BEFORE THE

**FEDERAL COMMUNICATIONS COMMISSION**

**WASHINGTON, D.C. 20554**

In the Matter of )

Wisconsin Public Service Commission ) CCB/CPD No. 00-1

Order Directing Filings )

# ORDER

Adopted: March 1, 2000 Released: March 2, 2000

By the Deputy Chief, Common Carrier Bureau:

## I. INTRODUCTION

1\. In this Order, we direct the four largest incumbent local exchange
carriers (LECs) in Wisconsin[^1] to submit to the Federal Communications
Commission (Commission) copies of the currently effective tariffs for
intrastate payphone service offerings that have not been determined by
the Wisconsin Public Service Commission (Wisconsin Commission) to comply
with section 276 of the Communications Act of 1934, as amended (Act) and
the Commission's rules.

## II. BACKGROUND

2\. Section 276 of the Act establishes requirements designed to promote
competition among payphone service providers and promote the widespread
deployment of payphone services to the benefit of the general
public.[^2] In its Payphone Reclassification Proceeding,[^3] the
Commission adopted regulatory requirements implementing section 276. The
Commission required, *inter alia*, that incumbent LECs file tariffs for
basic payphone lines at the state level only, and that unbundled
features and functions provided by incumbent LECs to their own payphone
operations or to others be tariffed at both the state and federal
levels.[^4] The Commission required that all incumbent LEC payphone
tariffs filed at the state level be cost‑based, nondiscriminatory, and
consistent with both section 276 and the Commission's Computer III
tariffing guidelines.[^5] The Commission determined that the rates
assessed by LECs for payphone services tariffed at the state level must
satisfy the requirements that the Commission applies to new interstate
access service proposed by incumbent LECs subject to price cap
regulation (the "new services test").[^6] The Commission stated that it
would rely initially on state commissions to ensure that the rates,
terms, and conditions applicable to the provision of basic payphone
lines comply with the requirements of section 276.[^7] The Commission
also determined that state commissions that are unable to review these
tariffs may require incumbent LECs operating in their states to file
these tariffs with the Commission. The Common Carrier Bureau (Bureau)
has emphasized that the Commission retains jurisdiction under section
276 to ensure that all requirements of section 276 and the Payphone
Reclassification Proceeding are met.[^8]

3.  On November 6, 1997, the Wisconsin Commission issued a letter order
    in its Docket 05-TI-156. In the letter order, the Wisconsin
    Commission held that its own jurisdiction to investigate the rates
    charged by LECs to payphone service providers "is very narrowly
    circumscribed to enforcing a prohibition on cross subsidy\...and
    discriminatory practices."[^9] The Wisconsin Commission also stated
    that the statutory remedies available under Wisconsin law "only
    address whether the retail rates charged by telecommunications
    utilities for competitive telecommunications service recover the
    underlying cost for that service." Accordingly, the Wisconsin
    Commission found that it lacks jurisdiction under state law to
    ensure that the rates, terms, and conditions applicable to providing
    basic payphone services comply with the requirements of section 276
    of the Act and the Commission's implementing rules.[^10]

4\. On October 28, 1998, the Bureau sent a letter to the Wisconsin
Commission stating that, after a review and consideration of the
Wisconsin Commission's November 6, 1997 letter order, it was our
intention to require the four largest LECs in Wisconsin to file with the
"FCC tariffs that set

forth the rates, terms, and conditions associated with pay phone
services, along with the required supporting documentation."[^11]

**III. DISCUSSION**

III. 5\. The Wisconsin Commission's stated lack of authority to review
     these payphone service offerings invokes this Commission's
     obligations under section 276[^12] and the Commission's *Payphone
     Orders*[^13] to promote competition among payphone service
     providers and ensure the widespread deployment of public payphone
     service, among other things. We therefore direct the four largest
     LECs in Wisconsin to submit currently effective intrastate tariffs
     that set forth the rates, terms, and conditions associated with
     payphone services to the Commission, along with the supporting
     documentation in compliance with the requirements of section 276
     and the Commission's implementing rules, including the new services
     test. More specifically, in order to ensure that the tariffs for
     the four largest LECs in Wisconsin comply with section 276 of the
     Act, and pursuant to the Commission's Payphone Orders, we direct
     Wisconsin Bell, Inc. (d/b/a Ameritech Wisconsin), GTE North
     Incorporated, subsidiaries of Century Telephone Enterprises Inc.,
     and the Telephone Data Systems, Inc.to submit tariffs for
     intrastate payphone service offerings to this Commission, together
     with the supporting documentation, as detailed below, necessary to
     demonstrate compliance with the requirements of section 276 and the
     Commission's implementing rules.

```{=html}
<!-- -->
```
6.  The submissions we require these incumbent LECs to make are not
    official tariff filings subject to or required by section 203 of the
    Act. Rather, the information submitted is necessary to permit us to
    review the incumbent LECs' rates, terms and conditions for a local
    service, payphone line service, that is normally tariffed in the
    intrastate jurisdiction. We require these submissions under
    authority of section 276 of the Act, in order to ensure that the
    incumbent LECs fully comply with our Payphone Orders. If we find an
    incumbent LEC's payphone line rate is not in compliance with the new
    services test or other section 276 requirements, we have authority,
    pursuant to section 205, 47 U.S.C. § 205,[^14] and our general
    authority under section 4(i) of the Act, 47 U.S.C. § 154(i), to make
    a determination as to the maximum permissible rate and to require
    the incumbent LEC to charge no more than that rate, as a measure
    necessary to the execution of the Commission's section 276
    functions. 47 U.S.C. § 205(a); *see also* 47 U.S.C. §§ 154(i) and
    276(b), (c).

7\. We intend to review these submissions in a procedural manner similar
to tariff review proceedings such as those conducted for "open network
architecture" (ONA) tariffs under Computer III tariffing guidelines.
Except as otherwise directed, the incumbent LECs should file a copy of a
tariff and supporting information, in accordance with the ordinarily
applicable Commission rules (e.g., usage-sensitive elements whether
specified in the payphone line tariff or cross-referenced to another
tariff as well as flat rate elements) and should provide cost support
for each rate element in accordance with the cost support requirements
described below. Rates, terms and conditions for other services commonly
used by payphone service providers ("PSPs") (e.g., call screening
services) should also be included.[^15] For each rate element, the
incumbent LEC must submit complete cost studies with full documentation.
Summaries of cost study results are not acceptable.[^16] The initial
submissions will be subject to public comment, and LECs will have the
opportunity to respond to the comments that are filed.[^17]

8\. In order to avoid unnecessary confusion and delay in the
implementation of Payphone Order-compliant tariff filings, we set forth
briefly below some of the methodological principles applied under
Computer III and other relevant FCC proceedings addressing the
application of the new services test and cost-based ratemaking
principles to services and facilities offered by incumbent LECs to
providers of services that compete with incumbent LEC services. While we
have allowed some flexibility in the application of these principles in
particular contexts, absent a persuasive justification, we expect the
incumbent LECs to apply these principles consistently and rigorously to
the cost justification of rates for services needed by incumbent LECs'
payphone service competitors.

9.  To satisfy the new services test, an incumbent LEC filing payphone
    line rates must demonstrate that the proposed rates do not recover
    more than the direct costs of the service plus "a just and
    reasonable portion of the carrier's overhead costs."[^18] Costs must
    be determined by the use of an appropriate forward-looking, economic
    cost methodology that is consistent with the principles the
    Commission set forth in the Local Competition First Report and
    Order.[^19]

10\. With respect to the calculation of direct costs, our longstanding
new services test policy is to require the use of consistent
methodologies in computing direct costs for related services.[^20] Cost
study inputs and assumptions used to justify payphone line rates should,
therefore, be consistent with the cost inputs used in computing rates
for other services offered to competitors.

11\. In determining a just and reasonable portion of overhead costs to
be attributed to services offered to competitors, the LECs must justify
the methodology used to determine such overhead costs.[^21] Absent
justification, LECs may not recover a greater share of overheads in
rates for the service under review than they recover in rates for
comparable services.[^22] Given that the new services test is a
cost-based test, overhead allocations must be based on cost, and
therefore may not be set artificially high in order to subsidize or
contribute to other LEC services.[^23] For purposes of justifying
overhead allocations, UNEs appear to be "comparable services" to
payphone line services, because both provide critical network functions
to an incumbent LEC's competitors and both are subject to a "cost-based"
pricing requirement. Thus, we expect incumbent LECs to explain any
overhead allocations for their payphone line services that represent a
significant departure from overhead allocations approved for UNE
services.

12\. We also note that the forward-looking cost studies we have required
in the contexts described above produce cost estimates on an
"unseparated" basis. In order to avoid double recovery of costs,
therefore, the LEC must demonstrate that in setting its payphone line
rates it has taken into account other sources of revenue (*e.g.,*
SLC/EUCL, PICC, and CCL access charges) that are used to recover the
costs of the facilities involved.

13\. At this time, this Order only applies to the LECs in Wisconsin
specifically identified herein. No other Wisconsin LECs are being
required at this time to submit data to the Commission. As stated above,
all copies of tariffs, including supporting information, must comply
with Part 61 of our Rules, 47 C.F.R. §§ 61.1 *et seq*. We require that
these copies of tariffs and supporting documentation be filed by May 12,
2000.

# IV. procedural matters

III. 14\. An original and six copies of all documents must be filed with
     the Office of the Secretary, Federal Communications Commission, 445
     12^th^ Street, S.W., Room TW-A325, Washington, D.C. 20554. In
     addition, parties must file two copies of any such documents with
     the Competitive Pricing Division, Common Carrier Bureau, 445 12^th^
     Street, S.W., Room 5-A207, Washington, DC 20554. Parties must also
     deliver one copy of such documents to ITS, Inc., the Commission's
     duplicating contractor, at its office at 1231 20^th^ Street, N.W.,
     Washington, DC 20036. The documents should reference CCB/CPD No.
     00-1.

15\. This matter shall be treated as a "permit but disclose" proceeding
and subject to the "permit but disclose" requirements under 47 C.F.R. §
1.1206(b), as revised. Persons making oral *ex parte* presentations are
reminded that memoranda summarizing the presentation must contain a
summary of the substance of the presentation and not merely a listing of
the subjects discussed. More than a one or two sentence description of
the views and arguments presented is generally required. *See* 47 C.F.R.
§ 1.1206(b). Other rules pertaining to oral and written *ex parte*
presentations in "permit but disclose" proceedings are set forth in
Section 1.1206(b) as well.

# V. ORDERING CLAUSES

16\. Accordingly, IT IS ORDERED that, pursuant to sections 205, 276 and
4(i) of the Communications Act of 1934, as amended, 47 U.S.C. § 276, and
through authority delegated pursuant to sections 0.91 and 0.291 of the
Commission's rules, 47 C.F.R. §§ 0.91 and 0.291, Ameritech, GTE, Century
and TDS shall file by May 12, 2000, tariffs as described above for
intrastate payphone service offerings in Wisconsin with the Commission,
together with all supporting documentation described above necessary to
demonstrate compliance with the requirements of section 276 and the
Commission's implementing rules.

> FEDERAL COMMUNICATIONS COMMISSION

Yog R. Varma

Deputy Chief

Common Carrier Bureau

[^1]: ^?^ The four largest incumbent LECs are Wisconsin Bell, Inc.
    (d/b/a Ameritech Wisconsin), GTE North Incorporated (GTE), the
    subsidiaries of Century Telephone Enterprises, Inc. (Century), and
    the Telephone Data Systems, Inc. (TDS).

[^2]:     ^?^ 47 U.S.C. § 276(b)(1).

[^3]:     ^?^ *Implementation of the Pay Telephone Reclassification and
    Compensation Provisions of the Telecomm. Act of 1996*, CC Docket No.
    96-128, *First Report and Order*, 11 FCC Rcd 20541 (1996); *Order on
    Reconsideration*, 11 FCC Rcd 21233 (1996)(*Payphone Reconsideration
    Order*), *aff\'d in part and remanded in part sub nom. Ill. Public
    Telecomm. Ass\'n v. FCC*, 117 F.3d 555 (D.C. Cir. 1997); *Second
    Report and Order*, 13 FCC Rcd 1778 (1997)(*Payphone Clarification
    Order*), *aff\'d in part and remanded in part sub nom. MCI v. FCC*,
    143 F.3d 606 (D. C. Cir. 1998); *Third Report and Order and Order on
    Reconsideration of the Second Report and Order*, 14 FCC Rcd 2545
    (1999), *appeal pending* *sub nom. American Public Communications
    Council v. FCC*, Case No. 99-1114 (D. C. Cir. filed Mar. 22, 1999).

[^4]:     ^?^ *Payphone Reconsideration Order*, 11 FCC Rcd at 21307-09.

[^5]:     ^?^ *Payphone Clarification Order*, 13 FCC Rcd at 1780 ¶ 2,
    citing *Payphone Reconsideration Order*, 11 FCC Rcd at 21308.

[^6]:     ^?^ *See Amendment of Sections 64.702 of the Commission\'s
    Rules and Regulations (Third Computer Inquiry)*, CC Docket No.
    85-229, *Report and Order*, 104 FCC 2d 958 (1986). The new services
    test is a cost‑based test that establishes the direct cost of
    providing the new service as a price floor. LECs then add a
    reasonable amount of overhead to derive the overall price of the new
    service. *See Amendment of Part 69 of the Commission\'s Rules
    Relating to the Creation of Access Charge Subelements for Open
    Network Architecture*, CC Docket No. 89-79, *Report and Order &
    Order on Further Reconsideration & Supplemental Notice of Proposed
    Rulemaking*, 6 FCC Rcd 4524 (1991).

[^7]:     ^?^ *See Letter to Joseph P. Mettner, Chairman, Public Service
    Commission of Wisconsin, from Kathryn C. Brown, Chief, Common
    Carrier Bureau*, 13 FCC Rcd 20865 (Com. Car. Bur. 1998).

[^8]:     ^?^ *Implementation of the Pay Telephone Reclassification and
    Compensation Provisions of the Telecomm. Act of 1996*, CC Docket No.
    96-128, *Order*, 12 FCC Rcd 20997 (Com. Car. Bur. 1997); *see also
    North Carolina Utilities Commission Order Dismissing and Directing
    Filings*, 13 FCC Rcd 5313 (Com. Car. Bur. 1998).

[^9]:     ^?^ Wisconsin Public Service Commission Letter Order, Docket
    No. 05-TI-156, November 6, 1997 (unpublished).

[^10]: ^?^ *Id*.

[^11]:     ^?^ *See Letter to Joseph P. Mettner, Chairman, Public
    Service Commission of Wisconsin, from Kathryn C. Brown, Chief,
    Common Carrier Bureau*, 13 FCC Rcd at 20866.

[^12]:     ^?^ 47 U.S.C. § 276 (b)(1).

[^13]:     ^?^ *See supra* note 2.

[^14]: ^?^ Section 205 provides the Commission with general prescription
    authority over carrier charges, classifications, regulations, and
    practices that the Commission determines are "in violation of any of
    the provisions of this Act." 47 U.S.C. § 205(a). With the enactment
    of section 276, which expressly addresses intrastate as well as
    interstate payphone services, the Commission's section 205 authority
    has been effectively extended to include prescription of a carrier's
    charges for intrastate payphone line service if existing charges
    violate section 276 or the Commission's implementing regulations. In
    somewhat analogous circumstances, the Supreme Court ruled that the
    Commission's general rulemaking authority under section 201(b) of
    the Act extends to the adoption of rules regarding intrastate
    matters that become subject to the Commission's jurisdiction as a
    result of enactment of the Telecommunications Act of 1996. *AT&T v.
    Iowa* *Utilities Board*, 525 U.S. 366, \_\_\_, 119 S. Ct. 721,
    729-30, 142 L. Ed.2d 834, 848-49 (1999). Thus, we may prescribe a
    payphone line rate, if necessary, and ensure compliance with such a
    prescription order, even though the prescribed rate may be filed in
    a state tariff.

[^15]: ^?^ Such services should be included in the submissions even if
    they are also offered to non-payphone subscribers.

[^16]: ^?^ See generally Commission Requirements for Cost Support
    Material To Be Filed with Open Network Architecture Access Tariffs,
    6 FCC Rcd 5682 (1991); *Open Network Architecture Tariffs*, 7 FCC
    Rcd 1512, 1515 ¶¶ 20-22.

[^17]: ^?^ Thus, we expect LECs to treat their initial submissions as
    they would treat a Direct Case filed in a section 204 investigation
    of a tariff for interstate service.

[^18]: ^?^ 47 CFR § 61.49(f)(2).

[^19]: ^?^ *Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996, First Report and Order*, 11 FCC Rcd
    15499 (1996).

[^20]: ^?^ *See generally* *Amendments of Part 69 of the Commission's
    Rules Relating to the Creation of Access Charge Subelements for Open
    Network Architecture*, 6 FCC Rcd 4524, 4531 ¶ 42; *Expanded
    Interconnection with Local Telephone Company Facilities*, 9 FCC Rcd
    5154, 5187-88 ¶ 122 (1994).

[^21]: ^?^ *Amendment of Part 69*, 6 FCC Rcd at 4531 ¶ 44.

[^22]: ^?^ *Expanded Interconnection with Local Telephone Company
    Facilities*, 9 FCC Rcd 5154, 5189 ¶ 128 (1994).

[^23]: ^?^ *Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996, First Report and Order*, 11 FCC Rcd
    15499 ¶ 713 (1996).