[Federal Register Volume 61, Number 160 (Friday, August 16, 1996)]
[Rules and Regulations]
[Pages 42558-42564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20859]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CC Docket No. 96-61; FCC 96-331]
Implementation of Section 254(g) of the Communications Act of
1934, as Amended
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: Pursuant to Section 254(g) of the Communications Act of 1934,
which was added by Section 101(a) of the 1996 Telecommunications Act,
the Commission adopts a geographic rate averaging rule ``to require
that the rates charged by providers of interexchange telecommunications
services to subscribers in rural and high cost areas shall be no higher
than the rates charged by each such provider to its subscribers in
urban areas'' and a rate integration rule to require ``that a provider
of interstate interexchange services shall provide such services to its
subscribers in each State at rates no higher than the rates charged to
its subscribers in any other State.'' These rules will ensure that
subscribers in rural and high-cost areas will not be charged higher
rates for interexchange services than subscribers in urban areas, and
that interexchange carriers will offer services to all their service
areas--whether rural, high-cost or urban--on the same terms.
EFFECTIVE DATE: September 16, 1996.
FOR FURTHER INFORMATION CONTACT: Sherille Ismail or Neil Fried,
Competitive Pricing Division, Common Carrier Bureau, (202) 418-1530.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order adopted and released August 7, 1996. The full text of this
Commission decision is available for inspection and copying during
normal business hours in the FCC Public Reference Room (Room 239), 1919
M St., N.W., Washington, D.C. The complete text of this decision may
also be purchased from the Commission's copy contractor, International
Transcription Service, Suite 140, 2100 M Street, N.W., Washington, D.C.
20037.
Regulatory Flexibility Analysis
The Commission promulgates the rules in the Report and Order to
implement Section 254(g) of the Communication Act of 1934, as amended
by the Telecommunications Act of 1996. The objective of these rules is
``to incorporate the policies of geographic rate averaging and rate
integration of interexchange services in order to ensure that
subscribers in rural and high cost areas throughout the Nation are able
to continue to receive both intrastate and interstate interexchange
services at rates no higher than those paid by urban subscribers.''
The Regulatory Flexibility Act defines ``small entity'' to include
the definition of ``small business concern'' under the Small Business
Act, 15 U.S.C. 632. Under the Small Business Act, a ``small business
concern'' is one that (1) is independently owned and operated, (2) is
not dominant in its field of operation, and (3) meets any additional
criteria established by the Small Business Administration (SBA). Our
geographic averaging and rate integration rules will apply to all
providers of interexchange service. The SBA has not developed a
definition of small entities specifically applicable to providers of
interexchange service. The closest applicable definition under SBA
rules is for telephone communications companies other than
radiotelephone (wireless) companies. According to SBA regulations, a
telephone communications company other than a radiotelephone company is
a small business concern if it has fewer than 1,500 employees.
The most relevant employee data available from the SBA does not
enable us to make a meaningful estimate of the number of providers of
interexchange service that are small entities because it is based upon
a 1992 Census of Transportation, Communications, and Utilities survey
from which we can only
[[Page 42559]]
calculate the average number of people employed by various-sized
telephone entities other than radiotelephone companies. Based on a
Commission staff report entitled Long Distant Market Shares: Fourth
Quarter, 1995, however, we estimate that approximately 500 carriers
provide interexchange service. Some of these carriers are not
independently owned and operated, or have more than 1,500 employees.
Consequently, we estimate that our geographic averaging and rate
integration rules will apply to less than 500 ``small entities.'' We
are unable on the present record to estimate with more particularity
how many of these entities would be considered small for the purposes
of the Regulatory Flexibility Act.
No comments specifically addressed the Commission's initial
regulatory flexibility analysis. However, a number of associations that
represent, at least to some extent, the interests of small
telecommunications providers, generally supported the Commission's
proposed rules to implement geographic averaging and rate integration.
Other commenters asserted that these rules would harm small regional
providers of interexchange service in high-cost areas, arguing that
such providers would be unable to compete with nationwide carriers that
can charge lower rates by spreading their costs over a larger customer
base. A few suggested that subsidies or other support mechanisms might
alleviate their concerns. The record in this proceeding does not show
that small interexchange service providers will be disproportionately
harmed by implementation of rate integration. The practical impact of
our rules will be to require all providers of interexchange service,
including those that are small entities, to set rates on a
geographically averaged and rate-integrated basis.
To comply with our Report and Order, carriers must charge rural and
high-cost area customers for interexchange service no more than they
charge urban customers, and must charge customers for such services in
one state no more than they charge customers in any other state. The
Notice of Proposed Rulemaking (NPRM), 61 FR 14717, April 3, 1996,
proposed requiring providers of interexchange telecommunications
services to file certifications that they were complying with these
requirements in the event the Commission decides to mandate permissive
detariffing of interexchange services. We will consider later in this
proceeding what enforcement mechanisms may be necessary to support
geographic averaging and rate integration when the Commission addresses
the detariffing issue. We have proposed a requirement that AT&T,
Sprint, MCI, IT&E, GTE, and PCI submit preliminary plans no later than
February 1, 1997, to achieve rate integration for services provided to
Guam, the Northern Marianas, American Samoa, and other offshore points,
and final plans no later than June 1, 1997. The preliminary plans need
not include rates, but at a minimum should resolve service and rate-
band issues. Final plans shall include a rate schedule. Carriers
already have in place their own individualized rate schedules, which
they have presumably tailored to the areas they provide service.
Consequently, carriers' staff preparing the preliminary and final plans
will likely need no special skills other than general familiarity with
the new rate schedules that these entities are planning, or have
chosen, to adopt to comply with the rate averaging and rate integration
requirements.
Section 254(g) reflects a congressional determination that the
country's higher-cost, lower-volume markets should share in the
technological advances and increased competition characteristic of the
nation's telecommunications industry as a whole, and that interexchange
rates should be provided throughout the nation on a geographically
averaged and rate- integrated basis. As noted above, we have decided
that the statutory objectives of Section 254(g) require us to apply our
rules to all providers of interexchange service, including small ones.
We have chosen, however, to allow carriers to offer private line
service and temporary promotions on a deaveraged basis. In so doing, we
have minimized the impact our rules might otherwise have had, and
enable carriers to use such devices to enter new markets.
The Commission considered and rejected several significant
alternatives. We could have reduced burdens on small carriers by
exempting them from compliance through forbearance. However, we do not
believe that forbearing at this time would be consistent with the
congressional goals that underlie Section 254(g). We could also have
reduced burdens on small carriers by establishing cost-support
mechanisms. However, the present record does not justify any such cost-
support mechanisms. Accordingly, we decline to adopt these alternative
measures for small carriers.
Paperwork Reduction Analysis
We have decided to require AT&T, Sprint, MCI, IT&E, GTE, and PCI to
submit preliminary and final plans to achieve rate integration of Guam,
the Northern Marianas, and American Samoa by August 1, 1997. These one-
time plan requirements constitute new ``collections of information,''
within the meaning of the Paperwork Reduction Act of 1995, 44 U.S.C.
3501-3520. The public burden for these one-time collections of
information is estimated as follows:
------------------------------------------------------------------------
Burden
Title Hours per Annual per
response responses carrier
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Preliminary rate integration plan...... 30 1 30 hrs.
Final rate integration plan............ 40 1 40 hrs.
--------------------------------
Total One-Time Annual Burden: 70 hrs.
x 6 carriers = 420 hrs.
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The foregoing estimate includes the time the carriers will need to
spend: (1) Reviewing the portions of our Report & Order relevant to the
one-time plan requirements; (2) reviewing their current rate schedules;
(3) determining what rate adjustments they will need to make to their
rate schedules to comply with our rate integration rule; (4) revising
their rates in the case of the final plans; and (5) completing and
reviewing the collections of information. Send comments regarding this
burden estimate or any other aspect of the collection of information,
including suggestions for reducing the burden, to the Federal
Communications Commission, Records Management Branch, Paperwork
Reduction Project, Washington, D.C. 20554 and to the Office of
Management and Budget, Paperwork Reduction Project, Washington, D.C.
20503.
Summary of Report and Order
1. On February 8, 1996, the ``Telecommunications Act of 1996''
(1996 Act), Public Law No. 104-104, 110 Stat. 56 (1996), became law.
Section 101(a) of the 1996 Act adds Section 254(g) of the
Communications Act of 1934. Section 254(g) provides that within six
months of enactment of the 1996 Act the Commission shall adopt a
geographic rate averaging rule ``to require that the rates charged by
providers of interexchange telecommunications services to subscribers
in rural and high cost areas shall be no higher than the rates charged
by each such provider to its subscribers
[[Page 42560]]
in urban areas'' and a rate integration rule to require ``that a
provider of interstate interexchange services shall provide such
services to its subscribers in each State at rates no higher than the
rates charged to its subscribers in any other State.'' In our March 25,
1996, NPRM, we proposed rules to implement Section 254(g). In our
Report and Order we establish those rules.
I. Rate Averaging
A. General Rule
2. Although we have consistently endorsed a policy of geographic
rate averaging, we have not formally issued a rule requiring carriers
to geographically average rates. We adopt the rate averaging rule we
proposed in the NPRM that ``the rates charged by all providers of
interexchange telecommunications services to subscribers in rural and
high cost areas shall be no higher than the rates charged by each such
provider to its subscribers in urban areas.'' As required under the
1934 Act, as amended, our rule will apply to all providers of
interexchange telecommunications services and to all interexchange
``telecommunications services,'' as defined in the 1934 Act. This
definition does not create any exception for nonresidential services.
B. Contract Tariffs, Tariff 12 Offerings, Optional Calling Plans,
Discounts, Promotions, and Private Line Services
3. Section 254(g) and our geographic rate averaging rule will
require carriers to charge subscribers in rural and high-cost areas
rates for telecommunications services that are no higher than rates
offered to urban subscribers. The Commission's current policy as
reflected in AT&T tariffs, however, has permitted AT&T to offer
contract tariffs, Tariff 12 offerings, optional calling plans, and
temporary promotions, subject to some limitations. Contract tariffs and
Tariff 12 offerings generally involve discounts from basic rate
schedules. Optional calling plans offer customers discounts from basic
rate schedules, subject to terms and conditions specified in the
optional calling plan. Temporary promotions involve discounts from
basic rate schedules as well as limited sign-up periods for the
promotional discount rates. As noted, we have also permitted AT&T to
offer private line services at geographically deaveraged rates. AT&T
rates for private line services vary from LATA (Local Access and
Transport Area) to LATA, continuing pricing practices that AT&T has
historically used in setting rates for private line services.
4. The legislative history of Section 254(g) states that Congress
intended that section to ``incorporate'' our existing policy concerning
geographic rate averaging, and ``that the Commission, where
appropriate, could continue to authorize limited exceptions to the
general geographic rate averaging policy using the [forbearance]
authority provided by new section 10 of the Communications Act.''
Therefore, we will conduct a forbearance analysis to determine whether
we should permit IXCs to depart from geographic rate averaging where we
have permitted them to do so under current policy.
5. We do not believe that our current policy of allowing carriers
to offer contract tariffs and Tariff 12 options conflicts with
geographic averaging because we require that these offerings be
available to similarly situated customers throughout the carrier's
service area. The legislative history to Section 254(g), however,
indicates that the conferees viewed contract tariffs and Tariff 12
offerings, at least to some extent, as permissible exceptions to
geographic rate averaging that could be authorized through forbearance.
Accordingly, our forbearance analysis will encompass contract tariffs
and Tariff 12 offerings to ensure that our requirements implementing
Section 254(g) are consistent with congressional intent.
6. Section 10 requires the Commission to forbear from applying any
provision of the Act if we find that (1) enforcement of such provision
unnecessary to ensure that practices in connection with the relevant
telecommunications service are just and reasonable and are not unjustly
or unreasonably discriminatory; (2) enforcement of such provision is
unnecessary to protect consumers; and (3) forbearance from applying
such provision is consistent with the public interest. In addition, the
Commission, in making its public interest determination, must
``consider whether forbearance from enforcing the provision * * * will
promote competitive market conditions, including the extent to which
such forbearance will enhance competition among providers of
telecommunications services.''
7. We do not believe that permitting carriers to depart from
geographic rate averaging to the extent necessary to offer contract
tariffs, Tariff 12 offerings, optional calling plans, temporary
promotions, and private line services in accordance with our current
policy will subject rural and high-cost area customers to unjust or
unreasonable, or unjustly or unreasonably discriminatory, rates
because: (1) We will continue to require carriers to make these
services generally available under our current rules (e.g., contract
tariffs and Tariff 12 offerings must be available to similarly situated
customers) regardless of their geographic location, and (2) the only
``geographically-specific'' discounts that carriers may offer are
temporary promotions. Thus, except for temporary promotions and private
line services, interexchange telecommunications service offerings will
be available on the same terms throughout a carrier's service area. In
addition, we do not believe based on the record that allowing
geographically deaveraged private line rates will produce unjust or
unreasonable or unjustly or unreasonably discriminatory rates, as it is
our current practice and has not raised such concerns. Thus, we find
that enforcement of the geographic rate-averaging requirement for
contract tariffs, Tariff 12 offerings, optional calling plans,
temporary promotions, and private line services is not necessary to
ensure that charges, practices, and classifications are just and
reasonable and not unjustly and unreasonably discriminatory.
8. Enforcement of the geographic rate-averaging requirement for
these services is also not necessary to protect consumers because these
service offerings are generally beneficial to consumers. For example,
promotions, optional calling plans, and discounts facilitate
introduction of new and beneficial services to consumers. Indeed, we
are particularly concerned that carriers will cease to offer such
service offerings, to the clear detriment of all consumers, unless
carriers are permitted to offer them for a limited time on a narrower
scale than throughout their entire service areas. We believe that the
limited scope and nature of promotions offered on a geographically
specific basis will protect consumers and that, to the extent that
these service offerings promote new services, consumers will benefit,
including rural customers. We also believe that it is not necessary to
apply geographic averaging to private line services, contract tariffs,
and Tariff 12 offerings to protect residential consumers because these
services are normally provided to businesses. Business consumers
benefit from these services because in many cases the services are
provided at discounted rates. Thus, we conclude that enforcement of the
geographic rate-averaging requirement for contract tariffs, Tariff 12
options, optional calling plans, temporary promotions, and
[[Page 42561]]
private line services is not necessary to protect consumers.
9. Finally, we believe that forbearance from applying the
geographic rate averaging requirement to the extent permitted under our
rules is consistent with the public interest. We come to this
conclusion because we believe that allowing deaveraged rates, such as
for temporary promotions, will ultimately benefit consumers by
encouraging widespread offerings of new services. Moreover, it has been
our practice to allow these exceptions to our existing policy, and we
have no reason to believe this current practice is contrary to the
public interest. In addition, excepting these specific types of service
offerings from the geographic rate averaging requirement will continue
to stimulate competition for customers among interexchange carriers.
Limited departures from geographic rate averaging, such as for private
line services and temporary promotions available only in some areas,
are often designed to spur, or respond to, competition. For example,
interexchange carriers often offer promotional discounts as a response
to competition within the interexchange market. For these reasons, we
conclude that limited forbearance from applying the geographic rate
averaging requirement to contract tariffs, Tariff 12 offerings,
temporary promotions, and private line services is consistent with the
public interest.
10. Accordingly, we forbear from applying Section 254(g),
consistent with the intent of Congress, to the extent necessary to
permit carriers to depart from geographic rate averaging to offer
contract tariffs, Tariff 12 offerings, optional calling plans,
temporary promotions, and private line services in accordance with our
policy as previously applied to AT&T. As with current policy, we will
require carriers to offer the same basic service package to all
customers in their service areas, and permit carriers to offer contract
tariffs, Tariff 12 offerings, and optional calling plans provided they
are available to all similarly situated customers, regardless of their
geographic location. We will permit carriers to offer promotions that
may be ``geographically limited,'' provided that the promotions are
temporary, as discussed further below.
11. These requirements are fully consistent with the Commission's
past practices. Contrary to the claims of some IXCs, we have not in the
past exempted from our geographic rate averaging policy entire groups
of services, such as contract tariffs, negotiated arrangements, or
optional calling plans, where carriers offer discounted rates on a
permanent or long-term basis. The record is clear, in fact, that we
have required optional calling plans to be generally available
throughout a carrier's service area and prohibited geographic
restrictions in contract tariffs because a service package that is
available to only one customer ``unreasonably discriminates among
similarly situated customers,'' and is therefore unlawful. The only
type of geographic restriction in a contract tariff that we have
permitted is one that is necessary because of technical limitations
imposed by a LEC's switching equipment or billing capabilities, or
where the underlying basic service is limited.
12. As stated, we believe that temporary promotions benefit
consumers because they facilitate the introduction of new services. We
have permitted temporary promotions in the past for these reasons, and
believe that Congress intended us to continue to do so. We conclude,
however, that ``temporary'' promotions should, in fact, be temporary
and not the basis for repeated offerings by carriers. Before AT&T was
found nondominant for purposes of interexchange service, we proposed to
keep promotional rates outside of price caps as long as they were
offered for no longer than 90 days. Further, we find that a 90-day
period in which customers may receive discounted rates as part of a
promotion is sufficient time for a targeted promotional offering to
attract interest in new or revised services, but not so long as to
undermine our geographic rate averaging requirement. Accordingly, even
though AT&T has tariffed longer promotions in the past, we believe this
length of time for temporary promotions not available throughout a
carrier's service area best implements the statutory mandate for
geographic averaging. Further, rather than specifying a range of
permissible combinations of sign-up and discount periods, we believe
that specifying a single time period for promotional discounts will
facilitate administration of Section 254(g) and our implementing rules.
13. We will therefore permit carriers, as part of temporary
promotions not available throughout a carrier's service area, to offer
discounted promotional rates for no more than 90 days. We will not at
this time establish limits on the duration of sign-up periods for
promotions, but we expect them to be relatively brief. We can review at
a later time specific carriers' practices in this regard if necessary.
We also expect that carriers' temporary promotions will not, when
viewed over a number of years, reflect a pattern of undue
discrimination against rural or high-cost areas. Thus, we expect that,
viewed over time, temporary promotions will be offered in rural and
high-cost areas, as well as to urban customers. We find it unnecessary
to adopt advertising requirements concerning discounts and promotions.
We believe that consumers will be protected as long as long-term
discounts and promotions are available to all similarly situated
customers throughout a carrier's service area.
C. Forbearance in Competitive Conditions
14. We are not persuaded that we should establish an exception to
our general rate averaging rule based on the existence of competing
regional carriers that may be able to offer lower rates for
interexchange services because of lower access charges or other costs.
To establish such an exception we would need to forbear under Section
10 of the 1934 Act. As noted previously, we must forbear from applying
any provision of the 1934 Act, as amended, when (1) enforcement of that
provision is unnecessary to ensure that the relevant charges and
practices are just and reasonable and not unjustly or unreasonably
discriminatory; (2) enforcement of that provision is unnecessary to
protect consumers; and (3) forbearance from applying the provision is
consistent with the public interest.
15. Commenters have failed to justify this exception under Section
10 because they have based their claims entirely on generalized
assertions of the alleged need for a competitive exception to
geographic averaging requirements. With respect to the first prong of
the forbearance test, we believe that establishing a broad exception to
Section 254(g) for low-cost regions entails a substantial risk that
many subscribers in rural and high cost areas may be charged more than
subscribers in other areas. Accordingly, we cannot conclude that
enforcing our rate averaging requirements is unnecessary to ensure just
and reasonable and nondiscriminatory charges for subscribers. We also
see no basis in the record to conclude that it is unnecessary to
enforce Section 254(g) to ensure protection of consumers. We are
concerned that widespread deaveraged rates for interexchange services
could produce unreasonably high rates for some subscribers. Further,
commenters have not made a persuasive case that our geographic rate
averaging requirement may compel them to abandon service in some areas.
Finally,
[[Page 42562]]
we believe that, as part of our initial implementation of Section
254(g), it is not in the public interest to create the broad exception
urged by commenters. Accordingly, we conclude that commenters have not
justified forbearance to create a competitive exception to geographic
rate averaging. We also will not forbear from enforcing our rate
averaging policy against nondominant carriers. We note that Congress
knew at the time the 1996 Act was passed that all IXCs were nondominant
and we find that Congress would not have required us to adopt rules to
implement geographic rate averaging if it had intended us to abandon
this policy with respect to all IXCs so soon after enactment.
16. We are also not persuaded that we should forbear for smaller
carriers serving high-cost areas on the grounds that they might have
difficulty competing against nationwide carriers. These carriers have
provided only conclusory allegations of harm and have not shown that
they will be unable to compete with larger carriers in a rate-averaged
environment, much less that they have satisfied all three of the
requirements set forth in Section 10 for exercise of our forbearance
authority. Thus, these carriers, like the nationwide carriers, have
failed to justify forbearance on this record.
17. We also reject AT&T's suggestion that we delay implementing
Section 254(g) until access charges are lower and more cost based. We
believe that Congress was fully aware of geographic differences in
access charges when it adopted Section 254(g), and intended us to
require geographic rate averaging even under these conditions.
Moreover, nothing in the text or legislative history of Section 254(g)
suggests that the Congress intended to delay implementation of the
geographic rate averaging requirement.
II. State Authority
18. We conclude that Congress intended the states to play an active
role in enforcing Section 254(g) with respect to intrastate geographic
rate averaging. The Senate Report states that ``States shall continue
to be responsible for enforcing [intrastate geographic rate averaging],
so long as the State rules are not inconsistent with'' the regulations
the Commission adopts. We believe that intrastate rate structures that
are based on reasonable mileage bands will meet this requirement
because that is the method traditionally used by carriers to offer
geographically averaged rates. We will not, however, permit states to
establish special rate zones within states absent forbearance by the
Commission because we believe that would result in geographically
deaveraged rates in violation of Section 254(g). Section 254(g)
requires that rates be no higher in any rural or high-cost area than
they are in any urban area. To the extent that AT&T proposes to
associate some, but not all, rural areas with certain urban areas, we
presume that some rural areas will experience higher rates than some
urban areas, in violation of the statute.
III. Rate Integration
A. General Rule
19. Section 254(g) also requires the Commission to promulgate a
rate integration rule requiring that ``a provider of interstate
interexchange services shall provide such services to its subscribers
in each State at rates no higher than the rates charged to its
subscribers in any other State.'' The Commission has a well-established
policy of rate integration. Since 1972, the Commission has required any
carrier that provides domestic interstate interexchange service between
the contiguous forty-eight states and various offshore points to
integrate its rates pursuant to a plan to integrate the carrier's rates
and services for offshore points with its rates for similar services on
the mainland. In 1976, the Commission required carriers that offered
message toll, private line, and specialized services to or from Alaska,
Hawaii, Puerto Rico, and the Virgin Islands to integrate their rates
for those services into the rate structures and uniform mileage rate
patterns applicable to the mainland. This policy required IXCs to lower
their rates in the newly integrated areas to levels comparable to those
prevailing in the mainland for interexchange calls of similar distance,
duration, and time of day. To implement the statutory requirements of
Section 254(g), we will adopt the rate integration rule we proposed in
the NPRM that ``a provider of interstate interexchange
telecommunications services shall provide such services to its
subscribers in each State at rates no higher than the rates charged to
its subscribers in any other State.'' As with geographic rate
averaging, this rule will incorporate our existing policies. This rule
will apply to all domestic interstate interexchange telecommunications
services as defined in the 1996 Act, and all providers of such
services. As with our geographic rate averaging policy, carriers may
comply with this rule by establishing reasonable mileage bands for
calls.
20. We are not persuaded that we must forbear from requiring
carriers to comply with rate integration, either generally or in
competitive conditions, for the same reasons discussed with respect to
geographic rate averaging. Our rate integration policy has integrated
offshore points into the domestic interstate interexchange rate
structure so that the benefits of growing competition for interstate
interexchange telecommunications services, as well as regulatory and
other developments concerning interstate services, are available
throughout our nation. Furthermore, absent forbearance, the statute
requires us to incorporate our 1976 Integration of Rates and Services
Order requiring geographic rate integration.
21. We are also not persuaded that we should forbear from applying
rate integration to smaller carriers serving high-cost areas on the
grounds that they might have difficulty competing against nationwide
carriers. These carriers have provided only conclusory allegations of
harm and have not shown that they will be unable to compete with larger
carriers in a rate-integrated environment, much less that they have
satisfied all three of the requirements for exercise of our forbearance
authority. Thus, these carriers have failed to make a showing on this
record justifying forbearance.
22. We believe that AMSC, despite its arguments to the contrary, is
required by the plain terms of the 1996 Act to integrate the rates
charged for its offshore service into the rate structure for its
mainland rates. Further, as with rate averaging, we interpret Section
254(g) to extend to all providers of interexchange service the rate
integration policy that previously was applied only to AT&T. AMSC's
services would appear to fall within the definition of interstate
interexchange telecommunications services subject to Section 254(g). A
Bureau decision referred to by AMSC permitted an AMSC tariff to take
effect without any finding of lawfulness; it did not establish any
policy of excluding AMSC services from rate integration. Accordingly,
we reject AMSC's arguments on this issue.
B. U.S. Territories and Possessions
23. In the NPRM, we noted that ``State'' is defined in the
Communications Act to include U.S. territories and possessions. Thus,
in making the Section 254(g) rate integration provision applicable to
interstate interexchange services provided between ``states,'' as
defined in the Communications Act, 47 U.S.C. 153(40), Congress made
rate integration applicable to interexchange services provided to all
U.S. possessions and
[[Page 42563]]
territories, including Guam, the Northern Marianas, and American Samoa.
Further, rate integration applies to all interstate interexchange
telecommunications services as defined in the Communications Act, 47
U.S.C. 153(22), 153(46). Accordingly, under our rate integration rule
implementing 254(g), providers of interexchange service to these points
must do so on an integrated basis with services they provide to other
states.
24. We believe that the resolutions the Guam/Northern Marianas
Working Group adopted July 9, 1996, regarding rate integration for Guam
and the Northern Marianas provide a reasonable framework to guide
carriers towards implementing rate integration. Thus, a carrier should
establish rates for services provided to Guam and the Northern Marianas
consistent with the rate methodology it employs for services it
provides to other states. Similarly, to the extent that a provider of
interexchange service offers optional calling plans, contract tariffs,
discounts, promotions, and private line services to its subscribers on
the mainland, it should use the same ratemaking methodology and rate
structure when offering those services to its subscribers in Guam or
the Northern Marianas.
25. We also agree with the Working Group that cost support and
universal service issues should be addressed in the first instance by
the Universal Service Joint Board. Guam has specifically raised these
issues in CC Docket No. 96-45. Accordingly, we will address those
issues in the context of any Joint Board recommendation. For purposes
of our decision, however, we do not view establishment of cost-support
mechanisms as a precondition of rate integration. Nor have they been
justified on the present record. Thus, we reject requests that we
establish, or further consider, any cost-support mechanisms in this
docket.
26. The Working Group resolutions urge that rate integration for
services provided to Guam and the Northern Marianas should take place
concurrently with, or shortly after, the inclusion of Guam and the
Northern Marianas into the North American Numbering Plan, the
implementation of Feature Group D service, and the Guam Telephone
Authority's (GTA's) revision to its access charge structure. All three
events are expected to occur by July 1, 1997. We do not view these
developments as preconditions for rate integration of services provided
to these points. Rather, the statute requires rate integration
regardless of whether these developments occur. However, we believe
that these developments will facilitate rate integration. Inclusion of
Guam and the Northern Marianas in the North American Numbering Plan
(NANP) will help carriers integrate them into their nationwide service
plans. Implementation of Feature Group D will provide subscribers with
high-quality equal access to providers of interexchange service serving
Guam. Revision of access charges by GTA will help providers of
interexchange service set final rate schedules for service to and from
Guam. Accordingly, we require providers of interexchange service to
integrate services offered to subscribers in Guam and the Northern
Marianas with services offered in other states no later than August 1,
1997.
27. We additionally require that carriers submit preliminary plans
to achieve rate integration no later than February 1, 1997, and final
plans no later than June 1, 1997. These plans will permit the
Commission to review progress toward achieving rate integration, as
required by the 1996 Act. The preliminary plans need not include rates,
but at a minimum should resolve service and rate-band issues. Final
plans shall include a rate schedule. Carriers may integrate these
points by expanding mileage bands, adding mileage bands, offering
postalized rates, or other means that achieve rate integration. We also
require that any rate changes between the adoption date of this Report
and Order and August 1, 1997, must be consistent with achieving rate
integration by August 1, 1997. We also believe that it would facilitate
resolution of any further regulatory issues concerning rate integration
for these points if the Common Carrier Bureau addresses them in the
first instance. Accordingly, we will delegate to the Chief, Common
Carrier Bureau, authority to resolve any issues concerning carriers'
plans for rate integration for these offshore points.
28. We reject GTE's view that Section 254(g) does not require its
Micronesian Telecommunications Corp. subsidiary to integrate rates with
other GTE affiliates. The statute mandates that the Commission require
rate integration among all states, territories, and possessions, and
this goal is best achieved by interpreting ``provider'' to include
parent companies that, through affiliates, provide service in more than
one state. Moreover, nothing in the record supports a finding that
Congress intended to allow providers of interexchange service to avoid
rate integration by establishing or using their existing subsidiaries
to provide service in limited areas. Thus, we determine that GTE, for
the purposes of Section 254(g), constitutes a ``provider'' of
interexchange services within the meaning of that section, and that it
must integrate rates across affiliates. Accordingly, we require GTE to
comply with the same timetable and requirements as the other carriers
serving the Northern Marianas and Guam.
29. We reject the contentions of PCI and IT&E that they are not
subject to the rate-integration obligation. As noted, Section 254
applies to all providers of interexchange service. Therefore, PCI &
IT&E must provide Guam and the Northern Marianas service on a rate-
integrated basis. Based on the present record, however, there is
insufficient evidence to evaluate whether PCI's and IT&E's rates for
service originating in Guam and the Northern Marianas comply with
Section 254(g). Consequently, we will also require PCI and IT&E to
abide by the same timetable and requirements as the other carriers
serving the Northern Marianas and Guam. They may demonstrate with more
particularity that their current rates comply with rate integration
when they submit their plans.
30. Although carriers serving American Samoa are required to
provide service on a rate-integrated basis, American Samoa has stated
that it believes that rates for services provided to American Samoa are
already rate integrated. Nevertheless, we will also direct providers of
interexchange service serving American Samoa to submit plans for
American Samoa in order to ensure that they will comply with the
statute. To the extent services are provided to other U.S. possessions
and territories by carriers subject to Section 254(g), the record does
not reflect what carriers serve some of these points, such as Wake
Island and Midway Island, or whether service is provided in special
ways, such as in cooperation with military authorities, that might
affect provision of service on a rate-integrated basis to these points.
Accordingly, we are directing the Common Carrier Bureau to investigate
service arrangements for these points and to take such steps as are
necessary to assure compliance with Section 254(g) by August 1, 1997.
31. We also believe that AT&T's concerns about termination of
foreign traffic in Guam, the Northern Marianas, and American Samoa do
not justify delaying rate integration. Our decision to extend rate
integration to Guam is intended to benefit U.S. consumers. We do not by
this decision, however, affect the classification or treatment of the
underlying costs of facilities between these offshore points and other
U.S.
[[Page 42564]]
points for purposes of interconnection arrangements with foreign
carriers.
32. Our requirement that carriers implement rate integration by
August 1, 1997, complies with Section 254(g). That section requires us
to adopt rules requiring rate integration for Guam, the Northern
Marianas and American Samoa by August 8, 1996. We do not read this
provision as mandating rate integration for all points by that date.
Instead, we interpret the statute to permit a reasonable transition
period for the offshore points to which our rate integration policy is
being applied for the first time.
IV. AT&T's Commitments
33. The rules we adopt in this proceeding will require AT&T to
provide interexchange service at geographically averaged and integrated
rates. We believe these requirements incorporate the Commission's
existing rate averaging and rate integration policies and, thus, should
supersede the commitments AT&T made in the AT&T Reclassification
proceeding concerning rate averaging and rate integration. Accordingly,
we release AT&T from its commitments to continue to comply with the
Commission's orders regarding rate integration and to file any tariff
containing a geographically deaveraged rate on five business days'
notice. We do not release AT&T from its more specific commitments
concerning Hawaii and Alaska. AT&T is still affirmatively bound by the
rules we establish in this Report and Order, and by our prior opinions,
rules, and orders on geographic rate averaging and rate integration,
which the rules incorporate.
Ordering Clauses
Accordingly, it is ordered That pursuant to authority contained in
sections 1, 4(i), 10, 201-205, 214(e), 215 and 254(g) of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 160,
201-205, 214(e) and 254(g), Part 64 of the Commission's rules are
amended as set forth below.
It is further ordered That the policies, rules and requirements set
forth herein are adopted.
It is further ordered That the policies, rules and requirements
adopted herein shall be effective September 16, 1996.
It is further ordered That with respect to interexchange services
provided between any U.S. state, territory or, possession and Guam, the
Northern Marianas, or American Samoa, AT&T, GTE, MCI, Sprint, PCI, and
IT&E shall: (1) Submit to the Commission no later than February 1,
1997, preliminary plans to achieve rate integration by August 1, 1997,
with respect to those points; and (2) submit to the Commission no later
than June 1, 1997, final plans to achieve rate integration by August 1,
1997, with respect to those points.
It is further ordered That AT&T is released from the commitments it
made in the AT&T Reclassification proceeding concerning rate averaging
and rate integration, as described herein.
It is further ordered That the Chief, Common Carrier Bureau, is
delegated authority to resolve any regulatory issues concerning
implementation of rate integration for offshore points consistent with
this Report and Order. The Common Carrier Bureau is directed to
investigate service arrangements for offshore points and to take such
steps as are necessary to ensure compliance with Section 254(g), by
August 1, 1997, for such offshore points.
List of Subjects in 47 CFR Part 64
Communications common carriers, Telephone.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Part 64 of Title 47 of the Code of Federal Regulations is amended
as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
1. The authority citation for Part 64 continues to read as follows:
Authority: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154,
unless otherwise noted. Interpret or apply secs. 201, 218, 226, 228,
48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228,
unless otherwise noted.
2. Subpart R is added to Part 64 to read as follows:
Subpart R--Geographic Rate Averaging and Rate Integration
Sec. 64.1801 Geographic rate averaging and rate integration.
Authority: 47 U.S.C. Secs. 151, 154(i), 201-205, 214(e), 215 and
254(g).
Subpart R--Geographic Rate Averaging and Rate Integration
Sec. 64.1801 Geographic rate averaging and rate integration.
(a) The rates charged by providers of interexchange
telecommunications services to subscribers in rural and high-cost areas
shall be no higher than the rates charged by each such provider to its
subscribers in urban areas.
(b) A provider of interstate interexchange telecommunications
services shall provide such services to its subscribers in each U.S.
state at rates no higher than the rates charged to its subscribers in
any other state.
[FR Doc. 96-20859 Filed 8-15-96; 8:45 am]
BILLING CODE 6712-01-P
