaming arrangements, which it asserts were permissible
under the MFJ, are any arrangements whereby ``two businesses act
independently to provide related products or services, but coordinate
their activities so that the customer obtains a `complete' package of
the desired products or services.'' According to YPPA, ``teaming'' may
include joint sales activities (including joint planning for sales
calls), through advertising, premise visits or telemarketing.''
161. Conversely, Time Warner argues that section 274(c)(2)(B)
permits a BOC to engage in a non-BOC owned teaming or business
arrangement to provide its electronic publishing affiliate with the
necessary facilities and telephone service for electronic publishing,
provided that such facilities and services are offered on a
nondiscriminatory basis pursuant to tariffed rates and conditions.
162. Bell Atlantic argues that, by placing section 274(c)(2)(B)
under the ``Joint Marketing'' provisions in section 274(c), Congress
intended to clarify that ``teaming or business arrangements'' are not
to be considered joint marketing activities. PacTel argues that
``teaming arrangements'' are included under the heading of ``Joint
Marketing'' because such arrangements are one of the three categories
of exceptions listed under that heading.
163. PacTel argues that the nondiscrimination requirement for
teaming and other business arrangements relates to how a BOC provides
facilities, services and basic telephone service information to
electronic publishers, not to a BOC's choice of teaming partners. Even
if the nondiscrimination requirement were interpreted to apply to a
BOC's choice of teaming partners, PacTel argues, a BOC nevertheless
would retain discretion to team only with electronic publishers that
met its reasonable standards. BellSouth similarly contends that the
nondiscrimination obligation of section 274(c)(2)(B) precludes a BOC
from giving preference to the teaming or business arrangement in the
conduct of its regulated common carrier activities, but does not impose
on the BOC an obligation to invest in a particular entity. SBC argues
that the nondiscrimination requirement in section 274(c)(2)(B)
``provide[s] evenhandedness in the BOCs' provision of marketing and
other services to [unaffiliated] electronic publishers.'' YPPA argues
that the nondiscrimination requirement means that a teaming arrangement
between a BOC and its separated affiliate ``cannot be markedly
different'' from teaming arrangements made available to other
electronic publishers.
164. NAA argues that, if a BOC uses its CPNI to provide ``basic
telephone service information'' as part of a teaming arrangement, it is
subject to the privacy requirements in section 222 for access to and
use of the CPNI. PacTel states that section 274(c)(2)(B) allows a BOC
to use CPNI as part of a teaming arrangement, consistent with section
222 of the Act. PacTel therefore argues that ``BOCs can use CPNI with
the type of telecommunications service from which the information was
derived, and with customer authorization can use it with any service.''
PacTel maintains that, to the extent that ``basic telephone service
information'' is also CPNI, section 222 of the Act and any implementing
regulations the Commission adopts govern the use of such information.
To the extent such information is not CPNI, but network information,
PacTel argues that a BOC is required to share such information with all
electronic publishers with which the BOC teams. SBC argues that, where
information qualifies as both ``basic telephone service information''
under section 274(i)(3) as well as CPNI under
[[Page 7711]]
section 222(f)(1), the terms of section 274 should prevail over the
general terms in section 222 of the Act. SBC points out that section
274 of the Act contains no ``approval'' requirement as a precondition
for using, disclosing, or accessing basic telephone service
information. As such, SBC argues, a BOC should be permitted to use such
information without first obtaining approval under section 222(c)(1)
when engaged in permissible teaming or business arrangements.
(3) Discussion
165. We decline at this time to adopt specific regulations
clarifying the types of arrangements that are contemplated by the terms
``teaming or business arrangements'' in section 274(c)(2)(B) of the
Act. We conclude that those terms, which are not defined in the
statute, may encompass a broad range of permissible marketing
activities because section 274(c)(2)(B) imposes no explicit marketing
limitations. At the same time, however, this provision contains no
language that operates to remove business or teaming arrangements from
the scope of the prohibitions in section 274(c)(1). We thus find that
Congress, in including the general terms ``teaming or business
arrangements'' in section 274(c)(2)(B), did not intend to limit or
expand the types of marketing activities in which BOCs could engage
under that section other than those specifically restricted or
authorized elsewhere in section 274 (e.g., in section 274(c)(1)).
166. Under section 274(c)(2)(B), therefore, a BOC providing
telecommunications services and the electronic publishing provider with
which it teams are limited to marketing their respective services. This
interpretation is supported by the plain language of section
274(c)(2)(B), which generally provides that a BOC may engage in teaming
or business arrangements if such BOC ``only provides facilities,
services, and basic telephone service information as authorized by
[section 274].'' Under this interpretation, a BOC is permitted to
market only the facilities, services and basic telephone service
information that section 274(c)(2)(B) permits the BOC to provide. This
interpretation also is supported by a comparison of the text in section
274(c)(2)(B) with the text of sections 274(c)(2)(A) and (C), relating
to inbound telemarketing and electronic publishing joint ventures,
respectively. Unlike section 274(c)(2)(C), section 274(c)(2)(B) does
not specifically permit the authorized entity to engage in joint
marketing activities otherwise prohibited to the BOC by section
274(c)(1), i.e., promotion, marketing, sales, and advertising
activities. In addition, unlike section 274(c)(2)(A), section
274(c)(2)(B) contains no language that explicitly addresses marketing.
We therefore conclude that a BOC participating in a teaming arrangement
may not market the electronic publishing services of an electronic
publishing provider with which it teams. In addition, the restrictions
specifically set forth in section 274(c)(2)(B) would apply, i.e., that
such BOC only provide facilities, services and basic telephone service
information as authorized by section 274, that the BOC not ``own'' the
teaming or business arrangement, and that the teaming arrangement be
``nondiscriminatory.''
167. As noted above, a few commenters provide examples of the types
of activities they believe are permissible under section 274(c)(2)(B)
as a ``teaming or business arrangement.'' Bell Atlantic, for example,
contends that such arrangements include, but are not limited to,
marketing proposals in which a BOC and an electronic publisher each
prepares its portion of a joint bid to a customer. In addition, YPPA
argues that a teaming arrangement is any arrangement whereby ``two
businesses act independently to provide related products or services,
but coordinate their activities so that the customer obtains a
`complete' package of the desired products or services.'' YPPA states,
for example, that a BOC may engage in a teaming arrangement with a
separated affiliate whereby the BOC provides a customer with regulated
telephone service and the separated affiliate provides the same
customer with electronic publishing services. We conclude that nothing
in the statute prohibits a BOC from engaging in the types of activities
proposed by these commenters, so long as all of the requirements of
section 274, including section 274(c)(2)(B), are satisfied. To the
extent issues arise in the future as to whether certain other
activities are permissible under section 274(c)(2)(B) as ``teaming or
business arrangements,'' we intend to address those issues on a case-
by-case basis.
168. We also conclude that section 274(c)(2)(B)'s requirement that
a BOC only engage in teaming or business arrangements that are
``nondiscriminatory'' means that a BOC may provide to the teaming
arrangement the necessary facilities, services and basic telephone
service information for electronic publishing, provided that such
facilities, services and information are offered on a nondiscriminatory
basis both to other teaming arrangements and to unaffiliated electronic
publishers. Under this interpretation, for example, a BOC would be
prohibited from favoring a teaming arrangement with a separated
affiliate over an arrangement with an unaffiliated electronic
publishing provider in the provision of the BOC's facilities, services
and basic telephone service information under section 274(c)(2)(B). We
agree with PacTel and BellSouth that section 274(c)(2)(B) of the Act
does not require a BOC to participate in a teaming arrangement with, or
to invest in, an electronic publishing provider. Given that a ``teaming
arrangement'' under section 274(c)(2)(B) contemplates that a BOC may
hold less than a 10 percent interest in such arrangement, we believe
that Congress did not intend to compel a BOC to acquire such an
interest in other arrangements simply because the BOC has chosen to
participate in a teaming arrangement with an electronic publisher of
its choice. In addition, we find that such an interpretation would
provide a disincentive for BOCs to engage in teaming arrangements in
contravention of the plain language of section 274(c)(2)(B) and the
pro-competitive goals of the 1996 Act.
169. We defer to our pending CPNI proceeding the question of
whether the term ``basic telephone service information'' as defined in
section 274(i)(3) of the Act includes CPNI as defined in section 222 of
the Act. Based on the definition of ``basic telephone service
information'' in section 274(i)(3), however, we conclude that the term
includes network information of the BOC. We also defer to our CPNI
proceeding the issue of whether section 222 requires a BOC engaged in
permissible marketing activities under section 274(c)(2) to obtain
customer approval before using, disclosing, or permitting access to
CPNI. In particular, we defer to that proceeding the issue of whether
or to what extent section 274(c)(2)(B) of the Act imposes any
obligations on BOCs that use, disclose, or permit access to CPNI
pursuant to a teaming arrangement. As noted above, however, the CPNI
requirements the Commission previously established in the Computer II
and Computer III proceedings remain in effect, pending the outcome of
the CPNI proceeding, to the extent that they do not conflict with
section 222 of the Act. Because we conclude that ``basic telephone
service information'' under section 274(i)(3) includes network
information, BOCs that provide network information as part of a teaming
arrangement are required to provide such information to other teaming
arrangements on a
[[Page 7712]]
nondiscriminatory basis pursuant to section 274(c)(2)(B).
c. Electronic Publishing Joint Ventures--Section 274(c)(2)(C)
(1) Permissible Level of BOC Ownership Interest in Electronic
Publishing Joint Venture and Waiver for ``Good Cause''
(a) Background
170. Section 274(c)(2)(C) of the Act expressly permits a BOC or
affiliate to ``participate on a nonexclusive basis in electronic
publishing joint ventures with entities that are not a [BOC],
affiliate, or separated affiliate to provide electronic publishing
services.'' The BOC or affiliate, however, may not hold more than a 50
percent direct or indirect equity interest (or the equivalent thereof)
or the right to more than 50 percent of the voting control over the
joint venture. In addition, officers and employees of a BOC or
affiliate participating in an electronic publishing joint venture may
hold no greater than 50 percent of the voting control over the joint
venture. The House Report clarifies that this restriction prohibits
officers and employees of a BOC from ``collectively having more than 50
percent of the voting control of the venture.'' In the NPRM, we
tentatively concluded that a BOC is deemed to ``own'' an electronic
publishing joint venture ``if it holds greater than a 10 percent but
not more than a 50 percent direct or indirect equity interest in the
venture, or has the right to greater than 10 percent but not more than
50 percent of the venture's gross revenues.'' We sought comment on that
tentative conclusion.
171. Section 274(c)(2)(C) also provides that, ``[i]n the case of
joint ventures with small, local electronic publishers, the Commission
for good cause shown may authorize [a BOC] or affiliate to have a
larger equity interest, revenue share, or voting control but not to
exceed 80 percent.'' As we observed in the NPRM, although the term
``small, local electronic publisher'' is not defined in the statute,
the House Report indicates that the term was intended to apply to
publishers serving communities of fewer than 50,000 persons. We sought
comment in the NPRM on how we should determine the service area of a
``small, local electronic publisher'' for the purpose of applying the
80 percent threshold. In addition, we sought comment on whether it
would be consistent with congressional intent to adopt additional
standards for determining which electronic publishers are subject to
the 80 percent threshold, and, if so, what such standards should be. We
also sought comment on how we should define ``local'' under section
274(c)(2)(C).
172. With regard to section 274(c)(2)(C)'s provision allowing
waiver of the 50 percent equity interest and revenue share limitation
in the case of joint ventures with small, local electronic publishers
for ``good cause shown,'' we sought comment on the ``good cause''
showing that is required under that provision, and whether any
additional regulations are necessary to implement the provision.
(b) Comments
173. The Joint Parties agree that a minimum 10 percent equity
interest or gross revenue share by a BOC is sufficient to constitute
ownership of an electronic publishing joint venture. NAA states that a
BOC must ``own'' an electronic publishing joint venture, which means it
must hold greater than a 10 percent direct or indirect equity interest
in the venture, or have the right to greater than 10 percent of the
venture's gross revenues. NAA also points out that, except for joint
ventures with small, local electronic publishers, a BOC is limited to a
minority stake in the electronic publishing joint venture. NAA argues
that we should not adopt any standards at this time for determining
what constitutes a ``small, local electronic publisher'' under section
274(c)(2)(C), but instead should address the issue in the context of
specific waiver applications. NAA maintains that, in such cases, the
``good cause'' showing that is required under section 274(c)(2)(C)
would be satisfied by demonstrating that greater participation by the
BOC ``is needed to enable the [electronic publishing] service to be
provided to the public.''
(c) Discussion
174. We conclude that a BOC may hold greater than a 10 percent but
not more than a 50 percent direct or indirect equity interest in an
electronic publishing joint venture under section 274(c)(2)(C) of the
Act, or may have the right to greater than 10 percent but not more than
50 percent of the venture's gross revenues. Therefore, while a BOC may
``own'' an electronic publishing joint venture, it is limited to a 50
percent stake in such venture. Our interpretation is consistent with
the definition of ``electronic publishing joint venture'' in section
274(i)(5) of the Act, which contemplates a degree of ownership by a BOC
or affiliate, the definition of ``own'' in section 274(i)(8), and with
the plain language of section 274(c)(2)(C), which restricts a BOC's
ownership or revenue share interest in an electronic publishing joint
venture to 50 percent.
175. We decline at this time to adopt any standards for determining
which entities constitute ``small, local electronic publishers'' for
the purpose of applying the 80 percent threshold in section
274(c)(2)(C) of the Act. While the House Report indicates that the term
was intended to apply to publishers serving communities of fewer than
50,000 persons, it is difficult from a practical standpoint to define
the service area of such publishers, given that electronic publishing
services, by definition, contemplate the dissemination of information
to the general public. Moreover, the term ``small'' may be defined
based on a variety of standards, including the size of the community
served, the gross revenues of the electronic publishing entity, or
other factors. Given the difficulties with establishing standards at
this time for determining what constitutes a ``small, local electronic
publisher'' under section 274(c)(2)(C), we conclude that it is best to
clarify this phrase on a case-by-case basis.
176. With regard to the ``good cause'' showing that is required for
a BOC to hold a greater interest in an electronic publishing joint
venture with a small, local electronic publisher under section
274(c)(2)(C) of the Act, one factor we may consider in determining
whether a BOC has satisfied this standard is whether increased
investment by the BOC is necessary to enable the joint venture to
provide electronic publishing services. In adopting section
274(c)(2)(C), we believe that Congress intended, inter alia, to
encourage market participation by small, local electronic publishing
entities in the provision of electronic publishing services by allowing
a BOC to hold a greater ownership interest in electronic publishing
joint ventures with such entities. We emphasize, however, that this is
only one factor we may consider in determining whether a BOC satisfies
the ``good cause'' standard under section 274(c)(2)(C), and that other
circumstances may exist that militate for or against a finding of
``good cause.'' We thus conclude that the issue of what constitutes
``good cause'' under section 274(c)(2)(C) should be addressed on a
case-by-case basis in the context of fact-specific waiver applications.
(2) BOC Participation on a ``Nonexclusive'' Basis
(a) Background
177. In the NPRM, we also sought comment on what regulations, if
any, are necessary to ensure that a BOC
[[Page 7713]]
participates in an electronic publishing joint venture on a
``nonexclusive'' basis. We noted that this provision appears to
prohibit arrangements whereby a BOC participates in an electronic
publishing joint venture with an electronic publishing entity to the
exclusion of all other such entities. We also sought comment on whether
the provision prohibits contracts between a BOC and an electronic
publisher whereby the electronic publisher is committed to purchase
basic transmission services necessary to provide electronic publishing
exclusively from such BOC, or whether the provision contemplates other
types of prohibitions.
(b) Comments
178. BellSouth, NAA, and NYNEX argue that the ``nonexclusive''
requirement in section 274(c)(2)(C) precludes a BOC from entering into
an electronic publishing joint venture with one entity to the exclusion
of all others. PacTel similarly states that a BOC and its affiliate are
prohibited under the provision from entering into an agreement that
either prohibits other parties from participating in the joint venture
or precludes the BOC or its affiliate from participating in other
electronic publishing joint ventures with other parties. BellSouth
states, however, that a BOC is not obligated to participate in more
than one electronic publishing joint venture. BellSouth and NAA also
argue that the provision does not preclude a BOC from insisting, as a
condition of its participation in the electronic publishing joint
venture, that the joint venture purchase basic transmission services
exclusively from the BOC in order to provide electronic publishing
services. NAA and PacTel contend that the provision does not require an
electronic publishing joint venture to be open to all, nor does it
prelude a BOC from exercising its business judgment regarding its joint
venture partners.
(c) Discussion
179. We conclude that the section 274(c)(2)(C) requirement that a
BOC or affiliate participate in an electronic publishing joint venture
on a ``nonexclusive'' basis prohibits a BOC or affiliate from entering
into an agreement with its joint venture partner that precludes either
entity from participating in other such ventures with other parties.
The ``nonexclusive'' requirement in section 274(c)(2)(C) protects
against the potential that a BOC could place competing local exchange
providers at a competitive disadvantage by preventing its joint venture
partners from aligning with such providers in other electronic
publishing joint ventures. We note, however, that while section
274(c)(2)(C) of the Act proscribes these types of exclusive
arrangements, it does not prevent a BOC from agreeing with its joint
venture partner to exclude other parties from that particular venture.
In addition, we find that section 274(c)(2)(C) does not require that an
electronic publishing joint venture be open to any and all potential
venture participants, nor does it preclude a BOC from exercising its
business judgment regarding its joint venture partners. As noted above,
because an ``electronic publishing joint venture'' as defined in
section 274(i)(5) of the Act, contemplates some degree of BOC
ownership, a BOC should be allowed to retain discretion regarding its
joint venture partners. Requiring a BOC to take an ownership interest
in a joint venture in which it was not free to select its partner would
discourage BOCs from participating in such ventures and restrict
competition in the provision of electronic publishing services.
180. We also find that the ``nonexclusive'' requirement in section
274(c)(2)(C) of the Act does not require a BOC or BOC affiliate to
participate in more than one electronic publishing joint venture. As
BellSouth points out, such an interpretation could be viewed as
precluding a BOC from consummating an electronic publishing joint
venture arrangement with its joint venture partner until the BOC had
located and negotiated with another partner with whom to establish a
joint venture. A BOC thus may refuse to participate in a second
electronic publishing joint venture that is proposed to it after it has
entered into an electronic publishing joint venture with another
unaffiliated entity. Given that Congress, in adopting section 274 of
the Act, sought to promote competition in the provision of electronic
publishing services by allowing BOCs to provide such services subject
to certain safeguards, we conclude that section 274(c)(2)(C) was not
intended to require a BOC to participate in more than one electronic
publishing joint venture. Such a requirement could restrict competitive
entry into the provision of electronic publishing services by hampering
BOC participation in electronic publishing joint ventures.
181. We also conclude that section 274(c)(2)(C) does not preclude a
BOC from requiring an electronic publishing joint venture to purchase
basic transmission services exclusively from the BOC as a condition of
the BOC's participation in the joint venture. The express language of
section 274(a) of the Act contemplates the provision by an electronic
publishing joint venture of electronic publishing services that are
disseminated by means of the BOC or BOC affiliate's basic telephone
service. Moreover, nothing in section 274(a) indicates that Congress
intended to prohibit a BOC participating in an electronic publishing
joint venture from requiring that the joint venture purchase basic
telephone service exclusively from the BOC.
(3) Interplay Between Section 274(c)(1)(B) and Section 274(c)(2)(C)
(a) Background
182. We noted in the NPRM that the joint marketing prohibitions in
section 274(c)(1) of the Act appear not to apply to an electronic
publishing joint venture. We also sought comment on the extent to which
section 274(c)(2)(C), which allows a BOC to participate in electronic
publishing joint ventures under certain conditions, permits a BOC to
market jointly with an electronic publishing joint venture in light of
other provisions in section 274 that prohibit certain marketing
activities. We noted, for example, that section 274(b)(6) prohibits an
electronic publishing joint venture from using the ``name, trademark,
or service marks of an existing [BOC]'' for the marketing of any
product or service, while section 274(c)(2)(A) permits a BOC to provide
inbound telemarketing services for, among other things, an electronic
publishing joint venture, but only under certain conditions. In
addition, we sought comment in the NPRM on the distinction, if any,
between the term ``carry out'' in sections 274(c)(1)(A) and (B), which
set forth the general marketing prohibitions on BOCs, and the term
``provide'' in section 274(c)(2)(C).
(b) Comments
183. A number of commenters argue that section 274(c)(2)(C) is an
exception to the general joint marketing prohibitions in section
274(c)(1) of the Act and thus permits a BOC to provide promotion,
marketing, sales and advertising services to an electronic publishing
joint venture. SBC argues that, because section 274(c)(2)(C) authorizes
a BOC participating in an electronic publishing joint venture to
``provide promotion, marketing, sales, or advertising personnel and
services,'' the venture itself may be staffed by BOC marketing and
sales personnel. Ameritech argues that joint marketing activities
otherwise prohibited under section 274(c)(1) are permitted to the
extent they come under one of the three
[[Page 7714]]
categories of permissible joint marketing activities in section
274(c)(2) of the Act. NAA argues that section 274(c)(2)(C) permits a
BOC to market jointly with an electronic publishing joint venture
subject to the restrictions in section 274(b)(6) on use of names and
trademarks. In addition, NAA contends that the use of the terms ``carry
out'' in section 274(c)(1) and ``provide'' in section 274(c)(2)(C) was
not intended to limit the services a BOC may perform for an electronic
publishing joint venture.
184. Conversely, Time Warner argues that a BOC is prohibited from
jointly marketing its local exchange services with the electronic
publishing services of an electronic publishing joint venture, and vice
versa. According to Time Warner, if a joint venture were permitted to
jointly market its electronic publishing services with the BOC's local
exchange services, ``the ability to leverage the BOC's local exchange
monopoly into the electronic publishing market would remain.''
185. Bell Atlantic contends that sections 274(b)(6) and (c)(2)(A)
of the Act do not affect the right of a BOC to provide marketing
services for an electronic publishing joint venture. According to Bell
Atlantic, the statute prohibits the joint venture, not the BOC, from
using the BOC's name, trademark or service marks. To the extent the BOC
is providing services to the joint venture, Bell Atlantic argues, it is
free to use its own name, trademark and service marks. Bell Atlantic
also maintains that it is subject to the conditions on inbound
telemarketing in section 274(c)(2)(A) of the Act to the extent it
performs inbound telemarketing activities for a joint venture.
(c) Discussion
186. We conclude that section 274(c)(2)(C) provides an exception to
the general joint marketing prohibitions imposed on BOCs in section
274(c)(1) of the Act. As some commenters point out, the introductory
clause in section 274(c)(1) of the Act indicates that subsections
(c)(1)(A) and (B) prohibit BOCs from carrying out certain types of
joint marketing activities ``[e]xcept as provided in [section
274(c)(2)].'' Therefore, while section 274(c)(1)(B) of the Act might
otherwise be interpreted to prohibit a BOC from carrying out joint
marketing activities with an electronic publishing joint venture,
section 274(c)(2)(C) provides a clear exception that allows a BOC to
engage in such activities. In particular, section 274(c)(2)(C) of the
Act expressly permits a BOC participating in an electronic publishing
joint venture to provide ``promotion, marketing, sales or advertising
personnel and services'' to such joint venture.
187. Given the plain language of section 274(c)(2)(C), which allows
a BOC participating in an electronic publishing joint venture to
provide ``promotion, marketing, sales or advertising personnel and
services'' to such joint venture, we agree with SBC that an electronic
publishing joint venture may be staffed by BOC marketing and sales
personnel. Moreover, we agree with NAA that use of the terms ``carry
out'' in section 274(c)(1) and ``provide'' in section 274(c)(2)(C) was
not intended to limit the services a BOC may perform for an electronic
publishing joint venture. To the contrary, based on the more specific
language of the statute, which allows BOC provision of marketing
personnel as well as services, we conclude that section 274(c)(2)(C)
contemplates a broader range of BOC marketing activities than those
proscribed in section 274(c)(1) of the Act.
188. We also conclude that section 274(c)(2)(C) does not override
the general prohibition in section 274(b)(6) of the Act on the use of
``name, trademarks, or service marks of an existing [BOC]'' by an
electronic publishing joint venture and a BOC for the marketing of any
product or service of the joint venture. Nothing in section 274 of the
Act indicates that Congress intended section 274(c)(2)(C) to provide an
exception to the broad restriction in section 274(b)(6) on the use of
an existing BOC's name, trademarks and service marks. As such, to the
extent a BOC engages in marketing activities permissible under section
274(c)(2)(C) of the Act, it must still comply with section 274(b)(6),
as well as all other applicable provisions in section 274. For example,
we agree with Bell Atlantic that a BOC is subject to the conditions in
section 274(c)(2)(A) of the Act to the extent it performs inbound
telemarketing activities for an electronic publishing joint venture.
D. Nondiscrimination Safeguards
1. Background
189. Section 274(d) requires a BOC ``under common ownership or
control with a separated affiliate or electronic publishing joint
venture [to] provide network access and interconnections for basic
telephone service to electronic publishers at just and reasonable rates
that are tariffed (so long as rates for such services are subject to
regulation) and that are not higher on a per-unit basis than those
charged for such services to any other electronic publisher or any
separated affiliate engaged in electronic publishing.'' Prior to the
Act, electronic publishing services were regulated as enhanced services
and were subject to the nondiscrimination requirements established
under the Commission's Computer II and Computer III regimes. Under
Computer III and Open Network Architecture, BOCs have been permitted to
provide enhanced services on an integrated basis. Moreover, BOCs have
been required to provide at tariffed rates nondiscriminatory
interconnection to unbundled network elements used to provide enhanced
services.
190. We concluded in the NPRM that the Computer III/ONA
requirements should continue to apply to the extent that such
requirements are not inconsistent with the Act. We sought comment on
whether the requirements of Computer III/ONA are consistent with the
nondiscrimination requirements of section 274(d). To the extent that
commenters argue that the Computer III/ONA requirements are
inconsistent, we sought comment on whether and to what extent
regulations are necessary to implement section 274(d).
191. We also tentatively concluded in the NPRM that section 274(d)
prohibits BOCs under common ownership or control with a separated
affiliate or electronic publishing joint venture from providing volume
discounts, term discounts, or other preferential rates for basic
telephone service to electronic publishers. In reaching this tentative
conclusion, we reasoned that any such discount would be unlawful
because section 274(d) prohibits BOCs from providing basic telephone
services to some electronic publishers at rates that are ``higher on a
per-unit basis'' than rates charged to other electronic publishers. We
also tentatively concluded that section 274(d) does not require BOCs to
file tariffs for services that no longer are subject to tariff
regulation. Finally, we sought comment on the meaning of the
requirement that access and interconnection be provided to electronic
publishers ``at just and reasonable rates that are tariffed (so long as
rates for such services are subject to regulation).''
2. Comments
192. The parties generally agree that the language of section
274(d) is sufficiently clear and that there is no need for the
Commission to adopt additional rules to implement this provision of the
statute. If the Commission nonetheless adopts rules to implement
section 274(d), Cincinnati Bell would exempt ``any LEC with less
[[Page 7715]]
than 2% of the nation's access lines.'' MCI contends that the BOCs, in
complying with section 274(d), must provide competitors with
``functional equality or service of equal quality relative to the
services the BOCs provide their affiliates.''
193. In addition, the commenters generally agree that the Computer
III/ONA nondiscrimination requirements are consistent with section
274(d), but they disagree on whether we should continue to apply these
requirements to BOC intraLATA electronic publishing services. Some of
the BOCs argue that application of the Computer III/ONA requirements is
unnecessary because section 274 imposes a separate affiliate
requirement on BOCs that is similar to the structural separation
requirements of Computer II. Ameritech supports elimination of the
Computer III/ONA requirements, claiming that they ``were, and are,
simply a solution in search of a problem.'' Other commenters, in
contrast, support retaining the Computer III/ONA requirements. Time
Warner argues that, although the Computer III/ONA requirements ``have
not been useful to enhanced service providers,'' these requirements
will be more effective if combined with the structural separation and
nondiscrimination requirements of section 274. MCI and AT&T observe
that there is no evidence that Congress intended to displace the
Computer III/ONA requirements for electronic publishing services,
although MCI states that the requirements are ``inadequate to prevent
discrimination.''
194. With regard to preferential rates, AT&T and Time Warner agree
with our tentative conclusion that section 274(d) prohibits BOCs under
common ownership or control with a separated affiliate or electronic
publishing joint venture from providing volume and term discounts for
network access and interconnections for basic telephone service to
electronic publishers. They contend that, because the rates charged to
one electronic publisher must not be higher on a ``per-unit basis''
than the rates charged to other electronic publishers, the statute
requires uniform rates for such services. A number of BOCs, on the
other hand, argue that volume and term discounts are permitted so long
as the BOC offers the same discount to other electronic publishers on
the same terms and conditions.
195. PacTel also argues that Congress did not define the term
``units'' for purposes of calculating per-unit rates. PacTel notes that
it provides transport in units such as DS0, DS1, and DS3, which are
priced differently based on its cost savings. PacTel further asserts
that a group of minutes of use, when sold together as a block, could
constitute a unit, which presumably would cost less than buying the
minutes of use individually. It thus asserts that BOCs may continue to
create reasonable units or groups of services, and must only offer such
units to all electronic publishers at the same price.
196. Time Warner also argues that the requirement that rates be
just and reasonable and nondiscriminatory should apply independently of
any decision to reduce or eliminate tariff filing requirements. In
order to enforce this requirement in the event of detariffing, Time
Warner contends that the Commission should require BOCs to file with
the Commission, and furnish to any electronic publisher upon request, a
list of rates charged to electronic publishers. Several BOCs, on the
other hand, argue that filing a rate list is unnecessary because, under
section 274(b)(3)(B), if a particular service is not subject to
tariffing requirements, the transaction must be reduced to writing and
made publicly available. Moreover, some commenters note that, since
section 274(d) does not require BOCs to file tariffs for services that
are no longer subject to tariff filing requirements, a separate rate
list requirement would be both inconsistent with the statute and overly
regulatory.
197. PacTel and YPPA further argue that, once the rates for basic
telephone service are no longer subject to regulation, section 274(d)
is no longer applicable. These commenters contend that the Commission
detariffs services when it determines that competition will keep rates
just and reasonable, and therefore that the market, rather than tariff
filings or other regulatory requirements, will ensure that rates are
just and reasonable.
3. Discussion
198. We decline to adopt rules to implement section 274(d), based
on the record before us; we will reconsider this decision if
circumstances warrant. We find that the language of section 274(d) is
sufficiently clear to ensure that BOCs provide unaffiliated electronic
publishers with network access and interconnections for basic telephone
service that are equal in quality, and at nondiscriminatory terms,
relative to those it provides to electronic publishers affiliated with
the BOC. We reject MCI's contention, however, that section 274(d) is a
guarantee of functional equivalence for unaffiliated electronic
publishers. We find that neither the statute nor its legislative
history supports such an interpretation.
199. We also conclude that the Computer III/ONA requirements are
consistent with the requirements of section 274(d). The parties have
not indicated that there is any inconsistency between the
nondiscrimination requirements of Computer III/ONA and section 274(d).
Section 274(d), moreover, does not repeal or otherwise affect the
Computer III/ONA requirements.
200. We recognize, however, that section 274(b) imposes certain
structural separation requirements on BOC provision of electronic
publishing services. Under our current regulatory regime, a BOC must
comply fully with the Computer II separate subsidiary requirements in
providing an information service to be relieved of the obligation to
file a Comparably Efficient Interconnection (CEI) plan to provide that
service on an integrated basis pursuant to Computer III. The record in
this proceeding, however, is insufficient to support a finding, as
NYNEX proposes, that BOC electronic publishing services that are
offered through a section 274 separated affiliate satisfy all the
relevant requirements of Computer II. Instead, we will consider this
issue, as well as issues raised regarding the revision or elimination
of the Computer III/ONA requirements, in the context of the Computer
III Further Remand proceeding. We conclude, therefore, that Computer
II, Computer III, and ONA requirements continue to govern the BOCs'
provision of intraLATA electronic publishing services. We also note
that the nondiscrimination requirements of section 274(d) apply to the
BOCs' provision of both intraLATA and interLATA electronic publishing
services.
201. We further conclude that section 274(d) prohibits preferential
rates, including volume or term discounts. This section expressly
requires that a BOC under common ownership or control with a separated
affiliate or electronic publishing joint venture must provide other
electronic publishers network access and interconnections for basic
telephone service at rates ``that are not higher on a per-unit basis
than those charged for such services'' to its own affiliates or other
competing electronic publishers. We conclude from the plain language of
the statute that Congress intended that BOCs under common ownership or
control with a separated affiliate or electronic publishing joint
venture must charge electronic publishers a uniform per-unit rate for a
service. We find further support for this interpretation in a floor
statement that Congressman Hyde made regarding the
[[Page 7716]]
purpose of the amendment that contained the ``not higher on a per-unit
basis'' language:
In the development of the manager's amendment to be offered by
Chairman Bliley, the Judiciary Committee has worked closely with the
Commerce Committee to improve H.R. 1555 in areas that are of
particular concern to, and under the jurisdiction of the Judiciary
Committee. * * * Under the manager's amendment, the Bell companies
will be required to provide services to small electronic publishers
at the same per-unit prices that they give to larger publishers.
This will allow the small newspapers and other electronic publishers
to bring the information superhighway to rural areas that might
otherwise be passed by.
141 Cong. Rec. H8292-93 (daily ed. Aug. 2, 1995) (statement of Rep.
Hyde, Chairman of the House Committee on the Judiciary) (emphasis
added)
202. We conclude, however, that section 274(d) only prohibits
discounts for network access and interconnections for basic telephone
service used in the provision of electronic publishing services. Thus,
under this section, BOCs may offer discounts for the provision of such
services to an electronic publisher for use in any of its other non-
electronic publishing activities. Otherwise, an entity that engages in
electronic publishing as well as other activities would be prohibited
from obtaining a volume discount or term discount for any basic
telephone service it purchases for any of its activities, whether or
not related to its electronic publishing services. There is no
indication that Congress intended to prohibit such discounts for an
electronic publisher's non-electronic publishing activities, thereby
putting such electronic publisher at a competitive disadvantage vis-a-
vis its non-electronic publishing competitors.
203. Moreover, we find that section 274(d) does not require a BOC
under common ownership or control with a separated affiliate or
electronic publishing joint venture to charge electronic publishers the
same per-unit price for different services, particularly when those
services use different facilities and impose different costs on the
BOCs. Ignoring such cost disparities for providing different services
would remove the incentive to use the most efficient service and could
increase costs for all electronic publishers as well as hamper
competition in the electronic publishing market.
204. We agree with PacTel that the statute does not define the term
``units,'' for purposes of calculating per-unit rates. BOCs, therefore,
may charge a flat rate or, in the alternative, a rate based on usage
for a service, each of which would have a different base unit. We
reject, however, PacTel's argument that a group of minutes of use, for
example, could constitute a unit, unless such a group of minutes is
both the smallest unit of minutes offered to electronic publishers and
accommodates the needs of small electronic publishers. In this manner,
such a group of minutes would neither constitute a volume discount nor
disadvantage small electronic publishers.
205. We also adopt our tentative conclusion that section 274(d)
does not require BOCs to file tariffs for services that are not subject
to rate regulation. Section 274(d) is clear that BOCs subject to the
requirements in this section file tariffs for services only ``so long
as rates for such services are subject to regulation.'' No commenter
disagrees with this conclusion.
206. In addition, we reject the argument that, because competition
will be sufficient to ensure that a detariffed service's rates are just
and reasonable, section 274(d) is inapplicable to such services. We
find that the ``just and reasonable'' and ``per-unit'' requirements in
section 274(d) are independent of the requirement that rates be
tariffed ``so long as rates for such services are subject to
regulation.'' Thus, the section 274(d) nondiscrimination requirements
will continue to apply, regardless of whether the service is tariffed
or no longer subject to regulation, until the sunset date of this
provision in February, 2000.
207. We decline at this time to address Time Warner's argument that
the Commission should require BOCs to file rates for network access and
interconnections for basic telephone service provided to electronic
publishers even after elimination of tariff filing requirements. We
note that BOCs currently are required to file state and federal tariffs
for ONA services, which are the tariffed services generally used by
enhanced service providers, such as electronic publishers, to provide
their services to customers. The Commission will determine whether
additional filing or regulatory requirements are necessary if and when
a service that is currently subject to tariff filing requirements is
detariffed. Further, several BOCs stated that section 274(b)(3)(B)
eliminates the need for additional regulatory requirements because
under that section, if a particular service is not subject to tariffing
requirements, the transaction between a BOC and its separated affiliate
or joint venture must be pursuant to a written contract that is
publicly available. As discussed below, we are issuing a Further NPRM
in this proceeding to seek additional comments on the meaning of
section 274(b)(3)(B).
IV. Telemessaging
A. Application of Sections 260 and 272 to BOC InterLATA Telemessaging
Services
1. Background
208. We stated in our NPRM that section 260 sets forth various
requirements for the provision of telemessaging service by LECs subject
to the requirements of section 251(c), i.e., incumbent LECs. The
Commission's current rules permit BOCs to provide telemessaging
services on an integrated basis, subject to the Computer III/ONA
requirements. Other LECs have been permitted to provide telemessaging
services subject only to the requirements of sections 201 and 202,
which apply to all common carriers, including the BOCs. The NPRM also
recognized that section 260 does not distinguish between intraLATA and
interLATA provision of telemessaging services. We therefore sought
comment on whether section 260 applies to BOC provision of
telemessaging services, both on an intraLATA and interLATA basis. We
also noted that, in the Non-Accounting Safeguards NPRM, we tentatively
concluded that telemessaging is an information service subject to the
separate affiliate and nondiscrimination requirements of section 272
and, therefore, we tentatively concluded that BOC provision of
interLATA telemessaging services is subject to the requirements of
section 272 in addition to the requirements of section 260. We sought
comment on whether, if we decided not to adopt this tentative
conclusion, BOCs providing telemessaging services on either an
intraLATA or interLATA basis would be subject only to the requirements
of section 260.
2. Comments
209. Commenters generally agree that section 260 applies to all
incumbent LEC provision of telemessaging, both on an intraLATA and
interLATA basis. Commenters disagree, however, on whether BOC provision
of interLATA telemessaging services is subject to both sections 272 and
260. MCI, U S WEST, and Voice-Tel state that BOC provision of interLATA
services is subject to both sections 272 and 260, because telemessaging
service is an ``information service'' and thus falls within the terms
of section 272(a)(2)(C). BellSouth and PacTel agree with this point,
but argue that Congress, in enacting a separate provision for
telemessaging services, did not intend BOC provision of interLATA
[[Page 7717]]
telemessaging services to be subject to the requirements of section
272.
3. Discussion
210. We conclude that section 260 applies to all incumbent LEC
provision of telemessaging services, both on an intraLATA and interLATA
basis. We find that neither the statute nor its legislative history
evinces an intent by Congress to distinguish between BOCs and other
LECs, or between intraLATA and interLATA services. Moreover, because we
concluded in the Commission's Non-Accounting Safeguards Order that
telemessaging service is an ``information service,'' BOC provision of
telemessaging service on an interLATA basis is subject to the
requirements of section 272 in addition to the requirements of section
260.
B. Definition of ``Telemessaging Service''
1. Background
211. Section 260(c) defines ``telemessaging service'' as ``voice
mail and voice storage and retrieval services, any live operator
services used to record, transcribe, or relay messages (other than
telecommunications relay services), and any ancillary services offered
in combination with these services.'' We sought comment in the NPRM on
whether rules are necessary to clarify any ambiguities in this
definition. We also sought comment on the types of services
contemplated by the term ``ancillary services.''
2. Comments
212. None of the commenters identifies any ambiguities in the
definition of ``telemessaging service'' in section 260(c). Some
commenters state generally that the language of section 260 is clear
and that no rules are needed to implement this provision. ATSI states
that ``ancillary services'' are ``all value-added services in addition
to those primary [telemessaging] services, offered by telemessagers to
the communications customer.'' ATSI lists specific examples, but
recommends against establishing a comprehensive list of primary or
ancillary telemessaging services, since new services are created as
technology and consumer demands change.
3. Discussion
213. We conclude that the definition of ``telemessaging service''
in section 260(c) is sufficiently clear and therefore decline to
establish an exclusive list of ``telemessaging services'' or
``ancillary services.'' We note that BellSouth asks us to clarify that
live operator services do not fall within the Commission's definition
of ``enhanced'' services, because they do not employ ``computer
processing applications.'' See BellSouth at 26. We concluded in the
Non-Accounting Safeguards Order that live operator services ``are an
example of one area in which the `information service' definition is
broader than that of `enhanced services.' '' Non-Accounting Safeguards
Order at para.Sec. 145 n.342. We will determine whether any individual
service is a ``telemessaging service'' or ``ancillary service'' as
necessary on a case-by-case basis. We note that BellSouth asks us to
clarify that live operator services do not fall within the Commission's
definition of ``enhanced'' services, because they do not employ
``computer processing applications.'' See BellSouth at 26. We concluded
in the Non-Accounting Safeguards Order that live operator services
``are an example of one area in which the `information service'
definition is broader than that of `enhanced services.' ''
C. Nondiscrimination Requirements
1. Section 260(a)(2) and Sections 201 and 202
a. Background
214. Section 260(a)(2) provides that an incumbent LEC ``shall not
prefer or discriminate in favor of its telemessaging service operations
in its provision of telecommunications services.'' We sought comment in
the NPRM on the extent to which section 260(a)(2) imposes greater
obligations on LECs providing telemessaging services than currently
exist under sections 201 and 202 of the Act.
b. Comments
215. Some commenters assert that section 260(a)(2) imposes greater
obligations on LECs providing telemessaging services than currently
exist under sections 201 and 202 of the Act, based on the broad,
unqualified language in section 260(a)(2). Some of the BOCs, however,
disagree, asserting that section 260(a)(2) merely duplicates the
requirements of sections 201 and 202 for incumbent LEC provision of
telemessaging services. Voice-Tel contends that, in complying with
section 260(a)(2), ``it is not sufficient for the interconnections
offered to be comparable if the result is that the competitor is put at
any disadvantage.''
c. Discussion
216. As noted above, section 260(a)(2) states that an incumbent LEC
``shall not prefer or discriminate in favor of its telemessaging
service operations in its provision of telecommunications services.''
Section 202(a), in contrast, prohibits ``any unjust or unreasonable
discrimination * * *, or * * * any undue or unreasonable preference or
advantage'' by common carriers providing interstate communications
services. Because the section 260(a)(2) nondiscrimination bar, unlike
that of section 202(a), is not qualified by the terms ``unjust and
unreasonable,'' we conclude that Congress did not intend section
260(a)(2) to be synonymous with the nondiscrimination standard in
section 202(a), but intended a more stringent standard. This conclusion
is consistent with our interpretation of similar language in sections
251(c)(2) and 272(c)(1). We therefore reject claims that section
260(a)(2) merely duplicates the nondiscrimination bar of section 202(a)
for the provision of telemessaging services by incumbent LECs.
217. We also conclude that section 260(a)(2) is not a guarantee of
functional equivalence for unaffiliated telemessaging providers, as
Voice-Tel contends. We find that neither the statute nor its
legislative history supports such an interpretation. We note that the
Joint Explanatory Statement states only that section 260(a)(2)
prohibits incumbent LECs ``from discriminating against nonaffiliated
entities with respect to the terms and conditions of any network
services they provide to their own telemessaging operations.'' To the
extent that competitors require different telecommunications services
than the LEC provides to its own telemessaging operations, we note that
other nondiscrimination requirements in the Act and analogous state
nondiscrimination laws may apply to such requests. In addition, the
Commission's ONA rules require the BOCs and GTE to unbundle network
services useful to enhanced service providers.
2. Section 260(a)(2) and Computer III/ONA Requirements
a. Background
218. We concluded in the NPRM that the nondiscrimination
requirements of Computer III/ONA should continue to apply to the extent
they are not inconsistent with section 260(a)(2). We sought comment on
whether the nondiscrimination provisions of Computer III/ONA are
consistent with section 260(a)(2), and whether these provisions should
be applied only to the BOCs or to all incumbent LECs to fulfill the
requirements of section 260(a)(2).
[[Page 7718]]
b. Comments
219. Most commenters agree that the Computer III/ONA
nondiscrimination requirements are consistent with section 260(a)(2)
and assert that these requirements should continue to apply to BOC
intraLATA telemessaging services. MCI and AT&T observe that there is no
evidence that Congress intended to displace the Computer III/ONA
requirements for telemessaging services. Similarly, ATSI asserts that
``[s]ection 260 is not limited by existing rules or other provisions of
the Act.'' The commenters disagree, however, on whether the current
scope of the Computer III/ONA requirements should be extended to
include all incumbent LECs, not just the BOCs. Cincinnati Bell asserts
that the Computer III/ONA requirements should not be extended beyond
their current scope, while PacTel and U S WEST argue that they should
be extended to include all incumbent LECs. AT&T would extend the
Computer III/ONA requirements to all incumbent LECs ``possess[ing]
substantial market power as a result of [their] bottleneck control over
local exchange facilities in a significant service area (e.g., SNET,
GTE, and other Tier I LECs),'' while USTA would exempt small and mid-
sized LECs from these requirements.
220. Several commenters argue that the Computer III/ONA
requirements should be revised or eliminated. Although MCI supports
continued application of the Computer III/ONA requirements, it states
that they ``are inadequate to prevent access discrimination.''
Ameritech supports elimination of the Computer III/ONA requirements,
claiming that they ``were, and are, simply a solution in search of a
problem.'' Bell Atlantic argues that the Computer III/ONA rules are
unnecessary, given that price caps and sections 202(a) and 251 ``fully
protect against discrimination.''
c. Discussion
221. We conclude that the Computer III/ONA requirements are
consistent with the requirements of section 260(a)(2). We affirm our
conclusion, therefore, that Computer III/ONA requirements continue to
govern the BOCs' provision of intraLATA telemessaging services. In
addition, we note that the Commission's Computer II requirements also
continue to govern BOC provision of intraLATA information services,
including telemessaging. We also note that the nondiscrimination
requirements of section 260(a)(2) apply to the BOCs' provision of both
intraLATA and interLATA telemessaging services, as well as other
incumbent LECs' provision of telemessaging services. The parties have
not indicated that there is any inconsistency between the
nondiscrimination requirements of Computer III/ONA and section
260(a)(2). Section 260(a)(2), moreover, does not repeal or otherwise
affect the Computer III/ONA requirements. We will consider in the
Commission's Computer III Further Remand proceeding whether the
Computer III/ONA requirements need to be revised or eliminated. For the
same reason, we also decline to extend the Computer III/ONA
requirements to entities other than BOCs, as recommended by some
commenters.
3. Section 260(a)(2) and Adoption of Rules
a. Background
222. We sought comment in the NPRM on whether and what types of
specific regulations may be necessary to implement section 260(a)(2).
b. Comments
223. The BOCs argue that the language of section 260(a)(2) is
sufficiently clear and thus there is no need for the Commission to
adopt rules to implement this provision. ATSI and Voice-Tel, on the
other hand, argue that the Commission should adopt rules to implement
section 260(a)(2). Voice-Tel states that Commission rules will ensure
that complaints of discrimination are treated consistently and will
help the Commission administer the Act efficiently. SBC argues that any
rules adopted by the Commission must apply to all incumbent LECs, while
Cincinnati Bell would exempt any LEC with less than two percent of the
nation's access lines.
224. Voice-Tel argues that the ``broad language'' of the
nondiscrimination requirement in section 260(a)(2) ``makes any
discrimination in pricing or other behavior unlawful,'' including the
marketing of voice messaging services. Some BOCs, on the other hand,
argue that the scope of section 260(a)(2) is limited to the provision
of ``telecommunications services,'' which, as defined in section 3(46)
of the Act, does not include marketing-related activities.
225. Voice-Tel also would require all incumbent LECs to establish a
separate affiliate to provide telemessaging services, in order to
ensure that incumbent LECs comply with section 260(a)(2). Voice-Tel
claims that nothing in the Act prevents the Commission from imposing
this measure. The BOCs argue, in contrast, that, if Congress had
intended to establish a separate affiliate requirement, it would have
expressly said so, as it did for certain information services in
section 272 and for electronic publishing services in section 274.
c. Discussion
226. We conclude that no rules are necessary to implement section
260(a)(2), based on the record before us; we will reconsider this
decision if circumstances warrant. We therefore decline to adopt the
specific rules proposed by certain commenters.
227. In particular, we decline to impose a separate affiliate
requirement on all incumbent LECs providing telemessaging services. We
find that the safeguards expressly established by Congress in section
260 are sufficient to guard against discriminatory behavior by
incumbent LECs in favor of their own telemessaging operations. In
addition, we find it significant that Congress limited the separate
affiliate requirement in section 272 to BOC provision of interLATA
information services (including interLATA telemessaging services),
interLATA telecommunications services, and manufacturing, and in
section 274 to BOC provision of electronic publishing services.
228. Further, we conclude that the scope of section 260(a)(2) is
limited, by its terms, to the provision of ``telecommunications
services,'' which, as defined in section 3(46) of the Act, does not
include marketing-related activities. Accordingly, we reject Voice-
Tel's argument that marketing is included within the scope of
260(a)(2).
V. Final Regulatory Flexibility Certification
229. The Commission certified in the NPRM that the conclusions it
proposed to adopt would not have a significant economic impact on a
substantial number of small entities because the proposed conclusions
did not pertain to small entities. No comments were submitted in
response to the Commission's request for comment on its certification.
For the reasons stated below, we certify that the conclusions adopted
herein will not have a significant economic impact on a substantial
number of small entities. This certification conforms to the Regulatory
Flexibility Act (RFA), as amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA).
230. The RFA provides that the term ``small business'' has the same
meaning as the term ``small business concern''
[[Page 7719]]
under the Small Business Act. The Small Business Act defines a ``small
business concern'' as one that is independently owned and operated; is
not dominant in its field of operation; and meets any additional
criteria established by the Small Business Administration (SBA). SBA
has not developed a definition of ``small incumbent LECs.'' The closest
applicable definition under SBA rules is for Standard Industrial
Classification (SIC) code 4813 (Telephone Communications, Except
Radiotelephone). The SBA has prescribed the size standard for a ``small
business concern'' under SIC code 4813 as 1,500 or fewer employees.
231. The conclusions we adopt in this Order to implement section
274 apply only to the BOCs which, because they are large corporations
that are dominant in their field of operation and have more than 1,500
employees, do not fall within the SBA's definition for a ``small
business concern.'' The conclusions we adopt pursuant to section 260,
however, apply to all incumbent LECs. Some of these incumbent LECs may
have fewer than 1,500 employees and thus meet the SBA's size standard
to be considered ``small.'' Because such incumbent LECs, however, are
either dominant in their field of operations or are not independently
owned and operated, consistent with our prior practice, they are
excluded from the definition of ``small entity'' and ``small business
concerns.'' Accordingly, our use of the terms ``small entities'' and
``small businesses'' does not encompass small incumbent LECs. Out of an
abundance of caution, however, for regulatory flexibility analysis
purposes, we will consider small incumbent LECs within this analysis
and use the term ``small incumbent LECs'' to refer to any incumbent
LECs that arguably might be defined by SBA as ``small business
concerns.''
232. With respect to section 260, 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, 1,347 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, we are unable at this time to estimate
with greater precision the number of LECs that would qualify as small
business concerns under SBA's definition. Consequently, we estimate
that there are fewer than 1,347 small incumbent LECs that may be
affected by the conclusions adopted in this Order.
233. The Commission adopts the conclusions in this Order to ensure
the prompt implementation of sections 260 and 274 of the Act. Section
260 permits incumbent LECs, including the BOCs, to provide
telemessaging service subject to certain nondiscrimination safeguards.
We certify that although there may be a substantial number of small
incumbent LECs affected by the conclusions adopted in this Order to
implement section 260, these conclusions will not have a significant
economic impact on those affected small incumbent LECs.
234. We decline to elaborate on the definition of ``telemessaging
service'' prescribed by Congress or to establish a list of services
that fall within section 260(c), for the reasons set forth in Part
IV.B. Because we take no action pursuant to section 260(c) in this
Order, there will be no significant economic impact on a substantial
number of small entities.
235. Our conclusion that section 260(a)(2) imposes a more stringent
standard for determining whether discrimination is unlawful than that
which already exists under sections 201 and 202 and applies to all
incumbent LECs will not have a significant economic impact on small
incumbent LECs. Incumbent LECs, including small incumbent LECs, are
subject to other nondiscrimination requirements in the Act and state
law and therefore already are required to respond to complaints of
discriminatory behavior or limit their participation in discriminatory
activities. We therefore find that the impact on incumbent LECs,
including small incumbent LECs, of the more stringent standard of
section 260(a)(2) will most likely be minimal.
236. Our decision not to extend the Computer III/ONA
nondiscrimination requirements to all incumbent LECs, as well as our
decision not to adopt rules implementing the nondiscrimination
requirement of section 260(a)(2), as noted in Section IV.C, will
prevent any significant economic impact on incumbent LECs, particularly
small incumbent LECs. Thus, although their conduct will be subject to
the requirements of section 260, small incumbent LECs will be spared
the regulatory burdens and economic impact of complying with additional
rules.
237. Section 274 of the Act allows BOCs to provide electronic
publishing service disseminated by means of its basic telephone service
only through a ``separated affiliate'' or an ``electronic publishing
joint venture'' that meets the separation, joint marketing, and
nondiscrimination requirements prescribed by that section. BOCs that
were offering electronic publishing services at the time the 1996 Act
was enacted have until February 8, 1997, to meet those requirements,
which expire on February 8, 2000. Because section 274 applies only to
BOCs, which, as noted above, do not fall within the SBA's definition
for a ``small business concern,'' the conclusions we adopt in this
Order implementing this section have no significant economic impact on
a substantial number of small entities.
238. The Commission shall send a copy of this certification, along
with this Order, in a report to Congress pursuant to the SBREFA, 5
U.S.C. 801(a)(1)(A). A copy of this certification will also be provided
to the Chief Counsel for Advocacy of the Small Business Administration,
and will be published in the Federal Register.
VI. Final Paperwork Reduction Analysis
239. As required by the Paperwork Reduction Act of 1995, Public Law
104-13, the NPRM invited the general public and the OMB to comment on
proposed changes to the Commission's information collection
requirements contained in the NPRM. Specifically, the Commission
proposed to extend various reporting requirements, which apply to the
BOCs under Computer III, to all incumbent LECs pursuant to section
260(a)(2). OMB approved all of the proposed changes to the Commission's
information collection requirements in accordance with the Paperwork
Reduction Act. In approving the proposed changes, OMB ``encourage[d]
the [Commission] to investigate the potential for sunsetting these
requirements as competition and other factors allow.''
240. In this Order, the Commission adopts none of the changes to
our information collection requirements proposed in the NPRM. We
therefore need not address the OMB's comment, although we note that our
decision is consistent with the OMB's recommendation.
241. We conclude, however, that to the extent a BOC refers a
customer to a separated affiliate, electronic publishing joint venture
or affiliate during the normal course of its telemarketing operations,
the BOC must refer that customer to all unaffiliated electronic
publishers requesting the referral service, on nondiscriminatory terms.
As part of this requirement, BOCs must provide the names of all such
unaffiliated electronic publishers, as well as its own affiliated
electronic
[[Page 7720]]
publishers, in random order, to the customer. Implementation of this
requirement is subject to OMB approval as prescribed by the Paperwork
Reduction Act.
VII. Ordering Clauses
242. Accordingly, It is ordered that pursuant to sections 1, 2, 4,
201, 202, 260, 274 and 303(r) of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154, 201, 202, 260, 274, and 303(r), the
Report and Order is Adopted, and the clarification and interpretation
contained herein will become effective March 24, 1997. The collection
of information contained within is contingent upon approval by the OMB.
243. It is further ordered that the Secretary shall send a copy of
this Report and Order, including the final regulatory flexibility
certification, to the Chief Counsel for Advocacy of the Small Business
Administration, in accordance with paragraph 605(b) of the Regulatory
Flexibility Act, 5 U.S.C. 601 et seq.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Note: This Attachment will not appear in the Code of Federal
Regulations.
Attachment--List of Commenters in CC Docket No. 96-152
Alarm Detection Systems, Inc.
Alarm Industry Communications Committee
Alert Holding Group, Inc.
Ameritech
Association of Directory Publishers (ADP)
Association of Telemessaging Services International (ATSI)
AT&T Corporation (AT&T)
Atlas Security Service, Inc.
Bell Atlantic Telephone Companies (Bell Atlantic)
BellSouth Corporation (BellSouth)
Checkpoint Ltd.
Cincinnati Bell Telephone (Cincinnati Bell)
Commercial Instruments & Alarm Systems, Inc.
Commonwealth Security Systems, Inc.
ElectroSecurity Corporation
Entergy Technology Holding Company
George Alarm Company, Inc.
Information Industry Association (IIA)
Joint Parties (Bell Atlantic and Newspaper Association of America)
MCI Telecommunications Corporation (MCI)
Merchant's Alarm Systems
Midwest Alarm
Morse Signal Devices
National Security Service
New York State Department of Public Service (New York Commission)
Newspaper Association of America (NAA)
NYNEX Corporation (NYNEX)
Pacific Telesis Group (PacTel)
Peak Alarm
People of the State of California/California PUC (California
Commission)
Per Mar Security Services
Post Alarm Systems
Rodriguez, Francisco
Safe Systems
Safeguard Alarms, Inc.
SBC Communications, Inc. (SBC)
SDA Security Systems, Inc.
Security Systems by Hammond, Inc.
Sentry Alarm Systems of America, Inc.
Sentry Protective Systems
Smith Alarm Systems
Superior Monitoring Service, Inc.
SVI Systems, Inc.
Time Warner Cable (Time Warner)
United States Telephone Association (USTA)
U S West, Inc. (U S WEST)
Valley Burglar & Fire Alarm Co., Inc.
Vector Security
Voice-Tel
Wayne Alarm Systems
Yellow Pages Publishers Association (YPPA)
[FR Doc. 97-4020 Filed 2-19-97; 8:45 am]
BILLING CODE 6712-01-P
