[Federal Register Volume 64, Number 188 (Wednesday, September 29, 1999)]
[Rules and Regulations]
[Pages 52464-52468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25026]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[CC Docket No. 96-152; FCC 99-241]
Telemessaging, Electronic Publishing, and Alarm Monitoring
Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document declines to reconsider the Commission's
Telemessaging and Electronic Publishing Order, declines to adopt rules
pursuant to the Further Notice, and clarifies several points concerning
telemessaging and electronic publishing. The intended effect is to
promote the pro-competitive and deregulatory objectives of the
Telecommunications Act of 1996.
DATES: Effective October 29, 1999.
FOR FURTHER INFORMATION CONTACT: Michelle Carey, Deputy Chief, Policy
and Program Planning Division, Common Carrier Bureau, (202) 418-1580 or
via the Internet at mcarey@fcc.gov. Further information may also be
obtained by calling the Common Carrier Bureau's TTY number: 202-418-
0484.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
adopted September 8, 1999, and released September 13, 1999. The full
text of this Order is available for inspection and copying during
normal business hours in the FCC Reference Center, 445 12th Street,
S.W., Room CY-A257, Washington, D.C. The complete text also may be
obtained through the World Wide Web, at http://www.fcc.gov/Bureaus/
Common Carrier/Orders/fcc99241.wp, or may be purchased from the
Commission's copy contractor, International Transcription Service,
Inc., (202) 857-3800, 1231 20th St., N.W., Washington, D.C. 20036.
Synopsis of Order on Reconsideration and Third Report and Order
I. Introduction
1. On February 8, 1996 the ``Telecommunications Act of 1996'' (1996
Act) became law. On February 7, 1997 the Commission released the
Telemessaging and Electronic Publishing Order, 62 FR 7690, February 20,
1997, which implemented the telemessaging and electronic publishing
provisions of the 1996 Act, sections 260 and 274, respectively. On
March 24, 1997 AT&T Corp. (AT&T) and the Pacific Telesis Group
(Pacific) filed separate petitions to reconsider various
[[Page 52465]]
aspects of the Telemessaging and Electronic Publishing Order. On the
same day the Commission released the Telemessaging and Electronic
Publishing Order, the Commission issued a Further Notice, 62 FR 7744,
February 20, 1997, that sought comment on the meaning of ``control,''
``financial interest'' and ``transaction'' in section 274. For the
reasons set forth below, we grant AT&T's petition in part and deny in
part, and grant Pacific's petition. We also decline to adopt rules in
response to the Further Notice.
II. Background
2. Section 274 allows a Bell Operating Company (BOC) to provide
electronic publishing service disseminated by means of its basic
telephone service only through a ``separated affiliate'' or an
``electronic publishing joint venture'' that meets the separation,
joint marketing, and nondiscrimination requirements in that section. In
the Telemessaging and Electronic Publishing Order, the Commission
concluded that the requirement in section 274(b) that a separated
affiliate or electronic publishing joint venture be ``operated
independently'' is not a separate, substantive requirement that imposes
obligations in addition to those enumerated in this section, but rather
that this requirement is satisfied if a BOC and its separated affiliate
or electronic publishing joint venture comply with the separation
requirements set forth in subsections 274(b)(1)-(9).
3. In this proceeding, AT&T asks the Commission to reconsider its
decision and conclude that the ``operated independently'' requirement
imposes additional, substantive requirements beyond those listed in
subsections 272(b)(1)-(9). AT&T also asks the Commission to clarify
that section 274(b)(3)(B) requires that any agreement between a BOC and
a separated affiliate or joint venture for inbound telemarketing or
referral services be pursuant to a written contract or a tariff that is
filed with the Commission and made publicly available. Pacific asks the
Commission to clarify that the restrictions on joint promotion,
marketing, sales or advertising set forth in section 274(c)(1)(A) and
(B) do not apply to activities between a BOC and an entity owned or
controlled by a BOC if the services are disseminated through an
unaffiliated carrier's basic telephone service, and no separated
affiliate or other BOC affiliate is involved.''
4. In this Order on Reconsideration:
--We decline AT&T's request to reconsider the Commission's conclusion
that the ``operated independently'' provision in section 274(b) is not
a separate, substantive requirement;
--We clarify, as requested by AT&T, that section 274(b)(3)(B) requires
any agreement between a BOC and a separated affiliate or electronic
publishing joint venture for inbound telemarketing or referral services
be pursuant to a written contract or a tariff that is filed with the
Commission and made publicly available; and
--We clarify, as requested by Pacific, that the restrictions on joint
promotion, marketing, sales, or advertising set forth in sections
274(c)(1)(A) and (B) do not apply to activities between a BOC and an
entity owned or controlled by a BOC if the electronic publishing
services are disseminated through an unaffiliated carrier's basic
telephone service, and no separated affiliate or other BOC affiliate is
involved in such promotion, marketing, sales, and advertising.
III. Order on Reconsideration
A. The ``Operated Independently'' Requirement of Section 274(b)
a. Background
5. Section 274(b) of the 1996 Act provides that ``[a] separated
affiliate or electronic publishing joint venture shall be operated
independently from the [BOC].'' In the Telemessaging and Electronic
Publishing Order, the Commission concluded that the ``operated
independently'' requirement of section 274(b) obligates a separated
affiliate to comply with the requirements of subsections 274(b)(1)-(9),
and an electronic publishing joint venture to comply with subsections
274(b)(1)-(4), (6), (8)-(9). Moreover, the Commission found that the
phrase ``operated independently'' is not a separate substantive
restriction, but rather that section 274(b) is satisfied if a BOC and
its separated affiliate or electronic publishing joint venture comply
with the applicable restrictions of subsections 274(b)(1)-(9).
6. The Commission also found that its interpretation of the
``operated independently'' requirement of section 274(b) is consistent
with its interpretation of the ``operate independently'' provision in
section 272(b). In the Non-Accounting Safeguards Order, 62 FR 2927,
January 2, 1997, the Commission determined that the ``operate
independently'' provision of section 272(b) imposes requirements beyond
those set forth in subsections 272(b)(2)-(5). The Commission explained
that section 272(b) imposes five structural and transactional
requirements governing the relationship between a BOC and a section 272
affiliate, only one of which is that the affiliate ``shall operate
independently from the [BOC].'' In the Telemessaging and Electronic
Publishing Order, in contrast, the Commission found that the ``operated
independently'' requirement in section 274(b) is followed by nine
substantive restrictions, which it read as the criteria that must be
satisfied to ensure operational independence under this section.
b. Discussion
7. We decline, at this time, to reinterpret the phrase ``operated
independently'' to impose additional, separate substantive
requirements, absent any indication that the requirements listed in
section 274(b)(1)-(9) are inadequate to assure that a BOC and its
separated affiliate or electronic publishing joint venture operate
independently. Subsections (1)-(9) impose specific requirements to
assure operational independence, including, among other things, a
requirement to maintain separate books and accounts, a limitation on
debt assumption, a requirement to carry out transactions independently,
and a restriction on common ownership of property.
8. Section 272(b) sets forth the structural and transactional
requirements for the separate affiliates BOCs must establish to
provide, among other things, interLATA telecommunications and
information services pursuant to section 272(a). Although section
274(b) contains similar language to section 272(b)(1), section 274(b)
mandates that a separated affiliate or electronic publishing joint
venture must be ``operated independently'' and then lists nine specific
requirements governing the relationship between a BOC and a separated
affiliate or joint venture. In contrast, section 272(b) imposes five
statutory requirements governing the relationship between a BOC and a
section 272 affiliate, only one of which is that the affiliate shall
``operate independently'' from the BOC. Between the Non-Accounting
Safeguards Order and the Telemessaging and Electronic Publishing Order,
the Commission provided sufficient explanation for its conclusion that
the ``operated independently'' requirement of section 274(b) imposes
different requirements than the ``operate independently'' provision of
section 272(b).
9. As the Commission has previously concluded, sections 272(b) and
274(b) are organized and structured differently
[[Page 52466]]
and address different subject matters. Accordingly, we find that the
terms ``operate independently'' in section 272(b)(1) and ``operated
independently'' in section 274(b) do not have to be interpreted to
impose the same obligations on the BOCs.
10. Although it is correct that the Commission, on its own
authority, previously imposed requirements of operational independence
in the context of Computer II and the cellular separation rules, in the
Telemessaging and Electronic Publishing Order the Commission was
interpreting a new statute, with new requirements, enacted by Congress.
It was not adopting, on its own authority, a new standard for
operational independence that contradicted earlier decisions.
Accordingly, there is no need to distinguish the Commission's prior
precedents or to impose the same requirements adopted prior to
enactment of the 1996 Act.
B. Inbound Telemarketing or Referral Services
a. Background
11. In the Telemessaging and Electronic Publishing Order, the
Commission held that ``[a] BOC may choose to provide inbound
telemarketing or referral services either pursuant to a contractual
arrangement or during the normal course of its inbound telemarketing
operations.'' The Commission stated that to the extent ``a BOC chooses
either or both of these approaches'' in providing inbound telemarketing
or referral services, the nondiscrimination provisions of section
274(c)(2)(A) require that such services be made available to
unaffiliated electronic publishers using the same approach, i.e.,
pursuant to a contractual arrangement or during the normal course of
its inbound telemarketing operations.
12. AT&T asks the Commission to clarify that section 274(b)(3)(B)
requires any agreement between a BOC and its section 274 affiliate or
joint venture partner for inbound telemarketing or referral services to
be pursuant to a written contract or a tariff that is filed with the
Commission and made publicly available. Section 274(b)(3)(B) provides
that a separated affiliate or joint venture and the BOC with which it
is affiliated shall ``carry out transactions * * * (B) pursuant to
written contracts or tariffs that are filed with the Commission and
made publicly available.''
b. Discussion
13.We agree with AT&T that we should clarify the Commission's
discussion in paragraph 150 of the Telemessaging and Electronic
Publishing Order. In that paragraph, the Commission noted that a BOC
may ``choose to provide inbound telemarketing or referral services
either pursuant to a contractual arrangement or during the normal
course of its inbound telemarketing operations.'' We clarify in this
Order that any such agreement between a BOC and its section 274
affiliate or joint venture partner relating to an inbound telemarketing
or referral service, whether it be pursuant to contract or through the
``normal course'' of business, constitutes a ``transaction'' for
purposes of section 274(b)(3)(B). Accordingly, we conclude that any
agreement whereby a BOC agrees to provide inbound telemarketing or
referral services must be pursuant to a written contract or tariff that
is filed with the Commission and made publicly available. We find that
the requirements of section 274(b)(3)(B), by requiring all
``transactions'' to be publicly disclosed and auditable in accordance
with generally accepted auditing standards, will help ensure that BOCs
are complying with the nondiscrimination and accounting safeguards of
the 1996 Act.
C. Dissemination by Means of an Unaffiliated Carrier's Basic Telephone
Service
a. Background
14. In the Telemessaging and Electronic Publishing Order, the
Commission held that, pursuant to the terms of section 274, in order
for a BOC to be engaged in the provision of electronic publishing and
subject to section 274, electronic publishing must be disseminated by
means of the BOC's basic telephone service, and the BOC must have
control of, or a financial interest in, the content of the information
being provided. In reading section 274(a) together with the definition
of ``basic telephone service'' in section 274(i)(2), the Commission
concluded that, if a BOC or BOC affiliate disseminates electronic
publishing services through the basic telephone service of a competing
wireline local exchange carrier or commercial mobile radio service
provider, a separated affiliate or electronic publishing joint venture
is not required.
15. The Commission also noted that sections 274(c)(1)(A) and (B)
generally prohibit a BOC from carrying out any promotion, marketing,
sales, or advertising activities with a separated affiliate or an
affiliate if, in the latter case, such activities ``relate to'' the
provision of electronic publishing. Thus, the Commission held that a
BOC affiliate that does not provide electronic publishing services
itself, but rather provides services that ``relate to'' the provision
of electronic publishing, is precluded from carrying out marketing and
sales-related activities for or in conjunction with the BOC.
b. Discussion
16. Pacific asks the Commission to clarify that the restrictions on
joint promotion, marketing, sales, or advertising set forth in sections
274(c)(1)(A) and (B) do not apply if the electronic publishing services
are disseminated through an unaffiliated carrier's basic telephone
service and no separated affiliate or other BOC affiliate is involved
in the dissemination. We agree that such clarification is appropriate.
17. Section 274(i)(10) defines a BOC to include an entity or
corporation owned or controlled by the BOC (other than an electronic
publishing joint venture owned by such an entity or corporation).
Consistent with the Commission's finding in the Telemessaging and
Electronic Publishing Order, we find that an entity or corporation
owned or controlled by a BOC pursuant to section 274(i)(10) may
promote, market, sell, or advertise electronic publishing services, and
engage in promotion, marketing, sales, and advertising related to
electronic publishing, if: (1) The electronic publishing service is
disseminated by means of the basic telephone service of a competing
wireline local exchange carrier or commercial mobile radio service
(CMRS) provider; and (2) no separated affiliate or other BOC affiliate
is involved in such promotion, marketing, sales, and advertising.
18. As noted in the Telemessaging and Electronic Publishing Order,
the dissemination of electronic publishing services through the basic
telephone service of competing, unaffiliated providers significantly
reduces the ability of a BOC (including an entity or corporation owned
or controlled by the BOC) to engage in anticompetitive behavior.
Accordingly, as the Commission held in the underlying order, to the
extent a BOC (including an entity or corporation owned or controlled by
the BOC) disseminates electronic publishing services through the
facilities of a competing wireline local exchange carrier or CMRS
provider, and thus not via its own basic telephone services, it is not
required to
[[Page 52467]]
provide such services through a separated affiliate or electronic
publishing joint venture. We clarify that, in this situation, the joint
marketing restriction in section 274(c)(1)(A), which prohibits a BOC
from carrying out ``promotion, marketing, sales, or advertising for or
in a conjunction with a separated affiliate,'' would not apply.
Similarly, we conclude that, in such a situation, the joint marketing
restriction in section 274(c)(1)(B) would not apply unless the BOC is
carrying out ``promotion, marketing, sales, or advertising for or in
conjunction with an affiliate that is related to the provision of
electronic publishing.''
IV. Third Report and Order
19. On the same day the Commission issued the Electronic Publishing
Order, the Commission released a Further Notice of Proposed Rulemaking
(Further Notice) that sought comment on the meaning of ``control'' and
``financial interest'' for the purpose of determining what constitutes
BOC provision of electronic publishing services under section 274. The
Further Notice also sought comment on how the Commission should resolve
certain ambiguities in section 274(b)(3)(B), which requires that BOCs
and their separated affiliates or electronic publishing joint ventures
``carry out transactions pursuant to written contracts or tariffs that
are filed with the Commission and made publicly available.''
A. Definition of ``Control'' and ``Financial Interest''
a. Background
20. We concluded in the Telemessaging and Electronic Publishing
Order that a BOC engaged in the provision of electronic publishing is
subject to section 274 only to the extent that it controls, or has a
financial interest in, the content of the information being
disseminated over its basic telephone services. We sought further
comment in the Further Notice on the meaning of ``control'' and
``financial interest'' in the context of section 274.
21. In the Further Notice, we tentatively concluded that section
274(i)(4)'s definition of control, i.e., the ``possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, by contract, or otherwise,'' is inappropriate for
determining the meaning of ``control'' in the present context, i.e.,
when a BOC has ``control of the content of information transmitted via
its basic telephone service.'' In addition, the Commission also
tentatively concluded that a BOC has a ``financial interest'' in the
content of the information when the BOC owns the information or has a
direct or indirect equity interest in the information being
disseminated via its basic telephone services. The Commission sought
comment on other forms of BOC participation that should be considered
indicia of ``financial interest.''
b. Discussion
22. We decline to adopt rules further defining ``control'' or
``financial interest'' for purposes of section 274 for two reasons.
First, the Commission has not, to date, received any complaints
alleging a violation of section 274. Thus, there has been no showing
that the Commission's current rules are inadequate to ensure that the
objectives of section 274 are being fulfilled. Second, any rules we
implemented would expire on February 8, 2000 when the requirements of
section 274 automatically sunset. In the event any disputes arise
before the sunset date regarding whether a BOC is actually engaged in
the provision of electronic publishing, they may be resolved on a case-
by-case basis through a section 208 complaint process. Given the
availability of this complaint process and the limited duration any
rules would have, therefore we find that the public interest would not
be served by adopting further rules to implement this section.
B. Meaning of ``Transaction'' in Section 274(b)(3)
a. Background
23. In the Further Notice, the Commission sought comment on what
constitutes a ``transaction'' for purposes of section 274(b)(3). The
Commission noted that, in the Accounting Safeguards Order, 62 FR 2918,
January 21, 1997, the Commission concluded that for purposes of a
similar public disclosure requirement in section 272(b)(5), the BOC and
its affiliate must have agreed upon the terms and conditions for
telephone exchange and exchange access for the agreement to constitute
a ``transaction.''
24. The commenters agreed that the definition of ``transaction''
should parallel the Commission's definition for ``transaction'' adopted
in connection with section 272(b)(5). As noted above, AT&T asked the
Commission to clarify that section 274(b)(3)(B) requires any agreement
between a BOC and its section 274 affiliate or joint venture partner
for inbound telemarketing or referral services to be pursuant to a
written contract or tariff that is filed with the Commission and made
publicly available.
b. Discussion
25. We decline to adopt further rules implementing section
274(b)(3)(B) for the same two reasons stated above. Moreover, we note
that our conclusion in the Order on Reconsideration clarifies that
section 274(b)(3)(B) requires any agreement whereby a BOC agrees to
provide inbound telemarketing or referral services must be pursuant to
a written contact or tariff that is filed with the Commission and made
publicly available. Accordingly, any such agreement either through a
written contract or ``normal course of business'' constitutes a
``transaction'' for purposes of section 274(b)(3)(B).
V. Final Regulatory Flexibility Certification
26. Supplemental Final Regulatory Flexibility Certification. In the
Telemessaging and Electronic Publishing Order, the Commission concluded
that the rules adopted in that Order pertain to only BOCs which do not
qualify as small entities under the Regulatory Flexibility Act (RFA),
as amended by the Contract With America Advancement Act of 1996, Public
Law 104-121, 110 Stat. 847 (1996). The Commission therefore certified
that the rules adopted in that order would not have a significant
impact on a substantial number of small entities, as required by the
RFA. The clarifications we adopt in the Order on Reconsideration and
Third Report & Order do not affect our certification in the
Telemessaging and Electronic Publishing Order.
27. The Commission's Office of Public Affairs shall send a copy of
this Order on Reconsideration, including this certification, in a
report to Congress pursuant to the SBREFA, 5 U.S.C. 801(a)(1)(A). A
copy of this certification will also be provided to the Chief Counsel
for Advocacy of the Small Business Administration, and will be
published in the Federal Register.
VI. Final Paperwork Reduction Analysis
28. As required by the Paperwork Reduction Act of 1995, Public Law
104-13, the Further Notice of Proposed Rulemaking invited the general
public and the OMB to comment on proposed changes to the Commission's
information collection requirements contained in the Further Notice of
Proposed Rulemaking. The collections
[[Page 52468]]
of information were approved by OMB under OMB control number 3060-0762.
No comments were submitted in response to the Commission's request for
comment on the information collections contained in the Further Notice
of Proposed Rulemaking. In this Third Report and Order, we have decided
to adopt all of the information collection requirements proposed in the
Further Notice of Proposed Rulemaking.
VII. Ordering Clauses
29. Accordingly, it is ordered that, pursuant to Sections 1, 2, 4,
201-202, 274, and 303(r) of the Communications Act of 1934, as amended,
47 U.S.C. 151, 152, 154, 201-202, 274, and 303(r), the Order on
Reconsideration and Third Report and Order in CC Docket No. 96-152 is
adopted.
30. It is further ordered that the Petition for Reconsideration
filed by AT&T Corporation is granted to the extent described herein and
is denied in all other respects and the Petition for Reconsideration
filed by Pacific Telesis Group is granted to the extent described
herein.
31. It is further ordered that the policies, rules, and
requirements set forth in this Order on Reconsideration and Third
Report and Order are effective thirty days after publication in the
Federal Register.
32. It is further ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this Order
on Reconsideration and Third Report and Order, including the
Supplemental Final Regulatory Flexibility Certification, to the Chief
Counsel for Advocacy of the Small Business Administration.
Federal Communications Commission
Magalie Roman Salas,
Secretary.
[FR Doc. 99-25026 Filed 9-28-99; 8:45 am]
BILLING CODE 6712-01-P
