Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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**MEMORANDUM OPINION AND ORDER ON RECONSIDERATION**

**AND ORDER ON APPLICATION FOR REVIEW**

**Adopted:** January 23, 2002 **Released:** February 15, 2002

By the Commission: Commissioner Copps approving in part, dissenting in
part, and issuing a

statement

> Paragraph No.

I. INTRODUCTION 1

II\. BACKGROUND 5

III\. MEMORANDUM OPINION AND ORDER ON RECONSIDERATION 9

A. Jurisdiction 9

1\. Federal/State Jurisdiction 9

2\. Determining the N-1 Carrier on IntraLATA and Extended Area Service
Calling Plans 14

B. Costs of the Regional Databases 18

1\. Billing and Collection Issues 18

2\. Revenues to be Included in the Allocator 28

3\. National and Multi-Regional Carriers 35

C. Recovery of Carrier-Specific Costs Directly Related to Providing
Number Portability 41

1\. Independent and Rural Incumbent LECs 41

2\. Recovery of Number Portability Costs from Other Carriers 59

3\. Recovery of Number Portability Costs from Feature Group A Access
Lines 66

4\. Recovery of Number Portability Costs from Centrex and PBX Lines 74

5\. Recovery through the Incumbent LEC End-User Charge. 83

6\. Querying all Calls to an NXX 95

IV\. ORDER ON APPLICATION FOR REVIEW 102

A. Operation Support Systems (OSS) Costs 102

1\. Background 102

2\. Discussion 104

B. 911 Costs 112

1\. Background 112

2\. Discussion 113

C. Joint Costs 114

1\. Recovery of Advancement Costs 114

V. FINAL REGULATORY FLEXIBILITY CERTIFICATION 118

VI\. PAPERWORK REDUCTION ANALYSIS 124

VII\. ORDERING CLAUSES 125

PARTIES TO THE PROCEEDING Appendix A

FINAL RULES Appendix B

# INTRODUCTION

1.  On May 5, 1998, the Commission adopted the *Third Report and
    Order*[^1] in this docket, implementing section 251(e)(2) of the
    Communications Act of 1934, as amended (the Act), with regard to the
    costs of providing local number portability. The *Third Report and
    Order*, among other things, determined that section 251(e)(2)
    requires the Commission to ensure that carriers bear the cost of
    providing long-term number portability on a competitively neutral
    basis for both interstate and intrastate calls. The *Third Report
    and Order* also determined that incumbent local exchange carriers
    (LECs) may recover carrier-specific costs of number portability
    through federally-tariffed end-user and query service charges.[^2]

2.  Eighteen parties filed petitions for reconsideration and
    clarification in response to the *Third Report and Order*. Thirteen
    parties filed oppositions or comments on the petitions, and ten
    parties filed reply comments.[^3] In this *Order*, we resolve the
    following issues raised in these filings regarding the rules adopted
    in the *Third Report and Order*. Specifically, we (1) affirm that
    the Commission has exclusive jurisdiction over the distribution and
    recovery of costs associated with intrastate and interstate number
    portability; (2) clarify that the local number portability
    administrator may assess shared costs on all eligible
    telecommunications carriers, not just carriers with existing
    long-term number portability contracts; (3) clarify that incumbent
    LECs must allocate their shared costs between the query service and
    end-user charges; (4) affirm the adoption of the end-user revenue
    allocator; (5) deny petitioners\' request that costs associated with
    a number portability charge to carriers purchasing unbundled
    switching be calculated based on total element long run incremental
    cost (TELRIC);[^4] (6) deny petitioners\' request that costs for
    number portability be based on avoided costs;[^5] (7) clarify that
    carriers may not recover number portability costs from other
    carriers through interconnection charges or resale prices; (8)
    clarify that as long as an incumbent LEC provides number portability
    functionality, it may assess the number portability end-user charge
    on resellers and purchasers of switching ports as unbundled network
    elements; (9) affirm that carriers not subject to rate-of-return
    regulation or price caps may recover their carrier-specific costs in
    any lawful manner consistent with their obligations under the
    Communications Act; (10) clarify that commercial mobile radio
    service (CMRS) providers are co-carriers, not end users, and,
    therefore, are not subject to an end-user charge; (11) clarify that
    carriers who offer Feature Group A access lines may assess an
    end-user surcharge on such lines; (12) affirm that Centrex lines may
    be assessed one end-user number portability charge per line and a
    Private Branch Exchange (PBX) trunk may be charged nine end-user
    number portability charges per PBX trunk; (13) affirm that Plexar
    may be assessed one number portability charge per line; (14) affirm
    that incumbent LECs may impose an end-user charge in service areas
    where the switch is number-portability-capable; (15) clarify that
    small and rural incumbent LECs that do not yet provide number
    portability functionality but provide service under Extended Area
    Service (EAS) arrangements may recover their N minus one (N-1) query
    and Number Portability Administration costs through end-user
    charges; (16) clarify that incumbent LECs may not begin billing
    carriers for N-1 queries until a number has been ported from an
    NXX; (17) clarify that after the five-year recovery period for
    implementation costs of number portability through the end‑user
    charge, any remaining costs will be treated as normal network
    costs; (18) affirm that price cap LECs and rate-of-return LECs
    should treat the query services charge as a new service within the
    meaning of section 61.38 of our rules; and (19) affirm our rules
    adopted in the *Third Report and Order* concerning levelized
    charges. We take this action toward the implementation of local
    number portability at the direction of Congress,[^6] and apply the
    mandate of section 251(e)(2) in the most efficient manner possible.

3.  In the *Third Report and Order*, the Commission delegated authority
    to the Common Carrier Bureau (Bureau) to determine appropriate
    methods for apportioning joint costs among portability and
    non-portability services, and to provide guidance to carriers before
    they filed their federal number portability tariffs.[^7] On December
    14, 1998, pursuant to delegated authority, the Bureau issued the
    *Cost Classification Order*.[^8] The *Cost Classification Order*,
    among other things, provided guidance to incumbent LECs
    concerning: (1) the costs that are eligible for recovery through
    federal number portability charges established in the *Third Report
    and Order*; (2) the appropriate methodologies for determining the
    amount of eligible number portability costs; (3) advancement costs;
    and (4) allocation of these eligible costs between the end-user,
    pre-arranged and default query charges.[^9]

4.  In response to the *Cost Classification Order*, four parties filed
    petitions for clarification or applications for review. Four parties
    filed oppositions or comments and four parties filed replies. In
    this *Order*, we address all issues raised in these petitions.
    Specifically, we: (1) affirm that carriers may only recover
    carrier-specific costs directly relating to the provision of number
    portability; (2) affirm that carriers must distinguish clearly costs
    incurred for narrowly defined portability functions from costs
    incurred to adapt their systems to implement number portability; (3)
    affirm that costs carriers incur as an incidental consequence of
    number portability are ordinary costs of doing business and
    represent general network upgrades; (4) affirm the two-part cost
    recovery test; and (5) affirm that costs which do not meet the
    two-part recovery test may not be recovered through the number
    portability cost recovery mechanisms.

# BACKGROUND

5.  In the *Third Report and Order*, we concluded that section 251(e)(2)
    requires that carriers bear the following costs on a competitively
    neutral basis: (1) costs the LECs incur to meet the obligations
    imposed by section 251(b)(2); and (2) costs other telecommunications
    carriers, such as interexchange carriers (IXCs) and CMRS providers,
    incur for industry-wide solutions to provide local number
    portability. [^10] We also held that the costs of establishing
    number portability include: (1) costs associated with the creation
    of the regional databases to support number portability;[^11] (2)
    costs associated with the initial upgrading of the public switched
    network; and (3) ongoing costs of providing number portability, such
    as the costs involved in transferring a telephone number to another
    carrier and routing calls under the N-1 querying protocol.[^12] We
    concluded that section 251(e)(2) applies to the distribution of
    number portability costs among carriers as well as the recovery of
    those costs by carriers.[^13] We found that carrier-specific costs
    not directly related to providing number portability are not costs
    of number portability and, consequently, are not subject to section
    251(e)(2) and its competitively neutral mandate.[^14]

6.  In the *Third Report and Order*, we applied the rules adopted in the
    *First Report and Order* regarding competitively neutral cost
    recovery to the rules regarding the recovery of shared and
    carrier-specific costs.[^15] The rules regarding shared costs
    require that each telecommunications carrier contribute to the costs
    of each regional database in proportion to each carrier's
    intrastate, interstate, and international end-user
    telecommunications revenues for that region. We determined that
    after each carrier\'s portion of the shared costs is distributed on
    the basis of end-user revenues, the costs are treated as
    carrier-specific costs directly related to providing number
    portability.[^16] We concluded that it is competitively neutral for
    carriers to bear their own carrier-specific costs directly related
    to providing number portability, [^17] and we allowed the incumbent
    LECs to recover these costs through: (1) a monthly number
    portability end--user charge;[^18] and, (2) a number portability
    query-service charge that applies to carriers on whose behalf the
    incumbent LEC performs queries.[^19] We allowed other
    telecommunications carriers to recover their carrier-specific costs
    directly related to providing local number portability in any lawful
    manner.[^20]

7.  In the *Cost Classification Order,* the Bureau adopted a two-part
    test for incumbent LECs to use to identify carrier-specific costs
    that are directly related to the implementation and provision of
    number portability.[^21] In order to determine that costs are
    eligible for recovery through the federal cost recovery mechanism, a
    carrier must show that these costs: (1) would not have been incurred
    by the carrier \"but for\" the implementation of number portability;
    and (2) were incurred \"for the provision of\" number
    portability.[^22] The Bureau found that application of this test
    would avoid over compensation of LECs for their costs, as LECs
    already recover the cost of general network upgrades through
    standard cost recovery mechanisms. The Bureau, therefore, concluded
    that the incumbent LECs should not be allowed to recover these same
    costs through both federal number portability charges, as well as
    through price caps or rate-of-return recovery mechanisms.[^23]

8.  The Bureau concluded that only new costs, but not the costs incurred
    by incumbent LECs prior to number portability implementation, could
    be claimed as eligible number portability costs.[^24] The Bureau
    reasoned that to allow recovery of costs other than new costs would
    lead to double recovery of costs already subject to recovery through
    standard recovery mechanisms.[^25] The Bureau directed the LECs to
    submit tariffs that distinguish clearly costs incurred for the
    narrowly defined portability functions from costs incurred to adapt
    other systems to implement number portability, such as repair and
    maintenance, billing, or order processing systems.[^26]

# MEMORANDUM OPINION AND ORDER ON RECONSIDERATION

## Jurisdiction

### Federal/State Jurisdiction 

#### Background

9.  In the *Third Report and Order*, we determined that section
    251(e)(2)[^27] requires the Commission to ensure that carriers bear
    the costs of providing local number portability on a competitively
    neutral basis for both interstate and intrastate calls.[^28] In this
    light, we determined that an exclusively federal recovery mechanism
    for long-term number portability would enable the Commission to
    satisfy most directly the competitive neutrality mandate of the 1996
    Act and minimize the administrative and enforcement difficulties
    that might arise if jurisdiction over local number portability was
    concurrent, i.e., split between federal and state regulatory
    authorities.[^29] Several petitioners seek reconsideration of the
    Commission\'s conclusion that it has exclusive jurisdiction to
    establish a federal cost recovery mechanism for the cost of
    providing intrastate local number portability. Petitioners argue
    that section 251(e)(2) provides no express authority for the
    Commission to establish an end-user collection mechanism for
    intrastate number portability costs or to develop a centralized
    approach for the recovery of the ongoing intrastate costs of
    implementing long-term number portability.[^30] Specifically,
    petitioners argue that the language of section 251(e)(2) does not
    grant the Commission the unambiguous, straightforward authority
    required to preempt the states\' authority to determine an
    appropriate recovery mechanism for the intrastate costs of number
    portability.[^31]

#### Discussion

10. We are unpersuaded by petitioners\' arguments. We agree with
    commenters that petitioners have not raised any new or compelling
    arguments that were not presented to, and considered by, the
    Commission in the *Third Report and Order*. [^32] As we determined
    in the *Third Report and Order*, section 251(e)(2)\'s express and
    unconditional grant of authority to the Commission requires us to
    ensure that carriers bear the cost of providing number portability
    on a competitively neutral basis for both interstate and intrastate
    calls.[^33] 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. Additionally, the Supreme Court has stated that \"\[t\]he FCC
    has rulemaking authority to carry out the \'provisions of this
    Act,\' which include §§ 251 and 252, added by the Telecommunications
    Act of 1996.\"[^34]

11. Moreover, we are unpersuaded by petitioners\' arguments that section
    251(e)(2) provides no express authority allowing the Commission to
    exercise jurisdiction over the carrier-specific cost recovery
    mechanism for the ongoing intrastate costs of number
    portability.[^35] As we concluded in the *Third Report and Order*,
    section 251(e)(2) requires the Commission to ensure that number
    portability costs are distributed among, as well as recovered by,
    carriers on a competitively neutral basis.[^36] Despite our
    tentative conclusion in the *First Report and Order* [^37] that
    section 251(e)(2) only applied to the distribution of number
    portability costs, in the *Third Report and Order* we determined
    that section 251(e)(2) applies to both distribution and recovery of
    number portability costs.[^38] We concluded that this interpretation
    of section 251(e)(2) best achieves the congressional goal of
    ensuring that the costs of providing number portability are
    recovered in a manner that does not discourage the development of
    local competition that number portability is intended to
    encourage.[^39] We reasoned that if we ensured the competitive
    neutrality of only distribution of costs, carriers could effectively
    undo this competitively neutral distribution by recovering some of
    these costs from other carriers in a manner that is not
    competitively neutral.[^40] We continue to believe that section
    251(e)(2) applies to both the distribution and recovery of number
    portability costs, thereby ensuring achievement of the congressional
    goal of promoting local competition.

12. We are not persuaded by petitioners' argument that because the 1996
    Act does not modify section 152(b),[^41] which specifically
    preserves state jurisdiction over intrastate communications, the
    Commission lacks jurisdiction over intrastate number portability
    costs.[^42] In *AT&T Corp. v Iowa Utilities Board,*[^43] the Supreme
    Court rejected the argument that because local competition
    provisions are not identified in section 152(b)\'s \"except\"
    clause, the 1996 Act does nothing to displace the presumption that
    the states retain their traditional authority over local phone
    service.[^44] The Court determined that this argument ignores
    section 201(b), which explicitly gives the Commission jurisdiction
    to make rules governing matters to which the 1996 Act applies.[^45]
    The Supreme Court concluded that section 201(b) \"means what it
    says: The FCC has rulemaking authority to carry out the \'provisions
    of this Act,\' which include §§ 251 and 252, added by the
    Telecommunications Act of 1996.\"[^46] Thus, we affirm our decision
    in the *Third Report and Order* that we have exclusive jurisdiction
    over the distribution and recovery of both intrastate and interstate
    costs of implementing long-term number portability.

13. Finally, we note that some petitioners request clarification that in
    states where a recovery mechanism has not yet been established for
    interim number portability, the incumbent LEC may elect to have the
    costs of interim number portability incorporated into the long-term
    number portability monthly charge.[^47] This issue was decided in
    our reconsideration of the *First Report and Order*.[^48] In the
    *Fourth Reconsideration Order*, although we reaffirmed our authority
    over interstate and intrastate number portability cost recovery, we
    denied requests that we generally preempt state number portability
    cost recovery decisions for interim number portability.[^49]
    Instead, we affirmed our earlier conclusion in the *First Report and
    Order* that states may continue to decide on cost recovery
    mechanisms for interim number portability, as long as they meet our
    competitively neutral guidelines.[^50] Thus, we will not allow
    incumbent LECs to incorporate the costs of interim number
    portability into their long-term number portability monthly charge.

### Determining the N-1 Carrier on IntraLATA and Extended Area Service Calling Plans

#### Background

14. In the *Second Report and Order*, we adopted the North American
    Numbering Council's (NANC\'s) recommendation that the carrier in the
    call routing process immediately preceding the terminating carrier
    be designated the \"N-1\" carrier.[^51] Petitioners request that the
    Commission, in instances of intraLATA toll calling and EAS calling
    plans, relinquish jurisdiction over the distribution and recovery of
    intrastate costs associated with long-term number portability to the
    states.[^52] In the alternative, petitioners request that the
    Commission direct NANC to develop querying protocol and cost
    recovery scenarios for intraLATA and EAS-type services.[^53]
    Petitioners contend that due to the complex and varied arrangements
    for these services, it will be difficult for the Commission to
    determine the N-1 carrier assignment for intrastate services and
    appropriate tariff rates for number portability network
    interconnection and local number portability queries associated with
    various intraLATA and EAS type services.[^54]

#### Discussion

15. We agree with petitioners that these types of intrastate services
    may create complex issues regarding those costs that may be
    appropriate for recovery by carriers in the implementation of
    long-term number portability. However, we do not believe it
    appropriate to allow the individual states to exercise jurisdiction
    over the implementation and cost recovery mechanism for local number
    portability in the context of intraLATA and EAS-type services. As we
    have stated above, we believe that an exclusively federal cost
    recovery mechanism for long-term number portability enables the
    Commission to satisfy most directly the 1996 Act's competitive
    neutrality mandate and minimize the administrative and enforcement
    difficulties that might arise if jurisdiction over local number
    portability were divided.[^55] Therefore, we deny petitioners'
    request that we should relinquish jurisdiction over the intrastate
    costs of number portability associated with intraLATA and EAS-type
    service calling plans.

16. Petitioners further request that the Commission clarify its
    definition of N-1 carrier assignment responsibility for these
    specific intraLATA and EAS-type services. Petitioners argue that the
    many and varied types of call routing arrangements for these types
    of intrastate services will make it difficult for the Commission to
    determine the N-1 carrier in all instances.[^56] Petitioners argue
    that NANC\'s Architecture & Administrative Plan for Local Number
    Portability[^57] failed to provide N-1 querying protocol scenarios
    for IntraLATA toll calls or EAS-type service.[^58] Petitioners
    request that the Commission direct NANC to develop comprehensive
    intraLATA and EAS-type service querying protocol scenarios for the
    various arrangements for these services throughout the country.[^59]

17. We deny the request to develop the specific protocol scenarios
    requested by petitioners because at this time the procedures
    established under the *Second Report and Order* appear
    sufficient.[^60] We do believe that, in most instances, carriers
    have not had any significant difficulty determining which carrier is
    the N-1 carrier. Under the N-1 querying protocol, the N-1 carrier is
    responsible for the query where \"N\" is the entity terminating the
    call to the end-user, or a network provider contracted by the entity
    to provided tandem access.[^61] Thus, the N-1 carrier (*i.e.,* the
    last carrier before the terminating carrier) for a local call will
    usually be the calling customer\'s local service provider; the N-1
    carrier for an interexchange call will usually be the calling
    customer\'s interexchange carrier.[^62] We believe that until a
    specific problem arises in determining the N-1 carrier, it is
    premature to ask NANC to spend the time and resources it would take
    to develop scenarios for the many different types of intraLATA and
    EAS-type services throughout the country. We encourage the carriers
    to bring such specific issues to NANC, pursuant to NANC's oversight
    of number portability administration, for a recommended resolution
    to be submitted by NANC to the Common Carrier Bureau as and when
    such issues arise in the context of the provision of number
    portability.[^63]

## Costs of the Regional Databases 

### Billing and Collection Issues

#### Background

18. In the *Third Report and Order*, we stated that, as part of its
    management duties under section 52.26 of the Commission\'s
    rules,[^64] the local number portability administrator (LNPA) of
    each regional database must collect sufficient revenues to fund the
    operation and management of that database.[^65] We required the LNPA
    to allocate the costs of each regional database among carriers in
    proportion to each carrier\'s intrastate, interstate, and
    international end-user telecommunications revenues attributable to
    that region.[^66] We also noted that some carriers have already
    begun paying their regional database administrators based on
    temporary agreements negotiated between the regional limited
    liability corporations (LLCs) and the region\'s LNPA, despite the
    fact that all eligible carriers had not yet signed such
    agreements.[^67] We permitted, but did not require, each regional
    administrator to adjust prospectively through a reasonable true‑up
    mechanism the future bills of those carriers that participated in
    such agreements.[^68] Such true-ups account for the period prior to
    the effective date of our rules and recognize that agreements might
    have included reasonable cost recovery mechanisms to recover
    regional database costs on a temporary basis pending the adoption of
    the *Third Report and Order*.[^69] NeuStar has been selected the
    LNPA of each region.[^70]

19. A number of petitioners raised issues relating to billing and
    collection of LNPA costs. Specifically, petitioners seek
    reconsideration or clarification of: (1) the universe of carriers
    used to calculate cost recovery; (2) potential double recovery of
    shared database charges; (3) audits of the LNPA\'s costs; and (4)
    the scope of work that may be included in the administrators\'
    shared costs.[^71] In response to these concerns, NeuStar asserts
    that these billing and collection issues are premature and should
    not be addressed at this time.[^72] NeuStar asserts that the
    \"consultative process\" occurring between it and the LLCs will
    provide an effective forum for establishing alternate billing and
    collection implementation approaches to address industry concerns,
    such as those raised by the commenters.[^73]

#### Discussion

20. WorldCom requests that the Commission clarify that when NeuStar
    implements its true-up, it does so using all carriers as a basis of
    its cost recovery plan, not just those carriers that have already
    signed user agreements with the LNPA.[^74] WorldCom believes that it
    would not be competitively neutral to allow NeuStar to bill the
    total costs of the regional database to only the small group of
    carriers that have signed user agreements, with the intention of
    somehow crediting those carriers if and when other carriers pay
    their proportionate share.[^75] We agree with WorldCom and hereby
    clarify that LNPAs shall assess shared costs on all eligible
    carriers, not just carriers with existing long-term number
    portability contracts with an LLC. As we stated in the *Third Report
    and Order*, we require all telecommunications carriers to bear LNPA
    shared costs, and we recognize that some carriers have already begun
    paying their regional database administrators based on temporary
    agreements negotiated by the regional LLC.[^76] We did not envision
    that such true-up would exempt carriers that have not yet signed
    long-term number portability contracts with the LLC, but rather
    would include such carriers in the cost allocation. We agree with
    WorldCom that although carriers without LLC contracts did not pay
    shared number portability costs from the start, they are not exempt
    from their responsibility to bear costs in a competitively neutral
    manner.[^77] We also agree with AT&T that we did not intend to
    penalize carriers currently under contract with the LNPA.[^78]

21. However, we decline to adopt WorldCom\'s recommendation that we
    specify the manner in which NeuStar should implement true-ups, such
    as prohibiting NeuStar from requiring a few carriers to pay 100
    percent of the costs, and crediting funds back as other payments
    flow in after other carriers are billed at a later date.[^79] We do
    not believe that WorldCom has presented sufficient evidence to
    support its claim that this true-up method is discriminatory.[^80]
    Also, we acknowledge NeuStar\'s need to create and maintain the
    number portability database, despite the fact that all carriers have
    not signed user agreements with NeuStar. We reiterate our earlier
    finding in the *Second Report and Order*, in which we held that the
    LLCs shall \"provide immediate oversight and management of the local
    number portability administrators.\"[^81] We strongly encouraged all
    parties to attempt to resolve issues regarding number portability
    deployment among themselves and, if necessary, under the auspices of
    the NANC.[^82]

22. Vanguard asserts that WorldCom\'s request that all carriers must
    bear their proportionate share of the LNPA\'s shared costs may lead
    to double recovery.[^83] Vanguard asserts that incumbent LECs
    performing queries for CMRS carriers are recovering their portion of
    the shared administrator\'s charges through query service charges,
    and any true-up adopted by administrators has to be sensitive to
    this particular potential for double recovery of costs, which would
    not be competitively neutral.[^84] MCI responds that Vanguard\'s
    concern is over-recovery through query service charges, not double
    recovery, and such concerns should be addressed in the context of
    specific query service tariffs.[^85]

23. We agree with MCI that Vanguard\'s concern about double recovery is
    really an issue of potential over-recovery through query service
    charges.[^86] Vanguard believes that CMRS providers will be
    double-paying their share of number portability costs by paying
    their regional LNPAs for their respective portion of the shared
    costs, as well as paying incumbent LECs for query service charges,
    through which incumbent LECs will pass on their own shared LNPA
    costs. First, we note that all carriers who contract out their
    querying services, not just CMRS carriers, will be in the identical
    position of paying both the regional LNPAs for shared costs, as well
    as query service charges. Second, we held in the *Third Report and
    Order* that each carrier\'s LNPA costs, once distributed, are
    carrier-specific costs directly related to number portability,[^87]
    and that an incumbent LEC\'s carrier-specific costs directly related
    to number portability are to be recovered through tariffed
    charges.[^88] We also held in the *Cost Classification Order* that
    carriers are to allocate their carrier-specific costs directly
    related to number portability between end-user charges and query
    service charges.[^89] We clarify that incumbent LECs must allocate
    their shared administrative fees between the query service charge
    and the end-user charge.[^90] If a carrier believes that an
    incumbent LEC is recovering its shared costs solely through query
    service charges rather than allocating such charges between end-user
    and query service charges, or recovering these costs through
    inflated query service charges, it should so state in the context of
    a carrier\'s tariff review process[^91] or through the Commission\'s
    normal complaint procedures.[^92] We will investigate a specific
    carrier\'s tariff and rates and examine them for over-recovery via
    the query service charge at that time.

24. WorldCom asks the Commission to clarify that shared LNPA costs
    include shared database costs, future statement of work
    modifications, and porting charges.[^93] We agree with WorldCom that
    the LNPAs may include database costs and modifications. We have
    previously concluded that number portability costs include initial
    costs as well as costs due to subsequent changes in the number
    portability database.[^94] Like all other shared costs, these costs
    should be distributed among all carriers.[^95] However, the meaning
    of WorldCom's statement that the LNPA should be allowed to assess
    \"porting charges\" is unclear. We note that in the *Third Report
    and Order*, we stated that acceptable LNPA shared costs that could
    be distributed to telecommunications carriers include
    \"nonrecurring, recurring, upload, and download costs.\"[^96] If
    WorldCom is referring to such uploading and downloading costs, and
    such costs meet the \"but for\" test for number portability cost
    recovery,[^97] then we agree that such charges should be included in
    the LNPA's shared costs.

25. WorldCom also asks the Commission to clarify that if number
    portability implementation causes public safety concerns that must
    be addressed on a technical or operational level, any LNPA charges
    related to resolving those public safety concerns also should be
    billed as shared costs.[^98] We held in the *First Report and Order*
    that, as a general matter, any long-term number portability must not
    \"result in unreasonable degradation in service quality or network
    reliability when implemented,\"[^99] and recognized that consumers
    \"rely on the public switched telephone network for their
    livelihood, health and safety.\"[^100] In the *Third Report and
    Order,* we adopted the tentative definition of shared costs as
    \"costs incurred by the industry as a whole, such as those incurred
    by third-party administrator to build, operate, and maintain the
    databases needed to provide number portability.\"[^101] As we have
    already established a definition of \"shared costs\" that commenters
    to the *Third Report and Order* found to be workable, we decline to
    expand on that definition in the abstract.[^102]

26. In the *Third Report and Order*, we reserved the right to audit each
    LNPA\'s costs.[^103] PCIA asserts that the Commission should clarify
    which of the regional database administrator\'s costs are
    recoverable and should implement a procedural mechanism for affected
    entities to review and comment on the administrator\'s annual
    budget.[^104] In opposition, AT&T comments that such procedure would
    add a new layer of administrative complexity for the Commission,
    introduce a new source of delays, and increase the costs of both the
    LNPAs and the carriers.[^105] NeuStar asserts that it was awarded
    the number portability regional contracts through a vigorously
    competitive selection process designed to ensure the lowest possible
    prices in the industry, which renders additional Commission
    oversight of its budget unnecessary.[^106] NeuStar also believes
    that public disclosure of its budget would unfairly harm it in
    competitive bidding for any future third party contracts.[^107]
    NeuStar states that it has committed to make its fees available for
    audits pursuant to existing number portability administration
    contracts.[^108] AT&T also notes that the *Second Report and Order*
    instructed carriers that they could pursue complaints to NANC or the
    Commission if the LNPAs are not meeting Commission
    requirements.[^109]

27. We agree with AT&T that adding an additional audit requirement would
    add administrative complexity and cost without a commensurate
    benefit. As AT&T noted, the Commission stated in the *Second Report
    and Order* that the LLCs \"provide immediate oversight and
    management of the local number portability administrators.\"[^110]
    The record does not support PCIA\'s contention that additional
    provisions for public comment on NeuStar\'s annual budget are
    necessary, especially because the specifics of NeuStar\'s budget
    have been agreed upon in the context of contractual negotiations,
    and because carriers may request an audit of NeuStar\'s budget
    pursuant to LNPA contracts. We therefore deny PCIA\'s request to
    implement a procedural mechanism to review and comment on the
    administrator's annual budget.

### Revenues to be Included in the Allocator 

#### Background

28. In the *Third Report and Order,* we decided that the number
    portability regional database administrator would allocate the costs
    of each number portability regional database among all
    telecommunications carriers in proportion to each carrier\'s
    intrastate, interstate, and international end-user
    telecommunications revenues attributable to that region.[^111] Our
    decision to use the end-user revenue allocator was based on our
    conclusion that it meets the two-prong competitive neutrality test
    in that: (1) the allocator will not give one service provider an
    appreciable, incremental cost advantage when competing for a
    subscriber; and (2) allocating shared costs in proportion to
    end-user revenues will prevent the shared costs from disparately
    affecting the ability of carriers to earn a normal return.[^112]

29. MCI challenges the end-user revenue allocator adopted by the
    Commission. MCI asserts that the end-user revenue allocator is
    over-inclusive because it captures services that are completely
    unrelated to number portability, that neither use numbering
    resources nor impose any costs on the Number Portability
    Administration Center (NPAC) system, and receive no benefits from
    local competition or local number portability.[^113] MCI requests
    that we exclude from the regional database cost allocator revenues
    from services such as private lines, virtual private networks, toll
    free, and outbound international services.[^114]

#### Discussion

30. We affirm our decision in the *Third Report and Order* that the
    number portability regional database administrator will allocate the
    costs of each number portability regional database among all
    telecommunications carriers in proportion to each carrier\'s
    intrastate, interstate, and international end-user
    telecommunications revenues attributable to that region. We disagree
    with MCI that the end-user revenue allocator is over-inclusive.
    Section 251(e)(2) requires that number portability costs \"be borne
    by all telecommunications carriers on a competitively neutral basis
    as determined by the Commission.\"[^115] The statutory language
    mandates that the costs of number portability be shared by all
    telecommunications carriers in a competitively neutral manner, and
    does not limit the application of the shared costs to
    telecommunications services that use numbering resources. The
    Commission determined that the end-user revenues allocator is
    competitively neutral in part because it spreads the costs of number
    portability among all telecommunications carriers rather than
    imposing the costs disproportionately on any particular class or
    classes of carriers.[^116]

31. In this light, the Commission determined that the end-user revenue
    allocator would not give one service provider any appreciable,
    incremental cost advantage when competing for a subscriber.[^117]
    The Commission reasoned that because the allocator would distribute
    the shared costs of the regional databases to each carrier in
    proportion to that carrier\'s end-user revenues, carriers would
    incur approximately the same increase in shared costs to win a
    specific customer.[^118]

32. Moreover, the Commission concluded that allocating shared costs in
    proportion to end-user revenues would prevent the shared costs from
    disparately affecting the ability of carriers to earn a normal
    return.[^119] The Commission reasoned that because allocations of
    the shared costs would vary directly with end-user revenues, a
    carrier's share of the regional database costs would increase in
    proportion to its customer base.[^120] Thus, no carrier\'s portion
    of the shared costs would be excessive in relation to its expected
    revenues, and its allocated share would only increase as it
    increases its revenue stream.[^121]

33. MCI argues that administrative efficiency is not a valid reason for
    adopting an allocator that imposes cost recovery obligations on
    carriers where there is no relationship between the service \--
    number portability \-- and the services from which the carrier
    realizes revenues.[^122] We disagree. As discussed above, Congress
    mandated that the Commission establish a competitively neutral
    mechanism for the recovery of number portability costs.[^123] In
    seeking to establish a revenue allocator, the Commission not only
    sought one that satisfied this Congressional mandate, but one that
    would be relatively simple for telecommunications carriers to apply.
    In this light, the Commission adopted the end-user
    telecommunications revenue allocator for three reasons. First,
    because it met the Congressional competitive neutrality
    mandate.[^124] Second, because it would be administratively
    efficient for telecommunications carriers to apply because they
    already track their sales to end users for billing purposes.[^125]
    And, third, because telecommunication carriers are familiar with the
    end-user revenues allocator from its use for universal service
    support contributions.[^126]

34. We agree with Bell Atlantic that if we begin excluding revenues from
    the allocation process, other carriers will likely seek to exclude
    revenues from other services, resulting in little change in
    allocation, but a great deal of extra bookkeeping.[^127] We also
    believe that allowing carriers to exclude revenues associated with
    particular services would result in unnecessary administrative work
    for not only the telecommunications carriers, but also for the LNPA.
    Reducing the bookkeeping and reporting burdens on the
    telecommunications industry is one of the goals of the Commission\'s
    recent *Streamlined Contributor Reporting Requirements Order*.[^128]
    We continue to believe that the application of the end-user revenues
    allocator fulfills our congressional mandate of ensuring that the
    costs of number portability are shared on a competitively neutral
    basis by all telecommunications carriers. Thus, we affirm our
    end-user revenues allocator and deny MCI\'s request for
    reconsideration.

### National and Multi-Regional Carriers

#### Background

35. In the *Third Report and Order*, we determined that the costs of the
    number portability regional databases should be allocated among all
    telecommunications carriers operating in each of the seven number
    portability regions in proportion to each carrier\'s end-user
    revenues as determined by the end-user revenues collected by all
    telecommunications carriers in that region.[^129] To facilitate the
    cost allocation of the regional databases, the local number
    portability administrator for each regional database may collect
    end-user revenue information for all telecommunications carriers
    once each year.[^130]

36. Commenters argue that compliance with section 52.32(a)(2) of our
    rules will require national and multi-regional carriers to change
    the manner in which they record revenues.[^131] WorldCom requests
    that the Commission allow national and multi-regional carriers to
    report total end-user revenues, and then divide these figures among
    the seven regional databases.[^132] MCI suggests that the Commission
    permit carriers to attribute end-user revenues on a pro‑rata or
    other reasonable basis, rather than being required to develop new
    revenue attribution systems only for number portability.[^133] In
    response, NeuStar notes that it is engaged in discussions with the
    LLC for each region on the very issues raised by MCI and
    WorldCom.[^134] NeuStar argues that it would be premature for the
    Commission to address these issues at this time.[^135] Moreover, in
    separately filed petitions for waiver, Williams Communications, Inc.
    (Williams) and AMSC Subsidiary Corporation (AMSC) request waiver of
    section 52.32 of our rules on similar grounds.[^136]

#### Discussion

37. We recognize the inherent difficulties some national and
    multi-regional carriers will experience in attempting to determine
    end-user revenue by regional database area. We agree with WorldCom
    that the use of an estimate can reduce an otherwise onerous data
    collection paperwork burden.[^137] We also agree with MCI that
    requiring national and multi-regional carriers to develop
    region-specific attribution systems for all of its end-user services
    may be costly and administratively burdensome.[^138] The use of a
    proxy based on the percentage of subscribers a carrier serves in a
    particular region is a reasonable means of reaching an estimate and
    of reducing the administrative burden on the carriers. Therefore, we
    will allow national and multi-region carriers to use a proxy to
    allocate, on a good faith basis, their end-user revenues to the
    appropriate regional LNP administrator. Those carriers that submit,
    with their LNP Worksheet, an attestation certifying that they are
    unable to precisely divide their traffic and resulting end-user
    revenue among the seven LNPA regions identified in the LNP worksheet
    will be allowed to divide their end-user revenue among these regions
    based on the percentage of subscribers served in each region.
    Carriers may use their billing databases to identify subscriber
    location.[^139]

38. We acknowledge that subscriber percentages may not be the only
    satisfactory proxy for end-user revenue. Accordingly, national and
    multi-region carriers that cannot make a proxy certification based
    upon subscriber percentages may request a waiver of section 52.32 of
    our rules based on other reasonable proxy methods.

39. Neither AMSC nor Williams propose to allocate their revenue based
    upon number of subscribers served in the regions in which they
    provide service. AMSC would divide its end-user revenue equally
    between the LNP regions.[^140] Williams proposes to report its
    revenue derived from services rendered in or between two or more
    regions, based on a "good-faith estimate" as to which portions of
    those revenues are derived from each of the seven regions, but it
    does not explain its proposed methodology.[^141] Williams requests a
    waiver only until such time as the Commission issues rules,
    guidelines or policies which instruct carriers how to apportion
    revenue between regions, for long-term number portability cost
    recovery purposes, which we have now done. AMSC does not limit its
    waiver request in this fashion, but rather seems to request
    permission to permanently adopt its alternative allocation system.

40. In evaluating these petitions, we recognize that both AMSC and
    Williams, in all likelihood, have already begun paying their
    regional database administrators. Although we find that the
    particular allocation proxy we permit above is preferable to either
    of the allocation alternatives set forth in the AMSC or Williams
    petitions, we are also mindful of the potential administrative costs
    that may be incurred were we to conclude that the alternatives
    proposed by petitioners could not be used for those periods for
    which filings have already been submitted. Therefore, taking into
    account all these circumstances, we grant both waivers to the
    limited extent that the alternative revenue allocations have been
    submitted by AMSC or Williams on or before the release date of this
    Order. On a going-forward basis, we further conclude that although
    the proxy we adopt today provides a better allocation method than
    those in the petitions, we would consider alternative allocation
    methods that these companies might propose in waiver petitions for
    prospective periods, based upon their particular circumstances. With
    respect to future worksheets, therefore, Williams and AMSC may
    either (1) file an attestation certifying that they are unable to
    precisely divide their traffic and resulting end-user revenue among
    the seven LNPA regions identified in the worksheet and accordingly
    will divide their end-user revenue among these regions based on the
    percentage of subscribers served in each region, consistent with
    this Order; or (2) request in a timely manner a waiver to use
    another appropriate proxy. If petitioners choose the latter
    alternative, we encourage them to file their waiver requests
    expeditiously.

## Recovery of Carrier-Specific Costs Directly Related to Providing Number Portability

### Independent and Rural Incumbent LECs

#### Background 

41. In the *First Reconsideration Order,* the Commission determined that
    carriers outside the 100 largest Metropolitan Statistical Areas
    (MSAs) would only be required to provide local number portability
    within six months of a request from a carrier offering competitive
    local service.[^142] In the *Third Report and Order*, the Commission
    allowed but did not require incumbent LECs to recover their carrier
    specific costs directly related to providing number portability
    through a federally tariffed end-user charge.[^143] At that time,
    the Commission determined that recovery of these costs from end
    users would not begin until the end users were reasonably able to
    begin receiving the direct benefits of long-term number
    portability.[^144] The Commission allowed an incumbent LEC to assess
    the monthly end-user charge only on end users in the 100 largest
    MSAs, and end users it serves outside the 100 largest metropolitan
    statistical areas from a number portability-capable switch.[^145]
    Because carriers may make any switch number portability-capable, the
    Commission determined that this approach would encourage carriers to
    install number portability and ensure that end users were assessed
    number portability charges only where they were reasonably likely to
    benefit from number portability.[^146] Petitioners contend that
    carriers that are not required to be number portability-capable at
    this time, are, nevertheless, incurring costs associated with number
    portability.[^147] Petitioners argue that the *Third Report and
    Order* fails to provide a mechanism for carriers, in this situation,
    to recover their costs related to number portability.[^148]

42. Specifically, petitioners request that an alternative recovery
    mechanism be established for incumbent LECs who are not required to
    be number portability-capable at this time.[^149] Petitioners note
    that once shared costs are allocated to each telecommunications
    carrier, that carrier\'s portion of the shared cost is treated as a
    \"carrier-specific cost\" directly related to providing number
    portability. Under the rules set forth in the *Third Report and
    Order*, however, incumbent LECs who are not number
    portability-capable cannot recover these costs. Petitioners argue
    that this places small and independent incumbent LECs at a
    competitive disadvantage.[^150]

43. Petitioners further argue that the *Third Report and Order* fails to
    provide a recovery mechanism for the costs that will be incurred for
    query services by those incumbent LECs that have no number
    portability capability.[^151] USTA argues that the Commission should
    allow incumbent LECs without long-term number portability capability
    to book and recover these costs though the regular accounting and
    separations process.[^152]

44. NECA and NTCA both note that because of joint local calling
    agreements between small incumbent LECs and larger incumbent LECs
    for the provision of number portability database query services, the
    larger incumbent LECs will assess smaller incumbent LECs a charge
    for performing query services. NECA and NTCA further point out that
    because of these agreements, most of their pool participants, as N-1
    carriers, will incur query service costs whenever any number in an
    NXX their customers call, has been ported.[^153] NTCA further argues
    that since the benefits of number portability accrue to
    interexchange carriers, the Commission should consider recovery
    through access charges as long as the mechanism it establishes is
    competitively neutral.[^154]

#### Discussion

45. In the *Third Report and Order*, we required that all shared
    costs[^155] be allocated among all telecommunications carriers based
    on the requirement of section 251(e)(2) of the Act that the costs of
    establishing number portability \"shall be borne by all
    telecommunications carriers on a competitively neutral
    basis.\"[^156] After distribution, each carrier\'s portion of shared
    costs is treated as a carrier-specific cost directly related to
    providing local number portability.[^157] To ensure that there would
    be sufficient revenues to fund the operation and management of the
    databases, we concluded that it was necessary to allocate the costs
    of each regional database among carriers in proportion to each
    carrier\'s intrastate, interstate, and international end-user
    telecommunications revenues attributable to that region.[^158]

46. NTCA argues that if no alternative recovery mechanism is made
    available to incumbent LECs outside the 100 largest MSAs, they will
    be forced to either upgrade their systems and assess charges on
    their end users, or contribute to the costs of the regional
    databases with no method of cost recovery. They contend that both
    options create a \"significant expense\" for these carriers even
    though they have not received a request for portability.[^159]

47. Petitioners further argue that many of the carriers outside the top
    100 MSAs face no local competition in the near future, and do not
    have immediate long-term portability deployment obligations.[^160]
    Petitioners further contend that it would be unfair to begin
    charging end users when there is no facilities-based local
    competition and end users receive no direct benefit from number
    portability.[^161] For this reason, petitioners suggest that
    non-portability capable carriers should be permitted to treat
    carrier-specific local number portability costs in the same manner
    that other, similar network costs are currently treated i.e.,
    through normal accounting and separations processes,[^162] or
    allowed to recover the costs through access charges.[^163]

48. In opposition, both AT&T and MCI urge the Commission to reject
    proposals which allow incumbent LECs to shift costs to competitors
    via access charges.[^164] AT&T recognizes that petitioners do not
    explicitly advocate including local number portability costs in
    access charges, but argues that incumbent LECs should not be allowed
    to recover such costs through the regular separations process, as
    this approach would result in increased access charges to
    IXCs.[^165] MCI states that in principle it has no objections to the
    creation of an alternative cost recovery mechanism for these small
    and rural incumbent LECs to recover long-term number portability
    related costs. However, MCI urges the Commission not to allow
    recovery of query costs from other carriers through access
    charges.[^166]

49. In the alternative, petitioners suggest that small and rural
    incumbent LECs be allowed to pool their costs.[^167] NECA
    specifically urges the Commission to allow these carriers to use a
    pooling method similar to that allowed for data base query charges
    associated with calls to \"800\" and \"900\" numbers.\"[^168] NECA
    argues that this type of pooling arrangement would allow carriers to
    recover their local number portability costs before being local
    number portability-capable because costs are included in central
    office expense accounts and are then allocated between jurisdictions
    on the same basis as central office investment.[^169]

50. We agree with AT&T that the *Third Report and Order* does not allow
    recovery of long-term number portability costs through the normal
    accounting and separations process. We also note that MCI objects to
    the recovery of query services costs from other carriers, but not to
    the creation of some viable alternative recovery mechanism.

51. We believe that competitive neutrality is essential to sustain
    continued deployment of the long-term number portability service. We
    have mandated that a carrier may only recover long-term number
    portability shared costs through a federal tariff. Recovery must,
    therefore, be sought through a federal recovery process. We agree,
    however, with the petitioners that certain small carriers who do not
    currently have long-term number portability-capable switches, but
    are incurring long-term number portability shared costs and
    additional query costs as a result of their participation in an EAS
    calling plan would be financially disadvantaged if they were not
    allowed recovery of these costs. For this reason, we reconsider the
    issue of whether non-LNP capable carriers serving areas outside the
    100 largest MSAs may recover their eligible number portability costs
    through the federal mechanisms that are available to other carriers.

52. The information provided in support of the expedited petition for
    interim waiver shows that a significant number of end users are
    located in areas adjacent to the 100 largest MSAs and areas where
    number portability is available. These end users also participate in
    EAS calling plans through their local service providers and make
    calls to numbers in extended calling areas that are served by number
    portability-capable switches. The terminating carriers query these
    calls in order to determine whether the called party has ported a
    number. The cost of these queries is passed on to the non-LNP
    capable LECs as query charges. In this instance, the queries are a
    direct result of the implementation of number portability in the
    neighboring area located within the EAS area. We find that the costs
    the non-LNP capable LECs incur for queries to areas within EAS
    calling plan areas are costs incurred as a result of the
    implementation of number portability and are also the costs of doing
    business within the EAS area.

53. We also find that the non-number portability capable LECs'
    customers, in this situation, receive direct benefits from the
    implementation of number portability in EAS calling plan areas.
    These customers' EAS calls are completed by a number
    portability-capable switch located within the EAS area; even though
    the non-number portability-capable LECs do not own the number
    portability-capable switches, the switches are a part of the EAS
    networks that complete calls from the non-number portability-capable
    LECs' customers. The query charges paid by the non-number
    portability-capable LECs recover the cost of performing the query
    and a portion of the number portability-capable LECs' implementation
    costs.[^170] Moreover, these customers would have difficulty
    completing their calls within the EAS calling plan area without
    access to the number portability-capable switch. The benefits of
    number portability, therefore, extend to customers other than those
    of the number portability-capable LEC. We conclude, therefore, that
    a non-LNP capable LEC that participates in an EAS calling plan with
    any one of the 100 largest MSAs or with an adjacent number
    portability-capable LEC, may recover its costs for payment of query
    charges as eligible number portability costs through an end-user
    charge as set out in the *Third Report and Order* and explained in
    the *Cost Classification Order*.[^171] We will not create a special
    category of cost recovery for small and rural carriers, and remain
    consistent with our decision in this regard as stated in the *Third
    Report and Order*.

54. We also allow these non-number portability-capable LECs to recover
    their LNPA charges through an end-user charge. Their customers also
    benefit from the creation and maintenance of the number portability
    administration database. Accurate location routing number (LRN)
    information promotes call completion for the customers of the
    non-number portability-capable LECs in EAS calling plan areas. These
    carriers are also distinct from competing local exchange carriers
    (CLECs) and the other unregulated telecommunications companies that
    pay LNPA charges because they lack an alternative method of
    recovering these costs and cannot include the cost in the price of
    another service. Although we are clarifying the language of the
    *Third Report and Order*, we are compelled, however, to affirm our
    prior decision that number portability costs should not be recovered
    through access charges.[^172] We decline to allow the non-number
    portability-capable LECs to recover their eligible number
    portability costs in access charges as requested by the NECA because
    recovery through access charges would not be competitively neutral
    as stated in the *Third Report and Order*.[^173]

55. Our decision on this issue emphasizes the statement in the *Third
    Report and Order* that incumbent LECs are to recover
    carrier-specific number portability costs through end-user charges
    only when and where the end users are reasonably able to begin
    receiving the direct benefits of number portability. Those receiving
    direct benefits of number portability include the customers of small
    and rural incumbent LECs located within EAS calling plan areas that
    encompass portions of one of the 100 largest MSAs and/or other areas
    served by number portability-capable switches.[^174] We also
    elaborate on the statement in the *Third Report and Order* that
    incumbent LECs may also assess a monthly charge only on end users it
    serves in the 100 largest MSAs, and end users it serves outside the
    100 largest MSAs from a number portability-capable switch, by adding
    that the small and rural incumbent LECs that provide service through
    EAS calling plan agreements and are located adjacent to number
    portability-capable areas may assess a monthly charge on their end
    users. As parties to the EAS calling plan agreements, these carriers
    provide service to customers within their study areas in a number
    portability environment and calls from these customers are completed
    by number portability-capable switches located in the neighboring
    LEC's service area of the EAS calling plan area. The customers in
    the small and rural LECs' study areas, therefore, are connected to
    the number portability network through the EAS calling plans, and
    receive the direct benefit of completing their calls using the
    number portability-capable switches. The small and rural incumbent
    LECs are, thus, authorized to recover their query and LNPA costs
    that were incurred after our decision mandating LNP for a period of
    five-years using the same method that other incumbent LECs use to
    recover their costs.

56. Our decision also complies with the congressional mandate that
    number portability cost recovery mechanisms must be competitively
    neutral. Allowing the small and rural carriers located within EAS
    calling plan areas to recover their number portability costs prior
    to becoming number portability-capable does not give these carriers
    an incremental cost advantage over other carriers when competing for
    customers.[^175] Once the carriers add number portability to their
    networks, they can recover the costs of establishing number
    portability, for a five-year period, through the same end-user
    charge through which they recover the query and LNPA costs. The
    small and rural carriers' costs will vary directly in proportion to
    the number of customers each carrier serves and the number of EAS
    calls their customers make to number portability-capable exchanges
    of adjoining LECs. In addition, our decision does not in any way
    affect competing service providers and, therefore, does not
    disparately affect the ability of the competing service providers to
    earn a normal return.[^176]

57. NECA also suggests that a Fifth Amendment \"takings\" issue is
    presented by the *Third Report and Order*.[^177] NECA notes that the
    *Third Report and Order* requires carriers \"to contribute to the
    support of number portability in adjacent regions" while "at the
    same time specifically forbids carriers from recovering those costs
    in their rates.\"[^178] We disagree with NECA; this issue was
    addressed, and rejected, in the *Third Report and Order*.[^179]

58. We consider the issue of whether the small and rural LECs should be
    allowed to recover costs that may be incurred to implement number
    portability functionality through a second end-user charge after or
    while these LECs recover the query and LNPA costs through an initial
    end-user charge. In order to comply with Congress' competitive
    neutrality requirement, we conclude that these carriers must be
    allowed an opportunity to recover all eligible LNP costs through the
    five-year federal cost recovery mechanism established in the *Third
    Report and Order*. We considered the costs associated with equipping
    a network with number portability functionality in the context of
    the tariff investigations and recognized in the *Third Report and
    Order* that the most significant portion of a carrier's cost will be
    incurred for this purpose.[^180] To limit these companies to
    recovering only their query and LNPA costs may give other carriers
    an appreciable cost advantage over them or significantly impact
    their ability to earn a normal return. Incumbent LECs may recover
    query and LNPA costs through an end-user charge collected over one
    five-year period and may recover the costs of equipping their
    networks with number portability functions through an end-user
    charge collected over a different five-year period.[^181] These
    five-year periods may run either consecutively or concurrently, in
    whole or in part, as may be determined by the Commission.

### Recovery of Number Portability Costs from Other Carriers

#### Background

59. In the *Third Report and Order* the Commission determined that
    incumbent LECs may assess a monthly number portability end-user
    charge on resellers of the incumbent LEC\'s local service, as well
    as on purchasers of switching ports as unbundled network elements
    under section 251 of the Communications Act.[^182] We reasoned that
    allowing the incumbent LECs to assess this charge was competitively
    neutral \"because the reseller and the purchaser of the switch port
    will incur the \[end-user\] charge in lieu of costs they would
    otherwise incur in obtaining long-term number portability
    functionality elsewhere.\"[^183] We noted that the unregulated
    reseller and purchaser of the switch port may recover in any lawful
    manner the charges the incumbent LEC assesses on them.[^184]

60. A number of petitioners seek clarification or reconsideration of
    issues relating to the manner in which incumbent LECs recover their
    number portability costs from other carriers. MCI seeks
    clarification that any costs associated with a number portability
    charge to carriers purchasing unbundled switching be calculated
    based on Total Element Long Run Incremental Cost (TELRIC), and that
    costs for number portability charged to resellers be based on
    avoided costs.[^185] MCI claims that, to comport with the costing
    requirements of the 1996 Act, charges assessed on carriers
    purchasing unbundled switching or resale must be cost-based, citing
    section 251(c)(3) and (4).[^186] Comcast seeks clarification that
    incumbent LECs may not recover their number portability costs
    through interconnection charges or add‑ons to interconnection
    charges to their carrier \"customers,\" and that incumbent LECs may
    not seek to recover carrier-specific costs through interconnection
    charges to other carriers where no number portability functionality
    is provided.[^187] PCIA requests that the Commission affirm that
    paging providers are co-carriers for purposes of cost recovery, not
    end-users, and, for this reason, should not be assessed end-user
    fees.[^188] PCIA asserts that the Commission has held in past orders
    that all CMRS providers, including paging providers, are to be
    treated by LECs as co-carriers.[^189]

#### Discussion

61. In our view, MCI's request for clarification addresses prices for
    unbundled network elements and resale, and not the mechanism
    established by the Commission in the *Third Report and Order* by
    which incumbent LECs may recover their costs of implementing
    long-term number portability.[^190] The statutory language relating
    to number portability costs differs from the sections governing the
    pricing of unbundled network elements and resale rates. Section
    251(e)(2), which the Commission applied in the *Third Report and
    Order* to create the LNP end user charge, provides 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." By contrast, the Commission has found
    that section 251(c)(3) requires incumbent LECs to price unbundled
    network elements under the TELRIC pricing methodology,[^191] and
    that section 251(c)(4) requires that resale rates be set at the
    retail rate minus any avoided costs.[^192] Although the Commission
    decided in the *Third Report and Order* to permit carriers to impose
    end user surcharges on purchasers of unbundled switching ports and
    resellers, it did not find that these surcharges thereby became an
    element of the UNE or resale rates.[^193] Our decision to permit the
    imposition of end user surcharges on purchasers of unbundled
    switching ports and resellers was, instead, based upon the
    conclusion that, although incumbent LECs will provide the underlying
    number portability functionality in such situations, they will no
    longer have a direct relationship with the end users.[^194] Instead,
    the purchaser of the unbundled switch port and the reseller receive
    all their number portability functionality from the incumbent
    through these arrangements.[^195] Moreover, we believe that
    application of the TELRIC standard would be inappropriate because
    the LNP end-user charge is intended to recover the short-term costs
    of number portability,[^196] whereas TELRIC is designed to recover
    long-run costs. Accordingly, we conclude that the LNP end-user
    charges for number portability associated with unbundled switching
    ports and resellers are not part of the rate elements for these
    services. We therefore deny MCI's request that the LNP costs
    associated with unbundled switch ports and resale be based on the
    statutory standards set forth in sections 251(c)(3) and 251(c)(4),
    respectively, and reaffirm that they are governed by the
    competitively neutral standard set forth in section 251(e)(2).

62. We agree with Comcast that incumbent LECs may not recover any number
    portability costs through interconnection charges or add-ons to
    interconnection charges to their carrier \"customers,\" nor may they
    recover carrier-specific costs through interconnection charges to
    other carriers where no number portability functionality is
    provided.[^197] To the extent necessary, we clarify our decision
    accordingly. The *Third Report and Order* allows incumbent LECs to
    assess number portability charges in limited circumstances and only
    where the incumbent LEC provides number portability
    functionality: (1) on resellers of the incumbent LEC\'s local
    service; (2) on purchasers of switching ports as unbundled network
    elements under section 251; and, (3) on other carriers for whom the
    LEC provides query services.[^198] Allowing the incumbent LECs to
    assess an end-user charge on resellers and on purchasers of
    switching ports as unbundled network elements is competitively
    neutral because the reseller and the purchaser of the switch port
    will incur the charge in lieu of costs they would otherwise incur in
    obtaining long-term number portability functionality
    elsewhere.[^199]

63. In considering the issue of recovery of costs through charges on
    other carriers, Comcast asks that we recognize that we have not
    fully addressed how wireless providers and other non-incumbent LECs
    will recover their carrier-specific costs.[^200] Comcast argues
    that, for technical reasons, wireless providers cannot perform
    queries for themselves or for other carriers and, accordingly, must
    recover their carrier-specific costs through end-user charges.
    Comcast further asserts that the inability of wireless providers to
    recover any of their costs from other telecommunications providers
    means that the current cost recovery scheme creates a cost advantage
    for incumbent LECs, who can recover their costs both through query
    charges and end-user charges.[^201]

64. We disagree. First, we note that the Commission has fully addressed
    the issue of how other carriers, including non-incumbent LECs and
    wireless carriers, may recover their costs of number portability.
    Specifically, we held that carriers not subject to rate regulation
    \-- such as competitive LECs, CMRS providers and non-dominant IXCs
    \-- may recover their carrier-specific costs directly related to
    providing number portability in any lawful manner consistent with
    their obligations under the Communications Act.[^202] Second, we
    disagree that CMRS carriers are at a competitive disadvantage
    because they cannot perform, and charge other carriers for, query
    services. In filing number portability tariffs, incumbent LECs must
    allocate their carrier-specific costs incurred only to provide
    portability functions for end-users to that service and costs
    incurred specifically to provide only one particular type of query
    service to that service.[^203] Remaining eligible costs should be
    allocated on the basis of the capacity requirements for each type of
    service.[^204] Requiring carriers to allocate their costs in this
    manner ensures that incumbent LECs will not use their query service
    charges to other carriers for the recovery of the costs of providing
    number portability service to end-users, thereby achieving a lower
    end-user charge.[^205] Moreover, although we recognized in the
    *Third Report and Order* that some small LECs and CMRS providers may
    find that their smaller customer bases might make adding number
    portability capability in their own networks uneconomical, we also
    recognized that such carriers have other options for achieving
    economies of scale similar to those of the larger incumbent LECs.
    For example, such carriers could arrange for another carrier to
    perform queries for them, enter into cooperative agreements with
    other small carriers, or install number portability in their own
    networks and use excess number portability capacity to provide query
    services to other carriers.[^206] Thus, we affirm our conclusion
    that our competitive neutrality standard is met if we leave
    unregulated those carriers not subject to rate regulation.[^207] We,
    therefore, decline to establish a federal recovery mechanism for
    these carriers.

65. Moreover, we clarify that CMRS providers and paging providers are
    co-carriers with incumbent LECs for the purpose of number
    portability cost recovery, and should not be assessed end-user
    charges.[^208] In the recent investigation of the number portability
    tariff filings of Ameritech, GTE, and SBC, the Commission found
    unlawful Ameritech\'s imposition of number portability surcharges on
    CMRS providers\' Type 1 DID/DOD Trunks.[^209] In making that
    decision, the Commission reasoned that, as in the context of access
    charges, CMRS providers and paging providers are carriers, not end
    users, for purposes of number portability.[^210] Our number
    portability rules specify that monthly number portability surcharges
    may be assessed only on end users, not carriers.[^211] We also agree
    with Arch\'s assertion that incumbent LECs may not impose a monthly
    end-user charge on all Type 1 interconnections by analogizing such
    connections to a PBX-type service, on which LECs may impose monthly
    surcharges.[^212] As we stated in *Bell Atlantic Cellular*, \"it is
    clear that PBX service is quite different than that of \[radio
    common carrier\] interconnections.\"[^213] The most notable
    difference is that a PBX trunk connects an end-user premise and a
    LEC switch, while a Type 1 connection links the LEC to the Mobile
    Telephone Switching Office (MTSO), which is not an end-user
    premise.[^214] We thus agree with PCIA and Arch that, because CMRS
    providers and paging companies are co-carriers and not end-users,
    they should not be assessed an end-user charge by LECs. Moreover, we
    conclude that an interpretation that our orders and rules governing
    local number portability permit incumbent LECs to impose an end-user
    charge on all Type 1 interconnections is unreasonable. We find that
    our orders clearly prohibit carriers from imposing their end-user
    query costs on other carriers, except in very limited circumstances
    where the incumbent LEC also provides the number portability
    functionality.

### Recovery of Number Portability Costs from Feature Group A Access Lines

#### Background

66. Feature Group A is a local exchange service that is used to provide
    interstate access service to IXCs and end users.[^215] Feature Group
    A access provides IXCs with dedicated transmission facilities from
    the IXC\'s Point of Presence (POP) to a LEC central office.[^216]
    Within Local Access and Transport Areas (LATAs) in which an IXC
    takes Feature Group A service, a caller reaches the IXC\'s POP by
    dialing a Feature Group A ten-digit number, plus an authorization
    code and the ten digit number the customer wishes to reach.[^217]
    The caller must pay any local toll charges incurred to reach the
    IXC\'s POP, in addition to the IXC\'s toll charges; when the LEC
    terminates a call through a Feature Group A arrangement, however,
    the LEC generally will carry the call anywhere within the receiving
    service area without assessing additional toll charges.[^218]
    Feature Group A service is also used by non-carrier entities as part
    of an interstate Foreign Exchange (FX) or Off Network Access Line
    (ONAL) arrangement.[^219] In this type of arrangement, the Feature
    Group A customer obtains from a LEC a combination of local exchange
    service and dedicated interoffice transport facilities linking the
    LEC dial tone office to an IXC POP.[^220] The IXC POP is linked to
    the out-of-state Feature Group A customer by an interstate private
    line, which enables end users in the dial tone office area to reach
    out-of-state Feature Group A customers without incurring interstate
    toll charges.[^221] The dial tone office processes the call
    originating in its service area as a local call and delivers it to
    the dedicated trunked transport and, ultimately, to the IXC\'s
    interstate private line for transmission to the Feature Group A
    customer.[^222]

67. Several petitioners request that the Commission revise or clarify
    the Commission\'s new rule, found at section 52.33(a)(1)(ii), to
    allow incumbent LECs to assess a surcharge on Feature Group A
    lines.[^223] The petitioners assert that because Feature Group A
    lines are used as a form of access lines and the telephone numbers
    associated with them are portable, the Commission should clarify or
    find upon reconsideration that carriers may charge Feature Group A
    end users and carriers an LNP monthly end-user surcharge.[^224] The
    petitioners assert that such surcharge should be allowed,
    notwithstanding that the service is obtained through an access
    tariff and the Commission specifically prohibits the recovery of
    number portability costs through access charges.[^225] In
    opposition, parties assert that a surcharge should not be assessed
    purchasers of Feature Group A access, because number portability
    costs can be recovered from other carriers only through query
    charges, not through surcharges.[^226] Parties opposed to the
    request assert that the request is an attempt to circumvent the
    Commission\'s decision that carriers should not be required to pay
    other carriers\' LNP costs.[^227] Additionally, some commenters
    assert that carriers are already paying access fees for Feature
    Group A service and should not also be charged an end-user
    surcharge.[^228]

#### Discussion

68. In the *Third Report and Order*, we determined that incumbent LECs
    may assess end-user surcharges on resellers as well as purchasers of
    switching ports as unbundled network elements,[^229] based on our
    conclusion that incumbent LECs will provide the underlying number
    portability functionality in such situations, although they will no
    longer have a direct relationship with the end-users.[^230] We did
    not allow incumbent LECs to assess surcharges on carriers that
    purchase only their local loops as unbundled network elements,
    however, because the unbundled local loop does not contain the
    number portability functionality.[^231] Accordingly, the purchaser
    of the unbundled loop still will be responsible for providing such
    functionality and, thus, incurring elsewhere the corresponding
    cost.[^232]

69. We clarify, however, that carriers who offer Feature Group A access
    lines may assess a monthly surcharge on such lines. We conclude that
    this clarification is consistent with our decision in the *Third
    Report and Order* that incumbent LECs may impose a monthly surcharge
    on resellers as well as on purchasers of switching ports as
    unbundled network elements. We will amend section 52.33(a)(1)(ii) of
    our rules to reflect this clarification. We agree with the parties\'
    assertion that the LEC providing the Feature Group A line also
    provides the underlying number portability functionality, and should
    be allowed to recover its number portability costs through a
    surcharge on the Feature Group A line.[^233] Our conclusion is based
    on the determination that the Feature Group A line, whether
    providing access to the end-user\'s private network or a connection
    between an end office and the IXC\'s POP, connects to the end office
    switch and uses that switch in the same manner that an end-user line
    does.[^234] Because a Feature Group A line connects to the end
    office switch, uses the switch in the same manner as an ordinary
    end-user line, and uses a ten-digit telephone number that is
    portable,[^235] the incumbent LEC is responsible for providing the
    underlying number portability functionality and may thus recover its
    permissible incremental costs through a monthly surcharge on the
    Feature Group A line.

70. We disagree with AT&T\'s assertion that when Feature Group A lines
    are used to connect a LEC end office and an IXC\'s POP, allowing a
    LEC to assess a number portability surcharge on the IXC would result
    in double billing.[^236] Incumbent LECs may only assess one end-user
    charge per line.[^237] Additionally, as discussed below, incumbent
    LECs may not recover their number portability costs through
    increased access charges. Therefore, allowing incumbent LECs to
    assess one end-user surcharge on Feature Group A lines does not
    result in double billing.

71. We disagree with Vanguard\'s assertion that we are \"reclassifying\"
    carriers who purchase Feature Group A lines as end users in order to
    allow incumbent LECs to assess end-user surcharges.[^238] We merely
    find that such carriers are in a situation similar to end users and
    incumbent LECs may recover their number portability costs in such a
    situation. As discussed above, we allow such cost recovery because
    in this situation, the carrier purchasing Feature Group A service is
    in the same position as an end user. Additionally, in response to
    AT&T\'s request that only Feature Group A line end-users, but not
    carriers who use Feature Group A lines, be assessed a surcharge, we
    note that SBC asserts that incumbent LECs are incapable of
    identifying the nature of the customer purchasing the Feature Group
    A service and cannot differentiate between such customers for
    purposes of a number portability-related charge.[^239] We also agree
    with Bell Atlantic that the label that is on the service should not
    determine whether the number portability surcharge applies to that
    service, but rather whether the telephone number associated with the
    line is capable of being ported to another carrier. Feature Group A
    lines satisfy this test.[^240]

72. We disagree with Vanguard\'s assertion that allowing LECs to assess
    this surcharge would require carriers purchasing Feature Group A to
    purchase portability functionality, regardless of whether that
    functionality has any utility for the purchasing carrier.[^241] We
    noted in the *Third Report and Order* that it is competitively
    neutral to allow an incumbent LEC to assess an end-user surcharge
    because the reseller and unbundled switch port purchaser will
    receive all their number portability functionality through these
    arrangements and will incur such costs in lieu of costs they would
    otherwise incur in obtaining number portability functionality
    elsewhere.[^242] We agree with the numerous commenters who assert
    that Feature Group A lines have their own ten-digit numbers which
    are portable, and thus incumbent LECs may recover their number
    portability costs through an end-user surcharge.

73. We also disagree with Vanguard\'s assertion that allowing carriers
    to assess end-user charges on other carriers would permit the
    incumbent LECs to recover number portability costs through
    interstate access charges, albeit indirectly.[^243] Such incumbent
    LECs are providing the number portability functionality to the
    carriers and may recover such costs through the end-user surcharge.
    Although the Feature Group A service is obtained through an access
    tariff, incumbent LECs assign Feature Group A lines a ten-digit
    number that is portable, and a LEC providing such underlying number
    portability functionality may recover its costs through a monthly
    end-user surcharge.[^244]

### Recovery of Number Portability Costs from Centrex and PBX Lines

#### Background

74. Business customers with a large number of telephone lines may choose
    to connect their users with each other and with other telephone
    lines in one of two ways: Centrex or a PBX.[^245] Centrex customers
    receive service from a LEC\'s central office switch via line side
    connections, while in a PBX arrangement, customers are connected to
    the central office switch via trunk side connections.[^246] In the
    *Third Report and Order*, we held that incumbent LECs may assess
    end-users one monthly number portability charge per line, but
    applied a line-to-trunk equivalency ratio in the case of PBX trunks.
    [^247] We observed, as we had in the *Access Charge Reform Order*,
    that one PBX trunk provides, on average, the equivalent service
    capacity of nine Centrex lines.[^248] For this reason, we allowed
    LECs to assess one monthly end-user charge per Centrex line, and
    nine monthly number-portability end-user charges per PBX
    trunk.[^249] Our decision was based on our determination that in the
    absence of this line-to-trunk equivalency ratio, large customers
    would be encouraged to choose one of these arrangements over the
    other because of the number portability charge, an outcome that we
    concluded would violate the competitively neutral requirement of
    section 251(e)(2).[^250]

75. A number of incumbent LECs request reconsideration of this
    equivalency determination.[^251] According to the incumbent LECs,
    while the Commission sought to create a similar type of
    \"equivalency\" between Centrex and PBX trunk subscribers, we erred
    in establishing the 9:1 equivalency ratio.[^252] The petitioners
    argue that rather than treating the PBX trunk as a single unit, the
    Commission incorrectly treated the Centrex subscriber as the unit of
    reference and allowed PBX customers to be charged 9 times the amount
    charged the Centrex customer.[^253] Petitioners argue that we should
    have used the exact equivalency ratio used in the access charge
    context, that is, assessing one line charge for PBX and one-ninth of
    a line charge for Centrex. For number portability, we allowed
    carriers to assess nine charges for PBX and one charge for Centrex.

#### Discussion

76. We agree with those carriers who assert that a trunk equivalency
    ratio is needed to account for the service capacity differences
    between a PBX trunk and a Centrex line. We also agree that the PBX
    trunk provides, on average, the equivalent service capacity of nine
    Centrex lines.[^254] We disagree, however, that we have deviated
    from the trunk equivalency ratio adopted in the *Access Charge
    Reform Order*[^255] and affirm our earlier finding that Centrex
    lines may be assessed one number portability charge and PBX trunks
    may be charged nine number portability charges.

77. Consistent with our decision in the *Access Charge Reform Order*, we
    find that a 9:1 ratio is \"reasonable and administratively
    simple.\"[^256] The one-ninth charge urged by the petitioners, on
    the other hand, is unreasonable and would be administratively
    difficult to use in computing tariffs. Were we to adopt the
    petitioners\' suggestion and reduce the Centrex line number
    portability charge, incumbent LECs would be required to assess
    one-ninth of a charge on all other end-user lines, to avoid a
    discriminatory rate and one that impermissibly imposes the burden of
    number portability on residential end-users. We note that the
    petitioners have failed to address the impact of the proposed change
    in the equivalency ratio on residential customers.

78. Ameritech[^257] and UTC assert that the 9:1 trunk equivalency ratio
    is a major policy change from our earlier access charge reform ratio
    that was made without a public policy or cost justification.[^258]
    These carriers state that the Commission did not make any finding
    that PBX customers should make a disproportionate contribution to
    the costs of number portability, nor did it find any cost
    justification for forcing PBX customers to pay multiple number
    portability monthly charges.[^259] Bell Atlantic makes the same
    argument.[^260] We disagree. The equivalency ratio remains the same
    \-- 9:1 \-- based on our finding that a PBX trunk provides
    approximately the same functionality as nine Centrex lines.[^261] We
    also disagree that we are imposing a disproportionate contribution
    to the costs of number portability on PBX customers. To the
    contrary, the trunk equivalency ratio compensates for the fact that
    one PBX trunk provides the functionality of approximately nine
    Centrex lines and is intended to place PBX and Centrex services on
    an equal footing with respect to number portability charges so that
    customers do not choose one service over the other because of the
    number portability charge.

79. We also are not persuaded that the equivalency ratio established in
    the *Third Report and Order* should be changed.[^262] The 1:1/9
    ratio will materially impact billing systems that are already
    configured for access charges assessed on PBX and Centrex at a nine
    to one ratio. We recognize, as we did in the *Third Report and
    Order*, that number portability is a new service that will require
    carriers to incur costs to modify their networks to provide number
    portability.[^263] We do not find that changes in billing systems,
    if any, resulting from the 9:1 ratio, would support the requested
    change to a 1:1/9 ratio. Moreover, we note that in the *Cost
    Classification Order*, we stated that carriers may not recover the
    costs of \"billing or order processing systems\" unless they can
    clearly distinguish costs incurred for narrowly defined portability
    functions from costs incurred to adapt other systems to implement
    number portability.[^264]

80. SBC asserts that Plexar systems are unique PBX-like arrangements
    that ascribe separate 7- and 10-digit telephone numbers to each
    station in the system, with a single local exchange provider
    providing all the stations in the Plexar system.[^265] Accordingly,
    SBC requests that Plexar systems be assessed one number portability
    charge, not nine.[^266] SBC asserts that a 9:1 ratio relating to the
    number of Plexar stations to an equivalent number of individual
    voice paths is an effective means for levying per-line charges under
    the access charge reform rulemaking.[^267] SBC further asserts that
    a similar ratio was used for Centrex, and thus Plexar and PBX trunks
    should be assessed one portability charge, rather than one-ninth of
    the charge per Centrex line.[^268] AT&T disagrees, and asserts that
    because Plexar is like Centrex in that every Plexar telephone line
    has its own dedicated connection to switching equipment it should be
    assessed one number portability charge, not nine.[^269] In a prior
    rulemaking, we examined the relationship between Plexar and Centrex,
    and determined that Plexar offers a nearly identical functionality
    to Centrex.[^270] We agree with AT&T that because each station in
    the Plexar system has its own dedicated connection to a switch, it
    is similar to Centrex and should be assessed the same number
    portability charge, that is, one number portability charge per
    line.[^271]

81. Finally, we disagree with those commenters who assert that a 9:1
    line-to-trunk ratio is not competitively neutral. Indeed, the ratio
    is specifically aimed at ensuring that, by treating end-users in a
    nondiscriminatory manner, the local number portability cost recovery
    mechanism fulfills section 251(e)(2)\'s competitively neutral
    mandate. We, therefore, affirm our conclusion that in the absence of
    establishing a 9:1 equivalency between a PBX trunk and Centrex
    subscribers, large customers would be encouraged to choose one of
    these arrangements over the other because of the number portability
    charge, an outcome that would violate the competitive neutrality
    requirements of section 251(e)(2).[^272]

82. We also disagree with those carriers who assert that allowing one
    charge for Centrex lines and nine charges for PBX trunks is not
    competitively neutral, because competitive LECs are not required to
    assess number portability monthly charges on these services.[^273]
    These carriers assert that competitive LECs are free to recover
    their costs as they see fit and are thus not required to
    \"overcharge\" their PBX customers in order to recover their number
    portability costs.[^274] In response, we note that incumbent LECs
    are not required to \"overcharge\" their PBX customers, but rather
    may, if they wish, assess up to nine portability charges due to the
    PBX trunk\'s higher capacity.[^275] We also determined in the *Third
    Report and Order* that carriers not subject to rate regulation, such
    as competitive LECs, may recover their carrier-specific costs
    directly related to number portability in any lawful manner
    consistent with their obligations under the Communications
    Act.[^276] We stated that allowing incumbent LECs to recover their
    carrier-specific number portability costs from their customers gives
    the incumbent LECs the option to forego some or all of the charges
    to compete in the local service market. [^277] We also noted in the
    *Third Report and Order* that regulating the recovery of number
    portability costs by incumbent LECs but not competitive LECs will
    not place any carrier at a competitive disadvantage because
    competitive LECs also have portability costs, and incumbent LECs are
    unlikely to have a \"material disadvantage\" in competing for
    subscribers under our rules.[^278] Here, the petitioners allege that
    they must \"overcharge\" their customers, and that such charges will
    cause them to lose customers. The incumbent LECs' allegations alone
    are insufficient to persuade us that the optional end-user charge
    does not provide competitive parity with CLECs, which also incur
    similar costs. At this stage, these carriers can only speculate that
    CLECs will not assess end-user charges for PBX lines and that
    incumbent LECs must always assess the end-user charges where they
    are faced with competition in a specific market. We see no reason,
    therefore, to abandon the requirements established in the *Third
    Report and Order* regarding the charges that apply to Centrex and
    PBX lines.

### Recovery through the Incumbent LEC End-User Charge

#### Initiation of the end-user charge

##### Background

83. In the *Third Report and Order*, we allowed incumbent LECs to assess
    a number portability monthly charge, for a five-year period, only on
    end users they serve in the 100 largest MSAs and on end users they
    serve outside the 100 largest MSAs when the switch serving that MSA
    is number-portability capable.[^279] We determined that such an
    approach will encourage carriers to install number portability and
    help ensure that end-users are assessed number portability charges
    only where they are reasonably likely to benefit from number
    portability.[^280] We chose the five-year period for the end-user
    charge because it enables incumbent LECs to recover their
    portability costs in a timely fashion, and also helps produce
    reasonable charges for customers and avoids imposing those charges
    for an unduly long period.[^281] Florida asserts that this rule
    should be amended to provide that incumbent LECs may impose an end
    user charge "no sooner than the end users are reasonably able to
    begin receiving number portability.\"[^282] Bell Atlantic states
    that Florida's request would be administratively difficult to impose
    and enforce.[^283]

##### Discussion

84. We agree with Bell Atlantic and therefore decline to change our
    rules. We based our determination of when carriers may begin
    collecting end-user charges on our need to balance carriers\' need
    to recover their costs with our concerns about consumer charges
    being levied before number portability is available in an area.
    Here, we agree with Bell Atlantic that allowing the imposition of
    number portability charges when individual end users are able to
    receive direct benefits would greatly increase the burden on
    carriers, due to carriers\' need to determine when each residential
    and business line is number portability-capable, and then to begin
    billing consumers within that region only. We also agree with Bell
    Atlantic that changing the time a carrier may begin billing based on
    the individual availability of number portability would involve the
    Commission in numerous disputes over when that exact time had
    arrived. On the other hand, it is relatively simple for carriers and
    the Commission to make such determination within each MSA. It is
    also unclear how Florida\'s proposal would benefit individual
    consumers above and beyond our current provisions. We authorized
    carriers to begin assessing end-user charges no sooner than February
    1, 1999 based on the implementation schedule and in anticipation
    that number portability would be available to a large number of
    customers by the end of 1998. Because number portability has been
    implemented in the top 100 MSAs since the end of 1998, as required
    by the *First Report and Order,* as modified,[^284] Florida's
    request is moot. We therefore deny Florida\'s request and uphold our
    earlier determination.

#### Recovery Period of the End-User Charge

##### Background

85. In the *Third Report and Order*, we decided that incumbent LECs may
    recover their number portability costs with a federally-tariffed
    monthly end-user charge.[^285] We determined that the end-user
    charge may begin \"no earlier than February 1, 1999, on a date the
    incumbent local exchange carrier selects, and ... last no longer
    than five years.\"[^286] We decided further that after the five-year
    recovery of the implementation costs of number portability with the
    end-user charge, \"\[c\]arriers can recover any remaining costs
    through existing mechanisms available for recovery of general costs
    of providing service.\"[^287]

86. NECA and SBC request clarification regarding how incumbent LECs will
    recover number portability costs beyond the five-year cost recovery
    period.[^288] SBC asks us to address this issue before we implement
    our directive on separations.[^289] Furthermore, SBC asks for
    clarification that, until the issue of the distribution of joint
    costs is decided,[^290] incumbent LECs are under no obligation to
    attempt to exclude what they would define as number portability
    costs from the separations process.[^291] USTA urges us to clarify
    that section 52.33(a)(1) of the *Third Report and Order*
    specifically provides for a full five-year cost recovery
    period.[^292] USTA asserts that the *Third Report and Order* is not
    clear as to whether incumbent LECs serving the top 100 MSAs may
    recover their implementation costs from end users over five years
    from the date the incumbent LECs begin the charge, or whether they
    must recover those costs from end users within five years of
    February 1, 1999.[^293]

##### Discussion

87. We clarify that after incumbent LECs have recovered their initial
    implementation costs of number portability through the end-user
    charge, any remaining number portability costs will be normal
    network costs recoverable under general rate-of-return and price-cap
    regulations.[^294] We designed the end-user charge to ensure that
    incumbent LECs would have a reasonable opportunity to recover their
    initial costs of implementing number portability,[^295] which make
    up the majority of their number portability costs.[^296] Thus, we
    noted in the *Third Report and Order* that \"once incumbent LECs
    have recovered their initial implementation costs, number
    portability will be a normal network feature, and a special end-user
    charge will no longer be necessary to ensure that incumbent LECs
    recover their number portability costs on a competitively neutral
    basis.\"[^297]

88. In addition, we note that carriers\' charges for providing query
    services to other carriers will continue beyond the five-year period
    of the number portability end-user charge. [^298] Because of this
    fact, the Common Carrier Bureau, in its *Cost Classification Order*,
    required price cap LECs to treat the query service charge as a new
    service within the meaning of section 61.49(g) of our rules.[^299]
    This action was consistent with the treatment of such charges in
    previously filed tariffs.[^300] We affirm this requirement.
    Furthermore, we require rate-of-return LECs that provide number
    portability query service to treat the query service as a new
    service within the meaning of section 61.49(g) of our rules. We note
    SBC\'s request that incumbent LECs be able to utilize the
    separations process for their number portability costs before the
    issue of the distribution of joint costs is decided.[^301] Although
    SBC's request was rendered moot by the December 1998 release of the
    *Cost Classification Order*, we established an exclusively federal
    cost recovery mechanism for number portability costs in the *Third
    Report and Order,* which precludes assignment and recovery of number
    portability costs for intrastate ratemaking purposes, through the
    jurisdictional separations process.[^302]

89. Finally, we clarify that incumbent LECs will have five years to
    recover their implementation costs of number portability through an
    end-user charge, regardless of when they initiate the charge. Thus,
    for example, if an incumbent LEC began its recovery through an
    end-user charge on June 1, 1999, it would have 60 months from that
    date to recover its implementation costs of number portability. We
    will amend section 52.33(a)(1) of our rules to read: \"The monthly
    number-portability charge may take effect no earlier than February
    1, 1999, on a date the incumbent local exchange carrier selects, and
    may end no later than five years after *the incumbent local exchange
    carrier's monthly number-portability charge takes effect*."[^303]

#### Administration of the End-User Charge

##### Background

90. UTC and Florida assert that the Commission should require that LECs
    imposing the end-user charge apply a standardized label, such as
    \"Federal Number Portability Charge,\" because the myriad of new
    charges appearing on telecommunications bills has confused
    consumers.[^304] UTC states that while it has taken steps to educate
    its members on the new charges, this task is difficult in the
    absence of standard labels, and those UTC members that are customers
    of multiple LECs are faced with even greater complexity, as each LEC
    bill may contain a different description of the same type of
    charge.[^305] Florida requests the Commission implement public
    service announcements and require carriers to include bill inserts
    and explanations of new charges or services before they are
    introduced.[^306] Florida also asserts that the Commission should
    establish sufficient staffing to educate consumers about the number
    portability end-user charge.[^307]

##### Discussion

91. It appears that the issues raised by UTC and Florida regarding
    formats for telephone bills are identical to those raised in the
    *Truth-in-Billing NPRM* and decided on April 15, 1999 in the
    *Truth-in-Billing Order.*[^308] In the *Truth-in-Billing Order,* we
    adopted broad principles and guidelines to promote truth-in-billing
    rather than rigid, detailed rules that govern carrier billing
    practices. We determined that services included on the telephone
    bill must be accompanied by a brief, clear description of the
    services rendered.[^309] This description must convey enough
    information to enable a customer reasonably to identify and to
    understand the service for which the customer is being
    charged.[^310] We observed that the industry and consumer focus
    groups may be best equipped to develop standard service descriptions
    that are compatible with the character limitations for text messages
    and other operational restrictions found in the systems currently
    used for billing.[^311] In the *Truth-in-Billing* *Order,* we also
    noted that the failure of carriers to consistently label and
    accurately describe certain line item charges associated with
    federal regulatory action, such as the number portability end-user
    charge, has increased customer confusion about the nature of the
    charges.[^312] To address this problem, we adopted a guideline
    requiring carriers to use clear standardized labels on telephone
    bills to refer to line item charges related to federal regulatory
    action.[^313] In addition, we sought comment on whether to mandate
    specific standard labels for such charges.[^314] Although we
    declined to formulate standardized descriptions for services, such
    as the \"Federal Number Portability Charge\" suggested by UTC and
    Florida, we encouraged carriers and consumer groups to come together
    to develop uniform terminology and jointly submit proposals to the
    Commission.[^315] Because we are already considering whether to
    require specific standard labels for number portability service and
    other line items in another proceeding, we will not resolve that
    question here. Instead, we will again encourage the industry and
    consumer groups to develop uniform terminology to describe the
    number portability end-user charge on customer bills.

#### Levelization of the End-User Charge

##### Background

92. We held in the *Third Report and Order* that incumbent LECs must
    levelize their monthly number portability charge over five
    years.[^316] A levelized rate is one that is calculated to remain
    constant over a recovery period and is set at the level at which the
    discounted present value of the stream of payments is equal to the
    discounted present value of the stream of costs over the
    period.[^317] We require levelization of the monthly charge to
    protect consumers from varying rates.[^318] Incumbent LECs may
    collect less than the maximum allowable charge, or decline to
    collect the charge, from some or all of their customers as long as
    they do so in a reasonable and nondiscriminatory manner.[^319] We
    will not, however, allow incumbent LECs to offset lower charges for
    some customers by collecting higher charges in areas where no
    competitive carriers are present. We also stated that after a
    carrier establishes its levelized end-user charge in the tariff
    review process, we do not anticipate that it may raise the charge
    during the five-year period unless it can show that the end-user
    charge was not reasonable based on the information available at the
    time it was initially set.[^320]

93. USTA asserts that incumbent LECs in the top 100 MSAs must be able to
    adjust their monthly number portability charge up or down to fully
    recover costs during the five-year recovery period without making
    the showing required by the Commission.[^321] USTA asserts that
    demand for number portability can change, and customers can be lost,
    which makes it unlikely that an incumbent LEC\'s estimate of costs
    at the beginning of the five year recovery period will be the same
    as its actual costs throughout that period.[^322]

##### Discussion

94. We decline at this time to change the rule adopted in the *Third
    Report and Order* concerning levelized charges.[^323] USTA has
    presented no compelling reason to do so. We continue to recognize
    consumers\' sensitivity to end-user charges, as well as our stated
    goal of protecting consumers from varying rates.[^324] We note that
    we did not state in the *Third Report and Order* that carriers may
    never change their monthly end-user rates. Carriers may reduce their
    rates, provided they do so in a reasonable and nondiscriminatory
    manner.[^325] Also, we did not foreclose carriers from increasing
    their rates, but held that to do so, carriers must show that their
    end-user charges were not reasonable based on the information
    available at the time they were initially set. We continue to
    believe that requiring such a showing will best protect consumers
    from rate variances. Based on our goal of protecting consumers from
    rate shifts, we decline to grant USTA\'s request.

### Querying all Calls to an NXX

#### Background

95. In the *First Report and Order*, we concluded that \"there is no
    direct correlation between the number of queries made and the number
    of telephone numbers that have been forwarded because queries will
    be performed on all calls to a particular switch *once any single
    number has been transferred or 'ported'* from that switch."[^326] In
    the *Third Report and Order*, we concluded that \"long-term number
    portability requires N-1 carriers to incur query costs for all
    interswitch calls to an NXX once number portability is available for
    that NXX, whether or not the terminating customer has ported a
    number.\"[^327] We also stated that a carrier must query all
    interswitch calls to an NXX once number portability is \"available\"
    to determine whether the terminating customer has ported the
    telephone number.[^328]

96. In the *Cost Classification Order*, the Bureau directed the
    incumbent LECs, when filing their long-term number portability
    tariffs, to demonstrate whether their demand assumptions included
    performing queries for all calls in NXXs where no number had been
    ported and to explain why it is necessary to query calls in this
    situation.[^329]

97. USTA seeks clarification of the *Third Report and Order*, requesting
    that the Commission establish a specific procedure for opening an
    NXX code for portability.[^330] USTA asserts that the procedures
    followed by carriers in opening NXX codes for portability varies
    among carriers. The carriers may either begin charging for queries
    on the Bellcore (now Telcordia) Local Exchange Routing Guide (LERG)
    effective date (which is in advance of an initial port), or begin
    charging for queries upon notice of the first service port.[^331]
    USTA requests that the Commission establish a cost recovery
    mechanism for querying functions that provides no financial impact
    prior to implementation of \"true number portability\" and allows
    incumbent LECs with non-number portability capable switches to
    recover query costs only when legitimate queries are required.[^332]
    USTA further requests that the Commission clarify that an incumbent
    LEC will not be required to perform query functions unnecessarily
    and prematurely.[^333]

98. In addition to USTA's petition, Time Warner seeks reconsideration of
    the Bureau\'s order reconsidering the suspension[^334] of Sprint
    Local Telephone Companies\' (Sprint) long-term number portability
    tariffs on the ground that Sprint\'s tariffs indicate that Sprint
    intends to charge for long-term number portability default queries
    on calls to NXXs where no number has been ported.[^335]

#### Discussion

99. We note that the issue of queries for calls to NXXs where no number
    has been ported has been raised in the context of other number
    portability proceedings. Comcast Cellular Communications, Inc., in
    its petition for reconsideration of the Commission\'s *Query
    Services Order*,[^336] urged the Commission to address the issue of
    whether assessing default query charges on calls to non-ported NXXs
    is reasonable in regard to Bell Atlantic\'s interim query services
    tariff.[^337] In the course of the long-term number portability
    tariff investigations, the Bureau sought information from the
    carriers to enable the Bureau to resolve this issue.[^338] AT&T
    Communications and Time Warner filed comments regarding the tariffs
    filed by the incumbent LECs in response to the Bureau\'s *Cost
    Classification Order*, urging the Bureau to reject the tariffs of
    companies that impose default query charges on calls to NXXs with no
    ported numbers.[^339] In response, SBC argued that the issue of
    whether an incumbent LEC may query all calls to NXXs where a number
    has not been ported was resolved in the Commission\'s *Third Report
    and Order*, which requires carriers to query all interswitch calls
    to an NXX once number portability is available for that NXX in order
    to determine whether the terminating customer has ported a
    number.[^340]

100. In the *LNP Investigation Order*, we affirmed the Bureau\'s
     conclusion that querying all calls and charging carriers prior to
     the date that a number is ported in an NXX is premature and
     inconsistent with the *Third Report and Order* and *Cost
     Classification Order* requirement that customers may not be charged
     for number portability until they are able to receive the benefits
     of that service.[^341] This conclusion is based on the language in
     the *First Report and Order* wherein we stated that queries will be
     performed on all calls once any single number has been transferred
     or ported from that switch.[^342] This language contemplates that
     carriers will not perform queries until a number has been ported
     from an NXX. We further concluded that querying all calls and
     charging carriers prior to the date upon which a number is ported
     in an NXX is premature, unnecessary to prevent potential service
     disruption, and without value or purpose.[^343]

101. We find that Sprint is not authorized to charge for long-term
     number portability default queries on calls made to NXXs where no
     number has been ported. In response to the Commission's decision in
     the *LNP Investigation Order*, however, Sprint amended its number
     portability tariff to discontinue the practice of charging N-1
     carriers for long-term number portability default queries for calls
     to numbers in an NXX before a number has been ported from that NXX.
     Time Warner's petition for reconsideration is, therefore, moot and
     is denied.

# ORDER ON APPLICATION FOR REVIEW

## Operation Support Systems (OSS) Costs 

### Background

102. In the *Third Report and Order*, the Commission delegated authority
     to the Bureau to determine appropriate methods for apportioning
     joint costs among portability and non-portability services and to
     issue an order to provide guidance to carriers before they file
     their federal tariffs.[^344] Consistent with the *Third Report and
     Order*, the Bureau's *Cost Classification Order* specifically
     addressed issues related to the determination of costs eligible for
     cost recovery, the apportionment of costs between portability and
     non-portability services, and the apportionment between end-user
     charges and query service charges.[^345] In it, the Bureau
     reiterated the earlier conclusions of the *Third Report and Order*
     and, consistent with its mandates, adopted a two-part test for
     identification of carrier-specific costs directly related to number
     portability.[^346] Pursuant to the *Cost Classification Order*, a
     carrier must demonstrate that the costs that are eligible for cost
     recovery through the federal recovery mechanism: (1) would not have
     been incurred by the carriers \"but for\" the implementation of
     number portability; and (2) were incurred \"for the provision of\"
     number portability.[^347] The Bureau stated that this two-part test
     avoids overcompensation of LECs for their costs because LECs are
     already deemed to be recovering costs of general network upgrades
     through \"standard recovery mechanisms.\"[^348] Consistent with the
     *Third Report and Order*, the Bureau further held that LECs should
     not be allowed to recover such costs through both federal number
     portability charges and under price caps or rate-of-return
     regulation.[^349] The Bureau stated that it required LECs to
     distinguish clearly costs incurred for narrowly defined portability
     functions from costs incurred to adapt their systems to implement
     number portability, such as repair and maintenance, billing, or
     order processing systems.[^350]

103. Several carriers filed applications for review or clarification of
     the *Cost Classification Order*.[^351] Petitioners argue that the
     *Cost Classification Order* is too restrictive and prevents
     carriers from recovering all costs associated with the
     implementation of number portability.[^352] Specifically,
     petitioners argue that the two-part test set out in the *Cost
     Classification Order* exceeds the Bureau\'s delegated authority by
     excluding costs associated with OSS modifications that are the
     direct result of number portability by incorrectly classifying them
     as general network upgrades.[^353] Petitioners also assert that the
     *Cost Classification Order* requires incumbent LECs to recover
     number portability costs through access charges and other cost
     recovery mechanisms prohibited by the *Third Report and
     Order*.[^354] Petitioners challenge the Bureau\'s determination
     that the two-part test excludes recovery of some OSS costs
     associated with the implementation of long-term number
     portability.[^355]

### Discussion 

104. We disagree with those commenters who assert that the *Cost
     Classification Order* is overly restrictive and prevents carriers
     from recovering costs associated with the implementation of number
     portability.[^356] We agree with Ameritech that the Bureau set
     forth a reasonable methodology for the allocation of joint costs,
     and that this method is consistent with section 251(e)(2) of the
     Act and with the *Third Report and Order*.[^357] Additionally, we
     have previously approved the two-part cost classification test, as
     stated in the *LNP Investigation Order*[^358] and the *U S WEST LNP
     Investigation Order*.[^359] We also disagree with the assertion
     that carriers are not allowed to recover the costs of OSS
     modifications. As we stated in the *LNP Investigation Order*,
     \"\[t\]he *Cost Classification Order* does not exclude all costs
     for modifications to OSS, but instead excludes those costs incurred
     as \'an incidental consequence of number portability.\'\"[^360] As
     we stated in the *Third Report and Order*, the costs carriers incur
     as an incidental consequence of number portability are not costs
     directly related to providing number portability and are, thus,
     ordinary costs of doing business in this new environment.[^361]
     These costs may not be recovered through number portability
     charges. However, they may be recovered through price caps and
     rate-of-return recovery mechanisms.[^362]

105. We disagree with U S WEST\'s assertion that the Bureau requires
     incumbent LECs to recover network costs, including any network
     upgrade or OSS cost, through cost recovery mechanisms that the
     Commission has expressly forbidden, namely through access charges
     and through state recovery mechanisms.[^363] In the *LNP
     Investigation Order*, we held that general network upgrades are not
     eligible number portability costs because they are assumed to be
     recovered through ordinary price cap and rate-of-return
     mechanisms.[^364] We stated in the *Third Report and Order* that
     carrier-specific costs directly related to number portability may
     not be recovered through access charges.[^365] In the *Cost
     Classification Order*, the Bureau correctly interpreted the *Third
     Report and Order* when it stated that carriers may recover some
     general network upgrades through price caps and rate-of-return
     regulation, but could not also recover these costs through the
     number portability cost recovery mechanism, because this could lead
     to double recovery.[^366] Thus, the Bureau has not required
     incumbent LECs to recover carrier-specific costs directly related
     to number portability through forbidden cost recovery mechanisms,
     but has merely stated that general upgrade costs that are
     incidental to number portability that are not recovered through the
     number portability federal charges may be recovered elsewhere,
     through access charges and state cost recovery mechanisms.

106. We also disagree with those commenters who assert that the two-part
     cost allocation method constitutes an unconstitutional taking
     because carriers\' costs will not be recovered.[^367] U S WEST
     asserts that due to the Bureau\'s order, it must absorb
     approximately \$85 million in number portability costs, reflecting
     expenses for OSS changes, switch hardware and software upgrades,
     and signaling system expansion.[^368] We held in the *Third Report
     and Order* that incumbent LECs may recover their carrier-specific
     costs directly related to providing number portability through two
     federally tariffed charges,[^369] including that portion of a
     carrier\'s joint costs that is demonstrably an incremental cost
     incurred in the provision of number portability.[^370] We held that
     costs the carriers incur as an incidental consequence of number
     portability are not costs directly related to number
     portability.[^371] The Bureau correctly interpreted the *Third
     Report and Order* that the costs of general network upgrades are
     recoverable through \"standard recovery mechanisms\" under price
     caps or rate-of-return regulation.[^372] We also held in the *Third
     Report and Order* that carriers not subject to rate regulation may
     recover their carrier-specific costs directly related to providing
     number portability in any lawful manner consistent with their
     obligations under the Act.[^373] Because carriers will be allowed
     to recover their costs through federally tariffed charges, through
     standard recovery mechanisms, or in any lawful manner, we do not
     agree that carriers are required to incur costs for which no cost
     recovery is allowed.

107. Moreover, we disagree with those commenters who assert that the
     Bureau did not give full consideration to arguments that certain
     OSS modifications were necessary to ensure that there will be no
     impairment of \"quality, reliability, or convenience.\"[^374] We
     have previously considered and rejected this argument. In the *U S
     WEST LNP Investigation Order*, the Commission noted that it
     previously considered and rejected the argument that all costs
     allegedly incurred to prevent any degradation of service, however
     insignificant, are eligible number portability costs.[^375]
     Although the industry, the NANC, and the Commission all considered
     degradation of the quality of service when selecting the method
     used to implement number portability,[^376] in the *First Report
     and Order* we expressly stated that the implementation of any
     long-term cost recovery method should not *unreasonably* degrade
     existing service quality or network reliability.[^377] We affirm
     our earlier finding that this performance criterion is not
     authority for the proposition that all costs incidental to
     achieving that performance level are costs incurred for the
     provision of number portability.[^378] Thus, OSS modification costs
     are eligible for cost recovery only to the extent that they are
     directly related to providing number portability.[^379]

108. We disagree with Cincinnati Bell\'s assertion that the Bureau\'s
     cost allocation policy contradicts the Commission\'s previous
     statements that all number portability costs should be recoverable
     except to the degree the upgrade enhances other services.[^380] We
     affirm our earlier determination in the *LNP Investigation Order*
     and the *U S WEST LNP Investigation Order* that costs carriers
     incur as an incidental consequence of number portability are
     ordinary costs of doing business in this new environment and
     represent general network upgrades.[^381] Doing otherwise could
     overcompensate LECs who are already recovering costs of general
     network upgrades through \"standard recovery mechanisms.\"[^382]
     Such overcompensation would violate the provisions of the *Third
     Report and Order* that only those costs directly related to
     providing number portability are recoverable through federal number
     portability recovery mechanisms.[^383] We also affirm the Bureau\'s
     requirement that LECs must distinguish the costs of providing
     number portability itself, which are recoverable through the
     federal charges provided in the *Third Report and Order*, from
     general network upgrade costs recoverable through price caps and
     rate-of-return mechanisms in order to avoid possible
     double-recovery.[^384]

109. We are not persuaded by Ameritech\'s assertion that because we have
     imposed access to OSS as a condition of BOC long-distance entry
     under section 271, OSS is clearly necessary to number portability
     and all OSS costs must be recoverable.[^385] In the *LNP
     Investigation Order*, we clarified that number portability cost
     recovery issues were not considered in the context of Ameritech\'s
     application to provide interLATA services in Michigan.[^386] We
     further held that statements we made in that context do not
     establish a standard for the recovery of OSS costs, nor should they
     be relied upon by the incumbent LECs as guidance in determining the
     eligible portion of OSS costs to be allocated to number portability
     tariffs.[^387] In the *Third Report and Order,* we noted that
     section 251(e)(2) \"expressly and unconditionally grants the
     Commission authority to ensure that carriers bear the costs of
     providing number portability on a competitively neutral
     basis.\"[^388] We concluded that an exclusively federal recovery
     mechanism would enable us to satisfy most directly our competitive
     neutrality mandate, and allowed incumbent LECs to recover their
     costs pursuant to the requirements we set forth.[^389] We fail to
     see how the fourteen-point checklist for BOC long-distance entry
     under section 271 negates our authority under sections 251 or 271,
     or how it changes our determination that not all costs of network
     upgrades could be recovered through federal number portability
     tariffs. We therefore disagree with Ameritech\'s assertion and deny
     its request to recover all OSS upgrade costs necessary for number
     portability through federal number portability end-user or query
     charges.

110. We also disagree with U S WEST's statement that we should have used
     an alternative method for calculating eligible OSS costs, rather
     than the two-part \"but for\" test adopted by the Bureau.[^390] U S
     WEST asserts that the economically proper way to calculate the
     direct costs of number portability would have been to take the
     costs of network upgrades that would not have been deployed absent
     the number portability mandate, add the extra costs of accelerating
     the deployment of otherwise-planned upgrades solely to meet the
     Commission\'s timetable, and subtract the value of the incidental
     non-portability network benefits these upgrades cost.[^391] We
     believe that such a formula would be administratively difficult and
     does not conform to our previously-adopted formula. Specifically,
     we have not allowed LECs to add the extra costs of accelerating the
     deployment of otherwise-planned upgrades, because, as we stated in
     the *Third Report and Order*, upgrades that will enhance LECs\'
     services generally are not costs eligible for recovery through
     federal number portability tariffs.[^392] We also stated in the
     *LNP Investigation Order* that the two-part cost eligibility test
     avoids overcompensation of LECs for their costs because LECs are
     already deemed to be recovering costs of general network upgrades
     through standard recovery mechanisms.[^393] U S WEST has presented
     no compelling arguments to overturn the two-part formula adopted in
     the *Cost Classification Order*,[^394] and we therefore deny its
     request.

111. We further disagree with Cincinnati Bell\'s assertion that the
     Bureau\'s statement that number portability costs not directly
     related to the provision of number portability are to be treated as
     general network upgrades means that LECs will be competitively
     disadvantaged, and the cost recovery will not be competitively
     neutral.[^395] We stated in the *Third Report and Order* that costs
     not directly related to providing number portability are not costs
     of providing number portability that must be borne by all
     telecommunications carriers on a competitively neutral basis, as
     mandated by statute.[^396] Thus, costs that do not meet our
     two-part cost recovery formula are not subject to the competitive
     neutrality mandate. Additionally, as noted above, carriers cannot
     claim they are competitively disadvantaged because they are not
     allowed to recover their number portability costs, because they are
     allowed to recover such costs either through the number portability
     federal mechanism or through \"normal\" cost recovery mechanisms.

## 911 Costs 

### Background

112. Several carriers request that we clarify that incremental costs
     incurred to adapt and upgrade 911 equipment, facilities, databases
     and software are required for the provision of number portability,
     and thus all upgrade costs should be recoverable.[^397] Bell
     Atlantic asserts that its system that supports 911 service was
     modified to permit a carrier to update the 911 database for
     telephone numbers in NXXs assigned to another carrier and to enable
     911 personnel to direct database problems to the correct service
     provider.[^398] Bell Atlantic asserts that this work does not fit
     within the Bureau\'s narrow reading of the Commission\'s rules, but
     few customers would find porting satisfactory if they could not use
     911 or if that service were not reliable.[^399]

### Discussion

113. We recognize the significant public safety concerns involved with
     911 services. We, therefore, clarify that carriers will be allowed
     to treat and recover as number portability costs those costs to
     modify their 911 and E911 services and databases only to the extent
     that such OSS modifications to the 911 and E911 database provide
     updates of customer information or line and number information for
     ported numbers. In the *LNP Investigation Order,* we determined
     that the incumbent LECs may recover the costs of modifying E911
     systems because of public interest considerations.[^400] Because of
     the public safety concerns involved with 911 and E911 service, we
     made an exception to the cost recovery standards set out in the
     *Cost Classification Order* to allow certain types of OSS
     modifications to these systems.[^401] Thus, we allow these carriers
     to treat and recover as number portability costs those costs
     necessary to modify their 911 services and databases only to the
     extent that such costs were incurred to provide number
     portability.[^402] We stated, however, that modifications to OSS
     systems that relate to the LECs\' provision of 911 or E911 service
     as part of the local service or plain old telephone service the
     LECs provide their own customers are not eligible number
     portability costs and may not be recovered through end-user and
     query service charges. Other costs associated with 911 or E911
     modifications to the incumbent LECs' local service to its customers
     are general network upgrade costs recoverable through price caps
     and rate-of-return mechanisms.[^403]

## Joint Costs 

### Recovery of Advancement Costs 

#### Background

114. In the *Third Report and Order*, we determined that carriers could
     not recover the entire cost of an upgrade as a carrier-specific
     cost directly related to providing number portability just because
     some aspect of the upgrade relates to the provision of number
     portability.[^404] We determined that only the portion of a
     carrier\'s joint costs that is a demonstrably incremental cost
     incurred in the provision of long-term number portability is a
     carrier-specific cost directly related to the provision of
     long-term number portability.[^405] We allowed LECs to recover only
     the incremental costs of upgrades through the federal number
     portability recovery mechanism.

115. Advancement costs are primarily those costs arising from the cost
     of money or the time value of money that have been incurred for the
     deployment of upgrades or modifications to the network at an
     accelerated pace or earlier date than provided for in the LECs'
     original plans.[^406] Consistent with the *Third Report and Order*,
     the Bureau's *Cost Classification Order* stated that LECs may claim
     only the incremental portion of advancement costs directly related
     to the provision of number portability.[^407] Bell Atlantic seeks
     review of the *Cost Classification Order* on the grounds that all
     advancement costs associated with the costs of advancing purchase
     should be recovered through the federal number portability cost
     recovery mechanism.[^408] Bell Atlantic posits that the entire cost
     of advancing purchases is a direct cost of number portability,
     because the advanced cost was incurred specifically to provide
     number portability and would not have been incurred
     otherwise.[^409]

#### Discussion

116. We disagree with Bell Atlantic\'s contention that the entire cost
     of advancing purchases is a direct cost of number portability. We
     affirm the Bureau\'s interpretation that only the incremental
     portion of advancement costs that are directly related to the
     provision of number portability are eligible number portability
     costs.[^410] In the *Third Report and Order*, we specifically
     rejected requests that we classify the entire costs of an upgrade
     as a carrier-specific cost directly related to providing number
     portability just because some aspect of the upgrade related to the
     provision of number portability.[^411] In recognizing that carriers
     incur costs for software generics, switch hardware, and OSS,
     Signaling System 7 (SS7) or Advanced Intelligent Network (AIN)
     upgrades which provide a wide range of services and features, we
     stated that only a portion of these joint costs are
     carrier-specific costs directly related to providing number
     portability.[^412] We determined that all of a carrier\'s dedicated
     number portability costs, such as for number portability software
     and for service control points (SCPs) and signal transfer points
     (STPs) reserved exclusively for number portability would be subject
     to the competitive neutrality mandate of section 251(e)(2).[^413]
     We reasoned that apportioning costs in this way would further the
     goal of section 251(e)(2) by recognizing that providing number
     portability will cause some carriers, including small and rural
     LECs, to incur costs that they would not ordinarily have incurred
     in providing telecommunications services.[^414] At the same time,
     this approach recognizes that some upgrades will enhance carriers\'
     services generally and presumably provide additional revenues to
     offset those upgrade costs, and that at least some portion of such
     upgrade costs are not directly related to providing number
     portability.

117. We agree with the Bureau that these same principles apply to
     advancement costs. [^415] Even though the costs of planned upgrades
     may have been advanced by number portability requirements and LECs
     may not have deployed these upgrades early \"but for\" our
     portability implementation schedule, the associated upgrades
     provide general enhancements to the LECs' networks. We believe that
     allowing the recovery of advancement costs associated with general
     enhancements to the LECs' networks would violate the competitive
     neutrality mandate of section 251(e)(2) and may lead to double
     recovery of these costs. Moreover, we believe that advancement
     costs associated with upgrades that enhance a carrier\'s services
     generally and presumably produce additional revenues are costs
     incurred as an incidental consequence of number portability and are
     not costs directly related to providing number portability.[^416]
     Therefore, we affirm the Bureau\'s conclusion that only the
     advancement costs equaling the difference between the costs of the
     upgrade with the number portability function and its costs without
     that function may be claimed as eligible number portability
     costs.[^417]

# FINAL REGULATORY FLEXIBILTY CERTIFICATION

118. The Regulatory Flexibility Act of 1980, as amended (RFA),[^418]
     requires that a regulatory flexibility analysis be prepared for
     notice-and-comment rulemaking proceedings, unless the agency
     certifies that "the rule will not, if promulgated, have a
     significant economic impact on a substantial number of small
     entities."[^419] The RFA generally defines the term "small entity"
     as having the same meaning as the terms "small business," "small
     organization," and "small governmental jurisdiction."[^420] In
     addition, the term "small business" has the same meaning as the
     term "small business concern" under the Small Business Act.[^421] 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).[^422]

119. Section 251(b)(2) of the Act seeks to remove one barrier to
     competition by requiring all local exchange carriers (LECs) "to
     provide, to the extent technically feasible, number portability in
     accordance with requirements prescribed by the Commission." On May
     5, 1998, the Commission adopted the *Third Report and Order* in
     this docket, implementing section 251(e)(2) of the Act with regard
     to the costs of providing local number portability. In the *Third
     Report and Order*, the Commission concluded that incumbent LECs may
     recover their carrier-specific costs directly related to providing
     long-term number portability on a competitively neutral basis,
     through two federal charges: (1) a monthly number-portability
     charge applicable to end users; and (2) a number portability
     query-service charge, applicable to carriers on whose behalf the
     LEC performs queries. On December 14, 1998, pursuant to authority
     delegated to it in the *Third Report and Order*, the Bureau issued
     the *Cost Classification Order*, which specifically addressed
     issues related to the determination of costs eligible for cost
     recovery, the apportionment of costs between portability and
     non-portability services, and apportionment between end-user
     charges and query service charges.

120. This *Order* responds to three types of issues raised in petitions
     for reconsideration and clarification and applications for review.
     First, it clarifies numerous points made in the *Third Report and
     Order*.[^423] Second, it affirms several issues decided in the
     *Third Report and Order* and the *Cost Classification Order*.[^424]
     And third, it denies certain requests concerning cost
     recovery.[^425] No party filed comments or applications for
     reconsideration on the regulatory flexibility analysis contained in
     the *Third Report and Order*. In this *Order*, we have considered
     and addressed the comments of parties concerning recovery by
     non-LNP capable small and rural incumbent LECs of the costs of
     number portability query service and Local Number Portability
     Administration.

121. All clarifications contained in this item are of a minor,
     procedural nature except one clarification that will result in a
     positive net impact on small entities. Small and rural incumbent
     LECs that do not yet provide number portability functionality but
     do provide service under Extended Area Service arrangements may
     recover their N minus one query and Local Number Portability
     Administration costs through end-user charges. Because this will
     allow small and rural incumbent LECs to recover their costs, it
     will have a *de minimus* impact on the affected small entities.

122. Therefore, we certify that the requirements of the *Order* will not
     have a significant economic impact on a substantial number of small
     entities.

123. The Commission will send a copy of the *Order*, including a copy of
     this Final Regulatory Flexibility Certification, in a report to
     Congress pursuant to the Congressional Review Act.[^426] In
     addition, the *Order* and this final certification will be sent to
     the Chief Counsel for Advocacy of the SBA, and will be published in
     the Federal Register.[^427]

# paperwork reduction aNALYSIS

124. The action contained herein has been analyzed with respect to the
     Paperwork Reduction Act of 1995 and found to impose new or modified
     reporting and/or recordkeeping requirements or burdens on the
     public. Implementation of these new or modified reporting and/or
     recordkeeping requirements will be subject to approval by the
     Office of Management and Budget (OMB) as prescribed by the Act, and
     will go into effect upon announcement of OMB approval in the
     Federal Register.

# ORDERING CLAUSES 

125. Accordingly, IT IS ORDERED that, pursuant to 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, this Memorandum Opinion and
     Order on Reconsideration and Order on Application for Review
     ("Order") and the revisions to Part 52 of the Commission's rules,
     47 C.F.R. Part 52, are hereby ADOPTED. The requirements in this
     Order shall become effective 30 days after a publication of this
     Order or summary thereof in the Federal Register.

126. IT IS FURTHER ORDERED that, pursuant to 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, the Petitions for
     Reconsideration and/or Clarification and the Applications for
     Review ARE GRANTED to the extent indicated herein and otherwise ARE
     DENIED.

127. IT IS FURTHER ORDERED that Williams' Petition for Expedited Waiver
     and AMSC's Waiver Request are GRANTED, as discussed herein.

128. IT IS FURTHER ORDERED that NECA's Expedited Petition for Waiver is
     DENIED as discussed herein.

129. IT IS FURTHER ORDERED that the Commission's Consumer Information
     Bureau, Reference Information Center, SHALL SEND a copy of this
     Order, including the Final Regulatory Flexibility Certification, to
     the Chief Counsel for Advocacy of the Small Business
     Administration.

130. IT IS FURTHER ORDERED that the collection of information contained
     within this Order is contingent upon approval by the OMB. The
     Commission will publish a document at a later date announcing OMB
     approval.

     FEDERAL COMMUNICATIONS COMMISSION

     William F. Caton

Acting Secretary

**APPENDIX A: PARTIES TO THE PROCEEDING**

#########  {#section .unnumbered}

######### Petitions for Reconsideration and Clarification {#petitions-for-reconsideration-and-clarification .unnumbered}

Ameritech

Bell Atlantic

BellSouth Corporation

Comcast Cellular Communications, Inc.

Florida Public Service Commission

MCI Telecommunications Corporation

National Exchange Carrier Association, Inc.

National Telephone Cooperative Association

New York Department of Public Service

Oklahoma Rural Telephone Coalition

Pennsylvania Office of the Consumer Advocate

Personal Communications Industry Association

SBC Communications Inc.

Sprint Local Telephone Companies

Texas Statewide Telephone Cooperative, Inc.

U S WEST, Inc.

United States Telephone Association

WorldCom, Inc.

#########  {#section-1 .unnumbered}

######### Responses to and Comments on Petitions for Reconsideration and Clarification {#responses-to-and-comments-on-petitions-for-reconsideration-and-clarification .unnumbered}

AT&T Corp.

Bell Atlantic

BellSouth Corporation

Cincinnati Bell Telephone Company

Lockheed Martin IMS

Maine Public Utilities Commission

MCI Telecommunications Corporation

Organization for the Promotion and Advancement of Small
Telecommunications Companies

SBC Communications Inc.

Telephone Resellers Association

United States Telephone Association

UTC, the Telecommunications Association

Vanguard Cellular Systems, Inc.

#########   {#section-2 .unnumbered}

######### Reply Comments  {#reply-comments .unnumbered}

Ameritech

Bell Atlantic

BellSouth Corporation

Comcast Cellular Communications, Inc.

MCI Telecommunications Corporation

National Exchange Carrier Association, Inc.

National Telephone Cooperative Association

SBC Communications Inc.

Sprint Local Telephone Companies

US WEST Communications, Inc.

**Applications for Review and Petition for Clarification or Review of
Joint Cost Order**

Ameritech

Bell Atlantic

Cincinnati Bell Telephone Company

U S WEST Communications, Inc.

**Oppositions to Comments on Applications for Review and Petition for
Clarification or Review of Joint Cost Order**

AT&T Corp.

BellSouth Corporation

Independent Telephone & Telecommunications Alliance

United States Telephone Association

**Replies and Responses**

Bell Atlantic

Cincinnati Bell Telephone Company

SBC Communications Inc.

U S WEST Communications, Inc.

**APPENDIX B---FINAL RULES**

**PART 52 - NUMBERING**

1\. The authority for Part 52 continues to read as follows:

AUTHORITY: Secs 1, 2, 4, 5, 48 Stat. 1066, as amended; 47 U.S.C. § 151,
152, 154, 155 unless otherwise noted. Interpret or apply secs. 3, 4,
201-05, 207-09, 218, 225-7, 251-2, 271 and 332, 48 Stat. 1070, as
amended, 1077; 47 U.S.C. 153, 154, 201-05, 207-09, 218, 225-7, 251-2,
271 and 332 unless otherwise noted.

2\. Part 52, subpart C, section 52.33(a) of Title 47 of the Code of
Federal Regulations is amended to read as follows:

**§ 52.33 Recovery of carrier-specific costs directly related to
providing long-term number**

**portability**

> \(a\) Incumbent local exchange carriers may recover their
> carrier-specific costs directly related to providing long-term number
> portability by establishing in tariffs filed with the Federal
> Communications Commission a monthly number-portability charge, as
> specified in paragraph (a)(1), a number portability query-service
> charge, as specified in paragraph (a)(2), and a monthly
> number-portability query/administration charge, as specified in
> paragraph (a)(3).

( 1) The monthly number-portability charge may take effect no earlier
than February 1, 1999, on a date the incumbent local exchange carrier
selects, and may end no later than five years after the incumbent local
exchange carrier's monthly number-portability charge takes effect.

\(i\) \* \* \*

\(ii\) An incumbent local exchange carrier may assess on carriers that
purchase the incumbent local exchange carrier's switching ports as
unbundled network elements under section 251 of the Communications Act,
and/or Feature Group A access lines, and resellers of the incumbent
local exchange carrier's local service, the same charges as described in
paragraph (a)(1)(i) of this section, as if the incumbent local exchange
carrier were serving those carriers' end users.

\(iii\) \* \* \*

\(iv\) \* \* \*

\(2\) \* \* \*

\(3\) An incumbent local exchange carrier serving an area outside the
100 largest metropolitan statistical areas that is not
number-portability capable but that participates in an extended area
service calling plan with any one of the 100 largest metropolitan
statistical areas or with an adjacent number portability-capable local
exchange carrier may assess each end user it serves one monthly
number-portability query/administration charge per line to recover the
costs of queries, as specified in paragraph (a)(2), and carrier-specific
costs directly related to the carrier's allocated share of the regional
local number portability administrator's costs, except that per-line
monthly number-portability query/administration charges shall be
assigned as specified in paragraph (a)(1) with respect to monthly
number-portability charges.

\(i\) Such incumbent local exchange carriers may assess a separate
monthly number-portability charge as specified in paragraph (a)(1) but
such charge may recover only the costs incurred to implement number
portability functionality and shall not include costs recovered through
the monthly number-portability query/administration charge.

\(ii\) The monthly number-portability query/administration charge may
end no later than five years after the incumbent local exchange
carrier's monthly number-portability query/administration charge takes
effect. The monthly number-portability query/administration charge may
be collected over a different five-year period than the monthly
number-portability charge. These five-year periods may run either
consecutively or concurrently, in whole or in part.

\* \* \* \*

SEPARATE STATEMENT OF

COMMISSIONER MICHAEL J. COPPS,

APPROVING IN PART, DISSENTING IN PART

*Re:* *Telephone Number Portability (CC Docket No. 95-116)*

I dissent from the part of this Order that authorizes a new monthly
number portability charge on certain customers' bills for a service
those customers are not even able to obtain. In the Telecommunications
Act of 1996, Congress recognized that the inability of customers to
retain their telephone number when they switch service providers would
impede the development of competition. Congress therefore imposed a
number portability obligation on local exchange carriers.

To implement this directive of the 1996 Act, the Commission in previous
orders required carriers that received a request from another carrier to
upgrade their networks to provide number portability. For those carriers
that receive such a request, the Commission allowed, but did not
require, carriers to recover from their customers the costs of upgrading
their networks. Importantly, however, the Commission prohibited carriers
from charging customers until local number portability was actually
available to those customers. As a result, carriers could only assess a
monthly charge on customers that receive the direct benefits of number
portability. Moreover, the Commission determined that carriers could
only assess the charge for five years, and that any ongoing costs would
have to be recovered from other existing mechanisms.

In today's Order, the Commission foregoes that approach, and allows
carriers that have not upgraded their networks to assess a monthly
charge for ongoing costs. Customers of these carriers may therefore have
to pay a monthly fee, but will not be able to retain their phone number
if they switch providers. Even more of a problem, this fee will have a
disproportionate impact on consumers served by smaller, more rural
carriers, and could result in charges estimated as high as \$1.00 per
month for some customers.

Certainly carriers are entitled to recover the legitimate costs of
implementing number portability. But customers should be receiving the
real and direct benefits of number portability before they are forced to
pay a monthly fee. I do not believe that today's Order appropriately
balances these concerns. I would have followed the previous Commission's
decision and not allowed carriers to impose a new line-item until their
customers receive the benefits of the service. Indeed, just last month,
this Commission determined that the costs of implementing number
conservation measures should be recovered from other existing
mechanisms, and not from a new line-item on customers' bills. I see no
reason to adopt a different approach here. Consumers should be rightly
dissatisfied when they are asked to pay for services that are not
available to them.

[^1]: *Telephone Number Portability*, Third Report and Order, CC Docket
    No. 95-116, 13 FCC Rcd 11701 (1998) (*Third Report and Order*).

[^2]: *Id*. at 11707, para. 9.

[^3]: A list of petitioners and commenting parties appears at Appendix
    A.

[^4]: We note that the Eighth Circuit has ruled that, while TELRIC is an
    acceptable method for determining costs, certain specific rules
    contained within the Commission's pricing rules are contrary to
    congressional intent. *Iowa Utils. Bd. v. FCC*, 219 F.3d 744, 749-53
    (8^th^ Cir. 2000), *cert. granted sub nom., Verizon Communications
    v. FCC*, 531 U.S. 1124 (2001). The Eighth Circuit has stayed the
    issuance of its mandate, *Iowa Utils Bd. v. FCC*, No. 96-3321, *et
    al.* (8^th^ Cir. Sept. 25, 2000), pending appeal before the Supreme
    Court, which has granted certiorari in the case. *Verizon
    Communications v. FCC*, 531 U.S. 1124 (2001). Accordingly, the
    Commission's rules continue in effect at this time.

[^5]: In *Iowa Utilities Bd. v. FCC*, *see* n. 4, *supra*, the Eighth
    Circuit concluded that section 252(d)(3) of the Communications Act
    requires costs that are actually avoided, not those costs that could
    be avoided, be excluded from wholesale rates offered to resellers.
    *Iowa Utilities Bd. v. FCC*, 219 F.3d at 755.

[^6]: Section 251(e)(2) of the Act 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.\" 47 U.S.C. § 251(e)(2).

[^7]: *Third Report and Order*, 13 FCC Rcd at 11740, para. 75.

[^8]: *Telephone Number Portability Cost Classification Proceeding*, CC
    Docket No. 95-116, Memorandum Opinion and Order, 13 FCC Rcd 24495
    (CCB 1998) (*Cost Classification Order*).

[^9]: *See Cost Classification Order*, 13 FCC Rcd at 24498, para. 5.

[^10]: *Third Report and Order*, 13 FCC Rcd at 11723-24, para. 36.
    Section 251(e)(2) requires that the costs of establishing number
    portability be "borne by all telecommunications carriers on a
    competitively neutral basis." 47 U.S.C. § 251(e)(2). Section
    251(b)(2) requires all LECs \"to provide, to the extent technically
    feasible, number portability in accordance with requirements
    prescribed by the Commission.\" 47 U.S.C. § 251(b)(2).

[^11]: Number portability is deployed through a system of multiple
    regional databases. The regional databases will facilitate the
    provision of number portability by providing carriers with the
    number portability routing information that is necessary to route
    telephone calls between the carriers\' networks. Each database
    serves an area that corresponds to one of the original regional Bell
    Operating Company service territories. *See Telephone Number
    Portability,* CC Docket No. 95-116, First Report and Order and
    Further Notice of Proposed Rulemaking, 11 FCC Rcd 8352, 8399-8400,
    paras. 91-92 (1996) (*First Report and Order*).

[^12]: *Third Report and Order*, 13 FCC Rcd at 11725, para. 38. Under
    the N-1 querying protocol, the N-1 carrier is the carrier
    responsible for the query to the carrier\'s or a third party\'s
    service control point. The query is a call made to determine the
    address or location routing number (LRN) for the call. \"N\" is the
    entity terminating the call to the end-user, or a network provider
    with whom the entity has contracted to provide tandem access. The
    N-1 carrier for a local call will usually be the calling customer\'s
    LEC and the N-1 carrier for an interexchange call will usually be
    the calling customer\'s interexchange carrier. Carriers may arrange
    for another carrier or third party to perform query services for
    them as long as that entity charges the N-1 carrier in accordance
    with the requirements established in this proceeding. If a call is
    not queried by the N-1 carrier, the call might be routed by default
    to the LEC that originally served the telephone number, who will
    perform the default query for the N-1 carrier. The N-1 protocol was
    recommended by the North American Numbering Council (NANC), the
    industry and the state/regional workshops regarding the technical
    and operational standards for long term number portability and was
    adopted by the Commission in the *Second Report and Order*. *See
    Telephone Number Portability*, CC Docket No. 95-116, Second Report
    and Order, 12 FCC Rcd 12281, 12287, para. 8, 12323-24, paras. 73-75
    (1997) (*Second Report and Order*).

[^13]: *Third Report and Order*, 13 FCC Rcd at 11725-26, para. 39.

[^14]: *Id*. at 11724, para. 37. On December 14, 1998, the Common
    Carrier Bureau issued an order providing guidance for carriers on:
    (1) the costs that are eligible for recovery through federal number
    portability charges; (2) the appropriate methodologies for measuring
    costs eligible for LNP recovery; and (3) the allocation of eligible
    costs between end user and query services charges. *Cost
    Classification Order*, 13 FCC Rcd 24495. The *Third Report and
    Order* delegated authority to the Common Carrier Bureau for this
    purpose. *Id*. at 11740, para. 75.

[^15]: *Id*. at 11731-32, 11754-56, paras. 52-53, 105-107. Our
    competitive neutrality rules require that the cost of number
    portability borne by each carrier does not affect significantly any
    carrier\'s ability to compete with other carriers for customers in
    the marketplace. Under our two-part test to determine whether this
    requirement is met, the way carriers bear the costs of number
    portability: (1) must not give one service provider an appreciable,
    incremental cost advantage over another service provider when
    competing for a specific subscriber, and (2) must not disparately
    affect the ability of competing service providers to earn a normal
    return. *See First Report and Order*, 11 FCC Rcd. at 8419-21, paras.
    131-135.

[^16]: *Third Report and Order*, 13 FCC Rcd at 11738-39, para. 69.

[^17]: *Id.* at 11773-76, paras. 135-141.

[^18]: *Id.* at 11776, para. 142. *See* 47 C.F.R. §§ 52.33(a), (a)(1).

[^19]: *Third Report and Order*, 13 FCC Rcd at 11778, para. 147. *See*
    47 C.F.R. §§ 52.33(a), (a)(2).

[^20]: *Third Report and Order*, 13 FCC Rcd at 11774, para. 136.

[^21]: *Cost Classification Order*, 13 FCC Rcd at 24500, para. 10.

[^22]: *Id*.

[^23]: *Id*. at para. 11.

[^24]: *Id.* at 24503, para. 18.

[^25]: *Id.*

[^26]: *See id*. at 24501, para. 12.

[^27]: *See* 47 U.S.C. § 251(e)(2).

[^28]: *See Third Report and Order,* 13 FCC Rcd at 11719-20, para. 28.

[^29]: *See id*. at 11720, para. 29; s*ee also* *First Report and
    Order*, 11 FCC Rcd at 8415-24, paras. 121-40.

[^30]: *See* New York DPS Petition at 2-6; Pennsylvania Office of the
    Consumer Advocate Petition at 3.

[^31]: *See* New York DPS Petition at 2-6; Pennsylvania Office of the
    Consumer Advocate Petition at 3.

[^32]: AT&T Opposition at 2; BellSouth Comments at 7-8; MCI\'s Response
    at 13; SBC Comments at 4-5.

[^33]: *Third Report and Order*, 13 FCC Rcd at 11719-20, paras. 28-29.

[^34]: *AT&T Corp. v. Iowa Utilities Board*, 525 U.S. 366, 378 (1999).

[^35]: *See* New York DPS Petition at 7.

[^36]: *Third Report and Order*, 13 FCC Rcd at 11725, para 39.

[^37]: *First Report and Order*, 11 FCC Rcd at 8460, para. 209.

[^38]: *Third Report and Order*, 13 FCC Rcd at 11725, para 39.

[^39]: *Id.*

[^40]: *Id.* The Commission noted, as an example, that an incumbent LEC
    could redistribute its number portability costs to other carriers by
    seeking to recover them in increased access charges to IXCs.

[^41]: *See* 47 U.S.C. § 152(b).

[^42]: *See* New York DPS Petition at 2-6.

[^43]: *AT&T Corp. v. Iowa Utilities Board*, 525 U.S. 366.

[^44]: *Id.* at 379-80. Title 47 U.S.C. § 152(b) states, in relevant
    part, that \"Except as provided in sections 223 through 227,
    inclusive, and section 332, and subject to the provisions of section
    301 and title VI, nothing in this Act shall be construed to apply or
    to give the Commission jurisdiction . . . .\" 47 U.S.C. § 152(b).

[^45]: *AT&T Corp. v. Iowa Utilities Board*, 525 U.S. at 380.

[^46]: *Id.* at 378.

[^47]: *See* Ameritech Petition at 12; U S WEST Reply at 4.

[^48]: *See Telephone Number Portability*, CC Docket No. 95-116, Fourth
    Memorandum Opinion and Order on Reconsideration, FCC 99-151 (rel.
    July 16, 1999) (*Fourth Reconsideration Order*).

[^49]: *Fourth Reconsideration Order* at para. 29.

[^50]: *Id.*

[^51]: *See Second Report and Order*, 12 FCC Rcd at 12323, para. 73.

[^52]: ORTC and TSTCI Joint Petition at 8-9.

[^53]: *Id.* at 11.

[^54]: *Id*. at 8-9.

[^55]: *Third Report and Order*, 13 FCC Rcd at 11720, para. 29; *see
    also First Report and Order*, 11 FCC Rcd at 8415-24, paras. 121-40.

[^56]: ORTC and TSTCI Joint Petition at 8-9.

[^57]: *See* North American Numbering Council, Local Number Portability
    Administration Selection Working Group Report App. D (Architecture &
    Administrative Plan for Local Number Portability) (Apr. 25, 1997)
    (NANC Recommendation), *adopted*, *Second Report and Order,* 12 FCC
    Rcd at 12323, para.73.

[^58]: ORTC and TSTCI Joint Petition at 9.

[^59]: *Id.* at 11.

[^60]: *Second Report and Order,* 12 FCC Rcd at 12323, para. 73.

[^61]: *Third Report and Order*, 13 FCC Rcd at 11711, para. 15; *see
    also* NANC Recommendation at 8.

[^62]: *Third Report and Order*, 13 FCC Rcd at 11711, para.15.

[^63]: In the *Second Report and Order*, the Commission adopted the
    NANC\'s recommendation that it provide general oversight of number
    portability administration on an ongoing basis. Specifically, the
    Commission established a procedure whereby parties may bring matters
    regarding number portability administration to the NANC so that it
    may recommend a resolution of those matters to the Commission.
    *Second Report and Order*, 12 FCC Rcd at 12351, para. 128.

[^64]: 47 C.F.R. § 52.26.

[^65]: *Third Report and Order*, 13 FCC Rcd at 11761, para. 116.

[^66]: *Id.*

[^67]: *Id.* at para. 117.

[^68]: *Id.*

[^69]: *Id.*

[^70]: *See id.* at 11709-10, para. 13. We note that on November 17,
    1999 the Commission approved the transfer of Lockheed Martin IMS's
    NANPA functions to NeuStar. *See Request of Lockheed Martin
    Corporation and Warburg, Pincus & Co. for Review of the Transfer of
    Lockheed Martin Communications Industry Services Business*, CC
    Docket No. 92-237, Order, 14 FCC Rcd 19792 (1999).

[^71]:  ^?^ *See, e.g*., WorldCom Petition at 7; *see also* AT&T Corp.
    Opposition at 15-16. We note that WorldCom and MCI merged after the
    filing of the pleadings in this proceeding.

[^72]: Lockheed Martin IMS Comments at 2.

[^73]: *Id.* at 3.

[^74]: WorldCom Petition at 7; *see also* AT&T Corp. Opposition at
    15-16.

[^75]: WorldCom Petition at 7.

[^76]: *Third Report and Order*, 13 FCC Rcd at 11759-61, paras. 113-117.

[^77]: WorldCom Petition at 6.

[^78]: AT&T Corp. Opposition at 15-16.

[^79]: WorldCom Petition at 7.

[^80]: *See id.*

[^81]: *Second Report and Order*, 12 FCC Rcd at 12345, para. 114. We
    note that such oversight is to continue only until the Commission
    concludes further proceedings to examine the issue of local number
    portability administrator oversight and management. *Id*. at
    12346-47, para. 119; *see also* 47 C.F.R. § 52.26(b)(2).

[^82]: *Second Report and Order*, 12 FCC Rcd at 12352-53, para. 130.

[^83]: Vanguard Opposition at 5-7.

[^84]: *Id.* at 6-7.

[^85]: MCI Reply at 7-8.

[^86]: *Id.*

[^87]: *Third Report and Order*, 13 FCC Rcd at 11745, para. 87.

[^88]: *Id.* at 11773-74, para. 135.

[^89]: *See Cost Classification Order*, 13 FCC Rcd at 24511, para. 40.

[^90]: *See id.*

[^91]: 47 U.S.C. § 204.

[^92]: *Id*. at § 208.

[^93]: WorldCom Petition at 10.

[^94]: *Third Report and Order*, 13 FCC Rcd at 11725, para. 38.

[^95]: *Id.* at 11759-61, paras. 113-117.

[^96]: *Id.* at 11745, para. 87.

[^97]: *Cost Classification Order*, 13 FCC Rcd at 24500, para. 10.

[^98]: WorldCom Petition at 10.

[^99]: *First Report and Order*, 11 FCC Rcd at 8378, para. 48.

[^100]: *Id.* at 8382, para. 55.

[^101]: *Third Report and Order,* 13 FCC Rcd at 11738-11739, para. 69.

[^102]: *See* WorldCom Petition at 10.

[^103]: *Third Report and Order*, 13 FCC Rcd at 11763-64, para. 121.

[^104]: PCIA Petition at 3-5; *see also* UTC Comments at 5.

[^105]: AT&T Opposition at 14-15.

[^106]: Lockheed Martin IMS Comments at 4.

[^107]: *Id.*

[^108]: *Id.*

[^109]: AT&T Opposition at 14-15.

[^110]: *Second Report and Order*, 12 FCC Rcd at 12345, para. 114.

[^111]: ^?^ *Third Report and Order*, 13 FCC Rcd at 11754-55 and 11759,
    paras. 105 and 113.

[^112]: *Id.* at 11755-56, paras. 106-07.

[^113]: MCI Petition at 3.

[^114]: *Id.* at 1-6.

[^115]: 47 U.S.C. § 251(e)(2).

[^116]: *Third Report and Order*, 13 FCC Rcd at 11755-56, paras.
    106-107.

[^117]: *Id.* at 11755, para. 106.

[^118]: The Commission provided the following example as explanation: if
    one of two LECs wins a third LEC\'s subscriber, whichever of the two
    LECs who wins the subscriber will win the end-user revenue that
    subscriber generates. This will increase the winning LEC's allocated
    portion of the shared costs. Because the subscriber is likely to use
    approximately the same amount of local service regardless of which
    of the two competing LECs provides service to the subscriber, the
    incremental shared cost one of the two LECs would experience if it
    had won the subscriber would be about the same as the incremental
    shared cost the other would experience if it won the subscriber.
    This increase would also approximately equal the decrease in the
    shared costs the third carrier would experience, having lost the
    subscriber. These amounts may not be exactly the same because each
    of the three carriers may have different rates and may not collect
    exactly the same revenue from that subscriber. The Commission
    reasoned that any difference would not be significant enough to
    create an appreciable, incremental cost disadvantage. *Id*.

[^119]: *Id*. at 11755-56, para. 107.

[^120]: *Id*.

[^121]: *Id*.

[^122]: MCI Petition at 4.

[^123]: 47 U.S.C. § 251(e)(2).

[^124]: *Third Report and Order*, 13 FCC at 11755, para. 106.

[^125]: *Id.* at 11765, para. 107.

[^126]: *Id*. Since that time, we have modified our rules for
    contributions to the Telecommunications Relay Services (TRS) and
    North American Numbering Plan (NANP) so that the contributions are
    now based on end-user telecommunications revenues. *See* *1998
    Biennial Regulatory Review \-- Streamlined Contributor Reporting
    Requirements Associated with Administration of Telecommunications
    Relay Services, North American Numbering Plan, Local Number
    Portability, and Universal Service Support Mechanisms*, CC Docket
    No. 98-171, Report and Order, 14 FCC Rcd 16602, 16630-35, paras.
    59‑70 (1999) (*Streamlined Contributor Reporting Requirements
    Order*).

[^127]: Bell Atlantic Response at 3-4.

[^128]: One of the goals of the *Streamlined Contribution Reporting
    Requirement Order* is to reduce carriers\' and service providers\'
    burdens by combining the reporting requirements of the TRS Fund,
    federal universal support mechanisms, NANP, and local number
    portability administration into one consolidated form, the
    Telecommunications Reporting Worksheet. *See Streamlined Contributor
    Reporting Requirements Order,* 14 FCC Rcd at 16603, para. 1.

[^129]: *Third Report and Order*, 13 FCC Rcd at 11761, para. 116.

[^130]: *Id.* *See* 47 C.F.R. § 52.32(a)(2). We note that NeuStar, the
    database administrator for all seven regions, requested this
    information from all telecommunications carriers through FCC Form
    487, the LNP 1998 Worksheet. FCC Form 499-A replaced FCC Form 487 in
    July 1999 and is now used to collect this information. *See
    Streamlined Contributor Reporting Requirements Order*, 14 FCC Rcd
    16602.

[^131]: WorldCom Petition at 8-9; MCI Petition at 8-9; MCI Reply at 2
    n.4.

[^132]: WorldCom Petition at 8.

[^133]: MCI Petition at 8-9*;* MCI Reply at 2 n.4.

[^134]: Lockheed Comments at 2-3, 5. NeuStar also notes that each local
    number portability region has an established limited liability
    company (LLC), which has existing contracts with the LNPA to provide
    local number portability database services. *Id*. at 1 n.2.

[^135]: *Id*. at 2-3.

[^136]: *See* Williams Communications Petition for Expedited Waiver
    (filed Mar. 29, 1999) (Williams Petition) and AMSC Subsidiary
    Corporation Waiver Request (filed Apr. 13, 1999) (AMSC Waiver).

[^137]: *See* WorldCom Petition at 8.

[^138]: *See* MCI Petition at 8-9.

[^139]: *See Local Competition and Broadband Reporting*, CC Docket No.
    99-301, Report and Order, 15 FCC Rcd 7717, 7745, 7757, paras. 52, 85
    (2000).

[^140]: *See* AMSC Waiver at 1. AMSC requests waiver of section 52.32 on
    the ground that it operates a mobile satellite service system that
    provides two-way mobile voice and data through out the United States
    using five slightly overlapping beams. AMSC states that when a
    customer is using one of its mobile terminals, AMSC cannot identify
    which of the five beams the customer is using. Moreover, as beams
    cover thousands of square miles, AMSC argues that there is no simple
    or precise way to divide its traffic and end-user revenue between
    the regions identified in the LNP worksheet. ANSC requests that the
    Commission allow it to divide its end-user revenue on FCC Form 499-A
    equally between the LNP regions.

[^141]: *See* Williams Petition at 2. Williams seeks waiver of section
    52.32 on the grounds that it derives a substantial portion of its
    revenue from services that are provided to large business customers
    in two or more regions, and that it is not able to assign revenue
    from many of its customers to a single region. Williams requests
    that the Commission allow it to report its revenue derived from
    services rendered in or between two or more regions, based on a
    good-faith estimate as to which portions of those revenues are
    derived from each of the seven regions.

[^142]: *See Telephone Number Portability,* CC Docket No. 95-116, First
    Memorandum Opinion and Order on Reconsideration*,* 12 FCC Rcd 7236,
    7266, 7298, paras. 48, 107 (1997) (*First Reconsideration Order*).

[^143]: *Third Report and Order*, 13 FCC Rcd at 11773-74, para. 135.

[^144]: *Id.* at 11776, para. 142.

[^145]: *Id.* at 11776, para. 143.

[^146]: *Id*.

[^147]: *See* NECA Petition at 1-4; NTCA Petition at 3; ORTC and TSTCI
    Petition at 3-4; *see also* Petition for Expedited Interim Waiver (
    filed March 19, 1999) (NECA Waiver) (NECA, NRTA, NTCA, OPATSCO, and
    USTA are parties to the interim waiver request).

[^148]: *See* NECA Petition at 1-4; NTCA Petition at 3; ORTC and TSTCI
    Petition at 3-4; *Third Report and Order*, 13 FCC Rcd at 11776,
    para. 143.

[^149]: NECA Petition at 5; NTCA Petition at 5; ORTC and TSTCI Joint
    Petition at 4.

[^150]: *See* NECA Petition at 5; NTCA Petition at 5; ORTC and TSTCI
    Joint Petition at 4.

[^151]: USTA Petition at 5; NECA Petition at 4-5; NTCA Petition at 5;
    ORTC and TSTCI Joint Petition at 4; NECA Reply at 3, 5.

[^152]: USTA Petition at 5-6.

[^153]: NECA Petition at 3-4; NTCA Petition at 5-6.

[^154]: NTCA Reply at 3.

[^155]: Shared costs are costs incurred by the industry as a whole, such
    as those incurred by the third-party administrator to build, operate
    and maintain the databases needed to provide number portability.
    *See Third Report and Order,* 13 FCC Rcd at 11738-39, para. 69.

[^156]: *See Third Report and Order*, 13 FCC Rcd at 11759, para. 113
    (quoting 47 U.S.C. § 251(e)(2)).

[^157]: *Id.* at 11745, para. 87.

[^158]: *Id.* at 11754, para. 105.

[^159]: NTCA Petition at 4.

[^160]: NTCA points out that \"\[u\]nder the current cost-recovery
    rules, the small and rural LECs are forced to either: (1) upgrade
    their systems and assess charges on their end-users; or (2)
    contribute to the costs of the regional database with no method of
    cost-recovery\" and no provisions made for compensating affected
    carriers. *Id*.

[^161]: *See, e.g.*, NECA Waiver at 3-4; ORTC and TSTCI Joint Petition
    at 2-3. NECA suggests that those customers may be faced with
    substantial local rate increases as a result of other, unrelated
    Commission decisions in the areas of access reform, separations
    reform and universal service. NECA Petition at 4 n.10.

[^162]: NECA Petition at 5, 9; ORTC and TSTCI Joint Petition at 4; USTA
    Petition at 5-6.

[^163]: NECA Waiver at 4.

[^164]: AT&T Opposition at 13-14; MCI Response at 7-8.

[^165]: AT&T Opposition at 13 n.31.

[^166]: MCI Response at 7-8.

[^167]: *See* NECA Petition at 5; ORTC and TSTCI Joint Petition at 4.

[^168]: NECA Petition at 5.

[^169]: *Id.* at n.11.

[^170]: *Cost Classification Order*, 13 FCC Rcd at 24511, paras. 40, 41
    (Allocation of joint costs should be based on the capacity set aside
    to handle default, prearranged, and database queries).

[^171]: *Third Report and Order*, 13 FCC Rcd at 11773, para. 135; *Cost
    Classification Order*, 13 FCC Rcd at 24498-99, para. 6.

[^172]: *Third Report and Order,* 13 FCC Rcd at 11773, para. 135.

[^173]: *Id*. at 11725-26, 11773, paras. 39, 135. *Cf.* NECA *Ex Parte*
    Letter from Regina McNeil, NECA Senior Attorney, to Magalie Roman
    Salas, Secretary, FCC (filed Mar. 24, 2000) at 4; NECA Waiver at 4.

[^174]: *Third Report and Order* at 11776, paras. 142-143.

[^175]: *Id*. at 11731-32, para. 53.

[^176]: *Id*. at 11731-32, 11774, paras. 53, 136.

[^177]: NECA Petition at 4 n. 8.

[^178]: *Id.*

[^179]: *Third Report and Order*, 13 FCC Rcd at 11779, para. 149.

[^180]: *See id*., 13 FCC Rcd at 11774, para. 137.

[^181]: This depends on when a carrier that participates in an EAS
    calling arrangement begins to equip its network with number
    portability functionality.

[^182]: *Third Report and Order*, 13 FCC Rcd at 11778, para. 146.

[^183]: *Id*.

[^184]: *Id*.

[^185]: MCI Petition at 6-7.

[^186]: *Id*. at 6.

[^187]: Comcast Petition at 2-6.

[^188]: PCIA Petition at 5-7.

[^189]: PCIA Petition at 6-7.

[^190]: *See generally Third Report and Order*, 13 FCC Rcd at 11731-32,
    11738-41, 11773-79, paras. 53, 68-77, 135-47.

[^191]: *See* 47 C.F.R. §§ 51.501-09. Although the U.S. Court of Appeals
    for the Eighth Circuit stayed the Commission's pricing rules in
    1996, *Iowa Utils Bd. v. FCC*, 120 F.3d 753, 800, 804, 805-06 (8^th^
    Cir. 1997), the Supreme Court restored the Commission's pricing
    authority and remanded to the Eighth Circuit for consideration of
    the challenged rules. *AT&T v. Iowa Utils. Bd.*, 525 U.S. 366, 385
    (1999). On remand from the Supreme Court, the Eighth Circuit
    concluded that while TELRIC is an acceptable method for determining
    costs, certain specific rules contained within the Commission's
    pricing rules were contrary to congressional intent. *Iowa Utils.
    Bd. v. FCC*, 219 F.3d 744 (8^th^ Cir. 2000), *cert. granted sub
    nom., Verizon Communications v. FCC*, 531 U.S. 1124 (2001). The
    Eighth Circuit has stayed the issuance of its mandate, *Iowa Utils
    Bd. v. FCC*, No. 96-3321, *et al.* (8^th^ Cir. Sept. 25, 2000),
    pending appeal before the Supreme Court, which has granted
    certiorari in the case. *Verizon Communications v. FCC*, 531 U.S.
    1124 (2001). Accordingly, the Commission's rules continue in effect
    at this time.

[^192]: In *Iowa Utilities Bd. v. FCC*, *see* n.191, *supra***,** the
    Eighth Circuit concluded that section 252(d)(3) of the
    Communications Act requires costs that are actually avoided, not
    those costs that could be avoided, be excluded from wholesale rates
    offered to resellers. *Iowa Utilities Bd. v. FCC*, 219 F.3d at 755.

[^193]: *Id.*, 13 FCC Rcd at 11778, para. 146.

[^194]: *Id*. at 11778, para. 146.

[^195]: *Id.* The unregulated reseller and purchaser of the unbundled
    switch port can, in turn, recover in any lawful manner the charges
    the incumbent assesses on them.

[^196]: *See Third Report and Order*, 13 FCC Rcd at 11777, para. 144.
    This cost recovery method limits the ability of carriers to impose
    costs on other carriers. Indeed, a cost structure for LNP may not be
    competitively neutral if it permits a carrier to shift a
    disproportionate share of costs onto another carrier. *See* para.
    11, *supra*.

[^197]: Comcast Petition at 3.

[^198]: ^ ?^ *Third Report and Order*, 13 FCC Rcd at 11778-79, paras.
    146-147; *see also* Bell Atlantic Response at 3 (pointing out that
    the *Third Report and Order* allows incumbent LECs to 1) pass the
    end user charge to resellers and unbundled network element
    purchasers, and 2) charge other carriers for number portability
    query service).

[^199]: *Third Report and Order*, 13 FCC Rcd at 11778, para. 146.

[^200]: Comcast Reply at 3.

[^201]: *Id*. at 3-4.

[^202]: *Third Report and Order*, 13 FCC Rcd at 11774, para. 136.

[^203]: *Id.*, 13 FCC Rcd at 11778-79, para. 147; *Cost Classification
    Order*, 13 FCC Rcd at 24511, para. 40.

[^204]: *Cost Classification Order*, 13 FCC Rcd at 24511, para. 41.

[^205]: We distinguish, however, the situation where an incumbent LEC
    incurs costs for query services that other carriers or third parties
    provide. As with other carrier-specific costs directly related to
    providing number portability to end users, incumbent LECs may
    recover such costs with a five-year monthly charge on the end‑users
    it serves from a number portability capable switch. *See Third
    Report and Order*, 13 FCC Rcd at 11776-77, para. 143. If an
    incumbent LEC in such a situation does not have a number
    portability-capable switch, it should keep track of the query costs
    it incurs from other carriers or third parties. The incumbent LEC
    may begin recovering those costs from its end users when it begins
    to serve them from a number portability-capable switch. In the case
    of incumbent LECs serving carriers in EAS, these carriers may
    recover their query costs and LNP administration charges through an
    end-user charge as discussed in Section III.C.1 of this of this
    order for a limited period of five years from the date of the first
    end-user charge. Any costs the incumbent LEC incurs subsequently for
    implementation of a number portability network may also be recovered
    for a limited five-year period in accordance with section. These
    five-year periods may run consecutively or concurrently. Incumbent
    LECs may recover for each type of LNP cost during only one five-year
    period.

[^206]: *Id.* at 11775, para. 138.

[^207]: *Id*. at 11774, para. 136.

[^208]: Pursuant to our rules, incumbent LECs may \"assess each end user
    it serves . . . one monthly number-portability charge per line
    . . . .\" 47 C.F.R. § 52.33(a)(1)(i).

[^209]: *See Long-Term Number Portability Tariff Filings of Ameritech,
    et al.,* CC Docket No. 99-35, Memorandum Opinion and Order, 14 FCC
    Rcd 11883, 11933, para. 109 (1999) (*LNP Investigation Order*). In
    addition to discussing this issue in their Comments in that
    proceeding, Arch and PCIA filed a Petition for Reconsideration of
    the *LNP* *Designation Order* requesting clarification that CMRS
    carriers are co-carriers, not end users, and may not be assessed
    monthly surcharges. Arch asserted that its local exchange provider,
    Ameritech, was billing Arch a \"Service Provider Number Portability
    Monthly Charge\" on all of Arch\'s Type I Wireless Interconnection
    trunks. *See* Petition for Partial Reconsideration of Order
    Designating Issues for Investigation (filed Mar. 26, 1999) (Arch
    Petition); *Long-Term Telephone Number Portability Tariff Filings of
    Ameritech, et al.,* CC Docket No. 99-35, Order Designating Issues
    for Investigation (*LNP Designation Order*), 14 FCC Rcd 3367 (1999).

[^210]: *LNP Investigation Order,* 14 FCC Rcd at 11934, paras. 110-111.

[^211]: 47 C.F.R. § 52.33(a)(1)(i).

[^212]: Arch Petition at 11.

[^213]: *Bell Atlantic Telephone Companies*, Transmittal No. 418, Order,
    6 FCC Rcd 4794, 4795, para. 10 (1991) (*Bell Atlantic Cellular*).

[^214]: *Id.*

[^215]: *See AT&T Communications Tariff F.C.C. Nos. 9 and 11*, CC Docket
    No. 94-120, Memorandum Opinion and Order*,* 10 FCC Rcd 4288,
    4289-91, paras. 2-6 (1995).

[^216]: *Id.* at 4289-90, paras. 2-3.

[^217]: *See id.* at 4290, para. 4.

[^218]: *Id.*

[^219]: *Id.* at para. 5.

[^220]: *Id.*

[^221]: *Id.*

[^222]: *Id.*

[^223]: Ameritech Petition at 13; Bell Atlantic Petition at 1; SBC Reply
    at 1-2.

[^224]: *See* Ameritech Petition at 13.

[^225]: *Id.*

[^226]: *See* AT&T Opposition at 12-13; Ameritech Reply at 2.

[^227]: MCI Response at 8; Vanguard Opposition at 4-5.

[^228]: ^ ?^ *See* MCI Response at 8.

[^229]: *Third Report and Order*, 13 FCC Rcd at 11778, para. 146.

[^230]: *Id.*

[^231]: *Id.*

[^232]: *Id.*

[^233]: Bell Atlantic Reply at 1-2; SBC Reply at 2 n.4.

[^234]: Bell Atlantic Petition at 1; Ameritech Reply at 2.

[^235]: *See* Bell Atlantic Petition at 1; Ameritech Reply at 2.

[^236]: *See* AT&T Opposition at 13.

[^237]: *See Third Report and Order*, 13 FCC Rcd at 11777-78, para. 145.

[^238]: Vanguard Opposition at 4-5.

[^239]: SBC Reply at 3.

[^240]: Bell Atlantic Reply at 2 (*citing Third Report and Order*, 13
    FCC Rcd at 11776, 11778, paras. 142, 146).

[^241]: Vanguard Opposition at 5.

[^242]: ^ ?^ *Third Report and Order*, 13 FCC Rcd at 11778, para. 146.

[^243]: Vanguard Opposition at 5.

[^244]: *See* SBC Petition at 2.

[^245]: *Access Charge Reform*, CC Docket No. 96-262, Second Order on
    Reconsideration and Memorandum Opinion and Order, 12 FCC Rcd 16606,
    16615-19, paras. 31-42 (1997) (*Access Charge Reform Order*).

[^246]: *Id*. at 16616, para. 32.

[^247]: *Third Report and Order*, 13 FCC Rcd at 11777-78, para. 145.

[^248]: *Id.*

[^249]: *Id.*

[^250]: *Id.*

[^251]: ^ ?^ *See, e.g.,* Bell Atlantic Petition at 2; BellSouth
    Petition at 2-5; U S WEST Petition at 3-7.

[^252]: *See* U S WEST Petition at 4.

[^253]: *Id.*

[^254]: *Third Report and Order*, 13 FCC Rcd at 11777-78, para. 145.

[^255]: Bell Atlantic Petition at 2; BellSouth Petition at 4-5

[^256]: *Access Charge Reform Order*, 12 FCC Rcd at 16617-18, para. 38.

[^257]: We note that SBC acquired Ameritech after the filing of the
    pleadings in this proceeding.

[^258]: Ameritech Petition for at 9; UTC Comments at 3-4; *see also* U S
    WEST Petition at 4- 5.

[^259]: Ameritech Petition at 9; UTC Comments at 4.

[^260]: Bell Atlantic Petition at 2.

[^261]: *Third Report and Order*, 13 FCC Rcd at 11777, para. 145.

[^262]: Ameritech Petition at 10; US WEST Reply at 7.

[^263]: *Third Report and Order*, 13 FCC Rcd at 11728, para. 46.

[^264]: *Cost Classification Order,* 13 FCC Rcd at 24501, para. 12.

[^265]: SBC Petition at 3.

[^266]: *Id*. at 3-4.

[^267]: *See id.* at 4.

[^268]: *Id.*

[^269]: AT&T Opposition at 11-12.

[^270]: *See Public Utility Commission of Texas*, Docket No. CCB Pol
    96-13, Memorandum Opinion and Order, 13 FCC Rcd 3460, 3559 n.492
    (1997) (\"\[a\]lthough SWBT Centrex and Plexar services were
    different in several respects, they provided virtually the same
    functionality\"); *see also Rules and Policies Regarding Calling
    Number Identification Service - Caller ID*, CC Docket No. 91-281,
    Third Report and Order, Memorandum Opinion and Order on Further
    Reconsideration, and Memorandum Opinion and Order on
    Reconsideration, 12 FCC Rcd 3867, 3880 n.76 (1997) (\"Plexar is a
    SWBT Centrex service\").

[^271]: AT&T Opposition at 11-12.

[^272]: *Third Report and Order*, 13 FCC Rcd at 11777-78, para. 145.

[^273]: Ameritech Petition at 9; *see* SBC Petition at 4.

[^274]: *See, e.g*., Ameritech Petition at 9.

[^275]: *Third Report and Order*, 13 FCC Rcd at 11777-78, para. 145.

[^276]: *Id.* at 11774, para. 136.

[^277]: *Id. at* 11775, para. 139.

[^278]: *Id.*

[^279]: *Id.* at 11776-77, paras. 142-144.

[^280]: *Id.*

[^281]: *Id.*

[^282]: Florida PSC Petition at 3-4.

[^283]: Bell Atlantic Response at 2-3.

[^284]: *See Third Report and Order*, 13 FCC Rcd at 11712, para. 17.

[^285]: *Id*. at 11773-74, 11776, paras. 135, 142.

[^286]: ^ ?^ *Id.* at 11776, para. 142; *see also* 47 C.F.R. §
    52.33(a)(1).

[^287]: *Third Report and Order*, 13 FCC Rcd at 11777, para. 144.

[^288]: NECA Petition at 8; SBC Petition at 8.

[^289]: SBC Petition at 7-8 (citing *Third Report and Order*, 13 FCC Rcd
    at 11720, para. 29 (incumbent LECs' number portability costs will
    not be subject to separations)). Jurisdictional separations is the
    process of apportioning regulated costs between the intrastate and
    interstate jurisdictions, pursuant to Part 36 of the Commission\'s
    rules. 47 C.F.R. § 36 *et seq*. We note that at the time SBC's
    Petition was filed, the Commission was reviewing its jurisdictional
    separations procedures "to ensure that they meet the objectives of
    the 1996 Act, and to consider changes \[that may be needed\] in
    light of changes in the law, technology, and market structure of the
    telecommunications industry." *See Jurisdictional Separations Reform
    and Referral to the Federal-State Joint Board*, CC Docket No.
    80-286, Notice of Proposed Rulemaking, 12 FCC Rcd 22120, 22122,
    para. 2 (1997). On May 22, 2001, the Commission issued a Report and
    Order establishing a five‑year interim freeze of the Part 36
    separations rules, pending comprehensive reform of the separations
    process. This freeze will be in effect from July 1, 2001 to June 30,
    2006, or until comprehensive reform is completed, whichever comes
    first. *See Jurisdictional Separations Reform and Referral to the
    Federal‑State Joint Board*, CC Docket No. 80-286, Report and Order,
    FCC 01‑162 (rel. May 22, 2001).

[^290]: In the *Third Report and Order*, the Commission delegated
    authority to the Chief of the Common Carrier Bureau to issue an
    order to provide guidance for carriers in determining their
    carrier-specific costs directly related to number portability. The
    intent was for carriers to have this guidance before they filed
    their number portability end-user charge tariffs, which were to take
    effect no earlier than February 1, 1999. *Third Report and Order*,
    13 FCC Rcd at 11740, para. 75. The result was the *Cost
    Classification Order*, 13 FCC Rcd 24495.

[^291]: SBC Petition at 7-8.

[^292]: USTA Petition at 3.

[^293]: *Id*.

[^294]: *See* 47 C.F.R. §§ 61.38-61.39, 61.41-61.49.

[^295]: *Third Report and Order*, 13 FCC Rcd at 11775, 11777, paras.
    139, 144.

[^296]: *Id.* at 11724-25, para. 38.

[^297]: *Id.* at 11777, para. 144.

[^298]: *Id.* at 11778-79, para. 147.

[^299]: *Cost Classification Order*, 13 FCC Rcd at 24513, para. 47.

[^300]: *Id.*

[^301]: SBC Petition at 7-8. *See* *supra* note 289 and accompanying
    text.

[^302]: *Third Report and Order*, 13 FCC Rcd at 11720, para. 29.

[^303]: *See* Appendix B § 52.33(a)(1) (emphasis added).

[^304]: Florida PSC Petition at 2; UTC Comments at 5-6.

[^305]: UTC Comments at 5-6.

[^306]: *See* Florida PSC Petition at 1-2, 4-5.

[^307]: *Id*. at 1-2.

[^308]: *Truth-in-Billing and Billing Format*, CC Docket No. 98-170,
    First Report and Order and Further Notice of Proposed Rulemaking, 14
    FCC Rcd 7492 (1999) (*Truth-in-Billing Order*).

[^309]: *Id.* at 7516, para. 38.

[^310]: *Id.* at 7517-18, para. 40.

[^311]: *Id.* at 7519 and 7525-26, paras. 43, 54.

[^312]: *Id*. at 7524-25, paras. 52-53.

[^313]: *Id*. at 7525-26, para. 54.

[^314]: *Id.* at 7526-27, 7537, paras. 55, 71.

[^315]: *Id.* at 7519, para. 43.

[^316]: ^ ?^ *Third Report and Order*, 13 FCC Rcd at 11776-77, para.
    143.

[^317]: ^ ?^ *Id.* at n.478.

[^318]: *Id.*, 13 FCC Rcd at 11776-77, para. 143.

[^319]: *Id.*

[^320]: *Id.* at 11777, para. 144.

[^321]: USTA Petition at 3-4.

[^322]: *Id*. at 4.

[^323]: *Third Report and Order*, 13 FCC Rcd at 11776-77, paras. 142-46.

[^324]: *Id.* at 11707, 11776-77, paras. 10, 143-44.

[^325]: ^ ?^ *Id.* at 11776-77, paras. 142-44.

[^326]: *First Report and Order*, 11 FCC Rcd at 8463, para. 219
    (emphasis added).

[^327]: *Third Report and Order*, 13 FCC Rcd at 11729, para. 46.

[^328]: *Id.*

[^329]: *Cost Classification Order,* 13 FCC Rcd at 24513, para. 48. We
    note that the issue of performing queries for calls to NXXs where no
    number has been ported also was raised in other related number
    portability proceedings.

[^330]: USTA Petition at 2, 7; USTA Comments at 2.

[^331]: USTA Petition at 7.

[^332]: *Id.* at 7-8.

[^333]: *Id.*

[^334]: *See Long-Term Telephone Number Portability Tariff Filings of
    Sprint Local Telephone Companies*, CC Docket No. 99-35,
    Reconsideration of Decision To Suspend and Investigate Tariff
    Filings of Sprint Local Telephone Companies, 14 FCC Rcd 3828 (1999)
    (*Sprint LNP Tariff Reconsideration Order*).

[^335]: Time Warner Petition for Reconsideration of Sprint LNP Tariff
    Reconsideration Order (filed Apr. 7, 1999).

[^336]: *Number Portability Query Services Order*, CC Docket No. 98-14,
    Order, 13 FCC Rcd 16117 (1998).

[^337]: Comcast Cellular Communications Petition for Reconsideration
    (filed Sept. 18, 1998). The Commission denied Comcast\'s petition in
    an order released December 17, 1998. *Comcast Cellular
    Communications, Inc. Petition for Reconsideration of Number
    Portability Query Services Order*, CC Docket No. 98-14, Memorandum
    Opinion and Order, 14 FCC Rcd 1664 (1998). The Commission concluded
    that the issue would be most appropriately handled after the filing
    of the incumbent LECs\' number portability tariffs, when both
    end‑user and query costs would be before the Commission for review.

[^338]: In the *Cost Classification Order,* the Bureau requested that
    carriers state whether their demand assumptions include performing
    queries for all calls even in NXXs where no telephone number has
    been ported and to explain why it is necessary to query all calls in
    this situation. *See Cost Classification Order*, 13 FCC Rcd at
    24513, para. 48.

[^339]: AT&T Petition to Reject or Suspend Tariffs at 8 (filed Jan. 22,
    1999); Time Warner Petition to Suspend for One Day and Set for
    Investigation at 1-2 (filed Jan. 21, 1999); s*ee also* *LNP
    Designation Order,* 14 FCC Rcd 3367*.*

[^340]: SBC Reply at 4-5 (filed Jan. 27, 1999).

[^341]: *LNP Investigation Order,* 14 FCC Rcd at 11949, para. 140; s*ee
    also Number Portability Designation Order,* 14 FCC Rcd at 3383,
    para. 46; *Third Report and Order*, 13 FCC Rcd at 11729, para. 46;
    *First Report and Order*, 11 FCC Rcd at 8463, para. 219.

[^342]: *LNP Investigation Order*, 14 FCC Rcd at 11947, para. 136
    (citing *First Report and Order*, 11 FCC Rcd at 8463, para. 219). We
    also noted that the references in the *Third Report and Order*
    regarding queries to calls where number portability is \"available\"
    refer to paragraph 219 of the *First Report and Order*. *See Third
    Report and Order*, 13 FCC Rcd at 11711, para. 15 & n.58.

[^343]: *LNP Investigation Order*, 14 FCC Rcd at 11948-49, para. 139.

[^344]: *Third Report and Order*, 13 FCC Rcd at 11740, para. 75.

[^345]: *See Cost Classification Order,* 13 FCC Rcd at 24495, para. 1.

[^346]: *Id.* at 24500, para. 10.

[^347]: *Id.*

[^348]: *Id.* at 24500, para. 11.

[^349]: *Id.*

[^350]: *Id.* at 24501, para. 12.

[^351]: A list of petitioners and commenting parties appears at Appendix
    A.

[^352]: *See* Bell Atlantic Application at 2-3; Cincinnati Bell
    Application at 4-7; U S WEST Application at 7-13.

[^353]: *Id.*

[^354]: *See* Cincinnati Bell Application at 7; U S WEST Application at
    13-17.

[^355]: *See* Cincinnati Bell Application at 5-6; U S WEST Application
    at 12.

[^356]: *See* Bell Atlantic Application at 2-3; Cincinnati Bell
    Application at 4-7; U S WEST Application at 7-13.

[^357]: Ameritech Petition for Clarification or Review at 2-3.

[^358]: *LNP Investigation Order*, 14 FCC Rcd at 11901-02, paras. 40-44.

[^359]: *See Long-Term Number Portability Tariff Filings of U S WEST
    Communications, Inc.,* CC Docket No. 99-35, Memorandum Opinion and
    Order, 14 FCC Rcd 11983, 11994, paras. 21- 22 (1999) (*U S WEST LNP
    Investigation Order*).

[^360]: *LNP Investigation Order*, 14 FCC Rcd at 11902, para. 43.

[^361]: *See Third Report and Order*, 13 FCC Rcd at 11740, para. 72.

[^362]: *Cost Classification Order*, 13 FCC Rcd at 24500-01, paras.
    10-11.

[^363]: U S WEST Application at 13-17.

[^364]: *LNP Investigation Order*, 14 FCC Rcd at 11901-02, para. 42.

[^365]: ^ ?^ *Third Report and Order*, 13 FCC Rcd at 11773, para. 135.

[^366]: ^ ?^ *Cost Classification Order*, 13 FCC Rcd at 24500-01, para.
    11.

[^367]: ^ ?^ U S WEST Application at 17-19.

[^368]: ^ ?^ *Id*. at 7.

[^369]: ^ ?^ *Third Report and Order*, 13 FCC Rcd at 11773, 11778-79,
    paras. 135, 147.

[^370]: ^ ?^ *Id.* at 11740, para. 73.

[^371]: ^ ?^ *Id*. at para. 72.

[^372]: *Cost Classification Order*, 13 FCC Rcd at 24500, paras. 10-11.

[^373]: *See Third Report and Order*, 13 FCC Rcd at 11774, para. 136.

[^374]: Bell Atlantic Application at 2-3; Cincinnati Bell Application at
    3-4.

[^375]: *U S WEST LNP Investigation Order,* 14 FCC Rcd at 12000-01,
    para. 36.

[^376]: *Cost Classification Order*, 13 FCC Rcd at 24501-02, para. 13.

[^377]: *First Report and Order*, 11 FCC Rcd at 8378, para. 48.

[^378]: *U S WEST LNP Investigation Order,* 14 FCC Rcd at 12000-01,
    para. 36; *see also Cost Classification Order*, 13 FCC Rcd at
    24501-02, para. 13.

[^379]: *Cost Classification Order*, 13 FCC Rcd at 24500-01, paras.
    10-11.

[^380]: Cincinnati Bell Application at 4.

[^381]: *LNP Investigation Order*, 14 FCC Rcd at 11916-17, para. 73; *U
    S WEST LNP Investigation Order,* 14 FCC Rcd at 12000-01, paras.
    35-37.

[^382]: *See Cost Classification Order*, 13 FCC Rcd at 24500-01, paras.
    10-11.

[^383]: *Third Report and Order*, 13 FCC Rcd at 11740, para. 72; *see
    also Cost Classification Order*, 13 FCC Rcd at 24500, para. 10.

[^384]: *Cost Classification Order*, 13 FCC Rcd at 24500-01, paras.
    10-11.

[^385]: Ameritech Petition for Clarification or Review at 7-8.

[^386]: *LNP Investigation Order*, 14 FCC Rcd at 11902, para. 44.

[^387]: *Id.*

[^388]: *Third Report and Order*, 13 FCC Rcd at 11719, para. 28.

[^389]: *Id.* at 11719-20, paras. 28-29.

[^390]: U S West Application at 12-13.

[^391]: *Id.* at 13.

[^392]: *Third Report and Order*, 13 FCC Rcd at 11740, para. 73.

[^393]: *LNP Investigation Order*, 14 FCC Rcd at 11901-02, para. 42.

[^394]: *Cost Classification Order*, 13 FCC Rcd at 24500-01, paras.
    10-11.

[^395]: Cincinnati Bell Application at 7.

[^396]: *See Third Report and Order*, 13 FCC Rcd at 11724, para. 37.

[^397]: *See* Ameritech Petition for Clarification or Review at 10-11;
    Bell Atlantic Application at 3-4; Cincinnati Bell Application at
    4-6.

[^398]: Bell Atlantic Application at 4.

[^399]: *Id.*

[^400]: *LNP Investigation Order*, 14 FCC Rcd at 11905-06, para. 52.

[^401]: *Id*.

[^402]: *Cost Classification Order*, 13 FCC Rcd at 24500-01, paras.
    10-11.

[^403]: *Third Report and Order*, 13 FCC Rcd at 11740, paras. 72-73.

[^404]: *Id.* at 11740, para.73.

[^405]: *Id.*

[^406]: *Cost Classification Order*, 13 FCC Rcd at 24507 n.70.

[^407]: *Id.* at 24507-08, para. 30.

[^408]: Bell Atlantic Application at 4-5.

[^409]: *Id*. at 5.

[^410]: *Cost Classification Order*, 13 FCC Rcd at 24507-08, para. 30.

[^411]: *Third Report and Order*, 13 FCC Rcd at 11740, para. 73.

[^412]: *Id.* at 11740, paras. 72, 73. (Carrier-specific costs directly
    related to providing number portability are limited to costs
    carriers incur specifically in the provision of number portability
    services, such as for the querying of calls and the porting of
    telephone numbers from one carrier to another).

[^413]: *Id.* at 11740, para. 73.

[^414]: *Id.*

[^415]: *See Cost Classification Order,* 13 FCC Rcd at 24507-08, para.
    30.

[^416]: *Third Report and Order,* 13 FCC Rcd at 11740, paras. 72-73.

[^417]: *Cost Classification Order*, 13 FCC Rcd at 24507-08, para. 30.

[^418]: The RFA, *see* 5 U.S.C. § 601 -- 612, has been amended by the
    Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA),
    Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).

[^419]: 5 U.S.C. § 605(b).

[^420]: 5 U.S.C. § 601(6).

[^421]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small-business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^422]: 15 U.S.C. § 632.

[^423]: Specifically, it clarifies that: (1) the local number
    portability administrator may assess shared costs on all eligible
    telecommunications carriers, not just carriers with existing
    long-term number portability contracts; (2) incumbent LECs must
    allocate their shared costs between the query service and end-user
    charges; (3) carriers may not recover number portability costs from
    other carriers through interconnection charges or resale prices; (4)
    an incumbent LEC may assess the number portability end-user charge
    on resellers and purchasers of switching ports as unbundled network
    elements as long as it provides number portability functionality;
    (5) CMRS providers are co-carriers, not end users, and, therefore,
    are not subject to an end-user charge; (6) carriers who offer
    Feature Group A access lines may assess an end-user surcharge on
    such lines; (7) small and rural incumbent LECs that do not yet
    provide number portability functionality but provide EAS service may
    recover their N-1 query and Number Portability Administration costs
    through end-user charges; (8) incumbent LECs may not begin billing
    carriers for N-1 queries until a number has been ported from an NXX;
    and, (9) after the five-year recovery period for implementation
    costs of number portability through the end‑user charge, any
    remaining costs will be treated as normal network costs.

[^424]: Specifically, it affirms that: (1) the Commission has exclusive
    jurisdiction over the distribution and recovery of costs associated
    with intrastate and interstate number portability; (2) carriers not
    subject to rate-of-return regulation or price caps may recover their
    carrier-specific costs in any lawful manner consistent with their
    obligations under the Communications Act; (3) Centrex lines may be
    assessed one end-user number portability charge per line and a PBX
    trunk may be charged nine end-user number portability charges per
    PBX trunk; (4) Plexar may be assessed one number portability charge
    per line; (5) incumbent LECs may impose an end-user charge in
    service areas where the switch is number-portability-capable; (6)
    price cap LECs and rate-of-return LECs should treat the query
    services charge as a new service within the meaning of section 61.38
    of our rules; (7) carriers may only recover carrier-specific costs
    directly related to the provision of number portability; (8)
    carriers must distinguish clearly costs incurred for narrowly
    defined portability functions from costs incurred to adapt their
    systems to implement number portability; (9) costs carriers incur as
    an incidental consequence of number portability are ordinary costs
    of doing business and represent general network upgrades; and (10)
    costs that do not meet the two-part cost recovery test may not be
    recovered through number portability cost recovery mechanisms. It
    also affirms (11) the adoption of the end-user revenue allocator;
    (12) the rules adopted in the *Third Report and Order* concerning
    levelized charges; and (13) the two-part cost recovery test.

[^425]: Specifically, it denies requests that certain costs associated
    with number portability be calculated based on avoided costs and
    TELRIC.

[^426]: *See* 5 U.S.C. § 801(a)(1)(A).

[^427]: *See* 5 U.S.C. § 605(b).