[Federal Register Volume 64, Number 165 (Thursday, August 26, 1999)]
[Rules and Regulations]
[Pages 46571-46584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22131]
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FEDERAL COMMUNICATIONS COMMISSION
47 CRF Part 52
[CC Docket No. 95-116; FCC 99-151]
Telephone Number Portability
AGENCY: Federal Communications Commission.
ACTION: Policy statement.
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SUMMARY: This document addresses issues raised on reconsideration of
the First Report and Order relating to interim number portability.
First, the Commission affirms its earlier conclusion that it has the
authority to establish cost recovery guidelines for interim number
portability. Second, the Commission rejects claims that the cost
recovery guidelines for interim number portability set forth in the
First Report and Order are arbitrary and capricious, or constitute an
unconstitutional taking. The Commission denies the request that these
cost recovery guidelines be applied retroactively. The Commission also
affirms its earlier decision to adopt general cost recovery guidelines
for interim number portability while allowing states flexibility to
continue using a variety of cost recovery approaches that are
consistent with its guidelines. The Commission also clarifies issues
relating to terminating access charges, billing system modifications,
and certain cost recovery allocators, as each of these issues relates
to interim number portability.
DATES: Effective September 27, 1999.
FOR FURTHER INFORMATION CONTACT: Rhonda Lien or Janet Sievert at (202)
418-1520, Competitive Pricing Division, Common Carrier Bureau.
SUPPLEMENTARY INFORMATION: This summarizes the Commission's Fourth
Memorandum Opinion and Order on Reconsideration in CC Docket No. 95-
116, In re Telephone Number Portability, FCC 99-151, adopted June 23,
1999 and released July 16, 1999. The file in its entirety is available
for inspection and copying during the weekday hours of 9:00 a.m. to
4:30 p.m. in the Commission's Reference Center, 445 12th St. SW., Room
CY-A257, Washington DC, or copies may be purchased from the
Commission's duplicating contractor, ITS Inc., 1231 20th St. NW.,
Washington DC 20036; (202) 857-3088.
Analysis of Proceeding
I. Introduction
The Commission adopted the First Report and Order and Further
Notice of Proposed Rulemaking, 61 FR 38605 (July 25, 1996) in this
docket, which implemented the provisions of section 251 of the
Communications Act of 1934, as amended, that relate to telephone number
portability. In re Telephone Number Portability, CC Docket No. 95-116,
First Report and Order and Further Notice of Proposed Rulemaking, 11
FCC Rcd 8352 (1996) (First Report and Order). Specifically, section
251(b)(2) requires that all local exchange carriers (LECs) provide,
``to the extent technically feasible, number portability in accordance
with requirements prescribed by the Commission.'' 47 U.S.C. 251(b)(2).
Section 251(e)(2) provides that ``the costs of establishing * * *
number portability shall be borne by all telecommunications carriers on
a competitively neutral basis as determined by the Commission.'' 47
U.S.C. 251(e)(2). The Communications Act of 1934, as amended (``the
Act'' or ``the 1996 Act'') defines ``number portability'' as ``the
ability of users of telecommunications services to retain, at the same
location, existing telecommunications numbers without impairment of
quality, reliability, or convenience when switching from one
telecommunications carrier to another.'' 47 U.S.C. 153(30). In the
First Report and Order, the Commission determined, among other things,
that it has authority under section 251 to promulgate rules regarding
long-term and currently available (or ``interim'') number portability,
as well as to establish cost recovery methods for each.
Twenty-two parties filed petitions for reconsideration or
clarification of the First Report and Order. Nineteen parties filed
oppositions to or comments on the petitions, and 16 parties filed reply
comments. On March 6, 1997, the Commission adopted a First Memorandum
Opinion and Order on Reconsideration, 62 FR 18280 (April 15, 1997) in
this proceeding, addressing a number of these issues. In re Telephone
Number Portability, CC Docket 95-116, First Memorandum Opinion and
Order on Reconsideration, 12 FCC Rcd 7236 (1997). A Second Memorandum
Opinion and Order on Reconsideration, 63 FR 68197 (Dec. 10, 1998)
clarified that all LECs must discontinue using interim number
portability in areas where a long-term number portability method has
been implemented. In re
[[Page 46572]]
Telephone Number Portability, CC Docket 95-116, Second Memorandum
Opinion and Order on Reconsideration, 13 FCC Rcd 21,204 (1998). The
item also clarified that Remote Call Forwarding (RCF) and Flexible
Direct Inward Dialing (DID) are not the exclusive methods of providing
interim number portability that LECs are obligated to provide on a
transitional basis. Instead, LECs may implement any technically
feasible method of interim number portability comparable to RCF and
DID. The Commission also held that a LEC is required to implement the
specific method of interim number portability requested by a competing
carrier, provided that provision of the requested method is not unduly
burdensome. A Third Memorandum Opinion and Order on Reconsideration. CC
Docket No. 95-116, 13 FCC Rcd 16,090 (1998) denied a petition for
reconsideration that sought modification to the long-term number
portability deployment schedule. In its Third Report and Order on
number portability, 63 FR 35150 (June 29, 1998), CC Docket No. 95-116,
13 FCC Rcd 11,701 (1998), the Commission adopted rules governing
recovery of the costs of long-term number portability. In this Fourth
Memorandum Opinion and Order on Reconsideration, the Commission
addresses issues raised by petitioners relating to cost recovery for
interim number portability.
II. Background
3. In the First Report and Order, the Commission exercised its
authority to prescribe requirements governing the LECs' duty to provide
number portability. After determining that section 251(b)(2) requires
LECs to provide number portability in the short term, the Commission
prescribed that such number portability be provided through Remote Call
Forwarding (RCF), Flexible Direct Inward Dialing (DID), or other
comparable methods. The Commission based this finding on its conclusion
that section 251(b)(2), by referring to the provision of number
portability ``to the extent technically feasible,'' creates a dynamic
requirement that allows for changes in the methods by which a LEC
provides the required number portability. Accordingly, the Commission
concluded that because RCF, DID, and other comparable measures
currently are technically feasible number portability methods, section
251(b)(2) requires LECs to provide number portability through such
methods. The Commission stated that, upon receipt of a specific request
from another telecommunications carrier, a LEC must provide number
portability through such measures as soon as reasonably possible, until
such time as the LEC implements a long-term database method for number
portability in that area.
4. In light of its finding that the Communications Act requires
LECs to provide interim number portability, the Commission also
determined that it must adopt cost recovery principles for interim
number portability measures pursuant to section 251(e)(2). The
Commission concluded that section 251(e)(2) ``gives us specific
authority to prescribe pricing principles that ensure that the costs of
establishing number portability are allocated on a `competitively
neutral' basis.'' Applying section 251(e)(2) to interim number
portability, the Commission concluded that it should adopt guidelines
that the states must follow in mandating cost recovery mechanisms for
interim number portability measures.
5. Section 251(e)(2) requires that ``the costs of establishing
number administration and number portability be borne by all
telecommunications carriers on a competitively neutral basis.'' 47
U.S.C. 251(e)(2). In the First Report and Order, the Commission
determined that the costs of currently available (referred to here as
interim) number portability are those ``incremental costs incurred by a
LEC to transfer numbers initially and subsequently forward calls to new
service providers.'' The Commission also determined that for purposes
of interim number portability, the phrase ``all telecommunications
carriers'' was to be read literally, and included ``any provider of
telecommunications services,'' including incumbent LECs, new LECs,
commercial mobile radio service (CMRS) providers, and interexchange
carriers (IXCs).
6. The Commission also set forth two criteria with which any cost
recovery method must comply in order to be considered competitively
neutral. First, ``a `competitively neutral' cost recovery mechanism
should not give one service provider an appreciable, incremental cost
advantage over another service provider, when competing for a specific
subscriber.'' Second, the cost recovery mechanism ``should not have a
disparate effect on the ability of competing service providers to earn
normal returns on their investments.'' In the First Report and Order,
the Commission provided some examples of methods currently in use that
would comply with these criteria. Such methods include, but are not
limited to: allocating incremental costs based on (a) the number of
ported numbers, (b) the number of active telephone numbers, (c) the
number of active telephone lines, (d) gross telecommunications revenues
net of charges paid to other carriers; and (e) each carrier bearing its
own costs. The Commission further stated that requiring new entrants to
bear all of the costs of interim number portability, measured on the
basis of incremental costs, would not comply with the statutory
requirements of section 251(e)(2). In setting forth these criteria,
however, the Commission left to the states the determination of the
specific cost recovery mechanism to be utilized. On May 5, 1998, the
Commission adopted a Third Report and Order that resolved numerous
issues regarding the means by which carriers will bear the costs of
providing long-term number portability. The Commission found that
section 251(e)(2) expressly and unconditionally grants the Commission
authority, and requires the Commission, to ensure that all
telecommunications carriers bear the costs of providing number
portability for interstate and intrastate calls on a competitively
neutral basis. The Commission concluded that section 251(e)(2)
addresses both interstate and intrastate matters and overrides the
reservation of authority of section 2(b) to the states over intrastate
matters. Thus, the Commission determined that section 251(e)(2)
authorizes it to provide the distribution and cost recovery mechanism
for all the costs of providing long-term number portability. The
Commission determined that an exclusively federal recovery mechanism
for long-term number portability ``will enable the Commission to
satisfy most directly its competitive neutrality mandate.''
II. Reconsideration Issues
A. Commission Authority To Require Interim Number Portability
1. Background
7. In the First Report and Order, the Commission required LECs to
provide interim number portability, based on the 1996 Act's requirement
that LECs provide number portability ``to the extent technically
feasible.'' The Commission based this conclusion on the language of
section 251(b)(2), which states that LECs have ``[t]he duty to provide,
to the extent technically feasible, number portability in accordance
with requirements prescribed by the Commission.'' Several carriers
challenge the Commission's finding that the 1996 Act provides authority
for the Commission to order LECs to provide interim number portability.
[[Page 46573]]
2. Discussion
8. The Commission reaffirms its earlier conclusion that it has
authority to require that number portability be implemented ``to the
extent technically feasible'' and that its authority under section
251(b)(2) encompasses all forms of number portability. Section 3(30) of
the Act defines number portability as ``the ability of users of
telecommunications services to retain, at the same location, existing
telecommunications numbers without impairment of quality, reliability,
or convenience when switching from one telecommunications carrier to
another.'' This definition is not limited to any one technical method
of number portability. Nor is the duty of LECs pursuant to section
251(b)(2), to provide number portability ``to the extent technically
feasible . . . in accordance with requirements prescribed by the
Commission,'' limited to long-term number portability. The Commission
acknowledges that some ambiguity exists regarding the statutory mandate
to require the provision of interim number portability, because, while
sections 251(b) and 3(30) refer to the provision of ``number
portability,'' section 271(c)(2)(B) refers to both ``regulations
pursuant to section 251 to require number portability'' and ``interim
number portability'' to be provided by Bell Operating Companies (BOCs)
until the Commission issues such regulations.'' See 47 U.S.C.
251(b)(2), 271(c)(2)B)(ix), 153(30). The Commission finds, however,
that its earlier interpretation of section 251(b)(2), that is,
requiring all LECs to provide number portability to the extent
technically feasible, is consistent with, and necessary to effectuate,
Congress's goal to promote competition in the provision of local
telecommunications service. Indeed, prior Commission decisions reflect
its understanding of Congress's intent, stated in the First Report and
Order, that number portability is a dynamic concept that allows for
changes in the methods by which LECs provide it. Additionally, in
placing number portability obligations within section 251, which is
concerned overall with the development of competitive local markets,
Congress recognized the importance of number portability to the
development of local competition. Because the statutory language, like
the language in the House bill, requires LECs to provide number
portability ``to the extent technically feasible'' and according to
requirements prescribed by the Commission, rather than ``when
technically feasible,'' the Commission does not believe that this
legislative history suggests an intent by Congress to prevent the
Commission from requiring LECs to provide ``interim,'' ``currently
available,'' or ``transitional'' number portability until ``true''
number portability becomes available.
9. The Commission finds unpersuasive BellSouth's contention that,
because Congress considered including a specific reference to interim
number portability, but did not adopt it in section 251(b), the lack of
such language demonstrates that the Commission is without jurisdiction
in this area, in particular regarding language set forth in section 261
of Senate Bill 652. This language was not included in the final version
of the legislation. Because the legislative history provides no
explanation for the deletion of this language, it is subject to various
interpretations, and the Commission is not persuaded that BellSouth's
is the most reasonable among them. See Mead Corp. v. Tilley, 490 U.S.
714, 723 (1989); Rastelli v. Warnder, 782 F.2d 17, 23 (2d Cir. 1986).
The Joint Explanatory Statement of the Conference Report states that
all differences between the Senate Bill, the House Amendment, and the
substitute reached in conference are noted therein ``except for
clerical corrections, conforming changes made necessary by agreements
reached by the conferees, and minor drafting and clerical changes.''
Because the Joint Explanatory Statement does not address the omission
of section 261 of the Senate Bill from the final legislation, the more
logical inference from the quoted statement is that Congress regarded
the change as an inconsequential modification rather than a significant
alteration. This view is supported by two additional facts noted above:
first, the statement in the Joint Explanatory Statement that section
251 ``incorporates provisions from both the Senate Bill and the House
Amendment;'' and second, the statements from the House Report
suggesting that the Commission's authority to prescribe requirements
for number portability extends both to interim number portability,
which is being provided now, and to long-term number portability, which
will ``be deployed when it is technically feasible.''
10. This reading of the term ``number portability'' to include all
forms of number portability, whether interim or long-term, also is more
consistent than BellSouth's reading with Congress' goal of fostering
competition in the local exchange marketplace. Congress recognized that
number portability is essential to meaningful competition in the
provision of local exchange services, and the record in this proceeding
demonstrates that customers are reluctant to switch carriers if doing
so requires that they give up their current telephone numbers. Nor is
this view inconsistent with the distinction between ``interim number
portability'' and ``section 251 number portability'' referenced in
section 271(c)(2)(B)(ix). The legislative history of the 1996 Act does
not explain why Congress decided to refer specifically to interim
number portability only in section 271(c)(2)(B)(ix). In the absence of
such an explanation, and given the broad definition of number
portability in section 3(30) and the legislative history described
above, it seems unlikely that Congress's reference to interim number
portability in section 271(c)(2)(B)(ix) was intended to narrow the
concept of number portability as used elsewhere in the statute.
11. Contrary to BellSouth's assertion, in the First Report and
Order, the Commission did not rely on section 271(c)(2)(B)(xi) as the
basis for requiring all LECs to provide interim number portability.
Rather, the Commission merely referred to section 271(c)(2)(B)(xi) as
offering further support for its interpretation of section 251(b)(2).
In addition, the Commission explained that its interpretation of
section 251(b)(2) would prevent a BOC seeking interLATA authorization,
pursuant to section 271 of the Act, from being able to avoid providing
number portability during the time between the adoption of the
Commission's number portability rules and the implementation of long-
term number portability measures. See 47 U.S.C. 271. Under BellSouth's
interpretation, a BOC could refuse to offer interim number portability
from the time of the adoption of the First Report and Order until the
actual implementation of long-term number portability, yet still be in
compliance with the number portability checklist requirement set forth
in section 271. The Commission believes that a more logical
interpretation of these sections is that, in providing for both types
of number portability, Congress did not intend for there to be such a
time lag but instead required the provision of interim number
portability until long-term number portability is in place.
[[Page 46574]]
B. Commission Authority To Establish Cost Recovery Guidelines for
Interim Number Portability
1. Background
12. In the First Report and Order, the Commission asserted
jurisdiction over interim number portability and established cost
recovery guidelines for interim number portability measures for the
states to implement. Several commenters assert that the Commission
lacks authority to promulgate cost recovery guidelines for interim
number portability.
2. Discussion
13. The Commission upholds its earlier decision and affirms its
authority to establish cost recovery guidelines for interim number
portability measures. Its interpretation of the statute finds support
in the language of the 1996 Act, is consistent with the Act's
underlying goals, and is consistent with the conclusions reached in the
Third Report and Order.
14. The Commission finds that sections 251(b)(2) and 251(e)(2)
grant it explicit authority over, respectively, the provision of and
the recovery of costs associated with number portability. 47 U.S.C.
251(b)(2), (e)(2). The Commission finds that its authority under
section 251(e)(2), as with section 251(b)(2), is not limited to long-
term number portability, since the statutory definition of number
portability draws no distinction between interim and long-term number
portability. Section 3(30) of the Act defines number portability as
``the ability of users of telecommunications services to retain, at the
same location, existing telecommunications numbers without impairment
of quality, reliability, or convenience when switching from one
telecommunications carrier to another. 47 U.S.C. 153(30). This
definition is not limited to one technical method of providing number
portability. Similarly, sections 251(b)(2) and 251(e)(2) refer only to
the provision and cost recovery of ``number portability,'' but do not
limit the term ``number portability'' to long-term measures. As
discussed above, given the broad definition of number portability in
section 3(30), it seems unlikely that Congress's reference to interim
number portability in section 271(c)(2)(B)(ix) was intended to narrow
the concept of number portability as used elsewhere in the statute,
such as in sections 251(b)(2) and 251(e)(2). In addition, the
Commission finds that its interpretation of section 251(b)(2),
requiring all LECs to provide interim number portability, is consistent
with, and necessary to effectuate Congress's goal to promote
competition in the provision of local telecommunications service.
15. The Commission also notes that its conclusion that it has
statutory authority over interim number portability, regardless of
whether it is characterized as an intrastate or interstate service, and
the establishment of cost recovery rules for interim number
portability, is consistent with its holdings in the Third Report and
Order. There, the Commission concluded that the express and
unconditional grant of authority of section 251(e)(2) to the Commission
grants us the authority to ensure that carriers bear the costs of
providing number portability on a competitively neutral basis for both
interstate and intrastate calls. Section 251(e)(2) states that carriers
shall bear the costs of number portability ``as determined by the
Commission,'' and does not distinguish between costs incurred in
connection with intrastate calls and costs incurred in connection with
interstate calls. Thus, the Commission concludes for interim number
portability, as it did in the Third Report and Order for long-term
number portability, that section 251(e)(2) addresses both interstate
and intrastate matters and overrides the reservation of authority to
the states over intrastate matters contained in section 2(b). 47 U.S.C.
152(b). See Iowa Utils. Bd. v. FCC, 120 F.3d at 792, 794 and n.10, 795
and n.12, 802 and n.23, 806. See also In re Implementation of the Local
Competition Provisions in the Telecommunications Act of 1996, CC Docket
No. 96-98, First Report and Order, 61 FR 45476 (August 29, 1996), 11
FCC Rcd 15,499 at 15,548 and n.155 (1996), vacated in part, aff'd in
part, Iowa Utils. Bd. v. FCC, 120 F.3d 753 (8th Cir. 1997), rev'd in
part, aff'd in part and remanded sub nom. AT&T Corp. v. Iowa Utils.
Bd., 119 S.Ct. at 730.
16. The Commission is not persuaded that it lacks jurisdiction over
cost recovery for interim number portability measures because the
states have historically regulated the retail provision of RCF and DID.
The states' regulation of rates for these services when provided on a
retail basis does not preclude an express Congressional grant of
authority to this Commission under section 251(e)(2) to regulate the
cost recovery for interim number portability. Section 251(e)(2) states
that carriers shall bear the costs of number portability ``as
determined by the Commission,'' and does not distinguish between costs
incurred in connection with intrastate calls and costs incurred in
connection with interstate calls.
17. The Commission disagrees with Bell Atlantic's claim that,
because section 251(e)(2) refers to the costs of ``establishing''
number portability and there is nothing to ``establish'' with respect
to interim number portability, the Commission is without authority to
adopt cost recovery guidelines for the provision of interim number
portability. In arguing that there is nothing to ``establish''
regarding interim number portability, Bell Atlantic defines the term
``establish'' narrowly, i.e, limiting the meaning of ``establish'' to
physically upgrading the public switched telephone network or creating
databases necessary for customers to retain their telephone numbers
when switching carriers. To give full effect to the pro-competitive
objectives of the 1996 Act, the Commission concludes that the term
``establish'' should be read more broadly. Although the functionalities
necessary to provide interim number portability already exist in most
public switched telephone networks, additional actions are necessary to
implement interim number portability in a manner useful to new
entrants. The actions required to establish interim number portability
and the associated costs vary according to where the call originates in
a carrier's network. The provision of interim number portability
results in switching and transport costs, and may include some small
non-recurring costs, such as administrative costs. Because additional
actions are required by LECs in the provision of interim number
portability, the Commission finds that the process of transferring
numbers and subsequently forwarding calls is what ``establishes''
(i.e., ``creates'' or ``brings into existence'') interim number
portability for use by new entrants.
18. In addition to disagreeing with Bell Atlantic's narrow
interpretation of the term ``establish'' in section 251(e)(2), the
Commission also finds that it would be contrary to Congressional intent
to conclude that the Commission's authority to impose a competitively
neutral cost recovery mechanism is limited to long-term number
portability. Congress imposed a number portability requirement on all
LECs, and directed the Commission to adopt a competitively neutral cost
recovery mechanism, in order to give new entrants a realistic
opportunity to compete against incumbent LECs for local exchange
customers. 47 U.S.C. 251(e). Mandating a number portability requirement
without ensuring a competitively neutral cost recovery mechanism could
significantly handicap the ability of new entrants to
[[Page 46575]]
win customers, whether the method of porting numbers is long-term or
interim. In the First Report and Order, the Commission concluded that,
because interim number portability costs will be small and incurred for
a relatively short period, requiring carriers to bear their own costs
would meet its competitive neutrality guidelines. The Commission
specifically prohibited incumbent LECs from shifting all of their costs
onto new entrants, however. Because both carriers would be competing
for the same customer, the new provider may be forced to charge higher
prices due to its need to recover the incumbent LEC's incremental costs
of number portability, while the customer would face no additional
charges if it stayed with the incumbent LEC. Thus, the Commission
concludes that Bell Atlantic's interpretation--that the Commission has
authority under section 251(e)(2) to impose a competitively neutral
cost recovery mechanism for long-term number portability, but lacks
such authority over interim number portability--will not promote
competition.
19. The Commission similarly is not persuaded by Bell Atlantic's
claim that cost recovery for interim number portability must be subject
to negotiation between carriers, and that the Commission therefore
lacks authority to establish cost recovery guidelines. Bell Atlantic's
argument is based on language in the Senate Report discussing section
261 of Senate Bill 652, which states that interconnection agreements
reached under section 251 must, if requested, provide for interim
number portability, including the method by which it will be provided,
and the amount of compensation. As discussed above, section 261, as it
appeared in Senate Bill 652, distinguished between interim and final
number portability, but was ultimately dropped from the final version
of the 1996 Act. The Commission finds unpersuasive Bell Atlantic's
interpretation of the legislative history. See Helvering v. Hallock,
309 U.S. 106, 119-20 (1940); Brennan v. Midwestern United Life
Insurance, 259 F. Supp. 673 (1966); Women Involved in Farm Economics v.
USDA, 682 F. Supp. 599 (1988).
20. The Commission rejects BellSouth's assertion that the
Commission lacks authority to depart from cost-causative pricing
principles. As the Commission explained in the Third Report and Order,
Congress imposed a number portability requirement on all LECs, and
directed the Commission to adopt a competitively neutral cost recovery
mechanism, in order to give new entrants a realistic opportunity to
compete against incumbent LECs for local exchange customers. A cost
causative basis for pricing number portability could defeat the purpose
for which number portability was mandated. Mandating a number
portability requirement without ensuring a competitively neutral cost
recovery mechanism could significantly handicap the ability of new
entrants to win customers, whether the method of porting numbers is
long-term or interim, because they could be forced to bear all
incremental costs of number portability and pass those costs onto
customers in the form of higher prices.
21. Finally, the Commission rejects BellSouth's contention that the
Commission based its jurisdiction to order interim number portability
on pre-1996 Act provisions and is therefore precluded from relying on
section 251(e)(2) for jurisdiction to determine cost recovery for such
interim measures. To the contrary, in the First Report and Order the
Commission concluded only that sections 1 and 202 of the Communications
Act provide a pre-existing and independent basis for its jurisdiction
to require the provision of interim number portability methods. The
Commission did not rely solely on sections 1 and 202 as a basis for
jurisdiction, and hereby clarifies that, although it finds that
sections 1 and 202 provide an additional statutory basis on which it
may require interim number portability, it has independent authority to
do so by virtue of sections 251(b)(2) and 251(e)(2) of the Act.
22. The Commission reiterates its earlier finding, as discussed
above, that section 251(e)(2) addresses both interstate and intrastate
matters, and overrides section 2(b)'s reservation of authority to the
states over intrastate matters. Although the Commission asserts federal
jurisdiction over interim number portability and affirms its authority
to establish cost recovery guidelines for interim number portability
measures, it denies requests that it generally preempt state number
portability cost recovery policies. Instead, the Commission affirms its
earlier conclusion that states may continue to utilize various cost
recovery mechanisms as long as they meet the Commission's competitive
neutrality guidelines. This cost recovery approach is different than
the one adopted in the Third Report and Order for long-term number
portability cost recovery, in which the Commission adopted an
exclusively federal cost recovery mechanism. The Commission notes that
in the Third Report and Order, it found that section 251(e)(2)
authorizes the Commission to provide the distribution and recovery
mechanism for all the costs of providing long-term number portability,
but did not interpret the statute to require the adoption of an
exclusively federal recovery mechanism for all forms of number
portability. Instead, an exclusively federal cost recovery mechanism
for long-term number portability was adopted for several policy reasons
that are inapplicable to interim number portability. The Commission
determined in the Third Report and Order that an exclusively federal
cost recovery mechanism for long-term number portability will enable it
``to satisfy most directly its competitive neutrality mandate and will
minimize the administrative and enforcement difficulties that might
arise where jurisdiction over long-term number portability divided.''
Additionally, an exclusively federal cost recovery mechanism for long-
term number portability obviates the need for state allocation of the
shared costs of the regional database, a task that would likely be
complicated by the database's multistate nature.
23. Although the Commission has determined that the Commission's
authority to provide the distribution and recovery mechanism for all
number portability costs extends to long-term and interim number
portability, it does not find it necessary to establish an exclusively
federal recovery mechanism for interim number portability. Instead, it
will continue to permit states to provide for cost recovery in accord
with the competitive neutrality standards adopted in the First Report
and Order, and elaborated here, for the following reasons. First, the
Commission believes that adopting an exclusively federal cost recovery
mechanism would be very disruptive to existing interim number
portability cost recovery. States have been providing for interim
number portability cost recovery since 1996. Also, cost recovery for
interim number portability has been determined through existing
interconnection agreements, as incumbent LECs are required by section
251(c) to provide for interim number portability in their
interconnection agreements. 47 U.S.C. 251(c). The Commission notes that
federal courts have upheld the interim number portability cost recovery
guidelines established in the First Report and Order. See, e.g.,
Southwestern Bell Telephone v. AT&T, 1998 WL 657717*4 (D.Tex. 1998);
see also US WEST Communications v. MFS Intelnet, 35 F. Supp. 2d 1221,
1236 (D.Or. 1998).
[[Page 46576]]
Second, the Commission believes that disruption of existing cost
recovery mechanisms is not warranted because interim number portability
will remain in place for a very limited period of time. Interim number
portability was replaced by long-term number portability in the 100
largest MSAs by the end of 1998, and is subsequently being replaced in
other switches in which a bona fide request for number portability has
been received. Third, the Commission believes that a cost allocation
method that requires LECs to bear their own costs of interim number
portability is competitively neutral, as individual carrier's costs
will be small and no shared costs or database costs must be allocated.
As previously indicated, to the extent that RCF, DID and other
comparable methods are used to provide currently available number
portability, and the capability for currently available number
portability already exists in the incumbent LEC network, only the
short-run incremental costs are properly attributed to interim number
portability. Having already provisioned their switches with enough
capacity to carry all of their respective customers' incoming and
outgoing calls, the Commission does not expect incumbent LECs to incur
additional costs with respect to switch capacity when a customer
chooses to port its number to a new service provider and the incumbent
LEC must forward calls using interim number portability methods. As a
result, the Commission expects little or no change in the level of
incumbent LECs switching and transport costs per ported number.
24. As stated in the First Report and Order, if a carrier believes
that a LEC's pricing provisions for number portability violate the
Commission's competitive neutrality guidelines or violate a state-
mandated cost recovery mechanism, it may be able to seek relief from
its state commission. If the carrier is not able to obtain relief in
this way, or if a state has not yet adopted a cost recovery mechanism
for cost recovery of interim number portability measures, it may be
able to bring action against the LEC in federal district court pursuant
to section 207 for damages or file a section 208 complaint with this
Commission against another carrier alleging a violation of the Act or
the Commission's rules. Alternatively, if a carrier believes that a
state has not properly applied the statute or Commission rules, or if a
state's cost recovery mechanism is not competitively neutral because it
improperly burdens new entrants with interim number portability costs,
it may file a request for declaratory ruling with the Commission or
otherwise seek court review of the state cost recovery mechanism.
C. Cost Recovery Guidelines
1. Background
25. In the First Report and Order, the Commission established two
criteria with which any cost recovery method must comply in order to be
considered competitively neutral. First, ``a `competitively neutral'
cost recovery mechanism should not give one service provider an
appreciable, incremental cost advantage over another service provider,
when competing for a specific subscriber.'' Second, the cost recovery
mechanism ``should not have a disparate effect on the ability of
competing service providers to earn normal returns on their
investments.'' In setting forth these criteria, however, the Commission
left to the states the determination of the exact cost recovery
mechanism to be utilized. Several carriers have challenged the
Commission's cost recovery guidelines.
2. Discussion
26. The Commission rejects the claims of those carriers that assert
that its cost recovery guidelines are arbitrary, capricious, or plain
error. Number portability promotes competition by allowing customers to
switch carriers easily without having to change their telephone
numbers. In the First Report and Order, the Commission explained that
the Commission departed from cost causation principles with respect to
interim number portability because, ``[d]epending on the technology
used, to price number portability on a cost causative basis could
defeat the purpose for which it was mandated.'' As the Commission
stated in the Third Report and Order, pricing number portability on a
cost-causative basis could defeat Congress's purpose of removing
barriers to local competition because the nature of the costs involved
with some number portability solutions might make it economically
infeasible for some carriers to compete for a customer serviced by
another carrier. If it is assumed that the customer who ports his or
her number is the cost causer, and all of the costs associated with
forwarding a call are placed on the customer who switches carriers,
customers who want to retain their telephone numbers could be deterred
from switching carriers due to increased costs. This result is wholly
contrary to the pro-competitive intent of sections 251(b)(2) and
252(e)(2) regarding the provision of number portability.
27. Additional economic and policy considerations also support the
Commission's decision not to follow strict principles of cost causation
in this specific context by imposing all interim number portability
costs on new entrants. First, all customers benefit from number
portability because number portability promotes competition, lower
prices, increased choices, and greater innovation. In addition, other
customers will benefit to the extent that they need not search for a
customer's new number when that customer switches carriers. Since
number portability generates an externality from which all customers
benefit, the porting customers should not pay the full economic costs.
Moreover, as discussed in the First Report and Order and Third Report
and Order, if the costs are placed entirely on one carrier or group of
carriers, ``the new entrant's share of the cost [could be] so large,
relative to its expected profits, that the entrant would decide not to
enter.'' Preventing new, efficient entrants from offering service
because of costs associated with number portability would directly
contravene one of the 1996 Act's primary purposes, namely to encourage
local exchange competition.
28. Furthermore, the Commission agrees with MCI that the costs of
number portability should not be viewed narrowly as simply costs of
entry, but more broadly as costs of creating a competitive environment
that will benefit all consumers. In the Third Report and Order, the
Commission concluded that applying principles of competitive neutrality
to long-term number portability cost recovery would ensure that the
cost of number portability does not undermine the goal of the 1996 Act
to ``promote a competitive environment'' for the provision of local
communications services. Similarly, the Commission concludes that
requiring incumbent LECs to share in the costs of providing both
interim and long-term number portability is in the public interest and
will contribute to the development of competition in the local exchange
market.
29. BellSouth asserts that the cost recovery guidelines for interim
number portability are ``vague and ambiguous,'' and that the Commission
failed to define the phrases ``appreciable cost advantage'' and
``normal return.'' As applied to its cost recovery guidelines, the
Commission clarifies that, when the Commission used the phrase
``appreciable cost advantage'' the Commission meant a difference in
costs that, if reflected in retail prices, would cause a not-
insignificant number of
[[Page 46577]]
customers to change, or decline to change, carriers. The Commission
also finds that a ``normal return'' in economic terms is the return
sufficient to assure confidence in the financial integrity of the
company so as to maintain its credit and attract capital. Normal return
in this context does not guarantee that all firms will be profitable
and, hence, remain in the industry. Rather, this concept means that
number portability costs imposed on a particular carrier should not be
so significant, by themselves, as to drive existing carriers out of the
market or make continued operations unprofitable, or deter the entry of
carriers that, but for the number portability costs, would have entered
the market.
30. The Commission finds no merit to BellSouth's suggestion that
the Commission's definition of, and criteria for, competitive
neutrality, are novel or unprecedented. The ``competitively neutral''
principles established in the First Report and Order were drawn from
well-accepted principles of economic theory. To be competitive, a firm
must be able to offer a particular customer a service/price package
which that customer finds comparable to that offered by other carriers,
and it must be able to do so while earning a normal rate of return. In
making business decisions, firms are concerned with both the short-run
and the long-run. In the short-run, firms are concerned with their
ability to compete, while in the long-run firms are concerned with
remaining in the market. The first criterion of the competitive
neutrality test addresses the short-run concern, in that carriers
cannot compete effectively if one carrier has an appreciable,
incremental cost advantage over other carriers. The second criterion
addresses the concern that the cost recovery mechanism should not have
a disparate effect on the ability of competing service providers to
earn normal returns on their investments.
31. The Commission also rejects arguments that the methods
currently suggested in the First Report and Order fail to meet the
second criterion of competitive neutrality, which states that ``[the
allocation mechanism] should not have a disparate effect on the ability
of competing service providers to earn normal returns on their
investments.'' As applied to interim number portability, the methods
for allocating the costs of interim number portability suggested in the
First Report and Order, including allocation according to a carrier's
number of active lines or number of active telephone numbers, meet the
criteria established for competitive neutrality. Given the relatively
small incremental costs of interim number portability, the Commission
concludes that using either number of telephone lines or number of
active telephone numbers as the basis for allocation also meets the
second criterion. Although that carrier's costs for number portability
go up relative to other carriers, it also receives the corresponding
revenues generated by the new customer. One characteristic of these
rules is that the costs allocated to particular carriers increase with
the size of the carrier so that smaller carriers will not be driven
from the market. In creating the competitive neutrality criteria, the
Commission also was guided by the 1996 Act's objectives. Number
portability and competitively neutral cost recovery are necessary to
fulfill the 1996 Act.
32. The Commission also rejects BellSouth's argument that it is
arbitrary and capricious to use transitional measures as an incentive
to adopt long-term number portability as quickly as possible. As
discussed above, the Commission finds that it has jurisdiction over
number portability, and that number portability is a dynamic, not
static, concept. Section 271 of the Act explicitly states that BOCs
must provide ``interim telecommunications number portability'' until
``the date by which the Commission issues regulations pursuant to
section 251 to require number portability.'' While the costs of long-
term number portability will be greater than those of interim number
portability, carriers will be able to recover their costs through two
separate federally-tariffed charges, and end-user and query service
charge.
33. The Commission disagrees that it is interfering with existing
state-mandated interim number portability cost recovery mechanisms. As
the Commission stated in the First Report and Order, the Commission
provides flexibility for the states to determine their own cost
allocation mechanisms, subject to the guidelines set forth in the First
Report and Order. If a state previously determined its cost allocation
scheme without taking section 251(e)(2) into account, that state must
now ensure that its method comports with the 1996 Act and the
Commission's implementing regulations.
34. The Commission disagrees with AirTouch's assertion that
carriers that do not serve customers with ported numbers, such as
wireless carriers, should not be required to share in the cost of
number portability because such carriers do not benefit from number
portability. The Commission looks to section 251(e)(2) of the Act,
which plainly requires that the costs of establishing number
portability be borne by ``all telecommunications carriers on a
competitively neutral basis as determined by the Commission.'' 47
U.S.C. 251(e)(2). This interpretation is consistent with the Third
Report and Order, wherein the Commission concluded that the provisions
of section 3 of the Act, when read together, define ``all
telecommunications carriers'' as all persons or entities other than
aggregators that charge to transmit information for the public without
changing the form or content of the information, regardless of the
facilities they use. Applying the statutory definition to section
251(e)(2), the Commission concluded that the way all telecommunications
carriers bear the costs of providing number portability--including
incumbent LECs, competitive LECs, CMRS providers, IXCs, and resellers--
must be competitively neutral as determined by the Commission. The
Commission has exercised its statutory mandate by articulating criteria
for states to use in adopting cost recovery mechanisms. As the states
develop cost recovery mechanisms pursuant to the statutory mandate,
carriers will bear their own costs or states may allocate costs in a
competitively neutral fashion on all telecommunications carriers that
does not unduly burden any particular carrier or group of carriers.
35. The Commission finds no merit in SCLP and SCI's claim that
requiring CMRS providers to contribute to number portability would have
a ``disparate effect'' on their ability to earn a normal rate of
return. These carriers have failed to present any evidence to support
their claim that contributing to the costs of interim number
portability would have such an effect. As noted in the First Report and
Order, a disparate effect may be said to exist when a ``new entrant's
share of the [interim number portability] costs may be so large,
relative to its expected profits, that the entrant would decide not to
enter the market.'' With respect to existing carriers, the Commission
clarifies that a disparate effect under its definition would exist if
that carrier or class of carriers would be driven from the market,
while other carriers would not, as a result of number portability
costs. These carriers' unsupported allegations that contributing to the
costs of interim number portability would have a disparate effect are
insufficient to support their request for a blanket exemption for all
CMRS carriers.
36. The Commission also disagrees with SCLP and SCI's assertion
that its
[[Page 46578]]
First Report and Order demonstrates an intent that the costs of interim
number portability be placed on non-cost causers only where necessary
to preserve competitive neutrality. In making this claim, SCLP and SCI
rely on the word ``relevant'' in the Commission's statement that
``states may apportion the incremental costs of interim measures among
relevant carriers by using competitively neutral allocators.'' In using
the term ``relevant carriers,'' the Commission intended to reflect that
differing cost recovery mechanisms, all of which could satisfy its
competitively neutral mandate, might encompass all, or a subset of all,
telecommunications carriers, depending on the specifics of the cost
recovery mechanism.
37. In the First Report and Order, the Commission concluded that,
in choosing the phrase ``all telecommunications carriers,'' Congress
intended to include all types of carriers in the cost recovery
mechanism because, unlike the requirement to provide number portability
which applies solely to local exchange carriers, the requirements
relating to number portability cost recovery apply to ``all
telecommunications carriers on a competitively neutral basis.'' The
term ``telecommunications carrier'' is defined in the Act as ``any
provider of telecommunications services. * * *'' 47 U.S.C. 153(44). The
Commission adopted a literal reading of the statutory requirement and
of the statutory definition of ``telecommunications carriers.'' While
the Commission's interpretation prevents an incumbent LEC from
recovering its costs entirely from the new entrant, such an incumbent
LEC may be able to recover its incremental interim number portability
costs via the state-adopted allocation mechanism from ``all
telecommunications carriers'' if a state implements such a cost
recovery mechanism. Since the carrier providing the call forwarding
itself falls within the category of ``all telecommunications
carriers,'' the carrier providing the forwarding is prevented by
statute from recovering all of its costs from other carriers. States
could also permit incumbent LECs to recover any remaining costs in some
other manner, e.g., from end-users.
38. The Commission affirms its finding that a ``mechanism that
requires each carrier to pay for its own costs of interim number
portability measures'' is competitively neutral and would constitute an
acceptable cost recovery scheme that states could adopt. First, no
significant capital costs are incurred by the carrier winning the
customer or by the carrier losing the customer. Thus, the cost recovery
mechanism does not give one service provider an appreciable,
incremental advantage over another service provider when competing for
the same customer. Second incumbent LECs should still be able to earn a
normal return, as the anticipated costs of interim number portability
measures are relatively small.
39. The Commission disagrees with BellSouth's argument that
``having determined that the costs of [interim number portability] will
be incurred solely by the incumbent LECs,'' it was arbitrary and
capricious for the Commission to determine that requiring each carrier
to bear its own costs does not operate to the competitive disadvantage
of the incumbent LECs. The Commission also disagrees with Bell
Atlantic's argument that the First Report and Order was not
competitively neutral because the Commission denied Bell Atlantic the
ability to recover incremental costs of interim number portability. As
a threshold matter, these carriers are incorrect when they assert that
the Commission determined that the costs of providing interim number
portability will be incurred solely by incumbent LECs. Although finding
that ``initially, the costs of providing interim number portability
will be incurred primarily by the incumbent LEC, because the incumbent
LECs currently hold the vast majority of numbers in use,'' the First
Report and Order imposed interim number portability requirements on all
local exchange carriers. The Commission finds that it would be
competitively neutral for carriers to pay their own incremental interim
number portability costs, that is, to absorb the costs themselves or
pass the costs onto their own retail customers. Additionally, the
Commission has not foreclosed incumbent LECs from recovering all of
their incremental costs of interim number portability, but has
permitted each state to adopt a cost recovery mechanism, consistent
with its competitive neutrality guidelines. The First Report and Order
does not deny any carrier the right to recover costs, but, rather
adopts guidelines that states must follow in implementing a cost
recovery mechanism.
40. The Commission also concludes that the assertion by Bell
Atlantic and Cincinnati Bell that new entrants should be required to
bear all the costs of interim number portability is not consistent with
the pro-competitive intent of sections 251(b)(2), 252(e)(2), and the
1996 Act as a whole. As the Commission stated in the Third Report and
Order, the Commission has interpreted the Congressional mandate of
competitive neutrality to require the Commission to depart from cost-
causation principles when necessary to ensure that the cost of number
portability borne by each carrier does not significantly affect any
carrier's ability to compete with other carriers. The Commission
specifically prohibited incumbent LECs from shifting all of their costs
onto new entrants, however. Despite the fact that such incremental
costs are small, shifting all of an incumbent LEC's costs of interim
number portability to a new entrant could result in a cost so large,
``relative to expected profits,'' that the new entrant would decide not
to enter the market. As the Commission stated in the First Report and
Order, imposing the full incremental cost of interim number portability
solely on new entrants would place them at an ``appreciable,
incremental cost disadvantage relative to another service provider when
competing for the same customer'' and would, therefore, violate the
first criteria of the competitive neutrality mandate.
41. The Commission is not persuaded by BellSouth's contention that
the cost allocation mechanisms discussed in the First Report and Order
guarantee the profitability of the new entrants. Number portability
facilitates the development of competition among local providers.
Through its competitive neutrality criteria and state-determined cost
allocation mechanisms, the First Report and Order removes a potential
barrier to entry that could result from high rates or charges that
incumbent LECs potentially could impose for interim number portability
on new entrants that possess their own switches. It does not guarantee
that a new entrant will be profitable or be able to compete
successfully in the market.
42. GTE suggests a third criterion, that ``a cost recovery
mechanism must not influence a customer's selection of his or her
service provider.'' While the Commission agrees with GTE that a cost
recovery mechanism should not influence a customer's selection of his
or her service provider, this criterion is effectively embodied in the
first prong of its competitive neutrality test and, thus, the
Commission sees no need to revise that test.
D. Alternative Allocators for Cost Recovery of Interim Number
Portability
1. Background
43. In the First Report and Order, the Commission provided a list
of examples of allocators for interim number portability cost recovery
that would
[[Page 46579]]
meet the Commission's criteria for competitive neutrality. The
Commission stated, for example, that a cost allocator based on a
carrier's number of active telephone numbers, or a carrier's relative
number of presubscribed customers, would meet its competitive
neutrality guidelines. Several parties ask the Commission to approve
additional allocators, or take exception to cost allocators deemed to
be competitively neutral by the Commission in the First Report and
Order.
2. Discussion
44. In the First Report and Order, the Commission provided a non-
exhaustive list of examples of allocators for interim number
portability cost recovery that would meet the Commission's criteria for
competitive neutrality. The Commission disagrees with GTE's argument
that a federally-mandated cost pooling mechanism needs to be
implemented. For the reasons discussed in the First Report and Order,
the Commission believes that states should be able to adopt various
cost recovery mechanisms based on its competitive neutrality
guidelines. The Commission is not, however, precluding states from
selecting cost pooling as a cost recovery mechanism, nor is the
Commission determining that cost pooling is not competitively neutral
for the recovery of interim number portability costs. Although in the
Third Report and Order the Commission rejected pooling of carriers'
long-term number portability costs as a mechanism for recovery of these
costs because pooling mechanisms, in general, reduce carrier incentives
to provide service efficiently, states may find that these
disadvantages are not as significant when pooling is used as a
mechanism for the recovery of interim number portability costs. Because
the costs of interim number portability are relatively small, given
that incumbent LECs have already provisioned their switches with the
capacity to provide the services needed for interim number portability,
creating incentives for carriers to provide service efficiently may be
less of a concern. The Commission allows states to utilize various cost
recovery mechanisms, and states will make the decision as to whether
they will choose pooling as a recovery mechanism and impose cost
accounting and distribution mechanisms on carriers.
45. In clarifying that the list of potential allocators referenced
in the First Report and Order is not exhaustive, the Commission also
affirms that a cost recovery mechanism based on a carriers' gross
revenues is an acceptable means of allocating costs among carriers.
Financial measures, including gross revenues, are developed for
different uses, such as for tax filings, annual reports, and SEC
filings, and are readily available for this use. Additionally, such an
allocator does not disparately affect the incremental costs of winning
a specific customer or group of customers. A LEC with a small share of
the market's revenues would pay a percentage of the incremental costs
of interim number portability that is small enough that it will have no
appreciable affect on its ability to compete for that customer.
Accordingly, utilizing a gross revenues allocator does not violate the
Commission's competitive neutrality guidelines.
46. It appears that carriers' concerns with some of the allocators
approved by the Commission are focused on its second criterion, on
whether losing a customer affects a firm's ``normal return.'' Losing a
customer will necessarily affect a firm's revenues and subsequent
return on investment. The First Report and Order did not intend to
change that. Rather, as stated in the Third Report and Order, the
second prong of the competitive neutrality test does not guarantee any
particular rate of return, but merely states that an allocator should
not disparately affect a carrier's ability to earn a normal return. The
Commission also stated that allocating costs on an active telephone
number basis would meet the second criteria, because it should not give
any carrier a cost advantage, relative to its competitors.
47. In a written ex parte presentation to the Commission, AT&T
summarized a number of existing state cost recovery mechanisms in
effect at that time. In one method, cost elements required for interim
number portability are attributed to the requesting carrier, which is
deemed the cost causer, and must be borne by that entity. This method
allocates all incremental costs of interim number portability to the
new entrant. The Commission reiterates its earlier conclusion in the
First Report and Order that a cost recovery mechanism that imposes the
entire incremental costs of interim number portability on a facilities-
based new entrant violates its competitive neutrality criteria. New
entrants subjected to such a cost recovery mechanism may pursue one of
the enforcement options discussed above.
48. NYNEX suggests that allocating costs on the basis of total
telecommunications retail revenues is competitively neutral and should
be permitted as an allocator. The Commission agrees with NYNEX that
such an allocation may meet its competitive neutrality guidelines
because, as with allocators based on gross telecommunications revenues,
it would not give one service provider an appreciable, incremental cost
advantage over another service provider. Under this allocation method,
a LEC with a small share of the market's revenues would pay a
percentage of the incremental cost of number portability that will be
small enough to have no appreciable affect on its ability to compete
for a customer.
49. In sum, the Commission reaffirms its determination to allow
each state to determine the appropriate cost recovery mechanism for its
jurisdiction as long as it meets its competitive neutrality criteria.
The Commission recognizes that, in the First Report and Order, the
Commission tentatively concluded that a cost recovery mechanism for
interim number portability that assesses charges based on a carrier's
gross revenues less charges carriers paid to other carriers would meet
its competitive neutrality guidelines, while in the Third Report and
Order, the Commission declined to utilize this allocator for long-term
number portability cost recovery. The Commission notes, however, that
interim number portability and long-term number portability, as
implemented pursuant to industry-wide discussions, have very different
cost characteristics. A cost recovery method that is appropriate for
one may not be suitable for the other. Although the Commission has
established one particular cost recovery mechanism for long-term number
portability, the Commission declines to issue an exclusive list of
acceptable cost recovery methods for interim number portability from
which the states may choose to adopt. States are free to adopt an
appropriate cost recovery method pursuant to the competitive neutrality
criteria.
E. Takings
1. Background
50. Several petitioners claim that its cost recovery guidelines for
interim number portability do not ensure adequate compensation and
therefore constitute an unlawful taking under the Fifth and Fourteenth
Amendments to the Constitution.
2. Discussion
51. The Commission rejects the claim that the cost recovery
guidelines for interim number portability established in the First
Report and Order violate the Fifth Amendment's mandate that no private
property shall be ``taken for public use without just compensation.''
[[Page 46580]]
See U.S. Const. amend. V. As discussed below, the Commission concludes
that the petitioners' takings claim is premature. More importantly, in
examining its cost recovery guidelines in light of criteria articulated
by the Supreme Court, the Commission finds that the petitioners'
takings claim fails on the merits.
52. In the First Report and Order, the Commission clearly stated
that, although its guidelines govern state allocation of costs of
interim number portability, it is the responsibility of the states to
adopt specific cost recovery mechanisms. Although petitioners have
broadly stated that they believe that incumbent LECs will not receive
adequate compensation as a result of the guidelines established in the
First Report and Order, they have not shown the actual impact of the
guidelines based on state orders. The Commission concludes, therefore,
that, absent an actual rate order under which the impact of the cost
recovery guidelines can be evaluated, the petitioners' takings argument
is premature. This conclusion is consistent with FPC v. Texaco Inc., in
which the Supreme Court held that ``[a]ny broadside assertion that
indirect regulation will be confiscatory is premature. The consequences
of indirect regulation can only be viewed in the entirety of the rate
of return allowed on investment, and this effect will be unknown until
the Commission has applied its scheme in individual cases over a period
of time.'' FPC v. Texaco Inc. 417 U.S. 380, 391-92 (1974).
53. Assuming arguendo that the petitioners' takings claim is not
premature, the Commission finds it without merit. The Supreme Court has
made clear that ``government may execute laws or programs that
adversely affect recognized economic values,'' Penn Central v. City of
New York, 438 U.S. 104, 124 (1978), and that ``given the propriety of
governmental power to regulate, it cannot be said that the Takings
Clause is violated whenever legislation requires one person to use his
or her assets for the benefit of another.'' Connolly v. Pension Benefit
Guaranty Corp., 475 U.S. 211, 222 (1986). In fact, ``government hardly
could go on if to some extent values incident to property could not be
diminished without paying for every such change in the general law.''
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922). Despite the
conclusory assertion of Cincinnati Bell to the contrary, its guidelines
will not result in a significant economic impact on incumbent LECs. As
noted in the First Report and Order, ``the capability to provide number
portability through interim methods, such as RCF and DID, already
exists in most of today's networks, and no additional network upgrades
are necessary.'' The incremental costs associated with the utilization
of pre-existing network functionality for purposes of interim number
portability are relatively small.
54. In Duquesne Light Co. v. Barasch, the Supreme Court rejected a
takings claim on the grounds that it was permissible to preclude
certain costs from inclusion in an electric utility's rate base because
the overall rate was within constitutional requirements. Duquesne Light
Co. v. Barasch, 488 U.S. 299 (1989). A rate is too low for
constitutional purposes, according to the Court, if it is ``so unjust
as to destroy the value of [the] property for all the purposes for
which it was acquired.'' The Court held that `` `[i]t is not the
theory, but the impact of the rate order which counts.' . . . The
Constitution protects the utility from the net effect of the rate order
on its property. Inconsistencies in one aspect of the methodology have
no constitutional effect on the utility's property if they are
compensated by countervailing factors in some other aspect.''
55. In determining that the overall impact of the rate order was
not constitutionally objectionable and that the takings clause was not
violated, the Court in Duquesne Light Company took note of the fact
that ``[n]o argument has been made that these slightly reduced rates
jeopardize the financial integrity of the companies, either by leaving
them insufficient operating capital or by impeding their ability to
raise future capital. Nor has it been demonstrated that these rates are
inadequate to compensate current equity holders for the risk associated
with their investments. . . .'' Similarly, no showing has been made
that the cost recovery guidelines at issue here will ``jeopardize the
financial integrity'' of incumbent LECs, nor has a showing been made
that the cost recovery guidelines will result in state rate orders that
are inadequate to compensate LECs ``for the risk associated with their
investments.''
56. Having already provisioned their switches with enough capacity
to carry all of their customers' incoming and outgoing calls, incumbent
LECs should incur no additional costs with respect to switch capacity
when losing customers and using RCF to provide number portability.
Although RCF will require additional switch capacity--and an increase
in transport costs--to process incoming calls, this effect is offset by
the fact that the incumbent LEC will no longer handle the outgoing
calls originated by the ported customer. As a result, little or no
change in the level of incumbent LEC switching and transport costs per
ported number should occur. The Commission concludes, therefore, that
the additional incremental costs of interim number portability to
incumbent LECs will be extremely small. Additionally, incumbent LECs
may be able to recover some portion of their costs from other carriers
through state-mandated cost recovery mechanisms. Additionally, as
discussed above, if a carrier believes that a LEC's pricing provisions
for number portability violate the Commission's competitive neutrality
guidelines or violate a state-mandated cost recovery mechanism, a
carrier has a variety of ways it may seek relief.
57. Moreover, as the Supreme Court has stated, ``[t]hose who do
business in the regulated field cannot object if the legislative scheme
is buttressed by subsequent amendments to achieve the legislative
end.'' Based on the extensive public debate that preceded enactment of
the 1996 Act, it cannot be said that investors lacked adequate notice
of possible changes to the Communications Act, including the number
portability requirement at issue here. Indeed, while courts have
readily found that a taking has occurred when interference with
property rights can be characterized as a physical invasion or
permanent appropriation, such a finding has not been reached when the
challenged interference arises from a public program adjusting the
benefits and burdens of economic life to promote the common good. The
Commission's number portability cost recovery guidelines, which are
designed to facilitate local telephone competition and thereby benefit
all consumers of telecommunications services, falls squarely into the
latter category. In short, the petitioners have failed to demonstrate
that the Commission's cost recovery guidelines violate the Fifth and
Fourteenth Amendments.
F. Retroactive Application of Cost Recovery Guidelines for Interim
Number Portability
1. Background
58. ACSI asks the Commission to allow new entrants to recover
retroactively number portability costs paid to incumbent LECs in excess
of that required pursuant to the guidelines set forth in the First
Report and Order. Specifically, ACSI requests that the Commission
provide for a true-up of rates paid in excess of those required
pursuant to the First Report and Order
[[Page 46581]]
as far back as February 8, 1996, the date the 1996 Act became
effective, or the date number portability was first provided to the new
entrant, whichever is later.
2. Discussion
59. The Commission denies ACSI's request that its cost recovery
rules for interim number portability be applied to number portability
provided prior to the adoption and effective date of those rules. In
section 251(e)(2) of the Act, Congress required that ``the cost of
establishing. . . number portability shall be borne by all
telecommunications carriers on a competitively neutral basis as
determined by the Commission.'' The plain language of this section
demonstrates that, while establishing the parameters on how number
portability costs are to be allocated and who should pay such costs,
Congress intended that specific cost recovery rules were to be
established by the Commission at some point in time following the
enactment of the 1996 Act. The Commission rejects ACSI's argument that,
because the number portability provision became effective on February
8, 1996, ACSI is merely seeking to have the Commission give effect to
this pre-existing requirement. Section 251(e)(2) is not self-executing,
but is dependent on Commission action. The Commission sees no basis in
the record for applying the rules adopted pursuant to section 251(e)
retroactively.
60. The Commission's cost recovery guidelines for interim number
portability became effective August 26, 1996, however, and the
Commission agrees that it may be appropriate for states to provide a
true-up of interim number portability costs from that date through the
effective date of a state-approved cost recovery program. To provide
the states with the flexibility during the interim period to continue
using a variety of cost recovery approaches, the Commission did not
adopt a fixed cost recovery mechanism. Instead, it adopted guidelines
for the states to follow in mandating cost recovery for interim number
portability. The Commission recognizes, however, that a significant
period of time may have elapsed before each state adopted a cost
recovery mechanism for interim number portability. Thus, absent a true-
up from the effective date of the First Report and Order, the benefits
of a competitively neutral cost recovery mechanism for interim number
portability may be lost for many new entrants if they have been paying
cost recovery amounts in excess of what would be allowed under the
competitive guidelines of the First Report and Order. The Commission
notes that several state arbitration decisions have adopted a true-up
approach pending the adoption of a state-approved cost recovery
mechanism. The Commission strongly encourages states to review their
cost recovery mechanisms. Consistent with its competitive neutrality
principles, the Commission encourages states to adopt a true-up of
amounts paid for interim number portability between August 26, 1996 and
the date the state-approved cost recovery program takes effect, to the
extent such amounts exceed what would have been paid under the state-
approved plan, had it been in effect.
G. Terminating Access Charges
1. Background
61. In the First Report and Order, the Commission stated that
terminating access charges for calls forwarded from an incumbent LEC to
a competing provider through the use of a interim number portability
method should be shared between the incumbent LEC, which is the donor
switch and the terminating switch carrier. A ``donor'' switch is the
end office switch to which the called telephone number was originally
assigned. The Commission stated that the ``overarching principle'' in
such billing arrangements was that carriers were to share in the access
revenues for a ported call, because neither the incumbent LEC
forwarding carrier nor the terminating carrier provides all the
facilities used to terminate a ported call. The Commission also held
that incumbent LECs and new entrants should assess their terminating
access charges on IXCs through meet-point billing arrangements. MCI
asserts that, regardless of what type of billing arrangement is
adopted, IXCs should not be charged increased access charges as a
result of the additional call routing and associated costs necessary to
terminate a call to a ported number under interim number portability
measures.
2. Discussion
62. IXCs currently pay LECs access charges for terminating calls on
LEC switches. In a competitive local exchange market, an IXC
terminating a call to a long distance customer that has ported his or
her number to a new entrant will terminate the call to the incumbent
LEC's switch, which then will forward it to the new entrant's switch
utilizing interim number portability measures. Under this scenario,
incumbent LECs and new entrants both provide facilities used to
terminate calls to ported numbers using interim number portability. In
the First Report and Order, the Commission required both forwarding and
terminating carriers to assess charges on IXCs for terminating access
through meet-point billing arrangements. In requiring that these
revenues be shared, the Commission left to the carriers whether ``each
issues a bill for access on a ported call, or whether one of them
issues a bill to the IXCs covering all of the transferred calls and
shares the correct portion of the revenues with the other carriers
involved.'' The Commission further provided that, if carriers determine
it more efficient to issue individual bills, the forwarding carrier
must ``provide the terminating carrier with the necessary information
to permit the terminating carrier to issue a bill.''
63. The Commission finds that the additional costs that local
exchange carriers may incur should not be included in the access
charges paid by IXCs for terminating long-distance calls because any
additional routing and transport costs that are a result of interim
number portability are incremental costs of providing number
portability. Such costs may be recovered through a local number
portability cost recovery mechanism, or borne by the local exchange
carrier that forwards the call, as determined by the state, on a
competitively neutral basis. Because they are telecommunications
carriers, IXCs may be required to contribute to the costs of interim
number portability through the cost recovery mechanism adopted by state
commissions. The Commission clarifies that, to prevent double recovery
on the part of the terminating switch carrier, new entrants receiving a
portion of access charges from IXCs for terminating calls may not also
impose terminating charges on the incumbent LEC.
64. As discussed in the First Report and Order, carriers may incur
incremental costs for forwarding calls when utilizing interim number
portability. MCI requests that the Commission clarify what is included
in these incremental costs and, thus, what should be shared by all
carriers on a competitively neutral basis. The incremental costs of
providing number portability via RCF, DID, or other comparable
technically feasible measures are the costs that the forwarding carrier
incurs in forwarding the call that it would not incur if it did not
forward the call. As mentioned in the First Report and Order, such
costs may differ depending on where the call originates within the
network, and on the type of technology utilized to forward the call.
Thus, the Commission
[[Page 46582]]
declines to list each potential additional cost that may be incurred
and who should be allowed to bill for those incremental costs.
65. Finally, the Commission notes that it has ``not foreclose[d]
arrangements in which one exchange carrier bills the entire amount [of
access charges] and remits the other exchange carrier its share.'' The
First Report and Order does not require that the carrier that owns the
donor switch and the carrier that owns the terminating switch each
issue a separate bill to the IXC. The First Report and Order states
that ``it is up to the carriers whether they each issue a bill for
access on a ported call, or whether one of them issues a bill to the
IXCs covering all of the transferred calls and shares the correct
portion of the revenues with the other carriers involved.'' Thus,
either the carrier that owns the donor switch or the carrier that owns
the terminating switch may bill the entire amount of access charges and
remit to the other local exchange carrier its share of the invoiced
charges. In short, the First Report and Order does not prohibit
carriers who mutually agree from sending one bill to the IXC and then
splitting the access charges appropriately between themselves.
H. Modification of Billing Systems to Accommodate the Sharing of Access
Charges in Meet-Point Billing Type Arrangements
1. Background
66. In the First Report and Order, the Commission concluded that
meet-point billing between neighboring incumbent LECs provides the
appropriate model for the proper access billing arrangement for interim
number portability. In complying with the Commission's directive that
forwarding and terminating carriers share access revenues received from
IXCs for ported calls through meet-point billing arrangements, GTE
argues that LECs should not be required to modify their billing
systems.
2. Discussion
67. The First Report and Order did not specify whether carriers
must modify their billing systems in order to accommodate the
requirement that access charges be shared in meet-point billing type
arrangements. It requires that the forwarding carrier provide ``the
necessary information to permit the terminating carrier to issue a
bill,'' but does not specify whether carriers have to make
modifications in their billing systems in order to do so. The
Commission agrees with GTE and Time Warner that it would not be cost
effective to require carriers to modify their billing systems to
accommodate interim number portability. It does not require carriers to
modify their billing systems to track and record the details of every
call. It does require, however, that carriers adopt some method of
implementing its requirement to share terminating access revenues, by,
for example, providing information about PIU (percent interstate
usage), traffic samples, or total access charges per line.
68. If carriers cannot agree on appropriate meet-point billing
arrangements, the Commission agrees that this issue may be included in
mediation or arbitration before a state commission, or be subject to
other dispute resolution processes chosen by the carriers involved. The
Commission rejects GTE's suggestion, however, that parties seek
informal assistance from the Commission as a means of resolving meet-
point billing arrangement disputes. Also, if a meet-point billing
arrangement dispute arises in the context of an interconnection request
made pursuant to section 251, the 1996 Act clearly places the
responsibility for arbitration and/or mediation of unresolved issues on
the state commissions.
IV. Supplemental Regulatory Regulatory Flexibility Analysis
69. As required by the Regulatory Flexibility Act (RFA), see 5
U.S.C. 601 et seq. (the RFA, see 5 U.S.C. 601 et seq., has been amended
by the Contract with America Advancement Act of 1996, Pub. L. No. 104-
121, 110 Stat. 847 (1996) (CWAAA); Title II of the CWAAA is the Small
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)), an
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the
First Report and Order. In addition, the Commission sought comments on
the proposals included in the Initial Regulatory Flexibility Analysis
(IRFA) in the First Report and Order. The Commission incorporated a
Final Regulatory Flexibility Analysis in the Third Report and Order.
The additional Regulatory Flexibility Analysis in this Fourth
Memorandum Opinion and Order is as follows:
70. Need for and Objectives of Action: The Commission, in
compliance with sections 251(b)(2), 251(d)(1), and 251(e)(2) of the
Communications Act of 1934, as amended by the Telecommunications Act of
1996, adopted rules and procedures in the Third Report and Order that
are intended to ensure the implementation of telephone number
portability with the minimum regulatory and administrative burden on
telecommunications carriers. Congress has recognized that number
portability will lower barriers to entry and promote competition in the
local exchange marketplace. To prevent the cost of number portability
from itself becoming a barrier to local competition, section 251(e)(2)
requires that ``[t]he cost of establishing telecommunications numbering
administration arrangements and number portability shall be borne by
all telecommunications carriers on a competitively neutral basis as
determined by the Commission.'' The Commission issued this Fourth
Memorandum Opinion and Order to address issues relating to cost
recovery for interim number portability. Interim number portability
utilizes an interim method to allow consumers to change carriers while
retaining their telephone numbers before long-term number portability
becomes available.
71. Summary of Significant Issues Raised by the Public Response to
the FRFA: There were no comments submitted specifically in response to
the Regulatory Flexibility Analysis. In the Third Report and Order, the
Commission adopted rules and regulations to ensure that the way all
telecommunications carriers, including small entities, bear the costs
of number portability does not significantly affect any carrier's
ability to compete with other carriers for customers in the
marketplace. This Fourth Memorandum Opinion and Order addresses issues
relating to cost recovery for interim number portability. It affirms
the Commission's conclusion that it has the authority to establish cost
recovery guidelines for interim number portability. Second, the
Commission rejects claims that the cost recovery guidelines for interim
number portability set forth in the First Report and Order are
arbitrary and capricious, or constitute an unconstitutional taking. The
item denies the request that these cost recovery guidelines be applied
retroactively. The item affirms the Commission's earlier decision to
adopt general cost recovery guidelines for interim number portability
while allowing states flexibility to continue using a variety of cost
recovery approaches that are consistent with its guidelines. Finally,
the item clarifies issues relating to terminating access charges,
modification of billing systems, and the competitive neutrality of
certain cost recovery allocators, as each of these issues relates to
interim number portability.
72. Description and Estimate of Number of Small Businesses to Which
Actions Will Apply: The Regulatory
[[Page 46583]]
Flexibility Act generally defines the term ``small business'' as having
the same meaning as the term ``small business concern'' under the Small
Business Act. See 15 U.S.C. 632. A small business concern is one which:
(1) Is independently owned and operated; (2) is not dominant in its
field of operation; and (3) satisfies any additional criteria
established by the Small Business Administration (SBA). Id. According
to SBA's regulations, entities engaged in the provision of telephone
service may have a maximum of 1,500 employees in order to qualify as a
small business concern. See 13 CFR 121.201. This standard also applies
in determining whether an entity is a small business for purposes of
the RFA.
73. As described in the previous Regulatory Flexibility Analysis
contained in the Third Report and Order, the Commission's rules
governing number portability cost recovery apply to all
telecommunications carriers, including incumbent LECs, new LEC
entrants, and IXCs, as well as cellular, broadband PCS, and covered SMR
providers. Small incumbent LECs subject to these rules are either
dominant in their filed of operations or are independently owned and
operated, and, consistent with the Commission's prior practice, are
excluded from the definition of ``small entities'' and ``small business
concerns.'' See In re Implementation of the Local Competition
Provisions in the Telecommunications Act of 1996, First Report and
Order, 11 FCC Rcd 15499, 16144-45, 16149-50 (1996), vacated in part,
aff'd in part, Iowa Utils. Bd. v. FCC, 120 F.3d 753 (8th Cir. 1997),
rev'd in part, aff'd in part and remanded sub nom. AT&T Corp. v. Iowa
Utils. Bd., 119 S.Ct. (1998). Accordingly, the Commission's use of the
terms ``small entities'' and ``small businesses'' does not encompass
small incumbent LECs. Local Competition Order, 11 FCC Rcd at 16,150.
Out of an abundance of caution, however, for regulatory flexibility
analysis purposes, see 13 CFR 121.902(b)(4), the Commission will
consider small incumbent LECs within this analysis and use the term
``small incumbent LECs'' to refer to any incumbent LECs that arguably
might be defined by the SBA as ``small business concerns.''
74. Insofar as the Commission's rules apply to all
telecommunications carriers, they may have an economic impact on a
substantial number of small businesses, as well as on small incumbent
LECs. The rules may have an impact upon new entrant LECs and small
incumbent LECs, as well as cellular, broadband PCS, and covered SMR
providers. Based upon data contained in the most recent census and a
report by the Commission's Common Carrier Bureau, the Commission
estimates that 2,100 small entities could be affected. The Commission
has derived this estimate based on the following analysis.
75. According to the 1992 Census of Transportation, Communications,
and Utilities, there were approximately 3,469 firms with under 1,000
employees operating under the Standard Industrial Classification (SIC)
category 481--Telephone. See U.S. Dept. of Commerce, Bureau of the
Census, 1992 Census of Transportation, Communications, and Utilities
(issued May 1995). Many of these firms are the incumbent LECs and, as
noted above, would not satisfy the SBA definition of a small business
because of their market dominance. There were approximately 1,350 LECs
in 1995. Industry Analysis Division, FCC, Carrier Locator: Interstate
Service Providers at Table 1 (Number of Carriers Reporting by Type of
Carrier and Type of Revenue) (December 1995). Subtracting this number
from the total number of firms leaves approximately 2,119 entities
which potentially are small businesses which may be affected. This
number contains various categories of carriers, including small
incumbent LECs, competitive access providers, cellular carriers,
interexchange carriers, mobile service carriers, operator service
providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. Some of these carriers, although not
dominant, may not meet the other requirement of the definition of a
small business because they are not ``independently owned and
operated.'' See 15 U.S.C. 632(a)(1). For example, a PCS provider that
is affiliated with a long distance company with more than 1,500
employees would not meet the definition of a small business. Another
example would be if a cellular provider is affiliated with a dominant
LEC. Thus, a reasonable estimate of the number of ``small businesses''
affected by this item would be approximately 2,100.
76. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements of the Rules: The Fourth Memorandum Opinion and
Order provides guidance regarding issues relating to cost recovery for
interim number portability. This Fourth Memorandum Opinion and Order
affirms the Commission's conclusion that it has the authority to
establish cost recovery guidelines for interim number portability.
Second, the Commission rejects claims that the cost recovery guidelines
for interim number portability set forth in the First Report and Order
are arbitrary and capricious, or constitute an unconstitutional taking.
This item denies the request that these cost recovery guidelines be
applied retroactively. This item affirms the Commission's earlier
decision to adopt general cost recovery guidelines for interim number
portability while allowing states flexibility to continue using a
variety of cost recovery approaches that are consistent with its
guidelines.
77. The Fourth Memorandum Opinion and Order also confirms an
earlier Commission decision that a cost recovery mechanism based on a
carrier's gross revenues is an acceptable means of allocating costs
among carriers. It states that no additional recordkeeping will be
required for this option of recordkeeping, because such gross revenue
reporting is readily available through such things as tax filings,
annual reports and SEC filings, which are developed for other purposes.
The item does not require carriers to adopt any one billing arrangement
for sharing costs when they forward calls while utilizing interim
number portability. The item allows carriers to determine the best
method of splitting these costs between them, but requires them to
adopt some method of sharing terminating access revenues. Additionally,
it affirms the Commission's earlier determination that meet-point
billing between neighboring incumbent LECs provides the appropriate
model for the proper access billing arrangement for interim number
portability, but states that carriers are not required to modify their
billing systems to track and record the details of every call.
78. Steps Taken to Minimize Impact on Small Entities Consistent
With Stated Objectives: The record in this proceeding indicates that
the need for customers to change their telephone numbers when changing
local service providers is a barrier to local competition. Requiring
number portability, and ensuring that all telecommunications carriers
bear the costs of number portability on a competitively neutral basis,
will make it easier for competitive providers, many of which may be
small entities, to enter the market. The Bureau has attempted to keep
regulatory burdens on all local exchange carriers to a minimum to
ensure that the public receives the benefits of the expeditious
provision of service provider number portability in accordance with the
statutory requirements. For example, the Fourth Memorandum Opinion and
Order affirms the Commission's earlier determination that meet-point
billing
[[Page 46584]]
between neighboring incumbent LECs provides the appropriate model for
the proper access billing arrangement for interim number portability,
but states that carriers are not required to modify their billing
systems to track and record the details of every call. Such
determination recognizes that number portability will cause some
carriers, including small entities, to incur costs that they would not
ordinarily have incurred in providing telecommunications services, but
attempts to keep such costs to a minimum.
79. Report to Congress: The Commission will send a copy of this
Fourth Memorandum Opinion and Order, including this supplemental RFA,
in a report to Congress pursuant to the Small Business Regulatory
Enforcement Fairness Act of 1996. See 5 U.S.C. 801(a)(1)(A). A copy of
the Third Report and Order and this supplemental FRFA (or summaries
thereof) will be sent to the Chief Counsel for Advocacy of the Small
Business Administration. See 5 U.S.C. 604(b).
80. Paperwork Reduction Act: This Fourth Memorandum Opinion and
Order provides guidance regarding issues relating to cost recovery for
interim number portability. The Third Report and Order concluded that
carriers may recover the portion of their number portability joint
costs that is demonstrably an incremental cost incurred in the
provision of number portability. Third Report and Order, 13 FCC Rcd at
11,740, para. 73. The Third Report and Order also requires incumbent
LECs that choose to recover their carrier-specific costs directly
related to providing number portability to use federally-tariffed end-
user charges. Id. at 11,776. The Commission also concluded that
carriers may identify only those incremental overheads that they can
demonstrate were incurred specifically in the provision of number
portability. Id. at 11,740. In this Fourth Memorandum Opinion and
Order, the Commission affirms its earlier decision that it has the
authority to establish cost recovery guidelines for interim number
portability. Second, the Commission rejects claims that the cost
recovery guidelines for interim number portability set forth in the
First Report and Order are arbitrary and capricious, or constitute an
unconstitutional taking. This item denies the request that these cost
recovery guidelines be applied retroactively. The item affirms the
Commission's earlier decision to adopt general cost recovery guidelines
for interim number portability while allowing states flexibility to
continue using a variety of cost recovery approaches that are
consistent with its guidelines. The item also confirms an earlier
Commission decision that a cost recovery mechanism based on a carrier's
gross revenues is an acceptable means of allocation costs among
carriers. The item states that no additional recordkeeping will be
required for this option of recordkeeping, because such gross revenue
reporting is readily available through such things as tax filings,
annual reports and SEC filings, which are developed for other purposes.
The item does not require carriers to adopt any one billing arrangement
for sharing costs when they forward calls while utilizing interim
number portability. The item allows carriers to determine the best
method of splitting these costs between them, but requires them to
adopt some method of sharing terminating access revenues. Additionally,
the item affirms the Commission's earlier determination that meet-point
billing between neighboring incumbent LECs provides the appropriate
model for the proper access billing arrangement for interim number
portability, but states that carriers are not required to modify their
billing systems to track and record the details of every call. These
information collection requirements are contingent upon approval of the
Office of Management and Budget (OMB).
V. Ordering Clauses
81. Accordingly, it is ordered that pursuant to authority contained
in sections 1, 2, 4(i), 201-205, 215, 251(b)(2), 251(e)(2), and 332 of
the Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i),
201-205, 215, 251(b)(2), 251(e)(2), and 332, and Parts 1, 20 and 52 of
the Commission's rules, 47 CFR 1.106, 20, and 52, the Petitions for
Reconsideration and/or Clarification are granted to the extent
indicated herein and otherwise are denied.
82. It is further ordered that the Motion to Accept Late-filed
Comments of Telecommunications Resellers Association and the Motion to
Accept Late-Filed Reply Comments of US WEST are granted.
83. It is further ordered that the Commission's Office of Public
Affairs Reference Operations Division shall send a copy of this
Memorandum Opinion and Order including the supplemental Regulatory
Flexibility Analysis to the Chief Counsel for Advocacy of the Small
Business Administration.
List of Subjects in 47 CFR Part 52
Communications, Common Carriers, Telecommunications, Telephone.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-22131 Filed 8-25-99; 8:45 am]
BILLING CODE 6712-01-P
