[Federal Register Volume 62, Number 22 (Monday, February 3, 1997)]
[Proposed Rules]
[Pages 4965-4976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2568]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 63
[CC Docket No. 97-11; FCC 97-6]
Implementation of Section 402(b)(2)(A) of the Telecommunications
Act of 1996
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission is issuing a Notice of Proposed Rulemaking
(``NPRM'') to seek comment on the scope of the statutory exemption
under Section 402(b)(2)(A) of the Telecommunications Act of 1996.
Section 402(b)(2)(A) provides that common carriers are exempt from the
requirements of Section 214 of the Communications Act of 1934, as
amended (``the Act'') ``for the extension of any line.'' The Commission
seeks comment on how ``extension of any line'' should be defined. It
tentatively concludes that an ``extension of a line'' is a line that
allows the carrier to expand its service into a geographic territory
that it is eligible to serve, but that its network does not currently
reach. The Commission also proposes to forbear, under Section 401 of
the 1996 Act (47 U.S.C. 160), from exercising Section 214 authority
over ``new'' lines with respect to local exchange carriers (``LECs'')
subject to price cap regulation, LECs that are considered average
schedule companies, and domestic carriers deemed non-dominant, whether
they are offering local or domestic, long distance services. In
addition, the Commission proposes to grant Section 214 blanket
authority for small projects undertaken by carriers to construct new
lines. Further, it seeks comment on other alternatives, including
whether to treat price cap LECs which have elected a ``no-sharing'' X-
factor differently from other price-cap LECs and whether to forbear
altogether from applying Section 214 to small carriers. The intended
effect of this action is to implement Section 402(b)(2)(A).
DATES: Comments are due on or before February 24, 1997 and Reply
Comments are due on or before March 17, 1997. Written comments must be
submitted by the Office of Management and Budget (OMB) on the proposed
and/or modified information collections on or before April 4, 1997.
ADDRESSES: Office of the Secretary, Federal Communications Commission,
1919 M Street, N.W. Room 222, Washington, D.C. 20554. Secretary,
Network Services Division, Common Carrier Bureau, 2000 M Street, N.W.,
Room 235, Washington, D.C. 20554. International Transcription Services,
Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037. Dorothy
Conway, Federal Communications Commission, Room 234, 1919 M Street,
N.W., Washington, D.C. 20554, or via the Internet dconway@fcc.gov.
Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-17th Street, N.W.,
Washington, D.C. 20503 or via the Internet fain__t@al.eop.gov.
FOR FURTHER INFORMATION CONTACT: Marty Schwimmer, Attorney, Network
[[Page 4966]]
Services Division, Common Carrier Bureau, (202) 418-2334. For
additional information concerning the information collections contained
in this NPRM contact Dorothy Conway, (202) 418-0217, or via the
Internet at dconway@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Notice of Proposed Rulemaking adopted January 9, 1997, and released
January 13, 1997 (FCC 97-6). The full text of this Notice of Proposed
Rulemaking is available for inspection and copying during normal
business hours in the FCC Reference Center (Room 239), 1919 M St., NW.,
Washington, D.C. and is also available from the FCC's World Wide Web
site, http://www.fcc.gov. The complete text also may be purchased from
the Commission's copy contractor, International Transcription Service,
Inc., (202) 857-3800, 2100 M St., NW., Suite 140, Washington D.C.
20037.
Paperwork Reduction Act
The 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 the Office of
Management and Budget (OMB) to comment on the information collections
contained in this NPRM, as required by the Paperwork Reduction Act of
1995, Public Law No. 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 4, 1997. 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: 3060-0149.
Title: Application and Supplemental Information Requirements--Part
63, Section 214, Sections 63.01-63.601.
Form No.: N/A.
Type of Review: Proposed revision to Existing Collection.
Respondents: Businesses or others for profit, including small
businesses.
Number of Respondents: 255.
Estimate Hour Per Response: 10 hours.
Total Annual Burden: 2550.
Estimated Annual Reporting and Recordkeeping Cost Burden: $0.
Needs and Uses: The information is used to determine if proposed
facilities are needed and to monitor the growth of networks and the
availability of common carrier services in the telecommunications
market, to relieve carriers and the Commission of a review of each
subsequent facility addition.
Synopsis of Notice of Proposed Rulemaking
Table of Contents
Section Paragraph
I. INTRODUCTION AND BACKGROUND............................. 1
II. ISSUES................................................. 3
A. Overview.............................................. 3
1. Statutory Authority and Construction................ 4
2. Definitional Issues................................. 5
3. Discussion.......................................... 21
B. Section 214 Requirements for Price Cap Carriers,
Average Schedule Carriers, and Domestic, Non-dominant
Carriers................................................ 37
C. Section 214 Requirements for Domestic, Dominant, Rate-
of-Return Carriers...................................... 52
1. Streamlined Application Procedures.................. 52
2. Blanket Authority for Small Projects................ 59
D. Reporting Requirements................................ 63
1. Current Section 214 Reporting Requirements.......... 63
2. Elimination of Reports.............................. 65
E. Section 214 Discontinuance Requirements............... 68
F. Technical Amendments to 47 CFR Part 63................ 72
III. PROCEDURAL MATTERS.................................... 74
A. Ex Parte Presentations................................ 74
B. Regulatory Flexibility Act Analysis................... 75
C. Initial Paperwork Reduction Act Analysis.............. 76
D. Comment Filing Procedures............................. 78
IV. ORDERING CLAUSES....................................... 80
I. Introduction and Background
Section 214 of the Communications Act of 1934, as amended, imposes
regulatory obligations on common carriers seeking to change their
facilities or construct new facilities. Section 214 states that ``[n]o
carrier shall undertake the construction of a new line or of an
extension of any line, or shall acquire or operate any line, or
extension thereof, or shall engage in transmission over or by means of
such additional or extended line, unless and until there shall first
have been obtained from the Commission a certificate that the present
or future public convenience and necessity require or will require the
construction, or operation, or construction and operation, of such
additional or extended line.'' Congress enacted Section 214 to prevent
useless duplication of facilities that could result in increased rates
being imposed on captive telephone ratepayers.
On February 8, 1996, the Telecommunications Act of 1996 was signed
into law to ``establish a pro-competitive, de-regulatory national
policy'' framework for the United States telecommunications industry.
As part of this comprehensive legislation, Congress adopted Section
402(b)(2)(A) of the 1996 Act. This provision states that, ``[t]he
Commission shall permit any common carrier to be exempt from the
requirements of Section 214 of the Communications Act of 1934 for the
extension of any line . * * *'' Under this exemption, carriers seeking
to extend their lines of communication no longer need to seek
Commission authorization for their proposals under Section 214 or our
Part 63 rules. Accordingly, we have initiated this rulemaking
proceeding: (1) to implement Section 402(b)(2)(A) of the 1996 Act; and
(2) to determine the extent to which the Commission should exercise its
remaining Section 214 authority in light of the forbearance provisions
of the 1996 Act.
II. Issues
A. Overview
Section 402(b)(2)(A) exempts common carriers from the requirements
of Section 214 ``for the extension of any line.'' Accordingly, although
they must continue to obtain appropriate authorization for the use of
radio frequencies under Title III of the Communications Act of 1934,
carriers are free to construct, acquire, operate, or transmit over the
``extension'' of a line without receiving Section 214 or Part 63
approval. In this notice, we seek comment on the scope of this
statutory exemption and, in particular, on how ``extension of any
line'' should be defined. As discussed below, we tentatively conclude
that an ``extension of a line'' is a line that allows the carrier to
expand its service into a geographic territory that it is eligible to
serve, but that its network does not currently reach. We also propose
to forbear, under Section 401 of the 1996 Act, from exercising Section
214 authority over ``new'' lines with respect to local exchange
carriers (``LECs'') subject to price cap regulation, LECs that are
considered average schedule companies, and domestic carriers deemed
non-dominant, whether they are offering local or domestic, long
distance services. In addition, we propose to grant Section 214 blanket
authority for small projects undertaken by carriers to
[[Page 4967]]
construct new lines. We also seek comment on other alternatives: namely
(1) whether we should treat price cap LECs which have elected a ``no-
sharing'' X-factor differently from other price-cap LECs; and (2)
whether we should forbear altogether from applying Section 214 to small
carriers.
1. Statutory Authority and Construction
4. Section 214 defines a ``line'' as ``any channel of communication
established by the use of appropriate equipment, other than a channel
of communications established by the interconnection of two or more
existing channels.'' Section 214 identifies two broad categories of
lines. A carrier may construct a ``new line'' or it may construct an
``extension'' of a line. Similarly, a carrier may acquire or operate a
``line'' or an ``extension thereof,'' and may transmit over ``such
additional * * * line'' or ``extended line.'' Section 402(b)(2)(A)
exempts carriers from the requirements of Section 214 with respect to
the ``extension of any line.'' Accordingly, the exemption created by
Congress in 402(b)(2)(A) applies to some, not all, of the carrier
activities otherwise subject to Section 214 certification.
2. Definitional Issues
5. Although the text of Section 214 identifies discrete categories
of transactions subject to Section 214 certification, historically, the
certification process, standards, and requirements applicable to all
such transactions have been identical. As a result, neither courts nor
the Commission has had a need to provide specific definitions of these
categories or to distinguish among them. The language of Section
402(b)(2)(A), however, requires that we now define the ``extension of
any line'' and distinguish such an extension from ``new lines,'' which
are not exempted from the requirements of Section 214.
6. In developing a definition of ``extension of any line,'' we
believe that appropriate guidance should be drawn from three sources:
(a) the meaning of the words, ``extension'' and ``new;'' (b) Congress's
original purposes in enacting Section 214 of the 1934 Act and Section
402(b)(2)(A) of the 1996 Act; and (c) court and Commission precedent
interpreting the text of Section 214 and Section 1(18-22) of the
Interstate Commerce Act, from which Section 214 was derived.
7. (a) Definitions of ``Extension'' and ``New.'' Webster's
dictionary defines ``extension'' as, inter alia, ``the act of extending
or state of being extended'' or ``an addition to a main structure.''
The verb ``extend'' means ``to expand the area or scope of'' or ``to
increase the influence of.'' By contrast, the word ``new'' is defined
as ``having existed or been made for only a short time,''
``unfamiliar,'' ``novel,'' or ``recently arrived or established in a
position, place or relationship.''
8. Thus, the phrase ``extension of a line'' implies that, to extend
its lines, a carrier should add to its network by beginning to serve
new territory, thereby expanding its area of service. As distinguished
from an extension, a ``new line'' suggests one which, independent of
location, has recently been created or is in some other way ``novel.''
9. (b) Legislative Intent. Section 214 was originally enacted to
prevent a monopoly carrier from engaging in ``useless duplication of
facilities, with consequently higher charges upon the users of the
service.'' The stated legislative purpose of the 1996 Act is ``to
promote competition and reduce regulation in order to secure lower
prices and higher quality services for American telecommunications
consumers and encourage the rapid deployment of new telecommunications
technologies.'' Consistent with this broad purpose, Congress enacted
Section 402(b)(2)(A), intending to ``eliminate[] the Section 214
approval requirement for extension of lines.'' In this proceeding, we
seek to give effect to the de-regulatory letter and spirit of the 1996
Act in general, and Section 402(b)(2)(A) specifically, thereby
promoting competition by removing outdated barriers to entry in
telecommunications markets.
10. (c) Precedent. In expanding their own networks, carriers
generally undertake one of two basic types of activities. They may
either (1) expand the geographic area covered by their facilities; or
(2) increase the capabilities of their network within their existing
service area. Each type of activity has implications with respect to
the definition of the ``extension'' of a line.
11. (1) Geographic Considerations. Congress patterned Section 214
on Section 1(18-22) of the Interstate Commerce Act. In interpreting
that provision, the Supreme Court defined ``extensions'' as lines ``the
purpose and effect [of which] is to extend substantially the line of a
carrier into new territory.'' Two 1938 Commission decisions generally
followed the Supreme Court's ``new territory'' language in the
communications context, and instruct our efforts to distinguish ``new''
lines from ``extensions.'' That year, the Commission used the term
``extension'' to describe the acquisition of telegraph lines to serve
``new territory not theretofore served'' by the acquiring carrier. In
another opinion issued the same day, the Commission used the term
``new, additional or supplemental facilities'' to describe lines
constructed by Southwestern Bell within its service area in Texas.
12. Other decisions, however, cloud the Commission's 1938
definition. Since that time, the Commission has also stated that:
``Section 214 is not confined to the `extension' of a line--which might
reasonably be construed as requiring some part of the common carrier
facilities to cross a state boundary--but includes the `construction of
a new line' even though wholly within a single [s]tate so long as it is
part of an interstate `channel of communication' or `line.'''
13. In the international context, in granting certain Section 214
authorizations, the Commission staff has cautioned that ``should [the
carrier] obtain any interest in facilities beyond the authorized
international points for the purpose of providing common carrier
services, including private line service, between the U.S. and other
international points, such action would constitute an extension of
lines under Section 214.'' We recently indicated, however, that we
would not be bound by this view and provided the following preliminary
guidance with respect to the expansion of service into a new
international market: ``When we grant a carrier initial authority to
acquire and operate facilities to a particular country, we do not grant
that carrier authority for an `extension of lines' within the meaning
of Section 214 * * * but instead grant that carrier authority to
acquire and operate new lines to a particular geographic market.''
Thus, in the international context, we have suggested that lines that
allow a carrier to serve new international markets should be considered
``new lines.''
14. (2) Capacity Considerations. Carriers can create new channels
of communication, not only by expanding into new territory, but also by
increasing the capabilities of their existing networks. Such increases
may result from the laying of lines between points the carrier serves
to supplement or supplant existing lines or from the use of
technologically advanced electronic multiplexing, switching, coding, or
similar central office or network equipment to allow a carrier to
derive additional channels of communication from its existing
facilities.
15. The Commission has consistently held that increases in capacity
by either method create channels of communication requiring Section 214
[[Page 4968]]
authorization; however, the Commission has not clearly or consistently
stated whether these channels should be considered ``new lines'' or
``extensions.''
16. The Commission has suggested that in-region lines installed to
supplement existing ones constitute ``new lines.'' However, when it
first considered the issue of in-region increases in capacity, the
Commission stated that, in enacting Section 214, ``there was no
intention on the part of Congress to limit the right of carriers to
make full use of their own physical facilities by the derivation of as
many circuits thereon or therefrom as possible. Therefore, it is not
our opinion that Section 214 requires a certificate of convenience and
necessity when a company of the Bell System rearranges its circuits or
derives new circuits so as to make maximum use of its existing
facilities, when the result is not an extension of a particular
company's service into fields not theretofore served by it.''
Therefore, the Commission did not require Section 214 certification for
such projects until after Congress amended Section 214 in 1943 to
define a line as ``any channel of communication. * * *''
17. In light of the 1943 amendment, the Commission held that
channels produced through the use of electronic equipment in
conjunction with a pre-existing wire pair were ``lines'' within the
meaning of Section 214. The Commission did not, however, indicate
whether these lines were ``new'' lines or ``extensions.''
18. Noting that carriers are required to obtain Section 214
certification before installing multiplexing equipment, the Commission
more recently stated that such equipment creates ``new `lines' or
channels under Section 214.'' Consistent with that holding, the
Commission rejected a tariff filed by AT&T for Bell Packet Switching
Service (``BPSS'') based on the fact that AT&T had not obtained Section
214 authority to install the required equipment. The Commission stated
that ``the BPSS processor and interface facilities together perform
multiplex operations that effectively establish new or additional
channels of communication.'' Although both of these opinions
specifically use the term ``new lines'' to describe channels of
communication created electronically, we find little evidence to
suggest that the Commission deliberately chose that term with the
intent to distinguish such lines from ``extensions.''
19. Recent Commission precedent, also, fails to indicate whether
activities that increase the capabilities of a carrier's in-region
network create ``new'' lines or ``extensions.'' With respect to carrier
installation of facilities for the provision of video dialtone
(``VDT''), the Commission stated that, ``an upgrade of * * * facilities
to offer video dialtone service constitutes the establishment or
extension of a line. * * *'' Although the Commission continued its
discussion by stating that ``[b]y constructing video dialtone
platforms, LECs will be installing new systems and laying fiber to
create new channels of communication,'' the Commission did not indicate
clearly that it had consciously distinguished between ``new'' lines and
``extensions'' in characterizing VDT facilities.
20. With respect to international service, increases in a carrier's
capacity to serve a given country would be considered ``lines'' under
the Commission's interpretation of Section 214 since 1943. The
Commission, however, did not assert its Section 214 jurisdiction over
international lines created by electronically increasing the capacity
of existing facilitites until 1964. That year, the Commission stated:
AT&T, and the various record carriers, have increased the capacity
of, or the number of messages (voice and record) handled, by their
respective facilities by the use of appropriate equipment; e.g. the use
of Time Assignment Speech Interpolation (``TASI'') equipment by AT&T.
To date, we have not exercised the authority given us pursuant to the
provisions of Section 214 * * * to require the filing and a grant of
appropriate applications before installation of such equipment. We
feel, however, that, in view of the rapid growth of facilities in this
field, the imminence of satellite communications, and the vast increase
in facilities possible through heretofore unregulated installations, we
should require such an application, and a grant thereof before the
installation of such equipment.
The Commission went on to impose suitable conditions on the grant
of the application at issue. The Commission did not, however, provide
clear guidance as to whether it considered increases such as these to
be ``new lines'' or ``extensions,'' or whether it made any principled
distinction between channels created electronically and channels
created by constructing wholly separate, parallel facilities.
3. Discussion
21. After reviewing the legislative intent of Congress, and
Commission and court precedent, we find that, to date, the Commission
has not clearly defined ``extension of any line'' for purposes of
Section 214. We, therefore, take this opportunity to seek comment on an
appropriate definition. We tentatively conclude that an ``extension of
a line'' is a line that allows the carrier to expand its service into
geographic territory that it is eligible to serve, but that its network
does not currently reach. With respect to projects that increase the
capabilities of a carrier's existing network within an area it already
serves, we tentatively conclude, based on a review of Commission
precedent, that we should consider the resulting additional channels of
communication to be ``new lines.'' We seek comment on this tentative
conclusion, including comment on whether such upgrades should be
treated instead as ``extensions.''
22. Alternately, we seek comment on whether, consistent with the
Surface Transportation Board's treatment of ``double-tracking'' of rail
lines, we should treat in-region increases in network capacity as
``improvements,'' outside the scope of Section 214. We seek specific
comment on whether such treatment would be: (1) consistent with the
statutory definition of a line as ``any channel of communication''; and
(2) appropriate in light of the original intent of Section 214 to
inhibit network ``gold-plating'' and the intent of the 1996 Act to
promote competition by removing outdated barriers to entry in
telecommunications markets.
23. Extension Within the United States: The definition of extension
we have proposed exempts carriers from their obligation to obtain
Section 214 authorization for expansions into additional domestic
territory that they are otherwise eligible to serve. By relieving
carriers of the burden of obtaining Section 214 approval for such
projects, the definition would encourage carriers to expand their
service areas into territory served by other carriers. We tentatively
conclude that this definition would be consistent with the natural
meaning of ``extend,'' as well as court and Commission precedent
because it would exempt from Section 214 certification lines that
``expand the area or scope of'' a carrier's network. In addition, by
exempting carriers' efforts to expand their facilities or services
beyond the areas in which they are currently providing service, we
believe that we would encourage the development of competition,
consistent with the 1996 Act.
24. Consistent with the original purpose underlying Section 214,
under our proposed definition, the Commission would retain jurisdiction
over the construction of most in-region facilities. These projects take
place within the area where there is the potential danger that a
dominant carrier
[[Page 4969]]
will create needlessly duplicative facilities, the cost of which may be
borne by captive telephone ratepayers. These potential dangers are
especially great in the case of a LEC subject to rate-of-return
regulation, which would be in a position to recover the cost of
additional, unnecessary facilities from its ratepayers. We note,
however, that our proposed definition would allow even a rate-of-return
LEC to extend lines into additional geographic territory without
specific Section 214 certification. We tentatively conclude that our
existing accounting and cost allocation rules would help protect such a
LEC's captive ratepayers from bearing the cost of such extensions, even
if the LEC sought to build unneeded, out-of-region facilities. We
request comment on this tentative conclusion.
25. Under our proposed definition, a carrier would be able to
extend its lines only into additional domestic territory that it is
eligible to serve under the Communications Act, as amended, and the
Commission's rules and policies. In this respect, we note that most
LECs (i.e., all except the BOCs and GTE) were eligible to immediately
provide interstate, interexchange services, consistent with the
policies stated in the Competitive Carrier Proceeding, even before the
1996 Act became law. Under the 1996 Act, the Bell Operating Companies
(``BOCs'') are authorized to provide out-of-region, interLATA service,
and are eligible to provide in-region, interLATA service once they
comply with the requirements imposed by new Sections 271 and 272. In
addition, the 1996 Act replaced the GTE Consent Decree, which barred
GTE from providing domestic, interstate, interexchange services; GTE
may now do so consistent with the requirements of the Communications
Act, as amended, and the Commission's rules and policies. Furthermore,
all domestic carriers are eligible to provide exchange telephone
service on a competitive basis. Some carriers are already providing
such competitive local exchange service, and others may soon begin to
do so, either on a facilities or resale basis. Congress intended the
1996 Act to encourage such competitive activities and we believe that
the elimination of carriers' Section 214 obligations will further that
intent. We tentatively conclude, therefore, that a domestic carrier
wishing to serve new territory may extend its lines to do so without
obtaining Section 214 authority, as long as the carrier obtains any
other regulatory approvals that may still be required.
26. We recognize that this proposed definition of ``extension'' may
produce some anomalous results. For example, a domestic IXC that does
not currently have facilities that serve the entire geographic United
States would be able to extend lines into additional territory
consistent with the policies developed in the Competitive Carrier
proceeding. However, an IXC that already serves the entire domestic
United States with its own facilities would not be permitted, under our
proposed definition, to extend its lines without obtaining Section 214
approval. We note, however, that there should be no substantial or
practical impact on the domestic IXCs because, as discussed more fully
below, we tentatively conclude that we should forbear from applying
Section 214 and our Part 63 rules to non-dominant IXCs under Section
401 of the 1996 Act. We believe our proposed definition would create
fewer anomalies overall than other possible definitions. In addition,
we are confident that we will be able to correct such results through
the exercise of our forbearance authority.
27. Under our tentative definition, once a carrier has expanded
into new territory by ``extending'' its lines, additional activities
within that territory seemingly would create ``new'' lines. In the
Competitive Carrier proceeding, we determined that LECs could offer
interstate, interexchange services on a non-dominant basis through an
affiliate that met certain separation requirements; a LEC offering such
services directly, by contrast, would be regulated as dominant. We
recently extended this regulatory regime, on a temporary basis, to BOC
provision of out-of-region, interLATA telecommunications services to
provide interim protection from potential cost-shifting and
anticompetitive conduct by the BOCs. While we have recently sought
comment on whether it might be appropriate at some future date to
modify or eliminate the separation requirements thus imposed, those
requirements remain in place. In this proceeding, while we propose
forbearance from Section 214 regulation for most LECs and all non-
dominant carriers, as discussed below, we also propose that rate-of-
return LECs remain subject to streamlined Section 214 regulation.
Accordingly, rate-of-return LECs might find themselves subject to
Section 214 certification requirements only for their second and
subsequent lines into a given territory. We seek specific comment on
these and other potential anomalies, including possible remedies.
28. Accordingly, we ask parties to comment on whether our proposed
definition of line ``extensions,'' as it applies to all common
carriers, whether they are IXCs, LECs, resellers, international
carriers (discussed below), or others, satisfies the goals of Section
402(b)(2)(A). We seek specific discussion of our proposed definition's
impact on particular projects subject to Section 214 regulation or the
Section 402(b)(2)(A) exemption. In addition, commenters advocating
revisions to our definition should propose specific language and
discuss the basis for their proposals in light of the dictionary
meanings, legislative history, and precedents discussed above.
29. Our proposed definition would exclude all carrier lines in
areas within which the carrier is currently providing service.
Accordingly, under our tentative conclusion in paragraph 21, above,
channels of communication derived from in-region network upgrades would
be treated as ``new lines.'' Such treatment would be consistent with
past Commission characterizations of such lines. Furthermore, it would
preserve the Commission's Section 214 authority with respect to in-
region network upgrades by dominant carriers. In-region network
upgrades by dominant carriers present the greatest opportunities to
duplicate facilities unnecessarily, with consequently higher charges to
ratepayers. Although we expect the development of competition to lessen
those opportunities, we tentatively conclude that, currently, continued
Commission regulation of such projects remains consistent with the
goals of Section 214. As with the IXCs, however, we tentatively
conclude that the full exercise of this authority is not necessary to
protect ratepayers in every instance. Specifically, as discussed more
fully below, we tentatively conclude that we should forbear from
regulating the in-region activities of LECs that are subject to price
cap regulation (``price cap carriers''), LECs that are considered
average schedule companies, and competitive access providers
(``CAPs'').
30. International Lines: We have provided preliminary guidance with
respect to the definition of a line ``extension'' in the international
context by stating, with respect to Section 402(b)(2)(A), that:
We do not view this provision as applicable to our authority to
require common carriers to obtain Section 214 authority to acquire,
operate, or resell facilities or services to serve individual
countries. When we grant a carrier initial authority to acquire and
operate facilities to a particular country, we do not grant that
carrier authority for an ``extension of lines'' within the meaning
[[Page 4970]]
of Section 214 * * * but instead grant that carrier authority to
acquire and operate new lines to a particular geographic market.
31. Because the initiation of service to a new foreign point raises
an array of issues not associated with the expansion of service within
the domestic United States, we tentatively conclude that such
initiation of service involves the construction, acquisition, or
operation of ``new lines.'' This definition would be consistent with
the meaning of ``new,'' which, in contrast to an ``extension,'' implies
something ``unfamiliar'' or ``novel.'' We seek comment on this
tentative conclusion.
32. Within the international context, we have stated that ``the
international geographic market exists in terms of separate and
distinct areas determined by national borders.'' Therefore, we
tentatively conclude that the initiation of service to a new country is
an action fundamentally different in character from the extension of
facilities domestically, where carriers have much greater economic and
operational flexibility. Carrier initiation of international service
raises legal, economic, policy, and facility-specific issues different
from those raised by the provision of domestic service. The Commission,
for example, recently adopted a route-by-route approach to reviewing
foreign carrier Section 214 applications to provide international
services. Where a foreign carrier holds market power in a proposed
destination market, the Commission examines whether effective
competitive opportunities exist for U.S. carriers in that market. This
allows us to address the potential anticompetitive effects of
permitting a foreign carrier to provide U.S. telecommunications
services between the United States and a country where it has market
power. The legal, economic, policy, and facility-specific issues
involved in service to particular foreign points require individual
consideration, as well as consultation with the Executive Branch.
33. Accordingly, when we grant a carrier authority to acquire and
operate facilities to a particular country, we tentatively conclude
that we do not grant that carrier authority to ``extend'' lines within
the meaning of Section 214 and Section 402(b)(2)(A), but instead grant
that carrier authority to acquire and operate new lines. International
carriers are not eligible to initiate service to new international
points until they receive specific Section 214 authorization to do so.
We tentatively conclude, therefore, that few carrier activities
involving the provision of international services can properly be
considered line ``extensions'' within the meaning of Section 214 or
Section 402(b)(2)(A). Accordingly, under our proposed definition,
virtually all international lines must be classified as ``new.'' We
seek comment on this tentative conclusion.
34. Our proposed definition also would exclude projects that
increase a carrier's capacity to carry traffic between the United
States and another country it already serves. Such projects do not
involve the expansion of service into any new geographic territory.
Accordingly, we tentatively conclude that such capacity increases
constitute ``new'' lines subject to Section 214 regulation, consistent
with our characterization of domestic carrier in-region network
upgrades. Nevertheless, we seek specific comment on the impact of our
decision on all international carrier projects.
35. Other Options: We have tentatively concluded that an
``extension'' of a carrier's line should be defined as a line that
allows the carrier to expand its service into geographic territory that
it is eligible to serve, but that its network does not currently reach.
We seek comment, however, on other alternatives, such as defining
``extension of any line'' to include:
(i) any line, some part of which crosses a state boundary,
consistent with the language of General Tel. Co. of California. Lines
that are wholly within a single state, but that nevertheless form part
of an interstate channel of communication would be excluded from this
definition.
(ii) any augmentation of lines in a carrier's network, heretofore
subject to Section 214 certification, without distinguishing ``new''
lines from ``extensions.'' Such a definition would be consistent with
the Commission's historic treatment of ``new'' lines and ``extensions''
as one uniform group, without subdivision. Under such a definition, the
Commission would exempt all additions to a carrier's network from the
requirements of Section 214. Such a definition would subject to Section
214 review only discontinuance, reduction, or impairment of service.
(iii) any channel of communication that is not created with a
physically new facility. Under such a definition, capacity increases in
existing facilities would be considered extensions, while the
installation of physically new lines would remain subject to Section
214 certification. Such a definition potentially could influence
carrier business decisions, because physically new facilities would be
subject to a greater regulatory burden than capacity increases in
existing facilities.
(iv) any line that connects to a carrier's network. Such a
definition would include any line that augments a carrier's facilities
by connecting to them. It would exclude augmentations that do not
directly connect to the carrier's existing lines, as well as any
discontinuance, reduction, or impairment of service.
We seek comment on these alternatives and on whether another
definition would better address the considerations apparent in the
language of Sections 214 and Section 402(b)(2)(A), the legislative
history, and judicial and Commission precedents.
36. We note that carrier activities constituting the ``extension''
of a line, as defined in the course of this proceeding, are exempt from
the requirements of Section 214 as of the date of enactment of the 1996
Act, February 8, 1996.
B. Section 214 Requirements for Price Cap Carriers, Average Schedule
Carriers, and Domestic, Non-dominant Carriers
37. Under the definition of line ``extension'' proposed above,
Section 402(b)(2)(A) of the 1996 Act preserves the Commission's Section
214 authority over telecommunications carriers seeking to construct,
acquire, or operate new lines of communication, or engage in
transmission over such lines. Consistent with the forbearance authority
granted the Commission in Section 401 of the 1996 Act, however, and for
the reasons stated herein, we propose in this notice to forbear from
applying all Section 214 authorization requirements to LECs subject to
price cap regulation (``price cap carriers''), to LECs that are average
schedule companies, and to all domestic carriers classified as non-
dominant, whether they are offering local or long distance services.
Accordingly, we tentatively conclude that these carriers should no
longer be required to obtain Section 214 authorization for the
construction, acquisition, or operation of new lines between domestic
points, or for transmission over such lines. In light of this proposal,
we tentatively conclude that Section 63.07 of our rules should be
repealed.
38. Section 401 amends Title I of the Communications Act of 1934 by
adding a new Section 10. Section 10(a) directs the Commission to
forbear from enforcing a regulation or provision of the Communications
Act when: (1) Enforcement is not necessary to ensure that the charges,
practices, classifications, or regulations by, for, or in connection
with a carrier or service
[[Page 4971]]
are just and reasonable and not unjustly or unreasonably
discriminatory; (2) enforcement is not necessary to protect consumers;
and (3) forbearance is consistent with the public interest. Section
10(b) further instructs the Commission to consider whether forbearance
will promote competitive market conditions and enhance competition
among providers of telecommunications services. If the Commission
determines that such forbearance will promote competition among
providers of telecommunications services, that determination may
provide the basis for the Commission's finding, pursuant to subsection
10(a)(3), that forbearance is in the public interest.
39. We tentatively conclude that, under the first prong of the
three-part forbearance analysis set forth in Section 10(a), the
imposition of Section 214 authorization requirements on price cap,
average schedule, and non-dominant carriers is not necessary to ensure
that the charges, practices, classifications, or regulations by, for,
or in connection with these carriers or their services are just,
reasonable and not unreasonably discriminatory. This tentative
conclusion is based primarily on the presumption that price cap and
average schedule carriers, by virtue of the rate regulation schemes
applied to each, are constrained in their ability to raise interstate
telephone service rates. Non-dominant carriers, by virtue of facing
competition in their service areas also are constrained in their
ability to raise rates.
40. Price cap carriers are limited in their ability to realize a
regulatory benefit from overinvesting in facilities because rates for
interstate services are capped in accordance with preset formulas that
account for inflation and productivity growth. By capping prices rather
than carrier profits, price cap regulation discourages overinvestment
in facilities and encourages carriers to lower costs and increase
productivity. We recognize that, under the Commission's current price
cap regulations, carriers may elect a ``sharing'' option, which could
affect the rates charged for interstate services. In general, under our
current interim LEC price cap rules, a BOC could select an X-factor
option that requires it to share interstate earnings with its customers
that exceed specified benchmarks and permits the BOC to make a low-end
adjustment if interstate earnings fall below a specified floor.
Therefore, price cap regulation of a monopoly carrier that has elected
a sharing option may not eliminate entirely that carrier's incentive to
invest in unnecessary facilities. Such ``gold-plating'' activities may
have the potential to increase the carrier's costs and, therefore, to
reduce the carrier's obligation to share its regulated profits with its
customers.
41. Although price-cap regulation that includes a sharing option
preserves some of the incentives toward ``gold-plating'' that accompany
rate-of-return regulation, we believe that all forms of price cap
regulation nevertheless reduce these incentives. Price cap carriers
incur sharing obligations on a sliding scale once their profits exceed
certain levels; only when the carrier enters its ``100% sharing'' zone
would it reap the full benefit of an increase in its costs. Virtually
all of the price-cap carriers have adopted the ``no-sharing'' X-factor.
This fact seems to indicate strongly that, in general, the benefits
associated with the no-sharing option exceed the benefits of adopting a
sharing option and strategically overinvesting in facilities. Moreover,
we expect that growth in competition for local exchange and interstate
access will provide additional incentives for the price-cap LECs to
increase their efficiency. Therefore, whether a price cap carrier
elects a ``sharing'' or ``no sharing'' option, we tentatively conclude
that additional regulation under Section 214 is not required to protect
telephone service ratepayers adequately against potentially higher
rates resulting from investment in unnecessary facilities. Accordingly,
we tentatively conclude that ``sharing'' and ``no sharing'' price cap
carriers should be treated alike for purposes of applying forbearance
from the Section 214 authorization requirements. We seek comment on
this tentative conclusion, and request that commenters address whether
we should distinguish price cap carriers that have elected an X-factor
with no sharing requirement from other price cap carriers. We seek
specific comment on whether we should apply the streamlined Section 214
procedures that we propose for rate-of-return carriers to price cap
carriers that have a sharing obligation.
42. Similarly, average schedule companies are compensated for
interstate telephone services through access service rates developed by
the National Exchange Carrier Association (``NECA'') on the basis of
industry-wide averages. This constraint on the ability of average
schedule carriers to raise interstate telephone service rates reduces
the incentive that these carriers otherwise might have to overinvest in
facilities. Accordingly, we tentatively conclude that the first prong
of the Section 10 forbearance test is satisfied for carriers that are
average schedule companies.
43. In the Competitive Carrier proceeding, the Commission granted
blanket Section 214 authority to non-dominant domestic carriers based
on its finding that, in a competitive environment, market forces could
protect the public from unreasonably high rates and undue
discrimination. More recently, the Commission has reaffirmed its view
that marketplace forces can replace regulation and make burdensome
regulatory requirements unnecessary for both carriers and the
Commission. Based on our continuing belief that market forces limit the
ability of non-dominant carriers to recover the cost of unnecessary
facilities from telephone service ratepayers, we propose to forbear
from applying the Section 214 authorization requirements to all
domestic facilities of domestic non-dominant carriers. Such forbearance
would be consistent with our decision, under the forbearance provisions
of the 1996 Act, no longer to require or to allow nondominant
interexchange carriers to file tariffs for their interstate, domestic,
interexchange services.
44. As discussed above, Section 214 review was intended to protect
against duplicative and wasteful investments that could harm telephone
service ratepayers. Our concern is that interstate telephone ratepayers
not pay for such investments through increased rates for telephone
service, particularly when carriers' rates are based on their costs
plus a reasonable rate-of-return above those costs. Accordingly, our
tentative finding that price cap, average schedule, and non-dominant
carriers need not be required to obtain Section 214 authorizations is
consistent with the rationale for Section 214 review. Specific Section
214 review of these carriers' investments in facilities is not
necessary to ensure that their charges are just and reasonable because
competitive forces or other regulatory constraints on prices already
ensure that these classes of carriers have little economic incentive or
ability to invest in wasteful or duplicative facilities.
45. We also tentatively conclude that, under the first prong of the
Section 10(a) forbearance analysis, the imposition of Section 214
authorization requirements on price cap, average schedule, and domestic
non-dominant carriers is not necessary to prevent those carriers from
engaging in anticompetitive or discriminatory practices. The Section
214 certification process is not designed to prevent such abusive
practices and, furthermore, the Commission has in place rules
specifically addressing anticompetitive and discriminatory practices.
We retain the ability to
[[Page 4972]]
reimpose Section 214 requirements should it become necessary to ensure
that carrier rates and practices are just, reasonable, and
nondiscriminatory.
46. We tentatively conclude that, under the second prong of the
Section 10(a) forbearance analysis, imposition of the Section 214
authorization requirements on price cap (sharing and non-sharing),
average schedule, and domestic non-dominant carriers is not necessary
to protect consumers. Section 214 was originally enacted to protect
telephone ratepayers. The rate regulation scheme applied to price cap
and average schedule carriers, and market forces acting on domestic
nondominant carriers, however, minimize the risk that telephone
ratepayers will pay for wasteful investments by these carriers. We also
tentatively find that forbearance from imposing Section 214
authorization requirements will benefit consumers because it will
reduce the regulatory costs and delay currently imposed on carriers
seeking to introduce new services. Accordingly, forbearance treatment
should promote the ability of carriers to satisfy consumer demands more
efficiently and at lower rates.
47. We also seek comment on whether there are other factors, apart
from rate-of-return regulation or sharing obligations, that may affect
the potential for duplicative and wasteful investments. In particular,
we seek comment on the extent to which the rules and policies advocated
by LECs in the appeal of our interconnection order and in the universal
service proceeding could affect the incentives of carriers to make
investments that are inconsistent with the statutory objective(s) of
Section 214.
48. We tentatively conclude that, under the final prong of the
Section 10(a) forbearance analysis, forbearance is in the public
interest because it will promote competitive market conditions and
enhance competition among providers of telecommunications services. The
Commission's Section 214 review process currently appears to impose
regulatory barriers to the entry of new carriers and the creation or
expansion of facilities by all carriers because carriers proposing
projects that do not fall within one of the Commission's blanket
authority rules must engage in a potentially lengthy Commission review
of their proposals and disclose potentially competitively sensitive
information to rivals. By reducing the regulatory burden imposed by
Section 214, we would encourage the development of competition by
facilitating market-driven network expansion and reducing the costs of
obtaining regulatory approval. Accordingly, we tentatively conclude
that forbearance from applying the Section 214 authorization
requirements to price cap, average schedule, and domestic non-dominant
carriers would stimulate competition by facilitating entry of new
carriers, price decreases, and improved offerings. Accordingly, we
tentatively conclude, pursuant to Sections 10(a)(3) and 10(b), that the
forbearance policy proposed herein is in the public interest.
49. We seek comment on the forbearance policy proposed above. We
also seek comment on the advantages and disadvantages of alternative
reform proposals including, for example, streamlining our Section 214
application procedures with respect to one or more of these classes of
carriers instead of forbearing from applying the Section 214
authorization requirements. In addition, we seek comment on any
procedures which may be necessary with respect to Section 214 in the
event a carrier subject to forbearance treatment changes its cost
accounting method and, as a result, no longer falls within a forborne
class of carriers.
50. In the Competitive Carrier proceeding, the Commission found,
for purposes of assessing the market power of interexchange carriers
covered by that proceeding, that: ``(1) interstate, domestic,
interexchange telecommunications services comprise the relevant product
market, and (2) the United States (including Alaska, Hawaii, Puerto
Rico, U.S. Virgin Islands, and other U.S. offshore points) comprises
the relevant geographic market for this product, with no relevant
submarkets.''
51. The Commission recently tentatively concluded that, under
certain circumstances, narrower market definitions may provide a more
refined analytical tool for assessing market power. Specifically, its
tentative conclusions were: (1) to define as a ``relevant product
market an interstate, interexchange service for which there are no
close substitutes or a group of services that are close substitutes for
each other but for which there are no other close substitutes''; and
(2) to define the ``relevant geographic market for interstate,
interexchange services as all calls (in the relevant product market)
between two particular points.'' Although the Commission proposed
treating ``interstate, interexchange calling generally as one national
market,'' the Commission also proposed to examine credible evidence of
market power in particular product or point-to-point markets. We seek
comment on how revisions to the Commission's assessment of market power
in these differing contexts may affect our proposal to forbear from
Section 214 regulation of nondominant carriers, if we were to adopt
such revisions. In addition, we seek specific comment on the regulation
under section 214 of a carrier that might be regulated as dominant in
some product, geographic, or service markets, but nondominant in
others.
C. Section 214 Requirements for Domestic, Dominant, Rate-of-Return
Carriers
1. Streamlined Application Procedures
52. In this notice, we propose to amend Section 63.01 of our rules
to streamline Section 214 filing procedures for domestic carriers that
we tentatively conclude should remain subject to the Section 214
authorization requirements. We propose to limit this category of
carriers to domestic dominant carriers that are subject to rate-of-
return regulation (``dominant rate-of-return carriers''). We propose to
retain a Section 214 authorization requirement for these carriers given
our tentative conclusion that the rate regulation method applied to
them gives them an incentive to overinvest in facilities and because
they lack external constraints on their ability to pass such costs on
to telephone service ratepayers. As recently stated by the Commission,
``[w]e are mindful of our statutory obligations under the
Communications Act of 1934 to guard against abuses of market power in
situations where effective competition does not yet exist. We meet
these obligations through our Section 214 authorization process and
apply dominant carrier regulation and other safeguards where
circumstances warrant.'' Since dominant rate-of-return carriers have
both the incentive and the opportunity to recover the cost of
duplicative or wasteful facilities directly from telephone service
ratepayers, we believe that Section 214 review remains warranted for
such carriers' proposals to construct, acquire, or operate new or
additional domestic lines.
53. Nevertheless, we propose to amend Part 63 of our rules to
reduce the burden on carriers required to file Section 214
applications. Specifically, we propose to streamline the Section 63.01
filing requirements by eliminating the filing of unnecessary
information and providing for automatic approval of Section 214
applications thirty-one days after the Commission issues public notice
that the application has been accepted for filing, unless (1) the
Common Carrier Bureau (the ``Bureau'') notifies the applicant within
that period
[[Page 4973]]
that the grant will not be automatically effective; or (2) within
thirty days following the issuance of public notice a party both files
an opposition to the application with the Commission and serves a copy
on the applicant.
54. As reflected in the attached appendix of proposed rule
amendments, we propose to amend Section 63.01 to lessen the burden on
carriers and to require carriers to file only the following
information: (a) name and address of applicant; (b) state of
incorporation of corporate applicant; (c) information identifying the
officer to whom correspondence may be addressed; (d) points between
which proposed facilities are to be located; (e) a brief description of
the facilities to be added and of the applicant's existing facilities
between these points; (f) an affidavit, executed under penalty of
perjury: (1) that there is a public need for proposed facilities; and
(2) that the facilities are economically justified; and (g) a statement
whether authorization of facilities is categorically excluded from
Section 1.1306 of the Commission's rules.
55. We propose to eliminate from our current Section 63.01 filing
requirements information concerning: (a) whether the carrier is or will
become a carrier subject to Section 214 of the Communications Act; (b)
whether the facilities will be used to extend communication services
into territory at present not directly served by the applicant or to
supplement existing facilities of the applicant; (c) the types of
services to be provided over the proposed facilities; (d) the
applicant's present and estimated future facilities requirements; (e)
the map or sketch showing the proposed facilities; (f) a description of
the manner and means by which other interstate and foreign
communications services of a similar character are now being rendered
by the applicant and others in the area to be served by the proposed
facilities; (g) proposed tariff charges and regulations for domestic
applications; (h) a statement of the accounting proposed to be
performed in connection with the project; and (i) whether the carrier
has an affiliation with a foreign carrier. We tentatively conclude that
all of this information is either collected elsewhere by the
Commission, unnecessary, confusing in light of the provisions of
Section 402(b)(2)(A), or no longer of decisional significance to the
Commission.
56. Our proposed streamlined application procedure also would
revise the current requirement that a carrier provide a summary of the
factors showing the public need for the proposed facility and a
detailed economic justification. We propose to allow a carrier instead
to certify that there is a public need for its proposed facilities and
that they are economically justified. The filing of detailed statements
setting forth this information is burdensome on carriers and, in recent
years, it has been our experience that few (if any) carriers have filed
Section 214 applications proposing projects that do not meet these
requirements. Nevertheless, we retain the authority to request from a
carrier this or any other detailed information our review of a specific
application may require.
57. We also propose automatic approval of Section 214 applications
on the thirty-first day following the date on which each application is
placed on public notice, unless the Common Carrier Bureau notifies the
applicant that the grant will not be automatically effective, or
another party files an opposition with the Commission and serves the
opposition on the applicant. If the Bureau so notifies the applicant,
or an opposition is filed and served, within 30 days, final action by
the Bureau would be taken within 90 days of the expiration of the 30
day period (i.e., within 120 days of the issuance of public notice). We
seek comment on these proposed Part 63 rule amendments and on
alternative proposals to streamline the Section 214 approval process.
58. Although we have tentatively concluded that streamlined
regulation will be appropriate with respect to dominant rate-of-return
carriers, we recognize that the firms remaining under rate of return
regulation are generally small (accounting, in the aggregate, for less
than approximately 2% of interstate revenues), and that, as a practical
matter, few Section 214 applications from such firms have ever been
challenged or rejected. Accordingly, we seek comment on whether, as
with the other types of carriers discussed above, the Commission should
forbear from regulating these small carriers under Section 214
altogether.
2. Blanket Authority for Small Projects
59. Current Commission rules allow carriers to file streamlined,
informal applications for Section 214 certification for certain small,
in-region projects with a cost of less than $2,000,000 each or an
annual rental of less than $500,000 each. In recent years, it has been
our experience that few applications have been filed under this section
and those few have not been contested, but instead have been deemed
approved twenty one days after the Commission issues public notice that
the application has been accepted for filing. In addition, based on the
size of the projects involved, we believe that project-specific
applications are not required to protect ratepayers from unnecessary
rate increases. Accordingly, we tentatively conclude that we should
grant blanket authority for small projects involving the construction,
operation, or acquisition of new lines, or transmission over such
lines.
60. We believe that it would be difficult for a carrier to engage
in any substantial wasteful duplication of facilities or to raise its
rates significantly based on projects undertaken pursuant to this rule.
Not only are the dollar amounts involved small, but these projects
require investment in facilities that, as a general matter, must be
amortized over long periods of time, with the result that even a rate-
of-return carrier could include only a fraction of the total outlay in
its cost data for a single accounting period. As the rule is currently
written, however, a carrier may engage in as many projects as it deems
appropriate under this rule, subject to the approval of the Commission
under the streamlined provisions of Section 63.03. Therefore, we
tentatively conclude that a grant of blanket authority on any per-
project basis would leave no meaningful check on the ability of a rate-
of-return carrier to construct facilities at will, with the possible
result that rates will be raised unnecessarily. Instead, we propose to
grant blanket authority for carriers to construct, operate, or acquire
new lines, or engage in transmission over such lines, subject to an
annual cap on spending.
61. In developing an appropriate dollar amount for such an annual
cap, we take initial note of the current $2,000,000 per-project limit
under our streamlined rule. We propose that one such project could be
undertaken by a carrier on average every two months without any
significant adverse effect on ratepayers. However, we are also aware
that there are great size differences between the largest and smallest
rate-of-return carriers. Accordingly, for such large carriers, we
propose an alternate annual percentage cap. Specifically, we propose
that a carrier could increase the total book value of its lines by up
to 10% in any given year without any significant adverse effects on
ratepayers. Because these investments are typically amortized over long
periods of time, any potential rate increase from such projects would
necessarily be small.
62. In sum, we propose to replace the current $2,000,000 per-
project cap to allow carriers to engage in projects that,
[[Page 4974]]
in the aggregate, either: (1) Have a total annual cost of no more than
$12,000,000 or an annual rental of no more than $3,000,000; or (2)
increase the total book value of the carrier's lines by not more than
10%. Projects in excess of this annual cap would be subject to the
streamlined application procedures proposed above. We seek comment on
this proposal, including specific comment on several issues. We request
that commenters discuss: (a) Whether we should forbear from imposing
Section 214 regulation on these projects, including specific reference
to the forbearance criteria in the 1996 Act; (b) whether we should
subject these projects to the streamlined regulation proposed above;
and (c) whether the proposed cost limits are appropriate.
D. Reporting Requirements
1. Current Section 214 Reporting Requirements
63. In the past, the Commission has streamlined its Section 214
application process or granted blanket authorizations when it was able
to conclude that review of all information required by Section 63.01 no
longer was consistent with the public interest. In connection with such
streamlining or blanket authorization, the Commission has imposed
reporting obligations on carriers engaging in the activities covered by
these streamlined filing requirements or blanket authorizations. Part
63 of our rules currently imposes two such reporting requirements.
Section 63.03(e) of our rules requires annual reports from carriers
that have obtained continuing authority to commence small projects
within their existing service areas. Section 63.04(c) imposes a
similar, semiannual, reporting requirement on those carriers that have
obtained continuing authority to provide temporary or emergency
service.
64. If, as discussed above, we adopt a policy of forbearance toward
certain classes of carriers, then we tentatively conclude that those
classes of carriers would not be subject to any Section 214 reporting
requirements under the Commission's rules. In addition, we tentatively
conclude that the reporting burden should be substantially reduced for
carriers required to obtain Section 214 certification.
2. Elimination of Reports
65. We tentatively conclude that the Commission no longer needs to
require carriers to file routinely the reports required under Sections
63.03(e) and 63.04(c) of our rules. In recent years, neither the public
nor the Commission's staff has made significant use of the information
provided in these reports. Under Section 63.03(e), carriers may request
continuing authority to commence small projects to supplement existing
facilities within the carrier's service area. Projects commenced under
this authority must have a construction, installation, or acquisition
cost of no more than $70,000 or an annual rental cost of no more than
$14,000. Carriers subject to this requirement must file this report
annually.
66. Under Section 63.04(c), carriers may request continuing
authority to provide temporary or emergency service through the
construction or installation of facilities for which the estimated
construction, installation, and acquisition costs do not exceed $35,000
or an annual rental of $7000, as long as the project does not involve a
``major action'' under the Commission's environmental rules. Carriers
that obtain such authority are required to file semiannual reports
identifying the projects commenced over the preceding six months.
67. It would be extremely difficult for carriers to construct or
acquire significantly wasteful, duplicative facilities covered by
either Section 63.03 or 63.04 because of the relatively small cost of
the projects covered by those sections. Instead of obligating carriers
to file these reports, we propose to rely on the Commission's general
authority under the Communications Act to obtain information from
carriers in individual instances if the information becomes necessary
for us to perform our regulatory duties. Parties requesting that the
Commission retain these reporting requirements should explain clearly
how these reports have benefitted members of the public in the past and
how the reports would benefit the public in the future.
E. Section 214 Discontinuance Requirements
68. Section 214(a) requires carriers that discontinue, reduce, or
impair service to a community to obtain from the Commission a
certificate that neither the present nor future public convenience and
necessity will be adversely affected. In general, dominant carriers
seeking Commission authority to discontinue, reduce, or impair service
are required, pursuant to current Section 63.61 of our rules, to file a
formal application with the Commission. Depending on the nature of the
service for which authority to discontinue is sought, Section 63.62 of
our rules instructs applicants with respect to the contents of
particular applications. Upon reviewing an application for
discontinuance authority, the Commission then issues a formal order
granting or denying such authorization.
69. Under current Section 63.71 of our rules, non-dominant carriers
seeking to reduce or discontinue service are required to notify all
affected customers in writing of the planned discontinuance, reduction
or impairment of service unless the Commission authorizes another form
of notice in advance. Non-dominant carriers must also file with the
Commission an application that includes a description and the date of
the planned discontinuance, reduction or impairment, the geographic
areas of service affected, the dates and method of notice given to
customers, and any other information the Commission may require. The
application is automatically granted on the thirty-first day after its
filing with the Commission, unless the Commission notifies the
applicant within that time that the grant will not automatically be
effective.
70. The 1996 Act does not alter the Commission's authority under
Section 214(a) with respect to discontinuances or reductions in
services. We note, however, that carriers assume a certain amount of
risk when entering a new geographic or product market. If regulatory
requirements create significant barriers to exit, a carrier may be
reluctant to accept potential risks and, as a result, may never enter
the market. Accordingly, in order to further the 1996 Act's goal to
promote competition, we seek in this proceeding to eliminate any
unnecessary barriers to exit currently imposed by our rules.
Specifically, we seek comment on whether the streamlined discontinuance
procedures set forth in Section 63.71 of our rules, which currently
apply only to domestic non-dominant carriers, should apply to all
domestic common carriers. In doing so, we tentatively conclude that the
streamlined procedures contained in Section 63.71 appear to strike a
reasonable balance between protecting consumers and reducing
unnecessary barriers to exit for all carriers, whether dominant or non-
dominant. We seek comment on this tentative conclusion.
71. As local exchange markets becomes increasingly competitive,
however, many currently dominant LECs may find themselves under
increasing pressure to reduce or eliminate service in unprofitable
areas. Therefore, although we propose to extend the applicability of
Section 63.71 to domestic dominant carriers, we remain concerned that
the relatively short advance notification period
[[Page 4975]]
provided under Section 63.71 might allow a dominant carrier to obtain
automatic discontinuance authority even though it is the only carrier
serving a particular community. In addition, we are mindful of the
Commission's obligation under the new universal service provisions of
the 1996 Act to order a common carrier, or carriers, to provide
interstate telecommunications service to an unserved community, or
portion thereof, that requests such service. At a minimum, therefore,
we tentatively conclude that we should extend the advance notification
period contained in Section 63.71 to 60 days with respect to domestic,
dominant carriers, in the event that we do apply Section 63.71 to all
domestic carriers. We seek comment on this tentative conclusion,
including comment on (1) whether a 60 day advance notification period,
in conjunction with the universal service support mechanisms
recommended by the Joint Board and/or adopted by the Commission, will
provide adequate incentives to carriers and protection to consumers;
and (2) whether additional safeguards are necessary to protect
consumers against discontinuance of service by dominant carriers; and
(3) whether we should treat differently from all other carriers a
dominant carrier that is either (a) the sole service provider in a
particular community; or (b) relinquishing its designation as an
eligible telecommunications carrier under Section 214(e)(4).
F. Technical Amendments to 47 CFR Part 63
72. In light of the rule amendments proposed above, we tentatively
conclude that we should rewrite the entire text of Sections 63.01,
63.02, and 63.03 of our rules, to repeal Sections 63.06 and 63.07 of
our rules, and to make technical, conforming amendments to Sections
63.04, 63.08, 63.52, 63.61, 63.62 and 63.71 of our rules. We seek
comment on our proposal to repeal or amend these rule sections.
73. The 1996 Act also provides that ``a common carrier shall not be
required to obtain a certificate under [S]ection 214 with respect to
the establishment or operation of a system for the delivery of video
programming.'' Accordingly, we propose an amendment to our rules, in
the form of a new Section 63.01(b), to conform to this statutory
mandate.
III. Procedural Matters
A. Ex Parte Presentations
74. This is a non-restricted notice and comment rulemaking
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period provided that they are disclosed as provided in
the Commission's rules.
B. Regulatory Flexibility Act Analysis
75. We certify that the Regulatory Flexibility Act of 1980 is not
applicable to this rulemaking proceeding. If the proposed rule changes
are promulgated, there will not be a significant economic impact on a
substantial number of small business entities, as defined by Section
601(3) of the Regulatory Flexibility Act because these rule changes
would lessen, not increase, the regulatory burden on small businesses.
The Secretary shall send a copy of this Notice of Proposed Rulemaking
to the Chief Counsel for Advocacy of the Small Business Administration
in accordance with Section 605(b) of the Regulatory Flexibility Act.
C. Initial Paperwork Reduction Act Analysis
76. This NPRM 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 NPRM, as required by the Paperwork
Reduction Act of 1995. Public and agency comments are due at the same
time as other comments on this NPRM; OMB comments are due 60 days from
date of publication of this NPRM 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 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.
77. In addition to filing comments with the Secretary, as detailed
below, a copy of any comments on the information collections contained
herein should be submitted to Dorothy Conway, Federal Communications
Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or
via the Internet to dconway@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.
D. Comment Filing Procedures
78. Pursuant to applicable rules set forth in Sections 1.415 and
1.419 of the Commission's rules, 47 CFR Secs. 1.415 and 1.419,
interested parties may file comments on or before February 24, 1997,
and reply comments on or before March 17, 1997, with the reference
number ``CC Docket 9-11'' on each document. To file formally in this
proceeding, commenters and reply commenters must file an original and
six copies of all comments, reply comments, and supporting comments.
Commenters and reply commenters wishing each Commissioner to receive a
personal copy of their comments must file an original and eleven
copies. Comments and reply comments must comply with Section 1.49 and
all other applicable sections of the Commission's rules. However, we
require here that a summary be included with all comments, regardless
of length. All comments must 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 the Secretary, Network Services
Division, Common Carrier Bureau, 2000 M Street, N.W., Suite 235,
Washington, D.C. 20554. Parties must also file one copy of any
documents filed in this docket with the Commission's duplicating
contractor, International Transcription Services, Inc. (``ITS''), 2100
M Street, N.W., Suite 140, Washington, D.C. 20037 (tel. 202-857-3800).
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. Copies of comments and
reply comments will also be available through ITS.
79. Parties are also asked to submit comments and reply comments on
diskette. Such diskette submissions are in addition to, and not a
substitute for, the formal filing requirements addressed above. Parties
submitting diskettes should submit them to Secretary, Network Services
Division, Common Carrier Bureau, 2000 M Street, N.W., Suite 235,
Washington, D.C. 20554. Diskette submissions 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 labelled with the party's
name, proceeding, type of pleading (comments or reply comments) and
date of submission. The diskette should be accompanied by a cover
letter.
[[Page 4976]]
IV. Ordering Clauses
80. Accordingly, it is hereby ordered that, pursuant to Sections 1,
4(i), 4(j), 10, 214, 218, 254 and 571 of the Communications Act of
1934, as amended, 47 U.S.C. Secs. 151, 154(i), 154(j), 214, 218, 254
and 571, a NOTICE OF PROPOSED RULEMAKING is hereby ADOPTED.
81. It is further ordered that the Secretary shall send a copy of
this NOTICE OF PROPOSED RULEMAKING, including the regulatory
flexibility certification to the Chief Counsel for Advocacy of the
Small Business Administration, in accordance with Section 605(b) of the
Regulatory Flexibility Act, 5 U.S.C. 605(b).
List of Subjects in 47 CFR Part 63
Communications common carriers, Reporting and recordkeeping
requirements, Telegraph, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-2568 Filed 1-31-97; 8:45 am]
BILLING CODE 6712-01-P
