[Federal Register Volume 63, Number 38 (Thursday, February 26, 1998)]
[Proposed Rules]
[Pages 9749-9770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4650]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 51, 53, and 64
[CC Docket No. 95-20, FCC 98-8]
Computer III Further Remand Proceedings: Bell Operating Company
Provision of Enhanced Services; 1998 Biennial Regulatory Review--Review
of Computer III and ONA Safeguards and Requirements
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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[[Page 9750]]
SUMMARY: The Commission is issuing this Notice of Proposed Rulemaking
seeking comment on the remand from the United States Court of Appeals
for the Ninth Circuit relating to the replacement of structural
separation requirements for Bell Operating (BOC) provision of enhanced
services with nonstructural safeguards, as well as the effectiveness of
the Commission's Computer III and ONA nonstructural rules in general.
The Commission believes it is necessary not only to respond to the
issues remanded by the Ninth Circuit, but also to reexamine the
Commission's nonstructural safeguards regime governing the provision of
information services by the BOCs in light of the Telecommunications Act
of 1996 and ensuing changes in telecommunications technologies and
markets.
DATES: Comments are due on or before March 27, 1998 and Reply Comments
are due on or before April 23, 1998. Written comments by the public on
the proposed information collections are due March 27, 1998. Written
comments must be submitted by the Office of Management and Budget (OMB)
on the proposed information collections on or before April 27, 1998.
ADDRESSES: Comments and reply comments should be sent to Office of the
Secretary, Federal Communications Commission, 1919 M Street, N.W., Room
222, Washington, D.C. 20554, with a copy to Janice Myles of the Common
Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C. 20554.
Parties should also file one copy of any documents filed in this docket
with the Commission's copy contractor, International Transcription
Services, Inc., 1231 20th St., N.W., Washington, D.C. 20036. In
addition to filing comments with the Secretary, a copy of any comments
on the information collections contained herein should be submitted to
Judy Boley, Federal Communications Commission, Room 234, 1919 M Street,
N.W., Washington, D.C. 20554, or via the Internet to jboley@fcc.gov,
and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725--17th Street,
N.W., Washington, D.C. 20503 or via the Internet to fain__t@al.eop.gov.
FOR FURTHER INFORMATION CONTACT: Lisa Sockett, Attorney, Common Carrier
Bureau, Policy and Program Planning Division, (202) 418-1580. For
additional information concerning the information collections contained
in this NPRM contact Judy Boley at (202) 418-0214, or via the Internet
at jboley@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking adopted January 29, 1998 and released January
30, 1998 (FCC 98-8). This NPRM contains proposed or modified
information collections subject to the Paperwork Reduction Act of 1995
(PRA). It has been submitted to the OMB for review under the PRA. The
OMB, the general public, and other Federal agencies are invited to
comment on the proposed or modified information collections contained
in this proceeding. The full text of this Notice of Proposed Rulemaking
is available for inspection and copying during normal business hours in
the FCC Reference Center, 1919 M St., N.W., Room 239, Washington, D.C.
The complete text also may be obtained through the World Wide Web, at
http://www.fcc.gov/Bureaus/Common Carrier/Orders/fcc988.wp, or may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 1231 20th St., N.W.,
Washington, D.C. 20036.
Paperwork Reduction Act
This NPRM contains either a proposed or modified information
collection. The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public and OMB to comment on the
information collections contained in this NPRM, as required by the
Paperwork Reduction Act of 1995, Pub. L. 104-13. Public and agency
comments are due at the same time as other comments on this NPRM; OMB
notification of action is due April 27, 1998. Comments should address:
(a) whether the proposed collection of information is necessary for the
proper performance of the functions of the Commission, including
whether the information shall have practical utility; (b) the accuracy
of the Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
OMB Approval Number: None.
Title: Computer III Further Remand Proceedings: Bell Operating
Company Provision of Enhanced Services; 1998 Biennial Regulatory
Review--Review of Computer III and ONA Safeguards and Requirements.
Form No.: N/A.
Type of Review: New collection.
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No. of
Information collection respondents Estimated time per response Total annual
(approx.) burden
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Consolidation of generic 5 4 hours (2 hours twice a year)..................... 20 hours.
information in semi-annual
reports.
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Respondents: Bell Operating Companies.
Estimated costs per respondent: $0.
Needs and Uses: The NPRM seeks comment on a number of issues, the
result of which could lead to the imposition of information
collections.
Synopsis of Notice of Proposed Rulemaking
I. Introduction
1. In the Commission's Computer III and Open Network Architecture
(ONA) proceedings, the Commission sought to establish appropriate
safeguards for the provision by the Bell Operating Companies (BOCs) of
``enhanced'' services.\1\ Examples of enhanced services include, among
other things, voice mail, electronic mail, electronic store-and-
forward, fax store-and-forward, data processing, and gateways to online
databases. Underlying this effort, as well as our reexamination of the
Computer III and ONA rules in this Further Notice of Proposed
Rulemaking (Further Notice), are three complementary goals. First, we
seek to enable consumers and communities across the country to take
advantage of innovative ``enhanced'' or ``information'' services \2\
offered by both
[[Page 9751]]
the BOCs and other information service providers (ISPs). Second, we
seek to ensure the continued competitiveness of the already robust
information services market. Finally, we seek to establish safeguards
for BOC provision of enhanced or information services that make common
sense in light of current technological, market, and legal conditions.
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\1\ Basic services, such as ``plain old telephone service''
(POTS), are regulated as tariffed services under Title II of the
Communications Act. Enhanced services use the existing telephone
network to deliver services that provide more than a basic
transmission offering. Bell Operating Companies' Joint Petition for
Waiver of Computer II Rules, Memorandum Opinion & Order, 10 FCC Rcd
1724 n.3 (1995) (Interim Waiver Order); 47 CFR 64.702(a). The terms
``enhanced service'' and ``basic service'' are defined and discussed
more fully infra at para. 38.
\2\ The terms ``enhanced services'' and ``information services''
are used interchangeably in this Further Notice.
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2. Under Computer III and ONA, the BOCs are permitted to provide
enhanced services on an ``integrated'' basis (i.e., through the
regulated telephone company), subject to certain ``nonstructural
safeguards,'' as described more fully below. These rules replaced those
previously established in Computer II, which required AT&T (and
subsequently the BOCs) to offer enhanced services through structurally
separate subsidiaries. On February 21, 1995, the Commission released a
Notice of Proposed Rulemaking (Computer III Further Remand Notice)
following a remand from the United States Court of Appeals for the
Ninth Circuit (California III). The Computer III Further Remand Notice
sought comment on both the remand issue in California III relating to
the replacement of structural separation requirements for BOC provision
of enhanced services with nonstructural safeguards, as well as the
effectiveness of the Commission's Computer III and ONA nonstructural
rules in general.
3. Since the adoption of the Computer III Further Remand Notice,
significant changes have occurred in the telecommunications industry
that affect our analysis of the issues raised in this proceeding. Most
importantly, on February 8, 1996, Congress passed the
Telecommunications Act of 1996 (1996 Act) to establish ``a pro-
competitive, de-regulatory national policy framework'' in order to make
available to all Americans ``advanced telecommunications and
information technologies and services by opening all telecommunications
markets to competition.'' As the Supreme Court recently noted, the 1996
Act ``was an unusually important legislative enactment'' that changed
the landscape of telecommunications regulation.
4. The 1996 Act significantly alters the legal and regulatory
framework governing the local exchange marketplace. Among other things,
the 1996 Act opens local exchange markets to competition by imposing
new interconnection, unbundling, and resale obligations on all
incumbent local exchange carriers (LECs), including the BOCs. In
addition, the 1996 Act allows the BOCs, under certain conditions, to
enter markets from which they previously were restricted, including the
interLATA telecommunications and interLATA information services
markets. In some cases, the 1996 Act requires a BOC to offer services
in these markets through a separate affiliate.\3\ In addition, the 1996
Act incorporates new terminology and definitions that differ from those
the Commission had been using.
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\3\ We note that on December 31, 1997, the United States
District Court for the Northern District of Texas held that sections
271-275 of the Act are a bill of attainder and thus are
unconstitutional as to SBC Corporation and U S WEST. SBC
Communications, Inc. v. Federal Communications Comm'n, No. 7:97-CV-
163-X, 1997 WL 800662 (N.D. Tex. Dec. 31, 1997) (SBC v. FCC) (ruling
subsequently extended to Bell Atlantic), request for stay pending.
In general, the analysis in this Further Notice assumes the
continued applicability of these provisions to the Bell companies.
At appropriate places in this Further Notice, however, we ask
commenters to assess the impact of SBC v. FCC on our analysis.
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5. In light of the 1996 Act and ensuing changes in
telecommunications technologies and markets, we believe it is necessary
not only to respond to the issues remanded by the Ninth Circuit, but
also to reexamine the Commission's nonstructural safeguards regime
governing the provision of information services by the BOCs. Congress
recognized, in passing the 1996 Act, that competition will not
immediately supplant monopolies and therefore imposed a series of
safeguards to prevent the BOCs from using their existing market power
to engage in improper cost allocation and discrimination in their
provision of interLATA information services, among other things. These
statutory safeguards seek to address many of the same anticompetitive
concerns as, but do not explicitly displace, the safeguards established
by the Commission in the Computer II, , and ONA proceedings. We
therefore issue this Further Notice to address issues raised by the
interplay between the safeguards and terminology established in the
1996 Act and the regime. These 1996 Act-related issues were not raised
in the Computer III Further Remand Notice. We therefore ask interested
parties to respond to the issues raised in this Further Notice and, to
the extent that parties want any arguments made in response to the
Computer III Further Remand Notice to be made a part of the record for
this Further Notice, we ask them to restate those arguments in their
comments.
6. We note, in addition, that Congress required the Commission to
conduct a biennial review of regulations that apply to operations or
activities of any provider of telecommunications service and to repeal
or modify any regulation it determines to be ``no longer necessary in
the public interest.'' Accordingly, the Commission has begun a
comprehensive 1998 biennial review of telecommunications and other
regulations to promote ``meaningful deregulation and streamlining where
competition or other considerations warrant such action.'' In this
Further Notice, therefore, we seek comment on whether certain of the
Commission's current and ONA rules are ``no longer necessary in the
public interest.'' To the extent parties identify additional Computer
III and ONA rules they believe warrant review under the Act, we invite
those comments as well.
7. Consistent with the 1996 Act, in this Further Notice we seek to
strike a reasonable balance between our goal of reducing and
eliminating regulatory requirements when appropriate as competition
supplants the need for such requirements to protect consumers and
competition, and our recognition that, until full competition is
realized, certain safeguards may still be necessary. We want to
encourage the BOCs to provide new technologies and innovative
information services that will benefit the public, as well as ensure
that the BOCs will make their networks available for the use of
competitive providers of such services. We therefore seek comment in
this Further Notice on, among other things, the following tentative
conclusions:
--Notwithstanding the 1996 Act's adoption of separate affiliate
requirements for BOC provision of certain information services (most
notably, interLATA information services), the Act's overall pro-
competitive, de-regulatory framework, as well as our public interest
analysis, support the continued application of the Commission's
nonstructural safeguards regime to BOC provision of intraLATA
information services [paragraphs 43-59];
--Given the protections established by the 1996 Act and our ONA rules,
we should eliminate the requirement that BOCs file Comparably Efficient
Interconnection (CEI) plans and obtain Common Carrier Bureau (Bureau)
approval for those plans prior to providing new intraLATA information
services [paragraphs 60-65];
--At a minimum, we should eliminate the CEI-plan requirement for BOC
intraLATA information services provided through an Act-mandated
affiliate under section 272 or 274 [paragraphs 66-72]; and
--The Commission's network information disclosure rules established
pursuant to section 251(c)(5) should supersede certain,
[[Page 9752]]
but not all, of the Commission's previous network information
disclosure rules established in Computer II and Computer III [paragraph
122].
We also generally seek comment on, among other things, the
following issues:
--Whether enactment and implementation of the 1996 Act, as well as
other developments, should alleviate the Ninth Circuit's concern about
the level of unbundling mandated by ONA [paragraphs 29-36];
--Whether the Commission's definition of the term ``basic service'' and
the 1996 Act's definition of ``telecommunications service'' should be
interpreted to extend to the same functions [paragraphs 38-42];
--Whether the Commission's current ONA requirements have been effective
in providing ISPs with access to the basic services that ISPs need to
provide their own information service offerings [paragraphs 85-90];
--Whether the Commission, under its general rulemaking authority,
should extend to ISPs some or all section 251-type unbundling rights,
which the Commission previously concluded was not required by section
251 of the Act [paragraphs 94-96]; and
--How the Commission's current ONA reporting requirements should be
streamlined and modified [paragraphs 99-116].
8. As set forth in the 1998 appropriations legislation for the
Departments of Commerce, Justice, and State, the Commission is required
to undertake a review of its implementation of the provisions of the
1996 Act relating to universal service, and to submit its review to
Congress no later than April 10, 1998. The Commission must review,
among other things, the Commission's interpretations of the definitions
of ``information service'' and ``telecommunications service'' in the
1996 Act, and the impact of those interpretations on the current and
future provision of universal service to consumers, including consumers
in high cost and rural areas. We recognize that there is a some overlap
between the inquiry in this Further Notice about the relationship
between the Commission's definition of the term ``basic service'' and
the 1996 Act's definition of ``telecommunications service,'' and the
issues to be addressed in the Commission's report to Congress.
Furthermore, we recognize that other aspects of this Further Notice
also may be affected by the analysis in the Universal Service Report.
We note that the inquiry in this Further Notice is primarily focused on
the rules and terminology the Commission should be using in the context
of its Computer II and Computer III requirements. We also note that the
order in this proceeding will be issued after the Universal Service
Report is submitted to Congress, and will thus take into account any
conclusions made in that report.
II. Background
A. Overview of Computer III/ONA and Related Court Decisions
9. We discussed in detail the factual history of Computer III/ONA
in the Computer III Further Remand Notice. One of the Commission's main
objectives in the Computer III and ONA proceedings has been to permit
the BOCs to compete in unregulated enhanced services markets while
preventing the BOCs from using their local exchange market power to
engage in improper cost allocation and unlawful discrimination against
ESPs. The concern has been that BOCs may have an incentive to use their
existing market power in local exchange services to obtain an
anticompetitive advantage in these other markets by improperly
allocating to their regulated core businesses costs that would be
properly attributable to their competitive ventures, and by
discriminating against rival, unaffiliated ESPs in the provision of
basic network services in favor of their own enhanced services
operations. In Computer II, the Commission addressed these concerns by
requiring the then-integrated Bell System to establish fully
structurally separate affiliates in order to provide enhanced services.
Following the divestiture of AT&T in 1984, the Commission extended the
structural separation requirements of Computer II to the BOCs.
10. In Computer III, after reexamining the telecommunications
marketplace and the effects of structural separation during the six
years since Computer II, the Commission determined that the benefits of
structural separation were outweighed by the costs, and that
nonstructural safeguards could protect competing ESPs from improper
cost allocation and discrimination by the BOCs while avoiding the
inefficiencies associated with structural separation. The Commission
concluded that the advent of more flexible, competition-oriented
regulation would permit the BOCs to provide enhanced services
integrated with their basic network facilities. Towards this end, the
Commission adopted a two-phase system of nonstructural safeguards that
permitted the BOCs to provide enhanced services on an integrated basis.
The first phase required the BOCs to obtain Commission approval of a
service-specific CEI plan in order to offer a new enhanced service. In
these plans, the BOCs were required to explain how they would offer to
ESPs all the underlying basic services the BOCs used to provide their
own enhanced service offerings, subject to a series of ``equal access''
parameters. Thus, the CEI phase of nonstructural safeguards imposed
obligations on the BOCs only to the extent they offered specific
enhanced services. The Commission indicated that such a CEI requirement
could promote the efficiencies of competition in enhanced services
markets by permitting the BOCs to participate in such markets provided
they open their networks to competitors.
11. During the second phase of implementing Computer III, the
Commission required the BOCs to develop and implement ONA plans. The
ONA phase was intended to broaden a BOC's unbundling obligations beyond
those required in the first phase. ONA plans explain how a BOC will
unbundle and make available to unaffiliated ESPs network services in
addition to those the BOC uses to provide its own enhanced services
offerings. These ONA plans were required to comply with a defined set
of criteria in order for the BOC to obtain structural relief on a
going-forward basis. This means that a BOC would not need to obtain
approval of CEI plans prior to offering specific enhanced services on
an integrated basis. The Commission also required the BOCs to comply
with various other nonstructural safeguards in the form of rules
related to network disclosure, customer proprietary network information
(CPNI), and quality, installation, and maintenance reporting. All of
these nonstructural safeguards were designed to promote the efficiency
of the telecommunications network, in part by permitting the technical
integration of basic and enhanced services and in part by preserving
competition in the enhanced services market through the control of
potential anticompetitive behavior by the BOCs.
12. In 1990, the Court of Appeals for the Ninth Circuit vacated
three orders in the Computer III proceeding, finding that the
Commission had not adequately justified the decision to rely on
(nonstructural) cost accounting safeguards as protection against cross-
subsidization of enhanced services by the BOCs. In response to this
remand, the Commission adopted the BOC Safeguards Order, which
strengthened
[[Page 9753]]
the cost accounting safeguards, and reaffirmed the Commission's
conclusion that nonstructural safeguards should govern BOC
participation in the enhanced services industry, rather than structural
separation requirements.
13. During the period from 1988 to 1992, the Commission approved
the BOCs' ONA plans, which described the basic services that the BOCs
would provide to unaffiliated and affiliated ESPs and the terms on
which these services would be provided. During the two-year period from
1992 to 1993, the Bureau approved the lifting of structural separation
for individual BOCs upon their showing that their initial ONA plans
complied with the requirements of the BOC Safeguards Order, and these
decisions were later affirmed by the Commission.
14. After California I and the Commission's response in the BOC
Safeguards Order, the Ninth Circuit in California II upheld the
Commission's orders approving BOC ONA plans. In California II, the
court concluded that the Commission had scaled back its vision of ONA
since Computer III by approving BOC ONA plans before ``fundamental
unbundling'' had been achieved. The court also concluded that the issue
of whether implementation of ONA plans justified the lifting of
structural separation, as the Commission had determined, was not
properly before it.
15. In California III, the Court of Appeals for the Ninth Circuit
partially vacated the Commission's BOC Safeguards Order. The California
III court found that, in granting full structural relief based on the
BOC ONA plans, the Commission had not adequately explained its apparent
``retreat'' from requiring ``fundamental unbundling'' of BOC networks
as a component of ONA and a condition for lifting structural
separation. The court was therefore concerned that ONA unbundling, as
implemented, failed to prevent the BOCs from engaging in discrimination
against competing ESPs in providing access to basic services. The court
did find, however, that the Commission had adequately responded to its
concerns regarding cost-misallocation by strengthening its cost
accounting rules and introducing a system of ``price cap'' regulation;
the court indicated its belief that these strengthened safeguards would
significantly reduce the BOCs' incentive and ability to misallocate
costs. The court also upheld the scope of federal preemption adopted in
the BOC Safeguards Order.
16. In response to California III, the Bureau issued the Interim
Waiver Order, which reinstated the requirement that BOCs must file CEI
plans, and obtain Commission approval of those plans, to continue to
provide specific enhanced services on an integrated basis. Also in
response, the Commission issued the Computer III Further Remand Notice,
60 FR 12529, March 7, 1995, which sought comment on the California III
court's remand question regarding the sufficiency of ONA unbundling as
a condition of lifting structural separation, and on the general issue
of whether relying on nonstructural safeguards serves the public
interest.
B. Overview of the 1996 Act
17. Since the California III remand and the Commission's release of
the Computer III Further Remand Notice, the 1996 Act became law and the
Commission has conducted a number of proceedings to implement its
provisions. These developments give us a fresh perspective from which
to evaluate the Commission's current regulatory framework for the
provision of information services. In this section, we describe some of
the major provisions of the 1996 Act, and in later sections we examine
how those provisions may affect our current rules.
1. Opening the Local Exchange Market
18. Various provisions of the 1996 Act are intended to open local
exchange markets to competition. Section 251(c) of the Act requires,
among other things, incumbent LECs, including the BOCs and GTE, to
provide to requesting telecommunications carriers interconnection and
access to unbundled network elements at rates, terms, and conditions
that are just, reasonable, and nondiscriminatory, and to offer
telecommunications services for resale. Section 253(a) bars state and
local governments from imposing certain legal requirements that
prohibit or have the effect of prohibiting the ability of any entity to
provide any telecommunications service, and section 253(d) authorizes
the Commission to preempt such legal requirements to the extent
necessary to correct inconsistency with the Act. As a result,
telecommunications carriers may now enter the local exchange market,
and compete with the incumbent LEC, through access to unbundled network
elements, resale, or through construction of network facilities.
19. In implementing section 251 of the Act, the Commission
prescribed certain minimum points of interconnection necessary to
permit competing carriers to choose the most efficient points at which
to interconnect with the incumbent LEC's network. The Commission also
adopted a minimum list of unbundled network elements (UNEs) that
incumbent LECs must make available to new entrants, upon request. In
Parts III and IV below, we discuss and seek comment on the potential
impact of these unbundling requirements in more detail, both with
respect to the issue in California III regarding the Commission's
justification of ONA unbundling as a condition of lifting structural
separation, as well as our overall reexamination of the Commission's
current nonstructural safeguards framework.
2. BOC Provision of Information Services
20. The 1996 Act conditions the BOCs' entry into the market for
many in-region interLATA services, among other things, on their
compliance with the separate affiliate, accounting, and
nondiscrimination requirements set forth in section 272. In the Non-
Accounting Safeguards Order, 62 FR 2927, January 21, 1997, we noted
that these safeguards are designed to prohibit anticompetitive
discrimination and improper cost allocation while still permitting the
BOCs to enter markets for certain interLATA telecommunications and
information services, in the absence of full competition in the local
exchange marketplace. We also concluded in the Non-Accounting
Safeguards Order that the Commission's Computer II, Computer III, and
ONA requirements are consistent with section 272 of the Act, and
continue to govern the BOCs' provision of intraLATA information
services, since section 272 only addresses BOC provision of interLATA
services.
21. Sections 260, 274, and 275 of the Act set forth specific
requirements governing the provision of telemessaging, electronic
publishing, and alarm monitoring services, respectively, by the BOCs
and, in certain cases, by incumbent LECs. Section 260 delineates the
conditions under which incumbent LECs, including the BOCs, may offer
telemessaging services. We affirmed our conclusion in the Non-
Accounting Safeguards Order that, since telemessaging service is an
``information service,'' BOCs that offer interLATA telemessaging
services are subject to the separation requirements of section 272. We
further concluded that the Computer III/ONA requirements are consistent
with the requirements of section 260(a)(2), and, therefore, BOCs may
offer intraLATA telemessaging services on an integrated basis subject
to both Computer III/ONA and the requirements in section 260.
[[Page 9754]]
22. Section 274 permits the BOCs to provide electronic publishing
services, whether interLATA or intraLATA, only through a ``separated
affiliate'' or an ``electronic publishing joint venture'' that meets
certain separation, nondiscrimination, and joint marketing requirements
in that section. The Commission found that there was no inconsistency
between the nondiscrimination requirements of Computer III/ONA and
section 274(d). We therefore found that the Computer III/ONA
requirements continue to govern the BOCs' provision of intraLATA
electronic publishing. We also noted that the nondiscrimination
requirements of section 274(d) apply to the BOCs' provision of both
intraLATA and interLATA electronic publishing.
23. Section 275 of the Act prohibits the BOCs from providing alarm
monitoring services until February 8, 2001, although BOCs that were
providing alarm monitoring services as of November 30, 1995 are
grandfathered. Section 275 of the Act does not impose any separation
requirements on the provision of alarm monitoring services. We
concluded in the Alarm Monitoring Order, 62 FR 16093, April 4, 1997
that the Computer III/ONA requirements are consistent with the
requirements of section 275(b)(1), and therefore continue to govern the
BOCs' provision of alarm monitoring service. We discuss the potential
impact of the Act's new requirements for BOC provision of certain
information services on our cost-benefit analysis of structural versus
nonstructural safeguards in more detail in Part IV.B.
III. California III Remand
A. Background
24. In California III, the Ninth Circuit reviewed the BOC
Safeguards Order, in which the Commission reaffirmed its earlier
determination to remove structural separation requirements imposed on a
BOC's provision of enhanced services, based on a BOC's compliance with
ONA requirements and other nonstructural safeguards. The court found
that, in the BOC Safeguards Order, and in the orders implementing ONA,
the Commission had ``changed its requirements for, or definition of,
ONA so that ONA no longer contemplates fundamental unbundling.''
Because, in the Ninth Circuit's view, the Commission had not adequately
explained why this perceived shift did not undermine its decision to
rely on the ONA safeguards to grant full structural relief, the court
remanded the proceeding to the Commission.
25. In the Computer III Phase I Order, (51 FR 24350 (July 3, 1986))
the Commission declined to adopt any specific network architecture
proposals or specific unbundling requirements, but instead set forth
general standards for ONA. BOCs were required to file initial ONA plans
presenting a set of ``unbundled basic service functions that could be
commonly used in the provision of enhanced services to the extent
technologically feasible.'' The Commission stated that, by adopting
general requirements rather than mandating a particular architecture
for implementing ONA, it wished to encourage development of efficient
interconnection arrangements. The Commission also noted that
inefficiencies might result from ``unnecessarily unbundled or
splintered services.''
26. The Computer III Phase I Order required the BOCs to meet a
defined set of unbundling criteria in order for structural separation
to be lifted. In the BOC ONA Order, (54 FR 3435 (January 24, 1989)) the
Commission generally approved the ``common ONA model'' proposed by the
BOCs. The common ONA model was based on the existing architecture of
the BOC local exchange networks, and consisted of unbundled services
categorized as basic service arrangements (BSAs), basic service
elements (BSEs), complementary network services (CNSs), and ancillary
network services (ANSs).
27. In the BOC ONA proceeding, certain commenters criticized the
common ONA model. The commenters argued that the BOCs had avoided the
Computer III Phase I Order unbundling requirements by failing to
``disaggregate communications facilities and services on an element-by-
element basis.'' They urged the Commission to adopt a more
``fundamental'' concept of unbundling in the ONA context, by requiring
the BOCs to unbundle facilities such as loops, as well as switching
functions, inter-office transmission, and signalling. Specifically,
they claimed that BSAs could be further unbundled; e.g., trunks could
be unbundled from the circuit-switched, trunk-side BSA, so that ESPs
could connect their own trunks to BOC switches.
28. In the BOC ONA Order, the Commission rejected arguments that
ONA, as set forth in the Computer III Phase I Order, required
unbundling more ``fundamental'' than that set forth in the ``common ONA
model'' proposed by the BOCs. The Commission indicated that the
Computer III Phase I Order anticipated that the BOCs would unbundle
network services, not facilities, and determined that the ONA services
developed by the BOCs under the common ONA model were consistent with
the examples of service unbundling set forth in the Computer III Phase
I Order. The Ninth Circuit, however, agreed with the view that the
Commission's approval of the BOC ONA plans, and subsequent lifting of
structural separation, was a retreat from a ``requirement'' of
``fundamental unbundling.''
B. Subsequent Events May Have Alleviated the Ninth Circuit's California
III Concerns
29. In this section, we seek comment on whether the enactment and
implementation of the 1996 Act, as well as other developments, should
alleviate the Ninth Circuit's underlying concern about the level of
unbundling mandated by ONA. Section 251 of the Act requires incumbent
LECs, including the BOCs and GTE, to provide to requesting
telecommunications carriers interconnection and access to unbundled
network elements at rates, terms, and conditions that are just,
reasonable, and nondiscriminatory, and to offer telecommunications
services for resale. Section 251 also requires incumbent LECs to
provide for physical collocation at the LEC's premises of equipment
necessary for interconnection or access to unbundled network elements,
under certain conditions.
30. In its regulations implementing these statutory provisions, the
Commission identified a minimum list of network elements that incumbent
LECs are required to unbundle, including local loops, network interface
devices (NIDs), local and tandem switching capabilities, interoffice
transmission facilities (often referred to as trunks), signalling
networks and call-related databases, operations support systems (OSS)
facilities, and operator services and directory assistance. Additional
unbundling requirements may be specified during voluntary negotiations
between carriers, by state commissions during arbitration proceedings,
or by the Commission as long as such requirements are consistent with
the 1996 Act and the Commission's regulations. We note that the 1996
Act creates particular incentives for the BOCs to unbundle and make
available the elements of their local exchange networks. For example,
section 271 provides that a BOC may gain entry into the interLATA
market in a particular state by demonstrating, inter alia, that it has
entered into access and interconnection agreements with competing
telephone exchange service providers that satisfy the ``competitive
[[Page 9755]]
checklist'' set forth in section 271(c)(2)(B).
31. In our view, the unbundling requirements imposed by section 251
and our implementing regulations (hereinafter referred to as ``section
251 unbundling'') are essentially equivalent to the ``fundamental
unbundling'' requirements proposed by certain commenters, and rejected
by the Commission as premature, in the BOC ONA Order. These commenters
asked the Commission to require the BOCs to unbundle network elements
such as loops, switching functions, inter-office transmission, and
signalling. Section 251(c)(3) and the Commission's implementing
regulations require those elements, and others, to be unbundled by the
BOCs, and by other incumbent LECs that are subject to the requirements
of section 251(c). In addition, the type and level of unbundling under
section 251 is different and more extensive than that required under
ONA. This may be because one of Congress's primary goals in enacting
section 251--to bring competition to the largely monopolistic local
exchange market--is more far-reaching than the Commission's goal for
ONA, which has been to preserve competition and promote network
efficiency in the developing, but highly competitive, information
services market.
32. We recognize that, according to the terms of section 251, only
``requesting telecommunications carriers'' are directly accorded rights
to interconnect and to obtain access to unbundled network elements.\4\
In that regard, the section 251 unbundling requirements do not provide
access and interconnection rights to the identical class of entities as
does the ONA regime, since these rights do not extend to entities that
provide solely information services (``pure ISPs''). We also recognize
that the development of competition in the local exchange market has
not occurred as rapidly as some expected since the enactment of the
1996 Act.
---------------------------------------------------------------------------
\4\ See 47 U.S.C. 251(c)(2), (c)(3). The Commission determined
that entities that provide both telecommunications services and
information services are classified as telecommunications carriers
for the purposes of section 251, and are subject to the general
interconnection obligations of section 251(a), to the extent that
they are acting as telecommunications carriers. Local Competition
Order, 61 FR 45476, August 29, 1996. The Commission further
concluded that telecommunications carriers that have obtained
interconnection or access to unbundled network elements under
section 251 in order to provide telecommunications services, may
offer information services through the same arrangement, so long as
they are offering telecommunications services through the same
arrangement as well. Id. See infra paragraphs 92-96 for a more
complete discussion of section 251 unbundling vis-a-vis ONA. See
also paragraph 8 for a discussion of the Universal Service Report.
---------------------------------------------------------------------------
33. We believe, however, that section 251 is intended to bring
about competition in the local exchange market that, ultimately, will
result in increased variety in service offerings and lower service
prices, to the benefit of all end-users, including ISPs. Moreover,
because local telecommunications services are important inputs to the
information services ISPs provide, ISPs are uniquely positioned to
benefit from an increasingly competitive local exchange market. There
is evidence, for example, that carriers that have direct rights under
section 251 will compete with the incumbent LECs to provide pure ISPs
with the basic network services that ISPs need to create their own
information service offerings, either by obtaining unbundled network
elements for the provision of telecommunications services or through
the resale of such services. As a result, incumbent LECs have an
incentive to provide an increased variety of telecommunications
services to pure ISPs at lower prices in response to the market
presence of such competitors. Pure ISPs also could enter into
partnering or teaming arrangements with carriers that have direct
rights under section 251. In addition, ISPs can obtain certification as
telecommunications service providers in order to receive direct
benefits under section 251. We also note that many ISPs that currently
provide both telecommunications services and information services will
have the benefit of both section 251 unbundling as well as ONA.
34. For all these reasons, the fact that section 251's access and
interconnection rights apply by their terms only to a ``requesting
telecommunications carrier'' does not, in our view, change our
conviction that the 1996 Act, as well as other factors, should
alleviate the court's underlying concern in California III that the
level of unbundling required under ONA does not provide sufficient
protection against access discrimination. We seek comment on this
analysis. In light of several recent court decisions bearing on these
issues, we also ask commenters to address how the opinions of the
Eighth Circuit Court of Appeals, including the decision regarding the
recombination of unbundled network elements, as well as the decision of
the United States District Court for the Northern District of Texas
concerning the constitutionality of sections 271 through 275 of the
Act, affect our analysis.
35. In addition to the changes engendered by the 1996 Act, there
have been other regulatory and market-based developments that, we
believe, also should alleviate the court's underlying concern about
whether the level of unbundling mandated by ONA provides sufficient
protection against access discrimination. For example, the Commission's
Expanded Interconnection proceeding requires Class A LECs, including
the BOCs and GTE, to allow all interested parties to provide
competitive interstate special access, transport, and tandem switched
transport by interconnecting their transmission facilities with the
LECs' networks. Competing ISPs that utilize transmission facilities
thus may provide certain transport functions as part of their enhanced
services independent of the Computer III framework. These additional
interconnection requirements, together with section 251 unbundling and
the Commission's current ONA requirements, further help to protect ISPs
against access discrimination by the BOCs. We seek comment on this
analysis.
36. In addition, the level of competition within the information
services market, which the Commission termed ``truly competitive'' as
early as 1980, has continued to increase markedly as new competitive
ISPs have entered the market. The phenomenal growth of the Internet
over the past several years illustrates how robustly competitive one
sector of the information services market has become. Recent surveys
suggest that there are some 3,000 Internet access providers in the
United States; these providers range from small start-up operations, to
large providers such as IBM and AT&T, to consumer online services such
as America Online. We believe that other sectors of the information
services market have also continued to grow, as we observed in the
Computer III Further Remand Notice. The presence of well-established
participants in the information services market, such as EDS, MCI,
AT&T, Viacom, Times-Mirror, General Electric, and IBM, may make it more
difficult for BOCs to engage in access discrimination. For example, the
California I court indicated that ``the emergence of powerful
competitors such as IBM, which have the resources and expertise to
monitor the quality of access to the network, reduces the BOCs' ability
to discriminate in providing access to their competitors.'' We seek
comment on whether the sustained growth of competition within the
information services market,
[[Page 9756]]
including the continued participation of large information service
competitors, serves to diminish further the threat of access
discrimination and, consequently, the court's concern about whether the
level of unbundling mandated by ONA is sufficient.
IV. Effect of the 1996 Act
37. As detailed in the background section, the Commission issued
the Computer III Phase I Order more than ten years ago, shortly after
divestiture, and before the BOCs had obtained authorization from the
MFJ court to begin to provide information services. Similarly, the
implementation of ONA primarily took place between 1988 and 1992. Our
objective is now, as it was then, to promote efficiency and increased
service offerings while controlling anticompetitive behavior by the
BOCs. We therefore reevaluate below the continuing need for these
safeguards, in light of the 1996 Act and the significant technological
and market changes that have taken place since the Computer III
nonstructural safeguards were first proposed. This reevaluation is also
part of the Commission's 1998 biennial review of regulations as
required by the 1996 Act.
A. Basic/Enhanced Distinction
38. In the Computer II proceeding, the Commission adopted a
regulatory scheme that distinguished between the common carrier
offering of basic transmission services and the offering of enhanced
services. The Commission defined a ``basic transmission service'' as
the common carrier offering of ``pure transmission capability'' for the
movement of information ``over a communications path that is virtually
transparent in terms of its interaction with customer-supplied
information.'' The Commission further stated that a basic transmission
service should be limited to the offering of transmission capacity
between two or more points suitable for a user's transmission needs.
The common carrier offering of basic services is regulated under Title
II of the Communications Act. In contrast, the Commission defined
enhanced services as:
services, offered over common carrier transmission facilities used
in interstate communications, which employ computer processing
applications that act on the format, content, code, protocol or
similar aspects of the subscriber's transmitted information; provide
the subscriber additional, different, or restructured information;
or involve subscriber interaction with stored information.
Enhanced services are not regulated under Title II of the
Communications Act.
39. The 1996 Act does not utilize the Commission's basic/enhanced
terminology, but instead refers to ``telecommunications services'' and
``information services.'' The 1996 Act defines telecommunications as:
the transmission, between or among points specified by the user, of
information of the user's choosing, without change in the form or
content of the information as sent and received.
Telecommunications service is defined as:
the offering of telecommunications for a fee directly to the public,
or to such classes of users as to be effectively available directly
to the public, regardless of facilities used.
The 1996 Act defines information service as:
the offering of a capability for generating, acquiring, storing,
transforming, processing, retrieving, utilizing, or making available
information via telecommunications, and includes electronic
publishing, but does not include any use of any such capability for
the management, control, or operation of a telecommunications system
or the management of a telecommunications service.
40. We concluded in the Non-Accounting Safeguards Order that,
although the text of the Commission's definition of ``enhanced
services'' differs from the 1996 Act's definition of ``information
services,'' the two terms should be interpreted to extend to the same
functions. We found no basis to conclude that, by using the term
``information services,'' Congress intended a significant departure
from the Commission's usage of ``enhanced services.'' We further
explained that interpreting ``information services'' to include all
``enhanced services'' provides a measure of regulatory stability for
telecommunications carriers and ISPs by preserving the definitional
scheme under which the Commission exempted certain services from
traditional common carriage regulation.
41. Consistent with our conclusion in the Non-Accounting Safeguards
Order that ``enhanced services'' fall within the statutory definition
of ``information services,'' we seek comment in this Further Notice on
whether the Commission's definition of ``basic service'' and the 1996
Act's definition of ``telecommunications service'' should be
interpreted to extend to the same functions, even though the two
definitions differ. We ask parties to address whether there is any
basis to conclude that, by using the term ``telecommunications
services,'' Congress intended a significant departure from the
Commission's usage of ``basic services.'' As noted in the Non-
Accounting Safeguards Order, we believe the public interest is served
by maintaining the regulatory stability of the definitional scheme
under which the Commission exempted certain services from traditional
common carriage regulation. To the extent parties believe that
``telecommunications services'' differ from ``basic services'' in any
regard, they should identify the distinctions that should be drawn
between the two categories, describe any overlap between the two
categories, and delineate the particular services that would come
within one category and not the other.
42. In light of our conclusion in the Non-Accounting Safeguards
Order that the statutory term ``information services'' includes all
services the Commission has previously considered to be ``enhanced,''
and our decision in this proceeding to seek comment on whether the
statutory term ``telecommunications services'' includes all services
the Commission has previously considered to be ``basic services,'' we
seek comment on whether the Commission hereafter should conform its
terminology to that used in the 1996 Act. We ask commenters to discuss
whether the Commission's rules, which previously distinguished between
basic and enhanced services, should now distinguish between
telecommunications and information services. For example, we ask
whether the Commission's Computer II decision should now be interpreted
to require facilities-based common carriers that provide information
services to unbundle their telecommunications services and offer such
services to other ISPs under the same tariffed terms and conditions
under which they provide such services to their own information
services operations.
B. Cost-Benefit Analysis of Structural Safeguards
1. Background
43. The Commission's goals in addressing BOC provision of
information services have been both to promote innovation in the
provision of information services and to prevent access discrimination
and improper cost allocation. Because the BOCs control the local
exchange network and the provision of basic services, in the absence of
regulatory safeguards they may have the incentive and ability to engage
in anticompetitive behavior against ISPs that must obtain basic network
services from the BOCs in order
[[Page 9757]]
to provide their information service offerings. For example, BOCs may
discriminate against competing ISPs by denying them access to services
and facilities or by providing ISPs with access to services and
facilities that is inferior to that provided to the BOCs' own
information services operations. BOCs also may allocate costs
improperly by shifting costs they incur in providing information
services, which are not regulated under Title II of the Act, to their
basic services.
44. Under rate-of-return regulation, which allows carriers to set
rates based on the cost of providing a service, the BOCs may have had
an incentive to shift costs incurred in providing information services
to their basic service customers. In 1990, the Commission replaced
rate-of-return regulation with price cap regulation of the BOCs and
certain other LECs to discourage improper cost allocation, among other
things. Recently, the Commission revised its price caps regime to
eliminate the sharing mechanism, which required price cap carriers to
``share'' with their access customers half or all their earnings above
certain levels in the form of lower rates. This revision substantially
reduces the BOCs' incentive to misallocate costs.
45. Since the adoption of Computer I in 1971, the Commission has
employed various regulatory tools, including structural separation, to
prevent access discrimination and cost misallocation, first by AT&T and
then, after divestiture, by the BOCs, in providing information
services. In Computer I, we imposed a ``maximum separation policy'' on
the provision of ``data processing'' services by common carriers other
than AT&T and its Bell System subsidiaries. We continued to impose
structural separation on the provision of enhanced services by AT&T and
its Bell System subsidiaries in Computer II, until we replaced
structural separation with a system of nonstructural safeguards in
1986, in Computer III.
46. The Commission has long recognized both the benefits as well as
the costs of structural separation as a regulatory tool. The Commission
noted in Computer II that a structural separation requirement reduces
firms' ability to engage in anticompetitive activity without detection
because the extent of joint and common costs between affiliated firms
is reduced, transactions must take place across corporate boundaries,
and the rates, terms, and conditions on which services will be
available to all potential purchasers must be made publicly available.
Structural separation thus is useful as an enforcement tool and as a
deterrent, because firms are less likely to engage in anticompetitive
activity the more easily it can be detected. As for costs, the
Commission recognized that structural separation increases firms'
transaction and production costs, but did not agree with arguments
presented at the time that structural separation reduces innovation.
47. The Commission similarly weighed the benefits and costs of
structural separation in Computer III when, with the passage of time
and the accumulation of experience, it replaced the Computer II
structural separation requirements with a system of nonstructural
safeguards. The Commission concluded in Computer III that the benefits
of structural separation are not significantly greater than the
benefits of nonstructural safeguards in preventing anticompetitive
practices by the BOCs, and that structural separation imposes greater
costs on the public and the BOCs than nonstructural safeguards. The
Commission also found that the benefits of structural separation had
decreased since the adoption of the BOC Separation Order, 49 FR 1190,
January 10, 1984 due to technological and market developments that
diminished the BOCs' ability to misallocate costs and engage in access
discrimination. Further, the Commission found, based on its experience,
that the introduction of new information services by the BOCs was
slowed or prevented altogether by structural separation, thus denying
the public the benefits of innovation. The Commission also found that
structural separation imposed direct costs on the BOCs resulting from
duplication of facilities and personnel, limitations on joint
marketing, and deprivation of economies of scope. The Ninth Circuit
upheld the Commission's analysis of the costs of structural separation
in California I and California III.
2. Effect of the 1996 Act and Other Factors
48. In the Computer III Further Remand Notice, the Commission
sought comment on how various factors, including reports of
anticompetitive behavior by the BOCs and the increase in the number of
BOC information service offerings since the elimination of structural
separation, affected the Commission's cost-benefit analysis of
structural separation in Computer III. The 1996 Act was enacted after
the Commission issued the Computer III Further Remand Notice, and
raises additional issues that may affect this cost-benefit analysis. As
discussed in more detail below, we tentatively conclude that the Act's
overall pro-competitive, de-regulatory framework, as well as our public
interest analysis, support the continued application of the
Commission's nonstructural safeguards regime to the provision by the
BOCs of intraLATA information services. We also tentatively conclude
that allowing the BOCs to offer intraLATA information services subject
to nonstructural safeguards serves as an appropriate balance of the
need to provide incentives to the BOCs for the continued development of
innovative new technologies and information services that will benefit
the public with the need to protect competing ISPs against the
potential for anticompetitive behavior by the BOCs. We thus propose to
allow the BOCs to continue to provide intraLATA information services on
an integrated basis, subject to the Commission's Computer III and ONA
requirements as modified or amended by this proceeding, or on a
structurally separate basis. If a BOC chooses to provide intraLATA
information services on a structurally separate basis, we seek comment
on whether we should permit the BOC to choose between a Computer II and
an Act-mandated affiliate under section 272 or section 274, or whether
we should mandate one of these types of affiliates.
a. Section 251 and Local Competition
49. Competition in the local exchange and exchange access markets
is the best safeguard against anticompetitive behavior. BOCs are unable
to engage successfully in discrimination and cost misallocation to the
extent that competing ISPs have alternate sources of access to basic
services. Stated differently, when other telecommunications carriers,
such as interexchange carriers (IXCs) or cable service providers,
compete with the BOCs in providing basic services to ISPs, the BOCs are
less able to engage successfully in discrimination and cost
misallocation because they risk losing business from their ISP
customers for basic services to these competing telecommunications
carriers.
50. As discussed above, the 1996 Act affirmatively promotes local
competition. Sections 251 and 253, among other sections, are intended
to eliminate entry barriers and foster competition in the local
exchange and exchange access markets. Indeed, the market for local
exchange and exchange access services has begun to respond to some
degree to the pro-competitive mandates of the 1996 Act. Some ISPs, for
example, currently are obtaining basic services that underlie their
information services from competing
[[Page 9758]]
providers of telecommunications services that have entered into
interconnection agreements with the BOCs pursuant to section 251.
51. We recognize that the BOCs remain the dominant providers of
local exchange and exchange access services in their in-region states,
and thus continue to have the ability and incentive to engage in
anticompetitive behavior against competing ISPs. On the other hand, the
movement toward local exchange and exchange access competition should,
over time, decrease and eventually eliminate the need for regulation of
the BOCs to ensure that they do not engage in access discrimination or
cost misallocation of their basic service offerings. The Commission has
previously concluded that the nonstructural safeguards established in
Computer III could combat such anticompetitive behavior as effectively
as structural separation requirements, but in a less costly way. We
thus tentatively conclude that the de-regulatory, pro-competitive
provisions of the 1996 Act, and the framework the 1996 Act set up for
promoting local competition, are consistent with, and provide
additional support for, the continued application of the Commission's
current nonstructural safeguards regime for BOC provision of intraLATA
information services. We seek comment on this tentative conclusion.
b. Structural Separation and the 1996 Act
52. In the Computer III Further Remand Notice, we sought comment on
the issue of whether some form of structural separation should be
reimposed for the provision of information services by the BOCs, and we
discussed briefly the costs and benefits that the Commission previously
identified in granting structural relief to the BOCs. In this section,
we seek comment on the extent to which the Act-mandated separation
requirements may affect this cost-benefit analysis.
53. The 1996 Act permits the BOCs to enter markets from which they
were previously restricted, allowing the BOCs to develop and market
innovative new technologies and information services. In doing so,
Congress in certain cases imposed structural separation requirements on
the BOCs. Section 272, for example, allows the BOCs to provide certain
interLATA information services as well as in-region, interLATA
telecommunications services, and to engage in manufacturing activities,
only through a structurally separate affiliate. Section 274 imposes
structural separation requirements on BOC provision of intraLATA and
interLATA electronic publishing services. Congress did not, however,
mandate separation requirements for BOC provision of other information
services.
54. In the Non-Accounting Safeguards Order we recognized that
section 272 on its face does not require the BOCs to offer intraLATA
information services through a separate affiliate, and deferred to this
proceeding the question of whether the Commission should exercise its
general rulemaking authority to do so. We find it significant that
Congress limited the separate affiliate requirement in section 272 to
BOC provision of most interLATA information services, interLATA
telecommunications services, and manufacturing, and in section 274 to
BOC provision of electronic publishing services. We therefore
tentatively conclude that Congress' decision to impose structural
separation requirements in sections 272 and 274, while relevant to our
cost-benefit analysis, does not in itself warrant a return to
structural separation for BOC provision of intraLATA information
services not subject to those sections. We seek comment on this
tentative conclusion.
55. Congress's decision to mandate structural separation only for
certain information services does not necessarily foreclose the
Commission from mandating or allowing structural separation for other
information services. We recognize that, for example, the statutory
separate affiliate requirements may reduce the cost of returning to a
structural separation regime for BOC provision of intraLATA information
services, given that the BOCs already are required to establish at
least one structurally separate affiliate in order to provide the
services covered by sections 272 and 274. Some BOCs may find it more
efficient to provide all of their information services through a
statutorily-mandated affiliate. In addition, it may be in the public
interest for the Commission to prescribe a uniform set of regulations
for BOC provision of both intraLATA and interLATA information services,
by requiring, for example, that BOCs provide all information services
through an affiliate that complies with the statute. This approach
would eliminate the need to distinguish between intraLATA and interLATA
information services for purposes of regulation and, consequently,
lower compliance and enforcement costs.
56. On the other hand, mandatory structural separation would entail
increased transaction and production costs for the BOCs, as discussed
above. In addition, in the Computer III Further Remand Notice we noted
that all of the BOCs currently are offering some information services
on an integrated basis pursuant to CEI plans approved by the
Commission. Thus, our cost-benefit analysis should take into account
the costs today of returning to structural separation. These would
include the personnel, operational, and other changes the BOCs would
have to undergo in order to reinstate a regime of structural
separation, and the service disruptions, lower service quality, reduced
innovation, and higher user rates that may result. We must also
consider the effect on the public of the potential delay in the
development of new technologies and information services by the BOCs
that may result. In addition, once the separation requirements under
sections 272 and 274 sunset, structural separation for intraLATA
information services based on the existence of the statutorily-mandated
affiliates would have to be reexamined.
57. We also recognize the benefits of a flexible, regulatory
framework that would allow the BOCs, consistent with the public
interest, to structure their operations as they see fit in order to
maximize efficiencies and thus provide greater benefits to consumers.
We note that, under our current rules, a BOC may provide an intraLATA
information service either on an integrated basis pursuant to an
approved CEI plan or on a structurally separated basis pursuant to the
Commission's Computer II rules. SBC has argued that the BOCs continue
to need this type of flexibility to provide intraLATA information
services either on an integrated basis, subject to appropriate
safeguards, or through a separate affiliate, because the most
appropriate form of regulation varies service-by-service, depending on
the relative significance of cost considerations and other factors.
Although the Commission may need to devote more resources to administer
and enforce multiple regulatory regimes, this approach would allow the
BOCs to structure their intraLATA information service offerings more in
accordance with their business needs. In addition, such an approach may
minimize the risk of service disruptions, since the BOCs would not have
to change the manner in which they are providing their current
intraLATA information service offerings.
58. In addition to the factors cited by the Commission in the
Computer III Phase I Order, more recent events may affect the analysis
of the relative costs and benefits of structural and nonstructural
safeguards. In particular,
[[Page 9759]]
we earlier discussed how our Price Caps Fourth Report and Order, 62 FR
31939, June 11, 1997 eliminates the sharing mechanism from the price
caps regime, thereby reducing the BOCs' incentive to misallocate costs.
We also described previously how the local competition provisions of
the 1996 Act provide for alternate sources of access to basic services,
thereby diminishing the BOCs' ability to engage in anticompetitive
behavior against competing ISPs.
59. In light of this analysis, we continue to believe it is
preferable, as a matter of public interest, to continue with the
Commission's nonstructural safeguards regime rather than to reimpose
structural separation, notwithstanding the affiliate requirements of
sections 272 and 274 of the Act. We thus tentatively conclude that the
BOCs should continue to be able to choose whether to provide intraLATA
information services either on an integrated basis, subject to the
Commission's Computer III and ONA requirements as modified or amended
by this proceeding, or pursuant to a separate affiliate. We seek
comment on this tentative conclusion. In addition, if a BOC chooses to
provide intraLATA information services through a separate affiliate, we
seek comment on whether we should permit the BOC to choose between a
Computer II and an Act-mandated affiliate, or whether we should mandate
one of these types of affiliates. Finally, we seek comment on how the
recent SBC v. FCC decision in the United States District Court for the
Northern District of Texas affects this analysis.
C. Comparably Efficient Interconnection (CEI) Plans
1. Proposed Elimination of Current Requirements
60. In the Interim Waiver Order adopted in response to the
California III decision, the Bureau allowed the BOCs to continue to
provide existing enhanced services on an integrated basis, provided
that they filed CEI plans for those services. In addition, the Bureau
required the BOCs to file CEI plans for new enhanced services they
propose to offer, and to obtain the Bureau's approval for these plans
before beginning to provide service. We concluded that the partial
vacation of the BOC Safeguards Order in California III reinstated the
service-specific CEI plan regime, augmented by implementation of ONA,
until the Commission concluded its remand proceedings. BOCs were also
required to comply with the requirements established in their approved
ONA plans, because we had previously determined that ONA requirements
are independent of the removal of structural separation requirements.
61. In this Further Notice, we tentatively conclude that we should
eliminate the requirement that BOCs file CEI plans and obtain Bureau
approval for those plans prior to providing new information services.
We note that CEI plans were always intended to be an interim measure,
designed to bridge the gap between the Commission's decision to lift
structural separation in the Computer III Phase I Order and the
implementation of ONA. While CEI plans have been effective as interim
safeguards, we tentatively conclude that they are not necessary to
protect against access discrimination once the BOCs are providing
information services pursuant to approved ONA plans, which they have
been for several years. ONA provides ISPs an even greater level of
protection against access discrimination than CEI. Under ONA, not only
must the BOCs offer network services to competing ISPs in compliance
with the nine CEI ``equal access'' parameters, but the BOCs must also
unbundle and tariff key network service elements beyond those they use
to provide their own enhanced services offerings. BOCs are also subject
to ONA amendment requirements that constitute an additional safeguard
against access discrimination following the lifting of structural
separation.
62. Further, under the 1996 Act, the BOCs are now subject to
additional statutory requirements that will help prevent access
discrimination, including the section 251 unbundling requirements and
the network information disclosure requirements of section 251(c)(5).
These statutory requirements all serve as further protections against
access discrimination, both by requiring the BOCs to open the local
exchange market to competition, and by ensuring that the BOCs publicly
disclose on a timely basis information about changes in their basic
network services.
63. Given the protections afforded by ONA and the 1996 Act, we
believe that the substantial administrative costs associated with BOC
preparation, and agency review, of CEI plans outweigh their utility as
an additional safeguard against access discrimination. Moreover, the
time and effort involved in the preparation and review of the CEI plans
may delay the introduction of new information services by the BOCs,
without commensurate regulatory benefits. Such a result is contrary to
one of the Commission's original purposes in adopting a nonstructural
safeguards regime, which was to promote and speed introduction of new
information services, benefiting the public by giving them access to
innovative new technologies.
64. For the reasons outlined above, we tentatively conclude that we
should eliminate the requirement that BOCs file CEI plans and obtain
Bureau approval for those plans prior to providing new information
services. We believe the significant burden imposed by these
requirements on the BOCs and the Commission outweighs their possible
incremental benefit as additional safeguards against access
discrimination. In this light, we tentatively conclude that lifting the
CEI plan requirement will further our statutory obligation to review
and eliminate regulations that are ``no longer necessary in the public
interest.'' We seek comment on this tentative conclusion and our
supporting analysis.
Parties who disagree with this tentative conclusion should address
whether there are more streamlined procedures that could be adopted as
an alternative to the current CEI filing requirements.
65. We recognize that, as part of our effort to reexamine our
nonstructural safeguards regime, we seek comment in this Further Notice
on whether we should modify or amend certain ONA requirements. Because
we base our tentative conclusion that we should eliminate the CEI-plan
filing requirement in part on the adequacy of ONA, we ask that parties
comment on how any of the modifications the Commission proposes in Part
IV.D., or proposed by commenters in response to our questions, may
affect this tentative conclusion. We also seek comment on whether the
requirements that the 1996 Act imposes on the BOCs, such as those
relating to section 251 unbundling and network information disclosure,
are sufficient in themselves to provide a basis for eliminating CEI
plans.
2. Treatment of Services Provided Through 272/274 Affiliates
a. Section 272
66. In the Non-Accounting Safeguards Order, we noted that section
272 of the Act imposes specific separate affiliate and
nondiscrimination requirements on BOC provision of ``interLATA
information services,'' but does not address BOC provision of intraLATA
information services. We concluded that, pending the conclusion of the
Computer III Further Remand proceeding, BOCs may continue to provide
intraLATA information services on an integrated basis, in compliance
[[Page 9760]]
with the Commission's nonstructural safeguards established in Computer
III and ONA.
67. The Non-Accounting Safeguards Order also raised the related
issue of whether a BOC that provides all information services (both
intraLATA and interLATA) through a section 272 separate affiliate
satisfies the Commission's Computer II separate subsidiary
requirements, and therefore does not have to file a CEI plan for those
services. We noted that the record in the Non-Accounting Safeguards
Order was insufficient to make this determination, and that we would
examine this issue in the Computer III Further Remand proceeding.
68. If we do not adopt our tentative conclusion in this proceeding
to eliminate the CEI plan filing requirement for the BOCs, we
tentatively conclude that the BOCs should not have to file CEI plans
for information services that are offered through section 272 separate
affiliates, notwithstanding that section 272's requirements are not
identical to the Commission's Computer II requirements (all other
applicable Computer III and ONA safeguards, however, as amended or
modified by this proceeding, would continue to apply). We note that, to
the extent certain or all BOCs no longer have to provide interLATA
services through a section 272 affiliate as a result of the SBC v. FCC
decision by the United States District Court for the Northern District
of Texas, then this tentative conclusion would not apply.
69. We reach our tentative conclusion for several reasons. First,
we believe that the concerns underlying the Commission's Computer II
requirements regarding access discrimination and cost misallocation are
sufficiently addressed by the accounting and non-accounting
requirements set forth in section 272 and the Commission's orders
implementing this section. Second, after a BOC receives authority under
section 271 to provide interLATA services through a section 272
affiliate, the BOC in many cases may want to provide a seamless
information service to customers that would combine both the inter-and
intraLATA components of such service. For the Commission to require
that the BOC also receive approval under a CEI plan for the intraLATA
component of such service is, in our view, unnecessary, and likely to
delay the provision of integrated services that would be beneficial to
consumers. We seek comment on this tentative conclusion and supporting
analysis.
70. We also noted in the Non-Accounting Safeguards Order that other
issues raised regarding the interplay between the 1996 Act and the
Commission's Computer III/ONA regime would be addressed in the Computer
III Further Remand proceeding. These included whether: (1) the
Commission should harmonize its regulatory treatment of intraLATA
information services provided by the BOCs with the section 272
requirements imposed by Congress on interLATA information services; (2)
the 1996 Act's CPNI, network disclosure, nondiscrimination, and
accounting provisions supersede various of the Commission's Computer
III nonstructural safeguards; and (3) section 251's interconnection and
unbundling requirements render the Commission's Computer III and ONA
requirements unnecessary. These issues are either being addressed in
this Further Notice or have been covered in other proceedings.
b. Section 274
71. In the Telemessaging and Electronic Publishing Order, 62 FR
7690, February 20, 1997 we concluded that the Commission's Computer II,
Computer III, and ONA requirements continue to govern the BOCs'
provision of intraLATA electronic publishing services. We found,
however, that the record was insufficient to determine whether BOC
provision of electronic publishing through a section 274 affiliate
satisfied all the relevant requirements of Computer II, such that the
BOC would not have to file a CEI plan for that service. We noted that
we would consider that issue, as well as other issues raised regarding
the revision or elimination of the Computer III/ONA requirements, in
the Computer III Further Remand proceeding.
72. If we do not adopt our tentative conclusion in this proceeding
to eliminate the CEI plan filing requirement for the BOCs, we
tentatively conclude, as we do above for information services that are
provided through a section 272 affiliate, that BOCs should not have to
file CEI plans for electronic publishing services or other information
services provided through their section 274 affiliate (as noted above,
however, all other applicable Computer III and ONA safeguards, as
amended or modified by this proceeding, would continue to apply). As
noted above, to the extent certain or all BOCs no longer are subject to
section 274 for their provision of electronic publishing as a result of
the SBC v. FCC decision by the United States District Court for the
Northern District of Texas, then this tentative conclusion would not
apply.
73. Again, we reach our tentative conclusion for several reasons.
First, we believe the section 274 separation and nondiscrimination
requirements, and the Commission's rules implementing those
requirements, are sufficient to address concerns regarding access
discrimination and misallocation of costs in general. Second, given
that Congress set forth detailed rules in section 274 for the specific
provision of electronic publishing services, we do not believe the
Commission should continue to require the BOCs to file, and the
Commission to approve, CEI plans before the BOCs may provide such
services. We seek comment on this tentative conclusion and supporting
analysis.
3. Treatment of Telemessaging and Alarm Monitoring Services
74. In the Telemessaging and Electronic Publishing Order and the
Alarm Monitoring Order, respectively, we concluded that the
Commission's Computer II, Computer III, and ONA requirements continue
to govern the BOCs' provision of intraLATA telemessaging services and
alarm monitoring services. Because neither section 260 nor section 275
imposes separation requirements for the provision of intraLATA
telemessaging services or alarm monitoring services, respectively, BOCs
may provide those services, subject both to other restrictions in those
sections, as applicable, as well as the Commission's current
nonstructural safeguards regime, as modified by the proposals that we
may adopt in this proceeding.
4. Related Issues
75. If we adopt our tentative conclusion to eliminate the CEI plan
filing requirement for the BOCs, we seek comment on whether we should
dismiss all CEI matters pending at that time (including pending CEI
plans, pending CEI plan amendments, and requests for CEI waivers), on
the condition that the BOCs must comply with any new or modified rules
that may be established as a result of this Further Notice. We also
seek comment on whether we should require a BOC with CEI approval to
continue to offer service under the CEI requirements. To the extent
that parties involved in pending CEI matters raise issues other than
those directly related to the CEI requirements (e.g., whether the
service for which the BOC is seeking CEI-plan approval is a true
information service, as opposed to a telecommunications service that
should be offered under tariff), we seek comment on how and in what
forum those issues should be addressed.
[[Page 9761]]
76. We note that section 276 directs the Commission to prescribe a
set of nonstructural safeguards for BOC provision of payphone service,
which must include, at a minimum, the ``nonstructural safeguards equal
to those adopted in'' the Computer III proceeding. In implementing
section 276, the Commission required the BOCs, among other things, to
file CEI plans describing how they would comply with various
nonstructural safeguards. The Bureau approved the BOCs' CEI plans to
provide payphone service on April 15, 1997.
77. We seek comment on whether the changes that may be made to the
Commission's Computer III and ONA rules as a result of this Further
Notice should also apply to the nonstructural safeguards regime
established in the Payphone Order proceeding for BOC provision of
payphone service. For example, to the extent that we adopt our
tentative conclusion to eliminate the CEI plan filing requirement,
should we also relieve the BOCs from the requirement of filing
amendments to their CEI plans for payphone service? How does this
comport with the statutory requirement in section 276? We seek comment
on these issues.
D. ONA and Other Nonstructural Safeguards
1. ONA Unbundling Requirements
a. Introduction
78. The Commission's ONA unbundling requirements serve both to
safeguard against access discrimination and to promote competition and
market efficiency in the information services industry. As described
above, the Commission conditioned the permanent elimination of the
Computer II structural separation requirements imposed on the BOCs upon
the evolutionary implementation of ONA and other nonstructural
safeguards. The ONA requirements, however, have a significance
independent of whether they provide the basis for lifting structural
separation. In 1990, during the course of the remand proceedings in
response to California I, the Commission required the BOCs to implement
ONA regardless of whether ONA provided the basis for elimination of
structural separation. As discussed below, the Commission stated that
``[a] major goal of ONA is to increase opportunities for ESPs to use
the BOCs'' regulated networks in highly efficient ways, enabling ESPs
to expand their markets for their present services and develop new
offerings as well, all to the benefit of consumers.'' It was for this
reason that the Commission applied the ONA requirements to GTE in 1994.
79. ONA is the overall design of a carrier's basic network services
to permit all users of the basic network, including the information
services operations of the carrier and its competitors, to interconnect
to specific basic network functions and interfaces on an unbundled and
``equal access'' basis. The BOCs and GTE through ONA must unbundle key
components of their basic services and make them available under
tariff, regardless of whether their information services operations
utilize the unbundled components. Such unbundling ensures that
competitors of the carrier's information services operations can
develop information services that utilize the carrier's network on an
economical and efficient basis.
b. ONA Unbundling Requirements
80. In the Computer III Phase I Order we declined to adopt any
specific network architecture proposals for ONA and instead specified
certain standards that carriers' ONA plans must meet. The unbundling
standard for the BOCs required that: (1) the BOCs' enhanced services
operations obtain unbundled network services pursuant to tariffed
terms, conditions, and rates available to all ISPs; (2) BOCs provide an
initial set of basic service functions that could be commonly used in
the provision of information services to the extent technologically
feasible; (3) ISPs participate in developing the initial set of network
services; (4) BOCs select the set of network services based on the
expected market demand for such elements, their utility as perceived by
information service competitors, and the technical and costing
feasibility of such unbundling; and (5) BOCs comply with CEI
requirements in providing basic network services to affiliated and
unaffiliated ISPs. In the BOC ONA Order that reviewed the initial BOC
ONA plans for compliance with the Commission's requirements, the
Commission generally approved the use of the ``common ONA model'' that
described unbundled services BOCs would provide to competing ISPs.
Under the common ONA model, ISPs obtain access to various unbundled ONA
services, termed Basic Service Elements (BSEs), through access links
described as Basic Service Arrangements (BSAs). BSEs are used by ISPs
to configure their information services. Other ONA elements include
Complementary Network Services (CNSs), which are optional unbundled
basic service features (such as stutter dial tone) that an end user may
obtain from carriers in order to obtain access to or receive
information services, and Ancillary Network Services (ANSs), which are
non-Title II services, such as billing and collection, that may be
useful to ISPs.
81. The BOCs and GTE are also subject to the ONA amendment
requirement. Under this requirement, if a subject carrier itself seeks
to offer an information service that uses a new BSE or otherwise uses
different configurations of underlying basic services than those
included in its approved ONA plan, the carrier must amend its ONA plan
at least ninety days before it proposes to offer that information
service. The Commission must approve the amendment before the subject
carrier can use the new basic service for its own information services.
82. In addition to the ONA services that BOCs and GTE currently
provide, there are mechanisms to help ISPs obtain the new ONA services
they require to provide information services. When an ISP identifies a
new network functionality that it wants to use to provide an
information service, it can request the service directly from the BOC
or GTE through a 120-day process specified in our rules, or it can
request that the Network Interconnection Interoperability Forum (NIIF)
sponsored by the Alliance for Telecommunications Industry Solutions
(ATIS) consider the technical feasibility of the service.
83. Under the Commission's 120-day request process, an ISP that
requests a new ONA basic service from the BOC or GTE must receive a
response within 120 days regarding whether the BOC or GTE will provide
the service. The BOC or GTE must give specific reasons if it will not
offer the service. The BOC or GTE's evaluation of the ISP request is to
be based on the ONA selection criteria set forth in the original Phase
I Order: (1) market area demand; (2) utility to ISPs as perceived by
the ISPs themselves; (3) feasibility of offering the service based on
its cost; and (4) technical feasibility of offering the service. If an
ISP objects to the BOC or GTE's response, it may seek redress from the
Commission by filing a petition for declaratory ruling.
84. Additionally, ISPs can ask the NIIF for technical assistance in
developing and requesting new network services. Upon request, the NIIF
will establish a task force composed of representatives from different
industry sectors to evaluate the technical feasibility of the service,
and through a consensus process, make recommendations on how the
service can be implemented. ISPs can then take the information to a
specific BOC or GTE and request the service under the
[[Page 9762]]
120-day process using the NIIF result to show that the request is
technically feasible.
85. As part of the Commission's 1998 biennial review of
regulations, we seek comment on whether ONA has been and continues to
be an effective means of providing ISPs with access to the BOC/GTE
unbundled network services they need to structure efficiently and
innovatively their information service offerings. To the extent that
commenters assert that ONA is effective or ineffective, we request that
they cite to specific instances to support their claims.
86. In addition, we seek comment on whether the ``common ONA
model'' through which ISPs gain access to BSEs, BSAs, CNSs, and ANSs is
adequate to provide ISPs with the network functionalities they need. If
not, what specific changes to the ONA unbundling framework should be
made? Some parties have argued that the common ONA model forces ISPs to
purchase unnecessary services or functionalities that are embedded
within the BSEs, BSAs, CNSs, and ANSs. We seek comment on this
argument. In addressing these issues, commenters should take note of
our separate inquiry below regarding the impact of section 251 and its
separate unbundling regime.
87. We further seek comment on whether ISPs make use of the ONA
framework to acquire unbundled network services or whether they use
other means to obtain such services in order to provide their
information service offerings. Commenters that have used means other
than ONA to acquire or provide unbundled network services should
identify those means, state why ONA was not used, and discuss why the
alternative approach was more effective and efficient.
88. In addition, we seek comment on whether the ONA 120-day request
process established to help ISPs obtain new ONA services has been
effective. We seek comment, from ISPs in particular, regarding whether
they have made use of the 120-day request process, and the results from
using that process. If ISPs have not used the 120-day request process,
we request that they explain why they have not done so. We further
request that parties comment, with specificity, on what, if anything,
we should do to streamline the 120-day request process to make it more
useful. In the alternative, we seek comment on whether the 120-day
request process should be eliminated, in light of the fact that the
issues that must be resolved between the carrier and the requesting ISP
are technical and operational in nature, and may be most appropriately
addressed in an industry forum, such as the NIIF. We also seek comment
on whether the ONA amendment process has been effective.
89. We further seek comment regarding the role of the NIIF in
helping ISPs obtain basic services from the BOCs and GTE. We seek
comment, from ISPs in particular, regarding whether they have requested
assistance from the NIIF in determining the technical feasibility of
offering particular network functionalities as new basic services, and
if so, the results obtained. If ISPs have not done so, we request that
they tell us why not. We further seek comment on whether we should
continue to request that the NIIF perform the function of facilitating
ISP ONA requests or whether some other forum or industry group would be
more appropriate.
90. Finally, we seek comment on whether and how the development of
new information services, including, for example, Internet services,
should affect our analysis of the effectiveness of the Commission's
current ONA rules for ISPs. As we noted in the Information Service and
Internet Access NOI, 62 FR 4657, January 31, 1997, many of the
Commission's existing rules have been designed for traditional circuit-
switched voice networks rather than the emerging packet-switched data
networks. While the Information Service and Internet Access NOI sought
comment, in general, on identifying ways in which the Commission could
facilitate the development of high-bandwidth data networks while
preserving efficient incentives for investment and innovation in the
underlying voice network, we seek comment in this Further Notice
specifically on whether and how the Commission should modify the
Computer III and ONA rules in light of these technological
developments.
91. Specifically, we seek comment on how the Commission's Computer
III or ONA rules may impact the BOCs' incentive to invest in and deploy
data network switching technology. For example, the Commission's
existing ONA rules require the BOCs to unbundle and separately tariff
all basic services. We have interpreted this rule to require a BOC to
unbundle and separately tariff a basic service used in the provision of
an information service provided by the BOC affiliate, even where the
basic service is solely located in, and owned by, the BOC affiliate,
not the BOC. This situation may arise, for example, when a frame relay
switch is located in, and owned by, the BOC affiliate rather than the
BOC. We seek comment on the appropriate treatment of these types of
services.
c. Effect of the 1996 Act
(1) Section 251 Unbundling
92. Section 251 of the Act requires incumbent LECs, including the
BOCs and GTE, to provide to requesting telecommunications carriers
interconnection and access to unbundled network elements at rates,
terms, and conditions that are just, reasonable, and nondiscriminatory,
and to offer telecommunications services for resale. The Act defines
``telecommunications carrier'' as ``any provider of telecommunications
services, except that such term does not include aggregators of
telecommunications services (as defined in section 226).'' As we
concluded in the Local Competition Order, the term ``telecommunications
carrier'' does not include ISPs that do not also provide domestic or
international telecommunications. Thus, as discussed above, companies
that provide both information and telecommunications services are able
to request interconnection, access to unbundled network elements, and
resale under section 251, but companies that only provide information
services (``pure ISPs'') are not accorded such rights under section
251.
93. Despite this limitation, there are several ways that pure ISPs
may be able to obtain benefits from section 251, as discussed in Part
III.B. We recognize, however, that section 251 provides a level of
unbundling that pure ISPs do not receive under the Commission's current
ONA framework. Unbundling under section 251 includes the physical
facilities of the network, together with the features, functions, and
capabilities associated with those facilities. Section 251 also
requires incumbent LECs to provide for the collocation at the LEC's
premises of equipment necessary for interconnection or access to
unbundled network elements, under certain conditions. Unbundling under
ONA, in contrast, emphasizes the unbundling of basic services, not the
substitution of underlying facilities in a carrier's network. ONA
unbundling also does not mandate interconnection on carriers' premises
of facilities owned by others. These differences may be due to the
different policy goals that the two regimes were designed to serve.
94. Section 251 unbundling raises a number of issues relating to
the Commission's ONA framework. In the Non-Accounting Safeguards Order,
for example, some parties stated that section 251's interconnection and
[[Page 9763]]
unbundling requirements render the Commission's Computer III and ONA
requirements unnecessary. A related issue is whether the Commission,
pursuant to our general rulemaking authority, should extend section
251-type unbundling to ``pure ISPs.''
95. In this Further Notice, we seek comment on whether section 251,
as currently applied, obviates the need for ONA. We ask commenters to
analyze this issue with respect to both pure ISPs as well as ISPs that
are also telecommunications carriers. For example, is ONA unbundling
still necessary for ISPs that are also telecommunications carriers for
whom section 251 unbundling is available? As for pure ISPs, does the
fact that they can obtain the benefits of section 251 by becoming
telecommunications carriers, or by partnering with or obtaining basic
services from competitive telecommunications providers, render ONA
unnecessary? Commenters should address whether ONA should still be
available for pure ISPs or other ISPs in areas where there may not be
sufficient competition in the local exchange market.
96. We also seek comment on whether it is in the public interest
for the Commission to extend section 251-type unbundling to pure ISPs.
Put differently, we seek comment regarding whether, pursuant to our
general rulemaking authority contained in section 201-205 of the Act,
and as exercised in the Computer III, ONA, and Expanded Interconnection
proceedings, we can and should extend some or all rights accorded by
section 251 to requesting telecommunications carriers to pure ISPs.
Commenters who contend that it is in the public interest to extend
section 251-type unbundling should address why it is necessary to do
so, given the alternative options pure ISPs have to obtain the benefits
of section 251 unbundling, as well as the unbundling rights ISPs
currently enjoy under the Commission's existing ONA regime. Commenters
should also address whether the extension of section 251-type
unbundling to pure ISPs would be inconsistent with section 251, which
by its terms applies only to telecommunications carriers. Similarly,
commenters should address whether section 251-type unbundling is
appropriate for pure ISPs, given the different purposes section 251 and
ONA serve, and the different approaches to unbundling they encompass.
Furthermore, commenters that argue that we should extend the section
251 unbundling framework to pure ISPs should explain what such a
framework would include. For example, commenters should address, among
other things, whether extending section 251-type unbundling rights to
pure ISPs necessarily requires the extension to pure ISPs of any
obligations under section 251 or other Title II provisions. Commenters
should also address whether extending section 251-type unbundling to
pure ISPs obviates the need for ONA.
(2) InterLATA Information Services
97. As discussed, we tentatively conclude in this Further Notice
that the Commission's nonstructural safeguard regime should continue to
apply to BOC provision of intraLATA information services. Prior to the
enactment of the 1996 Act, however, we did not distinguish between
intraLATA and interLATA information services, and we did not explicitly
apply our Computer III and ONA rules to BOC provision of interLATA
information services since the BOCs were prevented under the MFJ from
providing interLATA services. Section 272 of the 1996 Act, however,
does distinguish between intraLATA and interLATA information services
by imposing separation and nondiscrimination requirements on BOC
provision of interLATA information services. We seek comment,
therefore, on whether the Commission's ONA requirements, as modified or
amended by this proceeding, should be interpreted as encompassing BOC
provision of interLATA information services. We also seek comment on
whether it would be inconsistent with section 272 for the Commission to
apply ONA requirements to BOC provision of interLATA information
services.
98. In addressing this issue, we ask that commenters take note of
the following policy considerations. As noted above, the Commission
required the BOCs to implement ONA regardless of whether ONA provided
the basis for elimination of structural separation. We stated that ONA
serves the public interest, not only by serving as a critical
nonstructural safeguard against anticompetitive behavior by the BOCs,
but also by promoting the efficient use of the network by ISPs, to the
benefit of consumers. On the other hand, section 272 already sets forth
the statutory requirements for BOC provision of interLATA information
services and, therefore, including such services within the
Commission's ONA framework may be unnecessary to protect the public
interest. Moreover, as discussed above, section 251 unbundling may
obviate ONA in some or all respects, including its application to BOC
provision of interLATA information services. We also seek comment, to
the extent commenters believe that ONA should encompass BOC provision
of interLATA information services, on how the Commission's current ONA
requirements, including ONA reporting requirements, may need to be
changed or supplemented, if at all, to take account of such services.
2. ONA and Nondiscrimination Reporting Requirements
a. Introduction
99. In this section of the Notice, we examine the various reporting
requirements imposed on the BOCs and GTE by the Computer III and ONA
regimes. These reporting requirements were originally intended as a
safeguard, in that the BOCs and GTE must disclose information that
would allow detection of patterns of access discrimination. In
addition, certain reporting requirements were intended to promote
competition, by providing interested parties (including ISPs and
equipment manufacturers) with information about service introduction
and deployment by the subject carriers, which may assist such parties
in structuring their own operations.
100. We recognize, however, that a number of years have passed
since certain of these reporting requirements were imposed, and that
some of the information we require to be disclosed may no longer be
useful, relevant, or related to either the safeguard or competition
promotion functions identified above. Thus, as part of the Commission's
1998 biennial review of regulations, we intend in this proceeding to
reexamine each of the reporting obligations imposed on the BOCs and GTE
by the Computer III and ONA regimes, to determine whether any of these
requirements should be eliminated or modified, consistent with the 1996
Act. We also seek comment on what, if any, different or additional
reporting requirements should be imposed to safeguard against
anticompetitive behavior by the BOCs and GTE and to promote competition
in the provision of information services. In particular, we also seek
comment on methods to facilitate access to and use of this information
by unaffiliated entities, including small entities.
101. We set forth the ONA reporting reporting requirements and make
specific inquiries regarding each requirement. The following are
general inquiries that apply to all ONA reporting requirements. We ask
parties to respond to both the specific and general inquiries in their
comments on each ONA reporting requirement.
[[Page 9764]]
a. Is the information reported necessary to or helpful in
monitoring the compliance of the subject carriers with their unbundling
and nondiscrimination obligations? If not, why not? Would other types
of information be more useful for compliance monitoring or enforcement
purposes?
b. Is this requirement duplicative? In other words, does the
Commission currently require other reports that disclose the same or
substantially similar information, or serve the same purposes? If so,
how should the Commission streamline these requirements?
c. Do industry groups, such as ATIS and/or NIIF, collect and
compile information that is duplicative of that required by the
Commission? If so, is that information readily available to interested
parties?
d. Should we continue to require the subject carriers to file this
report with the Commission both on paper and on disk, or should we
adopt streamlined filing proposals similar to those set forth in the
Further Notice of Proposed Rulemaking in the Non-Accounting Safeguards
proceeding? Specifically, should we require either:
(i) a certification process whereby the subject carrier must
maintain the required information in a standardized format, and file
with the Commission an annual affidavit stating: (1) the information is
so maintained; (2) the information will be updated in compliance with
our rules; (3) the information will be maintained accurately; and (4)
how the public will be able to access the information; or
(ii) electronic posting whereby the subject carriers must make the
required information available on the Internet (for example, by posting
it on their website) or through another similar electronic mechanism?
e. If we continue to maintain a paper filing requirement, is the
information presented in a clear, comprehensible format? If not, what
modifications to the format would improve clarity and accessibility?
f. If we continue to maintain a paper filing requirement, should we
alter the frequency with which we require this report to be filed? If
so, what alteration should be made, and what is the basis for that
alteration? In the alternative, if we impose a certification process or
electronic posting requirement, how often should subject carriers be
required to update the information they must maintain? How must the
subject carriers maintain historical data, and for what length of time?
102. In conjunction with our inquiries elsewhere in this item, we
seek to examine, and, if possible, clarify the relationship between the
ONA reporting requirements and the other obligations imposed on the
subject carriers by ONA. For example we seek comment above on whether
we should modify or eliminate the ONA unbundling requirements. To the
extent that parties argue that we should do so, we request that they
comment upon the effect that such action would have on the reporting
obligations of the subject carriers. It seems that if the subject
carriers were no longer required to unbundle and tariff ONA services,
much of the information we currently require to be disclosed in the
annual and semi-annual ONA reports would cease to exist. Does this mean
that all such reporting requirements should be eliminated? Are there
other meaningful reporting requirements that should be imposed instead?
b. Annual ONA Reports
103. The BOCs and GTE are required to file annual ONA reports that
include information on: (1) annual projected deployment schedules for
ONA service, by type of service (BSA, BSE, CNS), in terms of percentage
of access lines served system-wide and by market area; (2) disposition
of new ONA service requests from ISPs; (3) disposition of ONA service
requests that have previously been designated for further evaluation;
(4) disposition of ONA service requests that were previously deemed
technically infeasible; (5) information on Signaling System 7 (SS7),
Integrated Services Digital Network (ISDN), and Intelligent Network
(IN) projected development in terms of percentage of access lines
served system-wide and on a market area basis; (6) new ONA services
available through SS7, ISDN, and IN; (7) progress in the IILC (now
NIIF) on continuing activities implementing service-specific and long-
term uniformity issues; (8) progress in providing billing information
including Billing Name and Address (BNA), line-side Calling Number
Identification (CNI), or possible CNI alternatives, and call detail
services to ISPs; (9) progress in developing and implementing Operation
Support Systems (OSS) services and ESP access to those services; (10)
progress on the uniform provision of OSS services; and (11) a list of
BSEs used in the provision of BOC/GTE's own enhanced services. In
addition, the BOCs are required to report annually on the unbundling of
new technologies arising from their own initiative, in response to
requests by ISPs, or resulting from requirements imposed by the
Commission.
104. We believe that certain aspects of the annual reporting
requirements may be outdated and should be streamlined. We seek
comment, for example, on whether we should continue to require the
subject carriers to continue to report on projected deployment of ONA
services (item 1), particularly as this information does not appear to
change appreciably from year to year. Should we instead require the
subject carriers to make a one-time filing of a 5-year deployment
schedule at the time a new ONA service is introduced? In addition,
should we require the subject carriers to continue to report on the
disposition of ONA service requests from ISPs (items 2, 3, and 4),
despite evidence that the frequency of such requests has declined
appreciably since the initial implementation of ONA?
105. We seek comment on whether we should continue to require the
subject carriers to report on deployment of SS7 (items 5 and 6), which
has become available in most service areas. We further seek comment on
whether we should continue to require the subject carriers to report on
the availability and deployment of ISDN, IN, and AIN services (items 5
and 6). In addition, we seek comment regarding whether the requirement
that the BOCs report on ``new ONA services available through SS7, ISDN,
and IN, and plans to provide these services'' (item 6) overlaps so
significantly with the requirement that they report on the unbundling
of new technologies that one of these requirements should be
eliminated.
106. In addition, we seek comment on whether, and to what extent,
we should alter the requirement that carriers report on progress in
industry forums regarding uniformity issues. Currently, subject
carriers are required to report on progress in the IILC on continuing
activities implementing service-specific and long-term uniformity
issues (item 7). As a preliminary matter, we note that the functions
that used to be performed by the IILC were transferred, as of January
1, 1997, to the NIIF. We tentatively conclude that, at a minimum, the
ONA reporting requirement should be updated to reflect this change. We
believe that the BOCs have agreed to provide to the NIIF periodic
updates regarding issues that have been resolved. We seek comment on
the nature of such updates to the NIIF, including specifically what
information the BOCs provide. We further seek comment regarding whether
the information from such updates is comprehensive enough, and
sufficiently accessible to interested parties, to allow
[[Page 9765]]
us to eliminate the ONA reporting requirement covering progress of
matters in the NIIF. In the alternative, we seek comment regarding
whether there are other sources of information produced by or for ATIS
or the NIIF that may reasonably substitute for this ONA reporting
requirement.
107. We seek comment on whether we should continue to require the
subject carriers to report on progress in providing billing information
and call detail services to ISPs (item 8). We seek comment on whether
we should continue to require the subject carriers to report on
progress in developing, implementing, and providing access to Operation
Support Systems (OSS) services (items 9 and 10). We believe it is
important for such information to continue to be publicly available. We
recognize, however, that such information may be more appropriately
provided pursuant to other statutory provisions. For example, we issued
a Public Notice on June 10, 1997, asking for comment on LCI's petition
for expedited rulemaking to establish reporting requirements,
performance, and technical standards for OSS in the context of section
251 of the Act. We seek comment on the appropriate forum for collecting
information about OSS and whether continued reporting under Computer
III is necessary in light of other pending Commission proceedings. We
further seek comment on what, if any, changes we should make to the ONA
OSS reporting requirements, to better reflect the obligations with
respect to OSS imposed on carriers in the Local Competition Order.
c. Semi-Annual ONA Reports
108. In addition to the annual ONA reports discussed above, the
BOCs and GTE are required to file semi-annual ONA reports. These semi-
annual reports include: (1) a consolidated nationwide matrix of ONA
services and state and federal ONA tariffs; (2) computer disks and
printouts of data regarding state and federal tariffs; (3) a printed
copy and a diskette copy of the ONA Services User Guide; (4) updated
information on 118 categories of network capabilities requested by ISPs
and how such requests were addressed, with details and matrices; and
(5) updated information on BOC responses to the requests and matrices.
109. Considerable portions of the semi-annual reports filed by the
BOCs appear to be redundant, as each of the BOCs files identical
information. This generic information includes the ONA service matrix
and the Services Description section of the ONA Services User Guide, as
well as information on the 118 network capabilities originally
requested by ISPs, and how the BOCs collectively have responded to
these requests. Bell Communications Research, Inc. (Bellcore)
originated and, until its spin-off earlier this year, prepared these
portions of the BOCs' semi-annual reports; currently, an organization
called the National Telecommunications Alliance (NTA) has assumed this
responsibility. We see no benefit to continuing to require each of the
BOCs separately to file the generic portions of the semi-annual report,
particularly as there appear to be few changes in this information from
year to year. Thus, we tentatively conclude that the BOCs should be
permitted to make one consolidated filing (or posting) for all generic
information they currently submit in their semi-annual reports. We seek
comment on this tentative conclusion. We further seek comment on
whether we should allow GTE to join in this consolidated filing or
posting (to the extent that this arrangement would be mutually
agreeable to the parties) with respect to the information it files that
overlaps with that filed by the BOCs.
110. In addition, we seek comment on the frequency with which we
require the subject carriers to file the information contained in the
semi-annual ONA reports. In particular, we inquire as to whether we
should reduce the filing frequency, and restructure the semi-annual
reports to become part of the annual ONA reports filed by the subject
carriers. A reduction in filing frequency would decrease the burden
imposed on the subject carriers, without, we believe, significantly
affecting the quality or utility of the information supplied, much of
which is either generic or rather static in nature, or is available
through other means (for example, in the state and federal tariffs
filed by the subject carriers).
111. We also seek comment regarding whether certain information
required in the semi-annual reports overlaps with the information
required in the annual reports. For example, in the annual ONA reports,
the Commission requires the BOCs and GTE to supply information on the
disposition of several categories of ONA requests, whereas in the semi-
annual reports, the Commission requires the BOCs and GTE to supply
information regarding how they have responded to ISP requests for the
existing 118 categories of network capabilities. These separate
requirements seem to elicit similar, if not identical, information. To
the extent there is overlap, we seek comment regarding whether these
requirements may be simplified and consolidated, or, in the
alternative, whether either or both sets should be eliminated entirely.
We also seek comment on other, similar, overlaps among the ONA
reporting requirements, and what we should do to eliminate the burdens
or inefficiencies associated with them.
d. Nondiscrimination Reports
112. The BOCs and GTE are also required to establish procedures to
ensure that they do not discriminate in their provision of ONA
services, including the installation, maintenance, and quality of such
services, to unaffiliated ISPs and their customers. For example, they
must establish and publish standard intervals for routine installation
orders based on type and quantity of services ordered, and follow these
intervals in assigning due dates for installation, which are applicable
to orders placed by competing service providers as well as orders
placed by their own information services operations. In addition, they
must standardize their maintenance procedures where possible, by
assigning repair dates based on nondiscriminatory criteria (e.g.,
available work force and severity of problem), and handling trouble
reports on a first-come, first-served basis.
113. In order to demonstrate compliance with the nondiscrimination
requirements outlined above, the BOCs and GTE must file quarterly
nondiscrimination reports comparing the timeliness of their
installation and maintenance of ONA services for their own information
services operations versus the information services operations of their
competitors. If a BOC or GTE demonstrates in its ONA plan that it lacks
the ability to discriminate with respect to installation and
maintenance services, and files an annual affidavit to that effect, it
may modify its quarterly report to compare installation and maintenance
services provided to its own information services operations with
services provided to a sampling of all customers. In their quarterly
reports, the BOCs and GTE must include information on total orders, due
dates missed, and average intervals for a set of service categories
specified by the Commission, following a format specified by the
Commission.
114. We tentatively conclude that the nondiscrimination obligations
for provisioning and performing maintenance activities established by
Computer III continue to apply to the BOCs and GTE. We seek comment,
however, on whether the current quarterly installation and maintenance
reports are an appropriate and effective mechanism for monitoring the
BOCs'
[[Page 9766]]
and GTE's compliance with these nondiscrimination obligations. Are
there ways in which the quarterly reports, and the accompanying annual
affidavits, may be simplified, clarified, or otherwise made more useful
to the Commission and the interested public? Along these lines, we note
that the Commission issued a Further Notice of Proposed Rulemaking in
conjunction with its Non-Accounting Safeguards Order, seeking comment
on what types of reporting requirements are necessary to implement the
specific nondiscrimination requirement set forth in section 272(e)(1)
of the Communications Act. While we acknowledge that the
nondiscrimination obligations imposed on the BOCs by section 272(e)(1)
differ from those imposed by Computer III, we seek comment regarding
whether the information required to demonstrate compliance with both
sets of nondiscrimination requirements is sufficiently similar that we
should harmonize the ONA nondiscrimination reporting requirements with
the reporting requirements adopted in response to the Further Notice of
Proposed Rulemaking in the Non-Accounting Safeguards proceeding. We
also seek comment on whether we should harmonize the ONA
nondiscrimination reporting requirements with reporting requirements
being considered in other proceedings, such as in the LCI OSS Petition.
115. We note that, like the BOCs, AT&T was originally required to
file quarterly nondiscrimination reports on the provision of
installation and maintenance services to unaffiliated providers of
enhanced services. The Commission modified and reduced these reporting
requirements in 1991 and in 1993. In 1996, the Bureau eliminated the
requirement that AT&T file quarterly installation and maintenance
nondiscrimination reports, as well as the requirement that AT&T file an
annual affidavit that its quarterly reports are true and that it has
not discriminated in providing installation and maintenance services.
116. The Bureau declined to eliminate the requirement that AT&T
file a second affidavit, which affirms that AT&T has followed the
installation procedures in its ONA plan and has not discriminated in
the quality of network services provided to competing enhanced service
providers, deferring that determination to the instant proceeding. We
tentatively conclude that we should no longer require AT&T to file this
second affidavit because the level of competition in the interexchange
services market is an effective check on AT&T's ability to discriminate
in the quality of network services provided to competing ISPs. This
tentative conclusion is consistent with our previous finding that the
competitive nature of the interexchange market provides an important
assurance that access to those services will be open to ISPs, and that
much of the information of greatest use to ISPs is controlled by LECs
such as the BOCs, and not by interexchange carriers. We also find that
this tentative conclusion comports with our statutory obligation to
eliminate regulations that are no longer necessary due to ``meaningful
economic competition'' between providers of such service. We seek
comment on this tentative conclusion.
3. Other Nonstructural Safeguards
a. Network Information Disclosure Rules
117. The Commission's network information disclosure rules seek to
prevent anticompetitive behavior by ensuring that ISPs and other
interested parties can obtain timely access to information affecting
the interconnection of information services to the BOCs', AT&T's, and
other carriers' networks. Prior to the 1996 Act, the rules set forth in
the Commission's Computer II and Computer III proceedings governed the
disclosure of network information. Section 251(c)(5) of the Act
requires incumbent LECs to ``provide reasonable public notice of
changes in the information necessary for the transmission and routing
of services using that local exchange carrier's facilities or networks,
as well as of any other changes that would affect the interoperability
of those facilities or networks.'' The Commission recently adopted
network information disclosure requirements to implement section
251(c)(5) in the Local Competition Second Report and Order, 61 FR
47284, September 6, 1996. Although we discussed our preexisting network
information disclosure requirements in conjunction with the
requirements of section 251(c)(5) in the Local Competition Second
Report and Order, we did not address in that proceeding whether our
Computer II and Computer III network information disclosure
requirements should continue to apply independently of our section
251(c)(5) network information disclosure requirements. We address that
issue in this proceeding as part of our 1998 biennial review of
regulations, in an effort to eliminate unnecessary and possibly
conflicting requirements.
118. The rules established pursuant to section 251(c)(5) in some
respects appear to duplicate and even exceed the rules established
under Computer II and Computer III, while in other respects they do
not. For example, section 251(c)(5) of the Act, and the Commission's
rules implementing that section, only apply to incumbent LECs, while
some of the Computer II network information disclosure requirements
apply more broadly to ``all carriers owning basic transmission
facilities.'' We seek comment, therefore, on the extent to which the
Commission should retain its network information disclosure rules
established in the Commission's Computer II and Computer III
proceedings in light of the disclosure requirements stemming from
section 251(c)(5) of the 1996 Act. As a starting point, we set forth in
the following paragraphs a general description of the current network
disclosure requirements under Computer II, Computer III, and section
251(c)(5), and then we ask parties to comment on whether, and why,
specific requirements should be retained or eliminated. The following
descriptions are not intended to be an exhaustive list of every feature
of the Commission's current network disclosure requirements. These
descriptions are intended, rather, to serve as a basis for comparison
by parties commenting in this proceeding.
119. Computer II Network Disclosure Obligations.
a. Application of the Network Disclosure Obligations. The Computer
II network information disclosure rules consist of two requirements:
(1) a disclosure obligation which depends on the existence of a
Computer II separate subsidiary; and (2) a disclosure obligation that
applies independent of whether the carrier has a Computer II separate
subsidiary. The Commission initially imposed both requirements on AT&T
in the Computer II Final Decision. The Commission extended disclosure
requirement (2) in the Computer II Reconsideration Order, 46 FR 5984,
January 21, 1981, to ``all carriers owning basic transmission
facilities'' (hereinafter the ``all-carrier'' rule). After divestiture,
the Commission extended disclosure requirement (1) to the BOCs insofar
as they are providing information services in accordance with the
structural separation requirements of Computer II.
b. Events Triggering the Public Notice Requirement. The Computer II
``all-carrier'' rule is triggered by implementation of ``change[s] * *
* to the telecommunications network that would affect either
intercarrier interconnection or the manner in which interconnected CPE
must operate
[[Page 9767]]
* * *.'' The Computer II separate affiliate disclosure obligation is
triggered by any of three events: (1) the BOC communicates the relevant
network information directly to its Computer II separate affiliate; (2)
such information is used by the BOC or a third party to develop
services or products which reasonably can be expected to be marketed by
the Computer II separate affiliate; or (3) the BOC engages in joint
research and development with its Computer II separate affiliate,
leading to the design or manufacture of any product that either affects
the network interface or relies on a not-yet implemented interface.
c. Timing of Public Notice. Under Computer II, the disclosure
obligation of the ``all-carrier'' rule must be met ``in a timely manner
and on a reasonable basis.'' The Computer II separate affiliate network
disclosure obligation requires that disclosure be made to information
service competitors of the Computer II affiliate ``at the same time''
disclosure is made directly to the Computer II separate affiliate as
described in item (1). If the disclosure requirement is triggered by
the events described in items (2) and (3), then disclosure must be made
at the ``make/buy'' point, i.e., when the BOC or an affiliated company
decides, in reliance on previously undisclosed information, to produce
itself or to procure from a non-affiliated company any product, whether
it be hardware or software, the design of which either affects the
network interface or relies on the network interface.
d. Types of Information To Be Disclosed. The Computer II ``all-
carrier'' rule encompasses ``all information relating to network design
* * *, insofar as such information affects * * * intercarrier
interconnection * * *.'' For the separate affiliate network disclosure
requirement, the information required to be disclosed consists of, ``at
a minimum, * * * any network information which is necessary to enable
all [information] service * * * vendors to gain access to and utilize
and to interact effectively with [the BOCs'] network services or
capabilities, to the same extent that [the BOCs' Computer II separate
affiliate] is able to use and interact with those network services or
capabilities.'' This requirement includes information concerning
``network design, technical standards, interfaces, or generally, the
manner in which interconnected * * * enhanced services will
interoperate with [any of the BOCs'] network.'' In addition to
technical information, the information required includes marketing
information, such as ``commitments of the carrier with respect to the
timing of introduction, pricing, and geographic availability of new
network services or capabilities.''
e. How Public Notice Should Be Provided. Under Computer II,
carriers subject to the ``all-carrier'' rule must disclose in their
tariffs or tariff support material either the relevant network
information or a statement indicating where such information can be
obtained, that will allow competitors to use network facilities in the
same manner as the subject carrier. The separate affiliate network
disclosure obligation requires that the BOCs ``file with the
Commission, within seven calendar days of the date the disclosure
obligation arises, a notice apprising the public that the disclosure
has taken place and indicating in summary form the nature of the
information which has been disclosed [to its Computer II separate
affiliate], the identity of any source documents and where interested
parties can obtain additional details.'' Moreover, when a BOC ``files a
tariff for a new or changed network service where there has been a
prior disclosure to or for the benefit of [the Computer II separate
affiliate], the tariff support materials must list any disclosure
notices previously filed with the Commission that are relevant to the
tariffed offering.''
120. Computer III Network Disclosure Obligations.
a. Application of the Network Disclosure Obligations. The Computer
III network information disclosure rules initially were imposed on AT&T
and the BOCs in the Phase I Order and Phase II Order, 52 FR 20714, June
3, 1987. The Commission later extended the Computer III network
information disclosure rules and other nondiscrimination safeguards to
GTE in the GTE ONA Order, 59 FR 26756, May 24, 1994.
b. Events Triggering the Public Notice Requirement. The Computer
III public notice requirement is triggered at the ``make/buy'' point;
that is, when AT&T, any of the BOCs, or GTE ``makes a decision to
manufacture itself or to procure from an unaffiliated entity, any
product the design of which affects or relies on the network
interface.''
c. Timing of Public Notice. AT&T, the BOCs, and GTE must disclose
the relevant information concerning planned network changes at two
points in time. First, they must disclose the relevant technical
information at the ``make/buy'' point. They are permitted, however, to
condition this ``make/buy'' disclosure on the recipient's signing of a
nondisclosure agreement, upon which the relevant technical information
must be disclosed within 30 days. Second, they must make public
disclosure of the relevant technical information a minimum of twelve
months before implementation of the change; however, if the planned
change can be implemented between six and twelve months following the
``make/buy'' point, then public notice is permitted at the ``make/buy''
point, but at a minimum of six months before implementation.
d. Types of Information To Be Disclosed. Under Computer III, the
range of information encompassed by the network information disclosure
requirements is adopted from, and identical to, the Computer II
requirements. Specifically, at the ``make/buy'' point, AT&T, the BOCs,
and GTE must disclose that a network change or network service is under
development. The notice itself need not contain the full range of
relevant network information, but it must describe the proposed network
service with sufficient detail to convey what the new service is and
what its capabilities are. The notice must also indicate that technical
information required for the development of compatible information
services will be provided to any entity involved in the provision of
information services and may indicate that such information will be
made available only to such entities willing to enter into a
nondisclosure agreement. Once an entity has entered into a
nondisclosure agreement, AT&T, the BOCs, or GTE must provide the full
range of relevant information.
e. How Public Notice Should Be Provided. Under the Computer III
rules, public notice is made through direct mailings, trade
associations, or other reasonable means.
121. Section 251(c)(5) Network Disclosure Obligations.
a. Application of the Network Disclosure Obligations. These rules
apply to all incumbent LECs, as the term is defined in section 251(h)
of the Act.
b. Events Triggering the Public Notice Requirement. The incumbent
LEC makes a decision to implement a network change that either: (1)
affects ``competing service providers' performance or ability to
provide service; or (2) otherwise affects the ability of the incumbent
LEC's and a competing service provider's facilities or network to
connect, to exchange information, or to use the information
exchanged.'' Examples of network changes that would trigger the section
251(c)(5) public disclosure obligations include, but are not limited
to, changes that affect (1) transmission, (2) signalling standards, (3)
call routing, (4)
[[Page 9768]]
network configuration, (5) logical elements, (6) electronic interfaces,
(7) data elements, and (8) transactions that support ordering,
provisioning, maintenance, and billing.
c. Timing of Public Notice. Incumbent LECs must disclose planned
network changes at the ``make/buy'' point, but at least twelve months
before implementation of the change. If the planned change can be
implemented within twelve months of the ``make/buy'' point, then public
notice must be given at the ``make/buy'' point, but at least six months
before implementation. If the planned changes can be implemented within
six months of the make/buy point, then the public notice may be
provided less than six months before implementation, if additional
requirements set forth in section 51.333 of the Commission's rules are
met.
d. Types of Information To Be Disclosed. Under the Commission's
regulations, incumbent LECs are required to disclose, at a minimum,
``complete information about network design, technical standards and
planned changes to the network.'' Public notice of planned network
changes, at a minimum, shall consist of: (1) the carrier's name and
address; (2) the name and telephone number of a contact person who can
supply additional information regarding the planned changes; (3) the
implementation date of the planned changes; (4) the location(s) at
which the changes will occur; (5) a description of the type of changes
planned (including, but not limited to, references to technical
specifications, protocols, and standards regarding transmission,
signalling, routing, and facility assignment as well as references to
technical standards that would be applicable to any new technologies or
equipment, or that may otherwise affect interconnection); and (6) a
description of the reasonably foreseeable impact of the planned
changes.
e. How Public Notice Should Be Provided. Network disclosure may be
made either: (1) by filing public notice with the Commission in
accordance with section 51.329 of the Commission's rules; or (2)
providing public notice through industry fora, industry publications,
or on the incumbent LEC's own publicly accessible Internet sites, as
well as a certification filed with the Commission in accordance with
section 51.329 of the Commission's rules.
122. We tentatively conclude that the Commission's rules
established pursuant to section 251(c)(5) for incumbent LECs should
supersede the Commission's previous network information disclosure
rules established in Computer III. We also tentatively conclude that
the Commission's network disclosure rules established in Computer II
should continue to apply--specifically, the Computer II separate
affiliate disclosure rule should continue to apply to any BOC that
operates a Computer II subsidiary, and the all-carrier rule should
continue to apply to all carriers owning basic transmission facilities.
We reach our tentative conclusion regarding the Computer III network
disclosure rules since, in our view, the 1996 Act disclosure rules for
incumbent LECs are as comprehensive, if not more so, than the
Commission's Computer III disclosure rules. Parties who disagree with
this view should explain why all or some aspects of the Commission's
Computer III disclosure rules are still needed for incumbent LECs in
light of the rules established pursuant to section 251(c)(5) of the
Act.
123. We recognize, however, that some BOCs may still be providing
certain intraLATA information services through a Computer II
subsidiary, rather than on an integrated basis under the Commission's
Computer III rules. We tentatively conclude, therefore, that the
Computer II separate subsidiary disclosure rule should continue to
apply in such cases because, for instance, it encompasses marketing
information which is not included within the scope of information to be
disclosed under section 251(c)(5) and it requires disclosure under a
more stringent timetable than that required under section 251(c)(5). We
also tentatively conclude that the all-carrier rule should continue to
apply to all carriers owning basic transmission facilities, since it is
broader in certain respects than section 251(c)(5). First, it applies
to all carriers, whereas section 251(c)(5) just applies to incumbent
LECs. In addition, the all-carrier rule requires, among other things,
the disclosure of network changes that affect end users' CPE, whereas
our rules interpreting section 251(c)(5) only require the disclosure of
information that affects ``competing service providers.'' We seek
comment on these tentative conclusions and analyses.
b. Customer Proprietary Network Information (CPNI)
124. The Commission first established its CPNI rules in the
Computer II Final Decision in 1980 to encourage AT&T, the BOCs, and GTE
to develop and market efficient, integrated combinations of information
and basic services without the marketing restrictions imposed by
structural separation, while protecting the competitive interests of
information service competitors. While the CPNI rules are an integral
part of the Commission's current nonstructural regulatory framework for
the provision of information services by AT&T, the BOCs, and GTE, we
defer consideration of all CPNI issues relating to our Computer II and
Computer III rules to our CPNI rulemaking proceeding.
125. Section 702 of the 1996 Act, which added a new section 222 to
the Communications Act of 1934, as amended, sets forth requirements for
use of CPNI by telecommunications carriers, including the BOCs.
Although the requirements of section 222 were effective upon enactment
of the 1996 Act, we issued a CPNI Notice on May 17, 1996, 61 FR 26483,
May 28, 1996, which sought comment on, among other things, what
regulations we should adopt to implement section 222. We stated in the
CPNI Notice that the CPNI requirements the Commission previously
established in the Computer II and Computer III proceedings remain in
effect pending the outcome of the rulemaking, to the extent they do not
conflict with section 222. The CPNI proceeding will address whether
these pre-existing requirements should be retained, eliminated,
extended, or modified in light of the Act.
126. Under the Computer II structural separation requirements,
AT&T, the BOCs, and GTE were prohibited from jointly marketing their
basic services with the enhanced services provided through their
separate affiliate. Under the Computer III nonstructural safeguards
regime, AT&T, the BOCs, and GTE were permitted to engage in joint
marketing of basic and enhanced services subject to restrictions on
their use of CPNI. In the BOC Safeguards Order, the Commission
strengthened the CPNI rules by requiring that, for customers with more
than twenty lines, BOC personnel involved in marketing enhanced
services obtain written authorization from the customer before gaining
access to its CPNI.
127. On March 6, 1992, the Association of Telemessaging Services
International, Inc. (ATSI) filed a petition for reconsideration of the
BOC Safeguards Order in CC Docket No. 90-623, the Computer III Remand
proceeding. ATSI asked the Commission to modify the BOC Safeguards
Order by: (1) prohibiting joint marketing of basic and information
services; (2) extending the prior authorization requirement for CPNI to
all users, regardless of size; and (3) ensuring that users who restrict
access to their CPNI continue to receive nondiscriminatory treatment
and an adequate level of service. On May 17, 1996, the Commission
issued an order dismissing issues (2) and (3) as moot
[[Page 9769]]
because of the passage of the Telecommunications Act of 1996 and our
commencement of a new proceeding to address the obligations of
telecommunications carriers with respect to CPNI in light of the new
statute. The order also noted that issue (1) remained to be addressed
by the Commission. ATSI filed a motion to withdraw its petition for
reconsideration in CC Docket No. 90-623 and to incorporate its petition
into the Commission's Computer III Further Remand proceeding in CC
Docket No. 95-20, as well as other proceedings, on December 10, 1996.
On May 14, 1997, the Common Carrier Bureau partially granted the ATSI
Motion by agreeing to address in this proceeding whether joint
marketing of basic services and information services by the BOCs should
be prohibited.
128. We therefore seek comment on the issue raised in the ATSI
Petition: whether, to the extent the Commission continues to allow the
BOCs to provide information services subject to a nonstructural
safeguards regime, the BOCs should be prohibited from jointly marketing
basic services and information services when these services are
provided on an intraLATA basis. To the extent parties support the view
that the term ``telecommunications service'' in the Act encompasses the
same set of services as the term ``basic service'' did under the
Commission's previous rules, parties should discuss the issue raised in
the ATSI petition in terms of whether joint marketing should be allowed
between telecommunications services and information services. As noted
in the ATSI Order, we do not address this question with respect to
interLATA information services, since under section 272 of the Act BOCs
must provide interLATA information services pursuant to a section 272
affiliate and subject to the joint marketing provisions in that
section. Also, under section 274, BOCs providing electronic publishing,
whether on an interLATA or intraLATA basis, must do so pursuant to a
section 274 affiliate and subject to the joint marketing rules in that
section.
129. In its petition, ATSI argues that joint marketing of basic
services and information services harms consumers and diminishes
overall competition in the information services market. ATSI alleges
that the BOCs have abused the Commission's joint marketing rules by:
(1) routing calls to subscribers of competing voice messaging providers
to the BOC's own voice messaging service instead; (2) soliciting
customers of competing voice messaging providers who contact the BOCs
to request other BOC services; (3) providing customers with misleading
and disparaging information about the voice messaging services offered
by competing providers; and (4) engaging in other unfair practices.
ATSI therefore requests that the Commission prohibit the BOCs from
using the same personnel and facilities to market basic services and
information services. We seek comment on these issues. We also seek
comment on the costs and operational efficiencies or inefficiencies of
allowing the BOCs to provide intraLATA information services on an
integrated basis, but requiring different personnel and facilities to
market basic services and information services.
V. Jurisdictional Issues
130. Our authority, pursuant to section 2(a) of the Communications
Act, to establish, enforce, modify, or eliminate a regime of safeguards
for the provision of information services by the BOCs and GTE is well
settled. In addition, the scope of our authority to preempt
inconsistent regulation on the part of the states has been established
by the Commission in the previous Computer III orders and has been
affirmed on appeal.
131. In the Computer III Phase I Order, the Commission preempted:
(1) all state structural separation requirements applicable to the
provision of enhanced services by AT&T and the BOCs; and (2) all state
nonstructural safeguards applicable to AT&T and the BOCs that were
inconsistent with federal safeguards. The California I court vacated
these preemption actions, on the ground that the Commission had not
adequately justified imposing them. In response to the California I
remand, the Commission narrowed the scope of federal preemption to
cover only: (1) state requirements for structural separation of
facilities and personnel used to provide the intrastate portion of
jurisdictionally mixed enhanced services; (2) state CPNI rules
requiring prior authorization that is not required by federal
regulation; and (3) state network disclosure rules that require initial
disclosure at a time different than the federal rules. The Commission
reasoned that such state requirements would thwart or impede the
nonstructural safeguards pursuant to which the BOCs may provide
interstate enhanced services, and the federal goals such safeguards
were intended to achieve. The California III court upheld the
Commission's narrowly tailored preemption, stating that the Commission
had met its burden of demonstrating that it was preempting only state
regulations that would negate valid federal regulatory goals.
132. Thus, we believe that the proposals we make in the current
Further Notice, and the options upon which we seek comment, fall within
the scope of our authority previously established in the context of
this proceeding, as outlined above. To the extent that our proposals go
beyond our recognized preemption authority, we ask that commenters
identify those proposals and comment on our authority to adopt them.
VI. Procedural Matters
A. Ex Parte Presentations
133. This matter shall be treated as a ``permit-but-disclose''
proceeding in accordance with the Commission's revised ex parte rules,
which became effective June 2, 1997. See Amendment of 47 CFR 1.1200 et
seq. Concerning Ex Parte Presentations in Commission Proceedings, GC
Docket No. 95-21, Report and Order, 62 FR 15852, April 3, 1997, (citing
47 CFR 1.1204(b)(1)) (1997). Persons making oral ex parte presentations
are reminded that memoranda summarizing the presentations must contain
summaries of the substance of the presentations and not merely a
listing of the subjects discussed. More than a one or two sentence
description of the views and arguments presented is generally required.
See 47 CFR 1.1206(b)(2), as revised. Other rules pertaining to oral and
written presentations are set forth in section 1.1206(b) as well.
B. Initial Paperwork Reduction Act Analysis
134. This Further Notice contains either a proposed or modified
information collection. As part of its continuing effort to reduce
paperwork burdens, we invite the general public and the Office of
Management and Budget (OMB) to take this opportunity to comment on the
information collections contained in this Further Notice, as required
by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and
agency comments are due at the same time as other comments on this
Further Notice; OMB comments are due 60 days from the date of
publication of this Further Notice in the Federal Register. Comments
should address: (a) whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and
[[Page 9770]]
clarity of the information collected; and (d) ways to minimize the
burden of the collection of information on the respondents, including
the use of automated collection techniques or other forms of
information technology.
C. Initial Regulatory Flexibility Certification
135. The Regulatory Flexibility Act (RFA) requires that an initial
regulatory flexibility analysis be prepared for notice-and-comment
rulemaking proceedings, unless the agency certifies that ``the rule
will not, if promulgated, have a significant economic impact on a
substantial number of small entities.'' The RFA generally defines
``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA).
136. This Further Notice pertains to the Bell Operating Companies
(BOCs), each of which is an affiliate of a Regional Holding Company
(RHC), as well as to GTE and AT&T. Neither the Commission nor SBA has
developed a definition of ``small entity'' specifically applicable to
the BOCs, GTE, or AT&T. The closest definition under SBA rules is that
for establishments providing ``Telephone Communications, Except
Radiotelephone,'' which is Standard Industrial Classification (SIC)
code 4813. Under this definition, a small entity is one employing no
more than 1,500 persons. We note that each BOC is dominant in its field
of operation and all of the BOCs as well as GTE and AT&T have more than
1,500 employees. We therefore certify that this Further Notice will not
have a significant economic impact on a substantial number of small
entities. The Commission's Office of Public Affairs, Reference
Operations Division, will send a copy of this Further Notice, including
this certification, to the Chief Counsel for Advocacy of the Small
Business Administration. A copy will also be published in the Federal
Register.
D. Comment Filing Procedures
137. Pursuant to applicable procedures set forth in sections 1.415
and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested
parties may file comments on or before March 27, 1998, and reply
comments on or before April 23, 1998. To file formally in this
proceeding, you must file an original and six copies of all comments,
reply comments, and supporting comments. If you want each Commissioner
to receive a personal copy of your comments, you must file an original
and eleven copies. Comments and reply comments should be sent to Office
of the Secretary, Federal Communications Commission, 1919 M Street,
N.W., Room 222, Washington, D.C., 20554, with a copy to Janice Myles of
the Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington,
D.C., 20554. Parties should also file one copy of any documents filed
in this docket with the Commission's copy contractor, International
Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C.,
20036. Comments and reply comments will be available for public
inspection during regular business hours in the FCC Reference Center,
1919 M Street, N.W., Room 239, Washington, D.C., 20554.
138. Comments and reply comments must include a short and concise
summary of the substantive arguments raised in the pleading. Comments
and reply comments must also comply with section 1.49 and all other
applicable sections of the Commission's rules. We also direct all
interested parties to include the name of the filing party and the date
of the filing on each page of their comments and reply comments. All
parties are encouraged to utilize a table of contents, regardless of
the length of their submission.
139. Parties are also asked to submit comments and reply comments
on diskette. Such diskette submissions would be in addition to and not
a substitute for the formal filing requirements addressed above.
Parties submitting diskettes should submit them to Janice Myles of the
Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C.,
20554. Such a submission should be on a 3.5 inch diskette formatted in
an IBM compatible form using MS DOS 5.0 and WordPerfect 5.1 software.
The diskette should be submitted in ``read only'' mode. The diskette
should be clearly labeled with the party's name, proceeding, type of
pleading (comment or reply comments) and date of submission. The
diskette should be accompanied by a cover letter.
140. You may also file informal comments or an exact copy of your
formal comments electronically via the Internet at http://www.fcc.gov/
e-file/> or via e-mail computer3@comments.fcc.gov>. Only one copy of
electronically-filed comments must be submitted. You must put the
docket number of this proceeding in the subject line if you are using
e-mail (CC Docket No. 95-20), or in the body of the text if by
Internet. You must note whether an electronic submission is an exact
copy of formal comments on the subject line. You also must include your
full name and Postal Service mailing address in your submission.
VII. Ordering Clauses
141. Accordingly, It is ordered that, pursuant to sections 1, 2, 4,
10, 11, 201-205, 251, 271, 272, and 274-276, of the Communications Act
of 1934, as amended, 47 U.S.C. 151, 152, 154, 160, 161, 201-205, 251,
271, 272, and 274-276, a Further notice of proposed rulemaking is
adopted.
142. It is Further Ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this
Further notice of proposed rulemaking, including the Initial Regulatory
Flexibility Certification, to the Chief Counsel for Advocacy of the
Small Business Administration, in accordance with the Regulatory
Flexibility Act, see 5 U.S.C. 605(b).
List of Subjects
47 CFR Part 51
Communications common carriers, Interconnection.
47 CFR Part 53
Bell Operating Companies, Communications common carriers, InterLATA
services, Separate affiliate safeguards, Telephone.
47 CFR Part 64
Communications common carriers, Reporting and recordkeeping
requirements, Telephone.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-4650 Filed 2-25-98; 8:45 am]
BILLING CODE 6712-01-P
