[Federal Register Volume 61, Number 146 (Monday, July 29, 1996)]
[Proposed Rules]
[Pages 39385-39397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19136]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[CC Docket No. 96-152, FCC 96-310]
Implementation of the Telecommunications Act of 1996:
Telemessaging, Electronic Publishing, and Alarm Monitoring Services
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission is issuing this Notice of Proposed Rulemaking
(NPRM) which seeks comment on proposed regulations to clarify, where
necessary, and to implement the non-accounting separate affiliate and
nondiscrimination safeguards prescribed by Congress in sections 274,
275 and 260 of the Telecommunications Act of 1996 (47 U.S.C. 274, 275
and 260) with respect to BOC and/or LEC provision of electronic
publishing, alarm monitoring and telemessaging services, respectively.
In the NPRM, the Commission seeks to promote competition in the
provision of electronic publishing, alarm monitoring, and telemessaging
services by minimizing the burden of the rules it must adopt pursuant
to the requirements of the new law.
DATES: Comments are due on or before September 4, 1996 and Reply
Comments are due on or before September 20, 1996. Written comments by
the public on the proposed and/or modified information collections are
due September 4, 1996. Written comments must be submitted by the Office
of Management and Budget (OMB) on the proposed and/or modified
information collections on or before September 27, 1996.
ADDRESSES: Comments and Reply Comments should be sent to Office of the
Secretary, Federal Communications Commission, 1919 M Street, N.W., Room
222, Washington, D.C. 20554, with a copy to Janice Myles of the Common
Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C. 20554.
Parties should also file one copy of any documents filed in this docket
with the Commission's copy contractor, International Transcription
Services, Inc., 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.
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, D.C. 20554, or via the Internet
to dconway@fcc.gov, and to Timothy Fain, OMB Desk Officer, 10236 NEOB,
725--17th Street, N.W., Washington, D.C. 20503 or via the Internet to
fain__t@al.eop.gov.
FOR FURTHER INFORMATION CONTACT: Michelle Carey, Attorney, Common
Carrier Bureau, Policy and Program Planning Division, (202) 418-1557,
Robert MacDonald, Attorney, Common Carrier Bureau, Policy and Program
Planning Division (202) 418-2764, or Raelynn Tibayan, Attorney, Common
Carrier Bureau, Policy and Program Planning Division, (202) 418-2698.
For additional information concerning the information collections
contained in this NPRM 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 Rulemaking adopted July 18, 1996 and released July 18, 1996
(FCC 96-310). This NPRM contains proposed or modified information
collections subject to the Paperwork Reduction Act of 1995 (PRA). It
has been submitted to the Office of Management and Budget (OMB) for
review under the PRA. OMB, the general public, and other Federal
agencies are invited to comment on the proposed or modified information
collections contained in this proceeding. The full text of this Notice
[[Page 39386]]
of Proposed Rulemaking is available for inspection and copying during
normal business hours in the FCC Reference Center (Room 239), 1919 M
St., NW., Washington, D.C. The complete text also may be purchased from
the Commission's copy contractor, International Transcription Service,
Inc., (202) 857-3800, 2100 M St., NW., Suite 140, Washington, D.C.
20037.
Paperwork Reduction Act
This NPRM contains either a proposed or modified information
collection. The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public and the Office of
Management and Budget (OMB) to comment on the information collections
contained in this NPRM, as required by the Paperwork Reduction Act of
1995, Public Law No. 104-13. Public and agency comments are due at the
same time as other comments on this NPRM; OMB notification of action is
due September 27, 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.
OMB Approval Number: None.
Title: Implementation of the Telecommunications Act of 1996:
Telemessaging, Electronic Publishing, and Alarm Monitoring Services.
Form No.: N/A.
Type of Review: New collection.
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Number of Estimated time
Information collection respondents per response Total annual
(approx.) (hours) burden (hours)
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Network disclosure........................................ 1,400 48 67,200
Installation and maintenance reporting--timeliness........ 1,400 8 11,200
Installation and maintenance reporting--quality........... 1,400 1 1,400
Annual report............................................. 1,400 2 2,800
Biannual tariff report.................................... 1,400 2 5,600
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Total Annual Burden: 88,200.
Respondents: Incumbent local exchange carriers and/or Bell
Operating Companies.
Estimated costs per respondent: $0
Needs and Uses: The NPRM seeks comments on a number of issues, the
resolution of which may lead to the imposition of information
collections subject to the Paperwork Reduction Act. The NPRM seeks
comment on certain reporting requirements to implement the non-
accounting, separate affiliate and/or nondiscrimination requirements of
the 1996 Act.
SYNOPSIS OF NOTICE OF PROPOSED RULEMAKING
I. Introduction
1. In enacting the Telecommunications Act of 1996 (``1996 Act''),
Congress sought to establish ``a pro-competitive, de-regulatory
national policy framework'' for the U.S. telecommunications industry.
In furtherance of that goal, the 1996 Act seeks to eliminate or modify
artificial barriers to competition in telecommunications markets. Such
barriers include the legal restrictions that have excluded the Bell
Operating Companies (``BOCs'') from various markets, such as the
manufacturing of telecommunications equipment and the provision of
interLATA telecommunications services. The 1996 Act permits the BOCs to
enter those and other markets from which they previously were
restricted, including the provision of electronic publishing, alarm
monitoring and telemessaging on an interLATA basis, subject to certain
safeguards.
2. Section 274 establishes separate affiliate and nondiscrimination
requirements that are applicable to BOC provision of electronic
publishing service. Sections 275 and 260 establish nondiscrimination
and cross-subsidization safeguards that apply to local exchange carrier
(``LEC'') provision of alarm monitoring and telemessaging services,
respectively. The purpose of this Notice of Proposed Rulemaking
(``NPRM'') is to clarify, where necessary, and to implement the non-
accounting separate affiliate and nondiscrimination safeguards
prescribed by Congress in sections 274, 275 and 260 with respect to BOC
and/or LEC provision of electronic publishing, alarm monitoring and
telemessaging services, respectively.
3. This proceeding is one of a series of interrelated rulemakings
that collectively will implement the 1996 Act. Certain of those
proceedings focus on opening markets to entry by new competitors. Other
proceedings focus on the separate affiliate, nondiscrimination and
other safeguards that Congress adopted in the 1996 Act to foster the
development of robust competition in all telecommunications markets. As
discussed more fully below, those safeguards are intended both to
protect subscribers to BOC monopoly services against the potential risk
of having to ``foot the bill'' for BOC entry into competitive services
and to protect competition in the new markets that the BOCs will enter
against the potential risk that the BOCs will use their existing market
power to obtain an unfair advantage in those new markets.
A. Background
4. Prior to the enactment of the 1996 Act, the BOCs and their
affiliates were effectively precluded under the Modification of Final
Judgment (``MFJ'') from providing information services across local
access and transport area (``LATA'') boundaries. While the MFJ, as
originally entered, prohibited the BOCs from providing any information
services, that restriction was eliminated in 1991. BOCs nevertheless
were precluded from providing information services across LATA
boundaries because the MFJ still prohibited the BOCs from providing
interLATA telecommunications services. Therefore, BOCs could provide
information services only between points located in the same LATA. They
were allowed to do so on an integrated basis, subject to certain
nondiscrimination and cross-subsidization safeguards established by the
Commission.
5.The 1996 Act seeks to eliminate artificial statutory and
regulatory barriers to entry into telecommunications markets. Such
barriers may be particularly inimical to the interests of consumers
when the excluded potential entrants are engaged in a complementary
business and, as a consequence, could realize economies of scope (both
technical and marketing) if they were allowed to enter. Such economies
of scope should benefit consumers in both the markets in which
[[Page 39387]]
the entrant currently offers service and the markets it seeks to enter.
6. The 1996 Act opens the way for BOCs to provide, among other
things, electronic publishing and telemessaging, and, in the future,
alarm monitoring services on an interLATA basis in states in which they
currently provide local exchange and exchange access services. The
provision by the BOCs of such interLATA information services offers the
prospect of fostering vigorous competition among providers of such
services, because of the unique assets that the BOCs possess. BOCs can
offer a widely recognized brand name that is associated with
telecommunications services, the benefits of ``one-stop shopping,'' and
other advantages of vertical integration.
7. At the same time, Congress recognized that BOC entry into the
provision of in-region interLATA information services such as
electronic publishing, alarm monitoring and telemessaging raises
serious concerns for competition and consumers. A BOC's existing core
business of providing local exchange and exchange access service is
still a near-monopoly. If it is regulated under rate-of-return
regulation, a price cap structure with sharing (either for interstate
or intrastate services), or a price cap scheme that adjusts the X-
factor periodically based on changes in industry productivity, a BOC
may have an incentive to improperly allocate to its regulated core
business costs that would be properly attributable to its competitive
ventures. In addition, a BOC could potentially discriminate in
providing exchange access services and facilities that its rivals need
to compete in the electronic publishing, alarm monitoring and
telemessaging markets. Specifically, a BOC could seek to use its
control over exchange access services and facilities to weaken its
competitors' offerings.
8. Our goal in this proceeding is to establish non-accounting
separate affiliate and nondiscrimination safeguards that fulfill those
statutory objectives. Pursuant to sections 274, 275 and 260, we seek to
guard against the potential that BOCs offering electronic publishing,
as well as BOCs and other incumbent LECs offering alarm monitoring and
telemessaging services, would improperly allocate costs in a way that
adversely affects local telephone ratepayers or competition in markets
those entities will enter. We intend to achieve that objective without
depriving those carriers of legitimate competitive advantages that can
benefit both subscribers to their monopoly local services and consumers
of the carriers' new services. We must also adopt rules that prevent
potential anticompetitive discrimination by BOCs and other incumbent
LECs against rivals without eliminating efficiencies derived from
economies of scope.
9. We recognize that these objectives are a means to an overriding
end: the replacement of stagnant monopoly regulation with the
discipline of dynamic competition. When competition takes hold in what
are now the bottleneck markets of local exchange and exchange access,
we will no longer need the safeguards that Congress prescribed in the
1996 Act and the implementing rules that we will adopt in this
proceeding. We note that, by providing for sunset of the section 274
provisions on February 8, 2000, Congress may have recognized that the
level of competition in the electronic publishing industry at that time
would be such that the structural safeguards in section 274 would no
longer be necessary. We began the movement toward the goal of fostering
competition when we adopted our Notice of Proposed Rulemaking to
implement section 251 (61 FR 18311 (April 25, 1996)). That proceeding
seeks to eliminate the legal barriers and reduce the economic and
regulatory impediments to entry into the monopoly markets of incumbent
LECs. Our upcoming access reform and jurisdictional separations reform
rulemakings also will contribute to achieving our goal of fostering
effective competition in local telecommunications markets. Until we
reach that goal, we seek to minimize the burden of the rules that we
adopt in this proceeding, but not at the cost of exposing ratepayers in
local markets controlled by BOCs and independent LECs and competitors
of BOC/LEC services to potential improper cost allocations and unlawful
discrimination.
B. Overview of Sections 274, 275 and 260
10. Section 274 allows a BOC to provide electronic publishing
service disseminated by means of its basic telephone service only
through a ``separated affiliate'' or an ``electronic publishing joint
venture'' that meets the separation and nondiscrimination requirements
prescribed by that section. BOCs that were offering electronic
publishing services at the time the 1996 Act was enacted have until
February 8, 1997, to meet those requirements. The requirements under
section 274 expire on February 8, 2000, four years after the date of
enactment of the 1996 Act.
11. Section 275(a) prohibits a BOC that was not engaged in the
provision of alarm monitoring services as of November 30, 1995, from
providing such services for five years after the date of enactment of
the 1996 Act. Section 275(a), however, allows BOCs to provide alarm
monitoring services under certain conditions if they were already
providing such services as of November 30, 1995. In addition, section
275 permits an incumbent LEC, including any grandfathered BOC, to
provide alarm monitoring services on an integrated basis so long as it
complies with certain nondiscrimination and cost allocation safeguards.
12. Section 260 permits incumbent LECs (including the BOCs) to
provide telemessaging service subject to certain nondiscrimination
safeguards. Although section 260 does not require a LEC to provide
telemessaging through a separate subsidiary, in the BOC In-Region NPRM,
we tentatively concluded that telemessaging service constitutes an
``information service,'' and therefore proposed that BOC provision of
telemessaging on an interLATA basis would be subject to the separate
affiliate, nondiscrimination and cross-subsidization requirements of
section 272, in addition to the requirements of section 260.
13. This NPRM addresses the non-accounting separate affiliate and
nondiscrimination requirements of sections 274, 275 and 260. We address
in separate proceedings the non-accounting separate affiliate and
nondiscrimination requirements established by sections 272 (applicable
to BOC provision of in-region interLATA telecommunications services and
interLATA information services other than electronic publishing and
alarm monitoring) and 273 (applicable to BOC manufacturing activities).
The accounting safeguards required to implement sections 271 through
276 and section 260 also will be addressed in a separate rulemaking
proceeding.
14. The structural separation requirement for electronic publishing
imposed by section 274 of the 1996 Act seeks to guard against improper
cost allocations by the BOCs in two principal ways. First, by requiring
the BOCs to use separate facilities and employees for local exchange
service and electronic publishing service, that requirement seeks to
reduce the joint and common costs that would require allocation between
the telephone operating company and the affiliate engaged in
competitive businesses. Second, by requiring a BOC to maintain records
documenting transactions between the BOC and its affiliate, section 274
discourages the improper allocation of costs between the two entities
by
[[Page 39388]]
facilitating its detection. Thus, while they do not eliminate the
potential for improper cost allocations by a BOC, structural safeguards
seek to reduce the likelihood that any such cost misallocation would go
undetected.
15. The provisions of section 274 concerning electronic publishing
joint ventures represent an alternative to structural separation as a
means of addressing the potential problems of improper cost allocations
and discrimination. Rather than making undetected cost shifting and
discrimination more difficult, those provisions limit the potential
likelihood that the BOCs will engage in such behavior by limiting their
ownership interest in the electronic publishing entity. Because much of
the benefit of favoring an electronic publishing joint venture would
accrue to unrelated participants in such joint venture, the gains to
the BOC from such activity would be small.
16. The structural separation requirements of section 274(b) for
BOCs, along with the prohibitions on discrimination and cross-
subsidization in sections 260(a) and 275(b) that apply to all incumbent
LECs, address concerns about the BOCs' or the LECs' use of their market
power to confer an unlawfully discriminatory competitive advantage on
themselves or their affiliates when they provide competitive services.
Those safeguards prevent a BOC or LEC from using its control over local
exchange and exchange access markets to: (1) PProvide higher quality
service to itself or its affiliate than the service provided to
competing service providers at the same price; (2) provide exchange
access services to itself or its affiliate at a lower rate than the
rate charged to competing unaffiliated firms; or (3) improperly shift
costs from its electronic publishing, alarm monitoring or telemessaging
operations to the local telephone ratepayers, thus artificially
reducing the costs of providing such competitive services below those
of other providers and resulting in higher rates for local exchange
subscribers.
17. Each of these examples of anticompetitive behavior has the
potential to harm consumers in the electronic publishing, alarm
monitoring and telemessaging markets. If a BOC or LEC provided poorer
quality service to its competitor than to itself or its affiliate, but
did not correspondingly lower the price charged to the competitor, then
consumers would likely face a less attractive menu of offerings from
competitors. This would harm both competitors and consumers, and would
raise the BOC's profits. If the BOC or LEC exploited its market power
to charge rivals supracompetitive prices for inputs, or otherwise
raised its rivals' costs, the effect would be similar in degrading the
options available to consumers from unaffiliated providers. The
resulting ``price squeeze'' would also force competing providers either
to match the price of the BOC or LEC or affiliate in the competitive
market and absorb lower profit margins, or maintain their retail prices
and accept smaller market shares. Thus, a less efficient producer might
expand at the expense of a more efficient one.
18. In the discussion that follows, we first examine the scope of
the Commission's authority to adopt rules implementing sections 274,
275 and 260. We subsequently discuss, in turn, the structural
separation, joint marketing and nondiscrimination requirements relating
to BOC provision of electronic publishing under section 274, and the
general nondiscrimination requirements applicable to LEC provision of
alarm monitoring and telemessaging under sections 275 and 260,
respectively. Finally, we discuss enforcement provisions in sections
274, 275 and 260.
II. Scope of Commission's Authority
A. Telemessaging Services
19. In the BOC In-Region NPRM, we tentatively concluded that
telemessaging is an information service that, when provided by BOCs on
an interLATA basis, is subject to the requirements of section 272 in
addition to the requirements of section 260. We also tentatively
concluded in the BOC In-Region NPRM that our authority under sections
271 and 272 applies to intrastate and interstate interLATA information
services provided by BOCs or their affiliates.
20. Section 260 of the Act imposes additional safeguards regarding
the provision of telemessaging services, not only on the BOCs, but on
all incumbent LECs. We seek comment on whether, in light of our
tentative conclusion that sections 271 and 272 give the Commission
jurisdiction over intrastate interLATA information services including
telemessaging, section 260 can also be read to give us jurisdiction
over intrastate telemessaging services in implementing and enforcing
section 260. We note, however, that unlike sections 271 and 272, the
scope of section 260 is not strictly limited to interLATA services, nor
is it limited to the BOCs. We seek comment, therefore, on whether any
such intrastate jurisdiction would extend only to the BOCs, as only
BOCs are covered by sections 271 and 272, or to all incumbent LECs.
21. We also seek comment, as we did in the BOC In-Region NPRM, on
the extent to which, assuming section 260 does not itself apply to
intrastate services, the Commission may nevertheless have authority to
preempt state regulation with respect to the matters addressed by
section 260. The Commission has authority to preempt state regulation
of intrastate communications services where such state regulation would
``thwart or impede'' the Commission's exercise of its lawful authority
over interstate communications services, such as when it is not
``possible to separate the interstate and intrastate portions of the
asserted FCC regulation.'' Thus, we seek specific comment on the extent
to which (1) it may not be possible to separate the interstate and
intrastate portions of the regulations we propose here to implement
section 260, and (2) state regulation inconsistent with our regulations
may thwart or impede the Commission's exercise of lawful authority over
interstate telemessaging services. We seek comment, for example, on the
extent to which the Commission would have authority to preempt
potentially inconsistent state regulations regarding a LEC's ability to
provide telemessaging services on an integrated basis under section
260. We also seek comment on the extent to which the Commission would
not have the authority to preempt the state regulation of an intrastate
telemessaging service.
B. Electronic Publishing Services
22. Although electronic publishing is specifically included within
the definition of ``information service'' in section 3(20) of the Act,
it is specifically exempted from the separate affiliate and
nondiscrimination requirements of section 272. Section 274, which
applies only to BOCs, requires the use of a ``separated affiliate'' or
``electronic publishing joint venture'' in order for a BOC to engage in
the provision of electronic publishing services disseminated by means
of its basic telephone service.
23. Section 274 imposes a number of safeguards on the provision by
BOCs of electronic publishing through a separated affiliate or
electronic publishing joint venture. Unlike sections 260 and 275,
however, section 274 specifically refers to State commission
jurisdiction regarding one of these safeguards. Section 274(b)(4)
provides that a separated affiliate or joint venture and the BOC with
which it is affiliated shall: value any assets that
[[Page 39389]]
are transferred directly or indirectly from the Bell operating company
to a separated affiliate or joint venture, and record any transactions
by which such assets are transferred, in accordance with such
regulations as may be prescribed by the Commission or a State
commission to prevent improper cross subsidies. This explicit reference
to State commission regulations indicates that the requirements of this
section apply to both interstate and intrastate electronic publishing
services. We tentatively conclude, therefore, that the Commission may
not have exclusive jurisdiction over all aspects of intrastate services
pursuant to section 274. We seek comment on this tentative conclusion.
We ask parties to comment specifically on the extent of our authority,
if any, under section 274 over intrastate electronic publishing
services.
24. Section 274(e) also provides that any person claiming a
violation of this section may file a complaint with the Commission, or
may bring suit pursuant to section 207. It also provides that an
application for a cease and desist order may be made to the Commission,
or in any federal district court. No reference is made to complaints
being filed with State commissions. We thus encourage parties to
clearly identify the Commission's jurisdiction under section 274 over
intrastate electronic publishing services, particularly in light of the
specific provisions of sections 274(b)(4) and 274(e). We also ask that
commenters clearly identify whether specific subsections of section 274
confer intrastate authority on the Commission.
25. We also seek comment on the extent to which, apart from any
intrastate jurisdiction conferred by section 274 itself, the Commission
may have authority to preempt state regulation with respect to the
matters addressed by section 274 pursuant to Louisiana PSC. Thus, we
seek specific comment on the extent to which (1) it may not be possible
to separate the interstate and intrastate portions of the regulations
we propose here to implement section 274, and (2) state regulation
inconsistent with our regulations may thwart or impede the Commission's
exercise of lawful authority over interstate electronic publishing
services. We also seek comment on the extent to which the Commission
would not have the authority to preempt the state regulation of an
intrastate electronic publishing service.
C. Alarm Monitoring Services
26. Alarm monitoring, as defined in section 275(e), appears to fall
within the definition of ``information service'' in section 3(20) of
the Act. Alarm monitoring services, however, are specifically exempted
from the separate affiliate and nondiscrimination requirements of
section 272. Section 275 of the Act delays until February 8, 2001,
entry into alarm monitoring by a BOC or its affiliate that was not
providing this service as of November 30, 1995, and imposes safeguards
regarding the provision of alarm monitoring, not only on BOCs, but on
all other incumbent LECs. We seek comment on the extent of our
authority, if any, under section 275 over intrastate alarm monitoring
services.
27. We also seek comment, as we did in the BOC In-Region NPRM, on
the extent to which, assuming section 275 does not itself apply to
intrastate alarm monitoring services, the Commission may have authority
to preempt state regulation with respect to the matters addressed by
section 275 pursuant to Louisiana PSC. Thus, we seek specific comment
on the extent to which (1) it may not be possible to separate the
interstate and intrastate portions of the regulations we propose here
to implement section 275, and (2) state regulation inconsistent with
our regulations may thwart or impede the Commission's exercise of
lawful authority over interstate alarm monitoring services. We seek
comment, for example, on the extent to which the Commission would have
authority to preempt potentially inconsistent state regulations
regarding an incumbent LEC's, including a BOC's, ability to provide
alarm monitoring services on an integrated basis under section 275. We
also seek comment on the extent to which the Commission would not have
the authority to preempt the state regulation of an intrastate alarm
monitoring service.
III. BOC Provision of Electronic Publishing--Section 274
28. At the time of enactment of the 1996 Act, the BOCs were
providing certain intraLATA information services, including electronic
publishing services, on an integrated basis. Under the Commission's
existing regulatory regime, electronic publishing is regulated as an
enhanced service, and is provided pursuant to comparably efficient
interconnection (``CEI'') plans filed with the Commission. Section 274,
however, imposes structural separation and other requirements on BOCs
that provide electronic publishing services. Any BOC or BOC affiliate
providing electronic publishing service on the date of enactment of the
1996 Act has until February 8, 1997, to meet the requirements of the
Act and our regulations. Our task, therefore, is to adopt the rules
necessary to implement these requirements.
A. Definition of ``Electronic Publishing''
29. As noted above, electronic publishing is specifically included
within the definition of information services. BOC provision of
electronic publishing, however, is explicitly exempted from the
separate affiliate and nondiscrimination requirements of section 272
that apply to BOC provision of interLATA information services. Instead,
section 274 establishes more detailed requirements for BOC provision of
electronic publishing services. We note that, in contrast to section
272, which applies only to BOC provision of interLATA information
services, section 274 does not distinguish between the intraLATA and
interLATA provision of electronic publishing. We seek comment,
therefore, on whether section 274 applies to BOC provision of both
intraLATA and interLATA electronic publishing services.
30. Section 274(h)(1) defines ``electronic publishing'' as:
the dissemination, provision, publication, or sale to an
unaffiliated entity or person, of any one or more of the following:
news (including sports); entertainment (other than interactive
games); business, financial, legal, consumer, or credit materials;
editorials, columns, or features; advertising; photos or images;
archival or research material; legal notices or public records;
scientific, educational, instructional, technical, professional,
trade, or other literary materials; or other like or similar
information.
Section 274(h)(2) also lists specific services that are excluded
from the definition of electronic publishing. These excepted services
include, among other things, common carrier provision of
telecommunications service, information access service, information
gateway service, voice storage and retrieval, electronic mail, certain
data and transaction processing services, electronic billing or
advertising of a BOC's regulated telecommunications services, language
translation or data format conversion, ``white pages'' directory
assistance, caller identification services, repair and provisioning
databases, credit card and billing validation for telephone company
operations, 911-E and other emergency assistance databases, and video
programming and full motion video entertainment on demand.
31. We seek to define those services that are properly included in
the definition of electronic publishing in section 274(h)(1) and those
services that
[[Page 39390]]
are excluded under 274(h)(2). We ask parties to identify any enhanced
services that BOCs currently provide that appear to meet the definition
of an electronic publishing service under the 1996 Act. To the extent
that it is unclear whether a particular service, or a particular group
of services, is encompassed by the statutory definition of electronic
publishing, we invite parties to identify the basis for the ambiguity
and to make recommendations on how the service, or services, should be
classified.
B. ``Separated Affiliate'' and ``Electronic Publishing Joint Venture''
Requirements
1. Definitions
32. Section 274 prescribes the terms under which a BOC may offer
electronic publishing. Section 274(a) states that no BOC or BOC
affiliate ``may engage in the provision of electronic publishing that
is disseminated by means of such [BOC's] or any of its affiliates'
basic telephone service, except that nothing in this section shall
prohibit a separated affiliate or electronic publishing joint venture
operated in accordance with this section from engaging in the provision
of electronic publishing.'' We tentatively conclude, therefore, that a
BOC or BOC affiliate may engage in the provision of electronic
publishing services disseminated by means of a BOC or its affiliate's
basic telephone service only through a ``separated affiliate'' or an
``electronic publishing joint venture.'' We seek comment on this
tentative conclusion.
33. Section 274(i)(9) defines a ``separated affiliate'' as ``a
corporation under common ownership or control with a [BOC] that does
not own or control a [BOC] and is not owned or controlled by a [BOC]
and that engages in the provision of electronic publishing which is
disseminated by means of such [BOC's] or any of its affiliates' basic
telephone service.'' The term ``control'' (including the terms
``controlling,'' ``controlled by'' and ``under common control with'')
is defined as the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract, or otherwise.
34. Section 274(i)(5) defines an ``electronic publishing joint
venture'' as ``a joint venture owned by a [BOC] or affiliate that
engages in the provision of electronic publishing which is disseminated
by means of such [BOC's] or any of its affiliates' basic telephone
service.'' As will be discussed in more detail below, however, this
definition of an electronic publishing joint venture may be
circumscribed by section 274(c)(2)(C), which appears to limit the
percentage of ownership and the right to revenues a BOC may have in an
electronic publishing joint venture. Parties are invited to comment on
this interpretation.
2. Structural Separation and Transactional Requirements
35. Section 274(b) provides that a ``separated affiliate or
electronic publishing joint venture shall be operated independently''
from the BOC and then lists nine structural separation and
transactional requirements that apply to the separated affiliate or
electronic publishing joint venture established pursuant to section
274(a). As indicated below, the structural separation requirements of
section 274(b) do not apply equally to separated affiliates and
electronic publishing joint ventures. In light of these differences, we
seek comment on whether Congress intended the phrase ``operated
independently'' to have a different meaning for separated affiliates
and for electronic publishing joint ventures. Moreover, we invite
parties to comment on what additional regulatory requirements we should
adopt, if any, to ensure compliance with the ``operated independently''
requirement of section 274(b).
a. Section 274(b)(2)
36. Section 274(b)(2) states that a separated affiliate or
electronic publishing joint venture and the BOC with which it is
affiliated shall ``not incur debt in a manner that would permit a
creditor of the separated affiliate or joint venture upon default to
have recourse to the assets of the [BOC].'' In the BOC In-Region NPRM,
we noted that such a restriction appears to be designed to protect
subscribers to a BOC's exchange and exchange access services from
bearing the cost of default upon the part of BOC affiliates.
37. We request comment on what types of activities a BOC, a
separated affiliate, or an electronic publishing joint venture are
precluded from engaging in under this provision. We tentatively
conclude that a BOC may not cosign a contract, or any other instrument,
with a separated affiliate or an electronic publishing joint venture
that would incur debt in violation of section 274(b)(2). We seek
comment on this tentative conclusion. We also seek comment on whether
this subsection affects a separated affiliate differently from an
electronic publishing joint venture because of the different corporate
relationship that exists between a separated affiliate and a BOC, and
an electronic publishing joint venture and a BOC.
38. Parties are invited to comment on whether we should establish
specific requirements regarding the types of activities that are
contemplated by section 274(b)(2). To the extent that there are a range
of options, we seek comment on the relative costs and benefits of each.
b. Section 274(b)(5)
39. Section 274(b)(5) states that a separated affiliate and a BOC
shall ``(A) have no officers, directors, and employees in common after
the effective date of this section; and (B) own no property in
common.'' Because this provision explicitly refers only to the
relationship between a separated affiliate and a BOC, we tentatively
conclude that a BOC may share officers, directors, and employees with
an electronic publishing joint venture. For this same reason, we also
tentatively conclude that a BOC and an electronic publishing joint
venture may own ``property in common.'' We seek comment on these
tentative conclusions.
40. We also seek comment on the extent of the separation between a
BOC and a separated affiliate required by section 274(b)(5)(A). We
note, for example, that section 274(c)(2) permits joint marketing
activities between a BOC and either a separated affiliate or electronic
publishing joint venture under certain conditions. With respect to a
BOC and a separated affiliate, therefore, we seek comment on whether,
to the extent that they are engaged in permissible joint marketing
activities, the separated affiliate may share marketing personnel with
the BOC. Further, we seek comment on how BOCs may engage in joint
marketing activities with a separated affiliate pursuant to section
274(c)(2)(A) if they cannot share marketing personnel. For example,
although it is possible that the statute would allow the separate
marketing personnel of the BOC and the separated affiliate to each
market the services of the other, this scenario would reduce the
efficiencies generally associated with joint marketing ventures. We
seek guidance, therefore, on the practical implications of these
provisions and whether they can be harmonized.
41. We also invite parties to comment on the types of property
encompassed by the phrase ``property in common.'' We tentatively
conclude that section 274(b)(5)(B) prohibits a BOC and its separated
affiliate from jointly owning goods, facilities, and physical space. In
[[Page 39391]]
addition, we tentatively conclude that it also prohibits the joint
ownership of telecommunications transmission and switching facilities,
one of the separation requirements we previously adopted for
independent LECs in the Competitive Carrier Fifth Report and Order (49
FR 34824 (September 4, 1984)). We seek comment on these tentative
conclusions.
42. In addition, although section 274(b)(5)(B) explicitly prohibits
the ownership of common property between a BOC and a separated
affiliate, does it also prohibit a BOC and a separated affiliate from
sharing the use of property owned by one entity or the other? Does it
prohibit them from jointly leasing any property? We seek comment on
these issues.
c. Section 274(b)(6)
43. Section 274(b)(6) states that a separated affiliate or
electronic publishing joint venture and the BOC with which it is
affiliated shall ``not use for the marketing of any product or service
of the separated affiliate or joint venture, the name, trademarks, or
service marks of an existing [BOC] except for names, trademarks, or
service marks that are owned by the entity that owns or controls the
[BOC].'' Because this provision appears to be quite precise, we
tentatively conclude that the adoption of regulations to implement this
provision is unnecessary. We seek comment on this tentative conclusion.
d. Section 274(b)(7)
44. Section 274(b)(7) states that a BOC is not permitted ``(A) to
perform hiring or training of personnel on behalf of a separated
affiliate; (B) to perform the purchasing, installation, or maintenance
of equipment on behalf of a separated affiliate, except for telephone
service that it provides under tariff or contract subject to the
provisions of this section; or (C) to perform research and development
on behalf of a separated affiliate.'' Similar to section 274(b)(5),
this provision refers explicitly to the relationship between a BOC and
a separated affiliate. We tentatively conclude, therefore, that a BOC
is permitted to perform these activities on behalf of an electronic
publishing joint venture. We seek comment on this tentative conclusion.
45. To the extent that a BOC and a separated affiliate are engaged
in permissible joint marketing activities, we seek comment on whether
they may perform the hiring or training of marketing personnel on
behalf of the separated affiliate under section 274(b)(7)(A). We also
seek comment on the type of ``equipment'' encompassed by section
274(b)(7)(B). For example, if a BOC is providing telephone service to a
separated affiliate under tariff or contract subject to the
requirements of section 274, does this subsection permit the BOC to
purchase, install, and maintain transmission equipment for the
separated affiliate? We invite parties to comment on these issues.
46. In addition, although the statute is clear that a BOC may not
perform research and development on behalf of a separated affiliate
under 274(b)(7)(C), are there any circumstances under which a BOC may
share its research and development with a separated affiliate? Does
this provision simply limit a BOC's ability to perform research and
development for the sole and exclusive use of a separated affiliate, or
must the BOC refrain from performing any research or development that
may potentially be of use to a separated affiliate? We also seek
comment on other ways in which this provision may limit a BOC's ability
to perform research and development generally.
3. Comparison to Separate Affiliate Requirement of Section 272
47. We seek comment on the interrelationship between the
requirements for a ``separate affiliate'' in section 272(b) and the
requirements for a ``separated affiliate'' and ``electronic publishing
joint venture'' in section 274(b). We believe that identifying the
specific differences in these statutory requirements is important for
two reasons. First, it will facilitate BOC compliance with the statute.
As mentioned above, BOCs are currently providing electronic publishing
as well as other information services on an integrated basis and have
until February 8, 1997, to bring their provision of electronic
publishing services into compliance with the structural separation
requirements of section 274(b). Under the 1996 Act, therefore, BOCs
must first distinguish electronic publishing services from other
information services and then provide their electronic publishing
services consistent with the requirements of section 274(b) and their
other information services consistent with the requirements of section
272(b). To the extent that certain BOCs currently are providing all of
their information services on an integrated basis, we seek comment on
what modifications BOCs would have to make to their current provision
of service in order to provide electronic publishing services in
compliance with the separated affiliate or electronic publishing joint
venture requirements of section 274.
48. Second, in the BOC In-Region NPRM we tentatively concluded that
a BOC may engage in the manufacturing activities, interLATA
telecommunications services, and interLATA information services
permitted by section 272 through a single separate affiliate as long as
all the requirements imposed by section 272 and our implementing
regulations were satisfied. In view of this tentative conclusion, we
seek comment on whether a BOC may provide electronic publishing
services through the same entity or affiliate through which it provides
its interLATA information services. We also seek comment on whether a
BOC may provide electronic publishing services through the same entity
or affiliate through which it provides in-region interLATA
telecommunications services, manufacturing activities, and interLATA
information services. In addition, if the BOC does choose to provide
any or all of its section 272 services and its section 274 electronic
publishing services through the same entity, we seek comment on whether
the BOC would have to comply with the requirements of section 272,
section 274, or both.
C. Joint Marketing
1. Restrictions on Joint Marketing Activities--Section 274(c)(1)
49. Section 274(c)(1) of the 1996 Act sets forth several
restrictions on joint marketing activities in which a BOC and an
affiliate may engage, with certain exceptions. Section 274(c)(1)(A)
specifically states that ``a [BOC] shall not carry out any promotion,
marketing, sales, or advertising for or in conjunction with a separated
affiliate.'' Section 274(c)(1)(B) provides that ``a [BOC] shall not
carry out any promotion, marketing, sales, or advertising for or in
conjunction with an affiliate that is related to the provision of
electronic publishing.'' Because the definition of ``affiliate'' in
section 274 expressly excludes a ``separated affiliate,'' we seek
comment on what is meant by section 274(c)(1)(B).
50. We note that the clause ``that is related to the provision of
electronic publishing'' in section 274(c)(1)(B) may be interpreted to
modify either the ``promotion, marketing, sales, or advertising''
activities that are circumscribed by that section, or the word
``affiliate.'' If we were to adopt the former interpretation, then
section 274(c)(1)(B) would prohibit a BOC from carrying out any
promotion, marketing, sales or advertising activities ``related to the
provision of electronic publishing''
[[Page 39392]]
with any affiliate, regardless of the type of business in which such
affiliate engaged. On the other hand, if we were to adopt the latter
interpretation, i.e., that the clause ``that is related to the
provision of electronic publishing'' modifies the word ``affiliate,''
then the affiliate prohibited by section 274(c)(1)(B) from engaging in
joint marketing activities with a BOC would be one that were in some
manner related to the provision of electronic publishing. We therefore
seek comment on the proper interpretation of section 274(c)(1)(B).
Parties arguing for a particular interpretation should state the basis
for their interpretation and should demonstrate why an alternative
construction is not warranted.
51. The joint marketing prohibitions in section 274(c)(1)(B) would
appear not to apply to an electronic publishing joint venture. Under
section 274(c)(2)(C), a BOC is expressly permitted to ``provide
promotion, marketing, sales or advertising personnel and services'' to
an electronic publishing joint venture in which it participates. We
therefore tentatively conclude that the term ``affiliate'' in
subsection (c)(1)(B) excludes an electronic publishing joint venture.
We seek comment on whether that interpretation is consistent with other
provisions in section 274.
52. Assuming section 274(c)(2)(C) may be read to except electronic
publishing joint ventures from the joint marketing restrictions in
section 274(c)(1), it is still unclear to what extent section
274(c)(2)(C) authorizes BOCs to engage in marketing activities with
such joint ventures. Other provisions in section 274 appear to
circumscribe a BOC's otherwise permissible joint marketing activities
under section 274(c)(2)(C). In particular, section 274(b)(6) prohibits
an electronic publishing joint venture or a separated affiliate from
using the ``name, trademark, or service marks of an existing [BOC]''
for the marketing of any product or service, while section 274(c)(2)(A)
permits a BOC to provide inbound telemarketing services to, among other
things, an electronic publishing joint venture under certain
conditions. We thus seek comment on the extent to which section
274(c)(2)(C) allows a BOC to market jointly with an electronic
publishing joint venture in light of those other sections.
53. The term ``joint marketing'' is not explicitly defined in the
1996 Act. Similarly, the legislative history does not address the
meaning of that term. In the context of section 274(c)(1), ``joint
marketing'' appears to contemplate the ``promotion, marketing, sales,
or advertising'' by a BOC for or with an affiliate. We tentatively
conclude that such activities encompass prohibitions on advertising the
availability of local exchange or other BOC services together with the
BOC's electronic publishing services, making those services available
from a single source and providing bundling discounts for the purchase
of both electronic publishing and local exchange services. We seek
comment on that tentative conclusion and on whether any other types of
prohibitions are contemplated. We also request comment on the
distinction, if any, between the term ``carry out'' in sections
274(c)(1)(A) and (B) and the term ``provide'' in section 274(c)(2)(C).
We seek comment on whether and to what extent the joint marketing
provisions in section 272(g) and the customer proprietary network
information (``CPNI'') provisions in section 222 affect implementation
of section 274.
2. Permissible Joint Activities--Section 274(c)(2)
54. Section 274(c)(2) permits three types of joint activities
between a BOC and a separated affiliate, electronic publishing joint
venture, affiliate, or unaffiliated electronic publisher under
specified conditions. Under subsection (c)(2)(A), a BOC may provide
``inbound telemarketing'' or ``referral services related to the
provision of electronic publishing for a separated affiliate,
electronic publishing joint venture, affiliate, or unaffiliated
electronic publisher: [p]rovided [t]hat if such services are provided
to a separated affiliate, electronic publishing joint venture, or
affiliate, such services shall be made available to all electronic
publishers on request, at nondiscriminatory terms.''
55. The statute is silent as to the specific types of obligations
section 274(c)(2)(A) imposes on a BOC. Similarly, the Joint Explanatory
Statement does not address that question. According to the Committee
Report accompanying H.R. 1555, a BOC is permitted under the provision
to refer a customer who requests information regarding an electronic
publishing service to its affiliate, but that BOC must make such
referral service available to unaffiliated providers on the same terms,
conditions and prices. The Report also states that outbound
telemarketing or similar activities in which a call is initiated by a
BOC, its affiliate or someone on its behalf, is prohibited. We seek
comment on whether the conditions imposed on inbound telemarketing
discussed in the House Report should be adopted. We also seek comment
on the significance of the legislative history regarding the
prohibition on outbound telemarketing and whether we should adopt any
regulations pertaining to outbound telemarketing.
56. In addition to certain joint telemarketing activities, a BOC is
permitted to engage in ``teaming'' or ``business arrangements'' to
provide electronic publishing under certain conditions pursuant to
section 274(c)(2)(B). Section 274(c)(2)(B) specifically states that ``a
[BOC] may engage in nondiscriminatory teaming or business arrangements
to engage in electronic publishing with any separated affiliate or with
any other electronic publisher if (i) the [BOC] only provides
facilities, services, and basic telephone service information as
authorized by this section, and (ii) the [BOC] does not own such
teaming or business arrangement.'' Neither the statute nor the
legislative history defines ``teaming or business arrangement.'' We
request comment on what types of arrangements are encompassed by those
terms.
57. Section 274(c)(2)(B) appears to permit a BOC to participate in
any type of business arrangement to engage in electronic publishing so
long as the BOC complies with the conditions set forth therein. On the
other hand, that section arguably may apply only to joint marketing
arrangements in which a BOC participates, since it was placed under the
``Joint Marketing'' subheading in section 274(c). We seek comment on
the significance, if any, of section 274(c)(2)(B)'s placement under the
``Joint Marketing'' provisions in section 274(c) and the extent to
which section 274(c)(2)(B) may be interpreted to address joint business
activities for which joint marketing is allowed under certain
conditions. We also seek comment on what regulations, if any, are
necessary to ensure that the arrangements in which BOCs engage pursuant
to section 274(c)(2)(B) are ``nondiscriminatory.'' In addition, we seek
comment on how the provision of ``basic telephone service information''
under that section relates to the requirements in section 222 for
access to and use of CPNI.
58. The third joint activity in which a BOC is permitted to engage
is an electronic publishing joint venture. Section 274(c)(2)(C)
expressly permits a BOC or affiliate ``to participate on a nonexclusive
basis in electronic publishing joint ventures with entities that are
not a [BOC], affiliate, or separated affiliate to provide electronic
publishing services.'' The BOC or affiliate, however, may not hold more
than a 50 percent direct or indirect
[[Page 39393]]
equity interest (or the equivalent thereof) or the right to more than
50 percent of the gross revenues under a revenue sharing or royalty
agreement in any electronic publishing joint venture. In addition,
officers and employees of a BOC or affiliate participating in an
electronic publishing joint venture may hold no greater than 50 percent
of the voting control over the joint venture. The House Report states
that such restriction prohibits officers and employees of a BOC from
``collectively having more than 50 percent of the voting control of the
venture.''
59. The term ``electronic publishing joint venture,'' as defined in
section 274(i)(5), contemplates a degree of ownership by a BOC or
affiliate. As noted above, the term ``own'' with respect to an entity
means ``to have a direct or indirect equity interest (or the equivalent
thereof) of more than 10 percent of an entity, or the right to more
than 10 percent of the gross revenues of an entity under a revenue
sharing or royalty agreement.'' Therefore, it appears that an
electronic publishing joint venture is a joint venture in which a BOC
or affiliate, inter alia, holds greater than a 10 percent ownership
interest or the right to more than 10 percent of the venture's gross
revenues. Section 274(c)(2)(C) appears to prohibit a BOC, or its
affiliate, or their officers and employees from owning more than 50
percent of a joint venture or obtaining the right to more than 50
percent of the venture's gross revenues. We tentatively conclude that a
BOC is deemed to ``own'' an electronic publishing joint venture if it
holds greater than a 10 percent but not more than a 50 percent direct
or indirect equity interest in the venture, or has the right to greater
than 10 percent but not more than 50 percent of the venture's gross
revenues. We seek comment on that conclusion.
60. Section 274(c)(2)(C) also provides that, ``in the case of joint
ventures with small, local electronic publishers, the Commission for
good cause shown may authorize [a BOC] or affiliate to have a larger
equity interest, revenue share, or voting control but not to exceed
80%.'' The term ``small, local electronic publisher'' is not defined in
the statute. While the Joint Explanatory Statement also is silent,
according to the House Report, the term was intended to apply to
publishers serving communities of fewer than 50,000 persons.
61. Unlike services whose geographic market areas are defined by
analog technical limitations or pre-established geographic boundaries,
electronic publishing, by definition, contemplates the dissemination of
information to the general public. If we adopt a rule that defines a
small, local electronic publisher as an entity serving communities of
fewer than 50,000, how should we determine the service area of a
``small, local electronic publisher'' for the purpose of applying the
80% threshold? To the extent parties conclude that the service area of
such an electronic publisher cannot readily be defined by the number of
persons within a community, we request comment on whether it would be
consistent with the intent of Congress as expressed in the legislative
history for us to adopt additional standards for determining which
electronic publishers are subject to the 80% threshold, and, if so,
what such standards should be. Commenters answering that question in
the affirmative also are asked to address whether ``small'' should be
defined in terms of the gross revenues of an electronic publisher, or
in other terms. We also seek comment on how we should define ``local''
under section 274(c)(2)(C).
62. With respect to section 274(c)(2)(C)'s provision allowing
waiver of the 50% equity interest and revenue share limitation in the
case of joint ventures with small, local electronic publishers for
``good cause shown,'' we note that the Commission currently may waive
its rules for ``good cause.'' We seek comment on the ``good cause''
showing that is required in order for a BOC to hold a greater interest
in a small, local electronic publisher under section 274(c)(2)(C), and
whether any additional regulations are necessary to implement the
``good cause'' waiver provision in section 274(c)(2)(C).
63. We also seek comment on what regulations, if any, are necessary
to ensure that a BOC participates in an electronic publishing joint
venture under section 274(c)(2)(C) on a ``nonexclusive'' basis. Neither
the statute nor the legislative history indicates what types of
arrangements are prohibited under that provision. As an initial matter,
we note that this prohibition appears to bar arrangements whereby a BOC
participates in an electronic publishing joint venture with an
electronic publishing entity to the exclusion of all other such
entities. We invite parties to comment specifically on whether the
provision prohibits contracts between a BOC and an electronic publisher
whereby the electronic publisher is committed to purchase basic
transmission services necessary to provide electronic publishing
exclusively from such BOC or whether the provision contemplates other
types of prohibitions.
D. Nondiscrimination Safeguards
64. We also seek comment on whether and the extent to which
regulations are necessary to implement the nondiscrimination safeguards
for electronic publishing set forth in section 274(d). That section
states that a BOC ``under common ownership or control with a separated
affiliate or electronic publishing joint venture shall provide network
access and interconnections for basic telephone service to electronic
publishers at just and reasonable rates that are tariffed (so long as
rates for such services are subject to regulation) and that are not
higher on a per-unit basis than those charged for such services to any
other electronic publisher or any separated affiliate engaged in
electronic publishing.''
65. Prior to the 1996 Act, electronic publishing services were
regulated as enhanced services and were subject to the
nondiscrimination requirements established under our Computer II and
Computer III regimes. Under Computer III, BOCs have been allowed to
provide enhanced services on an integrated basis pursuant to approved
CEI plans as well as rules regarding nondiscriminatory access to
unbundled network elements, network information disclosure, limitations
on use of CPNI, and nondiscrimination in quality of service,
installation and maintenance. Moreover, under Computer III and Open
Network Architecture (``ONA''), BOCs have been required to provide at
tariffed rates nondiscriminatory interconnection to unbundled network
elements used to provide enhanced services. We conclude that these
requirements continue to apply to the extent they are not inconsistent
with the 1996 Act. We seek comment on whether the requirements of
Computer III and ONA are consistent with the nondiscrimination
requirements of section 274(d). To the extent that parties argue they
are inconsistent, we seek comment on what regulations are necessary to
implement section 274(d). Commenting parties should propose specific
regulations and demonstrate in detail how section 274(d) makes them
necessary.
66. Section 274(d) requires that a BOC under common ownership or
control with a separated affiliate or electronic publishing joint
venture must provide other electronic publishers ``network access and
interconnections for basic telephone service'' at ``just and reasonable
rates that are tariffed'' and that are not higher than the rates it
charges to its own affiliates or other competing electronic publishers.
The term ``basic telephone service'' is
[[Page 39394]]
defined in section 274(i)(2) as ``any wireline telephone exchange
service, or wireline telephone exchange service facility, provided by a
[BOC] * * *'' excluding competitive services introduced after
divestiture and mobile services. We interpret this section to require
BOCs to provide unaffiliated electronic publishers with access to ``any
wireline telephone exchange service'' and/or interconnection to any
``wireline telephone exchange service facility'' that it provides to
its electronic publishing affiliate or joint venture. We seek comment
on this interpretation. We tentatively conclude that the unbundling and
network disclosure requirements of Computer III apply to this situation
to the extent they are not inconsistent with the 1996 Act. We seek
comment on whether those requirements are consistent with the
requirements set forth in section 274(d).
67. We also seek comment on the meaning of the requirement that
access and interconnection be provided to electronic publishers ``at
just and reasonable rates that are tariffed (so long as rates for such
services are subject to regulation).'' We note that carriers currently
are obligated under section 201(b) to provide communications services
at ``charges'' that are ``just and reasonable.'' Section 274(d), in
contrast, requires that rates not be ``higher on a per-unit basis than
those charged for such services to any other electronic publisher.'' We
interpret this provision to require that BOCs offer necessary ``basic
telephone service'' to all electronic publishers at uniform rates.
Volume discounts or other preferential rates, therefore, would be
unlawful because basic telephone services would be provided to some
electronic publishers at higher per-unit rates than rates charged to
other publishers. We seek comment on this tentative conclusion. We also
seek comment on how we should interpret the requirement that ``rates be
tariffed (so long as rates for such services are subject to
regulation).'' We tentatively conclude that this section does not
require BOCs to file tariffs for services that no longer are subject to
tariff regulation. We seek comment on this tentative conclusion.
IV. Alarm Monitoring
68. Section 275(e) defines ``alarm monitoring service'' as ``a
service that uses a device located at a residence, place of business,
or other fixed premises (1) to receive signals from other devices
located at or about such premises regarding a possible threat at such
premises to life, safety, or property, from burglary, fire, vandalism,
bodily injury, or other emergency, and (2) to transmit a signal
regarding such threat by means of transmission facilities of a [LEC] or
one of its affiliates to a remote monitoring center to alert a person''
of such threat. Section 275(a) delays until February 8, 2001 entry into
alarm monitoring by a BOC or its affiliate that was not providing this
service as of November 30, 1995.
69. We seek to define more clearly the services that are included
in the definition of alarm monitoring. Alarm monitoring service as
defined in section 275(e) appears to fall within the definition of
``information service'' in section 3(20) of the Act. We also note that
section 272(a)(2)(C) specifically exempts alarm monitoring service from
the separate affiliate requirement applicable to other interLATA
information services. We tentatively conclude, therefore, that the
provision of underlying basic tariffed telecommunications services
alone, without an enhanced or information component, does not fall
within the definition of alarm monitoring service under section 275(e).
We note, for example, that Ameritech and US West both provide basic
tariffed telecommunications services used for alarm monitoring. These
tariffed services do not involve enhanced or information features and,
therefore, do not appear to be subject to the 1996 Act requirements. We
seek comment on this tentative conclusion.
70. Currently, it appears that only one BOC provides alarm
monitoring service as an information service. Ameritech provides an
alarm monitoring service directly to end-user customers, including the
sale, installation, monitoring and maintenance of monitoring and
control systems for end-users. This service is provided on an
integrated basis pursuant to a CEI plan on file. We tentatively
conclude that this service qualifies as an alarm monitoring service
under section 275(e) and is therefore grandfathered under section
275(a)(2). We seek comment on this tentative conclusion. We also seek
comment on whether any other services provided by BOCs should be
considered alarm monitoring services under section 275(e) and
grandfathered under section 275(a)(2). For example, US West asserts
that an enhanced service it provides called ``Versanet'' which is used
by alarm monitoring companies to monitor residence and business
locations for burglary, fire, or life safety events, is an alarm
monitoring service under section 275(e). US West provides this service
on an integrated basis pursuant to a waiver of Commission rules. We
seek comment on whether this service constitutes an alarm monitoring
service under section 275(e) and is grandfathered under section
275(a)(2).
71. We also seek comment on what types of activities constitute the
``provision'' of alarm monitoring services subject to the 1996 Act.
Parties should address, with specificity, the levels and types of
involvement in alarm monitoring that would rise to the level of
``engag(ing) in the provision'' of alarm monitoring. For example, we
tentatively conclude that resale of an alarm monitoring service
constitutes the provision of such service. We seek comment on this
tentative conclusion. We also seek comment on whether, among other
things, billing and collection, sales agency, marketing, and/or various
compensation arrangements, either individually or collectively, would
constitute the provision of alarm monitoring. Parties should also
address any other factors that may be relevant in determining whether
an incumbent LEC, including a BOC, is providing an alarm monitoring
service subject to the 1996 Act.
72. Section 275(a)(2) prohibits a BOC already providing alarm
monitoring service from ``acquir(ing) any equity interest in, or
obtain(ing) financial control of, any unaffiliated alarm monitoring
service entity'' prior to February 8, 2001. Specifically excepted from
this prohibition, however, is an ``exchange of customers for the
customers of an unaffiliated alarm monitoring service entity.'' We seek
comment on whether there is a need to issue regulations to further
define the terms of section 275(a)(2). For example, we seek comment
specifically on what is meant by ``equity interest'' and ``financial
control'' for the purpose of determining what types of transactions are
prohibited under section 275(a)(2). We also seek comment on the
conditions under which an ``exchange of customers'' would be consistent
with the Act's purposes.
73. Under section 272 the provision of alarm monitoring service is
specifically exempted from the separate affiliate and nondiscrimination
requirements that would otherwise apply to the provision of interLATA
information services. We also note that, in contrast to section 272
which applies only to BOC provision of interLATA information services,
section 275 does not distinguish between the intraLATA and interLATA
provision of alarm monitoring. We seek comment, therefore, on whether
section 275 applies to BOC provision of both intraLATA and interLATA
alarm monitoring services.
74. Section 275(b)(1) requires that an incumbent LEC ``provide
nonaffiliated
[[Page 39395]]
entities, upon reasonable request, with the network services it
provides to its own alarm monitoring operations, on nondiscriminatory
terms and conditions.'' As discussed above, sections 201 and 202 of the
Communications Act already place significant nondiscrimination
obligations on common carriers. In addition, alarm monitoring has been
considered an enhanced service under the Computer III and ONA regime,
so that the BOCs have been free to provide alarm monitoring services on
an integrated basis pursuant to CEI plans filed with the Commission. We
conclude that these Computer III nondiscrimination provisions continue
to apply to the extent they are not inconsistent with the
nondiscrimination requirements of section 275(b)(1). We seek comment on
whether the existing nondiscrimination and network unbundling rules in
Computer III as they apply to BOC provision of alarm monitoring service
are consistent with the requirements of section 275 and whether they
should be applied to all incumbent LECs for the provision of alarm
monitoring. To the extent that parties argue that the nondiscrimination
provisions of Computer III and ONA are inconsistent or should not be
applied, we seek comment on whether and what types of specific
regulations are necessary to implement section 275(b)(1). Commenting
parties should state specifically what rules, if any, are required and
how section 275(b)(1) makes them necessary.
V. Telemessaging
75. Section 260 sets forth various requirements for the provision
of telemessaging service by LECs subject to the requirements of section
251(c). Our rules permit the BOCs to provide telemessaging on an
integrated basis, subject to CEI and ONA requirements. Other LECs have
been permitted to provide telemessaging subject only to the
requirements of sections 201 and 202, which apply to all common
carriers, including the BOCs. Like sections 274 and 275, section 260
does not distinguish between the intraLATA and interLATA provision of
telemessaging. We seek comment, therefore, on whether section 260
applies to BOC provision of telemessaging, both on an intraLATA and
interLATA basis. In the BOC In-Region NPRM, we tentatively concluded
that telemessaging is an information service subject to section 272's
separate affiliate and nondiscrimination requirements, and therefore,
BOC provision of this service on an interLATA basis would be subject to
the requirements of section 272 in addition to the requirements of
section 260. If we decide not to adopt that tentative conclusion, we
seek comment on whether BOCs providing telemessaging services on either
an inter- or intraLATA basis would be subject only to the requirements
of section 260.
76. Section 260 defines ``telemessaging service'' as ``voice mail
and voice storage and retrieval services, any live operator services
used to record, transcribe, or relay messages (other than
telecommunications relay services), and any ancillary services offered
in combination with these services.'' We seek comment on whether rules
are necessary to clarify any ambiguities that may exist in this
definition. We also invite parties to address the types of services
contemplated by the term ``ancillary services,'' and to provide
specific examples.
77. Section 260 also sets out specific nondiscrimination
requirements applicable to LECs that are engaged in the provision of
telemessaging. Section 260(a)(2) provides that a LEC that provides
telemessaging service ``shall not prefer or discriminate in favor of
its telemessaging service operations in its provision of
telecommunications services.'' We seek comment on the extent to which
this section imposes greater obligations on LECs providing
telemessaging service than currently exist under sections 201 and 202
of the Act. We conclude that the requirements of Computer III and ONA
continue to apply to the extent not inconsistent with section 260. We
seek comment on whether the nondiscrimination provisions of Computer
III and ONA are consistent with section 260(a)(2), and whether these
provisions should be applied just to BOCs or to all incumbent LECs to
fulfill the requirements of section 260(a)(2). To the extent that
parties argue that the nondiscrimination provisions of Computer III and
ONA are inconsistent or should not be applied, we seek comment on
whether and what types of specific regulations are necessary to
implement section 260(a)(2). Commenting parties should state
specifically what rules, if any, are required and how section 260(a)(2)
makes them necessary.
VI. Enforcement Issues
A. Electronic Publishing--Section 274(e)
78. Section 274(e) provides a private right of action to any person
claiming that an act or practice of a BOC, affiliate, or separated
affiliate has violated section 274. Under section 274(e)(1), such
person may file a complaint with the Commission or bring suit as
provided in section 207. Section 274(e)(1) also states that a BOC,
affiliate, or separated affiliate shall be liable as provided in
section 206, except that damages may not be awarded for a violation
``that is discovered by a compliance review'' as required by section
274(b)(8) and ``corrected within 90 days.'' In addition to damages,
section 274(e)(2) permits an aggrieved person to apply to the
Commission for a cease and desist order or to a U.S. District Court for
an injunction or an order compelling compliance.
79. Parties are invited to comment on the legal and evidentiary
standards necessary to establish that a BOC has violated section 274.
Commenters should describe what specific acts or omissions are
sufficient to state a prima facie claim for relief under this section.
Currently, in a typical complaint proceeding, the complainant generally
has the burden of establishing that a common carrier has violated the
Communications Act or a Commission rule or order. Ordinarily, this
burden of proof does not, at any time in the proceeding, shift to the
defendant carrier. In the BOC In-Region NPRM we sought comment on
whether, for purposes of complaints arising under section 271(d)(6)(B),
shifting the ultimate burden of proof from the complainant to the
defendant advances the pro-competitive goals of the 1996 Act. We seek
comment on whether there are similar policy concerns for doing this in
the context of section 274 as well.
80. We also ask parties to comment specifically on what showing, if
any, is required for the issuance of a cease and desist order under
section 274. For example, would the evidentiary showing be different
for a complainant seeking damages under section 274(e)(1) as opposed to
one seeking a cease and desist order under 274(e)(2)? We also seek
comment on what actions, if any, the Commission should take to deter
violations of, and facilitate the prompt disposition of, complaints
under section 274.
B. Telemessaging and Alarm Monitoring--Sections 260(b) and 275(c)
81. Sections 260(b) and 275(c) require that the Commission
establish expedited procedures for the receipt and review of complaints
alleging violations of the nondiscrimination provisions in sections
260(a) and 275(b), or regulations adopted pursuant thereto, that result
in ``material financial harm'' to a provider of alarm monitoring or
telemessaging service, respectively. Such procedures must ``ensure that
the
[[Page 39396]]
Commission will make a final determination with respect to any such
complaint within 120 days after receipt of the complaint.'' In
addition, these sections provide that if a complaint ``contains an
appropriate showing that the alleged violation occurred, as determined
by the Commission in accordance with such regulations,'' the Commission
must, within 60 days, order the incumbent LEC and its affiliates ``to
cease engaging in such violation pending such final determination.''
82. Apart from the expedited complaint procedures themselves, which
will be addressed in a separate proceeding, we seek comment on the
legal and evidentiary standards necessary to ensure a full and fair
resolution of complaints filed under section 260 and 275 within the
120-day statutory window. Parties are invited to comment on what prima
facie showing should be required of a complainant that invokes the 120-
day complaint resolution requirement. Commenters should describe what
specific acts or omissions are sufficient to state a prima facie claim
for relief under section 260 and 275. As noted above, in the BOC In-
Region NPRM we sought comment on whether, for purposes of complaints
arising under section 271(d)(6)(B), shifting the ultimate burden of
proof from the complainant to the defendant advances the pro-
competitive goals of the 1996 Act. We seek comment on whether there are
similar policy concerns for doing this in the context of sections 260
and 275 as well.
83. Although parties filing complaints under section 208 are not
required to show direct damage, sections 260(b) and 275(c) require that
complainants availing themselves of the expedited complaint procedures
establish ``material financial harm.'' We seek comment, therefore, on
the meaning of ``material financial harm'' in these sections. Should
there be a particular legal or evidentiary showing that the complaint
must make in order to demonstrate material financial harm, or should
the Commission decide the materiality of the harm on an individual case
basis? If the complainant's pleadings allege a violation of the
nondiscrimination requirements of sections 260 or 275, but do not
demonstrate material financial harm, should the complainant still be
entitled to an expedited review? We invite parties to comment on these
issues.
84. In addition, we seek comment on what type of showing
constitutes an ``appropriate showing'' for the Commission to issue the
LEC an order ``to cease engaging'' in an alleged violation of section
260 or 275. Would it be enough for the complainant to establish a prima
facie showing of discrimination? We also seek comment on the meaning of
an order ``to cease engaging'' under sections 260(b) and 275(c). Do
these sections give the Commission authority to issue a cease and
desist order similar to the one in section 274(e)(2)? If so, parties
should comment on whether the showing under section 274 differs in any
material respect from the showing required under sections 260 and 275.
We also seek comment on what actions the Commission should take to
deter violations of, and facilitate the prompt disposition of,
complaints under sections 260 and 275.
VII. Conclusion
85. We seek comment on the foregoing issues regarding the
implementation of the non-accounting separate affiliate and
nondiscrimination requirements of sections 274, 275 and 260 of the 1996
Act. Any party disagreeing with our tentative conclusions should
explain with specificity in terms of costs and benefits its position
and suggest alternative regulatory policies.
VIII. Procedural Issues
A. Ex Parte Presentations
86. This is a non-restricted notice-and-comment rulemaking
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided that they are disclosed as provided in
the Commission's rules. See generally 47 CFR 1.1202, 1.1203 and 1.1206.
B. Regulatory Flexibility Analysis
87. Section 603 of the Regulatory Flexibility Act, as amended,
requires an initial regulatory flexibility analysis in notice and
comment rulemaking proceedings, unless we certify that ``the rule will
not, if promulgated, have a significant economic impact on a
significant number of small entities.'' The Regulatory Flexibility Act
generally defines the term ``small entity'' as having the same meaning
as ``small-business concern'' under the Small Business Act, which
defines ``small-business concern'' as ``one which is independently
owned and operated and which is not dominant in its field of operation
* * *.'' This proceeding pertains to the BOCs and other ILECs which,
because they are dominant in their field of operations, are by
definition not small entities under the Regulatory Flexibility Act. We
therefore certify, pursuant to Section 605(b) of the Regulatory
Flexibility Act, that the rules will not, if promulgated, have a
significant economic impact on a substantial number of small entities.
The Secretary shall send a copy of this Notice, including this
certification and statement, to the Chief Counsel for Advocacy of the
Small Business Administration. A copy of this certification will also
be published in the Federal Register notice.
C. Initial Paperwork Reduction Act of 1995 Analysis
88. This NPRM contains either a proposed or modified information
collection. As part of its continuing effort to reduce paperwork
burdens, we invite the general public and the Office of Management and
Budget (OMB) to take this opportunity to comment on the information
collections contained in this NPRM, as required by the Paperwork
Reduction Act of 1995, Public Law No. 104-13. Public and agency
comments are due September 4, 1996; OMB comments are due September 27,
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.
D. Comment Filing Procedures
89. Pursuant to applicable procedures set forth in Secs. 1.415 and
1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested
parties may file comments on or before September 4, 1996 and reply
comments on or before September 20, 1996. To file formally in this
proceeding, you must file an original and six copies of all comments,
reply comments, and supporting comments. If you would like each
Commissioner to receive a personal copy of your comments, you must file
an original and eleven copies. Comments and reply comments should be
sent to Office of the Secretary, Federal Communications Commission,
1919 M Street, NW., Room 222, Washington, DC 20554, with a copy to
Janice Myles of the Common Carrier Bureau, 1919 M Street, NW., Room
544, Washington, DC 20554. Parties should also file one copy of any
documents filed in this docket with the Commission's copy contractor,
International Transcription Services,
[[Page 39397]]
Inc., 2100 M Street, NW., Suite 140, Washington, DC 20037. Comments and
reply comments will be available for public inspection during regular
business hours in the FCC Reference Center, 1919 M Street, NW., Room
239, Washington, DC 20554.
90. In order to facilitate review of comments and reply comments,
both by parties and by Commission staff, we require that comments be no
longer than thirty-five (35) printed pages and reply comments be no
longer than twenty-five (25) printed pages. Page limits do not include
proposed rules, which parties are encouraged to submit. Comments and
reply comments must include a short and concise summary of the
substantive arguments raised in the pleading. Comments and reply
comments must also comply with Section 1.49 and all other applicable
sections of the Commission's Rules. We also direct all interested
parties to include the name of the filing party and the date of the
filing on each page of their comments and reply comments. Comments and
reply comments must clearly identify the specific portion of this
Notice 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 Table of Contents of this Notice, 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 materials 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.
91. Parties are also asked to submit comments and reply comments on
diskette. Such diskette submissions would be in addition to and not in
lieu of the formal filing requirements addressed above. Parties
submitting diskettes should submit them to Janice Myles of the Common
Carrier Bureau, 1919 M Street, NW., Room 544, Washington, DC 20554.
Such submission should be on a 3.5 inch diskette formatted in an IBM
compatible form using MS DOS 5.0 and WordPerfect 5.1 software. The
diskette should be submitted in ``read only'' mode. The diskette should
be clearly labelled with the party's name, proceeding, type of pleading
(comment or reply comments) and date of submission. The diskette should
be accompanied by a cover letter.
92. Written comments by the public on the proposed and/or modified
information collections are due on September 4, 1996. Written comments
must be submitted by the Office of Management and Budget (OMB) on the
proposed and/or modified information collections on or before September
27, 1996. 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, NW., 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.
IX. Ordering Clauses
93. Accordingly, it is ordered that pursuant to sections 1, 4, 260,
274, 275, and 303(r) of the Communications Act of 1934, as amended, 47
U.S.C. Secs. 151, 154, 260, 274, 275, and 303(r), a Notice of Proposed
Rulemaking is hereby Adopted.
94. It is Further Ordered that, the Secretary shall send a copy of
this Notice of Proposed Rulemaking, including the regulatory
flexibility certification, to the Chief Counsel for Advocacy of the
Small Business Administration, in accordance with paragraph 603(a) of
the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (1981).
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 96-19136 Filed 7-25-96; 8:45 am]
BILLING CODE 6712-01-P
