[Federal Register Volume 63, Number 124 (Monday, June 29, 1998)]
[Rules and Regulations]
[Pages 35150-35161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17076]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 52
[CC Docket No. 95-116; FCC 98-82]
Telephone Number Portability
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: On May 12, 1998, the Commission released a Third Report and
Order in CC Docket No. 95-115, adopting measures to distribute the
costs of long-term number portability among telecommunications
carriers. In this order, the Commission decides that telecommunications
carriers shall pay for the shared costs of the number portability
regional databases based on each telecommunications carrier's end-user
telecommunications revenues in each region, telecommunications carriers
shall bear their own carrier-specific costs directly related to
providing number portability, incumbent LECs have the option to recover
their carrier-specific costs directly related to providing number
portability through a five-year end user charge, as well as through
number portability query charges to other carriers, and unregulated
carriers may recover their carrier-specific costs directly related to
providing number portability in any lawful manner. This Third Report
and Order ensures that all telecommunications carriers bear the costs
of number portability in a competitively neutral manner.
EFFECTIVE DATE: July 29, 1998, except for Secs. 52.32(b) and
52.33(a)(1), which contain information collection requirements that are
not effective until approved by the Office of Management and Budget.
The Commission will publish a document in the Federal Register
announcing the effective date for those sections.
FOR FURTHER INFORMATION CONTACT: Lloyd Collier at (202) 418-2712, or
Neil Fried at (202) 418-1865, Competitive Pricing Division, Common
Carrier Bureau.
SUPPLEMENTARY INFORMATION: This summarizes the Commission's Third
Report and Order in CC Docket No. 95-116, In the Matter of Telephone
Number Portability, FCC 98-82, RM 8535, adopted May 5, 1998, and
released May 12, 1998. The file in its entirety is available for
inspection and copying during the weekday hours of 9 a.m. to 4:30 p.m.
in the Commission's Reference Center, room 239, 1919 M St., N.W.,
Washington D.C., or copies may be purchased from the Commission's
duplicating contractor, ITS, Inc. 1231 20th St., N.W., Washington, D.C.
20036, phone (202) 857-3800.
[[Page 35151]]
ANALYSIS OF PROCEEDING
I. Background
A. The Provision of Long-Term Number Portability
The Telecommunications Act of 1996 amends the 1934 Act to provide
for a pro-competitive, de-regulatory national policy framework designed
to accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunications markets to competition.
Congress added section 251(b)(2) to the 1934 Act, which requires all
LECs, both incumbents and new entrants, ``to provide, to the extent
technically feasible, number portability in accordance with
requirements prescribed by the Commission.'' In light of Congress'
number portability mandate, the Commission released a combined First
Report and Order (Order) & Further Notice of Proposed Rulemaking
(Further Notice) (61 FR 38605, July 25, 1996) in July 1996 to begin
implementing number portability. Without number portability, customers
ordinarily cannot change their local telephone companies unless they
change telephone numbers. Under the existing network architecture and
the North American Numbering Plan (NANP), a telephone number functions
like an address: every number is associated with an individual switch
operated by a particular local telephone company in a specific
geographic area. The area code, also called the Numbering Plan Area
(the NPA), identifies the general geographic area within which the
switch provides service. The next three digits of the telephone number
(the NXX) identify the switch that serves the customer. The last four
digits identify the specific telephone line serving the customer's
location. Carriers use this ten-digit number to connect a telephone
call to the called party. Thus, if a customer changes local telephone
companies and receives service at the same location from a different
telephone company providing service from a different switch, the
customer's new local telephone company typically must assign the
customer a new seven-digit number (NXX code plus line number)
associated with the new switch and new telephone line.
2. Number portability technology allows customers to retain their
telephone numbers when changing local service providers. Although the
Commission did not mandate a specific long-term number portability
method, most carriers intend to provide long-term number portability
through a location routing number (LRN) architecture. Under an LRN
architecture, each switch is assigned a unique ten-digit LRN, the first
six digits of which identify the location of that switch. Each
customer's telephone number is matched in a regional database with the
LRN for the switch that currently serves that telephone number. Each
database serves an area that corresponds to one of the original
regional Bell Operating Company (RBOC) service territories. Neutral
third parties, called local number portability administrators (LNPAs),
will administer these regional databases.
3. When a customer changes from one LEC to another, the carrier
that wins the customer will ``port'' the customer's number from the
former carrier by electronically transmitting (uploading) the new LRN
to the administrator of the relevant regional database. This will pair
the customer's original telephone number with the LRN for the switch of
the new carrier, allowing the customer to retain the original telephone
number. The regional database administrators will then electronically
transmit (download) LRN updates to carrier-operated local service
management systems (LSMSs). Each carrier will distribute this
information to service control points (SCPs) or signal transfer points
(STPs) that the carrier will use to store and process data for
providing number portability.
4. For a carrier to route an interswitch telephone call to a
location where number portability is available, the carrier must
determine the LRN for the switch that serves the terminating telephone
number of the call. Once number portability is available for an NXX,
carriers must ``query'' all interswitch calls to that NXX to determine
whether the terminating customer has ported the telephone number.
Carriers will accomplish this by sending a signal over the SS7 network
to retrieve from an SCP or STP the LRN associated with the called
telephone number. The industry has proposed, and the Commission has
endorsed, an ``N minus one'' (N-1) querying protocol. Under this
protocol, the N-1 carrier will be responsible for the query, where
``N'' is the entity terminating the call to the end user, or a network
provider contracted by the entity to provide tandem access. Thus the N-
1 carrier (i.e. the last carrier before the terminating carrier) for a
local call will usually be the calling customer's local service
provider; the N-1 carrier for an interexchange call will usually be the
calling customer's interexchange carrier (IXC). An N-1 carrier may
perform its own querying, or it may arrange for other carriers or third
parties to provide querying services on its behalf.
5. To route a local call under this system, the originating local
service provider will examine the seven-digit number that its customer
dialed, for example ``456-7890.'' If the called telephone number is on
the originating switch (i.e. an intraswitch call), the originating
local service provider will simply complete the call. If the call is
interswitch, the originating local service provider will compare the
NXX, ``456,'' with its table of NXXs for which number portability is
available. If ``456'' is not such an NXX, the originating local service
provider will treat the call the same as it did before the existence of
long-term number portability. If it is an NXX for which portability is
available, the originating local service provider will add the NPA, for
instance ``123,'' to the dialed number and query ``(123) 456-7890'' to
an SCP containing the LRNs downloaded from the relevant regional
database. The SCP will return the LRN for ``(123) 456-7890'' (which
would be ``(123) 456 XXXX'' if the customer has not changed carriers,
or something like ``(123) 789-XXXX'' if the customer has changed
carriers), and use the LRN to route the call to the appropriate switch
with an SS7 message indicating that it has performed the query. The
terminating carrier will then complete the call. To route an
interexchange call, the originating local service provider will hand
the call off to the IXC and the IXC will undertake the same procedure.
B. Prior Commission Decisions
6. The Order, as modified by the First Memorandum Opinion and Order
on Reconsideration (First Reconsideration Order) ( 62 FR 18280, April
15, 1997), requires LECs to implement long-term number portability: (1)
in Chicago, Philadelphia, Atlanta, New York, Los Angeles, Houston, and
Minneapolis--the largest metropolitan statistical area (MSA) in each of
the seven RBOC regions'between October 1, 1997, and March 31, 1998; (2)
in the rest of the 100 largest MSAs in quarterly stages between January
1, 1998, and December 31, 1998; and (3) thereafter in switches outside
the 100 largest MSAs, within six months of a request by a
telecommunications carrier. A number of carriers have received
extensions of the March 31, 1998, implementation deadline for certain
areas ranging from two to five months.
7. The Commission explained that the statutory definition of number
portability requires LECs to implement
[[Page 35152]]
number portability in such a way that LEC customers can keep their
telephone numbers when they switch to any other telecommunications
carrier, including, therefore, when they switch to a commercial mobile
radio services (CMRS) provider. The Commission also required in the
Order that certain types of CMRS providers be able by December 31,
1998, to route calls to any ported numbers and be able by June 30,
1999, to allow their own customers to take their telephone numbers to
other carriers. By its language, section 251(b)(2) requires only that
LECs provide number portability, and the 1934 Act, as amended, excludes
from the definition of ``local exchange carrier'' those entities
engaged in the provision of a commercial mobile service under section
332(c), except to the extent that the Commission finds that such
service should be included in the definition of such term. Although the
Commission declined in the Order to address whether CMRS providers are
LECs, the Commission exercised authority under sections 1, 2, 4(i), and
332 to require three categories of CMRS providers'cellular providers,
broadband personal communications service (PCS) providers, and covered
specialized mobile radio (SMR) providers'to provide number portability.
The Commission concluded that requiring these CMRS providers to provide
number portability would serve the public interest by promoting
competition between and among local wireless and wireline carriers, as
well as among providers of interstate access service.
8. In the Order, the Commission exempted some CMRS providers from
the obligation to provide number portability: paging and other
messaging service providers, private paging service providers, business
radio service providers, providers of land mobile service on 220-222
MHz, public coast stations, public land mobile service providers, 800
MHz air-ground radio-telephone service providers, offshore radio
service providers, mobile satellite service providers, narrowband PCS
service providers, local SMR licensees, and local multipoint
distribution service (LMDS) providers. The Commission reasoned that
such carriers currently have little impact on competition for local
service.
9. In the First Reconsideration Order, the Commission concluded
that within the 100 largest MSAs, LECs must provide number portability
only in switches for which another carrier has specifically and
reasonably requested the provision of number portability. The
Commission reasoned that such an approach allows carriers to focus
their resources where competitors plan to enter, which is where number
portability is likely to have the most impact in the short run on the
development of competition for local services. Structuring
implementation in this fashion reduces costs, eases the demands on
software vendors, and encourages efficient deployment, network
planning, and testing. The Commission emphasized, however, that all
carriers, even those operating portability-incapable switches, are
still responsible for properly routing calls to telephone numbers in
locations where number portability is available. Carriers can meet that
responsibility either by routing the call to one of their switches that
is capable of performing the necessary database query, or by arranging
for another carrier or a third party to query the database or route the
call.
10. In the Second Report and Order (62 FR 48774, September 17,
1997), the Commission determined that if an N-1 carrier arranges with
another entity to perform queries on the carrier's behalf, that other
entity may charge the N-1 carrier in accordance with requirements to be
established in this Third Report and Order. The Commission also noted
that when an N-1 carrier fails to ensure that a call is queried, the
call might inadvertently be routed by default to the LEC that
originally served the telephone number. If the number was ported, the
LEC incurs costs in redirecting the call. This could happen, for
example, if there is a technical failure in the N-1 carrier's ability
to query, or if the N-1 carrier fails to ensure that its calls are
queried, either through its own query capability or through an
arrangement with another carrier or third-party. The Commission
determined in the Second Report and Order that if a LEC performs
queries on default-routed calls, the LEC may charge the N-1 carrier in
accordance with requirements to be established in this Third Report and
Order. The Commission determined further that it would allow LECs to
block default-routed calls, but only in specific circumstances when
failure to do so is likely to impair network reliability. The
Commission also said that it would require LECs to apply this blocking
standard to calls from all carriers on a nondiscriminatory basis.
II. The Statutory Framework
A. Federal/State Jurisdiction
11. We conclude that section 251(e)(2) requires the Commission to
ensure that carriers bear the costs of providing long-term number
portability on a competitively neutral basis for both interstate and
intrastate calls. In reaching this conclusion, we note that section
251(e)(2) expressly and unconditionally grants the Commission authority
to ensure that carriers bear the costs of providing number portability
on a competitively neutral basis.
12. Consequently, we find that section 251(e)(2) authorizes the
Commission to provide the distribution and recovery mechanism for all
the costs of providing long-term number portability. We conclude that
an exclusively federal recovery mechanism for long-term number
portability will enable the Commission to satisfy most directly its
competitive neutrality mandate, and will minimize the administrative
and enforcement difficulties that might arise were jurisdiction over
long-term number portability divided. Further, such an approach
obviates the need for state allocation of the shared costs of the
regional databases, a task that would likely be complicated by the
databases' multistate nature. Under the exclusively federal number
portability cost recovery mechanism, incumbent LECs' number portability
costs will not be subject to jurisdictional separations. Instead, we
will allow incumbent LECs to recover their costs pursuant to
requirements we establish in this Third Report and Order.
B. Scope of Section 251(e)(2)
13. We interpret the terms of section 251(e)(2) in ways that will
best implement its goals. The 1996 Act amended the 1934 Act to provide
for a pro-competitive, de-regulatory national policy framework and to
open all telecommunications markets to competition. Section 251(b)(2)
furthers those congressional goals by requiring all LECs to provide
number portability so that subscribers of local telephone service can
retain their telephone numbers when changing carriers. At the same
time, by requiring the Commission to ensure that all telecommunications
carriers bear on a competitively neutral basis the costs of providing
number portability, section 251(e)(2) seeks to prevent those costs from
themselves undermining competition.
14. We conclude that ``the cost[s] of establishing `` number
portability'' to be borne on a competitively neutral basis include the
costs that LECs incur to meet the obligations imposed by section
251(b)(2), as well as the costs other telecommunications carriers'such
as IXCs and CMRS providers'incur for the industry-wide solution to
local number portability. 1 The Act defines number
[[Page 35153]]
portability as the ability of users of telecommunications services to
retain, at the same location, existing telecommunications numbers
without impairment of quality, reliability, or convenience when
switching from one telecommunications carrier to another. Thus, ``the
costs of number portability'' are the costs of enabling
telecommunications users to keep their telephone numbers without
degradation of service when they switch carriers. Such costs include
the costs a carrier incurs to make it possible to transfer a telephone
number to another carrier, as well as the costs involved in making it
possible to route calls to customers who have switched carriers (i.e.,
the costs involved in making the N-1 querying protocol possible). IXCs
and CMRS providers, as well as LECs, incur these costs.
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\1\ Under the N-1 protocol recommended by the industry under the
auspices of the NANC, and the Commission's requirements for the
provision of long-term number portability, almost all
telecommunications carriers'including LECs, IXCs, and CMRS
providers'will incur costs of number portability.
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15. We also adopt the tentative conclusion in the Further Notice
that costs not directly related to providing number portability, as
defined further below, are not costs of providing number portability.
Consequently, such costs need not ``be borne by all telecommunications
carriers on a competitively neutral basis'' under section 251(e)(2).
Section 251(e)(2) requires that the costs of providing number
portability be borne on a competitively neutral basis. Costs not
directly related to providing number portability encompass a wide range
of costs that carriers incur to provide telecommunications functions
unrelated to number portability. We find no indication that Congress
intended to place such costs within the scope of the competitive
neutrality requirement of section 251(e)(2). Because costs not directly
related to providing number portability are not subject to 251(e)(2),
the Commission is not obligated under that section to create special
provisions to ensure that they are borne on a competitively neutral
basis.
16. We also conclude that section 251(e)(2) requires the Commission
to ensure that number portability costs are distributed among, as well
as recovered by, carriers on a competitively neutral basis. Despite the
Commission's tentative conclusion that section 251(e)(2) only applies
to the distribution of number portability costs, we now find ambiguous
the scope of the language requiring that costs ``be borne * * * on a
competitively neutral basis.'' We find further that reading section
251(e)(2) as applying to both distribution and recovery best achieves
the congressional goal of ensuring that the costs of providing number
portability do not restrict the local competition that number
portability is intended to encourage. Because the manner in which
carriers recover the costs of providing number portability could affect
their ability to compete, we cannot ensure that number portability
costs are ``borne by all telecommunications carriers on a competitively
neutral basis'' unless we address both distribution and recovery. If
the Commission ensured the competitive neutrality of only the
distribution of costs, carriers could effectively undo this
competitively neutral distribution by recovering from other carriers.
For example, an incumbent LEC could redistribute its number portability
costs to other carriers by seeking to recover them in increased access
charges to IXCs. Therefore, we find that section 251(e)(2) requires the
Commission to ensure that both the distribution and recovery of
intrastate and interstate number portability costs occur on a
competitively neutral basis.
C. Competitive Neutrality
17. We adopt the Commission's tentative conclusion to apply to
long-term number portability the Order's definition of competitive
neutrality as requiring that the cost of number portability borne by
each carrier does not affect significantly any carrier's ability to
compete with other carriers for customers in the marketplace. Applying
this definition will ensure that the cost of implementing number
portability does not undermine the goal of the 1996 Act to promote a
competitive environment for the provision of local communications
services.
18. We also adopt the Commission's tentative conclusion to apply to
long-term number portability the two-part test the Commission developed
to determine whether carriers will bear the interim costs of number
portability on a competitively neutral basis. Under this test, the way
carriers bear the costs of number portability: (1) must not give one
service provider an appreciable, incremental cost advantage over
another service provider when competing for a specific subscriber, and
(2) must not disparately affect the ability of competing service
providers to earn a normal return.
19. Accordingly, we adopt for purposes of long-term number
portability the Order's definition of competitive neutrality as
requiring that the cost of number portability borne by each carrier
does not affect significantly any carrier's ability to compete with
other carriers for customers in the marketplace. We also adopt the two-
part test for determining whether this definition is met. We apply this
interpretation of competitive neutrality to the shared costs of
providing number portability below. We find it unnecessary to address
whether to apply our competitive neutrality principles to states that
opt out of the regional database plan because no state elected to opt
out by the July 1, 1997, deadline. We apply the interpretation of
competitive neutrality to the carrier-specific costs directly related
to providing number portability below.
III. Categorization of Costs
20. We adopt the Commission's tentative conclusion to divide the
costs raised by this proceeding into three categories: (1) shared
costs; (2) carrier-specific costs directly related to providing number
portability; and (3) carrier-specific costs not directly related to
providing number portability. The division of costs between shared
costs and carrier-specific costs directly related to providing number
portability recognizes that some costs of providing number portability
are incurred by regional database administrators, while others are
incurred by carriers in the first instance. The division between
carrier-specific costs directly related to providing number portability
and carrier-specific costs not directly related to providing number
portability recognizes that some component of the costs carriers incur
will provide carriers with benefits unrelated to number portability.
21. We adopt the Commission's tentative definition of shared costs
as costs incurred by the industry as a whole, such as those incurred by
the third-party administrator to build, operate, and maintain the
databases needed to provide number portability. We also conclude that
once the shared costs are allocated they are attributable to specific
carriers, at which point we will treat them as carrier-specific costs
directly related to providing number portability.
22. We also adopt the Commission's tentative subcategorization of
the shared costs into nonrecurring costs, recurring costs, upload
costs, and download costs. We clarify, however, that the shared upload
and download costs include only the costs that the database
administrators incur to process uploads and downloads; the costs that
the carriers incur individually to process uploads and downloads are
carrier-specific costs directly related to providing number
portability.
[[Page 35154]]
23. We further conclude that query costs are not shared costs
initially incurred by the regional database administrators, but are
carrier-specific costs directly related to providing number
portability. At the time of the Further Notice, the Commission's
understanding had been that the regional administrators might perform
queries for carriers. In that case, query costs might have constituted
shared costs because the database administrators would have incurred
costs for the industry as a whole, and the costs would need to be
allocated among individual carriers. The industry has chosen, however,
not to adopt this approach to number portability. Instead, the N-1
carrier will incur all querying costs individually in the first
instance, either by querying its own copy of data downloaded from the
regional databases, or by arranging for the querying of such a database
copy maintained by another carrier or other third party. Because the
regional database administrators will not perform queries on behalf of
carriers, query costs are more appropriately considered carrier-
specific costs directly related to providing number portability.
24. We conclude that carrier-specific costs directly related to
providing number portability are limited to costs carriers incur
specifically in the provision of number portability services, such as
for the querying of calls and the porting of telephone numbers from one
carrier to another. Costs that carriers incur as an incidental
consequence of number portability, however, are not costs directly
related to providing number portability.
25. We reject the requests of some commenters that we classify the
entire cost of an upgrade as a carrier-specific cost directly related
to providing number portability just because some aspect of the upgrade
relates to the provision of number portability. Carriers incur costs
for software generics, switch hardware, and OSS, SS7 or AIN upgrades to
provide a wide range of services and features. Consequently, only a
portion of such joint costs are carrier-specific costs directly related
to providing number portability. Thus, we will consider as subject to
the competitive neutrality mandate of section 251(e)(2) all of a
carrier's dedicated number portability costs, such as for number
portability software and for the SCPs and STPs reserved exclusively for
number portability. We will also consider as carrier-specific costs
directly related to the provision of number portability that portion of
a carrier's joint costs that is demonstrably an incremental cost
carriers incur in the provision of long-term number portability.
Apportioning costs in this way will further the goals of section
251(e)(2) by recognizing that providing number portability will cause
some carriers, including small and rural LECs, to incur costs that they
would not ordinarily have incurred in providing telecommunications
service. At the same time, this approach recognizes that some upgrades
will enhance carriers' services generally, and that at least some
portion of such upgrade costs are not directly related to providing
number portability.
26. Because carrier-specific costs directly related to providing
number portability only include costs carriers incur specifically in
the provision of number portability, carriers may not use general
overhead loading factors in calculating such costs. Carriers already
allocate general overhead costs to their rates for other services, and
allowing general overhead loading factors for long-term number
portability might lead to double recovery. Instead, carriers may
identify as carrier-specific costs directly related to providing long-
term number portability only those incremental overheads that they can
demonstrate they incurred specifically in the provision of long-term
number portability.
27. As discussed below, we are permitting incumbent LECs to recover
their number portability costs in federally tariffed end-user charges
and query services. To facilitate determination of the portion of joint
costs carriers shall treat as carrier-specific costs directly related
to providing number portability, and to facilitate evaluation of the
cost support that carriers will file in their federal tariffs, we are
requesting that carriers and interested parties file comments by August
3, 1998 proposing ways to apportion the different types of joint costs.
Carriers and interested parties may file reply comments by September
16, 1998. We will delegate authority to the Chief, Common Carrier
Bureau, to determine appropriate methods for apportioning joint costs
among portability and nonportability services, and to issue any orders
to provide guidance to carriers before they file their tariffs, which
are to take effect no earlier than February 1, 1999.
28. We decline to create special cost categories for the number
portability costs of small and rural carriers. The Commission's
definitions of carrier-specific costs directly and not directly related
to providing number portability will enable all carriers, including
small and rural carriers, as well as carriers providing Extended Area
Service, to identify the costs subject to section 251(e)(2). The three
cost categories the Commission has created account for all potential
number portability costs and provide workable distinctions for the
purposes of implementing section 251(e)(2).
29. Creating unique cost categories for wireless carriers is also
unnecessary at this time. The Commission's definitions are not tied to
unique technological constraints of wireline communications, and
nothing in the record leads us to conclude that the three cost
categories are too narrow to apply to the number portability costs of
wireless carriers. Wireless carriers, like wireline carriers, will
depend upon the regional databases, and the record does not suggest
that the costs of the regional databases are disproportionately
affected by any one industry segment.
IV. Costs of the Regional Databases
A. Distribution of Shared Costs: Allocation v. Usage-Based Rates
30. We require telecommunications carriers to pay for the database
administrators' nonrecurring, recurring, upload, and download costs
pursuant to an allocator, which we select below, rather than on a
usage-sensitive basis. We have used the two-prong competitive
neutrality test to ensure that the allocator we choose distributes
these costs on a competitively neutral basis. Once these shared costs
are distributed to telecommunications carriers, we treat each carrier's
portion of the costs as a carrier-specific cost directly related to
providing number portability. Because telecommunications carriers will
recover these costs as carrier-specific costs directly related to
providing number portability, which we discuss below, we need not
address their recovery here.
31. Distributing the shared costs among telecommunications carriers
in proportion to database use would shift these costs to
telecommunications carriers that win more customers because such
carriers will perform more uploads. At the outset of number
portability, these carriers are more likely to be competitive LECs.
Consequently, usage-sensitive distribution of the shared costs could
give one service provider an appreciable, incremental cost advantage
over another service provider when competing for a specific subscriber,
as well as disparately affect the ability of competing service
providers to earn a normal return. Although the record does not show
conclusively that usage-based charges would hamper materially a
carrier's ability to compete for subscribers, we
[[Page 35155]]
believe it prudent at this early stage in the deployment of number
portability to minimize such risk.
32. Moreover, assessing shared costs on a usage-sensitive basis
could discourage carriers from performing uploads and downloads, or at
least penalize those carriers that do so more frequently. The entire
industry benefits from the maintenance of reliable regional databases
for providing number portability: unless carriers download data, they
will be unable to terminate traffic to the appropriate end-user; unless
carriers upload ported numbers to the databases, the databases will be
inaccurate, making downloads useless for current and future database
participants alike. Thus, all carriers that port telephone numbers and
all carriers that terminate calls to portability-capable NXXs depend on
the timely uploading and downloading of information to and from the
regional databases to ensure an accurate database and the proper
routing of telephone calls. Furthermore, all telecommunications
carriers that depend on the availability of telephone numbers will
benefit from number portability because it allows subscribers to retain
their telephone numbers when changing local service providers, and
because it facilitates the conservation of telephone numbers through
number pooling.
33. We will not adopt a separate distribution methodology for
wireless carriers. The record indicates that wireless carriers will use
the regional databases in the same manner as wireline carriers.
Consequently, we see no reason to treat wireless carriers differently
than wireline carriers with respect to the distribution of the shared
costs.
B. The Allocator
34. As part of its management duties under Sec. 52.26 of the
Commission's Rules, the LNPA of each regional database must collect
sufficient revenues to fund that database. We will require the LNPA of
each regional database to do this by allocating the costs of each
regional database among carriers in proportion to each carrier's
intrastate, interstate, and international end-user telecommunications
revenues attributable to that region. The Commission adopted end-user
telecommunications revenues in the Universal Service Order (62 FR
32862, June 17, 1997) as the assessment base for determining
contributions to universal support mechanisms. We will require carriers
to include intrastate, interstate, and international revenues in
calculating end-user revenues because number portability will affect
all such services. An end-user telecommunications revenue allocator is
similar to a retail-revenues allocator in that both are based on
telecommunications revenues that carriers collect from end-users.
Unlike retail-revenues, however, end-user telecommunications revenues
includes revenues derived from subscriber line charges
(SLCs).2 End-user telecommunications revenues also include
revenues collected from carriers that purchase telecommunications
services for their own internal use.
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\2\ The SLC is a flat monthly per-line rate that the end user
pays.
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35. The end-user telecommunications revenue allocator meets the
two-prong competitive neutrality test. First, the allocator will not
give one service provider an appreciable, incremental cost advantage
when competing for a subscriber. Because the end-user
telecommunications revenue allocator will distribute the shared costs
of the regional databases to each carrier in proportion to that
carrier's end-user revenues, it will cost carriers approximately the
same increase in shared costs to win a specific subscriber. For
example, if one of two LECs wins a third LEC's subscriber, whichever of
the two LECs wins the subscriber will win the end-user revenue that
subscriber generates, which will increase its allocated portion of the
shared costs. Because the subscriber is likely to use approximately the
same amount of local service regardless which of the two competing LECs
provides service to the subscriber, the incremental shared cost one of
the two LECs would experience if it had won the subscriber would be
about the same as the incremental shared cost the other would
experience if it won the subscriber. This increase would also
approximately equal the decrease in shared costs the third carrier
would experience, having lost the subscriber. These amounts may not be
exactly the same because each of the three carriers may have different
rates and may not collect exactly the same revenue from that
subscriber. The difference, however, will not be significant enough to
create an appreciable, incremental cost disadvantage. Furthermore, any
difference will not be caused by providing number portability, but by
differences in the underlying efficiency, services, and rates of each
of the carriers. Thus we believe the allocator will not itself create
an appreciable, incremental cost advantage that was not already present
even absent number portability.
36. Second, allocating shared costs in proportion to end-user
revenues will prevent the shared costs from disparately affecting the
ability of carriers to earn a normal return. Because carriers'
allocations of the shared costs will vary directly with their end-user
revenues, their share of the regional database costs will increase in
proportion to their customer base. Thus, no carrier's portion of the
shared costs will be excessive in relation to its expected revenues,
and its allocated share will only increase as it increases its revenue
stream. Consequently, the end-user revenues allocator will not
disparately affect competing carriers' abilities to earn a normal
return. An end-user revenues allocator will also be easy to administer
because carriers already track their sales to end-users for billing
purposes, and will be familiar with the end-user revenues allocator
from its use for universal service support contributions. Although an
end-user revenues allocator will relieve pure wholesalers, which have
no end-user revenue, from directly bearing shared costs, the end-user
method does not exclude wholesale revenues from the revenue base that
determines carriers' shared costs. As the Commission explained in the
Universal Service Order, wholesale charges are built into retail rates,
and thus the allocator still reflects wholesale revenue. This is
competitively neutral because it avoids double-counting revenues, and
because wholesale carriers are not competing with retail carriers for
end users in the marketplace.
C. Carriers Required To Share the Costs of the Regional Databases
37. We will require allocation of the shared costs among all
telecommunications carriers because section 251(e)(2) states that
``[t]he cost of establishing * * * number portability shall be borne by
all telecommunications carriers on a competitively neutral basis.'' Our
end-user revenues allocator, by its nature, does not reach carriers,
such as pure wholesalers, that do not have end-user revenues. Because
section 251(e)(2) requires all carriers to bear the costs of number
portability on a competitively neutral basis, we will require carriers
that do not have end-user revenues to pay $100 per year per region as
their statutory share of the shared costs. We believe that $100
represents a fair contribution for carriers that do not have end-user
revenues, but can revisit this issue should it become necessary. This
fee will not give any such carriers an appreciable, incremental cost
advantage when competing for a
[[Page 35156]]
subscriber because such carriers do not compete for end-user customers.
Moreover, this charge will be the same for all such carriers. Thus, it
will not create any disadvantage to the extent these carriers are
competing with each other. This fee is also not likely to disparately
affect the ability of competing carriers to earn a normal return
because such a nominal charge is unlikely to affect a carrier's return
and, again, because all such carriers will face the same charge.
Consequently, such a fee is competitively neutral.
D. Regional v. National Allocation of Regional Database Costs
38. We will require telecommunications carriers to bear the shared
costs on a regional basis because such a plan is most consistent with
the regional nature of the databases, and because a national approach
would require designation of a national administrator. As part of its
duties established in Sec. 52.26 of the Commission's Rules,3
each local number portability administrator of a regional database
shall collect sufficient revenues from all telecommunications carriers
providing telecommunications service in areas that regional database
serves to fund the operation of that regional database. Thus, after
subtracting the charges it collects from telecommunications carriers
with no end-user revenues, each database administrator shall distribute
the remaining shared costs based upon each remaining telecommunications
carrier's proportion of the end-user revenues collected by all
telecommunications carriers in that region. To apply the end-user
revenues allocator, administrators may request regional end-user
revenues data from telecommunications carriers once a year. We direct
telecommunications carriers to comply with such requests. One of the
objectives of the biennial review of our regulations required under the
Communications Act is to consider ways to reduce filing burdens on
carriers. The Commission may further consider in the biennial review or
other proceedings how best to administer the allocation of the shared
costs.
---------------------------------------------------------------------------
\3\ These duties include all management tasks required to run
the regional databases.
---------------------------------------------------------------------------
39. We are aware that some carriers have already begun paying their
regional database administrators based on temporary agreements
negotiated by the regional LLCs. We will permit, but not require, each
regional administrator and LLC to adjust prospectively through a
reasonable true-up mechanism the future bills of those carriers that
participated in such agreements so that the shared costs each such
carrier will have contributed approaches what those carriers would have
paid had an end-user telecommunications revenue allocator been in place
when carriers started paying the regional administrators. Permitting
the regional administrators and LLCs to perform such true-ups ensures
that costs are recovered from carriers in a manner consistent with our
rules, while accounting for the period prior to the effective date of
our rules and recognizing that agreements may have been reasonable
mechanisms to recover regional database costs on a temporary basis
pending this Third Report and Order.
V. Carrier-Specific Costs Directly Related to Providing Number
Portability
40. We will allow but not require incumbent LECs subject to rate-
of-return or price-cap regulation to recover their carrier-specific
costs directly related to providing number portability through a
federal charge assessed on end-users. As noted, we recognize consumers'
sensitivity to end-user charges. Under the circumstances before us,
however, we conclude that allowing carriers to recover number
portability costs in this manner will best serve the goals of the
statute. The Commission has only two sources from which it may allow
carriers to recover costs in the federal jurisdiction: charges IXCs pay
LECs for exchange access, and end-user charges. Because number
portability is not an access-related service and IXCs will incur their
own costs for the querying of long-distance calls, we will not allow
LECs to recover long-term number portability costs in interstate access
charges. Nor would it likely be competitively neutral to do so. We note
further that, like long-term number portability, the advent of equal
access and 800 number portability required carriers to incur
significant costs to modify their networks, although these costs were
not recovered in federal end-user charges. These improvements led to
increased competition and substantial long-term benefits to consumers.
We anticipate a similarly positive effect for consumers with respect to
the impact of number portability, namely the increased choice and lower
prices that result from the competition that number portability helps
make possible. We also note that number portability will facilitate
number pooling, which will help forestall telephone-number
exhaust.4
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\4\ Until now, local service providers had to be assigned entire
NXXs, even if they did not need all 10,000 of the NXX's telephone
numbers. With the advent of number portability, carriers can share
NXXs and pool unused telephone numbers, which results in more
efficient allocation of telephone numbers and reduces the need for
measures such as area-code overlays to combat telephone number
exhaust.
---------------------------------------------------------------------------
41. Carriers not subject to rate regulation--such as competitive
LECs, CMRS providers, and non-dominant IXCs--may recover their carrier-
specific costs directly related to providing number portability in any
lawful manner consistent with their obligations under the
Communications Act.5 Requiring incumbent LECs to bear their
own carrier-specific costs of providing number portability and allowing
them to recover those costs from their own customers, while leaving
other carriers unregulated, meets our competitive neutrality standard
that number portability cost distribution and recovery mechanisms: (1)
not give one service provider an appreciable, incremental cost
advantage over another service provider when competing for a specific
subscriber, and (2) not disparately affect the ability of competing
service providers to earn a normal return.
---------------------------------------------------------------------------
\5\ Although generally not rate regulated, competitive LECs,
CMRS providers, and IXCs--as telecommunications carriers--remain
subject to the Communications Act and Commission rules.
---------------------------------------------------------------------------
42. Requiring incumbent LECs to bear their own carrier-specific
costs directly related to providing number portability will not
disadvantage any telecommunications carrier because under an LRN
implementation of long-term number portability a carrier's costs should
vary directly with the number of customers that carrier serves. Our
examination of the present record and cost data that some carriers have
provided indicates that incumbent LECs, competitive LECs, and CMRS
providers competing in the local service market are likely to have
approximately the same long-run incremental number portability cost of
winning a subscriber. Incumbent LECs will likely have large absolute
costs because of their large networks, but they also will have a large
customer base over which to spread those costs; competitive LECs and
CMRS providers will likely incur fewer absolute costs because of their
smaller networks, but they will also likely have smaller customer bases
over which to spread those costs.
43. Some small LECs and CMRS providers may find that their smaller
customer bases make adding number portability capability in their own
[[Page 35157]]
networks uneconomical. Such carriers can benefit from economies of
scale similar to those of incumbent LECs, however, by arranging for
another carrier or third-party provider to provide number portability
functionality for them, as it appears that a market for number
portability services may develop. Similarly, they may enter into
cooperative agreements with other small carriers. Conversely, such
carriers might install number portability in their networks and sell
any excess number portability capacity to other carriers. Because
resellers will simply be reselling the number portability capability of
a facilities-based carrier, we would expect that resellers will also
have comparable incremental number portability costs. Similarly, we
would expect that carriers competing for interexchange customers will
bear the costs of providing number portability associated with N-1
queries in rough proportion to the number of interexchange customers
they serve; the more customers they win, the more queries they must
perform to terminate those customers' calls. IXCs and CMRS providers
can either query interexchange calls themselves or arrange for other
carriers or third-party providers to provide querying service for them.
44. Regulating the recovery of number portability costs by
incumbent LECs, but not by competitive LECs, CMRS providers, and IXCs,
also will not place any carrier at a competitive disadvantage. Creating
an optional end-user charge for incumbent LECs ensures that such
carriers have a reasonable opportunity to recover their costs and at
the same time allows carriers to forego some or all of such charges if
they deem it necessary to compete in the local service market.
Similarly, unregulated carriers may recover their costs in end-user
charges if they choose to do so. Regulating incumbent LEC recovery
should not disadvantage incumbent LECs as compared to competitive LECs
because competitive LECs also have number portability costs under LRN.
If a customer does switch to a competitive LEC, that customer may have
to pay end-user charges or service rates that recover the competitive
LEC's portability costs. Thus, the customer's incentive to leave the
incumbent LEC is offset by the fact that the customer would then have
to pay charges that recover the competitive LEC's number portability
costs. Therefore, incumbent LECs are unlikely to have a material
disadvantage in competing for subscribers under our recovery mechanism.
45. We also observe that under LRN-based long-term number
portability the LEC serving the customer who places a local call will
generally be responsible for the query. Thus, winning a customer shifts
responsibility for the queries needed to complete that customer's local
calls from the original carrier to the acquiring carrier. Similarly,
the IXC serving the customer who places an interexchange call will be
responsible for any query needed. Consequently, under the LRN approach
to number portability, query costs follow customers, and requiring each
carrier to bear its own carrier-specific costs directly related to
providing number portability is competitively neutral.
46. Under the requirements we adopt today, an incumbent LEC may
recover its carrier-specific costs directly related to providing long-
term number portability to end users by establishing a monthly, number
portability charge in tariffs filed with the Commission. We determine,
however, that recovery from end users should be designed so that end
users generally receive the charges only when and where they are
reasonably able to begin receiving the direct benefits of long-term
number portability. To achieve this, we will allow the monthly number-
portability charge to begin no earlier than February 1, 1999, on a date
the incumbent LEC carrier selects, and to last no longer than five
years. We choose this start date for the federal end-user charge
because by the end of 1998, under the implementation schedule the
Commission has mandated for number portability, a large proportion of
customers will reside in areas where number portability is available:
the largest 100 MSAs. 6 In contrast, if the end-user charge
were permitted to start immediately, substantially fewer customers
would be in areas where number portability is available. Thus, the
February 1, 1999, start date will better tailor recovery to areas where
customers can receive number portability than would an earlier start
date for recovery. We choose February 1, 1999, rather than January 1,
1999, to provide a brief additional time-period to ensure that number
portability has been implemented before customers incur charges, and
because carriers will also be filing tariff revisions to take effect
January 1, 1999, to implement PICC and SLC adjustments.
---------------------------------------------------------------------------
\6\ The top 100 MSAs comprise approximately 61.1% of all
subscriber lines, a conservative estimate, based on our calculation
that approximately 61.1% of the United States population resides in
the 100 largest MSAs. We calculated this percentage from population
estimates of the United States Census Bureau.
---------------------------------------------------------------------------
47. In addition, we will allow an incumbent LEC to assess the
monthly charge only on end users it serves in the 100 largest MSAs, and
end users it serves outside the 100 largest metropolitan statistical
areas from a number-portability-capable switch. Because carriers may
make any switch number-portability capable, this approach will
encourage carriers to install number portability and help ensure that
end-users are assessed number portability charges only where they are
reasonably likely to be benefitting from number portability. If a
carrier receives an extension past February 1, 1999, for one of the 100
largest MSAs, the carrier may not assess the monthly charge in that MSA
until it begins providing long-term number portability in the MSA. The
incumbent local exchange carrier shall levelize 7 the
monthly number-portability charge over five years by setting a rate for
each charge at which the present value of the revenue recovered by the
charge equals the present value of the cost being recovered. The
carriers shall use a discount rate equal to the rate of return on
investment which the Commission has authorized for regulated interstate
access services pursuant to Part 65 of the Commission's Rules.
Currently, this rate is 11.25 percent. We require levelization of the
monthly charge to protect consumers from varying rates. Incumbent LECs
may collect less than the maximum allowable charge, or decline to
collect the charge, from some or all of their customers so long as they
do so in a reasonable and nondiscriminatory manner. Thus we will not,
for example, allow incumbent LECs to offset such lower charges by
collecting higher charges in areas where no competitive carriers are
present.
---------------------------------------------------------------------------
\7\ A levelized rate is one that is calculated to remain
constant over a recovery period and is set at the level at which the
discounted present value of the stream of payments is equal to the
discounted present value of the stream of costs over the period.
---------------------------------------------------------------------------
48. We choose the five-year period for the end-user charge because
it will enable incumbent LECs to recover their portability costs in a
timely fashion, but will also help produce reasonable charges for
customers and avoid imposing those charges for an unduly long period. A
longer period would increase the total charges consumers pay because,
as discussed, carriers' unrecovered capital investment will be subject
to an 11.25 percent return, while a shorter period would increase the
monthly charge to consumers. We find that a five-year period
effectively balances these concerns. After a carrier
[[Page 35158]]
establishes its levelized end-user charge in the tariff review process
we do not anticipate that it may raise the charge during the five-year
period unless it can show that the end-user charge was not reasonable
based on the information available at the time it was initially set.
Furthermore, once incumbent LECs have recovered their initial
implementation costs, number portability will be a normal network
feature, and a special end-user charge will no longer be necessary to
ensure that incumbent LECs recover their number portability costs on a
competitively neutral basis. Carriers can recover any remaining costs
through existing mechanisms available for recovery of general costs of
providing service.
49. We will allow incumbent LECs to assess one monthly number-
portability charge per line, except that one PBX trunk shall receive
nine monthly number-portability charges and one primary rate interface
integrated services digital network line (PRI ISDN line) shall receive
five monthly number-portability charges. As the Commission observed in
the access charge reform proceeding, a PBX trunk provides on average
the equivalent service capacity of nine Centrex lines. See In re Access
Charge Reform, Second Order on Reconsideration and Memorandum Opinion
and Order (62 FR 56120, October 29, 1997). We set the PBX charge at
nine times the level of the ordinary charge because Centrex and PBX
arrangements are functionally equivalent. To do otherwise could
encourage a large customer to choose one of these arrangements over the
other because of the number portability charge, and thus would not be
competitively neutral. Similarly, the access charge reform proceeding
set a five to one equivalency ratio for PRI ISDN lines, and we apply
that equivalency ratio here. To further our goals for the Lifeline
Assistance Program, carriers may not impose the monthly number-
portability charge on customers in that program.
50. The incumbent LEC may assess the monthly charge on resellers of
the incumbent LEC's local service, as well as on purchasers of
switching ports as unbundled network elements under section 251 of the
Communications Act, because the incumbent LEC will be providing the
underlying number portability functionality even though the incumbent
LEC will no longer have a direct relationship with the end user. Thus,
it appears that the reseller and the purchaser of the unbundled switch
port will receive all their number portability functionality through
these arrangements. Consequently, allowing the incumbent LEC to assess
the charge will be competitively neutral because the reseller and the
purchaser of the switch port will incur the charge in lieu of costs
they would otherwise incur in obtaining long-term number portability
functionality elsewhere. The unregulated reseller and purchaser of the
switch port may recover in any lawful manner the charges the incumbent
LEC assesses on them. The incumbent local exchange carrier may not
assess the monthly number-portability charge on carriers that purchase
the incumbent local exchange carrier's local loops as unbundled network
elements under section 251. We do not allow the incumbent LEC to assess
such a charge because the unbundled loop does not contain the number
portability functionality. The purchaser of the unbundled loop will
still be responsible for providing such functionality, and thus
incurring elsewhere the corresponding cost. Congress has directed the
Commission to provide for the recovery of number portability costs.
Because we have so provided in this proceeding, we presume that state
commissions will not include the costs of number portability when
pricing unbundled network elements.
51. Local service providers may query calls for other carriers by
arrangement, or may receive unqueried, default-routed traffic when the
N-1 carrier has not performed the query. Thus we also will allow
incumbent LECs to recover from N-1 carriers in a federally tariffed
query-service charge their carrier-specific costs directly related to
providing prearranged and default query services. Other carriers
required or permitted to file federal tariffs may also tariff query
services. Carriers shall indicate in the cost support section of their
tariffs the portion of their carrier-specific costs directly related to
providing number portability attributable to the number portability
services they provide end users, and that portion attributable to the
number portability query services they provide on behalf of other
carriers.
52. All the RBOCs and GTE have submitted, and periodically revised,
estimates of the costs they will incur in implementing LRN number
portability. In reviewing the record, we observe a wide variation among
companies' estimated costs and their categorization of those costs as
directly related or not directly related to providing number
portability. We remind the incumbent LECs that only costs directly
related to providing number portability are recoverable through the
long-term number portability cost recovery mechanism we establish in
this Third Report and Order. As discussed above, the Chief, Common
Carrier Bureau, will further consider methods of identifying the
portion of joint costs that incumbent LECs should treat as carrier-
specific costs directly related to providing number portability.
VI. Regulatory Flexibility Act Analysis
53. As required by section 603 of the Regulatory Flexibility Act
(RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Further Notice. The Commission sought written
public comments on the proposals in the Further Notice, including on
the IRFA. The Commission's Final Regulatory Flexibility Analysis (FRFA)
in this Third Report and Order is as follows:
54. Need for and Objectives of Rules: The Commission, in compliance
with sections 251(b)(2), 251(d)(1), and 251(e)(2) of the Communications
Act of 1934, as amended by the Telecommunications Act of 1996, adopts
rules and procedures intended to ensure the implementation of telephone
number portability with the minimum regulatory and administrative
burden on telecommunications carriers. In implementing the statute, the
Commission has the responsibility to adopt rules that will implement
most quickly and effectively the national telecommunications policy
embodied in the Act and to promote the pro-competitive, deregulatory
markets envisioned by Congress. Congress has recognized that number
portability will lower barriers to entry and promote competition in the
local exchange marketplace. To prevent the cost of number portability
from itself becoming a barrier to local competition, however, section
251(e)(2) requires that ``[t]he cost of establishing telecommunications
numbering administration arrangements and number portability shall be
borne by all telecommunications carriers on a competitively neutral
basis as determined by the Commission.''
55. Summary of Significant Issues Raised by the Public in Response
to the IRFA: There were no comments submitted specifically in response
to the IRFA. However, in their general comments, some commenters assert
that if competition is to emerge in the local exchange market the
regulatory standards adopted by the Commission to recover the cost of
implementing long-term number portability should not disproportionately
burden small entities, especially new entrants. In the Third Report and
Order, we adopt rules and regulations to ensure that the way
[[Page 35159]]
all telecommunications carriers, including small entities, bear the
costs of number portability does not significantly affect any carrier's
ability to compete with other carriers for customers in the
marketplace.
56. Description and Estimate of Number of Small Businesses to Which
Rules Will Apply: The Regulatory Flexibility Act generally defines the
term ``small business'' as having the same meaning as the term ``small
business concern'' under the Small Business Act. A small business
concern is one which (1) is independently owned and operated; (2) is
not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA). According to the SBA's regulations, entities engaged in the
provision of telephone service may have a maximum of 1,500 employees in
order to qualify as a small business concern. This standard also
applies in determining whether an entity is a small business for
purposes of the RFA.
57. Our rules governing long-term number portability cost recovery
apply to all telecommunications carriers, including incumbent LECs, new
LEC entrants, and IXCs, as well as cellular, broadband PCS, and covered
SMR providers. Small incumbent LECs subject to these rules are either
dominant in their field of operations or are independently owned and
operated, and, consistent with the Commission's prior practice, are
excluded from the definition of ``small entities'' and ``small business
concerns.'' Accordingly, our use of the terms ``small entities'' and
``small businesses'' does not encompass small incumbent LECs. Out of an
abundance of caution, however, for regulatory flexibility analysis
purposes, we will consider small incumbent LECs within this analysis
and use the term ``small incumbent LECs'' to refer to any incumbent
LECs that arguably might be defined by the SBA as ``small business
concerns.''
58. Insofar as our rules apply to all telecommunications carriers,
they may have an economic impact on a substantial number of small
businesses, as well as on small incumbent LECs. The rules may have an
impact upon new entrant LECs and small incumbent LECs, as well as
cellular, broadband PCS, and covered SMR providers. Based upon data
contained in the most recent census and a report by the Commission's
Common Carrier Bureau, we estimate that 2,100 small entities could be
affected. We have derived this estimate based on the following
analysis:
59. According to the 1992 Census of Transportation, Communications,
and Utilities, there were approximately 3,469 firms with under 1,000
employees operating under the Standard Industrial Classification (SIC)
category 481--Telephone. See U.S. Dept. of Commerce, Bureau of the
Census, 1992 Census of Transportation, Communications, and Utilities
(issued May 1995). Many of these firms are the incumbent LECs and, as
noted above, would not satisfy the SBA definition of a small business
because of their market dominance. There were approximately 1,350 LECs
in 1995. Industry Analysis Division, FCC, Carrier Locator: Interstate
Service Providers at Table 1 (Number of Carriers Reporting by Type of
Carrier and Type of Revenue) (December 1995). Subtracting this number
from the total number of firms leaves approximately 2,119 entities
which potentially are small businesses which may be affected. This
number contains various categories of carriers, including small
incumbent LECs, competitive access providers, cellular carriers,
interexchange carriers, mobile service carriers, operator service
providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. Some of these carriers--although not
dominant--may not meet the other requirement of the definition of a
small business because they are not ``independently owned and
operated.'' See 15 U.S.C. Sec. 632(a)(1). For example, a PCS provider
which is affiliated with a long distance company with more than 1,500
employees would not meet the definition of a small business. Another
example would be if a cellular provider is affiliated with a dominant
LEC. Thus, a reasonable estimate of the number of ``small businesses''
affected by this Order would be approximately 2,100.
60. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements of the Rules: The Third Report and Order
concludes that the costs raised in this proceeding should be divided
into three categories: shared costs, carrier-specific costs directly
related to number portability, and carrier-specific costs not directly
related to number portability. Shared costs are those costs incurred on
behalf of the industry as a whole, such as the costs of the regional
database administrator to build, operate, and maintain the databases
needed to provide number portability. The Third Report and Order
concludes that all telecommunications carriers with end-user revenues
are required to pay an allocated portion of the shared costs incurred
by the regional database administrator in proportion to that carrier's
international, interstate, and intrastate end-user telecommunications
revenues for that region. While carriers already track their sales to
end-users for billing purposes, they will need to identify their
regional end-user revenues. That information, along with periodic
updates, must be provided to the regional database administrator for
the appropriate allocation of shared costs.
61. The Third Report and Order requires incumbent LECs to maintain
records that detail both the nature and specific amount of those
carrier-specific costs that are directly related to number portability,
and those carrier-specific costs that are not directly related to
number portability. The Third Report and Order directs carriers and
interested parties to file comments by August 3, 1998, and reply
comments by September 16, 1998, proposing ways to apportion the
different types of joint costs between portability and nonportability
services. The Third Report and Order requires incumbent LECs that
choose to recover their carrier-specific costs directly related to
providing number portability to use federally-tariffed end-user
charges.
62. Steps Taken to Minimize Impact on Small Entities Consistent
with Stated Objectives: The record in this proceeding indicates that
the need for customers to change their telephone numbers when changing
local service providers is a barrier to local competition. Requiring
number portability, and ensuring that all telecommunications carriers
bear the costs of number portability on a competitively neutral basis,
will make it easier for competitive providers, many of which may be
small entities, to enter the market. We have attempted to keep
regulatory burdens on all local exchange carriers to a minimum to
ensure that the public receives the benefits of the expeditious
provision of service provider number portability in accordance with the
statutory requirements. For example, the Third Report and Order
concludes that all telecommunications carriers with end-user revenues
are required to pay an allocated portion of the shared costs incurred
by the regional database administrator in proportion to that carrier's
international, interstate, and intrastate end-user telecommunications
revenues for the region. Apportioning shared costs in this way will
further the statutory purpose of ensuring that carriers bear the costs
of number portability on a competitively neutral basis. Furthermore,
the Third Report and Order concludes that regulated
[[Page 35160]]
carriers may identify that portion of their joint costs that is
demonstrably an incremental cost that they incurred in the provision of
long-term number portability. Allowing such identification recognizes
that number portability will cause some carriers, including small
entities, to incur costs that they would not ordinarily have incurred
in providing telecommunications services. The Third Report and Order
also concludes that non-dominant carriers, such as competitive LECs,
CMRS providers, and IXCs--some of which will be small entities--are not
subject to extensive regulation and may recover their number
portability costs in any manner otherwise consistent with Commission
rules and the Communications Act.
63. Report to Congress: The Commission shall send a copy of this
FRFA, along with this Third Report and Order, in a report to Congress
pursuant to the Small Business Regulatory Enforcement Fairness Act of
1996. A copy of the Third Report and Order and this FRFA (or summaries
thereof) will also be published in the Federal Register and will be
sent to the Chief Counsel for Advocacy of the Small Business
Administration.
VII. Paperwork Reduction Act
64. This Third Report and Order concludes that the costs raised in
this proceeding should be divided into three categories: shared costs,
carrier-specific costs directly related to number portability, and
carrier-specific costs not directly related to number portability.
Shared costs are those costs incurred on behalf of the industry as a
whole, such as the costs of the regional database administrator to
build, operate, and maintain the databases needed to provide number
portability. The Third Report and Order concludes that all
telecommunications carriers with end-user revenues are required to pay
an allocated portion of the shared costs incurred by the regional
database administrator in proportion to that carrier's international,
interstate, and intrastate end-user telecommunications revenues for the
region. While carriers already track their sales to end-users for
billing purposes, they will need to identify their regional end-user
revenues. That information, along with periodic updates, must be
provided to the regional database administrator for the appropriate
allocation of shared costs. The Third Report and Order also requires
incumbent LECs to maintain records that detail both the nature and
specific amount of those carrier-specific costs that are directly
related to number portability, and those carrier-specific costs that
are not directly related to number portability. The Third Report and
Order requires incumbent LECs that choose to recover their carrier-
specific costs directly related to providing number portability to use
federally-tariffed end-user charges. These information collection
requirements are contingent upon approval of the Office of Management
and Budget (OMB).
VIII. Ordering Clauses
65. Accordingly, it is ordered that pursuant to authority contained
in sections 1, 2, 4(i), 201-205, 215, 251(b)(2), 251(e)(2), and 332 of
the Communications Act of 1934, as amended, 47 U.S.C. Secs. 151, 152,
154(i), 201-205, 215, 251(b)(2), 251(e)(2), and 332, Part 52 of the
Commission's rules is amended as set forth.
66. It is further ordered that the policies, rules and requirements
set forth herein are adopted.
67. It is further ordered that the policies, rules and requirements
adopted herein shall be effective on July 29, 1998, except for
Secs. 52.32(b) and 52.33(a)(1), which contain information collection
requirements that are not effective until approved by the Office of
Management and Budget. The Commission will publish a document in the
Federal Register announcing the effective date for those sections.
68. It is further ordered that the Commission's Office of Public
Affairs, References Operations Division, shall send a copy of this
Third Report and Order, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
69. It is further ordered that incumbent local exchange carriers
may file tariffs to take effect no earlier than February 1, 1999,
setting out the monthly number portability charge they intend to
collect from their end users, in accordance with this Order.
70. It is further ordered that pursuant to authority contained in
section 5(c)(1) of the Communications Act of 1934, as amended, 47
U.S.C. 155(c)(1), the Chief, Common Carrier Bureau, is delegated
authority to determine appropriate methods for apportioning joint costs
among portability and nonportability services, and to issue any orders
to provide guidance to incumbent LECs before they file their tariffs,
which are to take effect no earlier than February 1, 1999. To
facilitate determination of the portion of joint costs carriers shall
treat as carrier-specific costs directly related to providing number
portability, and to facilitate evaluation of the cost support that
carriers will file in their federal tariffs, carriers and interested
parties may file comments by August 3, 1998 proposing ways to apportion
the different types of joint costs. Carriers and interested parties may
file reply comments by September 16, 1998.
List of Subjects in 47 CFR Part 52
Carrier-specific costs, Communications common carriers, Long-term
number portability cost recovery, Number portability, Regional
databases, Shared costs.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Accordingly, part 52 of Title 47 of the Code of Federal Regulations
is amended to read as follows:
PART 52--NUMBERING
1. The authority for part 52 continues to read as follows:
Authority: Sec. 1, 2, 4, 5, 48 Stat. 1066, as amended; 47 U.S.C.
Sec. 151, 152, 154, 155, 251 unless otherwise noted. Interpret or
apply secs. 3, 4, 201-05, 207-09, 218, 225-27, 251-52, 271 and 332,
48 Stat. 1070, as amended, 1077; 47 U.S.C. 153, 154, 201-05, 207-09,
218, 225-27, 251-52, 271 and 332 unless otherwise noted.
2. Add Sec. 52.32 to read as follows:
Sec. 52.32 Allocation of the shared costs of long-term number
portability
(a) The local number portability administrator, as defined in
Sec. 52.21(h), of each regional database, as defined in Sec. 52.21(1),
shall recover the shared costs of long-term number portability
attributable to that regional database from all telecommunications
carriers providing telecommunications service in areas that regional
database serves. Pursuant to its duties under Sec. 52.26, the local
number portability administrator shall collect sufficient revenues to
fund the operation of the regional database by:
(1) Assessing a $100 yearly contribution on each telecommunications
carrier identified in paragraph (a) introductory text that has no
intrastate, interstate, or international end-user telecommunications
revenue derived from providing telecommunications service in the areas
that regional database serves, and
(2) Assessing on each of the other telecommunications carriers
providing telecommunications service in areas that regional database
serves, a charge that recovers the remaining shared costs of long-term
number portability attributable to that regional database in proportion
to the ratio of:
(i) The sum of the intrastate, interstate, and international end-
user
[[Page 35161]]
telecommunications revenues that such telecommunications carrier
derives from providing telecommunications service in the areas that
regional database serves, ii) to the sum of the intrastate, interstate,
and international end-user telecommunications revenues that all
telecommunications carriers derive from providing telecommunications
service in the areas that regional database serves.
(b) The local number portability administrator for a particular
regional database may require the telecommunications carriers providing
telecommunications service in the areas served by the regional database
to provide once a year that data necessary to calculate, pursuant to
paragraph (a)(1) or (a)(2) of this section, those carriers' portions of
the shared costs of long-term number portability attributable to that
regional database. All such telecommunications carriers shall comply
with any such requests.
(c) Once a telecommunications carrier has been allocated, pursuant
to paragraph (a)(1) or (a)(2) of this section, its portion of the
shared costs of long-term number portability attributable to a regional
database, the carrier shall treat that portion as a carrier-specific
cost directly related to providing number portability.
3. Add Sec. 52.33 to read as follows:
Sec. 52.33 Recovery of carrier-specific costs directly related to
providing long-term number portability.
(a) Incumbent local exchange carriers may recover their carrier-
specific costs directly related to providing long-term number
portability by establishing in tariffs filed with the Federal
Communications Commission a monthly number-portability charge, as
specified in paragraph (a)(1), and a number portability query-service
charge, as specified in paragraph (a)(2).
(1) The monthly number-portability charge may take effect no
earlier than February 1, 1999, on a date the incumbent local exchange
carrier selects, and may end no later than five years after that date.
(i) An incumbent local exchange carrier may assess each end user it
serves in the 100 largest metropolitan statistical areas, and each end
user it serves from a number-portability-capable switch outside the 100
largest metropolitan statistical areas, one monthly number-portability
charge per line except that:
(A) One PBX trunk shall receive nine monthly number-portability
charges.
(B) One PRI ISDN line shall receive five monthly number-portability
charges.
(C) Lifeline Assistance Program customers shall not receive the
monthly number-portability charge.
(ii) An incumbent local exchange carrier may assess on carriers
that purchase the incumbent local exchange carrier's switching ports as
unbundled network elements under section 251 of the Communications Act,
and resellers of the incumbent local exchange carrier's local service,
the same charges as described in paragraph (a)(1)(A) of this section,
as if the incumbent local exchange carrier were serving those carriers'
end users.
(iii) An incumbent local exchange carrier may not assess a monthly
number-portability charge for local loops carriers purchase as
unbundled network elements under section 251.
(iv) The incumbent local exchange carrier shall levelize the
monthly number-portability charge over five years by setting a rate for
the charge at which the present value of the revenue recovered by the
charge does not exceed the present value of the cost being recovered,
using a discount rate equal to the rate of return on investment which
the Commission has prescribed for interstate access services pursuant
to Part 65 of the Commission's Rules.
(2) The number portability query-service charge may recover only
carrier-specific costs directly related to providing long-term number
portability that the incumbent local exchange carrier incurs to provide
long-term number portability query service to carriers on a prearranged
and default basis.
(b) All telecommunications carriers other than incumbent local
exchange carriers may recover their number portability costs in any
manner consistent with applicable state and federal laws and
regulations.
[FR Doc. 98-17076 Filed 6-26-98; 8:45 am]
BILLING CODE 6712-01-U
