[Federal Register Volume 61, Number 120 (Thursday, June 20, 1996)]
[Proposed Rules]
[Pages 31481-31489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15789]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CC Docket No. 96-128; FCC 96-254]
Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: The Telecommunications Act of 1996 directs the Commission to
promulgate new rules governing the payphone industry. Section 276 of
the 1996 Act directs the Commission, among other things, to ensure that
all payphone owners are compensated for calls originated on their
payphones, and to ``discontinue * * * all intrastate and interstate''
subsidies for payphones owned by incumbent local exchange carriers
(``LECs''). In this NPRM, the Commission proposed rules that would
accomplish the following objectives set forth by Congress in Section
276: compensation for ``each and every completed intrastate and
interstate call using [a] payphone[;]'' termination of all subsidies
for LEC payphones, including ``access charge payphone service
elements[;]'' prescription of nonstructural safeguards for Bell
Operating Company (``BOC'') payphones; promulgation of rules permitting
the BOCs to negotiate with the payphone location provider about a
payphone's presubscribed interLATA carrier, unless the Commission finds
that such negotiations are ``not in the public interest;'' promulgation
of rules permitting all payphone providers to negotiate with the
location provider about a payphone's presubscribed intraLATA carrier;
and establishment of a class of public interest payphones to be located
``where there would otherwise not be a payphone[.]'' The intended
effect of this NPRM is to propose a rule implementing Section 276 of
the Communications Act of 1996.
DATES: Written comments by the public on the Further NPRM of Proposed
Rule Making and the proposed and/or modified information collections
are due June 27, 1996. Reply comments are due on July 8, 1996. Written
comments by the Office of Management and Budget (OMB) on the proposed
and/or modified information collections on or before August 19, 1996.
ADDRESSES: In addition to filing comments with the Secretary, 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, DC 20554, or via the Internet to
dconway@fcc.gov and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725
17th Street NW., Washington, DC 20503 or via the Internet to
fain__t@al.eop.gov.
FOR FURTHER INFORMATION CONTACT: Michael Carowitz, Enforcement
Division, Common Carrier Bureau, (202) 418-0960. For additional
information concerning the information collections contained in this
Further Notice of Proposed Rule Making contact Dorothy Conway at 202-
418-0217, or via the Internet at dconway@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rule Making in CC Docket No. 96-128, adopted on June 4,
1996 and released June 6, 1996. The full text of the Notice of Proposed
Rule Making is available for inspection and copying during normal
business hours in the FCC Reference Center, Room 239, 1919 M Street,
N.W., Washington, D.C. The complete text of this decision may also be
purchased from the Commission's duplicating contractor, International
Transcription Services, 2100 M Street, N.W., Suite 140, Washington,
D.C. 20037 (202) 857-3800. This Notice of Proposed Rule Making contains
proposed or modified information collections subject to the Paperwork
Reduction Act of 1995 (PRA), Public Law 104-13. It has been submitted
to the Office of Management and Budget (OMB) for review under Section
3507(d) of the PRA. OMB, the general public, and other Federal agencies
are invited to comment on the proposed or modified information
collections contained in this proceeding.
Paperwork Reduction Act
This NPRM contains eight proposed or modified information
collections. 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
[[Page 31482]]
information collections contained in this NPRM, 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 NPRM; OMB
notification of action is due August 19, 1996. 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.
(1) OMB Control Number: None.
Title: Proposed Quarterly Report of Interexchange Carriers
(``IXCs'') Listing the Number of Dial-Around Calls for Which
Compensation is Being Paid to Payphone Owners.
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 275.
Estimated Time Per Response: \1/2\ hour.
Total Annual Burden: 550 hours.
Estimated Cost Per Respondent: $0.
Needs and Uses: IXCs who are responsible for paying per-call
compensation to payphone providers must provide this report to the
payphone providers. Without provision of this report, payphone
providers would be unable to ascertain the compensation amount to be
paid by the IXCs.
(2) OMB Control Number: None.
Title: Proposed Annual Report of Interexchange Carriers (``IXCs'')
Listing the Compensation Amount Paid to Payphone Providers and the
Number of Payees.
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 275.
Estimated Time Per Response: 2 hours.
Total Annual Burden: 550 hours.
Estimated Cost Per Respondent: $5,000.
Needs and Uses: IXCs who are responsible for paying per-call
compensation to payphone providers are required to provide annual
reports to the Common Carrier Bureau listing the amount of compensation
paid to payphone providers and the number of payees. Without provision
of this report, the Commission would be unable to ensure that all the
IXCs are paying their respective compensation obligations. In addition,
IXCs must initiate an annual independent verification of their per-call
tracking functions.
(3) OMB Control Number: None.
Title: Proposed Quarterly Report of IntraLATA Carriers Listing
Payphone ANIs.
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 400.
Estimated Time Per Response: 8 hours for initial report, 2 hours
for subsequent reports.
Total Annual Burden: 5600 hours for initial report, 3200 hours for
subsequent reports.
Estimated Cost Per Respondent: $0.
Needs and Uses: IntraLATA carriers are required to provide to
interexchange carriers (``IXCs'') a quarterly report listing payphone
ANIs. Without provision of this report, resolution of disputed ANIs
would be very difficult because IXCs would not be able to tell which
ANIs belong to payphones and would not be able to ascertain which dial-
around calls were originated by payphones for compensation purposes.
(4) OMB Control Number: None.
Title: Proposed One-Time Report of Local Exchange Companies
(``LECs'') of Cost Accounting Studies.
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 400.
Estimated Time Per Response: 50 hours.
Total Annual Burden: 20,000 hours.
Estimated Cost Per Respondent: $0.
Needs and Uses: LECs are required to provide to the Common Carrier
Bureau, on a one-time basis, a report containing engineering studies,
time and wage studies, and other cost accounting studies to identify
the direct cost of central office coin services. Without provision of
this report, the Commission would be unable to ascertain whether the
LECs were charging their payphone competitors unreasonably high prices
for central office coin services.
(5) OMB Control Number: None.
Title: Proposed Initial Report of Bell Operating Companies
(``BOCs'') of Comparably Efficient Interconnection Plans.
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 7.
Estimated Time Per Response: 50 hours.
Total Annual Burden: 350 hours.
Estimated Cost Per Respondent: $0.
Needs and Uses: BOCs are required to provide to the Common Carrier
Bureau initial Comparably Efficient Interconnection (``CEI'') plans
describing how they intend to comply with the CEI equal access
parameters. Thereafter, they may include this information in the CEI
plans they already file with the Commission. Without the provision of
these reports, the Commission would be unable to ascertain whether the
BOCs were providing competing payphone providers with unbundled
nondiscriminatory access to their network features and functionalities.
(6) OMB Control Number: None.
Title: Proposed Report of Bell Operating Companies (``BOCs'') of
Modified Comparably Efficient Interconnection Plans.
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 7.
Estimated Time Per Response: 6 hours.
Total Annual Burden: 42 hours.
Estimated Cost Per Respondent: $0.
Needs and Uses: BOCs are required to provide to the Common Carrier
Bureau initial Comparably Efficient Interconnection plans describing
how they intend to comply with the CEI equal access parameters.
Thereafter, they may include this information in the CEI plans they
already file with the Commission. Without the provision of these
reports, the Commission would be unable to ascertain whether the BOCs
were providing competing payphone providers with unbundled
nondiscriminatory access to their network features and functionalities.
(7) OMB Control Number: None.
Title: Proposed Annual Filing of Nondiscrimination Reports (on
quality of service, installation and maintenance) by Bell Operating
Companies (``BOCs'').
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 7.
Estimated Time Per Response: 50 hours.
Total Annual Burden: 350 hours.
Estimated Cost Per Respondent: $0.
Needs and Uses: BOCs are required to provide to the Common Carrier
Bureau nondiscrimination reports on an annual basis. Without the
provision of these reports, the Commission would be unable to ascertain
whether the BOCs were providing competing payphone providers with equal
access to all the basic underlying network services that are provided
to its own payphones.
[[Page 31483]]
(8) OMB Control Number: None.
Title: Proposed Public Disclosure of Network Information by Bell
Operating Companies (``BOCs'').
Type of Review: New collection.
Respondents: Business or other for-profit, including small
business.
Number of Respondents: 7.
Estimated Time Per Response: 50 hours.
Total Annual Burden: 350 hours. Report would be issued
periodically, when new network services are developed or network
changes made.
Estimated Cost Per Respondent: $0.
Needs and Uses: BOCs are required to publicly disclose changes in
their networks or new network services at two different points in time.
First, disclosure would occur at the ``make/buy'' point: when a BOC
decides to make for itself, or procure from an unaffiliated entity, any
product whose design affects or relies on the network interface.
Second, a BOC would publicly disclose technical information about a new
service 12 months before it is introduced. If the BOC could introduce
the service within 12 months of the make/buy point, it would make a
public disclosure at the make/buy point. In no event, however, would
the public disclosure occur less than six months before the
introduction of the service. Without provision of these reports, the
industry would be unable to ascertain whether the BOCs were designing
new network services or changing network technical specifications to
the advantage of their own payphones.
SUMMARY OF NOTICE OF PROPOSED RULE MAKING
I. Background
1. Section 276(b)(1)(A) directs the Commission to establish a
compensation mechanism to ensure ``that all payphone service providers
are fairly compensated for each and every completed intrastate and
interstate call'' from their payphones. Section 276(b)(1)(B) mandates
that the Commission ``discontinue the intrastate and interstate carrier
access charge payphone service elements and payments * * * and all
intrastate and interstate subsidies from basic exchange and exchange
access revenues.'' In addition, Section 276(b)(1)(D) directs the
Commission to consider whether BOCs should be permitted to be involved
with the location provider's selection of the payphone's presubscribed
carrier. Together with the other subsections of Section 276, these
three provisions help to establish regulatory parity for all payphone
service providers (``PSPs''), whether competitive payphone owners or
incumbent LECs (both independents and BOCs).
II. Discussion
A. Compensation for Each and Every Completed Intrastate and Interstate
Call Originated by Payphones
a. Scope of Payphone Calls Covered by this Rulemaking
2. Currently, most calls originated on payphones are within one of
the following categories: (1) coin calls; (2) directory assistance
calls; (3) operator service (``0+'' and ``0-'') calls; (4) access code
calls (using e.g., ``10XXX'' codes and ``1-800'' or ``950'' carrier
access numbers); and (5) subscriber 800 calls. Each of these categories
can be further subdivided between local, intraLATA toll, intrastate
interLATA, interstate interLATA and international. Each type of call is
a potential source of revenue for the payphone owner, whether the
revenue is derived from coins deposited into the payphone, through
commission payments on operator service calls, or from compensation
mandated by the FCC or the states.
3. The 1996 Act requires the Commission to ensure that PSPs are
fairly compensated for all calls originated by their payphones. In
light of the multiple sources of revenue for payphones, the Commission
seeks comment on what constitutes ``fair'' compensation and how we
should ``ensure'' that each PSP receives it for calls for originated by
its payphones. The Commission concludes that its mandate under Section
276(b)(1)(A) is to ensure that PSPs are ``fairly compensated'' for
``each and every completed intrastate and interstate call'' regardless
of whether the PSP currently receives compensation for the particular
call originated by its payphone. The Commission tentatively concludes,
however, that it should use this mandate to prescribe compensation only
when payphone providers are not already ``fairly compensated.''
Currently, PPOs and non-BOC LECs receive compensation, pursuant to
individual contracts, from the payphone's presubscribed IXC for all
``0+'' calls. IXCs have long competed for this type of business.
Therefore, the Commission tentatively concludes that it need not
prescribe per-call compensation for 0+ calls because competition in
this area ensures ``fair'' compensation for PSPs. It seeks comment on
these tentative conclusions.
4. The 1996 Act does not expressly state that compensation should
extend to international calls. The Commission finds no evidence,
however, of congressional intent to leave these calls uncompensated.
Therefore, despite the lack of reference to international calls in
Section 276(b)(1)(A), the Commission tentatively concludes that it
should exercise its general jurisdiction under Sections 4(i) and 201(b)
of the Communications Act of 1934, as amended, to ensure that PSPs are
compensated for international as well as interstate and intrastate
calls originating from their payphones in the United States. The
Commission seeks comment on this tentative conclusion.
5. The rate for the most common type of call, the local coin call,
is set by state commissions. Typically, the rate set for local coin
services provided by the incumbent LECs also applies to the PPOs.
Section 276 of the Act requires the Commission to ensure that the
payphone provider receives fair compensation for each interstate and
intrastate call, including local coin sent-paid calls. Section 276 also
expressly preempts state regulations that are inconsistent with the
Commission's regulations. The Commission seeks comment, however, on how
it should exercise its jurisdiction under Section 276. The Commission
notes that it had a range of options for ensuring fair compensation for
these calls, and it sought comment on which option will ensure fair
compensation for PSPs with respect to local coin sent-paid calls.
6. More specifically, one option would be to set a nationwide local
coin rate for all calls originated by payphones. The Commission seeks
comment on whether the Commission should take such action and request
that commenters identify the specific public interest benefits they
believe would result from a nationwide rate, why local rates are
inadequate to ensure fair compensation, the impacts of variations among
the states in the local coin sent-paid rate on PSPs and the public, and
whether those impacts are predominantly local, statewide, regional or
national. Another option would be for the Commission to prescribe
specific national guidelines that states would use to establish a local
rate that would ensure that all PSPs are fairly compensated. The
Commission seeks comment on whether the Commission should take such
action and request that commenters identify specific public interest
benefits they believe would result from the Commission prescribing such
guidelines, what factors such guidelines should consider, how the
guidelines would ensure fair compensation for local coin calls, the
impacts of variations among the states
[[Page 31484]]
in local coin rates, and whether those impacts are predominantly local,
statewide, regional or national.
7. A third option for ensuring fair compensation for PSPs would be
for the states, in the first instance, to continue to set the coin
rates for local payphone calls according to factors within their
discretion. The Commission has long recognized the interest of the
states in setting end-user rates for local calls, including rates for
411 calls. Indeed, as discussed above, the states have long had a
traditional and primary role in regulating payphones. However, because
Section 276 of the 1996 Act requires the Commission to ensure that PSPs
are fairly compensated for ``each and every completed intrastate and
interstate call,'' the Commission seeks comment on what further
procedures, such as a complaint or petition process, it should
establish, should it ultimately determine to defer to the states in
setting payphone rates. The Commission also seeks comment on what
standards it could use to adjudicate any complaints or petitions that
challenge a particular rate. It further ask whether the states' setting
of the rates for local coin calls subject to complaint or petition
would be consistent with Section 276's mandate that the Commission
ensure fair compensation for ``each and every completed intrastate and
interstate call.'' The Commission sought comment on whether the
Commission should take such action and request that commenters identify
specific public interest benefits they believe would result from having
coin rates for local payphone calls set by the states.
b. Entities Required To Pay Compensation
8. Because the 1996 Act directs the Commission to ensure that all
PSPs are compensated, with limited exception, for ``each and every
intrastate and interstate call'' using their payphones, the Commission
also addresses who pays that compensation. The possible payors include:
the caller using the payphone; the carrier over whose network the call
is placed; or, in the case of subscriber 800 calls, the entity being
called (who may or may not directly pass all the charges on to the
caller using the payphone). Industry participants have made two
compensation proposals that might satisfy the per-call compensation
requirement.
9. The first proposal builds on the per-call compensation mechanism
proposed for interstate access code calls in CC Docket No. 91-35. If
this ``carrier-pays'' mechanism were extended to all dial-around calls,
the IXC who receives such a call from a payphone would be required to
pay a per-call charge to the provider of the payphone. Each IXC would
decide independently how to recover this cost.
10. Another approach would be to rely on a ``set use fee.'' The
``set use fee'' is a fee that the IXC would bill and collect from the
end user. The fee would then be remitted to the PSP. In the case of the
subscriber 800 and other toll-free number calls, the set use fee could
be collected from the subscriber. For access code calls and operator-
assisted calls, the set use fee would be collected from the end user
that is billed for the call.
11. The Commission tentatively concludes that, for non-coin
payphone calls, either a ``carrier-pays'' system or a ``set use fee''
system where the end user pays would satisfy the requirements of the
1996 Act. As a general principle, however, the Commission tends to
favor an approach that minimizes transaction costs on the caller and on
the industry. The Commission finds that the carrier-pays mechanism is
preferable because it would result in less transaction costs because
the IXC could aggregate its payments to payphone providers. Under a
set-use fee, these payments would be spread among a vast number of
payphone callers through their individual telephone bills. Therefore,
the Commission tentatively concludes that it should adopt a ``carrier-
pays'' compensation mechanism that builds on existing procedures. It
seeks comment on these tentative conclusions.
c. Ability of Carriers To Track Calls From Payphones
12. Based on prior FCC proceedings, the Commission tentatively
concludes that tracking mechanisms and surrogates exist, or might
readily be made available, to support the complete per-call
compensation plan mandated by Section 276(b)(1)(A). It seeks comment on
what tracking options are currently, or may soon be, available. The
Commission seeks further comment on the ability of existing IXC-based
tracking mechanisms to accommodate all payphone providers and IXCs. In
the event that there is no standard technology or mechanism available
for tracking, the Commission seeks comment on alternative surrogate
methodologies that could be devised and by whom. Finally, it seeks
comment on which party or parties, whether IXCs, PSPs, or intraLATA
carriers, should be required to develop and maintain the tracking or
surrogate methodologies.
d. Administration of Per-Call Compensation
13. The Commission tentatively concludes that the direct-billing
arrangement established in previous Commission orders should be
maintained with the simple addition of requiring IXCs, and the
intrastate interexchange operations of LECs to send back to each PSP a
statement indicating the number of toll-free and access code calls that
each carrier has received from each of that PSP's payphones. The
Commission proposes to continue to leave the details of the billing
arrangements for the parties to determine. All parties, whether
carriers or PSPs, would be free to retain the services of one or more
clearinghouses to assist them with billing and collection and/or
payment of the compensation. The Commission would require, however,
that the carrier responsible for paying compensation file each year a
brief report with the Common Carrier Bureau listing the total amount of
compensation paid, pursuant to the rules adopted in this proceeding, to
PSPs for intrastate, interstate, and international calls; the number of
compensable calls received by the carrier; and the number of payees.
e. Per-Call Compensation Amount
14. The Commission previously examined various compensation methods
in the Second Report and Order. The Commission notes that the theory of
compensation and price surrogates that the Commission has historically
relied upon in its determination of the ``range of reasonable
compensation rates'' provides some guidance for our analysis of how to
ensure that PSPs are ``fairly compensated'' and what should be the
appropriate per-call compensation amount for all calls within the scope
of this rulemaking. As before, while the Commission noted that it was
confronted in the proceeding by the lack of reliable PPO cost data, it
tentatively concludes that PSPs should be compensated for their costs
in originating the types of calls for which it has tentatively
concludes that compensation is appropriate. It tentatively concludes
further that these costs should be measured by appropriate cost-based
surrogates. It seeks comment on these tentative conclusions. The
Commission also questions whether, to ensure that PSPs receive fair
compensation, it should prescribe different per-call compensation
amounts for the different types of calls originated by payphones. It
seeks further comment on how
[[Page 31485]]
compensation levels should be permitted to change in the future, and
whether some cost index or price cap system would be appropriate to
ensure that compensation levels reflect expected changes in unit costs
over time. The Commission also seeks comment on whether it should
provide PPOs some measure of interim compensation, to be paid until the
effective date of the final rules we adopt in this proceeding, for the
growing volume of dial-around calls originated from their payphones.
B. Reclassification of Incumbent LEC-Owned Payphones
a. Classification of LEC Payphones as CPE
15. To effectuate the Act's mandate that access charge payphone
service elements and payphone subsidies be discontinued, the Commission
tentatively concludes that it should treat incumbent LEC payphones as
unregulated, detariffed CPE. It tentatively concludes further that
incumbent LECs should be required to provide to PSPs, on a
nondiscriminatory tariffed basis, all functionalities used in a LEC's
delivery of payphone services.
16. The option of using central office coin services, such as coin
recognition, answer detection, and other related services, allows
incumbent LECs to use the less expensive ``dumb'' pay telephones, which
gives incumbent LECs a cost advantage over their competitors. The
Commission tentatively concludes that requiring that central office
coin services be made available to PPOs eliminates this cost advantage
and will increase competition in the payphone industry. To unbundle
payphones from their underlying transmission, the Commission
tentatively concludes that incumbent LECs, whether or not they
themselves provide payphone service, must offer individual central
office coin transmission services to PSPs under a nondiscriminatory,
public, tariffed offering. It seeks comment on this tentative
conclusion and on which central office coin services must be made
available by incumbent LECs to the PSPs to achieve this goal. In the
interest of clarity, it seeks comment on both the type of services and
the technological requirements necessary to allow PPOs to use payphones
that are equivalent to those payphones currently used by LECs. The
Commission also tentatively concludes that Section 68.2(a)(1) of the
FCC's regulations should be amended to facilitate registration of both
instrument implemented and central-office-implemented payphones. It
seeks comment on this tentative conclusion.
b. Transfer of Payphone Equipment to Unregulated Status
17. If the Commission concludes that it will treat payphones as
detariffed CPE, the incumbent LECs would have to transfer their
payphones and related equipment from regulated to unregulated
activities. FCC rules provide that, if reallocations of
telecommunications plant (i.e., central office equipment and outside
plant) from regulated to nonregulated operations are required, such
plant will be transferred at undepreciated baseline cost plus an
interest charge based on the authorized interstate rate of return to
reflect the time value of money. The Commission seeks comment on the
specific assets to be transferred. It tentatively concludes that the
assets to be transferred should be defined generally in terms of CPE
deregulation. Thus, the assets to be transferred may include all
facilities related to payphone service, including associated taxes and
depreciation, but likely would not include the loops connecting the
payphones to the network, or the central office ``coin-service'' or
operator service facilities supporting incumbent LEC payphones.
Including these network support facilities may be inappropriate because
it would allow incumbent LECs to continue providing a different form of
interconnection to their payphones than is available to PSPs. The
Commission also tentatively concludes that a phase-in period for a
transfer of payphone-related assets is not necessary, because payphone
terminal equipment consists of less than one percent of total plant
investment for the entire LEC industry. The Commission seeks comment on
our tentative conclusions and the general approach to asset transfers
outlined here.
c. Termination of Access Charge Compensation and Other Subsidies
18. Incumbent LECs today generally recover payphone costs allocated
to the interstate jurisdiction through the per-minute carrier common
line (``CCL'') charge they assess on IXCs and other interstate access
customers for originating and terminating interstate calls. The
incumbent LEC assesses the PPO a subscriber line charge (``SLC'') (at
the multi-line business rate) to recover the payphone common line costs
associated with that phone. In the case of competitive payphones, a PPO
recovers its payphone costs out of the revenue it receives from end
users, premises owners, and OSPs to whom its payphones are
presubscribed.
19. The 1996 Act mandates that the Commission ``discontinue the
intrastate and interstate carrier access charge payphone service
elements and payments * * * and all intrastate and interstate subsidies
from basic exchange and exchange access revenues[.]'' Accordingly, the
Commission must adopt rules that provide for the removal from regulated
intrastate and interstate rate structures of all charges that recover
the costs of payphones (i.e., the costs of payphone sets, not including
the costs of the lines connecting those sets to the public switched
network, which, like the lines connecting competitive payphones to the
network, will continue to be treated as regulated). It tentatively
concludes that incumbent LECs must reduce their interstate CCL charges
by an amount equal to the interstate allocation of payphone costs
currently recovered through those charges. LECs subject to the price
cap rules would treat this as an exogenous cost change to the Common
Line basket pursuant to Section 61.44(c) of our rules. The Commission
requests incumbent LECs to identify in their comments all accounts that
contain costs attributable to their payphone operations. The Commission
also requests comment on whether specific cost pools and allocators
should be used to capture the nonregulated investment and expenses
associated with their payphone operations. It seeks further comment on
whether a transition period is necessary to move from subsidized
compensation to per-call compensation for LEC payphones, and how that
transition would proceed.
20. The Commission also proposes, pursuant to the mandate of
Section 276(b)(1)(B), to require incumbent LECs to remove from their
intrastate rates any charges that recover the costs of payphones. The
Commission solicits comment on whether it should set a deadline and a
specific mechanism for elimination of any intrastate subsidies as well,
or whether it would be both consistent with the statute as well as
preferable from a policy perspective to permit the states to formulate
their own mechanisms for achieving this result within a specific time
frame.
21. In the telephone network, payphones, as well as all other
telephones, are connected to the local switch by means of a subscriber
line. The costs of the subscriber line that are allocated to the
interstate jurisdiction are recovered through two separate charges: a
flat-rate SLC assessed upon the end user customer who subscribes to
local service; and a per-minute CCL charge that recovers the balance of
the interstate subscriber line costs not
[[Page 31486]]
recovered through the SLC. LEC payphone costs are also included in the
CCL charge. The CCL charge, however, applies to interstate switched
access service that is unrelated to payphone service costs. While PPOs
are required to pay the SLC for the loop used by each of their
payphones, LECs have not been required to pay this charge because the
subscriber lines connected to LEC payphones have been recovered
entirely through the CCL charge. The Commission tentatively concludes
that, to avoid discrimination among payphone providers, the SLC should
apply to subscriber lines that terminate at both LEC and competitive
payphones. It tentatively concludes that the removal of payphone costs
from the CCL and the payment or imputation of a SLC to the subscriber
line that terminates at a LEC nonregulated payphone would result in the
recovery of LEC payphone costs on a more cost-causative basis. The
Commission seeks comment on these tentative conclusions and, more
generally, on how removing LEC payphones from the CCL charge would
affect the SLC.
22. The incumbent LECs' multi-line business SLC is currently
subject to a $6.00 per month cap. Those LECs with interstate subscriber
line costs that exceed this amount recover a portion of the interstate
costs of subscriber lines through the CCL charge. The issue of the
appropriate interstate SLC for the future has been referred to a
Federal-State Joint Board. To the extent that LECs charge or impute to
their own payphone operations only the multi-line business SLC, which
may be less than the full interstate cost of the subscriber lines
connecting their payphones to the network, and recover the balance of
the cost of these lines through the CCL charge, they may, in effect, be
subsidizing their payphones with access charge revenues, in violation
of Section 276. The Commission seeks comment on whether LECs in those
circumstances should charge or impute to their own payphone operations,
as well as to PPOs, an additional monthly charge representing the
difference between the SLC cap and the full interstate cost of these
subscriber lines. It also seeks comment on whether comparable changes
should be made to incumbent LECs' intrastate rates.
d. Deregulation of AT&T Payphones
23. In the Interstate, Interexchange Marketplace proceeding, the
Commission notes that it would consider in the instant proceeding ``the
issue of bundling pay telephone equipment with the underlying
transmission capacity.'' The Commission tentatively concludes that
other IXC bundling issues should be treated under the same rules we
have proposed in the Interstate, Interexchange Marketplace proceeding.
Commenters who disagree with this tentative conclusion, however, are
invited to comment in the proceeding.
24. Like LEC payphones, AT&T payphones are classified as network
equipment and, therefore, may receive subsidies. The Commission
tentatively concludes that payphones provided by AT&T should be
classified as CPE. While the 1996 Act does not expressly address AT&T
payphones, Section 276 directs the Commission to adopt regulations that
will ``promote competition among payphone service providers and promote
the widespread deployment of payphone services to the benefit of the
general public[.]'' Discontinuing possible subsidies for AT&T payphones
would be congruent with the 1996 Act's requirement that the Commission
discontinue subsidies for other payphones (i.e., those owned by
incumbent LECs) and would provide for symmetrical regulation of the
payphone industry. There are other reasons why this proposed action is
in harmony with the other rules the Commission has proposed in its
proceeding. First, since Tonka, AT&T payphones have been treated the
same as BOC payphones. Once LEC telephones, including those provided by
the BOCs, are declared to be CPE, the basis for treating AT&T payphones
as network equipment no longer exists. Second, the Commission believes
that deregulating AT&T payphones is in line with its general policy to
deregulate non-dominant carriers. It seeks comment on this tentative
conclusion.
C. Nonstructural Safeguards for BOC Provision of Payphone Service
25. The Computer III nonstructural safeguards currently apply to a
BOC's provision of payphone service if enhanced services are provided
through the payphone. Under the Computer III framework, BOCs are
permitted to provide enhanced services on an integrated basis subject
to nondiscrimination safeguards. The safeguards the Commission adopted
in Computer III include: (1) nondiscriminatory access to network
features and functionalities; (2) restrictions on the use of Customer
Proprietary Network Information (``CPNI''); (3) network information
disclosure rules; (4) nondiscrimination in the provision, installation,
and maintenance of services as well as nondiscrimination reporting
requirements; and (5) cost accounting safeguards. The Commission
tentatively concludes that all Computer III nonstructural safeguards
must be applied to meet our obligation under the 1996 Act. It seeks
comment on this tentative conclusion. We also seek comment on whether
there are other nonstructural safeguards that, while not explicitly
specified in the Computer III, should be applied to BOC payphones.
26. Currently, the Commission regulates BOC provision of enhanced
services through Comparably Efficient Interconnection (``CEI'') and
Open Network Architecture (``ONA'') requirements that require unbundled
nondiscriminatory access to BOC network features and functionalities.
Pursuant to these requirements, BOCs must file a service-specific CEI
plan before offering any enhanced service on an integrated basis. A BOC
must demonstrate in its CEI plan how it would provide competing
enhanced service providers (ESPs) with ``equal access'' to all basic
underlying network services the BOC used to provide its own enhanced
services. Subsequently, the Commission required BOCs to develop and
implement ONA plans detailing more fundamental unbundling of their
basic network services. ONA requires further unbundling of network
elements than under CEI because it is not limited to those elements
associated with specific BOC enhanced services. In 1993, the Common
Carrier Bureau lifted structural separation requirements after each BOC
demonstrated that its ONA plan complied with the BOC Safeguards Order.
Following the California III court decision, the Commission has
continued to require BOCs to file CEI plans for each individual
enhanced service it offers in addition to fulfilling the access
requirements of its ONA plan.
b. BOC CEI Plans
27. To ensure BOC compliance with the Computer III and ONA
requirements, we propose to require that each BOC file, within 90 days
of the effective date of the order in this proceeding, an initial CEI
plan describing how it intends to comply with the CEI equal access
parameters and nonstructural safeguards for the provision of payphone
services. Thereafter, the BOCs may integrate the filing of information
on payphone services unbundling and nonstructural safeguards with their
ongoing ONA filings. Generally, in a CEI plan, a BOC must describe how
it intends to comply with the CEI ``equal access'' parameters for the
specific payphone service it intends to offer. The CEI equal access
parameters include: interface functionality; unbundling of basic
[[Page 31487]]
services; resale; technical characteristics; installation, maintenance,
and repair; end user access; CEI availability; minimization of
transport costs; and availability to all interested customers or
enhanced service providers. Because the 1996 Act requires that we apply
safeguards that are equal to those set forth in Computer III ``at a
minimum,'' the Commission seeks comment on any other parameters or
requirements for BOC payphone service that, while not listed in this
NPRM, are consistent with the intent of the 1996 Act.
D. Ability of BOCs To Negotiate With Location Providers on the
Presubscribed Interlata Carrier
28. While the location provider selects the OSP for BOC and GTE
payphones, all other payphone providers are able to select the OSP
serving their payphones. As discussed above, payphone providers, both
PPOs and independent LECs, compete in the market for payphone services
by offering the location provider a commission on coin and 0+ traffic
originating from the payphones located on the location provider's
premises. In turn, payphone providers earn revenue by reselling local
and 1+ long distance service and by contracting for 0+ traffic with
OSPs that pay commissions on 0+ traffic. The legislation directs the
Commission to provide similar rights to BOCs, unless the Commission
determines that it is not in the public interest.
29. The Commission seeks comment on the extent to which extending
to the BOCs the same rights that all other payphone providers have to
select and contract with the interLATA carriers that carry interLATA
traffic from their payphones would be ``not in the public interest.''
The Commission questions whether these rights will benefit the general
public by increasing competition, available services, and overall
efficiency. It also asks whether carrier-selection rights will help to
foster increased competition and market parity that will ``promote the
widespread deployment of payphone services to the benefit of the
general public.'' Parties commenting on this issue should also address
how any Commission action with respect to a BOC's right to select and
contract with interLATA carriers would be consistent with the other
goals enunciated in Section 276, such as promoting regulatory parity
between BOCs and independent payphone providers, and that the location
provider has the ultimate decision-making authority in determining
interLATA services in connection with the choice of payphone providers.
30. The Commission seeks comment on whether the ability to select
the interLATA carrier serving their payphones is likely to permit the
BOCs to behave anticompetitively in the payphone market in the absence
of safeguards to prevent cost misallocations and discrimination. In
addition, the Commission seeks comment on whether the structural and
accounting safeguards mandated under Sections 271 and 272 of the 1996
Act, and any Commission rules implementing these safeguards, are
sufficient to prevent anticompetitive abuses. If not, the Commission
seeks comment on whether the Commission should adopt rules to prevent
BOCs from giving more favorable interLATA rates to their own payphone
operations than to their payphone competitors. Parties are asked to
specify what safeguards would be necessary to prevent potential
anticompetitive behavior by the BOCs in this regard. The Commission
also seeks comment on to what extent a BOC not authorized to provide
in-region interLATA service under Section 271 of the 1996 Act should be
allowed to participate in the selection of the interLATA carrier,
especially if the BOC has a non-attributable interest in the interLATA
carrier, such as an option to purchase or an agreement to merge.
E. Ability of Payphone Service Providers To Negotiate With Location
Providers on the Presubscribed Intralata Carrier
31. Currently, in some states, competitive payphones are required
to route intraLATA 0+ and 0- calls, and sometimes other intraLATA
calls, to the incumbent LEC. In contrast, Section 276(b)(1)(E) requires
the Commission to prescribe regulations to allow PSPs to negotiate with
the location provider on the selecting and contracting with the
intraLATA carrier serving the payphone. In accordance with this
requirement, the Commission tentatively concludes that all PSPs,
whether LECs or PPOs, should be given this right to negotiate with
location providers concerning the intraLATA carrier. The Commission
seeks comment on these tentative conclusions.
F. Establishment of Public Interest Payphones
32. Because Section 276(b)(2) directs the Commission to ``determine
whether public interest payphones * * * should be maintained,'' the
Commission seeks comment on whether it would be in the public interest
to maintain payphones provided in the interest of public health,
safety, and welfare, in locations where there would otherwise not be a
payphone.''
33. If the Commission determines that public interest payphones
should be maintained, then Section 276(b)(2) gives the Commission
statutory authority to determine further how public interest payphones
should be regulated. As with our jurisdiction over local call rates,
the Commission seeks comment on a range of options for maintaining
public interest payphones. One option would be for the Commission to
prescribe federal regulations for the maintenance of these payphones.
It seeks comment on whether and how this approach would serve the
public interest, and on whether Section 276 requires the Commission to
assume this responsibility.
34. A second option would be for the Commission to establish
national guidelines for public interest payphones. It seeks comment on
whether there are any state initiatives or programs concerning public
interest payphones that the Commission could use as a model for
national guidelines. Commenters supporting national guidelines should
specify what factors the guidelines should consider and how the
guidelines should be applied on a nationwide basis.
35. In the event that the Commission establishes national
guidelines for public interest payphones, it seeks comment on what is
to be considered a ``public interest payphone.'' The Joint Explanatory
Statement for Section 276 clarifies that the term ``public interest
payphones'' refers to payphones where payphone service would not
otherwise be available as a result of the operation of the market.
``Thus, the term does not apply to a payphone located near other
payphones, or to a payphone that, even though unprofitable by itself,
is provided for a location provider with whom the payphone provider has
a contract.'' The Commission seeks comment on whether a ``public
interest payphone'' should be defined as a payphone: (1) that operates
at a financial loss, but also fulfills some public policy objective,
such as emergency access; and (2) even though unprofitable by itself,
is not provided for a location provider with whom the PSP has a
contract. Under this definition, many payphones that fulfill important
public policy objectives would not be included because they would be
paid for, in the form of lower commission payments, by the entity that
is requesting that a payphone be placed in a particular location to
fulfill a public policy objective. This proposed definition would not
necessarily
[[Page 31488]]
decrease the number of payphones in existence fulfilling public policy
objectives, but would require the entities that most directly benefit
from these low profitability payphones to assume the cost of their
availability. The Commission seeks comment generally on this possible
definition. Parties may specify whether the definition should be
narrower, broader, or more specific.
36. A third option for maintaining public interest payphones would
be to defer to the states to determine, pursuant to their own statutes
and regulations, which payphones should be treated as ``public interest
payphones.'' This approach would treat the provision of ``public
interest payphones'' as primarily a matter of state concern. The
Commission seeks comment on whether it would be consistent with the
statute and better serve the public interest to allow the states to
develop their own guidelines regarding which payphones are ``public
interest payphones.''
37. With regard to a funding mechanism to support public interest
payphones ``fairly and equitably,'' the Commission seeks comment on
whether such a mechanism should be handled in conjunction with how
public interest payphones are maintained, whether through federal
regulations, federal guidelines for the states, or by the states
themselves. In the alternative, the Commission seeks comment on whether
it would it serve the public interest for the Commission and the states
to administer different portions of a public interest payphone program.
Commenters that support a Commission-mandated funding mechanism should
detail how the mechanism would function, including who would be
eligible to receive funding, who would be responsible for paying into
the fund, and who would administer the funding mechanism.
G. Other Issues
1. Dialing Parity
38. Section 251(b)(3) states that all LECs have the duty to
``provide dialing parity to competing providers of telephone exchange
service and telephone toll service.'' The Commission tentatively
concludes that the benefits of dialing parity requirements that it
adopts pursuant to Section 251(b)(3) of the Act should extend to all
payphone location providers. It seeks comment on this tentative
conclusion and on other methods for achieving dialing parity for
payphone location providers, and users, of payphones that are
consistent with the definition of dialing parity under Section 3(15) of
the 1934 Act, as amended. As a related matter, the Commission seeks
comment on whether the Commission should extend the type of intraLATA
carrier unblocking requirements established in TOCSIA to all local and
long distance calls.
2. Letterless Keypads
39. At least two distributors of payphone equipment have been
promoting letterless keypads. Such keypads defeat callers' attempts to
reach their OSP of choice through a ``vanity'' access number, such as
MCI's ``1-800-COLLECT'' or AT&T's ``1-800-CALL-ATT'' and ``10ATT,''
that can be easily remembered by callers. Standard payphone keypads
contain certain letters of the alphabet that correspond to each digit
(e.g., A, B, and C correspond to the digit ``2''). A ``letterless''
keypad does not include any letters associated with the requisite
digits. The Commission expressed concern that use of letterless keypads
may frustrate the intent of Congress, as expressed in TOCSIA, to permit
callers to reach the OSP of their choice from payphones. In addition,
the Commission is concerned that these keypads ultimately frustrates
congressional intent, as expressed in the 1996 Act, ``to promote
competition among payphone service providers and promote the widespread
deployment of payphone services to the benefit of the general
public[.]''
40. To promote consumer access to OSPs, TOCSIA required the
unblocking of 800 and 950 access numbers at aggregator locations and
directed the Commission to mandate the unblocking of 10XXX access codes
and/or the establishment of 800/950 access numbers by each OSP. In the
succeeding years, some OSPs have chosen to use ``vanity'' dialing
sequences for access numbers. While the Commission has previously found
that it does not have conclusive data showing a net change in the
average number of access code calls (both 10XXX and 800/950 access
calls) originated by each competitive payphone each month, payphone
industry representatives have argued that use of ``vanity'' dialing
sequences by payphone users has grown since their introduction.
41. The Commission staff has reviewed advertisements for letterless
keypads that specifically refer to a ``by-pass keypad'' that ``prevents
dial around [calls].'' The Commission tentatively concludes that the
use of letterless keypads violates both TOCSIA and the 1996 Act by
preventing callers from accessing their OSP of choice. It seeks comment
on how the Commission should take action to prohibit use of these ``by-
pass'' letterless keypads to restrict the availability of ``vanity''
access numbers.
3. Other Pending Payphone Proceedings
42. Several proceedings pending before the Commission concern the
rules governing the payphone industry. The Commission tentatively
concludes that it would further the public interest to consolidate and
address those proceedings within this rulemaking. The pending
proceedings are as follows: (1) Petition of the Public Telephone
Council to Treat BOC Payphones as CPE, DA 88-2055; (2) Policies and
Rules Concerning Operator Service Access and Pay Telephone
Compensation, CC Docket. No. 91-35 (payphone compensation issues only);
(3) Petition of Oncor Communications, Inc. Requesting Compensation for
Competitive Payphone Premises Owners and Presubscribed Operator
Services Providers, DA 95-1921; and (4) Amendment of Section 69.2 (m)
and (ee) of the Commission's Rules to Include Independent Public
Payphones Within the ``Public Telephone'' Exemption from End User
Common Line Access Charges, RM 8723. Each of these proceedings
addresses issues covered by Section 276 of the Act. We seek comment on
the implications of our tentative conclusion. Specifically, the
Commission seeks comment on which proceedings on the list commenters
believe may be resolved here, and reasons for such opinions, and which
proceedings should continue separately from this rulemaking, and the
reasons for those opinions. The Commission also concludes in the NPRM
that the Commission need not address the Florida Payphone remand in a
separate proceeding because the rules adopted in the proceeding will
address the remand by ensuring that PSPs are compensated, pursuant to
the 1996 Act, for all intrastate and interstate calls, including
subscriber 800 calls.
III. Comments and Ex Parte Presentations
43. All interested may file comments on the issues set forth in
this NPRM, on which comment is specifically sought, by June 27, 1996,
and reply comments by July 8, 1996. All relevant and timely comments
will be considered by the Commission before final action is taken in
this proceeding. To file formally in this proceeding, which involves
issues concerning the Commission's expedited implementation of the 1996
Act, participants must file an original, ten copies, and the electronic
version on disk of all comments and reply comments. Comments and reply
comments should be sent to the Office of the Secretary, Federal
[[Page 31489]]
Communications Commission, Washington, DC 20554. If participants want
each Commissioner to have a personal copy of their comments, an
original plus fourteen copies must be filed. In addition, participants
should submit two additional copies directly to the Common Carrier
Bureau, Enforcement Division, Room 6008, 2025 M Street NW., Washington,
D.C. 20554. The petition, comments, and reply comments will be
available for public inspection during regular business hours in the
Dockets Reference Room (Room 230) of the Federal Communications
Commission, 1919 M Street, NW., Washington, DC 20554. Copies of the
petition and any subsequently filed documents in this matter may be
obtained from ITS, Inc., 2100 M Street, NW., Suite 140, Washington, DC
20037, (202) 857-3800.
44. To facilitate review of comments and replies, both by parties
and by Commission staff, the Commission requires that comments be no
longer than seventy-five (75) pages and replies be no longer than
thirty-five (35) pages, including exhibits, appendices, and affidavits
of expert witnesses. Empirical economic studies and copies of relevant
state orders will not be counted against these page limits. The page
limits will not be waived and will be strictly enforced. Comments and
replies must include a short and concise summary of the substantive
arguments raised in the pleading. Comments and replies must also comply
with Section 1.49 and all other applicable sections of the Commission's
rules. The Commission also directs all interested parties to include
the name of the filing party and the date of the filing on each page of
their comments and replies. Comments and replies also must clearly
identify the specific portion of this NPRM to which a particular
comment or set of comments is responsive. If a portion of a party's
comments does not fall under a particular topic listed in the outline
of this NPRM, such comments must be included in a clearly labelled
section at the beginning or end of the filing. Parties may not file
more than a total of ten (10) pages of ex parte submissions, excluding
cover letters. This 10 page limit does not include: (1) written ex
parte filings made solely to disclose an oral ex parte contact; (2)
written material submitted at the time of an oral presentation to
Commission staff that provides a brief outline of the presentation; or
(3) written material filed in response to direct requests from
Commission staff. Ex parte filings in excess of this limit will not be
considered as part of the record in this proceeding.
45. Parties are invited to submit, in conjunction with their
comments or replies, proposed text for rules that the Commission could
adopt in this proceeding. Specific rule proposals should be filed as an
appendix to a party's comments or reply, and will not be counted
against the page limits set forth in the preceding paragraph. Such
appendices may include only proposed text for rules that would
implement proposals set forth in the parties' comments and replies in
this proceeding, and may not include any comments or arguments.
46. This is a non-restricted notice and comment rule making
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided they are disclosed as provided in
Commission rules.
IV. Conclusion
V. Regulatory Flexibility Analysis
47. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Section 601 et seq. (1981), the Commission has prepared a
Regulatory Flexibility Analysis of the expected impact on small
entities resulting from the policies and proposals set forth in the
NPRM. The full analysis is contained within the NPRM. The Secretary
shall send a copy of the NPRM to the Chief Counsel for Advocacy of the
Small Business Administration in accordance with Section 603(a) of the
Regulatory Flexibility Act.
VI. Ordering Clauses
48. Accordingly, it is further ordered, pursuant to Sections 1,
4(i)-4(j), 201-205, 226, and 276 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 154(i), 154(j), 201-205, 226, and 276 that a
Notice of Proposed Rulemaking is ADOPTED.
49. It is furhter ordered that the Chief of the Common Carrier
Bureau is delegated authority to require the submission of additional
information, make further inquiries, and modify the dates and
procedures, if necessary, to provide for a fuller record and a more
efficient proceeding.
50. It is further ordered that this Notice of Proposed Rulemaking
is the Commission's disposition of all matters remanded by the U.S.
Court of Appeals for the District of Columbia Circuit in Florida Public
Telecommunications Ass'n. v, FCC, 54 F.3d 857 (D.C. Cir. 1995).
51. It is further ordered that the Secretary shall send a copy of
this NPRM, including the IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration in accordance with paragraph 603(a) of
the Regulatory Flexibility Act, Public Law No. 96-354, 94 Stat. 1164, 5
U.S.C. 601 et seq. (1981).
List of Subjects in 47 CFR Part 64
Communications common carriers; Reporting and recordkeeping
requirements; Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-15789 Filed 6-19-96; 8:45 am]
BILLING CODE 6712-01-P
