[Federal Register Volume 64, Number 157 (Monday, August 16, 1999)]
[Rules and Regulations]
[Pages 44423-44426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20887]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[CC Docket Nos. 96-149 and 96-61; FCC 99-103]
Regulatory Treatment of LEC Provision of Interexchange Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document amends the Commission's rules to allow
independent local exchange carriers (LECs) that provide in-region, long
distance services solely on a resale basis to do so through a separate
corporate division rather than a separate legal entity.
EFFECTIVE DATE: September 15, 1999.
FOR FURTHER INFORMATION CONTACT: Andrea Kearney, Attorney, Common
Carrier Bureau, Policy and Program Planning Division, (202) 418-1580.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second
Order On Reconsideration adopted May 18, 1999, and released June 30,
1999 (FCC 99-103). The full text of this Order is available for
inspection and copying during normal business hours in the FCC
Reference Center, 425 12th Street, SW, Washington, D.C. The complete
text also may be obtained through the World Wide Web, at http://
www.fcc.gov/Bureaus/Common Carrier/Order/fcc99-103.wp, or may be
purchased from the Commission's copy contractor, International
Transcription Service, Inc., (202) 857-3800, 1231 20th St., N.W.,
Washington, D.C. 20036.
Synopsis of Second Order on Reconsideration
1. In this second order on reconsideration, we modify our
conclusion in the LEC Classification Order, 62 FR 35974 (July 3, 1997)
and allow independent LECs that provide in-region, long distance
services solely on a resale basis to do so through a separate corporate
division rather than a separate legal entity. The record indicates that
this group includes most of the small and mid-sized LECs that currently
provide in-region, long distance services. We also clarify the meaning
of the term ``interexchange'' to avoid any possibility of unnecessary
application of the Commission's separate affiliate requirements. In
addition, we affirm our decision relaxing regulation of the BOCs'
section 272 interLATA affiliates, i.e., by classifying these affiliates
as non-
[[Page 44424]]
dominant for in-region, long distance services. We also address several
other miscellaneous issues raised in the reconsideration petitions.
Consistent with the LEC Classification Partial Stay Order, 63 FR 16696
(April 6, 1998) and the relief we grant in this order on
reconsideration, any independent LEC that was providing long distance
services on an integrated basis through the use or control of its own
facilities must form a separate affiliate to provide such services
within 60 days of the release of this order on reconsideration.
Finally, we act on the Leaco Rural Telephone Cooperative, Inc. (Leaco)
Petition for Waiver of the LEC Classification Order requirements.
V. Supplemental Final Regulatory Flexibility Analysis
2. As required by the Regulatory Flexibility Act (RFA), the
Commission issued a Final Regulatory Flexibility Analysis (FRFA) in the
LEC Classification Order, in which it certified that the rules adopted
in that order would not have a significant impact on a substantial
number of small entities. None of the petitions for reconsideration
filed in this proceeding specifically addresses, or seeks
reconsideration of, that FRFA. This present Supplemental FRFA addresses
the potential effect on small entities of the rules we adopt in this
order. This Supplemental FRFA incorporates and adds to our FRFA in the
LEC Classification Order.
3. Need for and Objectives of this Report and Order and the
Regulations Adopted Herein. The need for and objectives of the rules
adopted in this order on reconsideration are the same as those
discussed in the LEC Classification Order's FRFA. In general, the
regulations adopted in the LEC Classification Order are intended to
promote increased competition in the interexchange market. In this
order on reconsideration, we clarify the LEC Classification Order and
grant or deny petitions filed for reconsideration in order to further
the same needs and objectives.
4. Description and Estimates of the Number of Small Entities
Affected by this Report and Order. In this FRFA, we consider the impact
of this order on two categories of entities, ``small incumbent LECs''
and ``small non-incumbent LECs.'' Consistent with our prior practice,
we shall continue to exclude small incumbent LECs from the definition
of a small entity for the purpose of this FRFA. Accordingly, our use of
the terms ``small entities'' and ``small businesses'' does not
encompass ``small incumbent LECs.'' We use the term ``small incumbent
LECs'' to refer to any incumbent LECs that arguably might be defined by
SBA as ``small business concerns.'' We include ``small non-incumbent
LECs'' in our analysis, even though we believe that we are not required
to do so.
5. The RFA defines a ``small business'' to be the same as a ``small
business concern'' under the Small Business Act, 15 U.S.C. 632, unless
the Commission has developed one or more definitions that are
appropriate to its activities. 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 SBA. SBA has defined a small
business for Standard Industrial Classification (SIC) category 4813
(Telephone Communications, Except Radiotelephone) to be a small entity
when it has fewer than 1,500 employees.
6. Incumbent LECs. SBA has not developed a definition of small
incumbent LECs. The closest applicable definition under SBA rules is
for telephone communications companies other than radiotelephone
(wireless) companies. The most reliable source of information regarding
the number of LECs nationwide of which we are aware appears to be the
data that we collect annually in connection with the Telecommunications
Relay Service (TRS). According to our most recent data, 1,376 companies
reported that they were engaged in the provision of local exchange
services. Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we
are unable at this time to estimate with greater precision the number
of LECs that would qualify as small business concerns under SBA's
definition. Consequently, we estimate that there are fewer than 1,376
small incumbent LECs that may be affected by the decisions and
regulations adopted in this order on reconsideration.
7. Non-Incumbent LECs. SBA has not developed a definition of small
non-incumbent LECs. For purposes of this order, we define the category
of ``small non-incumbent LECs'' to include small entities providing
local exchange services that do not fall within the statutory
definition in section 251(h), including potential LECs, LECs which have
entered the market since the 1996 Act was passed, and LECs that were
not members of the exchange carrier association pursuant to
Sec. 69.601(b) of the Commission's regulations. We believe it is
impracticable to estimate the number of small entities in this
category. We believe it is impossible to estimate the number of
entities which may enter the local exchange market in the near future.
Nonetheless, we will estimate the number of small entities in a
subgroup of the category of ``small non-incumbent LECs.'' According to
our most recent data, 119 companies identify themselves in the category
``Competitive Access Providers (CAPs) and Competitive LECs (CLECs).'' A
CLEC is a provider of local exchange services which does not fall
within the definition of ``incumbent LEC'' in section 251(h). Although
it seems certain that some of the carriers in this category are CAPs,
are not independently owned and operated, or have more than 1,500
employees, we are unable at this time to estimate with greater
precision the number of non-incumbent LECs that would qualify as small
business concerns under SBA's definition.
8. Summary Analysis of the Projected Reporting, Recordkeeping, and
Other Compliance Requirements. In this order on reconsideration, we
conclude that independent LECs that are in-region, long distance
resellers are permitted to provide such services through a separate
division rather than a separate legal entity, subject to the Fifth
Report and Order requirements, as modified by the LEC Classification
Order. No party to this proceeding suggests that permitting independent
LECs to provide long distance resale through a separate division would
affect small entities or small incumbent LECs. We determine that
compliance with the separate division requirement, rather than a
separate legal entity requirement, may require small incumbent LECs to
use accounting, economic, technical, legal, and clerical skills.
9. Steps Taken To Minimize Economic Impact on Small Entities and
Small Incumbent LECs, and Alternatives Considered. We believe that the
modification of the separate legal entity requirement will facilitate
entry of independent LECs into the long distance market. We believe
that resale is an essential facilitator of competition in the long
distance industry because it allows independent LECs, some of which may
be small entities, and other providers to enter the market immediately,
and add their own facilities when it becomes efficient to do so. The
modification of the separate legal entity requirement for independent
LEC long distance resellers seems likely to benefit independent LECs,
some of which may be small entities, by helping to reduce the cost of
entry and of providing service. We reject alternatives to exempt all
independent
[[Page 44425]]
LECs, or small and rural independent LECs, from the separate legal
entity requirement, for the reasons stated in Section III of this order
on reconsideration.
10. Report to Congress. The Commission shall send a copy of this
FRFA, along with this order on reconsideration, in a report to Congress
pursuant to the SBREFA, 5 U.S.C. 801(a)(1)(A). A copy of this analysis
will also be provided to the Chief Counsel for Advocacy of the Small
Business Administration, and will be published in the Federal Register.
VI. Ordering Clauses
11. Accordingly, It is Ordered that pursuant to sections 1, 2, 4,
201, 202, 220, 251, 271, 272 and 303(r) of the Communications Act of
1934, as amended, 47 U.S.C. sections 151, 152, 154, 201, 202, 220, 251,
271, 272, and 303(r), the ORDER ON RECONSIDERATION is hereby Adopted,
and the requirements contained herein shall be effective 30 days after
publication of a summary thereof in the Federal Register. The amendment
to the Uniform System of Accounts for Telecommunications Companies,
part 32 of the Commission's rules, shall be effective six months after
publication in the Federal Register, although affected parties may
elect to implement these changes upon adoption.
12. It is further ordered that part 64, subpart T of the
Commission's rules, is AMENDED as set forth in the rule changes hereto.
13. It is further ordered that the petitions for reconsideration
are granted in part, as described herein, and otherwise are denied.
14. It is further ordered that the Leaco Rural Telephone
Cooperative, Inc. Petition for Waiver is rendered moot in part, as
described herein, and the remainder is denied.
15. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this order
on reconsideration, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
List of Subjects in 47 CFR Part 64
Communications common carriers.
Federal Communications Commission.
LaVera F. Marshall,
Chief, Agenda Branch.
Rule Changes
For the reasons discussed in the preamble, Federal Communications
Commission amends 47 CFR part 64 as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS MATERIALS
1. The authority citation for part 64 continues to read:
Authority: 47 U.S.C. 10, 201, 218, 226, 228, 332, unless
otherwise noted.
2. Section 64.1902 is revised to read as follows:
Sec. 64.1902 Terms and definitions.
Terms used in this part have the following meanings:
Books of Account. Books of account refer to the financial
accounting system a company uses to record, in monetary terms, the
basic transactions of a company. These books of account reflect the
company's assets, liabilities, and equity, and the revenues and
expenses from operations. Each company has its own separate books of
account.
Incumbent Independent Local Exchange Carrier (Incumbent Independent
LEC). The term incumbent independent local exchange carrier means, with
respect to an area, the independent local exchange carrier that:
(1) On February 8, 1996, provided telephone exchange service in
such area; and
(2) (i) On February 8, 1996, was deemed to be a member of the
exchange carrier association pursuant to Sec. 69.601(b) of this title;
or
(ii) Is a person or entity that, on or after February 8, 1996,
became a successor or assign of a member described in paragraph (2)(i)
of this section. The Commission may also, by rule, treat an independent
local exchange carrier as an incumbent independent local exchange
carrier pursuant to section 251(h)(2) of the Communications Act of
1934, as amended.
Independent Local Exchange Carrier (Independent LEC). Independent
local exchange carriers are local exchange carriers, including GTE,
other than the BOCs.
Independent Local Exchange Carrier Affiliate (Independent LEC
Affiliate). An independent local exchange carrier affiliate is a
carrier that is owned (in whole or in part) or controlled by, or under
common ownership (in whole or in part) or control with, an independent
local exchange carrier.
In-Region Service. In-region service means telecommunications
service originating in an independent local exchange carrier's local
service areas or 800 service, private line service, or their
equivalents that:
(1) Terminate in the independent LEC's local exchange areas; and
(2) Allow the called party to determine the interexchange carrier,
even if the service originates outside the independent LEC's local
exchange areas.
Local Exchange Carrier. The term local exchange carrier means any
person that is engaged in the provision of telephone exchange service
or exchange access. Such term does not include a person insofar as such
person is engaged in the provision of a commercial mobile service under
section 332(c), except to the extent that the Commission finds that
such service should be included in the definition of that term.
3. Section 64.1903 is revised to read as follows:
Sec. 64.1903 Obligations of all incumbent independent local exchange
carriers.
(a) Except as provided in paragraph (c) of this section, an
incumbent independent LEC providing in-region, interstate,
interexchange services or in-region international interexchange
services shall provide such services through an affiliate that
satisfies the following requirements:
(1) The affiliate shall maintain separate books of account from its
affiliated exchange companies. Nothing in this section requires the
affiliate to maintain separate books of account that comply with Part
32 of this title;
(2) The affiliate shall not jointly own transmission or switching
facilities with its affiliated exchange companies. Nothing in this
section prohibits an affiliate from sharing personnel or other
resources or assets with an affiliated exchange company; and
(3) The affiliate shall acquire any services from its affiliated
exchange companies for which the affiliated exchange companies are
required to file a tariff at tariffed rates, terms, and conditions.
Nothing in this section shall prohibit the affiliate from acquiring any
unbundled network elements or exchange services for the provision of a
telecommunications service from its affiliated exchange companies,
subject to the same terms and conditions as provided in an agreement
approved under section 252 of the Communications Act of 1934, as
amended.
(b) Except as provided in paragraph (b) (1) of this section, the
affiliate required in paragraph (a) of this section shall be a separate
legal entity from its affiliated exchange companies. The affiliate may
be staffed by personnel of its affiliated exchange companies, housed in
existing offices of its affiliated exchange companies, and use its
affiliated exchange companies'
[[Page 44426]]
marketing and other services, subject to paragraph (a)(3) of this
section.
(1) For an incumbent independent LEC that provides in-region,
interstate domestic interexchange services or in-region international
interexchange services using no interexchange switching or transmission
facilities or capability of the LEC's own (i.e., ``independent LEC
reseller,'') the affiliate required in paragraph (a) of this section
may be a separate corporate division of such incumbent independent LEC.
All other provisions of this Subpart applicable to an independent LEC
affiliate shall continue to apply, as applicable, to such separate
corporate division.
(2) [Reserved]
(c) An incumbent independent LEC that is providing in-region,
interstate, domestic interexchange services or in-region international
interexchange services prior to April 18, 1997, but is not providing
such services through an affiliate that satisfies paragraph (a) of this
section as of April 18, 1997, shall comply with the requirements of
this section no later than August 30, 1999.
[FR Doc. 99-20887 Filed 8-13-99; 8:45 am]
BILLING CODE 6712-01-P
